BjKI IARA REGIONAL STATE UNIT \R lENTERPRISE "SU VOKOVA" FINANCIAL STATEMENTS ANI) INDEPENDENT AUDITORS' REPORT FOR TIIE YEAR ENDED 31 DECEMBER 2018 Bukhara RSUE. <aIs fr 1Disclaimer of Opinion section of iur report, we vere not abe to obtain suficiei appropnat audit evidence to provide a basis for an audit opinio n ii hese financial statenets. \Ve are independent of the Company in accordance with the ethical requirements that are relevant to our ait of the finanial statemnwnts and have fulflled our other responsihildks under those ethiea! requirentns. Egagement Partner: F:i , N.K Karim-ov Audit manager: N.N. Yulchiev 28 June, 2019 Tashkent, Uzbekistan Bukhara RSUF 0SuvOkoval Financial statements for the year ended 31 December 2018 ;n thousands of UZS: STATEMENT OF FINANCIAL POSITON As at 31 December As at 31 December 2018 2017 Assets Non current assets Property, plant and equipment 4 434 308 441 236 508 236 Deferred expenses 6 1 252 844 68 127 Total Non - current assets 435 561 285 236 576 363 Current assets Inventories 7 3378083 2 128607 Trade and other receivables 8 90 807 077 44 818 284 Cash and cash equivalents 9 20458 717 1 065900 Total Current assets 114643877 48012791 Total Assets 550205162 284589154 Liability Current Liability Accrued interest payable 3557310 1 701 867 Current portion of long term borrowings 12 17 781 151 25516939 Trade and other payables 13 62016573 33297163 Total Current Liability 83355034 60515969 Long term liability Long-term borrowings 12 869682136 588023289 Total Long term Liability 869 682 136 588 023 289 Total Liability 953 037 170 648 539 258 Equity Charter capital 10 3369845 3369845 Accumulated loss (488 636 989) (406 595 482) Restricted capital 11 82435 135 39275533 Total Equity (402 832 008) (363 950 104) Total Liability and Equity 550205162 284589154 \pproved and signied on bchaff of the CoMpany's m-anagement: Director Chief Accountant Kholmurodov I.R. Rustamov DI 28 June 2019 The acomrpanying notes or pages 11 50 arc an intqa pat of the curent f -Tinc A stenrnnut 7 Bukhara RSUE Suvokovan i4nancial statements for the year ered 3 December 208 in thOuSHIds of UZS) STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December Notes For the year ended 31 For the year ended 31 December 2018 December 2017 Revenue 14 40235890 35289822 Cost of sales 15 (34959310) (27951 651) Gross profit 5276580 7338171 General and administrative expenses 16 (5 467 983) (3 582 058) Sales expenses 17 - (2008047) Other operating expense 16 (2 826 047) (2 293 660) Impairment of trade and other receivables 8 (1 416 715) (466 692) Impairment of cash and cash equivalents - (2603) Government grant 18 11 550714 3785671 Other operating income 19 405 229 292 245 Operating profit 7 521 779 3 063 027 Finance cost 20 (83958366) (337 841 198) Finance income 20 -8 601 Interest expense (5587312) (5894261) Net loss before tax for the year (82 023 899) (340 663 831) Tax expense - - Net profit/(loss) for the year (82 023 899) (340 663 831) Approved and signed on behalf of the Companys management: Director Chief Accountant Kholmurodov I.R. Rustainov DI 28 Jute 2019 The accomnpanyinq rotes on Pages 11 C are an irtega can of the current fiancta s:atemLrts 8 Bukhara RSUE ,Suvokovai Financial statements for:he year ernded 31 December 20'1 tn f t)ousands of UZS; STATEMENT OF CHANGES IN EQI ITY For the year ended 31 Deccmber Notes Charter Restricted Accumulated Total Capital Capital loss As at January 1, 2017 3369845 13544018 (65931 652) (49017788) Loss for the year - - (340 663 831) (340 663 831) Contribution of Government in kind - 25731515 - 25731515 kind As at December 31, 2017 3369845 39275533 (406 595 483) (363 950 104) Effect on impact of IFRS 9 9 - - (17607) (17607) Loss for the year - - (82023899) (82023899) Contribution of Government in - 43159602 43159602 kind As at December 31, 2018 3 369 845 82435 135 (488 636 989) (402 832 008) Approved and signed on behalf of the CompanV's management: Director Chief Accountant Kholmurodov LR. Rustanov DI 28 June 2019 The accompanying notes on pages 11 50 are an intgral part of tne crrent financ al staemni:ts 9 Buknara RSUE < Inancial staterrents for the vear ended 31 December 202 12 r tiousards of UZS NOTES TO THE FINANCIAL STATEMENTS 1. Main activities of the Company The conipany was registered by Decree No. 589 of 24 June 1978 of the Council lo Nhisters of the Soviet Socialist Repubbe of Uzbekistan. Due to the econormic reforms introduced after independence in 1991, the Government of the Republic of Uzbekistan (hereinafter the Governnent) decentralized most of the organizations involved in publi( services. Subsequently, in accordance with the Resolution of the CJabinet of Ministers of the Republic of 1z,bekistan No. 3-71 dated 22tily, 1993, the Company was transferred to the direct management of the Nunicipal - operational associaton of the Bukhara region, which is full owned by the Government. According to the proposal of the Council ot Ninsters of the Republic of Karakalpastan, regional bokliiats. the Ministry of lIconony, the .i\nistry of Finance of the Republic of Uzbekistan, the U zbek Agency Uzkoniniunkhizrnat, a single state unitarv enterprise Suvokov wvas established with branches i cities and distnets based on existing wvater supply and sexwage or;antizations (hereinafter referred to as the Company). In accordance with the proposal, typical structures of state-ovned unitary enterprises of Suvokova. as wvell as their city and district branches, cornprehensive measures to ensure the iniplementation of prority tasks for the development and modernization of drinking water supply and sew,vage systems, mniprovement of the SVste1m O: connecung business entities to water supply networks and sewage on a turnkev basis. Tlie enterprise has the rights of an independent economic enterprise and is ianaged in accordance with the legislation of the Republic of Uzbekistan. Being a part of the khokimiyat of the Bukhara region, and being the assignec of the Regional Productain 'nterprise "Suvokova" of the Bukhara region. reorg.tuzed int the State I nitary Enterprise "Suvokova" is considered to be a defendant in all paranieters enl and financial and econonic activiUes. The company operates in the city of Bukhara and is fully managed by the Municipal Operational Association on behalf of the Governnent of the Republic of I zbekistan and represents social and econonic iuportance for the Bukhara region. The abiity of the Company to continue uninterrupted operations depends on the conunued support of the (oxernment of the Repiublc of Uzbekistan. The main activity of the Company is the nmanagenient of sewage water supply systens The total nuiber of employees as of 31 December 2018 was 931 people (2017: 930 people). The legal address of the Company: Republic of 1*zbekistan, Bukhara, 10500 1, 1 bn Sino Street, 111. The main actvities of the Company, are: + Realization of the governieit's policy on the issue of water supply, implementation of plans and tasks, : Construction of facilities on the basis of funds allocated by the state; <1 Monitoring and irnproxement of the activities of branches uinder the organization's order, < In order to develop and approve an annual business plan and submit to the khokim region in accordance with the established procedure; . The percentage of funds to be transferred to a savings account must be deterniiied and approved in accordance with the procedure of the financial department of the regional khokimiyat; © Creation of other enterprises througli its subsidianies for the direet provision of water supply in the cities of oblasts, oblast centers, the population of urban and rural settlements, comniunal housing enterpnses, business settlement and state organizations. In addtion to the nature and objectves of the Conpainy's activities, it plays a significant role in the ongoing social and econonuc reforms iniplemented in the Republc of iUzbekistan. Consequendt, the Conpany's acuvities are sinetiv controlled by the state authorities, and, in accordance with the resolution of the Public I tilities Department No.01-8 of January 9, 2011, unies like the Company are allowed to have a maximum gross nargin of l0" 11 Bukniar RS1 «Suvokova, nrcaaterI stterts for uhe year ended3 Decembrner 2018 un thousards cf JZS< 1. Main achivitics of the Company (Coitinued) In accordance with the Agrecient on Additional Financing of July 12, 201.6 No. 5698 17% and 5699-UiZ between the International Developnent Association (hereinafter - IDA) and the Republic of Uzbekistan, the Projecr on the reconstruction of sewage treatnient plants in the cities of Bukhara and Samarkand (lhereinafter - Prolect). 'he objectives of this Prolect are: (a) to reduce the harmful effects of wastewaåter collection on the env,ironmient; (b) improving the efficiencv and sustainabilty of sexwage systens in the Bukhara RSUE "Suvokova" (hereinafter - B3VK and the Samarkand RSUE "Suvokova". The total anlount of funding for the projeet is esumated at USD 105 milhon. The project is funded by the IDA with a loan in the amount of -74,700,000 Special Drawing Rights (equivalent to USD 105.0 milhon), with an interest rate of 1.25% of the prmicipal amount under standard co nditions (IDA 5698 UZ) and 1.83% for solid conditions (IDA 5699 1L/). TIhe maintenance fee in respect of the withdrain and outstaiding portion of the sub loan is 0.75% per annum. Ile interest rate on obligations in the amount of 0.5 per annun should be paid on the unused loan aniounts. The principal amount of the loan must be repaid every six montis for 25 years, including 5 years of the grace period, starting from the date of approval by the Board of Directors of the World Bank. It is planned that the project will last until 2019. Tbe hn:,tn of Finance of the RepubLe of Lzbekistan is responsible for repaying the loan on behalf of the Republie of Lzbekistan in accordance witli the Loan Agreement ofjul 12, 2016 No. IDA 5698 1/. and ID 5699-1/. between IDA and the Repubh otT Ubekistan. I lowever, there are siib-credit agreements bet-een the Ninistry of Finance of the Republie of Uzbekistan and Bukhara RSL IV and Sanarkand RSŒF on the acceptance of olkgations specified in the ( Credit \greelent, The project includes the following parts '(coniponents): P'art A: iistiiiiiional Strthieliii ningil. alld Capacity ilidingt, 1. Institutional strengthening and capacity building of BVK and local coninuniies tirough, inter alia: (a) provision of staff trainin, in utilty managenient with an emphases on improving general nanagement, water and wastewater systems operation, and consuier orientation; (b) design and implementation of public awareness raising caipigns and customer satisfaction surveys; and (c) improvement of internal control and accountahility systenis; (d.) enhancement of the accouninng estabhshtent of BVK; and (e) estabshmen of a pilot SCADA. 2. Institutional strengthening and capacity building of SVK and >cail connunities through, inter alia: (a) provision of staff training in utility managenietit with an emphases on improv ing general management, water and wastewater svstems operation, and consumer onentation, b) design and implementation of public awareness raising campaigns and custonier satisfacun surveys; and (c) imp)rovemiienit of internal control and accountability (d) enhancement of the accounting establishment of SVK; and (e) establishnent of a pilot SCADA. 1 Institutional strengthening of the Recipient's water sector services through the provision of technical assistance to review, inter alla: (a) the strategy for the management and developmet of water sector services at the national level; (b) the technical standards apphed in the supply of water sector senrces; and (c) the price-setting poheies for said services. 4. Financing of feasibility snidies for future priorint (non-P'roject, mv1,esttmeits in the water supphy and sanitation sector of the Recipient. Part B: Phyisical lov,cstmnits 1. Rehabilitation of Bukhara Sewerage System, includig, inter alia: (a) replacement of existing sewers; (b) rehabilitation of e\:,istg w astewater puinping stations and construction of an additional wastewater pumping station; (c) construction of new sewers; (d) completion of the rehabilitation of Bukhara Waste\water Treatnent Plant; (e) provision of operational equipment; and (t) provision of teclinical assistance required therefor. 2. Rehabilitation of Samarkand Sewerage System, including inter ala: (a) replacement of existing sewvers; kb) rehabilitation of existing wastewater pumping stations and construction of an additional wastewvater puinpg station, (c constructon of new sewers; (d) completton of the rehabilitation and upgrading of the Satnarkand main wastew,k\xater treatient plant; (e provision of operatial 12 Bukn ar RSUE Suvokova» Financl statermens for thec year ened 31 De cembte' 7018 in thousands of UZSi 1. Main activitics of the Company (Coiuntied) equipnent; and (f; provision of technical assistane required therefor; and (g.) construetion of a new wastewater treatment plant located in Farhad. Part C: Project Management Streigtiening the Pt -'s and the respective PL's Project management, moniteong and coordination capacity through the provision ot goods and consultant services (icluding Project auditing serces), Training, and Operatng Costs. Also, the Government of the Republic of Uzbekistan received permssion from the International Development Association (IDA) to purchase a oan (loan agreeient No. 5189-UZ dated july 18, 2013) to iniprove the drinking water supply in the Alat and Karakul districts of the Bukhara region. The project will finance the improvement of the coverage, quality and efficiency of coiimunal water services in the Alat and Karakul districts of the Bukhara region. Ile total amount of funding for the project is estmated at 139.02 million 1 SD. ie project is tinanced from various sources, including 1DA loan in the amount of 53.20 nulhon special drawing rights (e(uivaleit to 82 million ,S) with an interest rate of (.75% per annuni of the )rtici pal aiount. The interest rate on obligations in the atmount of 0.5, per annum should be paid on the unused k>an amounts. Thie prinicipil amnouiit of the loan Must be repaid everv six montlis for 25 years, ineluding a grace period of 5 years, starting froim 2018. It is planned that the project will last until 20)19. Another source of tunding is the (overnint of the Republie of Uzbekistan, whose contributiiion is S 519 million, It is planned that the project wiIII last iunil 2019 The Ministry t Finince of the Republic of Uzbekistan is responsible for repaving the loan on hbalf to the Republic of 1zb)ekistan in accordance with the Loan Agreemcent of ily 18, 2013 No. 5189-17 between 11DA and the Republic of 1,'zbekistan. 1lowever, there is an agreenent on retinancing berween the Nhiistry of Finance of thl Republic of Uzbekistan and the Bukhara RSVE. "Suvokova" (hereinafter B K) ahout accelpting the obligantions specified in the Loan Agreement. Engineering-design and operational technical assistance services to support the Project Implementing Entity and the PCG and its Bukhara branch in the following tasks of Project implementation: review of the available feasibility study and preparation of optimied lpreliminar designs; * preparation of detailed designs and bidding documents, constructon supison, and reportang; 4: improvement of uthty operato n, maintenance and management, all through the proviston of goods and consultants' services, Rehabilitation and expansion of water production and bulk transmission systems through: * the construction of a new expanded water treatment plant in Dvoinik, including the rehabibtatnon of the existing intake and pre-sedimentation ponds; 4 the renewal and expansion of transmission systens including the 24 km tanmk line from )voinik to Alat- town; * the rehabilitation of the 13 km trunk lne from Alat tow,vn to Karakul-town; and o: the rehabihtation and expansion of the transmission pumping stations and related water tanks to upgrade the producnon and transmission capacitA to about 49,800 m3 per day, all through the carrying out of works and the provision of goods and consultants' serviceS. Rehabilitation and expansion of urban and rural water networks through: ** the rehabditation and expansion of exisung water distribution systerns in Alat-to\wrn and Karakul town, 13 B3Lkhata fRSUE 3ijvonc)vaxý Fiancialen 'r the year ended 11 DecernDer 2C1 n tnousa ds of UI/S 1. Main activities of the Company (Continued) inciuding treated water tanks, treated water pumping stations, disinfection svstems, distribution netwvorks, installation of meters on about 7,200 existing household connections and Instillation of about 1,600 new household connecuons and meters; 9 construction of new rural water transiussion and distribution systeis including pumpmg, storage, networks and metered connections in about 120 of the surrounding villages based on the optinuzed feasibiltn, study and preliminary design cost estimates, all through the carrying out of works and the provision of goods and consultants' services. * nstitutional strengthening and capacity building through the carrying out of insltutional asessiients of the capacity, organization and training needs of the Project linplementing Hntv to improve its management and operational performance for a sustainable water supply service in the Alat and Karakaul distriets. : Strengthening Ihe capacity- of utility managenent and operations staff by providing local and internaional training on management and technical operations, througli the provision of consultants' serv ices and Training. : Strengthening the managenent and operational capacit« of Project limpleinenting .nnt thtoig h " the establshment of modern procedures and systenis, including hardware and software, for billing, collection, custonier service, internal auditing, accoiuntiug and record keeping: " the provision of operations aind ainten:.te equipment; " the provision of laboratory equipment and supplies, al] through the provision of goods, consutiants' services and T-raining. * D)eveloping a commun icaiions strategYV and carrving out of pub.ic consultations and aw,ireness campaign, consumer satisfaction and gender surveys, through the provision of consultants' servces, Preparatio)n (j .a feusibilit, silld\ ( sw alld oll ni s)i1-sae salnitliin x line i 1 neked in iile awn and disric ct o ()tat aniid Klaakil to accompam increaed w;er supply er e, thlr igli 'he prxlon c co n'uL,suham s ServiceS. S1 reng'tihc nii g i the capliaciiy of ie 1Project Coordination i ti l al nit al the lexcl o< el Pm)c 1 t1 iiiPleientin l `ritit 6 >or Pri ici i anage mem, moitorciing andr itc oritionii, tiroughil th i rx of oidi s i c con''duhants erv i ct includting ni iancial and rcchnical audlis, anld Tra1 tiig, ald finlancing of cremenal ()pernling sores about revenue to help investors better understand the natuire, amount, tining and uncertainty of revenue and cash flowns from contracts xwith custotners. The Company has applied the standard in preparing the financial statements for the year ended 3 1 December 2018. The Companiy's revenue from contraets wiith coustoners comprises oie min streati being the sale of drinking water and collection of waste water. Ihe Coipan undertook a comnpreensli ive analysis Of the impact of the new rev enue standard based on a review of the contractual terins of its principal revenie strean with the primary focus being to understand wvhethfer the tining and amount of revenuc recognised could differ under IVRS 15. for the Company`s revenuc stream. the nature and timitng of satisfaction of the performance obligations, and, hence, the arnount and timing of rev-enue recognised under IFRS 15, is the same as that under IAS 18 I FRS 9 "l -nancia Inslimensf IFRS 9. replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measuremient. IRS 9 includes revised guidance on the classification and measurement cd finaicial instruients, includinig a new expected credit loss model for calculation of impairment on tjnancial assets, and the tiew, general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of tnancial instttrients from IAS 39. The Company has apphed IFRS 9 retrospectively., tth the ititial apphation date of 1 January 2018 and has adjusted the comparative information for the period hegining 1 Jatiuary 2018. There were no impacts on 16 Hukhara RSUE Fiaicial statenrts far the year erded "1 IDecember 2018 in thu sars of UZS: 2. New and Revised International Financial Reporting( Standards (cominued) IFRT 9 "Finanaa/Infimmentr" (cie the comparative balances other than a change in classificanon and measurement ot receivables and liabillties. The adoption of IFRS 9 has impacted the foll owing areas: * the classification and measurement of the Company's inancial assets are reviewed based on the new criteria that consider the assets' contractual cash flows and the business model in which they are managed. An expected credit loss-based impairment will need to be recognized on the Company's trade and other receivables in accordance wvith the new criteria. * the impairnent of financial assets applying the expected credit loss model. This affects the Company 's trade and other reccivables measured at anortized cost. For contract assets arising ftron IFRS 15 and trade receivables, the Company applies a simplified model of recognizing lifetime expected credit losses as these items do not have a significant financing component. * the classification and measurement of the Company's financial liabilities are reviewed based on the new criteria anti accounted for at amortized cost usin the effecrivc interest rate method as previously by IAS 39lie reclassification and effect fCrom the adoption of I:RS 9 onl the Company's statement of finaincial position decrease as at lanuarl 1, 2018 s,is follows in thousand UZS Measurement Category Carrying amount Opening Closing balance .balance Original IAS 39 New IFRS 9 deceb e Adoption 1aJane Category Category 31 of IFRS 9 2017 (lAS 39) 2018 (IFRS 9) Financial Assets Trade and other receivables Amortized cost Amortized cos 44 818 284 44 818 284 Cash and cash equivalents Amortized cost Amortized cos 1 065 900 (17 067) 1 048 833 Total 45884184 (17067) 45867117 Financial Liabilities Borrowings Amortized cost Amortized cos 613 540 228 - 613 540 228 Other Financial Liabilities Amortized cost Amortized cos 1 701 867 1 701 867 Trade and other payables Amortized cost Amortized cos 33297 163 33 297 163 Total 648539258 - 648539258 IFRIC Inte(r,1ation 22 Fore (n CurrenI Tinsjation. and - Ia'ace Con.idention 1he Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset. expense or Income (or part of it) on the derecognition of a non iionctary asset or non monetary liabilit relating to advance considera tion, the date of the transaction is the date on which, Company intitially recogruzes the non monetarv asset or non-monetary liability arising from the advance consideration. If there are multiple pay ments or receipts m- advance, then the entity must deternne the date of the transactions for each paymen: or receipt of advance consideration. This interpretation does not have any impact on the Company's financial statements. 17 Bikharm RSUE uSuvokoVa, Frarc:ial staternents for *he year erded 3' Decembe 201, ri thojsans cf UZS7 2. New aud Revised International Fintiancial Reporting Standards (continued) Aendment: lo 1. AS 40 11nur JfInvetmen Pmpenr) The amendnients clarify when an entity should transfer property, including property under constructon or developmen: into, or out of investnent property. The amendmesti state that a change in use occurs when the property meets, or ceases to mee, the definition of investmrent propertn and there is evidence of the change in use. A mere change in management's intentions for the use ofa property does not provide evidence of a change in use. These amendments do not have any impact on the Company's financial statements. Amendments to 111KS 2 Laistiration and leajure ment of Share-base Pa zment T iraacton hlie IASB issued amendinents to IFRS 2 Share-based Pay ment that address three main areas: the effects of vesung conditions on the measurement of a cash-settled share based payment transaction; the classincation of a share-based pavnient transaction with net settleient features for withholding tax obligations; and accountng wvhere a iodifcation to the terrns and conditions of a share based paynent transaction changes its classincaton fron cash settled to equity settled. On adoption, enties are required to apply the amendmients without restating prior periods, but retrospective appheation is permitted if elected for all three amtendi ents and other critera are met. These amendnents are not applicable to the Company. Amedmn to lo 1lRS 41 Aplyin)Ä 111RS 9 linanaa| Inrznmmen witlh 11 I. 1R In enive Compesai on Under IFRS 9, a debt instrument can be measured at arnortised cost or at fatr value through other comprehensive incomne, provided that the contractual cash flows are 'solely pavments of principal and interest on the principal atnount outstanding' lthe SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amiendments to IRS 9 clarify that a financIal asser passes the SPPI critenon regardless of the event or circumstance that causes the carly terrunadon of the contract and 19 Bukhara RSjE «Suvokova» Financial sta:ements fo, thfe year endec 31 De:emrTtier 2018 1n th,usads of UZS; 2. New and Revised International F:inancial Reporting Standards (continued) irrespective of which parry pay s or receives reasonable compensanon for the early ternination of ihe contract. The aiendments should be apphed retrospecrively and are effec,\-e from I january 2019, with earher aliphcation perintted. These amendrments have no impact on the financial stateiments of the Company. A menjment to, J F RS 1(0 and Lii 2&: Sal or onbnimon o Ioets between aN In; e,tor and its - Miso;ate or joænt I etr The amendments address the confi-ct hetween IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendnents clainfy that the gain "r loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognised in full Any gain or loss resulting fron tie sale or conribution of assets that do not constitite a business, however, is recognised only to the extent of unrelated mvestors' interests in the associate or joint venture. The IASB has deferred the etective date of tihese amendments indetnitely, but an entity that cariy adopts the amendiments must apply tiemr prospectivel. Tliese amendmentes are not applicable to the Coipany- Am~edents lo I S 19: Pi 1mendment. Cutaumen or Seemnf The amendents to IAS 19 address the accutliiting when a plan amiendment, curtaihnent (jr settlement ccuirs during a reporiing period. 'Ie amendmlents speeify thati when a plan arnendient, curiailmenit r settlement occurs durig the annual reporting period, an entiti is reqired to: • Determine current service cost for the remainder of the period after the plan amendient, curtailment or setleient, using ihe actuarial assumpuns used to reieasure the net defined beneftt liability (asset) refleting the beneFits offered under the plan and the plan assets after that ev\ent; • Determine net interest for the renainder of the period after the plan arnendment, curtailment or settlement using: the net detined benefit liability (asset) reflecting tle benenits offered under the plan and the plan assets after that eecti; and the discuiint rate used to reieasure that nei defined beneft liability (asse Tlhe amendmients applI to plan arnendments, curtailments, ur setdements oculrring on or after the beginning of the first annual reporring penod that begins on or after I Januairy 2019, ith early appliaion pernutted. Tliese amendieiits wxill apply oil to any future plan amendiients, curtailnients, ur settleienits of the Com panyi. Aimendments toi i 1 28: I »ntennm interests in asadates anjomt; :en!um The anendments elarify that an entity apphes IFRS 9 to long-teri interests in an associate or joint venturt to which the equity method is not applied but that, in subsiance, form part of the nei investnient in the associate or oint veniture (long term interests). This clanfication is relevant because it unphes thar the expected credit loss model in IFRS 9 applies to such long tern interests. The amendiments also elanfied thar, in applying IFRS 9, an entity does not take account of any losses of the associare or loint venture, or any impairient losses on the net investment, recogrnised as adiustnients to the net ivestment in the associate or joint venture that anse from applying IAS 28 lnv estments in Associates and jont Venitures. The amendrments should be applied retrospectively and are effective from 1 january 2019, with carly application permitted. Since the Company does not have such long-term interests in any associate and joint venture, the arnendments wil not have an iupact on its financial statements. 20 Bu- nara RSU3yE- «suvokovåý F rareia scatemerts for the year ended 31 Deceriber 201P r thousands of L/SI 2. Ne-w and Revised International Financial Reporting Standards (continued) Annual Improvements 2015-2017 Cyclc (issued in December 2017) lF;R,S 3 Busnes Combinations The arendinents clarify that, when an enänv ohtains control of a business that is a joint operation, it applies the requirements for a busmess combination achieved in stages, Including remeasurin previously held interests in the assets and labihues of the joint operaton at fair value. In doing so, the acuirer remeasures its entire previously held interest in the joint operation. An entir applies thosc aniendnens to business combinatols for which ithe acquisition date is on or after the beginning of the first annual reporting period beginning on ör after 1 January 2019, with early application permitted. The aniendments will not have an imipact on ie Company's financial statements. IFVR 11 oin! A m rnt A part that pardcilpates in, but does not have joint control of, a joit operation might obtairi joint control of the point operation in which the activ\ity if the joint operation constitutes a business as defined in IFRS 3. The amendienits clarify that the prex-iousy held interests in that joint operation are not remeasured. An entity apples those amendments to transactions in which it obtains iont control on or after the beginning of tie first annual reporting period beginnng on or after 1 jnuary 2019, with early applcation perinitted. lhese amendnenrts are eurrently not app:icable to the Company but may apply to future transactionS. LS 12 Incom;e TJW. Thle ani dments clarify that the incoine tax constquenees of dividends are linked more directly to past transactions or events that generated distributable proftts than to distributions to owners. Therefore, an entitv recognizes the incorne tax consequenes ofdividends in profit or loss, other comoprehensivc incoime or equity according to where the enuity onginally recogeiied those past transactions or events. An enrtiy apples those amendients for annual reporting periods beginning on or after 1 January 2019, wii carly applicarion is permiitted. WVhen an ennty first applies those amendienis, it applies then t the income tax consequences of dividends recognized on or after the begirming of the earhest comparanetik period. The Company does not expect significait effect on its financial statements. L U S 3 Bonwaa'y Cost The amendinents clarify that an entitv treats as part of general borrowings an\ borrowing originally made to develop a qualifng asset when suhstaitially all of the activities necessan to prepare that asset for its intended use or sale are complete. An entity apphes those amendients to horrowing costs incurred on or after the beginning of the annual reporting period in vhiich the entity first applies those amendmients. An entity applies those amendnents for annual reporting periods beginning on or after 1 january 2019, with carlv applcation pernitted. The Company does not expect signincant effect on its tinancial starements. 3. Significant Accoutiing Policies Statement of compliance The financial statements of the Company have been prepared in accordance with Internattonal Financial Repordng Standards ("IFRS") as issued by the International Accouriting Standards Board. 21 Bukhara RSUE o:Suvokova>> Financ I statements for the year ended 3' December 2018 tin t'housands of UZS) 3. Significant Accounting Policies (continued) Basis of preparation The financial statements have been prepared on the historical cost basis except for certain financial instrumntrs titially recognized at fair value. The financial statements Of the CompanY are presented in I zhek Soums (hereinafter - "UZS"). The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The functional and presentation currency of the financial statements of the Compan, is UZS. All amounts in these financial statements are rounded to thousand unless othevrise stated. Going concern basis Tliese financial statements reflect the current assessimient byv the ianagetent of the Compan\ of the impacts that affect the operations and financial position of the Company. The future development of the economy of the Republic of Uzbekistan largely depends on the effectiveness of the measures taken by the Governmetu of the Republic of Uzbekistan and other factors, including legislative and poliucal events that are not controlled by the (CompllIan . The ComlpanY's managenient is not in a position to predict the effects of these factors on the financial condition in the future. Nlanagernent believes that the Compan vill continue to operate as goin concern basis. In making this decision, rmanagetnent had in mind the current intent and coniltinued support ot the State, Nanagement believes that the State w,vill enable the COMpani to fulfill its Obligations in the future. Accrual basis These financial statements were prepared on the accrual basis. lhe accrual basis assumes ensures recognion of the results of business operations, as well as events when they occurred, regardless of the tine of palmc. Transactions and events are recorded in the accounting and included in the financial statements for the periods to which they relate. Recognition of the elements of financial statements 1hese financial statements include all asset., liabilities, equity, income and expenses, which are the elements of the financial statements. All elements of the financial statements are presented on a lincar basis. Tle inclusion ofseveral elements of the financial statements into a single item is made taking into account their characteristics (functions) in the Company's operations. Each material class of similar items is presented separately in the financial statements. Items of a dissimilar nature or tunctioni are presented separately unless they are immaterial. Foreign currency translation In preparing the financial statements, transactions in foreign currencies other than the ftinctional currency (foreign currency) are carried at the exchange rates prevailing as at the transaction date. Monetary items denominated in foreign currencies are translated at the exchatige rates prevaiing as at tile reporting date. Non-monetary items denominated in fore!ig,n Currencies that are measured at fair value are translated at the exchange rates prevailing at the date of determination of fair value 22 Fiukqara RSUF ('Suvokovan' F-iIanaI state-nts for tIe year ended 31 Dec-ember 201R (in hu sands of IS 3. Significant Accounting Policies (continued) Non-monetary items measured at historical cost, denominated in foreign currency, are not retranslated. Exchange differences on monetary items, which arise as a result of changes in the exchange rates, are recognized in profit or loss in the period when they arise. The I Uzbek sum was chosen as the functional currency, as well as the currency in which these financial statements are presented. All financial statement data has been rounded to the nearest thousand, Foreign currencies, especially the US dollar and the Euro, play a significant r(ole in deternining the economic parameters ot many business transactions in the Republic of Uzbekistan. The table below shows the rates of .zb[ek Som against the US dokllar and luro, estabsheild by the Central Bank of Uzbekistan: Date US dollar EURO 31 December 2018 8,339,55 9,49 i7 31 December 2017 8,120A0 9,624. 2 According to the Decree of the President of the Republic of Uzbekistan "On Priority Measures for the Liberalization of Monetar Policy" No. j17-7 (ated September 2, 2017, in order to increase the cfficieicY of foreign exchange flows based on market principles, create a favorable investment and business climate to attract foreign investment, as vell as increase the stimulating the role of monetary policy in foreign trade, the rate of national currency in relaton to foreign currencies is estabhlished at the interbank electronic trading of the foreign exchange lyuchitcino based on supply and demand, Since September 5, 2017, the national Currency of the UZS has been devalued, the rate of I (one) US dollar is equal to 8,101) U/S (before the devaluation of 4,210.35 UZS). Property, plant and equipment An item is recognized as property, plant and equipment when it is highly probable that future economic benefits associated with the item will flow to the Coinpany, and the actual acquisition cost of the asset can be measured reliably. I listorical cost of property, plant and equipment includes the purchase price as well as import duties aInd other non recoverable taxes, borrowing costs, which are directly attributable to construction of long-term projects if recognition criteria are met, and also direct costs attributable to bringing the asset to the working condition and delivery to the place of its intended use. Subsequent costs incurred after the entry of property, plant and equipment into operations, such as repair and maintenance costs are usually recognized as an expense in the period in which these costs are incurred, Costs, which result in an increase in the expected future econonic benefits embodied in the asser beyond its originally assessed performance are capitalized as an additional cost of property, plant and equipment. All other costs are recognized as expenses in the reporting period when they incurred. After initial recognition as an asset, the item of property, plant and equipment is stated at historical cost less depreciation and impairment losses, if any. 23 Bukhara RSUE MSuvokovan F rancial statemeits for the year ended 31 December 2018 tIhousadds of ZS I 3. Significant Accounting Policies (continued) The iuseful lire of property. plant and equipment is determined taking into account the expected use of an asset and mav be shorter than its economic life. lhe useful life of property, plant and equipment is a matter of judgment based on the experience with similar assets. The Company determines the following useful liVes for property, plant and equipment: Category of property, plant and equipment Usefil life Buildings and constructions 30 years Machinery and equipmtent 8-12 vears Vehicles 5 years lther years The usetill life of items or property, plamt and equipment and their residual value may be revised byi management as necessar-, considering all factors, which influence future economic benefits and the Companl's intentions wvith respect to the use of property, plant and equipnciit. Depreciation of property, plant and equipment is recognized in the stateiient of comprehensive income and is calculated using the straight-line method over the expected useful lives of the assets. [pon sale or disposal of assets, its cost and accumulated depreciation are clininated from the respective accounts, and any gain or loss resulted from its disposal is included in the statement of comprehensive 1n00r0lc. Impairment of non-financial assets An assessment is made at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, Nanageient estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or a cash-generating unit's 'CGU) fair value less costs to sell and its v-alue in use and is determined for an individual asset, unless the asset does not generate cash in flowvs that are largely independent of those from other assets or groups of assets, Where the carrNing amount ofan asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written dovn to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a prc-tax discount rate that reflects current market assessments of tle time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. Uncertain tax positions Management reassesses the Company's uncertain tax positions at the end of each reporting period. Obligations are recorded for those income tax positions, which, according to management, are likely to result in additional tax charges II case of disputing these positions by the tax authorities. Such an assessment is performed on the basis of the interpretation of tax legislation in force or substantively enacted at the end of the reporting penod and any knovn court order or other decision on similar matters. LiabiLties for fines, penalties and taxes, except for income tax, are recorded based on management's best estimate of the expenditure required to settle the obl.gations at the end of the reporting period. 24 Bukhara RSUE Inac ia statements for the year rded 31 Decemf 21.i n thoisands of UZSi 3. Significant Accouiting, Policies (continued) "12 month expected credit losses" are recognised for the first category while 'lifetime expected credit losses' are recognised for the second category. If the terms ofan impaired financial asset held at amortized cost are renegotiated or otherwise modified because of financial difficulties of the counterpartn, impairment is measured using the original effective interest rate before the modification of terms. Uncollectible assets are written off against the related impairment loss provision after all the necessary procedures to recov er the asset have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously wratten off are credited to impairment loss account within the profit or loss for the ycar. Current corporate income tax Tax assets and liabilities attributable to the current corporate income tax for the current and previous periods are measured at the amount recoverable from tax authorities, or payable to tax authorities. Tax rates and tax laws used to calculate these amounts, are the rates and laws, which have been actually adopted as at the reporting date in the countries in which the (Omupan operates and generates taxable income. Current corporate income tax attributable to items recognized directly in equity is recogiized in cquity. Capital Share capital is the aggregate in monetary terms of contributions (shares at a nominal value) of the founders (shareholders) in tie Company's property when it is created to support the activities, within the framework defined by the constituent documents. The share capital of the Company is the collective property of the founders and at the same time the property of the CompanN as a legal entity. The procedure for foirming and changing the share capital is regulated by the legislation of the Republic oC 'zbekistan. Capital of restricted use Contributions of the Government of the Republic of Ulzbekistan are capitalized upoi receipt and are recorded at fair value, which are designated as cash and in kind as Capital of restricted use ini cqUIit. Foreign currency revaluation The functional currency of die Company is the currency of the underlying econonic enixironnment in which the company operates. The functional currency and reporting currency of the Company is the national CUrrency of the Republic of Uzbekistan Uzbek Sum (hereinafter referred to as "UTIZS"). Monetary assets and liabilities are transferred to the functional currency of the Company at tie official exchange rate of the Central Bank of the Republic of Uzbekistan (CM.", for the respective reporting dates. The gains and losses arising from the settlement and the translation of ionetary asseti and liabilities into the functional currency of the company at the official rate at the end of the year are recognized in the statement of comprehensive income. Recalculation at the exchange rate at the end of the year is not carried out with respect to non-monetary items of the balance sheer, measured at actual costs. Events after the reporting date Post year end events that provide additional information about a Company's position at the statement of finaticial position date (adjusting events" are reflected in the financial statements. Post-year end events that are not adjusting events are disclosed in the notes when material. In terms of its products, the Company has 30 Btkhar a RSUF hnnl sta ens sica fo, tie year erded 3' December 2018 tin lhousands af UWSI 3. Significant Accounting Policies (continued) one business segment, ie production and sale of additives and materials for the construction industry. Related party transactions According to JAS 24, "Related party disclosure", the Company discloses the nature of the related parly relationships as well as information about those transactions and outstanding account balances necessarn for an understanding of the potential effect of the relationships on the financial statements. In these financial statements related parties are considered to be those that have the ability to control or exercise significant influence over operating and financial decisions ofotLher party. \Wiei decidig on whether the parties are related, a substance of the relationship is taken into account, and not merely its legal form. Significant accounting judgments and estimates Preparation of financial statements in accordance with IFRS requires the preparation of judgicnts by management of the Company and use of subjective estimates and assumptions that affect recorded amount, of assets and liabilities and dhSisUre of information about ptential assets and liabilities at the reporting date of financial statements and recorded amounts of income and expenses during the reporting period. E'ven though the estimates are based on historical knowvledge and othcr significant factors, events or actions may anse in such a manner, so actual results may di ffer from these estimatiims. Key assumptions for future and other key sources of estimation of uncertainty at the reporting date that have a significant risk of material adjustment to the carring amounts of assets and liabilities within the next financial year are presented below: Iptairvient' of Proper!, ph and equipmen The Company assesses whether there are an' indicators of impairment of the carrying aniount of property, plant and equipment at each reporting date. Impairment is based on many factors such as: current competitive environment, changes in the expected growth of industry, changes in the availability of fitiancing in the future, techiiological obsolescence. discontinuance of services, current replacement costs and other changes in conditions that indicate a significant impairment. If any such indicators exist, the recoverable amount of asset is estimated and compared to its carrying amount. If the carrying amount exceeds the recoverable amount of assets, impairment is recognized. The recoverable amount is determined as the higher of two values: fair value less costs to sell or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate before tax. which, in management's opinion, reflects current market assessments of uine value of otine and assets' inherent risks. The change in estimated recoverable amount can lead to impairment or its recovery in tuture periods. Based on t-he assessment, the Company concluded that there are no any indicators of impaurment as at December 31, 2018. Ini assessing tax risks, Management considers probable obligations the known areas at tax positions which the Company would not appeal or does tiot believe it could successfully appeal, if assessed bv tax authorities. Such determinations inherently invo -e significatit judgment and are subject to change as a result of changes in tax laws and regulations, the determination of expected outcomes from pending tax proceedings and the outcome 31 Bu~khara RSJ[ «Suvokoivay F nan al s:a: remIs ore ve:ar ended 31 Decernberýb Xjt 20 sdsi at U/S; 3. Significant Accounting Policiks (continued) of ongoing compliance auds by tax authorities. Further uncertainies related to taxes are detailed in Note 22. Pro:rismynfo,`rdobides The Company recognizes provisions for doubtful accounts receivale. DoubtfuLI accounts are estimared considering pre-ious and expected performance results of the customer. Changes in -he econorn. the setor, or the specific characteristics of the custoner may requirc adjustments in the provisi>n for do ib!ttl debts reflected in the financial statements. C inHewi and ådbzie. Contingent assets are not recognized in the statement of financial position, and information about tliei is disclosed in the financial statements in cases wdhere it is probable that the econoiic benefits asscated with them will be received. Contingent habilities are tot reco)rded in the statement of financial position, and information about them is disclosed in the financial statements. unlecss the outtlow of resources duc to tlieir redemption is unlikely. 32 BjIaTa RSUE- 4Suvokov,a Financ al stalemen*s for the year rndcd 31 Decemher 2018 (n thousarcs of UZS 4. Propcrty, plant and equipment Buildings and Machinery and Computers and Construction in- Total constructions equipment office equipment progress Gross carrying amount Balance 1 January2018 13298494 69664 126 822835 152722781 236508236 Additions - - 277 176 207 171 358 207448534 Internal reclass 34 042 778 (34 042 778) - - - Transfers 2 968 - - (2968) - Disposals - (55 586) (39 802) - (95 388) Balance at 31 December 2018 47344240 35565762 1 060209 359891 171 443861 382 Depreciation and impairment Depreciation (4072861) (5513780) (45 520) - (9632161) Disposals - 55586 23634 - 79220 Balance at 31 December 2018 (4072 861) (5458 194) (21 886) - (9 552 941) Carrying amount 31 December 2018 43 271 379 30 107 568 1 038 323 359 891 171 434 308 441 THie book value of the "Buildings and constructions" group reprcsents the ct o v te sewage treatment plant building and the sewage network system. lie book value of the "Machinery and equipment" groups is the cost of tractors, trucks used for cleaning the sew age sVsten and pumps. ItOnimplete construction is mainly the cost of reconstruction of sewage treatment plants and sewage systems. 33 BuKhava RSUE .SL%.Iova F inai a staeients for the 'Ar enJed 31 Deceibe- 2018 fn t hosands Cf UZS1 4. Property, plant and cquipment (contintud) Buildings and Machinery and Computers and Construction in- Total constructions equipment office equipment progress Gross carrying amount Balance 1 January2017 18038688 70596246 858260 66795280 156288474 Additions 146 766 - 10375 86050669 86207810 Internal reclass - - (123168) (123168) Transfers - - - - - Disposals (13 465) (12 925) (5 504) - (31 894) Balance at 31 December 2017 18171 989 70583321 863131 152722781 242341 222 Depreciation and impairment Depreciation (4 886 685) (932 118) (45 800) - (5864603) Disposals 13 190 12923 5504 31 617 Balance at 31 December 2017 (4873495) (919 195) (40 296) - (5832986) Carrying amount 31 December 2017 13 298 494 69 664 126 822 835 152 722 781 236 508 236 34 Bukhara RSUF oSuvokova) Fdrianal statements for tIe year endeo 31 Decembe 20!8 i.n thouLsanIs of U/S Investients in the Suvakava District According to the orders of the Cabinet of Ministers of the Republic of LCzhekistan, Izbekistan No. 215 dated October 16, 2015 and No. 306 of October 30, 2015, "On Measures to implement the Main Directions for the Development of Water Supply and Sewerage Organizations," the Company was reorganized as the Suvokava State Unirar Fnterpnse and is a commercial organization. Al areas were merged into the Company, 6. Deferred expenses Deferred expenses inchude a one-time commission of one percent of the prnucipal amount of the I BRD lo)an. These deferred expenses for the loan period of 20 years. 7. Inivenitories 31 December 2018 31 December 2017 Spate parts 897488 451 504 Water meters - 12 163 Raw materials and materials 1 734413 1 337401 Stationery and fuel 746182 327539 Total inventory 3378083 2128607 Inventories are ra\v materials, stationery, inventoY and houschod items, spare parts and are recorded at historical co)st Raw materials mainly include chemicals use d in a sewage treatment tank, reinforced concrete CUrbs and manholes, as well as various cast iron devices (bends, latches. valves, etc.). Spare parts include spare parts for vchiclcs. excavators and tractors purchased from suppliers used in the dialy acuvtics of the (oipany s. Trade receivables and wther rccei-ables Below is infonnation on other receivables: 31 December 2018 31 December 2017 Financial assets Trade receivables 27019 793 48428232 Less provision for impairment (4 343 728) (4 343 728) Total financial assets 22676065 44084504 Non-financial assets Prepayment 68536316 519 Prepaid taxes 655558 377313 Other receivables 360891 360986 Less provision for impairment (1 421 753) (5 038) Total non-financial assets 68131012 733780 Total trade receivables and other receivables 90 807 077 44 818 284 The accounts receivable for the main business, with a maturty of less than three months, are not considered as overdue debts. 35 Bukhiara RSUE <w: 31 December 2018 31 December 2017 Total % Total % Legalentities 13768975 61% 37762551 86% individuals 8907090 39% 6321 953 14% Total trade receivables 22676065 100% 44084504 100% The following is an analysis of trade receivables for credit quality as of 31 l)ecember 2018: 31 December 2018 31 December 2017 Legal Individuals Total Legal Individuals Total entities entities Neither past due nor impaired Currentaccounts 12352260 8907090 21259351 37380611 6321953 43702564 receivable Currentandnon- 12352260 8907090 21259351 37380611 6321953 43702564 impaired With a delay of payment from 90 to (1416715) - (1416715) - -- 365 days With a delay of payment more than - - (381 940) (381 940) 365 days Totaloverdue and (1416715) - (1416715) (381 940) - (381 940) impaired Pro\sionfor 1 416 715 - 1416715 381 940 - 381 940 impairment Total accounts receivable, net 13 768 975 8 907 090 22 676 065 37 762 551 6 321 953 44 084 504 amount 36 Huýr,hwa RSUJF ,Stivoova) - n.ncia ståternents 'or .he yar endes 31 December 201 E mousands of UZS; 9. Cash and cash equivalents 31 December 2018 31 December 2017 Ham kor Bank - Current account in US dollars - lpoteka Bank - Special accounts in UZS 327 528 967 625 Hamkor Bank - Special Account in UZS 139680 49302 lpoteka Bank - Current account in UZS 484 45 286 National Bank - Special accounts in UZS 3515 Cash in transit 19996426 Corporate card 172 172 Effect of IFRS 9 (17 607) - Reversal for the year 12034 Total cash and cash equivalents 20458717 1 065900 T~he special account in UiS dollars and Euros is a spectal account with the joint Stock (Cotntircial Bank "Asaka" for accounrting of funds received on IBRD and 11).\ loans, The company has a current account in tie 1ZS in the AICB "poreka-bank" and in the bank "laikorbank" and the blOck account for conversion into the JSCB "\saka". .joint-stock conmiercial bank "1 1aikorbank" xwith parficipation of foreign capita]. according to Moody's ratings, has a deposiratating in national currency with the "B2" rating, a deposit rating in foreign currenc "B2", and a basic credit rating of the bank "b1". The outlook for all ratngs is "Stable". According to the agency Standard & Poor's, the joint-stock ecominmercial morigage bank "lpoteka-bank" has a "B + / B" rating with a "Stable" outklok. The assigned rating of 1ICB "Ipoteka-bank" is one of the highest amorng the ratings assigned to the coniniercial banks of Uzbekistan, which has a rating from the agency Standard & Poor's. The international rattng agency Mtoody's has affirmed the ratings of the jointt Mortgage Bank AlCB Iputeka Bank for deposits in naIOnal currencY and foreign currency at B2 level. All ratings at Ipoteka bank have a torecast "Stable". Joint-stock comiiercial bank "Asaka" according to the international raring agency "1Fitch Ratings" has an international credit rating "Stable". Also, the international rating atncy "MNood's" assigtined the rating of the bank "\saka" at the level of "Stable". 10. Chartered capital 31 December2018 31 December 2017 Charted capital 3369845 3369845 Total Chartered capital 3369845 3369845 The Companyx was registered by Decrec No. 589 of June 24. 1978, by the Council of MiNnisters of the Soviet Socialist Republic of Lzbekistan. 'Ihe company has the nights of an independent economie enterpnse and is managed in accordance with the legislaton of the Republic of 1zbekistan. I he share of the Gov,ernient of the Republic of Uzbekistan n the authorized capital of the Company is equal to one hundr d percent, the arnount of the authoried capital of the Company is direcily regulated by the Governmnemt of the Repubbe of Uzbekistan. 37 Bukhara RSUE <penses on long-term borrowings (5587312) (5038207) Loss from revaluation of foreign currency on financial activities: Long-term borrowings (83 958 366) (332 802 991) Accounts payable on principal other activities accounts payable Financial expenses (89545678) (337 841 198) Profit from revaluation of foreign currency on financial activities: Long-term borrowings -8 601 Financial income 8 601 21. Inconie Taxes The Company compiles tax payments for the current period on the basis of tax accounting data that is carned out in accordance with the requirements of the tax legislation of the Republic of Uzbekistan, which may differ from IFRS. Differences betwveen IFRS and the tax egislanon of the Republic of Lzbeklstan result in certain temporary differences between the carring amount of a number of assets and liabilities for the purposes of compiling financial statements and for the purpose of calculating the corporate income tax. Tax on income (profit) by the Company is accrued in accordance with the Tax Code of the RepublC of Uzbekistan. The current tax rate on income (profit) for the Company in 2018 amounted to 14 percent of the taxable profit4 43 Bukiara RSUE iSuvokovan Financial statements for the year ended 31 December 20*8 (in thousands of UZS- 21. Income taxes (continued) In accordance with the tax legislation of the Republic of 'zbekistan, the Companv also pavs other taxes and deductions related to its operating activitles. 2018 2017 Loss before tax (82 023 899) (340 663 831) Estimated amountof compensation for income taxata statutory (11483346) (25549787) rate of 14% (2017: 7.5%) Non-deductible expenses 11483346 25549787 Income tax expense for the year - - 22. Conitingent liabilities Legal issues. In the normal course of business, the Companv is subject to lawsuits and claims. In the opinion of the management, the probable liabilities (if any) arising from such claims or claims will not have a material adverse effect on the Financial position or performance of the Company in the fture, Insurance. The market of insurance services in the Republic of U lzbekistan is at the stage of formation and nIV torms of insurance, common in other countries of the world, are not yet available in Uzbekistan. li comp3anY doles not have full insurance coverage for its production facilities; losses ciused by production delays, or incurred obligations to third parties due to damage to real estate or tile environment caused bw accidents or the Company's activities. Until the Conipanv has full insurance coverage, there is a risk that the loss or damage of certain assets could have a material adverse effect on the Company's operations and financial position. Tax law. Currently in the Republic of Uzbekistan there are a number of legislative acts regulating the system Of taxes paid to the Republican and local state budgets. These taxes include value added tax, income tax, and a number of other taxes and social deductions. The tax legislation of the Republic of Uzbekistan is subject to varinig interpretations and sub ect to frequent changes. Often there are different opinions regarding the interpretation of legislative acts both between different departments and xwithin one department (ic the State Tax Committee and its various inspections), which creates unccrtainty and the ground for various disputes. Tax declarations and other legal obligations 'for example, questions of cIstoms and currency regulation, are subject to review and inspection by a number of agencies that by law have the right to apply significaint administrative penalties (including fines and penalties and may take a tougher position in the interpretation of legislation and verification of tax calculations. As a consequence, tax authionties Inay tile claims for those transactions and accounting methods for which they did not make claims before. This situation creates a greater probability of occurrence of tax risks it the Republic of IU xbekistan than, for example, in other countries with more developed taxation systems. Tax inspections can cover five calendar years of activity, imnediately preceding the year of verification. Under certain conditions, earlier periods may be subjected to verification. As of 31 December 2018 management believes that it adheres to an adequate interpretation of the relevant legislation, and the Company's position regarding tax, currency and customs issues will be supported by the controlling bodies. 44 Bukhara RSUE 4Suvok(ova> Firarcial statements for the year endea 31 Decnemte 2318 in thousards of UZS; 22. Cotinimcnt liabilities (continted) Credit related conmitments. The main purpose of these instruments is to ensure the prcvision of funds to customers as necessary. The total amount of obligations for guarantees. sureties, letters of credit and other financial liabilities does not necessarily represent future cash requirements, as the expiration or cancellation of these obligations may be possible without the provision of funds to the countcrparty, Nevertheless, there is a potential risk, therefore, in the statement of financial position, among other obligations under guarantees, provision is made for a loan commitment in respect of provided guarantees and guarantees, depending on the financial condition of the client. The management of the company does not control issued credit related connutments, as it bheliees there will be no obligation and accordinglY no provision for these contingent credit liabilities has been created. 23. Related Party Transactions For the purposes of these financial statements, the parties are considered to be related if one of them has the abiht to control the other or exercise significant influence in naking other finiancial and operational decisions by the other party as set out in IAS 24 "Related Party Disclosures". In considering all possible relationships with related parties, the economic content of such relationships is taken into account, and not onY their legal form. The companw is a state enterprise wvith 100t state share in the authorized capital. The conpany purchases goods and serxices from a large number of enterprises \ith state participation. Such purchases are individually small amounts and are usuall carried out connmerciallx. The transactions wiih the state also include settlements on taxes. Management believes that transactions with related parties are carried out on termns eqimvalent to market conditions. Transactions with related parties are not secured and are not guaranteed by third parties. Key management personnel of the Company receive short term compensation, including salaries, paid leave and paid sick leave, bonuses and other pymets. The total amount of payments to the Company's top management is not public information. 24. Seimetit Information Operating segnients are components that carry out CeConomic activities, Vhile thex can generate revenue or maxy be related to expenses. the operating results of the segments are regularly analysed by the supreme operational management body, and financial information is available for operating segments. The highest operational management body can be represented by one person or a group of people who allocate resources aind e%aluate the results of the coipati's activities ThIe functions of the supreme operational management body are performed by the Company's Management Board. The operating segment of the Company's reporting is one operating segment, namely, investment portfolio management of subsidiaries, associates and joint ventures. The management evaluates the operating results of the segnient to make decisions about the allocation of resources and evaluation of their performance. The Management does not divide the Company's assets atid liabilities into segments, as all assets and liabilities are accounted for by the Comipany's only reporting segmncrit. To Conduct an analsis of the Company's operations and make decisions based on this aialysis, the Company's Management Board is provided with financial results in the form of operating reports for one segment. Ilie financial results in this operating statement do not differ from those in the financial statements. 45 Kikhara RSUE «Sjvokovay F; ran cal staterments fOr the yoar e:idccS De1 ' be 20 . r tt:n.c:s ot UZSf 25. Fair value Fair value is defined as the price at which the instrument can be exchanged as part of a current transaction betwcen interested parties willing to enter into a transaction on market tenns, other than forced sale or liquidation. The best conirmation of fair valuc is the quoration of a financial instrument in an active market. Since tor most of the Compan,'s financial instruments there is no liquid market, their fair value must be determined on the basis of current market conditions and specific risks associated with a particular instrumeint. The Republic of Uzbekistan continues to show some features of the dev eloping econoyiv, and the existing economiic conditions connnue to restrict actvines in the finaicial market of the Republe of Vbekistan. Information on the financial market can be outdated and therefore cannot represent the inarket valuc of financial instrunents. All ntnancial instruments of the Company are accounted f0r at anortized cost. Tlheir fair value at Level 3 of the fair value hierarchi was estinated using the disconed cash fow method. Financial assets carried at amortized cost The estimated fair valuc of fixed interest rate instruments is based on the method of discounting the aiounts of expected future cash flows using current interest rates tor new instrurnents that involve a similar credit risk and a sinilar maturity. The discount rate used depends on the credit risk of the counterpartv. The carrying aniount of financial assets otlier than investment in the Company is approximatey eqial to their fair value. Liabilities recorded at aniortized cost The fair value of habilies is determined using the valuation technique. The estimated fair valuc of the instrument with a fixed interest rate and a fixed niaturity is based on the expected discounted cash flows Using interest rates for new instriments with similar credit risk and a sinilar period to maturity. The fair valie of labilies repayable on demand or redeemed in advance notice ("habihties payable on deniand") is calculated as the atmount payable on deniand, discounted starting fronm the tirst date of the poteninal presentation of the demand for settlenent of the obhgation. 1iscount rates used vary froi 2.5 to 12, per annum depending on the inaturity date and the eurrency of the obligation. Duc to the short maturities, the boo k value of short term financial pay-ables approximates its fair value. 26. Risk Nlanagcient 'ihe Chairman of the Management Board has overall responsibility for the organization of the Conipany's risk tnanagement system and for oversecing the operation of this system. The risk management of the Compaiv is carried out in respect of financial risks (market, curreney, interest, credit nsks, liqtudlty nsks) The Company's main task in risk management is to idenufi and analyze the rsks faced by the Company, estahlish acceptable risk limits and appropriate control mechanisins, and for monitoring riks and compliance with die need to make changes in connection with changes in market conditions and the Company's operations. Market risk Market risk is the risk that changes in inarket prices, such as foreign exchange rates and interest rates, will affect the Company's profits or the value of its available financial instruments. The goal of narket risk management is to control exposure to market risk and keep it within acceptable lirnits, wvhile seeking to optnmuze return on investment. 46 Bjkha ra RSUE aSuvokovay F nancal statements for Me year ended 31 December 2018 1 n thousands of UZS) 26. Risk Managemntt (Conuiiued) Currency risk The Company is exposed to foreign exchange risk on the following transactions: provision and receipt of loans in foreign currency; mutual settlements with related parties in foreign currency. Due to the underdevelopment of the instruments of cirrency risk management in the financial market of Uzbekistan, the Company does not effect Currency risk insurance. The table below shows the changes in the financial result and aggregate income as a result of possible changes in exchange rates used at the end of the reporting period, while all other conditions reman unchanged. A reasonably possible change in the exchange rate for each currency is determined on the basis of the extreme kiits of the fluctuations of the rates changed in comparison with the semi-annual dynamics of 2018 with the current rates (for 2017 annual). The semi annual change in the rate is only for strengthening foreign exchange. The risk wvas calculated only for cash balances in currencies other than the functional currency of the Company 'Ilie change in the exchange rate will be further negatively reflected in the financial position of the Company, as the Company is forced to attract credit resources from banks and international financial institutions to fulfill the whole investment obligations. According to the Decree of the President of the Rcpublic of ['zbekistan "( )n Priority Measures to I.iberalize Mlonetary Policy" No. 5 17 dated September 2, 2017 in order to increase the efficiency of fOreign exchange flows based in market principles, create a faxncable ivestemnt anid business cliiate to attract oreigi investment, as well as boost stimulating the role ot I ninetarv policy in foreign trade, the rate of natiotal currency in relation to foreign Currencies is established on the interbank electronic trading of the currency exchange only based on suppl and derand. Since September 5, 2017, the national currency of the UZS has been devalued, the rate of 1 (one) USD is equal to 8,100 U/S lbefore the devaluation of 4,210.35 U/S1). Changes in the exchange rate adversely affected the financial statements of the bank, and led to the receipt of a substantial CIrrency loss from the revaluation of currency items through the income statement. The following table provides an analysis of the Company's currency risk as of 31 December 2018 hlie Company's financial assets and liabilities are shown in the table at face value in terms of major currencies. UZS U.S. dollar EURO Others 31 December USD 1 EUR1= 2018 8,339.55 UZS 9,479.57 UZS Financial assets: Cash and cash equivalents 20458717 - - 20458717 Long-term accounts receivable -- - -- Trade receivables 22 676 065 - - 22 676 065 Total financial assets 43134782 - - 43134782 Financial liabilities: Trade payables 62016573 - - - 62016573 Longtermloansandsemi- - 793150924 76531212 - 869682 136 deferred loans Short-term loans and bortoting loeceind 3525483 16111 112 - - 19636595 borrowings received Other financial liabilities - 1 701 867 - - 1 701 867 Total financial liabilities 65542055 810963903 76531 212 - 953037171 Open balance sheet (22 407 273) (810 963 903) (76 531 212) - (909 902 388) The following table provides an arnalysis of tie Company's cUrrency risk as of 31 December 2017, The Conipaiy's financial assets and liabilities are shown in the table at face value in terms of major currencies. 47 Bukhara RSLJE cSuvokovan Financal statemrents for the yeaf ended 31 December 2078 in thousands of UZS, 26. Risk Management (Continued) UZS U.S. dollar EURO Others 31 December USD1= EUR1= 2017 8,120.07 UZS 9,624.72 UZS Financial assets: Cash and cash equivalents 1 065 900 - - - 1 065 900 Long-term accounts receivable -- Trade receivables 44 818 284 - - 44 818 284 Total financial assets 45884184 - - - 45884184 Financial liabilities: Trade payables 33297163 - - - 33297 163 Long-term loansandsemi- - 558296650 29726639 - 588023289 deferred loans Short-term loans and 9405827 16111 112 - - 25516939 borrowings received Other financial liabilities - 1 701 867 - - 1 701 867 Total financial liabilities 42 702 991 576 109 629 29726 639 - 648 539 259 Open balance sheet 3 181 194 (576 109 629) (29 726 639) - (602 655 074) Analysis of sensitivity to foreign exchange risk The following table provides an analysis of the sensitivity of the Company to 30 a and 151 of the increase and decrease in the sum to the US dollar and curo as of 31 Decemnber 2018 and 201'. 2` and 181 i respectively. Management beheves that, given the current economic situation m the Republic of Czbekistan, it is possible that the exchange rate of the sum aginst the US dollar and euro will fluctuate up to 50 0 This level of sensitivity is used internally by the Company when preparing currency risk reports for key management personnel of the Company and represents management's assessment of possible changes in exchange rates. The sensitivity analysis includes only the foreign currency amounts available at the end of the period, with the conversion at the end of the year using rates that are changed by S"5n compared to those in effect as of 31 December 2018 and 2017, respectively. 31 December, 2018 31 December, 2017 UZS/USD UZS/USD UZSIUSD UZSIUSD +3% -3% +151% -151% Impacton net income and equity (24 328917) 24328917 (869 925 540) 869925 540 31 December, 2018 31 December, 2017 UZSIEUR UZS/EUR UZS/EUR UZSIEUR +2% -2% +181% -181% Impacton net income and equity (1 530624) 1 530 624 (1 042 758 429) 1 042 758 429 48 Dukhara RSUE vSuvokovay Financ a statemen!s for the yea end :! 1 i DecPmiber 201 iO r t* ousanrds of UZSi 26. Risk Managemient (Continued) Limitations of sensitivity analysis The above rables reflect the effect of a change in the main assumption, while other assumptions remain unchanged. In fact, there is a connection between assumpions and other factors. It should also be noted that the sensitivity is non-linear, so interpolation or extrapolation of the results should not be performed. The sensitivity analysis does not take into account that the Group actively manages assets and liabilities. In addition to this, the financial position of the Company may vary depending on the changes taking place in the market. For example. the Group's strategy in the area of financial risk management is aimed at managing the risk of market %-olatilhty. In die case of sharp negative price fluctuanons in the securities market, management can resort to such methods as selling investients, changing the composition of the investment portfolio, and also to other methods of protection. Therefore, the change in assumptions may not have an impact on liabilities and significantly affect the assets recorded on the balance sheet at the market price, In this situaton, different methods of assessing assets and liabilities can lead to significant fluctuations in the amount of Capital, Other limitations in the above sensILIVit analVsis include the use (wkith the aim of disclosing the potential risk) of hypothetical market movements, which are lust the Coimpany's forccast of fOrthcoming market changes that can not be predicted with any degree of certainty. Also a limitation is the assumption that all interest rates change in an identical vay. Interest rate risk. The Company assumes the risk associated with the effect Of tluctuations in market interest rates on its financial position and cash flows. Such fluctuations may increase the level of 1inst margin, but in the event of unexpected changes in interest rates, interest margin ma\ also decline or cause losses, Changes in interest rates aftect mainly borrowvcd loans and loans, changing either their fair value 'fixed-rate debt) or future cash flows :variable rate debt). When attracting new loans or loans, the management decides whether a fixed or variable interest rate will he more beneficial to the Company during the expected period before niaturty, based on its own professional judgment. The change in the floating interest rate during the reporting period would not affect the profit or loss for the period, as all borrowed loans w-ere received with a fixed interest rate. The refinancing rate establslied by the Central Bank of the Republic of t'zbekistan since September 25 2018 has been increased from 1-o to 16%g. This change may have a negative impact on the financial position of the Company, as the Company is forced to attract credit resources from banks and internantional tinancial insntutions in order to fulfill the whole investment obligations. Credit risk. The Company is exposed to credit risk, namely the risk that one party to a financial instrument bears financial losses to the other party by defaulung on its obligations. Exposure to credit risk arises from the provision of services by the Company on deferred payment terms and other transactions with counterparties that result in finaicial assets. Financial assets for which the Company has a potential credit risk are mnainly due to die related parties' indebtedness for loans, balances with banks and other receivables. 49 Bukhara RSUE aSuvokova, F,nanca statements for the year endej 3' Decembe- 2018 n thousards o' U/Si 26. Risk Managmcient (Continuted) The company issues loans to its structural enterprises and the obligation to repay loans was not evenly distributed. In this regard, the Company's exposure to credit risk from counterparty debt is significant. To reduce the credit risk associated with paying suppliers, the Company adheres to the policy of concluding the main contracts for the purchase of goods and services from corporate clients that have a reliable credit history The Company's accounts are serviced in one bank (see Note 12). The management of the Compan believes that the credit risk assoiated with cash depends on the size of the bank and its reputation. Maximum exposure to credit risk The maxmiuni size of the Company's credit risk may vary significantly, depending on the individual risks inherent in specific assets and on general market risks. The following table shows the maximum exposure to credit risk for financial assets. For financial assets recorded on balance sheet accounts, the maximum exposure to credit risk is the carrying value of these assets, excluding offsets of assets and liabilities and collateral. Liquidity risk. LiquidnY risk is the risk that the Company has difficulty in meeting its financial obligations, which are settled by the transfer of cash or another finaincial asset. The Company's approach to liquidity management is to ensure, to the extent possible, the Company's comtinued availability of liquid funds suffIcient to pay off its obligations on time, both under normal and stressful conditions, preventing the OCCurrence of unacceptable losses and without Icopardizing reputation of the Company. The Company does not provide an analysis of the Company's financial liabilities by maturity, with an indication of the terms that remain at the reporting date before the end of the terims of repaynent of information secrecy provided by the terms of the contracts. Capital management Capital Management The Company's task in the field of capital management is to ensure the Company's ability to continue its uninterrupted business, providing an acceptable level of profitabiliry, respecting the interests of other partners and maintaining an optimal capital structure. The company controls capital based m the ratio >f debt to capital. This indicator is calculated by dividing the net amount of the debt by the xhole amount of capital under the management of the Company. Net debt is the total amount of debt recognized in the statement of fitiancial position, net of cash and cash equivalents. 'I he total amount of capital under managenient of the Company is the total amount of equity recorded in the statement of financial position. 27. Subsequent cvcnts After 31 December 2018 - the reporting date until the approval of these financial statements, there are no adiusting events reflected in the financial statement or events that are materially significant for disclosure in these financial statements. 50