Financial Statements, For the year ended 31 December 2016 and Independent Auditors' Report IndependerAuditos Repoci 3 STATEET O FNAC' _ STO 7 STATEMENT OF COM 7 STATEMENT F C1AG. TY 8 STATEMENT CF1CAS _C-, 9 Nores ro n`c k I10 1. Majin acti v, o e Co:2-..:-< 10 2. The econc enr Company operates 13 3. Basss o, .e--(2 j: 1 Sta-em=nts 14 4. [mporai asssonal udrgment 14 5. Summay u Poices 16 6. Propa a_ s 26 7. Invesc,e- s c 26 8. Defe Us a26 9. Inven. - s- 27 10. Tra ce s J, aceiva:es 27 11. CasC: as - 28 12. Cha:eo 29 13. Restrc:ee a - 29 14. Boro.mg 30 15. Trad t ab0es 31 16. Reve,s% 31 17. Coso es 32 18. Ac-m;sn- expenses 32 19. Gova 33 20. Oth e -ss 33 21. Finan - a :: U-z 34 22. Ilncomi 34 23. Con -s 34 24. Reýa - acO-S 36 25. Seg - 36 26. Fair 36 27. Risk 37 28. Eyesss3.-oCeze 41 GrantThornton AO 000 «Grant Thornton» Pecnyönmxa Y36eKbcTaH, 100128, TawxeHT, yn. Aas. 1A Ten.: +998 (71) 244-47-45/46 0aKc: +998 (71) 244-47-43 AO "Grant Thornton" LLC 1A, Abay Str, Tashkent, 100128, Republic of Uzbekistan Tel.: +998 (71) 244-47-45/46 Fax: +998 (71) 244-47-43 To the Owner and Management of Sarnarkand W: w.ti.ora State Unitary En-erpriseSvokova" E: audit(uzt.uz In our opinion because of d--ig itcc of te CmATer discussed in the Basis for Adverse Opinion section of our report, the accompanyfng inan Ii. 1. - no nor pr fairly (or do not give a true and fair viev of) the financial position of the Samarkand Sratr : Unm nnpse "Suvoknva' (hereinafter - the "Company") as at 31 December 2016, and their financial performanne i a thir ca dw Mo r he year then ended in accordance with International Financial Reporfing Standards (IFRSs). \We have andired the ccc T sof i mpanv, which comprisc the statement of financial position as at 31 December 216, and es o c nse income, statemnt of changes in equity and satement of cash flows for the year rhen ended, and noets to -heltionncial starements, including a summar of sigrnificant accounting policies 1. The Coipans L -R.7acia statem ,:-; of and for the vear ended 31 December 2015 and 2016 includes adiumnts and recassi is ofsuoy nmancial data in order ro reflect the transition from local accounting sandards to lnernio:3 i ncial Reporng Standards. We vere not provided with sufficient appropriate infomtrion anit expLai eaing the natre and the period, to which these adjusiments relate, so that we were not abie to älssess vteir p e over the CoMpany's IFRS financial statements as of and for the year ended 31 December 2016. 2. As it is cisclsed u n Nt: c h ccorp-Tnig financial siatemiemis, as at 31 December 2016 the net cartying value of tie propn sL¯S 101.055,344 thousand (2015: UZS 54,026,872 thousand thousand), tersmo op sassets (2015: 90% of the Company's assers). Based on the audit procedur-s pefre eeid cei-ri.t!:- ,idicators for impairnent of these assets as of the reporting date, such as: * tle Comn i1o rs otp' ' CYerations for 2016 in the amount of UZS 8,842,043 thousand and as at 31 December -c e s ouniot l US 31,811,946 thousand; * the Co-n'n sov .mntr ) 91 ~89 Thousind and are below its share capital in the nmount of LZS 16,913,863an * there a iicarits . som§rte ot ne prn, plant and euipment are obsolete or phvsically darnaged. Howvevor, !. ri. imrpatroirmt rview o the property, plant and equipment as at 31 December e . nh accep.vacounting policy disclosed in nore 37 in order to deternne whether adjustmetnrs -1- eed0 : .2ade ro Carrying amount of tie property, plant and equipment. Due to the nature ana ComulemIt o voese assets, uere nlot ale to make onr owin estimare and to determine the value of imipalrment viso:: ut ty t!e of the C-ompan's properiy, plant and equipment as at 31 December 20 16. 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Jue гса гlте 1aCk о£ suf�тciezтt арртв,э, ...� ,.. :.. .., _: >, .:. . .,��_:....: ... ,.� 11ere ,т�г аlэiе :о б1эт:1ilа ��..,е}.�з1н� x�surance п.-;г1т €1?с coanpletelтess ьтпд хесггrзсt- сэL ri•,-cr:� _.� _с: 1 1:_.��i •��с -:гi;lсг, frвыт indi�•iеЭиггls #�ж т11е �•еах еzгдед "э1 December 2t}16. `?. �•iti IF 1ti i{1:,�1t]=.�i1 1. ��т:: ....._, _- С:�:.1i'��� �t': ;::C.jU1iS•. i�..l?г'1I �?i1! �, Т11С С_.бIУ1р'.1I11` 1ttiS LeCб�Tllli.d Пеi a�5eI5 ]37. атС}l1ГгУ бУ l_ �� ! : _ `,,,з,оаг о{ �� lзrзцс, эс�. 1he i�sг,7n�1a1 dat.i бf €hese EaranclгeS t�ere nt7t includc_� : т1.. . ,:-. ргтбr .б tг1 _1:�.пи,агz ''ii1G. T1tis rëpre�enrs дератпце frвm адврtед ассвиг�т t� 1:гзiг, , ,,,.. .__- _.1 д:1та гб l�e i.тсlис?ед цт the С:сэгnрап<'s fтагтсiаl stateгnents £rпт the nтnпт�:т. �=1 t�, rгь:г�:: -_ I � ;+.:�11, <ьп1 со±тестiоп lтаs еб 1уе гnacie retzoaeri4-e$т- in The Elrst set вf fsпasгci.г. ..:1г,.:. .. у.:., .: . � �::-4 .� I idenr±tic_тгiоп бf т'nc crrбrs, 14-ьггт resratctтteпr вf tlte ссэтраrаtакТе аrгтга.:-г .:� _1 ,_з�сl.� id. q_епг11•, г; >тт �1 Пссетbег 201з, _ .. , •- _ �.�е ., . ..,±��� _ . асси=тг�. .-. .._ �_, �.. с� е, ггrе �г ic:�_. ::t-ec:. ��•1тi1е гlтi a�sers a.rc ат-еrsгагед in the аzттоиzэ[ of L ,�` й . . iA i.......�,. �у�.... , . „ Ке�' аидiт --_ . < :. __ _ __._ _...::__�_тt, ,�_� т'".� птсэsг ;i7nliicanr fвr пиr audit в£ Fьэаlэсl„1 .... - _,�:- , _ ,_�. т-'г� t.�1гт:�г ni n•�r гudit вf the fцtancial statementz iгт _� t_.._ . . т ...... .. .... :зр11..с1,. �,.i :.ii� e;7б:ti_э5, ыпсг �1-е до гбt eтpress а separate сэрirйсэп пп Tltese s?т:гzт��°�. 1. �`е -� -- - ' Г�t.г atгdit рrбседгг+�е� цтсlидед e�-aluatinl; tlтc Campans's 12eS•еlluf' 1` .l . _ .. .. .. . . _... - .�. .L•:! ._ f �СТ I � - - - 7 : '• !_ргч7 ,.еэ :. и. с с::ггс,1= +.,т th��• �ге1д сэt Inrcэranarгвn st'steпts to б£1п.�`1di1.LSi,..,.�. . ..._ " - -..�,.._-. • .. - - � .. . .,. - - - �t:w..:._ •:� _. ___ �. егте-w цт tcrкr_м еэt rhe alпllri• То pz'e�ent ...-_ --- -- _- ; ,--; гаr lгsss в� дь}га relared tб revenue. � tl e tesrcd rL� fб1}ои-ilг} kсг ccsпtrгэls foa- s�stems цтгбh�ед 'цг i " i _� :-C�1u% ...Lr.ti:Fil:lDi:i: То prnc:�- ..-.. - `.� 1:,�,с1,�с•": Ta,t f•eyuer_с1- nt tlэе backup апд , „ _ uses 17и:�1:� . ;._. :- __-.._ < < •: . , а _, --с-,и -- :_ъ г_с:lакг г~ гlте se>`�er rббтs tгз relie� бIт тlтс г�,t 1. .,: --,_ ��.г`--'- � �.с1:т ='•iэtita-z г1тligliotit 'h'L' -Clir 0 Tile tiliýil- Cial la Eemen i s, :ý-licther duc to fraud. or error, design ,md p e rfo rin d 7 -o c e J o ---jc)sc risks, and obiýIln evidertet thät is sufficierit and appropriate to provide a fn-, Mr. (3 t detecting a inýýrcrl il inissnarerneni resulring from fraud is higher than for Onc ýCILIýitýrý.!;'ý) o_ýä S, MIsre.preseiita _Sionl tions, or the 0 Obtäll -m. 'Jevari[ u dit. ýii, urder to design audk procedures rälat are parpose c, c,ýprLýsimä in opinjon on the effecilý7eness of the eritits-'s interlial 6 Evihiaw 5ý at ACCO-LIVLinL esttn-ilite-ý and relåted diselosti--c.s tke -.7 l_:"2 COIlrelir OF ffic '7,iuncial snitelnerits, ineluding the disclosures, and NvIlether rhe underlvirni tmnsäctions and events -ii a inanner rhat aeffleves fair ln G- 51C C Lt! T-3c n es iiiid. I)uslnes,,; acti,,-ltjes ,ärl-ii in t r - We are tesponsible for the direction, SUPC1-x s- e ý c , ")ur ý111d< o Pi Vi 10 11 WC are re, -eriiiii (~ r among iur corporare gm r-P ding, other mat ic"-ý -InJ 11 Ly` i i cludi ii z a riv s rwi fican t deficiencies in internål W-e are alsu -C tnosc CI'Mrl_ýC!2 Mr ýth a starement that wc and other ,nd -icrc applicable, relatecl safeguards. The engagement partner responsible for the audit resulting in this independent auditor's report is Nematulla Krirmov Managing Partner: KarirnoyN.F Audit Manager: Yulcliev N.N J71 Auditor: Usmanov L.A AO «Grant Thornton» LLC 14 May 2018 Tashkent, Uzbekistan Samarkand SUE 'Suvokava" Financial Statements for the year ended 31 december 2016 (in thousand UZS) Statement of financial position ASSETS Non current assets Fixed and non-material assets 6 101 055 344 54 026 872 Investments 7 - 44066 Total Non - current assets 101 055 344 54 070 938 Current assets Inventory 8 2071 127 400485 Trade and other receivables 9 25 723 968 5 013 537 Cash and Cash Equivalents 10 518534 571 052 Total Current assets 28 313629 5985074 Total Assets 129368 972 60056012 EQUITY AND LIABILITY Equity Charter capital 11 13048353 3160229 Restricted Capital 12 3959507 3088 107 Retained earnings (31 811 946) (11 890970) Total Equity (14 804 086) (5 642 634) Long term liability Long-term borrowings 13 72510905 62229621 Other long-term liabilities 55615834 - Total Long term Liability 128 126 739 62 229 621 Current Liability Trade payables 14 14083310 3429596 Current portion of long-term liability 13 1 963 010 39429 Total Current Liability 16046319 3469025 Total Liability 144173059 65 698 646 Total Equity and Liability 129 368 973 60056012 Aproved and si',ed on be Iaf of the, Compn YuuoK.S Osmiano)va L.I Acting direcior CifArcountant 30 April 2018 7 Samarkand SUE "Suvokava" Financial Statements for the year ended 31 december 2016 Yin thousand UZS) Statement of comprebensive income For the year änded' For they yer- nded 31 decemberl Revenuse 15 35302424 7213570 Cost of Sales 16 (29032205) (5334036) Gross Profit 6270219 1879534 General and Administrative expenses 17 (6 310 877) (1 119 783) Provision for impairment of trade recievables (2 586 059) 28 775 Govemmental grant 18 4473160 - Other operating income 19 2120099 65055 Operating profit 3 966 542 853 581 Finance cost 20 (14193738) (7717003) Finance income 20 1 805 211 340325 Loss before tax expense (8 421 985) <6 523 097) income tax expense 21 (60058) (16927) Net loss (8 482 043) (6 540 024) Total Comprehencive loss for the year (8 482 043) <6 540 024) Approved and signed on be alf of the Cornpan YXusupuv K Osmnanova 1! Actng director ChefAccountant 30 April 2018 The ntels on pays 12 o 36 are mi p le anta sktnts 8 � i � :� �, ь.��' р� Q n c�i n���-у U� г���-, �� а� �� �" с W= и г� � ® ы т � и � � т � � �� _ �• х- ! ы �, � � " ! Г� . . � �. � �'.. � Ф tA Ф � � � � � tCj � ; у � т -�. г�з �, �'-- гт 3 � � 1. ��, xs а� rt� � �; а � ^' �. т 4q � �в т� Ф a�-i � -�' s� � Ф С � � _ ,� , �', � � � ® � Ф °'D tD � 4 �' � у� � П'i � - r' -�1G , , tQ � ? Ss7 � � �14 �' � � �' �. с�"аз С � � .. ;: � �` fl. ¢р � � "� . � �' 3. � О б . - � Г '. - �` +� �t . С7 "б" � С � �, `i. �-. йЕ. � Ф�� С}. О Ф� � s51 . . L,. ,- tB Ф l7" �] 4ч Ф 4�Л р� � ф Ш � Ф� � �� � fi� з Й� Ci .� � _ _ � � .. �. � � Q � � � "�` � �_.. 'v � � �. � т Ст iF �� ��. � � =� Е,.�.4 т � � Z � � Ф �'у -s �. . �' [ы +�л Н^ � � -n r) С�° з +З Ф � �� ., д � п �` 9гд ` � � s г� � Q г N � � !.w �, гг � т 'а, и � Ф �r 3 r �] т т а7 '...�` " � ср ._ ^ в ° �' ы л' "' �„' Ф � т � � с �. � � ° � ,L й � �: � �,• . � � р �• b ,r � � -- N о м Е-r�+ ст � а' - т cia со � �с й` €л` sir sir � � �� з эг х �` �` �х. � л.. r, _� г г ': � r г �, � г �. �� � � ��, :-ы � w ¢ц ts [„т а � � �Q с� 3i ш оз т � � � а Q � ; t"п ti � л�i � �� � � s � б � 1 �. 1 �' (J]. 1 � + л 4 GJ�' . tŭ 3 .,.}. s � � � � � � � о ч с �' о i °7 с°� ffi '^+ , б �"� w � � а � w �, �, � 3 у а7 у т Сп т д�,ю слw -� ��о �о *,�рΡ rs� С7 у Ф � 47 б ь i��� б s�v S � �� ..� � i Ф4 � � j Ot � � . Gs t� �'• i'+ . � � 1у, ' СЛ tA � ��., � £�л 1�V �� � � N � �' � б�лi А.. � N N 1ьА � i � � i �wв.+ G�' � . � б � .ь{/) 1j i Э � ы г � � Samarkand SUE 'Suvokava' Noles to financial statements, for the year ended 31 decembef,201 6 (in thousand UZS)) Statement of cash flows Notes For theyear ended Forthevearende 31 4e.90mber 2016 31. deciember 201 ws from operating activities Loss for the year before taxation (8421985) (6523097) to reconcile gains to net cash flows from operating activities, Depreciation of fixed and intangible assets 6 5242652 469140 Impairment of investments in Suvokawa district authorities 44066 - Provision for impairment of trade receivables 9 2586060 (28775) Governmental Grants 18 (4473160) Financial Cost 20 1763230 30617 Exchange differences, net amount 20 (10625297)_____ 7346061 Operating cash before changes in working capital (13884433) 1 293946 Increase in trade receivables and other receivables (20710431) (1 565208) Increase inventory (1670642) 8104 UacT-ease I increase in trade and other payables 10653714 1887435 Chnnge in working capital (25611793) 330331 Cash flows from financing activities Increase the authorized capital 9888124 Interest paid 20 (21817296) (378835) Net cash grovided U financing activities 1119291721 1 245 442 Cash flows from investing activities Purchase of fixed assets (52271 124) (19906374) Obtaining government subsidies 871 400 Net cash used in investing activities (51399723) (19906374) Cash flows from operating activities Receipt of borrowed funds 90811 750 18957634 Repayment of borrowed funds (1 923581) (368741, Net cash from financing activities 88888170 18920760 Net (decrease) in cash and cash equivalents (52518) 255514 Cash and cash equivalents at the beginning of the year 10 571 052 315538 Cash and cash equivalents at the end of the period 10 518534 571052 Approved and signed on behalf r),f ii c Ujill, x1v, -Vusllpovz n Osmanov-a L.1 Actifig director Chief Accfjunt ,mt 30 April 2019 T &, 12! J6 -ire ,jl i'vIez"el"p;'- 1 10 Samarkand SUE "Suvokave" Notes to financial statements, for the year ended 31 december-2016 (in thousand UZS)) Notes to financial Statements 1 The Company and its operations The state unitary enterprise "Suvokava" (hereinafter referred to as the Company) is a commercial organization that was formed by the orders of the Cabinet of Ministers of the Republic of Uzbekistan No. 215 dated October 16, 2015 and No. 306 of October 30, 2015 "On Measures for Implementing the Main Directions for the Development of Water Supply and Sewerage Organizations" According to the proposal of the Cabinet of Ministers of the Republic of Karakalpakstan, regional khokimivats, the Minisrry of Economy, the Ministry of Finance of the Republic of Uzbekistan, the Uzbek agency "Uzkommunkhizmat", a single state unitary enterprise "Suvokova" was established with branches in cities and regions on die basis of operating organizations of water supply and sewerage (hereinafter - Company). In accordance with the proposal, the standard structures of the state unitary enterprises of Suvokova, as well as their city and regional branches, integrated measures to ensure the implementation of priority tasks for the development and modernization of drinking water supply and sewerage systems, improving the system for connecting business entities to water supply networks and sanitation on a turnkey basis. The enterprise 'has the rights of an independent economic enterprise and is managed in accordance with the legislation of de Republic of Uzbekistan. Being a member of the khokimiyat of the Samarkand region, and being the assignee of the Regional Production Enterprise "Suvokova" of the Samarkand region, reorganized into the State Unitary Enterprise "Suvokova" is considered a defendant in al parameters of legal and financial and economic acivities. The Company operates in Samarkand city and is wholly owned by the Communal Service Department on behaIf of the Government of the Republic of Czhekistan and has social and economic importance to Samarkand region. The capability of tbc Company to continue as a going concern depends on continuous support of the Government of Uzbekistan. The main activities of the Company are: + Implementation of the government policy on water supply, implementation of plans and tasks + Construction of facilities on the basis of funds allocated by the state 4 Monitoring and improvement of the activities of branches under the order of the organizanon + The use of existing sewerage lines, the development of the company's lines, for the continuous provision of water supply to the population, organizations, institutions and enterprises, improvement, as well as providing water supply in an amount sufficient for firefighting. 4 Treoatment of sewage waste and constant agitation in the provision of water supply + Participation in the development of annual and long-term plans for the development of the water sector of the region + Monitoring of the development of the billing system in cities and regions 4 Ensuring the implementation of foreign investments aimed at the development of water supply and sewage systems in accordance with the state program. The total nunber of employees as at 3 1December, 2016 was 249 people (2015: 265 people). The legal address of the Company: Republic of Uzbekistan, Samarkand, 104147, Uzbekistan Street, 114-A. In addition to the nature and objectives of the Company's activities, it plays a significant role in the ongoing social and economic reforms implemented in the Republic of Uzbekistan. Consequently, the Company's actti&s are strictly conroled by the srate authorities, and, in accordance with the resolution of the Public Utilities Department No01 -8 of January 9, 2011, unilities like the Company are allowed to have a maximum gross margin of 10%. The Government of the Republic of Ubekistan has accepted the Project on reconstruction of sewage treatment plants in the cities of Bukhara and Samarkand on die basis of a loan agreement No. 4633-UZ dated November 26, 2009 between the International Development Agency (IDA) and the Republic of Izbckisran 11 Samarkand SUE 'Suvokava" Notes to financial statements for the year ended 31 december,2016 (in thousand UZS)) 1. The Company's Operation (Continuation) The project includes the following parts (components): "riA. P lit;reSIPWena + repair of the sewerage system in the city of Bulkhara, including: + repair and replacement of existing sewer pipes; 4 repair of existing water pumping stations; 4 slight expansion of the sewage system; + repairofa waer treatment plantin the city of Bukhara,includingrepair and replacement of equipment, financing of minor construction works and increase of energy output; + providing working equipment; 4 provision of engineering advice and other technical assistance for repairs. Repair of the sewerage system in the city of Samarkand, including: + repair and replacement of existing sewer pipes; + repair of existing water pumping stations and construction of additional water pumping stations; 4 repair of the main water treatnent plant and the Farhad water treatment plant, including repair and replacement of equipment, financing of minor construction works and increase of energy output; 4 providing working equipment; + provision of engineering advice and other technical assistance for tepairs. Pa;t B. fIsnsiutiona/ strengtwI2 and aafriu-baIk/h Institutional strengthening and capacity building of Bukhara SUE through: + development of communication strategies and campaigns to improve public awareness; 4 training of personnel in the management of public services with an emphasis on the focus on the consumer; 4 establishing a pilot system for dispatch control and data collection for faster response to emergencies and for daily activities. Institutional strengthening and capacity building of the Samarkand SUEthrough 4 development of communication strategies and campaigns to improve public awareness; 4 training of personnel in the management of public services with an emphasis on the focus on the consumer; 4 establishing a pilot system for dispatch control and data collection for faster response to emergncries and for daily activities, Par*t C Feasibil/7 studp WATJrh ~sta;kstments Financing of the feasibility study for future priority investments in the water supply sector. Improving the management of the PCU Project, monitoring and coordination capacity through the provision of goods, and consulting services, including project audit and training, and financing nf operating costs. The total funding for the Project is estimated at $ 67.95 million. The project is funded from various sources, including a MAP loan of 35.60 million special drawing rights (equivalent to 55.0 million US dollars) with an interest rate of 0.75% per annum of the principaL The interest rate on liabilities in the amount of 0.5% per annum should be paid on unused loan amounts. The principal amount of the loan must be repaid every six months for a period of 35 years, including a grace period of 10 ytears beginning in 2019. Another sourte of financing is the Government of the Republic of Uzbekistan, whose contribution is 12.96 million US dolars. It is planned that the Project will last until 2019. 12 Samarkand SUE "Suvokava' Notes to financial statements, for the year ended 31 december,2016 (in thousand UZS)) 2 The economic environment the Company operating 2.1 General Characteristics The economy of the Republic of Uzbekistan continues to show some features of the developing niarket. The government develops the legislative, tax and regulatory framework required in a market economy, and also conducts significant economic and social changes. The future stability of the Uzbek economy largely depends on the ongoing reforms and transformations, as well as on the effectiveness of economic, financial and monetary measures undertaken by the Government. In view of the fact that the reform process is still incomplete, the operations conducted in Uzbekistan involve risks that are not typical for economically developed countries. Among them, in particular, the inconvertibility of UZS in most countries outside the Republic of Uzbekistan, there is a low level of liquidity in the debt securities market and the capital market, as well as continuing inflation. From 1 januarv, 2015 until 28 June, 2017 the refinancing rate remained at 9 percent per annum. Since 29 june, 2017, the refinancing rate from the Central Bank of the Republic of Uzbekistan has been increased to 14 percent per annum. The further economic development of the Republic of Uzbekistan largely depends on the effectiveness of economic measures, financial mechanisms and monetary policy adopted by the Government, as well as the development of the tax, regulatory and legal and political system. The state of the economy of the Republic of Uzbekistan is characterized by relatively average inflation rates. During 2016, the inflation rate was less than 5.7 percent (in 2015: less than 5.6 percent). Dynamics of growth and macroeconomic stability are provided in Uzbekistan. Uzbekistan's GDP growth in 2016 was 7.8 percent (in 2015: 8.0 percent). 2.2 Currency transactions Foreign currencies. especially the US dollar and die Euro, play a significant role in determining the economic paramneters of many economic transactions in the Republic of Uzbekistan. The table below shows de rates of UZ soum in relation to the US dollar and Euro, set by the Central Bank of lUzbekistan: US Dollar Euro As at 31december, 2016 3 231,48 3 419,23 As at 31 december, 2015 2 809,98 3 074,19 13 Samarkand SUE 'Suvokava" Notes to financial statements, for the year ended 31 december.2016 (in thousand UZS)) 3 Basis of Presentation of Financial Statements 3.1 Applicable Standards The accompanying financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards ("IFRS") approved by the International Accounting Standards Committee ("IASB') on the basis of the historical cost convention, adjusted for the initial recognition of financil instruments at fair value. The company maintains accounts in accordance with the requirements of the current legislation of the Republic of Uzbekistan. These financial statements are prepared on the basis of these accounts with the adjus-ners necessary to bring it in line with IFRS in all material respects. 3.2 Functional and Presentation Currency The national currency of the Republic of Uzhekistan is "UAek Sum" (hereinafter referred to as "TZS") UZS was selected as a 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. 4 Important assessments and professional judgement The preparation of financial statements in accordance with IFRS requires management to apply judgments, assIumptions and estimates that affect the application of accounting policies and to reflect the amounts of assets and liabilities, income and expenses in the financial statements. Estimates and associated assumptions are based on hisvorical experience and other applicable factors necessary to determine the carrying amount of assets and liabilities. Despite the fact that the estimates are based on the most complete knowledge of the management of the current situation, the actual results, in the final analysis, may differ materially from the accepted estimates. The Companv makes estimates and assumptions that affect the reported amounts of assets and liabilities in the next financial year. Estimates and assumptions are continuall analyzed on the basis of management experience and other factors, induding expectations of future events that management believes are reasonable in the light of current circumstances. In the process of applying accounting policies, management also uses professional judgment and assessment. A professional judgment that has the most significant effect on the amounts recognized in the financial statements and estimates thnt result in material adjustments to the carrying amounts of assets and liabilities within the next financial year include: Provision for doubtful debts Management of the Company forns a provision for doubtful debts to account for settlement losses caused by the inability of debtors to make the required payments. When assessing the adequacy of the allowance for doubtful debts, the management proceeds from its own estimate of the distribution of outstanding balances of accounts receivable by the limitation period, the accepted practice of writing off, the creditworthiness of the client and changes in the terms of payment. With the continuing deterioration in the financial position of the debtors, the actual amount of write-offs mav exceed the expected amount. Continuity ofactiv Thes financial statements reflect the Management!s assessment of those impacts that affect the Company's operations and financial position. The future development of the economy of the Republic of Uzbekistan depends to a Large cxucnt on the effectiveness of measures taken by the Government of the Republic Uzbekistan and other faccors, including legislative and political events beyond the control of the Company. The Company's management is not able to predict the consequences of the impact of these factors on the financial situation in the future. Management believes that the Company will continue to function as a continuously operating enterprise. In making this decision, the management had in mind the current intention and further 14 Samarkand SUE Suvokava" Notes to financial statements, for the year ended 31 december-2016 (in thousand UZS)) 4. Important assessments and professional judgement (Continuation) supprt of the Stare. The management believes thar the Srae will enabLe rhe Company to fulfill its obligation in the future. Tay legislation andpoiential tax revenues and expenses The tax, currency and customs legislation of the Republic of Uzbekistan allows for various interpretations The CompanY s potential tax revenues and expenses are estimated by management at each reporting date. Liabilities for income tax are estimated by management in accordance witi applicable law. Liabilities for fines, penalties and taxes, other than income tax, as of the reporting date are recognized in accordance with the most probable estimate of the management of the forthcoming expenses for these taxes. inital recognition of transactions with rehrted parties In the oritmal course of business. the Company conducts transactions with related parties. In accordance with IAS 39 "Financial Instruments: Recognition and Measurement", financial instruments should be initially recognized at fair value. In the absence of an active market for such transactions, professional judgments are used to determine whether transactions at market or non-market interest rates have been performed. The basis for judging is the pricing of similar types of transactions with unrelated parties and the analysis of the effective interest rate. 5. Summary of Significant Accounting Policy 5.1 Changes in International Financial Reporting Standards Applying new IFRS standards The following changes to the applicable TFRS standards came into effect, effective January 1, 2016: + Amendments to IFRS 11 "Joint Ventures" (issued in May 2014) to account for de acquisition of shares in joint operations that are a separate business. + Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (issued in May 2014) to carift the pernitted methods for calculating depreciation. v Amendments to IFRS 10 "Consolidated Financial Statements" and TAS 28 "Investments in Associates and Joint Vcnmures" (issued in September 2014) to address the inconsistency between the requirements of the standards with respect to the sale or contribution of assets to the associate or a joint venture by an investor. + Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 12 "Disclosures about Participation in Other Organizations" and IAS 28 "Investments in Associates and Joint Ventures" (issued in December 2014) , explaining de order of accounting for investment in investment orgamzations. + Amendments to IAS 1 "Presentation of Financial Statements" (issued in December 2014). The standard has been amended to clarify die notion of materiality and explains that an entity is not required to provide a separate disclosure required by IFRS if the information 2rising from this disclosure is irmnateial, even if the I1FRS requirement contains a list of individual disclosures or describes them as mimumrn requirements. + "Annual Improvements to IFRS, the period 2012-2014." The Company reviewed these amendments to standards in the preparation of financial statements. Changes to the current standards did not have a significant impact on the Company's financial statements. Standards, clarificdtions and changes to existing standards that have not entered into force and are not applied by the Companv ahead ofschedule A number of new standards, interpretations and amendments to the standards enter into force for annual periods beginning on or after 1 January 2017. In particular, the Company did not early apply the followina standards, clarifications and changes to standards: 4 IFRS 15 Revenue under contracts with customers (issued in May 2014 and effective for annual pe ios beginning on or after I January 2018). The new standard establishes the basic principle that revenue 15 Samarkand SUE 'Suvokava" Notes to financial statements, for the year ended 31 december 2016 {in thousand UZS)) 5. Su unary of Significant Accounting Policy (Continuation) should be recognized when goods are transferred or services are provided to dhe buyer at a contract price. Revenue from the sale of goods accompanied by the provision of services that can be clearl separated is recognized separately from the revenue from the provision of services, and discounts and rebates from the contract price are allocated to individual elements of revenue, In cases where the amount of payment is changed for any reason, revenue is reflected in the amount of the minimurm amounts that are not subject to a significant risk of cancellation. The costs of enforcing contracts with cusitmets should be recognized as an asset and written offtiroughout the period in which the benefits of the contract are realized. + IFRS 16 Leases (issued in January 2016 and effective for annual periods beginning on or after 1 January 2019). The standard supersedes IAS 17 Leases and introduces a single reflection model for all types of leases in the statement of financial position in a manner similar to the current treatment of financial lease contracts and requires that assets and liabilities be recognized for most leases, with the exception of specially stipulated cases. For the lessors, there have been minor changes in the current miles established by IAS 17 "Leases". Early application is permitted if the FRS 15 "Revenue under conracts with customers" standard is applied at the same time ahead of schedule. + IFRIC 22 "Advances received and issued in a foreign currency" (issued in December 2016 and effective for annual periods beginning on or after 1 January 2018) clarifies the procedure for determining the applied exchange rates on initial recognition of the proceeds received and issued advances. 4 Amendments to IFRS 9 Financial Instruments (issued in July 2014 and effective for annual periods beginning on or after I January 2018). IFRS 9 Financial lnstrunents replaces parts of lAS 39 Financial Instruments: Recognition and Measurement relating to the classification and measurement of financial assets. Financial assets should be classified in two valuation categories: subsequently measured at fair value and subsequently measured at amortized cost. cost. The choice of the valuation method should be made at the initial recognition. The classification depends on the business model of financial instruments inanagement organization and on the characteristics of cash flows provided for in the contract on the instrument. The requirements for hedge accounting have been adjusted to establish a closer relationship between accounting and risk management. The standard provides organizations with the option to choose between de accounting policies applying the hedge accounting requirements contained in IFRS 9 Financial Instruments or the continued use of IAS 39 Financial Instruments: Recognition and Measurement to all hedging instruments, since The present standard does not provide for accounting for cases of macro hedging. 4 Amendments to IAS 7 "Statement of Cash Flows" (issued in January 2016 and effective for annual periods beginning on or after 1 January 2017). The amended standard obliges to disclose the reconciliation of movements for liabilities arising from financial activities. + Amendments to 1S 12 "Income Taxes" for recognition of deferred tax assets for unrealized losses (issued in January 2016 and effective for annual periods beginning on or after I January 2017). , Amendments to IFRS 2 Share-based Payment (issued in June 2016 and effective for annual periods beginning on or after 1 January 2018). The amendments clarify the procedure for recording changes in the terms of remuneration on the basis of shares and the obligation to pay tax withbeld from the amount of remuneration provided on the basis of shares. + Amendments to IFRS 4 "Insurance Contracts" (issued in September 2016 and effective for annual periods beginning on or after 1 January 2018) relate to the simultaneous application of IFRS 4 "Insurance Contracts" and IFRS 9 Financial Instruments. 4 Amendments to IAS 40 Investment Property (issued in December 2016 and effective for annual periods beginning on or after 1 Januarv 2018). The amendments establish more precise requirements for determining the principles for classifying and stopping the assignment of property to investment real estate. The Company is currently assessing how these changes will affect its financial position and performance- Managemert also makes certain judgments in applying accounting policies. Such assessments and judgments are continually analyzed on the basis of historical data and other information, including forecasts and expectitions of future events that appear to be reasonable in the light of emerging circumstances. Actual results may differ from those estimates, and management may review its estimates in the future, both in the positive and in the negative, taking into account the facts associated with each assessment. 16 NGl.s to finacil staements. for [he yar - - tousand UZL) The following are the assumptions that may have the most significant effect on the financial statements and estimates that could result in significant changes in the carrying amounts of assets and liabilities within the next financial year. The Company estimates financial instruments held for trading and recognized as at fair value through profit or loss, available-for-sale financial assets, derivative financial instruments, investment properties at fair value at each balance sheet date. Fair value is the price that would have been received upon the sale of an asset or paid in the transfer of an obligation in an evaluation environment conducted in an organized market between market participants at the valuation date. The fair value estimate assumes that the sale of an asset or the transfer of an obligation takes place: 0 either in the market that is the underlying for the asset or liability; + or in the absence of the main market in the most favorable market for the asset or liability. The fair value of an asset or liability is estimated using assumptions that would be used by market participants in determining the price of an asset or liability, assuming that market participants act in their best interests. An estimate of the fair value of a non-financial asset takes into account the ability of a market participant to generate economic benefits from using the asset in the best and most efficient manner or selling it to another market participant who will use this asset in the best and most efficient manner. The Company uses valuation techniques that are acceptable in the circumstances and for which data are available that are sufficient to estimate fair value, while maxinizing the use of relevant observable inputs and minimizing unobservable inputs. All assets and liabilities the fair value of which is measured or disclosed in the financial statements are classified within the hierarchy of sources of fair value as described below, based on the lowest-level inputs that are relevant to the fair value measurement as a whole: 4 Level 1: quotes in an active market with respect to identical assets or liabilities (without any adjustments). 4 Level 2: data other than quotations relating to Level 1, available directly (ie quotes) or indirectly (that is, data derived from quotations). This category includes instruments that are valued using: market * quotations in active markets for similar instruments, market quotes for similar instruments on the market that are not considered as active, or other valuation techniques, all of whose data are used directly or indirectly based on observed baseline data. 4 Level 3: data that is not available. This category includes tools that are evaluated using information that is not based on observable inputs, while such, unobservable data has a significant impact on the valuation of the instrument. This category includes instruments valued on the basis of quotations for similar instruments for which significant unobservable adjustments or judgments are required to reflect the difference between the instruments. In the case of assets and liabilities that are recognized in the financial statements on a periodic basis, the Company determines the transfer between the levels of the sources of the hierarchy, re-analyzing the classification (based on the initial data of the lowest level, which are significant for the assessment of fair value in general) at the end of each reporting period. ->3. 2]a 1iiC11th In (if ,i num _111 C ts The Company distributes its financial assets to the following accounting categories: loans and receivables. Loans and receivables are unquoted non-derivative financial assets with fixed or determinable payments, except for those that the Company intends to sell as soon as possible. 4 Iasicatiol I of f1innial IiIbilities The Company classifies its financial liabilities into financial liabilities carried at amortized cost. 17 Samanwandi SU.E Surohave No!es to financ a atements. for the year ended 31 december 2016 fir, thousand UZS)) - SumnmaL of Sig ifiCant A ccounn1g Policy (ContiliCion i 5-5. rTinncial ins5lltirlCnts - Hic inii approachcs to evaluatioIn Financial instruments are carried at fair value or amortized cost, depending on their classification. Below is a description of these estimation methods. Fair value is die price that can be obtained upon the sale of an asset or paid when transferring an obligation to conduct a transaction on a voluntary basis between market paricipants at the valuation date. The best confirmation of fair value is the quoted price in an active market- An active market is a market in which transactions with an asset or an obligation are conducted with sufficient frequency and in sufficient volume to obtain information about assessments on an ongoing basis- Valuation methods, such as the discounted cash flow model, and models based on data from similar transactions performed on market conditions, or the financial data of an investee are used to determine the fair value of financial instruments for which market information on the price of transactions is not available. The Company uses such methods of estimating fair value, which are the most acceptable under given conditions and use the main observables as much as possible. Amoried cost - represents the amount at which the financial instrument was measured at initial recognition, less principal repayments, reduced or increased by the amount of accrued interest, and for financial assets - less the amount of losses (direct or through the use of an allowance account ) from impairment. Accrued interest includes depreciation of deferred transaction costs at initial recognition, as well as any premiums or discount from the repayment amount using the effective interest method. Accrued interest income and accrued interest expense, including accrued coupon income and amortized discount or premium (including deferred when providing commission, if any) are not shown separately, but are included in the carrying amount of the relevant items in the statement of financial position. The effective interest method is a method of allocating interest income or interest expense over the relevant period to ensure a constant interest rate in each period (effective interest rate) on the carrying value of the instrument. The effective interest rate is the rate applied when the estimated future cash payments or receipts are accurately discounted (excluding future credit losses) over the expected life of the financial instrument or, where appropriate, a shorter period to the net book value of the financial instrument. The effective interest rate is used to discount cash flows from floating rate instruments until the next interest change date, with the exception of a premium or discount, that reflects the credit spread at the floating rate specified for this instrument or other variable factors that are set regardless of the market value - Such premiums or discounts are amortized over the entire expected period of the instrument's circulation. The calculation of the present value includes all fees and amounts paid or received by the parties to the contract that form an integral part of the effective interest rate. Property, plant and equipment are stated at cost, less accumulated depreciation and, if necessary, provision for impairment- The costs of ninor repairs and maintenance are accounted for as tlcy arise. Expenses for replacement of large components of fixed assets are capitalized with subsequent write-off of the replaced component. At each financial year end, management assesses property, plant and equipment for impairment. In the case of impairment of property, plant and equipment, they are written off to the higher of value received from use and fair value less costs to sell The carrying amount of the asset is reduced to the recoverable amount; an inipairment loss is recognized in the statement of comprehensive income. The gain or loss on disposal of property, plant and equipment in the amount of the difference in the consideration received and their carrying amount is recognized in profit or loss. 18 Sam aniS Soev Notes to__ fnnasatmns I - - : an thosand UZ Depreciation - The depreciation of an object begins when it becomes available for use. Depreciation on property, plant and equipment is calculated using a straight-line method, that is, a uniform reduction in the cost to the residual value over the following estimated useful lives of the assets: Useful life (in years) Buildings and Constructions 50 Machinery and Equipment 8-12 Computers and Office Equipments 5-7 Others 5 The residual value of the asset is the estimated amount that the Company would currently receive if the asset was sold, less estimated costs of disposal if the condition and age of the asset were consistent with the age and condition that the asset will have at the end of its useful life. If the Company intends to use the asset before the end of its physical life, the residual value of the asset is zero. The residual value of assets and their useful life are reviewed and, if necessary, adjusted at the end of each reporting period Income taxes are recognized in the financial statements in accordance with the requirements of Uzbek law, effective or substantively enacted at the financial year end- Income tax expense comprises current and deferred taxes and is recognized in the statement of comprehensive income unless they are to be recognized in other comprehensive income or equity because they are related to transactions that are also recognized in other comprehensive income or capital in the same or in any other reporting period. Current tax is the amount that is expected to be paid or recovered from the budget in respect of taxable profit or loss for the current and previous periods. Taxable profits or losses are calculated on the basis of an assessment if the financial statements are approved before the filing of the relevant tax returns. Taxes other than income tax are included in general and administrative expenses. Deferred income taxes are calculated using the balance sheet method for carrying forward tax losses and temporary differences arising between the tax base of assets and liabilities and their carrying amount in the financial statements. The carrying amount of deferred tax is calculated at tax rates that are expected to apply during the period of reversal of temporary differences or use carried forward for future tax loss periods at the tax rates, in full or in principal moments at the balance sheet date. Deferred tax assets for deductible temporary differences and deferred tax losses are recognized only if there is a high probability of future taxable profits, which can be reduced by the amount of such deductions. 5.8. ncert;in tax positionls Management reassesses the Company's uncertain tax positions at the end of each reporting period. Liabilities are recorded for those positions of income tax, which, according to the management, are likely to lead to additional tax charges in case of challenging these positions by the tax authorities. Such an assessment is carried out on the basis of interpretation of tie tax legislation that was in effect or substantially entered into force at the end of the reporting period and any known court decision or other decision on such matters. Liabilities for fines, penalties and taxes, other than income tax, are recorded on the basis of management's best estimate of the costs required to settle liabilities at the end of the reporting period. 19 Samnarkandl SUE SuCaDLa Notes to Tianciai stalements, for the yeareided 31 Oecember 2016 io thousand UZS)) Inventories are recorded at the lower of the original cost and net realizable value. The cost of inventories is determined using the FIFO method. Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling costs. 510. Trade receivabhes - Trade receivables and other receivables are carried at amortized cost using the effective interest method, 5.11. rnP nU mi of tintacil assets Irric d at arnornized Cost Impairment losses are recognized in the statement of comprehensive income as they are incurred as a result of one or more events ("loss events") that occurred after the initial recognition of the financial asset and affect the amount or timing of estimated future cash flows that are related to the financial asset or with a group of financial assets that can be assessed with sufficient reliability. If the Company does not have objective evidence of impairment for an individually assessed financial asset (regardless of its materiality), this asset is included in a group of financial assets with similar credit risk characteristics and is assessed in conjunction with them for impairment. The main factors that the Company takes into account when considering the issue of impairment of a financial asset are its overdue status and the ability to exercise collateral, if any. The following are the other main criteria on the basis of which the existence of objective evidence of an impairment loss is determined: + delay in any next payment, while late payment can not be explained by a delay in the work of settlement systems; poor social knowledge base of users about the sewage system (private individuals); + the counterparty experiences significant financial difficulties, as evidenced by financial information about the counterparty at the Company's disposal; + the counterparty is considering the possibility of declaring bankruptcy or other financial reorganization; + there is a negative change in the payment status of the counterparty due to changes in national or local economic conditions affecting the counterparty; or + the cost of collateral, if any, is significantly reduced as a result of the deteriorating market situation. If the terms of an impaired financial asset carried at amortized cost are reviewed as a result of negotiations or modified in any other way because of the financial difficulties of the other party, the impairment is determined using the original effective interest rate until the conditions are revised. Impairment losses are always recognized by creating a provision in such amount to bring the asset's carrying amount to the present value of expected cash flows (which does not include future loan losses that have not yet been incurred) discounted using the original effective interest rates for this asset. Calculation of the discounted value of the expected cash flows of the financial asset to which collateral is secured includes cash flows that may arise as a result of the creditor's entry into possession of the debtor's property, less the cost of obtaining and selling collateral, regardless of the likelihood of the creditor entering into possession of the debtor's property. If, in a subsequent period, the amount of the impairment loss decreases and this decrease can be objectively related to an event occurring after the impairment was recognized (such as an increase in the customer's credit rating), the previously recognized impairment loss is reversed by adjusting the created provision through the statement of comprehensive income . 20 Notes toinanc.ia sements , For he year ended 37 eceTber.2016 nZS) Assets that can not be repaid and for which all necessary procedures have been completed for the purpose of full or partial recovery and the final amount of the loss is determined are written off against the provision for impairment on the balance sheet. Subsequent recoveries of previously written-off amounts are credited to the impairment loss account in the statement of comprehensive income. Prepayments are recorded at historical cost less allowance for impairment. A prepayment is classified as a long- term if the expected period of receipt of goods or services related to it exceeds one year, or if the prepayment relates to an asset that will be recorded as non-negotiable on initial recognition. The amount of the prepayment for the acquisition of the asset is included in its carrying amount when the Company receives control of this asset and there is a possibility that the future economic benefits associated with it will be received by the Company. Other prepayments are written off when you receive goods or services related to it. If there is a sign that the assets, goods or services relating to the prepayment will not be received, the carrying amount of the prepayment is to be reduced and the related impairment loss is recorded in the statement of comprehensive income. Cash includes cash and cash on bank accounts. Cash equivalents include short-term financial assets that can be easily transferred to cash and have a maturity of less than three months. Restricted funds include cash balances and cash equivalents that are not to be used for other purposes than those provided for in the loan terms or under banking law. Restricted funds are not included in de statement of cash flows. Deferred tax assets and liabilities are calculated on temporary differences using the balance sheet liability method. Deferred tax assets and liabilities are included in the financial statements for all temporary differences between the tax base of assets and liabilities and their carrying amount that is recorded in the financial statements. Deferred tax assets are recognized only if it is probable that the existence of future taxable profit will allow the deferred tax assets to be realized or if such assets can be offset against existing deferred tax liabilities. Deferred tax assets and liabilities are calculated at tax rates that are expected to apply in the period when assets are realized or liabilities are discharged on the basis of tax rates in effect at the balance sheet date or about which the effective date in the near future was reliably known as of the reporting date- Deferred income taxes are recognized for all temporary differences associated with investments in subsidiaries and associates, as well as joint ventures, unless it is possible to check the timing of the reversal of temporary differences and when it is probable that the temporary differences will not decrease in the foreseeable future. Value added tax related to sales proceeds is parable to the budget on an earlier of two dates: (a) the date of receipt of receivables from customers or (b) the date of delivery of goods or services to customers. VAT paid on the acquisition of goods and services is generally recoverable by offset against VAT accrued on sales proceeds upon receipt of the seller's invoice. Such offset is made in accordance with the tax legislation. VAT payable and VAT paid are disclosed in the statement of financial position in its detailed form as assets and liabilities- When a provision is made for the impairment of receivables, the impairment loss is recognized in the total amount due, including VAT. VAT is applied at the following rates for sewerage services: + 20% - the standard rate applied to legal entities; and + 0% is the zero rate applied when selling services to individuals. 21 0 ;or~-t Me ;tar1 (100 je i -GCIC Borrowing costs directly attributable to the acquisition, construction or production of an asset whose preparation for its intended use or for sale necessarily requires considerable time (an asset that meets certain requirements) are included in the cost of this asset. Capitalization of borrowing costs begins when: a. the Company bears costs for die qualifying asset; b. the Company bears borrowing costs; c. the Company shall take the necessary steps to prepare the asset for use or sale. The Company capitalizes borrowing costs that could have been avoided if it had not made capital expenditures on qualifiing assets. Capitalized borrowing costs are calculated on the basis of the average cost of the Company:s assets (weighted average interest expenses apply to expenses for qualifying assets), except when the funds are borrowed for the acquisition of a qualifying asset. 5.17. Debt for the main activity is accrued upon the fact of the counterpart's performance of its contractual obligations and is accounted for at amortized cost using the effective interest method. .18. Rest-n cs for iutre expenses :ia t Set) Reserves for future expenses and payments are non-finanicial liabilities with an indefinite period or amount. They are accrued if, as a result of a certain event in the past, the Company has legally substantiated or voluntarily assumed obligations, it is probable that an outflow of resources providing for economic benefits will be required to settle the obligation and the amount of the obligation can be estimated in monetary terms with a sufficient degree of reliability- Reserves, including post-employment compensation and a reserve for obligations for the liquidation of fixed assets and environmental restoration, are recognized if, as a result of a past event, the Company has a current legal or voluntarily assumed obligation, the settlement of which is likely to require disposal of resources and which can be estimated in monetary terms with a sufficient degree of reliability. Liabilities are recognized immediately after they are identified at the current fair value of the expected future cash flows associated with the settlement of these liabilities. The initial assessment of the costs of the liquidation of fixed assets (and subsequent changes in estimates) are capitalized as part of fixed assets. Chartered capital is die aggregate in monetary terms of contributions (shares at a nominal value) of the founders (shareholders) in the Company's property when it is created to support the activities within the framework defined by die constituent documents- The chartered capital of the Company is the collective property of the founders and at the same time the property of the Company as a legal entity. The procedure for forming and changing the chartered capital is regulated by the legislation of the Republic of Uzbekistan. Contributions of the Government of the Republic of Uzbekistan are capitalized upon receipt and are recorded at fair value, which are designated as cash and in kind as Capital of restricted use in equity. The functional currency of the Company is the currency of the underling economic environment 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 "UZS"). Monetary assets and liabilities are transferred to the functional currency of the Company at the official exchange rate of the Central Bank of the Republic of Uzbekistan (CBU), for the respective reportuig dates. The gains and losses arising from the settlement and the translation of monetary assets and liabilities into the functional currency of the company at the official rate at the end of the y-ear are recognized in the statement of 22 Saimarkand SUEt Suvo< Av$ Notes to financial statements for the year ended 31 decemtber2016 .:' mousa::bZSfr s. SntnnalrA W S1i gi lic-ft 1ACCOUntl1ng Policy (Coni0TILIo) 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 statement of financial position, measured at actual costs. 122, Me rccognition The source of revenue is the use of the sewage system by legal entities and individuals. Revenues from the sale of services are recognized when the risks and rewards of ownership of the services are transferred, usually at the time the services are provided. The rendered services are takenjnto account on the basis of indicators of water meters installed in the field- In the absence of water meters, mainly from individuals, revenue is calculated on the basis of agreed and approved by the state standards. Revenues are shown net of VAT. The amount of revenue is detemined at the fair value of the consideration received or receivable. 5- 23. Remun0non o employces and dedttions to socil isurance funids On the territory of the Republic of Uzbekistan, the Company implements deductions for a single social tax. These deductions are also reflected on the accrual basis. The single social tax includes contributions to the Pension Fund. The Company does not have its own pension scheme. Salary expenses, contributions to the stare pension fund and social insurance fund, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued as the Company's employees provide relevant services. 524. -n1tigent assets and liability Contingent assets are not recognized in the statement of financial position, and information about them is disclosed in the financial statements when it is probable that the related economic benefits will be received. Contingent liabilities are not recognized in the statement of financial position, and information about them is disclosed in the financial statements, except for cases when the disposal of resources due to their redemption is unlikely. 3.25. Rclatc partv transactions Related parties are Piose where one of the parties is controlled by the other or has significant influence in making financial or business decisions of the other party. In considering all possible relationships with related parties, the economic content of such relationships is taken into account, and not only their legal form. Due to the reason that the Company is government related company, applies exemption from JFRS and discloses following about the transactions and related outstanding balances: the name of the government and the nature of its relationship and the nature, type and amount of each individually significant transaction. The Company disclose key management personnel compensation in total and for each of the follow ing categories: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits and (e) share-based payment. Post-year-end events that provide additional information about a Company's position at the statement of financial 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 one business segment, i.e. production and sale of additives and materials for the construction industry. 5_27, Error Errors can arise in respect of the recognition, measurement, presentation or disclosure of elements of consolidated financial statements. An entity corrects material prior period errors retrospectively in the first set of consolidated financial statements authorized for issue after iCtir discovery by restating the comparative amounts for the prior period presented in which the error occurred. 23 Sanahand SL'E Suvkoitvo No,Ps to financialistements. for te year ended 31 Iecember 2016 __in Ptousand UZS) idgs Machinery Computers an and nOfieIntangible Costruction Tt construe- assets in progress . Eluipment equipments tions Carrying arnount as of 31 Decenter, 2015 8414101 3258 876 278 398 42420 46558279 58552074 Accumulated depreciation (3 141 760) (1 232 834) (146 366) (4 242) - (4 525 202) Net Book Value as at 31 5272 341 2 026 042 1 2 032 38 178 46 558 279 54026872 december 2015 Associations: Book value 5609837 48 840 949 1 501 514 274 456 9992358 66219 114 Accumulated depreciation (439 344) (15 913 786) (231 220) (274456) - (16 858 805) Capitalization of borrowzin o - - - - 4060313 4060313 borrow ing costs Receipts - 957873 - - 12727 970600 Transfer 49135144 - - - (49135144) - Disposals (725 982) (1 390 217) (3900) - - (2120099) Depreciation charge (3716977) (1 428 351) (93 082) (4242) - (5242652) Carrying amount as at Crbyrna 2oun asa62433100 51 667481 1776013 316876 11 488533 127682003 De ce mbe r 31, 2016 Accumulated depreciation (7 298 081) (18 574 970) (470 668) (282 940) - (26 626 659) Net Book Value as at 31 december 2016 55135020 33092510 1305345 33936 11 488533 101 055 34 The carrying amount of the "Buildings arid structures" group basically represents the cost of the sewage treatment plant building and the sewage network system. The carrying amount of the "Machinery and equipment" groups is basically the cost of tractors, trucks used for cleaning the sewage system and pumps. - Construction in progress is mainly the cost of reconstruction of sewage treatment plants and sewage systems. The unification of the branches was in accordance with the proposal of the Council of Ministers of die Republic of Karakalpakstan, regional khokimiyats, the Ministry of Economy, the Ministry of Finance of the Republic of Uzbekistan, the Uzbek agency "Uzkommunkhizmat", a single state unitary enterprise "Suvokova" was established with branches in cities and regions on the basis of operating water supply and sewerage organizations. According to the orders of the Cabinet of Ministers of the Republic of Uzbekistan, Uzbekistan No- 215 dated October 16, 2015 and No. 306 of October 30, 2013, "On Measures to Imple-ment die Main Directions for die Development of Water Supply and Sewerage Organizations," the Company was reorganized as the Suvokava State Unitary Enterprise and is a commercial organization. All areas were merged into the Company. 24 Samarkand SUE "Suvokava' Notes to financial statements, for the year ended 31 december.2016 (in thousand UZS)) 8. Inventory S2 As #1 d r01 Spare parts 212985 214969 Inventory and accessories 112091 76151 Raw materials 1 356 074 51 283 Fuel 50613 39073 Oter 339364 19009 Total reserves 2071 127 400485 Inventories are raw materials, stationery, inventory and household items, spare parts and are recorded at histoxical cost. Raw materials mainly include chemicals used in a sewage trearment rank, reinforced concrete curbs and manholes, as well as various cast iron devices (bends, latches, valves, etc.). Spare parts include spare parts for vehicles, excavators and tractors purchased from suppliers used in the daily activities of the Company. 9. Account recievables Below is information on other receivables: As, at 31 decembe.r AS a 1dcme Financial assets Trade receivables 21 631 743 3 979 582 Receivables for other services 188911 1 303 845 Accounts receivable under the IDA project - 116639 Provision for impairment (3701804) (1 115 744) Total accounts receivable 18 118 850 4284 322 Other non-linancial assets: Prepayment 7605118 629281 Prepaid taxes - 99934 Total non-financial assets in receivables 7605118 729215 Total accounts receivable on operathng activities and other receivables 25723968 5013537 The accounts receivable for the main business, with a maturity of less than three months, are not considered as overdue debts. At the date of each statement of financial position, the Company assesses all objective factors that may be considered as a depreciation of receivables. In the event that there is sufficient grounds to consider a receivable as impaired, the amount of the allowance for impairment is determined as the difference between the carrying amount of that debt and the expected recoverable amount discounted at the original effective interest rate. In the event that the Company establishes the fact that, that there are no objective factors of the depreciation of the given receivable, irrespective of the materiality of the amount- The company attributes this debt to the group of arrears with corresponding characteristics of credit risk, and the fact of impainment of the entire group of receivables is considered. The main factors that the Company takes into account when considering the issue of impairment of trade receivables is its overdne status for more than 91 days. Movements inL the provision for impairment of trade receivables and other receivables as of 31 December, 2016 and 2015 are as follows: 25 Samarkand SUE -Suvokava" Notes to financial statements, for the year ended 31 december,2016 (in thousand UZS)) 9 Account receivables (Continuation) Asat 31 decer A a 2016 Provision for impairment at 1 January 2016 1 115 744 1 144519 Provision for impairment of trade receivables 2 586 060 (28 775) Provision for impairment 3701804 1 115744 10. Cash and cash equivalents As at 31 december As a -t1e b 2016 2015 Seittlment accounts in UZS 307 255 203 707 Other special accounts in the UZS 211278 367345 Total cash and cash equivalents 518534 571052 Below is an analysis of cash in banks by credit quality: Asat'31december Asat3ldecember, 620151 Cash at banks Banks of Uzbekistan 518534 571 052 Total cash in the bank on demand 518 534 571 052 The balance of cash and cash equivalents as of 31 December, 2016 is in joint-Stock Commercial Bank "Ipoteka- Bank" and Joint-Stock Commercial Bank "Hankorbank". Joint-stock commercial bank "Ipoteka Bank" and Joint-Stock Commercial Bank "Harmkor Bank" have a rating of "Stable" according to the rating, Moodys and long-term rating on deposit in local currency "B2" 11. Chartered Capital As at3 december Asl 31 december 2016 2015 Chartered Capital 13048353 3160229 Total Equity 13048353 3160229 The company was registered by Decree No. 589 of 24 june, 1978, by the Council of Ministers of the Soviet Socialist Republic of Uzbekistan. The company has the fights of an independent economic enterprise and is managed in accordance with the legislation of the Republic of Uzbekistan. The share of the Government of the Republic of Ubekisman in the authorized capital of the Company is equal to one hundred percent, the amiount of the authorized capial of de Company is directly regulaced by the Govcrnnent of de Repuolic of Uzbekistan. In accordance with the Decree of the Cabinet of Ministers of the Republic of Uzbekistan No. 306 of 30 October, 2015 "On measures to implement the main directions of development of-water supply and sanitation', the athorizcd capital was increased by 9 888 1214 thousand LZS. 26 Samarkand SUE "Suvokava" Notes to financial statements, for the year ended 31 december2016 (in thousand UZS)) 12. Restricted Capital As at 31 decemnber' As. at 31 decembler 20162015, Contribution of the Government of the Republic of Uzbekistan in kind 3 948 830 3 077 430 Contribution of the Government of the Republic of Uzbekistan in cash 10677 10 677 Total retricted capital 3959507 3088107 Under the IDA loan No. 4633 in accordance with Presidential Decree No. 1216 of 29 October, 2009. the State's contribution in kind is provided in the form of exemption from taxes and duties on goods, work, services and vehicles of the Suvokova Agency of the Samarkand region and its contractors. The contribution of the State on co-financing the ProecCt is capitalized upon its receipt and is recorded at fair value, defined as the cost of construction as capital of restricted use in equity. 13. Long-tern borrowings As at-1 december As at 31 deceMber 2016 2015 Non-current portion IDA loan issued through the Ministry of Finance 71 676 488 61 478 965 Nafexis bank loan issued through the Ministry of Finance 834 418 750 656 Total 72510905 62229621 Current Portion: The current portion of the loan from Natexis Bank, issued through the 1963010 39429 Ministry of Finance Total 1963010 39429 Total long-term borrwings 74 473 915 62269050 In addition to the loan agreemlent No. 4633-UZ dated 26 November, 2009, signed by the IDA and the Republic of Uzbekistan, on 29 November, 2010, a iong-term sub-loan agreement was signed. A company valued under Speci2l Drawing Rights (SDRs) of 16.4 million SDRs equivalent to 25.3 million US dollars. The parties under this sub-loan agreement are the Government of the Republic of Uzbekistan, the IZbek Agency "Uzkommunkhizmat", the hokimiyat of the Samarkand region and the Company. Under the sub- loan agreement, the Company is the recipient of funds from IDA through the Ministry of Finance of the Republic of Uzbekistan represented by the Government of die Republic of Uzbekistan. According to the repayment schedule of the loan agreement, principal repayment starts on 1 Novenber, 2019 with a final maturity date of I May, 2044. Under the terms of the loan, 0.75% per annum is paid for the used loan amount and 0.5% per annum is paid for the unused amount. The loan of Natexis Bank is a sub-loan agreement No. OUZ989C, signed on 19 May, 2005 between the Government of the Republic of Uzbekistan (the main guarantor of the loan of Natexis Bank), Khokirniat of Samarkand (guarantor) to finance the restoration and improvement of the quality of the existing water supply. 27 Samarkand SUE Suvokava" Notes to financial statements, for the year ended 31 december-2016 (in thousand UZS)) 14. Trade payables As ait 31 december As at 31 d6eember 2016 2015 Financial labilities Accounts payable to suppliers and contractors 12 431 826,46 1 123 547 Total financial liabilities 12 431 826 1 123 547 Non-inancial liabilities Taxes payable to the budget 141 387,85 3 168 Advances received 478 424.00 2 147 563 Salary to be paid 1 031671,22 155318 Total 1 651 483 2 306 049 Total trade payables 14083310 3429596 15. Revenue o r ed dr th -ye -Oed31 Revenue from legal entities 12096026 4136223 Revenue from individuals 23 200 393 3 050 032 Revenue from work and services 6005 27315 Total revenue 35302424 7213670 The source of revenue is the sale of services for water use and sanitation (sewerage) to legal entities and individuals and services for metrology (preventive inspection, inspection and repair of water meters). Tariffs for the supply of a sewage system are approved by the regional department of the Ministry of Finance of the Republic of Uzbekistan. Companies are allowed to have a gross margin from the total income of not more than 10%, By population, i.e. Individuak aregistered in the specialized program Billing - automation of accounting control and analysis of indicators of water use and sanitaion. According to concluded agreements with the population for wter use, the data on the availabiliry of water meters (meters) have been entered into the program, and if they are not established, then by the number of residents, the data are provided by the self-govenmwent bodies. Monthly, the program records data on consumed water volumes (meter readings) collected by line inspectors and, according to the established tariffs, the Company's revenues are calculated. For those categories of the population that do not have water meters (meters), accrual is made monthly according to the tariff for the number of residents. The technical effectiveness of de billing system is limited. Data on billing for individual clients is based on budgetary nonns for using the sewage system per person, while the acual use of sewerage by individuals can vary significantly. 16. Cost of sales The componens of the cost of sales are shown in the table below- o y d So -h y 3 d-cemr e 2016 2015 Staff costs 6867258 1998 594 Repair and maintenance expense 1947675 1336206 Materials and spare parts 1 142 888 967 537 Fuel and energy 11062135 609097 Depreciation 5118878 421432 Other 2893371 1 170 Total cost of sales 29032205 5334036 28 Samarkand SUE "Suvokava' Notes to financial statements for the year ended 31 decenber 2016 fin thousand UZS)) 17. General and Administrative expenses 31 decemoer 31fdeceme 2016 Labor costs 2 884 098 573 695 Deductions to social insurance. 718 040 Taxes other than income tax 1 248 534 245 694 Stationery and supplies 81 593 51 183 Depreciation deductions 123774 47708 Bank commissions 273 983 45 223 The services 205 677 44847 Fuel 123897 32928 Communications costs 55219 19357 Sponsorship and charity 10500 16549 Protection of the environment 3984 2605 Commission fees 26015 738 Fines and penalties 22078 145 Other expenses 532485 39111 Total general and administrative expenses 6310877 1 119783 18. Governmental grant For the year ended 31 For the year ended431 december acme 2016 2015 Governmental Grant 4473160 Total Governmental Grant 4473160 19. Other operating income co-the4"yeh ded; Forftheyerend 31idecember 31,decemb)er 2016 201.5 The profit from the disposal of fixed assets 2 120 099 - Other operating income - 65 055 Total operating income 2120099 65 055 20. Financial income and expense For the year ended For the-year ended 31 december 31 decemnber 2016 .2015 Foreign exchange revaluation expenses (12 430 508) (7686 386) Interest expense on long-term (21 617296) (378 836) borrowings Less capitalized finance costs 20054066 348219 Financial expenses (14 193 738) (7 717 003) icorne from exchange rate differences 1805211 340325 Financial income 1805211 340325 The Company capitalized borrowing costs arising from financing directly related to the reconstruction of sewage canals. The profit and loss from revaluation of foreign currency arises mainly from the revaluation of labilides in US dollars and EURO for loans from IDA and Natexis Bank as a result of strengthening or we-akeitng of dbe UZS in relation no the US dollar and EURO. 29 Samarkand SUE 'Suvokava' Notes to financial statements, for the year ended 31 december 2a16 (in thousand UZS)) 21. Income tax expense The Company compiles tax payments for the current period on the basis of tax accounting data that is carried out i accordance with the requirements of the tax legislation of the Republic of Uzbekistan, which may differ from FRS Differences between IFRS and the tax legislation of the Republic of Uzbekistan result in certain temporary differences between the carrying 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 Republic of Uz7bekistan. The current tax rate on income (profit) for the Conpany in 2016 and 2015 amounted to 7.5 percent of the taxable profit. In accordance with the tax legislation of the Republic of Uzbekistan, the Company also pays other taxes and deductions related to its operating activities. Fo #* year6ended For the year endebd 31 'december 31 decemiber 2016 201-5 Loss before tax (8421 985) (6 523 097) Estimated amount of compensation for income tax at a statutory rate of 7.5% (2(15: 7.5%) (831 649) (489 232) Non-deductible expenses 221 834 162 328 Unrecognized other possible tax assets 469 873 343 831 Income tax expense for the year 60058 16927 22. Contingent assets and liabilities Legal issues. In he normal course of business, the Company 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 future. Insurance. The marker of insurance services mi the Republic of Uzbekistan is at the stage of formation and many forms of insurance, common in other countries of the world, are not yet available in Uzbekistan. The company does not have full insurance coverage for its production facilities, losses caused by production delays, or incurred obligations to third parties due to damage to real estate or the environment caused by accidents or the Company's activities, Until the Company has full insurance coverage, there is a risk that the loss or damage of ccrtain assets could have a material adverse effect on the Company's operations and financial position. Tav 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 varying interpretations and subject to frequent changes. Often there are different opinions regarding the interpretation of legisative acts both between different departments and within one department (ic the State Tax Committee and its various inspections), which creates uncertainty and the ground for various disputes. Tax declarations and other legal obligations (for example, questions of customs and currency regulation) are subject to review and inspection by a number of agencies that by law have the right to apply significant administrative penalties (including fines and penalties) and may take a tougher position in the interpretation of legislation and veriication of tax calculations. As a conscquencc, tax authorities may file claims for those 30 Samarkand SUE 'Suvokava' Votes to financial statements, for the year ended 31 december-2016 (in thousand UZS)) 22. Contingent assets and liabilities (Continuation) rransac-ions and accounting merhods for which they did not make daims before. This situation creates a greater probability of occurrence of tax risks in the Republic of Uzbekistan than, for example, in other countries with more developed taxation systems. Tax inspections can cover five calendar years of activity, immediately preceding the year of verification. Under certain conditions, earlier periods may be subjected to verification. As of 31 December, 2016 management believes that it adheres to an adequate interpretation of the relevant legislation, and the Company's position regarding tax, currencvand customs issues will be supported by the controlling bodies. Credit re/ared commimnns. The main purpose of these instruments is to ensure the provision 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 die provision of funds to the counterparty. Nevertheless, there is a potential risk, therefore, in the statement of financial position, among other oblgations under guaranees, provision is made for credit related commitnts with respect to guarantees and guarantees provided, depending on the financial condition of the client. The management of the company does not control issued credit related commitments, as it believes there will be no obligation and accordingly no provision for these contingent credit liabilities has been created. 23. Operations with related parties For te purposes of these financial statements, the parties are considered to be related if one of them has the ability to control the other or exercise significant influence in making other financial 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 only their legal form- In the normal course ofbusiness, the Company conducts transactions with its subsidiaries, associates and joint ventures, as well as with other parties. These operations include settlements, lending, trade finance and foreign exchange transactions. In the Company's financial statements, transactions with related parties include transactions with both Company Participants and the Company's intrasystem organizations. All related disclosures on related parties are disclosed in the notes to ie financial statements. Key management personnel of the Company receive short-term compensation, including salaries, paid leave and paid sick leave, bonuses and other payments. The total amount of payments to the Company's top management is not public infonnation, 24. Segment information Operating segnents are components that carry out economic activities, while they can generate revenue or mav be related to expenses, the operating results of the segments are regularly analyzed 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 and evaiate the results of the company's activities. The functions of the supreme operational management body are perfomned by the Companys 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 segment to make decisions about the allocation of resources and evaluation of their perfomance. The 31 Samarkand SUE 'Suvokava' Notes to financial statements, for the year ended 31 decembae206 (in thousand UZS)) 24. Segment information (Continuation) Management does nor divide de Conpany's assers and liabilities into segments, as all assets and liabilities are accounted for by the Company's only reporting segment. To conduct an analysis of the Company's operations and make decisions based on this analysis, the Company's Management Board is provided with financial results in the fonn of operating reports for one segment. The financial results in this operating statement do not differ from those in the financial statements. 25. Fair Value Fair value is defined as the price at which the instrument can he exchanged as part of a current transacion between interested parties wiling to enter into a transaction on market trins, other than forced sale or liquidation. The best confirmation of fair value is the quotation of a financial instrument in an active market. Since for most of the Company's financial instnunents there is no liquid market, their fair value must be deterined on the basis of current market conditions and specific risks associated with a particular instrument. The Republic of Uzbekistan continues to show some features of the developing economy, and the existing economic conditions continue to restrict activities in the financial market of the Republic of Uzbekistan. Information on the financial market can be outdated and therefore can not represent the market value of financial instruments, All financial instruments of the Company are accounted for at amortized cos Their fair value at Level 3 of the tir value hierarchy was estimated using the discounted cash flow method. Fir;mcild assets carried t anortized cost The estimated fair value of fixed interest rate instruments is based on the method of discounting the amounts of expected future cash flows using current interest rates for new instruments that involve a similar credit risk and a similar maturity. The discount rate used depends on die credit risk of the counterarry. The catrying amount of financial assets other than investment in the Company is approximately equal to their fair value. Liabilies recorded at anortized cost The fair value of liabilities is detefrined using the valuation technique. The estimated fair value of die instrument with a fixed interest rate and a fixed maturity is based on the expected discounted cash flows using interest rates for new instruments with similar credit risk and a similar period to maturity. The fair value of liabilities repayable on demand or redeemed in advance notification ("obligations payable on demand") is calculated as the amount payable on demand, discounted from the first date of the potential presentation of the demand for the repayment of the obligation. Discount rates used vary from 2.5% to 12% per amum deperding on the naaturitv date and the currency of the obligation. Due to the short maturities, the book vait of short-tcrn financia payables approximates its fair value. 26. Management of Risks The Chainium of the Management Board has overall responsibility for the organization of the Company's risk management system and for overseeing the operation of this system. The risk management of the Company is carried out in respect of financial risks (market, currency, interest, credit risks, liquidity risks) The Company's main task in risk managemnent is to identify and analyze the risks faced by the Company, establish acceptable risk limits and appropriate Control mechanisms, and for monitoring risks and compliance with the need to make changes in connection with changes in market conditions and the Company's operations. larket risk M\arket risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, xvil affect the Company's profits or the value of its available financial instrnents. The goal of market risk management is to control exposure to market risk and keep it within acceptable linits, while seeking to optimize return on investment. 32 Samarkand SUE "Suvokava Notes to financial statements, for the year ended 31 december,2016 (in thousand UZS)) 26. Management of Risks (Continuation) UzS Other Toa EUR V= 3.1 December USDI1=3_9 321 2148 V3C Finacial Assets Cash and Cash Equivalents 518 534 - - 518534 Trade and other receivables 25 723 968 - - - 25 723 968 Total financial assets 26242501 - - 26242501 Financial liability Trade payables 12120300 - - - 12120300 Long-term borrowings - 71 676 488 834 418 - 72 510 905 Short-term loans and borrowings 1963010 - - - 1963010 received Derivative financial instruments - - - Total financial liabilities 14083 310 71 676 488 834 418 - 86 594 215 Open balance sheet 12159192 471 876 488) (83448) - (60 351 713) The following table provides an analysis of the Company's currency risk as of December 31, 2015 The Company's financial assets and liabilities are shown in the table at face value in terns of major currencies. ZSOther To EUR1 =31 D.eember USD1=- 3,419,23 2015 3,231.48 V3C Finacial Assets Cash and Cash Equivalents 571 052 - -- 571 052 Trade and other receivables 5 013 537 - -- 5 013 537 Total financial assets 5 584 589 - -- 5 584 589 Financial liability Trade payables 3 390 167 - - - 3 390 187 Long-term borrowings - 61 478 965 750 656 62229 621 Short-term loans and borrowings received Derivative financial instruments - - - -- Total financial liabilities 3 390 167 61 478 985 750 656 65 619 788_ Open balance sheet 2 194 422 (61 478 965) (750 656) - (0035 199)_ The Company is exposed to foreign exchange risk on the followxing transactions: provision and receipt of loans in foreign currency; mnutual settlements n ith related parties in foreign currency. Due to the underdevelopment of the instrunts of curtency tisk m-anagement in the financial market of Uz7bekistan, the Company does -not effect currency risk insurance, The table belowv shows the changes in the financial result and aggregate Ancome as a result of possible changes in e-xchange rates used at the end of the reporting period, -while all other conditions remnain unchanged. A reasonably Possible change in the exchange rate for each currency is deternd-ined onl the basis of the e_xtreme limits of the fluctuations of the rates changed in comparison with the sem-ii-annual dynamnics of 2017 with the cUrrenlt.rates (for 2015_ annual). The senxi-annual change in rhe rate is only for stre-ngthening forcign exchiange, 33 Samarkand SUE "Suvokava' Notes to financial statements, for the year ended 31 december 2046 (in thousand UZS)) 26. Management of Risks (Continuation) The rtisk was calculated onlv for cash balances in currencies other than the functional currency of die Compauy The change in the exchange rate will be further negatively reflected in the financial position of die Company, as the Company is forced to attract credit resources from banks and international financial institutions to fulfill the whole investment obligations. J n(ssf csensh6inr- ro foreipn exchange risk The table below presents a sensitivity annlysis of the Company to 1 5% and 16% of the increase and decrease in the sum to the US dollar and curo as of 31 December, 2016 and 2015, 11% and 3.8%, respectively. Management believes that, given the current economic situation in the Republic of Uzbekistan, it is possible that dhe exchange rate of the sunm against the US dollar and euro will fluctuate up to 25%. 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 onlv amounts in foreign currencies available for the end of he period, with the conversion at the end of the year using rates that are changed by 25% compared to those in force as of December 31, 2016 and 2013, respectively. Limitations of sensitivity analysis The ahove tables reflect the effect of a change in the main assumption, while other assumptions remain unchanged. In fact, there is a connection between assumptions 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 diat die 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, Lhe Group's strategy in the area of financial risk management is aimed at managing the risk of market volatility. In the case of sharp negative price fluctuations in the securities market, management can resort to such methods as selling investments, 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 situation, different methods of assessing assets and liabilities can lead to significant fluctuations in the amount of capital. Other limitations in the above sensitivity analysis include the use (with the aim of disclosing the potential risk) of hypothetical market movements, which are just the Company's forecast 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 way. In terest rate risk. The Company assurnes the risk associated with the effect of fluctuations in narket interest rates on its financial position and cash flows. Such fluctuations nay increase the level of interest margin, but in the event of unexpected changes in interest rates, interest margin may also decline or cause losses. Oanges in interest rates affect mainly borrowed 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 be more beneficial to the Company during the expected period before maturity, based on its own professional judgmient 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 were received with a fixed interest rate. The refinancing rate established by the Central Bank of the Republic of Uzbekistan since June 29, 2017 has been increased from 9% to 14%. This change may have a negative impact on de financial position of the Conipan., as the Company is forced to attract credit resources from banks and international financial institutons in order to ufillI the whole investment obligations. 34 Samarkand SUE "Suvokava" Notes to financial statements, for the year ended 31 december,2016 (in thousand UZS)) 26. Management of Risks (Continuation) The Company is exposed to credit risk, namely the risk that one parry to a financial instrument bears financial losses to the other party by defaulting on its obligations. Exposure to credit risk arises from the provision of seices the Company on deferred payment terms and other transactions with counterparties that result in financial assets. Financial assets for which the Company has a potential credit risk are mainly due to the related parties' indebtedness for loans, balances with banks and other receivables. The company issues loans to its structural enterprises. And the obligation to repay loans was not evenly distribured. In this regard, the Companys exposure to credit risk from counterparty debt is significant- To reduce the credit risk associated with paving 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 6). The management of the Company believes diat the credit risk associated with cash depends on the size of the bank and its reputation. ALximn exposure to credit risk The maximum size of the Company's credit risk may vary significantly, depending on the individual risks inhercnt in specific assets and on general market risks. The f(alloing table shows the maximum exposure to credit risk for financial assets. For financial assets recorded on balance sheet accounts, te maximum exposure to credit risk is the carrying value of these assers, excluding offsets of assets and liabilities and collateral. Cash and Cash Equivalents 518 534 - 518 533,00 518 533,52 Trade recievables 25723 968 - 25723 968 25 723 967,75 Cash and Cash Equivalents 571 052 - 571 052 571 052,00 Trade recievables. 5013537 5013537 5013537,00 Liqueditiyirisk. Uiquidity risk is the risk that the Company has difficulty in meeting its financial obligations, which are settled by the transfe r of cash or another finanicial asset. The Company's approachi to liquidity management is to ensure, to the extent possible, thei Company's continued availability of liquid funds sufficient to pay off its obligations on time, both under nons and stressful conditions, preventing the occurrence of unacceptable losses and eithout eopardizing reputation of the Company. The Company does not provide an analysis of the Company's fin-Anciq] liabilities by maturity, specifying the dartes that remain at the reporting date before the end o)f the contractual terms of the communication of secrecy of informanoon. 35 Sarnarkand SUE `Suvokava' Notes to financial statements. for the year ended 31 december.2016 (in thousand UZS)) 26. Management of Risks (Continuation) The Conpans rask in the field of capital management is to ensure the Company's ability ro continue its uninterrupted business, providing an acceptable level of profitabilitv, respecting the interests of other partners and maintaining an optimal capital structure. 27. Events after reporting date. According to the Decree of the President of the Republic of Uzbekistan, PD-517 of 18 April, 201 "On measures to further improvement of the management of the housing and communal services system" and PO- 2900 of 18 April, 2017 "On the organization of activities of the Ministry of Housing and Communal Services of the Republic of Uzbekistan", the enterprise was reorganized as the Samarkand regional state unitary enterprise "Suvokova" under the Ministry of Housing and Communal Services. 36