SYRDAR A REGIONY.L STATE UNITARY ENERPR ZE < INDEPENDENT AUDITOR'S REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" TABLE OF CONTENT STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 INDEPENDENT AUDITOR'S REPORT STATEMENT OF FINANCIAL POSITION 2 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 3 STATEMENT OF CHANGES IN EQU:ITY 4 STATEMENT OF CASH FLOWS 5 1. INTRODUCTION 6 2. OPERATING ENVIRONMENT 9 3. NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS 11 4. SIGNIFICANT ACCOUNTING POLICIES 17 5. IMPORTANT ASSESSMENTS AND PROFESSIONAL JUDGMENT 29 6. PROPERTY, PLANT AND EQUIPMENT, AND CONSTRUCTION IN PROGRESS 30 7. INVENTORIES 31 8. TRADE ACCOUNTS RECEIVABLE 31 9. ADVANCES PAID 32 10. ADVANCE TAXES AND STATUTORY CONTRIBUTIONS PAID 33 11. OTI IER ACCOUNTS RECEIVABLE 33 12. CASH AND CASH EQUIVALENTS 33 11. CHARTER CAPITAL 34 14. LOANS 35 15. DEFERRED INCOME 35 16. OTHER NON-CURRENT LIABILITIES 36 17. TRADE ACCOUNTS PAYABLE 37 18. ADVANCES RECEIVED 37 19. TAXES AN) STATUTORY CONTRIBUTIONS PAYABLE 38 20. PAYABLE TO EMPLOYEES 38 21. OTHER ACCOUNTS PAYABLE 38 22. REVENUE 39 23. COST OF SALES 39 24. GENERAL AND ADMINISTRATIVE EXPENSES 40 25. OTHER INCOME 40 26. FOREIGN EXCHANGE GAIN AND LOSS 40 27. FINANCE INCOME AND COST 41 28. CONTINGENT LIABILITIES 41 29. OPERATIONS WITH RELATED PARTIES 42 30. FINANCIAL INSTRUMENTS, FINANCIAL RISK MANAGEMENT 43 31. SUBSEQUENT EVENTS 45 STATEMENT OF MANAGEMENTS RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 Management of Syrdarva State Unitary Enterprise "Suvoqova" (hereinafter - the "Company") Is responsible for the preparation of the financial statements, dat fairly present, in all material respects, financial position of the Company as at December 31, 2018, and the results of its operations, cash flows and changes in equitv for the year then ended, in accordance with International Financial Reporting Standards (hereinafter - "I'RS"). In preparing the financial statements, management is responsible for: selecting or proper accounting pnciples and its consistent application; presenting information, including accounting policies, in a manner that provides relevance, reliability, comparability and understandability of such information; - using of reasonable and appropriate estinates and assumptions; - providing additional disclosures when compliance with the requirements of IFRS is insufficient for users of the financial statements to understand the impact of particular transactions, as well as other events and conditions on the financial position and financial results of the Company's operaton; and assessment of the Company's ability to continue as a going concern in the foreseeable future. Management is abo reiponiblc tor - designing, implementing and maintaining the effective and reliable functonaluy of the internal control system; - maintaining adequate accounting system, allowing the preparation of information aboUt the Company's financial position at any time with reasonable accuracy, and to ensure compliance of financial statements with IFRS, - maintaining accounting records in accordance with the legislation of the Republic of I Uzbekistan; - adopting measures vithin its competence to safeguard as scts of the Company; and - detecting and preventing fraud and other irregulanties. The financial statements for the year ended December 31 20 18 were approved by management of the Company on June 28, 2019. Director G Y. X. Jalolo Chief accountant O.S. Kholbwaev GrantThornton An instinct for growth AO 000 4Grant Thornton) Pecny6nAKa Ya6eKVcTaH, 100128, TaueHI, yn. A6ap. 1A Ten: +998 (71) 230-45-43 OaKc- +998 (71) 244-47-43 "Grant Thornton" AO LLC 1A, Abay Str, Tashkent, 100128, Republic of Uzbekistan Tel.: +998 (71) 230-45-43 Fax: +998 (71) 244-47-43 W: www+grantthornton,uz INDEPFNDENT ATTITTOR'S REPORT TO THE OWNER AND MANAGEMENT OF SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" Adverse Opinion We have audited the financial statements of Svrdarya State Lnitarn Flnterprise "Suvoqova" (hereinafter - the "C'ompanv"), which comprise the statement of tinancial position as at December 31, 2018 and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash tlows for the year then ended, and notes to the financial statements, including a summar of sigificant accounting policies. In our opinion, because of the significance of the matter discussed in the in the BasisrilAdrene Otiiion section of our report, the accompanying financial statements do not present fairly the financial position of the Company as at December 31, 2018, and its financial performance and its cash flows for the year then ended in accordance with Internaotial Financial Reporung Standards jhereinafter - the "IFRSs") Basis for Adverse Opinion 1. As disclosed in Note 6 to the accompanving financial statements of the Company as at December 31, 2018, net carrying value of property, plant and equipment is 116 361 672 thousand tiZS ,December 31, 2017: 118 729 537 thousand t/S), which are 26% of the Cornpany's assets (2017: 37% ), Based on the audit procedures performed we identified certain indicators for impairmet of these assets as of the reporting date, such as: a" the Company ITncurred loss from its operations for 2018 in the amount of 45 207 407 thousand UZS and as at December 31, 2018 the acCtiulated losses amount 350 959 891 thousand; b) the Company's net assets amount 342 818 855 thousand UZS and are below its share capital in the amount of 350 959 891 thousand UZS; and cl there are indication that some of the property, plant and equipment are obsolete or physically damaged. GrantThornton An instinct for growth Basis for Averse Opinion (contiiued) However, the Company has not carfned out an impairinent review on the property, plant and equipment as at December 31, 2018 required by the accepted accounting policy disclosed in Note 4 in order to determine whether adjustments are needed to be made to the carrving amount of the properry, plant and equipment. Duc to the nature and complexity of these assets, we were not able to make our estiate and to determine the valuc of impairment provision on the carring valuc of the Company's property, plant and equipment as at December 31, 2018. Fur,hienuore. duning the year 2018, the Company incorreccdy used the depreciation rates for property, paInt and equipmet as diseosed in No:e 4 to the accoipanying financial statements. Based on our audit procedures performed, we recaIculated the depreciation expense of property, plant and equipimnt for year 2018 and we have identified that depreciation expenses for 2018 is underestimated in the amount of 4 983 156 thousand 1ZS. Consequently, net carrving valuc of property, plant and equipment is overesumated and expenses and accumulated losses as of and for the year ending December 31, 2018 are underestimated for the arnount of 4 983 156 thousand UZS. 2. As disclosed in Note 14 to the accompanyintg financial statements o the Company, the Company has longke-term loan pa\able amountcd 49 Äl 6 539 itus:id UZ) iiid cuirit pion of thi loanm jayable amounted 8 627 911 thousand 'S as at December 31, 2018, which receipted from \;ia 1 Development Bank 1, 14liB herei;iet, r -the nå ased on >he auda jnttedut. puft.ttJ, k li a tt i nt bn påt d i 0ffi.:> å-ä -. itl t1 lppIfPY doenmeno miehunumv lerrer ot rontirmntion ot the blaou111nt of ADVB', loan as at December 31, 2018. Sstetuendtl , we were unahle tto>ahtn ro11 sn1le ur nt w itclcness and Accuracy of Ilie long-,:term loan for the vear ended )ecembcr 31, 218. 3. As disclosed in Note 26 to the accompatylig financial statenents for the year ended 31 December 2018, the Company has foreign exchange loss, net anounted 18 021 909 thousand U Z1S. Furtiienore, as disclosed in Note 9, to the accornpanying financial statements, the Company recognized foreign exchange gain to the non-monetary itens, presemted in foreign currency (US dollar), which was contradict to the requirement of LAS 21 "The Effect of Changes in Foreign Exchange Rates". During the audit, we were not been provided with the foreign exchange gain and loss calcula tions. Due to the nature and complexity of foreign exchange calculanon, we were not able to make our own esimate and to deternine the effect to the financial statements as at and for the y-ear ending December 31, 2018. We conducted our audit in accordance with International Standards on Auditing (ireinafter - the "ISAs"). Our responsibilities under those standards are further described in the -Idiir Repnibiiriesor E:he t of ths :e,aa .Statements section ot our report. \Ve are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the Republic of Lzbekistai and we have fulfilled our other ethical responsibilies in accordance with these requirements. We believe that the audit evidence we have obrained is sufficient and appropnate to provide a basis for our advense opinion. GrantThornton An instinct for growth Key audit matters Key audit matters are matters that, according to our professional judgment, were rhe most signifcant for our audit of finiancial statements for the current period. These matters were considered in the context of our audit of the finaicial statements in general as well as in the formation of our opinion on this reporting, and we do ot express a separate opinion on these tnatters. Except for the matters deseribed in the Basi+fprAdre Opiniw section, we have deternined that therc are no other key audit matters to communicate in our report. Material Uincertaiiity Related to Going Concern We draw attention to the Statement of Changes in Equity, which indicates that the Company incurred a total comprehensive loss of 45 207 407 thousand UZS for the year ended December 31, 2018 and, as of that date, ttw Compan's accumulated loi ammnted t- ;A0 9;9 991 rhoiinand 7 7,- nd itN totel mhabihtics eyceeded its total asse:s by 342 818 855 thousand UZS. These condinons indicate that a iatenal uncertaint- exists, that may ast signi icant doubt on the ability of the Company to continue as a going conen. Our opinion is not modified in respect of this rmatter. Respo nisibilityof Natiagemient and Those Charged vi c f it rn for tie Fiiaial St atem en ts Management is responsible for the prepaniion and fair presentation of the financial staternets in accordance with IFRSs, and for such internal control as management detenines is necessarv to enable the preparation of financial statenents that are free from matenal misstatement, whether duc to fraud or error. In precptiring the finati-anl !taitemcount1 management ir pnribl f"r iivevring th-eomny' 1bt t continue as a going concern, disclosing, as applicable. matters related to going concern and using the going concern basis of accounting unless management either intends ro liqdare the Company or to cease operations, or nas no realistic altemauve but to do so. Those charged with governiance are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for the Audit of tei Financial Statiints Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are trec from material misstatement, whether due to fraud or error, and to issuc an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance. but is not a guarantee that an audit conducted in accordance with IS.As will alwavs detect a matenal misstatement when it exists. Misstatements can anse from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the econoinc decisions of users taken on die basis of these financial statemients. As part of an audit in accordance with ISAs. we exercise professional judgnen and maintain professional scepticism throughout the audit. WVe also: • Identify and assess the risks of matenal misstatement of the fimancial statements, whether duc to fraud error, design and perform audit procedures responsive to those nsks, and obtain audit evidence that is sui:ent and appropriate to provide a basis for our opinion. Ilie risk of not detecting a material misstatement resulting front fraud is higher than for one resulting from error, as fraud may -nvolve collusion, forgery, intenntonal omissions, misrepresentartons, or the overnde of internal control; • Obtai an understatnding of intemal control relevant to the audit in order to design audit procedures that are appropriate i the circumstances, but not for the purpose of expressing atn opinion on the effectiveness of the Company's internal control; GrantThornton An instinct for growth Aiditor's Resp>nsib)itities for the Audit of the Financial Statements continued) • Evaluate the apiropriateness ofaccounting policies usdc and the reasonableness of accounting esttnates and related disclosures made by managerent; and • Conclude on the appropriateness of management's use of the going concern basis of aceccunntiirlg and, based on the audit evidenc obraimed, whether a maenal unertainrr exists related to events or conditons that may cast significant doub: on the Companys abilitv o connutie as a gomig conccrn. If w concilude that a material -n ncertamnt exists, we are required to draw attention in our auditor's report to the related disclosures in the tinancial statements or, if such disclosures are inadequate, to nio(1ty our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. lowever, future evens or conditions may cause the Company to cease to confnue as a goting concemi. • Evaluate the overall preseiitaion, stricture and content of the inaticial stateäents, iluding the disclosures, and whether the financial statenwnts present the underlying transactions and events in a manner that achieves fair presentation. We cm<->iuctieate with thcos charged wih go,vernance regarding, aiong other nutiers, the planned scope and ining of the audit and signildcant audit tilings, ineluding any sigmticant dehieniees n internal control that we iden61y during our audit. Engagement Partner: N.F.Karimov Senior manager: Auditor: ? NJ4kYtkhiev A.KH.Abdu ahö jaev June 28, 2019 Tashkent, the Republic Uzbekistan SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 STATEMENT OF FINANCIAL POSITION Dece6mber 31 In thousands of lUZS Notes q& 20T121 ASSETS Non-current assets Property, plant and equipment 6 116361 671 118729537 88111 122 Construction in progress 6 267835646 144 918313 65785176 Total non-current assets 384197317 263647850 153 896 298 Current assets Inventories 7 1406901 1 147047 1 873683 Investments 1 027 1 027 1 027 Trade accounts receivable 8 3 521 157 037 555 738 Advances paid 9 39 169082 47532297 20344268 Advance taxes and statutory 10 1 310 503 1 094867 1 099 550 contributions paid Other accounts receivable 11 590 077 2 682 63 563 Cash and cash equivalents 12 26705558 3741 280 12 146 171 Total current assets 69186669 53676237 36084000 TOTAL ASSETS 453383986 317324087 189980298 EQUITY AND LIABILITIES Equity (hRptor cpit*l 13 H 141 01(;3 A 141 03 ` 141 036 Retained earnings (350 959 891) (305 745 942) (54 334 816) TOTAL EQUITY (342 818 855) (297 604 906) (46193780) Non-current liabilities Loans, non-current portion 14 574491 983 451 003816 150520301 ntfrrred onnnmr 1F 147 s1n ;? AR 732 R4A R1R7 100 Other non-current liabilities 16 25 364 435 21 900 746 5 730 830 Total non-current liabilities 747506680 559637408 210088321 Current liabilities Trade accounts payable 17 35003470 46257332 21 984077 Advances received 18 1 194766 1 690 541 - Taxes and statutory contributions payable 19 2 770 754 1 688 071 1 108936 Payable to employees 20 634 134 1 487272 1 409090 Short-term loans - - 102007 Loans, current portion 14 8627941 3959550 1 397233 Other accounts payable 21 465096 208819 84414 Total current liabilities 48696161 55291 585 26085757 TOTAL LIABILITIES 796I20261 614928993 236174078 TOTAL EQUITY AND UABILITIES 453 383 986 317 324 087 189 980 298 Approved and signed on behalf of dhe Company's Maqagenient on june 28, 2019. Director Y. X. Jalolov Chief accountant O.S. Kholbiutaev Syrdarya region, the Republic of Izbekistan 2 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 STATENMNT OF PROFIT OR LOSS AND OTH ER ()MIRIA 1LNSIV INCOME Revenue 22 11 201 602 9918186 Cost of sales 23 (19306792) (17341 494) Gross loss (8 105 190) (7423 308) General and administrative expenses 24 (22 767 511) (10800 682) Other income 25 3696203 1 722 115 Loss from operating activities (27 176 498) (16 501 875) Foreign exchange loss, net 26 (18021 909) (234 909 345) Finance income/(cost), net 27 (9000) 94 Loss before income tax (45207407) (251 411 126) Income tax expense - - Loss for the year (45207407) (251411 126) Other comprehensive income - Total comprehensive loss for the year (45 207 407) (251 411 126) Approved and signed on behalf of dhe Conpany's Management on June 28, 2019l Dihrcctor j4N~} . 1,J10ov Cluf accountant O.S. Kholbutaev Syrdarna region, the Republic of Uzbekistan 3 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 SI'ATIMENT OF CIHANGES IN ;Q1 ITY In thousands of UZS NotesToa As at January 1, 2017 (restated) 13 8141 036 (54 334 816) (46 193 780) Loss for the year - (251 411 126) (251 411126) Other comprehensive loss for the year - - Total comprehensive loss for the year - (251 411 126) (251 411 126) As at December 31, 2017 (restated) 13 8 141 036 (305 745 942) (297 604 906) Effect on impact of IFRS 9 (Note 2) - (6 542) (6 542) As at January 1, 2018 (recalculated) 13 8 141 036 (305 752 484) (297 611 448) Loss for the year - (45207407) (45207407) Other comprehensive loss forth year - - Total comprehensive loss for the year - (45 207 407) (45 207 407) As at December 31, 2018 13 8 141 036 (350 959 891) (342 818 855) Approved and stgned on behalf of the Company's Management on June 28, 2019. t)ircctor Y. N. 111olov ChIef accountant O.S. Kholbutaev Syrdarva region, the Republic of Uzbckistan 4 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 SIAFEMINT OF CASII FLOWS In thiousandsý ol'UZS Nts21 CASH FIDWN FROM OPERATING ACTIV1iES: I oss before income tax (45 207 407) (251 411 126) Adjustments for: Depreciation ofproperty, plant and equipmnrt 6 11 741 147 8864933 Finance (income)/cost, net 27 900) (94) Iosses from recovery of`allowance for expected eredit losses 12 63 872 - Provision for obsolete invent aries 7 2275352 1 127757 Acerual of allowance for doubtful trade accounts receivable 8 137 936 3 584 021 Acerual of allowance for doubt ful advances paid 9 13 505 279 - (ain on disposal of property, plant and equipment 25 (57558) (16 169) Provision for unused vacation 20 51 148 60964 A mortisation ofdelfered ineome 25 (2982 113) (l 365640) Foreii cxchange loss, net 26 18 021 909 234 909 345 Lsi from operating activitie% he fore changes in working caital (2 441 435) (4 246 009) Changes in working capital: ChanIvs in inventories 7 (2535206) (401 125) Chang in advances paid 9 10 062 051 105 934 879 Chanw xes and statutory contribut ions pay able 10. 19 867 047 579 135 hang in ru aronweivale 8 87751 /8'o /4 in otler accOunts recivable Il 16524417 60881 C hang.s in t rade accoutnts py le 17 71 117 129 (24 640 '(7) 1h,riL in oll wived 18 (495 775) 1 69<) 1 11,hihlad ,w 'Oh i o m Ii,, I i pia L--, 20, :1 (6 7 00q)9 6 Cash inflow from operatiing activitics 95 558 970 86867 695 Net cash inflow trom operating activities 95 558 970 86t 867 695 CASH FDMN FRO.M INVFSTING ACT1IVITIES: Purchase of propcrty, planti and equipnent 6 (1967939) (1 228536) Construet ion 6 (130 337 288) (117 712 907) Proeeds fram sale of propertv, plant and equip ment - 205 Donations from Sy rdary a reioan Authoity 25 602 534 4 510 069 Net cash outflow from investing activitie" (131 702 693) (114 431 169) CASH FLONNS FRONI FINANCING ACTIVITIES: Repayinent of Loan AD13 No. 1842-UIZ 14 (2 089 000) (660215) Receipts from Co-financing ofthe Rep ublie of Jbekistan 15 351087(012 15 536 250 Proceeds from Govemment to sett le of Ioan A D3 No. I 842-U B i 5 2 0891000 - Proceeds from Loan IDA No. 4869-UZ7 14 23592511 972409 Net cash inflow from finaneing activities 58679523 15848444 Net increase/(decrease) in cash and cash equivalents 22535800 (11 715030) Effect ofchangis in foreigni exchange rate an ashi and cash equivalents 428 478 3 310 139 Cash and eash cquivalents at the beginning ofthe year 12 3 741 280 12 146 171 Cash and cash equivaulents at the end of the year I 2 26705558 3 741 280 Approved and sigied on behalf of the Companvs Man agernent on lune 28, 2019. )irector Y XJalolor Ch:ef accountant O.S. Klholbutacv Syrdarva region, the Republic of Uzbeklstan 1,ý 1 , I ý , 1,ý, ý 11ý' I 'ýý ,. ; ) ,, "" 'ý5 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 1. INTRODIUCFION The Syrdarva Regional State Urutary Enterprise "Suvoqova" 'hereinafter the - "Conpany") was incorporated under Decree No. 366 dated August 2, 1978 by the Agency "zommuizmat" of the Republic of Uzbekistan. The Company has the rights of an independent economic entity and is governed under the legislation of the Republic of I zbekistan. [he Companv was reorganized in accordance with the Resolution of the Cabinet of Ministers of the Republic of LIzbekistan No. 306 dated October 30, 2015 and Resolution of the Authority of the Syrdarya Region No. 277 dated Novenbet ., 20115. 'ihe Company was developed in accordance with the Civil Code of the Republic of tCzbekistan, the Law of the Republic of UAbekistan "On the contractual and kgal basis of economic entities", Order of the President of the Republic of lzbekistan PD-2900 dated April 28, 2017, Cabinet of Manisters of the Republic of Ubekistan No. 215 dated October 16, 2006 and the Charter "On State Enterprises", the Decree of the Cabinet of Ministers of the Republic of Uzbekistan "On measures to inplement the main directions of do:%elopment of organizations in water supplies and sewage systems" No. 306 dated October 30, 2015, the Order Authorty of Syrdarva region "On further improveintit of the system of the Regional State Lnutan Enterprise "Suvoqova" No. 2!, dated November 10, 2015, as well as other legislation. [his charter determnes the organization of the legal status ot the (.ompany, its branches and representative offices, the specifics of its activities, the rights and obligations of the founder and executor, as wvel as the property relations between the Coipany and the founder. In accordance with the resolution of the P)resident of the Republic of Uzbekistan PP-2900 "()n the organization of the activity of the Ministry of housing and communal services of the Republic of tzbekistan", the Company .,iw trancfurrLd from thte Authori- Qf Sy,rdar-a 'f threl ,l,Ie on w o N th \nfnn o In t?ong "Ind communal services of the Republic of Uzbekistan. *Tle sole founder of the Company is the Management of housing and communal services of the Syrdarva region of tie Miustry of housing and communal services of the Republic of ICzbckistan. Management of housing and communal services of the Syrdarya region of the Ministryof housing and communal services of the 100% - Republic of Uzbekistan Authority of Syrdarya region of the Republic of Uzbekistan - 100% Total 100% 100% The Company includes urban branches located in the cities or Gulistan, Yangier, ShIrin, and Bakht of the Gulistan, Sayhnobad, Syrdarva, Baaut, Khavast, Nirzaabad, Sardoba, Akaltyn districts and Zomin potable water facilir. The Compan\ operates in Gulistan city and is monopolisr, and has social and econonic importance to Syrdarna region. The capabiliny of the Company to sustainably continue its operations depends on conitinuous support of the Government of Lizbekistan. 6 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 1. INTFRODUTION (CONTINI 1D) The main actvities of the Company are water supply and sewerage services in the regn ni. Ilie total nunber of staff as at December 31, 2018 amounted 622 employees (2017: 638 employcs). The Company's registered address is 70, VirdavsiY Street, 120100, Gulistan, Republic of Uzbekistan. ihe nain acavities of the Company are: • Reahzation of the goverwiien's policy on the issur of water supply, iiipementation of plans and tasks; • Construction of facilities on the basis of funds allocated by the state; • Monitoring and improvement of the activities of branches under the organiation's order; • In order to develop and approve an annual business plan and submit to the .Authorit of region in accordance with the established procedure; • The percentage of funds to be transferred to a savings account mst be deternmed and approved in accordance wvith the procedure of the financial departnent of the regional Authority; • Creation of other enterpnses through its subsidiaries for the direct provision of wvater supplY in the cities ot the region, centres of the region, the population of urban and niral setemjenits, ciiiunal housing fntfrprs ame ;,atlprmem andl 'ie orennTons, ln aÄcordance ' th thu tmx \gr ' \ ,u 7 i0 Septmhr l 1'411 l Iixeen ile litiitAe ,ji,il Development Association (hereinafter - the "IDA") and the Republic of Uzbekstan, a project was organized to improve the water supply of regional centers and rural serleients of Bayaut, Klhavast, Mirzaabad, Sardoba and Akaltvn districts of the Sy-rdarva region (hereinafter - the Project). Ilie purpose of this project is to inmprove the quality, aradabiity and sustainability ofwater supply in certaln areas of the Syrdarya region. The total cost of the projeet is 138.6 million US dollars. TIhe project is funded from the sources of IDA and Government of Uzbekistan. The ainounr of IDA loan is 57.14 million special drawing rights (equivalent to S 88.0 million) with an interest rate of 0.75% per annun of the principal amiount. >Yhe interest rate on obligations in the amount of 0.5% per annum should be paid on the unused loan amounts. The pnncipal amount of the loai iust be repaid every six inonths for 35 y-ears, including a preferential period of ten years, stardng in 2021. The aniount of another source, the Goverment of the Republic of Uzbekistan, whose contnbution is 36.2 million US dollars. The project inipleientation period is defined witin 7 years. 2011-2017) I lowever, in the protocol of the Govermenit of the Republic of Uzbekistan No. 229 dated June 1), 211 approved by the Deputy Priie Minister of the Repiblic of Uzbekistan and the World Bank letter No. 0213/ 17 of 17 May 2017, indicated the need to extend the prolect to 18 months that is until 30 June 2019. The Nhmstry of 1inance of the Republic of Uzbekistan is responsible for repaying the loan on behalf of the Republic of Uzbekistan in accordance with the Loan Agreenent No. 4869-U/. dated September 16, 2011 be:ween IDA and the Republic of Uzbekistan. However, there is an atgreement on retinancing between the Ninistrv of Vinance of the Republic of Ubekistan and the Company on accepnng the obligations specified in the I oan Agreement. In addition to the nanure and obicon e of the company, the Company plays a signincant role in the current social and cconomic reforms introduced in the Republic of Uzbekistan. 'herefore, the Conpany's activites are stietly controlled by state authorities, and, in accordance with the Resolution of the Coniniunal Services Department No. 01-8 dated january 9, 2011. utility orgaizations like the Company are allowed to have a naximum gross margin of 10%. 7 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 1. INTROI)UCTION (CONTINUED) Thlie Goverunent of the Republic of Uzbekistan has adopted a project to improve the w,vater supply of regional centers and rural settlements of Bayaut, Khavast, Niraabad. Sardoba and Akaltyn districts of the Syrdarva region thercinafter - the "Project") on the basis of the loan agreement No, 4869-UZ of September 16, 2011 between the IDA and the Republic of Uzbekistan. The Project includes the following parts (coniponents): Part A. Improvin.- the water supply infrastructure Restoration and limited expansion of water supply systems in five distncts (Akaltyn, Bayaut, Kha%vast. M%irzaabad. Sardoba) of the Syrdarva region, including construction works and provision of: * appropriate design and supervision services; * equipnciit for operation and maintenance; * spare parts; * information systems; * a pilot system for dispatching and data collection (SCADA); and * laboratories for testing water quality, by conducting w ork and ensuring the purchase of goods and services of consultants. Pirt i. Institutitnal stren(thening and capacitN bilidint_ * nprIovement of manaimtx l ;nd w ucokin. ithd id thc wrilc cAn,al * Preparaion of an assessment of the institutional capacity of linI( ;d research in the area of private nector involvement; * providing tranimg in local and international management and operiuon; * Apl V I m un ofiwirc tru warr m*n.oem* * development of information strategies and public awareness campaigns; and * preparation of studies on customer satisfaction. All this activiMy will be carred out through HIe ac(Iuisiltion of goods, consulting services and training. Part C. Feasibilit\ stud (or future inestments Financing of the feasibility study for future priority investments in the water supply sector. Part 1). Project Nanagenent Improving the management of the PCG Project, monitoring and coordination capacity through the provision of goods, and consulting services, including projcct audit and training, and financing of operating costs. Li SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 2. OPERATING ENVIRONMENIT The economv of the Republte of V.zbekistan conturites to show some features of developing market. The government develops the legislative, tax and regulatory franework necessarv in a inarket economy, and also undertakes significant economic and social changes. The future stability of the econony of 1 zbekistan largey depends on the ongoing refornis and transformations, as well as on the effectiv eness of econonie, financial and nonetarv measures taken by the Government of Uzbekistan, w,lhich are all outside the control of the Ciompanv. Duc to the fact that the reform process has not yet been completed, operations carred out in Uzbekistan are traught with risks that are not typical for econoically developed countries. The future financial and economic events in Uzbckjstan, including the applation and interpretation of current and future laws and tax rules that significandy affect the financial markets of VUzbekistan and the econony as a whole, will continuc to affeet the financial position and results of the Company's operations. According to the Decree of the President of the Repubbc of Uzbekistan No. UP-49474 "On the strategy for further development of the Republic of Uzbekistan" dated 7 February 2017, an Action Strategy was approved in prionyv areas of the Republic o Uzbekistan in 2017-(021, providirg for an Action Strategy in fie prioritv arcas, one of which is. the development and liberalization if the econ imy, niding imonetarn and tax In accordance with Decree of the President No. UP-517 " O0n Pnorit Nleasures to Liberalze Monetary Polic" dated 2 September 2t017, legal entiies are free to purchase foreign currenc to pav for current operations (import of goods and services, repaymlent of loans, travel expenses and etc) in coiiercial banks from 5 September 2017. Obligatory sale of foreign currency received from exports to the Government was also caneeled, which in the past was-, 50' o and then 25 n. This mcans that the monetarl WItcy of a country that has been very restricuve for many years is now heavily liberahized. Aso, Presidental Decree No. 1P 5168 "On the Concept of Improving the Tax Policy of the Republic of Uzbekistan" dated 29 June 2018 provides for a consistent reduction of the tax burden, simplification of thl tax system and iniprovement of tax administration, which are essential conditions for accelerated economic dcvelopmnent and improving the countr-s investment attractiveness . 'Ihe document provides for 1 January 2019: • - recucing the tax- burden on the pavroll; - improving die taxation or taxpayers of generally cstablished and simplified taxes xwitli the optirluzation or taxes on tuniover, as well as the criteria for the transiion to a simplified tax regime; * measures are being implemented to reduce the negative impact of inproving tax policy on taxpavers of the simpified tax regime; and S -the procedure for calculatitng and paing value added tax aid excise tax is beig inproved. The following refinancing rares werc set by the Central Bank of the Repube ot lzbekistan: Rate of refinancing from 01-01-2015 to 27-06-2017 9% from 28-06-2017 to 24-09-2018 14% from 25-09-2018 16 9 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31. 2018 2. OPER AT ING 1NVIRONMNTI (CO)N'l IN I)) The state of the economy of the Republic of Uzbekistan is characterized by a relatively average inflation rate. During 2018, the inflation rate was 14.3 percent (in 20-17: 1±4 percent;- Growch and macroccononic stability are ensured in U 'zbckisrat, The Gl)P) growth in IU.bekistan in 2018 wvas 5.1 percent (in 2017: 5.3 percent). The followving table sliow,vs the official exchange rate of U TZS Uzbekistan (hereinafter - "UZS") to one US dollar (hereinafter - "US dollar"), established by the Central Bank of the Republic of Uzbekistan: Embhange rae Change(% December 31, 2018 8 339,55 3% December 31, 2017 8120,07 151% January 1, 2017 3 231 48 15% l`oreign currencies, especially the US dollar play a significant roi e in determining the econonic parameters of miainy econiom ilic iansactions in the Ri piblic of Uzbekistan. 10 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31. 2018 3. NEW AND RFVISVD INTE'RNATIONAI, FINANCIAL RIEPORTING STANDARDS Standards and interpretations adopted this vear The accoutiing policy adopted in the preparation of the financial stalemenrts is consistent with that apphed in the preparation of the Company's financial statements for the year ended December 31, 2017, except for the newv adopted standards and interpretanons effective as at January 1, 2018. The Company has not carly adopted anv other standard. interpretation or amendient that has been issued but not vet effcctive. ThIe Companv first applies IFRLS 15 Revenue under conrracts with customners and 1 FRS 9 Fimancial Instruments, which requirc a recalculanon of previously presented financial staternents. The nature and irmpact of thesc changes is disclosed below. The Company also applied some other atendments and clarinfcations for the first time in 2018, but thev did not have a materal impact on its financial statements. IF< RS 15 "Re;eu jsi Iom C oineYyts with usomm" IFRS 15 establishes a comprehensix-e franievork for determining wvhether, how much and when revenue is recognized. It replaces exisung revenue recognition guidaice standard, including 1 AS 18 Revenuc, IAS Il Constnuction Contracts and I FR IC 13 Customer Loyahy Programmes. 1IRS 15is effectve for ainual reporting p(riodt bkginiin on ur aiLe 1 hlåmu.ta 2013 IVRS 1 5 establishes a five-step model to account for revetnte arising tmointats with custoiers. It requires revenuc to be recognised when (or as) control of a good or service transfers to a custorner at an amount that reflects the consideration to which an enuty expeets to be entitled in exchange for transferrig goods or services to a Custoner. IFRS 15 requires entites to exercise judgement, taking into consideration all of the relevan faers and circumstances whein apply ing cach step of the model to contracts with thcir customers. The standard also spec fies the accounung for the incremental costs of obtaining a contract and the costs direly related to fulfilling a otnut. In addinu, the standard requires cihanced aud vxtenive disloshrs bout revenuc to help investors better understand the nature, amount, tingit and iincertainrt- ot revenue and cash flows from contraets with custorners. Thle Company has applied the standard in preparing the financial statements for the year ended 31 December 2018. *he Company's revenuc from contracts xvithi custnmers comprises one main stream being the sale of drnkitiing warer anf collection of waste water. ie Company undertook a coi)relinsive analysis of the impact of the new revenuc standard based on a review of the contractual termns of its principal revenue stream with the primary focus being to understand whether the timing and amount of revenuc recognised could differ under IFRS 15. For the Company's reveiuc stream, the nature and tining of satisfaction of the performance obhganons, and, hence, the amiount and timing of revenuc recognised under IVRS 15, is the same as that under IAS 18 ! FRS 9 "Finana Initmmmis"< IFRS 9 replaces the existing guidance in IAS 39 Financial listrumenis: Recognition and Nlcasurement. IFRS 9 include, revised guidance on the classification and measuretent of financial instrumnents, including a nex expected credit loss mnodel for caIculation of impairinent on financial assets, and the new general hedge accounting requiretments. It also cames forward the guidance on recogniton and derecognion of financial instrunents from IAS 39. The Company has apphed IVRS 9 retrospecuely, with the initial application date of 1 January 20118 and has adjusted the conparative information for the period beginning 1 january 2018. There were io impacts on the comparative balances other than a change in classification and measurement of receivables and labilties. 11 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA' NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 3. NEW AND REVISED INTERNATIONAL FINANCIAL RE PORTING STVANDARDS (CONTINITED) Standards and interpretations aidopted this ywar (Continued) IFRS 9 -Finaiia/ Imments" (coninued) Ihe adoption of IFRS 9 has impacted the following areas: * the classification and measurement of the Company's financial assets are reviewed based on the new cntena that consider the assets' contractual cash flows and the business model in which they are managed. An expected credit loss-based impairment will need to be recognized on the Company's trade and other receivables in accordance with the new criteria. * the impairment of financial assets applying the expected credit loss model. 'This affects the Company's trade and other receivables measured at amortized cost. For contract assets arising from IFRS 15 and trade receivables, the Company applies a simplified model of recognizing liteuime expected credit losses as these items do not have a significant financing component. * the classificarion and measurement of the Compan's financial liabilities arc reviewed bawsd on the iew\ Lliail and accounted fi al 41nt1iized cOst using die effeCLe C CICSeSt 1tLU* etod as pe\i tusll y 1% 31 Measurement Carrying amount category Trade ouns ofceiUOriginal Original ec Adoption January IAS 39 IFIRS 9 IFIRS 9 2018 category category (Isae 39)R 9 Financial Assets Trade accounts receivable Aotzdmried 157 037 - 157 037 cost cost Cash and cash equialents (Note 12) Amortized Amortized 3 741 280 (6 542) 3 734 738 cost cost 3898317 (6542) 3891 775 Financial liabilities Loans Amortized Anortizd 454963366 454963366 cost cost Other financial liabilities Amortized Amortizd 21 900 746 21 900 746 cost cost Trade payables Amortized Amortized 46257332 - 46257332 cost cost 523121444 - 523121444 IPRC Intopretation 22 Foren won,. 1Tantions andbnce Connderatons The Interpretation clarifies that, in determining the spot exchange rate to use on initial recogiton of the related asset, expense or income (or part of it) on the derecognition of a non monetary asset or non-monelar liabilitV relating to advance consideration, the date of the transaction is the date on which, Company inirally recogIes the non monetary asset or non monetary liability arising from the adv;ance consideration. If there are multiple paynents or receipts in ad-,ance, then the entity must determine the date of the transactions for each payttent or receipt of ad%-ance consideration. This interpretation does not have any impact on the Company's financial statements. 12 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31. 2018 3. NEW AND REVISED INTERNATIONAl. FINANCIAL REPORTING STANl)ARI.)S (CO 1 NTN 1U ED) Standards and interpretations adopted this vear (Continued) Amendments to IAS 40 'ransfers of Investment Property The amendmients clarfy Xvhen an entitn should transfer property, including properry under construcon or development into, or out of investnent property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the detiution of investnent property and there is evidence of the change in usc. A mere change in management's intentions for the use of a property does not provide evidence of a change in use. T'hese amendnents do not have any impact on the Company's financial statements. Amendments to 1FRU 2 Cifxicaio äin and Meksurement ofShare- bajed P0n Trasato The IASB issued ameindnients to IVRS 2 Share based Payment that address fhree nain areas: the effects of vesung condinons on the teasuremenrt of a cash setded share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholdmg tax obligations; and accounring where a modification to the terms and condinns of a share-based payment transaction changes its classication from cash setrled to equity settled. On adoptnin, enties are required to apply the aXmendmnts vithour restating prim pculoeiod, bl kexiUspetve aglivillitic k.. d if clttkd fu all a t m vI an .u ti LiU itLIA are me. Iliese amendnients are not applicable to the Company. Amendm,ens to FRS 4 A pp.ing 1RS 9 n mustament wi k 4 Insurace C-nUiUR The arendinen ts address concerns ansing from implementing the new financial instruments standard, IFRS 9. before implementing IFRS 17 Insurance Contraets, vhich replaces IRS 4. The amendments introduce two ptions f,r ntirir i ming in,nne rte ti*lmpor"rv e':emiprion from ipplying IFRS 9 and an overla' approach. Ihese amendments are not applicable to the Conpany. Amendme,ts to -1S 28 mstmentswmlj in A1JJo:iae and Join T 'ents G|Ti'atomn IAJt meamnI nVestees air näe through pro!it or tossi n invesment2-ui>PUSInesmen choce The amendments clanify that an entitv that is a venture capital organisation, or other tuahiRying entitv, may elect, at initial recogtion on an investment by investment basis, to mieasure its investments in associates and join1 ventures at fair value through profit or loss. These atmeidients are not applicable to the Company. New and revised IFRS - issued, Imt not efftetive The Company did not adopt the following new and revised IFRS and Interpretations (issued, but not yet effecdve)3: IURS 16 -Lea,es" IFRS 16 will replace LAS 17 "Leases", IVRIC 4 Determining vhether an Arrangement contains a Lease, SIC- 15 Operating Leases-Incentiv\es and SIC 27 Evaluating the Substance of Transactions Involvimg the 1 egal Form of a Lease. It completes the IASB's long rumrng project to overhaul lease accounung. IFRS 16 sets out the principles for the recogition, measurement, presentation and disclosure of leases and requlires lessees to account for all leases under a single on balance sheet miodel similar to the accounting i for fnance leases under LS 17, The standard includes two recogn-tion exemptions for lessees - leases of 'low valuc' assets and short-term leases. IFRS 16 is effective from penods beginning on or after 1 January 2019. Early adoption is permnitted; however, the Company have decided not to early adopt. 13 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA- NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 3. NEWA AND RlVISIA) INT RNATIONAI. FINANCIAI. R1P()RTING STFANDARDS (CONTINDI I)) Standards and interpretations adopted this year (Continued) 1he Company is planning to adopt IFRS 16 on 1 January 2019 using the Standard's inoditied retrospective approach. Under this approach the cumulative effect of untially applying IFRS 16 is recogrized as an adjustment to equity at the date of initial application. 'The Company assessed the effect fron the adoption and concluded that the effect from the adoption of I[RS 16 on the Company's financial statements is not significant. T1hus, the comparative information will not be restated. IFRS 17 In.ywn.e Contracts in May 2017, the IASH issued IFRS 17 Insurance Contracts (lFRS 17), 1 comprehensive neW accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (JFRS 4) that was issued in 2005, The overall objective of IfRS 17 is to provide an accounting nodel for insurance contracts that is more useful and consistent for insurers. In contrast to the requireinents in If"RS 4. which are largely based on grandfathering previous local accounting policies, IFRS 17 prov,ides a comprehensive model for insurance contracts, covenng 'Jll Clek Ant aicoLILing Aspcts. Is tandard is int aJpliLablC to dIe Comipanl New an d revised I FRS - issIIed, hbtit not cfft,ct i vc (Cot1ini ued) 1I l t Ineoprptaion 23 Uncer;tin,jver Injerc 7a. Treatment Ile Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 and does not apply to taxes or levies outside die scope of LIS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The interpetl)uenitli speiflll. adktresse~ the lulknymg * Whether an entity considers uncertain tax treatments separately; * The assumptions an entity makes about the exaination oftax treatiments by taxation authorines; * low an enity determines taxable profit rax loss), tax bases, uiused tax losses, unused tax credits and tax rates, * How an entity considers changes in facts and circumstances. An enfity has to determine whether to consider each uncertain tax treatment separately or together wvith one or more other uncertain tax treatments. TYhe approach that better predicts the resolution of the uncertainty should be followed. lie interpretation is effective for annual reporting periods beginning on or after 1 January 2019, but certain transition reliefs are available. 1he Company will apply the interpretation from its effecove date. meldent: to I Re,q 9 P menpamnt Falatumi rll Nqahe CoNPeni Ion Under IFRS 9, a debt instrument can be measured at amorused cost or at fair value through other comprehensive income, provided that the contractual cash flows are solely payients of principal and interest on the principal amount outstanding' (the SPPI criterion) and the instrument is held within the appropnate business model for that classification. The amendments to IfWRS 9 clanft- that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. The amendments should be applied retrospectively and are effective from 1 January 2019, with earlier application permitted. These amendments have no impact on the financial statements of the Company. 14 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 3. NIAV AND REVISED INTERNATIONAI. FINANCIAL REPORTING STANDA RDS (CONTIN11 D) New and revised IFRS - issued, Ibuti not cffective (Continued) A mnd:metto I FRS 10 and L S 28: Sale or Coninbuton o e nsets between an brnestr and its l.uodt orjoil 1 'enure The amendienits address the conflict between llFRS 1) and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint vennure. The amendmients clarify that the gain or loss resulting from the sale or contnbuion of assets that constirute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recogniised in full. Any gain or loss resulting from the sale or contnbution of assets that do not constitute a business. however, is recognised only to the extent of unrelated investors' interests in the associate or joint venture. Tlht L\SB has deferred the effective date of these amendienits indefnitel, but an entit that carly adopts the amendments must apply them prospecI vely T.hese anendments are not applicable to the Com -npany. I1mendment; to L1V 19: IM`än memmen, (G10a-i"!vnI oettlmen) The anendments to IAS 19 address the accounting when a plan amendment, eurtailment or settlelent occurs during a reporting period. The amenidments specify that when a plan aiendient, curtaåment or settlenient 0e0cr` dunti tie aniii reporting period. an entity is required t, • Determune current service cost for the remainder of the period after the plan amiendment, curtalnent or settlement, using the actuarial assunptins Used to renicasure rhe nert defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets aftcr that evert; • Deternine nert interest for the remainder of the period after the plan amenidment, curtailmerit or setement using: the nert defined benefit liabiltir (asset) reflecting the benefits offered under the plan and the plan assets after iat ev ent, and ie L,> uLi ta uåkd t- itjmäure that net detined benefit liabiht (arret). Ihe amendmenits apply to plan aniendrnents, curtailhents, or settdemerits iccurng on or aiter the beginning of the first annual reporting penod that begins on or after 1 january 2019, with early application pernutted. T1hese ameindmerits will apply only to ain future plan amendients, curtailniciits, or settlements of the Company, AmPendnt to 1 .AS 28: Läng 'am InS0. in aoaa/ and I it nire Tlie atmeidmenits clarify that an entity applies IFRS 9 to long-term iiterests i an associate or joint venture to which the equity muethod is not applied but that, in substance, form part o the nret investment in the associate or joitit venture (long term inerests. l his clarification is relevant because it Impihes that the expected credit loss model in IFRS 9 apphes to such long-tenn interests. Ihe amendiiients also clarified that, in applving IFRS 9, an entity does not take account of anv losses of tie associate or joint venture, or anv impairment losses on the net investment, recogniused as adjustments to the riet investment in the associate or jotrit venture that arise frorn applVing L-S 28 Investnents in Associates and Joint Ventires. ihe ariendments sliould be apphed retrospectively and are efective from 1 January 2019, with early applicauion pernitted. Since the Company does not have such long-term interests in any associate and joint venture, the amendmrents will not have an impact on its finaticial statements. 15 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 3. NIAV ANI) REVAIS1ED IN'TIERNATIONAL INANCIAL REPORT ING 'TANI)ARI)S (CONTINI HD) New and revised IFRS - issued, but not effective (Contintiucd) Annual Improvements 2015-2017 Cycle (issued in Decemiber 2017) IFRS 3 Buine.u Combinafio-n Ihe amendment. clarify that, when an entity obtains control of a business that is a joint operation, it applics the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquircr remeasures its entire previously held interest in the joint operation. An entity applies those amendments to business conibinauons for which the acquisition date is on or after the beginning of the first aninual reporting penod beginning on or after 1 January 2019, with carly application permitted. 'The amendments vill not have an impact on the Company's financial statements. P-R1, od-mi~md party that pirtipates in, hut iovs mir hve pinr cnirol ot a oint operaion might obtain joint control of the joint operation in winch he activity offfhe joint operation constinutes a business as defined in IfRS 3. The amendments clarify that the previously held interests in that joint operation are not rerneasured. An enutit applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting penod beginting on or after I January 2019, with early application permitted. These amtiendmients are CUrrentlv not applicable to the Company but may apply to future transactions. I IS 12 Incom Taxeu The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that genterated distributable profits than to distributions to owners. Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. An entity applies those amendients for annual reporting periods beginning on or after I january 2019, with early application is pcnmuted. When an entity first applies those amendments, it applies them to the income tax consequences of dividends recognized on or after the beginning of the earliest comparative period. The Company does not expect significant effect on it> financial statements. LS 23 Bo7ovinq Coki The amendments clanfY that an entitv treat as part of general borrowings any borro\ing origially made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. An entity applies those amendments to borrowving costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An etitity applies those atendnents for annual reporting penods beginning on or after 1 January 2019, with early application permitted. The Company does not expect significant effect on its fitiancial statements. SYRDARYA STATE UNITARY ENTERPRISE "SUVOOOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 4. S1GNIFICANT ACCOUNTING POLICIES Statemuent of compliance Ilie financial statements of the Company have been prepared in accordance with International Financial Reporuing Standards 'IFRS") as issued by the Inernational Accounnig Standards Board. Basis of preparation Ihe financial statements have been prepared on the historical cost basis except for certain financial instruments initially recogiized at fair value. The company maintains accounts in accordance with the requirements of tie current legislarion of the Republic of Uzbekistan. For IFRSs purposes, the Company makes respectve adjustients and reclassifications to the financial statenents in order to comply wýith IFRSs. 'he financial stateients of the C iompanv are presented in Uzbekistan Soun (hereinafter - "UZS"). The principal accounting pohcies appled in the preparation of these financial statemeits are set out below. ihese policies have been consistently applied to all the penods presented, unless otherwise stated. he funinonal and presentanon currency of the financial statememits of the Company is LZS. Al aritmnts in these financial statements are rounded to thousand unless otherwise stated. Going concern basis TVhese financial statements have been prepared in accordance with IFRS, based on Ilie assumpdni diat the Conpany will conitiue a' a g 1 n )n m tin i vns sde If.cis alld sHulement 'flibilinA I the. m11l coursc o4 business in he f o..r.. bIl firn o wver, the ompany ineurred a total comprehensive loss of 43 207 407 tliousaind UZS for the y'ear ended December 31, 2018 (2017: 251 411 126 thousand UZS) and, as of that date, the Company's accunulated loss anounted to 350 959 891 thousand 1ZS (December 31, 2017: 30~>745 942 thouad U1, and its toutal liabih tic" axcc, ded o u a1 by 0 "IA 31 . I 21 il thitd LI (Dcembai 31, 2017: 297 604 906 tihoukand UZ ci. Thete condion mdicate the exitence of a inatenal uncertainty, winch ma asi siginiY t doubt about the ability of tle Company lo condnue a, a going coin c. lowever, management of die c mpany does not have any intention or necessit lo litidatc ut siginficandyx reduce the size of its business and regularly ionitors the need for liquidity to erisure the availability of ftmnds in an amount sufficient to perform any upcoming obhgations and therefore the Conpany will continue as a going conern. The Company also has an opportunity to receive additional Governnent assistance financing. Acecrial basis These financial statements were prepared (n the accrual basis. The accrual basis assumes ensures recognitiuon of the results of business operatons,. as well as events when thev occurred, regardless of the time of payment. Transactions and events are recorded in the accounnL atid mncluded in the financial statements for the periods to which they relate. Recognitio >n of tlie eleients of financial statenients These inancial statements include all assets, habilies, equity, income and expenses. which are the elements of the financial statements. All elements of the financial statenents are presented on a linear basis. 1`he inclusion of several elemcnts of the financial statements into a single item is made taking in:o accoit their cha racr-nrisncs fnnctions) in the Company's operations. Each tmaterial class of similar items is presented separately in the finatieal statements. Items of a dissmilar nature or tuncton are presented separately unless they are immaterial. 17 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 4. SIGNIFICANTl ACCOUNI'IN(; PO0LICIES (CONT'INUFI)] Foretgii currency translation In preparing the financial statements, transactions in foreign currencies other than the functonal currency (foreign currency) are carricd at the exchange rates prevaihng as at the transaction date. MonetarV items denomnated in foreign currencies are translated at the exchange rates prevailing as at the reportMg date. Non monetary itens denominated in foreign currencies that are measured at fair value are translated at the exchange rates prevailing at the date of deternination of fair value. Non-monetary items measured at historical cost, denominated in forcign currency, are not retranslated, Exchange differences on monetarv items, which arise as a result of changes in the exchail, rares, are recognized in profit or loss in the penod when they anse. Currency exchange rates of Centre Bank of the Repubbc of Vzbekistan (hereinafter - the "CBI.- used bly the Company in preparing the financial statements are as follows: per 1 VS Dollar as at December 31, 2018 were equal to 8 339,55 UZS (December 31, 2017: 8 120,07 U'ZS Property, plant and eqlipment An item is recognized as property, plant and equipment when it is highlv probable that fuure cconomic benefits atated wit th Iem will fw to the Comp:Ily, and the actual acquiätion cost of the aset can be measured reliably. H fistorical cost of property, plant and ejuipment includes the purchase price as well as import duties and other non -recoverable taxes, borrowing costs, which are directy attributable to cons:nrion of long-termn prolects if recogniton cerirera are met, and also direct costs attributable to bringi:g the asset to the workmn conditon and deLiverv to the place of its intended use. Subsequntt costs incurred after the entn of property, plant and equipment into operations, such as repair and maintenance costs are usually recognized as an expense in the period in which these costs are incurred. Costs, . hich Ii resiuh ina an incriease in the expected futre econonut benefi eibihdied ii the a,sse bcyond its originally assessed performance are capitalized as an additional cost of property, plant and equipmenrt. All other costs are recognized as expenses in the reporting period when they incurred. After initial recognition as an asset, the item of property, plant and equipment is stated at historical cost less depreciation and impairment losses, if any. Te useful lite of property, plant and equipnent is determined taking int account the expected use of an asset and may be shorter than its eonomnc life. Tie useful lie of propertv, plant and equipment is a matter of judgment hased on the experience with stnilar assets. Ilie Company deternines the following useful lives for property, plant and equipment: Category of property, plant and equipment Depreciation rate Useful life Buildings and constructions 5 80 % 20 12,5 years Macinery and equipment 15 years IT and office equipmeni 15-209 5-7 years 'ehicles 20% 5 years Other 10o 10 years 18 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 4. SIGNIFICANT ACCOUNTING POICIF'S (CONTINtED) Property, plant and equipment (Continued) The useful life of items of property, plant and equipment and their residual value may be revised by management as necessary, considering all factors, which influence fltire economric benefits and the Company's intentions xwith respect to the use of property, plant and equipment. Depreciation of property, plant and equipment is recognized in the statement of comprehensive inconic and is calculated using the straight line mcthod over the expected useful lives of die assets. Upon sale or disposal of assets, its cost and accumulated depreciation are eliminated from the respective accounts, and any gain or loss resulted from its disposal is included n the statement of comprehensive income impairment of non-financial assets An assessment is nade at each reporting date whether there is an indication that an asset nay be impaired. If any such indication exists, or when annual impairment testing for an asset is required, Management estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or a cash-generating unit's (CG-) fair value less costs to sel land its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where tlh carving1 amui uant of an a.iet or CC exceeds it, recoverable amount, the asset is conFidered impaired and is written down to its recoverable amount. In assessing value in use, the e:timated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair Value less costs to sell, an appropriate valuation model is used. Inveitories Inventories are ininally recognized at purchase cost. which includes the purchase price, import dunes and other no-rcoverable taxes, and transportation expenses, handling and other costs directly attributable to the purchase of inventories. First in first out (INFO) method is used for measuring cost of inventories. After initial recognition, inventories are measured at the lower of cost or net realizable value. Reco-nition of revenue and expenses Rerenue Revenuc comprises of revenue from sale of drinking w,vater and usage of sew-age system. Revenue from malor products and services is showv n in Note 22. Revenue :s measured at the fair value of the consideration received or receivable and represents aniount receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes. To determine whether to recognize revenue from services, the Company follows a 5-step process: 1. Identifying the contract wvith a customer 2 Identif'Ving the performance obhgauons 3 Determining the transaction price 4. Allocating the transaction price to the pvrformance obligations 5 Recognizing revenue when/as performance obligation(s) are sausfied Revenue is recognized either at a point in time or over time, wvhen (or as) the Cotmpany satisies performance obligations by transferring tie promised goods or serxicCs to its customers. F..-pen.ces Expenses are recognized at the moment of actual receipt of relevant goods or services, regardless of when cash was paid and are recorded in financial statements in the period to which thek relate. 19 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA' NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31. 2018 4. SIGNIFICANT ACCOUNITING POLICIES C()N'IINU ED) Valut added tax (VAT) \aluc added tax related to sales procceds is payable to the hudget on an carlier of two dates: • the date of receipt of receivables fron custoners; or 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 acenced on sales proceeds upon receipt of the seller's invoice. Sueli offset is made in accordance with the tax legislation. VAT pavable and V .Vpaid are disclosed in the statement offnianc-a. position in its detat!ed form as assets and liabilities, \When a provision is made for the iipairnent of receivabes, the impairment loss is recognized in the total aniounit due, including VAT. VATI\ is applied at the followig rates tor sewerage services: • 20%) - the standard rate applied to legal entitjes; and * 0%0 is the zero rate applied when selling services to idi vidials. P>rovisions Provisions are recogiuzed when the Company has a present legal or conistrucive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligations, and a relable sinate of the amount can be made. \\ here there are a number of similar obligatio>ns, the likelihood, that an outfow xill be required ii t.ettleiment. it, determined by consideng the class of obliganion as a whole.\ provi:ion is recognized even it tie hkelthood of an amount of outflow wnih repect to any onie iem ineludfed in the same of class of obliganon may be small. If the effeet of the time value of money is material. pir,s 1s-ns are discounted using a curreni pre tax rate that reflects, where appropnate, the risks specitic to ti.e.m Wxre~ mni n~ . i th cnere m i the proni,su ci dfiv* io flie pissiae or tinme is recciyized as a inance cost. Dedutiiions from employe'c< remneration ln 2018 the Company pays a social tax to the state budget of the Republic of Uzbekistan in accordance with the tax legislation of the Republic of 'zbekistan and other payments to eiployees, ineluding material benenits. On the tertory of rlth Republic of Uzbekistan, the Ciompany iiplements deductions for a single social tax. 1tese deductions are also reflected on the acencal basis. 1The single social tax includes contributions to the Pension lund. Ilie Cotiplany, does not have its owin pension schene. Salan expenses, contribudons to the state 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. Financial instruments K't mea.fuwemen.' temuxi Financial assets, other than those designated and effecive as liedging instrumeits,. are classified into the following categones: • amortised cost; • fair value through profit or loss (FVPIL; • fair valuc through other comprehensive incone (FVO()'. Financial instruments of the Company include financial assets and financial iabilities which are carmed at amtortised cost as deseribed below. 20 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 4. SIGNIFICANT ACCOUNTING POICIES (CONTINUED) Financial instruments (continued) ied it is the amount at which the financial instrument was recognised at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any write down for expected impairment losses. Accrued interest includes anorusation of transaction costs deferred at irutial recognition and of any preinum or discount to manirit amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and anorused disCount or prenium (including fees deferred at origination, if any), are riot presented separatelh and are included In the carning valu s of related items in the statement of financial posinon. Th elfcre interect Pe:hod is a rnethod of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effctive interest rate, on the carrying amount. The effecuve interest rate is the rate that exactly discounts estimated future cash pa\iments or receipt. cxcluding future credit losses) through the expected life of the financial instrument or a shorter penod, if appropriate, to the net carning amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date. except for the premium or disCount which reflects die credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised n l dIe '1hIole expeC ud life of dhe in uouW,1 mll li e 1 4 ui tik a1nA Allo 1 ut, it .111 1 k I J bet,eeu poti the c(lit: thtt Olw ah 1iia pairt Af tf . cliv. inu r rAt rAic. Chow 4! tion of pinan ial asset Iiancial assets ot the Company include trade accounts receivables and cash and cash equivalents. The Management determines the classifeation of its financial assets at initial recognition. Trade receivables are recognized initially at fair value plus transaction costs. Subsequently, trade receivables are stated at amortized cost usIng the effective interest method. Trade receivables are unquoted non-derivanve financial assets with fixed or determinable payments other than those that the Company intends to sell in the near term. They are included in current assets, except for maturities greater than 12 months after the reporting date. These are classified as non-current assets. C,aifation of inan /lbties Financial ltabilics of the Company include financial liabilities carned at aimorrised cost. The Company's financial liabilities comprise trade payables, borrowings, pa.yable to the lenders. Init/ rcognition0/ naia instPumlenl'., Financial instruments are initially recorded at fair value plus transacuoi costs. Fair value at initial recogrunon is best evidenced b\ the transaction price. A gain or loss on initial recognition is oul recorded if there is a difference between fair value and tratnsaction price which can be evidenced by other observable cuirrent market transactions in the same instrument or by a valuanon technique whose inputs include only data frot observable iarkets. Si*ubs*equent mnreient of finand/ a'!j Financial assets are measured at amortised cost if the assets meet die following conditions: * they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; the contracmial terms of the financial assets give rise to cash flows that are solelypavmens of Principal and interest on the principal amount outstanding. After initial recognition, these are measured at aiortised cost using the effective interest method. Discounttung is omitted where the effect of discounting is unlateral. 21 SYRDARYA STATE UNITARY ENTERPRISE "SUVOOOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUE)) Financial inst rumint ts (cointinued) Derecognition offinanaal assets The Company derecognizes financial assets when (a) the assets arc redeemed or the rights to cash flows from the assets otherwise expire or (b) the Company has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass through arrangement while (i) also transferring substantially all asks and rewards of ownership of the assets or 'ii) neither transferring nor retaining substantially all risks and rewards of ownership but not retaining control. Control is retained if the counterparty does not have the practical ab,Iity to sell the asset in its etiirety to an unrelated third party without needing to impose additional restrictions on the sale Impairent o/inanda a-m cried at arnodted a(v Expected impairment losses are defined as the difference between all the contractual cash flows that are due to an entity and the cash flows that it actually expects to receive ("cash shortfalls"). Tils difference is discounted at the original effective interest rate (or credit adjusted effective interest rate for purchased or onginated credit- impaired financial assets). The assessment of impairment for financial asset can either be individually or collecovely and is based on how an entity manages its credit risk. If an entvt has a small number of receivables with large value and these receivables are managed on an account basis i.e. individually) it may not be appropnate in that case to base the unpairment on a provision matrix as such a matrix would unlikely be in line \vith the expected credit loss of the individual receivable. Recognition of credit losses is no longer dependent on the Company first identifying a credit loss event. Instead the Company considers a broader range of informiation when assessing credit risk and measuring expected credit losses, including past events, current condinons, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward -looking approach, a disunction is made between: * financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk ("Stage I") * financial instruments that have deteriorated significantly in credit quality ince initial recognition and vhose credit risk is not low ("St'ge 2")L * "Stage 3" Would cover financial assets that have ob1ective evidence of impairment at the reporting date. "12-month expected credit losses" are recognised for the first category vhile 'lifetiic expected credit losses' are recognised for the second category. If the terms of an impaired financial asset held at amortized cost ate renegotnated or otherwise modihfied because of financial difficulties of the counterparty, impairment is measured using the original effective interest rate before the modification of terms. t'ncollectible assets are written off against the related inpairnent loss provision after all the necessary procedures to recover the asset have been completed and the amount of the loss has been deterriuned. Subsequent recoveries of amounts previously written off are credited to impainnenit loss account within the profit or loss for the year. Current crporatpm it poid utnorooounto rooolvablo D ? AR? (nq-, niq) nqC1fl)74 Cash and cash equivalelits H1 3 /41 280 (U U26 018) 5 767 208 Total current assets 53676237 (28534727) 82 210 964 TOTAL AGGETG 317 324 087 (71 250 373) 3t0 584 460 EGUITY AND LIABILITIES Equity r.h;rtPr rapitpl 8141 036 - 8141 036 Restricted Capital D and G - (76 255 260) 76 255 260 Retained earnings (305 745 942) 16834622 (322 580 564) TOTAL EQUITY (297 604 906) (59 420 638) (238 184 268) Non-current liabilities Loans, non-current portion I and H 451 003816 (194135) 451 197951 Deferred income G 86 732 846 86 732 846 - Other non-current liabilities I 21 900 746 (48 373 731) 70 274477 Total non-current liabilities 559 637 408 38 164 980 521 472 428 Current liabilities Trade accounts payable E 46 257 332 (41 408 872) 87 666 204 Advances received D 1690541 (11 784 127) 13474668 Taxes and statutory contributions F 1 688 071 (883 430) 2 571 501 payable Payable to employees 1 487 272 (96 655) 1 583 927 Short-term loans - - Loans, current portion I 3959550 3 959550 Other accounts payable D 208819 208819 - Total current liabilities 55291 585 (50004715) 105296300 TOTAL LIABILITIES 614928993 (11 839735) 626768728 TOTAL EQUITY AND LIABILITIES 317 324 087 (71 260 373) 388 584 460 Zb SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 4. SIGNIFICANT ACCOUNTING POLICIES (CONTINULED) Ilic adIustment to the statement of financial position as atjanuary 1, 2017 is as follows: ASSETS Non-current assets Property, plant and equipment Aand J 88 111 122 70272452 17838670 Construction in progress A 65785 176 (54023376) 119808552 Financial assets available for sale 8 - (1 027) 1 027 Prepaid eenses B - (1604 117) 1604117 Total non-current assets 153896298 14643932 139252366 Current assets Inventories C 1 873683 366688 1 506995 Investments B 1 027 1 027 - Trade accounts receivable D 555 738 (13 205 800) 13761 538 Advances paid E 20 344 268 (730 189) 21 074 457 Advance taxes and statutory F 1 099550 (2 126893) 3226443 -onfrilmuions paid Other accounts receivable D 63563 (1475596) 1 539 159 Cash and cash equivalents H 12 146 171 8543078 3603 093 Total current assets 36084000 (8627685) 44711685 TOTAL ASSETS 189980298 6016247 183964051 EGUITY AND LIABIUTIES Equity Clhqt + A[.apAi 8 141 iA - A 141 036 Restricted Capital U and G (18019000) 10 0191 0.0 Retained earnings (54 334 816) (41 590816) (12744000) TOTAL EQUITY (46193780) (60209884) 14016104 Non-current liabilities Loans, non-current portion I and H 150520301 21 474486 129045815 Deferred income G 53837 190 53837 190 - Other non-current liabilities I 5 730 830 (6 184 648) 11 915 478 Total non-current liabilities 210 088 321 69 127 028 140 961 293 Current liabilities Trade accounts payable E 21 984 077 (823 684) 22 807 761 Advances received D - (1 841 762) 1 841 762 Taxes and statutory contributions payable F 1 108 936 217650 891 286 Payable to employees 1 409 090 (103 144) 1 512 234 Short-term loans 102007 102007 - Loans, current portion 1 397 233 1 397 233 Other accounts payable I 84414 84414 - Debt on the lease agreement to return D - (1 933611) 1 933611 Total current liabilities 2608757 (2900897) 28986654 TOTAL LIABILITIES 236174078 66226131 169947947 TOTAL EQUITY AND LIABILITIES 189980298 6016247 183964051 27 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 4. SIGNIFICANT ACCOiNTING POI.ICIES (CON'INtJ;ED) The adjUStiment to the statement of profit or loss and other comprehensive income for the year ended December 31, 2017 is as follows: In thousands of IUZS Notes$ettd Adutet Revenue 9918 186 79405 9838781 Cost of sales J (17341494) (957293) (16384201) Gross loss (7 423 308) (877 888) (6 545 420) General and administration expenses K (10 800 682) 1 094 066 (11 894 748) Other income L 1 722 115 (2295465) 4017580 Selling expenses M - 1 545 693 (1 545 693) Other operating expense M - 2193602 (2193602) Loss from operating activities (16 501 875) 1 660 006 (18 161 881) Foreign exchange loss, net M (234 909 345) 14649 514 (249 558 859) Financ income/(cost) npt 94 6581 (6487) nin rvqInriw-i frnrm rvrnwryof ilInuvorinw t for expected credit losses Loss before income tax (251 411 126) 16316 101 (267 727 227) Income tax expense - 33 (33) Loss for the year (251 411 126) 16316135 (267 727 261) Other comprehensive income - - - Total comprehensive loss for the year (251 411 126) 16 316 135 (267 727 261) 28 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 5. IMPORTANT IASSESSMEN1 TS AND) PROF 'SSIONAL JUDGINT Preparation of financial statements in accordance wvith IFRS requires mainiagement to apply udgnents by management of the Company and use of subjective estimate and assumptions that affect recorded amounts of assets and liabilities and disclosure of information about potential assets and liabihties at the reporting date of financial statements and recorded amounts of income and expenses during the reporting period. Fven though the cstimates are based on historical knowledge and other significant factors, events or actions may anse in such a manner, so actual results may differ from these estimations. Key assumptioIs for future and other key sources of estimation cf uncertainty at the reporting date that have a sigrnficant risk of material adjustment to the carrying amounts of assets and liabilities witin the next financial year are presented below: Impairment if (property, plant and equipinent Thle Company assesses whether there are any indicators of impairment of the carrying amount of property. plant and equ:pment at each reporting date. Impaiment is based on tmIanI factors such as: current competitive environment, changes in the expected growth of industrv, changes in the availabihty of financing in the future, technological obsolescence, discontinuance (f services, current replacement costs and other changes ini Lon1ditiOns that illdicate a signi ficant impairment- If any such indicators exist. the recoverable amount of asset is estimated and compared to its carning amount. It the carrying amount exceeds the recoverable amount of assets, impairment is recogizcd. Te ` ecoh e bl amount is determined as the higher of two values: fair value less costs to sell or value in use. In assessing value in use, die estimated future cash flows are discounted to their Iresent value using a discount rate before tax, which. ini tmanagements opinion, reflects current market assessments of rime value of money and assets' inherent risks. The change in estimated recoverable amount can lead to imipairnent or its recovern itn future periods. Based on the assessment, the Compary concluded that there are no any indicators of im:1pairment as at December 31. 2018. Taxationi In assessing tax risks, Management considers probable obligations the known areas at tax positions. which the Company would not appeal or does not believe it could successfully appeal, if assessed by tax authotues. Such determnuattIons inherently involve significatit judgmenit and are subject to change as a result of changes in tax laws and regulations, the determination of exiected outcomes from 1ending tax proceedings and the outcome of ongoing compliance audits by tax authorities. Provision for doubtful debis The Company recognizes provisions for doubtful accoutnts receivable. Doubtful accounts are estimated considering previous and expected performancc results of the customer Changes in the economy, the sector. or the specific characteristics of the customer may require ad' usttlents in the provision for doubtful debts reflected in the finatncial statements. Contingent assets and liabilities Contingent assets are not recognized in the statement of financial position, and information about them is disclosed in the financial statements in cases where it is probable that the econonuc benefits associated with them will be received, Contingent liabilitics are not recorded in the statement of financial position, aid information about them is disclosed in the financial statements, unless the outflow of resources due to their redemption is unlikely. 29 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 6. PItOPLRTY, PLANT AND Q EQI1PMENF, AND CONSIRUICT ION IN PROGRESS The movement in property, plant and equipment, and construction in progress for the years ended )ecembe'r 31, 2018 and 2017 presented as follows Machinery In thousands of UZS Bidnsadand Ianofie Vehicles Other Sub-total CosrcinTotal constructions e equipment in progress CarryingamountasatJanuary1,2017 82806977 2941 223 76675 2266 64 20083 88111122 65785176 153896298 (restated) Additions 477276 498749 176 783 72228 3500 1 228536 117712907 118941443 Disposals - (324 958) - - - (324 958) - (324 958) Internal transfer 38 579 770 38579770 (38579770) - Charge for the year (Notes 23 and 24) (7 391 811) (802 025) (42 736) (624 982) (3 379) (8 864 933) - (8 864 933) CarryingamountasatDecember31,2017 114472212 2312989 210722 1713410 20204 118729537 144918313 263647850 (restated) Additions 1 257 1 929382 - - 37300 1 967939 130337288 132305227 Disposals -- - (14613) (14613) Internal transfer 7405342 - - - - 7405342 (7405342) - Charge for the year (Notes 23 and 24) (9476287) (1 203189) (56867) (997472) (7332) (11 741 147) - (11 741 147) Carrying amount as at December 31, 2018 112402524 3039182 153855 715938 50172 116361 671 267835646 384197317 Cost 137889662 5323399 284748 3935283 33198 147466290 144918313 292384603 Accumulated depreciation (23417450) (3010410) (74026) (2 221 373) (12994) (28736753) - (28736753) CarryingamountasatDecember31,2017 114472212 2312989 210722 1713410 20204 118729537 144918313 263647850 (restated) Cost 145296261 7252781 284748 3935283 70498 156839571 267835646 424675217 Accumr lated depreciation (32893 737) (4213599) (130893) (3219 345) (20326) (40477900) - (40477900) Carrying amount as at December 31, 2018 112402524 3039182 153855 715 338 50172 116361671 267835646 384197317 As at )ecenber 31, 2018 and 2017 the Company did not hav ainv property, plant and equipment pledged a -ollateral. As at December 31, 2018 the cost of fully depreciated property, plant and equipment amounted to 30 251 192 thlsanid _ZS (DcccIber 31,2017: 30 337 246). Constniction in progress iainly consists of the costs for the recoistiruction of water suppl svstems iun&r -e Pro cct. In; addition from the Budget of the Syrdarva region allocated funds to finance the investment progran of the Republic of Uzbckistan. 30 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 7. INVENTORIES As at Decenber 31, 2018 and 2017 inventories were presented as follows: Raw materials - 544 1891 Fuel - 140443 23230 Spare parts 37806 127494 184518 Construction materials 4 107 098 1 739 299 1 444 381 Other 745723 347641 300280 Less: provision for obsolete inventories (3483726) (1 208 374) (80 617) 1 406 901 1 147 047 1 873 683 T-he movement in provision for obsolete inventories tor the years ended December 31, 2018 and 2017 was presented below: December 31 D In thousands of UZS 2.12017 2017 (resta~ted) (restted Tax on the improAement and development of social 53 697 53697 53697 infrastructure Property tax 2296 2296 - VAT 1 055231 872 218 936569 Ulikled 111UJm-1 tax5 608 nnAg nnR Water tax 15914 3007 3000 Land tax - 7140 - Statutory contr ibutions to the Special Trust Funds of 180 240 153 384 103 159 Uzbekis tan Other taxes 2517 2517 2 517 1 310503 1094867 1099550 8. TRA)E ACCO NTS REAVABLE As at )ecenher 31, 2018 and 2017 advances paid were presented as follows: December-31, Januay1 In thousands of UZS December 31, 2017 21 2018 (restated (rested UZS 10381354 7294268 978941 US dollar (Note 30) 28787728 40238029 19365327 39169082 47532297 20 344 268 Thle movernent in allowancc for doubtful accouns for the years ended 1)ecember 31, 2018 and 2017 was presented below: n thousands of UZS Dc b 01 01 As at January 1 (4485) (4485) Accrued (Note 24) (13505 279) (4485) Used - (13 509 764) (4 485) (4 485) A1l amounts of the trade accounts reccivable were denounated in the UZS. 31 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 9. ADVANCES PAID As at December 31. 2018 and 20117 advances paid were presented as follows: In thousands of IUZS 20701 China Petroleum Piptline Burefu 13505 279 6953 588 Texno-Atinak LLC 10508089 10190543 OOO KRANTAS TASHKENT, 6842500 6662420 2651 391 LRS Planung & Technologie GmbH 3477 288 3 385 773 1 238 004 MAFOCTPAnl CYB KYPOIAW M)K 3 164 820 1 657 220 - HyunSung Construction Co.Ltd 2 719 371 4 916 546 2 088 118 OOO 'Y3arpocaHoaTnoCwxa" 1 784 980 1 688 776 672 069 Daejoo ENT Corp LTD (South Korea) 1 466 326 - 5 190 735 AO AMYBYXOPOKAHAJlKYPA1l1W 1 369404 4308645 3314407 000 PROGRESSIVE PLASTIC TECHOLOGY 1 290 425 684 813 - Hifab International AB 1 017951 991 287 109327 "TUNNEL CONSTRUCTION AND PROJECT' MWW 797 558 - - STEMOURILISH L41 336 978 246393 453549 Grant Thornton LLC 333582 124145 - AJlc In.ort Vo Tirn rnt AS 331 883 1 149 470 3380 786 000 MAGNA MFli I 1 AA 44 161 548 PKfl OAO Y3PTC5 279 500 - IDS Marketing Kompany 218 997 213233 QUALITY GROUP TRADE MN)K 178 548 - 000 EBULLINCE 150000 150000 XaeT Hyp caBpo MNW 64 582 - - Hinjiang Qitailong Business CO LTD - 938 923 373 656 000 ORI HAYOT INJINIRING 569 839 000 Tpance jep,aUo - 1260000 Other 2670941 1 853459 306872 Less allowances for doubtful advances paid (13509764) (4485) (4485) 39169082 47532297 20344268 I'he movement in allowance for doubifl accounts for the years ended December 31, 2018 and 2017 waS presented bclow: Decemnber 31, Janryq1x December 311 In thousands of UZS '01 2017 21 (restated) (restated As at January 1 (4 485) (4485) - Accrued (Note 24) (13505279) - (4485) Used -- - (13509764) (4485) (4485) As at December 31, 2018 and 2017 advances pald were denominated in the fo wing currencies: December 31 In thousands of 1UZS .21 0721 (restd) (eted UzS 10381 354 7294268 978941 US dollar (Note 30) 28787728 40 238 029 19 365 32 / 39 169 082 47532297 20 344 268 32 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 10. ADVANCI,1AXES ANI) SIAI1tORY CONTRIB ltIONS PAII) As at )cccmbcr 31, 2018 and 2017 advance taxes and statutorn cotnr:buons paid werc prsenTcd as follows: ID rn In thousands of UZS Il01a21 2018, I..7 (restated) (r Tax on the improvement and development of social 53697 53697 53697 infrastructure Property tax 2296 2296 - VAT 1 055231 872218 936569 Unified income tax 608 608 608 Water tax 15914 3007 3000 Land tax - 7140 - Statutory contributions to the Special Trust Funds of 180240 153384 103 159 Uzbekistan Other taxes 2517 2517 2517 1310503 1094867 1099550 11. OH1 ER ACCO1 UNTS REC1VABLE111 ha eembr 1 1 ll ) 1 17 ~other arcournt rcccivablc werc prc;cntcd a f1eVw In thousands of UZS 0721 SUE 'Syrdarya Suvoqova" trade union 69138 - - Pension Fund of the Uzbekistan 5269 1 511 1 179 Accounts receivable for claims 274 274 274 000 OBI HAYOT INJINIRING - 293 47497 "GULISTON IKKILAMCHI UORAME IALLAWSHUbA 14008 KORXONASI 'TMZ KAPITAL QURILISH" LLC 514381 - - Other 1015 604 605 590077 2682 63563 12. CASI I AND CASI I I-Q( IV AL .FNIS As at Decmcinbr 311, 2018 and 2017 cash and cash equivalents wcrc presentcd as follows: December 31, jan-Uary 1, December 31 In thousands of UZS 20171 2017 (retaoted) (restated Cash on current bank accounts 6 455 958 3 708 075 3 304 545 Cash in transit (Note 30) 20 313 472 33 205 8 841 626 Less: Allowance for credit losses (63 872) - 26705558 3741280 12146171 33 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 12. CASH AND CASII EQUIVALEN'S (CONIN1 ED) The movecenrt of the allowance for expected credit losses for the years ended December 31, 2018 and 2017 is as follows: In thousands of UIZS 20821 (restad) At the beginning of the year under LAS 39 - Effect of the adoption IFRS 9 (Note 3) 6 542 At the beginning of the year under IFRS 9 6542 - Accrued for the year (Note 24) 57330 At the end of the year 63 872 - As at December 31, 2018 and 2017 cash and cash equivaleits were denominated in the following currencies: December 31, In thousands ofUZS 2017 2017: 201 (restated) (restated) UZS 6444718 3708075 3304545 US dollar 20260840 33205 8041 626 26705558 3741280 12146171 Ca.h on current bank opened in "Ipoteka-Baik" JSCM%IB Syrdarya region branch in L'zbekistan. The international rating agency Nloody's affirmed the ratings of the -Ipoteka-Hank" YSC NIB, torecast is Stable.lhe ratings of deposits in national currency 1 and in foreign currency at B2 (wwa< kaak.w). Cash in transit is I)esignated Accounts of Project Coordination Unit (hereinafter the "PCG") which is opened in "Hamkorbank" ISCB 'l'ashkent branch in Lbekistan or the pirposes of financing the expenditures of the Project within IDA sources. The international rilng agency Nfoody's affirmed the rauings of the "I laikorbank" JSCB, forecast is Stable. The ratings of deposits in national currency 131 and foreign currencies at B2 (wwwV..hamfkrbankiiuz). 13. CIIARIER CAPFTAL As at December 31, 2018 and 2017 the charter capital structure was preented as follows: Decemer312018 December 31, 2017 January 1. 2017 In thousands of UIZS (restated) (restated) Share Amount Share Amnount Share AMOun Management of housing and communal services of the Syrdarya region of the Ministryof housing and 100% 8141 036 - - - communal services of the Republic of Uzbekistan Authorityof Syrdarya region of the - - 100% 8 141 036 100% 8 141 036 Republic of Uzbekistan 100% 8 141 036 100% 8 141 036 100% 8 141 036 No dividends were declared or paid during 2018 and 2017. 34 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31. 2018 14. LA)ANS As at December 31, 2018 and 2017 loans were presented as folows: Decebr3, Jnay1 December 31 n thousands of UZS2 2018 Loans payable non-current portion: Loan IDANo. 4869-UZ 524927444 398075324 127666790 Loan ADB No. 1842-UZB 49564539 52928492 22853511 Loan payable current portion: Loan ADB No. 1842-UZB 8627941 3 959 550 1 397 233 583119924 454963366 151917534 As at December 31, 2018 and 2017 loans were denorrunated in tie following currencies: December3, January 1. December 31, In thousands of UZS 2017 2017 2018 (restated) (restatd), US dollars (Note 30) 574 491 983 451 003816 150520301 UZS 8627941 3959550 1 397233 583119924 454963366 151917534 15.1EFEREDINCOMEV As at December 31, 2018 and 2017 deterred income were presctited as f0llows: December 31, In thousands of UZ$ Notes 4 0721 20181 Anlanc n nt .Janitary 1 86 732 846 53 837 190 42 821 191 RECEIPTS: Projectco-financing receipts from 29 35087012 15536250 5056204 Gowrnment Project direct payments from the source of 29 9009 171 3 520 505 879 707 Government Non-monetary Government grants 29 602 534 4 510 069 1 421 818 Financing constructions by the source of 29 17111812 10694472 4525592 Syrdarya region Authority Settlementof Loan ADB No 1842-UZB by the 29 2089000 - source of Government USED: Amortisation of Government grants and Government Co-financing sources related to 25 (2982113) (1 365 640) (870 325) assets 147650262 86732846 53837190 During 2018 the Coipany receipts rorn the Government of 1Czhekistan, regarding Co-financing the Pro ect "Syrdarya Water Supply Project" "hereinafter - the "SWSP") amounted 35 087 012 Li/S (2017: 15 536 250 In addition, during 2018, regarding the S\WrSP Project, on behalf of the Company direct paid (financed) to the counterparties, by the founds of the GoveriInent of 1zhekistan. in the amount of 9 009 171 UZS (2017: 3 520 505 UZS). 35 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 10. Ol11R NON-CURRENT I1AHILITIES As at Dcccrmber 31, 2018 and 2017 non-current liabhi ties were presented as follows: December 31, In thousands of UZS '2217101 (restaed) (etateid) LRS Planning and Technologies GmbH 6 761 582 6 583 631 2 620 036 Daejoo ENT Corp Ltd 4926334 3512716 744165 AO Amy6yXopoKypWnWW 4059454 2976168 812269 Alke Insaat Sanayi ve Ticaret AS 2771 866 1 802924 - TEXNO-Atinak LLC 1 915122 303070 - 000 MEGA MEBIKO 1670122 1 626167 317010 HyunSung Construction Co.Ltd 1 423 263 1 096 405 265 879 China Petroleum Pipeline Bureau 1 007 489 342 516 - Hn "Stemqurilish" 453073 358532 58156 000 WapK KypWilWW cepemc 376130 366231 145746 000 06m-xaeT-WHWHWpwHr - 2 932 386 767 569 25 364 435 21 900 746 5 730 830 Aundng t, th siqlIctJ 1giccinil btwn fhe Comrpnany alld the clmoncj stated abovc, provided :i guarantee deduction in the amount of 5i from the works fulfilled. Ihese guarantee deductions will be paid after a year fron the vear completion of the contractial obliganons. All anounts of the other non-curret liabilities were denomnimnated in the LS Dollar (Note 30), 36 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31. 2018 17. TRADE ACCOUNIS PAY*ABLF As at )ecember 31, 2018 and 2017 trade accounts payable were presentced as follows: Decmbr 3.anayl December 31, DembW1. J In thousands of UZS 2017 217 2018 (restated) (restated). C;4pgape B01nonST 3neKTpoceT OAXK 8737262 10395745 8722507 MChJ "MEGA-MEBIKO" OK 5 639 445 8 653 956 1 008 281 Caxywa6aACKonl 3Cfl 2759499 2759499 2372787 Cwpgape T3TK 2758061 1 910080 1 292731 FlHrAep W3TK 1 816865 1 523343 1 097918 OKOTTMH T3TK 1799066 1 614005 1415044 GoeByT T3TK 1462 556 551 680 340 085 FynL4CToH TymaH 3Cil 1 396361 1 365592 613875 XOeoc T3TK 1 393 462 1 002 076 796 801 Mp3ao6og TyWaH T3TK 1 039117 735090 326066 FynWCTOH waxap 3neKTpoceT U3TK 1015477 901 417 739760 Hinjiang Qitailong Business CO LTD 673 285 - - 000 ASIA PIPEPLAST 473 181 133366 - 000 WapK Kyp1nVIIu cepawc 379 949 2 637 963 1 435 661 Cappao6a T3TK 357459 308406 288776 ,W03aK X3TK 339039 340 503 231 502 Fargona Gidro Bur Tamir MNK 291 580 - SIRDARYO SIFAT QURILISH 254434 - "TRANCE ENERGY'MChJ 200 257 - - 000 "CRANES AND SPECIAL TRUCKS" 183 975 190 000 190 000 CwcpaTnW caHTexoL1K cyBi Kyptlnow MWX 174 891 163 029 - "Energo Status" ML4)K 166960 618740 - "KEMBERLIT-ADAMAS"XK 126426 126426 126426 UUU UNIVERSAL UIL PRUUUU I 10b 131 - 000 OBI HAYOT INJINIRING 68054 3 125 464 - Daejoo ENT Corp.LTD (South Korea) - 5 525 670 000 " INVEST LOYIHA KONSALT" - 490 495 - Other 1 391 672 1 184 787 985 857 35003470 46257332 21984077 As at December 31, 2018 and 2017 trade accounts payable werc denominated in the following currencies: Deceber31, December 31, Jan uary 1,' -n thousandsofUZS 2017 2017 2018 (restted) (restafted).:,I UZS 28058762 25633784 19350135 US dollar (Note 30) 6944708 20623548 2633942 35 003 470 46 257332 21 984 077 18. ADVANCES RECEIVE) As at December 31, 2018 and 2017 advances received were presecnd as follows: December31,O E In thousands of UZS 2017 2017 (restated) (restatleid)l Advance received from legal entity customers 923 329 -- Engineering company"Slujba yedinogo zakazchika" 271 437 1 690541 - 1194766 1690541 - 37 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 19. TAXIS AND STATUTORY (X)NTRIlTIONS PAX ABLE As at December 31, 2018 and 2017 taxes and statutor contributions payable were presented as follows: Decembr A December 31, In thousands of UZS 2017 2017 W4 (restated) (restated)," Payroll taxes 651 519 258061 126861 Income tax payable 8528 8528 8528 VAT 112 487 - Unified social payment 1 272983 1 034506 614472 Statutory contributions to the Special Trust Funds of Uzbekstan725237 386976 359075 Uzbekistan 2770754 1 688071 1108936 20. PAYABLE TO EMPLOJT:ES As at December 31, 2018 and 201-7 payable to employees were presented as follows: December 3 In thwisands nf I1 7A' 1707 2018 .... . Payroll 170 502 1 140030 1 351 677 Provision tor unused vacation i69 525 I 18 31 57413 Other 294107 228865 - 634134 1487272 1409090 T1he movement in provision for unused vacation for the vears ended December 31, 2018 and 2(11 7 was presented as foll ows: Deceber31, December 31, JanuaryV1 In thousands of UZS 2017 2017 (restated) (restated)ji As at 1 January 118377 57413 57413 Accrued (Notes 23 and 24) 51 148 60 964 - Used - - 169525 118377 57413 21. OTHE11R ACCOUNTS PAYAAL, s\ at December 31, 2018 and 2017- other accounts payable were presented as follows: 000 06w-xar-W1iHWiapMHr 57392 57392 47497 000 "OPTIK-ALOQA-QURIL ISH" - 7000 2000 Mnistryof housing and communal services of the 392 412 - Republic of Uzbekistan (Note 29) I-Kl npoeKT AnaT KapaKyn AKWSP - 101 723 - Other 15292 42704 34917 465096 208819 84414 38 SYRDARYA STATE UNITARY ENTERPRISE -SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 21. OTIAR ACCOUNTS PAYABLE (CONTINU1`D1)) In accordance with the resolution of the President of the Republic of I'zhekistan PP 2900 "On the orgaiuzation of the activity of the Ministry of housing and conununal services of the Republic of 'zbekistan", the Company transfers part of the revenue from the provided water supply to the Ministry of housing and connunal services of the Republic of Uzbekistan. )unng 2018, the Company accrued liability to the Ministry of housing and communal services of the Repubhc of f the revenUe Crom rhe provided wvater supply in the amount of 392 412 thousands of UZS. 22. REVENI For the years ended December 31, 2018 and 2017 revenue was presented as follows: In thousands of UZS 2018 (ettd Water supply 8969886 8731 458 Sewerage service 2231 716 1 035042 Other - 151 686 11201G02 9010100 21. COST OF SALES for the years ended December 31, 2018 and 2017 cost of sales was presented as followvs: . 2017' In thousands of UZS 2018 (restated)i Wator cupply: Depreciation (Note 6) (11 296 b20) ( bb / biI) Electricity expenses (4790781) (4100885) Payroll and related taxes (2714639) (2 159254) Unified social payment (313 053) (533221) ln\vntory expenses (32 140) (1 481 702) Fuel costs (32078) (11 996) Provision for unused vacation (Note 20) (26085) (31 092) Postage expenses (6170) - Losses in supply process (Note 24) 1 038021 460 591 Other (466659) (280866) Sub-total (18 640 204) (16 825 942) Sewerage service: Payroll and related taxes (345350) (333642) Unified social payment (189656) (83482) Depreciation (Note 4) (125862) (73 763) Other (5 720) (24 665) Sub-total (666 588) (515 552) Total (19 306 792) (17 341 494) 39 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 24. GENERAI AND ADMINISTRAI'l[VI' XIENSFS For the years ended December 31, 2018 and 2017 general and administrative expenses \were presented as follo-ws: In thousands of UZS Notes 2018 (restated) Allowances for doubtful advances paid 9 (13505279) - Payroll and related taxes (2 856 278) (2 084 749) Provision for obsolete inventory 7 (2275352) (1 127757) Losses in supplyprocess 23 (1038021) (460591) Unified social payment expenses (604545) (528255) Inventory e)penses (477945) (41 160) Maintaining expenses of Project Coordination Group (467212) (567461) Bank charges (428929) (364396) Transfer to the WMnistryof housing and communal services of 29 (392412) the Republic of Uzbekistan Depreciation 6 (318665) (103653) Allowances for doubtful trade accounts receivable 8 (137 936) (3 584 021) Allowance for credit losses 12 (57330) - Provision for unused vacation 20 (25 063) (20 872) Fuel wosts (1 617) (1 126) Consulting expenses - (684 614) Fines and penalties - (557 098) Other ___12_ ((665929) (22767511) -10800682 25. OTE IR INCOM [ For the years ended December 31, 2018 and 2017 other income were presented as folws: 2017? ithousands of UZS 20181 Arnortisation of deffered income (Note 15) 2982113 1 365640 Donated fixed assets 478 203 - Construction services' income 126694 340306 Income from disposal of assets 57558 16169 Scrap metal 51 635 - 3696203 1 722115 26. FOREIGN FX(C JANGIU GAIN ANI) IAOSS For the years ended December 31, 2018 and 2017 foreign ex hiange gain and loss were presented as foIlows;: In thousands of lUZS 21 Foreign exchange gain 61 568413 150689502 Foreign exchange loss (79 590 322) (385 598 847) (18021 909) (234 909 345) 40 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 27. FINANCE INCOMI AND COS' For the years ended December 31, 2018 and 2017 finance incorme and cost verc presented as follows: In thousands of UZS 201820 i (revÅsed)j Dividends received - 94 Interest expenses (9000) - (9000) 94 28. CONT INGLNT LIABILIIES Igal issues In the noinnal course of operations, the Company is sublect to lawsuits and claims. In the opinioi of the managernent, the probable liabilines (if any) arising from such clalms or claims will not have a rateral adverse effect on the financial positon or performancc of the Company in the future. Insuraice h111e"1 arket of insurance services in the Repubh if Uzbekistan is at the age of formation and nany fornns o insurance, common in other countnies of the worål, are not yet available in Uzbekistan. Ihe comnpany does not have full insurance coverage foir its production aciihues, loses caud by producti> on dela ,t iot in,utted obhligaion to third parnu; duv to mainng to real uirate or the o eitrnmet ]a "k y 1 an,ts -r the. Company's acutivities. Untl the Ciompany has full insurance coverage, there is a risk that the loss or damage of certain acmet muld lhave a ateautal adveise effect on th ompany's opcranions and ia11)Cl pw.ition. 1T3x Ilaw CurrentIv in the teubbe oC Czbekistan there are a number of legislative acts regulaing ie sy sten oi ot aes paid to the Repubbcan and local state budgets. These taxes include value added tax, income tax, and a nuiber of other taxes and social deductions. Ilie (ax legislation of the Repubhc of Uzbekistan is subject to vaning in:erpret.ior and subject to frequent changes. Oftei there are different opittons regarding the interpretation : legislatve acts both between different deparitments and within one department (ie the State Tax Committee and its various inspections), which creates uncertainty and the ground for vanous disputes. Tax deciratimons and other legal obligaions (for example, questons of cistons and currency reg11atton) are subject to review and inspection by a number of agencies that by law have the right to apply signitcant admmstraive penalties (including fines and penalties) and may take a rougher posinon in the interretation of lecislatton and veriication of tax calculations. Consejuently, tax authorides may nie claims for those transactions and accouning methods for wich they did not make claims before. This siniation creates a greater probability of occurrence of tax risks in the Republie of I.'zbekistan than, for example, in other countries with nore developed taxaion systems. Tax inspecions can cover five calendar years of acvitv, imrtiediately preceding the year of verification. Under certaln conditons. carlier penods may be subjected to verincaton. As at December 31, 2018 management of the Company believes that lt adheres to an adequate iterpreation of the relevant legislarion, and the Company's position regarding tax, currency and customs issues will be supported by the controllng bodies. 41 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31. 2018 28. CONTINGENIT LIABILITIES (CONTIN E D,)) Credit related commitments The rmain purpose of these instruments is to ensure the provision of funds to customers as necessary. 1he total amount of obligations for guarantees, sureties, letters of credit and other financial liabilities does not necessaril% represent future cash requirements, as the expiration or cancellation of these obligations may be possible without the provision of funds to the counterparty. Nevertheless, there is a potential risk, therefOre, in the statement of financial position, among other obligations under guarantees, provision is made for a loan commutmnt in respect of provided guarantees and guarantees, depending on die financial condition of the client. The management of the company does not control issued credit related commitments, as it beliekes there will be no obligation and accordingly no provision for these contingent credit habilities has been created. 29. ()PIRATIONS WITHI REI.ATED PARTIES For the purposes of these financial statements, the parties are considered to be related if one of then has the ability to control the other or exercise signuficatit influence in making other t nancial and operational decisions by the other party as set out in IAS 21 "Related Party Dis;cloure.". In considering all possible relationships with related parties, the economic content of such relationships is taken into account, and not onil their legal form. Th1e Company is a state enterprise with 100'% state share in the authorized capital. The company purchases goods and services from a large number of enterprises with state participation. The transactons with the state also include settlements on taxes. Below descrbed the largest amounts of operations with related parties: 2017 2016@ In thousands of UZS Notes 2018 (restated) (ettd RECEIPTS: Project co-financing receipts from Government 15 35087 012 15 536 250 5056204 Project direct payments from the source of 15 9009171 3520505 879 707 Government Non-monetary Government grants 15 602 534 4510069 1 421 818 Financing constructions by the source of Syrdarya 15 17111812 10694472 4525 592 region Authority Settlement of Loan ADB No. 1842-UZB by the 15 2089000 source of Government EXPENSES: Ministryof housing and communal services of the 24 392412 - - Republic of Uzbekistan 64291941 34261296 11883321 Transactions wxith related parties are not secured and are not guaranteed by third parties. In 2018, the Company had 4 (201 7: 4) key managenient personnel. In 2018, the Company accrued remunerations to the key management personnel in the folloving order: * General Director 43 694 LZS; * Deputy director of operations 16 410 UZS; * Deputy director - Chief etigineer 22 062 LUZS; and * Chief accountant 34 430 UZS 42 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 30. FINANCIAL INSTRUMINTS, FINANCIAL RISK MANAGEMINI Financial risk nianageinent objecti,es and policies The Chairmnan of the Management Board has overall responsibility for the orgarization of the Company's rlsk management system and for oversecing the operation of this system. The risk management of the Company is carned out in respect of financial risks (market, currency, interest, credit risks, liquidty risks, .'The Company's main task in risk management is to idenifR and analyze the msks faced by the Company, establish acceptable nsk limits and appropriate control rnechanisms, and for monitoring risks and compliance with the need to make changes in connecdon wvith changes in market conditions and the Company 's operations The Company is exposed to various risks associated with financial instnments. Financial assets and liabilines are divided into categories in accordance wvith the accounting policY of the CompanY. The main inancial instruments of the oompany consist of cash and cash equivalents, trade accounts receivable, loans, payabe to the I).\ and ADB and trade accounts payable. The main nsks ansing from the Company's financial instrumeiits are liquidi risk, foreign currency risk and credit isk. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Company 's profits or the valuc of its availahle financial instruments. The goal of market risk management is to control exposure to market risk and keep it w,ithin acceptable limits, whe seeking to optimize return on investmlent. Curreney risk 'Ihe Companv has certain transactions denominated in foreign currencies. In this regard, tliere is a risk of changes in exchange rates. The carrving values of assets and habilities of the Company denonunated in foreign currency (US dollar) as at December 31, 2018 and 2017 were as follows: Liabilikties Asimts in thousands of UZS Notes December 31, December 31, December 31, Decem ber31 2018 2017 2018 201 UIS Dollar: Cash and cash equivalents 12 - - 20313472 33205 Sub-total -- 20 313 472 33 205 Trade accounts payable 17 6 944 708 20 623 548 Loans, non-current portion 14 574491 983 451 003816 - Other non-current liabiljties 16 25364435 21 900 746 Sub-total 606 801 126 493528110 Total 606801 126 493528110 20313472 33205 The table below represents detailed information about Possible impact of increasing or decreasing or 1UZS exchange rate by 3% for 2018 and 151' for 2017 in relation to the respective currencies. Ilie sensitivit level of 20% is used in the analysis and preparation of internal reporting on Ilie foreign currency risk for key management personnel and reflects management's assessment of reasonablY possible changes in exchange rates. The sensitivity aialysis oily considers balances of monetary items denormiated in foreign curreticies and adjusts translanon of these balances at reporung date considering 3% change in foreign exchange rates. 43 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 30. FINAN(IAL INSTRUMNINTS, FINANCIAl. RISK MANAGIM N ((ONFINI LD) Currency risk (contiiiued) The arnounts shown helow relect the (decrease)/increase in protit in case of weakerng of the 1S exchanjge rate against the respective currency by 3% -(17: 151%). Strengtherung of /-S exchange rate against the respective currency by 3% (2017: 151 ) would have comparable impact on the proft and equity, and the amounts below would be \with reverse sign: Us D:öllär ithousands of UZS 20'18 201 Assets 609404 50140 Liabilities (18 204 034) (745 227 446) The above tables reflect the effeet of a change in the nain assumption, wllt other assumnpt ios renain unchanged. In fact, there is a connection bete. en assumlptons and other factors. It should also be noted that fhe sensitiv ity. is non linear, so interpolation or extrapolation of the resuits should not be performed. The sensitivity analvsis does not take into account that the Group actisvely nanages assets and liabilities. In additon to this, the financial position of :he Company may varv dependnig on the changes taking place in the market. For example, the Group's strategy in the arca of financial risk niariagenent is aimed at managing the nsk of narlket volatilitv. In the case of sharp neganrve price flu3-uations in the secunties mnarket, inaiagemeit (-3m1 Iesoit tO hb ilthLidS as ,«Ililig invcntn, chaiging the o iof the<: motmn p1 moh i and also to other methods of protection. iherefore, the change in assuiptions mav not havv an impact on liabilies and significantdv affeet the assets recorded on the balance sheet at the market price. In this situauon, different methods of assessinig assets and liabilies can lead to siytucant tuctuanons in the amount ot capitaL Other hiutations in the above sensitivliy analyss indude the use (wih tlih aln of disclosing the potenual nsk) Of hyspotheical market movements, whvich are just the Conmpan's torecast oft orfhcoming market changes tiat rn not he predicted with any .egree ofw c-rrmair. Also a Iiutanon is the assiiption that all interest rates change in an identical way. Interest rae risk IIe Cornpany assnes the risk associated with the effeet of fluctuations m market imnterest rates on its tinancial position and cash flows. Such fluctuations maY increase the level of interest imargin, but in die event of unexpected changes in interest rates, interest margin may also decline or cause losses. Changes in interest rates affeet mainly borrowed loans and loans, changing cither their fair value (fixed-ra te debt) or future cash fows (vanable-rate debt). When attracting new loans or loans, the managenent decides xlhether a fixed or vamable interest rate will be more benecical to the Company during the expected period before maturity, based on its owvin professional judgnent. Ihe change in the floatig interest rate during the reporting penod would not affeet the profit or loss for the period, as all borrowed loans were received with a fixed interest rate. 44 SYRDARYA STATE UNITARY ENTERPRISE "SUVOQOVA" NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 30. IINANCIAL INSTRUMENTS, FINANCIA L. RISK MANAGii'NTr< (CONTF INUE:D) Credit risk Credit risk is the risk that one party on financial instrument fails to meet an obligation and will cause the other party to incur financial loss. Management of the Conipany penodically reviews the credit raungs of these banks, in order to avoid extreme credit risks (Notc 12). The Company's inanagement believes that the international credit esis and subsequent changes in the credit ratings of local banks is not an extreme credit risk. The following table represents the amounts in current bank accounits at reporting date using Moody's agency credit ratings. Decemnber31, Deceber 1j ~ ebr31 ee e 1 In thousands of UZS Location 2018 207y01 : 21 "ipoteka-Bank- JSCMB Uzbekistan BB+/negative BB+Inegative 6444718 3 708 075 "Hamkorbank JSCB tzbekistan BB/stable BB/stable 20 260 840 33 205 26705558 3741 280 LIqultidiltk risk. l.quidity nsk is the risk that the ( Conpany has di ticuiltv in niecing its tinticial obligtions, wnich are setted by the transfer of cash or another financial asset. The Company's approach to guidty, management is to tmsure, to the extent possible, the Companv's continued avaflabihtN of liquid funds sufficient to pax of its obliatlons on time, both under normal and stressful condimons, preventing the occurrence of unacceptable losses and without eol)ardizing reputation of the Conpany. The Cornpany does not provide an analysis of the tomapanys imiaa haiues bY mLunulty, oh m iwibil..meioui of the terns that renat at the reporting date before the end of the terns ot repaynent of information secrecy provided by the terns of the contracts. Capita: management Capital nianagement The Company's task in the field of capital mianagement is to ensure the Conipany's abilty to continue its uniterrupted business, providing an acceptable level of profitabilty, respecting the interests of other partners and maintaining an opumal capital stnictre. he company controls capital based on the ratio of debt to capital. This indicator is calculated by dividing the net amouit of the debt by the whole anount of capital under the nanagement of the Company. Net debt is the total anount of debt recognized in the statemrent of financial position, net of cash and cash equivalents. Ihe totai amount of capital under management of the Company is the total amount ot equity recorded in the statement of financial position. 31. SUBSEQU ENT EVENTS lhc compan's a:naemii is n aware of signitticant c\ ems after tlie reprting dait 45