Half-year Report

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JOINT STOCK COMMERCIAL BANK

"UZBEK INDUSTRIAL AND CONSTRUCTION BANK"

TABLE OF CONTENTS

CONTENTS

REVIEW REPORT

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

Condensed Consolidated Interim Statement of Financial Position 1

Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income 2

Condensed Consolidated Interim Statement of Changes in Equity 3

Condensed Consolidated Interim Statement of Cash Flows 4

Notes to the Condensed Consolidated Interim Financial Information

1. INTRODUCTION

2. OPERATING ENVIRONMENT OF THE GROUP

3. BASIS OF PRESENTATION

4. ADOPTION OF NEW AND REVISED STANDARDS

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. SEGMENT REPORTING

7. CASH AND CASH EQUIVALENTS

8. DUE FROM OTHER BANKS

9. LOANS AND ADVANCES TO CUSTOMERS

10. INVESTMENT SECURITIES MEASURED AT AMORTISED COST

11. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS

12. DUE TO OTHER BANKS

13. CUSTOMER ACCOUNTS

14. OTHER BORROWED FUNDS

15. SUBORDINATED DEBT

16. INTEREST INCOME AND EXPENSE

17. ADMINISTRATIVE AND OTHER OPERATING EXPENSES

18. INCOME TAXES

19. EARNINGS PER SHARE

20. COMMITMENTS AND CONTINGENCIES

21. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES

22. FAIR VALUE

23. CAPITAL RISK MANAGEMENT

24. RISK MANAGEMENT POLICIES

25. RELATED PARTY TRANSACTIONS

26. EVENTS AFTER THE END OF THE REPORTING PERIOD

JOINT STOCK COMMERCIAL BANK

"UZBEK INDUSTRIAL AND CONSTRUCTION BANK"

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

(in millions of Uzbek Soums)

Approved for issue and signed on behalf of the Management Board on 10 October 2022.

1. INTRODUCTION

This condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" for the six months period ended 30 June 2022 for Joint Stock Commercial Bank "Uzbek Industrial and Construction Bank "(the "Bank") and its subsidiaries (together referred to as the "Group").

The Bank was incorporated in 1991 and is domiciled in the Republic of Uzbekistan. It is registered in Uzbekistan to carry out banking and foreign exchange activities and has operated under the banking license #17 issued by the Central Bank of Uzbekistan ("CBU") on 25 December 2021 (succeeded the licenses #17 issued on 25 January 2003 and #25 issued on 29 January 2005 by the CBU for banking operations and general license for foreign currency operations, respectively).

Principal activity. The Bank's principal activity is commercial banking, retail banking, operations with securities, foreign currencies and origination of loans and guarantees. The Bank accepts deposits from legal entities and individuals, extended loans, and transfer payments. The Bank conducts its banking operations from its head office in Tashkent and 44 branches within Uzbekistan as of 30 June 2022 (31 December 2021: 44 branches).

The Bank participates in the state deposit insurance scheme, which was introduced by the Uzbek Law #360-II "Insurance of Individual Bank Deposit" on 5 April 2002. On 28 November 2008, the President of Uzbekistan issued the Decree #PD-4057 stating that in case of the withdrawal of a license of a bank, the State Deposit Insurance Fund guarantees repayment of 100% of individual deposits regardless of the deposit amount.

As at 30 June 2022 (unaudited), the number of Bank's employees was 3,680 (31 December 2021: 3,841).

Registered address and place of business. 3, Shakhrisabz Street, Tashkent, 100000, Uzbekistan

At 30 June 2022 (unaudited) and 31 December 2021, the Group consolidated the following companies in these consolidated financial statements:

In addition to the above consolidation disclosure table, in 2021, in accordance with Presidential decree-6244 "On additional measures to increase industrial power of the regions", seven companies were established with ownership structure of more than 50% held by the Group in each company. All these seven companies are also consolidated in the Group's financial statements. These companies will serve the purpose of regions industrial power improvement. During the first six months of 2022, the total additional capital investment in existing wholly owned subsidiaries amounted to 54 902 million UZS.

The table below represents the Group's investment in associates at 30 June 2022 (unaudited) and 31 December 2021.

During the first half of 2022 the Group invested to "Kattaqurgon Business Services" LLC in partnership with Asakabank and NBU for developing Business environment in Samarkand region in accordance with the government order.

The table below represents the interest of the shareholders in the Bank's share capital as at 30 June 2022 (unaudited) and 31 December 2021:

2. OPERATING ENVIRONMENT OF THE GROUP

Republic of Uzbekistan. The Uzbekistan economy displays characteristics of an emerging market, including but not limited to, a currency that is not freely convertible outside of the country and a low level of liquidity in debt and equity markets. Also, the banking sector in Uzbekistan is particularly impacted by local political, legislative, fiscal and regulatory developments. The largest Uzbek banks are state-controlled and act as an arm of the Government to develop the country's economy. The Government distributes funds from the country's budget, which flow through the banks to various government agencies, and other state and privately owned entities.

Uzbekistan experienced the following key economic indicators in 2022:

● Inflation: 12.2% (2021: 10.7%)

● GDP growth 5.4% (2021: 7.4%).

● Official exchange rates: 30 June 2022: USD 1 = UZS 10,860.25 (31 December 2021: USD 1 = UZS 10,837.66).

● Central Bank refinancing rate: 14-16% (2021: 14%).

In June 2022 Standard & Poor's international rating agency affirmed the Republic of Uzbekistan's long-term foreign and short-term sovereign credit rating for foreign and local currency liabilities at the BB- level. The outlook was Stable. The agency expects that the sanctions imposed on Russia will put pressure on Uzbekistan's economic growth and slow down the pace of fiscal consolidation this year, as Russia is Uzbekistan's largest trading partner. The agency predicts that real GDP growth will average around 5% per year starting in 2023.

The regulator pursues the inflation targeting policy aimed to reaching 5% by the end of 2023 and averaging around that level for an extended period. This is achieved in large part by imposing tighter requirements on liquidity, which should narrow down monetary base and loan portfolios of banks.

In the first half 2022 inflation rate increased year-on-year to 12.2% against 10.9% over the same period last year.

Influence of geopolitical events in the world

In February 2022, due to the conflict between the Russian Federation and Ukraine, numerous sanctions were announced against the Russian Federation by many countries. These sanctions are intended to have a negative economic impact on the Russian Federation. Due to the growing geopolitical tensions, since February 2022, there has been a significant increase in volatility in the currency markets, as well as a volatility of UZS against the US dollar and euro.

On 18 March 2022, due to geopolitical events around Ukraine and Russia, the exchange rate of the US dollar against the UZS weakened to 11,571.99 or the exchange rate of the USD dollar against the UZS increased by 7% since 31 December 2021 (2021: 3.4% annual).

In order to reduce the impact of the external environment on the economy of the Republic of Uzbekistan, on March 17, 2022, the Board of the Central Bank of the Republic of Uzbekistan increased the CBU refinancing rate by 3% to 17%. In June 2022 and then in July 2022, after some decrease in the degree of influence of the external environment on the economy, the Board of the Central Bank of Uzbekistan decreased the CBU refinancing rate to 16% and 15% respectively.

For the purpose of managing the country risk, the Bank controls transactions with counterparties within the limits set by the Bank's collegial body, which are reviewed regularly. The Group continues to assess the effect of these events and changes in economic conditions on its operations, financial position and financial performance.

The future effects of the current economic situation taking into consideration the sanctions to the Russian government and the above measures are difficult to predict, and management's current expectations and estimates could differ from actual results.

3. BASIS OF PRESENTATION

The condensed consolidated interim financial information of the Group has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and should be read in conjunction with the annual financial statements of the Group for the year ended 31 December 2021, which have been prepared in accordance with International Financial Reporting Standards (IFRS).

Except as described below, the same accounting policies and methods of computation were followed in the preparation of this condensed consolidated interim financial information as compared with the annual consolidated financial statements of the Group for the year ended 31 December 2021.

Interim period tax measurement. Interim period income tax expense is accrued using the effective tax rate that would be applicable to expected total annual earnings, that is, the estimated weighted average annual effective income tax rate applied to the pre-tax income of the interim period. In addition, the Group's new accounting policy, implemented retrospectively as a result of amendments to IAS 12, Income Taxes, is to recognize tax benefits of distributions to owners in profit or loss when these tax benefits are linked more directly to past transactions or events that generated distributable profits than to the distributions to owners.

4. Adoption of New and Revised Standards

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2023 or later, and which the Group has not early adopted.

● IFRS 17 "Insurance Contracts" (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023).

● Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023).

● Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB).

● Classification of liabilities as current or non-current, deferral of effective date - Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023).Classification of liabilities as current or non-current, deferral of effective date - Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023).

● Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for annual periods beginning on or after 1 January 2023).

● Deferred tax related to assets and liabilities arising from a single transaction - Amendments to IAS 12 (issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023).

The requirements of the amended standards have not been taken into account in the preparation of this condensed consolidated interim financial information. The Group is currently assessing the effect of this amendments on its financial position and results of operations.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In preparing this condensed consolidated interim financial information, the significant judgments made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those that applied to the Group's annual consolidated financial statements for the year ended 31 December 2021 prepared in accordance with IFRS. There have been no changes to the basis upon which the significant accounting estimates have been determined compared with 31 December 2021.

ECL measurement

Measurement of ECL is a significant estimate that involves determination of methodology, models and data inputs consistent with those at 31 December 2021. The following components have a major impact on credit loss allowance: definition of default, significant increase in credit risk ("SICR"), probability of default ("PD"), exposure at default ("EAD"), and loss given default ("LGD"), as well as models of macro-economic scenarios. The Group regularly reviews and validates the models and inputs to the models to reduce any differences between expected credit loss estimates and actual credit loss experience.

The Group incorporates forward-looking information into a measurement of ECL when there is a statistically proven correlation between the macro-economic variables and defaults. As at the reporting date the Group has obtained quarterly values for macroeconomic variables: export, import, GDP, CPI, current account balances, unemployment rates, aligned them with quarterly default rates across all loan portfolios and performed statistical tests for correlation considering different time lags. The Management analysed forward-looking information and assessed that effect of macro is not significant. The Management updates its statistical tests for correlation as at each reporting date.

If probability of default (PD) increased by 10% for the whole loan portfolio then ECL would have increased by 5% and amounted UZS 1,912,914 million as of 30 June 2022. If LGD increased by 10% for the whole loan portfolio then ECL would have increased by 4% and amounted UZS 1,815,321 million.

6. SEGMENT REPORTING

Operating segments are components of the Group that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision makers (CODM) and for which discrete financial information is available. The CODM of the group is the Management Board. The Management Board regularly uses financial information based on IFRS for operational decision-making and resource allocation.

(a) Description of products and services from which each reportable segment derives its revenue

The Group is organized on the basis of two main business segments - corporate banking which represents direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency and derivative products and retail banking which represents private banking services, private customer current accounts, savings, deposits and debit cards, consumer loans.

(b) Information about reportable segment profit or loss, assets, and liabilities

Segment information for the reportable segments for the period ended 30 June 2022 (unaudited) is set out below:

Segment information for the reportable segments for the year ended 31 December 2021 is set out below:

The cash management is performed by Treasury Department to support liquidity of the Bank as a whole.

6. SEGMENT REPORTING (Continued)

(c) Reconciliation of income and expenses, assets, and liabilities for reportable segments:

6. SEGMENT REPORTING (Continued)

7. CASH AND CASH EQUIVALENTS

As at 30 June 2022 (unaudited) and 31 December 2021 for the purpose of ECL measurement cash and cash equivalents balances are included in Stage 1 except for balances with Russian banks. The balances with Russian banks are classified under the category Correspondent accounts and placements with other banks with original maturities of less than three months.

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7. CASH AND CASH EQUIVALENTS (Continued)

The credit quality of cash and cash equivalents at 30 June 2022 (unaudited) is as follows:

Moody's credit rating for Uzbekistan was set at BB- as at 30 June 2022 and at 31 December 2021 which is used for assessment of cash balances with the CBU.

The credit quality of cash and cash equivalents at 31 December 2021 is as follows:

The credit rating is based on the rating agency Moody's (if available) or the rating agencies Standard & Poor's and Fitch, which are converted to the nearest equivalent value on the Moody's rating scale.

Information on related party balances is disclosed in Note 25. Information on fair value of cash and cash equivalents is disclosed in Note 22.

8. DUE FROM OTHER BANKS

Mandatory deposits with the CBU include non-interest-bearing reserves against client deposits. The Group does not have the right to use these deposits for the purposes of funding its own activities.

Restricted cash represents balances on correspondent accounts with foreign banks placed by the Group on behalf of its customers. The Group does not have the right to use these funds for the purpose of funding its own activities.

8. DUE FROM OTHER BANKS (Continued)

At 30 June 2022 (unaudited) the Group had balances with eleven counterparty banks (31 December 2021: ten counterparty banks) with aggregated amounts above UZS 20,000 million. The total aggregate amount of these deposits was UZS 2,379,230 million (2021: UZS 1,516,330 million) or 90% of the total amount due from other banks (31 December 2021: 83%).

As at 30 June 2022 (unaudited) and 31 December 2021 for the purpose of ECL measurement due from other bank balances are included in Stage 1 and Stage 3.

Analysis by credit quality of due from other banks outstanding at 30 June 2022 (unaudited) is as follows:

Per credit quality table above the Turkiston Bank was rated as CCC+ (Rated B- at 31 December 2021) and Hi-Tech Bank was classified as Unrated (Unrated at 31 December 2021) as at 30 June 2022 (unaudited). Both Turkiston and Hi-Tech Banks were classified under Stage 3 for purpose of ECL as at 30 June 2022 and as at 31 December 2021.

Analysis by credit quality of due from other banks outstanding at 31 December 2021 is as follows:

The credit rating is based on the rating agency Moody's (if available) or the rating agencies Standard & Poor's and Fitch.

Information on related party balances is disclosed in Note 25. Information on fair value of due from other banks is disclosed in Note 22.

8. DUE FROM OTHER BANKS (Continued)

The following tables discloses the changes in the credit loss allowance and gross carrying amount for due from banks between the beginning and the end of the reporting periods: