Interim Financial Statements

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Joint Stock Commercial Bank "UZBEK INDUSTRIAL

AND CONSTRUCTION BANK"

Condensed Consolidated Interim Financial Information prepared in accordance with IAS 34, Interim Financial Reporting

30 June 2021

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.................................................................................................................................................................. 5

2. OPERATING ENVIRONMENT OF THE GROUP............................................................................................................ 6

3. BASIS OF PRESENTATION.............................................................................................................................................. 6

4. ADOPTION OF NEW AND REVISED STANDARDS..................................................................................................... 7

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY.................. 7

6. SEGMENT REPORTING.................................................................................................................................................... 8

7. CASH AND CASH EQUIVALENTS............................................................................................................................... 10

8. DUE FROM OTHER BANKS........................................................................................................................................... 11

9. LOANS AND ADVANCES TO CUSTOMERS.............................................................................................................. 13

10. INVESTMENT SECURITIES MEASURED AT AMORTISED COST......................................................................... 21

11. PREMISES, EQUIPMENT AND INTANGIBLE ASSETS............................................................................................. 21

12. DUE TO OTHER BANKS................................................................................................................................................. 21

13. CUSTOMER ACCOUNTS............................................................................................................................................... 22

14. OTHER BORROWED FUNDS......................................................................................................................................... 23

15. SUBORDINATED DEBT................................................................................................................................................... 24

16. INTEREST INCOME AND EXPENSE............................................................................................................................ 25

17. ADMINISTRATIVE AND OTHER OPERATING EXPENSES...................................................................................... 25

18. INCOME TAXES................................................................................................................................................................ 26

19. EARNINGS PER SHARE................................................................................................................................................. 27

20. COMMITMENTS AND CONTINGENCIES.................................................................................................................... 27

21. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES.................................................................. 28

22. FAIR VALUE....................................................................................................................................................................... 28

23. CAPITAL RISK MANAGEMENT..................................................................................................................................... 31

24. RISK MANAGEMENT POLICIES.................................................................................................................................... 32

25. RELATED PARTY TRANSACTIONS.............................................................................................................................. 38

26. EVENTS AFTER THE END OF THE REPORTING PERIOD...................................................................................... 40

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 30 September 2021.

The notes set out on pages 6 to 40 form an integral part of this condensed consolidated interim financial information 1

JOINT STOCK COMMERCIAL BANK

"UZBEK INDUSTRIAL AND CONSTRUCTION BANK"

CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

(in millions of Uzbek Soums, except for earnings per share which are in Soums)

The notes set out on pages 6 to 40 form an integral part of condensed consolidated interim financial information 2

JOINT STOCK COMMERCIAL BANK

"UZBEK INDUSTRIAL AND CONSTRUCTION BANK"

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

(in millions of Uzbek Soums)

The notes set out on pages 6 to 40 form an integral part of condensed consolidated interim financial information 3

The notes set out on pages 6 to 40 form an integral part of condensed consolidated interim financial information

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 2021 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 21 October 2017 (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 2021 (31 December 2020: 45 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 2021 (unaudited), the number of Bank's employees was 3,885 (31 December 2020: 4,052).

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

At 30 June 2021 (unaudited) and 31 December 2020, the Group consolidated the following companies in these consolidated financial statements:

The Group's ownership

30 June 2021 31 December

Country of (unaudited) 2020 Type of

During six months of 2021, the Group liquidated PSB Industrial Investments LLC. There was no impact on the Group's financial results in 2021 since PSB Industrial Investments LLC did not operate since second half of 2020 and there were no balances at the date of its liquidation.

The table below represents the Group's investment in associates at 30 June 2021 (unaudited) and 31 December 2020.

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 2021:

● Inflation: 11.1% (2020: 11.1%)

● GDP growth 4.8% (2020: 1.6%).

● Official exchange rates: 30 June 2021: USD 1 = UZS 10,605.30 (31 December 2020: USD 1 = UZS 10,476.92).

● Central Bank refinancing rate: 14% (2020: 14%).

In June 2021 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 updated to Stable. The agency forecasts Uzbekistan's economy to grow by 4.8% in 2021, with the service sector becoming the main driver of the growth.

On 12 March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. In response to the pandemic, in 2020 (in 2021, some restrictions were held, where remained), the Uzbekistan authorities implemented numerous measures attempting to contain the spreading and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place orders and limitations on business activity, including closures. These measures have, among other things, severely restricted economic activity in Uzbekistan and have negatively impacted, and could continue to negatively impact businesses, market participants, clients of the Group, as well as the Uzbekistan and global economy for an unknown period of time. From the beginning of 2021 Uzbekistan actively supported health care systems related to vaccination and as a result at 20 September 2021 28% of the whole population got vaccinated.

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.

So far, the growth of loan portfolio stock was in line with the expectations of the Central Bank. Currently, it slowed to 8.5% from 15.8% in 2020 on a year-to-date basis. This is despite the fact that loans issued in the first half of this year grew 140% from the same period a year earlier, which is explained by the significantly elevated level of returning loans.

In the first half 2021 inflation rate declined year-on-year to 10.9% against 14.2% over the same period last year.

The rate of depreciation of national currency against US dollar also decreased from 7% to 1.2% in the first half of 2020 and 2021. This is coupled with de-dollarization policy of the government which aims to decrease the foreign currency part of the banks' loan portfolio below 50% by the end of the year.

In 2021 business environment has gradually recovering after pandemic crisis and began actively developing its activities as it was before pandemic.

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

Management is taking necessary measures to ensure sustainability of the Group's operations and support its employees.

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 2020, 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 2020.

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.

This condensed consolidated interim financial information is presented in millions of Uzbek Soums ("UZS"), except for earnings per share amounts and unless otherwise indicated.

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 2021 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 - Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022).

● 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).

● Proceeds before intended use, Onerous contracts - cost of fulfilling a contract, Reference to the Conceptual Framework - narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018- 2020 - amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022).

● Interest rate benchmark (IBOR) reform - phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021).

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 amendment 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 2020 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 2020, except for additional modification that the Group applied for measuring ECL as of 31 December 2020 in response to the COVID-19 pandemic:

· During 2020 the Group offered forbearance solutions to customers in the form of reductions to contractual payments including freezes to interest payments for up to six months. The forbearance was provided to all customers notwithstanding their financial difficulties before the COVID-19 pandemic. These measures have not been treated as a trigger for credit impairment or SICR for the restructured loans that had no overdue prior and during the pandemic period and subsequently had no overdue in scheduled payments, since measures were based on legislative moratoria on loan repayments applied in light of the COVID-19 crisis.

· During 2020 the Group has also adjusted the calculation of loss given default rates (LGD) by excluding the loan recovery results of the second and third quarters of 2020, assuming the recovery pattern during the lockdown period does not accurately reflect the financial performance of the borrowers. Cash flows and turnover of customer accounts observed during pre and post quarantine periods suggest that significant slow- down in the recovery of loans were mainly attributable to factors other than the financial standing of the borrowers. This adjustment to LGD has been applied across all portfolios of the Group.

Due to improvement of economic situation, absence of COVID-19 related moratoria on loan repayments in the first half of 2021 and observed curing of borrowers from COVID-19 pandemic the above adjustments and overlays to the risk parameters were not applied to the ECL as of 30 June 2021.

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 4% and amounted UZS 1,664,986 million as of 30 June 2021. If LGD increased by 10% for the whole loan portfolio then ECL would have increased by 7% and amounted UZS 1,719,132 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 2021 (unaudited) is set out below:

30 June 2021 (unaudited)

Segment information for the reportable segments for the year ended 31 December 2020 is set out below:

31 December 2020

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

6. SEGMENT REPORTING (Continued)

Due to significant increase of retail transactions and business activities in comparison with the previous year, the management of the Group is currently in the process of development and enhancement of segmentation reporting.

6. SEGMENT REPORTING (Continued)

The increase in allowance for expected credit losses was triggered by the increase in correspondent accounts and placements with other banks.

As at 30 June 2021 (unaudited) and 31 December 2020 for the purpose of ECL measurement cash and cash equivalents balances are included in Stage 1.

7. CASH AND CASH EQUIVALENTS (Continued)

The credit quality of cash and cash equivalents at 30 June 2021 (unaudited) 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.

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.

The increase in credit loss allowance was triggered by the increase in the Placements with other banks with original maturities of more than three months balances.

8. DUE FROM OTHER BANKS (Continued)

At 30 June 2021 (unaudited) the Group had balances with fourteen counterparty banks (31 December 2020: 6 counterparty banks) with aggregated amounts above UZS 10,000,000 thousand. The total aggregate amount of these deposits was UZS 1,961,543 million (2020: UZS 1,726,208 million) or 91% of the total amount due from other banks (31 December 2020: 91%).

As at 30 June 2021 (unaudited) and 31 December 2020 for the purpose of ECL measurement due from other bank balances are included in Stage 1.

Analysis by credit quality of due from other banks outstanding at 30 June 2021 (unaudited) is as follows:

Analysis by credit quality of due from other banks outstanding at 31 December 2020 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.

9. LOANS AND ADVANCES TO CUSTOMERS

The Bank uses the following classification of loans:

· Loans to state and municipal organisations - loans issued to clients wholly owned by the Government of the Republic of Uzbekistan and budget organisations;

· Corporate loans - loans issued to clients other than government entities and private entrepreneurs;

· Loans to individuals - loans issued to individuals for consumption purposes, for the purchase of residential houses and flats and loans issued to private entrepreneurs without forming legal entity.

The loan allowance reduction is explained by the improvement in the quality of the loan portfolio due to decreased COVID 19 effects on the Group borrowers. During 2020, the Group provided forbearances to customers via restructuring of interest payments by accruing of interest to the loan outstanding principal with final maturities predominantly extended by six months. Such restructuring increased the number of loans being classified in Stage 3 as a result significantly increasing the allowance for expected credit losses. During 2021 no additional major restructuring was made by the Group and prior year restructured amounts were mostly repaid influencing the loan and advances to customers balance staging.

The other major reason of allowance for expected credit losses reduction is improvement of individually significant loans performance on which the ECL is calculated on an individual basis and constituted in current year UZS 351,092 million and UZS 758,997 million as at 31 December 2020

The table below represents loans and advances to customer's classification by stages as at 30 June 2021 (unaudited) and 31 December 2020:

9. LOANS AND ADVANCES TO CUSTOMERS (Continued)

The following tables discloses the changes in the credit loss allowance and gross carrying amount for loans and advances to corporate customers between the beginning and the end of the reporting period:

9. LOANS AND ADVANCES TO CUSTOMERS (Continued)

The following tables discloses the changes in the credit loss allowance and gross carrying amount for loans and advances tocorporate customers between the beginning and the end of the reporting period:

\* The line "Changes in EAD and risk parameters" under columns related to Gross Carrying Amount represents changes in the gross carrying amount of loans issued in prior periods which have not been fully repaid during 2021 and transfers of new issued loans between stages.

\* The line "Changes in EAD and risk parameters" under columns related to Credit Loss Allowance represents changes in risk parameters (PD, LGD), changes in EAD and adjustment of ECL due to transfer to new stages, as well as transfers of ECL on new loans originated during the reporting period from Stage 1 to other stages. The information on transfers above reflects the migration of loans from their initial stage (or the stage as at the beginning of the reporting date) to the stage they were in as at the reporting date. This information does not reflect the intermediate stage that the loans could be assigned to throughout the reporting period.

9. LOANS AND ADVANCES TO CUSTOMERS (Continued)

The following table discloses the changes in the credit loss allowance and gross carrying amount for loans and advances to corporate customers between the 1 January 2020 and 30 June 2020:

9. LOANS AND ADVANCES TO CUSTOMERS (Continued)

The following table discloses the changes in the credit loss allowance and gross carrying amount for loans and advances to corporate customers between the 1 January 2020 and 30 June 2020:

9. LOANS AND ADVANCES TO CUSTOMERS (Continued)

Economic sector risk concentrations within the loans and advances to customer are as follows:

As at 30 June 2021(unaudited), the Group granted loans to 13 (31 December 2020: 12) borrowers in the amount of UZS 14,759,440 million (31 December 2020: UZS 12,563,610 million), which individually exceeded 10% of the Group's equity.

Information about loans and advances to individuals as at 30 June 2021 (unaudited) and 31 December 2020 are as follows: