Inecobank CJSC Interim Financial Statements For the period ended 31 March 2019 Contents Interim statement of Comprehensive Income ...............................................................3 Interim statement of Financial Position .......................................................................4 Interim statement of Changes in Equity .......................................................................5 Interim statement of Cash Flows ................................................................................6 Compliance with the mandatory ratios set by the Central Bank of the RA ........................7 Notes to the Interim Financial Statements ...................................................................8 2 Statement of Profit or Loss and Other Comprehensive Income for the first quarter of 2019 In thousands of Armenian Drams 01/01/2019- 01/01/2018- Notes 31/03/2019 31/03/2018 Interest income 4 7,777,252 7,128,700 Interest expense 4 (3,155,545) (3,089,045) Net interest income 4,621,707 4,039,655 Fee and commission income 5 621,079 476,188 Fee and commission expense 6 (356,394) (244,729) Net fee and commission income 264,685 231,459 Net gain / (loss) on financial instruments at fair value through profit or loss 17,722 - Net gain from foreign currency trading and translation 7 306,876 297,568 Net (loss) / gain on investment securities 16,167 (4,288) Other operating income 8 177,312 405,103 Operating income 5,404,469 4,969,497 Income from change in fair value of contingent consideration - 6,096 Impairment losses (1,227,694) (793,676) Personnel expenses (1,224,285) (993,366) Other general administrative expenses 9 (718,637) (623,157) Profit before income tax 2,233,853 2,565,394 Income tax expense (444,683) (521,142) Profit after taxation 1,789,170 2,044,252 Other comprehensive income, net of income tax Revaluation of investment securities (165,781) 40,922 Total comprehensive income 1,623,389 2,085,173 3 Statement of Financial Position for the first quarter of 2018 In thousands of Armenian Drams Notes March 31, 2019 December 31, 2018 ASSETS Cash and cash equivalents 10 45,444,944 42,629,390 Investment securities 11 - Held by the Bank 19,710,855 28,999,460 - Pledged under sale and repurchase agreements 11,356,523 - Loans and advances to banks 12 683,973 1,061,361 Amount receivable under reverse repurchase 13 agreements 921,024 2,718,140 Loans to customers 14 214,476,172 206,523,844 Property, equipment and intangible assets 15 6,035,361 5,664,727 Right-of-use asset 16 1,826,981 - Financial assets at FVTPL 1,265 - Other assets 17 5,582,185 5,274,767 Total assets 306,039,283 292,871,689 LIABILITIES Deposits and balances from banks 6,528 7,196 Repurchase agreements 10,886,241 - Current accounts and deposits from customers 18 159,418,771 164,377,527 Other borrowed funds 19 62,704,728 67,460,916 Subordinated debt 7,319,386 - Debt securities issued 6,507,012 5,567,815 Lease liability 16 1,846,423 - Current tax liability 637,240 501,953 Deferred tax liabilities 1,573,637 1,706,579 Financial liabilities at FVTPL 1,160 - Other liabilities 20 2,130,302 1,865,237 Total liabilities 253,031,428 241,487,223 EQUITY Share capital 21 14,545,680 14,545,680 Share premium 7,753,923 7,753,923 Main reserve 3,500,000 3,500,000 Property revaluation reserve 1,738,578 1,744,734 Investment revaluation reserve 1,354,131 1,519,912 Retained earnings (accumulated losses) 24,115,543 22,320,217 Total equity 53,007,855 51,384,466 Total liabilities and equity 306,039,283 292,871,689 4 Statement of Changes in Equity for the first quarter of 2019 In thousands of Armenian Drams Revaluation Revaluation Share Share Main surplus for reserve for Retained Total capital premium reserve land and investment earnings building securities The same intermediate period of the previous financial year (cumulative from the beginning of the year) Balance as of 31 December 2017 (audited) 14,545,680 7,753,923 3,500,000 1,562,516 1,629,109 19,251,814 48,243,042 Impact of adopting IFRS 9 as at 1 January 2018 - - - - 207,731 (753,816) (546,085) Balance as of 01 January 2018 (not audited) 14,545,680 7,753,923 3,500,000 1,562,516 1,836,840 18,497,998 47,696,957 Net gain /loss of the period - - - - - 2,044,252 2,044,252 Other comprehensive income - - - - 40,922 - 40,922 Dividends - - - - - - - Internal movements, - - - (4,667) - 4,667 - including Transfer to main reserve - - - - - - - Depreciation of revaluation surplus for land and building - - - (4,667) - 4,667 - Balance as of 31 March 2018 (not audited) 14,545,680 7,753,923 3,500,000 1,557,849 1,877,762 20,546,917 49,782,131 Revaluation Revaluation Share Share Main surplus for reserve for Retained Total capital premium reserve land and investment earnings building securities The same intermediate period of the current year (cumulative from the beginning of the year) Balance as of 01 January 2019 (not audited) 14,545,680 7,753,923 3,500,000 1,744,734 1,519,912 22,320,217 51,384,466 Net gain /loss of the period - - - - - 1,789,170 1,789,170 Other comprehensive income - - - - (165,781) - - 165,781 Dividends - - - - - - - Shares issued - - - - - - - Internal movements, - - - (6,156) - 6,156 - including Transfer to main reserve - - - - - - - Depreciation of revaluation surplus forland and building - - - (6,156) - 6,156 - Balance as of 31 March 2019 (not audited) 14,545,680 7,753,923 3,500,000 1,738,578 1,354,131 24,115,543 53,007,855 5 Statement of Cash Flows for the first quarter of 2019 In thousands of Armenian Drams 6 Compliance with the mandatory ratios set by the Central Bank of the RA In thousands of Armenian Drams Compulsory Any non value set by the NORMS Actual value compliance during Central Bank of reporting quarter Armenia Minimal required paid-in capital (AMD'000) 22,299,603 50,000 Compliant Minimal required total (own) capital (AMD'000) 51,176,768 30,000,000 Compliant N1ª minimal ratio of total capital to risk-weighted assets 16.01% 12.00% Compliant N2(1) minimal ratio of high-liquid assets to total assets in all currencies 20.12% 15.00% Compliant N2(11) minimal ratio of high-liquid assets to total assets in convertible 12.21% 4.00% Compliant currencies N2(2) minimal ratio of high-liquid assets to demand liabilities in all 96.85% 60.00% Compliant currencies N2(21) minimal ratio of high-liquid assets to demand liabilities in 52.11% 10.00% Compliant convertible currencies N3(1) Maximum risk of one borrower 11.00% 20.00% Compliant N3(2) Maximum risk on major borrowers 46.86% 500.00% Compliant Maximum risk of one borrower related to the Bank 0.25% 5.00% Compliant Maximum risk of all borrowers related to the Bank 1.45% 20.00% Compliant Minimal obligatory reserves at the Central Bank of RA in drams X 2.00% Compliant in foreign currencies X 18.00% Compliant Maximum ratio of total foreign currency position to total capital 1.17% 10.00% Compliant (without derivatives)* Maximum ratio of each foreign currency position to total capital USD 1.11% 7.00% Compliant EUR 0.03% 7.00% Compliant RUB 0.02% 7.00% Compliant Other currencies X X Compliant 7 1 Background Principal activities These interim financial statements comprise the financial statements of "Inecobank" CJSC (the Bank). Inecobank" CJSC is a closed joint stock company, established in 1996. The Bank was registered by the Central Bank of Armenia in October 1996 and has a general banking license No. 68. The principal activities of the Bank are deposit taking, customer account maintenance, credit operations, issuing guarantees, cash and settlement operations, securities and foreign exchange transactions. The activit The Bank conducts business throughout the Republic of Armenia from its head office and twenty two lic of Armenia. Legal address of the Bank is 17 Toumanyan Street, Yerevan, 0001, RA. Legal addresses of the branches are: Gyumri Branch 6 Alek Manukyan Street, Gyumri, RA Vanadzor Branch 75 Tigran Mets Street, Vanadzor, RA Armavir Branch 17 Hanrapetutyun Street, Armavir, RA Koryun Branch 105/1 Teryan Street, Yerevan, RA 18 Abovyan Branch 18 Abovyan Street, Yerevan, RA Arabkir Branch 49-1 Komitas Street, Yerevan, RA Hrazdan Branch 46/100 Ogostos 23 Street, Hrazdan, RA Nor Norq Branch 15/9-17/1 Gai ave., Nor Norq, Yerevan, RA Malatia Branch 39/3 Raffu Street, Yerevan, RA Shengavit Branch 22/3 Bagratunyatc Street, Yerevan, RA Abovyan Branch 7/3 Sahmanadrutyan Square, Abovyan, RA Tigran Mets Branch 29A-95 Tigran Mets, Yerevan, RA Ashtarak Branch 2 Nerses Ashtaraketci Square, Ashtarak, RA Lori Branch 41 Tigran Mets Street, Vanadzor, RA Artashat Branch 1 Kharazyan, Artashat,RA Zeytun Branch 51/9 Paruyr Sevak street, Yerevan, RA Ajapnyak Branch 192/8 Bashinjaghyan street, Yerevan, RA 8 Komitas Branch 39/78 Komitas ave., Yerevan, RA Khorenatsi branch 15 Khorenatsi str., "Elite Plaza" Business Center Mashtots Branch 18 Mashtots avenue, 52/1 building, Yerevan, RA Shengavit Branch 2 15 Bagratunyats street, Yerevan, RA Komitas Branch 2 54 B. Komitas ave., Yerevan, RA Avetisyan Branch 63/41Avetisyan Street., Yerevan, RA Cascade Branch 2/83 Baghramyan Street., Yerevan, RA The average number of employees within the bank is 810, of which 62 is the supporting staff. Shareholders 2.98%), Mr. Karen Safaryan (27.90%), European Bank for Reconstruction and Development (12.65%), agrif Cooperatief U.A (10.01%), Developing World Markets (5.1%) and others (11.35%). Related party transactions are detailed in note 26. 2 Basis of preparation Statement of compliance The accompanying financial statements are prepared in accordance with International Financial Reporting Basis of measurement The financial statements are prepared on the historical cost basis except for the financial instruments at fair value through profit or loss and investment securities which are stated at fair value, as well as land and buildings stated at revalued amounts.