BC ENERGBANK SA INDIVIDUAL STATEMENT OF FINANCIAL...

BC ENERGBANK SAINDIVIDUAL STATEMENT OF FINANCIAL POSITIONAs at 31 Deeeniber 2017 ______

Note 2017 2016M DI.*000 MDL’000

ASSETSCash and balances with National Bank 3 730.785 688.738

C'urrent accounts and deposits with banks 4 182,639 132.672

Financial investments, debi securities held to matunty 5 699.454 538.037

Loans. net 6 870.755 865.205

Financial investments. cquity securities available-for-sale 7 2.733 3.331

Intangiblc assets 8 3.823 1.969

Property and equipment 9 131.183 130.808

C'urrent incomc tax asset 1.427 855

Other assets 10 52,614 53.811

Total assets 2.675.413 2.415.426

LIAB1LITIESDue to customers 11 1.911.554 1.674.857

Other borrowings 12 149.600 179.034

Other liabihties 13 15.503 17.219

Defcrred tax liabilitics 14 3.348 2.923

Total liabilitics 2.080.005 1.874.033

Shareholders' equityOrdinary shares 15 100.000 100.000Property revaluation reserve 15.368 15.966Other reserv es 16 152.940 147.111Retaincd eamings 327.100 278.316

Total shareholders' equity 595,408 541.393

Total liabilities and shareholders* equity 2.675.413 2.415.426

The accompanying notes arc an integral pan o f these financial statements.

The financial statements were authorized for issue on 04 April 2018 by the Executives o f the Bank representedby:

C'hicf Accountant Mr. Sergiu Slobcxlean

I

BC ENERGBANK SAINDIVIDUAL STATEMENT OF COMPREHENSIVE INCOMEFor the Year Fnded 31 December 2017

Note 2017M DL’000

2016 M DL'000

Intercst and similar income Inter est expense and similar charges

2020

159.550(61.478)

184.863(78.242)

Noi intercst and similar income 98.072 106.621

Fee and commission income Fee and commission expense

2121

55.792(10.767)

50.421(9.390)

Net fee and commission income 45.025 41,031

Financial income. net Othcr operating expenses. net

2123

46.3701.511

50.2921.723

Total operating income 190,978 199,667

Impairment o f loansImpairment o f receivablcs and othcr assets

6 (9.765)(5,220)

(7.152)(13.099)

Net operating income 175,993 179.416

Pcrsonncl expensesGeneral and administrative expensesDcpreciation and amortization

2425

8 .9

(73.489)(36,295)

(6.044)

(68.311)(30.784)

(5.507)Total operating expenses (115.828) (104.602)

Profit before lax 60.165 74.814

Income tax expense 14 (5,552) _ (6.228)Profit for the year 54,613 68.586

Other comprehensive income

Impairment o f financial assets (598) .

Other comprehensive income (598) -

Total comprehensive income for the year 54.015 68.586

Eamings per share (MDL per sliarc) 30 27,31 34.29

The accompanying notes arc an integral pan o f these individual financial statements.

The individual financial statements were authonzed for issue on 04 April 2018 by the Executives o f the Bank represented by:

President

Mr. Iurii Vasilachi

Chief Accountant

Mr. Sergiu Slobodean

b c e n f k g b a n k s a

INDIVIDUAL STATEMENT OF C'HANCiES IN EQUITYFor ihc Year Fndcd 31 Dcccmbcr 2017

O rd in a ry shares Kevaliialion reserve O ther reserves K ctaincd earn ings TotalM 1)1/000 M D I.'000 M D L'000 M D I.*000 M DL'000

Balancc al 1 .1 anuarv 2017 100,000 15.966 147.111 278.316 541.393Dividends - - - -

Transfer to reserves _ . 5.829 (5.829) -

Transactions with owners - - 5.829 (5.829) -

Profit for the year 54.613 54.613Impairment o f financial assets . (598) - - (598)

Total com prehensive income - (598) - 54.613 54.015

Balancc al 31 Dcccmbcr 2017 100,000 15.368 152.940 327.100 595.408

Balancc at 1 J a n u a r) 2016 100.000 15.^66 134.210 232.631 482.807Dividends • - - (10.000) (10.000)Transfer tu reserves . - 12,901 (12.901) -

T ransactions with o n n ers - - 12.901 (12.901) (10.000)

Prolit for the year . 68.586 68,586

Total com prehensive income - - - 68.586 68.586

Balancc at 31 Dcccmbcr 2016 100,000 15,*>66 147.111 278.316 541,393

Ihe accompanying notes arc an integral part o f these individual financial statements.

BC ENERGBANK SA

INDIV IDUAL STATEMENT OF CASH FLOWSFor the Y'ear Ended 31 December 2017

Nota 2017 2016MDL’000 MDL *000

Cash flows from operating activiticsInterest receipts 162.745 184.509Interest payments (63.755) (80.117)Net fee and commission receipts 45.025 41.031Net financial and other operating income 50.262 50.131StalTcosts paid (70.115) (61.187)Payments o f general and administrative expenses (35.948) (29,869)Cash flows before working capital changcs 88,214 104,498

(Increase) / decrease in operating assetsDue from NBM 762 11.757Investment deht securities over 90 days (35.843) (76.244)Loans (29.567) (5.910)Other assets 1.675 15.224Increase /(dec re ase) in operating liahilities:Due to customers 239.011 138.243Other liabilities (5.402) (2.320)Net cash from operating activitics beforc income tax 258.850 185,248

Income tax paid (5.700) (5.599)Net cash from/(used in) operating activitics 253.150 179,649

Cash flows from investing activiticsPurchase o f intangible assets (2.473) (383)Purchase o f property and equipment (6.464) (17,783)Proceeds from disposal o f property and equipment - 160Impairment o f Financial assets 598 -Net cash uscd in investing activitics (8339) (18.006)

Cash flows from financing activiticsProceeds from loans and borrovvings 80.542 ‘>0.085Repayment o f loans and borrowings (109.689) (99.491)Div idends paid - (10.000)Net cash from/(uscd in) financing activitics (29,147) (19.406)

Net foreign exchange differencc (2,376) 1.896

Ncl incrcase/(dccreasc) in cash and cash cquivalcnts 213,288 144.133

Cash and cash cquivalents at 1 January 1.020.402 876.269

Cash and cash cquivalcnts at 31 December 19 1.233.690 1.020.402

The accompanying notes arc an integral part o f these individual financial statements.

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BC ENERGBANK SANOTES TO THE INDIVID!'Al. FINANCIAL STATEMENTSFor (hc Year Fndcd 31 Dcccmbcr 2017

1. General information about Bank

BC' Fnergbank SA ("the Bank” ) was cstablishcd in the Republic o f Moldova on 16 January 1997 as a closed joint stock company. The Bank is principally engaged m retail banking opcrations in the Republic o f Moldova. The Bank opera tes through its head oflice located in Chisinau. 22 branches (22 branches as at 31 December 2016) and 43 agencies (43 agencies as at 31 Dcccmbcr 2016) located throughout the country. At the end o f 2017 the Bank possessed a license granted by the National Bank o f Moldova, which allows the Bank to bc engaged in

all banking activities.

The number o f employces employed by the Bank as at 31 December 2017 was 594 (593 as at 31 December 2016).

The registered oftice o f the Bank is located at 23 3 I ighina Street. Chisinau. Republic o f Moldova.

As Bank's opcrations do not have sigmficantly dilTerent nsks and retums and considering the regulatory environment. the nature o f its serviccs. the business process. as well as the types o f customers for the products and service> and the methods used to provide the services are homogenous for all Bank’s activities. the Bank operates as a smgle business segment unit and its activities arc cxclusivelv cam ed out in the Republic of Moldova.

fhc Board o f Directors formulatcs policics for die operation o f the Bank and supervises thcir implcmcntation. Ilie Board is composed o f 7 members appc>inted by the General Meeting o f Shareholders.

As at 31 December 2017 the Board o f Directors comprised the following members:

- Mr. Vladimir Tonciuc. C'hairman o f the Board:- Mr.Valeriu Usatu. Fnergoimpex. Mcmbcr o f the Board:- Mr.Mihail Pop. Mcmber of the Board.- Mrs. Natalia Cecctova. Gamaiun SRI . Member o f the Board:- Mrs.Maximenco Galina. Mcmbcr o f the Board:- Mrs. Natal ia Covanji. Member o f the Board:- Mr. Ghcnnadi Dimov. Member o f the Board.

ITiesc financial statements were authorised for issue on 04 Apnl 2018 by the Executives o f the Bank represented by the Prcsidcnt and the C'hief Accountant.

2. Accounting policics

2.1 Basis of preparation

Statement of compliance

The individual financial statements o f the Bank have been prepared in accordance with International Financial Rcponing Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis of measurement

I hc individual financial statements have been prepared under the histonc cost convention. except for land and buildings. invcstment propenies and a\ailablc-for-sale assets that have been measured at fair value.

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BC ENERGBANK SANOTES TO T1IE INDIVIDUAL FINANCIAL STATEMENTSFor the Year Ended 31 December 2017

2. Accotiiiling policics (con(inued)

2.1 Basis of preparation (con(inued)

Funcţional and presentation currcnc)The individual financial statements are presented in Moldovan lei (“MDI "). which is also us funcţional currency and the currency o f the country m which the Bank operates. All financial In fo rm a t io n presented in MDL has bccn rounded to the nearest thousands. except when otherwise indicated.

2.2 Significant accounting judgments and estimates

ITie Bank makes estimates and assumptions that affect the reported amounts o f assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors. including expcctations of futurc events that arc belicvcd to bc rcasonablc under the circumstances.

(i) Impairment losses on loans and advancesThe Bank reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss should be recorded in the income statement. the Bank makes judgements as to whether thcrc is anv observable data indicating that thcrc is a measurable decrease in the estimated futurc cash flows from a portfolio o f loans before the decrease can be identitied with an individual loan in that portfolio. This evidence may include observable data indicating that thcrc has bccn an adverse changc in the paymcnt status o f borrowcrs in a Bank. or naţional or local economie conditions that correlate with defaults on assets in the Bank. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence o f impairment similar to those in the portfolio when scheduling its future cash flows. The mcthodology and assumptions uscd for estimatmg both the amount and timing o f future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Where the final outcome o f these factors is difi'crcnt from the amounts that were initially rccordcd. such differences could materially impact the provision for loan impairment in the period in which such detenmnation is made.

(ii) Going concernHie Bank’s management has made an assessment o f the Bank's ability to continuc as a going concern and is satisfied that the Bank has the rcsourccs to continuc in busmess for the foreseeable future. Furthermore, the management is not aware o f any material unccrtainties that may cast sigmficant doubi upon the Bank's ability to continue as a going concern. Thereforc. the financial statements continue to be prepared on the going concern

basis.

(iii) Fair value o f financial InstrumentsThe fair value o f financial instruments that are not traded in an active market is determmed by using valuaiion techniques. The management uses its judgment to select the valuation method and make assumptions that arc mainly based on market conditions existing at each balance sheet date.

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BC ENF.RGBANK SANOTES TO MIE INDIVIDl AL FINANCIAL STATEMENTSFor ihc Year Fndcd 31 Dcccmbcr 2017

2. Accounting policics (continucd)

2.3 t'hangc in accounting policics

The accounting policics adopted arc consistcnt with those o f the previous financial year. The adopt ion o f new standards and interpretations eflective for the Bank from I January 2017 did not have any impact on the accounting policies. financial position or performance o f the Bank.

2.4 Significant accounting policics

The principal accounting policics apphed in the preparation o f these financial statements are set out helow.

a. Forcign currcncy translation

Foreign currency transactions arc translatcd into the funcţional currency using the exchangc rates prcvailing at the dates o f the transactions Foreign exchangc gains and losses resulting from the settlcmcnt o f such transactions and from the translation at year-end exchangc rates o f monetary assets and liabilitics denonunated in foreign currencies are recognized in the income statement.

Changes in the fair \a lue o f monetar, sccurities denommatcd in foreign currcncy classified as available for sale are analysed between translation dift'erences resulting from changes in the amortised cost o f the sccurity and other changes in the carrying amount o f the security. Translation differences related to changes in the amortised cost are recognized in profit or loss. and other changes in the carrying amount are recognized in equity.

Translation diffcrences on non-monetarv nems. such as equity investments classified as available-for-sa le financial assets, are includcd in the fair valuc reserve in equity The year-end and average rates for the year were:

____________2017_______________________ 2(U6___________t ’SD Euro LSI) Euro

Average for the period 18.4902 20.8282 19.9238 22.0548Year end 17.1002 20.4099 19.9814 20.8895

b. Financial assetsThe Bank classifics its financial assets in the following catcgones: loans and receivables, held-to-maturitv investments and available-for-sale financial assets. Management determincs the classification o f its investments at iniţial recognition.

(i) Loans and receivuhlesLoans and receivables arc non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. other than: (a) those that the entity intends to sell immediately or in the shorl term. which are classified as held for trading. and those that the entity upon mmal recognition designates as at lair valuc through profit or loss; (b) those that the entity upon iniţial recognition designates as available for sale: or (c) those for which the holder may not recover substantially all o f its iniţial investment. other tlian because of credit detenoration.

(ii) Held-to-maturityHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Bank’s management has the positive intention and ability to hold to maturity. If the Bank were to sell other than an insignificant amount o f held-to-maturity assets, the entirc category would be tainted and reclassified as available-for-salc.

(iii) A vailuhle-for-salcAvailable-for-sale investments are those intended to be held for an indefinite period o f time. which may be sold in response to nccds for liquidity or chango in interest rates. exchangc rates or equity prices. State securities are

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BC ENERGBANK SANOTES I O THE INDIVIDUAL FINANCIAL STATEMENTSFor ihe Year Ended 31 December 2017

2. Accounting policics (continiied)

2.4 Significant accounting policics (continiied)

(iii) A vailable-for-sale (continiied) also included in this category.

h. Financial assetsRegular way purchascs and salcs o f financial assets at fair valuc through profit and loss, hcld-to-maturity and available-for-sale are recognized on trade-date the date on which the Bank commits to purchase or sell theasset.

Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets cam ed at fair value through profit and loss are initially recognized at fair value. and transaction costs arc expensed in the income statement. Financial assets are derecognized when the rights to receivc cash flows from the financial assets have expired or where the Bank has transferred substantially all risks and rewards o f ownership. Financial Iiabilities are derecognized when they are extinguished. that is. when the obligation is dischargcd. cancclled or expired.

Available-for-salc financial assets and financial assets at fair valuc through profit or loss are subsequentlv carried at fair value. I.oans and receivables and held-to-maturity investmenis are carried at amortized cost usmg the effective interest method. Gains and losscs arising from changes in the fair value o f the 'financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Gains and losscs arising from changes in the fair value o f available-for-sale financial assets arc recognized directiv in cquitv. until the financial asset is derecognized or impaired. At this tirne. the cumulative gain or loss previously recognized in equity is recognized in profit or loss.

However. tnterest calculated using the effective interest method and foreign currency gains and losses on monetary assets classilied as available for sale are recognized in the income statement. Dividends on available- for-salc equity instrumente are recognized in the income statement when the entity’s right to receivc payment îs cstablishcd.

The fair values o f quoted investments in active markets are based on current bid prices. or if no such price is available. the last traded price on such day. If the market for a financial asset îs not active (and for unlisted securitics). the Bank cstablishes fair value by using valuation techniques. These include the use o f recent arm 's lcngth transactions. discounted cash flow analysis, option pricing models and other valuation techniques commonlv uscd by market participants.

c. Investments in associatesAn associate is an entity in which the Bank has significant înlluence and which is neither a subsidiary nor a joint venture. In the separate financial statements o f the Bank. investments in associatcs are cam ed at cost less

impairment losses.

d. Offsetting financial instrumentsFinancial assets and Iiabilities are offset and the net amount reported in the balancc sheet when there îs a legally enforccable right to set ofTthe rccognized amounts and there is an intention to settle on a net basis. or reali/e the

asset and settle the liability simultaneously.

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BC ENERCBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Vear Fndcd 31 Dcccmbcr 2017


2.4 Significant accounting policics (continucd)

c. Intcrest income and expenseIn ter est income an d expense for all in tcrest bcaring financial Instrum ents, except for those c lassified as held for trading or designated at fair valuc through profit or loss. are rccognized in the income statement for all Instrum en ts m easu red at amortised cost using the eflcctive intcrest method.

Tlie effective interest method îs a method o f calculating the amortised cost of a financial asset or a financial liability and o f allocating the intcrest income or intcrest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or reccipts through the expected Iile o f the financial instrument or. when appropriate. a shorter period to the net canying amount o f the financial asset or financial liability. When calculating the effective interest rate. the Bank estimates cash flows considermg all contractual tenns o f the financial instrument but does not consider future credit losses. The calculation includcs all fees and commissions paid or rcceived bctween parties to the contract that are an integral part of the effective interest rate. transaction costs and all other premiums or discounts.

Once a financial asset or a Bank of financial assets has been written down as a rcsult o f an impairment loss. interest income îs rccognized using the rate o f interest used to discount the future cash fiows for the purposc o f mcasuring the impairment loss.

f. Fee and comniission incomeFees and commissions are generally recogni^ed on an accrual basis when the scrvice has been provided. Loan commitment fees for loans that arc likclv to be drawn down are deferred (togeiher with related dircct costs) and rccognized as an adjustment to the cffcctive interest rate on the loan. Commission and fccs ansing from ncgotiating. or participating in the negotiation of. a transaction for a third partv such as the arrangement o f the acquisition of shares or other securities or the purchase or sale of businesses are rccognized on complction of the underlying transaction. Portfolio and other management advisory and sem ee fees are rccognized based on the applicable service contracts. usually on a time-apportion basis.

g. Sale and repurchase agreementsSecurities sold subiect to repurchase agreements (‘repos’) arc classified in the financial statements as available- for-sale securities (treasury bills) and the counter partv liability is included in amounts duc to banks or customers. as appropriate Securities purchased under agreements to rescll (‘reverse repos-) are rccorded as loans and advanccs to other banks or customcrs. as appropriate. The differencc bctween sale and repurchase price is treated as interest and accrued over the life o f the agreements using the effective interest method.

Securities held by the Bank as collateral for lending activities with financial institutions arc not rccognized in the financial statements. unless these arc sold to third parties. in which casc the purchase and sale are recorded with the gain or loss included in tradmg mcome. The obligation to retum them is recorded at fair value as a trading liability.

h. Derccognition

The Bank derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or ît transfers the rights to receive the contractual cash flows on the financial asset in a transaction m which substantially all the risks and rcwards o f ownership o f the financial asset are transferred Any interest in transferred financial assets that is crcated or retained by the Bank is recognised as a separate asset or liability.

On derccognition o f a financial asset. the differencc bctwccn the carrying amount o f the asset (or the carrying amount allocated to the portion ol the asset transferred). and the sum o f (i) the consideration received (including any newr asset obtained less any new liability assumed) and (ii) any cumulative gam or loss that had been

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BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor Ihe Year Ended 31 December 2017


2.4 Significant accountin" policics (continucd)

h. Derecognition (continucd)

recogni/cd in othcr comprehensive income îs recognized in profit or loss.

The Bank derccogmses a financial liabilitv when its contractual obligations are discharged or cancelled or expire.

The Bank enters into transactions whercby it transfers assets rccognised on its statement o f financial position. but retains either all risks and rewards o l'the transferred assets or a portion o f them. I f all or substantially all risks and rewards are rctaincd. then the transferred assets are not dcrccognised from the statement o f financial position. Transfers o f assets with retention o f all or substantially all risks and rewards include, for example, securities lending and repurchase transactions.

The rights and obligations rctaincd in the transfer arc rccognised scparatcly as assets and Iiabilities as appropriate. In transfers where control over the asset is retained. the Bank continues to recognise the asset to the extent o f its continuing involvement. determined by the extern to which it is exposed to changes in the valuc of the transferred asset.

i. Impairment of Financial assets

(i) Assets carried ut amortized costs

The Bank's asscsscs at each balance sheet date whether there is objective evidence that a financial asset or Bank o f financial assets îs impaircd. A financial asset or a Bank o f financial assets is impaired and impairment losses are incurred if. and only if, there is objective evidence o f impairment as a result o f one or more events that occurrcd after the iniţial rccognition o f the asset (a 'loss cveni*) and that loss event (or events) has an impact on the estimated futurc cash flows o f the financial asset or Bank o f financial assets that can be reliably estimated.

The criteria that the Bank uses to determine that there îs objective evidence o f an impairment loss include:

• Delinqucncy in contractual payments o f principal or interest;• Cash tlow difficulties experienced by the borrowcr (for example. equity ratio. net income pcrcentage o f sales):• Breach o f loan covcnants or conditions:• Imtiation o f bankruptcy proceedings;• Deterioration o f the borrower’s competitive position:• Deterioration in the value o f collateral; and• Downgrading bclow investment grade levcl.

Ihe estimated period between a loss occu rrin g and its Identification is determ ined by th e Bank m anagem ent for each identified portfolio. In general, the periods vary from 6m onths to 12 months.

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BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Year Fuded 31 December 2017

2. Accounting policies (continued)

2.4 Significant accounting policies (continued)

i. Impairment of financial assets (continued)The Bank iirst assesses whether objective evidence o f impairment exists individually for financial assets that are individually sigmficant. and thcrcaftcr indi\idually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence o f impairment exists for an individually assessed financial asset. whether significant or not. it mcludes the asset in a Bank o f financial assets with similar credit nsk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or connnues to be recogm/.cd arc not included in a collective assessment o f impairment.

The amount o f the loss is measured as the difference between the asset's carrying amount and the present value o f estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount o f the asset is rcduced through the usc o f an allowance account and the amount o f the loss is rccognized in the income statement. If a loan or held-to-maturity investment has a variable interest rate. the discount rate for measunng any impairment loss is the currcnt effective interest rate determined under the contract.

rhe calculation o f the present valuc o f the estimated future cash flows o f a collateralizcd financial asset rcflccts the cash flows that may result from foreclosurc less costs for obtaining and selling the collateral. whether or not forcclosure is probable.

For the purposes o f a collective evaluadon o f impairment. financial assets are Banked on the basis o f similar credit nsk characteristics (i e., on the basis o f the Bank * grading proccss that considers asset type. industry. geographical location. collateral type. past-due status and other relevant factors). Those characteristics are relev ant to the estimation o f future cash flows for Banks o f such assets by being indicative o f the debtors* ability to pay all amounts due according to the contractual terms o f the assets bcing evaluated.

Future cash flows in a Bank o f financial assets that are collectively evaluated for impairment are estimated on the basis o f the contractual cash flows o f the asset* in the Bank and histoncal loss expcricnce for assets w ith credit nsk characteristics similar to those in the Bank. Histoncal loss experienţe is adjusted on the basis of currcnt observable data to reflect the effects o f current conditions that did not affect the period on which the histoncal loss expcricnce is based and to remove the effects o f conditions in the historica! period that do not exist currently.

Estimates o f changes in future cash flow s for Banks o f assets should reflect and be directionally consistent with changes in related observable data from period to period (for example. changes in unemployment rates. property priccs. paymcnt status. or other factors indicative o f changes in the probability o f losses in the Bank and their magnitude). ITj c methodology and assumptions used for estimating future cash flows arc reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experiencc. When a loan îs uncollectible. it is wntten off agamst the related provision for loan impairment. Such loans are written ofTafter all the necessary procedures have been completcd and the amount of the loss has been determined.

If in a subsequent period, the amount o f the impairment loss decrcascs and the decrease can be related objectively to an event occurnng afier the impairment was rccognized (such as an improvement in the debtor’s credit rating). the previously rccognized impairment loss is reversed by adjusting tlic allowance account. rhe amount o f the rcversal is rccognized in the income statement in impairment cliangc for credit losses.

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BC ENERGBANK SANOTES TO T1IE INDIVIDUAL FINANCIAL STATEMENTSFor Ihe* Year Ended 31 December 2017


2.4 Signifîcant accounting policics (continiied)

i. Impairment of financial assets (continiied)

fii) Assets carried at fa ir valueThe Bank assesses at each balancc sheet date whether thcrc is objective evidence that a financial asset or a Bank o f financial assets is impaircd. In the case o f equity investments classified as available-for-sale. a signifîcant or prolongcd decline in the fair valuc o f the security below its cost is considered in determining whether the assets are impaircd. I f any such evidence exists for available-for- sale financial assets. the cumulative loss measured as the difYcrcnce bctwccn the acquisition cost and the current fair value. less any impairment loss on that financial asset previously recognized in profit or loss is removed from equity and recognized in the income statement. If. in a subsequent period, the fair value o f a debt instrument classified as available for sale increases and the increase can bc objectivcly related to an event occurring after the impairment loss was recognized in profil or loss. the impairment loss is reversed through the income statement.

fiii) Renegotiated loansWhcre possible. the Bank seeks to restructurc loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Oncc the terms have bccn renegotiated any impairment is measured using the original Effective Interest Rate (“EIR") as calculatcd before the modilîcation o f terms and the loan îs no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments arc likcly to occur. The loans continue to be subject to an individual or collective impairment assessment. calculated using the loan's original effective interest rate.

j. Impairment of non - financial assetsAssets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that arc subjcct to amortization are revicwed for impairment whcncvcr events or changes in circumstances indicate that the carrying amount may not be reco\erable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recovcrable amount. The recoverable amount is the higher of an asset’s fair valuc less costs to sell and value in usc. For the purposcs o f asscssmg impairment. assets are Banked at the lowcst levels for which there are separately identifiablc cash flows (cash-gcnerating units). Non-financial assets othcr than goodwill that sufTered impairment are reviewed for possible reversal o f the impairment at each reporting date.

k. Cash and cash cquivalcntsFor the purposes o f the cash flow statement. cash and cash cquivalcnts comprise balances with less than three months’ maturity o f the assets at acquisition dates including: cash. non-restricted balances with National Bank of Moldova, treasury bills. NBM certificates, amounts due from other banks and amounts duc from quick payment

systems.

I. Intangihlc assetsAcquired computer software licenscs are capitalized on the basis o f the costs incurred to acquire and bring to usc the specific software. These costs are amortized on the basis o f the expccted useful lives (three to five years)

using the straight-line method.

Costs associatcd with developing or maintainmg computer software programs are recognized as an expense as

incurred.

12

BC ENERGBANK SANOTES TO THE INDIM Dl Al. FINANCIAL STATEMENTSFor tiu* Year Fndcd 31 December 2017



ni. Property and ecpiipmentBuildings arc stated at revalued amounts. being tts fair value at the date o f re valuation. Icss accumulated deprcciation and Icss pro vis ion for impairment. where required. Other property and equipmcnt is stated at histoncal cost Icss depreciation. Histoncal cost includcs expenditure that is directiv attributable to the acquisition o f the items.

Land is not depreciated Depreciation on other assets is calculatcd using the straight-linc method to allocatc their cost to thcir rcsidual values over their estimated useful lives, as follows:

Asset t y p e _________________ ___________________________Ani

Buildings 25-75Fumiture and cquipmcnt 2-20Motor vehicles 7-10Other 5-20

Assets under construction arc not dcprcciatcd until thcrc arc brought in usc.

The assets* rcsidual valuc and useful lives are reviewed. and adjusted if appropriate, at each balancc shect date. Assets that arc subjcct to amortization arc reviewed for impairment whenever events or changes in circumstances indicate that the eanym g amount may not bc recoverable. An asset's carrying amount is written down immcdiatcly to its rccoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and valuc in

Gains and losses on disposal o f property, plant and equipmcnt are determined by rcfcrcncc to thcir carrying amount. These are included in their operatmg expenses in the meome statements.

n. Invcstnient propertyProperty held for long-tcrm rentai yields or for capital appreciation or both. which is not occupied by the Bank is classified as mvestment propeny.Invcstnient property compriscs frcehold land. Investment property is cam ed at fair value. Fair value is based on active market prices. adjusted. if necessarv. for any diffcrcnce in the nature. location or condition o f the spccific asset. If this Information is not available. the Bank uses alternative valuation method such as salcs comparison method by comparing similar or substitute propertics sold in the market with subject property. These valuations are reviewed annually by Directors.If an investment property bccomes owner-occupicd. it is reclassified as property, plant and cquipmcnt and its fair value at the date o f reclassification bccomes its cost for accounting purposcs o f subsequent rccording. Propeny that is being constructed or developed for ftiture usc as investment propeny is classified as property. plant and equipment and stated at cost until construction or development is complete, at which time it is reclassified and subscquently accountcd for as investment propeny .

If an item of property. plant and equipmcnt bccomes an investment property because its usc has changed, any differencc resulting between the carrying amount and the fair valuc o f this item at the date o f transfer is rccognised in equity as a revaluation o f propeny . plant and cquipmcnt under IAS 16. Howcvcr. if a fair valuc gain reverses a previous impairment loss. the gain is rccognised in the incomc statement. Upon the disposal o f such investment property. any surplus prcviously recorded in equity is transferred to retained camings: the transfer is not made through the income statement.

13

BCENERGBANKSANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor Ihe Year Ended 31 December 2017


2.4 Signifîcant accounting policics (continiied)

0. LeascsThe determination o f whether an arrangement is a lease or it contains a lease, is based on the substance o f the arrangement and requires an assessment o f whether the fulfilment o f the arrangement is dependent on the usc o f a specific asset or assets and the arrangement conveys a right to use the asset.

Bank as a tessee

1.ease which does not transfer to the Bank substantially all the risks and benefits incidental to ownership o f the leased item arc operating leascs. Operating lease payments arc rccognised as an expense in the income statement on a straight line basis over the lease term.

Bank as a lessorI.eases where the Bank does not transfer substantially all the risk and benefits o f ownership o f the asset are classified as operating leases. Iniţial direct costs incurred in negotiating operating leascs arc added to the carrying amount o f the leased asset and recogntsed over the lease term on the same basis as rentai income.

p. Defined contrihution planThe Bank. in the normal course o f business makes payments to the Moldovan State funds on behalf o f its employees for pension, hcalth carc and unemploymcnt benefit. All cmployecs o f the Bank arc members o f the State pension plan.

The Bank does not operate any other pension scheme and. consequently. has no further obli gat ion in respect of pensions. The Bank does not operate any othcr defined benefit plan or post-rctirement benefit plan. The Bank has no obligation to provide further services to current or former employees.

q. ProvisionsProvisions and legal claims are recognized when the Bank has a present legal or constructive obligation to transfer economic benefits as a result o f past events. It is probable that an outllow o f rcsourccs will be required to settle the obligation and the amount has bccn reliably estimated.

Where there are a number of similar obligations. the likelihood that an outflow will be required in settlcmcnt îs detennined by considcring the class o f obligations as a wholc. A provision is rccogni/cd even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value o f the expenditures expected to be required to settle the obligation using a pre-lax rate that reflects current market assessmcnts o f the time value o f money and the risks specific to the obligation. The increase in the provision due to passage o f time is recognized as interest expense.

r. Financial guarantee contractsFinancial guarantee contracts are contracts that rcquire the issuer to make spccificd payments to rcimburse the holder for a loss it incurs because a spccificd debtor fails to make payments when due. in accordance with the terms o f a debt instrument. Such financial guarantees are given to banks. financial institutions and othcr bodies on behalf o f customcrs to secure loans, overdrafts and other banking facilities.

14

BC ENERGBANK SANOTES TO TIIE INDIVIDUAL FINANCIAL STATEMENTSFor du* Year Fndcd 31 December 2017

2. Accounting policies (con(inucd)


r. Financial guarantee contracts (continued)

Financial guarantccs are mitially recogni/ed in the financial statements at fair valuc on the date the guarantee was given. Subsequent to iniţial recognition. the bank’s liabilitics under such guarantccs arc measured at the higher o f the iniţial measurcment. less amortization calculated to recogmse in the incomc statement the fee income eanied on a straight line basis over the life o f the guarantee and the besi estimate of the expenditure requircd to settle any financial obligation arising at the balancc shcet date. These estimates are determined based on experienţe o f similar transactions and history o f past losses. supplemcnted by the judgment of Management. Any incrcase in the liability relating to guarantccs îs taken to the income statement under other operating expenses.

s. TaxationIncome tax payable on profits. based on the applicable Moldovan tax law is rccognized as an expense in the period in wbich profits arise. The tax effects o f incomc tax losses available for carry forward are rccognized as an asset when it is probable that future taxable profits will be available agamst which these losses can be utilised.

Deferred income tax is provided m tuli. using the liability method. on temporary differences arising between the tax bases o f assets and liabilitics and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or subsiantially enactcd by the balance sheet date and are expected to apply when the related deferred incomc tax asset is realized or the deferred incomc tax liability is settled.

The principal temporary difterences arise from depreciation o f equipm cnt provisions for loans and advances to customers. other assets and other liabilitics. The rates enacted or substantivelv enacted at the balance sheet date arc used to determine deferred income tax. However, the deferred income tax is not accounted for if it arises from iniţial recognition o f an asset or liability in a transaction other than a business combination that at the time o f the transaction afîects ncither accounting nor taxable profit nor loss.

Deferred tax assets are rccognized where it îs probable that future taxable profit will bc available agamst which the temporary differences can be utilised

t. BorrowingsBorrowings are rccognised mitially at fair value. being their issuc procceds (fair value o f consideration received) net o f transaction costs meurred. Subsequentlv borrowings are stated at amortised cost and any diffcrence between net procceds and the redemption value is recognized in the income statement over the period o f the borrowings using the effective interest method.

u. DividendsDividends are not accounted for until they have been approved at the Annual General Mccting.

15

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Year Ended 31 December 2017


2.4 Signifîcant accounting policics (continucd)

v. Assets for resaleAssets for resale includc forccloscd col lateral on non-performing loans. They are classified as assets held for sale as thcir carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. T*hey are siated at the lower o f carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction radier than through continuing use. rhe Bank considers impairment both at the time o f classification as assets for resale as well as in subsequent

periods. At the time o f rccognition as assets for resale. any impairment loss is rccognised in profit or loss unlcss the asset had bccn measured at revalue d amount in accordance with IAS 16 or IAS 38, in which case the impairment is treated as a revaluation decrease.In the subsequent periods. any impairment loss is calculatcd based on the differencc bctwecn the adjusted carrying amounts of the asset and fair value less costs to sell. Any impairment loss that arises is recognised in profit or loss. even for assets that previously carried at rcvalucd amounts.

2.5 New and revised standards that are effective for anuual periods bcginning on or after 1 Januar> 2017

A number o f new and revised standards are effective for annual periods beginning on or after 1 January 2017. These amendmcnts had no material effect on the financial statements for any period presented and therefore were not presented.

Dic Bank has implemented the following standards. amendmcnts to existing standards and interpretatlons i^sued by the International Accounting Standards Board (IASB) that are applicable for the current period:

IAS 12 Reeognition of Deferred l ax Assets for l nreali/cd I.osses (Amendiuents).

Tlie objective o f these amendmcnts is to clarify the requirements for deferred tax accounting when an asset is measured at fair value and the fair value is less than the amount o f the tax base o f the asset. Changes were not applicable to the Bank and. respectively. they had no effect on the financial position.

IAS 7: Disclosure Iniţiative ( Amendmcnts).

The objective o f these changes is to provide information that enables users o f financial statements to evaluate changes in terms o f Iiabilities resultmg from financing activ itics. including the changes both from cash flows and the non-cash items. Specific changes need the provision of a table o f reconciliat ion between the iniţial and final balances o f debts resultmg from financing activitics. including changes in cash flows from financing activity, changes arising from obtaining or losing control o f subsidiaries or other segments. the effect o f changes in exchange rates. changes m fair value and other types o f changes. These changes did not have a signifîcant impact on the Bank's financial statements.

2.6 Standards, amendmcnts and interpretations to existing standards that are not vet effective and have

not been adopted early b \ the Bank

At the date o f authorisation o f these financial statements. certam new standards. and amendmcnts to existing standards have bccn published by the IASB that are not vet effective. and have not been adopted earlv by the B. Information on those expected to be relevant to the Bank's financial statements is provided bclow.

Management anticipatcs that all relevant pronounccments will be adopted in the Bank’s accounting policies for the first period bcginning after the effective date o f the pronouncement.

16

BC ENERGBANK SANOTES TO THE INDIVIDUAL FIN ANCIAL STATEMENTSFor ihc Year Fndcd 31 December 2017

2. Accounting policies (continucd)

2.6 Standards. aniendments aiul interpretations to existing standards that are not yel effective and have not been adopted earlv by the Bank (continued)

New standards. interpretations and amendments not either adopted or listed below arc not expected to have a material impact on the Bank's individual financial statements.

IFRS 9 ‘Financial Instruments'

The Standard shall be effective for annual periods beginning on or after 1 January 2018 and the early application is permitted. The final version o f IFRS 9 Financial Instruments reflects all phases o f the Financial Instruments Project and replaces IAS 39 Financial Instruments Recognition and Measurement. The Standard introduces neu requirements for classification and measurement. depreciation and hedge accounting. rhe Bank has performed an assessment o f the effects of the new standard and considers that it will have an average impact on the Bank’s financial statements. Thus. in recognition o f the impairment o f financial assets and provisions for contingent liabilitics in accordance with IFRS 9. the Bank would have had a prehminary estimated impact on equity as follows:

Additional impairment forined from equity upon the

First application of IFRS 9

Impact upon the first application of IFRS 9 __________ MDL'000

Allowances for impairment losses from state securities Allowances for impairment losses from loans Total impact on equity

4.81115.19820.009

BC ENERGBANK SANOTES TO THE INDIVIDl'AL FINANCIAL STATEMENTSFor Ihe Year Furieri 31 December 2017


2.6 Standards. amendments and intcrprclations to existing standards that arc not vet effective and have not been adopted early by the Bank (continucd)

IFRS 15 Revenuefrom Contracts with Customers

The Standard becomes cffcctive for annual periods bcginning on or after I January 2018. II RS 15 establishes a five-step model that will apply to revenues arising from a contract with a client (with limited exceptions), regardless the type o f transaction or industry. The requirements o f the Standard will also apply to the rccognition and measurement o f gains and losses on the sale o f certam non-financial assets that arc not the result o f the entity’s ordinary activitics (cg sale o f tangiblc and mtangiblc assets).

An extensive disclosure o f information. including disaggregation o f total revenuc. in format ion on execution obligations. changes in assets and Iiabilities between periods and keyjudgm ents and estimates. will be provided. The Bank does not consider that these amendmcnts will have a material elTcct on the Bank's financial statements.

Clarifications shall be applied for annual periods begmning on or after I January 2018 and early application is permitted. Tlie purpose o f the clarifications is to clcar the lASB's intentions when elaborating the requirements o f IFRS 15 Revenite from contracts with customers. in particular the accounting for the identilication of performancc obligations. modifymg the formulation o f the principie o f "distinctly identifiable” assets. o f the considerations regarding the trustee and principal, including the fact that an entity acts as a trustec or a principal, as well as the application o f the control and licensing pnnciplc. providing additional guidancc on the accounting o f intellectual property and royaltics. ITic clarifications also provide additional practicai solutions available to cntitics that either apply IFRS 15 completely retrospcctivcly or choose to applv the modified retrospective approach. The management has estimated that the cffcct o f these clarifications on the financial statements will be insignificant.

IF R S 16 Leascs

ITic Standard becomes effective for annual periods bcginning on or after I January 2019. II RS 16 sets out the pnnciples for recognizing. cvaluating. presenting and describing providing Information about the leascs o f the two partics to a contract, namcly the client ("lessee") and the provider ("Icssor"). The new standard requircs lessees to recognize the majority o f leases in the financial statements. I.essees will have a single accounting model for all contracts. with some exceptions. Lessor’s account remains significantly unchangcd. Ihe management has estimated that the effect o f these changes on the financial statements will bc insignificant.

IFRS 2: Clussificution unJ Measurement o f Shure-bused Payment Transactions (amendments).

The amendmcnts become effectivc for annual periods bcginning on or after 1 January 2018 and early application is permitted. The amendments provide for requirements for accounting the effccts o f the necessary conditions for vesting and the effects o f the vesting rights on the valuation o f cash-settlcd share-based payment transactions. sharc-based payment transactions with the net sctilement featurc o f the source taxation as well as for changes to the terms and conditions applicable to sharc-based payment that change the classification o f the transaction from the cash settlcment transaction to the equity settlement transaction. The management has estimated that these changes will not have an cfî'cct on the financial statements.

IA S 40: Transfers o f Investment Property (Amendment).

Fhc amendmcnts become effective for annual periods begmning on or after 1 January- 2018 and early application is permitted. Changes clarify when an entity nccds to transfer real estatc. including real

18

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor ihc Year Ended 31 December 2017


2.6 Standards, amcndmcnts and interpretations to existing standards that are not vet effective and liavc not been adopted cari) by the Bank (continued)

estate under construction or development, into or out o f investment property. The amendmcnt foresees that a changc in usc occurs when the property nieets or no loager meets the definition o f investment property and there is cvidcnce o f change in use. A simple change of management's intennon to use a building does not provide evidence o f a change in use. The management has estimated that these changes will not have a significant impact on the financial statements.

IFRS 9: Prepayment Features with Xcgative Compcnsation (Amendment).

The amendment shall becom e effec tive for annual periods beginning on or after 1 January 2019 and the early application is permitted. rhe changc allows for financial assets with prepayment characteristics that allow or require either a partv to a contract either to pay or reccive reasonable compensation for early termination o f the contract (so that from the perspective o f the asset holder u is possible to exist "negative compensation") are measured at amortized cost or at fair value through other comprehensive income. The management has estimated that the effect o f these changes on the financial statements will bc insignificant.

IFRIC Interpretation 22: Foreign Currency Transactions and Advance Consideration.

fhe interpretation shall become effective for annual periods beginning on or after I January 2018 and early application is permitted. Interpretation clarifies how transactions are recorded that include the receipt or payment o f foreign currency advances. Interpretation covers foreign currency transactions for which the entity recogmzes a non-monctary asset or a non-monetary liability arising from the payment or receipt o f an advance amount before the entity recognizes the asset. expense or income. The Interpretation provides that. in determining the exchangc rate. the transaction date is the date o f iniţial recognition o f the non-cash asset paid in advance or the deferred income debt If there arc multiple payments or receipts made in advance. then the entity must determine a transaction date for each payment or cash advance. The management has estimated that the effect o f these changes on the financial statements will be insignificant.

IFRIC Interpretation 23: l ’ncertainty over Income Tax Treatment

Interpretation bccomes effective for annual periods beginning on or after 1 January 2019 and early application is permitted. The Interpretation addresses accounting o f incomc tax when tax treatment involves a degree o f unccrtainty that affects the application o f IAS 12. The interpretation provides guidance on how certam tax treatments are analyzed individually or collectively. tax audits. the appropriate method that refiects the unccrtainty and accounting for changes in events and circumstanccs. The management has estimated that the effect o f these changes on the financial statements will be insignificant.

The IASB has issued IFRS Annual Improvements * Cycle 2015-2017. which is a collection o f changes to IFRSs. Amendments enter into forcc for annual periods beginning on or after January 1. 2019. early application being permitted. The management has estimated that the effect o f these changes on the financial statements will be insignificant.

IA S 12 Income Taxes.

Ilic amendments clarify that the effects on the incomc tax on financial instrument payments classified as equity must be rccognized in the manner in which transactions or past events that gcncraied distributable profit were rccognized.

19

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor ihe Year Ended 31 December 2017


2.6 Standards. amendments and interpretations to existing standards that are not vet effective and have noi bccn adopted early by the Bank (continucd)

IA S 23 Borrawing Costs.

I he amendments clarify paragraph 14 o f the Standard, which states that when a qualifving asset is available for its intended use or sale. and some o f the specific loans relatcd to the qualifving asset reniain outstanding at that time, the loan must be included in the funds that an entity leascs. in general. The Bank has dccidcd not to apply these standards. amendments and interpretations before the effective date on which they become effective.

20

BC ENERGBANK SANOTES TO THE INDIN IDI AL FINANCIAL STATEMENTSFor the Year Ended 31 December 2017

l. Cash aud balances with National Bank

2017 2016MDL'000 M DI.*000

Cash on liand 257.577 257.823

Current account with NBM 363.680 241,784

Overnight placements - 80.000

Included in cash and cash equivalents (Note 19) 621,257 579,607

Mandatory reserve 109.528 109.131

730,785 688,738

Current account and obligatory resenes

I he National Bank o f Moldov a (NBM) rcquircs commcrcial banks to maintain for liquidity purposes minimum reserves calculatcd at a certam rate o f the average funds borrovved by banks during the previous month (between the 8th o f the current month and the 7th o f the following month). including all custoiner deposits. Based on the decision Nr 85 by the Administrative Council o f NBM dated 15 April 2004. the method for calculation and maintaining the compulsory reserves was changed. Funds attractcd in Moldovan Lei (MDL) and in non* convertible currencies are reserved in MDL. Funds attracted in freely convertible currencies are reserved in US Dollars (USD) and or EURO (EUR). As o f 31 Dccember 2017 the rate for calculation of the minimum compulsory reserve in all currencies was in US Dollars (USD) and or EURO (EUR) 14.0% (31 December 2016: 14.0%), in Moldovan Lei (MDL) 40.0% (31 December 2016: 35.0%).

As at 31 December 2017 the balancc reserved in the current account hcld w ith the NBM amounted to MDL '000 363.680 (31 December 2016: MDI *000 241.784). lliis balance included compulsory reserve on funds attracted in Moldovan Lei and non-convertiblc currencies. The balancc reserved on USD and EUR compulsory- reserve accounts amounted to USD’000 2.608and EUR’000 3.125 respecţi vel y (31 December 2016: USD’000 2,536 and EUR'000 2.811)

The interest paid by NBM on the compulsory reserves during 2017 varied between 0.30% and 0.60% per annum for resenes in foreign currency and 3.50°o- 6.00% for reserves in MDI (2016: 0.20?o and 0.65% for reserves m foreign currency and 6.00% - 16.41% per annum for reserves in MDL). The compulsory reserves on funds attracted in USD and EUR arc placcd in Nostro accounts of NBM at correspondent banks mcorporated in OECD countries.

Ih e obligator)' reserves held in the current account at NBM arc available for use in the Bank’s day to day operalions.

21


4. Cur reni accounts and deposits with banks

2017 2016M DL’000 M D l/000

C'urrent accounts Overnight placements

72.965109.674

46,51886.154

Included in cash and cash equivalents (Note 19) 182,639 132.672

182.639 132,672

The major part o f current accounts and deposits are held w ith foreighn banks.

As at 31 December 2017 overnights include balances denominated in USD 2017 the interest rate on overnight deposits var ied between 0.25% and 0.75%.

with Bank o f New York. During

5. Einancial investments, debt securities2017

M D I/0002016

MDL'000

State securitiesCertificates issued by the NBM

275.037424.417

238.590299.447

699.454 538.037

Included in cash and cash equivalents (Note 19) Debt securities with maturity over 90 days

424.417275.037

299.447238.590

699.454 538,037

State securities as at 31 December 2017 represent MDI. medium tenn securities issued by the Ministry o f Finance o f the Republic o f Moldova with interest rate ranging from 5.16% to 8.35% per annum (2016: 5.16% to

26.48%).

Certificates issued by the National Bank o f Moldova as at 31 December 2017 are 14 days original maturity bcaring with interest rate ranging from 6.5% to 9.0 % per annum (2016: from 9.0% to 19.5 %).

As o f 31 December 2017 and 2016 the Bank did not hold any state securities as mortgage for loan from the

NBM.

22


6. l oans. net

2017 2016

-------------- MDL'000 M DL’000

I.oans 916.856 899.076

Less: Allowance for impairment losses (46.101) (33.871)

870.755 865,205

For the year ended 31 December 2017 the interest accrucd on individuali) impaired loans amounted toMDL'000 9.499 <31 December 2016: MDL’000 7.831).

Analysis o f loan portfolio by mdustry is presented bel o u :

2017 2016

-------------- M DL’000 MDL’000

Consumer loans 242.753 151.896

Manufacturing and trade 200.322 275.855

Agriculture and food mdustry 180.039 193.725

Loans granted to financial non-banking sector 65.371 67.640

Real estate. construction and land improvement 23.383 38.492

Other 204.988 171.468

916.856 899.076

Range o f loan interest rates practiced by the Bank is presented below:2017 2016

•/. %

Interest rate on loans (nun max) 1 .0 -2 0 .0 3 .0 -2 0 .0

The movement in allowance for impairment losses from loans during 2017 and 2016 arc presented below. Ibcallowance for impairment losses includcs the resumption o f provisions for previously canccled loans. but forwhich the Bank has recorded reimbursements. The recoverable amount was credited directiv to the reversal ofimpairment in the profit or loss account for the current year.

2017 2016M DL’000 MDL’000

Balancc as at 1 January 33.871 24.129Wnte-offs - (9)Recoverics 2.465 2.599Charge for the year 9.765 7.152

Balancc as at 31 December 46.101 33.871

Individual impairment 30.399 23,805Collective impairment 15.702 10.066

46.101 33,871

23

HC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Year Ended 31 December 2017

6. Loans, net (continucd)

It ’rite offpolicyThe Bank writes oflfa loan balance (and any related allowance for impairment losses) when the Bank determines that the loans arc uncollcctiblc. Ihis dctcrmination is rcachcd after considering information such as the occurrence o f significant changes in the borrower financial position such that the borrower can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure.

7. Financial investments, equity securities - available-for-sale

Investment securities available-for-sale include unlisted equity investments in local companies. The analysis o f equity investments is as follows:

Field of activityOw nership

2017%

Ownership2016

%2017

MDL‘0002016

MDL'000

Electrosistem SA Leasing 24.83 24.83 1.407 2.287

Garant Invcst SRL Credit guarantee 9.92 9.92 440 440

Birou de credit SRL Credit bureau 3.29 3.29 782 500

Other 104 104

2,733 3,331

All available-for-sale equity securities as at 31 December 2017 and 2016 are camed at cost bccausc. less any impairment allowance. there is no quoted market price in an active market for them and the fair value cannot be rcliably determined.The management o f the Bank analv/ed the impairment indicators related to the investment in Llectrosistem SA and stated a depreciation o f 880 thousand lei and appreciation o f the fair va lues regardmg other investments.

rhe movements in investment portfolio o f the Bank are presented below:

2017 2016

MDL'000 MDL'000

Balancc as at I January 3,331 3,331

Impairment (598) -

Balance as at 31 December 2,733 3,331

24

BC ENERGBANK SANOTES TO THE INDIVIDl'AL FINANCIAL STATEMENTSFor Ihe Year Ended 31 December 2017

!. Iniangible assets

2017 M DL'000

2016 MDL *000

CosiBalance as at 1 January 9.340 9.547

Additions 2.473 383

Disposals (35) (590)

Balance as at 31 December 11,778 9.340

Accumulatcd deprecialionBalance as at 1 January 7J71 7.121

Charge for the year 619 840

Disposals (35) (590)

Balance as al 31 December 7,955 7.371

Net book value

At 3 1 December 3.823 1,969

The iniangible assets represent computer software and workstation licenses.

As at 31 December 2017 the cost o f fully amortized intangible assets amounted to MDL*000 5.780 (as at 31 December 2016 M DL’000 5.293).

BC ENERCiBANK SANOTES TO TIIK IN D IM D l Al.FINANCIAL STATEMENTSFor the Year Ended 31 Dcccmbcr 2017

i. Property and cquipmcntLand aiul buildings

MDL'000

Furniturc and cquipment MDL'000

Motor vehides MDL'000

Assets under construction

MDL'000Total

M DL'000Cost or valuationBalancc as at 1 January 2017 117,162 34.965 7,075 - 159.202Additions - 5,005 - 878 5,883Transfcrs 28 - 844 (872) -

Disposals - (725) (419) . (1.144)Balance as al 31 December 2017 117,190 39,245 7,500 6 163.941

Accumulated depreciationBalance as at 1 January 2016 2,158 23,298 2.938 - 28.394Chargc for the year 1.629 2,991 805 - 5.425Disposals - (645) (416) . (1,061)Balancc as at 31 December 2016 3,787 25.644 3.327 - 32.758

Net book \alucAt 31 December 2017 113.403 13,601 4.173 6 131.183

At 31 December 2016 115,004 11.667 4.137 - 130,808

As at 31 Deceinbcr 2017, the cost o f fully depreciated property and equipmcnt still used by the Bank amountcd to MDI.'OOO 16,355 (as at 31 Dcccmbcr 2016: MDL'000 15.057).As at 31 Dcccmbcr 2017 the management o f the Bank has analy/ed market priccs and found that they approximatc the levels existing at the date o f rcvaluation report.

26

BCENERGBANK SA

NOTES TO THE INDIVIIHIAI. FINANCIAL STATEMENTSFor tiu* Year Ended 31 December 2017

9. Property and e(|iiipment (continucd)

Terenuri şi Clădiri MDL *000

Mobilier şi echipamente M DI.*000

AutovehiculeM DL’000

Active iu curs dc execuţie MDL *000

lo ia lM DI.'000

Cost or valuationBalancc as at 1 January 2016 104.127 32,891 5.737 399 143.154Additions 177 2.659 - 15.299 18.135Transfers 13.183 335 1.981 (15.499) -Kcclassi ficat ion - - - (122) (122)Disposals (325) (920) (643.) (77) <1.965)Balance as at 31 December 2016 117.162 34,965 7,075 - 159.202

Accumulatcd depreciationBalancc as at 1 January 2016 718 21.635 2,703 - 25.056Charge for Ihe year 1.440 2.547 680 - 4.667Disposals . (884) (445) - (1.329)

Balance as al 31 December 2016 2.158 23.298 2,938 - 28,394

Net book valueAt 31 December 2016 115.004 11.667 4,137 - 130,808

At 31 December 2015 103,409 11.256 3,034 399 118,098


10. Olher assets2017 2016

MDL’000 M DL’000

Receivables from money transfer systems (Note 19) 5,377 8.676

Settlements with other individuals 1.562 964

Investments in associates 47 47

Debtors on capital investments - 61Assets for resale 56.445 56.136Inventory and spare paris 1.608 1.606Prcpayments 763 750

Other assets 5.782 4.298

Lcss: Allowance for losses on assets taken in possession (18.970) (18.727)

52.614 53.811

Assets acquired include land and buildings. taken into possession by the Bank in exchange for repayment of loans.

11. Due to customers

2017 2016

Corporale customersMDL’000 MDL‘000

Currcnt accounts 656.945 526,765Term deposits 92.910 95.653

Individual*749.855 622.418

Currcnt accounts 192.018 150.429

Temi deposits 969.681 902.010

1.161,699 1.052.439

1.911.554 1.674.857

28

BC ENERGBANK SANOTES TO I UE INDIN 11)1 AL FINANCIAL STATEMENTSFor the Year Ended 31 Dcccmbcr 2017

11. Duc Iu customers (cuniiuiicd)

The annual interes! rates paid by the Bank for the MDI and FCY deposits o f individuals and companies ranged as follows:

2017 2016MDL Valuta MDI. Valută

% % % % % % % %

min MaX

min max min max min max

Persoane juridice

Demand deposits 0.00 5.00 0.00 2.00 0.00 5.00 0.10 1.50

Ierni deposits up to 3 nionths 0.00 3.00 0.00 0.05 0.00 10.00 0.00 0.05

Term deposits >3 monihs< 1 year 0.00 7.00 0.00 1.50 0.00 16.00 0.00 2.10

Tenii deposits over 1 vear 0.00 8.00 0.00 1.90 0.00 8.50 0.00 3.00

Individual*

Demand deposits 0.00 6.80 0.00 0.20 0.00 0.00 0.00 0.00

Terni deposits up to 3 months 0.00 2.30 0.00 0.10 0.00 17.25 0.00 0.10

Temi deposits >3 months< 1 vear 0.00 7.00 0.00 1.80 0.00 18.00 0.00 2.00

Temi deposits over I year

12. Other borrowings

0.00 8.30 0.00 3.00 0.00 18.50

2017

0.00 2.70

201iInterest rate,

% MDL‘000 MDL’000

BorrowingsRISP loans with lloating rate due 2.03-6.5 48.809 70.131FIDA loans with floating rate due 2.04-6.5 36.141 56.408PAC loans with lloating rate due 2.03-6.5 6.668 10.496KFW loans with floating rate due 1.93-6.5 228 4.411Filiera Vinului loans w ith lloating rate due 1.01-6.5 23.054 26.720Livada Moldovei 0.9 33.035 8.927Interest accrued 1.665 1.941

149.600 179.034

Dunng 2017 and 2016 the Bank didn’t ha\e any defaults o f principal, interest or other breaches o f contractual terms.

29

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Vear Ended 31 December 2017

13. Other Iiabilities

2017 2016MDL'*000 M DL’000

Suspcnsc accounts 300 3.349Amounts in transit 190 108Settlements with employees 5.616 6.293Settlements with other individuals and institutions 9.079 6.488Dividends payable . 21Crcditors on capital investments . 460Othcr 318 500

15,503 17.219

Suspcnsc accounts represent balances o f customcrs with incomplctc Information, which after the clcarance are transferred to customers' accounts.

14. Taxation

The major components o f tax expense and the reconciliation o f the expected tax expense based on the effectivetax rate o f 12% (2016: 12%) and the reported tax expense in profit or loss are as follows:

2017 2016M DL'000 MDL'000

Profit before tax 60.165 74.814Moldovan statutory income tax rate 12% 12%Expected tax expense 7.220 8.978

Effect o f deductible non-dcductible expenses revenue (1.668) (2.750)Impact o f tax lacilities application - -Actual tax expense 5.552 6,228

Tax expense comprises:Current tax expense Deferred tax expense:

5.127 6.089

Origination and reversal o f temporary differences 425 139

5,552 6.228

Impact o f change in tax legislation refers to changing the allowance for losscs on assets and condiţional commitments, which entered into forcc on I May 2015. In accordance with changing tax laws o f the Republic o f Moldova, financial institutions are allowed for dcducting losses on assets and condiţional commitnicnts. calculatcd according to International Financial Reporting Standards (IFRS). Prior to this change. it was permitted deduction for losscs calculatcd according to rcgulations approvcd by the National Bank o f Moldova (NBM).

30


14. Taxation (continued)

Deferred taxes arising from temporary diffcrcnccs are summarized as follows:

Recogni/ed inDeferred tax assets (liabilides) 1 January 2(117 profit and loss 31 December 2017

M DL'000 MDL'000 MDL'000

AssetsProperty and equipment (3.678) (344) (4.022)

IiabilitiesOther Iiabilities 755 (81) 674

(2.923) (425) (3.348)

Rccognised as:Deferred tax assel Deferred tax liahility

Deferred tax assets (Iiabilities)

(2.923)

1 January 2016 MDL'000

(425)

Reeogni/ed in profit and loss

MDL'000

(3.348)

31 December 2016 MDL'000

AssetsProperty and equipment (3.347) (331) (3.678)

IiabilitiesOthcr Iiabilities 563 192 755

(2.784) (139) (2.923)

Rccognised as:Deferred tax asset - - -

Deferred tax liahility (2.784) <«*> (2.923)

Deferred tax was calculatcd by applying the 2017 standard tax rate o f 12% (2016 standard tax rate o f 12%).

31


15. Ordinary shares

Share capital as at 31 December 2017 represenis 2.000 thousand (31 Dcccmbcr 2016: 2,000 thousand) ordinary shares authorized and issued. As at 31 December 2017 and 2016 the nominal valuc per share is MDI 50. All shares have equal voting rights and arc fiiUy paid.Shareholders w ith a holding o f more than or equal to 5% o f the issued share capital arc as follows:

2017 2016Capitalul aefionar consistă din: % %

ICS ..RED UNION FENOSA" SA 9.98 9.98I lostex Establishment 9.62 9.62Esperan Property Consultants I.td 9.60 9.60Dima-Holding SRL 8.62 8.62Sfinx-Impcx SA 6.89 6.89Lntch SA 8.10 8.10Evident-Hlcctro SA 7.33 7.33Dunav IM 6.07 6.07Other. Icss than 5% 33.79 33.79

100.00 100.00

There are 44 other shareholders (31 Deccmbcr 2016: 44) o f which 34 represent individuals and 10 enterpriscs (31 December 2016: 34 individuals and 10 enterprises).

16. Reserves

2017 2016M DL'000 MDL’000

Statutory reserv es 10.002 10.002

General reserves for banking risks 142.938 137.109

152.940 147.111

In accordance with local legislation. the Bank is rcquired to create a legal reserve by appropriation of 5% o f the net profit for the year until this reserve is equal to at least 10% o f the issued and fully paid share capital. This îs a

non-distributablc reserve.

General reserves for banking nsks include amounts resulting from differences between assets impairment under

IFRS and calculated but not provided for under prudcntial (NBM) norms.

17. Dividends per share

In 2017 no dividends have been proposed and disiributed. In 2016: MDI 000 10.000 (MDI. 5.0 share).

32


18. Capital management

The Bank’s obiective* when managing capital arc to safeguard the Bank's ability to continuc as a going concern in order to provide rctums for shareholdcrs and benefits for other stakcholdcrs and to maintain an optimal capital structure to reduce the cost o f capital

In order to maintain or adjust the capital structure. the Bank may adjust the amount o f dividends paid to shareholdcrs. retum capital to shareholders. issue new shares or sell assets to reduce debt. No changes were made in the objectives. policics and processes from the previous years.

Capital adcquacy and the use o f regulatory capital are monitored by the Bank's management, cmploying techniques based on the requirements dcvcloped by the National Bank of Moldova.

The NBM requires each bank or banking Bank to hold the minimum Icvel o f the regulator)' capital o f MDL’000 200.000 (31 December 2016: MDL'000 200.000) and maintain a ratio o f total regulatory capital to the nsk- weighted asset at minimum o f 16% (31 December 2016: 16%).

2017 2016M DL’000 MDL'000

Weighted average assets and contingent commitments in accordance with NBM rcgulations 986.130 890.732Total normative capital in accordance with NBM rcgulations Risk weighted capital adequacy in accordance with NBM regulations. %

433.278

43.94

386,349

43.37

19. Cash aiul cash equhalcnts

For the purposcs o f the cash tlow statement. cash and cash cquivalcnts comprise the following balances with lessthan three months maturity (90 days):

Nota 2017MDL'000

2016MDL'000

Cash and balances with National Bank 3 621.257 579.607Current accounts and deposits with banks 4 182.639 132.672Debt securit ies 5 424.417 299.447Other assets 10 5.377 8.676

1.233.690 1.020.402

33


20. Intcrest and similar incomc and expense

2017 2016M DL'000 MDL'000

Intcrest and similar incomeLoans and advances to customers 95.588 100.365Available-for-sale held to matunty investments 43.711 59.229Loans and advances to banks 20.251 25.269

159,550 184.863Interest expense and similar charges Deposits from individuals (47.167) (65.696)Deposits from corporatc clicnts (7.173) (5.232)Deposits and loans from banks (260) (35)Other borrowings (6.878) (7.279)

(61,478) (78,242)

Net interest incomc 98,072 106.621

21. Net fee and commission income

2017 2016M DL’000 MDL'000

Fee and commission incomeProcessing o f payments by clicnts 49.028 44.256

Commission on guarantees and letters o f credit 1.298 1.352Transactions with debit cards 2.150 1.757

Other 3.316 3.056

55,792 50,421

Fee and commission expense Commissions on debit card serviccs (6.229) (5,006)

Payment transactions (4.308) (3.887)

Other (230) (497)

(10,767) (9.390)

Net fee and commission incomc 45.025 41.031

34

BC ENERGBANK SANOTES TO TIIE INDIVIDUAL FINANCIAL STATEMENTSFor Ihe Year Ended 31 December 2017 ________

22. Financial income. net2017 2016

M DL’000 MDL'000

Ciains on trading o f foreign currency. net 48.591 48.396

Foreign exchange losses (2.376) 1.896

Dividend income on shares 155 *

46.370 50.292

23. Other operating expenses. net2017 2016

MDL’000 MDL'000

Rent income 503 818

Gains (losses) on disposal o f property and equipment andother assets 453 803

Other non-mterest income 555 102

1,511 1,723

24. Personnel expenses

2017 2016MDL'000 MDL'000

Salaries and bonuscs 45.871 42.952

Social Insurance and contributions 12.039 10.889

Medical Insurance 2.285 2.069

Other personnel expenses 9.244 6.880

Provision for unuscd vacation 4.050 5,521

73.489 68.311

The Bank make>. contributions to the State pension system o f the Rcpublic o f Moldova calculatcd as a percentage o f gross salary. The>e contributions are charged to the income statement in the period in which the relatcd salary is eamed by the employce.

35

BC ENERGBANK SANOTES TO THE INDIV IDUAL FINANCIAL STATEMENTSFor the Vear Ended 31 December 2017

25 .General and administrative expenses2017 2016

M D I.000 MDI.*000

Utilities and rent 6.381 6,698Postage and telephonc 2.631 2.480Safeguarding o f assets and security costs 4.120 3.775Advertising and charity 4.353 3.829Stationery and supplies 1.291 1.966Repairs and maintenance 6.809 6.527Professional scrviccs 4.998 1,639Guarantee fund 881 766I axes and pena It ies 737 462

Other 4.094 2.642

36.295 30.784

26. Guarantees and other financial commitmentsThe aggregate amounts o f outstanding financial guarantccs. commitments. and other off-balance sheet items asat 31 December 2017 and 2016 are:

2017 2016MDL’000 M DL’000

Financial guarantees 65.864 76.960Financing commitments and other S4.384 106.426

150.248 183.386

In the normal course o f business. the Bank issucs guarantccs and Icttcrs o f credit on hehalf o f its customers. The credit risk on guarantccs is similar to that ansing from granting o f loans. In the event o f a claim on the Bank as a rcsult o f a customcrs default on a guarantee these Instruments also present a degree o f liquidity risk to the Bank.

Financing commitmcnts represeni the Bank’s commitments to grant loans and advances to customcrs. Financing commitments do not nccessarily represent future cash requirements. sincc many o f these commitments will

expire or terminale without being funded.

27. Capital commitments

There were no capital commitments as at 31 December 2017 and 2016.

36

BC ENERGBANK SANOTES TO THE INDIVIDl'AL FIN ANCIAL STATEMEN TSFor ihe Year Ended 31 Dccembcr 2017

28. Operating lease commitments

Where the Bank is lessce. the futurc minimum lcasc payments under non-cancellable buildmg and vehicles operating leases are as follows:

2017 2016M DL’000 M DL’000

No latcr than 1 year 2.970 2,896

Latcr than I year and no latcr than 5 years 4.776 3,059

I.ater than 5 years 853 1.818

8.599 7,773

29. Contingent Iiabilities

As at 31 December 2017 and 2016 the Bank is a defendant in a number o f lawsuits arising out o f normal corporale activitics. In the opinion o f Management and the Bank's legal department. the probability o f loss is remote.

30. Earnings per share

Ordinar} shares Profit attributahlc to equity Basic earnings issm d holders of the Parent per share

MDL'000 MDL

As at 31 December 2017 2.000.000 54.613 27.31As at 31 December 2016 2.000.000 68.586 34.29

Basic earnings per share are calculatcd by dividing net profit for the year attributable to ordinary equity holders by the weighted average number o f ordinary shares issued during the year. As at 31 December 2017 and 2016 there were no dilutive equity instruments subscribed to by the Bank.

37

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Year Ended 31 December 2017_______________________

31. Fair value of financial instrument*

The Bank uses the following hierarchy for determining and disclosing the fair valuc o f financial instnunents by valuation tcchniquc: l.cvcl 1: quoted (unadjusted) prices in active markets for identica! assets or liabilities;Lcvel 2: other tcchniques for which all inputs which have a significant cfTect on the recorded fair valuc are observable. either dircctly or indirectly; and I.evel 3: techniques which use inputs which have a significant cfTect on the recorded fair value that are not based on observable market dala.

The following t a b le shows an analysis o f financial In s tru m e n ts re c o rd e d at fair value by lcvel o f th e fa ir v a lu e h ie ra rch y :

2017 2016Carrying Carrying

value I.evel 1 I.evel 2 I.evel 3 Fair value valuc I.evel I Lcvel 2 I.evel 3

MDL'OM DI.*000 M 1)1/00(1 M DL’000 MDL’000 MDL'000 M DL'000 M DL'000 M DL'000 00

Financial assets Cash and balances withNBM 730.785 - 730.785 - 730,785 688.738 - 688,738Loans and advances tobanks 182.639 - 182,639 - 182.639 132.672 - 132.672Investments held-to-maturity 699.454 699.454 - - 699,454 538,037 538.037I oans and advanccs tocustomers 870.755 - - 841.092 841.092 865.205 • - 8 3 1 , 8 1 2

Financial liabiliticsDue to banks - - - - - -Other borrowings 149.600 - 149.600 - 149,600 179,034 - 179,034Due to customers 1.911,554 - 1,910.045 - 1,910,045 1.674.857 - 1.673.193

38

Fair value

M DL'000

688,738

132,672

538,037

831,812

179,0341.673.193

BC ENERCiBANK SANOTES TO TIIE INDIVIDUAL FINANCIAL STATEMEN I SFor Ihe Vear Ended 31 December 2017

31. Fair valuc of financial In s tru m e n ts (continued)

fi) Loans and advances to banksl.oans and advances to banks include inter-bank placcments and loans. llie fair valuc o f floating rate placements and ovemight deposits approximates their carrying amount. ITie estimated fair value o f fixed interest bearing placements is based on discountcd cash flows using prevailing money-market interest rates for debts with similar credit risk and remaimng maturity.

fi) Held-to-malurity investments securitiesITte fair value o f the securities hcld at maturity approximates the balance sheet value. These investments are mainly State securities and Certificatcs issucd by the NBM.

fii) Loans and advances to customersl.oans and advances to customers are stated at the net amount o f the provision for impairment o f loans. The estimated fair value of customer loans is the present value o f estimated future cash flows. Futurc cash flows are updated based on the market rate to determine the fair value o f the lender and the advances to customers.

fiii) Liahilities. including due to other banks, due to customers and other borrowvd funds The fair value o f floating rate borrowings approximates their carrying amount Ihe estimated fair value o f fixed intcrcst-bcaring deposits and other borrowings uithout quoted market price is based on discountcd cash flows using interest rates for new debts with similar remaimng maturity.

32. Kelated parties

During the year. a number of banking and non-bankmg transactions were entered into with related parties in the normal coursc o f business. These include loans granting. deposit laking. trade fmancc. payment settlement. foreign currency transactions and acquisition o f services and goods from related parties.

According to the statement o f the Bank Board Mcmbers and the Management Committcc. on 31 December 2017 and 31 December 2016 and during these periods. the Bank had no party that ultimately controlled the company. that is. a person or a group o f persons. which would have joint control Ihe shareholdcrs and their representatives in the Board o f Dircctors and the Management Committee are working in a spirit o f cooperation with reg ard to the governance and implementation of the Bank's operaţional and financial policics.

39

BC ENERGBANK SANOTES TO TIIE INDIVIDUAL FINANCIAL STATEMENTSFor Ihc Year Furieri 31 December 2017

32. Related parties (continued)

When examining each possiblc relationship with related parties. special attention is drawn to the substance o f the relationship and not just the legal form. Details o f transactions between the Bank and other related parties are disclosed below.

Subsiriiaries Associates Kev iniinagemeiit personnel Other related parties2017 2016 2017 2016 2017 2016 2017 2016

(iu MDL’000)

Interest and similar incomc 957 1.834 314 363 811 629

Fee and commission incomc - - 2 II 61 120 358 311Intcrest expense and similar chargcs • - - - (315) (414) (2.259) (803)Rcntexpense - - - - (239) (239)Personnel expenses - - (19.697) (16.003) (236) (169)

- - 959 1.845 (19.637) (15.934) (1.565) GZU.

40

BC ENERGBANK s a

NOTES TC) MIE INDIVIDUAL FINANCIAL STATEMENTSFor fiu* Year Ended 31 December 2017

32. Kclatcd parties (continucd)

Balances and transactions w ith related parties arc presented below

Suhsidiaries Associates Key management personnel Other related parties2017 2016 2017 2016 2017 2016 2017 2016

(in MDL’000)

AssetsI'quity instrument» 1.407 2,2871 .oans and advances - - 12.432 16,408 2.811 4.286 15.688 12,552LiahilitiesIX’posits

-_ 1 19 6,950 X.64X 165.596 33,754

Commitnicntt, guaranlees and otherIssucd - - 1.688 5 276 377 22,797 794Rcccivcd . . 6,6X3 6.759 2.834 3.241 17.962 15.444Provisions for Iiabilities, guaranlees aud commilments 1.9X1 2.275 28 33

22.211 25.478 14.852 18.827 222.071 65,577

I he total remuneration o f Board mernbers. the Executive Committce and Ccnsor Committcc o f the Bank for the year ended 3 1 December 2017 and 31 Decctnbcr 2016 is represented by short-term employcc benefits.

Terms am! conditions of transactions with related partiesIhe above mentioncd outstanding balances arose from the ordinary coursc o f business. Ihe interest chargcd to and by related parties is at normal commcrcial rates. Loans to employees were granted at market rates. Outstanding balances al the year-end are unsccurcd. Thcrc have been no guarantces rcccivcd from any related parties. For the year ended 31 December 2017. the Bank has noi incurred doubtful debts relating to amounts owed by related parties (2016: nil).

41

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSl or du* Year Fndcd 31 Dcccmbcr 2017

33. Risk management

The Bank’s activities expose it to a variety o f financial risks and those activities involve the analysis. cvaluation. acceptance and management o f some degree o f risk or combination o f risks. Taking risk is core to the financial business. and the operaţional risks are an mevitable consequence o f being in business. Ihe Bank’s aim is therefore to achieve an appropriate balancc between risk and reium and mimmisc potential adverse effects on the Bank's financial performancc.

ITic B a n k 's risk m anagem ent po lic ies a re designed to iden tify an d analyse these risks. to set app rop ria te risk

lim its and Controls, and to m onito r the risks and adherence to lim its by m can s o f re liab le an d up-to -date

Inform ation system s. The B ank regu larly rev iew s its risk m an ag em en t po lic ies and system s to reflect changes in

m arkets. p roducts and em erg ing best practice.

Risk management is cam ed out by the Risk Management Committee (Risk Committee) under policies approved by the Board o f Directors. The Risk Committee identifies. evaluates and hedges financial risks in close cooperation with the Bank's operating units. The Board pro\ides writtcn prmciples for overall risk management, as wcll as written policies covering specific areas. such as foreign exchangc nsk. interest rate nsk. credit nsk. use o f derivative financial Instruments and non-derivative financial Instruments. In addition. internai audit is responsible for the independent review o f risk management and the control environment. The most important types o f risk arc credit nsk. liquidity risk. market risk and other operaţional risk. Market risk includes currency risk. interest rate and other price risk.

rhe Bank takes on exposure to credit risk. which is the risk that a counterparty will cause a financial loss for the Bank by failing to discharge an obligation. Credit nsk is the most imponant risk for the Bank’s business: management therefore carcfully manages its exposure to credit risk. Credit exposures arise principally in lending activitics that lead to loans and advances. and investment activities that bring debt securities and other bills into the Bank’s asset portfoho. There is also credit risk in olT-balancc sheet financial Instruments, such as loan commitments. The credit risk management and control arc ccntralised in credit risk management team of the Risk Committee and reported to the Board o f Directors and head o f each business unit regularly.

rhe Bank structures the Icvels o f credit risk it undertakes by placing limits on the amount o f risk accepied in relation to one borrower. or Banks o f borrowers. and industry segments. Such nsks are momtored on a rcvolving basis and subject to an annual or more frequcnt review Limits on the level o f credit risk by product and industrysector are approved quarterly by the Board o f Directors.

The exposure to any one borrower including banks and brokers is further rcstncted by sub-limits covering on- and off-balance sheet exposures. and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits arc monitored daily.

Exposure to credit risk is managed through regular analysis o f the ability o f borrowers and potential borrowers to mcct interest and capital repaymcnt obltgations and by changmg these lending limits where appropriate. Lxposure to credit nsk is also managed in pan by obtainmg collateral and corporate and personal guarantees. buta significant portion is personal lending where no such facilities can bc obtained.

42

BC FNERGBANK SANOTES TO THE INDIVIDUAL FIN ANCIAL STATEMENTSFor Ihe Year F.nded 31 December 2017

33. Risk management (continiu'd)

33.1 Credit risk (continucd)

The Bank assesses the probability o f default o f individual countcrpartics using internai rating tools tailorcd to the various categories o f counterparty. They have bccn dcvclopcd mtcmally and combine statistical analysis with credit oflîcer judgment and are validated. where appropriatc, by comparison with extemally available data. Clicnts o f the Bank are segmented mto five rating classes. ITic Bank's rating scale, which is shown below. rcllects the range o f default probabilities defined for each rating class. This mcans that. in principie, exposures migrate between classes as the asscssmcnt o f their probability o f default changes. The rating tools arc kept under review and upgradcd as ncccssary. The Bank regularly validates the performance o f the rating and their predietive power with regard to default events.

Bank*» rating Description o f the grade____

1 Standard2 Watch3 Sub-standard4 Doubtful5 Loss

Credit qualitv by class o f financial assets

The table below shows the credit qualitv by class o f asset for all financial assets exposed to credit risk. based on the Bank’s internai credit rating systcm. ITic amounts presented are gross o f impairment allow anccs.

2017Neither past due Past due but not Indisidually

Nota nor impaired impaircd impaired TotalM DL’000 MDL’000 MDL’000 MDL’000

Balances with National Bank 3 473.208 473,208Current accounts and deposits with banks 4 182.639 182.639Financial investments. debt securities hcld to maturity 5 699.454 699.454Loans 6 745.233 73.266 98.357 916.856Othcr financial assets 11 9.759 - - 9.759

2.110.293 73,266 98.357 2.281,916

43

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Vear Ended 31 December 2017

33. Risk management (continued)

33.1 Credit risk (continued)

2016Neither past due Past duc but not Individually

Nota nor impaired impaired impaired TotalMDL’000 MDL'000 MDL’000 M DL’000

Balances with National Bank 3 430.915 430.915C'urrent accounts and deposits withbanks 4 132.672 - 132.672Financial investments. debtsecurities -held to maturity 5 538.037 - 538,037Loans 6 707.1‘>9 101.156 90.721 899.076Other financial assets 11 11.576 - 11.576

1.820.399 101,156 90,721 2.012.276

Loans and aeh anccs

Loans and advances are summarized as follows:

2017 2016Enterprises Individuals Enterprises Individuals

M DL’000 MDL'000 M DL’000 MDL'000

Neilher past due norimpaired 488.274 256,959 533.500 173.699Past duc but not impaired 38.745 34.521 82.986 18.170

Individually impaired 98.357 - 90.721 -

Oross 625.376 291.480 707.207 191.869

Less: allowances forimpairment (30.399) (15,702) (30.461) (3.410)

Net 594,977 275.778 676,746 188.459

44

BC ENERGBANK SANOTES TO THE INDIVIDl AL FINANCIAL STATEMENTSFor ihe Year Ended 31 December 2017



(i) Loans and adsances neither past duc nor impaircd

The crcdit quality o f the portfolio o f loans and advances that were neither past duc nor impaired can be assessed by rcfercncc to the intemal rating system adopted by the Bank.


MDL'000 MDL’000 M DL’000 MDL'000

Standard 241,557 197.297 289.130 125.839

Watch 207.587 56.252 232.801 45.723

Sub-standard 25.277 3.410 11.569 2.137

Doubtful 13.739 - - -

Loss 114 ■ * •

488.274 256.959 533.500 173.699

(ii) Loans and advances past due but noi impaired

Past due loans and advances a re not considered im paired . un lcss o th e r Inform ation is av a ilab le to ind ica te the

con trarv . G ross am o u n t o f loans a n d adv ances by c lass to cu s to m ers that w ere p ast duc but not im paired w ere as

follow s:


MDL'000 M DL'000 MDL'000 MDL'000

Less than 30 days 10.297 15.268 13.332 10.04931 to 60 days 11.680 4.593 31.395 992More than 61 days 16.768 14.660 38.259 7.129

38,745 34.521 82.986 18.170

The Bank holds col lateral against loans and advances to customers in the form of mortgagc interests over property. stock o f matcrials and equipment as well as corporale guarantccs and cash deposits. Upon iniţial recognition of loans and advances. the fair value o f collatcral is based on valuation techniques commonly uscd for the corresponding assets. In subsequent periods. the fair value is updatcd by referencc to market price or indexes o f similar assets. Duc to system limitations it is impracticable to report on the fair value o f collateral plaeed against past duc but not impaircd loans.

45

BC ENERGBANK SANOTES l'O THE INDIVIDUAL FINANCIAL STATEMENTSFor the Vear Ended 31 Dcccmbcr 2017

33. Kisk management (continucd)


(iii) Loans and aihances individually impaired

As at 31 December 2017 the individually impaired loans and advances to customers before taking into consideration the cash flows from collateral held is MDL'000 98.357 (31 December 2016 - MDL'000 90.721). The fair value o f collateral that the Bank holds relating to loans individually determined to be impaired at 31 December 2017 amounts to MDL’000 112,780. The collateral consists o f properties and equipmcnt

<iv) Loans and advances renegotiated

Restructuring activities include extended payment arrangements. approved externai management plâns, modification and deferral o f payments. Following restructuring. a previously overdue customer account is reset to a normal status and managed together with other similar accounts. Restructuring policies and practices are based on mdicators or critcria which. in the judgment o f local management, indicate that payment will most likely continue. These policies are kept under continuous review. Renegotiated loans that would otherwise be past due or impaired amounts to M DL’000 16.997 at 31 December 2017 (2016: MDL'000 132.755).

Credit-relatcd commitments

The primary purpose o f these Instrum ents is to ensure that funds are available to a customer as required. Guarantees and standby letters o f credit - which represent irrevocablc assuranccs that the Bank will make payments in the event that a customer cannot meet its o b lig a tio n s to third parties - carry the same credit risk as loans. Documentary and commercial letters o f credit which arc wTitten undertakings by the Bank on behalf o f a

customer authorising a third partv to draw drafts on the Bank up to a stipulatcd amount under specific terms and conditions are collateralised by the underlying shipments of goods to which they reiate and therefore carry less nsk than a direct borrow ing.

Commitments to extend credit represent unused portions o f authorisations to extend credit in the form o f loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potcntially exposed to loss in an amount equal to the total unused commitments.

However, the likely amount o f loss is less than the total unused commitments. as most commitments to extend credit are contingent upon customers maintaining specific credit standards ihe Bank monitors the term to maturity o f credit commitments bccause longcr-tcrm commitments generally h a \e a greater degree o f credit risk

than shorter-term commitments.

46

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Year Fiuled 31 December 2017

33. Risk management (continucd)

33.1 Credit risk (continucd)

Maximum exposure to credit risk before collateral held or othcr credit enhancements:

Note 2017 2016MDI/OOO MDL'000

Balances with National Bank 3 473.208 430.915

Current accounts and deposits with banks 4 182.639 132.672

Financial investments. debt securities 5 699,454 538.037

Loans. net 6 870.755 865.205

Othcr financial assets 11 9.759 11.576

2.235.815 1.978.405

Off-balance sheet items 28 150.247 183.386

Total credit risk exposure 2.085.568 1.795.019

The above table represents a worst casc scenario o f credit risk exposure to the Bank at 31 Deccmbcr 201" and 2016. without taking account o f any collateral held or other credit enhancements attachcd. For on balance sheet assets. the exposures set out abo\e are based on net carrying amounts as reported in the balancc sheet

Management is confident in ns ability to continue to control and sustain minimal exposure o f credit risk to the Bank.

Risk concentrations of the maximum exposure to credit risk

rhc Bank's concentrations o f risk are managed by client countcrparty and by mdustry sector. Ihe maximum crcdit cxposurc to any client or counterpartv as at 31 December 2017 and 31 December 2016 is nill, without taking into account pledge or other guarantees held.

The lo ans granted to 20 major customers (Banks) o f the Bank as at 31 December 2017 am oun ted at MDL’000 321,992 representing 35% o f the Bank's gross loan portfolio (as at 31 December 2016: MDL’000 353.136 or 39%). These are analyzcd by Industries as follows:

2017 2016____________ MDL'000 MDL'000

Manulacturing and trade 82.921 129.103Agnculturc and food mdustry 106.3 II 126.168

Other 132.760 97.865

321.992 353.136

For signifîcant credit risk concentration at the mdustry level pleasc refer to note 6.

47

BC ENERGBANK SANOTES TO 11IE INDIVIDUAL FIN ANCIAL STATEMENTSFor Ihe Year Fndcd 31 Dcccmbcr 2017


33.2 Market risk

The economy o f the Republic o f Moldova continues to display characteristics o f an emerging market. These characteristics include, but are not limited to. the existence o f a currcncy that is not frecly convertiblc outside of the country. a low lcvel o f liquidity in the public and private debt and equity markets and reiaţively high inflation.

Additionally. the financial services sector in the Republic o f Moldova is vulnerable to adverse currcncy fluctuations and economic conditions.

The prospects for future economic stability in the Republic o f Moldova are largely dependent upon the effectiveness o f economic measures undertaken by the governmcnt, together with legal and regulatory developmcnts.

The Bank takes on exposure to market risks. which is the risk that the fair value or future cash flows o f a financial instrument will fluctuate bccausc o f changes in market prices. Market nsks arise from open positions in interest rate. currency and equity products. all o f which are exposed to general and specific market movements and changes in the level o f volatility o f market rates or prices such as interest rates. credit spreads. foreign exchangc rates and equity prices. The Bank separates exposures to market risk into either trading or non-trading port fol ios.

The market risks arising from trading and non-trading activities are concentrated i i i the Bank's Treasury and monitored by two teams separately. Regular reports are subnutted to the Board o f Directors and heads o f cach business unit.

Trading portfolios include those positions arising from market-making transactions where the Bank acts as principal with clicnts or with the market.

48

BC ENERGBANK SANOI I S IO I III INDIYIDl \ l FINANCIAI STATEMENTSFor Ihe Year Ended 31 December 2017

33. Risk management (continiied)

33.2.1 Foreign cxchangc risk

Ihe Bank takes on exposure to efifects o f fluctuations m the prevailing foreign currency cxchangc rates on its financial position and cash flows The Board sets limits on the level o f exposure by currency and in total for both ovemight and intra-day positions. which arc monitored daily.

Sensitivit}’ analysis io currency risk

The Bank perfonned a sensitivity analysis to currency risk at which it is reasonablv exposed at 31 Deccmber 2017. showing how income statement could have been allected as a result o f possible changes in currency rates.

Ihe tables below show the currencies for which the Bank has signifîcant cxposurc to currency risk as at 31 December 2017 and as at 31 December 2016. for the balance sheet nems that arc sensitivc to the currency rates' modifications Ihe analysis demonstrate* the effect o f reasonablv possible changes in currency rates against Moldovan Leu with all other \anables held constant:

As at 31 December 2017 Increase in currency rates.

%

Effect on PBT MDL'000

Decrease in currency rates.

%

Effect on PBT MDL'000

EUR -5 % (1.582) -5% 1.582LSI) ♦5% (255) -5% 255

As at 31 December 2016 Increase in Effect on P B 1 Decrease in Effect on PBTcurrency rates,

%MDL'000 currency rates,

%MDl.'OOO

EUR -5 % (1.547) -5% 1.547USD -5 % 579 -5% (579)

The tables below summarize the Bank's exposure to foreign currency cxchangc rate risk at 31 December 2017 and 31 December 2016. Included in the table are the Bank’s financial assets and Iiabilities at carrying amounts. categori/ed by currency.

49

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Vear Fndcd 31 Dcccmbcr 2017


33.2.1 Foreign exchangc risk (continucd)

As at 31 December 2017Total MDL USD EUR Other

MDL'000 MDL'000 MDL’000 MDL'000 M DL‘000

ASSETSCash and balances with National BankC urrent accounts and deposits with banksFinancial investments, debt securities - held to maturity

730.785

182,639

699.454

434.664

699.454

94.983

119.454

194.728

60.488

6.410

2.697

Loans. netFinancial investments, equity securities - available-for-sale

870,755

2.733

556.367

2.733

86,550 227.838 ;Other financial assets 9.759 6,563 831 2.337 28

Total assets 2.496.125 1.699.781 301.818 485.391 9.135

LIABILIT1FSDuc to banks - - - - -

Due to customers 1,911.554 1.154.244 288.510 461.739 7,061Other borrowings 149.600 77.087 17,770 54.743 -Other Financial liabilitics 8.086 6.884 640 556 6

Total liabilitics 2.069.240 1.238.215 306.920 517.038 7.067

GAP 426.885 461.566 (5.102) (31.647) 2.068

Other currencies include mainly the Russian Ruble, the Bclarusian Rubel and the Ukrainian Hryvnia.

50

BC ENERGBANK SANOTES TO THE INDIVIDl AI EIN VNCIAL STATEMENTSFor ihe Y'ear Fndcd 31 December 2017


33.2.1 Foreign exchangc risk (continued)

As al 31 December 2016Total MDL IS D E l R OtherMDL'000 MDL'000 MDL'000 MDL'000 MDL'000

ASSETSCash and balances with National BankC'urrent accounts and deposits with banksFinancial investments. debt securities - held to maturity

688.738

132.672

538.037

388.366

538.037

108.368

93.942

183.185

37.620

8.819

1,110

Loans. netFinancial investments. equity securities - available-for-sale

865,205

3.331

512.899

3.331

160.311 191.995

Other financial assets 11.576 4.556 2.198 3.480 1.342

Total assets 2,239,559 1.447.189 364.819 416.280 11.271

LIABILITIESDue to banks - - - - -

Due to customers 1.674.857 947.035 305.009 417.845 4.968Other borrowings 179,034 105.207 45.806 28.021 -Other financial liabihties 8.916 5.103 2.434 1.360 19

Total liabilitics 1.862.807 1.057.345 353.249 447.226 4,987

GAP 376.752 389.K44 11.570 (30.946) 6.284

Other currencies mamly include Russian Rouble. Belorussian Rouble and Lkraiman Hrivna.

51



33.2.2 Interest rate risk

Interest sensitivity o f assets, liahilities anii offbalance sheet items repricing analysis

Cash flow interest rate risk is the risk that the future cash flows o f a financial instrument will fluctuate bccause o f changes in market interest rates. Fair valuc interest rate risk is the nsk that the value o f a financial instrument will fluctuate bccause o f changes in market interest rates. Plie Bank takes on exposure to the effects of fluctuations in the prevailing levels o f market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result o f such changes but may reduce or create losses in the event that uncxpectcd movements arise. The Board sets limits on the level o f mismatch o f interest rate repricing that may be undertaken. which is monitored daily.

According to the internai and externai financial market evolution. the Bank forecasts the evolution o f interest rates for its assets and Iiabilities and the impact o f these possible changes on the net interest income. The Bank estimates a fluctuation o f - * 100 and - 50 basis points:

Increase in basis points

Sensitivity of Net Interest Income,

M DL’000

Decrease in basis points

Sensitivity of Net Interest Income,

MDL’0002017 + 100 6.766 -100 (6.766)

+50 3.383 -50 (3.383)

20 IA ♦100 5.084 -100 (5.084)*50 2.542 -50 (2.542)

Ihe tables below summarize the Bank’s exposure to interest rate risks at 31 December 2017 and 31 December 2016. Included in the table arc the Bank's financial assets and Iiabilities at carrymg amounts. catcgorizcd by the earlicr o f contractual repricing or maturity dates.

52

BC ENERCBANK SA

NOTES TO I HE INDIYIDl Al. HNANCIAI. STATEMENTSFor the Year Fndcd 31 Dcccmbcr 2017

33. Risk management (conliniii'ri)

33.2.2 Interest rate risk (continucd)

31 Dcccmbcr 2017 ’l otal MDL'000

Less llian 1 montli

MDL'000

From 1 nioillll Io 2 monllis

MDL'000

From 2 montlis to 3 monllis MDL'000

From 3 monllis io 6 monllis

MDL'000

From 6 monllis io 9 monllis

MDL'000

From 9monllis (o 12 monllis

MDL'000

From 1 (o 5 ycars

MDL'000

Morc than 5 ycars

MDL'000

Non-interest bea ring

i tenis MDL'000

ASSETSC ash and balanccs with NationalBank 730,785 433.344 . . . 297.441C’urrent accounts and deposits withbanks 182.639 169,406 . . . . . . . 13,233Financial investments. debtsecurities held lo maturity 699.454 476.045 12.552 54.541 69.559 54. IM 29,716 2.877 - -

Loans, nei 870,755 53,623 711,265 . 105.867Financial invcstmeniH, equitysecurities available-for-sale 2.733 - - - - - - . 2,733Other financial assets 9.759 - - - - - - 9.759

l oial assets 2.496.125 1,132,418 723,817 54.541 69.559 54.164 29.716 2.877 . 429,033

LIABILITIESDue io banks - . . . . . • _ . .Due to customers 1.911.554 1.236.777 - - . - - - . 674.777Other borrowings 149,600 24.235 20,890 4.114 98,681 . - - - 1,680Other financial liabilitics 8,086 6,009 - - - - - - - 2.077

l oial liabilitics 2,069,240 1,267,021 20.890 4.114 98,681 - . . _ 678,534

Interest nap 426.885 (134,603) 702.927 50.427 (29.122) 54.164 29,716 2.877 . (249,501)Interest yap. cumulative 702,927 753,354 ~24.232 - - N . V K , 808.112 8I0.9K9 810.989 561,488

BC ENERGBANK SANOTES IO ITIK INDIVIDUAL FINANCIAL STA I F.MFN I SFor Ihe Year F.ndcd 31 December 2017


33.2.2 Interest rate risk (continiied)

Front 1 From 2 From 3 From 6 From 9 More Non-interestLess than month to months to months to months to months to From 1 to than 5 bea ring

31 December 2016 Total 1 inontli 2 months 3 months 6 months 9 months 12 months 5 years years itemsM DL'000 MDL'000 MDL'000 MDL'000 MDL'000 MDL'000 MDL'000 MDL'000 MDL'000 MDL'000

ASSETSCash and balanccs with NationalBank 688.738 428.528 - - - - - 260.210

Current accounts and deposits withbanks 132.672 86,964 - - - - - - - 45,708

Financial investments. debtsecurities held to maturity 538.037 343,154 27.670 40,616 76.074 28,958 21.398 167 - -

l.oans. net 865,205 71.675 704,300 - - - - - - 89,230

Financial investments. equitysecurities available-lor-sa le 3,331 - - - - - - - - 3.331

( )thcr financial assets 11,576 * - - - - - - 11.576

Total assets 2.239,559 930,321 731,970 40,616 76.074 28,958 21,398 167 . 410,055

I.IABILITIFSDue to banks - - - - - - - - - -

Due to customers 1.674.857 1.141.034 - - - - - * - 533.823

Other borrowings 179,034 41,634 - 5,097 124.253 - 4,932 - - 3.118

Other Financial Iiabilities 8.916 4.127 * * - - - - - 4.789

l otul Iiabilities 1.862.8(17 1.186.795 - 5,097 124,253 . 4.932 . . 541,730

Interest gap 376,752 (256.474) 731,970 35,519 (48,179) 28.958 16.466 167 m (131,675)Interest gap. cumulative 731.970 767.489 719,310 748,268 764,734 764,901 764,901 633,226

54

BC ENERGBANK SANOTES TO THE INDIN IDL’AL FINANCIAL STATEMENTSFor Ihe Year Fndcd 31 December 2017


33.3 I.iquidih risk

rhe Bank is exposed to daily calls on its available cash resources from overnight deposits. currcnt accounts. maturing deposits. loan draw-downs and guarantees. The Bank does not maintain cash resources to meet all of these needs. as expcncnce shows that a minimum lcvcl o f rcinvestmcnt o f maturing funds can be predicted with a high lcvel ofeertainty. rhe Board sets limits on the minimum proportion of maturing funds available to meet such calls and on the minimum lcvel o f mtcr-bank and other borrowmg facilities that should be in place to covor withdrawals at unexpectcd levels o f demand.

The matching and controlled mismatching o f the matunties and interest rates o f assets and liabilitics is fundamental to the management o f the Bank. It is unusual for financial institutions to be completely matched. as transactcd business is often o f unccrtainty terni and differcnt types. An unmatched position potentially enhances profit ability. but also încreases the risk o f losses.

Tlie maturities o f assets and liabilitics and the ability to replace. at an acccptable cost. interest-bearing liabilitics as they mature are important factors in assessing the liquidity o f the Bank and its exposure to changes in interest rates and exchangc rates.

Management is confident that in spiţe o f a substantial portion o f deposits having contractual maturity dates withm three months. divcrsification o f these deposits by number and type o f deposits. and the past experience of the Bank would indicate that these deposits provide a long-tcrm and stablc source o f funding for the Bank.

The table bclow classifies the Bank's assets and liabilitics in maturity groups that are based on the remaining period up to contractual maturity at the balancc sheet date on the basis o f unrecorded contractual payment obligations. Payments requiring notificat ion are treated as if the notification had been made immediately. Ilowever. the Bank estimates that many customers will not be required to pay the bonds in the near future in which the Bank would have to pav and the table does not reflect the expected cash flows indicatcd by the Bank's history o f mamtaming the deposits.

55

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor clic Vcar Ended 31 Deccmbcr 2017_______

33. Risk management (continiied)

33.3 Liquidity risk (continucd)

La 31 decembrie 2017

TotalM DL'000

l.ess than 1 month

M DL'000

From 1 month to 2

months MDL'000

From 2 months Io 3

months MDL'000

From 3 months to 6

months MDL'000

From 6 months to 9

months MDL'000

From 9 months to 12 months M D I/000

l-rom 1 to 5years

M D I/000

More than 5 years

M DL’000

ASSETS

Cash and balances with National Bank 730,784 730.7X4Current accounts and deposits with banks 182,639 182,639 - - - - - - -

Financial mvcstmcnts, debt sccurities held to maturity 707,091 476.910 12.828 55,052 71.494 56,458 31,362 2,987 .

l.oans. net 1,023,185 59.187 29.227 33.224 107.007 97.728 84.797 577,335 34,680I mancial investments, equity sccurities available- lbr-sale 2,733 _ . . . . • 2.733

Othcr financial assets 9,759 9.716 - - - - - * 43

Total assets 2.656.191 1.459.236 42,055 88.276 178.501 154,186 116.159 580,322 37.456

LIAB1MTIES

Duc to banksDue to customers 1 .946.107 912,179 81.410 92.052 165.703 229,551 257,518 199,409 8,285

Othcr borrowings 160.097 3.448 20,823 22 1.987 2,012 6.580 104.786 20,439Othcr financial Iiabilities 8,086 8.086 • • • - * - -

Total Iiabilities 2.114.290 923,713 102,233 92,074 167,690 231,563 264,098 304,195 28.724

Maturity gap 541.901 535.523 (60.178) (3.798) 10.811 (77.377) (147,939) 276.127 8.732

56

BC ENERGBANKSANO I KS IC) I III INDIVIDUAL FINANCIAL STATEMENTSFor Ihe Year Fndcd 31 Dcccmbcr 2017

33. Risk m anagem ent (continucd)

33.3 l.iquidity risk (continucd)

La 31 dcccm bric 2016T otalM D L'000

l.css than 1niontliM D L'000

From 1 iu on t li to 2 monllis M DL'000

From 2 monllis to 3 monllis M DL'000

From 3montlis to 6montlisM DL'000

From 6 montlis to 9 monllisM D L'000

From 9 m ontlis to 12 monllisM D L'000

From 1 to 5ycarsM DL'000

M orc than 5ycarsM DL'000

ASSETSCash and balances with National Bank 688,738 688,738Currcnt accounts and deposits with banks 132,672 132.672Financial investments, debt securities held to maturity 547.891 344.024 28.498 42.113 79.427 30,883 22.771 175Loans, net 1,019.092 98.387 43,953 42,133 127.026 88,410 90,119 500,155 28.909Financial investments, equity securities available-for-sale 3,331 3,331Other financial assets 11,576 11.533 - - - - - - 43

1 otiil assets 2,403,300 1,275,354 72.451 «4,246 206.453 119.293 112.890 500,330 32,283

LIABII IT IFS

Due to banksDue to customers 1 ,715,400 736.944 88.575 85,579 179.940 250.040 239,251 124.625 10.446( )ther borrowings 199,235 4.4X0 978 28 15,119 6.459 21,656 134.186 16,329Other financial liabilitics 8 ,9 16 8.916 - - - - - - *

Total liabilitics 1.923,551 750,340 89.553 85,607 195,059 256.499 260,907 258.811 26,775

M aturity ţţap 479,749 525,014 (17,102) (1,361) 11,394 (137,206) (148,017) 241.519 5,508

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor tiu* Year Furieri 31 Deccmbcr 2017

33. Risk m anagem ent (continucd)

33.3 I.iquiriit) risk (continucd)

The tables below show the contractual expiry by maturity o f the Bank’s contingent Iiabilities and commitments:

l ess than 3 From 3 m onths From 1 to 5 M orc than 31 December 2017 m onths to I year years 5 years Total

M D L'000 M D L’000 M D L’000 M D L’000 M DL'000

Commitments and guarantees 45.819 31.799 72.447 183 150.248

45.819 31,799 72.447 183 150,248

31 December 2016l.ess than 3

months

M D L'000

From 3 m onths to 1 year

M D L’000

From 1 to 5 years

M D L’000

M orc than 5 years M D L’000

TotalM DL'000

Commitments and guarantees 67.188 61.712 54.486 - 183.386

67,188 61,712 54.486 - 183,386

The Bank cxpects that not all o f the contingent Iiabilities or commitments will be drawn before expiry o f thecommitments.

58

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor ihe Year Fnded 31 December 2017

33. Risk m anagem ent (continiied)

33.3 Liquidity risk (continued)

Hie tables below show the contractual expiry by maturity o f the Bank's assets and Iiabilities:

31 December 2017 l p to 12 m onthsM ore th an 12

m onths Total

ASSETSCash and balances with National Bank 730.785 730.785Current accounts and deposits with banks 182.639 182.639Financial investments. debt securities held to maturity 696,577 2.877 699.454

Loans. net 357,340 513.415 870.755Financial investments, equity securities

available-for-sale 2.733 . 2,733

Investment property - 47 47

Intangiblc assets - 3.823 3,823Property and equipment - 131.183 131.183Current income tax asset 1.427 - 1.427

Other assets 10.530 42.037 52.567

Total assets 1,982,031 693.382 2.675.413

LIA B ILITIESDue to customers 1.715.187 196.367 1.911.554Other borrowings 33.727 115,873 149,600

Other Iiabilities 15.503 - 15.503Deferred tax Iiabilities 3.348 * 3.348

Total liahilities 1.767,765 312.240 2.080.005

Gap 214.266 381.142 595,408

59

BC ENERGBANK SANOTES TO THE INDIVIDUAL FINANCIAL STATEMENTSFor the Vear Fiuled 31 December 2(117

35. Risk m anagem ent (continued)

35.3 l.iquiditş risk (continued)

31 December 2016 l p to 12 montlisM ore than 12

montlis Total

ASSETSCash and balances with National Bank 688,738 688.738Currcnt accounts and deposits with banks 132.672 132.672Financial investments. debt securities held to maturity 537.870 167 538.037

Loans. net 418.404 446.801 865.205Financial investments, equity securities - available-for-sale 3.331 3.331Investment property - 47 47Intangiblc assets - 1,969 1.969

Property and equipmcnt - 130.808 130.808

C'urrent income tax asset 855 - 855Other assets 16.355 37.409 53.764

Total assets 1.798.225 617,201 2.415.426

LIA BILITIESDue to customers 1.549.992 124.864 1.674.857

Other borrowings 42.727 136.306 179,034

Other liabilitics 17.219 - 17.219

Deferred tax liabilities 2.923 - 2.923

Total liabilitics 1.612.862 261.171 1.874.033

Gap 185.363 356.030 541.393

33.4 Tax risk

The tax system in the Republic o f Moldov a has undergone severa 1 changes in recent ycars and is in a continuous process o f upgrading and modemization. As a result. there are still difîerent interpretations o f tax legislation. In certam situations. the tax authorities may treat certam aspects differently by calculating additional taxes and charges and interest and related late payments. In Moldova, the tax exercise remains open for fiscal vcrification for at least 4 years. The management of the Bank considers that the tax liabilitics included in these financial statements are adequate.

60

BC ENERGBANK SANOTES TO THE INDIVIDl’AL FINANCIAL STATEMENTSFor Ihe Year Ended 31 December 2(117

34. Segment reporting

An segment o f activity is component of the Bank which engages in business activitics which may generale income and incur expenses. whose results are examined periodically by Bank's decision factors with the purposc o f allocating resources to segments and evaluating their performance and for which separate iinancial Information is available. Dunng 2017 and 2016 the Bank performed bank transactions that were provided only on the Moldovan market. Management considers that the inherent risks and benefits o f banking activity do not diffcr signilicantly between clients' categoiies as well as between difFerent geographical regions. and therefore does not require the need for separate reportmg on segments that will provide some additional benefits. The Bank does not monitor the activity on different segments bccause it considers it less relevant to the internai decision making process. The results are examined by the Bank only at Bank level. as a umque segment. Picase refer to Note 6 for the structure o f the loan portfolio and Note 14 for the deposit structure. Decision about segment reporting is made by the management o f Bank.

35. Subsequent events

On 5 March 2018. was accepted the resignation o f the members o f the Board of Directors o f Bank Cecctova Natalia and Maximenco Galina. Hiese members were temporarily replaced by Casian Aureliu and Stratan Alexandru until 23 April 2018.

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