Accounting classification and fair values

Data in THUF

31 December

2019 31 December 2018

Fixed-interest 22 337 291 22 176 244

Floating-interest 386 819 425 132

Interest-bearing assets 22 724 111 22 601 376

Fixed-interest 435 613 968 463

Floating-interest - -

Interest-bearing liabilites 435 613 968 463

In the case of fixed-interest financial assets available for sale, the possible change in interest rate (30 basis points for HUF in 2019, 20 basis points for euro investments) would change the Company's equity by HUF -349,471 thousand annually. (In 2018, 30 basis points for forint investments and 20 basis points for euro investments, which would have changed the Company's equity by HUF -282,562 thousand annually.)

The Company's interest-bearing assets and liabilities bore the following interest rates as of the end of 2018 and 2019:

31 December 2019 31 December 2018

HUF EUR HUF EUR

Government bonds 0.01%-7.5% 3% 0.01%-7.5% 3%

Corporate bonds n/a n/a n/a n/a

Cash and cash equivalents - - - - Loans, and financial

reinsurance n/a 3.38% - 7.91% n/a 3.38% - 7.91%

Interest bearing shares n/a n/a n/a n/a

51.5. Accounting classification and fair values

The carrying values of loans and receivables, available-for-sale financial instruments and other financial liabilities do not differ significantly from their fair values.

The following table presents the Company’s assets and liabilities as classified into financial asset and liability categories:

125

126 The Company applies the following three measurement levels when determining the fair value of assets and liabilities:

• Level 1: price quoted on active market for asset/liability

• Level 2: Based on input information that differs from level 1, which can be directly or indirectly observed for the given asset/liability

• Level 3: Inputs for assets and liabilities which are not based on observable market data

In the case of loans and receivables, the Company estimates that the book value approximates the fair value of assets and therefore no separate presentation of the fair value is required.

In case of the various financial instruments, the fair value of the assets determined by the following methods:

• Debt securities

o except the government bonds, and discounted T-bills issued into the primary dealership system, the last net exchange price of the evaluation period shall be used with the accumulated interest until the reporting date added (in case of the determination of the fair value);

o the fair value in the case of the T-bills and government bonds (both with fixed and floating interest payments), which:

mandatory quoted, have more than 3 months remaining maturity and issued into the primary dealership system, is determined by the average of the best net bid/ask price (published by ÁKK - Government Debt Management Agency, at the reporting date, and the last workday before the reporting date) plus the accumulated interest at the reporting date;

o the fair value in case of the T-bills and government bonds (only the securities with fixed interest payments), including securities guaranteed by the state, which: non-mandatory quoted in the primary dealership system, have less than 3 months remaining maturity, is determined by the net exchange rate published by ÁKK at the reporting date, and the last workday before the reporting date, calculated based on 3 monthly benchmark yield, plus the accumulated interest;

o in the case of non-mandatory residual maturities of less than 3 months in the primary distribution system, fixed rate and discount government securities, including government-guaranteed securities, using the 3-month reference yield published by the GTC on the reporting date or the last business day preceding that date; the market value calculated as the sum

127 of the calculated net exchange rate and the interest accrued by the reporting date

o if there is no more recent information than 30 days about the price of the debt security, which listed on the stock exchange (excluded the securities issued into the primary dealership system), then the fair value of the asset shall be determined by the published, average net price of the registered OTC trade, weighted with turnover, plus the accumulated interest at the reporting date, unless this price is older than 30 days. The validity of the registered prices of the OTC trading is the marked period in the publication, in other words, it shall be calculated from the last day of the reference period even if it isn’t a workday. The closing price of the share shall be used, unless this price is older than 30 days;

o in case of the unlisted share, the valuation price shall base on the OTC trading price and the last weighted average price, unless the last weighted average price is older than 30 days;

o if none of the mentioned valuation method is applicable, then the lower of the last exchange price or the purchase price shall be used, independently from the date of the data.

• Derivative instruments:

o according to the Regulation of the T-daily results of the forward transactions of the Budapest Stock Exchange, if the transactions opened at „T day” than by using the strike price and the stock exchange settlement price of „T day”, if the transactions closed at „T-day” than by using the strike price and the stock exchange settlement price of „T-1 day, and in case of the transactions opened before „T day”, then by using stock exchange settlement price of „T day” and „T-1 day”;

o in case of the foreign currency forward transactions over the counter, the valuation based on the prompt exchange rate and forward exchange rate based on the interbank interest rates denominated in the relating foreign currencies. The interest rates applied in the calculation, are the interbank interest rates, with the closest term to the remaining maturity of the future contract;

o the valuation of the options relating to the issue of the interest-bearing share is according to Note 4.3.

128 The following table presents the hierarchy for fair value measurements in respect of financial instruments measured at fair value:

Data in THUF

The Company does not examine its activities by segment, as the management treats the company as one portfolio. Furthermore, the management has examined that the Company operates in a geographical segment and does not classify its products under other risk exposures.

53. CONTINGENT LIABILITIES

The Company is subject to insurance solvency regulations and it has complied with all regulatory requirements either in accordance with EU Directives or with Hungarian regulations. The Company has no contingent liabilities in connection with such regulations or otherwise,.