THE STATE ROAD AGENCEY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT, SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD FROM 01 JANUARY 2018 To 31 DECEMBER 2018 Together with Independent Auditors' Report 1BDO THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 Contents: INDEPENDENT AUDITORS' REPORT 3-5 SPECIAL PURPOSE STATEMENT OF SOURCES AND USES OF FUNDS 6 USE OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FUNDS BY THE PROJECT COMPONENTS 7 SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT 8 STATEMENT OF WITHDRAWALS THROUGH THE SUMMARY OF STATEMENTS OF EXPENDITURES 9 STATEMENT OF CASH WITHDRAWAL FROM SPECIAL ACCOUNTS 10 SPECIAL ACCOUNT STATEMENT I I STATEMENT OF CASH WITHDRAWAL FROM TRANSIT ACCOUNTS 12 STATEMENT OF FACTUAL EXPENDITURES IN NATIONAL CURRENCY 13 RECONCILIATION BETWEEN RECORDS OF PIU AND THE BANK 14 NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS 15 WORLD BANK AUDIT DOCUMENTATION CHECKLIST 22 2 www.bdo.ua BDO LLC Tel.: +38 044 393 26 87 201-203, Kharkivske Road, 10th floor Fax: +38 044 393 26 91 Kyiv e-mail: bdo@bdo.kiev.ua Ukraine, 02121 Tel.: +38 056 370 30 43 4, Andriya Fabra Str. Fax: +38 056 370 30 45 Dnipro e-mail: dnipro@bdo.com.ua Ukraine, 49000 INDEPENDENT AUDITORS' REPORT To the State Road Agency of Ukraine Opinion We have audited the accompanying In our opinion, the accompanying special purpose financial special purpose project financial statements give true and fair view of the sources and uses of statements of the Road Sector funds of the Second Roads and Safety Improvement Project for Development Project (the the period from 01 January 2018 to 31 December 2018, in "Project"), financed under the accordance the Bank's regulations. International Bank for External funds have been used in compliance with the Reconstruction and Development requirements of the corresponding general conditions, financial ("IBRD") Loan agreement No. 8549- agreements, and the Disbursement Letter, paying due attention UA dated 19 November 2015 to efficiency and cost-effectiveness; and have been used only between the IBRD and Ukraine, 'for the corresponding purposes. whose beneficiary is The State Road Agency of Ukraine (the Conditions of the Loan Agreement N2 8549-UA do not provide for "Ukravtodor"), which comprise: the use of partners' funds. " The special purpose statement The services have been purchased in compliance with the of sources and uses of funds for corresponding general conditions, financial agreements, and the the year ended 31 December Disbursement Letter. 2018; Accounting and storing of the necessary interim documents, " the special purpose statement accounting data and accounts regarding all Project transactions, on expenditure detail for the including those concerning the expenditures disclosed in the year ended 31 December 2018 Statement of actual expenditures, are performed in a due ycolletivear nred D e 28 manner. There is a clear interconnection between accounting (collectively referred to as the data and the financial statements provided to the World Bank. "special purpose project financial statements"); The prepared financial statements comply with the requirements of generally accepted accounting principles and " summary of significant practices, and the instructions from the World Bank; and truly accounting policies and other and objectively reflect the financial position of the Project as at explanatory information. 31 December 2018 as well as the resources and expenditures for the period from 01 January 2018 to 31 December 2018. Separate opinion regarding Expenditures In addition, with regard to the expenditures for the period from 01 January 2017 to 31 December 2017 adequate supporting documentation was maintained to confirm applications submitted to the Bank for reimbursement of the expenditures incurred, and that the expenditures stated in the withdrawal applications are to be financed in accordance with the terms and conditions of the Loan N2 8549-UA. BDO LLC, a Ukrainian LLC, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. IBDO Separate opinion regarding Special Accounts Statement In our opinion, the financial statements on the Special accounts give true and fair view of financial position of the Special Accounts of the Project, as at 31 December 2018 and for the period from 01 January 2018 to the date fixed in consistence with the World Bank regulations. These accounts were conducted according to the provisions of the corresponding general conditions, financial agreements, and the Disbursement Letter. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Special Purpose Financial Statements section of our report. We are independent of the State Road Agency of Ukraine in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA's Code) and ethical requirements applied in Ukraine to our audit of financial statements, and we have fulfilled our other ethical responsibilities in accordance with the IESBA's Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Explanatory paragraph We draw attention to Note I to the Special Financial Statements, where the fact is disclosed that the end date of the loan funds use is 31 December 2021. We do not further qualify our opinion in this regard. Responsibility of Management and Those Charged with Governance for the Special Purpose Financial Statements Management is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with the rules of the World Bank, and for such internal control as management determines is necessary to enable the preparation of the special purpose financial statements that are free from material misstatement, whether due to fraud or error. In preparing the special purpose financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process of the Project. Auditor's Responsibility for the Audit of the Special Purpose Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose financial statements. IBDO As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: " Identify and assess the risks of material misstatement of the special purpose financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. " Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the special purpose financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the special purpose financial statements, including the disclosures, and whether the special purpose financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. The audit was performed under the,control of a audit partn r Nikolaenko 0. Key audit partner Nikolaenko 0. For and on behalf of BDO LLC Director Balchenko S. 17 April 2019 Kyiv THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 SPECIAL PURPOSE STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2018, AND CUMULATIVE AS AT 31 DECEMBER 2018 (in US dollars) For the year For the whole ended 31 period of the Unused Loan December Project balance 2017 implementation Opening balance Special account with NTSU - USD 259 227 Transit account with Ukreximbank - USD - Transit account with OPERU STSU (UAH) 26 488 Total available funds at the beginning of the period 285 714 Sources of funds: Loan of the International Bank for Reconstruction and Development 29 393 653 32 519 475 337 800 000 305 280 525 Total financing: 29 393 653 32 519 475 337 800 000 305 280 525 Project expenditure: Category 1: Goods, works, non- consulting services, consultants' services, training and incremental operating costs 29 655 593 31 095 700 333 900 000 302 804 299 Category 2: Land acquisition and resettlement costs - 2 500 000 2 500 000 Category 3: Front-end fee 1 400 000 1 400 000 Total project expenditure: 29 655 593 32 495 700 337 800 000 305 304 300 Closing balance Special account with NTSU - USD 23 608 Transit account with Ukreximbank - USD Transit account with OPERU STSU (UAH) 167 23 775 Notes on pages 16 - 21 are an integral part of these special purpose project financial statements. 6 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 USE OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FUNDS BY THE PROJECT COMPONENTS FOR THE YEAR ENDED 31 DECEMBER 2018, AND CUMULATIVE AS AT 31 DECEMBER 2018 (in US dollars) For the year For the whole ended 31 period of the Budget Unused Loan December Project balance 2018 implementation Use of the World Bank funds by the 337 800 000 305 304 300 Project components Part 1. Road rehabilitation and safety improvement 1.1. Civil works 27 824 086 27 824 086 1.2. Supervision services 173 148 173 148 1.3. Land acquisition and resettlement costs - Total in Part 1 27 997 234 27 997 234- Part 2. Maintenance of core national road corridors Maintenance services, design and site supervision of all civil works - - Total in Part 2 - Part 3. Network management and development Consulting services 1 658 338 3 098 237 Total in Part 3 1 658 338 3 098 237 Bank charge for currency conversion 21 229 Front-end fee 1 400 000 TOTAL PROJECT EXPENDITURES 29 655 593 32495 700 337 800 000 305 304 300 SUMMURY STATEMENT BY SUBCATEGORIES: Civil works 27 824 086 27 824 086 Supervision services 173 148 173 148 Land acquisition and resettlement costs - Contract CS-8 860 758 950 257 Contract CS-9(a) - 361 093 Contract CS-9(b) 95 594 477 178 Contract CS-9(c) 139 573 233 788 Contract CS-9(d) - 118 326 Contract CS-9(e) - 59 600 Contract CS-10 308 132 448 191 Contract CS-11 90000 Contract CS-12 207 690 296 700 Contract CS-14 16 833 448 191 Contract CS-15 29 760 29 760 Bank charge for currency conversion 21 229 Front-end fee . 1,400,000 TOTAL PROJECT EXPENDITURES 29 655 593 32 495 700 337 800 000 305 304 300 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements. 7 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT for the period from 01 January 2018 to 31 December 2018 (in US dollars)_ Payment USD Date of Equivalent Application number Category withdrawal Currency Amount amount 9 1 09-May-2018 USD 333 748 333 748 11 1 29-Jun-2018 USD 17 560606 17 560606 12 1 13-Sep-2018 EUR 149 214 173 148 13 1 18-Sep-2018 USD 42 850 42 850 14 1 15-Oct-2018 USD 207690 207690 16 1 15-Oct-2018 USD 308 132 308 132 17 1 05-Nov-2018 USD 223 748 223 748 18 1 09-Nov-2018 USD 8 502 877 8 502 877 19 1 30-Nov-2018 USD 260413 260413 20 1 21-Dec-2018 USD 1 760 603 1 760 603 21 1 26-Dec-2018 USD 19 840 19 840 Total: 29 393 653 Summary schedule by categories: DA-A total - Category 1 - total 29 393 653 Total: 29 393 653 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements. 8 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 STATEMENT OF WITHDRAWALS THROUGH THE SUMMARY OF STATEMENTS OF EXPENDITURES for the period from 01 January 2018 to 31 December 2018 (in US dollars) Application number Category Total 1 4 1. Expenditures factually incurred during 2017 and compensated by the World Bank during 2018 10 221 772 221 772 Total 221 772 221 772 2. Applications submitted to the World Bank and reimbursed for the period from 01 January 2018 to 31 December 2018. 09 333 748 333 748 10 123 026 123 026 11 17 560 606 - 17 560 606 12 173 148 173 148 13 42850 42 850 14 207690 207 690 15 105987 105 987 16 308 132 308 132 17 223 748 223 748 18 8 502 877 8 502877 19 260413 260 413 20 1 760 603 1 760603 21 19840 19 840 Total 29 622 666 29 622 666 3. Costs actually incurred for the period from 01 January 2018 to 31 December 2018 From the Loan account 29 393 653 29 393 653 From special accounts - - From transit accounts in 252 020 252 020 national currency From transit accounts in USD 9 920 9 920 Total 29 655 593 29 655 593 4. Table of differences in Project costs between the World Bank records and PIU for the period from 01 January 2018 to 31 December 2018 Reimbursed according to 29 622 666 29 622 666 IBRD information Amount of costs not provided for reimbursement as at 31 32 926 32 926 December 2018 According to PIU data 29 655 593 29 655 593 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements. 9 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 STATEMENT OF CASH WITHDRAWAL FROM SPECIAL ACCOUNTS for the period from 01 January 2018 to 31 December 2018 (in US dollars) Payment USD Equivalent Category Date of withdrawal Currency Amount amount Sub accounts 08.02.2018 USD 9 920 9 920 Sub_accounts 29.03.2018 USD 114 182 114 182 Sub_accounts 06.04.2018 USD 3 529 3 529 Sub_accounts 11.05.2018 USD 1 520 1 520 Sub_accounts 22.06.2018 USD 1 342 1 342 Sub_accounts 04.07.2018 USD 1 394 1 394 Sub_accounts 30.07.2018 USD 97290 97 290 Sub_accounts 10.09.2018 USD 1 460 1 460 Sub_accounts 27.09.2018 USD 1 229 1 229 Sub_accounts 17.12.2018 USD 3 754 3 754 Total: 235 619 Summary by categories Category 1 - total- Sub_accounts 235 619 Total: 235 619 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements. 10 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 SPECIAL ACCOUNT STATEMENT for the period from 01 January 2018 to 31 December 2018 (in US dollars) Deposit Bank JSC Ukreximbank Loan N2 85490 Currency US dollars OPENING BALANCE 259 227 Receipts: Funds received - TOTAL FUNDS RECEIVED Deductions: expenditure - Transfer of funds to the transit account 235 619 TOTAL COSTS 235 619 CLOSING BALANCE 23 607 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements. 11 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 STATEMENT OF CASH WITHDRAWAL FROM TRANSIT ACCOUNTS for the period from 01 January 2018 to 31 December 2018 (in US dollars) Payment USD Equivalent Category Date of withdrawal Currency Amount amount 1 08.02.2018 USD 9 920 9 920 Pa3oM: 9 920 Summary by categories Category 1 - total 9 920. Sub accounts Total: 9 920 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements. 12 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 STATEMENT OF FACTUAL EXPENDITURES IN NATIONAL CURRENCY for the period from 01 January 2018 to 31 December 2018 (in US dollars) ----- Onnama----- USD EKBisaneHm Banoma CyMa Cyma Category 1: Goods, works, non-consulting services, consultants' services, training and incremental operating costs UAH 6 737 842 252 020 Total expenditure of the period 6 737 842 252 020 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements, 13 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 RECONCILIATION BETWEEN RECORDS OF PIU AND THE BANK for the period from 01 January 2018 to 31 December 2018 (in US dollars) Loan amount 337 800 000 Subtract: Project costs: Category 1: Goods, works, non-consulting services, consultants' services, training and incremental operating costs 31 095 701 Category 2: Land acquisition and resettlement costs - Category 3: Front-end fee 1 400 000 Total: (32 495 701) Special account with NTSU - USD 23 607 Transit account with Ukreximbank (USD) - Transit account with OPERU STSU (UAH) 167 Total available funds (23 775) Total withdrawals: (32 519 475) Balance as at 31 December 2018 305 280 525 Notes on pages 16 - 22 are an integral part of these special purpose project financial statements. 14 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018, AND CUMULATIVE AS AT 31 DECEMBER 2018 (IN US DOLLARS) 1. BACKGROUND According to the Loan Agreement dated 19 December 2015 between Ukraine and International Bank for Reconstruction and Development (hereinafter - the Bank), the Bank agreed to provide Ukraine with the Loan in amount of 560 million USD in order to assist in financing the Road Sector Development Project. The objective of the Project is to improve transport connectivity, maintenance operations and road safety for road users on selected sections of the national roads network and improve road network management in Ukraine. The Project consists of the following parts: Part 1: Road Rehabilitation and Safety Improvement Rehabilitation and safety improvement of selected sections of the M03 highway, including road infrastructure such as bridges, interchanges and bypasses, site supervision of all civil works, acquisition of equipment, and financing the cost of any land acquisition and resettlement necessary for execution of the foregoing works. Part 2: Maintenance of Core National Road Corridors Maintenance of selected sections of core national road corridors, including road infrastructure such as bridges, interchanges and bypasses, improvements for road safety, design and site supervision of all civil works. Part 3: Network Management and Development 3.1 Preparation and implementation of an integrated road safety and network management system including a system for tolling, weigh-in-motion system for axle load control and automatic speed enforcement cameras through, inter alia: (a) support in the preparation of relevant legislation, regulatory framework, and implementation of recommendations from the Road Safety Capacity Review; (b) support for conducting awareness campaigns and public consultations regarding such system; (c) the preparation of feasibility studies and functional specifications for the systems including plans for a first phase of system implementation; (d) the acquisition and installation of required equipment; (e) capacity building activities for key stakeholders in operating and managing the new systems; (f) support for the preparation of concession documents for an operator to finance, install and operate the national totting system; and (g) the provision of technical assistance for evaluation of procurement processes, supervision of installation and monitoring of initial stages of operations and results under the system. 3.2 Provision of institutional capacity building support for maintenance management, through, inter alia: (a) support for data collection, planning, design, safety audits and management support to ensure effective implementation of prioritized maintenance plans and performance-based road contracts; and (b) capacity building to facilitate implementation: of reforms in the maintenance industry, improved systems and capacity building to monitor the implementation and impact of said reforms. 15 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 3.3 Provision of support for the preparation of feasibility studies, detailed design and bidding documents and associated social and environmental safeguards documents and instruments in compliance with the Bank's Safeguards Policies for selected priority road improvement schemes including, sections of the Lviv to Kherson road. 3.4 Provision of Project management and implementation support including, inter alia, the carrying out of technical audits, safety audits, financial audits, and of design reviews, all through provision of technical assistance required therefor and the financing of Incremental Operating Costs. For the purpose of the Project implementation, Ukravtodor has established the Project Implementation Unit (PIU) acting within the State Enterprise "Ukrainian road investments" and has respective resources and staff with appropriate skills, according to the authorities acceptable for the Bank. 2. BASIS OF PRESENTATION These special purpose project financial statements are prepared on the cash basis of accounting and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the Guidelines on Annual Financial Reporting and Auditing for World Bank - Financed Activities issued by the World Bank's Financial Management Sector Board. Project financing is recognized as a source of project funds when the cash is received. Project expenditures are recognized as a use of project funds when the payments are made. The reporting currency is United States dollars ("USD"). Items included in the special purpose project financial statements are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Company (the "functional currency"). The functional currency of the project is USD. Transactions in other currencies are converted to US dollars at the inter-bank exchange rate prevailing at the date of the transaction of corresponding conversion of USD to the payment currency. Cash balances in other currencies are converted to US dollars at the inter-bank exchange rate of the last conversion of USD to the payment currency. 3. ACCOUNTING POLICY Basis of preparation The special financial statements were prepared on the cash basis. Accounting policy was consistently applied throughout the entire period of using the Loan funds. Reporting period These statements cover the period of using the funds of the Loan from 01 January 2017 to 31 December 2017. The World Bank set the end date of the loan closing - 31 December 2021, or a later date as set by the Bank. Special Bank Account According to the terms of the Loan Agreement and in order to facilitate the Project performance, the State Treasury Service of Ukraine (STSU) has opened and maintains Special account in US dollars with the State Export-Import Bank on conditions approved by IBRD. 16 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 Receipts and Expenditures Recognition The Project keeps its records and prepares its financial statements under the cash method. The receipts are shown when they are performed on bank accounts, which are supported by the advances from IBRD. The expenses are registered at the date when there is funds withdrawal. Reporting on the project is under the provisions of Section 5.08 of the General Conditions and on the basis of indicators acceptable to the Bank. Each Project Report shall cover the period of one calendar quarter, and shall be furnished to the Bank not later than forty-five (45) days after the end of the period covered by each such report. All goods, works and non-consulting services required for the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with the requirements set forth or referred to in Section I of the Procurement Guidelines, and with the provisions of Section III of Annex 2 to the Loan Agreement. All consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with the requirements set forth or referred to in Sections I and IV of the Consultant Guidelines and with the provisions of Section III of Annex 2 to the Loan Agreement. Foreign Currency Transactions The accompanying financial statements are presented in US dollars. Transactions performed in other currencies are recalculated in US dollars at the effective exchange rate on the date of transaction, unless otherwise stated. Statements of Expenditures Statements of expenditure are used for recognition of expenses under the Loan paid from the Special account during a calendar quarter. According to additional instructions of funds withdrawal set by the IBRD, all expenditures paid from the Special account should be included in statements of expenditures for corresponding periods and submitted to the IBRD. Along with supplies information submitted original documents (copies of checks, invoices, statements of work performed, etc.). 4. BUDGET The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan ("Category"), the allocation of the amounts of the Loan to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category. Category Amount of the Loan Allocated Percentage of Expenditures to be (expressed in USD) financed (inclusive of Taxes) (1) Goods, works, non-consutting 556 100 000 100% services, consultants' services, Training and Incremental Operating Costs (2) Land Acquisition and Resettlement 2 500 000 100% Costs (3) Front-end Fee 1 400 000 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions (4) Interest Rate Cap or Interest Rate Amount due pursuant to Section 2.08(c) Collar premium of this Agreement TOTAL AMOUNT 560 000 000 17 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 World Bank letter of 02 February 2017 amended the Loan Agreement, concerning the cancellation of the loan in the amount of $222.2 million, the removal of measures financed anticipated in these funds, and clarification of indicators for monitoring project performance of the road sector. The amended distribution expenses by category is as follows: Amount of the Loan allocated Percentage of expenditures to be Category (expressed in USD) financed(inclusive of Taxes) (1) Goods, works, non-consulting services, consultants' services, 333 900 000 100% Training and Incremental Operating Costs (2) Land Acquisition and Resettlement 2 500 000 100% Costs Amount payable pursuant to Section 2.03 of this Agreement in accordance with (3) Front-end Fee 1 400 000 Section 2.07 (b) of the General Conditions (4) Interest Rate Cap or Interest Rate Amount due pursuant to Section 2.08(c) Collar premium of this Agreement TOTAL AMOUNT 337 800 000 5. SCHEDULE OF THE LOAN REPAYMENT The following table sets forth the Principal Payment Dates of the Loan and the percentage of the total principal amount of the Loan payable on each Principal Payment Date ("Installment Share"). If the proceeds of the Loan have been fully withdrawn as of the first Principal Payment Date, the principal amount of the Loan repayable by the Borrower on each Principal Payment Date shall be determined by the Bank by multiplying: (a) Withdrawn Loan Balance as of the first Principal Payment Date; by (b) the Installment Share for each Principal Payment Date, such repayable amount to be adjusted, as necessary, to deduct any amounts referred to in paragraph 4 of Schedule 3, to which a Currency Conversion applies. Principal Payment Date Installment Share (Expressed as a Percentage) On each February 15 and August 15 Beginning February 15, 2022 4.55% through February 15. 2032 On August 15, 2032 4.45% The interest payable by the Borrower for each Interest Period shall be at a rate equal to the Reference Rate for the Loan Currency plus the Variable Spread ; provided, that upon a Conversion of all or any portion of the principal amount of the Loan, the interest payable by the Borrower during the Conversion Period on such amount shall be determined in accordance with the relevant provisions of Article IV of the General Conditions. Notwithstanding the foregoing, if any amount of the Withdrawn Loan Balance remains unpaid when due and such non-payment continues for a period of thirty days, then the interest payable by the Borrower shall instead be calculated as provided in Section 3.02 (e) of the General Conditions. The Payment Dates are February 15 and August 15 in each year. The Front-end Fee payable by the Borrower shall be equal to one quarter of one percent (0.25%) of the Loan amount. 6. CONSTRUCTION WORKS Major repairs on motorway M-03 on the section Kyiv-Kharkiv-Dovzhansky Construction and contract work at the expense of IBRD loan funds was carried out on the basis of the Contract, concluded after the international tender, on 21.05.2018 Contract 1 was concluded with the winner of the tender by Onur Taahut Tasimacilik insaat Ticaret and Sanayi Anonim Sirketi. The contract provides for the construction of major repairs of the highway and reconstruction of the M-03 Kiev- 18 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 Kharkiv-Dovzhansky on the sections of the road between 335 + 104 km to 336 + 873 km (Lot 2.1), between 340 + 961 km to 344 + 817 km (Lot 2.1), between 347 + 200 km to 356 + 200 km (Lot 2.1), between 356 + 200 km and 385 km + 100 km (Lot 2.2), between 395 + 064 km to 420 + 050 km (Lot 2.3). The contract provides for the period of responsibility of the Contractors for defects, duration 730 days from the moment of signing the Act of acceptance of the road section into operation. During this period, the Contractors undertake to eliminate all defects that arose from their fault during construction, as well as complete all non-essential works that were not completed at the time of acceptance. 7. SUPERVISION SERVICES In order to appoint Engineers to carry out technical supervision of the execution of construction and contract works under Part 1 within the framework of the implementation of the "Road Sector Development Project", the State Road Service of Ukraine in 2018 concluded a contract with Egis International for the provision of consulting services. The contract between Ukravtodor and Egis International was signed on May 7, 2018, for a total amount of 1 492 407 Euros. Under the terms of the Contract, services include supervision over the overhauls of the M-03 Motorway Kiev-Kharkiv-Dovzhansky. During 2018, the contract with Egis International was changed, which increased the Contract price to EUR 2 079 140 and additional staff members were involved in the Consultant team. The mobilization and maintenance of the Engineer are completely completed, with the exception of the Laboratory of the Engineer in the village Chutove. 8. CONSULTANCY SERVICES ON NETWORK MANAGEMENT AND DEVELOPMENT Consultancy services on Ukrainian network maintenance and development during the Project implementation were provided on the basis of ten contracts concluded during 2016-2018. The Contract between Ukravtodor and Swedish National Road Consulting AB (Sweden) was signed on April 25, 2017, for a total of 1,491,650 USD. The Contract provides for consultancy services on electronic tolling, weight-in-motion and automated speed enforcement systems design (Contract CS-8). The term of the Contract is 24 months. The Consultant started providing services on May 18, 2017, in accordance with the terms of the Contract. The Contract between Ukravtodor and EVRODORINZHPROEKT LLC was signed on August 31, 2016 for the total amount of 298,200 USD. The Contract provides for consulting services for undertaking geodetic surveying works, technical recording and passportization of public highway M-06 Kyiv - Chop on sections km 14+080 - km 129+600, km 151+730 - km 434+230 (Contract CS-9(a)). Validity of the Contract is 7 months. The Consultant commenced the services provision on September 14, 2016, according to the contractual terms. During the year 2017, amendments were made Nol and No2 to the Contract CS-9(a) dated February 02 and June 07, 2017, respectively. The amendments provide for VAT as a part of contract price, whereby the total contract price increased to 357,840 USD. Amendment No2 provided for the contract extension for 3 calendar months. The contact is complete. Contract between Ukravtodor and Proektdormisttechnologia LLC (Ukraine) was signed on August 23, 2016 for the total amount of 398,400 USD. The Contract provides for consulting services for elaboration of design of bidding documents (rehabilitation), maintenance and improvement of public highway M-06 Kyiv - Chop on sections km 14+080 - km 129+600, km 151+730 - km 434+230 (Contract CS-9(b)). Validity of the Contract is 5 months. The Consultant commenced the services provision on September 06, 2016, according to the contract terms. During the year 2017 Amendments were made to the Contract CS-9(b) No 1 - No6 dated 02.02.2017, 23.02.2017, 14.04.2017, 07.06.2017, 04.08.2017, 08.11.2017, respectively. The Amendments provide for VAT as a part of contract price, whereby the total Contract price increased to 478,080 USD. The term of the services provision was extended for 10 months. The contact is complete. Contract between Ukravtodor and JV Ukraine Geoinformation Systems LLC (Ukraine) together with EVRODORINZHPROEKT LLC was signed on November 18, 2016 for the total amount of 236,088 USD. The Contract provides for consulting services for undertaking geodetic surveying works, technical recording and passportization of public highway M-03 Kyiv - Kharkiv - Dovzhansky on sections km 18+000 - km 35+000, km 41+311 - km 191+400 and section of regional highway R-03 North-East bypass of Kyiv km 0+000 - km 19+256 with approaches to public highway M-03 km 0+000 - km 5+500 (Contract CS-9(c)). 19 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 Validity of the Contract is 6 months. The Consultant commenced the services provision on August, 04, 2017, according to the contract terms. The contact is complete. Contract between Ukravtodor and JV Proektdormisttechnologia LLC and PE Geodesic Engineering Agency (Ukraine) was signed on November 18, 2016 for the total of 118,080 USD. The Contract provides for consulting services for condition survey of the M-03 Road Kyiv-Kharkiv-Dovzhansky on section km 18+000 - km 35+000 and R-03 Road North-East bypass of Kyiv km 0+000 - km 19+256 with approaches to M-03 Road km 0+000 - km 5+500 (Contract CS-9(d)). Validity of the Contract is 2 months. The Consultant commenced the services provision on December, 05, 2016, according to the contract terms. During the year 2017, the Amendments Nol and No2 dated 08.02.2017 and 03.04.2017, respectively were made to the Contract CS-9(d) concerning contract extension for 5 months. The contact is complete. Contract between Ukravtodor and JV EGIS INTERNATIONAL (France) and Egis Ukraina LLC (Ukraine) was signed on December 01, 2016 for a total of 149,000 USD. The Contract provides for consulting services for elaboration of design documentation for repair and maintenance of the M-03 Road Kyiv-Kharkiv- Dovzhansky on section km 41+311 - km 191+400 (Contract CS-9(e)). Validity of the Contract is 3 months. The Consultant commenced the services provision on December, 08, 2016, according to the contract terms. During the year 2017, the Amendment No 1 was made to the Contract CS-9(e) dated 07.06.2017 concerning contract extension for 8 months. Contract between Ukravtodor and JV Lotti Ingegneria S.p.A. and Studi e Pianificazione del Territorio (Italy) was signed on July 27, 2017 for a total of 1,400,598 USD (Contract CS-10(a)). The Contract provides for consultancy Services for elaboration of a feasibility study (FS) to perform: - Highway repair H-02 Lviv - Ternopit on section from Lviv to Ternpil; - Rehabilitation and repair of highway M-12 Striy - Ternopil - Kirovograd - Znamyanka (through Vinnitsya) on section from Ternopit to Kirovograd (except km 291+240 - km 332+052); - Highway repair M-13 Kirovograd - Platonove on section from highway M-12 to Southern bypass of Kirovograd; - Repair of Southern bypass of Kirovograd; - Highway repair H-14 Oleksandrivka - Kirovograd - Mykolayiv on section from Kirovograd to Mykolayiv; - Rehabilitation and repair of highway M-14 Odesa - Melitopol - Novoazovsk on section from Mykolayiv to Kherson. Validity of the Contract is 24 months. The Consultant commenced the services provision on August 03, 2017, according to the contract terms. Contract between Ukravtodor and JV Project Planning Et Management Ltd. (Bulgaria) and Kocks Consult Gmbh (Germany) was signed on December 23, 2016 for a total of 150,000 USD (Contract CS-11). The Contract provides for consulting services on elaboration of tender documents for capital repair and reconstruction of M-03 Kyiv- Kharkiv - Dovzhanskyy road, sections km 4+144 of M-22 - km 340+961 of M- 03 (Lot 3.1), km 333+250 - km 336+873and km 340+961 -km 356+200 (Lot 3.2), km 356+200 - km 385+100 (Lot 3.3) and km 395+064 - km 420+050 (Lot 3.5). Validity of the Contract is 6 months. The Consultant commenced the services provision on December 30, 2016, according to the Contract terms. During the year 2017, Amendment No 1 was made to the Contract CS-11 dated 17.10.2017 concerning contract extension for 12 months. The Contract between Ukravtodor and IRD Engineering s.r.t. was signed on May 12, 2017, for a total of 296,700 USD. The Contract provides for the consuttancy services on elaboration of alternative preliminary designs including environmental studies for construction of Chutove bypass on public highway M-03 Kyiv-Kharkiv-Dovzhansky on section km 385 + 100 - km 395 + 064 (Lot 3.4) (Contract CS- 12)). Validity of the Contract is 4 months. The consultant commenced to provide services on May 22, 2017, in accordance with the terms of the Contract. During 2017, the Consultant completed the provision of services and provided a full package of reports and documentation in accordance with the terms of the Contract for the appropriate consideration by Ukravtodor. After consideration and approval by Ukravtodor of the documentation received, it is expected that a full settlement will be made with the Consultant. The Contract between Ukravtodor and an individual consultant - an individual entrepreneur Zakharov 0. was signed on December 1, 2016, for a total of 39,720 USD. The contract provides for consulting 20 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 services on social interaction issues. The main task of the consultant will be active cooperation with the local communities where the Projects will be implemented and with the World Bank consultants in order to ensure that the rights of representatives of local communities are respected within the framework of the relevant legislation of Ukraine and the World Bank's social policy (Contract CS-14). Validity of the Contract is 25 months. The consultant commenced to provide services in December 2016. During 2017, Amendment No 1 was made to Contract CS-14 dated December 1, 2016, to clarify the registration data of the Consultant as an individual - business entity. The Contract between Ukravtodor and an individual consultant - a nonresident individual Vladishescu V. (Moldova) was signed on November 20, 2017, for a total of 49,600 USD. The Contract provides for the provision of consultancy services for the Resettlement Action Plan in accordance with the criteria specified in the Terms of Reference and on the basis of the Migration Policy Framework for the Second Road Safety Improvement Project (Contract CS-15). Validity of the Contract is 6 months. The consultant commenced to provide services in November 2017. 9. OPERATING ENVIRONMENT The principal business activities are performed on the territory of Ukraine. Ukrainian economy is in a protracted crisis, complicated by military conflict in eastern Ukraine and unrecognized separation of the Autonomous Republic of Crimea. The stabilization of the situation in Ukraine largely depends upon the government's actions to address the armed conflict, reforming the financial, administrative, fiscal and legal systems of the country. In order to solve the above problems the government introduces a very stringent and unpopular measures, such as partial mobilization of reservists population, introduction of new taxes and fees, restrictions on cash and non-cash foreign currency transactions, and so on. 21 THE STATE ROAD AGENCY OF UKRAINE ROAD SECTOR DEVELOPMENT PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from 01 January 2018 to 31 December 2018 WORLD BANK AUDIT DOCUMENTATION CHECKLIST Name of Loan/Credit: |World Bank UKRAINE Loan/Credit # 8549-UA Audit Report. |Year ended December 31, 2018 Check if Check if Included N/A 1. Audit report (Opinion): A. Applicable accounting standards noted X B. Applicable auditing standards noted X C. Opinion rendered on all forms of withdrawals: 1. Statement of Expenditures X 2. Special Account X D. All sources of financing for the project are noted X II. Financial Reports: A. Revenue Earning Entity (all of the following are required): 1. Balance sheet X 2. Cash Flow Statement X 3. Income Statement X B. Non-Revenue Earning Entity (all of the following are required): 1. Balance sheet X 2. Summary of Sources and Uses of Funds X C. If applicable (refer to Loan Agreement): 1. Statement of Expenditure (SOE) Statement X 2. Special Account Statement X Ill. Notes to the Financial Statements ___ X IV. Reconciliation between World Bank records and project records X V. Management Letter _ X- 22