MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749-HR PROJECT FINANCIAL STATEMENTS AND DESIGNATED ACCOUNT STATEMENT TOGETHER WITH INDEPENDENT AUDITOR'S REPORTS FOR THE YEAR ENDED 31 December 2021 CONTENTS Independent Auditor's Report 1-2 Statement of Assets and Liabilities 3 Statement of Sources and Uses of funds by Project Categories 4 Statement of Uses of funds by Project Activities 5 Summary Reports and Statement of Expenditure 6- 11 Designated Account Statement 12 Notes to the Project Financial Statements 13 - 18 Management Letter 19 Checklist 21 MOORE Moore Audit Zagreb Audit d.o.o. za revizijske usluge TrgJ. F Kennedyja 6B.. 10000 Zagreb HRVATSKA Tel:+385 (0) 13667 994 E-mail:audit-revizija@audit.hr www.audit.hr INDEPENDENT AUDITOR'S REPORT 1. We have audited the attached Financial Statements for the year ended 31 December 2021 of the MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT (hereinafter: the "Project) financed under the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN No. 8749 - HR, which comprise the Statement of Assets and Liabilities, the Statement of Sources and Uses of funds, the Statement of Uses of funds by Project Activities, Statement of Expenditure (SOE) and Designated Account Statement (all together, the "Project Financial Statements"). 2. The Project Financial Statements are the responsibility of the Project's management. Our responsibility is to express an opinion on the Project Financial Statements based on our audit. 3. We conducted our audit in accordance with International Standards on Auditing issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall statement presentation. We believe our audit provides a reasonable basis for our opinion. The Project management's policy is to prepare the accompanying financial statements on the cash receipts and payments basis in conformity with International Public Sector Accounting Standards issued by the Public Sector Committee of the International Federation of Accountants. On this basis, cash receipts are recognized when received and cash expenditures are recognized when paid rather than when incurred. 4. In our opinion, Financial Statements of the MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT present fairly in all material respects the cash receipts and payments of the Project during the year ended 31 December 2021, in accordance with International Public Sector Accounting Standards issued by the Public Sector Committee of the International Federation of Accountants. 1 ,n indepen -idet,neember f hMr Vetu arin ted iw thruou,te b.mp n rldf, MOORE Moore Audit Zagreb 5. With respect to Summary Statement of Expenditure ("SOE") - Application for Loan Withdrawal: (a) adequate supporting documentation has been maintained to support claims for reimbursements of expenditures incurred; (b) the Summary Statement of Expenditure has been reconciled to the other Project Financial Statements and (c) the expenditure disbursements underlying the Summary Statement of Expenditure have been made in accordance with the purposes intended in the Loan Agreement No. 8749 - HR. 6. Regard to the establishment of a severance package, which includes support for retraining, counselling and mediation in employment, we confirm the following: a) Eligibility of reported expenditures included in PFS and Disbursement Withdrawal Applications ensuring that the funds were spent according to the intended purpose as agreed in the Loan Agreement and Project Appraisal Document. b) The payments have been made to eligible beneficiaries c) Due Personal Income Tax, Health Insurance, Social or other related charges in retrenchment payments have been paid in due time d) Retrenchment payments have been calculated and paid in accordance with the respective law and regulations, e) There have been proper authorizations of severance payroll, f) There have been correct data transfer of calculated retrenchment amounts to the Remuneration Departments. g) That employee release formal procedures have been fulfilled. h) That sufficient internal control procedures are in place. i) That new recruits in HAC were not past employees HAC which had received retrenchment payment, j) That the retrenchment payments claimed to the World Bank have not been financed by a EBRD loan, Zagreb, 06 April 2022 Audit d.o.o. Trg Johna Fitzegeralda Kennedyja 6b 10000 Zag b Darko fari6, director, certified auditor 2 in inkpene A e hr fi f Inor Global Vern -rk Limited ".."'bers in principal .res throughout the n rW STATEMENT OF ASSETS AND LIABILITIES For the year ended 31 December 2021 31. December 31. December 31. December 31. December 31. December 2021. 2020. 2019. 2018. 2017. EUR EUR EUR EUR EUR Assets Project expenditures 16.094.438 15.329.458 13.636.377 11.429.522 2.135.006 Designated Account 195.139 607.497 690.685 515.343 558.389 HAC Transitional account 0 824 824 824 0 TOTAL 16.289.577 15.937.779 14.327.886 11.945.689 2.693.395 Sources IBRD loan no. 8749 - HR - Designated Account 11.700.000 11.350.000 9.750.000 7.370.000 1.000.000 - Reimbursements 0 0 0 0 0 - Direct Payments 4.572.512 4.572.512 4.572.512 4.572.512 1.693.395 - Exchange rate difference 17.065 15.267 5.374 3.177 0 TOTAL 16.289.577 15.937.779 14.327.886 11.945.689 2.693.395 The first prepayments on the Designated Account were received on December 11, 2017, while the first costs of the Project were incurred on December 14, 2017. The Project costs shown in 2018 are less than the actual costs paid for the amount of EUR 4.501. The Project Implementation Unit has corrected this difference in the Project financial statements for 2019. 3 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR v � о о о� � °°о cNo с й и и о и � г� vi ui о ui � v й rn °о °т и р ui ri c�i ui ° о о о °о °о о °о °о с о о о о о � � � о° °м ° °о °о � со о пi � о о ш � c�i и � пi c�i с� � с� � ��r с� оо � о о ао ш д й � aNO й v � °о � � � + ' �' с� � rn N ° rn �'+ и и о м г� о Г � ❑ о + Г v cD Г � с0 Е � N N � + U м � С и � � О и СО СО О О tD � о о О О СО М О О О � � С'7 и и И � и [� о М М М о � СО � � г N � N N N О) О f� l0 О СО О �О о � е- � 1� � рр М � и М � и и О � � а�0 N й � N � (О N Oi � � 01 :.i � � �и о о�и �и о о �и �_ � � � � � Ш м и са и со � ~ N сои с°� со� со� д� V c�i лi пi лi � V � о о � о о � � С Ш о о о о о U С О с�°� N й rn rn т й о � и ш и и J Г Г' < � �F� а а = и v о rn и v� о и о� т ' � а�о й � а�о й � Q и о N � ° ° ° = ш г � � � Ш а� LL оо О ° � с и �г _г �а Ш N й � С � N и � О � +✓ U v � L г � � � �`+ Q � С Н = О и о ш v й Ш t� Ф � � и V Q � � т > о � � г L О м 'а� ш й•°' и � v) � � о rn° = а�с Шп ` � ❑ �� Ё г с ш л О� � � � � � �L � �ор Z с`в � ¢� ш -° � о � � w � ш � с � ш � � _ Ш>, о ссо г��о L т ,i о.5 � ш г О ш� � J�� � о с.� � � �'� 1- r � ❑'й .� L и v Н ш -° Ш = �s � �а р � Н О о т о� о о й °о � ш с о О� И LL И � � � Н � (.7 т�❑ Н � С 1 и � °O сOOо Г N м� м оC°о rn й��°о cNc � � м v � оо и о с� � ао � с� о и � � и � ri о г� о oi о ui °� � о й т м � р v м с� � с°� °о rn �_ � р м � м v N� и N и о о о о о о о о о о о о о о о о о о о о о о о о о о о с о о о о о о о о о о о о о '� о о о о о о о о о о о о о ° r м и о оо о и � о о о с� о о (6 00 N О О 00 N о О СО М 01 О О � N � N<О М и � N �"1 N N � N 00 N М N � � м� N и С!� 1l') О OD N М N 00 СО N М � О� 1� и М � м и а0 l0 � О О 1� а0 � ор h � г`> со � c�i м со oi v пi oi oi oi о � = N и 1� N а0 а0 а0 о � Ср р) h(р � Q1 О + а0 М � М (р � О о и � h О � N + и � � и оо сд ш ш м � �� + '� � с� + � сиi у �о и U М о� о о о о о о о о о о о �_ � rn о о о о и ~ � С> М ш N г Т N :V N ш с� г� и о ео со rn о о ао � о со rn rn с� � �ч о с� м о � оо ао г� и сс � и м rn rn и Н Г / � N о� й rn v� м й м м й o�i V ьь N и м о � и � с� с� О= ri � v ui oi о о rn и ш и � и � о ао и о и �� о о и rn и v о м� и а~ °i и w v о со со и rn т ао � оо о м ui �ri v ао ri вi °i �r о �д N и и � с� ш v rn м и о р О м М N 00 м N 00 N �, _ т N U = ш ° п`oi й о~о rn м � о�о о°° й° о у� � � N СО а0 М о о h О � J � ° � N N аО О 00 �_ СО N м о � М = � N Г М� � N N М N N � О G� V � � � � i% а о и о и о � и м о и о et и ш О � о � и и ш и и � � о г� 2 � и со ti ао и v и � �- и � G� Ш о и О� г � г� оо � и <с lL Q � N � � � м i. 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Payment EUR/HRK-- SOE No.1 Consul, 128.740 17.120 14.12.2017. 7,520 SOE No.1 Consul. 3.201.062 423.349 19.12.2017. 7,561 SOE No.1 Consul. 41.250 5.490 26.1.2018 7,514 SOE No.1 Consul. 41.250 5.490 30.1.2018 7,514 SOE No.1 Consul- 41.250 5.564 28.2.2018 7,414 SOE No.1 Consul. 41.250 5.564 1.3.2018 7,414 SOE No.1 Consul- 41.250 5.543 28.3.2018 7,441 SOE No.1 Consul. 41.250 5.543 30.3.2018 7,441 SOE No.1 Consul- 338.184 45.512 13.4.2018 7,431 SOE No.1 Consul. 370.000 49.736 18.4.2018 7,439 TOTAL Application No.6 4.285.486 568.911 Amount of Amount paid from Exchange Type of eligible cost - Designated Date of Rate Application No. 6 cost HRK Account - EUR Payment EUR/HRK from 31.12.2017 SOE No.1 Retrench. 24.617.265 3.304.276 to 24.04.2018 7,45 Total Application No.6 24.617.265 3.304.276 Amount of Amount paid from Exchange Type of eligible cost - Designated Date of Rate -A plication No. 9 cost HRK Account - EUR Payment EUR/HRK SOE No.3 Consul. 143.646 19.311 30.4.2018, 7,438 SOE No.3 Consul. 124.877 16-802 3.5.2018. 7,432 SOE No.3 Consul, 311.631 41.938 4.5.2018, 7,431 SOE No.3 Consul- 2.090.660 282.233 25.5.2018, 7,408 SOE No.3 Consul. 154.055 20.781 30.5.2018. 7,413 SOE No.3 Consul. 6.561 885 1.6.2018. 7,415 Total Application No.9 2.831.430 381.950 6 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR SUMMARY REPORTS AND STATEMENT OF EXPENDITURE For the year ended 31 December 2021 Amount of Amount paid from Exchange Type of eligible cost - Designated Rate Application No. 10 cost HRK Account - EUR Date of Payment EUR/HRK from 24.04.2018 SOE No.3 Retrench. 10.235.095 1.373.816 to 24.05.2018 7,45 Total Application No.10 10.235.095 1.373.816 Amount of Amount paid from Exchange Type of eligible cost - Designated Date of Rate Application No. 11 cost HRK Account - EUR Payment EUR/HRK SOE No.4 Consul. 198.690 26.900 11.6.2018 7,386 SOE No.4 Consul. 138.175 18.733 20.6.2018 7,376 SOE No.4 Consul. 188.078 25.470 29.6.2018 7,384 Total Application No.11 524.943 71.103 Amount of Amount paid from Exchange Type of eligible cost - Designated Date of Rate Application No. 13 cost HRK Account - EUR Payment EURIHRK SOE No.5 Consul. 41.250 5.593 27.7.2018 7,376 SOE No.5 Consul. 107.205 14.478 30.7.2018 7,420 SOE No.5 Consul. 935.352 126.589 31.8.2018 7,393 SOE No.5 Consul. 3.234.820 437.547 20.9.2018 7,393 SOE No.5 Consul. 45.756 6.160 28.9.2018 7,428 SOE No.5 Consul. 129.608 17.511 3.10.2018 7,402 SOE No.5 Consul. 518.431 70.042 5.10.2018 7,402 SOE No.5 Consul. 32.774 4.412 15.10.2018 7,428 Total Application No.13 5.045.196 682.332 Amount of Amount paid from Exchange Type of eligible cost - Designated Date of Rate Application No. 13 cost HRK _ Account - EUR Payment EUR/HRK From 25.05.2018 SOE No.5 Retrench. 678.585 91.084 to 30.09.2018 7,45 Total Application No.13 678.585 91.084 7 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR SUMMARY REPORTS AND STATEMENT OF EXPENDITURE For the year ended 31 December 2021 Amount of Amount paid from Exchange Type of eligible cost - Designated Date of Rate Application No. 14 cost HRK Account - EUR Payment EUR/HRK SOE No.6 Consul. 41.250 5.557 29.10.2018 7,423 SOE No.6 Consul. 41.250 5.556 30.10.2018 7,424 SOE No.6 Consul. 73.823 9.944 31.10.2018 7,424 SOE No.6 Consul. 1.505 203 31.10.2018 7,424 SOE No.6 Consul. 41.250 5.567 14.11.2018 7,409 SOE No.6 Consul. 259.945 35.021 30.11.2018 7,423 SOE No.6 Consul. 32.493 4.378 28.11.2018 7,423 SOE No.6 Consul. 32.493 4.378 3.12-2018 7,423 SOE No.6 Consul. 1.634.606 220.268 10.12.2018 7,421 SOE No.6 Consul. 96.462 12.990 19.12.2018 7,426 SOE No.6 Consul. 1.178 159 21.12.2018 7,416 SOE No.6 Consul. 415.251 56.198 24.12.2018 7,389 SOE No.6 Consul. 160.793 22.177 27.12.2018 7,251 Total Application No.14 2.832.299 382.396 Application No. 15 Amount of Amount paid Exchange Type of eligible cost - from Designated Date of Rate cost HRK Account - EUR Payment EUR/HRK SOE No.7 Consul. 259.152 34.938 25.1.2019 7,417 SOE No.7 Consul. 68.000 9.167 30.1.2019 7,418 SOE No.7 Consul. 1.818.582 244.927 31.1.2019 7,425 SOE No.7 Consul 406.803 54.893 12.2.2019 7,411 Total Application No.15 2.552.537 343.925 Amount paid Application No. 16 Amount of from Exchange Remark Type of eligible cost Designated Date of Rate cost - HRK Account - EUR Payment EUR/HRK SOE No.8 Consul. 360 49 30.7.2018 7,380 Correction SOE No.8 Consul. 36.744 4.947 28.9.2018 7,428 Correction SOE No.8 Consul. (3.669) (495) 27.12.2018 7,416 Correction SOE No.8 Consul. 94.677 12.755 28.2.2019 7,423 SOE No.8 Consul. 68.000 9.161 1.3.2019 7,423 SOE No.8 Consul. 43.502 5.875 20.3.2019 7,405 SOE No.8 Consul. 1.193.278 160.975 29.3.2019 7,413 Total Application No.16 1.432.892 193.267 8 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR SUMMARY REPORTS AND STATEMENT OF EXPENDITURE For the year ended 31 December 2021 Application No. 17 Amount of Amount paid Exchange eligible cost - from Designated Date of Rate Type of cost HRK Account - EUR Payment EURIHRK SOE No.9 Consul. 1.376.333 185.331 3.4.2019 7,426 SOE No.9 Consul. 75.295 10.150 11.4.2019 7,418 SOE No.9 Consul. 208.385 28.099 15.4.2019 7,416 SOE No.9 Consul. 34.000 4.582 29.4.2019 7,420 SOE No.9 Consul. 132.524 17.848 30.4.2019 7,425 SOE No.9 Consul. 177.860 23.992 2.5.2019 7,413 SOE No.9 Consul. 67.535 9.088 17.5.2019 7,431 SOE No.9 Consul. 64.600 8.715 30.5.2019 7,413 SOE No.9 Consul. 105.993 14.300 31.5.2019 7,412 SOE No.9 Consul. 711.439 95.968 5.6.2019 7,413 SOE No.9 Consul. 32.403 4.375 10.6.2019 7,406 SOE No.9 Consul. 64.684 8.719 21.6.2019 7,419 SOE No.9 Consul. 365.473 49.250 26.6.2019 7,421 SOE No.9 Consul. 1.533.648 206.651 28.6.2019 7,421 Total Application No.17 4.950.172 667.068 Application No. 18 Amount of Amount paid Exchange Type of eligible cost - from Designated Date of Rate cost HRK Account - EUR Payment EUR/HRK SOE No.10 Consul. 71.761 9.681 11.7.2019 7,412 SOE No.10 Consul. 570.970 77.158 23.7.2019 7,400 SOE No.10 Consul. 64.626 8.719 25.7.2019 7,412 SOE No.10 Consul. 1.100.778 148.553 26.7.2019 7,410 SOE No.10 Consul. 1.217.103 164.679 28.7.2019 7,391 SOE No.10 Consul. 34.000 4.599 30.7.2019 7,393 SOE No.10 Consul. 258.736 34.875 31.7.2019 7,419 SOE No.10 Consul. 258.504 34.875 2.8.2019 7,412 SOE No.10 Consul. 57.800 7.836 30.8.2019 7,376 SOE No.10 Consul. 253.934 34.403 9.9.2019 7,381 SOE No.10 Consul. 1.367.853 185.331 24.9.2019 7,381 SOE No.10 Consul. 43.536 5.888 30.9.2019 7,394 Total Application No.18 5.299.601 716.597 9 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR SUMMARY REPORTS AND STATEMENT OF EXPENDITURE For the year ended 31 December 2021 Application No. 19 Amount of Amount paid Exchange Type of eligible cost - from Designated Date of Rate cost HRK Account - EUR Payment EUR/HRK SOE No.11 Consul. 68.000 9.186 30.10.2019 7,402 SOE No.11 Consul. 78.401 10.591 31.10.2019 7,403 SOE No.11 Consul. 43.337 5.838 13.11.2019 7,423 SOE No.11 Consul 51.000 6.843 29.11.2019 7,452 SOE No.11 Consul 61.735 8.284 2.12.2019 7,452 Total Application No.19 302.473 40.742 Application No. 20 Amount of Amount paid Exchange Type of eligible cost - from Designated Date of Rate cost HRK Account - EUR Payment EUR/HRK SOE No.12 Consul. 911.325 122.375 20.12.2019 7,447 SOE No.12 Consul 55.675 7.487 24.12.2019 7,436 SOE No.12 Consul. 130.144 17.511 27.12.2019 7,432 SOE No.12 Consul. 147.162 19.792 30.12.2019 7,435 SOE No.12 Consul. 580.426 78.091 31.12.2019 7,433 Total Application No.20 1.824.732 245.256 Amount of Amount paid Exchange Application No. 21 Type of eligible cost - from Designated Date of Rate cost HRK Account - EUR Payment EUR/HRK SOE No.13 Consul. 397.358 53.397 30.1.2020 7,442 SOE No.13 Consul. 56.350 7.571 31.1.2020 7,443 SOE No.13 Consul. 535.792 71.976 18.2.2020 7,444 SOE No.13 Consul. 822.645 110.603 20.2.2020 7,438 SOE No.13 Consul. 32.513 4.375 24.2.2020 7,432 SOE No.13 Consul. 2.206.221 296.619 28.2.2020 7,438 SOE No.13 Consul. 102.219 13.723 6.3.2020 7,449 SOE No.13 Consul. 408.877 54.893 9.3.2020 7,449 Total Application No.21 4.561.975 613.157 Amount of Amount paid Exchange Application No. 22 Type of eligible cost - from Designated Date of Rate cost HRK Account - EUR Payment EUR/HRK SOE No.14 Consul. 910.719 122.375 10.3.2020 7,442 SOE No.14 Consul. 27.430 3.675 27.3.2020 7,464 SOE No.14 Consul. 86.700 11.622 30.3.2020 7,460 Total Application No.22 1.024.849 137.672 10 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR SUMMARY REPORTS AND STATEMENT OF EXPENDITURE For the year ended 31 December 2021 Amount of Amount paid Exchange Application No. 23 Type of eligible cost - from Designated Date of Rate cost HRK Account - EUR Payment EURJHRK SOE No.15 Consul. 154.142 20.476 27.4.2020 7,528 SOE No.15 Consul. 1.249.129 167.945 29.4.2020 7,438 SOE No.15 Consul. 399.560 52.532 30.4.2020 7,606 SOE No.15 Consul. 781.641 105.063 12.5.2020 7,440 SOE No.15 Consul. 3.413 457 13.5.2020 7,457 SOE No.15 Consul. 286.381 37.684 29.5.2020 7,599 SOE No.15 Consul. 1.598.241 210.126 2.6.2020 7,606 SOE No.15 Consul. 13-056 1.726 10.6.2020 7,564 SOE No.15 Consul. 29.920 3.945 26.6.2020 7,584 SOE No.15 Consul. 113.730 14.996 30.6.2020 7,584 Total Application No.23 4.629.213 614.950 Amount of Amount paid from Exchange Application No. 24 Type of eligible cost - Designated Date of Rate cost HRK Account - EUR Payment EURIHRK SOE No.16 Consul. 34.053 4.487 2.7.2020 7,588 SOE No.16 Consul. 373.289 49.250 23.7.2020 7,579 SOE No.16 Consul. 88.672 11.731 30.7.2020 7,559 SOE No.16 Consul. 59.450 7.865 31.7.2020 7,559 SOE No.16 Consul. 132.677 17.552 3.8.2020 7,559 SOE No.16 Consul. 186.659 24.775 13.8.2020 7,534 SOE No.16 Consul. 888.082 118.125 14.8.2020 7,518 SOE No.16 Consul. 157.096 20.962 31.8.2020 7,494 SOE No.16 Consul. 225.209 29.931 25.9.2020 7,524 SOE No.16 Consul 66.585 8.855 30.9.2020 7,519 Total Application No.24 2.211.772 293.533 Amount of Amount paid Exchange Application No. 25 eligible cost from Designated Date of Rate Type of cost - HRK Account - EUR Payment EUR/HRK SOE No.17 Consul. 70.720 9.374 30.10.2020 7,544 SOE No.17 Consul- 63.000 8.348 2.11.2020 7,547 SOE No.17 Consul- 60.384 7.979 30.11.2020 7,568 SOE No.17 Consul. 60.928 8.068 30.12.2020 7,552 Total Application No.25 255.032 33.769 11 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR SUMMARY REPORTS AND STATEMENT OF EXPENDITURE For the year ended 31 December 2021 Amount paid Application No. 26 Amount of from Exchange eligible cost Designated Date of Rate Type of cost - HRK Account - EUR Payment EUR/HRK SOE No.18 Consul. 61.200 8.120 29.1.2021 7,537 SOE No.18 Consul. 77.000 10.192 25.2.2021 7,555 SOE No.18 Consul. 34.000 4.499 26.2.2021 7,557 SOE No.18 Consul. 27.200 3.599 3.3.2021 7,558 SOE No.18 Consul. 34.000 4.487 28.3.2021 7,578 SOE No.18 Consul. 27.200 3.587 31.3.2021 7,582 Total Application No.26 260.600 34.484 Amount paid Amount of fom Date Exchange Application No. 27 Type of cost eligible cost Dsnt Paye Rate - HRK Designated Payment EURIHRK Account - EUR SOE No.19 Consul. 21.000 2.769 11.4.2021. 7,583 SOE No.19 Consul. 61.200 8.085 30.4.2021- 7,570 SOE No.19 Consul. 61.200 8.102 28.5.2021. 7,553 SOE No.19 Consul 370.438 49.250 17.6.2021. 7,522 SOE No.19 Consul 61.200 8.149 30.6.2021. 7,510 Total Application No.27 575.038 76.355 Amount of Amount paidExchange from Date of Ecag Application No. 28 Type of cost eligible cost Dsnt Paye Rate - HRK Designated Payment EU/R Account - EUR SOE No.20 Consul. 57.120 7.625 30.7.2021 7,491 SOE No.20 Consul. 34.000 4.533 29.8.2021. 7,501 SOE No.20 Consul. 27.200 3.626 30.8.2021 7,501 SOE No.20 Consul. 61.200 8.179 29.9.2021 7,483 Total Application No.28 179.520 23.963 Amount p aid Amount of fom Date Exchange Application No. 29 Type of cost eligible cost Dsnt Paye Rate - HRK Designated Payment EU/R Account - EUR SOE No.21 Consul. 61.200 8.164 29.10.2021. 7,496 SOE No.21 Consul. 34.000 4.525 26.11.2021. 7,514 SOE No.21 Consul. 27.200 3.622 30.11.2021. 7,509 SOE No.21 Consul. 657.692 87.553 01.12.2021. 7,512 SOE No.21 Consul. 1.003.995 133.545 30.12.2021. 7,519 SOE No.21 Consul. 2.945.905 391.944 29.12.2021. 7,516 Total Application No.29 4.729.992 629.353 12 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR DESIGNATED ACCOUNT STATEMENT for the year ended 31 December 2021* (EUR) Account No- 1001005-1863000160 Depository Bank Ministry of Sea, Transport and Infrastructure Address Prisavlje 14, Zagreb Loan IBRD Loan No. 8749 - HR 2021. 2020. 2019. 2018. 2017. EUR EUR EUR EUR EUR Opening balance at the beginning of 607.497 690.685 515.343 558.389 0 the period Add: IBRD Payments 350.000 1.600.000 2.380.000 6.370.000 1.000.000 Available funds during the period 957.497 2.290.685 2.895.343 6.928.389 1.000.000 Less: Payments for eligible expenditures over (764.155) (1.693.081) (2.206.855) (6.415.399) (441.610) the period Exchange difference 1.798 9.893 2.197 3.177 0 HAC transitional account 0 0 0 (824) 0 Total (/62.3b/) (1.683.188) (2.204.6b8) (6.413.046) (441.610) Closing balance at the end of the 195.140 607.497 690.685 515.343 558.389 period The Closing balance in 2021, 2020 and 2019 does not include the transitional account in HAC 13 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR NOTES TO THE PROJECT FINANCIAL STATEMENTS For the year ended 31 December 2021 1. GENERAL INFORMATION On 8 May 2017, the International Bank for Reconstruction and Development ("IBRD") and the Republic of Croatia ("Government" or "Borrower") signed a Loan Agreement for the Road Sector Modernization and Restructuring Project ("the Loan") in amounting to 22 million euros. The objectives of the project are to improve institutional efficiency, increase operational efficiency and improve the debt repayment capacity of companies in the road sector of the Republic of Croatia. The project consists of two components: Component A (1.) Institutional Strengthening and Sector Reforms The objective of this component is to establish an institutional framework for the road sector. Component B (2.) Operational Restructuring of Road Sector Companies The objective of this component is to implement management tools and carry out the revenue enhancement and cost rationalization actions required to improve operational and financial sustainability of the Road Sector Companies. A summary of the main project components is shown below: Component A (1.) Institutional Strengthening and Sector Reforms la) Financial Advisor for Transactions, and the revision of the financial strategy implemented at the end of 2021. 1b) Transport Sector Planning and Road Sector Governance and Monitoring: i) Development of a directorate in the Ministry of Sea, Transport and Infrastructure (MSTI) to coordinate strategic planning and public investment management. ii) Development of a sector governance framework including definition of KPIs and monitoring arrangements iii) Procurement of equipment for the operation of the Road Infrastructure Sector iv) Improvement and standardization of accounting practices across the Road Sector Companies. In 2021 was made a complementary analysis of the impact of changes in accounting policies on the financial statements of companies 1c) Implementation support 14 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR NOTES TO THE PROJECT FINANCIAL STATEMENTS For the year ended 31 December 2021 Component B (2.) Operational Restructuring of Road Sector Companies 2a) Road classification and standards i) Implement a technical classification of the public road network; ii) Develop consistent sets of maintenance-related regulations and specifications for all classes of roads. 2b) Road Asset Management System i) Development of a multi-year costed road maintenance program by each Road Sector Company. 2c) Rationalization of Operations and Business Functions - Motorways i) Development of action plans and their implementation to improve technical and business efficiency and effectiveness through optimization of management and roads' operations and maintenance costs, outsourcing enhancement and rationalization of technical units, administrative activities and revenue improvements. ii) Provision of staff retrenchment packages to include support for retraining, counselling, advisory services and employment intermediation. iii) Automation (robotization) of 15 business processes in HAC. 2d) Tolling 2e) Operational and business rationalization of Hrvatske ceste d.o.o. (HC) i) the restructuring and transition of HC to a regional management system based on six regions; ii) development of improved maintenance contracting practices (from 2023); and 2f) Road safety (i) Analysis of the social cost of traffic accidents 15 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR NOTES TO THE PROJECT FINANCIAL STATEMENTS For the year ended 31 December 2021 Project execution Prolect Steering Committee To manage and monitor all technical and financial aspects of road sector reform, debt refinancing and strategic management of project implementation, the Project Steering Committee was established within the MMPI, led by the Minister of the Ministry of Sea, Transport and Infrastructure Proiect Implementation Unit (PIU) Project Implementation Unit ("PIU") founded by Ministry of Sea, Transport and Infrastructure, it is responsible for coordinating the implementation and communication of project activities, including responsibility for: i) technical investments, retrenchment and human resources aspects; ii) financial management and procurement; iii) ensuring compliance with environmental and social safeguards; iv) preparing and circulating progress reports every semester; and v) monitoring and evaluation of Project activities. Subsidiary Agreement and Inter-Institutional Agreements To facilitate the carrying out of Parts 2b), 2c), 2d) and 2f) of the Project, the Borrower, through MOF, shall make part of the proceeds of the Loan available to HAC under a subsidiary agreement between the Borrower, through MOF and MSTI, and HAC. In the following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan: Amount of the Percentage of Loan Category Allocated Expenditures to be (EURO) financed Goods, non-consulting services, consultant's services and Training for the Proiect 15.230.000 100% Retrenchment Payments 4.770.000 100% Unallocated 2.000.000 TOTAL AMOUNT 22.000.000 The Loan Closing Date is December 31, 2021 16 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR NOTES TO THE PROJECT FINANCIAL STATEMENTS For the year ended 31 December 2021 2. LOAN AGREEMENT WITH INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT The Loan Agreement stipulates that the Republic of Croatia shall pay the initial fee to the Bank in the amount of 0.25% of the total amount. The Republic of Croatia shall pay the initial fee not later than sixty days after the Effective Date. 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 Fixed Spread; provided, however, that the interest payable shall in no event be less than zero percent (0%) per annum; and provided furthermore 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 The interest of the principal amount of the Loan is paid half-yearly, with payment dates on May 15 and November 15 in each year. 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: Instalment Share Principal Payment Date (Expressed as a Percentage) On each May 15 and November 15 Beginning May 15, 2021 through May 15, 2026 8,33% On November 15, 2026 8,37% 3. BASIS OF PREPARATION The special purpose financial statements of the Project are prepared under the cash basis of accounting. Under the cash basis of accounting, transactions are recorded when cash is paid or received by the Project. 4. SIGNIFICANT ACCOUNTING POLICIES Following are the principle accounting policies adopted in preparation of these special purpose financial statements. a) Functional and presentational currency The special purpose financial statements are prepared in Euro. Transactions arising in currencies other than Euro are translated into the Euro using the Croatian National Bank exchange rates prevailing at the date of transaction. The designated account for the loan is opened at the Ministry of Sea of Transport and Infrastructure. 17 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR NOTES TO THE PROJECT FINANCIAL STATEMENTS For the year ended 31 December 2021 b) Funds received Funds received represent cash received from the IBRD and they are recognized when received, or in the case of direct payments from a loan account (initial fee) when the Project receives notification of payment from the IBRD. c) Expenditures Expenditures represent cash expenditures of the Project and are recognized when paid. 5. SUBSEQUENT EVENTS On 2. February 2022, in accordance with the provisions of the contracts, 4 invoices were paid in the total amount of EUR 114.181,66 relating to services and goods delivered in December 2021. Except this, after 31 December 2021, there were no events that would significantly affect the financial statements of the Project, which, consequently, should be disclosed. 6. ACCOUNTING RECORDS AND BASE FOR PRESENTATION All transactions of the Project are recorded within MSTI's business books. The amount of retrenchment payments which has been paid-out from the HAC business account are recorded in the HAC's business books. The project's accounting records are also included in the auxiliary tables (Excel) on the basis of which the attached financial statements of the Project are created. 7. DEVIATIONS FROM AGREED CONDITIONS We did not identify deviations from the agreed conditions. 18 MODERNIZATION AND RESTRUCTURING OF THE ROAD SECTOR PROJECT International Bank for Reconstruction and Development Loan no. 8749 - HR