HALr Inienjersk biro c.o.o. Riieka, Srsm y u.1 T051 322303 F 725377 SInzenjerski Biro L r'evliijaib.hl www ibr.hr INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS FOR THE PROJECT ,,INNOVATION AND ENTREPRENEURSHIP VENTURE CAPITAL REPORTING YEARS 2015 AND 2016 HAMAG BICRO - Croatian agency for SMEs, innovations and investments ZAGREB Rijeka, june 2017. HAMAG BIIRO FINANCIAL STATEMENTS FOR THE PROJECT "INNOVATION AND ENTREPRENEURSHIP VENTURE CAPITAL" FOR LOAN PERIOD PHASE FOR 2015 AND 2016 HAMAG BICRO - Croatian agency for SMEs, innovations and investments ZAGREB Zagreb, june 2017. godine H IAMA~ BI@RO - Croatian agency for SMEs, innovations and investments Content INDEPENDENT AUDITOR'S REPORT...................................................................................................................1 FINANCIAL STATEMENTS 2015 AND 2016 - INNOVATION AND ENTREPRENEURSHIP VENTURE CAPITAL PROJECT (IBRD LOAN 8518HR)..........................................................................................................................1 RESPONSIBILITY FOR ENCLOSED FINANCIAL STATEMENTS............................................................................1 1. INTRODUCTION ....................................................................................................................................... 2 1.1. GENERAL LOAN INFORMATION ........................................................................................................ 2 1.2. ACTIVITIES IN 2015..............................................................................................................................2 1.3. ACTIVITIESIN 2016 ................................................................................................................................ 3 2. GENERAL PROJECT INFORMATION .................................................................................................. 3 2.1. INTRODUCTIO N ..................................................................................................................................... 3 2.2. PROJECTIMPLEMENTATION .......................................................................................................... 3 2.3. MAIN PROJECTCOMPONETS .......................................................................................................... 4 2.3.1. Component 1: Pilot Venture Capital Fund (EUR 15.6 million) .................................................... 4 2.3.2. Component 2: Seed Co-Investment Fund (EUR 2.5 million)..........................................................4 2.33. Component 3: Technical Assistance (EUR 1.5 million) .................................................................5 2.4. 'IBRD LOAN PROJECT FINANCING ......................................................5 2.4.1. General inform ation.................................................................................................................. . 5 FINANCIAL DATA AS OF DECEMBER 31, 2016 ON THE PROJECT..................................................................................-.6 2.42. Project financing ................................................................... ..................... 6 2,5. DESCRIPTION OF THE USE OFTHE LOAN..........................................................................................7 2.5.1. In general............................................................................ .......................................... .......... 7 2.5.2. Projectfinancing HAMAG-BICRO's Activity in State Treasury...................................................7......7 3. REPORTING AND ACCOUNTING FRAMEWORK ......................................................................................... 8 3.1. REPORTING FRAMEWORK .................................................... 3.2. ACCOUNTING FRAMEWORK ..................................................8 4. BASIC DEFINITIONS AND CONVENTIONS .............................................................................................9 4.1. DEFINITIONS .............................................................9 4.2. CONVENTIONS ...........................................................9 5. PROJECT BALANCE SHEET ...................................................................................................................... 10 5.1. INTRO DUCTIO N ............................................................................................................................... 10 5.2. PROJECT BALANCE SHEET (IN EUR) AS AT DECEMBER 31,2016 ..............................10 5.2.1. Front End Fee. ............................................... 10 6. PROJECT SOURCES & USES OF FUNDS FOR THE PERIOD FROM JANUARY 1, 2016 TO DECEMBER 31, 2016 (IN EUR CURRENCY) ............................................................................................................................................ 11 6.1. PROJECTSOURCES & USES OF FUNDS ............................. ..............12 6.1.1. Category 4 - Consulting services, Training and Operating costs............................................... 14 6.12. Variance .......................................................14 6.2. IBRD LOAN 8518HR BALANCE .................................................14 6.2.1. Breakdown of changes throughout 2016............. ................ ...........14 6.3. USES OF FUNDS BY PROJECT ACTIVITIES FOR THE PERIOD FROM JANUARY 1, 2016 TO DECEMBER 31, 2016 (IN EUR URRENCY ..................................................... 15 6.3.1. Introdiction.............................................................................. ........ ... ...............15 6.3.2. Statement of uses of funds by project activities .......................................16 H1AMAG I RO * Croatian agency for 5MES, innovations and investments 6.3.3. Sub Component 3.4. - Project managament..........................................................................17 DURING 2016, THIS COMPONENT WAS PAID IN THE AMOUNT OF EUR 35,969.16 (EQUIVALENT TO THE PAID AMOUNT OF HRK 270,586.26). AS STATED IN THE DETAILED REVIEW OF THE PAYMENT IN PARAGRAPH 8.3.2.1'- PAYMENTS FROM THE LOCAL PROJECT (OPERATIONS) ACCOUNT AT THE TREASURY IN 2016, CONVERTED INTO THE CURRENCY OF THE LOAN (EUR) IN 2016, REFERS TO CONSULTING IN AMOUNT OF EUR 29,829.60 (HRK 224,400.00) WHILE 6.139, 56 EUR (46,186.26 KN) REFERS TO OPERATING COSTS.............17 6.3.4. Va rance.............................................................................................................................. . .... 1 7 7. STATEMENT OF EXPENDITURES (SOE) - SUPPORTING DOCUMENTATION.........................................17 7.1. INTRO DUCTIO N...................................................................................................................................17 71.1. Statement of expenditures - SoE for withdrawals in 2016, by suppliers and the Funds............18 7.122 Payments to Designated Account based on withdrawal application and auditor's obligation to exam ine these paym ents..................................................................................... ................................... 20 8. STATEMENT OF PROJECT DESIGNATED ACCOUNT IN 2016 ................................................................20 8.1. BACKGROUND OF DESIGNATED ACCOUNTS .................................................................................... 20 8.1.1. Designated Account at CNB ...................................................................................................... 20 8.1.2. Local Project (Operations) Account at the Treasury, through which Designated Account at CNB operates21 8.21 DESIGNATED ACCOUNT STATEMENT............. ............................................................................... 21 8.2.1. Designated Account (DA) Statement as at December 31, Current year (in EUR Currency)............21 8.2.2. Project Account (PA) Statement in Treasury as at December 31, 2016 (in HRK Currency) ............22 8.2.3. Balance'account................. .............................................22 8.2.4. Interests .. .,..................................................................................................................................22 8.2,5. Applied exchange rate and rate differences.............................................................................23 8.3. DETAILEDCAH FLOWOVERVIEW FROM LOCAL PROJECTACCOUNT ............. .........23 8.3.1. Specific withdrawals to Local Projecr (Opeations) Account, in 2016..................23 8.3.2. Individual payments from the Local Project Account in 2016, including types of contracts and pa id exp en ditures.........................................................................................................................................24 HLB Inienjerski biro d.o.o. Rijeka, Strossmayerova 11 T 051 322 303 Inkenjerski Biro F 757 nienF 725 377 E revizija@ibr.hr www.ibr.hr INDEPENDENT AUDITOR'S REPORT ON PROJECT FINANCIAL STATEMENTS,, INNOVATION AND ENTREPRENEURSHIP VENTURE CAPITAL PROJECT ", FOR THE WORLD BANK CONSIDERATION HAMAG BICRO - Croatian agency for SMEs, innovations and investments Ksaver 208, Zagreb President of the Board and Project Coordinator Opinion We have audited the 2015 and 2016 financial statements of the Innovation and Entrepreneurship Venture Capital Project (hereinafter: the "Project"), prepared by the Project team at the HAMAG BICRO - Croatian agency for SMEs, innovations and investments (hereinafter: the "Subject"). The financial statements comprise the Project Balance Sheet, the Statement of Sources and Uses of Funds, the Statement of Uses of Funds by Project Activity, the Statement ofSOE Withdrawal Schedule, the Designaed Account Statement and corresponding notes and clarifications, in respect of the Project. The Project is funded thorugh the International Bank for Reconstruction and Development (hereinafter: the "Bank"), under the Loan Agreement No. 8518-HR. The statements are presented on pages 1-28. In our opinion, the accompanying financial statements give, in all material respects, a fair view of the Project's balance sheet, funding sources, uses of the funds, uses of Funds by Project Activity, Statements of Expenditures (hereinafter: the "SoE") used for withdrawal application, and the balance of Project Designated Account in 2015 and 2016, in relation to the Project funded by the IBRD loan no. 8518HR, and in compliance with reporting framework prescribed by the Bank. Basis for Opinion We have audited financial statements in line with the International Auditing Standards (IAS) and the Bank's "Guidelines-Annual financial reporting and auditing for World Bank-financed activities" of June 30, 2003, provisions of the Contract for Consulting Services No. IEVCP/LCS/3.4.-3/AUDIt (hereinafter: the "Contract"), of June 19, 2017, and special provisions of the Contract regarding Summary Reports and Designated Account. In addition, we have also taken into account provisions and instructions from the following manuals: * Loan Handbook for World Bank Borrowers, May 2016; * Disbursement Handbook for World Bank Clients, May 2006; * Guidelines : procurement of goods, works, and non-consulting services under IBRD loans and IDA credits and grants by World Bank borrowers (as revised, July 2014); * Guidelines : selection and employment of consultants under IBRD loans and IDA credits and grants by World Bank Borrowers, January 2011 (as revised, July 2014). I Our responsibilities, in accordance with those standards, are further described in detail in Audi/or's Responsibilities for the Audit of the Financial statements section of our report. We are independent from the audited Subject, in accordance with the Code of Ethics for Professional Accountants (IESBA Code). We have fulfllf6d our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matters 1. We draw attention to points 8.2.5. which explicate the function of Designated Account (hereinafter: the "DA") opened at the Croatian National Bank (hereinafter: the "CNB") and how its Local Operation Account at the Treasury functions in practice, including application of the FIFO method on the exchange rate in the process of funds transfer from the DA to the Operations Accoun at the Treasury and paymets from it. 2. Also, we draw attention to note 3. Reporting Framework and accounting basis which sets forth distinctive features of drafting these financial statements. These financial statements focus on reporting framework based on cash basis. They also focus on type of statements reports that make up a complete set of these financial statements. For that reason, these financial statements may be inadequate for purposes other than those defined in the reporting framework. Other Matters In acordance to the item 1 c) Annex A of the Contract Project's Component I - Pilot Venture Capital Fund (15.6 million EUR) will not be the subject of our auditing. The subject of our auditing according to the Contract are: Project's Financial Statements for the activities under the Component 2 - Seed Co-Investment Fund (2,5 million EUR) and Component 3- Technical Assistance (1,5 million EUR). Responsibility of the Project Management and those charged with governance for the financial statements The Project Coordinator is responsible for preparation of consolidated financial statements that give a true and fair view in accordance with financial reporting framework prescribed by the Bank, and for such internal control as they determine is necessary to enable preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the annual financial statements, the Project Coordinator is responsible for assessing the Subject's ability to continue as going concern in accordance to the Loan Agreement provisions and Project implementation deadlines. Those charged with governance are responsible for overseeing the financial reporting process established by the Subject. Auditor's responsibilities for the audit of annual financial statements Our audits are required by standards, instructions, guidelines and requirements to be planned and conducted properly in order to provide reasonable assurances that financial statements are free of any material misstatements. Auditing also includes testing of the appropriateness of accounting principles used and prudence of accounting estimates made by the management, as well as evaluating the overall financial statement presentation. Our audit has included procedures for collecting auditing evidence relevant to the amounts and disclosures presented in the financial statements for the Project. We are confident that the auditing evidence obtained has been sufficient and has provided the appropriate basis for our auditing opinion. Our objectives are to obtain reasonable assurance about whether the 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 financial statements. 2 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 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 Entity's internal control. * 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 Entity's ability to to realize the Project. 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 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. * assess the overall presentation, structure and content of annual financial statements, including publications, as well as assessing whether annual financial statements reflect transactions and events on which they are based in a way that achieves a fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of audit and significant audit findings, including any significant deficiencies in internal control that we identified during our audit. HLB Inlenjerski biro d.o.o. Rijeka, June 29th, 2017 Strossmayerova 11 51000 Rijeka Croatia On ehalf of HLB Inienjerski biro d.o.o. Kris ina Krivi&i Ugrin denko Str4'e Board Member Certified auditor In enjerski Eiro .1 Inlrerski birv d.o0 RiikaI, SLossmnayaova 11 3 3 IA ic Ru - Croatian agency for SMEs, innovations and investments FINANCIAL STATEMENTS 2015 AND 2016 - INNOVATION AND ENTREPRENEURSHIP VENTURE CAPITAL PROJECT (IBRD LOAN 8518HR) Responsibility for enclosed financial statements in accordance with the general principles and provisions set in the Contract for Consulting Services CONTRACT No IEVCP/LCS/3.4.-3/AUDIT - Independent External Audit (hereinafter: the "Contract") the Project Coordinator is responsible for the organization, lawful business practice and managing of accounting operations and shall also ensure that all Project financial statements for every financial year are prepared in accordance with legal and/or contractual provisions. Also, the Project Coordinator is responsible for organisation and good performance of the Project Implementation Unit (hereinafter: the PIU") and the financial reporting system used to generate Project's financial statements. In compliance with the defined financial reporting framework, Project's financial statements comprise: a) Project Balance Sheet b) Sources and Uses of Funds c) Uses of Funds by Project Activity d) SOE Withdrawal Schedule e) Designated Account Statement f) Notes to the financial statements Project financial statements disclosed on pages 1 to 28 were approved by the Project Coordinator on June 26th, 2017 and signed by: resident of the Board and Project Coordinator Vjeran Vrbanec Project financial statements 1 1IAMAG MCR) - Croatian agency for SMEs, innovations and investments 21 INTRODUCTION 1.1. GENERAL LOAN INFORMATION On July 8th, 2015 the Republic of Croatia entered into Loan Agreement with the International Bank for Reconstruction and Development (IBRD) with the purpose to implement the Innovation and Entrepreneurship Venture Capital Project (Project). The main objective of the IEVC Project is to strengthen risk capital financing in the territory of the Republic of Croatia for innovative SMEs and Startups. Croatian Agency for SMEs, Innovation, and Investment (HAMAG-BICRO) has the overall responsibility for the implementation and coordination of IEVC Project and has a status of the Project Implementation Entity in which the Project implementation unit was established. Ministry of Economy, Entrepreneurship, and Crafts is responsible for assuring that the HAMAG- BICRO, as the Project Implementing Entity, carries out the Project in accordance with this Agreement and the Project Operations Manual (POM). Pursuant to the requirements contained in the Loan Agreement, the accompanying Loan Agreement documents and other relevant documentation as well as under the Project Financial Statements Audit Contract, HAMAG BICRO - the Croatian Small and Medium Business Agency (hereinafter "HAMAG-BICRO") is obligated to issue the Project financial statements each year. These are the first annual Financial Statements and in accordance with the Loan Agreement and the Project Audit Contract there is an obligation to issue the Project Fiancial Stetements for the period from the signing of the Loan Agreement, September 9th, 2015 to the end of the year for the whole 2016. 1.2. ACTIVITIES IN 2015 Since the IBRD Loan Agreement was signed on July 8th, 2015, on the date of effective date of the 90 days, i.e. 6th October 2015, the Project based on this Agreement, i.e. its actual activities, has realy begun during the 2016. No financial activities related to the Project have been undertaken in 2015 except that n accrodance with the item 2.03. of the Loan agreement the Fropt-end Fee was paid by the borrower as equal to one quarter of one percent (0.25%) of the Loan amount that is 50.000 EUR. It was not paid from the Loan but directly from the Budget of the Republic of Croatia on 12 October, 2015 and therefore before the deadline stipulated by the Agreement by which Borrower pays Front End Fee not later than 70 days after the Effective Date. As mentioned previosly for the financial statements for the period until the end of 2015, the financial statements for the year 2015 are not applicable, namely all items of the financial statements in 2015 have a zero status except of Front End Fee as presented in the financial statements for 2016 or as cumulative value or as amount of the previous period. Project financial statements 2 # I( -- Croatian agency for SMEs, innovations and investments 1.3. ACTIVITIES IN 2016 The project started from the financial point'of view just in 2016, so except for the activities of paying the Frant End Fee as mentioned above, all other activities described in these financial statements for the years 2015 and 2016 refer to 2016. 2. GENERAL PROJECT INFORMATION 2.1. INTRODUCTION The Project has a tenure of six years and consists of three components: a) a Pilot Venture Capital Fund, b) a Seed Co-Investment fund; and c) Technical Assistance (TA). The project's objective is to strengthen the financing of venture capital in the Republic of Croatia for innovative MSPs and newly established companies. 2.2. PROJECT IMPLEMENTATION The Government of the Republic of Croatia ("the "Government") under this Project will establish and finance a program aimed at increasing the supply of risk capital financing for innovative SMEs and start-ups. The Project encompasses both supply and demand side interventions. From the supply side, it will provide financing for sequential stages of the innovation phase - both at the start- up/seed and early stages. From the demand side, the Project will provide technical assistance for the overall implementation of the program, which will include capacity building at the government level and also at the level of the entrepreneurship community. Regarding the status of the Project the Componet 1. - The Pilot Venture Capital will not probably be realized. Namely the relevant ministries consider the achievement of the objectives and purposes of this Component with the resources of the European Regional Development Fund. Pursuant to the Loan Agreement, Annex 1, Section V, the implementation of Component 1 is related to a period of 2 years from the date of the Effectiveness of the Loan, otherwise, the Component can be canceled, with the possibility of allocating its fund to other components of the Project. Implementation of the Components 2 - Seed Co-Investment Fund is carried out in accordance with the Loan Agreement as well as implementation of the Component 3 - Technical support (EUR 1.5 million) but both currently the planned activities do not reach the total funds allocated to the component. Project financial statements 3 . l - Croatian agency for SMEs, innovations and investments 2.3. MAIN PROJECT COMPONETS As already mentioned the Project has a tenure of six years and will have three components. The Project will be financed 100%through a World Bank loan to the Republic of Croatia. Each component is described as follows. 2.3.1. Component 1: Pilot Venture Capital Fund (EUR 15.6 million) The Pilot Venture Capital ("PVC") Fund will be registered in Croatia as a closed end fund and will be established as a limited liability company in accordance with the Croatian Alternative Investment Fund Act. The PVC Fund will be supervised by HANFA. It will be a 10-year euro-denominated fund, with an option for a two year extension. The PVC Fund will consist of both public and private financing, in a ratio consistent with EU state aid regulation. It will be established with the purpose of providing financing, in the form of equity or quasi equity instruments, to innovative SMEs (including startups) with the locus of activity in Croatia. The PVC Fund will be managed by a private fund manager selected through an international tender process. The Fund Manager may choose to obtain registration as an EuVECA manager for the PVC Fund, in accordance with the EuVECA Regulation. To ensure the commercial viability of the fund and its uptake by private investors, the Government of Croatia will provide a financial contribution of EUR 3.6 million towards the Fund's Management Operating Costs. This means the net amount available for investment by the PVC Fund is EUR 12 million. 2.3.2. Component 2: Seed Co-Investment Fund (EUR 2.5 million) The second component of the Project is Seed Co-Investment Fund (SCI Fund). The program intends to encourage private equity investments in the early stages of the development of innovative MSPs operating in the Republic of Croatia. The program allows for smaller amounts of venture capital funding together with private investors investing such as business angels, corporate investors, venture capital funds, and incubators. The Seed Co-Investment Fund is to encourage equity investment in the early stage of financing and it will be an open fund with a starting capital of EUR 2.5 million which amount is provided from the Loan. HAMAG-BICRO invests funds in the same amount as a private investor in the form of quasi-equity investment. Eligible projects will be co- funded in the amount of at least 30.000,00 EUR up to 300.000,00 EUR with projected duration of up to 24 months. Unlike a private investor, HAMAG-BICRO does not enter into the ownership of the startup. If the investor sell its investment into the start-up firm whole given amountare distributed bteween the investor and HAMAG-BICRO in the ratio of 50% / 50% until HAMAG-BICRO repays the invested funds increased by 6% per annum (after which the investor is entitled to 90% and HAMAG- BICRO to 10% of the remaining amount of its stake). In the case of bankruptcy, start-up or if no Investor's share has been sold after 15 years, the funds invested by HAMAG-BICRO are no longer required (quasi-equity will be write-off). Project financial statements 4 - Croatian agency for SMEs, innovations and investments 2.3.3. Component 3: Technical Assistance (EUR 1.5 million) This component of the Project will be established to assist in the creation and operation of the Project. This component will have four sub-components. (a) Sub Component 3.1: The Global Advisory Network ("GAN") - EUR 400 thousand. The objective of this sub-component is to establish a network of experts who will provide advice and guidance for the implementation of both funds designed under this Project (PVC Fund and SCI Fund). (b) Sub Component 3.2: Capacity Building and Networking - EUR 400 thousand. The objectives of this sub-component are twofold. First, to develop human capabilities of the main actors involved in the infant and early stage financing industry in Croatia; such as HAMAG-BICRO staff, investors and entrepreneurs. Second, to strengthen social capital and networks - both local and global among incubators, accelerators, business angel networks, matchmaking services, entrepreneurs and larger investors. (c) Sub Component 3.3: Monitorinq & Evaluation - EUR 100 thousand. The aim of this sub-component is to ensure accountability in the use of government's money, and provide guidance on how the Project can be improved. (d) Sub Component 3.4: Project Management - EUR 600 thousand. This sub-component will finance necessary activities for establishment of the Project Implementation Unit (PIU), Project management and implementation, and carrying out outreach activities. 2.4. IBRD LOAN PROJECT FINANCING 2.4.1. General information According to the Loan Agreement the Project will be financed 100% through a World Bank loan to the Republic of Croatia. Project implementation is still ongoing and loan repayments have not been initiated. The terms of repayment under the Loan Agreement are as follows: Project financial statements 5 HAMAGABIGRO - Croatian agency for SMEs, innovations and investments General Informption . Loan Approval July 7th, 2015 Signing July 8th, 2015 Effective (90 days) e October 6th, 2015 Closing date September 30th, 2021 Application Deadlines January 31st, 2022 Signed Amount 20.000.000,00 EUR Financial Data as of December 31, 2016 on the Project ITEM AMOUNT DESCRIPTION Committed (contracted): 62.803,76 EUR 0,31% Procurement ongoing: 133.500,00 EUR 0,67% Procurement planned to be initiated and 100.000,00 EUR 0,50% contracted in 1Q2017 Seed Fund Co-Investments planned to be 600.000,00 EUR 3,00% contracted in 1Q2017 Withdrawn: 500.000,00 EUR 2,50% Disbursed: 35.969,16 EUR 0,18 % 2.4.2. Projectfinancing At the beginning of the project, the separate activity for the project has to be opened within the HAMAG-BICRO budget which is integrated in the, Ministry of Economy, Entrepreneurship and Craft budget. The budget is to be approved by The Parliament and published in Official Gazette which is prerequisite for further financial activities. For the IEVC Project the related activity is included under the code K822077 and source of funding is line 81 - World Bank Loan. Based on the valid Procurement Plan (last version approved by the Bank), the PIU will prepare the request for project funding and submit it to the Ministry of Economy, Entrepreneurship and Craft for approval and budgeting as part of overall HAMAG BICROs annual budget, approved by the Croatian Parliament. The plan contains figures for the loan funds for budget institutions. P'i Project financial statements 6 HAMAG H#BICRO - Croatian agency for SMEs, innovations and investments 2.5. DESCRIPTION OF THE USE OF THE LOAN 2.5.1. In general Prior to any disbursement, HAMAG-BICRO has opened special Activity in the State Budget for the loan funds K822077 - Innovation and Entrepreneurship Venture Capital Project (IEVCP). I I Disbursements of loan funds are processed in accordance with the procedures described in the valid World Bank's Disbursement Handbook and Disbursement Letter through MOF's designated account opened at the CNB and denominated in EUR currency. There is a possibility to use direct payments methods from the Bank to contractors for larger payments as indicated in the Disbursement Letter. Loan disbursements are approved by the person authorized for signing the disbursement documents and are sent to the Bank. The Letter of Authorized Signatories for loan disbursements is issued by the MOF. The Financial Expert keeps register of all disbursements including: disbursement No, date of issuance, contract No, description (supplier name and invoice internal No in case of direct payment), amount in EUR, HRK (and in other currency if contracted), date of sending the disbursement to the Bank and disbursement date. Upon receipt of payment and Payment Advice from the Bank, Payment Advice is attached to the disbursement document and reconciled with the loan register. A copy of Payment Advice is immediately sent to MOF and the obligatory reports for the CNB3 are prepared and submitted. The Financial Expert prepares the monthly reports on World Bank Loan funds payments and, after signing by the authorized persons, sends them to the MOF. 2.5.2. Project financing HAMAG-BICRO's Activity in State Treasury Loan funds are handled in the Loan currency EUR, according to the terms and conditions set out in the Disbursement Letter, through MOF's foreign exchange account held in CNB in EUR currency. Loan funds are to be transferred to centralized State Treasury to the Activity that belongs to HAMAG-BICRO for all of the Project's eligible expenses under all three components as follows: 1. PVC Fund - the funds will flow from the Bank to HAMAG-BICRO's State Treasury Account ("STA") and then to the PVC Fund Manager account held in a commercial bank acceptable to the Bank. Contributions to the PVC Fund for investment would be disbursed based on the PVC sub-financing agreements signed between the PVC Management Firm and PVC beneficiaries; 2. SCI Fund - the funds will flow from the Bank to HAMAG-BICRO's STA and then to the investee company account held in a commercial bank; 3. Technical Assistance - the funds will flow from the Bank to HAMAG-BICRO's STA and then to suppliers' bank accounts according to regular procedures determined in the POM. For payments to the individual local consultants, eligible loan funds are transferred from STA to HAMAG-BICRO's Government Account (transactions are executed by the FINA) in HRK and then paid to the individual local consultants and Croatian treasury (taxes and contributions). Payments have to be synchronized with issuance of tax returns (in accordance with Croatian regulations). After the payment, PIU obtains the proof of payment - Statement of Account for its reconciliation and archive. Project financial statements 7 - Croatian agency for SMEs, innovations and investments After preparation of payment orders and obtaining the signatures, Financial Expert submits the payment order to HAMAG-BICRO's Department responsible for payment executions, which is authorized to enter the payment order in State Treasury System. Loan Funds on HAMAG-BICRO's State Treasury Activity can be used only for strictly defined payments in accordance with the Loan Agreement and cannot be used for any other purposes. The Financial Expert keeps registers and data of all payments. Funds' balance is reconciled immediately upon the receipt of proofs of payments from CNB. Payments in EUR are calculated in HRK by using middle exchange rate of the CNB on the date of payment. Payments from HAMAG- BICRO's State Treasury Activity to domestic beneficiaries and suppliers are to be settled in HRK. PIU reconciles the funds and sends semi-annual reports on usage of funds and sends the information to the Bank in the agreed formats/forms. 3. REPORTING AND ACCOUNTING FRAMEWORK 3.1. REPORTING FRAMEWORK The reporting framework for Project's financial statements is prescribed in item 15. FINANCIAL MONITORING REPORTS FOR WORLD BANK-FINANCED PROJECTS: GUIDELINES FOR BORROWERS. It allows reporting based either on the cash basis or the accrual basis. Additional reporting details in line with the cash basis are prescribed by the International Public Sector Accounting Standards (IPSAS "Financial Reporting Under the Cash Basis of Accounting"). These standards prescribe the reporting framework based on the cash basis of accounting The Contract for financial statements audit (CONTRACT No. IEVCP/LCS/3.4.-3/AUDIT), Annex 'A', item 2 - Objection prescribing Terms of Reference and Scope of Services, indicates the content of the Project's financial statements, for Project's reporting purposes: (a) Project Balance Sheet (b) Sources and Uses of Funds (c) Uses of Funds by Project Activity (d) SOE Withdrawal Schedule (e) Designated Account Statement (f) Notes to the financial statements 3.2. ACCOUNTING FRAMEWORK Reporting framework is based on cash basis accounting in these Project Financila Statements. Project financial statements 8 - Croatian agency for SMEs, innovations and investments 4. BASIC DEFINITIONS AND CONVENTIONS 4.1. DEFINITIONS Hereinafter, the abbreviation "IBRD" will be used to designate the World Bank, or its full title the International Bank for Reconstruction and Development. "Project" will be used to designate the Innovation and Entrepreneurship Venture Capital Project. Expressions such as "Entity", "Organisation", "HAMAG-BISRO" in these financial reports designate the Project implementing entity, the Croatian agency for SMEs, innovations and investments. The abbreviation "DA" refers to Designated Account and PA as local Project Account at Threasury and CNB as Croatian National Bank. 4.2. CONVENTIONS All amounts will be expressed in EUR (as per the Loan Agreement) or in kunas (HRK) or in another monetary unit. The amounts will not be rounded up; rather they will be presented in their full amount including fractions of the basic monetary unit - cents for EUR, lipas for HRK. Monetary units presented in such manner will be designated by their international three letters simbol as EUR and HRK or international simbols C and kn. Other currency units will be designated by corresponding international currency code. If any amount should be displayed differently than previous one, this will be expressly noted in the text. Project financial statements 9 - Croatian agency for SMEs, innovations and investments 5. PROJECT BALANCE SHEET 5.1. INTRODUCTION Project Balance Sheet is the default report showing the Project's status from the aspect of assets and lialbilities at the reporting date. 5.2. PROJECT BALANCE SHEET (IN EUR) AS AT DECEMBER 31, 2016 Assets Note Amount Amount Cash and cash equivalents 464.030,84 Designated account (EUR) 8.2.3 464.030,84 Prepayments 0,00 umulative Project expenditures 85.969,16 IBRD Project expenditures 6.3.2 35.969,16 Other Project expenditures 0,00 Front End Fee 5.2.1 50.000,00 Foreign exchange difference (if net loss) 0,00 Total assets 550.000,00 Liabilities Accounts payable 0,00 interest income on bank account 0,00 Income from sales of bidding documents 0,00 Funding 550.000,00 IBRD 6.2.1 500.000,00 Other (private capital and angel investors funding) 0,00 Government fund 5.2.1 50.000,00 Foreign exchange difference (if net income) 0,00 Total liabilities 550.000,00 5.2.1. Frant End Fee As stated in point 1.2. no financial activities related to the Project have been undertaken in 2015 except, in accordance with Section 2.03. of the Loan Agreement was paid an Front End Fee of EUR 50,000 from the Croatian Budget. Project financial statements 10 古一〕 - Lroatian agency tor .5nnts, tnnovatLons and LnVeSEments 6.1. PROJECT SOURCES & USES OF FUNDS Actual Planned varlaq e Items discription Note Previous Year to Date Cumulative Previous Year to Date Cumulative Previous Year to Date Cumulative year YTD to Date year YTD to Date year Y1 to Date Opening Working Capital Cash and cash equivalents - plus 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Prepayments - plus {),00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Accounts payable - minus 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Payables to Government 1 (interest on bank accounts) - minus 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Payables to Government 2 (income from sales of bidding documents) - minus 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Tota 1 0,00 0,00 0,00 0,00 0,00 0,00 :::::::l 0,00 0,00 Add: Sources of Funds IBRD 0,00 500.000,00 500.000,00 0,00 500.000,00 500.000,00 0,00 0,00 0,00 C3-,e -Ilnlent funds 1.2 50.000,00 0,00 50-000,00 0,00 0,00 0,00 -50.000,0() 0,00 -50-000,00 Total 50.000,00 500.000,00 i 550,000,00 0,00 500.000,00 500-00000 _50.000,00 0,00 -50-000,00 Plus (income) or minus(loss) -- Foreign exchange Differences 0,00 0,00 0,00 0,00 0100 0,00 0,00 0,00 0,00 Total 0,00 0100 0,00 0100 0,001 0,00 0,00 0,00 0100 Less Uses of Funds Category I - PVC Investments 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,oo Category 2 - PVC Management IOC 0,00 0,00 0,00 0,00 0,00 0,{)O 0,00 0,00 0,00 Category 3 - SCI Subprojects 0,00 0,00 0,00 0,00 350.000,00 350.0011.00 0,00 -350.000,00 -350.000,00 Finandjski izvjekaji projekta 12 Actual .. . Planngd Items discrlption Nvte Previaus Year to Date Cumulative Previous Year to Date Cumulative Previous Year to Dato Cumulative year YTD to Date year YT to Date year YTD to Date CategorV 4 - Consulting services, Training and Operat ing costs 6.1.1 0,00 35.969,16 35.969,16 0,00 150.000,00 150.000,00 0,00 -114.030,84 -114.030,84 Category s - UNALLOCATED 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Subtotal 0,00 35.969,16 35.969,16 0,00 500.000,00 500.000,00 0,00 -464.030,84 -464.030,84 Front ånd Fee 1.2 50.000,00 0,00 50.000,00 0,00 0,00 0,00 0,00 50.000,00 50.000,00 Total 50.000,00 35.969,16 85.969,16 0,00 500.000,00 500.000,00 0,00 -414.030,84 -414.030,84 Opening Working Capital Cash and cash equivalents - plus 8.2.3 0,00 464.030,84 464.030,84 0,00 0,00 0,00 0,00 -464 030,84 -464.030,84 Prepaymentcs - plus 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Accounis pa1able - minus 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0.00 Payables to Government i (rierest on bank accountsj - minus 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Payables to Government 2 (income from sales of bidding documents) - minus 0,00 0,00 0,00 0 00 0,00 0,00 0,00 0,00 0,00 Total 0,00 464.030,84 ,00 0,00 0,0 0,00 -464.030,84 -464.030,84 Financijski izvještaji projekta 13 .. ......- - - - - --. AMAG S3IORO - Croatian agency for SMEs, innovations and investments .1.1. Category,4 - Consulting services, Training and. Operating costs ee item 6.3.3. .1.2. Variance i the first year of the Project, 2016, the funds of Seed co-Investment fund have been planned for he implementation of activities related to the First Open Call for Co-financing. is planned: a) EUR 350,000 (Category 3 - SCI Subprojects) for the purpose of co-financing projects that are estimated to be contracted under the First Open Call for Co-financing Projects financed by Seed co-Investment fund, within Component 1 of the Project (SCI Fund); b) EUR 150 000 (Category 4 - Consultancy Services) for the engagement of independent experts, members of the Commission for Evaluation of Applications received under the SCI Fund Program, legal aid experts for the purpose of making agreement models for Co- financing by SCI Fund within the Component 3-Technical assistance as well as Seed and VC Investments Experts who would conduct educational workshops for venture capital entrepreneurs. he tender for SCI Fund was opened by the First Call on April 13, 2016, with an initially scheduled eadline for submission of applications by September 1, 2016. In order to further promote and resent the Program to entrepreneurs and investors as well as in order to achieve the highest quality esponse, HAMAG-BICRO, with the support of the Borrower, has decided to extend the deadline for ubmission of applications by 1 February 2017. i accordance with the postponement of the planned timetable of activities, the planned funds will 'e transferred in 2017. .2. IBRD LOAN 8518HR BALANCE .2.1. Breakdown of changes throughout 2016 Withdrawal from Type of payrnent fromn DESCRIPTION Note Date Loan Account Loan Account oan balance, beginning of 2016 0,00, 201h June )A Withdrawal (Appi.no.) B.2.L1. 2016 500,000,00 C Advance (Appl. 1) )Li Withdrawal 0,00 C otal increase for 2016 500.000,00 f 'OTAL (Cumulative at the end of 2016) 500.000,00 C inancijski izvjegtaji projekta 14 I I(. UIC'R) - Croatian agency for SMEs, innovations and investments Outstanding,balance of the Loan as on 31st December 2016 amounts EUR 500.000,00. 6.3. USES OF FUNDS BY PROJECT ACTIVITIES FOR THE PERIOD FROM JANUARY 1, 2016 TO DECEMBER 31, 2016 (IN EUR CURRENCY) 6.3.1. Introdiction As stated in point 2.3. the Project is consisted of three components but the Component 3 is further divided into 4 (four) subcomponents whose structure and amounts are reported in the prescribed form shown in the next item. IA I Il Financijski izvjeitaji projekta 15 I A1A virUsan - Croatian agency for SMEs, innovations and investments 6.3.2. Statement of uses of funds by project activities Project component Note Previous Year to Cumulative Previous Year to Cumulative. Previous Year to Cumulative year Date YTD to Date year Date YTD to Date year Date YTD to Date Component 1-Venture Capital Fond 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Component 2-Seed co-Investment Fund 0,00 0,00 0,00 0,00 350.000,00 350.000,00 0,00 -350.000,00 -350.000,00 Component 3 Technical assistance 0,00 35.969,16 35.969,16 0,00 150.000,00 150.000,00 0,00 -114.030,84 -114.030,84 Sub Component 3.1 - The GlobalAdvisory Network 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Sub Component 3.2 - Capacity Building and Networking 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Sub Component 3.3- Monitoring and Evaluation 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Sub Component 3.4- Project Management 6.3.3 0,00 35.969,16 35.969,16 0,00 150.000,00 150.000,00 0,00 -114.030,84 -114.030,84 Front End Fee 1.2. 50.000,00 0,00 50.000,00 50.000,00 0,00 50.000,00 0,00 0,00 0,00 Total Project Expenditure 50.000,00 35.969,16 85.969,16 50.000,00 500.000,00 550.000,00 0,00 -464.030,84 -464.030,84 Project financial statements 16 -IANAc lC[RO - Croatian agency for SMEs, innovations and investments 6.3.3. Sub'Component 3.4.- Project managament During 2016, this component was paid in the amount of EUR 35,969.16 (equivalent to the paid amount of HRK 270,586.26). As stated in the detailed review of the payment in paragraph 8.3.2.1 - Payments from the Local Project (Operations) Account at the Treasury in 2016, converted into the currency of the loan (EUR) in 2016, refers to consulting in amount of EUR 29,829.60 (HRK 224,400.00) while 6.139, 56 EUR (46,186.26 kn) refers to operating costs 6.3.4. Variance See point 6.1.2. 7. STATEMENT OF EXPENDITURES (SoE) - SUPPORTING DOCUMENTATION 7.1. INTRODUCTION In line with the Loan Agreement provisions, and additional provisions set in Disbursement Letter, namely sections Additional instructions, Disbursement, Item II.Reporting on Use of Loan Proceeds, additional supporting documentation should be enclosed to withdrawal application, namely for paid eligible expenditures relating to: - consulting services of contractual value equivalent to or exceeding USD 100.000 as well as - individual consultants' services of contractual value equivalent to or exceeding USD 50.000. Any other payments are subject of the Statement of Expenses (SoE) form, the form SoE (Attachment 4a) for services including training, operative cost as well as Pilot Venture Capital Management Operating Costs and a Simple form SoE (Attachment 4b) for withdrawing for the purpose of sub-financing Pilot Venture Capital i Seed Co-Investememt fondova In 2016, there were no SoE based withdrawal applications. The only withdrawal application was an advance payment to DA as explained In point 8.2.1.1. ITE DESCRPTIONAMOUNTA Withdrawal Application No.1 20th June 2016 500.000,00 EUR TOTAL 500.000,00 EUR Project financial statements 17 - " . - - Croatian agency for SMEs, innovations and investments 7.1.1. Statement of expenditures - SoE for withdrawals in 2016, by suppliers and the Funds 7.1.1.1. Withdrawal - SoE number (Attachment 4a) 1 2 3 4 5 6 7 8 9 10 11 Currency and Total Currency and WB Contract Type of Goods Amount of % Financed Eligible amount paid or Service / Currency and Total Invoice, as from Exchange Payment Supplier Number, as specified Brief Amount of Contract specified in from expenditure (5 x Designated Rate date Notes in Client Connection Decito ihrwl IBRD/IDA/TF 6)Acon(i Description withdrawal Account (if application Applicable) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A TOTAL N/A N/A Project financial statements 18 71.1.2. Withdrawal - SoE number (Attachment 4b) 1 2 3 4 5 6 7 8 9 10 100% of Amount Amount EORD Name or number of Amount and currency Discription of paid i % Financed requested In the Date of Rate of Amount Remarks Sub-financing of Sub-financing cost Application IBRD Application payment Exchange withdrown (4 x 5) from DA N/A N/A N/A N/A N/A N/A N/A N/A N/A -N/A TOTAL -s N/A Project financial statements 19 HAMA BIORO - Croatian agency for SMEs, innovations and investments 7.1.2. Paymqnts to Designated Account based on withdrawal application and auditor's obligation to examine these payments Following previous point, in 2016 there were no withdrawals on Designated Account based on SoE. Payments of eligible expenditures were made during 2016, but as stated in point 8.3.2.1., due to small amount of Project expenditures ircurred and sufficient funds in the Local Project Account, there were no additional requests for withdrawals to Designated Account. 8. STATEMENT OF PROJECT DESIGNATED ACCOUNT IN 2016 8.1. BACKGROUND OF DESIGNATED ACCOUNTS For the purpose of the Project financing in 2015, a Desigated Account is opened in EUR as Loan currency in the Croatian National Bank (CNB). This account is due to the special nature of the work of the Budget of the Republic of Croatia's a "Transitional" account, which immediately transfers amount to a Local Project Account opened in the Treasury and converted into HRK. 8.1.1. Designated Account at CNB Account No HR8710010051510000193 Accouni currency EUR Depositary bank Croatian National Bank Add ress Trg hrvatskih velikana 1, Zagreb, Croatia Related Loan IBRD Loan br. 8518RR dated 8t uly 2016 Celing 2.000.000 EUR Loan amiount 20.000.000 EUR In agreement with the IBRD and in line with specific Treasury requirements, i.e. the Ministry of Finance, Designated Account in EUR operates in a way that funds withdrawn to th0account are, transferred within several days to the Local Project Account at The Treasury which is assigned to the HAMAG-BICRO and opened specially for this purpose; funds are converted at the middle exchange rate established on the day of receipt of funds from the IBRD account to Designated Account in EUR. Project financial statements 20 HAMAG BIORo - Croatian agency for SMEs, innovations and investments 8.1.2. Local P;oject (Operations) Account at the Treasury, through which Designated Account at CNB operates Account No. 1510000185 Account currency HRK Depositary lank Ministry of Finance, State Treasury Address Katan&eva 5 Zagreb; Croaia Related ian IBRD Loair No. 8518HR od 8 JUly2015 Local Project Account at the Treasury is essentially the operational part of Designated Account at the CNB. In this way the account at the CNB functions as "in-between account" in EUR, because the funds withdrawn from the IBRD in EUR are transferred and converted to HRK at the Treasury account. This account in HRK operates as the payment account for Designated Account. 8.2. DESIGNATED ACCOUNT STATEMENT 8.2.1. Designated Account (DA) Statement as at December 31, Current year (in EUR Currency) Description Note Amount 1 Opening Balance as at January 1, current year o,00 Add: 2 Cumulative unexplained discrepancy 0,00 3 IBRD advance/replenishment during the current year 8.2.1.1 500.000,00 4 Less: Refund to IBRD from DA during the current year 00 5 Present outstanding amount advanced to DA 500.000,00 DA closing balance as at December 31, current yeir carried forward to 6 next period 0,00 7 Add: Amount of eligible expenditures paid during the current year 0,00 8 Service charges (if debited into DA) 0,00 Transfer from DA to Credit Local account (Project account - PA in 9 Treasury) 8.2.1.2 500.000,00 10 Less: Interest earned (if credited into DA) 0,00 11 Total advance accounted for 500.000,00 12 Discrepancy (5)-(11) to be explained /11 0,00 As explained in the note, the actual Designated Account balance on December 31, 2016 is 0 (zero) EUR. Project financial statements 21 HAMAGttMCRO - Croatian agency for SMEs, innovations and investments 8.2.1.1 Withdrawal odAdvance payment on DA On June 20, 2016, through the Application No. I to the Designated account opened in the CNB, an amount of EUR 500,000 was paid as an advance within the allowed amount up to the maximum agreed ceiling of EUR 2,000,000 for the project launch. 8.2.1.2 Transfer to the Local Project Account In accordance with point 8.1.1. the same day that the advance was credited to the DA it was converted into kunas and transferred to the Local Project Account (PA) in the Treasury at the middle exchange rate of the CNB in the amount of HRK 3,761,365.00. 8.2.2. Project Account (PA) Statement in Treasury as at December 31, 2016 (in HRK Currency) Description Note Amount 1 Opening Balance as at January 1, current year 0,00 -Add: 2 Cumulative unexplained discrepancy 90,00 3 IBRD advance/replenishment during the current year 8.2.1.2 3.761.365,00 4 Less: Refund to IBRD from DA during the current year 0,00 5 Present outstanding amount advanced to PA 3.761.365,00 PAclosing balance as at December 31,current year carried forward to 6 next period 3.490.778,74 7 Add: Amount of eligible expenditures paid during the current year 270.586,26 8 Service charges (if debited into PA) 0,00 Transfer from Credit Local account (Project account - PA in Treasury) to 9 DA 0,00 10 Less: Interest earned (if credited into PA) 0,00 11 Total advance accounted for 3.761.365,00 12 Discrepancy (5)-(11) to be explained /ll 0,00 8.2.3. Balance account ,H December 31, 2016 Local Project Account balance, in HRK totals 3.490.778,74 HRK translated in EUR .nder used rete of exchange, note 8.2.5., is EUR 464.030,84. 3.2.4. Interests ;ince the actual funds are stockpiled in the Operations account at the Treasury, and not in Designated \ccount at CNB, and since such actual funds make part of aggregate Treasury funds, it is not possible :o determine the Designated Account interests. 'roject financial statements 22 HAMAG BIORO - Croatian agency for SMEs, innovations and investments 8.2.5. Applied exchange rate and rate differences in order to acknowledge special features of Designated Account at CNB and the Project Account at the Treasury (in HRK currency), the FIFO method (First In - First Out) was selected as acceptable. This suggests that all payments from the Project Account in HRK are calculated at conversion rate set on the date of transfer of funds in EUR currency from Designated Account to the Project Account in HRK currency at the Treasury. This rate is applied until all funds converted at this rate are depleted; after that, a new rate applies to remaining balance which was generated following new transfers from Designated Account to the Operations Account at the Treasury. Such practice eliminates the possibility of exchange rate differences which may be generated using funds from the Local Project Account in HRK. Applied exchange rates and payments at such rates in 2016 are as follows: Date of Received Applied Amount In Payment HRK, for Amount transfer to amount In exchange No date at DA payments at Note No NB) deD (EURI Operations Treasury, in rate a tNote account HRK (5/3) exchange rate 1 2 3 4 5 6 7 . 8 20th June 20th.iune 1 500.000,00 2016 3.761.365,00 7,522730 270.586,26 2016 2016 Remaining amount Applied. for payments In HRK Used in current exchange period on 31.12.2016. at rate applied exchange rate - 1 Used, at applied exchanged rate 7,522730 270.586,26 3.490.778,74 8.3. DETAILED CASH FLOW OVERVIEW FROM LOCAL PROJECT ACCOUNT The following represents an overview of individual withdrawals to and payments from Local Project (operations) Account. 8.3.1. Specific withdrawals to Local Project (Opeations) Account, in 2016 TWithdrawal from Typeaf payment DE5CRIPTION Date_-- Loan account in EUR from Loan account Withdrawal (DA) 20th June 2016 500.000 Advance TOTAL 500.000 Project financial statements 23 fI HAMAG BI0RO - Croatian agency for SMEs, innovations and investments 8.3.2. Individual payments from the Local Project Account in 2016, including types of contracts and paid expenditures K Project financial statements 24 8.3.2.1. Payments from the Local Project Account at the Treasury in 2016, converted to Loan currency (EUR) Currency and Amount Currency and Currency and Total Anunt % Amount paid (Sub)Camp Caregary Eligible for Amount Paid Date of Ecange Supplier Contract Number onent Category discription Total Amount of Invoice Financed Financing (6 x from Local Payment Rate in Loan of Contract Covered by by 1BRD Currency Application 1 2 3 4 4 5 5 7 8 9 10 11 12 Per diem cost - Split N/A 3.4 4 Oper. Cost N/A 150,00 kn 100% 150,00 kn 150,00 kn 7.7.2016 7,52273 19,94 EUR Per diem cost- N/A 100% Osijek 3.4 4 Oper. Cost N/A 150,00 kn 150,00 kn 150,00 kn 7.7.2016 7,52273 19,94 EUR Rege Commerce N/A 100% d.o,o. 3.4 4 Oper. Cost 2.000,00 kn 2.000,00 kn 2.000,00 kn 2.000,00 kn 7.7.2016 7,52273 265,86 EUR Bantours N/A 3.4 4 Oper. Cost 312,50 kn 312,50 kn 100% 312,50 kn 312,50 kn 4.7.2016 7,52273 41,54 EUR Studentski Centar N/A 100% Split 3.4 4 Oper. Cost 624,38 kn 424,76 kn 424,76 kn 424,76 kn 7.7.2016 7,52273 56,46 EUR Studentski Centar N/A 100% Split 3.4 4 Oper. Cost 624,38 kn 824,00 kn 824,00 kn 824,00 kn 7.7.2016 7,52273 109,53 EUR Jelena 1EVCP-IC- Mieled 01/2016/Procurement 100% Mihaljevit Expert 3.4 4 Consulting 175.920,00 kn 14.300,00 kn 14.300,00 kn 14.300,00 kn 7.7,2016 7,52273 1.900,91 EUR IEVCP-IC- Goran 02/2016/Financial 100% 8olifevid Expert 34 4 Consulting 169.320,00 kn 13.750,00 kn ____ 13.750,00 kn 13.750,00 kn 7.7.2016 7,52273 1.827,79 EUR Project financial statements 25 rIAMwU .L u;mU - HrvatsKa agencija za malo gospodarstvo i investicije Currency and Amount Currency and (ub)Comp Caregry Currency and Total Amount % Eligible for Amount Paid Date of Exchan Amount pad Supplier Contract Number ( )t mp Category discription Total Amount of Invoice Financed Financing (6 x from Local Payment Rate In Loan onen of Contract Covered by by IBRD Currency Application 1 2 3 4 4 5 6 78 9 10 11 12 IEVCP-jC- Goran 02/2016/Financial 100% BoUievid Expert 3.4 4 Consulting 169.320,00 kn 13.750,00 knn 13.750,00 kn 1 elena IEVCP-IC- Mihaljevid 01/2016/Procurement 100% M Expert 3.4 4 Consulting 175.920,00 kn 14.300,00 kn 14.300,00 kn 14.300,00 kn 3.8.2016 7,52273 1.900,91 FUR IEVCP-IC- Goran 02/2016/Financial 100% Boitevic Expert 3.4 4 Consulting 169.320,00 kn 13.750,00 kn 13.750,00 kn 13.750,00 Rn 6.9.2016 7,52273 1.827,79 EUR Jielena IEVCP-IC- Jelea .v! 01/2016/Procurement 10 Mlhatevid Expert 3.4 4 Consulting 175.920,00 kn 14.300,00 kn 14.300,00 kn 14.300,00 Rn 6.9.2016 7,52273 1.900,91 FUR Abis d.o.o. N/A 3.4 4 Oper. Cost 12.325,00 kn 12.325,00 kn 100% 12.325,00 kn 12.325,00 Rn 24.8.2016 7,52273 1.638,37 FUR IEVCP-IC- Goran 02/2016/Financial 100% Bo2idevid Expert 3.4 4 Consulting 169.320,00 kn 13.750,00 kn 13.750,00 kn IEVCP-IC- Miha2jevi6 01/2016/Procurement 100% Expert 3.4 4 Consulting 175.920,00 kn 14.300,00 kn 14.300,00 Rn 14.300,00 kn 12.9.2016 7,52273 1.900,91 EUR IEVCP-IC- Goran 02/2016/Financial Boidevic Expert 3.4 4 Consulting 169.320,00 kn 13.750,00 Rn 13.750,00 Rn 13.750,00 kn 10.10.2016 7,52273 1.827,79 FUR Jelena IEVCP-IC- Jelena 01/2016/Procurement 100% Expert 3.4 4 Consulting 175.920,00 kn 14.300,00 kn 14,300,00 Rn IEVCP-IC- Goran 02/2016/Financial 100% Bozievid Expert 3.4 4 Consu 169.320,00 Rn 13.750,00 Rn 13.750,00 kn 13.750,00 kn 4.11.2016 7,52273 1.827,79 EUR P1roject fin 13ancial, statem 38ents 26 HA MAG 7 BICRO - Hrvatska agencija za malo gospodarstvo i investicije Currency and Amount Currency and (Sub)Comp Caregory Currency and Total Amount % Eligible for Amount Paid Date of Exchange Amount paid Supplier Contract Number nt Category discription Total Amount of Invoice Financed Financing (6 x from Local Payment Rate one of Contract Covered by by IBRD 7) account Currency Application 7 1 2 3 4 4 5 6 7 8 9 10 b 11 12 Jelena IEVCP-IC- 10 ..01/2016/Procurement Mihalevic Ex~per crmn 3.4 4 Consulting 175.920,00 kn 14.300,00 kn 10% 14.300,00 kn 14.300,00 kn 4.11.2015 47,52273 1.900,91 EUR Mihaljevic Expert3. [EVCP-IC- Goran 02/2016/Financial Bolidevi Expert 3.4 4 Consulting 159.320,00 kn 13.750,00 kn 13.750,00 kn 13.750,00 kn 16.12.2016 7,52273 1.827,79 EUR Jelena IEVCP-IC- eln . 01/2016/Procurement 10 Mihaljevic Expert 3.4 4 Consulting 175,920,00 kn 14.300,00 kn 14.300,00 kn 14.300,00 kn 16.12.2016 7,52273 1.900,91 EUR Crane N/A 10 Crane. N/ 3.4 4 Oper. Cost 30.000,00 kcn 15.000,00 kn 10% 15.000,00 kn 15.000,00 kn 29.12.2016 7,52273 1.993,96 EUR d.o.o.34 Crane NA10 Crane. N/ 3.4 4 1Oper. Cost 30.000,00 kn 15.000,00 kn 10% 15.000,00 kn 15.000,00 kn 29.12.2016 7,52273 1.993,96 EUR dt.o.34 IEVCP-IC- Goran 02/2016/Financial 100% Boilevid Expert 3.4 4 Consulting 169.320,00 kn 13.750,00 kn 13.750,00 kn 1 Jelena [EVCP-IC- Mihaijevid 01/2016/Procurement 100% Expert 3.4 4 Consulting 175.920,00 kn 14.300,00 kn 14.300,00 kn 14.300,00 kn 30.12.2016 7,52273 1.900,91 EUR 4 Oper.2Cost730M0,0 kn 11580,00 kn 1 00,00 kn 22 351.969,16 EUR Project financial statements 27 HAMAG INGO - Croatian agency for SMEs, innovations and investments All these amounts paid during the reporting period due to the appropriateness of the funds in the Designated Account, i.e: in the Project Account, were not subject to a refund request through the Statement of Expenditures (SoEs) on the Special Account, from the Loan Account, Note 7.1.2. 8.3.2.2. Total of eliqible expenditures not subject of withdrawal application Due to small amount of Project expenditures incurred in 2016, and sufficient funds in the Local Project Account to cover such expenditures, the PIU did not initiate any requests for withdrawal application in 2016 for any of incurred expenditures in 2016. As indiciated in table (point 8.3.2.1), eligible expenditures in 2016 amounted to EUR 35.969,16 and It will be the subject of reimbursement i next period In Zagreb, June 26th, 2017 ,Sdent of the Board and Project Coordinator --Vjdn Vrbanec Project financial statements 28 Nal110/2017/04-1E In*lenjerski Biro HLB Inienjerski biro d.o.o. Rijeka, Strossmayerova II 019 89015118914 T +385 51 322 303 F 051 725 377; E revizija@ibr.hr Web: www.ibr.hr HLB In2enjerski biro d.o.o. is legal entity registered in Republic of Croatia for conducting audit, accounting and business advisory services and it is member of HLB International global network. HLB International is a world - wide network of independent professional accounting firms and business advisers. The network comprises member firms in over 100 countries who, collectively, have more than 1720 partners and 13.510 staff in over 450 offices. HLB International is a member of Forum of firms. Our Company is Network representative for Republic of Croatia's territory. Company is specialized for providing all kinds of audit services to virtually all sorts of industry and government bodies, and is member of Croatia Audit Chamber. www.hlb-croatia.com www.hlbi.com