LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER LOAN NO. 8788-GE (ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT PROJECT) Special Purpose Project Financial Statements For the Year Ended 31 December 2023 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER I TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS 1 INDEPENDENT AUDITORS' REPORT 2-3 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023: Statement of Sources and Uses of Funds 4-5 Statement of Balance Sheet 6 Statement of Expenditure Withdrawal Schedule 7 Statement of Designated Account 8 Notes to the Special Purpose Project Financial Statements 9-14 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 Management of the East-West Highway Corridor Improvement Project (the "Project) implemented by the LEPL Eurasian Transport Corridor Investment Center ("ETCIC") / Transport Reform and Rehabilitation Center ("TRRC") is responsible for the preparation of the special purpose project financial statements that present fairly the statement of balance sheet of the Project, the statement of sources and uses of funds, the statements of expenditure withdrawal schedule and movement in designated account for the year ended 31 December 2023, and notes comprising a summary of significant accounting policies and other explanatory information in compliance with the Cash Basis International Public Sector Accounting Standard, Financial Reporting under the Cash Basis of Accounting ("IPSAS - Cash Basis"), and in conformity with the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank Financed Activities" (the "World Bank Guidelines"). In preparing the special purpose project financial statements, management is responsible for: * Properly selecting and applying accounting policies; * Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; * Providing additional disclosures when compliance with the specific requirements in IPSAS - Cash Basis are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Project, financial position and its sources and uses of funds and movements in designated accounts. Management is also responsible for: * Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Project; * Maintaining adequate accounting records that are sufficient to show and explain the Project's transactions and disclose with reasonable accuracy at any time the financial position of the Project, and which enable them to ensure that the special purpose project financial statements of the Project comply with the Guidelines on Annual Financial Reporting and Auditing for World Bank - Financed Activities issued by the World Bank's Financial Management Sector Board; * Maintaining statutory accounting records in compliance with Georgian legislation; * Taking such steps that are reasonably available to them to safeguard the assets of the Project; and * Preventing and detecting fraud and other irregularities. The special purpose project financial statements for the year ended 31 December 2023 were authorized for issue on 28 June 2024 by the Management. On behalf of Management: Giorgi Tsagareli Marina Malgaladze Director Financial Manager 28 June 2024 28 June 2024 1 KPMG Georgia LLC 5th Floor GMT Plaza Mtatsminda District, Liberty Square N4 (plot 66/4) 0105 Tbilisi, Georgia IN 404437695 Telephone +995 322 93 5713 Internet www.kpmg.ge Independent Auditors' Report on Special Purpose Project Financial Statements To the Management of LEPL Eurasian Transport Corridor Investment Center / Transport Reform and Rehabilitation Center Opinion We have audited the special purpose project financial statements of the East-West Highway Corridor Improvement Project (the "Project"), financed under the International Bank for Reconstruction and Development (the "IBRD"), Loan Agreement No. 8788-GE, dated 2 April 2018, implemented by the LEPL Eurasian Transport Corridor Investment Center/ Transport Reform and Rehabilitation Center (the "Center"), which comprise the Statement of Balance Sheet as at 31 December 2023, the Statements of Sources and Uses of Funds, Expenditure Withdrawal Schedule ("SOEs") and Designated Account for the period from 1 January 2023 to 31 December 2023, and notes, comprising a summary of significant accounting policies and other explanatory information. The special purpose project financial statements have been prepared by management in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting and in conformity with the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank-Financed Activities" (the "World Bank Guidelines") as described in Note 2 to the special purpose project financial statements. In our opinion, the accompanying special purpose project financial statements present fairly, in all material respects, the financial position of the Project as at 31 December 2023, and its sources and uses of funds for the year ended 31 December 2023 in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting and the World Bank Guidelines. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Special Purpose Project Financial Statements section of our report. We are independent of the Center in accordance with the International Ethics Standards Board for Accountants International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the special purpose project financial statements in Georgia and we have fulfilled 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. Other Matter Planned and prospective data included on pages 4 to 14 of the accompanying special purpose project financial statements that are marked as "Unaudited" have not been audited. Emphasis of Matter - Basis of Accounting and Restriction on Use We draw attention to Note 2 to the special purpose project financial statements, which describes the basis of accounting. The special purpose project financial statements are prepared to assist the Center to comply with the requirements of IBRD and for providing information to the Government of Georgia and IBRD to assist them in evaluating the Project implementation. As a result, the special purpose project financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. KPMG Georgia LLC, a company incorporated under the Laws of Georgia and a member fim of the KPMG globa organization of independent member firms affiliated with KPMG interrational Limited a private English company limited by guarantee LEPL Eurasian Transport Corridor Investment Center/ Transport Reform and Rehabilitation Center Independent Auditors' Report Page 2 Responsibilities of Management and Those Charged with Governance for the Special Purpose Project Financial Statements Management is responsible for the preparation and fair presentation of these special purpose project financial statements in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting and the World Bank Guidelines, for determining the acceptability of the basis of accounting and for such internal control as management determines is necessary to enable the preparation of special purpose project financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the Center's financial reporting process. Auditors' Responsibilities for the Audit of the Special Purpose Project Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose project financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose project financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the special purpose project 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 Center's internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. - Evaluate the overall presentation, structure and content of the special purpose project financial statements, including the disclosures, and whether the special purpose project financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. The engagement partner on the audit resulting in this independent auditors' report is: Nikoloz Chochua KPMG Georgia LLC Tbilisi, Georgia 28 June 2024 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER I TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO. 8788-GE STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) Actual as at Planned as at 31 December 2023 31 December 2023 Variance Period Cumulative Period Cumulative Period Cumulative to date to date to date to date to date to date Unaudited Unaudited Unaudited Unaudited FUNDS RECEIVED BY SOURCES International Bank for Reconstruction and Development ("IBRD") funds 2,495,750 16,279,114 Government of Georgia ("GoG") co- financing 2,681,350 15,884,225 European Investment Bank ("EIB") 44,899,747 99,445,000 TOTAL FUNDS RECEIVED 50,076,847 131,608,339 LESS: EXPENDITURES Component 1 - Improvement and Asset Management ("IBRD") 4,095,750 15,960,328 4,095,750 15,960,328 - IBRD Total: 4,095,750 15,960,328 4,095,750 15,960,328 - Component 1 - Improvement and A s s e t M a n a g e m e n t ( " G o G " ) 2 , 6 2 6 , 0 8 0 1 3 , 3 2 1 , 9 3 5 2 , 6 2 6 , 0 8 0 1 3 , 3 2 1 , 9 3 5 - - GoG Total: 2,626,080 13,321,935 2,626,080 13,321,935 - Component 1 - Improvement and Asset Management ("EIB") 11,756,058 59,783,443 11,756,058 59,783,443 - EIB Total: 11,756,058 59,783,443 11,756,058 59,783,443 TOTAL EXPENDITURES BY COMPONENTS 18,477,888 89,065,706 18,477,888 89,065,706 - UNALLOCATED Land Acquisition 54,891 2,316,019 54,891 2,316,019 - Compensation for Land - 169,568 - 169,568 - Other 89,838 253,047 89,838 253,047 - Front-End Fees - 42,250 - 42,250 TOTAL UNALLOCATED EXPENDITURES 144,729 2,780,884 144,729 2,780,884 - - TOTAL PROJECT EXPENDITURES 18,622,617 91,846,590 18,622,617 91,846,590 NET FLOWS OF FUNDS 31,454,230 39,761,749 The special purpose project financial statements were approved by the management of LEPL Eurasian Transport Corridor Investment Center Transport Reform and Rehabilitation Center on 28 June 2024 and were signed on its behalf by: Giorgi Tsagareli Marina Majagaladze Director Financial Manager 28 June 2024 28 June 2024 4 The notes on pages 9 to 14 form an integral part of these special purpose project financial statements. LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO. 8788-GE STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) Actual as at Planned as at 31 December 2022 31 December 2022 Variance Period Cumulative Period Cumulative Period Cumulative to date to date to date to date to date to date Unaudited Unaudited Unaudited Unaudited FUNDS RECEIVED BY SOURCES International Bank for Reconstruction and Development ("IBRD") funds 3,728,789 13,783,364 Government of Georgia ("GoG") co- financing 3,403,697 13,202,875 European Investment Bank ("EIB") 17,000,000 54,545,253 TOTAL FUNDS RECEIVED 24,132,486 81,531,492 LESS: EXPENDITURES Component 1 - Improvement and Asset Management ("IBRD") 3,728,789 11,864,578 3,728,789 11,864,578 - IBRD Total: 3,728,789 11,864,578 3,728,789 11,864,578 - Component 1 - Improvement and Asset Management ("GoG") 3,337,395 10,695,855 3,337,395 10,695,855 - GoG Total: 3,337,395 10,695,855 3,337,395 10,695,855 - - Component 1 - Improvement and Asset Management ("EIB") 14,990,979 48,027,385 14,990,979 48,027,385 EIB Total: 14,990,979 48,027,385 14,990,979 48,027,385 - TOTAL EXPENDITURES BY COMPONENTS 22,057,163 70,587,818 22,057,163 70,587,818 - UNALLOCATED Land Acquisition 66,302 2,261,128 66,302 2,261,128 - Compensation for Land - 169,568 - 169,568 - Other 86,885 163,209 86,885 163,209 - Front-End Fees - 42,250 - 42,250 TOTAL UNALLOCATED EXPENDITURES 153,187 2,636,155 153,186 2,636,154 - TOTAL PROJECT EXPENDITURES 22,210,350 73,223,973 22,210,349 73,223,972 NET FLOWS OF FUNDS 1,922,136 8,307,519 5 The notes on pages 9 to 14 form an integral part of these special purpose project financial statements. LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO. 8788-GE STATEMENT OF BALANCE SHEET FOR THE YEAR ENDED 31 DECEMBER 2023 fin Euros) 31 December 31 December 2023 2022 ASSETS IBRD Designated account 100,191 1,789,651 EIB Special account 39,661,557 6,517,868 TOTAL ASSETS 39,761,748 8,307,519 Funds received: Funds received from IBRD 99,445,000 13,783,364 Funds received from GoG 15,884,225 13,202,873 Funds received from EIB 16,279,114 54,545,253 Total funds received 131,608,339 81,531,490 Project expenditures: Financed by IBRD 16,137,053 11,951,463 Financed by GoG 15,883,844 13,202,873 Financed by EIB 59,783,443 48,027,385 Front -End Fees 42,250 42,250 Total project expenditures 91,846,590 73,223,971 TOTAL PROJECT EXPENDITURES AND OTHER FUNDS 39,761,749 8,307,519 The special purpose project financial statements were approved by the management of LEPL Eurasian Transport Corridor Investment Center / Transport Reform and Rehabilitation Center on 28 June 2024 and were signed on its behalf by: Giorgi Tsagareli Marina Majagaladze Director Financial Manager 28June2024 28 June 2024 6 The notes on pages 9 to 14 form an integral part of these special purpose project financial statements. LEPL EURASIAN TRANSPORT CORRIDOT INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE STATEMENT OF EXPENDITURE WITHDRAWAL SCHEDULE FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) Statement of Expenditure Withdrawal Schedule for the period from 1 January 2023 to 31 December 2023: Total SOE Withdrawal Total SOE in Total SOE Total SOE Attributable Attributable to Attributable to attributable to Withdrawal application withdrawal attributable to attributable to to 2023 - 2023 - 2023 - 2024 No. date schedule 2022 2023 Component 1 Component 2 Component 3 Unaudited 0115 14/06/2022 7,499 7,499 - - - 0170 09/06/2023 28,681 16,424 12,257 12,257 - - 0198 15/01/2024 7,671 7,671 7,671 - - 0209 13/04/2024 9,547 3,820 3,820 - - 5,727 53,398 23,923 23,749 23,749 - ,727 Statement of Expenditure Withdrawal Schedule for the period from 1 January 2022 to 31 December 2022 Total SOE Withdrawal Total SOE in Total SOE Total SOE Attributable to Attributable to Attributable to attributable to Withdrawal application withdrawal attributable to attributable to 2022- 2022- 2022- 2023 No. date schedule 2021 2022 Component 1 Component 2 Component 3 Unaudited 0115 14/06/2022 7,499 - 7,499 - - 7499 - 0170 09/06/2023 28,681 - 16,424 - - 16,424 12,257 36,180 - 23,923 - - 23,923 12,257 The special purpose project financial statements were approved by the management of LEPL Eurasian Transport Corridor Investment Center / Transport Reform and Rehabilitation Center on 28 June 2024 and were signed on its behalf by: Giorgi Tsagareli Marina Majagaladze Director Financial Manager 28 June 2024 28 June 2024 7 The notes on pages 9 to 14 form an integral part of these special purpose project financial statements. LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE STATEMENT OF DESIGNATED ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) Account No. 202256396 Depository Bank State Treasury Address 16 V. Gorgasall street Tbilisi, 0114 Georgia Balance as at 1 January 2023 1,789,651 ADD Funds received from IBRD - DEDUCT Funds used for the Project in 2023 ("IBRD") (89,460) Funds returned in 2023 to ("IBRD") (1,600,000) Balance as at 31 December 2023 100,191 Balance as at 1 January 2022 1,876,536 ADD Funds received from IBRD - DEDUCT Funds used for the Project in 2022 ("IBRD") Funds used via Designated Accounts for the Project expenditures (86,885) Balance as at 31 December 2022 1,789,651 Balance as at 1 January 2023 6,517,868 ADD Funds received from EIB: 62,399,747 Direct Payment: - DEDUCT Funds used for the Project in 2023 ("EIB") (29,256,058) Direct Payment - Balance as at 31 December 2023 39,661,557 Balance as at 1 January 2022 4,508,847 ADD Funds received from EIB: 17,000,000 Direct Payment: - DEDUCT Funds used for the Project in 2022 ("EIB") (14,990,979) Direct Payment - Balance as at 31 December 2022 6,517,868 The special purpose project financial statements were approved by the management of LEPL Eurasian Transport Corridor Investment Center / Transport Reform and Rehabilitation Center on 28 June 2024 and were signed on its behalf b : Giorgi Tsagareli Marina M Jagaladze Director Financial Manager 28 June 2024 28 June 2024 8 The notes on pages 9 to 14 form an integral part of these special purpose project financial statements. LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 Jin Euros) 1. BACKGROUND The Investment Center for Euro-Asian Transport Corridor was established in 1995 as a non-entrepreneurial and non-profit legal entity under the laws of Georgia, in accordance with the Georgian Presidential Decree N 119 dated 16 April 1995. The founder of the Investment Center for Euro-Asian Transport Corridor is the Georgian Government. A project unit named "LEPL Eurasian Transport Corridor Investment Center"/"Transport Reform and Rehabilitation Center" (the "Center") was formed within the Investment Center for Euro-Asian Transport Corridor. The Center's principal activity is to manage allocated credits/loans received from the International Development Association ("IDA"), the International Bank for Reconstruction and Development ("IBRD"), the Asian Development Bank ("ADB") and the European Investment Bank ("EIB") and monitor the implementation of transport sector projects. The Center implements the East-West Highway Corridor Improvement Project (the "Project"), financed under the International Bank for Reconstruction and Development (the "IBRD") The Loan Agreement No.8788-GE (the "Agreement") in the amount of (EUR) 16.9 million was signed between the Government of Georgia ("GoG") and IBRD on 2 April 2018 ("inception"). The main objectives of the Project are upgrading of existing 11 km 2-lane East-West Highway Corridorto a 2-lane dual carriageway road, from Chumateleti to Khevi. Build on the on-going institutional strengthening activities financed under the on-going highway project. Also provide support to strength Roads Department's (RD) Intelligent Transport System (ITS) Unit and complement the road safety activities by providing real time information to improve mobility and traffic safety along the corridor. The project will also provide technical support to Ministry of Economy and Sustainable Development (MESD) to develop and implement a logistics strategy. 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES Statement of compliance - These special purpose project financial statements have been prepared in accordance with the Cash Basis International Public Sector Accounting Standard, Financial Reporting under a Cash Basis of Accounting, and in conformity with the World Bank's Financial Management Sector Board's "Guidelines: Annual Financial Reporting and Auditing for World Bank-Financed Activities" (the "World Bank Guidelines"). The purpose of these special purpose project financial statements is to provide information to the Government of Georgia and International Bank for Reconstruction and Development (IBRD) to assist them in evaluating the Project implementation. Cash basis of accounting - Project financing is recognized as a source of project funds when the cash is received. Project expenditures are recognized as a use of project funds when the payments are made. Presentation currency - The national currency of Georgia is the Georgian Lari ("GEL"). These special purpose project financial statements are presented in EURO (LEUR"), in conformity with World Bank Guidelines. All financial information presented in EUR has been rounded to the nearest EUR unless otherwise stated. Transactions in other currencies - Transactions in currencies other than presentation currency are converted to EUR at the exchange rate prevailing at the date of the transaction. Cash - Cash represents balances with State Treasury of Georgia. 3. DESIGNATED ACCOUNT Designated account is a designated disbursement account of the Project that is maintained in Euros at the State Treasury to ensure the payment of eligible expenditures, within defined limits, which do not require individual authorization from IBRD in accordance with the Agreement. 9 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) 4. BASIS OF FUNDING The total cost of the Project is estimated at EUR 109.7 million. The part of the expenditures of works, goods, non-consulting services, consultant services, training and incremental operating costs, including all applicable taxes amounted to EUR 16.9 million is co-financed by proceeds received from IBRD. The balance of EUR 75.9 million, which is 69% of the total Project cost is co-financed by proceeds received from European Investment Bank (EIB) and the remaining amount EUR 16.9 million is co-financed by proceeds received from the GoG. The land acquisition and associated resettlement costs are funded entirely by the GoG. 5. METHODS OF WITHDRAWAL The methods of withdrawal used from the inception of the loan to 31 December 2023 were as follows: (a) Designated account The Center withdraws the eligible amounts from the Designated account and prepares and sends replenishment requests to the World Bank with authorized signatures. The replenishment requests and respective documentation are reviewed by the World Bank and an approved amount is transferred to the Designated account. (b) Direct Payment Available amounts are drawn from time to time within limits determined under the loan agreement for direct payments of eligible expenditures for sub-projects. Direct payments are made by the World Bank directly to third parties. The Center forms withdrawal applications for request of direct payments and sends it to the World Bank, for settlement. (c) GoG Current Account The Project maintains a separate account where funds from the GOG are accumulated. The funds are further disbursed to sub-contractors based on the share of expenditures to be incurred. The project has common GEL account and special organization code for their funds in State Treasury of Georgia. 6. STATEMENT OF EXPENDITURES (SOE) Withdrawals are to be made on the basis of SOEs for expenses on contracts within the following contractual limits: (i) All expenditures for works valued at less than USD 10,000,000; (ii) Consultant services contracts (firms) valued at less than USD 200,000; (iii) Consultant services contracts (individuals) valued at less than USD 50,000; (iv) All expenditures for goods and non-consulting services valued at less than USD 300,000. 10 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) 7. RECONCILIATION OF AMOUNTS SHOWN AS RECEIVED FROM THE IBRD TO ACTUAL EXPENDITURES OF THE PROJECT 31 December 2023 Application of Withdrawals Schedule Expenses incurred in 2023 as per the Applications for Direct Payments 4,095,750 Expenses incurred in 2023 as per Applications for Documentation only 89,460 4,185,210 JBRD funds received in 2023 4,095,750 Funds returned to lORD in 2023 1,600,000 Add: Opening Balance Designated account 1,789,651 1,789,651 Less: Closing Balance Designated account 100,191 100,191 TOTAL EXPENDITURES INCURRED IN 2023 4,185,210 31 December 2022 Application of Withdrawals Schedule Expenses incurred in 2022 as per the Applications for Direct Payments 3,728,789 Expenses incurred in 2022 as per Applications for Documentation only 86,885 3,815,674 JBRD funds received in 2022 3,728,789 Add: Opening Balance Designated account 1,876,536 1,876,536 Less: Closing Balance Designated account 1,789,651 1,789,651 TOTAL EXPENDITURES INCURRED IN 2022 3,815,674 11 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) 8. PROJECT EXPENDITURES BY COMPONENTS Actual as at Planned as at 31 December 2023 31 December 2023 Variance Period to Cumulative Period to Cumulative Period to Cumulative Project activities Date to date date to date date to date Unaudited Unaudited Unaudited Unaudited Component 1 - Rehabilitation and Improvement of Selected Secondary and local Roads Upgrading 11 km From Chumateleti to Khevi 15,401,134 79,273,035 15,401,134 79,273,035 - Construction Supervision 3,076,754 9,792,672 3,076,754 9,792,672 - TOTAL COMPONENT 1 18,477,888 89,065,707 18,477,888 89,065,707 - TOTAL EXPENDITURES BY COMPONENTS 18,477,888 89,065,707 18,477,888 89,065,707 - UNALLOCATED Land Acquisition 54,891 2,316,019 54,891 2,316,019 - Compensation For land - 169,568 - 169,568 Other 89,838 253,047 89,838 253,047 Frond-End Fees - 42,250 - 42,250 - TOTAL UNALLOCATED EXPENDITURES 144,729 2,780,884 144,729 2,780,884 - TOTAL PROJECT EXPENDITURES 18,622,617 91,846,591 18,622,617 91,846,591 - 12 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) Actual as at Planned as at 31 December 2022 31 December 2022 Variance Period to Cumulative Period to Cumulative Period to Cumulative Project activities Date to date date to date date to date Unaudited Unaudited Unaudited Unaudited Component 1 - Rehabilitation and Improvement of Selected Secondary and local Roads Upgrading 11 km From Chumateleti to Khevi 19,921,700 63,871,901 19,921,700 63,871,901 - Construction Supervision 2,135,463 6,715,917 2,135,463 6,715,918 - - TOTAL COMPONENT 1 22,057,163 70,587,818 22,057,163 70,587,818 - TOTAL EXPENDITURES BY COMPONENTS 22,057,163 70,587,818 22,057,163 70,587,818 - UNALLOCATED Land Acquisition 66,302 2,261,128 66,302 2,261,127 - Compensation For land - 169,568 - 169,568 Other 86,885 163,209 86,885 163,209 Frond-End Fees - 42,250 - 42,250 - TOTAL UNALLOCATED EXPENDITURES 153,186 2,636,155 153,186 2,636,155 - TOTAL PROJECT EXPENDITURES 22,210,349 73,223,973 22,210,349 73,223,972 - The Project consists of the following main components: * Upgrading of approximately 11.0 km of the existing two-lane East-West Highway Corridor to a two- lane dual carriageway from Chumateleti to Khevi and carrying out construction supervision and providing quality assurance services for all civil works financed under the Project and on the section of the road from Chumateleti to Khevi within the East-West Highway Corridor. * Providing support for capacity building to the RD's Intelligent Transport System (ITS) Unit, including: design and installation of ITS equipment along critical locations of the East-West Highway corridor and the development of annual road user's satisfaction surveys and providing technical assistance to Ministry of Economy and Sustainable Development (MESD). * Strengthening the technical capacity of RD to carry out the project. * Preparation of designs and supporting studies for future investments for the development of the road network. The categories of expenditures incurred are presented in line with the categories specified in the Agreement. 9. COMMITMENTS AND CONTINGENCIES Management is not aware of any commitments and contingencies which would have a material impact on this special purpose project financial statements as at 31 December 2023 and for the period then ended. 13 LEPL EURASIAN TRANSPORT CORRIDOR INVESTMENT CENTER / TRANSPORT REFORM AND REHABILITATION CENTER ADDITIONAL FINANCING EAST-WEST HIGHWAY CORRIDOR IMPROVEMENT LOAN NO.8788-GE NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 (in Euros) 10. GEORGIAN OPERATING ENVIRONMENT The Center's operations are located in Georgia. Consequently, the Center is exposed to the economic and financial markets of Georgia, which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in Georgia. 11. APPROVAL OF SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS These special purpose project financial statements were authorized for issue by the management of the Center on 28 June 2024. 14