AVSI Foundation Financial statements as at December 31, 2017

Independent auditor’s report

EY S.p.A. Tel: +39 02 722121 Via Meravigli, 12 Fax: +39 02 722122037 20123 Milano ey.com

Independent auditor’s report (Translation from the original Italian text)

To the Bord of Directors of AVSI Foundation

Report on the Audit of the Financial Statements

Opinion We have audited the financial statements of AVSI Foundation (the Foundation), which comprise the balance sheet as at December 31 2017, the income statement and statement of cash flows for the year then ended, and explanatory notes.

In our opinion, the financial statements of AVSI Foundation have been prepared, in all material respects, in accordance with the principles and criteria described in the paragraph "Accounting principle and valuation criteria" of the explanatory notes.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Foundation in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Matters This report is not issued pursuant to the provisions of the Italian law, as the Foundation is not subject to the statutory audit pursuant to the Italian Civil Code, for the year ended December 31, 2017.

Responsibilities of Directors and Those Charged with Governance for the Financial Statements The Directors are responsible for the preparation of the financial statements in compliance with the principles and criteria described in the paragraph "Accounting principle and valuation criteria" of the explanatory notes, and for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Directors are responsible for assessing the Foundation’s ability to continue as a going concern and, when preparing the financial statements, for the appropriateness of the going concern assumption, and for appropriate disclosure thereof. The Directors prepare the financial statements on a going concern basis unless they either intend to liquidate the Foundation or to cease operations, or have no realistic alternative but to do so. The statutory audit committee (“Collegio dei Revisori”) is responsible, within the terms provided by the law, for overseeing the Foundation’s financial reporting process.

EY S.p.A. Sede Legale: Via Po, 32 - 00198 Roma Capitale Sociale Euro 2.525.000,00 i.v. Iscritta alla S.O. del Registro delle Imprese presso la C.C.I.A.A. di Roma Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. 250904 P.IVA 00891231003 Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998 Iscritta all’Albo Speciale delle società di revisione Consob al progressivo n. 2 delibera n.10831 del 16/7/1997

A member firm of Ernst & Young Global Limited

Auditor’s Responsibilities for the Audit of the Financial Statements 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 International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have exercised professional judgment and maintained professional skepticism throughout the audit. In addition:  we have identified and assessed the risks of material misstatement of the financial statements, whether due to fraud or error, designed and performed audit procedures responsive to those risks, and obtained 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;  we have obtained 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 Foundation’s internal control;  we have evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors;  we have concluded on the appropriateness of Directors’ 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 Foundation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Foundation to cease to continue as a going concern.

We have communicated with those charged with governance, identified at an appropriate level as required by ISA Italia, 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.

Milan, June 26, 2018

EY S.p.A. Signed by: Luca Pellizzoni, Partner

This report has been translated into the English language solely for the convenience of international readers.

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AVSI REGISTERED OFFICE: CESENA (FC) Via Padre Vicinio da Sarsina, 216 Tax code (Italian fiscal code): 81017180407

GOVERNING BODIES

Board of Directors

President Patrizia Savi

Vice President Alfredo Mantica Directors Daniele Contini, Michele Faldi, Lorenzo Ornaghi, Giampaolo Silvestri, Alda Vanoni

Secretary General Giampaolo Silvestri

Board of Auditors

President Michele Grampa Auditors Delia Gatti, Alfredo Tradati

Independent Audit Company EY S.p.A.

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INDEX

DIRECTORS' REPORT

- Economic and financial summary of the Foundation 4 - Relationships with foreign subsidiaries 7 - Performance of the early months of 2018 9

BALANCE SHEET, INCOME STATEMENT, CASH FLOW

- Balance Sheet – Assets 11 - Balance Sheet – Liabilities 12 - Income Statement 13 - Cash Flow 14

NOTES TO THE FINANCIAL STATEMENTS

- Structure and content of the Financial Statements 15 - Accounting principles and valuation criteria 17 - Comments on the main items of Assets 23 - Comments on the main items of Liabilities 31 - Memorandum accounts 39 - Comments on the main items of the Income Statement 40

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DIRECTORS' REPORT

Dear Founding members,

We submit herewith to your attention the Annual Report for fiscal year 2017, prepared under the responsibility of the Board of Directors in compliance with Art. 2423 of the Civil Code of . As it is better clarified in the notes to the Financial Statements, the Income Statement is reclassified by function rather than by nature as this approach provides a clearer and more representative overview of the Foundation’s economic standing.

In order to obtain a global overview of the activities implemented over the year in facts and figures, please refer to the Foundation's social report.

As usual, at the end of a year of hard work we wish to express our wholeheartedly gratitude and thank to all those who have joined us in our work: our expatriate staff, our staff in Italy and our local staff; all volunteers and supporters, who have all freely contributed with their valuable work and expertise; all private donors, individuals and companies, national Institutions, international Agencies, local Agencies and the Founding Members, that with their significant contributions make it possible for us to keep sharing the needs and the very meaning of life with the poorest in the world.

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ECONOMIC AND FINANCIAL SUMMARY OF THE FOUNDATION

The summary of the economic and financial data as of December 31, 2017 is presented below following two different descriptive criteria (amounts in thousands of Euros):

Summary of Economic data for fiscal year 2017 (Table 1)

2017 2016

- Contributed income for projects 24,125 18,240

- Project expenses (23,791) (17,699)

Operating results of projects 334 541 - Contributed income for the organization 3,883 3,573

- Organization expenses (4,055) (3,967)

Operating results of the organization (172) (394) - Revenue from ancillary activities 233 124

- Expenses for ancillary activities (76) (115) Operating results of ancillary activities 157 9

Operating results 319 156

- Financial income (charges), net (130) (35) - Extraordinary income (charges), net (83) 8 - Project adjustments 0 (74) Income before taxes 106 55

- Taxes of the year (23) (23)

Net result 83 32

The first table highlights the operating result for project management determined as the difference between the contributions received for projects and the related costs and expenses incurred for project implementation, equal to EUR 334 thousand.

Next, there is the contributed income for the organization. It is accounted for when received and is represented by that part of contributed income from state agencies and private donors which is expressly devoted to cover organization expenses. Contributions for the organization less organization expenses give a negative operating result of EUR 172 thousand in 2017.

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The operating result of ancillary activities is equal to EUR 157 thousand and is determined by incomes from services provided to private clients and seen as ancillary to development cooperation and aid, net of costs directly incurred for these activities.

The algebraic sum of "Operating results of projects", "Operating results of the organization" and "Operating results of ancillary activities" represents the Operating Result, positive for EUR 318 thousand in fiscal year 2017.

The profit is EUR 82 thousand, net of income taxes of the period and gross of financial and extraordinary management results.

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Economic figures for fiscal year 2017 (Table 2)

2017 % of revenue

- Contributed income for projects 24,125 85.43% - Contributed income for the organization 3,883 13.75% - Revenue from ancillary activities 233 0.83% Total contributed income 28,241 100% - Project expenses (23,791) -84.24% - Organization expenses (4,055) -14.36% - Expenses for ancillary activities (76) -0.27% Total expenses (27,922) -98.87% Operating results 318 1.13% - Financial income (charges), net (130) -0.46% - Extraordinary income (charges), net (83) -0.29% - Adjustments on projects 0 0.00% Income before taxes 106 0.37% - Taxes of the year (23) -0.08% Net income 83 0.29%

Cash flow (Profit plus amortization and depreciation) 178 0.62%

The second criteria, in line with the Income Statement model adopted, highlights the total contributions received, devoted either to projects or to the organization, from which the expenses globally incurred for projects and the organization are deducted.

The main assets and liabilities are presented in the Table below (amounts in thousands of Euros): Assets and liabilities 2017 2016

Fixed assets 1,655 2,042 Middle/long-term liabilities (1,306) (1,021) Fixed capital 349 1,021

Net working capital (3,261) (3,134) Cash and cash equivalents net of financial short-term liabilities 3,189 2,296 Securities 43 54 Financial assets 3,232 2,350

Equity (320) (237)

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RELATIONSHIPS WITH FOREIGN SUBSIDIARIES

The relationships with the foreign subsidiaries refer to the expenses incurred by the Foundation and mainly related to staff, on their behalf. These expenses are recorded among the accounts receivable of the Foundation. The accounts are periodically adjusted for the amounts received once the expenses are reimbursed. The registration of this account receivable, together with the share of administrative reimbursement to headquarters recognized for the implementation of projects at the local level, constitute the amount of the recognized contributions.

A breakdown of this amounts is explained in the Table below (in Euros):

Economic relationships with AVSI's foreign subsidiaries Entities Recognized contributions 2017

AVSI Uganda 643,305 AVSI DR Congo 378,735 AVSI Congo Brazzaville 37,957 AVSI Haiti 537,480 AVSI Iraq 17,439 AVSI Lebanon 1,090,878 AVSI Ivory Coast 172,829 AVSI Kenya 62,585 AVSI South Sudan 170,643

Total 3,111,852

Entities Expenses incurred 2017 AVSI Uganda 214,842 AVSI D.R. Congo 220,200 AVSI Congo Brazzaville 29,954 AVSI Haiti 344,503 AVSI Mexico 9,505 AVSI Iraq 18,038 AVSI Lebanon 445,142 AVSI Ivory Coast 107,127 AVSI Kenya 15,826 AVSI South Sudan 155,806 Total 1,560,942

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The figures above refer to the recognized contributions and the expenses incurred by AVSI Italy in 2017 for projects directly funded to foreign subsidiaries listed above.

Financial relationships with AVSI's foreign subsidiaries

Entities Receivables December 31, 2017 AVSI Uganda 416,470 AVSI South Sudan 258,317 AVSI D.C. Congo 723,128 AVSI Haiti 130,665 AVSI Lebanon 386,894 AVSI Ivory Coast 131,863 AVSI Congo Brazzaville 6,906 AVSI Iraq 17,439 Total 2,071,682

Entities Payables December 31, 2017 AVSI Uganda 149,625 AVSI South Sudan 120 AVSI Rwanda 4,825 AVSI Kenya 1,276 AVSI Iraq 17,717 AVSI Nigeria 3,627 AVSI Mozambique 5,530 AVSI Burundi 2,361 AVSI Lebanon 11,183 AVSI Syria 10,859 AVSI Haiti 21,125 AVSI USA 10,607 AVSI Ivory Coast 43 Total 238,897

The figures above refer to the accounts receivable from and payable to foreign subsidiaries as of December 31, 2017.

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PERFORMANCE OF THE EARLY MONTHS OF 2018

During the first months of 2018, proceeds from projects show a decrease as compared to the same period of 2017.

The significant reduction, in comparison with 2017, of revenues deriving from institutional projects, being in line with budget forecasts, is determined by the receipt in the first months of 2017 of the first installment of the “Back to the future” project.

At the same time, there is an increase in the approval of new projects by institutional donors, with particular regard to the Italian State.

As far as the Ministry of Foreign Affairs and International Cooperation (MAECI) is concerned, in these first months, a significant part of the projects envisaged in the budget have been approved, with a consequent positive impact on the volume of contributions collected. As far as ongoing projects are concerned, there were some delays in the operational activity of checking and examining the reports submitted and the subsequent disbursement of contributions, with particular regards to projects managed by AICS (Italian Agency for Development Cooperation) headquarters.

The time of payment by other donors remains substantially steady.

Diversification of donors which has already been underway for a long time constantly carries on and strengthens; the growing weight of foreign international organizations and aid agencies among the donors of the Foundation is a clear evidence of this trend. In particular, we highlight the approval in the course of the last months of 2017 of an important project funded by USAID and implemented in Uganda for a value of € 37 million and with a duration of 7 years, which had led to an increase in receipts since the first months of 2018.

It is important to point out the fact that the trend of institutional donors, directly entrusting projects resulting in transferring the funds directly to local offices rather than to AVSI headquarters, is growing.

Private grants received in the first months of 2018 are in line with the same period of 2017.

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Distance support still shows a slight decrease as compared to the same period last year, offset by a slight increase in contributions received from private donors on specific projects and on the “Tents campaign”.

The Syria-Open Hospitals project submitted to private donors and started in 2017 in Syria is significantly growing. It is aimed at providing support to the most vulnerable population affected by the conflict, through the upgrading of some non-profit private hospitals in Aleppo and Damascus. The project has collected funds from private Italian foundations, significant contributions from private donors and businesses, from the Italian Bishops’ Conference as well as from the Bishops’ Conferences of foreign countries. Significant contributions from foreign States and private donors are under evaluation during the first few months of 2018.

Organization costs for the first few months of 2018 are in line with the relevant budget.

Starting from 2017, AVSI foundation appointed the audit company EY SpA (Ernst & Young) to audit AVSI financial statements. With reference to the auditing of financial statements of AVSI local subsidiaries worldwide, the foundation appointed, for most of them, the same audit company EY SpA.

p. BOARD OF DIRECTORS President Patrizia Savi

Milan, May 30 , 2018

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AVSI

ANNUAL REPORT AS OF DECEMBER 31, 2017 AND DECEMBER 31, 2016 BALANCE SHEET (amounts in Euros) ASSETS December 31, 2017 December 31, 2016

INTANGIBLE ASSETS

Modifications to statute 1.470 2.058 Software expenses 30.615 2.318 Quality certification 2.550 2.664 Trademark registration - - Improvements on third party's assets 11.996 1.626 46.631 8.666

TANGIBLE ASSETS

Land and buildings 1.469.230 1.899.475 Plants, machinery and equipment 1.303 2.068 Office furniture 17.434 21.747 Electronic office equipment 39.709 29.574 1.527.676 1.952.864

FINANCIAL ASSETS Participations in other foundations 80.927 80.874 80.927 80.874

TOTAL FIXED ASSETS 1.655.235 2.042.404

RECEIVABLES Receivables from private donors 1.410.825 1.139.489 Receivables from clients for ancillary activities 138.612 111.715 Receivables from social security institutions 13.225 8.880 Receivables from tax authorities 3.689 3.689 Other receivables 58.746 45.531 Receivables from institutional donors - Projects funded by the Italian Government 2.161.829 3.701.555 - Projects funded by the European Union 10.309.738 16.150.746 - Projects funded by International Organizations/Other bilateral donors 31.665.375 1.727.114 - Projects funded by CEI (Italian Bishops' Conference) 865.238 328.841 - Projects funded by local Agencies 220.607 295.167 45.222.787 22.203.423

From the related parties - payable within the next year - payable beyond the next year - From foreign subsidiaries - payable within the next year 2.071.682 1.281.844 - payable beyond the next year 2.071.682 1.281.844

FINANCIAL ASSETS OTHER THAN FIXED ASSETS Other securities 43.384 53.586

CASH AND CASH EQUIVALENTS Bank and post deposits 4.709.519 3.646.959 Cash at hand 23.887 4.733.405 7.847 3.654.806

TOTAL CIRCULATING ASSETS 53.696.355 28.502.964

ACCRUALS AND DEFERRALS 24.487 19.570

TOTAL ASSETS 55.376.076 30.564.938 AVSI

ANNUAL REPORT AS OF DECEMBER 31, 2017 AND DECEMBER 31, 2016 BALANCE SHEET (amounts in Euros) LIABILITIES December 31, 2017 December 31, 2016

Membership fees 40.918 40.918 Accumulated fund 859.028 859.028 Variation to accumulated fund - Adjustments to accumulated fund (662.605) (694.981) - Membership fees paid in the year - Profit (loss) of the year 82.645 (579.960) 32.375 (662.606)

EQUITY 319.986 237.339

SEVERANCE PAY OF EMPLOYED STAFF 1.116.660 1.004.756

MIDDLE/LONG TERM LIABILITIES - Loans 189.257 16.308 TOTAL MIDDLE/LONG TERM LIABILITIES 189.257 16.308

ACCOUNTS PAYABLE TO BANKS - payable within the next year 1.543.560 1.358.336 - payable beyond the next year 1.543.560 1.358.336 ACCOUNTS PAYABLE TO PROJECTS - Italian Government 1.212.255 3.057.683 - European Union 11.237.458 16.122.172 - International Organizations/Other bilateral donors 31.501.225 1.678.455 - local Agencies 15.077 147.156 - CEI (Italian Bishops' Conference) 842.654 396.652 - International Adoptions 8.220 28.548 - Private donors 2.637.992 993.552 - Distance Support Program 3.382.416 50.837.298 3.899.432 26.323.650 ACCOUNTS PAYABLE TO SUPPLIERS - payable within the next year 311.557 283.110 - payable beyond the next year 311.557 283.110 ACCOUNTS PAYABLE TO PROJECT STAFF - payable within the next year 11.385 207.695 - payable beyond the next year 11.385 207.695 ACCOUNTS PAYABLE TO STAFF IN THE MAIN OFFICES - payable within the next year 588.299 609.120 - payable beyond the next year 588.299 609.120 ACCOUNTS PAYABLE TO TAX AUTHORITIES - payable within the next year 81.681 93.949 - payable beyond the next year 81.681 93.949 ACCOUNTS PAYABLE TO SOCIAL SECURITY INSTITUTIONS - payable within the next year 133.606 130.627 - payable beyond the next year 133.606 130.627 ACCOUNTS PAYABLE TO FOREIGN SUBSIDIARIES - payable within the next year 238.897 259.070 - payable beyond the next year 238.897 259.070 ACCOUNTS PAYABLE TO OTHERS - payable within the next year 2.317 40.740 - payable beyond the next year 2.317 40.740

TOTAL ACCOUNTS PAYABLE 53.748.599 29.306.298

ACCRUALS AND DEFERRALS 1.576 237

TOTAL EQUITY AND LIABILITIES 55.376.076 30.564.938

MEMORANDUM ACCOUNTS December 31, 2017 December 31, 2016

SURETIES FROM THIRD PARTIES

- Guarantees released by banks 3.581.154 1.941.941 - Commitments with third parties

COMMITMENTS FOR PROJECTS - Own commitments for projects (237.798) 832.052

TOTAL MEMORANDUM ACCOUNTS 3.343.356 2.773.993 AVSI

ANNUAL REPORT AS OF DECEMBER 31, 2017 AND DECEMBER 31, 2016 INCOME STATEMENT (amounts in Euros) INCOME STATEMENT 2017 2016

Contributed income from the Italian Government 2.997.124 2.321.904 Contributed income from the European Union 6.245.673 2.700.660 Contributed income from International Organizations/Other bilateral donors 1.310.563 1.289.017 Contributed income from local Agencies 223.073 206.001 Contributed income from CEI (Italian Bishops' Conference) 772.503 347.843 Contributed income from Private Donors 5.421.320 4.582.559 Contributed income from DSP Private Donors to institutional projects 6.228.534 6.304.792 Contributed income from DSP Private Donors 926.506 487.675 CONTRIBUTED INCOME FOR PROJECTS 24.125.296 18.240.450

Contributed income from the Italian Government 250.261 141.825 Contributed income from the European Union 186.355 431.675 Contributed income from International Organizations/Other bilateral donors 1.841.937 1.507.319 Contributed income from local Agencies and CEI (Italian Bishops' Conference) 0 4.629 Contributed income from Private Donors 727.057 609.012 Contributed income from DSP 737.292 767.626 Contributed income from International Adoptions 139.800 111.200 CONTRIBUTED INCOME DUE TO ORGANIZATION EXPENSES 3.882.702 3.573.285

Counseling 13.200 0 Sponsorship 154.900 99.400 Revenue from sales of CO2 emissions rights 64.588 24.670 REVENUE FROM ANCILLARY ACTIVITIES 232.688 124.070

TOTAL CONTRIBUTED INCOME 28.240.685 21.937.804

EXPENSES INCURRED + FUNDS TRANSFERRED TO PROJECTS Projects funded by the Italian Government (2.479.824) (1.906.900) Projects funded by the European Union (5.923.272) (2.391.305) Projects funded by International Organizations/Other bilateral donors (1.199.321) (1.189.454) Projects funded by local Agencies (134.855) (130.699) Projects funded by CEI (Italian Bishops' Conference) (772.503) (347.843) Projects funded by DSP (925.747) (455.255) Projects funded by private donors (9.193.400) (20.628.922) (8.329.426) (14.750.882)

EXPENSES FOR PROJECT-DEDICATED STAFF (3.161.197) (2.948.246)

TOTAL PROJECT EXPENSES (23.790.119) (17.699.128)

EXPENSES FOR STAFF IN THE MAIN OFFICES (3.164.280) (3.006.740)

OTHER ORGANIZATION EXPENSES - Expenses for raw materials, subsidiary and consumption materials (115.621) (127.124) - Expenses for services (676.149) (661.540) - Travel and transportation (208.364) (180.708) - Expenses for third parties' goods (125.298) (124.197) - Other management expenses (31.348) (1.156.780) (28.644) (1.122.212)

AMORTIZATION AND DEPRECIATION - Amortization of intangible assets (21.165) (11.074) - Depreciation of tangible assets (73.394) (83.816) - Provisions and depreciation 0 (94.559) (4.920) (99.810)

COSTS TRANSFERRED TO PROJECT MANAGEMENT 360.946 261.762 COSTS TRANSFERRED TO ANCILLARY MANAGEMENT 0 0

TOTAL ORGANIZATION EXPENSES (4.054.673) (3.967.000)

EXPENSES FOR ANCILLARY ACTIVITIES - Expenses for staff (16.479) (12.481) - Expenses for services (6.017) (486) - Expenses for consumption materials 0 (66.285) - Travel and transportation (1.473) 0 - Fund transfers (52.864) (35.899)

TOTAL EXPENSES INCURRED FOR ANCILLARY ACTIVITIES (76.832) (115.151)

OPERATING RESULTS 319.061 156.524

Other financial revenue Revenue from securities in circulating assets 13 27 Other revenue 45.766 45.779 47.304 47.332

Interest and other financial expenses (176.044) (82.247)

FINANCIAL REVENUE AND EXPENSES (130.264) (34.915)

Extraordinary revenue 25.735 20.625 Extraordinary expenses (109.407) (12.688)

EXTRAORDINARY REVENUE AND EXPENSES (83.672) 7.937

Adjustments to accounts payable in currencies other than the Euro (capital gain on projects) 619.886 81.109 Provision for project receivables depreciation 0 (50.000) Adjustments to accounts receivables in currencies other than the Euro (capital loss on projects) (619.555) (105.358)

ADJUSTMENTS ON PROJECTS 331 (74.248)

INCOME BEFORE TAXES 105.456 55.298

Taxes of the year (22.812) (22.924)

RESULT OF THE YEAR 82.645 32.375 AVSI

CASH FLOW

(amounts in Euros)

31/12/2017 31/12/2016

A. Cash flow from income activities

Result of the year 82.645 32.375 Taxes of the tear 22.812 22.924 (Profit)/Loss on disposal of tangible assets 83.672 0 Interest expenses/(Interest revenues) 130.264 34.915 Result of the year before taxes, interest and plus/minus from dismissal 319.393 90.213

Variation due to non cash components without reflection in Net Working Capital Amortization of intangible assets 21.165 11.074 Depreciation of tangible assets 73.394 83.816 Adjustement in tangible and intagible assets Severance pay 135.546 145.984 Provision for project receivables depreciation 0 50.000 Cash Flow before variation in Net Working Capital 230.106 290.874

Variation in Working Capital (Increase) Decrease of accounts receivable from institutional donors (23.638.918) (10.943.802) (Increase) Decrease of accounts receivable from private donors (271.336) (159.885) (Increase) Decrease of other receivables (824.092) (511.035) (Increase) Decrease of accruals and deferrals in assets (4.917) (9.549) Increase (Decrease) of accruals and deferrals in liabilities 1.339 0 Increase (Decrease) of accounts payable to projects 25.133.533 11.936.118 Increase (Decrease) of accounts payable to suppliers 28.447 (946) Increase (Decrease) of other payables (285.017) 149.080 Total Variation in Net Working Capital 139.039 459.981

Other Variations Interests paid (130.264) (34.915) Taxes paid (22.812) (16.089) Loss on disposal of tangible assets (83.672) Adjustment on projects (331) Severance paid (23.642) (110.962) Total Other Variation -260.721 -161.966

Cash flow from income activities (A) 427.817 679.103

B. Cash flow from investments

(Investments)/Disinvestments in intangible assets (59.130) (3.355) (Investments)/Disinvestments in tangible assets 351.794 (43.551) (Investments)/Disinvestments in participation in other companies (53) 4.990

Cash flow from investments (B) 292.610 (41.916)

C. Cash flow from financing activities

Increase/ (Diminution) payable to bank within next year 185.223 181.992 Loans opened in the year 500.000 0 Loans refunded in the year (327.051) (282.208)

Cash flow from financing activities (C) 358.172 (100.216)

Increase (Diminution) in cash and cash equivalent (A+-B+-C) 1.078.599 536.971

Cash and cash equivalent at the beginning of the year 3.654.806 3.117.835

Cash and cash equivalent at the end of the year 4.733.405 3.654.806

NOTES TO THE ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2017

STRUCTURE AND CONTENT OF THE ANNUAL REPORT

Under Art. 20 of its Articles of Incorporation, the Foundation is required to prepare a budget plan and a financial statement, together with a report on the Association’s management. Due to the specific statutory provisions contained therein, the Foundation’s Board of Directors decided to prepare its Annual Report in accordance with the provisions of the Italian Civil Code (Art. 2423 and following) and to depart from such provisions wherever necessary to achieve a better presentation of the Foundation's financial and economic situation and assets keeping its peculiarities into account.

By Resolution of the Board of Directors of April 30, 2013 the Foundation adopted the Organization, Management and Control model as provided for Legislative Decree 231/2001. Following the adoption of this model, with the same resolution the Foundation set up a Supervisory Body with the task of supervising the proper implementation of the model and appointed its members.

These notes are an integral part of the Annual Report for the year ended December 31, 2017 in accordance with Art. 2423 of the Italian Civil Code. The figures disclosed in the report correspond to those of the accounting records kept by the Foundation's management. As stressed above, this report was prepared in accordance with the provisions set forth in Articles 2423 and following of the Civil Code. An exception is represented by the Income Statement, in which revenues and expenses are matched against each other, but the accounts are classified by function rather than by nature.

Classifications executed on a functional basis provide more transparency to the information provided concerning the pursuit of the Foundation’s purposes. Project expenses are kept separate from the organization’s administrative expenses. The contributed income used to cover each of these two expense categories are also kept separate.

The financial statements for the year ended December 31, 2017 have been prepared in accordance with the rules of the Civil Code, interpreted and integrated by the accounting principles and criteria developed by Organismo Italiano di Contabilità (O.I.C., Italian Accounting Agency).

The accounting policies set out below have been adjusted with the changes, additions and improvements introduced in 2016 as part of the project of renovation of the National Accounting Standards through Legislative Decree no. 139/2015 which introduced into Italian Law the Directive 2013/34/EU, thus repealing previous Directives 1978/660/CEE and 1983/349/CEE. The main innovations introduced by the aforementioned decree have not had any impact on the Foundation’s financial statements. 15

As for the Financial Statements, the peculiarities of the Foundation were taken into consideration, provided that this did not contrast with the accounting requirements of the Civil Code.

Accordingly, the provisions laid down in the Civil Code for the preparation of the Financial Statements were slightly adjusted. Where deemed necessary, descriptions were added to better clarify the content of every single account and better reflect the Foundation’s financial and economic performance. Furthermore, in order to achieve a clearer representation of the Foundation’s financial and economic performance, a Cash Flow Statement was prepared also for fiscal year 2017.

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ACCOUNTING PRINCIPLES AND VALUATION CRITERIA

Under Art. 2426 of the Italian Civil Code, the valuation criteria adopted in the Annual Report for the fiscal year ended on December 31, 2017 are the following:

Intangible assets Intangible assets are recorded at purchase cost, inclusive extra expenses and are amortized over the estimated useful life on the basis of the following rates:

Categories Rates • Expenses due to statutory amendments 20% • Expenses due to quality certification 20% • Expenses due to trademark registration 20% • Software expenses 33% • Improvements on third party’s assets Residual life of lease contract

When, regardless of amortization already accounted for, a sustained loss in value incurred, intangible assets are depreciated accordingly. Write-downs can be reversed if the original reasons to operate the devaluation are no longer applicable in the following fiscal years; the initial value will be re- introduced adjusted for depreciation only.

Tangible assets Tangible assets are recorded at purchase cost. This corresponds to the price paid including the related charges incurred up to the beginning of the year. The free acquired assets are recorded at the market value of the acquisition date. The costs may be adjusted only in conformity with specific national laws and regulations governing tangible assets revaluation. Under no circumstances financial expenses are capitalized on the cost of tangible assets. The assets are debited with non-deductible VAT thus increasing their depreciation value.

Ordinary maintenance and repair expenses are recognized as an expense in the Income Statement for the fiscal year when they are incurred. The costs incurred for renovations and improvements are capitalized only if they result in actual productivity increases.

Assets are written off from the Balance Sheet either when they are sold.

When, regardless of amortization already accounted for, a sustained loss in value incurred, intangible assets are depreciated accordingly. Write-downs can be reversed if the original reasons to operate the devaluation are no longer applicable, the initial value will be re-introduced adjusted for depreciation only.

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Depreciation of tangible assets is calculated with the straight-line method. The technical rates applied intend to exactly match up with the useful life of assets, reduced to 50% for those assets acquired during the fiscal year considered.

In consideration of the above observations, the rates applied are the following:

Categories Rates • Buildings 3% • Plants, machinery and equipment 15% • Motor vehicles 25% • Office furniture 12% • Electronic office equipment 20% • Other assets with unit value lower than the legal limit (EUR 516.46) 100%

Financial assets Participations are computed according to the cost method and are recorded in the Balance Sheet at purchase or subscription cost. Such cost is reduced for sustained losses in value in case the subsidiaries bear losses and no profits appear possible in the near future to make up for those losses. If depreciation is no longer applied in subsequent fiscal years, the initial value will be re-introduced.

Assessment of projects "Receivables from private and institutional donors", "Accounts payable due to projects", "Commitments for projects". As described in the "Directors' Report" , the projects for international cooperation under the responsibility of AVSI require prior approval and are funded by a number of institutions, in particular the Italian Government (Ministry of Foreign Affairs and International Cooperation, Italian Agency for Development Cooperation, Ministry of Labor and Social Affairs, Presidency of the Council of Ministers), the European Union, local authorities, CEI (Italian Bishops' Conference), International Organizations (World Bank, Unicef, UNDP) and other bilateral donors (USAID).

Significant additional contributions are provided by private donors.

Income contributed from private donors plays a major role for AVSI. Such income is employed to fund either ad hoc projects or different projects whose funds are covered only in part from other institutions.

AVSI's budget plans for multiannual international cooperation projects are always required to have a zero economic and financial balance. The cost coverage is granted by the contributions made by the institutions mentioned above and with funding from private donors when “institutional contributions” are deemed insufficient to cover them or when higher costs are incurred compared to those budgeted and “approved” by “institutional donors”.

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The accounting system adopted by AVSI is summarized below.

Upon receipt of a document entrusting AVSI with the implementation of a project and the estimate of its related financial burden, the whole amount which will be provided by the donor is accounted as a receivable in the Balance Sheet and as a revenue in the Income Statement. At the same time, the income expected is adjusted for the whole amount as not received yet and the same amount is recorded among the accounts payable in the Balance Sheet as a debt from AVSI towards the project for its implementation. Each time that an installment of the project is received the total amount of receivables in the Balance Sheet is decreased by that amount. Due to the accounting system adopted, each time that a project receives AVSI’s own contributed income the related amount is recorded in specifically established memorandum accounts on a yearly basis. Memorandum accounts for each project allow to establish the size of the resources which AVSI is supposed to raise on a yearly basis and devote to the implementation of that project co-funded by institutional donors. The costs incurred for a given project will result in a decrease of the related commitments in the Income Statement. Their counterpart is represented by the funds raised from AVSI's private donors. Using this accounting method the amounts of funds which AVSI still has to collect from the various donors for both ongoing and ended projects and the total amount of the resources made available by donors are known for each project. The total yearly commitments for projects where a part of AVSI contributed income is necessary are also known.

The representation in the Balance Sheet for each single project is ensured through the following accounts: - "Receivables from institutional donors": receivables appear among the assets of the Balance Sheet and represent the amounts which AVSI has not received yet from donors. - "Accounts payable to projects": this account appears among liabilities in the Balance Sheet and represents the amounts contributed by donors which AVSI still has to transfer for project implementation. - "Own commitments for projects" and "Committed own resources used for projects" represent the annual commitment in terms of AVSI’s own resources for projects.

Receivables Receivables are recognized in the financial statements according to the amortized cost method, taking into account the time factor and the estimated realizable value. The amortized cost method is not applied when transaction costs, fees paid among the parties and any other difference between the initial and expiration value are negligible or if the receivables are short-term (i.e. with maturity shorter than 12 months). A specific depreciation fund may be established in order to adjust receivables to the estimated realizable value.

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Financial assets other than fixed assets "Other securities" are computed at the lower of cost or realizable value estimated on the basis of market performance.

Cash and cash equivalents Cash and cash equivalents are recorded at nominal value. Financial availability denominated in foreign currency is valued at year end exchange rates.

Accruals and deferrals Accruals and deferrals are revenues earned or expenses incurred over two or more subsequent fiscal years which have to be matched against each other on an accrual basis.

Severance pay fund for employed staff A severance pay fund is allocated to cover the liabilities against employed staff, in accordance with the laws and provisions in force and with collective employment contracts.

Accounts payable Accounts payable are recorded according to the amortized cost method, taking into account the time factor. The amortized cost method is not applied to accounts payable when its effects prove to be negligible. The effects are considered negligible for short-term accounts payable (i.e. with maturity shorter than 12 months). Any adjustment of trade accounts payable is made only if the nominal value of the accounts payable significantly exceeds the market price of goods purchased with payment in the short term and if the extension granted significantly spreads in the following financial year. Amounts payable to employees for holidays as well as for deferred remuneration including amounts due to social security institutions, are allocated on the basis of the amount that the Foundation should pay in case of termination of employment at the balance sheet date.

Commitments and risks Sureties are required depending on the amount of risk at year-end. Those risks, which are likely to occur, are described in the Accompanying Notes and corresponding provisions are allocated to the Commitments and risks fund. Those risks, which might possibly occur, are indicated in the commentary to the funds section, but no provisions are allocated to the Commitments and risks fund. Risks, which are highly unlikely to occur, are not accounted for.

Revenue and cost recognition Revenue from "Contributed income due to projects" is recorded in the fiscal year when the related costs are incurred. AVSI’s accounting system requires that when contributed income is earned from a donor the whole amount is recorded as an account receivable and the same amount is recorded in the accounts payable due from the Foundation to the project. Such adjustment is made through a sub-account in the Income Statement labeled "Increased/decreased contributed income" and classified by donor type.

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The correlation between project expenses and the corresponding revenue is ensured by a reduction of the accounts payable to projects and a decrease of the adjusted revenue received against each cost for the project of reference and funded by a donor.

Revenue from "Contributed income due to organization expenses" is accounted for when it is received.

Revenue from the “ 5 per mille project " is recorded as the amount which is allegedly due to the Foundation as notified by the Italian Inland Revenue Service and which will presumably be received during the second half of 2018.

Revenue from “Income from ancillary activities” is recorded on an accrual basis when the conditions for recognition are fulfilled.

"Funds transferred before financial reporting " are considered as project costs, recorded upon transfer of funds to the implementation countries and reclassified under the “Costs for projects incurred in implementation countries” item once the analytical financial reports for the project are received.

"Project expenses in Italy" and "Organization expenses" and “ Ancillary activity expenses” are recorded on an accrual basis and on the reconciliation principle which, for services, is coincident with the period when a service is performed.

Interest income and interest expenses as well as the other revenues and expenses are accounted for on an accrual basis.

Income taxes of the year Current taxes are recognized as expenses on the basis of the estimated taxable income in accordance with the provisions and regulations in force and considering tax exemptions and tax credits where applicable.

Under Art. 12, par. I of Legislative Decree no. 460 dated December 4, 1997, the performance of institutional activities aimed to pursue social purposes exclusively does not represent a business activity. Therefore, the contributed income received and the revenue from the Foundation’s activities are exempt from income taxes (IRES). The Foundation’s activity is subject to IRAP tax, possibly with tax reductions depending on the various Italian regions where the Foundation operates.

Criteria for the translation of accounts expressed in foreign currencies Accounts receivable and payable originally recorded in currencies other than the Euro are translated into Euro at the historic exchange rate of the date when the related operations are performed. At year- end receivables and accounts payable are reported in the Balance Sheet at the exchange rate of the date when the year ends. Any changes on exchange rates due to such adjustments are recorded in the Income Statement under "Adjustments to accounts receivable in currencies other than the Euro" and "Adjustments to accounts payable for projects in currencies other than the Euro" respectivel y. 21

At year-end accounts receivable and payable are reported in the Balance Sheet at the exchange rate of the date when the year ends. Any changes on exchange rates due to such adjustments are recorded in the Income Statement under "Adjustments to accounts receivable in currencies other than the Euro” and "Adjustments to accounts payable for projects in currencies other than the Euro” respectively.

Further information Whether not otherwise stated, the amounts indicated in these Notes are expressed in Euros.

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COMMENTS ON THE MAIN ITEMS OF ASSETS

We will now focus on the main items of Assets.

FIXED ASSETS

Intangible assets EUR 46,631

Intangible assets as of December 31, 2017 are composed as follows:

Description December 31,2017 December 31, 2016

Modification to statute 1,470 2,058 Software expenses 30,615 2,318 Quality certification 2,550 2,664 Improvements on third party's assets 11,996 1,626 Total 46,631 8,666

The significant increase in the “Software expenses” item is due to amortization costs related to the redesign of the institutional website of the Foundation, the improvement of the section of the website dedicated to online donations and the start up of a program for the management of institutional project design.

Tangible assets EUR 1,527,676

The movements over the period are reported below : Year beginning Movements of the year Year end

Historic Accumulat Balance Increases Decreases Historic Accumulated Balance ed cost depreciatio Jan. 1, 2017 (Decreases) Accumulate Depr, cost depreciation Dec. 31, 2017 n d depr,

Land and buildings 2,359,792 -460,317 1,899,475 -405,025 32,915 -58,135 1,954,767 -485,537 1,469.230 Plants, machinery and equipment 34,144 -32,075 2,068 -765 34,144 -32,840 1,303 Office furniture 68,005 -46,258 21,747 -4,313 68,005 -50,571 17,434 Electronic office equipment 77,219 -47,645 29,574 20,316 -10,181 97,535 -57,826 39,709

Other assets, unit value below legal 6,053 -6,053 0 6,053 -6,053 0 limit

Total 2,545,213 -592,348 1,952,865 -384,709 32,915 -73,395 2,160,503 -632,828 1,527,676

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Land and buildings This account refers to the building for civilian use where AVSI is based. It is located in Cesena, Via Padre Vicinio da Sarsina and was acquired for consideration in February 2008. This account also includes a property located in Romania, acquired as a result of a donation of a private sponsor and granted to the Romanian NGO Fundatia through a free loan for use in order to run a vocational training center. As well as a building complex consisting of two housing units and its outbuildings located in Cesena (Loc. Macerone) acquired in 2014. At the beginning of the year, this account had a value of EUR 2,359,792. The increase of the year, amounting to EUR 32,915, is due to small internal building works as well as to an intervention on the electrical system of the building in Cesena, via Padre Vicinio da Sarsina used as registered office, carried out during 2017. The decrease in the year for EUR 405,025 is due to the sale in 2017 of two housing units and their outbuildings located in Cesena (Macerone) acquired during 2014. As of December 31 2017, this account amounted to EUR 1,469,230 of net EUR 485,537 as accumulated depreciation.

Plants, machinery and equipment Plants, machinery and equipment were worth EUR 1,303 as of December 31, 2017.

Office furniture Office furniture was worth EUR 17,434 as of December 31, 2017.

Electronic office equipment Electronic office equipment was worth EUR 39,709 as of December 31, 2017. The net increase of EUR 20,316 is due to the recording under “Assets” of electronic equipment donated by an insurance company for EUR 3,297, to the purchase of smartphones supplied to the staff of the Foundation for EUR 16,470 as well as to the purchase of a PC for video editing activities for EUR 549.

As for the depreciation rates applied, please refer to the notes in the "Accounting Principles and Valuation Criteria" section.

Such fixed assets were not subjected to either devaluations or revaluations either by law or on a voluntary basis.

FINANCIAL ASSETS

Membership fees for participation in other Foundations EUR 80.927 This item, equals to EUR 80,927 as of December 31, 2017, represents a 40% participation in the endowment fund of Banco Alimentare Foundation (a non profit organization with social purposes) acquired on September 28, 1998 and whose value amounts to EUR 80,254, the participation fee in the endowment fund of Santa Lucia Association with a worth of EUR 620 and the 22.7%

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participation fee in the nominal value in the Ugandan “I Fish Farm” social enterprise established within a project implemented by AVSI foundation for a value of EUR 53. The movements occurred to these items are reported in the table below:

Year beginning Movements of the year Year end Historic Accumulat Balance Increases Depreciatio Historic Accumulated Balance ed n. cost deprec. Jan. 1, 2017 (Decreases) of the year Cost deprec. Dec.31, 2017

Banco Alimentare Foundation 103,291 -23,037 80,254 0 0 103,291 -23,037 80,254 I Fish Farm 0 0 0 53 0 53 0 53 Santa Lucia Association 620 0 620 0 0 620 0 620

Total 103,911 -23,037 80,864 33 0 103,964 -23,037 80,927

At the date when these Notes were prepared, the financial statements of Banco Alimentare Foundation had been approved for fiscal year 2017, therefore figures related to such year are reported in the table below.

Endowment Equity, Results Participation Equity Value

Registered fund net of the year share net for

Name of Foundation office Address al 31/12/17 al 31/12/17 2017 owned Balance Sheet

Banco Alimentare Foundation Milano Via Donizetti, 30 264,059 801,905 -14,168 40.00% 320,762 80,254

CURRENT ASSETS

Receivables from private donors EUR 1,410,825

This account consists of receivables from private and banking Foundations for various projects implemented in Kenya, Uganda, Haiti and Syria for a total of EUR 1,404,350. In particular, we highlight receivables from Fondazione Gemelli (EUR 400,000), Fondazione Terzo Pilastro (EUR 300,000), Conference Catholic Bishop (EUR 314,071), Fondazione CARIPLO (EUR 146,751), Absolute Energy (EUR 147,554) and others for the remaining amount.

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Receivables from clients for ancillary activities EUR 138,612

This account refers to the receivables still outstanding from the company Cloros (EUR 81,130) and from the company International Exhibition (EUR 5,978) as well as to invoices to be issued to the companies Treedom (EUR 45,000) and TEKVA (EUR 6,500) for consultancy services delivered.

Receivables from social security institutions EUR 13,225

This account refers to receivables from INPS for employees and co.co.pro contractors (EUR 6,417), from INAIL for employees (EUR 5,611), from INAIL for co.co.pro contractors (EUR 444) and from INAIL for expatriate staff (EUR 752).

Receivables from tax authorities EUR 3,689

This account relates to the residual receivable of a one-off withholding tax on the severance pay fund for employed staff of 1998. This amount (EUR 114, receivables for VAT equal to EUR 3,452 and receivables for IRPEF tax equal to EUR 123) will be collected when the staff working in that period quits.

Other receivables EUR 58,746

This account includes deposits for EUR 4,683, other receivables for EUR 24,063 of which EUR 17,770 are credit notes to be received and other receivables resulting from a loan free of charge equal to EUR 30,000 for the founding member “La Libanaise- Femme du 31 Mai” in order to address part of the expenses related to the renovation of its registered office.

Receivables from Institutional Donors EUR 45,222,787

This account represents the total amounts expected to be earned for projects. The amount "Receivables from institutional donors" may be divided, according to the donor, as follow:

Description December 31, 2017 December 31, 2016

Ministry of Foreign Affairs and International Cooperation 777,269 1,920,974

Presidency of the Council of Ministers 546,413 640,271

International Adoptions Committee 129,883 129,883

Ministry of Foreign Affairs and International Cooperation - Italian Embassies for emergency projects 885,531 1,149,578

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-- 38,115 Total Projects funded by the Italian Government 2,339,095 3,878,822

Accumulated depreciation on receivables for projects from Ministry of Foreign Affairs and -177,266 -177,266 International Cooperation

Total Projects funded by the Italian Government, net 2,161,829 3,701,556

Projects funded by the European Union 10,309,738 16,150,746

Projects funded by International Organizations/Other bilateral donors 31,665,375 1,727,114

Projects funded by local Agencies 220,607 295,167

Projects funded by CEI (Italian Bishops’ Conference) 865,238 328,842

Total 45,222,787 22,203,425

Compared to fiscal year 2016 there was a decrease in receivables from the Italian development cooperation. In particular, we highlight that with the entry into operation of the Italian Agency for Development Cooperation, the new development and emergency projects are all classified under the new agency. The projects already ongoing maintain the previous classification. The decrease by EUR 1,145,874 of accounts receivable from the Ministry of Foreign Affairs and Cooperation reflects the collection of three intermediate installments of development projects implemented in Palestine, Mozambique and South Sudan and some adjustments on existing receivables.

The balance of accounts receivable from the Italian Agency for Development Cooperation (AICS) amounts to EUR 885,531.In the course of 2017, 5 new emergency projects were launched in South Sudan, Uganda, Syria, Palestine and Democratic Republic of Congo.

There were also decreased accounts receivable from the Presidency of the Council of Ministers for EUR 93,858. This decrease is due to the following factors: firstly, the difference of the contributed income stemming from the “5 per mille project” related to fiscal year 2016 and the accounts receivable recorded for fiscal year 2017, as indicated in the list of “5 per mille” beneficiaries published on the website of the Italian Revenue Agency/Agenzia delle Entrate (EUR 7,401); secondly, from the receipt of the first instalment of the contribution for a project in South Sudan funded by the “8 per mille”state fund for EUR 86,457.

The amount of receivables from the Italian State including the accumulated receivable depreciation for EUR 177,267 remained unchanged compared to year 2016 as it was considered sufficient to cover any losses on receivables.

The accounts receivable from the European Union amounts to EUR 10,309,738, a decrease by EUR 5,841,008 is recorded in comparison with 2016. This decrease relates to the net effect of: firstly, a decrease in receivables after the collection of some installments of funds for ongoing (old and new)

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projects for EUR 7,420,141; secondly, the increase in receivables equal to EUR 1,579,133 related to the launch during the year of three new development projects in Uganda, Haiti and Burundi.

The accounts receivable from International Organizations and other bilateral donors significantly increased by EUR 29,938,261, due to the following factors: a new important project in Uganda funded by USAID for a total value of EUR 31,085,888, a new program funded by BPRM in Kenya, two new programs in Ivory Coast and Haiti and the amounts collected following the submission of progress reports of ongoing projects or advance payments (for projects funded mainly by USAID, USDOS, English Cooperation, German Cooperation and the Haitian Ministry of Agriculture through funds from IADB and the World Bank).

Finally, receivables from Local Agencies decreased by EUR 74,560 and receivables from CEI (Italian Bishops’ Conference) increased by EUR 536,396 as a result of an increase in receivables for the launch of a new project in Syria equal to EUR 1,000,000 (included in the overall aid program for hospitals in Syria called “Open Hospitals”), the launch of a new project in Myanmar and the collection of various installments of ongoing projects for a total amount of EUR 682,109.

Receivables from AVSI subsidiaries EUR 2,071,682 Receivable from foreign AVSI subsidiaries are reported in the Table below.

Receivables from AVSI subsidiaries December 31, 2017 December 31, 2016

Receivables from AVSI Uganda 416,470 277,184 Receivables from AVSI Dem. Rep. Congo 723,128 522,550 Receivables from AVSI Haiti 130,665 30,179 Receivables from AVSI South Sudan 258,317 141,979 Receivables from AVSI Lebanon 386,894 277,478 Receivables from AVSI Iraq 17,439 0 Receivables from AVSI Ivory Coast 131,863 32,474 Receivables from AVSI Congo Brazzaville 6,906 0 Total 2,071,682 1,281,844

Such receivables refer to costs incurred by the Foundation on behalf of their subsidiaries abroad.

Financial assets other than fixed assets EUR 43,384

As of December 31, 2017, this account is composed as follows:

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Description December 31, 2017 December 31, 2016

Other securities

Assets managed by Symphonia SGR 43,384 43,586

Management of securities - 10,000

Total 43,384 53,586 On June 1, 1999 an asset management agreement was entered into between the Foundation and SYMPHONIA SGR S.p.A. contemplating the investment of the Foundation’s current assets in financial instruments at low risk. During 2017, the residual bonds owned by the Foundation were fully liquidated.

Cash and cash equivalents EUR 4,733,405

Description December 31, 2017 December 31, 2016

Ordinary bank deposits in Euros 4,421,983 3,291,432

Ordinary bank deposits in foreign currencies 180,449 253,665

Post deposits (Bancoposta) 107,086 101,863

Total bank and post deposits 4,709,519 3,646,959

Cash on hand 23,887 7,847

Total 4,733,405 3,654,806

Bank and post office deposits include current capital as of December 31, 2017 and are made up of 53 ordinary current accounts, 2 post office accounts, 5 accounts in US dollars, 1 PAYPAL account and 2 prepaid credit cards. For a thorough analysis of the changes occurred in cash and cash equivalents please refer to the Cash Flow.

PREPAID EXPENSES AND ACCRUED INCOME Prepaid expenses and accrued income amounted to EUR 24,487 as of December 31, 2017. This account refers to accrued income broken down as follows: Description December 31, 2017 December 31, 2016

Prepaid lease expenses 6,575 7,101 Prepaid expenses for insurance policies 7,646 857 29

Prepaid expenses for certifications 1,223 1,222 Prepaid rental expenses 3,957 1,220 Prepaid expenses for consultancy services 5,057 9,170 Other prepaid expenses 29

Total 24,487 19,570

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COMMENTS ON THE MAIN ITEMS OF LIABILITIES

EQUITY

Changes in Foundation’s equity are detailed below:

Membership Accumulated Results Description fees fund of the year Total

Balance as of December 31.12.2014 40,918 64,078 56,589 161,585

Result of the year 2014 brought forward 56,589 -56,589 0

Increases of the year 2015 0

Results of the year 2015 43,379 43,379

Saldi 31.12.2015 40,918 120,667 43,379 204,964

Result of the year 2015 brought forward 43,379 -43,379 0

Increases of the year 2016 0

Results of the year 2016 32,375 32,375

Balances as of December 31, 2016 40,918 164,046 32,375 237,340

Result of the year 2016 brought forward 32,375 -32,375 0

Increases of the year 2017 0

Results of the year 2017 82,645 82,645

Balances as of December 31, 2017 40,918 196,421 82,645 319,985

The "Endowment fund" was increased over time with legacies, donations and various gifts and either decreased as a result of the coverage of the losses of the period or increased with the profits of the year.

The result of the year 2017 show a profit for EUR 82,645.

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PROVISION FOR POST-EMPLOYMENT BENEFITS FOR EMPLOYED STAFF

Severance pay for employed staff EUR 1,116,660

Changes in terms of staff employed by the Foundation are summarized below:

Employed staff as of Hired 2017 Dismissed 2017 Employed staff as of January 1, 2017 December 31, 2017

52 4 2 54

Movements in provisions during the year is as follows:

Severance pay for employed staff Balance as of January 1, 2017 1,004,756

Provision of the year recorded in the Income Statement 154,311

Allocation for supplementary benefits -18,207 Taxes on severance pay of employed staff -3,558 Indemnities settled in the year -20,642

Balance as of December 31, 2017 1,116.660

The "Severance pay of employed staff" is the liability due to employees as of December 31, 2017 according with laws and collective employment contracts currently in force.

LIABILITIES

The notes on the composition and the movements of the various accounts payable classified under this heading are reported below.

Loans EUR 189,257

This account is made up of the residual amount of a soft mortgage loan as of December 31, 2017 (initial loan amount: EUR 300,000) taken out from Cassa di Risparmio di Cesena for the renovation of the new Foundation's registered office in Cesena, and of an unsecured loan (initial loan amount: EUR 500,000) taken out in 2017 from Credito Valtellinese for advances on projects, for the portion not due in the following year, which is reclassified within accounts payable to banks.

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The mortgage will expire on June 30, 2018 and contemplates half-year installments paid back on the basis of a variable rate equal to 6-month Euribor plus a 2,5% spread. The installment due within the next fiscal year amounts to EUR 16,308. The unsecured loan will expire on July 5, 2019 and contemplates quarterly installments paid back on the basis of a variable rate equal to 3-month Euribor plus at 1.5% spread. The installment due within the next fiscal year amounts to EUR 249,059.

Accounts payable to banks EUR 1,543,560

This account includes the final balance as of December 31, 2017 of a bank account held at Banca Prossima opened for a MAECI-receivable secured credit line, and the portions of mortgages for EUR 265,367 as detailed above.

ACCOUNTS PAYABLE TO PROJECTS EUR 50,837,298

This account represents the whole amount contributed by donors, to be used for the thorough implementation of projects.

The amount related to "Accounts payable to projects" can be classified by donor type into:

ACCOUNTS PAYABLE TO PROJECTS December 31, 2017 December 31, 2016

Ministry of Foreign Affairs and International Cooperation (MAECI) 391,062 1,771,445 Presidency of the Council of Ministers 8,357 130,333 Italian Agency for Development Cooperation (AICS) 812,836 1,153,542 Ministry of Foreign Affairs and International Cooperation – Italian Embassies for emergency 2,363 projects Italian Government 1,212,255 3,057,683

European Union 11,237,458 16,122,172

International Organizations/Other bilateral donors 31,501,225 1,678,455

Local Agencies 15,077 147,156

CEI (Italian Bishops’ Conference) 842,654 396,652

Total accounts payable from projects funded by Institutional Donors 44,808,689 21,402,118

Private donors for International Adoptions 8,220 28,548 Private donors for various initiatives 2,616,605 968,847 Private donors for charitable initiatives 21,388 24,705 33

Distance Support Program (DSP) 3,382,416 3,899,432

Total from projects funded by private donors 6,028,629 4,921,532

Total 50,837,298 26,323,650

A comparison between the data of the two years highlights a significant increase of EUR 24,513,667. The analysis of this account by type of donor shows that there was a decrease of EUR 1,845,428 in funds provided by the Italian Government. The analysis of the composition of these data shows a significant decrease in 2017 in accounts payable to the Italian Ministry of Foreign Affairs and Cooperation (MAECI) and MAECI Italian Embassies for emergency projects for a total amount of EUR 1,382,745. This is due to the fact that with the start-up of the Italian Agency for Development Cooperation (AICS), the new projects are recorded under this donor. In essence, due to the approaching conclusion of activities, the accounts payable to projects managed by MAECI are naturally running out, while accounts payable to the Italian Agency for Development Cooperation (AICS) related to projects started in 2016 and 2017 decrease due to the continuation of their implementation. The account payable to the Presidency of the Council of Ministers decreased during 2017 by EUR 121,976 due to transfers of funds and costs incurred for the management of the project funded by “8 per mille” state fund.There was a significant decrease of EUR 4,884,714 in accounts payable for projects funded by the European Union due to transfers of funds and costs incurred during the year for the consortium project in Lebanon and Jordan funded by the EU Madad trust fund and to the regular implementation of projects in the Foundation’s portfolio. There was also a high increase of EUR 29,822,790 in the accounts payable to international organizations and other bilateral donors, due to a bigger number of projects managed in Italy during the year, in particular the launch of the project in Uganda funded by USAID already mentioned in these notes to the annual report. Accounts payable to CEI (Italian Bishops’ Conference) increased by EUR 446,002 due to the launch of new significant projects during the year.

A detailed analysis of the figures shows an increase of accounts payable to projects funded by private donors for EUR 1,107,097.

In particular, there was a significant increase in the account payable to private donors for various initiatives for EUR 1,647,757 due to the receipt in the last part of the year of private contributions for the “Open Hospitals” project in Syria which were and will be used during 2018.

As of 31 December, 2017 the large amount of the accounts payable to DSP (Distance Support Program) decreases by EUR 517,015 from the previous year. The decrease in such caption is explained by a combination of factors: annual fees for distance support received by the Foundation from DSP sponsors to be transferred to the beneficiaries during the subsequent fiscal year, the collection during the year of multiannual DSP fees and a minor, compared to the previous years, extension of scheduled payments. 34

Accounts payable to suppliers EUR 311,557

As of December 31, 2017 the breakdown of "Accounts payable to suppliers" entirely due within the subsequent year, is the following:

Description December 31, 2017 December 31, 2016

Accounts payable to suppliers 231,932 208,645 Suppliers for self-invoices 912 4,184 Invoices to be received 78,713 70,281 Total 311,557 283,110

ACCOUNTS PAYABLE TO PROJECT STAFF EUR 11,385

As of December 31, 2017 the breakdown of accounts payable to project staff is the following:

Description December 31, 2017 December 31, 2016

Accounts payable to Expatriate Staff and Volunteers 2,608 224,028 Accounts payable to collaborators for projects -1,363 1,375 Accounts payable due to advance payments 10,140 -17,708 Total 11,385 207,695

For the year 2017, thanks to a better financial situation, the payment for the month of December 2017 of the salaries for expatriate staff was made according to the regular planning and therefore in the last days of November.

Accounts payable to staff in the main offices EUR 588,299

The breakdown of “accounts payable due to staff employed in main offices” in Italy as of December 31, 2017 compared to 2016 is the following:

Description December 31, 2017 December 31, 2016

Accounts payable to staff salaries 96,260 172,815 Accounts payable to staff for paid holidays 487,135 424,199 Accounts payable to Co.co.pro. contractors 10,195 13,338 Accounts payable to collaborators 800 Accounts payable due to advance payments - 5,292 -2,032

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Total 588,299 609,120 These payables refer to the salaries and fees of December 2017, paid in January 2018. The other items included in the caption relate to holiday leaves unused and to the 14 th month salary to employed staff of December 31, 2017. For the year 2017, the payment for the 13 th month salary has been made during the year.

Accounts payable to tax authorities EUR 81,681

This caption includes dues to tax authorities for taxes matured for employed staff, project contractors, occasional collaborators and expatriate staff. The breakdown of payables to tax authorities is detailed as follows: Description December 31, 2017 December 31, 2016

VAT due to tax authorities 423 11,513 Withholding tax due to tax authorities for employed staff 78,889 75,559 Withholding tax due to tax authorities for Co.co.pro. contractors -1,348 2,944 Withholding tax due to tax authorities for collaborators 2,495 710 Regional additional tax for co.co.pro contractors 184 370 Municipal additional tax for co.co.pro contractors 97 101 Substitute tax due to tax authorities on severance pay for employed staff 817 680 Accounts payable to direct taxes 124 2,072 Total 81,681 93,949

Accounts payable to social security institutions EUR 133,606

These accounts refer to payables to INPS (Social Security Institute), INAIL (Institute for Employment Injuries) and other complementary funds for employed staff, collaborators and expatriate staff, as detailed in the Table below:

Description December 31, 2017 December 31, 2016

Accounts payable to INPS for employed 101,957 96,987 staff Accounts payable to INPS for Co.co.pro 1,379 3,800 contractors Accounts payable to INPS for expatriate - 53 0 staff Accounts payable to INAIL for employed 6,566 7,252 staff Accounts payable to INAIL for Co.co.pro 217 532 contractors Accounts payable to INAIL for expatriate 849 784 staff Accounts payable to Bilateral Agencies for 263 248 employed staff Accounts payable to FOREIGN FUND for 528 516 employed staff 36

Accounts payable to Negri Fund 4,624 4,544 Accounts payable to Besusso FASDAC 2,269 2,269 Accounts payable to Pastore premium 2,634 2,635 Accounts payable to INPGI 4,384 4,293 Accounts payable to CASAGIT 542 532 Accounts payable to complementary social 5,073 4,619 security fund for journalists

Accounts payable to equalization fund for 5 5 journalists Accounts payable to complementary social 2,369 1,611 security fund

Total 133,606 130,627

Accounts payable to AVSI’s foreign subsidiaries EUR 238,897

Description December 31, 2017 December 31, 2016

Accounts payable to AVSI Uganda 149,625 166,484

Accounts payable to AVSI South Sudan 120 120

Accounts payable to AVSI Kenya 1,276 1,777

Accounts payable to AVSI Rwanda 4,825 2,003

Accounts payable to AVSI Dem. Rep. Congo - 59,469

Accounts payable to AVSI Nigeria 3,627 3,627

Accounts payable to Mozambique 5,530 -

Accounts payable to AVSI Burundi 2,361 2,361

Accounts payable to AVSI Lebanon 11,183 1,122

Accounts payable to AVSI Iraq 17,717 -

Accounts payable to AVSI Syria 10,859 -

Accounts payable to AVSI Jordan - 4,086

Accounts payable to AVSI Palestine - 3,512

Accounts payable to AVSI USA 10,607 3,450

Accounts payable to AVSI Haiti 21,125 11,016

Accounts payable to AVSI Ivory Coast 43 43

Total 238,897 259,070

The accounts payable to AVSI's foreign subsidiaries relate to costs incurred by such counterparts on AVSI’s behalf. Accounts payable to others EUR 2,317

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The accounts payable to others relate mainly to costs incurred for the rent of AVSI’s guest house.

Accrued expenses and deferred income EUR 1,564

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MEMORANDUM ACCOUNTS

Memorandum accounts include guarantees received from third parties in favor of AVSI for EUR 3,581,154 and own commitments to projects for EUR -237,798 as the commitments incurred by the Foundation were higher than expected in the year.

Guarantees received by AVSI from third parties are guarantees that, as shown in the table below, relates to ongoing and ended cooperation projects funded by the Italian Ministry of Foreign Affairs and International Cooperation or through Italian embassies in the framework of emergency programs. Institution Project Surety no. Amount

Credito Valtellinese Emergency Uganda SURE 10876 17.1436 242.910,50 Credito Valtellinese Emergency South Sudan SANPIC 10876 17.1428 200.477,00 Credito Valtellinese Emergency Lebanon MISS 10804 17.1013 499.884,00 Credito Valtellinese Palestine AICS Emergency 10910 17.1012 99.277,41 Credito Valtellinese Emergency Lebanon AAMAL 10805 17.0860 499.039,57 Banca Popolare Emilia Romagna Emergency DRC 10462 PHASE II - WATER 18144440 17.500,00 Banca Popolare Emilia Romagna Emergency DRC 10462 PHASE II - HEALTH 18144441 46.075,00 Banca Popolare Emilia Romagna Emergency SYRIA SALE AID 10803 18137750 205.822,50 Banca Popolare Emilia Romagna Emergency IRAQ EST AID 10739 18134925 135.000,00 Banca Popolare Emilia Romagna LEBANON AICS AID 10671 (50%) 18133055 174.899,39 Banca Popolare Emilia Romagna LEBANON AICS AID 10671 (2%) 18133053 6.995,98 Banca Popolare Emilia Romagna Region Myanmar 18132490 100.000,00 Banca Popolare Emilia Romagna Jordan DES AICS AID 10704 (50%) 18128957 219.990,50 Banca Popolare Emilia Romagna Jordan DES AICS AID 10704 (2%) 18128958 8.799,62 Banca Popolare Emilia Romagna South Sudan SUPER AICS AID 10700 (50%) 18125191 188.963,71 Banca Popolare Emilia Romagna South Sudan SUPER AICS AID 10700 (2%) 18125187 7.557,47 Banca Popolare Emilia Romagna Syria Italian Cooperation AID 10672 (50%) 18122203 99.852,00 Banca Popolare Emilia Romagna Syria Italian Cooperation AID 10672 (2%) 18122201 3.994,08 Banca Popolare Emilia Romagna IMAROSA S.S. rent building unit in Milan 18110580 4.000,00 Banca Popolare Emilia Romagna Mozambique MAE AID 10555 18107340 122.991,36 Banca Popolare Emilia Romagna Haiti Agriconsulting Europe S.A. 18106101 35.600,00 Banca Popolare Emilia Romagna Lebanon MAE F.E.S.T.A. AID 010329 366394 126.016,31 Banca Popolare Emilia Romagna Ngerageze Elie Fernick 363451 695,00 Banca Popolare Emilia Romagna Palestine MAE AID 010143 361293 279.106,67 Banca Popolare Emilia Romagna South Sudan MAE AID 010162 361292 125.493,99 Banca Popolare Emilia Romagna Poland 212 269573 130.212,00 Total 3.581.154,06

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COMMENTS ON THE MAIN ITEMS OF THE INCOME STATEMENT

In this section, the main items of the Income Statement for the fiscal year ended December 31, 2017 will be analyzed.

CONTRIBUTED INCOME FOR PROJECTS EUR 24,125,296

Contributed income for project management of fiscal year 2017 are explained in the table below:

Contributed income Contributed income for Contributed income Adjustment to accrued over the Description project development for the organization contributed income year

Contributed income from the Italian Government 1,864,989 -250,261 1,382,396 2,997,124 Contributed income from the EU 1,531,875 -186,355 4,900,153 6,245,673 Contributed income from International 31,884,580 -118,939 -30,455,078 1,310,563 Organizations/Other bilateral donors Contributed income from local Agencies 90,994 132,079 223,073 Contributed income from CEI (Italian Bishops’ 1,218,505 -446,002 772,503 Conference) Contributed income from Private Donors 2,595,367 -2,043,490 4,869,443 5,421,320 Contributed income from Distance Support Program 6,228,534 6,228,534 (DSP) to projects Contributed income for DSP management 7,375,317 -737,292 -5,711,518 926,506

Total 52,790,161 -3,336,338 -25,328,527 24,125,296

"Contributed income accrued during the period" is the algebraic sum of " Contributed income for project development" less "Contributed income for the organization " and "Increased/decreased contributed income" as detailed below: − "Contributed income for project development" : the whole income is contributed by the donor for projects; − "Contributed income for the organization" : income contributed by several donors and allocated to cover organization expenses of the Foundation. This income is written off the contributed income for projects account and recorded in the contributed income due to organization expenses; − "Increased/decreased contributed income": total amount of the adjustments of the revenue earned on all projects. This account is represented for each project by the balance between the amount related to the total of the contributed income recorded and the amounts related to each cost incurred during the period, charged to the donor and ascribed to the project. In particular, income from private donors (EUR 2,043,490) for the organization includes the contributed income for the organization from projects implemented in the foreign offices of AVSI Foundation equal to EUR 1,772,998. The difference between the two amounts (EUR 320,492) represents the contributed income for the organization having been collected from private donors. This last amount differs from the contributions detailed for various private donors for the

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organization (EUR 727,057) as it includes private funds devoted to organization expenses incurred by the Foundation for fundraising and promotional activities, contributed income allocated to cover expenses for expatriate staff which cannot be directly ascribed to projects and other contributed income allocated to cover organization expenses.

A detailed report for the years 2017 and 2016 is reported below, classified by donor type:

Description 2017 2016

Contributed income from the Italian Government 2,997,124 2,321,904

Ministry of Foreign Affairs and International Cooperation - AICS 1,246,440 1,253,947 Italian Agency for Development Cooperation (AICS) – Italian Embassies for emergency projects 1,638,482 1,006,761

Presidency Council of Ministers 112,202 61,195 Contributed income from the European Union 6,245,673 2,700,660

Contributed income from International Organizations/Other bilateral donors 1,310,563 1,289,017

Contributed income from local Agencies 223,073 206,001 Contributed income from CEI (Italian Bishops’ Conference) 772,503 347,843

Private donors 5,421,320 4,582,559 Contributed income from Distance Support Program (DSP) to projects 6,228,534 6,304,792 Contributed income for DSP management 926,506 487,675 Total 24,125,296 18,240,450

CONTRIBUTED INCOME FOR THE ORGANIZATION EUR 3,882,702

Contributed income for the organization for fiscal years 2017 and 2016 consists of contributed income from:

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Description 2017 2016

Contributed income from the Italian Government 250,261 141,825

Contributed income from the European Union 186,355 431,675

Contributed income from International Organizations/Other bilateral donors 1,841,937 1,507,319

Contributed income from local Agencies and CEI (Italian Bishops’ Conference) 0 4,629

Various private donors 727,057 609,012 Distance Support Program 737,292 767,626 International Adoptions 139,800 111,200 Total contributed income from private donors 1,604,149 1,487,837

Total 3,882,702 3,573,285

The total includes both contributions deriving from project management and contributions directly intended to cover the organization costs of the Foundation.

REVENUE FROM OTHER ACTIVITIES EUR 232,688

Revenue from other activities in 2017 relates to “cause related marketing” for EUR 154,900, to activities to reduce carbon emissions (assignment of rights on shares) within some projects implemented in Haiti for EUR 64,588 and to consultancy services aimed at launching development cooperation activities.

A comparison with 2016 is provided in the table below:

Description 2017 2016

Consultancy 13,200 0

Sponsorship 154,900 99,400

Assignment of rights on shares 64,588 24,670

Total 232,688 124,070

PROJECT EXPENSES EUR 23,790,119

A breakdown of project expenses in 2017 compared to 2016 is the following:

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Description e 2017 2016

Project expenses incurred in implementation countries 518,945 2,300,224 Project expenses incurred in Italy 1,059,080 817,664 Total project expenses incurred in implementation countries and in Italy 1,578,025 3,117,888 Funds transferred to implementation countries before financial reporting 19,050,897 11,632,994 Total project expenses and funds transferred to implementation countries 20,628,922 14,750,882

Expenses for project staff (abroad) 3,161,197 2,948,246

Total 23,790,119 17,699,128

Changes in the different expenses captions constituting the "Project expenses" account are detailed below.

Expenses incurred and funds transferred to projects EUR 20,628,922

This item includes the global expenses incurred by the Foundation for project implementations over the year. This item also includes costs incurred in Italy and those incurred in implementation countries for which financial reports were submitted or have still to be submitted.

Project expenses are as follows:

Project expenses in implementation countries and in Italy EUR 1,578,025

In the years 2017 and 2016 the expenses incurred for projects in implementation countries and in Italy, classified by donor type, are the following:

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Description 2017 2016

Implementation Italy Total Implementation Italy Total country country

Italian Government 46,489 46,489 83,826 24,549 108.375

European Union 93,869 93,869 328,957 52,056 381,013

International Organizations 508,692 213,325 722,017 291,428 89,914 381,342 – Other bilateral donors

Local Agencies 0 834 834

Privati vari 10,253 705,397 715,649 1,596,013 650,311 2,246,324

Total 518,945 1,059,080 1,578,025 2,300,224 817,664 3,117,888

These expenses relate to the implementation of the projects funded by the various donors listed.

Funds transferred to implementation countries before financial reporting EUR 19,050,897

Funds transferred to implementation countries are regarded as project expenses. They are recorded when transferred to AVSI's offices in implementation countries. Under " Funds transferred to implementation countries before financial reporting” those funds are listed for which the related analytical reporting is still to be received.

The funds transferred in 2017 are:

Funds transferred to implementation countries before financial reporting 2017 2016

Italian Government 2,433,335 1,798,525 European Union 5,829,403 2,010,292 International Organizations/Other bilateral donors 477,304 808,113 Local Agencies 134,855 129,865 Italian Bishops’ Conference (CEI) 772,503 347,843 Distance Support Program (DSP) 925,747 455,255 Various private donors 8,477,750 6,083,101

Total 19,050,897 11,632,994

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Expenses incurred in implementation countries in previous EUR 183,523 years

These expenses relate to the implementation of the projects funded by the various donors listed in previous years and for which the related financial reporting are received in 2017. The table below details the expenses by type of donor included in the financial reports entered in the accounts in 2017 and broken down according to the year in which those expenses were actually incurred.

Year

Description 2013 2014 2015 2016 Reported amounts Expenses incurred abroad

Projects funded by MAECI - Projects funded by EU - Projects funded by Int, Org, /Bilateral donors 181,138 181,138 Projects funded by local Agencies - Projects funded by CEI - DSP projects - Projects funded by private donors 2,384 2,384 Total 0 0 0 183,523 183,523

Expenses for project staff EUR 3,161,197

"Expenses for project staff" are the following: Description 2017 2016

Average Amount Average Amount

Expatriate staff and volunteers Salaries & wages 53,881 221,717 Total 1 53,881 4 221,717

Collaborators and consultants Collaborators' salaries 2,807,945 2,480,509 Consultants' fees 299,370 246,020

Total 75 3,107,316 70 2,726,529

Total 76 3,161,197 74 2,948,246

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The average number of people increased by 2 in the year 2017.

ORGANIZATION EXPENSES EUR 4,054,673

"Organization expenses" are the following:

Description 2017 2016

Organization expenses for staff 3,164,280 3,006,740 Other organization expenses 1,156,780 1,122,212 Amortization and depreciation 94,559 99,810 Sub-total 4,415,619 4,228,762 Expenses transferred to project and ancillary management -360,946 -261,762

Total 4,054,673 3,967.000

Expenses for staff in the main offices EUR 3,164,280

"Expenses for staff in the main offices" are the following:

Description 2017 2016

Average Amount Average Amount

Employed staff

Salaries & wages 1,949,536 1,874,337

Social and insurance charges 781,428 591,493

Food expenses 34,317 38,321

Daily allowances 72,307 57,329

Severance pay 15,431 145,984

Total employed staff 53 2,853,020 52 2,707,465

Co,co,pro, contractors

Salaries for co,co,pro, contractors 97,028 108,742

Social and insurance charges 18,829 21,182

Food expenses 146 575

Daily allowances 1,808 3,228

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Total 4 117,810 5 133,726

Other occasional collaborators and consultants

Consultants 185,846 146,310

Collaborators 4,132 12,811

Social charges 1,391 2,503

Food expenses 2,082 3,925

Total 11 193,450 10 165,549

Total occasional collaborators and consultants . 15 311,261 15 299,275

Total 68 3,164,280 67 3,006,740

Expenses for staff in the main offices include also the costs incurred by consultants in Italy and abroad not allocated on institutional projects.

Other organization expenses EUR 1,156,780

"Other organization expenses" in the years 2017 and 2016 are the following:

Description 2017 2016

Expenses for services Electricity, water, gas and diesel supplies 38,248 34,604 Phone bills 48,925 44,821 Postal charges and stamp duties 90,795 97,508 Bank fees 57,931 61,790 Maintenance and repair costs 119,983 123,294 Other maintenance and repair costs 24,492 14,443 Payroll costs 45,572 47,186

Office insurance 4,735 4,668 Fixed personnel insurance 4,987 6,423 D&O civil liability insurance 5,498 -

Courier service fees 11,084 14,620 Cleaning of main offices 21,917 30,854 Advertising materials / literature costs 27,740 50,548

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Event organization / management costs 36,909 36,226 Client entertainment costs 24,884 18,197 Other services 112,449 76,358 Total 676,149 661,540

Consumption goods purchased 115,621 127,124

Travel and transportation 208,364 180,708

Premises leased 125,298 124,197

Other administrative expenses 31,348 28,644

Total 1,156,780 1,122,212

The Table above provides a comparison between the organization expenses of 2017 and 2016. These expenses are detailed below:

The "Utility costs (electricity, water and gas)" account increases by EUR 3,644 compared to 2016 due to the effect of a slight increase in consumption.

The "Phone bills" account increases by EUR 4,104 compared to 2016 due to an increasing number of telephone users.

The "Postal charges and stamp duties" account decreases by EUR 6,713 compared to 2016 for the decrease in the items sent during the year.

The "Bank fees " account records a decrease of EUR 3,859 in 2017 compared to 2016 thanks to the renegotiation of some banking conditions as well as to a lower volume of transactions.

The "Maintenance and repair costs" account marks a EUR 3,311 decrease compared to 2016 due to the renegotiation of some contracts, especially for IT assistance.

The “Other maintenance and repair costs” account marks a EUR 10,049 increase compared to 2016 mainly due to maintenance costs relating to common areas of AVSI office in Cesena.

The "Fixed personnel insurance" account marks a decrease by EUR 1,435 in 2017 compared to 2016 due to a reduced number of insured people during the year.

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The “D&O civil liability insurance” account represents the expense incurred in 2017 for taking out an insurance policy to protect directors and managers of the Foundation from liability risks during their mandate.

The "Courier service fees" account marks an increase by EUR 3,356 in 2017 compared to 2016 due to a decrease in the amount of items sent during the year.

The "Cleaning of main offices" account records a decrease by EUR 8,937 in 2017 compared to 2016 due to the change of the cleaning company for AVSI office in Milan and the renegotiation of the contract for AVSI office in Cesena.

The "Advertising materials" account marks a decrease by EUR 22,808 compared to 2016. This is due to the combination of the following factors: a reduction in the expenses for fundraising campaigns and advertising in magazines and on billboards, the lack in 2017 of costs for transport and customs clearance of material used for promotional purposes abroad.

The "Event organization / management costs" account is in line with the values of 2016.

The "Client entertainment costs" account increases by EUR 6,687.

The "Other services" account increases by EUR 36,091. This significant increase is due to the costs related to the continuation in 2017 of a contract started in 2016 with a foundation specialized in strategic philanthropy, to the expenses for training the staff devoted to raising funds from private donors and human resources, and to the launch of a system of corporate welfare with the consequent consulting costs incurred for its setting up and organization.

The "Consumption goods purchased" account relates to the expenses incurred for purchasing stationery items, books, publications, subscriptions, videos/pictures/images and consumption materials. This account decreases in 2017 by EUR 11,503 compared to 2016.

The "Travel and transportation costs" account mainly relates to the expenses incurred for air travel (EUR 78,819), for accommodation and daily allowances abroad (EUR 21,519), train and taxi fares (EUR 45,920), car rentals (EUR 27,475), fuel and mileage reimbursements and other expenses (total EUR 34,631). These expenses relate to staff in the main offices in Italy and to expatriate staff not participating in institutional projects. This account increases significantly by EUR 27,656 compared to 2016.

The "Premises leased" account (equal to EUR 125,298) primarily relates to the lease of a part of a building in Milan, Via Legnone 4, where the Foundation is headquartered (EUR 93,264), to the lease expense for the guesthouse in Milan, Via Legnone 20, for EUR 6,628, and to the expense for the rent of meeting rooms in Naples for the activities of the international adoption department for EUR 6,000. In the “ Other leases ” item, the expense for EUR 19,405 refers to the AVSI Foundation’s booth at the

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Rimini Meeting and to the rent of a meeting room for the organization of an event for the remaining balance.

The "Other administrative expenses" account shows a EUR 2,704 increase compared to the previous year.

Amortization and depreciation EUR 94,559

Amortization (EUR 94,559) refers to the provisions accrued over the period. More specifically, the provision accrued for intangible assets is equal to EUR 21,165 and that accrued for tangible assets amounts to EUR 73,394.

Costs transferred to project management EUR (360,946)

This account is negative as it includes costs that were originally ascribed to the organization and subsequently were transferred to project management as budgeted. The costs transferred refer to part of the cost for headquarters staff. Compared to the previous year, the costs transferred increased by EUR 99,184.

Expenses for ancillary activities EUR 76,832

These are costs incurred for services provided in the framework of the ancillary business activity of the Foundation; compared to the previous year, they decrease by EUR 38,319. This account includes EUR 16,479 for employed staff, EUR 6,017 for services acquired, EUR 1,473 for travel and transportation expenses and EUR 52,864 for fund transfers to Haiti to implement reforestation activities. .

Financial revenue and expenses EUR 130,264

Revenue from securities in circulating assets The "Revenue from securities in circulating assets" account amounts to EUR 13 in 2017.

Other revenue The "Other revenue" account amounts to EUR 45,766 in 2017 and refers mainly to interest income on bank and post accounts (EUR 2,476) and exchange differences for EUR 43,186.

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Interest and other financial expenses The caption "Interest and other financial expenses " amounting to EUR 176,044 in 2017 relates to charges on sureties (EUR 11,286), interest expenses on banking accounts and loans (EUR 33,073) and fluctuations in exchange rates (EUR 131,679). Fluctuations in exchange rates are the result of the fluctuations of the US dollar against the Euro occurred during the period.

Non-recurring revenues and expenses EUR 83,672

Non-recurring revenues Non-recurring revenues consist of contingent assets for EUR 5,392 and of non-existent assets for EUR 20,344.Specifically, contingent assets refer to the following factors: firstly, electronic equipment donated by an insurance company for EUR 3,297 recorded under “Assets” in the balance sheet; secondly, from a credit note of EUR 2,095 issued by a supplier. The non-existent assets refer mainly (EUR 19,500) to associative fees not due relating to the financial years 2007/2008/2009. The remaining amount is related to various non-existing payables.

Non-recurring expenses Non-recurring expenses consist of contingent liabilities for EUR 6,585, non-existent liabilities for EUR 8,668. and capital loss for EUR 94,154. This last value consists of the difference between the book value of the buildings in Macerone of Cesena (FC) owned by the Foundation and the amount collected following the sale of these buildings occurred during the year.

Adjustments on projects EUR 331 This account consists of the algebraic sum of an adjustment of receivables and payables on projects implemented by the Foundation and funded by international organizations and other bilateral donors whose transaction currencies are the US dollar.

Taxes of the year EUR 22,812 Taxes of the year refer mainly to IRAP (EUR 15,646), IMU (EUR 3,688), TASI and TARI (EUR 843), substitute tax on the soft loan taken out from CREVAL (EUR 1,250) and IRES (EUR 1,161). The latter is computed only on Foundation’s non institutional activities result during the year 2017.

Secretary General Giampaolo Silvestri

Milan, May 30, 2018

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