\ r r ARMENIAN SOCIAL INVESTMENT FUND

i Public Disclosure Authorized r r [ [ Public Disclosure Authorized

FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR'S REPORT

for the year· ended 31 December 2013

cPublic Disclosure Authorized

[

l l Public Disclosure Authorized

l May 2014 u L l r

TABLE OF CONTENT

Page r THE BOARD OF THE ASIF ...... 3 INDEPENDENT AUDITOR'S .REPORT ...... 4 I STATEMENT OF FINANCIAL POSITION ...... 6 [ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ...... ? STATEMENT OF CHANGES IN EQUITY ...... & STATEMENT OF CASH FLOWS ...... 9 NOTES TO THE FINANCIAL STA TEMENTS ...... l 0

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u Armenian Socia/ Investment Fund Firwncial Stmements for the year endt•d 31 December 2013 2 /9 l l ~ r r THE BOARD OF THE ASIF

The Chairman r Prime Minister of the Republic of Annenia

l Members

Annen Gevorgyan Deputy Prime minister of the Republic of , Minister of r Territorial Administration r Gagik Khachatryan Minister of Finance of the Republic of Armenia Minister of Urban Development of the Republic of Armenia

Artem Asatryan Minister of Labor and Social Affairs of the Republic of Armenia

Annen Ashotyan Minister of Education and Science of the Republic of Armenia

Taron Margaryan Mayor of Yerevan

General Director of representation in Armenia of charitable Jirayr Markosyan organisation "Aznavour pour 1'Armenia"

Ara V ardanyan Executive Director of All-Armenian Fund

Levon Karaqashyan Representative of organization "Knights ofVardan" [ Arpi V ardanyan Director of AGBU Armenia representation Ashot Kirakosyan Executive director of Armenian Social Investment Fund

l I l

Armenian Socia/lnl'estment Fund Financial Statements for the yea1· ended 31 December 2013 3:f9 'r "UOU -Ufi~l}.:PS" Utll£! "80S-AUDIT" LTD r

l INDEPENDENT AUDITOR'S REPORT N 33

On the financial stateme.nts ofArmenian Social Investment Fund r for the year ended 31 December 2013

[ To the Management of the Armenian Social Investment Fund

We have audited the accompanying financial statements of the Armenian Social Investment Fund [ (the ASIF) which comprise the statement of financial position as at 31 December 2013, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes.

Management's Responsibility for the Financial Statements The ASIF' s Management of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatements, whether due to fraud or error.

Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain reasonable audit evidence about the amounts [ and disclosures in the financial statements. The procedures selected depend on the auditor's judgment including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those assessments, the auditor considers [ internal control relevant to the entity's preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit [ also includes the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the [ financial statements.

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11; p. tpuwG 0037, U.SrqpwGJwG 38/55; 1bn." (+37410) 20 11 51; !bwpu" (+3741 0) 20 11 50; www.sosaudit.am; tL-Ljmulll· [email protected]

An Associate of the Crowe Horwath Business Alliance c 38/55 A.Tigranyan, 0037 Yerevan, RA; Tel. : (+37410) 20 11 51; Fax: (+37410) 20 11 50; www.sosaudit.am; E-mail: [email protected] [ r "UOU-Ufii'L}..flS" UOl.C "SOS-AUDIT" LTD

r l We believe that the audit evidence we have obtained is sufficient and appropriate to provide a r basis for our opinion. Opinion In our opinion the accompanying financial statements present fairly in all material respects the financial position of the Armenian Social Investment Fund as of 31 December 2013, and its financial performance and its cash flows for the year then ended in accordance with International [ Financial Reporting Standards.

SOS-Audit LLC 7 May 2014

Gnel K.hachatryan, FCCA Auditor

[ ( [

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11; J!. b(luwO 0037, U.S~q(lWOJwO 38/55; "'bn.' (+37410) 20 11 51; :bwJ!u· (+37410) 20 11 50; www.sosaudit.am; tL-ltmuu,. [email protected]

An Associate of the Crowe Horwath Business Alliance 38/55 A.Tigranyan, 0037 Yerevan, RA; Tel.: (+3741 0) 20 11 51; Fax: (+37410) 20 11 50; www.sosaudit.am; E-mail: [email protected] I r STATEMENT OF FINANCIAL POSITION r Armenian Social Investment Fund As at31 December 2013

Note 31.12.2013 31.12.2012 r USD USD

[ ASSETS Non-current assets Property and equipment 3 30,624 22,747 r Funds receivable 4 ___iJ 65,98_!_ 11,081,831 Total non-current assets 4,196,605 11,104,578 f Current assets Advances 5 265,380 680,922 Cash 6 1'159,575 1,315,436 f Total current assets 1,424,955 1,996,358 TOTAL ASSETS 5,621,560 13,100,936

LIABILITIES AND EQUITY Equity Founders' contribution 7 151,631 151,631 Accumulated deficit (178,0692 (169,785) Total equity (26,438) (18,154)

Non-current liabilities Government grants 8 5,155,841 12,908,855 Total non-current liabilities 5,155,841 12,908,855

Current liabilities [ Accounts payable 9 492,157 210,235 Total current liabilities 492,157 210,235 [ TOTAL LIABILITIES AND EQUITY 5,621,560 13,100,936

The financial statements were approved by the management ofthe Armenian Social Investment Fund on 7 May 2014 and signed on its behalf The accompanying notes form an integral part ofthese financial statements. [ L{> r Executive Director l 0 Armenian Social Investment Fund 0 Financiai Statemellls for the year ended 31 December 2013 6/ /9 [ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Armenian Social Investment Fund l For the year ended 31 December 2013 r Note 2013 2012 r USD USD r Cost of the Projects 10 (7 ,922,942) (4,768,327) Income from Gr11nts 8 7,922,942 4,768,327 Other income/(expense), net 1,172 10,781 Exchange gain/(loss), net (USD/AMD) {9,456) (3,801) l Results of the year before income tax (8,284) 6,980 Income tax Results of the year (8,284} 6,980 Other comprehensive income Comprehensive result for the year {8,284} 6,980

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[ [ r l L Armenian Social Investment Fund Financial Statements for the year ended 31 December 2013 7/19

( L { STATEMENT OF CHANGES IN EQUITY

Armenian Social Investment Fund For the year ended 31 December 2013 r Founders Accumulated Total contribution deficit r USD USD USD Balance as at 1 January 2012 151,631 (176,765) (25,134) r Results of the year 6,980 6,980 Balance as at 31 December 2012 151,631 (169,785) (18,154) ( Results of the y~ar (8,284) (8,284) Balance as at 31 December 2013 151,631 (178,069) {26,438}

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l l [ t Armenian Social Investment Fund f. Financial Statements for the year ended 31 December 20/3 8/19 r l r NOTES TO THE FINANCIAL STATEMENTS

Armenian Socia/ Investment Fund r For the year ended 31 December 2013 r 1. Background I 1.1 Organization and its operations The Armenian Social Investment Fund (the ASIF) has been established by a Decree N 162 dated 11.04.2000 ofthe Government ofthe Republic of Armenia, the sole founder, as an autonomous non­ r profit agency to assist in the rehabilitation of small-scale infrastructure through community initiated and demand-based activities. The Board, chaired by the Prime-Minister of the Republic of Armenia, [ is a supreme governing body of the ASIF. The Annenian Social Investment Fund was registered in accordance with resolution N 988 of the [ Ministry of Justice ofthe Republic of Annenia dated on 13 September 2000. The major projects implemented by ASIF since its incorporation are ASIF I, ASIF II and ASIF III projects (The Projects) with objective to raise the living standards of the poor and vulnerable groups in the Republic of Armenia through: a) improving the quality and access, and increasing the coverage of community infrastructure and services in poor communities, and for the most vulnerable groups in response to critical emerging needs; and b) promoting complementary institutional capacity building at the community and municipal level so as to improve the quality and sustainability of service delivery and municipal investments, increase accountability, and enhance greater stakeholder empowerment at local level.

The Projects financing was provided by the Government of the Republic of Armenia through funds received from international donors, the largest creditor being International Development Association (the IDA) and International Bank of Reconstruction and Development (the IBRD). The Projects co­ financing was provided by: • Government of the Republic of Armenia, • Local Communities, • Other sponsors.

The ASIF registered address is: 31 Ulnetsy Street, Yerevan, 0037, Republic of Armenia. [ L l

Armenian Socia/lnvestmellf Fund L Financial Statemellfsfor the year ended 31 December 2013 /0//9 ~ 2. Summary of significant accounting policies

2.1 Bases ofpr~paration

These financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Federation of Accountants.

The principal accounting policies applied in the preparation of these financial statements are set out ( below. These policies have been consistently applied to all the periods presented. The financial statements consist of: Statement of financial position, r Statement of profit and loss and other comprehensive income, Statement of changes in equity, [ Statement of cash flows, Notes to the financial statements, including significant accounting policies.

2.2 Basis ofmeasurement

These financial statements are prepared on the historical cost basis.

2.3 Functional a11d presentation currency

The ASIF's functional currency is the national currency of the Republic of Armenia, Dram (AMD). The presentation currency of these financial statements is United States Dollar (USD).

2.4 Foreign currency transactions

Foreign currency is a currency other than the functional currency of the ASIF. Transactions in foreign currencies are translated to functional currency at exchange rates at the dates of the transactions. Settlement rate of foreign currency over functional currency established by the ( Central Bank of the Republic of Armenia is taken as the exchange rate. The ASIF's accounts are maintained and transactions are made in USD and Armenian Drams c (AMD). Transactions denominated in local currency are translated into USD as follows: Contributions of the Republic of Armenia expressed in AMD are presented in USD at the official exchange rate defined by the Central Bank of Armenia at the date of transfer. [ Payments to contractors and suppliers expressed in AMD are presented in USD at the exchange rates defined by the CBA at the date of payment. [ The exchange rate defined by the CBA as at 31 December 2012 is: USD 1 = 403.58 AMD. The exchange rate defined by the CBA as at 31 December 2013 is: USD 1 = 405.12 AMD,

L Credits agreed between IDA and the Republic of Armenia Govenunent for ASIF III project, as well as residual amounts, determined at Special Drawing Rights (SDR) and translated into USD at the l year end rates determined by World Bank Group. The exchange rate defined by the WB as at 31 December 2012 is: SDR 1 = USD 1.53692, Armenian Social Investment Fund f Financial Statemelllsfor the year ended 31 December 2013 11 :19 The exchange rate defined by the WB as at 31 December 2013 is: SDR 1 = USD 1.54000. r 2.5 Government grt~nts Grants from the government in return for past or future compliance with certain conditions relating to operating activities of ASIF are recognized at their fair value where there is reasonable assurance r that: a) the ASIF will comply with the conditions attached to them; and [ b) the grants will be received.

Government grants relating to the purch~se of property, plant and equipment are deferred and are recognized in the income statement on a straight line basis over the expected lives of the related r assets. Grants relating to costs are deferred and recognized in the income statement over the period necessary to match them with the costs that they are intended to compensate. r. 2.6 Property, plant and equipment [ Property, plant and equipment are stated at cost, less accumulated depreciation and provision for impairment, where required. Costs of minor repairs and maintenance are expensed when incurred. Cost of replaci~g major parts or components of property, plant and equipment items are capitalized and the replaced part is retired. Depreciation is calculated on a straight-line basis in accordance with the following annual depreciation rates:

Machinery and equipment 20% Transportation means 20% Operational fixtures 20%

2.7 Cash L Cash comprise cash balances and bank accounts balances. 2.8 Advances

Advances are carried at cost less provision for impairment. If there is an indication that the assets, goods or services relating to an advance will not be received, the carrying value of the advance is written down accordingly and a corresponding impairment loss is recognised in the income [ statement. l L [

Armenian Saciallnvestmellt Fumi l Financial Stmemellts for the year endE·d 31 Decem her 2013 l r 3. Property and equipment

Property, plant and equipment represent assets acquired in the scope of the ASIF III project for use at ASIF.

Machinery Transportation Operational Total and equipment means fixtures USD USD USD USD ( Cost As of 1 January 2012 142,754 156,175 7,519 306,448 Acquisitions - - - - [ As of 31 December 2012 142,754 156,175 7,519 306,448 Acquisitions 23,389 - 372 23,761 As of 31 December 2013 166,143 156,175 7,891 330,209 ( Accumulated depreciation As of 1 January 20 12 127,545 127,542 5,229 260,316 Annual charges 8,991 13,784 610 23,385 As of 31 December 2012 136,536 141,326 5,839 283,701 Annual charges 5,235 10,046 603 15,884 As of 31 December 20 13 141,771 151,372 6,442 299,585 Carrying value As of 1 January 2012 15,209 28,633 2,290 46,132 As of 31 December 2012 6,218 14,849 1,680 22,747 As of31 December 2013 24,372 4,803 1,449 30,624

As at 31.12.2013 the property and equipment with cost of 240,356 USD are fully depreciated (31.12.2012: 189,523 USD).

4. Funds receivable

It represents funds receivable for implementation of ASIF III project:

31.12.2013 31.12.2012 Sources of Funds USD USD International Development Association (IDA 5071-AM)- 3n1 additional financing 3,685,801 8,786,239 Republic of Annenia Government - 122,367 Republic of Annenia Government -3ra additional financing 480,180 2,173,225 D Total 4,165,981 11,081,831 [ [ l

{ Armenian Socia! Jnvestme111 Fu11d Fintmcial Stateme/1/s for the year ended 31 December 2013 )].: )9 ,_ --. ~. ---. r-- ~ ,_., - ~ - C""J - r---'j --, :--::1 -, -

4.1 Roll-forward offunds receivable on ASIF III project USD

IDA IBRD IDA 4548-AM 7847-AM- 5071-AM- RA RA RA Commu- - 2nd 3nl Government Government- Government- nity IDA additional additional additional RA - additional 2nd additional 3n1 additional contribu- 4238-AM financing financing financing Government financing financing financing tions Sponsors Total

01.01.2012 - - 1,645,599 - 138,946 - 49,596 - - - 1,834,141 Granted - - - 11,000,000 - - - 2,900,000 700,000 - 14,600,000 Received/refund 5.722 - {1,645,5~) (2, 115,503) (16,580) - (193,711) (726,775) (668,192) 3 (5.360,635) Other increase/ (decrease) (5,722) - - - - 144,115 - (31,808) (3) 106,582 Revaluation (SDRIUSD) - - - (98,257) ------(98,257)_ 31.12.2012 --- 8,786,240 122,366 - - 2,173,225 -- 11,081,831 Granted ------Received/refund - - - (5,056,585) 1,401 298 - (I ,693,045) (275, 127) (62,720) (7,085, 778) Other increase/ (decrease} - - - - (123,767} (298) - - 275,127 62,720 213,782 ' Revaluation (SDRIUSD) - - - (43,854) ------(43,854) 31.12.2013 - - - 3,685,801 - -- 480,180 -- 4165,981

Armenian Socia/ Investment Fund Financial Statements for the year ended 31 December 2013 14 19 r 4.2 IDA funds revaluation r IDA 5071-AM Additional Financing Funds 31.12.2013 31.12.2012 Revaluation Receivable in SDR 2,393,378 5,716,784 r Exchange Rate SDRIUSD 1.54000 1.53692 Equivalent in USD 3,685,801 8,786,240 [ Total in USD 3,729,655 8,884,497 Revaluation gain/(loss} for the ~ear (USD) (43,854) (98,257)

[ 5. Advances

31.12.2013 31.12.2012 [ USD USD Advances for Works-ASIF III 264,937 680,478 Other advances 443 444 [ Total Advances 265,380 680,922

6. Cash

31.12.2013 31.12.2012 USD USD IBRD 7847-AM 2nct additional financing Designated account (USD) -ASIF III - 63,176 IDA 5071-AM third additional financing Designated account (USD) -ASIF III 173,626 362,224 Current accounts (AMD)-ASIF III 978,184 881,688 Other accounts (AMD) 7,699 8,332 Cash on hand (AMD) 66 16 [ 1,159,575 1,315,436

7. Founders' contribution

The Government of the Republic of Armenia is the sole founder of ASIF. The Founder contributed Property, Plant and Equipment with the valued amount of USD 151,631. u Those assets were fully depreciated as at 31 December 2006. [

Armenian Social investment Fund Financial Statements for the year ended 31 December 2013 15119

r 8. Government grants r Mostly relates to received grants for implementation of ASIF III project. 2013 2012 ASIFID ASIFll Total ASIFill ASIFll Total r USD USD USD USD USD USD r Opening balance 12,908,855 - 12,908,855 r-- 3,068,857 - 3,068,857 Grants received - - - 14,600,000 - 14,600,000 Other [ increase/( decrease) 213,782 - 213,782 106,582 - 106,582 Revaluation (SDRIUSD) (43,854) - (43,854) (98,257) - (98,257) [ Income corresponding to ( compensated costs (7,922,942) - (7 ,922,942) (4,768,327) - (4,768,327) Closing balance 5,155,841 - 5,155,841 12,908,855 - 12,908,855 c

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Armenian Social Investment Fund u Financial Statements for the year ended 31 December 2013 16/19 0 ,_ ,___ --, ~ ~ -L _..J r:-; -- LJ ;---; - ~

8.1 Roll-forward ofASIF III grant USD RA RA IDA IBRD IDA Govern me Government RA 4548-AM 7847-AM 5071-AM- nt- -2nd Government- Community IDA additional 2nt additional 3nd additional RA additional additional 3nt additional contribu- Item/Financing 4238-AM financing financing financing Government financing financing financing tions Sponsors Total 01.01.2012 6,807 8,099 2,296,300 - ll7,273 14,975 343,803 - 213,082 68,518 3,068,857 Grants -- - 11,000,000 - - - 2,900,000 700,000 - 14,600,000 Increase/ (decrease) (5,722) - - - 144,115 - - - (31,808) (3) 106,582 Revaluation (SDRIUSD) - - - (98,257) ------(98,257) Income corresponding to compensated costs (22,225) 6 (2,29{180) (1 ,322,584) {25,958) (18,686) (469,119) (328,756) (222,218) (64,607) . (4,768,327)

31.12.2012 (21,140) 8,105 2,120 9,579,159 235,430 (3,711) (125,316) 2,571,244 659,056 3,908 12,908,855 Grants ------Increase/ (decrease) 37,422 (8,105) (2,111) - (223,549) 3,711 122,154 - 220,202 64,058 213,782 Revaluation (SDRIUSD) - - - (43,854) ------(43,854) Income corresponding to compensated costs (9,258) - (9) (5,805,343) (10,443) - 3,791 (1,508,761) (524,953) (67,966) (7,922,942J 31.12.2013 7,024 - - 3,729,962 1,438 - 629 1,062,483 354,305 - 5,155,841

Armenian Socia/ Investment Fund Financial Statements for tl1e .vear ended 31 December 2013 17! 19 l

[ 9. Accounts payable

31.12.2013 31.12.2012 USO USO ASIF Ill Project I. Works (LOG*) 444,940 134,898 2. Goods (LOG*) - 1,012 r 3. Consultants' services and Training (LOG*) 166 - 6. Works, Goods, Consultants' services and Training (LOG*)- [ IBRD 7847-AM - 64,502 Payable on interest accrued on local account 47,051 9,823 Tota_l 492,157 210,235

*Liquidated damages guaranty [ 10. Cost ofthe PI'Ojects

2013 2012 { ASIF III ASIF II Total ASIF III ASIF II Total USO USO USD USD USO USO Works 6,221,120 - 6,221,120 3,268,425 - 3,268,425 Goods 799,024 - 799,024 508,494 - 508,494 Consultants' services and Training 253,899 - 253,899 385,815 - 385,815 Operating costs 633,015 - 633,015 582,208 - 582,208 15,884 - 15,884 23,385 - 23,385 l:""'ciatioo of PPE nt-end fee ------[ al 7,922,942 - 7,922,942 4,768,327 - 4,768,327

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Armenian Social investment Fund ~ Financial Statements _lor the year ended 31 December 2013 /8.'/9 0 [ I r. 11. Cash Flows

2013 2012 ASIF ASIF III ASIF Total AS IF ASIF III ASIF Total other 11 other II [ USD USD USD USD USD USD USD USD Funds received/ (returned) - 7,085,778 - 7,085,778 - 5,359,578 - 5,359,578 ( IDA - 5,056,585 - 5,056,585 - 3,754,323 - 3,754,323 RA Government - 1,691,346 - 1,691,346 - 937,066 - 937,066 Community Contributions - 275,127 - 275,127 - 668,192 - 668,192 Other SQonsors - 62,720 - 62,720 - (3) - (3)

Expenditures [ on Projects - (7,280,159) - (7,280,159) - (5,396,070) - (5,396,070) Works - (5,563,903) - (5,563,903) - (3,922,547) - (3,922,547) Goods - (829,507) - (829,507) - (498,790) - (498,790) Consultant Services and Training - (253,734) - (253,734) - (392,525) - (392,525) Operating Costs - (633,015) - (633,015) - (582,208) - (582,208) Front-end fee ------

Other operating cash flows (net) (588) 37,265 - 36,677 (810) -- (810)

Exchange difference (45) 1,888 - 1,843 (440) (I ,855) - (2,295)

Net cash result (633) (155,228) - (155,861) (1,250) (38,347) - (39,597) Opening cash ( balance 8,332 1,307,104 - 1,315,436 9,582 1,345,451 - 1,355,033 Closing cash balance 7,699 1,151,876 - 1,159,575 8,332 1,307,104 - 1,315,436

12. Taxes

Applicable taxes are paid in accordance with tax regulations of the Republic of Armenia. Income tax rate in the Republic of Armenia is 20%.

13. Litigations and contingencies

[ No claims were received against the ASIF as at 31.12.2013. [ 0 u Armenian Socia/ Investment Fund Financial Statements for the year ended 31 December 2013 19/19 r