TSIAR-FINANS, LLC H 2a, Chust street, Tashkent, , Uzbekistan

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1 4CIAR GROUP Public Disclosure Authorized TSIAR-FINANS, LLC H 2a, Chust street, Tashkent, , Uzbekistan R Tel/Fax: (998-71) , , H reception(aciar.uz; reception(wciargroup.net IDA CREDIT No.4896-UZ AND No.5231-UZ "HEALTH SYSTEM IMPROVEMENT PROJECT" 1 "HEALTH 3" INDEPENDENT AUDITOR'S REPORT ON SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE PERIOD FROM 01 JANUARY 2016 TO 31 DECEMBER 2016 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized In Ineednaebro OPGNV RU NENTOA

2 #CIAR GROUP 000 TSIAR-FINANS* 2- COONTENTS CONTENTS CONTENTS... INDEPENDENT AUDITOR'S REPORT STATEMENT OF SOURCES AND USES OF FUNDS STATEMENT OF USES OF FUNDS BY PROJECT COMPONENTS...7 SUMMARY STATEMENT OF SOE...8 BALANCE SHEET STATEMENT OF PROJECT'S USD SPECIAL ACCOUNT...10 STATEMENT OF PROJECT'S UZS SPECIAL ACCOUNT NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS PROGRAM BACKGROUND PROGRAM ACCOUNTING POLICY PRESENTED FINANCIAL STATEMENTS FIXED ASSETS CASH AND CASH EQUIVALENTS DIRECT PAYMENTS STATEMENT OF EXPENDITURE (SOE) PROCEDURES PROJECT BUDGET PERFORMANCE BUDGET PERFORMANCE ON THE FINANCING THE PROJECT EXPENDITURESIDISBURSEMENTS...20 L PROJECT RECEIVABLES...21 C...n 11. PROJECT LIABILITIES TAXES EVENTS AFTER REPORTING DATE STATEMENT OF PROJECT'S UZS BUDGET ACCOUNT STATEMENT OF PROJECT'S USD BIDDING ACCOUNT STATEMENT OF PROJECT'S UZS BIDDING ACCOUNT STATEMENT OF CPIB'S UZS TRANSIT BIDDING ACCOUNT STATEMENT OF CPIB'S EUR MAIN ACCOUNT STATEMENT OF CPIB'S UZS MAIN ACCOUNT STATEMENT OF CPIB'S UZS TRANSIT ACCOUNT STATEMENT OF UZS PLASTIC CARD STATEMENT OF UZS PLASTIC CARD FOR COMBUSTIBLE FUEL NO STATEMENT OF UZS PLASTIC CARD FOR COMBUSTIBLE FUEL NO STATEMENT OF FF PIU UZS PLASTIC CARD RECONCILIATION OF IDA CREDIT FINANCING...27 E

3 *CIAR GROUP 000 TSIAR-FINANS* INDEPENDENT AUDITOR'S REPORT To the Management of Central Project Implementation Bureau "Healht-3" under the Ministry of Health &6 of the Republic of Uzbekistan We have audited the accompanying Special Purpose Financial Statements (hereinafter - Financial Statements) of the "Health System Improvement Project" / "Health 3" (hereinafter - Project) financed against the Financing Agreement of the International Development Association (hereinafter - IDA) and against budget funds of the Government of the Republic of Uzbekistan (hereinafter - Government, GOU), based on the provisions of the Financing Agreements No.4896-UZ dated 16 September 2011 and No.5231-UZ dated 18 July 2013 (hereinafter - the Financing Agreements), for the year ended 31 December 2016, The Special Purpose Financial Statements comprise Statement of Sources and Uses of Funds, Statement of Uses of Funds by Project Components, Summary Statement of SOE, Balance Sheet, Project's Special Accounts Statements as at 31 December 2016 and for the year then ended, and a summary of significant accounting policies and other explanatory information. The Special Purpose Financial Statements have been prepared by the Central Project Implementation Bureau "Healht-3" under the Ministry of Health of the Republic of Uzbekistan (hereinafter - CPIB) according to the International Public Sector Accounting Standards (hereinafter - IPSAS), based on the cash flow method, issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants. Responsibility of the managers for drawing up financial statement The management of the CPIB is responsible for preparation and fair presentation of these Special Purpose Financial Statements based on the cash flow basis in accordance with IPSAS. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the Special Purpose Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's responsibility Our responsibility is to express an opinion on the accompanying Special Purpose Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA), published by International Federation of Accountants. Those standards require that we should follow ethical norms, plan and perform the audit to obtain reasonable assurance that there is no incorrect or false data in the Special Purpose Financial Statements. Audit stipulates carrying out the procedures, which are aimed to get audit proofs as regards numeric data and information, contained in the Special Purpose Financial Statements. Choosing the procedures is based on auditor's professional judgment, including the estimation of risks of substantial misrepresenting of financial statement as a result of fraud or mistakes. In the process of estimation of above-mentioned risks, Auditor considers internal control system related to the preparation and authentic submission of financial statement of the organization to develop audit procedures, which are necessary in the present circumstances, but not to express opinion on the effectiveness of organization's internal control system. An audit also includes evaluating principles of accounting policies used and estimates made by the management, as well as evaluating the overall presentation of the Financial Statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

4 *CIAR GROUP 000 <TSIAR-FINANS* a 4 Auditor's opinion In our opinion, the above-stated Special Purpose Financial Statements give a true and fair view of the sources and uses of the "Health System Improvement" / "Health 3" Project funds for the period from 01 January 2016 to 31 December 2016 and complies with conditions of the Financing Agreement and IPSAS. Moreover, (a) with respect to SOEs, adequate supporting documentation has been maintained to support claims to the Association for reimbursement of expenditures incurred; and (b) the expenditures comply with objectives stipulated in the Financing Agreement No.4896-UZ. In our opinion, the Special Accounts Statements on IDA Credit No.4896-UZ for the period from 01 January 2016 to 31 December 2016 give a true and fair view of the financial position of the Special Accounts of the Project as at 31 December 2016 and of the cash flows for the for the year then ended and complies with the World Bank's guidelines. Emphasis of Matter Without expressing the modified Auditor's opinion we would like to pay attention to the Note 15 describing the fact that it was no Project financing on the reporting date (under the Financing Agreement dated 18th July 2013 on the IDA Credit No.5231-UZ). Basis of Accounting We draw attention to Note 2 to the Special Purpose Financial Statements, which describes the basis of accounting. The Special Purpose Financial Statements are prepared to assist the Project to comply with the financial reporting provisions on the requirements conditions of the Financing Agreement and IPSAS. As a result, the Special Purpose Financial Statements may not be suitable for another purpose. This audit report is only for information purpose and for internal use by IDA and the Government of the Republic of Uzbekistan, as well as the CPIB, and should not be distributed to or used by other parties. Auditor: TSIAR-FINANS LLC k /V 2A, Chust Street, Tashkent, , Uzbekistan AB ((29)) June 2017 In

5 "Health System Improvement Project" / "Health 3" IDA Credit No.4896-UZ and No.5231-UZ 5 STATEMENT OF SOURCES AND USES OF FUNDS As of 31 December 2016 (USD) IDA Funds IDA - Credit Cumulative Indicator Note Actual 2016 Actual 2015 from the of beginnmng of the Project Financinu Letter of credit (disbursement) 3, , , ,60 É Direct payment 3, , , ,78 Replenishment to Project USo Special i 3, ,55 Account , ,51 - Total IDA Funds , , ,89 Govemment Funds GOU counterpart financing in cash , , ,36 Total Government Funds , , ,36 Total on direct financing , , ,25 Other n38655, , ,08 Total other Funds , , ,08 TOTAL FINANCING , , , Expenses Direct Financing Funds i1. Goods, Consultant's services, Training and ncrernental Operating Cost l Goods , , ,37 Consultant's services , , ,93 Training , , ,32 Operating costs , , ,40 Total , , ,02 Other Funds i Other , , ,61 Total , , ,61 TOTAL EXPENSES , , ,63 Excess of Receipts over Payments ( ,32) , ,70 fi Continued on the next page

6 "Health System lmprovement Project" / "Health 3" IDA Credit No.4896-UZ and No.5231-UZ 6 Continued. Beginning at the previous page Cash Balance as at January 1 Project's UZS Special Account 473,40 0,43 Project's UZS Bidding Account , ,77 UZS Plastic card 395,41 749,06 B UZS Plastic card for combustible fuel No.1 57,19 0,00 UZS Plastic card for combustible fuel No 2 279,51 0,00 *. i CPI B's USD Transit bidding Account 0,00 225, CPIB's EUR Main Account 316,15 0,00 Project's USD Special Account , ,48 Project's USD Bidding Account , ,52 * USD Plastic card 0, ,30 Total , ,56 Net Available Funds , , ,70 Cash Balance as at December 31 Project's UZS Special Account 0,18 473,40 0,18 I Project's UZS Bidding Account 24915, , ,64 UZS Plastic card 27,37 395,41 27,37 UZS Plastic card for combustible fuel No 1 136,50 57,19 136,50 UZS Plastic card for combustible fuel No 2 94,34 279,51 94,34 CP B's USD Transit bidding Account 1 199,36 0, ,36 CPIB's EUR Main Account 1 441,42 316, ,42 Project's USD Special Account , , ,42 Project's USD Bidding Account , , ,47 Total , , ,70 Signed by management on 10 June 2017 R amadjanov -,, Kadirov * tin utive Director of the CPIB ncial Manager, Accountant of the CPIB Statement of Sources and Uses of Funds is to be read in conjunction with Notes (Pages from 12 to 27) thereto forming an integral part of the Special Purpose Financial statements.

7 "4 " Wl L4 ti 9U Di 4 *U L 91B - BLt a -t BW111 l,a 1.. "Health System Improvement Project" 1"Health 3' IDA Credit No.4896-UZ and No.5231-UZ 7 STATEMENT OF USES OF FUNDS BY PROJECT COMPONENTS As of 31 December 2016 (USD) Actual Budget Unused Funds Cumulative Cumulative TCumulatie Components Note from the from the from the beginning of beginning of beginning of Delivery 11. Hmpopital Sevice en vc r 857, ,07 - -ject-- 75 thpeve ,80 jc , ,61-85 th 614 Pro-- _ 071, , , ,28 inancin , , , , , , , , , Primary ealth Care , , , , , , , , , Hurnan Resource Q uality - -- Enhanct , , , , , , , , ,48 2. Strengthiening prvetomentrahealth Financing and Management , , , , Reforms 336, , , Strengthening on NCD) ,07; , , , , ,55; , , ,93 Srebention Control 3.1. Heaath Promotion and NDPrvnin18 113, ,83r ,35: ,45: , ,08: ,18: 971,17: 9 766,73: 32. NCD Surveillance ,80: 2 393, ,27; ,55: , ,47E 8680,75r ,79' 2 018, P o j c t M a n a g e m n , , , , , , ,3 Statement of Uses of Funds by Project Components is to be read in conjunction with Notes <Pages from 12 to 27> thereto forming an integral part of the Special Purpose Financial statements.

8 "Health System Improvement Project" / "Health 3" IDA Credit No.4896-UZ and No.5231-UZ 8 SUMMARY STATEMENT OF SOE As of 31December2016 (USD) ano. of. Wito.aof Date of Withdrawal Categor Application Categ or Wit on application Amount 1. Goods, Consultant's services, Training icaio and Incremental Operating Costs , , , , , , , , , , , , , , , , , , , , , ,27 Total , ,13 dø Signed by management on 10 June 2017 R. 1I Ma nov Y. T. Kadirov Acting Executive Director of th Financial Manager, Accountant of the CPIB Summary Statement of SOE is to be re- cnjunction with Notes (Pages from 12 to 27) thereto forming an integral part of the Special Purpose Financial statements.

9 "Health System Improvement Project" / "Health 3" IDA Credit No.4896-UZ and No.5231-UZ 9 BALANCE SHEET As of 31 December 2016 (USD) ASSETS Indicator as at 1 January, as at 31 December i Cash and cash equivalents , ,70 I TOTAL ASSETS , ,70 OWN FUNDS/FINANCING M IDA financing 6, , ,89 GOU financing , ,36 Other inflow , ,08 Project cumulative expenditures ( ,42) ( ,02) Other expenditures (33 353,64) (46 661,61) TOTAL OWN FUNDSIFINANCING , ,70 Signed by management on 10 June 2017 R. 1. MNaadjnov T. Kadirov Acting Executive Director of the CIPI inýancial Manager, Accountant of the CP11B Balance Sheet is to be read in conjunction with Notes (Pages from 12 to 27) thereto forming an integral part of the Special Purpose Financial statements.

10 "Health System Improvement Project" /"Health 3" p IDA Credit No.4896-UZ and No.5231-UZ 10 STATEMENT OF PROJECT'S USD SPECIAL ACCOUNT for 2016 Account No: Depositary bank: JSCB "invest Finance Bank" Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: USD Balance as at 01 January, ,28 USD Inflow: IDA Financing ,55 Total inflow: ,55 Outflow: a Expenses on related categories ,86 Sale of foreign currency i ,00 Transfer to the CPIB's EUR Main Account 2488,55 Total Outflow: ,41 Balance as at December 31, ,42 Signed by management on 10 June 2017 R. I. yamadjanov Y. T. Kadirov Actin xctvedrctro the Financial Manager, Accountant of the CPIB Statement of Project's USD Special Account is to be read in conjunction with Notes (Pages from 12 to 27) thereto forming an integral part of the Special Purpose Financial statements.

11 "Health System Improvement Project"! "Health 3" IDA Credit No.4896-UZ and No.5231-UZ 11 STATEMENT OF PROJECT'S UZS SPECIAL ACCOUNT for 2016 Account No: Depositary bank: JSCB "Invest Finance Bank' Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ * Currency: UZS USD 000' UZS Balance as at 01 January, , ,22 Inflow: Proceeds from sale of foreign currency , ,55 Total Inflow: , ,55 Outflow: Expenses on related categories , ,08 Transfer to the CPIB's UZS Main Account , ,80 Transfer to the CPIB's UZS Transit Account , ,57 Transfer to the Project's UZS Bidding Account , ,76 Total Outflow: , ,21 Balance as at December 31, ,18 0,56 k Signed by management on 10 June 2017 ger. l.(famadjanov% Y. T. Kadirov Acting Executive Director of t Financial Manager, Accountant of the CPIB Statement of Project's UZS Special Account is to be read in conjunction with Notes (Pages from 12 to 27) thereto forming an integral part of the Special Purpose Financial statements.

12 "Health System Improvement Project"/ "Health 3" * IDA Credit No.4896-UZ and No.5231-UZ 12 NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS for the year ended 31 December Program background l On April 7, 2011 the Board of Directors of the World Bank (hereinafter - WB, Bank) has approved the financing of the ((Health System Improvement / Halth-3" Project. On September 16, 2011 the International Development Association (hereinafter - IDA, Association) and Republic of Uzbekistan have signed the Financing Agreement and IDA lent to Uzbekistan Credit No.4896-UZ to facilitate implementation of ((Health System Improvement / Halth-3" Project for the amount 59.6 million Special Drawing Rights (hereinafter - SDR) which is USD 93 million. On July 18, 2013 IDA and Republic of Uzbekistan have signed Financing Agreement of Additional Financing and IDA lent to Uzbekistan Credit No.5231-UZ to facilitate implementation of Project for the amount 60.6 million SDR which is USD 93 million. The Project is co-financed with funds from the Government of the Republic of Uzbekistan ("Government"), represented by the Ministry of Finance ("MOF"). According to the Financing Agreement, the Ministry of Finance is responsible for repayment of Credits principal and service charge of the Credits. The Project aims to have two broad objectives: (a) improve access to quality health care at the primary level at Regional Medical Units (RMUs) and separate city medical units (CMUs) and (b) strengthen the Government's public health response to the rise in non-communicable diseases (NCDs). Project financing plan is as follows: Source of financing USD IDA Government Total On the basis of Decree No.1614 of the President of the Republic of Uzbekistan dated 7 September 2011 ((On additional measures facilitating implementation of the Project improving healthcare systems/health-libi with participation of the WB International Development Association Ministry of Health of the Republic of Uzbekistan (hereinafter - Ministry) is an executive agency responsible for the target and effective use of credit proceeds and Project implementation. In order to optimize logistics and economic effectiveness, based on Joint Project Implementation Bureau "Health 2" and ((Woman and Child Health Development Project) was created Central Project Implementation Bureau ((Health 3) (hereinafter - CPIB) and 14 Regional Project Implementation Bureau (hereinafter - CPIB). The CPIB is a legal entity in its operations governed by the its by-laws registered by the Resolution dated 21 October 2011 of the Khokim of Mirzo-Ulugbek district of Tashkent City CPIB is a public non-commercial enterprise with the following main objectives: * To achieve the goals and objectives of the Uzbek Health-3 project financed by the IDA credit as well as other projects to be implemented by the CPIB; * To establish and enable Monitoring and Evaluation system for the project implementation; * To ensure the targeted and effective timely disbursement of project funds for the project implementation; * Procurement of goods and services, training arrangements in line with the IDA and national regulatory requirements; * Providing assistance to the CPIB in achieving Project's goals and objectives. CPIB is located at: 51, Parkentskaya Street, Tashkent, , Republic of Uzbekistan. The Project consists of the following components: Component 1: Improving Health Service Delivery - Sub-component 1.1: Hospital Services Improvement - Sub-component 1.2: Primary Health Care Development I - Sub-component 1.3: Clinical Quality Enhancement

13 I "Health System Improvement Project"/ "Health 3" IDA Credit No.4896-UZ and No.5231-UZ 13 Component 2: Strengthening Health Financing and Management Reforms Component 3: Strengthening of the System for NCD Prevention & Control - Sub-component 3.1: Health Promotion and NCDs Prevention - Sub-component 3.2: Strengthening NCD Surveillance System Component 4: Project Management The expected life of the Project under the Investment Program defined the years, including initial financing for , and supplementary financing for IDA credit proceeds under the Project implementation are available to cover the following eligible costs: No. Category IDA Financing 1 Goods, Consultant's services, 1 itraining and Incremental Operating Costs Goods Consultant's services Training Operating costs Total Government proceeds under the Project implementation are available to cover the following eligible costs: a No.: Category GOU Financing 1 1. Goods, Consultant's services, Training and Incremental Operating Costs Goods Consultant's services Training Operating costs Financial costs in the investment period Exemptions from taxes and duties Total The Government contribution includes the payment of a unified social tax, income tax, social charges, INPS (Personal Defined Contribution Pension Account), agents' commission fees, taxes / duties, etc. 2. Project Accounting Policy S These Special Purpose Financial Statements have been prepared, in accordance with requirements of International Public Sector Accounting Standards (hereinafter - IPSAS) issued by the International Public Sector Accounting Standards Board of the International Federation of Accountants, following the cash flow basis and compliant with the World Bank recommendations Basis for the preparation of the Special Purpose Financial Statements Statement of Sources and Uses of Funds, Statement of Uses of Funds by Project Components, Summary Statement of SOE, Balance Sheet, Special Accounts Statements and Notes to the Financial Statements are developed to reflect operations conducted in the Project's framework. Statement of Sources and Uses of Funds, Statement of Uses of Funds by Project Components, Summary Statement of SOE, Balance Sheet and Special Accounts Statements are developed based on cash flow basis in accordance with below-stated principles. K 2.2. Financing Financing of the Project is considered as actual in the following cases:

14 "Health System Improvement Project" /"Health 3" IDA Credit No.4896-UZ and No.5231-UZ IDA Financing: * when suppliers of material resources or services are paid by the IDA from the Credit Account (hereinafter- Credit Account) under Direct payment procedures or by the Letter of Credit; * when the funds from the IDA's Credit Account were transmitted to the Project Special accounts (hereinafter - the Special account) opened with Joint-Stock Investment Commercial Bank ((Invest Finance BANK)) (hereinafter- JSCB 'InFinBANK). 2. Government financing: * Once the funds are transferred from the MOF accounts to the CPIB accounts (budget accounts) opened in the Treasury Ministry of Finance of the Republic of Uzbekistan; * In kind of tax and duty exemptions accounted on the basis of the certificates (notes/letters) furnished by the Project suppliers and subcontractors subjected to the general taxation requirements (VAT, mandatory contributions and fees to the public ear-marked funds, customs fees) Expenditures The Project expenditures are recognized as such and stated in the financial statements when the payment is made to suppliers of goods, works and/or services. The payments are made either directly from Credit account administered by the IDA, or by the Letter of Credit, or from Special and Budget accounts Additional sources of financing and other expenses Additional funds were received as proceeds from sale of bid documents Reporting currency and exchange rate methodology The reporting currency of the Project is US Dollar (USD). A part of financing and expenditures is made in USD, through Direct Payments and by the Letter of Credit. * CPIB has USD Accounts and EURO Account: USD Special Account ("Project's USD Special Account"), EURO Account ("CPIB's EUR Main Account"), Account for receipts from proceeds of sale of bid documents ("Project's USD Bidding Account"), Transit Bidding Account ("CPIB's USD Transit Bidding Account"), Account for receipts from proceeds of bid security (CBIP's USD Bid Security Account"). Besides, CPIB has Uzbek Soum (UZS) accounts: Special Account ("Project UZS Special Account") used to convert funds, Budget Account ("Project's UZS Budget Account") used for financing by the MOF, Account for receipts from proceeds of sale of bid documents ("Project's UZS Bidding Account"), Main Account ("CPIB's UZS Main Account") used to pay salary to staff, Transit Account ("CPIB's UZS Transit Account") used to transfer salary to staff on plastic cards, Corporative Plastic Cards used to CPIB's operating costs and Pension Account for the receipt pensions and benefits. For preparing Project's financial statements the following principles of foreign exchange rate conversion used: * for receipts and expenses in local currency (UZS) attributed to co-financing, the rate of Central Bank of Uzbekistan (CBU) effective at the date of receipt. * for IDA funds, expenses in UZS are restated in USD at the CBU exchange rate effective on the date of conversion. * IDA funded expenses in EURO are converted into USD at the CBU exchange cross rate effective on the date of conversion, EURO:UZS respectively. Closing balance in the CPIB UZS bank accounts are recorded at the respective CBU exchange rate effective on the date of conversion\receipts. 3. Presented financial statements Project Financial Statements are generated and produced by the Central Project Implementation Bureau (hereinafter - CPIB) under the Ministry of Health of the Republic of Uzbekistan being the Project Executing Agency appointed by the Uzbekistan Presidential Resolution No.1614 dated 7 September 2011.

15 "Health System Improvement Project"/ "Health 3" IDA Credit No UZ and No UZ 15 p The Project Special Purpose Financial Statements have been signed for and on behalf of CPIB Acting Executive Director Mr. Mamadjanov, and Financial Manager and Accountant of CPIB Mr. Kadirov on 10 June Project Reporting Period is the same as conventional calendar year. The Project Financial Statements have been prepared in line with IPSAS based on the cash flow method: 3.1. Statement of Sources and Uses of Funds During the reported period, the Project was funded: / by IDA in the amount of USD , 05 - financing USD ,05 under the Direct Payment Procedures (pls. see Note 6) including letter of credit ,97 and USD ,55 replenishment of the Project USD Special Account under the SOE Procedure (pls. see Note 6) / by GOU counterpart financing for the amount of USD ,84 in cash to cover the Project recurrent costs. Other funds and expenditures include financing and expenses on bidding funds. This amount is not reported in the Statement of Uses of Funds by Project categories/components, since these funds are not direct financing of the Project expenditures. The total Project expenditures in 2016 amount USD including IDA Funds USD ,76 and GOU Funds USD , Statement of Uses of Funds by Project Components a This Statement has detailed the information on the Expenditures of the Project Reported Period by the Project components and sub-components Summary Statement of SOE This Statement has detailed the information Statement of Expenditures of the Project Reported Period withdrawn to IDA Balance Sheet This report includes data on the accumulated Project funds, financing and cumulative Project expenditures as on December 31, Fixed Assets The fixed assets of the Project consist of office equipment, furniture and vehicles purchased for the use of CPIB for the period of the Project implementation. Cost of the fixed assets includes purchase price and other direct acquisition costs (custom duties and consumables). Costs of current refurbishment and maintenance are accounted when they occur and entered in the Accounts as Project expenditures. Fixed assets administered by the CPIB and procured from the Project funds are structured as following: Office equipment Furniture Vehicles Others Total At 1 January Purchase I Disposal At 1 January Purchase Disposal At 31December During the period from January 1, 2016 to December 31, 2016, the Project has procured computer supplies and parts at the price of USD 525.

16 "Health System Improvement Project"! "Health 3" IDA Credit No.4896-UZ and No.5231-UZ Cash and cash equivalents The Project opened a number of bank accounts in the Joint Stock Investment Commercial Bank 'InFinBANK". The Project's accounts and their purposes are listed below: 5.1. Project's Special accounts y The Project has two Special Accounts: USD and UZS (IDA Credit No.4896-UZ and No.5231-UZ) for financing eligible expenditures from IDA Credit. During the reported period the Special Accounts was used for paying to suppliers as well as to cover operational expenditures of CPIB. During the period from 01 January 2016 to 31 December 2016 the USD Special Account receipt was USD (IDA financing). Total expenditures paid from the Special Accounts for the reporting period is amount USD Budget account (Note 14) Budget account is used to cover expenditures, funded by the Government. This account receives remittances from the Ministry of Finance's accounts. Total amount of Government financing for the period from 01 January 2016 to 31 December 2016 comprised USD in UZS equivalent. The total amount of expenditures, incurred for the reporting period from the budget account is USD Bidding Accounts (Notes 15, 16) Project maintains two Bidding Accounts - one in USD and one in UZS - used for depositing cash proceeds from the sale of bidding documents. In 2016 the proceeds from sale of bidding documents was USD , including USD on the Project Bidding Account and USD on the CPIB Transit Bidding Account (minus proceeds of USD3 374,78 generated from sale of bidding documents under the Project of National Program for Flour fortification) (hereinafter - PIU FF)) (pls. refer to the Note 17) Other Project account 1. CPB's USD Transit Bidding Account (p1s. see Note 17) CPIB has opened this Project Account to generate proceeds from sale of bidding documents under several projects the CPIB is responsible for implementation. 2. CP/B's EURO Main Account (p/s. see Note 18) CPIB has set a EURO Account to pay the suppliers. In the reported period the EURO funds were used to cover the training costs for the staff. 3. CPIB's UZS Main Account (p/s. see Note 19) * CPIB has opened this Project Account to cover the recurrent costs. During the reporting period account was used for payroll and other expenses. 4. CP/B's UZS Transit Account (p/s. see Note 20) This Project Account is used to disburse salary and transfer to the plastic cards. 5. CPIB's UZS Corporative cards (pis. see Note 21, 22, 23, 24) CPIB has opened this Project Account to cover the recurrent costs. During the reporting period account was used for fuel and lubricants and air-flight tickets. 6. CP/B's USD Bid Security Account Project Accounts among others include Bid Security Account to deposit the Bid Security from the bidding suppliers. Once Bidding is completed and contract awarded the Bid Security is returned to the lost bidders. Cash Flow on the Account is not integrated in the Project Financial Statements since these funds are not the source of financing. 7 CP/B's UZS Pension Account Pension account is used for receipt of Pension and social benefits. Cash Flow on the Account is not integrated in the Project Financial Statements since these funds are not the source of financing.

17 "Health System Improvement Project" / "Health 3" IDA Credit No UZ and No.5231-UZ 17 Balances of the Project's bank accounts are reflected in the following table: janui7iåié~~ Account 00 S currency i cs ount 1 330, ,22 473,40 Project's UZS Bidding Account 30561, , ,96 UZS Plastic card I091, ,42.395,41 UZS Plastic card for combustible fuel No 1 155,63 155,63 57,19 UZS Plastic card for combustible fuel No 2 777,05 777,05 279,51 CPIB's EUR Main Account 281,75 866,00 316,15 Project's USD Special Account , , ,28 Project's USD Bidding Account 22230, , ,12 Total Project Funds as at January 1, , ,02 Balance as at December 31, 2016 Project's UZS Special Account 0,56 0,56 0,18 Project's UZS Bidding Account , , ,64 UZS Plastic card 87,67 87,67 27,37 UZS Plastic card for combustilble fuel No ,20 439,20 136,50 UZS Plastic card for combustible fuel No 2 303,53 303,53 94,34 PIB's EUR Main Account 1 199, , ,36 Project's USD Special Account 1242, , ,42 Project's USD Bidding Account , , ,42 Projects UZS Special Account 33024, , ,47 Total Project Funds as at December 31, , ,70 6. Direct payments Direct payments and Letters of Credit, made by the IDA from Credit Account during the period from 1 January 2016 till 31 December 2016 are stated in the following tables: Direct payments Amount in Paid Amount by Withdrawac Datedy payment categoryi ni USD) Total amount applicaton Currencurrency 1. Goods n USD USD , , , USD , , , USD , , , USD , , , USD , , , USD , , , USD , , ,00 Total , , ,53 b

18 a "Health System Improvement Project" / "Health 3" IDA Credit No.4896-UZ and No.5231-UZ 18 Letters of Credit No. 1 Pament Amout ~ Paid Amnount by Withdrawal Dated Curren payment category (in USD) application i currency 1. Goods Total amount USD , , , USD ,00 i , , USD , , , USD , , , USD , , , USD , , , USD , , , USD , , , USD , , il , _ USD , , , USD , , , USD , , , USD , , , USD , , , USD , , , USD , , , i USD , , , USD , , , USD , , , USD , , , USD , , , USD , , ,00 Total , , ,97 Below is the summary of IDA-financed total under the Direct Payment and Letters of Credit Procedure (from the beginning of the Project): Direct payments Paid Arnount by category Reporting Year (in USD) Tn u in U S D 1. Goods , , , , , ,18 2? , ,53 Total , ,78 Letters of Credit Reporting Year Paid Arnount by category (in USD) Total Amnount - - in U n USD 1. Goods , , , , , , , ,97 Total , ,60

19 a "Health System Improvement Project"/ "Health 3" IDA Credit No.4896-UZ and No.5231-UZ Statement of Expenditure (SOE) procedures SOE procedure used by the Project to replenish funds to the Special Account in accordance with the conditions of the Financing Agreement and IDA Guidelines' requirements. Summary data on funds reimbursed through SOE procedures for the period 1 January 2016 till 31 December 2016 is stated in the following table: Total Amount reported under SOEs ,26 Less: expenditures no submitted to IDA on 31 December 2016* ( ,77) Subtotal ,49 Of which: replenished to Special Account ,55 Including replenished expenditures for 2015 as per SOE 108 (77025,06) Subtotal ,49 a..[d.!.... Difference e I... *2016 expenditures for total of USD requested for IDA reimbursement under SOE procedure (SOE 156 and 159) are reimbursed on 23rd June Below is the summary of IDA-financed total under the SOE Procedure (from the beginning of the Project):. 0,00 Paid Amount by category ReportingYear (in USD) Total Amount 1. Goods, Consultant's services, Training and in USD Incremental Operating Costs , , , , i , ,81 Må , , , ,55 Total , ,51 8. Project budget performance IDA FUNDS Cumulative from the beginning of the Project i IDA Credit N.4896-UZ dvance Payment ,00 Replenishment to Project USD Special Account under the SOE's Procedure ,51 Direct payment ,78 Letter of credit (disbursement) ,60 Total Financing by IDA Credit No.4896-UZ ,89 Total budget by IDA Credit No.4896-UZ ,00 Financingpercentage of IDA Credit No.4896-UZ 79,62% IDA Credit N. o5231-uz Total financing by IDA Credit No.5231-UZ* l Total budget by IDA Credit No.5231-UZ ,0 Financing percentage of IDA Credit No.5231-UZ 0,00% Total IDA Financing ,89 Total IDA Budget ,00 Financing percentage of IDA Funds 39,81% i

20 "Health System Improvement Project"/ "Health 3" IDA Credit No UZ and No UZ 20 GOU FUNDS GOU counterpart financing in cash ,36 GOU in kind contribution ,40 Total éou Financing ,76 Lfota- budget n cash ,00 Percentage of cash financing 36,32% {Totaj GOU det ,00 Total Percentage af GOU Financing 50,09% 1 Total Project Financing ,65 Total Project Budget ,00.Total Percentage of Project Financing 42,45% * On the reporting date it was no financing and disbursements under the Additional Financing Agreement signed on 18 July 2013 (IDA Credit No.5231-UZ), ** GOU Counter financing budget does not include financial costs 9. Budget performance on the financing the Project expenditures/disbursements IDA FUNDS 9' IDA Credit No UZ Cumulative from the beginning of the Project TnGod,Cnutn' 1. Good Cncrltanta seruices, sering Training and ncremental Operating Costs , , ,02 tal Project Expenditures by IDA Credit No.4896-UZ , , ,02 Total budget by IDA Credit No.4896-UZ ,00 IDANo.4896 Credit disbursement rate 85,83% iida Credit No U Total Project Expenditures by IDA Credit No.5231-UZ* - - Total budget by IDA Credit No.5231-UZ ,00 B iexecution rate of IDA Credit No ,00% Total ProjectExpenditures by IDA Funds , , ,02 Total budget by IDA Funds , , :00 Total IDA Credit disbursement rate 75,94% 88,10% 42,92% GOU FUNDS b Consultant's services' Training 521,84 and Incremental Operating Costs 266, ,36 Exemptions from taxes and duties , , ,40 Total Project Expenditures by GOU Funds , , ,76 Total budget in cash expenditures , , ,00 Cash disbursement rate 34,20% 52,06% 36,32% Total budget of exemptions from taxes and duties ,00 Non-cash disbursement rate 54,80% Total budget by GOU Funds ,00 GOU funds disbursement rate 50,09% Total Project Expenditures , , ,78 Total Project Budget ,00 Project disbursement rate 44,76% * On the reporting date it was no financing and disbursements under the Additional Financing Agreement signed on 18 July 2013 (IDA Credit No.5231-UZ). ** GOU Counter financing budget does not include financial costs

21 "Health System Improvement Project" /"Health 3" IDA Credit No.4896-UZ and No.5231-UZ Project Receivables Project receivables include advance payments paid to suppliers and other contractors accounted on the accrual basis: USD as at 1 January, as at 31 December Advance payments to suppliers , ,27 I Other receivables 4 528, ,40 Total , , Project Liabilities Project payables include payables to suppliers, tax and contributions, payroll and other liabilities accounted on the accrual basis: --USD as at 1 January, as at December2016 Payables to suppliers and contractors , ,55 Tax and contribution payables , ,46 Payroll payables ,71 Other payables 557,43 68,77 Total , , Taxes Services and goods acquired from IDA funds are exempted from all taxes and levies based on Tax Code of the Republic of Uzbekistan. The CPIB is a legal entity in its operations governed by the its by-laws registered by the Resolution dated 21 October 2011 of the Khokim of Mirzo-Ulugbek district of Tashkent City. Based on the National Tax Code CPIB, being a public non-profit enterprise is tax and duties exempt. 13. Events after reporting date It was no Project disbursements on the reporting date under the Financing Agreement dated 18 July 2013, under the IDA Credit No.5231-UZ. Disbursement of Project funds is yet to start. *-

22 T "Health System Improvement Project"/ "Health 3" IDA Credit No.4896-UZ and No.5231-UZ Statement of Project's UZS Budget Account g Account No: Depositary bank: Treasury Ministry of Finance of the Republic of Uzbekistan Address: 5, Mustakillik Avenue, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: UZS USD 000' UZS Balance as at 01 January, ,00 0,00 Inflow: GOU Financing , ,53 Total Inflow: , ,53 Outflow: Expenses on related categories , ,53 Total Outflow: , ,53 Balance as at December 31, ,00 0, Statement of Project's USD Bidding Account Account No: Depositary bank: JSCB "Invest Finance Bank" Tashkent city Branch Address: i8 "b", Alisher Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: USo SUSD Balance as at 01 January, ,12 Inflow: Transfer from CPIB's USD Transit Bidding Account ,33 Inflow for bidding documents Total Inflow: Outflow: 177, ,32 Expenses on related categories 485,97 Total Outflow: 485,97 Balance as at December 31, ,47

23 "Health System Improvement Project" /"Health 3" IDA Credit No.4896-UZ and No.5231-UZ Statement of Project's UZS Bidding Account Account No: Depositary bank: JSCB "Invest Finance Bank" Address: 18 "b", Alisher Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: UZS Balance as at 01 January, 2016 USD 000' UZS , ,32 Inflow: Inflow for bidding documents 14895, ,32 Transfer from CPIB's USD Transit Bidding Account , ,25 Transfer from Project's UZS Special Account 16378, ,76 Total Inflow: 42554, ,33 Outflow: Expenses on related categories 16378, ,76 Other expenses 8060, ,92 Transfer to CPIB's UZS Main Account 4761, ,19 Total Outflow: 29200, ,87 Balance as at December 31, , , Statement of CPIB's UIZS Transit Bidding Account Account No: Depositary bank: JSCB "Invest Finance Bank" Address:4 18 "b", Navoiy street, Tashkent, Uzbekistan Credit 4896-UZ 6Related Currency: 7 cn. CILIA Balance as at 01 January, ,00 USD Inflow: Inflow for bidding documents ,80 Inflow of bid security ,00 18""Caoysre,Tskn,Ubksa 486U Total Inflow: ,80 Outflow: S Transfer to CPIB's USD Bid Security Account ,00 Transfer to Project's UZS Bidding Account B i c280,33 Transfer to Project's USD Bidding Account ,33 Transfer to FF PIU UZS Bidding Account i 687,39 Transfer to FF PI U USID Bidding Account i 687,39 etotal Ourflow: 57757,44 Balance as at December 31, ,36

24 "Health System Improvement Project" /"Health 3" IDA Credit No.4896-UZ and No.5231-UZ Statement of CPIB's EUR Main Account Account No: Depositary bank: JSCB "Invest Finance Bank" Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: FUR Balance as at 01 January, ,15 281,75 USD EUR Inflow: Transfer from Project's USD Special Account 2488, ,02 Total Inflow: 2 488, ,02 Outflow: Expenses on related categories 1 363, ,77 Total Outflow: 1 363, ,77 Balance as at December 31, , , Statement of CPIB's UZS Main Account Account No: Depositary bank: JSCB "Invest Finance Bank" Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: UZS USD 000' UZS Balance as at 01 January, ,00 0,00 Inflow: Transfer from Project's UZS Special Account 13368, ,80 Transfer from Project's UZS Bidding Account 4761, ,19 Transfer from CPIB's USZ Pension Account 12660, ,01 Transfer from FF PIU UZS Special Account , ,38 Transfer from FF PIU UZS Bidding Account 19, Total Inflow: , ,44 Outflow: Expenses on related categories 1964, ,56 Other expenses 3560, ,44 Payment of pensions and benefits 7707, ,81 Expenses on related categories FF PlU 6051, ,44 Transfer to CPIB's UZS Transit Account 6680, ,78 Transfer to CPIB's UZS Corporative Plastic Cards 15033, ,41 rtotal Ouff low: , ,44 6L5, Balance as at December 31, ,00 0,00

25 "Health System Improvement Project" /"Health 3" IDA Credit No.4896-UZ and No.5231-UZ Statement of CPIB's UZS Transit Account Account No: Depositary bank: JSCB "Invest Finance Bank" Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: UZS USD 000' UZS Balance as at 01 January, ,00 0,00 Inflow: Transfer from Project's UZS Special Account , ,57 Transfer from CPIB's UZS Main Account 6 680, ,78 Transfer from FF PIU UZS Special Account , ,95 Total Inflow: , ,30 Outflow: Expenses on related categories , ,39 Other expenses 1 200, ,75 Payment of pensions and benefits 4949, ,52 Expenses on related categories FF PlU 28659, ,64 Total Ouff low: , ,30 Balance as at December 31, ,00 0, Statement of UZS Plastic Card Account No: p Depositary bank: JSCB "Invest Finance Bank" Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: UZS USD 000' UZS Balance as at 01 January, , ,42 Inflow: Transfer from CPI B's UZS Main Account 5 139, ,00 Total Inflow: 5139, ,00 Outflow: Expenses on related categories 5 507, ,75 Total Outflow: 5507, ,75 IF C-1 Balance as at December 31, ,37 87,67

26 "Health System Improvement Project"/ "Health 3" IDA Credit No.4896-UZ and No.5231-UZ Statement of UZS Plastic card for combustible fuel No.1 Account No: Depositary bank: JSCB "Invest Finance Bank" Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: UZS USD 000' UZS Balance as at 01 January, ,19 155,63 * Inflow: Transfer from CPIB's UZS Main Account 2 880, ,00 Total Inflow: 2 880, ,00 Outflow: Expenses on related categories 2 748, ,43 w Transfer to UZS Plastic card for combustible fuel No.2 52,14 150,00 Total Outflow: 2 800, ,43 Balance as at December 31, ,50 439, Statement of UZS Plastic card for combustible fuel No.2 Account No: Depositary bank: JSCB "Invest Finance Bank" Address: 18 "b", Navoiy street, Tashkent, Uzbekistan Related Credit 4896-UZ Currency: UZS I USD 000' UZS Balance as at 01 January, ,51 777,05 Inflow: Transfer from CPIB's UZS Main Account 2 325, ,00 Transfer from UZS Plastic card for combustible fuel No.1 52,14 150,00 Total Inflow: 2 378, ,00 Outflow: Expenses on related categories 2 563, ,52 Total Outflow: 2 563, ,52 Balance as at December 31, ,34 303,53