Public Disclosure Authorized. Public Disclosure Authorized

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Montenegro Institutional Development and Agriculture Strengthening Project MIDAS Project ID: P107473 GLOBAL ENVIRONMENT FACILITY GRANT NUMBER TF093405 Financial Statements for the period from 1 January 2014 to 31 December 2014 and Independent Auditor s Report Public Disclosure Authorized

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No TF093405 CONTENTS Page INDEPENDENT AUDITOR S REPORT 1-2 PROJECT FINANCIAL STATEMENTS Statement of Sources and Uses of Funds 3-4 Statement of Uses of Funds by Project Activities 5 Special Account Statement 6-7 Notes to the Project Financial Statements 8-16 Annex 1 Project Financial Statements Annex 2 Supporting Documentation Special Purpose SOEs Used as the Basis for the Submission of Withdrawal Applications

INDEPENDENT AUDITOR S REPORT To the Ministry of Agriculture and Rural Development of Montenegro We have audited the accompanying financial statements of the Project Montenegro Institutional Development and Agriculture Strengthening - MIDAS (hereinafter referred to as: the Project), financed under International Bank for Reconstruction and Development (hereinafter referred to as: IBRD) acting as an Implementing Agency of the Global Environment Facility (hereinafter referred to as: GEF) Grant Agreement No. TF093405 as of 31 December 2014 and for the period from 1 January 2014 to 31 December 2014. These Project financial statements include Statement of Sources and Uses of Funds, Statement of Uses of Funds by Project Activities and Statement of Special Account. Management s Responsibility for the Financial Statements Management is responsible for the preparation of these Project financial statements in accordance with the World Bank guidelines and procedures and contractual basis of the Project and for such internal control as management determines is necessary to enable the preparation of the Project financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these Project financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and relevant World Bank guidelines. Those standards and World Bank guidelines require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Project financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Project financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the Project financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation of the Project financial statements 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 Project s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the Project financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the Project financial statements present fairly, in all material respects, the balance on the Special Account as of 31 December 2014 and the movements on the Special Account and the Sources and Uses of Funds of the Project for the period from 1 January 2014 to 31 December 2014, in accordance with the World Bank guidelines and procedures and contractual basis of the Project.

INDEPENDENT AUDITOR S REPORT To the Ministry of Agriculture and Rural Development of Montenegro (Continued) Basis of Accounting The Project financial statements are compiled in accordance with cash basis of accounting, as stated in Note 2.1. (b) to the Project financial statements. Other Matters In addition, (a) with respect to SOE, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and (b) which expenditures are eligible for financing under the Grant Agreement No. TF093405. Belgrade, 5 October 2015 Milovan Popovic Certified Auditor 2

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 NOTES TO THE PROJECT FINANCIAL STATEMENTS 1. GENERAL INFORMATION The Government of the Republic of Montenegro, acting through the Ministry of Agriculture, Forestry and Water Management (hereinafter referred to as: MAFWM or MARD) adopted the Agriculture and Rural Development Strategy of Montenegro (hereinafter referred to as: the Strategy) as of 17 July 2006. In 2008, the MAFWM created the National Programme for the Food and Rural Development 2009-2013 (hereinafter referred to as: the Programme). The Strategy and the Programme have been created according to the support of the European Agency for Reconstruction. The Government of Montenegro (hereinafter referred to as: GoM), during 2008, accessed the process of negotiating financial assistance with the World Bank, International Bank for Reconstruction and Development (hereinafter referred to as: IBRD) for the purposes of strengthening agricultural institutions and agricultural development. The GoM and the IBRD agreed on financing the Project Montenegro Institutional Development and Agriculture Strengthening MIDAS. The Government of Montenegro has signed the Loan Agreement No. 7716-ME in the amount of EUR 11,000,000 with IBRD dated 27 May 2009 and Grant Agreement number TF093405 in amount of USD 4,000,000 with IBRD acting as an Implementing Agency of the Global Environment Facility (hereinafter referred to as: GEF) dated 27 May 2009. The financing is approved for the Project titled Montenegro Institutional Development and Agriculture Strengthening MIDAS (hereinafter referred to as: Project). The Project will be realized by the Ministry of Agriculture and Rural Development (hereinafter referred to as: MARD), while implementation will be divided between the Ministry of Agriculture and Rural Development, Montenegro s Statistical Office and the Veterinary Directorate. The Project development objective is to improve delivery of government assistance for sustainable agriculture and rural development in a manner consistent with the EU s pre-accession requirements. Key outcome indicators are: (i) MARD capacity to disburse and track the use of rural development funds and to evaluate their impact in line with EU IPARD requirements; (ii) EU IPARD compatible rural development measures fully integrated in MARD support programs and (iii) a food safety system upgraded in an EU compliant manner. The project will have three components: (1) Strengthening MARD s rural development program; (2) Strengthening MARD s administrative and management capacity in accordance with EU pre-accession requirements and (3) Project management, administration and monitoring. According to the Status of Project in Execution (SOPE) Report for fiscal year 2010 issued by the World Bank, the first year of implementation of the Project has made important progress towards achieving the Project development objective. In particular, the project supported the implementation of a National Agricultural Census for the first time in 40 years. This will provide a basis for future elaboration of the MARD rural development program. The rural development program is a key component in the use and allocation of European Union (EU) rural development pre-accession funds. Other important progress mainly involves the preparation of the Project Grants Operational Manual (in cooperation with the EU Twinning Project) to guide implementation of the investment grants program, and the hiring of experts to help improve the capacity of MARD. 8

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 NOTES TO THE PROJECT FINANCIAL STATEMENTS 1. GENERAL INFORMATION (Continued) In the following table, the acceptable categories of expenses that can be financed from the Grant are presented, as well as the allocated amount of the funds from the Grant for each category and the percentage of costs that have to be financed for eligible expenses by each category: Category Amount of the Grant Allocated (expressed in USD) Percentage of Expenditures to be Financed 1. Rural Development Grants under Part A.1 of the Project 3,010,000 100% 2. Goods, works, consultants services and training 990,000 100% Total amount 4,000,000 The following table presents the percentage of available grant used as of 31 December 2014 per cost category: Uses of funds in USD Amount of the Grant allocated in USD Percentage of available Funds used 1. Rural Development Grants under Part A.1 of the Project 1,662,523 3,010,000 55.23% 2. Goods, works, consultants services and training 694,287 990,000 70.13% Total 2,356,810 4,000,000 58.92% Payments of Rural Development Grants to agricultural producers started in 2011 and significantly continued in 2012, 2013 and 2014. The second, third and fourth round of rural development grants were financed from budget available from GEF Grant. In 2014 total 112 grants in the amount of EUR 623,585.55 were financed through the Project. Concerning Goods, works, consultants services and training category - Services provided by Micro Project doo, Niksic based on assignment for the preparation of the Strategy for Agriculture and Rural Development 2014-2020, salaries and contributions of Project team staff together with purchase of IT Equipment comprise the major part. 9

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 NOTES TO THE PROJECT FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies have been adopted in the preparation of the financial statements. These have consistently been applied with those of the prior year. 2.1. Basis of preparation (a) General The Project Financial Statements have been prepared for the purpose of reporting to the IBRD on the activities of the Project related to funds received for the completion of the Project objectives in accordance with the IBRD Loan Agreement and GEF Grant Agreement. (b) Cash-basis for accounting Accounting records are maintained in accordance with cash basis of accounting, in accordance with the World Bank guidelines and procedures and contractual basis of the Project. Cash basis means a basis of accounting that recognizes transactions and other events only when cash is received or paid. (c) Reference currency The Technical Service Unit under the Ministry of Finance has adopted the Euro ( EUR ) as its reference and measurement currency for consistency with the reporting requirements, as it reflects the economic substance of the underlying events and transactions. (d) Going concern The accompanying financial statements have been prepared for the period starting from 1 January 2014 to 31 December 2014. Project implementation period is prescribed to start on 23 July 2009 and to end on 30 June 2015. The closing date of the Project was extended to 31 March 2016. 2.2. Foreign currency translation The Project reporting currencies are USD and EUR for GEF Grant. The national currency of Montenegro is Euro ( EUR ). The Project financing is in EUR and in USD and operating activities are usually carried out in the EUR, which is the national currency of the Montenegro. Transactions carried out during 2014 in national currency are translated to USD at the following exchange rates: 1 EUR = 1.365596, 1 EUR = 1.367101, 1 EUR = 1.282849 and 1 EUR = 1.248746. 10

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 NOTES TO THE PROJECT FINANCIAL STATEMENTS 3. SPECIAL ACCOUNT The Technical Service Unit (hereinafter referred to as: TSU) administers the Special Account. The TSU prepares withdrawal applications for replenishment of the Special Account which ought to be signed by designated signatories. Payments from the Special Account are executed by means of payment orders. After all the procedures with respect to flow of documents, verifications and authorizations prescribed by internal controls are applied, payment orders signed by designated signatories are submitted for payments from either the Special Account or the Budget (for Government contribution) split in accordance with eligible percentages of financing. In the case of Direct Payment the application form for such method payment is submitted to the Bank with the same authorized signatories as described above. Miodrag Radonjic, Director General of Directorate General for State Treasury, has privileges to the Special Account of the Project. Disbursement of funds from the Special Account is done in respect of the written approval from the Senior Financial Officer and Project Coordinator since July, 2014. Details concerning the GEF Special Account of the Project are as follows: Account No. Depository Bank Address Currency Currency 2345011-65 -02010658 EUR/USD Crnogorska komercijalna banka a.d. Podgorica Moskovska bb, Podgorica EUR USD Bank Accounts with Crnogorska komercijalna banka a.d. Podgorica are noninterestbearing to the deposit made to the Special Account by GEF. 11

NOTES TO THE PROJECT FINANCIAL STATEMENTS Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 4. SUMMARY OF EXPENDITURES IBRD s initial payment to the Project s designated account amounted to EUR 250,000.00 and it was paid as of 28 September 2009. With every further withdrawal application for replenishment of the Special Account, TSU submits to the IBRD Summary of expenditures made by the date of application. The review of submitted summary is presented in the table below, and detailed summaries are shown in the Annex 2 of the report: Number of Withdrawal Application Date of Withdrawal Application Application Amount Rural Development Grants Works, Goods, Consultants' Services, Training & WS & ST Operating Costs Total In USD Approved Amount WA 02 17.06.2010. 17,280.66-17,280.66-17,280.66 16,132.93 WA 03 08.11.2010. 21,455.13-21,455.13-21,455.13 21,455.13 Total for 2010 38,735.79-38,735.79-38,735.79 37,588.06 WA 04 07.04.2011. 10,179.01-10,179.01-10,179.01 10,179.01 WA 05 25.02.2011. 97,138.57-97,138.57-97,138.57 44,645.06 WA 06 18.04.2011. 57,955.82-57,955.82-57,955.82 57,955.82 WA 07 22.09.2011. 20,545.97-20,545.97-20,545.97 20,545.97 WA 08 20.12.2011. 33,042.06-33,042.06-33,042.06 33,042.06 Total for 2011 218,861.43-218,861.43-218,861.43 166,367.92 WA 09 22.03.2012. 39,604.15 21,724.26 17,879.88-39,604.14 39,604.15 WA 10 04.06.2012. 26,223.95 14,558.17 11,665.78-26,223.95 26,223.95 WA 11 12.09.2012. 33,590.57 7,665.48 25,925.08-33,590.56 33,590.57 WA 12 27.09.2012. 42,038.71 22,067.57 19,971.14-42,038.71 42,038.71 Total for 2012 141,457.38 66,015.48 75,441.88-141,457.36 141,457.38 WA 13 18.12.2012. 34,425.60 5,613.70 28,811.90-34,425.60 34,425.60 WA 14 04.03.2013. 53,183.27 2,572.25 50,611.02-53,183.27 53,183.27 WA 15 11.07.2013. 111,972.01 94,938.14 17,033.87-111,972.01 111,972.01 WA 16 18.07.2013. 113,160.11 100,954.25 12,205.87-113,160.12 113,160.11 WA 17 08.08.2013. 145,506.88 141,163.14 4,343.74-145,506.88 145,506.88 WA 18 14.11.2013. 163,916.89 150,820.09 13,096.80-163,916.89 163,916.89 WA 19 19.12.2013. 91,688.55 87,249.71 4,438.84-91,688.55 91,688.55 Total for 2013 713,853.31 583,311.28 130,542.04-713,853.32 713,853.31 12

NOTES TO THE PROJECT FINANCIAL STATEMENTS Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 Number of Withdrawal Application Date of Withdrawal Application Application Amount Rural Development Grants Works, Goods, Consultants' Services, Training & WS & ST Operating Costs Total In USD Approved Amount WA 20 30.12.2013. 208,870.18 196,068.63 12,801.55-208,870.18 208,870.18 WA 21 20.01.2014. 250,000.00 - - - 250,000 250,000.00 WA 22 07.03.2014. 88,385.06 82,167.00 6,217.69-88,384.69 88,385.06 WA 23 24.06.2014. 159,439.91 31,949.24 127,490.67-159,439.91 159,439.91 WA 24 31.07.2014. 172,778.47 146,496.04 26,282.43-172,778.47 172,778.47 WA 25 07.10.2014. 136,034.49 109,296.63 26,737.86-136,034.49 136,034.49 WA 26 14.11.2014. 267,763.07 246,902.52 20,860.55-267,763.07 267,763.07 WA 27 22.11.2014. 232,488.50 193,959.27 38,529.23-232,488.50 232,488.50 Total for 2014 1,515,759.68 1,006,839.33 258,919.98-1,515,759.31 1,515,759.68 Total 2,628,667.59 1,656,166.09 722,501.12-2,378,667.21 2,575,026.35 13

NOTES TO THE PROJECT FINANCIAL STATEMENTS Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 4. SUMMARY OF EXPENDITURES (Continued) The major expenditures in 2014 relate to the following: CONTRACTOR / SUPPLIER DESCRIPTION Invoice/Contract Ref # Total Invoiced Amount /EUR/ MN Budget /EUR/ SA-GEF Paid from Grant /EUR/ in Amount USD Grants Targeted rural development grants n/a 623,585.55-623,585.55 817,128.04 Consultants' Services Micro Project doo, Niksic Milos Sturanovic Marija Klikovac Goods CIKOM Informaticki inzenjering d.o.o. Update of the sectoral studies for the Strategy of Agriculture Development 2014-2020 Project Manager M&E Specialist Procurement of IT Equipment for Ministry for Agriculture and Rural Development MNE-MIDAS- TF093405-CS-CQ- 13-2.1.a.8.1. 79,566.30-79,566.30 107,595.14 MNE-MIDAS- P107473-TF093405- IC-3.1-S-09 23,824.92-23,824.92 31,901.39 MNE-MIDAS- TF093405-IC-CS-10- GEF 3.2 15,411.36-15,411.36 20,635.70 118,802.58-118,802.58 160,132.23 MNE-MIDAS-7716- ME-TF093405-SH-G- 14-2.1.A.9.1.2. 10,787.66-10,787.66 14,731.59 Other 74,043.63-74,043.63 96,681.51 Total 827,219.42-827,219.42 1,088,673.37 14

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 NOTES TO THE PROJECT FINANCIAL STATEMENTS 5. UNDISTRIBUTED FUNDS Undistributed funds for the Project as of 31 December 2014 are shown as follows: Date of payment Amount in USD Total amount of the grant 4,000,000.00 Disbursed 2009 Payments to Designated account: WA-01 28-Sep-09 250,000.00 2010 Payments to Designated account: WA-02 12-Jul-10 16,132.93 WA-03 6-Dec-10 21,455.13 2011 Payments to Designated account: WA-04 13-Apr-11 10,179.01 WA-05 10-Mar-11 44,645.06 WA-06 21-Apr-11 57,955.82 WA-07 4-Oct-11 20,545.97 WA-08 28-Dec-11 33,042.06 2012 Payments to Designated account: WA 9 29-Mar-12 39,604.15 WA 10 4-Jun-12 26,223.95 WA 11 17-Sep-12 33,590.57 WA 12 2-Oct-12 42,038.71 2013 Payments to Designated account: WA 13 10-Jan-13 34,425.60 WA 14 19-Mar-13 53,183.27 WA 15 30-Jul-13 111,972.01 WA 16 7-Aug-13 113,160.11 WA 17 10-Sep-13 145,506.88 WA 18 2-Dec-13 163,916.89 WA 19 24-Jul-13 91,688.55 2014 Payments to Designated account: WA 20 30-Dec-13 208,870.18 WA 21 30-Jan-14 250,000.00 WA 22 7-Mar-14 88,385.06 WA 23 24-Jun-14 159,439.91 WA 24 31-Jul-14 172,778.47 WA 25 7-Oct-14 136,034.49 WA 26 14-Nov-14 267,763.07 WA 27 22-Nov-14 232,488.50 Undisbursed 1,174,973.65 Undistributed funds as of 31 December 2014 are reconciled with confirmation received by the World Bank. 15

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No. TF093405 NOTES TO THE PROJECT FINANCIAL STATEMENTS 6. INTERNAL ORGANIZATION AND INTERNAL CONTROL SYSTEM 6.1. Project Management The Ministry of Agriculture, Forestry and Water Management has established the Project Steering Committee with a composition and terms of reference acceptable to the Bank. The Project Steering Committee is responsible for overall Project oversight and coordination. For the implementation of the Project, the MARD maintains the Project Management Team with a composition, staff, resources and terms of reference acceptable to the Bank. The Project Management Team is responsible for overall implementation, coordination, monitoring and evaluation of the Project. The Project Management Team is headed by a Project Coordinator and comprises of a Project Manager, a Monitoring and Evaluation Specialist and a part-time Environmental Specialist. 6.2. Ministry of Finance of Montenegro - Technical Services Unit The TSU has been established within the Ministry of Finance to support implementation of all World Bank financed projects. The TSU is responsible for the following functions: (i) procurement; (ii) financial management; and (iii) disbursement and auditing arrangements. The TSU will provide these services to the implementing entities of the Projects financed by the World Bank. The roles and responsibilities of the TSU and the Project implementing entities are regulated in accordance with a Memorandum of Understanding. The TSU staff comprises of the Senior Procurement Specialist/Director, Procurement Specialist, Senior Financial Specialist and Financial Specialist. 6.3. Explanation on Internal Control System Adequate system of internal controls has been instituted within the TSU for projects under implementation and is also applied to this Project. Defined controls and procedures are applied in practice which has been verified by the Bank s financial management supervision and annual audits by private audit firms for prior audit engagements. In general, key internal controls applied for the Project include: Existence of appropriate authorizations and approvals; Good segregation of duties; Different persons being responsible for different phases of transaction; Reconciliations between records and actual balances, as well as with third parties are performed on regular basis and Complete original documentation exists to support all Project transactions. 16

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No TF093405 Annex 1: Project Financial Statements

Montenegro Montenegro Institutional Development and Agricultural Strengthening Project - MIDAS Project Sources & Uses of Funds - Grant TF 093405 For the Quarter (Q4) Period ending 31.12.2014. [in Euro] Actual Planned Variance Current Year-To Cumulative Current Year-To Cumulative Current Year-To Cumulative Quarter Date To-Date Quarter Date To-Date Quarter Date To-Date Opening Cash Balance (DA) 4,960.60 30.04 - - - - 4,960.60 30.04 - Add: Sources of Funds GEF Funds-payments to DA 435,708.78 845,544.14 1,792,750.06 435,708.78 845,544.14 1,792,750.06 GEF Funds-contribution to Direct Payments - - - - - - - - - Total 440,669.38 845,574.18 1,792,750.06 - - - 440,669.38 845,574.18 1,792,750.06 Less: Uses of Funds Grants 352,914.30 623,585.55 1,251,667.24 - - - 352,914.30 623,585.55 1,251,667.24 Works - - - - - - - - - Goods - 11,174.90 113,674.57 - - - - 11,174.90 113,674.57 Consultants' Services 56,322.26 149,054.66 341,069.31 - - - 56,322.26 149,054.66 341,069.31 Training & WS & ST 13,886.27 43,404.31 66,064.95 - - - 13,886.27 43,404.31 66,064.95 Operating Costs 813.32 1,621.53 3,540.76 - - - 813.32 1,621.53 3,540.76 Total 423,936.15 828,840.95 1,776,016.83 - - - 423,936.15 828,840.95 1,776,016.83 Closing Cash Balance (DA*) 16,733.23 16,733.23 16,733.23 - - - 16,733.23 16,733.23 16,733.23 Note: Under the operating costs we monitor bank fees that are not eligible expenditures under the GEF, the amount needs to be repaid from the Budget Funds as per TTL's decision. Prepared By: Vesna Jestrovic TSU Senior Finance Officer Technical Services Unit - Ministry of Finance Tel:+382 20 201 696 Fax:+382 20 201 698 Mob:.+ 382 67 317 317 E-mail 1: vesna_tsu@yahoo.com E-mail 2: vesna.jestrovic@gov.me Page 1

Montenegro Montenegro Institutional Development and Agricultural Strengthening Project - MIDAS Project Sources & Uses of Funds - Grant TF 093405 For the Quarter (Q4) Period ending 31.12.2014. [in USD] Actual Planned Variance Current Year-To Cumulative Current Year-To Cumulative Current Year-To Cumulative Quarter Date To-Date Quarter Date To-Date Quarter Date To-Date Opening Cash Balance (DA) 370,691.49 51,779.00 - - - - 370,691.49 51,779.00 - Add: Sources of Funds Payment into EUR Designated A/C (553,600.00) (1,113,600.00) (2,369,890.70) (553,600.00) (1,113,600.00) (2,369,890.70) GEF Funds-payments to DA 636,286.06 1,515,759.68 2,825,026.35 636,286.06 1,515,759.68 2,825,026.35 GEF Funds-contribution to Direct Payments - - - - - - - - - Total 453,377.55 453,938.68 455,135.65 - - - 453,377.55 453,938.68 455,135.65 Less: Uses of Funds Grants 447,218.75 817,128.04 1,662,523.43 - - - 447,218.75 817,128.04 1,662,523.43 Works - - - - - - - - - Goods - 15,261.00 153,245.57 - - - - 15,261.00 153,245.57 Consultants' Services 71,951.95 198,616.46 453,761.47 - - - 71,951.95 198,616.46 453,761.47 Training & WS & ST 17,334.71 57,667.87 87,279.74 - - - 17,334.71 57,667.87 87,279.74 Operating Costs EUR 1,008.46 2,113.14 4,651.01 - - - 1,008.46 2,113.14 4,651.01 Operating Costs USD 308.63 869.76 2,066.82 - - - 308.63 869.76 2,066.82 Total 537,822.50 1,091,656.27 2,363,528.04 - - - 537,822.50 1,091,656.27 2,363,528.04 Closing Cash Balance (DA*) (84,444.95) (637,717.59) (1,908,392.39) - - - (84,444.95) (637,717.59) (1,908,392.39) Note: F/X Rates applied are: 1 = $1.323972; $1.357573; $1.384052; $1.394506; $1.365596; $1.367101; $1.282849; $1.248746; $1239926 Under the operating costs we monitor bank fees that are not eligible expenditures under the GEF, the amount needs to be repaid from the Budget Funds as per TTL's decision. Discrepances are due to the payments executed from the EUR Designated Account. Prepared By: Vesna Jestrovic TSU Senior Finance Officer Technical Services Unit - Ministry of Finance Tel:+382 20 201 696 / 697 Fax:+382 20 201 698 Mob:.+ 382 67 317 317 E-mail 1: vesna_tsu@yahoo.com E-mail 2: vesna.jestrovic@gov.me Page 2

Montenegro Montenegro Institutional Development and Agricultural Strengthening Project - MIDAS TF 093405 Uses of Funds By Project Activities For the Quarter (Q4) Period ending 31.12.2014. [in Euro] Actual Planned Variance PAD Project Activities Current Year-To Cumulative Current Year-To Cumulative Current Year-To Cumulative Life of Quarter Date To-Date Quarter Date To-Date Quarter Date To-Date Project (a) 1. Strengthening MAFWM's Rural Development Program 352,914.30 645,413.98 1,419,395.10 - - - 352,914.30 645,413.98 1,419,395.10 2. Strengthening MAFMWM's Administrative & management Capacity in Accordance with EU Pre-accession Requirements 25,099.38 110,538.77 138,868.31 - - - 25,099.38 110,538.77 138,868.31 3. Project Management, Administration & Monitoring 45,109.15 71,266.67 214,212.66 - - - 45,109.15 71,266.67 214,212.66 Total Project Expenditure 423,122.83 827,219.42 1,772,476.07 - - - 423,122.83 827,219.42 1,772,476.07 Page 3

Montenegro Montenegro Institutional Development and Agricultural Strengthening Project - MIDAS TF 093405 Bank Reconciliation as of DECEMBER 31, 2014 [in US$] Opening balance at the beginning of the quarter 370,691.49 Plus: Advances during the quarter 636,286.06 Interest earned and retained on account - Less: Refund to GEF from DA during the quarter - Amount of eligible expenditures paid during the quarter 536,505.41 1,006,977.55 536,505.41 Closing balance as at the end of the quarter 470,472.14 Balance as of 31.12.2014. as per Special Account Bank Statement 453,068.92 Discrepancies (list and explain below) -17,403.22 * Note: The discrepancy is due to the payments executed from the EUR Designated Account. Page 4

Montenegro Montenegro Institutional Development and Agricultural Strengthening Project - MIDAS TF 093405 Bank Reconciliation as of DECEMBER 31, 2014 [in EUR] Opening balance at the beginning of the quarter 4,960.60 Plus: Advances during the quarter 435,708.78 Interest earned and retained on account - Less: Refund to GEF from DA during the quarter - Amount of eligible expenditures paid during the quarter 423,122.83 440,669.38 423,122.83 Closing balance as at the end of the quarter 17,546.55 Balance as of 31.12.2014. as per Special Account Bank Statement 16,733.23 Discrepancies (list and explain below) -813.32 * The difference of 813.32 relates to bank fees. As operating costs are not eligible expenditures under the GEF the amount needs to be repaid from the Budget Funds as per TTL's decision. Page 5

Montenegro Institutional Development and Agriculture Strengthening MIDAS Project ID: P107473 Global Environment Facility Grant No TF093405 Annex 2: Supporting Documentation Special Purpose SOEs Used as the Basis for the Submission of Withdrawal Applications