Confidential Joint Stock Company "Ukrtransgaz" Support to Ukrtransgaz Project Implementation Unit under the European Commission-World Bank Trust Fund II for Policy Advice to Ukrainian Gas Sector Reforms and Infrastructural Support Project Special Purpose Project Financial Statements for the Period from 6 June 2017 to 31 December 2018 JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION-WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 1 INDEPENDENT AUDITOR'S REPORT 2-3 SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018: Special purpose statement of designated accounts 4 Special purpose statement of sources and uses of funds 5 Special purpose statement of expenditures 6 Special purpose statement on cost sheet 7 Notes to the special purpose project financial statements 9-11 JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION-WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT STATEMENT OF MANAGEMENT'S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 Management is responsible for the preparation of the special purpose financial statements of the project (the "special purpose project financial statements") on Support to Ukrtransgaz Project Implementation Unit (the "PIU") under the European Commission-World Bank Trust Fund II for Policy Advice to Ukrainian Gas Sector Reforms and Infrastructural Support (the "Project") that present fairly the financial position of the Project as of 31 December 2018 and cash flows in designated accounts, sources and uses of funds, expenditure and cost sheet for the period from 6 June 2017 to 31 December 2018, and a summary of significant accounting policies and other explanatory information in accordance with the basis of accounting as described in Note 2. In preparing the special purpose project financial statements, management is responsible for: * Properly selecting and applying accounting policies; * Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable, and understandable information; and * Providing additional disclosures and supplementary schedules when compliance with the requirements of basis of accounting as described in Note 2 are insufficient to enable users to understand the impact of particular transactions, other events, and conditions on the special purpose project financial statements. Management is also responsible for: * Designing, implementing, and maintaining an effective and sound system of internal controls; * Maintaining adequate accounting records that enable to disclose with reasonable accuracy at any time the financial position of the Project, and which enable to ensure that the special purpose project financial statements comply with the basis of accounting as described in Note 2; * Maintaining accounting records in compliance with the Ukrainian legislation; * Taking such steps as are reasonably available to them to safeguard the assets of the Project; and * Preventing and detecting fraud and other irregularities. The special purpose project financial statements for the period from 6 June 2017 to 31 December 2018 were approved by the Company's management on 15 March 2019. On behalf of management: Oleksiyenko S.O., CherniavskyipVf A., Acting President Chief Accountant 1 PJSC "Deloitte & Touche USC" 48, 50A, Zhylyanska St. DeloitteKyiv 01033 Ukraine Tel: +38 (044) 490 9000 Fax: +38 (044) 490 9001 deloitte.ua INDEPENDENT AUDITOR'S REPORT To Management of Joint Stock Company "Ukrtransgaz": Opinion We have audited the special purpose financial statements of the Project on Support to Ukrtransgaz Project Implementation Unit (the "PIU") under the European Commission-World Bank Trust Fund II for Policy Advice to Ukrainian Gas Sector Reforms and Infrastructural Support to Modernization of the gas transportation system of Public Joint Stock Company "Ukrtransgaz" (the "Company") under Joint European Commission - International Bank for Reconstruction and Development (the "IBRD") Facility to Ukrainian gas sector reforms and infrastructural support to Modernization of the gas transportation system (the "Project") financed by the European Union grant funds (Grant # TF0A4498), whose beneficiary is the Company. These special purpose project financial statements comprise the special purpose statement of designated accounts, the special purpose statement of sources and uses of funds, the special purpose statement of expenditures, and the special purpose statement on cost sheet for the period from 6 June 2017 to 31 December 2018, and a summary of significant accounting policies and other explanatory information (the "special purpose project financial statements"). The special purpose project financial statements have been prepared in accordance with the basis of accounting described in Note 2. In our opinion, the accompanying special purpose project financial statements for the period from 6 June 2017 to 31 December 2018 are prepared, in all material respects, in accordance with the basis of accounting described in Note 2. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Special Purpose Project Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (the "IESBA Code"), together with the ethical requirements that are relevant to our audit of the special purpose project financial statements in Ukraine, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Basis of Accounting and Restriction on Distribution and Use We draw attention to Note 2 to the special purpose project financial statements, which describes the basis of accounting. The accompanying special purpose project financial statements are prepared to assist the Company in complying with the requirements of the IBRD on implementation of the Project. As a result, the special purpose project financial statements may not be suitable for another purpose. This report is intended solely for use by management of Joint Stock Company "Ukrtransgaz" in communicating to the IBRD about the Company's compliance with the basis of accounting described in Note 2. This report is not intended for the benefit of the IBRD or any other third parties and we accept no responsibility or liability to any party other than the Company in respect of the report. Should any third party take decisions based on the contents of the report, the responsibility for such decisions shall remain with those third parties. Our opinion is not modified in respect of this matter. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. @ 2019 P]SC "Deloitte & Touche USC". All rights reserved. Emphasis of Matter - Arrest of the Company's Accounts We draw attention to Note 6 to the special purpose project financial statements, which describes the information on arrest and write-off of Company's cash from the designated accounts based on a court ruling. Our opinion is not modified in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Special Purpose Project Financial Statements Management is responsible for the preparation of the special purpose project financial statements in accordance with the basis of accounting described in Note 2 and for such internal control as management determines is necessary to enable the preparation of the special purpose project financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for the Audit of the Special Purpose Project Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose project financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose project financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose project financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control; * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. P J.SC 'I a"P.;h. 4 s4f~ 15 March 2019 2 JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION-WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT SPECIAL PURPOSE STATEMENT OF DESIGNATED ACCOUNTS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 In Euro Opening balance as of 6 June 2017 Movements on designated accounts during the period: Transfers from the grant account to designated accounts 96,000 Bank charges (214) Expenditures paid by funds on designated accounts (61,058) Net change in cash balance on the account 34,728 Funds arrested and written-off pursuant to the court's ruling (Note 6) (34,728) Closing balance as of 31 December 2018 Expenditures paid by own operating funds upon the account's arrest (10,133) Grant balance repayable as of 31 December 2018 (24,595) On behalf of management: Oleksiyenko S.O., Cherniavskyi V. A. Acting President Chief Accountant 3 The accompanying notes on pages from 9 to 11 form an integral part of these special purpose project financial statements. JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION-WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT SPECIAL PURPOSE STATEMENT OF SOURCES AND USES OF FUNDS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 In Euro Financing: Direct payments from grant account 857,071 Transfers from grant account to designated accounts 96,000 Total financing 953,071 Project expenditure: Consultants' services 884,886 Training costs 12,105 Operating costs 31,485 Total project expenditure 928,476 Unused grant amount 94,548 On behalf of management: Oleksiyenko S.O., Cherniavsk A., Acting President Chief Accountant 4 The accompanying notes on pages from 9 to 11 form an integral part of these special purpose project financial statements. JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION- WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT SPECIAL PURPOSE STATEMENT OF EXPENDITURES FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 In Euro Consultants' services: Project consultant's services 844,966 Translation services 39,920 884,886 Training costs 12,105 Operating costs: Office rent 31,170 Bank charges 315 31,485 Total project expenditure 928,476 Funds arrested and written-off pursuant to the court's ruling (Note 6) 34,728 Total project expenditure and funds arrested and written-off pursuant to the court's ruling 963,204 On behalf of management: Oleksiyenko S.O., Cherniavskj\ A., Acting President Chief Accountant 5 The accompanying notes on pages from 9 to 11 form an integral part of these special purpose project financial statements. JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION- WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT SPECIAL PURPOSE STATEMENT ON COST SHEET FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 In Euro Date of # payment Name of supplier Description of expenditure Amount 1 18/07/2017 JSC "Ukreximbank" Bank charges 2.9 2 18/07/2017 LLC "BC BL "Bashta # 5" Office rent 2,139.2 3 18/07/2017 LLC "BC BL "Bashta # 5" Office rent 2,550.6 4 18/07/2017 3SC "Ukreximbank" Bank charges 24.0 5 09/08/2017 JSC "Ukreximbank" Bank charges 0.3 6 09/08/2017 JSC "Ukreximbank" Bank charges 1.0 7 09/08/2017 LLC "BC BL "Bashta # 5" Office rent 2,550.5 8 17/08/2017 ISC "Ukreximbank" Bank charges 21.0 9 23/08/2017 JSC "Ukreximbank" Bank charges 0.3 10 23/08/2017 PE Verbytskyi D.A. Translation services 710.2 11 23/08/2017 PE Verbytskyi D.A. Translation services 5,254.0 12 12/09/2017 JSC "Ukreximbank" Bank charges 18.7 13 12/09/2017 JSC "Ukreximbank" Bank charges 1.0 14 13/09/2018 LLC "BC BL "Bashta # 5" Office rent 1,726.3 15 13/09/2018 LLC "BC BL "Bashta # 5" Office rent 788.1 16 20/09/2017 JSC "Ukreximbank" Bank charges 3.2 17 20/09/2017 PE Verbytskyi D.A. Translation services 4,582.5 18 13/09/2018 JSC "Ukreximbank" Bank charges 2.5 19 03/10/2017 JSC "Ukreximbank" Bank charges 9.1 20 03/10/2017 JSC "Ukreximbank" Bank charges 1.0 21 10/10/2017 JSC "Ukreximbank" Bank charges 0.1 22 10/10/2017 LLC "BC BL "Bashta # 5" Office rent 613.6 23 10/10/2017 LLC "BC BL "Bashta # 5" Office rent 1,822.8 24 23/10/2017 JSC "Ukreximbank" Bank charges 12.0 25 24/10/2017 JSC "Ukreximbank" Bank charges 0.1 26 24/10/2017 PE Verbytskyi D.A. Translation services 1,165.2 27 24/10/2017 PE Verbytskyi D.A. Translation services 3,331.0 28 02/11/2017 JSC "Ukreximbank" Bank charges 1.6 29 08/11/2017 ISC "Ukreximbank" Bank charges 0.1 30 08/11/2017 LLC "BC BL "Bashta # 5" Office rent 667.3 31 08/11/2017 LLC "BC BL "Bashta # 5" Office rent 1,767.7 32 02/11/2017 JSC "Ukreximbank" Bank charges 9.0 33 02/11/2017 JSC "Ukreximbank" Bank charges 1.0 34 07/12/2017 ISC "Ukreximbank" Bank charges 24.4 35 07/12/2017 3SC "Ukreximbank" Bank charges 1.0 36 13/12/2017 JSC "Ukreximbank" Bank charges 0.1 37 13/12/2017 LLC "BC BL "Bashta # 5" Office rent 1,196.8 38 13/12/2017 LLC "BC BL "Bashta # 5" Office rent 1,211.2 39 26/12/2017 JSC "Ukreximbank" Bank charges 0.1 40 15/12/2017 PE Verbytskyi D.A. Translation services 4,175.9 41 10/01/2018 JSC "Ukreximbank" Bank charges 0.1 42 10/01/2018 ISC "Ukreximbank" Bank charges 0.9 43 10/01/2018 LLC "BC BL "Bashta # 5" Office rent 2,384.5 44 18/01/2018 JSC "Ukreximbank" Bank charges 13.2 45 23/01/2018 JSC "Ukreximbank" Bank charges 0.1 46 22/01/2018 PE Verbytskyi D.A. Translation services 214.0 47 22/01/2018 PE Verbytskyi D.A. Translation services 2,925.4 48 06/02/2018 ISC "Ukreximbank" Bank charges 11.6 49 06/02/2018 ]SC "Ukreximbank" Bank charges 0.1 50 06/02/2018 JSC "Ukreximbank" Bank charges 0.9 51 06/02/2018 LLC "BC BL "Bashta # 5" Office rent 1,062.0 52 06/02/2018 LLC "BC BL "Bashta # 5" Office rent 1,143.8 53 14/02/2018 JSC "Ukreximbank" Bank charges 0.1 54 14/02/2018 PE Verbytskyi D.A. Translation services 1,972.0 55 05/03/2018 3SC "Ukreximbank" Bank charges 14.4 56 05/03/2018 JSC "Ukreximbank" Bank charges 0.9 57 06/03/2018 JSC "Ukreximbank" Bank charges 5.7 58 14/03/2018 JSC "Ukreximbank" Bank charges 2.2 6 The accompanying notes on pages from 9 to 11 form an integral part of these special purpose project financial statements. JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION- WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT SPECIAL PURPOSE STATEMENT ON COST SHEET FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 (CONTINUED) In Euro Date of # payment Name of supplier Description of expenditure Amount 59 14/03/2018 JSC "Ukreximbank" Bank charges 2.9 60 14/03/2018 LLC "BC BL "Bashta # 5" Office rent 857.9 61 14/03/2018 LLC "BC BL "Bashta # 5" Office rent 1,444.6 62 14/03/2018 PE Verbytskyi D.A. Translation services 3,558.4 63 14/03/2018 PE Verbytskyi D.A. Translation services 158.5 64 04/04/2018 JSC "Ukreximbank" Bank charges 11.9 65 04/04/2018 JSC "Ukreximbank" Bank charges 0.9 66 05/04/2018 JSC "Ukreximbank" Bank charges 0.1 67 05/04/2018 LLC "BC BL "Bashta # 5" Office rent 1,828.6 68 05/04/2018 LLC "BC BL "Bashta # 5" Office rent 522.2 69 11/04/2018 JSC "Ukreximbank" Bank charges 0.1 70 11/04/2018 PE Verbytskyi D.A. Translation services 2,485.1 71 07/05/2018 JSC "Ukreximbank" Bank charges 11.7 72 07/05/2018 ISC "Ukreximbank" Bank charges 0.9 73 14/05/2018 JSC "Ukreximbank" Bank charges 0.1 74 14/05/2018 JSC "Ukreximbank" Bank charges 0.1 75 11/05/2018 PE Verbytskyi D.A. Translation services 979.9 76 11/05/2018 PE Verbytskyi D.A. Translation services 837.2 77 11/05/2018 LLC "BC BL "Bashta # 5" Office rent 2,431.4 78 07/08/2018 LLC "BC BL "Bashta # 5" Office rent 2,460.9 79 07/08/2018 PE Verbytskyi D.A. Translation services 4,288.5 80 07/08/2018 PE Verbytskyi D.A. Translation services 3,282.0 81 07/08/2018 JSC "Ukreximbank" Bank charges 101.8 71,405.0 On behalf of management: Oleksiyenko S.O., Chernia, V. A., Acting President Chief A countant 7 The accompanying notes on pages from 9 to 11 form an integral part of these special purpose project financial statements. JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION-WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 In Euro 1. BACKGROUND On 23 March 2009, Joint Declaration on the Modernization of Ukraine's Gas Transit System was signed between the European Commission, International Financial Institutions, including the European Bank for Reconstruction and Development (the "EBRD"), the European Investment Bank (the "EIB"), the World Bank, and the Government of Ukraine with the intent to gradually integrate Ukraine into the single energy market of the European Union. In December 2014, a loan agreement was signed between the EBRD and Ukraine, as well as a finance agreement between the EIB and Ukraine. The total loan amount on the investment project was up to EUR 300,000,000 and aimed to repair the gas transit infrastructure in Ukraine, in particular, replace four sections of the gas transit pipeline of Urengoy-Pomary-Uzhhorod (the main Ukrainian gas transit pipeline from Russia to Europe), as well as reconstruct the Romny compressor station. Joint Stock Company "Ukrtransgaz" (the "Company") is responsible for implementation of the Project. The Company applied for financing from the European Union, as represented by the European Commission, for consultancy services to support the Project Implementation Unit (the "PIU") of the Company in their actions toward the timely and effective implementation of "Reconstruction, Capital Repairs, and Technical Re-equipping of the Main Gas Pipeline of Urengoy-Pomary-Uzhhorod" Project according to the applicable EBRD and EIB rules. Grant funds in the amount of EUR 1,047,619 were provided by the European Union, as represented by the European Commission, under Joint European Commission - International Bank for Reconstruction and Development (the "IBRD") Facility (Grant # TF0A4498). The IBRD acts as administrator of the abovementioned trust fund. The Grant's effective date was on 6 June 2017, and its closing date is on 31 July 2019. 2. BASIS OF ACCOUNTING These special purpose project financial statements are not general purpose financial statements and are prepared on the cash basis of accounting in accordance with International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" issued by the International Public Sector Accounting Standards Board. The Project's financing is recognized as a source of the Project's funds when the cash is received. The Project's expenditures are recognized as a use of the Project's funds when the payments are made. The reporting currency is Euro ("EUR"). Items included in the special purpose project financial statements are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Project (the "functional currency"). The functional currency of the Project is EUR. Transactions in other currencies are translated to EUR at the factual exchange rates. Cash balances in other currencies are translated to EUR at the period end exchange rates. The special purpose project financial statements cover the period from 6 June 2017 to 31 December 2018. 8 JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION-WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 In Euro 3. ACCOUNTING POLICIES The special purpose statement of designated accounts, the special purpose statement of sources and uses of funds, the special purpose statement of expenditures, and the special purpose statement on cost sheet are prepared on the cash basis of accounting. Financing by sources is recognized when received rather than earned, and expenditures are recognized when paid rather than incurred. 4. FUND WITHDRAWAL PROCEDURES Funds from the IBRD's account are distributed by means of advances via designated accounts and direct payments to suppliers' accounts. Designated accounts are represented by EUR and UAH denominated bank accounts opened with Joint Stock Company "The State Export-Import Bank of Ukraine". In accordance with a payment request sent to the IBRD by the Company, the IBRD makes transfers to designated accounts. For reporting eligible expenditures paid from the designated accounts, the Company attaches statements of expenditures to payment requests that follow. In accordance with a payment request sent to the IBRD by the Company, the IBRD makes direct payments to suppliers' accounts in accordance with the provisions of contracts on purchases of goods and services as approved by the IBRD. 5. OPERATING ENVIRONMENT In 2018 year, the Ukrainian economy proceeded recovery from the economic and political crisis of previous years and demonstrated sound real GDP growth of around 3.4% (2017: 2.5%), modest annual inflation of 9.8% (2017: 13.7%), and slight devaluation of national currency by around 2.4% to USD and 8.2% to EUR comparing to previous year averages. Also Ukraine continued to limit its political and economic ties with Russia, given annexation of Crimea, an autonomous republic of Ukraine, and a frozen armed conflict with separatists in certain parts of Luhansk and Donetsk regions. Amid such events, the Ukrainian economy demonstrated further refocusing on the European Union ("EU") market realizing all potentials of established Deep and Comprehensive Free Trade Area with EU, in such a way effectively reacting to mutual trading restrictions imposed between Ukraine and Russia. As a result, the weight of the Russian's export and import substantially fell from 18.2% and 23.3% in 2014 to around 7.7% and 14.2% in 2018, respectively. In terms of currency regulations, the new currency law was adopted in 2018 and came into force on 7 February 2019. It purports to enable the National Bank of Ukraine to promulgate more liberal currency regulation and soften a number of currency restrictions, such as: requirement to register loans obtained from non-residents with the NBU, 180-day term for making payments in foreign economic transactions, required 50% share of mandatory sale of foreign currency proceeds, etc. Further economic growth depends, to a large extent, upon success of the Ukrainian government in realization of planned reforms, cooperation with the International Monetary Fund ("IMF"), and smooth transition through presidential and parliamentary elections, due in March and October 2019, respectively. 9 JOINT STOCK COMPANY "UKRTRANSGAZ" SUPPORT TO UKRTRANSGAZ PIU UNDER THE EUROPEAN COMMISSION-WORLD BANK TRUST FUND II FOR POLICY ADVICE TO UKRAINIAN GAS SECTOR REFORMS AND INFRASTRUCTURAL SUPPORT PROJECT NOTES TO THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS FOR THE PERIOD FROM 6 JUNE 2017 TO 31 DECEMBER 2018 In Euro 6. ARREST OF THE COMPANY'S ACCOUNTS AND WRITE-OFF OF THE GRANT FUNDS PURSUANT TO THE COURT'S RULING Based on a claim from one of the Company's suppliers starting from April 2015 there was a suit against the Company regarding debt collection. By its decision dated 19 July 2016, the Commercial Court of Kyiv Region partially satisfied the claims of the supplier and on 4 June 2018, the state enforcement officer of Law Enforcement Office within the Department of State Enforcement Service of the Ukrainian Ministry of Justice passed a resolution to arrest and levy Company's funds in the amount of the debt, including a law enforcement fee. The Company filed a counterclaim against the write-off of funds by appealing that the funds on those accounts did not belong to the Company and were granted by the IBRD to meet the requirements of the Project. The court rejected the claim upon the pretext that the Company failed to provide evidence that the said accounts held the very same funds granted by the IBRD under the Project. At the date of the write-off, the funds on the accounts amounted to EUR 34,728. 7. APPROVAL OF THE SPECIAL PURPOSE PROJECT FINANCIAL STATEMENTS These special purpose project financial statements were approved by the Company's management and authorized for issue on 15 March 2019. 10