# COM_2017_0364_FIN.ENG.xhtml.1_EN_ACT_part1_v3.docx

european flagEUROPEAN COMMISSION

Brussels, 26.6.2017

COM(2017) 364 final

COMMUNICATION FROM THE COMMISSION

ANNUAL ACCOUNTS OF THE EUROPEAN DEVELOPMENT FUND 2016

Annual accounts of the
  European Development Fund 2016

CONTENTS

CERTIFICATION OF THE ACCOUNTS

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

FUNDS MANAGED BY THE EUROPEAN COMMISSION

FINANCIAL STATEMENTS OF THE EDF

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF

REVENUE

EXPENSES

FINANCIAL STATEMENTS OF THE EU
  TRUST FUNDS CONSOLIDATED IN EDF

FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND

FINAL ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA

BACKGROUND INFORMATION ON THE EUTF FOR AFRICA

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS

EDF REPORT ON FINANCIAL IMPLEMENTATION

ANNUAL REPORT ON IMPLEMENTATION - FUNDS MANA
  GED BY THE EUROPEAN INVESTMENT BANK

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2016 have been prepared in accordance with Title IX of the Financial Regulation of the 11th European Development Fund and with the accounting principles, rules and methods set out in annex to the financial statements.

I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Development Fund in accordance with Article 20 of the Financial Regulation of the 11th European Development Fund.

I have obtained from the authorising officers and from the EIB, who guarantee its reliability, all the information necessary for the production of the accounts that show the European Development Fund's assets and liabilities and the budgetary implementation.

I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present a true and fair view of the financial position of the European Development Fund in all material aspects.

[signed]

Rosa ALDEA BUSQUETS

Accounting Officer

23 June 2017

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

1.BACKGROUND

The European Union (hereinafter referred to as the EU) has cooperative relations with a large number of developing countries. The main objective is to promote economic, social and environmental development, with the primary aim of reducing and eradicating poverty in the long-term, by providing beneficiary countries with development aid and technical assistance. To achieve this, the EU draws up, jointly with the partner countries, cooperation strategies and mobilises the financial resources to implement them. These EU resources allocated to development cooperation come from three sources:

-The EU budget;

-The European Development Fund;

-The European Investment Bank.

The European Development Fund (hereinafter referred to as the EDF) is the main instrument for providing EU aid for development cooperation to the African, Caribbean and Pacific (hereinafter referred to as the ACP) States and Overseas Countries and Territories (hereinafter referred to as the OCTs).

The EDF is not funded by the EU budget. It is established by an internal agreement of the Representatives of the Member States, sitting within the Council, and managed by a specific committee. The European Commission (hereinafter referred to as the Commission) is responsible for the financial implementation of the operations carried out with EDF resources. The European Investment Bank (hereinafter referred to as the EIB) manages the Investment Facility.

During the period 2014-2020, the geographic aid granted to ACP States and OCTs will continue to be mainly funded by the EDF. Each EDF is usually concluded for a period of around five years and is governed by its own Financial Regulation which requires the preparation of financial statements for each individual EDF. Accordingly, financial statements are prepared separately for each EDF in respect of the part that is managed by the Commission. These financial statements are also presented in an aggregated way so as to provide a global view of the financial situation of the resources for which the Commission is responsible.

The Internal Agreement establishing the 11th EDF was signed by the participating Member States, meeting within the Council, in June 2013
  1
  . It came into force on 1 March 2015. In order to assure continuity between the end of the 10th EDF and the entry into force of the 11th EDF, the Commission proposed transitional measures, known as the Bridging Facility (BF)
  2
  . The BF is presented under the 11th EDF.

At the same time the 10th EDF Financial Regulation
  3
   was amended and the new Financial Regulation applicable to the transition period was adopted
  4
  . They entered into force on 30 May 2014. On 2 March 2015 the Council adopted the 11th EDF Financial Regulation
  5
  and the Implementation Rules
  6
  . They entered into force on 6 March 2015.

Within the framework of the ACP-EU Partnership Agreement, the Investment Facility was established. This Investment Facility is managed by the EIB and is used to support private sector development in the ACP States by financing essentially – but not exclusively – private investments. The Facility is designed as a renewable fund, so that loan repayments can be reinvested in other operations, thus resulting in a self-renewing and financially independent facility. As the Investment Facility is not managed by the Commission, it is not consolidated in the first part of the annual accounts – the financial statements of the EDF and the related report on financial implementation. The financial statements of the Investment Facility are included as a separate part of the annual accounts (part II) to provide a full picture of the development aid of the EDF
  7
  .

2.HOW IS THE EDF FUNDED?

The European Council of 2 December 2013 adopted the Multi-annual Financial Framework for 2014-2020. In this context, it was decided that geographical cooperation with the ACP States would not be integrated into the EU budget (budgetised), but would continue to be funded through the existing inter-governmental EDF.

The EU budget is annual and according to the budgetary principle of annuality, expenditure and revenue are planned and authorised for one year. Unlike the EU, the EDF is a fund operating on the basis of multiannuality. Each EDF establishes an overall fund to implement development cooperation during a period of usually five years. As resources are allocated on a multiannual basis, the allocated funds may be used over the period of the EDF. The lack of budget annuality is highlighted in the budgetary reporting, where the budgetary implementation of the EDFs is measured against the total funds.

The EDF resources are "ad hoc" contributions from the EU Member States. Approximately every five years, Member State representatives meet at intergovernmental level to decide on an overall amount that will be allocated to the fund and to oversee its implementation. The Commission then manages the fund in accordance with the Union policy on development cooperation. Since Member States have their own development and aid policies in parallel to the Union policy, the Member States must coordinate their policies with the EU to ensure they are complementary.

In addition to the above mentioned contributions, it is also possible for Member States to enter into cofinancing arrangements or to make voluntary financial contributions to the EDF.

3.YEAR-END REPORTING

3.1.ANNUAL ACCOUNTS

In accordance with Article 46 of the EDF Financial Regulation, the EDF financial statements are prepared on the basis of accrual-based accounting rules that themselves are based on International Public Sector Accounting Standards (IPSAS). The accounting rules adopted by the Accounting Officer of the Commission are applied by all the Institutions and bodies of the EU in order to establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements and consolidation, as required by Article 152 of the EU Financial Regulation. These EU accounting rules are also applied to the EDF while taking into account the specific nature of its activities.

The preparation of the EDF annual accounts is entrusted to the Commission's Accounting Officer who is the Accounting Officer of the EDF. He/she ensures that the annual accounts of EDF present a true and fair view of the financial position of the EDF.

The annual accounts are presented as follows:

Part I: Funds managed by the Commission

(I)Financial statements and explanatory notes of the EDF

(II)Financial statements of the EU trust funds consolidated in the EDF

(III)Consolidated financial statements of EDF and the EU trust funds

(IV)Report on financial implementation of the EDF

Part II: Annual report on implementation - Funds managed by the EIB

(I)Financial statements of the Investment Facility

The part 'Financial statements of the European trust funds consolidated in the EDF' includes financial statements of the two trust funds created under the EDF: The Bêkou EU Trust Fund (see section 'Financial statements of the Bêkou EU Trust Fund') and EU Trust Fund for Africa
  8
  (see section 'Financial statements of EUTF for Africa'). The trust funds individual financial statements are prepared under the responsibility of the EC Accounting Officer and subject to external audit carried out by a private auditor. The trust funds' financial statements included in these annual accounts are the final financial statements, i.e. after the necessary audit adjustments.

It should be noted that the layout of the financial statements and the explanatory notes were changed in 2016. The changes are purely in the presentation of the financial information and aim at giving a closer alignment to the other EU entities'. The 2015 comparative amounts are presented in line with the new format.

The annual accounts are adopted by the Commission by 31 July of the subsequent year and presented to the European Parliament and to the Council for discharge.

4.AUDIT AND DISCHARGE

4.1.AUDIT

The EDF annual accounts and resource management are overseen by its external auditor, the European Court of Auditors (hereinafter referred to as the ECA), which draws up an annual report for the European Parliament and the Council.

4.2.DISCHARGE

The final control is the discharge of the financial implementation of the EDF resources for a given financial year. The European Parliament is the discharge authority of the EDF. This means that following the audit and finalisation of the annual accounts it falls to the Council to recommend and then to the European Parliament to decide whether to grant discharge to the Commission for the financial implementation of the EDF resources for a given financial year. This decision is based on a review of the accounts and the annual report of the ECA (which includes an official statement of assurance) and replies of the Commission, and also following questions and further information requests to the Commission.

EUROPEAN DEVELOPMENT FUND

FINANCIAL YEAR 2016

FUNDS MANAGED BY THE EUROPEAN COMMISSION

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up.

CONTENTS

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

FUNDS MANAGED BY THE EUROPEAN COMMISSION

FINANCIAL STATEMENTS OF THE EDF

EDF BALANCE SHEET

EDF STATEMENT OF FINANCIAL PERFORMANCE

EDF CASHFLOW STATEMENT

EDF STATEMENT OF CHANGES IN NET ASSETS

BALANCE SHEET BY EDF

STATEMENT OF FINANCIAL PERFORMANCE BY EDF

STATEMENT OF CHANGES IN NET ASSETS BY EDF

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF

FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND

BALANCE SHEET

STATEMENT OF FINANCIAL PERFORMANCE

CASHFLOW STATEMENT

STATEMENT OF CHANGES IN NET ASSETS

FINAL ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA

BACKGROUND INFORMATION ON THE EUTF FOR AFRICA

BALANCE SHEET

STATEMENT OF F
  INANCIAL PERFORMANCE

CASHFLOW STATEMENT

STATEMENT OF CHANGES IN NET ASSETS

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

EDF REPORT ON FINANCIAL IMPLEMENTATION

ANNUAL REPORT ON IMPLEMENTATION - FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK

FINANCIAL STATEMENTS OF THE EDF

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add-up.

EDF BALANCE SHEET

| | | | EUR millions |
| --- | --- | --- | --- |
| | Note | 31.12.2016 | 31.12.2015 |
| NON-CURRENT ASSETS | | | |
| Pre-financing | 2.1 | 409 | 516 |
| Trust Fund contributions | 2.2 | 98 | 34 |
| | | 507 | 550 |
| CURRENT ASSETS | | | |
| Pre-financing | 2.1 | 1 372 | 1 145 |
| Exchange receivables and non-exchange recoverables | 2.3 | 132 | 171 |
| Cash and cash equivalents | 2.4 | 680 | 504 |
| | | 2 184 | 1 820 |
| TOTAL ASSETS | | 2 691 | 2 370 |
| | | | |
| NON-CURRENT LIABILITIES | | | |
| Provisions | 2.5 | (4) | (4) |
| Financial liabilities | 2.6 | (6) | (10) |
| | | (10) | (14) |
| CURRENT LIABILITIES | | | |
| Payables | 2.7 | (549) | (520) |
| Accrued charges and deferred income | 2.8 | (776) | (855) |
| | | (1 324) | (1 376) |
| TOTAL LIABILITIES | | (1 334) | (1 389) |
| | | | |
| NET ASSETS | | 1 357 | 980 |
| | | | |
| FUNDS & RESERVES | | | |
| Called fund capital - active EDFs | 2.9 | 42 323 | 38 873 |
| Called fund capital from closed EDFs carried forward | 2.9 | 2 252 | 2 252 |
| Called fund capital transfers between active EDFs | 2.9 | – | – |
| Economic result carried forward from previous years | | (40 146) | (36 994) |
| Economic result of the year | | (3 073) | (3 152) |
| NET ASSETS | | 1 357 | 980 |

EUR millions

Note

31.12.2016

31.12.2015

NON-CURRENT ASSETS

Pre-financing

2.1

409

516

Trust Fund contributions

2.2

98

34

507

550

CURRENT ASSETS

Pre-financing

2.1

1 372

1 145

Exchange receivables and non-exchange recoverables

2.3

132

171

Cash and cash equivalents

2.4

680

504

2 184

1 820

TOTAL ASSETS

2 691

2 370

NON-CURRENT LIABILITIES

Provisions

2.5

(4)

(4)

Financial liabilities

2.6

(6)

(10)

(10)

(14)

CURRENT LIABILITIES

Payables

2.7

(549)

(520)

Accrued charges and deferred income

2.8

(776)

(855)

(1 324)

(1 376)

TOTAL LIABILITIES

(1 334)

(1 389)

NET ASSETS

1 357

980

FUNDS & RESERVES

Called fund capital - active EDFs

2.9

42 323

38 873

Called fund capital from closed EDFs carried forward

2.9

2 252

2 252

Called fund capital transfers between active EDFs

2.9

–

–

Economic result carried forward from previous years

(40 146)

(36 994)

Economic result of the year

(3 073)

(3 152)

NET ASSETS

1 357

980

EDF STATEMENT OF FINANCIAL PERFORMANCE

| | | | EUR millions |
| --- | --- | --- | --- |
| | Note | 2016 | 2015 |
| REVENUE | | | |
| Revenue from non-exchange transactions | 3.1 | | |
| Recovery of expenses | | 8 | 90 |
| | | 8 | 90 |
| Revenue from exchange transactions | 3.2 | | |
| Financial income | | 3 | 8 |
| Other income | | 62 | 42 |
| | | 66 | 50 |
| Total Revenue | | 73 | 140 |
| EXPENSES | | | |
| Aid instruments | 3.3 | (2 970) | (3 059) |
| Co-financing expenses | 3.4 | 15 | (69) |
| Finance costs | 3.6 | 4 | (1) |
| Other expenses | 3.7 | (196) | (162) |
| Total Expenses | | (3 146) | (3 291) |
| | | | |
| ECONOMIC RESULT OF THE YEAR | | (3 073) | (3 152) |

EUR millions

Note

2016

2015

REVENUE

Revenue from non-exchange transactions

3.1

Recovery of expenses

8

90

8

90

Revenue from exchange transactions

3.2

Financial income

3

8

Other income

62

42

66

50

Total Revenue

73

140

EXPENSES

Aid instruments

3.3

(2 970)

(3 059)

Co-financing expenses

3.4

15

(69)

Finance costs

3.6

4

(1)

Other expenses

3.7

(196)

(162)

Total Expenses

(3 146)

(3 291)

ECONOMIC RESULT OF THE YEAR

(3 073)

(3 152)

EDF CASHFLOW STATEMENT

| | | | EUR millions |
| --- | --- | --- | --- |
| | Note | 2016 | 2015 |
| Economic result of the year | | (3 073) | (3 152) |
| Operating activities | | | |
| Capital increase - contributions | | 3 450 | 3 200 |
| (Increase)/decrease in trust funds contributions | | (64) | 5 |
| (Increase)/decrease in pre-financing | | (120) | 214 |
| (Increase)/decrease in exchange receivables and non-exchange recoverables | | 39 | (87) |
| Increase/(decrease) in provisions | | – | 4 |
| Increase/(decrease) in financial liabilities | | (4) | (24) |
| Increase/(decrease) in payables | | 28 | (179) |
| Increase/(decrease) in accrued charges and deferred income | | (80) | 131 |
| | | | |
| NET CASHFLOW | | 177 | 113 |
| | | | |
| Net increase/(decrease) in cash and cash equivalents | | 177 | 113 |
| Cash and cash equivalents at the beginning of the year | 2.4 | 504 | 391 |
| Cash and cash equivalents at year-end | 2.4 | 680 | 504 |

EUR millions

Note

2016

2015

Economic result of the year

(3 073)

(3 152)

Operating activities

Capital increase - contributions

3 450

3 200

(Increase)/decrease in trust funds contributions

(64)

5

(Increase)/decrease in pre-financing

(120)

214

(Increase)/decrease in exchange receivables and non-exchange recoverables

39

(87)

Increase/(decrease) in provisions

–

4

Increase/(decrease) in financial liabilities

(4)

(24)

Increase/(decrease) in payables

28

(179)

Increase/(decrease) in accrued charges and deferred income

(80)

131

NET CASHFLOW

177

113

Net increase/(decrease) in cash and cash equivalents

177

113

Cash and cash equivalents at the beginning of the year

2.4

504

391

Cash and cash equivalents at year-end

2.4

680

504

EDF STATEMENT OF CHANGES IN NET ASSETS

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Fund capital - active EDFs (A) | Uncalled funds - active EDFs (B) | Called fund capital - active EDFs (C) = (A)-(B) | Cumulative Reserves (D) | Called fund capital from closed EDFs carried forward (E) | Total Net Assets (C)+(D)+(E) |
| BALANCE AS AT 31.12.2014 | 45 691 | 10 018 | 35 673 | (36 994) | 2 252 | 932 |
| Capital increase - contributions | | (4 795) | 4 795 | – | – | 4 795 |
| Capital decrease - funds committed under the Bridging Facility | (1 595) | | (1 595) | | | (1 595) |
| Recognition of the 11th EDF capital | 29 367 | 29 367 | – | | | – |
| Economic result of the year | – | – | – | (3 152) | – | (3 152) |
| BALANCE AS AT 31.12.2015 | 73 464 | 34 590 | 38 873 | (40 146) | 2 252 | 980 |
| Capital increase - contributions | | (3 450) | 3 450 | | | 3 450 |
| Economic result of the year | | | – | (3 073) | | (3 073) |
| BALANCE AS AT 31.12.2016 | 73 464 | 31 140 | 42 323 | (43 219) | 2 252 | 1 357 |

EUR millions

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Total Net Assets (C)+(D)+(E)

BALANCE AS AT 31.12.2014

45 691

10 018

35 673

(36 994)

2 252

932

Capital increase - contributions

(4 795)

4 795

–

–

4 795

Capital decrease - funds committed under the Bridging Facility

(1 595)

(1 595)

(1 595)

Recognition of the 11th EDF capital

29 367

29 367

–

–

Economic result of the year

–

–

–

(3 152)

–

(3 152)

BALANCE AS AT 31.12.2015

73 464

34 590

38 873

(40 146)

2 252

980

Capital increase - contributions

(3 450)

3 450

3 450

Economic result of the year

–

(3 073)

(3 073)

BALANCE AS AT 31.12.2016

73 464

31 140

42 323

(43 219)

2 252

1 357

BALANCE SHEET BY EDF

| | | | | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 31.12.2016 | | | | | 31.12.2015 | | | |
| | Note | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF |
| NON-CURRENT ASSETS | | | | | | | | | | |
| Pre-financing | 2.1 | – | 32 | 242 | 135 | | – | 63 | 368 | 84 |
| Trust Fund contributions | 2.2 | – | – | – | 98 | | – | – | – | 34 |
| | | – | 32 | 242 | 232 | | – | 63 | 368 | 118 |
| CURRENT ASSETS | | | | | | | | | | |
| Pre-financing | 2.1 | 1 | 50 | 909 | 412 | | 3 | 67 | 879 | 195 |
| Exchange receivables and non-exchange recoverables | 2.3 | 1 | 71 | 59 | 2 | | 1 | 65 | 103 | 2 |
| Liaison accounts | 2.3 | 196 | 424 | 3 424 | – | | 214 | 657 | 1 190 | – |
| Cash and cash equivalents | 2.4 | – | – | – | 680 | | – | – | – | 504 |
| | | 198 | 544 | 4 391 | 1 094 | | 218 | 790 | 2 172 | 701 |
| TOTAL ASSETS | | 198 | 577 | 4 633 | 1 327 | | 218 | 853 | 2 541 | 819 |
| | | | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | | | |
| Provisions | 2.5 | – | – | – | (4) | | – | – | – | (4) |
| Financial liabilities | 2.6 | – | – | (6) | – | | – | – | (10) | – |
| | | – | – | (6) | (4) | | – | – | (10) | (4) |
| CURRENT LIABILITIES | | | | | | | | | | |
| Payables | 2.7 | (0) | (12) | (438) | (99) | | (0) | (14) | (492) | (14) |
| Liaison accounts | 2.3 | – | – | – | (4 043) | | – | – | – | (2 062) |
| Accrued charges and deferred income | 2.8 | (1) | (93) | (567) | (115) | | (3) | (114) | (682) | (57) |
| | | (1) | (104) | (1 005) | (4 257) | | (3) | (128) | (1 174) | (2 132) |
| TOTAL LIABILITIES | | (1) | (104) | (1 011) | (4 261) | | (3) | (128) | (1 184) | (2 136) |
| | | | | | | | | | | |
| NET ASSETS | | 197 | 472 | 3 622 | (2 934) | | 214 | 726 | 1 357 | (1 317) |
| | | | | | | | | | | |
| FUNDS & RESERVES | | | | | | | | | | |
| Called fund capital - active EDFs | 2.9 | 12 164 | 10 973 | 19 187 | – | | 12 164 | 10 973 | 15 737 | – |
| Called fund capital from closed EDFs carried forward | 2.9 | 627 | 1 625 | – | – | | 627 | 1 625 | – | – |
| Called fund capital transfers between active EDFs | 2.9 | (2 496) | 2 214 | 247 | 35 | | (2 476) | 2 376 | 35 | 65 |
| Economic result carried forward from previous years | | (10 100) | (14 248) | (14 415) | (1 382) | | (10 107) | (14 223) | (12 183) | (481) |
| Economic result of the year | | 2 | (91) | (1 397) | (1 587) | | 6 | (26) | (2 232) | (901) |
| NET ASSETS | | 197 | 472 | 3 622 | (2 934) | | 214 | 726 | 1 357 | (1 317) |

EUR millions

31.12.2016

31.12.2015

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Eighth EDF

Ninth EDF

10th EDF

11th EDF

NON-CURRENT ASSETS

Pre-financing

2.1

–

32

242

135

–

63

368

84

Trust Fund contributions

2.2

–

–

–

98

–

–

–

34

–

32

242

232

–

63

368

118

CURRENT ASSETS

Pre-financing

2.1

1

50

909

412

3

67

879

195

Exchange receivables and non-exchange recoverables

2.3

1

71

59

2

1

65

103

2

Liaison accounts

2.3

196

424

3 424

–

214

657

1 190

–

Cash and cash equivalents

2.4

–

–

–

680

–

–

–

504

198

544

4 391

1 094

218

790

2 172

701

TOTAL ASSETS

198

577

4 633

1 327

218

853

2 541

819

NON-CURRENT LIABILITIES

Provisions

2.5

–

–

–

(4)

–

–

–

(4)

Financial liabilities

2.6

–

–

(6)

–

–

–

(10)

–

–

–

(6)

(4)

–

–

(10)

(4)

CURRENT LIABILITIES

Payables

2.7

(0)

(12)

(438)

(99)

(0)

(14)

(492)

(14)

Liaison accounts

2.3

–

–

–

(4 043)

–

–

–

(2 062)

Accrued charges and deferred income

2.8

(1)

(93)

(567)

(115)

(3)

(114)

(682)

(57)

(1)

(104)

(1 005)

(4 257)

(3)

(128)

(1 174)

(2 132)

TOTAL LIABILITIES

(1)

(104)

(1 011)

(4 261)

(3)

(128)

(1 184)

(2 136)

NET ASSETS

197

472

3 622

(2 934)

214

726

1 357

(1 317)

FUNDS & RESERVES

Called fund capital - active EDFs

2.9

12 164

10 973

19 187

–

12 164

10 973

15 737

–

Called fund capital from closed EDFs carried forward

2.9

627

1 625

–

–

627

1 625

–

–

Called fund capital transfers between active EDFs

2.9

(2 496)

2 214

247

35

(2 476)

2 376

35

65

Economic result carried forward from previous years

(10 100)

(14 248)

(14 415)

(1 382)

(10 107)

(14 223)

(12 183)

(481)

Economic result of the year

2

(91)

(1 397)

(1 587)

6

(26)

(2 232)

(901)

NET ASSETS

197

472

3 622

(2 934)

214

726

1 357

(1 317)

STATEMENT OF FINANCIAL PERFORMANCE BY EDF

| | | | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2016 | | 2015 |
| | Note | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF |
| | | | | | | | | | | |
| REVENUE | | | | | | | | | | |
| Revenue from non-exchange transactions | 3.1 | | | | | | | | | |
| Recovery of expenses | | 1 | 5 | (2) | 4 | | 1 | 10 | 77 | 2 |
| | | 1 | 5 | (2) | 4 | | 1 | 10 | 77 | 2 |
| Revenue from exchange transactions | 3.2 | | | | | | | | | |
| Financial income | | (0) | 2 | 2 | (1) | | (0) | 6 | 0 | 2 |
| Other income | | 2 | 17 | 40 | 3 | | 3 | 15 | 22 | 2 |
| | | 2 | 19 | 43 | 2 | | 3 | 21 | 22 | 4 |
| Total revenue | | 3 | 23 | 41 | 7 | | 4 | 30 | 99 | 6 |
| EXPENSES | | | | | | | | | | |
| Aid instruments | 3.3 | 2 | (95) | (1 411) | (1 465) | | 5 | (47) | (2 197) | (820) |
| Co-financing expenses | 3.4 | – | – | 15 | – | | – | – | (68) | (1) |
| Finance costs | 3.6 | (0) | (0) | 4 | (0) | | 0 | 7 | (8) | (0) |
| Other expenses | 3.7 | (3) | (19) | (46) | (129) | | (3) | (15) | (58) | (86) |
| Total expenses | | (1) | (114) | (1 437) | (1 594) | | 2 | (56) | (2 331) | (907) |
| | | | | | | | | | | |
| ECONOMIC RESULT OF THE YEAR | | 2 | (91) | (1 397) | (1 587) | | 6 | (25) | (2 232) | (901) |

EUR millions

2016

2015

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Eighth EDF

Ninth EDF

10th EDF

11th EDF

REVENUE

Revenue from non-exchange transactions

3.1

Recovery of expenses

1

5

(2)

4

1

10

77

2

1

5

(2)

4

1

10

77

2

Revenue from exchange transactions

3.2

Financial income

(0)

2

2

(1)

(0)

6

0

2

Other income

2

17

40

3

3

15

22

2

2

19

43

2

3

21

22

4

Total revenue

3

23

41

7

4

30

99

6

EXPENSES

Aid instruments

3.3

2

(95)

(1 411)

(1 465)

5

(47)

(2 197)

(820)

Co-financing expenses

3.4

–

–

15

–

–

–

(68)

(1)

Finance costs

3.6

(0)

(0)

4

(0)

0

7

(8)

(0)

Other expenses

3.7

(3)

(19)

(46)

(129)

(3)

(15)

(58)

(86)

Total expenses

(1)

(114)

(1 437)

(1 594)

2

(56)

(2 331)

(907)

ECONOMIC RESULT OF THE YEAR

2

(91)

(1 397)

(1 587)

6

(25)

(2 232)

(901)

STATEMENT OF CHANGES IN NET ASSETS BY EDF

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Eighth EDF | Fund capital - active EDFs (A) | Uncalled funds - active EDFs (B) | Called fund capital - active EDFs (C) = (A)-(B) | Cumulative Reserves (D) | Called fund capital from closed EDFs carried forward (E) | Called fund capital transfers between active EDFs (F) | Total Net Assets (C)+(D)+(E)+(F) |
| BALANCE AS AT 31.12.2014 | 12 840 | – | 12 840 | (10 107) | 627 | (3 147) | 214 |
| Capital decrease - funds committed under the Bridging Facility | (676) | | (676) | | | | (676) |
| Transfers to/from the 10th EDF | | | – | | | (6) | (6) |
| Transfers to/from the 11th EDF | | | | | | 676 | 676 |
| Economic result of the year | | | – | 6 | | | 6 |
| BALANCE AS AT 31.12.2015 | 12 164 | – | 12 164 | (10 100) | 627 | (2 476) | 214 |
| Transfers to/from the 10th EDF | | | – | | | (20) | (20) |
| Transfers to/from the 11th EDF | | | – | | | – | – |
| Economic result of the year | | | – | 2 | | | 2 |
| BALANCE AS AT 31.12.2016 | 12 164 | – | 12 164 | (10 098) | 627 | (2 496) | 197 |

EUR millions

Eighth EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Called fund capital transfers between active EDFs (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2014

12 840

–

12 840

(10 107)

627

(3 147)

214

Capital decrease - funds committed under the Bridging Facility

(676)

(676)

(676)

Transfers to/from the 10th EDF

–

(6)

(6)

Transfers to/from the 11th EDF

676

676

Economic result of the year

–

6

6

BALANCE AS AT 31.12.2015

12 164

–

12 164

(10 100)

627

(2 476)

214

Transfers to/from the 10th EDF

–

(20)

(20)

Transfers to/from the 11th EDF

–

–

–

Economic result of the year

–

2

2

BALANCE AS AT 31.12.2016

12 164

–

12 164

(10 098)

627

(2 496)

197

EUR millions

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Ninth EDF | Fund capital - active EDFs (A) | Uncalled funds - active EDFs (B) | Called fund capital - active EDFs (C) = (A)-(B) | Cumulative Reserves (D) | Called fund capital from closed EDFs carried forward (E) | Called fund capital transfers between active EDFs (F) | Total Net Assets (C)+(D)+(E)+(F) |
| BALANCE AS AT 31.12.2014 | 11 699 | – | 11 699 | (14 223) | 1 625 | 1 758 | 860 |
| Capital decrease - funds committed under the Bridging Facility | (727) | – | (727) | | | | (727) |
| Transfers to/from the 10th EDF | | | – | | | (109) | (109) |
| Transfers to/from the 11th EDF | | | | | | 727 | 727 |
| Economic result of the year | | | – | (26) | | | (26) |
| BALANCE AS AT 31.12.2015 | 10 973 | – | 10 973 | (14 249) | 1 625 | 2 376 | 726 |
| Transfers to/from the 10th EDF | | | – | | | (163) | (163) |
| Transfers to/from the 11th EDF | | | – | | | – | – |
| Economic result of the year | | | – | (91) | | | (91) |
| BALANCE AS AT 31.12.2016 | 10 973 | – | 10 973 | (14 339) | 1 625 | 2 214 | 472 |

Ninth EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Called fund capital transfers between active EDFs (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2014

11 699

–

11 699

(14 223)

1 625

1 758

860

Capital decrease - funds committed under the Bridging Facility

(727)

–

(727)

(727)

Transfers to/from the 10th EDF

–

(109)

(109)

Transfers to/from the 11th EDF

727

727

Economic result of the year

–

(26)

(26)

BALANCE AS AT 31.12.2015

10 973

–

10 973

(14 249)

1 625

2 376

726

Transfers to/from the 10th EDF

–

(163)

(163)

Transfers to/from the 11th EDF

–

–

–

Economic result of the year

–

(91)

(91)

BALANCE AS AT 31.12.2016

10 973

–

10 973

(14 339)

1 625

2 214

472

EUR millions

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 10th EDF | Fund capital - active EDFs (A) | Uncalled funds - active EDFs (B) | Called fund capital - active EDFs (C) = (A)-(B) | Cumulative Reserves (D) | Called fund capital from closed EDFs carried forward (E) | Called fund capital transfers between active EDFs (F) | Total Net Assets (C)+(D)+(E)+(F) |
| BALANCE AS AT 31.12.2014 | 21 152 | 10 018 | 11 134 | (12 183) | – | (209) | (1 258) |
| Capital increase - contributions | | (4 795) | 4 795 | | | | 4 795 |
| Capital decrease - funds committed under the Bridging Facility | (192) | | (192) | | | | (192) |
| Transfers to/from the Eighth and Ninth EDF | | | – | | | 84 | 84 |
| Transfers to/from the 11th EDF | | | – | | | 160 | 160 |
| Economic result of the year | | | – | (2 232) | | | (2 232) |
| BALANCE AS AT 31.12.2015 | 20 960 | 5 223 | 15 737 | (14 415) | – | 35 | 1 357 |
| Capital increase - contributions | | (3 450) | 3 450 | | | | 3 450 |
| Transfers to/from the Eighth and Ninth EDF | | | – | | | 182 | 182 |
| Transfers to/from the 11th EDF | | | – | | | 30 | 30 |
| Economic result of the year | | | – | (1 397) | | | (1 397) |
| BALANCE AS AT 31.12.2016 | 20 960 | 1 773 | 19 187 | (15 812) | – | 247 | 3 622 |

10th EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Called fund capital transfers between active EDFs (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2014

21 152

10 018

11 134

(12 183)

–

(209)

(1 258)

Capital increase - contributions

(4 795)

4 795

4 795

Capital decrease - funds committed under the Bridging Facility

(192)

(192)

(192)

Transfers to/from the Eighth and Ninth EDF

–

84

84

Transfers to/from the 11th EDF

–

160

160

Economic result of the year

–

(2 232)

(2 232)

BALANCE AS AT 31.12.2015

20 960

5 223

15 737

(14 415)

–

35

1 357

Capital increase - contributions

(3 450)

3 450

3 450

Transfers to/from the Eighth and Ninth EDF

–

182

182

Transfers to/from the 11th EDF

–

30

30

Economic result of the year

–

(1 397)

(1 397)

BALANCE AS AT 31.12.2016

20 960

1 773

19 187

(15 812)

–

247

3 622

EUR millions

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 11th EDF | Fund capital - active EDFs (A) | Uncalled funds - active EDFs (B) | Called fund capital - active EDFs (C) = (A)-(B) | Cumulative Reserves (D) | Called fund capital from closed EDFs carried forward (E) | Called fund capital transfers between active EDFs (F) | Total Net Assets (C)+(D)+(E)+(F) |
| BALANCE AS AT 31.12.2014 | – | – | – | (481) | – | 1 597 | 1 116 |
| Recognition of the 11th EDF capital in line with the Internal Agreement | 29 367 | (29 367) | – | | | | – |
| Transfers to/from the Eighth, Ninth and 10th EDF | | | – | | – | (1 532) | (1 532) |
| Economic result of the year | | | – | (901) | | | (901) |
| BALANCE AS AT 31.12.2015 | 29 367 | (29 367) | – | (1 382) | | 65 | (1 317) |
| Transfers to/from the Eighth, Ninth and 10th EDF | | | – | | | (30) | (30) |
| Economic result of the year | | | – | (1 587) | | | (1 587) |
| BALANCE AS AT 31.12.2016 | 29 367 | (29 367) | – | (2 969) | – | 35 | (2 934) |

11th EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Called fund capital transfers between active EDFs (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2014

–

–

–

(481)

–

1 597

1 116

Recognition of the 11th EDF capital in line with the Internal Agreement

29 367

(29 367)

–

–

Transfers to/from the Eighth, Ninth and 10th EDF

–

–

(1 532)

(1 532)

Economic result of the year

–

(901)

(901)

BALANCE AS AT 31.12.2015

29 367

(29 367)

–

(1 382)

65

(1 317)

Transfers to/from the Eighth, Ninth and 10th EDF

–

(30)

(30)

Economic result of the year

–

(1 587)

(1 587)

BALANCE AS AT 31.12.2016

29 367

(29 367)

–

(2 969)

–

35

(2 934)

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add-up.

1.SIGNIFICANT ACCOUNTING POLICIES

1.1.ACCOUNTING PRINCIPLES

The objective of financial statements is to provide information about financial position, performance and cash flows of an entity that is useful to a wide range of users.

The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU Accounting Rule 1 'Financial Statements' and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting are relevance, reliability, understandability and comparability.

1.2.BASIS OF PREPARATION

2.Reporting period

Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December.

3.Currency and basis for conversion

The annual accounts are presented in millions of euros, the euro being the EDF's functional and reporting currency. Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the date when they were purchased.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are translated into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December.

Euro exchange rates

| Currency | 31.12.2016 | 31.12.2015 | Currency | 31.12.2016 | 31.12.2015 |
| --- | --- | --- | --- | --- | --- |
| BGN | 1.9558 | 1.9558 | PLN | 4.4103 | 4.2639 |
| CZK | 27.0210 | 27.0230 | RON | 4.5390 | 4.5240 |
| DKK | 7.4344 | 7.4626 | SEK | 9.5525 | 9.1895 |
| GBP | 0.8562 | 0.7340 | CHF | 1.0739 | 1.0835 |
| HRK | 7.5597 | 7.6380 | JPY | 123.4000 | 131.0700 |
| HUF | 309.8300 | 315.9800 | USD | 1.0541 | 1.0887 |

Currency

31.12.2016

31.12.2015

Currency

31.12.2016

31.12.2015

BGN

1.9558

1.9558

PLN

4.4103

4.2639

CZK

27.0210

27.0230

RON

4.5390

4.5240

DKK

7.4344

7.4626

SEK

9.5525

9.1895

GBP

0.8562

0.7340

CHF

1.0739

1.0835

HRK

7.5597

7.6380

JPY

123.4000

131.0700

HUF

309.8300

315.9800

USD

1.0541

1.0887

4.Use of estimates

In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to; accrued and deferred income and charges, provisions, financial risk on accounts receivables, contingent assets and liabilities, and degree of impairment of assets. Actual results could differ from those estimates.

Reasonable estimates are essential part of the preparation of financial statements and do not undermine their reliability. An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience. By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error. The effect of a change in accounting estimate shall be recognised in the surplus or deficit in the periods in which it becomes known.

4.1.BALANCE SHEET

5.Intangible assets

Acquired computer software licences are stated at historical cost less accumulated amortisation and impairment losses. The assets are amortised on a straight-line basis over their estimated useful lives. The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement. Internally developed intangible assets are capitalised when the relevant criteria of the EU accounting rules are met. The costs capitalisable include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Costs associated with research activities, non-capitalisable development costs and maintenance costs are recognised as expenses as incurred.

6.Property, plant and equipment

All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition or construction of the asset. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the entity and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred. Land and works of art are not depreciated as they are deemed to have an indefinite useful life. Assets under construction are not depreciated as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:

| Type of asset | Straight line depreciation rate |
| --- | --- |
| Buildings | 4 % to 10 % |
| Plant and equipment | 10 % to 25 % |
| Furniture and vehicles | 10 % to 25 % |
| Computer hardware | 25 % to 33 % |
| Other | 10 % to 33 % |

Type of asset

Straight line depreciation rate

Buildings

4 % to 10 %

Plant and equipment

10 % to 25 %

Furniture and vehicles

10 % to 25 %

Computer hardware

25 % to 33 %

Other

10 % to 33 %

Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance.

Leases

Leases of tangible assets, where the entity has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The interest element of the finance lease payment is charged to statement of financial performance over the period of the lease at a constant periodic rate in relation to the balance outstanding. The rental obligations, net of finance charges, are included in financial liabilities (non-current and current). The interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. The assets held under finance leases are depreciated over the shorter of the assets' useful life and the lease term.

Leases where the lessor retains a significant portion of the risks and rewards inherent to ownership are classified as operating leases. Payments made under operating leases are charged to the statement of financial performance on a straight-line basis over the period of the lease.

7.Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use.

Intangible assets and property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at least once per year. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly.

8.Financial assets

The financial assets are classified in the following categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available for sale financial assets. The classification of the financial instruments is determined at initial recognition and re-evaluated at each balance sheet date.

(I)Financial assets at fair value through profit or loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the entity. Derivatives are also categorised in this category. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date. During this financial year, the entity did not hold any investments in this category.

(II)Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the entity provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in non-current assets, except for maturities within 12 months of the balance sheet date. Loans and receivables include term deposits with the original maturity above three months.

(III)Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the entity has the positive intention and ability to hold to maturity. During this financial year, the entity did not hold any investments in this category.

(IV)Available for sale financial assets

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the entity expects to hold them, which is usually the maturity date.

Initial recognition and measurement

Purchases and sales of financial assets at fair value through profit and loss, held-to-maturity and available for sale are recognised on trade date - the date on which the entity commits to purchase or sell the asset. Cash equivalents, loans and term deposits are recognised at settlement date. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through profit and loss transaction costs are added to the fair value at initial recognition.

Financial instruments are derecognised when the rights to receive cash flows from the investments have expired or the entity has transferred substantially all risks and rewards of ownership to another party.

Subsequent measurement

Financial assets at fair value through profit and loss are subsequently carried at fair value with gains and losses arising changes in the fair value being included in the statement of financial performance in the period in which they arise.

Loans and receivables and held-to maturity investments are carried at amortised cost using the effective interest method.

Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in the fair value being recognised in the fairs value reserve. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance.

The entity assesses at each balance sheet date whether there is objective evidence that a financial asset is impaired and whether an impairment loss should be recorded in the statement of financial performance.

9.Pre-financing amounts

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, he has the obligation to return the pre-financing advance to the entity. The amount of the pre-financing may be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses).

Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period.

10.Receivables and recoverables

As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, for the purpose of drawing up the accounts, receivables are defined as stemming from non-exchange transactions and recoverables are defined as stemming from exchange transactions (when the entity receives value from another entity without directly giving approximately equal value in exchange).

Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see 1.3.4 above).

Recoverables from non-exchange transactions are carried at original amount (adjusted for interests and penalties) less write-down for impairment. A write-down for impairment is established when there is objective evidence that the entity will not be able to collect all amounts due according to the original terms of the recoverables. The amount of the write-down is the difference between the asset's carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance.

11.Cash and cash equivalents

Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks, and other short-term highly liquid investments with original maturities of three months or less.

12.Provisions

Provisions are recognised when the entity has a present legal or constructive obligation towards third parties as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. The amount of the provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. Where the provision involves a large number of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities ('expected value' method).

13.Payables

Included under accounts payable are both amounts related to exchange transactions such as the purchase of goods and services and non-exchange transactions related e.g. to cost claims from beneficiaries, grants or other EU funding.

Where grants or other funding is provided to the beneficiaries, the cost claims are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the accepted and eligible amount.

Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the entity.

14.Accrued and deferred income and charges

Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the entity or a contractual agreement exists (e.g. by reference to a contract), an accrued income will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Accounting Officer which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if a payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period.

14.1.STATEMENT OF FINANCIAL PERFORMANCE

15.Revenue

Revenue comprises gross inflows of economic benefits or service potential received and receivable by the entity, which represents an increase in net assets, other than increases relating to contributions from owners.

Depending on the nature of the underlying transactions in the statement of financial performance it is distinguished between:

(I)Revenue from non-exchange transactions

Revenue from non-exchange transactions are taxes and transfers because the transferor provides resources to the recipient entity without the recipient entity providing approximately equal value directly in exchange.

Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes. The entity shall recognise an asset in respect of transfers when the entity controls the resources as a result of a past event (the transfer) and expects to receive future economic benefits or service potential from those resources, and when the fair value can be reliably measured. An inflow of resources from a non-exchange transaction recognised as an asset (i.e. cash) is also recognised as revenue, except to the extent that the entity has a present obligation in respect of that transfer (condition), which needs to be satisfied before the revenue can be recognised. Until the condition is met the revenue is deferred and recognised as a liability (pre-financing received).

(II)Revenue from exchange transactions

Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date.

16.Expenses

Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets/equity. They include both the expenses from exchange transactions and expenses from nonexchange transactions.

Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the entity. They are valued at original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are recognised in the statement of financial performance.

Expenses from non-exchange transactions account for the majority of the entity's operating expenses. They relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations. Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation or an agreement has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made.

When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expense.

16.1.CONTINGENT ASSETS AND LIABILITIES

17.Contingent assets

A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.

18.Contingent liabilities

A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or a present obligation that arises from past events but is not recognised because: it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation or, in the rare circumstances where the amount of the obligation cannot be measured with sufficient reliability.

18.1.CO-FINANCING

Co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under condition and they are presented as payables to Member States, non-Member States and others. The EDF is required to use the contributions to deliver services to third parties or is otherwise required to return the assets (the contributions received). The outstanding payables relating to co-financing agreements represent the co-financing contributions received less the expenses incurred related to the project. The effect on net assets is nil.

Expenses relating to co-financing projects are recognised as they are incurred. The corresponding amount of contributions is recognised as operating revenue and the effect on economic result of the year is nil.

19.NOTES TO THE BALANCE SHEET

ASSETS

19.1.PRE-FINANCING

Many contracts provide for payments of advances before the commencement of works, delivery of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments on the basis of progress reports. Pre-financing is normally paid in the currency of the country or territory where the project is executed.

The timing of the recoverability or utilisation of pre-financing governs whether it is disclosed as a current or a non-current pre-financing asset. The utilisation is defined by the project's underlying agreement. Any repayments or utilisation due within twelve months of the reporting date are disclosed as current prefinancing. As many of the EDF projects are long-term in nature, it is necessary that the related advances are available for more than one year. Thus some pre-financing amounts are shown as noncurrent assets.

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Note | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Non-current pre-financing | 2.1.1 | – | 32 | 242 | 135 | 409 | 516 |
| Current pre-financing | 2.1.2 | 1 | 50 | 909 | 412 | 1 372 | 1 145 |
| Total | | 1 | 82 | 1 151 | 546 | 1 781 | 1 661 |

EUR millions

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Non-current pre-financing

2.1.1

–

32

242

135

409

516

Current pre-financing

2.1.2

1

50

909

412

1 372

1 145

Total

1

82

1 151

546

1 781

1 661

20.Non-current pre-financing

| | | EUR millions |
| --- | --- | --- |
| | 31.12.2016 | 31.12.2015 |
| Direct Management | 71 | 65 |
| Implemented by: | | |
| Commission | 39 | 43 |
| EU executive agencies | 4 | 1 |
| EU delegations | 29 | 21 |
| Indirect Management | 338 | 451 |
| Implemented by : | | |
| EIB and EIF | 180 | 323 |
| International organisations | 87 | 90 |
| Private law bodies with a public service mission | 25 | 3 |
| Public law bodies | 13 | 10 |
| Third countries | 34 | 25 |
| Total | 409 | 516 |

EUR millions

31.12.2016

31.12.2015

Direct Management

71

65

Implemented by:

Commission

39

43

EU executive agencies

4

1

EU delegations

29

21

Indirect Management

338

451

Implemented by :

EIB and EIF

180

323

International organisations

87

90

Private law bodies with a public service mission

25

3

Public law bodies

13

10

Third countries

34

25

Total

409

516

21.Current pre-financing

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Pre-financing (gross) | 9 | 231 | 2 945 | 1 560 | 4 745 | 4 250 |
| Cleared via cut-off | (8) | (181) | (2 037) | (1 148) | (3 373) | (3 105) |
| Total | 1 | 50 | 909 | 412 | 1 372 | 1 145 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Pre-financing (gross)

9

231

2 945

1 560

4 745

4 250

Cleared via cut-off

(8)

(181)

(2 037)

(1 148)

(3 373)

(3 105)

Total

1

50

909

412

1 372

1 145

| | | EUR millions |
| --- | --- | --- |
| | 31.12.2016 | 31.12.2015 |
| Direct Management | 246 | 283 |
| Implemented by: | | |
| Commission | 115 | 123 |
| EU executive agencies | 10 | 1 |
| EU delegations | 122 | 159 |
| Indirect Management | 1 125 | 861 |
| Implemented by : | | |
| EIB and EIF | 372 | 235 |
| International organisations | 432 | 336 |
| Private law bodies with a public service mission | 121 | 5 |
| Public law bodies | 53 | 56 |
| Third countries | 148 | 229 |
| Total | 1 372 | 1 145 |

EUR millions

31.12.2016

31.12.2015

Direct Management

246

283

Implemented by:

Commission

115

123

EU executive agencies

10

1

EU delegations

122

159

Indirect Management

1 125

861

Implemented by :

EIB and EIF

372

235

International organisations

432

336

Private law bodies with a public service mission

121

5

Public law bodies

53

56

Third countries

148

229

Total

1 372

1 145

The overall pre-financing at 31 December 2016 (EUR 1 781 million) is comparable to the total pre-financing at 31 December 2015 (EUR 1 661 million).

The slight increase in current pre-financing by EUR 227 million compared to 31 December 2015 is explained by a large number of new contracts for which no costs were yet incurred in 2016. This increase is offset by a decrease of the long term pre-financing (see note 2.1.1).

22.Guarantees received in respect of pre-financing

Guarantees are held to secure pre-financing and are released when the final claim under a project is paid. At 31 December 2016 the guarantees received by the EDF in respect of pre-financing amounted to EUR 53 million (2015 EUR 83 million).

The majority of pre-financing is paid under the indirect management mode. In this case the beneficiary of the guarantee is not the EDF but the contracting authority.

22.1.TRUST FUND CONTRIBUTIONS

This heading represents the amount paid as contributions to the Bêkou EU Trust Fund and the EUTF for Africa. The contributions are net of the costs incurred by the trust funds and attributable to the EDF.

The trust fund contributions are implemented by the EDF under the direct management mode.

| | | | | EUR millions |
| --- | --- | --- | --- | --- |
| Trust Funds | Net contribution at 31.12.2015 | Contributions paid in 2016 | Allocation of TF's net expenses 2016 | Net contribution at 31.12.2016 |
| Africa | – | 99 | (27) | 72 |
| Bêkou | 34 | – | (8) | 26 |
| Total | 34 | 99 | (35) | 98 |

EUR millions

Trust Funds

Net contribution at 31.12.2015

Contributions paid in 2016

Allocation of TF's net expenses 2016

Net contribution at 31.12.2016

Africa

–

99

(27)

72

Bêkou

34

–

(8)

26

Total

34

99

(35)

98

22.2.NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES

| | | | EUR millions |
| --- | --- | --- | --- |
| | Note | 31.12.2016 | 31.12.2015 |
| Recoverables from non-exchange transactions | 2.3.1 | 62 | 104 |
| Receivables from exchange transactions | 2.3.2 | 70 | 67 |
| Total | | 132 | 171 |

EUR millions

Note

31.12.2016

31.12.2015

Recoverables from non-exchange transactions

2.3.1

62

104

Receivables from exchange transactions

2.3.2

70

67

Total

132

171

23.Recoverables from non-exchange transactions

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Member States | – | 0 | 40 | – | 40 | 90 |
| Customers | 4 | 9 | 6 | 0 | 18 | 23 |
| Public bodies | – | 13 | 10 | 0 | 23 | 16 |
| Third states | 0 | 3 | 1 | – | 4 | 2 |
| Write down | (3) | (17) | (5) | – | (25) | (29) |
| Liaison accounts with EU institutions | – | – | – | 2 | 2 | 1 |
| Total | 1 | 8 | 51 | 2 | 62 | 104 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Member States

–

0

40

–

40

90

Customers

4

9

6

0

18

23

Public bodies

–

13

10

0

23

16

Third states

0

3

1

–

4

2

Write down

(3)

(17)

(5)

–

(25)

(29)

Liaison accounts with EU institutions

–

–

–

2

2

1

Total

1

8

51

2

62

104

Recoverables from Member States include ordinary contributions as well as amounts still to be received as a consequence of Bridging Facility adjustments. The activities of the Bridging Facility were financed through decommitted amounts from previous EDF's and the related capital movements were recorded in 2015.

The amounts are summarised in the table below:

| | | | EUR millions |
| --- | --- | --- | --- |
| Member States | Amounts to be received from MS | Amounts to be deducted from MS's contributions | Net amount at 31.12.2016 |
| Belgium | 25 | – | 25 |
| Cyprus | 0 | – | 0 |
| Czech Republic | 2 | – | 2 |
| Greece | 0 | – | 0 |
| Latvia | 0 | – | 0 |
| Portugal | 0 | – | 0 |
| Romania | 2 | – | 2 |
| Slovenia | 1 | – | 1 |
| United Kingdom | 10 | – | 10 |
| Total | 40 | – | 40 |

EUR millions

Member States

Amounts to be received from MS

Amounts to be deducted from MS's contributions

Net amount at 31.12.2016

Belgium

25

–

25

Cyprus

0

–

0

Czech Republic

2

–

2

Greece

0

–

0

Latvia

0

–

0

Portugal

0

–

0

Romania

2

–

2

Slovenia

1

–

1

United Kingdom

10

–

10

Total

40

–

40

24.Receivables from exchange transactions

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Accrued income | 0 | 63 | 7 | 0 | 70 | 67 |
| Liaison accounts between EDFs | 196 | 424 | 3 424 | (4 043) | (0) | 0 |
| Total | 196 | 487 | 3 431 | (4 043) | 70 | 67 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Accrued income

0

63

7

0

70

67

Liaison accounts between EDFs

196

424

3 424

(4 043)

(0)

0

Total

196

487

3 431

(4 043)

70

67

Included under accrued income are primarily amounts of accrued interest on pre-financing related to projects (EUR 63 million) and related to the EU-Africa Trust Fund (EUR 7 million).

For efficiency reasons, the single treasury covering all the EDFs is allocated to the 11th EDF
  9
  ; this leads to operations between the various EDFs, which are balanced out in the liaison accounts between the various EDF balance sheets. Liaison accounts are presented only in the individual EDFs.

24.1.CASH AND CASH EQUIVALENTS
  10

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Special accounts: | | | | | | |
| Financial institutions of Member States | – | – | – | 291 | 291 | 126 |
| Current accounts: | | | | | | |
| Commercial banks | – | – | – | 389 | 389 | 377 |
| Democratic Republic Congo Special fund* | – | – | – | – | – | 1 |
| Total | – | – | – | 680 | 680 | 504 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Special accounts:

Financial institutions of Member States

–

–

–

291

291

126

Current accounts:

Commercial banks

–

–

–

389

389

377

Democratic Republic Congo Special fund*

–

–

–

–

–

1

Total

–

–

–

680

680

504

*This balance represents the amounts available for the Democratic Republic of the Congo in accordance with the provisions of Council Decision 2003/583/EC7.

The overall increase in cash and cash equivalents is mainly explained by the advance payment of the first 2017 contributions by some Member States in December 2016.

It should be noted that there are STABEX funds held by beneficiary ACP States and thus not included on the EDF balance sheet. STABEX is the acronym for an EU compensatory finance scheme to stabilise export earnings of the ACP countries. Once the Commission and the beneficiary (ACP) State reach agreement on how the STABEX funds are to be utilised, a transfer convention is signed by both parties. In accordance with the provisions of Article 211 of the Lomé IV Agreement
  11
  (as revised), the funds are transferred into an interest bearing double signature account (Commission and Beneficiary State) opened in the name of the ACP State. The funds remain in these double signature accounts until a Framework of Mutual Obligations (FMO) justifies a transfer for a project. The Commission's Authorising Officer retains the power of signature over the account in order to ensure that the funds are disbursed as intended. The funds in the double signature accounts are the property of the ACP State and are consequently not recorded as assets in the EDF accounts. The transfers to these accounts are recorded as STABEX payments. See also note 3.1.1 for more information.

With the aim of improving the presentation in the 2016 annual accounts, the classification of financial insitutions and banks has been reviewed. The comparative figures for 2015 are disclosed accordingly.

LIABILITIES

24.2.PROVISIONS

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Provisions | – | – | – | 4 | 4 | 4 |
| Total | – | – | – | 4 | 4 | 4 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Provisions

–

–

–

4

4

4

Total

–

–

–

4

4

4

The provision is the best possible estimation of the probable amount to be paid by the EDF to finance the orderly closure of the Centre de Development (CDE), decided by the ACP-EU Committee of Ambassadors (Decision No 4/2014 of 23 October 2014).

The amount includes court cases (EUR 1.2 million) raised against the CDE and the remaining expected cost of the passive phase (e.g. residual administrative tasks, other residual litigations, archive, etc) that started on 31 December 2016 (see note 4.3.2).

24.3.FINANCIAL LIABILITIES

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Co-financing - payables | – | – | 6 | – | 6 | 10 |
| Total | – | – | 6 | – | 6 | 10 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Co-financing - payables

–

–

6

–

6

10

Total

–

–

6

–

6

10

The change in the total co-financing liabilities is explained in the note 2.7.2.1.

24.4.PAYABLES

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Note | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Current payables | 2.7.1 | 0 | 12 | 112 | 97 | 222 | 180 |
| Sundry payables | 2.7.2 | – | (0) | 325 | 2 | 327 | 340 |
| Total | | 0 | 12 | 438 | 99 | 549 | 520 |

EUR millions

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Current payables

2.7.1

0

12

112

97

222

180

Sundry payables

2.7.2

–

(0)

325

2

327

340

Total

0

12

438

99

549

520

25. Current payables

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Suppliers | 0 | 11 | 69 | 19 | 98 | 79 |
| Member States | – | – | 0 | – | 0 | 0 |
| Third states | 0 | 0 | 29 | 61 | 91 | 83 |
| Public bodies | 0 | 1 | 18 | 14 | 32 | 21 |
| Other current payables | 0 | 1 | (4) | 4 | 1 | (3) |
| Total | 0 | 12 | 112 | 97 | 222 | 180 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Suppliers

0

11

69

19

98

79

Member States

–

–

0

–

0

0

Third states

0

0

29

61

91

83

Public bodies

0

1

18

14

32

21

Other current payables

0

1

(4)

4

1

(3)

Total

0

12

112

97

222

180

Payables include cost statements received by the EDF relating to its grant activity. They are recorded for the amount being claimed from the moment the demand is received. The same procedure applies to invoices and credit notes received under procurement activities. The cost claims concerned have been taken into account for the year-end cut-off procedures. Following the cut-off entries, estimated eligible amounts have been recognised in the statement of financial performance.

26.Sundry payables

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Note | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Co-financing payables | 2.7.2.1 | – | – | 63 | 1 | 64 | 31 |
| Deferred fund capital contributions | 2.7.2.2 | – | – | 261 | – | 261 | 307 |
| Other sundry payables | 2.7.2.3 | – | – | – | 2 | 2 | 2 |
| Total | | – | – | 324 | 3 | 327 | 340 |

EUR millions

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Co-financing payables

2.7.2.1

–

–

63

1

64

31

Deferred fund capital contributions

2.7.2.2

–

–

261

–

261

307

Other sundry payables

2.7.2.3

–

–

–

2

2

2

Total

–

–

324

3

327

340

27.Co-financing payables

The breakdown of the non-current and current co-financing payables by Member State is summarized in the table below:

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Non-current co-financing | | | | | | |
| Belgium | – | – | 2 | – | 2 | 1 |
| Germany | – | – | 0 | – | 0 | 1 |
| United Kingdom | – | – | 1 | – | 1 | 3 |
| Sweden | – | – | 2 | – | 2 | 4 |
| Canada | – | – | 0 | – | 0 | 1 |
| | – | – | 6 | – | 6 | 10 |
| Current co-financing | | | | | | |
| Belgium | – | – | 3 | 1 | 4 | 3 |
| Denmark | – | – | 1 | 0 | 1 | 1 |
| France | – | – | 37 | – | 37 | 10 |
| Germany | – | – | 1 | – | 1 | 1 |
| Netherlands | – | – | 1 | – | 1 | 1 |
| Spain | – | – | 3 | – | 3 | 3 |
| United Kingdom | – | – | 11 | – | 11 | 1 |
| Sweden | – | – | 7 | – | 7 | 12 |
| Canada | – | – | 0 | – | 0 | (1) |
| | – | – | 63 | 1 | 64 | 31 |
| Total | – | – | 69 | 1 | 70 | 41 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Non-current co-financing

Belgium

–

–

2

–

2

1

Germany

–

–

0

–

0

1

United Kingdom

–

–

1

–

1

3

Sweden

–

–

2

–

2

4

Canada

–

–

0

–

0

1

–

–

6

–

6

10

Current co-financing

Belgium

–

–

3

1

4

3

Denmark

–

–

1

0

1

1

France

–

–

37

–

37

10

Germany

–

–

1

–

1

1

Netherlands

–

–

1

–

1

1

Spain

–

–

3

–

3

3

United Kingdom

–

–

11

–

11

1

Sweden

–

–

7

–

7

12

Canada

–

–

0

–

0

(1)

–

–

63

1

64

31

Total

–

–

69

1

70

41

The total non-current and current co-financing payables increased by EUR 29 million compared to the previous reporting period.

During 2016, new co-financing contributions were received from United Kingdom (EUR 9.4 million), Belgium (EUR 3.3 million) and Sweden (EUR 0.9 million).

The total non-current and current co-financing payables increased by EUR 15 million in order to recognise revenue and expenses related to cofinanced projects (see notes 3.1.2 and 3.4).

28.Deferred fund capital contributions

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| United Kingdom | – | – | 252 | – | 252 | 259 |
| Sweden | – | – | – | – | – | 48 |
| Hungary | – | – | 9 | – | 9 | – |
| Total | – | – | 261 | – | 261 | 307 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

United Kingdom

–

–

252

–

252

259

Sweden

–

–

–

–

–

48

Hungary

–

–

9

–

9

–

Total

–

–

261

–

261

307

The heading deferred fund capital contributions relates to Member States' contributions paid in advance.

29.Other sundry payables

Included under this heading are mainly unallocated cash receipts and returned payments.

29.1.ACCRUED CHARGES AND DEFERRED INCOME

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Accrued charges | 1 | 93 | 567 | 110 | 770 | 853 |
| Other accruals and deferrals | – | (0) | (0) | 6 | 6 | 2 |
| Total | 1 | 93 | 567 | 115 | 776 | 855 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Accrued charges

1

93

567

110

770

853

Other accruals and deferrals

–

(0)

(0)

6

6

2

Total

1

93

567

115

776

855

Accrued charges comprise estimated operating expenses for on-going or ended contracts without validated cost claims where the 2016 eligible expenses incurred by beneficiaries of EDF were estimated using the best available information about the existing contracts. The portion of the estimated accrued charges which relates to pre-financing paid has been recorded as a reduction of the pre-financing amounts (see note 2.1).

NET ASSETS

29.2.FUND CAPITAL

30.Called fund capital – active EDFs

| | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | Total |
| Fund capital | 12 164 | 10 973 | 20 960 | 29 367 | 73 464 |
| Uncalled fund capital | (0) | (0) | (5 223) | (29 367) | (34 590) |
| Called fund capital 31.12.2015 | 12 164 | 10 973 | 15 737 | – | 38 873 |
| | | | | | |
| Fund capital | 12 164 | 10 973 | 20 960 | 29 367 | 73 464 |
| Uncalled fund capital | – | (0) | (1 773) | (29 367) | (31 140) |
| Called fund capital 31.12.2016 | 12 164 | 10 973 | 19 187 | – | 42 323 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

Fund capital

12 164

10 973

20 960

29 367

73 464

Uncalled fund capital

(0)

(0)

(5 223)

(29 367)

(34 590)

Called fund capital 31.12.2015

12 164

10 973

15 737

–

38 873

Fund capital

12 164

10 973

20 960

29 367

73 464

Uncalled fund capital

–

(0)

(1 773)

(29 367)

(31 140)

Called fund capital 31.12.2016

12 164

10 973

19 187

–

42 323

The fund capital represents the total amount of contributions from Member States for the relevant EDF fund as laid down in each of the Internal Agreements. The uncalled funds represent the initial allocation not yet called up from Member States.

The called fund capital represents the amount of the initial allocations which have been called up for transfer to the treasury accounts by the Member States (see note 2.9.2 below).

31.Called and uncalled fund capital by Member State

| | | | | EUR millions |
| --- | --- | --- | --- | --- |
| Contributions | % | Uncalled capital 31.12.2015 | Capital called in 2016 | Uncalled capital 31.12.2016 |
| Austria | 2.41 | 126 | (83) | 43 |
| Belgium | 3.53 | 184 | (122) | 63 |
| Bulgaria | 0.14 | 7 | (5) | 2 |
| Cyprus | 0.09 | 5 | (3) | 2 |
| Czech Republic | 0.51 | 27 | (18) | 9 |
| Denmark | 2.00 | 104 | (69) | 35 |
| Estonia | 0.05 | 3 | (2) | 1 |
| Finland | 1.47 | 77 | (51) | 26 |
| France | 19.55 | 1 021 | (674) | 347 |
| Germany | 20.50 | 1 071 | (707) | 364 |
| Greece | 1.47 | 77 | (51) | 26 |
| Hungary | 0.55 | 29 | (19) | 10 |
| Ireland | 0.91 | 48 | (31) | 16 |
| Italy | 12.86 | 672 | (444) | 228 |
| Latvia | 0.07 | 4 | (2) | 1 |
| Lithuania | 0.12 | 6 | (4) | 2 |
| Luxemburg | 0.27 | 14 | (9) | 5 |
| Malta | 0.03 | 2 | (1) | 1 |
| Netherlands | 4.85 | 253 | (167) | 86 |
| Poland | 1.30 | 68 | (45) | 23 |
| Portugal | 1.15 | 60 | (40) | 20 |
| Romania | 0.37 | 19 | (13) | 7 |
| Slovakia | 0.21 | 11 | (7) | 4 |
| Slovenia | 0.18 | 9 | (6) | 3 |
| Spain | 7.85 | 410 | (271) | 139 |
| Sweden | 2.74 | 143 | (95) | 49 |
| United Kingdom | 14.82 | 774 | (511) | 263 |
| Total | 100.00 | 5 223 | (3 450) | 1 773 |

EUR millions

Contributions

%

Uncalled capital 31.12.2015

Capital called in 2016

Uncalled capital 31.12.2016

Austria

2.41

126

(83)

43

Belgium

3.53

184

(122)

63

Bulgaria

0.14

7

(5)

2

Cyprus

0.09

5

(3)

2

Czech Republic

0.51

27

(18)

9

Denmark

2.00

104

(69)

35

Estonia

0.05

3

(2)

1

Finland

1.47

77

(51)

26

France

19.55

1 021

(674)

347

Germany

20.50

1 071

(707)

364

Greece

1.47

77

(51)

26

Hungary

0.55

29

(19)

10

Ireland

0.91

48

(31)

16

Italy

12.86

672

(444)

228

Latvia

0.07

4

(2)

1

Lithuania

0.12

6

(4)

2

Luxemburg

0.27

14

(9)

5

Malta

0.03

2

(1)

1

Netherlands

4.85

253

(167)

86

Poland

1.30

68

(45)

23

Portugal

1.15

60

(40)

20

Romania

0.37

19

(13)

7

Slovakia

0.21

11

(7)

4

Slovenia

0.18

9

(6)

3

Spain

7.85

410

(271)

139

Sweden

2.74

143

(95)

49

United Kingdom

14.82

774

(511)

263

Total

100.00

5 223

(3 450)

1 773

Capital called in 2016 comprises entirely calls from 10th EDF. The total amount composes of ordinary call (EUR 3 450 million). The capital of the Eighth and the Ninth EDF has been called up and received in its entirety. No capital has yet been called from 11th EDF.

32.Called fund capital from closed EDFs carried forward

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Funds transferred from closed EDFs | 627 | 1 625 | – | – | 2 252 | 2 252 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Funds transferred from closed EDFs

627

1 625

–

–

2 252

2 252

This heading includes the resources transferred from closed EDFs to the Eighth and Ninth EDFs.

33.Called fund capital transfers between active EDFs

| | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | Total |
| Balance at 31.12.2014 | (3 147) | 1 758 | (209) | 1 597 | – |
| Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs | (6) | (109) | 114 | – | – |
| Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs | – | – | (32) | 32 | – |
| Transfer from the 10th and 11th performance reserves to the Bridging Facility | – | – | (41) | 41 | – |
| Recoveries from the Bridging Facility to the 10th and 11th performance reserves | – | – | 11 | (11) | – |
| Return of funds committed under the Bridging Facility | 676 | 727 | 192 | (1 595) | – |
| Balance at 31.12.2015 | (2 476) | 2 376 | 35 | 65 | – |
| Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs | (20) | (163) | 182 | | – |
| Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs | – | – | (356) | 356 | – |
| Transfer from the 11th performance reserve to the African Peace Facility (10th EDF) | – | – | 386 | (386) | – |
| Balance at 31.12.2016 | (2 496) | 2 214 | 247 | 35 | – |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

Balance at 31.12.2014

(3 147)

1 758

(209)

1 597

–

Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs

(6)

(109)

114

–

–

Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs

–

–

(32)

32

–

Transfer from the 10th and 11th performance reserves to the Bridging Facility

–

–

(41)

41

–

Recoveries from the Bridging Facility to the 10th and 11th performance reserves

–

–

11

(11)

–

Return of funds committed under the Bridging Facility

676

727

192

(1 595)

–

Balance at 31.12.2015

(2 476)

2 376

35

65

–

Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs

(20)

(163)

182

–

Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs

–

–

(356)

356

–

Transfer from the 11th performance reserve to the African Peace Facility (10th EDF)

–

–

386

(386)

–

Balance at 31.12.2016

(2 496)

2 214

247

35

–

This heading includes the resources transferred between the active EDFs.

Since the entry into force of the Cotonou Agreement, all the unspent funds in previous active EDFs are transferred to the most recently opened EDF after decommitment. The resources transferred from other EDFs increase the appropriations of the receiving fund and reduce the appropriations of the fund of origin. Funds transferred to the performance reserve of the 10th and 11th EDFs can be committed only under specific conditions set out in the Internal Agreements.

In 2016 EUR 386 million was taken from the 11th Performance reserve to finance the African Peace Facility under the 10th EDF.

34.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

REVENUE

| | | | EUR millions |
| --- | --- | --- | --- |
| | Note | 2016 | 2015 |
| Revenue from non-exchange transactions | 3.1 | 8 | 90 |
| Revenue from exchange transactions | 3.2 | 66 | 50 |
| Total | | 73 | 140 |

EUR millions

Note

2016

2015

Revenue from non-exchange transactions

3.1

8

90

Revenue from exchange transactions

3.2

66

50

Total

73

140

34.1.REVENUE FROM NON-EXCHANGE TRANSACTIONS

| | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Note | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 2016 | 2015 |
| Recovery of expenses | | 0 | 5 | 13 | 4 | 23 | 20 |
| Recovery of STABEX funds | 3.1.1 | 1 | – | – | – | 1 | 1 |
| Co-financing revenue | 3.1.2 | – | – | (15) | – | (15) | 69 |
| Total | | 1 | 5 | (2) | 4 | 8 | 90 |

EUR millions

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2016

2015

Recovery of expenses

0

5

13

4

23

20

Recovery of STABEX funds

3.1.1

1

–

–

–

1

1

Co-financing revenue

3.1.2

–

–

(15)

–

(15)

69

Total

1

5

(2)

4

8

90

The non-exchange revenue can be broken down by management mode as follows:

| | | EUR millions |
| --- | --- | --- |
| | 2016 | 2015 |
| Direct Management | 6 | 61 |
| Implemented by: | | |
| Commission | 1 | 3 |
| EU delegations | 5 | 58 |
| Indirect Management | 2 | 29 |
| Implemented by : | | |
| Third countries | (0) | 14 |
| International organisations | 2 | 14 |
| Public law bodies | 0 | 0 |
| Private law bodies with a public service mission | 0 | 1 |
| Total | 8 | 90 |

EUR millions

2016

2015

Direct Management

6

61

Implemented by:

Commission

1

3

EU delegations

5

58

Indirect Management

2

29

Implemented by :

Third countries

(0)

14

International organisations

2

14

Public law bodies

0

0

Private law bodies with a public service mission

0

1

Total

8

90

35.Recovery of STABEX funds

During 2016, EUR 1 million was returned to the EDF from double signature accounts in ACP countries. These revenues are included under revenue from non-exchange transactions (recovery of STABEX funds) in the statement of financial performance of the Eighth EDF.

36.Co-financing revenue

The cofinancing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance. The received contributions remain under liabilities (see note 2.7.2.1) until the conditions attached to the donated funds are met, i.e. eligible expenses are incurred (see note 3.4). The corresponding amount is then recognised as non-exchange revenue from cofinancing. Consequently the effect on economic result of the year is nil.

36.1.REVENUE FROM EXCHANGE TRANSACTIONS

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 2016 | 2015 |
| Financial income | (0) | 2 | 2 | (1) | 3 | 8 |
| Other income | 2 | 17 | 40 | 3 | 62 | 42 |
| Total | 2 | 19 | 43 | 2 | 66 | 50 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2016

2015

Financial income

(0)

2

2

(1)

3

8

Other income

2

17

40

3

62

42

Total

2

19

43

2

66

50

The financial income largely comprises interest on pre-financing that in 2016 amounted to EUR 3 million
  12
  (2015: EUR 7 million).

Other income entirely relates to the realised and unrealised foreign exchange gains.

EXPENSES

36.2.AID INSTRUMENTS

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 2016 | 2015 |
| Programmable aid | 1 | (3) | 1 007 | 746 | 1 751 | 1 971 |
| Macro-economic support | – | 39 | – | – | 39 | 51 |
| Sectoral policy | (0) | 18 | – | – | 18 | (24) |
| Intra ACP projects | – | 41 | 301 | 351 | 693 | 746 |
| Interest rate subsidies | (3) | – | – | – | (3) | (6) |
| Emergency aid | – | (0) | 98 | 300 | 398 | 285 |
| Other aid programmes related to former EDFs | – | 1 | – | – | 1 | 0 |
| Institutional support | – | – | 5 | 33 | 38 | 34 |
| Compensation export receipts | (0) | 0 | – | – | 0 | (3) |
| Contributions to Trust Funds | – | – | – | 35 | 35 | 5 |
| Total | (2) | 95 | 1 411 | 1 465 | 2 970 | 3 059 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2016

2015

Programmable aid

1

(3)

1 007

746

1 751

1 971

Macro-economic support

–

39

–

–

39

51

Sectoral policy

(0)

18

–

–

18

(24)

Intra ACP projects

–

41

301

351

693

746

Interest rate subsidies

(3)

–

–

–

(3)

(6)

Emergency aid

–

(0)

98

300

398

285

Other aid programmes related to former EDFs

–

1

–

–

1

0

Institutional support

–

–

5

33

38

34

Compensation export receipts

(0)

0

–

–

0

(3)

Contributions to Trust Funds

–

–

–

35

35

5

Total

(2)

95

1 411

1 465

2 970

3 059

The EDF operating expenditure covers various aid instruments and takes different forms, depending on how the money is paid out and managed.

36.3.CO-FINANCING EXPENSES

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 2016 | 2015 |
| Co-financing | – | – | (15) | – | (15) | 69 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2016

2015

Co-financing

–

–

(15)

–

(15)

69

Included under this heading are the expenses incurred on co-financing projects in 2016. It should be noted that the expenses incurred include estimated amounts related to the cut-off exercise (and consequently reversals of the estimated amounts related to last year). Because the reversals of the 2015 estimated expenses (EUR 50 million) exceed the expenses incurred in 2016 (EUR 35 million), the cofinancing expenses are negative for 2016. Corresponding negative revenue has been recognised in the statement of financial performance (see note 3.1.2).

36.4.AID INSTRUMENTS AND CO-FINANCING EXPENSES BY MANAGEMENT TYPE

| | | EUR millions |
| --- | --- | --- |
| | 2016 | 2015 |
| Direct Management | 1 173 | 1 106 |
| Implemented by: | | |
| Commission | 140 | 99 |
| EU executive agencies | 10 | 2 |
| Trust Funds | 36 | 5 |
| EU delegations | 987 | 1 000 |
| Indirect Management | 1 781 | 2 023 |
| Implemented by : | | |
| EIB and EIF | 5 | 31 |
| International organisations | 821 | 990 |
| Private law bodies with a public service mission | 143 | 31 |
| Public law bodies | 57 | 70 |
| Third countries | 756 | 900 |
| Private law bodies implementing Public Private Partnership | (1) | 1 |
| Total | 2 954 | 3 128 |

EUR millions

2016

2015

Direct Management

1 173

1 106

Implemented by:

Commission

140

99

EU executive agencies

10

2

Trust Funds

36

5

EU delegations

987

1 000

Indirect Management

1 781

2 023

Implemented by :

EIB and EIF

5

31

International organisations

821

990

Private law bodies with a public service mission

143

31

Public law bodies

57

70

Third countries

756

900

Private law bodies implementing Public Private Partnership

(1)

1

Total

2 954

3 128

36.5.FINANCE COSTS

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 2016 | 2015 |
| Write-down of receivables | 0 | 0 | (4) | – | (4) | 1 |
| Other financial expenses | – | – | – | 0 | 0 | 0 |
| Total | 0 | 0 | (4) | 0 | (4) | 1 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2016

2015

Write-down of receivables

0

0

(4)

–

(4)

1

Other financial expenses

–

–

–

0

0

0

Total

0

0

(4)

0

(4)

1

The heading write-down of receivables comprises closure estimate of expenses on irrecoverable receivables and also includes reversals of the estimated amounts related to last year. Because the reversals of the 2015 amounts (EUR 29 million) exceed the amounts estimated in 2016 (EUR 25 million), the overall expenses related to write-down of receivables are negative for 2016.

36.6.OTHER EXPENSES

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 2016 | 2015 |
| Administrative and IT expenses | – | (0) | 4 | 126 | 129 | 113 |
| Provision for risks and charges | – | – | – | – | – | 4 |
| Realised losses on trade debtors | 0 | 0 | 0 | – | 0 | 2 |
| Exchange loses | 3 | 19 | 42 | 3 | 66 | 44 |
| Total | 3 | 19 | 46 | 129 | 196 | 162 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2016

2015

Administrative and IT expenses

–

(0)

4

126

129

113

Provision for risks and charges

–

–

–

–

–

4

Realised losses on trade debtors

0

0

0

–

0

2

Exchange loses

3

19

42

3

66

44

Total

3

19

46

129

196

162

This heading includes support expenditure, i.e. the administrative costs related to the programming and implementation of the EDFs. This includes expenses for preparation, follow-up, monitoring, and evaluation of projects as well as expenses for computer networks, technical assistance etc.

37.CONTINGENT ASSETS & LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES

37.1. CONTINGENT ASSETS

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Performance guarantees | (0) | 4 | 5 | 0 | 9 | 13 |
| Retention guarantees | – | 4 | 3 | – | 7 | 6 |
| Total | (0) | 7 | 8 | 0 | 16 | 20 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Performance guarantees

(0)

4

5

0

9

13

Retention guarantees

–

4

3

–

7

6

Total

(0)

7

8

0

16

20

Performance guarantees are requested to ensure that beneficiaries of EDF funding meet the obligations of their contracts with the EDF.

Retention guarantees concern only works contracts. Typically 10 % of the interim payments to beneficiaries are withheld to ensure that the contractor fulfils their obligations. These withheld amounts are reflected as amounts payable. Subject to the approval of the contracting authority, the contractor may instead submit a retention guarantee which replaces the amounts withheld on interim payments. These received guarantees are disclosed as contingent assets.

In case of contracts managed under the indirect mode, the guarantees belong to a contracting authority other than the EDF and they are not recorded by the EDF.

37.2.OTHER SIGNIFICANT DISCLOSURES

38.Outstanding commitments not yet expensed

The amount disclosed below is the budgetary RAL ('Reste à Liquider') less related amounts that have been included as expenses in the statement of financial performance. The budgetary RAL is an amount representing the open commitments for which payments and/or de-commitments have not yet been made. This is the normal consequence of the existence of multi-annual programmes.

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Eighth EDF | Ninth EDF | 10th EDF | 11th EDF | 31.12.2016 | 31.12.2015 |
| Outstanding commitments not yet expensed | 2 | 202 | 2 406 | 4 136 | 6 746 | 5 821 |
| Total | 2 | 202 | 2 406 | 4 136 | 6 746 | 5 821 |

EUR millions

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2016

31.12.2015

Outstanding commitments not yet expensed

2

202

2 406

4 136

6 746

5 821

Total

2

202

2 406

4 136

6 746

5 821

At 31 December 2016 the budgetary RAL totalled EUR 7 665 million (2015: EUR 6 809 million).

39.Centre for the Development of Enterprise

The ACP-EU Council of Ministers agreed in June 2014 "to proceed with the orderly closing of the CDE", and at the same time "to ensure that the private sector support projects implemented by the CDE in ACP countries and regions are completed in full". For this purpose, the ACP-EU Council of Ministers granted a delegation of powers to the ACP-EU Committee of Ambassadors to take this matter forward with a view to adopt the necessary decisions.

The ACP-EU Committee of Ambassadors authorised, by Decision No 4/2014 of 23/10/2014, the Executive Board of the CDE to take, with immediate effect, all appropriate measures to prepare for the closure of the CDE. As stipulated in article 2 of that Decision, the Executive Board was instructed to contract a Curator to prepare and implement a closure plan.

The Curator submitted to the CDE Executive Board at the end of June 2015 a definitive strategic plan, with a budget and work-plan, which reflected the outcome of the social dialogue. The budget of the definitive strategic plan, approved by the CDE Executive Board, was the basis for the Commission's proposal for a Financing Decision that was adopted by the EC in 2015 for a total amount of EUR 18.2 million. Subsequent to the adoption of the above Financing Decision, a grant agreement was concluded in December 2015 between the CDE and the European Commission providing the necessary financing for the realization of CDE's assets and settlement of its liabilities. This grant agreement started on 1 January 2016 and will last until 31 December 2017. The value of the contract is covered by the outstanding commitments not yet expensed.

40.FINANCIAL RISK MANAGEMENT

The following disclosures with regard to the financial risk management of the EDF relate to the treasury operations carried out by the Commission on behalf of the EDF in order to implement its resources.

40.1.RISK MANAGEMENT POLICIES AND HEDGING ACTIVITIES

The rules and principles for the management of the treasury operations are laid down in the 11th EDF Financial Regulation and in the Internal Agreement.

As a result of the above regulation, the following main principles apply:

-The EDF contributions are paid by Member States in special accounts opened with the bank of issue of each Member State or the financial institution designated by it. The amounts of the contributions shall remain in those special accounts until the payments of EDF need to be made.

-EDF contributions are paid by Member States in EUR, while the EDF's payments are denominated in EUR and in other currencies, including less well-known ones.

-Bank accounts opened by the Commission on behalf of the EDF may not be overdrawn.

In addition to the special accounts, other bank accounts are opened by the Commission in the name of the EDF, with financial institutions (central banks and commercial banks), for the purpose of executing payments and receiving receipts other than the Member State contributions to the budget.

Treasury and payment operations are highly automated and rely on modern information systems. Specific procedures are applied to guarantee system security and to ensure segregation of duties in line with the Financial Regulation, the Commission’s internal control standards, and audit principles.

A written set of guidelines and procedures regulate the management of the treasury and payment operations with the objective of limiting operational and financial risk and ensuring an adequate level of control. They cover the different areas of operation, and compliance with the guidelines and procedures is checked regularly.

40.2.CURRENCY RISK

Exposure of the EDF to currency risk at year end – net position

| | | | | | | | | | | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 31.12.2016 | | 31.12.2015 |
| | USD | GBP | DKK | SEK | EUR | Other | Total | | USD | GBP | DKK | SEK | EUR | Other | Total |
| Financial assets | | | | | | | | | | | | | | | |
| Receivables and recoverables | 0 | – | – | – | 129 | 3 | 132 | | – | – | – | – | 171 | 1 | 171 |
| Cash and cash equivalents | 2 | 0 | – | – | 678 | – | 680 | | 4 | 0 | – | – | 500 | – | 504 |
| Total | 2 | 0 | – | – | 807 | 3 | 812 | | 4 | 0 | – | – | 671 | 1 | 675 |
| Financial liabilities | | | | | | | | | | | | | | | |
| Non-current financial liabilities | – | – | – | – | (6) | – | (6) | | 0 | – | – | – | (10) | – | (10) |
| Payables | 0 | – | – | – | (495) | (54) | (549) | | 0 | – | – | – | (473) | (47) | (520) |
| Total | 0 | – | – | – | (501) | (54) | (555) | | 0 | – | – | – | (483) | (47) | (530) |
| Total | 2 | 0 | – | – | 306 | (51) | 257 | | 4 | 0 | – | – | 188 | (46) | 145 |

EUR millions

31.12.2016

31.12.2015

USD

GBP

DKK

SEK

EUR

Other

Total

USD

GBP

DKK

SEK

EUR

Other

Total

Financial assets

Receivables and recoverables

0

–

–

–

129

3

132

–

–

–

–

171

1

171

Cash and cash equivalents

2

0

–

–

678

–

680

4

0

–

–

500

–

504

Total

2

0

–

–

807

3

812

4

0

–

–

671

1

675

Financial liabilities

Non-current financial liabilities

–

–

–

–

(6)

–

(6)

0

–

–

–

(10)

–

(10)

Payables

0

–

–

–

(495)

(54)

(549)

0

–

–

–

(473)

(47)

(520)

Total

0

–

–

–

(501)

(54)

(555)

0

–

–

–

(483)

(47)

(530)

Total

2

0

–

–

306

(51)

257

4

0

–

–

188

(46)

145

All contributions are held in EUR, and other currencies are purchased only when they are needed for the execution of payments. As a result the EDF's treasury operations are not exposed to currency risk.

40.3.INTEREST RATE RISK

The EDF does not borrow money and as a consequence it is not exposed to interest rate risk.

Interest is accrued on balances it holds on its different banks accounts. The Commission, on behalf of the EDF, has therefore put in place measures to ensure that interest earned regularly reflect market interest rates as well as their possible fluctuation.

Contributions to the EDF budget are credited by each Member State to a special account opened with the financial institution designed by it. As the remuneration applied to some of these accounts may currently be negative, cash management procedures are in place to minimise balances kept on the accounts concerned. In addition, in accordance with Council Regulation (EU)2016/888, any negative remuneration on these accounts is borne by the relevant Member State.

Overnight balances held on commercial bank accounts are remunerated on a daily basis. The remuneration of balances on such accounts is based on variable market rates to which a contractual margin (positive or negative) is applied. For most of the accounts the interest calculation is linked to a market reference rate and is adjusted to reflect any fluctuations of this rate. As a result no risk is taken by the EDF that its balances be remunerated at rates lower than market rates.

40.4.CREDIT RISK (COUNTERPARTY RISK)

Financial assets that are neither past due nor impaired:

| | | | EUR millions |
| --- | --- | --- | --- |
| | Total | Neither past due nor impaired | Past due but not impaired |
| | | | < 1 year | 1-5 years | > 5 years |
| Exchange receivables and non-exchange recoverables | 132 | 93 | 36 | 4 | – |
| Total at 31.12.2016 | 132 | 93 | 36 | 4 | – |
| Exchange receivables and non-exchange recoverables | 171 | 50 | 120 | 1 | – |
| Total at 31.12.2015 | 171 | 50 | 120 | 1 | – |

EUR millions

Total

Neither past due nor impaired

Past due but not impaired

< 1 year

1-5 years

> 5 years

Exchange receivables and non-exchange recoverables

132

93

36

4

–

Total at 31.12.2016

132

93

36

4

–

Exchange receivables and non-exchange recoverables

171

50

120

1

–

Total at 31.12.2015

171

50

120

1

–

Financial assets by risk category:

| | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- |
| | 31.12.2016 | 31.12.2015 |
| | Receivables | Cash | Total | Receivables | Cash | Total |
| Counterparties with external credit rating | | | | | | |
| Prime and high grade | 34 | 284 | 318 | 6 | 167 | 173 |
| Upper medium grade | 3 | 371 | 374 | 34 | 16 | 50 |
| Lower medium grade | 2 | 16 | 18 | 36 | 312 | 348 |
| Non- investment grade | 1 | 9 | 10 | 14 | 9 | 23 |
| Total | 40 | 680 | 720 | 90 | 503 | 593 |
| Counterparties without external credit rating | | | | | | – |
| Group 1 (debtors without defaults in the past) | 92 | 0 | 92 | 81 | 1 | 82 |
| Group 2 (debtors with defaults in the past) | – | – | – | – | – | – |
| Total | 92 | 0 | 92 | 81 | 1 | 82 |
| Total | 132 | 680 | 812 | 171 | 504 | 675 |

EUR millions

31.12.2016

31.12.2015

Receivables

Cash

Total

Receivables

Cash

Total

Counterparties with external credit rating

Prime and high grade

34

284

318

6

167

173

Upper medium grade

3

371

374

34

16

50

Lower medium grade

2

16

18

36

312

348

Non- investment grade

1

9

10

14

9

23

Total

40

680

720

90

503

593

Counterparties without external credit rating

–

Group 1 (debtors without defaults in the past)

92

0

92

81

1

82

Group 2 (debtors with defaults in the past)

–

–

–

–

–

–

Total

92

0

92

81

1

82

Total

132

680

812

171

504

675

Funds in the categories non-investment grade and lower medium grade relate mainly to Member State contributions to the EDF paid to the special accounts opened by Member States in accordance with Article 22(3) of the EDF FR. According to this regulation the amount of such contributions must remain in those special accounts until the payments need to be made.

Most of the EDF's treasury resources are kept, in accordance with the EDF FR, in the "special accounts" opened by Member States for the payment of their contributions. The majority of such accounts are held with Member States' treasuries or national central banks. These institutions carry the lowest counterparty risk for the EDF (exposure is with its Member States).

For the part of the EDF's treasury resources kept with commercial banks in order to cover the execution of payments, replenishment of these accounts is executed on a just-in-time basis and is automatically managed by the Commission treasury's cash management system. Minimum cash levels, proportional to the average amount of daily payments made from it, are kept on each account. As a consequence the amounts kept overnight on these accounts remain constantly at low levels which ensure the EDF's risk exposure is limited.

In addition, specific guidelines are applied for the selection of commercial banks in order to further minimise counterparty risk to which the EDF is exposed.

All commercial banks are selected by call for tenders. The minimum short-term credit rating required for admission to the tendering procedures is Moody's P-1 or equivalent (S&P A-1 or Fitch F1). A lower level may be required in specific and duly justified circumstances.

40.5.LIQUIDITY RISK

Maturity analysis of financial liabilities by remaining contractual maturity

| | | | | EUR millions |
| --- | --- | --- | --- | --- |
| | < 1 year | 1-5 years | > 5 years | Total |
| Financial liabilities | 549 | 6 | – | 555 |
| Total at 31.12.2016 | 549 | 6 | – | 555 |
| Financial liabilities | 520 | 10 | – | 530 |
| Total at 31.12.2015 | 520 | 10 | – | 530 |

EUR millions

< 1 year

1-5 years

> 5 years

Total

Financial liabilities

549

6

–

555

Total at 31.12.2016

549

6

–

555

Financial liabilities

520

10

–

530

Total at 31.12.2015

520

10

–

530

Budget principles applied to the EDF ensure that overall cash resources for the budgetary period are always sufficient for the execution of all related payments. Indeed the total Member States' contributions equal the overall amount of payment appropriations for the relevant budgetary period.

Member States contributions to EDF, however, are paid in three instalments per year, while payments are subject to certain seasonality.

In order to ensure that treasury resources are always sufficient to cover the payments to be executed in any given month, information on the treasury situation is regularly exchanged between the Commission' treasury and the relevant spending departments in order to ensure that payments executed in any given period do not exceed the available treasury resources.

In addition to the above, in the context of the EDF's daily treasury operations, automated cash management tools ensure that sufficient liquidity is available on each of the EDF's bank accounts, on a daily basis.

41.RELATED PARTY DISCLOSURES

The related parties of the EDF are the Bêkou EU Trust Fund and the EUTF for Africa. Transactions between these entities take place as part of the normal operations of the EDF and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules.

The EDF has no separate management since it is managed by the Commission. The entitlements of the key management of the EU, including the Commission, have been disclosed in the Consolidated annual accounts of the European Union under heading 7.2 "Key management entitlements".

42.EVENTS AFTER THE BALANCE SHEET DATE

At the date of transmission of these accounts, no material issues had come to the attention of or were reported to the Accounting Officer of the EDF that would require separate disclosure under this section. The annual accounts and related notes were prepared using the most recently available information and this is reflected in the information presented above.

43.RECONCILIATION OF ECONOMIC RESULT AND BUDGET RESULT

The economic result of the year is calculated on the basis of accrual accounting principles. The budget result is however based on cash accounting rules. As the economic result and the budget result both cover the same underlying operational transactions, it is a useful control to ensure that they are reconcilable. The table below shows this reconciliation, highlighting the key reconciling amounts, split between revenue and expenditure items.

| | | EUR millions |
| --- | --- | --- |
| | 2016 | 2015 |
| ECONOMIC RESULT OF THE YEAR | (3 073) | (3 152) |
| | | |
| Revenue | | |
| Entitlements not affecting the budget result | (2) | (1) |
| Entitlements established in current year but not yet collected | (7) | (11) |
| Entitlements established in previous years and collected in current year | 16 | 19 |
| Net effect of pre-financing | 43 | 28 |
| Accrued revenue (net) | 8 | 29 |
| Expenses | | |
| Expenses of the current year not yet paid | 63 | 61 |
| Expenses of previous years paid in the current year | (129) | (221) |
| Payments cancellation | 22 | 12 |
| Net effect of pre-financing | (459) | (53) |
| Accrued expenses (net) | 168 | 200 |
| | | |
| BUDGET RESULT OF THE YEAR | (3 350) | (3 088) |

EUR millions

2016

2015

ECONOMIC RESULT OF THE YEAR

(3 073)

(3 152)

Revenue

Entitlements not affecting the budget result

(2)

(1)

Entitlements established in current year but not yet collected

(7)

(11)

Entitlements established in previous years and collected in current year

16

19

Net effect of pre-financing

43

28

Accrued revenue (net)

8

29

Expenses

Expenses of the current year not yet paid

63

61

Expenses of previous years paid in the current year

(129)

(221)

Payments cancellation

22

12

Net effect of pre-financing

(459)

(53)

Accrued expenses (net)

168

200

BUDGET RESULT OF THE YEAR

(3 350)

(3 088)

43.1.RECONCILING ITEMS - REVENUE

The budgetary revenue of a financial year corresponds to the revenue collected from entitlements established in the course of the year and amounts collected from entitlements established in previous years.

The entitlements not affecting the budget result are recorded in the economic result but from a budgetary perspective cannot be considered as revenues as the cashed amount is transferred to reserves and cannot be recommitted without a Council decision.

The entitlements established in the current year but not yet collected are to be deducted from the economic result for reconciliation purposes as they do not form part of budgetary revenue. On the contrary, the entitlements established in previous years and collected in the current year must be added to the economic result for reconciliation purposes.

The net effect of pre-financing is the clearing of the recovered pre-financing amounts. This is a cash receipt which has no impact on the economic result.

The net accrued revenue mainly consists of accruals made for year-end cut-off purposes. Only the net effect, i.e. the accrued revenue of the current year less the reversal of accrued revenue of the previous year, is taken into consideration.

43.2.RECONCILING ITEMS – EXPENDITURE

Expenses of the current year not yet paid are to be added for reconciliation purposes as they are included in the economic result but do not form part of budgetary expenditure. On the contrary, the expenses of previous years paid in the current year must be deducted from the economic result for reconciliation purposes as they are part of the current year's budgetary expenditure but have either no effect on the economic result or they decrease the expenses in case of corrections.

The cash receipts from payment cancellations do not affect the economic result whereas they impact the budget result.

The net effect of pre-financing is the combination of the new pre-financing amounts paid in the current year (recognised as budgetary expenditure of the year) and the clearing of pre-financing paid in the current year or previous years through the acceptance of eligible costs. The latter represents an expense in accrual terms but not in the budgetary accounts since the payment of the initial pre-financing had already been considered as a budgetary expenditure at the time of its payment.

The net accrued expenses mainly consist of accruals made for year-end cut-off purposes, i.e. eligible expenses incurred by beneficiaries of EDF funds but not yet reported to the EDF. Only the net effect, i.e. the accrued expenses of the current year less the reversal of accrued expenses of the previous year, is taken into consideration.

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF

It should be noted that due to the rounding of figures into thousands of euros, some financial data in the tables may appear not to add-up.

FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND

It should be noted that due to the rounding of figures into thousands of euros, some financial data in the tables may appear not to add-up.

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND

General background on Union Trust Funds

A trust fund is a legal arrangement with a distinct financial structure that pools the funds of several donors to jointly finance an action on the basis of commonly agreed objectives and reporting formats.

In accordance with Article 187(1) of the Financial Regulation applicable to the general budget of the Union (EU FR) and Article 42 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR), the Commission is authorised to create Union Trust Funds for external actions (EUTF). The EUTFs are created under an agreement concluded with other donors to respond to emergency, post-emergency or thematic actions. The establishment of an EUTF needs to be justified namely by EU added value (its objectives can be better met at EU than at national level), and complementarity (the trust fund should not duplicate already existing and similar instruments).

EUTFs are created for a limited duration, which is, together with its objectives, defined by the constitutive act of each trust fund. In accordance with Article 187 of the EU FR, the EUTF has specific governance arrangements and contributions are placed outside the EU budget. Each EUTF has a governing board ('trust fund board') chaired by the Commission with representation of the donors and the non-contributing Member States as observers.

The Operational Board that is composed of the EU representative (the 'Chair'), founding Members ('Deputy Chairs') and representatives of other donors, who contributed at least EUR 3 million ('Members'), decides upon the use of the funds of the EUTF and assesses the effectiveness of the activities financed by the EUTF. On the administrative level the Operational Board is amongst others responsible for approval of the annual report, audited annual accounts, assessing the effectiveness of the internal control systems, follow up of observations by internal and external auditors, etc.

EUTFs are managed by the Commission under the responsibility of the authorising officer by delegation who provides assurance on the use of the funds to the Commission and to third donors. The EUTF manager is the authorising officer by sub-delegation. As is the case for the European Development Fund, the accounting officer of a EUTF is the accounting officer of the Commission, who is responsible for laying down accounting procedures and chart of accounts common to all EUTFs.

The Bêkou Trust Fund

The first multi-donor EU Trust Fund called Bêkou, which means 'hope' in Sango, was established on 15 July 2014, by the EU Commission (represented by DGs DEVCO and

  ECHO,

  and the

  EEAS

  ) and three of its Member States (Germany,

  France

  and the

  Netherlands

  ), with the aim of promoting the stabilisation and reconstruction of the Central African Republic (CAR). It has been established for a maximum duration of 60 months. The trust fund is managed from Brussels.

Annual accounts of the Bêkou Trust Fund

According to Article 8 of the Agreement establishing the European Union Trust Fund for the Central African Republic, the 'Bêkou EU Trust Fund' and article 11.2.1 of the Constitutive agreement, the annual accounts comprise two parts: (1) The annual financial report prepared by the EUTF manager and (2) The annual financial statements prepared by the EC Accounting Officer, who is, based on the same article also the Accounting Officer of the trust fund.

According to Article 8 of the Constitutive agreement the financial statements shall be prepared in accordance with the accounting rules adopted by the Commission's Accounting Officer (EU Accounting Rules, EAR) that are based on the International Public Sector Accounting Standards (IPSAS).

The annual accounts are subject to independent external audit and the final annual accounts are submitted by the EUTF manager and the Accounting Officer to the operational board for approval (Article 8.3.4(c)).

Highlights of the year

At the end of 2016, 7 donors contributed to the Bêkou Trust Fund: the European Development Fund (EDF), the EU Budget, 4 Member States (MS) and 1 non-Member State.

The Trust Fund will finance activities that contribute to assisting the Central African Republic in its recovery from crisis and in all aspects of reconstruction, with the emphasis on measures designed to:

·Restore essential public services (e.g. electricity, transport, access to justice and access to water) and basic social services (health and education), and stabilise the food and nutrition situation;

·Revive economic activity;

·Stabilise the country and restore the social fabric, in particular through reconciliation, peaceful coexistence between the communities of CAR and respect for human rights;

·Re-establish the legitimacy, rebuild capacity and restore the operation of national and local administrative structures.

It will also finance activities that contribute to mitigating the impact of the crisis on the countries sharing a common border with CAR and/or sheltering refugees and those fleeing the violence in CAR.

At the end of 2016 the total contribution pledged to the EUTF amounted to approximately EUR 173 million: EDF with EUR 68 million, EU Budget with EUR 50 million while MS and other donors have announced pledges of EUR 55 million.

In total, 11 programmes had been adopted for the recovery of the country. Up to the end of 2016 an amount of EUR 91.3 million in the areas of health, food and nutrition security, infrastructure, integration of women in the society as well as aid to central african refugies in surrounding countries had been committed.

BALANCE SHEET OF THE BÊKOU EU TRUST FUND

| | | | EUR '000 |
| --- | --- | --- | --- |
| | | 31.12.2016 | 31.12.2015 |
| NON-CURRENT ASSETS | | | |
| Pre-financing | | 3 604 | 3 446 |
| | | 3 604 | 3 446 |
| CURRENT ASSETS | | | |
| Pre-financing | | 12 458 | 6 047 |
| Exchange receivables and non-exchange recoverables | | 1 455 | 1 364 |
| Cash and cash equivalents | | 43 036 | 52 461 |
| | | 56 949 | 59 873 |
| TOTAL ASSETS | | 60 554 | 63 319 |
| | | | |
| NON-CURRENT LIABILITIES | | | |
| Financial liabilities | | (59 339) | (63 125) |
| | | (59 339) | (63 125) |
| CURRENT LIABILITIES | | | |
| Accrued charges and deferred income | | (1 215) | (193) |
| | | (1 215) | (193) |
| TOTAL LIABILITIES | | (60 554) | (63 319) |
| | | | |
| NET ASSETS | | - | – |
| | | | |
| FUNDS & RESERVES | | | |
| Accumulated surplus | | – | – |
| Economic result of the year | | – | – |
| NET ASSETS | | – | – |

EUR '000

31.12.2016

31.12.2015

NON-CURRENT ASSETS

Pre-financing

3 604

3 446

3 604

3 446

CURRENT ASSETS

Pre-financing

12 458

6 047

Exchange receivables and non-exchange recoverables

1 455

1 364

Cash and cash equivalents

43 036

52 461

56 949

59 873

TOTAL ASSETS

60 554

63 319

NON-CURRENT LIABILITIES

Financial liabilities

(59 339)

(63 125)

(59 339)

(63 125)

CURRENT LIABILITIES

Accrued charges and deferred income

(1 215)

(193)

(1 215)

(193)

TOTAL LIABILITIES

(60 554)

(63 319)

NET ASSETS

-

–

FUNDS & RESERVES

Accumulated surplus

–

–

Economic result of the year

–

–

NET ASSETS

–

–

STATEMENT OF FINANCIAL PERFORMANCE OF THE BÊKOU EU TRUST FUND

| | | | EUR '000 |
| --- | --- | --- | --- |
| | | 2016 | 2015 |
| REVENUE | | | |
| Revenue from non-exchange transactions | | | |
| Revenue from donations | | 17 232 | 9 354 |
| | | 17 232 | 9 354 |
| Revenue from exchange transactions | | | |
| Financial income | | 48 | 101 |
| | | 48 | 101 |
| Total Revenue | | 17 280 | 9 455 |
| EXPENSES | | | |
| Operating expenses | | (16 432) | (8 824) |
| Other expenses | | (848) | (631) |
| Total Expenses | | (17 280) | (9 455) |
| ECONOMIC RESULT OF THE YEAR | | – | – |

EUR '000

2016

2015

REVENUE

Revenue from non-exchange transactions

Revenue from donations

17 232

9 354

17 232

9 354

Revenue from exchange transactions

Financial income

48

101

48

101

Total Revenue

17 280

9 455

EXPENSES

Operating expenses

(16 432)

(8 824)

Other expenses

(848)

(631)

Total Expenses

(17 280)

(9 455)

ECONOMIC RESULT OF THE YEAR

–

–

CASHFLOW STATEMENT OF THE BÊKOU EU TRUST FUND

| | | EUR '000 |
| --- | --- | --- |
| | 2016 | 2015 |
| Economic result of the year | – | – |
| Operating activities | | |
| (Increase)/decrease in pre-financing | (6 569) | (9 493) |
| (Increase)/decrease in exchange receivables and non-exchange recoverables | (91) | (1 364) |
| Increase/(decrease) in financial liabilities | (3 786) | 18 125 |
| Increase/(decrease) in accrued charges and deferred income | 1 021 | 193 |
| | | |
| NET CASHFLOW | (9 425) | 7 461 |
| | | |
| Net increase/(decrease) in cash and cash equivalents | (9 425) | 7 461 |
| Cash and cash equivalents at the beginning of the year | 52 461 | 45 000 |
| Cash and cash equivalents at year-end | 43 036 | 52 461 |

EUR '000

2016

2015

Economic result of the year

–

–

Operating activities

(Increase)/decrease in pre-financing

(6 569)

(9 493)

(Increase)/decrease in exchange receivables and non-exchange recoverables

(91)

(1 364)

Increase/(decrease) in financial liabilities

(3 786)

18 125

Increase/(decrease) in accrued charges and deferred income

1 021

193

NET CASHFLOW

(9 425)

7 461

Net increase/(decrease) in cash and cash equivalents

(9 425)

7 461

Cash and cash equivalents at the beginning of the year

52 461

45 000

Cash and cash equivalents at year-end

43 036

52 461

STATEMENT OF CHANGES IN NET ASSETS OF THE BÊKOU EU TRUST FUND

| | | | EUR '000 |
| --- | --- | --- | --- |
| | Accumulated surplus/


  (deficit) | Economic result of the year | Net assets |
| BALANCE AS AT 31.12.2015 | – | – | – |
| Economic result of the year | – | – | – |
| BALANCE AS AT 31.12.2016 | – | – | – |

EUR '000

Accumulated surplus/

(deficit)

Economic result of the year

Net assets

BALANCE AS AT 31.12.2015

–

–

–

Economic result of the year

–

–

–

BALANCE AS AT 31.12.2016

–

–

–

FINAL ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA

It should be noted that due to the rounding of figures into thousands of euros, some financial data in the tables may appear not to add-up.

BACKGROUND INFORMATION ON THE EUTF FOR AFRICA

General background on Union Trust Funds

A trust fund is a legal arrangement with a distinct financial structure that pools the funds of several donors to jointly finance an action on the basis of commonly agreed objectives and reporting formats.

In accordance with Article 187(1) of the Financial Regulation applicable to the general budget of the Union (EU FR) and Article 42 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR), the Commission is authorised to create Union Trust Funds for external actions (EUTF). The EUTFs are created under an agreement concluded with other donors to respond to emergency, post­emergency or thematic actions. The establishment of an EUTF needs to be justified namely by EU added value (its objectives can be better met at EU than at national level), and complementarity (the trust fund should not duplicate already existing and similar instruments).

EUTFs offer a number of advantages: they are EU led instruments, offering better coordination with EU Member States; better control of operations by the Union and other donors and enhanced EU visibility. The EUTFs benefit from fast decision-making processes and from their capacity to pool larger sums from different sources making them a flexible, proactive and adaptable tool.

EUTFs are created for a limited duration, which is, together with its objectives, defined by the constitutive act of each trust fund. In accordance with Article 187 of the EU FR, the EUTF has specific governance arrangements and contributions are placed outside the EU budget. Each EUTF has a governing board ('trust fund board') chaired by the Commission with representation of the donors and the non-contributing Member States as observers. The trust fund board decides upon the use of the funds of the EUTF.

The work plan of the EUTF is approved by the Operational Board that is composed of the EU representative (the 'Chair'), founding Members ('Deputy Chairs') and representatives of other donors, who contributed at least EUR 3 million ('Members') who also assesses the effectiveness of the activities financed by the EUTF. On the administrative level the Operational Board is amongst others resonsible for approval of the annual report, audited annual accounts, assessing the effectiveness of the internal control systems, follow up of observations by internal and external auditors, etc.

EUTFs are managed by the Commission under the responsibility of the authorising officer by delegation who provides assurance on the use of the funds to the Commission and to third donors. The EUTF manager is the authorising officer by sub-delegation. As is the case for the European Development Fund, the accounting officer of a EUTF is the accounting officer of the Commission, who is responsible for laying down accounting procedures and chart of accounts common to all EUTFs.

The EUTF for Africa

European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa ('EUTF for Africa') was launched on 12 November 2015 during the

  Valletta Summit on Migration

  . The main objectives of this trust fund is to support all aspects of stability and contribute to better migration management as well as addressing the root causes of destabilisation, forced displacement and irregular migration, in particular by promoting resilience, economic and equal opportunities, security and development and addressing human rights abuses.

The trust fund operates in three main geographic areas, namely t

  he Sahel region and Lake Chad area

  ,

  the Horn of Africa

  and

  the North of Africa

  but also the neighbouring countries of the eligible countries may benefit, on a case by case basis, from the Trust fund's project. The Trust Fund is established for a limited period, until 31 December 2020 in order to provide a short and medium-term response to the challenges of the regions. The trust fund is managed from Brussels.

Annual accounts of the EUTF for Africa

According to Article 7 of ' The agreement establishing the European Union emergency trust fund for stability and addressing root causes of irregular migration and displaced persons in Africa and its internal rules' ('Constitutive agreement') the annual accounts comprise two parts: (1) The annual financial report prepared by the EUTF manager and (2) The annual financial statements prepared by the EC Accounting Officer, who is, based on the same article also the Accounting Officer of the trust fund.

According to Article 8 of the Constitutive agreement the financial statements shall be prepared in accordance with the accounting rules adopted by the Commission's Accounting Officer (EU Accounting Rules, EAR) that are based on the International Public Sector Accounting Standards (IPSAS).

The annual accounts are subject to independent external audit and the final annual accounts are submitted by the EUTF manager and the Accounting Officer to the operational board for approval (Article 8.3.4(c)).

The 2016 is the first year in which the financial statements of the EUTF for Africa are issued. This is in accordance with Article 8.3.2 following which the obligation of the accounting officer to prepare financial statements only applies in respect of that first financial year if the trust fund existed for more than six months. The transactions of 2015 are reflected in the comparative figures.

Highlights of the year

At the end of 2016 the total pledged resources amounted to EUR 2 555 million. Total external contributions amounted to EUR 152 million and the contributions from the EU and EDF budgets amounted to EUR 2 403 million.

In just a year, a total of 106 projects worth EUR 1.589 million have been approved for the Sahel/Lake Chad, the Horn of Africa and the North of Africa regions. The projects can be split by a geographical window as follows: 65 programs in the Sahel/Lake Chad region for a total amount of EUR 918.5 million; 35 programs in the Horn of Africa region for a total amount of EUR 606 million, and 6 programs in the North of Africa region for a total amount of EUR 64.5 million. The projects cover the following priority areas: development benefits of migration (EUR 942 million); legal migration and mobility (EUR 68 million); protection and asylum (EUR 233 million); prevention of and fight against irregular migration; migrant smuggling and trafficking in human beings (EUR 170 million); return, readmission and reintegration (EUR 163 million) and other (EUR 13 million). Out of the approved amount EUR 1 488 million has been committed and EUR 600 million has been contracted to implementing partners.

BALANCE SHEET OF THE EUTF FOR AFRICA

| | | | EUR '000 |
| --- | --- | --- | --- |
| | | 31.12.2016 | 31.12.2015 |
| NON-CURRENT ASSETS | | | |
| Pre-financing | | 44 854 | – |
| | | 44 854 | – |
| CURRENT ASSETS | | | |
| Pre-financing | | 70 731 | – |
| Exchange receivables and non-exchange recoverables | | 9 476 | – |
| Cash and cash equivalents | | 14 879 | 32 642 |
| | | 95 086 | 32 642 |
| TOTAL ASSETS | | 139 941 | 32 642 |
| | | | |
| NON-CURRENT LIABILITIES | | | |
| Financial liabilities | | (138 502) | (32 642) |
| | | (138 502) | (32 642) |
| CURRENT LIABILITIES | | | |
| Payables | | (702) | – |
| Accrued charges and deferred income | | (736) | – |
| | | (1 439) | – |
| TOTAL LIABILITIES | | (139 941) | (32 642) |
| | | | |
| NET ASSETS | | – | – |
| | | | |
| FUNDS & RESERVES | | | |
| Accumulated surplus | | – | – |
| Economic result of the year | | – | – |
| NET ASSETS | | – | – |

EUR '000

31.12.2016

31.12.2015

NON-CURRENT ASSETS

Pre-financing

44 854

–

44 854

–

CURRENT ASSETS

Pre-financing

70 731

–

Exchange receivables and non-exchange recoverables

9 476

–

Cash and cash equivalents

14 879

32 642

95 086

32 642

TOTAL ASSETS

139 941

32 642

NON-CURRENT LIABILITIES

Financial liabilities

(138 502)

(32 642)

(138 502)

(32 642)

CURRENT LIABILITIES

Payables

(702)

–

Accrued charges and deferred income

(736)

–

(1 439)

–

TOTAL LIABILITIES

(139 941)

(32 642)

NET ASSETS

–

–

FUNDS & RESERVES

Accumulated surplus

–

–

Economic result of the year

–

–

NET ASSETS

–

–

STATEMENT OF FINANCIAL PERFORMANCE OF THE EUTF FOR AFRICA

| | | | EUR '000 |
| --- | --- | --- | --- |
| | | 2016 | 2015 |
| REVENUE | | | |
| Revenue from non-exchange transactions | | | |
| Revenue from donations | | 52 246 | – |
| | | 52 246 | – |
| Revenue from exchange transactions | | | |
| Financial income | | 54 | – |
| Other exchange revenue | | 43 | – |
| | | 97 | – |
| Total revenue | | 52 343 | – |
| EXPENSES | | | |
| Operating expenses | | (49 042) | – |
| Other expenses | | (3 301) | – |
| Total expenses | | (52 343) | – |
| ECONOMIC RESULT OF THE YEAR | | – | – |

EUR '000

2016

2015

REVENUE

Revenue from non-exchange transactions

Revenue from donations

52 246

–

52 246

–

Revenue from exchange transactions

Financial income

54

–

Other exchange revenue

43

–

97

–

Total revenue

52 343

–

EXPENSES

Operating expenses

(49 042)

–

Other expenses

(3 301)

–

Total expenses

(52 343)

–

ECONOMIC RESULT OF THE YEAR

–

–

CASHFLOW STATEMENT OF THE EUTF FOR AFRICA

| | | EUR '000 |
| --- | --- | --- |
| | 2016 | 2015 |
| Economic result of the year | – | – |
| Operating activities | | |
| (Increase)/decrease in pre-financing | (115 585) | – |
| (Increase)/decrease in exchange receivables and non-exchange recoverables | (9 476) | – |
| Increase/(decrease) in financial liabilities | 105 860 | 32 642 |
| Increase/(decrease) in payables | 702 | – |
| Increase/(decrease) in accrued charges and deferred income | 736 | – |
| | | |
| NET CASHFLOW | (17 763) | 32 642 |
| | | |
| Net increase/(decrease) in cash and cash equivalents | (17 763) | 32 642 |
| Cash and cash equivalents at the beginning of the year | 32 642 | – |
| Cash and cash equivalents at year-end | 14 879 | 32 642 |

EUR '000

2016

2015

Economic result of the year

–

–

Operating activities

(Increase)/decrease in pre-financing

(115 585)

–

(Increase)/decrease in exchange receivables and non-exchange recoverables

(9 476)

–

Increase/(decrease) in financial liabilities

105 860

32 642

Increase/(decrease) in payables

702

–

Increase/(decrease) in accrued charges and deferred income

736

–

NET CASHFLOW

(17 763)

32 642

Net increase/(decrease) in cash and cash equivalents

(17 763)

32 642

Cash and cash equivalents at the beginning of the year

32 642

–

Cash and cash equivalents at year-end

14 879

32 642

STATEMENT OF CHANGES IN NET ASSETS OF THE EUTF FOR AFRICA

| | | | EUR '000 |
| --- | --- | --- | --- |
| | Accumulated surplus/


  (deficit) | Economic result of the year | Net assets |
| BALANCE AS AT 31.12.2015 | – | – | – |
| Economic result of the year | – | – | – |
| BALANCE AS AT 31.12.2016 | – | – | – |

EUR '000

Accumulated surplus/

(deficit)

Economic result of the year

Net assets

BALANCE AS AT 31.12.2015

–

–

–

Economic result of the year

–

–

–

BALANCE AS AT 31.12.2016

–

–

–

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add-up.

CONSOLIDATED BALANCE SHEET

| | | EUR millions |
| --- | --- | --- |
| | 31.12.2016 | 31.12.2015 |
| NON-CURRENT ASSETS | | |
| Pre-financing | 457 | 520 |
| Trust Fund contributions | – | – |
| Exchange receivables and non-exchange recoverables | – | – |
| | 457 | 520 |
| CURRENT ASSETS | | |
| Pre-financing | 1 455 | 1 151 |
| Exchange receivables and non-exchange recoverables | 143 | 172 |
| Cash and cash equivalents | 738 | 589 |
| | 2 336 | 1 912 |
| TOTAL ASSETS | 2 794 | 2 432 |
| | | |
| NON-CURRENT LIABILITIES | | |
| Provisions | (4) | (4) |
| Financial liabilities | (106) | (72) |
| | (110) | (76) |
| CURRENT LIABILITIES | | |
| Payables | (549) | (520) |
| Accrued charges and deferred income | (778) | (855) |
| | (1 327) | (1 376) |
| TOTAL LIABILITIES | (1 437) | (1 451) |
| | | |
| NET ASSETS | 1 357 | 980 |
| | | |
| FUNDS & RESERVES | | |
| Called fund capital - active EDFs | 42 323 | 38 873 |
| Called fund capital from closed EDFs carried forward | 2 252 | 2 252 |
| Called fund capital transfers between active EDFs | – | – |
| Economic result carried forward from previous years | (40 146) | (36 994) |
| Economic result of the year | (3 073) | (3 152) |
| NET ASSETS | 1 357 | 980 |

EUR millions

31.12.2016

31.12.2015

NON-CURRENT ASSETS

Pre-financing

457

520

Trust Fund contributions

–

–

Exchange receivables and non-exchange recoverables

–

–

457

520

CURRENT ASSETS

Pre-financing

1 455

1 151

Exchange receivables and non-exchange recoverables

143

172

Cash and cash equivalents

738

589

2 336

1 912

TOTAL ASSETS

2 794

2 432

NON-CURRENT LIABILITIES

Provisions

(4)

(4)

Financial liabilities

(106)

(72)

(110)

(76)

CURRENT LIABILITIES

Payables

(549)

(520)

Accrued charges and deferred income

(778)

(855)

(1 327)

(1 376)

TOTAL LIABILITIES

(1 437)

(1 451)

NET ASSETS

1 357

980

FUNDS & RESERVES

Called fund capital - active EDFs

42 323

38 873

Called fund capital from closed EDFs carried forward

2 252

2 252

Called fund capital transfers between active EDFs

–

–

Economic result carried forward from previous years

(40 146)

(36 994)

Economic result of the year

(3 073)

(3 152)

NET ASSETS

1 357

980

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE

| | | EUR millions |
| --- | --- | --- |
| | 2016 | 2015 |
| REVENUE | | |
| Revenue from non-exchange transactions | | |
| Recovery of expenses | 8 | 90 |
| Revenue from trust funds donations | 35 | 4 |
| | 43 | 94 |
| Revenue from exchange transactions | | |
| Financial income | 4 | 8 |
| Other income | 62 | 42 |
| | 66 | 50 |
| Total Revenue | 108 | 144 |
| EXPENSES | | |
| Aid instruments | (2 935) | (3 059) |
| Co-financing expenses | 15 | (69) |
| Finance costs | 4 | (1) |
| Expenses implemented by trust funds | (65) | (4) |
| Other expenses | (200) | (163) |
| Total Expenses | (3 181) | (3 296) |
| | | |
| ECONOMIC RESULT OF THE YEAR | (3 073) | (3 152) |

EUR millions

2016

2015

REVENUE

Revenue from non-exchange transactions

Recovery of expenses

8

90

Revenue from trust funds donations

35

4

43

94

Revenue from exchange transactions

Financial income

4

8

Other income

62

42

66

50

Total Revenue

108

144

EXPENSES

Aid instruments

(2 935)

(3 059)

Co-financing expenses

15

(69)

Finance costs

4

(1)

Expenses implemented by trust funds

(65)

(4)

Other expenses

(200)

(163)

Total Expenses

(3 181)

(3 296)

ECONOMIC RESULT OF THE YEAR

(3 073)

(3 152)

CONSOLIDATED CASH FLOW STATEMENT

| | | EUR millions |
| --- | --- | --- |
| | 2016 | 2015 |
| Economic result of the year | (3 073) | (3 152) |
| Operating activities | | |
| Capital increase - contributions | 3 450 | 3 200 |
| (Increase)/decrease in trust funds contributions | (0) | 39 |
| (Increase)/decrease in pre-financing | (242) | 204 |
| (Increase)/decrease in exchange receivables and non-exchange recoverables | 29 | (43) |
| Increase/(decrease) in provisions | – | 4 |
| Increase/(decrease) in financial liabilities | 34 | (7) |
| Increase/(decrease) in payables | 29 | (179) |
| Increase/(decrease) in accrued charges and deferred income | (78) | 132 |
| | | |
| NET CASHFLOW | 149 | 198 |
| | | |
| Net increase/(decrease) in cash and cash equivalents | 149 | 198 |
| Cash and cash equivalents at the beginning of the year | 589 | 391 |
| Cash and cash equivalents at year-end | 738 | 589 |

EUR millions

2016

2015

Economic result of the year

(3 073)

(3 152)

Operating activities

Capital increase - contributions

3 450

3 200

(Increase)/decrease in trust funds contributions

(0)

39

(Increase)/decrease in pre-financing

(242)

204

(Increase)/decrease in exchange receivables and non-exchange recoverables

29

(43)

Increase/(decrease) in provisions

–

4

Increase/(decrease) in financial liabilities

34

(7)

Increase/(decrease) in payables

29

(179)

Increase/(decrease) in accrued charges and deferred income

(78)

132

NET CASHFLOW

149

198

Net increase/(decrease) in cash and cash equivalents

149

198

Cash and cash equivalents at the beginning of the year

589

391

Cash and cash equivalents at year-end

738

589

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

| | | | | | | EUR millions |
| --- | --- | --- | --- | --- | --- | --- |
| | Fund capital - active EDFs (A) | Uncalled funds - active EDFs (B) | Called fund capital - active EDFs (C) = (A)-(B) | Cumulative Reserves (D) | Called fund capital from closed EDFs carried forward (E) | Total Net Assets (C)+(D)+(E) |
| BALANCE AS AT 31.12.2014 | 45 691 | 10 018 | 35 673 | (36 994) | 2 252 | 932 |
| Capital increase - contributions | | (4 795) | 4 795 | – | – | 4 795 |
| Capital decrease - funds committed under the Bridging Facility | (1 595) | | (1 595) | | | (1 595) |
| Recognition of the 11th EDF capital | 29 367 | 29 367 | – | | | – |
| Economic result of the year | – | – | – | (3 152) | – | (3 152) |
| BALANCE AS AT 31.12.2015 | 73 464 | 34 590 | 38 874 | (40 146) | 2 252 | 980 |
| Capital increase - contributions | | (3 450) | 3 450 | | | 3 450 |
| Economic result of the year | | | – | (3 073) | | (3 073) |
| BALANCE AS AT 31.12.2016 | 73 464 | 31 140 | 42 323 | (43 219) | 2 252 | 1 357 |

EUR millions

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Total Net Assets (C)+(D)+(E)

BALANCE AS AT 31.12.2014

45 691

10 018

35 673

(36 994)

2 252

932

Capital increase - contributions

(4 795)

4 795

–

–

4 795

Capital decrease - funds committed under the Bridging Facility

(1 595)

(1 595)

(1 595)

Recognition of the 11th EDF capital

29 367

29 367

–

–

Economic result of the year

–

–

–

(3 152)

–

(3 152)

BALANCE AS AT 31.12.2015

73 464

34 590

38 874

(40 146)

2 252

980

Capital increase - contributions

(3 450)

3 450

3 450

Economic result of the year

–

(3 073)

(3 073)

BALANCE AS AT 31.12.2016

73 464

31 140

42 323

(43 219)

2 252

1 357

EDF REPORT ON FINANCIAL IMPLEMENTATION

REPORT ON FINANCIAL IMPLEMENTATION - 2016

INTRODUCTORY NOTE

Previous EDFs

·As the Sixth EDF was closed in 2006 and the Seventh EDF was closed in 2008, the annual accounts no longer contain implementation tables for these EDFs. However, implementation of the transferred balances can be found in the Ninth EDF.

·As in past years, to ensure transparency in the presentation of the accounts for 2016, the tables set out separately for the Eighth EDF the part used for Lomé Convention programming and the part used for programming under the Cotonou Agreement.

·In accordance with Article 1(2)(b) of the Internal Agreement of the Ninth EDF, balances and decommitments of previous EDFs have been transferred to the Ninth EDF, and, during the life ot the Ninth EDF, have been committed as Ninth EDF funds.

10th EDF

The ACP-EC Partnership Agreement signed on 23 June 2000 in Cotonou by the Member States of the European Community and the States of Africa, the Caribbean and the Pacific (ACP States) entered into force on 1 April 2003. The Cotonou Agreement was amended twice, firstly by the agreement signed in Luxembourg on 25 June 2005, secondly by the agreement signed in Ouagadougou on 22 june 2010.

The EU Council Decision of 27 November 2001 (2001/822/EC) on the association of the overseas countries and territories (OCT) with the European Union entered into force on 2 December 2001. This Decision was amended on 19 March 2007 (Decision 2007/249/EC).

The Internal Agreement on the financing of Community aid under the multiannual financial framework for the period 2008-2013 in accordance with the revised Cotonou Agreement, adopted by the Representatives of the Governments of the Member States of the European Community on 17 July 2006, entered into force on 1 July 2008.

Under the Cotonou Agreement, the second period (2008-2013) of Community aid to the ACP States and OCTs is funded by the 10th EDF for an amount of EUR 22 682 million, of which:

·EUR 21 966 million is allocated to the ACP countries in accordance with the multiannual financial framework set out in Annex Ib to the revised Cotonou Agreement, of which EUR 20 466 million is managed by the European Commission;

·EUR 286 million is allocated to the OCTs in accordance with Annex IIAa of the revised Council Decision on the association of the OCTs with the European Community, of which 256 million is managed by the European Commission;

·EUR 430 million is for the Commission to finance the costs arising from the programming and implementation of 10th EDF resources, in accordance with Article 6 of the Internal Agreement.

According to the "Sunset clause" of the 10th EDF, (Articles 1(4) and 1(5) of the 10th EDF Internal Agreement) no funds could be committed after 31 December 2013. Uncommitted funds were transferred to the 11th EDF performance reserve.

11th EDF

The ACP-EC Partnership Agreement signed on 23 June 2000 in Cotonou by the Member States of the European Community and the States of Africa, the Caribbean and the Pacific (ACP States) entered into force on 1 April 2003. The Cotonou Agreement was amended twice, firstly by the agreement signed in Luxembourg on 25 June 2005, secondly by the agreement signed in Ouagadougou on 22 june 2010.

The EU Council Decision of 27 November 2001 (2001/822/EC) on the association of the overseas countries and territories (OCT) with the European Union entered into force on 2 December 2001. This Decision was amended on 19 March 2007 (Decision 2007/249/EC).

The Internal Agreement on the financing of Community aid under the multiannual financial framework for the period 2014-2020 in accordance with the revised Cotonou Agreement, adopted by the Representatives of the Governments of the Member States of the European Community on August 2013, entered into force on March 2015.

Under the Cotonou Agreement, the third period (2014-2020) of Community aid to the ACP States and OCTs is funded by the 11th EDF for an amount of EUR 30 506 million, of which:

·EUR 29 089 million is allocated to the ACP countries in accordance with Article 1(2)(a) and Article 2(d) of the Internal Agreement, of which EUR 27 955 million is managed by the European Commission;

·EUR 364.5 million is allocated to the OCTs in accordance with Article 1(2)(a) and Article 3(1) of the Internal Agreement, of which 359.5 million is managed by the European Commission;

·EUR 1 052.5 million is for the Commission to finance the costs arising from the programming and implementation of 11th EDF resources, in accordance with Article 1(2)(a) of the Internal Agreement.

- Remaining funds on non-mobilisable performance reserves at 31/12/2016

The amounts decommitted from projects under the Ninth and previous EDFs are transferred to the performance reserve of the 10th EDF, with the exception of Stabex funds.

The decommited funds from projects under the 10th EDF are transferred to the performance reserve of the 11th EDF.

During 2016, all decommitted funds from previous EDFs were transferred to the respective reserves.

In accordance with article 1(4) of the 11th EDF Internal Agreement and the Council Decision of 2 August 2016 (2016/1337), an amount of decommitted funds from the 10th EDF was transferred for the purpose of replenishing the African Peace Facility for the period 2016-2018 up to a maximum of EUR 491 million and up to EUR 16 million for support of expenditure.

EUR millions

| Total available on non-mobilisable performance reserves at 31/12/2015 | 151 |
| --- | --- |
| Total made available on non-mobilisable performance reserves during 2016 | 534 |
| Less amount transferred for replenishing the African Peace Facility at 31/12/2016 | (386) |
| Balance of non-mobilisable reserve (from decommitted funds under the Eighth, Ninth and 10th EDF) at 31/12/2016 | 299 |

Total available on non-mobilisable performance reserves at 31/12/2015

151

Total made available on non-mobilisable performance reserves during 2016

534

Less amount transferred for replenishing the African Peace Facility at 31/12/2016

(386)

Balance of non-mobilisable reserve (from decommitted funds under the Eighth, Ninth and 10th EDF) at 31/12/2016

299

- 11th EDF Stabex reserve

Following the closure of Stabex accounts, unused/decommitted funds are transferred to the 11th EDF Stabex A Envelope reserve (10th EDF Internal Agreement Art. 1(4)) and then to the national indicative programmes of the countries concerned.

- EDF Co-financings

Under the 10th and 11th EDF, transfer agreements for co-financings from Member States were signed, and commitment appropriations were opened for a total amount of EUR 209 million, while payment appropriations were opened for the cashed amounts totalling EUR 190 million.

The situation of co-financing appropriations at 31/12/2016 is shown in the table below :

EUR millions

| | Commitments appropriations | Payment appropriations |
| --- | --- | --- |
| Co-financing - A Envelope | 190.0 | 171.3 |
| Co-financing - Intra ACP | 13.4 | 13.4 |
| Co-financing – Administrative expenses | 5.5 | 5.4 |
| | 209.4 | 190.1 |

Commitments appropriations

Payment appropriations

Co-financing - A Envelope

190.0

171.3

Co-financing - Intra ACP

13.4

13.4

Co-financing – Administrative expenses

5.5

5.4

209.4

190.1

The following tables, concerning the amounts decided, contracted and paid, show net figures. 

  The tables presenting the situation by instrument are annexed.

ANNUAL REPORT ON IMPLEMENTATION - FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK

| EUROPEAN INVESTMENT BANK | CA/501/17 |
| --- | --- |
| | 9 March 2017 |
| | Document 17/098 |
| | |
| | |
| BOARD OF DIRECTORS |
| Investment Facility |
| financial statements |
| as at 31 december 2016 |
| | | |
| | -Statement of financial position


  -Statement of profit or loss and other comprehensive income


  -Statement of changes in contributors’ resources


  -Statement of cash flows


  -Notes to the financial statements


  -Independent auditor’s report | |
| | |
| | |
| | |
| ORG.: E | CONFIDENTIAL |

EUROPEAN INVESTMENT BANK

CA/501/17

9 March 2017

Document 17/098

BOARD OF DIRECTORS

Investment Facility

financial statements

as at 31 december 2016

-Statement of financial position

-Statement of profit or loss and other comprehensive income

-Statement of changes in contributors’ resources

-Statement of cash flows

-Notes to the financial statements

-Independent auditor’s report

ORG.: E

CONFIDENTIAL

STATEMENT OF FINANCIAL POSITION

Notes

| | Notes | 31.12.2016 | 31.12.2015 |
| --- | --- | --- | --- |
| | | | |
| ASSETS | | | |
| Cash and cash equivalents | 5 | 360,817 | 448,995 |
| Amounts receivable from contributors | 9/16 | 86,395 | - |
| Held-to-maturity financial assets | 10 | 169,398 | 228,521 |
| Derivative financial instruments | 6 | 6,920 | 311 |
| Loans and receivables | 7 | 1,729,380 | 1,460,057 |
| Available-for-sale financial assets | 8 | 516,884 | 419,353 |
| Other assets | 11 | 345 | 27 |
| | | | |
| Total assets | | 2,870,139 | 2,557,264 |
| | | | |
| | | | |
| LIABILITIES AND CONTRIBUTORS' RESOURCES | | | |
| | | | |
| LIABILITIES | | | |
| Derivative financial instruments | 6 | 25,189 | 8,219 |
| Deferred income | 12 | 26,283 | 29,325 |
| Provisions for guarantees issued | 13 | 625 | - |
| Amounts owed to third parties | 14 | 116,114 | 101,202 |
| Other liabilities | 15 | 2,546 | 2,364 |
| | | | |
| Total liabilities | | 170,757 | 141,110 |
| | | | |
| CONTRIBUTORS' RESOURCES | | | |
| Member States Contribution called | 16 | 2,377,000 | 2,157,000 |
| Fair value reserve | | 142,884 | 163,993 |
| Retained earnings | | 179,498 | 95,161 |
| | | | |
| Total contributors' resources | | 2,699,382 | 2,416,154 |
| | | | |
| Total liabilities and contributors' resources | | 2,870,139 | 2,557,264 |

Notes

31.12.2016

31.12.2016

31.12.2015

31.12.2015

ASSETS

ASSETS

Cash and cash equivalents

Cash and cash equivalents

5

5

360,817

360,817

448,995

448,995

Amounts receivable from contributors

Amounts receivable from contributors

9/16

9/16

86,395

86,395

-

-

Held-to-maturity financial assets

Held-to-maturity financial assets

10

10

169,398

169,398

228,521

228,521

Derivative financial instruments

Derivative financial instruments

6

6

6,920

6,920

311

311

Loans and receivables

Loans and receivables

7

7

1,729,380

1,729,380

1,460,057

1,460,057

Available-for-sale financial assets

Available-for-sale financial assets

8

8

516,884

516,884

419,353

419,353

Other assets

Other assets

11

11

345

345

27

27

Total assets

Total assets

2,870,139

2,870,139

2,557,264

2,557,264

LIABILITIES AND CONTRIBUTORS' RESOURCES

LIABILITIES AND CONTRIBUTORS' RESOURCES

LIABILITIES

LIABILITIES

Derivative financial instruments

Derivative financial instruments

6

6

25,189

25,189

8,219

8,219

Deferred income

Deferred income

12

12

26,283

26,283

29,325

29,325

Provisions for guarantees issued

Provisions for guarantees issued

13

13

625

625

-

-

Amounts owed to third parties

Amounts owed to third parties

14

14

116,114

116,114

101,202

101,202

Other liabilities

Other liabilities

15

15

2,546

2,546

2,364

2,364

Total liabilities

Total liabilities

170,757

170,757

141,110

141,110

CONTRIBUTORS' RESOURCES

CONTRIBUTORS' RESOURCES

Member States Contribution called

Member States Contribution called

16

16

2,377,000

2,377,000

2,157,000

2,157,000

Fair value reserve

Fair value reserve

142,884

142,884

163,993

163,993

Retained earnings

Retained earnings

179,498

179,498

95,161

95,161

Total contributors' resources

Total contributors' resources

2,699,382

2,699,382

2,416,154

2,416,154

Total liabilities and contributors' resources

Total liabilities and contributors' resources

2,870,139

2,870,139

2,557,264

2,557,264

STATEMENT OF profit or loss and other COMPREHENSIVE INCOME

| | Notes | From 01.01.2016 | From 01.01.2015 |
| --- | --- | --- | --- |
| | | to 31.12.2016 | to 31.12.2015 |
| | | | |
| Interest and similar income | 18 | 106,698 | 90,385 |
| Interest and similar expenses | 18 | -2,307 | -1,556 |
| | | | |
| Net interest and similar income | | 104,391 | 88,829 |
| | | | |
| Fee and commission income | 19 | 699 | 932 |
| Fee and commission expenses | 19 | -48 | -63 |
| | | | |
| Net fee and commission income | | 651 | 869 |
| | | | |
| Fair value change of derivative financial instruments | | -10,361 | 6,276 |
| Net realised gains on available-for-sale financial assets | 20 | 6,504 | 33,878 |
| Net foreign exchange loss | | -14,995 | -52,483 |
| | | | |
| Net result on financial operations | | -18,852 | -12,329 |
| | | | |
| Change in impairment on loans and receivables, net of reversal | 7 | 44,365 | -33,988 |
| Change in provisions for guarantees | 13 | -242 | - |
| Impairment on available-for-sale financial assets | 8 | -2,493 | -3,646 |
| General administrative expenses | 21 | -43,483 | -43,045 |
| | | | |
| Profit/loss for the year | | 84,337 | -3,310 |
| | | | |
| Other comprehensive income: | | | |
| | | | |
| Items that are or may be reclassified to profit or loss: | | | |
| Available-for-sale financial assets – Fair value reserve | 8 | | |
| 1. Net change in fair value of available-for-sale financial assets | | -14,624 | 43,394 |
| 2. Net amount transferred to profit or loss | | -6,485 | -35,523 |
| Total available-for-sale financial assets | | -21,109 | 7,871 |
| | | | |
| Total other comprehensive income | | -21,109 | 7,871 |
| | | | |
| Total comprehensive income for the year | | 63,228 | 4,561 |

Notes

Notes

From 01.01.2016

From 01.01.2016

From 01.01.2015

From 01.01.2015

to 31.12.2016

to 31.12.2016

to 31.12.2015

to 31.12.2015

Interest and similar income

Interest and similar income

18

18

106,698

106,698

90,385

90,385

Interest and similar expenses

Interest and similar expenses

18

18

-2,307

-2,307

-1,556

-1,556

Net interest and similar income

Net interest and similar income

104,391

104,391

88,829

88,829

Fee and commission income

Fee and commission income

19

19

699

699

932

932

Fee and commission expenses

Fee and commission expenses

19

19

-48

-48

-63

-63

Net fee and commission income

Net fee and commission income

651

651

869

869

Fair value change of derivative financial instruments

Fair value change of derivative financial instruments

-10,361

-10,361

6,276

6,276

Net realised gains on available-for-sale financial assets

Net realised gains on available-for-sale financial assets

20

20

6,504

6,504

33,878

33,878

Net foreign exchange loss

Net foreign exchange loss

-14,995

-14,995

-52,483

-52,483

Net result on financial operations

Net result on financial operations

-18,852

-18,852

-12,329

-12,329

Change in impairment on loans and receivables, net of reversal

Change in impairment on loans and receivables, net of reversal

7

7

44,365

44,365

-33,988

-33,988

Change in provisions for guarantees

Change in provisions for guarantees

13

13

-242

-242

-

-

Impairment on available-for-sale financial assets

Impairment on available-for-sale financial assets

8

8

-2,493

-2,493

-3,646

-3,646

General administrative expenses

General administrative expenses

21

21

-43,483

-43,483

-43,045

-43,045

Profit/loss for the year

Profit/loss for the year

84,337

84,337

-3,310

-3,310

Other comprehensive income:

Other comprehensive income:

Items that are or may be reclassified to profit or loss:

Items that are or may be reclassified to profit or loss:

Available-for-sale financial assets – Fair value reserve

Available-for-sale financial assets – Fair value reserve

8

8

1. Net change in fair value of available-for-sale financial assets

1. Net change in fair value of available-for-sale financial assets

-14,624

-14,624

43,394

43,394

2. Net amount transferred to profit or loss

2. Net amount transferred to profit or loss

-6,485

-6,485

-35,523

-35,523

Total available-for-sale financial assets

Total available-for-sale financial assets

-21,109

-21,109

7,871

7,871

Total other comprehensive income

Total other comprehensive income

-21,109

-21,109

7,871

7,871

Total comprehensive income for the year

Total comprehensive income for the year

63,228

63,228

4,561

4,561

STATEMENT OF CHANGES IN CONTRIBUTORS’ RESOURCES

| | | Contribution called | Fair value reserve | Retained earnings | Total |
| --- | --- | --- | --- | --- | --- |
| At 1 January 2016 | Notes | 2,157,000 | 163,993 | 95,161 | 2,416,154 |
| | | | | | |
| Member States contribution called during the year | 16 | 220,000 | - | - | 220,000 |
| | | | | | |
| Profit for the year 2016 | | - | - | 84,337 | 84,337 |
| | | | | | |
| Total other comprehensive income for the year | | - | -21,109 | - | -21,109 |
| | | | | | |
| Changes in contributors’ resources | | 220,000 | -21,109 | 84,337 | 283,228 |
| | | | | | |
| At 31 December 2016 | | 2,377,000 | 142,884 | 179,498 | 2,699,382 |
| | | | | | |
| | | Contribution called | Fair value reserve | Retained earnings | Total |
| At 1 January 2015 | | 2,057,000 | 156,122 | 98,471 | 2,311,593 |
| | | | | | |
| Member States contribution called during the year | 16 | 100,000 | - | - | 100,000 |
| | | | | | |
| Loss for the year 2015 | | - | - | -3,310 | -3,310 |
| | | | | | |
| Total other comprehensive income for the year | | - | 7,871 | - | 7,871 |
| | | | | | |
| Changes in contributors’ resources | | 100,000 | 7,871 | -3,310 | 104,561 |
| | | | | | |
| At 31 December 2015 | | 2,157,000 | 163,993 | 95,161 | 2,416,154 |

Contribution called

Contribution called

Fair value reserve

Fair value reserve

Retained earnings

Retained earnings

Total

Total

At 1 January 2016

At 1 January 2016

Notes

Notes

2,157,000

2,157,000

163,993

163,993

95,161

95,161

2,416,154

2,416,154

Member States contribution called during the year

Member States contribution called during the year

16

16

220,000

220,000

-

-

-

-

220,000

220,000

Profit for the year 2016

Profit for the year 2016

-

-

-

-

84,337

84,337

84,337

84,337

Total other comprehensive income for the year

Total other comprehensive income for the year

-

-

-21,109

-21,109

-

-

-21,109

-21,109

Changes in contributors’ resources

Changes in contributors’ resources

220,000

220,000

-21,109

-21,109

84,337

84,337

283,228

283,228

At 31 December 2016

At 31 December 2016

2,377,000

2,377,000

142,884

142,884

179,498

179,498

2,699,382

2,699,382

Contribution called

Contribution called

Fair value reserve

Fair value reserve

Retained earnings

Retained earnings

Total

Total

At 1 January 2015

At 1 January 2015

2,057,000

2,057,000

156,122

156,122

98,471

98,471

2,311,593

2,311,593

Member States contribution called during the year

Member States contribution called during the year

16

16

100,000

100,000

-

-

-

-

100,000

100,000

Loss for the year 2015

Loss for the year 2015

-

-

-

-

-3,310

-3,310

-3,310

-3,310

Total other comprehensive income for the year

Total other comprehensive income for the year

-

-

7,871

7,871

-

-

7,871

7,871

Changes in contributors’ resources

Changes in contributors’ resources

100,000

100,000

7,871

7,871

-3,310

-3,310

104,561

104,561

At 31 December 2015

At 31 December 2015

2,157,000

2,157,000

163,993

163,993

95,161

95,161

2,416,154

2,416,154

STATEMENT OF Cash FlowS

| | Notes | From 01.01.2016 to 31.12.2016 | From 01.01.2015 to 31.12.2015 |
| --- | --- | --- | --- |
| OPERATING ACTIVITIES | | | |
| Profit/(loss) for the financial year | | 84,337 | -3,310 |
| Adjustments made for: | | | |
| Impairment on available-for-sale financial assets | 8 | 2,493 | 3,646 |
| Net change in impairment on loans and receivables | 7 | -44,365 | 33,988 |
| Interest capitalised on loans and receivables | 7 | -7,183 | -13,262 |
| Change in accrued interest and amortised cost on loans and receivables | | -5,843 | 1,594 |
| Net change in provisions for guarantees issued | 13 | 625 | - |
| Change in accrued interest and amortised cost on held-to-maturity financial assets | 10 | -1,126 | 12 |
| Change in deferred income | | -3,042 | -1,985 |
| Effect of exchange rate changes on loans | 7 | -35,025 | -73,447 |
| Effect of exchange rate changes on available-for-sale financial assets | | -5,125 | -9,385 |
| Effect of exchange rate changes on cash held | | -1,106 | -12,216 |
| Loss on operating activities before changes in operating assets and liabilities | | -15,360 | -74,365 |
| Loan disbursements | 7 | -528,376 | -282,784 |
| Repayments of loans | 7 | 351,468 | 205,772 |
| Change in accrued interest on cash and cash equivalent | 5 | 2 | 4 |
| Fair value changes on derivatives | | 10,361 | -6,276 |
| Increase in held-to-maturity financial assets | 10 | -1,159,704 | -1,545,550 |
| Maturities of held-to-maturity financial assets | 10 | 1,219,953 | 1,417,005 |
| Increase in available-for-sale financial assets | 8 | -153,986 | -67,449 |
| Repayments/sales of available-for-sale financial assets | 8 | 37,978 | 64,791 |
| (Increase)/decrease in other assets | | -318 | 5,495 |
| Increase/(decrease) in other liabilities | | 182 | -227 |
| Increase in amounts payable to the European Investment Bank | | 423 | 4,668 |
| Net cash flows used in operating activities | | -237,377 | -278,916 |
| FINANCING ACTIVITIES | | | |
| Contribution received from Member States | 16 | 133,605 | 100,000 |
| Amounts received from Member States with regard to interest subsidies and technical assistance | | 30,000 | 92,590 |
| Amounts paid on behalf of Member States with regard to interest subsidies and technical assistance | | -15,510 | -22,290 |
| Net cash flows from financing activities | | 148,095 | 170,300 |
| Net decrease in cash and cash equivalents | | -89,282 | -108,616 |
| | | | |
| Summary statement of cash flows: | | | |
| Cash and cash equivalents at the beginning of financial year | | 448,998 | 545,398 |
| Net cash from: | | | |
| Operating activities | | -237,377 | -278,916 |
| Financing activities | | 148,095 | 170,300 |
| Effects of exchange rate changes on cash and cash equivalents | | 1,106 | 12,216 |
| Cash and cash equivalents at the end of financial year | | 360,822 | 448,998 |
| Cash and cash equivalents are composed of: | | | |
| Cash in hand | 5 | 51,462 | 71,405 |
| Term deposits (excluding accrued interest) | | 259,342 | 290,576 |
| Commercial papers | 5 | 50,018 | 87,017 |
| | | 360,822 | 448,998 |

Notes

Notes

From 01.01.2016 to 31.12.2016

From 01.01.2016 to 31.12.2016

From 01.01.2015 to 31.12.2015

From 01.01.2015 to 31.12.2015

OPERATING ACTIVITIES

OPERATING ACTIVITIES

Profit/(loss) for the financial year

Profit/(loss) for the financial year

84,337

84,337

-3,310

-3,310

Adjustments made for:

Adjustments made for:

Impairment on available-for-sale financial assets

Impairment on available-for-sale financial assets

8

8

2,493

2,493

3,646

3,646

Net change in impairment on loans and receivables

Net change in impairment on loans and receivables

7

7

-44,365

-44,365

33,988

33,988

Interest capitalised on loans and receivables

Interest capitalised on loans and receivables

7

7

-7,183

-7,183

-13,262

-13,262

Change in accrued interest and amortised cost on loans and receivables

Change in accrued interest and amortised cost on loans and receivables

-5,843

-5,843

1,594

1,594

Net change in provisions for guarantees issued

Net change in provisions for guarantees issued

13

13

625

625

-

-

Change in accrued interest and amortised cost on held-to-maturity financial assets

Change in accrued interest and amortised cost on held-to-maturity financial assets

10

10

-1,126

-1,126

12

12

Change in deferred income

Change in deferred income

-3,042

-3,042

-1,985

-1,985

Effect of exchange rate changes on loans

Effect of exchange rate changes on loans

7

7

-35,025

-35,025

-73,447

-73,447

Effect of exchange rate changes on available-for-sale financial assets

Effect of exchange rate changes on available-for-sale financial assets

-5,125

-5,125

-9,385

-9,385

Effect of exchange rate changes on cash held

Effect of exchange rate changes on cash held

-1,106

-1,106

-12,216

-12,216

Loss on operating activities before changes in operating assets and liabilities

Loss on operating activities before changes in operating assets and liabilities

-15,360

-15,360

-74,365

-74,365

Loan disbursements

Loan disbursements

7

7

-528,376

-528,376

-282,784

-282,784

Repayments of loans

Repayments of loans

7

7

351,468

351,468

205,772

205,772

Change in accrued interest on cash and cash equivalent

Change in accrued interest on cash and cash equivalent

5

5

2

2

4

4

Fair value changes on derivatives

Fair value changes on derivatives

10,361

10,361

-6,276

-6,276

Increase in held-to-maturity financial assets

Increase in held-to-maturity financial assets

10

10

-1,159,704

-1,159,704

-1,545,550

-1,545,550

Maturities of held-to-maturity financial assets

Maturities of held-to-maturity financial assets

10

10

1,219,953

1,219,953

1,417,005

1,417,005

Increase in available-for-sale financial assets

Increase in available-for-sale financial assets

8

8

-153,986

-153,986

-67,449

-67,449

Repayments/sales of available-for-sale financial assets

Repayments/sales of available-for-sale financial assets

8

8

37,978

37,978

64,791

64,791

(Increase)/decrease in other assets

(Increase)/decrease in other assets

-318

-318

5,495

5,495

Increase/(decrease) in other liabilities

Increase/(decrease) in other liabilities

182

182

-227

-227

Increase in amounts payable to the European Investment Bank

Increase in amounts payable to the European Investment Bank

423

423

4,668

4,668

Net cash flows used in operating activities

Net cash flows used in operating activities

-237,377

-237,377

-278,916

-278,916

FINANCING ACTIVITIES

FINANCING ACTIVITIES

Contribution received from Member States

Contribution received from Member States

16

16

133,605

133,605

100,000

100,000

Amounts received from Member States with regard to interest subsidies and technical assistance

Amounts received from Member States with regard to interest subsidies and technical assistance

30,000

30,000

92,590

92,590

Amounts paid on behalf of Member States with regard to interest subsidies and technical assistance

Amounts paid on behalf of Member States with regard to interest subsidies and technical assistance

-15,510

-15,510

-22,290

-22,290

Net cash flows from financing activities

Net cash flows from financing activities

148,095

148,095

170,300

170,300

Net decrease in cash and cash equivalents

Net decrease in cash and cash equivalents

-89,282

-89,282

-108,616

-108,616

Summary statement of cash flows:

Summary statement of cash flows:

Cash and cash equivalents at the beginning of financial year

Cash and cash equivalents at the beginning of financial year

448,998

448,998

545,398

545,398

Net cash from:

Net cash from:

Operating activities

Operating activities

-237,377

-237,377

-278,916

-278,916

Financing activities

Financing activities

148,095

148,095

170,300

170,300

Effects of exchange rate changes on cash and cash equivalents

Effects of exchange rate changes on cash and cash equivalents

1,106

1,106

12,216

12,216

Cash and cash equivalents at the end of financial year

Cash and cash equivalents at the end of financial year

360,822

360,822

448,998

448,998

Cash and cash equivalents are composed of:

Cash and cash equivalents are composed of:

Cash in hand

Cash in hand

5

5

51,462

51,462

71,405

71,405

Term deposits (excluding accrued interest)

Term deposits (excluding accrued interest)

259,342

259,342

290,576

290,576

Commercial papers

Commercial papers

5

5

50,018

50,018

87,017

87,017

360,822

360,822

448,998

448,998

Notes to the financial statements as at 31 December 2016

Notes to the financial statements as at 31 December 2016

1
     General information

1

The Investment Facility (“the Facility” or “IF”) has been established within the framework of the Cotonou Agreement (the “Agreement”) on co-operation and development assistance negotiated between the African, Caribbean and Pacific Group of States (the “ACP States”) and the European Union and its Member States on 23 June 2000, revised on 25 June 2005 and 22 June 2010.

The Facility is not a separate legal entity and the European Investment Bank (“EIB” or “the Bank”) manages the contributions on behalf of the Member States (“Donors”) in accordance with the terms of the Agreement and acts as an administrator of the Facility.

Financing under the Agreement is provided from EU Member States’ budgets. EU Member States contribute with the amounts allocated to finance the IF and grants for the financing of the interest subsidies as provided for under the multi-annual financial frameworks (First Financial Protocol covering the period 2000 - 2007 and referred to as the 9th European Development Fund (EDF), Second Financial Protocol covering the period 2008 - 2013 and referred to as the 10th EDF and the Third Financial Protocol covering the period 2014 - 2020 referred to as the 11th EDF). The EIB is entrusted with the management of:

-the Facility, a EUR 3,685.5 million risk-bearing revolving fund geared to fostering private sector investment in ACP countries of which EUR 48.5 million are allocated to Overseas Countries and territories (“OCT countries”);

-grants for the financing of interest subsidies worth max. EUR 1,220.85 million for ACP countries and max. EUR 8.5 million for OCT countries. Up to 15% of these subsidies can be used to fund project-related technical assistance (“TA”).

The present financial statements cover the period from 1 January 2016 to 31 December 2016.

On a proposal from the Management Committee of EIB, the Board of Directors of EIB adopted the Financial Statements on 9 March 2017, and authorised their submission to the Board of Governors for approval by 25 April 2017.

2
     Significant accounting policies

Basis of preparation – Statement of compliance

The Facility’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

2.2Significant accounting judgments and estimates

The preparation of financial statements requires the use of accounting estimates. It also requires the European Investment Bank’s Management to exercise its judgment in the process of applying the Investment Facility’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed hereafter.

The most significant use of judgments and estimates are as follows:

§Measurement of fair values of financial instruments

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or broker price quotations. Where the fair values cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The valuations are categorised into different levels in the fair value hierarchy based on the inputs used in the valuation techniques as described and disclosed in Notes 2.4.3 and 4.

These valuation techniques may include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist, Black-Scholes and polynomial option pricing models and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

The Facility uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, like interest rate and currency swaps that use only observable market data and require limited management judgement and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity securities, exchange traded derivatives and simple over the counter derivatives like interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.

For more complex instruments, the Facility uses own valuation models, which are developed from recognised valuation models. Some or all of the significant inputs into these models may not be observable in the market, and are derived from market prices or rates or are estimated based on assumptions. Example of instruments involving significant unobservable inputs includes certain loans and guarantees for which there is no active market. Valuation models that employ significant unobservable inputs require a higher degree of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued, determination of probability or counterparty default and prepayments and selection of appropriate discount rates.

The Facility has an established control framework with respect to the measurement of fair values. This framework includes the EIB’s Investment Bank’s Risk Management and Market Data Management functions. These functions are independent of front office management and are responsible for verifying significant fair value measurements. Specific controls include:

-Verification of observable pricing;

-A review and approval process for new valuation models and changes to existing models;

-Calibration and back testing of models against observed market transactions;

-Analysis and investigation of significant valuation movements;

-Review of significant unobservable inputs and valuation adjustments.

Where third-party information such as broker quotes or pricing services are used to measure fair value, the Facility verifies that such valuations meet the requirements of IFRS. This includes the following:

-Determining where broker quote or pricing service pricing is appropriate;

-Assessing whether a particular broker quote or pricing service is reliable;

-Understanding how the fair value has been arrived at and the extent to which it represents actual market transactions;

-When prices for similar instruments are used to measure fair value, how these prices have been adjusted to reflect the characteristics of the instrument subject to measurement.

§Impairment losses on loans and receivables

The Facility reviews its loans and receivables at each reporting date to assess whether an allowance for impairment should be recorded in the statement of profit or loss and other comprehensive income. In particular, judgment by the European Investment Bank’s Management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. In addition to specific allowances against individually significant loans and receivables, the Facility may also book a collective impairment allowance against exposures which have not been individually identified as impaired and have a greater risk of default than when originally granted.

In principle, a loan is considered as impaired when payment of interest and principal are past due by 90 days or more and, at the same time, the European Investment Bank’s Management considers that there is an objective indication of impairment.

§Provisions on financial guarantees

The Facility reviews its guarantee contracts at each reporting date to assess whether a provision should be recorded in the statement of profit or loss and other comprehensive income. For determining the provision particular judgement is required in making estimates and assumptions about a number of factors, such as:

-amount and timing of future cash flows;

-utilisation level of the guarantees;

-discount factors applied on the estimated cash flows.

§Valuation of unquoted available-for-sale equity investments

Valuation of unquoted available-for-sale equity investments is normally based on one of the following:

-recent arm’s length market transactions;

-current fair value of another instrument that is substantially the same;

-the expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics;

-adjusted net assets method; or

-other valuation models.

The determination of the cash flows and discount factors for unquoted available-for-sale equity investments requires significant estimation. The Facility calibrates the valuation techniques periodically and tests them for validity using either price from observable current market transactions in the same instrument or from other available observable market data.

§Impairment of available-for-sale financial assets

The Facility treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires judgment. The Facility treats “significant” generally as 30% or more and “prolonged” greater than 12 months. In addition, the Facility evaluates other factors, including normal volatility in share price for quoted equities and the future cash flows and the discount factors for unquoted equities.

§Consolidation of entities in which the Facility holds interest

The Facility made significant judgements that none of the entities in which it holds interest, are controlled by the Facility. This is due to the fact that in all such entities, either the General Partner or the Fund Manager or the Management Board have the sole responsibility for the management and control of the activities and affairs of the partnership and have the power and authority to do all things necessary to carry out the purpose and objectives of the partnership complying with the investment and policy guidelines.

2.3Changes in accounting policies

Except for the changes below, the Facility has consistently applied the accounting policies set out in Note 2.4 to all periods presented in these financial statements. The Facility has adopted the following new standards and amendments to standards.

Standards adopted

The following standards, amendments to standards and interpretations were adopted in the preparation of these financial statements:

-Amendments to IAS 1 ‘Presentation of financial statements’ – Disclosure initiative;

-Annual Improvements to IFRSs 2012–2014 Cycle – various standards.

These changes had no material impact on the Facility’s financial statements.

Standards issued but not yet effective

The following standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016, and have not been applied in preparing these financial statements. Those of which may be relevant for the Facility are set out below.

IFRS 9 Financial instruments

The last part of the standard was issued on 24 July 2014 and replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces a new expected credit loss model for impairment on financial assets and introduces new rules for hedge accounting.

IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (‘’FVOCI’’) and fair value through profit or loss (‘’FVTPL’’). The standard eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification.

IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. However, under IAS 39 all fair value changes of liabilities designated as at FVTPL are recognised in profit or loss, whereas under IFRS 9 these fair value changes are generally presented as follows:

-the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in other comprehensive income (‘’OCI’’); and

-the remaining amount of change in the fair value is presented in profit or loss.

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (‘’ECL’’) model. This will require considerable judgement as to how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis. The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments, and to contract assets.

Under IFRS 9, loss allowances will be measured on either of the following bases:

•
     12-month ECLs. These are ECLs that result from possible default events within the 12 month after the reporting date; and

•
     lifetime ECLs. These are ECLs that result from all possible default events over the expected life of a financial instrument.

Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset’s credit risk has not increased significantly if the asset has low credit risk at the reporting date.

While the Facility has not yet undertaken a detailed assessment of the impairment methodologies that it will apply under IFRS 9, it may result in an earlier recognition of credit losses with higher volatility.

IFRS 9 will require extensive new disclosures, in particular about credit risk and expected credit losses. The Facility’s preliminary assessment included an analysis to identify data gaps against current processes and the Facility plans to implement the system and controls changes that it believes will be necessary to capture the required data.

IFRS 9 has been endorsed by the EU on 22 November 2016 and is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Facility does not intend to adopt the standard earlier than its effective date.

The Facility is currently performing a detailed assessment of the impact resulting from the application of IFRS 9.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 standard has been endorsed by the EU is on 22 September 2016 and is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Facility has not yet determined the extent of the impact of this standard.

Amendment to IAS 7 ‘Cash flow statements’ – Disclosure initiative

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. Amendments are effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. Amendments are expected to be endorsed by the EU by the end of the year. The Facility does not plan to adopt this standard early and does not expect it to cause any material impact on the Facility’s financial statements.

2.4Summary of significant accounting policies

The statement of financial position represents assets and liabilities in decreasing order of liquidity and does not distinguish between current and non-current items.

2.4.1 
     Foreign currency translation

The Facility uses the Euro (EUR) for presenting its financial statements, which is also the functional currency. Except as otherwise indicated, financial information presented in EUR has been rounded to the nearest thousand.

Foreign currency transactions are translated, at the exchange rate prevailing on the date of the transaction.

Monetary assets and liabilities denominated in currencies other than Euro are translated into Euro at the exchange rate prevailing at the statement of financial position date. The gain or loss arising from such translation is recorded in the statement of profit or loss and other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of transactions at rates different from those at the date of the transaction, and unrealised foreign exchange differences on unsettled foreign currency monetary assets and liabilities, are recognised in the statement of profit or loss and other comprehensive income.

The elements of the statement of profit or loss and other comprehensive income are translated into Euro on the basis of the exchange rates prevailing at the date of the transaction.

2.4.2 
     Cash and cash equivalents

The Facility defines cash and cash equivalents as current accounts, short-term deposits or commercial papers with original maturities of three months or less.

2.4.3 
      Financial assets other than derivatives

Financial assets are accounted for using the settlement date basis.

§Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Facility has access at that date.

When applicable, the EIB on behalf of the Facility measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an on-going basis.

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The chosen valuation technique incorporates all the factors that market participants would take into account in pricing a transaction.

The EIB measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

-Level 1: inputs that are unadjusted quoted market prices in active markets for identical instruments to which the Facility has access.

-Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using quoted market prices in active markets for similar instruments, quoted prices for identical or similar instruments in markets that are considered less than active or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

-Level 3: inputs that are not observable. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

The Facility recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

§Held-to-maturity financial assets

Held-to-maturity financial assets comprise quoted bonds with the intention of holding them to maturity, and commercial papers with original maturities of more than three months.

Those bonds and commercial papers are initially recorded at their fair value plus any directly attributable transaction cost. The difference between entry price and redemption value is amortised in accordance with the effective interest method over the remaining life of the instrument.

The Facility assesses at each statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event (or event) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Impairment loss is recognised in the statement of profit and loss and the amount of the loss is measured as the difference between the carrying value and the present value of estimated future cash flows discounted at the instrument’s original effective interest rate.

§Loans

Loans originated by the Facility are recognised in the assets of the Facility when cash is advanced to borrowers. They are initially recorded at cost (net disbursed amounts), which is the fair value of the cash given to originate the loan, including any transaction costs, and are subsequently measured at amortised cost, using the effective yield method, less any provision for impairment or uncollectability.

§Available-for-sale financial assets

Available-for-sale financial assets are those which are designated as such or do not qualify to be classified as designated at fair value through profit or loss, held-to-maturity or loans and receivables. They include direct equity investments and investments in venture capital funds and are initially recorded at fair value plus transaction costs.

After initial measurement, available-for-sale financial assets are subsequently carried at fair value. Note the following details for the fair value measurement of equity investments, which cannot be derived from active markets:

a.Venture capital funds

The fair value of each venture capital fund is based on the latest available Net Asset Value (NAV), reported by the fund, if calculated based on international valuation guidelines recognised to be in line with IFRS (for example: the International Private Equity and Venture Capital Valuation guidelines, IPEV Guidelines, as published by the European Venture Capital Association). The Facility may however decide to adjust the NAV reported by the fund if there are issues that may affect the valuation.

b.Direct equity investments

The fair value of the investment is based on the latest set of financial statements available, re-using, if applicable, the same model as the one used at the acquisition of the participation.

Unrealised gains or losses on venture capital funds and direct equity investments are reported in contributors’ resources until such investments are sold, collected or disposed of, or until such investments are determined to be impaired. If an available-for-sale investment is determined to be impaired, the cumulative unrealised gain or loss previously recognised in equity is transferred to the statement of profit or loss and other comprehensive income.

For unquoted investment, the fair value is determined by applying recognised valuation techniques (for example adjusted net assets, discounted cash flows or multiple). These investments are accounted for at cost when the fair value cannot be reliably measured. To be noted that in the first 2 years of the investments, they are recognised at cost.

The participations acquired by the Facility typically represent investments in private equity or venture capital funds. According to industry practice, such investments are generally investments jointly subscribed by a number of investors, none of whom is in a position to individually influence the daily operations and the investment activity of such fund. As a consequence, any membership by an investor in a governing body of such fund does not in principle entitle such investor to influence the day-to-day operations of the fund. In addition, individual investors in a private equity or a venture capital fund do not determine policies of a fund such as distribution policies on dividends or other distributions. Such decisions are typically taken by the management of a fund on the basis of the shareholders agreement governing the rights and obligations of the management and all shareholders of the fund. The shareholders’ agreement also generally prevents individual investors from bilaterally executing material transactions with the fund, interchanging managerial personnel or obtaining privileged access to essential technical information. The Facility’s investments are executed in line with the above stated industry practice, ensuring that the Facility neither controls nor exercises any form of significant influence within the meaning of IFRS 10 and IAS 28 over any of these investments, including those investments in which the Facility holds over 20 % of the voting rights.

§Guarantees

Financial guarantee contracts are contracts that require the Facility to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Under the existing rules, these guarantees do not meet the definition of an insurance contract (IFRS 4 Insurance Contracts) and are accounted for under IAS 39 Financial Instruments: Recognition and Measurement, either as “Derivatives” or as “Financial Guarantees”, depending on their features and characteristics as defined by IAS 39.

The accounting policy for derivatives is disclosed under Note 2.4.5.

At initial recognition, the financial guarantees are recognised at fair value corresponding to the Net Present Value (NPV) of expected premium inflows and initial expected loss. This calculation is performed at the starting date of each transaction and is recognised on the statement of financial position as “Financial guarantees” under “other assets” and “other liabilities”.

Subsequent to initial recognition, the Facility’s liabilities under such guarantees are measured at the higher of:

-the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue and

-the best estimate of expenditure required to settle any present financial obligation arising as a result of the guarantee, in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

The best estimate of expenditure is determined in accordance with IAS 37. Financial guarantee provisions correspond to the cost of settling the obligation, which is the expected loss, estimated on the basis of all relevant factors and information existing at the statement of financial position date.

When a financial guarantee operation measured under IAS 39 is derecognised and treated under IAS 37, its value previously recorded under “Other liabilities” is transferred to the caption “Provisions for guarantees issued” on the statement of financial position.

The provision for financial guarantees (as measured per IAS 37) is recognised in the statement of profit or loss and other comprehensive income under “Change in provisions for guarantees, net of reversals”.

The premium received is recognised in the statement of profit or loss and other comprehensive income in “Fee and commission income” on the basis of an amortisation schedule in accordance with IAS 18 over the life of the financial guarantee.

In addition, when a guarantee agreement is signed, it is presented as a contingent liability for the Facility and when the guarantee is engaged, as a commitment for the Facility.

2.4.4 
     Impairment of financial assets

The Facility assesses at each statement of financial position date whether there is any objective evidence that a financial asset is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter into bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For the loans outstanding at the end of the financial year and carried at amortised cost, impairments are made when presenting objective evidence of risks of non-recovery of all or part of their amounts according to the original contractual terms or the equivalent value. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of profit or loss and other comprehensive income. Interest income continues to be accrued on the reduced carrying amount based on the effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account.

The Facility conducts the credit risk assessments based on each individual operation and does not consider a collective impairment.

For the available-for-sale financial assets, the Facility assesses at each statement of financial position date whether there is objective evidence that an investment is impaired. Objective evidence would include a significant or prolonged decline in the fair value of the investment below its costs. Where there is evidence of impairment, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss and other comprehensive income) is removed from contributors’ resources and recognised in the statement of profit or loss and other comprehensive income. Impairment losses on available-for-sale financial assets are not reversed through the statement of profit or loss and other comprehensive income; increases in their fair value after impairment are recognised directly in contributors’ resources.

The European Investment Bank’s Risk Management reviews financial assets for impairment at least once a year. Resulting adjustments include the unwinding of the discount in the statement of profit or loss and other comprehensive income over the life of the asset, and any adjustments required in respect of a reassessment of the initial impairment.

2.4.5 
     Derivative financial instruments

Derivatives include cross currency swaps, cross currency interest rate swaps, short term currency swaps (“FX swaps”) and interest rate swaps.

In the normal course of its activity, the Facility may enter into swap contracts with a view to hedge specific lending operations or into currency forward contract with a view to hedge its currency positions, denominated in actively traded currencies other than the Euro, in order to offset any gain or loss caused by foreign exchange rate fluctuations.

The Facility does not use any of the hedge possibilities under IAS 39. All derivatives are measured at fair value through the profit or loss and are reported as derivative financial instruments. Fair values are derived primarily from discounted cash-flow models, option-pricing models and from third party quotes.

Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivative financial instruments are shown in the statement of profit and loss and other comprehensive income under “Fair value change of derivative financial instruments”.

Derivatives are initially recognised using the trade date basis.

2.4.6 
     Contributions

Contributions from Member States are recognised as receivables in the statement of financial position on the date of the Council Decision fixing the financial contribution to be paid by the Member States to the Facility.

The Member States contributions meet the following conditions and are consequently classified as equity:

-as defined in the contribution agreement, they entitle the Member States to decide on the utilisation of the Facility’s net assets in the events of the Facility’s liquidation;

-they are in the class of instruments that is subordinated to all other classes of instruments;

-all financial instruments in the class of instruments that are subordinated to all other classes of instruments have identical features;

-the instrument does not include any features that would require classification as a liability; and

-the total expected cash flows attributable to the instrument over its life are based substantially on the profit or loss, the change in the recognised net assets or the change in the fair value of the recognised and unrecognised net assets of the Facility over the life of the instrument.

2.4.7 
     Interest income on loans

Interest on loans originated by the Facility is recorded in the statement of profit or loss and other comprehensive income (‘Interest and similar income’) and on the statement of financial position (‘Loans and receivables’) on an accrual basis using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the loan to the net carrying amount of the loan. Once the recorded value of a loan has been reduced due to impairment, interest income continues to be recognised using the original effective interest rate applied to the new carrying amount.

Commitment fees are deferred and recognised in income using the effective interest method over the period from disbursement to repayment of the related loan, and are presented in the statement of profit or loss and other comprehensive income within interest and similar income.

2.4.8 
     Interest subsidies and technical assistance

As part of its activity, the Facility manages interest subsidies and technical assistance on behalf of the Member States.

The part of the Member States contributions allocated to the payment of interest subsidies and TA is not accounted for in the Facility’s contributors’ resources but is classified as amounts owed to third parties. The Facility operates the disbursement to the final beneficiaries and then decreases the amounts owed to third parties.

When amounts contributed with regard to interest subsidies and TA are not fully granted, they are reclassified as contribution to the Facility.

2.4.9 
     Interest income on cash and cash equivalents

Interest income on cash and cash equivalents is recognised in the statement of profit or loss and other comprehensive income of the Facility on an accrual basis.

2.4.10Fees, commissions and dividends

Fees received in respect of services provided over a period of time are recognised as income as the services are provided, while fees that are earned on the execution of a significant act are recognised as income when the significant act has been completed. These fees are presented in the statement of profit or loss and other comprehensive income within fee and commission income.

Dividends relating to available-for-sale financial assets are recognised when received and presented in the statement of profit or loss and other comprehensive income within net realised gains on available-for-sale financial assets.

2.5Taxation

The Protocol on the Privileges and Immunities of the European Union, appended to the treaty on the European Union and the treaty of the functioning of the European Union, stipulates that the assets, revenues and other property of the Institutions of the Union are exempt from all direct taxes.

3
     Risk Management

This note presents information about the Facility’s exposure to and its management and control of credit and financial risks, in particular the primary risks associated with its use of financial instruments. These are:

-credit risk – the risk of loss resulting from client or counterparty default and arising on credit exposure in all forms, including settlement risk;

-liquidity risk – the risk that an entity is not able to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses;

-market risk – the risk that changes in market prices and rates, such as interest rates, equity prices and foreign exchange rates will affect an entity’s income or the value of its holdings in financial instruments.

Risk management organisation

The European Investment Bank adapts its risk management on an ongoing basis.

The Risk Management of EIB independently identifies, assesses, monitors and reports the risks to which the Facility is exposed. Within a framework whereby the segregation of duties is preserved, the Risk Management is independent of the Front Offices. At EIB level the Director General of Risk Management reports for risk matters to the designated Vice-President for Risk Management. The designated Vice-President is responsible for overseeing risk reporting to the European Investment Bank’s Management Committee and the Board of Directors.

Credit risk

Credit risk is the potential loss that could result from client or counterparty default and arising on credit exposure in all forms, including settlement.

3.2.1Credit risk policy

In carrying out the credit analysis on loan counterparts, EIB assesses the credit risk and expected loss with a view to quantify and price the risk. EIB has developed an Internal Rating Methodology (IRM) to determine the Internal Ratings of its credit-relevant borrower/guarantor counterparts. The methodology is based on a system of scoring sheets tailored for each major credit counterpart type (e.g. Corporates, Banks, Public Sector Entities, etc). Taking into consideration both, Best Banking Practice and the principles set under the Basel International Capital Accord (Basel II), all counterparts that are material to the credit profile of a specific transaction are classified into internal rating categories using the IRM for the specific counterpart type. Each counterpart is assigned an Internal Rating reflecting its probability of default foreign currency rating following an in-depth analysis of the counterpart’s business and financial risk profile and its country risk operating context.

The credit assessment of project finance and other structured limited recourse operations is using credit risk tools relevant for the sector, focused mainly on cash flow availability and debt service capacity. These tools include the analysis of projects’ contractual framework, counterpart’s analysis and cash flow simulations. Similarly to corporates and financial institutions, each project is assigned an internal risk rating.

All Internal Ratings are monitored over loan life, and periodically updated.

All non-sovereign (or non sovereign guaranteed/assimilated) operations are subject to specific transaction-level and counterpart size limits. Counterpart limits are set at consolidated group exposure level, where applicable. Such limits typically reflect e.g. the size of counterparts own funds.

In order to mitigate credit risk the EIB uses, where appropriate and on a case by case basis, various credit enhancements which are:

-Counterparty or project related securities (e.g., pledge over the shares; pledge over the assets; assignment of rights; pledge over the accounts); or/and

-guarantees, generally provided by the sponsor of the financed project (e.g., completion guarantees, first demand guarantees) or bank guarantees.

The Facility does not use any credit derivatives to mitigate credit risk.

3.2.2Maximum exposure to credit risk without taking into account any collateral and other credit enhancements

The following table shows the maximum exposure to credit risk for the components of the statement of financial position, including derivatives. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral.

Maximum exposure (in EUR’000)

| Maximum exposure (in EUR’000) | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| ASSETS | | |
| Cash and cash equivalents | 360,817 | 448,995 |
| Derivative financial instruments | 6,920 | 311 |
| Loans and receivables | 1,729,380 | 1,460,057 |
| Amounts receivable from contributors | 86,395 | - |
| Held-to-maturity financial assets | 169,398 | 228,521 |
| Other assets | 345 | 27 |
| Total assets | 2,353,255 | 2,137,911 |
| | | |
| OFF BALANCE SHEET | | |
| Contingent liabilities | | |
| - Signed non-issued guarantees | 35,337 | 10,000 |
| Commitments | | |
| - Un-disbursed loans | 901,899 | 1,189,564 |
| - Issued guarantees | 8,627 | 798 |
| Total off balance sheet | 945,863 | 1,200,362 |
| | | |
| Total credit exposure | 3,299,118 | 3,338,273 |

31.12.2016

31.12.2015

ASSETS

Cash and cash equivalents

360,817

448,995

Derivative financial instruments

6,920

311

Loans and receivables

1,729,380

1,460,057

Amounts receivable from contributors

86,395

-

Held-to-maturity financial assets

169,398

228,521

Other assets

345

27

Total assets

2,353,255

2,137,911

OFF BALANCE SHEET

Contingent liabilities

- Signed non-issued guarantees

35,337

10,000

Commitments

- Un-disbursed loans

901,899

1,189,564

- Issued guarantees

8,627

798

Total off balance sheet

945,863

1,200,362

Total credit exposure

3,299,118

3,338,273

3.2.3Credit risk on loans and receivables

3.2.3.1Credit risk measurement for loans and receivables

Each and every loan or guarantee undertaken by the Facility benefits from a comprehensive risk assessment and quantification of expected loss estimates that are reflected in a Loan Grading (“LG”). Operations under the IFE (as described in Note 23), with the exception of intermediated loans, are not subject to the Credit Risk Policy Guidelines and are subject to a different procedure. LGs are established according to generally accepted criteria, based on the quality of the borrower, the maturity of the loan, the guarantee and, where appropriate, the guarantor.

The loan grading (LG) system comprises the methodologies, processes, databases and IT systems supporting the assessment of credit risk in lending operations and the quantification of expected loss estimates. It summarises a large amount of information with the purpose of offering a relative ranking of loans’ credit risks. LGs reflect the present value of the estimated level of the “expected loss”, this being the product of the probability of default of the main obligors, the exposure at risk and the loss severity in the case of default. LGs are used for the following purposes:

-as an aid to a finer and more quantitative assessment of lending risks;

-as help in distributing monitoring efforts;

-as a description of the loan’s portfolio quality at any given date;

-as one input in risk-pricing decisions based on the expected loss.

The following factors enter into the determination of an LG:

I)The borrower’s creditworthiness: Risk Management independently reviews borrowers and assesses their creditworthiness based on internal methodologies and external data. In line with the Basel II Advanced Approach chosen, the Bank has developed an internal rating methodology (IRM) to determine the internal ratings of borrowers and guarantors. This is based on a set of scoring sheets specific to defined counterparty types.

II)The default correlation: it quantifies the chances of simultaneous financial difficulties arising for both the borrower and the guarantor. The higher the correlation between the borrower and the guarantor’s default probabilities, the lower the value of the guarantee and therefore the lower the LG.

III)The value of guarantee instruments and of securities: this value is assessed on the basis of the combination of the issuer’s creditworthiness and the type of instrument used.

IV)The contractual framework: a sound contractual framework will add to the loan’s quality and enhance its internal grading.

V)The loan’s duration: all else being equal, the longer the loan, the higher the risk of incurring difficulties in the servicing of the loan.

A loan’s expected loss is computed by combining the five elements discussed above. Depending on the level of this loss, a loan is assigned to one of the following LG classes listed below:

A
     Prime quality loans: there are three sub-categories. A comprises all EU sovereign risks, i.e. loans granted to or fully, explicitly and unconditionally guaranteed by Member States, where no repayment difficulties are expected and for which an unexpected loss of 0% is allocated. A+ denotes loans granted to (or guaranteed by) entities other than Member States, with no expectation of deterioration over their duration. A- includes those lending operations where there is some doubt about the maintenance of their current status (for instance because of a long maturity, or for the high volatility of the future price of an otherwise excellent collateral), but where any downside is expected to be quite limited.

B
     High quality loans: these represent an asset class with which the bank feels comfortable, although a minor deterioration is not ruled out in the future. B+ and B- are used to denote the relative likelihood of the possibility of such deterioration occurring.

C
     Good quality loans: an example could be unsecured loans to solid banks and corporates with a 7-year bullet, or equivalent amortising, maturity at disbursement.

D
     This rating class represents the borderline between “acceptable quality” loans and those that have experienced some difficulties. This watershed in loan grading is more precisely determined by the sub-classifications D+ and D-. Loans rated D- require heightened monitoring.

E
     This LG category includes loans with a risk profile greater than generally accepted. It also includes loans which in the course of their lives have experienced severe problems and their sliding into a situation of loss cannot be excluded. For this reason, the loans are subject to close and high monitoring. The sub-classes E+ and E- differentiate the intensity of this special monitoring process, with those operations graded E- being in a position where there is a strong possibility that debt service cannot be maintained on a timely basis and therefore some form of debt restructuring is required, possibly leading to an impairment loss.

F
     F (fail) denotes loans representing unacceptable risks. F- graded loans can only arise out of outstanding transactions that have experienced, after signature, unforeseen, exceptional and dramatic adverse circumstances. All operations where there is a loss of principal to the Facility are graded F and a specific provision is applied.

Generally, loans internally graded D- or below are placed on the Watch List. However, if a loan was originally approved with a risk profile of D- or weaker, it will only be placed on the Watch List as a result of a material credit event causing a further deterioration of its LG classification.

The table in section 3.2.3.3 shows the credit quality analysis of the Facility’s loan portfolio based on the various LG classes as described above.

3.2.3.2Analysis of lending credit risk exposure

The following table shows the maximum exposure to credit risk on loans signed and disbursed by nature of borrower taking into account guarantees provided by guarantors:

At 31.12.2016

| At 31.12.2016 | Guaranteed | Other credit enhancements | Not guaranteed | Total | % of Total |
| --- | --- | --- | --- | --- | --- |
| In EUR’000 | | | | | |
| Banks | 22,691 | 34,597 | 933,609 | 990,897 | 57% |
| Corporates | 110,849 | 97,213 | 320,406 | 528,468 | 31% |
| Public institutions | 38,330 | - | - | 38,330 | 2% |
| States | - | 3,764 | 167,921 | 171,685 | 10% |
| Total disbursed | 171,870 | 135,574 | 1,421,936 | 1,729,380 | 100% |
| Signed not disbursed | 94,976 | - | 806,923 | 901,899 | |
| | | | | | |
| At 31.12.2015 | Guaranteed | Other credit enhancements | Not guaranteed | Total | % of Total |
| In EUR’000 | | | | | |
| Banks | 18,964 | 73,670 | 758,412 | 851,046 | 58% |
| Corporates | 37,431 | 89,170 | 272,186 | 398,787 | 27% |
| Public institutions | 37,112 | - | 14 | 37,126 | 3% |
| States | - | 4,295 | 168,803 | 173,098 | 12% |
| Total disbursed | 93,507 | 167,135 | 1,199,415 | 1,460,057 | 100% |
| Signed not disbursed | 135,821 | - | 1,053,743 | 1,189,564 | |

Guaranteed

Other credit enhancements

Not guaranteed

Total

% of Total

In EUR’000

Banks

22,691

34,597

933,609

990,897

57%

Corporates

110,849

97,213

320,406

528,468

31%

Public institutions

38,330

-

-

38,330

2%

States

-

3,764

167,921

171,685

10%

Total disbursed

171,870

135,574

1,421,936

1,729,380

100%

Signed not disbursed

94,976

-

806,923

901,899

At 31.12.2015

Guaranteed

Other credit enhancements

Not guaranteed

Total

% of Total

In EUR’000

Banks

18,964

73,670

758,412

851,046

58%

Corporates

37,431

89,170

272,186

398,787

27%

Public institutions

37,112

-

14

37,126

3%

States

-

4,295

168,803

173,098

12%

Total disbursed

93,507

167,135

1,199,415

1,460,057

100%

Signed not disbursed

135,821

-

1,053,743

1,189,564

3.2.3.3Credit quality analysis per type of borrower

3.2.3.3

Credit quality analysis per type of borrower

The tables below show the credit quality analysis of the Facility’s loan portfolio as at 31 December 2016 and 31 December 2015 by the Loan Grading applications, based on the exposure signed (disbursed and un-disbursed):

The tables below show the credit quality analysis of the Facility’s loan portfolio as at 31 December 2016 and 31 December 2015 by the Loan Grading applications, based on the exposure signed (disbursed and un-disbursed):

At 31.12.2016

| At 31.12.2016 | | High Grade | Standard Grade | Min. Accept. Risk | High Risk | No grading | Total | % of Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In EUR’000 | | | | | | | | |
| | | A to B- | C | D+ | D- and below | | | |
| Borrower | Banks | 94,081 | 53,970 | 315,524 | 1,038,705 | 126,951 | 1,629,231 | 62% |
| | Corporates | 125,810 | - | 19,389 | 393,877 | 152,355 | 691,431 | 26% |
| | Public institutions | - | - | 38,330 | - | - | 38,330 | 1% |
| | States | - | - | 18,131 | 254,156 | - | 272,287 | 11% |
| Total | | 219,891 | 53,970 | 391,374 | 1,686,738 | 279,306 | 2,631,279 | 100% |
| | | | | | | | | |
| At 31.12.2015 | | High Grade | Standard Grade | Min. Accept. Risk | High Risk | No grading | Total | % of Total |
| In EUR’000 | | | | | | | | |
| | | A to B- | C | D+ | D- and below | | | |
| Borrower | Banks | 92,260 | 31,558 | 326,635 | 990,971 | 245,160 | 1,686,584 | 64% |
| | Corporates | 125,963 | - | 12,493 | 450,045 | - | 588,501 | 22% |
| | Public institutions | - | - | 37,112 | 40,014 | - | 77,126 | 3% |
| | States | - | - | 9,277 | 288,133 | - | 297,410 | 11% |
| Total | | 218,223 | 31,558 | 385,517 | 1,769,163 | 245,160 | 2,649,621 | 100% |

At 31.12.2016

High Grade

High Grade

Standard Grade

Standard Grade

Min. Accept. Risk

Min. Accept. Risk

High Risk

High Risk

No grading

No grading

Total

Total

% of Total

% of Total

In EUR’000

In EUR’000

A to B-

A to B-

C

C

D+

D+

D- and below

D- and below

Borrower

Borrower

Banks

Banks

94,081

94,081

53,970

53,970

315,524

315,524

1,038,705

1,038,705

126,951

126,951

1,629,231

1,629,231

62%

62%

Corporates

Corporates

125,810

125,810

-

-

19,389

19,389

393,877

393,877

152,355

152,355

691,431

691,431

26%

26%

Public institutions

Public institutions

-

-

-

-

38,330

38,330

-

-

-

-

38,330

38,330

1%

1%

States

States

-

-

-

-

18,131

18,131

254,156

254,156

-

-

272,287

272,287

11%

11%

Total

Total

219,891

219,891

53,970

53,970

391,374

391,374

1,686,738

1,686,738

279,306

279,306

2,631,279

2,631,279

100%

100%

At 31.12.2015

At 31.12.2015

High Grade

High Grade

Standard Grade

Standard Grade

Min. Accept. Risk

Min. Accept. Risk

High Risk

High Risk

No grading

No grading

Total

Total

% of Total

% of Total

In EUR’000

In EUR’000

A to B-

A to B-

C

C

D+

D+

D- and below

D- and below

Borrower

Borrower

Banks

Banks

92,260

92,260

31,558

31,558

326,635

326,635

990,971

990,971

245,160

245,160

1,686,584

1,686,584

64%

64%

Corporates

Corporates

125,963

125,963

-

-

12,493

12,493

450,045

450,045

-

-

588,501

588,501

22%

22%

Public institutions

Public institutions

-

-

-

-

37,112

37,112

40,014

40,014

-

-

77,126

77,126

3%

3%

States

States

-

-

-

-

9,277

9,277

288,133

288,133

-

-

297,410

297,410

11%

11%

Total

Total

218,223

218,223

31,558

31,558

385,517

385,517

1,769,163

1,769,163

245,160

245,160

2,649,621

2,649,621

100%

100%

3.2.3.4Risk concentrations of loans and receivables

3.2.3.4

Risk concentrations of loans and receivables

3.2.3.4.1Geographical analysis

3.2.3.4.1

Geographical analysis

Based on the country of borrower, the Facility’s loan portfolio can be analysed by the following geographical regions (in EUR‘000):

Based on the country of borrower, the Facility’s loan portfolio can be analysed by the following geographical regions (in EUR‘000):

Country of borrower

| Country of borrower | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Kenya | 341,805 | 192,945 |
| Nigeria | 241,547 | 195,290 |
| Uganda | 175,424 | 178,515 |
| Tanzania | 115,239 | 56,367 |
| Jamaica | 90,237 | 85,278 |
| Burundi | 87,373 | 40 |
| Mauritania | 85,008 | 94,123 |
| Dominican Republic | 81,230 | 72,474 |
| Togo | 64,605 | 75,387 |
| Ethiopia | 59,837 | 67,589 |
| Congo (Democratic Republic) | 47,122 | 39,766 |
| Ghana | 45,715 | 40,439 |
| Cameroon | 41,255 | 51,930 |
| Mauritius | 31,518 | 18,882 |
| Rwanda | 29,918 | 20,466 |
| Cape Verde | 23,029 | 24,623 |
| Mozambique | 22,389 | 25,124 |
| French Polynesia | 21,387 | 22,095 |
| Senegal | 18,544 | 10,991 |
| Regional-ACP | 15,640 | 111,103 |
| Malawi | 11,493 | 13,030 |
| Cayman Islands | 11,221 | - |
| Zambia | 11,079 | 8,733 |
| Botswana | 7,889 | 6,605 |
| Haiti | 6,879 | 7,071 |
| Barbados | 6,809 | - |
| Samoa | 6,356 | 6,267 |
| Mali | 6,159 | 6,688 |
| Burkina Faso | 4,480 | 5,967 |
| Congo | 3,460 | 5,189 |
| Vanuatu | 2,470 | 2,772 |
| New Caledonia | 2,191 | 2,705 |
| Seychelles | 2,058 | 468 |
| Palau | 1,929 | 2,197 |
| Liberia | 1,759 | 921 |
| South Africa | 1,336 | - |
| Micronesia | 1,088 | 1,169 |
| Trinidad and Tobago | 528 | 1,010 |
| Niger | 523 | 1,372 |
| Saint Lucia | 392 | 2,671 |
| Bahamas | 392 | - |
| Tonga | 46 | 54 |
| Angola | 19 | - |
| Sint Maarten | 2 | 6 |
| Grenada | - | 1,735 |
| Total | 1,729,380 | 1,460,057 |

Country of borrower

31.12.2016

31.12.2016

31.12.2015

31.12.2015

Kenya

Kenya

341,805

341,805

192,945

192,945

Nigeria

Nigeria

241,547

241,547

195,290

195,290

Uganda

Uganda

175,424

175,424

178,515

178,515

Tanzania

Tanzania

115,239

115,239

56,367

56,367

Jamaica

Jamaica

90,237

90,237

85,278

85,278

Burundi

Burundi

87,373

87,373

40

40

Mauritania

Mauritania

85,008

85,008

94,123

94,123

Dominican Republic

Dominican Republic

81,230

81,230

72,474

72,474

Togo

Togo

64,605

64,605

75,387

75,387

Ethiopia

Ethiopia

59,837

59,837

67,589

67,589

Congo (Democratic Republic)

Congo (Democratic Republic)

47,122

47,122

39,766

39,766

Ghana

Ghana

45,715

45,715

40,439

40,439

Cameroon

Cameroon

41,255

41,255

51,930

51,930

Mauritius

Mauritius

31,518

31,518

18,882

18,882

Rwanda

Rwanda

29,918

29,918

20,466

20,466

Cape Verde

Cape Verde

23,029

23,029

24,623

24,623

Mozambique

Mozambique

22,389

22,389

25,124

25,124

French Polynesia

French Polynesia

21,387

21,387

22,095

22,095

Senegal

Senegal

18,544

18,544

10,991

10,991

Regional-ACP

Regional-ACP

15,640

15,640

111,103

111,103

Malawi

Malawi

11,493

11,493

13,030

13,030

Cayman Islands

Cayman Islands

11,221

11,221

-

-

Zambia

Zambia

11,079

11,079

8,733

8,733

Botswana

Botswana

7,889

7,889

6,605

6,605

Haiti

Haiti

6,879

6,879

7,071

7,071

Barbados

Barbados

6,809

6,809

-

-

Samoa

Samoa

6,356

6,356

6,267

6,267

Mali

Mali

6,159

6,159

6,688

6,688

Burkina Faso

Burkina Faso

4,480

4,480

5,967

5,967

Congo

Congo

3,460

3,460

5,189

5,189

Vanuatu

Vanuatu

2,470

2,470

2,772

2,772

New Caledonia

New Caledonia

2,191

2,191

2,705

2,705

Seychelles

Seychelles

2,058

2,058

468

468

Palau

Palau

1,929

1,929

2,197

2,197

Liberia

Liberia

1,759

1,759

921

921

South Africa

South Africa

1,336

1,336

-

-

Micronesia

Micronesia

1,088

1,088

1,169

1,169

Trinidad and Tobago

Trinidad and Tobago

528

528

1,010

1,010

Niger

Niger

523

523

1,372

1,372

Saint Lucia

Saint Lucia

392

392

2,671

2,671

Bahamas

Bahamas

392

392

-

-

Tonga

Tonga

46

46

54

54

Angola

Angola

19

19

-

-

Sint Maarten

Sint Maarten

2

2

6

6

Grenada

Grenada

-

-

1,735

1,735

Total

Total

1,729,380

1,729,380

1,460,057

1,460,057

3.2.3.4.2Industry sector analysis

3.2.3.4.2

Industry sector analysis

The table below analyses the Facility’s loan portfolio by industry sector of the borrower. Operations which are first disbursed to a financial intermediary before being disbursed to the final beneficiary are reported under global loans (in EUR’000):

The table below analyses the Facility’s loan portfolio by industry sector of the borrower. Operations which are first disbursed to a financial intermediary before being disbursed to the final beneficiary are reported under global loans (in EUR’000):

Industry sector of borrower

| Industry sector of borrower | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Global loans and agency agreements | 987,242 | 658,098 |
| Electricity, coal and others | 277,524 | 197,547 |
| Urban development, renovation and transport | 203,094 | 207,773 |
| Basic material and mining | 78,849 | 88,615 |
| Tertiary and other | 67,590 | 201,361 |
| Roads and motorways | 48,600 | 48,165 |
| Airports and air traffic management systems | 38,330 | 37,126 |
| Food chain | 13,178 | 7,643 |
| Waste recuperation | 7,988 | 4 |
| Materials processing, construction | 6,964 | 13,719 |
| Telecommunications | 21 | 6 |
| Total | 1,729,380 | 1,460,057 |

Industry sector of borrower

31.12.2016

31.12.2016

31.12.2015

31.12.2015

Global loans and agency agreements

Global loans and agency agreements

987,242

987,242

658,098

658,098

Electricity, coal and others

Electricity, coal and others

277,524

277,524

197,547

197,547

Urban development, renovation and transport

Urban development, renovation and transport

203,094

203,094

207,773

207,773

Basic material and mining

Basic material and mining

78,849

78,849

88,615

88,615

Tertiary and other

Tertiary and other

67,590

67,590

201,361

201,361

Roads and motorways

Roads and motorways

48,600

48,600

48,165

48,165

Airports and air traffic management systems

Airports and air traffic management systems

38,330

38,330

37,126

37,126

Food chain

Food chain

13,178

13,178

7,643

7,643

Waste recuperation

Waste recuperation

7,988

7,988

4

4

Materials processing, construction

Materials processing, construction

6,964

6,964

13,719

13,719

Telecommunications

Telecommunications

21

21

6

6

Total

Total

1,729,380

1,729,380

1,460,057

1,460,057

3.2.3.5Arrears on loans and impairments

3.2.3.5

Arrears on loans and impairments

Amounts in arrears are identified, monitored and reported according to the procedures defined into the bank wide “Finance Monitoring Guidelines and Procedures”. These procedures are in line with best banking practices and are adopted for all loans managed by the EIB.

The monitoring process is structured in order to make sure that (i) potential arrears are detected and reported to the services in charge with minimum delay; (ii) critical cases are promptly escalated to the right operational and decision level; (iii) regular reporting to EIB management and to Member States is provided on the overall status of arrears and on the recovery measures already taken or to be taken.

The arrears and impairments on loans can be analysed as follows (in EUR’000):

Loans and receivables

| | | Loans and receivables | Loans and receivables |
| --- | --- | --- | --- |
| | Notes | 31.12.2016 | 31.12.2015 |
| Carrying amount | | 1,729,380 | 1,460,057 |
| | | | |
| Individually impaired | | | |
| Gross amount | | 119,381 | 214,232 |
| Allowance for impairment | 7 | -117,640 | -191,046 |
| Carrying amount individually impaired | | 1,741 | 23,186 |
| | | | |
| Collectively impaired | | | |
| Gross amount | | - | - |
| Allowance for impairment | | - | - |
| Carrying amount collectively impaired | | - | - |
| | | | |
| Past due but not impaired | | | |
| | | | |
| Past due comprises | | | |
| 0-30 days | | 1,620 | 1,521 |
| 30-60 days | | 30 | 15 |
| 60-90 days | | - | - |
| 90-180 days | | - | - |
| more 180 days | | 1 | 13 |
| Carrying amount past due but not impaired | | 1,651 | 1,549 |
| | | | |
| Carrying amount neither past due nor impaired | | 1,725,988 | 1,435,322 |
| | | | |
| Total carrying amount loans and receivables | | 1,729,380 | 1,460,057 |

Loans and receivables

Notes

31.12.2016

31.12.2015

Carrying amount

1,729,380

1,460,057

Individually impaired

Gross amount

119,381

214,232

Allowance for impairment

7

-117,640

-191,046

Carrying amount individually impaired

1,741

23,186

Collectively impaired

Gross amount

-

-

Allowance for impairment

-

-

Carrying amount collectively impaired

-

-

Past due but not impaired

Past due comprises

0-30 days

1,620

1,521

30-60 days

30

15

60-90 days

-

-

90-180 days

-

-

more 180 days

1

13

Carrying amount past due but not impaired

1,651

1,549

Carrying amount neither past due nor impaired

1,725,988

1,435,322

Total carrying amount loans and receivables

1,729,380

1,460,057

3.2.3.6Loan renegotiation and forbearance

The Facility considers loans to be forborne if in response to adverse changes in the financial position of a borrower the Facility renegotiates the original terms of the contractual arrangements with this borrower affecting directly the future cash flows of the financial instrument, which may result in a loss to the Facility. However, the financial impact of restructuring activities is in general limited to impairment losses, if any, as financial neutrality is generally applied by the Facility and reflected in the renegotiated pricing conditions of the operations restructured.

In the normal course of business, the Loan Grading (LG) of the loans in question would have deteriorated and the loan would have been included in the Watch List before renegotiation. Once renegotiated, the Facility will continue to closely monitor these loans. If the renegotiated payment terms will not recover the original carrying amount of the asset, it will be considered as impaired. The corresponding impairment losses will be calculated based on the forecasted cash flows discounted at the original effective interest rate. The need for impairment for all loans whose LG deteriorated to E- is assessed regularly; all loans with a LG of F require impairment. Once the Loan Grading of a loan has improved sufficiently, it will be removed from the Watch List in line with the procedures of the Facility.

Forbearance measures and practices undertaken by the Facility’s restructuring team during the reporting period includes extension of maturity, deferral of capital only, deferral of capital and interest and capitalisation of arrears. Such forbearance measures do not lead to the derecognition of the underlying operation.

Exposures subject to changes in contractual terms which do not affect future cash flows, such as collateral or other security arrangements or the waiver of contractual rights under covenants, are not considered as forborne and hence those events are not considered as sufficient to indicate impairment on their own.

Operations subject to forbearance measures are reported as such in the table below:

In EUR’000

| In EUR’000 | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Number of operations subject to forbearance practices | 22 | 16 |
| Carrying values | 171,135 | 225,631 |
| of which impaired | 124,250 | 204,711 |
| Impairment recognised | 113,052 | 188,197 |
| Interest income in respect of forborn operations | 19,877 | 14,262 |
| Exposures written off (following the termination/sale of the operation) | 31,298 | - |

31.12.2016

31.12.2015

Number of operations subject to forbearance practices

22

16

Carrying values

171,135

225,631

of which impaired

124,250

204,711

Impairment recognised

113,052

188,197

Interest income in respect of forborn operations

19,877

14,262

Exposures written off (following the termination/sale of the operation)

31,298

-

Forbearance measures

| | | | Forbearance measures | | | |
| --- | --- | --- | --- | --- | --- | --- |
| In EUR’000 | 31.12.2015 | Extension of maturities | Deferral of capital only | Deferral of capital and interest | Other | Contractual repayment and termination (1) | 31.12.2016 |
| Banks | 17,891 | - | - | 12,150 | 8,062 | -827 | 37,276 |
| Corporates | 207,740 | - | - | - | 26,203 | -100,084 | 133,859 |
| Total | 225,631 | - | - | 12,150 | 34,265 | -100,911 | 171,135 |
| | | | | | | | |
| (1) Decreases are explained by repayments of capital occurred during the year on operations already considered as forborne as of 31 December 2015 and by termination during the year. |

In EUR’000

31.12.2015

Extension of maturities

Deferral of capital only

Deferral of capital and interest

Other

Contractual repayment and termination (1)

31.12.2016

Banks

17,891

-

-

12,150

8,062

-827

37,276

Corporates

207,740

-

-

-

26,203

-100,084

133,859

Total

225,631

-

-

12,150

34,265

-100,911

171,135

(1) Decreases are explained by repayments of capital occurred during the year on operations already considered as forborne as of 31 December 2015 and by termination during the year.

3.2.4Credit risk on cash and cash equivalents

Available funds are invested in accordance with the Facility’s schedule of contractual disbursement obligations. As of 31 December 2016 and 31 December 2015, investments were in the form of bank deposits, certificates of deposit and commercial papers.

The authorized entities have a rating similar to the short-term and long-term ratings required for the EIB’s own treasury placements. The minimum short term rating required for authorised entities is P-1/A-1/F1 (Moody’s, S&P, Fitch). In case of different ratings being granted by more than one credit rating agency, the lowest rating governs. The maximum authorized limit for each authorised bank is currently
  EUR 50,000,000 (fifty million euro). An exception to this rule has been granted to Societe Generale where the Facility has its operational cash accounts. The short term credit limit for Societe Generale as at 31 December 2016 and 31 December 2015 amounts to

  EUR 110,000,000 (one hundred and ten million euro). The increased limit applies to the sum of the cash held at the operational cash accounts and the instruments issued by this counterpart and held by the treasury portfolio.

All investments have been done with authorised entities with a maximum tenor of three months from value date and up to the credit exposure limit. As at 31 December 2016 and 31 December 2015 all term deposits, commercial papers and cash in hand held by the treasury portfolio of the Facility had a minimum rating of P-1 (Moody’s equivalent) at settlement day.

The following table shows the situation of cash and cash equivalents including accrued interest (in EUR’000):

Minimum short-term rating

| Minimum short-term rating | Minimum long-term rating | 31.12.2016 | 31.12.2015 |
| --- | --- | --- | --- |
| (Moody’s term) | (Moody’s term) | | |
| P-1 | Aaa | 37,949 | 10% | 49,999 | 11% |
| P-1 | Aa2 | 46,963 | 13% | 26 | 0% |
| P-1 | Aa3 | 40,436 | 11% | - | 0% |
| P-1 | A1 | 100,012 | 28% | 115,705 | 26% |
| P-1 | A2 | 135,457 | 38% | 283,265 | 63% |
| Total | | 360,817 | 100% | 448,995 | 100% |

Minimum long-term rating

31.12.2016

31.12.2015

(Moody’s term)

(Moody’s term)

P-1

Aaa

37,949

10%

49,999

11%

P-1

Aa2

46,963

13%

26

0%

P-1

Aa3

40,436

11%

-

0%

P-1

A1

100,012

28%

115,705

26%

P-1

A2

135,457

38%

283,265

63%

Total

360,817

100%

448,995

100%

3.2.5Credit risk on derivatives

3.2.5.1Credit risk policy of derivatives

The credit risk with respect to derivatives is represented by the loss which a given party would incur where the other counterparty to the deal would be unable to honour its contractual obligations. The credit risk associated with derivatives varies according to a number of factors (such as interest and exchange rates) and generally corresponds to only a small portion of their notional value.

In the normal course of its activity, the Facility may enter into swap contracts with a view to hedge specific lending operations or into currency forward contracts, with a view to hedge its currency positions denominated in actively traded currencies other than the Euro. All the swaps are executed by the European Investment Bank with an external counterpart. The swaps are arranged by the same Master Swap Agreements and Credit Support Annexes signed between the European Investment Bank and its external counterparts.

3.2.5.2Credit risk measurement for derivatives

All the swaps executed by the European Investment Bank that are related to the Facility are treated within the same contractual framework and methodologies applied for the derivatives negotiated by the European Investment Bank for its own purposes. In particular, eligibility of swap counterparts is determined by the European Investment Bank based on the same eligibility conditions applied for its general swap purposes.

The European Investment Bank measures the credit risk exposure related to swaps and derivatives transactions using the Net Market Exposure (“NME”) and Potential Future Exposure (“PFE”) approach for reporting and limit monitoring. The NME and the PFE fully include the derivatives related to the Investment Facility.

·The following table shows the maturities of cross currency interest rate swaps, sub-divided according to their notional amount and fair value:

Swap contracts at 31.12.2016

| Swap contracts at 31.12.2016 | less than | 1 year | 5 years | more than | Total 2016 |
| --- | --- | --- | --- | --- | --- |
| In EUR’000 | 1 year | to 5 years | to 10 years | to 10 years | |
| Notional amount | - | 7,430 | - | - | 7,430 |
| Fair Value (i.e. net discounted value) | - | -3,051 | - | - | -3,051 |
| | | | | | |
| | | | | | |
| Swap contracts at 31.12.2015 | less than | 1 year | 5 years | more than | Total 2015 |
| In EUR’000 | 1 year | to 5 years | to 10 years | to 10 years | |
| Notional amount | - | 9,589 | - | - | 9,589 |
| Fair Value (i.e. net discounted value) | - | -3,835 | - | - | -3,835 |

less than

1 year

5 years

more than

Total 2016

In EUR’000

1 year

to 5 years

to 10 years

to 10 years

Notional amount

-

7,430

-

-

7,430

Fair Value (i.e. net discounted value)

-

-3,051

-

-

-3,051

Swap contracts at 31.12.2015

less than

1 year

5 years

more than

Total 2015

In EUR’000

1 year

to 5 years

to 10 years

to 10 years

Notional amount

-

9,589

-

-

9,589

Fair Value (i.e. net discounted value)

-

-3,835

-

-

-3,835

·The Facility enters into foreign exchange short term currency swaps (“FX swaps”) contracts in order to hedge currency risk on loan disbursements in currencies other than EUR. FX swaps have a maturity of maximum three months and are regularly rolled-over. The notional amount of FX swaps stood at EUR 1,611.0 million at 31 December 2016 against EUR 1,400.0 million at 31 December 2015. The fair value of FX swaps amounts to EUR -15.3 million at 31 December 2016 against EUR -3.7 million at 31 December 2015.

·The Facility enters into interest rate swap contracts in order to hedge the interest rate risk on loans disbursed. As at 31 December 2016 there are two interest rate swaps outstanding with a notional amount of EUR 41.2 million (2015: EUR 44.9 million) and a fair value of EUR 0.1 million (2015: EUR -0.3 million).

3.2.6Credit risk on held-to-maturity financial assets

The following table shows the situation of the held-to-maturity portfolio entirely composed of treasury bills issued by Italy, Portugal and Spain with remaining maturities of less than three months. EU Member States are eligible issuers. The maximum authorized limit for each authorised issuer is EUR 50,000,000 (fifty million euro). Investments in medium and long-term bonds could also be eligible, according to the investment guidelines and depending on liquidity requirements:

Minimum short-term rating

| Minimum short-term rating | Minimum long-term rating | 31.12.2016 | 31.12.2015 |
| --- | --- | --- | --- |
| (Moody’s term) | (Moody’s term) | | |
| P-1 | Aa2 | 18,012 | 10% | - | 0% |
| P-1 | A1 | 30,002 | 18% | 10,000 | 4% |
| P-1 | A2 | - | 0% | 69,502 | 31% |
| P-2 | Baa2 | - | 0% | 50,007 | 22% |
| P-2 | Non-Rated | 20,025 | 12% | - | 0% |
| P-3 | Baa3 | - | 0% | 50,012 | 22% |
| NP | Ba1 | 50,005 | 30% | 49,000 | 21% |
| Non-Rated | Baa2 | 51,354 | 30% | - | 0% |
| Total | | 169,398 | 100% | 228,521 | 100% |

Minimum long-term rating

31.12.2016

31.12.2015

(Moody’s term)

(Moody’s term)

P-1

Aa2

18,012

10%

-

0%

P-1

A1

30,002

18%

10,000

4%

P-1

A2

-

0%

69,502

31%

P-2

Baa2

-

0%

50,007

22%

P-2

Non-Rated

20,025

12%

-

0%

P-3

Baa3

-

0%

50,012

22%

NP

Ba1

50,005

30%

49,000

21%

Non-Rated

Baa2

51,354

30%

-

0%

Total

169,398

100%

228,521

100%

Liquidity risk

Liquidity risk refers to an enitity’s ability to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses. It can be split into funding liquidity risk and market liquidity risk. Funding liquidity risk is the risk that an entity will not be able to meet efficiently both expected and unexpected current and future cash flow needs without affecting its daily operations or its financial condition. Market liquidity risk is the risk that an entity cannot easily offset or eliminate a position at the market price because of inadequate market depth or market disruption.

3.2.2Liquidity risk management

The Facility is primarily funded by annual contributions from Member States as well as by reflows stemming from the Facility’s operations. The Facility manages its funding liquidity risk primarily by planning of its net liquidity needs and the required Member States annual contributions.

In order to calculate Member States’ annual contributions, disbursement patterns of the existing and pipelined portfolio is analysed and followed up throughout the year. Special events, such as early reimbursements, sales of shares or default cases are taken into account to correct annual liquidity requirements.

To further minimize the liquidity risk, the Facility maintains a liquidity reserve sufficient to cover at any point in time forecasted cash disbursements, as communicated periodically by EIB’s Lending Department. Funds are invested on the money market and bond markets in the form of interbank deposits and other short term financial instruments by taking into consideration the Facility’s cash disbursement obligations. The Facility’s liquid assets are managed by the Bank’s Treasury Department with a view to maintain appropriate liquidity to enable the Facility to meet its obligations.

In accordance with the principle of segregation of duties between the Front and Back Office, settlement operations related to the investment of these assets are under the responsibility of the EIB’s Planning and Settlement of Operations Department. Furthermore, the authorisation of counterparts and limits for treasury investments, as well as the monitoring of such limits, are the responsibility of the Bank’s Risk Management Directorate.

3.2.3Liquidity risk measurement

The tables in this section analyse the financial liabilities of the Facility by maturity on the basis of the period remaining between the balance sheet date and the contractual maturity date (based on undiscounted cash flows).

In terms of non-derivative financial liabilities, the Facility holds commitments in form of un-disbursed portions of the credit under signed loan agreements, of un-disbursed portions of signed capital subscription/investment agreements, of loan guarantees granted, or of committed interest subsidies and TA.

Loans under the IF have a disbursement deadline. However, disbursements are made at times and in amounts reflecting the progress of underlying investment projects. Moreover, the IF’s loans are transactions performed in a relatively volatile operating environment, hence their disbursement schedule is subject to a significant degree of uncertainty.

Capital investments become due when and as soon as equity fund managers issue valid calls for capital, reflecting the progress in their investment activities. The drawdown period is usually of 3 years, with frequent prolongation by one or two years. Some disbursement commitments usually survive the end of the drawdown period until full disposal of the fund’s underlying investments, as the fund’s liquidity may be insufficient from time to time to meet payment obligations arising in respect of fees or other expenses.

Guarantees are not subject to specific disbursement commitments unless a guarantee is called. The amount of guarantees outstanding is reduced alongside the repayment schedule of guaranteed loans.

Committed interest subsidies’ cash outflows occur in the case of subsidized loans financed by the Bank’s own resources. Therefore, reported outflows represent only commitments related to these loans rather than the total amount of committed un-disbursed interest subsidies. As in the case of loans, their disbursement schedule is uncertain.

Committed TA “gross nominal outflow” in the “Maturity profile of non-derivative financial liabilities” table refers to the total un-disbursed portion of signed TA contracts. The disbursement time pattern is subject to a significant degree of uncertainty. Cash outflows classified in the “3 months or less” bucket represent the amount of outstanding invoices received by the reporting date.

Commitments for non-derivative financial liabilities for which there is no defined contractual maturity date are classified under “Maturity Undefined”. Commitments, for which there is a recorded cash disbursement request at the reporting date, are classified under the relevant time bucket.

In terms of derivative financial liabilities, the maturity profile represents the contractual undiscounted gross cash flows of swap contracts including cross currency swaps (CCS), cross currency interest rate swaps (CCIRS), short term currency swaps and interest rate swaps.

Maturity profile of non-derivative financial liabilities

| Maturity profile of non-derivative financial liabilities | 3 months or less | More than 3 months to 1 year | More than 1 year to 5 years | More than 5 years | Maturity Undefined | Gross nominal outflow |
| --- | --- | --- | --- | --- | --- | --- |
| In EUR’000 as at 31.12.2016 | | | | | | |
| Outflows for committed but un-disbursed loans | 82,405 | - | - | - | 819,494 | 901,899 |
| Outflows for committed investment funds and share subscription | 4,592 | - | - | - | 239,458 | 244,050 |
| Others (signed non-issued guarantees, issued guarantees) | - | - | - | - | 43,964 | 43,964 |
| Outflows for committed interest subsidies | - | - | - | - | 275,917 | 275,917 |
| Outflows for committed TA | 2,671 | - | - | - | 24,807 | 27,478 |
| Total | 89,668 | - | - | - | 1,403,640 | 1,493,308 |
| | | | | | | |
| Maturity profile of non-derivative financial liabilities | 3 months or less | More than 3 months to 1 year | More than 1 year to 5 years | More than 5 years | Maturity Undefined | Gross nominal outflow |
| In EUR’000 as at 31.12.2015 | | | | | | |
| Outflows for committed but un-disbursed loans | 41,028 | - | - | - | 1,148,536 | 1,189,564 |
| Outflows for committed investment funds and share subscription | 23,371 | - | - | - | 274,984 | 298,355 |
| Others (signed non-issued guarantees, issued guarantees) | - | - | - | - | 10,798 | 10,798 |
| Outflows for committed interest subsidies | - | - | - | - | 281,682 | 281,682 |
| Outflows for committed TA | 811 | - | - | - | 28,072 | 28,883 |
| Total | 65,210 | - | - | - | 1,744,072 | 1,809,282 |
| | | | | | | |
| | | | | | | |
| Maturity profile of derivative financial liabilities | 3 months or less | More than 3 months to 1 year | More than 1 year to 5 years | More than 5 years | Gross nominal inflow/outflow |
| | | | | | |
| In EUR’000 as at 31.12.2016 | | | | | |
| CCS and CCIRS – Inflows | 3 | 2,409 | 5,222 | - | 7,634 |
| CCS and CCIRS – Outflows | - | -3,688 | -7,377 | - | -11,065 |
| Short term currency swaps – Inflows | 1,611,000 | - | - | - | 1,611,000 |
| Short term currency swaps – Outflows | -1,636,001 | - | - | - | -1,636,001 |
| Interest Rate Swaps – Inflows | 411 | 1,234 | 5,529 | 1,550 | 8,724 |
| Interest Rate Swaps - Outflows | - | -1,962 | -5,316 | -1,329 | -8,607 |
| Total | -24,587 | -2,007 | -1,942 | 221 | -28,315 |
| | | | | | |
| Maturity profile of derivative financial liabilities | 3 months or less | More than 3 months to 1 year | More than 1 year to 5 years | More than 5 years | Gross nominal inflow/outflow |
| | | | | | |
| In EUR’000 as at 31.12.2015 | | | | | |
| CCS and CCIRS – Inflows | 5 | 2,307 | 7,671 | - | 9,983 |
| CCS and CCIRS – Outflows | - | -3,571 | -10,714 | - | -14,285 |
| Short term currency swaps – Inflows | 1,400,000 | - | - | - | 1,400,000 |
| Short term currency swaps – Outflows | -1,407,763 | - | - | - | -1,407,763 |
| Interest Rate Swaps – Inflows | 383 | 1,269 | 6,059 | 2,524 | 10,235 |
| Interest Rate Swaps - Outflows | - | -2,145 | -6,127 | -2,206 | -10,478 |
| Total | -7,375 | -2,140 | -3,111 | 318 | -12,308 |

3 months or less

More than 3 months to 1 year

More than 1 year to 5 years

More than 5 years

Maturity Undefined

Gross nominal outflow

In EUR’000 as at 31.12.2016

Outflows for committed but un-disbursed loans

82,405

-

-

-

819,494

901,899

Outflows for committed investment funds and share subscription

4,592

-

-

-

239,458

244,050

Others (signed non-issued guarantees, issued guarantees)

-

-

-

-

43,964

43,964

Outflows for committed interest subsidies

-

-

-

-

275,917

275,917

Outflows for committed TA

2,671

-

-

-

24,807

27,478

Total

89,668

-

-

-

1,403,640

1,493,308

Maturity profile of non-derivative financial liabilities

3 months or less

More than 3 months to 1 year

More than 1 year to 5 years

More than 5 years

Maturity Undefined

Gross nominal outflow

In EUR’000 as at 31.12.2015

Outflows for committed but un-disbursed loans

41,028

-

-

-

1,148,536

1,189,564

Outflows for committed investment funds and share subscription

23,371

-

-

-

274,984

298,355

Others (signed non-issued guarantees, issued guarantees)

-

-

-

-

10,798

10,798

Outflows for committed interest subsidies

-

-

-

-

281,682

281,682

Outflows for committed TA

811

-

-

-

28,072

28,883

Total

65,210

-

-

-

1,744,072

1,809,282

Maturity profile of derivative financial liabilities

3 months or less

More than 3 months to 1 year

More than 1 year to 5 years

More than 5 years

Gross nominal inflow/outflow

In EUR’000 as at 31.12.2016

CCS and CCIRS – Inflows

3

2,409

5,222

-

7,634

CCS and CCIRS – Outflows

-

-3,688

-7,377

-

-11,065

Short term currency swaps – Inflows

1,611,000

-

-

-

1,611,000

Short term currency swaps – Outflows

-1,636,001

-

-

-

-1,636,001

Interest Rate Swaps – Inflows

411

1,234

5,529

1,550

8,724

Interest Rate Swaps - Outflows

-

-1,962

-5,316

-1,329

-8,607

Total

-24,587

-2,007

-1,942

221

-28,315

Maturity profile of derivative financial liabilities

3 months or less

More than 3 months to 1 year

More than 1 year to 5 years

More than 5 years

Gross nominal inflow/outflow

In EUR’000 as at 31.12.2015

CCS and CCIRS – Inflows

5

2,307

7,671

-

9,983

CCS and CCIRS – Outflows

-

-3,571

-10,714

-

-14,285

Short term currency swaps – Inflows

1,400,000

-

-

-

1,400,000

Short term currency swaps – Outflows

-1,407,763

-

-

-

-1,407,763

Interest Rate Swaps – Inflows

383

1,269

6,059

2,524

10,235

Interest Rate Swaps - Outflows

-

-2,145

-6,127

-2,206

-10,478

Total

-7,375

-2,140

-3,111

318

-12,308

3.2.4Long term financial assets and liabilities

The following table sets out the carrying amounts of non-derivative financial assets and financial liabilities expected to be recovered or settled more than 12 months after the reporting date.

In EUR’000

| In EUR’000 | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| | | |
| Financial assets: | | |
| Loans and receivables | 1,692,867 | 1,423,368 |
| Available-for-sale financial assets | 516,884 | 419,353 |
| Other assets | 141 | - |
| Total | 2,209,892 | 1,842,721 |
| | | |
| Financial liabilities: | | |
| Provisions for guarantees issued | 497 | - |
| Amount owed to third parties | 69,960 | 57,346 |
| Total | 70,457 | 57,346 |

31.12.2016

31.12.2015

Financial assets:

Loans and receivables

1,692,867

1,423,368

Available-for-sale financial assets

516,884

419,353

Other assets

141

-

Total

2,209,892

1,842,721

Financial liabilities:

Provisions for guarantees issued

497

-

Amount owed to third parties

69,960

57,346

Total

70,457

57,346

Market risk

Market risk represents the risk that changes in market prices and rates, such as interest rates, equity prices and foreign exchange rates will affect an entity’s income or the value of its holdings in financial instruments.

3.2.5Interest rate risk

Interest rate risk arises from the volatility in the economic value of, or in the income derived from, interest rate bearing positions due to adverse movements in interest rates.

The Facility is not directly impacted by the fluctuation of its economic value or to pricing mismatches between different assets, liabilities and hedge instruments because (i) it does not have any direct borrowing costs or interest rate bearing liabilities and (ii) it accepts the impact of interest rate fluctuations on the revenues from its investments.

The Facility measures the sensitivity of its loan portfolio and micro hedging swaps to interest rate fluctuations via a Basis Point Value (BPV) calculation.

The BPV measures the gain or loss in the net present value of the relevant portfolio, due to a 1 basis point (0.01%) increase in interest rates tenors ranging within a specified time bucket “money market – up to one year”, “very short – 2 to 3 years”, “short – 4 to 6 years”, “medium – 7 to 11 years”, “long – 12 to 20 years” or “extra-long – more than 21 years”.

To determine the net present value (NPV) of the loans’ cash flows denominated in EUR, the Facility uses the EIB’s EUR base funding curve (EUR swap curve adjusted with EIB’s global funding spread). The EIB’s USD funding curve is used for the calculation of the NPV of loan’s cash flows denominated in USD. The NPV of the loans’ cash flows denominated in currencies for which a reliable and sufficiently complete discount curve is not available, is determined by using EIB’s EUR base funding curve as a proxy.

To calculate the net present value of the micro hedging swaps, the facility uses the EUR swap curve for cash flows denominated in EUR and the USD swap curve for cash flows denominated in USD.

As shown in the following table the net present value of the loan portfolio including related micro-hedging swaps as at 31 December 2016 would decrease by EUR 516k (as at 31 December 2015: decrease by EUR 532k) if all relevant interest rates curves are simultaneously shifted upwards in parallel by 1 basis point.

Basis point value

| Basis point value | Money | Very Short | Short | Medium | Long | Extra Long | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| In EUR’000 | Market | | | | | | |
| As at 31.12.2016 | 1 year | 2 to 3 years | 4 to 6 years | 7 to 11 years | 12 to 20 years | 21 years | |
| Total sensitivity of loans and micro hedging swaps | -46 | -101 | -164 | -175 | -30 | - | -516 |
| | | | | | | | |
| Basis point value | Money | Very Short | Short | Medium | Long | Extra Long | Total |
| In EUR’000 | Market | | | | | | |
| As at 31.12.2015 | 1 year | 2 to 3 years | 4 to 6 years | 7 to 11 years | 12 to 20 years | 21 years | |
| Total sensitivity of loans and micro hedging swaps | -37 | -72 | -252 | -139 | -32 | - | -532 |

Money

Very Short

Short

Medium

Long

Extra Long

Total

In EUR’000

Market

As at 31.12.2016

1 year

2 to 3 years

4 to 6 years

7 to 11 years

12 to 20 years

21 years

Total sensitivity of loans and micro hedging swaps

-46

-101

-164

-175

-30

-

-516

Basis point value

Money

Very Short

Short

Medium

Long

Extra Long

Total

In EUR’000

Market

As at 31.12.2015

1 year

2 to 3 years

4 to 6 years

7 to 11 years

12 to 20 years

21 years

Total sensitivity of loans and micro hedging swaps

-37

-72

-252

-139

-32

-

-532

3.4.2Foreign exchange risk

Foreign exchange (“FX”) risk for the IF is the risk of loss in earnings or economic value due to adverse movements of FX rates.

Given a reference accounting currency (EUR for the IF), the Facility is exposed to FX risk whenever there is a mismatch between assets and liabilities denominated in a non-reference accounting currency. FX risk also includes the effect of changes in the value of future cash flows denominated in non-reference accounting currency, e.g. interest and dividend payments, due to fluctuations in exchange rates.

3.4.2.1Foreign exchange risk and treasury assets

The IF’s treasury assets are denominated either in EUR or USD.

FX risk is hedged by means of FX cross currency spot or forward transactions, FX swaps or cross-currency swaps. The EIB’s Treasury Department can, where deemed necessary and appropriate, use any other instrument, in line with the Bank’s policy, that provide protection against market risks incurred in connection with the IF’s financial activities.

3.4.2.2Foreign exchange risk and operations financed or guaranteed by the IF

Member States’ IF contributions are received in EUR. The operations financed or guaranteed by the IF as well as interest subsidies can be denominated in EUR, USD or any other authorized currency.

A foreign exchange risk exposure (against the EUR reference currency) arises whenever transactions denominated in currencies other than the EUR are left un-hedged. The IF’s foreign exchange risk hedging guidelines are set out below.

3.4.2.2.1.Hedging of operations denominated in USD

The FX risk generated by IF operations denominated in USD shall be covered on an aggregated basis via the use of USD/EUR FX swaps, rolled over and adjusted in terms of amount on a periodic basis. The use of FX swaps serves a dual purpose. On one side the necessary liquidity for new disbursements (loans and equity) is generated and on the other side an FX macro hedging is maintained.

At the beginning of each period, the cash flows to be received or paid in USD during the next period shall be estimated on the basis of planned or expected reflows/disbursements. Subsequently, the maturing FX swaps shall be rolled over, their amount being adjusted to cover at least the USD liquidity needs projected over the next period.

-On a monthly basis, the USD FX position shall be hedged, if exceeding the relevant limits, by means of a spot or forward operation.

-Within a roll-over period, unexpected USD liquidity deficits shall be covered by means of ad hoc FX swap operations while liquidity surpluses shall either be invested in treasury assets or converted into EUR if occurred from an increase of the FX position.

3.4.2.2.2.Hedging of operations denominated in currencies other than EUR or USD

-IF operations denominated in currencies other than EUR and USD shall be hedged through cross-currency swap contracts with the same financial profile as the underlying Loan, provided that a swap market is operational.

-IF has operations denominated in currencies for which hedging possibilities are either not efficiently available or available at a high cost. These operations are denominated in local currencies (LCs) but settled in EUR or USD. IF’s financial risk framework, which was approved by the IF Committee on 22 January 2015, offers the possibility to hedge the FX exposure in LCs that exhibit a significant positive correlation with the USD synthetically via USD-denominated derivatives. The LCs hedged synthetically with USD denominated derivatives are reported in the table in section 3.4.2.2.3 below under item “Local currencies (under synthetic hedge)”, while the LCs not hedged synthetically with the USD are reported in the same table under item “Local currencies (not under synthetic hedge)”.

3.4.2.2.3Foreign exchange position (in EUR’000)

The tables of this note show the Facility’s foreign exchange position.

The foreign exchange position is presented in the tables below in accordance with the IF’s Risk Policies (as described in the IF’s financial risk framework). The FX position as per Risk Policies is based on accounting figures and defined as the balance between selected assets and liabilities. The assets and liabilities defined in the FX position as per Risk Policies are selected so as to ensure that the earnings will only be converted into the reporting currency (EUR) when received.

The unrealised gains/losses and impairment on available-for-sale financial assets are included in the FX position as per Risk Policies, as well as impairments on loans and receivables. Derivatives included in the FX position as per Risk Policies are considered at their nominal value instead of their fair value, in order to be aligned with the retained value of the assets, considered also at their nominal value adjusted by the impairment for loans.

In the tables below the remaining part of the assets and liabilities, which includes mainly interest accruals on loans, derivatives and subsidies, is presented as “FX position excluded from Risk Policies”.

At 31 December 2016

| At 31 December 2016 | Assets and liabilities | | Commitments and contingent liabilities |
| --- | --- | --- | --- |
| Currencies | FX position as per Risk Policies | FX position excluded from Risk Policies | Balance sheet FX position | | |
| USD | -258,496 | 7,578 | -250,918 | | 282,991 |
| Local currencies
  (under synthetic hedge)* | | | | | |
| KES | 117,881 | 3,869 | 121,751 | | - |
| TZS | 97,116 | 1,931 | 99,046 | | - |
| DOP | 52,553 | 2,013 | 54,566 | | - |
| UGX | 36,776 | 1,077 | 37,854 | | - |
| RWF | 22,258 | 194 | 22,452 | | - |
| Local currencies
  (not under synthetic hedge)* | | | | | |
| HTG, MUR, MZN, XOF, ZMW, BWP | 22,534 | 252 | 22,786 | | 246 |
| Total non-EUR currencies | 90,622 | 16,914 | 107,537 | | 283,237 |
| EUR | - | 2,591,845 | 2,591,845 | | 1,241,229 |
| Total EUR and non-EUR | 90,622 | 2,608,759 | 2,699,382 | | 1,524,466 |
| |
| * See section 3.4.2.2.2 for explanations on synthetic hedge. |
| At 31 December 2015 | Assets and liabilities | | Commitments and contingent liabilities |
| Currencies | FX position as per Risk Policies | FX position excluded from Risk Policies | Balance sheet FX position | | |
| USD | -207,050 | 5,023 | -202,027 | | 270,236 |
| Local currencies
  (under synthetic hedge)* | | | | | |
| KES | 129,862 | 3,101 | 132,963 | | - |
| TZS | 46,246 | 780 | 47,025 | | - |
| DOP | 40,799 | 1,274 | 42,073 | | - |
| UGX | 30,182 | 565 | 30,747 | | - |
| RWF | 11,979 | 164 | 12,143 | | - |
| Local currencies
  (not under synthetic hedge)* | | | | | |
| HTG, MUR, MZN, XOF, ZMW | 15,474 | 201 | 15,675 | | 798 |
| Total non-EUR currencies | 67,492 | 11,108 | 78,599 | | 271,034 |
| EUR | - | 2,337,555 | 2,337,555 | | 1,579,719 |
| Total EUR and non-EUR | 67,492 | 2,348,663 | 2,416,154 | | 1,850,753 |

Assets and liabilities

Commitments and contingent liabilities

Currencies

FX position as per Risk Policies

FX position excluded from Risk Policies

Balance sheet FX position

USD

-258,496

7,578

-250,918

282,991

Local currencies
  (under synthetic hedge)*

KES

117,881

3,869

121,751

-

TZS

97,116

1,931

99,046

-

DOP

52,553

2,013

54,566

-

UGX

36,776

1,077

37,854

-

RWF

22,258

194

22,452

-

Local currencies
  (not under synthetic hedge)*

HTG, MUR, MZN, XOF, ZMW, BWP

22,534

252

22,786

246

Total non-EUR currencies

90,622

16,914

107,537

283,237

EUR

-

2,591,845

2,591,845

1,241,229

Total EUR and non-EUR

90,622

2,608,759

2,699,382

1,524,466

- See section 3.4.2.2.2 for explanations on synthetic hedge.

At 31 December 2015

Assets and liabilities

Commitments and contingent liabilities

Currencies

FX position as per Risk Policies

FX position excluded from Risk Policies

Balance sheet FX position

USD

-207,050

5,023

-202,027

270,236

Local currencies
  (under synthetic hedge)*

KES

129,862

3,101

132,963

-

TZS

46,246

780

47,025

-

DOP

40,799

1,274

42,073

-

UGX

30,182

565

30,747

-

RWF

11,979

164

12,143

-

Local currencies
  (not under synthetic hedge)*

HTG, MUR, MZN, XOF, ZMW

15,474

201

15,675

798

Total non-EUR currencies

67,492

11,108

78,599

271,034

EUR

-

2,337,555

2,337,555

1,579,719

Total EUR and non-EUR

67,492

2,348,663

2,416,154

1,850,753

3.4.2.3Foreign exchange sensitivity analysis

As at 31 December 2016 a 10 percent depreciation of EUR versus all non EUR currencies would result in an increase of the contributors’ resources amounting to EUR 12.0 million (31 December 2015: EUR 8.7 million). A 10 percent appreciation of the EUR versus all non EUR currencies would result in a decrease of the contributors’ resources amounting to EUR 9.9 million (31 December 2015: EUR 7.1 million).

3.4.2.4Conversion rates

The following conversion rates were used for establishing the balance sheet at 31 December 2016 and 31 December 2015:

31 December 2016

| | 31 December 2016 | 31 December 2015 |
| --- | --- | --- |
| Non-EU currencies | | |
| Botswana Pula (BWP) | 11.2657 | 11.9451 |
| Dominican Republic Pesos (DOP) | 48.7476 | 49.0144 |
| Haitian Gourde (HTG) | 68.78 | 61.19 |
| Kenya Shillings (KES) | 108.06 | 111.3 |
| Mauritania Ouguiyas (MRO) | 375.79 | 326.46 |
| Mauritius Rupees (MUR) | 37.85 | 38.85 |
| Mozambican Metical (MZN) | 75.25 | 50.59 |
| Rwanda Francs (RWF) | 856.8 | 806.36 |
| Tanzania Shillings (TZS) | 2,296.99 | 2,344.42 |
| Uganda Shillings (UGX) | 3,805.00 | 3,665.00 |
| United States Dollars (USD) | 1.0541 | 1.0887 |
| Franc CFA Francs (XAF/XOF) | 655.957 | 655.957 |
| South Africa Rand (ZAR) | 14.457 | 16.953 |
| Zambia Kvacha (ZMW) | 10.4653 | 11.9571 |

31 December 2015

Non-EU currencies

Botswana Pula (BWP)

11.2657

11.9451

Dominican Republic Pesos (DOP)

48.7476

49.0144

Haitian Gourde (HTG)

68.78

61.19

Kenya Shillings (KES)

108.06

111.3

Mauritania Ouguiyas (MRO)

375.79

326.46

Mauritius Rupees (MUR)

37.85

38.85

Mozambican Metical (MZN)

75.25

50.59

Rwanda Francs (RWF)

856.8

806.36

Tanzania Shillings (TZS)

2,296.99

2,344.42

Uganda Shillings (UGX)

3,805.00

3,665.00

United States Dollars (USD)

1.0541

1.0887

Franc CFA Francs (XAF/XOF)

655.957

655.957

South Africa Rand (ZAR)

14.457

16.953

Zambia Kvacha (ZMW)

10.4653

11.9571

3.4.3Equity price risk

Equity price risk refers to the risk that the fair values of equity investments decrease as the result of changes in the levels of equity prices and/or the value of equity investments.

The IF is exposed to equity price risk via its investments in direct equity and venture capital funds.

The value of non-listed equity positions is not readily available for the purpose of monitoring and control on a continuous basis. For such positions, the best indications available include prices derived from any relevant valuation techniques.

The effects on the Facility’s contributors’ resources (as a result of a change in the fair value of the available-for-sale equity portfolio) due to a +/-10% change in the value of individual direct equity and venture capital investments, with all other variables held constant, is
  EUR 51.7 million respectively EUR -51.7 million as at 31 December 2016 (EUR 41.9 million respectively EUR -41.9 million as at 31 December 2015).

4
     Fair values of financial instruments

Accounting classifications and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. These do not include fair value information for financial assets and financial liabilities not carried at fair value if the carrying amount is a reasonable approximation of fair value.

At 31 December 2016

| At 31 December 2016 | Carrying amount | | Fair value |
| --- | --- | --- | --- |
| In EUR’000 | Held for trading | Available-for-sale | Cash, loans and receivables | Held to maturity | Other financial liabilities | Total | | Level 1 | Level 2 | Level 3 | Total |
| Financial assets carried at fair value: | | | | | | | | | | | |
| Derivative financial instruments | 6,920 | - | - | - | - | 6,920 | | - | 6,920 | - | 6,920 |
| Venture Capital Funds | - | 437,788 | - | - | - | 437,788 | | - | - | 437,788 | 437,788 |
| Direct Equity Investments | - | 79,096 | - | - | - | 79,096 | | 22,880 | - | 56,216 | 79,096 |
| Total | 6,920 | 516,884 | - | - | - | 523,804 | | 22,880 | 6,920 | 494,004 | 523,804 |
| Financial assets not carried at fair value: | | | | | | | | | | | |
| Cash and cash equivalents | - | - | 360,817 | - | - | 360,817 | | | | | |
| Loans and receivables | - | - | 1,729,380 | - | - | 1,729,380 | | - | 1,951,786 | - | 1,951,786 |
| Amounts receivable from contributors | - | - | 86,395 | - | - | 86,395 | | | | | |
| Bonds | - | - | - | 169,398 | - | 169,398 | | 120,123 | 48,031 | - | 168,154 |
| Other assets | - | - | 345 | - | - | 345 | | | | | |
| Total | - | - | 2,176,937 | 169,398 | - | 2,346,335 | | 120,123 | 1,999,817 | - | 2,119,940 |
| Total financial assets | 6,920 | 516,884 | 2,176,937 | 169,398 | - | 2,870,139 | | | | | |
| | | | | | | | | | | | |
| Financial liabilities carried at fair value: | | | | | | | | | | | |
| Derivative financial instruments | -25,189 | - | - | - | - | -25,189 | | - | -25,189 | - | -25,189 |
| Total | -25,189 | - | - | - | - | -25,189 | | - | -25,189 | - | -25,189 |
| Financial liabilities not carried at fair value: | | | | | | | | | | | |
| Provisions for guarantees issued | - | - | - | - | -625 | -625 | | | | | |
| Amounts owed to third parties | - | - | - | - | -116,114 | -116,114 | | | | | |
| Other liabilities | - | - | - | - | -2,546 | -2,546 | | | | | |
| Total | - | - | - | - | -119,285 | -119,285 | | | | | |
| Total financial liabilities | -25,189 | - | - | - | -119,285 | -144,474 | | | | | |

Carrying amount

Fair value

In EUR’000

Held for trading

Available-for-sale

Cash, loans and receivables

Held to maturity

Other financial liabilities

Total

Level 1

Level 2

Level 3

Total

Financial assets carried at fair value:

Derivative financial instruments

6,920

-

-

-

-

6,920

-

6,920

-

6,920

Venture Capital Funds

-

437,788

-

-

-

437,788

-

-

437,788

437,788

Direct Equity Investments

-

79,096

-

-

-

79,096

22,880

-

56,216

79,096

Total

6,920

516,884

-

-

-

523,804

22,880

6,920

494,004

523,804

Financial assets not carried at fair value:

Cash and cash equivalents

-

-

360,817

-

-

360,817

Loans and receivables

-

-

1,729,380

-

-

1,729,380

-

1,951,786

-

1,951,786

Amounts receivable from contributors

-

-

86,395

-

-

86,395

Bonds

-

-

-

169,398

-

169,398

120,123

48,031

-

168,154

Other assets

-

-

345

-

-

345

Total

-

-

2,176,937

169,398

-

2,346,335

120,123

1,999,817

-

2,119,940

Total financial assets

6,920

516,884

2,176,937

169,398

-

2,870,139

Financial liabilities carried at fair value:

Derivative financial instruments

-25,189

-

-

-

-

-25,189

-

-25,189

-

-25,189

Total

-25,189

-

-

-

-

-25,189

-

-25,189

-

-25,189

Financial liabilities not carried at fair value:

Provisions for guarantees issued

-

-

-

-

-625

-625

Amounts owed to third parties

-

-

-

-

-116,114

-116,114

Other liabilities

-

-

-

-

-2,546

-2,546

Total

-

-

-

-

-119,285

-119,285

Total financial liabilities

-25,189

-

-

-

-119,285

-144,474

4
     Fair values of financial instruments (continued)

Accounting classifications and fair values (continued)

At 31 December 2015

| At 31 December 2015 | Carrying amount | | Fair value |
| --- | --- | --- | --- |
| In EUR’000 | Held for trading | Available-for-sale | Cash, loans and receivables | Held to maturity | Other financial liabilities | Total | | Level 1 | Level 2 | Level 3 | Total |
| Financial assets carried at fair value: | | | | | | | | | | | |
| Derivative financial instruments | 311 | - | - | - | - | 311 | | - | 311 | - | 311 |
| Venture Capital Funds | - | 396,203 | - | - | - | 396,203 | | - | - | 396,203 | 396,203 |
| Direct Equity Investments | - | 23,150 | - | - | - | 23,150 | | 178 | - | 22,972 | 23,150 |
| Total | 311 | 419,353 | - | - | - | 419,664 | | 178 | 311 | 419,175 | 419,664 |
| Financial assets not carried at fair value: | | | | | | | | | | | |
| Cash and cash equivalents | - | - | 448,995 | - | - | 448,995 | | | | | |
| Loans and receivables | - | - | 1,460,057 | - | - | 1,460,057 | | - | 1,649,401 | - | 1,649,401 |
| Bonds | - | - | - | 228,521 | - | 228,521 | | 124,009 | 104,520 | - | 228,529 |
| Other assets | - | - | 27 | - | - | 27 | | - | - | - | - |
| Total | - | - | 1,909,079 | 228,521 | - | 2,137,600 | | 124,009 | 1,753,921 | - | 1,877,930 |
| Total financial assets | 311 | 419,353 | 1,909,079 | 228,521 | - | 2,557,264 | | | | | |
| | | | | | | | | | | | |
| Financial liabilities carried at fair value: | | | | | | | | | | | |
| Derivative financial instruments | -8,219 | - | - | - | - | -8,219 | | - | -8,219 | - | -8,219 |
| Total | -8,219 | - | - | - | - | -8,219 | | - | -8,219 | - | -8,219 |
| Financial liabilities not carried at fair value: | | | | | | | | | | | |
| Provisions for guarantees issued | - | - | - | - | - | - | | | | | |
| Amounts owed to third parties | - | - | - | - | -101,202 | -101,202 | | | | | |
| Other liabilities | - | - | - | - | -2,364 | -2,364 | | | | | |
| Total | - | - | - | - | -103,566 | -103,566 | | | | | |
| Total financial liabilities | -8,219 | - | - | - | -103,566 | -111,785 | | | | | |

Carrying amount

Fair value

In EUR’000

Held for trading

Available-for-sale

Cash, loans and receivables

Held to maturity

Other financial liabilities

Total

Level 1

Level 2

Level 3

Total

Financial assets carried at fair value:

Derivative financial instruments

311

-

-

-

-

311

-

311

-

311

Venture Capital Funds

-

396,203

-

-

-

396,203

-

-

396,203

396,203

Direct Equity Investments

-

23,150

-

-

-

23,150

178

-

22,972

23,150

Total

311

419,353

-

-

-

419,664

178

311

419,175

419,664

Financial assets not carried at fair value:

Cash and cash equivalents

-

-

448,995

-

-

448,995

Loans and receivables

-

-

1,460,057

-

-

1,460,057

-

1,649,401

-

1,649,401

Bonds

-

-

-

228,521

-

228,521

124,009

104,520

-

228,529

Other assets

-

-

27

-

-

27

-

-

-

-

Total

-

-

1,909,079

228,521

-

2,137,600

124,009

1,753,921

-

1,877,930

Total financial assets

311

419,353

1,909,079

228,521

-

2,557,264

Financial liabilities carried at fair value:

Derivative financial instruments

-8,219

-

-

-

-

-8,219

-

-8,219

-

-8,219

Total

-8,219

-

-

-

-

-8,219

-

-8,219

-

-8,219

Financial liabilities not carried at fair value:

Provisions for guarantees issued

-

-

-

-

-

-

Amounts owed to third parties

-

-

-

-

-101,202

-101,202

Other liabilities

-

-

-

-

-2,364

-2,364

Total

-

-

-

-

-103,566

-103,566

Total financial liabilities

-8,219

-

-

-

-103,566

-111,785

Measurement of fair values

4.2.1Valuation techniques and significant unobservable inputs

The table below sets out information about the valuation techniques and significant unobservable inputs used in measuring financial instruments, categorised as level 2 and 3 in the fair value hierarchy:

Valuation technique

| | Valuation technique | Significant unobservable inputs | Relationship of unobservable inputs to fair value measurement |
| --- | --- | --- | --- |
| Financial instruments carried at fair value | | |
| | | | |
| Derivative financial instruments | Discounted cash flow: Future cash flows are estimated based on forward exchange/interest rates (from observable forward exchange rates and yield curves at the end of the reporting period) and contract forward/interest rates, discounted at a rate that reflects the credit risk of various counterparties. | Not applicable. | Not applicable. |
| | | | |
| Venture Capital Fund (VCF) | Adjusted net assets method: The fair value is determined by applying either the Facility’s percentage ownership in the underlying vehicle to the net asset value reflected in the most recent report adjusted for cash flows or, where available, the precise share value at the same date, submitted by the respective Fund Manager. In order to bridge the interval between the last available Net assets value (NAV) and the year-end reporting, a subsequent event review procedure is performed and if necessary the reported NAV is adjusted. | Adjustment for time elapsed between the last reporting date of the VCF and the measurement date, taking into account: operating expenses and management fees, subsequent changes in the fair value of the VCF’s underlying assets, additional liabilities incurred, market changes or other economic condition changes. | The longer the period between the fair value measurement date and the last reporting date of the VCF, the higher the adjustment for time elapsed. |
| | | | |
| Direct Equity Investment | Adjusted net assets. | Adjustment for time elapsed between the last reporting date of the investee and the measurement date, taking into account: operating expenses, subsequent changes in the fair value of the investee’s underlying assets, additional liabilities incurred, market changes or other economic condition changes, capital increase, sale/change of control. | The longer the period between the fair value measurement date and the last reporting date of the investee, the higher the adjustment for time elapsed. |
| | | | |
| | | Discount for lack of marketability (liquidity) determined by reference to previous transaction prices for similar equities in the country/region, ranging from 5 to 30%. | The higher the marketability discount, the lower the fair value. |
| | | | |
| Financial instruments not carried at fair value | | |
| | | | |
| Loans and receivables | Discounted cash flows: The valuation model uses contractual cash flows that are conditional upon the non-occurrence of default by the debtor and do not take into account any collateral values or early repayments’ scenarios. To obtain the Net Present Value (NPV) of the loans, the model retained discounts the contractual cash flows of each loan using an adjusted market discount curve. The individual loan NPV is then adjusted to take into consideration the relevant associated Expected Loss. The results are then summed to obtain the fair value of Loans and receivables. | Not applicable. | Not applicable. |
| | | | |
| Held-to-maturity financial assets | Discounted cash flows. | Not applicable. | Not applicable. |

Significant unobservable inputs

Relationship of unobservable inputs to fair value measurement

Financial instruments carried at fair value

Derivative financial instruments

Discounted cash flow: Future cash flows are estimated based on forward exchange/interest rates (from observable forward exchange rates and yield curves at the end of the reporting period) and contract forward/interest rates, discounted at a rate that reflects the credit risk of various counterparties.

Not applicable.

Not applicable.

Venture Capital Fund (VCF)

Adjusted net assets method: The fair value is determined by applying either the Facility’s percentage ownership in the underlying vehicle to the net asset value reflected in the most recent report adjusted for cash flows or, where available, the precise share value at the same date, submitted by the respective Fund Manager. In order to bridge the interval between the last available Net assets value (NAV) and the year-end reporting, a subsequent event review procedure is performed and if necessary the reported NAV is adjusted.

Adjustment for time elapsed between the last reporting date of the VCF and the measurement date, taking into account: operating expenses and management fees, subsequent changes in the fair value of the VCF’s underlying assets, additional liabilities incurred, market changes or other economic condition changes.

The longer the period between the fair value measurement date and the last reporting date of the VCF, the higher the adjustment for time elapsed.

Direct Equity Investment

Adjusted net assets.

Adjustment for time elapsed between the last reporting date of the investee and the measurement date, taking into account: operating expenses, subsequent changes in the fair value of the investee’s underlying assets, additional liabilities incurred, market changes or other economic condition changes, capital increase, sale/change of control.

The longer the period between the fair value measurement date and the last reporting date of the investee, the higher the adjustment for time elapsed.

Discount for lack of marketability (liquidity) determined by reference to previous transaction prices for similar equities in the country/region, ranging from 5 to 30%.

The higher the marketability discount, the lower the fair value.

Financial instruments not carried at fair value

Loans and receivables

Discounted cash flows: The valuation model uses contractual cash flows that are conditional upon the non-occurrence of default by the debtor and do not take into account any collateral values or early repayments’ scenarios. To obtain the Net Present Value (NPV) of the loans, the model retained discounts the contractual cash flows of each loan using an adjusted market discount curve. The individual loan NPV is then adjusted to take into consideration the relevant associated Expected Loss. The results are then summed to obtain the fair value of Loans and receivables.

Not applicable.

Not applicable.

Held-to-maturity financial assets

Discounted cash flows.

Not applicable.

Not applicable.

With the application of IFRS 13, valuation adjustments are included in the fair value of derivatives at 31 December 2016 and 2015, namely:

-Credit valuation adjustments (CVA), reflecting counterparty credit risk on derivative transactions, amounting to EUR -76.4k as at 31 December 2016 and to EUR -121.7k as at 31 December 2015.

-Debit valuation adjustments (DVA), reflecting own credit risk on derivative transactions, amounting to EUR +42.9k as at
  31 December 2016 and EUR +64.4k as at 31 December 2015.

4.2.2Transfers between Level 1 and 2

The Facility’s policy is to recognise the transfers between Levels as of the date of the event or change in circumstances that caused the transfer.

In 2016 and 2015 the Facility did not make transfers from Level 1 to 2 or Level 2 to 1 of the fair value hierarchy.

4.2.3Level 3 fair values

Reconciliation of Level 3 fair values

The following tables present the changes in Level 3 instruments for the year ended 31 December 2016 and 31 December 2015:

In EUR'000

| In EUR'000 | Available-for-sale financial assets |
| --- | --- |
| Balance at 1 January 2016 | 419,175 |
| Gains or losses included in profit or loss: | |
| - net realised gains on available-for-sale financial assets | -6,504 |
| - impairment on available-for-sale financial assets | -2,493 |
| Total | -8,997 |
| Gains or losses included in other comprehensive income: | |
| - net change in fair value of available-for-sale financial assets | -24,628 |
| Total | -24,628 |
| Disbursements | 153,986 |
| Repayments | -37,978 |
| Write offs | -7,554 |
| Balance at 31 December 2016 | 494,004 |
| | |
| In EUR'000 | Available-for-sale financial assets |
| Balance at 1 January 2015 | 401,926 |
| Gains or losses included in profit or loss: | |
| - net realised gains on available-for-sale financial assets | -33,878 |
| - impairment on available-for-sale financial assets | -2,665 |
| Total | -36,543 |
| Gains or losses included in other comprehensive income: | |
| - net change in fair value of available-for-sale financial assets | 52,365 |
| Total | 52,365 |
| Disbursements | 67,449 |
| Repayments | -64,791 |
| Write offs | -1,231 |
| Balance at 31 December 2015 | 419,175 |

Available-for-sale financial assets

Balance at 1 January 2016

419,175

Gains or losses included in profit or loss:

- net realised gains on available-for-sale financial assets

-6,504

- impairment on available-for-sale financial assets

-2,493

Total

-8,997

Gains or losses included in other comprehensive income:

- net change in fair value of available-for-sale financial assets

-24,628

Total

-24,628

Disbursements

153,986

Repayments

-37,978

Write offs

-7,554

Balance at 31 December 2016

494,004

In EUR'000

Available-for-sale financial assets

Balance at 1 January 2015

401,926

Gains or losses included in profit or loss:

- net realised gains on available-for-sale financial assets

-33,878

- impairment on available-for-sale financial assets

-2,665

Total

-36,543

Gains or losses included in other comprehensive income:

- net change in fair value of available-for-sale financial assets

52,365

Total

52,365

Disbursements

67,449

Repayments

-64,791

Write offs

-1,231

Balance at 31 December 2015

419,175

At 31 December 2016

| At 31 December 2016 | Increase | Decrease |
| --- | --- | --- |
| (in EUR’000) | | |
| Direct Equity Investments | 10 | -10 |
| Total | 10 | -10 |
| | | |
| At 31 December 2015 | Increase | Decrease |
| (in EUR’000) | | |
| Direct Equity Investments | 31 | -31 |
| Total | 31 | -31 |

At 31 December 2016

Increase

Increase

Decrease

Decrease

(in EUR’000)

(in EUR’000)

Direct Equity Investments

Direct Equity Investments

10

10

-10

-10

Total

Total

10

10

-10

-10

At 31 December 2015

At 31 December 2015

Increase

Increase

Decrease

Decrease

(in EUR’000)

(in EUR’000)

Direct Equity Investments

Direct Equity Investments

31

31

-31

-31

Total

Total

31

31

-31

-31

5
     Cash and cash equivalents (in EUR’000)

The cash and cash equivalents are composed of:

31.12.2016

| | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Cash in hand | 51,462 | 71,405 |
| Term deposits | 259,337 | 290,573 |
| Commercial papers | 50,018 | 87,017 |
| Cash and cash equivalents in the statement of financial position | 360,817 | 448,995 |
| Accrued interest | 5 | 3 |
| Cash and cash equivalents in the cash flow statement | 360,822 | 448,998 |

31.12.2016

31.12.2015

31.12.2015

Cash in hand

Cash in hand

51,462

51,462

71,405

71,405

Term deposits

Term deposits

259,337

259,337

290,573

290,573

Commercial papers

Commercial papers

50,018

50,018

87,017

87,017

Cash and cash equivalents in the statement of financial position

Cash and cash equivalents in the statement of financial position

360,817

360,817

448,995

448,995

Accrued interest

Accrued interest

5

5

3

3

Cash and cash equivalents in the cash flow statement

Cash and cash equivalents in the cash flow statement

360,822

360,822

448,998

448,998

At 31 December 2016

| At 31 December 2016 | Fair Value | Notional amount |
| --- | --- | --- |
| | Assets | Liabilities | |
| Cross currency interest rate swaps | - | -3,051 | 7,430 |
| Interest rate swaps | 388 | -335 | 41,233 |
| FX swaps | 6,532 | -21,803 | 1,611,000 |
| Total derivative financial instruments | 6,920 | -25,189 | 1,659,663 |
| | | | |
| At 31 December 2015 | Fair Value | Notional amount |
| | Assets | Liabilities | |
| Cross currency interest rate swaps | - | -3,835 | 9,589 |
| Interest rate swaps | 311 | -639 | 44,913 |
| FX swaps | - | -3,745 | 1,400,000 |
| Total derivative financial instruments | 311 | -8,219 | 1,454,502 |

At 31 December 2016

Fair Value

Fair Value

Notional amount

Notional amount

Assets

Assets

Liabilities

Liabilities

Cross currency interest rate swaps

Cross currency interest rate swaps

-

-

-3,051

-3,051

7,430

7,430

Interest rate swaps

Interest rate swaps

388

388

-335

-335

41,233

41,233

FX swaps

FX swaps

6,532

6,532

-21,803

-21,803

1,611,000

1,611,000

Total derivative financial instruments

Total derivative financial instruments

6,920

6,920

-25,189

-25,189

1,659,663

1,659,663

At 31 December 2015

At 31 December 2015

Fair Value

Fair Value

Notional amount

Notional amount

Assets

Assets

Liabilities

Liabilities

Cross currency interest rate swaps

Cross currency interest rate swaps

-

-

-3,835

-3,835

9,589

9,589

Interest rate swaps

Interest rate swaps

311

311

-639

-639

44,913

44,913

FX swaps

FX swaps

-

-

-3,745

-3,745

1,400,000

1,400,000

Total derivative financial instruments

Total derivative financial instruments

311

311

-8,219

-8,219

1,454,502

1,454,502

7
     Loans and receivables (in EUR’000)

| | Global loans(*) | Senior loans | Subordinated loans | Total |
| --- | --- | --- | --- | --- |
| Nominal as at 1 January 2016 | 661,792 | 818,007 | 160,555 | 1,640,354 |
| Disbursements | 476,685 | 51,691 | - | 528,376 |
| Write offs | - | -109 | -31,189 | -31,298 |
| Repayments | -178,282 | -107,259 | -65,927 | -351,468 |
| Interest capitalised | - | - | 7,183 | 7,183 |
| Foreign exchange rates differences | 34,332 | 2,009 | 941 | 37,282 |
| Nominal as at 31 December 2016 | 994,527 | 764,339 | 71,563 | 1,830,429 |
| | | | | |
| Impairment as at 1 January 2016 | -9,403 | -22,445 | -159,198 | -191,046 |
| Impairment recorded in statement of profit or loss and other comprehensive income | -8,794 | -11,999 | - | -20,793 |
| Write offs | - | 109 | 31,189 | 31,298 |
| Reversal of impairment | 360 | 6,100 | 58,698 | 65,158 |
| Foreign exchange rates differences | -348 | -59 | -1,850 | -2,257 |
| Impairment as at 31 December 2016 | -18,185 | -28,294 | -71,161 | -117,640 |
| | | | | |
| Amortised Cost | -3,906 | -3,682 | - | -7,588 |
| Interest | 14,807 | 9,371 | 1 | 24,179 |
| Loans and receivables as at 31 December 2016 | 987,243 | 741,734 | 403 | 1,729,380 |
| | | | | |
| (*) including agency agreements | | | | |

Global loans(*)

Global loans(*)

Senior loans

Senior loans

Subordinated loans

Subordinated loans

Total

Total

Nominal as at 1 January 2016

Nominal as at 1 January 2016

661,792

661,792

818,007

818,007

160,555

160,555

1,640,354

1,640,354

Disbursements

Disbursements

476,685

476,685

51,691

51,691

-

-

528,376

528,376

Write offs

Write offs

-

-

-109

-109

-31,189

-31,189

-31,298

-31,298

Repayments

Repayments

-178,282

-178,282

-107,259

-107,259

-65,927

-65,927

-351,468

-351,468

Interest capitalised

Interest capitalised

-

-

-

-

7,183

7,183

7,183

7,183

Foreign exchange rates differences

Foreign exchange rates differences

34,332

34,332

2,009

2,009

941

941

37,282

37,282

Nominal as at 31 December 2016

Nominal as at 31 December 2016

994,527

994,527

764,339

764,339

71,563

71,563

1,830,429

1,830,429

Impairment as at 1 January 2016

Impairment as at 1 January 2016

-9,403

-9,403

-22,445

-22,445

-159,198

-159,198

-191,046

-191,046

Impairment recorded in statement of profit or loss and other comprehensive income

Impairment recorded in statement of profit or loss and other comprehensive income

-8,794

-8,794

-11,999

-11,999

-

-

-20,793

-20,793

Write offs

Write offs

-

-

109

109

31,189

31,189

31,298

31,298

Reversal of impairment

Reversal of impairment

360

360

6,100

6,100

58,698

58,698

65,158

65,158

Foreign exchange rates differences

Foreign exchange rates differences

-348

-348

-59

-59

-1,850

-1,850

-2,257

-2,257

Impairment as at 31 December 2016

Impairment as at 31 December 2016

-18,185

-18,185

-28,294

-28,294

-71,161

-71,161

-117,640

-117,640

Amortised Cost

Amortised Cost

-3,906

-3,906

-3,682

-3,682

-

-

-7,588

-7,588

Interest

Interest

14,807

14,807

9,371

9,371

1

1

24,179

24,179

Loans and receivables as at 31 December 2016

Loans and receivables as at 31 December 2016

987,243

987,243

741,734

741,734

403

403

1,729,380

1,729,380

(*) including agency agreements

(*) including agency agreements

Global loans(*)

| | Global loans(*) | Senior loans | Subordinated loans | Total |
| --- | --- | --- | --- | --- |
| Nominal as at 1 January 2015 | 542,506 | 782,563 | 146,643 | 1,471,712 |
| Disbursements | 196,607 | 86,177 | - | 282,784 |
| Repayments | -106,921 | -96,147 | -2,704 | -205,772 |
| Interest capitalised | - | - | 13,262 | 13,262 |
| Foreign exchange rates differences | 29,600 | 45,414 | 3,354 | 78,368 |
| Nominal as at 31 December 2015 | 661,792 | 818,007 | 160,555 | 1,640,354 |
| | | | | |
| Impairment as at 1 January 2015 | -5,751 | -13,491 | -132,895 | -152,137 |
| Impairment recorded in statement of profit or loss and other comprehensive income | -3,692 | -7,576 | -24,995 | -36,263 |
| Reversal of impairment | 381 | 57 | 1,837 | 2,275 |
| Foreign exchange rates differences | -341 | -1,435 | -3,145 | -4,921 |
| Impairment as at 31 December 2015 | -9,403 | -22,445 | -159,198 | -191,046 |
| | | | | |
| Amortised Cost | -3,129 | -5,781 | 284 | -8,626 |
| Interest | 8,838 | 10,533 | 4 | 19,375 |
| Loans and receivables as at 31 December 2015 | 658,098 | 800,314 | 1,645 | 1,460,057 |
| | | | | |
| (*) including agency agreements | | | | |

Global loans(*)

Senior loans

Senior loans

Subordinated loans

Subordinated loans

Total

Total

Nominal as at 1 January 2015

Nominal as at 1 January 2015

542,506

542,506

782,563

782,563

146,643

146,643

1,471,712

1,471,712

Disbursements

Disbursements

196,607

196,607

86,177

86,177

-

-

282,784

282,784

Repayments

Repayments

-106,921

-106,921

-96,147

-96,147

-2,704

-2,704

-205,772

-205,772

Interest capitalised

Interest capitalised

-

-

-

-

13,262

13,262

13,262

13,262

Foreign exchange rates differences

Foreign exchange rates differences

29,600

29,600

45,414

45,414

3,354

3,354

78,368

78,368

Nominal as at 31 December 2015

Nominal as at 31 December 2015

661,792

661,792

818,007

818,007

160,555

160,555

1,640,354

1,640,354

Impairment as at 1 January 2015

Impairment as at 1 January 2015

-5,751

-5,751

-13,491

-13,491

-132,895

-132,895

-152,137

-152,137

Impairment recorded in statement of profit or loss and other comprehensive income

Impairment recorded in statement of profit or loss and other comprehensive income

-3,692

-3,692

-7,576

-7,576

-24,995

-24,995

-36,263

-36,263

Reversal of impairment

Reversal of impairment

381

381

57

57

1,837

1,837

2,275

2,275

Foreign exchange rates differences

Foreign exchange rates differences

-341

-341

-1,435

-1,435

-3,145

-3,145

-4,921

-4,921

Impairment as at 31 December 2015

Impairment as at 31 December 2015

-9,403

-9,403

-22,445

-22,445

-159,198

-159,198

-191,046

-191,046

Amortised Cost

Amortised Cost

-3,129

-3,129

-5,781

-5,781

284

284

-8,626

-8,626

Interest

Interest

8,838

8,838

10,533

10,533

4

4

19,375

19,375

Loans and receivables as at 31 December 2015

Loans and receivables as at 31 December 2015

658,098

658,098

800,314

800,314

1,645

1,645

1,460,057

1,460,057

(*) including agency agreements

(*) including agency agreements

8
     Available-for-sale financial assets (in EUR’000)

The main components of available-for-sale financial assets are as follows:

Venture Capital Funds

| | Venture Capital Funds | Direct Equity Investments | Total |
| --- | --- | --- | --- |
| Cost as at 1 January 2016 | 267,331 | 22,979 | 290,310 |
| Disbursements | 101,323 | 52,663 | 153,986 |
| Repayments / sales | -37,948 | -30 | -37,978 |
| Write offs | -4,594 | -2,960 | -7,554 |
| Foreign exchange rates differences on repayments / sales | 5,141 | -16 | 5,125 |
| Cost as at 31 December 2016 | 331,253 | 72,636 | 403,889 |
| | | | |
| Unrealised gains and losses as at 1 January 2016 | 153,901 | 10,092 | 163,993 |
| Net change in unrealised gains and losses | -24,474 | 3,365 | -21,109 |
| Unrealised gains and losses as at 31 December 2016 | 129,427 | 13,457 | 142,884 |
| | | | |
| Impairment as at 1 January 2016 | -25,029 | -9,921 | -34,950 |
| Impairment recorded in statement of profit or loss and other comprehensive income during the year | -2,457 | -36 | -2,493 |
| Write offs | 4,594 | 2,960 | 7,554 |
| Impairment as at 31 December 2016 | -22,892 | -6,997 | -29,889 |
| | | | |
| Available-for-sale financial assets as at 31 December 2016 | 437,788 | 79,096 | 516,884 |
| | | | |
| | | | |
| | Venture Capital Funds | Direct Equity Investments | Total |
| Cost as at 1 January 2015 | 259,784 | 19,714 | 279,498 |
| Disbursements | 63,574 | 3,875 | 67,449 |
| Repayments / sales | -64,181 | -610 | -64,791 |
| Write offs | -1,231 | - | -1,231 |
| Foreign exchange rates differences on repayments / sales | 9,385 | - | 9,385 |
| Cost as at 31 December 2015 | 267,331 | 22,979 | 290,310 |
| | | | |
| Unrealised gains and losses as at 1 January 2015 | 149,995 | 6,127 | 156,122 |
| Net change in unrealised gains and losses | 3,906 | 3,965 | 7,871 |
| Unrealised gains and losses as at 31 December 2015 | 153,901 | 10,092 | 163,993 |
| | | | |
| Impairment as at 1 January 2015 | -24,534 | -8,001 | -32,535 |
| Impairment recorded in statement of profit or loss and other comprehensive income during the year | -1,726 | -1,920 | -3,646 |
| Write offs | 1,231 | - | 1,231 |
| Impairment as at 31 December 2015 | -25,029 | -9,921 | -34,950 |
| | | | |
| Available-for-sale financial assets as at 31 December 2015 | 396,203 | 23,150 | 419,353 |

Venture Capital Funds

Direct Equity Investments

Direct Equity Investments

Total

Total

Cost as at 1 January 2016

Cost as at 1 January 2016

267,331

267,331

22,979

22,979

290,310

290,310

Disbursements

Disbursements

101,323

101,323

52,663

52,663

153,986

153,986

Repayments / sales

Repayments / sales

-37,948

-37,948

-30

-30

-37,978

-37,978

Write offs

Write offs

-4,594

-4,594

-2,960

-2,960

-7,554

-7,554

Foreign exchange rates differences on repayments / sales

Foreign exchange rates differences on repayments / sales

5,141

5,141

-16

-16

5,125

5,125

Cost as at 31 December 2016

Cost as at 31 December 2016

331,253

331,253

72,636

72,636

403,889

403,889

Unrealised gains and losses as at 1 January 2016

Unrealised gains and losses as at 1 January 2016

153,901

153,901

10,092

10,092

163,993

163,993

Net change in unrealised gains and losses

Net change in unrealised gains and losses

-24,474

-24,474

3,365

3,365

-21,109

-21,109

Unrealised gains and losses as at 31 December 2016

Unrealised gains and losses as at 31 December 2016

129,427

129,427

13,457

13,457

142,884

142,884

Impairment as at 1 January 2016

Impairment as at 1 January 2016

-25,029

-25,029

-9,921

-9,921

-34,950

-34,950

Impairment recorded in statement of profit or loss and other comprehensive income during the year

Impairment recorded in statement of profit or loss and other comprehensive income during the year

-2,457

-2,457

-36

-36

-2,493

-2,493

Write offs

Write offs

4,594

4,594

2,960

2,960

7,554

7,554

Impairment as at 31 December 2016

Impairment as at 31 December 2016

-22,892

-22,892

-6,997

-6,997

-29,889

-29,889

Available-for-sale financial assets as at 31 December 2016

Available-for-sale financial assets as at 31 December 2016

437,788

437,788

79,096

79,096

516,884

516,884

Venture Capital Funds

Venture Capital Funds

Direct Equity Investments

Direct Equity Investments

Total

Total

Cost as at 1 January 2015

Cost as at 1 January 2015

259,784

259,784

19,714

19,714

279,498

279,498

Disbursements

Disbursements

63,574

63,574

3,875

3,875

67,449

67,449

Repayments / sales

Repayments / sales

-64,181

-64,181

-610

-610

-64,791

-64,791

Write offs

Write offs

-1,231

-1,231

-

-

-1,231

-1,231

Foreign exchange rates differences on repayments / sales

Foreign exchange rates differences on repayments / sales

9,385

9,385

-

-

9,385

9,385

Cost as at 31 December 2015

Cost as at 31 December 2015

267,331

267,331

22,979

22,979

290,310

290,310

Unrealised gains and losses as at 1 January 2015

Unrealised gains and losses as at 1 January 2015

149,995

149,995

6,127

6,127

156,122

156,122

Net change in unrealised gains and losses

Net change in unrealised gains and losses

3,906

3,906

3,965

3,965

7,871

7,871

Unrealised gains and losses as at 31 December 2015

Unrealised gains and losses as at 31 December 2015

153,901

153,901

10,092

10,092

163,993

163,993

Impairment as at 1 January 2015

Impairment as at 1 January 2015

-24,534

-24,534

-8,001

-8,001

-32,535

-32,535

Impairment recorded in statement of profit or loss and other comprehensive income during the year

Impairment recorded in statement of profit or loss and other comprehensive income during the year

-1,726

-1,726

-1,920

-1,920

-3,646

-3,646

Write offs

Write offs

1,231

1,231

-

-

1,231

1,231

Impairment as at 31 December 2015

Impairment as at 31 December 2015

-25,029

-25,029

-9,921

-9,921

-34,950

-34,950

Available-for-sale financial assets as at 31 December 2015

Available-for-sale financial assets as at 31 December 2015

396,203

396,203

23,150

23,150

419,353

419,353

9
     Amounts receivable from contributors (in EUR’000)

| Balance as at 1 January 2016 | 228,521 |
| --- | --- |
| Acquisitions | 1,159,704 |
| Maturities | -1,219,953 |
| Change in amortisation of premium/discount | -87 |
| Change in accrued interest | 1,213 |
| Balance as at 31 December 2016 | 169,398 |
| | |
| Balance as at 1 January 2015 | 99,988 |
| Acquisitions | 1,545,550 |
| Maturities | -1,417,005 |
| Change in amortisation of premium/discount | -12 |
| Balance as at 31 December 2015 | 228,521 |

Balance as at 1 January 2016

Balance as at 1 January 2016

228,521

228,521

Acquisitions

Acquisitions

1,159,704

1,159,704

Maturities

Maturities

-1,219,953

-1,219,953

Change in amortisation of premium/discount

Change in amortisation of premium/discount

-87

-87

Change in accrued interest

Change in accrued interest

1,213

1,213

Balance as at 31 December 2016

Balance as at 31 December 2016

169,398

169,398

Balance as at 1 January 2015

Balance as at 1 January 2015

99,988

99,988

Acquisitions

Acquisitions

1,545,550

1,545,550

Maturities

Maturities

-1,417,005

-1,417,005

Change in amortisation of premium/discount

Change in amortisation of premium/discount

-12

-12

Balance as at 31 December 2015

Balance as at 31 December 2015

228,521

228,521

31.12.2016

| | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Amount receivable from EIB | 1 | 1 |
| Financial guarantees | 344 | 26 |
| Total other assets | 345 | 27 |

31.12.2016

31.12.2015

31.12.2015

Amount receivable from EIB

Amount receivable from EIB

1

1

1

1

Financial guarantees

Financial guarantees

344

344

26

26

Total other assets

Total other assets

345

345

27

27

12 Deferred income (in EUR’000)

The main components of deferred income are as follows:

31.12.2016

| | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Deferred interest subsidies | 25,884 | 28,683 |
| Deferred commissions on loans and receivables | 399 | 642 |
| Total deferred income | 26,283 | 29,325 |

31.12.2016

31.12.2015

31.12.2015

Deferred interest subsidies

Deferred interest subsidies

25,884

25,884

28,683

28,683

Deferred commissions on loans and receivables

Deferred commissions on loans and receivables

399

399

642

642

Total deferred income

Total deferred income

26,283

26,283

29,325

29,325

13
     Provisions for guarantees issued (in EUR’000)

13

Provisions for guarantees issued (in EUR’000)

The amount of provisions for guarantees issued is recognised using the best estimate of expenditure required to settle any present financial obligation arising as a result of the guarantees and represents the sum of:

The amount of provisions for guarantees issued is recognised using the best estimate of expenditure required to settle any present financial obligation arising as a result of the guarantees and represents the sum of:

-the amounts initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue and

-

the amounts initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue and

-the excess over the above amounts, as measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

-

the excess over the above amounts, as measured in accordance with IAS 37 Provisions

, Contingent Liabilities and Contingent Assets.

2016

| | 2016 | 2015 |
| --- | --- | --- |
| Balance at 1 January | - | - |
| Additions recorded in statement of profit or loss and other comprehensive income | 242 | - |
| Utilised | - | - |
| Transfer from "Other liabilities", financial guarantees | 383 | |
| Release of provision | - | - |
| Balance at 31 December | 625 | - |

2016

2015

2015

Balance at 1 January

Balance at 1 January

-

-

-

-

Additions recorded in statement of profit or loss and other comprehensive income

Additions recorded in statement of profit or loss and other comprehensive income

242

242

-

-

Utilised

Utilised

-

-

-

-

Transfer from "Other liabilities", financial guarantees

Transfer from "Other liabilities", financial guarantees

383

383

Release of provision

Release of provision

-

-

-

-

Balance at 31 December

Balance at 31 December

625

625

-

-

31.12.2016

| | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Net general administrative expenses payable to EIB | 43,483 | 43,045 |
| Other amounts payable to EIB | - | 15 |
| Interest subsidies and TA not yet disbursed owed to Member States | 72,631 | 58,142 |
| Total amounts owed to third parties | 116,114 | 101,202 |

31.12.2016

31.12.2015

31.12.2015

Net general administrative expenses payable to EIB

Net general administrative expenses payable to EIB

43,483

43,483

43,045

43,045

Other amounts payable to EIB

Other amounts payable to EIB

-

-

15

15

Interest subsidies and TA not yet disbursed owed to Member States

Interest subsidies and TA not yet disbursed owed to Member States

72,631

72,631

58,142

58,142

Total amounts owed to third parties

Total amounts owed to third parties

116,114

116,114

101,202

101,202

The main components of other liabilities are as follows:

31.12.2016

| | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Loan repayments received in advance | 2,081 | 1,826 |
| Deferred income from interest subsidies | 458 | 512 |
| Financial guarantees | 7 | 26 |
| Total other liabilities | 2,546 | 2,364 |

31.12.2016

31.12.2015

31.12.2015

Loan repayments received in advance

Loan repayments received in advance

2,081

2,081

1,826

1,826

Deferred income from interest subsidies

Deferred income from interest subsidies

458

458

512

512

Financial guarantees

Financial guarantees

7

7

26

26

Total other liabilities

Total other liabilities

2,546

2,546

2,364

2,364

16
     Member States Contribution called (in EUR’000)

| Member States | Contribution to the Facility | Contribution to interest subsidies and technical assistance | Total
  contributed | Called and not paid |
| --- | --- | --- | --- | --- |
| Austria | 62,223 | 6,941 | 69,164 | 2,410 |
| Belgium | 91,930 | 10,222 | 102,152 | 5,295 |
| Bulgaria | 448 | 182 | 630 | 140 |
| Cyprus | 288 | 117 | 405 | 90 |
| Czech Republic | 1,632 | 663 | 2,295 | 510 |
| Denmark | 50,420 | 5,675 | 56,095 | 2,000 |
| Estonia | 160 | 65 | 225 | 50 |
| Finland | 35,148 | 4,038 | 39,186 | 1,470 |
| France | 562,411 | 60,332 | 622,743 | 19,550 |
| Germany | 546,115 | 60,216 | 606,331 | 20,500 |
| Greece | 30,417 | 3,707 | 34,124 | 1,470 |
| Hungary | 1,760 | 715 | 2,475 | - |
| Ireland | 15,665 | 2,074 | 17,739 | 910 |
| Italy | 299,100 | 34,737 | 333,837 | 12,860 |
| Latvia | 224 | 91 | 315 | 70 |
| Lithuania | 384 | 156 | 540 | 120 |
| Luxembourg | 6,829 | 768 | 7,597 | 270 |
| Malta | 96 | 39 | 135 | 30 |
| Netherlands | 122,895 | 13,805 | 136,700 | 4,850 |
| Poland | 4,160 | 1,690 | 5,850 | 1,300 |
| Portugal | 23,633 | 2,889 | 26,522 | 1,150 |
| Romania | 1,184 | 481 | 1,665 | 370 |
| Slovakia | 672 | 273 | 945 | 210 |
| Slovenia | 576 | 234 | 810 | 180 |
| Spain | 145,249 | 18,596 | 163,845 | 7,850 |
| Sweden | 64,924 | 7,485 | 72,409 | 2,740 |
| United Kingdom | 308,457 | 37,500 | 345,957 | - |
| Total as at 31 December 2016 | 2,377,000 | 273,691 | 2,650,691 | 86,395 |
| Total as at 31 December 2015 | 2,157,000 | 243,691 | 2,400,691 | - |

Member States

Member States

Contribution to the Facility

Contribution to the Facility

Contribution to interest subsidies and technical assistance

Contribution to interest subsidies and technical assistance

Total
  contributed

Total

contributed

Called and not paid

Called and not paid

Austria

Austria

62,223

62,223

6,941

6,941

69,164

69,164

2,410

2,410

Belgium

Belgium

91,930

91,930

10,222

10,222

102,152

102,152

5,295

5,295

Bulgaria

Bulgaria

448

448

182

182

630

630

140

140

Cyprus

Cyprus

288

288

117

117

405

405

90

90

Czech Republic

Czech Republic

1,632

1,632

663

663

2,295

2,295

510

510

Denmark

Denmark

50,420

50,420

5,675

5,675

56,095

56,095

2,000

2,000

Estonia

Estonia

160

160

65

65

225

225

50

50

Finland

Finland

35,148

35,148

4,038

4,038

39,186

39,186

1,470

1,470

France

France

562,411

562,411

60,332

60,332

622,743

622,743

19,550

19,550

Germany

Germany

546,115

546,115

60,216

60,216

606,331

606,331

20,500

20,500

Greece

Greece

30,417

30,417

3,707

3,707

34,124

34,124

1,470

1,470

Hungary

Hungary

1,760

1,760

715

715

2,475

2,475

-

-

Ireland

Ireland

15,665

15,665

2,074

2,074

17,739

17,739

910

910

Italy

Italy

299,100

299,100

34,737

34,737

333,837

333,837

12,860

12,860

Latvia

Latvia

224

224

91

91

315

315

70

70

Lithuania

Lithuania

384

384

156

156

540

540

120

120

Luxembourg

Luxembourg

6,829

6,829

768

768

7,597

7,597

270

270

Malta

Malta

96

96

39

39

135

135

30

30

Netherlands

Netherlands

122,895

122,895

13,805

13,805

136,700

136,700

4,850

4,850

Poland

Poland

4,160

4,160

1,690

1,690

5,850

5,850

1,300

1,300

Portugal

Portugal

23,633

23,633

2,889

2,889

26,522

26,522

1,150

1,150

Romania

Romania

1,184

1,184

481

481

1,665

1,665

370

370

Slovakia

Slovakia

672

672

273

273

945

945

210

210

Slovenia

Slovenia

576

576

234

234

810

810

180

180

Spain

Spain

145,249

145,249

18,596

18,596

163,845

163,845

7,850

7,850

Sweden

Sweden

64,924

64,924

7,485

7,485

72,409

72,409

2,740

2,740

United Kingdom

United Kingdom

308,457

308,457

37,500

37,500

345,957

345,957

-

-

Total as at 31 December 2016

Total as at 31 December 2016

2,377,000

2,377,000

273,691

273,691

2,650,691

2,650,691

86,395

86,395

Total as at 31 December 2015

Total as at 31 December 2015

2,157,000

2,157,000

243,691

243,691

2,400,691

2,400,691

-

-

31.12.2016

| | 31.12.2016 | 31.12.2015 |
| --- | --- | --- |
| Commitments | | |
| Un-disbursed loans | 901,899 | 1,189,564 |
| Un-disbursed commitment in respect of available-for-sale financial assets | 244,050 | 298,355 |
| Issued guarantees | 8,627 | 798 |
| Interest subsidies and technical assistance | 334,553 | 352,036 |
| | | |
| Contingent liabilities | | |
| Signed non-issued guarantees | 35,337 | 10,000 |
| | | |
| Total contingent liabilities and commitments | 1,524,466 | 1,850,753 |

31.12.2016

31.12.2015

31.12.2015

Commitments

Commitments

Un-disbursed loans

Un-disbursed loans

901,899

901,899

1,189,564

1,189,564

Un-disbursed commitment in respect of available-for-sale financial assets

Un-disbursed commitment in respect of available-for-sale financial assets

244,050

244,050

298,355

298,355

Issued guarantees

Issued guarantees

8,627

8,627

798

798

Interest subsidies and technical assistance

Interest subsidies and technical assistance

334,553

334,553

352,036

352,036

Contingent liabilities

Contingent liabilities

Signed non-issued guarantees

Signed non-issued guarantees

35,337

35,337

10,000

10,000

Total contingent liabilities and commitments

Total contingent liabilities and commitments

1,524,466

1,524,466

1,850,753

1,850,753

From 01.01.2016

| | From 01.01.2016 | From 01.01.2015 |
| --- | --- | --- |
| | to 31.12.2016 | to 31.12.2015 |
| Held-to-maturity financial assets | - | 4 |
| Loans and receivables | 102,580 | 86,305 |
| Interest subsidies | 4,118 | 4,076 |
| Total interest and similar income | 106,698 | 90,385 |
| | | |
| Included within the line item of “Loans and receivables” under interest income for the year ended 31 December 2016 is a total of EUR +15,700 relating to impaired financial assets (31 December 2015: EUR +15,869). |
| | | |
| The main component of interest and similar expenses is as follows: |
| | | |
| | From 01.01.2016 | From 01.01.2015 |
| | to 31.12.2016 | to 31.12.2015 |
| Derivative financial instruments | -1,142 | -1,525 |
| Cash and cash equivalents | -752 | -31 |
| Held-to-maturity financial assets | -413 | - |
| Total interest and similar expenses | -2,307 | -1,556 |

From 01.01.2016

From 01.01.2015

From 01.01.2015

to 31.12.2016

to 31.12.2016

to 31.12.2015

to 31.12.2015

Held-to-maturity financial assets

Held-to-maturity financial assets

-

-

4

4

Loans and receivables

Loans and receivables

102,580

102,580

86,305

86,305

Interest subsidies

Interest subsidies

4,118

4,118

4,076

4,076

Total interest and similar income

Total interest and similar income

106,698

106,698

90,385

90,385

Included within the line item of “Loans and receivables” under interest income for the year ended 31 December 2016 is a total of EUR +15,700 relating to impaired financial assets (31 December 2015: EUR +15,869).

Included within the line item of “Loans and receivables” under interest income for the year ended 31 December 2016 is a total of EUR +15,700 relating to impaired financial assets (31 December 2015: EUR +15,869).

The main component of interest and similar expenses is as follows:

The main component of interest and similar expenses is as follows:

From 01.01.2016

From 01.01.2016

From 01.01.2015

From 01.01.2015

to 31.12.2016

to 31.12.2016

to 31.12.2015

to 31.12.2015

Derivative financial instruments

Derivative financial instruments

-1,142

-1,142

-1,525

-1,525

Cash and cash equivalents

Cash and cash equivalents

-752

-752

-31

-31

Held-to-maturity financial assets

Held-to-maturity financial assets

-413

-413

-

-

Total interest and similar expenses

Total interest and similar expenses

-2,307

-2,307

-1,556

-1,556

19
     Fee and commission income and expenses (in EUR’000)

The main components of fee and commission income are as follows:

From 01.01.2016

| | From 01.01.2016 | From 01.01.2015 |
| --- | --- | --- |
| | to 31.12.2016 | to 31.12.2015 |
| Fee and commission on loans and receivables | 515 | 890 |
| Fee and commission on financial guarantees | 183 | 42 |
| Other | 1 | - |
| Total fee and commission income | 699 | 932 |
| | | |
| The main component of fee and commission expenses is as follows: |
| | | |
| | From 01.01.2016 | From 01.01.2015 |
| | to 31.12.2016 | to 31.12.2015 |
| Commission paid to third parties with regard to available-for-sale financial assets | -48 | -63 |
| Total fee and commission expenses | -48 | -63 |

From 01.01.2016

From 01.01.2015

From 01.01.2015

to 31.12.2016

to 31.12.2016

to 31.12.2015

to 31.12.2015

Fee and commission on loans and receivables

Fee and commission on loans and receivables

515

515

890

890

Fee and commission on financial guarantees

Fee and commission on financial guarantees

183

183

42

42

Other

Other

1

1

-

-

Total fee and commission income

Total fee and commission income

699

699

932

932

The main component of fee and commission expenses is as follows:

The main component of fee and commission expenses is as follows:

From 01.01.2016

From 01.01.2016

From 01.01.2015

From 01.01.2015

to 31.12.2016

to 31.12.2016

to 31.12.2015

to 31.12.2015

Commission paid to third parties with regard to available-for-sale financial assets

Commission paid to third parties with regard to available-for-sale financial assets

-48

-48

-63

-63

Total fee and commission expenses

Total fee and commission expenses

-48

-48

-63

-63

From 01.01.2016

| | From 01.01.2016 | From 01.01.2015 |
| --- | --- | --- |
| | to 31.12.2016 | to 31.12.2015 |
| Net proceeds from available-for-sale financial assets | 2,159 | 834 |
| Dividend income | 4,345 | 33,044 |
| Net realised gains on available-for-sale financial assets | 6,504 | 33,878 |

From 01.01.2016

From 01.01.2015

From 01.01.2015

to 31.12.2016

to 31.12.2016

to 31.12.2015

to 31.12.2015

Net proceeds from available-for-sale financial assets

Net proceeds from available-for-sale financial assets

2,159

2,159

834

834

Dividend income

Dividend income

4,345

4,345

33,044

33,044

Net realised gains on available-for-sale financial assets

Net realised gains on available-for-sale financial assets

6,504

6,504

33,878

33,878

From 01.01.2016

| | From 01.01.2016 | From 01.01.2015 |
| --- | --- | --- |
| | to 31.12.2016 | to 31.12.2015 |
| Actual cost incurred by the EIB | -45,858 | -45,506 |
| Income from appraisal fees directly charged to clients of the Facility | 2,375 | 2,461 |
| Total general administrative expenses | -43,483 | -43,045 |

From 01.01.2016

From 01.01.2015

From 01.01.2015

to 31.12.2016

to 31.12.2016

to 31.12.2015

to 31.12.2015

Actual cost incurred by the EIB

Actual cost incurred by the EIB

-45,858

-45,858

-45,506

-45,506

Income from appraisal fees directly charged to clients of the Facility

Income from appraisal fees directly charged to clients of the Facility

2,375

2,375

2,461

2,461

Total general administrative expenses

Total general administrative expenses

-43,483

-43,483

-43,045

-43,045

22
     Involvement with unconsolidated structured entities (in EUR’000)

22

Definition of a structured entity

Definition of a structured entity

A structured entity is one that has been designed so that voting or similar rights are not the dominant factor in deciding, who controls the-entity. IFRS 12 observes that a structured entity often has some or all of the following features:

A structured entity is one that has been designed so that voting or similar rights are not the dominant factor in deciding, who controls the-entity. IFRS 12 observes that a structured entity often has some or all of the following features:

·Restricted activities;

·A narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors;

·Insufficient equity to permit the structured entity to finance its activities without subordinated financial support;

·Financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).

Unconsolidated structured entities

The term 'unconsolidated structured entities' refers to all structured entities that are not controlled by the Facility and includes interests in structured entities that are not consolidated.

Definition of Interests in structured entities:

IFRS 12 defines "interests" broadly to include any contractual or non-contractual involvement that exposes the reporting entity to variability in returns from the performance of the entity. Examples of such interests include the holding of equity interests and other forms of involvement such as the provision of funding, liquidity support, credit enhancements, commitments and guarantees to the other entity. IFRS 12 states that a reporting entity does not necessarily have an interest in another entity solely because of a typical customer supplier relationship.

The table below describes the types of structured entities that the Facility does not consolidate but in which it holds an interest.

Type of structured entity

| Type of structured entity | Nature and purpose | Interest held by the Facility |
| --- | --- | --- |
| Project Finance - lending to Special Purposes Vehicles (“SPV”) | Project Finance Transactions (PF Operations) are transactions where the Facility relies for the servicing of its debt on a borrower whose sole or main source of revenue is generated by a single or limited number of assets being financed by such debt or other pre-existing assets contractually linked to the project. PF operations are often financed through SPV. | Net disbursed amounts;


  Interest income. |
| Venture capital operations | The Facility finances venture capital and investment funds. Venture capital and investment funds pool and manage money from investors seeking private equity stakes in small and medium-size enterprises with strong growth potential as well as financing infrastructure projects. | Investments in units/shares issued by the venture capital entity;


  Dividends received as dividend income. |

Nature and purpose

Interest held by the Facility

Project Finance - lending to Special Purposes Vehicles (“SPV”)

Project Finance Transactions (PF Operations) are transactions where the Facility relies for the servicing of its debt on a borrower whose sole or main source of revenue is generated by a single or limited number of assets being financed by such debt or other pre-existing assets contractually linked to the project. PF operations are often financed through SPV.

Net disbursed amounts;

Interest income.

Venture capital operations

The Facility finances venture capital and investment funds. Venture capital and investment funds pool and manage money from investors seeking private equity stakes in small and medium-size enterprises with strong growth potential as well as financing infrastructure projects.

Investments in units/shares issued by the venture capital entity;

Dividends received as dividend income.

The table below shows the carrying amounts of unconsolidated structured entities in which the Facility has an interest at the reporting date, as well as the Facility's maximum exposure to loss in relation to those entities. The maximum exposure to loss includes the carrying amounts and the related un-disbursed commitments.

Type of structured entity

| Type of structured entity | Caption | Carrying amount at 31.12.2016 | Carrying amount at 31.12.2015 | Maximum exposure to loss at 31.12.2016 | Maximum exposure to loss at 31.12.2015 |
| --- | --- | --- | --- | --- | --- |
| Venture capital funds | Available-for-sale financial assets | 437,788 | 396,203 | 672,222 | 645,833 |
| Total | | 437,788 | 396,203 | 672,222 | 645,833 |

Caption

Carrying amount at 31.12.2016

Carrying amount at 31.12.2015

Maximum exposure to loss at 31.12.2016

Maximum exposure to loss at 31.12.2015

Venture capital funds

Available-for-sale financial assets

437,788

396,203

672,222

645,833

Total

437,788

396,203

672,222

645,833

23
     Impact financing envelope (in EUR’000)

In June 2013 the ACP-EU Joint Ministerial Council approved the new financial protocol for the 11th European Development Fund (EDF), covering the period 2014-2020.

A new EUR 500m endowment was agreed for the Investment Facility, the so called ‘impact financing envelope’ or “IFE”, enabling the Facility to support projects that promise a particularly high development impact whilst bearing the greater risks inherent in such investments. This envelope will present new possibilities for enhancing the Facility’s private sector lending through investments in the following instruments:

Social impact equity funds - promoted by an emerging population of private equity fund managers who put the alleviation of social or environmental issues at the core of their funds' investment strategy but still target sustainability at the levels of both the fund and its investee companies.

Loans to financial intermediaries - (e.g. microfinance institutions, local banks and credit unions) operating in ACP countries in which the EIB cannot consider financing - in particular in local currency - under the existing credit risk guidelines, e.g. due to either high country risks, currency volatility or lack of pricing benchmarks. The main objective of such loans will be to fund projects with a high developmental impact, especially in the field of support to micro and small enterprises (MSEs) and agriculture, which generally do not qualify for IF financing.

Risk sharing facilitating instruments - which will take the form of first loss guarantees ("first loss pieces") that will facilitate risk sharing operations of the EIB with local financial intermediaries (mainly commercial banks) for the benefit of underserved SMEs and small projects that meet the Impact Financing Criteria in situations where a market gap has been identified in relation to the access of SMEs/small projects to finance. The first loss pieces would be structured as a counter-guarantee in favour of senior guarantee tranches funded by the EIB - under the Investment Facility - and by other International Financial Institutions/Development Financial Institutions, thus generating a substantial leverage effect.

Direct financing - through debt or equity instruments in projects with sound and experienced promoters and high developmental impacts, but that will, however, also entail higher expectations of losses and difficulties to recover the investment (equity type risk with higher than usual expectation of losses). The EIB will apply strict selection and eligibility criteria for this instrument, as these projects, notwithstanding their high developmental impact, would not be able to meet acceptable financing criteria (i.e. low expectation of recovering the investment or offsetting the losses through interest rates /equity returns).

The IFE will also allow diversification into new sectors, such as health and education, agriculture and food security, and the development of new and innovative risk-sharing instruments.

From a financial and accounting perspective the IFE forms part of the IF portfolio and is accounted for in the overall IF annual financial statements.

The following table represents the carrying amounts and the committed, but undisbursed amounts, per type of asset:

| Type of IFE investment | Caption | Carrying amount at 31.12.2016 | Carrying amount at 31.12.2015 | Undisbursed amount at 31.12.2016 | Undisbursed amount at 31.12.2015 |
| --- | --- | --- | --- | --- | --- |
| Social impact equity funds | Available-for-sale financial assets | 5,021 | 2,257 | 19,567 | 16,927 |
| Loans to financial intermediaries | Loans and receivables | 23,702 | - | 46,958 | 10,000 |
| Risk sharing facilitating instruments | Issued guarantees | -288 | - | 33,719 | - |
| Direct financing – equity participations | Available-for-sale financial assets | 39,986 | - | 14 | 40,000 |
| Total | | 68,421 | 2,257 | 100,258 | 66,927 |

Type of IFE investment

Type of IFE investment

Caption

Caption

Carrying amount at 31.12.2016

Carrying amount at 31.12.2016

Carrying amount at 31.12.2015

Carrying amount at 31.12.2015

Undisbursed amount at 31.12.2016

Undisbursed amount at 31.12.2016

Undisbursed amount at 31.12.2015

Undisbursed amount at 31.12.2015

Social impact equity funds

Social impact equity funds

Available-for-sale financial assets

Available-for-sale financial assets

5,021

5,021

2,257

2,257

19,567

19,567

16,927

16,927

Loans to financial intermediaries

Loans to financial intermediaries

Loans and receivables

Loans and receivables

23,702

23,702

-

-

46,958

46,958

10,000

10,000

Risk sharing facilitating instruments

Risk sharing facilitating instruments

Issued guarantees

Issued guarantees

-288

-288

-

-

33,719

33,719

-

-

Direct financing – equity participations

Direct financing – equity participations

Available-for-sale financial assets

Available-for-sale financial assets

39,986

39,986

-

-

14

14

40,000

40,000

Total

Total

68,421

68,421

2,257

2,257

100,258

100,258

66,927

66,927

24
     Subsequent events

There have been no material post balance sheet events which could require disclosure or adjustment to the 31 December 2016 financial statements.

OJ L 210, 6.8.2013, p. 1.

Council Regulation (EU) No 567/2014 of 26 May 2014 amending Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th EDF as regards the application of the transition period between the 10th EDF and the 11th EDF until the entry into force of the 11th EDF Internal Agreement. OJ L 157, 27.5.2014, Art. 43.

In accordance with Article 59 of the Financial Regulation applicable to the 11th European Development Fund, the treasury is presented in the balance sheet of the 11th EDF.

In accordance with Article 59 of the Financial Regulation applicable to the 11th European Development Fund, the treasury is presented in the balance sheet of the 11th EDF. The nature of the various bank accounts is outlined in chapter 5, Financial Risk Management.

OJ L 156, 29.5.1998, p. 3-106.