# EUR-Lex - 52006DC0429 - EN

Important legal notice

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# 52006DC0429

**Communication from the Commission to the European Parliament, the Council and the Court of Auditors - Annual Accounts For The Financial Year 2005 Of The 6th, 7th, 8th And 9th European Development Funds /* COM/2006/0429 final */ **

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[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 31.7.2006

COM(2006) 429 final

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS

Annual Accounts For The Financial Year 2005 Of The 6th, 7th, 8th And 9th European Development Funds

TABLE OF CONTENTS

1. FINANCIAL STATEMENTS 3

1.1. ACCOUNTING PRINCIPLES AND VALUATION RULES 4

1.2. CONSOLIDATION 6

1.3. CURRENCY AND BASIS FOR CONVERSION 6

1.4. BALANCE SHEET ACCOUNTS 6

1.5. ECONOMIC OUTTURN ACCOUNTS 7

1.6. RECORDING OF OPERATIONS 8

1.7. USE OF ESTIMATES 8

1.8. IMPACT OF THE TRANSITION TO ACCRUAL ACCOUNTING 9

1.9. FINANCIAL STATEMENTS 10

1.10. NOTES TO THE ACCOUNTS 27

1.11. OFF BALANCE ITEMS 42

2. REPORT ON FINANCIAL IMPLEMENTATION 43

2.1. APPROPRIATIONS AT 31.12.2005 48

2.2. CONSOLIDATED ACCOUNTS 59

2.3. SITUATION BY COUNTRY AND BY INSTRUMENT 67

2.4. OTHER MANAGEMENT INFORMATION 71

3. FINANCIAL INFORMATION EIB 79

3.1. INVESTMENT FACILITY INCOME STATEMENT 80

3.2. INVESTMENT FACILITY BALANCE SHEET 81

3.3. INVESTMENT FACILITY CASH FLOW STATEMENT 82

3.4. INVESTMENT FACILITY STATEMENT OF CHANGES IN EQUITY 83

3.5. NOTES TO THE FINANCIAL STATEMENTS 84

4. APPENDIX — SITUATION BY COUNTRY AND BY INSTRUMENT 96

1. FINANCIAL STATEMENTS

1.1. ACCOUNTING PRINCIPLES AND VALUATION RULES

1.1.1. Financial Regulations

The balance sheets and income and expenditure accounts were drawn up in accordance with the Financial Regulations applicable to the 6th, 7th, 8th and 9th European Development Funds (EDFs)[1].

The relevant documents must be presented to the Court of Auditors as provided for in Articles 66, 67 and 68 of the Financial Regulation applicable to the 6th EDF Articles 69, 70 and 71 of the Financial Regulation applicable to the 7th EDF, Articles 66, 67 and 68 of the Financial Regulation applicable to the 8th EDF and Articles 102 and 103 of the Financial Regulation applicable to the 9th EDF. Article 102 (9th EDF) stipulates that, starting with the annual accounts for 2005, the Commission shall send the provisional accounts to the Court of Auditors by 31 March of the following year. The Court of Auditors shall in turn make its observations on the accounts known to the Commission by 15 June (Article 103). On the basis of these observations, the Commission approves the final accounts by 31 July and sends them to the European Parliament, the Council and the Court of Auditors. The accounts are then published in the Official Journal by 31 October together with the statement of assurance given by the Court of Auditors in respect of the part of the EDF resources for which the Commission is responsible for financial management.

1.1.2. Accrual Based Accounts

In accordance with the provisions of articles 99 and 135.3 of the 9th EDF Financial Regulation, full accrual based accounts have to be prepared for the first time for the 2005 financial year.

To ensure the comparability of the information, the EDF Accounting Officer has restated the opening financial statements for the financial year 2005, on a full accrual accounting basis. The accounting information provided by the present IT accounting system (OLAS) has been adjusted, where necessary, in order to provide figures which comply with accrual accounting principles. Additional information in respect of income and expenditure items has also been provided by the Authorising Officer.

These financial statements have been drafted in conformity with a new set of accounting rules and methods for the EDF. These were drawn up on the basis of International Accounting Standards (IPSAS/IAS) and Generally Accepted Accounting Principles (GAAPs). The new rules and methods were subject to a peer review by the "Accounting Standards Committee" on which the Court of Auditors is represented as an observer.

The rules of valuation and accounting methods adopted by the Accounting Officer of the European Development Fund have been applied in respect of the part of the EDF resources for which the European Commission is responsible for financial management.

The annual accounts for 2005 are presented as follows:

- The financial statements

- The reports on financial implementation

- The financial statements and information supplied by the European Investment Bank (EIB)

1.1.3. Accounting Principles

The objectives of financial statements are to provide information about the financial position, performance and cash-flows of an entity that is useful to a wide range of users. For a public sector entity, the objectives are more specifically to provide information useful for decision making, and to demonstrate the accountability of the entity for the resources entrusted to it.

If they are to present a true and fair view, financial statements must not only supply relevant information to describe the nature and range of the activities, explain how it is financed and supply definitive information on its operations, but do so in a clear and comprehensible manner which allows comparisons between financial years. It is with these goals in mind that the present document has been drawn up.

The accounting system of the European Development Funds comprises general accounts and financial accounts. Both sets of accounts are kept in euro on the basis of the calendar year. The general accounts allow for the preparation of the financial statements as they show all charges and income for the financial year and are designed to establish the financial position in the form of a balance sheet at 31 December. The financial accounts give a detailed picture of the use of EDF resources. They are based on the cash accounting principle.

Article 98 of the 9th Financial Regulation sets out the accounting principles to be applied in drawing up the financial statements, as follows:

- going concern basis;

- prudence;

- consistent accounting methods;

- comparability of information;

- materiality;

- no netting;

- reality over appearance;

- accrual-based accounting.

In accordance with the provisions of Articles 99 and 135.3 of the 9th EDF Financial Regulation, the financial statements for 2005 have been prepared on a different basis to that of 2004, i.e. on accrual accounting rather than cash accounting principles. Therefore adjustments were made to the balance sheet as of 31 December 2004 so as to arrive at the opening, accrual compliant, balance sheet as at 1 January 2005 (for example, the inclusion of pre-financing amounts).

1.2. CONSOLIDATION

Each EDF is governed by its own Financial Regulation which imposes 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 European Commission. These financial statements are also presented in a consolidated way so as to provide a global view of the financial situation of the resources for which the European Commission is responsible.

Given the clear division of responsibilities set out in Article 1 of the 9th Financial Regulation, the financial statements of the Commission and the European Investment Bank – the entities entrusted with the management of EDF resources – have not been consolidated.

1.3. CURRENCY AND BASIS FOR CONVERSION

Functional and reporting currency

The financial statements are presented in millions of euros, which is the European Communities' functional and reporting currency.

Transactions and balances

Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the underlying transactions.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the exchange rates applying on 31 December 2005:

EURO Exchange Rate at 31 December 2005 |

GBP 0.6853 |

1.4. BALANCE SHEET ACCOUNTS

1.4.1. 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 pre-financing agreement. The float or advance is repaid or used for the purpose for which it was provided during the period defined in the agreement. If the beneficiary does not incur sufficient eligible expenditure, he has the obligation to return, in whole or in part, the pre-financing advance to the European Development Fund. The amount of the pre-financing is reduced (wholly or partially) by the acceptance of eligible costs and amounts returned.

At year-end outstanding pre-financing amounts are valued at the original amount(s) paid to the beneficiary less: any amounts returned, eligible amounts cleared and the estimated eligible amounts not yet cleared at year-end.

Guarantees held to secure pre-financed amounts are treated as “Contingent Assets” and as such they are not accounted for in the financial statements (IPSAS 19). Details are however provided in section 1.11 below for information purposes.

1.4.2. Debtors

Receivables are carried at original requested amounts less any provision for bad debts. A provision for bad debts is established when there is objective evidence that the European Development Fund will not be able to collect the full amount due to it from third parties.

1.4.3. Creditors

Liabilities are recorded at the eligible amount when a request for payment meets the predefined criteria.

The EDF has current liabilities for amounts already due to beneficiaries for which no invoices were received at the reporting date. The recognition criteria foresee that a charge is recognised by the EDF for the amount of the estimated payment due for the period, that is to say the portion of the incurred eligible expenses due to the beneficiaries at the reporting date. Material amounts are recognised as an accrued expense (Accrued Expenditure) on the basis of estimates (e.g. the degree of execution of contracts) provided by the Authorising Officer.

Payments due must be pre-recorded when cost claims or expense summaries are received and not at the time of their payment. In these cases, payments due are carried at the original value of the related cost claim or expense summary.

1.4.4. Cash & cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. They include accounts held with financial institutions in the ACP states and the OCTs, and with financial institutions in the Member States.

1.5. ECONOMIC OUTTURN ACCOUNTS

1.5.1. Income

In application of Accrual Based Accounting Principles the only source of income for the funds is derived from interest payable on various cash balances held with commercial Banks (see 1.10 below).

1.5.2. Expenditure

Expenditure should be recognised in the EDF financial statements as expenditure of the period that the events giving rise to a payment occurred, so long as:

- A contract has been signed which authorises the payment;

- Eligibility criteria, if any, have been met by the beneficiary; and

- A reasonable estimate of the amount due can be made. For example, invoices sent by the beneficiary, degree of execution of contracts etc..

Expenditure includes all payment orders executed by the banks up to 31 December 2005.

Expenditure incurred by Commission Delegations is not finally entered in to the EDF accounts until it has been validated by both the authorising officer and the accounting officer. Any expenditure which did not meet this double criterion at the year end is shown under the heading of "transactions to be finalised".

1.6. RECORDING OF OPERATIONS

The deadline for the commitment of the funds under the 9th EDF has been set at 31 December 2007 in line with the “sunset clause” adopted by Council Decision 2005/446/CE of 30 May 2005[2].

Entitlements due from the Member States (mainly contributions which have not yet been called or interest due on the late payment of called funds) must be entered in the accounts. These items are set out in the balance sheets for the various EDFs.

In accordance with the principles of accrual-based accounting, the financial statements show the financial charges and income for the financial year regardless of the date of payment or collection.

1.7. USE OF ESTIMATES

In accordance with generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management. Significant estimates include, but are not limited to, provisions for future charges, financial risk on accounts receivable, accrued income and charges. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known.

1.8. IMPACT OF THE TRANSITION TO ACCRUAL ACCOUNTING

ASSETS | 1/01/2005 | 31/12/2004 |

Current assets |

Net contribution receivables | 42,38 | 42,38 |

Debtors | 121,04 | 21,56 |

- Provision for doubtful debts | - 0,02 | - 0,02 |

Net Prefinancing | 1.885,06 | - 13,94 |

Other current assets | 6,89 | 6,89 |

Deferred charges | 537,00 | 537,00 |

Liaison accounts | - | - |

Security cash accounts | 537,00 | 537,00 |

STABEX | 430,17 | 430,17 |

RD Congo special fund | 106,83 | 106,83 |

Cash and cash equivalents | 261,89 | 261,89 |

Total Current assets | 3.391,24 | 1.392,75 |

- | - |

Total assets | 3.391,24 | 1.392,75 |

LIABILITIES |

Funds and reserves |

Subscribed funds (a) | 42.250,15 | 42.250,15 |

Uncalled funds (b) | - 17.210,15 | - 17.210,15 |

Called fund capital (a)-(b) | 25.040,00 | 25.040,00 |

Accumulated reserves | - 24.261,09 | - 25.398,49 |

cumulated reserves at 31/12/N-1 | N.A. | N.A. |

economic outurn for the year | N.A. | N.A. |

Reserves | 1.033,84 | 1.033,84 |

interfund transfers | 848,74 | 848,74 |

replenishment of stabex resources | 185,10 | 185,10 |

Total Funds and reserves | 1.812,75 | 675,35 |

Current liabilities |

Creditors | 1.578,49 | 717,40 |

Liaison accounts | - | - |

Total current liabilities | 1.578,49 | 717,40 |

- | - |

Total Funds and reserves and liabilities | 3.391,24 | 1.392,75 |

1.9. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET 2005 for the 6th, 7th, 8th and 9th EDF (Million Euro) |

ASSETS | Notes | 31/12/2005 | 1/01/2005 |

Current assets |

Net contribution receivables | 1 | 13,72 | 42,38 |

Debtors | 2 | 145,14 | 121,04 |

- Provision for doubtful debts | 3 | - 6,37 | - 0,02 |

Net Prefinancing | 4 | 2.304,20 | 1.885,06 |

Other current assets | 5 | 3,31 | 6,89 |

Deferred charges | 6 | 393,19 | 537,00 |

Liaison accounts | 7 | - |

Security cash accounts | 8 | 391,55 | 537,00 |

STABEX | 371,88 | 430,17 |

RD Congo special fund | 19,67 | 106,83 |

Cash and cash equivalents | 9 | 270,55 | 261,89 |

Total Current assets | 3.515,29 | 3.391,24 |

- |

Total assets | 3.515,29 | 3.391,24 |

LIABILITIES |

Funds and reserves |

Subscribed funds (a) | 10 | 42.877,15 | 42.250,15 |

Uncalled funds (b) | 11 | - 15.487,15 | - 17.210,15 |

Called fund capital (a)-(b) | 12 | 27.390,00 | 25.040,00 |

Accumulated reserves | 13 | - 26.787,49 | - 24.261,09 |

cumulated reserves at 31/12/N-1 | - 24.261,09 | N.A. |

economic outurn for the year | - 2.526,40 | N.A. |

Reserves | 14 | 1.033,84 | 1.033,84 |

interfund transfers | 848,74 | 848,74 |

replenishment of stabex resources | 185,10 | 185,10 |

Total Funds and reserves | 1.636,35 | 1.812,75 |

Current liabilities |

Creditors | 15 | 1.878,94 | 1.578,49 |

Liaison accounts | 7 | - |

Total current liabilities | 1.878,94 | 1.578,49 |

- |

Total Funds and reserves and liabilities | 3.515,29 | 3.391,24 |

6th EDF BALANCE SHEET 2005 (Million Euro) |

ASSETS | Notes | 31/12/2005 | 1/01/2005 |

Current assets |

Net contribution receivables | 1 | - | - |

Debtors | 2 | 12,62 | 8,12 |

- Provision for doubtful debts | 3 | - 3,49 | - 0,01 |

Net Prefinancing | 4 | 37,01 | 47,75 |

Other current assets | 5 | 2,85 | 6,84 |

Deferred charges | 6 | - | - |

Liaison accounts | 7 | 2.355,51 | 2.395,42 |

Security cash accounts | 8 | - |

STABEX | - | - |

RD Congo special fund | - | - |

Cash and cash equivalents | 9 | - | - |

Total Current assets | 2.404,50 | 2.458,13 |

- |

Total assets | 2.404,50 | 2.458,13 |

LIABILITIES |

Funds and reserves |

Subscribed funds (a) | 10 | 7.560,00 | 7.560,00 |

Uncalled funds (b) | 11 | - | - |

Called fund capital (a)-(b) | 12 | 7.560,00 | 7.560,00 |

Accumulated reserves | 13 | - 7.290,58 | - 7.243,09 |

cumulated reserves at 31/12/N-1 | - 7.243,09 | N.A. |

economic outurn for the year | - 47,49 | N.A. |

Reserves | 14 | - 182,99 | - 158,43 |

interfund transfers | - 368,10 | - 343,53 |

replenishment of stabex resources | 185,10 | 185,10 |

Total Funds and reserves | 86,43 | 158,48 |

Current liabilities |

Creditors | 15 | 38,77 | 20,34 |

Liaison accounts | 7 | 2.279,31 | 2.279,31 |

Total current liabilities | 2.318,07 | 2.299,65 |

Total Funds and reserves and liabilities | 2.404,50 | 2.458,13 |

7th EDF BALANCE SHEET 2005 (Million Euro) |

ASSETS | Notes | 31/12/2005 | 1/01/2005 |

Current assets |

Net contribution receivables | 1 | - | - |

Debtors | 2 | 20,15 | 22,12 |

- Provision for doubtful debts | 3 | - 2,69 | - 0,01 |

Net Prefinancing | 4 | 287,54 | 260,81 |

Other current assets | 5 | - | - |

Deferred expenses | 6 | 62,46 | 112,86 |

Liaison accounts | 7 | 2.279,31 | 2.279,31 |

Security cash accounts | 8 | - |

STABEX | - | - |

RD Congo special fund | - | - |

Cash and cash equivalents | 9 | - | - |

Total Current assets | 2.646,76 | 2.675,09 |

- |

Total assets | 2.646,76 | 2.675,09 |

LIABILITIES |

Funds and reserves |

Subscribed funds (a) | 10 | 10.940,00 | 10.940,00 |

Uncalled funds (b) | 11 | - | - |

Called fund capital (a)-(b) | 12 | 10.940,00 | 10.940,00 |

Accumulated reserves | 13 | - 9.527,36 | - 9.233,99 |

cumulated reserves at 31/12/N-1 | - 9.233,99 | N.A. |

economic outurn for the year | - 293,37 | N.A. |

Reserves | 14 | - 559,14 | - 473,06 |

interfund transfers | - 559,14 | - 473,06 |

replenishment of stabex resources | - | - |

Total Funds and reserves | 853,50 | 1.232,96 |

Current liabilities |

Creditors | 15 | 210,67 | 180,93 |

Liaison accounts | 7 | 1.582,59 | 1.261,20 |

Total current liabilities | 1.793,26 | 1.442,13 |

- |

Total Funds and reserves and liabilities | 2.646,76 | 2.675,09 |

8th EDF BALANCE SHEET 2005 (Million Euro) |

ASSETS | Notes | 31/12/2005 | 1/01/2005 |

Current assets |

Net contribution receivables | 1 | 13,72 | 42,38 |

Debtors | 2 | 55,97 | 59,12 |

- Provision for doubtful debts | 3 | - 0,19 | - |

Net Prefinancing | 4 | 1.007,78 | 1.057,31 |

Other current assets | 5 | - | - |

Deferred expenses | 6 | 310,14 | 317,31 |

Liaison accounts | 7 | 928,96 | - |

Security cash accounts | 8 | - | - |

STABEX | - | - |

RD Congo special fund | - | - |

Cash and cash equivalents | 9 | - | - |

Total Current assets | 2.316,39 | 1.476,12 |

- |

Total assets | 2.316,39 | 1.476,12 |

LIABILITIES |

Funds and reserves |

Subscribed funds (a) | 10 | 12.840,00 | 12.840,00 |

Uncalled funds (b) | 11 | - 4.055,00 | - 6.405,00 |

Called fund capital (a)-(b) | 12 | 8.785,00 | 6.435,00 |

Accumulated reserves | 13 | - 7.851,95 | - 6.963,08 |

cumulated reserves at 31/12/N-1 | - 6.963,08 | N.A. |

economic outurn for the year | - 888,87 | N.A. |

Reserves | 14 | - 1.603,43 | - 1.319,54 |

interfund transfers | - 1.603,43 | - 1.319,54 |

replenishment of stabex resources | - | - |

Total Funds and reserves | - 670,38 | - 1.847,63 |

- |

Current liabilities | - |

Creditors | 15 | 921,32 | 937,75 |

Liaison accounts | 7 | 2.065,45 | 2.385,99 |

Total current liabilities | 2.986,77 | 3.323,75 |

- |

Total Funds and reserves and liabilities | 2.316,39 | 1.476,12 |

9th EDF BALANCE SHEET 2005 (Million Euro) |

ASSETS | Notes | 31/12/2005 | 1/01/2005 |

Current assets |

Net contribution receivables | 1 | - | - |

Debtors | 2 | 56,41 | 31,68 |

- Provision for doubtful debts | 3 | - | - |

Net Prefinancing | 4 | 971,88 | 519,19 |

Other current assets | 5 | 0,46 | 0,05 |

Deferred expenses | 6 | 20,58 | 106,83 |

Liaison accounts | 7 | 1.582,59 | 1.581,74 |

Security cash accounts | 8 | 391,55 | 537,00 |

STABEX | 371,88 | 430,17 |

RD Congo special fund | 19,67 | 106,83 |

Cash and cash equivalents | 9 | 270,55 | 261,89 |

Total Current assets | 3.294,02 | 3.038,37 |

- |

Total assets | 3.294,02 | 3.038,37 |

- |

- |

LIABILITIES | - |

- |

Funds and reserves | - |

Subscribed funds (a) | 10 | 11.537,15 | 10.910,15 |

Uncalled funds (b) | 11 | - 11.432,15 | - 10.805,15 |

Called fund capital (a)-(b) | 12 | 105,00 | 105,00 |

Accumulated reserves | 13 | - 2.117,60 | - 820,93 |

cumulated reserves at 31/12/N-1 | - 820,93 | N.A. |

economic outurn for the year | - 1.296,67 | N.A. |

Reserves | 14 | 3.379,41 | 2.984,87 |

interfund transfers | 3.379,41 | 2.984,87 |

replenishment of stabex resources | - | - |

Total Funds and reserves | 1.366,81 | 2.268,94 |

- |

Current liabilities | - |

Creditors | 15 | 708,19 | 439,46 |

Liaison accounts | 7 | 1.219,01 | 329,96 |

Total current liabilities | 1.927,21 | 769,43 |

- |

Total Funds and reserves and liabilities | 3.294,02 | 3.038,37 |

CONSOLIDATED ECONOMIC OUTTURN ACCOUNT 2005 for the 6th, 7th, 8th and 9th EDF (Million Euro) |

Notes | cash basis expenditure 2004 | cash basis expenditure 2005 | increase in prefinancing | increase in invoices to be paid | accrual basis expenditure 2005 |

Operating interest | 20 | 0,35 | 0,35 | 0,35 |

Other operating income | - | - | - |

OPERATING INCOME (1) | 0,35 | 0,35 | 0,35 |

- |

Programmable aid | 1.029,88 | 844,61 | - 38,65 | 65,87 | 949,13 |

Macro-economic support | 380,18 | 383,01 | - | - | 383,01 |

Regional programs | 12,12 | 23,06 | 10,82 | 21,08 | 33,32 |

Interest-rate subsidies | 9,62 | 0,27 | - | - | 0,27 |

Emergency aid | 120,80 | 125,02 | 56,01 | 65,92 | 134,92 |

Refugee aid | 26,55 | 8,15 | - 10,60 | - 5,76 | 12,99 |

Aids Fund | - | - | 0,00 | - | - 0,00 |

Risk Capital | 143,28 | 60,80 | - | - | 60,80 |

Stabex | 7,29 | 66,40 | - | - | 66,40 |

Sysmin | 27,22 | 14,79 | 6,11 | 5,32 | 13,99 |

Transfers from former EDFs | 10,42 | 4,68 | - 7,81 | 3,13 | 15,61 |

Structural adjustment | 89,68 | 15,89 | - | - | 15,89 |

Debt relief | 100,00 | 7,60 | - | 13,99 | 21,59 |

Payments world bank | - | - | - | 1,60 | 1,60 |

Sectorial policy | 277,77 | 594,38 | 264,31 | 162,09 | 492,16 |

Compensation export receipts | 20,67 | 26,33 | 40,04 | 10,39 | - 3,32 |

Centre for the development of enterprise | 14,64 | 20,07 | 20,07 | 16,51 | 16,51 |

Centre for the development of agriculture | 12,46 | 12,03 | 15,15 | 14,21 | 11,09 |

General Assembly | 0,63 | 1,15 | - | - 0,08 | 1,07 |

Special operations | - | - | - | - | - |

Technical assistance | - | 0,00 | - 0,08 | - 0,04 | 0,04 |

Intra ACP Projects | 58,96 | 131,42 | 64,19 | 131,68 | 198,91 |

Congo Fund | 0,09 | 89,23 | - | 0,57 | 89,80 |

Operational expenditure | 2.342,25 | 2.428,88 | 419,58 | 966,63 | 2.515,78 |

Administrative and financial expenditure | 16 | 71,68 | 55,86 | 24,83 | - 2,47 | 28,56 |

Total Expenditure (cash basis) | 17 | 2.413,93 | 2.484,73 |

Accrual adjustments | 18 | N.A. | 59,42 | - 0,19 |

TOTAL EXPENDITURE / Accrual basis (2) | 19 | N.A. | 2.544,15 | 863,99 | 1.470,65 | 2.544,15 |

NET COST OF OPERATING ACTIVITIES (2-1) | N.A. | 2.543,81 | 2.543,81 |

- |

Financial income | 20 | 12,24 | 23,95 | 23,95 |

Financial charges | 21 | - 0,37 | - 0,19 | - 0,19 |

Provisions | 22 | - 0,01 | - 6,36 | - 6,36 |

Surplus/(deficit) from financial activities (3) | 11,87 | 17,41 | 17,41 |

NET ECONOMIC RESULT (1-2+3) | N.A. | - 2.526,40 | - 2.526,40 |

6th EDF ECONOMIC OUTTURN ACCOUNT 2005 (Million Euro) |

Notes | cash basis expenditure 2004 | cash basis expenditure 2005 | increase in prefinancing | increase in invoices to be paid | accrual basis expenditure 2005 |

Operating interest | 20 | - | - | - |

Other operating income | - | - | - |

OPERATING INCOME (1) | - | - | - |

Programmable aid | 27,20 | 20,02 | - 3,80 | 16,01 | 39,83 |

Macro-economic support | - | - | - | - | - |

Regional programs | - | - | - | - | - |

Interest-rate subsidies | - | - 0,02 | - | - | - 0,02 |

Emergency aid | - | - | - | - | - |

Refugee aid | - | - 0,05 | - 0,05 | 0,13 | 0,13 |

Aids Fund | - | - | 0,00 | - | - 0,00 |

Risk Capital | 2,28 | 1,22 | - | - | 1,22 |

STABEX | - | - | - | - | - |

Sysmin | 0,04 | - 0,05 | - | 0,09 | 0,04 |

Transfers from former EDFs | 0,33 | 0,38 | - 0,12 | 0,28 | 0,78 |

Structural adjustment | - | - | - | - | - |

Debt relief | - | - | - | - | - |

Payments world bank | - | - | - | - | - |

Sectorial policy | - | - | - | - | - |

Compensation export receipts | - | - | - | - | - |

Centre for the development of enterprise | - | - | - | - | - |

Centre for the development of agriculture | - | - | - | - | - |

General Assembly | - | - | - | - | - |

Special operations | - | - | - | - | - |

Technical assistance | - | - | - | - | - |

Intra ACP Projects | - | - | - | 1,91 | 1,91 |

Congo Fund | - | - | - | - | - |

Operational expenditure | 29,84 | 21,50 | - 3,97 | 18,42 | 43,89 |

Administrative and financial expenditure | 16 | 0,16 | 0,11 | - | - | 0,11 |

Total Expenditure (cash basis) | 17 | 30,00 | 21,62 |

Accrual adjustments | 18 | N.A. | 22,30 | - 0,09 |

TOTAL EXPENDITURE / Accrual basis (2) | 19 | N.A. | 43,92 | - 3,97 | 18,42 | 43,92 |

NET COST OF OPERATING ACTIVITIES (2-1) | N.A. | 43,92 | 43,92 |

Financial income | 20 | - | - | - |

Financial charges | 21 | - 0,09 | - 0,09 | - 0,09 |

Provisions | 22 | - | - 3,48 | - 3,48 |

Surplus/(deficit) from financial activities (3) | - 0,09 | - 3,57 | - 3,57 |

NET ECONOMIC RESULT (1-2+3) | N.A. | - 47,49 | - 47,49 |

7th EDF ECONOMIC OUTTURN ACCOUNT 2005 (Million Euro) |

Notes | cash basis expenditure 2004 | cash basis expenditure 2005 | increase in prefinancing | increase in invoices to be paid | accrual basis expenditure 2005 |

Operating interest | 20 | - | - | - |

Other operating income | - | - |

OPERATING INCOME (1) | - | - | - |

Programmable aid | 203,06 | 159,10 | 26,94 | 62,62 | 194,78 |

Macro-economic support | - | - | - | - | - |

Regional programs | - | - | - | - | - |

Interest-rate subsidies | 0,67 | 0,02 | - | - | 0,02 |

Emergency aid | - 0,42 | - 0,00 | - | 0,01 | 0,01 |

Refugee aid | 0,04 | - 0,46 | - 0,64 | 0,31 | 0,49 |

Aids Fund | - | - | - | - | - |

Risk Capital | 10,07 | 12,23 | - | - | 12,23 |

STABEX | 0,50 | 50,40 | - | - | 50,40 |

Sysmin | 20,33 | 9,69 | 6,13 | 4,73 | 8,28 |

Transfers from former EDFs | 10,09 | 4,30 | - 7,69 | 2,85 | 14,83 |

Structural adjustment | 0,12 | 0,03 | - | - | 0,03 |

Debt relief | - | - | - | 0,07 | 0,07 |

Payments world bank | - | - | - | - | - |

Sectorial policy | - | - | - | - | - |

Compensation export receipts | - | - | - | - | - |

Centre for the development of enterprise | - | - | - | - | - |

Centre for the development of agriculture | - | - | - | - | - |

General Assembly | - | - | - | - | - |

Special operations | - | - | - | - | - |

Technical assistance | - | - | - | - | - |

Intra ACP Projects | - | - | - | 9,55 | 9,55 |

Congo Fund | - | - | - | - | - |

Operational expenditure | 244,47 | 235,31 | 24,75 | 80,13 | 290,69 |

Administrative and financial expenditure | 16 | - | - | - | - | - |

Total Expenditure (cash basis) | 17 | 244,47 | 235,31 |

Accrual adjustments | 18 | N.A. | 55,38 | - |

TOTAL EXPENDITURE / Accrual basis (2) | 19 | N.A. | 290,69 | 24,75 | 80,13 | 290,69 |

NET COST OF OPERATING ACTIVITIES (2-1) | N.A. | 290,69 | 290,69 |

Financial income | 20 | - | - | - |

Financial charges | 21 | - | - | - |

Provisions | 22 | - 0,01 | - 2,68 | - 2,68 |

Surplus/(deficit) from financial activities (3) | - 0,01 | - 2,68 | - 2,68 |

NET ECONOMIC RESULT (1-2+3) | N.A. | - 293,37 | - 293,37 |

8th EDF ECONOMIC OUTTURN ACCOUNT 2005 (Million Euro) |

Notes | cash basis expenditure 2004 | cash basis expenditure 2005 | increase in prefinancing | increase in invoices to be paid | accrual basis expenditure 2005 |

Operating interest | 20 | - | - |

Other operating income | - | - |

OPERATING INCOME (1) | - | - |

Programmable aid | 799,62 | 665,49 | - 61,79 | - 12,76 | 714,52 |

Macro-economic support | 103,81 | 77,34 | - | - | 77,34 |

Regional programs | - | - | - | - | - |

Interest-rate subsidies | 8,94 | 0,27 | - | - | 0,27 |

Emergency aid | 2,45 | 1,43 | - 3,70 | - 4,09 | 1,04 |

Refugee aid | 26,51 | 8,66 | - 9,91 | - 6,20 | 12,37 |

Aids Fund | - | - | - | - | - |

Risk Capital | 130,93 | 47,35 | - | - | 47,35 |

Stabex | 6,79 | 16,00 | - | - | 16,00 |

Sysmin | 6,84 | 5,15 | - 0,02 | 0,50 | 5,67 |

Transfers from former EDFs | - | - | - | - | - |

Structural adjustment | 89,57 | 15,86 | - | - | 15,86 |

Debt relief | - | - | - | 13,92 | 13,92 |

Payments world bank | - | - | - | 1,60 | 1,60 |

Sectorial policy | - | 14,70 | 6,05 | - 0,23 | 8,41 |

Compensation export receipts | - | - | 16,93 | - 1,65 | - 18,57 |

Centre for the development of enterprise | - | - | - | - | - |

Centre for the development of agriculture | - | - | - | - | - |

General Assembly | - | - | - | - | - |

Special operations | - | - | - | - | - |

Technical assistance | - | - | - | - |

Intra ACP Projects | - | - | - | - | - |

Congo Fund | - | - | - | - | - |

Operational expenditure | 1.175,46 | 852,24 | - 52,45 | 451,24 | 895,78 |

- | - |

Administrative and financial expenditure | 16 | 16,44 | 1,87 | - 0,24 | - 0,37 | 1,74 |

Total Expenditure (cash basis) | 17 | 1.191,91 | 854,11 |

Accrual adjustments | 18 | N.A. | 43,41 | - |

TOTAL EXPENDITURE / Accrual basis (2) | 19 | N.A. | 897,51 | - 52,68 | 450,87 | 897,51 |

NET COST OF OPERATING ACTIVITIES (2-1) | N.A. | 897,51 | 897,51 |

Financial income | 20 | 9,63 | 8,84 | 8,84 |

Financial charges | 21 | - | - | - |

Provisions | 22 | - | - 0,19 | - 0,19 |

Surplus/(deficit) from financial activities (3) | 9,63 | 8,65 | 8,65 |

NET ECONOMIC RESULT (1-2+3) | N.A. | - 888,87 | - 888,87 |

9th EDF ECONOMIC OUTTURN ACCOUNT 2005 (Million Euro) |

Notes | cash basis expenditure 2004 | cash basis expenditure 2005 | increase in prefinancing | increase in invoices to be paid | accrual basis expenditure 2005 |

Operating interest | 20 | 0,35 | 0,35 | 0,35 |

Other operating income |

OPERATING INCOME (1) | 0,35 | 0,35 | 0,35 |

Programmable aid | - | - | - | - | - |

Macro-economic support | 276,37 | 305,66 | - | - | 305,66 |

Regional programs | 12,12 | 23,06 | 10,82 | 21,08 | 33,32 |

Interest-rate subsidies | - | - | - | - | - |

Emergency aid | 118,77 | 123,58 | 59,72 | 70,01 | 133,87 |

Refugee aid | - | - | - | - | - |

Aids Fund | - | - | - | - | - |

Risk Capital | - | - | - | - | - |

Stabex | - | - | - | - | - |

Sysmin | - | - | - | - | - |

Transfers from former EDFs | - | - | - | - | - |

Structural adjustment | - | - | - | - | - |

Debt relief | 100,00 | 7,60 | - | - | 7,60 |

Payments world bank | - | - | - | - | - |

Sectorial policy | 277,77 | 579,68 | 258,25 | 162,32 | 483,75 |

Compensation export receipts | 20,67 | 26,33 | 23,12 | 12,04 | 15,25 |

Centre for the development of enterprise | 14,64 | 20,07 | 20,07 | 16,51 | 16,51 |

Centre for the development of agriculture | 12,46 | 12,03 | 15,15 | 14,21 | 11,09 |

General Assembly | 0,63 | 1,15 | - | - 0,08 | 1,07 |

Special operations | - | - | - | - | - |

Technical assistance | - | 0,00 | - 0,08 | - 0,04 | 0,04 |

Intra ACP Projects | 58,96 | 131,42 | 64,19 | 120,23 | 187,45 |

Congo Fund | 0,09 | 89,23 | - | 0,57 | 89,80 |

Operational expenditure | 892,48 | 1.319,83 | 451,24 | 416,84 | 1.285,42 |

Administrative and financial expenditure | 16 | 55,08 | 53,88 | 25,07 | - 2,10 | 26,71 |

Total Expenditure (cash basis) | 17 | 947,56 | 1.373,70 |

Accrual adjustments | 18 | N.A. | - 61,67 | - 0,10 |

TOTAL EXPENDITURE / Accrual basis (2) | 19 | N.A. | 1.312,03 | 476,31 | 414,74 | 1.312,03 |

NET COST OF OPERATING ACTIVITIES (2-1) | N.A. | 1.311,69 | 1.311,69 |

Financial income | 20 | 2,61 | 15,12 | 15,12 |

Financial charges | 21 | - 0,27 | - 0,10 | - 0,10 |

Provisions | 22 | - | - | - |

Surplus/(deficit) from financial activities (3) | 2,34 | 15,02 | 15,02 |

NET ECONOMIC RESULT (1-2+3) | N.A. | - 1.296,67 | - 1.296,67 |

CASH FLOW SATEMENT 2005 for the 6th, 7th, 8th and 9th EDF (Million Euro) |

Net economic result | - 2.526,40 |

Increase in provision | 6,36 |

Financial income adjustment | - 1,40 |

operational income adjustment | 0,30 |

Accrual adjustments | 59,42 |

Financial charges | 0,19 |

provision for bank charges | - 0,02 |

Decrease in transactions awaiting finalisation | 5,85 |

Cash Flows from operating activities | - 2.455,70 |

Contributions from member states | 2.199,70 |

Cash flows from financing activities | 2.199,70 |

Net increase/decrease in cash and cash equivalent | - 256,00 |

Treasury balance at beginning of period | 261,89 |

Stabex security accounts at beginning of period | 430,17 |

Congo Account | 106,83 |

Cash and cash equivalent at beginning of period | 798,88 |

Treasury balance at end of period | 270,55 |

Stabex security accounts at end of period | 371,88 |

Congo Account | 19,67 |

SWIFT account | - 119,23 |

Cash and cash equivalent at end of period | 542,87 |

CONSOLIDATED STATEMENT IN CHANGES IN CAPITAL 2005 for the 6th, 7th, 8th and 9th EDF (Million Euro) |

Fund Capital | Uncalled Funds | Called funds capital | Other reserves | Accumulated reserves | Total Equity |

(a) | (b) | (c) | (d) | (e) | (h)=(e)+(d)+(c) |

Closing balance 2003 | 41.895,15 | - 19.275,15 | 22.620,00 | 1.033,84 | N.A. | N.A. |

Contributions | - | - | 2.315,00 | - | - | 2.315,00 |

Capital increase | 355,00 | - 250,00 | 105,00 | - | - | 105,00 |

Transfers from former FED | - | - | - | - | - | - |

Net economic result | - | - | - | - | - | - |

Change in accounting policy | - | - | - | - | - 24.261,09 | - 24.261,09 |

Closing balance 2004 | 42.250,15 | - 17.210,15 | 25.040,00 | 1.033,84 | - 24.261,09 | 1.812,75 |

Contributions | - | - | 2.350,00 | - | - | 2.350,00 |

Capital increase | 627,00 | - 627,00 | - | - | - | - |

Transfers from former FED | - | - | - | - | - | - |

Net economic result | - | - | - | - | - 2.526,40 | - 2.526,40 |

Other movements | - | - | - | - | - | - |

Closing balance 2005 | 42.877,15 | - 15.487,15 | 27.390,00 | 1.033,84 | - 26.787,49 | 1.636,35 |

6th EDF STATEMENT IN CHANGES IN CAPITAL 2005 (Million Euro) |

Fund Capital | Uncalled Funds | Called funds capital | Other reserves | Accumulated reserves | Total Equity |

(a) | (b) | (c) | (d) | (e) | (h)=(e)+(d)+(c) |

- |

Closing balance 2003 | 7.560,00 | - | 7.560,00 | - 126,19 | N.A. | N.A. |

Contributions | - | - | - | - | - | - |

Capital increase | - | - | - | - | - | - |

Transfers to 9th FED | - | - | - | - 32,24 | - | - 32,24 |

Net economic result | - | - | - | - | - | - |

Change in accounting policy | - | - | - | - | - 7.243,09 | - 7.243,09 |

Closing balance 2004 | 7.560,00 | - | 7.560,00 | - 158,43 | - 7.243,09 | 158,48 |

Contributions | - | - | - | - | - | - |

Capital increase | - | - | - | - | - | - |

Transfers to 9th FED | - | - | - | - 24,56 | - | - 24,56 |

Net economic result | - | - | - | - | - 47,49 | - 47,49 |

Other movements | - | - | - | - | - | - |

Closing balance 2005 | 7.560,00 | - | 7.560,00 | - 182,99 | - 7.290,58 | 86,43 |

7th EDF STATEMENT IN CHANGES IN CAPITAL 2005 (Million Euro) |

Fund Capital | Uncalled Funds | Called funds capital | Other reserves | Accumulated reserves | Total Equity |

(a) | (b) | (c) | (d) | (e) | (h)=(e)+(d)+(c) |

- |

Closing balance 2003 | 10.940,00 | - | 10.940,00 | - 420,58 | N.A. | N.A. |

- |

Contributions | - | - | - | - | - | - |

Capital increase | - | - | - | - | - | - |

Transfers to 9th FED | - | - | - | - 52,48 | - | - 52,48 |

Net economic result | - | - | - | - | - | - |

Change in accounting policy | - | - | - | - | - 9.233,99 | - 9.233,99 |

- | - |

Closing balance 2004 | 10.940,00 | - | 10.940,00 | - 473,06 | - 9.233,99 | 1.232,96 |

- | - |

Contributions | - | - | - | - | - | - |

Capital increase | - | - | - | - | - | - |

Transfers to 9th FED | - | - | - | - 86,09 | - | - 86,09 |

Net economic result | - | - | - | - | - 293,37 | - 293,37 |

Other movements | - | - | - | - | - | - |

- |

Closing balance 2005 | 10.940,00 | - | 10.940,00 | - 559,14 | - 9.527,36 | 853,50 |

8th EDF STATEMENT IN CHANGES IN CAPITAL 2005 (Million Euro) |

Fund Capital | Uncalled Funds | Called funds capital | Other reserves | Accumulated reserves | Total Equity |

(a) | (b) | (c) | (d) | (e) | (h)=(e)+(d)+(c) |

- |

Closing balance 2003 | 12.840,00 | - 8.720,00 | 4.120,00 | - 1.112,55 | N.A. | N.A. |

- |

Contributions | 2.315,00 | - | - | 2.315,00 |

Capital increase | - | - | - | - | - | - |

Transfers to 9th FED | - | - | - | - 207,00 | - | - 207,00 |

Net economic result | - | - | - | - | - | - |

Change in accounting policy | - | - | - | - | - 6.963,08 | - 6.963,08 |

Closing balance 2004 | 12.840,00 | - 6.405,00 | 6.435,00 | - 1.319,54 | - 6.963,08 | - 1.847,63 |

- |

Contributions | - | - | 2.350,00 | - | - | 2.350,00 |

Capital increase | - | - | - | - | - | - |

Transfers to 9th FED | - | - | - | - 283,89 | - | - 283,89 |

Net economic result | - | - | - | - | - 888,87 | - 888,87 |

Other movements | - | - | - | - | - | - |

Closing balance 2005 | 12.840,00 | - 4.055,00 | 8.785,00 | - 1.603,43 | - 7.851,95 | - 670,38 |

9th EDF STATEMENT IN CHANGES IN CAPITAL 2005 (Million Euro) |

Fund Capital | Uncalled Funds | Called funds capital | Other reserves | Accumulated reserves | Total Equity |

(a) | (b) | (c) | (d) | (e) | (h)=(e)+(d)+(c) |

Closing balance 2003 | 10.555,15 | - 10.555,15 | - | 2.693,15 | N.A. | N.A. |

Contributions | - | - | - | - |

Capital increase | 355,00 | - 250,00 | 105,00 | - | - | 105,00 |

Transfers from other EDF | - | - | - | 291,72 | - | 291,72 |

Net economic result | - | - | - | - | - | - |

Change in accounting policy | - | - | - | - | - 820,93 | - 820,93 |

Closing balance 2004 | 10.910,15 | - 10.805,15 | 105,00 | 2.984,87 | - 820,93 | 2.268,94 |

Contributions | - | - | - | - | - | - |

Capital increase | 627,00 | - 627,00 | - | - | - | - |

Transfers from other EDF | - | - | - | 394,54 | - | 394,54 |

Net economic result | - | - | - | - | - 1.296,67 | - 1.296,67 |

Other movements | - | - | - | - | - | - |

Closing balance 2005 | 11.537,15 | - 11.432,15 | 105,00 | 3.379,41 | - 2.117,60 | 1.366,81 |

1.10. NOTES TO THE ACCOUNTS

1. Member State (EUR 15 )Contributions

Details of contributions called up and received during the year 2005 are shown in table 1. The EIB contribution is the sum of the Special Congo Contribution (see note 10) and the120 million Euro transfer referred to in note 12.

Contributions called up and received for the year ended 31 December 2004 and 2005 for the 8th and 9th EDF |

table 1 | (million Euro) |

% | called up in 2004 | received in 2004 | outstanding at 31/12/2004 | called up in 2005 | received in 2005 | outstanding at 31/12/2005 | total called up |

Austria | 2,65 | 58,70 | 58,70 | - | 61,75 | 61,75 | - | 181,92 |

Belgium | 3,92 | 86,83 | 86,83 | - | 91,34 | 91,34 | - | 269,11 |

Denmark | 2,14 | 47,40 | 47,40 | - | 49,86 | 49,86 | - | 146,91 |

Finland | 1,48 | 32,78 | 32,78 | - | 34,48 | 34,48 | - | 101,60 |

France | 24,30 | 538,25 | 576,78 | 42,38 | 566,19 | 594,85 | 13,72 | 1.668,20 |

Germany | 23,36 | 517,42 | 517,42 | - | 544,29 | 544,29 | - | 1.603,66 |

Greece | 1,25 | 27,69 | 27,69 | - | 29,13 | 29,13 | - | 85,81 |

Ireland | 0,62 | 13,73 | 13,89 | - | 14,45 | 14,45 | - | 42,56 |

Italy | 12,54 | 277,76 | 277,76 | - | 292,18 | 292,18 | - | 860,87 |

Luxemburg | 0,29 | 6,42 | 6,42 | - | 6,76 | 6,76 | - | 19,91 |

Netherlands | 5,22 | 115,62 | 115,62 | - | 121,63 | 121,63 | - | 358,35 |

Portugal | 0,97 | 21,49 | 25,56 | - | 22,60 | 22,60 | - | 66,59 |

Spain | 5,84 | 129,36 | 129,36 | - | 136,07 | 136,07 | - | 400,92 |

Sweden | 2,73 | 60,47 | 71,25 | - | 63,61 | 63,61 | - | 187,41 |

United Kingdom | 12,69 | 281,08 | 461,28 | - | 295,68 | 295,68 | - | 871,17 |

EIB 8th EDF | 100,00 | 100,00 | - | 20,00 | 20,00 | - | 120,00 |

STABEX | 1.800,00 |

TOTAL 8th EDF | 2.315,00 | 2.548,75 | 42,38 | 2.350,00 | 2.378,66 | 13,72 | 8.785,00 |

EIB 9th EDF | 105,00 | 105,00 | - | - | - | - | 105,00 |

TOTAL 9th EDF | 105,00 | 105,00 | - | - | - | - | 105,00 |

100 | 2.420,00 | 2.653,75 | 42,38 | 2.350,00 | 2.378,66 | 13,72 | 8.890,00 |

2. Debtors

The detail of this heading is shown in table 2:

Interest for late payment of EDF contributions for the year ended 31/12/2005 |

Balance at 01/01/05 | Interest payable 2005 | Interest paid 2005 | Balance at 31/12/05 |

Austria | 0,01 | - 0,01 | - | - |

Belgium | 0,01 | 0,01 | 0,01 | 0,01 |

Denmark | - | - | - | - |

Finland | - | 0,05 | 0,05 | - |

France | 1,18 | 0,06 | 0,20 | 1,04 |

Germany | 0,10 | 0,27 | 0,37 | - |

Greece | - | - | - | - |

Ireland | 0,00 | - 0,00 | - | - |

Italy | - | - | - | - |

Luxemburg | 0,01 | 0,01 | 0,02 | - |

Netherlands | - | - | - | - |

Portugal | 0,03 | - 0,03 | - | - |

Spain | 0,06 | - | - | 0,06 |

Sweden | - | - | - | - |

United Kingdom | 1,02 | - | - | 1,02 |

TOTAL | 2,43 | 0,35 | 0,64 | 2,13 |

(2.2) Interest on late contributions STABEX

All STABEX contributions were received prior to the beginning of the 2005 financial year. The amount shown for interest due represents the outstanding balance carried over and corresponds to interest due from France.

(2.3) Interest receivable European banks and STABEX main account

This amount represents interest earned on the STABEX security accounts during the financial year 2005 but only credited to the bank account in 2006. This interest is the property of the relevant beneficiary countries.

(2.4) Interest receivable STABEX security accounts

This amount represents interest earned on the STABEX security accounts during the financial year 2005 but only credited to the bank account in 2006.

(2.5) Debit notes / Recovery Orders to be issued

In order to apply accrual accounting principles, the Authorising Officer has calculated the amount of advances to be recovered for which recovery orders have yet to be issued.

Details are shown table 2.2

table 2.2 | million Euro |

Debit notes / ROs to be issued | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL |

Total at 31/12/05 | 2,38 | 15,38 | 53,19 | 51,19 | 122,15 |

Total at 01/01/2005 | 2,58 | 14,15 | 55,82 | 27,37 | 99,92 |

increase | -0,20 | 1,24 | - 2,63 | 23,82 | 22,22 |

(2.6) Recoveries

The movements for the year on issued recovery orders are shown below in table 2.3:

table 2.3 | million Euro |

6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL |

Open recovery orders at 31/12/2004 | 5,54 | 8,00 | 3,71 | 0,93 | 18,18 |

correction of opening balance | - | - 0,03 | - 0,42 | - | - 0,44 |

Open recovery orders at 01/01/05 | 5,54 | 7,98 | 3,30 | 0,93 | 17,74 |

New recovery orders issued in 2005 | 13,49 | 13,17 | 26,44 | 8,24 | 61,34 |

Recovery orders closed in 2005 | 8,79 | 16,38 | 26,96 | 8,43 | 60,56 |

cashed | 6,19 | 8,91 | 24,98 | 8,42 | 48,50 |

waived (art 73 FR) | 1,97 | 1,20 | 0,32 | 0,00 | 3,49 |

off set | 0,63 | 6,27 | 1,66 | 0,01 | 8,57 |

Open recovery orders at 31/12/05 | 10,24 | 4,76 | 2,78 | 0,74 | 18,52 |

The closing balance for recovery orders (18,52 million Euro) represents the value of recovery orders issued but unpaid at the year end. During 2005 recovery order files closed amounted to 60,56 million Euro. Of this total, an amount of 3,49 million Euro was written off by the Authorising Officer during the year and an amount of 8,57 million Euro was recovered by the Accounting Officer by way of offsetting, in accordance with the provisions of Article 46 of the 9th EDF Financial Regulation.

3. Provision for doubtful debts

In compliance with IPSAS 19, the accounting officer has established a provision for doubtful debts on two variables:

- Age of the debt, applying a provision of 20% of the euro value for each year the debt is outstanding

- The evaluation of the non recovery risk, in collaboration with the Authorising Officer.

Potential Exchange rate losses (on Recovery Orders not issued in euro) are not taken into account for this calculation, as these are not considered to be material.

The detail of this provision is shown is table 3:

table 3 | million Euro |

Provision for doubtful debts | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL |

balance at 31/12/2005 | 3,49 | 2,69 | 0,19 | - | 6,37 |

balance at 01/01/2005 | 0,01 | 0,01 | - | - | 0,02 |

increase | 3,48 | 2,68 | 0,19 | - | 6,36 |

4. Net Pre-financing

Until 2004 financial year, payments on account and advances were treated as expenditure on projects in the annual accounts of the EDF (except for advances of study awards and to bodies such as GTZ, AGRER and AEC). Following the principles of accrual accounting, advance payments are now classified as assets. The figures for open Pre-financing have been provided by the Authorising Officer (see table 4.1) and have been revised downwards by the open recoveries concerning advances and by the calculated figures for invoices to be sent, as shown in table 4.

table 4 | million Euro |

net prefinancing | notes | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL 31/12/2005 | TOTAL 01/01/2005 |

Study awards | 1,49 | - | - | - | 1,49 | 2,41 |

AEC | 0,44 | - | - | - | 0,44 | 0,56 |

GTZ | - 0,00 | - | - | - | - 0,00 | 1,24 |

Adjustments | 0,03 | - | - | - | 0,03 | 0,03 |

Pre-financing | 4.1 | 47,67 | 307,68 | 1.063,75 | 1.023,80 | 2.442,90 | 1.998,49 |

-open recoveries | 2.3 | 10,24 | 4,76 | 2,78 | 0,74 | 18,52 | 17,74 |

-recovery orders to be issued | 2.5 | 2,38 | 15,38 | 53,19 | 51,19 | 122,15 | 99,92 |

TOTAL | 37,01 | 287,54 | 1.007,78 | 971,88 | 2.304,20 | 1.885,06 |

(4.1) Pre-financing

Many contracts provide for payments of advances before the commencement of works, deliveries of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments on account on the basis of progress reports. Advances, which normally are paid in the currency of the country or territory, where the project is executed, are kept separate in the accounts of the Authorising Officer to allow them to be cleared.

The table below summarizes outstanding advances (except for Structural adjustment programmes and direct budgetary support programme) at the end of the year. Conversion into EUR is made using the official exchange rate of December 31, 2005

table 4.1 | million Euro |

pre-financing | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL |

Total at 31/12/05 | 47,67 | 307,68 | 1.063,75 | 1.023,80 | 2.442,90 |

Total at 01/01/2005 | 51,64 | 282,93 | 1.116,43 | 547,49 | 1.998,49 |

increase | - 3,97 | 24,75 | - 52,68 | 476,31 | 444,41 |

5. Other current assets

This amount comprises all payments/receipts awaiting final allocation to the appropriate projects as shown in table 5.

table 5 | million Euro |

Other current assets | 6th EDF | 9th EDF | Total at 31/12/05 | Total at 31/12/04 |

expenditure to be finalised | 2,85 | 0,00 | 2,85 | 6,93 |

devaluation | 0,00 | 0,00 | 0,00 | -0,09 |

income to regularise | 0,00 | -0,06 | -0,06 | -0,49 |

Partial recoveries | 0,00 | 0,51 | 0,51 | 0,53 |

TOTAL | 2,85 | 0,46 | 3,31 | 6,89 |

6. Deferred charges

This heading represents the total funds available for the relevant ACP State. The amount shown in 7th and 8th EDF concerns deferred STABEX expenditure, whilst the amount shown in 9th EDF concerns the available Special Democratic republic of Congo Fund. The total amounts due to the states concerned (including accrued interest for 2005 – see note 2 and table 2 above) are shown in table 6.

table 6 | million Euro |

STABEX movement schedule for the year ended 31/12/2005 | Balance per 31/12/2004 | Balance per 01/01/2005 | Interest | Payments | Balance at 31/12/2005 |

BENIN | 0,05 | 0,05 | 0,00 | 0,05 |

BURKINA FASO | 0,75 | 0,75 | 0,02 | 0,76 |

BURUNDI | 26,29 | 26,29 | 0,56 | 0,40 | 26,45 |

CAMEROUN | 5,27 | 5,27 | 0,11 | 5,38 |

COMORES | 0,05 | 0,05 | 0,00 | 0,05 |

DOMINICA | 5,18 | 5,18 | 0,11 | 5,29 |

ETHIOPIA | 0,88 | 0,88 | 0,02 | 0,90 |

GAMBIA | 0,98 | 0,98 | 0,02 | 1,01 |

GRENADA | 0,32 | 0,32 | 0,01 | 0,33 |

GUINEA-BISSAU | 0,32 | 0,32 | 0,01 | 0,33 |

IVORY COAST | 42,01 | 42,01 | 0,90 | 42,91 |

JAMAICA | 0,57 | 0,57 | 0,01 | 0,59 |

MADAGASCAR | 13,55 | 13,55 | 0,29 | 13,84 |

MALAWI | 0,89 | 0,89 | 0,02 | 0,91 |

MAURITANIA | 17,39 | 17,39 | 0,37 | 17,76 |

PAPUA-NEW GUINEA | 0,64 | 0,64 | 0,01 | 0,66 |

RWANDA | 5,62 | 5,62 | 0,12 | 5,74 |

SENEGAL | 9,86 | 9,86 | 0,21 | 10,07 |

SIERRA LEONE | 2,99 | 2,99 | 0,06 | 3,05 |

SAINT LUCIA | 13,41 | 13,41 | 0,29 | 13,69 |

SOLOMON ISLANDS | 29,50 | 29,50 | 0,56 | 16,00 | 14,06 |

SUDAN | 196,92 | 196,92 | 3,93 | 50,00 | 150,85 |

ST VINCENT & GRENADINES | 3,87 | 3,87 | 0,08 | 3,95 |

TANZANIA | 30,27 | 30,27 | 0,65 | 30,92 |

TONGA | 0,08 | 0,08 | 0,00 | 0,09 |

UGANDA | 19,73 | 19,73 | 0,42 | 20,15 |

ZIMBABWE | 2,77 | 2,77 | 0,06 | 2,83 |

TOTAL Stabex | 430,17 | 430,17 | 8,84 | 66,40 | 372,60 |

R D CONGO | 106,83 | 106,83 | 1,07 | 89,23 | 20,58 |

TOTAL Stabex & Congo | 537,00 | 537,00 | 11,82 | 155,63 | 393,19 |

The total of the deferred STABEX expenditure represents the total of STABEX funds available and which will be transferred to the relevant beneficiary ACP State at a future date. This total amount concerns the 8th EDF, with the exception of 8,63 million Euro allocated to Burundi and 53,83 million Euro allocated to Sudan which fall under the 7th EDF.

In addition to the funds shown above, there are other STABEX funds held by beneficiary ACP States. Once the Commission and the beneficiary (ACP) State have reached 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 4 Agreement (as revised), the funds are transferred into an interest bearing double signature account (Commission official and Beneficiary State) opened in the name of the ACP State. The Commission official retains the power of signature over the account in order to ensure that the funds are disbursed as intended. The funds are the property of the ACP State and as such are not recorded as assets in the EDF Annual Accounts. Details on these accounts are however provided in the annual EDF Financial Management Report.

7. Liaison accounts

For reasons of efficiency, there is a single treasury for all the EDFs being implemented; this leads to operations between the various EDFs, which are balanced out in the liaison accounts between the various balance sheets.

Balances on the liaison accounts at 31/12/2005 are detailed in table 7.

table 7 | million Euro |

liaison accounts | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Total at 31/12/05 | Total at 31/12/04 |

to/from 6th EDF | - | 2.279,31 | - 2.065,45 | - 290,05 | - 76,20 | - 116,11 |

to/from 7th EDF | - 2.279,31 | - | - | 1.582,59 | - 696,71 | - 1.018,11 |

to/from 8th EDF | 2.065,45 | - | - 928,96 | 1.136,49 | 2.385,99 |

to/from 9th EDF | 290,05 | - 1.582,59 | 928,96 | - | - 363,58 | - 1.251,77 |

76,20 | 696,71 | - 1.136,49 | 363,58 | - | - |

8. Security cash accounts

This heading shows the cash balance remaining on the security STABEX accounts opened in the name of the various beneficiary States and the Special D R Congo Fund account. See also note 6.

9. Cash and cash equivalents

In accordance with Article 129 of the 9th EDF Financial Regulation the treasury is presented in the balance sheet of the 9th EDF. Table 8 shows the breakdown of total cash at bank:

table 8 | million Euro |

Cash and cash equivalents | NOTES | Balance at 31/12/05 | Balance at 01/01/05 |

Treasury accounts | 9.1 | 1,53 | 82,33 |

ACP Paying Agents | 9.2 | 47,86 | 42,73 |

EUR Paying Agents | 9.3 | 207,99 | 17,04 |

Stabex current account | 9.4 | 12,17 | 19,59 |

Funds en route | 9.5 | 1,00 | 100,20 |

TOTAL | 270,55 | 261,89 |

(9.1) Treasury accounts

Accounts held with the central banks of the Member States into which EDF contributions are paid. The Accounting Officer makes transfers from these accounts to the EUR paying agents.

(9.2) ACP paying agents

Amounts held in bank accounts held within ACP States used for making payments in local currency within the beneficiary state. The accounts are generally kept in euros, but may also be kept in a currency of a Community Member State.

(9.3) EUR paying agents

These accounts are held with commercial banks established in the Member States (EUR 15) and with the EIB. The accounts are kept in euros and are used for payments to beneficiaries within the Union and elsewhere. Payments are generally made in euros, but may also be made in other currencies. These funds are also used to replenish ACP paying agent accounts and the liaison account with General Budget.

(9.4) STABEX current account

This amount represents the cash balance remaining on the STABEX main account. 12.165.852 euro will be made available for Togo by way of transfer to a security account, once instructions have been received from the Authorising Officer.

The interest earned in this account is periodically transferred to the EDF main account to be used in accordance with Articles 1.3 and 9 of the Internal Agreement.

(9.5) Funds en route

Some replenishment sent before the year end were only registered by the beneficiary bank in 2006.

10. Subscribed Funds - Fund Capital (a)

This represents the total amount receivable from the Member States for the relevant EDF fund as laid down in each of the internal agreement between the Member States and the beneficiary African, Caribbean and Pacific (ACP) States and the Overseas Countries and Territories (OCT).

The initial allocation for the (current) 9th EDF, which originally totalled 10.555,15 million Euro, has since been increased by an amount of 105 million Euros in 2004, which was released by the EIB in accordance with the provisions of Council Decision 2003/583/EC. This additional allocation is in favour of actions to be undertaken in the Democratic Republic of the Congo.

Article 2(2) of the Internal Agreement for the 9th EDF set a 1.000 million Euro reserve. 250 million Euros were released in 2004 following the adoption of Council Decision 2004/289/CE in order to establish a water facility. A further 627 million Euros were released during 2005 following Decisions n° 6/2005[3] and 7/2005[4] of the ACP-EC Council of Ministers of 22/11/2005.

11. Uncalled funds (b)

Initial allocation not yet receivable from Member States (EU 15).

12. Called funds capital (c)

This represents the amount of the initial allocations which has been called up for transfer to the treasury accounts by the Member States in accordance with the procedure in Article 8 of the Financial Regulation, whereby each year the Commission must establish and communicate to the Council a statement of the payments to be made in the following year and a schedule of calls for contributions. The Commission must justify the amount requested on the basis of its capacity to deliver the proposed level of resources effectively.

Contributions are still being called up from the 8th EDF, with the sole exception of the 105 million Euros in favour of the Democratic Republic of the Congo called in from the 9th Fund.

In an extraordinary meeting of the ACP Working Group at Council on 26 October 2004, Member Sates unanimously decided that the EIB should transfer an amount of 100 million Euros from its EDF treasury to the Commission’s EDF treasury, with a consequent reduction of the overall amount of the contributions from Member States. Following the same principle, in 2005 Member States decided on a second transfer of 20 million Euro from the EIB treasury to the Commission.

Details of amounts called up and received during the year are shown in table 1 (see note 1).

13. Cumulative reserves (d)

Up to the 2004 financial year the economic outturn of each fund was not included in the balance sheet. This category regroups the effects of the change in accounting policy.

The cumulative reserves for 2004 include the cumulative expenditure and interest (see table 9.1) until 31/12/2004, as shown in table 9.

table 9 | million Euro |

cumulative reserves | notes | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Balance at 31/12/2004 |

Cumulative interest at 31/12/2004 | 13 | 37,78 | 400,74 | 72,04 | 9,02 | 519,58 |

- cumulative payments at 31/12/2003 | 7.282,16 | 9.605,10 | 6.339,20 | 277,66 | 23.504,12 |

- payments 2004 | 30,00 | 244,47 | 1.191,91 | 947,56 | 2.413,93 |

accrual adjustments | 18 | 31,39 | 214,86 | 495,98 | 395,54 | 1.137,77 |

-provisions | 3 | 0,01 | 0,01 | - | - | 0,02 |

- financial costs | 21 | 0,09 | - | - | 0,27 | 0,37 |

TOTAL | - 7.243,09 | - 9.233,99 | - 6.963,08 | - 820,93 | - 24.261,09 |

table 9.1 | million Euro |

cumulative interest up to 31/12/2004 | notes | 6th EDF | 7th EDF | 8th EDF | 9th EDF | total at 31/12/2004 |

Capitalised interest | 13.1 | 13,70 | 49,00 | 35,45 | 1,80 | 99,95 |

Stabex interest | 13.1 | 24,08 | 319,89 | - | - | 343,97 |

EIB interest | 13.1 | - | 3,41 | - | 0,12 | 3,53 |

European banks interest | 13.1 | - | 22,47 | - | 4,45 | 26,92 |

Interest late contributions | 13.2 | - | 5,96 | 1,86 | 0,73 | 8,56 |

Interest income Stabex security accounts | 13.3 | - | - | 34,73 | - | 34,73 |

Interest income special Congo contribution | 13.3 | - | - | - | 1,92 | 1,92 |

TOTAL | 37,78 | 400,74 | 72,04 | 9,02 | 519,58 |

(13.1) Capitalised interest, STABEX interest, EIB interest, European banks interest

The interest earned on accounts with European paying agents (including the main STABEX account) can be used to finance projects in accordance with Articles 1.3 and 9 of the Internal Agreement.

This heading represents the amount of interest on deposited funds which can be committed for the financing of such projects. This interest results in an effective increase in the Funds’ overall appropriations.

(13.2) Interest on late payment

This is interest due on the late payment of contributions by Member States or the late reimbursement of recovery orders. Such funds can be used for financing projects. This interest results in an effective increase in the Funds’ overall appropriations.

(13.3) Interest income, STABEX security accounts and the Special Democratic Republic of the Congo account

This represents the accumulated income generated by the STABEX security accounts and the Special D.R. Congo account. Whilst such income appears to increase the total of the Fund it should be borne in mind that any income generated by these accounts is earmarked for the specific purpose and beneficiary state.

14. Other reserves (e)

This heading includes the replenishment of STABEX resources under 6th EDF, and the resources transferred from other EDFs.

The replenishment of STABEX resources (185,10 million Euros) comprises direct contributions by the ACP States (replenishment of resources) and the amounts by which transfer entitlements have been reduced at the request of the ACP States. The obligation to replenish STABEX resources was abolished by the ACP-EDF Council Decision of19 November 1991.

Since the entry into force of the Cotonou Agreement, all the unspent funds in previous EDFs are transferred to the 9th EDF after decommitment. The resources transferred from other EDFs increase the appropriation of the receiving fund and reduce that of the Fund of origin. The total balance is shown in table 10 below.

table 10 | million Euro |

inter-EDF transfers | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Consolidate | Total at 31/12/05 |

to/from 4th EDF | 144,32 | - | - | - | - | 144,32 |

to/from 5th EDF | 177,63 | 526,78 | - | - | - | 704,41 |

to/from 6th EDF | - | 181,76 | 94,00 | 414,30 | 690,05 | 690,05 |

to/from 7th EDF | - 181,76 | - | 532,82 | 734,86 | 1.085,92 | 1.085,92 |

to/from 8th EDF | - 94,00 | - 532,82 | - | 2.230,25 | 1.603,43 | 1.603,43 |

to/from 9th EDF | - 414,30 | - 734,86 | - 2.230,25 | - | - 3.379,41 | - 3.379,41 |

TOTAL | - 368,10 | - 559,14 | - 1.603,43 | 3.379,41 | - | 848,74 |

15. Creditors

The total creditor balance is detailed in table 11:

table 11 | million Euro |

Creditors | notes | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Total at 31/12/2005 | Total at 01/01/2005 |

Contributions received in advance | 15.1 | - | - | 1,40 | 1,40 | 180,36 |

liaison a/c with General Budget | 15.2 | - | - | - | 119,23 | 119,23 | - |

Provision for bank charges | 15.3 | - | - | - | 0,02 | 0,02 | 0,05 |

Outstanding Stabex payments | 15.4 | - | 62,46 | 310,14 | - | 372,60 | 430,17 |

Outstanding Special Congo funds | 15.5 | - | - | - | 20,58 | 20,58 | 106,83 |

Accruals |

(15.1) Contributions received in advance

Certain contributions were paid in advance by Member States, as shown in table 11.1:

table 11.1 | Million Euro |

Balance at 31/12/05 | Balance at 01/01/2005 |

Ireland | 1,40 | 0,16 |

United Kingdom | - | 180,20 |

TOTAL | 1,40 | 180,36 |

(15.2) Liaison account with General Budget

As from the beginning of financial year 2005, payments to beneficiaries within the Union in euros or in other currencies are executed through SWIFT by the General Budget of the European Commission. For this purpose, a current account has been opened.

(15.3) Provisions for bank charges

This amount is made up of transactions relating to bank charges for the year ended31 December 2005, which were debited to the relevant bank accounts after the year end.

(15.4) Outstanding STABEX payments

This balance represents the amounts due to beneficiary ACP States in respect of the STABEX aid instrument. The total represents the balances held on the STABEX security accounts.

(15.5) Outstanding Special D R Congo Funds

This balance represents the amounts available for Congo in accordance with the provisions of Council Decision 2003/583/EC.

(15.6) Non finalized payments

Payments authorised before 31 December 2005 but executed by the bank in 2006. The amounts registered in the accounts of the Authorising Officer are shown in table 11.2.

table 11.2 | million Euro |

non finalised payments | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL |

Total at 31/12/05 | 1,17 | 2,67 | 13,42 | 5,54 | 22,81 |

Total at 01/01/2005 | 0,13 | 0,98 | 10,21 | 47,36 | 58,68 |

increase | 1,05 | 1,69 | 3,21 | - 41,82 | - 35,87 |

(15.7) Eligibility to be confirmed

Invoices which arrived before the end of the financial year 2005 but which had still not been analysed at 31.12.2005. The amounts registered in the accounts of the Authorising Officer are shown in table 11.3.

table 11.3 | million Euro |

eligibility to be confirmed | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL |

Total at 31/12/05 | 1,14 | 11,62 | 50,14 | 53,43 | 116,32 |

Total at 01/01/2005 | 0,86 | 106,34 | 52,46 | 19,32 | 178,98 |

increase | 0,27 | - 94,72 | - 2,32 | 34,11 | - 62,66 |

(15.8) Accrued Expenditure

These figures reflect expenditure which has been incurred but has not yet been invoiced (e.g. work in progress on capital projects). The amounts calculated by the Authorising Officer are shown in table 13.4.

table 11.4 | million Euro |

Accrued expenditure | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL |

Total at 31/12/05 | 36,45 | 133,92 | 547,61 | 507,99 | 1.225,97 |

Total at 01/01/2005 | 19,35 | - 39,25 | 557,78 | 85,54 | 623,42 |

increase | 17,10 | 173,17 | - 10,17 | 422,45 | 602,55 |

16. Administrative expenditure

This heading includes administrative and financial expenditure financed by bank interest. Under the 8th and 9th EDF it includes expenditure related to the devolution process in application of provisions of articles 1.3, 4 and 9 of the Internal Agreement. The breakdown of this expenditure is shown in table 12.

Accrual adjustments | notes | 6th | 7th | 8th | 9th | Cumulative total up to 01/01/2005 |

- prefinancing | 4 | 51,64 | 282,93 | 1.116,43 | 547,49 | 1.998,49 |

- financial costs | 21 | - 0,09 | - | - | - 0,27 | - 0,37 |

- Non finalised payments | 15.1 | 0,13 | 0,98 | 10,21 | 47,36 | 58,68 |

- Eligibility to be confirmed | 15.2 | 0,86 | 106,34 | 52,46 | 19,32 | 178,98 |

- Accrued expenditure | 15.3 | 19,35 | - 39,25 | 557,78 | 85,54 | 623,42 |

Total accruals | - 31,39 | - 214,86 | - 495,98 | - 395,54 | - 1.137,77 |

table 13.2 | million Euro |

Accrual adjustments | notes | 6th | 7th | 8th | 9th | Cumulative total up to 31/12/2005 | increase 2005 |

- prefinancing | 4 | 47,67 | 307,68 | 1.063,75 | 1.023,80 | 2.442,90 | 444,41 |

- financial costs | 21 | - 0,18 | - | - | - 0,37 | - 0,55 | - 0,19 |

- Non finalised payments | 15.1 | 1,17 | 2,67 | 13,42 | 5,54 | 22,81 | - 35,87 |

- Eligibility to be confirmed | 15.2 | 1,14 | 11,62 | 50,14 | 53,43 | 116,32 | - 62,66 |

- Accrued expenditure | 15.3 | 36,45 | 133,92 | 547,61 | 507,99 | 1.225,97 | 602,55 |

Total accruals | - 9,08 | - 159,47 | - 452,58 | - 457,21 | - 1.078,35 | 59,42 |

19. Total expenditure on an accrual basis

Project expenditure by Fund for 2005 has been restated in accordance with the relevant international accounting standards. The expenditure for each policy area will be presented on an accrual basis as and from the 2008 financial year, once the accounts have been migrated to the new IT (ABAC) system.

20. Financial income

Interest income is presented in the balance sheet of the 9th EDF. The sole is STABEX security interest which is presented in 8th EDF due to absence of this aid instrument in the 9th EDF.

Financial income for the year is shown in table 14 below:

table 14 | million Euro |

interest earned during 2005 | notes | 8th EDF | 9th EDF | total at 31/12/2005 |

EIB interest | 13.1 | - | 0,23 | 0,23 |

European banks interest | 13.1 | 13,70 | 13,70 |

interest on recovery orders | 13.2 | - | 0,12 | 0,12 |

Interest on late contributions | 13.2 | 0,35 | 0,35 |

Interest income on the Stabex security accounts | 13.3 | 8,84 | - | 8,84 |

Interest income on the special D R Congo contribution | 13.3 | - | 1,07 | 1,07 |

Total Operating | - | 0,35 | 0,35 |

Total Financial | 8,84 | 15,12 | 23,95 |

TOTAL INTEREST | 8,84 | 15,46 | 24,30 |

21. Financial costs

Up to the 2004 financial year this category of expenditure was presented as a part of administrative costs. In the interests of transparency these costs are now presented under a separate heading. See details in table 12.

1.11. OFF BALANCE ITEMS

Guarantees are held to secure pre-financing and released when the final claim under a project is paid . In accordance with the “Prudence” concept and in compliance with the provisions of IPSAS 19, Contingent Assets are not accounted for in the financial statements. They are disclosed here by way of note in the interests of transparency.

The total amount registered by the Authorising Officer under this heading is shown in tables 15 and 16.

Table 15 | Million Euro |

Guarantees | on Pre-financing | on guarantee withholding | on performance | TOTAL 01/01/2005 |

6th EDF | 2,52 | 0,05 | 0,40 | 2,97 |

7th EDF | 61,62 | 15,45 | 25,80 | 102,87 |

8th EDF | 738,35 | 39,06 | 102,46 | 879,88 |

9th EDF | 21,38 | 0,71 | 7,57 | 29,66 |

TOTAL | 823,87 | 55,27 | 136,24 | 1.015,38 |

Table 16 | Million Euro |

Guarantees | on Pre-financing | on guarantee withholding | on performance | TOTAL 31/12/2005 |

6th EDF | 4,63 | 0,05 | 1,34 | 6,01 |

7th EDF | 66,34 | 24,47 | 39,49 | 130,30 |

8th EDF | 789,17 | 49,36 | 100,36 | 938,89 |

9th EDF | 117,00 | 31,19 | 31,74 | 179,93 |

TOTAL | 977,14 | 105,07 | 172,93 | 1.255,13 |

2. REPORT ON FINANCIAL IMPLEMENTATION

Introductory note

Previous EDFs

Decision No 1/2000 of the ACP-EC Council of 27 July 2000 regarding transitional measures provides for some of the unallocated resources from previous EDFs to be used for programmes consistent with the relevant provisions of the Cotonou Agreement and put into early application under transitional measures.

Commission Decision C(2001)717, which fixes the allocations for the indicative programmes of the ACP countries under the ACP-EC Partnership Agreement, stipulates that the unallocated resources from previous EDFs up to a maximum of EUR 1.2 billion are to be used for implementation in accordance with the rules and procedures of the relevant EDFs pending the entry into force of the Financial Protocol to the 9th EDF.

Commission Decision C(2001)1578 fixed the allocations for regional programmes and intra-ACP cooperation under the Financial Protocol to the ACP-EC Partnership Agreement.

Commission Decision C(2002)2567 increased the envelope intended for intra-ACP cooperation by EUR 60 million, from the general reserves of the 6th and 7th EDFs, and also provided for the use of these additional funds pending the entry into force of the Financial Protocol to the 9th EDF, in accordance with the rules and procedures applicable to the original EDFs.

Lastly, Decision No 3/2002 of the ACP-EC Council of Ministers of 23 December 2002 took an amount of EUR 25 million from the unallocated resources of the 8th EDF (general reserve) and allocated it to regional cooperation under the ACP-EC Partnership Agreement.

As last year, to ensure transparency in the presentation of the accounts the various tables below set out separately for each of the 6th, 7th and 8th EDFs the part used for Lomé Convention programming and the part used for programming under the Cotonou Agreement. Entry in the accounts and the presentation of accounts in connection with the Cotonou Agreement is based on Article 3(2) of Annex IV to the ACP-EC Partnership Agreement, as regards countries. That Article gives the ACP countries an allocation A to cover macroeconomic support and support for programmes and projects and an allocation B to cover unforeseen needs such as emergency assistance, debt relief initiatives and support to offset the adverse effects of instability in export earnings.[5] For the regions, the accounts are set out according to the regional programming as referred to in Chapter 2 of the ACP-EC Partnership Agreement (i.e. regional indicative programmes and intra-ACP cooperation).

9th 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 EU Council Decision of 27 November 2001 (2001/822/EC) on the association of the overseas countries and territories (OCT) with the European Community entered into force on 2 December 2001.

The Cotonou Agreement was concluded for a twenty-year period with a five-year review clause and a Financial Protocol for each five-year period. The EU Council Decision on the association of the OCT with the European Community is applicable for ten years.

The first five years are, therefore, financed under the 9th EDF . The 9th EDF was set at EUR 13 800 million, including EUR 13 500 million allocated to the ACP States in accordance with the first Financial Protocol included in the Cotonou Agreement, EUR 175 million allocated to the OCT (provided for by the EU Council Decision on the association of the OCT) and EUR 125 million reserved for the European Commission to cover expenses in connection with implementing the 9th EDF resources (provided for in the internal agreement for the 9th EDF). The total amount of the first Financial Protocol, supplemented by the balances transferred from the previous EDFs, covers the period 2000-2007 (Annex I(5) to the Cotonou Agreement).

Of the total budget of EUR 13 500 million for the ACP States, EUR 1 000 million was released in 2004 and 2005 after examination by the EU Council, on the basis of a proposal from the European Commission:

- EUR 250 million was released in accordance with Joint ACP-EU Council Decision 01/2004 of 7 May 2004 and allocated to the Intra-ACP Fund (natural resources) to finance the Water Facility operation.

- EUR 18 million was released in accordance with Council Decision 10752/05 of 19 July 2005 and allocated to the envelope for long-term development support to cover the financing of the National Indicative Programme of Timor-Leste for the period 2006-2007.

- EUR 482 million was released in accordance with ACP-EC Council of Ministers Decision No 6/2005 of 22 November 2005 and allocated to the envelope for long-term development support (EUR 352 million), the envelope for regional cooperation and integration (EUR 48 million) and the Investment Facility (EUR 82 million), in order to contribute to financing of the EU Energy Initiative (EUR 220 million), the International Commodity Risk Management Financing Facility (EUR 25 million), adaptation to the new EU feed and food sanitary and phytosanitary rules (EUR 30 million), strengthening the African Union (EUR 50 million), the "Education for All" Fast Track Initiative (EUR 63 million), tackling HIV/AIDS, tuberculosis and malaria (EUR 62 million), and the operating costs of the CDE/CTA (EUR 32 million).

- EUR 250 million was released in accordance with ACP-EC Council of Ministers Decision No 7/2005 of 22 November 2005 and allocated to the envelope for long-term development support (EUR 185 million), the envelope for regional cooperation and integration (EUR 24 million) and the Investment Facility (EUR 41 million), also to finance the Water Facility operation.

The breakdown of 9th EDF allocations for ACP States, including the "conditional billion" and allocations managed directly by the European Investment Bank (EIB), is as follows:

‘EUR | 9th EDF allocation | Reduction / conditional billion | Unopened allocations (EIB-managed) | Reallocations between envelopes and the conditional billion | Open allocations OLAS (EC-managed) |

Long-term development budget | 10.000.000.000 | (186.850.000) (interest rate subsidies) | -690.000.000 | 9.123.150.000 |

Regional budget | 1.300.000.000 | 731.000.000 | 2.031.000.000 |

Investment Facility | 2.200.000.000 | (122.000.000)[6] | (2.037.000.000) | -41.000.000 |

Total | 13.500.000.000 | (122.000.000) | (2.222.850.000) | 0 | 11.154.150.000 |

The long-term development budget for ACP States has two components:

The A allocation for macroeconomic support, sectoral policies, and programmes and projects supporting Community aid: this corresponds to the allocation for the NIPs and structural adjustment in previous EDFs.

The B allocation , intended to cover unforeseen needs such as emergency aid, contributions to debt reduction initiatives and support to offset adverse fluctuations in export earnings, generally corresponds to the Stabex, Sysmin and emergency aid allocations in previous EDFs.

The breakdown of 9th EDF allocations for the OCT, including those managed directly by the European Investment Bank (EIB), is as follows:

‘EUR | 9th EDF allocation | Unopened allocations (EIB-managed) | Open allocations (OLAS) |

Long-term development budget | 127.100.000 | 127.100.000 |

C reserve | 17.900.000 | (1.000.000) (interest rate subsidies) | 16.900.000 |

Regional budget | 8.000.000 | 8.000.000 |

Budget for studies and technical assistance | 2.000.000 | 2.000.000 |

Investment Facility | 20.000.000 | (20.000.000) | 0 |

TOTALS | 175.000.000 | (21.000.000) | 154.000.000 |

The unallocated C reserve for OCTs is maintained to finance humanitarian aid, emergencies, refugee assistance and fluctuations in export earnings, and corresponds to the B allocation for the ACP countries.

Also, under Commission decision C(2003)1904, any balances remaining from previous EDFs on the date of entry into force of the Cotonou Agreement and any amounts decommitted at a later date from ongoing projects under those Funds, were transferred to the 9th EDF . Any resource thus transferred to the 9th EDF after previously having been allocated to the indicative programme of an ACP State or region has been allocated to that State or region. On the other hand, the unallocated resources have been transferred to reserves which will be subject to new programming under the 9th EDF.

All figures presented in the Report on Financial Implementation are on a cash basis.

The tables annexed giving the amounts decided, contracted and paid refer to net data. Only Table 2.7. refers separately to amounts committed and decommitted and amounts paid and recovered.

Owing to the technical limitations of the current accounting system, partial recoveries are recorded by the program as being fully recovered. An amount of EUR 0.46 million (EUR 0.09 million for 2005) is in fact shown as recovered in the income and expenditure accounts. The amount actually recovered is indicated in the financial statements in part one of this document. This discrepancy will no longer appear as from the 2007 financial year when the new ABAC accounting system comes on stream.

2.1. APPROPRIATIONS AT 31.12.2005

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2.2. CONSOLIDATED ACCOUNTS

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2.3. SITUATION BY COUNTRY AND BY INSTRUMENT

2.3.1. 6th EDF

Notes to the management accounts:

22. In tables 3.1.1 to 3.1.8, the figure “0.0” indicates that the corresponding amount is between EUR –4.999 and EUR 4.999.

Where no figure is given, the amount is equal to zero.

Countries with a nil balance in all columns are not listed in the tables.

23. In all tables the heading “All countries ACP” refers to projects which cover a number of countries but are not financed by regional cooperation.

24. In all tables the heading “Financial and administrative expenses” represents projects financed by EDF interest which have been transferred to a financial instrument (grants, Structural Adjustment Facility) with the exception of one amount of EUR 1 million financed from the “grants” appropriation and used for posting bank charges and exchange rate differences.

25. In the first column of tables 3.1.1 and 3.1.2, the allocation for “Regional co-operation” (EUR 871.64 million) corresponds to the Commission’s regional co-operation target for ACP states only (EUR 912.23 million) minus the amount transferred during the years 2000, 2001 and 2002 to the general reserve according the transitional measures (i.e. EUR 1 million, EUR 1.36 million and EUR 0.16 million) and EUR 28.9 million transferred to 9th EDF following the entry in force of Cotonou in 2003, EUR 6.9 million in 2004 and EUR 2,18 million in 2005.

26. All the amounts of appropriations are the same of those of decisions since the amounts not committed have been transferred to 9th EDF following the entry in force of Cotonou (decision of the commission of 16 April 2003).

2.3.2. 7th EDF

Notes to the management accounts:

- In tables 3.2.1 to 3.2.8, the figure "0.0" indicates that the corresponding amount is between EUR –4.999 and EUR 4.999.Where no figure is given, the amount is equal to zero.Countries with a nil balance in all columns are not listed in the tables.

- In all tables the heading "All countries ACP" refers to projects which cover a number of countries but are not financed by regional cooperation.

- In all tables the heading "Financial and administrative expenses" represents projects financed by EDF interest which have been transferred to a financial instrument (grants, Structural Adjustment Facility).

- In the first column of tables 3.2.1 and 3.2.2, the allocation for "Regional Co-operation" (EUR 1.128,16 million) is composed as follows:

Commission's regional co-operation target (ACP states only) 1,125.00 Target overrun 67.90 Transfers from unallocated resources in order to finance the programme of assistance to ACP countries for integration within the WTO 10.00 Amount transferred during the year 2000 to the general reserve according the transitional measures (8.50) Amount transferred during the year 2001 to the general reserve according the transitional measures (2.20) Amount transferred during the year 2002 to the general reserve according the transitional measures (0.70) Amount transferred during the year 2003 to the 9th EDF following the entry in force of Cotonou (49.10) Amount transferred during the year 2004 to the 9th EDF following the entry in force of Cotonou (5.92)

Amount transferred during the year 2005 to the 9th EDF following the entry in force of Cotonou (8.26)

Total as at 31.12.2005 1,128.16

(a) All the amounts of appropriations are the same of those of decisions since the amounts not committed have been transferred to 9th EDF following the entry in force of Cotonou (decision of the commission of 16 April 2003)

2.3.3. 8th EDF

Notes to the management accounts:

27. In tables 3.3.1 to 3.3.8, the figure "0.0" indicates that the corresponding amount is between EUR –4.999 and EUR 4.999.Where no figure is given, the amount is equal to zero.Countries with a nil balance in all columns are not listed in the tables.

28. In all tables the heading "All countries ACP" refers to projects which cover a number of countries but are not financed by regional co-operation.

29. In all tables the heading "Financial and administrative expenses" represents projects financed by EDF interest which have been transferred to a financial instrument (grants, Structural Adjustment Facility)

30. In the third column of tables 1 and 2, the allocation for "Regional Cooperation" (EUR 1,418.94 million) is composed as follows:

Commission's regional co-operation target (ACP states only) 1,300.00

Council decision 3/2000 in order to ensure the continuity of several activities waiting the entry in force of 9th EDF 306.00

Council decision 10/2001 dated 20/12/2001 on the use of unallocated Resources from the 8th EDF 180.70

Amount transferred during the year 2000 to the general reserve according the transitional measures (68.00)

Council decision 3/2002 dated 23/12/2002 on the use of unallocated Resources from the 8th EDF 54.20

Amount transferred during the year 2003 to the 9th EDF following the entry in force of Cotonou (317.33)

Amount transferred during the year 2004 to the 9th EDF following the entry in force of Cotonou (5.01)

Amount transferred during the year 2005 to the 9th EDF following the entry in force of Cotonou (31.62)

Total as at 31.12.2005 1.418,94

31. All the amounts of appropriations are the same of those of decisions since the amounts not committed have been transferred to 9th EDF following the entry in force of Cotonou (decision of the Commission of 16 April 2003).

32. EUR 4.36 million of payments have been finalised in OLAS in 2005 on behalf of a reclassification of certain transactions on the Stabex instrument. In the financial statements, these amounts have been registered at the corresponding value date (EUR 4.30 million in 2002 et EUR 0.06 in 2003).

2.3.4. 9th EDF

Notes to the management accounts:

(a) In tables 3.4.1 to 3.4.8, the figure "0.0" indicates that the corresponding amount is between EUR –4.999 and EUR 4.999.

Where no figure is given, the amount is equal to zero.

Countries with a nil balance in all columns are not listed in the tables.

(b) In all tables the presentation has been made taking in account the financial resources (envelope A, envelope B and implementation costs) used and the nature of the project (macroeconomic support, sectoral policies, emergency assistance etc.)

2.3.5. All EDF

The relative tables are attached in appendix.

2.4. OTHER MANAGEMENT INFORMATION

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TABLE 4.1.2

Breakdown of sleeping commitments (TRO): Projects with RALs of over €1 million

33. Stabex projects (€ million)

8th EDF | COUNTRY | PROJECTS | AMOUNT UNSPENT |

Burundi | STABEX 99 COFFEE -RAW OR ROASTED | 8.7 |

Madagascar | STABEX 99 COFFEE -RAW OR ROASTED | 11.2 |

Mauritania | Stabex 98 - Squid, octopus and cuttlefish | 14.8 |

Rwanda | STABEX 99 COFFEE -RAW OR ROASTED | 3.5 |

Rwanda | STABEX 99 RAW HIDES AND SKINS | 1.1 |

Senegal | Art. 195(a) reduction - oil | 2.5 |

Sierra Leone | STABEX 99 COFFEE -RAW OR ROASTED | 2.0 |

Sudan | Stabex 98 - cotton | 4.8 |

Sudan | Stabex 99 - cotton | 44.9 |

Tanzania | Stabex 99 coffee - raw or roasted | 26.2 |

Tanzania | Art. 195(a) reduction – green coffee | 1.0 |

Togo | Stabex 99 oil cakes | 1.4 |

Total | 122.1 |

34. Slow starters (€ million)

These are primarily projects for which contracts have not yet been awarded. This may be because the tender procedure had to be cancelled to comply with the rules of sound financial management (non-compliant bids, procedural failures by the beneficiary administration) or the start has been delayed (e.g. amendments had to be made to the financing agreement). In the case of budgetary support/structural adjustment projects, audits on previous instalments and/or those needed for payment of instalments have not been completed yet.

Country Projects Amount unspent

7th EDF | Ethiopia | Church conservation in Lalibela | 4.0 |

8th EDF | Congo Brazza | Supporting the rule of law | 14.3 |

Ethiopia | Church conservation in Lalibela | 5.1 |

Zambia | Democracy and good governance | 1.1 |

Tanzania | Water supply programme | 26.9 |

Mauritania | Renovation of ore port | 45.0 |

All countries | Multi-country training project | 3.0 |

9th EDF | Guinea | Rehabilitation for refugees | 1.2 |

Suriname | Rehabilitation | 29.8 |

Total | 130.4 |

35. Ongoing EIB projects which did not entail payments during the reference period or for which the contract has not yet been signed (€ million)

Country Projects Amount unspent

6th EDF | Mozambique | Private sector support | 3.1 |

7th EDF | Cameroon | Bananas | 4.0 |

Jamaica | Water facilities | 15.0 |

8th EDF | Belize | Citrus sector | 2.2 |

Botswana | Water supply | 2.1 |

Dominican Rep. | Financial sector | 4.5 |

Guyana | Power project | 20.0 |

Malawi | Blantyre hotels | 2.0 |

Malawi | Tea sector facility | 10.0 |

Mauritius | Airport sector | 10.5 |

Mozambique | Motraco ii | 1.9 |

Namibia | Nampower | 1.3 |

Swaziland | Seb iii Maguga | 7.0 |

Swaziland | Lower Usuthu | 5.7 |

Swaziland | Motraco | 1.8 |

St Lucia | Bank of St Lucia | 3.0 |

Trinidad | Caribbean microfinance | 4.0 |

Total | 98.1 |

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Table 4.2.3

Italian cofinancing

In 1985 the European Commission signed an agreement with the Italian Government to cofinance development projects that would be managed by the Commission.

The agreement was repeatedly extended to 31 December 2004 by exchanges of letters between the Italian Government and the Member of the Commission responsible for Development.

The Commission then took a decision to implement the framework cofinancing agreement under written procedure E/1588/2004. The purpose of this decision was to adopt the regulatory budgetary framework for commitments made under the Agreement. With this in mind, the Commission decision states that the Commission will implement the cofinancing arrangements in accordance with the rules laid down in the EDF Financial Regulation and that the same EDF authorising officers by delegation or subdelegation are empowered by this decision to manage Italy’s contribution. The authorising officer by delegation is also empowered to determine the appropriate final deadline for implementation in accordance with the applicable rules.

The treasury movements of Italian funds for projects managed by the Commission in ACP countries in 2005 are as follows (in EUR):

Project No | Country | Project | Balance | Contribution | Payments | Balance |

31/12/2004 | 31/12/2005 |

ITA COF | 1 | BURUNDI | REG. - Ruzizi II | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 2 | CAPE VERDE | Airport | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 3 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 4 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 5 | TOGO | CIMAO | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 6 | Guinea-Bissau | M'Pack road | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 7 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 8 | ZAIRE | T.A. Ofida | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 9 | ZAMBIA | Sysmin II | 438.254,02 | 0,00 | 0,00 | 438.254,02 |

ITA COF | 10 | TANZANIA | Musoma road | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 11 | ZAIRE | Parco Virunga | 155.561,80 | 0,00 | 0,00 | 155.561,80 |

ITA COF | 12 | Guinea-Bissau | Farim bridge | 3.034,20 | 0,00 | 0,00 | 3.034,20 |

ITA COF | 13 | SUDAN | Sugar | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 14 | SUDAN | Steel supply | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 15 | ZAIRE | T.A. Kivu | 202.332,84 | 0,00 | 0,00 | 202.332,84 |

ITA COF | 16 | ZAIRE | Drinking water | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 17 | TANZANIA | Railway | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 18 | DOMINICA | Dryer | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 19 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 20 | BURKINA FASO | DIAPER II | 35.326,10 | 0,00 | 0,00 | 35.326,10 |

ITA COF | 21 | MAURITIUS | Footwear | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 22 | BOTSWANA | K. airport | 160.586,01 | 0,00 | 0,00 | 160.586,01 |

ITA COF | 23 | SOMALIA | Somalia - beef | 1.694.318,41 | 0,00 | 0,00 | 1.694.318,41 |

ITA COF | 24 | Guinea-Bissau | Oil import | 194.860,96 | 0,00 | 0,00 | 194.860,96 |

ITA COF | 25 | MALI | Nioro | 169.812,57 | 0,00 | 0,00 | 169.812,57 |

ITA COF | 26 | ANGOLA | Boavida hosp. | 161.422,54 | 0,00 | 0,00 | 161.422,54 |

ITA COF | 27 | TANZANIA | Hospital P. | 9.592,49 | 0,00 | 0,00 | 9.592,49 |

ITA COF | 28 | DJIBOUTI | IGADD food project | 3.031,61 | 0,00 | 0,00 | 3.031,61 |

ITA COF | 29 | SEYCHELLES | Technical assistance | 51.073,21 | 0,00 | 0,00 | 51.073,21 |

ITA COF | 30 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 31 | BURUNDI | Rutana Kankuzo | 154.846,04 | 0,00 | 0,00 | 154.846,04 |

ITA COF | 32 | CONGO | Kinkala B. road | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 33 | GUI. CONAKRY | Fouta Djalon | 305.162,33 | 0,00 | 0,00 | 305.162,33 |

ITA COF | 34 | SENEGAL | National Road No 2 | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 35 | ZAIRE | Film Kivu | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 36 | BURKINA FASO | Technical assistance | 89.763,43 | 0,00 | 0,00 | 89.763,43 |

ITA COF | 37 | cofinancing interest | 13.327.958,54 | 543.184,29 | 0,00 | 13.871.142,83 |

ITA COF | 38 | TANZANIA | Pemba ports | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 39 | ANGOLA | Lubango road | 200.500,00 | 0,00 | 0,00 | 200.500,00 |

ITA COF | 40 | Administrative expenditure | 417.701,55 | 6.533.87 | 15.815,78 | 408.419,64 |

ITA COF | 41 | MOZAMBIQUE | Technical assistance | 78.963,69 | 0,00 | 0,00 | 78.963,69 |

ITA COF | 42 | MOZAMBIQUE | Maputo | 14.387,00 | 0,00 | 0,00 | 14.387,00 |

ITA COF | 43 | MOZAMBIQUE | Refugees | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 44 | MADAGASCAR | Manambery bridge | 65.250,91 | 0,00 | 0,00 | 65.250,91 |

ITA COF | 45 | MOZAMBIQUE | Children assistance | 11.295,81 | 0,00 | 0,00 | 11.295,81 |

ITA COF | 46 | ANGOLA | Minars assistance | 497,94 | 0,00 | 0,00 | 497,94 |

ITA COF | 47 | ACP | ACP-Conf. after Lomé IV | 2.708,00 | 0,00 | 0,00 | 2.708,00 |

ITA COF | 48 | ANGOLA | SMEs | 27.750,00 | 0,00 | 0,00 | 27.750,00 |

ITA COF | 49 | SADC | SME- Workshop | 0,00 | 0,00 | 0,00 | 0,00 |

ITA COF | 50 | SOMALIA | Rehabilitation | 15.629.054,15 | 0;00 | 909.982;03 | 14.719.072,12 |

ITA COF | 51 | TANZANIA | Bogamoyo road | 1.636.461,46 | 0,00 | 0,00 | 1.636.461,46 |

ITA COF | 52 | SOMALIA | PACE | 550.646,00 | 0,00 | 72.110,25 | 478.535,75 |

TOTAL | 35.792.153,61 | 549.721,16 | 997.908,06 | 35.343.963,71 |

A total of 52 projects have been cofinanced by the Italian Government in the ACP States since the signing of the above agreement, two of which were still running in 2005.

In 2005 a new contract was signed along with 8 supplementary agreements to extend the date and amend the budget breakdown, but without the need for an additional financial commitment.

3. FINANCIAL INFORMATION EIB

3.1. INVESTMENT FACILITY INCOME STATEMENT

(In EUR’000)

The notes refer to the Notes to the Financial Statements

3.2. INVESTMENT FACILITY BALANCE SHEET

(In EUR’000)

The notes refer to the Notes to the Financial Statements

3.3. INVESTMENT FACILITY CASH FLOW STATEMENT

(In EUR’000)

3.4. INVESTMENT FACILITY STATEMENT OF CHANGES IN EQUITY

(In EUR’000)

3.5. NOTES TO THE FINANCIAL STATEMENTS

3.5.1. General information

The Investment Facility (the “Facility”) 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 and revised on 25 June 2005.

The Facility is managed by the European Investment Bank (the “EIB” or the “Bank”). Under the terms of the Agreement up to EUR 2,200 million for ACP and EUR 20 million for OCT (as agreed by the Council Decision of 27 November 2001 on the association of the Overseas Countries and Territories with the European Community) may be allocated to finance the Facility. Within the framework of the Agreement, the EIB also manages loans granted from its own resources. All other financial resources and instruments under the Agreement are administered by the European Commission.

3.5.2. Significant accounting policies

In 2005, the Facility adopted the International Financial Reporting Standards for the preparation of its financial statements and this adoption was done according to IFRS 1 – First Time Adoption of IFRS – using January 1, 2004 as the transition date.

The accounting policies applied are in conformity with the IFRS and with the overall principles of the Directives 86/635/EEC of the Council of the European Communities of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions, as amended by Directive 2001/65/EC of 27 September 2001 and by Directive 2003/51/EC of 18 June 2003 on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance undertakings (the “Directives”).

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Facility’s accounting policies. The area involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed.

The Balance Sheet represents assets and liabilities in decreasing order of liquidity and does not distinguish between current and non-current items.

36. Foreign currency translation

The Facility uses the Euro (EUR) for presenting its financial statements, which is also the functional currency.

For the presentation of the financial statements, assets and liabilities denominated in currencies other than the Euro are translated into Euro at the spot rates of exchange prevailing on the balance sheet date.

The profit and loss accounts are translated monthly into Euro based on the exchange rates prevailing at the end of each month.

Exchange differences arising on translation are recorded as a currency gain or loss in the income statement.

37. Cash and cash equivalents

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

38. Financial assets other than derivatives

Financial assets are accounted for using the settlement date basis.

- Loans

Loans originated by the Facility are 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.

- Equity investments

This consists of the Facility direct or indirect equity investments. Such assets are carried at fair value and classified as available for sale.

39. Venture capital funds

The fair value of each venture capital fund will be based on the Net Asset Value (NAV), reported by the fund, if calculated based on international valuation standard recognized to be compliant with IFRS. The Facility may however decide to adjust the NAV reported by the fund if there are issues that may affect the valuation.

If no internationally recognized fair valuation standard is applied, the valuation will be conducted on the basis of the underlying portfolio.

40. Direct equity investments

The fair value of the investment will be 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.

For non quoted investments, the fair value is determined by applying recognized valuation techniques. Unrealised gains or losses are reported in equity until such investment is sold, collected or disposed of, or until such investment is determined to be impaired. At this time the cumulative profit or loss previously recognised in reserves is included in the income statement. These investments are accounted for at cost when the fair value cannot be reliably measured.

- Guarantees

Guarantees issued by the Facility are categorized as financial guarantees and are recorded off-balance sheet, with the exception of related premiums, unless a provision is needed to cover probable losses, determined in accordance with IAS 37.

41. Impairment of financial assets

Impairments are made for loans outstanding at the end of the financial year, 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. Specific provisions for impairment are then recognized in the income statement. Impairment is then defined as the difference between the carrying value of the loans and the net present value of expected future cash flows, determined using the instrument’s original effective interest rate where applicable. On the basis that the Bank conducts credit risk assessment on a loan by loan basis, there is no need for collective impairment provision.

The Facility determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below cost. This determination of whether a decline is significant or prolonged is based on a judgmental appreciation. If a specific provision for impairment is made for an equity investment, any change in fair value that had previously been recognized in reserves is taken to the income statement.

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 income statement over the life of the asset, and any adjustments required in respect of a reassessment of the initial impairment.

42. Derivative financial instruments

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

However, the Facility has not entered into any hedge accounting transactions under IFRS rules as at December 31, 2005 and 2004. Therefore, all derivatives are measured at fair value through the income statement. Fair values are derived primarily from discounted cash-flow models, option-pricing models and from third party quotes. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

43. Contributions

Contributions from Member States are recognized as receivable in the balance sheet on the date of the Council Decision fixing the financial contribution to be paid by the Member States to the Facility.

44. Interest subsidies

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

The part of the Member States contributions allocated to the payment of interest subsidies is not accounted for in the Facility’s equity but is classified as an amount owed to third parties.

45. Interest income on treasury

Under the terms of the Facility and according to the Financial Regulation applicable to the 9th European Development Fund, the funds received by the EIB on behalf of the Facility are recorded in an account in the Commission’s name. Interest on these deposits, placed by the Facility with the EIB, is not accounted for by the Facility as it is payable directly to the European Commission.

Reflows, being repayment of principal, interest or commissions stemming from financial operations, and interest calculated on these reflows are accounted for within the Facility.

46. Interest, fees, commissions and dividends

Interest is recorded on an accruals basis using the effective yield method.

Fees received in respect of services provided over a period of time are recognized as income as the services are provided. Commitment fees are deferred and recognized in income using the effective interest method over the period from disbursement to repayment of the related loan.

Dividends relating to equity investments are recognised when received.

47. Taxation

The Protocol on the Privileges and Immunities of the European Union, appended to the Treaty of 29 October 2004 establishing a Constitution for Europe, stipulates that the assets, revenues and other property of the Institutions of the Union are exempt from all direct taxes.

48. Effect of changes in accounting policies

Previous financial statements were produced in accordance with the general principles of the Directive 86/635/EEC of the Council of the European Communities of 8 December 1986 (as amended by Directive 2001/65/EC of 27 September 2001) on the annual accounts and consolidated accounts of banks and other financial institutions (the “Directive”).

Where necessary, certain prior-year figures have been reclassified to conform with changes to the current year’s presentation for comparative purposes. The transition to IFRS has not affected the net income and equity for the year 2004.

3.5.3. Risk Management

49. Credit risk

This section presents financial information about the investments made by the Facility.

As at December 31, 2005, the Facility’s only exposures were with private borrowers. The table hereafter analyses the Facility exposure disbursed by type of investment instrument used.

The table below analyses the Facility exposure disbursed by sector.

50. Interest rate risk

The table below summarizes the Facility’s exposure to interest rate risk through its investments.

51. Liquidity risk

The table below sets out the Facility’s assets and liabilities by relevant maturity groupings based on the remaining period to the contractual maturity date.

52. Foreign exchange risk

The table below analyses the Facility assets and liabilities by relevant currency groupings.

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In accordance with the Cotonou Agreement, the Facility may enter in financial operations in currencies other than Euro and bear the foreign exchange risk. However, when an adequate swap market exists, the Facility may enter into a swap agreement to cover itself against any foreign exchange fluctuation.

3.5.4. Segment information

In accordance with IAS 14, the primary segment of the Facility is business operation and the secondary segment is geographical.

The activity of the Facility comprises primary Banking and Treasury operations.

Banking operations represent investments in projects, which are made with the purpose of supporting investments of private and commercially run public sector entities. The main investment products are loans, equity investments and guarantees.

Treasury activities include investing surplus liquidity and managing the Facility foreign exchange risk.

The Facility’s activities are divided into five regions for internal management purposes.

Primary reporting format – business segment (in EUR’000):

Secondary reporting format – geographical segment (in EUR’000) :

(*) Revenues represent the net profit on the Facility’s operational activity (i.e. interest and commission income, less impairment, plus or minus the realised gain or loss on equity investments respectively).

(**) Under geographical segment “Other” are considered the amount payable to or receivable from the Member States or the European Investment Bank and the Facility cash and cash equivalent.

3.5.5. Net fee and commission income

(in EUR’000)

The main components of net fee and commission income are as follow:

3.5.6. Net result on financial operations

(in EUR’000)

The main components of net fee profit on dealing activities and foreign exchange are as follow:

3.5.7. General administrative expenses

(in EUR’000)

General administrative expenses represent the actual costs incurred by the European Investment Bank (the “Bank”) for managing the Facility less income generated from standard appraisal fees directly charged by the Bank to clients of the Facility.

Under Council Decision of 8 April 2003, the Member states agreed to cover in full the expenses incurred by the Bank for the management of the Facility for the first 5 years of the 9th European Development Fund.

Net general administrative expenses provisioned as at 31 December 2004 in the Bank financial statements amounted to EUR 18 million. Based on the actual costs incurred by the European Investment Bank, this amount was subsequently adjusted by EUR 2.17 million in 2005. The 2004 income statement of the Facility has been restated to take into account this adjustment.

3.5.8. Cash and cash equivalents

(in EUR’000)

For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than three months maturity from the date of acquisition. At 31 December 2005 and 2004, the Facility has only current accounts with the European Investment Bank.

The cash and cash equivalents can be broken down between the funds received from the Member States and not yet disbursed and the funds from the Facility’s operational and financial activities.

3.5.9. Loans and equity investments

(in EUR’000)

At 31 December 2005, no loan was considered as impaired.

One equity investment has been completely impaired during the year, for an amount of EUR 1.9 million.

Investments in quoted companies represent EUR 10.1 million of the total equity investments.

At 31 December 2004, loans and advances to credit institutions for an amount of EUR 7.8 million have been reclassified in equity investments due to their nature in order to comply with IFRS rules.

3.5.10. Amounts receivable from contributors

(in EUR’000)

The main components of amounts receivable from contributors are as follows:

3.5.11. Other assets

Other assets are made up of interest receivable on loans.

3.5.12. Derivative financial instruments

(in EUR’000)

3.5.13. Amounts owed to third parties

(in EUR’000)

The main components of amounts owed to third parties are as follow:

3.5.14. Facility Member States Contribution

(in EUR’000)

With regard to the Member States Contribution to the Facility, an amount of EUR 455 million has been called, of which EUR 395 million has been paid-in. Of this contribution, an amount of EUR 370 million is allocated to the funding of the Facility as such, whereas EUR 85 million are earmarked to finance interest subsidies.

In 2005, a prior contribution amounting to EUR 20 million was cancelled retroactively at the request of the Member States participating in the 9th European Development Fund.

The statement of Facility Member States Contribution as at 31 December 2005 is as follows:

(*) On the 22 December 2005, the Council fixed the amount of the financial contributions to be paid by each Member State by 20 January 2006.

3.5.15. Commitments

(in EUR’000)

The Facility’s commitments are as follow:

3.5.16. Subsequent events

There has been no material post balance sheet events which would require disclosure or adjustment to the 31 December 2005 financial statements.

On a proposal from the Management Committee, the Board of Directors reviewed these financial statements on 7 March 2006 and decided to submit them to the Board of Governors for approval at their meeting to be held on 6 June 2006.

4. APPENDIX — SITUATION BY COUNTRY AND BY INSTRUMENT

(All figures presented in the Report on Financial Implementation are on a cash basis)

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[1] OJ L 83 of 1/04/2003 p. 1-31

[2] OJ L 156 of 18/06/2005 p. 19-20

[3] OJ L 48 of 18/02/2006 p. 19-20

[4] OJ L 48 of 18/02/2006 p. 21

[5] The unallocated resources from the previous EDFs include the balance of the Sysmin funds, which by Decision 3/2000 of the ACP-EC Ambassadors' Committee was set at 410.926 million. Council Decision E410/2001 includes these resources in programming for the national indicative allocations (part B) under the financial protocol to the ACP-EC Partnership Agreement.

[6] In connection with the release of the conditional billion, a balance of EUR 123 million was reallocated to the regional envelope in February 2006 on the basis of corrigendum no 1 (dated 1 February 2006) to ACP-EC Council Decisions Nos 6 and 7 of 22 November 2005. This amount of EUR 123 million will also be corrected in 2006 in order to achieve a figure of EUR 122 million corresponding to the amount still available under the investment facility following the initial allocation from the conditional billion. The final total of the regional envelope managed by the Commission (OLAS) will consequently be EUR 2 153 000 000.