# EUR-Lex - 52012DC0436 - EN

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# 52012DC0436

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS CONSOLIDATED ANNUAL ACCOUNTS OF THE EUROPEAN UNION - FINANCIAL YEAR 2011 /* COM/2012/0436 final */**

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EUROPEAN UNION

CONSOLIDATED

REPORTs on IMPLEMENTATION OF THE
budgEt AND
EXPLANATORY NOTES

FINANCIAL YEAR 2011

CONTENTS

Page

Part II:  Consolidated
reports on implementation of the budget and explanatory notes

Consolidated reports
on implementation of the budget:

1. EU Budget outturn                                                                                     94

2. Statement of Comparison of
Budget and Actual Amounts                                   95

Revenue:

3. Summary of the implementation of
budget revenue                                          97

Expenditure:

4. Breakdown and changes in commitment and payment
appropriations by
financial framework heading                                                                             98

5. Implementation of commitment appropriations by
financial framework heading       98

6. Implementation of payment appropriations by
financial framework heading            99

7. Movement in commitments
outstanding by financial framework heading              100

8. Breakdown of commitments
outstanding by year of origin by financial framework

heading                                                                                                  100

9. Breakdown and changes in commitment and payment
appropriations by

policy area                                                                                                 101

10. Implementation of commitment appropriations by
policy area                          102

11. Implementation of payment appropriations by
policy area                               103

12. Movement in commitments
outstanding by policy area                                   104

13. Breakdown of commitments
outstanding by year of origin by policy area           105

Institutions:

14. Summary of the implementation
of budget revenue by Institution                    106

15. Implementation of commitment
and payment appropriations by Institution         107

Agencies:

16. Agency income: budget forecasts, entitlements
and amounts received             108

17. Commitment and payment
appropriations by Agency                                     109

18. Budget outturn including
Agencies                                                             110

Explanatory
notes to the consolidated reports on implementation of the budget:

1.
Budgetary principles, structure and appropriations                                          112

2.
Explanation of the consolidated reports on the implementation of the budget      115

Consolidated
reports on the

implementation
of the budget*

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

RESULT OF IMPLEMENTATION OF THE EU BUDGET

||               1: EU BUDGET OUTTURN || EUR millions

EUROPEAN UNION || 2011 || 2010 ||

Revenue for the financial year || 130 000 || 127 795 ||

Payments against current year appropriations || (128 043) || (121 213) ||

Payment appropriations carried over to year N+1 || (1 019) || (2 797) ||

Cancellation of unused payment appropriations carried over from year N-1 || 457 || 741 ||

Exchange differences for the year || 97 || 23 ||

Budget Outturn* || 1 492 || 4 549 ||

- Of which EFTA
amounts total EUR (5) million in 2011 and EUR 9 million in 2010.

The budget surplus for
the European Union is returned to the Member States during the following year
through deduction of their amounts due for that year.

2. Statement of Comparison OF Budget and Actual amounts ||

REVENUE ||

|| || || || || || || || EUR millions

Title || Original Budget || Final Budget || Entitlements established || Revenue || Difference Final-Actual || Receipts as % of budget || Outstanding

|| 1 || 2 || 3 || 4 || 5=2-4 || 6=4/2 || 7=3-4

1. Own resources || 125 106 || 118 289 || 118 193 || 118 164 || 125 || 99.89% || 29

3. Surpluses, balances and adjustments || 0 || 6 354 || 6 472 || 6 370 || (16) || 100.25% || 102

4. Revenue accruing from persons working with the institutions and with other Union bodies || 1 182 || 1 182 || 1 213 || 1 207 || (25) || 102.12% || 6

5. Revenue accruing from the administrative operation of the institutions || 56 || 56 || 609 || 587 || (531) || 1 048.48% || 22

6. Contributions and refunds in connection with Union/Community agreements and programmes || 30 || 82 || 2 745 || 2 454 || (2 372) || 2 993.28% || 291

7. Interest on late payments and fines || 123 || 733 || 13 943 || 1 183 || (450) || 161.37% || 12 761

8. Borrowing and lending operations || 0 || 0 || 159 || 1 || 0 || || 159

9. Miscellaneous revenue || 30 || 30 || 44 || 34 || (4) || 111.86% || 11

Total || 126 527 || 126 727 || 143 380 || 130 000 || (3 273) || 102.58% || 13 380

|| || || || || || ||

EXPENDITURE – BY FINANCIAL FRAMEWORK HEADING || EUR millions

Financial Framework Heading || Original Budget || Final Budget (*) || Payments made || Difference Final-Actual || % || Appropriations carried over || Appropriations lapsing

|| 1 || 2 || 3 || 4=2-3 || 5=3/2 || 6 || 7=2-3-6

1. Sustainable growth || 53 280 || 56 982 || 54 732 || 2 251 || 96.05% || 2 051 || 199

2. Preservation & management of natural resources || 56 379 || 58 887 || 57 374 || 1 513 || 97.43% || 1 416 || 97

3. Citizenship, freedom, security and justice || 1 459 || 2 008 || 1 827 || 181 || 91.00% || 144 || 37

4. The EU as a global player || 7 238 || 7 366 || 7 102 || 264 || 96.42% || 145 || 118

5. Administration || 8 172 || 9 716 || 8 359 || 1 357 || 86.03% || 1 012 || 345

6. Compensations || || || || || || ||

Total || 126 527 || 134 960 || 129 395 || 5 565 || 95.88% || 4 768 || 797

- including appropriations carried over and assigned revenue

2. Statement of Comparison OF Budget and Actual amounts Amounts/Expenditure ||

BY POLICY AREA || EUR millions

Policy Area || Original Budget || Final Budget (*) || Payments made || Difference Final-Actual || % || Appropriations carried over || Appropriations lapsing

|| 1 || 2 || 3 || 4=2-3 || 5=3/2 || 6 || 7=2-3-6

01 Economic and financial affairs || 341 || 443 || 389 || 54 || 87.76% || 9 || 46

02 Enterprise || 1 210 || 1 485 || 1 336 || 149 || 89.99% || 123 || 25

03 Competition || 93 || 104 || 94 || 10 || 90.73% || 9 || 1

04 Employment and social affairs || 9 163 || 10 498 || 10 392 || 106 || 98.99% || 75 || 30

05 Agriculture and rural development || 55 269 || 57 784 || 56 342 || 1 442 || 97.50% || 1 406 || 35

06 Mobility and transport || 1 142 || 1 217 || 1 114 || 103 || 91.53% || 77 || 26

07 Environment and Climate action || 390 || 379 || 332 || 47 || 87.54% || 24 || 23

08 Research || 4 117 || 5 476 || 4 604 || 872 || 84.08% || 861 || 10

09 Information society and media || 1 334 || 1 741 || 1 489 || 252 || 85.51% || 250 || 2

10 Direct research || 396 || 832 || 441 || 391 || 53.01% || 384 || 6

11 Maritime affairs and Fisheries || 771 || 812 || 772 || 40 || 95.08% || 5 || 35

12 Internal market || 93 || 104 || 95 || 9 || 91.52% || 8 || 1

13 Regional policy || 33 317 || 33 052 || 32 995 || 57 || 99.83% || 51 || 5

14 Taxation and customs union || 115 || 133 || 123 || 10 || 92.20% || 9 || 1

15 Education and culture || 1 996 || 2 725 || 2 414 || 310 || 88.62% || 305 || 5

16 Communication || 253 || 279 || 259 || 21 || 92.61% || 17 || 4

17 Health and consumer protection || 596 || 659 || 623 || 37 || 94.40% || 27 || 10

18 Area of freedom, security and justice || 885 || 1 014 || 944 || 70 || 93.10% || 40 || 30

19 External relations || 3 385 || 3 462 || 3 313 || 148 || 95.72% || 66 || 82

20 Trade || 104 || 113 || 104 || 8 || 92.51% || 8 || 1

21 Development and relations with ACP States || 1 480 || 1 583 || 1 513 || 71 || 95.54% || 43 || 27

22 Enlargement || 1 013 || 970 || 928 || 42 || 95.63% || 38 || 4

23 Humanitarian aid || 839 || 1 090 || 1 068 || 22 || 97.96% || 10 || 12

24 Fight against fraud || 75 || 83 || 71 || 12 || 85.96% || 7 || 4

25 Commission's policy coordination & legal advice || 191 || 221 || 197 || 24 || 89.07% || 21 || 4

26 Commission’s administration || 1 017 || 1 274 || 1 063 || 211 || 83.45% || 196 || 15

27 Budget || 69 || 73 || 60 || 13 || 82.01% || 12 || 1

28 Audit || 11 || 13 || 12 || 1 || 91.58% || 1 || 0

29 Statistics || 124 || 159 || 134 || 25 || 84.26% || 19 || 6

30 Pensions and related expenditure || 1 278 || 1 273 || 1 257 || 16 || 98.75% || 0 || 16

31 Language Services || 393 || 501 || 442 || 60 || 88.11% || 56 || 3

32 Energy || 1 535 || 1 087 || 963 || 123 || 88.63% || 44 || 79

40 Reserves || 100 || 0 || 0 || 0 || 0.00% || 0 || 0

90 Other Institutions || 3 428 || 4 321 || 3 512 || 809 || 81.27% || 565 || 245

Total || 126 527 || 134 960 || 129 395 || 5 565 || 95.88% || 4 768 || 797

- including appropriations carried over and assigned revenue

3. SUMMARY OF THE IMPLEMENTATION OF BUDGET REVENUE ||

|| || || || || || || || EUR millions

Title || Income appropriations || Entitlements established || Revenue || Receipts as || Outstanding

|| Initial || Final || Current year || Carried over || Total || On entitlements current year || On entitlements carried over || Total || % of budget ||

1. Own resources || 125 106 || 118 289 || 118 111 || 81 || 118 193 || 118 121 || 43 || 118 164 || 99.89% || 29

3. Surpluses, balances and adjustments || 0 || 6 354 || 6 308 || 164 || 6 472 || 6 308 || 62 || 6 370 || 100.25% || 102

4. Revenue accruing from persons working with the institutions & with other EU bodies || 1 182 || 1 182 || 1 206 || 7 || 1 213 || 1 201 || 6 || 1 207 || 102.12% || 6

5. Revenue from administrative operations of institutions || 56 || 56 || 591 || 18 || 609 || 573 || 14 || 587 || 1 048.48% || 22

6. Contributions and refunds in connection with community agreements & programmes || 30 || 82 || 2 470 || 275 || 2 745 || 2 313 || 141 || 2 454 || 2 993.28% || 291

7. Interest on late payments and fines || 123 || 733 || 50 || 13 893 || 13 943 || (172) || 1 355 || 1 183 || 161.37% || 12 761

8. Borrowing and lending operations || 0 || 0 || 37 || 122 || 159 || 1 || 0 || 1 || 195.64% || 159

9. Miscellaneous revenue || 30 || 30 || 34 || 10 || 44 || 30 || 4 || 34 || 111.86% || 11

Total || 126 527 || 126 727 || 128 808 || 14 572 || 143 380 || 128 374 || 1 626 || 130 000 || 102.58% || 13 380

|| || || || || || || || || ||

Detail Title 1: Own resources

Chapter || Income appropriations || Entitlements established || Revenue || Receipts as || Outstanding

|| Initial || Final || Current year || Carried over || Total || On entitlements current year || On entitlements carried over ||  Total || % of budget ||

11. Sugar levies || 123 || 123 || 132 || 0 || 132 || 132 || 0 || 132 || 106.75% || 0

12. Customs duties || 16 654 || 16 544 || 16 593 || 81 || 16 675 || 16 603 || 43 || 16 646 || 100.62% || 29

13. VAT || 13 787 || 14 126 || 14 077 || 0 || 14 077 || 14 077 || 0 || 14 077 || 99.65% || 0

14. GNI || 94 542 || 87 497 || 87 259 || 0 || 87 259 || 87 259 || 0 || 87 259 || 99.73% || 0

15. Correction of budgetary imbalances || 0 || 0 || 52 || 0 || 52 || 52 || 0 || 52 || || 0

16. Reduction GNI-based contributions NL, S || 0 || 0 || (1) || 0 || (1) || (1) || 0 || (1) || || 0

Total || 125 106 || 118 289 || 118 111 || 81 || 118 193 || 118 121 || 43 || 118 164 || 99.89% || 29

|| || || || || || || || || ||

Detail Title 3: Surpluses, balances and adjustments

Chapter || Income appropriations || Entitlements established || Revenue || Receipts as || Outstanding

|| Initial || Final || Current year || Carried over || Total || On entitlements current year || On entitlements carried over || Total || % of budget ||

30. Surplus from previous year || 0 || 4 539 || 4 539 || 0 || 4 539 || 4 539 || 0 || 4 539 || 100.00% || 0

31. VAT balances || 0 || 673 || 680 || 37 || 717 || 680 || 14 || 694 || 103.11% || 23

32. GNI balances || 0 || 1 142 || 1 135 || 128 || 1 263 || 1 135 || 48 || 1 183 || 103.64% || 80

34. Adjustment for non-participation in JHAP || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || || 0

35. United Kingdom correction-adjustments || 0 || 0 || (46) || 0 || (46) || (46) || 0 || (46) || || 0

Total || 0 || 6 354 || 6 308 || 164 || 6 472 || 6 308 || 62 || 6 370 || 100.25% || 102

4. Breakdown & changes in commitment & payment appropriations by financial FRAMEWORK HEADING ||

|| || || || || || || || EUR millions

|| Commitment appropriations || Payment appropriations

Financial Framework Heading || Appropriations adopted || Modifications (Transfers & AB || Carried over || Assigned revenue || Total additional || Total authorised || Appropriations adopted || Modifications (Transfers & AB) || Carried over || Assigned revenue || Total additional || Total authorised

|| 1 || 2 || 3 || 4 || 5=3+4 || 6=1+2+5 || 7 || 8 || 9 || 10 || 11=9+10 || 12=7+8+11

1 Sustainable growth || 64 501 || 3 || 182 || 2 308 || 2 490 || 66 995 || 53 280 || 714 || 281 || 2 707 || 2 989 || 56 982

2 Preservation and management of natural resources || 58 659 || 0 || 2 || 2 680 || 2 682 || 61 341 || 56 379 || (585) || 419 || 2 675 || 3 093 || 58 887

3 Citizenship, freedom, security and justice || 1 822 || 276 || 24 || 169 || 193 || 2 291 || 1 459 || 255 || 98 || 196 || 294 || 2 008

4 The EU as global player || 8 754 || 5 || 42 || 287 || 329 || 9 088 || 7 238 || (184) || 38 || 274 || 313 || 7 366

5 Administration || 8 173 || 0 || 9 || 785 || 794 || 8 967 || 8 172 || 1 || 745 || 799 || 1 544 || 9 716

6 Compensations || || || || || || || || || || || ||

Total || 141 909 || 284 || 259 || 6 228 || 6 488 || 148 681 || 126 527 || 200 || 1 582 || 6 651 || 8 233 || 134 960

|| || || || || || || || || ||

5. Implementation of commitment appropriations by financial FRAMEWORK HEADING

|| || || || || EUR millions

Financial Framework Heading || Commitment appropriations authorised || Commitments made || Appropriations carried over || Appropriations lapsing

|| From the year’s appropriations || From carry-overs || From assigned revenue || Total || % || Assigned revenue || Carry-overs by decision || Total || % || From the year’s budget appropriations || From carry overs || Assigned revenue || Total || %

|| 1 || 2 || 3 || 4 || 5=2+3+4 || 6=5/1 || 7 || 8 || 9=7+8 || 10=9/1 || 11 || 12 || 13 || 14=11+12+13 || 15=14/1

1 Sustainable growth || 66 995 || 64 065 || 182 || 991 || 65 238 || 97.38% || 1 317 || 36 || 1 353 || 2.02% || 403 || 0 || 0 || 404 || 0.60%

2 Preservation and management of natural resources || 61 341 || 58 577 || 2 || 1 328 || 59 907 || 97.66% || 1 352 || 23 || 1 375 || 2.24% || 59 || 0 || 0 || 59 || 0.10%

3 Citizenship, freedom, security and justice || 2 291 || 2 048 || 24 || 92 || 2 165 || 94.50% || 76 || 41 || 117 || 5.12% || 9 || 0 || 0 || 9 || 0.38%

4 The EU as a global player || 9 088 || 8 572 || 42 || 194 || 8 808 || 96.91% || 94 || 178 || 272 || 2.99% || 8 || 0 || 0 || 8 || 0.09%

5 Administration || 8 967 || 7 941 || 9 || 504 || 8 454 || 94.28% || 281 || 22 || 303 || 3.38% || 210 || 0 || 0 || 210 || 2.34%

6 Compensations || || || || || || || || || || || || || || ||

Total || 148 681 || 141 204 || 259 || 3 108 || 144 572 || 97.24% || 3 120 || 301 || 3 420 || 2.30% || 689 || 0 || 0 || 689 || 0.46%

6. Implementation of payment appropriations by financial FRAMEWORK HEADING

|| || || || || || || || || || || || || || EUR millions

Financial Framework Heading || Payment Approp-riations authorised || Payments made || Appropriations carried over || Appropriations lapsing

From the year’s appropriations || From carry-overs || From assigned revenue || Total || % || Automatic carry-overs || Carry-overs by decision || Assigned revenue || Total || % || From the year’s appropriations || From carryovers || Assigned revenue || Total || %

|| 1 || 2 || 3 || 4 || 5=2+3+4 || 6=5/1 || 7 || 8 || 9 || 10=7+8+9 || 11=10/1 || 12 || 13 || 14 || 15=12+ 13+14 || 16= 15/1

1 Sustainable growth || 56 982 || 53 658 || 235 || 839 || 54 732 || 96.05% || 131 || 53 || 1 868 || 2 051 || 3.60% || 153 || 47 || 0 || 199 || 0.35%

2 Preservation & management of natural resources || 58 887 || 55 646 || 391 || 1 337 || 57 374 || 97.43% || 32 || 46 || 1 338 || 1 416 || 2.40% || 70 || 27 || 0 || 97 || 0.16%

3 Citizenship, freedom, security & justice || 2 008 || 1 636 || 92 || 99 || 1 827 || 91.00% || 9 || 38 || 97 || 144 || 7.17% || 31 || 6 || 0 || 37 || 1.83%

4 The EU as a global player || 7 366 || 6 902 || 19 || 181 || 7 102 || 96.42% || 27 || 25 || 93 || 145 || 1.97% || 99 || 19 || 0 || 118 || 1.61%

5 Administration || 9 716 || 7 304 || 614 || 442 || 8 359 || 86.03% || 637 || 22 || 352 || 1 012 || 10.41% || 209 || 131 || 5 || 345 || 3.55%

6 Compensations || || || || || || || || || || || || || || || ||

Total || 134 960 || 125 145 || 1 352 || 2 898 || 129 395 || 95.88% || 835 || 185 || 3 748 || 4 768 || 3.53% || 562 || 230 || 5 || 797 || 0.59%

7. MOVEMENTs IN COMMITMENTS OUTSTANDING - BY FINANCIAL FRAMEWORK HEADING ||

|| || || || || || || || EUR millions

|| Commitments outstanding at the end of the previous year || Commitments of the year ||

Financial Framework Heading || Commitments carried forward from previous year || Decommitments /Revaluations/ Cancellations || Payments || Commitments outstanding at year-end || Commitments made during the year || Payments || Cancellation of commitments which cannot be carried over || Commitments outstanding at year-end || Total Commitments outstanding at year-end

1 Sustainable growth || 150 467 || (1 262) || (48 945) || 100 259 || 65 238 || (5 786) || (3) || 59 448 || 159 707

2 Preservation and management of natural resources || 22 963 || (193) || (11 687) || 11 083 || 59 907 || (45 687) || 0 || 14 220 || 25 302

3 Citizenship, freedom, security and justice || 1 911 || (118) || (555) || 1 237 || 2 165 || (1 272) || 0 || 893 || 2 130

4 The EU as a global player || 18 332 || (469) || (4 740) || 13 123 || 8 808 || (2 363) || (1) || 6 444 || 19 567

5 Administration || 722 || (77) || (631) || 14 || 8 454 || (7 728) || (4) || 722 || 737

6 Compensations || || || || || || || || ||

Total || 194 395 || (2 120) || (66 559) || 125 717 || 144 572 || (62 836) || (9) || 81 727 || 207 443

8. breakdown of commitments outstanding by year of origin - BY FINANCIAL FRAMEWORK HEADING ||

|| || || || || || || || EUR millions ||

Financial Framework Heading || <2005 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || Total

1 Sustainable growth || 820 || 998 || 10 089 || 984 || 7 997 || 29 501 || 49 870 || 59 448 || 159 707

2 Preservation & management of natural resources || 42 || 32 || 928 || 91 || 180 || 1 237 || 8 573 || 14 220 || 25 302

3 Citizenship, freedom, security and justice || 16 || 14 || 21 || 80 || 172 || 401 || 534 || 893 || 2 130

4 The EU as a global player || 783 || 357 || 986 || 1 093 || 2 097 || 3 180 || 4 627 || 6 444 || 19 567

5 Administration || 0 || 0 || 0 || 0 || 0 || 0 || 14 || 722 || 737

Total || 1 661 || 1 401 || 12 024 || 2 247 || 10 446 || 34 319 || 63 618 || 81 727 || 207 443

9. Breakdown and changes in commitment and payment appropriations by Policy Area ||

|| EUR millions

|| Commitment appropriations || Payment appropriations

Policy Area || Approps adopted || Modifications (Transfer /AB) || Carried over || Assigned revenue || Total additional || Total authorised || Approps adopted || Modifications (Transfer/ AB) || Carried over || Assigned revenue || Total additional || Total authorised

|| 1 || 2 || 3 || 4 || 5=3+4 || 6=1+2+5 || 7 || 8 || 9 || 10 || 11=9+10 || 12=7+8+11

01 Economic and financial affairs || 524 || (122) || 0 || 13 || 13 || 416 || 341 || 26 || 54 || 22 || 76 || 443

02 Enterprise || 1 056 || (1) || 0 || 119 || 119 || 1 174 || 1 210 || 95 || 33 || 146 || 180 || 1 485

03 Competition || 93 || (2) || 0 || 5 || 5 || 96 || 93 || (2) || 8 || 5 || 13 || 104

04 Employment and social affairs || 11 398 || 255 || 19 || 16 || 35 || 11 689 || 9 163 || 1 283 || 36 || 15 || 51 || 10 498

05 Agriculture and rural development || 57 292 || 0 || 0 || 2 667 || 2 667 || 59 960 || 55 269 || (510) || 357 || 2 667 || 3 024 || 57 784

06 Mobility and transport || 1 547 || 1 || 0 || 115 || 115 || 1 663 || 1 142 || (110) || 66 || 119 || 185 || 1 217

07 Environment and Climate action || 471 || 0 || 0 || 21 || 21 || 492 || 390 || (44) || 17 || 16 || 33 || 379

08 Research || 5 335 || 0 || 0 || 849 || 849 || 6 184 || 4 117 || 130 || 29 || 1 199 || 1 228 || 5 476

09 Information society and media || 1 539 || (3) || 0 || 248 || 248 || 1 784 || 1 334 || 101 || 17 || 289 || 305 || 1 741

10 Direct research || 395 || 0 || 0 || 484 || 484 || 879 || 396 || (7) || 39 || 403 || 443 || 832

11 Maritime affairs and Fisheries || 1 001 || 23 || 2 || 2 || 4 || 1 028 || 771 || 0 || 38 || 2 || 40 || 812

12 Internal market || 95 || 2 || 0 || 3 || 3 || 100 || 93 || 2 || 6 || 3 || 9 || 104

13 Regional policy || 40 383 || 141 || 21 || 4 || 25 || 40 549 || 33 317 || (346) || 77 || 4 || 81 || 33 052

14 Taxation and customs union || 142 || (3) || 0 || 4 || 4 || 143 || 115 || 6 || 8 || 4 || 12 || 133

15 Education and culture || 2 429 || (6) || 0 || 514 || 514 || 2 937 || 1 996 || 145 || 20 || 563 || 583 || 2 725

16 Communication || 273 || 1 || 0 || 6 || 6 || 280 || 253 || 8 || 13 || 5 || 18 || 279

17 Health and consumer protection || 692 || (23) || 0 || 36 || 36 || 705 || 596 || (8) || 35 || 36 || 71 || 659

18 Area of freedom, security and justice || 1 210 || 42 || 24 || 62 || 86 || 1 339 || 885 || 24 || 31 || 75 || 106 || 1 014

19 External relations || 4 315 || 45 || 31 || 118 || 149 || 4 508 || 3 385 || (75) || 43 || 109 || 152 || 3 462

20 Trade || 105 || 0 || 0 || 3 || 3 || 109 || 104 || 0 || 5 || 3 || 8 || 113

21 Development & relations ACP States || 1 542 || 81 || 6 || 121 || 127 || 1 749 || 1 480 || (47) || 31 || 119 || 150 || 1 583

22 Enlargement || 1 123 || (5) || 0 || 44 || 44 || 1 163 || 1 013 || (94) || 7 || 44 || 52 || 970

23 Humanitarian aid || 878 || 256 || 0 || 14 || 14 || 1 149 || 839 || 234 || 5 || 12 || 17 || 1 090

24 Fight against fraud || 82 || 0 || 0 || 0 || 0 || 81 || 75 || 1 || 7 || 0 || 7 || 83

25 Commission’s policy coordination and legal advice || 191 || 2 || 0 || 10 || 10 || 203 || 191 || 2 || 18 || 10 || 28 || 221

26 Commission’s administration || 1 019 || 4 || 0 || 108 || 108 || 1 131 || 1 017 || 10 || 134 || 112 || 246 || 1 274

27 Budget || 69 || (12) || 0 || 6 || 6 || 64 || 69 || (12) || 8 || 6 || 15 || 73

28 Audit || 11 || 0 || 0 || 1 || 1 || 12 || 11 || 0 || 1 || 1 || 2 || 13

29 Statistics || 145 || (5) || 0 || 17 || 17 || 157 || 124 || 10 || 7 || 18 || 25 || 159

30 Pensions and related expenditure || 1 278 || (5) || 0 || 0 || 0 || 1 273 || 1 278 || (5) || 0 || 0 || 0 || 1 273

31 Language Services || 393 || (2) || 0 || 83 || 83 || 474 || 393 || (2) || 28 || 83 || 110 || 501

32 Energy || 700 || 1 || 146 || 42 || 188 || 889 || 1 535 || (518) || 15 || 54 || 70 || 1 087

40 Reserves || 754 || (383) || 0 || 0 || 0 || 371 || 100 || (100) || 0 || 0 || 0 || 0

90 Other Institutions || 3 428 || 0 || 9 || 493 || 502 || 3 930 || 3 428 || 0 || 388 || 504 || 893 || 4 321

Total || 141 909 || 284 || 259 || 6 228 || 6 488 || 148 681 || 126 527 || 200 || 1 582 || 6 651 || 8 233 || 134 960

10. Implementation of commitment appropriations by Policy Area         EUR millions ||

Policy Area || Commitment appropriations authorised || Commitments made || Appropriations carried over || Appropriations lapsing

From the year’s approps || From carry-overs || Assigned revenue || Total || % || Assigned revenue || Carry-overs: decision || Total || % || From year’s budget approps || From carry-overs || Assigned revenue || Total || %

|| 1 || 2 || 3 || 4 || 5=2+3+4 || 6=5/1 || 7 || 8 || 9=7+8 || 10=9/1 || 11 || 12 || 13 || 14=11+12+13 || 15=14/1

01 Economic and financial affairs || 416 || 403 || 0 || 11 || 414 || 99.55% || 2 || 0 || 2 || 0.41% || 0 || 0 || 0 || 0 || 0.05%

02 Enterprise || 1 174 || 1 053 || 0 || 61 || 1 113 || 94.87% || 58 || 0 || 58 || 4.94% || 2 || 0 || 0 || 2 || 0.19%

03 Competition || 96 || 91 || 0 || 3 || 94 || 97.65% || 2 || 0 || 2 || 2.28% || 0 || 0 || 0 || 0 || 0.07%

04 Employment and social affairs || 11 689 || 11 612 || 19 || 7 || 11 638 || 99.57% || 9 || 34 || 42 || 0.36% || 8 || 0 || 0 || 8 || 0.07%

05 Agriculture and rural development || 59 960 || 57 257 || 0 || 1 322 || 58 579 || 97.70% || 1 345 || 0 || 1 345 || 2.24% || 36 || 0 || 0 || 36 || 0.06%

06 Mobility and transport || 1 663 || 1 545 || 0 || 64 || 1 609 || 96.79% || 51 || 0 || 51 || 3.08% || 2 || 0 || 0 || 2 || 0.12%

07 Environment & Climate action || 492 || 466 || 0 || 11 || 478 || 97.08% || 10 || 0 || 10 || 2.02% || 4 || 0 || 0 || 4 || 0.90%

08 Research || 6 184 || 5 334 || 0 || 396 || 5 730 || 92.67% || 453 || 0 || 453 || 7.33% || 0 || 0 || 0 || 0 || 0.01%

09 Information society and media || 1 784 || 1 535 || 0 || 102 || 1 637 || 91.75% || 146 || 0 || 146 || 8.21% || 1 || 0 || 0 || 1 || 0.04%

10 Direct research || 879 || 395 || 0 || 79 || 474 || 53.90% || 405 || 0 || 405 || 46.09% || 0 || 0 || 0 || 0 || 0.01%

11 Maritime affairs and Fisheries || 1 028 || 996 || 2 || 1 || 999 || 97.13% || 1 || 23 || 24 || 2.35% || 5 || 0 || 0 || 5 || 0.51%

12 Internal market || 100 || 96 || 0 || 2 || 98 || 98.21% || 1 || 0 || 1 || 1.47% || 0 || 0 || 0 || 0 || 0.32%

13 Regional policy || 40 549 || 40 472 || 21 || 2 || 40 495 || 99.87% || 2 || 40 || 41 || 0.10% || 12 || 0 || 0 || 12 || 0.03%

14 Taxation and customs union || 143 || 139 || 0 || 2 || 141 || 98.01% || 3 || 0 || 3 || 1.78% || 0 || 0 || 0 || 0 || 0.21%

15 Education and culture || 2 937 || 2 422 || 0 || 297 || 2 720 || 92.58% || 217 || 0 || 217 || 7.40% || 0 || 0 || 0 || 0 || 0.02%

16 Communication || 280 || 271 || 0 || 3 || 274 || 97.71% || 3 || 0 || 3 || 0.96% || 4 || 0 || 0 || 4 || 1.32%

17 Health & consumer protection || 705 || 653 || 0 || 21 || 674 || 95.61% || 15 || 0 || 15 || 2.12% || 16 || 0 || 0 || 16 || 2.27%

18 Freedom, security and justice || 1 339 || 1 244 || 24 || 40 || 1 308 || 97.74% || 22 || 3 || 25 || 1.86% || 5 || 0 || 0 || 5 || 0.40%

19 External relations || 4 508 || 4 312 || 31 || 72 || 4 415 || 97.93% || 46 || 44 || 90 || 2.00% || 3 || 0 || 0 || 3 || 0.07%

20 Trade || 109 || 105 || 0 || 2 || 106 || 98.01% || 1 || 0 || 1 || 1.22% || 1 || 0 || 0 || 1 || 0.77%

21 Development & relations ACP || 1 749 || 1 495 || 6 || 111 || 1 612 || 92.16% || 10 || 127 || 136 || 7.80% || 1 || 0 || 0 || 1 || 0.04%

22 Enlargement || 1 163 || 1 110 || 0 || 9 || 1 119 || 96.29% || 35 || 8 || 43 || 3.70% || 0 || 0 || 0 || 0 || 0.01%

23 Humanitarian aid || 1 149 || 1 131 || 0 || 8 || 1 139 || 99.19% || 6 || 0 || 6 || 0.55% || 3 || 0 || 0 || 3 || 0.26%

24 Fight against fraud || 81 || 77 || 0 || 0 || 77 || 95.16% || 0 || 0 || 0 || 0.02% || 4 || 0 || 0 || 4 || 4.82%

25 Policy coord and legal advice || 203 || 193 || 0 || 5 || 198 || 97.72% || 4 || 0 || 4 || 2.09% || 0 || 0 || 0 || 0 || 0.20%

26 Commission’s administration || 1 131 || 1 020 || 0 || 61 || 1 081 || 95.61% || 47 || 0 || 47 || 4.16% || 3 || 0 || 0 || 3 || 0.23%

27 Budget || 64 || 57 || 0 || 4 || 61 || 94.91% || 3 || 0 || 3 || 4.17% || 1 || 0 || 0 || 1 || 0.92%

28 Audit || 12 || 11 || 0 || 0 || 12 || 96.94% || 0 || 0 || 0 || 2.74% || 0 || 0 || 0 || 0 || 0.32%

29 Statistics || 157 || 137 || 0 || 9 || 146 || 93.06% || 7 || 0 || 7 || 4.58% || 4 || 0 || 0 || 4 || 2.37%

30 Pensions +related expenditure || 1 273 || 1 257 || 0 || 0 || 1 257 || 98.75% || 0 || 0 || 0 || 0.00% || 16 || 0 || 0 || 16 || 1.25%

31 Language Services || 474 || 390 || 0 || 50 || 440 || 92.98% || 33 || 0 || 33 || 6.89% || 1 || 0 || 0 || 1 || 0.13%

32 Energy || 889 || 698 || 146 || 16 || 860 || 96.75% || 26 || 0 || 26 || 2.96% || 3 || 0 || 0 || 3 || 0.29%

40 Reserves || 371 || 0 || 0 || 0 || 0 || 0.00% || 0 || 0 || 0 || 0.00% || 371 || 0 || 0 || 371 || 100.00%

90 Other Institutions || 3 930 || 3 225 || 9 || 336 || 3 570 || 90.83% || 156 || 22 || 178 || 4.53% || 182 || 0 || 0 || 182 || 4.64%

Total || 148 681 || 141 204 || 259 || 3 108 || 144 572 || 97.24% || 3 120 || 301 || 3 420 || 2.30% || 689 || 0 || 0 || 689 || 0.46%

11. Implementation of payment appropriations by budget Policy Area ||

|| || || || || || || || EUR millions

Policy Area || Payment Appro-priations authorised || Payments made || Appropriations carried over || Appropriations lapsing

|| From the year's approps || From carry-overs || Assigned revenue || Total || % || Automatic carry-overs || Carry-overs by decision || Assigned revenue || Total || % || From the year's approps || From carry-overs || Assigned revenue || Total || %

|| 1 || 2 || 3 || 4 || 5=2+3+4 || 6=5/1 || 7 || 8 || 9 || 10=7+8+9 || 11=10/1 || 12 || 13 || 14 || 15=12+13+14 || 16=15/1

01 Economic and financial affairs || 443 || 330 || 40 || 20 || 389 || 87.76% || 6 || 0 || 2 || 9 || 1.92% || 31 || 14 || 0 || 46 || 10.32%

02 Enterprise || 1 485 || 1 271 || 22 || 43 || 1 336 || 89.99% || 20 || 0 || 103 || 123 || 8.29% || 14 || 12 || 0 || 25 || 1.71%

03 Competition || 104 || 85 || 7 || 2 || 94 || 90.73% || 6 || 0 || 3 || 9 || 8.53% || 0 || 1 || 0 || 1 || 0.74%

04 Employment and social affairs || 10 498 || 10 354 || 32 || 7 || 10 392 || 98.99% || 17 || 50 || 8 || 75 || 0.72% || 26 || 4 || 0 || 30 || 0.29%

05 Agriculture & rural development || 57 784 || 54 663 || 349 || 1 330 || 56 342 || 97.50% || 25 || 45 || 1 337 || 1 406 || 2.43% || 27 || 8 || 0 || 35 || 0.06%

06 Mobility  and transport || 1 217 || 1 001 || 64 || 48 || 1 114 || 91.53% || 6 || 0 || 71 || 77 || 6.33% || 25 || 1 || 0 || 26 || 2.15%

07 Environment & Climate action || 379 || 307 || 14 || 10 || 332 || 87.54% || 18 || 0 || 6 || 24 || 6.33% || 21 || 2 || 0 || 23 || 6.13%

08 Research || 5 476 || 4 217 || 23 || 364 || 4 604 || 84.08% || 26 || 0 || 835 || 861 || 15.73% || 4 || 7 || 0 || 10 || 0.19%

09 Information society and media || 1 741 || 1 422 || 15 || 52 || 1 489 || 85.51% || 13 || 0 || 236 || 250 || 14.35% || 1 || 2 || 0 || 2 || 0.14%

10 Direct research || 832 || 343 || 35 || 63 || 441 || 53.01% || 44 || 0 || 341 || 384 || 46.22% || 2 || 4 || 0 || 6 || 0.77%

11 Maritime affairs and Fisheries || 812 || 750 || 21 || 1 || 772 || 95.08% || 3 || 1 || 1 || 5 || 0.64% || 18 || 17 || 0 || 35 || 4.28%

12 Internal market || 104 || 89 || 5 || 1 || 95 || 91.52% || 6 || 0 || 2 || 8 || 7.56% || 0 || 1 || 0 || 1 || 0.92%

13 Regional policy || 33 052 || 32 917 || 76 || 2 || 32 995 || 99.83% || 11 || 38 || 2 || 51 || 0.16% || 4 || 1 || 0 || 5 || 0.02%

14 Taxation and customs union || 133 || 114 || 7 || 1 || 123 || 92.20% || 7 || 0 || 3 || 9 || 7.03% || 0 || 1 || 0 || 1 || 0.77%

15 Education and culture || 2 725 || 2 126 || 15 || 273 || 2 414 || 88.62% || 15 || 0 || 290 || 305 || 11.21% || 0 || 5 || 0 || 5 || 0.18%

16 Communication || 279 || 246 || 11 || 2 || 259 || 92.61% || 14 || 0 || 3 || 17 || 6.09% || 2 || 2 || 0 || 4 || 1.30%

17 Health and consumer protection || 659 || 572 || 31 || 20 || 623 || 94.40% || 11 || 0 || 16 || 27 || 4.07% || 5 || 5 || 0 || 10 || 1.53%

18 Freedom, security and justice || 1 014 || 876 || 25 || 43 || 944 || 93.10% || 8 || 0 || 31 || 40 || 3.95% || 24 || 6 || 0 || 30 || 2.95%

19 External relations || 3 462 || 3 243 || 12 || 59 || 3 313 || 95.72% || 10 || 6 || 50 || 66 || 1.91% || 51 || 32 || 0 || 82 || 2.37%

20 Trade || 113 || 99 || 4 || 1 || 104 || 92.51% || 4 || 2 || 2 || 8 || 6.69% || 0 || 1 || 0 || 1 || 0.80%

21 Development and relations ACP || 1 583 || 1 393 || 11 || 108 || 1 513 || 95.54% || 16 || 17 || 11 || 43 || 2.73% || 7 || 20 || 0 || 27 || 1.74%

22 Enlargement || 970 || 914 || 3 || 10 || 928 || 95.63% || 4 || 0 || 34 || 38 || 3.95% || 0 || 4 || 0 || 4 || 0.43%

23 Humanitarian aid || 1 090 || 1 054 || 5 || 9 || 1 068 || 97.96% || 6 || 0 || 3 || 10 || 0.90% || 12 || 0 || 0 || 12 || 1.14%

24 Fight against fraud || 83 || 66 || 5 || 0 || 71 || 85.96% || 6 || 1 || 0 || 7 || 8.93% || 3 || 2 || 0 || 4 || 5.11%

25 Commission’s policy coordination and legal advice || 221 || 178 || 15 || 4 || 197 || 89.07% || 15 || 0 || 5 || 21 || 9.28% || 0 || 3 || 0 || 4 || 1.65%

26 Commission’s administration || 1 274 || 893 || 122 || 47 || 1 063 || 83.45% || 130 || 2 || 65 || 196 || 15.37% || 3 || 12 || 0 || 15 || 1.18%

27 Budget || 73 || 49 || 8 || 3 || 60 || 82.01% || 8 || 0 || 4 || 12 || 16.29% || 1 || 1 || 0 || 1 || 1.71%

28 Audit || 13 || 11 || 1 || 0 || 12 || 91.58% || 1 || 0 || 0 || 1 || 7.29% || 0 || 0 || 0 || 0 || 1.13%

29 Statistics || 159 || 125 || 5 || 4 || 134 || 84.26% || 5 || 0 || 14 || 19 || 12.19% || 4 || 2 || 0 || 6 || 3.55%

30 Pensions and related expenses || 1 273 || 1 257 || 0 || 0 || 1 257 || 98.75% || 0 || 0 || 0 || 0 || 0.00% || 16 || 0 || 0 || 16 || 1.25%

31 Language Services || 501 || 373 || 25 || 43 || 442 || 88.11% || 17 || 0 || 39 || 56 || 11.23% || 1 || 3 || 0 || 3 || 0.67%

32 Energy || 1 087 || 934 || 14 || 16 || 963 || 88.63% || 6 || 0 || 39 || 44 || 4.08% || 78 || 2 || 0 || 79 || 7.28%

40 Reserves || 0 || 0 || 0 || 0 || 0 || 0.00% || 0 || 0 || 0 || 0 || 0.00% || 0 || 0 || 0 || 0 || 0.00%

90 Other Institutions || 4 321 || 2 873 || 330 || 308 || 3 512 || 81.27% || 351 || 22 || 192 || 565 || 13.07% || 182 || 58 || 5 || 245 || 5.66%

Total || 134 960 || 125 145 || 1 352 || 2 898 || 129 395 || 95.88% || 835 || 185 || 3 748 || 4 768 || 3.53% || 562 || 230 || 5 || 797 || 0.59%

12. MOVEMENTs IN COMMITMENTS OUTSTANDING BY POLICY AREA ||

EUR millions ||

|| Commitments outstanding at end of the previous year || Commitments of the year ||

Policy Area || Commitments carried forward from previous year || Decommitments /Revaluations/Cancellations || Payments || Commitments outstanding at year-end || Commitments made during the year || Payments || Cancellation commitments which cannot be carried over || Commitments outstanding at year-end || Total commitments outstanding at year-end

01 Economic & financial affairs || 581 || (24) || (175) || 382 || 414 || (214) || 0 || 200 || 582

02 Enterprise || 2 414 || (36) || (963) || 1 415 || 1 113 || (373) || 0 || 740 || 2 155

03 Competition || 8 || (1) || (7) || 0 || 94 || (87) || 0 || 7 || 7

04 Employment & social affairs || 28 673 || (250) || (9 999) || 18 424 || 11 638 || (394) || 0 || 11 245 || 29 669

05 Agriculture rural development || 20 197 || (76) || (10 833) || 9 288 || 58 579 || (45 509) || 0 || 13 070 || 22 358

06 Mobility and transport || 2 468 || (154) || (894) || 1 420 || 1 609 || (220) || 0 || 1 389 || 2 809

07 Environment & Climate action || 783 || (30) || (199) || 554 || 478 || (133) || 0 || 344 || 898

08 Research || 8 222 || (147) || (2 910) || 5 165 || 5 730 || (1 694) || (2) || 4 035 || 9 200

09 Information society & media || 2 157 || (35) || (767) || 1 355 || 1 637 || (722) || 0 || 914 || 2 269

10 Direct research || 163 || (12) || (93) || 58 || 474 || (348) || 0 || 125 || 184

11 Maritime affairs and Fisheries || 1 877 || (42) || (521) || 1 314 || 999 || (251) || 0 || 748 || 2 062

12 Internal market || 20 || (1) || (16) || 3 || 98 || (80) || 0 || 19 || 22

13 Regional policy || 101 474 || (561) || (31 994) || 68 919 || 40 495 || (1 001) || 0 || 39 494 || 108 413

14 Taxation and customs union || 76 || (2) || (51) || 22 || 141 || (71) || 0 || 69 || 92

15 Education and culture || 1 698 || (82) || (707) || 909 || 2 720 || (1 708) || 0 || 1 012 || 1 921

16 Communication || 123 || (16) || (83) || 24 || 274 || (176) || 0 || 98 || 122

17 Health and consumer protection || 724 || (58) || (312) || 355 || 674 || (311) || 0 || 363 || 718

18 Freedom, security & justice || 1 282 || (51) || (267) || 964 || 1 308 || (678) || 0 || 631 || 1 595

19 External relations || 9 380 || (249) || (2 229) || 6 901 || 4 415 || (1 085) || 0 || 3 330 || 10 232

20 Trade || 19 || (1) || (12) || 6 || 106 || (93) || 0 || 13 || 20

21 Development/relations ACP || 3 276 || (94) || (971) || 2 211 || 1 612 || (542) || 0 || 1 070 || 3 281

22 Enlargement || 2 766 || (93) || (766) || 1 907 || 1 119 || (162) || 0 || 957 || 2 864

23 Humanitarian aid || 621 || (24) || (369) || 229 || 1 139 || (699) || 0 || 441 || 670

24 Fight against fraud || 32 || (4) || (16) || 12 || 77 || (56) || 0 || 22 || 34

25 Commission's policy coordination & legal advice || 20 || (3) || (17) || 1 || 198 || (180) || 0 || 18 || 19

26 Commission’s administration || 179 || (14) || (156) || 10 || 1 081 || (907) || 0 || 174 || 184

27 Budget || 8 || (1) || (8) || 0 || 61 || (52) || 0 || 9 || 9

28 Audit || 1 || 0 || (1) || 0 || 12 || (11) || 0 || 1 || 1

29 Statistics || 108 || (5) || (50) || 53 || 146 || (84) || 0 || 62 || 115

30 Pensions & related expenditure || 0 || 0 || 0 || 0 || 1 257 || (1257) || 0 || 0 || 0

31 Language Services || 28 || (3) || (25) || 0 || 440 || (417) || 0 || 24 || 24

32 Energy || 4 672 || (47) || (820) || 3 805 || 860 || (143) || 0 || 717 || 4 522

90 Other Institutions || 344 || (2) || (330) || 12 || 3 570 || (3 181) || (3) || 385 || 397

Total || 194 395 || (2 120) || (66 559) || 125 717 || 144 572 || (62 836) || (9) || 81 727 || 207 443

13. breakdown of commitments outstanding by year of origin BY POLICY AREA ||

|| || || || || || || || EUR millions ||

Policy Area || <2005 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || Total

01 Economic and financial affairs || 0 || 11 || 43 || 10 || 5 || 113 || 200 || 200 || 582

02 Enterprise || 9 || 9 || 10 || 27 || 179 || 222 || 959 || 740 || 2 155

03 Competition || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 7 || 7

04 Employment and social affairs || 109 || 333 || 2 029 || 62 || 984 || 5 209 || 9 697 || 11 245 || 29 669

05 Agriculture and rural development || 6 || 1 || 631 || 0 || 30 || 828 || 7 790 || 13 070 || 22 358

06 Mobility and transport || 24 || 21 || 45 || 161 || 152 || 400 || 618 || 1 389 || 2 809

07 Environment & Climate action || 3 || 13 || 23 || 78 || 111 || 156 || 172 || 344 || 898

08 Research || 157 || 96 || 204 || 370 || 736 || 1 413 || 2 189 || 4 035 || 9 200

09 Information society and media || 12 || 13 || 20 || 75 || 196 || 363 || 676 || 914 || 2 269

10 Direct research || 0 || 1 || 5 || 2 || 11 || 15 || 24 || 125 || 184

11 Maritime affairs and Fisheries || 33 || 18 || 275 || 10 || 28 || 302 || 649 || 748 || 2 062

12 Internal market || 0 || 0 || 0 || 0 || 0 || 0 || 3 || 19 || 22

13 Regional policy || 681 || 579 || 8 004 || 159 || 5 532 || 20 317 || 33 647 || 39 494 || 108 413

14 Taxation and customs union || 0 || 0 || 0 || 0 || 2 || 5 || 16 || 69 || 92

15 Education and culture || 4 || 3 || 4 || 78 || 177 || 238 || 405 || 1 012 || 1 921

16 Communication || 0 || 0 || 0 || 0 || 1 || 3 || 20 || 98 || 122

17 Health and consumer protection || 11 || 2 || 10 || 14 || 50 || 92 || 175 || 363 || 718

18 Area of freedom, security and justice || 1 || 9 || 7 || 57 || 142 || 345 || 403 || 631 || 1 595

19 External relations || 406 || 135 || 421 || 750 || 1 149 || 1 658 || 2 382 || 3 330 || 10 232

20 Trade || 0 || 0 || 0 || 0 || 0 || 2 || 4 || 13 || 20

21 Development and relations ACP States || 118 || 87 || 118 || 145 || 344 || 586 || 812 || 1 070 || 3 281

22 Enlargement || 45 || 42 || 116 || 185 || 385 || 453 || 682 || 957 || 2 864

23 Humanitarian aid || 0 || 0 || 1 || 2 || 12 || 41 || 172 || 441 || 670

24 Fight against fraud || 0 || 0 || 0 || 1 || 1 || 3 || 6 || 22 || 34

25 Commission's policy coordination & legal advice || 0 || 0 || 0 || 0 || 0 || 0 || 1 || 18 || 19

26 Commission’s administration || 0 || 0 || 0 || 0 || 1 || 0 || 9 || 174 || 184

27 Budget || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 9 || 9

28 Audit || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 1 || 1

29 Statistics || 2 || 1 || 3 || 3 || 2 || 10 || 31 || 62 || 115

30 Pensions and related expenditure || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0

31 Language Services || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 24 || 24

32 Energy || 42 || 28 || 56 || 55 || 216 || 1 545 || 1 863 || 717 || 4 522

90 Other Institutions || 0 || 0 || 0 || 0 || 0 || 0 || 12 || 385 || 397

Total || 1 661 || 1 401 || 12 024 || 2 247 || 10 446 || 34 319 || 63 618 || 81 727 || 207 443

14. SUMMARY OF THE IMPLEMENTATION OF BUDGET REVENUE BY INSTITUTION ||

|| || || || || || || || EUR millions

Institution || Income appropriations || Entitlements established || Revenue || Receipts as || Outstanding

|| Initial || Final || Current year || Carried || Total || On entitlements of current year || On entitlements Carried || Total || % of budget ||

European Parliament || 125 || 125 || 170 || 29 || 200 || 169 || 4 || 173 || 139.02% || 26

European Council and Council || 49 || 49 || 121 || 8 || 129 || 111 || 7 || 118 || 240.35% || 11

Commission || 126 236 || 126 436 || 128 119 || 14 535 || 142 654 || 127 697 || 1 615 || 129 312 || 102.27% || 13 342

Court of Justice || 44 || 44 || 45 || 0 || 45 || 44 || 0 || 44 || 102.26% || 0

Court of Auditors || 21 || 21 || 20 || 0 || 20 || 20 || 0 || 20 || 94.14% || 0

Economic and Social Committee || 11 || 11 || 16 || 0 || 16 || 16 || 0 || 16 || 138.47% || 0

Committee of the Regions || 8 || 8 || 21 || 0 || 21 || 21 || 0 || 21 || 262.06% || 0

Ombudsman || 1 || 1 || 1 || 0 || 1 || 1 || 0 || 1 || 99.52% || 0

European Data Protection Supervisor || 1 || 1 || 1 || 0 || 1 || 1 || 0 || 1 || 69.15% || 0

European External Action Service || 32 || 32 || 295 || 0 || 295 || 295 || 0 || 295 || 917.61% || 0

Total || 126 527 || 126 727 || 128 808 || 14 572 || 143 380 || 128 374 || 1 626 || 130 000 || 102.58% || 13 380

15. Implementation of commitment and payment appropriations by Institution ||

Commitment appropriations ||

|| || || || || || || || EUR millions

Institution || Commitment appropriations authorised || Commitments made || Appropriations carried over || Appropriations lapsing

From the year's approps || From carry-overs || From assigned revenue || Total || % || From assigned revenue || Carry-overs by decision || Total || % || From the year's budget approps || from carry-overs || Assigned revenue || Total || %

|| 1 || 2 || 3 || 4 || 5=2+3+4 || 6=5/1 || 7 || 8 || 9=7+8 || 10=9/1 || 11 || 12 || 13 || 14=11+12+13 || 15=14/1

European Parliament || 1 820 || 1 570 || 9 || 24 || 1 603 || 88.11% || 101 || 22 || 123 || 6.74% || 94 || 0 || 0 || 94 || 5.15%

European Council and Council || 647 || 507 || 0 || 47 || 554 || 85.51% || 37 || 0 || 37 || 5.77% || 56 || 0 || 0 || 56 || 8.71%

Commission || 144 751 || 137 979 || 250 || 2 772 || 141 002 || 97.41% || 2 964 || 279 || 3 242 || 2.24% || 507 || 0 || 0 || 507 || 0.35%

Court of Justice || 344 || 336 || 0 || 2 || 338 || 98.11% || 1 || 0 || 1 || 0.34% || 5 || 0 || 0 || 5 || 1.55%

Court of Auditors || 145 || 134 || 0 || 0 || 135 || 92.81% || 0 || 0 || 0 || 0.30% || 10 || 0 || 0 || 10 || 6.89%

Economic & Social Committee || 132 || 123 || 0 || 3 || 125 || 95.20% || 0 || 0 || 0 || 0.30% || 6 || 0 || 0 || 6 || 4.50%

Committee of the Regions || 96 || 82 || 0 || 12 || 94 || 97.76% || 0 || 0 || 0 || 0.02% || 2 || 0 || 0 || 2 || 2.22%

Ombudsman || 9 || 9 || 0 || 0 || 9 || 92.54% || 0 || 0 || 0 || 0.00% || 1 || 0 || 0 || 1 || 7.46%

European Data Protection Supervisor || 8 || 7 || 0 || 0 || 7 || 89.31% || 0 || 0 || 0 || 0.00% || 1 || 0 || 0 || 1 || 10.69%

European External Action Service || 729 || 457 || 0 || 249 || 706 || 96.82% || 16 || 0 || 16 || 2.19% || 7 || 0 || 0 || 7 || 0.99%

Total || 148 681 || 141 204 || 259 || 3 108 || 144 572 || 97.24% || 3 120 || 301 || 3 420 || 2.30% || 689 || 0 || 0 || 689 || 0.46%

|| || || || || || ||

Payment appropriations ||

|| || || || || || || EUR millions

Institution || Payment appropriations authorised || Payments made || Appropriations carried over || Appropriations lapsing

From year's approps || From carryovers || From assigned revenue || Total || % || Automatic carry-overs || Carry-overs by decision || From assigned revenue || Total || % || From year's approps || From carry-overs || Assigned revenue || Total || %

|| 1 || 2 || 3 || 4 || 5=2+3+4 || 6=5/1 || 7 || 8 || 9 || 10=7+8+9 || 11=10/1 || 12 || 13 || 14 || 15=12+13+14 || 16=15/1

European Parliament || 2 060 || 1 348 || 207 || 25 || 1 580 || 76.72% || 223 || 22 || 109 || 353 || 17.14% || 94 || 33 || 0 || 126 || 6.14%

European Council and Council || 699 || 465 || 40 || 41 || 547 || 78.26% || 41 || 0 || 44 || 86 || 12.29% || 56 || 10 || 0 || 66 || 9.45%

Commission || 130 639 || 122 272 || 1 021 || 2 590 || 125 883 || 96.36% || 484 || 163 || 3 557 || 4 203 || 3.22% || 380 || 172 || 0 || 552 || 0.42%

Court of Justice || 361 || 318 || 15 || 2 || 334 || 92.62% || 18 || 0 || 1 || 19 || 5.36% || 5 || 2 || 0 || 7 || 2.02%

Court of Auditors || 161 || 121 || 15 || 0 || 137 || 84.64% || 13 || 0 || 0 || 14 || 8.41% || 10 || 1 || 0 || 11 || 6.95%

Economic & Social Committee || 142 || 115 || 7 || 3 || 126 || 88.83% || 7 || 0 || 1 || 8 || 5.71% || 6 || 2 || 0 || 8 || 5.46%

Committee of the Regions || 103 || 73 || 6 || 12 || 91 || 88.39% || 9 || 0 || 0 || 9 || 8.51% || 2 || 1 || 0 || 3 || 3.10%

Ombudsman || 10 || 8 || 0 || 0 || 9 || 85.89% || 1 || 0 || 0 || 1 || 6.55% || 1 || 0 || 0 || 1 || 7.56%

European Data protection Supervisor || 9 || 6 || 1 || 0 || 7 || 74.86% || 1 || 0 || 0 || 1 || 10.49% || 1 || 1 || 0 || 1 || 14.65%

European External Action Service || 777 || 419 || 38 || 225 || 682 || 87.80% || 38 || 0 || 36 || 74 || 9.56% || 7 || 9 || 5 || 21 || 2.65%

Total || 134 960 || 125 145 || 1 352 || 2 898 || 129 395 || 95.88% || 835 || 185 || 3 748 || 4 768 || 3.53% || 562 || 230 || 5 || 797 || 0.59%

|| 16. AgencIES income: budget forecasts, entitlements and amounts received || EUR millions ||

Agency || Forecasted income budget || Entitlements established || Amounts received || Outstanding || Funding Commission Policy Area

European Agency for the Cooperation of Energy Regulators || 4 || 4 || 4 || 0 || 06

European Aviation Safety Agency || 139 || 111 || 111 || 0 || 06

Frontex || 118 || 119 || 119 || 0 || 18

European Centre for the Development of Vocational Training || 19 || 19 || 18 || 1 || 15

European Police College || 8 || 9 || 9 || 0 || 18

European Chemicals Agency || 35 || 38 || 38 || 0 || 02

European Centre for Disease prevention and control || 57 || 57 || 57 || 0 || 17

European Monitoring Centre for Drugs and Drug Addiction || 16 || 16 || 16 || 0 || 18

European Banking Authority || 13 || 13 || 13 || 0 || 12

European Insurance and Occupational Pensions Authority || 11 || 9 || 9 || 0 || 12

European Environment Agency || 62 || 45 || 44 || 0 || 07

European Police office || 85 || 85 || 85 || 0 || 18

European Securities and Markets Authority || 17 || 17 || 17 || 0 || 12

Community Fisheries Control Agency || 12 || 12 || 12 || 0 || 11

European Food Safety Authority || 76 || 76 || 76 || 0 || 17

European Institute for Gender Equality || 8 || 8 || 8 || 0 || 04

European GNSS supervisory authority || 8 || 39 || 39 || 0 || 06

Fusion for Energy || 242 || 279 || 243 || 36 || 08

Eurojust || 32 || 31 || 31 || 0 || 18

European Maritime Safety Agency || 57 || 53 || 53 || 0 || 06

Office For Harmonisation in the Internal Market || 166 || 176 || 176 || 0 || 12

European Medicines Agency || 209 || 220 || 199 || 21 || 17

European Network and Information Security Agency || 8 || 8 || 8 || 0 || 09

European Regulators for Electronic Communications office || 1 || 1 || 1 || 0 || 09

European Union Agency for Fundamental Rights || 22 || 22 || 22 || 0 || 18

European Railway Agency || 26 || 25 || 25 || 0 || 06

European Agency for Safety and Health at Work || 15 || 15 || 15 || 0 || 04

European Institute of Innovation and Technology || 16 || 10 || 10 || 0 || 15

Translation Centre for the Bodies of the EU || 51 || 47 || 43 || 4 || 15

European Training Foundation || 20 || 20 || 20 || 0 || 15

Community Plant Variety Office || 13 || 13 || 13 || 0 || 17

European Foundation for the Improvement of Living and Working Conditions || 21 || 21 || 21 || 0 || 04

Education, Audiovisual & Culture Executive Agency || 50 || 50 || 50 || 0 || 15

Executive Agency for Competitiveness and Innovation || 16 || 16 || 16 || 0 || 06

European Research Council Executive Agency || 36 || 36 || 36 || 0 || 08

Research Executive Agency || 39 || 39 || 39 || 0 || 08

Executive Agency for Health and Consumers || 7 || 7 || 7 || 0 || 17

Trans-European Transport Network Executive Agency || 10 || 10 || 10 || 0 || 06

Total || 1 744 || 1 773 || 1 710 || 63 ||

|| || || EUR millions

Type of revenue || Forecasted income budget || Entitlements established || Amounts received || Outstanding

Commission Subsidy || 1 119 || 1 137 || 1 137 || 0

Fee income || 441 || 457 || 437 || 19

Other income || 184 || 180 || 136 || 44

Total || 1 744 || 1 773 || 1 710 || 63

|| 17. Commitment & payment appropriations by Agency ||

|| || EUR millions ||

Agency || Commitment appropriations || Payment appropriations

Approp-riations || Commit-ments made || Carried over || Approp-riations || Payments made || Carried over

European Agency for the Cooperation of Energy Regulators || 5 || 3 || 0 || 6 || 4 || 1

European Aviation Safety Agency || 150 || 122 || 26 || 162 || 103 || 55

Frontex || 121 || 119 || 0 || 145 || 100 || 39

European Centre for the Development of Vocational Training || 21 || 21 || 0 || 21 || 18 || 2

European Police College || 10 || 10 || 0 || 11 || 8 || 2

European Chemicals Agency || 93 || 89 || 0 || 105 || 85 || 15

European Centre for Disease prevention and control || 57 || 55 || 0 || 72 || 58 || 11

European Monitoring Centre for Drugs and Drug Addiction || 17 || 16 || 0 || 17 || 16 || 1

European Banking Authority || 13 || 9 || 0 || 13 || 7 || 2

European Insurance and Occupational Pensions Authority || 11 || 7 || 0 || 11 || 6 || 0

European Environment Agency || 71 || 46 || 25 || 75 || 43 || 31

European Police Office || 87 || 82 || 0 || 107 || 84 || 17

European Securities & Markets Authority || 17 || 13 || 0 || 17 || 11 || 2

Community Fisheries Control Agency || 13 || 13 || 0 || 13 || 12 || 1

European Food Safety Authority || 78 || 77 || 0 || 87 || 72 || 13

European Institute for Gender Equality || 8 || 7 || 0 || 10 || 5 || 3

European GNSS supervisory authority || 77 || 33 || 44 || 56 || 21 || 34

Fusion for Energy || 649 || 647 || 1 || 298 || 255 || 40

Eurojust || 35 || 31 || 2 || 41 || 31 || 7

European Maritime Safety Agency || 58 || 55 || 1 || 59 || 50 || 2

Office For Harmonisation in the Internal Market || 387 || 151 || 0 || 422 || 149 || 32

European Medicines Agency || 212 || 202 || 3 || 254 || 205 || 39

European Network and Information Security Agency || 8 || 8 || 0 || 10 || 9 || 1

European Regulators for Electronic Communications Office || 1 || 1 || 0 || 1 || 1 || 0

European Union Agency for Fundamental Rights || 21 || 20 || 1 || 28 || 21 || 7

European Railway Agency || 26 || 25 || 0 || 32 || 26 || 4

European Agency for Safety & Health at Work || 16 || 14 || 1 || 20 || 14 || 4

European Institute of Innovation and Technology || 26 || 24 || 0 || 16 || 7 || 5

Translation Centre for the Bodies of the EU || 51 || 42 || 0 || 55 || 43 || 4

European Training Foundation || 21 || 20 || 0 || 21 || 20 || 1

Community Plant Variety Office || 14 || 13 || 0 || 14 || 12 || 0

European Foundation for the Improvement of Living and Working Conditions || 21 || 20 || 0 || 24 || 20 || 4

Education, Audiovisual & Culture Executive Agency || 50 || 50 || 0 || 56 || 50 || 6

Executive Agency for Competitiveness and Innovation || 16 || 15 || 0 || 18 || 15 || 1

European Research Council Executive Agency || 36 || 35 || 0 || 37 || 34 || 2

Research Executive Agency || 39 || 38 || 0 || 43 || 37 || 3

Executive Agency for Health and Consumers || 7 || 7 || 0 || 8 || 7 || 1

Trans-European Transport Network Executive Agency || 10 || 10 || 0 || 11 || 10 || 1

Total || 2 553 || 2 149 || 107 || 2 397 || 1 670 || 394

Type of expenditure || Commitment appropriations || Payment appropriations ||

Appropriations || Commitments made || Carried over || Appropriations || Payments made || Carried over

Staff || 757 || 727 || 4 || 773 || 720 || 21

Administrative expenses || 274 || 260 || 4 || 361 || 265 || 76

Operational expenses || 1 522 || 1 162 || 99 || 1 263 || 684 || 297

Total || 2 553 || 2 149 || 107 || 2 397 || 1 670 || 394

18. BUDGET OUTTURN INCLUDING AGENCIES || EUR millions ||

|| || EUROPEAN UNION || AGENCIES || Elimination of subsidies to agencies || TOTAL

|| Revenue for the financial year || 130 000 || 1 710 || (1 137) || 130 573

|| Payments against current year appropriations || (128 043) || (1 451) || 1 137 || (128 357)

|| Payment appropriations carried over to year N+1 || (1 020) || (394) || 0 || (1 413)

|| Cancellation of unused appropriations carried over from year N-1 || 457 || 167 || 0 || 624

|| Exchange differences for the year || 97 || (2) || 0 || 96

|| Budget Outturn || 1 492 || 31 || 0 || 1 523

Explanatory
notes to the

consolidated
reports on the implementation of the budget

1.      BUDGETARY
PRINCIPLES, STRUCTURE & APPROPRIATIONS

2.      EXPLANATION
OF THE CONSOLIDATED REPORTS ON THE IMPLEMENTATION OF THE BUDGET

1. BUDGETARY PRINCIPLES, STRUCTURE & APPROPRIATIONS

1.1    LEGAL BASIS AND THE FINANCIAL REGULATION

The budgetary accounts are kept in
accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002
(OJ L 248 of 16 September 2002) on the Financial Regulation applicable to the
general budget of the European Union and Commission Regulation (EC, Euratom) No
2342/2002 of 23 December 2002 laying down detailed rules for the implementation
of this Financial Regulation. The general budget, the main instrument of the
Union's financial policy, is the instrument which provides for and authorises
the Union's revenue and expenditure every year.

Every year, the Commission
estimates all the Institutions' revenue and expenditure for the year and draws
up a draft budget which it sends to the budgetary authority. On the basis of
this draft budget, the Council draws its position which is then the subject of
negotiations between the two arms of the budgetary authority. The President of
Parliament declares that the joint draft has been finally adopted making the
budget enforceable. The task of executing the budget is mainly the
responsibility of the Commission.

1.2      BUDGETARY
PRINCIPLES

The
general budget of the European Union is governed by a number of basic
principles:

–
Unity
and budget accuracy: all expenditure and revenue must be in a single budget,
booked on a budget line and expenditure may not exceed authorised
appropriations;

–
universality: this principle
comprises two rules:

– the rule of non-assignment,
meaning that budget revenue must not be earmarked for specific items of
expenditure (total revenue must cover total expenditure);

– the gross budget rule,
meaning that revenue and expenditure are entered in full in the budget without
any adjustment against each other;

–
annuality: appropriations are
authorised for a single year so must be used during that year;

–
equilibrium: the revenue and
expenditure shown in the budget must be in balance (estimated revenue must
equal payment appropriations);

–
specification: each appropriation is
assigned to a specific purpose and a specific objective;

–
unit
of account:
the budget is drawn up and implemented in euros, as are the accounts;

–
sound
financial management: budget appropriations are used in accordance with the
principle of sound financial management, i.e. economy, efficiency and
effectiveness;

–
transparency: the budget and
amending budgets and final accounts are published in the Official Journal of
the European Union.

1.3      BUDGET
STRUCTURE

The
budget consists of:

(a)
a
general statement of revenue;

(b)
 separate
sections giving the statements of revenue and expenditure of each Institution:
Section I: Parliament; Section II: Council; Section III: Commission; Section
IV: Court of Justice; Section V: Court of Auditors; Section VI: Economic and
Social Committee; Section VII: Committee of the Regions; Section VIII:
Ombudsman; Section IX : European Data Protection Supervisor; Section X:
European External Action Service.

Each Institution's items of revenue
and expenditure are classified according to their type or the use to which they
are assigned under titles, chapters, articles and items.

1.4      STRUCTURE OF
THE BUDGETARY ACCOUNTS

1.4.1 General overview

Only the Commission budget contains
administrative appropriations and operating appropriations. The other
Institutions have only administrative appropriations. Furthermore, the budget
distinguishes between two types of appropriation: non-differentiated
appropriations and differentiated appropriations.

Non-differentiated appropriations
are used to finance operations of an annual nature (which comply with the
principle of annuality). They cover all the administrative chapters of the
budget of the Commission Section and the whole of every other section, EAGF
appropriations of an annual nature and certain technical appropriations
(repayments, borrowing and lending guarantees, etc.) In the case of
non-differentiated appropriations, the amount of commitment appropriations is
the same as that of payment appropriations.

Differentiated appropriations were
introduced in order to reconcile the principle of annuality with the need to
manage multi-annual operations. They are intended to cover multi-annual
operations and comprise all the other appropriations in all Chapters except
Chapter 1 of the Commission Section. Differentiated appropriations are split
into commitment and payment appropriations:

–
commitment
appropriations: cover the total cost of the legal obligations entered into for the
current financial year for operations extending over a number of years.
However, budgetary commitments for actions extending over more than one
financial year may, in accordance with Article 76(3) of the Financial
Regulation, be broken down over several years into annual instalments where the
basic act so provides.

–
payment
appropriations: cover expenditure arising from commitments entered into in the
current financial year and/or earlier financial years.

1.4.2   Origin of
Appropriations

The main source of appropriations
is the Union's budget for the current year. However, there are other types of
appropriations resulting from the provisions of the Financial Regulation. They
come from previous financial years or outside sources:

–
Initial
budget appropriations adopted for the current year can be supplemented with transfers
between lines in accordance with the rules laid down in Articles 22 to 24 of
the Financial Regulation (No 1605/2002 of 25 June 2002) and by amending budgets
(covered by Articles 37 and 38 of the Financial Regulation).

–
Appropriations
carried over from previous year or made available again also supplement the
current budget. These are (i) non-differentiated payment appropriations which
may be carried over automatically for one financial year only in accordance
with Article 9(4) of the Financial Regulation; (ii) appropriations carried over
by decision of the Institutions in one of two cases: if the preparatory stages
have been completed (Article 9(2)(a) of the Financial Regulation) or if the
legal base is adopted late (Article 9(2)(b)). Both commitment and payment
appropriations may be carried over (Article 9(3)) and (iii) appropriations made
available again as a result of decommitments: This involves the re-entry of
commitment appropriations concerning structural funds which have been
decommitted. Amounts can be re-entered by way of exception in the event of
error by the Commission or if they are indispensable for completion of the
programme (Article 157 of the Financial Regulation).

–
Assigned
revenue
which is made up of (i) refunds where the amounts are assigned revenue on the
budget line which incurred the initial expenditure and may be carried over
without limit; (ii) EFTA appropriations: The agreement on the European Economic
Area provides for financial contribution by its members to certain activities
in the EU budget. The budget lines concerned and the amounts projected are
published in Annex III of the EU budget. The lines concerned are increased by
the EFTA contribution. Appropriations not used at the year-end are cancelled
and returned to the EEA countries; (iii) Revenue from third parties/ other
countries that have concluded agreements with the European Union involving a
financial contribution to EU activities. The amounts received are considered to
be revenue from third parties which is allocated to the budget lines concerned
(often in the field of research) and may be carried over without limit (Article
10 and Article 18(1)(a) and (d) of the Financial Regulation); (iv) Work for
third parties: As part of their research activities, the EU research centres
may work for outside bodies, (Article 161(2) of the Financial Regulation). Like
the revenue from third parties, the work for third parties is assigned to
specific budget lines and may be carried over without limit (Article 10 and
Article 18(1)(d) of the Financial Regulation); and (v) Appropriations made
available again as a result of repayment of payments on account: These are EU
funds which have been repaid by the beneficiaries and may be carried over
without limit. In the area of Structural Funds the re-inscription is based on a
Commission Decision (Article 18(2) of the Financial Regulation and Article 228
of its Implementing Rules).

1.4.3   Composition of
Appropriations Available

–
Final
budget appropriations = initial budget appropriations adopted + amending budget
appropriations + transfers;

–
Additional
appropriations = assigned revenue (see above) + appropriations carried over from the
previous financial year or made available again following decommitments;

–
Total
appropriations authorised = final budget appropriations + additional
appropriations;

–
Appropriations
for the year (as used to calculate the budgetary result) = final budget
appropriations + assigned revenue.

1.5      BUDGET
IMPLEMENTATION

The implementation of the budget is
governed by the Financial Regulation, Article 48(1) of which states: "The
Commission shall implement ... the budget in accordance with this Regulation,
on its own responsibility and within the limits of the appropriations
authorised." Article 50 states that the Commission shall confer on the
Institutions the requisite powers for the implementation of the sections of the
budget relating to them.

1.6      OUTSTANDING
COMMITMENTS (RAL)

With the introduction of
differentiated appropriations, a gap developed between commitments entered into
and payments made: this gap, corresponding to outstanding commitments,
represents the time-lag between when the commitments are entered into and when
the corresponding payments are made.

2. EXPLANATION OF THE CONSOLIDATED REPORTS ON THE IMPLEMENTATION OF
THE BUDGET

2.1      BUDGET OUTTURN
FOR THE YEAR (Table 1)

2.1.1   General

The amounts of own resources
entered in the accounts are those credited in the course of the year to the
accounts opened in the Commission's name by the governments of the Member
States. Revenue comprises also, in the case of a surplus, the budget outturn
for the previous financial year. The other revenue entered in the accounts is
the amount actually received in the course of the year.

For the purposes of calculating the
budget outturn for the year, expenditure comprises payments made against the
year's appropriations for payments plus any of the appropriations for that year
that are carried over to the following year. Payments made against the year's
appropriations for payments means payments that are made by the accounting
officer by 31 December of the financial year. In the case of the European
Agricultural Guarantee Fund, the payments are those effected by the Member
States between 16 October N-1 and 15 October N, provided that the accounting
officer was notified of the commitment and authorisation by 31 January N+1.
EAGF expenditure may be subject to a conformity decision following controls in
the Member States.

The budget outturn comprises two
elements: the result of the European Union and the result of the participation
of the EFTA countries belonging to the EEA. In accordance with Article 15 of
Regulation No 1150/2000 on own resources, this outturn represents the
difference between:

–
total
revenue received for that year;

–
and
total payments made against that year's appropriations plus the total amount of
that year's appropriations carried over to the following year.

The following are added to or
deducted from the resulting figure:

–
the
net balance of cancellations of payment appropriations carried over from
previous years and any payments which, because of fluctuations in the euro
rate, exceed non-differentiated appropriations carried over from the previous
year;

–
the
balance of exchange-rate gains and losses recorded during the year.

The budget outturn is returned to
the Member States the following year through deduction of their amounts due for
that financial year.

Appropriations carried over from
the previous financial year in respect of contributions by and work for third
parties, which by definition never lapse, are included with the additional
appropriations for the financial year. This explains the difference between
carryovers from the previous year in the 2011 budget implementation statements
and those carried over to the following year in the 2010 budget implementation
statements. The payment appropriations for re-use and appropriations
made available again following the repayment of payments on account are
disregarded when calculating the outturn for the year.

The payment
appropriations carried over include: automatic carryovers and carryovers by
decision. The cancellation of unused payment appropriations carried over from
the previous year shows the cancellations on appropriations carried over
automatically and by decision. It also includes the decrease in assigned
revenue appropriations carried over to the next year in comparison with 2010.

2.1.2   Reconciliation
of the budget outturn with the economic outturn

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

|| RECONCILIATION: ECONOMIC OUTTURN – BUDGET OUTTURN ||

|| || EUR millions

|| 2011 || 2010

|| ||

ECONOMIC OUTTURN FOR THE YEAR || (1 789) || 17 232

|| ||

Revenues || ||

Entitlements established in current year but not yet collected || (371) || (3 132)

Entitlements established in previous years and collected in current year || 2 072 || 1 346

Accrued revenue (net) || (236) || (371)

|| ||

Expenditure || ||

Accrued expenses (net) || 3 410 || (7 426)

Expenses prior year paid in current year || (936) || (386)

Net-effect pre-financing || 1 131 || (678)

Payment appropriations carried over to next year || (1 211) || (2 798)

Payments made from carry-overs & cancellation of unused payment appropriations || 2 000 || 1 760

Movement in provisions || (2 109) || (323)

Other || (378) || (257)

|| ||

Economic outturn Agencies & ECSC || (91) || (418)

|| ||

BUDGET OUTTURN FOR THE YEAR || 1 492 || 4 549

|| ||

Reconciling items - Revenue

The actual budgetary
revenue for a financial year corresponds to the revenue collected from
entitlements established in the course of the year and amounts collected from
entitlements established in previous years. Therefore the entitlements
established in the current year but not yet collected are to be deducted
from the economic outturn for reconciliation purposes as they do not form part
of budgetary revenue. On the contrary the entitlements established in
previous years and collected in current year must be added to the economic
outturn for reconciliation purposes.

The net accrued
revenue mainly consists of accrued revenue for agricultural levies, own
resources and interests and dividends. Only the net-effect, i.e. accrued
revenue for current year minus reversal accrued revenue from previous year, is
taken into consideration.

Reconciling items - Expenditure

The net accrued
expenses mainly consist of accruals made for year-end cut-off purposes,
i.e. eligible expenses incurred by beneficiaries of Community funds but not yet
reported to the Commission.

While accrued expenses
are not considered as budgetary expenditure, the payments made in the current
year relating to invoices registered in prior years are part of current
year's budgetary expenditure.

The net effect of
pre-financing is the combination of (1) the new pre-financing amounts paid
in the current year and recognised as budgetary expenditure of the year and (2)
the clearing of the pre-financing paid in current year or previous years
through the acceptance of eligible costs. The latter represent an expense in
accrual terms but not in the budgetary accounts since the payment of the
initial pre-financing had already been considered as a budgetary expenditure at
the time of its payment.

Besides the payments
made against the year's appropriations, the appropriations for that year that
are carried to the next year also need to be taken into account in
calculating the budget outturn for the year (in accordance with Article 15 of
Regulation No 1150/2000). The same applies for the budgetary payments made in
the current year from carry-overs and the cancellation of unused payment
appropriations.

The movement
in provisions relate to year-end estimates made in the accrual accounts
(employee benefits mainly) that do not impact the budgetary accounts. Other
reconciling amounts comprise different elements such as asset depreciation,
asset acquisitions, capital lease payments and financial participations for
which the budgetary and accrual accounting treatments differ.

2.2      COMPARISON OF
BUDGET AND ACTUAL AMOUNTS (Table 2)

In the initial adopted budget,
signed by the President of the European Parliament on 15 December 2010, the
amount of payment appropriations was EUR 126 527 million and the amount to be
financed by own resources totalled EUR 125 106 million. The revenue and
expenditure estimates in the initial budget are typically adjusted during the
budgetary year, such modifications being presented in amending budgets.
Adjustments in the GNI-based own resources ensure that budgeted revenue matches
exactly budgeted expenditure. In accordance with the principle of equilibrium,
budget revenue and expenditure (payment appropriations) must be in balance.

Revenue:

During 2011 seven amending budgets
were adopted. Taking them into account, the total final revenue in the 2011
budget amounted to EUR 126 727 million. This was financed by own resources
totalling EUR 118 289 million (thus EUR 6 816 million less than initially
forecasted) and the remainder by other revenue. The reduced need for own resources
stemmed mainly from the inclusion of EUR 4 539 million relating to the surplus
of the previous year. Finally the changes in the revenue forecast in the
Amending Budget no. 6/2011 resulted in a supplementary reduction.

As far as the own resources outturn
is concerned, the collection of traditional own resources matched almost the
forecasted amounts. Namely because the budget estimates that were modified at
the time the Amending Budget No. 4/2011 was established (they were increased by
EUR 1 090 million according to the new macroeconomic forecasts of spring 2011),
were once again amended in the Amending Budget No. 6/2011 to take into account
the actual rhythm of collection. Thus they were decreased by EUR 1 200
re-establishing almost the original amount.

The final Member States' VAT and
GNI payments also correspond closely to the final budgetary estimate. The
differences between the forecasted amounts and the amounts actually paid are
due to the differences between the euro rates used for budgetary purposes and
the rates in force at the time when the Member States outside the EMU actually
made their payments.

Expenditure:

The year 2011 was the fifth year of
the current programming period, with many major programmes seeing an acceleration
in the implementation of payments. Given the general context of fiscal
consolidation in the Member States, however, the increase of payment
appropriations in the budget had been limited, and proved insufficient to meet
the payment needs during the course of the year. It was also below a level,
which would have had an affect on reducing the volume of outstanding
commitments (RAL = reste à liquider).

For commitments, the authorised
budget, and hence the political targets set, were fully implemented (99.6%)
Adjustments during the year concerned EUR 240 million for the European
Solidarity Fund, unforeseeable expenditure by its very nature, and EUR 41
million for Title 18 Area of freedom, security and justice (mainly for
FRONTEX). The total implementation of EUR 141 204 million left EUR 617 million
unused. After the carryover to 2012, an amount of EUR 316 million lapses, as
well as the un-mobilised reserve for European Globalisation fund of EUR 371
million and unused provisional appropriations of EUR 2 million.

The total implementation of payment
appropriations, EUR 125 145 million, represents an implementation rate of 98.8%.
The total appropriations were amended in course of the year, with an additional
EUR 200 million authorised in Amending Budget 6/2011 for the European Social
Fund (ESF). A further amount of EUR 253 million was redeployed from Rural
Development to the ESF in this amending budget, and the budgetary authority
transfer DEC 52/2011 provided another EUR 601 million for this Fund. Despite
these measures, a surge in payment requests in the last three weeks of the
year, and an absence of the necessary payment appropriations, meant that some
EUR 11 billion in claims will only be met in 2012.

The unused voted appropriations
excluding the reserves amounted to EUR 1 580 million (2010: EUR 3 243 million)
and after the carryover to 2012, a total of EUR 560 million (2010: EUR 1 730
million) lapses, mainly in Headings 2 and 4. EUR 2 million of provisional
payment appropriations remained unused.

A more detailed
analysis of budgetary adjustments, their relevant context, their justification
and their impact is presented in Commission's Report on Budgetary and Financial
Management 2011, Part A "Overview at budget level" and Part B dealing
with each heading
of the multi-annual financial framework.

2.3    REVENUE (Table 3)

The revenue of the
general budget of the European Union can be divided into two main categories:
own resources and other revenue. This is laid down in Article 311 of the Treaty
on the Functioning of the European Union, which states that: "Without
prejudice to other revenue, the budget shall be financed wholly from own
resources." The main bulk of budgetary expenditure is financed by own
resources. Other revenue represents only a minor part of total financing.

There are three
categories of own resources: traditional own resources, the VAT resource and
the GNI resource. Traditional own resources, in turn, comprise sugar levies and
customs duties. A correction mechanism in favour of the United Kingdom as well as a gross reduction in the annual GNI-based contribution of Netherlands and Sweden are also part of the own resources system.

The allocation of own
resources is made in accordance with the rules laid down in the Council
Decision No. 2007/436/EC, Euratom of 7 June 2007 on the system of the European
Communities' own resources (ORD 2007). On 1 March 2009 the ORD 2007 entered
into force. However it took effect on 1 January 2007. Consequently the
retroactive effects have been taken in account in the budgetary year 2009.

2.3.1   Traditional
own resources

Traditional own
resources: All established amounts of traditional own resources must be entered
in one or other of the accounts kept by the competent authorities.

–          In the ordinary account provided for in Article 6(3)(a)
of Regulation No 1150/2000: all amounts recovered or guaranteed.

–          In the separate account provided for in Article 6(3)(b)
of Regulation No 1150/2000: all amounts not yet recovered and/or not
guaranteed; amounts guaranteed but challenged may also be entered in this
account.

For the separate
account, the Member States quarterly statement to the Commission includes:

–          the balance
to be recovered during the previous quarter,

–          the
established entitlements during the quarter in question,

–          rectifications
of the base (corrections/cancellations) during the quarter in question,

–          amounts
written off (which cannot be made available according to Article 17(2) of
Regulation 1150/2000),

–          the amounts
recovered during the quarter in question,

–          the balance
to be recovered at the end of the quarter in question.

Traditional own
resources must be entered in the Commission's account with the Treasury or the
body appointed by the Member State at the latest on the first working day
following the 19th day of the second month following the month during which the
entitlement was established (or recovered in the case of the separate account).
Member States retain, by way of collection costs, 25% of traditional own
resources. The contingent own resources entitlements are adjusted on the basis
of the likelihood of their recovery.

2.3.2   VAT-based
resources and GNI-based resources

VAT-based own resource
derive from the application of a uniform rate, for all Member States, to the
harmonised VAT base determined in accordance with the rules of Article 2(1)(b)
of the ORD 2007. The uniform rate is fixed at 0.30% except for the period
2007-2013 in which the rate of call for Austria is fixed at 0.225, for Germany at 0.15% and for Netherlands and Sweden at 0.10%. The VAT base is capped at 50% of GNI for
all Member States.

The GNI-based resource
is a variable resource intended to supply the revenue required, in any given
year, to cover expenditure exceeding the amount collected from traditional own
resources, VAT resources and miscellaneous revenue. The revenue derives from
the application of a uniform rate to the aggregate GNI of all the Member
States. VAT and GNI-based resources are determined on the basis of forecasts of
VAT and GNI bases made when the preliminary draft budget is being prepared.
These forecasts are subsequently revised; the figures are updated during the
budget year in question by means of an amending budget.

The actual figures for
the VAT and GNI bases are available in the course of the year following the
budget year in question. The Commission calculates the differences between the
amounts due by the Member States by reference to the actual bases and the sums
actually paid on the basis of the (revised) forecasts. These VAT and GNI
balances, either positive or negative, are called in by the Commission from the
Member States for the first working day of December of the year following the
budget year in question. Corrections may still be made to the actual VAT and
GNI bases during the subsequent four years, unless a reservation is issued. The
balances calculated earlier are adjusted and the difference is called in at the
same time as the VAT and GNI balances for the previous budget year.

When conducting
controls of VAT statements and GNI data, the Commission may notify reservations
to the Member States regarding certain points which may have consequences to
their own resources contributions. These points, for example, may result from
an absence of acceptable data, or a need to develop a suitable methodology.
These reservations have to be seen as potential claims on the Member States for
uncertain amounts as their financial impact cannot be estimated with accuracy.
When the exact amount can be determined, the corresponding VAT and GNI-based
resources are called either in connection with VAT and GNI balances or by
individual calls for funds.

2.3.3   UK correction

This mechanism reduces the own
resources payments of the UK in proportion to what is known as its
"budgetary imbalance" and increases the own resources payments of the
other Member States correspondingly. The budgetary imbalance correction
mechanism in favour of the United Kingdom was instituted by the European
Council in Fontainebleau (June 1984) and the resulting Own Resources Decision
of 7 May 1985. The purpose of the mechanism was to reduce the budgetary
imbalance of the UK through a reduction in its payments to the EU. Germany, Austria, Sweden and Netherlands benefit from a reduced financing of the correction
(restricted to one fourth of their normal share).

2.3.4   Gross reduction

The European Council of 15 and 16
December 2005 concluded that the Netherlands and Sweden shall benefit from
gross reductions in their annual GNI-based contributions during the period
2007-2013. Thus this mechanism of compensation stipulates that the Netherlands shall benefit from a gross reduction in its annual GNI contribution of EUR 605 million
and Sweden from a gross reduction in its annual GNI contribution of EUR 150
million, measured in 2004 prices.

2.4      EXPENDITURE (Tables
4 to 13)

2.4.1   Financial
Framework 2007-2013

|| EUR millions

|| 2007 || 2008 || 2009 || 2010 || 2011 || 2012 || 2013

1. Sustainable Growth || 53 979 || 57 653 || 61 696 || 63 555 || 63 974 || 67 614 || 70 147

2. Preservation & management of natural resources || 55 143 || 59 193 || 56 333 || 59 955 || 59 888 || 60 810 || 61 289

3. Citizenship, freedom, security & justice || 1 273 || 1 362 || 1 518 || 1 693 || 1 889 || 2 105 || 2 376

4. EU as a global player || 6 578 || 7 002 || 7 440 || 7 893 || 8 430 || 8 997 || 9 595

5. Administration || 7 039 || 7 380 || 7 525 || 7 882 || 8 091 || 8 523 || 9 095

6. Compensations || 445 || 207 || 210 || 0 || 0 || 0 || 0

Commitment appropriations: || 124 457 || 132 797 || 134 722 || 140 978 || 142 272 || 148 049 || 152 502

Total payment appropriations: || 122 190 || 129 681 || 120 445 || 134 289 || 133 700 || 141 360 || 143 911

This section describes
the main categories of EU expenditure, classified by heading of the financial
framework 2007-2013. The 2011 financial year was the fifth covered by the
financial framework 2007-2013. The overall ceiling on commitments
appropriations for 2011 comes to EUR 142 272 million, equivalent to 1.15% of
GNI. The corresponding ceiling on the appropriations for payments comes to EUR 133
700 million, i.e. 1.08 % of GNI. The above table shows the financial framework
at current prices.

Heading 1 – Sustainable growth

This Heading divided
into two separate, but interlinked components:

-
1a. Competitiveness for growth and employment, encompassing
expenditure on research and innovation, education and training, trans-European
networks, social policy, the internal market and accompanying policies.

-
1b. Cohesion for growth and employment, designed to enhance
convergence of the least developed Member States and regions, to complement the
EU strategy for sustainable development outside the less prosperous regions and
to support inter regional cooperation..

Heading 2 – Preservation and management
of natural resources

Heading 2 includes the
common agricultural and fisheries policies, rural development and environmental
measures, in particular Natura 2000. The amount earmarked for the common
agricultural policy reflects the agreement reached at the European Council in
October 2002.

Heading 3 – Citizenship, freedom,
security and justice

The new heading 3
(Citizenship, freedom, security and justice) reflects the growing importance
attached to certain fields where the EU has been assigned new tasks – justice
and home affairs, border protection, immigration and asylum policy, public
health and consumer protection, culture, youth, information and dialogue with
citizens. It is split in two components:

-
3a. Freedom, Security and Justice

-
3b. Citizenship

Heading 4 – The EU as a global
player

Heading 4 covers all
external action, including pre-accession instruments. Whereas the Commission
had proposed to integrate the European Development Fund (EDF) into the
financial framework, the European Council and the European Parliament agreed to
leave it outside.

Heading 5 - Administration

This heading covers
administrative expenditure for all institutions, pensions and the European
Schools. For the Institutions other than the Commission, these costs make up
the total of their expenditure, but the Agencies and other bodies make both
administrative and operational expenditure.

Heading 6 - Compensations

In accordance with the
political agreement that the new Member States should not become
net-contributors to the budget at the very beginning of their membership,
compensation was foreseen under this heading. This amount was available as
transfers to them to balance their budgetary receipts and contributions.

2.4.2   Policy areas

As part of its use of
Activity Based Management (ABM) the Commission implements Activity Based
Budgeting (ABB) in its planning and management processes. ABB involves a budget
structure where budget titles correspond to policy areas and budget chapters to
activities. ABB aims to provide a clear framework for translating the
Commission's policy objectives into action, either through legislative,
financial or any other public policy means. By structuring the Commission's
work in terms of activities, a clear picture is obtained of the Commission's undertakings
and simultaneously a common framework is established for priority setting.
Resources are allocated to priorities during the budget procedure, using the
activities as the building blocks for budgeting purposes. By establishing such
a link between activities and the resources allocated to them, ABB aims to
increase efficiency and effectiveness in the use of resources in the
Commission.

A policy area may be
defined as a homogeneous grouping of Activities constituting parts of the
Commission's work, which are relevant for the decision-making process. Each
policy area corresponds, in general, to a DG, and encompassing an average of
about 6 or 7 individual activities. Policy areas are mainly operational, since
their core activities aim at benefiting a third-party beneficiary within their
respective domains of activity. The operational budget is completed with the
necessary administrative expenditure for each policy area.

2.5      INSTITUTIONS
AND AGENCIES (Tables 14 to 18)

The consolidated
reports on the implementation of the general budget of the European Union
include, as in previous years, the budget implementation of all Institutions
since within the EU budget a separate budget for each Institution is
established. Agencies do not have a separate budget inside the EU budget and
they are partially financed by a Commission budget subsidy.

Concerning the EEAS, it
should be noted that, in addition to its own budget, it also receives
contributions from the Commission (EUR 202 million) and the EDF (EUR 50 million).
These budget credits are put at the disposal of the EEAS (as assigned revenue)
so as to cover primarily the costs of Commission staff working in the EU
delegations, these delegations being administratively managed by the EEAS.

In order to provide all
relevant budgetary data for the Agencies, the budgetary part of the
consolidated annual accounts include separate reports on the implementation of
the individual budgets of the traditional agencies consolidated.

CONTENTS

Page

NOTE ACCOMPANYING THE CONSOLIDATED
ACCOUNTS                           3

PART I:  CONSOLIDATED FINANCIAL
STATEMENTS AND EXPLANATORY NOTES    5

Balance Sheet                                                                          8

Economic Outturn Account                                                         9

Cashflow Table                                                                     10

Statement of changes in Net
Assets                                          11

Notes to the financial
statements                                             13

PART II: CONSOLIDATED REPORTS ON IMPLEMENTATION OF THE
BUDGET AND EXPLANATORY NOTES                                                                     91

Consolidated reports on implementation of the budget                93

Explanatory
notes to the consolidated reports on

implementation
of the budget                                                111

NOTE ACCOMPANYING THE CONSOLIDATED
ACCOUNTS

The consolidated annual accounts of the European
Union for the year 2011 have been prepared on the basis of the information
presented by the institutions and bodies under Article 129.2 of the Financial
Regulation applicable to the general budget of the European Union. I hereby
declare that they were prepared in accordance with Title VII of this Financial
Regulation and with the accounting principles, rules and methods set out in the
notes to the financial statements.

I have obtained from the accounting
officers of these institutions and bodies, who certified its reliability, all
the information necessary for the production of the accounts that show the
European Union's assets and liabilities and the budgetary implementation.

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

(signed)

Philippe Taverne

Accounting Officer of
the Commission

18 July 2012

EUROPEAN UNION

CONSOLIDATED

FINANCIAL STATEMENTS

AND EXPLANATORY NOTES

FINANCIAL YEAR 2011

CONTENTS

Page

PART I: CONSOLIDATED FINANCIAL
STATEMENTS AND EXPLANATORY NOTES

Balance Sheet                                                                      8

Economic Outturn
Account                                                      9

Cashflow Table     
                                                            10

Statement of Changes
in Net Assets                                      11

Notes to the Financial
Statements:                                        13

1.    Significant
accounting policies                                 14

2.    Notes to the Balance Sheet                                    24

3.    Notes to the Economic Outturn Account                    42

4.    Notes
to the Cashflow table                                   49

5.    Contingent
Assets & Liabilities and other disclosures 50

6.    Financial
corrections and recoveries                         54

7.    Borrowing
and lending activities of the EU                73

8.    Financial
risk management                                     79

9.    Related
party disclosures                                       85

10.  Events
after the balance sheet date                        87

11.  Scope
of consolidation                                           88

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

BALANCE SHEET

|| || || ||  EUR millions

|| Note || 31.12.2011 || 31.12.2010

|| NON-CURRENT ASSETS: || || ||

|| Intangible assets || 2.1 || 149 || 108

|| Property, plant and equipment || 2.2 || 5 071 || 4 813

|| Long-term investments: || || ||

|| Investments accounted for using the equity method || 2.3 || 374 || 492

|| Financial assets: Available for sale assets || 2.4 || 2 272 || 2 063

|| Financial assets: Long-term loans || 2.5 || 41 400 || 11 640

|| Long-term receivables & recoverables || 2.6 || 289 || 40

|| Long-term pre-financing || 2.7 || 44 723 || 44 118

|| || || 94 278 || 63 274

|| CURRENT ASSETS: || || ||

|| Inventories || 2.8 || 94 || 91

|| Short-term investments: || || ||

|| Financial assets: Available for sale assets || 2.9 || 3 619 || 2 331

|| Short-term receivables & recoverables: || || ||

|| Financial assets: Short-term loans || 2.10 || 102 || 2 170

|| Other receivables & recoverables || 2.11 || 9 477 || 11 331

|| Short-term pre-financing || 2.12 || 11 007 || 10 078

|| Cash and cash equivalents || 2.13 || 18 935 || 22 063

|| || || 43 234 || 48 064

|| TOTAL ASSETS || || 137 512 || 111 338

|| || || ||

|| NON-CURRENT LIABILITIES: || || ||

|| Pension & other employee benefits || 2.14 || (34 835) || (37 172)

|| Long-term provisions || 2.15 || (1 495) || (1 317)

|| Long-term financial liabilities || 2.16 || (41 179) || (11 445)

|| Other long-term liabilities || 2.17 || (2 059) || (2 104)

|| || || (79 568) || (52 038)

|| CURRENT LIABILITIES: || || ||

|| Short-term provisions || 2.18 || (270) || (214)

|| Short-term financial liabilities || 2.19 || (51) || (2 004)

|| Payables || 2.20 || (91 473) || (84 529)

|| || || (91 794) || (86 747)

|| TOTAL LIABILITIES || || (171 362) || (138 785)

|| || || ||

|| NET ASSETS || || (33 850) || (27 447)

|| || || ||

|| Reserves || 2.21 || 3 608 || 3 484

|| Amounts to be called from Member States* || 2.22 || (37 458) || (30 931)

|| || || ||

|| NET ASSETS || || (33 850) || (27 447)

*  The European
Parliament has adopted a budget on 1 December 2011 which
provides for the payment of the Union's short-term liabilities from own
resources to be collected by, or called up from, the Member States in 2012.
Additionally, under Article 83 of the Staff Regulations (Council Regulation
259/68 of 29 February 1968 as amended), the Member States shall jointly
guarantee the liability for pensions.

|| ECONOMIC OUTTURN ACCOUNT || ||

|| || ||

|| ||

|| || EUR millions

|| Note || 2011 || 2010

OPERATING REVENUE || || ||

Own resource and contributions revenue || 3.1 || 124 677 || 122 328

Other operating revenue || 3.2 || 5 376 || 8 188

|| || ||

|| || 130 053 || 130 516

|| || ||

OPERATING EXPENSES || || ||

Administrative expenses || 3.3 || (8 976) || (8 614)

Operating expenses || 3.4 || (123 778) || (103 764)

|| || ||

|| || (132 754) || (112 378)

|| || ||

(DEFICIT)/SURPLUS FROM OPERATING ACTIVITIES || || (2 701) || 18 138

|| || ||

Financial revenue || 3.5 || 1 491 || 1 178

Financial expenses || 3.6 || (1 355) || (661)

Movement in pension & other employee benefits liability || || 1 212 || (1 003)

Share of net deficit of joint ventures & associates || 3.7 || (436) || (420)

|| || ||

ECONOMIC OUTTURN FOR THE YEAR || || (1 789) || 17 232

|| CASHFLOW TABLE

|| || ||

|| || EUR millions

|| Note || 2011 || 2010

|| || ||

Economic outturn for the year || || (1 789) || 17 232

|| || ||

Operating activities || 4.2 || ||

Amortisation || || 33 || 28

Depreciation || || 361 || 358

(Increase)/decrease in long-term loans || || (29 760) || (876)

(Increase)/decrease in long-term pre-financing || || (605) || (2 574)

(Increase)/decrease in long-term receivables & recoverables || || (249) || 15

(Increase)/decrease in inventories || || (3) || (14)

(Increase)/decrease in short-term pre-financing || || (929) || (642)

(Increase)/decrease in short-term receivables & recoverables || || 3 922 || (4 543)

Increase/(decrease) in long-term provisions || || 178 || (152)

Increase/(decrease) in long-term financial liabilities || || 29 734 || 886

Increase/(decrease) in other long-term liabilities || || (45) || (74)

Increase/(decrease) in short-term provisions || || 56 || 1

Increase/(decrease) in short-term financial liabilities || || (1 953) || 1 964

Increase/(decrease) in payables || || 6 944 || (9 355)

Prior year budgetary surplus taken as non cash revenue || || (4 539) || (2 254)

Other non-cash movements || || (75) || (149)

|| || ||

Increase/(decrease) in pension & employee benefits liability || || (2 337) || (70)

|| || ||

Investing activities || 4.3 || ||

(Increase)/decrease in intangible assets and property, plant and equipment || || (693) || (374)

(Increase)/decrease in long-term investments || || (91) || (176)

(Increase)/decrease in short-term investments || || (1 288) || (540)

|| || ||

NET CASHFLOW || || (3 128) || (1 309)

|| || ||

Net increase/(decrease) in cash and cash equivalents || || (3 128) || (1 309)

Cash and cash equivalents at the beginning of the year || 2.13 || 22 063 || 23 372

Cash and cash equivalents at year-end || 2.13 || 18 935 || 22 063

STATEMENT OF CHANGES IN NET ASSETS ||

|| || || || || || EUR millions ||

|| Reserves (A) || Amounts to be called from     Member States (B) || Net Assets =(A)+(B)

Fair value reserve || Other reserves || Accumulated Surplus/(Deficit) || Economic outturn of the year

BALANCE AS AT 31 DECEMBER 2009 || 69 || 3 254 || (52 488) || 6 887 || (42 278)

Movement in Guarantee Fund reserve || || 273 || (273) || || 0

Fair value movements || (130) || || || || (130)

Other || || 4 || (21) || || (17)

Allocation of the economic outturn 2009 || || 14 || 6 873 || (6 887) || 0

Budget result 2009 credited to Member States || || || (2 254) || || (2 254)

Economic outturn for the year || || || || 17 232 || 17 232

BALANCE AS AT 31 DECEMBER 2010 || (61) || 3 545 || (48 163) || 17 232 || (27 447)

Movement in Guarantee Fund reserve || || 165 || (165) || || 0

Fair value movements || (47) || || || || (47)

Other || || 2 || (30) || || (28)

Allocation of the economic outturn 2010 || || 4 || 17 228 || (17 232) || 0

Budget result 2010 credited to Member States || || || (4 539) || || (4 539)

Economic outturn for the year || || || || (1 789) || (1 789)

BALANCE AS AT 31 DECEMBER 2011 || (108) || 3 716 || (35 669) || (1 789) || (33 850)

Notes to the
financial statements

1. SIGNIFICANT ACCOUNTING POLICIES

1.1        LEGAL BASIS AND ACCOUNTING RULES

The
accounts of the European Union are kept in accordance with Council Regulation
(EC, Euratom) No 1605/2002 of 25 June 2002 (OJ L 248 of 16 September
2002), on the Financial Regulation applicable to the general budget of the
European Union and Commission Regulation (EC, Euratom) No 2342/2002 of
23 December 2002 laying down detailed rules for the implementation of this
Financial Regulation.

In accordance with article 133 of
the Financial Regulation, the European Union prepares its financial statements
on the basis of accrual-based accounting rules that are derived from
International Public Sector Accounting Standards (IPSAS) or by default,
International Financial Reporting Standards (IFRS). These accounting rules,
adopted by the Accounting Officer of the Commission, have to be applied by all
the institutions and EU bodies falling within the scope of consolidation in
order to establish a uniform set of rules for accounting, valuation and
presentation of the accounts with a view to harmonising the process for drawing
up the financial statements and consolidation. The accounts are kept in Euro on
the basis of the calendar year.

1.2        ACCOUNTING PRINCIPLES

The objective of the financial
statements is to provide information about the financial position, performance
and cashflows of an entity that is useful to a wide range of users. For the EU
as 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. It is with these goals in mind
that the present document has been drawn up.

The overall considerations (or accounting
principles) to be followed when preparing the financial statements are laid
down in EU accounting rule 2 and are the same as those described in IPSAS 1,
that is: fair presentation, accrual basis, going concern, consistency of
presentation, aggregation, offsetting and comparative information.

Preparation of the financial
statements in accordance with the above mentioned rules and principles requires
management to make estimates that affect the reported amounts of certain items
in the balance sheet and economic outturn account, as well as the disclosures
of contingent assets and liabilities.

1.3        CONSOLIDATION

Scope
of consolidation

The consolidated financial
statements of the EU comprise all significant controlled entities (institutions
and agencies), associates and joint ventures, this being 50 controlled
entities, 5 joint ventures and 4 associates. The complete list of consolidated
entities can be found in note 11.1. In
comparison with 2010, the scope of consolidation has been extended by 7
controlled entities (one institution, 6 agencies). The impact of the additions
on the consolidated financial statements is not material.

Controlled entities

The decision to include an entity
in the scope of consolidation is based on the control concept. Controlled
entities are all entities over which the European Union has, directly or
indirectly, the power to govern the financial and operating policies so as to
be able to benefit from these entities' activities. This power must be
presently exercisable. Controlled entities are fully consolidated. The
consolidation begins at the first date on which control exists, and ends when
such control no longer exists.

The most common indicators of control within the European Union are: creation
of the entity through founding treaties or secondary legislation, financing of
the entity from the general budget, the existence of voting rights in the
governing bodies, audit by the European Court of Auditors and discharge by the
European Parliament. It is clear that an assessment for each entity needs to be
made in order to decide whether one or all of the criteria listed above are
sufficient to trigger control.

Under this approach, the EU's institutions (except the ECB) and agencies
(excluding the agencies of the former 2nd pillar) are considered as
under the exclusive control of the EU and are therefore included in the
consolidation scope. Furthermore the European Coal and Steel Community in
Liquidation (ECSC) is also considered as a controlled entity.

All material inter-company
transactions and balances between EU controlled entities are eliminated, while
unrealised gains and losses on inter-entity transactions are not material and
have therefore not been eliminated.

Joint ventures

A joint venture is a contractual
arrangement whereby the European Union and one or more parties (the
"venturers") undertake an economic activity which is subject to joint
control. Joint control is the contractually agreed sharing of control, directly
or indirectly, over an activity embodying service potential.

Participations in joint ventures are accounted for using the equity method
initially recognised at cost. The European Union's interest in the results of
its jointly controlled entities is recognised in the economic outturn account,
and its interest in the movements in reserves is recognised in the reserves.
The initial cost plus all movements (further contributions, share of results
and reserve movements, impairments, and dividends) give the book value of the
joint venture in the accounts at the balance sheet date.

Unrealised gains and losses on
transactions between the European Union and its jointly controlled entities are
not material and have therefore not been eliminated. The accounting policies of
joint ventures may differ from those adopted by the European Union for like
transactions and events in similar circumstances.

Associates

Associates are entities over which
the European Union has, directly or indirectly, significant influence but not
control. It is presumed that significant influence is given if the European Union
holds directly or indirectly 20% or more of the voting rights.

Participations in associates are accounted for using the equity method,
initially recognised at cost. The European Union's share of its associates'
results is recognised in the economic outturn account, and its share of
movements in reserves is recognised in the reserves. The initial cost plus all
movements (further contributions, share of results and reserve movements,
impairments, and dividends) give the book value of the associate in the
accounts at the balance sheet date. Distributions received from an associate
reduce the carrying amount of the asset. Unrealised gains and losses on
transactions between the European Union and its associates are not material and
have therefore not been eliminated.

The accounting policies of associates may differ from those adopted by the
European Union for like transactions and events in similar circumstances. In
cases where the European Union holds 20% or more of an investment capital fund,
it does not seek to exert significant influence. Such funds are therefore
treated as financial instruments categorised as available-for-sale and the
equity method is not applied.

Non-consolidated entities the funds
of which are managed by the Commission

The funds of the Sickness Insurance
Scheme for staff of the European Union, the European Development Fund and the
Participant's Guarantee Fund are managed by the Commission on their behalf,
however since these entities are not controlled by the European Union they are
therefore not consolidated in its accounts – see note 11.2 for further details on the amounts concerned.

1.4        BASIS OF PREPARATION

1.4.1     Currency and basis for conversion

Functional and reporting currency

The financial statements are
presented in millions of euros, the euro being the European Union's functional
and reporting currency.

Transactions and balances

Foreign currency transactions are
translated into euros using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement
of foreign currency transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the economic outturn account.

Different conversion methods apply
to property, plant and equipment and intangible assets, which retain their
value in euros at the rate that applied at the date when they were purchased.

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:

EURO Exchange Rates

Currency || 31.12.2011 || 31.12.2010 || Currency || 31.12.2011 || 31.12.2010

BGN || 1.9558 || 1.9558 || LTL || 3.4528 || 3.4528

CZK || 25.7870 || 25.0610 || PLN || 4.4580 || 3.9750

DKK || 7.4342 || 7.4535 || RON || 4.3233 || 4.2620

EEK || N/A || 15.6466 || SEK || 8.9120 || 8.9655

GBP || 0.8353 || 0.8607 || CHF || 1.2156 || 1.2504

HUF || 314.5800 || 277.9500 || JPY || 100.2000 || 108.6500

LVL || 0.6995 || 0.7094 || USD || 1.2939 || 1.3362

Changes in
the fair value of monetary securities denominated in a foreign currency and
classified as available-for-sale that relate to a translation difference are
recognised in the economic outturn account. Translation differences on non-monetary financial
assets and liabilities held at fair value through profit or loss are recognised
in the economic outturn account. Translation differences on non-monetary
financial assets classified as available-for-sale are included in the fair value reserve.

1.4.2     Use of
estimates

In accordance with IPSAS and
generally accepted accounting principles, the financial statements necessarily
include amounts based on estimates and assumptions by management based on the
most reliable information available. Significant estimates include, but are not
limited to, amounts for employee benefit liabilities, provisions, financial
risk on inventories and accounts receivables, accrued income and charges,
contingent assets and liabilities, and degree of impairment of intangible
assets and property, plant and equipment. Actual results could differ from
those estimates. Changes in estimates are reflected in the period in which they
become known.

1.5        BALANCE SHEET

1.5.1     Intangible assets

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

1.5.2     Property,
plant and equipment

All property, plant and
equipment are stated at historical cost less accumulated depreciation and
impairment losses. Historical cost includes expenditure that is directly
attributable to the acquisition or construction of the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits or service potential associated with the item will flow to the
European Union and its cost can be measured reliably. Repairs
and maintenance costs are charged to the economic outturn account during the
financial period in which they are incurred. As the European Union
does not borrow money to fund the acquisition of property, plant and equipment,
there are no borrowing costs related to such purchases.

Land and works of art are not depreciated as they are deemed to have an
indefinite useful life. Assets under construction are not depreciated as these
assets are not yet available for use. Depreciation on other assets is
calculated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives, as follows:

Depreciation rates

Type of asset || Straight line depreciation rate

Buildings || 4%

Plant, machinery and equipment || 10% to 25%

Furniture || 10% to 25%

Fixtures and fittings || 10% to 33%

Vehicles || 25%

Computer hardware || 25%

Other tangible assets || 10% to 33%

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

Leases

Leases of tangible
assets, where the European Union has substantially all the
risks and rewards of ownership, are classified as finance leases. Finance
leases are capitalised at the inception of the lease at the lower of the fair
value of the leased asset and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as
to achieve a constant rate on the finance balance outstanding. The rental
obligations, net of finance charges, are included in other liabilities (long
and short-term.) The interest element of the finance cost is charged to the
economic outturn account over the lease period so as to produce a constant
periodic interest rate on the remaining balance of the liability for each
period. The assets held under finance leases are depreciated over the shorter
of the assets' useful life and the lease term.

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

1.5.3     Impairment of
non-financial assets

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

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

1.5.4     Investments

Participations in Associates and
Joint Ventures

Participations in associates and
joint ventures are accounted for using the equity method. The costs of equity
are adjusted to reflect the share of increases or reductions in net assets of
the associates and joint ventures that are attributable to the European Union
after initial recognition if there are indications of impairment and written
down to the lower recoverable amount if necessary. The recoverable amount is
determined as described under 1.5.3. If
the reason for impairment ceases to apply at a later date, the impairment loss
is reversed to the carrying amount that would have been determined had no
impairment loss been recognised.

Investments in Venture Capital Funds

Classification and measurement

Investments in Venture Capital
Funds are classified as available-for-sale assets (see 1.5.5) and accordingly, are carried at fair value
with gains and losses arising from changes
in the fair value (including translation differences) recognised in the fair
value reserve.

Fair value considerations

Since they do not have a quoted
market price in an active market, investments in Venture Capital Funds are valued
on a line-by-line basis at the lower of cost or attributable net asset value
(“NAV”). Unrealised gains resulting from the fair value measurement are
recognised through reserves and unrealised losses are assessed for impairment
so as to determine whether they are recognised as impairment losses in the
economic outturn account or as changes in the fair value reserve.

1.5.5     Financial assets

Classification

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

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

A financial asset is classified in
this category if acquired principally for the purpose of selling in the short
term or if so designated by the European Union. Derivatives are also categorised in this category. Assets in
this category are classified as
current assets if they are expected to be realised within 12 months of
the balance sheet date.

(ii) Loans and receivables

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

(iii) Held-to-maturity investments

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

(iv) Available-for-sale
financial assets

Available-for-sale financial assets
are non-derivatives that are either designated in this category or not
classified in any of the other categories. They are classified as either
current or non-current assets, depending on the time period in which the EU
intends to dispose of them. Investments in unconsolidated entities and other
equity investments (e.g. Risk Capital Operations) that are not accounted for
using the equity method are also classified as available-for sale-financial
assets.

Initial
recognition and measurement

Purchases and sales of financial
assets at fair value through profit or loss, held-to-maturity and
available-for-sale are recognised on trade-date – the date on which the
European Union commits to purchase or sell
the asset. Loans are recognised when cash is advanced to the borrowers.
Financial instruments are initially recognised at fair value plus transaction costs for all financial assets not
carried at fair value through profit or loss. Financial assets carried at fair
value through profit or losses are initially recognised at fair value and transaction
costs are expensed in the economic outturn account.

The fair value of a financial asset on initial recognition is normally the
transaction price (i.e. the fair value of the consideration received). However,
when a long-term loan that carries no interest or an interest below market
conditions is granted, its fair value can be estimated as the present value of
all future cash receipts discounted using the prevailing market rate of
interest for a similar instrument with a similar credit rating.

Loans granted on borrowed funds are
measured at their nominal amount, which is considered to be the fair value of
the loan. The reasoning for this is as follows:

–
The
“market environment” for EU lending is very specific and different from the
capital market used to issue commercial or government bonds. As lenders in
these markets have the opportunity to choose alternative investments, the
opportunity possibility is factored into market prices. However, this
opportunity for alternative investments does not exist for the EU which is not
allowed to invest money on the capital markets; it only borrows funds for the
purpose of lending at the same rate. This means that there is no alternative
lending or investment option available to the EU for the sums borrowed. Thus,
there is no opportunity cost and therefore no basis of comparison with market
rates. In fact, the EU lending operation itself represents the market.
Essentially, since the opportunity cost "option" is not applicable,
the market price does not fairly reflect the substance of the EU lending
transactions. Therefore, it is not appropriate to determine the fair value of
EU lending with reference to commercial or government bonds.

–
Furthermore
as there is no active market or similar transactions to compare with, the
interest rate to be used by the European Union for fair valuing its lending
operations under EFSM, BOP and other such loans, should be the interest rate
charged.

–
In
addition, for these loans, there are compensating effects between loans and
borrowings due to their back-to-back character. Thus, the effective interest
for the loan equals the effective interest rate for the related borrowings. The
transaction costs incurred by the EU and then recharged to the beneficiary of
the loan are directly recognised in the economic outturn account.

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

Subsequent
measurement

(i) Financial assets at fair value
through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair
value of the ‘financial instruments at fair value through profit or loss’ category
are included in the economic outturn account
in the period in which they arise.

(ii) Loans and receivables and
held-to-maturity investments are carried at amortised cost using the effective
interest method. In the case of loans granted on borrowed funds, the same
effective interest rate is applied to both the loans and borrowings since these
loans have the characteristics of 'back-to-back operations' and the differences
between the loan and the borrowing conditions and amounts are not material. The
transaction costs incurred by the EU and then recharged to the beneficiary of
the loan are directly recognised in the economic outturn account.

(iii) Held to maturity – the EU
currently holds no held to maturity investments.

(iv) Available-for-sale financial
assets are subsequently carried at fair value. Gains and losses arising from
changes in the fair value of available-for-sale assets are recognised in the
fair value reserve. When assets classified as available-for-sale are sold or
impaired, the cumulative fair value adjustments previously recognised in the
fair value reserve are recognised in the economic outturn account. Interest on
available­for-sale financial assets calculated using the effective interest
method is recognised in the economic outturn account. Dividends on
available-for-sale equity instruments are recognised when the EU's right to
receive payment is established.

The fair values of quoted
investments in active markets are based on current bid prices. If the market
for a financial asset is not active (and for unlisted securities), the European
Union establishes a fair value by using valuation techniques. These include the
use of recent arm’s length transactions, reference to other instruments that
are substantially the same, discounted cash flow analysis, option pricing
models and other valuation techniques commonly used by market participants.

In cases where the fair value of
investments in equity instruments that do not have quoted market price in an
active market cannot be reliably measured, these investments are valued at cost
less impairment losses.

Impairment
of financial assets

The European Union
assesses at each balance sheet date whether there is objective evidence that a
financial asset is impaired. A
financial asset is impaired and impairment losses are incurred if, and only if,
there is objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset and that loss event
(or events) has an impact on the estimated future cash flows of the financial
asset that can be reliably estimated.

(a) Assets carried at amortised
cost

If there is objective evidence that
an impairment loss on loans and receivables or held-to-maturity investments
carried at amortised cost has been incurred, the amount of the loss is measured
as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest rate.
The carrying amount of the asset is reduced and the amount of the loss is
recognised in the economic outturn account. If a loan or held-to-maturity
investment has a variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate determined under the
contract. The calculation of the present value of the estimated future cash
flows of a collateralised financial asset reflects the cash flows that may
result from foreclosure less costs for obtaining and selling the collateral,
whether or not foreclosure is probable. If, in a subsequent period, the amount
of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through the economic outturn account.

(b) Assets carried at fair value

In the case of
equity investments classified as available-for-sale, a significant or
permanent (prolonged) decline in the fair value of the security below its cost
is considered in determining whether the securities are impaired. If any such
evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognised in the economic outturn account – is removed from reserves and recognised in the economic
outturn account. Impairment losses
recognised in the economic outturn account on equity instruments are not
reversed through the economic outturn account. If, in a subsequent period, the
fair value of a debt instrument classified as available-for-sale increases and
the increase can be objectively related to an event occurring after the
impairment loss was recognised, the impairment loss is reversed through the
economic outturn account.

1.5.6     Inventories

Inventories are stated
at the lower of cost and net realisable value. Cost is determined using the
first-in, first-out (FIFO) method. The cost of finished goods and work in
progress comprises raw materials, direct labour, other directly attributable
costs and related production overheads (based on normal operating capacity).
Net realisable value is the estimated selling price in the ordinary course of
business, less the costs of completion and selling expenses. When inventories
are held for distribution at no charge or for a nominal charge, they are
measured at the lower of cost and current replacement cost. Current replacement
cost is the cost the European Union would incur to acquire the asset on the
reporting date.

1.5.7     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 eligible expenditures, he has the obligation to return the
pre-financing advance to the European Union. The amount of the pre-financing is
reduced (wholly or partially) by the acceptance of eligible costs and amounts
returned, and this amount is recognised as an expense.

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

Interest on pre-financing is recognised as it is earned in accordance with the
provisions of the relevant agreement. An estimate of the accrued interest
revenue, based on the most reliable information, is made at the year-end and
included in the balance sheet.

1.5.8     Receivables

Receivables are carried
at original amount less write-down for impairment. A write-down for impairment
of receivables is established when there is objective evidence that the
European Union will not be able to collect all amounts due according to the
original terms of receivables. The amount of the write-down is the difference
between the asset’s carrying amount and the recoverable amount,. The amount of
the write-down is recognised in the economic outturn account. A general
write-down, based on past experience, is also made for outstanding recovery
orders not already subject to a specific write-down. See note 1.5.14 below
concerning the treatment of accrued income at year-end.

1.5.9     Cash and cash equivalents

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

1.5.10   Employee
benefits

Pension obligations

The European Union operates defined
benefit pension plans. Whilst staff contribute from their salaries one third of
the expected cost of these benefits, the liability is not funded. The liability
recognised in the balance sheet in respect of defined benefit pension plans is
the present value of the defined benefit obligation at the balance sheet date.
The defined benefit obligation is calculated by actuaries using the projected
unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest
rates of government bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to the
terms of the related pension liability.

Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are recognised
immediately in the economic outturn account.
Past-service costs are recognised
immediately in economic outturn account, unless the changes to the pension plan
are conditional on the employees
remaining in service for a specified period of time (the vesting period). In
this case, the past-service costs are amortised on a straight-line basis over
the vesting period.

Post-employment sickness benefits

The European Union provides health
benefits to its employees through the reimbursement of medical expenses. A
separate fund has been created for the day-to-day administration. Both current
employees, pensioners, widowers and their beneficiaries benefit from the
system. The benefits granted to the "inactives" (pensioners, orphans,
etc.) are classified as "Post-Employment Employee Benefits". Given
the nature of these benefits, an actuarial calculation is required. The
liability in the balance sheet is determined on a similar basis as that for the
pension obligations (see above).

1.5.11   Provisions

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

1.5.12   Financial liabilities

Financial liabilities are
classified as financial liabilities at fair value through profit or loss or as
financial liabilities carried at amortised cost (borrowings). Borrowings are
composed of borrowings from credit institutions and debts evidenced by
certificates. They are recognised initially at fair value, being their issue
proceeds (fair value of consideration received) net of transaction costs
incurred, then subsequently carried at amortised cost using the effective
interest method; any difference between proceeds, net of transaction costs, and
the redemption value is recognised in the economic outturn account over the
period of the borrowings using the effective interest method.

They are classified as non-current liabilities, except for maturities less than
12 months after the balance sheet date. In the case of loans granted on
borrowed funds, the effective interest method may not be applied to loans and
borrowings, based on materiality considerations. The transaction costs incurred
by the European Union and then recharged to the beneficiary of the loan are
directly recognised in the economic outturn account.

Financial liabilities categorised at fair value through profit or loss include derivatives
when their fair value is negative. They follow the same accounting treatment as
financial assets at fair value through profit or loss, see note 1.5.5.

1.5.13   Payables

A significant amount of the
payables of the EU are not related
to the purchase of goods or services – instead they are unpaid cost claims from
beneficiaries of grants or other EU funding.
They are recorded as payables for the requested amount when the cost claim is
received. Upon verification and acceptance of the eligible costs, the payables are
valued at the accepted and eligible amount.

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

1.5.14 Accrued and deferred income and charges

According to the European Union
accounting rules, transactions and events are recognised in the financial
statements in the period to which they relate. At the end of the accounting
period, accrued expenses are recognised based on an estimated amount of the
transfer obligation of the period. The calculation of accrued expenses is done
in accordance with detailed operational and practical guidelines issued by the Commission
which aim at ensuring that the financial statements reflect a true and fair
view.

Revenue is also accounted for in the period to which it relates. At year-end,
if an invoice is not yet issued but the service has been rendered, the supplies
have been delivered by the EU or a contractual agreement exists (i.e. by
reference to a treaty), an accrued income will be recognised in the financial
statements.

In addition, at year-end, if an invoice is issued but the services have not yet
been rendered or the goods supplied have not yet been delivered, the revenue will
be deferred and recognised in the subsequent accounting period.

1.6      ECONOMIC OUTTURN ACCOUNT

1.6.1   Revenue

Non-exchange revenue

This makes up the vast majority of
the EU's revenue and includes mainly
direct and indirect taxes and own resource amounts. In addition to taxes the
European Union may also receive
payments from other parties, such as duties, fines and donations.

GNI based resources and VAT resources

Revenue is recognised for the
period for which the European Commission sends
out a call for funds to the Member States claiming their contribution. They are
measured at their “called amount”. As VAT and GNI resources are based on
estimates of the data for the budgetary year concerned, they may be revised as
changes occur until the final data are issued by the Member States. The effect
of a change in estimate is included when determining the net surplus or deficit
for the period in which the change occurred.

Traditional own resources

Receivables and related revenues
are recognised when the relevant monthly A statements (including duties
collected and amounts due that are guaranteed and not contested) are received
from the Member States. At the reporting date, revenue collected by the Member
States for the period but not yet paid to the European Commission is estimated and recognised as accrued revenue. The
quarterly B statements (including duties neither collected nor guaranteed, as
well as guaranteed amounts that have been contested by the debtor) received
from the Member States are recognised as revenue less the collection costs to
which they are entitled (25%). In addition, a value reduction is recognised for
the amount of the estimated recovery gap in the economic outturn account.

Fines

Revenue from fines is recognised
when the EU's decision imposing a fine has been taken and it is officially
notified to the addressee. If there are doubts about the undertaking's
solvency, a value reduction on the entitlement is recognised. After the
decision to impose a fine, the debtors have two months from the date of
notification:

– either to accept the
decision, in which case they must pay the fine within the time limit laid down
and the amount is definitively collected by the EU;

–
or
not to accept the decision, in which case they lodge an appeal under EU law.

However, even if appealed, the
principal of the fine must be paid within the time limit of three months laid
down as the appeal does not have suspensory effect (Article 278 of the EU
Treaty) or, under certain circumstances and subject to the agreement of the
Commission's Accounting Officer, it may present a bank guarantee for the amount
instead.

If the undertaking appeals against the decision, and has already provisionally
paid the fine, the amount is disclosed as a contingent liability. However,
since an appeal against an EU decision by the addressee does not have
suspensory effect, the cash received is used to clear the receivable. If a
guarantee is received instead of payment, the fine remains as a receivable. If
it appears probable that the General Court may not rule in favour of the EU, a provision is recognised to cover
this risk. If a guarantee had been given instead, then the receivable
outstanding is written-down as required. The accumulated interest received by
the European Commission on the bank
accounts where received payments are deposited is recognised as revenue, and
any contingent liability is increased accordingly.

Exchange revenue

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

Interest income and expense

Interest income and expense are
recognised in the economic outturn account using the effective interest method.
This is a method of calculating the amortised cost of a financial asset or a
financial liability and of allocating the interest income or interest expense
over the relevant period. When calculating the effective interest rate, the
European Union estimates cash flows
considering all contractual terms of the financial instrument (for example,
prepayment options) but do not consider future credit losses. The calculation
includes all fees and points paid or received between parties to the contract
that are an integral part of the effective interest rate, transaction costs and
all other premiums or discounts.

Once a financial asset or a group
of similar financial assets has been written down as a result of an impairment
loss, interest income is recognised using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment loss.

Dividend income

Dividend income is recognised when
the right to receive payment is established.

1.6.2   Expenditure

Exchange expenses arising from the
purchase of goods and services are recognised when the supplies are delivered
and accepted by the European Union.
They are valued at original invoice cost. Non-exchange expenses are specific to
the EU and account for the majority of its expenditure. They relate to
transfers to beneficiaries and can be of three types: entitlements, transfers
under agreement and discretionary grants, contributions and donations.

Transfers are recognised as
expenses in the period during which the events giving rise to the transfer
occurred, as long as the nature of the transfer is allowed by regulation
(Financial Regulation, Staff Regulations, or other regulation) or a contract
has been signed authorising the transfer; any eligibility criteria have been
met by the beneficiary; and a reasonable estimate of the amount can be made.

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

1.7      CONTINGENT
ASSETS AND LIABILITIES

1.7.1   Contingent assets

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

1.7.2   Contingent liabilities

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

2. NOTES TO THE BALANCE SHEET

NON CURRENT ASSETS

2.1        INTANGIBLE
ASSETS

|| EUR millions

|| Amount

||

Gross carrying amount at 31 December 2010 || 236

Additions || 80

Disposals || (13)

Other changes || (2)

||

Gross carrying amount at 31 December 2011 || 301

||

Accumulated amortisation at 31 December 2010 || (128)

Amortisation charge for the year || (33)

Disposals || 8

Other changes || 1

||

Accumulated amortisation at 31 December 2011 || (152)

||

Net carrying amount at 31 December 2011 || 149

Net carrying amount at 31 December 2010 || 108

The above amounts
relate primarily to computer software.

2.2        PROPERTY,
PLANT AND EQUIPMENT

Included under assets
under construction at 31 December 2011 are EUR 219 million of assets relating
to the Galileo project, the EU's Global Navigation Satellite System, being
built with the assistance of the European Space Agency (ESA). When completed,
the system will comprise 30 satellites, 2 control centres and 16 ground
stations. The amount on the balance sheet reflects the costs incurred by the
Commission on this project since 22 October 2011, the date on which the first
two satellites of the system were successfully launched. Prior to this date,
and as explained in previous annual accounts, the Commission considered the
project to be in a research phase, thus in accordance with the EU accounting
rules all costs incurred were expensed. Since the beginning of the project and
until the end of the current financial perspective, the In-Orbit Validation
phase and the first part of the Full Operational Capability phase have a
planned cost to the EU of EUR 3 788 million. For the next financial
perspective, a further EUR 5 500 million is foreseen to be spent on; fully
deploying the system, exploiting it, delivering Galileo services until 2020 and
preparing the next generation of the constellation, and this will be entirely
financed by the EU budget. An amount of EUR 268 million has been
recognised as research expenses during the period.

The next two satellites
are due to be launched in autumn 2012 and once the subsequent testing on these
is complete, this will end the In-Orbit Validation ("IOV") phase of
the project. This phase had been jointly funded by the EU and ESA and according
to the grant agreement concluded between the two parties, ESA shall make an
official transfer of the constructed assets to the EU. This legal transfer will
require the ESA Council's agreement, noting that all except two Member States
of ESA (Norway and Switzerland), are also EU Member States. At this time, the
Commission has no reason to believe that such a transfer would be blocked by member(s)
of ESA.

PROPERTY, PLANT & EQUIPMENT ||

|| || || || || || || || EUR millions

|| Land and || Plant and || Furniture and || Computer  hardware || Other tangible || Finance leases || Assets under || TOTAL

|| buildings || equipment || vehicles || || assets || || construction ||

|| || || || || || || ||

|| || || || || || || ||

Gross carrying amount at previous year-end || 4 027 || 492 || 226 || 483 || 214 || 2 663 || 335 || 8 440

Additions || 89 || 37 || 19 || 112 || 22 || 28 || 335 || 642

Disposals || 0 || (11) || (19) || (44) || (12) || (6) || 0 || (92)

Transfers between asset categories || 22 || 1 || 0 || 4 || 0 || (2) || (24) || 1

Other changes || (20) || 9 || 3 || 2 || 4 || 2 || (1) || (1)

|| || || || || || || ||

Gross carrying amount at year-end || 4 118 || 528 || 229 || 557 || 228 || 2 685 || 645 || 8 990

|| || || || || || || ||

Accumulated depreciation at previous year-end || (1 868) || (382) || (167) || (378) || (124) || (708) || || (3 627)

Depreciation charge for the year || (132) || (47) || (14) || (63) || (22) || (95) || || (373)

Depreciation written back || 1 || 0 || 0 || 4 || 0 || 7 || || 12

Disposals || 0 || 11 || 16 || 44 || 11 || 0 || || 82

Transfers between asset categories || 0 || 0 || 0 || (2) || 0 || 1 || || (1)

Other changes || 0 || (7) || (1) || (1) || (2) || (1) || || (12)

|| || || || || || || ||

Accumulated depreciation at year-end || (1 999) || (425) || (166) || (396) || (137) || (796) || || (3 919)

|| || || || || || || ||

NET CARRYING AMOUNT AT 31 DECEMBER 2011 || 2 119 || 103 || 63 || 161 || 91 || 1 889 || 645 || 5 071

NET CARRYING AMOUNT AT 31 DECEMBER 2010 || 2 159 || 110 || 59 || 105 || 90 || 1 955 || 335 || 4 813

Charges still to be
paid in respect of finance leases and similar entitlements are shown in
long-term and short-term liabilities in the balance sheet (see notes 2.17 and 2.20.1). They
break down as follows:

Finance Leases || EUR millions

Description || Cumulative charges (A) || Future amounts to be paid || Total Value || Subsequent expenditure on assets ||  Asset value || Depreciation || Net carrying amount =A+B+C+E

< 1 year || > 1 year || > 5 years || Total Liability (B) || A+B || (C) || A+B+C || (E)

Land and buildings || 931 || 59 || 280 || 1 315 || 1 654 || 2 585 || 62 || 2 647 || (771) || 1 876

Other tangible assets || 23 || 7 || 7 || 1 || 15 || 38 || 0 || 38 || (25) || 13

Total at 31.12.2011 || 954 || 66 || 287 || 1 316 || 1 669 || 2 623 || 62 || 2 685 || (796) || 1 889

Total at 31.12.2010 || 865 || 65 || 282 || 1 390 || 1 737 || 2 602 || 61 || 2 663 || (708) || 1 955

2.3        INVESTMENTS
ACCOUNTED FOR USING THE EQUITY METHOD

|| || || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Participations in Joint Ventures || 2.3.1 || 62 || 138

Participations in Associates || 2.3.2 || 312 || 354

Total Investments || || 374 || 492

2.3.1     Participations
in joint ventures

|| EUR millions

|| GJU || SESAR || ITER || IMI || FCH || Total

Amount at 31.12.2010 || 0 || 11 || 12 || 78 || 37 || 138

Contributions || 0 || 18 || 92 || 19 || 59 || 188

Share of net result || 0 || (29) || (104) || (72) || (59) || (264)

Amount at 31.12.2011 || 0 || 0 || 0 || 25 || 37 || 62

Participations in joint ventures
are accounted for using the equity method. The following carrying amounts are
attributable to the EU based on its percentage of participation in joint
ventures:

|| || || EUR millions

|| || 31.12.2011 || 31.12.2010

Non-current assets || || 211 || 176

Current assets || || 123 || 165

Non-current liabilities || || 0 || 0

Current liabilities || || (314) || (208)

Revenue || || 8 || 7

Expenses || || (379) || (247)

Galileo Joint
Undertaking (GJU) in liquidation

The Galileo Joint Undertaking (GJU)
was put into liquidation at the end of 2006 and the process is still ongoing.
As the entity was inactive and still undergoing liquidation in 2011, there were
no revenues or expenditures incurred.

SESAR Joint Undertaking

The aim of this Joint
Undertaking is to ensure the modernisation of the European air traffic
management system and the rapid implementation of the European air traffic
management Master Plan by coordinating and concentrating all relevant research
and development efforts in the EU. At 31 December 2011, the Commission held
59.37 % of the ownership participation in SESAR. The total (indicative) Commission
contribution foreseen for SESAR (from 2007 to 2013) is EUR 700 million. The
unrecognised share of losses for the period and cumulatively is EUR 102
million.

ITER International Fusion Energy Organisation (ITER)

ITER involves the
European Union and China, India, Russia, South Korea, Japan and USA. ITER was created to; manage the ITER facilities, to encourage the exploitation of the
ITER facilities, to promote public understanding and acceptance of fusion
energy, and to undertake any other activities that are necessary to achieve its
purpose. The EU (Euratom) contribution to ITER International is given through
the Fusion for Energy Agency, including also the contributions from Member
States and from Switzerland. The total contribution is legally considered as a
Euratom contribution to ITER since the Member States and Switzerland do not have ownership interests in ITER. As the EU legally holds the participation in
the joint venture ITER International, the Commission must recognise the
participation in its accounts. At 31 December 2011, the Commission held 47 % of
the ownership participation in ITER. The total (indicative) Euratom contribution foreseen
for ITER (from 2007 to 2041) is EUR 7 649 million. The unrecognised share of
losses for the period and cumulatively is EUR 4 million.

Joint Technology Initiatives

Public private
partnerships in the form of Joint Technology Initiatives, which were
implemented through Joint Undertakings within the meaning of Article 171 of the
Treaty, have been created in order to implement the objectives of the Lisbon
Growth and Jobs Agenda. IMI and FCH are included under this heading but three others, ARTEMIS, Clean Sky and
ENIAC,
although legally referred to as joint undertakings, from an accounting
perspective must be considered as associates (and so included as such in note 2.3.2) because
the Commission has a significant influence, not joint control, over them.

IMI Joint Technology Initiative on
Innovative Medicines

The IMI Joint Undertaking supports
pre-competitive pharmaceutical research and development in the Member States and associated countries, aiming at increasing the research investment in the
biopharmaceutical sector and promotes the involvement of small and medium-sized
enterprises (SME) in its activities. At 31 December
2011, the Commission held 96.51% of the ownership participation in IMI. The
maximum indicative contribution of the Commission shall amount to EUR 1 billion
up to 31.12.2017.

FCH
Fuel Cells and Hydrogen Joint Undertaking

The objective of the FCH Joint
Undertaking is to combine resources from the public and private sectors to
strengthen research activities with a view to increasing the overall efficiency
of European research efforts and accelerate the development and deployment of
fuel cell and hydrogen technologies. At 31 December
2011, the Commission held 89.32% of the ownership participation in FCH. The
maximum indicative contribution of the EU shall amount to EUR 470 million up to
31.12.2017.

2.3.2     Participations
in Associates

|| || || || EUR millions

|| EIF || ARTEMIS || Clean Sky || ENIAC || Total

Amount at 31/12/2010 || 305 || 14 || 14 || 21 || 354

Contributions || 0 || 11 || 117 || 14 || 142

Share of net surplus/(deficit) || (3) || (25) || (131) || (15) || (174)

Other equity movements || (10) || 0 || 0 || 0 || (10)

Amount at 31/12/2011 || 292 || 0 || 0 || 20 || 312

Participations in associates are
accounted for using the equity method. The following carrying amounts are
attributable to the EU based on its percentage of participation in associates:

|| || || EUR millions

|| || 31.12.2011 || 31.12.2010

Assets || || 460 || 447

Liabilities || || (162) || (93)

Revenue || || 28 || 25

Surplus/(Deficit) || || (167) || (180)

European Investment Fund (EIF)

The European Investment Fund (EIF) is the European Union's
financial institution specialising in providing risk capital and guarantees to
SMEs. The Commission has paid in 20%, the balance being uncalled corresponding
to an amount of EUR 720 million.

EUR
millions

EIF || Total EIF capital || Commission subscription

Total Share Capital || 3 000 || 900

Paid-in || (600) || (180)

Uncalled || 2 400 || 720

ARTEMIS Joint Undertaking

This entity was created
to implement a Joint Technology Initiative with the private sector on Embedded
Computing Systems. The maximum indicative contribution of the Commission shall
amount to EUR 420 million. The unrecognised share of losses for the period and
cumulatively is EUR 3 million.

Clean Sky Joint Undertaking

The aim of this entity
is to accelerate the development, validation and demonstration of clean air
transport technologies in the EU and in particular to create a radically
innovative Air Transport System with the target of reducing the environmental
impact of air transport. The maximum indicative contribution of the Commission
shall amount to EUR 800 million. The unrecognised share of losses for the period and
cumulatively is EUR 5 million.

ENIAC Joint Undertaking

The aim of ENIAC is to define a
commonly agreed research agenda in the field of nano-electronics in order to
set research priorities for the development and adoption of key competences in
that area. These objectives will be pursued by pooling resources from the
public and private sectors to support R&D activities in the form of
projects. The total commitment of the EU shall amount to EUR 450 million. At 31 December 2011, the Commission held 96.77% of the
ownership participation in ENIAC.

2.4        FINANCIAL
ASSETS: AVAILABLE FOR SALE ASSETS

|| || EUR millions

|| 31.12.2011 || 31.12.2010

Guarantee Fund || 1 475 || 1 346

European Bank for Reconstruction and Development || 188 || 188

Risk Capital Operations || 134 || 137

ETF Start up || 234 || 199

European Fund for South East Europe || 111 || 102

Green for Growth Fund || 69 || 20

GEEREF || 38 || 56

Progress Microfinance Facility || 18 || 14

Other investments || 5 || 1

Total || 2 272 || 2 063

2.4.1     Guarantee Fund

Net assets of the Guarantee Fund* || EUR millions

|| 31.12.2011 || 31.12.2010

Available-for-sale assets || 1 174 || 1 154

Cash and cash equivalents || 302 || 193

Total assets || 1 476 || 1 347

Total liabilities || (1) || (1)

Net assets || 1 475 || 1 346

- after
elimination of the EFSM bonds and the provisioned contribution from EU paid in
February 2012

The Guarantee Fund for
external actions covers loans guaranteed by the EU as a result of a Council
Decision, in particular European Investment Bank (EIB) lending operations
outside the EU and loans under macro-financial assistance (MFA) and Euratom
loans outside the EU. It is a long-term instrument to cover any defaulting loans
guaranteed by the EU and can therefore be seen as a long-term investment. This
is evidenced by the fact that nearly 83% of the available-for-sale assets have
a maturity of between 1 and 10 years. The Fund is endowed by payments from the
general budget of the EU equivalent to 9% of the capital value of the
operations, the proceeds from interest on investments made from the Fund's
assets, and sums recovered from defaulting debtors for whom the Fund has had to
activate its guarantee. Any yearly surplus arising shall be paid back as
revenue for the EU budget.

The EU is required to include a guarantee reserve to cover loans to third
countries. This reserve is intended to cover the requirements of the Guarantee
Fund and, where necessary, activated guarantees exceeding the amount available
in the Fund, so that these amounts may be charged to the budget. This reserve
corresponds to the target amount of 9% of the loans outstanding at year-end.

2.4.2     Other long-term available-for-sale assets

These are investments and
participations purchased to help beneficiaries develop their business
activities.

European Bank for
Reconstruction and Development (EBRD)

As the EBRD is not
quoted on any stock exchange and in view of the contractual restrictions
included in the EBRD’s articles of incorporation relating, amongst others, to
the sale of participating interests, capped at acquisition cost and only
authorised to existing shareholders, the Commission's shareholding is valued at
cost less any write-down for impairment.

EUR
millions

EBRD || Total EBRD capital || Commission subscription

Total Share Capital || 28 380 || 900

Paid-in || (6 199) || (188)

Uncalled || 22 181 || 712

Under
Risk Capital Operations amounts are granted to financial intermediaries
to finance equity investments. They are managed by European Investment Bank and
financed under the European Neighbourhood Policy.

ETF start up covers the
Growth & Employment programme, the MAP programme, the CIP programme and the Technology
Transfer Pilot Project, under the trusteeship of the EIF, supporting the
creation and financing of start-up SMEs by investing in suitable specialised
venture capital funds. At year-end, a further EUR 126 million relating to ETF
Start up and SME Finance Facility had been committed to, but not yet been drawn
down by the other parties.

The European Fund
for South East Europe, an investment company with variable share capital
(SICAV) is also included under this heading. The overall objective of EFSE is
to foster economic development and prosperity in South East Europe through the
sustainable provision of additional development finance via local financial
intermediaries.

The overall objective of the Green
for Growth Fund (former Southeast Europe Energy
Efficient Fund) is to enhance energy efficiency and fostering renewable energies in South East Europe through the provision of dedicated
financing to businesses and households via partnering with financial
institutions and direct finance. GEEREF is an
innovative fund providing global risk capital through private investment for
energy efficiency and renewable energy projects in developing countries and
economies in transition.

2.5        FINANCIAL
ASSETS: LONG-TERM LOANS

|| || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Loans granted from the EU budget & ECSC || 2.5.1 || 170 || 162

Loans granted from borrowed funds || 2.5.2 || 41 230 || 11 478

Total || 41 400 || 11 640

2.5.1     Loans granted from the European Union budget & the ECSC
in Liquidation

|| EUR millions

|| Loans with special conditions || ECSC housing loans || Total

Total at 31.12.2010 || 140 || 22 || 162

New loans || 31 || 0 || 31

Repayments || (17) || (5) || (22)

Exchange differences || (4) || - || (4)

Changes in carrying amount || 1 || 2 || 3

Total at 31.12.2011 || 151 || 19 || 170

Loans with
special conditions are granted at preferential rates as
part of co-operation with non-member countries. All amounts fall due more than
12 months after year-end. The effective interest rates on these loans
vary between 7.73% and 14.507%.

2.5.2     Loans granted from borrowed funds

|| || EUR millions

|| MFA || Euratom || BOP || EFSM || ECSC in Liquidation || Total

Total at 31.12.2010 || 503 || 469 || 12 246 || - || 264 || 13 482

New loans        || 126 || - || 1 350 || 28 000 || - || 29 476

Repayments || (36) || (20) || (2 000) || - || - || (2 056)

Exchange differences || - || - || - || - || 6 || 6

Changes in carrying amount || 2 || 2 || 29 || 344 || (4) || 373

Total at 31.12.2011 || 595 || 451 || 11 625 || 28 344 || 266 || 41 281

Amount due < 1 year || 5 || - || - || - || 46 || 51

Amount due > 1 year || 590 || 451 || 11 625 || 28 344 || 220 || 41 230

The large increase in
these amounts is due to the EFSM loans disbursed during 2011 and is mirrored by
an increase in the EU's borrowings (see note 2.16). For more
information on borrowing and lending activities, see note 7.

2.6        LONG-TERM
RECEIVABLES & RECOVERABLES

|| EUR millions

|| 31.12.2011 || 31.12.2010

Member States || 268 || 14

ECSC staff loans || 7 || 9

Guarantees and deposits || 11 || 14

Other || 3 || 3

Total || 289 || 40

Of the above receivables, EUR 273
million (2010: EUR 14 million) relate to non-exchange transactions. The large
increase in long-term receivables from Member States concerns EAGF and rural
development non-executed clearance of accounts decisions. These amounts are to
be recovered in several instalments during 2012 and 2013, in the context of
financial assistance granted to certain Member States. Amounts to be recovered
in 2013 are included in the above table while amounts to be recovered in 2012
are included under short-term receivables (see note 2.11.1
below).

2.7        LONG-TERM PRE-FINANCING

|| || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Pre-financing || 2.7.1 || 40 625 || 40 298

Prepaid expenditure || 2.7.2 || 4 098 || 3 820

Total long-term pre-financing || 44 723 || 44 118

2.7.1     Pre-financing

The timing of the recoverability or
utilisation of the pre-financing governs whether it is disclosed as current or
long-term pre-financing asset. The utilisation is defined by the project's
underlying agreement. All repayments or utilisation due before twelve months of
the reporting date is disclosed as short–term pre-financing and therefore as
current assets, the balance is long-term.

Guarantees received in respect of
pre-financing:

These are guarantees
that the European Commission in certain cases requests from beneficiaries when
paying out advance payments (pre-financing). There are two values to disclose
for this type of guarantee, the “nominal” and the “on-going” values. For the
“nominal” value, the generating event is linked to the existence of the
guarantee. For the “on-going” value, the guarantee’s generating event is the
pre-financing payment and/or subsequent clearings. At 31 December 2011 the
"nominal" value of guarantees received in respect of pre-financing
amounted to EUR 1 330 million while the
"on-going" value of those guarantees was EUR 1 083 million (2010: EUR 1 227 million
and EUR 1 059 million respectively).

Certain pre-financing amounts paid
out under the 7th Research Framework Programme for research and
technological development (FP7) are effectively covered by a Participants
Guarantee Fund (PGF) – the amount of pre-financing paid out in 2011 totalled EUR
3.3 billion (2010: EUR 3.2 billion). This fund is a separate entity from the
European Union and is not consolidated in these accounts – note 11.2.3.

LONG-TERM PRE-FINANCING                    || || EUR millions

Management type || 31.12.2011 || 31.12.2010

Direct centralised management || 1 219 || 1 695

Indirect centralised management || 774 || 620

Decentralised management || 697 || 441

Shared management || 37 249 || 37 055

Joint management || 686 || 487

Total Long-Term Pre-financing || 40 625 || 40 298

The most significant long-term
pre-financing amounts relate to Structural Actions for the 2007-2013
programming period: the regional development fund (ERDF), the social fund
(ESF), the agricultural fund for rural development (EAFRD), the cohesion fund
(CF) and the fisheries fund. As many of these projects are long-term in nature,
it is necessary that the related advances are available for more than one year.
Thus these pre-financing amounts are shown as long-term assets.

Pre-financing represents a large
portion of the EU's total assets, and thus receives proper and regular
attention. It should be noted that the level of pre-financing amounts in the
various programmes must be sufficient to ensure the necessary float for the
beneficiary to start the project, while also safeguarding the financial
interests of the EU and taking into consideration legal, operational and
cost-effectiveness constraints. All these elements have been given due
consideration by the Commission in an effort to improve the follow-up of
pre-financing.

A closer look at the evolution of
pre-financing reveals an accelerated increase in the years 2007 to 2009, which
coincides with the early years of the 2007-2013 programming period. That period
witnessed the starting of new programmes and actions, and the subsequent
support from the Commission in the form of pre-financing payments. The year
2011 marks a first decrease in the level of pre-financing, a trend which
confirms that the increase witnessed in the early years of the 2007-2013
Financial Framework is a normal development linked to the spending profile of
multiannual programmes. In fact in 2011, total pre-financing has decreased by
1.5% or EUR 743 million compared to 2010, an evolution related mainly to
short-term shared management amounts (see note 2.12.1).
This decrease is however offset by an increase in prepaid expenditure, due to
the recognition of new assets regarding aid scheme advance amounts reimbursed
by Commission to the Member States (see below).

2.7.2   Prepaid
expenditure

|| || EUR millions

|| 31.12.2011 || 31.12.2010

Financial Engineering Instruments || 3 378 || 3 820

Aid schemes || 720 || -

Total || 4 098 || 3 820

Under the framework of
the cohesion and rural development programmes 2007-2013, payments can be made
from the EU Budget to Member States so as to contribute to Financial
Engineering Instruments (be it in the form of loans, guarantees or equity
investments) set up and managed under the responsibility of the Member State.
Monies that are unused by these instruments at year-end are the property of the
EU (as with standard pre-financing) and are thus treated as an asset on the
Commission balance sheet. However, the basic legal acts do not oblige the Member
States to provide periodic reports to the Commission on the use made of these
advances, and in some cases not even identify them in the statements of
expenditure submitted to the Commission. Thus, and on the basis of information
received from Member States on the utilisation of funds, an estimation is made
at each year-end of the value of this asset.

In parallel with the inclusion of
FEIs on its balance sheet in 2010, the Commission also analysed similar schemes
where advances are paid to Member States. It requested information from Member
States on their utilisation of advances received from various aid schemes (state aid,
market measures of EAGF) and contributions from the European Globalisation
Adjustment Fund. However, at year-end 2010 sufficient information was not available
from Member States to allow the Commission to make a reliable estimate of the
open amounts at 31 December 2010. Information now indicates that these amounts
would not have been material. Following continued work throughout 2011, the
Commission is now in a position to better estimate these open advances based on
information
collected from Member States, therefore an asset is now included on the
Commission balance sheet at 31 December 2011, split between long-term (EUR 720
million above) and short term (EUR 1 792 million, see note 2.12.2), depending on when the advances are
expected to be used. The recognition of this asset has the counterparty of
reducing the 2011 expenditure by the same amount.

CURRENT ASSETS

2.8        INVENTORIES

|| EUR millions

Description || 31.12.2011 || 31.12.2010

Scientific materials || 78 || 71

Other || 16 || 20

TOTAL || 94 || 91

2.9        FINANCIAL
ASSETS: AVAILABLE FOR SALE ASSETS

Available-for-sale financial assets
are purchased for their investment return or yield, or held to establish a
particular asset structure or a secondary source of liquidity and may therefore
be sold in response to needs for liquidity or changes in interest rates.

AVAILABLE FOR SALE ASSETS || || EUR millions

|| 31.12.2011 || 31.12.2010

ECSC in Liquidation || 1 463 || 1 283

BUFI investments || 1 358 || 515

Risk Sharing Finance Facility || 547 || 419

Loan Guarantee Instrument for TEN-T projects || 97 || 111

European Chemicals Agency || 151 || -

Other || 3 || 3

Total || 3 619 || 2 331

Regarding the ECSC in liquidation
amounts, all AFS investments are debt securities denominated in EUR and quoted
in an active market. At 31 December 2011 debt securities (expressed at their
fair value) reaching final maturity in the course of 2012 amount to EUR 481 million
(2010: EUR 294 million).

While there have been acquisitions in
both the Risk Sharing Finance Facility and the Loan Guarantee Instrument for
TEN-T Projects (see also note 5.1.2), the
large increase from the previous year is due mainly to the increased amount of
provisionally cashed fines in a specifically created fund managed by DG ECFIN (BUFI).
Prior to 2010, these amounts would have been held in specific bank accounts –
see note 2.13.2, restricted cash.

2.10      FINANCIAL
ASSETS: SHORT-TERM LOANS

These amounts represent mainly loans
with remaining final maturities less than 12 months after the balance sheet
date (see note 2.5.2 above for more
details). Last year there was an amount of EUR 2 billion included here relating
to a BOP loan to Hungary which was repaid in December 2011. Also included under
this heading are term deposits of EUR 51 million, primarily relating to the European
External Action Service and the Translation Centre for the Bodies of the
European Union.

2.11      OTHER
RECEIVABLES & RECOVERABLES

|| || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Current receivables || 2.11.1 || 6 189 || 6 786

Sundry receivables || - || 21 || 20

Accrued income and deferred charges || 2.11.2 || 3 267 || 4 525

Total || 9 477 || 11 331

The total above contains
an estimated EUR 8 955 million (2010: EUR 11 009 million) relating to
non-exchange transactions.

2.11.1 Current
receivables

|| EUR millions

Account Group || At 31.12.2011 || At 31.12.2010

Gross amount || Write down || Net Value || Gross amount || Write down || Net Value

Customers || 379 || (94) || 285 || 207 || (79) || 128

Fines || 3 369 || (244) || 3 125 || 4 584 || (406) || 4 178

Member States || 4 243 || (1 550) || 2 693 || 4 011 || (1 625) || 2 386

Others || 89 || (3) || 86 || 96 || (2) || 94

Total  || 8 080 || (1 891) || 6 189 || 8 898 || (2 112) || 6 786

Customers

These are recovery
orders entered in the accounts at year-end as established entitlements to be
recovered and not already included under other headings on the assets side of
the balance sheet.

Fines

This concerns amounts to
be recovered relating to fines issued by the Commission. Guarantees totalling EUR
3 012 million had been received for the fines outstanding at 31 December 2011
(2010: EUR 2 585 million) in respect of these receivables. It should be noted
that EUR 209 million of the receivables were due for payment after 31 December
2011.

Receivables from Member States

|| EUR millions

|| 31.12.2011 || 31.12.2010

EAGF and Rural Development receivables || ||

EAGF || 1 439 || 1 130

EAFRD || 23 || -

TRDI || 37 || 19

SAPARD || 142 || 146

Write-down || (771) || (814)

Total  || 870 || 481

VAT  paid and recoverable || 41 || 46

Own resources || ||

Established in the A account || 29 || 81

Established in the separate account || 1 263 || 1 285

Write-down || (779) || (811)

Other || 114 || 391

Total  || 627 || 946

Other receivables from Member States ||   ||

Pre-financing recovery expected || 963 || 561

Other || 192 || 352

Total  || 1 155 || 913

Total || 2 693 || 2 386

EAGF
and Rural Development receivables

This item primarily covers the
amounts owed by beneficiaries of EAGF at 31 December, as declared and certified
by the Member States at 15 October. An estimation is made for the receivables
arising after this declaration and up to 31 December. The Commission also
estimates a write-down for the amounts owed by beneficiaries that are unlikely
to be recovered. The fact that such an adjustment is made does not mean that
the Commission is waiving future recovery of these amounts. A deduction of 20%
is also included in the adjustment, and corresponds to what Member States are allowed
to retain to cover administrative costs.

Own resources receivables

It should be noted that Member
States are entitled to withhold 25% of traditional own resources as collection
costs, thus the above figures are shown net of this deduction. Based on the
estimations sent by Member States, a write-down has been deducted from
receivables from Member States. However, this does not mean that the Commission
is waiving recovery of the amounts covered by this value adjustment.

2.11.2   Accrued income
and deferred charges

|| EUR millions

|| 31.12.2011 || 31.12.2010

Accrued income || 2 952 || 3 445

Deferred charges || 296 || 1 061

Other || 19 || 19

Total  || 3 267 || 4 525

The main amount under this heading
is accrued income:

|| EUR millions

|| 31.12.2011 || 31.12.2010

Own resources || 2 644 || 2 657

Agricultural assigned revenue Nov & Dec || 111 || 72

EAGF: non-executed conformity correction decisions || - || 520

Cohesion, Regional & Rural Development Funds: financial corrections || 16 || 43

Other accrued income || 181 || 153

Total accrued income  || 2 952 || 3 445

The large decrease in deferred
charges is mainly due to an improvement in the accounting treatment of the
funds transferred by the Member States into Financial Engineering Instruments
which were yet to be declared to or reimbursed by the Commission at year-end.
These amounts are now deducted from the accrued charges to which they relate.

Other accrued income is primarily
late interest income, bank interest and interest on pre-financing.

2.12      SHORT-TERM PRE-FINANCING

|| || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Pre-financing || 2.12.1 || 8 089 || 9 123

Prepaid expenditure || 2.12.2 || 2 918 || 955

Total short-term pre-financing || 11 007 || 10 078

2.12.1   Pre-financing

|| || EUR millions

Management type || 31.12.2011 || 31.12.2010

Direct centralised management || 3 048 || 3 038

Indirect centralised management || 3 037 || 2 368

Decentralised management || 330 || 536

Shared management || 761 || 2 177

Joint management || 803 || 894

Implemented by other Institutions & Agencies || 110 || 110

Total Short-Term Pre-financing || 8 089 || 9 123

The decrease in
short-term pre-financing under shared management is due to the significant
advancement in the closure process of the programming period 2000-2006 (mostly
rural development fund, regional development fund and cohesion fund). Although
pre-financing instalments were paid in 2011 for new projects (programmes
related to the period 2007-2013), they were classified under long-term assets
as explained in note 2.7.

2.12.2   Prepaid expenditure

|| || EUR millions

|| 31.12.2011 || 31.12.2010

Financial Engineering Instruments || 1 126 || 955

Aid Schemes || 1 792 || -

Total || 2 918 || 955

As explained under note 2.7.2, these amounts relate to payments made to
Member States under the framework of the cohesion and rural develoment
programmes 2007-2013, so as to reimburse amounts paid in advance to
beneficiaries, but which have not yet been used at year-end. The above amounts
are expected to be used during 2012.

2.13      CASH AND CASH EQUIVALENTS

|| EUR millions

|| 31.12.2011 || 31.12.2010

Unrestricted cash: || ||

Accounts with Treasuries & Central Banks || 7 450 || 10 123

Current accounts || 1 099 || 1 150

Imprest accounts || 43 || 39

Transfers (cash in transit) || (5) || 1

Short-term deposits and other cash equivalents || 2 028 || 1 670

Total || 10 615 || 12 983

Restricted cash || 8 320 || 9 080

Total  || 18 935 || 22 063

2.13.1   Unrestricted
cash

Unrestricted cash covers all the
funds which the Commission keeps in its accounts in each Member State and EFTA
country (treasury or central bank), as well as in current accounts, imprest
accounts, short-term bank deposits  and petty cash.

Amounts shown as short-term
deposits relate primarily to monies managed by fiduciaries on behalf of the
Commission for the purpose of implementing particular programmes funded by the
EU budget. At year-end, EUR 118 million had been committed to, but not yet been
drawn down by the other parties.

2.13.2   Restricted cash

Restricted cash refers to amounts
received in connection with fines issued by the Commission for which the case is
still open. These are kept in specific deposit accounts that are not used for
any other activities. In case an appeal has been
lodged or where it is unknown if an appeal will be made by the other party the
underlying amount is shown as contingent liability in note 5.2.

NON CURRENT LIABILITIES

2.14      PENSION AND
OTHER EMPLOYEE BENEFITS

|| EUR millions

|| 31.12.2011 || 31.12.2010

Pensions – Staff || 30 617 || 32 801

Pensions – others || 777 || 840

Joint Sickness Insurance Scheme || 3 441 || 3 531

Total || 34 835 || 37 172

2.14.1   Pensions – Staff

In accordance with
Article 83 of the Staff Regulations, the payment of the benefits provided for
in the staff pension scheme (PSEO: Pension Scheme of European Officials) constitutes
a charge to the EU's budget. The scheme is not funded, but the Member States
guarantee the payment of these benefits collectively according to the scale
fixed for the financing of this expenditure. In addition, officials contribute
one third to the long-term financing of this scheme via a compulsory contribution.

The liabilities of the pension
scheme were assessed on the basis of the number of staff and retired staff at
31 December 2011 and on the rules of the Staff Regulations applicable at this
date. This valuation was carried out in accordance with the methodology of IPSAS
25 (and therefore also EU accounting rule 12). The
method used to calculate this liability is the projected unit credit method.
The main actuarial assumptions available at the valuation date and used on the
valuation were as follows:

||

Actuarial Assumptions || 31.12.2011 || 31.12.2010

Nominal discount rate || 4.9% || 4.6%

Expected inflation rate || 1.8% || 2.1%

Real discount rate || 3.0% || 2.4%

Probability of marriage: Man/Woman || 84%/38% || 84%/38%

General Salary Growth/pension revaluation || 0% || 0%

2008 International Civil Servants Life Table || Yes || Yes

The significant decrease
in the pension liability is explained by the sizeable increase in the discount
rate applied, resulting in a large actuarial gain for the year.

Movement in Gross Employee Benefits liability || EUR millions

|| Staff pension liability || Sickness Insurance

Gross Liability at previous year-end || 36 639 || 3 791

Service/normal cost || 1 255 || 169

Interest cost || 1 716 || 180

Benefits paid || (1 187) || (112)

Actuarial gains || (4 226) || (317)

Change due to newcomers || 36 || 0

Gross Liability at year-end || 34 233 || 3 711

Pension co-efficient liability || 834 || N/A

Deduction of taxes on pensions || (4 450) || N/A

Plan assets || 0 || (270)

Net liability at year-end || 30 617 || 3 441

2.14.2   Pensions – Others

This refers to the
liability relating to the pension obligation towards Members and former Members
of the Commission, the Court of Justice (and General Court) and the Court of
Auditors, the Secretaries General of the Council, the Ombudsman, the European
Data Protection Supervisor, and the European Union Civil Service Tribunal. Also
included under this heading is a liability relating to the pensions of Members
of the European Parliament.

2.14.3   Joint Sickness
Insurance Scheme

A valuation is also made for the estimated liability that the EU
has regarding its contributions to the Joint Sickness Insurance Scheme in
relation to its retired staff. The gross liability has been valued at EUR 3 711
million and plan assets of EUR 270 million are deducted from the gross
liability to arrive at the net amount. The discount rate and the general salary
growth used in the calculation are the same as those used in the staff pension
valuation.

2.15      LONG-TERM PROVISIONS

|| || || EUR millions

|| Amount at 31.12.2010 || Additional provisions || Unused amounts reversed || Amounts used || Transfer to short-term || Change in estimation || Amount at 31.12.2011

Legal cases || 306 || 95 || (29) || (4) || 0 || 0 || 368

Nuclear site dismantling || 905 || 0 || 0 || (8) || (29) || 137 || 1 005

Financial || 86 || 41 || 0 || 0 || (30) || 3 || 100

Other || 20 || 4 || (2) || 0 || 0 || 0 || 22

Total || 1 317 || 140 || (31) || (12) || (59) || 140 || 1 495

Legal cases

This is the estimate of
amounts that will probably have to be paid out more than 12 months after the
year-end in relation to a number of ongoing legal cases. The largest portion concerns
court cases pending at year-end in relation to financial corrections for EAGF
expenditure and other court cases concerning agricultural expenditure.

Nuclear
site dismantlement

In 2008 a consortium of
independent experts made an update of their 2003 study into the estimated costs
of the decommissioning of the JRC nuclear facilities and waste management
programme. Their revised estimate of EUR 1 222 million (previously EUR 1 145
million) is taken as the basis for the provision to be included in the
financial statements. In accordance with the EU accounting rules, this estimate
is indexed for inflation and then discounted to its net present value (using
the Euro zero-coupon swap curve). In view of the estimated duration of this
programme (around 20 years), it should be pointed out that there is some uncertainty
about this estimate, and the final cost could be different from the amounts
currently entered.

Financial provisions

These concern provisions which represent the
estimated losses that will be incurred in relation to the guarantees given
under the SME Guarantee Facility 1998, the SME Guarantee Facility 2001 and the
SME Guarantee Facility 2007 under CIP and the European Progress Microfinance Facility (Guarantee), where the
European Investment Fund (EIF) is empowered to issue guarantees in its own name
but on behalf of and at the risk of the Commission. The financial risk linked
to the drawn and undrawn guarantees is, however, capped. Long-term financial
provisions are discounted to their net present value (using the Euro Swap
annual rate).

2.16      LONG-TERM FINANCIAL
LIABILITIES

|| || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Long-term borrowings || 2.16.1 || 41 200 || 11 445

Elimination Guarantee Fund* || 2.4.1 || (21) || -

Total || || 41 179 || 11 445

- The Guarantee Fund holds EFSM
bonds issued by the Commission, so these need to be eliminated.

2.16.1   Long-term
borrowings

|| || EUR millions

|| MFA || Euratom || BOP || EFSM || ECSC in Liquidation || Total

Total at 31.12.2010 || 503 || 469 || 12 246 || 0 || 231 || 13 449

New borrowings          || 126 || 0 || 1 350 || 28 000 || 0 || 29 476

Repayments || (36) || (20) || (2 000) || 0 || 0 || (2 056)

Exchange differences || 0 || 0 || 0 || 0 || 6 || 6

Changes in carrying amount || 2 || 2 || 29 || 344 || (1) || 376

Total at 31.12.2011 || 595 || 451 || 11 625 || 28 344 || 236 || 41 251

Amount due < 1 year || 5 || 0 || 0 || 0 || 46 || 51

Amount due > 1 year || 590 || 451 || 11 625 || 28 344 || 190 || 41 200

This heading includes
borrowings due by the European Union maturing in over one year. Borrowings include debts
evidenced by certificates amounting to EUR 41 011 million (2010: EUR 13 211
million). The changes in carrying
amount correspond to the change in accrued interests. For more information on
borrowing and lending activities, see note 7.

2.17      OTHER
LONG-TERM LIABILITIES

|| EUR millions

|| 31.12.2011 || 31.12.2010

Finance Leasing debts || 1 603 || 1 672

Buildings paid for in instalments || 367 || 382

Other || 89 || 50

Total  || 2 059 || 2 104

CURRENT LIABILITIES

2.18      SHORT-TERM
PROVISIONS

|| || || EUR millions

|| Amount at 31.12.2010 || Additional provisions || Unused amounts reversed || Amounts used || Transfers from long term || Change in estimation || Amount at 31.12.2011

Legal cases || 29 || 11 || (18) || (5) || 0 || 0 || 17

Nuclear site dismantlement || 21 || 0 || 0 || (21) || 29 || 0 || 29

Financial || 140 || 27 || (2) || (33) || 30 || 3 || 165

Other || 24 || 56 || (1) || (20) || 0 || 0 || 59

Total || 214 || 94 || (21) || (79) || 59 || 3 || 270

This heading includes
the portion of provisions which fall due for payment in less than one year's time.

2.19      SHORT-TERM
FINANCIAL LIABILITIES

This heading relates to
borrowings (see note 2.16) that mature during
the 12
months following the balance sheet date.

2.20      PAYABLES

|| || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Current portion of long-term liabilities || 2.20.1 || 81 || 78

Current payables || 2.20.2 || 22 211 || 17 615

Sundry payables || - || 100 || 97

Accrued charges and deferred income || 2.20.3 || 69 081 || 66 739

Total || 91 473 || 84 529

2.20.1   Current portion
of long-term liabilities

|| EUR millions

|| 31.12.2011 || 31.12.2010

Finance leasing liabilities || 66 || 65

Other || 15 || 13

Total  || 81 || 78

2.20.2   Current
payables

|| EUR millions

Type || 31.12.2011 || 31.12.2010

Member States || 22 200 || 17 035

Suppliers and other || 1 511 || 1 292

Estimated non-eligible amounts and pending pre-payments || (1 500) || (712)

Total  || 22 211 || 17 615

Current payables include cost
statements received by the Commission under the framework of the grant
activities. They are credited for the amount being claimed from the moment the
demand is received. If the counterpart is a Member State, they are classified
as such. It is the same procedure for invoices and credit notes received under
procurement activities. The cost claims concerned have been taken into account
for the year-end cut off procedures. Following these cut off entries, estimated
eligible amounts have therefore been recorded in the accounts as expenses,
while the remaining part is disclosed as “Estimated non-eligible amounts and pending prepayments” (see
below). In order not to overestimate assets and liabilities, it was decided to
present the net amount under current liabilities.

Member
States

The primary amounts
here relate to unpaid cost claims for Structural Fund actions (EUR 5.8 billion
for ESF and EUR 14 billion for ERDF and CF).

Suppliers and other

Included under this
heading are amounts owed following grant and procurement activities, as well as
amounts payable to public bodies and non-consolidated entities (e.g. the EDF).

Estimated
non-eligible amounts and pending prepayments

Payables are reduced by that part
of the requests for reimbursement received, but not yet checked, that was
considered to be ineligible. The largest amounts concern the Structural Actions
DGs. Payables are also reduced by the part of requests for reimbursement
received corresponding to prepaid expenditure still to pay at year end (EUR 1
billion).

2.20.3   Accrued charges
and deferred income

|| EUR millions

|| 31.12.2011 || 31.12.2010

Accrued charges || 68 577 || 66 326

Deferred income || 490 || 407

Amounts related to consolidated entities || 14 || 6

Total  || 69 081 || 66 739

The split of accrued
charges is as follows:

|| EUR millions

|| 31.12.2011 || 31.12.2010

Agriculture and Rural Development: || ||

EAGF: Expenses 16/10 to 31/12 || 33 774 || 33 015

EAGF: Direct Aid || 10 701 || 10 703

EAGF: Sugar restructuring || 224 || 400

EAGF: Other || 23 || (303)

EAFRD || 12 127 || 10 792

Total || 56 849 || 54 607

Structural Actions: || ||

EFF || 56 || 116

ERDF & Cohesion Fund || 4 791 || 4 894

ISPA || 172 || 74

ESF || 1 687 || 2 182

Total || 6 706 || 7 266

Other accrued charges: || ||

R&D || 1 157 || 1 267

Other || 3 865 || 3 186

Total || 5 022 || 4 453

Total accrued charges  || 68 577 || 66 326

The large amount of deferred income
at 31 December 2011 is due to the advance payment of own resources
contributions by two Member States in 2011.

NET ASSETS & RESERVES

2.21      RESERVES

|| EUR millions

|| 31.12.2011 || 31.12.2010

Fair value reserve || (108) || (61)

Other reserves: || ||

Guarantee Fund || 1 911 || 1 746

Revaluation reserve || 57 || 57

Other || 1 748 || 1 742

Total || 3 716 || 3 545

Total  || 3 608 || 3 484

2.21.1   Fair value
reserve

In accordance with the
accounting rules, the adjustment to fair value of available-for-sale assets is
accounted for through the fair value reserve. In 2011 a net EUR 24 million of
accumulated fair value decreases have been taken out of the fair value reserve
and recognised in the economic outturn account relating to available-for-sale
assets.

Included in the fair value reserve
at year-end is EUR 87 million of decreases in fair value relating to Greek
government bonds held by the EU (nominal value EUR 129 million). However, it
should be noted that these bonds were exchanged in early 2012 for new bonds, with
similar terms but not falling under the scope of the Private Sector Involvement
(PSI) debt restructuring. The result was that all amounts due for repayment on
20 March 2012 (EUR 39 million) and 18 May (EUR 15.7 million) were repaid in
full and on schedule. Please see note 1.5.5
for further details on the fair value accounting of financial assets.

2.21.2   Other reserves

Guarantee Fund

See also note 2.4.1 concerning
the operation of the Guarantee Fund. This reserve reflects the 9% target amount
of the outstanding amounts guaranteed by the Fund that is required to be kept
as assets.

Revaluation reserve

This reserve comprises
the revaluation of certain Commission land and buildings made prior to 2005.

Other reserve

The amount relates primarily to the
ECSC in liquidation reserve for the assets of the Research Fund for Coal and
Steel. This reserve was created in the context of the winding-up of the ECSC.

2.22      AMOUNTS TO BE
CALLED FROM MEMBER STATES

|| EUR millions

|| Amount

Amounts to be called from Member States at 31 December 2010 || 30 931

Return of 2010 budget surplus to Member States || 4 539

Movement in Guarantee Fund reserve || 165

Other reserve movements || 34

Economic outturn (surplus) for the year || 1 789

Total amounts to be called from Members States at 31 December 2011 || 37 458

Split between: ||

Employee benefits || 34 835

Other amounts ||   2 623

This amount represents
that part of the expenses already incurred by the Commission up to 31 December
2011 that must be funded by future budgets. Many expenses are recognised under
accrual accounting rules in the year N although they may be actually paid in
year N+1 and funded using the budget of year N+1. The inclusion in the accounts
of these liabilities coupled with the fact that the corresponding amounts are
financed from future budgets, results in liabilities greatly exceeding assets
at the year-end. The most significant amounts to be highlighted are the EAGF
activities. The majority of the amounts to be called are in fact paid by the
Member States in less than 12 months after the end of the financial year in
question as part of the budget of the following year.

It is essentially only
the employee benefits obligations of the Commission towards its staff which are
paid out over a longer period, noting that the funding of the pension payments
by the annual budgets is guaranteed by the Member States. For information
purposes only, an estimate of the split of future employee benefit payments is
given below:

|| EUR millions

|| Amount

Short-term: amounts to be paid in 2012 || 1 335

Long-term: amounts to be paid after 2012 || 33 500

Total employee benefits liability at 31.12.2011 || 34 835

It should also be noted
that the above has no effect on the budget outturn – budget revenue should
always equal or exceed budget expenditure and any excess of revenue is returned
to Member States.

3. NOTES TO THE ECONOMIC OUTTURN
ACCOUNT

3.1       OWN RESOURCE AND CONTRIBUTIONS
REVENUE

|| || || EUR millions

|| Note || 2011 || 2010

Own resource revenue: || 3.1.1 || ||

GNI resources || || 88 442 || 91 178

VAT resources || || 14 763 || 12 517

Traditional own resources: || || ||

Custom duties || || 16 528 || 16 065

Sugar levies || || 161 || 150

Total traditional own resources || || 16 689 || 16 215

Budgetary adjustments || 3.1.2 || 4 533 || 2 135

Contributions of third countries (incl. EFTA countries) || || 250 || 283

Total || || 124 677 || 122 328

3.1.1     Own resource
revenue

Own resources is the
primary element of the EU’s operating revenue. Thus the bulk of expenditure is
financed by own resources as other revenue represents only a minor part of the
total financing. There are three categories of own resources: traditional own
resources, the VAT-based resource and the GNI-based resource. Traditional own
resources comprise sugar levies and customs duties. A correction mechanism in
respect of budgetary imbalances (UK Rebate) as well as a gross reduction in the
annual GNI-based contribution of Netherlands and Sweden are also part of the
own resources system. Member States retain, by way of collection costs, 25% of
traditional own resources, and the above amounts are shown net of this
deduction.

It should be noted that
inspections carried out by the Commission and audits performed by the Court of
Auditors have highlighted some deficiencies in the Belgian clearance and
accounting systems, impacting the reliability of amounts transferred to the EU
budget under Traditional Own Resources (TOR). A refund of EUR 169 million
(gross, EUR 126 million net) claimed by Belgium is currently pending, awaiting
the result of further audits and controls on the correctness of the amounts of
Belgian TOR credited to the Commission's account.

3.1.2     Budgetary
adjustments

The budgetary
adjustments include the budget surplus from 2010 (EUR 4 539 million) which is
indirectly refunded to Member States by deduction of the amounts of own
resources they have to transfer to the EU in the following year – thus it is a
revenue for 2011.

3.2       OTHER OPERATING REVENUE

|| || || EUR millions

|| Note || 2011 || 2010

Fines || 3.2.1 || 868 || 3 077

Agricultural levies || 3.2.2 || 65 || 25

Recovery of expenses: || 3.2.3 || ||

Direct centralised management || || 76 || 49

Indirect centralised management || || 17 || 11

Decentralised management || || 106 || 71

Joint management || || 3 || -

Shared management || || 845 || 1 776

Total || || 1 047 || 1 907

Revenue from administrative operations: || 3.2.4 || ||

Staff || || 1 141 || 1 073

Property, plant and equipment related revenue || || 94 || 13

Other administrative revenue || || 119 || 121

Total || || 1 354 || 1 207

Miscellaneous operating revenue: || 3.2.5 || ||

Adjustments/provisions || || 59 || 157

Exchange gains || || 476 || 460

Other || || 1 507 || 1 355

Total || || 2 042 || 1 972

Total || || 5 376 || 8 188

3.2.1     Fines

These revenues relate
to fines imposed by the Commission for infringement of competition rules. Receivables and related
revenues are recognised when the Commission decision imposing a fine has been
taken and it is officially notified to the addressee.

3.2.2     Agricultural levies

These amounts concern primarily milk levies which are a market
management tool aimed at penalising milk producers who exceed their reference
quantities. As it is not linked to prior payments by the Commission, it is in
practice considered as revenue for a specific purpose.

3.2.3     Recovery of
expenses

This heading represents the
recovery orders issued by the Commission and the deduction from subsequent
payments recorded in the Commission's accounting system, to recover
expenditures previously paid out from the general budget, based on controls,
closed audits or eligibility analysis, together with recovery orders issued by
Member States to beneficiaries of EAGF expenditure. It also includes the
variation of accrued income estimations from the previous year-end to the
current. It does not, however, show the full extent of the recovery of EU
expenditure, particularly for the significant spending areas of Structural
Actions where specific mechanisms are in place to ensure the return of
ineligible monies, most of which do not involve the issuance of a recovery
order. Recoveries of pre-financing amounts are also not included as revenue, in
accordance with the EU accounting rules.

The main amount, EUR 845 million,
relates to shared management and is made up mainly of EUR 721 million
concerning the European Agricultural Guarantee Fund (EAGF) and EUR 109 million
for Structural Actions.

(a) Agriculture: EAGF

In the framework of the European
Agricultural Guarantee Fund (EAGF), amounts accounted for as revenue of the
year under this heading are EUR 721 million, made up as follows:

-
conformity
corrections decided during the year,  EUR 686 million;

-
fraud
and irregularities EUR 35 million: being reimbursements declared by Member
States and recovered during the year of EUR 174 million minus the decrease in
the outstanding amounts declared by Member States to be recovered at year-end
concerning fraud and irregularities of EUR 139 million (EUR 991 million at
year-end 2011 compared to EUR 1 130 million at year-end 2010) – see also note 2.11.1.

(b) Structural Actions

-
The
recovery of expenditure under the Structural actions included under this
heading amounted to EUR 109 million (2010: EUR 279 million). The main amounts
in this sub-heading include recovery orders issued by the Commission to recover
undue expenditure made in previous years for an amount of EUR 127 million, the
variation (increase) of the accrued income at year-end for EUR 28 million (offset
by a correction of EUR 46 million).

Recovery orders are issued only in the following cases:

-     formal
financial correction decisions by  the Commission following the detection of
irregular expenditure in the amounts claimed by Member States

-     adjustments
at closure of a programme leading to a reduction in the EU contribution where a
Member State has not declared sufficient eligible expenditure to justify the
total pre-financing and interim payments already made; such operations may be
without a formal Commission decision if accepted by the Member State;

-     repayment
of amounts recovered after closure following the conclusion of legal
proceedings which were pending at the time of closure.

Other recovery orders issued under
Structural Actions concern the recovery of pre-financing. These amounts are not
shown as revenue, but credited to the pre-financing heading on the balance sheet.

3.2.4     Revenue from
administrative operations

This
revenue arises from deductions from staff salaries and is made up primarily of
two amounts – staff pension contributions and taxes on income.

3.2.5     Miscellaneous
operating revenue

An
amount of EUR 535 million (2010: EUR 430 million) relates to amounts received
from accession countries. Exchange gains, except on financial activities dealt
with in note 3.5 below, are also included under this heading.
These arise from the everyday activities and related transactions made in
currencies other than the Euro, as well as the year-end revaluation required to
prepare the accounts. They contain both realised and unrealised gains. There
was a net exchange gain for the year of EUR 94 million (2010: EUR 23 million).

3.3       ADMINISTRATIVE EXPENSES

|| || EUR millions

|| 2011 || 2010

Staff expenses || 5 416 || 5 171

Depreciation and impairment || 412 || 384

Other administrative expenses || 3 148 || 3 059

Total || 8 976 || 8 614

Included under this heading are
expenses of EUR 358 million relating to
operating leases – amounts committed to be paid during the remaining term of
these lease contracts are as follows:

|| || || || || EUR millions

Description || Future amounts to be paid

< 1 year || 1- 5 years || > 5 years || Total

Buildings || 318 || 1 203 || 790 || 2 311

IT materials and other equipment || 22 || 35 || 1 || 58

Total || 340 || 1 238 || 791 || 2 369

3.4        OPERATING EXPENSES

|| || || EUR millions

|| Note || 2011 || 2010

Primary operating expenses: || 3.4.1 || ||

Direct centralised management || || 10 356 || 10 123

Indirect centralised management || || 4 119 || 4 045

Decentralised management || || 766 || 933

Shared management || || 104 067 || 85 432

Joint management || || 1 714 || 1 868

Total || || 121 022 || 102 401

Other operating expenses: || 3.4.2 || ||

Adjustments/provisions || || 251 || 68

Exchange losses || || 382 || 439

Other || || 2 123 || 856

Total || || 2 756 || 1 363

Total || || 123 778 || 103 764

The
significant increase in operating expenses is due to shared management where
the increased activities related to the 2007-2013 programming period, resulted
in an increased recognition of expenditure in 2011. The main variations are
noted in areas of cohesion and regional development (EUR 19 billion). Given the
relatively stable nature of operating revenue, this large increase in operating
expenditure has resulted in an operating deficit in 2011 of EUR 2.7 billion.

3.4.1     Primary
operating expenses

The
European Commission's operating expenditure covers the various headings of the
financial framework and takes different forms, depending on how the money is
paid out and managed. The majority of the expenditure falls under the heading
“Shared Management” involving the delegation of tasks to Member States,
covering such areas as EAGF spending and actions financed through the different
Structural Actions (the regional development fund, the social fund, the agricultural fund
for rural development, the cohesion fund and the fisheries fund).

3.4.2     Other
operating expenses

Exchange
losses, except on financial activities dealt with in note 3.6 below,
occur on the everyday activities and related transactions made in currencies
other than the Euro, as well as the year-end revaluation required to prepare
the accounts – they are both realised and unrealised.

Research and Development costs || EUR millions

|| 2011 || 2010

Research costs || 327 || 295

Non-capitalised development costs || 145 || 157

Recognised as an expense || 472 || 452

3.5       FINANCIAL REVENUE

|| || EUR millions

|| 2011 || 2010

Dividend income || 5 || 1

Interest income: || ||

On pre-financing || 40 || 42

On late payments || 89 || 382

On available for sale assets || 113 || 100

On loans || 921 || 394

On cash & cash equivalents || 132 || 110

Other || 5 || 2

Total || 1 300 || 1 030

Other financial income: || ||

Realised gain on sale of financial assets || 3 || 11

Other || 178 || 83

Total || 181 || 94

Present value adjustments || 1 || 1

Exchange gains || 4 || 52

Total || 1 491 || 1 178

3.6       FINANCIAL EXPENSES

|| || EUR millions

|| 2011 || 2010

Interest expenses: || ||

Leasing || 91 || 93

On borrowings || 903 || 380

Other || 30 || 23

Total || 1 024 || 496

Other financial expenses: || ||

Adjustments to financial provisions || 74 || 60

Financial charges on budgetary instruments || 47 || 55

Impairment losses on AFS financial assets || 12 || 5

Realised loss on sale of financial assets || 5 || 1

Other || 144 || 42

Total || 282 || 163

Exchange losses || 49 || 2

Total || 1 355 || 661

3.7       SHARE OF NET DEFICIT OF JOINT
VENTURES & ASSOCIATES

In accordance with the
equity method of accounting, the Commission includes in its economic outturn
account its share of the net deficit of its joint ventures and associates (see
also notes 2.3.1 & 2.3.2).

3.8        REVENUE FROM NON-EXCHANGE TRANSACTIONS

In 2011 EUR 130 391 million
(2010: EUR 129 597 million) revenue from non-exchange transactions have been
recognised in the economic outturn account.

3.9       SEGMENT
REPORTING

The segment report
gives the split of the operating revenues and expenses by policy area, based on
the Activity Based Budget structure, within the Commission. These policy areas
can be grouped under three larger headings – Activities within the European
Union, Activities outside the European Union and Services & other.

“Activities within the
European Union” is the largest of these headings as it covers the many policy
areas within the European Union. “Activities outside the European Union”
concerns the policies operated outside the EU, such as trade and aid. “Services
& other” are the internal and horizontal activities necessary for the
functioning of the EU Institutions and bodies. Note that the information
relating to Agencies is included under the relevant policy area. Note also that
own resources and contributions are not split amongst the various activities as
these are calculated, collected and managed by central Commission services.

|| || || || || || EUR millions

|| Activities within the EU || Activities outside the EU || Services & Other || ECSC in Liquidation || Other Institutions || Consolidation eliminations || Total

Fines || 868 || 0 || 0 || 0 || 0 || 0 || 868

Agricultural levies || 65 || 0 || 0 || 0 || 0 || 0 || 65

Recovery of expenses || 906 || 138 || 3 || 0 || 2 || (2) || 1 047

Revenue from administrative operations || 142 || 2 || 993 || 0 || 664 || (447) || 1 354

Miscellaneous operating revenue || 2 502 || 98 || 580 || 7 || 132 || (1 277) || 2 042

OTHER OPERATING REVENUE || 4 483 || 238 || 1 576 || 7 || 798 || (1 726) || 5 376

Administrative expenses: || || || || || || ||

Staff expenses || (2 171) || (325) || (1 250) || 0 || (1 702) || 32 || (5 416)

Intangible assets & PPE related expenses || (109) || (1) || (121) || 0 || (181) || 0 || (412)

Other administrative expenses || (955) || (286) || (858) || 0 || (1 624) || 575 || (3 148)

Operating expenses: || (3 235) || (612) || (2 229) || 0 || (3 507) || 607 || (8 976)

Direct centralised management || (7 338) || (3 681) || (179) || 0 || 0 || 842 || (10 356)

Indirect centralised management || (3 423) || (682) || (32) || 0 || 0 || 18 || (4 119)

Decentralised management || (210) || (556) || 0 || 0 || 0 || 0 || (766)

Shared management || (103 988) || (80) || 1 || 0 || 0 || 0 || (104 067)

Joint management || (169) || (1 545) || 0 || 0 || 0 || 0 || (1 714)

Other operating expenses || (2 420) || (134) || (399) || (52) || (10) || 259 || (2 756)

|| (117 548) || (6 678) || (609) || (52) || (10) || 1 119 || (123 778)

TOTAL OPERATING EXPENSES || (120 783) || (7 290) || (2 838) || (52) || (3 517) || 1 726 || (132 754)

Net operating expenses || (116 300) || (7 052) || (1 262) || (45) || (2 719) || 0 || (127 378)

Own resource and contributions revenue || || || || || || || 124 677

Deficit from operating activities || || || || || || || (2 701)

Net financial revenue || || || || || || || 136

Movement in pension & other employee benefits liability || || || || || 1 212

Share of associates/joint ventures deficit || || || || || || || (436)

Economic outturn for the year || || || || || || || (1 789)

|| SEGMENT REPORTING – ACTIVITIES WITHIN THE EU || EUR millions ||

|| Economic & Financial || Enterprise & Industry || Competition || Employment || Agriculture || Transport & Energy || Environment || Research || Information Society

Other operating revenue: || || || || || || || || ||

Fines || 0 || 7 || 858 || 0 || 0 || 0 || 0 || 0 || 0

Agricultural levies || 0 || 0 || 0 || 0 || 65 || 0 || 0 || 0 || 0

Recovery of expenses || 0 || 4 || 0 || 23 || 807 || 7 || 1 || 5 || 24

Revenue from admin operations || 0 || 14 || 0 || 0 || 0 || 12 || 0 || 39 || 0

Miscellaneous operating revenue || 4 || 54 || 161 || 41 || 121 || 207 || 40 || 723 || 9

OTHER OPERATING REVENUE || 4 || 79 || 1 019 || 64 || 993 || 226 || 41 || 767 || 33

Administrative expenses: || (66) || (199) || (89) || (110) || (127) || (374) || (119) || (402) || (133)

Staff expenses || (60) || (143) || (83) || (84) || (106) || (255) || (86) || (231) || (107)

Intangible assets & PPE expenses || 0 || (16) || 0 || (1) || 0 || (13) || (1) || (4) || 0

Other administrative expenses || (6) || (40) || (6) || (25) || (21) || (106) || (32) || (167) || (26)

Operating expenses: || (66) || (1 116) || (1 492) || (11 044) || (57 063) || (1 427) || (256) || (4 207) || (1 251)

Centralised direct management || (66) || (665) || 0 || (148) || (30) || (802) || (239) || (2 739) || (1 230)

Centralised indirect management || 0 || (313) || 0 || (2) || 0 || (501) || (1) || (1 369) || (14)

Decentralised management || 0 || 0 || 0 || (29) || (5) || 0 || 0 || 0 || 0

Shared management || 0 || 0 || 0 || (10 841) || (56 883) || 0 || 0 || 0 || 0

Joint management || 0 || (94) || 0 || (6) || 0 || (68) || 0 || 0 || 0

Other operating expenses || 0 || (44) || (1 492) || (18) || (145) || (56) || (16) || (99) || (7)

TOTAL OPERATING EXPENSES || (132) || (1 315) || (1 581) || (11 154) || (57 190) || (1 801) || (375) || (4 609) || (1 384)

NET OPERATING EXPENSES || (128) || (1 236) || (562) || (11 090) || (56 197) || (1 575) || (334) || (3 842) || (1 351)

|| Joint Research Centre || Fisheries || Internal Market || Regional Policy || Taxation & Customs || Education & Culture || Health & Consumer protection || Justice, Freedom & Security || Total Activities within the EU

Other operating revenue: || || || || || || || || ||

Fines || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 3 || 868

Agricultural levies || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 65

Recovery of expenses || 0 || 5 || 0 || 15 || 0 || 7 || 7 || 1 || 906

Revenue from admin operations || 40 || 0 || 1 || 0 || 0 || 1 || 9 || 26 || 142

Miscellaneous operating revenue || 70 || 10 || 206 || (2) || 1 || 232 || 359 || 266 || 2 502

OTHER OPERATING REVENUE || 110 || 15 || 207 || 13 || 1 || 240 || 375 || 296 || 4 483

Administrative expenses: || (346) || (60) || (196) || (81) || (94) || (204) || (347) || (288) || (3 235)

Staff expenses || (245) || (39) || (134) || (65) || (42) || (107) || (223) || (161) || (2 171)

Intangible assets & PPE expenses || (26) || 0 || (7) || 0 || (2) || (1) || (26) || (12) || (109)

Other administrative expenses || (75) || (21) || (55) || (16) || (50) || (96) || (98) || (115) || (955)

Operating expenses: || (194) || (764) || (59) || (35 821) || (15) || (1 447) || (631) || (695) || (117 548)

Centralised direct management || (57) || (246) || (24) || (45) || (15) || (163) || (440) || (429) || (7 338)

Centralised indirect management || 0 || 0 || 0 || 0 || 0 || (1 174) || (49) || 0 || (3 423)

Decentralised management || 0 || 0 || 0 || (176) || 0 || 0 || 0 || 0 || (210)

Shared management || 0 || (514) || 0 || (35 600) || 0 || 0 || 0 || (150) || (103 988)

Joint management || 0 || 0 || 0 || 0 || 0 || (1) || 0 || 0 || (169)

Other operating expenses || (137) || (4) || (35) || 0 || 0 || (109) || (142) || (116) || (2 420)

TOTAL OPERATING EXPENSES || (540) || (824) || (255) || (35 902) || (109) || (1 651) || (978) || (983) || (120 783)

NET OPERATING EXPENSES || (430) || (809) || (48) || (35 889) || (108) || (1 411) || (603) || (687) || (116 300)

|| SEGMENT REPORTING – ACTIVITIES OUTSIDE THE EU || EUR millions ||

|| External Relations || Trade || Development || Enlargement || Humanitarian Aid || Total Activities outside the EU ||

Other operating revenue: || || || || || || ||

Recovery of expenses || 20 || 0 || 9 || 106 || 3 || 138 ||

Revenue from admin operations || 2 || 0 || 0 || 0 || 0 || 2 ||

Miscellaneous operating revenue || 10 || 0 || 90 || (1) || (1) || 98 ||

OTHER OPERATING REVENUE || 32 || 0 || 99 || 105 || 2 || 238 ||

Administrative expenses: || (99) || (71) || (331) || (78) || (33) || (612) ||

Staff expenses || (23) || (65) || (167) || (47) || (23) || (325) ||

Intangible assets & PPE expenses || (1) || 0 || 0 || 0 || 0 || (1) ||

Other administrative expenses || (75) || (6) || (164) || (31) || (10) || (286) ||

Operating expenses: || (3 381) || (8) || (1 217) || (958) || (1 114) || (6 678) ||

Direct centralised management || (1 699) || (5) || (833) || (547) || (597) || (3 681) ||

Indirect centralised management || (627) || 0 || (18) || (37) || 0 || (682) ||

Decentralised management || (209) || 0 || (37) || (310) || 0 || (556) ||

Shared management || (80) || 0 || 0 || 0 || 0 || (80) ||

Joint management || (638) || (3) || (326) || (63) || (515) || (1 545) ||

Other operating expenses || (128) || 0 || (3) || (1) || (2) || (134) ||

TOTAL OPERATING EXPENSES || (3 480) || (79) || (1 548) || (1 036) || (1 147) || (7 290) ||

NET OPERATING EXPENSES || (3 448) || (79) || (1 449) || (931) || (1 145) || (7 052) ||

|| || ||

|| SEGMENT REPORTING – SERVICES & OTHER || EUR millions ||

|| Press & Communication || Anti-Fraud Office || Co-ordination || Personnel & Admin || Eurostat || Budget || Audit || Languages || Other || Total Services & Other

Other operating revenue: || || || || || || || || || ||

Recovery of expenses || 1 || 0 || 0 || 1 || 0 || 0 || 0 || 1 || 0 || 3

Revenue from admin operations || 0 || 7 || 0 || 835 || 0 || 52 || 0 || 99 || 0 || 993

Miscellaneous operating revenue || (1) || 8 || 1 || 30 || 0 || 35 || 0 || 43 || 464 || 580

OTHER OPERATING REVENUE || 0 || 15 || 1 || 866 || 0 || 87 || 0 || 143 || 464 || 1 576

Administrative expenses: || (121) || (57) || (188) || (1 299) || (86) || (58) || (11) || (444) || 35 || (2 229)

Staff expenses || (79) || (44) || (159) || (526) || (70) || (44) || (10) || (353) || 35 || (1 250)

Intangible assets & PPE expenses || (2) || (1) || 0 || (114) || 0 || (1) || 0 || (3) || 0 || (121)

Other administrative expenses || (40) || (12) || (29) || (659) || (16) || (13) || (1) || (88) || 0 || (858)

Operating expenses: || (134) || (13) || (1) || (24) || (41) || (2) || 0 || (16) || (378) || (609)

Direct centralised management || (102) || (13) || 0 || (19) || (41) || (3) || 0 || (1) || 0 || (179)

Indirect centralised management || (32) || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || (32)

Shared management || 0 || 0 || 0 || 0 || 0 || 1 || 0 || 0 || 0 || 1

Other operating expenses || 0 || 0 || (1) || (5) || 0 || 0 || 0 || (15) || (378) || (399)

TOTAL OPERATING EXPENSES || (255) || (70) || (189) || (1 323) || (127) || (60) || (11) || (460) || (343) || (2 838)

NET OPERATING EXPENSES || (255) || (55) || (188) || (457) || (127) || 27 || (11) || (317) || 121 || (1 262)

4. NOTES TO THE CASHFLOW TABLE

4.1       PURPOSE AND PREPARATION OF THE
CASHFLOW TABLE

Cash flow information
is used to provide a basis for assessing the ability of the EU to generate cash
and cash equivalents, and its needs to utilise those cash flows.

The cashflow table is
prepared using the indirect method. This means that the net surplus or deficit
for the financial year is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash receipts or
payments, and items of revenue or expense associated with investing cash flows.

Cash flows arising from
transactions in a foreign currency are recorded in the European Union’s reporting
currency (Euro), by applying to the foreign currency amount the exchange rate
between the euro and the foreign currency at the date of the cash flow.

The cashflow table
presented reports cash flows during the period classified by operating and
investing activities (the EU does not have financing activities).

4.2       OPERATING ACTIVITIES

Operating activities
are the activities of the EU that are not investing activities. These are the
majority of the activities performed. Loans granted to beneficiaries (and the
related borrowings, when applicable) are not considered as investing (or
financing) activities as they are part of the general objectives and thus daily
operations of the EU. Operating activities also include investments such as
EIF, EBRD and venture capital funds. Indeed, the objective of these activities
is to participate in the achievement of policy targeted outcomes.

4.3       INVESTING ACTIVITIES

Investing activities
are the acquisition and disposal of intangible assets and property, plant and
equipment and of other investments
which are not included in cash equivalents. Investing activities do not include
loans granted to beneficiaries. The objective is to show the real investments
made by the EU.

5. CONTINGENT ASSETS & LIABILITIES
AND OTHER DISCLOSURES

CONTINGENT ASSETS

|| || || EUR millions

|| || 31.12.2011 || 31.12.2010

Guarantees received: || || ||

Performance guarantees || || 300 || 301

Other guarantees || || 34 || 30

Other contingent assets || || 19 || 8

Total Contingent Assets || || 353 || 339

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

CONTINGENT LIABILITIES

|| || || EUR millions

|| Note || 31.12.2011 || 31.12.2010

Guarantees given || 5.1 || 24 394 || 22 171

Fines – appeals to the Court of Justice || 5.2 || 8 951 || 9 627

EAGF, rural development, pre-accession – court judgements pending || 5.3 || 2 345 || 1 772

Cohesion policy – court judgements pending || 5.4 || 318 || -

Amounts relating to legal cases and other disputes || 5.5 || 251 || 458

Other contingent liabilities || || 2 || 4

Total Contingent Liabilities || || 36 261 || 34 032

All
contingent liabilities would be financed, should they fall due, by the EU budget
in the years to come.

5.1        GUARANTEES
GIVEN

5.1.1   On loans granted by the European Investment Bank
(EIB) from its own resources

|| EUR millions

|| 31.12.2011 || 31.12.2010

65% guarantee || 20 362 || 18 217

70% guarantee || 1 992 || 2 281

75% guarantee || 534 || 695

100% guarantee || 724 || 789

Total || 23 612 || 21 982

The EU budget guarantees
loans signed and granted by the EIB from its own resources to third countries
at 31 December 2011 (including loans granted to Member States before
accession). However, the EU’s guarantee is limited to a percentage of the
ceiling of the credit lines authorised: 65%, 70%, 75% or 100%. Where the
ceiling is not reached, the EU guarantee covers the full amount. At 31 December
2011 the amount outstanding totalled EUR 23 612 million and this, therefore, is
the maximum exposure faced by the EU. At 31 December 2011, about 83% of EIB
lending operations (sovereign and sub-sovereign lending operations) are covered
by a comprehensive guarantee, while on the remaining operations the EIB
benefits from a political risk coverage only.

5.1.2     Other
guarantees given

|| EUR millions

|| 31.12.2011 || 31.12.2010

Risk Sharing Finance Facility (RSFF) || 726 || 161

Loan Guarantee Instrument for Ten-T Projects (LGTT) || 39 || 11

MEDA: Moroccan guarantees || 17 || 17

Total || 782 || 189

Risk
Sharing Finance Facility (RSFF)

Under Risk Sharing Finance Facility
(RSFF), the Commission's contribution is used to provision financial risk for
loans and guarantees given by the EIB to eligible research projects. In total,
a Commission budget of up to EUR 1 billion is foreseen for the period 2007 to
2013, of which up to EUR 800 million are from the “Cooperation” and up to EUR
200 million from the “Capacities” specific programmes. The EIB has committed
itself to provide the same amount.

At 31
December 2011 the Commission had contributed EUR 776 million to the RSFF. This
has been invested by the EIB in bonds (fair value of EUR 547 million at 31
December 2011) and term deposits (EUR 240 million). The amount included as a
contingent liability above, EUR 726 million, represents the estimated maximum
loss at 31 December 2011 that the Commission would suffer in case of defaults
on loans or guarantees given by the EIB within the framework of the RSFF. It
should be noted that the Commission's overall risk is limited to the amount it
contributes to the Facility.

Loan
Guarantee Instrument for Ten-T Projects (LGTT)

The Loan
Guarantee Instrument for Ten-T Projects (LGTT) issues guarantees so as to
mitigate revenue risk in the early years of TEN-Transport projects.
Specifically the guarantee would fully cover stand-by credit lines, which would
only be drawn upon in cases where project cash flows are insufficient to
service senior debt. The instrument is a joint financial product of the
Commission and the EIB and the TEN-T regulation has earmarked EUR 500 million
from the EU budget to be allocated during the period 2007-2013. The EIB will allocate
another EUR 500 million, so in total the amount available will be EUR 1 billion
to the instrument.

At 31
December 2011 the Commission had contributed EUR 155 million to the LGTT. This
has been invested by the EIB in bonds (fair value of EUR 97 million at 31
December 2011) and term deposits (EUR 57 million). At end 2011, EUR 519 million
of loans have been signed and are thus covered by the guarantee. The amount
included as a contingent liability, EUR 39 million, represents the estimated
maximum loss at 31 December 2011 that the Commission would suffer in case of
defaults on loans given by the EIB within the framework of the LGTT operations.
This represents 7.5% of the total amounts guaranteed. It should be noted that
the Commission's overall risk is limited to the amount it contributes to the
Instrument.

The assets of the RSFF and LGTT
instruments are included on the Commission's balance sheet as short-term
Available-for-sale assets (see note 2.9)
and cash (note 2.13).

MEDA

As part of the MEDA programme, the
Commission created a guarantee mechanism through a specific Fund, which will
benefit two Moroccan organisations, namely the Caisse Centrale de Garantie and
the Fonds Dar Ad-Damane. As at 31 December 2011, EUR 17 million fell under the Commission
guarantee.

5.2        FINES

These amounts concern
fines imposed by the Commission for infringement of competition rules that have
been provisionally paid and where either an appeal has been lodged or where it
is unknown if an appeal will be made. The contingent liability will be
maintained until a decision by the Court of Justice on the case is final. Interest earned on
provisional payments is included in the economic result for the year and also
as a contingent liability to reflect the uncertainty of the Commission’s title
to these amounts.

5.3        COURT
JUDGEMENTS PENDING: EAGF, rural development and pre-accession

These are contingent
liabilities towards the Member States connected with the EAGF conformity
decisions, rural development and pre-accession financial corrections pending
judgement of the Court of Justice. The determination of the final amount of the
liability and the year in which the effect of successful appeals will be
charged to the budget will depend on the length of the procedure before the
Court.

5.4        COHESION
ACTIONS – LEGAL CASES PENDING

These are contingent
liabilities towards the Member States in conjunction with actions under
cohesion policy awaiting the oral hearing date or pending judgement of the
Court of Justice.

5.5        AMOUNTS
RELATED TO LEGAL CASES AND OTHER DISPUTES

This heading relates to actions for
damages currently being brought against the Commission, other legal disputes
and the estimated legal costs. It should be noted that in an action for damages
under Article 288 EC the applicant must demonstrate a sufficiently serious
breach by the institution of a rule of law intended to confer rights on
individuals, real harm suffered by the applicant, and a direct causal link
between the unlawful act and the harm.

OTHER SIGNIFICANT DISCLOSURES

COMMITMENTS AGAINST
APPROPRIATIONS NOT YET CONSUMED

|| EUR millions

|| 31.12.2011 || 31.12.2010

Commitments against appropriations not yet consumed || 165 236 || 155 642

The budgetary RAL ("Reste à
Liquider") is an amount representing the open commitments for which
payments and/or de-commitments have not yet been made. This is the normal
consequence of the existence of multi-annual programmes. At 31 December 2011
the budgetary RAL totalled EUR 207 443 million. The amount disclosed above is
this budgetary RAL less related amounts that have been included as expenses in
the 2011 economic outturn account.

SIGNIFICANT LEGAL COMMITMENTS

|| EUR millions

|| 31.12.2011 || 31.12.2010

Structural Operations || 142 916 || 210 638

Protocol with Mediterranean countries || 264 || 263

Fisheries agreements || 37 || 130

Galileo programme || 320 || 513

GMES programme || 400 || 390

TEN-T || 3 416 || 3 530

Other contractual commitments || 4 493 || 3 920

Total || 151 846 || 219 384

These commitments originated
because the Commission decided to enter into long-term legal commitments in
respect of amounts that were not yet covered by commitment appropriations in
the budget. This can relate to multi-annual programmes such as Structural
Actions or amounts that the European Commission is committed to pay in the
future under administrative contracts existing at the balance sheet date (e.g.
relating to the provision of services such as security, cleaning, etc, but also
contractual commitments concerning specific projects such as building works).

Structural Actions

The table below shows a
comparison between the legal commitments for which budget commitments have not
yet been made and the maximum commitments in relation to the amounts foreseen
in the financial framework 2007-2013.

|| || || || || EUR millions

|| Financial perspective amounts 2007-2013 (A) || Legal commitments concluded (B) || Budget commitments 2007-2011 (C) || Legal commitments less budget commitments (=B-C) || Maximum commitment (=A-C)

Cohesion policy funds || 347 550 || 347 542 || 240 438 || 107 104 || 107 112

Natural Resources || 100 549 || 100 545 || 69 818 || 30 727 || 30 731

Instrument for Pre-Accession Assistance || 11 259 || 8 162 || 6 186 || 1 976 || 5 073

Total || 459 358 || 456 249 || 316 442 || 139 807 || 142 916

Protocols with Mediterranean
countries

These commitments relate to financial protocols with
Mediterranean non-member countries. The amount included here is the difference
between the total amount of the protocols signed and the amount of the budget
commitments entered in the accounts. These protocols are international treaties
that cannot be wound up without the agreement of both parties, although the
winding-up process is on-going.

Fisheries agreements

These are commitments
entered into with third countries for operations under international fisheries
agreements.

Galileo programme

These are amounts are
committed to the Galileo programme developing a European Global Navigation
Satellite System – see also note 2.2.

GMES programme

The Commission has
entered into a contract with the ESA for the period from 2008 to 2013 for the
implementation of the space component of Global Monitoring for Environment and
Security (GMES). The total indicative amount for that period is EUR 728
million.

TEN-T commitments

This amount relates to
grants in the field of the trans-European transport network (TEN-T) for the
period 2007 - 2013. The programme applies to projects identified for the
development of a trans-European transport network to support both
infrastructure projects and research and innovation projects to foster the
integration of new technologies and innovative processes on the deployment of
new transport infrastructure. The total indicative amount for this programme is
EUR 8 013 million.

Other contractual
commitments

The amounts included
under this disclosure correspond to amounts committed to be paid during the
term of the contracts. The largest amount included here is EUR 2 572 million relating to
procurement arrangements of the Fusion for Energy Agency in the context of ITER
project. The next most significant amount is EUR 438 million relating to
building contracts of the Parliament.

6. FINANCIAL CORRECTIONS AND RECOVERIES

6.1      INTRODUCTION

This note provides an overview of
the correction of errors and irregularities detected, in particular in that
part of the EU budget that is implemented under the shared management mode
(i.e. some 80% of the total budget). Under shared management, the Commission
relies on Member States for the implementation of EU programmes i.e. the EU
contribution is paid to the Member States, generally to a specific paying
agency, which is then responsible for the payments made to beneficiaries. As a
result, Member States are the primary responsible for the prevention, detection
and correction of errors and irregularities committed by the beneficiaries,
while the European Commission ensures an overall supervisory role (i.e.
verifying the effective functioning of Member States' management and control
systems).

This note only covers financial
corrections and recoveries effected at EU level. The corrections effected by
Member States following their own audits are not recorded in the Commission's
accounting system because Member States can reuse, in most cases, these amounts
for other eligible expenditure. Member States are however requested to provide
the Commission with updated information on withdrawals, recoveries and pending
recoveries of Structural Funds, and to separately identify EU corrections in
the reporting related to the 2007-2013 period to avoid an overlap risk. This
information is however not disclosed below for reliability reasons since doubts
remain as to the quality and completeness of data submitted by some Member
States and/or for some programmes, as identified in the preliminary findings of
EU audits on recoveries carried out in Member States.

6.1.1   Financial corrections

Financial corrections are the main
tool used for the correction of errors and irregularities in the context of
shared management. Financial corrections are made by the European Commission so
as to exclude from EU funding expenditure that is not in accordance with
applicable rules and regulations. Financial corrections may also be applied
following the detection of serious deficiencies in the management and control
systems of Member States. The final objective of this correction mechanism is
to ensure that all expenditure declared by the Member State (i.e. on the basis
of which the EU contribution is paid) is legal and regular. The issuance of a
recovery order by the Commission to recover amounts unduly paid is just one of
the means of implementation of financing corrections.

The processing of financial
corrections follows these three main steps:

(1) Financial corrections in
progress:

The estimate of this amount is
established as follows:

- Under Agriculture and Rural
Development, the amount of financial corrections in progress is based on an
estimate of the amount of expenditure which is likely to be excluded from EU
financing by future conformity decisions. Since EAGF corrections are decided
per financial year of expense, it is possible to calculate the average of
financial corrections per financial year closed, and to extrapolate this
percentage to more recent financial years for which controls are still ongoing.
The reliability of this method is continuously assessed by comparing the
estimate amount with the results of the conformity audits completed in the
years concerned. 
- Under Cohesion Policy, the amount disclosed under financial
corrections in progress is based on audit findings of the Commission and
those of the Court of Auditors or OLAF, all of which are followed up by the
relevant Directorate General through on-going contradictory procedures with the
concerned Member States. This is a best and prudent estimate, taking into
account the state of play of the follow up of the audits and the issuance of
final position letters or pre-suspension letters at 31 December 2011. This
amount will certainly be subject to change following the contradictory
procedures, under which Member States are given the opportunity to present
further evidence to support their claims.

(2) Financial correction decided/confirmed:

The amount of the financial
correction is established with certainty and is definitive, either "decided"
through a Commission decision, or "confirmed" (i.e. accepted)
by the Member State. In the area of Agriculture and Rural Development
for the 2007-2013 period, the EAGF (i.e. European Agricultural Guarantee Fund)
and the EAFRD (i.e. European Agricultural Fund for Rural Development) have
replaced the EAGGF (i.e. European Agricultural Guidance and Guarantee Fund
2000-2006). Financial corrections' decisions are mainly launched as a result of
the verification of the expenditure declared by the Member States that is
subject to following clearance of accounts procedures:

- An annual financial clearance
decision is adopted by the Commission to formally accept the paying agencies'
annual accounts on the basis of management verifications and certifications,
which also includes a financial clearance decision for non-respect of payment
deadlines. As a result financial corrections may be established for payments
that do not respect legal or regulatory deadlines;

- A multi-annual conformity
clearance decision is adopted by the Commission on the conformity of the
expenditure declared by Member States with applicable EU rules and regulations.

In the area of Cohesion Policy,
financial corrections decided/confirmed are the result of EU controls
and audits by the Commission, the European Court of Auditors or OLAF.

(3) Financial corrections implemented:

In the case of the EAGF,
financial corrections are always implemented by deduction in the monthly
declarations. For Rural Development financial corrections are
implemented by the issue of recovery orders.

Financial corrections under Cohesion
Policy are implemented as follows:

(a) if the Member State disagrees
with the correction required or proposed by the Commission, following a formal
contradictory procedure with the Member State that includes the suspension of
payments to the programme; in this case, the Commission has three months from
the date of a formal hearing with the Member State (six months for 2007-2013
programmes) to adopt a formal financial correction decision and issue a recovery
order to obtain repayment from the Member State. These cases lead to a net
reduction of the EU contribution to the specific operational programme affected
by the financial correction (no possibility for the Member State to re-use the corrected amount for other eligible operations);

(b) if the correction is accepted,
the Member State deducts (withdraws) this amount from a subsequent payment
claim to the Commission, before recovery proceedings are completed at national
level (withdrawal), or once the recovery proceedings are completed at
national levels and amounts are effectively recovered from the beneficiary (recovery
at national level); in both cases (withdrawal or recovery at national
level deducted by the Member State from a subsequent payment claim), the
replacement of irregular expenditure by other eligible expenditure is allowed
by the applicable regulations and can be re-used for other eligible operations,
which have incurred regular expenditure. In these cases there is no impact in
the Commission's accounts, as the level of EU funding to a specific programme
is not reduced. The EU's financial interests are thus protected against
irregularities and fraud. The validation of the recovery order or of the
payment request, depending on the case, by the authorising officer in the
accounting system is a necessary step to establish the implementation of
financial corrections. In the case of a recovery order, implementation is
recognised at issue and before the cashing since recovery orders concerning
financial corrections are issued against Member States, and are always paid
before or at due date, or compensated with subsequent payments.

(c) At programme closure when no
re-use of the funds is possible by the Member State, the amount of the
financial correction is either deducted from the final cost claim
submitted by the Member State or decommitted by the Commission.

6.1.2   Recoveries

Recovery of amounts is a means of
implementing financial corrections that merit a separate disclosure given that
it concerns actual return of cash to the budget (or offsetting).

In accordance with the Financial
Regulation, recovery orders should be established by the authorising officer
for amounts unduly paid. Recoveries are then implemented by direct bank
transfer from the debtor (e.g. Member State) or by offsetting from other
amounts that the Commission owes to the Member State. The Financial Regulation
foresees additional procedures to ensure the collection of recovery orders
overdue, which are the object of a specific follow up by the Accounting Officer
of the Commission.

In the area of Agriculture,
Member States are obliged to identify errors and irregularities and to recover
amounts unduly paid in accordance with national rules and procedures. For the
EAGF, amounts recovered from the beneficiaries are credited to the Commission,
after deduction applied by Member States of 20% (on average), who book them as
revenue in the economic outturn account. For EAFRD, recoveries are deducted
from the next payment claim before it is sent to the Commission's services, and
therefore the relevant amount can be reused for the programme. If a Member State does not pursue the recovery or is not diligent in its actions, the Commission may
decide to intervene and to impose a financial correction on the Member State concerned.

In the area of Cohesion Policy,
  Member States (and not the Commission) are primarily responsible for
recovering, from beneficiaries, amounts unduly paid increased, where
applicable, by late payment interest. The amounts recovered by the Member
States are not disclosed in this note, which only presents the recoveries
established by the Commission. For the 2007-2013 period, Member States are
legally required to provide the Commission with clear and structured data on
amounts withdrawn from co-financing before the national recovery process is
finalised and the amounts effectively recovered from beneficiaries at national
level.

6.1.3   Suspensions and
interruptions of payments

In accordance with sector
legislation the Commission may also:

- interrupt the payment
deadline for a maximum period of 6 months for 2007-13 programmes if:

(a) There is evidence to
suggest a significant deficiency in the functioning of the management and
control systems of the Member State concerned;

(b) The Commission
services have to carry out additional verifications following information that
expenditure in a certified statement of expenditure is linked to a serious
irregularity which has not been corrected.

- suspend all or part of an
interim payment to a Member State for both 2000-06 and 2007-13 programmes in
the following three cases:

(a) There is evidence of
serious deficiency in the management and control system of the programme and
the Member State has not taken the necessary corrective measures; or

(b) Expenditure in a
certified statement of expenditure is linked to a serious irregularity which
has not been corrected; or

(c) Serious breach by a Member State of its management and control obligations.

Where the required measures are not
taken by the Member State, the Commission may impose a financial correction.

6.1.4   Other management
types

Concerning the part of the EU
budget that is managed under the direct management mode, expenditure that is
not in accordance with applicable rules and regulations is either the subject
of a recovery order established by the Commission or deducted from the
subsequent cost statement. If the deduction is directly made by the beneficiary
in the cost statement, the information cannot be registered in the Commission's
accounting system. The recovery of amounts unduly paid under the decentralised
and indirect centralised management modes is the responsibility of Member
States, third countries or agencies. The joint management mode applies also
corrective tools that are defined in the agreements concluded with
international organisations.

Note that all figures are rounded
into millions of Euros. It should be noted that due to the rounding of figures,
some financial figures in the tables may not add up. Amounts shown as 0
represent figures of less than EUR 500 000. Amounts that equal to zero are
shown as a dash (-).

6.2      SUMMARY TABLES

Financial
corrections and recoveries decided/confirmed in 2011

EUR millions

|| Note || 2011 || 2010

Financial corrections: || || ||

Agriculture and Rural Development || 6.3.1 ||  733 || 1 128

Cohesion Policy || 6.4.1 ||  673 ||  925

Other || 6.5 ||  0 ||  0

Subtotal Financial corrections || || 1 406 || 2 053

Recoveries || || ||

Agriculture and Rural Development || 6.3.1 ||  335 ||  292

Cohesion Policy || 6.4.4 ||  50 ||  24

Other || 6.5 ||  377 ||  301

Subtotal Recoveries || ||  762 ||  617

Total decided/confirmed in 2011 || || 2 168 || 2 670

Financial
corrections and recoveries implemented in 2011

EUR millions

|| Note || 2011 || 2010

Financial corrections: || || ||

Agriculture and Rural Development || 6.3.2 ||  483 ||  814

Cohesion Policy || 6.4.2 ||  624 ||  737

Other || 6.5 ||  0 ||  0

Subtotal Financial corrections || || 1 107 || 1 551

Recoveries || || ||

Agriculture and Rural Development || 6.3.2 ||  339 ||  286

Cohesion Policy || 6.4.4 ||  48 ||  25

Other || 6.5 ||  346 ||  274

Subtotal Recoveries || ||  733 ||  585

Total implemented in 2011 || || 1 840 || 2 136

6.3      FINANCIAL CORRECTIONS AND RECOVERIES UNDER
AGRICULTURE AND RURAL DEVELOPMENT

6.3.1   Financial corrections and recoveries decided in 2011

EUR millions

|| 2011 || 2010

EAGF: || ||

Financial clearance and non-respected payment deadlines || (63) ||  33

Conformity clearance ||  728 || 1 022

Rural Development: || ||

TRDI 2000-2006 ||  3 ||  49

SAPARD 2000-2006 ||  6 ||  3

EAFRD 2007-2013 ||  58 ||  20

Subtotal financial corrections ||  733 || 1 128

EAGF: || ||

EAGF - irregularities ||  174 ||  178

Rural Development: || ||

TRDI - recoveries ||  8 ||  10

SAPARD - recoveries ||  30 ||  5

EAFRD - irregularities ||  123 ||  98

Subtotal recoveries ||  335 ||  292

Total || 1 068 || 1 420

A
breakdown of the EAGF amounts per Member State is disclosed in Annex 1.

All
the above amounts are included in the economic outturn account of the
Commission.

The decrease in conformity
clearance procedures in 2011 follows a previous increase between 2009 and 2010.
The 2010 figure was exceptionally high as procedures decided in the year
included a large non-executed clearance procedure of EUR 471 million which was
adopted before the year-end, and executed in 2011. The amounts of procedures
decided for 2011 now reach comparable levels of 2009 and before.

The negative financial clearance
amount of EUR 63 million represents amounts paid out to certain Member States
(mainly Italy and the United Kingdom) that exceeded amounts to be recovered for
the year.

It should be noted that amounts
reported for Rural Development in financial corrections decided/confirmed, as
well as financial corrections implemented below, also include recoveries of
irregularities for EUR 0.2 million in 2011 (2010: EUR 3 million). These amounts
represent sums collected by the European Commission following the recovery of
undue payments effected by Member States.

6.3.2   Financial corrections and recoveries implemented in 2011

EUR millions

|| 2011 || 2010

EAGF: || ||

Financial clearance and non-respected payment deadlines || (63) ||  33

Conformity clearance ||  506 ||  728

Rural Development: || ||

TRDI 2000-2006 ||  3 ||  49

SAPARD 2000-2006 ||  6 ||  3

EAFRD 2007-2013 ||  31 ||  0

Subtotal financial corrections ||  483 ||  814

EAGF: || ||

EAGF - irregularities ||  178 ||  172

Rural Development: || ||

TRDI - recoveries ||  8 ||  10

SAPARD - recoveries ||  30 ||  5

EAFRD - irregularities ||  123 ||  98

Subtotal recoveries ||  339 ||  286

Total ||  822 || 1 101

A
breakdown of the EAGF amounts per Member State is disclosed in Annex 2.

6.3.3   Financial corrections – cumulative figures

EAGF
financial corrections decided – cumulative figures 1999 - 2011

EUR millions

|| As at end 2011 || As at end 2010

EAGF Clearance of accounts procedures || 7 717 || 7 035

A breakdown of the cumulated EAGF
clearance amount per Member State is disclosed in Annex 3.

The cumulated figures for 2011
correspond to amounts under conformity clearance decisions No. 1 to No. 36
taken up to 15 October 2011, being the end of EAGF financial year. The amounts
decided in the calendar year 2011 correspond to EUR 728 million (see note 6.3.1), and they include EUR 682 million as the
amount decided in the financial year 2011, which corresponds to the variation
between cumulated figures at end 2011 and cumulated figures at end 2010 of the
above table.

It should be noted that all
conformity clearance decisions have been formally taken by means of a
Commission decision while financial clearance decisions usually take a longer
time to proceed and will impact the coming years.

Rural
Development  corrections decided – cumulative figure 2000 - 2011

EUR millions

|| As at end 2011 || As at end 2010

Rural Development financial corrections: || ||

TRDI 2000-2006 || 64 || 61

SAPARD 2000-2006 || 24 ||  17

EAFRD 2007-2013 || 79 ||  21

Total || 167 ||  98

6.3.4   Financial corrections and recoveries in progress

Financial
corrections in progress

EUR millions

|| Financial corrections in progress as at 31.12.2010 || New financial corrections in progress in 2011 || Financial corrections decided in 2011 || Adjustments on financial corrections decided or in progress as at 31.12.2010 || Financial corrections in progress as at 31.12.2011

EAGF: || || || || ||

EAGF - future conformity and financial decisions || 2 288 ||  573 || (665) ||  8 || 2 204

Rural Development: || || || || ||

TRDI 2000-2006 ||  7 ||  29 || (3) ||  1 ||  34

SAPARD 2000-2006 ||  68 ||  36 || (6) || (20) ||  77

EAFRD 2007-2013 ||  123 ||  179 || (58) ||  261 ||  505

Total financial corrections in progress || 2 486 ||  818 || (732) ||  250 || 2 821

The amount of EAGF financial
corrections in progress at end 2011 shows the consolidation of the estimation
method for future conformity decisions.

SAPARD and TRDI programmes are in
the closure phase which explains the decrease in the amount of financial
corrections in progress.

Concerning EAFRD, the increase is
mainly explained by a change in the estimation method. Until last year, the
extrapolation method used was based on historical data, i.e. real cases opened
for EAGF 2000-06. This estimation was then compared to the level of real cases
opened for the first years of the EAFRD programmes. However last year this
method proved to give lower amounts than those actually constituted by cases
opened. Therefore the extrapolation method has been adapted and aligned to that
of EAGF since both funds actually share the same clearance process. The amounts
reported in progress give now a more realistic view on future financial
corrections.

Recoveries
in progress

EUR millions

|| Recoveries in progress as at 31.12.2010 || New recoveries in progress in 2011 || Recoveries decided in 2011 || Adjustments on recoveries decided or in progress as at 31.12.2010 || Recoveries in progress as at 31.12.2011

EAGF: || || || || ||

EAGF - irregularities ||  323 ||  199 || (174) || (95) ||  253

Rural Development: || || || || ||

TRDI 2000-2006 ||  7 ||  6 || (8) || 7 ||  12

SAPARD 2000-2006 ||  94 ||  6 || (30) || (19) ||  50

EAFRD 2007-2013 ||  22 ||  65 || (123) ||  81 ||  45

Total recoveries in progress ||  446 ||  275 || (335) || (26) ||  360

6.4       FINANCIAL CORRECTIONS AND RECOVERIES UNDER
COHESION POLICY

6.4.1   Financial corrections decided/confirmed in 2011

Financial
corrections decided/confirmed in 2011 by programming period

EUR millions

|| 2011 || 2010

Cohesion policy (EU work) || ||

- 1994-1999 programmes ||  13 ||  136

- 2000-2006 programmes ||  440 || 788

- 2007-2013 programmes ||  220 ||  2

Total ||  673 || 925

A
breakdown of these amounts per Member State is disclosed in Annex 4.

Concerning the programming period
1994-99, very few financial corrections were reported in 2011 as the vast
majority of programmes are closed. This figure will continue to decrease in the
future. For the programming period 2000-06, financial corrections are reported
and confirmed during the closure process which is ongoing. However audits
continue to be conducted even on closed programmes. The increase in the amount
of financial corrections decided/confirmed for the reporting period 2007-13
compared to last year is expected to continue in the coming years, as a result
of current audits on the spot.

Financial
corrections decided/confirmed in 2011 and their implementation in 2011

EUR millions

|| ERDF || CF || ESF || FIFG/EFF* || EAGGF Guidance || TOTAL

Financial Corrections 1994-1999: || || || || || ||

Implemented by decommitment/              deduction at closure || 6 || - || - || - || - || 6

Implemented by recovery order || 2 || - || 1 || 0 || 1 || 4

Not yet implemented || 3 || - || - || - || - || 3

Subtotal 1994-1999 period || 11 || - || 1 || 0 || 1 || 13

Financial Corrections 2000-2006: || || || || || ||

Implemented by decommitment/              deduction at closure || 217 || 72 || 8 || 0 || 0 || 297

Implemented by Member States || (10) || 4 || - || - || - || (6)

Implemented by recovery order || 5 || 3 || - || - || 0 || 8

Not yet implemented      || 199 || (62) || 0 || 3 || - || 140

Subtotal  2000-2006 period || 411 || 17 || 9 || 3 || 0 || 440

Financial Corrections 2007-2013: || || || || || ||

Implemented by decommitment/deduction at closure || - || - || - || - || - || 0

Implemented by Member States || 2 || - || 158 || - || - || 160

Implemented by recovery order || - || - || - || - || - || 0

Not yet implemented      || 0 || - || 59 || - || - || 59

Subtotal  2007-2013 period || 3 || - || 218 || - || - || 220

Total financial corrections decided/        confirmed in 2011 || 424 || 17 || 227 || 3 || 1 || 673

Total financial corrections decided/       confirmed in 2010 || 494 || 258 || 49 || 91 || 33 || 925

|| * EFF: the European Fisheries Fund (EFF) replaced the Financial Instrument for Fisheries Guidance (FIFG) for the programming period 2007-2013. ||

Out of the total amount of EUR 673
million confirmed in 2011, EUR 233 million include amounts confirmed in
previous years but not reported before, as well as adjustments on previously reported
amounts. This is due, on one hand, to the extra-accounting nature of the file
management of financial corrections, which makes it possible that new cases be
reported at a later stage, and on the other hand, to cases where the final
amount of a financial correction imposed during the operational programme is
only known at closure.

The amount of financial corrections
decided/confirmed in the year and implemented by issuance of a recovery order
by the Commission (i.e. cash reimbursed to the Commission) is EUR 12 million,
EUR 4 million for the 1994-99 period, and EUR 8 million for the 2000-06 period
(2010: EUR 158 million). It should be noted that implementation by means of a
recovery order represents only a limited amount of total financial corrections
(i.e. less than 3% of the amount implemented in 2011) since the applicable
sectoral legislation foresees the possibility for Member States to accept the
financial correction proposed by the Commission and then to replace the
irregular expenditure by a regular one during programme implementation (but at
closure it is no longer possible for the Member State to submit other
expenditure to replace the irregular one) - thus meaning that no recovery order
needs to be issued by the Commission. Recovery orders are only issued by the
Commission in the cases where the Member State refuses the financial correction
and the Commission needs to take a formal correction decision, or possibly at
the stage of programme closure when the financial correction imposed by the
Commission is higher than the amount claimed by the Member State.

For ERDF, the amounts of correction
for 2011 continue to concern mainly the 2000-2006 programmes, with the on-going
closure: following the analysis of winding up declarations, corrections based
on the extrapolation to each programme of residual risks calculated by
programme have been confirmed in 2011, and corrections will continue in 2012.
Financial corrections at closure imply a net reduction of the EU funding (i.e.
reduction of the final amounts to be paid, or recovery of amount if the final
amount to be paid is less than the correction).

Concerning the ESF, most of the
amount of financial corrections decided/confirmed in 2011 relate to the 2007-13
programming period due to the growing number of audits completed as the
implementation of the programmes increases. For the programming period 2000-06
the replacement of an irregular expenditure by a regular one by the Member State is no longer possible, however, progammes being in closure phase, the Member
States indicated in the closure documents whether the financial corrections
have been deducted, and these amounts are reported in the above table.
Financial corrections decided/confirmed for the programming period 1994-99
relate to either financial corrections following a Commission decision or to
the identification by the Member State of irregularities after the closure of
the operational programme that the Commission recovers by issuance of a
recovery order.

Regarding FIFG/EFF, the amount of
EUR 3 million of financial corrections decided/confirmed concerns both the
closure process on certain programmes, and the conclusion of audits on others.

Concerning EAGGF-Guidance, not all
programmes are closed. Financial corrections will continue to be reported in
2012 and 2013, even if the amounts at stake are very limited.

It should be noted that amounts
reported in the above tables for EAGGF Guidance Fund also include recoveries of
irregularities for EUR 2 million in 2011 (2010: EUR 3 million). These amounts
represent sums collected by the European Commission by means of a Commission
Decision, following the recovery of undue payment effected by the Member State.

6.4.2   Financial corrections implemented in 2011

Financial
corrections implemented in 2011 by programming period

EUR millions

|| 2011 || 2010

Cohesion policy (EU work) || ||

- 1994-1999 programmes ||  32 ||  476

- 2000-2006 programmes ||  432 ||  259

- 2007-2013 programmes ||  160 ||  2

Total ||  624 ||  737

A
breakdown of these amounts per Member State is disclosed in Annex 5.

It should be noted that the above
amounts, in particular for the programming period 2000-06, do not include the
totality of financial corrections reported by the Member States in final
payment claims received by the Commission in 2010, which are in the process of
being validated. At this stage, the financial correction is implemented by the Member State who certifies the deduction of the financial correction amount from the final
payment claim amount. However, in the context of programme closure, the
validation of the claim by the authorising officer in the accounting system is
subject to longer regulatory deadlines before it can be fully processed and
payments be made by the Commission. Payments claims received before the
year-end 2010 and not yet authorised at end 2011 include financial corrections
however as these payment claims will only be processed in 2012 and following
years, the amount of implemented financial corrections will be reported after
verification of all closure documents and full validation of the related
financial transactions. The corrections for the current programming period
2007-13 should increase further in the coming years as a result of the current
controls on the spot.

Financial
corrections implemented in 2011 (decided/confirmed in 2011 and in previous
years)

EUR millions

|| ERDF || CF || ESF || FIFG/EFF || EAGGF Guidance || Total 2010

Financial Corrections 1994-1999 period: || || || || || ||

Confirmed in 2011 || 8 || - || 1 || 0 || 1 ||  10

Confirmed previous years || 22 || - || 0 || - || 0 ||  22

Subtotal 1994-1999 period || 30 || - || 1 || 0 || 1 ||  32

Financial Corrections 2000-2006: || || || || || ||

Confirmed in 2011 || 211 || 79 || 0 || 0 || 0 ||  291

Confirmed previous years || 175 || 35 || 19 || (90) || - ||  140

Subtotal  2000-2006 period || 387 || 115 || 19 || (90) || 0 ||  432

Financial Corrections 2007-2013: || || || || || ||

Confirmed in 2011 || 2 || - || 157 || - || - ||  160

Confirmed previous years || 0 || - || 1 || - || - ||  1

Subtotal  2007-2013 period || 2 || - || 158 || - || - ||  161

Total financial corrections implemented in 2011 || 419 || 115 || 178 || (90) || 1 ||  624

Total financial corrections implemented in 2010 || 542 || 21 || 42 || 90 || 41 || 737

|| ||

Out of the amount of EUR 624
million reported as financial correction implemented in 2011, EUR 212 million include
amounts implemented in previous years but not reported before, as well as
adjustments on previously-reported amounts, for the same reasons explained in
note 6.4.1.

Financial
corrections implemented in 2011 (by implementation type)

EUR millions

|| ERDF || CF || ESF || FIFG/EFF || EAGGF Guidance || TOTAL

Financial Corrections 1994-99: || || || || || ||

Implemented by decommitment/deduction at closure ||  23 ||  - ||  - ||  - ||  - ||  23

Implemented by recovery order ||  7 ||  - ||  1 ||  0 || 1 ||  9

Subtotal 1994-1999 period ||  30 ||  - ||  1 ||  0 ||  1 ||  32

Financial Corrections 2000-2006: || || || || || ||

Implemented by decommitment/deduction at closure ||  237 ||  94 || 19 ||  0 ||  0 ||  351

Implemented by Member States ||  142 ||  17 ||  - ||  (90) ||  - || 69

Implemented by recovery order ||  8 ||  4 ||  - ||  - ||  0 ||  12

Subtotal  2000-2006 period ||  387 ||  115 ||  19 ||  (90) ||  0 ||  432

Financial Corrections 2007-2013: || || || || || ||

Implemented by decommitment/deduction at closure ||  - ||  - ||  - ||  - ||  - ||  0

Implemented by Member States ||  2 ||  - ||  158 ||  - ||  - ||  160

Implemented by recovery order ||  - ||  - ||  - ||  - ||  - ||  0

Subtotal  2007-2013 period ||  2 ||  - ||  158 ||  - ||  - ||  160

Total financial corrections implemented in 2011 ||  419 ||  115 ||  178 ||  (90) ||  1 ||  624

Total financial corrections implemented in 2010 ||  542 ||  21 ||  42 ||  90 ||  41 ||  737

The amount of financial corrections
implemented in the year by issuance of a recovery order by the Commission (i.e.
cash reimbursed to the Commission) is EUR 21 million, EUR 9 million for the
1994-99 period, and EUR 12 million for the 2000-06 period (2010: EUR 158
million). For reasons given above in note 6.3.1,
implementation by means of a recovery order represent only a very limited
amount of financial corrections (i.e. 3% of the amount implemented in 2011).

Concerning ERDF, it should be noted
that since final payment claims introduced in September 2010 are still under an
authorising process, they have not been taken into account in the above
implementation figures, thus the relatively lower implementation rates of 65%
and 78% for the ERDF and for the Cohesion Fund respectively. Almost all amounts
to be implemented stem from the on-going closure of 2000-06 programmes: EUR 2.1
billion (out of an oustanding total of EUR 2.2 billion) are included in
ERDF/Cohesion Fund final payment claims received but will be reported as
implemented only when the final payment will be authorised in the upcoming
months.

Concerning the ESF, all the
financial corrections implemented by the issuance of a recovery order relate to
the programming period 1994-99 since programmes are closed. For the period
2000-06 the corrections are either identified by the Member State in the closure documents or identified by the Commission who then requests the Member State to confirm that those amounts should be deducted at closure. Therefore no
recovery orders are issued. It should be noted that a high number of programmes
are still under analysis, consequently the amount of financial corrections
implemented at closure will increase in the coming years following the current
closure process (analysis of closure documents and financial validation of last
payment claim).

Concerning FIFG/EFF, the negative
amount of EUR 90 million represents an adjustment of several financial
corrections for Spain which were erroneously reported as implemented in 2010.
The Member State did deduct the amounts in question from claims sent to the
Commission in 2010, however these claims were part of the closure documents of
this programme, and were still being processed by the Commission at 31/12/2010.
According to the definition of implementation this adjustment is presented as a
negative amount in the 2011 figures.

6.4.3   Financial corrections – cumulative figures and
implementation rates

Financial
corrections decided/confirmed – cumulative figures

EUR millions

|| 1994-1999 Period || 2000-2006 Period || 2007-2013 Period || Total as at end 2011 || Total as at end 2010

ERDF || 1 769 || 4 575 ||  4 || 6 348 || 5 924

Cohesion Fund ||  273 ||  508 ||  0 ||  781 ||  763

ESF ||  397 || 1 182 ||  218 || 1 798 || 1 572

FIFG/EFF ||  100 ||  99 ||  0 ||  198 ||  195

EAGGF Guidance ||  125 ||  41 ||  0 ||  166 ||  165

Total || 2 663 || 6 405 ||  222 || 9 291 || 8 619

A
breakdown of the total amount per Member State is disclosed in Annex 4.

Financial
corrections implemented – cumulative figures

EUR millions

|| 1994-1999 Period || 2000-2006 Period || 2007-2013 Period || Total as at end 2011 || Total as at end 2010

ERDF || 1 766 || 2 359 ||  3 || 4 128 || 3 709

Cohesion Fund ||  266 ||  342 ||  0 ||  608 ||  493

ESF ||  396 || 1 165 ||  159 || 1 720 || 1 542

FIFG/EFF ||  100 ||  4 ||  0 ||  104 ||  194

EAGGF Guidance ||  125 ||  41 ||  0 ||  166 ||  165

Total || 2 652 || 3 912 ||  162 || 6 726 || 6 102

A
breakdown of the total amount per Member State is disclosed in Annex 5.

Included in the above table are
financial corrections that are being challenged by certain Member States
(noting that past experience has shown that the Commission has very rarely had
to repay amounts following such cases). For more details see note 5.4.

Financial
corrections decided/confirmed as at 31 December 2011 but not yet implemented
and implementation rates as at 31 December 2011 (cumulative figures)

EUR millions

|| ERDF || CF || ESF || FIFG/EFF || EAGGF Guidance || Total 2011 || Total 2010 ||

Financial corrections 1994-1999 programmes || || || || || || || ||

Financial corrections confirmed/decided || 1 769 || 273 ||  397 || 100 || 125 || 2 663 || 2 652 ||

Financial corrections implemented || 1 766 || 266 ||  396 || 100 || 125 || 2 652 || 2 621 ||

Financial corrections confirmed/decided but not yet implemented || 3 || 8 ||  1 || 0 || 0 ||  11 ||  31 ||

Rate of implementation || 100% || 97% || 100% || 100% || 100% || 100% || 99% ||

Financial corrections 2000-2006 programmes || || || || || || || ||

Financial corrections confirmed/decided || 4 575 || 508 || 1 182 || 99 || 41 || 6 405 || 5 965 ||

Financial corrections implemented || 2 359 || 342 || 1 165 || 4 || 41 || 3 912 || 3 480 ||

Financial corrections confirmed/decided but not yet implemented || 2 216 || 166 ||  17 || 94 || 0 || 2 493 || 2 485 ||

Rate of implementation || 52% || 67% || 99% || 4% || 100% || 61% || 58% ||

Financial corrections 2007-2013 programmes || || || || || || || ||

Financial corrections confirmed/decided || 4 || - ||  217 || - || - ||  222 ||  2 ||

Financial corrections implemented || 3 || - ||  159 || - || - ||  162 ||  2 ||

Financial corrections confirmed/decided but not yet implemented || 0 || - ||  59 || - || - ||  60 ||  0 ||

Rate of implementation || 87% || N/A || 73% || N/A || N/A || 73% || 84% ||

Total financial corrections || || || || || || || ||

Financial corrections confirmed/decided || 6 348 || 781 || 1 797 || 198 || 166 || 9 291 || 8 619 ||

Financial corrections implemented || 4 128 || 608 || 1 721 || 104 || 166 || 6 726 || 6 102 ||

Financial corrections confirmed/decided but not yet implemented || 2 220 || 173 ||  76 || 94 || 0 || 2 565 || 2 516 ||

Rate of implementation || 65% || 78% || 96% || 53% || 100% || 72% || 71% ||

Concerning the programming period
2000-2006, the low implementation rate is explained by the ongoing closure
process whereby payment claims received at end 2010 are not yet authorised, and
the related financial corrections cannot yet be taken into account in the 2011
implementation figures.

6.4.4   Recoveries

Recoveries confirmed in 2011

EUR millions

|| 2011 || 2010

Other management types ||  50 ||  24

Recoveries implemented in 2011

EUR millions

|| 2011 || 2010

Other management types ||  48 ||  25

Please note that some amounts
included in the above table were previously reported under note 6.5 in 2010.

6.4.5   Financial corrections in progress

EUR millions

|| Financial corrections in progress as at 31.12.2010 || New financial corrections in progress in 2011 || Financial corrections decided in 2011 || Adjustments to financial corrections decided or in progress as at 31.12.2010 || Financial corrections in progress as at 31.12.2011

Structural and Cohesion funds (1994-1999, 2000-2006 and 2007-2013 programmes) || || ||

ERDF ||  197 || 91 || (85) || (43) || 160

Cohesion Fund ||  262 || 105 || (69) || (132) || 166

ESF ||  284 || 0 || (1) || 0 || 283

FIFG/EFF ||  0 || 6 || 0 || 0 || 6

EAGGF Guidance ||  4 ||  24 || (1) || (3) ||  24

Total ||  747 ||  227 || (156) || (178) ||  640

At the end of 2011, correction
procedures were in progress at Commission level for approximately 140
programmes for ERDF and for the Cohesion Fund. The decrease in amounts compared
to previous years reflects the phasing out of financial corrections previously
reported as "in progress" for the 2000-06 programmes and the
initiation of fewer procedures at this stage of implementation for the current
programming period.

Concerning the ESF, the decrease in
the estimated amount of financial corections in progress is mainly caused by
the closure of some procedures initiated in 2010 and related to five programmes
of the 2007-13 period, one procedure for the 2000-06 period and one procedure
for the 1994-99 period. It should be noted that in the situation where an estimate
of potential amounts at stake during the audit cannot be calculated, mainly
because the controls are not finished yet, they are reported in the above table
for a EUR 1 value (prudent approach). This is the case for the current cases in
relation to the 2007-13 period.

6.4.6   Interruptions and suspension of payments

The breakdown of interruption cases
and amounts per Member State for 2011 is as follows:

EUR millions

|| ERDF / Cohesion Fund || ESF || EFF || Total

|| Number of cases || Amount || Number of cases || Amount || Number of cases || Amount || Number of cases || Amount

Interruptions - closed cased as at 31.12.2011 || || || || || || || ||

Czech Republic ||  2 ||  130 || || || || ||  2 ||  130

Germany ||  7 ||  246 || || || || ||  7 ||  246

Greece ||  2 ||  132 || || || || ||  2 ||  132

Spain ||  12 ||  277 ||  2 ||  8 || || ||  14 ||  285

Italy ||  7 ||  100 ||  4 ||  35 ||  1 ||  6 ||  12 ||  141

Latvia || || || || ||  1 ||  0 ||  1 ||  0

Lithuania ||  1 ||  32 || || ||  1 ||  1 ||  2 ||  33

Hungary ||  9 ||  211 || || || || ||  9 ||  211

Austria || || ||  1 ||  0 || || ||  1 ||  0

Poland || || ||  2 ||  519 || || ||  2 ||  519

Portugal || || || || ||  1 ||  10 ||  1 ||  10

Romania ||  2 ||  42 || || || || ||  2 ||  42

Slovakia ||  1 ||  30 || || || || ||  1 ||  30

United Kingdom ||  6 ||  109 ||  2 ||  26 || || ||  8 ||  135

Cross border ||  6 ||  22 || || || || ||  6 ||  22

Subtotal closed cases ||  55 || 1 331 ||  11 ||  588 ||  4 ||  17 ||  70 || 1 936

Interruptions - open cases as at 31.12.2011 || || || || || || || ||

Denmark || || || || ||  1 ||  0 ||  1 ||  0

Germany ||  3 ||  17 || || ||  2 ||  1 ||  5 ||  18

Estonia || || || || ||  1 ||  0 ||  1 ||  0

Spain || || ||  2 ||  10 ||  1 ||  62 ||  3 ||  72

France || || ||  2 ||  25 ||  2 ||  3 ||  4 ||  28

Italy ||  10 ||  303 ||  4 ||  53 || || ||  14 ||  356

Slovakia ||  2 ||  71 || || || || ||  2 ||  71

Finland || || || || ||  1 ||  0 ||  1 ||  0

Sweden || || || || ||  1 ||  0 ||  1 ||  0

United Kingdom || || ||  2 ||  234 ||  1 ||  34 ||  3 ||  268

Subtotal open cases ||  15 ||  391 ||  10 ||  323 ||  10 ||  100 ||  35 ||  814

Total interruptions in 2011 ||  70 || 1 722 ||  21 ||  911 ||  14 ||  117 ||  105 || 2 750

Total interruptions in 2010 ||  49 || 2 156 ||  12 ||  255 ||  12 ||  127 ||  73 || 2 538

Concerning the ERDF and the
Cohesion Fund, 70 interruption decisions for payment deadlines were taken in
2011 for a total amount of EUR 1 722 million. Payments were released for 55
cases representing EUR 1 331 million. 15 cases were still ongoing at year-end,
covering an amount of EUR 391 million. Suspension procedures were initiated for
ten programmes in 2011, and one suspension decision was formally taken in early
2012. The procedure was closed for four cases in 2011 based on actions taken
and reported by the Member States. For the remaining five cases the procedures
were still ongoing at year end.

Concerning the ESF, 21 interruption
decisions for payment deadlines were taken in 2011 for a total amount of EUR
911 million, all relating to the 2007-2013 programming period. Payments were
released before 31 December 2011 for 11 cases, representing EUR 588 million. 10
cases are still ongoing for an amount of EUR 323 million. Additionally, 3
suspension decisions were adopted in 2011 (Spain, France and Italy), all relating to the 2007-2013 period. Suspension was still ongoing for these 3 cases after
31 December 2011.

6.5       OTHER
FINANCIAL CORRECTIONS AND RECOVERIES

This heading concerns the financial
corrections and recovery of amounts unduly paid because of errors or
irregularities detected either by the Commission, Member States, the European
Court of Auditors, or OLAF for the part of the budget which is not executed
under shared management.

Other financial corrections
decided/confirmed in 2011

EUR millions

|| 2011 || 2010

European Refugee Fund II ||  0 ||  -

Other financial corrections
implemented in 2011

EUR millions

|| 2011 || 2010

European Refugee Fund II ||  0 ||  -

Financial corrections is a
mechanism that starts to be also applied in the policy of Home Affairs. The
amount of financial corrections decided and implemented in 2011 is EUR 0.4
million and is expected to increase in the coming years.

Other
recoveries confirmed in 2011

EUR millions

|| 2011 || 2010

Other management types: || ||

- external actions || 107 ||  137

- internal policies || 270 ||  164

Total other recoveries confirmed || 377 ||  301

Other
recoveries implemented in 2011

EUR millions

|| 2011 || 2010

Other management types: || ||

- external actions || 77 ||  136

- internal policies || 268 ||  138

Total other recoveries implemented || 346 ||  274

Please note that some amounts
previously reported in 2010 in the above tables under internal policies are now
disclosed in note 6.4.4.

Note
6 – Annex 1

Total
financial corrections and recoveries decided in 2011 for EAGF - Breakdown per
Member State

EUR millions

Member State || Financial clearance || Conformity clearance || Irregularities declared || Total 2011 || Total 2010

Belgium ||  0 || - ||  9 ||  9 ||  4

Bulgaria ||  0 ||  21 ||  3 ||  24 ||  20

Czech Republic ||  0 || - ||  1 ||  1 ||  1

Denmark ||  0 ||  22 ||  5 ||  27 ||  12

Germany || (1) ||  1 ||  11 ||  11 ||  28

Estonia ||  0 ||  0 ||  0 ||  0 ||  0

Ireland || (1) || - ||  8 ||  8 ||  7

Greece ||  2 ||  257 ||  4 ||  263 ||  477

Spain ||  2 ||  116 ||  20 ||  138 ||  83

France ||  2 ||  2 ||  18 ||  23 ||  67

Italy || (58) ||  80 ||  49 ||  71 ||  78

Cyprus ||  0 ||  8 ||  0 ||  8 ||  1

Latvia ||  0 || - ||  1 ||  1 ||  0

Lithuania ||  0 || - ||  1 ||  1 ||  2

Luxembourg ||  0 || - ||  0 ||  0 ||  1

Hungary ||  0 || - ||  2 ||  3 ||  8

Malta ||  0 ||  0 ||  0 ||  0 ||  0

Netherlands || - ||  25 ||  4 ||  29 ||  51

Austria ||  0 ||  1 ||  3 ||  5 ||  2

Poland ||  0 ||  46 ||  2 ||  49 ||  52

Portugal ||  1 ||  2 ||  8 ||  11 ||  58

Romania ||  8 ||  39 ||  8 ||  55 ||  55

Slovenia ||  0 || - ||  0 ||  0 ||  5

Slovakia ||  0 || - ||  1 ||  1 ||  0

Finland ||  0 ||  1 ||  1 ||  2 ||  2

Sweden ||  0 ||  72 ||  2 ||  74 ||  5

United Kingdom || (20) ||  33 ||  11 ||  24 ||  213

Total decided              || (63) ||  728 ||  174 ||  839 || 1 233

Note
6 – Annex 2

Total
financial corrections and recoveries implemented in 2011 for EAGF - Breakdown
per Member State

EUR millions

Member State || Financial clearance and non-respected payment deadlines || Conformity clearance || Irregularities declared by Member States (repaid to EU) || Total 2011 || Total 2010

Belgium ||  0 || - ||  10 ||  10 ||  3

Bulgaria ||  0 ||  12 ||  2 ||  15 ||  6

Czech Republic ||  0 ||  1 ||  1 ||  2 ||  1

Denmark ||  0 ||  0 ||  3 ||  3 ||  12

Germany || (1) ||  0 ||  11 ||  10 ||  26

Estonia ||  0 || - ||  0 ||  0 ||  0

Ireland || (1) || - ||  6 ||  5 ||  5

Greece ||  2 ||  191 ||  5 ||  198 ||  150

Spain ||  2 ||  116 ||  22 ||  140 ||  130

France ||  2 ||  22 ||  16 ||  41 ||  120

Italy || (58) ||  41 ||  60 ||  44 ||  33

Cyprus ||  0 || - ||  0 ||  0 ||  1

Latvia ||  0 || - ||  1 ||  1 ||  0

Lithuania ||  0 ||  0 ||  2 ||  2 ||  4

Luxembourg ||  0 || - ||  0 ||  0 ||  1

Hungary ||  0 || (3) ||  2 || (1) ||  26

Malta ||  0 || - ||  0 ||  0 ||  0

Netherlands || - ||  52 ||  4 ||  56 ||  51

Austria ||  0 || - ||  1 ||  1 ||  3

Poland ||  0 ||  1 ||  2 ||  3 ||  97

Portugal ||  1 ||  16 ||  8 ||  25 ||  24

Romania ||  8 ||  26 ||  7 ||  41 ||  16

Slovenia ||  0 ||  4 ||  1 ||  4 ||  1

Slovakia ||  0 || - ||  1 ||  1 ||  1

Finland ||  0 || - ||  1 ||  1 ||  2

Sweden ||  0 || - ||  2 ||  2 ||  5

United Kingdom || (20) ||  27 ||  10 ||  18 ||  215

Total implemented || - 63 ||  506 ||  178 ||  621 ||  934

Note
6 – Annex 3

Cumulated
EAGF clearance of accounts amounts - decided

Breakdown
per Member State

EUR millions

Member State || EAGF Clearance of accounts Cumulated amount at end 2011

Belgium ||  33

Bulgaria ||  37

Czech Republic ||  1

Denmark ||  172

Germany ||  171

Estonia ||  0

Ireland ||  41

Greece || 2 023

Spain || 1 334

France || 1 052

Italy || 1 472

Cyprus ||  10

Latvia ||  0

Lithuania ||  2

Luxembourg ||  5

Hungary ||  24

Malta ||  0

Netherlands ||  163

Austria ||  7

Poland ||  66

Portugal ||  133

Romania ||  86

Slovenia ||  5

Slovakia ||  0

Finland ||  21

Sweden ||  95

United Kingdom ||  762

Total decided || 7 717

Note
6 – Annex 4

Total
financial corrections confirmed in 2011 for Structural Actions -

Breakdown
per Member State

EUR millions

Member State || Cumulative end 2010 || Financial corrections confirmed in 2011 || Cumulative end 2011

ERDF || CF || ESF || FIFG/ EFF || EAGGF Guidance || Total Year 2011

1994-1999 || 2 652 ||  11 ||  0 ||  1 ||  0 ||  1 ||  13 || 2 664

Belgium ||  5 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  5

Denmark ||  3 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  4

Germany ||  340 || (2) ||  - ||  - ||  0 ||  1 || (1) ||  339

Ireland ||  42 ||  1 ||  - ||  - ||  - ||  - ||  1 ||  43

Greece ||  528 ||  - ||  - ||  - ||  - ||  - ||  0 ||  528

Spain ||  664 ||  - ||  - ||  0 ||  - ||  - ||  0 ||  665

France ||  88 ||  6 ||  - ||  1 ||  - ||  - ||  8 ||  95

Italy ||  505 ||  2 ||  - ||  - ||  - ||  0 ||  2 ||  507

Luxembourg ||  5 ||  - ||  - ||  - ||  - ||  - ||  0 ||  5

Netherlands ||  177 ||  1 ||  - ||  - ||  - ||  - ||  1 ||  178

Austria ||  2 ||  - ||  - ||  - ||  - ||  0 ||  0 ||  2

Portugal ||  141 ||  - ||  - ||  - ||  - ||  0 ||  0 ||  141

Finland ||  1 ||  - ||  - ||  - ||  - ||  - ||  0 ||  1

Sweden ||  1 ||  - ||  - ||  - ||  - ||  - ||  0 ||  1

United Kingdom ||  138 ||  2 ||  - ||  - ||  - ||  0 ||  2 ||  140

INTERREG ||  10 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  10

2000-2006 || 5 965 ||  411 ||  17 ||  9 ||  3 ||  0 ||  440 || 6 405

Belgium ||  10 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  11

Bulgaria ||  21 ||  - ||  1 ||  - ||  - ||  - ||  1 ||  22

Czech Republic ||  11 ||  - ||  8 ||  - ||  - ||  - ||  8 ||  19

Denmark ||  0 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  0

Germany ||  13 ||  0 ||  - ||  0 ||  - ||  0 ||  1 ||  13

Estonia ||  0 ||  - ||  0 ||  - ||  - ||  - ||  0 ||  0

Ireland ||  44 ||  - ||  - ||  - ||  - ||  - ||  0 ||  44

Greece ||  961 ||  221 ||  1 ||  - ||  - ||  - ||  223 || 1 183

Spain || 2 865 ||  104 || (5) ||  - ||  0 ||  - ||  98 || 2 963

France ||  287 ||  0 ||  - ||  0 ||  1 ||  0 ||  2 ||  288

Italy ||  930 ||  25 ||  - ||  - ||  - ||  - ||  25 ||  954

Cyprus ||  0 ||  - ||  - ||  - ||  - ||  - ||  0 ||  0

Latvia ||  4 ||  - ||  - ||  - ||  - ||  - ||  0 ||  4

Lithuania ||  2 ||  - ||  0 ||  - ||  - ||  - ||  0 ||  2

Luxembourg ||  2 ||  0 || ||  - ||  - ||  - ||  0 ||  2

Hungary ||  52 ||  0 ||  3 ||  - ||  - ||  - ||  3 ||  55

Malta ||  0 ||  - ||  - ||  - ||  0 ||  - ||  0 ||  0

Netherlands ||  2 ||  - ||  - ||  0 ||  - ||  - ||  0 ||  2

Austria ||  0 ||  - ||  - || ||  - ||  - ||  0 ||  0

Poland ||  246 ||  14 ||  5 ||  8 ||  - ||  - ||  27 ||  274

Portugal ||  157 ||  40 ||  4 ||  - ||  - ||  - ||  44 ||  201

Romania ||  12 ||  - ||  0 ||  - ||  - ||  - ||  0 ||  12

Slovenia ||  2 ||  - ||  - ||  - ||  - ||  - ||  0 ||  2

Slovakia ||  41 ||  4 ||  1 ||  - ||  - ||  - ||  5 ||  45

Finland ||  1 ||  - ||  - ||  - ||  - ||  - ||  0 ||  1

Sweden ||  11 ||  0 ||  - ||  0 ||  - ||  - ||  0 ||  11

United Kingdom ||  283 ||  5 ||  - ||  - ||  1 ||  - ||  6 ||  289

INTERREG ||  10 || (2) ||  - ||  - ||  - ||  - || (2) ||  8

2007-2013 ||  2 ||  3 ||  0 ||  218 ||  0 || N/A ||  219 ||  221

Belgium ||  - ||  - ||  - ||  0 ||  - || ||  0 ||  0

Bulgaria ||  - ||  - ||  - ||  2 ||  - || ||  2 ||  2

Czech Republic ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Denmark ||  0 ||  - ||  - ||  - ||  - || ||  0 ||  0

Germany ||  - ||  - ||  - ||  3 ||  - || ||  3 ||  3

Estonia ||  0 ||  - ||  - ||  0 ||  - || ||  0 ||  0

Ireland ||  0 ||  - ||  - ||  2 ||  - || ||  2 ||  2

Greece ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Spain ||  - ||  - ||  - ||  87 ||  - || ||  85 ||  85

France ||  0 ||  0 ||  - ||  - ||  - || ||  0 ||  0

Italy ||  - ||  - ||  - ||  1 ||  - || ||  1 ||  1

Cyprus ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Latvia ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Lithuania ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Luxembourg ||  0 ||  - ||  - ||  - ||  - || ||  0 ||  0

Hungary ||  1 ||  2 ||  - ||  25 ||  - || ||  27 ||  27

Malta ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Netherlands ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Austria ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Poland ||  0 ||  - ||  - ||  92 ||  - || ||  92 ||  92

Portugal ||  1 ||  - ||  - ||  - ||  - || ||  0 ||  1

Romania ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Slovenia ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Slovakia ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Finland ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Sweden ||  - ||  0 ||  - ||  - ||  - || ||  0 ||  0

United Kingdom ||  - ||  - ||  - ||  6 ||  - || ||  6 ||  6

INTERREG ||  - ||  0 ||  - ||  - ||  - || ||  0 ||  0

Total confirmed || 8 619 ||  424 ||  17 ||  227 ||  3 ||  1 ||  673 || 9 291

Note
6 – Annex 5

Total
financial corrections implemented in 2011 for Structural Actions -

Breakdown
per Member State

EUR millions

Member State || Cumulative end 2010 || Financial corrections implemented in 2011 || Cumulative end 2011

ERDF || CF || ESF || FIFG/ EFF || EAGGF Guidance || Total Year 2011

1994-1999 || 2 621 ||  30 ||  0 ||  1 ||  0 ||  1 ||  32 || 2 652

Belgium ||  6 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  6

Denmark ||  4 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  4

Germany ||  338 || (2) ||  - ||  - ||  0 ||  1 || (1) ||  338

Ireland ||  40 ||  - ||  - ||  - ||  - ||  - ||  0 ||  40

Greece ||  525 ||  - ||  - ||  - ||  - ||  - ||  0 ||  525

Spain ||  658 ||  - ||  - ||  0 ||  - ||  - ||  0 ||  658

France ||  89 ||  6 ||  - ||  1 ||  - ||  - ||  8 ||  97

Italy ||  504 ||  0 ||  - ||  - ||  - ||  0 ||  0 ||  505

Luxembourg ||  5 || ||  - ||  - ||  - ||  - ||  0 ||  5

Netherlands ||  177 ||  1 ||  - ||  - ||  - ||  - ||  1 ||  178

Austria ||  2 ||  - ||  - ||  - ||  - ||  0 ||  0 ||  2

Portugal ||  141 ||  - ||  - ||  - ||  - ||  0 ||  0 ||  141

Finland ||  1 ||  - ||  - ||  - ||  - ||  - ||  0 ||  1

Sweden ||  1 ||  - ||  - ||  - ||  - ||  - ||  0 ||  1

United Kingdom ||  120 ||  23 ||  - ||  - ||  - ||  0 ||  23 ||  144

INTERREG ||  9 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  9

2000-2006 || 3 480 ||  387 ||  115 ||  19 || - 90 ||  0 ||  432 || 3 912

Belgium ||  8 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  8

Bulgaria ||  2 ||  - ||  9 ||  - ||  - ||  - ||  9 ||  12

Czech Republic ||  0 ||  - ||  5 ||  - ||  - ||  - ||  5 ||  5

Denmark ||  0 ||  - ||  - ||  - ||  - ||  - ||  0 ||  0

Germany ||  10 ||  0 ||  - ||  0 ||  - ||  0 ||  1 ||  11

Estonia ||  0 ||  - ||  0 ||  - ||  - ||  - ||  0 ||  0

Ireland ||  26 ||  - ||  1 ||  - ||  - ||  - ||  1 ||  26

Greece ||  904 ||  244 ||  2 ||  - ||  - ||  - ||  245 || 1 149

Spain || 1 051 ||  15 ||  74 ||  - || (90) ||  - ||  0 || 1 051

France ||  248 ||  1 ||  - ||  - ||  - ||  0 ||  1 ||  250

Italy ||  768 ||  62 ||  - ||  3 ||  - ||  - ||  65 ||  833

Cyprus ||  0 ||  - ||  - ||  - ||  - ||  - ||  0 ||  0

Latvia ||  4 ||  - ||  - ||  - ||  - ||  - ||  0 ||  4

Lithuania ||  1 ||  - ||  0 ||  - ||  - ||  - ||  0 ||  1

Luxembourg ||  2 ||  - ||  - ||  - ||  - ||  - ||  0 ||  2

Hungary ||  41 ||  4 ||  2 ||  8 ||  - ||  - ||  14 ||  55

Malta ||  0 ||  - ||  - ||  - ||  0 ||  - ||  0 ||  0

Netherlands ||  1 ||  - ||  - ||  0 ||  - ||  - ||  0 ||  1

Austria ||  0 ||  - ||  - ||  - ||  - ||  - ||  0 ||  0

Poland ||  90 ||  41 ||  11 ||  8 ||  - ||  - ||  61 ||  151

Portugal ||  113 ||  4 ||  5 ||  - ||  - ||  - ||  8 ||  121

Romania ||  8 ||  - ||  3 ||  - ||  - ||  - ||  3 ||  11

Slovenia ||  2 ||  - ||  - ||  0 ||  - ||  - ||  0 ||  2

Slovakia ||  1 ||  2 ||  3 ||  - ||  - ||  - ||  4 ||  6

Finland ||  0 ||  0 ||  - ||  - ||  - ||  - ||  0 ||  0

Sweden ||  11 ||  0 ||  - ||  0 ||  - ||  - ||  0 ||  11

United Kingdom ||  188 ||  13 ||  - ||  - ||  - ||  - ||  13 ||  201

INTERREG ||  0 ||  1 ||  - ||  - ||  - ||  - ||  1 ||  1

2007-2013 ||  2 ||  2 ||  0 ||  158 ||  0 || N/A ||  160 ||  162

Belgium ||  - ||  - ||  - ||  0 ||  - || ||  0 ||  0

Bulgaria ||  - ||  - ||  - ||  1 ||  - || ||  1 ||  1

Czech Republic ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Denmark ||  0 ||  - ||  - ||  - ||  - || ||  0 ||  0

Germany ||  - ||  - ||  - ||  3 ||  - || ||  3 ||  3

Estonia ||  0 ||  - ||  - ||  - ||  - || ||  0 ||  0

Ireland ||  0 ||  - ||  - ||  2 ||  - || ||  2 ||  2

Greece ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Spain ||  - ||  - ||  - ||  41 ||  - || ||  41 ||  41

France ||  0 ||  0 ||  - ||  - ||  - || ||  0 ||  0

Italy ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Cyprus ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Latvia ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Lithuania ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Luxembourg ||  - ||  - ||  - ||  0 ||  - || ||  0 ||  0

Hungary ||  1 ||  2 ||  - ||  25 ||  - || ||  27 ||  28

Malta ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Netherlands ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Austria ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Poland ||  0 ||  - ||  - ||  86 ||  - || ||  86 ||  86

Portugal ||  1 ||  0 ||  - ||  0 ||  - || ||  0 ||  1

Romania ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Slovenia ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Slovakia ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Finland ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

Sweden ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

United Kingdom ||  - ||  - ||  - ||  - ||  - || ||  0 ||  0

INTERREG ||  - ||  0 ||  - ||  - ||  - || ||  0 ||  0

Total implemented || 6 102 ||  419 ||  115 ||  178 || (90) ||  1 ||  624 || 6 726

7. BORROWING & LENDING ACTIVITIES
OF THE EU

This
note includes information previously reported under note 2, notes to the balance sheet.

7.1      BORROWING AND
LENDING ACTIVITIES - OVERVIEW

Amounts at carrying value 31/12/2011 || EUR millions

|| EFSM || BOP || MFA || Euratom || ECSC || Total ||

Loans (see note 2.5) || 28 344 || 11 625 || 595 || 451 || 266 || 41 281 ||

Borrowings (note 2.16) || 28 344 || 11 625 || 595 || 451 || 236 || 41 251 ||

The above amounts are at carrying
value whereas the tables below are presented in nominal values.

The European Union (EU) is
empowered by the EU Treaty to adopt borrowing programmes to mobilise the
financial resources necessary to fulfill its mandate. The European Commission,
acting on behalf of the EU, currently operates three main programmes under
which it may grant loans and fund these by issuing debt instruments in the
capital markets or with financial institutions:

1.
European
Financial Stabilisation Mechanism (EFSM): support to Euro Area Member
states, up to approximately EUR 60 billion,  (EUR 28.3 billion outstanding at
year-end)

2.
Balance-of-Payments
(BOP) assistance: to Member States that have not yet adopted the euro;
up to EUR 50 billion (EUR 11.6 billion outstanding at year-end)

3.
Macro-Financial
Assistance (MFA): financial aid programme to assist non-Member States
(EUR 595 million outstanding at year-end)

The key points or characterisitics to note for these
3 instruments are:

-
EU
borrowing is raised on the capital markets or with financial institutions and not from the budget, as the EU
is not permitted to borrow to finance its ordinary budgetary expenses or a
budget deficit;

-
The
size of the borrowings varies from small private placements of single or double
digit EUR million amounts to benchmark-size operations in the context of the
balance of payment loans and the EFSM.

-
The
funds raised are lent back-to-back to the beneficiary country, i.e. with the
same coupon, maturity and amount. Notwithstanding the back-to-back methodology,
the debt service of the bond is the obligation of the European Union, which
will ensure that all bond payments are made in a timely manner. To this effect,
BOP beneficiares are required to deposit reimbursements 7 days in advance of
the due dates and EFSM beneficiaries 14 days in advance, which allows the
Commission sufficient time to ensure timely payment in all circumstances.

-
For
each country programme, the Council and Commission Decisions determine the
overall amount, the instalments to be paid and the maximum average maturity of
the loan package. Subsequently, the Commission and the beneficiary country
agree loan/funding parameters, including instalments and the payment of
tranches. In addition, all but the first instalment of the loan depend on
compliance with strict conditions, with agreed terms and conditions similar to
IMF support, in the context of a joint EU/IMF financial assistance, which is
another factor influencing the timing of funding.

-
This
implies that the timing and maturities of issuance are dependent on the related
EU lending activity.

-
Funding
is exclusively denominated in euro and the maturity spectrum is 5 to 30 years.

-
Borrowings
are direct and unconditional obligations of the EU and guaranteed by the 27
Member States.

-
Should
a beneficiary country default, the debt service will be drawn from the
available treasury balance of the European Commission, if possible. If that
would not be possible, the Commission would draw the funds necessary from the
Member States. EU Member States are legally obliged, according to the EU own
resources legislation (Article 12 of Council Regulation 1150/2000), to make
available sufficient funds to meet the EU’s obligations. Thus investors are
only exposed to the credit risk of the EU, not to that of the beneficiary of
loans funded.

-
 “Back-to-back”
lending ensures that the EU budget does not assume any interest rate or foreign
exchange risk.

Additionally, the Euratom
legal entity (represented by the Commission) borrows money to lend to both
Member and non-Member States to finance projects relating to energy
installations. Finally, the European Coal & Steel Community (ECSC)
in liquidation has at the balance sheet date one loan granted from borrowed
funds still outstanding, for a nominal amount of EUR 46 million. This loan was
granted to a public-owned company based in France. ECSC has also in its loan
portfolio loans granted from own funds to European institutions’ officials from
the former ECSC in liquidation pension fund.

More details on each of these
instruments are given below. The effective interest rates (expressed as a range
of interest rates) were as follows:

Loans || 31.12.2011 || 31.12.2010

EFSM || 2.375%-3.50% || N/A

BOP || 2.375%-3.625% || 2.375%-3.625%

Macro Financial Assistance (MFA) || 1.58513%-4.54% || 0.99%-4.54%

Euratom || 1.067%-5.76% || 0.96313%-5.76%

ECSC in liquidation || 1.158%-5.8103% || 0.556%-5.8103%

Borrowings || 31.12.2011 || 31.12.2010

EFSM || 2.375%-3.50% || N/A

BOP || 2.375%-3.625% || 2.375%-3.625%

Macro Financial Assustante (MFA) || 1.58513%-4.54% || 0.99%-4.54%

Euratom || 0.867%-5.6775% || 0.7613%-5.6775%

ECSC in liquidation || 1.158%-9.2714% || 0.556%-9.2714%

7.2      EFSM

EFSM NOMINAL VALUE     || EUR millions

|| Ireland || Portugal || Total

Total loans granted || 22 500 || 26 000 || 48 500

Loans disbursed at 31.12.11 || 13 900 || 14 100 || 28 000

Loans repaid at 31.12.11* || 0 || 0 || 0

Loans outstanding at 31.12.11 || 13 900 || 14 100 || 28 000

Undrawn amounts at 31.12.11 || 8 600 || 11 900 || 20 500

*A table showing the reimbursement schedule for these loans
is given at the end of this note.

On 11 May 2010 the Council adopted
a European Financial Stabilisation Mechanism (EFSM) to preserve financial
stability in Europe (Council Regulation (EU) n° 407/2010). The mechanism is
based on Art. 122.2 of the Treaty and enables the granting of financial
assistance to a Member State in difficulties or seriously threatened with
severe difficulties caused by exceptional circumstances beyond its control. The
assistance may take the form of a loan or credit line. The Commission borrows
funds on the capital markets or with financial institutions on behalf of the EU
and lends these funds to the beneficiary Member State. For each country
receiving a loan under the EFSM, a quarterly assessment on the fulfilment of
the policy conditions is carried out before an instalment is disbursed.

The ECOFIN Council conclusions of 9
May 2010 restrict the facility to EUR 60 billion but the legal limit is
provided in Article 2.2 of the Council Regulation no. 407/2010, which restricts
the outstanding amount of loans or credit lines to the margin available under
the own resources ceiling. Borrowings related to loans disbursed under the EFSM
are guaranteed by the EU Budget – thus at 31 December 2011, the budget is
exposed to a maximum possible risk of EUR 28 344 million regarding these loans
(the EUR 28 billion above being the nominal value). As the borrowings under the
EFSM are guaranteed by the EU budget, the European Parliament scrutinises the
Commission's EFSM actions and exercises control in the context of the budget
and discharge procedure.

The Council decided by Implementing
decision in December 2010 on a loan to Ireland of maximum EUR 22.5 billion, and
in May 2011 on a loan to Portugal of maximum EUR 26 billion. The initial
Implementing decisions fixed interest with a margin to result in conditions
similar to those of the IMF support. With the adoption of Council Implementing Decisions
no. 682/2011 and 683/2011 of 11 October 2011, the Council suppressed the
interest margin retroactively and extended the maximum average maturity from
7.5 years to 12.5 years and the maturity of individual tranches up to 30 years.

In January 2012, a further EUR 1.5 billion was
disbursed to both Ireland and Portugal (30 year maturity). Another EUR 3
billion was disbursed to Ireland in March (20 year maturity). EUR 1.8 billion
and EUR 2.7 billion were disbursed to Portugal in April and May respectively
(26 and 10 year maturities). EUR 2.3 billion was disbursed to Ireland in July (16 year maturity). Under EFSM, the EU intends to issue further bonds during 2012
for a total amount of EUR 3 billion, for loans to Ireland and Portugal.

7.3      BALANCE OF
PAYMENTS (BOP)

The BOP facility, a
policy based financial instrument, has been reactivated during the current
economic and financial crisis to provide medium-term financial assistance to
Member States of the EU. It enables the granting of loans to Member States
which are experiencing, or are seriously threatened with, difficulties in their
balance of payments or capital movements. Only Member States which have not
adopted the Euro may benefit from this facility. The maximum outstanding amount
of loans to be granted is EUR 50 billion. Borrowings related to these loans are guaranteed by
the EU Budget – thus at 31 December 2011, the budget is exposed to a maximum
possible risk of EUR 11 625 million regarding these loans (EUR 11.4 billion
below being the nominal value).

BOP NOMINAL VALUE           || EUR millions

|| Hungary || Latvia || Romania || Total

Disbursed in 2008 || 2 000 || - || - || 2 000

Disbursed in 2009 || 3 500 || 2 200 || 1 500 || 7 200

Disbursed in 2010 || - || 700 || 2 150 || 2 850

Disbursed in 2011 || - || - || 1 350 || 1 350

Loans disbursed 31.12.2011 || 5 500 || 2 900 || 5 000 || 13 400

Loans repaid at 31.12.2011 || (2 000) || - || - || (2 000)

Outstanding amount at 31.12.2011 || 3 500 || 2 900 || 5 000 || 11 400

Total loans granted || 6 500 || 3 100 || 6 400 || 16 000

Undrawn amounts 31.12.2011 || 0 || 200 || 1 400 || 1 600

*A table showing the reimbursement schedule for these loans
is given at the end of this note.

Between November 2008
and end 2011, loans amounting to EUR 16 billion were granted to Hungary, Latvia
and Romania, of which EUR 13.4 billion had been disbursed by the end of 2011.
It should be noted that the BOP assistance programme for Hungary expired in November 2010 (with EUR 1 billion undrawn) and a first repayment of EUR 2 billion
was received as scheduled in December 2011. Latvia still had EUR 200 million
undrawn and available at the end of 2011, but the right to draw this expired
unused in January 2012. The total of the new facility granted to Romania (below) was also undrawn at year-end.

In February 2011, Romania requested a follow-up precautionary financial assistance programme under the
Balance of Payments Facility to support the re-launch of economic growth. On 12
May 2011 the Council decided to make available precautionary EU BOP assistance
for Romania of up to EUR 1.4 billion (Council Decision 2011/288/EU). Currently,
Romania does not intend to request the disbursement of any instalment under the
precautionary financial assistance programme since the amounts would only be
requested in case of unforeseen market deterioration in the economic and/or
financial situation due to factors outside the control of the Romanian
authorities, leading to the opening of an acute financing gap. Should the
financial assistance be activated, it would be provided in form of a loan with
a maximum maturity of seven years.

7.4      MFA, EURATOM
& ECSC in Liquidation

MFA is a policy-based financial
instrument of untied and undesignated balance-of-payment and/or budget support
to partner third-countries geographically close to the EU territory. It takes
the form of medium/long term loans or grants or an appropriate combination of
both and generally complements financing provided in the context of an
IMF-supported adjustment and reform program. At 31 December 2011, a further EUR
239 million of loan agreements have been entered into by the Commission but not
yet drawn down by the other party before the year-end. The Commission has not received
third-party guarantees for these loans, but they are guaranteed by the
Guarantee Fund (see note 2.4).

Euratom is a legal entity of the EU and is
represented by the European Commission. It grants loans to Member States for
the purpose of financing investment projects in the Member States relating to
the industrial production of electricity in nuclear power stations and to
industrial fuel cycle installations. It also grants loans to non-Member States
for improving the level of safety and efficiency of nuclear power stations and
installations in the nuclear fuel cycle which are in service or under
construction. Guarantees from third-parties of EUR 447 million (2010: EUR 466
million) have been received covering these loans.

ECSC loans are granted
by the ECSC in liquidation on borrowed funds in accordance with articles 54 and
56 of the ECSC Treaty as well as three unquoted debt securities issued by the
European Investment Bank (EIB) as substitute of a defaulted debtor. These debt
securities will be held till their final maturity (2017 and 2019) in order to
cover the service of related borrowings. The changes in carrying amount
correspond to the change in accrued interests plus the amortisation of the year
of premiums paid and transaction cost incurred at inception, calculated
according to the effective interest rate method.

7.5     INTER-GOVERMENTAL
FINANCIAL STABILITY MECHANISMS

7.5.1   European
Financial Stability Facility (EFSF)

The European Financial Stability
Facility ("EFSF") was created by the euro area Member States
following the decisions taken on 9 May 2010 by the Ecofin Council. Its mandate
is to safeguard financial stability in Europe by providing financial assistance
to euro area Member States. The EFSF is expected to no longer be available for
new lending after 1 July 2013, in keeping with the current Framework Agreement.
In accordance with an agreement by the Euro-area Heads of State/Governments
reached in July 2011, the EFSF is authorised to use the following instruments
linked to appropriate conditionality:

-
Provide
loans to countries in financial difficulties

-
Intervene
in the debt primary and secondary markets. Intervention in the secondary market
will be only on the basis of an ECB analysis recognising the existence of
exceptional financial market circumstances and risks to financial stability

-
Act
on the basis of a precautionary programme

-
Finance
recapitalisations of financial institutions through loans to governments

-
Provide
partial risk protection certificates alongside new issuances of vulnerable
Member States

To fulfill its mission, EFSF issues
bonds or other debt instruments on the capital markets. It is backed by
guarantee commitments from the 17 euro-area Member States for a total of EUR
780 billion and has a lending capacity of EUR 440 billion. It is not guaranteed
by the EU budget. The EFSF is a Luxembourg-registered commercial company owned
by euro-area Member States outside the EU Treaty framework and thus is not an
EU body and is entirely separate from and not consolidated in the EU accounts.
Consequently it has no impact on the EU accounts, aside from the possible
sanctions revenue described below. The EFSF is subject to statutory audit
through external auditors under Luxembourgish legal provisions on auditing.

The Commission will be responsible
for negotiating the policy conditionality attached to the financial assistance
and the monitoring of compliance with that conditionality. Each country
receiving financial assistance from the EFSF will be subject to regular
assessments on the fulfilment of the policy conditionality before another
instalment is disbursed. Such conditionality may range from a macro-economic
adjustment programme (for regular loans) to continuous respect of
pre-established eligibility criteria (for precautionary assistance). In
principle, the European Commission, in liaison with the ECB, negotiates with
the Euro Area Member State concerned a memorandum of understanding (an
"MoU") detailing the conditionality attached to the financial
assistance facility. The content of the MoU shall reflect the severity of the
weaknesses to be addressed and the financial assistance instrument chosen.

In parallel with the EFSM loans granted
to Ireland and Portugal, a loan facility from the EFSF with an aggregate net
disbursement amount of EUR 17.7 billion for Ireland and EUR 26 billion for
Portugal was initiated (in addition to assistance from the International
Monetary Fund of respectively SDR 19.5 billion (approximately EUR 22.5 billion
based on the rate in force at the time of the agreement) and SDR 23.7 billion
(approximately EUR 26 billion) under an Extended Fund Facility).

Regulation 1173/2011 of the
Parliament and Council allows for the imposition of sanctions in the form of
fines on Member States whose currency is the Euro. These fines, being 0.2% of
the Member State's GDP in the preceding year, can be applied in cases where a
Member State has not taken appropriate actions to correct an excessive budget
deficit, or where there has been manipulation of statistics. Similarly,
Regulation 1174/2011 on macroeconomic imbalances makes provision for an annual
fine on a Eurozone Member State of 0.1% of GDP in the cases where a Member State has not taken the requested corrective action  or in case an insufficient
corrective action plan has been submitted. Regulation 1177/2011  updated
Regulation  1467/97 on speeding up and clarifying the implementation of the
excessive deficit procedure. This updated Regulation also foresees the
possibility of issuing fines to Eurozone Member States (equal to 0.2% of GDP
plus a variable component). According to all three Regulations, any fines
collected by the Commission shall be passed to the EFSF, or its successor
mechanism. Presently, it is foreseen that such fines will transit through the
EU Budget and then be transferred to the EFSF. This would mean that such monies
would appear as both a budget revenue and expense, thus having no impact on the
overall budget result. Likewise they would have no impact on the economic
result as presented in the EU financial statements.

7.5.2   European
Stability Mechanism (ESM)

The European Council agreed on 17
December 2010 on the need for euro area Member States to establish a permanent
stability mechanism: the European Stability Mechanism ("ESM"), an
intergovernmental organisation under public international law outside the EU
Treaty framework. The ESM Treaty was signed by the 17 euro area Member States
on the 2nd of February 2012 and is currently undergoing ratification procedures
in the participating Member States before it can become operational. Ultimately,
the ESM will assume the tasks currently fulfilled by the EFSF and EFSM in
providing, where needed, financial assistance to euro area Member States. There
will, however, be a period of overlap of all three mechanisms, but loans that
have already been granted under the EFSM will continue to be disbursed and
repaid under EFSM rules and so the related borrowings will still be guaranteed
by the EU budget and will remain on the EU balance sheet. The creation of the
ESM will thus not have an impact on the existing commitments under the EFSM. It
must also be noted that the EU budget will not guarantee ESM borrowings.

The ESM will be backed by a robust capital
structure, with a total subscribed capital of EUR 700 billion, of which EUR 80
billion will be in the form of paid-in capital provided by the euro-area Member
States. With such capital, its lending capacity in principle should reach EUR
500 billion. The
adequacy of the combined capacity with EFSF was recently reviewed. On 30 March, the Eurogroup
agreed to increase the cumulative lending ceiling of the EFSF/ESM to EUR 700bn,
and allow both mechanisms to coexist until 30 June 2013. The audit process of the ESM has
been developed with the supreme audit institutions, and an external independent
audit, as well as an audit by an independent board of auditors, will be
implemented.

The assistance provided under the
ESM will be accompanied by conditionality, appropriate to the assistance
instrument chosen. Loans to beneficiary Member States will be conditional on
the implementation of a strict economic and fiscal adjustment programme, in
line with existing arrangements. As this mechanism will have its own legal personality
and will be funded directly by the euro area Member States, it is not an EU body
and there is no impact on either the EU accounts or the EU budget, aside from
the possible sanctions revenue described below. The Commission will be
responsible for negotiating the policy conditionality attached to the financial
assistance and the monitoring of compliance with that conditionality (as with
the EFSF above). Each country receiving financial assistance from the ESM will
be subject to regular assessments on the fulfilment of the policy
conditionality before another instalment is disbursed.

As stated above, fines collected under Regulations
1173/2011, 1174/2011 and 1177/2011 will pass through the EU Budget and be
transferred to the ESM once the EFSF is no longer operational. Furthermore, the
Treaty on Stability, Coordination and Governance signed by 25 Member States
(excluding the UK and Czech Republic) foresees penalty payments on any of the
"Contracting Parties" where that Member State has not taken necessary
measures to address a breach of deficit criterion. Penalties imposed (which
cannot exceed 0.1% of GDP) will be payable to the ESM if applied to Eurozone
Member States (thus with no impact on the EU budget outturn, as with the EFSF
above), or to the EU Budget for non-Euro Member States – see Article 8
paragraph 2 of the Treaty. In the latter case, the sanction amount will be
revenue for the EU budget and reflected as such in its accounts.

|| Reimbursement schedule for outstanding EFSM & BOP loan amounts at 17 July 2012 || EUR Billions ||

Loan/Country || Instalment || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2021 || 2022 || 2025 || 2026 || 2028 || 2032 || 2038 || 2042 || Total

BOP || || || || || || || || || || || || || || || ||

Hungary || 2nd || 2.0 || || || || || || || || || || || || || ||

|| 3rd || || || 1.5 || || || || || || || || || || || ||

Latvia || 1st || 1.0 || || || || || || || || || || || || || ||

|| 2nd || || 1.2 || || || || || || || || || || || || ||

|| 3rd || || || || || || 0.5 || || || || || || || || ||

|| 4th || || || || || || || || || 0.2 || || || || || ||

Romania || 1st || || 1.5 || || || || || || || || || || || || ||

|| 2nd || || || || || || 1.0 || || || || || || || || ||

|| 3rd || || || || 1.15 || || || || || || || || || || ||

|| 4th || || || || || 1.2 || || || || || || || || || ||

|| 5th || || || || || 0.15 || || || || || || || || || ||

Total BOP || || 3.0 || 2.7 || 1.5 || 1.15 || 1.35 || 1.5 || 0.0 || 0.0 || 0.2 || 0.0 || 0.0 || 0.0 || 0.0 || 0.0 || 11.4

EFSM || || || || || || || || || || || || || || || ||

Ireland || 1st (T1) || || 5.0 || || || || || || || || || || || || ||

|| 1st (T2) || || || || || 3.4 || || || || || || || || || ||

|| 2nd || || || || || || || 3.0 || || || || || || || ||

|| 3rd (T1) || || || || || || || || || || 2.0 || || || || ||

|| 3rd (T2) || || || || || 0.5 || || || || || || || || || ||

|| 4th * || || || || || || || || || || || || || || 1.5 ||

|| 5th * || || || || || || || || || || || || 3.0 || || ||

|| 6th * || || || || || || || || || || || 2.3 || || || ||

Portugal || 1st (T1) || || || || || || || 1.75 || || || || || || || ||

|| 1st (T2) || || || 4.75 || || || || || || || || || || || ||

|| 2nd (T1) || || || || || || || 5.0 || || || || || || || ||

|| 2nd (T2) || || || || || || || || || || 2.0 || || || || ||

|| 2nd (T3) || || || || || 0.6 || || || || || || || || || ||

|| 3rd * || || || || || || || || || || || || || || 1.5 ||

|| 4th (T1) * || || || || || || || || || || || || || 1.8 || ||

|| 4th (T2) * || || || || || || || || 2.7 || || || || || || ||

Total EFSM || || 0.0 || 5.0 || 4.75 || 0.0 || 4.5 || 0.0 || 9.75 || 2.7 || 0.0 || 4.0 || 2.3 || 3.0 || 1.8 || 3.0 || 40.8

Overall total || || 3.0 || 7.7 || 6.25 || 1.15 || 5.85 || 1.5 || 9.75 || 2.7 || 0.2 || 4.0 || 2.3 || 3.0 || 1.8 || 3.0 || 52.2

- Disbursed in 2012 so not inlcuded
on EU balance sheet at 31 December 2011

8. FINANCIAL RISK MANAGEMENT

The following disclosures with
regard to the financial risk management of the European Union (EU) relate to:

–
lending
and borrowing activities carried out by the European Commission through:
European Financial Stabilty Mechanism (EFSM), Balance of Payments (BOP), Macro
Financial Assistance (MFA), Euratom actions and the European Coal & Steel
Community (in Liquidation);

–
the
treasury operations carried out by the European Commission in order to
implement the EU budget, including the receipt of fines; and

–
the
Guarantee Fund for external actions.

8.1      Types
of risk

Market risk is the risk that the fair value or future cashflows of a
financial instrument will fluctuate, because of changes in market prices.
Market risk embodies not only the potential for loss, but also the potential
for gain. It comprises currency risk, interest rate risk and other price risk
(the EU has no significant other price risk).

1.
Currency
risk is
the risk that the EU's operations or its investments' value will be affected by
changes in exchange rates. This risk arises from the change in price of one
currency against another.

2.
Interest
rate risk
is the possibility of a reduction in the value of a security, especially a
bond, resulting from an increase in interest rates. In general, higher interest
rates will lead to lower prices of fixed rate bonds, and vice versa.

.

Credit risk is the risk of loss due
to a debtor's/borrower's non-payment of a loan or other line of credit (either
the principal or interest or both) or other failure to meet a contractual
obligation. The default events include a delay in repayments, restructuring of
borrower repayments and bankruptcy.

Liquidity risk is the risk that arises from the difficulty of selling an
asset, for example, the risk that a given security or asset cannot be traded
quickly enough in the market to prevent a loss or meet an obligation.

8.2     Risk management
policies

Borrowing & Lending activities:

The lending and borrowing
transactions, as well as related treasury management, are carried out by the EU
according to the respective Council Decisions, if applicable, and internal
guidelines. Written procedure manuals covering specific areas such as
borrowings, loans and treasury management have been developed and are used by
the relevant operating units. As a general rule, there are no activities to
compensate interest rate variations or foreign currency variations
("hedging" activities) carried-out as lending operations are
generally financed by "back-to-back" borrowings, which thus do not
generate open interest rate or currency positions. The application of the
"back-to-back" character is checked regularly.

The European Commission manages the
liquidation of the liabilities and no new loans or corresponding funding is
foreseen for the ECSC in liquidation. New ECSC borrowings are restricted to
refinancing with the aim of reducing the cost of funds. As far as treasury
operations are concerned, the principles of prudent management with a view to
limiting financial risks are applied.

Treasury:

The rules and principles for the
management of the Commission's treasury operations are laid down in the Council
Regulation 1150/2000 (amended by Council Regulations 2028/2004 and 105/2009)
and in the Financial Regulation (Council Regulation 1605/2002, amended by Council
Regulations 1995/2006, 1525/2007 and 1081/2010) and its Implementing Rules
(Commission Regulation 2342/2002, amended by Commission Regulations 1261/2005,
1248/2006 and 478/2007).

As a result of the above
regulations the following main principles apply:

–
Own
resources are paid by the Member States in accounts opened for this purpose in
the name of the Commission with the Treasury or the body appointed by each
Member State. The Commission may draw on the above accounts solely to cover its
cash requirements.

–
Own
Resources are paid by Member States in their own national currencies, while the
Commission's payments are mostly denominated in EUR.

–
Bank
accounts opened in the name of the Commission may not be overdrawn. This
restriction does not apply to the Commission's own resource accounts in case of
a default on loans contracted or guaranteed pursuant to EU Council regulations
and decision.

–
Funds
held in bank accounts denominated in other currencies than EUR are either used
for payments in the same currencies or periodically converted in EUR.

In addition to the own resources
accounts, other bank accounts are opened by the Commission, with central banks
and commercial banks, for the purpose of executing payments and receiving
receipts other than the Member State contributions to the budget.

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

A written set of guidelines and
procedures regulates the management of the Commission's treasury and payment
operations with the objective of limiting operational and financial risk and
ensuring an adequate level of control. They cover the different areas of
operation (for example: payment execution and cash management, cashflow
forecasting, business continuity, etc.), and compliance with the guidelines and
procedures is checked regularly. Additionally, information is exchanged between
DG BUDGET and DG ECFIN on risk management and best exposures.

Provisionally cashed
fines: portfolio (BUFI)

From 2010
onwards provisionally cashed fines amounts are invested in a specifically
created fund, BUFI, managed by DG ECFIN. Fines amounts received before 2010
remain in specific bank accounts. The asset management for provisionally cashed
fines is carried out by the Commission in accordance with internal guidelines
and the asset management guidelines which are included in the SLA signed in
December 2009 between DG BUDG and DG ECFIN. Procedural manuals covering
specific areas such as treasury management have been developed and are used by
the relevant operating units. Financial and operational risks are identified
and evaluated and compliance with internal guidelines and procedures is checked
regularly.

The objectives of the
asset management activities are to invest the fines paid to the Commission in
such a way as to:

(a) ensure that the
funds are easily available when needed, while

(b) aiming
at delivering under normal circumstances a return which on average is equal to
the return of the BUFI Benchmark minus costs incurred.

Investments are restricted
basically to the following categories: term deposits with euro-zone Central
Banks, euro-zone sovereign debt agencies, fully state-owned or state-guaranteed
banks or supranational institutions; bonds, bills and Certificates of Deposit
issued by sovereign entities creating a direct euro-zone sovereign exposure or
which are issued by supranational institutions.

Guarantee Fund

The rules and principles for the
asset management of the Guarantee Fund (see note 2.4)
are laid out in the Convention between the European Commission and the European
Investment Bank (EIB) dated 25 November 1994 and the subsequent amendments
dated 17/23 September 1996, 8 May 2002, 25 February 2008 and 9 November 2010.
The Guarantee Fund operates only in EUR. It exclusively invests in this
currency in order to avoid any foreign currency risk. Management of the assets
is based upon the traditional rules of prudence adhered to for financial
activities. It is required to pay particular attention to reducing the risks
and to ensuring that the managed assets can be sold or transferred without significant
delay, taking into account the commitments covered.

8.3      Currency
risks

Borrowing & Lending activities:

Most financial assets and
liabilities are in EUR, so in these cases the EU has no foreign currency risk.
However, the EU does give loans in USD through the financial instrument
Euratom, which are financed by borrowings with an equivalent amount in USD
(back-to-back operation). At the balance sheet date the EU has no foreign
currency risk with regard to Euratom. The ECSC in liquidation has a small
foreign currency net exposure of EUR equivalent 1.3 million arising from EUR
equivalent 1.26 million housing loans and EUR equivalent 0.04 million current
account balances.

Treasury:

Own resources paid by Member States
in currencies other than EUR are kept on the own resources accounts, in
accordance with the Own Resources Regulation. They are converted into EUR when
they are needed to cover for the execution of payments. The procedures applied
for the management of these funds are dictated by the above Regulation. In a
limited number of cases these funds are directly used for payments to be
executed in the same currencies.

A number of accounts in EU
currencies other than EUR, and in USD and CHF, are held by the Commission with
commercial banks, for the purpose of executing payments denominated in these
same currencies. These accounts are replenished depending on the amount of
payments to be executed, as a consequence their balances do not represent
exposure to currency risk.

When miscellaneous receipts (other
than own resources) are received in currencies other than EUR, they are either
transferred to Commission's accounts held in the same currencies, if they are
needed to cover for the execution of payments, or converted into EUR and
transferred to accounts held in EUR. Imprest accounts held in currencies other
than EUR are replenished depending on the estimated short term local payments
needs in the same currencies. Balances on these accounts are kept within their
respective ceilings.

Provisionally cashed
fines: portfolio (BUFI)

Since all fines are imposed and
paid in EUR, there is no foreign currency risk.

Guarantee Fund

The financial assets are in EUR so
there is no currency risk.

8.4      Interest
rate risk

Borrowing & Lending activities:

Borrowings and loans with variable
interest rates

Due to the nature of its borrowing
and lending activities, the EU has significant interest-bearing assets and
liabilities. MFA and Euratom borrowings issued at variable rates expose
the EU to interest rate risk. However, the interest rate risks that arise from
borrowings are offset by equivalent loans in terms and conditions
(back-to-back). At the balance sheet date, the EU has loans (expressed in nominal
amounts) with variable rates of EUR 0.8 billion (2010: EUR 0.86 billion), with
a re-pricing taking place every 6 months.

Borrowings and loans with fixed
interest rates

The EU also has MFA and Euratom
loans with fixed rates totalling EUR 236 million in 2011 (2010: EUR 110
million) and which have a final maturity date between one and five years (EUR
25 million) and more than five years (EUR 211 million). More significantly, the
EU has eleven loans under the financial instrument BOP with fixed interest
rates totalling EUR 11.4 billion in 2011 (2010: EUR 12.05 billion) and with a
final maturity between one and five years (EUR 7.2 billion) and more than five
years (EUR 4.2 billion). Under the financial instrument EFSM, the EU has ten
loans with fixed interest rates totalling EUR 28 billion in 2011 and with a
final maturity between one and five years (EUR 9.75 billion) and more than five
years (EUR 18.25 billion).

Due to the nature of its
activities, the ECSC in liquidation is exposed to interest rate risk. The
interest rate risks that arise from borrowings are generally offset by
equivalent loans in terms and conditions. As regards asset management
operations, there are no bonds with variable interest rates in the ECSC
portfolio. Zero coupon bonds represented 15% of the bond portfolio at the
balance sheet date.

Treasury:

The Commission's treasury does not
borrow any money; as a consequence it is not exposed to interest rate risk. It
does, however, earn interest on balances it holds on its different banks
accounts. The Commission has therefore put in place measures to ensure that
interest earned on its bank accounts regularly reflects market interest rates,
as well as their possible fluctuation.

Accounts opened with Member States
Treasuries or National Central Banks for own resources receipts are
non-interest bearing and free of charges. For all other accounts held with
National Central Banks the remuneration depends on the specific conditions
offered by each bank; interest rates applied are variable and adjusted to
market fluctuations.

Overnight balances held on commercial
bank accounts earn interest on a daily basis. This is based on variable market
rates to which a contractual margin (positive or negative) is applied. For most
of the accounts the interest calculation is linked to the EONIA (Euro over
night index average), and is adjusted to reflect any fluctuations of this rate.
For some other accounts the interest calculation is linked to the ECB marginal
rate for its main refinancing operations. As a result no risk exists that the
Commission earns interest at rates lower than market rates.

Provisionally cashed
fines: portfolio (BUFI)

There are no bonds with variable
interest rates in the BUFI portfolio. Zero coupon bonds represented 34% of the
bond portfolio at the balance sheet date.

Guarantee Fund

Debt securities within the
Guarantee Fund issued at variable interest rates are subject to the volatility
effects of these rates, whereas debt securities at fixed rates have a risk with
regard to their fair value. Fixed rate bonds represent approximately 83% of the
investment portfolio at the balance sheet date (2010: 93%).

8.5      Credit risk

Borrowing & Lending activities

Exposure to credit risk is managed
firstly by obtaining country guarantees in the case of Euratom, then through
the Guarantee Fund (MFA & Euratom), then by the possibility of
drawing the necessary funds from the Commission's own resource accounts with
the Member States and ultimately through the Budget of the EU. The Own Resource
legislation fixes the ceiling for own resource payments at 1.23% of Member States'
GNI and during 2011 0.93% was actually used to cover payment appropriations.
This means that at 31 December 2011 there existed an available margin of 0.3%
to cover these guarantees. The Guarantee Fund for external actions was set up
in 1994 to cover default risks related to borrowings which finance loans to
countries outside the European Union. In any case, the exposure to credit risk
is mitigated by the possibility to draw on the Commission's own resource
accounts with Member States in excess of the assets on those accounts in case a
debtor would be unable to reimburse the amounts due in full. To this end the EU
is entitled to call upon all the Member States to ensure compliance with the
EU's legal obligation towards its lenders.

As far as treasury operations are
concerned, guidelines on the choice of counterparties must be applied.
Accordingly, the operating unit will be able to enter into deals only with
eligible banks having sufficient counterparty limits.

ECSC's exposure to credit risk is
managed through regular analysis of the ability of borrowers to meet interest
and capital repayment obligations. Exposure to credit risk is also managed by
obtaining collateral as well as country, corporate and personal guarantees. 61%
of the total amount of outstanding loans is covered by guarantees from a Member State or equivalent bodies (e.g. public institutions). 30% of loans outstanding have
been granted to banks or have been guaranteed by banks. As far as treasury
operations are concerned, guidelines on the choice of counterparties must be
applied. The operating unit is only allowed to enter into deals with eligible
banks having sufficient counterparty limits.

Treasury:

Most of the Commission's treasury
resources are kept, in accordance with Council Regulation 1150/2000 on own
resources, in the accounts opened by Member States for the payment of their
contributions (own resources). All such accounts are held with Member States'
treasuries or national central banks. These institutions carry the lowest credit
(or counterparty) risk for the Commission as the exposure is with its Member
States. For the part of the Commission's treasury resources kept with
commercial banks in order to cover the execution of payments, replenishment of
these accounts is instructed on a just-in-time basis and is automatically
managed by the treasury cash management system. Minimum cash levels,
proportional to the average amount of daily payments executed from it, are kept
on each account. As a consequence the amounts kept overnight on these accounts
remain constantly at low levels (overall between EUR 20 million and EUR 100
million on average, spread over more than 20 accounts) and so ensure the
Commission's risk exposure is limited. These amounts should be viewed with
regard to the overall treasury balances which fluctuate between EUR 1 billion
and EUR 35 billion, and with an overall amount of payments executed in 2011
that exceeded EUR 128 billion.

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

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

–
For
commercial banks that have been specifically selected for the deposit of
provisionally cashed fines (restricted cash), a minimum long-term rating AA in
one rating agency  is also required as a general rule and specific measures are
applied in case banks in this group are subject to downgrade. In addition the
amount deposited with each bank is limited to a certain percentage of its own
funds; the calculation of such limit also takes into account the amount of
outstanding guarantees issued to the Commission by the same institution.

–
Imprest
accounts are held with local banks selected by a simplified tendering
procedure. Rating requirements depend on the local situation and may
significantly differ from one country to another. In order to limit risk
exposure, balances on these accounts are kept at the lowest possible levels
(taking into account operational needs); they are regularly replenished, and
the applied ceilings are reviewed on a yearly basis.

–
The
credit ratings of the commercial banks where the Commission has accounts are
reviewed at least on a monthly basis, or with higher frequency if and when
needed. Intensified monitoring measures and daily reviews of commercial banks'
ratings were adopted in the context of the financial crisis, and kept in place
during 2011.

Significant amounts of
guarantees issued by financial institutions are also held by the Commission in
relation to the fines it imposes to companies breaching EU competition rules
(see note 2.11.1). These guarantees are
provided by fined companies as an alternative to making provisional payments. 
The risk management policy applied for the acceptance of such guarantees has
been reviewed in the early months of 2012 and a new combination of credit rating
requirements and limited percentages per counterpart (proportional to each
counterpart's own funds) has been defined in the light of the current financial
environment in the EU. It continues to ensure a high credit quality for the
Commission. The compliance of the outstanding guarantees with the applicable
policy requirements is reviewed regularly.

Provisionally cashed
fines: portfolio (BUFI)

For investments from provisionally
cashed fines the Commission takes on exposure to credit risk which is the risk
that a counterparty will be unable to pay amounts in full when due. The highest
concentration of exposure is towards France and Germany as each of these
countries represents respectively 62% and 25% of the total volume of the
portfolio.

Guarantee Fund

In accordance with the agreement
between the EU and the EIB on the management of the Guarantee Fund, all
interbank investments should have a minimum rating from Moody's or equivalent
of P-1. As at 31 December 2011 fixed term deposits (EUR 300 million) were made
with such counterparties (2010: EUR 124 million). As at 31 December 2011, the
fund has no investments in short-term discount papers. For the same period the
previous year, the fund invested in four short-term financial instruments and
all such investments (EUR 69 million) were made with counterparties having a
minimum rating of P-1 Moody's or equivalent. All the securities held in the
available for sale portfolio are in line with the management guidelines.

8.6      Liquidity risk

Borrowing & Lending activities

The liquidity risk that arises from
borrowings is generally offset by equivalent loans in terms and conditions
(back-to-back operations). For MFA and Euratom, the Guarantee Fund serves as a
liquidity reserve (or safety net) in case of payment default and payment delays
of borrowers. For BOP, the Council Regulation 431/2009 provides for a procedure
allowing sufficient time to mobilise funds through the Commission's own
resource accounts with the Member States. For EFSM, the Council Regulation
407/2010 provides for a similar procedure.

For the asset and liability
management of ECSC in liquidation, the Commission manages liquidity
requirements based on disbursement forecasts obtained through consultations
with the responsible Commission services.

Treasury:

EU budget principles ensure that
overall cash resources for the year are always sufficient for the execution of
all payments. In fact, the total Member States contributions equal the amount
of payment appropriations for the budgetary year. Member States contributions,
however, are received in twelve monthly instalments throughout the year, while
payments are subject to certain seasonality. In order to ensure that treasury
resources are always sufficient to cover the payments to be executed in any
given month, procedures regarding regular cash forecasting are in place, and
own resources or additional funding can be called up in advance from Member
States if needed, and under certain conditions. In addition to the above, in
the context of the Commission's daily treasury operations, automated cash
management tools ensure that sufficient liquidity is available on each of the
Commission's bank accounts, on a daily basis.

Guarantee Fund

The fund is managed according to
the principle that the assets shall have a sufficient degree of liquidity and
mobilisation in relation to the relevant commitments. The fund must maintain a
minimum of EUR 100 million in a portfolio with a maturity of < 12 months
which is to be invested in monetary instruments. As at 31 December 2011 these
investments amounted to EUR 300 million. Furthermore a minimum of 20% of the
fund's nominal value shall comprise monetary instruments, fixed-rate bonds with
a remaining maturity of no more than one year and floating-rate bonds. As at 31
December 2011 this ratio stood at 45%.

9. RELATED PARTY DISCLOSURES

9.1        RELATED PARTIES

The related parties of the
Commission are the other EU consolidated entities and the key management personnel
of these entities. Transactions between these entities take place as part of
the normal operations of the EU and as this is the case, no specific disclosure
requirements are necessary for these transactions in accordance with the EU
accounting rules.

9.2        KEY
MANAGEMENT ENTITLEMENTS

For the
purposes of presenting information on related party transactions concerning the
key management of the European Commission, such persons are shown here under
five categories:

Category 1: the
Presidents of the European Council, the Commission and the Court of Justice

Category 2: the
Vice-president of the Commission and High Representative of the European Union
for Foreign Affairs and Security Policy and the other Vice-presidents of the
Commission

Category 3: the Secretary-General
of the Council, the Members of the Commission, the Judges and Advocates General
of the Court of Justice, the President and Members of the General Court, the
President and Members of the European Civil Service Tribunal, the Ombudsman and
the European Data Protection Supervisor

Category 4: the
President and Members of the Court of Auditors

Category 5: the highest
ranking civil servants of the Institutions and Agencies

A summary of
their entitlements are given below – further information can be found in the
Official Journal of the European Union (L187 8/8/1967 last modified by Council
Regulation (EC, Euratom) No. 202/2005 of 18/1/2005 (L33 5/2/2005) and L268
20/10/1977 last modified by Council Regulation (EC, Euratom) no. 1293/2004 of
30/4/2004 (L243 15/7/2004)). Other information is also available in the Staff
Regulations published on the Europa website which is the official document
describing the rights and obligations of all officials of the EU. Key
management personnel have not received any preferential loans from the EU.

KEY MANAGEMENT FINANCIAL ENTITLEMENTS || EUR

Entitlement (per employee) || Category 1 || Category 2 || Category 3 || Category 4 || Category 5

Basic salary (per month) || 25 351.76 || 22 963.55 –23 882.09 || 18 370.84 – 20 667.20 || 19 840.51 – 21 126.47 || 11 681.17 –18 370.84

Residential/Expatriation allowance || 15% || 15% || 15% || 15% || 16%

Family allowances: Household (% salary) Dependent child Pre-school Education, or Education outside place of work || 2%+170.52 372.61 91.02 252.81 505.39 || 2%+170.52 372.61 91.02 252.81 505.39 || 2%+170.52 372.61 91.02 252.81 505.39 || 2%+170.52 372.61 91.02 252.81 505.39 || 2%+170.52 372.61 91.02 252.81 505.39

Presiding judges allowance || N/A || N/A || 500 - 810.74 || N/A || N/A

Representation allowance || 1 418.07 || 0 - 911.38 || 500 - 607.71 || N/A || N/A

Annual travel costs || N/A || N/A || N/A || N/A || Yes

Transfers to Member State: Education allowance* % of salary* % of salary with no cc || Yes 5% max 25% || Yes 5% max 25% || Yes 5% max 25% || Yes 5% max 25% || Yes 5% max 25%

Representation expenses || reimbursed || reimbursed || reimbursed || N/A || N/A

Taking up duty: Installation expenses Family travel expenses Moving expenses || 50 703.52 reimbursed reimbursed || 45 927.10 –47 764.18 reimbursed reimbursed || 36 741.68 – 41 334.40 reimbursed reimbursed || 39 681.02 – 42 252.94 reimbursed reimbursed || reimbursed reimbursed reimbursed

Leaving office: Resettlement expenses Family travel expenses Moving expenses Transition (% salary)** Sickness insurance || 25 351.76 reimbursed reimbursed 40% - 65% covered || 22 963.55 –23 882.09 reimbursed reimbursed 40% - 65% covered || 18 370.84 – 20 667.20 reimbursed reimbursed 40% - 65% covered || 19 840.51 – 21 126.47 reimbursed reimbursed 40% - 65% covered || reimbursed reimbursed reimbursed N/A optional

Pension (% salary, before tax) || Max 70% || Max 70% || Max 70% || Max 70% || Max 70%

Deductions: Community tax Sickness insurance (% salary) Special levy on salary Pension deduction || 8% - 45% 1.8% 5.5% N/A || 8% - 45% 1.8% 5.5% N/A || 8% - 45% 1.8% 5.5% N/A || 8% - 45% 1.8% 5.5% N/A || 8% - 45% 1.8% 5.5% 11.6%

Number of persons at year-end || 3 || 8 || 90 || 27 || 97

*
with correction coefficient (“cc”) applied

**
paid for the first 3 years following departure

10. EVENTS AFTER THE BALANCE SHEET DATE

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

Additional requests for
financial assistance within the Eurozone

The Eurogroup welcomed on 25 June
2012 the Spanish Government's formal application for financial assistance. On
the 9 July, it reached a political understanding on a programme designed to
help Spain recapitalise and restructure its financial institutions. Once the
memorandum of understanding is adopted, it will allow the first disbursement.
The financial assistance for recapitalisation will be provided via the European
Financial Stability Facility (EFSF) until the European Stability Mechanism
(ESM) becomes available and takes over this task.

The Eurogroup also welcomed on 27
June the request of the Cypriot authorities for financial assistance from euro
area Member States in view of the challenges that Cyprus is facing, in
particular due to distress in the banking sector and the presence of
macroeconomic imbalances. Based on an assessment of the financial needs, the
euro area financial support would be provided in the framework of a
comprehensive adjustment programme. The financial assistance package shall be
provided by the EFSF or the ESM on the basis of its financing instruments.

For more information on both the
EFSF and the ESM, as well as EU financial assistance programmes, please see
Note 7.

11. SCOPE OF CONSOLIDATION

11.1 CONSOLIDATED ENTITIES

A. CONTROLLED ENTITIES

1. Institutions and consultative bodies ||

Committee of the Regions || European Data Protection Supervisor

Council of the European Union || European Economic and Social Committee

Court of Justice of the European Union || European Ombudsman

European Commission || European Parliament

European Court of Auditors || European Council

European External Action Service* ||

||

2. EU Agencies ||

European Agency for Safety and Health at Work || European Union Agency for Fundamental Rights

European Aviation Safety Agency || European Network and Information Security Agency

European Centre for Disease Prevention and Control || European Training Foundation

European Centre for the Development of Vocational Training || European Agency for the Management of Operational Co-operation at External Borders of the Member States of the EU

European Environment Agency || Translation Centre for the Bodies of the European Union

European Food Safety Authority || European GNSS Supervisory Authority

European Foundation for the Improvement of Living and Working Conditions || Office for Harmonisation in the Internal Market (Trade Marks and Designs)

European Maritime Safety Agency || European Railway Agency

European Medicines Agency || Community Plant Variety Office

European Chemicals Agency || European Fisheries Control Agency

Fusion for Energy (European Joint Undertaking for ITER and the Development of Fusion Energy) || European Monitoring Centre for Drugs and Drug Addiction

Eurojust || European Police College (CEPOL)

European Institute for Gender Equality || European Police Office (EUROPOL)

||

Executive Agency for Competitiveness and Innovation || Executive Agency for Health and Consumers

Education, Audiovisual & Culture Executive Agency || Trans-European Transport Network Executive Agency

European Research Council Executive Agency || Research Executive Agency

European Agency for Cooperation of Energy Regulators* || European Insurance and Occupational Pensions Authority*

European Banking Authority* || European Securities and Markets Authority*

Office for the Body of European Regulators for Electronic Communications* || European Institute of Innovation and Technology*

||

3. Other controlled entities ||

European Coal and Steel Community (in liquidation) ||

||

B. JOINT VENTURES

ITER International Fusion Energy Organisation || Galileo Joint Undertaking in liquidation

SESAR Joint Undertaking || IMI Joint Undertaking

FCH Joint Undertaking ||

||

C. ASSOCIATES

European Investment Fund || ARTEMIS Joint Undertaking

Clean Sky Joint Undertaking || ENIAC Joint Undertaking

||

*  Consolidated for the first time in 2011

11.2    NON-CONSOLIDATED
ENTITIES

Although the EU manages the assets
of the below mentioned entities, they do not meet the requirements to be
consolidated and so are not included in the European Union accounts.

11.2.1   The European Development Fund (EDF)

The European Development Fund (EDF)
is the main instrument for providing European Union aid for development
cooperation to the African, Caribbean and Pacific (ACP) States and Overseas
Countries and Territories (OCTs). The 1957 Treaty of Rome made provision for
its creation with a view to granting technical and financial assistance,
initially limited to African countries with which some Member States had
historical links.

The EDF is not funded from the
European Union's budget but from direct contributions from the Member States,
which are agreed in negotiations at intergovernmental level. The Commission and
the EIB manage the resources of the EDF. Each EDF is usually concluded for a
period of around five years. Since the conclusion of the first partnership
convention in 1964, the EDF programming cycles have generally followed the
partnership agreement/convention cycles.

The EDF is governed by its own
Financial Regulation (OJ L 78 of 19/03/2008) which foresees the presentation of
its own financial statements, separately from those of the EU. The EDF annual
accounts and resource management are subject to the external control of the
Court of Auditors and the Parliament. For information purposes, the balance
sheet and the economic outturn account of the 8th, 9th
and 10th EDFs are shown below:

BALANCE SHEET – 8th, 9th and 10th EDFs

|| || || EUR millions

|| 31.12.2011 || 31.12.2010

|| NON-CURRENT ASSETS || 380 || 353

|| || ||

|| CURRENT ASSETS || 2 510 || 2 151

|| || ||

|| TOTAL ASSETS || 2 890 || 2 504

|| || ||

|| CURRENT LIABILITIES || (1 033) || (1 046)

|| || ||

|| TOTAL LIABILITIES || (1 033) || (1 046)

|| || ||

|| NET ASSETS || 1 857 || 1 458

|| || ||

|| FUNDS & RESERVES || ||

|| Called fund capital || 26 979 || 23 879

|| Other reserves || 2 252 || 2 252

|| Economic outturn carried forward from previous years || (24 674) || (21 908)

|| Economic outturn of the year || (2 700) || (2 765)

|| NET ASSETS || 1 857 || 1 458

ECONOMIC OUTTURN ACCOUNT – 8th, 9th and 10th EDFs

|| || || EUR millions

|| 2011 || 2010

|| OPERATING REVENUE || 99 || 140

|| || ||

|| OPERATING EXPENSES || (2 778) || (3 000)

|| || ||

|| DEFICIT FROM OPERATING ACTIVITIES || (2 679) || (2 860)

|| || ||

|| FINANCIAL ACTIVITIES || (21) || 95

|| ECONOMIC OUTTURN OF THE YEAR || (2 700) || (2 765)

11.2.2   The Sickness Insurance Scheme

The Sickness Insurance Scheme is
the scheme that provides medical assurance to the staff of the various European
Union bodies. The funds of the Scheme are its own property and are not
controlled by the European Union, although its financial assets are managed by
the Commission. The Scheme is funded by contributions from its members (staff)
and from the employers (the Institutions/Agencies/bodies.) Any surplus remains
within the Scheme.

The scheme has four separate entities – the main scheme covering staff of the
Institutions, Agencies of the European Union, and three smaller schemes
covering staff in the European University of Florence, the European schools and
staff working outside the EU such as staff in the EU delegations. The total
assets of the Scheme at 31 December 2011 totalled EUR 294 million (2010: EUR 286
million).

11.2.3   The Participants Guarantee Fund (PGF)

Certain pre-financing amounts paid
out under the 7th Research Framework Programme for research and
technological development (FP7) are effectively covered by a Participants
Guarantee Fund (PGF).

This is a mutual benefit instrument
set up to cover the financial risks incurred by the EU and the participants
during the implementation of the indirect actions of FP7, its capital and
interests constituting a performance security. All participants of indirect
actions taking the form of a grant contribute 5% of the total EU contribution
to the PGF's capital for the duration of the action. As such the participants
are the owners of the PGF, the EU (represented by the Commission) acting as
their executive agent. At the end of an indirect action, participants shall
recover their contribution to the capital in full, except where the PGF incurs
losses due to defaulting beneficiaries – in this case participants shall
recover, at a minimum, 80% of their contribution. The PGF thus guarantees the
financial interest of both the EU and the participants.

As at 31 December 2011 the PGF had
total assets of EUR 1 171 million (2010: EUR 879 million). The funds of the PGF
are its own property and are not controlled by the European Union, even if its
financial assets are managed by the Commission.