EUROPEAN COMMISSION Brussels,27.6.2018 COM(2018) 525 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION 2017



CONTENTS CERTIFICATION OF THE ACCOUNTS FINANCIAL STATEMENTS AND EXPLANATORY NOTES BALANCE SHEET STATEMENT OF FINANCIAL PERFORMANCE CASHFLOW STATEMENT11 STATEMENT OF CHANGES IN NET ASSETS12 NOTES TO THE FINANCIAL STATEMENTS13 BUDGETARY IMPLEMENTATION REPORTS 57

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Commission for the year 2017 have been prepared in accordance with the Financial Regulation applicable to the general budget of the European Union and the accounting rules adopted by myself in my capacity as the Commission's Accounting Officer, as are to be applied by all the institutions and Union bodies. I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Commission in accordance with Article 68 of the Financial Regulation. I have obtained from the authorising officers, who certified its reliability, all the information necessary for the production of the accounts that show the European Commission's assets and liabilities and the budgetary implementation. I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present fairly, in all material aspects, the financial position, the results of the operations and the cash flow of the European Commission. [signed] Rosa ALDEA BUSQUETS Accounting Officer of the Commission 22 June 2018



EUROPEAN COMMISSION FINANCIAL YEAR 2017 FINANCIAL STATEMENTS AND EXPLANATORY NOTES

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

CONTENTS BALANCE SHEET STATEMENT OF FINANCIAL PERFORMANCE CASHFLOW STATEMENT

STATEMENT OF CHANGES IN NET ASSETS NOTES TO THE FINANCIAL STATEMENTS 1.SIGNIFICANT ACCOUNTING POLICIES 2.NOTES TO THE BALANCE SHEET 3.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE 4.CONTINGENT LIABILITIES AND ASSETS 5.BUDGETARY AND LEGAL COMMITMENTS 6.FINANCIAL INSTRUMENTS DISCLOSURES 7.RELATED PARTIES 8.EVENTS AFTER THE BALANCE SHEET DATE BALANCE SHEET EUR millions Note 31.12.2017 31.12.2016 NON-CURRENT ASSETS Intangible assets 2.1 149 135 Property, plant and equipment 2.2 7 544 6 832 Investments accounted for using the equity method 2.3 581 528 Financial assets 2.4 58 533 60 733 Pre-financing 2.5 24 745 21 777 Exchange receivables and non-exchange recoverables 2.6 619 729 92 172 90 734 CURRENT ASSETS Financial assets 2.4 8 339 3 295 Pre-financing 2.5 24 552 23 964 Exchange receivables and non-exchange recoverables 2.6 11 421 10 607 Inventories 2.7 62 75 Cash and cash equivalents 2.8 23 113 27 579 67 488 65 521 TOTAL ASSETS 159 659 156 255 NON-CURRENT LIABILITIES Pension and other employee benefits 2.9 (72 495) (66 550) Provisions 2.10 (2 617) (1 786) Financial liabilities 2.11 (49 414) (54 375) (124 526) (122 711) CURRENT LIABILITIES Provisions 2.10 (645) (626) Financial liabilities 2.11 (6 813) (2 165) Payables 2.12 (39 376) (40 240) Accrued charges and deferred income 2.13 (63 314) (67 027) (110 148) (110 059) TOTAL LIABILITIES (234 674) (232 770) NET ASSETS (75 014) (76 515) Reserves 2.14 3 062 3 031 Amounts to be called from Member States* 2.15 (78 077) (79 546) NET ASSETS (75 014) (76 515) * The European Parliament adopted a budget on 18 November 2017 which provides for the payment of the Commission's short-term liabilities from own resources to be collected by, or called up from, the Member States in 2018. 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. STATEMENT OF FINANCIAL PERFORMANCE EUR millions Note 2017 2016 REVENUE Revenue from non-exchange transactions GNI resources 78 620 95 578 Traditional own resources 3.1 20 520 20 439 VAT 16 947 15 859 Fines 4 664 3 858 Recovery of expenses 3.2 1 879 1 946 Other 3.3 6 515 1 695 129 145 139 376 Revenue from exchange transactions Financial revenue 3.4 1 820 1 746 Other 3.5 692 649 2 511 2 395 Total Revenue 131 657 141 771 EXPENSES Implemented by Member States 3.6 European Agricultural Guarantee Fund (44 289) (44 152) European Agricultural Fund for Rural Development and other rural development instruments (11 359) (12 604) European Regional Development Fund & Cohesion Fund (17 650) (35 045) European Social Fund (7 353) (9 366) Other (1 253) (1 606) Implemented by the Commission, executive agencies and trust funds 3.7 (15 763) (15 644) Implemented by other EU agencies and bodies 3.8 (3 429) (3 064) Implemented by third countries and int. organisations 3.8 (4 115) (3 259) Implemented by other entities 3.8 (1 478) (2 035) Staff and pension costs 3.9 (6 995) (6 911) Changes in employee benefits actuarial assumptions (3 581) (992) Finance costs 3.10 (1 849) (1 857) Other 3.11 (4 642) (3 462) Total Expenses (123 756) (139 996) ECONOMIC RESULT OF THE YEAR 7 901 1 775

CASHFLOW STATEMENT EUR millions Note 2017 2016 Economic result of the year 7 901 1 775 Operating activities Amortisation 27 26 Depreciation 630 314 (Increase)/decrease in loans 395 1 726 (Increase)/decrease in pre-financing (3 557) (497) (Increase)/decrease in exchange receivables and non-exchange recoverables (705) (1 222) (Increase)/decrease in inventories 13 0 Increase/(decrease) in pension and other

employee benefits 5 945 3 343 Increase/(decrease) in provisions 850 548 Increase/(decrease) in financial liabilities (313) (2 254) Increase/(decrease) in payables (864) 7 874 Increase/(decrease) in accrued charges and

deferred income (3 713) (935) Prior year budgetary surplus taken as

non-cash revenue (6 405) (1 349) Other non-cash movements 4 23 Investing activities (Increase)/decrease in intangible assets and property, plant and equipment (1 382) (1 587) (Increase)/decrease in investments accounted for using the equity method (53) (31) (Increase)/decrease in available for sale financial assets (3 217) (835) (Increase)/decrease in financial assets at fair value through surplus or deficit (22) (0) NET CASHFLOW (4 467) 6 920 Net increase/(decrease) in cash and cash equivalents (4 467) 6 920 Cash and cash equivalents at the beginning of the year 2.8 27 579 20 660 Cash and cash equivalents at year-end 2.8 23 113 27 579 STATEMENT OF CHANGES IN NET ASSETS EUR millions Amounts to be called from Member States Accumulated Surplus/(Deficit) Other reserves Fair value reserve Net Assets BALANCE AS AT 31.12.2015 (79 878) 2 629 286 (76 964) Movement in Guarantee Fund reserve (82) 82 – - Fair value movements – – 24 24 Other (11) 9 – (2) 2016 budget result credited to Member States (1 349) – – (1 349) Economic result of the year 1 775 – – 1 775 BALANCE AS AT 31.12.2016 (79 546) 2 720 311 (76 515) Movement in Guarantee Fund reserve (20) 20 – – Fair value movements – – 10 10 Other (7) 47 (46) (6) 2017 budget result credited to Member States (6 405) – – (6 405) Economic result of the year 7 901 – – 7 901 BALANCE AS AT 31.12.2017 (78 077) 2 788 275 (75 014) NOTES TO THE FINANCIAL STATEMENTS

For further information in addition to the notes below, please also see the 2017 EU consolidated annual accounts. 1.SIGNIFICANT ACCOUNTING POLICIES The European Commission (hereinafter referred to as the Commission) applies the accounting policies of the European Union (hereinafter referred to as the EU). A summary of the significant EU accounting policies is given below. 2.LEGAL BASIS AND ACCOUNTING RULES The accounts of the EU are kept in accordance with Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ L 298, 26 October 2012, p. 1) hereinafter referred to as the 'Financial Regulation' and Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 (OJ L 362, 31 December 2012, p. 1) laying down detailed rules of application of this Financial Regulation. In accordance with article 143 of the Financial Regulation, the EU prepares its financial statements on the basis of accrual-based accounting rules that are based on International Public Sector Accounting Standards (IPSAS). 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. Application of new and amended European Union accounting rules (EAR) Amendments to EAR which are effective for annual periods beginning on or after 1 January 2017 The following amendments have been adopted by the Accounting Officer of the Commission: ·Amendments to EAR 1 "Financial Statements"; and ·Amendments to EAR 14 "Accounting Policies, Changes in Accounting Estimates and Errors". These amendments stem from the recent changes to IPSAS 1 "Presentation of Financial Statements" and IPSAS 3 "Accounting Policies, Changes in Accounting Estimates and Errors", proposing improvements to ensure consistency among IPSAS standards. Consequently, the related EARs have been updated and the main changes relate to the description of qualitative characteristics of financial reporting and updates to the hierarchy of sources to be used in the selection and application of accounting policies.

The adoption of these amendments has had no impact on the EU annual accounts 2017. New and revised EARs adopted but not yet effective at 31 December 2017 The EU has not applied the following new and revised EARs, which have been adopted by the Accounting Officer of the Commission, but which are not yet effective: ·Revision to EAR 12 "Employee Benefits" (effective for annual periods beginning on or after 1 January 2018): The EAR 12 has been revised in line with the new IPSAS 39 "Employee Benefits". The main change is that any gain or loss resulting from changes in the actuarial assumptions is to be recognised directly in net assets, in contrast with the current requirement to recognise them in surplus or deficit. The EU is currently analysing the impact and practical consequences of applying this revised EAR. However, no significant impact is expected on the consolidated financial statements, except for the recognition of the actuarial assumptions in the net assets instead of the statement of financial performance. ·New EAR 20 "Public Sector Combinations" (effective for annual periods beginning on or after 1 January 2019): The EAR 20, which is based on the IPSAS 40 "Public Sector Combinations", establishes the classification of a public sector combination into two different types depending on whether the transaction takes place under common control or not: (i) amalgamation, in which the transaction is based on the carrying amounts of the entity combined with the EU; and (ii) acquisition, in which the transaction is based on the acquisition date fair values of the entity acquired by the EU. Both have distinct requirements and levels of disclosure, in order to provide a better understanding of its effects to users of the financial statements of the EU. The impact on the EU financial statements in the year of initial application will depend on whether in that period the EU would enter into a public sector combination transaction. 3.ACCOUNTING PRINCIPLES The objective of 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 1 "Financial Statements" and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability. 4.CONSOLIDATION Scope of consolidation The consolidated financial statements of the EU comprise all significant controlled entities (i.e. the EU institutions (including the Commission) and the EU agencies), associates and joint ventures. The complete list of consolidated entities can be found in note 9 of the EU financial statements. It now comprises 52 controlled entities and 1 associate. Entities that fall under the consolidation scope, but which are immaterial to the EU consolidated financial statements as a whole, need not be consolidated or accounted for using equity method where to do so would result in excessive time or cost to the EU. Those entities are referred to as 'Minor entities' and are separately listed in note 9. In 2017, 7 entities have been classified as minor entities. Controlled entities The decision to include an entity in the scope of consolidation is based on the control concept. Controlled entities are all entities for which the EU is exposed, or has right, to variable benefits from its involvement and has the ability to affect the nature and amount of those benefits through its power over the other entity. This power must be presently exercisable and must relate to the relevant activities of the entity. 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 EU are: creation of the entity through founding treaties or secondary legislation, financing of the entity from the EU budget, the existence of voting rights in the governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. An individual assessment for each entity is made in order to decide whether one or all of the criteria listed above are sufficient to result in control. Under this approach, the EU's institutions (except the European Central Bank) 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 (ECSC) in Liquidation is also considered as a controlled entity. All material "inter-entity transactions and balances" between EU controlled entities are eliminated, while unrealised gains and losses on such transactions are not material and so have not been eliminated.



Joint Arrangements

A joint arrangement is an agreement over which the EU and one or more parties have joint control. Joint control is contractually agreed sharing of control over an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint operations or joint ventures. In case a joint arrangement is structured through a separate vehicle and parties to the joint arrangement have rights to the net assets of the arrangement, this joint arrangement classifies as a joint venture. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). In case the parties have rights to the assets, and obligations for the liabilities, related to the arrangement, this joint arrangement is classified as a joint operation. In relation to its interest in joint operations, the EU recognises in its financial statements: its assets and liabilities, revenue and expense, as well as its share of assets, liabilities, revenue and expense held or incurred jointly. Associates Associates are entities over which the EU has, directly or indirectly, significant influence but not control. It is presumed that significant influence exists if the EU holds directly or indirectly 20 % or more of the voting rights. Participations in associates are accounted for using the equity method (see note 1.5.4). Non-consolidated entities the funds of which are managed by the Commission The funds of the Joint Sickness Insurance Scheme for staff of the EU, the European Development Fund and the Participants Guarantee Fund are managed by the Commission on their behalf. However, since these entities are not controlled by the EU, they are not consolidated in its financial statements. 5.BASIS OF PREPARATION Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December. 6.Currency and basis for conversion Functional and reporting currency The financial statements are presented in millions of euros, unless stated otherwise, the euro being the EU'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 re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Translation differences on non-monetary financial instruments classified as available for sale financial assets are included in the fair value reserve. 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 European Central Bank (ECB) exchange rates applying on 31 December: Euro exchange rates Currency 31.12.2017 31.12.2016 Currency 31.12.2017 31.12.2016 BGN 1.9558 1.9558 PLN 4.177 4.4103 CZK 25.5350 27.0210 RON 4.6585 4.5390 DKK 7.4449 7.4344 SEK 9.8438 9.5525 GBP 0.8872 0.8562 CHF 1.1702 1.0739 HRK 7.4400 7.5597 JPY 135.01 123.4000 HUF 310.3300 309.8300 USD 1.1993 1.0541 7.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 receivable, accrued revenue and charges, contingent assets and liabilities, degree of impairment of intangible assets and property, plant and equipment and amounts disclosed in the notes concerning financial instruments. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known. 8.BALANCE SHEET 9.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 (311 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement. Internally developed intangible assets are capitalised when the relevant criteria of the EU accounting rules are met and the expenses relate solely to the development phase of the asset. 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. 10.Property, plant and equipment All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction or transfer 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 EU and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred. Land and works of art are not depreciated as they are deemed to have an indefinite useful life. Assets under construction are not depreciated as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows: Type of asset Straight line depreciation rate Buildings 4 % to 10 % Space assets 8 % to 25 % Plant and equipment 10 % to 25 % Furniture and vehicles 10 % to 25 % Computer hardware 25 % to 33 % Other 10 % to 33 % Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance. Leases Leases of tangible assets, where the EU has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease’s commencement at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The interest element of the finance lease payment is charged to expenditure over the period of the lease at a constant periodic rate in relation to the balance outstanding. The rental obligations, net of finance charges, are included in financial liabilities (non-current and current). The interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. The assets held under finance leases are depreciated over the shorter of the asset's 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. Operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term. 11.Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable (service) amount. The recoverable (service) 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 (service) amount if the asset’s carrying amount is greater than its estimated recoverable (service) amount. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly. 12.Investments accounted for using the equity method Participations in associates and joint ventures Investments accounted for using the equity method are initially recognised at cost. The EU's interest in these investments is recognised in the statement of financial performance, and its share in the movements in reserves is recognised in the fair value reserve in net assets. The initial cost together with all movements (further contributions, share of economic results and reserve movements, impairments, and dividends) give the book value of the investment in the financial statements at the balance sheet date. Distributions received from the investment reduce the carrying amount of the asset. If the EU's share of deficits of an investment accounted for using the equity method equals or exceeds its interest in the investment, the EU discontinues recognising its share of further losses ("unrecognised losses"). After the EU's interest is reduced to zero, additional losses are provided for and a liability is recognised, only to the extent that the EU has incurred legal or constructive obligation or made payments on behalf of the entity. If there are indications of impairment, a write-down to the lower recoverable amount is necessary. The recoverable amount is determined as described under note 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. In cases where the EU 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 and categorised as available for sale financial assets. Associates and joint ventures classified as minor entities are not accounted for under the equity method. EU contributions to those entities are accounted for as an expense of the period.

13.Financial assets Classification The EU classifies their financial assets in the following categories: financial assets at fair value through surplus or deficit; loans and receivables; held-to-maturity investments; and available for sale financial assets. The classification of financial instruments is determined at initial recognition and re-evaluated at each balance sheet date. (I)Financial assets at fair value through surplus or deficit A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. 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, or in case the EU is subrogated to the rights of the original lender following a payment made by the EU under a guarantee contract. Payments due within 12 months of the balance sheet date are classified as current assets. Payments due after 12 months from the balance sheet date are classified as non-current assets. Loans and receivables include term deposits with the original maturity above three months. (III)Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the EU has the positive intention and ability to hold to maturity. During this financial year, the EU did not hold any investments in this category. (IV)Available for sale financial assets Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the EU expects to hold them. Investments in entities that are neither consolidated nor accounted for using the equity method and other equity-type investments (e.g. Risk Capital Operations) are also classified as available for sale financial assets. Initial recognition and measurement Purchases and sales of financial assets at fair value through surplus or deficit, held-to-maturity and available for sale are recognised on trade-date – the date on which the EU commits to purchase or sell the asset. Cash equivalents and loans are recognised when cash is advanced to the borrowers. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through surplus or deficit transactions costs are added to the fair value at initial recognition. Financial assets carried at fair value through surplus or deficit are initially recognised at fair value and transaction costs are expensed in the statement of financial performance. The fair value of a financial asset on initial recognition is normally the transaction price (i.e. the fair value of the consideration received), unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets (e.g. in case of some derivative contracts). 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 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 EU for fair valuing its lending operations under the 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 statement of financial performance. Financial instruments are derecognised when the rights to receive cashflows from the investments have expired or the EU has transferred substantially all risks and rewards of ownership to another party. Subsequent measurement

a)Financial assets at fair value through surplus or deficit are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the ‘financial instruments at fair value through surplus or deficit’ category are included in the statement of financial performance in the period in which they arise. b)Loans and receivables 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 statement of financial performance. c)Held to maturity assets are carried at amortised cost using the effective interest method. The EU currently holds no held to maturity investments. d)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 financial assets are recognised in the fair value reserve, except for translation differences on monetary assets which are recognised in the statement of financial performance. When assets classified as available for sale financial assets are derecognised or impaired, the cumulative fair value adjustments previously recognised in the fair value reserve are recognised in the statement of financial performance. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance. 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 and over-the–counter derivatives), the EU 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 cashflow analysis, option pricing models and other valuation techniques commonly used by market participants. Investments in Venture Capital Funds, classified as available for sale financial assets, which do not have a quoted market price in an active market are valued at the attributable net asset value, which is considered as an equivalent of their fair value. In cases where the fair value of investments in equity instruments that do not have a 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 EU 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 cashflows 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 cashflows (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 statement of financial performance. 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 cashflows of a collateralised financial asset reflects the cashflows 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 statement of financial performance. (b)Assets carried at fair value In the case of equity investments classified as available for sale financial assets, 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 statement of financial performance – is removed from reserves and recognised in the statement of financial performance. Impairment losses recognised in the statement of financial performance on equity instruments are not reversed through the statement of financial performance. If, in a subsequent period, the fair value of a debt instrument classified as available for sale financial asset 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 statement of financial performance. 14.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 EU would incur to acquire the asset on the reporting date. 15.Pre-financing amounts Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, they have the obligation to return the pre-financing advance to the EU. The amount of the pre-financing may be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses). Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period. 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 on the balance sheet. Other advances to Member States which originate from reimbursement by the EU of amounts paid as advances by the Member States to their beneficiaries (including "financial instruments under shared management") are recognised as assets and presented under the pre-financing heading. Other advances to Member States are subsequently measured at the amount initially recognised on the balance sheet less a best estimate of the eligible expenses incurred by final beneficiaries, calculated on the basis of reasonable and supportable assumptions.

The EU contributions to the trust funds of the European Development Fund or other unconsolidated entities are also classified as pre-financing since their purpose is to give a float to the trust fund to allow it to finance specific actions defined under the trust fund's objectives. The EU contributions to trust funds are measured at the initial amount of the EU contribution less eligible expenses, including estimated amounts where necessary, incurred by the trust fund during the reporting period and allocated to the EU contribution in accordance with the underlying agreement. 16.Exchange receivables and non-exchange recoverables As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, for the purpose of drawing up the accounts, receivables are defined as stemming from exchange transactions and recoverables are defined as stemming from non-exchange transactions, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange (for example recoverables from Member States related to own resources). Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see note 1.5.5). The financial instruments notes disclosures concerning receivables from exchange transactions include accrued revenue and deferred charges from exchange transactions as they are not material. Recoverables from non-exchange transactions are carried at original amount (adjusted for interest and penalties) less write-down for impairment. A write-down for impairment of recoverables from

non-exchange transactions is established when there is objective evidence that the EU will not be able to collect all amounts due according to the original terms of recoverables from non-exchange transactions. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance. 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 concerning the treatment of accrued revenue at year-end. Amounts displayed and disclosed as recoverables from non-exchanges transactions are not financial instruments as they do not arise from a contract that would give rise to a financial liability or equity instrument. However, in the notes to the financial statements recoverables from non-exchange transactions are disclosed together with receivables from exchange transactions where appropriate. 17.Cash and cash equivalents Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks and other short-term highly liquid investments with original maturities of three months or less. 18.Pension and other employee benefits Pension obligations The EU 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 less the fair value of any plan assets. 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 statement of financial performance. Past-service costs are recognised immediately in statement of financial performance, 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 EU provides health benefits to its employees through the reimbursement of medical expenses. A separate fund has been created for its day-to-day administration. Both current employees, pensioners, widowers and their relatives 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). 19.Provisions Provisions are recognised when the EU 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 expenses 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). 20.Financial liabilities Financial liabilities are classified as financial liabilities at fair value through surplus or deficit, financial liabilities carried at amortised cost or as financial guarantee liabilities. 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 statement of financial performance over the period of the borrowings using the effective interest method. 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 EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance. Financial liabilities categorised at fair value through surplus or deficit include derivatives which fair value is negative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit, see note 1.5.5. Financial guarantee liabilities are initially recognised at fair value, being the premium received. Subsequently, financial guarantee liabilities are measured at the higher of the best estimate of the expenses expected to be required to settle the financial guarantee liability and the amount initially recognised less, when appropriate, cumulative amortisation. The EU recognises a financial guarantee liability when it receives consideration for granting of the guarantee, that is at market terms, or when the fair value of the guarantee can be measured reliably. In case no active market for a directly equivalent guarantee contract exists, the EU discloses the guarantee given as a contingent liability (see note 1.7.2) or - when it is more likely than not that an outflow of resources will be required to settle the obligation – the EU recognises a provision (see note 1.5.11).

Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. EU trust funds that are considered as part of the Commission's operational activities are accounted for in the Commission accounts and further consolidated in the EU annual accounts. Therefore, contributions from other donors to the EU trust funds fulfil the criteria of revenues from non-exchange transactions under conditions and they are presented as financial liabilities until the conditions attached to the contributions transferred are met, i.e. eligible costs are incurred by the trust fund. The trust fund is required to finance specific projects and return remaining funds at the time of winding-up. At the balance sheet date the outstanding contribution liabilities are measured at contributions received less the expenses incurred by the trust fund, including estimated amounts when necessary. For reporting purposes the net expenses are allocated to the contributions of other donors in proportion to net contributions paid as at 31 December. This allocation of contributions is only indicative. When the trust fund is wound up the actual split of remaining resources will be decided by the trust fund board. 21.Payables A significant amount of the payables of the EU are unpaid cost claims from beneficiaries of grants or other EU funding (non-exchange transactions). 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 EU. 22.Accrued and deferred revenue and charges Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the EU or a contractual agreement exists (e.g. by reference to a treaty), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period. Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Commission which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period. 23.STATEMENT OF FINANCIAL PERFORMANCE 24.Revenue REVENUE FROM NON-EXCHANGE TRANSACTIONS The vast majority of the EU's revenue relates to non-exchange transactions: GNI based resources and VAT resources Revenue is recognised for the period for which the 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 Recoverables from non-exchange transactions 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 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. In addition, a value reduction is recognised for the amount of the estimated recovery gap. 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: a)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; b)or not to accept the decision, in which case they lodge an appeal under EU law.

However, even if appealed, 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, the debtor 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 recoverable. If a guarantee is received instead of payment, the fine remains as a recoverable. 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 recoverable outstanding is written-down as required. The accumulated interest received by the Commission on the bank accounts where received payments are deposited is recognised as revenue, and any contingent liability is increased accordingly. Since 2010, all provisionally cashed fines are managed by the Commission in a specifically created fund (BUFI) and invested in financial instruments. REVENUE FROM EXCHANGE TRANSACTIONS Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date. Interest revenue and expense Interest revenue and expense are recognised in the statement of financial performance 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 revenue or interest expense over the relevant period. When calculating the effective interest rate, the EU estimates cashflows considering all contractual terms of the financial instrument (for example prepayment options) but does 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 revenue is recognised using the rate of interest to discount the future cashflows for the purpose of measuring the impairment loss. Revenue from dividends Revenue from dividends and similar distributions is recognised when the right to receive payment is established. 25.Expenses Expenses from non-exchange transactions account for the majority of the EU's expenses. They relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations. Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation (Financial Regulation, Staff Regulations, or other regulation) or an agreement has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made. When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expenses. Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the EU. They are valued at original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are estimated and recognised in the statement of financial performance. 26.CONTINGENT ASSETS AND LIABILITIES 27.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 EU. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable. 28.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 EU; 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.

29.CASHFLOW STATEMENT Cashflow 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 cashflows. The cashflow statement is prepared using the indirect method. This means that the economic result 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 cashflows. Cashflows arising from transactions in a foreign currency are recorded in the EU’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 cashflow. The cashflow statement reports cashflows during the period classified by operating and investing activities (the EU does not have financing 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. 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. 30.NOTES TO THE BALANCE SHEET ASSETS 31.INTANGIBLE ASSETS EUR millions Gross carrying amount at 31.12.2016 252 Additions 26 Disposals (1) Transfer between asset categories 4 Other changes 12 Gross carrying amount at 31.12.2017 292 Accumulated amortisation at 31.12.2016 (116) Amortisation charge for the year (27) Amortisation written back – Disposals 2 Transfer between asset categories (2) Other changes (0) Accumulated amortisation at 31.12.2017 (143) NET CARRYING AMOUNT AT 31.12.2017 149 NET CARRYING AMOUNT AT 31.12.2016 135 32.PROPERTY, PLANT AND EQUIPMENT EUR millions Land and buildings Space assets Plant and equipment Furniture and vehicles Computer hardware Other Finance leases Assets under construction TOTAL Gross carrying amount at 31.12.2016 1 436 3 602 257 74 248 155 1 550 1 925 9 247 Additions 28 0 7 2 18 4 8 1 265 1 333 Disposals (20) (1) (6) (6) (19) (4) – (0) (56) Transfer between asset categories 3 641 2 – 1 – (5) (646) (4) Other changes 0 21 0 0 1 1 – 0 24 Gross carrying amount at 31.12.2017 1 448 4 264 260 71 248 156 1 552 2 544 10 544 Accumulated depreciation at 31.12.2016 (806) (300) (233) (58) (201) (112) (705) – (2 415) Depreciation charge for the year (44) (480) (12) (4) (24) (13) (53) – (630) Depreciation written back – – (0) – – – – – (0) Disposals 10 1 6 6 19 4 – – 46 Transfer between asset categories 0 0 (0) – (1) – 3 – 2 Other changes (0) (1) (0) (0) (0) (0) – – (3) Accumulated depreciation at 31.12.2017 (840) (780) (240) (57) (207) (121) (756) – (3 000) NET CARRYING AMOUNT AT 31.12.2017 608 3 484 21 14 41 35 797 2 544 7 544 NET CARRYING AMOUNT AT 31.12.2016 631 3 302 24 16 47 43 844 1 925 6 832 33.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD The participation of the EU represented by the Commission in the European Investment Fund (EIF) is treated as an associate using the equity method of accounting. At 31 December 2017, the EU holds 29.7 % of the ownership interest in EIF (2016: 28.1 %). EUR millions European Investment Fund Participation at 31.12.2016 528 Contributions 44 Dividends received (7) Share of net result 21 Share in the net assets (6) Participation at 31.12.2017 581

EIF summarised financial information: EUR millions 31.12.2017 31.12.2016 Total EIF Total EIF Assets 2 488 2 301 Liabilities (532) (423) Revenue 263 240 Expenses (153) (118) Surplus/(deficit) 110 122 Reconciliation of the above summarised financial information to the carrying amount of the interest held in the EIF is as follows: EUR millions 31.12.2017 31.12.2016 Net assets of the associate 1 956 1 878 EC ownership interests in EIF 29.7% 28.1% Carrying amount 581 528 The Commission has paid-in 20 % of its subscribed shares in the EIF capital at 31 December 2017, the amount uncalled being as follows: EUR millions Total EIF capital EU subscription Total share capital 4 500 1 337 Paid-in (900) (267) Uncalled 3 600 1 070 34.FINANCIAL ASSETS EUR millions Note 31.12.2017 31.12.2016 Non-current financial assets Available for sale financial assets 2.4.1 10 410 7 721 Financial assets at fair value through surplus or deficit 2.4.2 16 – Loans 2.4.3 48 107 53 012 58 533 60 733 Current financial assets Available for sale financial assets 2.4.1 1 563 1 035 Financial assets at fair value through surplus or deficit 2.4.2 6 0 Loans 2.4.3 6 770 2 260 8 339 3 296 Total 66 872 64 029 35. Available for sale financial assets EUR millions 31.12.2017 31.12.2016 BUFI investments 2 158 2 013 European Bank for Reconstruction and Development 188 188 2 346 2 201 Guarantee Funds for budgetary guarantees: Guarantee Fund for external actions 2 199 2 069 EFSI Guarantee Fund 3 414 948 5 613 3 017 Financial instruments supported by the EU budget: Horizon 2020 1 730 1 213 Risk Sharing Finance Facility 665 719 Connecting Europe Facility 482 483 ETF start up 483 476 Risk Capital Operations 113 132 European Fund for South East Europe 119 118 Other 422 398 4 014 3 539 Total 11 973 8 757 Non-current 10 410 7 721 Current 1 563 1 035 36.Financial assets at fair value through surplus or deficit EUR millions 31.12.2017 31.12.2016 Type of derivative Notional amount Fair value Notional amount Fair value Foreign currency forward contract 634 6 50 0 EFSI guarantee on equity portfolio 258 16 – – Total 892 23 50 0 Non-current 258 16 – – Current 634 6 50 0



Fair value hierarchy of financial assets measured at fair value EUR millions 31.12.2017 31.12.2016 Level 1: Quoted prices in active markets 10 325 7 224 Level 2: Observable inputs other than quoted prices 510 231 Level 3: Valuation techniques with inputs not based on observable market data 1 161 1 302 Total 11 996 8 757 Reconciliation of financial assets measured using valuation techniques with inputs not based on observable market data (level 3)

EUR millions Opening balance at 31.12.2016 1 302 Purchases and sales 39 Gains or losses for the period in financial income or finance costs (21) Gains or losses in net assets 30 Transfers into level 3 – Transfers out of level 3 (188) Other – Closing balance at 31.12.2017 1 161 37. Loans EUR millions Note 31.12.2017 31.12.2016 Loans for financial assistance 2.4.3.1 54 744 54 944 Other loans 2.4.3.2 133 328 Total 54 877 55 272 Non-current 48 107 53 012 Current 6 770 2 260 37.1.1.1.Loans for financial assistance EUR millions EFSM BOP MFA Euratom Total Total at 31.12.2016 47 456 4 272 2 964 252 54 944 New loans – – 1 013 50 1 063 Repayments – (1 150) (58) (51) (1 260) Exchange differences – – – (1) (1) Changes in carrying amount 0 (8) 5 0 (3) Impairment – – – – – Total at 31.12.2017 47 456 3 114 3 924 250 54 744 Non-current 42 300 1 700 3 846 203 48 049 Current 5 156 1 414 78 47 6 695 The change in carrying amount corresponds to the change in accrued interests. Nominal value of loans for financial assistance at 31 December 2017 total EUR 54 000 million (2016: EUR 54 198 million).



Loans effective interest rates (expressed as a range of interest rates) 31.12.2017 31.12.2016 Macro Financial Assistance (MFA) 0 % - 4.54 % 0 % - 4.54 % Euratom 0.08 % - 5.76 % 0 % - 5.76 % Balance of Payment (BOP) 2.88 % - 3.38 % 2.37 % - 3.37 % European Financial Stability Mechanism (EFSM) 0.62 % - 3.75 % 0.62 % - 3.75 % 37.1.1.2.Other loans EUR millions 31.12.2017 31.12.2016 Loans with special conditions 78 93 Term deposits over 3 months 55 235 Total 133 328 Non-current 59 74 Current 75 254 Nominal value of other loans at 31 December 2017 total EUR 557 million (2016: EUR 668 million). Impairment on other loans EUR millions 31.12.2016 Additions Reversals Write-off Other 31.12.2017 Loans with special conditions 7 0 – – – 8 Subrogated loans 332 100 (0) – – 432 Total 339 101 (0) – – 440 38. PRE-FINANCING EUR millions Note 31.12.2017 31.12.2016 Non-current pre-financing Pre-financing 2.5.1 21 663 20 095 Other advances to Member States 2.5.2 3 018 1 651 Contribution to Trust Funds 64 31 24 745 21 777 Current pre-financing Pre-financing 2.5.1 22 908 21 781 Other advances to Member States 2.5.2 1 645 2 183 24 552 23 964 Total 49 297 45 741





39.Pre-financing EUR millions Gross amount Cleared via cut-off Net amount at 31.12.2017 Gross amount Cleared via cut-off Net amount at 31.12.2016 Shared Management EAFRD & other rural development instruments 3 735 3 735 3 955 – 3 955 ERDF & CF 20 561 (5 678) 14 883 19 858 (4 727) 15 131 ESF 6 792 (1 182) 5 610 6 477 (617) 5 860 Other 5 037 (2 267) 2 770 4 219 (2 393) 1 826 Direct Management Implemented by: Commission 12 454 (8 587) 3 867 12 710 (9 077) 3 633 EU executive agencies 13 845 (8 751) 5 094 13 138 (8 349) 4 789 Trust funds 440 (212) 228 142 (82) 60 Indirect Management Implemented by: Other EU agencies & bodies 3 767 (2 951) 816 2 790 (2 110) 680 Third countries 1 586 (956) 630 1 861 (1 135) 726 International organisations 9 001 (5 879) 3 121 7 230 (4 432) 2 797 Other entities 7 752 (3 936) 3 816 6 496 (4 077) 2 418 Total 84 969 (40 399) 44 570 78 876 (37 000) 41 876 Non-current 21 663 – 21 663 20 095 – 20 095 Current 63 307 (40 399) 22 908 58 781 (37 000) 21 781 40.Other advances to Member States EUR millions 31.12.2017 31.12.2016 Advances to Member States for financial instruments under shared management 2 768 2 534 Aid Schemes 1 895 1 300 Total 4 663 3 834 Non-current 3 018 1 651 Current 1 645 2 183 41.EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES EUR millions Note 31.12.2017 31.12.2016 Non-current Recoverables from non-exchange transactions 2.6.1 616 727 Receivables from exchange transactions 2.6.2 3 2 619 729 Current Recoverables from non-exchange transactions 2.6.1 10 924 10 266 Receivables from exchange transactions 2.6.2 497 341 11 421 10 607 Total 12 040 11 336 42. Recoverables from non-exchange transactions EUR millions Note 31.12.2017 31.12.2016 Non-current Member States 2.6.1.1 594 700 Accrued income and deferred charges 2.6.1.3 – – Other recoverables 22 27 616 727 Current Member States 2.6.1.1 6 123 8 122 Competition fines 2.6.1.2 4 225 1 808 Accrued income and deferred charges 2.6.1.3 384 153 Other recoverables 192 182 10 924 10 266 Total 11 540 10 993



42.1.1.1.Recoverables from Member States EUR millions 31.12.2017 31.12.2016 Recoverables related to own resources: Established in the A account 3 113 3 261 Established in the separate account 1 617 1 437 Own resources to be received 46 1 764 Impairment (997) (753) Other 56 36 Own resource recoverables 3 836 5 745 Recoverables in the area of agriculture and rural development: European Agricultural Guarantee Fund (EAGF) 2 280 2 606 European Agricultural Fund for Rural Development (EAFRD) 955 924 Temporary Rural Development Instrument (TRDI) 16 30 Special Accession Programme for Agriculture and Rural Development (SAPARD) 136 167 Impairment (804) (999) EAGF and rural development recoverables 2 583 2 729 Pre-financing recovery expected 182 293 VAT paid and recoverable 22 17 Other recoverables from Member States 94 39 Total 6 717 8 822 Non-current 594 700 Current 6 123 8 122 42.1.1.2.Recoverables from competition fines EUR millions 31.12.2017 31.12.2016 Recoverable from fines gross amount 7 679 6 510 Provisional payments (3 282) (4 524) Impairment (172) (178) Total 4 225 1 808 Non-current – – Current 4 225 1 808 42.1.1.3.Accrued income and deferred charges

EUR millions 31.12.2017 31.12.2016 Financial corrections 1 9 Other accrued income 322 70 Deferred charges relating to non-exchange transactions 61 74 Total 384 153 Non-current – – Current 384 153



43.Receivables from exchange transactions EUR millions 31.12.2017 31.12.2016 Non-current Other receivables 3 2 3 2 Current Customers 184 189 Impairment on receivables from customers (136) (124) Deferred charges relating to exchange transactions 172 162 Others 277 114 497 341 Total 501 343 44.INVENTORIES EUR millions 31.12.2017 31.12.2016 Scientific materials 45 54 Other 18 21 Total 62 75 45.CASH AND CASH EQUIVALENTS EUR millions 31.12.2017 31.12.2016 Accounts with Treasuries and Central Banks 20 078 24 566 Current accounts 152 127 Imprest accounts 5 5 Transfers (cash in transit) 0 – Bank accounts for budget implementation 20 236 24 698 Cash belonging to financial instruments 1 608 1 390 Cash relating to fines 1 234 1 325 Cash relating to trust funds 34 167 Total 23 113 27 579 LIABILITIES 46.PENSION AND OTHER EMPLOYEE BENEFITS Net employee benefit scheme liability EUR millions Pension Scheme of European Officials Other retirement benefit schemes Joint Sickness Insurance Scheme 31.12.2017 Total 31.12.2016 Total Defined Benefit Obligation 63 951 1 089 7 756 72 796 66 844 Plan assets N/A N/A (301) (301) (293) Net liability 63 951 1 089 7 455 72 495 66 550 Actuarial assumptions - employee benefits Pension Scheme of European Officials Joint Sickness Insurance Scheme 2017 Nominal discount rate 1.9 % 2.0 % Expected inflation rate 1.5 % 1.6 % Real discount rate 0.4 % 0.4 % Expected rate of salary increases 1.8 % 1.7 % Medical cost trend rates N/A 3.0 % Retirement age 63/64/66 63/64/66 2016 Nominal discount rate 1.7 % 1.9 % Expected inflation rate 1.4 % 1.5 % Real discount rate 0.3 % 0.4 % Expected rate of salary increases 1.2 % 1.1 % Medical cost trend rates N/A 3.0 % Retirement age 63/64/66 63/64/66

Movement in present value of employee benefits defined benefit obligation EUR millions Pension Scheme of European Officials Other retirement benefit Schemes Joint Sickness Insurance Scheme Total Present value as at 31.12.2016 58 746 1 062 7 036 66 844 Current service cost 2 637 84 266 2 986 Interest cost 1 148 19 134 1 300 Net actuarial (gains) and losses 3 616 (48) 394 3 962 Contributions from members – – 21 21 Benefits paid (1 417) (28) (94) (1 539) Liability increase/(decrease) due to taxes on pensions (778) 1 – (777) Present value as at 31.12.2017 63 951 1 089 7 756 72 796



Movement in present value of plan assets of the Joint Sickness Insurance Scheme EUR millions Present value as at 31.12.2016 293 Net movement in plan assets 8 Present value as at 31.12.2017 301 5 year trend EUR millions 2013 2014 2015 2016 2017 Present value of the defined benefit obligation 46 367 58 317 63 488 66 844 72 796 Fair value of plan assets (264) (272) (280) (293) (301) Employee benefits liability 46 103 58 045 63 208 66 550 72 495 Amounts recognised in the Statement of Financial Performance EUR millions Pension Scheme of European Officials Other retirement benefit Schemes Joint Sickness Insurance Scheme Total 2017 Current service cost 2 360 85 266 2 710 Interest cost 1 027 19 134 1 180 Past service cost – – – – Change in plan assets – – (81) (81) Staff and pension costs 3 387 104 318 3 809 Actuarial gains and losses 3 236 (49) 394 3 580 Total 6 623 55 712 7 390 Joint Sickness Insurance Scheme sensitivity EUR millions One percentage point increase One percentage point decrease The aggregate of the current service cost and interest cost components of net periodic post-employment medical costs 166 (141) The accumulated post-employment benefit obligation for medical costs 2 538 (1 867) 47.PROVISIONS EUR millions Amount at 31.12.2016 Additional provisions Unused amounts reversed Amounts used Transfer between categories Change in estimation Amount at 31.12.2017 Legal cases: Agriculture 149 49 (26) (122) - - 49 Cohesion 217 2 - (198) - - 20 Other 14 18 (3) (1) - 0 29 Nuclear site dismantling 1 113 - - (32) - 853 1 934 Financial 880 378 (46) (94) - (3) 1 115 Fines 23 7 (4) - - - 27 Other 16 74 (1) (2) - - 87 Total 2 412 529 (80) (449) – 849 3 262 Non-current 1 786 325 (30) (128) (188) 852 2 617 Current 626 204 (50) (321) 188 (3) 645 48.FINANCIAL LIABILITIES

EUR millions Note 31.12.2017 31.12.2016 Non-current financial liabilities Financial liabilities at amortised cost 2.11.1 49 412 54 375 Financial liabilities at fair value through surplus or deficit 2.11.2 2 – 49 414 54 375 Current financial liabilities Financial liabilities at amortised cost 2.11.1 6 813 2 164 Financial liabilities at fair value through surplus or deficit 2.11.2 – 1 6 813 2 165 Total 56 227 56 540 49.Financial liabilities at amortised cost EUR millions Note 31.12.2017 31.12.2016 Borrowings for financial assistance 2.11.1.1 54 744 54 944 Other financial liabilities 2.11.1.2 1 482 1 596 Total 56 225 56 540 Non-current 49 412 54 375 Current 6 813 2 164 49.1.1.1.Borrowings for financial assistance EUR millions EFSM BOP MFA Euratom Total Total at 31.12.2016 47 456 4 272 2 964 252 54 944 New borrowings – – 1 013 50 1 063 Repayments – (1 150) (58) (52) (1 260) Exchange differences – – – (1) (1) Changes in carrying amounts 0 (8) 5 – (3) Total at 31.12.2017 47 456 3 114 3 924 250 54 744 Non-current 42 300 1 700 3 846 203 48 049 Current 5 156 1 414 78 47 6 695 Borrowings effective interest rates (expressed as a range of interest rates) 31.12.2017 31.12.2016 Macro Financial Assistance (MFA) 0 % - 4.54 % 0 % - 4.54 % Euratom 0 % - 5.68 % 0 % - 5.68 % Balance of Payment (BOP) 2.88 % - 3.38 % 2.37 % - 3.37 % European Financial Stability Mechanism (EFSM) 0.62 % - 3.75 % 0.62 % - 3.75 %



49.1.1.2.Other financial liabilities EUR millions 31.12.2017 31.12.2016 Non-current Finance lease liabilities 918 969 Buildings paid for in instalments 258 279 Other 188 190 1 363 1 438 Current Finance lease liabilities 58 54 Buildings paid for in instalments 22 20 Fines to be reimbursed 13 25 Other 25 59 118 158 Total 1 482 1 596 Finance lease liabilities EUR millions Future amounts to be paid < 1 year 1 - 5 years > 5 years Total Liability Land and buildings 54 258 652 964 Other fixed assets 4 8 – 12 Total at 31.12.2017 58 266 652 976 Interest element 54 181 169 405 Total future minimum lease payments at 31.12.2017 113 447 821 1 381 Total future minimum lease payments at 31.12.2016 111 442 931 1 484 50.Financial liabilities at fair value through surplus and deficit EUR millions 31.12.2017 31.12.2016 Type of derivative Notional amount Fair value Notional amount Fair value Foreign currency forward contract – – 101 1 FX option (put spread) 9 2 – – Total 9 2 101 1 Non-current 9 2 – – Current – – 101 1 At 31 December 2017 all financial liabilities at fair value through surplus or deficit were categorised into level 2 of fair value hierarchy (valuation based on observable inputs other than quoted prices). 51.PAYABLES

EUR millions Gross Amount Adjust- ments* Net Amount at 31.12.2017 Gross Amount Adjust- ments* Net Amount at 31.12.2016 Cost claims and invoices received from: Member States EAFRD & other rural development instruments 481 481 500 (34) 467 ERDF & CF 12 602 (883) 11 719 10 663 (793) 9 871 ESF 4 183 (264) 3 919 4 145 (95) 4 050 Other 748 (280) 467 795 (47) 748 Private and public entities 1 563 (144) 1 419 1 677 (169) 1 507 Total costs claims & invoices received 19 577 (1 571) 18 006 17 781 (1 138) 16 643 EAGF 11 534 N/A 11 534 12 193 N/A 12 193 Own Resources Payables 8 836 N/A 8 836 10 441 N/A 10 441 Sundry Payables 1 000 N/A 1 000 962 N/A 962 Total 40 947 (1 571) 39 376 41 378 (1 138) 40 240 * Estimated non-eligible amounts and pending other advances to Member States. 52.ACCRUED CHARGES AND DEFERRED INCOME EUR millions 31.12.2017 31.12.2016 Accrued charges 63 070 66 310 Deferred income 219 690 Other 24 26 Total 63 314 67 027 The split of accrued charges is as follows: EUR millions 31.12.2017 31.12.2016 EAGF 33 303 33 033 EAFRD and other rural development instruments 17 464 17 024 ERDF and CF 4 249 7 157 ESF 2 870 3 473 Other 5 185 5 623 Total 63 070 66 310 NET ASSETS 53.RESERVES EUR millions Note 31.12.2017 31.12.2016 Fair value reserve 2.14.1 275 311 Guarantee Fund reserve 2 663 2 643 Other reserves 125 77 Total 3 062 3 031 54. Fair value reserve Movements during the period of fair value reserve related to the available for sale financial assets: EUR millions 2017 2016 Included in fair value reserve (8) 25 Included in statement of financial performance 18 0 Total 10 25 55.AMOUNTS TO BE CALLED FROM MEMBER STATES EUR millions Amounts to be called from Member States at 31.12.2016 79 546 Return of 2016 budget surplus to Member States 6 405 Movement in Guarantee Fund reserve 20 Other reserve movements 7 Economic result of the year (7 901) Total amounts to be called from Member States at 31.12.2017 78 077 56.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

REVENUE REVENUE FROM NON-EXCHANGE TRANSACTIONS:

OWN RESOURCES 57.TRADITIONAL OWN RESOURCES EUR millions 2017 2016 Customs duties 20 475 20 301 Sugar levies 45 138 Total 20 520 20 439 REVENUE FROM NON-EXCHANGE TRANSACTIONS: TRANSFERS 58.RECOVERY OF EXPENSES EUR millions 2017 2016 Shared management 1 775 1 876 Direct management 81 56 Indirect management 23 15 Total 1 879 1 946 59.OTHER REVENUE FROM NON-EXCHANGE TRANSACTIONS EUR millions 2017 2016 Budgetary adjustments 5 806 1 956 Contribution of third countries and accession countries 1 256 946 Contribution from Member States for external aid 988 732 Staff taxes and contributions 923 901 Transfer of assets 208 147 Adjustment of provisions 28 14 Agricultural levies 4 5 Funding of institutions (3 371) (3 324) Other 672 318 Total 6 515 1 695

REVENUE FROM EXCHANGE TRANSACTIONS 60.FINANCIAL REVENUE EUR millions 2017 2016 Interest on: Loans 1 371 1 436 Late payments 217 108 Other 36 31 Premium on financial guarantee liability (EFSI) 61 16 Financial revenue from financial assets or liabilities at fair value through surplus or deficit 57 (0) Realised gains on sale of available for sale financial assets 26 29 Dividend 23 13 Other financial revenue 28 112 Total 1 820 1 745 61.OTHER REVENUE FROM EXCHANGE TRANSACTIONS EUR millions 2017 2016 Foreign exchange gains 266 320 Fee and premium revenue related to financial instruments 51 48 Sales of goods 26 14 Share of net result of EIF 21 2 Property, plant and equipment related revenue 6 3 Other 321 262 Total 692 649

EXPENSES 62.SHARED MANAGEMENT EUR millions Implemented by Member States 2017 2016 European Agricultural Guarantee Fund 44 289 44 152 European Agricultural Fund for Rural Development and other rural development instruments 11 359 12 604 European Regional Development Fund and Cohesion Fund 17 650 35 045 European Social Fund 7 353 9 366 Other 1 253 1 606 Total 81 905 102 772 63. DIRECT MANAGEMENT EUR millions 2017 2016 Implemented by the Commission 8 855 9 287 Implemented by EU Executive Agencies 6 700 6 260 Implemented by Trust funds 208 97 Total 15 763 15 644 64. INDIRECT MANAGEMENT EUR millions 2017 2016 Implemented by other EU agencies and bodies 3 429 3 064 Implemented by third countries 1 101 876 Implemented by international organisations 3 014 2 382 Implemented by other entities 1 478 2 035 Total 9 022 8 358 65.STAFF AND PENSION COSTS EUR millions 2017 2016 Staff costs 3 186 3 218 Pension costs 3 809 3 693 Total 6 995 6 911 66.FINANCE COSTS EUR millions 2017 2016 Interest expenses: Borrowings 1 363 1 426 Other 21 56 Finance leases 56 39 Impairment losses on available for sale financial assets 39 40 Impairment loss on loans and receivables 324 184 Realised loss on sale of available for sale financial assets 2 0 Loss on financial assets or liabilities at fair value through surplus or deficit 12 1 Other finance costs 33 111 Total 1 849 1 857 67.OTHER EXPENSES EUR millions 2017 2016 Adjustment of provisions 1 371 680 Property, plant and equipment related expenses 870 570 Administrative and IT expenses 790 713 Funding and contributions to other EU bodies 458 425 Foreign exchange losses 429 491 Operating lease expenses 160 156 Reduction of fines by the Court of Justice 67 18 Other 495 408 Total 4 642 3 462 Expenses relating to research and development are as follows: EUR millions 2017 2016 Research costs 366 338 Non-capitalised development costs 58 43 Total 424 381 68.SEGMENT REPORTING BY MULTI ANNUAL FINANCIAL FRAMEWORK HEADING (MFF)

EUR millions Smart and inclusive growth Sustainable growth Security and citizenship Global Europe Administration Not assigned to MFF headings* Total GNI resources – – – – – 78 620 78 620 Traditional own resources – – – – – 20 520 20 520 VAT – – – – – 16 947 16 947 Fines – – – – – 4 664 4 664 Recovery of expenses 357 1 488 5 28 – – 1 879 Other 1 172 244 43 414 884 3 759 6 515 Non-exchange revenue 1 529 1 732 48 443 884 124 510 129 145 Financial revenue 147 (4) 0 17 0 1 659 1 820 Other 196 (12) (6) 10 242 261 692 Exchange revenue 343 (15) (6) 27 242 1 920 2 511 Total revenue 1 873 1 716 42 470 1 126 126 430 131 657 Expenses implemented by Member States: EAGF – (44 289) – – – – (44 289) EAFRD & other rural develop. instruments – (11 359) – – – – (11 359) ERDF & CF (17 650) – – – – – (17 650) ESF (7 353) – – – – – (7 353) Other (439) 74 (897) 9 – 0 (1 253) Implemented by the Commission, executive agencies and trust funds (9 809) (525) (1 080) (4 337) (12) 0 (15 763) Implemented by other EU agencies and bodies (2 530) (121) (754) (24) – – (3 429) Implemented by third countries and international organisations (434) 0 (177) (3 504) – – (4 115) Implemented by other entities (819) 15 1 (675) (0) – (1 478) Staff and pension costs (1 638) (360) (426) (615) (3 956) – (6 995) Changes in employee benefits actuarial assumptions – – – – (3 581) – (3 581) Finance costs (88) (16) (0) (18) (72) (1 655) (1 849) Other expenses (2 453) (88) (196) (113) (1 365) (427) (4 642) Total expenses (43 213) (56 669) (3 528) (9 277) (8 986) (2 082) (123 756) Economic result of the year (41 341) (54 953) (3 486) (8 807) (7 860) 124 348 7 901 * "Not assigned to MFF headings" includes off-budget operations and unallocated programmes with immaterial amounts. 69.CONTINGENT LIABILITIES AND ASSETS 70.CONTINGENT LIABILITIES 71.Budgetary guarantees EUR millions 31.12.2017 31.12.2016 Ceiling Signed Disbursed Ceiling Signed Disbursed EIB external lending mandate guarantees 37 479 28 950 19 972 40 645 30 161 21 145 EFSI guarantee 16 000 13 473 10 128 16 000 11 245 4 392 Total 53 479 42 423 30 100 56 645 41 406 25 537 72.Guarantees relating to financial assistance (borrowing and lending activities) EUR millions 31.12.2017 31.12.2016 Drawn Undrawn Total Drawn Undrawn Total EFSM 47 456 – 47 456 47 456 – 47 456 BOP 3 114 – 3 114 4 272 – 4 272 MFA 3 924 460 4 384 2 964 1 313 4 277 Euratom 250 250 500 252 300 552 Total 54 744 710 55 454 54 944 1 613 56 557 73.Guarantees given for EU financial instruments EUR millions 31.12.2017 31.12.2016 Horizon 2020 1 297 921 Risk Sharing Finance Facility 654 711 Connecting Europe Facility 490 465 Other 32 3 Total 2 473 2 101 74.Legal cases EUR millions 31.12.2017 31.12.2016 Fines 3 242 1 834 Agriculture 1 737 1 711 Cohesion 3 3 Other 438 506 Total 5 420 4 054 75.CONTINGENT ASSETS EUR millions 31.12.2017 31.12.2016 Guarantees received: Performance guarantees 89 121 Other guarantees 5 6 Other contingent assets 32 33 Total 125 160 76.BUDGETARY AND LEGAL COMMITMENTS EUR millions Note 31.12.2017 31.12.2016 Outstanding budgetary commitments not yet expensed 5.1 220 479 188 828 Shared management legal commitments under the current MFF pending implementation 5.2 211 688 276 351 Significant legal commitments in other areas 5.3 16 267 18 338 Total 448 434 483 517

77.OUTSTANDING BUDGETARY COMMITMENTS NOT YET EXPENSED EUR millions 31.12.2017 31.12.2016 Outstanding budgetary commitments not yet expensed 220 479 188 828 78.SHARED MANAGEMENT LEGAL COMMITMENTS UNDER THE CURRENT MFF PENDING IMPLEMENTATION EUR millions Funds Financial framework 2014-2020 (A) Legal commitments concluded (B) Budget commitments (C ) Decommit- ments (D) Budget available under MFF (=A-C) Legal commitments less budget commitments (=B-C+D) European Regional Development Fund and Cohesion Fund 262 058 262 058 140 302 – 121 756 121 756 European Social Fund 91 991 91 991 51 813 – 40 178 40 178 Fund for European Aid to the most Deprived 3 814 3 814 2 114 – 1 699 1 699 HEADING 1B: COHESION POLICY FUNDS 357 862 357 862 194 229 – 163 633 163 633 European Agricultural Fund for Rural Development 99 343 99 343 56 401 – 42 942 42 942 European Maritime and Fisheries Fund 5 749 5 749 3 210 – 2 539 2 539 HEADING 2: NATURAL RESOURCES 105 093 105 093 59 611 – 45 482 45 482 Asylum and Migration Fund 5 391 4 233 2 794 – 2 597 1 439 Internal Security Fund 2 812 2 635 1 500 – 1 311 1 134 HEADING 3: SECURITY & CITIZENSHIP 8 202 6 868 4 294 – 3 908 2 573 Total 471 157 469 822 258 134 – 213 023 211 688 79.SIGNIFICANT LEGAL COMMITMENTS IN OTHER AREAS EUR millions Note 31.12.2017 31.12.2016 Connecting Europe Facility 12 676 13 799 Copernicus 1 841 2 393 Galileo 253 523 Fisheries agreements 133 247 Operating lease commitments 5.3.1 868 891 Other contractual commitments 497 485 Total 16 267 18 338 80.Operating lease commitments EUR millions Future amounts to be paid < 1 year 1- 5 years > 5 years Total Buildings 133 381 350 864 IT materials and other equipment 2 3 0 4 Total 134 384 350 868 81.FINANCIAL INSTRUMENTS DISCLOSURES 82.CURRENCY RISKS Exposure of the EC to currency risk at year end – net position EUR millions 31.12.2017 USD GBP DKK SEK EUR Other Total Financial assets Available for sale financial assets 680 57 17 56 11 147 16 11 973 Financial assets at fair value through surplus or deficit (632) – – – 655 – 23 Loans* 6 – – – 120 7 133 Receivables and recoverables – 550 62 86 11 338 6 12 040 Cash and cash equivalents 42 3 178 27 693 17 509 1 664 23 113 97 3 785 105 834 40 768 1 693 47 282 Financial liabilities Financial liabilities at fair value through surplus or deficit – – – – – (2) (2) Payables (0) (0) – (1) (39 374) (1) (39 376) (0) (0) – (1) (39 374) (3) (39 378) Total 96 3 785 105 833 1 395 1 690 7 904 EUR millions 31.12.2016 USD GBP DKK SEK EUR Other Total Financial assets Available for sale financial assets 228 58 14 42 8 394 21 8 757 Financial assets at fair value through surplus or deficit (49) – – – 50 – 0 Loans* 4 – – – 315 10 328 Receivables and recoverables – 591 49 80 10 611 4 11 336 Cash and cash equivalents 31 2 392 426 1 220 21 423 2 087 27 579 213 3 041 490 1 341 40 793 2 122 48 001 Financial liabilities Financial liabilities at fair value through surplus or deficit (100) – – – 100 – (1) Payables (0) – – – (40 240) (0) (40 240) (101) – – – (40 141) (0) (40 241) Total 113 3 041 490 1 341 652 2 122 7 760 * Excluding back-to-back loans for financial assistance.

If the EUR had strengthened against the currency concerned by 10 % then this would have had the following impact: EUR millions Economic result USD GBP DKK SEK 2017 (3) (339) (8) (71) 2016 (3) (271) (43) (118) EUR millions Net assets USD GBP DKK SEK 2017 (5) (5) (2) (5) 2016 (7) (5) (1) (4) If the EUR had weakened against the currency concerned by 10 % then this would have had the following impact: EUR millions Economic result USD GBP DKK SEK 2017 4 414 10 86 2016 4 331 53 144 EUR millions Net assets USD GBP DKK SEK 2017 7 6 2 6 2016 9 6 2 5 83.INTEREST RATE RISK The following table illustrates the interest rate sensitivity of available for sale financial assets assuming possible change in interest rates of +/- 100 basis points (1 %). EUR millions Increase (+) / decrease (-) in basis points Effect on economic result and net assets 2017: Available for sale financial assets +100 (305) -100 324 2016: Available for sale financial assets +100 (238) -100 254 84.CREDIT RISK Analysis of the age of financial assets that are not impaired EUR millions Total Neither past due nor impaired Past due but not impaired < 1 year 1-5 years > 5 years Loans 54 877 54 877 0 – – Receivables and recoverables 12 040 8 587 2 887 359 208 Financial assets at fair value through surplus or deficit 23 23 – – – Total at 31.12.2017 66 940 63 486 2 887 359 208 Loans 55 272 55 271 1 – – Receivables and recoverables 11 336 10 031 124 909 273 Financial assets at fair value through surplus or deficit 0 0 – – – Total at 31.12.2016 66 608 65 302 125 909 273



Credit quality of financial assets that are neither past due nor impaired

EUR millions 31.12.2017 Available for sale* Financial assets at FVSD** Loans and receivables*** Cash Total Counterparties with external credit rating Prime and high grade 6 989 16 2 981 18 436 28 422 Upper medium grade 1 569 – 23 868 3 851 29 287 Lower medium grade 1 831 – 28 037 442 30 311 Non-investment grade – – 4 084 381 4 465 10 390 16 58 970 23 109 92 485 Counterparties without external credit rating Group 1 (debtors without defaults in the past) – 6 4 492 3 4 502 Group 2 (debtors with defaults in the past) – – 1 – 1 – 6 4 493 3 4 503 Total 10 390 23 63 463 23 113 96 988 EUR millions 31.12.2016 Available for sale* Financial assets at FVSD** Loans and receivables*** Cash Total Counterparties with external credit rating Prime and high grade 5 264 – 3 162 21 180 29 606 Upper medium grade 1 184 – 23 820 5 178 30 181 Lower medium grade 786 – 4 526 486 5 798 Non-investment grade – – 27 719 733 28 452 7 234 – 59 226 27 576 94 037 Counterparties without external credit rating Group 1 (debtors without defaults in the past) – 0 5 996 3 6 000 Group 2 (debtors with defaults in the past) – – 79 – 79 – 0 6 076 3 6 079 Total 7 234 0 65 302 27 579 100 116 * Available for sale financial assets (excluding equity instruments and Unitary Fund). ** Financial assets at fair value through surplus or deficit. *** Loans and Receivables include recoverables. 85.LIQUIDITY RISK Maturity analysis of financial liabilities by remaining contractual maturity EUR millions < 1 year 1-5 years > 5 years Total Borrowings (6 695) (14 769) (33 279) (54 744) Payables (39 376) – – (39 376) Other financial liabilities (118) (556) (807) (1 482) Total at 31.12.2017 (46 189) (15 325) (34 087) (95 601) Borrowings (2 006) (17 988) (34 950) (54 943) Payables (40 240) 0 – (40 240) Other financial liabilities (158) (532) (906) (1 596) Total at 31.12.2016 (42 405) (18 520) (35 855) (96 780)



Financial instruments at fair value through surplus or deficit EUR millions < 1 year 1-5 years > 5 years Total Derivative pay leg (634) (2) – (635) Derivative receive leg 638 – – 638 Net cash flows at 31.12.2017 5 (2) – 3 Derivative pay leg (150) – – (150) Derivative receive leg 149 – – 149 Net cash flows at 31.12.2016 (1) – – (1) 86.CARRYING AMOUNT AND FAIR VALUE OF FINANCIAL INSTRUMENTS The following classes of financial assets and liabilities are not measured at fair value: cash and cash equivalents, loans, exchange receivables and non-exchange recoverables, borrowings and other financial liabilities at amortised cost. The carrying amount of those financial assets and liabilities is considered as a reasonable approximation of their fair value. 87.RELATED PARTIES

The related parties of the entity are the 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. Details on key management entitlements are provided in note 7 of the EU consolidated annual accounts. 88.EVENTS AFTER THE BALANCE SHEET DATE At the date of signing of these accounts no material issues had come to the attention of or were reported to the Accounting Officer of the Commission that would require separate disclosure under this section. As explained in note 4.1.1 of the consolidated financial statements of the EU, the EFSI Agreement has been amended in March 2018 following the amended Regulation EU 2017/2396. The accounts and related notes were prepared using the most recently available information and this is reflected in the information presented.

EUROPEAN COMMISSION FINANCIAL YEAR 2017 BUDGETARY IMPLEMENTATION REPORTS

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

CONTENTS EU BUDGET RESULT STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS 1. IMPLEMENTATION OF EC BUDGET REVENUE 2. IMPLEMENTATION OF EC BUDGET EXPENDITURE 2.1.MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS 2.2.MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS

2.3.MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS 2.4.MFF: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) 2.5.MFF: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN 2.6.POLICY AREA: BREAKDOWN AND CHANGES IN COMMITMENT AND PAYMENT APPROPRIATIONS 2.7.POLICY AREA: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 2.8.POLICY AREA: IMPLEMENTATION OF PAYMENT APPROPRIATIONS 2.9.POLICY AREA: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) 2.10.POLICY AREA: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN RECONCILIATION OF ECONOMIC RESULT WITH BUDGET RESULT EU BUDGET RESULT EUR million 2017 2016 Revenue 139 691 144 717 Expenditure (135 764) (135 180) Payment appropriat. carried over to the following year (1 796) (1 655) Cancellation of unused appropr. carried over from previous year 40 63 Evolution of assigned revenue (1 450) (1 367) Exchange differences for the year (166) (173) Budget result* 555 6 405 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS EUR million Title Initial adopted budget Final adopted budget Entitlements established Revenue 1 Own resources 131 718 115 484 115 455 115 416 11 - Sugar levies 133 133 134 134 12 - Customs duties 21 334 20 374 20 364 20 325 13 - VAT 16 599 16 620 16 584 16 584 14 - GNI 93 652 78 356 78 279 78 279 15 - Correction of budgetary imbalances – – 94 94 16 - Reduction of GNI based contribution of the Netherlands and Sweden – – (0) (0) 3 Surpluses, balances and adjustments – 6 405 6 416 6 416 4 Revenue accruing from persons working with the institutions and other union bodies 1 139 1 139 1 148 1 137 5 Revenue accruing from the administrative operation of the institution 70 70 300 282 6 Contributions and refunds in connection with union agreements and programmes 60 60 12 473 12 165 7 Default interest and fines 1 120 3 230 11 387 3 573 8 Borrowing and lending operations 7 7 43 28 9 Miscellaneous revenue 25 25 12 6 Total 134 139 126 419 147 234 139 023



BUDGET EXPENDITURE: COMMITMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK (MFF) HEADING EUR million MFF Heading Initial adopted budget Final adopted budget Total appropriations available Commitments made 1. Smart and inclusive growth 74 899 75 399 85 181 83 268 1a: Competitiveness for growth and jobs 21 312 21 312 24 508 22 654 1b: Economic, social and territorial cohesion 53 587 54 087 60 673 60 614 2. Sustainable growth: natural resources 58 584 58 569 62 806 60 859 of which: Market related expenditure and direct payments 42 613 42 611 45 830 44 759 3. Security and citizenship 4 284 4 284 4 472 4 124 4. Global Europe 10 162 10 713 12 382 11 814 5. Administration 5 473 5 473 5 846 5 652 6. Compensations – – – – 8. Negative reserve and deficit carried over from the previous financial year – – – – 9. Special Instruments 534 1 472 1 544 1 291 Total 153 937 155 910 172 231 167 009



BUDGET EXPENDITURE: PAYMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK (MFF) HEADING

EUR million MFF Heading Initial adopted budget Final adopted budget Total appropriations available Payments made 1. Smart and inclusive growth 56 522 49 840 61 168 57 030 1a: Competitiveness for growth and jobs 19 321 20 065 24 370 21 376 1b: Economic, social and territorial cohesion 37 201 29 775 36 797 35 654 2. Sustainable growth: natural resources 54 914 54 467 58 575 56 743 of which: Market related expenditure and direct payments 42 563 42 558 45 975 44 695 3. Security and citizenship 3 787 2 793 2 994 2 867 4. Global Europe 9 483 8 938 10 944 9 793 5. Administration 5 474 5 471 6 136 5 571 6. Compensations – – – – 8. Negative reserve and deficit carried over from the previous financial year – – – – 9. Special Instruments 390 1 341 1 414 1 291 Total 130 569 122 850 141 230 133 294 1. IMPLEMENTATION OF EC BUDGET REVENUE EUR million Income appropriations Entitlements established Revenue Receipts as % of budget Out- standing Title Initial budget adopted Final budget adopted Current year Carried over Total On entitlements of current year On entitlements carried over Total 1 Own resources 131 718 115 484 115 429 26 115 455 115 414 2 115 416 100% 39 3 Surpluses, balances and adjustments – 6 405 6 416 – 6 416 6 416 – 6 416 100% – 4 Revenue accruing from persons working with the institutions and other union bodies 1 139 1 139 1 141 6 1 148 1 131 6 1 137 100% 11 5 Revenue accruing from the administrative operation of the institution 70 70 284 16 300 269 12 282 402% 18 6 Contributions and refunds in connection with union agreements and programmes 60 60 12 216 258 12 473 12 050 116 12 165 20276% 308 7 Default interest and fines 1 120 3 230 4 823 6 564 11 387 541 3 032 3 573 111% 7 814 8 Borrowing and lending operations 7 7 39 5 43 24 5 28 410% 15 9 Miscellaneous revenue 25 25 3 9 12 2 4 6 24% 6 Total 134 139 126 419 140 350 6 883 147 234 135 846 3 177 139 023 110% 8 210 2. IMPLEMENTATION OF EC BUDGET EXPENDITURE 2.1.MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS EUR million Commitment appropriations Payment appropriations Budget appropriations Additional appropriations Total appropr. available Budget appropriations Additional appropriat. Total appropr. available MFF Heading Initial adopted budget Amending budgets & transfers Final adopted budget Carry-overs Assigned revenue Initial adopted budget Amending budgets & transfers Final adopted budget Carry-overs Assigned revenue 1 2 3=1+2 4 5 6=3+4+5 7 8 9=7+8 10 11 12=9+10+11 1. Smart and inclusive growth 74 899 500 75 399 0 9 782 85 181 56 522 (6 682) 49 840 130 11 198 61 168 1a: Competitiveness for growth and jobs 21 312 0 21 312 0 3 195 24 508 19 321 744 20 065 117 4 188 24 370 1b: Econom