EN Official Journal of the European Union C 347/1

FINAL ACCOUNTS OF THE 8TH, 9TH AND 10TH EUROPEAN DEVELOPMENT FUNDS — FINANCIAL YEAR 2011

2012/C 347/01

TABLE OF CONTENTS

Note accompanying the accounts

Implementing and accounting for the EDF resources

PART I — EDF annual accounts: funds managed by the European commission

1. FINANCIAL STATEMENTS OF THE 8TH, 9TH AND 10TH EUROPEAN DEVELOPMENT FUNDS

1.1 8th, 9th and 10th EDFs: Aggregated balance sheet, economic outturn account, cash flow statement and statement of changes in net assets

1.2 8th EDF: Balance sheet, economic outturn account and statement of changes in net assets

1.3 9th EDF: Balance sheet, economic outturn account and statement of changes in net assets

1.4 10th EDF: Balance sheet, economic outturn account and statement of changes in net assets

1.5 Notes to the financial statements of the 8th, 9th and 10th EDFs

2. REPORT ON FINANCIAL IMPLEMENTATION

2.1 Allocations

2.2 Consolidated accounts

2.3. Other management information

PART II — EDF annual accounts: financial statements of the investment facility

3. FINANCIAL STATEMENTS OF THE INVESTMENT FACILITY

3.1 Statement of comprehensive income for the year ended 31 December 2011

3.2 Statement of financial position as at 31 December 2011

3.3 Statement of changes in contributors' resources

3.4 Statement of cash flows for the year ended 31 December 2011

3.5 Notes to the financial statements

ANNEX TO PART I — CHAPTER 2 (Report on the financial implementation): situation by country and by instrument

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the 8th, 9th and 10th European Development Funds for the year 2011 have been prepared in accordance with Title VIII of the Financial Regulation of the 10th European Development Fund and with the accounting principles, rules and methods set out in annex to the financial statements.

I acknowledge my responsibility for the preparation and presentation of the annual accounts of the 8th, 9th and 10th European Development Funds in accordance with Article 125 of the Financial Regulation of the 10th European Development Fund.

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

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

[signed] Philippe TAVERNE Accounting Officer

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

1. BACKGROUND

The European Union has cooperative development relations with a large number of developing countries. The main purpose is to promote economic and social development with a particular focus on reducing and alleviating poverty in the long-term, by providing beneficiary countries with development aid and technical assistance. To achieve this, the Union draws up, jointly with the partner countries, cooperation strategies and mobilises the financial resources to implement them. These Union resources allocated to development come from three sources:

— The European Union budget

— The European Development Fund

— The European Investment Bank

The European Development Fund (EDF) is the main instrument for providing Union aid for development cooperation to the African, Caribbean and Pacific (ACP) States and Overseas Countries and Territories (OCTs). The 1957 Treaty of Rome made provision for its creation with a view to granting technical and financial assistance, initially limited to African countries which at that time were still colonised and with which some Member States had historical links.

The EDF is not funded by the European Union's budget. It is funded by the Member States, subject to its own financial regulation and managed by a specific committee. The European Commission is responsible for the financial implementation of the operations carried out with EDF resources and the European Investment Bank (EIB) manages the Investment Facility.

During the period 2008-2013, the geographic aid granted to ACP States and OCTs will continue to be mainly funded by the EDF. Each EDF is usually concluded for a period of around five years. Since the conclusion of the first partnership convention in 1964, the EDF programming cycles have generally followed the partnership agreement/convention cycles. Each EDF is governed by its own Financial Regulation which imposes the preparation of financial statements for each individual EDF. Accordingly, financial statements are prepared separately for each EDF in respect of the part that is managed by the European Commission. These financial statements are also presented in an aggregated way so as to provide a global view of the financial situation of the resources for which the European Commission is responsible.

Within the framework of the Cotonou agreement, the Investment Facility was established. This Investment Facility is managed by the European Investment Bank and is used to support private sector development in the ACP States by financing essentially – but not exclusively – private investments. The Facility is designed as a renewable fund, so that loan repayments can be reinvested in other operations, thus resulting in a self-renewing and financially independent Facility. As the Investment Facility is not managed by the European Commission, it is not consolidated in the first part of the annual accounts – the financial statements of the 8th, 9th and 10th EDFs and the related report on financial implementation. The financial statements of the Investment Facility are included as a separate part of the annual accounts (part 2) to provide a full picture of the development aid of the EDF. The 10th EDF covers the period from 2008 to 2013 and has an overall budget of EUR 22 682 million. Of this amount, EUR 21 966 million is allocated to the ACP countries, EUR 286 million to the OCTs and EUR 430 million to the Commission as support expenditure for programming and implementation of the EDF (1).

2. HOW IS THE EDF FUNDED?

The European Council of 15-16 December 2005 adopted the financial perspectives for 2007-2013. In this context it was decided that geographical cooperation with the ACP States would not be integrated into the European Union budget (budgetised), but would continue to be funded through the existing inter-governmental EDF for the period 2008-2013.

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

The EDF resources are “ad hoc” contributions from the EU Member States. Approximately every five years, Member State representatives meet at intergovernmental level to decide on an overall amount that will be allocated to the Fund and to oversee its implementation. The Commission then manages the fund. Since Member States have their own development and aid policies in addition to the Union wide policies, the Member States must coordinate their policies with the EU to ensure they are complementary. Until 2010, contributions were called from the 15 participating Member States. In 2011, the first contributions under the 10th EDF, in which the 27 Member States participate, were called.

While some funds of the 10th EDF have been set aside for unforeseen needs, most are being programmed in indicative multi-annual frameworks, mainly geographic but also thematic, currently set for the years 2008-2013. Country strategy papers, regional strategy papers and intra-ACP strategy papers have been adopted by the Commission accordingly. Their implementation is monitored annually and the strategies are reviewed at mid-term (2010, ongoing) and at end-of-term (2012). As a result of these mid-term or end-of-term reviews, the Commission may, on behalf of the European Union, revise the strategies and resource allocation in the light of the current needs and the performance of the ACP states or regions concerned.

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

3. HOW ARE THE EDF RESOURCES MANAGED AND SPENT?

3.1 Operational expenditure

EDF operational expenditure takes different forms, depending on how the money is paid out and managed. In accordance with the Financial Regulation, the Commission implements the EDF resources using the following methods:

Decentralised management: these are the cases where the Commission delegates, more or less substantially according to the local situation of the beneficiary concerned, certain tasks for implementation of the budget to third countries.

Centralised management: this is where the budget is implemented either directly by the Commission services or indirectly where the Commission confers tasks of implementation of the budget to bodies of European Union law or national law, such as the European Union agencies of public law or with public service missions.

Joint management with international organisations: under this method, the Commission entrusts certain implementation tasks to an international organisation.

3.2 The different financial actors

The responsibility of the Authorising Officer by delegation covers the entire management process, from determining what needs to be done to achieve the policy objectives set to manage the activities launched from both an operational and budgetary standpoint, including signing legal commitments, monitoring performance, making payments and even recovering funds, if necessary.

The Head of the Delegation of the European Union is the local liaison between the Commission and the national or regional ACP/OCT authorities in the field. He/she works in close collaboration with the national or Regional Authorising Officers in defining the implementing strategy and Sectoral policies, preparing, studying and reviewing EDF programmes and projects.

The National Authorising Officer in the recipient country is a senior official appointed by the government of each ACP State/OCT. He/she represents the authorities of his/her country for all activities financed by the Fund and managed by the Commission and by the EIB. In most cases, these functions are exercised by a member of the government, generally the State Minister of Planning or Finance. The National Authorising Officer carries out the administrative, technical and financial duties of managing EDF programmes and projects.

The Accounting Officer executes payment and recovery orders drawn up by Authorising Officers and is responsible for managing the treasury, laying down accounting rules and methods, validating accounting systems, keeping the accounts and drawing up the corresponding annual accounts. Furthermore, the Accounting Officer is required to sign the accounts declaring that they provide a true and fair view of the financial position.

3.3 Implementing the EDF resources

The vast majority of financial resources awarded to ACP States and OCTs through the EDF are grants. At the beginning of each EDF, the European Union informs the ACP States and the OCTs about the level of grants which should be available to them over the period of the fund. Resources are allocated based on a country’s specific needs, taking into account the recipient country’s own policies and development efforts.

The beneficiary country develops a cooperation strategy while or after holding consultations with its development partners (donors). The cooperation strategies set with the European Union normally include both the country’s own medium-term development strategies, an analysis of the political and socio-economic context, plus the European Union’s own assessment. The European Commission’s staff provide technical support to the national authorities in preparing the cooperation strategy document.

A National Indicative Programme (NIP) is then drawn up to implement the cooperation strategy. The NIP targets the sectors and fields which will receive the aid, explains how the aid will fulfil its objectives, gives a timetable for implementation, and specifies how other actors such as International Organisations or NGOs will be involved in the programme (if relevant). This indicative global programme is subject to an annual, mid-term and end-of-the-EDF-term review and improvements and changes are made when necessary during its operation period.

3.4 Committing to spend the EDF resources

No EDF resources can be spent unless and until the Commission and the possible recipient of EDF money have entered into a written legal commitment.

Before a legal commitment (for example a contract or grant agreement) can be entered into with a third party, there must be a budget line with sufficient funds authorising the activity in question. If this condition is met, the funds required must be reserved in the budget by means of a budgetary commitment made in the accounting system. This, however, has no effect on the general accounts (or general ledger) since no charge has yet been incurred. This is because the accounting system of the EDF comprises two separate but linked elements:

(a) budget accounts, which provide a detailed record of budget implementation; and,

(b) general accounts, used to prepare the balance sheet and economic outturn.

The budget accounts show the commitments and payments made. They are based on the cash accounting principle, whereby an item of expense or income is only recorded in the accounts when cash is committed, paid out or received. This type of accounting is typical of the public sector whose focus has, historically, tended to be on the budget and its implementation.

The general accounts (based on the accrual accounting principle) show all expenditure and revenue over the financial year (and thus the economic outturn) and establish the financial position of the EDF in the form of a balance sheet of assets and liabilities at 31 December of a given year.

3.5 Making a payment

No payment can be made unless a budgetary commitment has already been approved by the Authorising Officer.

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular pre-financing agreement. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or is repaid – if the beneficiary does not incur eligible expenditure he/she is obliged to return the pre-financing advance to the EDF. Thus pre-financing paid is not a definitive expense until the relevant contractual conditions are met and so is recorded as an asset on the balance sheet when the initial payment is made. The amount of the pre-financing asset is reduced (wholly or partially) by the acceptance of eligible costs (which are taken as expenses in the economic outturn account) and amounts returned.

At year-end, an assessment has to be made concerning eligible expenses incurred by beneficiaries of EDF funds but not yet reported. Following these cut-off calculations, estimated eligible amounts are recorded as accrued charges, while the estimated non-eligible parts remain open in the “eligibility to be checked” accounts. These amounts are shown under current liabilities so as not to overestimate assets and liabilities.

3.6 Recovering undue payments

The eligibility of expenditure charged to the EDF is verified on the basis of the supporting documents stipulated in the applicable rules or in the conditions of each grant. With the aim of optimising the relationship between the costs and the benefits of control systems, checks on the supporting documents for final claims tend to be more detailed than those on interim claims, and thus may detect errors in interim payments which are corrected by adjustment of the final payment. Furthermore, the Commission has the right to verify the probity of the supporting documents by making checks on the claimant's premises, during the implementation of the action financed and/or afterwards (ex-post). Errors found during the implementation period may be corrected by adjustment of subsequent claims. Errors found ex-post will be the subject of a recovery order.

4. YEAR-END REPORTING

4.1 Annual accounts

It is the Accounting Officer's responsibility to prepare the annual accounts and ensure that they present a true and fair view of the financial position of the EDF.

The annual accounts are presented as follows:

Part I: Funds managed by the European Commission — Financial statements of the 8th, 9th and 10th European Development Funds — Report on financial implementation of the 8th, 9th and 10th European Development Funds

Part II: Funds managed by the European Investment Bank — Financial statements of the Investment Facility

The financial statements of the Investment Facility are included as a separate part of the annual accounts so as to provide a full picture of the development aid of the EDF.

Following audit by the Court of Auditors, the annual accounts are adopted by the Commission by 31 July of the subsequent year and presented to the Council and Parliament for discharge.

4.2 Annual Activity Report

The Authorising Officer is required to prepare an Annual Activity Report (AAR) on the activities under his/her responsibility. In this AAR, the Authorising Officer reports on policy results and on the reasonable assurance he may have that the resources assigned to the activities described in his report have been used for their intended purpose and in accordance with the principles of sound financial management, and that the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions.

5. AUDIT AND DISCHARGE

5.1 Audit

The EDF annual accounts and resource management are overseen by its external auditor, the European Court of Auditors, which draws up an annual report for the Council and the European Parliament. The Court's main task is to conduct an external, independent audit of the EDF annual accounts. As part of its activities, the Court of Auditors produces:

(1) an annual report, detailing its observations on the annual accounts and underlying transactions;

(2) an opinion, based on its audits and given in the annual report in the form of a statement of assurance, on (i) the reliability of the accounts and (ii) the legality and regularity of the underlying transactions;

(3) special reports giving the findings of audits covering specific areas of management.

The Court of Auditors is entitled to access all documents required during the course of its audit. The Court audits all areas of EDF activities, right down to examining the legality and regularity of individual transactions and payments. It also audits the annual accounts themselves, reviewing individual balance sheet and economic outturn account items, as well as the overall presentation of the financial statements. Thus the Court can offer its opinion not only on the figures presented, but also on the system and controls in place.

5.2 Discharge

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

The discharge represents the political aspect of the external control of financial implementation and is the decision by which the European Parliament, acting on a Council recommendation, "releases" the Commission from its responsibility for management of the financial implementation of a given financial year. This discharge procedure may produce one of two outcomes: the granting or postponement of the discharge. When granting discharge the Parliament may highlight observations it considers important, often recommending actions that the Commission should take concerning these matters. The Commission sets out the measures taken in a follow-up report and an action plan which it sends to both the Parliament and the Council.

PART I

EDF ANNUAL ACCOUNTS: FUNDS MANAGED BY THE EUROPEAN COMMISSION (2)

1. FINANCIAL STATEMENTS OF THE 8TH, 9TH AND 10TH EUROPEAN DEVELOPMENT FUNDS

1.1 8TH, 9TH AND 10TH EDFs: AGGREGATED BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT, CASH FLOW STATEMENT AND STATEMENT OF CHANGES IN NET ASSETS

AGGREGATED BALANCE SHEET

of the 8th, 9th and 10th EDFs

(EUR millions) Note 31.12.2011 31.12.2010 NON-CURRENT ASSETS Long-term pre-financing 2.1 380 353 CURRENT ASSETS Short-term pre-financing 2.2 1 175 1 096 Short-term receivables 2.3 111 247 Cash and cash equivalents 2.5 1 224 808 Total assets 2 891 2 503 CURRENT LIABILITIES Short-term payables 2.6 (1 033) (1 045) Total liabilities (1 033) (1 045) Net assets 1 858 1 458 FUNDS & RESERVES Called fund capital 2.7 26 979 23 879 Other reserves 2.8 2 252 2 252 Economic outturn carried forward from previous years (24 674) (21 909) Economic outturn of the year (2 700) (2 765) Net assets 1 858 1 458





AGGREGATED ECONOMIC OUTTURN ACCOUNT

of the 8th, 9th and 10th EDFs

(EUR millions) Note 2011 2010 OPERATING REVENUE 3.1 99 140 OPERATING EXPENSES Operating expenses 3.2 (2 702) (2 914) Administrative expenses 3.3 (75) (86) Surplus (deficit) from operating activities (2 679) (2 860) Financial revenue 3.4 (20) 95 Surplus (deficit) from financial activities (21) 95 Economic outturn of the year (2 700) (2 765)





AGGREGATED CASH FLOW STATEMENT

of the 8th, 9th and 10th EDFs

(EUR millions) Note 2011 2010 Economic outturn of the year (2 700) (2 765) OPERATING ACTIVITIES 4.2 Ordinary contributions from Member States 3 238 3 420 Co-financing contributions from Member States 7 65 (Reversal of) impairment losses on receivables 6 2 (Increase)/decrease in long-term pre-financing (28) (157) (Increase)/decrease in short-term pre-financing (79) (296) (Increase)/decrease in short-term receivables 14 (62) Increase/(decrease) in short-term payables (42) 78 Net cash flow 417 285 Net increase/(decrease) in cash and cash equivalents 417 285 Cash and cash equivalents at the beginning of the year 2.5 808 523 Cash and cash equivalents at the end of the year 2.5 1 224 808





AGGREGATED STATEMENT OF CHANGES IN NET ASSETS

of the 8th, 9th and 10th EDFs

(EUR millions) Fund Capital Uncalled funds Called fund capital Cumulative reserves Other reserves Total Net Assets (a) (b) (c) = (a) – (b) (d) (e) (c) + (d) + (e) Balance as at 31 December 2009 45 761 25 381 20 381 (21 909) 2 252 724 Capital increase – ordinary contributions — (3 500) 3 500 — — 3 500 Reclassification of co-financing contributions (3) (70) (69) (2) — — (2) Economic outturn of the year — — — (2 765) — (2 765) Balance as at 31 December 2010 45 691 21 812 23 879 (24 674) 2 252 1 458 Capital increase – ordinary contributions — (3 100) 3 100 — — 3 100 Economic outturn of the year — — — (2 700) — (2 700) Balance as at 31 December 2011 45 691 18 712 26 979 (27 374) 2 252 1 858

1.2 8TH EDF: BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS

BALANCE SHEET

of the 8th EDF

(EUR millions) Note 31.12.2011 31.12.2010 CURRENT ASSETS Short-term pre-financing 2.2 70 100 Short-term receivables 2.3 4 9 Liaison accounts 2.4 387 497 Total assets 461 605 CURRENT LIABILITIES Short-term payables 2.6 (29) (45) Total liabilities (29) (45) Net assets 432 560 FUNDS & RESERVES Called fund capital 2.7 12 840 12 840 Other reserves 2.8 (2 276) (2 237) Economic outturn carried forward from previous years (10 042) (9 985) Economic outturn of the year (90) (58) Net assets 432 560





ECONOMIC OUTTURN ACCOUNT

of the 8th EDF

(EUR millions) Note 2011 2010 OPERATING REVENUE 3.1 40 54 OPERATING EXPENSES 3.2 (128) (116) Surplus (deficit) from operating activities (88) (61) Financial revenue 3.4 (1) 4 Surplus (deficit) from financial activities (2) 4 Economic outturn of the year (90) (58)





STATEMENT OF CHANGES IN NET ASSETS

of the 8th EDF

(EUR millions) Fund Capital Uncalled funds Called fund capital Cumulative reserves Other reserves Total Net Assets (a) (b) (c) = (a) – (b) (d) (e) (c) + (d) + (e) Balance as at 31 December 2009 12 840 — 12 840 (9 985) (2 153) 703 Capital increase – ordinary contributions — — — — — — Transfers to the 10th EDF — — — — (85) (85) Economic outturn of the year — — — (58) — (58) Balance as at 31 December 2010 12 840 — 12 840 (10 042) (2 237) 560 Capital increase – ordinary contributions — — — — — — Transfers to the 10th EDF — — — — (38) (38) Economic outturn of the year — — — (90) — (90) Balance as at 31 December 2011 12 840 — 12 840 (10 132) (2 276) 432

1.3 9TH EDF: BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS

BALANCE SHEET

of the 9th EDF

(EUR millions) Note 31.12.2011 31.12.2010 NON-CURRENT ASSETS Long-term pre-financing 2.1 191 158 CURRENT ASSETS Short-term pre-financing 2.2 569 742 Short-term receivables 2.3 87 233 Liaison accounts 2.4 2 557 2 516 Cash and cash equivalents 2.5 6 7 Total assets 3 410 3 655 CURRENT LIABILITIES Short-term payables 2.6 (315) (392) Total liabilities (315) (392) Net assets 3 096 3 263 FUNDS & RESERVES Called fund capital 2.7 11 699 11 039 Other reserves 2.8 4 227 4 157 Economic outturn carried forward from previous years (11 932) (10 854) Economic outturn of the year (898) (1 078) Net assets 3 096 3 263





ECONOMIC OUTTURN ACCOUNT

of the 9th EDF

(EUR millions) Note 2011 2010 OPERATING REVENUE 3.1 49 82 OPERATING EXPENSES Operating expenses 3.2 (924) (1 230) Administrative expenses 3.3 (3) (6) Surplus (deficit) from operating activities (879) (1 155) Financial revenue 3.4 (19) 77 Surplus (deficit) from financial activities (19) 77 Economic outturn of the year (898) (1 078)





STATEMENT OF CHANGES IN NET ASSETS

of the 9th EDF

(EUR millions) Fund Capital Uncalled funds Called fund capital Cumulative reserves Other reserves Total Net Assets (a) (b) (c) = (a) – (b) (d) (e) (c) + (d) + (e) Balance as at 31 December 2009 11 699 4 160 7 539 (10 854) 4 308 993 Capital increase – ordinary contributions — (3 500) 3 500 — — 3 500 Transfers to the 10th EDF — — — — (151) (151) Economic outturn of the year — — — (1 078) — (1 078) Balance as at 31 December 2010 11 699 660 11 039 (11 932) 4 157 3 263 Capital increase – ordinary contributions — (660) 660 — — 660 Transfers to and from the 10th EDF — — — — 70 70 Economic outturn of the year — — — (898) — (898) Balance as at 31 December 2011 11 699 0 11 699 (12 830) 4 227 3 096

1.4 10TH EDF: BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS

BALANCE SHEET

of the 10th EDF

(EUR millions) Note 31.12.2011 31.12.2010 NON-CURRENT ASSETS Long-term pre-financing 2.1 189 195 CURRENT ASSETS Short-term pre-financing 2.2 536 255 Short-term receivables 2.3 20 5 Cash and cash equivalents 2.5 1 218 801 Total assets 1 963 1 255 CURRENT LIABILITIES Short-term payables 2.6 (689) (608) Liaison accounts 2.4 (2 944) (3 013) Total liabilities (3 633) (3 621) Net assets (1 670) (2 366) FUNDS & RESERVES Called fund capital 2.7 2 440 — Other reserves 2.8 301 333 Economic outturn carried forward from previous years (2 699) (1 070) Economic outturn of the year (1 712) (1 629) Net assets (4) (1 670) (2 366)





ECONOMIC OUTTURN ACCOUNT

of the 10th EDF

(EUR millions) Note 2011 2010 OPERATING REVENUE 3.1 10 4 OPERATING EXPENSES Operating expenses 3.2 (1 650) (1 567) Administrative expenses 3.3 (72) (80) Surplus (deficit) from operating activities (1 712) (1 643) Financial revenue 3.4 0 14 Surplus (deficit) from financial activities (1) 14 Economic outturn of the year (1 712) (1 629)





STATEMENT OF CHANGES IN NET ASSETS

of the 10th EDF

(EUR millions) Fund Capital Uncalled funds Called fund capital Cumulative reserves Other reserves Total Net Assets (a) (b) (c) = (a) – (b) (d) (e) (c) + (d) + (e) Balance as at 31 December 2009 21 222 21 221 2 (1 070) 97 (971) Capital increase – ordinary contributions — — — — — — Reclassification of co-financing contributions (5) (70) (69) (2) — — (2) Transfers from the 8th and the 9th EDF — — — — 236 236 Economic outturn of the year — — — (1 629) — (1 629) Balance as at 31 December 2010 21 152 21 152 — (2 699) 333 (2 366) Capital increase – ordinary contributions — (2 440) 2 440 — — 2 440 Transfers from/to the 8th and the 9th EDF — — — — (32) (32) Economic outturn of the year — — — (1 712) — (1 712) Balance as at 31 December 2011 21 152 18 712 2 440 (4 411) 301 (1 670)

1.5 NOTES TO THE FINANCIAL STATEMENTS OF THE 8TH, 9TH AND 10TH EDFs

1. SIGNIFICANT ACCOUNTING POLICIES

1.1. LEGAL PROVISIONS AND THE FINANCIAL REGULATION

The financial statements are drawn up in accordance with the Financial Regulation applicable to the 10th EDF. In accordance with the provisions of Article 121 of this regulation, the financial statements are prepared respecting the principles of accrual based accounting.

These financial statements have been drafted in conformity with the accounting rules and methods of the EDF, themselves drawn up on the basis of International Public Sector Accounting Standards (IPSAS) or by default, International Financial Reporting Standards (IFRS) as respectively issued by the International Public Sector Accounting Standard Board (IPSASB) and the International Accounting Standard Board (IASB). The rules on valuation and accounting methods adopted by the Accounting Officer of the EDF have been applied in respect of the part of the EDF resources for which the European Commission is responsible for financial management.

The EDF Accounting Officer must submit the provisional accounts to the Court of Auditors for audit by 31 March of the following year. The Court of Auditors shall in turn make its observations on the accounts known to the Commission by 15 June (Article 125). On the basis of these observations, the Commission approves the final accounts by 31 July and sends them to the European Parliament, the Council and the Court of Auditors. The accounts are then published in the Official Journal by 15 November, together with the statement of assurance given by the Court of Auditors in respect of the part of the EDF resources for which the Commission is responsible for the financial management.

1.2. ACCOUNTING PRINCIPLES

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

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

The accounting system of the EDF comprises general accounts and budget accounts. The budget accounts give a detailed picture of the implementation of the budget. They are based on the cash accounting principle. The general accounts allow for the preparation of the financial statements as they show all expenses and income for the financial year based on accrual accounting rules and are designed to establish the financial position in the form of a balance sheet at 31 December.

Article 120 of the 10th EDF Financial Regulation sets out the accounting principles to be applied in drawing up the financial statements:

— going concern basis;

— prudence;

— consistent accounting methods;

— comparability of information;

— materiality;

— no netting;

— reality over appearance;

— accrual-based accounting.

1.3. BASIS OF PREPARATION

1.3.1. Functional and reporting currency

The financial statements are presented in millions of euros, the euro being the functional and reporting currency of the EDF.

1.3.2. Currency and basis for conversion

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

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

Currency 31.12.2011 31.12.2010 BGN 1,9558 1,9558 CZK 25,7870 25,0610 DKK 7,4342 7,4535 EEK N/A 15,6466 GBP 0,8353 0,8607 HUF 314,5800 277,9500 LVL 0,6995 0,7094 LTL 3,4528 3,4528 PLN 4,4580 3,9750 RON 4,3233 4,2620 SEK 8,9120 8,9655 CHF 1,2156 1,2504 JPY 100,2000 108,6500 USD 1,2939 1,3362

1.3.3. 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 provisions, impairment losses on accounts receivable and accrued charges. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known.

1.4. BALANCE SHEET

1.4.1 Pre-financing amounts

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular pre-financing agreement. The float or advance is repaid or used for the purpose for which it was provided during the period defined in the agreement. If the beneficiary does not incur eligible expenditures, he/she has to return the pre-financing advance to the EDF. The amount of the pre-financing is reduced (wholly or partially) by the acceptance of eligible costs and amounts returned.

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

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

1.4.2 Receivables

Receivables are carried at original amount less write-down for impairment. A write-down for impairment of receivables is established when there is objective evidence that the full amount due cannot be collected according to the original terms of the receivable. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount, being the present value of expected future cash flows, discounted at the market rate of interest for similar borrowers. Also recognised is a general write-down for outstanding recovery orders not already subject to a specific write-down. This general write-down is based on the historical loss rates. The amount of the write-down is recognised in the economic outturn account.

1.4.3 Cash and cash equivalents

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

1.4.4 Payables

A significant amount of the payables of the EDF are not related to the purchase of goods or services – instead they are unpaid cost claims from beneficiaries of grants or other funding. They are recorded as payables for the requested amount when the cost claim is received and, after verification, accepted as eligible by the relevant financial agents. At this stage they 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.

1.4.5 Provisions

Provisions are recognised when the EDF 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. The amount of the provision is the best estimate of the expenditures expected to be required to settle the present obligation at the reporting date.

1.4.6 Accrued and deferred income and charges

A critical element in accrual accounting is the exercise of ensuring that transactions are recorded in the accounting year to which they relate. This exercise is referred to as the cut-off exercise. In particular, an assessment has to be made concerning eligible expenses incurred by beneficiaries of EDF funds but not yet reported to the EDF (accrued charges). Conversely, some payments made in the current year relate to subsequent periods (deferred charges) and these have to be identified and included in the subsequent period(s).

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

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

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

1.5. ECONOMIC OUTTURN ACCOUNT

1.5.1 Revenue

There is no revenue budgeted for the European Development Fund. The ordinary contributions from Member States are treated as fund capital. Revenue comprises recovery of expenses and interest income.

Recovery of expenses

For operations giving rise to reimbursement of expenditures previously paid by the EDF to a final beneficiary or third country, recovery orders and deductions from subsequent payments are established and accounted for as follows:

— Recovery of expenses: the recovery order issued results in a receivable with the corresponding entry being income in the economic outturn account for that year; or,

— Recovery of pre-financing amounts: in this case the amount is included under the pre-financing heading on the balance sheet.

Interest income

Interest income is recognised in the economic outturn account using the effective interest method. The interest income comprises interest received or receivable on cash balances and demandable deposits held with commercial banks and on late payment of entitlements to the EDF. Interest income is recognised as it accrues.

1.5.2 Expenditure

Exchange expenses arising from the purchase of goods and services are recognised when the supplies are delivered and accepted. They are valued at original invoice cost.

Non-exchange expenses account for the majority of the EDF's expenditure. They relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, or 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 or other) or a contract has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made.

When any 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 already due to the beneficiaries but not yet reported are estimated and recorded as accrued expenses.

Interest expense

Interest expense is recognised in the economic outturn account using the effective interest method. The interest expense comprises interest paid or payable and is recognised as it accrues.

1.6. CONTINGENT ASSETS AND LIABILITIES

1.6.1 Contingent assets

A contingent asset is a possible asset that arises from past events and whose 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 EDF. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.

Contingent assets are assessed at each balance sheet date to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset’s value can be measured reliably, the asset and the related revenue are recognised in the financial statements of the period in which the change occurs.

Guarantees are possible assets that arise from past events and whose existence will be confirmed by the occurrence or non-occurrence of the object of the guarantee. Guarantees can thus qualify as contingent assets. A guarantee is settled when the object of the guarantee no longer exists. It is crystallised when the conditions are fulfilled for calling for a payment from the guarantor.

1.6.2 Contingent liabilities

A contingent liability is a possible obligation that arises from past events and whose 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 EDF; 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. A contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

Contingent liabilities are assessed at each balance sheet date to determine whether an outflow of resources embodying economic benefits or service potential has become probable. If it becomes probable that an outflow of resources embodying economic benefits or service potential will be required for an item dealt with as contingent liability, a provision is recognised in the financial statements of the period in which the change of probability occurs.

2. NOTES TO THE BALANCE SHEET

NON CURRENT ASSETS

2.1 LONG-TERM PRE-FINANCING

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Long-term pre-financing — 191 189 380 353 Total — 191 189 380 353

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

Pre-financing is presented net of open recovery orders related to advances and estimated amounts not yet cleared at year-end. The timing of the recoverability or utilisation of the pre-financing governs whether it is disclosed as a short-term or a long-term pre-financing asset. The utilisation is defined by the project's underlying agreement. Any repayments or utilisation due within twelve months of the reporting date is disclosed as short-term pre-financing and therefore as current assets. As many of the EDF projects are long-term in nature, it is necessary that the related advances are available for more than one year. Thus these pre-financing amounts are shown as long-term assets.

The increase in long-term pre-financing of EUR 28 million compared to 31.12.2010 is mainly explained by an increase in long-term pre-financing related to Intra ACP Projects (EUR 49 million) and to Administrative Expenditure (EUR 14 million), offset by a decrease in the long-term pre-financing related to Sectoral Policy (EUR 17 million) and to Programmable Aid (EUR 15 million).

CURRENT ASSETS

2.2 SHORT-TERM PRE-FINANCING

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Short-term pre-financing (gross) 148 1 659 1 608 3 415 3 115 Less estimated clearing of pre-financing (78) (1 090) (1 072) (2 240) (2 019) Total 70 569 536 1 175 1 096

The increase in net short-term pre-financing of EUR 79 million is mainly due to an increase in net short-term pre-financing related to Administrative Expenditure (EUR 77 million), Programmable Aid (EUR 29 million), Institutional support (EUR 44 million) and Sectoral Policy (EUR 25 million). This increase was offset by a decrease in Intra ACP Projects (EUR 68 million), Other aid programmes related to former EDFs (EUR 20 million), and Emergency aid (EUR 7 million).

2.2.1 Guarantees received in respect of pre-financing

Guarantees are held to secure pre-financing and released when the final claim under a project is paid. A guarantee has two different values referred to as the “nominal” and the “on-going” values. For the “nominal” value, the generating event is linked to the existence of the guarantee. For the “on-going” value, the guarantee’s generating event is the pre-financing payment and/or subsequent clearings.

At 31 December 2011 the "nominal" value of guarantees received by the EDF in respect of pre-financing amounts to EUR 637 million. The "on-going" value of those guarantees amounts to EUR 394 million. At 31 December 2010 these values were EUR 674 million and EUR 363 million respectively.

2.3 SHORT-TERM RECEIVABLES

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Receivables from customers 2 10 1 13 10 Receivables from Member States — — 9 9 125 Accrued income and deferred charges 2 77 10 89 112 Total 4 87 20 111 247

2.3.1 Receivables from customers

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Receivables from customers 6 18 2 27 18 — Impairment of receivables from customers (4) (8) (1) (13) (8) Total 2 10 1 13 10

These are recovery orders entered in the accounts at 31 December 2011 as established entitlements to be recovered and not already included under other headings on the assets side of the balance sheet. The closing balance for recovery orders represents the value of recovery orders issued but not yet paid at year-end.

A provision is estimated for impairment losses for the amounts owed by beneficiaries that are unlikely to be recovered. This provision has two elements:

— Specific cases: Based on the risk of non recovery.

— General: Applying a provision based on historical loss rates to receivables which are not subject to a specific write-down.

The fact that such an adjustment is made does not mean that the future recovery of these amounts is waived.

The movements in open recovery orders during the period are detailed below.

(EUR millions) 8th EDF 9th EDF 10th EDF Total 2011 Total 2010 Open recovery orders at beginning of year 7 11 0 18 20 Recovery orders issued 11 63 55 130 164 Recovery orders closed (12) (56) (55) (123) (166) Cashed (9) (46) (53) (108) (143) Waived (art 73 FR) 0 (1) 0 (1) (1) Cancelled (1) (1) 0 (2) (5) Offset (3) (8) (1) (13) (17) Open recovery orders at end of year 6 19 1 25 18

2.3.2 Receivables from Member States

The EUR 9 million receivable from Member States in the 10th EDF comprises contributions receivable due from Hungary and Portugal which were received in January and February 2012 respectively and a cofinancing contribution from Denmark not yet due.

2.3.3 Accrued income and deferred charges

Accrued income and deferred charges mainly include accrued interest on pre-financing amounts. Furthermore, accrued interest income on late payment of contributions is included under this heading.

The decrease in accrued income and deferred charges of EUR 23 million is explained by lower accrued interest on pre-financing (EUR 23 million) (see note 3.4.2).

2.4 LIAISON ACCOUNTS

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 to/from 6th EDF (2 065) (214) — (2 279) (2 279) to/from 7th EDF — 2 279 — 2 279 2 279 to/from 8th EDF — (3 037) 584 (2 453) (2 563) to/from 9th EDF 3 037 — (3 529) (491) (450) to/from 10th EDF (584) 3 529 — 2 944 3 013 Total 387 2 557 (2 944) 0 0

For reasons of efficiency, the single treasury covering all the EDFs is allocated to the 10th EDF; this leads to operations between the various EDFs, which are balanced out in the liaison accounts between the various EDF balance sheets.

The major 2011 movements in the liaison accounts include payments made by the 10th EDF for implementation of the 8th and 9th EDFs and cash received by the 10th EDF related to contributions called under the 9th EDF.

2.5 CASH AND CASH EQUIVALENTS (6)

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Cash at banks — — 1 211 1 211 781 STABEX security accounts — — 5 5 17 Co-financing bank accounts — 6 2 8 10 Democratic Republic Congo special fund (7) — — 1 1 0 Total — 6 1 218 1 224 808

2.5.1 Cash at banks

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Special accounts - financial institutions of Member States — — 1 129 1 129 599 Current accounts – commercial banks — — 80 80 180 Local Paying Agents — — 2 2 1 Total — — 1 211 1 211 781

The overall increase in cash at banks is mainly explained by a lower budget execution in 2011 than planned.

Local paying agent accounts represent amounts held in bank accounts within ACP States and OCTs used for making payments in local currency within the beneficiary state. These accounts are kept in euros or in a currency of a Union Member State. In order to achieve a more centralised management of payments, during 2011, 2 out of the 8 remaining local paying agent accounts were closed.

2.5.2 STABEX Security accounts

(EUR millions) Balance at 31.12.2011 Balance at 31.12.2010 Saint Lucia 0 7 St Vincent and the Grenadines 0 4 Ivory Coast 2 2 Malawi 1 1 Other countries 2 3 Total 5 17

STABEX is the acronym for a European Union compensatory finance scheme to stabilise export earnings of the ACP countries. It was first introduced in the Lomé Convention (1975) with the purpose of remedying the harmful effects of the instability of export revenue from agricultural products. The balance on the STABEX security accounts represents the total of STABEX funds available which will be transferred to the relevant beneficiary ACP State at a future date. This balance is allocated to the 10th EDF. In 2011, two STABEX security accounts were closed following the winding up of the STABEX aid instrument.

In addition to these funds, there are other STABEX funds held by beneficiary ACP States. Once the Commission and the beneficiary (ACP) State reach agreement on how the STABEX funds are to be utilised, a transfer convention is signed by both parties. In accordance with the provisions of Article 211 of the Lomé IV Agreement (8) (as revised), the funds are transferred into an interest bearing double signature account (European Commission and Beneficiary State) opened in the name of the ACP State. The funds remain in these double signature accounts until a FMO (Framework of Mutual Obligations) justifies a transfer for a project.

The Commission's Authorising Officer retains the power of signature over the account in order to ensure that the funds are disbursed as intended. The funds in the double signature accounts are the property of the ACP State and are consequently not recorded as assets in the EDF accounts. The transfers to these accounts are recorded as STABEX payments.

In 2011, EUR 26 million was returned to the EDF from double signature accounts in ACP countries following Article 1.4 of the Internal Agreement of the 10th EDF (9). These funds were transferred mainly from Saint Lucia (EUR 9 million), Kenya (EUR 7 million) and Togo (EUR 4 million). These revenues are included in operating income (STABEX aid instrument) in the economic outturn account of the 8th EDF.

2.5.3 Co-financing bank accounts

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Co-financing bank accounts — 6 2 8 10 Total — 6 2 8 10

These bank accounts include amounts related to co-financing agreements dated 2007 and earlier. These co-financing funds are the property of the Member States concerned and hence a corresponding amount is registered as payable. Therefore, the effect on the net assets is nil.

The Italian co-financing under the 9th EDF is still ongoing in Somalia.

The co-financing bank accounts of the 10th EDF relate to old co-financing projects in the process of closure. These funds will be returned to the Member States after instruction from the Authorising Officer.

CURRENT LIABILITIES

2.6 SHORT-TERM PAYABLES

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Current payables 9 146 243 399 487 Accrued charges 20 168 151 339 286 Deferred capital contribution — — 295 295 272 Total 29 315 689 1 033 1 045

Short-term payables include cost statements received by the EDF under the framework of the grant and procurement activities. They are recorded for the amount being claimed from the moment the demand is received. The same procedure applies to invoices and credit notes received under procurement activities. The cost claims concerned have been taken into account for the year-end cut-off procedures. Following the cut-off entries, estimated eligible amounts have been recorded as accrued charges.

2.6.1 Current payables

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Suppliers and other 9 140 159 308 400 Payables to Member States – co-financing — 6 75 81 75 Sundry payables — — 10 10 12 Total 9 146 243 399 487

2.6.1.1 Suppliers and other

Included under this heading are amounts owed to suppliers as well as amounts payable to public bodies and third states.

The decrease of EUR 92 million compared to the previous reporting period includes primarly a EUR 62 million decrease in payables to third states.

2.6.1.2 Payables to Member States co-financing

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

EUR 8 million of the co-financing payables to Member States relate to co-financing agreements dated 2007 and earlier. These funds are kept in dedicated bank accounts, see 2.5.3, co-financing bank accounts, above.

In 2011, new co-financing contributions of EUR 7 million were received (Belgium EUR 3 million, United Kingdom EUR 2 million, Sweden EUR 1 million and Switzerland EUR 1 million). The funds relating to co-financing agreements signed in 2008 and later are not kept in dedicated bank accounts.

The co-financing payables were decreased by EUR 2 million to recognise revenue related to the co-financing projects (see 3.1.4 and 3.2.2).

2.6.1.3 Sundry payables

Sundry payables mainly comprise unallocated cash receipts and returned amounts.

2.6.2 Accrued charges

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Accrued charges 20 168 151 339 286 Total 20 168 151 339 286

At year-end, an assessment is made concerning eligible expenses incurred by beneficiaries of EDF funds but not yet reported. Following these cut-off calculations, estimated eligible amounts are recorded as accrued charges. Estimated utilisation of pre-financing amount is presented as an estimated clearing of pre-financing (see 2.2).

2.6.3 Deferred fund capital contribution

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 United Kingdom — — 289 289 269 Ireland — — 5 5 3 Lithuania — — 1 1 — Total — — 295 295 272

This comprises Member States' contributions paid in advance.

NET ASSETS

2.7 CALLED FUND CAPITAL

(EUR millions) 8th EDF 9th EDF 10th EDF Total Fund Capital 12 840 11 699 21 152 45 691 Uncalled fund capital — (660) (21 152) (21 812) Called fund capital 31.12.2010 12 840 11 039 — 23 879 Fund Capital 12 840 11 699 21 152 45 691 Uncalled fund capital — — (18 712) (18 712) Called fund capital 31.12.2011 12 840 11 699 2 440 26 979

The fund capital represents the total amount of contributions from the Member States for the relevant EDF fund as laid down in each of the Internal Agreements.

Uncalled funds represent the initial allocation not yet called up from Member States.

Called fund capital represents the amount of the initial allocations which has been called up for transfer to the treasury accounts by the Member States in accordance with the procedure laid down in Article 16 of the 10th EDF Financial Regulation.

The capital of the 8th and the 9th EDF has been called up and received in its entirety.

The 10th EDF entered into force in 2008 with a fund capital amounting to EUR 21 152 million, according to the Internal Agreement applicable to the 10th EDF.

Fund capital

(EUR millions) Contributions % uncalled 9th EDF 31.12.2010 called up in 2011 uncalled 9th EDF 31.12.2011 Austria 2,65 (19) 19 — Belgium 3,92 (27) 27 — Denmark 2,14 (15) 15 — Finland 1,48 (10) 10 — France 24,30 (170) 170 — Germany 23,36 (164) 164 — Greece 1,25 (9) 9 — Ireland 0,62 (4) 4 — Italy 12,54 (88) 88 — Luxemburg 0,29 (2) 2 — Netherlands 5,22 (37) 37 — Portugal 0,97 (7) 7 — Spain 5,84 (41) 41 — Sweden 2,73 (19) 19 — United Kingdom 12,69 (89) 89 — EIB N.A. 40 (40) — Total 100,00 (660) 660 —





(EUR millions) Contributions % uncalled 10th EDF 31.12.2010 called up in 2011 uncalled 10th EDF 31.12.2011 Austria 2,41 (510) 59 451 Belgium 3,53 (747) 86 661 Denmark 2,00 (423) 49 374 Finland 1,47 (311) 36 275 France 19,55 (4 135) 477 3 658 Germany 20,50 (4 336) 500 3 836 Greece 1,47 (311) 36 275 Ireland 0,91 (192) 22 170 Italy 12,86 (2 720) 314 2 406 Luxemburg 0,27 (57) 7 51 Netherlands 4,85 (1 026) 118 908 Portugal 1,15 (243) 28 215 Spain 7,85 (1 660) 192 1 469 Sweden 2,74 (580) 67 513 United Kingdom 14,82 (3 135) 362 2 773 Cyprus 0,09 (19) 2 17 Czech Republic 0,51 (108) 12 95 Estonia 0,05 (11) 1 9 Hungary 0,55 (116) 13 103 Lithuania 0,12 (25) 3 22 Latvia 0,07 (15) 2 13 Malta 0,03 (6) 1 6 Poland 1,3 (275) 32 243 Slovenia 0,18 (38) 4 34 Slovakia 0,21 (44) 5 39 Bulgaria 0,14 (30) 3 26 Romania 0,37 (78) 9 69 Total 100,00 (21 152) 2 440 18 712

In 2011, the final call under the 9th EDF was made and the first contributions under the 10th EDF, in which the 27 Member States participate, were called.

2.8 OTHER RESERVES

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 to/from 6th EDF 94 490 — 584 584 to/from 7th EDF 533 1 135 — 1 668 1 668 to/from 8th EDF — 2 762 141 2 903 2 864 to/from 9th EDF (2 762) — 161 (2 601) (2 531) to/from 10th EDF (141) (161) — (302) (333) Total (2 276) 4 227 301 2 252 2 252

Since the entry into force of the 10th EDF in 2008, all decommitted funds of previous EDFs are transferred to the reserve of the 10th EDF. This reserve may be committed only under the conditions set out in Article 1.4 of the Internal Agreement on the 10th EDF.

In 2011, EUR 38 million and EUR 80 million of decommitted funds were transferred to the 10th EDF from the 8th and 9th EDFs respectively and EUR 150 million were transferred from performance reserve of the 10th EDF to the 9th EDF (10).

On 23 May 2011 a Council decision was taken (11) to allocate an amount of EUR 200 million to South Sudan from funds decommitted from projects under the 9th and previous EDF's. At year-end 2011 this amount is still allocated to the performance reserve of the 10th EDF but should be released from these reserves in 2012.

3. NOTES TO THE ECONOMIC OUTTURN ACCOUNT

3.1 OPERATING REVENUE

(EUR millions) 8th EDF 9th EDF 10th EDF Total 2011 Total 2010 Recovery of expenses 3 11 2 16 29 Recovery of STABEX funds 26 — — 26 32 Exchange gains 11 37 7 54 78 Operating income co-financing — — 2 2 1 Total 40 49 10 99 140

3.1.1 Recovery of expenses

This heading represents the recovery orders issued by the EDF and the deduction from subsequent payments recorded in the EDF accounting system, to recover expenditures previously paid out, based on controls, audits or eligibility analysis. It should be noted that recovery of pre-financing amounts is not included as revenue, but credited to the pre-financing heading on the balance sheet.

3.1.1.1 Recovery of undue payments

In 2011, recovery orders for EUR 12 million were issued in respect of undue payments, compared to EUR 11 million in 2010. Of these, EUR 8 million related to the recovery of expenses and were thus recorded as operating revenue. EUR 4 million represented recoveries of pre-financing amounts paid and were credited to the pre-financing asset on the balance sheet.

The nature of the recovery of undue payments can be summarised as follows:

(EUR millions) Revenue Pre-financing Total 2011 Revenue Pre-financing Total 2010 Error 2 1 3 1 1 2 Irregularity 6 3 8 5 3 8 OLAF Notified 1 — 1 1 — 1 Total 8 4 12 7 4 11

3.1.2 Recovery of STABEX funds

In 2011, EUR 26 million was returned to the EDF from double signature accounts in ACP countries following Article 1.4 of the Internal Agreement of the 10th EDF (12). These funds were transferred mainly from Saint Lucia (EUR 9 million), Kenya (EUR 7 million) and Togo (EUR 4 million). These revenues are included in operating income (STABEX aid instrument) in the economic outturn account of the 8th EDF.

3.1.3 Exchange gains

Exchange gains arise from the everyday activities and related transactions made in currencies other than the euro, as well as the year-end revaluation required to prepare the annual accounts. They contain both realised and unrealised gains.

3.1.4 Operating income co-financing

The operating income relating to co-financing represents the contributions used (see 3.2.2). As these contributions fulfil the criteria of revenues from non-exchange transactions under condition, the contribution is recognised in accordance with the implementation of the co-financing project.

3.2 OPERATING EXPENSES

(EUR millions) 8th EDF 9th EDF 10th EDF Total 2011 Total 2010 Operating expenses – aid instruments 114 879 1 640 2 633 2 852 Operating expenses co-financing — — 2 2 1 Exchange losses 11 41 8 61 58 Impairment of receivables 3 4 — 7 3 Total 128 924 1 650 2 702 2 914

3.2.1 Operating expenses – aid instruments

(EUR millions) 8th EDF 9th EDF 10th EDF Total 2011 Total 2010 Programmable aid 58 56 1 136 1 251 1 127 Macro-economic support — 51 — 51 35 Sectoral policy 0 372 0 371 765 Interest rate subsidies 0 — — 0 Intra ACP projects — 301 349 650 336 Emergency aid — 63 149 212 442 Refugee aid 0 — — 0 (1) Risk capital 19 — — 19 STABEX 12 — — 12 46 Sysmin (13) (8) — — (8) 10 Other aid programmes related to former EDFs — 24 — 24 (17) Debt relief - Heavily Indebted Poor Countries and World Bank — — — — 14 Institutional support — 2 6 8 44 Compensation export receipts 32 10 — 42 37 Democratic Republic Congo Fund — 0 — 0 15 Total 114 879 1 640 2 633 2 852

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

3.2.2 Operating expenses co-financing

These are the expenses incurred on co-financing projects in 2011. As the co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under condition, a corresponding amount of contributions has been recognised as operating revenue (see 3.1.4).

3.2.3 Exchange losses

Exchange losses occur on the everyday activities and related transactions made in currencies other than the euro, as well as the year-end revaluation required to prepare the annual accounts – they are both realised and unrealised.

Looking at the net position, there was a net exchange loss of EUR 6 million for the year (exchange losses of EUR 61 million less exchange gains of EUR 54 million).

3.2.4 Impairment of receivables

This heading includes mainly pre-financing corrections and amounts written down/lost on realisation concerning debtors.

3.3 ADMINISTRATIVE EXPENSES

(EUR millions) 8th EDF 9th EDF 10th EDF Total 2011 Total 2010 Administrative expenses 0 3 72 75 86 Total 0 3 72 75 86

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

3.4 FINANCIAL REVENUE

(EUR millions) 8th EDF 9th EDF 10th EDF Total 2011 Total 2010 Interest income - European banks — 0 1 1 1 Interest income – STABEX 0 — — 0 0 Interest income on late payments of recovery orders 0 0 0 0 3 Interest on pre-financing (1) (19) (1) (21) 91 Total (1) (19) 0 (20) 95

The interest income in 2011 remains low due to the continued low interest rates.

3.4.1 Interest income on late payments of recovery orders

This is interest earned on late payments of recovery orders by debtors, including late payments of contributions by Member States. Such funds can be used for financing projects in accordance with Articles 1 and 6 of the Internal Agreement applicable to the 10th EDF.

3.4.2 Interest on pre-financing

Interest on pre-financing is recognised in the accounts in accordance with the provisions of article 7 paragraph 3 and article 8 of the 10th EDF Financial Regulation.

The accrued interest on pre-financing amounts for 2011 is lower than that of 2010 and in fact the reversal of the 2010 accrual resulted in negative interest revenue. This was caused by a reclassification during 2011 of several contracts which were previously labelled as grant contracts in 2010 to joint management contracts with International organisations. According to the provisions of the Financial Regulation articles mentioned above the former type of contracts give rise to calculation of interest accruals on prefinancing while the latter type of contracts does not.

4. NOTES TO THE CASH FLOW STATEMENT

4.1 PURPOSE AND PREPARATION OF THE CASH FLOW STATEMENT

Cash flow information is used to provide a basis for assessing the ability of the EDF to generate cash and cash equivalents, and its needs to utilise those cash flows.

The cash flow statement is prepared using the indirect method. This means that the net surplus or deficit for the financial year is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future operating cash receipts or payments.

Cash flows arising from transactions in a foreign currency are recorded in the EDF's reporting currency (euro), by applying to the foreign currency amount the exchange rate between the euro and the foreign currency at the date of the cash flow.

4.2 OPERATING ACTIVITIES

The EDF cash flow statement only shows cash flows from operating activities as the EDF does not have investment or financing activities. The objective of the operating activities is to participate in the achievement of policy targeted outcomes.

5. CONTINGENT ASSETS AND LIABILITIES AND OTHER DISCLOSURES

5.1 CONTINGENT ASSETS

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Performance guarantees 16 221 88 325 360 Retention guarantees 5 151 40 197 227 Contingent assets relating to legal cases — 1 — 1 1 Total 21 373 128 523 587

5.1.1 Performance guarantees

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

The decrease of EUR 35 million in performance guarantees is a difference between the guarantees released and new guarantees received. Most of the guarantees were relased under the 8th EDF (EUR 23 million linked mainly to programmable aid) and 9th EDF (EUR 90 million mainly linked to Sectoral policy aid).

5.1.2 Retention guarantees

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

The decrease of EUR 30 million in retention guarantees is a difference between the guarantees released and new guarantees received. Most of the guarantees were released under the 9th EDF (EUR 63 million linked mainly to Sectoral policy aid). The new guarantees were mainly received under the 9th EDF (EUR 31 million mainly linked to Sectoral policy aid) and the 10th EDF (EUR 22 million).

5.2 CONTINGENT LIABILITIES

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Amounts relating to legal cases — 0 — 0 6 Total — 0 — 0 6

The above amounts relate to actions for damages currently being brought against the EDF, other legal disputes and the estimated legal costs. All contingent liabilities and commitments would be financed, should they fall due, by the EDF in the future.

5.3 OTHER DISCLOSURES

5.3.1 Budgetary commitments

(EUR millions) 8th EDF 9th EDF 10th EDF Total 31.12.2011 Total 31.12.2010 Outstanding budgetary commitments not yet paid 157 1 643 3 794 5 594 5 991 Related amounts included in the economic outturn account (29) (308) (309) (646) (714) Total 128 1 335 3 485 4 948 5 277

Outstanding budgetary commitments represent open commitments for which payments and/or decommitments have not yet been made. This is a normal consequence of the existence of multiannual programmes. At 31 December 2011 the outstanding budgetary commitments totalled EUR 5 594 million. The amount disclosed as a future commitment to be funded is this outstanding budgetary commitment less related amounts that have been included as expenses in the 2011 economic outturn account, giving a total of EUR 4 948 million.

6. FINANCIAL RISK MANAGEMENT

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

6.1 RISK MANAGEMENT POLICIES AND HEDGING ACTIVITIES

The rules and principles for the management of the EDF's treasury operations are laid down in Council Regulation 215/2008 on the Financial Regulation applicable to the 10th EDF, and in the Internal Agreement.

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

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

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

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

In addition to the special accounts, other bank accounts are opened by the Commission on behalf of the EDF, with financial institutions (central banks and commercial banks), for the purpose of executing payments and receiving receipts other than the Member State contributions to the budget according to art. 44 of the Council Regulation (EC) No 215/2008 (see 6.4 below).

All commercial banks where accounts other than the "special accounts" mentioned above have been opened for the EDF, are selected by the Commission by call for tenders.

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

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

6.2 MARKET RISK

6.2.1 Currency risk

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

6.2.2 Interest rate risk

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

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

Overnight balances held on commercial bank accounts are remunerated on a daily basis. The remuneration of balances on such accounts is based on variable market rates to which a contractual margin (positive or negative) is applied. For most of the accounts the interest calculation is linked to the EONIA (Euro Over Night Index Average), and is adjusted to reflect any fluctuations of this rate. For some other accounts the interest calculation is linked to the ECB marginal rate (the one used for the ECB refinancing operations). As a result no risk is taken by the EDF that its balances be remunerated at rates lower than market rates.

6.3 CREDIT RISK (COUNTERPARTY RISK)

Most of the EDF's treasury resources are kept, in accordance with Council Regulation 215/2008, in the "special accounts" opened by Member States for the payment of their contributions. The majority of such accounts are held with Member States' treasuries or national central banks. These institutions carry the lowest counterparty risk for the EDF (exposure is with its Member States).

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

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

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

6.4 LIQUIDITY RISK

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

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

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

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

7. RELATED PARTY DISCLOSURES

No related party transactions requiring separate disclosure under this heading have been identified.

8. EVENTS AFTER THE BALANCE SHEET DATE

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

9. RECONCILIATION ECONOMIC OUTTURN - BUDGET OUTTURN

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

(EUR millions) 2011 2010 ECONOMIC OUTTURN OF THE YEAR (2 700) (2 765) REVENUE Entitlements not affecting the budget outturn (52) (33) Entitlements established in the current year but not yet collected (3) (4) Entitlements established in previous years and collected in the current year 10 10 Net effect of pre-financing 46 53 Net accrued revenue (13) (173) EXPENDITURE Expenses of the current year not yet paid 98 178 Expenses of previous years paid in the current year (249) (155) Payment cancellations 17 39 Net effect of pre-financing (346) (353) Net accrued expenses 317 (31) BUDGET OUTTURN OF THE YEAR (2 874) (3 233)

9.1 RECONCILING ITEMS – REVENUE

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

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

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

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

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

9.2 RECONCILING ITEMS – EXPENDITURE

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

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

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

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

2. REPORT ON FINANCIAL IMPLEMENTATION

INTRODUCTORY NOTE

Previous EDFs

— Decision 1/2000 of the ACP-EC Council of 27 July 2000 regarding transitional measures provides for some of the unallocated resources from previous EDFs to be used for programmes consistent with the relevant provisions of the Cotonou Agreement and put into early application under transitional measures.

— Commission Decision 410/2001 of 16 March 2001, which fixes the allocations for the indicative programmes of the ACP countries under the ACP-EC Partnership Agreement, provides that the unallocated resources from previous EDFs up to a maximum of EUR 1,2 billion are to be used for implementation in accordance with the rules and procedures of the relevant EDFs, pending the entry into force of the Financial Protocol to the 9th EDF.

— Commission Decision 1033/2001 of 15 June 2001 fixed the allocations for regional programmes and intra-ACP cooperation under the Financial Protocol to the ACP-EC Partnership Agreement.

— Commission Decision 1252/2002 of 11 July 2002 increased the envelope intended for intra-ACP cooperation by EUR 60 million, from the general reserves of the 6th and 7th EDFs, and also provided for the use of these additional funds pending the entry into force of the Financial Protocol to the 9th EDF, in accordance with the rules and procedures applicable to the original EDFs.

— Lastly, Decision 3/2002 of the ACP-EC Council of Ministers of 23 December 2002 took an amount of EUR 25 million from the unallocated resources of the 8th EDF (general reserve) and allocated it to regional cooperation under the ACP-EC Partnership Agreement.

— As the 6th EDF was closed in 2006 and the 7th EDF was closed in 2008, the annual accounts no longer contain implementation tables for these EDFs. However, implementation of the transferred balances can be found in the 9th EDF.

— As in past years, to ensure transparency in the presentation of the accounts for 2009, the tables below set out separately for the 8th EDF the part used for Lomé Convention programming and the part used for programming under the Cotonou Agreement. Regarding the latter, entry in the accounts and the presentation of accounts is based on Article 3(2) of Annex IV to the ACP-EC Partnership Agreement, as regards countries. That Article gives the ACP countries an A envelope to cover macroeconomic support and support for programmes and projects and a B envelope to cover unforeseen needs such as emergency assistance, debt relief initiatives and support to offset the adverse effects of instability in export earnings (14). For the regions, the accounts are set out according to the regional programming as referred to in Chapter 2 of the ACP-EC Partnership Agreement (i.e. regional indicative programmes and intra-ACP cooperation).

— Under Point 4 of Annex Ib (Multiannual financial framework for the period 2008 to 2013) to the ACP-EC Partnership Agreement, the remaining balances and the amounts decommitted under the Funds between 31.12.2007 and the entry into force of the 10th EDF were transferred to the 9th EDF to ensure that the EU administration could do its work and to cover the costs of ongoing projects until the 10th EDF comes into force.

— Council Decision 2010/406/EU decided to use for the benefit of Sudan an amount of EUR 150 million from the funds de-committed from projects under the 9th and previous EDF's for the purpose of addressing the needs of the most vulberable population. This amount has been allocated during 2011.

— Council Decision 2011/315/EU decided to use for the benefit of South Sudan an amount of EUR 200 million from the funds de-committed from projects under the 9th and previous EDF's to be used to support the implementation of the Three Year Southern Sudan Development plan. This amount has not yet been allocated for programming.

10th EDF

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

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

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

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

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

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

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

On the date of entry into force of the 10th EDF, these amounts were supplemented by unexpended balances and are still supplemented by decommitted funds resulting from the system to guarantee the stabilisation of export earnings from primary agricultural products (STABEX) under the Funds prior to the 9th EDF. These balances and decommitted funds should be used and managed in accordance with the revised Cotonou Agreement and the Internal Agreement.

Of the above mentioned 10th EDF allocations, the European Commission manages the amount of EUR 21 152 million as follows

— EUR 15 300 million for the national indicative programmes, comprising: — EUR 13 500 million for the A envelopes, of which EUR 12 467 million in allocations are opened and, from this amount, a sum of EUR 33 million was transferred to regional allocations (MTR region-PALOP). In addition, the A envelope was increased by EUR 57 million representing Stabex decommitted funds; — EUR 1 800 million for the B envelopes, of which EUR 601 million as initial allocations, and EUR 1 199 million as a reserve for unforeseen needs (used for financing different instruments like the yearly FLEX, and the ad-hoc Vulnerability FLEX and response to food prices crisis). Of this total an amount EUR 1 624 Million are openend.

— EUR 1 783 million for the regional indicative programmes, together with a transfer of EUR 33 million resulting in EUR 1 816 of allocations opened;

— EUR 2 700 million in Intra-ACP allocations, of which EUR 2 664 million opened;

— EUR 683 million as a reserve for subsequent allocation to the national and regional indicative programmes following the mid-term and end-of-term reviews;

— EUR 430 million for implementation costs, all opened;

— EUR 256 million OCT allocations: — A enveloppe funds for EUR 195 million, of which EUR 66 million are opened — B enveloppe funds of EUR 15 million, of which EUR 7 million are opened — Regional allocations funds of EUR 40 million, all are opened — Studies/technical assistance funds of EUR 6 million, all opened.

10th EDF non-mobilisable performance reserve

Since the 10th EDF came into force on 1 July 2008, the remaining balances and the amounts decommitted from projects under the 9th and previous EDFs are transferred to the performance reserve of the 10th EDF, with the exception of Stabex funds and 9th EDF administrative envelope. This reserve may be used under the conditions set out in Article 1(4) of the Internal Agreement on the 10th EDF.

Please find below the detail of this reserve as at 31.12.2011:

(EUR million) Total funds transferred to the 10th EDF non-mobilisable reserve: 438 minus funds transferred to the 9th EDF in favour of Sudan, Council Decision 2010/406/EU of 12.07.2010 – 150 Total available in the reserve (ACP+OCT): 288 Note: this reserve is to be decreased by EUR 200 million following Council Decision 2011/315/EU of 23.05.2011 in favour of South Sudan and to be transfered to the 9th EDF

10th EDF Stabex reserve

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

10th EDF Co-financings

Under the 10th EDF, transfer agreements for co-financings from Member States were signed for EUR 89 million and commitment appropriations were opened for a total amount of EUR 79 million, while payment appropriations were opened for the cashed amounts totalling EUR 73 million.

The situation of co-financing appropriations at 31.12.2011 is shown in the table below:

(EUR million) Commitments appropriations Payment appropriations Co-financing - A Envelope 69 61 Co-financing - Intra ACP 12 12 Co-financing - Administrative expenses 2 2 83 75

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

The tables presenting the situation by country and by instrument are annexed.

2.1 ALLOCATIONS

Table 1.1

8th EDF

Evolution of appropriations: 31 December 2011

ANALYSIS OF CREDITS PER INSTRUMENT

(EUR million) Instrument Initial appropriation Increases/decreases in cumulative resources at 31 December 2010 Increase or decrease in resources in 2011 Notes Current appropriation ACP Lomé Total indicative programmes 7 562 (2 396) (29) (15) 5 138 Interest-rate subsidies 370 (278) (9) 83 Emergency aid 140 (4) 136 Aid for refugees 120 (11) (0) (15) 108 Risk capital 1 000 37 1 037 Stabex 1 800 (1 077) 723 Sysmin 575 (463) 112 Structural adjustment 1 400 97 1 497 Heavily indebted poor countries 1 060 1 060 Use of interest income 37 37 Cotonou A envelope 429 429 B envelope 255 255 Total ACP 12 967 (2 314) (38) 10 615 OCT Total indicative programmes 115 (77) (0) (15) 37 Interest-rate subsidies 9 (7) 1 Emergency aid 3 (3) Aid for refugees 1 (1) Risk capital 30 (24) 6 Stabex 6 (4) 1 Sysmin 3 (0) 2 Total OCT 165 (116) (0) 48 Total 8th EDF 13 132 (2 430) (38) 10 663





Table 1.2

9th EDF

Evolution of appropriations: 31 December 2011

ANALYSIS OF CREDITS PER INSTRUMENT

(EUR million) Instrument Initial appropriation Increases/decreases in cumulative resources at 31 December 2010 Increase or decrease in resources in 2011 Notes Current level appropriation ACP A Envelope 5 318 4 095 (51) (16) 9 363 B Envelope 2 108 (807) (6) (16) 1 294 National allocations reserve 1 224 (1 224) CDE, CTA and Parliamentary Assembly 164 7 171 Long term development reserve 258 (258) 0 Regional allocations 904 7 (12) (16) 899 Intra ACP 300 2 936 (6) (16) 3 230 Implementation costs 125 0 3 (17) 128 Interests and other revenue 69 69 Administrative costs 46 46 Special allocation R.D. Congo 108 108 Special allocation Sudan 147 (17) 147 Transfers from 6th EDF - Lomé 24 (1) (16) 22 Transfers from 7th EDF - Lomé 731 (4) (16) 728 Voluntary contribution Peace facility 39 39 Total ACP 10 401 5 772 70 16 244 OCT A Envelope 0 249 249 B Envelope/ Use of C reserve 0 7 7 Long term development reserve 144 (144) Regional allocations 8 41 (0) (16) 49 Technical assistance envelope 2 (1) 1 Transfers from 6th EDF - Lomé 0 0 Transfers from 7th EDF - Lomé 3 3 Total OCT 154 154 (0) 308 Total 9th EDF 10 555 5 926 70 16 552





Table 1.3

10th EDF

Evolution of appropriations: 31 December 2011

ANALYSIS OF CREDITS PER INSTRUMENT

(EUR million) Instrument Initial appropriation Increases/decreases in cumulative resources at 31 December 2010 Increase or decrease in resources in 2011 Notes Current level appropriation ACP A Envelope 12 378 113 (20) 12 491 A Envelope reserve 13 500 (12 385) (82) (20) 1 034 B Envelope 1 464 161 (19) 1 624 B Envelope reserve 1 800 (1 464) (161) (19) 176 Regional allocations 1 816 1 816 Regional allocations reserve 1 783 (1 783) 0 National Allocation Reserve Enveloppe A Stabex 6 (5) (22) 0 NIP/RIP reserve 683 0 683 Intra-ACP 2 330 334 (19) 2 664 Intra-ACP Reserve 2 700 (2 330) (334) (19) 36 Implementation costs 430 0 (0) 430 Interests and other receipts 32 27 58 Cofinancing 79 4 (21) 83 Non-mobilisable reserve ACP 312 (33) (18) 280 Total ACP 20 896 455 24 21 375 OCT A Envelope 66 (19) 66 A Envelope reserve 195 0 (66) (19) 129 B Envelope 4 3 (19) 7 B Envelope reserve 15 (4) (3) (19) 8 Regional allocations reserve 40 0 (40) (19) 0 Regional allocations 0 40 (19) 40 Studies/technical assistance OCT 6 0 6 Non-mobilisable reserve OCT 7 1 (18) 8 Total OCT 256 7 1 264 Total 10th EDF 21 152 462 25 21 639

2.2 CONSOLIDATED ACCOUNTS

Table 2.1

EDF aggregated accounts at 31.12.2011

PROGRESS REPORT

(EUR million) Allocation 8th EDF 9th EDF 10th EDF 8th, 9th and 10th EDF Lomé Programmable aid 5 175 5 175 Non-programmable aid 4 767 4 767 Transfers from other funds 753 753 Sundry revenue 37 37 0 Cotonou A envelope 429 9 611 12 557 22 598 B envelope 255 1 301 1 632 3 188 Regional allocation 947 1 856 2 804 Intra ACP allocation 3 230 2 664 5 894 CDE, CTA and Joint Assembly 171 171 Special allocation Congo, Council Dec. 2003/583/EC 108 108 Special allocation Sudan, Council Dec. 2010/406/EU 147 147 Voluntary contribution Peace facility 39 39 Co-financing (commitment credits) 83 83 Implementation costs and interest. 243 494 737 NIP/RIP reserve 683 683 Regional allocations reserve 0 0 Intra-ACP reserve 36 36 Country reserve 1 346 1 346 Stabex - NIP Reserve A Envelope 0 0 Non-mobilisable performance reserve 288 288 Total 10 663 16 552 21 639 48 854





FED Aggregate total Annual figures At 31.12.2011 % of allocation 2006 2007 2008 2009 2010 2011 Decisions 8 10 640 100 % (265) (211) (53) (42) (45) (60) 9 16 454 99 % 3 187 3 455 775 (54) (116) (9) 10 13 734 62 % 4 766 3 501 2 349 3 118 Total 40 827 2 921 3 244 5 488 3 405 2 187 3 049 Assigned funds 8 10 494 98 % 202 35 55 (42) 8 (13) 9 15 691 95 % 2 915 3 317 3 163 997 476 9 10 8 648 40 % 130 3 184 2 820 2 514 Total 34 833 3 117 3 352 3 348 4 140 3 304 2 509 Payments 8 10 330 97 % 737 483 323 152 158 90 9 14 026 85 % 1 861 2 294 3 253 1 806 1 304 906 10 4 852 22 % 90 1 111 1 772 1 879 Total 29 208 2 598 2 777 3 666 3 069 3 233 2 874 Negative figures represent decommitments.

Table 2.2

EDF aggregated accounts at 31.12.2011

CLASS OF AID

8th EDF % 9th EDF % 10th EDF % Total % (23) (23) (23) (23) Lomé Programmable aid (NIP) Appropriations 5 175 5 175 Decisions 5 166 100 % 5 166 100 % Assigned funds 5 066 98 % 5 066 98 % Payments 4 981 96 % 4 981 96 % Non-programmable aid Appropriations 4 767 4 767 Decisions 4 756 100 % 4 756 100 % Assigned funds 4 742 99 % 4 742 99 % Payments 4 693 98 % 4 693 98 % Transfers from other funds Appropriations 753 753 Decisions 751 100 % 751 100 % Assigned funds 709 94 % 709 94 % Payments 654 87 % 654 87 % Sundry revenue Appropriations 37 37 Decisions 36 96 % 36 96 % Assigned funds 36 96 % 36 96 % Payments 35 94 % 35 94 % Total Appropriations 9 979 753 10 733 Decisions 9 958 100 % 751 100 % 10 709 100 % Assigned funds 9 843 99 % 709 94 % 10 552 98 % Payments 9 708 97 % 654 87 % 10 363 97 % Cotonou A envelope Appropriations 429 9 611 12 557 22 598 Decisions 429 100 % 9 546 99 % 9 276 74 % 19 251 85 % Assigned funds 421 98 % 9 181 96 % 5 635 45 % 15 237 67 % Payments 417 97 % 8 448 88 % 2 778 22 % 11 644 52 % B envelope Appropriations 255 1 301 1 632 3 188 Decisions 252 99 % 1 301 100 % 1 188 73 % 2 742 86 % Assigned funds 229 90 % 1 261 97 % 1 006 62 % 2 497 78 % Payments 204 80 % 1 150 88 % 855 52 % 2 209 69 % CDE, CTA and Joint Assembly Appropriations 171 171 Decisions 169 99 % 169 99 % Assigned funds 159 93 % 159 93 % Payments 154 90 % 154 90 % Regional allocation Appropriations 947 1 856 2 804 Decisions 941 99 % 579 31 % 1 520 54 % Assigned funds 888 94 % 245 13 % 1 133 40 % Payments 673 71 % 92 5 % 765 27 % Intra-ACP allocation Appropriations 3 230 2 664 5 894 Decisions 3 227 100 % 2 150 81 % 5 377 91 % Assigned funds 3 117 97 % 1 438 54 % 4 555 77 % Payments 2 590 80 % 850 32 % 3 441 58 % Voluntary contribution Peace Facility Appropriations 39 39 Decisions 39 100 % 39 100 % Assigned funds 37 95 % 37 95 % Payments 24 62 % 24 62 % Special allocation Congo Council Dec. 2003/583/EC Appropriations 108 108 Decisions 105 97 % 105 97 % Assigned funds 105 97 % 105 97 % Payments 105 97 % 105 97 % Special allocation Sudan Council Dec. 2010/406/EU Appropriations 147 147 Decisions 137 93 % 137 93 % Assigned funds 0 0 % 0 0 % Payments 0 0 % 0 0 % Implementation costs and interest Appropriations 243 494 737 Decisions 238 98 % 462 93 % 700 95 % Assigned funds 233 96 % 297 60 % 530 72 % Payments 227 94 % 274 55 % 501 68 % Total Appropriations 684 15 799 19 203 35 686 Decisions 682 100 % 15 702 99 % 13 656 71 % 30 040 84 % Assigned funds 651 95 % 14 982 95 % 8 620 45 % 24 253 68 % Payments 621 91 % 13 372 85 % 4 849 25 % 18 843 53