Communication from the Commission to the Council, the European Parliament and the European Court of Auditors - Final accounts for the financial year 2006 of THE 6th, 7th, 8th and 9th European Development Funds /* COM/2007/0458 final */





[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES | Brussels, 23.7.2007 COM(2007) 458 final COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND THE EUROPEAN COURT OF AUDITORS FINAL ACCOUNTS FOR THE FINANCIAL YEAR 2006 OF THE 6TH, 7TH, 8TH AND 9TH EUROPEAN DEVELOPMENT FUNDS TABLE OF CONTENTS 1. FINANCIAL STATEMENTS 3 1.1. ACCOUNTING PRINCIPLES AND VALUATION RULES 3 1.2. CONSOLIDATION 4 1.3. CURRENCY AND BASIS FOR CONVERSION 4 1.4. BALANCE SHEET ACCOUNTS 5 1.5. ECONOMIC OUTTURN ACCOUNTS 6 1.6. RECORDING OF OPERATIONS 6 1.7. USE OF ESTIMATES 7 1.8. CLOSURE OF 6th EDF 7 1.9. FINANCIAL STATEMENTS 8 1.10. NOTES TO THE ACCOUNTS 24 1.11. RESTATEMENT OF CERTAIN FIGURES FOR 2005 39 1.12. OFF BALANCE ITEMS 41 2. REPORT ON FINANCIAL IMPLEMENTATION 42 2.1. APPROPRIATIONS AT 31.12.2006 48 2.2. CONSOLIDATED ACCOUNTS 59 2.3. SITUATION BY COUNTRY AND BY INSTRUMENT 67 2.4. OTHER MANAGEMENT INFORMATION 71 3. FINANCIAL INFORMATION EIB 80 3.1. INCOME STATEMENT INVESTMENT FACILITY 81 3.2. BALANCE SHEET INVESTMENT FACILITY 82 3.3. CASH FLOW STATEMENT INVESTMENT FACILITY 83 3.4. STATEMENT OF CHANGES IN EQUITY INVESTMENT FACILITY 84 3.5. NOTES TO THE FINANCIAL STATEMENTS 85 4. APPENDIX – SITUTION BY COUNTRY AND BY INSTRUMENT 101 FINANCIAL STATEMENTS ACCOUNTING PRINCIPLES AND VALUATION RULES Financial Regulations The financial statements were drawn up in accordance with the Financial Regulation applicable to the 9th European Development Fund[1] (EDF). The relevant documents must be presented to the Court of Auditors as provided for in Articles 66, 67 and 68 of the Financial Regulation applicable to the 6th EDF[2], Articles 69, 70 and 71 of the Financial Regulation applicable to the 7th EDF[3], Articles 66, 67 and 68 of the Financial Regulation applicable to the 8th EDF[4] and Articles 102 and 103 of the Financial Regulation applicable to the 9th EDF. Article 102 (9th EDF) stipulates that the Commission shall send the provisional accounts to the Court of Auditors by 31 March of the following year. The Court of Auditors shall in turn make its observations on the accounts known to the Commission by 15 June (Article 103). On the basis of these observations, the Commission approves the final accounts by 31 July and sends them to the European Parliament, the Council and the Court of Auditors. The accounts are then published in the Official Journal by 31 October together with the statement of assurance given by the Court of Auditors in respect of the part of the EDF resources for which the Commission is responsible for financial management. Accrual Based Accounts In accordance with the provisions of article 99 of the 9th EDF Financial Regulation, financial statements are prepared in respect of the principle of accrual based accounting. The accounting information provided by the present IT accounting system (OLAS) has been adjusted, where necessary, in order to provide figures which comply with accrual accounting principles. Additional information in respect of income and expenditure items has also been provided by the Authorising Officer. These financial statements have been drafted in conformity with accounting rules and methods for the EDF drawn up on the basis of International Accounting Standards (IPSAS/IAS) and Generally Accepted Accounting Principles (GAAPs). The layout of the financial statements has been changed following the modification of the acounting rules for the Commission, validated by the Accounting Standards Committee in July 2006.The rules of valuation and accounting methods adopted by the Accounting Officer of the European Development Fund have been applied in respect of the part of the EDF resources for which the European Commission is responsible for financial management. The annual accounts for 2006 are presented as follows: - The financial statements - The reports on financial implementation - The financial statements and information supplied by the European Investment Bank (EIB) Accounting Principles The objectives of financial statements are to provide information about the financial position, performance and cash-flows of an entity that is useful to a wide range of users. For a public sector entity, the objectives are more specifically to provide information useful for decision making, and to demonstrate the accountability of the entity for the resources entrusted to it. If they are to present a true and fair view, financial statements must not only supply relevant information to describe the nature and range of the activities, explain how it is financed and supply definitive information on its operations, but do so in a clear and comprehensible manner which allows comparisons between financial years. It is with these goals in mind that the present document has been drawn up. The accounting system of the European Development Funds comprises general accounts and financial accounts. Both sets of accounts are kept in euro on the basis of the calendar year. The general accounts allow for the preparation of the financial statements as they show all charges and income for the financial year and are designed to establish the financial position in the form of a balance sheet at 31 December. The financial accounts give a detailed picture of the use of EDF resources. They are based on the cash accounting principle. Article 98 of the 9th EDF Financial Regulation sets out the accounting principles to be applied in drawing up the financial statements, as follows: - going concern basis; - prudence; - consistent accounting methods; - comparability of information; - materiality; - no netting; - reality over appearance, and - accrual-based accounting. CONSOLIDATION Each EDF is governed by its own Financial Regulation which imposes the preparation of financial statements for each individual EDF. Accordingly, financial statements are prepared separately for each EDF in respect of the part that is managed by the European Commission. These financial statements are also presented in a consolidated way so as to provide a global view of the financial situation of the resources for which the European Commission is responsible. Given the clear division of responsibilities set out in Article 1 of the 9th EDF Financial Regulation, the financial statements of the Commission and the European Investment Bank – the entities entrusted with the management of EDF resources – have not been consolidated. CURRENCY AND BASIS FOR CONVERSION Functional and reporting currency The financial statements are presented in millions of euros, which is the European Communities' functional and reporting currency. Transactions and balances Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the underlying transactions. Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the exchange rates applying on 31 December 2006: EURO Exchange Rate at 31 December 2006 | GBP 0,6743 | BALANCE SHEET ACCOUNTS Pre-financing amounts Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular pre-financing agreement. The float or advance is repaid or used for the purpose for which it was provided during the period defined in the agreement. If the beneficiary does not incur sufficient eligible expenditure, he has the obligation to return, in whole or in part, the pre-financing advance to the European Development Fund. The amount of the pre-financing is reduced (wholly or partially) by the acceptance of eligible costs and amounts returned. At year-end outstanding pre-financing amounts are valued at the original amount(s) paid to the beneficiary less: any amounts returned, eligible amounts cleared and the estimated eligible amounts not yet cleared at year-end. Guarantees held to secure pre-financed amounts are treated as “Contingent Assets” and as such they are not accounted for in the financial statements (IPSAS 19). Details are however provided in section 1.12 below for information purposes. Debtors Receivables are carried at original requested amounts less any provision for bad debts. A provision for bad debts is established when there is objective evidence that the European Development Fund will not be able to collect the full amount due to it from third parties. Creditors Liabilities are recorded at the eligible amount when a request for payment meets the predefined criteria. The EDF has current liabilities for amounts already due to beneficiaries for which no invoices were received at the reporting date. The recognition criteria foresee that a charge is recognised by the EDF for the amount of the estimated payment due for the period, that is to say the portion of the incurred eligible expenses due to the beneficiaries at the reporting date. Material amounts are recognised as an accrued expense (Accrued Expenditure) on the basis of estimates (e.g. the degree of execution of contracts) provided by the Authorising Officer. Payments due must be pre-recorded when cost claims or expense summaries are received and not at the time of their payment. In these cases, payments due are carried at the original value of the related cost claim or expense summary. Cash & cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. They include accounts held with financial institutions in the ACP states and the OCTs, and with financial institutions in the Member States. ECONOMIC OUTTURN ACCOUNTS Income In application of Accrual Based Accounting Principles the only source of income for the funds is derived from interest payable on various cash balances held with commercial Banks (see notes to the accounts). Expenditure Expenditure should be recognised in the EDF financial statements as expenditure of the period that the events giving rise to a payment occurred, so long as: - A contract has been signed which authorises the payment; - Eligibility criteria, if any, have been met by the beneficiary; and, - A reasonable estimate of the amount due can be made, for example, invoices sent by the beneficiary, degree of execution of contracts etc.. As expenditure incurred by Commission Delegations is not finally entered into the EDF accounts until it has been validated by both the Authorising Officer and the Accounting Officer, any expenditure which did not meet this double criterion at the year end is shown under the heading of "transactions to be finalised". Cash basis expenditure includes all payment orders executed by the banks up to 31 December 2006. In order to comply with accrual accounting principles the cash basis expenditure provided by the present IT accounting system (OLAS) has been adjusted with the additional information provided by the Authorising Officer about pre-financing and accrued expenditure. RECORDING OF OPERATIONS The deadline for the commitment of the funds under the 9th EDF has been set at 31 December 2007 in line with the “sunset clause” adopted by Council Decision 2005/446/CE of 30 May 2005[5]. Entitlements due from the Member States (mainly contributions which have not yet been called or interest due on the late payment of called funds) must be entered in the accounts. These items are set out in the balance sheets for the various EDFs. In accordance with the principles of accrual-based accounting, the financial statements show the financial charges and income for the financial year regardless of the date of payment or collection. USE OF ESTIMATES In accordance with generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management. Significant estimates include, but are not limited to, provisions for future charges, financial risk on accounts receivable, accrued income and charges. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known. CLOSURE OF 6 th EDF Given the state of progress of the 6th EDF, the Authorising Officer decided to close this fund on 31st July 2006. In the absence of a legal basis for the closure of EDFs, the balance remaining has been transferred to the 9th EDF according to the provisions of Part 3 of the Financial regulation applicable to the 9th EDF. This operation involved the transfer to the 9th EDF of the balances of ongoing projets on that date, amounting to EURO 52.105.915,98. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET 2006 for the 6th, 7th, 8th and 9th EDF (EUR millions) | Notes | 31.12.2006 | 31.12.2005 | CURRENT ASSETS | Contributions to be received | 1 | 0,00 | 13,72 | Debtors | 2 | 216,74 | 138,77 | Net Pre-financing | 3 | 2.808,96 | 2.304,20 | Other current assets | 4 | 0,95 | 3,31 | Liaison accounts | 5 | 0,00 | 0,00 | Cash and cash equivalents | 291,50 | 662,10 | STABEX Security accounts | 6 | 191,60 | 371,88 | D.R. Congo special fund | 7 | 3,42 | 19,67 | Cash at banks | 8 | 96,48 | 270,55 | TOTAL ASSETS | 3.318,15 | 3.122,10 | CURRENT LIABILITIES | Accounts payable | 8 | 2.095,84 | 1.485,75 | Liaison accounts | 5 | 0,00 | 0,00 | TOTAL LIABILITIES | 2.095,84 | 1.485,75 | NET ASSETS | 1.222,31 | 1.636,35 | FUNDS & RESERVES | Called fund capital | 10 | 29.900,00 | 27.390,00 | Results carried forward from previous years | 11 | -26.787,49 | -24.261,09 | Result for the year | -2.924,04 | -2.526,40 | Reserves | 12 | 1.033,84 | 1.033,84 | FUNDS & RESERVES | 1.222,31 | 1.636,35 | CONSOLIDATED ECONOMIC OUTTURN ACCOUNT 2006 for the 6th, 7th, 8th and 9th EDF (EUR millions) | Notes | cash basis expenditure 2006 | increase in pre-financing | increase in accrued expenditure | accrual basis expenditure 2006 | accrual basis expenditure 2005 | Operating interest | 2.1 | 0,06 | 0,06 | 0,35 | OPERATING INCOME (1) | 0,06 | 0,06 | 0,35 | Programmable aid | 619,64 | -131,81 | -1,88 | 749,57 | 982,45 | Macro-economic support | 411,33 | 3,51 | 407,82 | 383,01 | Sectoral policy | 817,83 | 260,40 | 353,81 | 911,24 | 492,16 | Intra ACP Projects | 423,34 | 423,08 | 339,10 | 339,36 | 198,91 | Interest-rate subsidies | 1,20 | 1,20 | 0,27 | Emergency aid | 116,33 | 17,05 | 30,84 | 130,12 | 134,92 | Refugee aid | 7,11 | -6,96 | -7,39 | 6,68 | 12,99 | Aids Fund | -0,01 | 0,01 | 0,00 | Risk Capital | 63,11 | 63,11 | 60,80 | STABEX | 189,52 | 189,52 | 66,40 | Sysmin | 15,72 | -0,61 | 13,47 | 29,80 | 13,99 | Transfers from former EDFs | 5,20 | 10,41 | 20,36 | 15,16 | 15,61 | Structural adjustment | 1,07 | 0,18 | 0,89 | 15,89 | Debt relief | 2,00 | 15,42 | 17,42 | 23,19 | Institutional Support | 30,86 | 14,55 | 16,03 | 32,34 | 28,67 | Compensation export receipts | 35,36 | -23,11 | -5,65 | 52,82 | -3,32 | Congo Fund | 15,73 | 51,53 | 22,41 | -13,39 | 89,80 | Operational expenditure | 2.755,35 | 618,20 | 796,53 | 2.933,67 | 2.515,74 | Administrative and financial expenditure | 13 | 6,58 | -36,74 | -19,53 | 23,79 | 28,60 | Total Expenditure (cash basis) | 14 | 2.761,93 | Accrual adjustments | 15 | 195,39 | 581,46 | 777,00 | -0,14 | -0,19 | TOTAL EXPENDITURE / Accrual basis (2) | 16 | 2.957,31 | 2.957,31 | 2.544,15 | NET COST OF OPERATING ACTIVITIES (2-1) | 2.957,26 | 2.957,26 | 2.543,81 | Financial income | 17 | 31,61 | 31,61 | 23,95 | Financial charges | 18 | -0,14 | -0,14 | -0,19 | Provisions | 2.7 | 1,75 | 1,75 | -6,36 | Surplus/(deficit) from financial activities (3) | 33,22 | 33,22 | 17,41 | NET ECONOMIC RESULT (1-2+3) | -2.924,04 | -2.924,04 | -2.526,40 | CASH FLOW STATEMENT 2006 for the 6th, 7th, 8th and 9th EDF (EUR millions) | notes | 31.12.2006 | 31.12.2005 | Net economic result | -2.924,04 | -2.526,40 | Increase in provision | 2.7 | -1,75 | 6,36 | Financial income adjustment | 17 | 0,07 | -1,40 | Operational income adjustment | 2.1 | 0,04 | 0,30 | Accrual adjustments | 15 | 195,39 | 59,42 | Financial charges | 18 | 0,14 | 0,19 | Increase in provision for bank charges | 9.3 | -0,04 | -0,03 | Decrease in transactions awaiting finalisation | 4 | 2,73 | 5,85 | Cash flows from operating activities | -2.727,46 | -2.455,71 | Contributions from Member States | 1 | 2.525,82 | 2.199,70 | Cash flows from financing activities | 2.525,82 | 2.199,70 | Net increase/decrease in cash and cash equivalent | -201,64 | -256,01 | Treasury balance at beginning of period | 8 | 270,55 | 261,89 | STABEX security accounts at beginning of period | 6 | 371,88 | 430,17 | Congo Account | 7 | 19,67 | 106,83 | SWIFT account | 9.2 | -119,23 | 0,00 | Cash and cash equivalent at beginning of period | 542,87 | 798,88 | Treasury balance at end of period | 8 | 96,48 | 270,55 | STABEX security accounts at end of period | 6 | 191,60 | 371,88 | Congo Account | 7 | 3,42 | 19,67 | SWIFT account | 9.2 | 49,73 | -119,23 | Cash and cash equivalent at end of period | 341,23 | 542,87 | CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL 2006 for the 6th, 7th, 8th and 9th EDF (EUR millions) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Equity | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | notes | 10 | 10 | 10 | 11 | 12 | Closing balance 2004 | 42.250,15 | 17.210,15 | 25.040,00 | -24.261,09 | 1.033,84 | 1.812,75 | Contributions | -2.350,00 | 2.350,00 | 2.350,00 | Capital increase | 627,00 | 627,00 | Transfers from former FED | Net economic result | -2.526,40 | -2.526,40 | Other movements | Closing balance 2005 | 42.877,15 | 15.487,15 | 27.390,00 | -26.787,49 | 1.033,84 | 1.636,35 | Contributions | -2.510,00 | 2.510,00 | 2.510,00 | Capital increase | 122,00 | 122,00 | Transfers from former FED | Net economic result | -2.924,04 | -2.924,04 | Other movements | Closing balance 2006 | 42.999,15 | 13.099,15 | 29.900,00 | -29.711,53 | 1.033,84 | 1.222,31 | 6th EDF BALANCE SHEET 2006 (EUR millions) | Notes | 31.07.2006 | 31.12.2005 | CURRENT ASSETS | Contributions to be received | 1 | 0,00 | 0,00 | Debtors | 2 | 0,00 | 9,13 | Net Pre-financing | 3 | 0,00 | 37,01 | Other current assets | 4 | 0,00 | 2,85 | Liaison accounts | 5 | 2.279,31 | 2.355,51 | Cash and cash equivalents | 0,00 | 0,00 | STABEX Security accounts | 6 | 0,00 | 0,00 | D.R. Congo special fund | 7 | 0,00 | 0,00 | Cash at bank | 8 | 0,00 | 0,00 | TOTAL ASSETS | 2.279,31 | 2.404,50 | CURRENT LIABILITIES | Accounts payable | 9 | 0,00 | 38,77 | Liaison accounts | 5 | 2.279,31 | 2.279,31 | TOTAL LIABILITIES | 2.279,31 | 2.318,07 | NET ASSETS | 0,00 | 86,43 | FUNDS & RESERVES | Called fund capital | 10 | 7.560,00 | 7.560,00 | Results carried forward from previous years | 11 | -7.290,58 | -7.243,09 | Result for the year | -10,36 | -47,49 | Reserves | 12 | -259,06 | -182,99 | FUNDS & RESERVES | 0,00 | 86,43 | 6th EDF ECONOMIC OUTTURN ACCOUNT 2006 (EUR millions) | Notes | cash basis expenditure 2006 | increase in pre-financing | increase in accrued expenditure | accrual basis expenditure 2006 | accrual basis expenditure 2005 | Operating interest | 2.1 | OPERATING INCOME (1) | Programmable aid | 4,79 | -37,50 | -30,49 | 11,81 | 39,83 | Macro-economic support | Sectoral policy | Intra ACP Projects | -10,00 | -8,27 | 1,73 | 1,91 | Interest-rate subsidies | -0,02 | Emergency aid | Refugee aid | -0,05 | 0,05 | 0,13 | Aids Fund | -0,01 | 0,01 | 0,00 | Risk Capital | 1,22 | STABEX | Sysmin | 0,04 | 0,04 | 0,04 | Transfers from former EDFs | 0,15 | -0,11 | -0,06 | 0,21 | 0,78 | Structural adjustment | Debt relief | institutional support | Compensation export receipts | Congo Fund | Operational expenditure | 4,95 | -47,67 | -38,77 | 13,85 | 43,89 | Administrative and financial expenditure | 13 | 0,00 | 0,00 | 0,11 | Total Expenditure (cash basis) | 14 | 4,95 | Accrual adjustments | 15 | 8,90 | -47,67 | -38,77 | 0,00 | -0,09 | TOTAL EXPENDITURE / Accrual basis (2) | 16 | 13,85 | 13,85 | 43,92 | NET COST OF OPERATING ACTIVITIES (2-1) | 13,85 | 13,85 | 43,92 | Financial income | 17 | Financial charges | 18 | 0,00 | 0,00 | -0,09 | Provisions | 2.7 | 3,49 | 3,49 | -3,48 | Surplus/(deficit) from financial activities (3) | 3,49 | 3,49 | -3,57 | NET ECONOMIC RESULT (1-2+3) | -10,36 | -10,36 | -47,49 | 6th EDF STATEMENT OF CHANGES IN CAPITAL 2006 (EUR millions) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Equity | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | notes | 10 | 10 | 10 | 11 | 12 | Closing balance 2004 | 7.560,00 | 0,00 | 7.560,00 | -7.243,09 | -158,43 | 158,48 | Contributions | Capital increase | Transfers to 9th FED | -24,56 | -24,56 | Net economic result | -47,49 | -47,49 | Other movements | Closing balance 2005 | 7.560,00 | 0,00 | 7.560,00 | -7.290,58 | -182,99 | 86,43 | Contributions | Capital increase | Transfers to 9th FED | -76,06 | -76,06 | Net economic result | -10,36 | -10,36 | Other movements | Closing balance 2006 | 7.560,00 | 0,00 | 7.560,00 | -7.300,94 | -259,06 | 0,00 | 7th EDF BALANCE SHEET 2006 (EUR millions) | Notes | 31.12.2006 | 31.12.2005 | CURRENT ASSETS | Contributions to be received | 1 | 0,00 | 0,00 | Debtors | 2 | 17,06 | 17,46 | Net Pre-financing | 3 | 203,75 | 287,54 | Other current assets | 4 | 0,00 | 0,00 | Liaison accounts | 5 | 2.279,31 | 2.279,31 | Cash and cash equivalents | 0,00 | 0,00 | STABEX Security accounts | 6 | 0,00 | 0,00 | D.R. Congo special fund | 7 | 0,00 | 0,00 | Cash at bank | 8 | 0,00 | 0,00 | TOTAL ASSETS | 2.500,12 | 2.584,30 | CURRENT LIABILITIES | Accounts payable | 9 | 92,62 | 148,21 | Liaison accounts | 5 | 1.868,50 | 1.582,59 | TOTAL LIABILITIES | 1.961,12 | 1.730,80 | NET ASSETS | 539,00 | 853,50 | FUNDS & RESERVES | Called fund capital | 10 | 10.940,00 | 10.940,00 | Results carried forward from previous years | 11 | -9.527,36 | -9.233,99 | Result for the year | -187,83 | -293,37 | Reserves | 12 | -685,81 | -559,14 | FUNDS & RESERVES | 539,00 | 853,50 | 7th EDF ECONOMIC OUTTURN ACCOUNT 2006 (EUR millions) | Notes | cash basis expenditure 2006 | increase in pre-financing | increase in accrued expenditure | accrual basis expenditure 2006 | accrual basis expenditure 2005 | Operating interest | 2.1 | OPERATING INCOME (1) | Programmable aid | 88,71 | -27,43 | -10,60 | 105,55 | 194,78 | Macro-economic support | Sectoral policy | Intra ACP Projects | -50,00 | -41,33 | 8,67 | 9,55 | Interest-rate subsidies | -0,01 | -0,01 | 0,02 | Emergency aid | -0,21 | -0,21 | 0,01 | Refugee aid | -0,18 | -0,18 | -0,66 | -0,66 | 0,49 | Aids Fund | Risk Capital | 5,46 | 5,46 | 12,23 | STABEX | 51,71 | 51,71 | 50,40 | Sysmin | 12,74 | 0,24 | 4,09 | 16,59 | 8,28 | Transfers from former EDFs | 0,78 | -6,63 | -6,95 | 0,46 | 14,83 | Structural adjustment | 0,03 | 0,03 | 0,03 | Debt relief | 0,06 | 0,06 | 0,07 | Institutional Support | Compensation export receipts | Congo Fund | Operational expenditure | 159,24 | -84,01 | -55,59 | 187,66 | 290,69 | Administrative and financial expenditure | 13 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | Total Expenditure (cash basis) | 14 | 159,24 | Accrual adjustments | 15 | 28,42 | -84,01 | -55,59 | TOTAL EXPENDITURE / Accrual basis (2) | 16 | 187,66 | 187,66 | 290,69 | NET COST OF OPERATING ACTIVITIES (2-1) | 187,66 | 187,66 | 290,69 | Financial income | 17 | Financial charges | 18 | Provisions | 2.7 | -0,18 | -0,18 | -2,68 | Surplus/(deficit) from financial activities (3) | -0,18 | -0,18 | -2,68 | NET ECONOMIC RESULT (1-2+3) | -187,83 | -187,83 | -293,37 | 7th EDF STATEMENT OF CHANGES IN CAPITAL 2006 (EUR millions) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Equity | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | notes | 10 | 10 | 10 | 11 | 12 | Closing balance 2004 | 10.940,00 | 0,00 | 10.940,00 | -9.233,99 | -473,06 | 1.232,96 | Contributions | Capital increase | Transfers to 9th FED | -86,09 | -86,09 | Net economic result | -293,37 | -293,37 | Other movements | Closing balance 2005 | 10.940,00 | 0,00 | 10.940,00 | -9.527,36 | -559,14 | 853,50 | Contributions | Capital increase | Transfers to 9th FED | -126,67 | -126,67 | Net economic result | -187,83 | -187,83 | Other movements | Closing balance 2006 | 10.940,00 | 0,00 | 10.940,00 | -9.715,19 | -685,81 | 539,00 | 8th EDF BALANCE SHEET 2006 (EUR millions) | Notes | 31.12.2006 | 31.12.2005 | CURRENT ASSETS | Contributions to be received | 1 | 0,00 | 13,72 | Debtors | 2 | 70,61 | 55,78 | Net Pre-financing | 3 | 888,93 | 1.007,78 | Other current assets | 4 | 0,00 | 0,00 | Liaison accounts | 5 | 2.450,58 | 928,96 | Cash and cash equivalents | 0,00 | 0,00 | STABEX Security accounts | 6 | 0,00 | 0,00 | D.R. Congo special fund | 7 | 0,00 | 0,00 | Cash at bank | 8 | 0,00 | 0,00 | TOTAL ASSETS | 3.410,12 | 2.006,24 | CURRENT LIABILITIES | Accounts payable | 9 | 651,73 | 611,17 | Liaison accounts | 5 | 2.065,45 | 2.065,45 | TOTAL LIABILITIES | 2.717,19 | 2.676,62 | NET ASSETS | 692,93 | -670,38 | FUNDS & RESERVES | Called fund capital | 10 | 11.295,00 | 8.785,00 | Results carried forward from previous years | 11 | -7.851,95 | -6.963,08 | Result for the year | -872,26 | -888,87 | Reserves | 12 | -1.877,85 | -1.603,43 | FUNDS & RESERVES | 692,93 | -670,38 | 8th EDF ECONOMIC OUTTURN ACCOUNT 2006 (EUR millions) | Notes | cash basis expenditure 2006 | increase in pre-financing | increase in accrued expenditure | accrual basis expenditure 2006 | accrual basis expenditure 2005 | Operating interest | 2.1 | OPERATING INCOME (1) | Programmable aid | 477,43 | -92,87 | 5,13 | 575,43 | 714,52 | Macro-economic support | 13,82 | 0,75 | 13,07 | 77,34 | Sectoral policy | 16,49 | -3,05 | 3,67 | 23,21 | 8,41 | Intra ACP Projects | Interest-rate subsidies | 1,21 | 1,21 | 0,27 | Emergency aid | 0,22 | -0,96 | -0,20 | 0,98 | 1,04 | Refugee aid | 7,29 | -6,73 | -6,73 | 7,29 | 12,37 | Aids Fund | Risk Capital | 57,65 | 57,65 | 47,35 | STABEX | 137,80 | 137,80 | 16,00 | Sysmin | 2,98 | -0,85 | 9,33 | 13,17 | 5,67 | Transfers from former EDFs | Structural adjustment | 1,04 | 0,18 | 0,86 | 15,86 | Debt relief - HIPC AND WB | 15,36 | 15,36 | 15,52 | Institutional Support | Compensation export receipts | 20,20 | -0,49 | 10,11 | 30,80 | -18,57 | D.R. Congo Fund | Operational expenditure | 736,15 | -104,01 | 36,66 | 873,83 | 895,78 | Administrative and financial expenditure | 13 | 0,66 | -0,08 | 3,90 | 4,64 | 1,74 | Total Expenditure (cash basis) | 14 | 736,81 | Accrual adjustments | 15 | 144,65 | -104,09 | 40,56 | TOTAL EXPENDITURE / Accrual basis (2) | 16 | 881,47 | 881,47 | 897,51 | NET COST OF OPERATING ACTIVITIES (2-1) | 881,47 | 881,47 | 897,51 | Financial income | 17 | 9,13 | 9,13 | 8,84 | Financial charges | 18 | Provisions | 2.7 | 0,08 | 0,08 | -0,19 | Surplus/(deficit) from financial activities (3) | 9,20 | 9,20 | 8,65 | NET ECONOMIC RESULT (1-2+3) | -872,26 | -872,26 | -888,87 | 8th EDF STATEMENT OF CHANGES IN CAPITAL 2006 (EUR millions) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Equity | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | notes | 10 | 10 | 10 | 11 | 12 | Closing balance 2004 | 12.840,00 | 6.405,00 | 6.435,00 | -6.963,08 | -1.319,54 | -1.847,63 | Contributions | -2.350,00 | 2.350,00 | 2.350,00 | Capital increase | Transfers to 9th FED | -283,89 | -283,89 | Net economic result | -888,87 | -888,87 | Other movements | Closing balance 2005 | 12.840,00 | 4.055,00 | 8.785,00 | -7.851,95 | -1.603,43 | -670,38 | Contributions | -2.510,00 | 2.510,00 | 2.510,00 | Capital increase | Transfers to 9th FED | -274,42 | -274,42 | Net economic result | -872,26 | -872,26 | Other movements | Closing balance 2006 | 12.840,00 | 1.545,00 | 11.295,00 | -8.724,21 | -1.877,85 | 692,93 | 9th EDF BALANCE SHEET 2006 (EUR millions) | Notes | 31.12.2006 | 31.12.2005 | CURRENT ASSETS | Contributions to be received | 1 | 0,00 | 0,00 | Debtors | 2 | 129,07 | 56,41 | Net Pre-financing | 3 | 1.716,28 | 971,88 | Other current assets | 4 | 0,95 | 0,46 | Liaison accounts | 5 | 1.868,50 | 1.582,59 | Cash and cash equivalents | 291,50 | 662,10 | STABEX Security accounts | 6 | 191,60 | 371,88 | D.R. Congo special fund | 7 | 3,42 | 19,67 | Cash at bank | 8 | 96,48 | 270,55 | TOTAL ASSETS | 4.006,30 | 3.273,43 | CURRENT LIABILITIES | Accounts payable | 9 | 1.351,49 | 687,61 | Liaison accounts | 5 | 2.664,43 | 1.219,01 | TOTAL LIABILITIES | 4.015,92 | 1.906,62 | NET ASSETS | -9,62 | 1.366,81 | FUNDS & RESERVES | Called fund capital | 10 | 105,00 | 105,00 | Results carried forward from previous years | 11 | -2.117,60 | -820,93 | Result for the year | -1.853,59 | -1.296,67 | Reserves | 12 | 3.856,56 | 3.379,41 | FUNDS & RESERVES | -9,62 | 1.366,81 | 9th EDF ECONOMIC OUTTURN ACCOUNT 2006 (EUR millions) | Notes | cash basis expenditure 2006 | increase in pre-financing | increase in accrued expenditure | accrual basis expenditure 2006 | accrual basis expenditure 2005 | Operating interest | 2.1 | 0,06 | 0,06 | 0,35 | OPERATING INCOME (1) | 0,06 | 0,06 | 0,35 | Programmable aid | 48,70 | 25,99 | 34,07 | 56,78 | 33,32 | Macro-economic support | 397,51 | 2,76 | 394,75 | 305,66 | Sectoral policy | 801,34 | 263,45 | 350,14 | 888,03 | 483,75 | Intra ACP Projects | 423,34 | 483,08 | 388,69 | 328,96 | 187,45 | Interest-rate subsidies | Emergency aid | 116,11 | 18,01 | 31,25 | 129,35 | 133,87 | Refugee aid | Aids Fund | Risk Capital | STABEX | Sysmin | Transfers from former EDFs | 4,27 | 17,15 | 27,37 | 14,49 | Structural adjustment | Debt relief -HIPC and World Bank | 2,00 | 2,00 | 7,60 | Institutional Support | 30,86 | 14,55 | 16,03 | 32,34 | 28,67 | Compensation export receipts | 15,16 | -22,62 | -15,76 | 22,02 | 15,25 | D.R. Congo Fund | 15,73 | 51,53 | 22,41 | -13,39 | 89,80 | Operational expenditure | 1.855,01 | 853,89 | 854,22 | 1.855,34 | 1.285,38 | Administrative and financial expenditure | 13 | 5,91 | -36,66 | -23,43 | 19,15 | 26,75 | Total Expenditure (cash basis) | 14 | 1.860,93 | Accrual adjustments | 15 | 13,42 | 817,23 | 830,79 | -0,14 | -0,10 | TOTAL EXPENDITURE / Accrual basis (2) | 16 | 1.874,34 | 1.874,34 | 1.312,03 | NET COST OF OPERATING ACTIVITIES (2-1) | 1.874,29 | 1.874,29 | 1.311,69 | Financial income | 17 | 22,49 | 22,49 | 15,12 | Financial charges | 18 | -0,14 | -0,14 | -0,10 | Provisions | 2.7 | -1,65 | -1,65 | Surplus/(deficit) from financial activities (3) | 20,70 | 20,70 | 15,02 | NET ECONOMIC RESULT (1-2+3) | -1.853,59 | -1.853,59 | -1.296,67 | 9th EDF STATEMENT OF CHANGES IN CAPITAL 2006 (EUR millions) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Equity | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | notes | 10 | 10 | 10 | 11 | 12 | Closing balance 2004 | 10.910,15 | 10.805,15 | 105,00 | -820,93 | 2.984,87 | 2.268,94 | Contributions | Capital increase | 627,00 | 627,00 | Transfers from other EDF | 394,54 | 394,54 | Net economic result | -1.296,67 | -1.296,67 | Other movements | Closing balance 2005 | 11.537,15 | 11.432,15 | 105,00 | -2.117,60 | 3.379,41 | 1.366,81 | Contributions | Capital increase | 122,00 | 122,00 | Transfers from other EDF | 477,15 | 477,15 | Net economic result | -1.853,59 | -1.853,59 | Other movements | Closing balance 2006 | 11.659,15 | 11.554,15 | 105,00 | -3.971,18 | 3.856,56 | -9,62 | NOTES TO THE ACCOUNTS Notes to the balance sheet 1. Contributions to be received Details of contributions called up and received during the year 2006 are shown in table 1. The EIB contribution is the sum of the Special Congo Contribution (see note 10) and the 20 EUR millions transfer referred to in note 10. table 1 | EUR millions | Contributions | % | Called up in 2005 | Received in 2005 | Contributions to be received at 31/12/2005 | Called up in 2006 | Received in 2006 | Contributions to be received at 31/12/2006 | total called up | Austria | 2,65 | 61,75 | 61,75 | 66,52 | 66,52 | 248,44 | Belgium | 3,92 | 91,34 | 91,34 | 98,39 | 98,39 | 367,50 | Denmark | 2,14 | 49,86 | 49,86 | 53,71 | 53,71 | 200,63 | Finland | 1,48 | 34,48 | 34,48 | 37,15 | 37,15 | 138,75 | France | 24,30 | 566,19 | 594,85 | 13,72 | 609,93 | 623,65 | 2.278,13 | Germany | 23,36 | 544,29 | 544,29 | 586,34 | 586,34 | 2.190,00 | Greece | 1,25 | 29,13 | 29,13 | 31,38 | 31,38 | 117,19 | Ireland | 0,62 | 14,45 | 14,45 | 15,56 | 15,56 | 58,13 | Italy | 12,54 | 292,18 | 292,18 | 314,75 | 314,75 | 1.175,63 | Luxemburg | 0,29 | 6,76 | 6,76 | 7,28 | 7,28 | 27,19 | Netherlands | 5,22 | 121,63 | 121,63 | 131,02 | 131,02 | 489,38 | Portugal | 0,97 | 22,60 | 22,60 | 24,35 | 24,35 | 90,94 | Spain | 5,84 | 136,07 | 136,07 | 146,58 | 146,58 | 547,50 | Sweden | 2,73 | 63,61 | 63,61 | 68,52 | 68,52 | 255,94 | United Kingdom | 12,69 | 295,68 | 295,68 | 318,52 | 318,52 | 1.189,69 | EIB 8th EDF | 20,00 | 20,00 | 120,00 | STABEX | 1.800,00 | TOTAL 8th EDF | 2.350,00 | 2.378,66 | 13,72 | 2.510,00 | 2.523,72 | 0,00 | 11.295,00 | EIB 9th EDF | 105,00 | TOTAL 9th EDF | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 105,00 | TOTAL | 100,00 | 2.350,00 | 2.378,66 | 13,72 | 2.510,00 | 2.523,72 | 0,00 | 11.400,00 | 2. Debtors The detail of this heading is shown in table 2: table 2 | EUR millions | Debtors | notes | 6th | 7th | 8th | 9th | Total at 31/12/2006 | Total at 31/12/2005 | Interest on late contributions | 2.1 | 2,09 | 2,09 | 2,13 | Interest on late contributions - STABEX | 2.2 | 0,79 | 0,79 | 0,79 | Interest receivable - European banks | 2.3 | 0,88 | 0,88 | 0,84 | Interest receivable - STABEX security | 2.4 | 0,61 | 0,61 | 0,72 | Recovery orders to be issued | 2.5 | 14,54 | 62,38 | 119,67 | 196,58 | 122,15 | Open recoveries | 2.6 | 5,38 | 8,35 | 6,68 | 20,40 | 18,52 | - Doubtful debts | 2.7 | 2,87 | 0,11 | 1,65 | 4,63 | 6,37 | TOTAL | 0,00 | 17,06 | 70,61 | 129,07 | 216,74 | 138,77 | In accordance with the provisions of the Cotonou Agreement, interest income is presented in the balance sheet of the 9th EDF. The sole exception is the interest earned in STABEX security accounts which is presented in the 8th EDF as this aid instrument does not feature in the 9th EDF (see notes 6 and 17). (2.1) Interest on late contributions In accordance with Article 40(4) of the 9th EDF Financial Regulation interest is charged to the Member States in the event of late payment of the called-up contributions. Such funds can be used for financing projects. This interest results in an effective increase in the Funds’ overall appropriations and represents its only source of operating income (see economic outturn account). Details of interests charged and subsequently paid by the Member States are given in table 2.1. table 2.1 | EUR millions | Interest for late payment 31/12/2006 | Balance at 31/12/2005 | Interest payable 2006 | Interest paid 2006 | Balance at 31/12/06 | Austria | Belgium | 0,01 | 0,01 | Denmark | Finland | France | 1,04 | 0,02 | 0,05 | 1,00 | Germany | Greece | 0,01 | 0,01 | Ireland | 0,02 | 0,02 | Italy | Luxemburg | Netherlands | Portugal | Spain | 0,06 | 0,06 | Sweden | 0,00 | 0,00 | United Kingdom | 1,02 | 1,02 | TOTAL | 2,13 | 0,06 | 0,09 | 2,09 | (2.2) Interest on late contributions STABEX All STABEX contributions were received prior to the beginning of the 2006 financial year. The amount shown for interest due represents the outstanding balance carried over and corresponds to interest due from France. (2.3) Interest receivable European banks and STABEX main account This amount represents interest earned on the European bank accounts and the STABEX current account during the financial year 2006 but only credited to the bank account in 2007. (2.4) Interest receivable STABEX security accounts This amount represents interest earned on the STABEX security accounts during the financial year 2006 but only credited to the bank account in 2007. This interest is the property of the relevant beneficiary countries. (2.5) Recovery orders to be issued In order to apply accrual accounting principles, the Authorising Officer has estimated the amount of advances to be recovered for which recovery orders have yet to be issued. Details are shown table 2.2 table 2.2 | EUR millions | recovery orders to be issued | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31/12/06 | 14,54 | 62,38 | 119,67 | 196,58 | Total at 31/12/05 | 2,38 | 15,38 | 53,19 | 51,19 | 122,15 | increase | -2,38 | -0,85 | 9,19 | 68,48 | 74,44 | (2.6) Recoveries The closing balance for recovery orders represents the value of recovery orders issued but unpaid at the year end. (2.7) Provision for doubtful debts In compliance with IPSAS 19, the Accounting Officer has established a provision for doubtful debts on two variables: - Age of the debt, applying a provision of 20% of the euro value for each year the debt is outstanding - The evaluation of the non recovery risk, in collaboration with the Authorising Officer. Potential Exchange rate losses (on Recovery Orders not issued in euro) are not taken into account for this calculation, as these are not considered to be material. The detail of this provision is shown is table 2.4: table 2.4 | EUR millions | Provision for doubtful debts | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL | Balance at 31/12/2006 | 2,87 | 0,11 | 1,65 | 4,63 | Balance at 31/12/2005 | 3,49 | 2,69 | 0,19 | 6,37 | increase | -3,49 | 0,18 | -0,08 | 1,65 | -1,75 | 3. Net Pre-financing Following the principles of accrual accounting, advance payments are classified as assets. The figures for open Pre-financing have been provided by the Authorising Officer (see table 3.1) and have been revised downwards by the open recoveries concerning advances and by the calculated figures for recovery orders to be issued, as shown in table 3. table 3 | EUR millions | Net Pre-financing | notes | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL 31/12/2006 | TOTAL 31/12/2005 | Pre-financing | 3.1 | 223,67 | 959,66 | 1.841,04 | 3.024,37 | 2.442,90 | Advances for study grants management | 3.2 | 1,58 | 1,58 | 1,96 | -open recoveries | 2.3 | 5,38 | 8,35 | 6,68 | 20,40 | 18,52 | -Recovery orders to be issued | 2.5 | 14,54 | 62,38 | 119,67 | 196,58 | 122,15 | TOTAL | 0,00 | 203,75 | 888,93 | 1.716,28 | 2.808,96 | 2.304,20 | (3.1) Pre-financing Many contracts provide for payments of advances before the commencement of works, deliveries of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments on account on the basis of progress reports. Advances, which normally are paid in the currency of the country or territory where the project is executed, are kept separate in the accounts of the Authorising Officer to allow them to be cleared. The table below summarizes outstanding advances (except for Structural adjustment programmes and direct budgetary support programme) registered in the Authorising Officer's accounts at the end of the year. Conversion into EUR is made using the official exchange rate of December 31, 2006. table 3.1 | EUR millions | Pre-financing | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31/12/2006 | 223,67 | 959,66 | 1.841,04 | 3.024,37 | Total at 31/12/2005 | 47,67 | 307,68 | 1.063,75 | 1.023,80 | 2.442,90 | increase | -47,67 | -84,01 | -104,09 | 817,23 | 581,46 | (3.2) Advances for study grants management This amount corresponds to advances paid to external bodies for the management of study awards. 4. Other current assets This amount comprises all payments/receipts awaiting final allocation to the appropriate projects as shown in table 4. table 4 | EUR millions | Other current assets | 6th EDF | 9th EDF | Total at 31/12/06 | Total at 31/12/05 | Expenditure to be finalised | 2,65 | 2,65 | 2,85 | Devaluation | 0,00 | 0,00 | 0,00 | Income to regularise | -2,12 | -2,12 | -0,06 | RAR on offsettings | 0,42 | 0,42 | 0,51 | TOTAL | 0,00 | 0,95 | 0,95 | 3,31 | 5. Liaison accounts For reasons of efficiency, there is a single treasury for all the EDFs being implemented; this leads to operations between the various EDFs, which are balanced out in the liaison accounts between the various balance sheets. Balances on the liaison accounts at 31/12/2006 are detailed in tables 5 and 5.1. table 5 | EUR millions | Liaison accounts | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Total at 31/12/06 | Total at 31/12/05 | to/from 6th EDF | 2.279,31 | -2.065,45 | -213,85 | -76,20 | to/from 7th EDF | -2.279,31 | 1.868,50 | -410,80 | -696,71 | to/from 8th EDF | 2.065,45 | -2.450,58 | -385,12 | 1.136,49 | to/from 9th EDF | 213,85 | -1.868,50 | 2.450,58 | 795,93 | -363,58 | 0,00 | 410,80 | 385,12 | -795,93 | 0,00 | 0,00 | table 5.1 | (EUR millions) | Liaison accounts | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL | 2006 | assets | 2.279,31 | 2.279,31 | 2.450,58 | 1.868,50 | 8.877,69 | liabilities | 2.279,31 | 1.868,50 | 2.065,45 | 2.664,43 | 8.877,69 | Total 2006 | 0,00 | 410,80 | 385,12 | -795,93 | 0,00 | 2005 | assets | 2.355,51 | 2.279,31 | 928,96 | 1.582,59 | 7.146,37 | liabilities | 2.279,31 | 1.582,59 | 2.065,45 | 1.219,01 | 7.146,37 | Total 2005 | 76,20 | 696,71 | -1.136,49 | 363,58 | 0,00 | Cash and cash equivalents 6. STABEX Security accounts This heading shows the cash balance remaining on the security STABEX accounts opened in the name of the various beneficiary States. The breakdown by country is shown in table 6: table 6 | EUR millions | FED | Balance at 31/12/2005 | Interest | Payments | Balance at 31/12/2006 | BENIN | 8th | 0,05 | 0,00 | 0,00 | 0,05 | BURKINA FASO | 8th | 0,76 | 0,02 | 0,00 | 0,78 | BURUNDI | 7th/8th | 26,40 | 0,74 | 0,51 | 26,62 | CAMEROUN | 8th | 5,37 | 0,15 | 0,00 | 5,52 | COMORES | 8th | 0,05 | 0,00 | 0,00 | 0,06 | DOMINICA | 8th | 5,28 | 0,15 | 5,17 | 0,26 | ETHIOPIA | 8th | 0,90 | 0,03 | 0,00 | 0,93 | GAMBIA | 8th | 1,00 | 0,03 | 0,00 | 1,03 | GRENADA | 8th | 0,33 | 0,01 | 0,00 | 0,34 | GUINEA-BISSAU | 8th | 0,33 | 0,01 | 0,00 | 0,34 | COTE D'IVOIRE | 8th | 42,83 | 1,05 | 28,03 | 15,85 | JAMAICA | 8th | 0,58 | 0,02 | 0,00 | 0,60 | MADAGASCAR | 8th | 13,81 | 0,37 | 13,53 | 0,65 | MALAWI | 8th | 0,91 | 0,03 | 0,00 | 0,94 | MAURITANIA | 8th | 17,72 | 0,50 | 0,00 | 18,22 | PAPUA-NEW GUINEA | 8th | 0,66 | 0,02 | 0,00 | 0,68 | RWANDA | 8th | 5,73 | 0,16 | 0,00 | 5,89 | SENEGAL | 8th | 10,05 | 0,28 | 0,00 | 10,33 | SIERRA LEONE | 8th | 3,05 | 0,09 | 0,00 | 3,13 | SAINT LUCIA | 8th | 13,67 | 0,38 | 0,00 | 14,05 | SOLOMON ISLANDS | 8th | 14,03 | 0,10 | 14,06 | 0,08 | SUDAN | 7th/8th | 150,56 | 3,96 | 100,00 | 54,52 | ST VINCENT & GRENADINES | 8th | 3,94 | 0,11 | 0,00 | 4,05 | TANZANIA | 8th | 30,86 | 0,50 | 17,36 | 14,00 | TONGA | 8th | 0,09 | 0,00 | 0,00 | 0,09 | UGANDA | 8th | 20,12 | 0,47 | 10,87 | 9,72 | ZIMBABWE | 8th | 2,82 | 0,08 | 0,00 | 2,90 | TOTAL STABEX | 371,88 | 9,24 | 189,52 | 191,60 | The balance on the stabex security accounts represents the total of STABEX funds available and which will be transferred to the relevant beneficiary ACP State at a future date. This total amount concerns the 8th EDF, with the exception of 8,23 EUR millions allocated to Burundi and 2,51 EUR millions allocated to Sudan, which fell under the 7th EDF. In addition to these funds, there are other STABEX funds held by beneficiary ACP States. Once the Commission and the beneficiary (ACP) State have reached agreement on how the STABEX funds are to be utilised, a transfer convention is signed by both parties. In accordance with the provisions of Article 211 of the Lomé IV Agreement[6] (as revised), the funds are transferred into an interest bearing double signature account (Commission official and Beneficiary State) opened in the name of the ACP State. The Commission official retains the power of signature over the account in order to ensure that the funds are disbursed as intended. The funds are the property of the ACP State and as such are not recorded as assets in the EDF Annual Accounts. Details on these accounts are however provided in the annual EDF Financial Management Report. 7. Special D.R. Congo account This balance represents the amounts available for D.R. Congo in accordance with the provisions of Council Decision 2003/583/EC[7]. 8. Cash at banks In accordance with Article 129 of the 9th EDF Financial Regulation the treasury is presented in the balance sheet of the 9th EDF. Table 7 shows the breakdown of total cash at bank: table 7 | EUR millions | Cash and cash equivalents | notes | Balance at 31/12/06 | Balance at 31/12/05 | Treasury accounts | 8.1 | 3,55 | 1,53 | ACP Paying Agents | 8.2 | 59,37 | 47,86 | EUR Paying Agents | 8.3 | 21,29 | 207,99 | STABEX current account | 8.4 | 12,17 | 12,17 | Funds en route | 8.5 | 0,10 | 1,00 | TOTAL | 96,48 | 270,55 | (8.1) Treasury accounts These are accounts held with the central banks of the Member States into which EDF contributions are paid. The Accounting Officer makes transfers from these accounts to the EUR paying agents. (8.2) ACP paying agents These are amounts held in bank accounts held within ACP States used for making payments in local currency within the beneficiary state. The accounts are generally kept in euros, but may also be kept in a currency of a Community Member State. (8.3) EUR paying agents These accounts are held with commercial banks established in the Member States (EUR 15) and with the EIB. The accounts are kept in euros and are used for payments to beneficiaries within the Union and elsewhere. Payments are generally made in euros, but may also be made in other currencies. These funds are also used to replenish ACP paying agent accounts and the liaison account with the General Budget. (8.4) STABEX current account This amount represents the cash balance remaining on the STABEX main account. 8,47 EUR millions will be made available for Togo by way of transfer to a security account, once instructions have been received from the Authorising Officer. The remaining amount of 3,69 EUR millions will be reversed to the general long term development reserve in the course of 2007. The interest earned in this account is periodically transferred to the EDF main account to be used in accordance with Articles 1.3 and 9 of the Internal Agreement. (8.5) Funds en route Some replenishment sent before the year end were only registered by the beneficiary bank in 2007. Current liabilities 9. Accounts payable The total creditor balance is detailed in table 8: table 8 | EUR millions | Accounts payable | notes | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Total at 31/12/2006 | Total at 31/12/2005 | Contributions received in advance | 9.1 | 3,49 | 3,49 | 1,40 | Liaison a/c with the General Budget | 9.2 | -49,73 | -49,73 | 119,23 | Provision for bank charges | 9.3 | -0,02 | -0,02 | 0,02 | Accrued expenditure | 92,62 | 651,73 | 1.397,75 | 2.142,10 | 1.365,10 | Non finalised payments | 9.4 | 4,02 | 26,58 | 79,69 | 110,29 | 22,81 | Eligibility to be confirmed | 9.5 | 9,31 | 42,99 | 54,89 | 107,19 | 116,32 | Invoices to be received | 9.6 | 79,29 | 582,17 | 1.263,17 | 1.924,62 | 1.225,97 | TOTAL | 0,00 | 92,62 | 651,73 | 1.351,49 | 2.095,84 | 1.485,75 | (9.1) Contributions received in advance Certain contributions were paid in advance by Member States, as shown in table 8.1: table 8.1 | EUR millions | Contributions received in advance | Balance at 31/12/06 | Balance at 31/12/05 | Ireland | 3,49 | 1,40 | TOTAL | 3,49 | 1,40 | (9.2) Liaison account with the General Budget As from the beginning of financial year 2005, payments to beneficiaries within the Union in euros or in other currencies are executed through SWIFT by the General Budget of the European Commission. For this purpose, a current account has been opened. This account is presented in the in the cash flow statement as cash equivalent. (9.3) Provisions for bank charges This amount is made up of transactions relating to bank charges for the year ended 31 December 2006, which were debited to the relevant bank accounts after the year end. Accrued expenditure The accounting information provided by the present IT accounting system (OLAS) has been adjusted in order to provide figures which comply with accrual accounting principles. Additional information has been provided by the Authorising Officer. This item includes non finalized payments, eligibility to be confirmed and an estimation of invoices to be received based in the degree of advancement of projects. (9.4) Non finalized payments These are payments authorised before 31 December 2006 but executed by the bank in 2007. The amounts registered in the accounts of the Authorising Officer are shown in table 8.2. table 8.2 | EUR millions | Non finalised payments | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31/12/06 | 4,02 | 26,58 | 79,69 | 110,29 | Total at 31/12/05 | 1,17 | 2,67 | 13,42 | 5,54 | 22,81 | increase | -1,17 | 1,35 | 13,16 | 74,14 | 87,48 | (9.5) Eligibility to be confirmed These are invoices which arrived before the end of the financial year 2006 but which had still not been analysed at 31.12.2006. The amounts registered in the accounts of the Authorising Officer are shown in table 8.3. table 8.3 | EUR millions | Eligibility to be confirmed | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31/12/06 | 9,31 | 42,99 | 54,89 | 107,19 | Total at 31/12/05 | 1,14 | 11,62 | 50,14 | 53,43 | 116,32 | increase | -1,14 | -2,31 | -7,15 | 1,46 | -9,13 | (9.6) Invoices to be recieved These figures reflect expenditure which has been incurred but has not yet been invoiced (e.g. work in progress on capital projects). The amounts estimated by the Authorising Officer are shown in table 8.4. table 8.4 | EUR millions | Invoices to be received | 6th EDF | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31/12/06 | 79,29 | 582,17 | 1.263,17 | 1.924,62 | Total at 31/12/05 | 36,45 | 133,92 | 547,61 | 507,99 | 1.225,97 | increase | -36,45 | -54,64 | 34,56 | 755,18 | 698,65 | Funds and Reserves 10. Called fund Capital Details of this heading are provided in table 9: table 9 | EUR millions | Capital 2006 | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Total EDF | Funds Capital(a) | 7.560,00 | 10.940,00 | 12.840,00 | 11.659,15 | 42.999,15 | Uncalled funds (b) | 1.545,00 | 11.554,15 | 13.099,15 | Called fund capital (a)-(b) | 7.560,00 | 10.940,00 | 11.295,00 | 105,00 | 29.900,00 | Capital 2005 | Funds Capital(a) | 7.560,00 | 10.940,00 | 12.840,00 | 11.537,15 | 42.877,15 | Uncalled funds (b) | 4.055,00 | 11.432,15 | 15.487,15 | Called fund capital (a)-(b) | 7.560,00 | 10.940,00 | 8.785,00 | 105,00 | 27.390,00 | The Fund Capital represents the total amount receivable from the Member States for the relevant EDF fund as laid down in each of the internal agreement between the Member States and the beneficiary African, Caribbean and Pacific (ACP) States and the Overseas Countries and Territories (OCT). The initial allocation for the (current) 9th EDF, which originally totalled 10.555,15 EUR millions, has since been increased by an amount of 105 EUR millions in 2004, which was released by the EIB in accordance with the provisions of Council Decision 2003/583/EC. This additional allocation is in favour of actions to be undertaken in the Democratic Republic of the Congo. Article 2(2) of the Internal Agreement for the 9th EDF set a 1.000 EUR millions reserve. 250 EUR millions were released in 2004 following the adoption of Council Decision 2004/289/CE in order to establish a water facility. A further 627 EUR millions were released during 2005 following decisions n° 6/2005[8] and 7/2005[9] of the ACP-EC Council of Ministers of 22/11/2005. During 2006 and after the adoption of the corrigendums to Council decisions n° 6/2005[10] and 7/2005[11] of the ACP-EC Council of Ministers, 122 EUR millions were released. The remaining amount will be released in 2007. Uncalled funds represents the initial allocation not yet receivable from Member States. Called funds 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 in Article 8 of the Financial Regulation, whereby each year the Commission must establish and communicate to the Council a statement of the payments to be made in the following year and a schedule of calls for contributions. The Commission must justify the amount requested on the basis of its capacity to deliver the proposed level of resources effectively. Contributions are still being called up from the 8th EDF, with the sole exception of the 105 EUR millions in favour of the Democratic Republic of the Congo called in from the 9th Fund. In 2005 Member States decided on a transfer of 20 EUR millions from the EIB's EDF treasury to the Commission’s EDF treasury with a consequent reduction of the overall amount of the contributions due from Member States. Details of amounts called up and received during the year are shown in table 1 (see note 1). 11. Cumulative reserves – Results carried forward from previous years The cumulative reserves include the results carried out from previous years and the net economic result for the year (see economic outturn account). Tables 10 and 10.1 below sumarize the cumulative reserves until 31/12/2004 (see also notes to the economic outturn account). table 10 | EUR millions | Cumulative reserves at 31/12/2004 | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Balance at 31/12/2004 | Cumulative interest at 31/12/2004 | 37,78 | 400,74 | 72,04 | 9,02 | 519,58 | - Cumulative payments at 31/12/2004 | 7.312,25 | 9.849,57 | 7.531,11 | 1.225,49 | 25.918,42 | - Provisions | 0,01 | 0,01 | 0,02 | Accrual adjustments | 31,39 | 214,86 | 495,98 | 395,54 | 1.137,77 | TOTAL | -7.243,09 | -9.233,99 | -6.963,08 | -820,93 | -24.261,09 | table 10.1 | EUR millions | Cumulative interest up to 31/12/2004 | 6th EDF | 7th EDF | 8th EDF | 9th EDF | total at 31/12/2004 | Capitalised interest | 13,70 | 49,00 | 35,45 | 1,80 | 99,95 | STABEX interest | 24,08 | 319,89 | 343,97 | EIB interest | 3,41 | 0,12 | 3,53 | European banks interest | 22,47 | 4,45 | 26,92 | Interest late contributions | 5,96 | 1,86 | 0,73 | 8,56 | Interest income STABEX security accounts | 34,73 | 34,73 | Interest income special Congo contribution | 1,92 | 1,92 | TOTAL | 37,78 | 400,74 | 72,04 | 9,02 | 519,58 | 12. Reserves This heading includes the replenishment of STABEX resources under the 6th EDF, and the resources transferred from other EDFs, as shown in table 11. table 11 | EUR millions | Reserves | 6th | 7th | 8th | 9th | balance at 31/12/2004 | transfers to/from other EDFs | -343,53 | -473,06 | -1.319,54 | 2.984,87 | 848,74 | Replenishment of STABEX resources | 185,10 | 185,10 | TOTAL | -158,43 | -473,06 | -1.319,54 | 2.984,87 | 1.033,84 | The replenishment of STABEX resources (185,10 EUR millions) comprises direct contributions by the ACP States (replenishment of resources) and the amounts by which transfer entitlements have been reduced at the request of the ACP States. The obligation to replenish STABEX resources was abolished by the ACP-EDF Council Decision of 19 November 1991. Since the entry into force of the Cotonou Agreement, all the unspent funds in previous EDFs are transferred to the 9th EDF after decommitment. The resources transferred from other EDFs increase the appropriation of the receiving fund and reduce that of the Fund of origin. The total balance is shown in table 11.1 below. table 11.1 | EUR millions | inter-EDF transfers | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Consolidate | Total at 31/12/06 | to/from 4th EDF | 144,32 | 144,32 | to/from 5th EDF | 177,63 | 526,78 | 704,41 | to/from 6th EDF | 181,76 | 94,00 | 490,36 | 766,12 | 766,12 | to/from 7th EDF | -181,76 | 532,82 | 861,54 | 1.212,59 | 1.212,59 | to/from 8th EDF | -94,00 | -532,82 | 2.504,67 | 1.877,85 | 1.877,85 | to/from 9th EDF | -490,36 | -861,54 | -2.504,67 | -3.856,56 | -3.856,56 | TOTAL | -444,16 | -685,81 | -1.877,85 | 3.856,56 | 0,00 | 848,74 | Notes to the Economic Outturn Account 13. Administrative expenditure This heading includes administrative and financial expenditure financed by bank interest. Under the 8th and 9th EDF it includes expenditure related to the devolution process in application of the provisions of articles 1.3, 4 and 9 of the Internal Agreement. The breakdown of this expenditure is shown in table 12. Following Council Decision 599 on 21st June 2005, a complementary amount of 90 EUR millions from the intra ACP allocation has been reallocated to finance devolution. In 2006, expenditure for personnel and infrastructure costs in this heading amounted to 62,9 EUR millions. Accrual adjustments annual increase 2006 | notes | 6th EDF | 7th EDF | 8th EDF | 9th EDF | increase 2006 | - Pre-financing | 3 | -47,67 | -84,01 | -104,09 | 817,23 | 581,46 | - Financial charges | 18 | 0,00 | -0,14 | -0,14 | Accrued expenditure | -38,77 | -55,59 | 40,56 | 830,79 | 777,00 | Non finalised payments | 9.6 | -1,17 | 1,35 | 13,16 | 74,14 | 87,48 | Eligibility to be confirmed | 9.7 | -1,14 | -2,31 | -7,15 | 1,46 | -9,13 | Invoices to be received | 9.8 | -36,45 | -54,64 | 34,56 | 755,18 | 698,65 | Total accruals | 8,90 | 28,42 | 144,65 | 13,42 | 195,39 | 16. Total expenditure on an accrual basis Project expenditure by Fund for 2006 has been restated in accordance with the relevant international accounting standards. The expenditure for each aid instrument will be presented on an accrual basis as and from the 2008 financial year, once the accounts have been migrated to the new IT (ABAC) system. 17. Financial income Interest income is presented in the balance sheet of the 9th EDF. The sole is STABEX security interest which is presented in the 8th EDF due to absence of this aid instrument in the 9th EDF. Financial income for the year is shown in table 14 below: table 14 | EUR millions | Interest earned during 2006 | notes | 8th EDF | 9th EDF | total at 31/12/2006 | total at 31/12/2005 | EIB interest | 17.1 | 10,56 | 10,56 | 0,23 | European banks interest | 17.1 | 11,44 | 11,44 | 13,70 | Interest on recovery orders | 17.2 | 0,00 | 0,00 | 0,12 | Interest income on the STABEX security accounts | 17.3 | 9,13 | 9,13 | 8,84 | Interest income on the special D.R. Congo contribution | 17.3 | 0,49 | 0,49 | 1,07 | TOTAL INTEREST | 9,13 | 22,49 | 31,61 | 23,95 | (17.1) EIB interest and European banks interest The interest earned on accounts with European paying agents (including the main STABEX account) can be used to finance projects in accordance with Articles 1.3 and 9 of the Internal Agreement. This heading represents the amount of interest on deposited funds which can be committed for the financing of such projects. This interest results in an effective increase in the Funds’ overall appropriations. (17.2) Interest on late payment of recovery orders This is interest due on the late payment of recovery orders. Such funds can be used for financing projects. This interest results in an effective increase in the Funds’ overall appropriations. (17.3) Interest income, STABEX security accounts and the Special D. R. Congo account This represents the cumulative income generated by the STABEX security accounts and the Special Democratic Republic of the Congo account. Whilst such income appears to increase the total of the Fund it should be borne in mind that any income generated by these accounts is earmarked for the specific purpose and beneficiary state. 18. Financial charges Up to the 2004 financial year this category of expenditure was presented as a part of administrative costs. In the interests of transparency these costs are now presented under a separate heading. See details in table 12. RESTATEMENT OF CERTAIN FIGURES FOR 2005 Certain figures for 2005 have been restated in order to comply with the generally accepted accounting principle ‘Comparability of information’ and to implement International Accounting Standard, IPSAS no. 3. A change in accounting policy was adopted during 2003 in relation to Stabex expenditure. In prior years amounts transferred to the Stabex security accounts had been booked as if they were payments and thus expensed in the income and expenditure account. However, in view of the fact that the Stabex security accounts are bank accounts under the sole control of the Accounting Officer, it was considered more appropriate not to classify these transfers as expenditure in the accounts and to amend previous transactions accordingly. As from 2003 and during the reclassification period, the STABEX deferred expenditure represented the total of STABEX funds transferred to the security accounts to be transferred to the relevant beneficiary ACP State at some future date. This liability to the beneficiary ACP State was included as account payable in the balance sheet. The reclasification of these transactions was finalized in 2005. Thus the deferred expenditure and its countepart as accounts payable should not have been included in the balance sheet for the financial year 2005. The restatement has no efect in the net assets, as set out in the table below: table 15 | EUR millions | Notes | Restated closing balance 2005 | correction | balance as originally shown in 2005 accounts | CURRENT ASSETS | Contributions to be received | 1 | 13,72 | 0,00 | 13,72 | Debtors | 2 | 138,77 | 0,00 | 138,77 | Net Pre-financing | 3 | 2.304,20 | 0,00 | 2.304,20 | Other current assets | 4 | 3,31 | 0,00 | 3,31 | Deferred expenses | 0,00 | -393,19 | 393,19 | Liaison accounts | 5 | 0,00 | 0,00 | 0,00 | Cash and cash equivalents | 662,10 | 0,00 | 662,10 | STABEX security accounts | 6 | 371,88 | 0,00 | 371,88 | D.R. Congo special fund | 6 | 19,67 | 0,00 | 19,67 | Cash at bank | 7 | 270,55 | 0,00 | 270,55 | TOTAL ASSETS | 3.122,10 | -393,19 | 3.515,29 | CURRENT LIABILITIES | Accounts payable | 8 | 1.485,75 | -393,19 | 1.878,94 | Liaison accounts | 5 | 0,00 | 0,00 | 0,00 | TOTAL LIABILITIES | 1.485,75 | -393,19 | 1.878,94 | NET ASSETS | 1.636,35 | 0,00 | 1.636,35 | FUNDS & RESERVES | Called fund capital | 9 | 27.390,00 | 0,00 | 27.390,00 | Results carried forward from previous years | 10 | -24.261,09 | 0,00 | -24.261,09 | Result for the year | -2.526,40 | 0,00 | -2.526,40 | Reserves | 11 | 1.033,84 | 0,00 | 1.033,84 | FUNDS & RESERVES | 1.636,35 | 0,00 | 1.636,35 | OFF BALANCE ITEMS Guarantees are held to secure pre-financing and released when the final claim under a project is paid. In accordance with the “Prudence” concept and in compliance with the provisions of IPSAS 19, Contingent Assets are not accounted for in the financial statements. They are disclosed here by way of note in the interests of transparency. As some errors were fund in the data registered in 2005. Table 16 shows the revised figures for guaranties held at the end of 2005 financial year. The total amount registered by the Authorising Officer at the end of 2006 is shown in table 17. Table 16 | Guarantees | on pre-financing | on guarantee withholding | on performance | TOTAL 31/12/2005 | 6th EDF | 4,63 | 0,05 | 1,34 | 6,01 | 7th EDF | 66,34 | 24,47 | 39,49 | 130,30 | 8th EDF | 211,14 | 49,36 | 100,36 | 360,86 | 9th EDF | 117,00 | 31,19 | 31,74 | 179,93 | TOTAL | 399,10 | 105,07 | 172,93 | 677,10 | Table 17 | Guarantees | on pre-financing | on guarantee withholding | on performance | TOTAL 31/12/2006 | 6th EDF | 7th EDF | 58,51 | 21,78 | 31,41 | 111,70 | 8th EDF | 195,82 | 39,79 | 73,09 | 308,71 | 9th EDF | 195,83 | 43,82 | 62,97 | 302,62 | TOTAL | 450,16 | 105,38 | 167,48 | 723,02 | REPORT ON FINANCIAL IMPLEMENTATION Introductory note Previous EDFs Decision No 1/2000 of the ACP-EC Council of 27 July 2000 regarding transitional measures provides for some of the unallocated resources from previous EDFs to be used for programmes consistent with the relevant provisions of the Cotonou Agreement and put into early application under transitional measures. Commission Decision 410/2001 of 16 March 2001, which fixes the allocations for the indicative programmes of the ACP countries under the ACP-EC Partnership Agreement, stipulates that the unallocated resources from previous EDFs up to a maximum of 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 No 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 No 3/2002 of the ACP-EC Council of Ministers of 23 December 2002 took an amount of €25 million from the unallocated resources of the 8th EDF (general reserve) and allocated it to regional cooperation under the ACP-EC Partnership Agreement. As last year, to ensure transparency in the presentation of the accounts the various tables below set out separately for each of the 6th, 7th and 8th EDFs the part used for Lomé Convention programming and the part used for programming under the Cotonou Agreement. Entry in the accounts and the presentation of accounts in connection with the Cotonou Agreement is based on Article 3(2) of Annex IV to the ACP-EC Partnership Agreement, as regards countries. That Article gives the ACP countries an allocation A to cover macroeconomic support and support for programmes and projects and an allocation B to cover unforeseen needs such as emergency assistance, debt relief initiatives and support to offset the adverse effects of instability in export earnings[12]. 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). 6th EDF Given the progress made, the Commission has decided to close the 6th EDF on 31 July 2006 (Decision PE/2006/1669 of 31 August 2006). The outstanding balances for global commitments (projects) and individual commitments (contracts) have been transferred to the 9th EFD under a specific heading which enables the amounts transferred and their use to be identified. The final amount of the 6th EFD is set at €7 338 721 709.34, out of an updated pre-closure allocation of €7 390 827 625.32. At 31 July 2006 implementation of the allocation stood as follows: financing decisions (projects) €7 390 827 625.32 (100%), individual commitments (contracts) €7 364 906 152.14 (99.64%), and payments €7 338 721 709.34 (99.29%). The “to be executed” balance at closure, transferred to the 9th EDF, is €52.105 millions; this is made up of €26.184 million of outstanding payments and €25.921 million of non-committed balance and concerns a portfolio of 86 projects and 193 individual commitments transferred to the 9th EDF. Indicative programmes (subsidies and special loans) €48 099 835.28 Non-programmable aid (aid for refugees and risk capital) €3 662 617.80 Unexpended balances (4th EDF) €343 462.90 The annual figures for the 6th EDF are presented in the 2006 annual accounts under the 6th EDF for the period 1 January to 31 July 2006 and under the 9th EDF for the period 1 August to 31 December 2006. 9th EDF The ACP-EC Partnership Agreement signed on 23 June 2000 in Cotonou by the Member States of the European Community and the States of Africa, the Caribbean and the Pacific (ACP States) entered into force on 1 April 2003. The EU Council Decision of 27 November 2001 (2001/822/EC) on the association of the overseas countries and territories (OCT) with the European Community entered into force on 2 December 2001. The Cotonou Agreement was concluded for a twenty-year period with a review clause and a Financial Protocol for each five-year period. For the first Financial Protocol (financed by the 9th EDF), once the unexpended balances of previous EDFs[13] have been taken into account, the Agreement will cover the period up to the end of 2007[14]; for the second Financial Protocol (to be financed by the 10th EDF), it may be amended (and will in fact cover six years[15]). The 9th EDF was set at €13 800 million, including €13 500 million allocated to the ACP States in accordance with the first Financial Protocol included in the Cotonou Agreement, €175 million allocated to the OCT (provided for by the EU Council Decision on the association of the OCT) and €125 million reserved for the European Commission to cover expenses in connection with implementing the 9th EDF resources (provided for in the internal agreement for the 9th EDF). The long-term development budget for ACP States has two components: The A allocation for macroeconomic support, sectoral policies, and programmes and projects supporting Community aid: this corresponds to the allocation for the NIPs and structural adjustment in previous EDFs. The B allocation , intended to cover unforeseen needs such as emergency aid, contributions to debt reduction initiatives and support to offset adverse fluctuations in export earnings, generally corresponds to the Stabex, Sysmin and emergency aid allocations in previous EDFs. Of the total 9th EDF budget for the ACP States, €1 000 million was released in 2004 and 2005 after examination by the EU Council, on the basis of a proposal from the European Commission: - €250 million were released in accordance with Council Decision 2004/289/EC of 22 March 2004 and allocated to the Intra-ACP Fund (natural resources) to finance the Water Facility operation. - €18 million were released in accordance with Council Decision 10752/05 of 19 July 2005 and allocated to the envelope for long-term development support to cover the financing of the National Indicative Programme of Timor-Leste for the period 2006-2007. - €482 million were released in accordance with ACP-EC Council of Ministers Decision No 6/2005 of 22 November 2006 and allocated to the envelope for long-term development support (€352 million), the envelope for regional cooperation and integration (€48 million) and the Investment Facility (€82 million). These resources were released to contribute to financing of the EU Energy Initiative (€220 million), the International Commodity Risk Management Financing Facility (€25 million), adaptation to the new EU feed and food sanitary and phytosanitary rules (€30 million), strengthening the African Union (€50 million), the “Education for All” Fast Track Initiative (€63 million), tackling HIV/AIDS, tuberculosis and malaria (€62 million), and the operating costs of the CDE/CTA (€32 million). - €250 million were released in accordance with ACP-EC Council of Ministers Decision No 7/2005 of 22 November 2005 and the corrigendum of 1 February 2006 and allocated to the envelope for long-term development support (€185 million), the envelope for regional cooperation and integration (€24 million) and the Investment Facility (€41 million). These resources were released to finance the Water Facility operation. The breakdown of 9th EDF allocations for ACP States, including the “conditional billion” and allocations managed directly by the European Investment Bank (EIB), is as follows: EUR | 9th EDF allocation | Reduction / conditional billion | Unopened allocations (EIB-managed) | Open allocations OLAS (EC-managed) | Long-term development budget | 10.000.000.000 | (1.000.000) (1) | (186 850 000) (interest rate subsidies) | 9.812.150.000 | Regional budget | 1.300.000.000 | 1.300.000.000 | Investment facility | 2.200.000.000 | (2.037.000.000) | 163.000.000 | Total | 13.500.000.000 | (1000.000) | (2.223.850.000) | 11.275.150.000 | (1) Council Decision 7/2005 of 22 November 2005 contains a rounding error. Pending a correction to this Decision from the ACP-CE countries, €1 million out of the conditional billion has not been released. Council Decision 2005/599/EC of 21 June 2005 allocated €90 millions to the intra-ACP allocation for devolution financing. The breakdown of 9th EDF allocations for the OCT, including those managed directly by the European Investment Bank (EIB), is as follows: EUR | 9th EDF allocation | Unopened allocations (EIB-managed) | Open allocations (OLAS) | Long-term development budget | 127.100.000 | 127.100.000 | C reserve | 17.900.000 | (1.000.000) (interest rate subsidies) | 16.900.000 | Regional budget | 8.000.000 | 8.000.000 | Budget for studies and technical assistance | 2.000.000 | 2.000.000 | Investment facility | 20.000.000 | (20.000.000) | 0 | TOTALS | 175.000.000 | (21.000.000) | 154.000.000 | The unallocated C reserve for OCTs is maintained to finance humanitarian aid, emergencies, refugee assistance and fluctuations in export earnings, and corresponds to the B allocation for the ACP countries. Also, under Commission Decision E/982/2003 of 16 June 2003, any balances remaining from previous EDFs on the date of entry into force of the Cotonou Agreement and any amounts decommitted at a later date from ongoing projects under those Funds, were transferred to the 9th EDF . Any resource thus transferred to the 9th EDF after previously having been allocated to the indicative programme of an ACP State or region has been allocated to that State or region. On the other hand, the unallocated resources have been transferred to reserves which will be subject to new programming under the 9th EDF. The tables annexed giving the amounts decided, contracted and paid refer to net data . Only Table 2.7. refers separately to amounts committed and decommitted and amounts paid and recovered. APPROPRIATIONS AT 31.12.2006 [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] CONSOLIDATED ACCOUNTS [pic] [pic] [pic] [pic] [pic] [pic] [pic] SITUATION BY COUNTRY AND BY INSTRUMENT 6th EDF Notes to the management accounts shown in appendix: 19. In tables 3.1.1 to 3.1.8, the figure “0.0” indicates that the corresponding amount is between EUR –4.999 and EUR 4.999.Where no figure is given, the amount is equal to zero.Countries with a nil balance in all columns are not listed in the tables. 20. In all tables the heading “All countries ACP” refers to projects which cover a number of countries but are not financed by regional cooperation. 21. In all tables the heading “Financial and administrative expenses” represents projects financed by EDF interest which have been transferred to a financial instrument (grants, Structural Adjustment Facility) with the exception of one amount of EUR 1 million financed from the “grants” appropriation and used for posting bank charges and exchange rate differences. 22. In the first column of tables 3.1.1 and 3.1.2, the allocation for “Regional co-operation” (EUR 856.41 million) corresponds to the Commission’s regional co-operation target for ACP states only (EUR 912.23 million) minus the amount transferred during the years 2000, 2001 and 2002 to the general reserve according the transitional measures (i.e. EUR 1 million, EUR 1.36 million and EUR 0.16 million) and EUR 28.9 million transferred to 9th EDF following the entry in force of Cotonou in 2003, EUR 6.9 million in 2004, EUR 2,18 million in 2005 and EUR 15.2 million in 2006 23. All the amounts of appropriations are the same of those of decisions since the amounts not committed have been transferred to 9th edf following the entry in force of Cotonou (decision of the commission of 16 April 2003). 7th EDF Notes to the management accounts shown in appendix : - In tables 3.2.1 to 3.2.8, the figure "0.0" indicates that the corresponding amount is between EUR –4.999 and EUR 4.999.Where no figure is given, the amount is equal to zero.Countries with a nil balance in all columns are not listed in the tables. - In all tables the heading "All countries ACP" refers to projects which cover a number of countries but are not financed by regional cooperation. - In all tables the heading "Financial and administrative expenses" represents projects financed by EDF interest which have been transferred to a financial instrument (grants, Structural Adjustment Facility). - In the first column of tables 3.2.1 and 3.2.2, the allocation for "Regional Co-operation" (EUR 1.128,16 million) is composed as follows: Commission's regional co-operation target (ACP states only) 1,125.00 Target overrun 67.90 Transfers from unallocated resources in order to finance the programme of assistance to ACP countries for integration within the WTO 10.00 Amount transferred during the year 2000 to the general reserve according the transitional measures (8.50) Amount transferred during the year 2001 to the general reserve according the transitional measures (2.20) Amount transferred during the year 2002 to the general reserve according the transitional measures (0.70) Amount transferred during the year 2003 to the 9th EDF following the entry in force of Cotonou (49.10) Amount transferred during the year 2004 to the 9th EDF following the entry in force of Cotonou (5.92) Amount transferred during the year 2005 to the 9th EDF following the entry in force of Cotonou (8.26) Amount transferred during the year 2006 to the 9th EDF following the entry in force of Cotonou (34.41) Total as at 31.12.2006 1093.75 (a) All the amounts of appropriations are the same of those of decisions since the amounts not committed have been transferred to 9th EDF following the entry in force of Cotonou (decision of the commission of 16 April 2003) 8th EDF Notes to the management accounts shown in appendix: 24. In tables 3.3.1 to 3.3.8, the figure "0.0" indicates that the corresponding amount is between EUR –4.999 and EUR 4.999.Where no figure is given, the amount is equal to zero.Countries with a nil balance in all columns are not listed in the tables. 25. In all tables the heading "All countries ACP" refers to projects which cover a number of countries but are not financed by regional co-operation. 26. In all tables the heading "Financial and administrative expenses" represents projects financed by EDF interest which have been transferred to a financial instrument (grants, Structural Adjustment Facility) 27. In the third column of tables 1 and 2, the allocation for "Regional Cooperation" (EUR 1,398.12 million) is composed as follows: Commission's regional co-operation target (ACP states only) 1,300.00 Council decision 3/2000 in order to ensure the continuity of several activities waiting the entry in force of 9th EDF 306.00 Council decision 10/2001 dated 20/12/2001 on the use of unallocated Resources from the 8th EDF 180.70 Amount transferred during the year 2000 to the general reserve according the transitional measures (68.00) Council decision 3/2002 dated 23/12/2002 on the use of unallocated Resources from the 8th EDF 54.20 Amount transferred during the year 2003 to the 9th EDF following the entry in force of Cotonou (317.33) Amount transferred during the year 2004 to the 9th EDF following the entry in force of Cotonou (5.01) Amount transferred during the year 2005 to the 9th EDF following the entry in force of Cotonou (31.62) Amount transferred during the year 2006 to the 9th EDF following the entry in force of Cotonou (20.83) Total as at 31.12.2006 1,398.12 (e) All the amounts of appropriations are the same of those of decisions since the amounts not committed have been transferred to 9th edf following the entry in force of Cotonou (decision of the Commission of 16 April 2003) 9th EDF Notes to the management accounts shown in appendix: (a) In tables 3.4.1 to 3.4.8, the figure "0.0" indicates that the corresponding amount is between EUR –4.999 and EUR 4.999. Where no figure is given, the amount is equal to zero. Countries with a nil balance in all columns are not listed in the tables. (b) In all tables the presentation has been made taking in account the financial resources (envelope A, envelope B and implementation costs) used and the nature of the project (macroeconomic support, sectoral policies, emergency assistance etc.) All EDF The relative tables are attached in annex 2. OTHER MANAGEMENT INFORMATION [pic] TABLE 4.1.2 CLASSIFICATION OF “TO REMAIN OPEN” SLEEPING PROJECTS 28. Stabex projects (EUR million) Country | Projects | Amount unspent | 8th EDF | Mauritania | Stabex 98 - Squid, octopus and cuttlefish | 14.75 | Rwanda | Art. 195(a) reduction - coffee | 0.43 | Senegal | Art. 195(a) reduction - oil | 2.45 | Sudan | Stabex 98 - cotton | 4.83 | Tanzania | Art. 195(a) reduction – green coffee | 1.01 | Togo | Art. 195(a) reduction - cocoa | 0.08 | Togo | Art. 195(a) reduction - coffee | 0.33 | Togo | Art. 195(a) reduction - cotton | 0.66 | Total | 24.55 | 29. EIB projects (EUR million) Country | Projects | Amount unspent | 7th EDF | Jamaica | Port Antonio water and sewerage | 15.00 | Tuvalu | DBT II global loan | 0.20 | 8th EDF | Botswana | Francistown water supply | 2.10 | Barbados | Barbados airport development | 1.54 | Cameroon | Chad Cameroun oil export system | 9.35 | Chad | Chad Cameroun oil export system | 6.25 | Chad | Global loan to financial sector | 0.50 | Dominican Rep. | Financial secor GL II A | 4.51 | Dominican Rep. | Finanial setor GL II B | 3.44 | Ethiopia | Development bank of Ethiopia | 25.00 | Guinea | Autonomous port of Conakry | 12.00 | Guyana | Power project | 20.00 | Guyana | Iped II | 0.46 | Malawi | Kangankunde mining project | 0.30 | Mauritius | Plaines Wilhems sewerage project | 7.46 | Mozambique | Motraco II | 0.58 | St Lucia | Bank of St. Lucia GL | 3.00 | St Lucia | Bank of St. Lucia GL | 0.84 | Swaziland | Motraco II | 1.75 | Swaziland | SEB III maguga | 7.00 | Trinidad & Tobago | Caribbean microfinance Ltd | 4.00 | 9th EFD (ex 6th) | Mozambique | Motraco II | 1.17 | Total | 126.80 | [pic] [pic] Table 4.2.3 Italian cofinancing In 1985 the European Commission signed an agreement with the Italian Government to cofinance development projects that would be managed by the Commission. The agreement was repeatedly extended to 31 December 2004 by exchanges of letters between the Italian Government and the Member of the Commission responsible for Development. The Commission then took a decision to implement the framework cofinancing agreement under written procedure E/1588/2004. The purpose of this decision was to adopt the regulatory budgetary framework for commitments made under the Agreement. With this in mind, the Commission decision states that the Commission will implement the cofinancing arrangements in accordance with the rules laid down in the EDF Financial Regulation and that the same EDF authorising officers by delegation or subdelegation are empowered by this decision to manage Italy’s contribution. The authorising officer by delegation is also empowered to determine the appropriate final deadline for implementation in accordance with the applicable rules. The treasury movements of Italian funds for projects managed by the Commission in ACP countries in 2006 are as follows (in EUR): Project No | Country | Project | Balance | Contribution | Payments | Balance | 31/12/2005 | 31/12/2006 | ITA COF | 1 | BURUNDI | REG. - Ruzizi II | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 2 | CAPE VERDE | Airport | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 3 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 4 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 5 | TOGO | CIMAO | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 6 | GUINEA-BISSAU | M'Pack road | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 7 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 8 | ZAIRE | T.A. Ofida | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 9 | ZAMBIA | Sysmin II | 438.254,02 | 0,00 | 0,00 | 438.254,02 | ITA COF | 10 | TANZANIA | Musoma road | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 11 | ZAIRE | Parco Virunga | 155.561,80 | 0,00 | 0,00 | 155.561,80 | ITA COF | 12 | GUINEA-BISSAU | Farim bridge | 3.034,20 | 0,00 | 0,00 | 3.034,20 | ITA COF | 13 | SUDAN | Sugar | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 14 | SUDAN | Steel supply | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 15 | ZAIRE | T.A. Kivu | 202.332,84 | 0,00 | 0,00 | 202.332,84 | ITA COF | 16 | ZAIRE | Drinking water | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 17 | TANZANIA | Railway | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 18 | DOMINICA | Dryer | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 19 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 20 | BURKINA FASO | DIAPER II | 35.326,10 | 0,00 | 0,00 | 35.326,10 | ITA COF | 21 | MAURITIUS | Footwear | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 22 | BOTSWANA | K. airport | 160.586,01 | 0,00 | 0,00 | 160.586,01 | ITA COF | 23 | SOMALIA | Somalia - beef | 1.694.318,41 | 0,00 | 0,00 | 1.694.318,41 | ITA COF | 24 | GUINEA-BISSAU | Oil import | 194.860,96 | 0,00 | 0,00 | 194.860,96 | ITA COF | 25 | MALI | Nioro | 169.812,57 | 0,00 | 0,00 | 169.812,57 | ITA COF | 26 | ANGOLA | Boavida hosp. | 161.422,54 | 0,00 | 0,00 | 161.422,54 | ITA COF | 27 | TANZANIA | Hospital P. | 9.592,49 | 0,00 | 0,00 | 9.592,49 | ITA COF | 28 | DJIBOUTI | IGADD food project | 3.031,61 | 0,00 | 0,00 | 3.031,61 | ITA COF | 29 | SEYCHELLES | Technical assistance | 51.073,21 | 0,00 | 0,00 | 51.073,21 | ITA COF | 30 | ACP | ACP - Fiere | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 31 | BURUNDI | Rutana Kankuzo | 154.846,04 | 0,00 | 0,00 | 154.846,04 | ITA COF | 32 | CONGO | Kinkala B. road | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 33 | GUI. CONAKRY | Fouta Djalon | 305.162,33 | 0,00 | 0,00 | 305.162,33 | ITA COF | 34 | SENEGAL | National Road No 2 | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 35 | ZAIRE | Film Kivu | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 36 | BURKINA FASO | Technical assistance | 89.763,43 | 0,00 | 0,00 | 89.763,43 | ITA COF | 37 | co-financing interest | 13.871.143 | 6.732.041,00 | 10.895.830,00 | 9.707.353 | ITA COF | 38 | TANZANIA | Pemba ports | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 39 | ANGOLA | Lubango road | 200.500,00 | 0,00 | 0,00 | 200.500,00 | ITA COF | 40 | Administrative expenditure | 408.419,64 | 609.749,31 | 533.617,23 | 484.551,70 | ITA COF | 41 | MOZAMBIQUE | Technical assistance | 78.963,69 | 0,00 | 0,00 | 78.963,69 | ITA COF | 42 | MOZAMBIQUE | Maputo | 14.387,00 | 0,00 | 0,00 | 14.387,00 | ITA COF | 43 | MOZAMBIQUE | Refugees | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 44 | MADAGASCAR | Manambery bridge | 65.250,91 | 0,00 | 0,00 | 65.250,91 | ITA COF | 45 | MOZAMBIQUE | Children assistance | 11.295,81 | 0,00 | 0,00 | 11.295,81 | ITA COF | 46 | ANGOLA | Minars assistance | 497,94 | 0,00 | 0,00 | 497,94 | ITA COF | 47 | ACP | ACP-Conf. after Lomé IV | 2.708,00 | 0,00 | 0,00 | 2.708,00 | ITA COF | 48 | ANGOLA | SME | 27.750,00 | 0,00 | 0,00 | 27.750,00 | ITA COF | 49 | SADC | SME- Workshop | 0,00 | 0,00 | 0,00 | 0,00 | ITA COF | 50 | SOMALIA | Rehabilitation | 13.966.188,24 | 4.981.063,00 | 1.675.657,20 | 17.271.594,04 | ITA COF | 51 | TANZANIA | Bogamoyo road | 1.636.461,45 | 0,00 | 250.156,92 | 1.386.304,54 | ITA COF | 52 | SOMALIA | PACE | 478.535,75 | 0,00 | 0,00 | 478.535,75 | TOTAL | 34.591.079,99 | 12.322.853,31 | 13.355.261,35 | 33.558.671,95 | A total of 52 projects have been cofinanced by the Italian Government in the ACP States since the signature of the above agreement, of which one Tanzania project was closed in the course of the year and another – “Somalia Rehabilitation” – is still under way. No new contracts have been concluded as part of the “Somalia Rehabilitation” programme. However, several proposals for subsidies are currently being prepared following a call for proposals in 2006. These proposals should materialise in 2007. FINANCIAL INFORMATION EIB INCOME STATEMENT INVESTMENT FACILITY (in EUR’000) Notes | Year to 31.12.2006 | Year to 31.12.2005 | Interest and similar income | 23 816 | 12 376 | From loans | 21 556 | 12 117 | From interest subsidies | 162 | - | From treasury | 2 098 | 259 | Interest expenses and similar charges | (2 493) | (1 103) | From derivatives | (2 483) | (1 103) | From others | (10) | - | Net interest income | 21 323 | 11 273 | Net fee and commission income | 5 | 4 366 | 708 | Financial operations | Net result on financial operations | 6 | (153) | 1 008 | Impairment loss on loans and equity investments | 9 | (1 823) | (1 918) | Member States special contribution to general administrative expenses | 7 | 33 913 | 32 455 | General administrative expenses | 7 | (33 913) | (32 455) | Net profit for the year | 23 713 | 11 071 | The notes refer to the Notes to the Financial Statements. BALANCE SHEET INVESTMENT FACILITY (in EUR’000) Notes | 31.12.2006 | 31.12.2005 | ASSETS | Cash and cash equivalents | 8 | 190 780 | 194 916 | Derivative financial instruments | 12 | 8 473 | - | Loans and equity investments | 9 | Loans | 338 997 | 196 731 | of which accrued interest | 3 784 | 2 722 | Equity investments | 66 449 | 30 886 | Amounts receivable from contributors | 10 | 103 913 | 92 455 | Other assets | 11 | 1 365 | 351 | Total assets | 709 977 | 515 339 | LIABILITIES | Derivative financial instruments | 12 | - | 5 584 | Amounts owed to third parties | 13 | 134 425 | 115 655 | Deferred income | 14 | 7 908 | 186 | Other liabilities | 15 | 1 463 | - | Total liabilities | 143 796 | 121 425 | EQUITY ATTRIBUTABLE TO MEMBER STATES | Facility Member States Contribution called | 16 | 515 000 | 370 000 | Retained earnings | 41 184 | 17 471 | Fair value reserve | 9 997 | 6 443 | Total equity | 566 181 | 393 914 | Total liabilities and Member States' resources | 709 977 | 515 339 | The notes refer to the Notes to the Financial Statements. CASH FLOW STATEMENT INVESTMENT FACILITY (in EUR’000) Year to 31.12.2006 | Year to 31.12.2005 | Cash flows from operating activities | Profit for the financial year | 23 713 | 11 071 | Adjustments | Impairment on equity investments | 130 | 1 918 | Impairment on loans | 1 693 | - | Interest capitalised | (4 303) | (1 978) | Increase in accruals and deferred income | 8 038 | 468 | Profit on operating activities | 29 271 | 11 479 | Net loan disbursements | (157 004) | (107 817) | Repayments | 3 585 | 863 | Fair value movement on derivatives | (14 057) | 5 441 | Increase in prepayments and accrued income on loans | (1 062) | (2 404) | Increase in equity investments | (31 965) | (5 854) | Proceeds from equity investments | 25 | - | Increase in other assets | (1 014) | (351) | Increase in other liabilities | 1 463 | - | Net cash from operating activities | (170 758) | (98 643) | Cash flows from financing activities | Paid in by Facility Member States | 145 000 | 210 000 | (Increase) / decrease in amount receivable from contributors | (11 458) | (32 455) | Net increase in amount payable from interest subsidies | 17 312 | 78 200 | Increase in amount payable third parties | 1 458 | 32 455 | Net cash from financing activities | 152 312 | 288 200 | Effects of exchange rate changes on loans and equity investments | 14 310 | (6 431) | Summary statement of cash flows | Cash and cash equivalents at beginning of financial year | 194 916 | 11 790 | Net cash from operating activities | (170 758) | (98 643) | Net cash from financing activities | 152 312 | 288 200 | Effects of exchange rate changes on loans and equity investments | 14 310 | (6 431) | Cash and cash equivalents at end of financial year | 190 780 | 194 916 | STATEMENT OF CHANGES IN EQUITY INVESTMENT FACILITY (in EUR’000) For the year ended 31 December 2006 | Facility Member States contribution | Retained earnings | Fair value reserve on AFS investment | Total Equity | At 31 December 2004 | 160 000 | 6 400 | (899) | 165 501 | Facility Member States contribution called during the year | 230 000 | - | - | 230 000 | Facility Member States contribution cancelled during the year | (20 000) | - | - | (20 000) | Net profit of the year | - | 11 071 | - | 11 071 | Change in fair value during the year | - | - | 7 342 | 7 342 | At 31 December 2005 | 370 000 | 17 471 | 6 443 | 393 914 | Facility Member States contribution called during the year | 145 000 | - | - | 145 000 | Net profit of the year | - | 23 713 | - | 23 713 | Change in fair value during the year | - | - | 3 554 | 3 554 | At 31 December 2006 | 515 000 | 41 184 | 9 997 | 566 181 | NOTES TO THE FINANCIAL STATEMENTS General information The Investment Facility (the “Facility”) has been established within the framework of the Cotonou Agreement (the “Agreement”) on co-operation and development assistance negotiated between the African, Caribbean and Pacific Group of States (the “ACP States”) and the European Union and its Member States on 23 June 2000 and revised on 25 June 2005. The Facility is managed by the European Investment Bank (the “EIB” or the “Bank”). Under the terms of the Agreement up to EUR 2,200 million for ACP and EUR 20 million for OCT (as agreed by the Council Decision of 27 November 2001 on the association of the Overseas Countries and Territories with the European Community) may be allocated to finance the Facility. Within the framework of the Agreement, the EIB also manages loans granted from its own resources. All other financial resources and instruments under the Agreement are administered by the European Commission. Significant accounting policies - Basis of preparation The Facility’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The accounting policies applied are in conformity with the IFRS and with the overall principles of the Directives 86/635/EEC of the Council of the European Communities of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions, as amended by Directive 2001/65/EC of 27 September 2001 and by Directive 2003/51/EC of 18 June 2003 on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance undertakings (the “Directives”). - Significant accounting judgements and estimates The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Facility’s accounting policies. The area involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed. The most significant use of judgements and estimates are as follows: Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded on the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of liquidity and model inputs such as correlation and volatility for longer dated derivatives. Impairment losses on loans and advances The Facility reviews its problem loans and advances at each reporting date to assess whether an allowance for impairment should be recorded in the income statement. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. In addition to specific allowance against individually significant loans and advances, the Facility also makes a collective impairment allowance against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This collective allowance is based on any deterioration in the internal rating of the loan or investment since it was granted or acquired. These internal ratings take into consideration factors such as any deterioration in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in cash flows. Valuation of unquoted equity investments Valuation of unquoted equity investments is normally based on one of the following: - recent arms length market transactions; - current fair value of another instrument that is substantially the same; - the expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics; or - other valuation models. The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation. The Facility calibrates the valuation techniques periodically and tests them for validity using either prices from observable current market transactions in the same instrument or from other available observable market data. Impairment of equity investments The Facility treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of whether a decline is significant or prolonged is based on a judgmental appreciation. - Change in accounting policies The accounting policies adopted are consistent with those used in the previous financial year except as follows: The Facility adopted the amendment to IAS 39 Financial Instruments: Recognition and Measurement for financial guarantee contracts (issued in August 2005), which requires for financial guarantee contracts that are not considered to be insurance contracts to be recognized initially at fair value and to be remeasured at the higher of the amount determined in accordance with IAS 37 Provision, Contingent Liabilities and Contingent Assets and the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18 Revenue . Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Facility’s accounting periods beginning on or after 1 March 2006 or later periods but which the Facility has not yet early adopted, as follows: - IFRS 7 Financial Instruments: Disclosures (effective for annual periods beginning on or after January 1, 2007): the Standard requires the Facility to make disclosures that enable users to evaluate the significance of the Facility's financial instruments and the nature and extent of risks arising from those financial instruments. - Amendment to IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after January 1, 2007): this amendment requires the Facility to make new disclosures to enable users of the financial statements to evaluate the Facility’s objectives, policies and processes for managing capital. - IFRIC 9 (effective for annual periods beginning on or after June 1, 2006): this interpretation establishes that the date to assess the existence of an embedded derivative is the date an entity first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. The Facility is still evaluating the effect of this interpretation and expects that adoption of this interpretation will have no impact on the Facility’s financial statements when implemented in 2007. - Summary of significant accounting policies The balance sheet represents assets and liabilities in decreasing order of liquidity and does not distinguish between current and non-current items. 1) Foreign currency translation The Facility uses the Euro (EUR) for presenting its financial statements, which is also the functional and presentational currency. Foreign currency transactions are translated, in accordance with IAS 21, at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in currencies other than in Euro are translated into Euro at the exchange rate prevailing at the bala