[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES | Brussels, 20.7.2009 COM(2009) 397 COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND THE COURT OF AUDITORS FINAL ACCOUNTS FOR THE FINANCIAL YEAR 2008 OF THE 7 TH , 8 TH , 9 TH AND 10 TH EUROPEAN DEVELOPMENT FUNDS TABLE OF CONTENTS NOTE ACCOMPANYING THE ACCOUNTS 3 1. FINANCIAL STATEMENTS OF THE EUROPEAN DEVELOPMENT FUND AND EXPLANATORY NOTES 4 1.1. PRINCIPAL EVENTS AND KEY POINTS 4 1.2. FINANCIAL STATEMENTS 6 1.3. NOTES TO THE FINANCIAL STATEMENTS 22 2. REPORT ON FINANCIAL IMPLEMENTATION 40 2.1. ALLOCATIONS AT 31.12.2008 45 2.2. AGGREGATED ACCOUNTS 56 2.3. SITUATION BY COUNTRY AND BY INSTRUMENT 64 2.4. OTHER MANAGEMENT INFORMATION 67 3. FINANCIAL INFORMATION EIB 73 3.1. INCOME STATEMENT INVESTMENT FACILITY 74 3.2. BALANCE SHEET INVESTMENT FACILITY 75 3.3. CASH FLOW STATEMENT INVESTMENT FACILITY 76 3.4. STATEMENT OF CHANGES IN EQUITY INVESTMENT FACILITY 77 3.5. NOTES TO THE FINANCIAL STATEMENTS INVESTMENT FACILITY 78 4. APPENDIX – Situation by country and by instrument 97 NOTE ACCOMPANYING THE ACCOUNTS I hereby declare that the annual accounts of the 7th, 8th, 9th and 10th European Development Funds for the year 2008 have been prepared in accordance with Title VIII of the Financial Regulation of the 10th European Development Fund and with the accounting principles, rules and methods set out in annex to the financial statements. I have obtained from the authorising officer and from the EIB, who certified its reliability, all the information necessary for the production of the accounts that show the European Development Funds' assets and liabilities and the budgetary implementation. I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present a true and fair view of the financial position of the European Development Funds in all material aspects. (signed) Philippe Taverne Accounting Officer FINANCIAL STATEMENTS OF THE EUROPEAN DEVELOPMENT FUND AND EXPLANATORY NOTES PRINCIPAL EVENTS AND KEY POINTS The European Development Fund (EDF) is the main instrument for providing Community aid for development cooperation in the African, Caribbean and Pacific (ACP) States and Overseas Countries and Territories (OCTs). The 1957 Treaty of Rome made provision for its creation with a view to granting technical and financial assistance, initially to African countries which at that time were still colonised and with which some Member States had historical links. Even though a heading has been reserved for the Fund in the Community budget since 1993 following a request by the European Parliament, the EDF is not yet included under the Community's general budget. It is funded by the Member States, subject to its own financial rules and managed by a specific committee. The geographic aid granted to ACP States and OCTs will continue to be mainly funded by the EDF during the period 2008-2013. Each EDF is concluded for a period of around five years. Since the conclusion of the first partnership convention in 1964, the EDF cycles have generally followed the partnership agreement/convention cycles. The 9th EDF expired on the entry into force of the 10th EDF on 1st July 2008. Council decision 2007/792/EC[1] of 26 November 2007 established a transitory period for the prolongation of the 9th EDF from 1st January 2008 until the entry into force of the 10th EDF. Each EDF is governed by its own Financial Regulation which imposes the preparation of financial statements for each individual EDF. Accordingly, financial statements are prepared separately for each EDF in respect of the part that is managed by the European Commission. These financial statements are also presented in an aggregated way so as to provide a global view of the financial situation of the resources for which the European Commission is responsible. Given the clear division of responsibilities set out in Article 2.2 of the 10th EDF Financial Regulation[2], the financial statements of the Commission and the European Investment Bank – the entities entrusted with the management of EDF resources – have not been consolidated in the accounts of the European Communities. Closure of the 7th EDF In order to facilitate the migration of the EDF accounting records to the new ABAC FED application, the Authorising Officer decided to close the 7 th EDF on 31st August 2008. In the absence of a legal basis for the closure of EDFs, the remaining balances and the related contracts and decisions were transferred to the 9th EDF according to the provisions of Part 3 of the Financial Regulation applicable to the 9th EDF. This is different from the procedure applied at the closure of the 6th EDF on 31st July 2006, when only the remaining balances were transferred. For information purposes, the 7th EDF balance sheet as at the closure date, 31st August, is disclosed under 1.2. Presentation of annual accounts The annual accounts for 2008 are presented as follows: - The financial statements - The reports on financial implementation - The financial statements and information supplied by the European Investment Bank (EIB) FINANCIAL STATEMENTS BALANCE SHEET for the 8th, 9th and 10th EDF (EUR millions) | Notes | 31.12.2008 | 31.12.2007 | CURRENT ASSETS | Receivables | 1 | 17,16 | 8,50 | Net pre-financing | 2 | 917,85 | 955,52 | Other current assets | 3 | -6,32 | -2,65 | Cash and cash equivalents | 290,76 | 388,22 | STABEX security accounts | 5 | 87,98 | 99,61 | Democratic Republic Congo special fund | 6 | 1,75 | 3,36 | Cash at banks | 7 | 185,94 | 285,24 | Co-financing bank accounts | 8 | 15,09 | 0.00 | TOTAL ASSETS | 1.219,45 | 1.349,58 | CURRENT LIABILITIES | Payables | 9 | 702,29 | 703,98 | TOTAL LIABILITIES | 702,29 | 703,98 | NET ASSETS | 517,15 | 645,60 | FUNDS & RESERVES | Called fund capital | 10 | 17.079,17 | 25.019,17 | Economic outturn carried forward from previous years | -15.784,30 | -22.410,59 | Economic outturn of the year | -3.029,96 | -3.255,88 | Other reserves | 11 | 2.252,25 | 1.292,89 | NET ASSETS | 517,15 | 645,60 | ECONOMIC OUTTURN ACCOUNT for the 8th, 9th and 10th EDF (EUR millions) | Notes | cash basis expenditure 2008 | accrual adjustments | accrual basis expenditure 2008 | accrual basis expenditure 2007 | Operating revenue (1) | 12 | 0,00 | 23,16 | 23,16 | 0,02 | Programmable aid | 413,68 | 2,90 | 416,58 | 637,53 | Macro-economic support | 349,87 | -5,65 | 344,23 | 426,59 | Sectoral policy | 1.450,25 | -62,77 | 1.387,48 | 1.148,85 | Intra ACP Projects | 487,17 | 30,08 | 517,24 | 381,66 | Interest-rate subsidies | 1,77 | 1,77 | 0,95 | Emergency aid | 181,95 | 5,67 | 187,62 | 154,81 | Refugee aid | 1,36 | 4,39 | 5,75 | -5,58 | Risk Capital | 16,57 | 16,57 | 57,81 | STABEX | 24,54 | 24,54 | 98,37 | Sysmin | 7,24 | -2,47 | 4,77 | 31,58 | Other aid programmes related to former EDFs | 29,57 | -10,69 | 18,88 | 4,82 | Structural adjustment | 0,20 | -0,13 | 0,07 | -6,30 | Debt relief - Heavily Indebted Poor Countries and World Bank | -1,07 | -1,07 | 179,87 | Institutional Support | 16,10 | 19,56 | 35,65 | 30,41 | Compensation export receipts | 40,78 | 1,24 | 42,01 | 83,91 | Democratic Republic Congo Fund | -1,67 | 3,22 | 1,56 | 17,25 | Operating expenses | 3.019,38 | -15,71 | 3.003,67 | 3.242,52 | Administrative and financial expenses | 13 | 83,09 | -24,81 | 58,28 | 31,68 | Total expenses / cash basis | 14 | 3.102,47 | Accrual adjustments | 15 | -40,52 | -0,34 | Total expenses / accrual basis (2) | 16 | 3.061,95 | 3.061,95 | 3.273,86 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (1-2) | -3.061,95 | -3.038,79 | -3.273,83 | Financial revenue | 17 | 12,66 | 12,66 | 18,65 | Financial expenses | -0,02 | -0.02 | -0,34 | Impairment of receivables | 1.4 | -3,81 | -3,81 | -0,35 | Surplus/(deficit) from financial activities (3) | 8,83 | 8,83 | 17,96 | ECONOMIC OUTTURN OF THE YEAR (1-2+3) | -3.053,11 | -3.029,96 | -3.255,88 | Economic outturn of the year for the 8th, 9th and 10th EDF | -3.029,96 | Economic outturn of the year for the 7th EDF | -98,49 | TOTAL ECONOMIC OUTTURN OF THE YEAR | -3.128,45 | CASH FLOW STATEMENT for the 7th, 8th, 9th and 10th EDF (EUR millions) | Notes | 31.12.2008 | 31.12.2007 | Economic outturn of the year | -3.128,45 | -3.255,88 | Impairment losses on receivables | 1.4 | 1,02 | 0,35 | Accrual adjustment – operating revenue | -23,15 | 2,88 | Accrual adjustment – operating & administrative expenses | 15 | 20,15 | 399,89 | Accrual adjustment - financial expenses | 0,00 | 0,34 | Bank charges to be refunded | 0,00 | 0,02 | Increase in co-financing payables | 9 | 15,09 | 0.00 | Decrease in accrued interest income | 1 | 1,60 | -0,11 | Increase in advances for study grants and other current assets | 3 & 2 | 4,60 | 3,81 | Cash flows from operating activities | -3.109,14 | -2.848,69 | Contributions from Member States | 9.1 & 10.1 | 3.022,34 | 2.886,76 | Cash flows from financing activities | 3.022,34 | 2.886,76 | Net increase/(decrease) in cash and cash equivalents | -86,79 | 38,07 | Cash at banks at beginning of period | 7 | 285,24 | 96,48 | STABEX security accounts at beginning of period | 5 | 99,61 | 191,60 | Democratic Republic Congo special fund at beginning of period | 6 | 3,36 | 3,42 | SWIFT account at beginning of period | 9.2 | -8,92 | 49,73 | Cash and cash equivalents at beginning of period | 379,30 | 341,23 | Cash at banks at end of period | 7 | 185,94 | 285,24 | STABEX security accounts at end of period | 5 | 87,98 | 99,61 | Democratic Republic Congo special fund at end of period | 6 | 1,75 | 3,36 | Co-financing bank accounts at end of period | 8 | 15,09 | 0.00 | SWIFT account at end of period | 9.2 | 1,74 | -8,92 | Cash and cash equivalents at end of period | 292,50 | 379,30 | STATEMENT OF CHANGES IN NET ASSETS for the 7th, 8th, 9th and 10th EDF (EUR millions) | Fund Capital | Uncalled Funds | Called fund capital | Cumulative reserves | Other reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 10 | 10 | 10 | 11 | Closing balance 2006 | 42.999,15 | 13.099,15 | 29.900,00 | -29.711,53 | 1.033,84 | 1.222,31 | Contributions | -2.640,00 | 2.640,00 | 2.640,00 | Capital increase | 40,17 | 1,00 | 39,17 | 39,17 | Transfers from former EDFs | Economic outturn of the year | -3.255,88 | -3.255,88 | Closure of 6th EDF | -7.560,00 | -7.560,00 | 7.300,94 | 259,06 | 0,00 | Closing balance 2007 | 35.479,32 | 10.460,15 | 25.019,17 | -25.666,46 | 1.292,89 | 645,60 | Contributions | -3.000,00 | 3.000,00 | 3.000,00 | Capital increase | 2,40 | 2,40 | Transfers from former EDFs | Economic outturn of the year | -3.029,96 | -3.029,96 | Opening 10th EDF | 21.152,00 | 21.152,00 | Closure of 7th EDF | -10.940,00 | -10.940,00 | 9.882,16 | 959,36 | -98,49 | Closing balance 2008 | 45.693,72 | 28.614,55 | 17.079,17 | -18.814,26 | 2.252,25 | 517,15 | 7th EDF BALANCE SHEET (EUR millions) | Notes | 31.08.2008 | 31.12.2007 | CURRENT ASSETS | Receivables | 1 | 0,00 | 2,12 | Net pre-financing | 2 | 0,00 | 75,36 | Other current assets | 3 | 0,00 | 0,00 | Liaison accounts | 4 | 0,00 | 242,23 | Cash and cash equivalents | 0,00 | 0,00 | STABEX security accounts | 5 | 0,00 | 0,00 | Democratic Republic Congo special fund | 6 | 0,00 | 0,00 | Cash at banks | 7 | 0,00 | 0,00 | Co-financing bank accounts | 8 | 0,00 | 0,00 | TOTAL ASSETS | 0,00 | 319,70 | CURRENT LIABILITIES | Payables | 9 | 0,00 | 19,59 | TOTAL LIABILITIES | 0,00 | 19,59 | NET ASSETS | 0,00 | 300,11 | FUNDS & RESERVES | Called fund capital | 10 | 10.940,00 | 10.940,00 | Economic outturn carried forward from previous years | -9.882,16 | -9.715,19 | Economic outturn of the year | -98,49 | -166,97 | Other reserves | -959,36 | -757,73 | NET ASSETS | 0,00 | 300,11 | 7th EDF ECONOMIC OUTTURN ACCOUNT (EUR millions) | Notes | cash basis expenditure 2008 | accrual adjustments | accrual basis expenditure 2008 | accrual basis expenditure 2007 | Operating revenue (1) | 12 | 0,00 | 0,00 | 0,00 | 0,00 | Programmable aid | 24,11 | 57,58 | 81,69 | 124,56 | Macro-economic support | 0,00 | 0,00 | 0,00 | 0,00 | Sectoral policy | 0,00 | 0,00 | 0,00 | Intra ACP Projects | 0,00 | 0,00 | 0,00 | 0,00 | Interest-rate subsidies | 0,00 | 0,00 | 0,00 | -0,49 | Emergency aid | -0,01 | 0,14 | 0,13 | 0,28 | Refugee aid | -0,02 | 0,64 | 0,62 | 0,28 | Risk Capital | 4,30 | 0,00 | 4,30 | 5,28 | STABEX | 0,00 | 0,00 | 0,00 | 8,23 | Sysmin | 12,46 | -6,20 | 6,27 | 27,01 | Other aid programmes related to former EDFs | -0,21 | 1,88 | 1,67 | 3,56 | Structural adjustment | -0,02 | 6,62 | 6,60 | -6,62 | Debt relief – Heavily Indebted Poor Countries and World Bank | 0,00 | 0,00 | 4,96 | Institutional Support | 0,00 | 0,00 | 0,00 | 0,00 | Compensation export receipts | 0,00 | 0,00 | 0,00 | Democratic Republic Congo Fund | 0,00 | 0,00 | 0,00 | 0,00 | Operating expenses | 40,60 | 60,67 | 101,27 | 167,05 | 0,00 | Administrative and financial expenses | 13 | 0,00 | 0,00 | 0,00 | Total expenses / cash basis | 14 | 40,60 | Accrual adjustments | 15 | 60,67 | 0,00 | 0,00 | TOTAL EXPENSES / Accrual basis (2) | 16 | 101,27 | 101,27 | 167,05 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (1-2) | -101,27 | -101,27 | -167,05 | Financial revenue | 17 | 0,00 | 0,00 | Financial expenses | 0,00 | 0,00 | 0,00 | Impairment of receivables | 1.4 | 2,79 | 2,79 | 0,08 | Surplus/(deficit) from financial activities (3) | 2,79 | 2,79 | 0,08 | ECONOMIC OUTTURN OF THE YEAR (1-2+3) | -98,49 | -98,49 | -166,97 | STATEMENT OF CHANGES IN NET ASSETS for the 7th EDF (EUR millions) | Fund Capital | Uncalled Funds | Called fund capital | Cumulative reserves | Other reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 10 | 10 | 10 | 11 | Closing balance 2006 | 10.940,00 | 0,00 | 10.940,00 | -9.715,19 | -685,81 | 539,00 | Contributions | Capital increase | Transfers to 9th EDF | -71,91 | -71,91 | Economic outturn of the year | -166,97 | -166,97 | Closing balance 2007 | 10.940,00 | 0,00 | 10.940,00 | -9.882,16 | -757,73 | 300,11 | Contributions | Capital increase | Transfers to 9th EDF | -201,63 | -201,63 | Economic outturn of the year | -98,49 | -98,49 | Balance at 31.08.2008 | 10.940,00 | 0,00 | 10.940,00 | -9.980,64 | -959,36 | 0,00 | Closure of 7th EDF | -10.940,00 | -10.940,00 | 9.980,64 | 959,36 | 0,00 | Closing balance 2008 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 8th EDF BALANCE SHEET (EUR millions) | Notes | 31.12.2008 | 31.12.2007 | CURRENT ASSETS | Receivables | 1 | 3,82 | 2,64 | Net pre-financing | 2 | 93,40 | 126,98 | Other current assets | 3 | Liaison accounts | 4 | 859,14 | 1.235,68 | Cash and cash equivalents | STABEX security accounts | 5 | Democratic Republic Congo special fund | 6 | Cash at banks | 7 | Co-financing bank accounts | 8 | TOTAL ASSETS | 956,37 | 1.365,30 | CURRENT LIABILITIES | Payables | 9 | 94,06 | 124,35 | TOTAL LIABILITIES | 94,06 | 124.35 | NET ASSETS | 862,31 | 1.240,94 | FUNDS & RESERVES | Called fund capital | 10 | 12.840,00 | 12.840,00 | Economic outturn carried forward from previous years | -9.504,00 | -8.724,21 | Economic outturn of the year | -321,18 | -779,79 | Other reserves | 11 | -2.152,51 | -2.095,06 | NET ASSETS | 862,31 | 1.240,94 | 8th EDF ECONOMIC OUTTURN ACCOUNT (EUR millions) | Notes | cash basis expenditure 2008 | accrual adjustments | accrual basis expenditure 2008 | accrual basis expenditure 2007 | Operating revenue (1) | 12 | 0,00 | 4,17 | 4,17 | Programmable aid | 228,46 | 6,54 | 235,00 | 393,52 | Macro-economic support | 0,66 | -0,94 | -0,28 | 2,79 | Sectoral policy | 11,58 | 3,82 | 15,40 | 20,95 | Intra ACP Projects | Interest-rate subsidies | 1,77 | 1,77 | 1,45 | Emergency aid | -0,06 | -0,06 | -0,15 | Refugee aid | 1,36 | 4,39 | 5,75 | -5,86 | Risk Capital | 16,57 | 16,57 | 52,52 | STABEX | 24,54 | 24,54 | 90,14 | Sysmin | 7,24 | -2,47 | 4,77 | 4,57 | Other aid programmes related to former EDFs | Structural adjustment | 0,20 | -0,13 | 0,07 | 0,32 | Debt relief - Heavily Indebted Poor Countries and World Bank | -1,07 | -1,07 | 173,31 | Institutional Support | Compensation export receipts | 29,77 | -2,95 | 26,83 | 49,49 | Democratic Republic Congo Fund | Operating expenses | 322,10 | 7,19 | 329,28 | 783,04 | Administrative and financial expenses | 13 | 1,02 | -0,18 | 0,84 | 1,95 | Total expenses / cash basis | 14 | 323,12 | Accrual adjustments | 15 | 7,01 | Total expenses / accrual basis (2) | 16 | 330,13 | 330,13 | 784,99 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (1-2) | -330,13 | -325,95 | -784,99 | Financial revenue | 17 | 4,03 | 4,03 | 6,18 | Financial expenses | Impairment of receivables | 1.4 | 0,74 | 0,74 | -0,97 | Surplus/(deficit) from financial activities (3) | 4,77 | 4,77 | 5,20 | ECONOMIC OUTTURN OF THE YEAR (1-2+3) | -325,36 | -321,18 | -779,79 | STATEMENT OF CHANGES IN NET ASSETS for the 8th EDF (EUR millions) | Fund Capital | Uncalled Funds | Called fund capital | Cumulative reserves | Other reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 10 | 10 | 10 | 11 | Closing balance 2006 | 12.840,00 | 1.545,00 | 11.295,00 | -8.724,21 | -1.877,85 | 692,93 | Contributions | -1.545,00 | 1.545,00 | 1.545,00 | Capital increase | Transfers to 9th EDF | -217,21 | -217,21 | Economic outturn of the year | -779,79 | -779,79 | Closing balance 2007 | 12.840,00 | 0,00 | 12.840,00 | -9.504,00 | -2.095,06 | 1.240,94 | Contributions | Capital increase | Transfers to other EDFs | -57,45 | -57,45 | Economic outturn of the year | -321,18 | -321,18 | Closing balance 2008 | 12.840,00 | 0,00 | 12.840,00 | -9.825,18 | -2.152,51 | 862,31 | 9th EDF BALANCE SHEET (EUR millions) | Notes | 31.12.2008 | 31.12.2007 | CURRENT ASSETS | Receivables | 1 | 13,33 | 3,75 | Net pre-financing | 2 | 761,90 | 753,18 | Other current assets | 3 | -0,03 | -2,65 | Cash and cash equivalents | 12,92 | 388,22 | STABEX security accounts | 5 | 99,61 | Democratic Republic Congo special fund | 6 | 3,36 | Cash at banks | 7 | 285,24 | Co-financing bank accounts | 8 | 12,92 | 0,00 | TOTAL ASSETS | 788,12 | 1.142,50 | CURRENT LIABILITIES | Payables | 9 | 374,36 | 560,05 | Liaison accounts | 4 | 837,33 | 1.477,90 | TOTAL LIABILITIES | 1.211,69 | 2.037,95 | NET ASSETS | -423,57 | -895,45 | FUNDS & RESERVES | Called fund capital | 10 | 4.239,17 | 1.239,17 | Economic outturn carried forward from previous years | -6.280,30 | -3.971,18 | Economic outturn of the year | -2.690,15 | -2.309,12 | Other reserves | 11 | 4.307,72 | 4.145,68 | NET ASSETS | -423,57 | -895,45 | 9th EDF ECONOMIC OUTTURN ACCOUNT (EUR millions) | Notes | cash basis expenditure 2008 | accrual adjustments | accrual basis expenditure 2008 | accrual basis expenditure 2007 | Operating revenue (1) | 12 | 0,00 | 18,98 | 18,98 | 0,02 | Programmable aid | 143,42 | 11,35 | 154,77 | 119,44 | Macro-economic support | 349,21 | -4,70 | 344,51 | 423,80 | Sectoral policy | 1.438,67 | -66,59 | 1.372,08 | 1.127,91 | Intra ACP Projects | 468,97 | 48,28 | 517,24 | 381,66 | Interest-rate subsidies | Emergency aid | 182,01 | 5,67 | 187,68 | 154,68 | Refugee aid | Risk Capital | STABEX | Sysmin | Other aid programmes related to former EDFs | 29,57 | -10,69 | 18,88 | 1,26 | Structural adjustment | Debt relief - Heavily Indebted Poor Countries and World Bank | 1,60 | Institutional Support | 16,10 | 19,56 | 35,65 | 30,41 | Compensation export receipts | 11,00 | 4,19 | 15,19 | 34,42 | Democratic Republic Congo Fund | -1,67 | 3,22 | 1,56 | 17,25 | Operating expenses | 2.637,29 | 10,28 | 2.647,57 | 2.292,43 | Administrative and financial expenses | 13 | 52,29 | 4,72 | 57,01 | 29,73 | Total expenses / cash basis | 14 | 2.689,58 | 15,01 | Accrual adjustments | 15 | 15,01 | -0,34 | Total expenses / accrual basis (2) | 16 | 2.704,58 | 2.704,58 | 2.321,82 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (1-2) | -2.704,58 | -2.685,60 | -2.321,80 | Financial revenue | 17 | 12,47 | Financial expenses | -0,34 | Impairment of receivables | 1.4 | -4,55 | -4,55 | 0,54 | Surplus/(deficit) from financial activities (3) | -4,55 | -4,55 | 12,67 | ECONOMIC OUTTURN OF THE YEAR (1-2+3) | -2.709,13 | -2.690,15 | -2.309,12 | STATEMENT OF CHANGES IN NET ASSETS for the 9th EDF (EUR millions) | Fund Capital | Uncalled Funds | Called fund capital | Cumulative reserves | Other reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 10 | 10 | 10 | 11 | Closing balance 2006 | 11.659,15 | 11.554,15 | 105,00 | -3.971,18 | 3.856,56 | -9,62 | Contributions | -1.095,00 | 1.095,00 | 1.095,00 | Capital increase | 40,17 | 1,00 | 39,17 | 39,17 | Transfers from other EDFs | 289,12 | 289,12 | Economic outturn of the year | -2.309,12 | -2.309,12 | Closing balance 2007 | 11.699,32 | 10.460,15 | 1.239,17 | -6.280,30 | 4.145,68 | -895,45 | Contributions | -3.000,00 | 3.000,00 | 3.000,00 | Capital increase | Transfers from other EDFs | 162,04 | 162,04 | Economic outturn of the year | -2.690,15 | -2.690,15 | Closing balance 2008 | 11.699,32 | 7.460,15 | 4.239,17 | -8.970,46 | 4.307,72 | -423,57 | 10th EDF BALANCE SHEET (EUR millions) | Notes | 31.12.2008 | CURRENT ASSETS | Receivables | 1 | 0,00 | Net pre-financing | 2 | 62,55 | Other current assets | 3 | -6,30 | Cash and cash equivalents | 277,84 | STABEX security accounts | 5 | 87,98 | Democratic Republic Congo special fund | 6 | 1,75 | Cash at banks | 7 | 185,94 | Co-financing bank accounts | 8 | 2,17 | TOTAL ASSETS | 334,10 | CURRENT LIABILITIES | Payables | 9 | 233,87 | Liaison accounts | 4 | 21,81 | TOTAL LIABILITIES | 255,68 | NET ASSETS | 78,41 | FUNDS & RESERVES | Called fund capital | 10 | 0,00 | Economic outturn carried forward from previous years | 0,00 | Economic outturn of the year | -18,63 | Other reserves | 11 | 97,04 | NET ASSETS | 78,41 | 10th EDF ECONOMIC OUTTURN ACCOUNT (EUR millions) | Notes | cash basis expenditure 2008 | accrual adjustments | accrual basis expenditure 2008 | Operating revenue (1) | 12 | 0,00 | 0,00 | Programmable aid | 41,79 | -14,98 | 26,81 | Macro-economic support | Sectoral policy | Intra ACP Projects | 18,20 | -18,20 | Interest-rate subsidies | Emergency aid | Refugee aid | Risk Capital | STABEX | Sysmin | Other aid programmes related to former EDFs | Structural adjustment | Debt relief – Heavily Indebted Poor Countries and World Bank | Institutional Support | Compensation export receipts | Democratic Republic Congo Fund | Operating expenses | 59,99 | -33,18 | 26,81 | Administrative and financial expenses | 13 | 29,78 | -29,35 | 0,43 | Total expenses (cash basis) | 14 | 89,77 | Accrual adjustments | 15 | -62,54 | Total expenses / accrual basis (2) | 16 | 27,24 | 27,24 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (1-2) | -27,23 | -27,23 | Financial revenue | 17 | 8,63 | 8,63 | Financial expenses | -0,02 | -0,02 | Impairment of receivables | 1.4 | Surplus/(deficit) from financial activities (3) | 8,61 | 8,61 | ECONOMIC OUTTURN OF THE YEAR (1-2+3) | -18,63 | -18,63 | STATEMENT OF CHANGES IN NET ASSETS for the 10th EDF (EUR millions) | Fund Capital | Uncalled Funds | Called fund capital | Cumulative reserves | Other reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 10 | 10 | 10 | 11 | Opening balance 2008 | 21.152,00 | 21.152,00 | 0,00 | 0,00 | 0,00 | 0,00 | Contributions | Capital increase | 2,40 | 2,40 | Transfers from other EDFs | 97,04 | 97,04 | Economic outturn of the year | -18,63 | -18,63 | Closing balance 2008 | 21.154,40 | 21.154,40 | 0,00 | -18,63 | 97,04 | 78,41 | NOTES TO THE FINANCIAL STATEMENTS Accounting Policies Legal provisions and the Financial Regulation The financial statements were drawn up in accordance with the Financial Regulation applicable to the 10th European Development Fund[3] (EDF). The relevant documents must be presented to the Court of Auditors as provided for in Articles 69, 70 and 71 of the Financial Regulation applicable to the 7th EDF[4], Articles 66, 67 and 68 of the Financial Regulation applicable to the 8th EDF[5], Articles 102 and 103 of the Financial Regulation applicable to the 9th EDF[6] and Articles 124 and 125 of the Financial Regulation applicable to the 10th EDF3. Article 124 (10th EDF) stipulates that the EDF Accounting Officer 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 125). On the basis of these observations, the Commission approves the final accounts by 31 July and sends them to the European Parliament, the Council and the Court of Auditors. The accounts are then published in the Official Journal by 15 November, together with the statement of assurance given by the Court of Auditors in respect of the part of the EDF resources for which the Commission is responsible for financial management. In accordance with the provisions of article 121 of the 10th EDF Financial Regulation, financial statements are prepared respecting the principles 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. As from the financial year 2009, a new accounting system has been implemented in order to present accrual accounts without adjustments. These financial statements have been drafted in conformity with accounting rules and methods of the EDF drawn up on the basis of International Public Sector Accounting Standards (IPSAS) or by default, International Financial Reporting Standards (IFRS) as respectively issued by the International Public Sector Accounting Standard Board (IPSASB) and International Accounting Standard Board (IASB). 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. Accounting Principles The objective of the financial statements is to provide information about the financial position, performance and cash flows of an entity that is useful to a wide range of users. For a public sector entity, 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 Fund comprises general accounts and budget accounts. These accounts are kept in euro on the basis of the calendar year. The budget accounts give a detailed picture of the implementation of the budget. They are based on the modified cash accounting principle. The general accounts allow for the preparation of the financial statements as they show all charges and income for the financial year based on accrual accounting rules and are designed to establish the financial position in the form of a balance sheet at 31st December. Article 120 of the 10th 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. Basis of preparation The financial statements are presented in millions of euros, which is the European Communities' functional and reporting currency. Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the underlying transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the economic outturn account. Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the exchange rates applying on 31 December: EURO Exchange Rate | 31.12.2008 | 31.12.2007 | GBP 0.9525 | GBP 0.7148 | Values in the tables may not add up, due to rounding. In accordance with generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to, 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. Balance sheet Receivables Receivables are carried at original amount less write-down for impairment. A write-down for impairment of receivables is established when there is objective evidence that the EDF will not be able to collect all amounts due according to the original terms of the receivables. The amount of the write-down is the difference between the asset's carrying amount and the recoverable amount, being the present value of expected future cash flows, discounted at the market rate of interest for similar borrowers. The amount for write-down is recognised in the economic outturn account. Also recognised is a general write-down in value of 20% per year for outstanding recovery orders not already subject to a specific write-down. 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 related to pre-financing amounts are disclosed as contingent assets and as such they are not accounted for in the financial statements (IPSAS 19). Cash & cash equivalents Cash and cash equivalents include accounts held with financial institutions in the ACP states, the OCTs and the Member States. For the purpose of the cash flow statement, cash and cash equivalents include the current account with the general budget of the EU presented under accounts payable in the balance sheet. Payables A significant amount of payables of the EDF are not related to the purchase of goods or services – instead they are unpaid cost claims from beneficiaries of grants or other funding. They are recorded as payables for the requested amount when the cost claim/request for payment is received and, after verification, accepted as eligible by the relevant financial agents. At this stage they are valued at the accepted and eligible amount. A critical element in accrual accounting is the exercise of ensuring that transactions are recorded in the accounting year to which they relate. This exercise is referred to as the cut-off exercise. In particular an assessment has to be made concerning eligible expenses incurred by beneficiaries of EDF funds but not yet reported to the EDF (accrued charges). According to the European Communities accounting rules, transactions and events are recognised in the financial statements in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period (e.g. the degree of execution of contracts) provided by the Authorising Officer. Economic Outturn Account Revenue The revenue of the EDF comprises interest generated on various cash balances held with commercial banks and on late payment of entitlements to the EDF. Expenditure Expenditure is recognised in the period that the events giving rise to a payment occurred, as 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 based on, for example, invoices sent by the beneficiary, degree of execution of contracts etc. As expenditure incurred by the Commission delegations is not entered into the EDF accounts until it has been validated by both the Authorising Officer and the Accounting Officer, any expenditure which was not validated at year-end is shown as "unallocated expenses" under the heading other current assets in the balance sheet. 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. Off balance sheet Contingent assets A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the European Communities. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable. Contingent assets are assessed continuously to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset’s value can be measured reliably, the asset and the related revenue are recognised in the financial statements of the period in which the change occurs. Guarantees Guarantees are possible assets or obligations that arise from past events and whose existence will be confirmed by the occurrence or non-occurrence of the object of the guarantee. Guarantees thus qualify as contingent assets or liabilities. A guarantee is settled when the object of the guarantee no longer exists. It is crystallised when the conditions are fulfilled for calling for a payment from the guarantor. Notes to the balance sheet 1. Receivables table 1 | EUR millions | Receivables | Notes | 8th | 9th | 10th | Total at 31.12.2008 | Total at 31.12.2007 | Interest receivable - STABEX | 1.1 | -0,01 | -0,01 | 0,41 | Interest receivable - other | 1.2 | 0,01 | 0,01 | 1,19 | Open recovery orders | 1.3 | 4,17 | 18,98 | 0,00 | 23,15 | 11,88 | - Impairment of receivables | 1.4 | -0,35 | -5,65 | 0,00 | -6,00 | -4,98 | TOTAL | 3,82 | 13,33 | 0,00 | 17,16 | 8,50 | In accordance with the provisions of the Cotonou Agreement, interest income and the corresponding receivables are allocated to the 10th EDF. Such funds can be used according to the provisions of articles 1 and 6 of the Internal Agreement applicable to the 10th EDF[7]. The only exception is the interest earned on STABEX security accounts which is allocated to the 8th EDF. (1.1) Interest receivable - STABEX This amount represents interest earned on the STABEX security accounts during the financial year 2008, for which the payment will be received in 2009. This interest is the property of the relevant beneficiary countries. (1.2) Interest receivable - other This amount represents interest earned on the European bank accounts and the STABEX current account during the financial year 2008, for which the payment will be received in 2009. (1.3) Open recovery orders The closing balance for recovery orders represents the value of recovery orders issued but unpaid at the year-end. As at 31 December 2007, the balance of outstanding recovery orders related to pre-financing was EUR 21.21 million. Of this amount, EUR 9.33 million was not included in the 2007 Annual Accounts. In 2008, the accounting records of the EDF were updated. The adjustment represents an increase in receivables and a corresponding decrease in pre-financing and therefore did not have any impact on the net assets. The movements in open recovery orders during the period are detailed below. table 1.3 | EUR millions | 8th EDF | 9th EDF | TOTAL | Open recovery orders at 31.12.2007 | 6,96 | 14,25 | 21,21 | Recovery orders issued in 2008 | 27,39 | 52,17 | 79,56 | Recovery orders closed in 2008 | -30,19 | -47,00 | -77,18 | Cashed | -27,54 | -35,90 | -63,45 | Waived (art 73 FR) | -1,06 | -1,63 | -2,69 | Cancelled | -0,62 | -0,92 | -1,54 | Offset | -0,96 | -8,54 | -9,51 | Revaluation | 0,00 | -0,43 | -0,43 | Open recovery orders at 31.12.2008 | 4,17 | 18,98 | 23,15 | (1.4) Impairment of receivables In compliance with IPSAS 19, the Accounting Officer has established a provision for impairment losses on receivables based on two variables: - The age of the debt, applying a provision of 20% of the euro value for each year the debt is outstanding; and, - The evaluation of the risk of non recovery, in collaboration with the Authorising Officer. table 1.4 | EUR millions | Impairment of receivables | 7th EDF | 8th EDF | 9th EDF | TOTAL | Balance at 31.12.2008 | 0,35 | 5,65 | 6,00 | Balance at 31.12.2007 | 2,79 | 1,09 | 1,10 | 4,98 | Increase (Decrease) | -2,79 | -0,74 | 4,55 | 1,02 | 2. Net pre-financing Following the principles of accrual accounting, advance payments made by the EDF are classified as assets. The figures for outstanding pre-financing have been provided by the Authorising Officer (see table 2.1). The pre-financing is presented net of open recovery orders related to advances and estimated amounts not yet cleared at year-end. In 2008, the presentation of open recovery orders was changed. The outstanding amounts are now included in the line gross pre-financing. table 2 | EUR millions | Net pre-financing | Notes | 8th EDF | 9th EDF | 10th EDF | TOTAL 31.12.2008 | TOTAL 31.12.2007 | Pre-financing (gross) | 2.1 | 244,54 | 2.377,17 | 63,77 | 2.685,48 | 2.766,52 | Advances for study grants management | 2.2 | 0,00 | 0,45 | 0,00 | 0,45 | 1,38 | -Estimated clearing of pre-financing | 2.3 | -151,14 | -1.615,72 | -1,22 | -1.768,08 | -1.800,51 | -Open recovery orders (2007) | 1.3 | 0,00 | 0,00 | -11,88 | TOTAL | 93,40 | 761,90 | 62,55 | 917,85 | 955,52 | (2.1) Pre-financing (gross) Many contracts provide for payments of advances before the commencement of works, deliveries of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments on the basis of progress reports. Pre-financing is normally paid in the currency of the country or territory where the project is executed. The table below summarises the outstanding pre-financing (except for structural adjustment programmes and direct budgetary support programmes) 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. table 2.1 | EUR millions | Pre-financing (gross) | 7th EDF | 8th EDF | 9th EDF | 10th EDF | TOTAL | Total at 31.12.2008 | 244,54 | 2.377,17 | 63,77 | 2.685,48 | Total at 31.12.2007 | 152,34 | 383,89 | 2.230,29 | 2.766,52 | Increase (Decrease) | -152,34 | -139,35 | 146,88 | 63,77 | -81,04 | (2.2) Advances for study grants management This amount corresponds to advances paid to external bodies for the management of study awards. (2.3) Estimated clearing of pre-financing This amount represents the accrued charges calculated by the Authorising Officer corresponding to the amount of eligible costs that were incurred by the beneficiaries of the outstanding pre-financing at year-end, but not yet reported. These amounts are treated as expenditure in the Economic Outturn Account and have been reclassified from accounts payable to pre-financing. 3. Other current assets This amount comprises all payments/receipts awaiting final allocation to the appropriate projects and economic outturn account. table 3 | EUR millions | Other current assets | 9th EDF | 10th EDF | Total at 31.12.2008 | Total at 31.12.2007 | Unallocated expenses | -0,03 | -0,03 | 1,19 | Unallocated revenue | -6,47 | -6,47 | -4,55 | Partial off-settings | 0,17 | 0,17 | 0,70 | TOTAL | -0,03 | -6,30 | -6,32 | -2,65 | 4. 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. table 4 | EUR millions | Liaison accounts | 8th EDF | 9th EDF | 10th EDF | Total at 31.12.2008 | Total at 31.12.2007 | to/from 6th EDF | -2.065,45 | -213,85 | -2.279,31 | 0,00 | to/from 7th EDF | 2.279,31 | 2.279,31 | 2.037,08 | to/from 8th EDF | -3.075,80 | 151,21 | -2.924,60 | -3.301,13 | to/from 9th EDF | 3.075,80 | -173,02 | 2.902,79 | 1.264,05 | to/from 10th EDF | -151,21 | 173,02 | 21,81 | 0,00 | Total | 859,14 | -837,33 | -21,81 | 0,00 | 0,00 | 5. STABEX Security accounts STABEX is the acronym for a European Commission compensatory finance scheme to stabilise export earnings of the ACP countries. It was first introduced in the first Lomé Convention (1975) with the purpose of remedying the harmful effects of the instability of export revenue from agricultural products. The balance on the STABEX security accounts represents the total of STABEX funds available which will be transferred to the relevant beneficiary ACP State at a future date. This balance is allocated to the 10th EDF. table 5 | EUR millions | STABEX security accounts | Balance at 31.12.2007 | Transfers from STABEX current account | Interest | Payments | Balance at 31.12.2008 | BENIN | 0,05 | 0,00 | 0,05 | BURKINA FASO | 0,01 | 0,00 | 0,01 | BURUNDI | 0,68 | 0,07 | 0,75 | CAMEROUN | 0,02 | 0,00 | -0,02 | 0,00 | COMORES | 0,06 | 0,00 | 0,06 | DOMINICA | 0,08 | 0,00 | 0,08 | ETHIOPIA | 0,96 | 0,04 | 1,01 | GAMBIA | 1,07 | 0,05 | 1,12 | GRENADA | 0,35 | 0,02 | 0,36 | GUINEA-BISSAU | 0,35 | 0,01 | -0,37 | 0,00 | COTE D'IVOIRE | 1,57 | 0,07 | 1,64 | JAMAICA | 0,62 | 0,03 | 0,65 | MADAGASCAR | 0,68 | 0,03 | 0,71 | MALAWI | 0,97 | 0,04 | 1,02 | MAURITANIA | 0,38 | 0,06 | 0,44 | PAPUA-NEW GUINEA | 0,70 | 0,03 | 0,73 | RWANDA | 6,12 | 0,27 | 6,39 | SENEGAL | 10,74 | 0,24 | -10,10 | 0,88 | SIERRA LEONE | 0,07 | 0,01 | -0,08 | 0,00 | SAINT LUCIA | 14,60 | 0,63 | 15,24 | SOLOMON ISLANDS | 0,00 | 0,00 | 0,00 | SUDAN | 48,62 | 2,10 | -2,05 | 48,67 | ST VINCENT & GRENADINES | 4,21 | 0,18 | 4,40 | TANZANIA | 3,56 | 0,14 | -3,70 | 0,00 | TOGO | 0,00 | 8,47 | 0,29 | -8,47 | 0,29 | TONGA | 0,09 | 0,00 | 0,10 | UGANDA | 0,00 | 0,00 | 0,24 | 0,25 | ZIMBABWE | 3,01 | 0,13 | 3,15 | TOTAL STABEX | 99,61 | 8,47 | 4,45 | -24,54 | 87,98 | In addition to these funds, there are other STABEX funds held by beneficiary ACP States. Once the Commission and the beneficiary (ACP) State reach agreement on how the STABEX funds are to be utilised, a transfer convention is signed by both parties. In accordance with the provisions of Article 211 of the Lomé IV Agreement[8] (as revised), the funds are transferred into an interest bearing double signature security account (Commission official and Beneficiary State) opened in the name of the ACP State. The funds remain on these security accounts until an FMO (Framework of Mutual Obligations) justifies a transfer for a project. The Commission official retains the power of signature over the account in order to ensure that the funds are disbursed as intended. The funds on the double signature accounts are the property of the ACP State and are consequently not recorded as assets in the EDF Annual Accounts. The transfers to these accounts are recorded as STABEX payments. Details on these accounts are provided in the annual EDF Financial Management Report[9]. In 2008, EUR 8.47 million was made available for Togo by way of transfer from the STABEX current account to a double signature security account, following the instructions of the Authorising Officer (refer note 7.4). 6. Democratic Republic Congo special fund This balance represents the amounts available for the Democratic Republic of the Congo in accordance with the provisions of Council Decision 2003/583/EC[10]. table 6 | EUR millions | 10th EDF | Balance at 31.12.2008 | Balance at 31.12.2007 | Democratic Republic Congo special fund | 1,75 | 1,75 | 3,36 | TOTAL | 1,75 | 1,75 | 3,36 | 7. Cash at banks In accordance with Article 153 of the 10th EDF Financial Regulation the treasury is presented in the balance sheet of the 10th EDF. table 7 | EUR millions | Cash at banks | Notes | 10th EDF | Balance at 31.12.2008 | Balance at 31.12.2007 | Treasury accounts | 7.1 | 133,98 | 133,98 | 208,09 | Local Paying Agents | 7.2 | 20,24 | 20,24 | 54,67 | European Paying Agents | 7.3 | 31,71 | 31,71 | 13,06 | STABEX current account | 7.4 | 0,00 | 0,00 | 8,47 | Cash in transit | 0,00 | 0,00 | 0,95 | TOTAL | 185,94 | 185,94 | 285,24 | (7.1) 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 European paying agents. (7.2) Local paying agents These are amounts held in bank accounts within ACP States and OCTs 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. (7.3) European paying agents These accounts are held with commercial banks established in the EU-15 Member States 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 local paying agent accounts and the liaison account with the General Budget of the EU. (7.4) STABEX current account The 2007 balance has been made available for Togo in 2008 by way of transfer to a double signature security account, following the instructions of the Authorising Officer. 8. Co-financing bank accounts These accounts include the remaining funds related to old co-financing agreements. These accounts are reported in the annual accounts for the first time. These funds are the property of the Member States concerned and hence a corresponding amount is registered as payable (see note 9.3). Therefore, the effect on the net assets is nil. The corresponding co-financing amount as at 31 December 2007 was EUR 30.91 million. The new 10th EDF Danish co-financing (see note 10) will use the standard EDF treasury structure, without dedicated bank accounts. table 8 | EUR millions | 9th EDF | 10th EDF | Balance at 31.12.2008 | Balance at 31.12.2007 | Co-financing bank accounts | 12,92 | 2,17 | 15,09 | 0,00 | TOTAL | 12,92 | 2,17 | 15,09 | 0,00 | 9. Payables table 9 | EUR millions | Payables | Notes | 8th EDF | 9th EDF | 10th EDF | Total at 31.12.2008 | Total at 31.12.2007 | Deferred income | 9.1 | 233,43 | 233,43 | 211,08 | Liaison account with the General Budget of the EU – SWIFT | 9.2 | -1,74 | -1,74 | 8,92 | Amounts due to Member States co-financing | 9.3 | 12,92 | 2,17 | 15,09 | 0.00 | Accrued Expenses | 94,06 | 361,44 | 0,01 | 455,51 | 483,98 | Eligibility to be confirmed and non finalised payments | 9.4 | 28,74 | 81,33 | 0,00 | 110,08 | 197,07 | Invoices to be received | 9.5 | 216,45 | 1.895,83 | 1,24 | 2.113,52 | 2.087,42 | - Estimated clearing of pre-financing | 2.3 | -151,14 | -1.615,72 | -1,22 | -1.768,08 | -1.800,51 | TOTAL | 94,06 | 374,36 | 233,87 | 702,29 | 703,98 | (9.1) Deferred income table 9.1 | EUR millions | Contributions received in advance | Balance at 31.12.2008 | Balance at 31.12.2007 | Ireland | 2,74 | 1,00 | United Kingdom | 222,08 | 208,09 | Finland | 8,61 | 2,00 | TOTAL | 233,43 | 211,08 | (9.2) Liaison account with the General Budget of the EU- SWIFT As from the beginning of financial year 2005, payments to beneficiaries within the Union are executed through SWIFT by the General Budget of the European Union. For this purpose, a current account has been opened. This account is presented in the cash flow statement as cash equivalent. This account will be closed as from 2009, when the EDF payments will be executed directly through the EDF SWIFT. (9.3) Amounts due to Member States from co-financing The Italian co-financing is still ongoing under the 9th EDF. The bank accounts in the 10th EDF relates to old co-financing. These funds will be returned to the Member States concerned after instruction from the Authorising Officer. See also note 8. These accounts are reported in the annual accounts for the first time; the corresponding co-financing amount as at 31 December 2007 was EUR 30.91 million. Accrued expenses 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. Accrued expenses include eligibility to be confirmed and an estimation of invoices to be received based on the degree of advancement of projects. In 2007, the methodology for the determination of the accrued expenditure was refined to incorporate the contract type. (9.4) Eligibility to be confirmed and non finalised payments These are invoices which arrived before the end of the financial year 2008 but which either had still not been analysed at the yearly closure or no payment had been authorised. The amounts registered in the accounts of the Authorising Officer are shown in the table below. table 9.4 | EUR millions | Eligibility to be confirmed and non finalised payments | 7th EDF | 8th EDF | 9th EDF | 10th EDF | TOTAL | Total at 31.12.2008 | 28,74 | 81,33 | 0,00 | 110,08 | Total at 31.12.2007 | 7,97 | 45,86 | 143,24 | 197,07 | Increase (Decrease) | -7,97 | -17,11 | -61,90 | 0,00 | -86,99 | (9.5) Invoices to be received These figures reflect expenditure which has been incurred but not yet invoiced. The amounts estimated by the Authorising Officer are shown in the table below. At the beginning of 2009, the Commission launched an in-depth analysis of the methodology and the different hypothesis on which the provision is established, with the help of an independent audit company. On the basis of the recommendations, a refined version of the methodology is currently under evaluation for a possible inclusion in the 2009 annual accounts. table 9.5 | EUR millions | Invoices to be received | 7th EDF | 8th EDF | 9th EDF | 10th EDF | TOTAL | Total at 31.12.08 | 216,45 | 1.895,83 | 1,24 | 2.113,52 | Total at 31.12.07 | 83,69 | 331,69 | 1.672,04 | 2.087,42 | Increase (Decrease) | -83,69 | -115,23 | 223,78 | 1,24 | 26,10 | Funds and Reserves 10. Called fund Capital table 10 | EUR millions | Capital 2008 | 7th EDF | 8th EDF | 9th EDF | 10th EDF | Total EDF | Fund Capital (a) | 0,00 | 12.840,00 | 11.699,32 | 21.154,40 | 45.693,72 | Uncalled funds (b) | 0,00 | 0,00 | 7.460,15 | 21.154,40 | 28.614,55 | Called fund capital (a)-(b) | 0,00 | 12.840,00 | 4.239,17 | 0,00 | 17.079,17 | Capital 2007 | Fund Capital (a) | 10.940,00 | 12.840,00 | 11.699,32 | 35.479,32 | Uncalled funds (b) | 0,00 | 0,00 | 10.460,15 | 10.460,15 | Called fund capital (a)-(b) | 10.940,00 | 12.840,00 | 1.239,17 | 0,00 | 25.019,17 | 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 Agreements[11] between the Member States and the beneficiary ACP States and OCTs. The initial allocation for the 9th EDF, which originally totalled EUR 10,555.15 million, has since been increased by an amount of EUR 105.00 million 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 EUR 1,000.00 million reserve which was released from 2004 to 2007 by different Council decisions[12]. Following the decision of the joint ACP/EU Council on 25th May 2007[13], the Commission decided to launch a call for additional voluntary contributions to support the African Peace Facility in the framework of the intra ACP cooperation which increased the 9th EDF by EUR 39.17 million. The 10th EDF entered into force on 1st July 2008 with a fund capital amounting to EUR 21,152.00 million, according to the Internal Agreement applicable to the 10th EDF. This amount has been increased with the Danish co-financing[14], amounting to EUR 2.40 million. Uncalled funds represent the initial allocation not yet receivable from Member States. Called fund capital represents the amount of the initial allocations which has been called up for transfer to the treasury accounts by the Member States in accordance with the procedure in Article 16 of the 10th EDF Financial Regulation. Details of contributions called up and received during the year 2008 are shown in table 10.1. table 10.1 | EUR millions | Contributions | % | called up in 2007 | received in 2007 | called up in 2008 | received in 2008 | Uncalled 9th EDF | Austria | 2,65 | 69,96 | 69,96 | 78,18 | 78,18 | 197,69 | Belgium | 3,92 | 103,49 | 104,74 | 115,70 | 115,70 | 292,44 | Denmark | 2,14 | 56,50 | 56,50 | 63,57 | 63,57 | 159,65 | Finland | 1,48 | 39,07 | 39,07 | 43,78 | 43,78 | 110,41 | France | 24,30 | 641,52 | 651,52 | 719,16 | 719,16 | 1.812,82 | Germany | 23,36 | 616,70 | 641,70 | 692,03 | 692,03 | 1.742,69 | Greece | 1,25 | 33,00 | 33,50 | 36,50 | 36,50 | 93,25 | Ireland | 0,62 | 16,37 | 18,37 | 18,74 | 18,74 | 46,25 | Italy | 12,54 | 331,06 | 331,06 | 371,05 | 365,42 | 935,50 | Luxemburg | 0,29 | 7,66 | 7,86 | 8,35 | 8,35 | 21,63 | Netherlands | 5,22 | 137,81 | 137,81 | 154,26 | 154,26 | 389,42 | Portugal | 0,97 | 25,61 | 25,61 | 29,16 | 29,16 | 72,36 | Spain | 5,84 | 154,18 | 154,18 | 173,01 | 173,01 | 435,67 | Sweden | 2,73 | 72,07 | 72,07 | 80,28 | 80,28 | 203,66 | United Kingdom | 12,69 | 335,02 | 335,02 | 376,23 | 376,23 | 946,69 | Estonia | N.A. | 0,03 | N.A. | Czech Republic | N.A. | 0,18 | N.A. | EIB | N.A. | 40,00 | 45,63 | N.A. | TOTAL | 100,00 | 2.640,00 | 2.679,17 | 3.000,00 | 3.000,00 | 7.460,15 | In 2008, contributions of EUR 5.63 million from Italy were received via the European Investment Bank. 11. Other reserves Since the entry into force of the Cotonou Agreement, all the unspent funds in previous EDFs are transferred to the most recently opened EDF after decommitment. The resources transferred from other EDFs increase the appropriation of the receiving fund and reduce that of the fund of origin. table 11 | EUR millions | Inter-EDF transfers | 8th EDF | 9th EDF | 10th EDF | Consolidate | Total at 31.12.2008 | to/from 6th EDF | 94,00 | 490,36 | 584,36 | to/from 7th EDF | 532,82 | 1.135,08 | 1.667,89 | to/from 8th EDF | 2.762,16 | 17,16 | 2.779,32 | 2.779,32 | to/from 9th EDF | -2.762,16 | 79,87 | -2.682,29 | -2.682,29 | to/from 10th EDF | -17,16 | -79,87 | -97,04 | -97,04 | TOTAL | -2.152,51 | 4.307,72 | 97,04 | 0,00 | 2.252,25 | Notes to the Economic Outturn Account 12. Operating revenue As from 2008, recovery orders are cleared against the related pre-financing and included in operating revenue at the moment they are authorised/issued. In accordance with Article 60 of the 10th EDF Financial Regulation, interest is charged to the Member States in the event of late payment of the called-up contributions. This interest results in an effective increase in the Funds’ overall appropriations as operating revenue. 13. Administrative and financial expenses This heading includes administrative and financial expenditure financed by interest and related to the devolution process in application of the provisions of articles 1 and 6 of the Internal Agreement applicable to the 10th EDF. In addition, following Council Decision 599 on 21st June 2005, a complementary amount of EUR 90 million from the intra ACP allocation was reallocated to finance devolution. Expenditure for personnel and infrastructure in this heading amounted to EUR 25.60 million in 2007 and to 0 million in 2008. 14. Total expenses / cash basis These amounts represent total payments for the Fund(s) in question during the 2008 financial year on a cash accounting basis, including advance payments and recovery orders. Cumulative figures are shown in the Report on Financial Implementation prepared by the Authorising Officer. 15. Accrual adjustments Total expenditure has been restated to comply with the international accounting standard, IPSAS 3. The accounting information provided by the EDF accounting system has been adapted, 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. table 15 | EUR millions | Accrual adjustments annual increase 2008 | Notes | 7th EDF | 8th EDF | 9th EDF | 10th EDF | increase 2008 for the 8th, 9th and 10th EDF | Pre-financing | 2 | 80,26 | 37,30 | -6,39 | -62,55 | -31,64 | Accrued Expenses | -19,59 | -30,29 | 21,40 | 0,01 | -8,88 | Eligibility to be confirmed | 9.4 | -7,97 | -17,11 | -61,90 | 0,00 | -79,01 | Invoices to be received | 9.5 | -83,69 | -115,23 | 223,78 | 1,24 | 109,79 | - Estimated clearing of pre-financing | 2.3 | 72,08 | 102,06 | -140,49 | -1,22 | -39,65 | Total accrual adjustments | 60,67 | 7,01 | 15,01 | -62,54 | -40,52 | 16. Total expenses / accrual basis Project expenditure by the EDF has been restated in accordance with the relevant international accounting standards. The expenditure for each aid instrument will be presented on a full accrual basis as and from the 2009 financial year, once the accounts have been migrated to the new IT (ABAC FED) system. 17. Financial revenue Financial revenue mainly comprises interest earned on European bank accounts and STABEX accounts. Interest revenue is allocated to the 10th EDF. table 17 | EUR millions | Interest earned during 2008 | Notes | 8th EDF | 9th EDF | 10th EDF | total at 31.12.2008 | total at 31.12.2007 | EIB | 17.1 | 0,00 | 2,16 | 2,15 | 2,49 | European banks | 17.1 | 2,45 | 6,47 | 8,92 | 9,80 | Recovery orders | 17.2 | 0,00 | 0,00 | 0,04 | STABEX | 17.3 | 4,03 | -0,11 | -0,11 | 3,81 | 6,18 | Special Democratic Republic Congo contribution | 17.3 | 0,06 | 0,11 | 0,17 | 0,14 | Transfer to 10th EDF | -2,39 | -2,39 | 0,00 | TOTAL INTEREST | 4,03 | 0,00 | 8,63 | 12,66 | 18,65 | (17.1) EIB and European banks interest revenue The interest earned on accounts with European paying agents can be used to finance projects in accordance with Articles 1 and 6 of the Internal Agreement applicable to the 10th EDF. This interest results in an effective increase in the Funds’ overall appropriations. (17.2) Interest revenue on late payments of recovery orders This is interest earned on late payments of recovery orders by debtors. Such funds can be used for financing projects in accordance with Articles 1 and 6 of the Internal Agreement applicable to the 10th EDF. This interest results in an effective increase in the Funds’ overall appropriations. (17.3) Interest revenue on the STABEX security accounts and the Special Democratic Republic Congo account This represents the 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 a specific purpose and beneficiary state (see note 5). Off balance sheet disclosures Guarantees 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. There are two values to disclose for this type of guarantee: the "nominal" and the "on-going values". For the "nominal" value the generating event is linked to the existence of the guarantee. The nominal value is disclosed as contingent asset. For the "on-going" value, the guarantee's generating event is the pre-financing payment and/or subsequent clearings. At 31st December 2008 the "nominal" value of guarantees received in respect of pre-financing amounts EUR 699.57 million (see table below) compared to EUR 410.25 million for the "on-going" value. table 18 | EUR millions | Guarantees | on pre-financing | on guarantee withholding | on performance | TOTAL 31.12.2008 | TOTAL 31.12.2007 | 7th EDF | 105,80 | 8th EDF | 93,98 | 18,88 | 46,66 | 159,52 | 259,36 | 9th EDF | 605,59 | 167,18 | 243,51 | 1.016,28 | 639,04 | 10th EDF | TOTAL | 699,57 | 186,06 | 290,17 | 1.175,80 | 1.004,20 | REPORT ON FINANCIAL IMPLEMENTATION Introductory note Previous EDFs Decision 1/2000 of the ACP-EC Council of 27 July 2000 regarding transitional measures provides for some of the unallocated resources from previous EDFs to be used for programmes consistent with the relevant provisions of the Cotonou Agreement and put into early application under transitional measures. Commission Decision 410/2001 of 16 March 2001, which fixes the allocations for the indicative programmes of the ACP countries under the ACP-EC Partnership Agreement, stipulates that the unallocated resources from previous EDFs up to a maximum of EUR 1.2 billion are to be used for implementation in accordance with the rules and procedures of the relevant EDFs, pending the entry into force of the Financial Protocol to the 9th EDF. Commission Decision 1033/2001 of 15 June 2001 fixed the allocations for regional programmes and intra-ACP cooperation under the Financial Protocol to the ACP-EC Partnership Agreement. Commission Decision 1252/2002 of 11 July 2002 increased the envelope intended for intra-ACP cooperation by EUR 60 million, from the general reserves of the 6th and 7th EDFs, and also provided for the use of these additional funds pending the entry into force of the Financial Protocol to the 9th EDF, in accordance with the rules and procedures applicable to the original EDFs. Lastly, Decision 3/2002 of the ACP-EC Council of Ministers of 23 December 2002 took an amount of EUR 25 million from the unallocated resources of the 8th EDF (general reserve) and allocated it to regional cooperation under the ACP-EC Partnership Agreement. As in past years, to ensure transparency in the presentation of the accounts for 2008, the tables below set out separately for each of the EDFs (7th and 8th) the part used for Lomé Convention programming and the part used for programming under the Cotonou Agreement. Regarding the latter, entry in the accounts and the presentation of accounts is based on Article 3(2) of Annex IV to the ACP-EC Partnership Agreement, as regards countries. That Article gives the ACP countries an A envelope to cover macroeconomic support and support for programmes and projects and a B envelope to cover unforeseen needs such as emergency assistance, debt relief initiatives and support to offset the adverse effects of instability in export earnings[15]. For the regions, the accounts are set out according to the regional programming as referred to in Chapter 2 of the ACP-EC Partnership Agreement (i.e. regional indicative programmes and intra-ACP cooperation). Under Point 4 of Annex Ib (Multiannual financial framework for the period 2008 to 2013) to the ACP-EC Partnership Agreement, the remaining balances and the amounts decommitted under these Funds between 31/12/2007 and the entry in force of the 10th EDF were transferred to the 9th EDF to ensure the working ability of the EU administration and to cover the ongoing costs to sustain running projects until the 10th EDF comes into force. Since the 10th EDF came into force on 1 July 2008, the remaining balances and the amounts decommitted under these Funds have been transferred to the performance reserve for the 10th EDF. This reserve may be drawn on only under the conditions set out in Article 1.4 of the Internal Agreement on the 10th EDF. As the 6th EDF was closed in 2006, the annual accounts no longer contain implementation tables for that EDF. However, implementation of the transferred balances can be found in the 9th EDF. 7th EDF Given the state of progress of the 7th EDF, the Commission decided to close this fund on 31 August 2008 (Decision PE/2008/4803 of 29/8/2008). All amounts committed, contracted and paid relating to contracts still open were transferred on that date (and not just the remaining balances as in the case of the 6th EDF). For that reason, the amounts transferred when closing the 7th EDF were much higher than those transferred when the 6th EDF was closed. The transfers came to: - EUR 740 980 526.27 for allocations and global commitments; - EUR 690 996 406.08 for individual commitments; - EUR 563 402 665.70 for payments already made and transferred. The balance of outstanding commitments transferred to the 9th EDF on closure came to EUR 177 577 860.57 consisting of a balance of EUR 127 593 740.38 to be disbursed and a balance of EUR 49 984 120.19 to be contracted. In view of the transfer of the remaining balance from the 7th EDF, the updated allocation for the 9th EDF rises from EUR 15 907 435 336.39 to EUR 16 648 415 862.66 (not including interest). The EUR 740 980 526.27 in allocations breaks down as follows:  indicative programmes (subsidies) | EUR 406 572 791.03 | Non-programmable aid (emergency aid, risk capital, Sysmin, STABEX, balance EDF5, SAF management support, HIPC debt relief initiative) | EUR 334 407 735.24 | • of which STABEX only | EUR 133 859 893.00 | 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 annual figures for the 7th EDF are presented in the 2008 annual accounts under the 7th EDF for the period 1 January to 31 August 2008 and under the 9th EDF for the period 1 September to 31 December 2008. 10th EDF The ACP-EC Partnership Agreement signed on 23 June 2000 in Cotonou by the Member States of the European Community and the States of Africa, the Caribbean and the Pacific (ACP States) entered into force on 1 April 2003. The Cotonou Agreement was amended by the agreement signed by the same States in Luxembourg on 25 June 2005. 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. This Decision was amended on 19 March 2007 (Decision 2007/249/EC). The Internal Agreement on the financing of Community aid under the multiannual financial framework for the period 2008-2013 in accordance with the revised Cotonou Agreement, adopted by the Representatives of the Governments of the Member States of the European Community on 17 July 2006, entered into force on 1 July 2008. Under the Cotonou Agreement, the second period (2008-2013) of Community aid to the ACP States and OCT is funded by the 10th EDF with total funds of EUR 22 682 million, of which: EUR 21 966 million allocated to the ACP countries in accordance with the multiannual financial framework in Annex Ib to the revised Cotonou Agreement; EUR 286 million allocated to the OCT in accordance with Annex IIAa of the revised Council Decision on the association of the OCT with the European Community; EUR 430 million for the Commission to finance the costs arising from the programming and implementation of 10th EDF resources, in accordance with Article 6 of the Internal Agreement. On the date of entry into force of the 10th EDF, these amounts were supplemented by unexpended balances and are still supplemented by decommitted funds resulting from the system to guarantee the stabilisation of export earnings from primary agricultural products (STABEX) under the Funds prior to the 9th EDF. These balances and decommitted funds should be used and managed in accordance with the revised Cotonou Agreement and the Internal Agreement. 10th EDF allocations for the ACP States and regions are as follows (in EUR): EUR 15 300 million for the national indicative programmes, of which: EUR 13 500 million for the A envelopes; EUR 1 800 million for the B envelopes, of which EUR 601 million as initial allocations and EUR 1 199 million as a reserve for subsequent allocations; EUR 1 783 million for the regional indicative programmes; EUR 683 million as a reserve for subsequent allocation to the national and regional indicative programmes following the mid-term and end-of-term reviews. The tables annexed, concerning the amounts decided, contracted and paid, show net figures . Only Table 2.7 shows separately the amounts committed and decommitted and the amounts paid and recovered. ALLOCATIONS AT 31.12.2008 [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] Table 1.10 [pic] [pic] [pic] [pic] AGGREGATED ACCOUNTS [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] SITUATION BY COUNTRY AND BY INSTRUMENT The tables are attached. Notes to the management accounts: - In the tables, the figure “0.00” indicates that the corresponding amount is between EUR –4 999 and EUR 4 999.Where no figure is given, the amount is zero.Countries with a nil balance in all columns are not listed in the tables. - The heading “All countries” refers to projects which cover a number of countries but are not financed by regional cooperation. - The heading “Financial and administrative expenses” represents projects financed by EDF interest or the envelope covering administrative expenditure. 7th EDF The figures in Tables 3.1.1 to 3.1.8 show the amounts relating to the transfer of projects, contracts and payments on closure of the 7th EDF (see point 4 "Appendix – Situation by country and by instrument"). In the first column of tables 3.1.1 and 3.1.2, the allocation for “ACP regional cooperation” (EUR 1008.04 million) comprises the following: Commission's regional cooperation target (ACP states only) | 1 125.00 | Target overrun | (5.92) | Transfers of unallocated resources in order to finance the programme of assistance to ACP countries for integration within the WTO | 67.90 | Amount transferred to the general reserve during 2000 in accordance with the transitional measures | 10.00 | Amount transferred to the general reserve during 2001 in accordance with the transitional measures | (8.50) | Amount transferred to the general reserve during 2002 in accordance with the transitional measures | (2.20) | Amount transferred to the 9th EDF during 2003 following the entry into force of Cotonou | (0.70) | Amount transferred to the 9th EDF during 2004 following the entry into force of Cotonou | (49.10) | Amount transferred to the 9th EDF during 2005 following the entry into force of Cotonou | (8.26) | Amount transferred to the 9th EDF during 2006 following the entry into force of Cotonou | (34.41) | Amount transferred to the 9th EDF during 2007 following the entry into force of Cotonou | (12.44) | Amount transferred to the 9th EDF before entry into force of the 10th EDF and to the 10th EDF after its entry into force | (2.32) | Amount transferred to the 9th EDF on closure of the 7th EDF | (-70.96) | Total at 31.12.2008 | 1008.04 | All the amounts of allocations correspond to the decisions, as the amounts not committed were transferred to the 9th EDF following the entry into force of Cotonou (Commission decision of 16 April 2003) or to the 10th EDF after its entry into force (1 July 2008). 8th EDF In the second column of tables 3.2.1 and 3.2.2, the allocation for “Regional cooperation” (EUR 1 358.50 million) comprises the following: Commission's regional cooperation target (ACP states only) | 1 300.00 | Council Decision 3/2000 in order to ensure the continuity of several activities pending the entry into force of the 9th EDF | 306.00 | Council Decision 10/2001 of 20.12.2001 on the use of unallocated resources from the 8th EDF | 180.70 | In accordance with the transitional measures | (68.00) | Council Decision 3/2002 of 23.12.2002 on the use of unallocated resources from the 8th EDF | 54.20 | Amount transferred to the 9th EDF during 2003 following the entry into force of Cotonou | (317.33) | Amount transferred to the 9th EDF during 2004 following the entry into force of Cotonou | (5.01) | Amount transferred to the 9th EDF during 2005 following the entry into force of Cotonou | (31.62) | Amount transferred to the 9th EDF during 2006 following the entry into force of Cotonou | (20.83) | Amount transferred to the 9th EDF during 2007 following the entry into force of Cotonou | (23.81) | Amount transferred to the 9th EDF before entry into force of the 10th EDF and to the 10th EDF after its entry into force | (15.80) | Total at 31.12.2008 | 1 358.50 | All the amounts of allocations correspond to the decisions, as the amounts not committed were transferred to the 9th EDF following the entry into force of Cotonou (Commission decision of 16 April 2003) or to the 10th EDF after its entry into force (1 July 2008). 9th EDF In all tables the presentation takes into 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.). The figures in Tables 3.3.1 to 3.3.8 show the amounts relating to the transfer of projects, contracts and payments on closure of the 7th EDF (see point 4 "Appendix – Situation by country and by instrument"). OTHER MANAGEMENT INFORMATION [pic] [pic] [pic] [pic] Table 4.2.3 Italian co-financing In 1985 the European Commission signed an agreement with the Italian Government providing for the co-financing of development projects managed by the Commission. The agreement was regularly extended by means of exchanges of letters between the Italian Government and the Development Commissioner until 31 December 2004. Then by written procedure E/1588/2004 the Commission took a decision on implementation of the co-financing framework agreement. The purpose of the decision was to lay down the budgetary and regulatory framework for commitments made under the agreement. The Commission decision accordingly provided that this co-financing should be implemented in accordance with the provisions of the EDF financial regulation. The decision empowered the EDF authorising officers by delegation or subdelegation to manage Italy's contribution to this co-financing. They were also empowered to determine the final date for its implementation in compliance with the relevant rules. In accordance with Article 4, point 4 of the July 1985 agreement between the European Commission and the Italian Government, a provision confirmed in Article 3, point 3 of decision E/1588/2004, the Italian Government requested by letter of 15 December 2006 that the Commission repay the account balances of the closed projects. These balances totalled EUR 4 708 867.66. This amount was reimbursed to the Italian Government in an appropriate account in March 2008. At 31 December 2008, the situation concerning the Italian funds managed by the Commission for projects in the ACP countries was as follows (EUR): In all, 52 projects implemented in the ACP countries have been co-financed by Italy since the signing of the above agreement, only one of which, "4th rehabilitation programme - Somalia", is still in progress: Project No | Country | Project | Balance | Contribution | Payments | Balance | 31/12/2007 | 31/12/2008 | ITA COF | 37 | Interest from co-financing | 10 540 484.09 | 402 762.01 | 10 943 246.10 | 260 534.29 | ITA COF | 40 | Administrative expenditure | 5 316 733.50 | 0.00 | 4 938 376.71 | 424 390.65 | ITA COF | 50 | SOMALIA | Rehabilitation | 11 490 132.80 | 0 00 | 661 843.64 | 10 828 289.16 | TOTAL | 28 733 654.93 | 402 762.01 | 16 543 466.45 | 11 513 214.10 | On 1 July 2008 management of the "co-financing interest", "administrative expenditure" and "Somalia rehabilitation" accounts was devolved to the Kenya Delegation. On that date, the situation in the accounts was as follows: Project No | Country | Project | Balance | 30/06/2008 | ITA COF | 37 | Interest from co-financing | 9 849 588.56 | ITA COF | 40 | Administrative expenditure | 416 936.05 | ITA COF | 50 | SOMALIA | Rehabilitation | 10 828 289.16 | TOTAL | 21 094 813.77 | On 30 June a payment order was issued to reimburse interest of EUR 9 849 588.56 to the Italian Government. The balance on the "interest" thus came to zero euro when the co-financing management was transferred to the Kenya Delegation. The Tanzania, Bogamoyo Road project is blocked pending resolution of a dispute before the courts. Its management remains with the Commission in Brussels. The situation on the account is as follows: Project No | Country | Project | Balance at 31/12/2008 | ITA COF | 51 | TANZANIA | Bogamoyo road | 1 386 304.54 | FINANCIAL INFORMATION EIB INCOME STATEMENT INVESTMENT FACILITY Year to | Year to | Notes | 31.12.2008 | 31.12.2007 | Interest and similar income | 5 | 61 097 | 46 580 | Interest and similar expense | 5 | -68 | -1 218 | Net interest and similar income | 61 029 | 45 362 | Fees and commission income | 6 | 2 632 | 1 396 | Net fees and commission income | 2 632 | 1 396 | Net result on financial operations | 7 | -19 425 | -8 005 | Impairment charge for credit loss | 11 | -52 675 | -2 770 | Member States special contribution to general administrative expenses | 13 | 17 871 | 32 756 | General administrative expenses | 8 | -35 741 | -32 756 | Profit/Loss for the year | -26 309 | 35 983 | BALANCE SHEET INVESTMENT FACILITY Notes | 2008 | 2007 | ASSETS | Cash and cash equivalents | 9 | 293 416 | 184 772 | Derivative financial instruments | 10 | 8 495 | 25 279 | Loans and receivables | 11 | 647 449 | 572 927 | Of which accrued interest and receivable income | 11 437 | 11 176 | Financial investments - available-for-sale | 12 | Equity investment - available-for-sale | 129 146 | 109 363 | Amounts receivable from contributors | 13 | 65 891 | 181 183 | Other assets | 14 | 525 | 3 894 | Total assets | 1 144 922 | 1 077 418 | LIABILITIES AND EQUITY | LIABILITIES | Derivative financial instruments | 10 | 15 746 | 841 | Deferred income | 15 | 20 186 | 18 030 | Amount owed to third parties | 16 | 193 733 | 131 152 | Other liabilities | 17 | 4 277 | 916 | Total Liabilities | 233 942 | 150 939 | EQUITY | Facility Member States Contribution called | 18 | 845 000 | 830 000 | Retained earnings | 50 858 | 77 167 | Fair value reserve | 15 122 | 19 312 | Total Equity | 910 980 | 926 479 | Total Liabilities and Equity | 1 144 922 | 1 077 418 | CASH FLOW STATEMENT INVESTMENT FACILITY 2008 | 2007 | OPERATING ACTIVITIES | Profit / Loss for the financial year | -26 309 | 35 983 | Adjustments | Impairment on equity investment available-for-sale | 1 725 | 366 | Impairment on loans | 52 675 | 2 770 | Interest capitalised | -12 022 | -6 747 | Increase in deferred income | 162 | 4 150 | Profit on operating activities before changes in operating assets and liabilities | 16 231 | 36 522 | Net loan disbursement | -176 614 | -286 028 | Repayments | 73 748 | 34 214 | Fair value movement on derivatives | 31 689 | -15 965 | Increase in equity investments available-for-sale | -41 641 | -43 143 | Proceeds from equity investments available-for-sale | 15 005 | 8 248 | Increase / Decrease in other assets | 3 369 | -2 456 | Increase / Decrease in other liabilities | 3 361 | - 518 | Net cash flows from operating activities | -74 852 | -269 126 | FINANCING ACTIVITIES | Paid in by Facility Member States | 15 000 | 315 000 | Increase / Decrease in amount receivable from contributors | 115 292 | -77 271 | Net increase / decrease in amount payable from interest subsidies | 59 596 | -3 273 | Increase / Decrease in amount payable to third parties | 2 985 | - 538 | Net cash flows from/(used in) financing activities | 192 873 | 233 918 | Net increase in cash and cash equivalents | 118 021 | -35 208 | Cash and cash equivalents at beginning of financial year | 184 772 | 190 780 | Effect of exchange rate changes on cash and cash equivalents | -9 377 | 29 200 | Cash and cash equivalents at end of financial year | 293 416 | 184 772 | STATEMENT OF CHANGES IN EQUITY INVESTMENT FACILITY Issued capital | Retained earnings | Other reserves | Total equity | At 1 January 2008 | 830 000 | 77 167 | 19 312 | 926 479 | Net changes in equity investments - available-for-sale | - | - | -4 190 | -4 190 | Facility Member States contribution called during the year | 15 000 | - | - | 15 000 | Loss for the year | - | -26 309 | - | -26 309 | Changes in contributors’ resources | 15 000 | -26 309 | -4 190 | -15 499 | At 31 December 2008 | 845 000 | 50 858 | 15 122 | 910 980 | At 1 January 2007 | 515 000 | 41 184 | 9 997 | 566 181 | Net changes in equity investments - available-for-sale | - | - | 9 315 | 9 315 | Facility Member States contribution called during the year | 315 000 | - | - | 315 000 | Profit for the year | - | 35 983 | - | 35 983 | Changes in contributors’ resources | 315 000 | 35 983 | 9 315 | 360 298 | At 31 December 2007 | 830 000 | 77 167 | 19 312 | 926 479 | NOTES TO THE FINANCIAL STATEMENTS INVESTMENT FACILITY 18. 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. Financing under the Agreement is provided from EU Member States’ budgets and is disbursed according to financial protocols defined for successive five - to six-year periods. Within the framework of the Agreement and following the entry into force of a second financial protocol on 1st July 2008 (covering the period 2008-2013), referred to as the 10th European Development Fund (EDF), the European Investment Bank (the ”EIB” or the “Bank”) is entrusted with the management of: - the ACP Investment Facility (IF), a EUR 3 137 m risk-bearing revolving fund geared to fostering private sector investment in ACP countries; - grants for the financing of interest rate subsidies worth EUR 400 m, of which up to EUR 40 m can be used to fund project-related technical assistance. In view of the phasing out of the EU-ACP sugar protocol, up to EUR 100 m can be allocated to assist ACP sugar producers in adapting to changing world market conditions. - Significant accounting policies Basis of preparation In line with the Investment Facility Management Agreement the preparation of the financial statements of the Facility is guided by International Public Sector Accounting Standards or International Financial Reporting Standards, as appropriate. The Facility's financial statements have been prepared on the basis of the following significant accounting principles: Significant accounting judgments and estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Investment Facility’s accounting policies. The areas 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 judgments 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 judgment is required in establishing fair values. The judgments include considerations of liquidity and model inputs such as correlation and volatility for longer dated derivatives. Impairment losses on loans and receivables The Investment Facility reviews its problem loans and receivables at each reporting date to assess whether an allowance for impairment should be recorded in the income statement. In particular, judgment 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 receivables, the Investment 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. In principle, a loan is considered as non performing when payment of interest and principal are past due by 90 days or more and, at the same time, management considers that payment will be completely unlikely. Valuation of unquoted available-for-sale equity investments Valuation of unquoted available-for-sale 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 available-for-sale equity investments requires significant estimation. The Investment Facility calibrates the valuation techniques periodically and tests them for validity using either price from observable current market transactions in the same instrument or from other available observable market data. Impairment of available-for-sale financial investments The Investment 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 years. 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. 19. Foreign currency translation The Investment Facility uses the Euro (EUR) for presenting its financial statements, which is also the functional and presentational currency. Foreign currency transactions are translated 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 balance sheet date. The gain or loss arising from such translation is recorded in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of transactions at rates different from those at the date of the transaction, and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities, are recognized in the income statement. The elements of the income statement are translated into Euro on the basis of the exchange rates prevailing at the end of each month. 20. Cash and cash equivalents The Investment Facility defines cash equivalents as current accounts or short-term deposits with original maturities of three months or less. 21. Financial assets other than derivatives Financial assets are accounted for using the settlement date basis. - Loans Loans originated by the Investment Facility are recognized in the assets of the Investment Facility when cash is advanced to borrowers. They are initially recorded at cost (net disbursed amounts), which is the fair value of the cash given to originate the loan, including any transaction costs, and are subsequently measured at amortized cost, using the effective yield method, less any provision for impairment or uncollectability. - Available-for-sale financial investments Available-for-sale financial investments are those which are designated as such or do not qualify to be classified as designated at fair value through profit or loss, held-to-maturity or loans and receivables. They include equity instruments, investments in venture capital funds and other debt instruments. After initial measurement, available-for-sale financial investments are subsequently carried at fair value. Note the following details for the fair value measurement of equity investments, which can not be derived from active markets: 22. Venture capital funds The fair value of each venture capital fund will be based on the Net Asset Value (NAV), reported by the fund, if calculated based on international valuation standards. The Investment Facility may however decide to adjust the NAV reported by the fund if there are issues that may affect the valuation. If no internationally recognized fair valuation standard is applied, the valuation will be conducted on the basis of the underlying portfolio. 23. Direct equity investments The fair value of the investment will be based on the latest set of financial statements available, re-using, if applicable, the same model as the one used at the acquisition of the participation. Unrealized gains or losses on equity investments are reported in equity until such investments are sold, collected or disposed of, or until such investment are determined to be impaired. If an available-for-sale investment is determined to be impaired, the cumulative unrealized gain or loss previously recognized in equity is included in the income statement. For unquoted investment, the fair value is determined by applying recognized valuation technique. These investments are accounted for at cost when the fair value cannot be reliably measured. - Guarantees Financial guarantees are initially recognized at fair value in the balance sheet under item “Financial guarantees”. Subsequent to initial recognition, the Investment Facility’s liabilities under each guarantee are measured at the higher of the amortized premium and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is taken to the income statement under item “Impairment charge for credit loss”. The premium received is recognized in the income statement under item “Net fee and commission income” using the effective interest rate method over the life of the guarantee. 24. Impairment of financial assets The Investment Facility assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For the loans outstanding at the end of the financial year and carried at amortized cost, impairments are made when presenting objective evidence of risks of non recovery of all or part of their amounts according to the original contractual terms or the equivalent value. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured according to internal models used by the Bank to approximate the likely loss or the loan recovery, which among other things evaluate the difference between the loans’ carrying amounts and the fair value of estimated futures cash flows of theses loans. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. Interest income continues to be accrued on the reduced carrying amount based on the effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. The Investment Facility conducts credit risk assessments for each specific exposure based on which there is no need for another assessment for a collective impairment provision. For the available-for-sale financial investments, the Investment Facility assesses at each balance sheet date whether there is objective evidence that an investment is impaired. Objective evidence would include a significant or prolonged decline in the fair value of the investment below its costs. Where there is evidence of impairment, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement) is removed from equity and recognized in the income statement. Impairment losses on available-for-sale financial investments are not reversed through the income statement; increases in their fair value after impairment are recognized directly in equity. For held-to-maturity investments the Investment Facility assesses individually whether there is objective evidence for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognised, any amount formerly charged are credited to the ‘Net result on financial operations’. The European Investment Bank’s Risk Management reviews financial assets for impairment at least once a year. Resulting adjustments include the unwinding of the discount in the income statement over the life of the asset, and any adjustments required in respect of a reassessment of the initial impairment. 25. Derivative financial instruments Derivatives include cross currency swaps, cross currency interest rate swaps, currency forwards and warrants. In the normal course of its activity, the Investment Facility may enter into swap contracts with a view to hedge specific lending operations or into currency forward contract with a view to hedge it currency positions, denominated in actively traded currencies other than the Euro, in order to offset any gain or loss caused by foreign exchange rate fluctuations. However, the Investment Facility has not entered into any hedge accounting transactions as at 31 December 2008. Therefore, all derivatives are measured at fair value through the income statement. Fair values are derived primarily from discounted cash-flow models, option-pricing models and from third party quotes. Warrants have been received by the Investment Facility as ancillary fees in the context of a lending operation. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivative financial instruments are included in “Net result on financial operations”. 26. 2.4.6 Contributions Contributions from Member States are recognized as receivable in the balance sheet on the date of the Council Decision fixing the financial contribution to be paid by the Member States to the Investment Facility. 27. Interest income on loans Interest on loans originated by the Investment Facility is recorded in the income statement (‘Interest and similar income’) and on the balance sheet (‘Loan and receivables’) on an accrual basis using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the loan to the net carrying amount of the loan. Once the recorded value of a loan has been reduced due to impairment, interest income continues to be recognized using the original effective interest rate applied to the new carrying amount. 28. Interest subsidies As part of its activity, the Investment Facility manages interest subsidies on behalf of the Member States. The part of the Member States contributions allocated to the payment of interest subsidies is not accounted for in the Investment Facility’s equity but is classified as an amount owed to third parties. 29. Interest income on treasury Under the terms of the Investment Facility and according to the Financial Regulation applicable to the 9th European Development Fund, the funds received by the EIB on behalf of the Investment Facility are recorded in an account in the Commission’s name. Interest on these deposits, placed by the Investment Facility with the EIB, is not accounted for by the Investment Facility as it is payable directly to the European Commission. Reflows, being repayment of principal, interest or commissions stemming from financial operations, and interest calculated on these reflows are accounted for within the Investment Facility. 30. Fees, commissions and dividends Fees received in respect of services provided over a period of time are recognized as income as the services are provided. Commitment fees are deferred and recognized in income using the effective interest method over the period from disbursement to repayment of the related loan. Dividends relating to available-for-sale equity investments are recognized w