COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS

Annual accounts of the European Development Fund 2017

(2018/C 350/01)

CONTENTS

CERTIFICATION OF THE ACCOUNTS 2

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES 3

FUNDS MANAGED BY THE EUROPEAN COMMISSION 6

FINANCIAL STATEMENTS OF THE EDF 8

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF 17

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 43

ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2017 44

ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA 2017 51

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 58

EDF REPORT ON FINANCIAL IMPLEMENTATION 63

ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK 91

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2017 have been prepared in accordance with Title IX of the Financial Regulation of the 11th European Development Fund and with the accounting principles, rules and methods set out in the notes to the financial statements.

I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Development Fund in accordance with Article 20 of the Financial Regulation of the 11th European Development Fund.

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

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

Rosa ALDEA BUSQUETS Accounting Officer 20 June 2018

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

1. BACKGROUND

The European Union (hereinafter referred to as the EU) has cooperative relations with a large number of developing countries. The main objective is to promote economic, social and environmental development, with the primary aim of reducing and eradicating poverty in the long-term, by providing beneficiary countries with development aid and technical assistance. To achieve this, the EU draws up, jointly with the partner countries, cooperation strategies and mobilises the financial resources to implement them. These EU resources allocated to development cooperation come from three sources:

— The EU budget;

— The European Development Fund;

— The European Investment Bank.

The European Development Fund (hereinafter referred to as the EDF) is the main instrument for providing EU aid for development cooperation to the African, Caribbean and Pacific (hereinafter referred to as the ACP) States and Overseas Countries and Territories (hereinafter referred to as the OCTs).

The EDF is not funded by the EU budget. It is established by an internal agreement of the Representatives of the Member States, sitting within the Council, and managed by a specific committee. The European Commission (hereinafter referred to as the Commission) is responsible for the financial implementation of the operations carried out with EDF resources. The European Investment Bank (hereinafter referred to as the EIB) manages the Investment Facility.

During the period 2014-2020, the geographic aid granted to ACP States and OCTs will continue to be mainly funded by the EDF. Each EDF is usually concluded for a period of around five years and is governed by its own Financial Regulation which requires 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 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 Commission is responsible.

The Internal Agreement establishing the 11th EDF was signed by the participating Member States, meeting within the Council, in June 2013 (1). It came into force on 1 March 2015. In order to assure continuity between the end of the 10th EDF and the entry into force of the 11th EDF, the Commission proposed transitional measures, known as the Bridging Facility (BF) (2). The BF is presented under the 11th EDF.

At the same time the 10th EDF Financial Regulation (3) was amended and the new Financial Regulation applicable to the transition period was adopted (4). They entered into force on 30 May 2014. On 2 March 2015 the Council adopted the 11th EDF Financial Regulation (5) and the Implementation Rules (6). They entered into force on 6 March 2015.

Within the framework of the ACP-EU Partnership Agreement, the Investment Facility was established. This Investment Facility is managed by the EIB and is used to support private sector development in the ACP States by financing essentially — but not exclusively — private investments. The Facility is designed as a renewable fund, so that loan repayments can be reinvested in other operations, thus resulting in a self-renewing and financially independent facility. As the Investment Facility is not managed by the Commission, it is not consolidated in the first part of the annual accounts — the financial statements of the EDF and the related report on financial implementation. The financial statements of the Investment Facility are included as a separate part of the annual accounts (part II) to provide a full picture of the development aid of the EDF (7).

2. HOW IS THE EDF FUNDED?

The European Council of 2 December 2013 adopted the Multi-annual Financial Framework for 2014-2020. In this context, it was decided that geographical cooperation with the ACP States would not be integrated into the EU budget (budgetised), but would continue to be funded through the existing inter-governmental EDF.

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

The EDF resources are ‘ad hoc’ contributions from the EU Member States. Approximately every five years, Member State representatives meet at intergovernmental level to decide on an overall amount that will be allocated to the fund and to oversee its implementation. The Commission then manages the fund in accordance with the Union policy on development cooperation. Since Member States have their own development and aid policies in parallel to the Union policy, the Member States must coordinate their policies with the EU to ensure they are complementary.

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

3. YEAR-END REPORTING

3.1. ANNUAL ACCOUNTS

In accordance with Article 46 of the EDF Financial Regulation, the EDF financial statements are prepared on the basis of accrual-based accounting rules that themselves are based on International Public Sector Accounting Standards (IPSAS). The accounting rules adopted by the Accounting Officer of the Commission are applied by all the Institutions and bodies of the EU in order to establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements and consolidation, as required by Article 152 of the EU Financial Regulation. These rules EU accounting rules are also applied to the EDF while taking into account the specific nature of its activities.

The preparation of the EDF annual accounts is entrusted to the Commission’s Accounting Officer who is the Accounting Officer of the EDF. She ensures that the annual accounts of EDF present a true and fair view of the financial position of the EDF.

The annual accounts are presented as follows:

Part I: Funds managed by the Commission

(i) Financial statements and explanatory notes of the EDF (ii) Financial statements of the EU trust funds consolidated in the EDF (iii) Consolidated financial statements of EDF and the EU trust funds (iv) Report on financial implementation of the EDF

Part II: Annual report on implementation — Funds managed by the EIB

(i) Financial statements of the Investment Facility

The part ‘Financial statements of the European trust funds consolidated in the EDF’ includes financial statements of the two trust funds created under the EDF: The Bêkou EU Trust Fund (see section ‘Financial statements of the Bêkou EU Trust Fund’) and The EU Trust Fund for Africa (see section ‘Financial statements of EU Trust Fund for Africa’). The trust funds individual financial statements are prepared under the responsibility of the EC Accounting Officer and subject to external audit carried out by a private auditor. The trust funds’ figures included in these annual accounts are final, i.e. after the necessary audit adjustments, but the accounts have not yet been formally signed-off.

The annual accounts must be adopted by the Commission not later than 31 July of the subsequent year and presented to the European Parliament and to the Council for discharge.

4. AUDIT AND DISCHARGE

4.1. AUDIT

The EDF annual accounts and resource management are overseen by its external auditor, the European Court of Auditors (hereinafter referred to as the ECA), which draws up an annual report for the European Parliament and the Council.

4.2. DISCHARGE

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

FUNDS MANAGED BY THE EUROPEAN COMMISSION (1)

CONTENTS

FINANCIAL STATEMENTS OF THE EDF 8

EDF BALANCE SHEET 9

EDF STATEMENT OF FINANCIAL PERFORMANCE 10

EDF CASH FLOW STATEMENT 11

EDF STATEMENT OF CHANGES IN NET ASSETS 12

BALANCE SHEET BY EDF 13

STATEMENT OF FINANCIAL PERFORMANCE BY EDF 14

STATEMENT OF CHANGES IN NET ASSETS BY EDF 15

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF 17

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 43

ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2017 44

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND 45

BALANCE SHEET 48

STATEMENT OF FINANCIAL PERFORMANCE 49

CASH FLOW STATEMENT 49

STATEMENT OF CHANGES IN NET ASSETS 50

ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA 2017 51

BACKGROUND INFORMATION ON THE EUTF FOR AFRICA 52

BALANCE SHEET 55

STATEMENT OF FINANCIAL PERFORMANCE 56

CASH FLOW STATEMENT 56

STATEMENT OF CHANGES IN NET ASSETS 57

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 58

CONSOLIDATED BALANCE SHEET 59

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE 60

CONSOLIDATED CASH FLOW STATEMENT 61

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS 62

EDF REPORT ON FINANCIAL IMPLEMENTATION 63

FINANCIAL STATEMENTS OF THE EDF (8)

EDF BALANCE SHEET

(EUR millions) Note 31.12.2017 31.12.2016 NON-CURRENT ASSETS Pre-financing 2.1 582 409 Trust Fund contributions 2.2 163 98 745 507 CURRENT ASSETS Pre-financing 2.1 1 518 1 372 Exchange receivables and non-exchange recoverables 2.3 92 132 Cash and cash equivalents 2.4 347 680 1 958 2 184 TOTAL ASSETS 2 703 2 691 NON-CURRENT LIABILITIES Provisions 2.5 (4) (4) Financial liabilities 2.6 (14) (6) (18) (10) CURRENT LIABILITIES Payables 2.7 (563) (549) Accrued charges and deferred income 2.8 (733) (776) (1 296 ) (1 324 ) TOTAL LIABILITIES (1 314 ) (1 334 ) NET ASSETS 1 389 1 357 FUNDS & RESERVES Called fund capital — active EDFs 2.9 46 173 42 323 Called fund capital from closed EDFs carried forward 2.9 2 252 2 252 Called fund capital transfers between active EDFs 2.9 — — Economic result carried forward from previous years (43 219 ) (40 146 ) Economic result of the year (3 818 ) (3 073 ) NET ASSETS 1 389 1 357





EDF STATEMENT OF FINANCIAL PERFORMANCE

(EUR millions) Note 2017 2016 REVENUE Revenue from non-exchange transactions 3.1 Recovery activities 61 8 61 8 Revenue from exchange transactions 3.2 Financial revenue 4 3 Other revenue 22 62 25 66 Total Revenue 87 73 EXPENSES Aid instruments 3.3 (3 700 ) (2 970 ) Co-financing expenses 3.4 (42) 15 Finance costs 3.6 (8) 4 Other expenses 3.7 (154) (196) Total Expenses (3 904 ) (3 146 ) ECONOMIC RESULT OF THE YEAR (3 818 ) (3 073 )





EDF CASH FLOW STATEMENT

(EUR millions) Note 2017 2016 Economic result of the year (3 818 ) (3 073 ) Operating activities Capital increase — contributions (net) 3 850 3 450 (Increase)/decrease in trust funds contributions (66) (64) (Increase)/decrease in pre-financing (319) (120) (Increase)/decrease in exchange receivables and non-exchange recoverables 40 39 Increase/(decrease) in financial liabilities 8 (4) Increase/(decrease) in payables 14 28 Increase/(decrease) in accrued charges and deferred income (42) (80) NET CASH FLOW (333) 177 Net increase/(decrease) in cash and cash equivalents (333) 177 Cash and cash equivalents at the beginning of the year 2.4 680 504 Cash and cash equivalents at year-end 2.4 347 680





EDF STATEMENT OF CHANGES IN NET ASSETS

(EUR millions) Fund capital — active EDFs (A) Uncalled funds — active EDFs (B) Called fund capital — active EDFs (C) = (A)-(B) Cumulative Reserves (D) Called fund capital from closed EDFs carried forward (E) Total Net Assets (C)+(D)+(E) BALANCE AS AT 31.12.2015 73 464 34 590 38 873 (40 146 ) 2 252 980 Capital increase — contributions (3 450 ) 3 450 3 450 Economic result of the year — (3 073 ) (3 073 ) BALANCE AS AT 31.12.2016 73 464 31 140 42 323 (43 219 ) 2 252 1 357 Capital increase — contributions (4 050 ) 4 050 4 050 Refund to Member States (200) (200) (200) Economic result of the year — (3 818 ) (3 818 ) BALANCE AS AT 31.12.2017 73 264 27 090 46 173 (47 037 ) 2 252 1 389





BALANCE SHEET BY EDF

(EUR millions) 31.12.2017 31.12.2016 Note Eighth EDF Ninth EDF 10th EDF 11th EDF Eighth EDF Ninth EDF 10th EDF 11th EDF NON-CURRENT ASSETS Pre-financing 2.1 — 32 221 330 — 32 242 135 Trust Fund contributions 2.2 — 86 — 77 — — — 98 — 118 221 407 — 32 242 232 CURRENT ASSETS Pre-financing 2.1 1 40 867 610 1 50 909 412 Exchange receivables and non-exchange recoverables 2.3 0 64 17 11 1 71 59 2 Liaison accounts 2.3 189 88 3 555 — 196 424 3 424 — Cash and cash equivalents 2.4 — — — 347 — — — 680 190 193 4 439 968 198 544 4 391 1 094 TOTAL ASSETS (*1) 190 311 4 660 1 375 198 577 4 633 1 327 NON-CURRENT LIABILITIES Provisions 2.5 — — — (4) — — — (4) Financial liabilities 2.6 — — (7) (7) — — (6) — — — (7) (11) — — (6) (4) CURRENT LIABILITIES Payables 2.7 (0) (13) (133) (417) (0) (12) (438) (99) Liaison accounts 2.3 — — — (3 833 ) — — — (4 043 ) Accrued charges and deferred income 2.8 (0) (76) (517) (140) (1) (93) (567) (115) (0) (89) (650) (4 389 ) (1) (104) (1 005 ) (4 257 ) TOTAL LIABILITIES (*1) (0) (89) (657) (4 401 ) (1) (104) (1 011 ) (4 261 ) NET ASSETS (*1) 190 222 4 003 (3 025 ) 197 472 3 622 (2 934 ) FUNDS & RESERVES Called fund capital — active EDFs 2.9 12 164 10 773 20 960 2 277 12 164 10 973 19 187 — Called fund capital from closed EDFs carried forward 2.9 627 1 625 — — 627 1 625 — — Called fund capital transfers between active EDFs 2.9 (2 503 ) 2 177 120 206 (2 496 ) 2 214 247 35 Economic result carried forward from previous years (10 098 ) (14 339 ) (15 812 ) (2 969 ) (10 100 ) (14 248 ) (14 415 ) (1 382 ) Economic result of the year 0 (13) (1 266 ) (2 539 ) 2 (91) (1 397 ) (1 587 ) NET ASSETS 190 222 4 003 (3 025 ) 197 472 3 622 (2 934 )





STATEMENT OF FINANCIAL PERFORMANCE BY EDF

(EUR millions) 2017 2016 Note Eighth EDF Ninth EDF 10th EDF 11th EDF Eighth EDF Ninth EDF 10th EDF 11th EDF REVENUE Revenue from non-exchange transactions 3.1 Recovery activities 0 5 49 7 1 5 (2) 4 0 5 49 7 1 5 (2) 4 Revenue from exchange transactions 3.2 Financial revenue (0) (1) 4 (0) (0) 2 2 (1) Other revenue 1 5 13 4 2 17 40 3 1 4 17 4 2 19 43 2 Total revenue 1 9 66 11 3 23 41 7 EXPENSES Aid instruments 3.3 (0) (14) (1 251 ) (2 435 ) 2 (95) (1 411 ) (1 465 ) Co-financing expenses 3.4 — — (42) (1) — — 15 — Finance costs 3.6 1 1 (10) (0) (0) (0) 4 (0) Other expenses 3.7 (2) (9) (29) (114) (3) (19) (46) (129) Total expenses (1) (22) (1 332 ) (2 549 ) (1) (114) (1 437 ) (1 594 ) ECONOMIC RESULT OF THE YEAR 0 (13) (1 266 ) (2 539 ) 2 (91) (1 397 ) (1 587 )





STATEMENT OF CHANGES IN NET ASSETS BY EDF

(EUR millions) Eighth EDF Fund capital — active EDFs (A) Uncalled funds — active EDFs (B) Called fund capital — active EDFs (C) = (A)-(B) Cumulative Reserves (D) Called fund capital from closed EDFs carried forward (E) Called fund capital transfers between active EDFs (F) Total Net Assets (C)+(D)+(E)+(F) BALANCE AS AT 31.12.2015 12 164 — 12 164 (10 100 ) 627 (2 476 ) 214 Transfers to/from the 10th EDF — (20) (20) Transfers to/from the 11th EDF — — — Economic result of the year — 2 2 BALANCE AS AT 31.12.2016 12 164 — 12 164 (10 098 ) 627 (2 496 ) 197 Transfers to/from the 10th EDF — (7) (7) Transfers to/from the 11th EDF — — — Economic result of the year — 0 — 0 BALANCE AS AT 31.12.2017 12 164 — 12 164 (10 098 ) 627 (2 503 ) 190





(EUR millions) Ninth EDF Fund capital — active EDFs (A) Uncalled funds — active EDFs (B) Called fund capital — active EDFs (C) = (A)-(B) Cumulative Reserves (D) Called fund capital from closed EDFs carried forward (E) Called fund capital transfers between active EDFs (F) Total Net Assets (C)+(D)+(E)+(F) BALANCE AS AT 31.12.2015 10 973 — 10 973 (14 249 ) 1 625 2 376 726 Transfers to/from the 10th EDF — (163) (163) Economic result of the year — (91) (91) BALANCE AS AT 31.12.2016 10 973 — 10 973 (14 339 ) 1 625 2 214 472 Refund to Member States (200) (200) (200) Transfers to/from the 10th EDF — (37) (37) Transfers to/from the 11th EDF — — — Economic result of the year — (13) — (13) BALANCE AS AT 31.12.2017 10 773 — 10 773 (14 352 ) 1 625 2 177 222





(EUR millions) 10th EDF Fund capital — active EDFs (A) Uncalled funds — active EDFs (B) Called fund capital — active EDFs (C) = (A)-(B) Cumulative Reserves (D) Called fund capital from closed EDFs carried forward (E) Called fund capital transfers between active EDFs (F) Total Net Assets (C)+(D)+(E)+(F) BALANCE AS AT 31.12.2015 20 960 5 223 15 737 (14 415 ) — 35 1 357 Capital increase — contributions (3 450 ) 3 450 3 450 Transfers to/from the Eighth and Ninth EDF — 182 182 Transfers to/from the 11th EDF — 30 30 Economic result of the year — (1 397 ) (1 397 ) BALANCE AS AT 31.12.2016 20 960 1 773 19 187 (15 812 ) — 247 3 622 Capital increase — contributions (1 773 ) 1 773 — 1 773 Transfers to/from the Eighth and Ninth EDF — 44 44 Transfers to/from the 11th EDF — (171) (171) Economic result of the year — (1 266 ) — (1 266 ) BALANCE AS AT 31.12.2017 20 960 — 20 960 (17 078 ) — 120 4 003





(EUR millions) 11th EDF Fund capital — active EDFs (A) Uncalled funds — active EDFs (B) Called fund capital — active EDFs (C) = (A)-(B) Cumulative Reserves (D) Called fund capital from closed EDFs carried forward (E) Called fund capital transfers between active EDFs (F) Total Net Assets (C)+(D)+(E)+(F) BALANCE AS AT 31.12.2015 29 367 29 367 — (1 382 ) — 65 (1 317 ) Transfers to/from the Eighth, Ninth and 10th EDF — — (30) (30) Economic result of the year — (1 587 ) — (1 587 ) BALANCE AS AT 31.12.2016 29 367 29 367 — (2 969 ) — 35 (2 934 ) Capital increase — contributions (2 277 ) 2 277 171 2 448 Transfers to/from the Eighth, Ninth and 10th EDF — — — Economic result of the year — (2 539 ) — (2 539 ) BALANCE AS AT 31.12.2017 29 367 27 090 2 277 (5 508 ) — 206 (3 025 )

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF (9)

1. SIGNIFICANT ACCOUNTING POLICIES

1.1. ACCOUNTING PRINCIPLES

The objective of 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.

The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU Accounting Rule 1 ‘Financial Statements’ and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability.

1.2. BASIS OF PREPARATION

1.2.1. Reporting period

Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December.

1.2.2. Currency and basis for conversion

The annual accounts are presented in millions of euros, the euro being the EDF’s functional and reporting currency. Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the date when they were purchased.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are translated into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December.

Euro exchange rates

Currency 31.12.2017 31.12.2016 Currency 31.12.2017 31.12.2016 BGN 1,9558 1,9558 PLN 4,177 4,4103 CZK 25,5350 27,0210 RON 4,6585 4,5390 DKK 7,4449 7,4344 SEK 9,8438 9,5525 GBP 0,8872 0,8562 CHF 1,1702 1,0739 HRK 7,4400 7,5597 JPY 135,01 123,4000 HUF 310,3300 309,8300 USD 1,1993 1,0541

1.2.3. Use of estimates

In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to; accrued and deferred revenue and charges, provisions, financial risk on accounts receivables, contingent assets and liabilities, and degree of impairment of assets. Actual results could differ from those estimates.

Reasonable estimates are essential part of the preparation of financial statements and do not undermine their reliability. An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience. By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error. The effect of a change in accounting estimate shall be recognised in the surplus or deficit in the periods in which it becomes known.

1.3. BALANCE SHEET

1.3.1. Financial assets

The financial assets are classified in the following categories: financial assets at fair value through surplus or deficit; loans and receivables; held-to-maturity investments; and available for sale financial assets. The classification of the financial instruments is determined at initial recognition and re-evaluated at each balance sheet date.

(i) Financial assets at fair value through surplus or deficit

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the entity. Derivatives are also categorised in this category. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date. During this financial year, the entity did not hold any investments in this category.

(ii) Loans and receivables

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

(iii) Held-to-maturity investments

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

(iv) Available for sale financial assets

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the entity expects to hold them, which is usually the maturity date.

Initial recognition and measurement

Purchases and sales of financial assets at fair value through surplus or deficit, held-to-maturity and available for sale are recognised on trade date — the date on which the entity commits to purchase or sell the asset. Cash equivalents, loans and term deposits are recognised at settlement date. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through surplus or deficit transaction costs are added to the fair value at initial recognition.

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

Subsequent measurement

Financial assets at fair value through surplus or deficit are subsequently carried at fair value with gains and losses arising changes in the fair value being included in the statement of financial performance in the period in which they arise.

Loans and receivables and held-to maturity investments are carried at amortised cost using the effective interest method.

Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in the fair value are recognised in the fair value reserve. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance.

The entity assesses at each balance sheet date whether there is objective evidence that a financial asset is impaired and whether an impairment loss should be recorded in the statement of financial performance.

1.3.2. Pre-financing amounts

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, he has the obligation to return the pre-financing advance to the entity. The amount of the pre-financing may be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses).

Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period.

1.3.3. Receivables and recoverables

As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, for the purpose of drawing up the accounts, receivables are defined as stemming from exchange transactions and recoverables are defined as stemming from non-exchange transactions (when the entity receives value from another entity without directly giving approximately equal value in exchange).

Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see 1.3.1 above).

Recoverables from non-exchange transactions are carried at original amount (adjusted for interests and penalties) less write-down for impairment. A write-down for impairment is established when there is objective evidence that the entity will not be able to collect all amounts due according to the original terms of the recoverables. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance.

1.3.4. Cash and cash equivalents

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

1.3.5. Provisions

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

1.3.6. Payables

Included under accounts payable are both amounts related to exchange transactions such as the purchase of goods and services and to non-exchange transactions e.g. to cost claims from beneficiaries, grants or other EU funding.

Where grants or other funding is provided to the beneficiaries, the cost claims are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the accepted and eligible amount.

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

1.3.7. Accrued and deferred revenue and charges

Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the entity or a contractual agreement exists (e.g. by reference to a contract), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Accounting Officer which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if a payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period.

1.4. STATEMENT OF FINANCIAL PERFORMANCE

1.4.1. Revenue

Revenue comprises gross inflows of economic benefits or service potential received and receivable by the entity, which represents an increase in net assets, other than increases relating to contributions from owners.

Depending on the nature of the underlying transactions in the statement of financial performance it is distinguished between:

(i) Revenue from non-exchange transactions

Revenue from non-exchange transactions are taxes and transfers because the transferor provides resources to the recipient entity without the recipient entity providing approximately equal value directly in exchange.

Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes. The entity shall recognise an asset in respect of transfers when the entity controls the resources as a result of a past event (the transfer) and expects to receive future economic benefits or service potential from those resources, and when the fair value can be reliably measured. An inflow of resources from a non-exchange transaction recognised as an asset (i.e. cash) is also recognised as revenue, except to the extent that the entity has a present obligation in respect of that transfer (condition), which needs to be satisfied before the revenue can be recognised. Until the condition is met the revenue is deferred and recognised as a liability (pre-financing received).

(ii) Revenue from exchange transactions

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

1.4.2. Expenses

Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets/equity. They include both the expenses from exchange transactions and expenses from non-exchange transactions.

Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the entity. They are valued at original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are recognised in the statement of financial performance.

Expenses from non-exchange transactions relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations. Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation or an agreement has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made.

When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expense.

1.5. CONTINGENT ASSETS AND LIABILITIES

1.5.1. Contingent assets

A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.

1.5.2. Contingent liabilities

A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or a present obligation that arises from past events but is not recognised because: it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation or, in the rare circumstances where the amount of the obligation cannot be measured with sufficient reliability.

1.6. CO-FINANCING

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

Expenses relating to co-financing projects are recognised as they are incurred. The corresponding amount of contributions is recognised as operating revenue and the effect on economic result of the year is nil.

2. NOTES TO THE BALANCE SHEET

ASSETS

2.1. PRE-FINANCING

Many contracts provide for payments of advances before the commencement of works, delivery 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 timing of the recoverability or utilisation of pre-financing governs whether it is disclosed as a current or a non-current pre-financing asset. The utilisation is defined by the project’s underlying agreement. Any repayments or utilisation due within 12 months of the reporting date are disclosed as current pre-financing. As many of the EDF projects are long-term in nature, it is necessary that the related advances are available for more than one year. Thus some pre-financing amounts are shown as non-current assets.

(EUR millions) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Non-current pre-financing 2.1.1 — 32 221 330 582 409 Current pre-financing 2.1.2 1 40 867 610 1 518 1 372 Total 1 72 1 088 939 2 100 1 781

The increase in overall pre-financing is explained by the very high level of payments in 2017. The overall level of net payments in 2017 increased by 24 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation). The level of ‘gross’ payments, i.e. payments without inflows from recovery orders, increased in 2017 by 25 %.

This increase is in line with the lifecycle of the EDF. The 11th EDF started in 2015 and 2017 was thus the third year of its existence. The 11th EDF has reached its maturity and peak with regards to the implementation of adopted actions. The number of open contracts in the 11th EDF increased from 1,3 k in 2016 to 1,6 k in 2017. In 2017 the value of the average contracted amount increased by 51 % compared to 2016. Therefore the level of net payments in the 11th EDF increased in 2017 by 52 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation). As the ratio between payments relating to invoices and the pre-financing is stable (42 %-44 %), the increase in payments resulted in the higher level of pre-financing.

The increase in the overall pre-financing is in line with the decrease in cash and cash equivalents (see note 2.4).

2.1.1. Non-current pre-financing

(EUR millions) 31.12.2017 31.12.2016 Direct Management 159 71 Implemented by: Commission 105 39 EU executive agencies 6 4 EU delegations 48 29 Indirect Management 423 338 Implemented by: EIB and EIF 166 180 International organisations 189 87 Private law bodies with a public service mission 11 25 Public law bodies 37 13 Third countries 20 34 Total 582 409

2.1.2. Current pre-financing

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Pre-financing (gross) 2 158 2 722 2 406 5 288 4 745 Cleared via cut-off (1) (118) (1 855 ) (1 796 ) (3 770 ) (3 373 ) Total 1 40 867 610 1 518 1 372





(EUR millions) 31.12.2017 31.12.2016 Direct Management 256 246 Implemented by: Commission 86 115 EU executive agencies 10 10 EU delegations 161 122 Indirect Management 1 262 1 125 Implemented by: EIB and EIF 345 372 International organisations 563 432 Private law bodies with a public service mission 59 121 Public law bodies 108 53 Third countries 186 148 Total 1 518 1 372

2.1.3. Guarantees received in respect of pre-financing

Guarantees are held to secure pre-financing and are released when the final claim under a project is paid. At 31 December 2017 the guarantees received by the EDF in respect of pre-financing amounted to EUR 54 million (2016 EUR 53 million).

The majority of pre-financing is paid under the indirect management mode. In this case the beneficiary of the guarantee is not the EDF but the contracting authority. Even though the EDF is not the beneficiary, those guarantees secure its assets. In 2017 those guarantees amounted to EUR 577 million.

2.2. TRUST FUND CONTRIBUTIONS

This heading represents the amount paid as contributions to the Bêkou EU Trust Fund and EU Trust Fund for Africa. The contributions are net of the costs incurred by the trust funds and attributable to the EDF.

The trust fund contributions are implemented by the EDF under the direct management mode.

(EUR millions) Trust Funds Net contribution at 31.12.2016 Contributions paid in 2017 Allocation of TF’s net expenses 2017 Net contribution at 31.12.2017 Africa 72 180 (104) 148 Bêkou 26 — (10) 16 Total 98 180 (114) 163

The activities of EUTF Africa increased in 2017 after the start-up year 2016. Its expenses in 2017 increased almost 5 times compared to 2016. Its payments doubled compared to the previous year.

2.3. NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES

(EUR millions) Note 31.12.2017 31.12.2016 Recoverables from non-exchange transactions 2.3.1 19 62 Receivables from exchange transactions 2.3.2 73 70 Total 92 132

2.3.1. Recoverables from non-exchange transactions

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Member States — — — 7 7 40 Customers 2 7 9 1 19 18 Public bodies — 10 8 2 20 23 Third states 0 1 4 0 6 4 Write down (2) (16) (15) (1) (34) (25) Liaison accounts with EU institutions — — — 2 2 2 Total 0 2 6 11 19 62

The overall decrease of the recoverables from non-exchange transactions is mainly due to a decrease in recoverables from Member States. At 31 December 2016 this included ordinary contributions and amounts to be received as a consequence of Bridging Facility adjustments that were compensated against Member States contributions in 2017.

At 31 December 2017 Member States’ recoverables include the outstanding financial adjustment implemented against the first instalment of fund capital to be called in 2018 (see note 2.9.1).

(EUR millions) Member States 31.12.2017 Czech Republic 2 Romania 1 Hungary 1 Ireland 1 Greece 1 Other 1 Total 7

2.3.2. Receivables from exchange transactions

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Accrued income — 63 11 — 74 70 Liaison accounts between EDFs 189 88 3 555 (3 833 ) (0) (0) Total 189 151 3 566 (3 833 ) 73 70

Included under accrued income are primarily amounts of accrued interest on pre-financing related to projects (EUR 63 million) and on pre-financing related to the EU-Africa Trust Fund (EUR 11 million).

For efficiency reasons, the single treasury covering all the EDFs is allocated to the 11th EDF (10); this leads to operations between the various EDFs, which are balanced out in the liaison accounts between the various EDF balance sheets.

Liaison accounts are presented only in the individual EDFs. The total of liaison accounts is nil.

2.4. CASH AND CASH EQUIVALENTS (11)

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Special accounts: Financial institutions of Member States — — — 105 105 292 Current accounts: Commercial banks — — — 242 242 389 Total — — — 347 347 680

The overall decrease in cash and cash equivalents is mainly explained by the exceptionally high level of payments in 2017. The overall level of net payments in 2017 increased by 24 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation). The level of ‘gross’ payments, i.e. payments without inflows from recovery orders, increased in 2017 by 25 %.

This increase of payments is in line with the lifecycle of the EDF. The 11th EDF started in 2015 and 2017 was the third year of its existence. The 11th EDF has reached its maturity and a peak in the implementation of adopted actions. The number of open contracts in the 11th EDF increased from 1,3 k in 2016 to 1,6 k in 2017. In 2017 the level of net payments in the 11th EDF increased by 52 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation).

With the aim of improving the presentation in the 2017 annual accounts, the classification of financial institutions and banks has been reviewed. The comparative figures for 2016 are disclosed accordingly.

LIABILITIES

2.5. PROVISIONS

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Provisions — — — 4 4 4 Total — — — 4 4 4

The provision is the best estimation of the probable amount to be paid by the EDF to finance the orderly closure of the Centre de Development (CDE), decided by the ACP-EU Committee of Ambassadors (Decision No 4/2014 of 23 October 2014).

The amount includes court cases (EUR 1,2 million) raised against the CDE and the remaining expected cost of the passive phase (e.g. residual administrative tasks, other residual litigations, archive, etc.) that started on 31 December 2016 (see note 4.2.2). No expenses regarding the passive phase have been incurred so far.

2.6. FINANCIAL LIABILITIES

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Co-financing — payables — — 7 7 14 6 Total — — 7 7 14 6

The change in the total co-financing liabilities is explained in the note 2.7.2.1.

2.7. PAYABLES

(EUR millions) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Current payables 2.7.1 0 13 114 235 361 222 Sundry payables 2.7.2 — (0) 20 182 202 327 Total 0 13 133 417 563 549

2.7.1. Current payables

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Suppliers 0 9 85 40 133 98 Member States — — 0 12 12 0 Third states 0 (0) 15 131 146 91 Public bodies — 3 10 70 83 32 Other current payables 0 1 4 (18) (13) 1 Total 0 13 114 235 361 222

Payables include cost statements received by the EDF relating to its grant activity. They are recorded for the amount being claimed from the moment the demand is received. The same procedure applies to invoices and credit notes received under procurement activities. The cost claims concerned have been taken into account for the year-end (cut-off) procedures. Following the cut-off entries, estimated eligible amounts have been recognised in the statement of financial performance. Non-eligible amounts have been disclosed as other current payables.

Member States payables represent the outstanding financial adjustment to be deducted from the first instalment of fund capital to be called in 2018 (see note 2.9.1). This heading includes the amounts due to France (EUR 10 million), the Netherlands (EUR 1 million) and Austria (EUR 1 million).

2.7.2. Sundry payables

(EUR millions) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Co-financing payables 2.7.2.1 — — 22 6 28 64 Deferred fund capital contributions 2.7.2.2 — — — 173 173 261 Other sundry payables — — — 1 1 2 Total — — 22 179 202 327

2.7.2.1. Co-financing payables

The breakdown of the non-current and current co-financing payables by Member State is summarised in the table below:

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Non-current co-financing Belgium — — 0 1 2 2 Denmark — — — 0 0 0 France — — 4 — 4 — Germany — — — — — 0 Sweden — — 1 2 3 2 United Kingdom — — 1 — 1 1 Canada — — — — — 0 Australia — — 0 — 0 — USAID — — — 4 4 — — — 7 7 14 6 Current co-financing Belgium — — 4 (1) 3 4 Denmark — — (1) 1 (0) 1 France — — 12 — 12 37 Germany — — 0 — 0 1 Netherlands — — 0 — 0 1 Spain — — 1 — 1 3 Sweden — — 5 0 5 7 United Kingdom — — 1 3 4 11 Canada — — 0 — 0 0 USAID — — — 2 2 — — — 22 6 28 64 Total — — 29 13 42 70

The total non-current and current co-financing payables decreased by EUR 28 million compared to the previous reporting period.

During 2017, new co-financing contributions were received from USAID (EUR 7 million), the United Kingdom (EUR 5 million) and Sweden (EUR 2 million).

The total co-financing payables were decreased by EUR 42 million in order to recognise revenue and expenses related to co-financed projects (see notes 3.1.1 and 3.4).

2.7.2.2. Deferred fund capital contributions

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 United Kingdom — — — 170 170 252 Lithuania — — — 2 2 — Hungary — — — — — 9 Total — — — 173 173 261

This heading completely relates to Member States’ 2018 contributions paid in advance.

2.8. ACCRUED CHARGES AND DEFERRED INCOME

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Accrued charges 0 76 517 137 730 770 Other accruals and deferrals — — — 3 3 6 Total 0 76 517 140 733 776

Accrued charges comprise estimated operating expenses for on-going or ended contracts without validated cost claims where the 2017 eligible expenses incurred by beneficiaries of EDF were estimated using the best available information about the existing contracts. The portion of the estimated accrued charges which relates to pre-financing paid has been recorded as a reduction of the pre-financing amounts (see note 2.1).

NET ASSETS

2.9. FUND CAPITAL

2.9.1. Called fund capital — active EDFs

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF Total Fund capital 12 164 10 973 20 960 29 367 73 464 Uncalled fund capital — — (1 773 ) (29 367 ) (31 140 ) Called fund capital 31.12.2016 12 164 10 973 19 187 — 42 323 Fund capital 12 164 10 773 20 960 29 367 73 264 Uncalled fund capital — — — (27 090 ) (27 090 ) Called fund capital 31.12.2017 12 164 10 773 20 960 2 277 46 173

The fund capital represents the total amount of contributions from Member States for the relevant EDF fund as laid down in each of the Internal Agreements. The uncalled funds represent the initial allocation not yet called up from Member States.

The called fund capital represents the amount of the initial allocations which have been called up for transfer to the treasury accounts by the Member States (see note 2.9.2 below).

By means of Council Decision (EU) 2017/1206 (12) the Member States’ contributions set out in the Internal Agreements of the Eighth and Ninth EDF are to be reduced accordingly for an amount of EUR 200 million from funds decommitted under the Eighth and the Ninth EDF. As the funds decommitted under the Eighth EDF have been already almost entirely transferred to the other EDFs, EUR 200 million was deducted from the capital of the Ninth EDF.

Refunds arising from this reduction have been compensated against additional call for funds under the 11th EDF. It resulted in the financial adjustment. The financial adjustment can be implemented against the third instalment 2017 and/or the first instalment 2018. The outstanding financial adjustment has been disclosed either as receivables or payables from/to Member States (see notes 2.3.1 and 2.7.1)

2.9.2. Called and uncalled fund capital by Member State

(EUR millions) Contributions 10th EDF % Uncalled capital 31.12.2016 Capital called in 2017 Uncalled capital 31.12.2017 Austria 2,41 43 (43) — Belgium 3,53 63 (63) — Bulgaria 0,14 2 (2) — Cyprus 0,09 2 (2) — Czech Republic 0,51 9 (9) — Denmark 2,00 35 (35) — Estonia 0,05 1 (1) — Finland 1,47 26 (26) — France 19,55 347 (347) — Germany 20,50 364 (364) — Greece 1,47 26 (26) — Hungary 0,55 10 (10) — Ireland 0,91 16 (16) — Italy 12,86 228 (228) — Latvia 0,07 1 (1) — Lithuania 0,12 2 (2) — Luxembourg 0,27 5 (5) — Malta 0,03 1 (1) — Netherlands 4,85 86 (86) — Poland 1,30 23 (23) — Portugal 1,15 20 (20) — Romania 0,37 7 (7) — Slovakia 0,21 4 (4) — Slovenia 0,18 3 (3) — Spain 7,85 139 (139) — Sweden 2,74 49 (49) — United Kingdom 14,82 263 (263) — Total 100,00 1 773 (1 773 ) —





(EUR millions) Contributions 11th EDF % Uncalled capital 31.12.2016 Capital called in 2017 Uncalled capital 31.12.2017 Austria 2,40 704 (55) 650 Belgium 3,25 954 (74) 880 Bulgaria 0,22 64 (5) 59 Croatia 0,23 66 (5) 61 Cyprus 0,11 33 (3) 30 Czech Republic 0,80 234 (18) 216 Denmark 1,98 582 (45) 537 Estonia 0,09 25 (2) 23 Finland 1,51 443 (34) 409 France 17,81 5 231 (406) 4 826 Germany 20,58 6 044 (469) 5 575 Greece 1,51 443 (34) 408 Hungary 0,61 180 (14) 166 Ireland 0,94 276 (21) 255 Italy 12,53 3 680 (285) 3 394 Latvia 0,12 34 (3) 31 Lithuania 0,18 53 (4) 49 Luxembourg 0,26 75 (6) 69 Malta 0,04 11 (1) 10 Netherlands 4,78 1 403 (109) 1 294 Poland 2,01 589 (46) 544 Portugal 1,20 351 (27) 324 Romania 0,72 211 (16) 195 Slovakia 0,38 110 (9) 102 Slovenia 0,22 66 (5) 61 Spain 7,93 2 330 (181) 2 149 Sweden 2,94 863 (67) 796 United Kingdom 14,68 4 311 (334) 3 976 Total 100,00 29 367 (2 277 ) 27 090

In 2017 EUR 1 773 million has been called from the 10th EDF and EUR 2 277 million EUR from the 11th EDF. At 31 December 2017 the capital of the Eighth, Ninth and 10th EDF has been called up and received in its entirety.

2.9.3. Called fund capital from closed EDFs carried forward

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Funds transferred from closed EDFs 627 1 625 — — 2 252 2 252

This heading includes the resources transferred from closed EDFs to the Eighth and Ninth EDFs.

2.9.4. Called fund capital transfers between active EDFs

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF Total Balance at 31.12.2015 (2 476 ) 2 376 35 65 — Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs (20) (163) 182 — — Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs — — (356) 356 — Transfer from the 11th performance reserve to the African Peace Facility (10th EDF) — — 386 (386) — Balance at 31.12.2016 (2 496 ) 2 214 247 35 — Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs (7) (37) 44 — — Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs — — (171) 171 — Balance at 31.12.2017 (2 503 ) 2 177 120 206 —

This heading includes the resources transferred between the active EDFs.

Since the entry into force of the Cotonou Agreement, all the unspent funds in previous active EDFs are transferred to the most recently opened EDF after decommitment. The resources transferred from other EDFs increase the appropriations of the receiving fund and reduce the appropriations of the fund of origin. Funds transferred to the performance reserve of the 10th and 11th EDFs can be committed only under specific conditions set out in the Internal Agreements.

3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

REVENUE

(EUR millions) Note 2017 2016 Revenue from non-exchange transactions 3.1 61 8 Revenue from exchange transactions 3.2 25 66 Total 87 73

3.1. REVENUE FROM NON-EXCHANGE TRANSACTIONS

(EUR millions) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 2017 2016 Recovery of expenses 0 5 7 7 19 23 Recovery of Stabex funds — — — 0 0 1 Co-financing revenue 3.1.1 — — 42 1 42 (15) Total 0 5 49 7 61 8

The non-exchange revenue can be broken down by management mode as follows:

(EUR millions) 2017 2016 Direct Management 5 6 Implemented by: Commission 1 1 EU delegations 4 5 Indirect Management 56 2 Implemented by: Third countries 55 (0) International organisations 2 2 Public law bodies 0 0 Private law bodies with a public service mission (1) 0 Total 61 8

3.1.1. Co-financing revenue

The co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance. The received contributions remain under liabilities (see note 2.7.2.1) until the conditions attached to the donated funds are met, i.e. eligible expenses are incurred (see note 3.4). The corresponding amount is then recognised as non-exchange revenue from co-financing. Consequently the effect on the economic result of the year is nil.

3.2. REVENUE FROM EXCHANGE TRANSACTIONS

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 2017 2016 Financial revenue (0) (1) 4 (0) 4 3 Other revenue 1 5 13 4 22 62 Total 1 4 17 4 25 66

The financial revenue comprises interest from the Trust Fund and interest on pre-financing.

Other income entirely relates to the realised and unrealised foreign exchange gains.

EXPENSES

3.3. AID INSTRUMENTS

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 2017 2016 Programmable aid 1 3 805 1 341 2 150 1 751 Macroeconomic support — 21 — — 21 39 Sectoral policy (0) (9) — — (9) 18 Intra-ACP projects — 0 417 694 1 112 693 Interest rate subsidies — — — — — (3) Emergency aid — (1) 26 264 289 398 Other aid programmes related to former EDFs — (1) — — (1) 1 Institutional support — — 3 21 23 38 Compensation export receipts (0) (1) — — (1) 0 Contributions to Trust Funds — — — 114 114 35 Total 0 14 1 251 2 435 3 700 2 970

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

The increase in overall expenses on aid instruments is in line with the lifecycle of the EDF. The 11th EDF started in 2015 and 2017 was thus the third year of its existence. The 11th EDF has reached its maturity and peak with regards to the implementation of adopted actions. The number of open contracts in the 11th EDF increased from 1,3 k in 2016 to 1,6 k in 2017. In 2017 the value of average contracted amount increased by 51 % compared to 2016.

The sectoral policy expenses were negative in 2017 due to reversal of an invoice that was incorrectly recorded in 2016.

3.4. CO-FINANCING EXPENSES

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 2017 2016 Co-financing — — 42 1 42 (15)

Included under this heading are the expenses incurred on co-financing projects in 2017. It should be noted that the expenses incurred include estimated amounts related to the cut-off exercise (and consequently reversals of the estimated amounts related to last year). Because the reversals of the 2015 estimated expenses (EUR 50 million) exceeded the expenses incurred in 2016 (EUR 35 million), the co-financing expenses were negative for 2016.

Corresponding revenue has been recognised in the statement of financial performance (see note 3.1.1).

3.5. AID INSTRUMENTS AND CO-FINANCING EXPENSES BY MANAGEMENT TYPE

(EUR millions) 2017 2016 Direct Management 1 447 1 173 Implemented by: Commission 122 140 EU executive agencies 26 10 Trust Funds 89 36 EU delegations 1 209 987 Indirect Management 2 295 1 781 Implemented by: EIB and EIF 48 5 International organisations 1 171 821 Private law bodies with a public service mission (20) 143 Public law bodies 356 57 Third countries 739 756 Private law bodies implementing Public Private Partnership 0 (1) Total 3 742 2 954

3.6. FINANCE COSTS

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 2017 2016 Write-down of receivables (1) (1) 10 1 9 (4) Other financial expenses — — — (1) (1) 0 Total (1) (1) 10 0 8 (4)

The heading write-down of receivables comprises the closure estimate of expenses on irrecoverable receivables. The 2017 estimated expenses reflect the increase of the overall write down on receivables from EUR 25 milllion to EUR 34 million (see note 2.3.1). Because the estimate also includes reversals of the the previous year’s estimation, the overall expenses were negative in 2016 (from EUR 29 million in 2015 to EUR 25 million in 2016).

3.7. OTHER EXPENSES

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 2017 2016 Administrative and IT expenses (0) 0 1 106 107 129 Provision for risks and charges — — — — — — Realised losses on trade debtors 1 1 1 — 3 0 Exchange loses 1 7 28 8 44 66 Total 2 9 29 114 154 196

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

4. CONTINGENT ASSETS & LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES

4.1. CONTINGENT ASSETS

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Performance guarantees — 4 6 0 10 9 Retention guarantees — 4 4 — 8 7 Total — 8 10 0 18 16

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

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

For contracts managed under the indirect mode, the guarantees belong to a contracting authority other than the EDF and they are therefore not recorded by the EDF. In 2017 those guarantees amounted to EUR 644 million.

4.2. OTHER SIGNIFICANT DISCLOSURES

4.2.1. Outstanding commitments not yet expensed

The amount disclosed below is the budgetary RAL (‘Reste à Liquider’) less related amounts that have been included as expenses in the statement of financial performance. The budgetary RAL is an amount representing the commitments for which payments and/or de-commitments have not yet been made. This is the normal consequence of the existence of multi-annual programmes.

(EUR millions) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2017 31.12.2016 Outstanding commitments not yet expensed 0 88 1 659 6 760 8 508 6 746 Total 0 88 1 659 6 760 8 508 6 746

At 31 December 2017 the budgetary RAL totalled EUR 9 745 million (2016: EUR 7 665 million).

4.2.2. Centre for the Development of Enterprise

The ACP-EU Council of Ministers agreed in June 2014 ‘to proceed with the orderly closing of the CDE’, and at the same time ‘to ensure that the private sector support projects implemented by the CDE in ACP countries and regions are completed in full’. For this purpose, the ACP-EU Council of Ministers granted a delegation of powers to the ACP-EU Committee of Ambassadors to take this matter forward with a view to adopt the necessary decisions.

The ACP-EU Committee of Ambassadors authorised, by Decision No 4/2014 of 23/10/2014, the Executive Board of the CDE to take, with immediate effect, all appropriate measures to prepare for the closure of the CDE. As stipulated in article 2 of that Decision, the Executive Board was instructed to contract a Curator to prepare and implement a closure plan.

The Curator submitted to the CDE Executive Board at the end of June 2015 a definitive strategic plan, with a budget and work-plan, which reflected the outcome of the social dialogue. The budget of the definitive strategic plan, approved by the CDE Executive Board, was the basis for the Commission’s proposal for a Financing Decision that was adopted by the EC in 2015 for a total amount of EUR 18,2 million. Subsequent to the adoption of the above Financing Decision, a grant agreement was concluded in December 2015 between the CDE and the European Commission providing the necessary financing for the realization of CDE’s assets and settlement of its liabilities. This grant agreement started on 1 January 2016 and lasted until 31 December 2017.

4.2.3. The United Kingdom’s withdrawal from the European Union

Background

On 23 June 2016 a majority of the citizens of the United Kingdom who voted in the referendum on membership of the European Union voted to leave the EU. On 29 March 2017 the United Kingdom formally notified the European Council of its intention to leave the EU and the European Atomic Energy Community (Euratom).

With regard to the EDF

On 19 March 2018 the Commission published a draft of the Withdrawal Agreement that outlined the progress made in the negotiations with the UK.

This draft Withdrawal Agreement states that the United Kingdom shall remain party to the EDF until the closure of the 11th EDF and all previous unclosed EDFs, and shall in this respect assume the same obligations as the Member States under the Internal Agreement by which it was set up, as well as the obligations resulting from previous EDFs until their closure. It may participate, as observer, without voting rights, in the EDF Committee.

The draft Withdrawal Agreement also states that, where the amounts from projects under the 10th EDF or from previous EDFs have not been committed or have been decommitted on the date of entry into force of this agreement, the United Kingdom’s share of those amounts shall not be reused. The same applies to the United Kingdom share of funds not committed or decommitted amounts under 11th EDF after 31 December 2020.

As at 31 December 2017, there is no financial impact to be reported in the EDF financial statement. The negotiations on the United Kingdom’s withdrawal from the European Union are still ongoing and, therefore, the final form of the agreement is not confirmed at this time.

5. FINANCIAL RISK MANAGEMENT

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

5.1. RISK MANAGEMENT POLICIES AND HEDGING ACTIVITIES

The rules and principles for the management of the treasury operations are laid down in the 11th EDF Financial Regulation and in the Internal Agreement.

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

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

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

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

In addition to the special accounts, other bank accounts are opened by the Commission in the name of the EDF, with financial institutions (central banks and commercial banks), for the purpose of executing payments and receiving receipts other than the Member State contributions to the budget.

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

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

5.2. CURRENCY RISK

Exposure of the EDF to currency risk at year end — net position

(EUR millions) 31.12.2017 31.12.2016 USD GBP DKK SEK EUR Other Total USD GBP DKK SEK EUR Other Total Financial assets Receivables and recoverables 64 — — — 26 2 92 0 — — — 129 3 132 Cash and cash equivalents 4 0 — — 344 — 347 2 0 — — 678 — 680 Total 68 0 — — 370 2 439 2 0 — — 807 3 812 Financial liabilities Non-current financial liabilities — — — — (14) — (14) — — — — (6) — (6) Payables (0) — — — (533) (30) (563) 0 — — — (495) (54) (549) Total (0) — — — (547) (30) (577) 0 — — — (501) (54) (555) Total 68 0 — — (177) (28) (138) 2 0 — — 306 (51) 257

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

5.3. INTEREST RATE RISK

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

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

Contributions to the EDF budget are credited by each Member State to a special account opened with the financial institution designed by it. As the remuneration applied to some of these accounts may currently be negative, cash management procedures are in place to minimise balances kept on the accounts concerned. In addition, in accordance with Council Regulation (EU) 2016/888, any negative remuneration on these accounts is borne by the relevant Member State.

Overnight balances held in commercial bank accounts are remunerated on a daily basis. The remuneration of balances on such accounts is based on variable market rates to which a contractual margin (positive or negative) is applied. For most of the accounts the interest calculation is linked to a market reference rate and is adjusted to reflect any fluctuations of this rate. As a result no risk is taken by the EDF that its balances be remunerated at rates lower than market rates.

5.4. CREDIT RISK (COUNTERPARTY RISK)

Financial assets that are neither past due nor impaired:

(EUR millions) Total Neither past due nor impaired Past due but not impaired < 1 year 1-5 years > 5 years Exchange receivables and non-exchange recoverables 92 92 0 — — Total at 31.12.2017 92 92 0 — — Exchange receivables and non-exchange recoverables 132 93 36 4 — Total at 31.12.2016 132 93 36 4 —





Financial assets by risk category:

(EUR millions) 31.12.2017 31.12.2016 Receivables Cash Total Receivables Cash Total Counterparties with external credit rating Prime and high grade 3 103 106 34 284 318 Upper medium grade 0 240 240 3 371 374 Lower medium grade 3 4 7 2 16 18 Non- investment grade 1 0 2 1 9 10 Total 7 347 354 40 680 720 Counterparties without external credit rating Group 1 (debtors without defaults in the past) 86 0 86 92 0 92 Group 2 (debtors with defaults in the past) — — — — — — Total 86 0 86 92 0 92 Total 92 347 440 132 680 812

Funds in the categories non-investment grade and lower medium grade relate mainly to Member State contributions to the EDF paid to the special accounts opened by Member States in accordance with Article 22(3) of the EDF FR. According to this regulation the amount of such contributions must remain in those special accounts until the payments need to be made.

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

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

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

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

5.5. LIQUIDITY RISK

Maturity analysis of financial liabilities by remaining contractual maturity

(EUR millions) < 1 year 1-5 years > 5 years Total Financial liabilities 563 13 1 577 Total at 31.12.2017 563 13 1 577 Financial liabilities 549 6 — 555 Total at 31.12.2016 549 6 — 555

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

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

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

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

6. RELATED PARTY DISCLOSURES

The related parties of the EDF are Bêkou, Africa EU Trust Funds and the European Commission. Transactions between these entities take place as part of the normal operations of the EDF and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules.

The EDF has no separate management since it is managed by the Commission. The entitlements of the key management of the EU, including the Commission, have been disclosed in the Consolidated annual accounts of the European Union under heading 7.2 ‘Key management entitlements’.

7. EVENTS AFTER THE BALANCE SHEET DATE

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

8. RECONCILIATION OF ECONOMIC RESULT AND BUDGET RESULT

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

(EUR millions) 2017 2016 ECONOMIC RESULT OF THE YEAR (3 818 ) (3 073 ) Revenue Entitlements not affecting the budget result (7) (2) Entitlements established in current year but not yet collected (3) (7) Entitlements established in previous years and collected in current year 29 16 Net effect of pre-financing 57 41 Accrued revenue (net) (62) 8 Other (2) (5) Expenses Expenses of the current year not yet paid 19 22 Expenses of previous years paid in the current year (60) (88) Net effect of pre-financing (685) (459) Accrued expenses (net) 373 256 BUDGET RESULT OF THE YEAR (4 158 ) (3 291 )

8.1. RECONCILING ITEMS — REVENUE

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

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

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

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

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

8.2. RECONCILING ITEMS — EXPENDITURE

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

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

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

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

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF

ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2017 (13)

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND

General background on Union Trust Funds

A trust fund is a legal arrangement with a distinct financial structure that pools the funds of several donors to jointly finance an action on the basis of commonly agreed objectives and reporting formats.

In accordance with Article 187(1) of the Financial Regulation applicable to the general budget of the Union (EU FR) and Article 42 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR), the Commission is authorised to create Union Trust Funds for external actions (EUTF). The EUTFs are created under an agreement concluded with other donors (at least one external donor) to respond to emergency, postemergency or thematic actions. The establishment of an EUTF needs to be justified namely by EU added value (its objectives can be better met at EU than at national level), and complimentarity (the trust fund should not duplicate already existing and similar instruments).

The European Commission submits the draft decision to establish an EUTF to the competent committee defined in the basic act governing the instrument that provides the EU’s financial contribution to the new Trust Fund. The consultation of the Committees ensures an adequate involvement of the Council in the establishment of any EUTF. The proposal for the revision of the Financial Regulation addresses the need for greater involvement of the European Parliament in the creation of EUTFs (Article 227(1)) and reporting on their activities (Article 244).

After the adoption of the establishment and financing decisions, the constitutive act of the EUTF is signed by the European Commission and the donors. The constitutive act details the main features of the EUTF, such as its specific objectives, the rules for the composition and the internal rules of its board, as well as the duration. EUTFs are created for a limited duration, which is, together with its objectives, defined by the constitutive act of each trust fund. In accordance with Article 187 of the EU FR, the EUTF has specific governance arrangements and contributions are placed outside the EU budget.

EUTFs offer a number of advantages: they are EU-led instruments, offering better coordination with EU Member States; better control of operations by the Union and other donors and enhanced EU visibility. Trust Funds benefit from fast decision-making processes and from their capacity to pool larger sums from different sources making them a flexible, proactive and adaptable tool.

EUTFs are managed by the Commission under the responsibility of the authorising officer by delegation who provides assurance on the use of the funds to the Commission and to third donors. The EUTF manager is the authorising officer by sub-delegation. As is the case for the European Development Fund, the accounting officer of a EUTF is the accounting officer of the Commission, who is responsible for laying down accounting procedures and chart of accounts common to all EUTFs.

The European Parliament and/or the Council may request the Commission to discontinue the appropriations for the Trust Fund or revise the constitutive act with a view to liquidate it.

Current EU Trust Funds

To date, the Commission has set up four EUTFs:

— The BÊKOU EUTF, whose objective is to support all aspects of the Central African Republic’s exit from crisis and its reconstruction efforts. Established on 15 July 2014;

— The MADAD EUTF, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014;

— The AFRICA EUTF; a European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa. Established on 12 November 2015;

— The COLOMBIA EUTF; to support the implementation of the peace agreement in the early recovery and stabilisation post conflict. Established on 12 December 2016.

Further information is available on the websites of individual EUTFs:

Bekou — http://ec.europa.eu/europeaid/bekou-trust-fund-introduction_en

Madad — http://ec.europa.eu/enlargement/neighbourhood/countries/syria/madad/index_en.htm

Africa — http://ec.europa.eu/europeaid/regions/africa/eu-emergency-trust-fund-africa_en

Colombia — http://ec.europa.eu/europeaid/eu-trust-fund-colombia_en

The Bêkou Trust Fund

The first multi-donor EU Trust Fund called Bêkou, which means ‘hope’ in Sango, was established on 15 July 2014, by the Commission (represented by DGs DEVCO and ECHO, and the EEAS) and three of its Member States (Germany, France and the Netherlands), with the aim of promoting the stabilisation and reconstruction of the Central African Republic (CAR). It has been established for a maximum duration of 60 months. The trust fund is managed from Brussels.

The Trust Fund Board and the Operational Committee of the Bêkou EU Trust Fund are composed of representatives of the donors, of the Commission and observers.

The Board adopts and reviews the strategy of the EUTF. The Board shall meet at least once a year.

The Operational Committee examines, approves and supervises the implementation of the actions financed by the Fund. The Committee also approves the annual accounts and the annual reports on the activities financed by the Trust Fund.

Annual accounts of the Bêkou Trust Fund

According to Article 8 of the Agreement establishing the European Union Trust Fund for the Central African Republic, the ‘Bêkou EU Trust Fund’ and Article 11.2.1 of the Constitutive agreement, the annual accounts comprise two parts: (1) The annual financial report prepared by the EUTF manager and (2) The annual financial statements prepared by the Commission’s Accounting Officer, who is, based on the same article also the Accounting Officer of the trust fund.

According to Article 8 of the Constitutive agreement the financial statements shall be prepared in accordance with the accounting rules adopted by the Commission’s Accounting Officer (EU Accounting Rules, EAR) that are based on the International Public Sector Accounting Standards (IPSAS).

The annual accounts are subject to independent external audit and the final annual accounts are submitted by the EUTF manager and the Accounting Officer to the Operational Committee for approval (Article 8.3.4(c)).

Highlights of the year

The EU launched its first ever Trust Fund, named Bêkou, in July 2014 to help the Central Africa Republic and its population overcome the consequences of the crisis in ensuring access to basic services, in re-launching economic recovery and job creation, and in supporting reconciliation.

In 2017, the Bêkou EUTF adopted its operational strategy for the period 2017-2019, which focuses on: (i) rural development; (ii) support to the health sector; (iii) redeployment of public services and (iv) reconciliation. Priorities have been aligned with the ‘Plan national de Relèvement et de Consolidation de la Paix’ (RCPCA) and the National Indicative Programme (NIP) for the Central African Republic (signed in June 2017) and ownership by national authorities will be enhanced. In 2017, The Bêkou EUTF has adopted actions for a total amount of EUR 52,3 million in the sectors of rural resilience and job creation, health, support to the return of internally displaced people (IDPs) and refugees, light infrastructure, water and sanitation. The indicated amount covers newly adopted programmes, as well as several revisions of already adopted actions.

The Bêkou EUTF encompasses 15 programmes since its creation. In terms of contracts, the Bêkou EUTF signed 15 new contracts in 2017 for a total amount of nearly EUR 20 million, which contribute to the implementation of its programmes in the sectors of health, food security, gender empowerment and wildlife conservation. Moreover, amounts committed to some spending areas have increased to implement the adopted programme revisions; in particular, an increase of EUR 12 million for the spending area ‘Basic health care’.

Pledges by its contributors amounted to more than EUR 236 million by the end of 2017. This is an increase of EUR 63 million compared to year 2016. However, EUR 56 million out of these EUR 236 million remain to be certified.

Furthermore, more than EUR 18 million was paid on top of payments made during previous years; total disbursements have reached over EUR 61 million since the creation of Bêkou EUTF.

In the financial statements, the most important movements can be found in:

— Pre-financing: a decrease of kEUR 7 912 as less contracts have an open pre-financed amount;

— Operating expenses: An increase of kEUR 12 486 illustrating the maturity of the Trust Fund and the increased activities in the fields of urban development and basic and primary health care.

BALANCE SHEET

(EUR ‘000) 31.12.2017 31.12.2016 NON-CURRENT ASSETS Pre-financing 686 3 604 686 3 604 CURRENT ASSETS Pre-financing 7 465 12 458 Exchange receivables and non-exchange recoverables 877 1 455 Cash and cash equivalents 39 943 43 036 48 285 56 949 TOTAL ASSETS 48 971 60 554 NON-CURRENT LIABILITIES Financial liabilities (44 720 ) (59 339 ) (44 720 ) (59 339 ) CURRENT LIABILITIES Payables (716) (0) Accrued charges and deferred revenue (3 536 ) (1 215 ) (4 252 ) (1 215 ) TOTAL LIABILITIES (48 971 ) (60 554 ) NET ASSETS — — FUNDS & RESERVES Accumulated surplus — — Economic result of the year — — NET ASSETS — —

STATEMENT OF FINANCIAL PERFORMANCE

(EUR ‘000) 2017 2016 REVENUE Revenue from non-exchange transactions Revenue from donations 29 620 17 232 29 620 17 232 Revenue from exchange transactions Financial revenue 1 48 1 48 Total Revenue 29 621 17 280 EXPENSES Operating expenses (28 918 ) (16 432 ) Other expenses (703) (848) Total Expenses (29 621 ) (17 280 ) ECONOMIC RESULT OF THE YEAR — —

CASH FLOW STATEMENT

(EUR ‘000) 2017 2016 Economic result of the year — — Operating activities (Increase)/decrease in pre-financing 7 912 (6 569 ) (Increase)/decrease in exchange receivables and non-exchange recoverables 578 (91) Increase/(decrease) in financial liabilities (14 620 ) (3 786 ) Increase/(decrease) in payables 716 0 Increase/(decrease) in accrued charges and deferred revenue 2 321 1 021 NET CASH FLOW (3 092 ) (9 425 ) Net increase/(decrease) in cash and cash equivalents (3 092 ) (9 425 ) Cash and cash equivalents at the beginning of the year 43 036 52 461 Cash and cash equivalents at year-end 39 943 43 036

STATEMENT OF CHANGES IN NET ASSETS

(EUR ‘000) Accumulated surplus/ (deficit) Economic result of the year Net assets BALANCE AS AT 31.12.2016 — — — Economic result of the year — — — BALANCE AS AT 31.12.2017 — — —

ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA 2017 (14)

BACKGROUND INFORMATION ON THE EUTF FOR AFRICA

General background on Union Trust Funds

A trust fund is a legal arrangement with a distinct financial structure that pools the funds of several donors to jointly finance an action on the basis of commonly agreed objectives and reporting formats.

In accordance with Article 187(1) of the Financial Regulation applicable to the general budget of the Union (EU FR) and Article 42 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR), the Commission is authorised to create Union Trust Funds for external actions (EUTF). The EUTFs are created under an agreement concluded with other donors (at least one external donor) to respond to emergency, postemergency or thematic actions. The establishment of an EUTF needs to be justified namely by EU added value (its objectives can be better met at EU than at national level), and complimentarity (the trust fund should not duplicate already existing and similar instruments).

The European Commission submits the draft decision to establish an EUTF to the competent committee defined in the basic act governing the instrument that provides the EU’s financial contribution to the new Trust Fund. The consultation of the Committees ensures an adequate involvement of the Council in the establishment of any EUTF. The proposal for the revision of the Financial Regulation addresses the need for greater involvement of the European Parliament in the creation of EUTFs (Article 227(1)) and reporting on their activities (Article 244).

After the adoption of the establishment and financing decisions, the constitutive act of the EUTF is signed by the European Commission and the donors. The constitutive act details the main features of the EUTF, such as its specific objectives, the rules for the composition and the internal rules of its board, as well as the duration. EUTFs are created for a limited duration, which is, together with its objectives, defined by the constitutive act of each trust fund. In accordance with Article 187 of the EU FR, the EUTF has specific governance arrangements and contributions are placed outside the EU budget.

EUTFs offer a number of advantages: they are EU-led instruments, offering better coordination with EU Member States; better control of operations by the Union and other donors and enhanced EU visibility. Trust Funds benefit from fast decision-making processes and from their capacity to pool larger sums from different sources making them a flexible, proactive and adaptable tool.

EUTFs are managed by the Commission under the responsibility of the authorising officer by delegation who provides assurance on the use of the funds to the Commission and to third donors. The EUTF manager is the authorising officer by sub-delegation. As is the case for the European Development Fund, the accounting officer of a EUTF is the accounting officer of the Commission, who is responsible for laying down accounting procedures and chart of accounts common to all EUTFs.

The European Parliament and/or the Council may request the Commission to discontinue the appropriations for the Trust Fund or revise the constitutive act with a view to liquidate it.

Current EU Trust Funds

To date, the Commission has set up four EUTFs:

— The BÊKOU EUTF, whose objective is to support all aspects of the Central African Republic’s exit from crisis and its reconstruction efforts. Established on 15 July 2014;

— The MADAD EUTF, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014;

— The AFRICA EUTF; a European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa. Established on 12 November 2015;

— The COLOMBIA EUTF; to support the implementation of the peace agreement in the early recovery and stabilisation post conflict. Established on 12 December 2016.

Further information is available on the websites of individual EUTFs:

Bekou — http://ec.europa.eu/europeaid/bekou-trust-fund-introduction_en

Madad — http://ec.europa.eu/enlargement/neighbourhood/countries/syria/madad/index_en.htm

Africa — http://ec.europa.eu/europeaid/regions/africa/eu-emergency-trust-fund-africa_en

Colombia — http://ec.europa.eu/europeaid/eu-trust-fund-colombia_en

The EUTF for Africa

European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa (‘EUTF for Africa’) was launched on 12 November 2015 during the Valletta Summit on Migration. The main objectives of this trust fund is to support all aspects of stability and contribute to better migration management as well as addressing the root causes of destabilisation, forced displacement and irregular migration, in particular by promoting resilience, economic and equal opportunities, security and development and addressing human rights abuses.

The trust fund operates in three main geographic areas, namely the Sahel region and Lake Chad area, the Horn of Africa and the North of Africa but also the neighbouring countries of the eligible countries may benefit, on a case by case basis, from the Trust fund’s project. The Trust Fund is established for a limited period, until 31 December 2020 in order to provide a short and medium-term response to the challenges of the regions. The trust fund is managed from Brussels.

The Trust Fund Board and the Operational Committee of the EUTF for Africa are composed of representatives of the donors and of the Commission, as well as representatives of non-contributing EU Member States, authorities of eligible countries’ and regional organisations as observers.

The Board establishes and reviews the strategy of the EUTF. The Board shall meet at least once a year.

The Operational Committee examines, approves and supervises the implementation of the actions financed by the Fund. The Committee also approves the annual accounts and the annual reports on the activities financed by the Trust Fund.

Annual accounts of the EUTF for Africa

According to Article 7 of ‘The agreement establishing the European Union emergency trust fund for stability and addressing root causes of irregular migration and displaced persons in Africa and its internal rules’ (‘Constitutive agreement’) the annual accounts comprise two parts: (1) The annual financial report prepared by the EUTF manager and (2) The annual financial statements prepared by the EC Accounting Officer, who is, based on the same article also the Accounting Officer of the trust fund.

According to Article 8 of the Consitutive agreement the financial statements shall be prepared in accordance with the accounting rules adopted by the Commission’s Accounting Officer (EU Accounting Rules, EAR) that are based on the International Public Sector Accounting Standards (IPSAS).

The annual accounts are subject to independent external audit and the final annual accounts are submitted by the EUTF manager and the Accounting Officer to the Operational Committee for approval (Article 8.3.4(c)).

Highlights of the year

As of 31 December 2017, resources allocated to the EU Trust Fund for Africa amount to approximately EUR 3 330 million: over EUR 2 900 million from the European Development Fund (EDF) and EU financial instruments including DCI, ENI, HOME and ECHO funding, and EUR 378,8 million from EU Member States and other donors (Switzerland and Norway), of which EUR 340,9 million have been paid as of 31 December 2017.

In the course of 2017, resources from the EDF and the EU budget have increased by approximately EUR 525 million (EUR 245 million from EDF, EUR 230 million from DCI and EUR 50 million from DG HOME funding) which represents an increase of almost 22 %. But, more importantly, as a result of the strong call for additional funding by the Commission and the European Council, resources pledged by EU Member States and other donors have significantly increased in 2017 by EUR 226,4 million (148,5 %), going from EUR 152,4 million at the end of December 2016 to EUR 378,8 million at the end of 2017. This remarkable increase of EU Member States contributions has mainly focussed on the North of Africa region.

As of 31 December 2017, a total of 143 projects worth EUR 2 388 million have been approved for the Sahel and Lake Chad, the Horn of Africa and the North of Africa regions. Of the total amount approved, 210 contracts have been signed with implementing partners for an amount of over EUR 1 502 million (63 % of the approved funding). In 2017, the EUTF for Africa focused on deploying activities at country and regional level to address the compelling needs of African partner countries while further translating the Trust Fund’s strategic priorities into action. During the year, 40 new programmes have been approved in the three regions, bringing the total of approved programmes at the end of 2017 to 143 including three which operate across several regions. With EUR 900 million contracted, the implementation pace of the EUTF for Africa has significantly improved in 2017. An overall amount of EUR 1,5 billion has been signed with implementing partners since the inception of the Trust Fund. The Trust Fund for Africa has further intensified its efforts aimed at creating economic and employment opportunities, notably in the countries of origin, and to develop sustainable development opportunities in the countries of transit encouraging people to abandon activities linked to illegal migration. It is expected that in total over half a million people will have a job, receive vocational training or assistance to develop a business with the assistance of the EUTF for Africa. In 2017, the EUTF for Africa has offered protection and assistance to more than 13 000 migrants and the capacities of 1 500 governmen