IV

(Notices)

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

EUROPEAN COMMISSION

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

Annual accounts of the European Development Fund 2018

(2019/C 326/01)

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 40

FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2018 41

FINAL ANNUAL ACCOUNTS OF THE EUTF AFRICA 2018 48

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 55

EDF REPORT ON FINANCIAL IMPLEMENTATION 59

ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK 89

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2018 have been prepared in accordance with Title X 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 18 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 21 June 2019

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 2018, the Council adopted the Financial Regulation applicable to the 11th EDF (2) This repealed the previous regulation in force and is applicable to operations financed from previous EDFs without prejudice to existing legal commitments This Regulation does not apply to the Investment Facility under previous EDFs

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

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 intergovernmental 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 above mentioned contributions, it is also possible for Member States to enter into cofinancing arrangements or to make voluntary financial contributions to the EDF

3 YEAR-END REPORTING

3 1 ANNUAL ACCOUNTS

In accordance with Articles 18(3) 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 These 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 Commission’s Accounting Officer and are subject to external audit carried out by a private auditor The trust funds’ figures included in these annual accounts are provisional

The EDF 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 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 of the financial implementation of the EDF resources for a given financial year is the discharge 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 to questions and further information requests

FUNDS MANAGED BY THE EUROPEAN COMMISSION (3)

CONTENTS

FINANCIAL STATEMENTS OF THE EDF 8

EDF BALANCE SHEET 9

EDF STATEMENT OF FINANCIAL PERFORMANCE 10

EDF CASHFLOW 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 40

FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2018 41

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND 42

BALANCE SHEET 45

STATEMENT OF FINANCIAL PERFORMANCE 46

CASHFLOW STATEMENT 46

STATEMENT OF CHANGES IN NET ASSETS 47

FINAL ANNUAL ACCOUNTS OF THE EUTF AFRICA 2018 48

BACKGROUND INFORMATION ON THE EUTF FOR AFRICA 49

BALANCE SHEET 52

STATEMENT OF FINANCIAL PERFORMANCE 53

CASHFLOW STATEMENT 53

STATEMENT OF CHANGES IN NET ASSETS 54

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 55

CONSOLIDATED BALANCE SHEET 56

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE 57

CONSOLIDATED CASH FLOW STATEMENT 57

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS 58

EDF REPORT ON FINANCIAL IMPLEMENTATION 59

FINANCIAL STATEMENTS OF THE EDF (4)

EDF BALANCE SHEET

EUR millions Note 31 12 2018 31 12 2017 NON-CURRENT ASSETS Pre-financing 2.1 887 582 Trust Fund contributions 2.2 201 163 1 088 745 CURRENT ASSETS Pre-financing 2.1 1 448 1 518 Exchange receivables and non-exchange recoverables 2.3 138 92 Cash and cash equivalents 2.4 387 347 1 973 1 958 TOTAL ASSETS 3 061 2 703 NON-CURRENT LIABILITIES Provisions 2.5 — (4) Financial liabilities 2.6 (18) (14) (18) (18) CURRENT LIABILITIES Payables 2.7 (241) (563) Accrued charges and deferred income 2.8 (1 281 ) (733) (1 523 ) (1 296 ) TOTAL LIABILITIES (1 540 ) (1 314 ) NET ASSETS 1 521 1 389 FUNDS & RESERVES Called fund capital - active EDFs 2.9 50 423 46 173 Called fund capital from closed EDFs carried forward 2.9 2 252 2 252 Economic result carried forward from previous years (47 037 ) (43 219 ) Economic result of the year (4 118 ) (3 818 ) NET ASSETS 1 521 1 389

EDF STATEMENT OF FINANCIAL PERFORMANCE

EUR millions Note 2018 2017 REVENUE Revenue from non-exchange transactions 3.1 Recovery activities 4 61 4 61 Revenue from exchange transactions 3.2 Financial revenue 10 4 Other revenue 46 22 57 25 Total Revenue 60 87 EXPENSES Aid instruments 3.3 (4 054 ) (3 700 ) Co-financing expenses 3.4 17 (42) Finance costs 3.6 7 (8) Other expenses 3.7 (148) (154) Total Expenses (4 178 ) (3 904 ) ECONOMIC RESULT OF THE YEAR (4 118 ) (3 818 )

EDF CASHFLOW STATEMENT

EUR millions Note 2018 2017 Economic result of the year (4 118 ) (3 818 ) Operating activities Capital increase - contributions (net) 4 250 3 850 (Increase)/decrease in trust funds contributions (38) (66) (Increase)/decrease in pre-financing (235) (319) (Increase)/decrease in exchange receivables and non-exchange recoverables (46) 40 Increase/(decrease) in provisions (4) — Increase/(decrease) in financial liabilities 3 8 Increase/(decrease) in payables (322) 14 Increase/(decrease) in accrued charges and deferred income 548 (42) NET CASHFLOW 40 (333) Net increase/(decrease) in cash and cash equivalents 40 (333) Cash and cash equivalents at the beginning of the year 2.4 347 680 Cash and cash equivalents at year-end 2.4 387 347

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 31.12.2016 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 Capital increase - contributions — (4 250 ) 4 250 — — 4 250 Economic result of the year — — — (4 118 ) — (4 118 ) BALANCE AS AT 31.12.2018 73 264 22 840 50 423 (51 155 ) 2 252 1 521

BALANCE SHEET BY EDF

EUR millions Note 31 12 2018 31 12 2017 Eighth EDF Ninth EDF 10th EDF 11th EDF Total Eighth EDF Ninth EDF 10th EDF 11th EDF Total NON-CURRENT ASSETS Pre-financing 2.1 — 23 520 344 887 — 32 221 330 582 Trust Fund contributions 2.2 — — — 201 201 — 86 — 77 163 — 23 520 546 1 088 — 118 221 407 745 CURRENT ASSETS Pre-financing 2.1 0 19 445 984 1 448 1 40 867 610 1 518 Exchange receivables and non-exchange recoverables 2.3 1 65 36 36 138 0 64 17 11 92 Inter-EDF accounts 2.3 183 111 2 421 — 2 715 189 88 3 555 — 3 832 Cash and cash equivalents 2.4 — — — 387 387 — — — 347 347 184 195 2 902 1 407 4 689 190 193 4 439 968 5 791 TOTAL ASSETS (*1) 184 218 3 422 1 953 5 777 190 311 4 660 1 375 6 536 NON-CURRENT LIABILITIES Provisions 2.5 — — — — — — — — (4) (4) Financial liabilities 2.6 — — (1) (16) (18) — — (7) (7) (14) — — (1) (16) (18) — — (7) (11) (18) CURRENT LIABILITIES Payables 2.7 (0) (6) (125) (111) (241) (0) (13) (133) (417) (563) Inter-EDF accounts 2.3 — — — (2 715 ) (2 715 ) — — — (3 833 ) (3 833 ) Accrued charges and deferred income 2.8 (0) (83) (358) (840) (1 281 ) (0) (76) (517) (140) (733) (0) (89) (482) (3 666 ) (4 237 ) (0) (89) (650) (4 389 ) (5 128 ) TOTAL LIABILITIES (*1) (0) (89) (484) (3 682 ) (4 255 ) (0) (89) (657) (4 401 ) (5 147 ) NET ASSETS (*1) 184 129 2 938 (1 729 ) 1 521 190 222 4 003 (3 025 ) 1 389 FUNDS & RESERVES Called fund capital - active EDFs 2.9 12 164 10 773 20 960 6 527 50 423 12 164 10 773 20 960 2 277 46 173 Called fund capital from closed EDFs carried forward 2.9 627 1 625 — — 2 252 627 1 625 — — 2 252 Called fund capital transfers between active EDFs 2.9 (2 509 ) 2 137 55 317 — (2 503 ) 2 177 120 206 — Economic result carried forward from previous years (10 098 ) (14 352 ) (17 078 ) (5 508 ) (47 037 ) (10 098 ) (14 339 ) (15 812 ) (2 969 ) (43 219 ) Economic result of the year 0 (53) (1 000 ) (3 065 ) (4 118 ) 0 (13) (1 266 ) (2 539 ) (3 818 ) NET ASSETS 184 129 2 938 (1 729 ) 1 521 190 222 4 003 (3 025 ) 1 389

STATEMENT OF FINANCIAL PERFORMANCE BY EDF

EUR millions Note 2018 2017 Eighth EDF Ninth EDF 10th EDF 11th EDF Total Eighth EDF Ninth EDF 10th EDF 11th EDF Total REVENUE Revenue from non-exchange transactions 3.1 Recovery activities 0 3 (3) 4 4 0 5 49 7 61 0 3 (3) 4 4 0 5 49 7 61 Revenue from exchange transactions 3.2 Financial revenue 0 2 8 1 10 (0) (1) 4 (0) 4 Other revenue 1 6 27 12 46 1 5 13 4 22 1 8 35 13 57 1 4 17 4 25 Total revenue 1 11 32 17 60 1 9 66 11 87 EXPENSES Aid instruments 3.3 0 (59) (984) (3 012 ) (4 054 ) (0) (14) (1 251 ) (2 435 ) (3 700 ) Co-financing expenses 3.4 — — 18 (1) 17 — — (42) (1) (42) Finance costs 3.6 0 1 5 1 7 1 1 (10) (0) (8) Other expenses 3.7 (1) (7) (71) (70) (148) (2) (9) (29) (114) (154) Total expenses (0) (64) (1 031 ) (3 082 ) (4 178 ) (1) (22) (1 332 ) (2 549 ) (3 904 ) ECONOMIC RESULT OF THE YEAR 0 (53) (1 000 ) (3 065 ) (4 118 ) 0 (13) (1 266 ) (2 539 ) (3 818 )

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 31.12.2016 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 Transfers to/from the 10th EDF — (7) (7) Economic result of the year — 0 — 0 BALANCE AS AT 31.12.2018 12 164 — 12 164 (10 098 ) 627 (2 509 ) 184





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 31.12.2016 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) Economic result of the year — (13) (13) BALANCE AS AT 31.12.2017 10 773 — 10 773 (14 352 ) 1 625 2 177 222 Transfers to/from the 10th EDF — (40) (40) Transfers to/from the 11th EDF — — — Economic result of the year — (53) — (53) BALANCE AS AT 31.12.2018 10 773 — 10 773 (14 406 ) 1 625 2 137 129





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 31.12.2016 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 Transfers to/from the Eighth and Ninth EDF — 47 47 Transfers to/from the 11th EDF — (112) (112) Economic result of the year — (1 000 ) — (1 000 ) BALANCE AS AT 31.12.2018 20 960 — 20 960 (18 077 ) — 55 2 938





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 31.12.2016 29 367 29 367 — (2 969 ) — 35 (2 934 ) Capital increase - contributions (2 277 ) 2 277 — 2 277 Transfers to/from the Eighth, Ninth and 10th EDF — — 171 171 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 ) Capital increase - contributions (4 250 ) 4 250 112 4 362 Transfers to/from the Eighth, Ninth and 10th EDF — — — Economic result of the year — (3 065 ) — (3 065 ) BALANCE AS AT 31.12.2018 29 367 22 840 6 527 (8 573 ) — 317 (1 729 )

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF (5)

1 SIGNIFICANT ACCOUNTING POLICIES

1 1 ACCOUNTING PRINCIPLES

The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of users

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 2018 31 12 2017 Currency 31 12 2018 31 12 2017 BGN 1,9558 1,9558 PLN 4,3014 4 177 CZK 25,7240 25,5350 RON 4,6635 4,6585 DKK 7,4673 7,4449 SEK 10,2548 9,8438 GBP 0,8945 0,8872 CHF 1,1269 1,1702 HRK 7,4125 7,4400 JPY 125,8500 135,01 HUF 320,9800 310,3300 USD 1 145 1,1993

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 an 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

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 During this financial year, the entity did not hold any investments in this category

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 and loans are recognised when cash is deposited in a financial institution or advanced to borrowers 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 cashflows 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 from 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 are 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 nonexchange 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 nonexchange 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 conditions 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 twelve months of the reporting date are disclosed as current prefinancing 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 noncurrent assets

EUR millions Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Non-current pre-financing 2.1.1 — 23 520 344 887 582 Current pre-financing 2.1.2 0 19 445 984 1 448 1 518 Total 0 42 964 1 328 2 335 2 100

The increase in non-current pre-financing was mainly caused by the extension up to 2023 (with 7 years disbursement period) of a contract that was supposed to end in 2017 In 2017 the total value of this contract had been expensed, whereas after the extension, the non-current pre-financing was estimated at EUR 217 million

The decrease in current pre-financing was caused by a decrease in the pre-financing payments made (by 10 %) and an increase in the level of clearings (mainly in the 10th EDF)

This decrease is in line with the lifecycle of the EDF Many contracts have been cleared and completed in the 10th EDF: this can be seen in the drop of their number – from 3,4k in 2017 to 2,6k in 2018

At the same time the number of open contracts in the 11th EDF increased from 1,6k in 2017 to 2,3k in 2018 The 11th EDF started in 2015 and 2018 was thus the fourth year of its existence The 11th EDF has reached maturity with regards to the implementation of adopted actions

2 1 1 Non-current pre-financing

EUR millions 31 12 2018 31 12 2017 Direct Management 188 159 Implemented by: Commission 140 105 EU executive agencies 0 6 EU delegations 48 48 Indirect Management 698 423 Implemented by: EIB and EIF 367 166 International organisations 280 189 Private law bodies with a public service mission 6 11 Public law bodies 24 37 Third countries 21 20 EU bodies and Public Private Partnership 0 — Private law bodies implementing Public Private Partnership — 0 Total 887 582

2 1 2 Current pre-financing

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Pre-financing (gross) 1 113 2 034 3 005 5 153 5 288 Cleared via cut-off (1) (94) (1 589 ) (2 021 ) (3 705 ) (3 770 ) Total 0 19 445 984 1 448 1 518





EUR millions 31 12 2018 31 12 2017 Direct Management 280 256 Implemented by: Commission 102 86 EU executive agencies 8 10 Trust Funds 1 — EU delegations 169 161 Indirect Management 1 169 1 262 Implemented by: EIB and EIF 100 345 International organisations 658 563 Private law bodies with a public service mission 78 59 Public law bodies 124 108 Third countries 208 186 EU Bodies and Public Private Partnership 0 — Private law bodies implementing Public Private Partnership 0 0 Total 1 448 1 518

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 2018 the guarantees received by the EDF in respect of pre-financing amounted to EUR 79 million (2017 EUR 54 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 2018 those guarantees amounted to EUR 534 million

2 2 TRUST FUND CONTRIBUTIONS

This heading represents the amount paid as contributions to the EU Trust Fund for Africa and the Bêkou EU Trust Fund 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 2017 Contributions paid in 2018 Allocation of TF’s net expenses 2018 Net contribution at 31 12 2018 Africa 148 345 (301) 192 Bêkou 16 — (7) 9 Total 163 345 (308) 201

2 3 NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES

EUR millions Note 31 12 2018 31 12 2017 Recoverables from non-exchange transactions 2.3.1 37 19 Receivables from exchange transactions 2.3.2 101 73 Total 138 92

2 3 1 Recoverables from non-exchange transactions

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Member States — — — 5 5 7 Customers 2 7 16 1 26 19 Public bodies 0 9 9 7 25 20 Third states 0 1 3 0 5 6 Write down (2) (15) (10) (0) (27) (34) Inter-company accounts with EU institutions — — — 3 3 2 Total 1 2 18 16 37 19

2 3 2 Receivables from exchange transactions

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Accrued income 0 63 18 0 81 74 Receivable from EU — — — 20 20 — Inter-EDF accounts 183 111 2 421 (2 715 ) (0) (0) Total 183 174 2 439 (2 695 ) 101 73

Included under accrued income are 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 18 million)

The receivable from the EU is the amount that was transferred to the trust account owned by the European Commission

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

Inter-EDF accounts are presented only in the individual EDFs The total of inter-EDF accounts is nil

2 4 CASH AND CASH EQUIVALENTS (6)

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Central banks — — — 276 276 105 Commercial banks — — — 87 87 242 Cash belonging to financial instruments — — — 24 24 — Total — — — 387 387 347

The total level of cash and cash equivalents remained stable However, the structure of the cash position has changed A significant decrease (EUR 136 million) was observed in the UK’s contribution account in the commercial bank Natwest It was mainly because at the end of 2017 the UK paid the first instalment of its 2018 contribution of EUR 170 million

On 31 12 2018 more cash was kept in the central banks, in order to limit counterparty risk (see note 5.4)

LIABILITIES

2 5 PROVISIONS

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Provisions — — — — — 4 Total — — — — — 4

The provision for the Centre de Development (CDE) has been released as the court cases have been finished and no additional costs should be incurred

2 6 FINANCIAL LIABILITIES

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Co-financing - payables — — 1 16 18 14 Total — — 1 16 18 14

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

2 7 PAYABLES

EUR millions Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Current payables 2.7.1 0 6 80 88 173 361 Sundry payables 2.7.2 — — 45 23 68 202 Total 0 6 125 111 241 563

2 7 1 Current payables

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Suppliers 0 5 65 32 102 133 Member States — — 0 1 1 12 Third states 0 — 6 31 37 146 Public bodies — 2 10 30 43 83 Other current payables (0) (2) (2) (6) (10) (13) Total 0 6 80 88 173 361

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 shown as other current payables

2 7 2 Sundry payables

EUR millions Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31 12 2018 31 12 2017 Co-financing payables 2.7.2.1 — — 47 21 68 28 Deferred fund capital contributions 2.7.2.2 — — — — — 173 Other sundry payables — — (2) 2 — 1 Total — — 45 23 68 202

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 2018 31 12 2017 Non-current co-financing Austria — — — 1 1 — Belgium — — 0 2 2 2 Czechia — — — 1 1 — Denmark — — — 3 3 0 Finland — — — 1 1 — France — — 1 1 2 4 Luxembourg — — — 1 1 — Netherlands — — — 3 3 — Portugal — — — 0 0 — Sweden — — 0 — 0 3 United Kingdom — — — 2 2 1 Australia — — 0 — 0 0 USAID — — — 2 2 4 — — 1 16 18 14 Current co-financing Austria — — — 0 0 — Belgium — — 4 0 4 3 Czechia — — — 0 0 — Denmark — — 0 2 3 (0) Finland — — — 0 0 — France — — 21 1 22 12 Germany — — 1 — 1 0 Luxembourg — — — 0 0 — Netherlands — — 1 1 2 0 Poland — — 0 — 0 — Portugal — — — 0 0 — Spain — — 2 — 2 1 Sweden — — 5 1 5 5 Switzerland — — 0 — 0 0 United Kingdom — — 13 12 25 4 Canada — — 0 — 0 0 Australia — — 0 — 0 1 USAID — — — 4 4 2 — — 47 21 68 28 Total — — 48 37 86 42

The total non-current and current co-financing payables increased by EUR 44 million compared to the previous reporting period

During 2018, a total of EUR 28 million new co-financing contributions were received

The total co-financing payables increased by EUR 17 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 2018 31 12 2017 United Kingdom — — — — — 170 Lithuania — — — — — 2 Total — — — — — 173

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 2018 31 12 2017 Accrued charges 0 83 358 838 1 279 730 Other accruals and deferrals — — — 3 3 3 Total 0 83 358 840 1 281 733

Accrued charges comprise estimated operating expenses for on-going or completed contracts without validated cost claims where the 2018 eligible expenses incurred by beneficiaries of EDF were estimated using the best available information 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)

Accrued charges increased mainly in the 11th EDF (from EUR 140 million in 2017 to EUR 840 million in 2018) This is in line with the increase in the number of contracts (from 1,6k in 2017 to 2,3k in 2018) The 11th EDF started in 2015 and 2018 was thus the fourth year of its existence The 11th EDF has reached maturity with regards to the implementation of adopted actions

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 10 773 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 Fund capital 12 164 10 773 20 960 29 367 73 264 Uncalled fund capital — — — (22 840 ) (22 840 ) Called fund capital 31.12.2018 12 164 10 773 20 960 6 527 50 423

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 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)

2 9 2 Called and uncalled fund capital by Member State

EUR millions Contributions 11th EDF % Uncalled capital 31 12 2017 Capital called in 2018 Uncalled capital 31 12 2018 Austria 2,40 650 (102) 548 Belgium 3,25 880 (138) 742 Bulgaria 0,22 59 (9) 50 Croatia 0,23 61 (10) 51 Cyprus 0,11 30 (5) 25 Czechia 0,80 216 (34) 182 Denmark 1,98 537 (84) 452 Estonia 0,09 23 (4) 20 Finland 1,51 409 (64) 345 France 17,81 4 826 (757) 4 068 Germany 20,58 5 575 (875) 4 700 Greece 1,51 408 (64) 344 Hungary 0,61 166 (26) 140 Ireland 0,94 255 (40) 215 Italy 12,53 3 394 (533) 2 862 Latvia 0,12 31 (5) 27 Lithuania 0,18 49 (8) 41 Luxembourg 0,26 69 (11) 58 Malta 0,04 10 (2) 9 Netherlands 4,78 1 294 (203) 1 091 Poland 2,01 544 (85) 458 Portugal 1,20 324 (51) 273 Romania 0,72 195 (31) 164 Slovakia 0,38 102 (16) 86 Slovenia 0,22 61 (10) 51 Spain 7,93 2 149 (337) 1 812 Sweden 2,94 796 (125) 671 United Kingdom 14,68 3 976 (624) 3 353 Total 100,00 27 090 (4 250 ) 22 840

In 2018 EUR 4 250 million has been called from the 11th EDF At 31 December 2018 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 2018 31 12 2017 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 31.12.2016 (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 — Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs (7) (40) 47 — — Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs — — (112) 112 — Balance at 31.12.2018 (2 509 ) 2 137 55 317 —

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 2018 2017 Revenue from non-exchange transactions 3.1 4 61 Revenue from exchange transactions 3.2 57 25 Total 60 87

3 1 REVENUE FROM NON-EXCHANGE TRANSACTIONS

EUR millions Note Eighth EDF Ninth EDF 10th EDF 11th EDF 2018 2017 Recovery of expenses 0 3 14 3 21 19 Recovery of STABEX funds — — 0 — 0 0 Co-financing revenue 3.1.1 — — (18) 1 (17) 42 Total 0 3 (3) 4 4 61

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

EUR millions 2018 2017 Direct Management 4 5 Implemented by: Commission 1 1 EU delegations 3 4 Indirect Management 0 56 Implemented by: Third countries (13) 55 International organisations 12 2 Public law bodies 0 0 Private law bodies with a public service mission 1 (1) Total 4 61

3 1 1 Co-financing revenue

The cofinancing 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 cofinancing 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 2018 2017 Financial revenue 0 2 8 1 10 4 Other revenue 1 6 27 12 46 22 Total 1 8 35 13 57 25

Financial revenue comprises interest from the Trust Funds 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 2018 2017 Programmable aid (0) 1 532 1 468 2 001 2 150 Macro-economic support — 26 — — 26 21 Sectoral policy — 2 — — 2 (9) Intra ACP projects — 27 389 410 827 1 112 Emergency aid — 3 60 811 873 289 Other aid programmes related to former EDFs — 0 — — 0 (1) Institutional support — — 3 15 18 23 Compensation export receipts 0 (0) — — 0 (1) Contributions to Trust Funds — — — 307 307 114 Total (0) 59 984 3 012 4 054 3 700

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 mainly in the 11th EDF This is in line with the lifecycle of this EDF The 11th EDF started in 2015 and 2018 was thus the fourth year of its existence In 2018 the 11th EDF reached maturity with regards to the implementation of adopted actions and thus the expenses have increased compared to 2017 The number of open contracts in the 11th EDF increased from 1,6k in 2017 to 2,3k in 2018

This increase is in line with the increase in clearings of pre-financing and increase in accrued charges

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 2018 2017 Co-financing — — (18) 1 (17) 42

Included under this heading are the expenses incurred on co-financing projects in 2018 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 2017 estimated expenses (EUR 52 million) exceeded the expenses incurred in 2018 (EUR 36 million), the co-financing expenses are negative for 2018

Corresponding negative 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 2018 2017 Direct Management 1 750 1 447 Implemented by: Commission 122 122 EU executive agencies 31 26 Trust Funds 594 89 EU delegations 1 003 1 209 Indirect Management 2 287 2 295 Implemented by: EIB and EIF 44 48 International organisations 920 1 171 Private law bodies with a public service mission 114 (20) Public law bodies 231 356 Third countries 977 739 EU bodies with Public Private Partnership 1 — Private law bodies implementing Public Private Partnership 0 0 Total 4 037 3 742

3 6 FINANCE COSTS

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 2018 2017 Write-down of receivables (0) (1) (5) (1) (7) 9 Other financial expenses — — — (0) (0) (1) Total (0) (1) (5) (1) (7) 8

The heading write-down of receivables comprises the estimate of expenses on irrecoverable receivables Because the estimate also includes reversals of the previous year’s estimation, the overall expenses were negative in 2018 (from EUR 34 million in 2017 to EUR 27 million in 2018 – see note 2.3.1)

3 7 OTHER EXPENSES

EUR millions Eighth EDF Ninth EDF 10th EDF 11th EDF 2018 2017 Administrative and IT expenses (0) (0) 45 67 112 107 Provision for risks and charges — — — (4) (4) — Realised losses on trade debtors 0 0 0 — 1 3 Exchange losses 0 6 26 7 39 44 Total 1 7 71 70 148 154

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 2018 31 12 2017 Performance guarantees — 0 10 0 11 10 Retention guarantees — 0 6 — 7 8 Total — 1 16 0 17 18

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 2018 those guarantees amounted to EUR 501 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 2018 31 12 2017 Outstanding commitments not yet expensed 0 88 1 650 8 009 9 071 8 508 Total 0 88 1 650 8 009 9 071 8 508

At 31 December 2018 the budgetary RAL totalled EUR 10 616 million (2017: EUR 9 745 million)

4 2 2 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) In doing so it triggered Article 50 of the Treaty on European Union, which sets out the procedure for a Member State to withdraw from the Union

The negotiation process

On 19 March 2018 the Commission published a draft of the Withdrawal Agreement that outlined the progress made in the negotiations In the financial settlement part of the Withdrawal Agreement, the EU and the UK translated the progress achieved in the first phase of negotiations into a legal text

A Joint Report was published on 14 November 2018 reporting agreement at negotiators’ level on the full text of the draft Withdrawal Agreement, and on an outline of the Political Declaration on the framework for the future relationship between the United Kingdom and the European Union On the same day, this updated and agreed draft Withdrawal Agreement was published, in which the UK agreed to pay all its obligations under the current Multiannual Financial Framework (MFF) and previous financial perspectives as if it were still a Member State, including its share of the Union’s liabilities and contingent liabilities The UK government approved the draft Withdrawal Agreement on the 14 November and the European Council endorsed it on 25 November 2018 On 11 January 2019, the Council (Article 50) approved the decision on the conclusion of the Withdrawal Agreement and sent it to the European Parliament for its consent On the request of the United Kingdom, in accordance with the procedure set in the Article 50 of the TFEU, on 21 March 2019 the European Council agreed to extend the UK’s departure date to 22 May 2019, provided the Withdrawal Agreement was approved by the House of Commons by 29 March 2019 at the latest and to the 12 April 2019 if it was not the case (European Council Decision (EU) 2019/476 (7) Subsequent to this, the House of Commons did not approve the Withdrawal Agreement by 29 March 2019 and so, again on the request of the United Kingdom, on 10 April 2019 the European Council agreed to an extension to the UK’s departure until 31 October 2019 (European Council Decision (EU) 2019/584 (8) The withdrawal should take place on the first day of the month following the completion of the ratification procedures or on 1 November 2019, whichever is the earliest The United Kingdom will remain a Member State until the new withdrawal date, with full rights and obligations in accordance with Article 50 TEU, and the United Kingdom has a right to revoke its notification at any time

With regard to the EDF

The 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

At the time of the signature of these accounts, and in the absence of ratification by the United Kingdom, the actual departure date and manner of the departure (with or without agreement) is not yet known Based on this current situation, there is no financial impact to be reported in the EDF financial statements as at 31 December 2018

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:

(a) 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.

(b) 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.

(c) 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 2018 31 12 2017 USD GBP DKK SEK EUR Other Total USD GBP DKK SEK EUR Other Total Financial assets Receivables and recoverables 63 — 0 — 67 8 138 64 — — — 26 2 92 Cash and cash equivalents 1 0 — — 386 — 387 4 0 — — 344 — 347 Total 64 0 0 — 453 8 525 68 0 — — 370 2 439 Financial liabilities Non-current financial liabilities — — — — (18) — (18) — — — — (14) — (14) Payables (1) — — — (218) (22) (241) 0 — — — (533) (30) (563) Total (1) — — — (236) (22) (259) 0 — — — (547) (30) (577) Total 63 0 0 — 217 (14) 267 68 0 — — (177) (28) (138)

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 reflects 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 (9), 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 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 138 121 12 5 — Total at 31.12.2018 138 121 12 5 — Exchange receivables and non-exchange recoverables 92 92 0 — — Total at 31.12.2017 92 92 0 — —





Financial assets by risk category:

EUR millions 31 12 2018 31 12 2017 Receivables Cash Total Receivables Cash Total Counterparties with external credit rating Prime and high grade 5 303 308 3 103 106 Upper medium grade — 80 80 0 240 240 Lower medium grade — 4 4 3 4 7 Non- investment grade — 0 0 1 0 2 Total 5 387 391 7 347 354 Counterparties without external credit rating Group 1 (debtors without defaults in the past) 133 0 134 86 0 86 Group 2 (debtors with defaults in the past) — — — — — — Total 133 0 134 86 0 86 Total 138 387 525 92 347 440

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 20(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 calls for tender 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 241 7 11 259 Total at 31.12.2018 241 7 11 259 Financial liabilities 563 13 1 577 Total at 31.12.2017 563 13 1 577

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’s treasury and the relevant spending departments

In addition to the above, in the context of the EDF’s 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 the Bêkou- and 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 signature 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 2018 2017 ECONOMIC RESULT OF THE YEAR (4 118 ) (3 818 ) Revenue Entitlements not affecting the budget result (1) (7) Entitlements established in current year but not yet collected (11) (3) Entitlements established in previous years and collected in current year 11 29 Net effect of pre-financing 36 57 Accrued revenue (net) (39) (62) Other (1) (2) Expenses Expenses of the current year not yet paid 115 19 Expenses of previous years paid in the current year (366) (60) Net effect of pre-financing (179) (685) Accrued expenses (net) 484 373 BUDGET RESULT OF THE YEAR (4 069 ) (4 158 )

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

FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2018 (10)

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND

General background on Union Trust Funds

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (11) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (12), the European Commission may establish Union trust funds for external actions (‘Union trust funds’) The Union trust funds are constituted under an agreement concluded with other donors for emergency and post-emergency actions necessary to react to a crisis, or for thematic actions

Union trust funds are established by the European Commission with a decission after consulting or approval of the European Parliament and the Council This decission includes the constitutive agreement with other donors

Union trust funds are only established and implemented subject to the following conditions:

— there is added value of the Union intervention: the objectives of Union trust funds, in particular by reason of their scale or potential effects, may be better achieved at Union level than at national level and the use of the existing financing instruments would not be sufficient to achieve policy objectives of the Union;

— Union trust funds bring clear political visibility for the Union and managerial advantages as well as better control by the Union of risks and disbursements of the Union and other donors’ contributions;

— Union trust funds do not duplicate other existing funding channels or similar instruments without providing any additionality;

— the objectives of Union trust funds are aligned with the objectives of the Union instrument or budgetary item from which they are funded

A board chaired by the Commission is established for each Union trust fund to ensure a fair representation of the donors and to decide upon the use of the funds The board includes a representative of each non-contributing Member State as an observer The rules for the composition of the board and its internal rules shall be laid down in the constitutive agreement of the Union trust fund

Union trust funds are established for a limited duration as determined in their constitutive agreement That duration may be extended upon request of the board of the Union trust fund and upon presentation by the Commission of a report justifying the extension 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

The accounting officer of the Commission serves as the accounting officer of the Union trust funds The accounting officer is responsible for laying down accounting procedures and chart of accounts common to all Union trust funds The Commission’s internal auditor, OLAF and the Court of Auditors exercise the same powers over Union trust funds as they do in respect of other actions carried out by the Commission The Union trust funds are also subject to an independent external audit every year

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 Bêkou EU Trust Fund (Bêkou EUTF) aims to ensure access to basic services, support economic recovery and job creation, and promote social cohesion and reconciliation Since its creation, the Bêkou EUTF has adopted 16 programmes and has reached more than 2 million beneficiaries

Despite the existence of a democratically elected government and its efforts to return to stability, the security situation in the CAR remains volatile It is in this complex and fragile context, where the Bêkou EUTF takes full advantage of its comparative advantages of flexibility and adaptability to changing circumstances Additionally, the Bêkou EUTF remains the only instrument building resilience for both the population and the state, in a true Linking Relief Rehabilitation and Development (LRRD) approach

Given the current situation in CAR and in view of the expiration of the Bêkou EUTF in July 2019, in November 2018, the EUTF Board formally requested an extension of 18 months, thus bringing the total duration of the Bêkou EUTF from 60 months to 78 months The official procedure, which includes a consultation of the European Parliament and the Council, was launched in December 2018

The operational highlights of the 2018 are the following:

— The Bêkou EUTF adopted a new action for a total amount of EUR 35 million in the sector of health and increased by EUR 2 million each the budget of two already adopted actions in the sectors of economic recovery and promotion of social cohesion, dialogue and reconciliation

— The Bêkou EUTF Results Framework was adopted, responding to the Court of Auditors’ recommendation on the identification of SMART objectives at a EUTF level This strategic tool will better demonstrate the overall results of the Bêkou EUTF actions

— The Bêkou EUTF projects were marked by the relative stability in the north-eastern and south-western parts of the country that called for additional interventions, the localised conflicts in Bangui and the hinterland, as well as the redeployment of public officials outside Bangui

On the financial side, by the end of 2018, pledges by EUTF contributors amounted to more than EUR 242 million This is an increase of EUR 6 million compared to 2017 Only EUR 5 million out of these EUR 242 million remain to be certified

In terms of contracts, the Bêkou EUTF signed 30 new contracts in 2018 for a total amount of nearly EUR 80 million (representing 48 % of the total amount contracted since its creation) They contribute to the implementation of its programmes in the sectors of health, economic recovery, rural resilience and job creation, water and sanitation, reconciliation and opening-up of regions

Last but not least, more than EUR 57 million (representing nearly 50 % of the total amount paid since the creation of Bêkou EUTF) was paid in 2018 on top of payments made during previous years; total disbursements have nearly reached EUR 119 million since the creation of the Bêkou EUTF

In the financial statements, the impact of the above mentioned activities are most visible when looking at:

— Pre-financing: an increase of kEUR 24 839 resulting from the high number of new contracts signed and advances paid out;

— Cash and cash equivalents: a decrease of kEUR 26 017 is mainly caused by the increased payments of pre-financing, highlighted above;

— Outstanding commitments not yet expensed: an increase from kEUR 25 310 to 54 645 kEUR due to the new contracts

BALANCE SHEET

EUR ‘000 31 12 2018 31 12 2017 NON-CURRENT ASSETS Pre-financing 3 443 686 3 443 686 CURRENT ASSETS Pre-financing 29 546 7 465 Exchange receivables and non-exchange recoverables 1 138 877 Cash and cash equivalents 13 926 39 943 44 611 48 285 TOTAL ASSETS 48 054 48 971 NON-CURRENT LIABILITIES Financial liabilities (42 737 ) (44 720 ) (42 737 ) (44 720 ) CURRENT LIABILITIES Payables (918) (716) Accrued charges and deferred revenue (4 399 ) (3 536 ) (5 317 ) (4 252 ) TOTAL LIABILITIES (48 054 ) (48 971 ) NET ASSETS — — FUNDS & RESERVES Accumulated surplus — — Economic result of the year — — NET ASSETS — —

STATEMENT OF FINANCIAL PERFORMANCE

EUR ‘000 2018 2017 REVENUE Revenue from non-exchange transactions Revenue from donations 33 682 29 620 33 682 29 620 Revenue from exchange transactions Financial revenue 1 1 1 1 Total Revenue 33 683 29 621 EXPENSES Operating expenses (32 825 ) (28 918 ) Other expenses (858) (703) Total Expenses (33 683 ) (29 621 ) ECONOMIC RESULT OF THE YEAR — —

CASHFLOW STATEMENT

EUR ‘000 2018 2017 Economic result of the year — — Operating activities (Increase)/decrease in pre-financing (24 839 ) 7 912 (Increase)/decrease in exchange receivables and non-exchange recoverables (261) 578 Increase/(decrease) in financial liabilities (1 982 ) (14 620 ) Increase/(decrease) in payables 202 716 Increase/(decrease) in accrued charges and deferred revenue 863 2 321 NET CASHFLOW (26 017 ) (3 092 ) Net increase/(decrease) in cash and cash equivalents (26 017 ) (3 092 ) Cash and cash equivalents at the beginning of the year 39 943 43 036 Cash and cash equivalents at year-end 13 926 39 943

STATEMENT OF CHANGES IN NET ASSETS

EUR ‘000 Accumulated surplus/ (deficit) Economic result of the year Net assets BALANCE AS AT 31.12.2017 — — — Economic result of the year — — — BALANCE AS AT 31.12.2018 — — —

FINAL ANNUAL ACCOUNTS OF THE EUTF AFRICA 2018 (13)

BACKGROUND INFORMATION ON THE EUTF FOR AFRICA

General background on Union Trust Funds

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (14) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (15), the European Commission may establish Union trust funds for external actions (‘Union trust funds’) The Union trust funds are constituted under an agreement concluded with other donors for emergency and post-emergency actions necessary to react to a crisis, or for thematic actions

Union trust funds are established by the European Commission with a decission after consulting or approval of the European Parliament and the Council This decission includes the constitutive agreement with other donors

Union trust funds are only established and implemented subject to the following conditions:

— there is added value of the Union intervention: the objectives of Union trust funds, in particular by reason of their scale or potential effects, may be better achieved at Union level than at national level and the use of the existing financing instruments would not be sufficient to achieve policy objectives of the Union;

— Union trust funds bring clear political visibility for the Union and managerial advantages as well as better control by the Union of risks and disbursements of the Union and other donors’ contributions;

— Union trust funds do not duplicate other existing funding channels or similar instruments without providing any additionality;

— the objectives of Union trust funds are aligned with the objectives of the Union instrument or budgetary item from which they are funded

A board chaired by the Commission is established for each Union trust fund to ensure a fair representation of the donors and to decide upon the use of the funds The board includes a representative of each non-contributing Member State as an observer The rules for the composition of the board and its internal rules shall be laid down in the constitutive agreement of the Union trust fund

Union trust funds are established for a limited duration as determined in their constitutive agreement That duration may be extended upon request of the board of the Union trust fund and upon presentation by the Commission of a report justifying the extension 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

The accounting officer of the Commission serves as the accounting officer of the Union trust funds The accounting officer is responsible for laying down accounting procedures and chart of accounts common to all Union trust funds The Commission’s internal auditor, OLAF and the Court of Auditors exercise the same powers over Union trust funds as they do in respect of other actions carried out by the Commission The Union trust funds are also subject to an independent external audit every year

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 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 projects 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 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 which is the responsibility of 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 2018, resources pledged to the EUTF Africa amounted to approximately EUR 4,2 billion This includes around EUR 3,7 billion from the European Development Fund (EDF) and EU financial instruments including the Development Cooperation Instrument (DCI), the European Neighbourhood Instrument (ENI), the Asylum, Migration and Integration Fund (AMIF) and funding from the Directorate-General for European Civil Protection and Humanitarian Aid Operations (DG ECHO), as well as EUR 489,5 million from EU Member States and other donors (Switzerland and Norway)

In the course of 2018, the overall resources of the EUTF Africa increased by EUR 902 million, including new pledges of EUR 674 million from the EDF and EUR 117 million from EU Budget The EUTF Africa received 24 new pledges from EU Member States and other donors amounting to EUR 110 million (EUR 49 million to the Sahel and Lake Chad window, EUR 47 million to the North of Africa window and EUR 14 million to the Horn of Africa window) All pledges from EU Member States and other donors made in 2018 plus an outstanding pledge of 2017 were certified by the end of 2018 The conclusions of the European Council of 28 June 2018 called on the EU and its Member States to provide additional funding to the EUTF Africa As a follow-up, the Commission adopted on 6 July a decision to transfer EUR 500 million from the 11th EDF reserve

With regards the state of implementation of the EUTF Africa in the year 2018, 45 new programmes were adopted as well as 13 top-ups across the three regions including cross-window programmes (16 in the Sahel/Lake Chad, 26 in the Horn of Africa and 9 in the North of Africa and 7 cross-window) This brings, as of the end of 2018, the total number of programmes approved by Operational committees to 187 for a total of EUR 3 590 million As of the end of 2018, contracts signed with implementing partners have reached 366, for an overall amount of EUR 2 461 million, of which 949,3 million in new operational contracts for 2018 only Modifications to old contracts bring the total operational contracted amount in 2018 to 959,9 million The contracting rate as of the end of 2018 has improved compared to the contracting rate as of the end of 2017 (69 % of signed contracts over approved funding as opposed to 62,9 %)

In the course of 2018, the EUTF Africa has further intensified its efforts together with its African and European partners, to foster stability and contribute to improved migration management in the Sahel and Lake Chad, the Horn of Africa and the North of Africa regions It continued addressing the root causes of destabilization, forced displacement and irregular migration, by promoting development and security During its third year, the EUTF Africa has further demonstrated its added-value as a swift and effective implementation tool which facilitates political dialogue with partner countries, applies innovative approaches and produces concrete results by pooling together funding and expertise from a variety of stakeholders

Through the EUTF Africa, over 5,3 million vulnerable people benefitted from basic services and food security and nutrition programmes Over 150 000 people were reached by information campaigns on resilience-building practices and basic rights and 96 000 migrants, or potential migrants, were reached out by information campaign on migration and risks linked to irregular migration Through the EU-IOM Initiative, the EUTF Africa has supported 42 628 vulnerable migrants voluntary returns mostly from Libya (18 329) and Niger (17 226), and more than 58 000 vulnerable migrants were assisted upon return to their country of origin Through the Better Migration Management programme in the Horn of Africa alone, the EUTF Africa has already assisted almost 11 000 migrants and forcibly displaced people and has trained nearly 1 600 persons on migration management

In the financial statements, the impact of this increased activity and new contracts is most visible when looking at:

— Pre-financing: increased by kEUR 57 110 as advances on the new contracts were paid out;

— Payables and accrued charges: increased by kEUR 81 753 as more cost claims are processed but also more expenses must be accrued for;

— Expenses: increased from kEUR 279 299 in 2017 to kEUR 576 808 in 2018 as the Trust Fund is in its third year of existence and many more contracts are being implemented;

— Outstanding commitments not yet expensed increased from kEUR 926 139 to kEUR 1 310 069 due to the new contracts

BALANCE SHEET

EUR ‘000 31 12 2018 31 12 2017 NON-CURRENT ASSETS Pre-financing 34 144 52 990 34 144 52 990 CURRENT ASSETS Pre-financing 273 214 197 258 Exchange receivables and non-exchange recoverables 16 656 3 020 Cash and cash equivalents 146 864 162 571 436 734 362 849 TOTAL ASSETS 470 878 415 838 NON-CURRENT LIABILITIES Financial liabilities (369 999 ) (396 713 ) (369 999 ) (396 713 ) CURRENT LIABILITIES Payables (12 733 ) (526) Accrued charges and deferred re