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

Annual accounts of the European Development Fund 2019

(2020/C 387/01)

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

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 44

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

EDF REPORT ON FINANCIAL IMPLEMENTATION 63

ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK 95

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2019 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 16 June 2020

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, managed by the EIB, and 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 multiannual 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 based on multiannuality. Each EDF establishes an overall fund to implement development cooperation during a period of usually five years. As resources are allocated on a multiannual basis, the allocated funds may be used over the period of the EDF. The lack of budget annuality is highlighted in the budgetary reporting, where the budgetary implementation of the EDFs is measured against the total funds.

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

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

3. YEAR-END REPORTING

3.1. ANNUAL ACCOUNTS

In accordance with Article 18(3) of the EDF Financial Regulation, the EDF financial statements are prepared based on 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 the 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 no later than 31 July of the year following the balance sheet date and presented to the European Parliament and to the Council for discharge.

4. AUDIT AND DISCHARGE

4.1. AUDIT

The EDF annual accounts are audited 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. 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 of the discharge authority.

FUNDS MANAGED BY THE EUROPEAN COMMISSION

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 15

STATEMENT OF CHANGES IN NET ASSETS BY EDF 16

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF 19

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 44

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2019 45

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2019 51

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

CONSOLIDATED BALANCE SHEET 59

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE 60

CONSOLIDATED CASH FLOW STATEMENT 61

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS 62

EDF REPORT ON FINANCIAL IMPLEMENTATION 63

FINANCIAL STATEMENTS OF THE EDF (3)

EDF BALANCE SHEET

EUR million Note 31.12.2019 31.12.2018 NON-CURRENT ASSETS Financial assets 2.1 36 — Pre-financing 2.2 910 887 Trust Fund contributions 2.3 266 201 1 213 1 088 CURRENT ASSETS Pre-financing 2.2 1 288 1 448 Exchange receivables and non-exchange recoverables 2.4 123 138 Cash and cash equivalents 2.5 1 179 387 2 590 1 973 TOTAL ASSETS 3 803 3 061 NON-CURRENT LIABILITIES Financial liabilities 2.6 (19) (18) (19) (18) CURRENT LIABILITIES Payables 2.7 (516) (241) Accrued charges and deferred income 2.8 (1 319 ) (1 281 ) (1 835 ) (1 523 ) TOTAL LIABILITIES (1 854 ) (1 540 ) NET ASSETS 1 948 1 521 FUNDS & RESERVES Fair value reserve 2.9 (2) — Called fund capital — active EDFs 2.10 54 809 50 423 Called fund capital from closed EDFs carried forward 2.10 2 252 2 252 Economic result carried forward from previous years (51 155 ) (47 037 ) Economic result of the year (3 956 ) (4 118 ) NET ASSETS 1 948 1 521





EDF STATEMENT OF FINANCIAL PERFORMANCE

EUR million Note 2019 2018 REVENUE Revenue from non-exchange transactions 3.1 Recovery activities 28 4 28 4 Revenue from exchange transactions 3.2 Financial revenue 7 10 Other revenue 39 46 46 57 Total Revenue 74 60 EXPENSES Aid instruments 3.3 (3 755 ) (4 054 ) Co-financing expenses 3.4 (14) 17 Finance costs 3.5 (1) 7 Other expenses 3.6 (260) (148) Total Expenses (4 030 ) (4 178 ) ECONOMIC RESULT OF THE YEAR (3 956 ) (4 118 )





EDF CASHFLOW STATEMENT

EUR million Note 2019 2018 Economic result of the year (3 956 ) (4 118 ) Operating activities Capital increase — contributions (net) 4 385 4 250 (Increase)/decrease in trust funds contributions (65) (38) (Increase)/decrease in pre-financing 136 (235) (Increase)/decrease in exchange receivables and non-exchange recoverables 15 (46) Increase/(decrease) in provisions — (4) Increase/(decrease) in financial liabilities 2 3 Increase/(decrease) in payables 275 (322) Increase/(decrease) in accrued charges and deferred income 37 548 Other non-cash movements (2) — Investing activities (Increase)/decrease in available for sale financial assets (36) — NET CASHFLOW 792 40 Net increase/(decrease) in cash and cash equivalents 792 40 Cash and cash equivalents at the beginning of the year 2.5 387 347 Cash and cash equivalents at year-end 2.5 1 179 387





EDF STATEMENT OF CHANGES IN NET ASSETS

EUR million 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) Fair value reserve (F) Total Net Assets (C)+(D)+(E)+(F) 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 Fair value movements (2) (2) Capital increase — contributions — (4 385 ) 4 385 — — 4 385 Economic result of the year — — — (3 956 ) — (3 956 ) BALANCE AS AT 31.12.2019 73 264 18 455 54 809 (55 111 ) 2 252 (2) 1 948





BALANCE SHEET BY EDF

EUR million 31.12.2019 31.12.2018 Note Eighth EDF Ninth EDF 10th EDF 11th EDF Total Eighth EDF Ninth EDF 10th EDF 11th EDF Total NON-CURRENT ASSETS Financial assets 2.1 — — — 36 36 — — — — — Pre-financing 2.2 — 6 325 580 910 — 23 520 344 887 Trust Fund contributions 2.3 — — — 266 266 — — — 201 201 — 6 325 882 1 213 — 23 520 546 1 088 CURRENT ASSETS Pre-financing 2.2 0 26 441 821 1 288 0 19 445 984 1 448 Exchange receivables and non-exchange recoverables 2.4 183 121 2 201 (2 382 ) 123 183 176 2 457 (2 679 ) 138 Inter-EDF accounts 182 53 2 160 (2 395 ) (0) 183 111 2 421 (2 715 ) (0) Cash and cash equivalents 2.5 — — — 1 179 1 179 — — — 387 387 365 201 4 801 (2 777 ) 2 590 367 306 5 323 (4 023 ) 1 973 TOTAL ASSETS 365 207 5 127 (1 896 ) 3 803 367 329 5 843 (3 477 ) 3 061 NON-CURRENT LIABILITIES Financial liabilities 2.6 — — (1) (18) (19) — — (1) (16) (18) — — (1) (18) (19) — — (1) (16) (18) CURRENT LIABILITIES Payables 2.7 — (5) (108) (404) (516) (0) (6) (125) (111) (241) Accrued charges and deferred income 2.8 — (96) (240) (983) (1 319 ) (0) (83) (358) (840) (1 281 ) — (101) (348) (1 386 ) (1 835 ) (0) (89) (482) (951) (1 522 ) TOTAL LIABILITIES — (101) (349) (1 405 ) (1 854 ) (0) (89) (484) (967) (1 540 ) NET ASSETS 365 106 4 778 (3 300 ) 1 948 366 240 5 359 (4 444 ) 1 521 Fair value reserves 2.9 — — — (2) (2) — — — — — Called fund capital — active EDFs 2.10 12 164 10 758 20 960 10 927 54 809 12 164 10 773 20 960 6 527 50 423 Called fund capital from closed EDFs carried forward 2.10 627 1 625 — — 2 252 627 1 625 — — 2 252 Called fund capital transfers between active EDFs 2.10 (2 510 ) 2 109 265 136 — (2 509 ) 2 137 55 317 — Economic result carried forward from previous years (10 098 ) (14 406 ) (18 077 ) (8 573 ) (51 155 ) (10 098 ) (14 352 ) (17 078 ) (5 508 ) (47 037 ) Economic result of the year (0) (34) (529) (3 393 ) (3 956 ) 0 (53) (1 000 ) (3 065 ) (4 118 ) NET ASSETS 183 53 2 618 (905) 1 948 184 129 2 938 (1 729 ) 1 521





STATEMENT OF FINANCIAL PERFORMANCE BY EDF

EUR million 2019 2018 Note 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 — 18 10 28 0 3 (3) 4 4 0 0 18 10 28 0 3 (3) 4 4 Revenue from exchange transactions 3.2 Financial revenue (0) — 3 4 7 0 2 8 1 10 Other revenue 1 6 21 12 39 1 6 27 12 46 1 6 24 16 46 1 8 35 13 57 Total revenue 1 6 42 26 74 1 11 32 17 60 EXPENSES Aid instruments 3.3 (0) (35) (579) (3 141 ) (3 755 ) 0 (59) (984) (3 012 ) (4 054 ) Co-financing expenses 3.4 — — (9) (5) (14) — — 18 (1) 17 Finance costs 3.5 (0) 2 (2) (1) (1) 0 1 5 1 7 Other expenses 3.6 (1) (8) 20 (272) (260) (1) (7) (71) (70) (148) Total expenses (1) (40) (571) (3 418 ) (4 030 ) (0) (64) (1 031 ) (3 082 ) (4 178 ) ECONOMIC RESULT OF THE YEAR (0) (34) (529) (3 393 ) (3 956 ) 0 (53) (1 000 ) (3 065 ) (4 118 )

STATEMENT OF CHANGES IN NET ASSETS BY EDF

EUR million 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 31.12.2017 12 164 — 12 164 (10 098 ) 627 (2 503 ) 190 Transfers to/from the 10th EDF — (7) (7) BALANCE AS AT 31.12.2018 12 164 — 12 164 (10 098 ) 627 (2 509 ) 183 Transfers to/from the 10th EDF — (1) (1) BALANCE AS AT 31.12.2019 12 164 — 12 164 (10 098 ) 627 (2 510 ) 183





EUR million 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 31.12.2017 10 773 — 10 773 (14 352 ) 1 625 2 177 222 Transfers to/from the 10th EDF — (40) (40) Economic result of the year — (53) (53) BALANCE AS AT 31.12.2018 10 773 — 10 773 (14 406 ) 1 625 2 137 129 Capital increase — contributions 15 (15) (15) Transfers to/from the 10th EDF — (27) (27) Economic result of the year — (34) — (34) BALANCE AS AT 31.12.2019 10 773 15 10 758 (14 440 ) 1 625 2 109 53





EUR million 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 31.12.2017 20 960 0 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 0 20 960 (18 077 ) — 55 2 938 Transfers to/from the Eighth and Ninth EDF — 28 28 Transfers to/from the 11th EDF — 181 181 Economic result of the year — (529) — (529) BALANCE AS AT 31.12.2019 20 960 — 20 960 (18 606 ) — 265 2 618





EUR million 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) Fair value reserve (G) Total Net Assets (C)+(D)+(E)+(F)+(G) BALANCE AS AT 31.12.2017 29 367 27 090 2 277 (5 508 ) — 206 — (3 025 ) Capital increase — contributions (4 250 ) 4 250 — 4 250 Transfers to/from the Eighth, Ninth and 10th EDF — — 112 112 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 ) Fair value movements (2) (2) Capital increase –contributions (4 400 ) 4 400 (181) 4 219 Economic result of the year — (3 393 ) — (3 393 ) BALANCE AS AT 31.12.2019 29 367 18 440 10 927 (11 966 ) — 136 (2) (905)

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF (4)

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 thousands of euros, the euro being the EU’s functional 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 31.12.2019 31.12.2018 Currency 31.12.2019 31.12.2018 BGN 1,9558 1,9558 PLN 4,2568 4,3014 CZK 25,4080 25,7240 RON 4,783 4,6635 DKK 7,4715 7,4673 SEK 10,4468 10,2548 GBP 0,8508 0,8945 CHF 1,0854 1,1269 HRK 7,4395 7,4125 JPY 121,9400 125,8500 HUF 330,5300 320,9800 USD 1,1234 1,145

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: amounts for employee benefit liabilities, accrued and deferred revenue and charges, provisions, financial risk on accounts receivable, 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. Intangible assets

An intangible asset is an identifiable non-monetary asset without physical substance. An asset is identifiable if it is either separable (i.e. it is capable of being separated or divided from the entity, e.g. by being sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so), or arises from binding arrangements (including rights from contracts or other legal rights), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations).

Acquired intangible assets are stated at historical cost less accumulated amortisation and impairment losses. Internally developed intangible assets are capitalised when the relevant criteria of the EU accounting rules are met and the expenses relate solely to the development phase of the asset. The capitalisable costs include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Costs associated with research activities, non-capitalisable development costs and maintenance costs are recognised as expenses as incurred.

Intangible assets are amortised on a straight-line basis over their estimated useful lives (3 to 11 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement.

1.3.2. Property, plant and equipment

All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction or transfer of the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the entity and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred. Land is not depreciated, as it is deemed to have an indefinite useful life. Assets under construction are not depreciated as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:

Type of asset Straight line depreciation rate Buildings 4 % to 10 % Plant and equipment 10 % to 25 % Furniture and vehicles 10 % to 25 % Computer hardware 25 % to 33 % Other 10 % to 33 %

Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance.

Leases

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. Leases are classified as either finance leases or operating leases.

Finance leases are leases where substantially all the risks and rewards incidental to ownership are transferred to the lessee. When entering a finance lease as a lessee, the assets acquired under the finance lease are recognised as assets and the associated lease obligations as liabilities as from the commencement of the lease term. The assets and liabilities are recognised at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Over the period of the lease term, the assets held under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. The minimum lease payments are apportioned between the finance charge (the interest element) and the reduction of the outstanding liability (the capital element). The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability, which is presented as current/non-current, as applicable. Contingent rents shall be charged as expenses in the period in which they are incurred.

An operating lease is a lease other than a finance lease, i.e. a lease where the lessor retains substantially all the risks and rewards incidental to ownership of an asset. When entering an operating lease as a lessee, the operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term with neither a leased asset nor a leasing liability presented in the statement of financial position.

1.3.3. Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are tested for impairment whenever there is an indication at the reporting date that an asset may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable (service) amount. The recoverable (service) amount is the higher of an asset’s fair value less costs to sell and its value in use.

Intangible assets and property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at least once per year. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly.

1.3.4. 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 presented 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 their trade date, i.e. 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.

1.3.5. 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. Thus, as the entity retains control over the pre-financing and is entitled to a refund for the ineligible part, the amount is presented as an asset.

Pre-financing is initially recognised on the balance sheet when cash is transferred to the recipient. It is measured at the amount of the consideration given. In subsequent periods pre-financing is measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period.

1.3.6. Receivables and recoverables

The EU accounting rules require a separate presentation of exchange and non-exchange transactions. To distinguish between the two categories, the term ‘receivable’ is reserved for exchange transactions, whereas for non-exchange transactions, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange, the term ‘recoverables’ is used (e.g. recoverables from Member States related to own resources).

Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see 1.3.4 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.

1.3.7. 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.

1.3.8. 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).

Provisions for onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.

1.3.9. 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, or pre-financing received (see note 1.4.1).

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.

1.3.10. Accrued and deferred revenue and charges

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

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

1.4. STATEMENT OF FINANCIAL PERFORMANCE

1.4.1. Revenue

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

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

(i) Revenue from non-exchange transactions

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

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

(ii) Revenue from exchange transactions

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

1.4.2. Expenses

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

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

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

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

1.5. CONTINGENT ASSETS AND LIABILITIES

1.5.1. Contingent assets

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

1.5.2. Contingent liabilities

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

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. FINANCIAL ASSETS

The financial assets of the EDF amounted to EUR 36 million at 31 December 2019 (2018: nil). They comprise available for sale financial assets that are almost entirely investments in equity instruments.

2.2. 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 based on progress reports. Pre-financing is normally paid in the currency of the country or territory where the project is executed.

The timing of use of pre-financing governs whether it is disclosed as a current or a non-current pre-financing. The use is defined by the project’s underlying agreement. Any use due within twelve months after the reporting date are disclosed as current pre-financing. As many of the EDF projects are long-term in nature, it is necessary that the related advances are available for more than one year. Thus some pre-financing amounts are shown as non-current assets.

EUR million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Non-current pre-financing 2.2.1 — 6 325 580 910 887 Current pre-financing 2.2.2 0 26 441 821 1 288 1 448 Total 0 32 766 1 401 2 199 2 335

The decrease of the total pre-financing at 31 December 2019 is mainly explained by a decrease of pre-financing of the 10th EDF (2018: EUR 964 million). In line with the lifecycle of the EDF, many contracts related to the 10th EDF were completed and closed. The number of open contracts under this EDF dropped from approximately 2 600 in 2018 to circa 2 300 in 2019. Consequently, the level of pre-financing payments made to beneficiaries decreased while the clearing of pre-financing increased.

This decrease was partially compensated by an increase of pre-financing related to 11th EDF (2018: EUR 1 328 million). The 11th EDF started in 2015 and in 2019 was at cruising speed concerning the implementation of adopted actions. The number of open contracts increased from around 2 300 in 2018 to 3 400 in 2019, which translated into an increase of total open pre-financing of EUR 73 million.

2.2.1. Non-current pre-financing

EUR million 31.12.2019 31.12.2018 Direct Management Implemented by: Commission 190 140 EU executive agencies 6 — EU delegations 49 48 244 188 Indirect Management Implemented by: EIB and EIF 313 367 International organisations 291 280 Private law bodies with a public service mission 22 6 Public law bodies 22 24 Third countries 17 21 EU bodies and Public Private Partnership 1 — 665 698 Total 910 887

2.2.2. Current pre-financing

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Pre-financing (gross) 0 115 1 627 3 288 5 030 5 153 Cleared via cut-off — (89) (1 186 ) (2 467 ) (3 742 ) (3 705 ) Total 0 26 441 821 1 288 1 448

2.2.3. 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 2019, the guarantees received by the EDF in respect of pre-financing decreased to EUR 46 million (2018: EUR 79 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.

2.3. 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 million Net contribution at 31.12.2018 Contributions paid in 2019 Allocation of TF’s net expenses 2019 Net contribution at 31.12.2019 Africa 193 600 (530) 263 Bêkou 9 — (5) 4 Total 201 600 (535) 266

2.4. EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES

EUR million Note 31.12.2019 31.12.2018 Recoverables from non-exchange transactions 2.4.1 32 37 Receivables from exchange transactions 2.4.2 91 101 Total 123 138

2.4.1. Recoverables from non-exchange transactions

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Member States — 0 — 1 1 5 Customers 1 4 17 4 27 26 Public bodies — 9 11 1 21 25 Third states 0 2 4 0 7 5 Write-down (2) (13) (12) (1) (27) (27) Inter-company accounts with EU institutions — — — 4 4 3 Total 0 3 20 9 32 37

2.4.2. Receivables from exchange transactions

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Accrued income 1 65 21 0 88 81 Receivable from EU — — — 4 4 20 Inter-EDF accounts 182 53 2 160 (2 395 ) (0) (0) Total 183 119 2 181 (2 391 ) 91 101

Included under accrued income are amounts of accrued interest on pre-financing related to projects (EUR 65 million) and on pre-financing related to the EU-Africa Trust Fund (EUR 21 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 zero.

2.5. CASH AND CASH EQUIVALENTS (5)

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Special accounts Central banks — — — 729 729 276 — — — 729 729 276 Current accounts Commercial banks — — — 421 421 87 Cash belonging to financial instruments — — — 30 30 24 — — — 450 450 111 Total — — — 1 179 1 179 387

The increase of amounts under this heading of EUR 792 million can be explained mainly by payment execution being lower than forecast. EDF payments totalled EUR 3 910 million on 31 December 2019, compared to the annual target of EUR 4 400 million. Two key reasons for this differential are the suspension of the signature of the contract on Global Partnership for Education with the World Bank and the postponement of Budget Support payments for Chad, Haiti, and Benin.

In addition, the increase under Commercial banks relates to EUR 264 million of the 2020 capital contribution received from the UK on the Natwest bank account at the end of December (see note 2.7.2.1) .

Similar previous years and in order to limit counterparty risk more cash is kept in accounts with central banks than in the commercial banks (see note 5.1).

LIABILITIES

2.6. FINANCIAL LIABILITIES

2.6.1. Co-financing payables

Co-financing payables represent funds received by the EDF in respect to the co-financing agreements. The EDF is required to use these contributions to deliver agreed services to third parties and return the unused funds to the contributors. Timing of the use of the co-financing amounts determines whether it is disclosed as current or non-current.

At the year end a case-by-case assessment of all co-financing payables is performed and all amounts that are unlikely to be used in the following 12 months are considered non-current.

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Non-current co-financing payables — — 1 18 19 18 Current co-financing payables — — 38 31 69 68 Total — — 39 50 88 86

The increase of the total co-financing payables of EUR 2,6 million is a combined effect of new co-financing amounts received in 2019 (EUR 17 million) and expenses incurred in respect of co-financing projects (EUR 14,4 million). In line with the accounting rules on co-financing, the incurred amounts did not have any impact on the result of the year because they were recognised both in the co-financing expenses (note 3.4) and in the co-financing revenue (note 3.1.1).

2.7. PAYABLES

EUR million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Current payables 2.7.1 — 5 72 106 182 173 Sundry payables 2.7.2 — (0) 36 298 334 68 Total — 5 108 404 516 241

2.7.1. Current payables

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Suppliers — 4 67 27 97 102 Member States — 0 0 2 2 1 Third states 0 — 4 74 78 37 Public bodies — 2 70 20 92 43 Other current payables (0) (1) (70) (17) (88) (10) Total — 5 72 106 182 173

Payables include cost statements received by the EDF relating to its grant giving activity. They are recorded for the amount being claimed from the moment the payment request 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 million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Co-financing payables 2.6.1 — — 38 31 69 68 Deferred capital contributions 2.7.2.1 — — — 264 264 — Other sundry payables — — (2) 3 1 0 Total — — 36 298 334 68

2.7.2.1. Deferred capital contributions

At 31 December 2019, the entire amount of EUR 264 million relates to 2020 contribution of the UK paid to the EDF at the end of December. At 31 December 2018, there were no capital contributions paid in advance.

2.8. ACCRUED CHARGES AND DEFERRED INCOME

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Accrued charges — 96 240 982 1 318 1 279 Other accruals and deferrals — — 0 1 1 3 Total — 96 240 983 1 319 1 281

Accrued charges comprise estimated operating expenses for on-going or completed contracts without validated cost claims where the eligible expenses incurred by beneficiaries 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 2.2 above).

The increase under this heading is a combined effect of an increase of accrued charges under the 11th EDF (2018: EUR 838 million) and a decrease of accrued charges under the 10th EDF (2018: EUR 358 million). This is in line with the lifecycle of the EDF and also related to the evolution of the number of open contracts under these EDFs: The 11th EDF was at the full cruising speed in 2019 and there were thus significantly more open contracts at 31 December 2019 for which the charges had to be estimated and accrued. Conversely, many contracts were completed and closed under the 10th EDF in 2019, which resulted into a decrease of open contracts and less accrued charges under this EDF.

NET ASSETS

2.9. FAIR VALUE RESERVE

In accordance with the accounting rules, the adjustment to fair value of available for sale financial assets is accounted for through the fair value reserve.

EUR million 31.12.2019 31.12.2018 Included in fair value reserve (2) — Included in statement of financial performance — — Total (2) —

2.10. FUND CAPITAL

2.10.1. Called fund capital — active EDFs

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF Total Fund capital 12 164 10 773 20 960 29 367 73 264 Uncalled fund capital — (0) (0) (22 840 ) (22 840 ) Called fund capital 31.12.2018 12 164 10 773 20 960 6 527 50 423 Fund capital 12 164 10 773 20 960 29 367 73 264 Uncalled fund capital — (15) (0) (18 440 ) (18 455 ) Called fund capital 31.12.2019 12 164 10 758 20 960 10 927 54 809

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 amounts not yet called from Member States. The called fund capital represents the contributions, which have been called by the EDF and transferred to the treasury accounts by the Member States (see below 2.10.2.).

2.10.2. Called and uncalled fund capital by Member State

EUR million Contributions 11th EDF % Uncalled capital 31.12.2018 Capital called in 2019 Uncalled capital 31.12.2019 Austria 2,40 548 (105) 442 Belgium 3,25 742 (143) 599 Bulgaria 0,22 50 (10) 40 Croatia 0,23 51 (10) 42 Cyprus 0,11 25 (5) 21 Czechia 0,80 182 (35) 147 Denmark 1,98 452 (87) 365 Estonia 0,09 20 (4) 16 Finland 1,51 345 (66) 278 France 17,81 4 068 (784) 3 285 Germany 20,58 4 700 (906) 3 795 Greece 1,51 344 (66) 278 Hungary 0,61 140 (27) 113 Ireland 0,94 215 (41) 173 Italy 12,53 2 862 (551) 2 311 Latvia 0,12 27 (5) 21 Lithuania 0,18 41 (8) 33 Luxemburg 0,26 58 (11) 47 Malta 0,04 9 (2) 7 Netherlands 4,78 1 091 (210) 881 Poland 2,01 458 (88) 370 Portugal 1,20 273 (53) 221 Romania 0,72 164 (32) 132 Slovakia 0,38 86 (17) 69 Slovenia 0,22 51 (10) 41 Spain 7,93 1 812 (349) 1 463 Sweden 2,94 671 (129) 542 United Kingdom 14,68 3 353 (646) 2 707 Total 100,00 22 840 (4 400 ) 18 440

Since the capital of the Eighth, Ninth and 10th EDF has been called up and received in its entirety in previous years, in 2019, an amount of EUR 4 400 million has been called which relates entirely to the 11th EDF.

2.10.3. Called fund capital from closed EDFs carried forward

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 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.

2.10.4. Called fund capital transfers between active EDFs

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF Total 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 — 0 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 — Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs (1) (27) 28 — (0) Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs — — 181 (181) — Balance at 31.12.2019 (2 510 ) 2 109 265 136 —

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 million Note 2019 2018 Revenue from non-exchange transactions 3.1 28 4 Revenue from exchange transactions 3.2 46 57 Total 74 60

3.1. REVENUE FROM NON-EXCHANGE TRANSACTIONS

EUR million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 2019 2018 Recovery of expenses 0 0 9 4 13 21 Recovery of STABEX funds — — 0 — 0 0 Co-financing revenue 3.1.1 — — 9 5 14 (17) Total 0 0 18 10 28 4

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

EUR million 2019 2018 Direct Management Implemented by: Commission 1 1 EU delegations 6 3 6 4 Indirect Management Implemented by: Third countries 15 (13) International organisations 5 12 Private law bodies with a public service mission 2 1 22 — Total 28 4

3.1.1. Co-financing revenue

The co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance when received. The contributions remain under liabilities (see note 2.6.1) 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 in the statement of financial performance as non-exchange revenue from co-financing. Consequently, the effect on the economic result of the year is zero.

3.2. REVENUE FROM EXCHANGE TRANSACTIONS

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2019 2018 Financial revenue (0) (0) 3 4 7 10 Other revenue 1 6 21 12 39 46 Total 1 6 24 16 46 57

Financial revenue comprises essentially accrued interest on overdue recovery orders (EUR 6,6 million) and interest on pre-financing. Other revenue relates in its entirety foreign exchange gains. The corresponding foreign exchange losses are recorded under other expenses (see note 3.6).

EXPENSES

3.3. AID INSTRUMENTS

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2019 2018 Programmable aid 0 (0) 295 1 824 2 119 2 001 Macro-economic support — 29 — — 29 26 Sectoral policy — 0 — — 0 2 Intra ACP projects — 2 272 678 951 827 Emergency aid — 4 12 97 112 873 Institutional support — — 0 7 7 18 Contributions to Trust Funds — — — 535 535 307 Total 0 35 579 3 141 3 755 4 054

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

The decrease under this heading is a combined effect of an increase of expenses under the 11th EDF (2018: EUR 3 012 million) and a decrease of expenses under the 10th EDF (2018: EUR 984 million). This is in line with the lifecycle of the EDF and also related to the evolution of the number of open contracts under these EDFs: The 11th EDF was at the full cruising speed in 2019 and there were thus significantly more open contracts at 31 December 2019 under which expenses were incurred. Conversely, many contracts were completed and closed under the 10th EDF in 2019, which resulted into less expenses incurred under this EDF.

As noted namely under the 11th EDF the structure of the aid instruments expenses changed compared to 2018. Under this EDF the Emergency aid expensed significantly decreased (2018: EUR 811 million), while the expenses related to Programmable aid, Intra ACP project and Contributions to the Trust funds significantly increased (2018: EUR 1 468 million, resp. EUR 410 million, resp. EUR 307 million respectively).

3.4. CO-FINANCING EXPENSES

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2019 2018 Co-financing — — 9 5 14 (17)

Included under this heading are the expenses incurred on co-financing projects in 2019. 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).

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

Aid instruments and co-financing expenses by management type

EUR million 2019 2018 Direct Management Implemented by: Commission 86 122 EU executive agencies (13) 31 Trust Funds 483 594 EU delegations 1 141 1 003 1 697 1 750 Indirect Management Implemented by: EIB and EIF 145 44 International organisations 1 003 920 Private law bodies with a public service mission 126 114 Public law bodies 184 231 Third countries 613 977 EU bodies with Public Private Partnership 1 1 2 073 2 287 Total 3 770 4 037

3.5. FINANCE COSTS

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2019 2018 Write-down of receivables 0 (2) 2 1 1 (7)

Included under this heading are the estimated expenses on irrecoverable amounts.

3.6. OTHER EXPENSES

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2019 2018 Administrative and IT expenses — — (41) 262 220 112 Provision for risks and charges — — — — — (4) Realised losses on trade debtors — 2 1 1 3 1 Exchange losses 1 6 21 9 37 39 Total 1 8 (20) 272 260 148

This heading includes mainly 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 million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Performance guarantees — 10 5 0 15 11 Retention guarantees — 5 4 — 9 7 Total — 15 8 0 24 17

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 indirect management, the guarantees belong to a contracting authority other than the EDF and they are therefore not disclosed by the EDF.

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 multiannual programmes.

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2019 31.12.2018 Outstanding commitments not yet expensed (0) 42 576 7 946 8 564 9 071

At 31 December 2019 the budgetary RAL totalled EUR 10 270 million (2018: EUR 10 616 million).

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.

(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 million 31.12.2019 31.12.2018 USD GBP DKK SEK EUR Other Total USD GBP DKK SEK EUR Other Total Financial assets Receivables and recoverables — — — — 115 8 123 63 — 0 — 67 8 138 Cash and cash equivalents 1 — — — 1 178 — 1 179 1 0 — — 386 — 387 1 — — — 1 293 8 1 302 64 0 0 — 453 8 525 Financial liabilities Non-current financial liabilities — — — — (19) — (19) — — — — (18) — (18) Payables (7) — — — (509) — (516) (1) — — — (218) (22) (241) (7) — — — (528) — (535) (1) — — — (236) (22) (259) Total (6) — — — 765 8 767 63 0 0 — 217 (14) 267

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 consequently 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 (6), 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 could be remunerated at rates lower than market rates.

5.4. CREDIT RISK (COUNTERPARTY RISK)

Financial assets that are neither past due nor impaired

EUR million Total Neither past due nor impaired Past due but not impaired < 1 year 1-5 years > 5 years Exchange receivables and non-exchange recoverables 123 100 16 7 — Total at 31.12.2019 123 100 16 7 — Exchange receivables and non-exchange recoverables 138 121 12 5 — Total at 31.12.2018 138 121 12 5 —





Financial assets by risk category

EUR million 31.12.2019 31.12.2018 Receivables Cash Total Receivables Cash Total Counterparties with external credit rating Prime and high grade 7 958 965 5 303 308 Upper medium grade — 220 220 — 80 80 Lower medium grade — 1 1 — 4 4 Non- investment grade — 0 0 — 0 0 7 1 179 1 186 5 387 391 Counterparties without external credit rating Group 1 (debtors without defaults in the past) 116 0 116 133 0 134 Group 2 (debtors with defaults in the past) — — — — — — Total 116 0 116 133 0 134 Total 123 1 179 1 302 138 387 525

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. Therefore 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 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 accepted in specific and duly justified circumstances.

5.5. LIQUIDITY RISK

Maturity analysis of financial liabilities by remaining contractual maturity

EUR million < 1 year 1-5 years > 5 years Total Financial liabilities 516 2 17 535 Total at 31.12.2019 516 6 22 516 Financial liabilities 241 7 11 259 Total at 31.12.2018 241 7 11 259

Budget principles applied to the EDF ensure that overall cash resources for the budgetary period are always sufficient for the execution of 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 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 transmission of these provisional accounts, apart from the matter highlighted below, 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.

Departure of United Kingdom from the European Union

On 1 February 2020, the United Kingdom ceased to be a Member State of the European Union. Following the conclusion of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (the ‘Withdrawal Agreement’) between the two parties, the United Kingdom committed to pay all its obligations under the current MFF and previous financial perspectives as if it were still a Member State.

The 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 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 transmission of these provisional accounts, and based on the Withdrawal Agreement concluded and already in operation, there is no financial impact to be reported in the 2019 EDF annual accounts.

Coronavirus disease 2019 (COVID-19)

During the first quarter of 2020, the coronavirus outbreak has had huge global impacts, including on the financial markets where significant falls in all major indices have occurred. This has led to increased volatility in the value of financial instruments recorded at fair value, including those on the EDF’s balance sheet. As a non-adjusting event, the outbreak of the coronavirus does not require any adjustments to the figures reported. For subsequent reporting periods, COVID-19 will likely affect the recognition and measurement of some assets and liabilities in the financial statements. Based on the information available at the time of transmission of these provisional accounts, the financial effects of the coronavirus outbreak cannot be reliably estimated.

8. RECONCILIATION OF ECONOMIC RESULT AND BUDGET RESULT

The economic result of the year is calculated based on 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 reconciliable. The table below shows this reconciliation, highlighting the key reconciling amounts, split between revenue and expenditure items. The notes to the table provide additional information on the nature of the key reconciling items.

EUR million 2019 2018 ECONOMIC RESULT OF THE YEAR (3 956 ) (4 118 ) Revenue Entitlements not affecting the budget result — (1) Entitlements established in current year but not yet collected (16) (11) Entitlements established in previous years and collected in current year 23 11 Net effect of pre-financing 53 36 Accrued revenue (net) (67) (39) Other (3) (1) Expenses Expenses of the current year not yet paid 107 115 Expenses of previous years paid in the current year (672) (366) Net effect of pre-financing (44) (179) Accrued expenses (net) 719 484 BUDGET RESULT OF THE YEAR (3 856 ) (4 069 )

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 line refers to clearing of pre-financing with amounts recovered from the beneficiaries. These cash receipts represent budgetary revenue but have no impact on the economic result and must be thus added for reconciliation purposes.

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 affect 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

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2019 (7)

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) (8) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (9), the European Commission may establish Union trust funds for external actions (‘EU 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 by a decision after consultation or approval of the European Parliament and the Council. This decision 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 are 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 EUTF BÊKOU, 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 EUTF MADAD, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014,

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

The Bêkou EU 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 EU 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. In May 2019 the EU approved an extension of the EUTF Bêkou until December 2020, thus bringing its total duration to 78 months.

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 meets 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 EU 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 which is the responsibility of 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)).

The annual accounts of the EUTF Bêkou are consolidated in the annual accounts of the European Developement Fund.

Highlights of the year

Since its creation in July 2014, the EUTF Bêkou has adopted 19 programmes and has reached more than 2,5 million beneficiaries. The programmes are to assist the Central African Republic (CAR) and its population in the aftermath of the 2013 crisis. More specifically, the EUTF Bêkou aims to ensure access to basic services (mainly health, water and sanitation), support economic recovery and job creation, and promote social cohesion and reconciliation.

Despite the presence of a democratically elected government and the signature of a peace agreement in February 2019, the security situation in the CAR remains volatile. It is in this complex and fragile context that the EUTF Bêkou deploys its comparative advantages of flexibility and adaptability to changing circumstances. Additionally, the EUTF Bêkou remains the only instrument building resilience for both the population and the State, in a true LRRD (linking relief, rehabilitation and development) approach.

In May 2019, given the current situation in CAR, the EU approved an extension of the EUTF Bêkou until December 2020, thus bringing its total duration from 60 months to 78 months. The official procedure, which included a consultation of the European Parliament and the Council, was launched in 2018 after the official request of the EUTF Board.

Operational highlights of the year 2019 include:

— In May, in the wake of the signature of the Peace Agreement, the EUTF Bêkou adopted a new multi-sectoral action to support the socio-economic recovery in the South-East, an area previously inaccessible. This action aims to renew the social contract between the State and the population, by supporting economic recovery, restoring basic health and water and sanitation services, promoting dialogue and social cohesion, and strengthening local authorities and the redeployment of the State. Budget allocated: EUR 18 million.

— In October, the EUTF Bêkou adopted a Programme supporting the promotion of entrepreneurship in urban and rural areas for a total amount of EUR 15 million. A new Technical and Communication Assistance Facility was also adopted. Moreover, the EUTF Bêkou increased the budget of three on-going actions in the sectors of health (additional EUR 21,76 million), gender empowerment (additional EUR 0,5 million), and socio-economic rehabilitation (additional EUR 0,78 million).

— Following the extension of the EUTF Bêkou, the Operational Strategy 2019 — 2020 was adopted at the November Board. It identifies three broad sectors of intervention that remain pertinent for the EUTF: (i) social sectors (mainly health and water and sanitation); (ii) actions in favour of economic resilience and recovery; and (iii) a reinforced support to the redeployment of the State and to reconciliation efforts.

— The EUTF Bêkou projects were marked by the volatile security context (localised conflicts in Bangui and the hinterland followed by periods of relative stability), but also by the reinforced coordination among government, partners and humanitarian actors.

On the financial side, at the end of 2019 pledges by EUTF contributors amounted to nearly EUR 296 million. This is an increase of EUR 53 million compared to 2018. EUR 31 million out of these EUR 295 million are still to be certified.

In terms of contracts, the EUTF Bêkou signed 11 new contracts in 2019 for a total amount of more than EUR 28 million. They contribute to the implementation of its programmes in the sectors of health, rural resilience and job creation, opening-up of regions and socio-economic recovery.

Last but not least, nearly EUR 32 million was paid in 2019 on top of payments made during previous years; total disbursements have reached nearly EUR 151 million since the creation of the EUTF Bêkou.

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

— Pre-financing: a decrease of kEUR 11 405 due to the expensing of amounts open at end 2018 during 2019 and less advances being paid out,

— Cash and cash equivalents: an increase of kEUR 3 506 (see cashflow statement) is mainly caused by the decreased payments of pre-financing;

BALANCE SHEET

EUR '000 Note 31.12.2019 31.12.2018 NON-CURRENT ASSETS Pre-financing 3 273 3 443 3 273 3 443 CURRENT ASSETS Pre-financing 18 312 29 546 Exchange receivables and non-exchange recoverables 1 853 1 138 Cash and cash equivalents 17 432 13 926 37 597 44 611 TOTAL ASSETS 40 870 48 054 NON-CURRENT LIABILITIES Financial liabilities (29 727 ) (42 737 ) (29 727 ) (42 737 ) CURRENT LIABILITIES Payables (10) (918) Accrued charges and deferred income (11 133 ) (4 399 ) (11 143 ) (5 317 ) TOTAL LIABILITIES (40 870 ) (48 054 ) NET ASSETS — — FUNDS & RESERVES Contribution from Members — — Accumulated surplus — — Economic result of the year — — NET ASSETS — —

STATEMENT OF FINANCIAL PERFORMANCE

EUR '000 Note 2019 2018 REVENUE Revenue from non-exchange transactions Revenue from donations 48 343 33 682 Recovery of expenses 68 — 48 410 33 682 Revenue from exchange transactions Financial revenue (2) 1 (2) 1 Total revenue 48 408 33 683 EXPENSES Operating expenses (47 620 ) (32 825 ) Other expenses (789) (858) Total expenses (48 408 ) (33 683 ) ECONOMIC RESULT OF THE YEAR — —

CASHFLOW STATEMENT

EUR '000 2019 2018 (Increase)/decrease in pre-financing 11 405 (24 839 ) (Increase)/decrease in exchange receivables and non-exchange recoverables (715) (261) Increase/(decrease) in financial liabilities (13 010 ) (1 982 ) Increase/(decrease) in payables (908) 202 Increase/(decrease) in accrued charges & deferred revenue 6 734 863 NET CASHFLOW 3 506 (26 017 ) Net increase/(decrease) in cash and cash equivalents 3 506 (26 017 ) Cash and cash equivalents at the beginning of the year 13 926 39 943 Cash and cash equivalents at year-end 17 432 13 926

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2019 (10)

BACKGROUND INFORMATION ON THE EUTF AFRICA

General background on EU 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 by a decision after consultation on approval of the European Parliament and the Council. This decision 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 are 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 EUTF BÊKOU, 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 EUTF MADAD, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014,

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

The EUTF 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 are 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. 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 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 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 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

In 2019, the EU Emergency Trust Fund for Africa (EUTF) further demonstrated itself to be a swift and effective implementation tool. It facilitated policy dialogue with African partner countries, applied innovative approaches, and produced tangible results across the three regions of the EUTF (Sahel and Lake Chad, Horn of Africa and North of Africa) by pooling funding and expertise from a wide range of stakeholders.

The EUTF further consolidated its achievements in partnership with EU Member States development agencies, UN organisations, NGOs and partner countries, with the approval of an additional 36 programmes and 16 ‘top-ups’ across the three regions by the operational committees for a total of EUR 851 million (13). This brings the total number of approved programmes to 223, for a total budget of EUR 4,4 billion. New contracts worth EUR 951 millio