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

Annual accounts of the European Development Fund 2020

(2021/C 438/01)

CONTENTS

CERTIFICATION OF THE ACCOUNTS 2

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES 3

FUNDS MANAGED BY THE EUROPEAN COMMISSION 7

FINANCIAL STATEMENTS OF THE EDF 9

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 46

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2020 47

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2020 54

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 61

EDF REPORT ON FINANCIAL IMPLEMENTATION 66

ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK 93

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2020 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 22 June 2021

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 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 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 5 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 Council of 2 December 2013 adopted the Regulation (EU, Euratom) No 1311/2013 laying down the multiannual financial framework for 2014-2020 (3). In this context, it was decided that geographical cooperation with the ACP States would not be integrated into the EU budget, 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 in principle for 1 year. Unlike the EU Budget, the EDF is a fund operating based on multi-annuality, to implement development cooperation during a period of usually 5 years. As resources are allocated on a multi-annual basis, the allocated funds may be used over the period of the EDF. This multiannual approach 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 5 years, Member State representatives meet at intergovernmental level to decide on an overall amount that will be allocated to the fund and to oversee its implementation. The Commission then manages the fund in accordance with the Union policy on development cooperation. Since Member States have their own development and aid policies in parallel to the Union policy, the Member States must coordinate their policies with the EU to ensure they are complementary.

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

3. EDF ACTIVITIES AFTER 31 DECEMBER 2020

The 11th EDF has reached its final stage as the sunset clause came into effect on 31 December 2020. This clause sets a cut-off date for commitments under the 11th EDF. As of 2021 no further financing agreements can be signed under the 11th EDF. However, specific contracts for the existing financing agreements will still be signed until 31 December 2023.

To ensure continuity of the development programmes, from 2021, the EDF programmes will be included in the EU multi-annual financial framework (MFF). This means that while so far the EDF programmes were funded by the voluntary contributions of EU Member States as of 2021 development programmes will be funded through the EU budget. This also implies that the funding of development programmes will be subject to the authorisation of the European Parliament and that the transactions will have to comply with the EU financial regulations in the same way as other EU funding programmes.

4. 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 or WA’) 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 UK continued involvement with the EDF is dealt with under Part Five, Chapter 5 of the WA.

According to Article 152 of the WA, the United Kingdom remains party to the EDF until the closure of the 11th EDF and all previous unclosed EDFs, and assumes the same obligations as the Member States in this respect. UK beneficiaries remain eligible to participate in projects under the 11th EDF and previous EDFs under the same conditions as before. The UK may participate, as an observer, without voting rights, in the EDF Committee and the Investment Facility Committee (Article 152(2) WA). The UK share of the Investment Facility of the EDF shall be reimbursed to the UK as the investment matures. Unless agreed otherwise, the United Kingdom's capital share shall not be recommitted beyond the end of the 11th EDF commitment period or rolled over into subsequent periods (Article 152(4) WA).

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 the 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 the 11th EDF after 31 December 2020 (Article 153).

The UK remains liable in respect of the guarantees provided under all EDFs. At the same time it is entitled to its share of any amount recovered under the terms of the Member States' guarantees and to the balance of its Member State Call Account in proportion to its respective participation in each guarantee agreement (Article 154).

At the time of the transmission of these provisional accounts, and based on the WA concluded and already in operation, there is no financial impact to be reported in the EDF annual accounts.

5. YEAR-END REPORTING

5.1. ANNUAL ACCOUNTS

In accordance with Articles 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 also 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.

6. AUDIT AND DISCHARGE

6.1. 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.

6.2. 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.

HIGHLIGHTS OF FINANCIAL IMPLEMENTATION 2020

Net amount, only 10th & 11th EDF.

Budget implementation

In 2020 the financial implementation (10th and 11th EDF) for decisions (global commitments: 2 687 million euros), contracts (individual commitments: 3 670 million euros) and payments (4 599 million euros) were all impacted by the EU response to the unpredicted crisis of COVID-19, which became a priority for the Commission. Therefore 2020 was a record year for payments, due to the increased disbursements to projects contributing to fighting the COVID crisis. This also led to the acceleration of the absorption period, which improved to 3 years in 2020. The sunset clause for the 11th EDF was reached on the 31st of December 2020. This means that as of 2021 there will be no further global commitments of projects under the 11th EDF (for the details please refer to Report on Financial Implementation section).

Impact of the activities in the financial statements

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

— Pre-financing (see note 2.2): an increase by EUR 29 million largely as a result of the new contracts signed and advances paid during 2020;

— The aid instrumens expenses (see note 3.3): a substantial increase (by EUR 852 million) as a result of the increased activity during the year in order to combat the negative effects of the COVID-19 pandemic, in particular as projects were reoriented to deal with the crisis, but also due to the normal lifecycle of the EDF whereby the activities of the 11th EDF are peaking.

— Cash and cash equivalents (see note 2.5): a decrease by EUR 451 million as a result of the significant increase in payments during the year to cover the augmented expenses and advances made on new contracts;

— Accrued charges (see note 2.8): an increased by EUR 208 million as a result of the increase in the number of open contracts at the end of the year for which no cost claims were validated at the year end.

FUNDS MANAGED BY THE EUROPEAN COMMISSION

CONTENTS

FINANCIAL STATEMENTS OF THE EDF 9

EDF BALANCE SHEET 10

EDF STATEMENT OF FINANCIAL PERFORMANCE 11

EDF CASHFLOW STATEMENT 12

EDF STATEMENT OF CHANGES IN NET ASSETS 13

BALANCE SHEET BY EDF 14

STATEMENT OF FINANCIAL PERFORMANCE BY EDF 16

STATEMENT OF CHANGES IN NET ASSETS BY EDF 17

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF 20

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 46

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2020 47

BALANCE SHEET 52

STATEMENT OF FINANCIAL PERFORMANCE 53

CASHFLOW STATEMENT 53

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2020 54

BALANCE SHEET 59

STATEMENT OF FINANCIAL PERFORMANCE 60

CASHFLOW STATEMENT 60

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 61

CONSOLIDATED BALANCE SHEET 62

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE 63

CONSOLIDATED CASH FLOW STATEMENT 64

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS 65

EDF REPORT ON FINANCIAL IMPLEMENTATION 66

FINANCIAL STATEMENTS OF THE EDF (4)

EDF BALANCE SHEET

EUR million Note 31.12.2020 31.12.2019 NON-CURRENT ASSETS Financial assets 2.1 33 36 Pre-financing 2.2 873 910 Trust Fund contributions 2.3 394 266 1 300 1 213 CURRENT ASSETS Pre-financing 2.2 1 355 1 288 Exchange receivables and non-exchange recoverables 2.4 140 123 Cash and cash equivalents 2.5 728 1 179 2 223 2 590 TOTAL ASSETS 3 523 3 803 NON-CURRENT LIABILITIES Financial liabilities 2.6 (2) (19) (2) (19) CURRENT LIABILITIES Payables 2.7 (615) (516) Accrued charges and deferred income 2.8 (1 527 ) (1 319 ) (2 143 ) (1 835 ) TOTAL LIABILITIES (2 145 ) (1 854 ) NET ASSETS 1 379 1 948 FUNDS & RESERVES Fair value reserve 2.9 (5) (2) Called fund capital — active EDFs 2.10 58 986 54 809 Called fund capital from closed EDFs carried forward 2.10 2 252 2 252 Economic result carried forward from previous years (55 111 ) (51 155 ) Economic result of the year (4 744 ) (3 956 ) NET ASSETS 1 379 1 948





EDF STATEMENT OF FINANCIAL PERFORMANCE

EUR million Note 2020 2019 REVENUE Revenue from non-exchange transactions 3.1 Recovery activities 92 28 92 28 Revenue from exchange transactions 3.2 Financial revenue 6 7 Other revenue 37 39 43 46 Total Revenue 135 74 EXPENSES Aid instruments 3.3 (4 607 ) (3 755 ) Co-financing expenses 3.4 (53) (14) Finance costs 3.5 (21) (1) Other expenses 3.6 (197) (260) Total Expenses (4 878 ) (4 030 ) ECONOMIC RESULT OF THE YEAR (4 744 ) (3 956 )





EDF CASHFLOW STATEMENT

EUR million Note 2020 2019 Economic result of the year (4 744 ) (3 956 ) Operating activities Capital increase — contributions (net) 4 177 4 385 (Increase)/decrease in trust funds contributions (127) (65) (Increase)/decrease in pre-financing (29) 136 (Increase)/decrease in exchange receivables and non-exchange recoverables (17) 15 Increase/(decrease) in financial liabilities (17) 2 Increase/(decrease) in payables 99 275 Increase/(decrease) in accrued charges and deferred income 209 37 Other non-cash movements (3) (2) Investing activities (Increase)/decrease in available for sale financial assets 2 (36) NET CASHFLOW (452) 792 Net increase/(decrease) in cash and cash equivalents (451) 792 Cash and cash equivalents at the beginning of the year 2.5 1 179 387 Cash and cash equivalents at year-end 2.5 728 1 179





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 31.12.2018 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 Fair value movements (3) (3) Capital increase — contributions (223) (4 400 ) 4 177 — — 4 177 Economic result of the year — — — (4 744 ) — (4 744 ) BALANCE AS AT 31.12.2020 73 041 14 055 58 986 (59 854 ) 2 252 (5) 1 378





BALANCE SHEET BY EDF

EUR million 31.12.2020 31.12.2019 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 — — (2) 35 33 — — — 36 36 Pre-financing 2.2 — 3 292 578 873 — 6 325 580 910 Trust Fund contributions 2.3 — 29 9 355 394 — — — 266 266 — 33 299 969 1 300 — 6 325 882 1 213 CURRENT ASSETS Pre-financing 2.2 — 9 341 1 005 1 355 — 26 441 821 1 288 Exchange receivables and non-exchange recoverables 2.4 181 (177) 1 723 (1 586 ) 140 183 121 2 201 (2 382 ) 123 Inter-EDF accounts 181 (246) 1 663 (1 598 ) — 182 53 2 160 (2 395 ) — Cash and cash equivalents 2.5 — — — 728 728 — — — 1 179 1 179 362 (414) 3 726 (1 451 ) 2 224 365 201 4 801 (2 777 ) 2 590 TOTAL ASSETS 362 (381) 4 025 (483) 3 523 365 207 5 127 (1 896 ) 3 803 NON-CURRENT LIABILITIES Financial liabilities 2.6 — — — (2) (2) — — (1) (18) (19) — — — (2) (2) — — (1) (18) (19) CURRENT LIABILITIES Payables 2.7 — (1) (62) (554) (615) — (5) (108) (404) (516) Accrued charges and deferred income 2.8 — (67) (217) (1 244 ) (1 527 ) — (96) (240) (983) (1 319 ) — (67) (279) (1 798 ) (2 143 ) — (101) (348) (1 386 ) (1 835 ) TOTAL LIABILITIES — (67) (279) (1 800 ) (2 145 ) — (101) (349) (1 405 ) (1 854 ) NET ASSETS 362 (448) 3 747 (2 282 ) 1 379 365 106 4 778 (3 300 ) 1 948 Fair value reserves 2.9 — — (2) (4) (5) — — — (2) (2) Called fund capital — active EDFs 2.10 12 164 10 535 20 960 15 327 58 986 12 164 10 758 20 960 10 927 54 809 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 (2 512 ) 2 041 188 283 — (2 510 ) 2 109 265 136 — Economic result carried forward from previous years (10 098 ) (14 440 ) (18 606 ) (11 966 ) (55 111 ) (10 098 ) (14 406 ) (18 077 ) (8 573 ) (51 155 ) Economic result of the year — 36 (457) (4 324 ) (4 744 ) — (34) (529) (3 393 ) (3 956 ) NET ASSETS 181 (203) 2 084 (683) 1 379 183 53 2 618 (905) 1 948





STATEMENT OF FINANCIAL PERFORMANCE BY EDF

EUR million 2020 2019 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 (1) 5 69 19 92 — — 18 10 28 (1) 5 69 19 92 — — 18 10 28 Revenue from exchange transactions 3.2 Financial revenue — 5 1 1 6 — — 3 4 7 Other revenue — 5 18 13 37 1 6 21 12 39 — 10 19 13 43 1 6 24 16 46 Total revenue (1) 15 88 32 135 1 6 42 26 74 EXPENSES Aid instruments 3.3 — 34 (462) (4 179 ) (4 607 ) — (35) (579) (3 141 ) (3 755 ) Co-financing expenses 3.4 — — (41) (12) (53) — — (9) (5) (14) Finance costs 3.5 1 (3) (16) (4) (21) — 2 (2) (1) (1) Other expenses 3.6 — (9) (25) (162) (197) (1) (8) 20 (272) (260) Total expenses 1 21 (545) (4 356 ) (4 878 ) (1) (40) (571) (3 418 ) (4 030 ) ECONOMIC RESULT OF THE YEAR — 36 (457) (4 324 ) (4 744 ) — (35) (529) (3 393 ) (3 956 )

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 31.12.2018 12 164 — 12 164 (10 098 ) 627 (2 509 ) 184 Transfers to/from the 10th EDF — (1) (1) BALANCE AS AT 31.12.2019 12 164 — 12 164 (10 098 ) 627 (2 510 ) 183 Transfers to/from the 10th EDF — (2) (2) BALANCE AS AT 31.12.2020 12 164 — 12 164 (10 098 ) 627 (2 512 ) 181





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 31.12.2018 10 773 — 10 773 (14 406 ) 1 625 2 137 129 Transfers to/from the 10th EDF 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 Capital increase — contributions — — — Transfers to/from the 10th EDF — (69) (69) Refund to Member States (223) (223) Economic result of the year — — — — BALANCE AS AT 31.12.2020 10 550 15 10 535 (14 440 ) 1 625 2 041 (203)





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 31.12.2018 20 960 — 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 Transfers to/from the Eighth and Ninth EDF — 71 71 Transfers to/from the 11th EDF — (147) (147) Economic result of the year — (457) — (457) BALANCE AS AT 31.12.2020 20 960 — 20 960 (19 063 ) — 188 2 084





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 31.12.2018 29 367 22 840 6 527 (8 573 ) — 317 — (1 729 ) Fair value movements — (2) (2) Capital increase — contributions (4 400 ) 4 400 4 400 Transfers to/from the Eighth, Ninth and 10th EDF — — (181) (181) 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) Fair value movements (2) (2) Capital increase — contributions (4 400 ) 4 400 147 4 547 Economic result of the year — (4 324 ) — (4 324 ) BALANCE AS AT 31.12.2020 29 367 14 040 15 327 (16 290 ) — 283 (4) (683)

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF (5)

1. SIGNIFICANT ACCOUNTING POLICIES

1.1. ACCOUNTING PRINCIPLES

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

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 31.12.2020 31.12.2019 Currency 31.12.2020 31.12.2019 BGN 1,9558 1,9558 PLN 4,5597 4,2568 CZK 26,2420 25,4080 RON 4,8683 4,783 DKK 7,4409 7,4715 SEK 10,0343 10,4468 GBP 0,8990 0,8508 CHF 1,0802 1,0854 HRK 7,5519 7,4395 JPY 126,4900 121,9400 HUF 363,8900 330,5300 USD 1,2271 1,1234

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.

1.2.4. Application of new and amended European Union Accounting Rules (EAR)

New EAR which are effective for annual periods beginning on or after 1 January 2020

There are no new EAR which became effective for annual periods beginning on or after 1 January 2020.

New EAR adopted but not yet effective at 31 December 2020

On 17 December 2020 the Accounting Officer of the European Commission adopted the revised EAR 11 ‘Financial Instruments’, which is effective for accounting periods beginning on or after 1 January 2021. The revised EAR 11 has been updated in line with the new IPSAS 41 ‘Financial Instruments’ and establishes the principles for the financial reporting of the financial assets and financial liabilities held by the EU entities. For more information please refer to the EU annual accounts of 2020. No material impact of this change is expected due to the small amount of financial instruments in the financial statements of the entity.

1.3. BALANCE SHEET

1.3.1. Financial assets

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

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

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the entity. Derivatives are also 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 3 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.

1.3.2. Pre-financing amounts

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, he has the obligation to return the pre-financing advance to the entity. Thus, as the entity retains control over the pre-financing and is entitled to a refund for the ineligible part, the amount is recognised 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.

1.3.3. 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.

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

1.3.4. Cash and cash equivalents

Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks, and other short-term highly liquid investments with original maturities of 3 months or less.

1.3.5. 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, at the moment 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. The corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the entity.

1.3.6. 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, or 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. These 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, revenue 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. For the EU entities, transfers mostly comprise funds received from the Commission (e.g. balancing subsidy to the traditional agencies, operating subsidy for the delegation agreements).

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.

(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 the incurring of liabilities that result in decreases in net assets. 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 either a possible obligation 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 where it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation.

A contingent liability also arises in the rare circumstances where a present obligation exists but cannot be measured with sufficient reliability.

Contingent liabilities are not recognised in the accounts. They are disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

1.6. FUND CAPITAL

The EDF member states provide contributions to the Fund for the implementation of EDF programmes as laid down in the Internal Agreement of each EDF. According to the applicable legal basis the capital calls, i.e. the requests for funding for a given year N, are decided by a Council Decision in year N-1, with the funds to be received clearly assigned to specified future periods.

The contributions meet the criteria of contribution from owners (EAR 1) and are thus treated as fund capital in the EDF financial statements. The fund capital represents the total amount of contributions to be received from the EDF members states. As the uncalled fund capital is openly deducted from the total fund capital (see Statement of Changes in Net Assets), only the called fund capital is recognised in the Balance Sheet.

As the agreed contributions are assigned to specified reporting periods, with the EDF’s legal claim against the EDF member states arising only in these periods, any amounts received in advance are recognised as deferred capital contributions under Payables rather than as called capital.

1.7. 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 the 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 33 million at 31 December 2020 (2019: 36 million). 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 12 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 1 year. Thus some pre-financing amounts are shown as non-current assets.

EUR million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Non-current pre-financing 2.2.1 — 3 292 578 873 910 Current pre-financing 2.2.2 — 9 341 1 005 1 355 1 288 Total — 12 633 1 583 2 228 2 199

The increase in total pre-financing by EUR 29 million at 31 December 2020 is a combined effect of the increase of pre-financing of the 11th EDF (2019: EUR 1 401 million) and decrease of pre-financing of the 10th EDF (2019: EUR766 million).

The increase of pre-financing in the 11th EDF can be largely explained by increase of advances paid out on new contracts signed during the year. The 11th EDF started in 2015 and in 2020 the contracting for the EDF activities reached a peak. As a result, the number of open contracts increased from around 3 400 in 2019 to 3 550 in 2020. This increase in pre-financing led to an increase in cash outflows and therefore to a decrease in cash and cash equivalents (see note 2.5).

The decrease of pre-financing in the 10th EDF is a consequence of the normal lifecycle of the EDF. As a result of phasing out of the 10th EDF many contracts were completed and closed. The number of open contracts under this EDF dropped from approximately 2 600 in 2019 to circa 2 500 in 2020. Consequently, the level of pre-financing payments made to beneficiaries decreased while the clearing of pre-financing increased.

2.2.1. Non-current pre-financing by management mode

EUR million 31.12.2020 31.12.2019 Direct Management Implemented by: Commission 139 190 EU executive agencies 8 6 EU delegations 25 49 171 244 Indirect Management Implemented by: EIB and EIF 266 313 International organisations 347 291 Private law bodies with a public service mission 28 22 Public law bodies 49 22 Third countries 11 17 EU bodies and Public Private Partnership 1 1 702 666 Total 873 910

2.2.2. Current pre-financing

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Pre-financing (gross) — 98 1 527 3 472 5 097 5 030 Cleared via cut-off — (89) (1 186 ) (2 467 ) (3 742 ) (3 742 ) Total — 9 341 1 005 1 355 1 288

2.2.3. Current pre-financing by management mode

EUR million 31.12.2020 31.12.2019 Direct Management Implemented by: Commission (40) 80 EU executive agencies 14 15 EU delegations 206 188 180 283 Indirect Management Implemented by: EIB and EIF 224 50 International organisations 572 569 Private law bodies with a public service mission 73 86 Public law bodies 146 119 Third countries 155 180 EU bodies and Public Private Partnership 4 1 1 175 1 005 Total 1 355 1 288

2.2.4. 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.

EUR million 31.12.2020 31.12.2019 Guarantees for Pre-financing 49 46

The increase of the pre-financing guarantees is a consequence of increase of pre-financing.

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 Commission under the direct management mode.

EUR million Net contribution at 31.12.2019 Contributions paid in 2020 Allocation of TF's net expenses 2020 Net contribution at 31.12.2020 Africa 263 771 (649) 385 Bêkou 4 29 (24) 9 Total 266 800 (673) 394

The contributions to the trust funds increased from EUR 600 million in 2019 to EUR 800 million in 2020. The increase of the funding was necessary to cover the increased activity of the trust funds resulting in higher expenses in this area.

2.4. NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES

Exchange transactions are transactions in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange. Non-exchange transactions are transactions in which an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.

EUR million Note 31.12.2020 31.12.2019 Recoverables from non-exchange transactions 2.4.1 48 32 Receivables from exchange transactions 2.4.2 92 91 Total 140 123

2.4.1. Recoverables from non-exchange transactions

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Member States — — — — — 1 Customers — 5 50 5 61 27 Public bodies — 11 14 2 27 21 Third states — 1 2 1 4 7 Write down — (15) (28) (4) (49) (27) Inter-company accounts with EU institutions — — — 4 4 5 Total — 2 38 8 48 32

2.4.2. Receivables from exchange transactions

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Accrued income — 67 21 — 88 88 Inter-EDF accounts 181 (246) 1 663 (1 598 ) — — Other — — — 4 4 4 Total 181 (179) 1 684 (1 594 ) 92 91

Included under accrued income are amounts of accrued interest on pre-financing, namely an amount of EUR 62,6 million relating to a debt relief project with the World Bank and EUR 18 million relating to the EU Africa Infrastructure Fund with the EIB.

The heading ‘other’ entirely comprises a receivable to the Global Energy Efficiency and Renewable Energy Fund (GEEREF).

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 (6)

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Special accounts Central banks — — — 693 693 729 — — — 693 693 729 Current accounts Commercial banks — — — 8 8 421 Cash belonging to financial instruments — — — 27 27 30 — — — 35 35 450 Total — — — 728 728 1 179

The decrease of amounts under this heading of EUR 451 million can be explained mainly by the increase in payments made from the commercial bank accounts which is in line with the increase in expenses (see note 3.3) and the increase in pre-financing (see note 2.2). EDF net payments reached a record high of EUR 4 605 million in 2020 (2019: EUR 3 910 million), mostly due to the impact of the COVID-19 pandemic. As a response to the pandemic, the EU is adapting its priorities and programmes with partner countries, which led to the increased disbursements, in particular to projects aimed at fighting the COVID crisis.

As in 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 relation 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 they are 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. Current amounts are shown under note 2.7.2.

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Non-current co-financing payables — — — 2 2 19 Current co-financing payables — — 10 32 42 69 Total — — 10 34 44 88

The decrease in total co-financing payables of EUR 44 million is mainly due to the increase in expenses incurred in respect of co-financed projects (EUR 53,2 million), namely related to 11th EDF (see note 3.4) which was partially offset by new co-financing projects of EUR 9 million. The substantial decrease of the non-current co-financing is in line with the life cycle of the co-financing projects: at the year-end a case by case analysis of the open co-financing is performed and only the amounts that will not be expensed next year are classified under non-current co-financing.

2.7. PAYABLES

EUR million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Current payables 2.7.1 — 1 53 291 345 182 Sundry payables 2.7.2 — — 8 262 270 334 Total — 1 62 553 615 516

2.7.1. Current payables

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Suppliers — 4 44 93 141 97 Member States — — — — — 2 Third states — — 2 187 189 78 Public bodies — — 21 79 100 92 Other current payables — (4) (13) (68) (85) (88) Total — — 53 291 345 182

Payables largely comprise cost statements received by the EDF in relation to grants provided to the beneficiaries. They are recorded at the moment when the cost statement is received and for the full amount of the cost statement. Following an eligibility check only the eligible amounts are paid to the beneficiaries. At the year-end the outstanding cost claims are analysed and the estimated eligible amounts related to those cost claims are recognised in the statement of financial performance. The estimated non-eligible amounts are shown under other current payables.

The increase in payables in particular for suppliers and third states is due to several invoices that have not been validated and paid before year-end.

2.7.2. Sundry payables

EUR million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Co-financing payables 2.6.1 — — 10 32 42 69 Deferred capital contributions 2.7.2.1 — — — 223 223 264 Other sundry payables — — (2) 7 5 1 Total — — 8 262 270 334

2.7.2.1. Deferred capital contributions

At 31 December 2020, the entire amount of EUR 223 million relates to a refund to Member States from decommitted or unused funds from projects under the Eight and Ninth EDF (see note 2.10.1). The Member states agreed for the refund to be offset with the contributions from the 11th EDF during the first call for contributions in 2021.

At 31 December 2020 apart from the refund, 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 31.12.2020 31.12.2019 Accrued charges — 67 217 1 243 1 526 1 318 Other accruals and deferrals — — — 1 1 1 Total — 67 217 1 244 1 527 1 319

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 (2019: EUR 983 million) and a decrease of accrued charges under the 10th EDF (2019: EUR 240 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 full cruising speed in 2020 and there were thus significantly more open contracts at 31 December 2020, for which charges had to be estimated and accrued (see note 2.2).

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 31.12.2020 31.12.2019 Fair value reserve 5 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 — (15) — (18 440 ) (18 455 ) Called fund capital 31.12.2019 12 164 10 758 20 960 10 927 54 809 Fund capital 12 164 10 550 20 960 29 367 73 041 Uncalled fund capital — (15) — (14 040 ) (14 055 ) Called fund capital 31.12.2020 12 164 10 535 20 960 15 327 58 986

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).

By means of Council Decision (EU) 2020/1708 (7) the Member States' contributions set out in the Internal Agreements of the Eighth and Ninth EDF were reduced accordingly for an amount of EUR 223 million from funds decommitted under the Eighth and the Ninth EDF. As the funds decommitted under the Eighth EDF have been already transferred to the other EDFs, EUR 223 million was deducted from the capital of the Ninth EDF. Refunds arising from this reduction have been compensated against additional call for funds under the 11th EDF. In fact, the refund will be used against the first instalment of 2021 which explains the EUR 223 million of deferred capital (see note 2.7.2).

On 1 February 2020, the United Kingdom ceased to be a Member State of the European Union. While the United Kingdom remains party to the EDF until the closure of all programs, and assumes the same obligations as the Member States, in accordance with Article 153 of the Withdrawal Agreement, its share of uncommitted and decommitted funds from the Eight, Ninth and 10th EDF cannot be reused.

2.10.2. Called and uncalled fund capital by Member States and the UK

EUR million Contributions 11th EDF % Uncalled capital 31.12.2019 Capital called in 2020 Uncalled capital 31.12.2020 Austria 2,40 442 (105) 337 Belgium 3,25 599 (143) 456 Bulgaria 0,22 40 (10) 31 Croatia 0,23 42 (10) 32 Cyprus 0,11 21 (5) 16 Czech Republic 0,80 147 (35) 112 Denmark 1,98 365 (87) 278 Estonia 0,09 16 (4) 12 Finland 1,51 278 (66) 212 France 17,81 3 285 (784) 2 501 Germany 20,58 3 795 (906) 2 889 Greece 1,51 278 (66) 212 Hungary 0,61 113 (27) 86 Ireland 0,94 173 (41) 132 Italy 12,53 2 311 (551) 1 759 Latvia 0,12 21 (5) 16 Lithuania 0,18 33 (8) 25 Luxemburg 0,26 47 (11) 36 Malta 0,04 7 (2) 5 Netherlands 4,78 881 (210) 671 Poland 2,01 370 (88) 282 Portugal 1,20 221 (53) 168 Romania 0,72 132 (32) 101 Slovakia 0,38 69 (17) 53 Slovenia 0,22 41 (10) 32 Spain 7,93 1 463 (349) 1 114 Sweden 2,94 542 (129) 413 United Kingdom 14,68 2 707 (646) 2 061 Total 100,00 18 440 (4 400 ) 14 040

Since the capital of the Eighth, Ninth and 10th EDF has been called up and received in its entirety in previous years, in 2020, 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 31.12.2020 31.12.2019 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 31.12.2018 (2 509 ) 2 137 55 317 — Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs (1) (27) 28 — — 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 — Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs (2) (69) 71 — — Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs — — (147) 147 — Balance at 31.12.2020 (2 512 ) 2 041 188 283 —

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, as set out in the Internal Agreements.

3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

REVENUE

EUR million Note 2020 2019 Revenue from non-exchange transactions 3.1 92 28 Revenue from exchange transactions 3.2 43 46 Total 135 74

3.1. REVENUE FROM NON-EXCHANGE TRANSACTIONS

EUR million Note Eighth EDF Ninth EDF 10th EDF 11th EDF 2020 2019 Recovery of expenses (1) 5 28 7 39 13 Co-financing revenue 3.1.1 — — 41 12 53 14 Total (1) 5 69 19 92 28

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

EUR million 2020 2019 Direct Management Implemented by: Commission 2 1 EU delegations 11 6 13 6 Indirect Management Implemented by: Third countries 42 15 Public law bodies 13 International organisations 17 5 Private law bodies with a public service mission 7 2 79 22 Total 92 28

3.1.1. Co-financing revenue

The co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance. The contributions remain under liabilities (see note 2.6.1 & 2.7.2) 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 2020 2019 Financial revenue — 5 1 1 6 7 Other revenue — 5 18 13 37 39 Total — 10 19 14 43 46

Financial revenue comprises essentially accrued interest on overdue recovery orders (EUR 1,5 million) and interest on pre-financing (EUR 4,7 million). Other revenue relates mainly to foreign exchange gains. The corresponding foreign exchange losses are recorded under other expenses (see note 3.6).

EXPENSES

Included under this heading are expenses incurred in relation to operational activities.

3.3. AID INSTRUMENTS

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2020 2019 Programmable aid — — 244 2 646 2 889 2 120 Macro-economic support — (8) — — (8) 29 Sectoral policy — 3 — — 3 (0) Intra ACP projects — (22) 212 829 1 019 951 Emergency aid — (7) 5 21 19 112 Institutional support — — 2 10 13 7 Contributions to Trust Funds — — — 673 673 535 Total — (33) 462 4 179 4 607 3 755

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

In 2020, operational expenditure increased significantly by EUR 852 million mainly as a result of the increase in expenses under the 11th EDF (kEUR 3 141 in 2019 to kEUR 4 179 in 2020). The COVID-19 crisis led to an increase in expenses under the 11th EDF in particular as projects were reoriented to deal with the crisis. In addition, the changes in expenses under the 10th and 11th EDF are also in line with the lifecycle of the EDF and related to the evolution of the number of open contracts under these EDFs. The 11th EDF has reached maturity in 2020, which means that at year-end there were significantly more contracts under which expenses were incurred (see note 2.2). Conversely, many contracts were completed and closed under the 10th and previous EDF’s in 2020, which resulted in less expenses incurred under those EDF’s.

Under the 11th EDF, the increase in expenses comes mainly from the increase in the programmable aid (increase from kEUR 2 120 in 2019 to kEUR 2 889 in 2020) and the Contributions to the Trust funds (increase from EUR 535 million in 2019 to EUR 673 million in 2020). On the other hand expenses relating to emergency aid decreased by EUR 92 million. As noted above, primarily under the 11th EDF the structure of the aid instruments expenses changed compared to 2019 so as to address the needs triggered by the COVID 19 pandemic.

The negative amount under the Ninth EDF is mainly due to the reversal of 2019 closure bookings.

3.4. CO-FINANCING EXPENSES

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2020 2019 Co-financing — — 41 12 53 14

Included under this heading are the expenses incurred on co-financing projects in 2020. 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).

In 2020, many co-financed projects under the 11th EDF have been finalised or reached maturity, which led to an increase in expenses and a decrease in co-financing liabilities (see note 2.6.1 & 2.7.2).

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 and in the co-financing revenue (note 3.1.1).

Aid instruments and co-financing expenses by management type

EUR million 2020 2019 Direct Management Implemented by: Commission 168 86 EU executive agencies 14 (13) Trust Funds 19 483 EU delegations 1 969 1 141 2 170 1 697 Indirect Management Implemented by: EIB and EIF (67) 145 International organisations 1 268 1 003 Private law bodies with a public service mission 243 126 Public law bodies 248 184 Third countries 795 613 EU bodies with Public Private Partnership 2 1 2 490 2 073 Total 4 660 3 770

3.5. FINANCE COSTS

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2020 2019 Write-down of receivables (1) 3 16 4 21 1

The increase under this heading is due to the increase in the estimated expenses on irrecoverable amounts arising from ageing recovery orders (over 2 years), bankruptcies and waivers.

3.6. OTHER EXPENSES

The heading Administrative and IT expenses includes amounts that are based on the EDF internal agreement allocated to the Commission to cover the administrative costs incurred by both the Headquarters and the Delegations in respect to managing the EDF programmes. The so called ‘support expenditure’ relate mainly to expenses for preparation, follow-up, monitoring, and evaluation of projects as well as expenses for computer networks, technical assistance, financial management and forecasting etc.

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 2020 2019 Administrative and IT expenses — — — 120 120 220 Provision for risks and charges — — — — — — Realised losses on trade debtors — 4 1 — 4 3 Exchange losses — 6 24 42 72 37 Total (0) 9 25 162 196 260

The decrease under this heading is a combined effect of the significant decrease in the year-end estimation of administrative and IT expenses (2019: EUR 220 million) and the increase of expenses relating to exchange losses (2019: EUR 37 million).

4. CONTINGENT ASSETS & LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES

4.1. CONTINGENT ASSETS

EUR million Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2020 31.12.2019 Performance guarantees — 7 4 — 12 15 Retention guarantees — 5 3 — 9 9 Total — 13 7 — 21 24

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 retention 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 31.12.2020 31.12.2019 Outstanding commitments not yet expensed — 42 580 6 602 7 224 8 564

At 31 December 2020 the budgetary RAL totalled EUR 9 286 million (2019: EUR 10 270 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 31.12.2020 31.12.2019 USD GBP DKK SEK EUR Other Total USD GBP DKK SEK EUR Other Total Financial assets Receivables and recoverables 65 — — — 69 6 140 — — — — 115 8 123 Cash and cash equivalents 2 — — — 726 — 728 1 — — — 1 178 — 1 179 67 — — — 795 6 868 1 — — — 1 293 8 1 302 Financial liabilities Non-current financial liabilities — — — — (2) — (2) — — — — (19) — (19) Payables (16) — (6) — (603) 10 (615) (7) — — — (509) — (516) (16) — (6) — (605) 10 (617) (7) — — — (528) — (535) Total 51 — (6) — 190 16 251 (6) — — — 765 8 767

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 credit interest rate risk. However, since the ECB deposit facility rate is negative (-0,5 % since September 2019), deposits in EUR generate negative interests.

Contributions to the EDF budget are credited by each Member State to a special account opened with the financial institution designated by it. In accordance with Council Regulation (EU) 2016/888 (8), any negative remuneration on these accounts is borne by the relevant Member State.

Overnight balances held in commercial bank accounts are however subject to negative interest charges. The Commission, on behalf of the EDF, has therefore put in place cash management procedures to minimise balances kept on these accounts and limit as much as possible the negative interest costs. Interest charges are calculated based on variable market rates to which a contractual margin (positive or negative) is applied. Controls are in place to ensure that these interest charges are in line with contractual agreements.

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 140 124 7 9 — Total at 31.12.2020 140 124 7 9 — Exchange receivables and non-exchange recoverables 123 100 16 7 — Total at 31.12.2019 123 100 16 7 —





Financial assets by risk category:

EUR million 31.12.2020 31.12.2019 Receivables Cash Total Receivables Cash Total Counterparties with external credit rating Prime and high grade 9 372 381 7 958 965 Upper medium grade — 211 211 — 220 220 Lower medium grade — 145 145 — 1 1 Non- investment grade — — — — — — 9 728 737 7 1 179 1 186 Counterparties without external credit rating Group 1 (debtors without defaults in the past) 131 — 131 116 — 116 Group 2 (debtors with defaults in the past) — — — — — — Total 131 — 131 116 — 116 Total 140 728 868 123 1 179 1 302

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 at 31.12.2020 615 2 — 617 Financial liabilities at 31.12.2019 516 2 17 535

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

8. RECONCILIATION OF ECONOMIC RESULT AND BUDGET RESULT

The economic result of the year is calculated 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 2020 2019 ECONOMIC RESULT OF THE YEAR (4 744 ) (3 956 ) Revenue Entitlements not affecting the budget result (2) — Entitlements established in current year but not yet collected (23) (16) Entitlements established in previous years and collected in current year 13 23 Net effect of pre-financing 61 53 Accrued revenue (net) (33) (67) Other — (3) Expenses Expenses of the current year not yet paid 119 107 Expenses of previous years paid in the current year (817) (672) Net effect of pre-financing (281) (44) Accrued expenses (net) 1 102 719 BUDGET RESULT OF THE YEAR (4 604 ) (3 856 )

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 2020 (9)

BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND

General background on Union Trust Funds

Establishment

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (10) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (11), 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.

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.

Mission

The EUTF Bêkou, was established, with the aim of promoting the stabilisation and reconstruction of the Central African Republic (CAR). Its main objective, as set out in the Constitutive Agreement, is ‘to provide consistent, targeted aid for the resilience of vulnerable groups and support for all aspects of the Central African Republic's exit from the crisis and reconstruction, to coordinate actions over the short, medium and long term and to help neighbouring countries cope with the consequences of the crisis’.

Main operational activities

The Union trust fund pools together resources from different donors to finance programmes on the basis of agreed objectives. Since its creation in July 2014, the EUTF Bêkou has adopted 22 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.

Governance

The management of the EUTF Bêkou is ensured by the European Commission, which also acts as the secretariat of its two governing bodies — the Trust Fund Board and the Operational Board. The Trust Fund Board and the Operational Committee of the EUTF Bêkou are composed of representatives of the donors, of the Commission, of the European Parliament, a representative of the Central African Republic’s authorities and observers. The rules for the composition of the board and its internal rules are laid down in the constitutive agreement of the Union trust fund.

The main task of the Board is to establish and review the overall strategy of the trust fund. The Operational Board is responsible for the selection of the actions financed by the Fund and supervises their implementation. It also approves the annual accounts and the annual reports on the activities financed by the trust fund.

Sources of financing

The EUTF Bêkou is financed through contributions from donors.

Annual accounts

Basis for preparation

The legal framework and the deadlines for the preparation of the annual accounts are set by the ‘Agreement establishing the European Union trust fund for the Central African Republic, “The Bêkou EU Trust Fund”, and its internal rules’ (‘Constitutive Agreement’). As per this Constitutive Agreement, the annual accounts are prepared in accordance with the rules adopted by the Accounting Officer of the Commission (EU Accounting Rules, EAR), which are based on internationally accepted accounting standards for the public sector (IPSAS).

Accounting Officer

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.

Composition of the annual accounts

The annual accounts cover the period from 1 January to 31 December and comprise the financial statements and the reports on the implementation of the budget. While the financial statements and the complementary notes are prepared on an accrual accounting basis, the budget implementation reports are primarily based on movements of cash.

Process from provisional accounts to discharge

The annual accounts are subject to independent external audit. The provisional annual accounts prepared by the Accounting Officer are transmitted, by the 1st of March of the following year, to the audit company selected by the entity following a tender procedure. Following the audit, the Accounting Officer prepares the final annual accounts and submits them 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.

Operational highlights

Achievements of the year

The EU launched its first ever Trust Fund (EUTF), named Bêkou (meaning hope in Sango language), in July 2014 to assist the Central African Republic (CAR) and its population in the aftermath of the 2013 crisis. The EUTF Bêkou aims to ensure access to basic services (mainly health and water and sanitation), support rural development and economic recovery, and promote reconciliation. Since its creation, the EUTF Bêkou has adopted 23 programmes and has reached more than 2,8 million beneficiaries.

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 currently the only instrument building resilience for both the population and the State, in a true LRRD (linking relief, rehabilitation and development) approach.

Operational highlights of the year 2020 include:

— In April, the EUTF Bêkou adopted three new programmes by written procedure. These include the third phase of the Gender programme, the second phase of the Reconciliation action, which envisages the continuation of the support to Central African radios and notably Radio Ndeke Luka, as well as a new programme on Vocational Training in the rural sector.

— In response to the COVID-19 outbreak, the EUTF Bêkou made substantial efforts to re-orient, accelerate and prioritise actions for the most effective response to the crisis. In this context, the Health and Water and Sanitation programmes were of critical importance for supporting the Team Europe’s response to the crisis that amplified existing needs in the two sectors. In June, the EUTF Bêkou approved a revision of the two actions, increasing the budget of the Health programme by EUR 2,2 million and that of the Water and Sanitation action by EUR 2 million.

— In December, the EUTF Bêkou adopted a programme supporting the deployment of civil protection for a total amount of EUR 4 million. Moreover, in order to avoid any financing gap in the all-important health sector, the EUTF Bêkou increased again the budget of the on-going health programme (phase III) (additional EUR 10 million).

— The implementation of EUTF Bêkou projects were marked by the volatile security context (localised conflicts in Bangui and the hinterland followed by periods of relative stability), as well as incertitude as the presidential elections of December 2020 were approaching.

In December 2020, following an official request from the EUTF Board, the EU decided an extension of the EUTF Bêkou until 31 December 2021, thus bringing its total duration from 78 months to 90 months. This will allow the EUTF Bêkou to commit and contract all received contributions in a timely way and responding to CAR’s needs. This is the second and last extension of the EUTF.

Budget and budget implementation

On the financial side, by the end of 2020, pledges by EUTF contributors amounted to nearly EUR 308,3 million. This is an increase of EUR 12,5 million compared to 2019. EUR 1 million out of these EUR 308,3 million is still to be certified.

In terms of contracts, the EUTF Bêkou signed 7 new contracts and 9 cost-extension contract riders in 2020 for a total amount of nearly EUR 53 million. They contribute to the implementation of its programmes in the sectors of health, water and sanitation, rural development and economic recovery, and reconciliation.

Last but not least, more than EUR 46 million was paid in 2020 on top of payments made during previous years; total disbursements have reached nearly EUR 197 million since the creation of the EUTF Bêkou.

The main impact of COVID-19 on the budget implementation of EUTF Bêkou in 2020 is a follows:

— Less contracts as a result of difficulties to prepare actions;

— Reduced expenses as a result of inability to implement projects and of difficulties to finalise financial reports and expenditure verification reports.

Impact of the activities in the financial statements

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

— Operating expenses (see note 3.3): which have overall decreased by kEUR 661; however the expenses relating to basic health have increased as a result of the increase in the budget in response to the additional challenges brought about by the COVID-19 pandemic;

— Pre-financing (see notes 2.1): decreased by kEUR 3 685 as a result of less advances being paid out due to fewer contracts being signed (7 new contracts in 2020 compared to 11 in 2019);

— Financial liabilities (see note 2.4): decreased by kEUR 11 889 mainly due to the fact that the cashed contributions from the donors are not sufficient to cover the yearly payment outflows. This also led to the shrinking of the cash and cash equivalents (see note 2.3).

BALANCE SHEET

EUR '000 Note 31.12.2020 31.12.2019 NON-CURRENT ASSETS Pre-financing 2.1 2 418 3 273 2 418 3 273 CURRENT ASSETS Pre-financing 2.1 15 482 18 312 Exchange receivables and non-exchange recoverables 2.2 5 340 1 853 Cash and cash equivalents 2.3 7 339 17 432 28 161 37 597 TOTAL ASSETS 30 579 40 870 NON-CURRENT LIABILITIES Financial liabilities 2.4 (17 838 ) (29 727 ) (17 838 ) (29 727 ) CURRENT LIABILITIES Payables 2.5 (795) (10) Accrued charges 2.6 (11 947 ) (11 133 ) (12 741 ) (11 143 ) TOTAL LIABILITIES (30 579 ) (40 870 ) NET ASSETS — — FUNDS & RESERVES Contribution from Members — — Accumulated surplus — — Economic result of the year — — NET ASSETS — —

STATEMENT OF FINANCIAL PERFORMANCE

EUR '000 Note 2020 2019 REVENUE Revenue from non-exchange transactions Revenue from donations 3.1 47 889 48 343 Recovery of expenses 3.2 115 68 48 004 48 410 Revenue from exchange transactions Financial revenue — (2) — (2) Total revenue 48 004 48 408 EXPENSES Operating expenses 3.3 (46 959 ) (47 620 ) Finance costs 3.4 (68) — Other expenses 3.5 (978) (789) Total expenses (48 004 ) (48 408 ) ECONOMIC RESULT OF THE YEAR

CASHFLOW STATEMENT

EUR '000 2020 2019 (Increase)/decrease in pre-financing 3 685 11 405 (Increase)/decrease in exchange receivables and non-exchange recoverables (3 487 ) (715) Increase/(decrease) in financial liabilities (11 889 ) (13 010 ) Increase/(decrease) in payables 784 (908) Increase/(decrease) in accrued charges 814 6 734 NET CASHFLOW (10 093 ) 3 506 Net increase/(decrease) in cash and cash equivalents (10 093 ) 3 506 Cash and cash equivalents at the beginning of the year 17 432 13 926 Cash and cash equivalents at year-end 7 339 17 432

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2020 (12)

BACKGROUND INFORMATION ON THE EUTF AFRICA

General background on Union Trust Funds

Establishment

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (13) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (14), 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.

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.

Mission

The main objectives of the EUTF Africa 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.

Main operational activities

The Union trust fund pools together resources from differ