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

Annual accounts of the European Development Fund 2021

(2022/C 400/01)

CONTENTS

CERTIFICATION OF THE ACCOUNTS 2

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES 3

FUNDS MANAGED BY THE EUROPEAN COMMISSION 8

FINANCIAL STATEMENTS OF THE EDF 10

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 52

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2021 53

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2021 60

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 68

EDF REPORT ON FINANCIAL IMPLEMENTATION 73

ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK 99

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2021 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

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

1. BACKGROUND

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

— the EU budget,

— the European Development Fund,

— the European Investment Bank.

Up until 2021, the European Development Fund (hereinafter referred to as the ‘EDF’) was 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.

Each EDF is concluded for a period of around five years and is governed by its own Financial Regulation, which requires the preparation of specific financial statements. In addition, these financial statements are aggregated 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 new text repealed the previous regulation 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 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 for one year. Unlike the EU Budget, the EDF is a fund operating based on multiannuality. Each EDF establishes an overall fund to implement development cooperation during a period of usually five years. As resources are allocated on a multiannual basis, the allocated funds may be used over the period of the EDF. The lack of budget annuality is highlighted in the budgetary reporting, where the budgetary implementation of the EDFs is measured against the total funds.

The EDF resources are ‘ad hoc’ contributions from the EU Member States. Approximately every five years, Member State representatives met at intergovernmental level and decided on an overall amount to be allocated to the fund and to oversee its implementation.

The Commission manages the fund in accordance with the Union policy on development cooperation. Since Member States have their own development and aid policies in parallel to the Union policy, the Member States must coordinate their policies with the EU to ensure they are complementary.

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

3. 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 meaning that 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 (and even later for audit and evaluation). Furthermore, the implementation of the ongoing projects funded by the European Development Fund will continue until their final completion.

In the context of the new Multi-Annual Financial Framework 2021–2027, the EU cooperation with ACP countries is integrated in the Neighbourhood, Development and International Cooperation Instrument –Global Europe. Similarly, the cooperation with OCTs is now covered by the Overseas Association Decision (OAD). This means that while up to 2021 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 are subject to the authorisation of the European Parliament and that the transactions have to comply with the EU financial regulations in the same way as other EU-funded programmes.

4. YEAR-END REPORTING

4.1. ANNUAL ACCOUNTS

In accordance with Article 18(3) of the EDF Financial Regulation, the EDF financial statements are prepared based on accrual-based accounting rules that themselves are based on International Public Sector Accounting Standards (IPSAS). These 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 by the EDF while taking into account the specific nature of its activities.

The preparation of the EDF annual accounts is entrusted to the Commission's Accounting Officer who is the Accounting Officer of the EDF and 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.

5. AUDIT AND DISCHARGE

5.1. 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.

5.2. 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 2021

Net amount, only 10th and 11th EDF.

Budget implementation

The year 2021 was marked by two events. 2021 was the first year following the sunset clause for the 11th EDF, which was reached on 31 December 2020. Therefore, in 2021 there were no further global commitments of projects under the 11th EDF. In addition, in 2021 the financial implementation for the 10th and 11th EDF for contracts (individual commitments: EUR 2 118 million) and payments (EUR 3 393 million) was impacted by the prolonged COVID crisis.

The total amount of gross payments for all EDFs (EUR 3 435 million) represents 91 % of the target of EUR 3 763 million communicated to the Member States. Due to the prolonged COVID situation, 50 % of Delegations in sub-Saharan Africa did not reach their minimum forecasted payment target (90 %). Most noticeable were Madagascar, that almost fully closed its borders, making it very difficult to continue implementation as initially foreseen; Chad and Gambia due to suspended or delayed implementation; Ethiopia, Guinea Conakry, and Mali where political crises affected operations severely, with an important impact on forecasted budget support payments. In the Pacific and in the Caribbean, COVID restrictions also affected implementation. In Fiji and Haiti, the negative collateral effects, emanating from the deterioration of the economic, social and political situation, had a devastating impact on infrastructure project.

Impact of the activities in the financial statements

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

— Pre-financing (see note 2.2): a decrease of EUR 101 million largely as a result of fewer advances paid out due to the decrease in the number of contracts signed (EUR 3 670 million in 2020 v EUR 2 118 million in 2021). This decrease was mainly driven by challenges faced due to the ongoing COVID-19 pandemic and geopolitical crises. Consequently, cash and cash equivalents increased by EUR 266 million as a result of this significant decrease in pre-financing and other payments (see note 2.5),

— The significantly lower number of open contracts at the end of 2021, caused both by the scaling down of EDF and adverse impact of the ongoing COVID-19 and geopolitical crises on signing of new contracts resulted in a substantial decrease of accrued charges by EUR 519 million (see note 2.8),

— Aid instruments expenses (see note 3.3): an overall decrease in aid instruments expenses of EUR 1 743 million is a combined effect. On one hand the challenging conditions related to the COVID-19 pandemic and unstable geopolitical situation in several countries hampered implementation of EDF activities in 2021. At the same time, the decrease of activities under the 10th and previous EDFs is in line with the scaling down of those EDFs resulting in fewer open contracts under these EDFs.

Impact of the changes in EAR 11 in the financial statements

On 1 January 2021, as a result of changes in the EU accounting rule 11 (see note 1 on Accounting Policies), the financial assets of the EDF were reclassified from financial assets available for sale to financial assets at fair value through surplus or deficit (FVSD). In both cases the financial assets are measured at fair value: the carrying amounts are thus comparable. The corresponding amount of the fair value reserve has been transferred to the accumulated surplus/deficit. This reclassification did not have any impact on the net assets of the EDF (see statement of changes in net assets).

FUNDS MANAGED BY THE EUROPEAN COMMISSION

CONTENTS

FINANCIAL STATEMENTS OF THE EDF 10

EDF BALANCE SHEET 11

EDF STATEMENT OF FINANCIAL PERFORMANCE 12

EDF CASHFLOW STATEMENT 13

EDF STATEMENT OF CHANGES IN NET ASSETS 14

BALANCE SHEET BY EDF 15

STATEMENT OF FINANCIAL PERFORMANCE BY EDF 17

STATEMENT OF CHANGES IN NET ASSETS BY EDF 18

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF 21

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF 52

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2021 53

BALANCE SHEET 58

STATEMENT OF FINANCIAL PERFORMANCE 59

CASHFLOW STATEMENT 59

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2021 60

BALANCE SHEET 66

STATEMENT OF FINANCIAL PERFORMANCE 67

CASHFLOW STATEMENT 67

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS 68

CONSOLIDATED BALANCE SHEET 69

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE 70

CONSOLIDATED CASH FLOW STATEMENT 71

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS 72

EDF REPORT ON FINANCIAL IMPLEMENTATION 73

FINANCIAL STATEMENTS OF THE EDF (4)

EDF BALANCE SHEET

(EUR million) Note 31.12.2021 31.12.2020 NON-CURRENT ASSETS Financial assets 2.1 39 33 Pre-financing 2.2 671 870 Trust Fund contributions 2.3 382 394 Exchange receivables 4 3 1 096 1 300 CURRENT ASSETS Pre-financing 2.2 1 453 1 355 Exchange receivables and non-exchange recoverables 2.4 35 140 Cash and cash equivalents 2.5 994 728 2 481 2 223 TOTAL ASSETS 3 577 3 523 NON-CURRENT LIABILITIES Financial liabilities 2.6 (7) (2) (7) (2) CURRENT LIABILITIES Payables 2.7 (501) (615) Accrued charges 2.8 (1 008 ) (1 527 ) (1 509 ) (2 143 ) TOTAL LIABILITIES (1 516 ) (2 145 ) NET ASSETS 2 061 1 379 FUNDS & RESERVES Fair value reserve 2.9 — (5) Called fund capital — active EDFs 2.10 62 643 58 986 Called fund capital from closed EDFs carried forward 2.10 2 252 2 252 Economic result carried forward from previous years (59 860 ) (55 111 ) Economic result of the year (2 974 ) (4 744 ) NET ASSETS 2 061 1 379





EDF STATEMENT OF FINANCIAL PERFORMANCE

(EUR million) Note 2021 2020 REVENUE Revenue from non-exchange transactions 3.1 Recovery activities 27 92 27 92 Revenue from exchange transactions 3.2 Financial revenue (26) 6 Other revenue 74 37 48 43 Total revenue 75 135 EXPENSES Aid instruments 3.3 (2 864 ) (4 607 ) Co-financing expenses 3.4 (19) (53) Finance costs 3.5 (20) (21) Other expenses 3.6 (145) (197) Total expenses (3 049 ) (4 878 ) ECONOMIC RESULT OF THE YEAR (2 974 ) (4 744 )





EDF CASHFLOW STATEMENT

(EUR million) Note 2021 2020 Economic result of the year (2 974 ) (4 744 ) Operating activities Capital increase — contributions (net) 3 657 4 177 (Increase)/decrease in trust funds contributions 12 (127) (Increase)/decrease in pre-financing 101 (29) (Increase)/decrease in exchange receivables and non-exchange recoverables 105 (17) Increase/(decrease) in financial liabilities 5 (17) Increase/(decrease) in payables (114) 99 Increase/(decrease) in accrued charges and deferred income (519) 209 Other non-cash movements — (3) Investing activities (Increase)/decrease in non-derivative financial assets at fair value through surplus or deficit (*1) (7) 2 NET CASHFLOW 266 (452) Net increase/(decrease) in cash and cash equivalents 266 (451) Cash and cash equivalents at the beginning of the year 2.5 728 1 179 Cash and cash equivalents at year-end 2.5 994 728





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 31.12.2019 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) 1 379 Impact of revised EAR 11 (5) 5 — BALANCE AS AT 1.1.2021 73 041 14 055 58 986 (59 860 ) 2 252 — 1 379 Capital increase — contributions (43) (3 700 ) 3 657 — — 3 657 Economic result of the year — — — (2 974 ) — (2 974 ) BALANCE AS AT 31.12.2021 72 998 10 355 62 643 (62 834 ) 2 252 — 2 061





BALANCE SHEET BY EDF

(EUR million) 31.12.2021 31.12.2020 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) 41 39 — — (2) 35 33 Pre-financing 2.2 — — 219 452 671 — 3 292 575 870 Trust Fund contributions 2.3 — 31 9 341 382 — 29 9 355 394 Exchange receivables — — — 4 4 — — — 3 3 — 31 226 839 1 096 — 33 299 969 1 300 CURRENT ASSETS Pre-financing 2.2 — 14 353 1 085 1 453 0 9 341 1 005 1 355 Exchange receivables and non-exchange recoverables 2.4 180 (314) 1 296 (1 127 ) 35 181 (177) 1 723 (1 586 ) 140 Inter-EDF accounts 181 (316) 1 279 (1 144 ) — 181 (246) 1 663 (1 598 ) — Cash and cash equivalents 2.5 — — — 994 994 — — — 728 728 361 (615) 2 928 (192) 2 481 362 (414) 3 726 (1 451 ) 2 223 TOTAL ASSETS 361 (584) 3 154 646 3 577 362 (381) 4 025 (483) 3 523 NON-CURRENT LIABILITIES Financial liabilities 2.6 — — — (7) (7) — — — (2) (2) — — — (7) (7) — — — (2) (2) CURRENT LIABILITIES Payables 2.7 — (0) (27) (473) (501) — (1) (62) (554) (615) Accrued charges 2.8 — (6) (110) (892) (1 008 ) — (67) (217) (1 244 ) (1 527 ) — (6) (138) (1 365 ) (1 509 ) — (67) (279) (1 798 ) (2 143 ) TOTAL LIABILITIES — (6) (138) (1 372 ) (1 516 ) — (67) (279) (1 800 ) (2 145 ) NET ASSETS 361 (591) 3 016 (725) 2 061 362 (448) 3 747 (2 282 ) 1 379 Fair value reserves 2.9 — — — — — — — (2) (4) (5) Called fund capital — active EDFs 2.10 12 164 10 492 20 960 19 027 62 643 12 164 10 535 20 960 15 327 58 986 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 ) 2 018 101 394 — (2 512 ) 2 041 188 283 — Economic result carried forward from previous years (10 098 ) (14 404 ) (19 065 ) (16 293 ) (59 860 ) (10 098 ) (14 440 ) (18 606 ) (11 966 ) (55 111 ) Economic result of the year (1) (6) (260) (2 708 ) (2 974 ) — 36 (457) (4 324 ) (4 744 ) NET ASSETS 180 (274) 1 737 419 2 061 181 (203) 2 084 (683) 1 379





STATEMENT OF FINANCIAL PERFORMANCE BY EDF

(EUR million) 2021 2020 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 26 27 (1) 5 69 19 92 — — 1 26 27 (1) 5 69 19 92 Revenue from exchange transactions 3.2 Financial revenue — 0 (22) (4) (26) — 5 1 1 6 Other revenue — 5 14 55 74 — 5 18 13 37 — 5 (8) 51 48 — 10 19 13 43 Total revenue — 5 (7) 78 75 (1) 15 88 32 135 EXPENSES Aid instruments 3.3 — (7) (214) (2 644 ) (2 864 ) — 34 (462) (4 179 ) (4 607 ) Co-financing expenses 3.4 — — — (19) (19) — — (41) (12) (53) Finance costs 3.5 — 7 (23) (3) (20) 1 (3) (16) (4) (21) Other expenses 3.6 — (11) (16) (119) (145) — (9) (25) (162) (197) Total expenses — (12) (252) (2 785 ) (3 049 ) 1 21 (545) (4 356 ) (4 878 ) ECONOMIC RESULT OF THE YEAR — (8) (259) (2 708 ) (2 974 ) — 36 (457) (4 324 ) (4 744 )

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 31.12.2019 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 Transfers to/from the 10th EDF — — — BALANCE AS AT 31.12.2021 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 31.12.2019 10 773 15 10 758 (14 440 ) 1 625 2 109 53 Transfers to/from the 10th EDF — — — Transfers to/from the 10th EDF — (69) (69) Refund to Member States (223) (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) Capital increase — contributions — — — Transfers to/from the 10th EDF — (23) (23) Refund to Member States (43) (43) (43) Economic result of the year — (6) — (6) BALANCE AS AT 31.12.2021 10 507 15 10 492 (14 410 ) 1 625 2 018 (274)





(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) Fair value reserve (G) Total Net Assets (C)+(D)+(E)+(F) 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) 2 084 Impact of revised EAR 11 (2) 2 — BALANCE AS AT 1.1.2020 20 960 — 20 960 (19 065 ) 188 — 2 084 Transfers to/from the Eighth and Ninth EDF — 23 23 Transfers to/from the 11th EDF — (110) (110) Economic result of the year — (260) (260) BALANCE AS AT 31.12.2021 20 960 — 20 960 (19 324 ) 101 — 1 737





(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 transfers between active EDFs (F) Fair value reserve (G) Total Net Assets (C)+(D)+(E)+(F)+(G) 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) Impact of revised EAR 11 (4) 4 — BALANCE AS AT 1.1.2020 29 367 14 040 15 327 (16 294 ) 283 — (683) Capital increase — contributions (3 700 ) 3 700 110 3 810 Economic result of the year — (2 708 ) — (2 708 ) BALANCE AS AT 31.12.2021 29 367 10 340 19 027 (19 002 ) 394 — 419

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 millions 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 31.12.2021 31.12.2020 Currency 31.12.2021 31.12.2020 BGN 1,9558 1,9558 PLN 4,5969 4,5597 CZK 26,8580 26,2420 RON 4,9490 4,8683 DKK 7,4364 7,4409 SEK 10,2503 10,0343 GBP 0,84028 0,8990 CHF 1,0331 1,0802 HRK 7,5156 7,5519 JPY 130,3800 126,4900 HUF 369,1900 363,8900 USD 1,1326 1,2271

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, financial risk of accounts receivable and the amounts disclosed in the notes concerning financial instruments, impairment allowance for financial assets at amortised cost and for financial guarantee contract liabilities, accrued revenue and charges, provisions, degree of impairment of intangible assets and property, plant and equipment, net realisable value of inventories, contingent assets and liabilities. 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 revised European Union Accounting Rules (EAR)

Revised EAR effective for periods beginning on or after 1 January 2021

In 2020, the Accounting Officer adopted the revised EAR 11 ‘Financial Instruments’, which is mandatorily effective as of 1 January 2021. The revised EAR 11 is based on the new IPSAS 41 ‘Financial Instruments’, the amended IPSAS 28 ‘Financial Instruments: Presentation’ and the amended IPSAS 30 ‘Financial Instruments: Disclosures’ which were issued in August 2018. It establishes the financial reporting principles for financial assets and financial liabilities. In accordance with the transition provisions of the revised EAR 11, the entity accounts for any changes from the initial application, on 1 January 2021. The revised EAR 11 does not require the restatement of prior periods. As a result, the financial assets, financial liabilities, exchange receivables and interest revenue/expense as at 31 December 2020 presented in these accounts have been accounted for in accordance with the accounting policies as stated in the 2020 financial statements of the entity.

Changes from the application of the revised EAR 11

New classification and measurement principles for financial assets

The revised EAR 11 introduces a principles-based approach to the classification of financial assets and requires the use of two criteria: the entity’s model for managing its financial assets and the contractual cash-flow characteristics of those assets. Depending on these criteria, financial assets are classified in the following categories: ‘financial assets at amortised cost’ (AC), ‘financial assets at fair value through net assets/equity’ (FVNA), or ‘financial assets at fair value through surplus or deficit’ (FVSD).

The application of the new criteria led to the reclassification of all equity investments and debt securities from ‘available for sale’ to FVSD. The related fair value reserve was reclassified — within Net Assets — to accumulated surplus or deficit.

New impairment model

Whereas the previous impairment model was based on incurred losses, the revised EAR 11 has introduced a forward-looking impairment model based on expected credit losses (ECL) over the lifetime of the financial asset. The ECL takes into account possible default events and the evolution of the credit quality of the financial assets. The new impairment model applies to all financial assets measured at AC or at FVNA as well as to loan commitments and financial guarantee contracts.

Financial guarantee accounting

The revised EAR 11 requires the application of the financial guarantee accounting requirements to all financial guarantee contracts. The measurement of the financial guarantee liability relies on the fair value of the guarantee at initial recognition and the evolution of the expected credit losses from the guaranteed debts portfolio.

1.3. BALANCE SHEET

1.3.1. Financial assets

Classification at initial recognition

The classification of the financial instruments is determined at initial recognition. Based on the management model and the asset contractual cash-flow characteristics the financial assets can be classified in three categories: Financial assets at amortised cost (‘AC’), financial assets at fair value through net assets/equity (‘FVNA’) or financial assets at fair value through surplus or deficit (‘FVSD’).

(i) Financial assets at amortised cost

Financial assets at amortised cost are non-derivative financial assets that meet two conditions: (1) The entity holds them in order to collect the contractual cash flows. (2) On specified days, there are contractual cash flows that are solely payments of the principal and interest on the outstanding principal.

This category comprises:

— cash and cash equivalents,

— loans (including term deposits with original maturity of more than three months),

— exchange receivables.

Financial assets at amortised cost are included in current assets, except for those with maturity of more than 12 months from the reporting date.

(ii) Financial assets at fair value through net assets/equity

These non-derivatives financial assets have contractual cash flows that represent only principal and interest on the outstanding principal. In addition, the management model is to hold the financial assets both to collect contractual cash flows and to sell the financial assets.

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

The entity does not hold such assets at 31 December 2021.

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

The entity classifies derivatives and equity investments as FVSD because the contractual cash flows do not represent only principal and interests on the principal.

In addition, the entity classifies the debt securities it holds as FVSD because the portfolios of debt securities are managed and evaluated on a portfolio fair value basis.

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

Initial recognition and measurement

Purchases of financial assets at fair value through surplus or deficit are recognised on their trade-date — the date on which the entity commits to purchase the asset. Cash equivalents and loans are recognised when cash is deposited in a financial institution or advanced to borrowers.

Financial assets are initially measured at fair value. For all financial assets not carried at fair value through surplus or deficit, the transactions costs are added to the fair value at initial recognition. For financial assets carried at fair value through surplus or deficit the transaction costs are expensed in the statement of financial performance.

The fair value of a financial asset on initial recognition is normally the transaction price unless the transaction is not at arm’s length, i.e. at no or at nominal consideration for public policy purposes. In this case, the difference between the fair value of the financial instrument and the transaction price is a non-exchange component which is recognised as an expense in the statement of financial performance. In this case, the fair value of a financial asset is derived from current market transactions for a directly equivalent instrument. If there is no active market for the instrument, the fair value is derived from a valuation technique that uses available data from observable markets.

Subsequent measurement

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method.

Financial assets at fair value through surplus or deficit are subsequently measured at fair value. Gains and losses from changes in the fair value (including those stemming from foreign exchange translation and any interests earned) are included in the statement of financial performance in the period in which they arise.

Fair value at subsequent measurement

The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities and over-the–counter derivatives), the EU establishes a fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cashflow analysis, option pricing models and other valuation techniques commonly used by market participants.

Investments in venture capital funds which do not have a quoted market price in an active market are valued at the attributable net asset value, which is considered as an equivalent of their fair value.

Impairment of financial assets

The EU recognises and measures an impairment loss for expected credit losses on financial assets that are measured at amortised cost and at fair value through net assets/equity.

The expected credit loss (ECL) is the present value of the difference between the contractual cash flows and the cash flows that the EU expects to receive. The ECL incorporates reasonable and supportable information that is available without undue cost or effort at the reporting date.

For assets at amortised cost, the asset’s carrying amount is reduced by the amount of the impairment loss which is recognised in the statement of financial performance. If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the statement of financial performance.

(a) Receivables

The entity measures the impairment loss at the amount of lifetime ECL, using practical expedients (e.g. provision matrix).

(b) Cash and cash equivalents

The entity holds cash and cash equivalents in current bank accounts and term deposits of up to 3 months. The cash is held in banks with very high credit ratings, thus having very low default probabilities. Given the short duration and low default probabilities, the expected credit losses from cash and cash equivalents are negligible. As a result, no impairment allowance is recognised for cash equivalents.

(c) Loans

The ECL is measured with a three stage model that takes into account probability weighted default events during the lifetime of the financial asset and the evolution of credit risk since the origination of the financial asset. For loans, origination is the date of the irrevocable loan commitment

If there is no significant increase in credit risk since origination (‘stage 1’), the impairment loss is the ECL from possible default events in the next 12 months from the reporting date (‘12-month ECL’). If there is a significant increase in credit risk since origination (‘stage 2’) or if there is objective evidence of a credit impairment (‘stage 3’), the impairment loss equals the ECL from possible default events over the whole lifetime of the financial asset (‘lifetime ECL’)

Derecognition

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. Sales of financial assets through surplus or deficit are recognised on their trade-date.

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 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. The entity classified them as financial assets at amortised cost and measured them accordingly.

Recoverables from non-exchange transactions are carried at fair value as at the date of acquisition 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 assets at amortised cost and include cash at hand, deposits held at call or at short notice with banks, and other short-term highly liquid investments with original maturities of three months or less.

1.3.5. 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. Financial liabilities

Financial liabilities are classified as financial liabilities carried at amortised cost, financial liabilities at fair value through surplus or deficit, or as financial guarantee contract liabilities.

Financial liabilities at amortised cost are initially recognised at fair value including transaction costs incurred and subsequently carried at amortised cost using the effective interest method. They are derecognised from the statement of financial position if and only if the obligation is discharged, waived, cancelled or expired.

Financial liabilities at fair value through surplus or deficit include derivatives where the fair value is negative. Where the guarantee contract requires the entity to make payments in response to changes in financial instruments prices or foreign exchange rates, the guarantee contract is a derivative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit.

The entity recognises a financial guarantee contract liability when it enters into a contract that requires to make specified payments to reimburse the guarantee holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contract liabilities are initially recognised at fair value.

The subsequent measurement depends on the evolution of the credit risk exposure from the financial guarantee. If there is no significant increase in credit risk (‘stage 1’), financial guarantee liabilities are measured at the higher of the 12 months’ expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation. If there is a significant increase in credit risk (‘stage 2’), financial guarantee liabilities are measured at the higher of the lifetime expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation.

Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. Financial guarantee contracts are classified as current liabilities except if the entity has an unconditional right to defer the settlement of the liability for at least twelve months after the reporting date.

1.3.7. Accrued and deferred revenue and charges

Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, 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:

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.

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.

(a) Interest revenue and expense

Interest revenue and expense from financial assets and financial liabilities at amortised cost are recognised in the statement of financial performance using the effective interest method. This is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest revenue or interest expense over the relevant period.

(b) Revenue from dividends

Revenue from dividends and similar distributions is recognised when the right to receive payment is established.

(c) Revenue and expense from financial assets at fair value through surplus or deficit

This refers to the fair value gains (revenue) and fair value losses (expense) from these financial assets, including those stemming from foreign exchange translation. For interest-bearing financial assets, this also includes interest.

(d) Revenue from financial guarantee contracts

The revenue from financial guarantee contracts (guarantee premium) is recognised over the time the entity stands ready to compensate the holder of the financial guarantee contract for the credit loss it may incur.

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 member 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

A financial asset is any asset that is:

(a) cash;

(b) an equity instrument of another entity;

(c) a contractual right: to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or

(d) a contract that will or may be settled in the entity’s own equity instruments.

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.

The financial assets of the EDF comprise of financial assets at FVSD and loans and are as follows:

(EUR million) 31.12.2021 31.12.2020 Financial assets at fair value through surplus or deficit (FVSD) 38 — Available for sale financial assets — 32 Loans 1 1 Total 39 33

The EUR 38 million of financial assets at FVSD relate to equity investments in two main areas: Renewable sustainable energy via Climate Investor One, ElectriFI and GEEREF, and promoting inclusive smallholder and rural SME finance via the ABC FUND.

EUR 1 million relates entirely to a loan given to ElectriFI which is an investment facility that finances early-stage and small-sised projects focusing on electricity access and generation from sustainable energy sources in emerging markets. It has a global scope, with a particular focus on sub-Saharan Africa.

2.2. PRE-FINANCING

Many contracts provide for payments of advances before the commencement of works, delivery of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments based on progress reports. Pre-financing is normally paid in the currency of the country or territory where the project is executed.

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

(EUR million) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Non-current pre-financing 2.2.1 — — 219 452 671 870 Current pre-financing 2.2.2 — 14 353 1 085 1 453 1 355 Total — 14 572 1 537 2 123 2 225

2021 marked the first year following the sunset clause of the 11th EDF. This meant that as of 1 January 2021 no further global commitments could be made. In addition, the prolonged COVID crisis made implementation increasingly difficult for several delegations in particular in Madagascar, Chad and Gambia. This coupled with political crises in other areas such as Ethiopia, Guinea, Conakry and Mali, led to a decrease in the signature of individual commitments and thus to a decrease in pre-financing in the 11th EDF from EUR 1 583 million in 2020 to EUR 1 537 million in 2021.

The decrease of pre-financing in the 10th EDF from EUR 633 million in 2020 to EUR 572 million in 2021, is a consequence of the normal lifecycle of the EDF. As a result of the phasing out of the 10th EDF many contracts were completed and closed. Consequently, the level of pre-financing payments made to beneficiaries decreased while the clearing of pre-financing increased.

In 2020, included under current pre-financing was an amount of EUR 3 million which are now classified as exchange receivables relating to financial instruments.

2.2.1. Non-current pre-financing by management mode

(EUR million) 31.12.2021 31.12.2020 Direct Management Implemented by: Commission 72 139 EU executive agencies 8 8 EU delegations 15 25 95 171 Indirect Management Implemented by: EIB and EIF 230 266 International organisations 278 343 Private law bodies with a public service mission 12 28 Public law bodies 40 49 Third countries 14 11 EU bodies and Public Private Partnership 1 1 575 698 Total 671 870

2.2.2. Current pre-financing

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Pre-financing (gross) — 24 970 4 717 5 711 5 097 Cleared via cut-off — (10) (617) (3 632 ) (4 258 ) (3 742 ) Total — 14 353 1 085 1 453 1 355

2.2.3. Current pre-financing by management mode

(EUR million) 31.12.2021 31.12.2020 Direct Management Implemented by: Commission 61 (40) EU executive agencies 11 14 EU delegations 159 206 231 180 Indirect Management Implemented by: EIB and EIF 160 224 International organisations 642 572 Private law bodies with a public service mission 109 73 Public law bodies 119 146 Third countries 190 155 EU bodies and Public Private Partnership 1 4 1 221 1 175 Total 1 453 1 355

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) 31.12.2021 31.12.2020 Guarantees for pre-financing 44 49

The majority of pre-financing is paid under the indirect management mode. In this case, the beneficiary of the guarantee is not the EDF but the contracting authority. Even though the EDF is not the beneficiary, those guarantees secure its assets. In 2021, those guarantees amounted to EUR 764 million.

2.3. TRUST FUND CONTRIBUTIONS

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

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

EUR million Net contribution at 31.12.2020 Contributions paid in 2021 Allocation of TF’s net expenses 2021 Net contribution at 31.12.2021 Africa 385 627 (631) 381 Bêkou 9 7 (15) 1 Total 394 634 (646) 382

The decrease of contributions from EUR 800 million in 2020 to EUR 634 million in 2021 stems from the decrease in trust funds expenses due to the ongoing COVID-19 pandemic and deteriorating safety situations in several regions which hampered activities of the trust funds in 2021.

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 31.12.2021 31.12.2020 Recoverables from non-exchange transactions 2.4.1 26 48 Receivables from exchange transactions 2.4.2 9 92 Total 35 140

2.4.1. Recoverables from non-exchange transactions

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Member States — — — — — — Customers — 4 47 5 56 61 Public bodies — 7 17 2 25 27 Third states — 1 4 1 6 4 Write down — (9) (51) (5) (66) (49) Inter-company accounts with EU Institutions — — — 5 5 4 Total — 2 16 8 26 48

2.4.2. Receivables from exchange transactions

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Accrued income — — (1) — — 88 Inter-EDF accounts 181 (316) 1 279 (1 144 ) — — Other — — — 9 9 4 Total 181 (316) 1 278 (1 136 ) 9 92

The decrease in accrued income in 2021, is mainly due to the termination of the debt relief project with the World Bank for which an amount of EUR 62,6 million was still outstanding at the end of 2020 but which was regularised in 2021. In addition, accrued interest in 2020 also included EUR 18 million related to the Africa EU Infrastructure project. Upon further analysis, it resulted that the interest was not due to the EDF and therefore this interest was not collected in 2021 (see note 3.2).

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.

The heading ‘other’ comprises two financial instrument receivables; a receivable of EUR 4 million from the Global Energy Efficiency and Renewable Energy Fund (GEEREF) and another receivable of EUR 4 million from Climate Investor One.

2.5. CASH AND CASH EQUIVALENTS (6)

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

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Special accounts Central banks — — — 795 795 693 — — — 795 795 693 Current accounts Commercial banks — — — 165 165 8 Cash belonging to financial instruments — — — 34 34 27 — — — 199 199 35 Total — — — 994 994 728

The increase in cash and cash equivalents by EUR 266 million can be explained mainly by the decrease in payments due to the additional challenges brought about by the prolonged COVID-19 pandemic and various political crises. This is in line with the decrease in expenses (see note 3.3) and the decrease in pre-financing (see note 2.2). EDF net payments amounted to EUR 3 323 million in 2021 compared to record high payments of EUR 4 605 million in 2020.

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. Financial Provisions

These provisions represent the estimated losses that will be incurred in relation to the guarantees given under different financial instruments, where entrusted entities are empowered to issue guarantees in their own name but on behalf of, and at the risk of, the EDF. The financial risk of the EDF linked to the guarantees is capped and financial assets are gradually provisioned to cover for the future guarantee calls.

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Financial guarantee liability — — — 1 1 —

The amount of EUR 1 million represent the estimated loss in relation to the guarantee given under the Euritz financial instrument of EUR 8 million (see note 3.2.1).

2.6.2. Co-financing payables

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

At the year-end a case-by-case assessment of all co-financing payables is performed and all amounts that are unlikely to be used in the following 12 months are considered non-current. Current amounts are shown under note 2.7.2.

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Non-current co-financing payables — — — 6 6 2 Current co-financing payables — — (3) 38 35 42 Total — — (3) 44 41 44

2.7. PAYABLES

Payables are liabilities to pay for goods or services that have been received or supplied and — unlike accrued charges — have already been invoiced or formally agreed with the supplier. Payables can relate to both exchange transactions (such as the purchase of goods and services) and non-exchange transactions (e.g. cost claims from beneficiaries of grants, pre-financing or other EU funding).

(EUR million) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Current payables 2.7.1 — — 33 230 263 345 Sundry payables 2.7.2 — — (5) 243 238 270 Total — — 27 473 501 615

2.7.1. Current payables

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Suppliers — — 25 47 72 141 Member States — — — 3 3 — Third states — — — 158 158 189 Public bodies — — (11) 61 51 100 Institutions and Agencies — — — 4 4 — Other current payables — — 18 (44) (25) (85) Total — — 33 230 263 345

Payables largely comprise cost statements received by the EDF in respect 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.

Included under payables to third states is an amount of EUR 60 million of budget support to Ethiopia, which has been suspended since November 2020 due to the situation in the country.

The decrease in payables in particular to suppliers and third states is due to a decrease in invoices that have not yet been validated and paid before year-end.

2.7.2. Sundry payables

(EUR million) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Co-financing payables 2.6.2 — — (3) 38 35 42 Deferred capital contributions 2.7.2.1 — — — 199 199 223 Other sundry payables — — (2) 6 4 5 Total — — (5) 243 238 270

2.7.2.1. Deferred capital contributions

An amount of EUR 43 million of deferred capital contributions relate to a refund to Member States from decommitted or unused funds from projects under the Eighth 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 2022.

In addition to the refund, an amount of EUR 156 million relate to the first instalment of 2022 paid in advance by the United Kingdom. According to Article 152 of the Withdrawal Agreement, 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 (see note 2.10.1).

2.8. ACCRUED CHARGES

Accruals are liabilities to pay for goods or services that have been received or supplied but — unlike payables — have not yet been invoiced or formally agreed with the supplier. The calculation of accruals is based on the open amount of budgetary commitments at year-end. The portion of the estimated accrued charges relating to pre-financing paid has been recorded as a reduction of the pre-financing amounts.

Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is issued but the services have not yet been rendered or the goods have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Accrued charges — 6 110 891 1 007 1 526 Other accruals and deferrals — — — 1 1 1 Total — 6 110 892 1 008 1 527

Accrued charges comprise estimated operating expenses for ongoing 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 that relates to pre-financing paid has been recorded as a reduction of the pre-financing amounts (see note 2.2 above).

The decrease in accrued charges is mainly driven by the decrease of accrued charges under the 11th EDF (2020: EUR 1 244 million) and 10th EDF (2019: EUR 217 million). This is in line with the lifecycle of the EDF and the underlying number of open contracts: The 11th EDF implementation peaked in 2020 in response to the upcoming sunset clause on 31 December 2020. In addition, due to the challenges faced due to the ongoing COVID-19 pandemic as well as political crises in several areas, implementation of EDF activities was difficult which led to a decrease in the number of individual contracts signed in 2021. As a result, at the end of 2021 there were significantly fewer open contracts for which the charges had to be estimated and accrued than in 2020 (see also note 2.2).

NET ASSETS

2.9. FAIR VALUE RESERVE

(EUR million) 31.12.2021 31.12.2020 Fair value reserve — 5

As a result of the revision of EAR 11, the fair value reserve has been transferred to the accumulated surplus/deficit (see note 2.1).

2.10. 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 member states. As the uncalled fund capital is 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.

2.10.1. Called fund capital — active EDFs

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF Total 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 Fund capital 12 164 10 507 20 960 29 367 72 998 Uncalled fund capital — (15) — (10 340 ) (10 355 ) Called fund capital 31.12.2021 12 164 10 492 20 960 19 027 62 643

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

By means of Council Decision (EU) 2021/1941 (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 43 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 43 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 2022 which explains the EUR 43 million of deferred capital (see note 2.7.2.1).

While the United Kingdom remains party to the EDF until the closure of all programmes, in accordance with Article 153 of the Withdrawal Agreement, its share of uncommitted and decommitted funds from the Eighth, 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 31.12.2020 Capital called in 2021 Uncalled capital 31.12.2021 Austria 2,40 337 (89) 248 Belgium 3,25 456 (120) 336 Bulgaria 0,22 31 (8) 23 Croatia 0,23 32 (8) 23 Cyprus 0,11 16 (4) 12 Czechia 0,80 112 (30) 83 Denmark 1,98 278 (73) 205 Estonia 0,09 12 (3) 9 Finland 1,51 212 (56) 156 France 17,81 2 501 (659) 1 842 Germany 20,58 2 889 (761) 2 128 Greece 1,51 212 (56) 156 Hungary 0,61 86 (23) 64 Ireland 0,94 132 (35) 97 Italy 12,53 1 759 (464) 1 296 Latvia 0,12 16 (4) 12 Lithuania 0,18 25 (7) 19 Luxembourg 0,26 36 (9) 26 Malta 0,04 5 (1) 4 Netherlands 4,78 671 (177) 494 Poland 2,01 282 (74) 208 Portugal 1,20 168 (44) 124 Romania 0,72 101 (27) 74 Slovakia 0,38 53 (14) 39 Slovenia 0,22 32 (8) 23 Spain 7,93 1 114 (294) 820 Sweden 2,94 413 (109) 304 United Kingdom 14,68 2 061 (543) 1 518 Total 100,00 14 040 (3 700 ) 10 340

Since the capital of the Eighth, Ninth and 10th EDF has been called up and received in its entirety in previous years, in 2021, an amount of EUR 3 700 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 31.12.2021 31.12.2020 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 31.12.2019 (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 — Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs — (23) 23 — — Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs — — (110) 110 — Balance at 31.12.2021 (2 512 ) 2 018 101 394 —

This heading includes the resources transferred between the active EDFs.

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

3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

REVENUE

(EUR million) Note 2021 2020 Revenue from non-exchange transactions 3.1 27 92 Revenue from exchange transactions 3.2 48 43 Total 75 135

3.1. REVENUE FROM NON-EXCHANGE TRANSACTIONS

Revenue from non-exchange transactions relates to transactions where the transferor provides resources to the recipient entity without the recipient entity providing approximately equal value directly in exchange. The heading mainly includes amounts received from the Commission during the year and recoveries of operational expenses.

(EUR million) Note Eighth EDF Ninth EDF 10th EDF 11th EDF 2021 2020 Recovery of expenses — 1 — 7 8 39 Co-financing revenue 3.1.1 — — — 19 19 53 Total — 1 — 26 27 92

The overall revenue from non-exchange transactions decreased by EUR 65 million returning to a normal level following a significant increase in 2020 (2019: EUR 28 million). Year 2020, saw augmented activities across the EDF in response to the upcoming sunset clause on 31 December 2020 and led to an increase in the co-financing revenue.

The decrease of the recovery from expenses can be largely explained by the fewer number of recovery orders issued in 2021 compared to 2020.

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

(EUR million) 2021 2020 Direct Management Implemented by: Commission 1 2 EU delegations 7 11 8 13 Indirect Management Implemented by: Third countries 27 42 Public law bodies (13) 13 International organisations 3 17 Private law bodies with a public service mission 2 7 19 79 Total 27 92

3.1.1. Co-financing revenue

The co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance when received. The contributions remain under liabilities (see notes 2.6.2 and 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

The revenue from exchange transactions and events relates to following types of transactions: rendering of services; sale of goods; and the use by others of entity assets yielding interest, royalties and dividends.

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 2021 2020 Financial revenue — — (22) (4) (26) 6 Other revenue — 5 14 55 74 37 Total — 5 (8) 51 48 43

The financial revenue is negative because last year’s estimated revenue were higher than the current year estimated amounts. This decrease of the estimates is a combined effect. Firstly, upon further analysis it was concluded that interest from the Africa EU Infrastructure project (EUR 18 million), included in the accrued financial revenue last year, forms part of the contributions to the trust fund and is not due to the EDF. Secondly, the accrued interest on late payments of recovery orders has decreased by EUR 8 million compared to last year.

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 2021 2020 Programmable aid — (4) (19) 1 268 1 244 2 889 Macro-economic support — 7 — — 7 (8) Sectoral policy — (2) — (2) (5) 3 Intra-ACP projects — — 228 724 951 1 019 Emergency aid — 6 7 (6) 6 19 Other aid programmes — — — (1) (1) — Institutional support — — (1) 15 14 13 Contributions to Trust Funds — — — 646 646 673 Total — 7 214 2 644 2 864 4 607

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

In 2021, operational expenditure decreased significantly by EUR 1 743 million mainly driven by the decrease in expenses under the 11th EDF (EUR 4 179 million in 2020 to EUR 2 644 million in 2021) coupled with the decrease under the 10th EDF (EUR 462 million in 2020 to EUR 214 million in 2021). This decrease is a combined result of the COVID-19 pandemic and political crises in several areas which slowed down and hampered implementation during the year in particular in the delegations (see note 2.4). In addition, expenses in 2020 were exceptionally high for the 11th EDF: the upcoming sunset clause on 31 December 2021, led to a heightened number of contracts and payments made.

The changes in expenses under the 10th EDF are in line with the lifecycle of the EDF and is also related to the evolution of the number of open contracts. Many contracts were completed and closed under the 10th and previous EDFs in 2021, which resulted in less expenses incurred under those EDFs. In fact, the number of open contracts for the 10th EDF at year-end were 33 % lower than in 2020.

Under the 11th EDF, the decrease in expenses comes mainly from the decrease in three areas:

(1) Programmable aid (EUR 2 889 million in 2020 v EUR 1 244 million in 2021);

(2) Intra-ACP projects (EUR 1 019 million in 2020 v EUR 951 million in 2021); and

(3) The contributions to the Trust funds (EUR 673 million in 2020 v EUR 646 million in 2021).

3.4. CO-FINANCING EXPENSES

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 2021 2020 Co-financing — — — 19 19 53

Included under this heading are the expenses incurred on co-financing projects in 2021. 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).

As indicated above, 2020 marked an exceptional year due to the sunset clause being reached which led to a heightened level of implementation. The amount of co-financing in 2021 corresponds more to the usual level of co-financing (2019: EUR 14 million) (see note 2.3).

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) 2021 2020 Direct Management Implemented by: Commission 168 168 EU executive agencies 4 14 Trust Funds (515) 19 EU delegations 658 1 969 315 2 170 Indirect Management Implemented by: EIB and EIF 113 (67) International organisations 1 053 1 268 Private law bodies with a public service mission 204 243 Public law bodies 212 248 Third countries 983 795 EU bodies with Public Private Partnership 3 2 2 568 2 490 Total 2 883 4 660

3.5. FINANCE COSTS

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 2021 2020 Net impairment losses on loans and receivables — — — 1 1 — Loss on financial assets or liabilities at FVSD — — — 1 1 — Write-down of recoverables — (7) 23 1 17 21 Total — (7) 23 3 20 21

At 31 December 2021, the net unrealised impairment loss on loans was EUR 1 million.

The EUR 1 million of financial expenses for financial assets at FVSD relate mainly to exchange differences, interest and fair value changes in particular for the ABC FUND.

The negative amount under the 9th EDF for the heading write-down of recoverables is mainly due to the reversal of last year’s closure bookings. In 2020 the estimated expenses on irrecoverable amounts arising from aging recovery orders (over 2 years), bankruptcies and waivers were higher than that in 2021.

3.6. OTHER EXPENSES

Included under this heading are expenses of administrative nature such as external non-IT services, operating leasing expenses, communications and publications, training costs, etc.

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 2021 2020 Administrative and IT expenses — — 4 94 98 120 Realised losses on trade debtors — 6 0 0 7 4 Exchange losses — 5 11 25 41 72 Total — 11 16 119 145 197

The heading Administrative and IT expenses includes amounts that are based on the EDF internal agreement with the Commission to cover the administrative expenditure incurred by both the Headquarters and the Delegations in respect to managing the EDF programmes. The so-called ‘support expenditure’ relates 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.

The decrease under this heading is a combined effect of the decrease in administrative and IT expenses (2020: EUR 120 million) and the decrease of expenses relating to exchange losses (2020: EUR 72 million).

The significant decrease of foreign exchange losses is mostly due to the decrease in unrealised losses from the revaluation of balances held in currencies at 31 December 2021.

4. CONTINGENT ASSETS & LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES

4.1. CONTINGENT ASSETS

Contingent assets are possible assets that arise from past events, and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events that are not wholly within the control of the entity.

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Pre-financing guarantees — — 3 — 44 49 Performance guarantees — 7 3 — 11 12 Retention guarantees — 5 3 — 9 9 Total — 13 6 — 20 21

Pre-financing guarantees are requested in certain cases from beneficiaries that are not Member States, when making advance payments.

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

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

For contracts managed under indirect management, the guarantees belong to a contracting authority other than the EDF and they are therefore not disclosed by the EDF (see note 2.2.4).

4.2. CONTINGENT LIABILITIES

Contingent liabilities are either possible obligations that arise from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, or present obligations arising from past events where the outflow of resources is not probable or the amount cannot be measured reliably.

4.2.1. Guarantees given

(EUR million) Eighth EDF Ninth EDF 10th EDF 11th EDF 31.12.2021 31.12.2020 Guarantees given — — — (7) (7) (3)

The above table shows the extent of the exposure of the EDF to possible future payments linked to guarantees given to the EIB group or other financial institutions. The amounts are presented net of financial provisions or financial liabilities recognised for those programmes.

The amount of EUR 7 million relates entirely to a guarantee under the Euritz financial instrument.

4.3. OTHER SIGNIFICANT DISCLOSURES

4.3.1. 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 31.12.2021 31.12.2020 Outstanding commitments not yet expensed — 21 408 5 926 6 355 7 224

The decrease in the RAL is largely driven by the decrease in budgetary RAL which totalled EUR 7 993 million (2020: EUR 9 286 million). This decrease is mostly caused by the fewer number of individual commitments signed during the year as a result of new challenges faced which hampered implementation in particular in the delegations (see note 2.2).

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) 31.12.2021 31.12.2020 USD DKK EUR Other Total USD DKK EUR Other Total Financial assets Available for Sale Financial Assets — — — — — 2 31 — 33 Financial assets at FVSD (*2) 8 — 30 — 39 — — — — Receivables (*3) — — 8 — 8 65 — 69 6 140 Cash and cash equivalents 3 — 991 — 994 2 — 726 — 728 11 — 1 029 — 1 040 69 — 826 6 901 Financial liabilities Payables (*4) — — — — — (16) (6) (605) 10 (617) — — — — — (16) (6) (605) 10 (617) Total 11 — 1 029 — 1 040 53 (6) 221 16 284

5.3. INTEREST RATE RISK

The EDF does not borrow money and consequently it is not exposed to interest rate risk.

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

Contributions to the EDF budget are credited by each Member State to a special account opened with the financial institution designed by it. As the remuneration applied to some of these accounts may currently be negative, cash management procedures are in place to minimise balances kept on the accounts concerned. In addition, in accordance with Council Regulation (EU) 2016/888 (8), any negative remuneration on these accounts is borne by the relevant Member State.

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

5.4. CREDIT RISK (COUNTERPARTY RISK)

Maximum credit risk exposure

For financial assets, the reported amounts are net carrying amounts and represent the EDFs’ exposure to credit risk at the end of the reporting period.

(EUR million) 31.12.2021 Financial assets Loans 1 Cash and cash equivalents 994 Exchange receivables (*5) 8 Guarantees given Financial guarantee contracts 8 Total at 31.12.2021 1 011

Financial Instrument Loans: credit quality

(EUR million) 31.12.2021 Stage 1 Stage 2 Stage 3 POCI Total Credit rating Premium and high grade — — — — — Upper medium grade — — — — — Lower medium grade — — — — — Non-investment grade and default grade — — 3 — 3 Gross carrying amount — — 3 — 3 Minus loss allowance — — 2 — 2 Net carrying amount — — 1 — 1

Cash and cash equivalents: credit quality

(EUR million) 31.12.2021 Credit rating Premium and high grade 751 Upper medium grade 241 Lower medium grade 2 Non-investment grade and default grade — Gross carrying amount 994 Minus loss allowance — Net carrying amount 994

Receivables: credit quality

(EUR million) 31.12.2021 Not due Past due Past due Past due Past due Total 0–30 days 31–90 days 91 days –1 year > 1 year Gross carrying amount 8 — — — — 8 Minus loss allowance — — — — — — Net carrying amount 8 — — — — 8

Based on the analysis of the exchange receivables and for the purposes of the transition to the updated EAR 11, there is no impairment adjustment to book on 1.1.2021 for the receivables recognised in the EDF annual accounts of 2021.

Financial assets at FVSD: credit quality

In 2021 the financial assets at FVSD included in these financial statements relate to equity investments that are not subject to credit risk (see note 2.1).

Credit risk disclosures published in the 2020 annual accounts

For information, the disclosures made for credit risk in the 2020 annual accounts were as follows:

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 —

Financial assets by risk category

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

5.5. LIQUIDITY RISK

Maturity analysis of financial liabilities by remaining contractual maturity

The finance liabilities and payables under this heading are disclosed by the carrying amounts from the Balance Sheet.

(EUR million) < 1 year 1–5 years > 5 years Total Financial liabilities at 31.12.2021 501 6 — 508 Financial liabilities at 31.12.2020 615 2 — 617

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

Ukraine

In accordance with EU accounting rule 19, Events after Reporting Date, the war in Ukraine, that began in February 2022, is a non-adjusting event, thus not requiring any adjustments to the figures reported in these financial statements at 31 December 2021. For subsequent reporting periods, the war may affect the recognition and measurement of some assets and liabilities on the balance sheet and also of some revenue and expenses recognised in the statement of financial performance. Based on the facts and circumstances at the time of preparation of these financial statements, in particular the evolving situation, the financial effect of the war in Ukraine on the EDF cannot be reliably estimated.

At the date of transmission of these accounts, no other 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 reconcilable. 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) 2021 2020 ECONOMIC RESULT OF THE YEAR (2 974 ) (4 744 ) Revenue Entitlements not affecting the budget result — (2) Entitlements established in current year but not yet collected (6) (23) Entitlements established in previous years and collected in current year 20 13 Revenue decreasing consumption 13 61 Accrued revenue (net) (69) (33) Other — — Expenses Expenses of the current year not yet paid 111 119 Expenses of previous years paid in the current year (741) (817) Net effect of pre-financing (295) (281) Accrued expenses (net) 539 1 102 BUDGET RESULT OF THE YEAR (3 401 ) (4 604 )

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