EUROPEAN COMMISSION Brussels, 26.6.2017 COM(2017) 362 final COMMUNICATION FROM THE COMMISSION ANNUAL ACCOUNTS OF THE EUROPEAN COMMISSION 2016



CONTENTS CERTIFICATION OF THE ACCOUNTS FINANCIAL STATEMENTS AND EXPLANATORY NOTES BALANCE SHEET STATEMENT OF FINANCIAL PERFORMANCE CASHFLOW STATEMENT STATEMENT OF CHANGES IN NET ASSETS NOTES TO THE FINANCIAL STATEMENTS BUDGETARY IMPLEMENTATION REPORTS CERTIFICATION OF THE ACCOUNTS The annual accounts of the European Commission for the year 2016 have been prepared in accordance with the Financial Regulation applicable to the general budget of the European Union and the accounting rules adopted by myself in my capacity as the Commission's Accounting Officer, as are to be applied by all the institutions and Union bodies. I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Commission in accordance with Article 68 of the Financial Regulation.

I have obtained from the authorising officers, who certified its reliability, all the information necessary for the production of the accounts that show the European Commission'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 fairly, in all material aspects, the financial position, the results of the operations and the cash flow of the European Commission. [signed] Rosa ALDEA BUSQUETS Accounting Officer of the Commission 23 June 2017 EUROPEAN COMMISSION FINANCIAL YEAR 2016 FINANCIAL STATEMENTS AND EXPLANATORY NOTES

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up. CONTENTS BALANCE SHEET STATEMENT OF FINANCIAL PERFORMANCE CASHFLOW STATEMENT STATEMENT OF CHANGES IN NET ASSETS NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES 2. NOTES TO THE BALANCE SHEET 3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE 4. CONTINGENT LIABILITIES AND ASSETS

5. BUDGETARY AND LEGAL COMMITMENTS 6. FINANCIAL INSTRUMENTS DISCLOSURES 7. RELATED PARTIES 8. EVENTS AFTER THE BALANCE SHEET DATE 52 BALANCE SHEET EUR millions Note 31.12.2016 31.12.2015 NON-CURRENT ASSETS Intangible assets 2.1 135 128 Property, plant and equipment 2.2 6 832 5 592 Investments accounted for using the equity method 2.3 528 497 Financial assets 2.4 60 733 55 341 Pre-financing 2.5 21 777 29 884 Exchange receivables and non-exchange recoverables 2.6 729 899 90 734 92 341 CURRENT ASSETS Financial assets 2.4 3 295 9 579 Pre-financing 2.5 23 964 15 360 Exchange receivables and non-exchange recoverables 2.6 10 607 9 215 Inventories 2.7 75 75 Cash and cash equivalents 2.8 27 579 20 660 65 521 54 889 TOTAL ASSETS 156 255 147 230 NON-CURRENT LIABILITIES Pension and other employee benefits 2.9 (66 550) (63 208) Provisions 2.10 (1 786) (1 562) Financial liabilities 2.11 (54 375) (50 897) (122 711) (115 666) CURRENT LIABILITIES Provisions 2.10 (626) (302) Financial liabilities 2.11 (2 165) (7 898) Payables 2.12 (40 240) (32 367) Accrued charges and deferred income 2.13 (67 027) (67 962) (110 059) (108 528) TOTAL LIABILITIES (232 770) (224 194) NET ASSETS (76 515) (76 964) Reserves 2.14 3 031 2 915 Amounts to be called from Member States* 2.15 (79 546) (79 879) NET ASSETS (76 515) (76 964) * The European Parliament adopted a budget on 1 December 2016 which provides for the payment of the Commission's short-term liabilities from own resources to be collected by, or called up from, the Member States in 2017. Additionally, under article 83 of the Staff Regulations (Council Regulation 259/68 of 29 February 1968 as amended), the Member States shall jointly guarantee the liability for pensions. STATEMENT OF FINANCIAL PERFORMANCE EUR millions Note 2016 2015 REVENUE Revenue from non-exchange transactions GNI resources 95 578 95 355 Traditional own resources 3.1 20 439 18 649 VAT 15 859 18 328 Fines 3 858 531 Recovery of expenses 3.2 1 946 1 547 Other 3.3 1 695 1 223 139 376 135 633 Revenue from exchange transactions Financial income 3.4 1 746 1 787 Other 3.5 647 1 264 2 393 3 051 Total Revenue 141 769 138 684 EXPENSES Implemented by Member States 3.6 European Agricultural Guarantee Fund (44 152) (45 032) European Agricultural Fund for Rural Development and other rural development instruments (12 604) (16 376) European Regional Development Fund & Cohesion Fund (35 045) (38 745) European Social Fund (9 366) (9 849) Other (1 606) (2 380) Implemented by the Commission, executive agencies and trust funds 3.7 (15 644) (15 635) Implemented by other EU agencies and bodies 3.8 (3 064) (1 616) Implemented by third countries and int. organisations 3.8 (3 259) (3 031) Implemented by other entities 3.8 (2 035) (2 107) Staff and pension costs 3.9 (6 911) (7 537) Changes in employee benefits actuarial assumptions (992) (2 008) Finance costs 3.10 (1 857) (1 933) Share of net result of joint ventures and associates 2 (641) Other 3.11 (3 462) (4 655) Total Expenses (139 994) (151 546) ECONOMIC RESULT OF THE YEAR 1 775 (12 862) CASHFLOW STATEMENT EUR millions Note 2016 2015 Economic result of the year 1 775 (12 862) Operating activities Amortisation 26 20 Depreciation 314 221 (Increase)/decrease in loans 1 726 1 455 (Increase)/decrease in pre-financing (497) 7 287 (Increase)/decrease in exchange receivables and non-exchange recoverables (1 222) 5 308 (Increase)/decrease in inventories 0 7 Increase/(decrease) in pension and employee benefits liability 3 343 5 163 Increase/(decrease) in provisions 548 (249) Increase/(decrease) in financial liabilities (2 254) (920) Increase/(decrease) in payables 7 874 (10 619) Increase/(decrease) in accrued charges and deferred income (935) 12 386 Prior year budgetary surplus taken as non-cash revenue (1 349) (1 435) Other non-cash movements 23 65 Investing activities (Increase)/decrease in intangible assets and property, plant and equipment (1 587) (1 054) (Increase)/decrease in investments accounted for using the equity method (31) (87) (Increase)/decrease in available for sale financial assets (835) (214) (Increase)/decrease in financial assets at fair value through surplus or deficit (0) – NET CASHFLOW 6 920 4 472 Net increase/(decrease) in cash and cash equivalents 6 920 4 472 Cash and cash equivalents at the beginning of the year 20 660 16 187 Cash and cash equivalents at year-end 27 579 20 660 STATEMENT OF CHANGES IN NET ASSETS

EUR millions Reserves (A) Amounts to be called from Member States (B) Net Assets =(A)+(B) Fair value reserve Other reserves Accumulated Surplus/(Deficit) Economic result of the year BALANCE AS AT 31.12.2014 202 2 438 (54 147) (11 226) (62 734) Movement in Guarantee Fund reserve - 189 (189) - – Fair value movements 84 - - - 84 Other - 2 (20) - (18) Allocation of the 2014 economic result - - (11 226) 11 226 – 2014 budget result credited to Member States - - (1 435) - (1 435) Economic result of the year - - - (12 862) (12 862) BALANCE AS AT 31.12.2015 286 2 629 (67 016) (12 862) (76 964) Movement in Guarantee Fund reserve – 82 (82) – Fair value movements 24 – – 24 Other – 9 (11) (2) Allocation of the 2015 economic result – – (12 862) 12 862 – 2015 budget result credited to Member States (1 349) (1 349) Economic result of the year 1 775 1 775 BALANCE AS AT 31.12.2016 311 2 720 (81 321) 1 775 (76 515) NOTES TO THE FINANCIAL STATEMENTS

For further information in addition to the notes below, please also see the 2016 EU consolidated annual accounts. 1.SIGNIFICANT ACCOUNTING POLICIES The European Commission (hereinafter referred to as the Commission) applies the accounting policies of the European Union (hereinafter referred to as the EU). A summary of the significant EU accounting policies is given below. 1.1.LEGAL BASIS AND ACCOUNTING RULES The accounts of the EU are kept in accordance with Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ L 298, 26 October 2012, p. 1) hereinafter referred to as the 'Financial Regulation' and Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 (OJ L 362, 31 December 2012, p. 1) laying down detailed rules of application of this Financial Regulation. In accordance with article 143 of the Financial Regulation, the EU prepares its financial statements on the basis of accrual-based accounting rules that are based on International Public Sector Accounting Standards (IPSAS). These accounting rules, adopted by the Accounting Officer of the Commission, have to be applied by all the institutions and EU bodies falling within the scope of consolidation in order to establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements and consolidation. 1.2.ACCOUNTING PRINCIPLES The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of users. For the EU as a public sector entity, the objectives are more specifically to provide information useful for decision making, and to demonstrate the accountability of the entity for the resources entrusted to it. It is with these goals in mind that the present document has been drawn up. 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 according to article 144 of the Financial Regulation are relevance, reliability, understandability and comparability. 1.3.CONSOLIDATION Scope of consolidation The consolidated financial statements of the EU comprise all significant controlled entities (i.e. the EU institutions (including the Commission) and the EU agencies), associates and joint ventures. The complete list of consolidated entities can be found in note 9 of the EU financial statements. It now comprises 52 controlled entities and 1 associate. Entities that fall under the consolidation scope, but which are immaterial to the EU consolidated financial statements as a whole, need not be consolidated or accounted for using equity method where to do so would result in excessive time or cost to the EU. Those entities are referred to as 'Minor entities' and are separately listed in note 9 - scope of consolidation. In 2016, 7 entities have been classified as minor entities. Controlled entities The decision to include an entity in the scope of consolidation is based on the control concept. Controlled entities are all entities for which the EU is exposed, or has right, to variable benefits from its involvement and has the liability to affect the nature and amount of those benefits through its power over the other entity. This power must be presently exercisable and must relate to the relevant activities of the entity. Controlled entities are fully consolidated. The consolidation begins at the first date on which control exists, and ends when such control no longer exists. The most common indicators of control within the EU are: creation of the entity through founding treaties or secondary legislation, financing of the entity from the EU budget, the existence of voting rights in the governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. An individual assessment for each entity is made in order to decide whether one or all of the criteria listed above are sufficient to result in control. Under this approach, the EU's institutions (except the European Central Bank) and agencies (excluding the agencies of the former 2nd pillar) are considered as under the exclusive control of the EU and are therefore included in the consolidation scope. Furthermore the European Coal and Steel Community (ECSC) in Liquidation is also considered as a controlled entity. All material "inter-entity transactions and balances" between EU controlled entities are eliminated, while unrealised gains and losses on such transactions are not material and so have not been eliminated. Joint Arrangements

A joint arrangement is an agreement over which the EU and one or more parties have joint control. Joint control is contractually agreed sharing of control over an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint operations or joint ventures. In case a joint arrangement is structured through a separate vehicle and parties to the joint arrangement have rights to the net assets of the arrangement, this joint arrangement classifies as a joint venture. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). In case the parties have rights to the assets, and obligations for the liabilities, related to the arrangement, this joint arrangement is classified as a joint operation. In relation to its interest in joint operations, the EU recognises in its financial statements: its assets and liabilities, revenue and expense, as well as its share of assets, liabilities, revenue and expense held or incurred jointly. Associates Associates are entities over which the EU has, directly or indirectly, significant influence but not control. It is presumed that significant influence exists if the EU holds directly or indirectly 20 % or more of the voting rights. Participations in associates are accounted for using the equity method (see note 1.5.4). Non-consolidated entities the funds of which are managed by the Commission The funds of the Joint Sickness Insurance Scheme for staff of the EU, the European Development Fund and the Participants Guarantee Fund are managed by the Commission on their behalf. However, since these entities are not controlled by the EU, they are not consolidated in its financial statements. 1.4.BASIS OF PREPARATION Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December. 2.Currency and basis for conversion Functional and reporting currency The financial statements are presented in millions of euros, the euro being the EU's functional and reporting currency. Transactions and balances 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. Translation differences on non-monetary financial instruments classified as available for sale financial assets are included in the fair value reserve. Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the rate that applied at the date when they were purchased. Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December: Euro exchange rates Currency 31.12.2016 31.12.2015 Currency 31.12.2016 31.12.2015 BGN 1.9558 1.9558 PLN 4.4103 4.2639 CZK 27.0210 27.0230 RON 4.5390 4.5240 DKK 7.4344 7.4626 SEK 9.5525 9.1895 GBP 0.8562 0.7340 CHF 1.0739 1.0835 HRK 7.5597 7.6380 JPY 123.4000 131.0700 HUF 309.8300 315.9800 USD 1.0541 1.0887 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, provisions, financial risk on inventories and accounts receivable, accrued income and charges, contingent assets and liabilities, degree of impairment of intangible assets and property, plant and equipment and amounts disclosed in the notes concerning financial instruments. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known.

3.1.BALANCE SHEET 4.Intangible assets Acquired computer software licences are stated at historical cost less accumulated amortisation and impairment losses. The assets are amortised on a straight-line basis over their estimated useful lives (311 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement. Internally developed intangible assets are capitalised when the relevant criteria of the EU accounting rules are met and relate solely to the development phase of the asset. The costs capitalisable include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Costs associated with research activities, non-capitalisable development costs and maintenance costs are recognised as expenses as incurred. 5.Property, plant and equipment All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction or transfer of the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the EU and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred.



Land and works of art are not depreciated as they are deemed to have an indefinite useful life. Assets under construction are not depreciated as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows: Type of asset Straight line depreciation rate Buildings 4 % to 10 % Space assets 8 % to 20 % Plant and equipment 10 % to 25 % Furniture and vehicles 10 % to 25 % Computer hardware 25 % to 33 % Other 10 % to 33 % Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance. Leases Leases of tangible assets, where the EU has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease’s commencement at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The interest element of the finance lease payment is charged to expenditure over the period of the lease at a constant periodic rate in relation to the balance outstanding. The rental obligations, net of finance charges, are included in financial liabilities (non-current and current). The interest element of the finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. The assets held under finance leases are depreciated over the shorter of the asset's useful life and the lease term. Leases where the lessor retains a significant portion of the risks and rewards inherent to ownership are classified as operating leases. Operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term. 6.Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable (service) amount. The recoverable (service) amount is the higher of an asset’s fair value less costs to sell and its value in use. Intangible assets and property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at least once per year. An asset’s carrying amount is written down immediately to its recoverable (service) amount if the asset’s carrying amount is greater than its estimated recoverable (service) amount. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly. 7.Investments accounted for using the equity method Participations in associates and joint ventures Investments accounted for using the equity method are initially recognised at cost. The EU's interest in these investments is recognised in the statement of financial performance, and its share in the movements in reserves is recognised in the fair value reserve in net assets. The initial cost together with all movements (further contributions, share of economic results and reserve movements, impairments, and dividends) give the book value of the investment in the financial statements at the balance sheet date. Distributions received from the investment reduce the carrying amount of the asset. If the EU's share of deficits of an investment accounted for using the equity method equals or exceeds its interest in the investment, the EU discontinues recognising its share of further losses ("unrecognised losses"). After the EU's interest is reduced to zero, additional losses are provided for and a liability is recognised, only to the extent that the EU has incurred legal or constructive obligation or made payments on behalf of the entity.

If there are indications of impairment, a write-down to the lower recoverable amount is necessary. The recoverable amount is determined as described under 1.5.3. If the reason for impairment ceases to apply at a later date, the impairment loss is reversed to the carrying amount that would have been determined had no impairment loss been recognised. In cases where the EU holds 20 % or more of an investment capital fund, it does not seek to exert significant influence. Such funds are therefore treated as financial instruments and categorised as available for sale financial assets. Associates and joint ventures classified as minor entities are not accounted for under the equity method. EU contributions to those entities are accounted for as an expense of the period. 8.Financial assets Classification The EU classifies their financial assets 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 financial instruments is determined at initial recognition and re-evaluated at each balance sheet date. (I)Financial assets at fair value through surplus or deficit A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the EU. Derivatives are also categorised in this category. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date. (II)Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the EU provides money, goods or services directly to a debtor with no intention of trading the receivable, or in case the EU is subrogated to the rights of the original lender following a payment made by the EU under a guarantee contract. Payments due within 12 months of the balance sheet date are classified as current assets. Payments due after 12 months from the balance sheet date are classified as non-current assets. Loans and receivables include term deposits with the original maturity above three months. (III)Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the EU has the positive intention and ability to hold to maturity. During this financial year, the EU did not hold any investments in this category. (IV)Available for sale financial assets Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the EU expects to hold them, which is usually the maturity date. Investments in entities that are neither consolidated nor accounted for using the equity method and other equity-type investments (e.g. Risk Capital Operations) are also classified as available for sale financial assets. Initial recognition and measurement Purchases and sales of financial assets at fair value through surplus or deficit, held-to-maturity and available for sale are recognised on trade-date – the date on which the EU commits to purchase or sell the asset. Cash equivalents and loans are recognised when cash is advanced to the borrowers. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through surplus or deficit transactions costs are added to the fair value at initial recognition. Financial assets carried at fair value through surplus or deficit are initially recognised at fair value and 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 (i.e. the fair value of the consideration received), unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets (e.g. in case of some derivative contracts). However, when a long-term loan that carries no interest or an interest below market conditions is granted, its fair value can be estimated as the present value of all future cash receipts discounted using the prevailing market rate of interest for a similar instrument with a similar credit rating. Loans granted are measured at their nominal amount, which is considered to be the fair value of the loan. The reasoning for this is as follows: -The “market environment” for EU lending is very specific and different from the capital market used to issue commercial or government bonds. As lenders in these markets have the opportunity to choose alternative investments, the opportunity possibility is factored into market prices. However, this opportunity for alternative investments does not exist for the EU which is not allowed to invest money on the capital markets; it only borrows funds for the purpose of lending at the same rate. This means that there is no alternative lending or investment option available to the EU for the sums borrowed. Thus, there is no opportunity cost and therefore no basis of comparison with market rates. In fact, the EU lending operation itself represents the market. Essentially, since the opportunity cost "option" is not applicable, the market price does not fairly reflect the substance of the EU lending transactions. Therefore, it is not appropriate to determine the fair value of EU lending with reference to commercial or government bonds.

-Furthermore as there is no active market or similar transactions to compare with, the interest rate to be used by the EU for fair valuing its lending operations under the EFSM, BOP and other such loans, should be the interest rate charged. -In addition, for these loans, there are compensating effects between loans and borrowings due to their back-to-back character. Thus, the effective interest for the loan equals the effective interest rate for the related borrowings. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance. Financial instruments are derecognised when the rights to receive cashflows from the investments have expired or the EU has transferred substantially all risks and rewards of ownership to another party. Subsequent measurement (I)Financial assets at fair value through surplus or deficit are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the ‘financial instruments at fair value through surplus or deficit’ category are included in the statement of financial performance in the period in which they arise. (II)Loans and receivables are carried at amortised cost using the effective interest method. In the case of loans granted on borrowed funds, the same effective interest rate is applied to both the loans and borrowings since these loans have the characteristics of 'back-to-back operations' and the differences between the loan and the borrowing conditions and amounts are not material. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance. (III)Held to maturity assets are carried at amortised cost using the effective interest method. The EU currently holds no held to maturity investments. (IV)Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available for sale financial assets are recognised in the fair value reserve, except for translation differences on monetary assets which are recognised in the statement of financial performance. When assets classified as available for sale financial assets are derecognised or impaired, the cumulative fair value adjustments previously recognised in the fair value reserve are recognised in the statement of financial performance. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance. Dividends on available for sale equity instruments are recognised when the EU's right to receive payment is established.



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, classified as available for sale financial assets, 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. In cases where the fair value of investments in equity instruments that do not have a quoted market price in an active market cannot be reliably measured, these investments are valued at cost less impairment losses. Impairment of financial assets The EU assesses at each balance sheet date whether there is objective evidence that a financial asset is impaired. A financial asset is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event (or events) has an impact on the estimated future cashflows of the financial asset that can be reliably estimated. (a)Assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cashflows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of financial performance. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cashflows of a collateralised financial asset reflects the cashflows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the statement of financial performance. (b)Assets carried at fair value In the case of equity investments classified as available for sale financial assets, a significant or permanent (prolonged) decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the statement of financial performance – is removed from reserves and recognised in the statement of financial performance. Impairment losses recognised in the statement of financial performance on equity instruments are not reversed through the statement of financial performance. If, in a subsequent period, the fair value of a debt instrument classified as available for sale financial asset increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the statement of financial performance. 9.Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other directly attributable costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. When inventories are held for distribution at no charge or for a nominal charge, they are measured at the lower of cost and current replacement cost. Current replacement cost is the cost the EU would incur to acquire the asset on the reporting date.



10.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, they have the obligation to return the pre-financing advance to the EU. The amount of the pre-financing may be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses). Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period. Interest on pre-financing is recognised as it is earned in accordance with the provisions of the relevant agreement. An estimate of the accrued interest revenue, based on the most reliable information, is made at the year-end and included on the balance sheet. Other advances to Member States which originate from reimbursement by the EU of amounts paid as advances by the Member States to their beneficiaries (including "financial instruments under shared management") are recognised as assets and presented under the pre-financing heading. Other advances to Member States are subsequently measured at the amount initially recognised on the balance sheet less a best estimate of the eligible expenses incurred by final beneficiaries, calculated on the basis of reasonable and supportable assumptions. The EU contributions to the trust funds of the European Development Fund or other unconsolidated entities are also classified as pre-financing since their purpose is to give a float to the trust fund to allow it to finance specific actions defined under the trust fund's objectives. The EU contributions to trust funds are measured at the initial amount of the EU contribution less eligible expenses, including estimated amounts where necessary, incurred by the trust fund during the reporting period and allocated to the EU contribution in accordance with the underlying agreement. 11.Exchange receivables and non-exchange recoverables As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, for the purpose of drawing up the accounts, receivables are defined as stemming from exchange transactions and recoverables are defined as stemming from non-exchange transactions, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange (for example recoverables from Member States related to own resources). Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see 1.5.5 above). The financial instruments notes disclosures concerning receivables from exchange transactions include accrued income and deferred charges from exchange transactions as they are not material. Recoverables from non-exchange transactions are carried at original amount (adjusted for interest and penalties) less write-down for impairment. A write-down for impairment of recoverables from

non-exchange transactions is established when there is objective evidence that the EU will not be able to collect all amounts due according to the original terms of recoverables from non-exchange transactions. 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. A general write-down, based on past experience, is also made for outstanding recovery orders not already subject to a specific write-down. See note 1.5.14 below concerning the treatment of accrued income at

year-end. Amounts displayed and disclosed as recoverables from non-exchanges transactions are not financial instruments as they do not arise from a contract that would give rise to a financial liability or equity instrument. However, in the notes to the financial statements recoverables from non-exchange transactions are disclosed together with receivables from exchange transactions where appropriate.



12.Cash and cash equivalents Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks and other short-term highly liquid investments with original maturities of three months or less. 13.Pension and other employee benefits Pension obligations The EU operates defined benefit pension plans. Whilst staff contribute from their salaries one third of the expected cost of these benefits, the liability is not funded. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of any plan assets. The defined benefit obligation is calculated by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised immediately in the statement of financial performance. Past-service costs are recognised immediately in statement of financial performance, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period. Post-employment sickness benefits

The EU provides health benefits to its employees through the reimbursement of medical expenses. A separate fund has been created for its day-to-day administration. Both current employees, pensioners, widowers and their relatives benefit from the system. The benefits granted to the "inactives" (pensioners, orphans, etc.) are classified as "Post-Employment Employee Benefits". Given the nature of these benefits, an actuarial calculation is required. The liability in the balance sheet is determined on a similar basis as that for the pension obligations (see above). 14.Provisions Provisions are recognised when the EU has a present legal or constructive obligation towards third parties as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. The amount of the provision is the best estimate of the expenses expected to be required to settle the present obligation at the reporting date. Where the provision involves a large number of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (“expected value” method). 15.Financial liabilities Financial liabilities are classified as financial liabilities at fair value through surplus or deficit or as financial liabilities carried at amortised cost. Borrowings are composed of borrowings from credit institutions and debts evidenced by certificates. They are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred, then subsequently carried at amortised cost using the effective interest method; any difference between proceeds, net of transaction costs, and the redemption value is recognised in the statement of financial performance over the period of the borrowings using the effective interest method. Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. In the case of loans granted on borrowed funds, the effective interest method may not be applied to loans and borrowings, based on materiality considerations. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance. EU trust funds that are considered as part of the Commission's operational activities are accounted for in the Commission accounts and further consolidated in the EU annual accounts. Therefore, contributions from other donors to the EU trust funds fulfil the criteria of revenues from non-exchange transactions under conditions and they are presented as financial liabilities until the conditions attached to the contributions transferred are met, i.e. eligible costs are incurred by the trust fund. The trust fund is required to finance specific projects and return remaining funds at the time of winding-up. At the balance sheet date the outstanding contribution liabilities are measured at contributions received less the expenses incurred by the trust fund, including estimated amounts when necessary. For reporting purposes the net expenses are allocated to the contributions of other donors in proportion to net contributions paid as at 31 December. This allocation of contributions is only indicative. When the trust fund is wound up the actual split of remaining resources will be decided by the trust fund board. Financial liabilities categorised at fair value through surplus or deficit include derivatives when their fair value is negative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit, see note 1.5.5. 16.Payables A significant amount of the payables of the EU are unpaid cost claims from beneficiaries of grants or other EU funding (non-exchange transactions). They are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the accepted and eligible amount. Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the EU. 17.Accrued and deferred income and charges Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the EU or a contractual agreement exists (e.g. by reference to a treaty), an accrued income 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 Commission which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if 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. 17.1.STATEMENT OF FINANCIAL PERFORMANCE 18.Revenue REVENUE FROM NON-EXCHANGE TRANSACTIONS The vast majority of the EU's revenue relates to non-exchange transactions: GNI based resources and VAT resources Revenue is recognised for the period for which the Commission sends out a call for funds to the Member States claiming their contribution. They are measured at their “called amount”. As VAT and GNI resources are based on estimates of the data for the budgetary year concerned, they may be revised as changes occur until the final data are issued by the Member States. The effect of a change in estimate is included when determining the net surplus or deficit for the period in which the change occurred.

Traditional own resources Recoverables from non-exchange transactions and related revenues are recognised when the relevant monthly "A" statements (including duties collected and amounts due that are guaranteed and not contested) are received from the Member States. At the reporting date, revenue collected by the Member States for the period but not yet paid to the Commission is estimated and recognised as accrued income. The quarterly "B" statements (including duties neither collected nor guaranteed, as well as guaranteed amounts that have been contested by the debtor) received from the Member States are recognised as revenue less the collection costs to which they are entitled. In addition, a value reduction is recognised for the amount of the estimated recovery gap. Fines Revenue from fines is recognised when the EU's decision imposing a fine has been taken and it is officially notified to the addressee. If there are doubts about the undertaking's solvency, a value reduction on the entitlement is recognised. After the decision to impose a fine, the debtors have two months from the date of notification: -either to accept the decision, in which case they must pay the fine within the time limit laid down and the amount is definitively collected by the EU; -or not to accept the decision, in which case they lodge an appeal under EU law. However, even if appealed, the fine must be paid within the time limit of three months laid down as the appeal does not have suspensory effect (Article 278 of the EU Treaty) or, under certain circumstances and subject to the agreement of the Commission's Accounting Officer, the debtor may present a bank guarantee for the amount instead. If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability. However, since an appeal against an EU decision by the addressee does not have suspensory effect, the cash received is used to clear the recoverable. If a guarantee is received instead of payment, the fine remains as a recoverable. If it appears probable that the General Court may not rule in favour of the EU, a provision is recognised to cover this risk. If a guarantee had been given instead, then the recoverable outstanding is written-down as required. The accumulated interest received by the Commission on the bank accounts where received payments are deposited is recognised as revenue, and any contingent liability is increased accordingly. Since 2010, all provisionally cashed fines are managed by the Commission in a specifically created fund (BUFI) and invested in financial instruments. 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. Interest income and expense Interest income and expense 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 income or interest expense over the relevant period. When calculating the effective interest rate, the EU estimates cashflows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest to discount the future cashflows for the purpose of measuring the impairment loss. Dividend income Dividend income is recognised when the right to receive payment is established. 19.Expenses Expenses from non-exchange transactions account for the majority of the EU's expenses. They 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 (Financial Regulation, Staff Regulations, or other 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 expenses. Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the EU. They are valued at original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are estimated and recognised in the statement of financial performance. 19.1.CONTINGENT ASSETS AND LIABILITIES 20.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 EU. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable. 21.Contingent liabilities A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU; or a present obligation that arises from past events but is not recognised because: it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation or in the rare circumstances where the amount of the obligation cannot be measured with sufficient reliability. 21.1.CASHFLOW STATEMENT Cashflow information is used to provide a basis for assessing the ability of the EU to generate cash and cash equivalents, and its needs to utilise those cashflows. The cashflow statement is prepared using the indirect method. This means that the economic result for the financial year is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of revenue or expense associated with investing cashflows. Cashflows arising from transactions in a foreign currency are recorded in the EU’s reporting currency (Euro), by applying to the foreign currency amount the exchange rate between the euro and the foreign currency at the date of the cashflow. The cashflow statement reports cashflows during the period classified by operating and investing activities (the EU does not have financing activities). Operating activities are the activities of the EU that are not investing activities. These are the majority of the activities performed. Loans granted to beneficiaries (and the related borrowings, when applicable) are not considered as investing (or financing) activities as they are part of the general objectives and thus daily operations of the EU. Operating activities also include investments such as investments in the European Investment Fund (EIF), the European Bank for Reconstruction and Development (EBRD) and venture capital funds. Indeed, the aim of these activities is to contribute to the achievement of policy objectives. Investing activities are the acquisition and disposal of intangible assets and property, plant and equipment and of other investments which are not included in cash equivalents. Investing activities do not include loans granted to beneficiaries. The objective is to show the real investments made by the EU. 22.NOTES TO THE BALANCE SHEET ASSETS 22.1.INTANGIBLE ASSETS

EUR millions Gross carrying amount at 31.12.2015 219 Additions 30 Disposals (4) Transfer between asset categories – Other changes 7 Gross carrying amount at 31.12.2016 252 Accumulated amortisation at 31.12.2015 (91) Amortisation charge for the year (26) Amortisation written back – Disposals 3 Transfer between asset categories – Other changes (2) Accumulated amortisation at 31.12.2016 (116) NET CARRYING AMOUNT AT 31.12.2016 135 NET CARRYING AMOUNT AT 31.12.2015 128 22.2.PROPERTY, PLANT AND EQUIPMENT EUR millions Land and buildings Space assets Plant and equipment Furniture and vehicles Computer hardware Other Finance leases Assets under construction TOTAL Gross carrying amount at 31.12.2015 1 395 725 253 73 237 148 1 552 3 350 7 733 Additions 15 13 8 4 26 11 3 1 469 1 550 Disposals (2) (2) (7) (3) (21) (5) (3) (0) (43) Transfer between asset categories 25 2 864 2 – 2 (0) (2) (2 891) – Other changes 3 1 1 0 2 1 0 (2) 7 Gross carrying amount at 31.12.2016 1 436 3 602 257 74 248 155 1 550 1 925 9 247 Accumulated depreciation at 31.12.2015 (765) (141) (226) (56) (194) (103) (656) – (2 141) Depreciation charge for the year (42) (161) (14) (4) (24) (14) (55) – (314) Depreciation written back – – 0 – – – – – 0 Disposals 2 2 7 3 21 5 3 – 42 Transfer between asset categories – – (0) – (2) 0 2 – – Other changes (0) (0) (0) (0) (0) (1) (0) – (2) Accumulated depreciation at 31.12.2016 (806) (300) (233) (58) (201) (112) (705) – (2 415) NET CARRYING AMOUNT AT 31.12.2016 631 3 302 24 16 47 43 844 1 925 6 832 NET CARRYING AMOUNT AT 31.12.2015 630 584 28 16 43 45 896 3 350 5 592 22.3.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD EUR millions Note 31.12.2016 31.12.2015 Participations in joint ventures – 5 Participations in associates 2.3.1 528 491 Total 528 497 23.Participation in associates EUR millions European Investment Fund Participation at 31.12.2015 491 Contributions 41 Dividends received (6) Share of net result 34 Changes in fair value reserve (0) Other equity movements (32) Participation at 31.12.2016 528 The following carrying amounts are attributable to the Commission based on its percentage of participation of 28.1 % at 31 December 2016 (2015: 26.5 %): EUR millions 31.12.2016 31.12.2015 Total EIF EU's share Total EIF EU's share Assets 2 301 647 2 183 578 Liabilities (423) (119) (328) (87) Revenue 240 67 192 51 Expenses (118) (33) (95) (25) Surplus/(deficit) 122 34 97 26 The Commission has paid in 20 % of the EU participation, the balance being uncalled, corresponding at 31 December 2016 to the following amounts: EUR millions Total EIF capital EU subscription Total share capital 4 382 1 232 Paid-in (876) (246) Uncalled 3 506 986 23.1.

FINANCIAL ASSETS EUR millions Note 31.12.2016 31.12.2015 Non-current financial assets Available for sale financial assets 2.4.1 7 721 5 820 Loans 2.4.3 53 012 49 521 60 733 55 341 Current financial assets Available for sale financial assets 2.4.1 1 035 2 101 Financial assets at fair value through surplus or deficit 2.4.2 0 – Loans 2.4.3 2 260 7 477 3 296 9 579 Total 64 029 64 919 24. Available for sale financial assets EUR millions 31.12.2016 31.12.2015 BUFI investments 2 013 2 647 European Bank for Reconstruction and Development 188 188 2 201 2 835 Guarantee Funds for budgetary guarantees: Guarantee Fund for external actions 2 069 2 002 EFSI Guarantee Fund 948 - 3 017 2 002 Financial instruments supported by the EU budget: Horizon 2020 1 213 765 Risk Sharing Finance Facility 719 773 Connecting Europe Facility* 483 425 ETF start up 476 485 Risk Capital Operations 132 152 European Fund for South East Europe 118 118 Other 398 366 3 539 3 084 Total 8 757 7 921 Non-current 7 721 5 820 Current 1 035 2 101

* Previous year amounts relate to Project Bond Initiative and Loan Guarantee Instrument for TEN-T projects. These two instruments were merged in 2016 into Connecting Europe Facility. 25.Financial assets at fair value through surplus or deficit EUR millions 31.12.2016 31.12.2015 Notional amount receive leg Notional amount pay leg Fair value Notional amount receive leg Notional amount pay leg Fair value Foreign currency forward contract 50 (50) 0 – – –

Fair value hierarchy of financial assets measured at fair value EUR millions 31.12.2016 31.12.2015 Level 1: Quoted prices in active markets 7 224 6 459 Level 2: Observable inputs other than quoted prices 231 152 Level 3: Valuation techniques with inputs not based on observable market data 1 302 1 310 Total 8 757 7 921 Reconciliation of financial assets measured using valuation techniques with inputs not based on observable market data (level 3) EUR millions Opening balance at 31.12.2015 1 310 Purchases and sales 32 Gains or losses for the period in financial income or finance costs (54) Gains or losses in net assets 13 Transfers into level 3 – Transfers out of level 3 – Other – Closing balance at 31.12.2016 1 302 26. Loans EUR millions Note 31.12.2016 31.12.2015 Loans for financial assistance 2.4.3.1 54 944 56 645 Other loans 2.4.3.2 328 353 Total 55 272 56 998 Non-current 53 012 49 521 Current 2 260 7 477 27.Loans for financial assistance EUR millions EFSM BOP MFA Euratom Total Total at 31.12.2015 47 509 5 811 3 024 301 56 645 New loans 4 750 - 10 – 4 760 Repayments (4 750) (1 500) (70) (49) (6 369) Exchange differences - - – – – Changes in carrying amount (53) (40) – – (93) Impairment - - – – – Total at 31.12.2016 47 456 4 272 2 964 252 54 944 Non-current 46 800 3 050 2 889 199 52 938 Current 656 1 222 75 53 2 006 The change in carrying amount corresponds to the change in accrued interests. Nominal value of loans for financial assistance at 31 December 2016 total EUR 54 198 million (2015: EUR 55 807 million). Loans effective interest rates (expressed as a range of interest rates) 31.12.2016 31.12.2015 Macro Financial Assistance (MFA) 0 % - 4.54 % 0 % - 4.54 % Euratom 0 % - 5.76 % 0.08 % - 5.76 % Balance of Payment (BOP) 2.37 % - 3.37 % 2.37 % - 3.62 % European Financial Stability Mechanism (EFSM) 0.62 % - 3.75 % 0.62 % - 3.75 %

28.Other loans EUR millions 31.12.2016 31.12.2015 Loans with special conditions 93 113 Term deposits over 3 months 235 240 Total 328 353 Non-current 74 83 Current 254 270 Nominal value of other loans at 31 December 2016 total EUR 668 million (2015: EUR 602 million). Impairment on other loans EUR millions 31.12.2015 Additions Reversals Write-off Other 31.12.2016 Loans with special conditions 13 – (6) – – 7 Subrogated loans 218 114 – – – 332 Total 231 114 (6) – – 339 28.1.

PRE-FINANCING EUR millions Note 31.12.2016 31.12.2015 Non-current pre-financing Pre-financing 2.5.1 20 095 28 548 Other advances to Member States 2.5.2 1 651 1 332 Contribution to Trust Funds 31 4 21 777 29 884 Current pre-financing Pre-financing 2.5.1 21 781 11 581 Other advances to Member States 2.5.2 2 183 3 779 23 964 15 360 Total 45 741 45 244 29.Pre-financing EUR millions Gross amount Cleared via cut-off Net amount at 31.12.2016 Gross amount Cleared via cut-off Net amount at 31.12.2015 Shared Management EAFRD & other rural development instruments 3 955 – 3 955 4 726 (1 629) 3 097 ERDF & CF 19 858 (4 727) 15 131 24 268 (7 416) 16 852 ESF 6 477 (617) 5 860 7 251 (1 325) 5 926 Other 4 219 (2 393) 1 826 4 359 (2 365) 1 994 Direct Management Implemented by: Commission 12 710 (9 077) 3 633 12 741 (9 744) 2 997 EU executive agencies 13 138 (8 349) 4 789 11 067 (7 769) 3 298 Trust funds 142 (82) 60 14 (5) 9 Indirect Management Implemented by: Other EU agencies & bodies 2 790 (2 110) 680 2 250 (1 649) 601 Third countries 1 861 (1 135) 726 2 151 (1 229) 922 International organisations 7 230 (4 432) 2 797 6 640 (4 014) 2 626 Other entities 6 496 (4 077) 2 418 5 327 (3 521) 1 806 Total 78 876 (37 000) 41 876 80 795 (40 666) 40 129 Non-current 20 095 – 20 095 28 548 – 28 548 Current 58 781 (37 000) 21 781 52 247 (40 666) 11 581 30.Other advances to Member States EUR millions 31.12.2016 31.12.2015 Advances to Member States for financial instruments

under shared management 2 534 3 287 Aid Schemes 1 300 1 824 Total 3 834 5 111 Non-current 1 651 1 332 Current 2 183 3 779 30.1.EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES EUR millions Note 31.12.2016 31.12.2015 Non-current Recoverables from non-exchange transactions 2.6.1 727 899 Receivables from exchange transactions 2.6.2 2 0 729 899 Current Recoverables from non-exchange transactions 2.6.1 10 266 8 844 Receivables from exchange transactions 2.6.2 341 372 10 607 9 215 Total 11 336 10 114 31. Recoverables from non-exchange transactions EUR millions Note 31.12.2016 31.12.2015 Non-current Member States 2.6.1.1 700 856 Accrued income and deferred charges 2.6.1.2 – – Other recoverables 27 42 727 899 Current Member States 2.6.1.1 8 122 6 803 Fines 1 808 1 601 Accrued income and deferred charges 2.6.1.2 153 242 Other recoverables 182 197 10 266 8 844 Total 10 993 9 742 32.Recoverables from Member States EUR millions 31.12.2016 31.12.2015 Recoverables related to own resources: Established in the A account 3 261 3 041 Established in the separate account 1 437 1 283 Own resources to be received 1 764 – Impairment (753) (760) Other 36 10 Own resource recoverables 5 745 3 573 Recoverables in the area of agriculture and rural development: European Agricultural Guarantee Fund (EAGF) 2 606 3 846 European Agricultural Fund for Rural Development (EAFRD) 924 750 Temporary Rural Development Instrument (TRDI) 30 26 Special Accession Programme for Agriculture and Rural Development (SAPARD) 167 175 Impairment (999) (1 092) EAGF and rural development recoverables 2 729 3 705 Pre-financing recovery expected 293 313 VAT paid and recoverable 17 13 Other recoverables from Member States 39 56 Total 8 822 7 660 Non-current 700 856 Current 8 122 6 803 33. Accrued income and deferred charges EUR millions 31.12.2016 31.12.2015 Cohesion, Agricultural & Rural Development Funds: Financial corrections 9 10 Other accrued income 70 162 Deferred charges relating to non-exchange transactions 74 70 Total 153 242 Non-current – – Current 153 242

34. Receivables from exchange transactions EUR millions 31.12.2016 31.12.2015 Non-current Other receivables 2 0 2 0 Current Customers 189 167 Impairment on receivables from customers (124) (105) Deferred charges relating to exchange transactions 162 142 Others 114 168 341 372 Total 343 372 34.1.INVENTORIES EUR millions 31.12.2016 31.12.2015 Scientific materials 54 55 Other 21 20 Total 75 75 34.2.CASH AND CASH EQUIVALENTS EUR millions 31.12.2016 31.12.2015 Accounts with Treasuries and Central Banks 24 566 17 119 Current accounts 127 110 Imprest accounts 5 4 Transfers (cash in transit) – – Other term deposits – 28 Bank accounts for budget implementation and

other term deposits 24 698 17 262 Cash belonging to financial instruments 1 390 1 298 Cash relating to fines 1 325 1 908 Cash relating to trust funds 167 192 Total 27 579 20 660 LIABILITIES 34.3.PENSION AND OTHER EMPLOYEE BENEFITS Net employee benefit scheme liability EUR millions Pension Scheme of European Officials Other retirement benefit schemes Joint Sickness Insurance Scheme 31.12.2016 Total 31.12.2015 Total Defined Benefit Obligation 58 746 1 062 7 036 66 844 63 488 Plan assets N/A N/A (293) (293) (280) Net liability 58 746 1 062 6 742 66 550 63 208 Actuarial assumptions - employee benefits Pension Scheme of European Officials Joint Sickness Insurance Scheme 2016 Nominal discount rate 1.7 % 1.9 % Expected inflation rate 1.4 % 1.5 % Real discount rate 0.3 % 0.4 % Expected rate of salary increases 1.2 % 1.1 % Medical cost trend rates N/A 3.0 % Retirement age 63/64/66 63/64/66 2015 Nominal discount rate 2.0 % 2.1 % Expected inflation rate 1.4 % 1.4 % Real discount rate 0.6 % 0.7 % Expected rate of salary increases 1.2 % 1.2 % Medical cost trend rates N/A 3.0 % Retirement age 63/64/65 63/64/66 Movement in present value of employee benefits defined benefit obligation

EUR millions Pension Scheme of European Officials Other retirement benefit Schemes Joint Sickness Insurance Scheme Total Present value as at 31.12.2015 54 967 859 7 662 63 488 Current Service Cost 2 267 75 283 2 626 Interest cost 1 264 18 161 1 442 Net Actuarial (gains) and losses 2 142 72 (1 039) 1 174 Contributions from members – – 24 24 Benefits paid (1 330) (13) (55) (1 398) Liability increase/(decrease) due to taxes on pensions (565) 52 – (512) Present value as at 31.12.2016 58 746 1 062 7 036 66 844



Movement in present value of plan assets of the Joint Sickness Insurance Scheme EUR millions Present value as at 31.12.2015 280 Net movement in plan assets 14 Present value as at 31.12.2016 293 5 year trend EUR millions 2012 2013 2014 2015 2016 Present Value of the defined benefit obligation 41 891 46 367 58 317 63 488 66 844 Fair Value of plan assets (271) (264) (272) (280) (293) Employee benefits liability 41 620 46 103 58 045 63 208 66 550 Amounts recognised in the Statement of Financial Performance EUR millions Pension Scheme of European Officials Other retirement benefit Schemes Joint Sickness Insurance Scheme Total 2016 Current service cost 2 042 93 283 2 418 Interest cost 1 138 21 161 1 320 Past service cost – – – – Change in plan assets – – (45) (45) Staff and pension costs 3 180 114 399 3 693 Actuarial gains and losses 1 929 103 (1 039) 992 Total 5 108 217 (640) 4 685 Joint Sickness Insurance Scheme sensitivity EUR millions One percentage point increase One percentage point decrease The aggregate of the current service cost and interest cost components of net periodic post-employment medical costs 89 (74) The accumulated post-employment benefit obligation for medical costs 2 201 (1 828) 34.4.PROVISIONS

EUR millions Amount at 31.12.2015 Additional provisions Unused amounts reversed Amounts used Transfer between categories Change in estimation Amount at 31.12.2016 Legal cases: Agriculture - 40 (21) 0 129 - 149 Cohesion - 19 - - 198 - 217 Other 371 6 (2) (33) (327) 0 14 Nuclear site dismantling 1 078 - - (29) - 64 1 113 Financial 410 536 (7) (53) - (6) 880 Fines 4 20 - - - - 23 Other 2 14 10 (11) - - 16 Total 1 864 636 (21) (125) – 57 2 412 Non-current 1 562 487 (22) (3) (303) 65 1 786 Current 302 149 1 (121) 303 (8) 626

34.5.FINANCIAL LIABILITIES EUR millions Note 31.12.2016 31.12.2015 Non-current financial liabilities Financial liabilities at amortised cost 2.11.1 54 375 50 897 Financial liabilities at fair value through

surplus or deficit 2.11.2 – – Financial guarantee liabilities – – 54 375 50 897 Current financial liabilities Financial liabilities at amortised cost 2.11.1 2 164 7 898 Financial liabilities at fair value through

surplus or deficit 2.11.2 1 – Financial guarantee liabilities – – 2 165 7 898 Total 56 540 58 794 35.Financial liabilities at amortised cost EUR millions Note 31.12.2016 31.12.2015 Borrowings for financial assistance 2.11.1.1 54 944 56 645 Other financial liabilities 2.11.1.2 1 596 2 149 Total 56 540 58 794 Non-current 54 375 50 897 Current 2 164 7 898 36.Borrowings for financial assistance EUR millions EFSM BOP MFA Euratom Total Total at 31.12.2015 47 509 5 811 3 024 301 56 645 New borrowings 4 750 – 10 – 4 760 Repayments (4 750) (1 500) (70) (49) (6 369) Exchange differences – – – – – Changes in carrying amounts (53) (40) – – (93) Total at 31.12.2016 47 456 4 272 2 964 252 54 944 Non-current 46 800 3 050 2 889 199 52 938 Current 656 1 222 75 53 2 006 Borrowings effective interest rates (expressed as a range of interest rates) 31.12.2016 31.12.2015 Macro Financial Assistance (MFA) 0 % - 4.54 % 0 % - 4.54 % Euratom 0 % - 5.68 % 0 % - 5.67 % Balance of Payment (BOP) 2.37 % - 3.37 % 2.37 % - 3.62 % European Financial Stability Mechanism (EFSM) 0.62 % - 3.75 % 0.62 % - 3.75 %

37.Other financial liabilities EUR millions 31.12.2016 31.12.2015 Non-current Finance lease liabilities 969 1 021 Buildings paid for in instalments 279 299 Other 190 139 1 438 1 459 Current Fines to be reimbursed 25 625 Finance lease liabilities 54 45 Buildings paid for in instalments 20 19 Other 59 1 158 690 Total 1 596 2 149 Finance lease liabilities EUR millions Future amounts to be paid < 1 year 1 - 5 years > 5 years Total Liability Land and buildings 50 242 722 1 014 Other tangible assets 4 5 – 9 Total at 31.12.2016 54 247 722 1 023 Interest element 57 195 209 461 Total future minimum lease payments at 31.12.2016 111 442 931 1 484 Total future minimum lease payments at 31.12.2015 93 442 1 040 1 575 38.Financial liabilities at fair value through surplus and deficit EUR millions 31.12.2016 31.12.2015 Notional amount receive leg Notional amount pay leg Fair value Notional amount receive leg Notional amount pay leg Fair value Foreign currency forward contract 99 (101) 1 – – –

At 31 December 2016 all financial liabilities at fair value through surplus or deficit were categorised into level 2 of fair value hierarchy (valuation based on observable inputs other than quoted prices). 38.1.

PAYABLES EUR millions Gross Amount Adjust- ments* Net Amount at 31.12.2016 Gross Amount Adjust- ments* Net Amount at 31.12.2015 Cost claims and invoices received from: Member States European Agricultural Fund for Rural Development & other rural development instruments 500 (34) 467 2 621 (230) 2 391 European Regional Development Fund & Cohesion Fund 10 663 (793) 9 871 8 360 (950) 7 410 European Social Fund 4 145 (95) 4 050 3 355 (2) 3 353 Other 795 (47) 748 436 (102) 334 Private and public entities 1 677 (169) 1 507 1 928 (223) 1 705 Total costs claims & invoices received 17 781 (1 138) 16 643 16 700 (1 507) 15 193 EAGF 12 193 N/A 12 193 6 851 N/A 6 851 Own Resources Payables 10 441 N/A 10 441 9 506 N/A 9 506 Sundry Payables 962 N/A 962 816 N/A 816 Total 41 378 (1 138) 40 240 33 873 (1 507) 32 367 * Estimated non-eligible amounts and pending other advances to Member States. 38.2.ACCRUED CHARGES AND DEFERRED INCOME EUR millions 31.12.2016 31.12.2015 Accrued charges 66 310 66 947 Deferred income 690 980 Other 26 34 Total 67 027 67 962 The split of accrued charges is as follows: EUR millions 31.12.2016 31.12.2015 European Agricultural Guarantee Fund 33 033 38 263 European Agricultural Fund for Rural Development and

other rural development instruments 17 024 14 806 European Regional Development Fund and Cohesion Fund 7 157 5 026 European Social Fund 3 473 2 636 Other 5 623 6 216 Total 66 310 66 947

NET ASSETS 38.3.RESERVES EUR millions Note 31.12.2016 31.12.2015 Fair value reserve 2.14.1 311 287 Guarantee Fund reserve 2 643 2 561 Other reserves 77 68 Total 3 031 2 915 39. Fair value reserve Movements of fair value reserve during the period EUR millions 2016 2015 Available for sale financial assets: Included in fair value reserve 25 79 Included in statement of financial performance 0 (3) Total 25 77 Relating to participations accounted for

using the equity method (0) 7 Total 24 85 39.1.AMOUNTS TO BE CALLED FROM MEMBER STATES

EUR millions Amounts to be called from Member States at 31.12.2015 79 879 Return of 2015 budget surplus to Member States 1 349 Movement in Guarantee Fund reserve 82 Other reserve movements 12 Economic result of the year (1 775) Total amounts to be called from Member States at 31.12.2016 79 546 40.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE REVENUE REVENUE FROM NON-EXCHANGE TRANSACTIONS:

OWN RESOURCES 40.1.TRADITIONAL OWN RESOURCES EUR millions 2016 2015 Customs duties 20 301 18 524 Sugar levies 138 125 Total 20 439 18 649 REVENUE FROM NON-EXCHANGE TRANSACTIONS: TRANSFERS 40.2.RECOVERY OF EXPENSES EUR millions 2016 2015 Shared management 1 876 1 465 Direct management 56 76 Indirect management 15 6 Total 1 946 1 547 40.3.OTHER REVENUE FROM NON-EXCHANGE TRANSACTIONS EUR millions 2016 2015 Budgetary adjustments 1 956 984 Contribution of third countries and accession countries 946 939 Staff taxes and contributions 901 815 Contribution from Member States for external aid 732 0 Transfer of assets 147 197 Adjustment of provisions 14 70 Agricultural levies 5 814 Funding of institutions (3 324) (3 189) Other 318 592 Total 1 695 1 223

REVENUE FROM EXCHANGE TRANSACTIONS

40.4.FINANCIAL INCOME EUR millions 2016 2015 Interest income on: Pre-financing (0) 8 Late payments 108 20 Available for sale financial assets 17 45 Loans 1 436 1 601 Cash and cash equivalents 5 11 Impaired financial assets 9 7 Other 0 0 Total interest income 1 575 1 693 Dividend income 13 8 Realised gains on sale of available for sale financial assets 29 20 Financial income from financial assets or liabilities

at fair value through surplus or deficit (0) – Other financial income 128 66 Total 1 745 1 787 40.5.OTHER REVENUE FROM EXCHANGE TRANSACTIONS EUR millions 2016 2015 Foreign exchange gains 320 949 Fee and premium revenue related to financial instruments 48 43 Sales of goods 14 20 Property, plant and equipment related revenue 3 – Other 262 251 Total 647 1 264 EXPENSES 40.6.SHARED MANAGEMENT EUR millions Implemented by Member States 2016 2015 European Agricultural Guarantee Fund 44 152 45 032 European Agricultural Fund for Rural Development & other rural development instruments 12 604 16 376 European Regional Development Fund and Cohesion Fund 35 045 38 745 European Social Fund 9 366 9 849 Other 1 606 2 380 Total 102 772 112 382 40.7. DIRECT MANAGEMENT EUR millions 2016 2015 Implemented by the Commission 9 287 10 097 Implemented by EU Executive Agencies 6 260 5 532 Implemented by Trust funds 97 6 Total 15 644 15 635 40.8. INDIRECT MANAGEMENT EUR millions 2016 2015 Implemented by other EU agencies & bodies 3 064 1 616 Implemented by third countries 876 905 Implemented by international organisations 2 382 2 126 Implemented by other entities 2 035 2 107 Total 8 358 6 754 40.9.STAFF AND PENSION COSTS EUR millions 2016 2015 Staff costs 3 218 3 126 Pension costs 3 693 4 411 Total 6 911 7 537

40.10.FINANCE COSTS EUR millions 2016 2015 Interest expenses: Borrowings 1 426 1 588 Other 56 20 Finance leases 39 60 Impairment losses on available for sale financial assets 40 27 Impairment loss on loans and receivables 184 174 Realised loss on sale of available for sale financial assets 0 3 Loss on financial assets or liabilities at fair value through surplus or deficit 1 – Other finance costs 111 60 Total 1 857 1 933 40.11.OTHER EXPENSES EUR millions 2016 2015 Reduction of fines by the Court of Justice 18 1 137 Foreign exchange losses 491 761 Administrative and IT expenses 713 754 Property, plant and equipment related expenses 726 637 Adjustment of provisions 680 517 Funding and contributions to other EU bodies 425 402 Other 408 447 Total 3 462 4 655 Expenses relating to research and development are as follows: EUR millions 2016 2015 Research costs 338 384 Non-capitalised development costs 43 60 Total 381 443 40.12.SEGMENT REPORTING BY MULTI ANNUAL FINANCIAL FRAMEWORK HEADING (MFF) EUR millions Smart and inclusive growth Sustainable growth Security and citizenship Global Europe Administration Not assigned to MFF headings* Total GNI resources – – – – – 95 578 95 578 Traditional own resources – – – – – 20 439 20 439 VAT – – – – – 15 859 15 859 Fines – – – – – 3 858 3 858 Recovery of expenses 48 1 871 4 23 – 0 1 946 Other 785 171 28 105 869 (262) 1 695 Non-exchange revenue 834 2 041 32 128 869 135 473 139 376 Financial income 87 0 0 21 (0) 1 637 1 746 Other 121 (11) (7) (5) 222 328 647 Exchange revenue 208 (11) (7) 16 222 1 965 2 393 Total revenue 1 041 2 030 25 144 1 091 137 438 141 769 Expenses implemented by Member States: EAGF – (44 152) – – – – (44 152) EAFRD & other rural develop. instruments – (12 604) – – – – (12 604) ERDF & CF (35 045) – – – – – (35 045) ESF (9 366) – – – – – (9 366) Other (466) (754) (470) 84 – – (1 606) Implemented by the Commission, executive agencies and trust funds (10 143) (544) (957) (3 951) (50) – (15 644) Implemented by other EU agencies and bodies (2 028) (110) (662) (265) – – (3 064) Implemented by third countries and international organisations (274) (5) (188) (2 792) – – (3 259) Implemented by other entities (1 411) (16) (2) (606) (0) – (2 035) Staff and pension costs (1 593) (345) (390) (575) (4 008) – (6 911) Changes in employee benefits actuarial assumptions – – – – (992) – (992) Finance costs (173) (47) (1) (20) (95) (1 520) (1 857) Share of net result of joint ventures and associates 2 – – – – – 2 Other expenses (1 468) (83) (102) (70) (1 271) (468) (3 462) Total expenses (61 964) (58 659) (2 772) (8 195) (6 416) (1 988) (139 994) Economic result of the year (60 923) (56 629) (2 747) (8 051) (5 324) 135 450 1 775 * "Not assigned to MFF headings" includes off-budget operations and unallocated programmes with immaterial amounts. 41.CONTINGENT LIABILITIES AND ASSETS 41.1.CONTINGENT LIABILITIES 42.Budgetary guarantees EUR millions 31.12.2016 31.12.2015 Ceiling Signed Disbursed Ceiling Signed Ceiling EIB external lending mandate guarantees 40 645 30 161 21 145 41 764 28 741 19 450 EFSI guarantee 16 000 11 245 4 392 16 000 1 252 202 Total 56 645 41 406 25 537 57 764 29 993 19 652 43.Guarantees relating to financial assistance (borrowing and lending activities) EUR millions 31.12.2016 31.12.2015 Drawn Undrawn Total Drawn Undrawn Total EFSM 47 456 – 47 456 47 509 – 47 509 BOP 4 272 – 4 272 5 811 5 811 MFA 2 964 1 313 4 277 3 024 1 323 4 347 Euratom 252 300 552 301 300 601 Total 54 944 1 613 56 557 56 645 1 623 58 268

44.Guarantees given for EU financial instruments EUR millions 31.12.2016 31.12.2015 Horizon 2020 921 459 Risk Sharing Finance Facility 711 845 Connecting Europe Facility* 465 429 Other 3 – Total 2 101 1 733 * Previous year amount relates to Project Bond Initiative and Loan Guarantee Instrument for TEN-T projects. These two instruments were merged in 2016 into the Connecting Europe Facility. 45.Legal cases EUR millions 31.12.2016 31.12.2015 Fines 1 834 3 951 Agriculture 1 711 1 377 Cohesion 3 3 Other 506 835 Total 4 054 6 166 45.1.CONTINGENT ASSETS EUR millions 31.12.2016 31.12.2015 Guarantees received: Performance guarantees 121 173 Other guarantees 6 3 Other contingent assets 33 46 Total 160 222 46.BUDGETARY AND LEGAL COMMITMENTS EUR millions Note 31.12.2016 31.12.2015 Outstanding budgetary commitments not yet expensed 5.1 188 828 174 295 Shared management legal commitments under the current MFF pending implementation 5.2 276 351 338 755 Significant legal commitments in other areas 5.3 18 338 14 882 Total 483 517 527 932 46.1.OUTSTANDING BUDGETARY COMMITMENTS NOT YET EXPENSED EUR millions 31.12.2016 31.12.2015 Outstanding budgetary commitments not yet expensed 188 828 174 295 46.2.SHARED MANAGEMENT LEGAL COMMITMENTS UNDER THE CURRENT MFF PENDING IMPLEMENTATION EUR millions Funds Financial framework 2014-2020 (A) Legal commitments concluded (B) Budget commitments (C ) Decommit- ments (D) Budget available under MFF (=A-C) Legal commitments less budget commitments (=B-C+D) European Regional Development Fund and Cohesion Fund 262 058 262 058 102 172 – 159 886 159 886 European Social Fund 91 991 91 991 38 418 – 53 573 53 573 Fund for European Aid to the most Deprived 3 814 3 814 1 570 – 2 244 2 244 HEADING 1B: COHESION POLICY FUNDS 357 862 357 862 142 160 – 215 702 215 702 European Agricultural Fund for Rural Development 99 348 99 348 42 064 – 57 284 57 284 European Maritime and Fisheries Fund 5 749 5 749 2 392 – 3 358 3 358 HEADING 2: NATURAL RESOURCES 105 097 105 097 44 455 – 60 641 60 641 Asylum and Migration Fund 3 607 1 977 1 970 – 1 637 7 Internal Security Fund 2 195 981 981 – 1 214 0 HEADING 3: SECURITY & CITIZENSHIP 5 802 2 958 2 951 – 2 851 7 Total 468 761 465 917 189 566 – 279 195 276 351 46.3.SIGNIFICANT LEGAL COMMITMENTS IN OTHER AREAS EUR millions Note 31.12.2016 31.12.2015 Connecting Europe Facility 13 799 10 051 Copernicus 2 393 2 939 Galileo 523 124 Fisheries agreements 247 373 Operating lease commitments 5.3.1 891 913 Other contractual commitments 485 483 Total 18 338 14 882

47.Operating lease commitments EUR millions Future amounts to be paid < 1 year 1- 5 years > 5 years Total Buildings 133 407 346 886 IT materials and other equipment 2 3 – 5 Total 135 410 346 891 48.FINANCIAL INSTRUMENTS DISCLOSURES 48.1.CURRENCY RISKS Exposure of the EC to currency risk at year end – net position EUR millions 31.12.2016 USD GBP DKK SEK EUR Other Total Financial assets Available for sale financial assets 228 58 14 42 8 394 21 8 757 Financial assets at fair value through surplus or deficit (49) – – – 50 – 0 Loans* 4 – – – 315 10 328 Receivables and recoverables – 591 49 80 10 611 4 11 336 Cash and cash equivalents 31 2 392 426 1 220 21 423 2 087 27 579 213 3 041 490 1 341 40 793 2 122 48 001 Financial liabilities Financial liabilities at fair value through surplus or deficit (100) – – – 100 – (1) Payables (0) – – – (40 240) (0) (40 240) (101) – – – (40 141) (0) (40 241) Total 113 3 041 490 1 341 652 2 122 7 760 EUR millions 31.12.2015 USD GBP DKK SEK EUR Other Total Financial assets Available for sale financial assets 81 76 11 8 7 717 28 7 921 Financial assets at fair value through surplus or deficit – – – – – – – Loans* 5 – – – 330 18 353 Receivables and recoverables – 537 52 82 9 441 1 10 114 Cash and cash equivalents 29 1 784 366 1 284 16 357 840 20 660 115 2 397 429 1 375 33 845 888 39 048 Financial liabilities Financial liabilities at fair value through surplus or deficit – – – – – – – Payables – – – – (32 367) – (32 367) – – – – (32 367) – (32 367) Total 115 2 397 429 1 375 1 478 887 6 681 * Excluding back-to-back loans for financial assistance. If the EUR had strengthened against the currency concerned by 10 %, then this would have had the following impact: EUR millions Economic result USD GBP DKK SEK 2016 (3) (271) (43) (118) 2015 (3) (211) (38) (124) EUR millions Net assets USD GBP DKK SEK 31.12.2016 (7) (5) (1) (4) 31.12.2015 (7) (7) (1) (1) If the EUR had weakened against the currency concerned by 10 %, then this would have had the following impact: EUR millions Economic result USD GBP DKK SEK 2016 4 331 53 144 2015 4 258 46 152

EUR millions Net assets USD GBP DKK SEK 31.12.2016 9 6 2 5 31.12.2015 9 8 1 1 48.2.INTEREST RATE RISK The following table illustrates the interest rate sensitivity of available for sale financial assets assuming possible change in interest rates of +/- 100 basis points (1 %). EUR millions Increase (+) / decrease (-) in basis points Effect on economic result and net assets 31.12.2016: Available for sale financial assets +100 (238) -100 254 31.12.2015: Available for sale financial assets +100 (160) -100 172 48.3.CREDIT RISK Analysis of the age of financial assets that are not impaired EUR millions Total Neither past due nor impaired Past due but not impaired < 1 year 1-5 years > 5 years Loans 55 272 55 271 1 – – Receivables and recoverables 11 336 10 031 124 909 273 Financial assets at fair value through surplus or deficit 0 0 – – – Total at 31.12.2016 66 608 65 302 125 909 273 Loans 56 998 56 998 – – – Receivables and recoverables 10 114 8 510 73 1 383 148 Total at 31.12.2015 67 112 65 508 73 1 383 148

Credit quality of financial assets that are neither past due nor impaired EUR millions 31.12.2016 Available for sale* Financial assets at FVSD** Loans and receivables Cash Total Counterparties with

external credit rating Prime and high grade 5 264 – 3 162 21 180 29 606 Upper medium grade 1 184 – 23 820 5 178 30 181 Lower medium grade 786 – 4 526 486 5 798 Non-investment grade – – 27 719 733 28 452 7 234 59 226 27 576 94 037 Counterparties without external credit rating Group 1 (debtors without defaults in the past) – 0 5 996 3 6 000 Group 2 (debtors with defaults in the past) – – 79 – 79 – 0 6 076 3 6 079 Total 7 234 0 65 302 27 579 100 116 EUR millions 31.12.2015 Available for sale* Loans and receivables Cash Total Counterparties with

external credit rating Prime and high grade 4 833 2 996 15 269 23 099 Upper medium grade 854 23 800 4 414 29 068 Lower medium grade 909 4 524 253 5 685 Non-investment grade 17 29 366 721 30 103 6 612 60 687 20 657 87 955 Counterparties without external credit rating Group 1 (debtors without defaults in the past) – 4 727 3 4 730 Group 2 (debtors with defaults in the past) – 95 – 95 – 4 822 3 4 825 Total 6 612 65 509 20 660 92 780 * Available for sale financial assets (excluding equity instruments and Unitary Fund). ** Financial assets at fair value through surplus or deficit. 48.4.

LIQUIDITY RISK Maturity analysis of financial liabilities by remaining contractual maturity

EUR millions < 1 year 1-5 years > 5 years Total Borrowings 2 006 17 988 34 950 54 943 Payables 40 240 0 – 40 240 Other financial liabilities 158 532 906 1 596 Total at 31.12.2016 42 405 18 520 35 855 96 780 Borrowings 7 207 9 456 39 982 56 645 Payables 32 366 (0) – 32 366 Other financial liabilities 690 398 1 060 2 149 Total at 31.12.2015 40 264 9 854 41 043 91 161 Financial liabilities at fair value through surplus or deficit EUR millions < 1 year 1-5 years > 5 years Total Derivative receive leg 149 – – 149 Derivative pay leg (150) – – (150) Net liability at 31.12.2016 (1) – – (1) 48.5.CARRYING AMOUNT AND FAIR VALUE OF FINANCIAL INSTRUMENTS The following classes of financial assets and liabilities are not measured at fair value: cash and cash equivalents, loans, exchange receivables and non-exchange recoverables, borrowings and other financial liabilities at amortised cost. The carrying amount of those financial assets and liabilities is considered as a reasonable approximation of their fair value. 49.RELATED PARTIES The related parties of the entity are the EU consolidated entities and the key management personnel of these entities. Transactions between these entities take place as part of the normal operations of the EU and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules. Details on key management entitlements are provided in note 7 of the EU consolidated annual accounts. 50.EVENTS AFTER THE BALANCE SHEET DATE At the date of signing of these accounts, except for the matter outlined below, no material issues had come to the attention of or were reported to the Accounting Officer of the Commission that would require separate disclosure under this section. The accounts and related notes were prepared using the most recently available information and this is reflected in the information presented. On 29 March 2017 the United Kingdom formally announced its intention to leave the European Union, thus activating Article 50 of the Treaty on European Union. In accordance with this article as well as the European Council guidelines on the financial agreement and negotiating directives provided by the Council, the EU shall conclude an agreement with the United Kingdom, setting out the arrangements for its withdrawal. At the time of the signing of these accounts, the negotiation process has just begun and there is no impact on the financial position of the Commission at 31 December 2016. EUROPEAN COMMISSION FINANCIAL YEAR 2016

BUDGETARY IMPLEMENTATION REPORTS

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up. CONTENTS EU BUDGET RESULT STATEMENTS OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS 1. IMPLEMENTATION OF EC BUDGET REVENUE 1.1 SUMMARY OF THE IMPLEMENTATION OF BUDGET REVENUE 2. IMPLEMENTATION OF EC BUDGET EXPENDITURE 2.1 MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS 2.2 MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 2.3 MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS 2.4 MFF: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) 2.5 MFF: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN 2.6 POLICY AREA: BREAKDOWN AND CHANGES IN COMMITMENT AND PAYMENT APPROPRIATIONS 2.7 POLICY AREA: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS 2.8 POLICY AREA: IMPLEMENTATION OF PAYMENT APPROPRIATIONS 2.9 POLICY AREA: MOVEMENTS IN COMMITMENTS OUTSTANDING (RAL) 2.10 POLICY AREA: COMMITMENTS OUTSTANDING BY YEAR OF ORIGIN 3. RECONCILIATION OF ECONOMIC RESULT WITH BUDGET RESULT

EU BUDGET RESULT EUR millions 2016 2015 Revenue for the financial year 144 717 146 624 Payments against current year appropriations (135 180) (143 485) Payment appropriations carried over to year N+1 (1 655) (1 299) Cancellation of unused appropriations carried over from year N-1 63 29 Evolution of assigned revenue (1 367) (704) Exchange differences for the year (173) 182 Budget result* 6 405 1 347 * Of which EFTA result is EUR 0 million in 2016 and EUR (2) million in 2015. STATEMENTS OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS BUDGET REVENUE EUR millions Initial adopted budget Final adopted budget Entitlements established Revenue 1 Own resources 142 269 133 677 132 192 132 166 3 Surpluses, balances and adjustments 0 1 349 1 358 1 358 4 Revenue accruing from persons working with the institutions and other union bodies 1 011 1 118 1 112 5 Revenue accruing from the administrative operation of the institutions 55 325 309 6 Contributions and refunds in connection with Union agreements and programmes 60 6 170 5 913 7 Interests on late payments and fines 123 123 9 739 3 175 8 Borrowing and lending operations 5 5 46 41 9 Miscellaneous revenue 25 25 24 15 Total 143 548 136 305 150 972 144 089 BUDGET EXPENDITURE: COMMITMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK (MFF) HEADING

EUR millions MFF Heading Initial adopted Final adopted Total Payments made budget budget appropriations available 1 Smart and inclusive growth 69 841 69 841 73 039 71 731 1a: Competitiveness for growth and jobs 19 010 19 010 21 569 20 332 1b: Economic, social and territorial cohesion 50 831 50 831 51 471 51 400 2 Sustainable growth: natural resources 62 484 62 470 66 952 64 547 of which: Market related expenditure and direct payments 42 220 42 218 46 051 44 285 3 Security and citizenship 4 052 4 292 4 423 4 336 4 Global Europe 9 167 9 377 12 240 11 278 5 Administration 5 164 5 173 5 521 5 379 6 Compensations 0 0 0 0 8 Negative reserve and deficit carried over from the previous financial year 0 0 0 0 9 Special Instruments 525 346 395 61 Total 151 233 151 498 162 569 157 332 BUDGET EXPENDITURE: PAYMENTS BY MULTIANNUAL FINANCIAL FRAMEWORK (MFF) HEADING EUR millions MFF Heading Initial adopted Final adopted Total Payments made budget budget appropriations available 1 Smart and inclusive growth 66 263 59 459 63 618 56 265 1a: Competitiveness for growth and jobs 17 418 17 406 20 976 18 461 1b: Economic, social and territorial cohesion 48 844 42 053 42 642 37 804 2 Sustainable growth: natural resources 55 121 55 214 59 464 57 412 of which: Market related expenditure and direct payments 42 212 42 210 46 057 44 084 3 Security and citizenship 3 022 3 069 3 195 3 077 4 Global Europe 10 156 9 860 11 163 10 277 5 Administration 5 164 5 172 5 807 5 350 6 Compensations 0 0 0 0 8 Negative reserve and deficit carried over from the previous financial year 0 0 0 0 9 Special Instruments 389 90 140 61 Total 140 114 132 864 143 386 132 442 1. IMPLEMENTATION OF EC BUDGET REVENUE

1.1 SUMMARY OF THE IMPLEMENTATION OF BUDGET REVENUE EUR millions Title Income appropriations Entitlements established Revenue Receipts Outstanding Initial adopted budget Final adopted budget Current Carried year over Total On On entitlements entitlements of current carried over year Total as % of budget 1 Own resources 142 269 133 677 132 164 28 132 192 132 163 3 132 166 99 % 26 3 Surpluses, balances and adjustments 0 1 349 1 358 0 1 358 1 358 0 1 358 101 % 0 4 Revenue accruing from persons working with the institutions 1 011 1 011 1 105 14 1 118 1 098 14 1 112 110 % 6 and other union bodies 5 Revenue accruing from the administrative operation of the 55 55 313 13 325 301 8 309 562 % 16 institutions 6 Contributions and refunds in connection with Union agreements 60 60 5 914 256 6 170 5 790 123 5 913 9854 % 258 and programmes 7 Interests on late payments and fines 123 123 2 946 6 793 9 739 1 045 2 131 3 175 2582 % 6 564 8 Borrowing and lending operations 5 5 40 6 46 36 6 41 792 % 5 9 Miscellaneous revenue 25 25 14 9 24 13 2 15 61 % 9 Total 143 548 136 305 143 854 7 119 150 972 141 804 2 285 144 089 106 % 6 883 2. IMPLEMENTATION OF EC BUDGET EXPENDITURE 2.1 MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS EUR millions Commitment appropriations Budget appropriations Additional appropriations Total Payment appropriations Budget appropriations Additional appropriations Total MFF Heading Initial adopted budget 1 Amending budgets & transfers 2 Final adopted budget 3=1+2 Carry- overs 4 Assigned revenue 5 approp. available Initial adopted budget Amending budgets & transfers Final adopted budget Carry- overs Assigned revenue approp. available 6=3+4+5 7 8 9=7+8 10 11 12=9+10+ 11 1. Smart and inclusive growth 69 841 0 69 841 153 3 045 73 039 66 263 (6 804) 59 459 117 4 042 63 618 1a: Competitiveness for growth and jobs 19 010 0 19 010 0 2 558 21 569 17 418 ( 13) 17 406 103 3 467 20 976 1b: Economic, social and territorial cohesion 50 831 0 50 831 153 487 51 471 48 844 (6 791) 42 053 15 575 42 642 2. Sustainable growth: natural resources 62 484 (15) 62 470 410 4 072 66 952 55 121 93 55 214 430 3 821 59 464 of which: Market related expenditure and direct payments 42 220 (2) 42 218 410 3 424 46 051 42 212 ( 3) 42 210 424 3 424 46 057 3. Security and citizenship 4 052 240 4 292 0 131 4 423 3 022 46 3 069 9 117 3 195 4. Global Europe 9 167 210 9 377 237 2 626 12 240 10 156 ( 295) 9 860 33 1 270 11 163 5. Administration 5 164 9 5 173 0 348 5 521 5 164 8 5 172 284 350 5 807 6. Compensations 0 0 0 0 0 0 0 0 0 0 0 0 8. Negative reserve and deficit carried over from the previous financial year 0 0 0 0 0 0 0 0 0 0 0 0 9. Special Instruments 525 ( 179) 346 0 50 395 389 ( 299) 90 1 50 140 Total 151 233 265 151 498 800 10 271 162 569 140 114 (7 250) 132 864 874 9 649 143 386 2.2 MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS EUR millions Commitments made Approp. carried over to 2017 Appropriations lapsing MFF Heading Total approp. available 1 from final adopted budget 2 from carry- overs 3 from assigned revenue 4 Total % 5=2+3+4 6=5/1 assigned revenue 7 carry- overs by decision 8 Total 9=7+8 from final adopted budget 10 from carry- overs 11 from assigned revenue 12 Total 13=10+ 11+12 1.Smart and inclusive growth 1a: Competitiveness for growth and jobs 1b: Economic, social and territorial cohesion 2.Sustainable growth: natural resources of which: Market related expenditure and direct payments 3.Security and citizenship 4.Global Europe 5.Administration 6.Compensations 8.Negative reserve and deficit carried over from the previous financial year 9.Special Instruments 73 039 21 569 51 471 66 952 46 051 4 423 12 240 5 521 0 m 0 395 69 808 18 997 50 811 62 013 41 770 4 287 9 364 5 166 0 0 61 145 0 145 396 395 0 237 0 0 0 0 1 778 1 335 443 2 138 2 120 49 1 677 213 0 0 0 71 731 98 % 20 332 94 % 51 400 100 % 64 547 96 % 44 285 96 % 4 336 98 % 11 278 92 % 5 379 97 % 0 0 % 0 0 % 61 15 % 1 267 1 224 43 1 934 1 304 82 948 135 0 0 50 0 0 0 433 433 0 10 1 0 0 130 1 267 1 224 43 2 368 1 737 82 959 137 0 0 180 33 13 20 23 15 5 3 5 0 0 155 8 0 8 14 14 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 41 13 28 38 29 5 3 5 0 0 155 Total 162 569 150 699 778 5 854 157 332 97 % 4 416 575 4 991 224 22 0 246

2.3 MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS EUR millions Payments made Appropriations carried over to 2017 Appropriations lapsing MFF Heading Total approp. available from final adopted budget from carry- overs from assigned revenue Total % automatic carry- overs carry- overs by decision assigned revenue Total from final adopted budget from carry- overs from assigned revenue Total 1 2 3 4 5=2+3+4 6=5/1 7 8 9 10=7+8+9 11 12 13 14=11+ 12+13 1. Smart and inclus