Communication from the Commission to the Council, the European Parliament and the Court of Auditors - Final accounts for the financial year 2007 of the 7th, 8th and 9th European Development Funds /* COM/2008/0490 final */





[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES | Brussels, 23.07.2008 COM(2008) 490 final COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND THE COURT OF AUDITORS FINAL ACCOUNTS FOR THE FINANCIAL YEAR 2007 OF THE 7TH, 8TH AND 9TH EUROPEAN DEVELOPMENT FUNDS TABLE OF CONTENTS 1. FINANCIAL STATEMENTS 3 1.1. EUROPEAN DEVELOPMENT FUND 3 1.2. FINANCIAL STATEMENTS 5 1.3. NOTES TO THE FINANCIAL STATEMENTS 19 1.4. OFF BALANCE SHEET ITEMS 37 2. REPORT ON FINANCIAL IMPLEMENTATION 38 2.1. ALLOCATIONS AT 31.12.2007 44 2.2. AGGREGATED ACCOUNTS 52 2.3. SITUATION BY COUNTRY AND BY INSTRUMENT 59 2.4. OTHER MANAGEMENT INFORMATION 61 3. FINANCIAL INFORMATION EIB 68 3.1. INCOME STATEMENT INVESTMENT FACILITY 69 3.2. BALANCE SHEET INVESTMENT FACILITY 70 3.3. CASH FLOW STATEMENT INVESTMENT FACILITY 71 3.4. STATEMENT OF CHANGES IN EQUITY INVESTMENT FACILITY 72 3.5. NOTES TO THE FINANCIAL STATEMENTS 73 4. APPENDIX – Situation by country and by instrument 93 FINANCIAL STATEMENTS EUROPEAN DEVELOPMENT FUND The European Development Fund (EDF) is the main instrument for providing community aid for development cooperation in the African, Caribbean and Pacific (ACP) States and Overseas Countries and Territories (OCTs). The 1957 Treaty of Rome made provision for its creation with a view to granting technical and financial assistance, initially to African countries which at that time were still colonised and with which some Member States had historical links. Even though a heading has been reserved for the Fund in the Community budget since 1993 following a request by the European Parliament, the EDF does not yet come under the Community's general budget. It is funded by the Member States, is subject to its own financial rules and is managed by a specific committee. The geographic aid granted to ACP States and OCTs will continue to be mainly funded by the EDF for the period 2008-2013. Each EDF is concluded for a period of around five years. Since the conclusion of the first partnership convention in 1964, the EDF cycles have generally followed the partnership agreement/convention cycles. The present 9th EDF will expire on the entry into force of the 10th EDF during 2008. Council decision 2007/792/EC[1] of 26 November 2007 establishes a transitory period for the prolongation of the 9th EDF from 1st January 2008 until the entry into force of the 10th EDF. Each EDF is governed by its own Financial Regulation which imposes the preparation of financial statements for each individual EDF. Accordingly, financial statements are prepared separately for each EDF in respect of the part that is managed by the European Commission. These financial statements are also presented in an aggregated way so as to provide a global view of the financial situation of the resources for which the European Commission is responsible. Given the clear division of responsibilities set out in Article 1 of the 9th EDF Financial Regulation[2], the financial statements of the Commission and the European Investment Bank – the entities entrusted with the management of EDF resources – have not been consolidated. Closure of the 6th EDF Given the state of progress of the 6th EDF, the Authorising Officer decided to close this fund on 31st July 2006. In the absence of a legal basis for the closure of EDFs, the balance remaining was transferred to the 9th EDF according to the provisions of Part 3 of the Financial regulation applicable to the 9th EDF. Presentation of annual accounts The annual accounts for 2007 are presented as follows: - The financial statements - The reports on financial implementation - The financial statements and information supplied by the European Investment Bank (EIB) FINANCIAL STATEMENTS BALANCE SHEET for the 7th, 8th and 9th EDF (EUR million) | Notes | 31.12.2007 | 31.12.2006 | CURRENT ASSETS | Receivables | 1 | 8.50 | 216.83 | Net Pre-financing | 2 | 955.52 | 2 808.88 | Other current assets | 3 | -2.65 | 0.95 | Cash and cash equivalents | 388.22 | 291.50 | STABEX security accounts | 5 | 99.61 | 191.60 | RD Congo special fund | 6 | 3.36 | 3.42 | Cash at bank | 7 | 285.24 | 96.48 | TOTAL ASSETS | 1 349.58 | 3 318.17 | CURRENT LIABILITIES | Payables | 8 | 703.98 | 2 095.86 | TOTAL LIABILITIES | 703.98 | 2 095.86 | NET ASSETS | 645.60 | 1 222.31 | FUNDS & RESERVES | Called fund capital | 9 | 25 019.17 | 29 900.00 | Results carried forward from previous years | -22 410.59 | -26 787.49 | Result for the year | -3 255.88 | -2 924.04 | Reserves | 10 | 1 292.89 | 1 033.84 | NET ASSETS | 645.60 | 1 222.31 | ECONOMIC OUTTURN ACCOUNT for the 7th, 8th and 9th EDF (EUR million) | Notes | cash basis expenditure 2007 | accrual adjustments | accrual basis expenditure 2007 | accrual basis expenditure 2006 | Operating interest | 1.1 | 0.02 | 0.02 | 0.06 | OPERATING REVENUE (1) | 0.02 | 0.02 | 0.06 | Programmable aid | 495.57 | 141.96 | 637.53 | 749.57 | Macro-economic support | 421.36 | 5.23 | 426.59 | 407.82 | Sectoral policy | 1 211.70 | -62.84 | 1 148.85 | 911.24 | Intra ACP Projects | 277.97 | 103.69 | 381.66 | 339.36 | Interest-rate subsidies | 0.95 | 0.95 | 1.20 | Emergency aid | 153.00 | 1.80 | 154.81 | 130.12 | Refugee aid | 1.31 | -6.89 | -5.58 | 6.68 | Risk Capital | 57.81 | 57.81 | 63.11 | STABEX | 98.37 | 98.37 | 189.52 | Sysmin | 23.36 | 8.22 | 31.58 | 29.80 | Transfers from former EDFs | 6.18 | -1.36 | 4.82 | 15.16 | Structural adjustment | 0.02 | -6.31 | -6.30 | 0.89 | Debt relief -HIPC and World Bank | -12.62 | 192.49 | 179.87 | 17.42 | Institutional Support | 42.40 | -11.99 | 30.41 | 32.34 | Compensation export receipts | 57.63 | 26.28 | 83.91 | 52.82 | R.D. Congo Fund | 0.19 | 17.06 | 17.25 | -13.39 | Operating expenses | 2 835.19 | 407.33 | 3 242.52 | 2 933.67 | Administrative and financial expenses | 11 | 38.78 | -7.10 | 31.68 | 23.79 | Total Expenses (cash basis) | 12 | 2 873.97 | Accrual adjustments | 13 | 399.89 | -0.34 | -0.14 | TOTAL EXPENSES / Accrual basis (2) | 14 | 3 273.86 | 3 273.86 | 2 957.31 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (2-1) | 3 273.83 | 3 273.83 | 2 957.26 | Financial revenue | 15 | 18.65 | 18.65 | 31.61 | Financial expenses | 16 | -0.34 | -0.34 | -0.14 | Impairment of receivables | 1.6 | -0.35 | -0.35 | 1.75 | Surplus/(deficit) from financial activities (3) | 17.96 | 17.96 | 33.22 | ECONOMIC RESULT (1-2+3) | -3 255.88 | -3 255.88 | -2 924.04[3] | CASH FLOW STATEMENT for the 7th, 8th and 9th EDF (EUR million) | notes | 31.12.2007 | 31.12.2006 | Economic result | -3 255.88 | -2 924.04 | Impairment of receivables | 1.6 | 0.35 | -1.75 | Financial revenue adjustment | 15 | -0.11 | 0.07 | Operational revenue adjustment | 1.1 | 2.88 | 0.04 | Accrual adjustments | 13 | 399.89 | 195.39 | Financial expenses | 16 | 0.34 | 0.14 | Bank charges to be refund | 1 | 0.02 | -0.04 | Decrease in advances for study grants and other current assets | 3 & 2.2 | 3.81 | 2.73 | Cash flows from operating activities | -2 848.69 | -2 727.46 | Contributions from member states | 2 886.76 | 2 525.82 | Cash flows from financing activities | 2 886.76 | 2 525.82 | Net increase/decrease in cash and cash equivalents | 38.07 | -201.64 | Treasury balance at beginning of period | 7 | 96.48 | 270.55 | Stabex security accounts at beginning of period | 5 | 191.60 | 371.88 | Congo Account | 6 | 3.42 | 19.67 | SWIFT Account | 8.2 | 49.73 | -119.23 | Cash and cash equivalent at beginning of period | 341.23 | 542.87 | Treasury balance at end of period | 7 | 285.24 | 96.48 | Stabex security accounts at end of period | 5 | 99.61 | 191.60 | Congo Account | 6 | 3.36 | 3.42 | SWIFT Account | 8.2 | -8.92 | 49.73 | Cash and cash equivalent at end of period | 379.30 | 341.23 | STATEMENT OF CHANGES IN NET ASSETS for the 7th, 8th and 9th EDF (EUR million) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 9 | 9 | 9 | 10 | Closing balance 2005 | 42 877.15 | 15 487.15 | 27 390.00 | -26 787.49 | 1 033.84 | 1 636.35 | Contributions | -2 510.00 | 2 510.00 | 2 510.00 | Capital increase | 122.00 | 122.00 | Transfers from former EDF | Economic result | -2 924.04 | -2 924.04 | Closing balance 2006 | 42 999.15 | 13 099.15 | 29 900.00 | -29 711.53 | 1 033.84 | 1 222.31 | Contributions | -2 640.00 | 2 640.00 | 2 640.00 | Capital increase | 40.17 | 1.00 | 39.17 | 39.17 | Transfers from former EDF | Economic result | -3 255.88 | -3 255.88 | Closure of 6th EDF | -7 560.00 | -7 560.00 | 7 300.94 | 259.06 | 0.00 | Closing balance 2007 | 35 479.32 | 10 460.15 | 25 019.17 | -25 666.46 | 1 292.89 | 645.60 | 7th EDF BALANCE SHEET (EUR million) | Notes | 31.12.2007 | 31.12.2006 | CURRENT ASSETS | Receivables | 1 | 2.12 | 17.06 | Net Pre-financing | 2 | 75.36 | 203.75 | Other current assets | 3 | Liaison accounts | 4 | 2 279.31 | 2 279.31 | Cash and cash equivalents | STABEX security accounts | 5 | RD Congo special fund | 6 | Cash at bank | 7 | TOTAL ASSETS | 2 356.78 | 2 500.12 | CURRENT LIABILITIES | Payables | 8 | 19.59 | 92.62 | Liaison accounts | 4 | 2 037.08 | 1 868.50 | TOTAL LIABILITIES | 2 056.67 | 1 961.12 | NET ASSETS | 300.11 | 539.00 | FUNDS & RESERVES | Called fund capital | 9 | 10 940.00 | 10 940.00 | Results carried forward from previous years | -9 715.19 | -9 527.36 | Result for the year | -166.97 | -187.83 | Reserves | 10 | -757.73 | -685.81 | NET ASSETS | 300.11 | 539.00 | 7th EDF ECONOMIC OUTTURN ACCOUNT (EUR million) | Notes | cash basis expenditure 2007 | accrual adjustments | accrual basis expenditure 2007 | accrual basis expenditure 2006 | Operating interest | 1.1 | OPERATING REVENUE (1) | Programmable aid | 63.04 | 61.52 | 124.56 | 105.55 | Macro-economic support | Sectoral policy | Intra ACP Projects | 8.67 | Interest-rate subsidies | -0.49 | -0.49 | -0.01 | Emergency aid | 0.00 | 0.28 | 0.28 | -0.21 | Refugee aid | 0.28 | 0.28 | -0.66 | Risk Capital | 5.28 | 5.28 | 5.46 | Stabex | 8.23 | 8.23 | 51.71 | Sysmin | 20.21 | 6.80 | 27.01 | 16.59 | Transfers from former EDFs | 0.39 | 3.17 | 3.56 | 0.46 | Structural adjustment | -6.62 | -6.62 | 0.03 | Debt relief -HIPC and World Bank | 4.96 | 4.96 | 0.06 | Institutional Support | Compensation export receipts | R.D. Congo Fund | Operating expenses | 96.66 | 70.39 | 167.05 | 187.66 | Administrative and financial expenses | 11 | Total Expenses (cash basis) | 12 | 96.66 | Accrual adjustments | 13 | 70.39 | TOTAL EXPENSES / Accrual basis (2) | 14 | 167.05 | 167.05 | 187.66 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (2-1) | 167.05 | 167.05 | 187.66 | Financial revenue | 15 | Financial expenses | 16 | Impairment of receivables | 1.6 | 0.08 | 0.08 | -0.18 | Surplus/(deficit) from financial activities (3) | 0.08 | 0.08 | -0.18 | ECONOMIC RESULT (1-2+3) | -166.97 | -166.97 | -187.83 | STATEMENT OF CHANGES IN NET ASSETS for the 7th EDF (EUR million) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 9 | 9 | 9 | 10 | Closing balance 2005 | 10 940.00 | 0.00 | 10 940.00 | -9 527.36 | -559.14 | 853.50 | Contributions | Capital increase | Transfers to 9th EDF | -126.67 | -126.67 | Economic result | -187.83 | -187.83 | Closing balance 2006 | 10 940.00 | 0.00 | 10 940.00 | -9 715.19 | -685.81 | 539.00 | Contributions | Capital increase | Transfers to 9th FED | -71.91 | -71.91 | Economic result | -166.97 | -166.97 | Closing balance 2007 | 10 940.00 | 0.00 | 10 940.00 | -9882.16 | -757.73 | 300.11 | 8th EDF BALANCE SHEET (EUR million) | Notes | 31.12.2007 | 31.12.2006 | CURRENT ASSETS | Receivables | 1 | 2.64 | 70.61 | Net Pre-financing | 2 | 126.98 | 888.93 | Other current assets | 3 | Liaison accounts | 4 | 3 301.13 | 2 450.58 | Cash and cash equivalents | STABEX security accounts | 5 | RD Congo special fund | 6 | Cash at bank | 7 | TOTAL ASSETS | 3 430.74 | 3 410.12 | CURRENT LIABILITIES | Payables | 8 | 124.35 | 651.73 | Liaison accounts | 4 | 2 065.45 | 2 065.45 | TOTAL LIABILITIES | 2 189.80 | 2 717.19 | NET ASSETS | 1 240.94 | 692.93 | FUNDS & RESERVES | Called fund capital | 9 | 12 840.00 | 11 295.00 | Results carried forward from previous years | -8 724.21 | -7 851.95 | Result for the year | -779.79 | -872.26 | Reserves | 10 | -2 095.06 | -1 877.85 | NET ASSETS | 1 240.94 | 692.93 | 8th EDF ECONOMIC OUTTURN ACCOUNT (EUR million) | Notes | cash basis expenditure 2007 | accrual adjustments | accrual basis expenditure 2007 | accrual basis expenditure 2006 | Operating interest | 1.1 | OPERATING REVENUE (1) | Programmable aid | 298.39 | 95.13 | 393.52 | 575.43 | Macro-economic support | 1.73 | 1.06 | 2.79 | 13.07 | Sectoral policy | 18.83 | 2.12 | 20.95 | 23.21 | Intra ACP Projects | Interest-rate subsidies | 1.45 | 1.45 | 1.21 | Emergency aid | -0.15 | -0.15 | 0.98 | Refugee aid | 1.31 | -7.17 | -5.86 | 7.29 | Risk Capital | 52.52 | 52.52 | 57.65 | STABEX | 90.14 | 90.14 | 137.80 | Sysmin | 3.15 | 1.42 | 4.57 | 13.17 | Transfers from former EDFs | Structural adjustment | 0.02 | 0.31 | 0.32 | 0.86 | Debt relief -HIPC and World Bank | -14.22 | 187.53 | 173.31 | 15.36 | Institutional Support | Compensation export receipts | 29.51 | 19.98 | 49.49 | 30.80 | R.D. Congo Fund | Operating expenses | 482.67 | 300.37 | 783.04 | 876.83 | Administrative and financial expenses | 11 | 0.75 | 1.20 | 1.95 | 4.64 | Total Expenses (cash basis) | 12 | 483.42 | Accrual adjustments | 13 | 301.57 | TOTAL EXPENSES / Accrual basis (2) | 14 | 784.99 | 784.99 | 881.47 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (2-1) | 784.99 | 784.99 | 881.47 | Financial revenue | 15 | 6.18 | 6.18 | 9.13 | Financial expenses | 16 | Impairment of receivables | 1.6 | -0.97 | -0.97 | 0.08 | Surplus/(deficit) from financial activities (3) | 5.20 | 5.20 | 9.20 | ECONOMIC RESULT (1-2+3) | -779.79 | -779.79 | -872.26 | STATEMENT OF CHANGES IN NET ASSETS for the 8th EDF (EUR million) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 9 | 9 | 9 | 10 | Closing balance 2005 | 12 840.00 | 4 055.00 | 8 785.00 | -7 851.95 | -1 603.43 | -670.38 | Contributions | -2 510.00 | 2 510.00 | 2 510.00 | Capital increase | Transfers to 9th EDF | -274.42 | -274.42 | Economic result | -872.26 | -872.26 | Closing balance 2006 | 12 840.00 | 1 545.00 | 11 295.00 | -8 724.21 | -1 877.85 | 692.93 | Contributions | -1 545.00 | 1 545.00 | 1 545.00 | Capital increase | Transfers to 9th EDF | -217.21 | -217.21 | Economic result | -779.79 | -779.79 | Closing balance 2007 | 12 840.00 | 0.00 | 12 840.00 | -9 504.00 | -2 095.06 | 1 240.94 | 9th EDF BALANCE SHEET (EUR million) | Notes | 31.12.2007 | 31.12.2006 | CURRENT ASSETS | Receivables | 1 | 3.75 | 129.17 | Net Pre-financing | 2 | 753.18 | 1 716.20 | Other current assets | 3 | -2.65 | 0.95 | Liaison accounts | 4 | 2 037.08 | 1 868.50 | Cash and cash equivalents | 388.22 | 291.50 | STABEX security accounts | 5 | 99.61 | 191.60 | RD Congo special fund | 6 | 3.36 | 3.42 | Cash at bank | 7 | 285.24 | 96.48 | TOTAL ASSETS | 3 179.57 | 4 006.32 | CURRENT LIABILITIES | Payables | 8 | 560.05 | 1 351.51 | Liaison accounts | 4 | 3 514.98 | 2 664.43 | TOTAL LIABILITIES | 4 075.03 | 4 015.94 | NET ASSETS | -895.45 | -9.62 | FUNDS & RESERVES | Called fund capital | 9 | 1 239.17 | 105.00 | Results carried forward from previous years | -3 971.18 | -2 117.60 | Result for the year | -2 309.12 | -1 853.59 | Reserves | 10 | 4 145.68 | 3 856.56 | NET ASSETS | -895.45 | -9.62 | 9th EDF ECONOMIC OUTTURN ACCOUNT (EUR million) | Notes | cash basis expenditure 2007 | accrual adjustments | accrual basis expenditure 2007 | accrual basis expenditure 2006 | Operating interest | 1.1 | 0.02 | 0.02 | 0.06 | OPERATING REVENUE (1) | 0.02 | 0.02 | 0.06 | Programmable aid | 134.14 | -14.69 | 119.44 | 56.78 | Macro-economic support | 419.63 | 4.17 | 423.80 | 394.75 | Sectoral policy | 1 192.87 | -64.96 | 1 127.91 | 888.03 | Intra ACP Projects | 277.97 | 103.69 | 381.66 | 328.96 | Interest-rate subsidies | Emergency aid | 153.16 | 1.52 | 154.68 | 129.35 | Refugee aid | Risk Capital | Stabex | Sysmin | Transfers from former EDFs | 5.79 | -4.53 | 1.26 | 14.49 | Structural adjustment | Debt relief -HIPC and World Bank | 1.60 | 1.60 | 2.00 | Institutional Support | 42.40 | -11.99 | 30.41 | 32.34 | Compensation export receipts | 28.12 | 6.30 | 34.42 | 22.02 | R.D. Congo Fund | 0.19 | 17.06 | 17.25 | -13.39 | Operating expenses | 2 255.86 | 36.58 | 2 292.43 | 1 855.34 | Administrative and financial expenses | 11 | 38.03 | -8.30 | 29.73 | 19.15 | Total Expenses (cash basis) | 12 | 2 293.89 | Accrual adjustments | 13 | 27.93 | -0.34 | -0.14 | TOTAL EXPENSES / Accrual basis (2) | 14 | 2 321.82 | 2 321.82 | 1 874.34 | SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES (2-1) | 2 321.80 | 2 321.80 | 1 874.29 | Financial revenue | 15 | 12.47 | 12.47 | 22.49 | Financial expenses | 16 | -0.34 | -0.34 | -0.14 | Impairment of receivables | 1.6 | 0.54 | 0.54 | -1.65 | Surplus/(deficit) from financial activities (3) | 12.67 | 12.67 | 20.70 | ECONOMIC RESULT (1-2+3) | -2 309.12 | -2 309.12 | -1 853.59 | STATEMENT OF CHANGES IN NET ASSETS for the 9th EDF (EUR million) | Fund Capital | Uncalled Funds | Called funds capital | Cumulative reserves | Reserves | Total Net Assets | (a) | (b) | (c)=(a)-(b) | (e) | (d) | (h)=(e)+(d)+(c) | Notes | 9 | 9 | 9 | 10 | Closing balance 2005 | 11 537.15 | 11 432.15 | 105.00 | -2 117.60 | 3 379.41 | 1 366.81 | Contributions | Capital increase | 122.00 | 122.00 | Transfers from other EDF | 477.15 | 477.15 | Economic result | -1 853.59 | -1 853.59 | Closing balance 2006 | 11 659.15 | 11 554.15 | 105.00 | -3 971.18 | 3 856.56 | -9.62 | Contributions | -1 095.00 | 1 095.00 | 1 095.00 | Capital increase | 40.17 | 1.00 | 39.17 | 39.17 | Transfers from other EDF | 289.12 | 289.12 | Economic result | -2 309.12 | -2 309.12 | Closing balance 2007 | 11 699.32 | 10 460.15 | 1 239.17 | -6 280.30 | 4 145.68 | -895.45 | NOTES TO THE FINANCIAL STATEMENTS Accounting Policies Legal provisions and the financial regulation The financial statements were drawn up in accordance with the Financial Regulation applicable to the 9th European Development Fund[4] (EDF). The relevant documents must be presented to the Court of Auditors as provided for in Articles 69, 70 and 71 of the Financial Regulation applicable to the 7th EDF[5], Articles 66, 67 and 68 of the Financial Regulation applicable to the 8th EDF[6] and Articles 102 and 103 of the Financial Regulation applicable to the 9th EDF. Article 102 (9th EDF) stipulates that the Commission shall send the provisional accounts to the Court of Auditors by 31 March of the following year. The Court of Auditors shall in turn make its observations on the accounts known to the Commission by 15 June (Article 103). On the basis of these observations, the Commission approves the final accounts by 31 July and sends them to the European Parliament, the Council and the Court of Auditors. The accounts are then published in the Official Journal by 31 October together with the statement of assurance given by the Court of Auditors in respect of the part of the EDF resources for which the Commission is responsible for financial management. In accordance with the provisions of article 99 of the 9th EDF Financial Regulation, financial statements are prepared in respect of the principle of accrual based accounting. The accounting information provided by the present IT accounting system (OLAS) has been adjusted, where necessary, in order to provide figures which comply with accrual accounting principles. Additional information in respect of income and expenditure items has also been provided by the Authorising Officer. These financial statements have been drafted in conformity with accounting rules and methods for the EDF drawn up on the basis of International Public Sector Accounting Standards (IPSAS) or by default, International Financial Reporting Standards (IFRS) as respectively issued by the International Public Sector Accounting Standard Board (IPSASB) and International Accounting Standard Board (IASB). The rules of valuation and accounting methods adopted by the Accounting Officer of the European Development Fund have been applied in respect of the part of the EDF resources for which the European Commission is responsible for financial management. Accounting Principles The objectives of financial statements are to provide information about the financial position, performance and cash flows of an entity that is useful to a wide range of users. For 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. If they are to present a true and fair view, financial statements must not only supply relevant information to describe the nature and range of the activities, explain how it is financed and supply definitive information on its operations, but do so in a clear and comprehensible manner which allows comparisons between financial years. It is with these goals in mind that the present document has been drawn up. The accounting system of the European Development Fund comprises general accounts and financial accounts. Both sets of accounts are kept in euro on the basis of the calendar year. The general accounts allow for the preparation of the financial statements as they show all charges and incomes for the financial year and are designed to establish the financial position in the form of a balance sheet at 31 December. The financial accounts give a detailed picture of the use of EDF resources. They are based on the cash accounting principle. Article 98 of the 9th EDF Financial Regulation sets out the accounting principles to be applied in drawing up the financial statements, as follows: - going concern basis; - prudence; - consistent accounting methods; - comparability of information; - materiality; - no netting; - reality over appearance, and - accrual-based accounting. Currency and basis for conversion The financial statements are presented in millions of euros, which is the European Communities' functional and reporting currency. Values in the tables may not add up, due to rounding. Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the underlying transactions. Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the exchange rates applying on 31 December: EURO Exchange Rate | 31.12.2007 | 31.12.2006 | GBP 0.7148 | GBP 0.6743 | Balance sheet Receivables Receivables are carried at original amount less write-down for impairment. A write-down for impairment of receivables is established when there is objective evidence that the EDF will not be able to collect all amounts due according to the original terms of the receivables. The amount of the write-down is the difference between the asset's carrying amount and the recoverable amount, being the present value of expected future cash flows, discounted at the market rate of interest for similar borrowers. The amount for write-down is recognised in the economic outturn account. Also recognised is a general write-down in value of 20% per year for outstanding recovery orders not already subject to a specific write-down. 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 pre-financing agreement. The float or advance is repaid or used for the purpose for which it was provided during the period defined in the agreement. If the beneficiary does not incur sufficient eligible expenditure, he has the obligation to return, in whole or in part, the pre-financing advance to the European Development Fund. The amount of the pre-financing is reduced (wholly or partially) by the acceptance of eligible costs and amounts returned. At year-end outstanding pre-financing amounts are valued at the original amount(s) paid to the beneficiary less: any amounts returned, eligible amounts cleared and the estimated eligible amounts not yet cleared at year-end (see note 2.3). Guarantees related to pre-financing amounts are disclosed as contingent assets (see point 1.4) and as such they are not accounted for in the financial statements (IPSAS 19). Cash & cash equivalents Cash and cash equivalents include accounts held with financial institutions in the ACP states and the OCTs, and with financial institutions in the Member States. For the purpose of the cash flow statement, cash and cash equivalents include the current account with the general budget of the EU presented under accounts payable in the balance sheet (see note 8). Payables A significant amount of payables of the EDF are not related to the purchase of good or services – instead they are unpaid cost claims from beneficiaries of grants or other funding. They are recorded as payables for the requested amount when the cost claim/request for payment is received and, after verification, accepted as eligible by the relevant financial agents. At this stage they are valued at the accepted and eligible amount. The EDF has current liabilities for amounts already due to beneficiaries for which no invoices were received at the reporting date. The recognition criteria foresee that a charge is recognised by the EDF for the amount of the estimated payment due for the period, that is to say the portion of the incurred eligible expenses due to the beneficiaries at the reporting date. Material amounts are recognised as an accrued expense (accrued expenditure) on the basis of estimates (e.g. the degree of execution of contracts) provided by the Authorising Officer. Economic outturn Account Revenue The only source of income for the funds is derived from interest generated on various cash balances held with commercial Banks (see notes to the accounts) or on late payment of entitlements to the EDF. Expenditure Expenditure should be recognised in the EDF financial statements as expenditure of the period that the events giving rise to a payment occurred, as long as: - A contract has been signed which authorises the payment; - Eligibility criteria, if any, have been met by the beneficiary; and, - A reasonable estimate of the amount due can be made based on, for example, invoices sent by the beneficiary, degree of execution of contracts etc.. As expenditure incurred by Commission Delegations is not finally entered into the EDF accounts until it has been validated by both the Authorising Officer and the Accounting Officer, any expenditure which was not validated at year end is shown under the heading of "unallocated expenses" on the balance sheet (see table 3). Cash basis expenditure includes all payment orders executed by the banks up to 31 December 2007. In order to comply with accrual accounting principles the cash basis expenditure provided by the present IT accounting system (OLAS) has been adjusted with the additional information provided by the Authorising Officer about pre-financing and accrued expenditure. Contingent assets and liabilities 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 European Communities. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset’s value can be measured reliably, the asset and the related revenue are recognised in the financial statements of the period in which the change occurs. Guarantees Guarantees are possible assets or obligations that arise from past events and whose existence will be confirmed by the occurrence or non-occurrence of the object of the guarantee. Guarantees thus qualify as contingent assets or liabilities. A guarantee is settled when the object of the guarantee no longer exists. It is crystallised when the conditions are fulfilled for calling a payment from the guarantor. Recording of operations Entitlements due from the Member States (mainly contributions which have not yet been called or interest due on the late payment of called funds) must be entered in the accounts. These items are set out in the balance sheets for the various EDFs. In accordance with the principles of accrual-based accounting, the financial statements show the financial charges and income for the financial year regardless of the date of payment or collection. Use of estimates In accordance with 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, provisions for future charges, financial risk on accounts receivable, accrued income and charges. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known. Notes to the balance sheet 1. Receivables table 1 | EUR million | Receivables | notes | 7th | 8th | 9th | Total at 31.12.2007 | Total at 31.12.2006 | Contributions to be received | 0.00 | 0.00 | Interest receivable on late contributions | 1.1 | 0.00 | 2.09 | Interest receivable on late contributions - STABEX | 1.1 | 0.00 | 0.79 | Interest receivable - European banks | 1.2 | 1.19 | 1.19 | 0.88 | Interest receivable - STABEX security | 1.3 | 0.41 | 0.41 | 0.61 | Banks charges to be refund | 0.00 | 0.02 | Recovery orders to be issued (2006) | 1.4 | 0.00 | 196.58 | Open recovery orders | 1.5 | 4.90 | 3.72 | 3.25 | 11.88 | 20.48 | - Impairment of receivables | 1.6 | -2.79 | -1.09 | -1.10 | -4.98 | -4.63 | TOTAL | 2.12 | 2.64 | 3.75 | 8.50 | 216.83 | In accordance with the provisions of the Cotonou Agreement, interest income relates to the 9th EDF. Such funds can be used according to the provisions of articles 1.3, 4 and 9 of the Internal Agreement applicable to 9th EDF (see note 11). The sole exception is the interest earned in STABEX security accounts which relates to the 8th EDF as this aid instrument does not feature in the 9th EDF (see notes 5 and 15). (1.1) Interest receivable on late contributions In accordance with Article 40(4) of the 9th EDF Financial Regulation, interest is charged to the Member States in the event of late payment of the called-up contributions. This interest results in an effective increase in the Funds’ overall appropriations and represents its only source of operating revenue (see economic outturn account). table 1.1 | EUR million | Interest on late payment of EDF contributions | Balance at 31.12.2006 | Late interest revenue 2007 | Interest received 2007 | Balance at 31.12.07 | France | 1.00 | -1.00 | 0.00 | Netherlands | 0.02 | -0.02 | 0.00 | Spain | 0.06 | 0.00 | -0.06 | 0.00 | United Kingdom | 1.02 | -1.02 | 0.00 | TOTAL | 2.09 | 0.02 | -2.11 | 0.00 | (1.2) Interest receivable European banks This amount represents interest earned on the European bank accounts and the STABEX current account during the financial year 2007, for which the payment will be received in 2008. (1.3) Interest receivable STABEX security accounts This amount represents interest earned on the STABEX security accounts during the financial year 2007, for which the payment will be received in 2008. This interest is the property of the relevant beneficiary countries. (1.4) Recovery orders to be issued For the first time in 2007 and to improve transparency, recovery orders to be issued against prefinancing paid are not presented as receivables but instead they are classified as prefinancing. To allow comparison with previous years, the estimations calculated by the Authorising Officer are presented in the table below (see also note 2). Table 1.4 | EUR million | Recovery orders to be issued | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31.12.07 | 9.90 | 24.95 | 144.97 | 179.82 | Total at 31.12.06 | 14.54 | 62.38 | 119.67 | 196.58 | Increase (Decrease) | -4.64 | -37.42 | 25.30 | -16.76 | (1.5) Open recovery orders The closing balance for recovery orders represents the value of recovery orders issued but unpaid at the year end. (1.6) Impairment of receivables In compliance with IPSAS 19, the Accounting Officer has established a provision for doubtful debts based on two variables: - Age of the debt, applying a provision of 20% of the euro value for each year the debt is outstanding - The evaluation of the non recovery risk, in collaboration with the Authorising Officer. Potential exchange rate losses (on recovery orders not issued in euro) are not taken into account for this calculation, as these are not considered to be material. table 1.6 | EUR million | Impairment of receivables | 7th EDF | 8th EDF | 9th EDF | TOTAL | Balance at 31.12.2007 | 2.79 | 1.09 | 1.10 | 4.98 | Balance at 31.12.2006 | 2.87 | 0.11 | 1.65 | 4.63 | Increase (Decrease) | -0.08 | 0.97 | -0.54 | 0.35 | 2. Net Pre-financing Following the principles of accrual accounting, advance payments made by the EDF are classified as assets. The figures for open pre-financing have been provided by the Authorising Officer (see table 2.1). The pre-financing is presented net of the open recovery orders concerning advances and the estimated amounts not yet cleared at year end. To improve transparency, and for the first time in 2007, prefinancing is not netted of recovery orders to be issued (see note 1.4). This reclassification has no impact in the net assets of the funds. table 2 | EUR million | Net pre-financing | notes | 7th EDF | 8th EDF | 9th EDF | TOTAL 31.12.2007 | TOTAL 31.12.2006 | Pre-financing (gross) | 2.1 | 152.34 | 383.89 | 2 230.29 | 2 766.52 | 3 024.37 | Advances for study grants management | 2.2 | 1.38 | 1.38 | 1.58 | -Estimated clearing of Prefinancing | 2.3 | -72.08 | -253.19 | -1 475.24 | -1 800.51 | -Open recovery orders | 1.5 | -4.90 | -3.72 | -3.25 | -11.88 | -20.48 | -Recovery orders to be issued (2006) | 1.4 | 0.00 | -196.58 | TOTAL | 75.36 | 126.98 | 753.18 | 955.52 | 2 808.88 | (2.1) Pre-financing(gross) Many contracts provide for payments of advances before the commencement of works, deliveries of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments on account on the basis of progress reports. Advances, which normally are paid in the currency of the country or territory where the project is executed, are kept separate in the accounts of the Authorising Officer to allow them to be cleared. The table below summarises outstanding advances (except for structural adjustment programmes and direct budgetary support programmes) registered in the Authorising Officer's accounts at the end of the year. Conversion into EUR is made using the official exchange rate of December 31 (see point 1.3.1.3). table 2.1 | EUR million | Pre-financing (gross) | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31.12.2007 | 152.34 | 383.89 | 2 230.29 | 2 766.52 | Total at 31.12.2006 | 223.67 | 959.66 | 1 841.04 | 3 024.37 | Increase (Decrease) | -71.34 | -575.76 | 389.26 | -257.84 | (2.2) Advances for study grants management This amount corresponds to advances paid to external bodies for the management of study awards. (2.3) Estimated clearing of prefinancing This amount represents the accrued charges calculated by the Authorising Officer corresponding to the amount of eligible costs that were incurred by the beneficiaries of the outstanding prefinancing at year end, but not yet reported. These amounts are treated as expenditure in the Economic Outturn Account and have been reclassified from accounts payables to prefinancing for the first time in 2007. This reclassification has no impact on the aggregated net assets and therefore the opening balance has not been restated. For information purposes, the impact of the reclassification on the 2006 aggregated current assets and liabilities is detailed below. Notes | As presented in 2006 final accounts | reclassification | Adjusted balance 31.12.2006 | CURRENT ASSETS | Receivables | 1 | 216.83 | 216.83 | Net Pre-financing | 2 | 2 808.88 | -1 789.36 | 1 019.53 | Other current assets | 3 | 0.95 | 0.95 | Cash and cash equivalents | 291.50 | 291.50 | STABEX security accounts | 5 | 191.60 | 191.60 | RD Congo special fund | 6 | 3.42 | 3.42 | Cash at bank | 7 | 96.48 | 96.48 | TOTAL ASSETS | 3 318.17 | -1 789.36 | 1 528.81 | CURRENT LIABILITIES | Payables | 8 | 2 095.86 | -1 789.36 | 306.50 | TOTAL LIABILITIES | 2 095.86 | -1 789.36 | 306.50 | NET ASSETS | 1 222.31 | 0.00 | 1 222.31 | 3. Other current assets This amount comprises all payments/receipts awaiting final allocation to the appropriate projects and economic outturn account. table 3 | EUR million | Other current assets | 9th EDF | Total at 31.12.07 | Total at 31.12.06 | Unallocated expenses | 1.19 | 1.19 | 2.65 | Devaluation | 0.00 | 0.00 | 0.00 | Unallocated revenue | -4.55 | -4.55 | -2.12 | Partial off-settings | 0.70 | 0.70 | 0.42 | TOTAL | -2.65 | -2.65 | 0.95 | 4. Liaison accounts For reasons of efficiency, there is a single treasury for all the EDFs being implemented; this leads to operations between the various EDFs, which are balanced out in the liaison accounts between the various balance sheets. table 4 | EUR million | Liaison accounts | 7th EDF | 8th EDF | 9th EDF | Total at 31.12.07 | Total at 31.12.06 | to/from 6th EDF | 2 279.31 | -2 065.45 | -213.85 | 0.00 | to/from 7th EDF | 2 037.08 | 2 037.08 | -410.80 | to/from 8th EDF | -3 301.13 | -3 301.13 | -385.12 | to/from 9th EDF | -2 037.08 | 3 301.13 | 1 264.05 | 795.93 | 242.23 | 1 235.68 | -1 477.91 | 0.00 | 0.00 | table 4.1 | EUR million | Liaison accounts | 7th EDF | 8th EDF | 9th EDF | TOTAL | 2007 | assets | 2 279.31 | 3 301.13 | 2 037.08 | 7 617.51 | liabilities | 2 037.08 | 2 065.45 | 3 514.98 | 7 617.51 | Total 2007 | 242.23 | 1 235.68 | -1 477.91 | 0.00 | 2006 | assets | 2 279.31 | 2 450.58 | 1 868.50 | 6 598.39 | liabilities | 1 868.50 | 2 065.45 | 2 664.43 | 6 598.39 | Total 2006 | 410.80 | 385.12 | -795.93 | 0.00 | 5. STABEX Security accounts The STABEX is the acronym for a European Commission compensatory finance scheme to stabilise export earnings of the ACP countries. It was first introduced in the first Lomé Convention (1975) with the purpose of remedying the harmful effects of the instability of export revenue from agricultural products. The balance on the STABEX security accounts represents the total of STABEX funds available and which will be transferred to the relevant beneficiary ACP State at a future date. This total amount concerns the 8th EDF, with the exception of EUR 2.51 million allocated to Sudan, which fell under the 7th EDF. table 5 | EUR million | STABEX security accounts | EDF | Balance at 31.12.2006 | Interest | Payments | Balance at 31.12.2007 | BENIN | 8th | 0.05 | 0.00 | 0.05 | BURKINA FASO | 8th | 0.78 | 0.01 | 0.78 | 0.01 | BURUNDI | 7th/8th | 26.62 | 1.05 | 26.99 | 0.68 | CAMEROUN | 8th | 5.52 | 0.04 | 5.54 | 0.02 | COMOROS | 8th | 0.06 | 0.00 | 0.06 | DOMINICA | 8th | 0.26 | 0.01 | 0.19 | 0.08 | ETHIOPIA | 8th | 0.93 | 0.04 | 0.96 | GAMBIA | 8th | 1.03 | 0.04 | 1.07 | GRENADA | 8th | 0.34 | 0.01 | 0.35 | GUINEA-BISSAU | 8th | 0.34 | 0.01 | 0.35 | COTE D'IVOIRE | 8th | 15.85 | 0.44 | 14.73 | 1.57 | JAMAICA | 8th | 0.60 | 0.02 | 0.62 | MADAGASCAR | 8th | 0.65 | 0.03 | 0.68 | MALAWI | 8th | 0.94 | 0.04 | 0.97 | MAURITANIA | 8th | 18.22 | 0.72 | 18.56 | 0.38 | PAPUA-NEW GUINEA | 8th | 0.68 | 0.03 | 0.70 | RWANDA | 8th | 5.89 | 0.23 | 6.12 | SENEGAL | 8th | 10.33 | 0.41 | 10.74 | SIERRA LEONE | 8th | 3.13 | 0.12 | 3.19 | 0.07 | SAINT LUCIA | 8th | 14.05 | 0.56 | 14.60 | SOLOMON ISLANDS | 8th | 0.08 | 0.00 | 0.08 | 0.00 | SUDAN | 7th/8th | 54.52 | 1.94 | 7.83 | 48.62 | ST VINCENT & GRENADINES | 8th | 4.05 | 0.16 | 4.21 | TANZANIA | 8th | 14.00 | 0.26 | 10.70 | 3.56 | TONGA | 8th | 0.09 | 0.00 | 0.09 | UGANDA | 8th | 9.72 | 0.07 | 9.78 | 0.00 | ZIMBABWE | 8th | 2.90 | 0.11 | 3.01 | TOTAL STABEX | 191.60 | 6.38 | 98.37 | 99.61 | In addition to these funds, there are other STABEX funds held by beneficiary ACP States. Once the Commission and the beneficiary (ACP) State have reached agreement on how the STABEX funds are to be utilised, a transfer convention is signed by both parties. In accordance with the provisions of Article 211 of the Lomé IV Agreement[7] (as revised), the funds are transferred into an interest bearing double signature account (Commission official and Beneficiary State) opened in the name of the ACP State. The Commission official retains the power of signature over the account in order to ensure that the funds are disbursed as intended. As these funds are the property of the ACP State, they are not recorded as assets in the EDF Annual Accounts and the transfers to these accounts are recorded as STABEX payments. Details on these accounts are however provided in the annual EDF Financial Management Report[8]. 6. Special D.R. Congo account This balance represents the amounts available for D.R. Congo in accordance with the provisions of Council Decision 2003/583/EC[9]. 7. Cash at banks In accordance with Article 129 of the 9th EDF Financial Regulation the treasury is presented in the balance sheet of the 9th EDF. table 7 | EUR million | Cash and cash equivalents | Notes | Balance at 31.12.07 | Balance at 31.12.06 | Treasury accounts | 7.1 | 208.09 | 3.55 | Local Paying Agents | 7.2 | 54.67 | 59.37 | European Paying Agents | 7.3 | 13.06 | 21.29 | STABEX current account | 7.4 | 8.47 | 12.17 | Cash in transit | 7.5 | 0.95 | 0.10 | TOTAL | 285.24 | 96.48 | (7.1) Treasury accounts These are accounts held with the central banks of the Member States into which EDF contributions are paid. The Accounting Officer makes transfers from these accounts to the European paying agents. (7.2) Local paying agents These are amounts held in bank accounts within ACP States and OCTs used for making payments in local currency within the beneficiary state. The accounts are generally kept in euros, but may also be kept in a currency of a Community Member State. (7.3) European paying agents These accounts are held with commercial banks established in the EU-15 Member States and with the EIB. The accounts are kept in euros and are used for payments to beneficiaries within the Union and elsewhere. Payments are generally made in euros, but may also be made in other currencies. These funds are also used to replenish local paying agent accounts and the liaison account with the General Budget of the EU. (7.4) STABEX current account This amount represents the cash balance remaining on the STABEX main account which will be made available for Togo by way of transfer to a security account, once instructions have been received from the Authorising Officer. The decrease of EUR 3.70 million compared to 2006 represents the transfer to the EDF main account (allocation to the general long term development reserve) in the course of 2007 following the instructions from the Authorising Officer. The interest earned in this account is periodically transferred to the EDF main account to be used in accordance with Articles 1.3 and 9 of the Internal Agreement applicable to 9th EDF. (7.5) Cash in transit Some replenishment sent before the year end were only registered by the beneficiary bank in 2008. 8. Payables table 8 | EUR million | Payables | notes | 7th EDF | 8th EDF | 9th EDF | Total at 31.12.2007 | Total at 31.12.2006 | Deferred income | 8.1 | 211.08 | 211.08 | 3.49 | Liaison a/c with General Budget of the EU | 8.2 | 8.92 | 8.92 | -49.73 | Accrued Expenses | 19.59 | 124.35 | 340.04 | 483.98 | 2 142.10 | Non finalised payments | 8.3 | 4.22 | 15.85 | 62.04 | 82.11 | 110.29 | Eligibility to be confirmed | 8.4 | 3.76 | 30.00 | 81.19 | 114.96 | 107.19 | Invoices to be received | 8.5 | 83.69 | 331.69 | 1 672.04 | 2 087.42 | 1 924.62 | - Estimated clearing of prefinancing | 2.3 | -72.08 | -253.19 | -1 475.24 | -1 800.51 | 0.00 | TOTAL | 19.59 | 124.35 | 560.05 | 703.98 | 2 095.86 | (8.1) Deferred income Table 8.1 | EUR million | Contributions received in advance | Balance at 31.12.2007 | Balance at 31.12.2006 | Ireland | 1.00 | 3.49 | United Kingdom | 208.09 | Finland | 2.00 | TOTAL | 211.08 | 3.49 | (8.2) Liaison account with the General Budget of the EU As from the beginning of financial year 2005, payments to beneficiaries within the Union are executed through SWIFT by the General Budget of the European Union. For this purpose, a current account has been opened. This account is presented in the cash flow statement as cash equivalent. Accrued expenses The accounting information provided by the present IT accounting system (OLAS) has been adjusted in order to provide figures which comply with accrual accounting principles. Additional information has been provided by the Authorising Officer. This item includes non finalised payments, eligibility to be confirmed and an estimation of invoices to be received based in the degree of advancement of projects. In 2007 the methodology for the determination of the accrued expenditure has been refined to incorporate to the analysis the type of contract. The estimated amount of eligible costs incurred by the beneficiaries of outstanding prefinancing amounts but not yet reported at year is now classified under prefinancing (see note 2.3). (8.3) Non finalised payments These are payments authorised before 31 December 2007 but executed by the bank in 2008. The amounts registered in the accounts of the Authorising Officer are shown in table 8.3. table 8.3 | EUR million | Non finalised payments | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31.12.07 | 4.22 | 15.85 | 62.04 | 82.11 | Total at 31.12.06 | 4.02 | 26.58 | 79.69 | 110.29 | Increase (Decrease) | 0.19 | -10.72 | -17.65 | -28.18 | (8.4) Eligibility to be confirmed These are invoices which arrived before the end of the financial year 2007 but which had still not been analysed at the yearly closure. The amounts registered in the accounts of the Authorising Officer are shown in table 8.4. Table 8.4 | EUR million | Eligibility to be confirmed | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31.12.07 | 3.76 | 30.00 | 81.19 | 114.96 | Total at 31.12.06 | 9.31 | 42.99 | 54.89 | 107.19 | Increase (Decrease) | -5.55 | -12.99 | 26.30 | 7.77 | (8.5) Invoices to be received These figures reflect expenditure which has been incurred but has not yet been invoiced (e.g. work in progress on capital projects). The amounts estimated by the Authorising Officer are shown in table 8.5. table 8.5 | EUR million | Invoices to be received | 7th EDF | 8th EDF | 9th EDF | TOTAL | Total at 31.12.07 | 83.69 | 331.69 | 1 672.04 | 2 087.42 | Total at 31.12.06 | 79.29 | 582.17 | 1 263.17 | 1 924.62 | Increase (Decrease) | 4.40 | -250.48 | 408.87 | 162.80 | Funds and Reserves 9. Called fund Capital table 9 | EUR million | Capital 2007 | 6th EDF | 7th EDF | 8th EDF | 9th EDF | Total EDF | Funds Capital (a) | 10 940.00 | 12 840.00 | 11 699.32 | 35 479.32 | Uncalled funds (b) | 0.00 | 0.00 | 10 460.15 | 10 460.15 | Called fund capital (a)-(b) | 10 940.00 | 12 840.00 | 1 239.17 | 25 019.17 | Capital 2006 | Funds Capital (a) | 7 560.00 | 10 940.00 | 12 840.00 | 11 659.15 | 42 999.15 | Uncalled funds (b) | 0.00 | 0.00 | 1 545.00 | 11 554.15 | 13 099.15 | Called fund capital (a)-(b) | 7 560.00 | 10 940.00 | 11 295.00 | 105.00 | 29 900.00 | The fund capital represents the total amount receivable from the Member States for the relevant EDF fund as laid down in each of the Internal Agreement[10] between the Member States and the beneficiary ACP States and OCTs. The initial allocation for the (current) 9th EDF, which originally totalled EUR 10,555 million, has since been increased by an amount of EUR 105 million in 2004, which was released by the EIB in accordance with the provisions of Council Decision 2003/583/EC. This additional allocation is in favour of actions to be undertaken in the Democratic Republic of the Congo. Article 2(2) of the Internal Agreement for the 9th EDF set a EUR 1,000 million reserve. Since 2004 a set of Council decisions[11] allowed the release of EUR 999 million. The remaining amount of EUR 1 million has been released during 2007. Following the decision of the joint ACP/EU Council on 25th May 2007[12], the Commission has decided to launch a call for additional voluntary contributions to support the African Peace Facility in the framework of the intra ACP cooperation. Detailed amounts by country are shown in table 9.1. The 2007 aggregated financial statements include the 7th, 8th and 9th EDFs. The aggregated statement of changes in net assets reflects the closure of the 6th EDF as a 2007 event. The closure of the 6th EDF had not been reflected in 2006, which was when the closure effectively took place. As the net assets of the 6th EDF were nil at the end of 2006, an exclusion of the 6th EDF would not have had any impact on the aggregated net assets. For information purposes, the impact of the closure of the 6th EDF on the 2006 aggregated funds and reserves is detailed below. As presented in 2006 final accounts | Adjustment to exclude the 6th EDF | Adjusted balance 31.12.2006 | FUNDS & RESERVES | Called fund capital | 29 900.00 | -7 560.00 | 22 340.00 | Results carried forward from previous years | -26 787.49 | 7 300.94 | -19 486.54 | Result for the year | -2 924.04 | 0.00 | -2 924.04 | Reserves | 1 033.84 | 259.06 | 1 292.89 | NET ASSETS | 1 222.31 | 0.00 | 1 222.31 | Uncalled funds represent the initial allocation not yet receivable from Member States. Called funds capital represents the amount of the initial allocations which has been called up for transfer to the treasury accounts by the Member States in accordance with the procedure in Article 8 of the Financial Regulation, whereby each year the Commission must establish and communicate to the Council a statement of the payments to be made in the following year and a schedule of calls for contributions. The Commission must justify the amount requested on the basis of its capacity to deliver the proposed level of resources effectively. Details of contributions called up and received during the year 2007 are shown in table 9.1. In 2007 the contributions due under the 8th EDF were fully exhausted and the Authorising Officer started the call for the 9th EDF contributions which were increased by the voluntary contributions. Inter-EDF transfers | 7th EDF | 8th EDF | 9th EDF | Consolidate | Total at 31.12.07 | to/from 5th EDF | 526.78 | 526.78 | to/from 6th EDF | 181.76 | 94.00 | 490.36 | 766.12 | to/from 7th EDF | 532.82 | 933.45 | 1 466.26 | 1 466.26 | to/from 8th EDF | -532.82 | 2 721.88 | 2 189.06 | 2 189.06 | to/from 9th EDF | -933.45 | -2 721.88 | -3 655.33 | -3 655.33 | TOTAL | -757.73 | -2 095.06 | 4 145.68 | 0.00 | 1 292.89 | Notes to the Economic Outturn Account 11. Administrative and financial expenses This heading includes administrative and financial expenditure financed by interest and related to the devolution process in application of the provisions of articles 1.3, 4 and 9 of the Internal Agreement applicable to 9th EDF. In addition, following Council Decision 599 on 21st June 2005, a complementary amount of EUR 90 million from the intra ACP allocation has been reallocated to finance devolution. In 2006, expenditure for personnel and infrastructure costs in this heading amounted to EUR 63 million and to EUR 26 million in 2007. 12. Total expenses (cash basis) These amounts represent total payments for the Fund(s) in question during the 2007 financial year on a cash accounting basis, including advance payments and recovery orders. Cumulative figures are shown in the Report on Financial Implementation prepared by the Authorising Officer. 13. Accrual adjustments Total expenditure has been restated to comply with the international accounting standard, IPSAS 3. The accounting information provided by the EDF accounting system has been adapted, where necessary, in order to provide figures which comply with accrual accounting principles. Additional information in respect of income and expenditure items has also been provided by the Authorising Officer. table 13 | EUR million | Accrual adjustments annual increase 2007 | notes | 7th EDF | 8th EDF | 9th EDF | increase 2007 | - Pre-financing | 2 | -143.41 | -828.96 | -1 085.98 | -2 058.35 | - Financial expenses | 16 | 0.34 | 0.34 | Accrued Expenses | -73.03 | -527.38 | -1 057.71 | -1 658.12 | Non finalised payments | 8.3 | 0.19 | -10.72 | -17.65 | -28.18 | Eligibility to be confirmed | 8.4 | -5.55 | -12.99 | 26.30 | 7.77 | Invoices to be received | 8.5 | 4.40 | -250.48 | 408.87 | 162.80 | - Estimated clearing of prefinancing | 2.3 | -72.08 | -253.19 | -1 475.24 | -1 800.51 | Total accruals | 70.39 | 301.57 | 27.93 | 399.89 | 14. Total expenses on an accrual basis Project expenditure by EDF has been restated in accordance with the relevant international accounting standards. The expenditure for each aid instrument will be presented on a full accrual basis as and from the 2009 financial year, once the accounts have been migrated to the new IT (ABAC) system. 15. Financial revenue Interest revenue is related to the 9th EDF. The sole is STABEX security interest which is related to the 8th EDF due to absence of this aid instrument in the 9th EDF. table 15 | EUR million | Interest earned during 2007 | notes | 8th EDF | 9th EDF | total at 31.12.2007 | total at 31.12.2006 | EIB | 15.1 | 2.49 | 2.49 | 10.56 | European banks | 15.1 | 9.80 | 9.80 | 11.44 | Recovery orders | 15.2 | 0.04 | 0.04 | 0.00 | STABEX security accounts | 15.3 | 6.18 | 6.18 | 9.13 | Special D R Congo contribution | 15.3 | 0.14 | 0.14 | 0.49 | TOTAL INTEREST | 6.18 | 12.47 | 18.65 | 31.61 | (15.1) EIB and European banks interest revenue The interest earned on accounts with European paying agents (including the main STABEX account) can be used to finance projects in accordance with Articles 1.3 and 9 of the Internal Agreement applicable to 9th EDF. This interest results in an effective increase in the Funds’ overall appropriations. (15.2) Interest revenue on late payments of recovery orders This is interest earned on late payments of recovery orders by debtors. Such funds can be used for financing projects in accordance with Articles 1.3 and 9 of the Internal Agreement applicable to 9th EDF. This interest results in an effective increase in the Funds’ overall appropriations. (15.3) Interest revenue on the STABEX security accounts and the Special D. R. Congo account This represents the income generated by the STABEX security accounts and the Special Democratic Republic of the Congo account. Whilst such income appears to increase the total of the Fund it should be borne in mind that any income generated by these accounts is earmarked for a specific purpose and beneficiary state (see note 5). 16. Financial expenses In the present IT system (OLAS), this category of expenditure is booked as a part of administrative costs. In the interests of transparency these costs are now presented under a separate heading. In 2007 financial expenses amount to EUR 0.34 million. OFF BALANCE SHEET ITEMS Guarantees are held to secure pre-financing and released when the final claim under a project is paid. In accordance with the “prudence” concept and in compliance with the provisions of IPSAS 19, contingent assets are not accounted for in the financial statements. They are disclosed here by way of note in the interests of transparency. There are two values to disclose for this type of guarantee: the "nominal" and the "on-going values". For the "nominal" value the generating event is linked to the existence of the guarantee. The nominal value is disclosed as contingent asset. For the "on-going" value, the guarantee's generating event is the prefinancing payment and/or subsequent clearings. At 31st December 2007 the "nominal" value of guarantees received in respect of prefinancing amounts EUR 576.79 million (see table below) compared to EUR 310.61 million for the "on-going" value. Guarantees | on pre-financing | on guarantee withholding | on performance | TOTAL 31.12.2007 | TOTAL 31.12.2006 | 7th EDF | 56.52 | 17.19 | 32.09 | 105.80 | 111.70 | 8th EDF | 145.58 | 38.35 | 75.42 | 259.36 | 308.71 | 9th EDF | 374.68 | 104.75 | 159.60 | 639.04 | 302.62 | TOTAL | 576.79 | 160.30 | 267.11 | 1 004.20 | 723.02 | REPORT ON FINANCIAL IMPLEMENTATION Introductory note Previous EDFs Decision 1/2000 of the ACP-EC Council of 27 July 2000 regarding transitional measures provides for some of the unallocated resources from previous EDFs to be used for programmes consistent with the relevant provisions of the Cotonou Agreement and put into early application under transitional measures. Commission Decision 410/2001 of 16 March 2001, which fixes the allocations for the indicative programmes of the ACP countries under the ACP-EC Partnership Agreement, stipulates that the unallocated resources from previous EDFs up to a maximum of EUR 1.2 billion are to be used for implementation in accordance with the rules and procedures of the relevant EDFs, pending the entry into force of the Financial Protocol to the 9th EDF. Commission Decision 1033/2001 of 15 June 2001 fixed the allocations for regional programmes and intra-ACP cooperation under the Financial Protocol to the ACP-EC Partnership Agreement. Commission Decision 1252/2002 of 11 July 2002 increased the envelope intended for intra-ACP cooperation by EUR 60 million, from the general reserves of the 6th and 7th EDFs, and also provided for the use of these additional funds pending the entry into force of the Financial Protocol to the 9th EDF, in accordance with the rules and procedures applicable to the original EDFs. Lastly, Decision 3/2002 of the ACP-EC Council of Ministers of 23 December 2002 took an amount of €25 million from the unallocated resources of the 8th EDF (general reserve) and allocated it to regional cooperation under the ACP-EC Partnership Agreement. As in past years, to ensure transparency in the presentation of the accounts for 2007, the tables below set out separately for each of the EDFs (7th and 8th) the part used for Lomé Convention programming and the part used for programming under the Cotonou Agreement. Entry in the accounts and the presentation of accounts in connection with the Cotonou Agreement is based on Article 3(2) of Annex IV to the ACP-EC Partnership Agreement, as regards countries. That Article gives the ACP countries an A envelope to cover macroeconomic support and support for programmes and projects and a B envelope to cover unforeseen needs such as emergency assistance, debt relief initiatives and support to offset the adverse effects of instability in export earnings[13]. For the regions, the accounts are set out according to the regional programming as referred to in Chapter 2 of the ACP-EC Partnership Agreement (i.e. regional indicative programmes and intra-ACP cooperation). Pursuant to Commission Decision C(2003)1904 of 16 June 2003 as amended by Decisions C(2006) 3862 of 24 August 2006 and C(2007)2149 of 24 May 2007, any balances remaining from previous EDFs on the date of entry into force of the Cotonou Agreement and any amounts decommitted at a later date from projects charged to these Funds were transferred to the 9th EDF . Any resource thus transferred to the 9th EDF after previously having been allocated to the indicative programme of an ACP State or region has been allocated to that State or region. On the other hand, the unallocated resources were transferred to reserves which have been reprogrammed under the 9th EDF. As the 6th EDF was closed in 2006, the annual accounts no longer contain implementation tables for that EDF. However, implementation of the transferred balances can be found in the 9th EDF. 9th EDF The ACP-EC Partnership Agreement signed on 23 June 2000 in Cotonou by the Member States of the European Community and the States of Africa, the Caribbean and the Pacific (ACP States) entered into force on 1 April 2003. The EU Council Decision of 27 November 2001 (2001/822/EC) on the association of the overseas countries and territories (OCT) with the European Community entered into force on 2 December 2001. The Cotonou Agreement was concluded for a twenty-year period with a review clause and a Financial Protocol for each five-year period. For the first Financial Protocol (financed by the 9th EDF), once the unexpended balances of previous EDFs[14] have been taken into account, the Agreement covered the period up to the end of 2007[15]; for the second Financial Protocol (to be financed by the 10th EDF), it may be amended (and will in fact cover six years[16]). The 9th EDF was set at EUR 13 800 million, including EUR 13 500 million allocated to the ACP States in accordance with the first Financial Protocol included in the Cotonou Agreement, EUR 175 million allocated to the OCT (provided for by the EU Council Decision on the association of the OCT) and EUR 125 million reserved for the European Commission to cover expenses in connection with implementing the 9th EDF resources (provided for in the internal agreement for the 9th EDF). The long-term development budget for ACP States has two components: The A envelope for macroeconomic support, sectoral policies, and programmes and projects supporting Community aid: this corresponds to the allocation for the NIPs and structural adjustment in previous EDFs. The B envelope , intended to cover unforeseen needs such as emergency aid, contributions to debt relief initiatives and support to offset adverse fluctuations in export earnings, generally corresponds to the Stabex, Sysmin and emergency aid allocations in previous EDFs. Of the total 9th EDF budget for the ACP States, EUR 1 000 million was released in 2004 and 2005 after examination by the EU Council, on the basis of a proposal from the European Commission: - EUR 250 million was released in accordance with Council Decision 2004/289/EC of 22 March 2004 and allocated to the Intra-ACP Fund (natural resources) to finance the Water Facility operation. - EUR 18 million was released in accordance with Council Decision 10752/05 of 19 July 2005 and allocated to the envelope for long-term development support to cover the financing of the National Indicative Programme of Timor Leste for the period 2006-2007. - EUR 482 million was released in accordance with ACP-EC Council of Ministers Decision 6/2005 of 22 November 2006 and allocated to the envelope for long-term development support (EUR 352 million), the envelope for regional cooperation and integration (EUR 48 million) and the Investment Facility (EUR 82 million). These resources were released to contribute to financing of the EU Energy Initiative (EUR 220 million), the International Commodity Risk Management Financing Facility (EUR 25 million), adaptation to the new EU feed and food health and plant health rules (EUR 30 million), strengthening the African Union (EUR 50 million), the “Education for All” Fast Track Initiative (EUR 63 million), tackling HIV/AIDS, tuberculosis and malaria (EUR 62 million), and the operating costs of the CDE/CTA (EUR 32 million). - EUR 250 million was released in accordance with ACP-EC Council of Ministers Decision 7/2005 of 22 November 2005 and the corrigendum of 1 February 2006 and allocated to the envelope for long-term development support (EUR 185 million), the envelope for regional cooperation and integration (EUR 24 million) and the Investment Facility (EUR 41 million). These resources were allocated to financing the Water Facility operation. The breakdown of 9th EDF allocations for ACP States, including the “conditional billion” and allocations managed directly by the European Investment Bank (EIB), is as follows: (EUR million) | 9th EDF allocation | Unopened allocations (EIB-managed) | Open allocations OLAS (EC-managed) | Long-term development budget | 10.000,00 | (186,85)[17] | 9.813,15 | Regional budget | 1.300,00 | 1.300,00 | Investment facility | 2.200,00 | (2.037,00) | 163,00 | Total | 13.500,00 | (2.223,85) | 11.276,15 | The 9th EDF allocations for OCTs, including those managed directly by the European Investment Bank (EIB), break down as follows: (EUR million) | 9th EDF allocation | Reduction / conditional billion | Unopened allocations (EIB-managed) | Open allocations OLAS (EC-managed) | Long-term development budget | 127,10 | 127,10 | 127,10 | C reserve | 17,90 | (1,00)[18] | 16,90 | 17,90 | Regional budget | 8,00 | 8,00 | 8,00 | Budget for studies and technical assistance | 2,00 | 2,00 | 2,00 | Investment facility | 20,00 | (20,00) | 0,00 | 20,00 | Total | 175,00 | (21,00) | 154,00 | 175,00 | The unallocated C reserve for OCTs is maintained to finance humanitarian aid, emergency aid, refugee assistance and fluctuations in export earnings, and corresponds to the B allocation for the ACP countries Council Decision 2005/599/EC of 21 June 2005 allocated EUR 90 million within the intra-ACP envelope to financing devolution. Pursuant to Commission Decision E/982/2003 of 16 June 2003, any balances remaining from previous EDFs on the date of entry into force of the Cotonou Agreement and any amounts decommitted at a later date from projects charged to these Funds were transferred to the 9th EDF . Any resource thus transferred to the 9th EDF after previously having been allocated to the indicative programme of an ACP State or region has been allocated to that State or region. On the other hand, the unallocated resources were transferred to reserves which have been reprogrammed under the 9th EDF. The total amount transferred since the entry into force of the 9th EDF is EUR 4.1 billion. Pursuant to Decision 2/2007 of the ACP-EC Council of Ministers of 25 May 2007 designed to allow additional bilateral contributions for intra-ACP cooperation in support of the objectives of the African Peace Facility, to be managed by the Commission, the 9th EDF was increased by EUR 39.17 million, which is shown separately on a specific financial instrument. As the funds of the 9th EDF, including the expected decommitments, could no longer be committed after 31 December 2007[19], a mechanism had to be found to commit the outstanding balances available before that date, in an effective manner, in support of the overall objectives of the ACP-EC partnership. Decision 1/2007 of the ACP-EC Council of Ministers of 25 May 2007 provides for reassigning part of the reserve of the 9th EDF envelope for long-term development to intra-ACP cooperation in the 9th EDF envelope for regional cooperation and integration. The funds transferred to the long-term development reserve on the basis of the end-of-term reviews of the national indicative programmes and the amounts available for intra-ACP cooperation have been mobilised in accordance with Decision 1/2007 as follows: 17. one intra-ACP reserve of EUR 26.7 billion open to all ACP States for emergency assistance under Article 72(3)(a) and (b) of the ACP-EC Partnership Agreement; 18. five regionalised B-envelopes amounting to EUR 17.5 million for the Southern African region, EUR 48.9 million for the region of Eastern and Southern Africa and the Indian Ocean, EUR 31.9 million for the West African region, EUR 16.1 million for the Central African region and EUR 35.4 million for the Caribbean region, mobilised for contributions to internationally agreed debt relief initiatives and for humanitarian and emergency assistance in accordance with Articles 72 and 73 of the ACP-EC Partnership Agreement on the basis of regional solidarity; 19. an intra-ACP FLEX programme of EUR 50 million for 2006 (application year 2005) and an intra-ACP FLEX programme of EUR 50 million for 2007 (application year 2006) in order to ensure minimum support to countries subject to the adverse effects of instability in export earnings; 20. replenishment of the African Peace Facility with EUR 100 million for various peace support, training and capacity-building activities; 21. institutional support to the ACP Secretariat in order to bridge the period until the entry into force of the 10th EDF and to contribute to the running costs of the ACP Secretariat for 2008 (EUR 1 million); 22. addition of EUR 2.5 million to the intra-ACP technical cooperation facility; 23. EUR 4 million as an urgent carry-over of the rinderpest eradication programme in Africa (PACE); 24. additional contribution of EUR 5 million to the Caribbean Knowledge and Learning Network (CKLN); 25. cover of EUR 14.87 million for new and unexpected needs that cannot be financed from the B envelopes (amount used for an additional contribution of EUR 3 million for the CTA and the financing of specific projects (African Outlook – EUR 1.3 million; Microfinances – EUR 2.8 million, Pesticides Programme – EUR 5 million; Investment Observatory – EUR 2.8 million)); 26. additional support of EUR 38 million for the Global Fund against HIV/AIDS, Tuberculosis and Malaria (GFATM); 27. top-up of EUR 48.7 million for the EU-ACP Infrastructure Trust Fund as an advance on the allocations scheduled under the 10th EDF. The tables annexed, concerning the amounts decided, contracted and paid, show net figures . Only Table 2.7 shows separately the amounts committed and decommitted and the amounts paid and recovered. ALLOCATIONS AT 31.12.2007 [pic] [pic] [pic] [pic] [pic] [pic] [pic] TABLEAU 1.8 [pic] AGGREGATED ACCOUNTS [pic] [pic] [pic] [pic] [pic] [pic] SITUATION BY COUNTRY AND BY INSTRUMENT The tables are in Annex 2. Notes to the management accounts: - In the tables, the figure “0.00” indicates that the corresponding amount is between EUR –4 999 and EUR 4 999.Where no figure is given, the amount is zero.Countries with a nil balance in all columns are not listed in the tables. - The heading “All countries” refers to projects which cover a number of countries but are not financed by regional cooperation. - The heading “Financial and administrative expenses” represents projects financed by EDF interest which have been transferred to a financial instrument (grants, Structural Adjustment Facility). 7th EDF In the first column of tables 3.2.1 and 3.2.2, the allocation for “Regional cooperation” (EUR 1 081.31 million) comprises the following: Commission's regional cooperation target (ACP states only) | 1.125,00 | Target overrun | (5,92) | Transfers from unallocated resources in order to finance the programme of assistance to ACP countries for integration within the WTO | 67,90 | Amount transferred to the general reserve during 2000 in accordance with the transitional measures | 10,00 | Amount transferred to the general reserve during 2001 in accordance with the transitional measures | (8,50) | Amount transferred to the general reserve during 2002 in accordance with the transitional measures | (2,20) | Amount transferred to the 9th EDF during 2003 following the entry into force of Cotonou | (0,70) | Amount transferred to the 9th EDF during 2004 following the entry into force of Cotonou | (49,10) | Amount transferred to the 9th EDF during 2005 following the entry into force of Cotonou | (8,26) | Amount transferred to the 9th EDF during 2006 following the entry into force of Cotonou | (34,41) | Amount transferred to the 9th EDF during 2007 following the entry into force of Cotonou | (12,44) | Total at 31.12.2007 | 1081,31 | All the amounts of allocations correspond to the decisions, as the amounts not committed were transferred to the 9th EDF following the entry into force of Cotonou (Commission decision of 16 April 2003). 8th EDF In the second column of tables 1 and 2, the allocation for “Regional cooperation” (EUR 1 374.31 million) comprises the following: Commission's regional cooperation target (ACP states only) | 1.300,00 | Council Decision 3/2000 in order to ensure the continuity of several activities pending the entry into force of the 9th EDF | 306,00 | Council Decision 10/2001 of 20.12.2001 on the use of unallocated resources from the 8th EDF | 180,70 | In accordance with the transitional measures | (68,00) | Council Decision 3/2002 of 23.12.2002 on the use of unallocated resources from the 8th EDF | 54,20 | Amount transferred to the 9th EDF during 2003 following the entry into force of Cotonou | (317,33) | Amount transferred to the 9th EDF during 2004 following the entry into force of Cotonou | (5,01) | Amount transferred to the 9th EDF during 2005 following the entry into force of Cotonou | (31,62) | Amount transferred to the 9th EDF during 2006 following the entry into force of Cotonou | (20,83) | Amount transferred to the 9th EDF during 2007 following the entry into force of Cotonou | (23,81) | Total at 31.12.2007 | 1.374.31 | All the amounts of allocations correspond to the decisions, as the amounts not committed were transferred to the 9th EDF following the entry into force of Cotonou (Commission decision of 16 April 2003). 9 th EDF In all tables the presentation takes into account the financial resources (envelope A, envelope B and implementation costs) used and the nature of the project (macroeconomic support, sectoral policies, emergency assistance, etc.). OTHER MANAGEMENT INFORMATION [pic] TABLE 4.1.2 CLASSIFICATION OF “TO REMAIN OPEN” DORMANT PROJECTS 1. Commission projects (EUR million) EDF | Country | Project | RAL | 7 | Angola | SUPPORT FOR PRODUCTION OF FILM "COMBOIO DA CANHOCA" | 0,07 | Sao Tome | PROGRAMME OF SUPPORT FOR CULTURAL INITIATIVES | 0,00 | 8 | Eritrea | INF. PROGRAMME TO SUPPORT REFUGEES AND INTERNALLY DISPLACED | 0,73 | Eritrea | INF. SUPPORT FOR VOLUNTARY REPATRIATION AND REINTEGRATION | 0,47 | Burkina Faso | SUPPORT FOR DECENTRALISED CULTURAL INITIATIVES -PHASE 2 | 0,00 | 9 | Benin | REHABILITATION OF FLOOD-PRONE DISTRICTS OF WEST COTONOU | 20,00 | Burkina Faso | CAPACITY-BUILDING CIVIL SOCIETY ORGANISATIONS (PROS) | 15,00 | Togo | 4TH GENERAL CENSUS OF POPULATION AND HOUSING | 1,98 | Centrafrica | SUPPORT FOR DEMOCRATIC TRANSITION | 0,30 | Bahamas | TECHNICAL COOPERATION FACILITY (TCF) | 0,07 | Malawi | INCREASE IN CEILING 8 ACP MAY 14, NOTE 28571 OF 24/12/2003 | 0,04 | Total | 38,67 | 2. EIB projects (EUR million) EDF | Country | Project | RAL | 7 | ACP TV | DBT II GLOBAL LOAN (8 TV 3) (22440, 22441) | 0,20 | 8 | ACP MAS | Plaines wilhems sewerage project (21396) | 7,46 | ACP SW | Seb iii maguga (22105) | 7,00 | ACP DO | Financial sector gl ii a (21889) | 4,51 | ACP DO | Financial sector gl ii b (21993) | 3,44 | ACP SLU | Bank of st. lucia gl (21432) | 3,00 | ACP SW | Motraco ii | 1,75 | ACP SLU | Bank of st. lucia gl (21435) | 0,84 | ACP MOZ | MOTRACO II | 0,58 | ACP CD | Global loan financial sector (22120) | 0,50 | ACP ET | DEVELOPMENT OF BANK OF ETHIOPIA (DBE) GL II (22424) | 25,00 | ACP TV | DBT II GLOBAL LOAN | 0,15 | Total | 54,43 | [pic] [pic] Table 4.2.3 Italian co-financing In 1985 the European Commission signed an agreement with the Italian Government providing for the co-financing of development projects managed by the Commission. The agreement was regularly extended by means of exchanges of letters between the Italian Government and the Development Commissioner until 31 December 2004. Then by written procedure E/1588/2004 the Commission took a decision on implementation of the co-financing framework agreement. The purpose of the decision was to lay down the budgetary and regulatory framework for commitments made under the agreement. The Commission decision accordingly provided that this co-financing should be implemented in accordance with the provisions of the EDF financial regulation. The decision empowered the EDF authorising officers by delegation or subdelegation to manage Italy's contribution to this co-financing. They were also empowered to determine the final date for its implementation in compliance with the relevant rules. In accordance with Article 4, point 4 of the July 1985 agreement between the European Commission and the Italian Government, a provision confirmed in Article 3, point 3 of decision E/1588/2004, the Italian Government requested by letter of 15 December 2006 that the Commission repay the account balances of the closed projects. These balances totalled EUR 4 708 867.66 (* - see table below). This amount was placed on an interim account and will be reimbursed to the Italian Government in the course of 2008. The interest yielded by these accounts amounted to EUR 6 153.92 and has been transferred to the interest account. At the end of 2007, the situation concerning the Italian funds managed by the Commission for projects in the ACP countries was as follows (EUR): Project No | Country | Project | balance | Contribution | Closure | payments | balance | In all, 52 projects implemented in the ACP countries have been co-financed by Italy since the signing of the above agreement, only one of which, "4th rehabilitation programme - Somalia", is still in progress. (**) Balance of accounts closed plus annual interest on the "administrative expenditure" account. FINANCIAL INFORMATION EIB INCOME STATEMENT INVESTMENT FACILITY Year to | Year to | Notes | 31.12.2007 | 31.12.2006 | Interest and similar income | 5 | 46 580 | 23 816 | Interest and similar expense | 5 | (1 218) | (2 493) | Net interest and similar income | 45 362 | 21 323 | Net fees and commission income | 6 | 1 396 | 4 366 | Net fees and commission income | 1 396 | 4 366 | Net result on financial operations | 7 | (8 005) | (283) | Impairment charge for credit loss | 11 | (2 770) | (1 693) | Member States special contribution to general administrative expenses | 8 | 32 756 | 33 913 | General administrative expenses | 8 | (32 756) | (33 913) | Profit for the year | 35 983 | 23 713 | BALANCE SHEET INVESTMENT FACILITY Notes | 2007 | 2006 | ASSETS | Cash and cash equivalents | 9 | 184 772 | 190 780 | Derivative financial instruments | 10 | 25 279 | 8 592 | Loans and receivables | 11 | 572 530 | 338 997 | Of which accrued interest | 10 779 | 3 784 | Financial investments - available-for-sale | 12 | Equity investment - available-for-sale | 109 363 | 66 449 | Amounts receivable from contributors | 13 | 181 183 | 103 913 | Other assets | 14 | 4 291 | 1 813 | Total assets | 1 077 418 | 710 544 | LIABILITIES AND EQUITY | LIABILITIES | Derivative financial instruments | 10 | 841 | 119 | Deferred income | 15 | 18 030 | 7 908 | Amount owed to third parties | 16 | 131 152 | 134 425 | Other liabilities | 17 | 916 | 1 911 | Total Liabilities | 150 939 | 144 363 | EQUITY | Facility Member States Contribution called | 18 | 830 000 | 515 000 | Retained earnings | 77 167 | 41 184 | Fair value reserve | 19 312 | 9 997 | Total Equity | 926 479 | 566 181 | Total Liabilities and Equity | 1 077 418 | 710 544 | CASH FLOW STATEMENT INVESTMENT FACILITY 2007 | 2006 | OPERATING ACTIVITIES | Profit for the financial year | 35 983 | 23 713 | Adjustments | Impairment on equity investment available-for-sale | 366 | 130 | Impairment on loans | 2 770 | 1 693 | Interest capitalised | (6 747) | (4 303) | Increase in accruals and deferred income | 4 150 | 8 038 | Profit on operating activities before changes in operating assets and liabilities | 36 522 | 29 271 | Net loan disbursements | (286 028) | (157 004) | Repayments | 34 214 | 3 585 | Fair value movement on derivatives | (15 965) | (14 057) | Increase in prepayments and accrued income on loans | - | (1 062) | Increase in equity investments available-for-sale | (43 143) | (31 965) | Proceeds from equity investments available-for-sale | 8 248 | 25 | Increase in other assets | (2 456) | (1 014) | Increase in other liabilities | (518) | 1 463 | Net cash flows from operating activities | (269 126) | (170 758) | FINANCING ACTIVITIES | Paid in by Facility Member States | 315 000 | 145 000 | Increase / (decrease) in amount receivable from contributors | (77 271) | (11 458) | Net increase in amount payable from interest subsidies | (3 273) | 17 312 | Increase in amount payable to third parties | (538) | 1 458 | Net cash flows from/(used in) financing activities | 233 918 | 152 312 | Net increase in cash and cash equivalents | (35 208) | (18 446) | Cash and cash equivalents at beginning of financial year | 190 780 | 194 916 | Effect of exchange rate changes on loans and equity investments | 29 200 | 14 310 | Cash and cash equivalents at end of financial year | 184 772 | 190 780 | STATEMENT OF CHANGES IN EQUITY INVESTMENT FACILITY For the year ended 31 December 2007 | Facility Member States Contribution | Retained earnings | Fair value reserve on AFS investments | Total Equity | At 1 January 2007 | 515 000 | 41 184 | 9 997 | 566 181 | Net changes in equity investments - available-for-sale | - | - | 9 315 | 9 315 | Facility Member States contribution called during the year | 315 000 | - | - | 315 000 | Profit for the year | - | 35 983 | - | 35 983 | Changes in contributors’ resources | 315 000 | 35 983 | 9 315 | 360 298 | At 31 December 2007 | 830 000 | 77 167 | 19 312 | 926 479 | At 1 January 2006 | 370 000 | 17 471 | 6 443 | 393 914 | Net changes in equity investments - available-for-sale | - | - | 3 554 | 3 554 | Facility Member States contribution called during the year | 145 000 | - | - | 145 000 | Profit for the year | - | 23 713 | - | 23 713 | Changes in contributors’ resources | 145 000 | 23 713 | 3 554 | 172 267 | At 31 December 2006 | 515 000 | 41 184 | 9 997 | 566 181 | NOTES TO THE FINANCIAL STATEMENTS 28. General information The Investment Facility has been established within the framework of the Cotonou Agreement (the “Agreement”) on co-operation and development assistance negotiated between the African, Caribbean and Pacific Group of States (the “ACP States”) and the European Union and its Member States on 23 June 2000 and revised on 25 June 2005. The Investment Facility is managed by the European Investment Bank (the “EIB” or the “Bank”). Under the terms of the Agreement up to EUR 2,200 million for ACP and EUR 20 million for OCT (as agreed by the Council Decision of 27 November 2001 on the association of the Overseas Countries and Territories with the European Community) may be allocated to finance the Investment Facility. Within the framework of the Agreement, the EIB also manages loans granted from its own resources. All other financial resources and instruments under the Agreement are administered by the European Commission. 29. Significant accounting policies Basis of preparation In line with the Investment Facility Management Agreement the preparation of the financial statements of the Facility is guided by International Public Sector Accounting Standards or International Financial Reporting Standards, as appropriate. The Facility's financial statements have been prepared on the basis of the following significant accounting principles: Significant accounting judgments and estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Investment Facility’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed. The most significant use of judgments and estimates are as follows: Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded on the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of liquidity and model inputs such as correlation and volatility for longer dated derivatives. Impairment losses on loans and receivables The Investment Facility reviews its problem loans and receivables at each reporting date to assess whether an allowance for impairment should be recorded in the income statement. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. In addition to specific allowance against individually significant loans and receivables, the Investment Facility also makes a collective impairment allowance against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This collective allowance is based on any deterioration in the internal rating of the loan or investment since it was granted or acquired. These internal ratings take into consideration factors such as any deterioration in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in cash flows. Valuation of unquoted available-for-sale equity investments Valuation of unquoted available-for-sale equity investments is normally based on one of the following: - recent arms length market transactions; - current fair value of another instrument that is substantially the same; - the expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics; or - other valuation models. The determination of the cash flows and discount factors for unquoted available-for-sale equity investments requires significant estimation. The Investment Facility calibrates the valuation techniques periodically and tests them for validity using either price from observable current market transactions in the same instrument or from other available observable market data. Impairment of available-for-sale financial investments The Investment Facility treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of whether a decline is significant or prolonged is based on a judgmental appreciation. Change in accounting policies The accounting policies adopted are consistent with those used in the previous financial years. Summary of significant accounting policies The balance sheet represents assets and liabilities in decreasing order of liquidity and does not distinguish between current and non-current items. 30. Foreign currency translation The Investment Facility uses the Euro (EUR) for presenting its financial statements, which is also the functional and presentational currency. Foreign currency transactions are translated, in accordance with IAS 21, at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in currencies other than in Euro are translated into Euro at the exchange rate prevailing at the balance sheet date. The gain or loss arising from such translation is recorded in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of transactions at rates different from those at the date of the transaction, and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities, are recognized in the income statement. The elements of the income statement are translated into Euro on the basis of the exchange rates prevailing at the end of each month. 31. Cash and cash equivalents The Investment Facility defines cash equivalents as current accounts or short-term deposits with original maturities of three months or less. 32. Financial assets other than derivatives Financial assets are accounted for using the settlement date basis. - Loans Loans originated by the Investment Facility are recognized in the assets of the Investment Facility when cash is advanced to borrowers. They are initially recorded at cost (net disbursed amounts), which is the fair value of the cash given to originate the loan, including any transaction costs, and are subsequently measured at amortized cost, using the effective yield method, less any provision for impairment or uncollectability. - Available-for-sale financial investments Available-for-sale financial investments are those which are designated as such or do not qualify to be classified as designated at fair value through profit or loss, held-to-maturity or loans and receivables. They include equity instruments, investments in venture capital funds and other debt instruments. After initial measurement, available-for-sale financial investments are subsequently carried at fair value. Note the following details for the fair value measurement of equity investments, which can not be derived from active markets: a) Venture capital funds The fair value of each venture capital fund will be based on the Net Asset Value (NAV), reported by the fund, if calculated based on international valuation standards. The Investment Facility may however decide to adjust the NAV reported by the fund if there are issues that may affect the valuation. If no internationally recognized fair valuation standard is applied, the valuation will be conducted on the basis of the underlying portfolio. b) Direct equity investments The fair value of the investment will be based on the latest set of financial statements available, re-using, if applicable, the same model as the one used at the acquisition of the participation. Unrealized gains or losses on equity investments are reported in equity until such investments are sold, collected or disposed of, or until such investment are determined to be impaired. If an available-for-sale investment is determined to be impaired, the cumulative unrealized gain or loss previously recognized in equity is included in the income statement. For unquoted investment, the fair value is determined by applying recognized valuation technique. These investments are accounted for at cost when the fair value cannot be reliably measured. - Guarantees Financial guarantees are initially recognized at fair value in the balance sheet under item “Financial guarantees”. Subsequent to initial recognition, the Investment Facility’s liabilities under each guarantee are measured at the higher of the amortized premium and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is taken to the income statement under item “Impairment charge for credit loss”. The premium received is recognized in the income statement under item “Net fee and commission income” using the effective interest rate method over the life of the guarantee. 33. Impairment of financial assets The Investment Facility assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For the loans outstanding at the end of the financial year and carried at amortized cost, impairments are made when presenting objective evidence of risks of non recovery of all or part of their amounts according to the original contractual terms or the equivalent value. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. Interest income continues to be accrued on the reduced carrying amount based on the effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. The Investment Facility conducts credit risk assessments based on which there is no need for a collective impairment provision. For the available-for-sale financial investments, the Investment Facility assesses at each balance sheet date whether there is objective evidence that an investment is impaired. Objective evidence would include a significant or prolonged decline in the fair value of the investment below its costs. Where there is evidence of impairment, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement) is removed from equity and recognized in the income statement. Impairment losses on available-for-sale financial investments are not reversed through the income statement; increases in their fair value after impairment are recognized directly in equity. For held-to-maturity investments the Investment Facility assesses individually whether there is objective evidence for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognised, any amount formerly charged are credited to the ‘Net result on financial operations’. The European Investment Bank’s Risk Management reviews financial assets for impairment at least once a year. Resulting adjustments include the unwinding of the discount in the income statement over the life of the asset, and any adjustments required in respect of a reassessment of the initial impairment. 34. Derivative financial instruments Derivatives include cross currency swaps and cross currency interest rate swaps. In the normal course of its activity, the Investment Facility may enter into swap contracts with a view to hedge specific lending operations, denominated in actively traded currencies other than the Euro, in order to offset any gain or loss caused by foreign exchange rate fluctuations. However, the Investment Facility has not entered into any hedge accounting transactions as at December 31, 2007. Therefore, all derivatives are measured at fair value through the income statement. Fair values are derived primarily from discounted cash flow models, option-pricing models and from third party quotes. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivative financial instruments are included in “Net result on financial operations”. 35. Contributions Contributions from Member States are recognized as receivable in the balance sheet on the date of the Council Decision fixing the financial contribution to be paid by the Member States to the Investment Facility. 36. Interest income on loans Interest on loans originated by the Investment Facility is recorded in the profit and loss account (‘Interest and similar income’) and on the balance sheet (‘Loan and receivables’) on an accrual basis using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the loan to the net carrying amount of the loan. Once the recorded value of a loan has been reduced due to impairment, interest income continues to be recognized using the original effective interest rate applied to the new carrying amount. 37. Interest subsidies As part of its activity, the Investment Facility manages interest subsidies on behalf of the Member States. The part of the Member States contributions allocated to the payment of interest subsidies is not accounted for in the Investment Facility’s equity but is classified as an amount owed to third parties. 38. Interest income on treasury Under the terms of the Investment Facility and according to the Financial Regulation applicable to the 9th European Development Fund, the funds received by the EIB on behalf of the Investment Facility are recorded in an account in the Commission’s name. Interest on these deposits, placed by the Investment Facility with the EIB, is not accounted for by the Investment Facility as it is payable directly to the European Commission. Reflows, being repayment of principal, interest or commissions stemming from financial operations, and interest calculated on these reflows are accounted for within the Investment Facility. 39. Fees, commissions and dividends Fees received in respect of services provided over a period of time are recognized as income as the services are provided. Commitment fees are deferred and recognized in income using the effective interest method over the period from disbursement to repayment of the related loan. Dividends relating to available-for-sale equity investments are recognized when received. 40. Taxation The Protocol on the Privileges and Immunities of the European Communities, appended to the Treaty of 8 April 1965 establishing a Single Council and a Single Commission of the European Communities, stipulates that the assets, revenues and other property of the Institutions of the Union are exempt from all direct taxes. 41. Reclassification of prior years figures Where necessary, certain prior years figures have been reclassified to conform to changes to the current year’s presentation for comparative purpose. 42. Risk management Credit risk This section presents financial information about the investments made by the Facility. 43. Exposure disbursed by nature of borrower (in EUR’000) The table hereafter analyses the Investment Facility exposure disbursed by nature of borrower. 2007 | 2006 | Banks/ Financial Insti