COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS FINAL ACCOUNTS OF THE 8TH, 9TH AND 10TH EUROPEAN DEVELOPMENT FUNDS - FINANCIAL YEAR 2012
Date: 2013-07-16
Institutions: European Commission
Subjects: European Development Fund, activity report, audit, balance sheet, budgetary discharge, closing of accounts, financial control, financial year













EUR-Lex - 52013DC0541 - EN











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52013DC0541

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS FINAL ACCOUNTS OF THE 8TH, 9TH AND 10TH EUROPEAN DEVELOPMENT FUNDS - FINANCIAL YEAR 2012 /* COM/2013/0541 final */









TABLE OF CONTENTS
IMPLEMENTING AND ACCOUNTING FOR THE
EDF RESOURCES. 2
PART I - EDF ANNUAL
ACCOUNTS: FUNDS MANAGED BY THE EUROPEAN COMMISSION. 8
1........... FINANCIAL STATEMENTS OF THE 8TH, 9TH
AND 10TH EUROPEAN DEVELOPMENT FUNDS. 9
1.1........ 8TH, 9TH AND 10TH EDFs: AGGREGATED
BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT, CASH FLOW TABLE AND STATEMENT OF
CHANGES IN NET ASSETS. 9
1.2........ 8TH EDF: BALANCE SHEET, ECONOMIC OUTTURN
ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS  13
1.3........ 9TH EDF: BALANCE SHEET, ECONOMIC OUTTURN
ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS  16
1.4........ 10TH EDF: BALANCE SHEET, ECONOMIC OUTTURN
ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS  19
1.5........ NOTES TO THE FINANCIAL STATEMENTS OF THE
8TH, 9TH AND 10TH EDFs. 22
2........... REPORT ON FINANCIAL IMPLEMENTATION. 38
2.1........ ALLOCATIONS. 38
2.2........ AGGREGATED ACCOUNTS. 38
2.3........ OTHER MANAGEMENT INFORMATION. 38
PART II - EDF ANNUAL
ACCOUNTS: FINANCIAL STATEMENTS OF THE INVESTMENT FACILITY. 38
3.1 ....... STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012. 38
3.2........ STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31 DECEMBER 2012. 38
3.3........ STATEMENT OF CHANGES IN CONTRIBUTORS’
RESOURCES FOR THE YEAR ENDED 31 DECEMBER 2012  38
3.4........ STATEMENT OF CASH FLOWS FOR THE YEAR
ENDED 31 DECEMBER 2012. 38
3.5........ NOTES TO THE FINANCIAL STATEMENTS AS AT
31 DECEMBER 2012. 38
ANNEX TO PART 1 – CHAPTER 2
(REPORT ON THE FINANCIAL IMPLEMENTATION): SITUATION BY COUNTRY AND BY
INSTRUMENT. 38
CERTIFICATION OF THE ACCOUNTS
The annual accounts of the 8th, 9th
and 10th European Development Funds for the year 2012 have been prepared in
accordance with Title VIII of the Financial Regulation of the 10th European
Development Fund and with the accounting principles, rules and methods set out
in annex to the financial statements.
I acknowledge my responsibility for
the preparation and presentation of the annual accounts of the 8th, 9th and
10th European Development Funds in accordance with Article 125 of the Financial
Regulation of the 10th European Development Fund.
I have obtained from the
authorising officer and from the EIB, who guarantee its reliability, all the information
necessary for the production of the accounts that show the European Development
Funds' assets and liabilities and the budgetary implementation.
I hereby certify that based on this
information, and on such checks as I deemed necessary to sign off the accounts,
I have a reasonable assurance that the accounts present a true and fair view of
the financial position of the European Development Funds in all material
aspects.
                                                                                                                
(Signed)
Manfred Kraff
Accounting Officer
                                                                                                
IMPLEMENTING
AND ACCOUNTING FOR THE EDF RESOURCES
1.         BACKGROUND
The European Union has cooperative
development relations with a large number of developing countries. The main
purpose is to promote economic and social development with a particular focus
on reducing and alleviating poverty in the long-term, by providing beneficiary
countries with development aid and technical assistance. To achieve this, the
Union draws up, jointly with the partner countries, cooperation strategies and
mobilises the financial resources to implement them. These Union resources
allocated to development come from three sources:
–       The European Union
budget
–       The European Development
Fund
–       The European Investment
Bank
The European Development Fund (EDF)
is the main instrument for providing Union aid for development cooperation to
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 limited
to African countries which at that time were still colonised and with which
some Member States had historical links.
The EDF is not funded by the
European Union's budget. It is funded by the Member States, subject to its own
financial regulation and managed by a specific committee. The European
Commission is responsible for the financial implementation of the operations
carried out with EDF resources and the European Investment Bank (EIB) manages
the Investment Facility. 
During the period 2008-2013, the
geographic aid granted to ACP States and OCTs will continue to be mainly funded
by the EDF. Each EDF is usually concluded for a period of around five years.
Since the conclusion of the first partnership convention in 1964, the EDF
programming cycles have generally followed the partnership agreement/convention
cycles. 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.
Within the framework of
the Cotonou agreement, the Investment Facility was established. This Investment
Facility is managed by the European Investment Bank and is used to support
private sector development in the ACP States by financing essentially – but not
exclusively – private investments. The Facility is designed as a renewable
fund, so that loan repayments can be reinvested in other operations, thus
resulting in a self-renewing and financially independent Facility. As the
Investment Facility is not managed by the European Commission, it is not
consolidated in the first part of the annual accounts – the financial
statements of the 8th, 9th and 10th EDFs and the related report on financial
implementation. The financial statements of the Investment Facility are
included as a separate part of the annual accounts (part 2) to provide a full
picture of the development aid of the EDF. The 10th EDF covers the period from
2008 to 2013 and has an overall budget of EUR 22 682 million. Of this
amount, EUR 21 966 million is allocated to the ACP countries, EUR 286 million
to the OCTs and EUR 430 million to the Commission as support expenditure for
programming and implementation of the EDF[1].

2.         HOW
IS THE EDF FUNDED?
The European Council of 15-16 December
2005 adopted the financial perspectives for 2007-2013. In this context it was
decided that geographical cooperation with the ACP States would not be
integrated into the European Union budget (budgetised), but would continue to
be funded through the existing inter-governmental EDF for the period 2008-2013.
The European Union
budget is annual and according to the budgetary principle of annuality,
expenditure and revenue are planned and authorised for one year. Unlike the
European Union, the EDF is a fund operating on the basis of multiannuality. Each
EDF is concluded through an internal agreement between Member States, which
establishes an overall fund to implement development cooperation during a
period of usually five years. As resources are allocated on a multiannual
basis, the allocated funds may be used over the period of the EDF. The lack of
budget annuality is highlighted in the budgetary reporting, where the budgetary
implementation of the EDFs is measured against the total funds.
The EDF resources are “ad hoc”
contributions from the EU Member States. Approximately every five years, Member
State representatives meet at intergovernmental level to decide on an overall
amount that will be allocated to the fund and to oversee its implementation The
Commission then manages the fund in accordance with the EU Development Policy
it proposes and which the Council adopts.  Since Member States have their own
development and aid policies in parallell  to the Union policy, the Member
States must coordinate their policies with the EU to ensure they are
complementary. Until 2010, contributions were called from the 15 participating
Member States. In 2011, the first contributions under the 10th EDF, in which
the 27 Member States participate, were called.
While some funds of the 10th EDF
have been set aside for unforeseen needs, most are being programmed in
indicative multi-annual frameworks, mainly geographic but also thematic,
currently set for the years 2008-2013. Country strategy papers, regional
strategy papers and intra-ACP strategy papers have been adopted by the
Commission accordingly. Their implementation is monitored annually and the
strategies are reviewed at mid-term (finalised) and at end-of-term (on-going).
As a result of these mid-term or end-of-term reviews, the Commission may, on
behalf of the European Union, revise the strategies and resource allocation in
the light of the current needs and the performance of the ACP states or regions
concerned.
In addition to the above
mentioned contributions, it is also possible for Member States to enter into
co-financing arrangements or to make voluntary financial contributions to the
EDF. 
3.       HOW ARE THE EDF RESOURCES MANAGED
AND SPENT?

3.1      Operational expenditure
EDF operational expenditure takes
different forms, depending on how the money is paid out and managed. In
accordance with the Financial Regulation, the Commission implements the EDF
resources using the following methods:
Decentralised management: these are the cases
where the Commission delegates to third countries, more or less substantially
according to the local situation of the beneficiary country concerned, certain
tasks for implementation of the budget.
Centralised management: this is where the
budget is implemented either directly by the Commission services or indirectly
where the Commission confers tasks of implementation of the budget to bodies accountable
under European Union law or national law, such as the European Union agencies.
Joint management with
international organisations: under this method, the Commission entrusts certain
implementation tasks to an international organisation.

3.2      The
different financial actors 
The responsibility of the Authorising
Officer by delegation covers the entire management process, from
determining what needs to be done to achieve the policy objectives set to
manage the activities launched from both an operational and budgetary
standpoint, including signing legal commitments and/or monitoring performance,
making payments and even recovering funds, if necessary.
The Head of the
Delegation of the European Union is the local liaison between the
Commission and the national or regional ACP/OCT authorities in the field.
He/she works in close collaboration with the national or Regional Authorising
Officers in defining the implementing strategy and Sectoral policies,
preparing, studying and reviewing EDF programmes and projects. 
The National
Authorising Officer in the recipient country is a senior official
appointed by the government of each ACP State/OCT. He/she represents the
authorities of his/her country for all activities financed by the fund and
managed by the Commission and by the EIB. In most cases, these functions are
exercised by a member of the government, generally the State Minister of
Planning or Finance. The National Authorising Officer carries out the
administrative, technical and financial duties of managing EDF programmes and
projects. 
The Accounting Officer of
the Commission executes payment and recovery orders drawn up by Authorising
Officers of the Commission and is responsible for managing the treasury, laying
down accounting rules and methods, validating accounting systems, keeping the
accounts and drawing up the corresponding annual accounts. Furthermore, the
Accounting Officer is required to sign the accounts declaring that they provide
a true and fair view of the financial position.
3.3      Implementing the EDF
resources
The bulk of the financial resources
awarded to ACP States and OCTs through the EDF are awarded through grants. At
the beginning of each EDF, the European Union informs the ACP States and the
OCTs about the indicative allocations which should be available to them over
the period of the fund. Resources are allocated based on a country’s needs and
performance criteria.
At a national level, the country
strategy paper (CSP) is a document prepared by the ACP State concerned and the Commission.
It is drawn from prior consultation with a wide range of actors including
non-State actors, local authorities and, where relevant, ACP Parliaments. The
CSP is an instrument to prioritise activities and build local ownership of
cooperation programmes. 
A National Indicative
Programme (NIP) is then drawn up on the basis of and consistent with the development
objectives and priorities expressed in the CSP. The NIP targets the sectors and
fields which will receive the aid, explains how the aid will fulfil its
objectives, and gives a timetable for implementation. The CSP and the NIP are
subject to an annual, mid-term and end-of-the-EDF-term review and improvements
and changes are made when necessary during its operational period.

3.4      Committing
to spend the EDF resources
No EDF resources can be spent
unless and until the Commission and the intended recipient of EDF money have
entered into a written legal commitment. A written legal commitment can be a
(grant, service or other) contract concluded with entities accountable under
private law such as NGOs or economic operators, or may consist of
administrative and/or financial arrangements concluded by the Commission with entities
accountable under public international law such as states and their public
entities or interational organisations,  possessing a legal personality and
capacity.
Before a legal commitment can be
entered into with a third party, there must be a budget line with sufficient
funds authorising the activity in question. If this condition is met, the funds
required must be reserved in the budget by means of a budgetary commitment made
in the accounting system. This, however, has no effect on the general accounts
(or general ledger) since no charge has yet been incurred. This is because the
accounting system of the EDF comprises two separate but linked elements:
(a)              
budget
accounts, which provide a detailed record of budget implementation; and,
(b)              
general
accounts, used to prepare the balance sheet and economic outturn.
The budget accounts show the
commitments and payments made. They are based on the cash accounting principle,
whereby an item is only recorded in the accounts when cash is committed, paid
out or received. This type of accounting is typical of the public sector whose
focus has, historically, tended to be on the budget and its implementation. 
The general accounts (based on the
accrual accounting principle) show all expenses and revenue over the financial
year (and thus the economic outturn) and establish the financial position of
the EDF in the form of a balance sheet of assets and liabilities at 31 December
of a given year.
3.5      Making a payment
No payment can be made unless a
budgetary commitment has already been approved by the Authorising Officer.
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 installments over a period defined in the particular
pre-financing agreement. The float or advance is either used for the purpose
for which it was provided during the period defined in the agreement or is
repaid – if the beneficiary does not incur eligible expenditure he/she is
obliged to return the pre-financing advance to the EDF. Thus pre-financing paid
is not a definitive expense until the relevant contractual conditions are met
and so is recorded as an asset on the balance sheet when the initial payment is
made. The amount of the pre-financing asset is reduced (wholly or partially) by
the acceptance of eligible costs (which are taken as expenses in the economic
outturn account) and amounts returned.           
At year-end, an assessment has to
be made concerning eligible expenses incurred by beneficiaries of EDF funds but
not yet reported. Following these cut-off calculations, estimated eligible
amounts are recorded as accrued charges, while the estimated non-eligible parts
remain open in the “eligibility to be checked” accounts. These amounts are
shown under current liabilities so as not to overestimate assets and
liabilities. 

3.6      Recovering
undue payments 
The eligibility of expenditure
charged to the EDF is verified on the basis of the supporting documents
stipulated in the applicable rules or in the conditions of each grant. With the
aim of optimising the relationship between the costs and the benefits of
control systems, checks on the supporting documents for final claims tend to be
more detailed than those on interim claims, and thus may detect errors in
interim payments which are corrected by adjustment of the final payment.
Furthermore, the Commission has the right to verify the probity of the
supporting documents by making checks on the claimant's premises, during the
implementation of the action financed and/or afterwards (ex-post). Errors found
during the implementation period may be corrected by adjustment of subsequent
claims. Errors found ex-post will be the subject of a recovery order.

4.         YEAR-END REPORTING

4.1      Annual accounts
It is the Accounting Officer's
responsibility to prepare the annual accounts and ensure that they present a
true and fair view of the financial position of the EDF.
The annual accounts are presented
as follows:
            Part I: Funds managed
by the European Commission
–       Financial statements of
the 8th, 9th and 10th European Development Funds 
–       Report on financial
implementation of the 8th, 9th and 10th European Development Funds 
            Part II: Funds managed
by the European Investment Bank
–       Financial statements of
the Investment Facility 
The financial statements
of the Investment Facility are included as a separate part of the annual
accounts so as to provide a full picture of the development aid of the EDF. 
Following audit by the Court of
Auditors, the annual accounts are adopted by the Commission by 31 July of the
subsequent year and presented to the Council and Parliament for discharge.

4.2      Annual
Activity Report
The Authorising Officer is required
to prepare an Annual Activity Report (AAR) on the activities under his/her
responsibility. In this AAR, the Authorising Officer reports on policy results
and on the reasonable assurance he may have that the resources assigned to the
activities described in his report have been used for their intended purpose
and in accordance with the principles of sound financial management, and that
the control procedures put in place give the necessary guarantees concerning
the legality and regularity of the underlying transactions.
5.         AUDIT AND DISCHARGE

5.1      Audit
The EDF annual accounts and
resource management are overseen by its external auditor, the European Court of
Auditors, which draws up an annual report for the Council and the European
Parliament. The Court's main task is to conduct an external, independent audit
of the EDF annual accounts. As part of its activities, the Court of Auditors
produces:
(1)              
an
annual report, detailing its observations on the annual accounts and underlying
transactions;
(2)              
an
opinion, based on its audits and given in the annual report in the form of a
statement of assurance, on (i) the reliability of the accounts and (ii) the
legality and regularity of the underlying transactions;
(3)              
special
reports giving the findings of audits covering specific areas of management.
The Court of Auditors is entitled
to access all documents required during the course of its audit. The Court
audits all areas of EDF activities, right down to examining the legality and
regularity of individual transactions and payments. It also audits the annual
accounts themselves, reviewing individual balance sheet and economic outturn
account items, as well as the overall presentation of the financial statements.
Thus the Court can offer its opinion not only on the figures presented, but
also on the system and controls in place.
5.2      Discharge
The final control is the discharge
of the financial implementation of the EDF resources for a given financial
year. The European Parliament is the discharge authority of the EDF. This means
that following the audit and finalisation of the annual accounts it falls to
the Council to recommend and then to the Parliament to decide whether to grant
discharge to the Commission for the financial implementation of the EDF
resources for the preceding financial year. This decision is based on a review
of the accounts and the annual report of the Court of Auditors (which includes
an official statement of assurance) and replies of the Commission, and also
following questions and further information requests to the Commission.
The discharge represents the
political aspect of the external control of financial implementation and is the
decision by which the European Parliament, acting on a Council recommendation,
"releases" the Commission from its responsibility for management of
the financial implementation of a given financial year. This discharge
procedure may produce one of two outcomes: the granting or postponement of the
discharge. When granting discharge the Parliament may highlight observations it
considers important, often recommending actions that the Commission should take
concerning these matters. The Commission sets out the measures taken in a
follow-up report and an action plan which it sends to both the Parliament and
the Council.
PART I - EDF ANNUAL
ACCOUNTS: FUNDS MANAGED BY THE EUROPEAN COMMISSION[2]
1.           FINANCIAL STATEMENTS OF THE 8TH, 9TH AND
10TH EUROPEAN DEVELOPMENT FUNDS            

1.1         8TH, 9TH
AND 10TH EDFs: AGGREGATED BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT, CASH FLOW TABLE
AND STATEMENT OF CHANGES IN NET ASSETS

AGGREGATED BALANCE SHEET OF THE 8TH, 9TH AND 10TH EDFs      

   ||   ||   ||   || EUR millions 
   || Note || 31.12.2012 || 31.12.2011 
   || NON-CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.1 || 438 || 380 
   ||   ||   ||   ||   
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 1 334 || 1 175 
   || Receivables || 2.3 || 70 || 111 
   || Cash and cash equivalents || 2.5 || 690 || 1 224 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 2 532 || 2 891 
   ||   ||   ||   ||   
   || NON-CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.6 || (40) || - 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (1 057) || (1 033) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (1 097) || (1 033) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || 1 435 || 1 858 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 29 579 || 26 979 
   || Other reserves || 2.9 || 2 252 || 2 252 
   || Economic outturn carried forward from previous years ||   || (27 374) || (24 674) 
   || Economic outturn of the year ||   || (3 023) || (2 700) 
   || NET ASSETS ||   || 1 435 || 1 858 
AGGREGATED ECONOMIC OUTTURN
ACCOUNT OF THE 8TH, 9TH AND 10TH EDFs

   ||   || EUR millions 
   || Note || 2012 || 2011 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 124 || 99 
   ||   ||   ||   
 OPERATING EXPENSES ||   ||   ||   
 Operating expenses || 3.2 || (3 017) || (2 702) 
 Administrative expenses || 3.3 || (107) || (75) 
   ||   ||   ||   
 SURPLUS (DEFICIT) FROM OPERATING ACTIVITIES ||   || (3 001) || (2 679) 
   ||   ||   ||   
 Financial revenue || 3.4 || (22) || (20) 
 SURPLUS (DEFICIT) FROM FINANCIAL ACTIVITIES ||   || (22) || (21) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || (3 023) || (2 700) 
AGGREGATED CASHFLOW TABLE OF THE 8TH,
9TH AND 10TH EDFs   

   ||   || EUR millions 
   || Note || 2012 || 2011 
   ||   ||   ||   
 Economic outturn of the year ||   || (3 023) || (2 700) 
   ||   ||   ||   
 OPERATING ACTIVITIES || 4.2 ||   ||   
 Ordinary contributions from Member States ||   || 2 606 || 3 238 
 Co-financing contributions ||   || 19 || 7 
 (Reversal of) impairment losses on receivables ||   || 4 || 6 
   ||   ||   ||   
 (Increase)/decrease in non-current pre-financing ||   || (58) || (28) 
 (Increase)/decrease in current pre-financing ||   || (159) || (79) 
 (Increase)/decrease in current receivables[3] ||   || 31 || 14 
 Increase/(decrease) in non-current liabilities ||   || 40 || - 
 Increase/(decrease) in current liabilities[4] ||   || 6 || (42) 
   ||   ||   ||   
 NET CASH FLOW ||   || (534) || 417 
   ||   ||   ||   
 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ||   || (534) || 417 
 Cash and cash equivalents at the beginning of the year || 2.5 || 1 224 || 808 
 Cash and cash equivalents at the end of the year || 2.5 || 690 || 1 224 
AGGREGATED STATEMENT OF CHANGES IN
NET ASSETS OF THE 8TH, 9TH AND 10TH EDFs           

   ||   ||   ||   ||   ||   ||   || EUR millions 
   || Fund Capital (a) || Uncalled funds (b) || Called fund capital (c)=(a)-(b) || Cumulative reserves (d) || Other reserves (e) || Total Net Assets (c)+(d)+(e) 
 BALANCE AS AT 31 DECEMBER 2010 || 45 691 || 21 812 || 23 879 || (24 674) || 2 252 || 1 458 
 Capital increase – ordinary contributions || - || (3 100) || 3 100 || - || - || 3 100 
  Economic outturn  of the year || - || - || - || (2 700) || - || (2 700) 
  BALANCE AS AT 31 DECEMBER 2011 || 45 691 || 18 712 || 26 979 || (27 374) || 2 252 || 1 858 
  Capital increase – ordinary contributions || - || (2 600) || 2 600 || - || - || 2 600 
 Economic outturn of the year || - || - || - || (3 023) || - || (3 023) 
  BALANCE AS AT 31 DECEMBER 2012 || 45 691 || 16 112 || 29 579 || (30 396) || 2 252 || 1 435 
1.2         8TH EDF:
BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS

BALANCE SHEET OF THE 8TH EDF 
   ||   ||   ||   || EUR millions 
   || Note || 31.12.2012 || 31.12.2011 
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 38 || 70 
   || Receivables || 2.3 || 1 || 4 
   || Liaison accounts || 2.4 || 345 || 387 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 384 || 461 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (22) || (29) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (22) || (29) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || 361 || 432 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 12 840 || 12 840 
   || Other reserves || 2.9 || (2 354) || (2 276) 
   || Economic outturn carried forward from previous years ||   || (10 132) || (10 042) 
   || Economic outturn of the year ||   || 7 || (90) 
   || NET ASSETS ||   || 361 || 432 
ECONOMIC OUTTURN ACCOUNT OF THE 8TH
EDF           
   ||   || EUR millions 
   || Note || 2012 || 2011 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 58 || 40 
   ||   ||   ||   
 OPERATING EXPENSES || 3.2 || (49) || (128) 
   ||   ||   ||   
   ||   ||   ||   
 SURPLUS (DEFICIT) FROM OPERATING ACTIVITIES ||   || 9 || (88) 
   ||   ||   ||   
 Financial revenue || 3.4 || (2) || (1) 
 SURPLUS (DEFICIT) FROM FINANCIAL ACTIVITIES ||   || (2) || (2) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || 7 || (90) 
STATEMENT OF CHANGES IN NET ASSETS
OF THE 8TH EDF
   ||   ||   ||   ||   ||   ||   || EUR millions 
   || Fund Capital (a) || Uncalled funds (b) || Called fund capital (c)=(a)-(b) || Cumulative reserves (d) || Other reserves (e) || Total Net Assets (c)+(d)+(e) 
 BALANCE AS AT 31 DECEMBER 2010 || 12 840 || - || 12 840 || (10 042) || (2 237) || 560 
 Capital increase – ordinary contributions || - || - || - || - || - || - 
 Transfers to/from the 10th EDF || - || - || - || - || (38) || (38) 
 Economic outturn of the year || - || - || - || (90) || - || (90) 
 BALANCE AS AT 31 DECEMBER 2011 || 12 840 || - || 12 840 || (10 132) || (2 276) || 432 
 Capital increase – ordinary contributions || - || - || - || - || - || - 
 Transfers to/from the 10th EDF || - || - || - || - || (78) || (78) 
 Economic outturn  of the year || - || - || - || 7 || - || 7 
 BALANCE AS AT 31 DECEMBER 2012 || 12 840 || - || 12 840 || (10 125) || (2 354) || 361 
1.3         9TH EDF:
BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS

BALANCE SHEET OF THE 9TH EDF
   ||   ||   ||   || EUR millions 
   || Note || 31.12.2012 || 31.12.2011 
   || NON-CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.1 || 119 || 191 
   ||   ||   ||   ||   
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 447 || 569 
   || Receivables || 2.3 || 58 || 87 
   || Liaison accounts || 2.4 || 1 919 || 2 557 
   || Cash and cash equivalents || 2.5 || - || 6 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 2 543 || 3 410 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (375) || (315) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (375) || (315) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || 2 168 || 3 096 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 11 699 || 11 699 
   || Other reserves || 2.9 || 4 126 || 4 227 
   || Economic outturn carried forward from previous years ||   || (12 830) || (11 932) 
   || Economic outturn of the year ||   || (827) || (898) 
   || NET ASSETS ||   || 2 168 || 3 096 
ECONOMIC OUTTURN ACCOUNT OF THE
9TH EDF
   ||   || EUR millions 
   || Note || 2012 || 2011 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 49 || 49 
   ||   ||   ||   
 OPERATING EXPENSES ||   ||   ||   
 Operating expenses || 3.2 || (856) || (924) 
 Administrative expenses || 3.3 || (1) || (3) 
   ||   ||   ||   
   ||   ||   ||   
 SURPLUS (DEFICIT) FROM OPERATING ACTIVITIES ||   || (809) || (879) 
   ||   ||   ||   
 Financial revenue || 3.4 || (18) || (19) 
 SURPLUS (DEFICIT) FROM FINANCIAL ACTIVITIES ||   || (18) || (19) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || (827) || (898) 
STATEMENT OF CHANGES IN NET ASSETS
OF THE 9TH EDF
   ||   ||   ||   ||   ||   ||   || EUR millions 
   || Fund Capital (a) || Uncalled funds (b) || Called fund capital (c)=(a)-(b) || Cumulative reserves (d) || Other reserves (e) || Total Net Assets (c)+(d)+(e) 
 BALANCE AS AT 31 DECEMBER 2010 || 11 699 || 660 || 11 039 || (11 932) ||   4 157 || 3 263 
 Capital increase – ordinary contributions || - || (660) || 660 || - || - || 660 
 Transfers to/from the 10th EDF || - || - || - || - || 70 || 70 
 Economic outturn of the year || - || - || - || (898) || - || (898) 
 BALANCE AS AT 31 DECEMBER 2011 || 11 699 || - || 11 699 || (12 830) || 4 227 || 3 096 
 Capital increase – ordinary contributions || - || - || - || - || - || - 
 Transfers to/from the 10th EDF || - || - || - || - || (100) || (100) 
 Economic outturn of the year || - || - || - || (827) || - || (827) 
 BALANCE AS AT 31 DECEMBER 2012 || 11 699 || - || 11 699 || (13 657) || 4 126 || 2 168 
1.4         10TH EDF:
BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS

BALANCE SHEET OF THE 10TH EDF
   ||   ||   ||   || EUR millions 
   || Note || 31.12.2012 || 31.12.2011 
   || NON-CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.1 || 319 || 189 
   ||   ||   ||   ||   
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 849 || 536 
   || Receivables || 2.3 || 11 || 20 
   || Cash and cash equivalents || 2.5 || 690 || 1 218 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 1 869 || 1 963 
   ||   ||   ||   ||   
   || NON-CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.6 || (40) || - 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (660) || (689) 
   || Liaison accounts || 2.4 || (2 264) || (2 944) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (2 963) || (3 633) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || (1 095) || (1 670) 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 5 040 || 2 440 
   || Other reserves || 2.9 || 479 || 301 
   || Economic outturn carried forward from previous years ||   || (4 411) || (2 699) 
   || Economic outturn of the year ||   || (2 203) || (1 712) 
   || NET ASSETS ||   || (1 095) || (1 670) 
ECONOMIC OUTTURN ACCOUNT OF THE
10TH EDF
   ||   || EUR millions 
   || Note || 2012 || 2011 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 18 || 10 
   ||   ||   ||   
 OPERATING EXPENSES ||   ||   ||   
 Operating expenses || 3.2 || (2 112) || (1 650) 
 Administrative expenses || 3.3 || (106) || (72) 
   ||   ||   ||   
   ||   ||   ||   
 SURPLUS (DEFICIT) FROM OPERATING ACTIVITIES ||   || (2 201) || (1 712) 
   ||   ||   ||   
 Financial revenue || 3.4 || (2) || 0 
 SURPLUS (DEFICIT) FROM FINANCIAL ACTIVITIES ||   || (2) || (1) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || (2 203) || (1 712) 
STATEMENT OF CHANGES IN NET ASSETS
OF THE 10TH EDF
   ||   ||   ||   ||   ||   ||   || EUR millions 
   || Fund Capital (a) || Uncalled funds (b) || Called fund capital (c)=(a)-(b) || Cumulative reserves (d) || Other reserves (e) || Total Net Assets (c)+(d)+(e) 
 BALANCE AS AT 31 DECEMBER 2010 || 21 152 || 21 152 || - || (2 699) || 333 || (2 366) 
 Capital increase – ordinary contributions || - || (2 440) || 2 440 || - || - || 2 440 
 Transfers from the 8th and the 9th EDF || - || - || - || - || (32) || (32) 
 Economic outturn of the year || - || - || - || (1 712) || - || (1 712) 
 BALANCE AS AT 31 DECEMBER 2011 || 21 152 || 18 712 || 2 440 || (4 411) || 301 || (1 670) 
 Capital increase – ordinary contributions || - || (2 600) || 2 600 || - || - || 2 600 
 Transfers from/to the 8th and the 9th EDF || - || - || - || - || 178 || 178 
  Economic outturn of the year || - || - || - || (2 203) || - || (2 203) 
 BALANCE AS AT 31 DECEMBER 2012 || 21 152 || 16 112 || 5 040 || (6 614) || 479 || (1 095) 
1.5         NOTES TO
THE FINANCIAL STATEMENTS OF THE 8TH, 9TH AND 10TH EDFs            
1.         SIGNIFICANT ACCOUNTING
POLICIES
1.1.     LEGAL PROVISIONS AND THE
FINANCIAL REGULATION

The
financial statements are drawn up in accordance with the Financial Regulation
applicable to the 10th EDF. In accordance with the provisions of Article 121 of
this regulation, the financial statements are prepared respecting the
principles of accrual accounting.
These financial statements have
been drafted in conformity with the accounting rules and methods of the EDF,
themselves 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 the International Accounting Standard Board (IASB).
The accounting rules adopted by the Accounting Officer of the EDF have been
applied in respect of the part of the EDF resources for which the European
Commission is responsible for financial management.
The EDF Accounting Officer must
submit the provisional accounts to the Court of Auditors for audit 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
125). 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 15 November, 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 the financial management.

1.2.     ACCOUNTING
PRINCIPLES
The objective of the financial
statements is 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 such as the EDF, 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 an organisation’s 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 EDF
comprises general accounts and budget accounts. The budget accounts give a
detailed picture of the implementation of the budget. They are based on the cash
accounting principle. The general accounts allow for the preparation of the
financial statements as they show all expenses and income for the
financial year based on accrual accounting rules and are designed to establish
the financial position in the form of a balance sheet at 31 December.
Article 120 of the 10th EDF
Financial Regulation sets out the accounting principles to be applied in
drawing up the financial statements:
–       going concern basis;
–       prudence;
–       consistent accounting
methods;
–       comparability of
information;
–       materiality;
–       no netting;
–       reality over appearance;
–       accrual-based
accounting.

1.3.     BASIS
OF PREPARATION

1.3.1.  Functional and reporting currency
The financial statements are
presented in millions of euros, the euro being the functional and reporting
currency of the EDF.

1.3.2.  Currency
and basis for conversion
Foreign currency transactions are
translated into euros using the exchange rates prevailing on the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement
of foreign currency transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the economic outturn account.
Year-end balances of monetary
assets and liabilities denominated in foreign currencies are converted into
euros on the basis of the below exchange rates applying on 31 December:     

 Currency || 31.12.2012 || 31.12.2011 || Currency || 31.12.2012 || 31.12.2011 
 XOF || 655.957 || 655.957 || KES || 113.460 || 109.362 
 XAF || 655.957 || 655.957 || BIF || 2037.95 || 1780.23 
 NGN || 206.074 || 204.185 || SLL || 5709.56 || 5663.54 
 PGK || 2.76702 || 2.81057 || TZS || 2077.48 || 2058.31 
 HTG || 56.2987 || 53.2461 || UGX || 3508.51 || 3181.89 
 GNF || 9250.40 || 9155.86 || MGA || 2981.70 || 2870.88 
 MWK || 439.917 || 213.286 || SZL || 11.1727 || 10.4830 
1.3.3.  Use of estimates
In accordance with IPSAS and
generally accepted accounting principles, the financial statements necessarily
include amounts based on estimates and assumptions by management based on the
most reliable information available. Significant estimates include, but are not
limited to, amounts for provisions, impairment losses on accounts receivable
and accrued charges. Actual results could differ from those estimates. Changes
in estimates are reflected in the period in which they become known.
1.4.     BALANCE SHEET

1.4.1   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 eligible expenditures, he/she has to return the pre-financing
advance to the EDF. 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 less: amounts
returned, eligible amounts cleared, estimated eligible amounts not yet cleared
at year-end and value reductions.
Interest on pre-financing is
recognised as it is earned in accordance with the provisions of the relevant
agreement. An estimate of the accrued interest revenue, based on the most reliable
information, is made at year-end.
1.4.2   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 full
amount due cannot be collected according to the original terms of the
receivable. 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. Also recognised is a general write-down for outstanding recovery
orders not already subject to a specific write-down. This general write-down is
based on the historical loss rates. The amount of the write-down is recognised
in the economic outturn account. 

1.4.3   Cash
and cash equivalents
Cash and cash
equivalents are financial instruments and are defined as current assets. They
include cash at hand, deposits held at call with banks and other current highly
liquid investments with original maturities of three months or less.
1.4.4   Payables
A significant amount of the
payables of the EDF are not related
to the purchase of goods 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 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.
Payables arising from the purchase
of goods and services are recognised at invoice reception for the original
amount and corresponding expenses are entered in the accounts when the supplies
or services are delivered and accepted.

1.4.5   Provisions
Provisions are recognised when the
EDF has a present legal or constructive obligation towards third parties as a
result of past events; it is more likely than not that an outflow of resources
will be required to settle the obligation, and the amount can be reliably
estimated. The amount of the provision is the best estimate of the expenditures
expected to be required to settle the present obligation at the reporting date.

1.4.6   Accrued
and deferred income and charges
A critical element in accrual
accounting is the exercise of ensuring that transactions are recorded in the
accounting year to which they relate. This exercise is referred to as the
cut-off exercise. In particular, an assessment has to be made concerning
eligible expenses incurred by beneficiaries of EDF funds but not yet reported
to the EDF (accrued charges). Conversely, some payments made in the current
year relate to subsequent periods (deferred charges) and these have to be
identified and included in the subsequent period(s).
According to the EDF accounting
rules, transactions and events are recognised in the financial statements in
the period to which they relate. At the end of the accounting period, accrued
expenses are recognised based on an estimated amount of the transfer obligation
of the period. The calculation of the accrued expenses is made in accordance
with detailed operational and practical guidelines issued by the Commission
which aim at ensuring that the financial statements reflect a true and fair
view.
Revenue is also accounted for in
the period to which it relates. At year-end, if an invoice is not yet issued
but the service has been rendered, the supplies have been delivered by the EDF
or a contractual agreement exists (i.e. by reference to a treaty), an accrued
income will be recognised in the financial statements.
In addition, at year-end, if an
invoice is issued but the services have not yet been rendered or the goods
supplied have not yet been delivered, the revenue will be deferred and
recognised in the subsequent accounting period. 
1.5.     ECONOMIC OUTTURN ACCOUNT

1.5.1   Revenue
There is no revenue budgeted for
the European Development Fund the ordinary contributions from Member States are
treated as fund capital. Revenue comprises recovery of expenses and interest
income. 
Recovery of expenses
For operations giving rise to
reimbursement of expenditures previously paid by the EDF to a final beneficiary
or third country, recovery orders and deductions from subsequent payments are
established and accounted for as follows:
–       Recovery of expenses:
the recovery order issued results in a receivable with the corresponding entry
being income in the economic outturn account for that year; or,
–       Recovery of
pre-financing amounts: in this case the amount is included under the
pre-financing heading on the balance sheet.
Interest income
Interest income is recognised in
the economic outturn account using the effective interest method. The interest
income comprises interest received or receivable on cash balances and
demandable deposits held with commercial banks and on late payment of
entitlements to the EDF. Interest income is recognised as it accrues.

1.5.2   Expense
Exchange expenses arising from the
purchase of goods and services are recognised when the supplies are delivered
and accepted. They are valued at original invoice cost.
Non-exchange expenses account for
the majority of the EDF's expenditure. They relate to transfers to
beneficiaries and can be of three types: entitlements, transfers under
agreement and discretionary grants, or contributions and donations.
Transfers are recognised as
expenses in the period during which the events giving rise to the transfer
occurred, as long as the nature of the transfer is allowed by regulation
(Financial Regulation or other) or a contract has been signed authorising the
transfer; any eligibility criteria have been met by the beneficiary; and a
reasonable estimate of the amount can be made.
When any request for payment or
cost claim is received and meets the recognition criteria, it is recognised as
an expense for the eligible amount. At year-end, incurred eligible expenses
already due to the beneficiaries but not yet reported are estimated and
recorded as accrued expenses.
Interest expense
Interest expense is recognised in
the economic outturn account using the effective interest method. The interest
expense comprises interest paid or payable and is recognised as it accrues.
1.6.     CONTINGENT ASSETS AND
LIABILITIES 

1.6.1   Contingent assets
A contingent asset is a possible
asset that arises from past events and whose 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 EDF. A contingent asset is disclosed when an
inflow of economic benefits or service potential is probable.
Contingent assets are assessed at
each balance sheet date 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 are possible assets that
arise from past events and whose existence will be confirmed by the occurrence
or non-occurrence of the object of the guarantee. Guarantees can thus qualify
as contingent assets. A guarantee is settled when the object of the guarantee
no longer exists. It is crystallised when the conditions are fulfilled for
calling for a payment from the guarantor.

1.6.2   Contingent
liabilities
A contingent liability is a
possible obligation that arises from past events and whose 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 EDF; or a present obligation
that arises from past events but is not recognised because: it is not probable
that an outflow of resources embodying economic benefits or service potential
will be required to settle the obligation or, in the rare circumstances where
the amount of the obligation cannot be measured with sufficient reliability. A
contingent liability is disclosed unless the possibility of an outflow of
resources embodying economic benefits or service potential is remote.
Contingent liabilities are assessed
at each balance sheet date to determine whether an outflow of resources
embodying economic benefits or service potential has become probable. If it
becomes probable that an outflow of resources embodying economic benefits or
service potential will be required for an item dealt with as contingent
liability, a provision is recognised in the financial statements of the period
in which the change of probability occurs.
2.         NOTES TO THE BALANCE
SHEET

NON-CURRENT ASSETS
2.1      PRE-FINANCING
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Pre-financing || - || 119 || 319 || 438 || 380 
 TOTAL || - || 119 || 319 || 438 || 380 
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 the basis of progress reports. Pre-financing is normally paid in
the currency of the country or territory where the project is executed.
The timing of the recoverability or
utilisation of the pre-financing governs whether it is disclosed as a current
or a non-current pre-financing asset. The utilisation is defined by the
project's underlying agreement. Any repayments or utilisation due within twelve
months of the reporting date are disclosed as current pre-financing. As many of
the EDF projects are long-term in nature, it is necessary that the related
advances are available for more than one year. Thus these pre-financing amounts
are shown as non-current assets.
The increase in non-current
pre-financing of EUR 58 million compared to 31.12.2011 is mainly explained by
an increase in non-current pre-financing related to PIR[5] Projects (EUR 97 million), Intra ACP
Projects (EUR 42 million) and PIN[6] grants
(EUR 10 million), offset by a decrease in the pre-financing related to Intra
ACP (EUR 73 million) and Administrative Expenses (EUR 29 million).
        
CURRENT ASSETS
2.2      PRE-FINANCING
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Pre-financing (gross) || 70 || 1 207 || 2 316 || 3 593 || 3 415 
 Less estimated clearing of pre-financing || (32) || (760) || (1 468) || (2 259) || (2 240) 
 TOTAL || 38 || 447 || 849 || 1 334 || 1 175 
The increase in net current
pre-financing of EUR 159 million is mainly due to an increase in pre-financing related
to the aid instruments PIN grants (EUR 147 million), PIR Projects (EUR 68
million) and Intra ACP-Debt Relief (EUR 39 million). This increase was partially
offset by a decrease in the net pre-financing related to Sectorial Policy (EUR
65 million) and Intra ACP - Social Sectors Projects (EUR 32 million).

2.2.1
Guarantees received in respect of pre-financing
Guarantees are held to secure
pre-financing and are released when the final claim under a project is paid.
A guarantee has two different values referred to as the “nominal” and the
“on-going” values. For the “nominal” value, the generating event is linked to
the existence of the guarantee. For the “on-going” value, the guarantee’s
generating event is the pre-financing payment and/or subsequent clearings.
At 31 December 2012 the
"nominal" value of guarantees received by the EDF in respect of
pre-financing amounts to EUR 566 million. The "on-going" value of
those guarantees amounts to EUR 391 million. At 31 December 2011 these
values were EUR 637 million and EUR 394 million respectively.

2.3      RECEIVABLES
   ||   ||   ||   ||   || EUR millions 
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Receivables from customers || 2.3.1 || 1 || 6 || 2 || 10 || 13 
 Receivables from Member States || 2.3.2 || - || - || 3 || 3 || 9 
 Accrued income and deferred charges || 2.3.3 || 0 || 51 || 6 || 57 || 89 
 TOTAL ||   || 1 || 58 || 11 || 70 || 111 
2.3.1 Receivables from
customers
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Receivables from customers || 5 || 19 || 3 || 26 || 27 
 -Write-down || (3) || (12) || (1) || (16) || (13) 
 TOTAL || 1 || 6 || 2 || 10 || 13 
These are recovery orders entered
in the accounts at 31 December 2012 as established entitlements to be recovered
and not already included under other headings on the assets side of the balance
sheet. The closing balance for recovery orders represents the value of recovery
orders issued but not yet paid at year-end.
The movements in open recovery
orders during the period are detailed below:
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2012 || TOTAL 2011 
 Open recovery orders at beginning of year || 6 || 19 || 1 || 25 || 18 
 Recovery orders issued || 12 || 64 || 63 || 139 || 130 
 Recovery orders closed || (13) || (64) || (61) || (138) || (123) 
 Cashed || (12) || (43) || (43) || (97) || (108) 
 Waived (art 73 FR) || - || (1) || - || (1) || (1) 
 Cancelled || 0 || (3) || 0 || (4) || (2) 
 Offset || (2) || (17) || (18) || (36) || (13) 
 Open recovery orders at end of year || 5 || 19 || 3 || 26 || 25 
2.3.2 Receivables from Member
States
The EUR 3 million receivable from
Member States in the 10th EDF comprises cofinancing contributions from Belgium,
Spain and Sweden.
2.3.3 Accrued income and deferred
charges
Accrued income and deferred charges
include primarily accrued interest on pre-financing amounts. Additionally,
accrued interest income on late payment of contributions is included under this
heading.
The decrease in accrued income and
deferred charges is explained by lower accrued interest on pre-financing (see
note 3.4).
2.4      LIAISON ACCOUNTS
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 to/from 6th EDF || (2 065) || (214) || - || (2 279) || (2 279) 
 to/from 7th EDF || - || 2 279 || - || 2 279 || 2 279 
 to/from 8th EDF || - || (3 038) || 628 || (2 410) || (2 453) 
 to/from 9th EDF || 3 038 || - || (2 892) || 146 || (491) 
 to/from 10th EDF || (628) || 2 892 || - || 2 264 || 2 944 
 TOTAL || 345 || 1 919 || (2 264) || 0 || 0 
For reasons of efficiency, the
single treasury covering all the EDFs is allocated to the 10th EDF; this leads
to operations between the various EDFs, which are balanced out in the liaison
accounts between the various EDF balance sheets.
The major 2012 movements in the
liaison accounts include payments made by the 10th EDF for implementation of
the 8th and 9th EDFs.
          
2.5      CASH AND CASH EQUIVALENTS[7]
   ||   ||   ||   ||   || EUR millions 
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Cash at banks || 2.5.1 || - || - || 687 || 687 || 1 211 
 STABEX security accounts || 2.5.2 || - || - || 2 || 2 || 5 
 Co-financing bank accounts || 2.5.3 || - || - || - || - || 8 
 Democratic Republic Congo special fund[8] || - || - || - || 1 || 1 || 1 
 TOTAL ||   || - || - || 690 || 690 || 1 224 
2.5.1 Cash at banks
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Special accounts - financial institutions of Member States || - || - || 633 || 633 || 1 129 
 Current accounts – commercial banks ||   ||   || 54 || 54 || 80 
 Local Paying Agents || - || - || 0 || 0 || 2 
 TOTAL || - || - || 687 || 687 || 1 211 
The overall decrease in cash at
banks is mainly explained by the level of payments made and a higher level of
budget execution than in the previous reporting period. 
Local paying agent accounts
represent amounts held in bank accounts within ACP States and OCTs used for
making payments in local currency within the beneficiary state. These accounts
are kept in euros or in a currency of a Union Member State. In order to achieve
a more centralised management of payments, during 2012, 3 out of the 4
remaining local paying agent accounts were closed.
2.5.2 STABEX Security accounts
   || EUR millions 
   || Balance at 31.12.2012 || Balance at 31.12.2011 
 Ivory Coast || 2 || 2 
 Malawi || - || 1 
 Other countries || 0 || 2 
 TOTAL || 2 || 5 
STABEX is the acronym for a European
Union compensatory finance scheme to stabilise export earnings of the ACP
countries. It was first introduced in the 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 which will be transferred to the
relevant beneficiary ACP State at a future date. This balance is allocated to
the 10th EDF. During 2012, eight STABEX security accounts were closed following
the winding up of the STABEX aid instrument. 
In addition to these funds, there
are other STABEX funds held by beneficiary ACP States. Once the Commission and
the beneficiary (ACP) State reach 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[9] (as revised), the funds are transferred
into an interest bearing double signature account (European Commission and
Beneficiary State) opened in the name of the ACP State. The funds remain in
these double signature accounts until a FMO (Framework of Mutual Obligations)
justifies a transfer for a project.
The Commission's Authorising
Officer retains the power of signature over the account in order to ensure that
the funds are disbursed as intended. The funds in the double signature accounts
are the property of the ACP State and are consequently not recorded as assets
in the EDF accounts. The transfers to these accounts are recorded as STABEX
payments. 
In 2012, EUR 49 million was
returned to the EDF from double signature accounts in ACP countries following
Article 1.4 of the Internal Agreement of the 10th EDF[10]. These funds were transferred mainly
from the Salomon Islands (EUR 12 million), Ivory Coast (EUR 11 million),
Burundi (EUR 5 million), St Vincent and the Grenadines (EUR 3
million), Senegal (EUR 3 million), Malawi (EUR 3 million), Uganda (EUR 3
million) and Burkina Faso (EUR 2 million). These revenues are included in
operating income (STABEX aid instrument) in the economic outturn account of the
8th EDF.
2.5.3 Co-financing bank accounts
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Co-financing bank accounts || - || - || - || - || 8 
 TOTAL || - || - || - || - || 8 
The co-financing bank accounts were
closed. These funds, except for administrative part, were returned to the
Member States following instructions from the Authorising Officer.   

NON-CURRENT LIABILITIES
2.6      PAYABLES
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Co-financing - payables || - || - || 40 || 40 || - 
 TOTAL || - || - || 40 || 40 || - 
Co-financing payables at the end of
2012 relate to the 10th EDF.
Co-financing contributions received
are presented as payables to Member States and non-Member States as they fulfill
the criteria of revenues from non-exchange transactions under condition. The
EDF is required to use the contributions to deliver services to third parties
or is otherwise required to return the assets (the contributions received) to
the Member States. The outstanding payable for co-financing agreements
represents the co-financing contribution received less the expenses incurred
related to the project. The effect on net assets is nil. 
In 2012, in order to improve the
presentation of the co-financing payables the amounts were split between
non-current and current liabilities. The increase in the total co-financing
payables is explained in the note 2.7.1.2. 
CURRENT LIABILITIES

2.7      PAYABLES
   ||   ||   ||   ||   || EUR millions  
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Current payables || 2.7.1 || 4 || 67 || 138 || 209 || 399 
 Accrued charges || 2.7.2 || 19 || 308 || 228 || 555 || 339 
 Deferred fund capital contribution || 2.7.3 || - || - || 293 || 293 || 295 
 TOTAL ||   || 22 || 375 || 660 || 1 057 || 1 033 
2.7.1 Current payables
   ||   ||   ||   ||   || EUR millions 
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Suppliers and other || 2.7.1.1 || 4 || 67 || 81 || 152 || 308 
 Co-financing payables || 2.7.1.2 || - || - || 46 || 46 || 81 
 Sundry payables || 2.7.1.3 || 0 || 0 || 12 || 12 || 10 
 TOTAL ||   || 4 || 67 || 138 || 209 || 399 
Payables include cost statements
received by the EDF relating to the grant activity. They are recorded for the
amount being claimed from the moment the demand is received. The same procedure
applies to invoices and credit notes received under procurement activities. The
cost claims concerned have been taken into account for the year-end cut-off
procedures. Following the cut-off entries, estimated eligible amounts have been
recognised in the economic outturn account.
2.7.1.1 Suppliers and other
Included under this heading are
amounts owed to suppliers as well as amounts payable to public bodies and third
states. 
The decrease of EUR 157 million
compared to the previous reporting period relates primarly to a EUR 75 million
decrease in payables to third states and a EUR 37 million decrease in payables
to non-public suppliers. 
2.7.1.2 Co-financing payables
In 2012, in order to improve the
presentation of the co-financing payables, the amounts were split between
non-current and current liabilities.  The decrease in current co-financing
payables is mainly due to a reclassification of EUR 40 million to the non-current
payables. 
The total non-current and current co-financing
payables increased by EUR 5 million. In 2012, new co-financing contributions
were received from Germany (EUR 2 million) and Canada (EUR 2 million). The
increase of Swedish co-financing payable (EUR 8 million) was partially offset
by a decrease in Spanish and co-financing payables to UK (EUR 2 million each)
and the clearing of the Italian co-financing payable within the 9th EDF. 
The co-financing payables were
decreased by EUR 8 million to recognise revenue related to the co-financing
projects (see 3.1.3 and 3.2.2).
2.7.1.3 Sundry payables
Sundry payables mainly comprise
unallocated cash receipts and returned amounts.
2.7.2 Accrued charges
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Accrued charges || 19 || 308 || 228 || 555 || 339 
 TOTAL || 19 || 308 || 228 || 555 || 339 
At year-end, an assessment is made
concerning eligible expenses incurred by beneficiaries of EDF funds but not yet
reported. Following these cut-off calculations, estimated eligible amounts are
recorded as accrued charges. 
Estimated utilisation of
pre-financing amounts is presented as an estimated clearing of pre-financing
(see 2.2). 
2.7.3 Deferred fund capital
contribution
   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 United Kingdom || - || - || 274 || 274 || 289 
 Ireland || - || - || 9 || 9 || 5 
 Lithuania || - || - || - || - || 1 
 Hungary || - || - || 10 || 10 || - 
 TOTAL || - || - || 293 || 293 || 295 
This comprises Member States'
contributions paid in advance.
NET ASSETS
2.8      CALLED FUND CAPITAL
   ||   || EUR millions 
   ||   8th EDF ||   9th EDF ||   10th EDF ||   TOTAL 
 Fund Capital || 12 840 || 11 699 || 21 152 || 45 691 
 Uncalled fund capital || - || - || (18 712) || (18 712) 
 Called fund capital 31.12.2011 || 12 840 || 11 699 || 2 440 || 26 979 
   ||   ||   ||   ||   
 Fund Capital || 12 840 || 11 699 || 21 152 || 45 691 
 Uncalled fund capital || - || - || (16 112) || (16 112) 
 Called fund capital 31.12.2012 || 12 840 || 11 699 || 5 040 || 29 579 
The fund capital represents the
total amount of contributions from Member States for the relevant EDF fund as
laid down in each of the Internal Agreements.
The uncalled funds represent the
initial allocation not yet called up from Member States.
The called fund 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 laid
down in Article 16 of the 10th EDF Financial Regulation.
The capital of the 8th and the 9th EDF
has been called up and received in its entirety. 
Called and uncalled fund capital by
Member State
   ||   ||   ||   || EUR millions 
 Contributions || % || uncalled 10th EDF 31.12.2011 || called up in 2012 || uncalled 10th EDF 31.12.2012 
 Austria || 2.41 || (451) || 63 || (388) 
 Belgium || 3.53 || (661) || 92 || (569) 
 Denmark || 2.00 || (374) || 52 || (322) 
 Finland || 1.47 || (275) || 38 || (237) 
 France || 19.55 || (3 658) || 508 || (3 150) 
 Germany || 20.50 || (3 836) || 533 || (3 303) 
 Greece || 1.47 || (275) || 38 || (237) 
 Ireland || 0.91 || (170) || 24 || (147) 
 Italy || 12.86 || (2 406) || 334 || (2 072) 
 Luxemburg || 0.27 || (51) || 7 || (44) 
 Netherlands || 4.85 || (908) || 126 || (781) 
 Portugal || 1.15 || (215) || 30 || (185) 
 Spain || 7.85 || (1 469) || 204 || (1 265) 
 Sweden || 2.74 || (513) || 71 || (441) 
 United Kingdom || 14.82 || (2 773) || 385 || (2 388) 
 Cyprus || 0.09 || (17) || 2 || (15) 
 Czech Republic || 0.51 || (95) || 13 || (82) 
 Estonia || 0.05 || (9) || 1 || (8) 
 Hungary || 0.55 || (103) || 14 || (89) 
 Lithuania || 0.12 || (22) || 3 || (19) 
 Latvia || 0.07 || (13) || 2 || (11) 
 Malta || 0.03 || (6) || 1 || (5) 
 Poland || 1.3 || (243) || 34 || (209) 
 Slovenia || 0.18 || (34) || 5 || (29) 
 Slovakia || 0.21 || (39) || 5 || (34) 
 Bulgaria || 0.14 || (26) || 4 || (23) 
 Romania || 0.37 || (69) || 10 || (60) 
 TOTAL || 100,00 || (18 712) || 2 600 || (16 112) 
In 2012 contributions under the 10th
EDF were called. The first tranche of the 2013 Member States' contributions was
called in November 2012.

2.9      OTHER
RESERVES
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 
 Balance at 31.12.2010 || (2 237) || 4 157 || 333 || 2 252 
 Transfer of decommited amounts to the 10th EDF from the 8th  and 9th EDFs || (38) || (80) || 118 || 0 
 Transfer from the 10th to the 9th EDF to allocate funds to Southern Sudan following Council Decision 2010/406/EU ||                       -   ||   150 ||   (150) ||   0 
 Balance at 31.12.2011 || (2 276) || 4 227 || 301 || 2 252 
 Transfer of decommited amounts to the 10th EDF from the 8th  and 9th EDFs || (78) || (300) || 378 || 0 
 Transfer from the 10th to the 9th EDF to allocate funds to Southern Sudan following Council Decision 2011/315/EU ||                        -   ||   200 ||   (200) ||   0 
 Balance at 31.12.2012 || (2 354) || 4 126 || 479 || 2 252 
 Balance at 31.12.2012 includes: ||   ||   ||   ||   
 - Funds allocated to Southern Sudan || -              || 350 || -                    || 350 
Since the entry into force of the
10th EDF in 2008, all decommitted funds of previous EDFs are transferred to the
reserve of the 10th EDF. This reserve may be committed only under the
conditions set out in Article 1.4 of the Internal Agreement on the 10th EDF.
In 2012, EUR 78 million and EUR 300
million of decommitted funds were transferred to the performance reserve of the
10th EDF from the 8th and 9th EDFs respectively while EUR 200 million were
transferred from the performance reserve of the 10th EDF to the 9th EDF in
order to allocate funds to South Sudan.[11]


3.         NOTES
TO THE ECONOMIC OUTTURN ACCOUNT

3.1      OPERATING REVENUE
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2012 || TOTAL 2011 
 Recovery of expenses || 2 || 14 || 2 || 17 || 16 
 Recovery of STABEX funds ||           49 || - || - || 49 || 26 
 Exchange gains || 7 || 35 || 8 || 51 || 54 
 Operating income co-financing || - || - || 8 || 8 || 2 
 TOTAL || 58 || 49 || 18 || 124 || 99 
3.1.1 Recovery of expenses
This heading represents the
recovery orders issued by the EDF and the deduction from subsequent payments
recorded in the EDF accounting system, to recover expenditures previously paid
out, based on controls, audits or eligibility analysis. It should be noted that
recovery of pre-financing amounts is not included as revenue, but credited to the pre-financing
heading on
the balance sheet. 
Recovery of undue payments
In 2012, recovery orders for EUR 27
million were issued in respect of undue payments, compared to EUR 12 million in
2011. Of these, EUR 11 million related to the recovery of expenses and were
thus recorded as operating revenue. EUR 16 million represented recoveries of
pre-financing amounts paid and were credited to the pre-financing asset on the
balance sheet. 
The nature of the recovery of undue
payments can be summarised as follows: 
 EUR millions || 
   || Revenue || Pre-financing || TOTAL 2012 || Revenue || Pre-financing || TOTAL 2011 
 Error || 1 || 1 || 2 || 2 || 1 || 3 
 Irregularity || 9 || 15 || 25 || 6 || 3 || 8 
 OLAF Notified || 1 || - || 1 || 1 || - || 1 
 TOTAL || 11 || 16 || 27 || 8 || 4 || 12 
3.1.2 Recovery of STABEX funds
In 2012, EUR 49 million was
returned to the EDF from double signature accounts in ACP countries following
Article 1.4 of the Internal Agreement of the 10th EDF[12]. These funds were transferred mainly from
the Salomon Islands (EUR 12 million), Ivory Coast (EUR 11 million), Burundi
(EUR 5 million), St Vincent and the Grenadines (EUR 3 million),
Senegal (EUR 3 million), Malawi (EUR 3 million), Uganda (EUR 3 million) and
Burkina Faso (EUR 2 million). These revenues are included in operating income
(STABEX aid instrument) in the economic outturn account of the 8th EDF.
3.1.3 Operating income
co-financing
The operating income relating to
co-financing represents the contributions used (see 3.2.2). As these
contributions fulfil the criteria of revenues from non-exchange transactions
under condition, the contribution is recognised in accordance with the
implementation of the co-financing project. 
3.2      OPERATING EXPENSES
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2012 || TOTAL 2011 
 Operating expenses – aid instruments || 41 || 812 || 2 085 || 2 938 || 2 633 
 Operating expenses co-financing ||  -     ||  -     || 8 || 8 || 2 
 Exchange losses || 8 || 39 || 20 || 66 || 61 
 Write-down of receivables || 0 || 6 || - || 6 || 7 
 TOTAL || 49 || 856 || 2 112     || 3 017 || 2 702 
In 2012 the Commission refined its
methodology for estimating accrued charges. Had this refinement not been made,
the operating expenses would have been 2 849 million euro instead of 3 017
million euro. The impact on net assets would have been the same amount (a
decrease of EUR 168 million) mainly due to an increase in the accrued charges
accounts (see 2.7.2).
3.2.1 Operating expenses – aid
instruments
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2012 || TOTAL 2011 
 Programmable aid || 17 || 93 || 1 366 || 1 476 || 1 251 
 Macro-economic support || - || 8 || - || 8 || 51 
 Sectoral policy || 0 || 322 || 3 || 326 || 371 
 Interest rate subsidies || 5 || - || - || 5 || 0 
 Intra ACP projects || - || 311 || 409 || 720 || 650 
 Emergency aid || - || 60 || 274 || 333 || 212 
 Refugee aid || 6 || - || - || 6 || 0 
 Risk capital || 1 || - || - || 1 || 19 
 STABEX || 4 || - || - || 4 || 12 
 Sysmin || 0 || - || - || 0 || (8) 
 Other aid programmes related to former EDFs || - || 10 || - || 10 || 24 
 Institutional support || - || (1) || 33 || 32 || 8 
 Compensation export receipts || 7 || 10 || - || 18 || 42 
 Total || 41 || 812 || 2 085 || 2 938 || 2 633 
The EDF operating
expenditure covers the various aid instruments and takes different forms,
depending on how the money is paid out and managed. 
3.2.2 Operating expenses
co-financing
These are the expenses
incurred on co-financing projects in 2012. As the co-financing contributions
received fulfil the criteria of revenues from non-exchange transactions under
condition, a corresponding amount of contributions has been recognised as operating
revenue (see 3.1.3). 
3.2.3 Write-down of receivables
This heading includes mainly
pre-financing corrections and amounts written down/lost on realisation
concerning debtors.

3.3      ADMINISTRATIVE
EXPENSES
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2012 || TOTAL 2011 
 Administrative expenses || - || 1 || 106 || 107 || 75 
 TOTAL || - || 1 || 106 || 107 || 75 
This heading includes support
expenditure; i.e. the administrative costs related to the programming and
implementation of the EDFs. This includes expenses for preparation, follow-up,
monitoring, and evaluation of projects as well as expenses for computer
networks, technical assistance etc.
3.4      FINANCIAL REVENUE
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2012 || TOTAL 2011 
 Interest income - European banks || - || 6 || 4 || 9 || 1 
 Interest on pre-financing || (2) || (24) || (6) || (32) || (21) 
 TOTAL || (2) || (18) || (2) || (22) || (20) 
Interest on pre-financing is
recognised in accordance with the provisions of article 7 paragraph 3 and
article 8 of the 10th EDF Financial Regulation. The reversal of the 2011 accrual
for interest on pre-financing resulted in a negative interest revenue in 2012. 
4.         NOTES TO THE CASH FLOW
STATEMENT

4.1      PURPOSE AND PREPARATION OF THE CASH FLOW STATEMENT
Cash flow information
is used to provide a basis for assessing the ability of the EDF to generate
cash and cash equivalents, and its needs to utilise those cash flows.
The cash flow statement
is prepared using the indirect method. This means that the net surplus or
deficit for the financial year is adjusted for the effects of transactions of a
non-cash nature and any deferrals or accruals of past or future operating cash
receipts or payments.
Cash flows arising from
transactions in a foreign currency are recorded in the EDF's reporting currency
(euro), by applying to the foreign currency amount the exchange rate between
the euro and the foreign currency at the date of the cash flow.
4.2      OPERATING ACTIVITIES
The EDF cash flow
statement only shows cash flows from operating activities as the EDF does not
have investment or financing activities. The objective of the operating
activities is to participate in the achievement of policy targeted outcomes. 
5.         CONTINGENT ASSETS AND
LIABILITIES AND OTHER DISCLOSURES

5.1      CONTINGENT ASSETS 
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Performance guarantees || 13 || 171 || 120 || 304 || 325 
 Retention guarantees || 6 || 107 || 74 || 188 || 197 
 Contingent assets relating to legal cases || - || - || - || - || 1 
 TOTAL || 19 || 279 || 194 || 492 || 523 
5.1.1 Performance
guarantees 
Performance guarantees
are sometimes requested to ensure that beneficiaries of EDF funding meet the
obligations of their contracts with the EDF.
The decrease of EUR 21
million in performance guarantees is the difference between the  guarantees
released and new guarantees received. Most of the guarantees relased were under
the 9th EDF, and the new guarantees were also mainly received under the 9th
EDF.
5.1.2 Retention
guarantees
Retention guarantees
concern only works contracts. Typically, 10% of the interim payments to
beneficiaries are withheld to ensure that the contractor fulfils his/her
obligations. These withheld amounts are reflected as amounts payable. Subject
to the approval of the contracting authority, the contractor may instead submit
a retention guarantee which replaces the amounts withheld on interim payments.
These received guarantees are disclosed as contingent assets.
The decrease of EUR 9
million in retention guarantees is a difference between the  guarantees
released and new guarantees received. Most of the guarantees released were under
the 9th EDF and  the new guarantees were also mainly received under the 9th
EDF. 
5.2      OTHER DISCLOSURES 

5.2.1
Budgetary commitments not yet expensed 
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2012 || TOTAL 31.12.2011 
 Outstanding budgetary commitments not yet paid || 103 || 938 || 4 601 || 5 642 || 5 594 
 Related amounts included in the economic outturn account || (22) || (382) || (310) || (714) || (646) 
 TOTAL || 81 || 557 || 4 291 || 4 928 || 4 948 
Outstanding budgetary commitments
represent open commitments for which payments and/or decommitments have not yet
been made. This is a normal consequence of the existence of multiannual
programmes. At 31 December 2012 the outstanding budgetary commitments totalled
EUR 5 642 million. The amount disclosed as a future commitment to be funded is
this outstanding budgetary commitment less related amounts that have been
included as expenses in the 2012 economic outturn account, giving a total of
EUR 4 928 million.

6.         FINANCIAL
RISK MANAGEMENT
The following disclosures with
regard to the financial risk management of the European Development Fund relate
to the treasury operations carried out by the European Commission on behalf of
the European Development Fund in order to implement its resources.

6.1      RISK
MANAGEMENT POLICIES AND HEDGING ACTIVITIES
The rules and principles for the
management of the EDF's treasury operations are laid down in Council Regulation
215/2008 on the Financial Regulation applicable to the 10th EDF, and in the
Internal Agreement.
As a result of the above
regulation, the following main principles apply:
–       The EDF contributions
are paid by Member States in special accounts opened with the bank of issue of
each Member State or the financial institution designated by it. The amounts of
the contributions shall remain in those special accounts until the payments of
EDF need to be made.
–       EDF contributions are
paid by Member States in EUR, while the EDF's payments are denominated in EUR
and in other currencies, including less well-known ones.
–       Bank accounts opened by
the Commission on behalf of the EDF may not be overdrawn.
In addition to the special
accounts, other bank accounts are opened by the Commission on behalf of the
EDF, with financial institutions (central banks and commercial banks), for the
purpose of executing payments and receiving receipts other than the Member
State contributions to the budget according to art. 44 of the Council
Regulation 215/2008 (see 6.4 below). 
All commercial banks where accounts
other than the "special accounts" mentioned above have been opened
for the EDF, are selected by the Commission by call for tenders. 
Treasury and payment operations are
highly automated and rely on modern information systems. Specific procedures
are applied to guarantee system security and to ensure segregation of duties in
line with the Financial Regulation, the Commission’s internal control
standards, and audit principles.
A written set of guidelines and
procedures regulate the management of the treasury and payment operations with
the objective of limiting operational and financial risk and ensuring an adequate level of
control. They cover the different areas of operation, and compliance with the
guidelines and procedures is checked regularly.
6.2      MARKET
RISK

6.2.1   Currency risk
All contributions are held in EUR,
and other currencies are purchased only when they are needed for the execution
of payments. As a result the EDF's treasury operations are not exposed to
currency risk.

6.2.2   Interest
rate risk
The EDF does not borrow monies and
as a consequence it is not exposed to interest rate risk.
It however earns interest on
balances it holds on its different banks accounts. The Commission, on behalf of
the EDF, has therefore put in place measures to ensure that interest earned
regularly reflect market interest rates as well as their possible fluctuation. 
Overnight balances held on
commercial bank accounts are remunerated on a daily basis. The remuneration of
balances on such accounts is based on variable market rates to which a
contractual margin (positive or negative) is applied. For most of the accounts
the interest calculation is linked to the EONIA (Euro Over Night Index
Average), and is adjusted to reflect any fluctuations of this rate. For some
other accounts the interest calculation is linked to the ECB marginal rate (the
one used for the ECB refinancing operations). As a result no risk is taken by
the EDF that its balances be remunerated at rates lower than market rates.
6.3      CREDIT RISK (COUNTERPARTY
RISK)
Most of the EDF's treasury
resources are kept, in accordance with Council Regulation 215/2008, in the
"special accounts" opened by Member States for the payment of their
contributions. The majority of such accounts are held with Member States'
treasuries or national central banks. These institutions carry the lowest
counterparty risk for the EDF (exposure is with its Member States).
For the part of the EDF's treasury
resources kept with commercial banks in order to cover the execution of
payments, replenishment of these accounts is executed on a just-in-time basis
and is automatically managed by the Commission treasury's cash management
system. Minimum cash levels, proportional to the average amount of daily
payments made from it, are kept on each account. As a consequence the amounts
kept overnight on these accounts remain constantly at low levels which ensure
the EDF's risk exposure is limited.
In addition, specific guidelines
are applied for the selection of commercial banks in order to further minimise
counterparty risk to which the EDF is exposed.
All commercial banks are selected
by call for tenders. The minimum short-term credit rating required for
admission to the tendering procedures is Moody's P-1 or equivalent (S&P A-1
or Fitch F1). A lower level may be required in specific and duly justified
circumstances.

6.4      LIQUIDITY
RISK
Budget principles applied to the
EDF ensure that overall cash resources for the budgetary period are always
sufficient for the execution of all related payments. Indeed the total Member
States' contributions equal the overall amount of payment appropriations for
the relevant budgetary period.
Member States contributions to EDF,
however, are paid in three instalments per year, while payments are subject to
certain seasonality.
In order to ensure that treasury
resources are always sufficient to cover the payments to be executed in any
given month, information on the treasury situation is regularly exchanged
between the Commission' treasury and the relevant spending departments in order
to ensure that payments executed in any given period do not exceed the
available treasury resources.
In addition to the above, in the
context of the EDF's daily treasury operations, automated cash management tools
ensure that sufficient liquidity is available on each of the EDF's bank accounts,
on a daily basis.

7.         RELATED
PARTY DISCLOSURES
No related party transactions
requiring separate disclosure under this heading have been identified.

8.         EVENTS
AFTER THE BALANCE SHEET DATE
At the date of transmission of
these accounts, no material issues had come to the attention of the Accounting
Officer of the EDF or were reported to him that would require separate
disclosure under this section. The annual accounts and related notes were
prepared using the most recently available information and this is reflected in
the information presented above.
9.         RECONCILIATION ECONOMIC
OUTTURN - BUDGET OUTTURN
The economic outturn of the year is
calculated on the basis of accrual accounting principles. The budget outturn is
however based on cash accounting rules. As both are the result of the same
underlying transactions, it is a useful control to ensure that they are
reconcilable. The table below shows this reconciliation, highlighting the key
reconciling amounts, split between revenue and expenditure items.       

   ||   || EUR millions 
   || 2012 || 2011 
   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR || (3 023) || (2 700) 
   ||   ||   
 REVENUE ||   ||   
  Entitlements not affecting the budget outturn || (47) || (52) 
 Entitlements established in the current year but not yet collected || (8) || (3) 
 Entitlements established in previous years and collected in the current year || 14 || 10 
 Net effect of pre-financing || 62 || 46 
 Net accrued revenue || (40) || (13) 
   ||   ||   
 EXPENDITURE ||   ||   
 Expenses of the current year not yet paid || 38 || 98 
 Expenses of previous years paid in the current year || (101) || (249) 
 Payment cancellations || 7 || 17 
 Net effect of pre-financing || (316) || (346) 
 Net accrued expenses || 204 || 317 
   ||   ||   
 BUDGET OUTTURN OF THE YEAR || (3 209) || (2 874) 
9.1 Reconciling items – Revenue
The budgetary revenue of a
financial year corresponds to the revenue collected from entitlements
established in the course of the year and amounts collected from entitlements
established in previous years. 
The entitlements not affecting
the budget outturn are recorded in the economic outturn but from a
budgetary perspective cannot be considered as revenues as the cashed amount is
transferred to reserves and cannot be recommitted without a Council decision. 
The entitlements established in
the current year but not yet collected are to be deducted from the economic
outturn for reconciliation purposes as they do not form part of budgetary
revenue. On the contrary, the entitlements established in previous years and
collected in the current year must be added to the economic outturn for
reconciliation purposes.
The net effect of pre-financing
is the clearing of the recovered pre-financing amounts. This is a cash receipt
which has no impact on the economic outturn.
The net accrued revenue
mainly consists of accruals made for year-end cut-off purposes. Only the net
effect, i.e. the accrued revenue of the current year less the reversal of
accrued revenue of the previous year, is taken into consideration.
9.2 Reconciling items –
Expenditure
Expenses of the current year not
yet paid are
to be added for reconciliation purposes as they are included in the economic
outturn but do not form part of budgetary expenditure. On the contrary, the expenses
of previous years paid in the current year must be deducted from the
economic outturn for reconciliation purposes as they are part of the current
year's budgetary expenditure but have either no effect on the economic outturn
or they decrease the expenses in case of corrections.
The cash receipts from payment
cancellations do not affect the economic outturn whereas they impact the
budget outturn.
The net effect of pre-financing
is the combination of the new pre-financing amounts paid in the current year
(recognised as budgetary expenditure of the year) and the clearing of
pre-financing paid in the current year or previous years through the acceptance
of eligible costs. The latter represents an expense in accrual terms but not in
the budgetary accounts since the payment of the initial pre-financing had
already been considered as a budgetary expenditure at the time of its payment.
The net accrued expenses
mainly consist of accruals made for year-end cut-off purposes, i.e. eligible
expenses incurred by beneficiaries of EDF funds but not yet reported to the
EDF. Only the net effect, i.e. the accrued expenses of the current year less
the reversal of accrued expenses of the previous year, is taken into
consideration.            

2.           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, provides 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 EUR 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
the 6th EDF was closed in 2006 and the 7th EDF was closed in 2008, the annual
accounts no longer contain implementation tables for these EDFs. However,
implementation of the transferred balances can be found in the 9th EDF.
·      
As
in past years, to ensure transparency in the presentation of the accounts for
2012, the tables below set out separately for the 8th EDF the part used for
Lomé Convention programming and the part used for programming under the Cotonou
Agreement. Regarding the latter, entry in the accounts and the presentation of
accounts 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).
·      
Under
Point 4 of Annex Ib (Multiannual financial framework for the period 2008 to
2013) to the ACP-EC Partnership Agreement, the remaining balances and the
amounts decommitted under the Funds between 31.12.2007 and the entry into force
of the 10th EDF were transferred to the 9th EDF to ensure that the EU
administration could do its work and to cover the costs of ongoing projects
until the 10th EDF comes into force.
·      
Council
Decision 2010/406/EU decided to use for the benefit of Sudan an amount of
EUR150 million from the funds de-committed from projects under the 9th
and previous EDF's for the purpose of addressing the needs of the most
vulnerable population. This amount has been allocated during 2011.
·      
Council
Decision 2011/315/EU decided to use for the benefit of South Sudan an amount of
EUR 200 million from the funds de-committed from projects under the 9th
and previous EDF's to be used to support the implementation of the Three Year
Southern Sudan Development plan. This amount has been allocated during 2012.
10th 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 Cotonou Agreement was amended by the
agreement signed by the same States in Luxembourg on 25 June 2005.
The EU Council Decision of 27
November 2001 (2001/822/EC) on the association of the overseas countries and
territories (OCT) with the European Union entered into force on 2 December
2001. This Decision was amended on 19 March 2007 (Decision 2007/249/EC).
The Internal Agreement on the
financing of Community aid under the multiannual financial framework for the
period 2008-2013 in accordance with the revised Cotonou Agreement, adopted by
the Representatives of the Governments of the Member States of the European
Community on 17 July 2006, entered into force on 1 July 2008.
Under the Cotonou Agreement, the
second period (2008-2013) of Community aid to the ACP States and OCTs is funded
by the 10th EDF to the tune of EUR 22 682 million, of which:
·      
EUR
21 966 million is allocated to the ACP countries in accordance with the
multiannual financial framework set out in Annex Ib to the revised Cotonou
Agreement, of which EUR 20 466 million  is managed by the European Commission;
·      
EUR
286 million is allocated to the OCTs in accordance with Annex IIAa of the
revised Council Decision on the association of the OCTs with the European
Community, of which 256 million is managed by the European Commission;
·      
EUR
430 million is for the Commission to finance the costs arising from the
programming and implementation of 10th EDF resources, in accordance with
Article 6 of the Internal Agreement.
Since the date of entry into force
of the 10th EDF these amounts are supplemented by decommitments from previous
EDF's, interest income and unused cash balances resulting from the system to
guarantee the stabilisation of export earnings from primary agricultural
products (STABEX) under the Funds prior to the 9th EDF. All funds are managed
in accordance with their specific rules as foreseen in the revised Cotonou
Agreement and the Internal Agreement. 

Of the above mentioned 10th EDF
allocations,
the European Commission manages the initial amount of EUR 21 152 million as
follows
–       EUR 15 300 million for
the national indicative programmes, comprising:
·      
EUR
13 500 million for the A envelope, of which EUR 13 345 million have been 
opened. In addition, the A envelope was increased from transfer of reserves by
EUR 341 million, increased by EUR 91 million from closure of stabex
de-commitments and decreased by EUR 33 million following transfer to regional
allocations (MTR region-PALOP). As a result the total available funds amount to
EUR 13 744 million in opened allocations and EUR 155 million still to be
opened.
·      
EUR
1 800 million for the B envelopes, fully opened. In addition the B enveloppe
was increased from reserves by EUR 148 million are open, bringing the total
open funds to EUR 1 948 million.
–       EUR 1 783 million for
the regional indicative programmes, together with a transfer of EUR 33 million
from Enveloppe A and a transfer to reserves of EUR 19 million, resulting in EUR
1 797 million of open allocations;
–       EUR 2 700 million in
Intra-ACP allocations, all are open, and together with a transfer of EUR 195
million from reserves, a total of EUR 2 895 million of allocations are open;
–       EUR 683 million as a
reserve, of which EUR 664 million has been transferred leaving a balance of EUR
19 million.
–       EUR 430 million for
implementation costs, all open
–       EUR 256 million OCT
allocations of which mainly:
·      
A
enveloppe funds for EUR 195 million, of which EUR 140 million are open
·      
B
enveloppe funds of EUR 15 million, of which EUR 7 million are open
·      
Regional
allocations funds of EUR 40 million, all are open
·      
Studies/technical
assistance funds of EUR 6 million, all open
- 10th EDF
non-mobilisable performance reserve
Since the 10th EDF came into force
on 1 July 2008, the remaining balances and the amounts decommitted from projects
under the 9th and previous EDFs are transferred to the performance
reserve of the 10th EDF, with the exception of Stabex funds and 9th
EDF administrative envelope. This reserve may be used under the conditions set
out in Article 1(4) of the Internal Agreement on the 10th EDF. 
Please find below the detail of
this reserve as at 31.12.2012 (EUR million):
 Total funds transferred to the 10th EDF non-mobilisable reserve: || 815 
 minus funds transferred to the 9th EDF in favour of  Sudan, Council Decision 2010/406/EU of 12.07.2010 || -150 
 minus funds transferred to the 9th EDF in favour of South Sudan, Council Decision 2011/315/EU of 23.05.2011 || -200 
 Total available in the reserve (ACP+OCT): || 465 
- 10th EDF Stabex reserve
Following the closure of Stabex
accounts, unused/decommitted funds are transferred to the 10th EDF
Stabex A Envelope reserve (10th EDF Internal Agreement Art. 1(4))
and then to the national indicative programmes of the countries concerned. 
The
situation at 31.12.2012 of the reserve is as follows (EUR million):
 Country concerned || Reserve A Envelope STABEX 
 Ivory Coast || 11.43 
 Cape Verde || 0.01 
 Guinea Bissau || 0.30 
 Sierra Leone || 0.22 
 Senegal || 0.90 
 Total || 12.86 
- 10th EDF Co-financings
Under the 10th EDF, transfer
agreements for co-financings from Member States were signed for  EUR 116
million and commitment appropriations were opened for a total amount of EUR 99
million, while payment appropriations were opened for the cashed amounts
totalling EUR 93 million. 
The
situation of co-financing appropriations at 31.12.2012 is shown in the table
below (EUR million): 
   || Commitments appropriations || Payment appropriations 
 Co-financing - A Envelope || 84 || 78 
 Co-financing - Intra ACP || 12 || 12 
 Co-financing – Administrative expenses || 3 || 3 
   || 99 || 93 
The
following tables, concerning the amounts decided, contracted and paid, show net
figures. 
The
tables presenting the situation by country and by instrument are annexed.
2.1         ALLOCATIONS
2.2         AGGREGATED
ACCOUNTS

2.3.       OTHER
MANAGEMENT INFORMATION
Italian
co-financing (1985)
The italian co-fnancing, in force
since 1985, and still open in 2011 as the  '4th rehabilitation programme –
Somalia' which was still in progress could finally be closed in 2012. Balances
available at closure have been repaid to Italy.
PART II - EDF ANNUAL
ACCOUNTS: FINANCIAL STATEMENTS OF THE INVESTMENT FACILITY
 EUROPEAN INVESTMENT BANK || CA/463/13 
   || 14 March 2013 
   || Document 13/072 
   ||   
   ||   
 BOARD OF DIRECTORS 
 Investment Facility 
 financial statements 
 as at 31 december 2012 
   ||   ||   
   || -        Statement of financial position -        Statement of comprehensive income -        Statement of changes in contributors’ resources -        Statement of cash flows -        Notes to the financial statements   ||   
 ORG.: E ||   
3.         FINANCIAL STATEMENTS OF THE
INVESTMENT FACILITY
3.1         STATEMENT OF FINANCIAL
POSITION AS AT 31 DECEMBER 2012
(In EUR’000)
   || Notes || 31.12.2012 || 31.12.2011 
   ||   ||   ||   
 ASSETS ||   ||   ||   
 Cash and cash equivalents || 5 || 466 568 || 452 279 
 Derivative financial instruments || 6 || 115 || 434 
 Loans and receivables || 7 || 1 146 280 || 1 033 160 
 Available-for-sale financial assets || 8 || 333 001 || 251 660 
 Amounts receivable from contributors || 9/15 || 87 310 || 87 310 
 Held-to-maturity financial assets || 10 || 99 029 || - 
 Other assets || 11 || 224 || 416 
   ||   ||   ||   
 Total Assets ||   || 2 132 527 || 1 825 259 
   ||   ||   ||   
   ||   ||   ||   
 LIABILITIES AND CONTRIBUTORS' RESOURCES ||   ||   ||   
   ||   ||   ||   
 LIABILITIES ||   ||   ||   
 Derivative financial instruments || 6 || 7 035 || 12 702 
 Deferred income || 12 || 37 808 || 33 003 
 Amounts owed to third parties || 13 || 312 086 || 329 660 
 Other liabilities || 14 || 1 153 || 1 113 
   ||   ||   ||   
 Total Liabilities ||   || 358 082 || 376 478 
   ||   ||   ||   
 CONTRIBUTORS' RESOURCES ||   ||   ||   
 Member States Contribution called || 15 || 1 561 309 || 1 281 309 
 Fair value reserve ||   || 68 434 || 41 750 
 Retained earnings ||   || 144 702 || 125 722 
   ||   ||   ||   
 Total Contributors' resources ||   || 1 774 445 || 1 448 781 
   ||   ||   ||   
 Total Liabilities and Contributors' resources ||   || 2 132 527 || 1 825 259 
The accompanying notes form an
integral part of these financial statements.
3.2         STATEMENT OF
COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2012
(In EUR’000)
   || Notes || From 01.01.2012 || From 01.01.2011 ||   
   || to 31.12.2012 || to 31.12.2011 ||   
   ||   ||   ||   ||   
 Interest and similar income || 17 || 67 503 || 59 561 ||   
 Interest and similar expense  || 17 || -1 114 || -940 ||   
   ||   ||   ||   ||   
 Net interest and similar income ||   || 66 389 || 58 621 ||   
   ||   ||   ||   ||   
 Fee and commission income || 18 || 1 934 || 2 149 ||   
 Fee and commission expenses || 18 || -292 || -144 ||   
   ||   ||   ||   ||   
 Net fee and commission income ||   || 1 642  || 2 005 ||   
   ||   ||   ||   ||   
 Fair value change of derivative financial instruments ||   || 5 348 || -7 534 ||   
 Net realised gains on available-for-sale financial assets || 19 || 1 045 || 17 228 ||   
 Net foreign exchange loss/gain ||   || -10 575 || 8 376 ||   
   ||   ||   ||   ||   
 Net result on financial operations ||   || -4 182  || 18 070 ||   
   ||   ||   ||   ||   
 Change in impairment on loans and receivables, net of reversal || 7 || 597 || 27 452 ||   
 Impairment on available-for-sale financial assets || 8 || -8 927 || -6 888 ||   
 Impairment on other assets || 20 || -337 || - ||   
 General administrative expenses || 21 || -36 202 || -38 006 ||   
   ||   ||   ||   ||   
 Profit for the year ||   || 18 980  || 61 254 ||   
   ||   ||   ||   ||   
 Other comprehensive income: ||   ||   ||   ||   
 Available-for-sale financial assets – Fair value reserve  ||   ||   ||   ||   
 1. Net change in fair value of available-for-sale financial assets  || 8 || 18 551 || 20 574 ||   
 2. Net amount transferred to profit or loss || 8 || 8 133 || -3 394 ||   
 Total available-for-sale financial assets ||   || 26 684 || 17 180 ||   
   ||   ||   ||   ||   
 Total other comprehensive income ||   || 26 684 || 17 180 ||   
   ||   ||   ||   ||   
 Total comprehensive income for the year ||   || 45 664 || 78 434 ||   
The accompanying notes form an
integral part of these financial statements.
3.3         STATEMENT OF CHANGES
IN CONTRIBUTORS’ RESOURCES FOR THE YEAR ENDED 31 DECEMBER 2012
(In EUR’000)
   || Contribution called || Fair Value Reserve || Retained earnings || Total 
 At 1 January 2012                                                                     Notes || 1 281 309 || 41 750 || 125 722 || 1 448 781 
   ||   ||   ||   ||   
 Member States contribution called during the year                         15 || 280 000 || - || - || 280 000 
   ||   ||   ||   ||   
 Profit for the year 2012 || - || - || 18 980 || 18 980 
   ||   ||   ||   ||   
 Total other comprehensive income for the year || - || 26 684 || - || 26 684 
   ||   ||   ||   ||   
 Changes in contributors’ resources || 280 000 || 26 684 || 18 980 || 325 664 
   ||   ||   ||   ||   
 At 31 December 2012 || 1 561 309 || 68 434 || 144 702 || 1 774 445 
   ||   ||   ||   ||   
   || Contribution called || Fair Value Reserve || Retained earnings || Total 
 At 1 January 2011                                                                     Notes || 1 131 309 || 24 570 || 64 468 || 1 220 347 
   ||   ||   ||   ||   
 Member States contribution called during the year                         15 || 150 000 || - || - || 150 000 
   ||   ||   ||   ||   
 Profit for the year 2011 || - || - || 61 254 || 61 254 
   ||   ||   ||   ||   
 Total other comprehensive income for the year || - || 17 180 || - || 17 180 
   ||   ||   ||   ||   
 Changes in contributors’ resources || 150 000 || 17 180 || 61 254 || 228 434 
   ||   ||   ||   ||   
 At 31 December 2011 || 1 281 309 || 41 750 || 125 722 || 1 448 781 
   ||   ||   ||   ||   
   ||   ||   ||   ||   
The accompanying notes form an
integral part of these financial statements.
3.4         STATEMENT OF CASH
FLOWS FOR THE YEAR ENDED 31 DECEMBER 2012
(In EUR’000)
   || Notes || From 01.01.2012 to 31.12.2012 || From 01.01.2011 to 31.12.2011 
 OPERATING ACTIVITIES ||   ||   ||   
 Profit for the financial year ||   || 18 980 || 61 254 
 Adjustments ||   ||   ||   
 Impairment on available-for-sale financial assets  ||   || 8 927 || 3 172 
 Net change in impairment on loans and receivables   ||   || -597 || -27 452 
 Interest capitalised on loans and receivables || 7 || -9 622 || -10 512 
 Change in accrued interest and amortised cost on loans and receivables ||   || -1 407 || -2 801 
 Change in accrued interest and amortised cost on held-to-maturity financial assets ||   || -751 || - 
 Increase in deferred income ||   || 4 805 || 3 424 
 Effect of exchange rate changes on loans  ||   || 16 044 || -15 337 
 Effect of exchange rate changes on available-for-sale financial assets ||   || -1 204 || 34 
 Profit on operating activities before changes in operating assets and liabilities ||   || 35 175 || 11 782 
   ||   ||   ||   
 Loan disbursements || 7 || -233 018 || -237 040 
 Repayments of loans || 7 || 115 480 || 104 410 
 Fair value changes on derivatives ||   || -5 348 || 7 534 
 Increase in held-to-maturity financial assets ||   || -98 278 || - 
 Increase in available-for-sale financial assets || 8 || -81 981 || -67 829 
 Sale of available-for-sale financial assets  || 8 || 19 601 || 24 971 
 Decrease in other assets ||   || 192 || 2 756 
 Increase in other liabilities ||   || 40 || 173 
 Increase in amounts payable to the European Investment Bank ||   || 6 876 || 4 144 
   ||   ||   ||   
 Net cash flows from operating activities ||   || -241 261 || -149 099 
   ||   ||   ||   
 FINANCING ACTIVITIES ||   ||   ||   
 Contribution received from Member States ||   || 236 345 || 136 345 
 Amounts received from Member States with regard to interest subsidies ||   || 43 655 || 76 345 
 Amounts paid on behalf of Member States with regard to interest subsidies    ||   || -24 450 || -22 899 
   ||   ||   ||   
 Net cash flows from financing activities ||   || 255 550 || 189 791 
   ||   ||   ||   
 Net increase in cash and cash equivalents ||   || 14 289 || 40 692 
 Cash and cash equivalents at beginning of financial year ||   || 452 279 || 411 587 
 Cash and cash equivalents at the end of the financial year ||   || 466 568 || 452 279 
   ||   ||   ||   
 Cash and cash equivalents are composed of: ||   ||   ||   
 Cash in hand ||   || 10 588 || 3 127 
 Term deposits ||   || 455 980 || 449 152 
   ||   || 466 568 || 452 279 
   ||   ||   ||   
 Supplementary disclosures of operating cash flows ||   || 2012 || 2011 
 Interest received ||   || 64 490 || 57 391 
 Interest paid ||   || -1 137 || -1 162 
 Dividends received ||   || 975 || 974 
The accompanying notes form an
integral part of these financial statements.

3.5         NOTES TO THE FINANCIAL
STATEMENTS AS AT 31 DECEMBER 2012
1          
General information
The Investment Facility (“the Facility” or “IF”) 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, revised on 25 June 2005 and 23 June
2010.
The Facility is not a separate legal entity and the European
Investment Bank (“EIB”) manages the contributions on behalf of the Member
States (“Donors”) in accordance with the terms of the Agreement.
Financing under the Agreement is provided from EU Member
States’ budgets and is disbursed according to financial protocols defined for
successive five- to six-year periods. Within the framework of the Agreement and
following the entry into force of a second financial protocol on 1 July 2008
(covering the period 2008-2013), referred to as the 10th European
Development Fund (“EDF”), the European Investment Bank (“EIB” or “the Bank”) is
entrusted with the management of:
-         
the
Facility, a EUR 3 185.5 million  risk-bearing revolving fund geared to
fostering private sector investment in ACP countries of which EUR 48.5 million
are allocated to Overseas Countries and territories (“OCT countries”);
-         
grants
for the financing of interest rate subsidies worth EUR 400 million for ACP
countries and EUR 1.5 million for OCT countries. Up to 10% of these subsidies
can be used to fund project-related technical assistance.
The present financial statements cover the period from 1
January 2012 to 31 December 2012.
 
On a proposal from the Management Committee of EIB, the
Board of Directors of EIB adopted the Financial Statements on 14 March 2013, and authorised their submission to the Board of
Governors for approval by 14 May 2013.
2          
Significant accounting policies
2.1       Basis of preparation – Statement of
compliance
The Facility’s financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the
European Union. 
2.2       Significant accounting judgments and
estimates
The preparation of financial statements requires the use of
accounting estimates. It also requires the European Investment Bank’s
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 hereafter.
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 statement of financial
position 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 derivatives with maturity of more than
three months.
§           
Impairment
losses on loans and receivables
The Facility reviews its
problem loans and receivables at each reporting date to assess whether an
allowance for impairment should be recorded in the statement of comprehensive
income. In particular, judgment by the European Investment Bank’s 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 Facility may also book 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.
In principle, a loan is
considered as impaired when payment of interest and principal are past due by
90 days or more and, at the same time, the European Investment Bank’s
Management considers that there is an objective indication of impairment.
§           
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 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 assets
The 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 what is
“significant” or “prolonged” requires judgment. The Facility treats
“significant” generally as 30% or more and “prolonged” greater than 12 months.
In addition, the Facility evaluates other factors, including normal volatility
in share price for quoted equities and the future cash flows and the discount
factors for unquoted equities.
2.3       Change in accounting policies
The accounting policies
adopted are consistent with those of the previous financial year. The Facility
has not adopted any new or amended IFRS standard during the year.
Standards issued but not
yet effective
A number of new standards,
amendments to standards and interpretations are effective for annual periods
beginning after 1 January 2012, and have not been applied in
preparing these financial statements. 
IAS 1 Presentation of items of Other comprehensive income
The amendments to IAS 1 change the grouping of items
presented in Other comprehensive income. Items that would be
reclassified to profit and loss at a future point in time would be presented
separately from items that will never be reclassified. The standard is
effective for periods beginning on or after 1 July 2012 with early adoption
permitted.
IFRS 9 Financial instruments
The first step in a three part project by the IASB to
replace IAS 39 Financial instruments, this standard redefines the
categories of financial assets and liabilities and their accounting treatment.
The standard remains a ‘work in progress’ and it will eventually replace IAS39
in its entirety. The current effective date of the standard is 1 January 2015.
IFRS 9 is not yet endorsed by the European Union. The Facility does not plan to
adopt this standard early and the extent of the impact has not yet been
determined.
The following standard was issued in 2011, with an effective
date of 1 January 2013 with early adoption permitted. The impact of the
adoption of this standard on the Facility’s financial statements has not yet
been determined.
IFRS 13 Fair value measurement
This standard defines fair value, sets out a framework for
measuring fair value and requires disclosures about fair value measurements.
2.4       Summary of significant accounting policies
The
statement of financial position represents
assets and liabilities in decreasing order of liquidity and does not
distinguish between current and non-current items.
2.4.1          
Foreign currency
translation
The Facility uses the Euro (EUR) for presenting its
financial statements, which is also the functional currency. Except as
otherwise indicated, financial information presented in EUR has been rounded to
the nearest thousand.
Foreign currency transactions are
translated, at the exchange rate prevailing on the date of the transaction. 
Monetary assets and liabilities denominated
in currencies other than 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 statement of comprehensive income.
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 unrealised foreign exchange differences on unsettled foreign
currency monetary assets and liabilities, are recognised in the statement of
comprehensive income.
The elements of the statement of
comprehensive income are translated into Euro on the basis of the exchange
rates prevailing at the end of each month.
2.4.2          
Cash and cash equivalents
The Facility defines cash and cash equivalents as current
accounts, short-term deposits or commercial papers with original maturities of
three months or less.
2.4.3          
Financial assets other than derivatives
Financial assets are accounted for using the settlement date
basis.
§           
Held-to-maturity
financial assets
Held-to-maturity financial assets comprise quoted bonds with
the intention of holding them to maturity.
Those bonds are initially recorded at their fair value plus
any directly attributable transaction cost. The difference between entry price
and redemption value is amortised in accordance with the effective interest
method over the remaining life of the bond.
The Facility assesses at each balance sheet date whether
there is any objective evidence that a financial asset or a group of financial
assets 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 (or 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. Impairment loss is
recognised in profit and loss and the amount of the loss is measured as the
difference between the carrying value and the present value of estimated future
cash flows discounted at the instrument’s original effective interest rate.
§           
Loans
Loans originated by the Facility are recognised in the
assets of the 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 amortised cost, using the effective yield method, less
any provision for impairment or uncollectability.
§           
Available-for-sale
financial assets
Available-for-sale financial assets 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 and investments in venture capital funds.
After initial measurement, available-for-sale financial
assets are subsequently carried at fair value. Note the following details for
the fair value measurement of equity investments, which cannot be derived from
active markets:
a.       
Venture
capital funds
The fair value of each venture capital fund is based on the
latest available Net Asset Value (NAV), reported by the fund, if calculated
based on international valuation guidelines recognised to be in line with IFRS
(for example: the International Private Equity and Venture Capital Valuation
guidelines, IPEV Guidelines, as published by the European Venture Capital
Association). The Facility may however decide to adjust the NAV reported by the
fund if there are issues that may affect the valuation.
b.       
Direct
equity investments
The fair value of the investment is 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.
Unrealised gains or losses on venture capital funds and
direct equity investments are reported in contributors’ resources until such
investments are sold, collected or disposed of, or until such investments are
determined to be impaired. If an available-for-sale investment is determined to
be impaired, the cumulative unrealised gain or loss previously recognised in
equity is included in the statement of comprehensive income.
For unquoted investment, the fair value is determined by
applying recognised valuation techniques (for example discounted cash flows or
multiple). These investments are accounted for at cost when the fair value
cannot be reliably measured. To be noted that in the first 2 years of the
investments, they are recognised at cost.
The participations acquired by the Facility typically
represent investments in private equity or venture capital funds. According to
industry practice, such investments are generally investments jointly
subscribed by a number of investors, none of whom is in a position to
individually influence the daily operations and the investment activity of such
fund. As a consequence, any membership by an investor in a governing body of
such fund does not in principle entitle such investor to influence the
day-to-day operations of the fund. In addition, individual investors in a
private equity or a venture capital fund do not determine policies of a fund
such as distribution policies on dividends or other distributions. Such
decisions are typically taken by the management of a fund on the basis of the
shareholders agreement governing the rights and obligations of the management
and all shareholders of the fund. The shareholders’ agreement also generally
prevents individual investors from bilaterally executing material transactions
with the fund, interchanging managerial personnel or obtaining privileged
access to essential technical information. The Facility’s investments are
executed in line with the above stated industry practice, ensuring that the
Facility neither controls nor exercises any form of significant influence
within the meaning of IAS 27 and IAS 28 over any of these investments,
including those investments in which the Facility holds over 20 % of the voting
rights.
§           
Guarantees
At initial recognition, the financial guarantees are
recognised at fair value corresponding to the Net Present Value (NPV) of
expected premium inflows. This calculation is performed at the starting date of
each transaction and is recognised on balance sheet as “Financial guarantees”
under “other assets” and “other liabilities”. 
Subsequent to initial recognition, the Facility’s
liabilities under such guarantees are measured at the higher of: 
-         
the
best estimate of expenditure required to settle any financial obligation
arising as a result of the guarantee, which is estimated based on all relevant
factors and information existing at the date of the statement of financial
position.
-         
the
amount initially recognised less cumulative amortisation. The amortisation of
the amount initially recognised is done using the actuarial method.
Any increase or decrease in the liability relating to
financial guarantees is taken to the statement of comprehensive income under
“fee and commission income”. 
The Facility’s assets under such guarantee are subsequently
amortized using the actuarial method and tested for impairment.
In addition, when a guarantee agreement is signed, it is
presented as a contingent liability for the Facility and when the guarantee is
engaged, as a commitment for the Facility.
2.4.4          
Impairment of financial assets
The 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 into bankruptcy or other financial reorganisation 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 amortised 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
recognised in the statement of comprehensive income. 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 recognised, the previously
recognised impairment loss is increased or reduced by adjusting the allowance
account.
The Facility conducts the credit risk assessments based on
each individual operation and does not consider a collective impairment.
For the available-for-sale financial assets, the 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 recognised in the statement of
comprehensive income) is removed from contributors’ resources and recognised in
the statement of comprehensive income. Impairment losses on available-for-sale
financial assets are not reversed through the statement of comprehensive
income; increases in their fair value after impairment are recognised directly
in contributors’ resources.
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 statement of comprehensive income
over the life of the asset, and any adjustments required in respect of a
reassessment of the initial impairment.
2.4.5          
Derivative financial
instruments
Derivatives include cross currency swaps, cross currency
interest rate swaps and currency forwards.
In the normal course of its activity, the Facility may enter
into swap contracts with a view to hedge specific lending operations or into
currency forward contract with a view to hedge its currency positions,
denominated in actively traded currencies other than the Euro, in order to
offset any gain or loss caused by foreign exchange rate fluctuations.
The Facility does not use any of the hedge possibilities
under IAS 39. All derivatives are measured at fair value through the profit or
loss and are reported as derivative financial instruments. 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”.
Derivatives are initially recognised using the trade date
basis.
2.4.6          
Contributions
Contributions from Member States are recognised as
receivables in the statement of financial position on the date of the Council
Decision fixing the financial contribution to be paid by the Member States to
the Facility.
The Member States contributions meet the following
conditions and are consequently classified as equity:
-         
as
defined in the contribution agreement, they entitle the Member States to decide
on the utilisation of the Facility’s net assets in the events of the Facility’s
liquidation;
-         
they are
in the class of instruments that is subordinate to all other classes of
instruments;
-         
all
financial instruments in the class of instruments that is subordinate to all
other classes of instruments have identical features;
-         
the
instrument does not include any features that would require classification as a
liability; and
-         
the
total expected cash flows attributable to the instrument over its life are
based substantially on the profit or loss, the change in the recognised net
assets or the change in the fair value of the recognised and unrecognised net
assets of the Facility over the life of the instrument.
2.4.7          
Interest income on loans
Interest on loans originated by the Facility is recorded in
the statement of comprehensive income (‘Interest and similar income’) and on
the statement of financial position (‘Loans 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
recognised using the original effective interest rate applied to the new
carrying amount.
2.4.8          
Interest subsidies and
technical assistance
As part of its activity, the Facility manages interest
subsidies and technical assistance 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 Facility’s
contributors’ resources but is classified as amounts owed to third parties. The
Facility operates the disbursement to the final beneficiaries and then
decreases the amounts owed to third parties.
When amounts contributed with regard to interest subsidies
and technical assistance are not fully granted, they are reclassified as
contribution to the Facility.
2.4.9          
Interest income on cash
and cash equivalents
Interest income on cash and cash equivalents is recognised
in the statement of comprehensive income of the Facility on an accrual basis.
2.4.10       
Fees, commissions and
dividends
Fees received in respect of services provided over a period
of time are recognised as income as the services are provided. Commitment fees
are deferred and recognised in income using the effective interest method over
the period from disbursement to repayment of the related loan.
Dividends relating to available-for-sale financial assets
are recognised when received.
2.4.11       
Taxation
The
Protocol on the Privileges and Immunities of the European Communities, appended
to the treaty on the European Union and the treaty of the functioning of the
European Union, stipulates that the assets, revenues and other property of the
Institutions of the Union are exempt from all direct taxes.
3          
Risk Management
This note presents information about the Facility’s
exposure to and its management and control of credit and financial risks, in
particular the primary risks associated with its use of financial instruments.
These are:
-         
credit
risk – the risk of loss resulting from client or counterparty default and
arising on credit exposure in all forms, including settlement risk;
-         
liquidity
risk – the risk that an entity will encounter difficulty in meeting obligations
associated with financial liabilities that are settled by delivering cash or
another financial asset;
-         
market
risk – exposure to observable market variables such as interest rates, foreign
exchange rates and equity market prices.
3.1       Risk management organisation
The European Investment Bank adapts its risk management on
an ongoing basis.
The Risk Management of EIB independently identifies,
assesses, monitors and reports the credit and equity price risks to which the
Facility is exposed. Within a framework whereby the segregation of duties is
preserved, the Risk Management is independent of the Front Offices. The
Director General of Risk Management reports for risk matters, to the designated
Vice-President of the European Investment Bank. The designated Vice-President
meets regularly with the Audit Committee to discuss topics relating to risks.
He is also responsible for overseeing risk reporting to the European Investment
Bank’s Management Committee and the Board of Directors.
3.2       Credit risk
Credit risk is the potential loss that could result from
client or counterparty default and arising on credit exposure in all forms,
including settlement.
3.2.1.        
Credit risk policy
In carrying out the credit analysis
on loan counterparts, EIB assesses credit risk with a view to quantify and
pricing it. The Facility has developed an Internal Rating Methodology (IRM) for
corporates or financial institutions to determine the Internal Ratings of its
main borrower/guarantor beneficiary counterparts. The methodology is based on a
system of scoring sheets tailored for each major credit counterpart type (e.g.
Corporates, Banks, Public Sector Entities, etc). Taking into consideration
both, best banking practice and the principles set under the Basel
International Capital Accord (Basel II), all counterparts that are material to
the credit profile of a specific transaction are classified into internal
rating categories using the IRM for the specific counterpart type. Each
counterpart is initially assigned to an Internal Rating reflecting the
counterpart’s long-term foreign currency rating (or local currency equivalent
when required) following an in-depth analysis of the counterpart’s risk profile
and its country risk operating context.
The credit assessment of project
finance and other structured limited recourse operations is not subject to IRM
and is using credit risk tools relevant for the sector, focused mainly on cash
flow availability and debt service capacity. These tools include the analysis
of projects’ contractual framework, counterpart’s analysis and cash flow
simulations. Similarly to corporates and financial institutions, each project
is assigned to an internal risk rating and an expected loss.
All non-sovereign (or non sovereign
guaranteed/assimilated) operations are subject to specific transaction-level
and counterpart size limits. The maximum nominal amount of each transaction is
capped by a limit which depends on the transaction expected loss. Counterpart
limits are applied to consolidated exposures. Such limits typically reflect the
size of counterparts own funds as well as their total external long-term
funding.
In order to mitigate credit risk the Facility uses various
credit enhancements which are:
-         
project
related securities (e.g., pledge over the shares; pledge over the assets;
assignment of rights; pledge over the accounts); or/and
-         
guarantees,
generally provided by the sponsor of the financed project (e.g., completion
guarantees, first demand guarantees).
In addition, the Facility uses seldom credit enhancements
which are not immediately correlated to the project risk, like collaterals or
bank guarantees.
The Facility does not use any credit derivatives to mitigate
credit risk.
3.2.2.        
Maximum
exposure to credit risk without taking into account any collateral and other
credit enhancements
The following table shows the maximum exposure to credit
risk for the components of the statement of financial position, including
derivatives. The maximum exposure is shown gross, before the effect of
mitigation through the use of collateral.
 Maximum exposure (in EUR’000) || 31.12.2012 || 31.12.2011 
 ASSETS ||   ||   
 Cash and cash equivalents || 466 568 || 452 279 
 Derivative financial instruments || 115 || 434 
 Loans and receivables || 1 146 280 || 1 033 160 
 Amounts receivable from contributors || 87 310 || 87 310 
 Held-to-maturity financial assets || 99 029 || - 
 Other assets || 224 || 416 
 Total Assets || 1 799 526 || 1 573 599 
   ||   ||   
 OFF BALANCE SHEET ||   ||   
 Contingent liabilities ||   ||   
 - Guarantees undrawn || 20 000 || 20 000 
 Commitments ||   ||   
 - Undisbursed loans || 749 044 || 701 092 
 - Guarantees drawn || 6 224 || 7 909 
 Total Off balance sheet || 775 268 || 729 001 
   ||   ||   
 Total credit exposure || 2 574 794 || 2 302 600 
3.2.3.        
Credit
risk on loans and receivables
3.2.3.1       
Credit
risk measurement for loans and receivables
Each and every lending transaction
undertaken by the Facility benefits from a comprehensive risk assessment and
quantification of expected loss estimates that are reflected in a Loan Grading
(“LG”). LGs are established according to generally accepted criteria, based on
the quality of the borrower, the maturity of the loan, the guarantee and, where
appropriate, the guarantor.
The loan grading (LG) system
comprises the methodologies, processes, databases and IT systems supporting the
assessment of credit risk in lending operations and the quantification of
expected loss estimates. It summarises a large amount of information with the
purpose of offering a relative ranking of loans’ credit risks. LGs reflect the
present value of the estimated level of the “expected loss”, this being the
product of the probability of default of the main obligors, the exposure at
risk and the loss severity in the case of default. LGs are used for the
following purposes:
-         
as an
aid to a finer and more quantitative assessment of lending risks;
-         
as
help in distributing monitoring efforts;
-         
as a
description of the loan’s portfolio quality at any given date;
-         
as one
input in risk-pricing decisions based on the expected loss.
The following factors enter into the
determination of an LG:
i)          
The borrower’s
creditworthiness: RM independently reviews borrowers and assesses their
creditworthiness based on internal methodologies and external data. In line
with the Basel II Advanced Approach chosen, the Bank has developed an internal
rating methodology (IRM) to determine the internal ratings of borrowers and
guarantors. This is based on a set of scoring sheets specific to defined
counterparty types.
ii)         
The default correlation:
it quantifies the chances of simultaneous financial difficulties arising for
both the borrower and the guarantor. The higher the correlation between the
borrower and the guarantor’s default probabilities, the lower the value of the
guarantee and therefore the lower the LG.
iii)        
The value of guarantee
instruments and of securities: this value is assessed on the basis of the
combination of the issuer’s creditworthiness and the type of instrument used.
iv)       
The contractual
framework: a sound contractual framework will add to the loan’s quality and
enhance its internal grading.
v)        
The loan’s duration: all
else being equal, the longer the loan, the higher the risk of incurring
difficulties in the servicing of the loan.
A loan’s expected loss is computed by
combining the five elements discussed above. Depending on the level of this
loss, a loan is assigned to one of the following LG classes listed below:
A     Prime quality loans: there are
three sub-categories. A comprises all EU sovereign risks, i.e. loans granted to
or fully, explicitly and unconditionally guaranteed by Member States, where no
repayment difficulties are expected and for which an unexpected loss of 0% is
allocated. A+ denotes loans granted to (or guaranteed by) entities other than
Member States, with no expectation of deterioration over their duration. A-
includes those lending operations where there is some doubt about the
maintenance of their current status (for instance because of a long maturity,
or for the high volatility of the future price of an otherwise excellent
collateral), but where any downside is expected to be quite limited.
B      High quality loans: these
represent an asset class with which the bank feels comfortable, although a
minor deterioration is not ruled out in the future. B+ and B- are used to
denote the relative likelihood of the possibility of such deterioration
occurring.
C      Good quality loans: an example
could be unsecured loans to solid banks and corporates with a 7-year bullet, or
equivalent amortising, maturity at disbursement.
D      This rating class represents
the borderline between “acceptable quality” loans and those that have
experienced some difficulties. This watershed in loan grading is more precisely
determined by the sub-classifications D+ and D-. Loans rated D- require
heightened monitoring.
E      This LG category includes
loans with a risk profile greater than generally accepted. It also includes
loans which in the course of their lives have experienced severe problems and
their sliding into a situation of loss cannot be excluded. For this reason, the
loans are subject to close and high monitoring. The sub-classes E+ and E-
differentiate the intensity of this special monitoring process, with those
operations graded E- being in a position where there is a strong possibility
that debt service cannot be maintained on a timely basis and therefore some
form of debt restructuring is required, possibly leading to an impairment loss.
F      F (fail) denotes loans
representing unacceptable risks. F- graded loans can only arise out of
outstanding transactions that have experienced, after signature, unforeseen,
exceptional and dramatic adverse circumstances. All operations where there is a
loss of principal to the Facility are graded F and a specific provision is
applied.
Generally, loans internally graded D- or below are placed
on the Watch List. However, if a loan was originally approved with a risk
profile of D- or weaker, it will only be placed on the Watch List as a result
of a material credit event causing a further deterioration of its LG
classification.
The table in section 3.2.3.3 shows the credit quality
analysis of the Facility’s loan portfolio based on the various LG classes as
described above.
3.2.3.2       
Analysis
of lending credit risk exposure
The following table shows the maximum exposure to credit
risk on loans signed and disbursed by nature of borrower taking into account
guarantees provided by guarantors:
 At 31.12.2012 In EUR’000 || Guaranteed || Other credit enhancements || Not guaranteed || Total 
 Banks || 12 630 || 136 695 || 207 582 || 356 907 
 Corporates || 20 077 || 78 171 || 478 358 || 576 606 
 Public institutions || 30 462 || - || 18 || 30 480 
 States || - ||  5 819 || 176 468 || 182 287 
 Total disbursed || 63 169 || 220 686 || 862 425 || 1 146 280 
 Signed not disbursed ||  14 091 || 142 963 || 591 990 || 749 044 
 At 31.12.2011 In EUR’000 || Guaranteed || Other credit enhancements || Not guaranteed || Total 
 Banks || 13 026 || 97 994 || 197 245 || 308 265 
 Corporates || 15 699 || 55 601 || 475 012 || 546 312 
 Public institutions || 37 670 || - || - || 37 670 
 States ||  - || 6 214 || 134 699 || 140 913 
 Total disbursed || 66 395 || 159 809 || 806 956 || 1 033 160 
 Signed not disbursed || 10 434 || 173 484 || 517 174 || 701 092 
The Facility’s loans events affecting its borrowers and
guarantors are continually monitored by Ops B, the EIB’s operational
directorate for operations outside the EU. In particular, contractual rights
are assessed on a case by case basis in case of a rating deterioration and/or
contractual default. Mitigation measures are pursued, whenever necessary in
accordance with the credit risk guidelines. Also, in case of renewals of bank
guarantees received for its loans, it is ensured that these are replaced or
action is taken in a timely manner.
As an immediate response to the developments in the
financial markets that have taken place since September 2008, the Facility has
acted to reinforce its arrangements for the monitoring and management of risks.
To this end, in April 2011, Ops B has created an autonomous monitoring division
reporting directly to the Director General, tasked with the responsibility of
performing loan financial and contractual monitoring. Its purpose is to promote
the exchange of information among departments and to suggest reporting and
operational management procedures for use at times of financial crisis with the
objective of rapid reaction if required. 
3.2.3.3       
Credit
quality analysis per type of borrower
The tables below show the credit quality analysis of the
Facility’s loan portfolio as at 31 December 2012 and 31 December 2011 by the
Loan Grading applications, based on the exposure signed (disbursed and
undisbursed).
 At 31.12.2012 In EUR’000 ||   ||  High Grade ||  Standard Grade ||  Min. Accept. Risk ||  High Risk ||  No grading ||  Total 
   ||   || A to B- || C || D+ || D- and below ||   ||   
 Borrower || Banks || 50 000 || 24 342 || 21 864 || 529 325 || 337 014 || 962 545 
 Corporates || 7 466 || 8 006 || - || 605 672 || - || 621 144 
 Public institutions || - || - || - || 70 480 || - || 70 480 
 States || - || - || - || 241 155 || - || 241 155 
 Total ||   || 57 466 || 32 348 || 21 864 || 1 446 632 || 337 014 || 1 895 324 
 At 31.12.2011 In EUR’000 ||   ||  High Grade ||  Standard Grade ||  Min. Accept. Risk ||  High Risk ||  No grading ||  Total 
   ||   || A to B- || C || D+ ||  D- and below ||   ||   
 Borrower || Banks || 50 002 || 9 674 || 39 966 || 356 629 || 351 476 || 807 747 
 Corporates || 3 917 || 5 279 || - || 635 825 || - || 645 021 
 Public institutions || - || - || - || 38 761 || - || 38 761 
 States || - || - || - || 242 723 || - || 242 723 
 Total ||   || 53 919 || 14 953 || 39 966 || 1 273 938 || 351 476 || 1 734 252 
3.2.3.4       
Risk
concentrations of loans and receivables
3.2.3.4.1           
Geographical
analysis
Based on the country of borrower, the Facility’s loan
portfolio can be analysed by the following geographical regions (in EUR‘000):
 Country of borrower || 31.12.2012 || 31.12.2011 
 Regional – ACP || 84 051 || 99 543 
 Uganda || 140 833 || 117 035 
 Regional – West Africa || 33 856 || 14 161 
 Mozambique || 137 745 || 126 666 
 Mauritania || 65 670 || 43 427 
 Ethiopia || 81 666 || 84 266 
 Dominican Republic || 67 991 || 66 118 
 Kenya || 131 566 || 65 611 
 Cameroon || 72 525 || 60 706 
 Zambia || 18 772 || 43 294 
 Congo (Democratic Republic) || 28 415 || 8 980 
 Nigeria || 14 383 || 28 691 
 Regional – Pacific || 17 767 || 20 603 
 Regional – Central Africa || 10 431 || 12 109 
 Jamaica || 71 027 || 59 317 
 Madagascar || - || 1 253 
 Mauritius || 11 302 || 12 732 
 Ghana || 5 642 || 7 812 
 Angola || 10 009 || 13 598 
 Trinidad and Tobago || 1 483 || 1 002 
 Burkina Faso || 10 727 || 12 588 
 Malawi || 4 950 || 5 833 
 New Caledonia || 4 198 || 4 673 
 Rwanda || 9 641 || 11 197 
 Niger || 4 146 || 3 950 
 French Polynesia || 2 631 || 3 131 
 Botswana || - || - 
 Senegal || 5 837 || 10 329 
 Lesotho || 3 827 || 3 902 
 Vanuatu || 3 639 || 3 917 
 Belize || 13 || 103 
 Grenada || 2 477 || 2 698 
 Gabon || 1 011 || 1 509 
 Togo || 52 644 || 53 224 
 Cape Verde || 27 073 || 28 405 
 Djibouti || 762 || 777 
 Haiti || 4 654 || - 
 Saint Lucia || 2 916 || - 
 Total || 1 146 280 ||  1 033 160 
3.2.3.4.2           
Industry
sector analysis
The table below analyses the Facility’s loan portfolio by
industry sector of the borrower. Operations which are first disbursed to a
financial intermediary before being disbursed to the final beneficiary are
reported under global loans (in EUR’000):
 Industry sector of borrower || 31.12.2012 || 31.12.2011 
 Global loans and agency agreements || 252 662 || 218 912 
 Airlines and aircraft manufacture || 13 || 103 
 Airports and air traffic management systems || 30 480 || 31 052 
 Basic material and mining || 168 911 || 135 573 
 Chemicals, plastics and pharmaceuticals || - || 20 400 
 Drinking water, water treatment || 38 697 || 33 247 
 Electricity, coal and others || 409 090 || 358 745 
 Food chain || - || 1 244 
 Investment goods/consumer durables || 3 827 || 3 902 
 Marine transport and other || 5 819 || 6 214 
 Materials processing, construction || 24 154 || 29 025 
 Paper chain || 4 747 || 4 840 
 Roads and motorways || 73 921 || 62 856 
 Telecommunications || 18 427 || 24 963 
 Tertiary and other || 115 532 || 102 084 
 Total || 1 146 280 ||  1 033 160 
3.2.3.5       
Arrears
on loans
Amounts in arrears are identified, monitored and reported
according to a set of procedures called “Guidelines for the Monitoring of late
payments”.
The monitoring and reporting of amounts in arrears is
generally managed by the Late Payment Unit (“LPU”) of EIB’s Transaction
Management and Restructuring Directorate. LPU prepares a monthly report on
unpaid loan instalments of the Facility, including a table comparing arrears of
more than eight days from month to month. The monthly report gives a detailed
indication of the steps already taken or to be taken by country, loan and
instalment. 
In addition, a monthly report on loans overdue by more than
90 days is prepared and sent to the European Commission. Twice a year the EIB
management committee receives a summary table on arrears for loans overdue by
more than 30 days and 90 days as well as a report including comparative
information on the annual and semi-annual evolution of arrears.
The arrears of payments on concerned loans can be analysed
as follows (in EUR’000):
   ||   Notes || Loans and receivables 31.12.2012 || Loans and receivables 31.12.2011 
 Carrying amount ||   || 1 146 280 || 1 033 160 
   ||   ||   ||   
 Individually impaired ||   ||   ||   
 Gross amount ||   || 110 767 || 112 662 
 Allowance for impairment || 7 || -45 144 || -48 816 
 Carrying amount individually impaired ||   || 65 623 || 63 846 
   ||   ||   ||   
 Collectively impaired ||   ||   ||   
 Gross amount ||   || - || - 
 Allowance for impairment ||   || - || - 
 Carrying amount collectively impaired ||   || - || - 
   ||   ||   ||   
 Past due but not impaired ||   ||   ||   
   ||   ||   ||   
 Past due comprises ||   ||   ||   
 30-60 days ||   || 12 ||  8 
 60-90 days ||   || - ||  472 
 90-180 days ||   || - ||  13 
 more 180 days ||   || - ||  33 
 Carrying amount past due but not impaired ||   || 12 ||  526 
   ||   ||   ||   
 Carrying amount neither past due nor impaired ||   || 1 080 645 || 968 788 
   ||   ||   ||   
 Total carrying amount loans and receivables ||   || 1 146 280 || 1 033 160 
   ||   ||   ||   || 
3.2.4.        
Credit
risk on cash and cash equivalents
Available funds are invested in accordance with the
Facility’s schedule of contractual disbursement obligations. As of 31.12.2012,
investments were only in the form of bank deposits and other short-term
financial instruments. Investments in medium and long-term bonds could also be
eligible, according to the investment guidelines and depending on liquidity
requirements.
The minimum short term rating required for authorised banks
or issuers is P-1/A-1/F1 (Moody’s, S&P, Fitch). In case of different
ratings being granted by more than one credit rating agency, the lowest rating
governs. The maximum authorized limit for each authorised bank or issuer is
currently EUR 50 000 000 (fifty million euro).
The deposits are executed with authorised entities with a
maximum maturity of three months from trading date and up to the credit
exposure limit.
As at 31 December 2012 and 31 December 2011 all bank
deposits and short term commercial papers held by the Facility had a minimum
rating of P-1 at settlement day according to Moody’s. The rating of P-2 as at
31 December 2011 is due to the downgrade of one counterparty on 21 December 2011.
The following table shows the situation of bank deposits
including accrued interest (in EUR’000):
 Minimum short-term rating (Moody’s term) ||      Minimum long-      term rating      (Moody’s term) || 31.12.2012 || 31.12.2011 
 P-1 ||      Aa1 || 43 400 || 10% || - || - 
 P-1 ||      Aa2 || - || - || 28 622 || 6% 
 P-1 ||      Aa3 || 130 901 || 29% || 105 547 || 24% 
 P-1 ||      A1 || 83 500 || 18% || 117 603 || 26% 
 P-1 ||      A2 || 198 179 || 43% || 179 938 || 40% 
 P-2 ||      A3 || - || - || 17 441 || 4% 
 Total ||       || 455 980 || 100% || 449 151 || 100% 
3.2.5.        
Credit
risk on derivatives
3.2.5.1       
Credit
risk policy of derivatives
The credit risk with respect to derivatives is represented
by the loss which a given party would incur where the other counterparty to the
deal would be unable to honour its contractual obligations. The credit risk
associated with derivatives varies according to a number of factors (such as
interest and exchange rates) and generally corresponds to only a small portion
of their notional value.
In the normal course of its activity, the Facility may
enter into swap contracts with a view to hedge specific lending operations or
into currency forward contracts, with a view to hedge its currency positions
denominated in actively traded currencies other than the Euro. All the swaps
are executed by the European Investment Bank with an external counterpart. The
swaps are disciplined by the same Master Swap Agreements and Credit Support
Annexes signed between the European Investment Bank and its external
counterparts. 
3.2.5.2       
Credit
risk measurement for derivatives
All the swaps executed by the European Investment Bank that
are related to the Facility are treated within the same contractual framework
and methodologies applied for the derivatives negotiated by the European
Investment Bank for its own purposes. In particular, eligibility of swap
counterparts is determined by the European Investment Bank based on the same
eligibility conditions applied for its general swap purposes.
The European Investment Bank measures the credit risk
exposure related to swaps and derivatives transactions using the Net Market
Exposure (NME) and Potential Future Exposure (PFE) approach for reporting and
limit monitoring. The NME and the PFE fully include the derivatives related to
the Investment Facility.
The following table shows the
maturities of swap contracts (including cross currency swaps, cross currency
interest rate swaps and excluding short-term currency swaps), sub-divided
according to their notional amount and fair value:
 Swap contracts at 31.12.2012 || less than || 1 year || 5 years || more than || Total 2012 
 In EUR’000 || 1 year || to 5 years || to 10 years || to 10 years ||   
 Notional amount || 1 480 || 9 833 || 15 253 || - || 26 566 
 Fair Value (i.e. net discounted value) || 71 || -528 || -3 529 || - || -3 986 
 Swap contracts at 31.12.2011 || less than || 1 year || 5 years || more than || Total 2011 
 In EUR’000 || 1 year || to 5 years || to 10 years || to 10 years ||   
 Notional amount || 7 042 || 43 593 || 16 899 || - || 67 534 
 Fair Value (i.e. net discounted value) || -674 || -1 331 || -3 869 || - || -5 874 
The Facility enters into short-term currency swap contracts
in order to hedge currency risk on loan disbursements in currencies different
from EUR. Short-term currency swaps have a maturity of maximum three months and
are regularly rolled-over. The notional amount of short-term currency swaps
stood at EUR 652 million at 31 December 2012 against EUR 585 million at 31
December 2011. The fair value of short-term currency swaps amounts EUR -2.9
million at 31 December 2012 against EUR -6.4 million at 31 December 2011.
The Facility enters into interest rate swap contracts in order
to hedge the interest rate risk on loans disbursed. As at 31 December 2012
there is one interest rate swap outstanding with a notional amount of EUR 19.6
million (2011: nil) and a fair value of EUR 0.03 million (2011: nil).
3.2.6.        
Credit
risk on held-to-maturity financial assets
The following table shows the
situation of the held-to-maturity portfolio entirely composed of bond positions
with remaining maturities of less than three months.
 Minimum short-term rating (Moody’s term) ||      Minimum long-      term rating      (Moody’s term) || 31.12.2012 || 31.12.2011 
 P-2 ||      Baa2 || 50 143 || 51% || - || - 
 P-3 ||      Baa3 || 48 886 || 49% || - || - 
 Total ||       || 99 029 ||  100% || - || - 
3.3       Liquidity risk
3.3.1           
Liquidity risk
management
Liquidity risk represents the risk that an entity will
encounter difficulty in meeting obligations associated with financial
liabilities that are settled by delivering cash or another financial asset.
The IF is primarily funded by annual contributions from
Member States (9th and 10th EDF resources) and secondly
by reflows stemming from IF operations. Each year, the EC, taking into account
EIB’s forecasts concerning the management and operations of the IF, shall
establish and communicate to the Council by 15 October a statement of the
commitments, payments and the annual amount of the calls for contributions
(interest subsidies included) to be made in the current and the following
budget years.
In order to calculate Member States annual contributions,
disbursement pattern of the existing and pipelined portfolio is analysed and
followed up throughout the year. Special events, such as early reimbursements,
sales of shares or default cases are taken into account to correct annual
liquidity requirements. To further minimize the liquidity risk, the Facility
maintains a liquidity reserve sufficient to cover at any point in time
forecasted disbursements, as communicated periodically by OPS B.
The treasury assets of the accounts opened in the name of
the IF are managed by the Bank’s Treasury Department in accordance with the
principle of segregation of duties between the Front and Back Office.
Settlement operations related to the investment of these assets are under the
responsibility of the Planning and Settlement of Operations Department.
Further, according to the principle of segregation of
duties, the authorisation of counterparts and limits for treasury investments,
as well as the monitoring of such limits, are the responsibility of the Bank’s
Risk Management Directorate. 
3.3.2           
Liquidity risk
measurement
The tables in this section analyse the financial
liabilities of the Facility by maturity on the basis of the period remaining
between the balance sheet date and the contractual maturity date (based on
undiscounted cash flows).
The Facility holds commitments in the form of undisbursed
portions of the credit under signed loan agreements, of undisbursed portions of
signed capital subscription/investment agreements, of loan guarantees granted,
or of committed interest rate subsidies and technical assistance (“TA”). The
disbursement time pattern is subject to a significant degree of uncertainty.
Loans under the IF have a disbursement deadline. However disbursements are made
at times and in amounts reflecting the progress of underlying investment
projects and funding transactions in a relatively volatile operating
environment. Capital investments become due when and as soon as equity fund
managers issue valid calls for capital, reflecting the progress in their
investment activities. The drawdown period is usually of 3 years, with frequent
prolongation by one or two years. Some disbursement commitments usually survive
the end of the drawdown period until full disposal of the fund’s underlying
investments, as the fund’s liquidity may be insufficient from time to time to
meet payment obligations arising in respect of fees or other expenses. Loan
guarantees are not subject to specific disbursement commitments unless a
guarantee is called by its beneficiary. The amount of guarantee outstanding is
reduced alongside the repayment schedule of each guaranteed loan.
On this background, the breakdown of maturities shown below
has been estimated, considering the contractual disbursement period in each
case, using forecasts established in line with standard methods for the
liquidity planning of the Facility. As far as disbursement commitments under
technical assistance contracts are concerned, these are usually of a short term
nature (below one year). “Maturity undefined” was chosen in the following
cases: commitments from drawn and undrawn guarantees; committed but un-disbursed
loans for which the contractual disbursement period has expired and extension
is awaited; interest rate subsidies for which funds had been called from Member
States to cover future requirements on a lump basis.
The liquidity profile of derivative financial liabilities
represents the contractual undiscounted cash flows of swap contracts including
cross currency swaps (CCS), cross currency interest rate swaps (CCIRS), short
term currency swaps and interest rate swaps.
 Maturity profile of non-derivative financial liabilities ||  3 months or less || More than 3 months to 1 year || More than 1 year to 5 years || More than 5 years || Maturity Undefined || Gross nominal outflow 
 In EUR’000 as at 31.12.2012 
 Others (issued guarantees, drawn guarantees) || - || - || - || - || 26 224 || 26 224 
 Outflows for committed but un-disbursed loans || 16 500 || 287 657 || 243 020 || - || 201 867 || 749 044 
 Outflows for committed investment funds and share subscription || - || 26 806 || 54 958 || 7 319 || 127 987 || 217 070 
 Outflows for committed interest subsidies || 255 || 101 495 || 79 206 || - || 23 599 || 204 555 
 Outflows for committed TA || 2 000 || 8 511 || 13 109 || - || - || 23 620 
 Total || 18 755 || 424 469 || 390 293 || 7 319 || 379 677 || 1 220 513 
 Maturity profile of non-derivative financial liabilities ||  3 months or less || More than 3 months to 1 year || More than 1 year to 5 years || More than 5 years || Maturity Undefined || Gross nominal outflow 
 In EUR’000 as at 31.12.2011 
 Others (issued guarantees, drawn guarantees) || - || - || - || - || 27 909 || 27 909 
 Outflows for committed but un-disbursed loans || 2 295 || 257 127 || 274 573 || 54 000 || 113 097 || 701 092 
 Outflows for committed investment funds and share subscription || 2 035 || 38 424 || 38 010 || 7 666 || 178 432 || 264 567 
 Outflows for committed interest subsidies || 1 445 || 31 100 || 139 211 || - || 16 211 || 187 967 
 Outflows for committed TA || 4 564 || 16 693 || - || - || - || 21 257 
 Total || 10 339 || 343 344 || 451 794 || 61 666 || 335 649 || 1 202 792 
 Maturity profile of derivative financial liabilities In EUR’000 as at 31.12.2012 ||  3 months or less || More than 3 months to 1 year || More than 1 year to 5 years || More than 5 years || Gross nominal inflow/outflow 
 CCS and CCIRS – Inflows || 1 238 || 7 364 || 14 498 || 5 350 || 28 450 
 CCS and CCIRS – Outflows || -1 286 || -8 428 || -17 218 || -5 894 || -32 826 
 Short term currency swaps – Inflows || 649 000 || - || - || - || 649 000 
 Short term currency swaps – Outflows || -652 451 || - || - || - || -652 451 
 Interest Rate Swaps – Inflows || 65 || 511 || 3 274 || 2 117 || 5 967 
 Interest Rate Swaps - Outflows || - || -753 || -3 537 || -1 577 || -5 867 
 Total || -3 434 || -1 306 || -2 983 || -4 || -7 727 
     ||   ||   ||   ||   ||   
 Maturity profile of derivative financial liabilities In EUR’000 as at 31.12.2011 ||  3 months or less || More than 3 months to 1 year || More than 1 year to 5 years || More than 5 years || Gross nominal inflow/outflow 
 CCS and CCIRS – Inflows || 9 873 || 14 365 || 19 533 || 7 430 || 51 201 
 CCS and CCIRS – Outflows || -10 091 || -17 527 || -24 420 || -9 015 || -61 053 
 Short term currency swaps – Inflows || 585 000 || - || - || - || 585 000 
 Short term currency swaps – Outflows || -591 909 || - || - || - || -591 909 
 Total || -7 127 || -3 162 || -4 887 || -1 585 || -16 761 
3.4       Market risk
Market risk represents the risk that changes in market
prices, such as interest rates, equity prices, foreign exchange rates and
credit spreads (not relating to changes in the issuer’s credit standing) will
affect an entity’s income or the value of its holdings in financial
instruments.
3.4.1.        
Interest
rate risk
Interest rate risk is the volatility in the economic value
of, or in the income derived from, the Facility’s positions due to adverse
movements in market yields or the term structure of interest rates. Exposure to
interest rate risk occurs when there are differences in repricing and maturity
characteristics of the different assets and liabilities.
The Facility measures the sensitivity of its loan portfolio
and related micro hedging swaps to interest rate risk via a Basis Point Value
(BPV) calculation.
The BPV measures the gain or loss in the net present value of
the relevant portfolio, due to a 1 basis point (0.01%) increase in interest
rates tenors ranging within a specified time bucket “money market – up to one
year”, “very short – 2 to 3 years”, “short – 4 to 6 years”, “long – 12 to 20
years” or “extra long – more than 21 years”.
To obtain the net present value of the loans, the Facility
uses the EUR funding curve (EUR swap curve + EIB funding spread) for cash flows
denominated in EUR and foreign currencies other than USD and the USD funding
curve for cash flows denominated in USD. To obtain the net present value of the
micro hedging swaps, the facility uses the EUR swap curve for cash flows
denominated in EUR and the USD swap curve for cash flows denominated in USD.
As shown in the following table the net present value of the
loan portfolio including related micro-hedging swaps as at 31.12.2012 would
decrease by EUR 341k (as at 31.12.2011: decrease by EUR 239k) if interest rates
rise simultaneously by 1 basis point.
 Basis point value In EUR’000 || Money Market || Very Short || Short || Medium || Long || Extra Long || Total 
 As at 31.12.2012 || 1 year || 2 to 3 years || 4 to 6 years || 7 to 11 years || 12 to-20 years || 21 years ||   
 Total sensitivity of loans and micro hedging swaps || -25 || -47 || -90 || -117 || -62 || - || -341 
 Basis point value In EUR’000 || Money Market || Very Short || Short || Medium || Long || Extra Long || Total 
 As at 31.12.2011 || 1 year || 2 to 3 years || 4 to 6 years || 7 to 11 years || 12 to-20 years || 21 years ||   
 Total sensitivity of loans and micro hedging swaps || -20 || -28 || -60 || -78 || -53 || - || -239 
3.4.2.        
Foreign
exchange risk
Foreign exchange (“FX”) risk is the volatility in the
economic value of, or in the income derived from, the Facility’s positions due
to adverse movements of foreign exchange rates.
The Facility is exposed to foreign exchange risk whenever
there is a currency mismatch between its assets and liabilities. Foreign
exchange risk also comprises the effect of unexpected and unfavourable changes
in the value of future cash flows caused by currency movements.
3.4.2.1         
Foreign
exchange risk and treasury assets
The IF’s treasury assets are denominated either in EUR or
USD.
FX risk is hedged by means of FX spot or forward
transactions, FX swaps or cross-currency swaps. The EIB’s Treasury Department
can, where deemed necessary and appropriate, use any other instrument, in line
with the Bank’s policy, that provide protection against market risks incurred
in connection with the IF’s financial activities.
3.4.2.2         
Foreign
exchange risk and operations financed or guaranteed by the IF
Member States’ IF contributions are received in EUR. The
operations financed or guaranteed by the IF as well as Interest Rate Subsidies
can be denominated in EUR, USD or any other authorized currency.
A foreign exchange risk exposure (against the EUR reference
currency) arises whenever transactions denominated in currencies other than the
EUR are left un-hedged. The IF’s foreign exchange risk hedging guidelines are
set out below. 
3.4.2.2.1.           
Hedging
of operations denominated in currencies other than EUR or USD
-         
IF
loans disbursed in currencies other than EUR and USD shall be hedged through
cross-currency swap contracts with the same financial profile as the underlying
Loan, provided that a swap market is operational.
-         
For
disbursements under IF Operations made in a currency other than EUR and USD,
and for which a long-term hedging operation is not undertaken, the Treasury
Department shall enter into a foreign exchange transaction two business days
prior to the disbursement. The conversion rate applied to IF Operations shall
correspond to the market exchange rate obtained by the Treasury Department.
Similarly, for repayments received in a currency other than EUR and USD, the
Treasury Department shall undertake an FX operation where necessary to convert
the currencies received.
-         
Uncalled
guarantees are not subject to any FX hedging. Guarantee calls in currencies
other than EUR and USD will be hedged.
-         
Operations
in currencies other than EUR and USD for which no FX hedging operation can be
undertaken by the Treasury Department shall be left un-hedged. This also
includes (synthetic) operations denominated in local currency but settled in
EUR or USD. The IF shall remain exposed to the FX risk incurred thereby.
3.4.2.2.2.           
Hedging
of operations denominated in USD
-         
The
total outstanding amount of all IF Operations (except uncalled Guarantees)
denominated in USD shall be hedged by means of USD/EUR FX swaps, rolled over on
a periodic basis. At the beginning of each period, the cash flows to be
received or paid in USD during the next period shall be estimated on the basis
of planned or expected reflows/disbursements. Subsequently, the maturing FX
swaps shall be rolled over, their amount being adjusted to cover at least the
USD liquidity needs projected over the next period. 
-         
A
periodic calculation of the overall USD exposure as per the accounting records
will be undertaken to adjust, if necessary, the hedge on the next FX swap roll.
-         
If
deemed operationally convenient by the Treasury Department, cross-currency
swaps can also be used to hedge specific USD Loans.
-         
Within
a roll-over period, unexpected USD liquidity deficits shall be covered by means
of ad hoc FX swap operations while liquidity surpluses shall either be invested
in treasury assets or swapped into EUR.
-         
At all
times, the total outstanding un-hedged amount from USD transactions (in nominal
terms) shall never exceed USD 5 000 000 (five million US
dollars). This limit shall be adjusted annually. In case of breach of this
limit, the Treasury Department shall bring the exposure back within limits by
means of an FX operation.
3.4.2.3         
Foreign
exchange position
The following tables show the Facility’s foreign exchange
position (in EUR’000):
  At 31 December 2012 || EUR || USD || KES || ACP/OCT Currencies || Total 
   ||   ||   ||   ||   ||   
 ASSETS ||   ||   ||   ||   ||   
 Cash and cash equivalents || 424 647 || 41 921 || - || - || 466 568 
 Derivative financial instruments || 1 064 || -949 || - || - || 115 
 Loans and receivables || 513 231 || 508 412 || 60 348 || 64 289 || 1 146 280 
 Available-for-sale financial assets || 66 509 || 259 694 || - || 6 798 || 333 001 
 Amounts receivable from contributors || 87 310 || - || - || - || 87 310 
 Held-to-maturity financial assets || 99 029 || - || - || - || 99 029 
 Other assets || - || - || - || 224 || 224 
 Total assets || 1 191 790 || 809 078 || 60 348 || 71 311 || 2 132 527 
   ||   ||   ||   ||   ||   
 LIABILITIES AND CONTRIBUTORS’ RESOURCES ||   ||   ||   ||   ||   
 Liabilities ||   ||   ||   ||   ||   
 Derivative financial instruments || -675 814 || 682 849 || - || - || 7 035 
 Deferred income || 37 560 || 248 || - || - || 37 808 
 Amounts owed to third parties || 312 040 || 46 || - || - || 312 086 
 Other liabilities || 905 || 19 || 14 || 215 || 1 153 
 Total liabilities || -325 309 || 683 162 || 14 || 215 || 358 082 
 Contributors’ resources ||   ||   ||   ||   ||   
 Member States Contribution called || 1 561 309 || - || - || - || 1 561 309 
 Fair value reserve || 5 366 || 59 144 || - || 3 924 || 68 434 
 Retained earnings || 144 702 || - || - || - || 144 702 
 Total Contributors’ resources || 1 711 377 || 59 144 || - || 3 924 || 1 774 445 
 Total liabilities and Contributors’ resources || 1 386 068 || 742 306 || 14 || 4 139 || 2 132 527 
 Currency position as at 31 December 2012 || -194 278 || 66 772 || 60 334 || 67 172 || - 
   ||   ||   ||   ||   ||   
 As at 31 December 2012: ||   ||   ||   ||   ||   
 COMMITMENTS ||   ||   ||   ||   ||   
 Un-disbursed loans and available-for-sale financial assets || 794 475 || 171 639 || - || - || 966 114 
 Guarantees drawn || - || - || - || 6 224 || 6 224 
 Interest subsidies and TA || 204 555 || - || - || - || 204 555 
   ||   ||   ||   ||   ||   
 CONTINGENT LIABILITIES ||   ||   ||   ||   ||   
 Guarantees undrawn || 20 000 || - || - || - || 20 000 
  At 31 December 2011 || EUR || USD || CAD || ACP/OCT Currencies || Total 
   ||   ||   ||   ||   ||   
 ASSETS ||   ||   ||   ||   ||   
 Cash and cash equivalents || 416 384 || 35 895 || - || - || 452 279 
 Derivative financial instruments || 13 419 || -12 985 || - || - || 434 
 Loans and receivables || 477 340 || 501 923 || - || 53 897 || 1 033 160 
 Available-for-sale financial assets || 54 287 || 186 525 || 4 303 || 6 545 || 251 660 
 Amounts receivable from contributors || 87 310 || - || - || - || 87 310 
 Other assets || 50 || - || - || 366 || 416 
 Total assets || 1 048 790 || 711 358 || 4 303 || 60 808 || 1 825 259 
   ||   ||   ||   ||   ||   
 LIABILITIES AND CONTRIBUTORS’ RESOURCES ||   ||   ||   ||   ||   
 Liabilities ||   ||   ||   ||   ||   
 Derivative financial instruments || -641 758 || 654 460 || - || - || 12 702 
 Deferred income || 32 689 || 314 || - || - || 33 003 
 Amounts owed to third parties || 329 598 || 62 || - || - || 329 660 
 Other liabilities || 691 || 19 || - || 403 || 1 113 
 Total liabilities || -278 780 || 654  855 || - || 403 || 376 478 
 Contributors’ resources ||   ||   ||   ||   ||   
 Member States Contribution called || 1 281 309 || - || - || - || 1 281 309 
 Fair value reserve || 41 750 || - || - || - || 41 750 
 Retained earnings || 125 722 || - || - || - || 125 722 
 Total Contributors’ resources || 1 448 781 || - || - || - || 1 448 781 
 Total liabilities and Contributors’ resources || 1 170 001 || 654 855 || - || 403 || 1 825 259 
 Currency position as at 31 December 2011 || -121 211 || 56 503 || 4 303 || 60 405 || - 
   ||   ||   ||   ||   ||   
 As at 31 December 2011: ||   ||   ||   ||   ||   
 COMMITMENTS ||   ||   ||   ||   ||   
 Un-disbursed loans and available-for-sale financial assets || 761 319 || 204 340 || - || - || 965 659 
 Guarantees drawn || - || - || - || 7 909 || 7 909 
 Interest subsidies and TA || 209 223 ||   || - || - || 209 223 
 CONTINGENT LIABILITIES ||   ||   ||   ||   ||   
 Guarantees undrawn || 20 000 || - || - || - || 20 000 
3.4.2.4         
Foreign
exchange sensitivity analysis (in EUR’000)
As at the reporting date the most
significant net foreign currency exposure is the USD net exposure. As at 31
December 2012 a +/- 10 percent change in the USD conversion rate would result
in a change of contributors’ resources amounting to EUR 6 682 respectively EUR -6
682 (31 December 2011: EUR 5 650 respectively EUR -5 650).
3.4.2.5         
Conversion
rates
The following conversion rates were
used for establishing the balance sheet at 31 December 2012 and 31 December
2011:
   || 31 December 2012 || 31 December 2011 
 Non-EU currencies ||   ||   
 Dominican Republic Pesos (DOP) || 53.1220 || 49.8498 
 Fiji Dollars (FJD) || 2.3417 || 2.3630 
 Haitian Gourde (HTG) || 55.7265 || 52.1645 
 Kenya Shillings (KES) || 113.68 || 109.53 
 Mauritania Ouguiyas (MRO) || 393.99 || 372.52 
 Mauritius Rupees (MUR) || 40.19 || 37.43 
 Rwanda Francs (RWF) || 811.83 || 771.76 
 Uganda Shillings (UGX) || 3 549 || 3 205 
 United States Dollars (USD) || 1.3194 || 1.2939 
 Franc CFA Francs (XAF/XOF) || 655.957 || 655.957 
 South Africa Rand (ZAR) || 11.1727 || 10.4830 
3.4.3.        
Equity
price risk (in EUR’000)
Equity price risk is the risk that the fair values of
equities decrease as the result of changes in the levels of equity indices and
the value of individual equity investments.
The IF is exposed to equity price risk via its venture
capital investments, i.e. investments in direct equity and venture capital
funds.
Equity investments are subject to scoring. Each investment
is assessed on several criteria ranging in three main categories: management,
business plan and structure. Individual cores are then consolidated into a
single overall score assigned to the investment and summarizing its global
strength.
Equity risk exposures are also subject to limits, defined at
both individual and cumulated levels. The size of such limits depends on the
quality of the equity investments.
The value of privately held equity positions is not readily
available for the purpose of monitoring and control on a continuous basis. For
such positions, the best indications available include prices of any relevant
valuation techniques.
The effects on the Facility’s contributors’ resources (as a
result of a change in the fair value of the available-for-sale equity
portfolio) due to a 10% decrease in equity indices and the value of individual
equity investments, with all other variables held constant is EUR -33 300 as at
31 December 2012 and EUR -25 166 as at 31 December 2011.
4          
Fair values of assets and liabilities
The table below sets out a comparison by category of the
carrying amounts and fair values of the Facility’s assets and liabilities that
are carried in the financial statements (in EUR’000):
   || Carrying value 31.12.2012 || Fair Value 31.12.2012 || Carrying value 31.12.2011 || Fair Value 31.12.2011 
 Assets carried at fair value ||   ||   ||   ||   
 Available-for-sale financial assets || 333 001 || 333 001 || 251 660 || 251 660 
 Derivative financial instruments || 115 || 115 || 434 || 434 
 Total || 333 116 || 333 116 || 252 094 || 252 094 
   ||   ||   ||   ||   
 Assets carried at amortised cost ||   ||   ||   ||   
 Cash and cash equivalents || 466 568 || 466 568 || 452 279 || 452 279 
 Loans and receivables || 1 146 280 || 1 226 409 || 1 033 160 || 1 022 679 
 Amounts receivable from contributors || 87 310 || 87 310 || 87 310 || 87 310 
 Held-to-maturity financial assets || 99 029 || 98 805 || - || - 
 Other assets || 224 || 224 || 416 || 416 
 Total || 1 799 411 || 1 879 316 || 1 573 165 || 1 562 684 
 Total assets || 2 132 527 || 2 212 432 || 1 825 259 || 1 814 778 
   ||   ||   ||   ||   
 Liabilities carried at fair value ||   ||   ||   ||   
 Derivative financial instruments || 7 035 || 7 035 || 12 702 || 12 702 
 Total || 7 053 || 7 053 || 12 702 || 12 702 
   ||   ||   ||   ||   
 Liabilities carried at amortised cost ||   ||   ||   ||   
 Deferred income || 37 808 || 37 808 || 33 003 || 33 003 
 Amounts owed to third parties || 312 086 || 312 086 || 329 660 || 329 660 
 Other liabilities || 1 153 || 1 153 || 1 113 || 1 113 
 Total || 351 047 || 351 047 || 363 776 || 363 776 
 Total liabilities || 358 082 || 358 082 || 376 478 || 376 478 
The following describes the methodologies and assumptions
used to determine the fair value of the assets and the liabilities:
§           
Assets for which fair
value approximates carrying value
For assets and liabilities that are liquid or having a
short term maturity less than three months, it is assumed that the carrying
amounts approximate to their fair value.
§           
Assets and liabilities
recorded at their fair value
Published price quotations in an active market are the
first source for determining the fair value of a financial instrument. Due to
the investment scope of the Facility’s portfolio those are rarely available.
For instruments without available market price, fair values are estimated using
valuation techniques or models based whenever possible on observable market data
prevailing at the balance sheet date.
The following table analyses financial assets designated at
fair value by valuation method. The different levels have been defined as
follows:
-         
Level
1:      quoted prices (unadjusted) in active markets;
-         
Level
2:      inputs other than quoted prices included within level 1 that are
observable for the asset,                either directly (i.e. as                    prices)
or indirectly (i.e. derived from prices);
-         
Level
3:      inputs for the asset that are not based on observable market data
(unobservable inputs).
 At 31 December 2012 In EUR’000 || Level 1 || Level 2 || Level 3 || Total 
 Financial assets ||   ||   ||   ||   
 Derivative financial instruments || - || 115 || - || 115 
 Available-for-sale financial assets || 11 001 || - || 322 000 || 333 001 
 Total || 11 001 || 115 || 322 000 || 333 116 
   ||   ||   ||   ||   
 Financial liabilities ||   ||   ||   ||   
 Derivative financial instruments || - || 7 035 || - || 7 035 
 Total || - || 7 035 || - || 7 035 
 At 31 December 2011 In EUR’000 || Level 1 || Level 2 || Level 3 || Total 
 Financial assets ||   ||   ||   ||   
 Derivative financial instruments || - || 434 || - || 434 
 Available-for-sale financial assets || 15 214 || - || 236 446 || 251 660 
 Total || 15 214 || 434 || 236 446 || 252 094 
   ||   ||   ||   ||   
 Financial liabilities ||   ||   ||   ||   
 Derivative financial instruments || - || 12 702 || - || 12 702 
 Total || - || 12 702 || - || 12 702 
In
2012 the Facility did not make transfers from Level 1 to 2 or Level 2 to 1 of
the fair value hierarchy.
The
following tables present the changes in Level 3 instruments for the year ended
31 December 2012 and 31 December 2011:
 In EUR'000 || Available-for-sale financial assets 
 Balance at 1 January 2012 || 236 446 
 Total gains or losses ||   
 - in profit or loss || 8 133 
 - in other comprehensive income || 15 041 
 Disbursements || 81 981 
 Repayments || -19 601 
 Balance at 31 December 2012 || 322 000 
 In EUR'000 || Available-for-sale financial assets 
 Balance at 1 January 2011 || 171 638 
 Total gains or losses ||   
 - in profit or loss || -3 206 
 - in other comprehensive income || 21 759 
 Disbursements || 67 829 
 Repayments || -21 574 
 Balance at 31 December 2011 || 236 446 
5          
Cash and cash equivalents (in EUR’000)
The cash and cash equivalents can be broken down between the
funds received from the Member States and not yet disbursed and the funds from
the Facility’s operational and financial activities.
   || 31.12.2012 || 31.12.2011 
 Member states contributions received and not yet disbursed || 117 622 || 195 205 
 Funds from the Facility’s financial and operational activities || 348 946 || 257 074 
 Total cash and cash equivalents || 466 568 || 452 279 
6          
Derivative financial instruments (in EUR’000)
The main components of derivative financial instruments, classified
as held for trading, are as follows:
 At 31 December 2012 || Fair Value || Notional amount 
 Assets || Liabilities 
 Cross currency swaps || 87 || -102 || 7 062 
 Cross currency interest rate swaps || - || -3 971 || 19 504 
 Interest rate swaps || 28 || - || 19 568 
 FX Forwards || - || -2 962 || 652 451 
 Total derivative financial instruments || 115 || -7 035 || 698 585 
     ||   ||   ||   
 At 31 December 2011 || Fair Value || Notional amount 
 Assets || Liabilities 
 Cross currency swaps ||  434 || -953 || 29 376 
 Cross currency interest rate swaps || - || -5 355 || 38 158 
 FX Forwards || - || -6 394 || 585 000 
 Total derivative financial instruments || 434 || -12 702 || 652 534 
7          
Loans and receivables (in EUR’000)
The main components of loans and receivable are as follows:
   || Global loans  (*) || Senior loans || Subordinated loans || Total 
 Nominal as at 1 January 2012 || 225 365 || 716 350 || 128 679 || 1 070 394 
 Disbursement || 79 015 || 154 003 || - || 233 018 
 Write offs || -947 || -1 206 || - || -2 153 
 Repayments || -39 967 || -71 368 || -4 145 || -115 480 
 Interest capitalised || - || -117 || 9 739 || 9 622 
 Foreign exchange rates differences || -8 780 || -7 692 || -493 || -16 965 
 Nominal as at 31 December 2012 || 254 686 || 789 970 || 133 780 || 1 178 436 
   ||   ||   ||   ||   
 Impairment as at 1 January 2012 || -7 609 || -16 372 || -24 835 || -48 816 
 Impairment recorded in statement of comprehensive income || -835 || -292 || - || -1 127 
 Impairment of write offs || 947 || 1 206 || - || 2 153 
 Reversal of impairment || 910 || 814 || - || 1 724 
 Foreign exchange rates differences || 93 || 348 || 480 || 921 
 Impairment as at 31 December 2012 || -6 494 || -14 296 || -24 355 || -45 145 
   ||   ||   ||   ||   
 Amortised Cost || -1 641 || -3 984 || -82 || -5 707 
 Accrued interest || 5 246 || 9 244 || 4 206 || 18 696 
 Loans and receivables as at 31 December 2012 || 251 797 || 780 934 || 113 549 || 1 146 280 
   ||   ||   ||   ||   || 
(*) including agency agreements
   || Global loans (*) || Senior loans || Subordinated loans || Total 
 Nominal as at 1 January 2011 || 246 500 || 542 322 || 123 910 || 912 732 
 Disbursement || 25 689 || 211 351 || 0 || 237 040 
 Write offs ||  0 ||  0 || -2 000 || -2 000 
 Repayments || -48 554 || -51 712 || -4 144 || -104 410 
 Interest capitalised || 0 || 459 || 10 053 || 10 512 
 Foreign exchange rates differences || 1 730 || 13 930 ||  860 || 16 520 
 Nominal as at 31 December 2011 || 225 365 || 716 350 || 128 679 || 1 070 394 
   ||   ||   ||   ||   
 Impairment as at 1 January 2011 || -15 006 || -18 056 || -44 023 || -77 085 
 Impairment recorded in statement of comprehensive income || -1 746 || -1 514 || -773 || -4 033 
 Impairment of write offs ||  0 ||  0 || 2 000 || 2 000 
 Reversal of impairment || 9499 || 3263 || 18 723 || 31 485 
 Foreign exchange rates differences || - 356 || - 65 || - 762 || -1 183 
 Impairment as at 31 December 2011 || -7 609 || -16 372 || -24 835 || -48 816 
   ||   ||   ||   ||   
 Amortised Cost || -1 700 || -3 428 || - 99 || -5 227 
 Accrued interest || 3 498 || 9 499 || 3 812 || 16 809 
 Loans and receivables as at 31 December 2011 || 219 554 || 706 049 || 107 557 || 1 033 160 
   ||   ||   ||   ||   || 
(*) including agency agreements
8          
Available-for-sale financial assets (in EUR’000)
The main components of available-for-sale financial assets
are as follows:
   || Venture Capital Fund || Direct Equity Investment || Total 
 Cost as at 1 January 2012 || 182 692 || 36 565 || 219 257 
 Disbursements || 56 007 || 25 974 || 81 981 
 Repayments / sales || -19 570 || -31 || -19 601 
 Foreign exchange rates differences on repayments / sales || 1 581 || -678 || 903 
 Cost as at 31 December 2012 || 220 710 || 61 830 || 282 540 
   ||   ||   ||   
 Unrealised gains and losses as at 1 January 2012 || 29 781 || 11 969 || 41 750 
 Net change in unrealised gains and losses || 29 540 || -2 856 || 26 684 
 Unrealised gains and losses as at 31 December 2012 || 59 321 || 9 113 || 68 434 
   ||   ||   ||   
 Impairment as at 1 January 2012 || -6 887 || -2 460 || -9 347 
 Impairment recorded in statement of comprehensive income during the year || -7 976 || -951 || -8 927 
 Foreign exchange rates differences on impairment || 133 || 168 || 301 
 Impairment as at 31 December 2012 || -14 730 || -3 243 || -17 973 
   ||   ||   ||   
 Available-for-sale financial assets as at 31 December 2012 || 265 301 || 67 700 || 333 001 
   || Venture Capital Fund || Direct Equity Investment || Total 
 Cost as at 1 January 2011 || 142 932 || 33 350 || 176 282 
 Disbursements || 59 579 || 8 250 || 67 829 
 Repayments / sales || -20 236 || -4 735 || -24 971 
 Foreign exchange rates differences on repayments / sales || 417 || -300 || 117 
 Cost as at 31 December 2011 || 182 692 || 36 565 || 219 257 
   ||   ||   ||   
 Unrealised gains and losses as at 1 January 2011 || 11 335 || 13 235 || 24 570 
 Net change in unrealised gains and losses || 18 446 || -1 266 || 17 180 
 Unrealised gains and losses as at 31 December 2011 || 29 781 || 11 969 || 41 750 
   ||   ||   ||   
 Impairment as at 1 January 2011 || -2 || -6 022 || -6 024 
 Impairment recorded in statement of comprehensive income during the year || - 6 888 || - || -6 888 
 Use of impairment booked in the statement of comprehensive income during previous years || 2 || 3 714 || 3 716 
 Foreign exchange rates differences on impairment || 1 || -152 || -151 
 Impairment as at 31 December 2011 || -6 887 || -2 460 || -9 347 
   ||   ||   ||   
 Available-for-sale financial assets as at 31 December 2011 || 205 586 || 46 074 || 251 660 
9          
Amounts receivable from contributors (in EUR’000)
The main components of amounts receivable from contributors
are as follows:
   || 31.12.2012 || 31.12.2011 
 Member states contribution called but not paid || 87 310 || 87 310 
 Total amount receivable from contributors || 87 310 || 87 310 
10       
Held-to-maturity financial assets (in EUR’000)
The held-to-maturity portfolio is composed of quoted bonds
which have a remaining maturity of less than three months at reporting date.
The following table shows the movements of the held-to-maturity portfolio: 
 Balance as at 1 January 2012 || - 
 Acquisitions || 98 278 
 Amortisation of premium/discount || -210 
 Change in accrued interest || 961 
 Balance as at 31 December 2012 || 99 029 
11       
Other assets (in EUR’000)
The main components of other assets are as follows:
   || 31.12.2012 || 31.12.2011 
 Amount receivable from EIB || 7 || 59 
 Financial guarantees || 217 || 357 
 Amounts receivable with regard to TA disbursements || 337 || - 
 Impairment on amounts receivable with regard to TA disbursements (Note 20) || -337 || - 
 Total other assets || 224 || 416 
12       
Deferred income (in
EUR’000)
The main components of deferred income are as follows:
   || 31.12.2012 || 31.12.2011 
 Deferred interest subsidies || 37 387 || 32 744 
 Deferred commissions on loans and receivables || 421 || 259 
 Total deferred income || 37 808 || 33 003 
13       
Amounts owed to third parties (in EUR’000)
The main components of amounts owed to third parties are as
follows:
   || 31.12.2012 || 31.12.2011 
 Net general administrative expenses payable to EIB || 36 202 || 38 011 
 Other amounts payable to EIB || 8 904 || 219 
 Interest subsidies not yet disbursed owed to Member States || 266 980 || 291 430 
 Total amounts owed to third parties || 312 086 || 329 660 
14       
Other liabilities (in
EUR’000)
The main components of other liabilities are as follows:
   || 31.12.2012 || 31.12.2011 
 Financial guarantees || 215 || 294 
 Other || 938 || 819 
 Total other liabilities || 1 153 || 1 113 
   ||   ||   
15       
Member States Contribution called (in EUR’000)
 Member States || Contribution to the Facility || Contribution to interest subsidies || Total contributed || Called and not paid (*) 
 Austria || 41 375 || 10 168 || 51 543 || 2 650 
 Belgium || 61 203 || 15 041 || 76 244 || 3 920 
 Denmark || 33 412 || 8 211 || 41 623 || 2 140 
 Finland || 23 107 || 5 679 || 28 786 || 1 480 
 France || 379 399 || 93 237 || 472 636 || 24 300 
 Germany || 364 722 || 89 630 || 454 352 || 23 360 
 Greece || 19 516 || 4 796 || 24 312 || 1 250 
 Ireland || 9 680 || 2 379 || 12 059 || 620 
 Italy || 195 788 || 48 115 || 243 903 || 12 540 
 Luxembourg || 4 528 || 1 113 || 5 641 || 290 
 Netherlands || 81 500 || 20 028 || 101 529 || 5 220 
 Portugal || 15 145 || 3 722 || 18 867 || 970 
 Spain || 91 180 || 22 407 || 113 588 || 5 840 
 Sweden || 42 624 || 10 4757 || 53 099 || 2 730 
 United Kingdom || 198 130 || 48 690 || 246 820 || - 
 Total as at 31 December 2012 || 1 561 309 || 383 691 || 1 945 000 || 87 310 
 Total as at 31 December 2011 || 1 281 309 || 383 691 || 1 665 000 || 87 310 
(*) On 20 November 2012, the Council fixed the amount of
financial contributions to be paid by each Member State by 21 January 2013.
16       
Contingent liabilities and commitments (in EUR’000)
   || 31.12.2012 || 31.12.2011 
   ||   ||   
 Commitments ||   ||   
 Undisbursed loans || 749 044 || 701 092 
 Undisbursed commitment in respect of available-for-sale financial assets || 217 070 || 264 567 
 Guarantees drawn || 6 224 || 7 909 
 Subsidies and TA || 228 175 || 209 223 
   ||   ||   
 Contingent liabilities ||   ||   
 Guarantees undrawn || 20 000 || 20 000 
   ||   ||   
 Total || 1 220 513 || 1 202 792 
17       
Net interest and similar income (in EUR’000)
The main components of interest and similar income are as
follows:
   || From 01.01.2012 || From 01.01.2011 
   || to 31.12.2012 || to 31.12.2011 
 Cash and cash equivalents || 1 678 || 5 518 
 Held-to-maturity financial assets || 36 || - 
 Loans and receivables || 64 060 || 50 800 
 Interest subsidies || 1 729 || 3 243 
 Total interest and similar income || 67 503 || 59 561 
The main component of interest and similar expense is as
follows:
   || From 01.01.2012 || From 01.01.2011 
   || to 31.12.2012 || to 31.12.2011 
 Derivative financial instruments || -1 114 || -940 
 Total interest and similar expense || - 1 114 || -940 
18       
Net fee and commission income (in EUR’000)
The main components of fee and commission income are as
follows:
   || From 01.01.2012 || From 01.01.2011 
   || to 31.12.2012 || to 31.12.2011 
 Fee and commission on loans and receivables || 1 710 || 1 894 
 Fee and commission on financial guarantees || 191 || 255 
 Other || 33 || - 
 Total fee and commission income || 1 934 || 2 149 
The main component of fee and commission expenses is as
follows:
   || From 01.01.2012 || From 01.01.2011 
   || to 31.12.2012 || to 31.12.2011 
 Commission paid to third parties with regard to available-for-sale financial assets || -292 || -144 
 Total fee and commission expenses || -292 || -144 
19       
Net realised gains on available-for-sale
financial assets (in EUR’000)
The main components of net realised gains on
available-for-sale financial assets are as follows:
   || From 01.01.2012 || From 01.01.2011 
   || to 31.12.2012 || to 31.12.2011 
 Net proceeds from available-for-sale financial assets || 70 || 16 254 
 Dividend income || 975 || 974 
 Net realised gains on available-for-sale financial assets || 1 045 || 17 228 
20       
Impairment on other assets (in EUR’000)
During the reporting period the Facility made a technical
assistance payment amounting to EUR 638 which due to fraudulent behaviour of
the counterparty did not reach the final beneficiary. Following legal
interventions, the Facility could recover EUR 301 and the remaining amount outstanding
was recorded as a receivable. As at the reporting date the likelihood that the
Facility will ever recover the outstanding amount is estimated to be low and
the outstanding amount of EUR 337 was recorded as impairment in the Facility’s
comprehensive income. 
21       
General administrative expenses (in EUR’000)
General administrative expenses represent the actual costs
incurred by the EIB for managing the Facility less income generated from
standard appraisal fees directly charged by the EIB to clients of the Facility.
   || From 01.01.2012 || From 01.01.2011 
   || to 31.12.2012 || to 31.12.2011 
 Actual cost incurred by the EIB || -38 390 || -39 937 
 Income from appraisal fees directly charged to clients of the Facility || 2 188 || 1 931 
 Net general administrative expenses || -36 202 || -38 006 
Following the entry in force of the revised Cotonou
Partnership Agreement on the 1st of July 2008, general administrative expenses
are not covered anymore by the Member States.
22       
Subsequent events
There have been no material post balance sheet events which
could require disclosure or adjustment to the 31 December 2012 financial
statements.
ANNEX TO PART 1 – CHAPTER 2 (REPORT ON THE FINANCIAL
IMPLEMENTATION): SITUATION BY COUNTRY AND BY INSTRUMENT 
Notes
to the tables:
·       The figure
"0.00" indicates that the corresponding amount is between EUR –4999
and EUR 4999. 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
ACP/OCT 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 or the envelope covering administrative expenditure.
[1]         OJ L 247 of 09.09.2006
[2]       All figures are rounded into
millions of euros. It should be noted that due to the rounding of figures, some
financial data in the tables may not add up. Amounts shown as 0 represent
figures of less than EUR 500 000. Amounts that equal to zero are shown as a
dash (-).
[3] Current receivables excluding receivables
relating to ordinary contributions and co-financing.
[4] Current
liabilities excluding liabilities relating to ordinary contributions and
co-financing.
[5] PIR - Regional Indicative
Programme
[6] PIN – National Indicative
Programme
[7]       In accordance with Article 153
of the 10th EDF Financial Regulation, the treasury is presented in the balance
sheet of the 10th EDF. The nature of the various bank accounts is outlined in
chapter 6, Financial Risk Management
[8]       This balance represents the amounts
available for the Democratic Republic of the Congo in accordance with the
provisions of Council Decision 2003/583/EC[8]. These funds are earmarked for a specific
purpose and beneficiary state.
[9]       OJ L 156 of 29.05.1998 pp. 3-106
[10]      OJ L 247 of 09.09.2006
[11]      Council Decision 2011/315/EU of 23
May 2011 concerning the allocation of funds decommitted from projects under the
ninth and previous European Development Funds for development cooperation in
Southern Sudan.
[12]      OJ L 247 of 09.09.2006
[13]          The
unallocated resources from the previous EDFs include the balance of the Sysmin
funds, which by Decision 3/2000 of the ACP-EC Council of Ministers was set at
EUR 410,926 million. Commission Decision PE/410/2001 includes these resources
in programming for the national indicative allocations (part B) under the
financial protocol to the ACP-EC Partnership Agreement.