COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ANNUAL ACCOUNTS OF THE 8TH, 9TH AND 10TH EUROPEAN DEVELOPMENT FUNDS - FINANCIAL YEAR 2013
Date: 2014-07-17
Institutions: European Commission
Subjects: European Development Fund, audit, budgetary discharge, closing of accounts, financial year













EUR-Lex - 52014DC0487 - EN











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52014DC0487

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ANNUAL ACCOUNTS OF THE 8TH, 9TH AND 10TH EUROPEAN DEVELOPMENT FUNDS - FINANCIAL YEAR 2013 /* COM/2014/0487 final */









TABLE OF CONTENTS
IMPLEMENTING AND ACCOUNTING FOR THE
EDF RESOURCES. 3
PART I - EDF
ANNUAL ACCOUNTS: FUNDS MANAGED BY THE COMMISSION. 6
1........... FINANCIAL
STATEMENTS OF THE 8TH, 9TH AND 10TH EDFs. 7
1.1........ 8TH, 9TH
AND 10TH EDFs: AGGREGATED BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT,
CASH FLOW TABLE AND STATEMENT OF CHANGES IN NET ASSETS. 7
1.2........ 8TH EDF: BALANCE
SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET ASSETS  11
1.3........ 9TH
EDF: BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET
ASSETS  14
1.4........ 10TH
EDF: BALANCE SHEET, ECONOMIC OUTTURN ACCOUNT AND STATEMENT OF CHANGES IN NET
ASSETS  17
1.5........ NOTES TO THE
FINANCIAL STATEMENTS OF THE 8TH, 9TH AND 10TH
EDFs. 20
2........... REPORT ON
FINANCIAL IMPLEMENTATION. 39
2.1........ ALLOCATIONS. 42
2.2........ AGGREGATED
ACCOUNTS. 45
PART II -
EDF ANNUAL ACCOUNTS: FINANCIAL STATEMENTS OF THE INVESTMENT FACILITY. 50
3........... FINANCIAL
STATEMENTS OF THE INVESTMENT FACILITY. 52
3.1........ STATEMENT OF
FINANCIAL POSITION AS AT 31 DECEMBER 2013. 52
3.2........ STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2013. 53
3.3........ STATEMENT OF
CHANGES IN CONTRIBUTORS’ RESOURCES FOR THE YEAR ENDED 31 DECEMBER 2013  54
3.4........ STATEMENT OF CASH
FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013. 55
3.5........ NOTES TO THE
FINANCIAL STATEMENTS AS AT 31 DECEMBER 2013. 56
ANNEX TO PART 1 – CHAPTER 2 (REPORT ON THE FINANCIAL
IMPLEMENTATION): SITUATION BY COUNTRY AND BY INSTRUMENT. 93
CERTIFICATION OF
THE ACCOUNTS
The annual accounts
of the 8th, 9th and 10th European Development
Funds for the year 2013 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 (EU)
has cooperative development relations with a large number of developing
countries. The main objective is to promote economic, social and environmental development,
with the primary aim of reducing and eradicating poverty in the long-term, by
providing beneficiary countries with development aid and technical assistance.
To achieve this, the EU draws up, jointly with the partner countries,
cooperation strategies and mobilises the financial resources to implement them.
These EU resources allocated to development cooperation come from three
sources:
–       The EU
budget;
–       The
European Development Fund;
–       The
European Investment Bank.
The European
Development Fund (EDF) is the main instrument for providing EU aid for
development cooperation to the African, Caribbean and Pacific (ACP) States and
Overseas Countries and Territories (OCTs).
The EDF is not
funded by the EU budget. It is established by an internal agreement of the
Representatives of the Member States, sitting within the Council, and managed
by a specific committee. The European Commission (hereafter referred to as
"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 continued to be
mainly funded by the EDF. Each EDF is usually concluded for a period of around
five years. 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 Commission. These financial statements are also
presented in an aggregated way so as to provide a global view of the financial
situation of the resources for which the Commission is responsible.
Within
the framework of the ACP-EU Partnership Agreement, the Investment Facility was
established. This Investment Facility is managed by the EIB 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 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 II) 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[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 EU budget (budgetised), but would continue to
be funded through the existing inter-governmental EDF for the period 2008-2013.
The EU
budget is annual and according to the budgetary principle of annuality,
expenditure and revenue are planned and authorised for one year. Unlike the EU,
the EDF is a fund operating on the basis of multiannuality. Each EDF establishes
an overall fund to implement development cooperation during a period of usually
five years. As resources are allocated on a multiannual basis, the allocated
funds may be used over the period of the EDF. The lack of budget annuality is
highlighted in the budgetary reporting, where the budgetary implementation of
the EDFs is measured against the total funds.
The EDF resources
are “ad hoc” contributions from the EU Member States. Approximately every five
years, Member State representatives meet at intergovernmental level to decide
on an overall amount that will be allocated to the fund and to oversee its
implementation. The Commission then manages the fund in accordance with the
Union policy in development cooperation. 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. 
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.         YEAR-END REPORTING

3.1      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 Commission
–       Financial
statements of the 8th, 9th and 10th EDFs 
–       Report on
financial implementation of the 8th, 9th and 10th
EDFs 
            Part II:
Funds managed by the EIB
–       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 European Court of Auditors (ECA), the annual accounts are adopted by the
Commission by 31 July of the subsequent year and presented to the European Parliament
and to the Council for discharge.
4.         AUDIT
AND DISCHARGE

4.1      Audit
The EDF annual
accounts and resource management are overseen by its external auditor, the ECA,
which draws up an annual report for the European Parliament and the Council. 
4.2      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 ECA (which includes an
official statement of assurance) and replies of the Commission, and also
following questions and further information requests to the Commission.
PART I
- EDF ANNUAL ACCOUNTS: FUNDS MANAGED BY THE COMMISSION[2]
1.           FINANCIAL
STATEMENTS OF THE 8TH, 9TH AND 10TH EDFs     

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 || 31.12.2013 || 31.12.2012 
   || NON-CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.1 || 424 || 438 
   ||   ||   ||   ||   
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 1 286 || 1 334 
   || Receivables || 2.3 || 84 || 70 
   || Cash and cash equivalents || 2.5 || 759 || 690 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 2 553 || 2 532 
   ||   ||   ||   ||   
   || NON-CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.6 || (25) || (40) 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (1 214) || (1 057) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (1 239) || (1 097) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || 1 313 || 1 435 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 32 529 || 29 579 
   || Other reserves || 2.9 || 2 252 || 2 252 
   || Economic outturn carried forward from previous years ||   || (30 396) || (27 374) 
   || Economic outturn of the year ||   || (3 072) || (3 023) 
   || NET ASSETS ||   || 1 313 ||  1 435 
AGGREGATED ECONOMIC
OUTTURN ACCOUNT OF THE 8TH, 9TH AND 10TH EDFs

   ||   || EUR millions 
   || Note || 2013 || 2012 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 123 || 124 
   ||   ||   ||   
 OPERATING EXPENSES ||   ||   ||   
 Operating expenses || 3.2 || (3 027) || (3 017) 
 Administrative expenses || 3.3 || (167) || (107) 
   ||   ||   ||   
 DEFICIT FROM OPERATING ACTIVITIES ||   || (3 072) || (3 001) 
   ||   ||   ||   
 Financial revenue || 3.4 || 0 || (22) 
 SURPLUS/(DEFICIT) FROM FINANCIAL ACTIVITIES ||   || 0 || (22) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || (3 072) || (3 023) 
AGGREGATED CASHFLOW
TABLE OF THE 8TH, 9TH AND 10TH EDFs      

   ||   || EUR millions 
   || Note || 2013 || 2012 
   ||   ||   ||   
 Economic outturn of the year ||   || (3 072) || (3 023) 
   ||   ||   ||   
 OPERATING ACTIVITIES || 4.2 ||   ||   
 Ordinary contributions from Member States ||   || 2 961 || 2 606 
 Co-financing contributions ||   || 18 || 19 
 (Reversal of) impairment losses on receivables ||   || (2) || 4 
   ||   ||   ||   
 (Increase)/decrease in non-current pre-financing ||   || 14 || (58) 
 (Increase)/decrease in current pre-financing ||   || 48 || (159) 
 (Increase)/decrease in current receivables[3] ||   || (7) || 31 
 Increase/(decrease) in non-current liabilities ||   || (15) || 40 
 Increase/(decrease) in current liabilities[4] ||   || 123 || 6 
   ||   ||   ||   
 NET CASH FLOW ||   || 69 || (534) 
   ||   ||   ||   
 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ||   || 69 || (534) 
 Cash and cash equivalents at the beginning of the year || 2.5 || 690 || 1 224 
 Cash and cash equivalents at the end of the year || 2.5 || 759 || 690 
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 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 
  Capital increase – ordinary contributions || - || (2 950) || 2 950 || - || - || 2 950 
 Economic outturn of the year || - || - || - || (3 072) || - || (3 072) 
  BALANCE AS AT 31 DECEMBER 2013 || 45 691 || 13 162 || 32 529 || (33 468) || 2 252 || 1 313 
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 || 31.12.2013 || 31.12.2012 
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 5 || 38 
   || Receivables || 2.3 || 2 || 1 
   || Liaison accounts || 2.4 || 290 || 345 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 297 || 384 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (28) || (22) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (28) || (22) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || 270 || 361 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 12 840 || 12 840 
   || Other reserves || 2.9 || (2 456) || (2 354) 
   || Economic outturn carried forward from previous years ||   || (10 125) || (10 132) 
   || Economic outturn of the year ||   || 10 || 7 
   || NET ASSETS ||   || 270 || 361 
ECONOMIC OUTTURN
ACCOUNT OF THE 8TH EDF           
   ||   || EUR millions 
   || Note || 2013 || 2012 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 64 || 58 
   ||   ||   ||   
 OPERATING EXPENSES || 3.2 || (53) || (49) 
   ||   ||   ||   
   ||   ||   ||   
 SURPLUS/(DEFICIT) FROM OPERATING ACTIVITIES ||   || 11 || 9 
   ||   ||   ||   
 Financial revenue || 3.4 || 0 || (2) 
 SURPLUS/(DEFICIT) FROM FINANCIAL ACTIVITIES ||   || 0 || (2) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || 10 || 7 
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 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 
 Capital increase – ordinary contributions || - || - || - || - || - || - 
 Transfers to/from the 10th EDF || - || - || - || - || (102) || (102) 
 Economic outturn  of the year || - || - || - || 10 || - || 10 
 BALANCE AS AT 31 DECEMBER 2013 || 12 840 ||   || 12 840 || (10 114) || (2 456) || 270 
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 || 31.12.2013 || 31.12.2012 
   || NON-CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.1 || 90 || 119 
   ||   ||   ||   ||   
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 259 || 447 
   || Receivables || 2.3 || 58 || 58 
   || Liaison accounts || 2.4 || 1 323 || 1 919 
   || Cash and cash equivalents || 2.5 || - || - 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 1 730 || 2 543 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (263) || (375) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (263) || (375) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || 1 467 || 2 168 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 11 699 || 11 699 
   || Other reserves || 2.9 || 3 756 || 4 126 
   || Economic outturn carried forward from previous years ||   || (13 658) || (12 830) 
   || Economic outturn of the year ||   || (331) || (827) 
   || NET ASSETS ||   || 1 467 || 2 168 
ECONOMIC OUTTURN ACCOUNT
OF THE 9TH EDF
   ||   || EUR millions 
   || Note || 2013 || 2012 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 34 || 49 
   ||   ||   ||   
 OPERATING EXPENSES ||   ||   ||   
 Operating expenses || 3.2 || (362) || (856) 
 Administrative expenses || 3.3 || 0 || (1) 
   ||   ||   ||   
   ||   ||   ||   
 DEFICIT FROM OPERATING ACTIVITIES ||   || (328) || (809) 
   ||   ||   ||   
 Financial revenue || 3.4 || (3) || (18) 
 DEFICIT FROM FINANCIAL ACTIVITIES ||   || (3) || (18) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || (331) || (827) 
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 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 
 Capital increase – ordinary contributions || - || - || - || - || - || - 
 Transfers to/from the 10th EDF || - || - || - || - || (371) || (371) 
 Economic outturn of the year || - || - || - || (331) || - || (331) 
 BALANCE AS AT 31 DECEMBER 2013 || 11 699 || - || 11 699 || (13 988) || 3 756 || 1 467 
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 || 31.12.2013 || 31.12.2012 
   || NON-CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.1 || 334 || 319 
   ||   ||   ||   ||   
   || CURRENT ASSETS ||   ||   ||   
   || Pre-financing || 2.2 || 1 021 || 849 
   || Receivables || 2.3 || 24 || 11 
   || Cash and cash equivalents || 2.5 || 759 || 690 
   ||   ||   ||   ||   
   || TOTAL ASSETS ||   || 2 138 || 1 869 
   ||   ||   ||   ||   
   || NON-CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.6 || (25) || (40) 
   ||   ||   ||   ||   
   || CURRENT LIABILITIES ||   ||   ||   
   || Payables || 2.7 || (923) || (660) 
   || Liaison accounts || 2.4 || (1 613) || (2 264) 
   ||   ||   ||   ||   
   || TOTAL LIABILITIES ||   || (2 561) || (2 963) 
   ||   ||   ||   ||   
   || NET ASSETS ||   || (423) || (1 095) 
   ||   ||   ||   ||   
   || FUNDS & RESERVES ||   ||   ||   
   || Called fund capital || 2.8 || 7 990 || 5 040 
   || Other reserves || 2.9 || 952 || 479 
   || Economic outturn carried forward from previous years ||   || (6 614) || (4 411) 
   || Economic outturn of the year ||   || (2 751) || (2 203) 
   || NET ASSETS ||   || (423) || (1 095) 
ECONOMIC OUTTURN
ACCOUNT OF THE 10TH EDF
   ||   || EUR millions 
   || Note || 2013 || 2012 
   ||   ||   ||   
 OPERATING REVENUE || 3.1 || 25 || 18 
   ||   ||   ||   
 OPERATING EXPENSES ||   ||   ||   
 Operating expenses || 3.2 || (2 612) || (2 112) 
 Administrative expenses || 3.3 || (167) || (106) 
   ||   ||   ||   
   ||   ||   ||   
 DEFICIT FROM OPERATING ACTIVITIES ||   || (2 754) || (2 201) 
   ||   ||   ||   
 Financial revenue || 3.4 || 3 || (2) 
 SURPLUS/(DEFICIT) FROM FINANCIAL ACTIVITIES ||   || 3 || (2) 
   ||   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR ||   || (2 751) || (2 203) 
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 2011 || 21 152 || 18 712 || 2 440 || (4 411) || 301 || (1 670) 
 Capital increase – ordinary contributions || - || (2 600) || 2 600 || - || - || 2 600 
 Transfers from 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) 
 Capital increase – ordinary contributions || - || (2 950) || 2 950 || - || - || 2 950 
 Transfers from/to the 8th and the 9th EDF || - || - || - || - || 473 || 473 
  Economic outturn of the year || - || - || - || (2 751) || - || (2 751) 
 BALANCE AS AT 31 DECEMBER 2013 || 21 152 || 13 162 || 7 990 || (9 365) || 952 || (423) 
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 (“EDF FR”)[5].
In accordance with the provisions of its Article 121, 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) as issued by the International Public
Sector Accounting Standard Board (IPSASB). 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 Commission is responsible for financial management.
The EDF Accounting
Officer must submit the provisional accounts to the ECA for audit by
31 March of the following year. The ECA 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 annual accounts
by 31 July and sends them to the European Parliament, the Council and the ECA.
The accounts are then published in the Official Journal by 15 November,
together with the statement of assurance given by the ECA 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 FR 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 || 31.12.2013 || 31.12.2012 || Currency || 31.12.2013 || 31.12.2012 
 XOF || 655.957 || 655.957 || KES || 117.270 || 113.460 
 XAF ||   655.957 || 655.957 || BIF || 2107.95 || 2037.95 
 NGN || 212.376 || 206.074 || SLL || 6013.08 || 5709.56 
 PGK || 3.38524 || 2.76702 || TZS || 2166.71 || 2077.48 
 HTG || 60.7227 || 56.2987 || UGX || 3423.24 || 3508.51 
 GNF || 9616.41 || 9250.40 || MGA || 3092.68 || 2981.70 
 MWK || 595.810 || 439.917 || SZL || 14.5660 || 11.1727 
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 EDF. 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 31.12.2013 || TOTAL 31.12.2012 
 Pre-financing || - || 90 || 334 || 424 || 438 
 TOTAL || - || 90 || 334 || 424 || 438 
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.
        
CURRENT ASSETS
2.2      PRE-FINANCING
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 || TOTAL 31.12.2012 
 Pre-financing (gross) || 39 || 832 || 3 059 || 3 931 || 3 593 
 Less estimated clearing of pre-financing || (34) || (573) || (2 038) || (2 645) || (2 259) 
 TOTAL || 5 || 259 || 1 021 || 1 286 || 1 334 

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 2013 the "nominal" value of guarantees received by the EDF
in respect of pre-financing amounts to EUR 303 million. The
"on-going" value of those guarantees amounts to EUR 151 million.

In 2013 an
in-depth review of the guarantees has been performed. Following this review,
guarantees with a “nominal” value of EUR 333 million have been written-off as
not belonging to the EDF. Had the 2012 comparatives been updated, the “nominal”
value would have decreased from EUR 566 million to EUR 349 million and the
“on-going” value would have decreased from EUR 391 million to EUR 185 million. 
2.3      RECEIVABLES
   ||   ||   ||   ||   || EUR millions 
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 || TOTAL 31.12.2012 
 Receivables from customers, public bodies and third states || 2.3.1 || 2 || 9 || 12 || 24 || 10 
 Receivables from Member States || 2.3.2 || - || - || 3 || 3 || 3 
 Accrued income and deferred charges || 2.3.3 || - || 48 || 9 || 57 || 57 
 TOTAL ||   || 2 || 58 || 24 || 84 || 70 
2.3.1 Receivables from
customers, public bodies and third states
   ||   ||   ||   || EUR millions 
     || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 || TOTAL 31.12.2012 
 Receivables from customers, public bodies and third states || 6 || 19 || 13 || 38 || 26 
 -Write-down || (3) || (10) || (1) || (14) || (16) 
 TOTAL || 2 || 9 || 12 || 24 || 10 
The movements in
open recovery orders during the period are detailed below:
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2013 || TOTAL 2012 
 Open recovery orders at beginning of year || 5 || 19 || 3 || 26 || 25 
 Recovery orders issued || 3 || 40 || 133 || 176 || 139 
 Recovery orders closed || (2) || (40) || (123) || (165) || (138) 
 Cashed || (1) || (27) || (103) || (131) || (97) 
 Waived || (0) || (1) || (0) || (1) || (1) 
 Cancelled || (0) || (6) || (0) || (6) || (4) 
 Offset || (1) || (7) || (19) || (27) || (36) 
 Open recovery orders at end of year || 6 || 19 || 13 || 38 || 26 
2.3.2 Receivables
from Member States
The EUR 3 million
receivable from Member States in the 10th EDF comprises cofinancing
contributions from United Kingdom, Denmark 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.
2.4      LIAISON
ACCOUNTS
   ||   ||   ||   || EUR millions || 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 
 Liaison accounts || 290 || 1 323 || (1 613) || 0 
 TOTAL || 290 || 1 323 || (1 613) || 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.
2.5      CASH AND
CASH EQUIVALENTS[6]
   ||   ||   ||   ||   || EUR millions 
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 || TOTAL 31.12.2012 
 Special accounts - financial institutions of Member States || - || - || - || 719 || 719 || 633 
 Current accounts – commercial banks || - || - || - || 39 || 39 || 54 
 STABEX security accounts || 2.5.1 || - || - || - || - || 2 
 Democratic Republic Congo special fund[7] || - || - || - || 1 || 1 || 1 
 TOTAL ||   || - || - || 759 || 759 || 690 
2.5.1 STABEX
Security accounts
   || EUR millions 
   || Balance at 31.12.2013 || Balance at 31.12.2012 
 Ivory Coast || - || 2 
 Other countries || - || 0 
 TOTAL || - || 2 
STABEX is the
acronym for a EU compensatory finance scheme to stabilise export earnings of
the ACP countries. 
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[8] (as revised), the funds
are transferred into an interest bearing double signature account (Commission
and Beneficiary State) opened in the name of the ACP State. The funds remain in
these double signature accounts until a Framework of Mutual Obligations (FMO)
justifies a transfer for a project. During 2013, the remaining STABEX security
accounts were closed following the winding up of the STABEX aid instruments.
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. See also note 3.1.2 for more information.        

NON-CURRENT
LIABILITIES
2.6      PAYABLES
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 || TOTAL 31.12.2012 
 Co-financing - payables || - || - || 25 || 25 || 40 
 TOTAL || - || - || 25 || 25 || 40 
Co-financing
payables at the end of 2013 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. 
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 31.12.2013 || TOTAL 31.12.2012 
 Current payables || 2.7.1 || 1 || 61 || 260 || 322 || 209 
 Accrued charges || 2.7.2 || 26 || 202 || 359 || 588 || 555 
 Deferred fund capital contribution || 2.7.3 || - || - || 304 || 304 || 293 
 TOTAL ||   || 28 || 263 || 923 || 1 214 || 1 057 
2.7.1 Current
payables
   ||   ||   ||   ||   || EUR millions 
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 || TOTAL 31.12.2012 
 Suppliers and other || 2.7.1.1 || 1 || 61 || 182 || 244 || 152 
 Co-financing payables || 2.7.1.2 || - || 0 || 75 || 75 || 46 
 Sundry payables || 2.7.1.3 || 0 || 0 || 3 || 3 || 12 
 TOTAL ||   || 1 || 61 || 260 || 322 || 209 
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 increase of EUR 93
million compared to the previous reporting period relates primarly to a EUR 74 million
increase in payables to third states. The highest third states payable balances
are represented by Ghana (EUR 64 million) and Zambia (EUR 33 million).
2.7.1.2 Co-financing
payables
The total non-current
and current co-financing payables increased by EUR 14 million. In 2013, new
co-financing contributions were received from Sweden (EUR 9 million), France (EUR 5 million), Australia (EUR 2 million), UK (EUR 2 million) and other countries. 
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 31.12.2013 || TOTAL 31.12.2012 
 Accrued charges || 26 || 202 || 359 || 588 || 555 
 TOTAL || 26 || 202 || 359 || 588 || 555 
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 31.12.2013 || TOTAL 31.12.2012 
 United Kingdom || - || - || 296 || 296 || 274 
 Ireland || - || - || 5 || 5 || 9 
 Lithuania || - || - || 2 || 2 || - 
 Hungary || - || - || - || - || 10 
 TOTAL || - || - || 304 || 304 || 293 
This comprises
Member States' contributions paid in advance at year-end.
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 || - || - || (16 112) || (16 112) 
 Called fund capital 31.12.2012 || 12 840 || 11 699 || 5 040 || 29 579 
   ||   ||   ||   ||   
 Fund Capital || 12 840 || 11 699 || 21 152 || 45 691 
 Uncalled fund capital || - || - || (13 162) || (13 162) 
 Called fund capital 31.12.2013 || 12 840 || 11 699 || 7 990 || 32 529 
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 FR.
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 31.12.2012 || called up in 2013 || uncalled 10th EDF 31.12.2013 
 Austria || 2.41 || (388) || 71 || (317) 
 Belgium || 3.53 || (569) || 104 || (465) 
 Bulgaria || 0.14 || (23) || 4 || (18) 
 Cyprus || 0.09 || (15) || 3 || (12) 
 Czech Republic || 0.51 || (82) || 15 || (67) 
 Denmark || 2.00 || (322) || 59 || (263) 
 Estonia || 0.05 || (8) || 1 || (7) 
 Finland || 1.47 || (237) || 43 || (193) 
 France || 19.55 || (3 150) || 577 || (2 573) 
 Germany || 20.50 || (3 303) || 605 || (2 698) 
 Greece || 1.47 || (237) || 43 || (193) 
 Hungary || 0.55 || (89) || 16 || (72) 
 Ireland || 0.91 || (147) || 27 || (120) 
 Italy || 12.86 || (2 072) || 379 || (1 693) 
 Latvia || 0.07 || (11) || 2 || (9) 
 Lithuania || 0.12 || (19) || 4 || (16) 
 Luxemburg || 0.27 || (44) || 8 || (36) 
 Malta || 0.03 || (5) || 1 || (4) 
 Netherlands || 4.85 || (781) || 143 || (638) 
 Poland || 1.30 || (209) || 38 || (171) 
 Portugal || 1.15 || (185) || 34 || (151) 
 Romania || 0.37 || (60) || 11 || (49) 
 Slovakia || 0.21 || (34) || 6 || (28) 
 Slovenia || 0.18 || (29) || 5 || (24) 
 Spain || 7.85 || (1 265) || 232 || (1 033) 
 Sweden || 2.74 || (441) || 81 || (361) 
 United Kingdom || 14.82 || (2 388) || 437 || (1 951) 
 TOTAL || 100,00 || (16 112) || 2 950 || (13 162) 

2.9      OTHER
RESERVES
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 
 Balance at 31.12.2011 || (2 276) || 4 227 || 301 || 2 252 
 Transfer of decommitted 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 2010/406/EU ||                        -   ||   200 ||   (200) ||   0 
 Balance at 31.12.2012 || (2 354) || 4 126 || 479 || 2 252 
 Transfer of decommitted amounts to the 10th EDF from the 8th  and 9th EDFs ||   (102) ||   (371) ||   473 ||   0 
 Balance at 31.12.2013 || (2 456) || 3 756 || 952 || 2 252 
 The balance at 31.12.2013 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 of the 10th EDF.
In 2013, EUR 102
million and EUR 371 million of decommitted funds from the 8th and 9th
EDFs respectively were transferred to the performance reserve of the 10th
EDF. 

3.         NOTES
TO THE ECONOMIC OUTTURN ACCOUNT

3.1      OPERATING REVENUE
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2013 || TOTAL 2012 
 Recovery of expenses || 1 || 11 || 1 || 13 || 17 
 Recovery of STABEX funds || 61 || - || - || 61 || 49 
 Exchange gains || 2 || 23 || 16 || 41 || 51 
 Operating income co-financing || - || - || 8 || 8 || 8 
 TOTAL || 64 || 34 || 25 || 123 || 124 
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 2013, recovery
orders for EUR 23 million were issued in respect of undue payments, compared to
EUR 27 million in 2012. Of these, EUR 6 million related to the recovery of
expenses and were thus recorded as operating revenue. EUR 17 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 2013 || Revenue || Pre-financing || TOTAL 2012 
 Error || 2 || 4 || 6 || 1 || 1 || 2 
 Irregularity || 4 || 12 || 16 || 9 || 15 || 25 
 OLAF Notified || - || 1 || 1 || 1 || - || 1 
 TOTAL || 6 || 17 || 23 || 11 || 16 || 27 
3.1.2 Recovery of
STABEX funds
In 2013, EUR 61
million was returned to the EDF from double signature accounts in ACP
countries. These funds were transferred mainly from Soudan (EUR 36 million), Ivory Coast (EUR 7 million), the Salomon Islands (EUR 5 million), Papua New Guinea (EUR 3 million), Sierra Leone (EUR 2 million), Zimbabwe (EUR 2 million) and Mauritania (EUR 2 million). These revenues
are included in operating income (recovery of STABEX funds) 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 
   || Note || 8th EDF || 9th EDF || 10th EDF || TOTAL 2013 || TOTAL 2012 
 Operating expenses – aid instruments ||   3.2.1 || 49 || 330 || 2 578 || 2 957 || 2 938 
 Operating expenses co-financing ||   3.2.2 || - || - || 8 || 8 || 8 
 Foreign exchange losses || - || 4 || 31 || 25 || 60 || 66 
 Write-down of receivables || - || 0 || 1 || 1 || 1 || 6 
 TOTAL ||   || 53 || 362 || 2 612 || 3 027 || 3 017 
3.2.1 Operating
expenses – aid instruments
   ||   ||   ||   || EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2013 || TOTAL 2012 
 Programmable aid || 42 || (2) || 1 678 || 1 719 || 1 476 
 Macro-economic support || - || 21 || - || 21 || 8 
 Sectoral policy || 0 || 225 || (2) || 222 || 326 
 Interest rate subsidies || 0 || - || - || 0 || 5 
 Intra ACP projects || - || 57 || 588 || 645 || 720 
 Emergency aid || - || 17 || 253 || 270 || 333 
 Refugee aid || 1 || - || - || 1 || 6 
 Risk capital || 0 || - || - || 0 || 1 
 STABEX || (1) || - || - || (1) || 4 
 Other aid programmes related to former EDFs || - || 5 || - || 5 || 10 
 Institutional support || - || 1 || 61 || 62 || 32 
 Compensation export receipts || 7 || 6 || - || 13 || 18 
 Total || 49 || 330 || 2 578 || 2 957 || 2 938 
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 2013. 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). 

3.3      ADMINISTRATIVE
EXPENSES
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 2013 || TOTAL 2012 
 Administrative expenses || - || 0 || 167 || 167 || 107 
 TOTAL || - || 0 || 167 || 167 || 107 
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 2013 || TOTAL 2012 
 Interest income - European banks || - || 0 || 0 || 0 || 9 
 Interest on pre-financing || 0 || (3) || 3 || 0 || (32) 
 TOTAL || 0 || (3) || 3 || 0 || (22) 
The higher amount of
interest income in 2012 is explained by income on EIB bank accounts.
Interest on pre-financing
is recognised in accordance with the provisions of Article 7(3) and Article 8
of the 10th EDF FR. The negative interest revenue in 2012 was caused
by the reversal of the previous year accrual for interest on pre-financing. The
negative interest revenue in 2013 in the 9th EDF is mainly caused by
fluctuations in the foreign currency exchange rate USD/EUR. 
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 31.12.2013 || TOTAL 31.12.2012 
 Performance guarantees || 4 || 63 || 49 || 116 || 304 
 Retention guarantees || 2 || 40 || 14 || 56 || 188 
 TOTAL || 6 || 103 || 62 || 171 || 492 
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.
In 2013
an in-depth review of the guarantees has been performed. Following this review,
guarantees with a value of EUR 188 million have been written-off as not
belonging to the EDF. Had the 2012 comparatives been updated, the value would
have decreased from EUR 304 million to EUR 177 million.
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.
In 2013
an in-depth review of the guarantees has been performed. Following this review,
guarantees with a value of EUR 105 million have been written-off as not
belonging to the EDF. Had the 2012 comparatives been updated, the value would
have decreased from EUR 188 million to EUR 98 million.
5.1.3 Guarantees
owned by entities other than the Commission 
Guarantees
owned by entities other than the Commission comprise guarantees endorsed by the
National Authorising Officer (the contracting authority of the third country)
in order to protect EU assets. These guarantees are kept in EU delegations and
are not contingent assets of the EDF, they are disclosed only for information
purposes.
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 
 Pre-financing guarantees Performance guarantees || 2 2 || 54 44 || 278 142 || 333 188 
 Retention guarantees || 1 || 34 || 70 || 105 
 TOTAL || 4 || 131 || 491 || 626 
5.2      OTHER
DISCLOSURES 

5.2.1
Budgetary commitments not yet expensed 
 EUR millions 
   || 8th EDF || 9th EDF || 10th EDF || TOTAL 31.12.2013 || TOTAL 31.12.2012 
 Outstanding budgetary commitments not yet paid || 74 || 611 || 5 340 || 6 025 || 5 642 
 Related amounts included in the economic outturn account || (28) || (215) || (540) || (782) || (714) 
 TOTAL || 47 || 396 || 4 800 || 5 243 || 4 928 
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 2013 the outstanding budgetary
commitments totalled EUR 6 025 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 2013 economic outturn account,
giving a total of EUR 5 243 million.

6.         FINANCIAL
RISK MANAGEMENT
The following
disclosures with regard to the financial risk management of the EDF relate to
the treasury operations carried out by the Commission on behalf of the EDF in order
to implement its resources.

6.1      RISK
MANAGEMENT POLICIES AND HEDGING ACTIVITIES
The rules and
principles for the management of the treasury operations are laid down in the
10th EDF FR 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 in the name of
the EDF, with financial institutions (central banks and commercial banks), for
the purpose of executing payments and receiving receipts other than the Member
State contributions to the budget.  
Treasury and payment
operations are highly automated and rely on modern information systems.
Specific procedures are applied to guarantee system security and to ensure
segregation of duties in line with the Financial Regulation, the Commission’s
internal control standards, and audit principles.
A written set of
guidelines and procedures regulate the management of the treasury and payment
operations with the objective of limiting operational and financial risk and
ensuring an
adequate
level of control. They cover the different areas of operation, and compliance
with the guidelines and procedures is checked regularly.
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 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 the 10th EDF FR, in
the "special accounts" opened by Member States for the payment of
their contributions. The majority of such accounts are held with Member States'
treasuries or national central banks. These institutions carry the lowest
counterparty risk for the EDF (exposure is with its Member States).
For the part of the
EDF's treasury resources kept with commercial banks in order to cover the
execution of payments, replenishment of these accounts is executed on a
just-in-time basis and is automatically managed by the Commission treasury's
cash management system. Minimum cash levels, proportional to the average amount
of daily payments made from it, are kept on each account. 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 
   || 2013 || 2012 
   ||   ||   
 ECONOMIC OUTTURN OF THE YEAR || (3 072) || (3 023) 
   ||   ||   
 REVENUE ||   ||   
 Entitlements not affecting the budget outturn || (68) || (47) 
 Entitlements established in the current year but not yet collected || (6) || (8) 
 Entitlements established in previous years and collected in the current year || 10 || 14 
 Net effect of pre-financing || 71 || 62 
 Net accrued revenue || 19 || (40) 
   ||   ||   
 EXPENDITURE ||   ||   
 Expenses of the current year not yet paid || 90 || 38 
 Expenses of previous years paid in the current year || (53) || (101) 
 Payment cancellations || 13 || 7 
 Net effect of pre-financing || (431) || (316) 
 Net accrued expenses || 464 || 204 
   ||   ||   
 BUDGET OUTTURN OF THE YEAR || (2 963) || (3 209) 
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
·      
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
2013, the tables set out separately for the 8th EDF the part
used for Lomé Convention programming and the part used for programming under
the Cotonou Agreement
·      
In
accordance with article 1(2)(b) of the Internal Agreement of the 9th
EDF, balances of the EDFs previous to the 9th EDF have been
transferred to the 9 th EDF, and, during the life ot the 9th
EDF, has been committed as 9th funds.
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 twice, firstly by the
agreement signed in Luxembourg on 25 June 2005, secondly by the agreement
signed in Ouagadougou on 22 june 2010.
The EU Council Decision of 27 November 2001
(2001/822/EC) on the association of the overseas countries and territories
(OCT) with the EU 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 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 EUR 256 million is managed by the 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, the initial amount allocated to the 10th EDF
has been 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. 
31 December 2013 was
an important target , the "Sunset clause" of the 10 th
EDF. This clause sets a clear cut-off date for commitments under the 10th
EDF (articles 1(4) and (5) of the 10th EDF Internal Agreement).
During the whole year, every effort has been made in order to commit the
maximum of the funds available from the 10th EDF. 
- 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. 
(EUR
million)
 ACP 10th EDF non-mobilisable performance reserve at 31/12/2013 || 924.1 
 OCT 10th EDF non-mobilisable performance reserve at 31/12/2013 || 14.1 
 Total 10th EDF non-mobilisable performance reserve at 31/12/2013 || 938.2 
In
accordance with article 1(4) of the 10th EDF Internal Agreement, the
Council has, on 12 December 2013, decided to use these funds for the Bridging
Facility. 
- 10th
EDF uncommitted funds
On
31/12/2013, the total amount of uncommitted funds resulted as:
(EUR
million)
 ACP (Bilateral, Regional Intra-ACP, Reserve NIP/RIP) || 74.5 
 OCT || 0.08 
 Total 10th EDF uncommitted funds at 31.12.2013 || 74.6 
These
funds have also been transferred to the Bridging Facility.
-
Bridging Facility
The Internal
Agreement establishing the 11th EDF was signed by the Member States,
meeting within the Council, in June 2013. This Internal Agreement will only enter
into force after ratification by all Member States. 
Pending the entry
into force of the 11th EDF,  the Commission has proposed
transitional measures, the "Bridging Facility", to ensure the
availability of funds for cooperation with ACP countries and with OCT, as well
as for support expenditure, between January 2014 and the entry into force of
the Internal Agreement establishing the 11th EDF. 
This Bridging
Facility has been adopted on 12 December 2013 (Decision 2013/759/EU), and is
financed from the following sources:
-       funds
decommitted from 8th and 9th EDF up to 31.12.2013,
-       uncommitted
balances from the 10th EDF at 31.12.2013,
-       funds
decommitted from the 10th and previous EDFs as from 01.01.2014.
At 31.12.2013, the total funds available
for the bridging facility amount to EUR 998.6 milion for ACP, and EUR 14.2
milion for OCT, not taking interests into accounts. These funds are accounted
for the 11th EDF.
- 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. As of 31 December 2013, the total amount of de-committed Stabex
funds, transferred to the 10th EDF for 33 countries reached EUR
165.3 million.
- 10th EDF Co-financings
Under the 10th
EDF, transfer agreements for co-financings from Member States were signed, and
commitment appropriations were opened for a total amount of EUR 134.4 million,
while payment appropriations were opened for the cashed amounts totalling EUR
110.6 million. 
The
situation of co-financing appropriations at 31.12.2013 is shown in the table
below (EUR million): 
   || Commitments appropriations || Payment appropriations 
 Co-financing - A Envelope || 118.1 || 95.3 
 Co-financing - Intra ACP || 12.1 || 12.1 
 Co-financing – Administrative expenses || 4.2 || 3.2 
   || 134.4 || 110.6 
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
 TABLE 1.1 || 
  8th EDF || 
 EVOLUTION OF APPROPRIATIONS:  31 December 2013 || 
 ANALYSIS OF CREDITS PER INSTRUMENT || 
   ||   || (EUR million) ||   ||   || (EUR million) || 
 INSTRUMENT || INITIAL APPROPRIATION || INCREASES/ DECREASES IN CUMULATIVE  RESOURCES AT 31 DECEMBER 2012 || INCREASE OR DECREASE IN RESOURCES IN 2013 || Notes || CURRENT APPROPRIATION || 
 ACP ||   ||   ||   ||   ||   || 
 Lomé ||   ||   ||   ||   ||   || 
 Total indicative programmes || 7 562 || (2 473) || ( 69) || (1) || 5 020 || 
 Interest-rate subsidies ||  370 || ( 287) ||   ||   ||  83 || 
 Emergency aid ||  140 || ( 4) ||   ||   ||  136 || 
 Aid for refugees ||  120 || ( 17) ||   || (1) ||  103 || 
 Risk capital || 1 000 ||  37 || ( 17) ||   || 1 019 || 
 Stabex || 1 800 || (1 077) ||  0 || (1) ||  724 || 
 Sysmin ||  575 || ( 474) ||   ||   ||  101 || 
 Structural adjustment || 1 400 ||  97 || ( 0) ||   || 1 497 || 
 Heavily indebted poor countries ||   || 1 060 || ( 1) ||   || 1 059 || 
 Use of interest income ||   ||  36 || ( 1) ||   ||  35 || 
 Cotonou ||   ||   ||   ||   ||   || 
 A envelope ||   ||  419 || ( 1) || (1) ||  418 || 
 B envelope ||   ||  252 || ( 14) || (1) ||  238 || 
 TOTAL ACP || 12 967 || (2 431) || ( 104) ||   || 10 432 || 
 OCT ||   ||   ||   ||   ||   || 
 Total indicative programmes ||  115 || ( 78) || ( 0) ||   ||  37 || 
 Interest-rate subsidies ||  9 || ( 7) ||   ||   ||  1 || 
 Emergency aid ||  3 || ( 3) ||   ||   ||   || 
 Aid for refugees ||  1 || ( 1) ||   ||   ||   || 
 Risk capital ||  30 || ( 24) ||   ||   ||  6 || 
 Stabex ||  6 || ( 4) ||   ||   ||  1 || 
 Sysmin ||  3 || ( 0) ||   ||   ||  2 || 
 TOTAL OCT ||  165 || ( 117) || ( 0) ||   ||  48 || 
 TOTAL 8th EDF || 13 132 || (2 548) || ( 104) ||   || 10 481 || 
   ||   ||   ||   ||   ||   || 
 (1) all decreases are decommitments transferred to the non-mobilisable performance reserve 10th EDF ||   ||   || 
 || 
2.2         AGGREGATED
ACCOUNTS 
TABLE 2.1: EDF
AGGREGATED ACCOUNTS AT 31.12.2013: PROGRESS REPORT.
TABLE 2.2: EDF
AGGREGATED ACCOUNTS AT 31.12.2013: CLASS OF AID.
PART II
- EDF ANNUAL ACCOUNTS: FINANCIAL STATEMENTS OF THE INVESTMENT FACILITY
 EUROPEAN INVESTMENT BANK || CA/472/14 
   || 13 March 2014 
   || Document 14/108 
   ||   
   ||   
 BOARD OF DIRECTORS 
 Investment Facility 
 financial statements 
 as at 31 december 2013 
   ||   ||   
   || -        Statement of financial position -        Statement of profit or loss and other comprehensive income -        Statement of changes in contributors’ resources -        Statement of cash flows -        Notes to the financial statements -        Independent auditor’s report ||   
 ORG.: E ||   
3.           FINANCIAL
STATEMENTS OF THE INVESTMENT FACILITY
3.1.       STATEMENT
OF FINANCIAL POSITION AS AT 31 DECEMBER 2013
 (In EUR’000)
   || Notes || 31.12.2013 || 31.12.2012 
   ||   ||   ||   
 ASSETS ||   ||   ||   
 Cash and cash equivalents || 5 || 599 515 || 466 568 
 Derivative financial instruments || 6 || 1 024 || 115 
 Loans and receivables || 7 || 1 222 199 || 1 146 280 
 Available-for-sale financial assets || 8 || 331 699 || 333 001 
 Amounts receivable from contributors || 9/15 || - || 87 310 
 Held-to-maturity financial assets || 10 || 102 562 || 99 029 
 Other assets || 11 ||  148 || 224 
   ||   ||   ||   
 Total Assets ||   || 2 257 147 || 2 132 527 
   ||   ||   ||   
   ||   ||   ||   
 LIABILITIES AND CONTRIBUTORS' RESOURCES ||   ||   ||   
   ||   ||   ||   
 LIABILITIES ||   ||   ||   
 Derivative financial instruments || 6 || 3 545 || 7 035 
 Deferred income || 12 || 35 083 || 37 808 
 Amounts owed to third parties || 13 || 331 235 || 312 086 
 Other liabilities || 14 || 2 572 || 1 153 
   ||   ||   ||   
 Total Liabilities ||   || 372 435 || 358 082 
   ||   ||   ||   
 CONTRIBUTORS' RESOURCES ||   ||   ||   
 Member States Contribution called || 15 || 1 661 309 || 1 561 309 
 Fair value reserve ||   || 78 191 || 68 434 
 Retained earnings ||   || 145 212 || 144 702 
   ||   ||   ||   
 Total Contributors' resources ||   || 1 884 712 || 1 774 445 
   ||   ||   ||   
 Total Liabilities and Contributors' resources ||   || 2 257 147 || 2 132 527 
The accompanying notes
form an integral part of these financial statements.
3.2.       STATEMENT
OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2013
(In EUR’000)
   || Notes || From 01.01.2013 || From 01.01.2012 ||   
   || to 31.12.2013 || to 31.12.2012 ||   
   ||   ||   ||   ||   
 Interest and similar income || 17 || 68 270 || 67 503 ||   
 Interest and similar expenses  || 17 || -1 175 || -1 114 ||   
   ||   ||   ||   ||   
 Net interest and similar income ||   || 67 095 || 66 389 ||   
   ||   ||   ||   ||   
 Fee and commission income || 18 || 4 051 || 1 934 ||   
 Fee and commission expenses || 18 || -43 || -292 ||   
   ||   ||   ||   ||   
 Net fee and commission income ||   || 4 008 || 1 642  ||   
   ||   ||   ||   ||   
 Fair value change of derivative financial instruments ||   || 4 399 || 5 348 ||   
 Net realised gains on available-for-sale financial assets || 19 || 5 294 || 1 045 ||   
 Net foreign exchange loss ||   || -6 925 || -10 575 ||   
   ||   ||   ||   ||   
 Net result on financial operations ||   || 2 768 || -4 182  ||   
   ||   ||   ||   ||   
 Change in impairment on loans and receivables, net of reversal || 7 || -27 334 || 597 ||   
 Impairment on available-for-sale financial assets || 8 || -8 176 || -8 927 ||   
 Impairment on other assets || 20 || - || -337 ||   
 General administrative expenses || 21 || -37 851 || -36 202 ||   
   ||   ||   ||   ||   
 Profit for the year ||   ||  510 || 18 980  ||   
   ||   ||   ||   ||   
 Other comprehensive income: ||   ||   ||   ||   
 Items that are or may be reclassified to profit or loss: ||   ||   ||   ||   
 Available-for-sale financial assets – Fair value reserve  || 8 ||   ||   ||   
 1. Net change in fair value of available-for-sale financial assets  ||   || 12 350 || 18 551 ||   
 2. Net amount transferred to profit or loss ||   || -2 593 || 8 133 ||   
 Total available-for-sale financial assets ||   || 9 757 || 26 684 ||   
   ||   ||   ||   ||   
 Total other comprehensive income ||   || 9 757 || 26 684 ||   
   ||   ||   ||   ||   
 Total comprehensive income for the year ||   || 10 267 || 45 664 ||   
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 2013
(In EUR’000)
   || Contribution called || Fair value reserve || Retained earnings || Total 
 At 1 January 2013                                                                      Notes || 1 561 309 || 68 434 || 144 702 || 1 774 445 
   ||   ||   ||   ||   
 Member States contribution called during the year                   15 || 100 000 || - || - || 100 000 
   ||   ||   ||   ||   
 Profit for the year 2013 || - || - ||  510 ||  510 
   ||   ||   ||   ||   
 Total other comprehensive income for the year || - || 9 757 || - || 9 757 
   ||   ||   ||   ||   
 Changes in contributors’ ressources || 100 000 || 9 757 ||  510 || 110 267 
   ||   ||   ||   ||   
 At 31 December 2013 || 1 661 309 || 78 191 || 145 212 || 1 884 712 
   ||   ||   ||   ||   
   || 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’ ressources || 280 000 || 26 684 || 18 980 || 325 664 
   ||   ||   ||   ||   
 At 31 December 2012 || 1 561 309 || 68 434 || 144 702 || 1 774 445 
   ||   ||   ||   ||   
   ||   ||   ||   ||   
The accompanying notes
form an integral part of these financial statements.
3.4         STATEMENT
OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013
(In EUR’000)
   || Notes || From 01.01.2013 to 31.12.2013 || From 01.01.2012 to 31.12.2012 
 OPERATING ACTIVITIES ||   ||   ||   
 Profit for the financial year ||   ||  510 || 18 980 
 Adjustments made for: ||   ||   ||   
 Impairment on available-for-sale financial assets  ||   || 8 176 || 8 927 
 Net change in impairment on loans and receivables   ||   || 27 334 || -597 
 Interest capitalised on loans and receivables || 7 || -10 363 || -9 622 
 Change in accrued interest and amortised cost on loans and receivables ||   || -249 || -1 407 
 Change in accrued interest and amortised cost on held-to-maturity financial assets ||   ||  733 || -751 
 Change in deferred income ||   || -2 725 || 4 805 
 Effect of exchange rate changes on loans  ||   || 30 402 || 16 044 
 Effect of exchange rate changes on available-for-sale financial assets ||   || -1 154 || -1 204 
 Effect of exchange rate changes on cash held ||   || -378 || -389 
 Profit on operating activities before changes in operating assets and liabilities ||   || 52 286 || 34 786 
 Loan disbursements || 7 || -242 203 || -233 018 
 Repayments of loans || 7 || 119 160 || 115 480 
 Change in accrued interest on cash and cash equivalent ||   || -1 || 389 
 Fair value changes on derivatives ||   || -4 399 || -5 348 
 Increase in held-to-maturity financial assets || 10 || -680 635 || -98 278 
 Maturities of held-to-maturity financial assets || 10 || 676 369 ||   
 Increase in available-for-sale financial assets || 8 || -34 700 || -81 981 
 Repayments/Sales of available-for-sale financial assets  || 8 || 38 737 || 19 601 
 Decrease in other assets ||   ||  76 || 192 
 Increase in other liabilities ||   || 1 419 || 40 
 (Decrease)/Increase in amounts payable to the European Investment Bank ||   || -6 539 || 6 876 
 Net cash flows from operating activities ||   || -80 430 || -241 261 
 FINANCING ACTIVITIES ||   ||   ||   
 Contribution received from Member States ||   || 187 310 || 236 345 
 Amounts received from Member States with regard to interest subsidies ||   || 50 000 || 43 655 
 Amounts paid on behalf of Member States with regard to interest subsidies    ||   || -24 312 || -24 450 
 Net cash flows from financing activities ||   || 212 998 || 255 550 
 Net increase in cash and cash equivalents ||   || 132 568 || 14 289 
 Summary statement of cash flows: ||   ||   ||   
 Cash and cash equivalents at the beginning of financial year ||   || 466 561 || 451 882 
 Net cash from: ||   ||   ||   
 Operating activities ||   || -80 430 || -241 261 
 Financing activities ||   || 212 998 || 255 550 
 Effects of exchange rate changes on cash and cash equivalents ||   ||  378 || 389 
 Cash and cash equivalents at the end of the financial year ||   || 599 507 || 466 561 
 Cash and cash equivalents are composed of: ||   ||   ||   
 Cash in hand ||   || 194 107 || 10 588 
 Term deposits (excluding accrued interest) ||   || 405 400 || 455 973 
   ||   || 599 507 || 466 561 
The accompanying notes
form an integral part of these financial statements.

3.5         NOTES
TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2013
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” or “the Bank”) manages the
contributions on behalf of the Member States (“Donors”) in accordance with the
terms of the Agreement and acts as an administrator of the Facility.
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 EIB 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 15% (10 % up the
end of 2012) of these subsidies can be used to fund project-related technical assistance.
The present financial statements cover the
period from 1 January 2013 to 31 December 2013.
 
On a proposal from the Management Committee
of EIB, the Board of Directors of EIB adopted the Financial Statements on 13 March 2014, and authorised
their submission to the Board of Governors for approval by 29 April 2014.
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:
§  
Measurement
of fair values of financial instruments
Fair values
of financial assets and financial liabilities that are traded in active markets
are based on quoted market prices or broker price quotations. Where the fair
values 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 judgement is required in establishing
fair values. The valuations are categorised into different levels in the fair
value hierarchy based on the inputs used in the valuation techniques as
described and disclosed in Notes 2.4.3 and 4.
These
valuation techniques may include net present value and discounted cash flow
models, comparison to similar instruments for which market observable prices
exist, Black-Scholes and polynomial option pricing models and other valuation
models. Assumptions and inputs used in valuation techniques include risk-free
and benchmark interest rates, credit spreads used in estimating discount rates,
bond and equity prices, foreign currency exchange rates, equity and equity index
prices and expected price volatilities and correlations.
The
objective of valuation techniques is to arrive at a fair value measurement that
reflects the price that would be received to sell the asset or paid to transfer
the liability in an orderly transaction between market participants at the
measurement date.
The
Facility uses widely recognised valuation models for determining the fair value
of common and more simple financial instruments, like interest rate and
currency swaps that use only observable market data and require limited
management judgement and estimation. Observable prices and model inputs are
usually available in the market for listed debt and equity securities, exchange
traded derivatives and simple over the counter derivatives like interest rate
swaps. Availability of observable market prices and model inputs reduces the
need for management judgement and estimation and also reduces the uncertainty
associated with determination of fair values. Availability of observable market
prices and inputs varies depending on the products and markets and is prone to
changes based on specific events and general conditions in the financial
markets.
For more
complex instruments, the Facility uses own valuation models, which are
developed from recognised valuation models. Some or all of the significant
inputs into these models may not be observable in the market, and are derived
from market prices or rates or are estimated based on assumptions. Example of
instruments involving significant unobservable inputs includes certain loans
and guarantees for which there is no active market. Valuation models that
employ significant unobservable inputs require a higher degree of management
judgement and estimation in the determination of fair value. Management judgement
and estimation are usually required for selection of the appropriate valuation
model to be used, determination of expected future cash flows on the financial
instrument being valued, determination of probability or counterparty default
and prepayments and selection of appropriate discount rates.
The
Facility has an established control framework with respect to the measurement
of fair values. This framework includes the EIB’s Investment Bank’s Risk
Management and Market Data Management functions. These functions are
independent of front office management and are responsible for verifying
significant fair value measurements. Specific controls include:
-       Verification
of observable pricing;
-       A review
and approval process for new valuation models and changes to existing models;
-       Calibration
and back testing of models against observed market transactions;
-       Analysis
and investigation of significant valuation movements;
-       Review of
significant unobservable inputs and valuation adjustments.
Where
third-party information such as broker quotes or pricing services are used to
measure fair value, the Facility verifies that such valuations meet the
requirements of IFRS. This includes the following:
-       Determining
where broker quote or pricing service pricing is appropriate;
-       Assessing
whether a particular broker quote or pricing service is reliable;
-       Understanding
how the fair value has been arrived at and the extent to which it represents
actual market transactions;
-       When prices
for similar instruments are used to measure fair value, how these prices have
been adjusted to reflect the characteristics of the instrument subject to
measurement.
§  
Impairment
losses on loans and receivables
The
Facility reviews its loans and receivables at each reporting date to assess
whether an allowance for impairment should be recorded in the statement of
profit or loss and other 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 allowances against individually significant loans and
receivables, the Facility may also book a collective impairment allowance
against exposures which have not been individually identified as impaired and
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
arm’s 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; 
-       adjusted
net assets method; 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     Changes in accounting policies
Except
for the changes below, the Facility has consistently applied the accounting
policies set out in Note 2.4 to all periods presented in these financial
statements. The Facility has adopted the following new standards and amendments
to standards.
Standard
adopted
The
following standards, amendments to standards and interpretations were adopted
in the preparation of these financial statements:
Amendments
to IAS 1 Presentation of items of Other comprehensive income (OCI)
As a
result of the amendments to IAS 1, the Facility has modified the presentation
of items of OCI in its statement of profit or loss and OCI, to present
separately items that would be reclassified to profit or loss from those that
would never be. Comparative information has been re-presented accordingly.
IFRS 13 Fair
value measurement
This
standard establishes a single framework for measuring fair value and making
disclosures about fair value measurements when such measurements are required
or permitted by other IFRSs. It unifies the definition of fair value as the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
It replaces and expands the disclosure requirements about fair value
measurements in other IFRSs, including IFRS 7. As a result, the Facility has
included additional disclosures in this regard.  In accordance with the
transitional provisions of IFRS 13, the Facility has applied the new fair value
measurement guidance prospectively and has not provided any comparative
information for new disclosures.  
IFRS
13 refers to a number of valuation adjustments which the Facility has
considered in the valuations of its derivatives, namely:
-       credit
value adjustments (CVA), reflecting the counterparties credit risk embedded in
the fair value of derivatives; 
-       debit value
adjustments (DVA), reflecting the Facility’s own credit embedded in the fair
value of derivatives.
CVA
per counterparty is calculated on the potential future exposure (PFE) and
expected positive exposure (EPE) measures, per net counterparty exposure. The
probabilities of default per counterparty are then modelled using
market-available CDS spreads. For counterparties without available CDS spreads,
spreads of banks of similar size and rating in similar jurisdictions are used.
The
adoption of this standard resulted in the recognition of a loss of EUR 184k in
the current period statement of profit or loss and other comprehensive income,
as described in Note 4.
Standards
issued but not yet effective
The following standards, amendments to
standards and interpretations are effective for annual periods beginning after
1 January 2013, and have not been applied in preparing these Financial
Statements. Those of which may be relevant for the Facility are set out below. 
The Facility does not plan to adopt these standards early.
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 IAS 39 in its entirety. The current effective date of the standard is
no earlier than 1 January 2017. IFRS 9 has not yet been 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 three standards were issued in
2012 and have been endorsed by the European Union being effective for annual
periods beginning after 1 January 2014. The impact of the adoption of these
standards on the Facility’s financial statements has not yet been determined.
IFRS 10 Consolidated financial statements
This standard establishes the principles for
the presentation and preparation of consolidated financial statements when an
entity controls one or more other entities.
IFRS 11 Joint arrangements
This standard sets up a framework for
determining the type of joint arrangements that an entity has with another
entity.
IFRS 12 Disclosure of interests in other
entities
The objective of this standard is to require
the disclosure of information that enables users of financial statements to
evaluate the nature of, and risks associated with, its interests in other
entities and the effects of those interests on its financial position,
financial performance and cash flows.
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 profit or loss and other
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
profit or loss and other comprehensive income.
The elements of the statement of profit or
loss and other 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.
§  
Fair
value of financial instruments
Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the
principal, or in its absence, the most advantageous market to which the
Facility has access at that date. 
When applicable, the EIB on behalf of the
Facility measures the fair value of an instrument using the quoted price in an
active market for that instrument. A market is regarded as active if
transactions for the asset or liability take place with sufficient frequency
and volume to provide pricing information on an on-going basis.
Where the fair values of financial assets and
financial liabilities recorded on the balance sheet cannot be derived from
active markets, they are determined using a variety of valuation techniques
that include the use of mathematical models. The input to these models is taken
from observable markets where possible, but where this is not feasible, a
degree of judgement is required in establishing fair values. The chosen
valuation technique incorporates all the factors that market participants would
take into account in pricing a transaction.
The EIB measures fair values using the
following fair value hierarchy that reflects the significance of the inputs
used in making the measurements:
-                         
Level
1: inputs that are unadjusted quoted market prices in active markets for
identical instruments to which the Facility has access.
-                         
Level
2: inputs other than quoted prices included within Level 1 that are observable
either directly (i.e. as prices) or indirectly (i.e. derived from prices). This
category includes instruments valued using quoted market prices in active
markets for similar instruments, quoted prices for identical or similar
instruments in markets that are considered less than active or other valuation
techniques where all significant inputs are directly or indirectly observable
from market data.
-                         
Level
3: inputs that are not observable. This category includes all instruments where
the valuation technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument’s valuation.
This category includes instruments that are valued based on quoted prices for
similar instruments where significant unobservable adjustments or assumptions
are required to reflect differences between the instruments.
The Facility recognises transfers between
levels of the fair value hierarchy as of the end of the reporting period during
which the change has occurred.
§  
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 direct equity investments 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 transferred to the statement of profit or loss and
other comprehensive income.
For unquoted investment, the fair value is
determined by applying recognised valuation techniques (for example adjusted
net assets, 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 profit or loss and other
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 profit or loss and other
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 profit or loss and other comprehensive income) is removed from contributors’
resources and recognised in the statement of profit or loss and other
comprehensive income. Impairment losses on available-for-sale financial assets
are not reversed through the statement of profit or loss and other
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
profit or loss and other 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, short term currency swaps and interest rate
swaps.
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 shown in the income statement under “Fair value change of
derivative financial instruments”.
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 profit or loss and other 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 (“TA”) on behalf of the Member
States.
The part of the Member States contributions
allocated to the payment of interest subsidies and TA 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 TA 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 profit or loss and other 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) || 31.12.2013 || 31.12.2012 
 ASSETS ||   ||   
 Cash and cash equivalents || 599 515 || 466 568 
 Derivative financial instruments || 1 024 || 115 
 Loans and receivables || 1 222 199 || 1 146 280 
 Amounts receivable from contributors || - || 87 310 
 Held-to-maturity financial assets || 102 562 || 99 029 
 Other assets ||  148 || 224 
 Total Assets || 1 925 448 || 1 799 526 
   ||   ||   
 OFF BALANCE SHEET ||   ||   
 Contingent liabilities ||   ||   
 - Guarantees undrawn || 25 000 || 20 000 
 Commitments ||   ||   
 - Undisbursed loans || 889 866 || 749 044 
 - Guarantees drawn || 4 414 || 6 224 
 Total Off balance sheet || 919 280 || 775 268 
   ||   ||   
 Total credit exposure || 2 844 728 || 2 574 794 
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 31.12.2013 In EUR’000 || Guaranteed || Other credit enhancements || Not guaranteed || Total || % of Total 
 Banks || 18 341 || 112 178 || 338 464 || 468 983 || 38% 
 Corporates || 26 315 || 94 365 || 417 990 || 538 670 || 44% 
 Public institutions || 29 120 || - ||  31 || 29 151 || 2% 
 States || - || 5 322 || 180 073 || 185 395 || 16% 
 Total disbursed || 73 776 || 211 865 || 936 558 || 1 222 199 || 100% 
 Signed not disbursed || 14 966 || 117 758 || 757 142 || 889 866 ||   
 At 31.12.2012 In EUR’000 || Guaranteed || Other credit enhancements || Not guaranteed || Total || % of Total 
 Banks || 12 630 || 136 695 || 207 582 || 356 907 || 31% 
 Corporates || 20 077 || 78 171 || 478 358 || 576 606 || 50% 
 Public institutions || 30 462 || - || 18 || 30 480 || 3% 
 States || - ||  5 819 || 176 468 || 182 287 || 16% 
 Total disbursed || 63 169 || 220 685 || 862 426 || 1 146 280 || 100% 
 Signed not disbursed ||  14 091 || 142 963 || 591 990 || 749 044 ||   
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 a 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 2013 and 31 December 2012 by the
Loan Grading applications, based on the exposure signed (disbursed and
undisbursed):
 At 31.12.2013 In EUR’000 ||   ||  High Grade ||  Standard Grade ||  Min. Accept. Risk ||  High Risk ||  No grading ||  Total || % of Total 
   ||   || A to B- || C || D+ ||  D- and below ||   ||   ||   
 Borrower || Banks || 65 571 || 15 434 || 97 478 || 689 905 || 404 129 || 1 272 517 || 60% 
 Corporates || 6 773 || 15 970 || 5 691 || 520 048 || - || 548 482 || 26% 
 Public institutions || - || - || - || 69 151 || - || 69 151 || 3% 
 States || - || - || - || 221 915 || - || 221 915 || 11% 
 Total ||   || 72 344 || 31 404 || 103 169 || 1 501 019 || 404 129 || 2 112 065 || 100% 
 At 31.12.2012 In EUR’000 ||   ||  High Grade ||  Standard Grade ||  Min. Accept. Risk ||  High Risk ||  No grading ||  Total || % of Total 
   ||   || A to B- || C || D+ ||  D- and below ||   ||   ||   
 Borrower || Banks || 50 000 || 24 342 || 21 864 || 529 325 || 337 014 || 962 545 || 51% 
 Corporates || 7 466 || 8 006 || - || 605 672 || - || 621 144 || 33% 
 Public institutions || - || - || - || 70 480 || - || 70 480 || 4% 
 States || - || - || - || 241 155 || - || 241 155 || 12% 
 Total ||   || 57 466 || 32 348 || 21 864 || 1 446 632 || 337 014 || 1 895 324 || 100% 
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 || 31.12.2013 || 31.12.2012 
 Uganda || 144 816 || 140 833 
 Kenya || 131 384 || 131 566 
 Mauritius || 108 511 || 119 228 
 Regional-ACP || 101 863 || 95 636 
 Mauritania || 93 455 || 73 602 
 Ethiopia || 75 962 || 81 666 
 Nigeria || 73 469 || 14 383 
 Cameroon || 70 154 || 72 525 
 Jamaica || 68 000 || 71 027 
 Dominican Republic || 64 015 || 67 991 
 Togo || 50 319 || 52 644 
 Congo (Democratic Republic) || 39 047 || 28 415 
 Cape Verde || 27 470 || 27 073 
 Mozambique || 26 202 || 28 298 
 Tanzania || 26 121 || - 
 French Polynesia || 13 994 || 2 631 
 Senegal || 13 063 || 13 762 
 Burkina Faso || 8 944 || 10 727 
 Samoa || 8 872 || 8 759 
 Congo || 8 649 || 10 431 
 Mali || 7 717 || 7 931 
 Rwanda || 6 439 || 9 641 
 Zambia || 6 412 || 18 772 
 Angola || 6 380 || 10 009 
 Ghana || 6 365 || 5 642 
 Haiti || 5 511 || 4 654 
 Vanuatu || 5 028 || 6 263 
 Malawi || 3 999 || 4 950 
 New Caledonia || 3 708 || 4 198 
 Lesotho || 3 417 || 3 827 
 Niger || 3 020 || 4 146 
 Grenada || 2 243 || 2 477 
 Palau || 2 224 || 2 566 
 Saint Lucia || 2 102 || 2 916 
 Tonga || 1 416 || 2 199 
 Fiji || 1 032 || 1 619 
 Gabon ||  512 || 1 011 
 Liberia ||  364 ||  4 
 Belize || - ||  13 
 Djibouti || - ||  762 
 Trinidad and Tobago || - || 1 483 
 Total ||                        1 222 199 || 1 146 280 
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 || 31.12.2013 || 31.12.2012 
 Global loans and agency agreements || 337 482 || 251 797 
 Electricity, coal and others || 234 106 || 255 031 
 Urban development, renovation and transport || 216 244 || 215 642 
 Basic material and mining || 176 909 || 185 200 
 Tertiary and other || 148 875 || 116 414 
 Roads and motorways || 38 880 || 40 565 
 Airports and air traffic management systems || 29 116 || 30 462 
 Materials processing, construction || 20 884 || 24 154 
 Telecommunications || 11 746 || 18 428 
 Paper chain || 4 540 || 4 747 
 Investment goods/consumer durables || 3 417 || 3 827 
 Airlines and aircraft manufacture || - || 13 
 Total || 1 222 199 || 1 146 280 
3.2.3.5    
Arrears
on loans
Amounts in arrears are identified, monitored
and reported according to the procedures defined into the bank wide “Finance
Monitoring Guidelines and Procedures”. These procedures are in line with best
banking practices and are adopted for all loans managed by the EIB.
Loans in arrears are monitored by the
Operational Reporting and Arrears Unit of EIB’s Transaction Management and
Restructuring Directorate. This ensures that (i) potential arrears are properly
detected and reported to the services in charge; (ii) critical cases are promptly
escalated to the right operational and decision level; (iii) regular reporting
is provided on the overall status of arrears and on the recovery measures
already taken or to be taken.
Regular reports on loans in arrears are sent
to the European Commission. Twice a year the EIB management committee and the
Board of Directors receive a summary analysis of arrears for loans overdue.
The
arrears of payments on concerned loans can be analysed as follows (in EUR’000):
   ||   Notes || Loans and receivables 31.12.2013 || Loans and receivables 31.12.2012 
 Carrying amount ||   || 1 222 199 || 1 146 280 
   ||   ||   ||   
 Individually impaired ||   ||   ||   
 Gross amount ||   || 227 007 || 105 154 
 Allowance for impairment || 7 || -70 791 || -45 145 
 Carrying amount individually impaired ||   || 156 216 || 60 009 
   ||   ||   ||   
 Collectively impaired ||   ||   ||   
 Gross amount ||   || - || - 
 Allowance for impairment ||   || - || - 
 Carrying amount collectively impaired ||   || - || - 
   ||   ||   ||   
 Past due but not impaired ||   ||   ||   
   ||   ||   ||   
 Past due comprises ||   ||   ||   
 30-60 days ||   || 1 561 || 12 
 60-90 days ||   || - || - 
 90-180 days ||   || - || - 
 more 180 days ||   || - || - 
 Carrying amount past due but not impaired ||   || 1 561 || 12 
   ||   ||   ||   
 Carrying amount neither past due nor impaired ||   || 1 064 422 || 1 086 259 
   ||   ||   ||   
 Total carrying amount loans and receivables ||   || 1 222 199 || 1 146 280 
   ||   ||   ||   || 
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 December
2013, investments were in the form of bank deposits. 
The authorized banks have a rating similar to the short-
and long-term ratings required for the EIB’s own treasury placements. The
minimum short term rating required for authorised banks 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 is currently EUR 50 000 000 (fifty million euro). 
All investments have been done with authorised entities
with a maximum tenor of three months from trading date and up to the credit
exposure limit. As at 31 December 2013 and 31 December 2012 all treasury
deposits held by the treasury portfolio of the Facility had a minimum rating of
P-1 (Moody’s equivalent) at settlement day. 
The following table shows the situation of bank cash
accounts and deposits including accrued interest (in EUR’000):
 Minimum short-term rating (Moody’s term) ||      Minimum long-      term rating      (Moody’s term) || 31.12.2013 || 31.12.2012 
 P-1 ||      Aa1 || 48 130 || 8% || 43 400 || 9% 
 P-1 ||      Aa3 || 50 000 || 8% || 130 901 || 28% 
 P-1 ||      A1 || 106 572 || 18% || 83 500 || 18% 
 P-1 ||      A2 || 394 765 || 66% || 208 729 || 45% 
 P-1 ||      Aa2 || 48 || 0% || 38 || 0% 
 Total ||       || 599 515 || 100% || 466 568 || 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 cross currency swaps and cross currency interest rate swaps,
sub-divided according to their notional amount and fair value:
 Swap contracts at 31.12.2013 || less than || 1 year || 5 years || more than || Total 2013 
 In EUR’000 || 1 year || to 5 years || to 10 years || to 10 years ||   
 Notional amount || 2 453 || 2 584 || 13 491 || - || 18 528 
 Fair Value (i.e. net discounted value) ||  19 || - 62 || -1 892 || - || -1 935 
 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 
The Facility enters into foreign exchange short term currency
swaps (“FX swaps”) contracts in order to hedge currency risk on loan
disbursements in currencies different from EUR. FX swaps have a maturity of
maximum three months and are regularly rolled-over. The notional amount of FX
swaps stood at EUR 700 million at 31 December 2013 against EUR 649 million at
31 December 2012. The fair value of FX swaps amounts to EUR -1.5 million at 31
December 2013 against EUR -2.9 million at 31 December 2012.
The Facility enters into interest rate swap contracts in
order to hedge the interest rate risk on loans disbursed. As at 31 December
2013 there are two interest rate swaps outstanding with a notional amount of
EUR 43.3 million (2012: EUR 19.6 million) and a fair value of EUR 0.92 million
(2012: EUR 0.03 million).
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 T-Bills issued by Belgium, France, Italy and Spain with remaining maturities of less than three months. EU Member
States are eligible issuers. The maximum authorized limit for each authorised
issuer is EUR 50 000 000 (fifty million euro). Investments in medium and
long-term bonds could also be eligible, according to the investment guidelines
and depending on liquidity requirements:
 Minimum short-term rating (Moody’s term) ||      Minimum long-      term rating      (Moody’s term) || 31.12.2013 || 31.12.2012 
 P-1 || Aa2 || 16 199 || 16% || - || - 
 P-1 || Aa3 || 39 399 || 38% || - || - 
 P-2 || Baa2 || - || - || 50 143 || 51% 
 P-3 ||      Baa3 || 46 964 || 46% || 48 886 || 49% 
 Total ||       || 102 562 ||  100% || 99 029 ||  100% 
3.3     Liquidity risk
Liquidity risk refers to an institution’s ability to fund
increases in assets and meet obligations as they come due, without incurring
unacceptable losses. It can be split into funding liquidity risk and market
liquidity risk. Funding liquidity risk is the risk that an institution will not
be able to meet efficiently both expected and unexpected current and future
cash flow needs without affecting its daily operations or its financial
condition. Market liquidity risk is the risk that an institution cannot easily
offset or eliminate a position at the market price because of inadequate market
depth or market disruption.
3.3.1       
Liquidity risk
management
The Facility is primarily funded by annual contributions
from Member States (9th and 10th EDF resources) as well as by reflows stemming
from the Facility’s operations. The Facility manages its funding liquidity risk
primarily by planning of its net liquidity needs and the required Member States
annual contributions.
Each year, the EC, taking into account EIB’s forecasts
concerning the management and operations of the Facility, 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 cash disbursements, as communicated periodically by EIB’s Lending
Department. Funds are invested on the money market and bond markets in the form
of interbank deposits and other short term financial instruments by taking into
consideration the Facility’s cash disbursement obligations. The Facility’s
liquid assets are managed by the Bank’s Treasury Department with a view to
maintain appropriate liquidity to enable the Facility to meet its
obligations.   
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 EIB’s Planning
and Settlement of Operations Department. Furthermore, 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).
In terms of non-derivative financial liabilities, the
Facility holds commitments in 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 table representing the maturity profile of
non-derivative financial liabilities as at 31 December 2012 has been restated
due to the application of an updated methodology. In the 2012 financial
statements, the breakdown of maturities has been prepared using forecasted
rather than contractual maturity dates, primarily due to the uncertainty in the
timing of cash flows. In the updated methodology, the maturity profile of
non-derivative financial liabilities depicts the cash outflows based on their
contractual maturity date.  
Loans under the IF have a disbursement deadline. However,
disbursements are made at times and in amounts reflecting the progress of
underlying investment projects. Moreover, the IF’s loans are transactions
performed in a relatively volatile operating environment, hence their
disbursement schedule is subject to a significant degree of uncertainty. 
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.
Committed interest subsidies’ cash outflows occur generally
in the case of subsidized loans financed by the Bank’s own resources.
Therefore, reported outflows represent only commitments related to these loans
rather than the total amount of committed undisbursed interest subsidies which
was reflected in the 2012 financial statements. As in the case of loans, their
disbursement schedule is uncertain.  
Committed TA “gross nominal outflow” in the “Maturity
profile of non-derivative financial liabilities” table refers to the total
undisbursed portion of signed TA contracts. The disbursement time pattern is
subject to a significant degree of uncertainty. Cash outflows classified in the
“3 months or less” bucket represent the amount of outstanding invoices received
by the reporting date. 
Commitments for non-derivative financial liabilities for
which there is no defined contractual maturity date are classified under
“Maturity Undefined”. Commitments, for which there is a recorded cash
disbursement request at the reporting date, are classified under the relevant
time bucket.
In terms of derivative financial liabilities, the maturity
profile represents the contractual undiscounted gross 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 31.12.2013 
 Outflows for committed but un-disbursed loans || 363 || - || - || - || 889 503 || 889 866 
 Outflows for committed investment funds and share subscription || 1 689 || - || - || - || 175 132 || 176 821 
 Others (issued guarantees, drawn guarantees) || - || - || - || - || 29 414 || 29 414 
 Outflows for committed interest subsidies || - || - || - || - || 191 760 || 191 760 
 Outflows for committed TA || 759 || - || - || - || 14 707 || 15 466 
 Total || 2 811 || - || - || - || 1 300 516 || 1 303 327 
 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 
 Outflows for committed but un-disbursed loans || 3 882 || - || - || - || 745 162 || 749 044 
 Outflows for committed investment funds and share subscription || 430 || - || - || - || 216 640 || 217 070 
 Others (issued guarantees, drawn guarantees) || - || - || - || - || 26 224 || 26 224 
 Outflows for committed interest subsidies || - || - || - || - || 179 108 || 179 108 
 Outflows for committed TA || 1 867 || - || - || - || 21 753 || 23 620 
 Total || 6 179 || - || - || - || 1 188 887 || 1 195 066 
 Maturity profile of derivative financial liabilities In EUR’000 as at 31.12.2013 ||  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 || 506 || 5 183 || 11 476 || 2 731 || 19 896 
 CCS and CCIRS – Outflows || -539 || -5 858 || -12 894 || -2 819 || -22 110 
 Short term currency swaps – Inflows || 700 000 || - || - || - || 700 000 
 Short term currency swaps – Outflows || -701 490 || - || - || - || -701 490 
 Interest Rate Swaps – Inflows || 232 || 1 053 || 6 341 || 5 720 || 13 346 
 Interest Rate Swaps – Outflows || - || -1 874 || -6 385 || -3 773 || -12 032 
 Total || -1 291 || -1 496 || -1 462 || 1 859 || -2 390 
   ||   ||   ||   ||   ||   
 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 
3.4     Market risk
Market risk represents the risk that changes in market
prices and rates, such as interest rates, equity prices and foreign exchange
rates will affect an entity’s income or the value of its holdings in financial
instruments.
3.4.1.     
Interest
rate risk
Interest rate risk arises from the volatility
in the economic value of, or in the income derived from, the Facility’s
interest rate bearing positions due to adverse movements in 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 micro hedging swaps to interest rate risk via a Basis Point
Value (BPV) calculation. Micro hedging swaps include CCS, CCIRS and
interest rate swaps which are associated with the hedging of specific lending
operations.
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”, “medium – 7
to 11 years”, “long
– 12 to 20 years” or “extra-long – more than 21 years”.
To determine the net present value (NPV) of
the loans’ cash flows denominated in EUR, the Facility uses the EIB’s EUR base
funding curve (EUR swap curve adjusted with EIB’s global funding spread).  The
EIB’s USD funding curve is used for the calculation of the NPV of loan’s cash
flows denominated in USD. The NPV of the loans’ cash flows denominated in
currencies for which a reliable and sufficiently complete discount curve is not
available, is determined by using EIB’s EUR base funding curve as a proxy. 
To calculate 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 December 2013 would decrease by EUR 344k (as at 31 December 2012: decrease
by EUR 341k) if all relevant interest rates curves are simultaneously shifted
upwards in parallel by 1 basis point.
 Basis point value In EUR’000 || Money Market || Very Short || Short || Medium || Long || Extra Long || Total 
 As at 31.12.2013 || 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 || -57 || -90 || -124 || -48 || - || -344 
 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 
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 due to fluctuations in exchange rates.
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 FX 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.
3.4.2.3       Foreign
exchange position
The following tables show the Facility’s foreign exchange
position (in EUR’000):
  At 31 December 2013 || EUR || USD || KES || ACP/OCT Currencies || Total 
   ||   ||   ||   ||   ||   
 ASSETS ||   ||   ||   ||   ||   
 Cash and cash equivalents || 542 373 || 57 142 || - || - || 599 515 
 Derivative financial instruments || 3 168 || -2 144 || - || - || 1 024 
 Loans and receivables || 488 249 || 572 346 || 66 111 || 95 493 || 1 222 199 
 Available-for-sale financial assets || 70 299 || 252 668 || - || 8 732 || 331 699 
 Held-to-maturity financial assets || 102 562 || - || - || - || 102 562 
 Other assets || - || - || - ||  148 ||  148 
 Total assets || 1 206 651 || 880 012 || 66 111 || 104 373 || 2 257 147 
   ||   ||   ||   ||   ||   
 LIABILITIES AND CONTRIBUTORS’ RESOURCES ||   ||   ||   ||   ||   
 Liabilities ||   ||   ||   ||   ||   
 Derivative financial instruments || -715 945 || 719 490 || - || - || 3 545 
 Deferred income || 34 880 ||  203 || - || - || 35 083 
 Amounts owed to third parties || 331 235 || - || - || - || 331 235 
 Other liabilities || 2 428 ||  2 || - ||  142 || 2 572 
 Total liabilities || -347 402 || 719 695 || - ||  142 || 372 435 
 Contributors’ resources ||   ||   ||   ||   ||   
 Member States Contribution called || 1 661 309 || - || - || - || 1 661 309 
 Fair value reserve || 2 632 || 69 082 || - || 6 477 || 78 191 
 Retained earnings || 145 212 || - || - || - || 145 212 
 Total Contributors’ resources || 1 809 153 || 69 082 || - || 6 477 || 1 884 712 
 Total liabilities and Contributors’ resources || 1 461 751 || 788 777 || - || 6 619 || 2 257 147 
 Currency position as at 31 December 2013 || -255 100 || 91 235 || 66 111 || 97 754 || - 
   ||   ||   ||   ||   ||   
 As at 31 December 2013: ||   ||   ||   ||   ||   
 COMMITMENTS ||   ||   ||   ||   ||   
 Un-disbursed loans and available-for-sale financial assets || 896 655 || 170 032 || - || - || 1 066 687 
 Guarantees drawn || - || - || - || 4 414 || 4 414 
 Interest subsidies and TA || 222 588 || - || - || - || 222 588 
   ||   ||   ||   ||   ||   
 CONTINGENT LIABILITIES ||   ||   ||   ||   ||   
 Guarantees undrawn || 25 000 || - || - || - || 25 000 
  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 || 228 175 || - || - || - || 228 175 
 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 2013 a +/- 10 percent change in the USD conversion
rate would result in a change of contributors’ resources amounting to EUR 9 123
respectively EUR -9 123 (31 December 2012: EUR 6 677 respectively EUR -6 677).
3.4.2.5       Conversion
rates
The following
conversion rates were used for establishing the balance sheet at 31 December
2013 and 31 December 2012:
   || 31 December 2013 || 31 December 2012 
 Non-EU currencies ||   ||   
 Dominican Republic Pesos (DOP) || 58.3329 || 53.1220 
 Fiji Dollars (FJD) || 2.5655 || 2.3417 
 Haitian Gourde (HTG) || 60.1459 || 55.7265 
 Kenya Shillings (KES) || 118.73 || 113.68 
 Mauritania Ouguiyas (MRO) || 398.7 || 393.99 
 Mauritius Rupees (MUR) || 41.27 || 40.19 
 Rwanda Francs (RWF) || 926.86 || 811.83 
 Tanzania Shillings (TZS) || 2 179.05 || n/a 
 Uganda Shillings (UGX) || 3 476 || 3 549 
 United States Dollars (USD) || 1.3791 || 1.3194 
 Franc CFA Francs (XAF/XOF) || 655.957 || 655.957 
 South Africa Rand (ZAR) || 14.566 || 11.1727 
3.4.3.     
Equity
price risk (in EUR’000)
Equity price risk refers to the risk that the
fair values of equity investments decrease as the result of changes in the
levels of equity prices and/or the value of equity investments.
The IF is exposed to equity price risk via
its investments in direct equity and venture capital funds.
The value of non-listed 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
derived from 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 the value of individual direct
equity and venture capital investments, with all other variables held constant
is      EUR -33 170 as at 31 December 2013 and EUR -33 300 as at 31 December
2012.
4       
Fair values of financial instruments
4.1     Accounting classifications and fair values
The following table shows the carrying amounts and fair
values of financial assets and financial liabilities, including their levels in
the fair value hierarchy. These do not include fair value information for financial assets and
financial liabilities not measured at fair value if the carrying amount is a
reasonable approximation of fair value. 
 At 31 December 2013 In EUR’000 || Carrying amount ||   || Fair value 
 Held for trading || Available-for-sale || Loan and receivables || Held to maturity || Other financial liabilities || Total ||   || Level 1 || Level 2 || Level 3 || Total 
 Financial assets measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Derivative financial instruments || 1 024 || - || - || - || - || 1 024 ||   || - || 1 024 || - || 1 024 
 Venture Capital Fund            || - || 269 252 || - || - || - || 269 252 ||   || - || - || 269 252 || 269 252 
 Direct Equity Investment || - || 62 447 || - || - || - || 62 447 ||   || 6 844 || - || 55 603 || 62 447 
 Total || 1 024 || 331 699 || - || - || - || 332 723 ||   || 6 844 || 1 024 || 324 855 || 332 723 
 Financial assets not measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Cash and cash equivalents || - || - || 599 515 || - || - || 599 515 ||   ||   ||   ||   ||   
 Loans and receivables || - || - || 1 222 199 || - || - || 1 222 199 ||   || - || 1 351 244 || - || 1 351 244 
 Bonds || - || - || - || 102 562 || - || 102 562 ||   || 102 549 || - || - || 102 549 
 Other assets || - || - || 148 || - || - || 148 ||   ||   ||   ||   ||   
 Total || - || - || 1 821 862 || 102 562 || - || 1 924 424 ||   || 102 549 || 1 351 244 || - || 1 453 793 
 Total financial assets || 1 024 || 331 699 || 1 821 862 || 102 562 || - || 2 257 147 ||   || 
   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Financial liabilities measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Derivative financial instruments || -3 545 || - || - || - || - || -3 545 ||   || - || -3 545 || - || -3 545 
 Total || -3 545 || - || - || - || - || -3 545 ||   || - || -3 545 || - || -3 545 
 Financial liabilities not measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Amounts owed to third parties || - || - || - || - || -331 235 || -331 235 ||   ||   ||   ||   ||   
 Other liabilities || - || - || - || - || -2 572 || -2 572 ||   ||   ||   ||   ||   
 Total || - || - || - || - || -333 807 || -333 807 ||   ||   ||   ||   ||   
 Total financial liabilities || -3 545 || - || - || - || -333 807 || -337 352 ||   ||   ||   ||   ||   
4          Fair values of financial instruments
(continued)
4.1           Accounting
classifications and fair values (continued)
 At 31 December 2012 In EUR’000 || Carrying amount ||   || Fair value 
 Held for trading || Available-for-sale || Loan and receivables || Held to maturity || Other financial liabilities || Total ||   || Level 1 || Level 2 || Level 3 || Total 
 Financial assets measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Derivative financial instruments || 115 || - || - || - || - || 115 ||   || - || 115 || - || 115 
 Venture Capital Fund            || - || 265 301 || - || - || - || 265 301 ||   || - || - || 265 301 || 265 301 
 Direct Equity Investment || - || 67 700 || - || - || - || 67 700 ||   || 11 001 || - || 56 699 || 67 700 
 Total || 115 || 333 001 || - || - || - || 333 116 ||   || 11 001 || 115 || 322 000 || 333 116 
 Financial assets not measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Cash and cash equivalents || - || - || 466 568 || - || - || 466 568 ||   ||   ||   ||   ||   
 Loans and receivables || - || - || 1 146 280 || - || - || 1 146 280 ||   || - || 1 226 409 || - || 1 226 409 
 Amounts receivable from contributors || - || - || 87 310 || - || - || 87 310 ||   ||   ||   ||   ||   
 Bonds || - || - || - || 99 029 || - || 99 029 ||   || 98 805 || - || - || 98 805 
 Other assets || - || - || 224 || - || - || 224 ||   ||   ||   ||   ||   
 Total || - || - || 1 700 382 || 99 029 || - || 1 799 411 ||   || 98 805 || 1 226 409 || - || 1 325 214 
 Total financial assets || 115 || 333 001 || 1 700 382 || 99 029 || - || 2 132 527 ||   || 
   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Financial liabilities measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Derivative financial instruments || -7 035 || - || - || - || - || -7 035 ||   || - || -7 035 || - || -7 035 
 Total || -7 035 || - || - || - || - || -7 035 ||   || - || -7 035 || - || -7 035 
 Financial liabilities not measured at fair value: ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   ||   
 Amounts owed to third parties || - || - || - || - || -312 086 || -312 086 ||   ||   ||   ||   ||   
 Other liabilities || - || - || - || - || -1 153 || -1 153 ||   ||   ||   ||   ||   
 Total || - || - || - || - || -313 239 || -313 239 ||   ||   ||   ||   ||   
 Total financial liabilities || -7 035 || - || - || - || -313 239 || -320 274 ||   ||   ||   ||   ||   
4.2     Measurement of fair values
4.2.1       
Valuation techniques and
significant unobservable inputs
The
table below sets out information about the valuation techniques and significant
unobservable inputs used in measuring financial instruments, categorised as
level 2 and 3 in the fair value hierarchy:
   || Valuation technique || Significant unobservable inputs || Relationship of unobservable inputs to fair value measurement 
   Financial instruments measured at fair value ||   ||   
   ||   ||   ||   
 Derivative financial instruments || Discounted cash flow: Future cash flows are estimated based on forward exchange/interest rates (from observable forward exchange rates and yield curves at the end of the reporting period) and contract forward/interest rates, discounted at a rate that reflects the credit risk of various counterparties. || Not applicable. || Not applicable. 
   ||   ||   ||   
 Venture Capital Fund (VCF) || Adjusted net assets method: The fair value is determined by applying either the Facility’s percentage ownership in the underlying vehicle to the net asset value reflected in the most recent report adjusted for cash flows or, where available, the precise share value at the same date, submitted by the respective Fund Manager. In order to bridge the interval between the last available Net assets value (NAV) and the year-end reporting, a subsequent event review procedure is performed and if necessary the reported NAV is adjusted. || Adjustment for time elapsed between the last reporting date of the VCF and the measurement date, taking into account: operating expenses and management fees, subsequent changes in the fair value of the VCF’s underlying assets, additional liabilities incurred, market changes or other economic condition changes.   || The longer the period between the fair value measurement date and the last reporting date of the VCF, the higher the adjustment for time elapsed. 
   ||   ||   ||   
 Direct Equity Investment || Adjusted net assets. || Adjustment for time elapsed between the last reporting date of the investee and the measurement date, taking into account: operating expenses, subsequent changes in the fair value of the investee’s underlying assets, additional liabilities incurred, market changes or other economic condition changes, capital Increase, sale/ change of control. || The longer the period between the fair value measurement date and the last reporting date of the investee, the higher the adjustment for time elapsed. 
   ||   ||   ||   
   ||   || Discount for lack of marketability (liquidity) determined by reference to previous transaction prices for similar equities in the country/region, ranging from 5 to 30%. || The higher the marketability discount, the lower the fair value. 
   ||   ||   ||   
   Financial instruments not measured at fair value ||   ||   
   ||   ||   ||   
 Loans and receivables || Discounted cash flows: The valuation model uses contractual cash flows that are conditional upon the non-occurrence of default by the debtor and do not take into account any collateral values or early repayments’ scenarios. To obtain the Net Present Value (NPV) of the loans, the model retained discounts the contractual cash flows of each loan using an adjusted market discount curve. The individual loan NPV is then adjusted to take into consideration the relevant associated Expected Loss. The results are then summed to obtain the fair value of Loans and receivables. || Not applicable. || Not applicable. 
   ||   ||   ||   
 Amounts owed to third parties || Discounted cash flows. || Not applicable. || Not applicable. 
   ||   ||   ||   
 Other liabilities || Discounted cash flows. || Not applicable. || Not applicable. 
With the application
of IFRS 13, valuation adjustments are included in the fair value of derivatives
at 31 December 2013, namely:
-         
Credit
valuation adjustments (CVA), reflecting counterparty credit risk on derivative
transactions, amounting to a loss of EUR 184k. 
-         
Debit
valuation adjustments (DVA), reflecting own credit risk on derivative
transactions, were estimated at nil.
The Facility’s policy
is to recognise the transfers between Levels as of the date of the event or
change in circumstances that caused the transfer.
4.2.2       
Transfers between Level
1 and 2
In
2013 the Facility did not make transfers from Level 1 to 2 or Level 2 to 1 of
the fair value hierarchy.
4.2.3       
Level 3 fair values
Reconciliation
of Level 3 fair values
The
following tables present the changes in Level 3 instruments for the year ended
31 December 2013 and 31 December 2012:
 In EUR'000 || Available-for-sale financial assets 
 Balance at 1 January 2013 || 322 000 
 Gains or losses included in profit or loss: ||   
 - net realised gains on available-for-sale financial assets || 5 294 
 - impairment on available-for-sale financial assets || -2 701 
 Total ||  2 593 
 Gains or losses included in other comprehensive income: ||   
 - net change in fair value of available-for-sale financial assets || 4 299 
 Total || 4 299 
 Disbursements || 34 700 
 Repayments || -38 737 
 Balance at 31 December 2013 || 324 855 
 In EUR'000 || Available-for-sale financial assets 
 Balance at 1 January 2012 || 236 446 
 Total gains or losses included in profit or loss || 8 133 
 Total gains or losses included in other comprehensive income || 15 041 
 Disbursements || 81 981 
 Repayments || -19 601 
 Balance at 31 December 2012 || 322 000 
In 2013 the Facility
did not make transfers out or to Level 3 of the fair value hierarchy.
Sensitivity
analysis
A +/- 10 percent
change at the reporting date to one of the significant unobservable inputs used
to measure the fair values of the Venture Capital Funds and Direct Equity
Investments, holding other inputs constant, would have the following effects on
the other comprehensive income:
 At 31 December 2013 (in EUR’000) || Increase || Decrease 
 Venture Capital Funds || 20 || -20 
 Direct Equity Investments || 141 || -141 
 Total || 161 || -161 
5       
Cash and cash equivalents (in EUR’000)
Cash and cash equivalents can be broken down
between amounts received from the Member States and not yet disbursed and
amounts from the Facility’s operational and financial activities.
   || 31.12.2013 || 31.12.2012 
 Member states contributions received and not yet disbursed || 36 624 || 117 622 
 Amounts from the Facility’s financial and operational activities || 562 891 || 348 946 
 Cash and cash equivalents in the statement of financial position || 599 515 || 466 568 
 Accrued interest || - 8 || - 7 
 Cash and cash equivalents in the cash flow statement || 599 507 || 466 561 
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 2013 || Fair Value || Notional amount 
 Assets || Liabilities 
 Cross currency swaps ||  56 || - || 2 067 
 Cross currency interest rate swaps ||  44 || -2 035 || 16 461 
 Interest rate swaps ||  924 || - || 43 335 
 FX swaps || - || -1 510 || 700 000 
 Total derivative financial instruments || 1 024 || -3 545 || 761 863 
   ||   ||   ||   
 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 swaps || - || -2 962 || 649 000 
 Total derivative financial instruments || 115 || -7 035 || 695 134 
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 2013 || 254 686 || 789 970 || 133 780 || 1 178 436 
 Disbursements || 150 513 || 91 690 || - || 242 203 
 Write offs || - || - || - || - 
 Repayments || -51 595 || -55 865 || -11 700 || -119 160 
 Interest capitalised || - || -342 || 10 705 || 10 363 
 Foreign exchange rates differences || -11 491 || -19 446 || -1 153 || -32 090 
 Nominal as at 31 December 2013 || 342 113 || 806 007 || 131 632 || 1 279 752 
   ||   ||   ||   ||   
 Impairment as at 1 January 2013 || -6 494 || -14 296 || -24 355 || -45 145 
 Impairment recorded in statement of profit or loss and other comprehensive income || -1 341 || - || -27 081 || -28 422 
 Write offs || - || - || - || - 
 Reversal of impairment || - || 1 088 || - || 1 088 
 Foreign exchange rates differences ||  160 ||  474 || 1 054 || 1 688 
 Impairment as at 31 December 2013 || -7 675 || -12 734 || -50 382 || -70 791 
   ||   ||   ||   ||   
 Amortised Cost || -2 109 || -3 883 || -66 || -6 058 
 Interest || 5 154 || 10 536 || 3 606 || 19 296 
 Loans and receivables as at 31 December 2013 || 337 482 || 799 926 || 84 790 || 1 222 199 
(*) including agency agreements
   || Global loans (*) || Senior loans || Subordinated loans || Total 
 Nominal as at 1 January 2012 || 225 365 || 716 350 || 128 679 || 1 070 394 
 Disbursements || 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 profit or loss and other comprehensive income || -835 || -292 || - || -1 127 
 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 
 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
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 2013 || 220 710 || 61 830 || 282 540 
 Disbursements || 33 600 || 1 100 || 34 700 
 Repayments / sales || -36 322 || -2 415 || -38 737 
 Foreign exchange rates differences on repayments / sales ||  922 || - 398 ||  524 
 Cost as at 31 December 2013 || 218 910 || 60 117 || 279 027 
   ||   ||   ||   
 Unrealised gains and losses as at 1 January 2013 || 59 321 || 9 113 || 68 434 
 Net change in unrealised gains and losses || 13 290 || -3 533 || 9 757 
 Unrealised gains and losses as at 31 December 2013 || 72 611 || 5 580 || 78 191 
   ||   ||   ||   
 Impairment as at 1 January 2013 || -14 730 || -3 243 || -17 973 
 Impairment recorded in statement of profit or loss and other comprehensive income during the year || -8 105 || -71 || -8 176 
 Foreign exchange rates differences on impairment ||  566 ||  64 ||  630 
 Impairment as at 31 December 2013 || -22 269 || -3 250 || -25 519 
   ||   ||   ||   
 Available-for-sale financial assets as at 31 December 2013 || 269 252 || 62 447 || 331 699 
   || 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 profit or loss and other 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 
9       
Amounts receivable from contributors (in
EUR’000)
The main components of amounts receivable
from contributors are as follows:
   || 31.12.2013 || 31.12.2012 
 Member states contribution called but not paid || - || 87 310 
 Total amounts receivable from contributors || - || 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 2013 || 99 029 
 Acquisitions || 680 635 
 Maturities || -676 369 
 Change in amortisation of premium/discount ||  228 
 Change in accrued interest || -961 
 Balance as at 31 December 2013 || 102 562 
 Balance as at 1 January 2012 || - 
 Acquisitions || 98 278 
 Change in 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:
   || 31.12.2013 || 31.12.2012 
 Amount receivable from EIB ||  6 || 7 
 Financial guarantees ||  142 || 217 
 Amounts receivable with regard to TA disbursements ||  337 || 337 
 Impairment on amounts receivable with regard to TA disbursements (Note 20) || -337 || -337 
 Total other assets ||  148 || 224 
12    
Deferred income (in
EUR’000)
The main components of deferred income are as
follows:
   || 31.12.2013 || 31.12.2012 
 Deferred interest subsidies || 34 787 || 37 387 
 Deferred commissions on loans and receivables ||  296 || 421 
 Total deferred income || 35 083 || 37 808 
13    
Amounts owed to third parties (in EUR’000)
The main components of amounts owed to third
parties are as follows:
   || 31.12.2013 || 31.12.2012 
 Net general administrative expenses payable to EIB || 37 851 || 36 202 
 Other amounts payable to EIB ||  716 || 8 904 
 Interest subsidies not yet disbursed owed to Member States || 292 668 || 266 980 
 Total amounts owed to third parties || 331 235 || 312 086 
14    
Other liabilities (in
EUR’000)
The main components of other liabilities are
as follows:
   || 31.12.2013 || 31.12.2012 
 Loan repayments received in advance || 1 827 || 215 
 Deferred income from interest subsidies || 603 || 723 
 Financial guarantees ||  142 || 215 
 Total other liabilities || 2 572 || 1 153 
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 || 44 025 || 11 493 || 55 518 || - 
 Belgium || 65 123 || 17 001 || 82 124 || - 
 Denmark || 35 552 || 9 281 || 44 833 || - 
 Finland || 24 587 || 6 419 || 31 006 || - 
 France || 403 698 || 105 387 || 509 085 || - 
 Germany || 388 082 || 101 310 || 489 392 || - 
 Greece || 20 766 || 5 421 || 26 187 || - 
 Ireland || 10 300 || 2 689 || 12 989 || - 
 Italy || 208 328 || 54 385 || 262 713 || - 
 Luxembourg || 4 818 || 1 258 || 6 076 || - 
 Netherlands || 86 720 || 22 638 || 109 358 || - 
 Portugal || 16 115 || 4 207 || 20 322 || - 
 Spain || 97 020 || 25 327 || 122 347 || - 
 Sweden || 45 355 || 11 840 || 57 195 || - 
 United Kingdom || 210 820 || 55 035 || 265 855 || - 
 Total as at 31 December 2013 || 1 661 309 || 433 691 || 2 095 000 || - 
 Total as at 31 December 2012 || 1 561 309 || 383 691 || 1 945 000 || 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)
   || 31.12.2013 || 31.12.2012 
 Commitments ||   ||   
 Undisbursed loans || 889 866 || 749 044 
 Undisbursed commitment in respect of available-for-sale financial assets || 176 821 || 217 070 
 Guarantees drawn || 4 414 || 6 224 
 Subsidies and TA || 222 588 || 228 175 
   ||   ||   
 Contingent liabilities ||   ||   
 Guarantees undrawn || 25 000 || 20 000 
   ||   ||   
 Total contingent liabilities and commitments || 1 318 689 || 1 220 513 
17    
Interest and similar income and expenses (in EUR’000)
The main components of interest and similar
income are as follows:
   || From 01.01.2013 || From 01.01.2012 
   || to 31.12.2013 || to 31.12.2012 
 Cash and cash equivalents ||  273 || 1 678 
 Held-to-maturity financial assets ||  461 || 36 
 Loans and receivables || 63 189 || 64 060 
 Interest subsidies || 4 347 || 1 729 
 Total interest and similar income || 68 270 || 67 503 
The main component of interest and similar
expenses is as follows:
   || From 01.01.2013 || From 01.01.2012 
   || to 31.12.2013 || to 31.12.2012 
 Derivative financial instruments || -1 175 || -1 114 
 Total interest and similar expenses || -1 175 || - 1 114 
18    
Fee and commission income and expenses (in EUR’000)
The main components of fee and commission
income are as follows:
   || From 01.01.2013 || From 01.01.2012 
   || to 31.12.2013 || to 31.12.2012 
 Fee and commission on loans and receivables || 3 896 || 1 710 
 Fee and commission on financial guarantees ||  145 || 191 
 Other ||  10 || 33 
 Total fee and commission income || 4 051 || 1 934 
The main component of fee and commission
expenses is as follows:
   || From 01.01.2013 || From 01.01.2012 
   || to 31.12.2013 || to 31.12.2012 
 Commission paid to third parties with regard to available-for-sale financial assets || -43 || -292 
 Total fee and commission expenses || -43 || -292 
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 01.01.2013 || From 01.01.2012 
   || to 31.12.2013 || to 31.12.2012 
 Net proceeds from available-for-sale financial assets || 2 688 || 70 
 Dividend income || 2 606 || 975 
 Net realised gains on available-for-sale financial assets || 5 294 || 1 045 
20    
Impairment on other assets (in EUR’000)
During 2012 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 01.01.2013 || From 01.01.2012 
   || to 31.12.2013 || to 31.12.2012 
 Actual cost incurred by the EIB || -40 966 || -38 390 
 Income from appraisal fees directly charged to clients of the Facility || 3 115 || 2 188 
 General administrative expenses || -37 851 || -36 202 
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
2013 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, 09.09.2006,
p. 22.
[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] Council
Regulation (EC) No 215/2008 of 18.02.2008 on the Financial Regulation
applicable to the 10th European Development Fund, OJ L 78,
19.03.2008, amended by the Council Regulation (EU) No 370/2011 of 11 April 2011,
OJ L 102, 14.04.2011.
[6]       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.
[7]       This balance
represents the amounts available for the Democratic Republic of the Congo in
accordance with the provisions of Council Decision 2003/583/EC[7]. 
[8]       OJ L 156, 29.5.1998,
p. 3-106.