Communication from the Commission to the European Parliament, the Council and the Court of Auditors — Annual accounts of the European Development Fund 2017
Date: 2018-09-28
Institutions: European Commission
Subjects: European Development Fund, balance sheet, closing of accounts, consolidated account, general budget (EU), implementation of the budget




C_2018350EN.01000101.xml










28.9.2018   


EN


Official Journal of the European Union


C 350/1






COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS
Annual accounts of the European Development Fund 2017
(2018/C 350/01)

CONTENTS






CERTIFICATION OF THE ACCOUNTS
2








IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES
3








FUNDS MANAGED BY THE EUROPEAN COMMISSION
6








FINANCIAL STATEMENTS OF THE EDF
8








NOTES TO THE FINANCIAL STATEMENTS OF THE EDF
17








FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF
43








ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2017
44








ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA 2017
51








CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS
58








EDF REPORT ON FINANCIAL IMPLEMENTATION
63








ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK
91




CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2017 have been prepared in accordance with Title IX of the Financial Regulation of the 11th European Development Fund and with the accounting principles, rules and methods set out in the notes to the financial statements.
I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Development Fund in accordance with Article 20 of the Financial Regulation of the 11th European Development Fund.
I have obtained from the authorising officer and from the EIB, who guarantee its reliability, all the information necessary for the production of the accounts that show the European Development Fund’s assets and liabilities and the budgetary implementation.
I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present a true and fair view of the financial position of the European Development Fund in all material aspects.


Rosa ALDEA BUSQUETS

Accounting Officer

20 June 2018



IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

1.   BACKGROUND

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






—


The EU budget;










—


The European Development Fund;










—


The European Investment Bank.




The European Development Fund (hereinafter referred to as the EDF) is the main instrument for providing EU aid for development cooperation to the African, Caribbean and Pacific (hereinafter referred to as the ACP) States and Overseas Countries and Territories (hereinafter referred to as the OCTs).
The EDF is not funded by the EU budget. It is established by an internal agreement of the Representatives of the Member States, sitting within the Council, and managed by a specific committee. The European Commission (hereinafter referred to as the Commission) is responsible for the financial implementation of the operations carried out with EDF resources. The European Investment Bank (hereinafter referred to as the EIB) manages the Investment Facility.
During the period 2014-2020, the geographic aid granted to ACP States and OCTs will continue to be mainly funded by the EDF. Each EDF is usually concluded for a period of around five years and is governed by its own Financial Regulation which requires 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.
The Internal Agreement establishing the 11th EDF was signed by the participating Member States, meeting within the Council, in June 2013 (1). It came into force on 1 March 2015. In order to assure continuity between the end of the 10th EDF and the entry into force of the 11th EDF, the Commission proposed transitional measures, known as the Bridging Facility (BF) (2). The BF is presented under the 11th EDF.
At the same time the 10th EDF Financial Regulation (3) was amended and the new Financial Regulation applicable to the transition period was adopted (4). They entered into force on 30 May 2014. On 2 March 2015 the Council adopted the 11th EDF Financial Regulation (5) and the Implementation Rules (6). They entered into force on 6 March 2015.
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 EDF and the related report on financial implementation. The financial statements of the Investment Facility are included as a separate part of the annual accounts (part II) to provide a full picture of the development aid of the EDF (7).
2.   HOW IS THE EDF FUNDED?

The European Council of 2 December 2013 adopted the Multi-annual Financial Framework for 2014-2020. 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.
The EU budget is annual and according to the budgetary principle of annuality, expenditure and revenue are planned and authorised for one year. Unlike the EU budget, the EDF is a fund operating 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 on development cooperation. Since Member States have their own development and aid policies in parallel to the Union policy, the Member States must coordinate their policies with the EU to ensure they are complementary.
In addition to the abovementioned contributions, it is also possible for Member States to enter into co-financing arrangements or to make voluntary financial contributions to the EDF.
3.   YEAR-END REPORTING

3.1.   ANNUAL ACCOUNTS

In accordance with Article 46 of the EDF Financial Regulation, the EDF financial statements are prepared on the basis of accrual-based accounting rules that themselves are based on International Public Sector Accounting Standards (IPSAS). The accounting rules adopted by the Accounting Officer of the Commission are applied by all the Institutions and bodies of the EU in order to establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements and consolidation, as required by Article 152 of the EU Financial Regulation. These rules EU accounting rules are also applied to the EDF while taking into account the specific nature of its activities.
The preparation of the EDF annual accounts is entrusted to the Commission’s Accounting Officer who is the Accounting Officer of the EDF. She ensures that the annual accounts of EDF present a true and fair view of the financial position of the EDF.
The annual accounts are presented as follows:
Part I: Funds managed by the Commission






 








(i)


Financial statements and explanatory notes of the EDF










(ii)


Financial statements of the EU trust funds consolidated in the EDF










(iii)


Consolidated financial statements of EDF and the EU trust funds










(iv)


Report on financial implementation of the EDF








Part II: Annual report on implementation — Funds managed by the EIB






 








(i)


Financial statements of the Investment Facility








The part ‘Financial statements of the European trust funds consolidated in the EDF’ includes financial statements of the two trust funds created under the EDF: The Bêkou EU Trust Fund (see section ‘Financial statements of the Bêkou EU Trust Fund’) and The EU Trust Fund for Africa (see section ‘Financial statements of EU Trust Fund for Africa’). The trust funds individual financial statements are prepared under the responsibility of the EC Accounting Officer and subject to external audit carried out by a private auditor. The trust funds’ figures included in these annual accounts are final, i.e. after the necessary audit adjustments, but the accounts have not yet been formally signed-off.
The annual accounts must be adopted by the Commission not later than 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 European Court of Auditors (hereinafter referred to as 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 European Parliament to decide whether to grant discharge to the Commission for the financial implementation of the EDF resources for a given financial year. This decision is based on a review of the accounts and the annual report of the ECA (which includes an official statement of assurance) and replies of the Commission, and also following questions and further information requests to the Commission.

FUNDS MANAGED BY THE EUROPEAN COMMISSION (1)


CONTENTS






FINANCIAL STATEMENTS OF THE EDF
8








EDF BALANCE SHEET
9








EDF STATEMENT OF FINANCIAL PERFORMANCE
10








EDF CASH FLOW STATEMENT
11








EDF STATEMENT OF CHANGES IN NET ASSETS
12








BALANCE SHEET BY EDF
13








STATEMENT OF FINANCIAL PERFORMANCE BY EDF
14








STATEMENT OF CHANGES IN NET ASSETS BY EDF
15








NOTES TO THE FINANCIAL STATEMENTS OF THE EDF
17








FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF
43








ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2017
44








BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND
45








BALANCE SHEET
48








STATEMENT OF FINANCIAL PERFORMANCE
49








CASH FLOW STATEMENT
49








STATEMENT OF CHANGES IN NET ASSETS
50








ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA 2017
51








BACKGROUND INFORMATION ON THE EUTF FOR AFRICA
52








BALANCE SHEET
55








STATEMENT OF FINANCIAL PERFORMANCE
56








CASH FLOW STATEMENT
56








STATEMENT OF CHANGES IN NET ASSETS
57








CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS
58








CONSOLIDATED BALANCE SHEET
59








CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
60








CONSOLIDATED CASH FLOW STATEMENT
61








CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
62








EDF REPORT ON FINANCIAL IMPLEMENTATION
63




FINANCIAL STATEMENTS OF THE EDF (8)


EDF BALANCE SHEET









(EUR millions)




 


Note


31.12.2017


31.12.2016





NON-CURRENT ASSETS



 


 


 





Pre-financing




2.1




582




409






Trust Fund contributions




2.2




163




98





 


 



745




507






CURRENT ASSETS



 


 


 





Pre-financing




2.1




1 518 




1 372 






Exchange receivables and non-exchange recoverables




2.3




92




132






Cash and cash equivalents




2.4




347




680





 


 



1 958 




2 184 






TOTAL ASSETS



 



2 703 




2 691 





 


 


 


 





NON-CURRENT LIABILITIES



 


 


 





Provisions




2.5




(4)




(4)






Financial liabilities




2.6




(14)




(6)





 


 



(18)




(10)






CURRENT LIABILITIES



 


 


 





Payables




2.7




(563)




(549)






Accrued charges and deferred income




2.8




(733)




(776)





 


 



(1 296 )




(1 324 )






TOTAL LIABILITIES



 



(1 314 )




(1 334 )






NET ASSETS



 



1 389 




1 357 






FUNDS & RESERVES



 


 


 





Called fund capital — active EDFs




2.9




46 173 




42 323 






Called fund capital from closed EDFs carried forward




2.9




2 252 




2 252 






Called fund capital transfers between active EDFs




2.9




—




—






Economic result carried forward from previous years



 



(43 219 )




(40 146 )






Economic result of the year



 



(3 818 )




(3 073 )






NET ASSETS



 



1 389 




1 357 









EDF STATEMENT OF FINANCIAL PERFORMANCE









(EUR millions)




 


Note


2017


2016





REVENUE



 


 


 





Revenue from non-exchange transactions




3.1



 


 





Recovery activities



 



61




8





 


 



61




8






Revenue from exchange transactions




3.2



 


 





Financial revenue



 



4




3






Other revenue



 



22




62





 


 



25




66






Total Revenue



 



87




73






EXPENSES



 


 


 





Aid instruments




3.3




(3 700 )




(2 970 )






Co-financing expenses




3.4




(42)




15






Finance costs




3.6




(8)




4






Other expenses




3.7




(154)




(196)






Total Expenses



 



(3 904 )




(3 146 )






ECONOMIC RESULT OF THE YEAR



 



(3 818 )




(3 073 )









EDF CASH FLOW STATEMENT









(EUR millions)




 


Note


2017


2016





Economic result of the year



 



(3 818 )




(3 073 )






Operating activities



 


 


 





Capital increase — contributions (net)



 



3 850 




3 450 






(Increase)/decrease in trust funds contributions



 



(66)




(64)






(Increase)/decrease in pre-financing



 



(319)




(120)






(Increase)/decrease in exchange receivables and


non-exchange recoverables



 



40




39






Increase/(decrease) in financial liabilities



 



8




(4)






Increase/(decrease) in payables



 



14




28






Increase/(decrease) in accrued charges and deferred income



 



(42)




(80)






NET CASH FLOW



 



(333)




177






Net increase/(decrease) in cash and cash equivalents



 



(333)




177






Cash and cash equivalents at the beginning of the year




2.4




680




504






Cash and cash equivalents at year-end




2.4




347




680









EDF STATEMENT OF CHANGES IN NET ASSETS












(EUR millions)




 


Fund capital — active EDFs
(A)


Uncalled funds — active EDFs
(B)


Called fund capital — active EDFs
(C) = (A)-(B)


Cumulative Reserves
(D)


Called fund capital from closed EDFs carried forward
(E)


Total Net Assets
(C)+(D)+(E)






BALANCE AS AT 31.12.2015





73 464 




34 590 




38 873 




(40 146 )




2 252 




980






Capital increase — contributions



 



(3 450 )




3 450 



 


 



3 450 






Economic result of the year



 


 



—




(3 073 )



 



(3 073 )







BALANCE AS AT 31.12.2016





73 464 




31 140 




42 323 




(43 219 )




2 252 




1 357 






Capital increase — contributions



 



(4 050 )




4 050 



 


 



4 050 






Refund to Member States




(200)



 



(200)



 


 



(200)






Economic result of the year



 


 



—




(3 818 )



 



(3 818 )







BALANCE AS AT 31.12.2017





73 264 




27 090 




46 173 




(47 037 )




2 252 




1 389 









BALANCE SHEET BY EDF















(EUR millions)




 


 


31.12.2017


31.12.2016




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Eighth EDF


Ninth EDF


10th EDF


11th EDF





NON-CURRENT ASSETS



 


 


 


 


 


 


 


 


 





Pre-financing




2.1



—



32




221




330



—



32




242




135






Trust Fund contributions




2.2



—



86



—



77




—




—




—




98





 


 


—



118




221




407



—



32




242




232






CURRENT ASSETS



 


 


 


 


 


 


 


 


 





Pre-financing




2.1




1




40




867




610




1




50




909




412






Exchange receivables and non-exchange recoverables




2.3




0




64




17




11




1




71




59




2






Liaison accounts




2.3




189




88




3 555 




—




196




424




3 424 




—






Cash and cash equivalents




2.4



—


—


—



347



—


—



—




680





 


 



190




193




4 439 




968




198




544




4 391 




1 094 






TOTAL ASSETS
 (*1)



 



190




311




4 660 




1 375 




198




577




4 633 




1 327 






NON-CURRENT LIABILITIES



 


 


 


 


 


 


 


 


 





Provisions




2.5




—




—




—




(4)




—




—




—




(4)






Financial liabilities




2.6



—


—



(7)




(7)



—


—



(6)




—





 


 


—


—



(7)




(11)



—


—



(6)




(4)






CURRENT LIABILITIES



 


 


 


 


 


 


 


 


 





Payables




2.7




(0)




(13)




(133)




(417)




(0)




(12)




(438)




(99)






Liaison accounts




2.3




—




—




—




(3 833 )




—




—




—




(4 043 )






Accrued charges and deferred income




2.8




(0)




(76)




(517)




(140)




(1)




(93)




(567)




(115)





 


 



(0)




(89)




(650)




(4 389 )




(1)




(104)




(1 005 )




(4 257 )






TOTAL LIABILITIES
 (*1)



 



(0)




(89)




(657)




(4 401 )




(1)




(104)




(1 011 )




(4 261 )






NET ASSETS
 (*1)



 



190




222




4 003 




(3 025 )




197




472




3 622 




(2 934 )






FUNDS & RESERVES



 


 


 


 


 


 


 


 


 





Called fund capital — active EDFs




2.9




12 164 




10 773 




20 960 




2 277 




12 164 




10 973 




19 187 



—





Called fund capital from closed EDFs carried forward




2.9




627




1 625 



—


—



627




1 625 



—


—





Called fund capital transfers between active EDFs




2.9




(2 503 )




2 177 




120




206




(2 496 )




2 214 




247




35






Economic result carried forward from previous years



 



(10 098 )




(14 339 )




(15 812 )




(2 969 )




(10 100 )




(14 248 )




(14 415 )




(1 382 )






Economic result of the year



 



0




(13)




(1 266 )




(2 539 )




2




(91)




(1 397 )




(1 587 )






NET ASSETS



 



190




222




4 003 




(3 025 )




197




472




3 622 




(2 934 )









STATEMENT OF FINANCIAL PERFORMANCE BY EDF















(EUR millions)




 


 


2017


2016




Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Eighth EDF


Ninth EDF


10th EDF


11th EDF





REVENUE



 


 


 


 


 


 


 


 


 





Revenue from non-exchange transactions




3.1



 


 


 


 


 


 


 


 





Recovery activities



 



0




5




49




7




1




5




(2)




4





 


 



0




5




49




7




1




5




(2)




4






Revenue from exchange transactions




3.2



 


 


 


 


 


 


 


 





Financial revenue



 



(0)




(1)




4




(0)




(0)




2




2




(1)






Other revenue



 



1




5




13




4




2




17




40




3





 


 



1




4




17




4




2




19




43




2






Total revenue



 



1




9




66




11




3




23




41




7






EXPENSES



 


 


 


 


 


 


 


 


 





Aid instruments




3.3




(0)




(14)




(1 251 )




(2 435 )




2




(95)




(1 411 )




(1 465 )






Co-financing expenses




3.4




—




—




(42)




(1)




—




—




15




—






Finance costs




3.6




1




1




(10)




(0)




(0)




(0)




4




(0)






Other expenses




3.7




(2)




(9)




(29)




(114)




(3)




(19)




(46)




(129)






Total expenses



 



(1)




(22)




(1 332 )




(2 549 )




(1)




(114)




(1 437 )




(1 594 )






ECONOMIC RESULT OF THE YEAR



 



0




(13)




(1 266 )




(2 539 )




2




(91)




(1 397 )




(1 587 )









STATEMENT OF CHANGES IN NET ASSETS BY EDF













(EUR millions)




Eighth EDF


Fund capital — active EDFs
(A)


Uncalled funds — active EDFs
(B)


Called fund capital — active EDFs
(C) = (A)-(B)


Cumulative Reserves
(D)


Called fund capital from closed EDFs carried forward
(E)


Called fund capital transfers between active EDFs
(F)


Total Net Assets
(C)+(D)+(E)+(F)





BALANCE AS AT 31.12.2015




12 164 



—



12 164 




(10 100 )




627




(2 476 )




214






Transfers to/from the 10th EDF



 


 



—



 


 



(20)




(20)






Transfers to/from the 11th EDF



 


 


—


 


 



—




—






Economic result of the year



 


 


—



2



 


 



2






BALANCE AS AT 31.12.2016




12 164 



—



12 164 




(10 098 )




627




(2 496 )




197






Transfers to/from the 10th EDF



 


 


—


 


 



(7)




(7)






Transfers to/from the 11th EDF



 


 


—


 


 



—




—






Economic result of the year



 


 


—



0



 



—




0






BALANCE AS AT 31.12.2017




12 164 




—




12 164 




(10 098 )




627




(2 503 )




190




















(EUR millions)




Ninth EDF


Fund capital — active EDFs
(A)


Uncalled funds — active EDFs
(B)


Called fund capital — active EDFs
(C) = (A)-(B)


Cumulative Reserves
(D)


Called fund capital from closed EDFs carried forward
(E)


Called fund capital transfers between active EDFs
(F)


Total Net Assets
(C)+(D)+(E)+(F)





BALANCE AS AT 31.12.2015




10 973 



—



10 973 




(14 249 )




1 625 




2 376 




726






Transfers to/from the 10th EDF



 


 


—


 


 



(163)




(163)






Economic result of the year



 


 


—



(91)



 


 



(91)






BALANCE AS AT 31.12.2016




10 973 



—



10 973 




(14 339 )




1 625 




2 214 




472






Refund to Member States




(200)



 



(200)



 


 


 



(200)






Transfers to/from the 10th EDF



 


 


—


 


 



(37)




(37)






Transfers to/from the 11th EDF



 


 


—


 


 



—




—






Economic result of the year



 


 


—



(13)



 



—




(13)






BALANCE AS AT 31.12.2017




10 773 




—




10 773 




(14 352 )




1 625 




2 177 




222




















(EUR millions)




10th EDF


Fund capital — active EDFs
(A)


Uncalled funds — active EDFs
(B)


Called fund capital — active EDFs
(C) = (A)-(B)


Cumulative Reserves
(D)


Called fund capital from closed EDFs carried forward
(E)


Called fund capital transfers between active EDFs
(F)


Total Net Assets
(C)+(D)+(E)+(F)





BALANCE AS AT 31.12.2015




20 960 




5 223 




15 737 




(14 415 )



—



35




1 357 






Capital increase — contributions



 



(3 450 )




3 450 



 


 


 



3 450 






Transfers to/from the Eighth and Ninth EDF



 


 


—


 


 



182




182






Transfers to/from the 11th EDF



 


 


—


 


 



30




30






Economic result of the year



 


 



—




(1 397 )



 


 



(1 397 )






BALANCE AS AT 31.12.2016




20 960 




1 773 




19 187 




(15 812 )



—



247




3 622 






Capital increase — contributions



 



(1 773 )




1 773 



 


 



—




1 773 






Transfers to/from the Eighth and Ninth EDF



 


 


—


 


 



44




44






Transfers to/from the 11th EDF



 


 



—



 


 



(171)




(171)






Economic result of the year



 


 



—




(1 266 )



 



—




(1 266 )






BALANCE AS AT 31.12.2017




20 960 




—




20 960 




(17 078 )




—




120




4 003 




















(EUR millions)




11th EDF


Fund capital — active EDFs
(A)


Uncalled funds — active EDFs
(B)


Called fund capital — active EDFs
(C) = (A)-(B)


Cumulative Reserves
(D)


Called fund capital from closed EDFs carried forward
(E)


Called fund capital transfers between active EDFs
(F)


Total Net Assets
(C)+(D)+(E)+(F)





BALANCE AS AT 31.12.2015




29 367 




29 367 




—




(1 382 )




—




65




(1 317 )






Transfers to/from the Eighth, Ninth and 10th EDF



 


 


—


 



—




(30)




(30)






Economic result of the year



 


 


—



(1 587 )



 



—




(1 587 )






BALANCE AS AT 31.12.2016




29 367 




29 367 



—



(2 969 )




—




35




(2 934 )






Capital increase — contributions



 



(2 277 )




2 277 



 


 



171




2 448 






Transfers to/from the Eighth, Ninth and 10th EDF



 


 


—


 


 



—




—






Economic result of the year



 


 


—



(2 539 )



 



—




(2 539 )






BALANCE AS AT 31.12.2017




29 367 




27 090 




2 277 




(5 508 )




—




206




(3 025 )






NOTES TO THE FINANCIAL STATEMENTS OF THE EDF (9)

1.   SIGNIFICANT ACCOUNTING POLICIES

1.1.   ACCOUNTING PRINCIPLES

The objective of 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.
The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU Accounting Rule 1 ‘Financial Statements’ and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability.
1.2.   BASIS OF PREPARATION

1.2.1.   Reporting period
Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December.
1.2.2.   Currency and basis for conversion
The annual accounts are presented in millions of euros, the euro being the EDF’s functional and reporting currency. Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the date when they were purchased.
Year-end balances of monetary assets and liabilities denominated in foreign currencies are translated into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December.

Euro exchange rates











Currency


31.12.2017


31.12.2016


Currency


31.12.2017


31.12.2016





BGN




1,9558 




1,9558 




PLN




4,177 




4,4103 






CZK




25,5350 




27,0210 




RON




4,6585 




4,5390 






DKK




7,4449 




7,4344 




SEK




9,8438 




9,5525 






GBP




0,8872 




0,8562 




CHF




1,1702 




1,0739 






HRK




7,4400 




7,5597 




JPY




135,01 




123,4000 






HUF




310,3300 




309,8300 




USD




1,1993 




1,0541 





1.2.3.   Use of estimates
In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to; accrued and deferred revenue and charges, provisions, financial risk on accounts receivables, contingent assets and liabilities, and degree of impairment of assets. Actual results could differ from those estimates.
Reasonable estimates are essential part of the preparation of financial statements and do not undermine their reliability. An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience. By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error. The effect of a change in accounting estimate shall be recognised in the surplus or deficit in the periods in which it becomes known.
1.3.   BALANCE SHEET

1.3.1.   Financial assets
The financial assets are classified in the following categories: financial assets at fair value through surplus or deficit; loans and receivables; held-to-maturity investments; and available for sale financial assets. The classification of the financial instruments is determined at initial recognition and re-evaluated at each balance sheet date.
(i)   Financial assets at fair value through surplus or deficit

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the entity. Derivatives are also categorised in this category. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date. During this financial year, the entity did not hold any investments in this category.
(ii)   Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the entity provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in non-current assets, except for maturities within 12 months of the balance sheet date. Loans and receivables include term deposits with the original maturity above three months.
(iii)   Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the entity has the positive intention and ability to hold to maturity. During this financial year, the entity did not hold any investments in this category.
(iv)   Available for sale financial assets

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the entity expects to hold them, which is usually the maturity date.

Initial recognition and measurement

Purchases and sales of financial assets at fair value through surplus or deficit, held-to-maturity and available for sale are recognised on trade date — the date on which the entity commits to purchase or sell the asset. Cash equivalents, loans and term deposits are recognised at settlement date. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through surplus or deficit transaction costs are added to the fair value at initial recognition.
Financial instruments are derecognised when the rights to receive cash flows from the investments have expired or the entity has transferred substantially all risks and rewards of ownership to another party.

Subsequent measurement

Financial assets at fair value through surplus or deficit are subsequently carried at fair value with gains and losses arising changes in the fair value being included in the statement of financial performance in the period in which they arise.
Loans and receivables and held-to maturity investments are carried at amortised cost using the effective interest method.
Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in the fair value are recognised in the fair value reserve. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance.
The entity assesses at each balance sheet date whether there is objective evidence that a financial asset is impaired and whether an impairment loss should be recorded in the statement of financial performance.
1.3.2.   Pre-financing amounts
Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, he has the obligation to return the pre-financing advance to the entity. The amount of the pre-financing may be reduced (wholly or partially) by the acceptance of eligible costs (which are recognised as expenses).
Pre-financing is, on subsequent balance sheet dates, measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period.
1.3.3.   Receivables and recoverables
As the EU accounting rules require a separate presentation of exchange and non-exchange transactions, for the purpose of drawing up the accounts, receivables are defined as stemming from exchange transactions and recoverables are defined as stemming from non-exchange transactions (when the entity receives value from another entity without directly giving approximately equal value in exchange).
Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see 1.3.1 above).
Recoverables from non-exchange transactions are carried at original amount (adjusted for interests and penalties) less write-down for impairment. A write-down for impairment is established when there is objective evidence that the entity will not be able to collect all amounts due according to the original terms of the recoverables. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance.
1.3.4.   Cash and cash equivalents
Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks, and other short-term highly liquid investments with original maturities of three months or less.
1.3.5.   Provisions
Provisions are recognised when the entity has a present legal or constructive obligation towards third parties as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. The amount of the provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. Where the provision involves a large number of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (‘expected value’ method).
1.3.6.   Payables
Included under accounts payable are both amounts related to exchange transactions such as the purchase of goods and services and to non-exchange transactions e.g. to cost claims from beneficiaries, grants or other EU funding.
Where grants or other funding is provided to the beneficiaries, the cost claims are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the accepted and eligible amount.
Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the entity.
1.3.7.   Accrued and deferred revenue and charges
Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the entity or a contractual agreement exists (e.g. by reference to a contract), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.
Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Accounting Officer which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if a payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period.
1.4.   STATEMENT OF FINANCIAL PERFORMANCE

1.4.1.   Revenue
Revenue comprises gross inflows of economic benefits or service potential received and receivable by the entity, which represents an increase in net assets, other than increases relating to contributions from owners.
Depending on the nature of the underlying transactions in the statement of financial performance it is distinguished between:
(i)   Revenue from non-exchange transactions

Revenue from non-exchange transactions are taxes and transfers because the transferor provides resources to the recipient entity without the recipient entity providing approximately equal value directly in exchange.
Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes. The entity shall recognise an asset in respect of transfers when the entity controls the resources as a result of a past event (the transfer) and expects to receive future economic benefits or service potential from those resources, and when the fair value can be reliably measured. An inflow of resources from a non-exchange transaction recognised as an asset (i.e. cash) is also recognised as revenue, except to the extent that the entity has a present obligation in respect of that transfer (condition), which needs to be satisfied before the revenue can be recognised. Until the condition is met the revenue is deferred and recognised as a liability (pre-financing received).
(ii)   Revenue from exchange transactions

Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date.
1.4.2.   Expenses
Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets/equity. They include both the expenses from exchange transactions and expenses from non-exchange transactions.
Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the entity. They are valued at original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are recognised in the statement of financial performance.
Expenses from non-exchange transactions relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations. Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation or an agreement has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made.
When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expense.
1.5.   CONTINGENT ASSETS AND LIABILITIES

1.5.1.   Contingent assets
A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.
1.5.2.   Contingent liabilities
A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; 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.
1.6.   CO-FINANCING

Co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under condition and they are presented as payables to Member States, non-Member States and others. The EDF is required to use the contributions to deliver services to third parties or is otherwise required to return the assets (the contributions received). The outstanding payables relating to co-financing agreements represent the co-financing contributions received less the expenses incurred related to the project. The effect on net assets is nil.
Expenses relating to co-financing projects are recognised as they are incurred. The corresponding amount of contributions is recognised as operating revenue and the effect on economic result of the year is nil.
2.   NOTES TO THE BALANCE SHEET


ASSETS

2.1.   PRE-FINANCING

Many contracts provide for payments of advances before the commencement of works, delivery of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments 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 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 12 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 some pre-financing amounts are shown as non-current assets.












(EUR millions)




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Non-current pre-financing




2.1.1




—




32




221




330




582




409






Current pre-financing




2.1.2




1




40




867




610




1 518 




1 372 






Total



 



1




72




1 088 




939




2 100 




1 781 





The increase in overall pre-financing is explained by the very high level of payments in 2017. The overall level of net payments in 2017 increased by 24 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation). The level of ‘gross’ payments, i.e. payments without inflows from recovery orders, increased in 2017 by 25 %.
This increase is in line with the lifecycle of the EDF. The 11th EDF started in 2015 and 2017 was thus the third year of its existence. The 11th EDF has reached its maturity and peak with regards to the implementation of adopted actions. The number of open contracts in the 11th EDF increased from 1,3 k in 2016 to 1,6 k in 2017. In 2017 the value of the average contracted amount increased by 51 % compared to 2016. Therefore the level of net payments in the 11th EDF increased in 2017 by 52 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation). As the ratio between payments relating to invoices and the pre-financing is stable (42 %-44 %), the increase in payments resulted in the higher level of pre-financing.
The increase in the overall pre-financing is in line with the decrease in cash and cash equivalents (see note 2.4).
2.1.1.   Non-current pre-financing







(EUR millions)




 


31.12.2017


31.12.2016





Direct Management




159




71











 



Implemented by:







 


 










 








 



Commission












105




39











 








 



EU executive agencies












6




4











 








 



EU delegations












48




29






Indirect Management




423




338











 



Implemented by:







 


 










 








 



EIB and EIF












166




180











 








 



International organisations












189




87











 








 



Private law bodies with a public service mission












11




25











 








 



Public law bodies












37




13











 








 



Third countries












20




34






Total




582




409





2.1.2.   Current pre-financing











(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Pre-financing (gross)




2




158




2 722 




2 406 




5 288 




4 745 






Cleared via cut-off




(1)




(118)




(1 855 )




(1 796 )




(3 770 )




(3 373 )






Total




1




40




867




610




1 518 




1 372 















(EUR millions)




 


31.12.2017


31.12.2016





Direct Management




256




246











 



Implemented by:







 


 










 








 



Commission












86




115











 








 



EU executive agencies












10




10











 








 



EU delegations












161




122






Indirect Management




1 262 




1 125 











 



Implemented by:







 


 










 








 



EIB and EIF












345




372











 








 



International organisations












563




432











 








 



Private law bodies with a public service mission












59




121











 








 



Public law bodies












108




53











 








 



Third countries












186




148






Total




1 518 




1 372 





2.1.3.   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. At 31 December 2017 the guarantees received by the EDF in respect of pre-financing amounted to EUR 54 million (2016 EUR 53 million).
The majority of pre-financing is paid under the indirect management mode. In this case the beneficiary of the guarantee is not the EDF but the contracting authority. Even though the EDF is not the beneficiary, those guarantees secure its assets. In 2017 those guarantees amounted to EUR 577 million.
2.2.   TRUST FUND CONTRIBUTIONS

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









(EUR millions)




Trust Funds


Net contribution at 31.12.2016


Contributions paid in 2017


Allocation of TF’s net expenses 2017


Net contribution at 31.12.2017





Africa




72




180




(104)




148






Bêkou




26




—




(10)




16






Total




98




180




(114)




163





The activities of EUTF Africa increased in 2017 after the start-up year 2016. Its expenses in 2017 increased almost 5 times compared to 2016. Its payments doubled compared to the previous year.
2.3.   NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES









(EUR millions)




 


Note


31.12.2017


31.12.2016





Recoverables from non-exchange transactions




2.3.1




19




62






Receivables from exchange transactions




2.3.2




73




70






Total



 



92




132





2.3.1.   Recoverables from non-exchange transactions











(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Member States




—




—




—




7




7




40






Customers




2




7




9




1




19




18






Public bodies




—




10




8




2




20




23






Third states




0




1




4




0




6




4






Write down




(2)




(16)




(15)




(1)




(34)




(25)






Liaison accounts with EU institutions




—




—




—




2




2




2






Total




0




2




6




11




19




62





The overall decrease of the recoverables from non-exchange transactions is mainly due to a decrease in recoverables from Member States. At 31 December 2016 this included ordinary contributions and amounts to be received as a consequence of Bridging Facility adjustments that were compensated against Member States contributions in 2017.
At 31 December 2017 Member States’ recoverables include the outstanding financial adjustment implemented against the first instalment of fund capital to be called in 2018 (see note 2.9.1).






(EUR millions)




Member States


31.12.2017





Czech Republic




2






Romania




1






Hungary




1






Ireland




1






Greece




1






Other




1






Total




7





2.3.2.   Receivables from exchange transactions











(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Accrued income




—




63




11




—




74




70






Liaison accounts between EDFs




189




88




3 555 




(3 833 )




(0)




(0)






Total




189




151




3 566 




(3 833 )




73




70





Included under accrued income are primarily amounts of accrued interest on pre-financing related to projects (EUR 63 million) and on pre-financing related to the EU-Africa Trust Fund (EUR 11 million).
For efficiency reasons, the single treasury covering all the EDFs is allocated to the 11th EDF (10); this leads to operations between the various EDFs, which are balanced out in the liaison accounts between the various EDF balance sheets.
Liaison accounts are presented only in the individual EDFs. The total of liaison accounts is nil.
2.4.   CASH AND CASH EQUIVALENTS (11)












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Special accounts:



 


 


 


 


 


 





Financial institutions of Member States



—


—


—



105




105




292






Current accounts:



 


 


 


 


 


 





Commercial banks



—


—


—



242




242




389






Total



—


—


—



347




347




680





The overall decrease in cash and cash equivalents is mainly explained by the exceptionally high level of payments in 2017. The overall level of net payments in 2017 increased by 24 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation). The level of ‘gross’ payments, i.e. payments without inflows from recovery orders, increased in 2017 by 25 %.
This increase of payments is in line with the lifecycle of the EDF. The 11th EDF started in 2015 and 2017 was the third year of its existence. The 11th EDF has reached its maturity and a peak in the implementation of adopted actions. The number of open contracts in the 11th EDF increased from 1,3 k in 2016 to 1,6 k in 2017. In 2017 the level of net payments in the 11th EDF increased by 52 % compared to 2016 (see table 2.1 in the EDF Report on Financial Implementation).
With the aim of improving the presentation in the 2017 annual accounts, the classification of financial institutions and banks has been reviewed. The comparative figures for 2016 are disclosed accordingly.

LIABILITIES

2.5.   PROVISIONS












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Provisions



—


—



—




4




4




4






Total



—


—



—




4




4




4





The provision is the best estimation of the probable amount to be paid by the EDF to finance the orderly closure of the Centre de Development (CDE), decided by the ACP-EU Committee of Ambassadors (Decision No 4/2014 of 23 October 2014).
The amount includes court cases (EUR 1,2 million) raised against the CDE and the remaining expected cost of the passive phase (e.g. residual administrative tasks, other residual litigations, archive, etc.) that started on 31 December 2016 (see note 4.2.2). No expenses regarding the passive phase have been incurred so far.
2.6.   FINANCIAL LIABILITIES












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Co-financing — payables



—


—



7




7




14




6






Total



—


—



7




7




14




6





The change in the total co-financing liabilities is explained in the note 2.7.2.1.

2.7.   PAYABLES













(EUR millions)




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Current payables




2.7.1




0




13




114




235




361




222






Sundry payables




2.7.2




—




(0)




20




182




202




327






Total



 



0




13




133




417




563




549





2.7.1.   Current payables












(EUR millions)




 


 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Suppliers



 



0




9




85




40




133




98






Member States



 



—




—




0




12




12




0






Third states



 



0




(0)




15




131




146




91






Public bodies



 



—




3




10




70




83




32






Other current payables



 



0




1




4




(18)




(13)




1






Total



 



0




13




114




235




361




222





Payables include cost statements received by the EDF relating to its 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 statement of financial performance. Non-eligible amounts have been disclosed as other current payables.
Member States payables represent the outstanding financial adjustment to be deducted from the first instalment of fund capital to be called in 2018 (see note 2.9.1). This heading includes the amounts due to France (EUR 10 million), the Netherlands (EUR 1 million) and Austria (EUR 1 million).
2.7.2.   Sundry payables












(EUR millions)




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Co-financing payables




2.7.2.1




—




—




22




6




28




64






Deferred fund capital contributions




2.7.2.2




—




—




—




173




173




261






Other sundry payables



 



—




—




—




1




1




2






Total



 



—




—




22




179




202




327





2.7.2.1.   Co-financing payables

The breakdown of the non-current and current co-financing payables by Member State is summarised in the table below:











(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016







Non-current co-financing




 


 


 


 


 


 





Belgium



—


—



0




1




2




2






Denmark



—


—



—




0




0




0






France



—


—



4



—



4




—






Germany



—


—



—



—



—




0






Sweden



—


—



1




2




3




2






United Kingdom



—


—



1



—



1




1






Canada



—


—



—



—



—




0






Australia



—


—



0




—




0




—






USAID



—


—



—




4




4




—





 




—






—






7






7






14






6








Current co-financing




 


 


 


 


 


 





Belgium




—




—




4




(1)




3




4






Denmark




—




—




(1)




1




(0)




1






France




—




—




12




—




12




37






Germany




—




—




0




—




0




1






Netherlands




—




—




0




—




0




1






Spain




—




—




1




—




1




3






Sweden




—




—




5




0




5




7






United Kingdom




—




—




1




3




4




11






Canada




—




—




0




—




0




0






USAID




—




—




—




2




2




—





 




—






—






22






6






28






64







Total




—




—




29




13




42




70





The total non-current and current co-financing payables decreased by EUR 28 million compared to the previous reporting period.
During 2017, new co-financing contributions were received from USAID (EUR 7 million), the United Kingdom (EUR 5 million) and Sweden (EUR 2 million).
The total co-financing payables were decreased by EUR 42 million in order to recognise revenue and expenses related to co-financed projects (see notes 3.1.1 and 3.4).
2.7.2.2.   Deferred fund capital contributions












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






United Kingdom




—




—




—




170




170




252






Lithuania




—




—




—




2




2




—






Hungary




—




—




—




—




—




9






Total




—




—




—




173




173




261





This heading completely relates to Member States’ 2018 contributions paid in advance.
2.8.   ACCRUED CHARGES AND DEFERRED INCOME












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Accrued charges




0




76




517




137




730




770






Other accruals and deferrals




—




—




—




3




3




6






Total




0




76




517




140




733




776





Accrued charges comprise estimated operating expenses for on-going or ended contracts without validated cost claims where the 2017 eligible expenses incurred by beneficiaries of EDF were estimated using the best available information about the existing contracts. The portion of the estimated accrued charges which relates to pre-financing paid has been recorded as a reduction of the pre-financing amounts (see note 2.1).

NET ASSETS

2.9.   FUND CAPITAL

2.9.1.   Called fund capital — active EDFs










(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



Total






Fund capital




12 164 




10 973 




20 960 




29 367 




73 464 






Uncalled fund capital




—




—




(1 773 )




(29 367 )




(31 140 )






Called fund capital 31.12.2016




12 164 




10 973 




19 187 




—




42 323 





 


 


 


 


 


 





Fund capital




12 164 




10 773 




20 960 




29 367 




73 264 






Uncalled fund capital




—




—




—




(27 090 )




(27 090 )






Called fund capital 31.12.2017




12 164 




10 773 




20 960 




2 277 




46 173 





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 have been called up for transfer to the treasury accounts by the Member States (see note 2.9.2 below).
By means of Council Decision (EU) 2017/1206 (12) the Member States’ contributions set out in the Internal Agreements of the Eighth and Ninth EDF are to be reduced accordingly for an amount of EUR 200 million from funds decommitted under the Eighth and the Ninth EDF. As the funds decommitted under the Eighth EDF have been already almost entirely transferred to the other EDFs, EUR 200 million was deducted from the capital of the Ninth EDF.
Refunds arising from this reduction have been compensated against additional call for funds under the 11th EDF. It resulted in the financial adjustment. The financial adjustment can be implemented against the third instalment 2017 and/or the first instalment 2018. The outstanding financial adjustment has been disclosed either as receivables or payables from/to Member States (see notes 2.3.1 and 2.7.1)
2.9.2.   Called and uncalled fund capital by Member State









(EUR millions)




Contributions 10th EDF


%


Uncalled capital 31.12.2016


Capital called in 2017


Uncalled capital 31.12.2017





Austria




2,41 




43




(43)




—






Belgium




3,53 




63




(63)




—






Bulgaria




0,14 




2




(2)




—






Cyprus




0,09 




2




(2)




—






Czech Republic




0,51 




9




(9)




—






Denmark




2,00 




35




(35)




—






Estonia




0,05 




1




(1)




—






Finland




1,47 




26




(26)




—






France




19,55 




347




(347)




—






Germany




20,50 




364




(364)




—






Greece




1,47 




26




(26)




—






Hungary




0,55 




10




(10)




—






Ireland




0,91 




16




(16)




—






Italy




12,86 




228




(228)




—






Latvia




0,07 




1




(1)




—






Lithuania




0,12 




2




(2)




—






Luxembourg




0,27 




5




(5)




—






Malta




0,03 




1




(1)




—






Netherlands




4,85 




86




(86)




—






Poland




1,30 




23




(23)




—






Portugal




1,15 




20




(20)




—






Romania




0,37 




7




(7)




—






Slovakia




0,21 




4




(4)




—






Slovenia




0,18 




3




(3)




—






Spain




7,85 




139




(139)




—






Sweden




2,74 




49




(49)




—






United Kingdom




14,82 




263




(263)




—






Total




100,00 




1 773 




(1 773 )




—

















(EUR millions)




Contributions 11th EDF


%


Uncalled capital 31.12.2016


Capital called in 2017


Uncalled capital 31.12.2017





Austria




2,40 




704




(55)




650






Belgium




3,25 




954




(74)




880






Bulgaria




0,22 




64




(5)




59






Croatia




0,23 




66




(5)




61






Cyprus




0,11 




33




(3)




30






Czech Republic




0,80 




234




(18)




216






Denmark




1,98 




582




(45)




537






Estonia




0,09 




25




(2)




23






Finland




1,51 




443




(34)




409






France




17,81 




5 231 




(406)




4 826 






Germany




20,58 




6 044 




(469)




5 575 






Greece




1,51 




443




(34)




408






Hungary




0,61 




180




(14)




166






Ireland




0,94 




276




(21)




255






Italy




12,53 




3 680 




(285)




3 394 






Latvia




0,12 




34




(3)




31






Lithuania




0,18 




53




(4)




49






Luxembourg




0,26 




75




(6)




69






Malta




0,04 




11




(1)




10






Netherlands




4,78 




1 403 




(109)




1 294 






Poland




2,01 




589




(46)




544






Portugal




1,20 




351




(27)




324






Romania




0,72 




211




(16)




195






Slovakia




0,38 




110




(9)




102






Slovenia




0,22 




66




(5)




61






Spain




7,93 




2 330 




(181)




2 149 






Sweden




2,94 




863




(67)




796






United Kingdom




14,68 




4 311 




(334)




3 976 






Total




100,00 




29 367 




(2 277 )




27 090 





In 2017 EUR 1 773 million has been called from the 10th EDF and EUR 2 277 million EUR from the 11th EDF. At 31 December 2017 the capital of the Eighth, Ninth and 10th EDF has been called up and received in its entirety.
2.9.3.   Called fund capital from closed EDFs carried forward











(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Funds transferred from closed EDFs




627




1 625 




—




—




2 252 




2 252 





This heading includes the resources transferred from closed EDFs to the Eighth and Ninth EDFs.
2.9.4.   Called fund capital transfers between active EDFs










(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total





Balance at 31.12.2015




(2 476 )




2 376 




35




65




—






Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs




(20)




(163)




182




—




—






Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs




—




—




(356)




356




—






Transfer from the 11th performance reserve to the African Peace Facility (10th EDF)




—




—




386




(386)




—






Balance at 31.12.2016




(2 496 )




2 214 




247




35




—






Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs




(7)




(37)




44




—




—






Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs




—




—




(171)




171




—






Balance at 31.12.2017




(2 503 )




2 177 




120




206




—





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


REVENUE









(EUR millions)




 


Note


2017


2016





Revenue from non-exchange transactions




3.1




61




8






Revenue from exchange transactions




3.2




25




66






Total



 



87




73





3.1.   REVENUE FROM NON-EXCHANGE TRANSACTIONS













(EUR millions)




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF



2017




2016






Recovery of expenses



 



0




5




7




7




19




23






Recovery of Stabex funds



 



—




—




—




0




0




1






Co-financing revenue




3.1.1




—




—




42




1




42




(15)






Total



 



0




5




49




7




61




8





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







(EUR millions)




 


2017


2016





Direct Management




5




6











 



Implemented by:







 


 










 








 



Commission












1




1











 








 



EU delegations












4




5






Indirect Management




56




2











 



Implemented by:







 


 










 








 



Third countries












55




(0)











 








 



International organisations












2




2











 








 



Public law bodies












0




0











 








 



Private law bodies with a public service mission












(1)




0






Total




61




8





3.1.1.   Co-financing revenue
The co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance. The received contributions remain under liabilities (see note 2.7.2.1) until the conditions attached to the donated funds are met, i.e. eligible expenses are incurred (see note 3.4). The corresponding amount is then recognised as non-exchange revenue from co-financing. Consequently the effect on the economic result of the year is nil.
3.2.   REVENUE FROM EXCHANGE TRANSACTIONS












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



2017




2016






Financial revenue




(0)




(1)




4




(0)




4




3






Other revenue




1




5




13




4




22




62






Total




1




4




17




4




25




66





The financial revenue comprises interest from the Trust Fund and interest on pre-financing.
Other income entirely relates to the realised and unrealised foreign exchange gains.

EXPENSES

3.3.   AID INSTRUMENTS












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



2017




2016






Programmable aid




1




3




805




1 341 




2 150 




1 751 






Macroeconomic support




—




21




—




—




21




39






Sectoral policy




(0)




(9)




—




—




(9)




18






Intra-ACP projects




—




0




417




694




1 112 




693






Interest rate subsidies




—




—




—




—




—




(3)






Emergency aid




—




(1)




26




264




289




398






Other aid programmes related to former EDFs




—




(1)




—




—




(1)




1






Institutional support




—




—




3




21




23




38






Compensation export receipts




(0)




(1)




—




—




(1)




0






Contributions to Trust Funds




—




—




—




114




114




35






Total




0




14




1 251 




2 435 




3 700 




2 970 





The EDF operating expenditure covers various aid instruments and takes different forms, depending on how the money is paid out and managed.
The increase in overall expenses on aid instruments is in line with the lifecycle of the EDF. The 11th EDF started in 2015 and 2017 was thus the third year of its existence. The 11th EDF has reached its maturity and peak with regards to the implementation of adopted actions. The number of open contracts in the 11th EDF increased from 1,3 k in 2016 to 1,6 k in 2017. In 2017 the value of average contracted amount increased by 51 % compared to 2016.
The sectoral policy expenses were negative in 2017 due to reversal of an invoice that was incorrectly recorded in 2016.
3.4.   CO-FINANCING EXPENSES












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



2017




2016






Co-financing




—




—




42




1




42




(15)





Included under this heading are the expenses incurred on co-financing projects in 2017. It should be noted that the expenses incurred include estimated amounts related to the cut-off exercise (and consequently reversals of the estimated amounts related to last year). Because the reversals of the 2015 estimated expenses (EUR 50 million) exceeded the expenses incurred in 2016 (EUR 35 million), the co-financing expenses were negative for 2016.
Corresponding revenue has been recognised in the statement of financial performance (see note 3.1.1).
3.5.   AID INSTRUMENTS AND CO-FINANCING EXPENSES BY MANAGEMENT TYPE








(EUR millions)




 


2017


2016





Direct Management




1 447 




1 173 











 



Implemented by:







 


 










 








 



Commission












122




140











 








 



EU executive agencies












26




10











 








 



Trust Funds












89




36











 








 



EU delegations












1 209 




987






Indirect Management




2 295 




1 781 











 



Implemented by:







 


 










 








 



EIB and EIF












48




5











 








 



International organisations












1 171 




821











 








 



Private law bodies with a public service mission












(20)




143











 








 



Public law bodies












356




57











 








 



Third countries












739




756











 








 



Private law bodies implementing Public Private Partnership












0




(1)






Total




3 742 




2 954 





3.6.   FINANCE COSTS












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



2017




2016






Write-down of receivables




(1)




(1)




10




1




9




(4)






Other financial expenses




—




—




—




(1)




(1)




0






Total




(1)




(1)




10




0




8




(4)





The heading write-down of receivables comprises the closure estimate of expenses on irrecoverable receivables. The 2017 estimated expenses reflect the increase of the overall write down on receivables from EUR 25 milllion to EUR 34 million (see note 2.3.1). Because the estimate also includes reversals of the the previous year’s estimation, the overall expenses were negative in 2016 (from EUR 29 million in 2015 to EUR 25 million in 2016).
3.7.   OTHER EXPENSES












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



2017




2016






Administrative and IT expenses




(0)




0




1




106




107




129






Provision for risks and charges




—




—




—




—




—




—






Realised losses on trade debtors




1




1




1




—




3




0






Exchange loses




1




7




28




8




44




66






Total




2




9




29




114




154




196





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.
4.   CONTINGENT ASSETS & LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES

4.1.   CONTINGENT ASSETS












(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Performance guarantees




—




4




6




0




10




9






Retention guarantees




—




4




4




—




8




7






Total




—




8




10




0




18




16





Performance guarantees are requested to ensure that beneficiaries of EDF funding meet the obligations of their contracts with the EDF.
Retention guarantees concern only works contracts. Typically 10 % of the interim payments to beneficiaries are withheld to ensure that the contractors fulfil their obligations. These withheld amounts are reflected as amounts payable. Subject to the approval of the contracting authority, the contractor may instead submit a retention guarantee which replaces the amounts withheld on interim payments. These received guarantees are disclosed as contingent assets.
For contracts managed under the indirect mode, the guarantees belong to a contracting authority other than the EDF and they are therefore not recorded by the EDF. In 2017 those guarantees amounted to EUR 644 million.
4.2.   OTHER SIGNIFICANT DISCLOSURES

4.2.1.   Outstanding commitments not yet expensed
The amount disclosed below is the budgetary RAL (‘Reste à Liquider’) less related amounts that have been included as expenses in the statement of financial performance. The budgetary RAL is an amount representing the commitments for which payments and/or de-commitments have not yet been made. This is the normal consequence of the existence of multi-annual programmes.











(EUR millions)




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF



31.12.2017




31.12.2016






Outstanding commitments not yet expensed




0




88




1 659 




6 760 




8 508 




6 746 






Total




0




88




1 659 




6 760 




8 508 




6 746 





At 31 December 2017 the budgetary RAL totalled EUR 9 745 million (2016: EUR 7 665 million).
4.2.2.   Centre for the Development of Enterprise
The ACP-EU Council of Ministers agreed in June 2014 ‘to proceed with the orderly closing of the CDE’, and at the same time ‘to ensure that the private sector support projects implemented by the CDE in ACP countries and regions are completed in full’. For this purpose, the ACP-EU Council of Ministers granted a delegation of powers to the ACP-EU Committee of Ambassadors to take this matter forward with a view to adopt the necessary decisions.
The ACP-EU Committee of Ambassadors authorised, by Decision No 4/2014 of 23/10/2014, the Executive Board of the CDE to take, with immediate effect, all appropriate measures to prepare for the closure of the CDE. As stipulated in article 2 of that Decision, the Executive Board was instructed to contract a Curator to prepare and implement a closure plan.
The Curator submitted to the CDE Executive Board at the end of June 2015 a definitive strategic plan, with a budget and work-plan, which reflected the outcome of the social dialogue. The budget of the definitive strategic plan, approved by the CDE Executive Board, was the basis for the Commission’s proposal for a Financing Decision that was adopted by the EC in 2015 for a total amount of EUR 18,2 million. Subsequent to the adoption of the above Financing Decision, a grant agreement was concluded in December 2015 between the CDE and the European Commission providing the necessary financing for the realization of CDE’s assets and settlement of its liabilities. This grant agreement started on 1 January 2016 and lasted until 31 December 2017.
4.2.3.   The United Kingdom’s withdrawal from the European Union

Background

On 23 June 2016 a majority of the citizens of the United Kingdom who voted in the referendum on membership of the European Union voted to leave the EU. On 29 March 2017 the United Kingdom formally notified the European Council of its intention to leave the EU and the European Atomic Energy Community (Euratom).

With regard to the EDF

On 19 March 2018 the Commission published a draft of the Withdrawal Agreement that outlined the progress made in the negotiations with the UK.
This draft Withdrawal Agreement states that the United Kingdom shall remain party to the EDF until the closure of the 11th EDF and all previous unclosed EDFs, and shall in this respect assume the same obligations as the Member States under the Internal Agreement by which it was set up, as well as the obligations resulting from previous EDFs until their closure. It may participate, as observer, without voting rights, in the EDF Committee.
The draft Withdrawal Agreement also states that, where the amounts from projects under the 10th EDF or from previous EDFs have not been committed or have been decommitted on the date of entry into force of this agreement, the United Kingdom’s share of those amounts shall not be reused. The same applies to the United Kingdom share of funds not committed or decommitted amounts under 11th EDF after 31 December 2020.
As at 31 December 2017, there is no financial impact to be reported in the EDF financial statement. The negotiations on the United Kingdom’s withdrawal from the European Union are still ongoing and, therefore, the final form of the agreement is not confirmed at this time.
5.   FINANCIAL RISK MANAGEMENT

The following disclosures with regard to the financial risk management of the EDF relate to the treasury operations carried out by the Commission on behalf of the EDF in order to implement its resources.
5.1.   RISK MANAGEMENT POLICIES AND HEDGING ACTIVITIES

The rules and principles for the management of the treasury operations are laid down in the 11th EDF Financial Regulation and in the Internal Agreement.
As a result of the above regulation, the following main principles apply:






—


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.
5.2.   CURRENCY RISK


Exposure of the EDF to currency risk at year end — net position




















(EUR millions)




 


31.12.2017


31.12.2016




USD


GBP


DKK


SEK


EUR


Other


Total


USD


GBP


DKK


SEK


EUR


Other


Total





Financial assets



 


 


 


 


 


 


 


 


 


 


 


 


 


 





Receivables and recoverables




64




—




—




—




26




2




92




0




—




—




—




129




3




132






Cash and cash equivalents




4




0




—




—




344




—




347




2




0




—




—




678




—




680






Total




68




0




—




—




370




2




439




2




0




—




—




807




3




812






Financial liabilities



 


 


 


 


 


 


 


 


 


 


 


 


 


 





Non-current financial liabilities




—




—




—




—




(14)




—




(14)




—




—




—




—




(6)




—




(6)






Payables




(0)




—




—




—




(533)




(30)




(563)




0




—




—




—




(495)




(54)




(549)






Total




(0)




—




—




—




(547)




(30)




(577)




0




—




—




—




(501)




(54)




(555)






Total




68




0




—




—




(177)




(28)




(138)




2




0




—




—




306




(51)




257





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.
5.3.   INTEREST RATE RISK

The EDF does not borrow money and as a consequence it is not exposed to interest rate risk.
Interest is accrued on balances it holds in its different banks accounts. The Commission, on behalf of the EDF, has therefore put in place measures to ensure that interest earned regularly reflect market interest rates as well as their possible fluctuation.
Contributions to the EDF budget are credited by each Member State to a special account opened with the financial institution designed by it. As the remuneration applied to some of these accounts may currently be negative, cash management procedures are in place to minimise balances kept on the accounts concerned. In addition, in accordance with Council Regulation (EU) 2016/888, any negative remuneration on these accounts is borne by the relevant Member State.
Overnight balances held in commercial bank accounts are remunerated on a daily basis. The remuneration of balances on such accounts is based on variable market rates to which a contractual margin (positive or negative) is applied. For most of the accounts the interest calculation is linked to a market reference rate and is adjusted to reflect any fluctuations of this rate. As a result no risk is taken by the EDF that its balances be remunerated at rates lower than market rates.
5.4.   CREDIT RISK (COUNTERPARTY RISK)


Financial assets that are neither past due nor impaired:











(EUR millions)




 


Total


Neither past due nor impaired


Past due but not impaired




< 1 year


1-5 years


> 5 years





Exchange receivables and non-exchange recoverables




92




92




0




—




—






Total at 31.12.2017




92




92




0




—




—






Exchange receivables and non-exchange recoverables




132




93




36




4




—






Total at 31.12.2016




132




93




36




4




—









Financial assets by risk category:












(EUR millions)




 


31.12.2017


31.12.2016




Receivables


Cash


Total


Receivables


Cash


Total





Counterparties with external credit rating



 


 


 


 


 


 





Prime and high grade




3




103




106




34




284




318






Upper medium grade




0




240




240




3




371




374






Lower medium grade




3




4




7




2




16




18






Non- investment grade




1




0




2




1




9




10







Total






7






347






354






40






680






720







Counterparties without external credit rating



 


 


 


 


 


 





Group 1 (debtors without defaults in the past)




86




0




86




92




0




92






Group 2 (debtors with defaults in the past)




—




—




—




—




—




—







Total






86






0






86






92






0






92







Total




92




347




440




132




680




812





Funds in the categories non-investment grade and lower medium grade relate mainly to Member State contributions to the EDF paid to the special accounts opened by Member States in accordance with Article 22(3) of the EDF FR. According to this regulation the amount of such contributions must remain in those special accounts until the payments need to be made.
Most of the EDF’s treasury resources are kept, in accordance with the 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.
5.5.   LIQUIDITY RISK


Maturity analysis of financial liabilities by remaining contractual maturity










(EUR millions)




 


< 1 year


1-5 years


> 5 years


Total





Financial liabilities




563




13




1




577






Total at 31.12.2017





563






13






1






577







Financial liabilities




549




6




—




555






Total at 31.12.2016





549






6






—






555






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.
6.   RELATED PARTY DISCLOSURES

The related parties of the EDF are Bêkou, Africa EU Trust Funds and the European Commission. Transactions between these entities take place as part of the normal operations of the EDF and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules.
The EDF has no separate management since it is managed by the Commission. The entitlements of the key management of the EU, including the Commission, have been disclosed in the Consolidated annual accounts of the European Union under heading 7.2 ‘Key management entitlements’.
7.   EVENTS AFTER THE BALANCE SHEET DATE

At the date of signing of these accounts, no material issues had come to the attention of or were reported to the Accounting Officer of the EDF that would require separate disclosure under this section. The annual accounts and related notes were prepared using the most recently available information and this is reflected in the information presented above.
8.   RECONCILIATION OF ECONOMIC RESULT AND BUDGET RESULT

The economic result of the year is calculated on the basis of accrual accounting principles. The budget result is however based on cash accounting rules. As the economic result and the budget result both cover the same underlying operational transactions, it is a useful control to ensure that they are reconcilable. The table below shows this reconciliation, highlighting the key reconciling amounts, split between revenue and expenditure items.







(EUR millions)




 


2017


2016





ECONOMIC RESULT OF THE YEAR




(3 818 )




(3 073 )






Revenue



 


 





Entitlements not affecting the budget result




(7)




(2)






Entitlements established in current year but not yet collected




(3)




(7)






Entitlements established in previous years and collected in current year




29




16






Net effect of pre-financing




57




41






Accrued revenue (net)




(62)




8






Other




(2)




(5)






Expenses



 


 





Expenses of the current year not yet paid




19




22






Expenses of previous years paid in the current year




(60)




(88)






Net effect of pre-financing




(685)




(459)






Accrued expenses (net)




373




256






BUDGET RESULT OF THE YEAR




(4 158 )




(3 291 )





8.1.   RECONCILING ITEMS — REVENUE

The budgetary revenue of a financial year corresponds to the revenue collected from entitlements established in the course of the year and amounts collected from entitlements established in previous years.
The entitlements not affecting the budget result are recorded in the economic result but from a budgetary perspective cannot be considered as revenues as the cashed amount is transferred to reserves and cannot be recommitted without a Council decision.
The entitlements established in the current year but not yet collected are to be deducted from the economic result for reconciliation purposes as they do not form part of budgetary revenue. On the contrary, the entitlements established in previous years and collected in the current year must be added to the economic result for reconciliation purposes.
The net effect of pre-financing is the clearing of the recovered pre-financing amounts. This is a cash receipt which has no impact on the economic result.
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.
8.2.   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 result 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 result for reconciliation purposes as they are part of the current year’s budgetary expenditure but have either no effect on the economic result or they decrease the expenses in case of corrections.
The cash receipts from payment cancellations do not affect the economic result whereas they impact the budget result.
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.

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF


ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2017 (13)


BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND


General background on Union Trust Funds

A trust fund is a legal arrangement with a distinct financial structure that pools the funds of several donors to jointly finance an action on the basis of commonly agreed objectives and reporting formats.
In accordance with Article 187(1) of the Financial Regulation applicable to the general budget of the Union (EU FR) and Article 42 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR), the Commission is authorised to create Union Trust Funds for external actions (EUTF). The EUTFs are created under an agreement concluded with other donors (at least one external donor) to respond to emergency, postemergency or thematic actions. The establishment of an EUTF needs to be justified namely by EU added value (its objectives can be better met at EU than at national level), and complimentarity (the trust fund should not duplicate already existing and similar instruments).
The European Commission submits the draft decision to establish an EUTF to the competent committee defined in the basic act governing the instrument that provides the EU’s financial contribution to the new Trust Fund. The consultation of the Committees ensures an adequate involvement of the Council in the establishment of any EUTF. The proposal for the revision of the Financial Regulation addresses the need for greater involvement of the European Parliament in the creation of EUTFs (Article 227(1)) and reporting on their activities (Article 244).
After the adoption of the establishment and financing decisions, the constitutive act of the EUTF is signed by the European Commission and the donors. The constitutive act details the main features of the EUTF, such as its specific objectives, the rules for the composition and the internal rules of its board, as well as the duration. EUTFs are created for a limited duration, which is, together with its objectives, defined by the constitutive act of each trust fund. In accordance with Article 187 of the EU FR, the EUTF has specific governance arrangements and contributions are placed outside the EU budget.
EUTFs offer a number of advantages: they are EU-led instruments, offering better coordination with EU Member States; better control of operations by the Union and other donors and enhanced EU visibility. Trust Funds benefit from fast decision-making processes and from their capacity to pool larger sums from different sources making them a flexible, proactive and adaptable tool.
EUTFs are managed by the Commission under the responsibility of the authorising officer by delegation who provides assurance on the use of the funds to the Commission and to third donors. The EUTF manager is the authorising officer by sub-delegation. As is the case for the European Development Fund, the accounting officer of a EUTF is the accounting officer of the Commission, who is responsible for laying down accounting procedures and chart of accounts common to all EUTFs.
The European Parliament and/or the Council may request the Commission to discontinue the appropriations for the Trust Fund or revise the constitutive act with a view to liquidate it.

Current EU Trust Funds

To date, the Commission has set up four EUTFs:






—


The BÊKOU EUTF, whose objective is to support all aspects of the Central African Republic’s exit from crisis and its reconstruction efforts. Established on 15 July 2014;










—


The MADAD EUTF, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014;










—


The AFRICA EUTF; a European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa. Established on 12 November 2015;










—


The COLOMBIA EUTF; to support the implementation of the peace agreement in the early recovery and stabilisation post conflict. Established on 12 December 2016.




Further information is available on the websites of individual EUTFs:
Bekou — http://ec.europa.eu/europeaid/bekou-trust-fund-introduction_en
Madad — http://ec.europa.eu/enlargement/neighbourhood/countries/syria/madad/index_en.htm
Africa — http://ec.europa.eu/europeaid/regions/africa/eu-emergency-trust-fund-africa_en
Colombia — http://ec.europa.eu/europeaid/eu-trust-fund-colombia_en

The Bêkou Trust Fund

The first multi-donor EU Trust Fund called Bêkou, which means ‘hope’ in Sango, was established on 15 July 2014, by the Commission (represented by DGs DEVCO and ECHO, and the EEAS) and three of its Member States (Germany, France and the Netherlands), with the aim of promoting the stabilisation and reconstruction of the Central African Republic (CAR). It has been established for a maximum duration of 60 months. The trust fund is managed from Brussels.
The Trust Fund Board and the Operational Committee of the Bêkou EU Trust Fund are composed of representatives of the donors, of the Commission and observers.
The Board adopts and reviews the strategy of the EUTF. The Board shall meet at least once a year.
The Operational Committee examines, approves and supervises the implementation of the actions financed by the Fund. The Committee also approves the annual accounts and the annual reports on the activities financed by the Trust Fund.

Annual accounts of the Bêkou Trust Fund

According to Article 8 of the Agreement establishing the European Union Trust Fund for the Central African Republic, the ‘Bêkou EU Trust Fund’ and Article 11.2.1 of the Constitutive agreement, the annual accounts comprise two parts: (1) The annual financial report prepared by the EUTF manager and (2) The annual financial statements prepared by the Commission’s Accounting Officer, who is, based on the same article also the Accounting Officer of the trust fund.
According to Article 8 of the Constitutive agreement the financial statements shall be prepared in accordance with the accounting rules adopted by the Commission’s Accounting Officer (EU Accounting Rules, EAR) that are based on the International Public Sector Accounting Standards (IPSAS).
The annual accounts are subject to independent external audit and the final annual accounts are submitted by the EUTF manager and the Accounting Officer to the Operational Committee for approval (Article 8.3.4(c)).

Highlights of the year

The EU launched its first ever Trust Fund, named Bêkou, in July 2014 to help the Central Africa Republic and its population overcome the consequences of the crisis in ensuring access to basic services, in re-launching economic recovery and job creation, and in supporting reconciliation.
In 2017, the Bêkou EUTF adopted its operational strategy for the period 2017-2019, which focuses on: (i) rural development; (ii) support to the health sector; (iii) redeployment of public services and (iv) reconciliation. Priorities have been aligned with the ‘Plan national de Relèvement et de Consolidation de la Paix’ (RCPCA) and the National Indicative Programme (NIP) for the Central African Republic (signed in June 2017) and ownership by national authorities will be enhanced. In 2017, The Bêkou EUTF has adopted actions for a total amount of EUR 52,3 million in the sectors of rural resilience and job creation, health, support to the return of internally displaced people (IDPs) and refugees, light infrastructure, water and sanitation. The indicated amount covers newly adopted programmes, as well as several revisions of already adopted actions.
The Bêkou EUTF encompasses 15 programmes since its creation. In terms of contracts, the Bêkou EUTF signed 15 new contracts in 2017 for a total amount of nearly EUR 20 million, which contribute to the implementation of its programmes in the sectors of health, food security, gender empowerment and wildlife conservation. Moreover, amounts committed to some spending areas have increased to implement the adopted programme revisions; in particular, an increase of EUR 12 million for the spending area ‘Basic health care’.
Pledges by its contributors amounted to more than EUR 236 million by the end of 2017. This is an increase of EUR 63 million compared to year 2016. However, EUR 56 million out of these EUR 236 million remain to be certified.
Furthermore, more than EUR 18 million was paid on top of payments made during previous years; total disbursements have reached over EUR 61 million since the creation of Bêkou EUTF.
In the financial statements, the most important movements can be found in:






—


Pre-financing: a decrease of kEUR 7 912 as less contracts have an open pre-financed amount;










—


Operating expenses: An increase of kEUR 12 486 illustrating the maturity of the Trust Fund and the increased activities in the fields of urban development and basic and primary health care.





BALANCE SHEET








(EUR ‘000)




 


31.12.2017


31.12.2016





NON-CURRENT ASSETS



 


 





Pre-financing




686




3 604 





 



686




3 604 






CURRENT ASSETS



 


 





Pre-financing




7 465 




12 458 






Exchange receivables and non-exchange recoverables




877




1 455 






Cash and cash equivalents




39 943 




43 036 





 



48 285 




56 949 






TOTAL ASSETS




48 971 




60 554 






NON-CURRENT LIABILITIES



 


 





Financial liabilities




(44 720 )




(59 339 )





 



(44 720 )




(59 339 )






CURRENT LIABILITIES



 


 





Payables




(716)




(0)






Accrued charges and deferred revenue




(3 536 )




(1 215 )





 



(4 252 )




(1 215 )






TOTAL LIABILITIES




(48 971 )




(60 554 )






NET ASSETS



—


—





FUNDS & RESERVES



 


 





Accumulated surplus



—


—





Economic result of the year



—


—





NET ASSETS



—


—





STATEMENT OF FINANCIAL PERFORMANCE








(EUR ‘000)




 


2017


2016





REVENUE



 


 





Revenue from non-exchange transactions



 


 





Revenue from donations




29 620 




17 232 





 



29 620 




17 232 






Revenue from exchange transactions



 


 





Financial revenue




1




48





 



1




48






Total Revenue




29 621 




17 280 






EXPENSES



 


 





Operating expenses




(28 918 )




(16 432 )






Other expenses




(703)




(848)






Total Expenses




(29 621 )




(17 280 )






ECONOMIC RESULT OF THE YEAR




—




—






CASH FLOW STATEMENT








(EUR ‘000)




 


2017


2016





Economic result of the year



—


—





Operating activities



 


 





(Increase)/decrease in pre-financing




7 912 




(6 569 )






(Increase)/decrease in exchange receivables and non-exchange recoverables




578




(91)






Increase/(decrease) in financial liabilities




(14 620 )




(3 786 )






Increase/(decrease) in payables




716




0






Increase/(decrease) in accrued charges and deferred revenue




2 321 




1 021 






NET CASH FLOW




(3 092 )




(9 425 )






Net increase/(decrease) in cash and cash equivalents




(3 092 )




(9 425 )






Cash and cash equivalents at the beginning of the year




43 036 




52 461 






Cash and cash equivalents at year-end




39 943 




43 036 






STATEMENT OF CHANGES IN NET ASSETS









(EUR ‘000)




 


Accumulated surplus/
(deficit)


Economic result of the year


Net assets





BALANCE AS AT 31.12.2016



—


—


—





Economic result of the year



—


—


—





BALANCE AS AT 31.12.2017



—


—


—





ANNUAL ACCOUNTS OF THE EUTF FOR AFRICA 2017 (14)


BACKGROUND INFORMATION ON THE EUTF FOR AFRICA


General background on Union Trust Funds

A trust fund is a legal arrangement with a distinct financial structure that pools the funds of several donors to jointly finance an action on the basis of commonly agreed objectives and reporting formats.
In accordance with Article 187(1) of the Financial Regulation applicable to the general budget of the Union (EU FR) and Article 42 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR), the Commission is authorised to create Union Trust Funds for external actions (EUTF). The EUTFs are created under an agreement concluded with other donors (at least one external donor) to respond to emergency, postemergency or thematic actions. The establishment of an EUTF needs to be justified namely by EU added value (its objectives can be better met at EU than at national level), and complimentarity (the trust fund should not duplicate already existing and similar instruments).
The European Commission submits the draft decision to establish an EUTF to the competent committee defined in the basic act governing the instrument that provides the EU’s financial contribution to the new Trust Fund. The consultation of the Committees ensures an adequate involvement of the Council in the establishment of any EUTF. The proposal for the revision of the Financial Regulation addresses the need for greater involvement of the European Parliament in the creation of EUTFs (Article 227(1)) and reporting on their activities (Article 244).
After the adoption of the establishment and financing decisions, the constitutive act of the EUTF is signed by the European Commission and the donors. The constitutive act details the main features of the EUTF, such as its specific objectives, the rules for the composition and the internal rules of its board, as well as the duration. EUTFs are created for a limited duration, which is, together with its objectives, defined by the constitutive act of each trust fund. In accordance with Article 187 of the EU FR, the EUTF has specific governance arrangements and contributions are placed outside the EU budget.
EUTFs offer a number of advantages: they are EU-led instruments, offering better coordination with EU Member States; better control of operations by the Union and other donors and enhanced EU visibility. Trust Funds benefit from fast decision-making processes and from their capacity to pool larger sums from different sources making them a flexible, proactive and adaptable tool.
EUTFs are managed by the Commission under the responsibility of the authorising officer by delegation who provides assurance on the use of the funds to the Commission and to third donors. The EUTF manager is the authorising officer by sub-delegation. As is the case for the European Development Fund, the accounting officer of a EUTF is the accounting officer of the Commission, who is responsible for laying down accounting procedures and chart of accounts common to all EUTFs.
The European Parliament and/or the Council may request the Commission to discontinue the appropriations for the Trust Fund or revise the constitutive act with a view to liquidate it.

Current EU Trust Funds

To date, the Commission has set up four EUTFs:






—


The BÊKOU EUTF, whose objective is to support all aspects of the Central African Republic’s exit from crisis and its reconstruction efforts. Established on 15 July 2014;










—


The MADAD EUTF, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014;










—


The AFRICA EUTF; a European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa. Established on 12 November 2015;










—


The COLOMBIA EUTF; to support the implementation of the peace agreement in the early recovery and stabilisation post conflict. Established on 12 December 2016.




Further information is available on the websites of individual EUTFs:
Bekou — http://ec.europa.eu/europeaid/bekou-trust-fund-introduction_en
Madad — http://ec.europa.eu/enlargement/neighbourhood/countries/syria/madad/index_en.htm
Africa — http://ec.europa.eu/europeaid/regions/africa/eu-emergency-trust-fund-africa_en
Colombia — http://ec.europa.eu/europeaid/eu-trust-fund-colombia_en

The EUTF for Africa

European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa (‘EUTF for Africa’) was launched on 12 November 2015 during the Valletta Summit on Migration. The main objectives of this trust fund is to support all aspects of stability and contribute to better migration management as well as addressing the root causes of destabilisation, forced displacement and irregular migration, in particular by promoting resilience, economic and equal opportunities, security and development and addressing human rights abuses.
The trust fund operates in three main geographic areas, namely the Sahel region and Lake Chad area, the Horn of Africa and the North of Africa but also the neighbouring countries of the eligible countries may benefit, on a case by case basis, from the Trust fund’s project. The Trust Fund is established for a limited period, until 31 December 2020 in order to provide a short and medium-term response to the challenges of the regions. The trust fund is managed from Brussels.
The Trust Fund Board and the Operational Committee of the EUTF for Africa are composed of representatives of the donors and of the Commission, as well as representatives of non-contributing EU Member States, authorities of eligible countries’ and regional organisations as observers.
The Board establishes and reviews the strategy of the EUTF. The Board shall meet at least once a year.
The Operational Committee examines, approves and supervises the implementation of the actions financed by the Fund. The Committee also approves the annual accounts and the annual reports on the activities financed by the Trust Fund.

Annual accounts of the EUTF for Africa

According to Article 7 of ‘The agreement establishing the European Union emergency trust fund for stability and addressing root causes of irregular migration and displaced persons in Africa and its internal rules’ (‘Constitutive agreement’) the annual accounts comprise two parts: (1) The annual financial report prepared by the EUTF manager and (2) The annual financial statements prepared by the EC Accounting Officer, who is, based on the same article also the Accounting Officer of the trust fund.
According to Article 8 of the Consitutive agreement the financial statements shall be prepared in accordance with the accounting rules adopted by the Commission’s Accounting Officer (EU Accounting Rules, EAR) that are based on the International Public Sector Accounting Standards (IPSAS).
The annual accounts are subject to independent external audit and the final annual accounts are submitted by the EUTF manager and the Accounting Officer to the Operational Committee for approval (Article 8.3.4(c)).

Highlights of the year

As of 31 December 2017, resources allocated to the EU Trust Fund for Africa amount to approximately EUR 3 330 million: over EUR 2 900 million from the European Development Fund (EDF) and EU financial instruments including DCI, ENI, HOME and ECHO funding, and EUR 378,8 million from EU Member States and other donors (Switzerland and Norway), of which EUR 340,9 million have been paid as of 31 December 2017.
In the course of 2017, resources from the EDF and the EU budget have increased by approximately EUR 525 million (EUR 245 million from EDF, EUR 230 million from DCI and EUR 50 million from DG HOME funding) which represents an increase of almost 22 %. But, more importantly, as a result of the strong call for additional funding by the Commission and the European Council, resources pledged by EU Member States and other donors have significantly increased in 2017 by EUR 226,4 million (148,5 %), going from EUR 152,4 million at the end of December 2016 to EUR 378,8 million at the end of 2017. This remarkable increase of EU Member States contributions has mainly focussed on the North of Africa region.
As of 31 December 2017, a total of 143 projects worth EUR 2 388 million have been approved for the Sahel and Lake Chad, the Horn of Africa and the North of Africa regions. Of the total amount approved, 210 contracts have been signed with implementing partners for an amount of over EUR 1 502 million (63 % of the approved funding). In 2017, the EUTF for Africa focused on deploying activities at country and regional level to address the compelling needs of African partner countries while further translating the Trust Fund’s strategic priorities into action. During the year, 40 new programmes have been approved in the three regions, bringing the total of approved programmes at the end of 2017 to 143 including three which operate across several regions. With EUR 900 million contracted, the implementation pace of the EUTF for Africa has significantly improved in 2017. An overall amount of EUR 1,5 billion has been signed with implementing partners since the inception of the Trust Fund. The Trust Fund for Africa has further intensified its efforts aimed at creating economic and employment opportunities, notably in the countries of origin, and to develop sustainable development opportunities in the countries of transit encouraging people to abandon activities linked to illegal migration. It is expected that in total over half a million people will have a job, receive vocational training or assistance to develop a business with the assistance of the EUTF for Africa. In 2017, the EUTF for Africa has offered protection and assistance to more than 13 000 migrants and the capacities of 1 500 governmental entities have been strengthened in order to fight against the smuggling of migrants and trafficking of human beings.
In the financial statements, the impact of this increased activity is most visible when looking at:






—


Pre-financing: an increase of kEUR 134 662 (+ 117 %). This is comparable with the amounts contracted, which increased from EUR 600 million in 2016 to 1 502 million in 2017.










—


Cash and cash equivalents: an increase of kEUR 147 691 due to the new funds received.




Expenses: An increase of kEUR 226 956 illustrating the increased activities of the Trust Fund after the start-up year 2016.

BALANCE SHEET








(EUR ‘000)




 


31.12.2017


31.12.2016





NON-CURRENT ASSETS



 


 





Pre-financing




52 990 




44 854 





 



52 990 




44 854 






CURRENT ASSETS



 


 





Pre-financing




197 258 




70 731 






Exchange receivables and non-exchange recoverables




3 020 




9 476 






Cash and cash equivalents




162 571 




14 879 





 



362 849 




95 086 







TOTAL ASSETS





415 838 




139 941 






NON-CURRENT LIABILITIES



 


 





Financial liabilities




(396 713 )




(138 502 )





 



(396 713 )




(138 502 )






CURRENT LIABILITIES



 


 





Payables




(526)




(702)






Accrued charges and deferred revenue




(18 600 )




(736)





 



(19 126 )




(1 439 )







TOTAL LIABILITIES





(415 838 )




(139 941 )






NET ASSETS



—


—





FUNDS & RESERVES



 


 





Accumulated surplus



—


—





Economic result of the year



—


—






NET ASSETS




—


—





STATEMENT OF FINANCIAL PERFORMANCE








(EUR ‘000)




 


2017


2016





REVENUE



 


 





Revenue from non-exchange transactions



 


 





Revenue from donations




279 027 




52 246 





 



279 027 




52 246 






Revenue from exchange transactions



 


 





Financial revenue




2




54






Other revenue




270




43





 



271




97






Total Revenue




279 299 




52 343 






EXPENSES



 


 





Operating expenses




(271 669 )




(49 042 )






Other expenses




(7 630 )




(3 301 )






Total expenses




(279 299 )




(52 343 )







ECONOMIC RESULT OF THE YEAR





—




—






CASH FLOW STATEMENT








(EUR ‘000)




 


2017


2016





Economic result of the year



—


—





Operating activities



 


 





(Increase)/decrease in pre-financing




(134 662 )




(115 585 )






(Increase)/decrease in exchange receivables and non-exchange recoverables




6 456 




(9 476 )






Increase/(decrease) in financial liabilities




258 211 




105 860 






Increase/(decrease) in payables




(177)




702






Increase/(decrease) in accrued charges and deferred revenue




17 864 




736






NET CASH FLOW




147 691 




(17 763 )






Net increase/(decrease) in cash and cash equivalents




147 691 




(17 763 )






Cash and cash equivalents at the beginning of the year




14 879 




32 642 






Cash and cash equivalents at year-end




162 571 




14 879 






STATEMENT OF CHANGES IN NET ASSETS









(EUR ‘000)




 


Accumulated surplus/
(deficit)


Economic result of the year


Net assets





BALANCE AS AT 31.12.2016



—


—


—





Economic result of the year



—


—


—





BALANCE AS AT 31.12.2017



—


—


—





CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS (15)


CONSOLIDATED BALANCE SHEET








(EUR millions)




 


31.12.2017


31.12.2016





NON-CURRENT ASSETS



 


 





Pre-financing




636




457





 



636




457






CURRENT ASSETS



 


 





Pre-financing




1 723 




1 455 






Exchange receivables and non-exchange recoverables




96




143






Cash and cash equivalents




550




738





 



2 369 




2 336 






TOTAL ASSETS




3 005 




2 794 






NON-CURRENT LIABILITIES



 


 





Provisions




(4)




(4)






Financial liabilities




(292)




(106)





 



(296)




(110)






CURRENT LIABILITIES



 


 





Payables




(564)




(549)






Accrued charges and deferred income




(755)




(778)





 



(1 319 )




(1 327 )






TOTAL LIABILITIES




(1 615 )




(1 436 )






NET ASSETS




1 389 




1 357 






FUNDS & RESERVES



 


 





Called fund capital — active EDFs




46 173 




42 323 






Called fund capital from closed EDFs carried forward




2 252 




2 252 






Economic result carried forward from previous years




(43 219 )




(40 146 )






Economic result of the year




(3 818 )




(3 073 )






NET ASSETS




1 389 




1 357 






CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE








(EUR millions)




 


2017


2016





REVENUE



 


 





Revenue from non-exchange transactions



 


 





Recovery activities




61




8






Revenue from trust funds donations




194




35





 



255




43






Revenue from exchange transactions



 


 





Financial revenue




4




4






Other revenue




22




62





 



26




66






Total Revenue




281




108






EXPENSES



 


 





Aid instruments




(3 585 )




(2 935 )






Expenses implemented by trust funds




(301)




(65)






Co-financing expenses




(42)




15






Finance costs




(8)




4






Other expenses




(162)




(200)






Total Expenses




(4 099 )




(3 181 )






ECONOMIC RESULT OF THE YEAR




(3 818 )




(3 073 )






CONSOLIDATED CASH FLOW STATEMENT








(EUR millions)




 


2017


2016





Economic result of the year




(3 818 )




(3 073 )






Operating activities



 


 





Capital increase — contributions




3 850 




3 450 






(Increase)/decrease in trust funds contributions




—




(0)






(Increase)/decrease in pre-financing




(446)




(242)






(Increase)/decrease in exchange receivables and non-exchange recoverables




47




29






Increase/(decrease) in financial liabilities




186




34






Increase/(decrease) in payables




15




29






Increase/(decrease) in accrued charges and deferred income




(22)




(78)






NET CASH FLOW




(188)




149






Net increase/(decrease) in cash and cash equivalents




(188)




149






Cash and cash equivalents at the beginning of the year




738




589






Cash and cash equivalents at year-end




550




738






CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS












(EUR millions)




 


Fund capital — active EDFs
(A)


Uncalled funds — active EDFs
(B)


Called fund capital — active EDFs
(C) = (A)-(B)


Cumulative Reserves
(D)


Called fund capital from closed EDFs carried forward
(E)


Total Net Assets
(C)+(D)+(E)






BALANCE AS AT 31.12.2015





73 464 




34 590 




38 873 




(40 146 )




2 252 




980






Capital increase — contributions



 



(3 450 )




3 450 



—


—



3 450 






Economic result of the year




—




—




—




(3 073 )




—




(3 073 )







BALANCE AS AT 31.12.2016





73 464 




31 140 




42 323 




(43 219 )




2 252 




1 357 






Capital increase — contributions



 



(4 050 )




4 050 



 


 



4 050 






Refund to Member States




(200)



 



(200)



 


 



(200)






Economic result of the year



 


 



—




(3 818 )



 



(3 818 )







BALANCE AS AT 31.12.2017





73 264 




27 090 




46 173 




(47 037 )




2 252 




1 389 






EDF REPORT ON FINANCIAL IMPLEMENTATION

1.   INTRODUCTORY NOTE

1.1.   Closed EDFs







—


As the sixth EDF was closed in 2006 and the seventh 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 ninth EDF.










—


As in past years, to ensure transparency in the presentation of the accounts for 2017, the tables set out separately for the eighth 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 ninth EDF, balances and decommitments of previous EDFs have been transferred to the ninth EDF, and, during the life of the ninth EDF, have been committed as ninth EDF funds.




2.   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 (OCTs) with the European Union entered into force on 2 December 2001. This Decision was amended on 19 March 2007 (Decision 2007/249/EC).
The Internal Agreement on the financing of Community aid under the multiannual financial framework for the period 2008-2013 in accordance with the revised Cotonou Agreement, adopted by the Representatives of the Governments of the Member States of the European Community on 17 July 2006, entered into force on 1 July 2008.
Under the Cotonou Agreement, the second period (2008-2013) of Community aid to the ACP States and OCTs is to be funded by the 10th EDF for an amount of EUR 22 682 million, of which:






—


EUR 21 966 million is allocated to the ACP countries in accordance with the multiannual financial framework set out in Annex Ib to the revised Cotonou Agreement, of which EUR 20 466 million is managed by the European Commission;










—


EUR 286 million is allocated to the OCTs in accordance with Annex IIAa of the revised Council Decision on the association of the OCTs with the European Community, of which EUR 256 million is managed by the European Commission;










—


EUR 430 million is for the Commission to finance the costs arising from the programming and implementation of 10th EDF resources, in accordance with Article 6 of the Internal Agreement.




The actual credits available (see table 1.3) differ from the above due to: decommitments from previous EDFs, interest and co-financing.
According to the ‘Sunset clause’ of the 10th EDF (Articles 1(4) and 1(5) of the 10th EDF Internal Agreement), no funds could be committed after 31 December 2013. Uncommitted funds were transferred to the 11th EDF performance reserve.
3.   11th EDF

The Internal Agreement on the financing of Union aid under the multiannual financial framework for the period 2014-2020 in accordance with the revised Cotonou Agreement, adopted by the Representatives of the Governments of the Member States of the European Union on August 2013, entered into force on March 2015.
Under the Cotonou Agreement, the third period (2014-2020) of Union aid to the ACP States and OCTs is to be funded by the 11th EDF for an amount of EUR 30 506 million, of which:






—


EUR 29 089 million is allocated to the ACP countries in accordance with Article 1.2(a) and Article 2(d) of the Internal Agreement, of which EUR 27 955 million is managed by the European Commission;










—


EUR 364,5 million is allocated to the OCTs in accordance with Article 1.2(a) and Article 3.1 of the Internal Agreement, of which 359,5 million is managed by the European Commission;










—


EUR 1 052,5 million is for the Commission to finance the costs arising from the programming and implementation of 11th EDF resources, in accordance with Article 1.2(a) of the Internal Agreement.




The actual credits available (see table 1.4) differ from the above due to the same reasons as mentioned under the 10th EDF above.

Remaining funds on non-mobilisable performance reserves at 31 December 2017

The amounts decommitted from projects under the ninth and previous EDFs are transferred to the performance reserve of the 10th EDF, with the exception of Stabex funds.
The decommited funds from projects under the 10th EDF are transferred to the performance reserve of the 11th EDF.
During 2017, all decommitted funds from previous EDFs were transferred to the respective reserves.
In accordance with Article 1.4 of the 11th EDF Internal Agreement and the Council Decision of 2 August 2016 (2016/1337), an amount of decommitted funds from the 10th EDF shall be allocated for the purpose of replenishing the African Peace Facility for the period 2016-2018 up to a maximum of EUR 491 million and up to EUR 16 million for support of expenditure.
In accordance with Article 1.4 of the 11th EDF Internal Agreement and the Council Decision of 4 July 2017 (2017/1206), the shares of Member States’ contributions set out in Article 1(2)(a) of the Internal Agreements of the Eighth and Ninth EDF shall be reduced accordingly for an amount of EUR 200 million from funds decommitted under the Eighth and the Ninth EDF.






(EUR millions)




Total available on non-mobilisable performance reserves at 31.12.2017


 




Non-mobilisable reserve from decommitted funds under the eighth, and ninth EDF at 31.12.2017


309,1 




Non-mobilisable reserve from decommitted funds under the 10th EDF at 31.12.2017


206,0 




Total available on non-mobilisable performance reserves at 31.12.2017


515,1 





EDF Co-financings

Under the 10th and 11th EDFs, transfer agreements for co-financings from Member States were signed, and commitment appropriations were opened for a total amount of EUR 228,5 million, while payment appropriations were opened for the cashed amounts totalling EUR 211,2 million.
The situation of co-financing appropriations at 31.12.2017 is shown in the table below:







(EUR millions)




 


Commitments appropriations


Payment appropriations




Co-financing — A Envelope


208,8 


191,9 




Co-financing — Intra-ACP


13,4 


13,4 




Co-financing — Administrative expenses


6,3 


5,9 




 



228,5 




211,2 





The following tables, concerning the amounts decided, contracted and paid, show net figures. The tables presenting the situation by instrument are annexed.

Table 1.1


Eight EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2017


ANALYSIS OF CREDITS PER INSTRUMENT











(EUR millions)




INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2016


INCREASE OR DECREASE IN RESOURCES IN 2017


Notes


CURRENT LEVEL APPROPRIATION





ACP



 


 


 


 


 





Lomé



 


 


 


 


 






Regular MS Contributions






12 967 






(3 272 )






(6)




 




9 689 






Aid for refugees


120


(20)


 


 


100




Emergency aid (Lomé)


140


(4)


 


 


136




Heavily indebted poor countries (Lomé)


0


1 060 


 


 


1 060 




Interest-rate subsidies


370


(298)


(3)



 (2)



69




Risk capital


1 000 


15


 


 


1 015 




Stabex


1 800 


(1 077 )


 


 


723




Structural adjustment


1 400 


97


 


 


1 497 




Sysmin


575


(474)


 


 


101




Total indicative programmes


7 562 


(2 605 )


(3)



 (2)



4 954 




Utilisation of interest income


0


35


 


 


35





Cotonou



 


 


 


 


 






Regular MS Contributions






0






650






(0)




 




650






A Envelope — National Allocations


0


417


(0)



 (2)



417




B Envelope — National Allocations


0


233


(0)



 (2)



233




Interests and other receipts


0


0


 


 


0





SUB TOTAL ACP




12 967 




(2 621 )




(6)



 



10 339 






OCTs



 


 


 


 


 





Lomé



 


 


 


 


 






Regular MS Contributions






0






46






(1)




 




46






Interest-rate subsidies


0


1


 


 


1




Risk capital


0


6


 


 


6




Stabex


0


1


 


 


1




Sysmin


0


2


 


 


2




Total indicative programmes


0


36


(1)



 (2)



35





SUB TOTAL OCTs




0




46




(1)



 



46






TOTAL 8th EDF




12 967 




(2 575 )




(7)



 



10 385 






Table 1.2


Ninth EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2017


ANALYSIS OF CREDITS PER INSTRUMENT











(EUR millions)




INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2016


INCREASE OR DECREASE IN RESOURCES IN 2017


Notes


CURRENT LEVEL APPROPRIATION





ACP



 


 


 


 


 





Lomé



 


 


 


 


 






Regular MS Contributions






0






672






(2)




 




669






Transfers from 6th EDF — Lomé


0


20


(0)



 (3)



20




Transfers from 7th EDF — Lomé


0


651


(2)



 (3)



649





Cotonou



 


 


 


 


 






Regular MS Contributions






8 919 






5 583 






(34)




 




14 468 






A Envelope — National Allocations


5 318 


3 319 


(13)



 (3)



8 624 




B Envelope — National Allocations


2 108 


(896)


(2)



 (3)



1 210 




CDE, CTA and Parliamentary Assembly


164


(10)


 


 


154




Implementation costs


125


52


 


 


177




Interests and other receipts


0


63


 


 


63




Other Intra-ACP allocations


300


2 314 


(13)



 (3)



2 602 




Peace facility


0


354


 


 


354




Regional allocations


904


(134)


(5)



 (3)



765




Special allocation R.D. Congo


0


105


 


 


105




Special allocation South Sudan


0


267


 



 (5)



267




Special allocation Sudan


0


110


 



 (4)



110




Voluntary contribution Peace facility


0


39


 


 


39





SUB TOTAL ACP




8 919 




6 255 




(36)



 



15 138 






OCTs



 


 


 


 


 





Lomé



 


 


 


 


 






Regular MS Contributions






0






3




 


 




3






Transfers from 6th EDF — Lomé


0


0


 


 


0




Transfers from 7th EDF — Lomé


0


3


 


 


3





Cotonou



 


 


 


 


 






Regular MS Contributions






0






290






(1)




 




289






A Envelope — National Allocations


0


237


(0)



 (3)



237




B Envelope — National Allocations


0


4


 


 


4




Regional allocations


0


48


(1)



 (3)



47




Studies/Technical assistance OCTs


0


1


 


 


1





SUB TOTAL OCTs




0




293




(1)



 



292






TOTAL 9th EDF




8 919 




6 548 




(37)



 



15 430 






Table 1.3


10th EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2017


ANALYSIS OF CREDITS PER INSTRUMENT











(EUR millions)




INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2016


INCREASE OR DECREASE IN RESOURCES IN 2017


Notes


CURRENT LEVEL APPROPRIATION





ACP



 


 


 


 


 






Regular MS Contributions






20 896 






233






(120)




 




21 009 






A Envelope — National Allocations


0


13 244 


(144)



 (7)



13 100 




A Envelope reserve


13 500 


(13 500 )


 


 


0




B Envelope — National Allocations


0


2 015 


(11)



 (7)



2 004 




B Envelope reserve


1 800 


(1 800 )


 


 


0




Implementation costs


430


15


(0)



 (7)



445




Institutional and support expenditure


0


232


(0)



 (7)



232




Interests and other receipts


0


84


2



 (7)



85




Intra-ACP Reserve


2 700 


(2 700 )


 


 


0




National allocations Reserve A Envelope Stabex


0


0


 


 


0




NIP/RIP reserve


683


(683)


 


 


0




Non-mobilisable reserve


0


243


43



 (7)



286




Other Intra-ACP allocations


0


1 889 


(3)



 (7)



1 886 




Peace facility


0


1 014 


 


 


1 014 




Regional allocations


0


1 962 


(5)



 (7)



1 956 




Regional allocations reserve


1 783 


(1 783 )


 


 


0






Co-financing






0






204






0




 




204






A Envelope — National Allocations


0


187


 



 (8)



187




Implementation costs


0


5


 



 (8)



5




Other Intra-ACP allocations


0


12


 



 (8)



12




Peace facility


0


1


 



 (8)



1





SUB TOTAL ACP




20 896 




437




(120)



 



21 213 






OCTs



 


 


 


 


 






Regular MS Contributions






0






275






0




 




275






A Envelope — National Allocations


0


193


(1)



 (7)



192




A Envelope reserve


0


0


 


 


0




B Envelope — National Allocations


0


15


(0)



 (7)



15




B Envelope reserve


0


0


 


 


0




National allocations Reserve A Envelope Stabex


0


0


 


 


0




Non-mobilisable reserve


0


21


2



 (7)



23




Regional allocations


0


40


 


 


40




Regional allocations reserve


0


0


 


 


0




Studies/Technical assistance OCTs


0


5


(0)



 (7)



5





SUB TOTAL OCTs




0




275




0



 



275






TOTAL 10th EDF




20 896 




712




(120)



 



21 488 






Table 1.4


11th EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2017


ANALYSIS OF CREDITS PER INSTRUMENT











(EUR millions)




INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2016


INCREASE OR DECREASE IN RESOURCES IN 2017


Notes


CURRENT LEVEL APPROPRIATION





ACP



 


 


 


 


 






Regular MS Contributions






29 008 






54






170




 




29 232 






A Envelope — National Allocations


0


15 115 


425


 


15 540 




B Envelope — National Allocations


0


648


67


 


715




B Envelope reserve


0


0


 


 


0




Implementation costs


1 053 


0


 


 


1 053 




Institutional and support expenditure


0


246


 


 


246




Interests and other receipts


0


16


0


 


16




Intra-ACP Reserve


3 590 


(3 387 )


(110)


 


93




National allocations Reserve A Envelope Stabex


0


0


0


 


0




NIP/RIP reserve


24 365 


(20 937 )


(1 077 )


 


2 351 




Non-mobilisable reserve


0


31


170



 (16)



201




Other Intra-ACP allocations


0


2 241 


10


 


2 251 




Peace facility


0


900


100


 


1 000 




Regional allocations


0


5 181 


585


 


5 766 






Co-financing






0






5






20




 




24






A Envelope — National Allocations


0


3


19


 


22




Implementation costs


0


0


1


 


1




Peace facility


0


1


 


 


1






EC Internal SLA






0






1






0




 




1






A Envelope — National Allocations


0


1


0


 


1





SUB TOTAL ACP




29 008 




60




190



 



29 257 






OCTs



 


 


 


 


 






Regular MS Contributions






0






363






(5)




 




358






A Envelope — National Allocations


0


41


142


 


183




NIP/RIP reserve


0


316


(151)


 


165




Non-mobilisable reserve


0


3


1



 (16)



5




Regional allocations


0


0


1


 


1




Studies/Technical assistance OCTs


0


3


2


 


5






Co-financing






0






0






0




 




0






A Envelope — National Allocations


0


0


0


 


0






EC Internal SLA






0






0






0




 




0






A Envelope — National Allocations


0


0


0


 


0





SUB TOTAL OCTs




0




363




(5)



 



358







Regular MS Contributions






0






0






6




 




6






A Envelope — National Allocations


0


0


6


 


6





SUB TOTAL




0




0




6



 



6






TOTAL 11th EDF




29 008 




423




191



 



29 621 






Table 2.1


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2017


PROGRESS REPORT












(EUR millions)




 


ALLOCATION


EDF




 


8


9


10


11


TOTAL





Lomé



Sundry Income


35


 


 


 


35




Total indicative programmes


4 989 


 


 


 


4 989 




Total Non-Programmable Aid


4 711 


 


 


 


4 711 




Transfers from other funds


 


672


 


 


672





SUB TOTAL: REGULAR MS CONTRIBUTIONS



9 735 


672


 


 


10 407 





Cotonou



A Envelope — National Allocations


417


8 861 


13 292 


15 729 


38 299 




B Envelope — National Allocations


233


1 215 


2 019 


715


4 181 




Bridging facility


 


 


 


(0)


(0)




CDE, CTA and Parliamentary Assembly


 


154


 


 


154




Country reserve


 


 


0


0


0




Implementation Costs and Interests Revenues


0


240


536


1 073 


1 849 




Intra-ACP allocations


 


2 955 


3 132 


3 497 


9 584 




Intra-ACP Reserve


 


 


0


93


93




National allocations Reserve A Envelope Stabex


 


 


0


0


0




NIP/RIP reserve


 


 


0


2 515 


2 515 




Non-mobilisable reserve


 


 


309


206


515




Regional allocations


 


812


1 996 


5 767 


8 575 




Regional allocations reserve


 


 


0


 


0




Special allocation R.D. Congo


 


105


 


 


105




Special allocation South Sudan


 


267


 


 


267




Special allocation Sudan


 


110


 


 


110




Voluntary contribution Peace facility


 


39


 


 


39





SUB TOTAL: REGULAR MS CONTRIBUTIONS



650


14 758 


21 284 


29 596 


66 287 




A Envelope — National Allocations


 


 


 


1


1





SUB TOTAL: EC INTERNAL SLA



 


 


 


1


1




A Envelope — National Allocations


 


 


187


22


209




Implementation Costs and Interests Revenues


 


 


5


1


6




Intra-ACP allocations


 


 


12


1


13





SUB TOTAL: CO-FINANCING



 


 


204


24


229




 



TOTAL



10 385 


15 430 


21 488 


29 621 


76 924 






















 


EDF


Aggregate Total


Cummulative Figures


Annual Figures




At 31/12/2017


% of allocation


2008


2009


2010


2011


2012


2013


2014


2015


2016


2017





Decisions



 


 


 


 


 


 


 


 


 


 


 


 


 




 


8


10 382 


100 %


10 786 


(42)


(45)


(60)


(64)


(98)


(63)


(12)


(13)


(9)




 


9


15 391 


100 %


16 633 


(54)


(116)


(9)


(297)


(72)


(381)


(170)


(104)


(38)




 


10


21 052 


98 %


4 766 


3 501 


2 349 


3 118 


3 524 


4 131 


(95)


(156)


(80)


(5)




 


11


19 027 


64 %


 


 


 


 


 


 


1 160 


5 372 


6 688 


5 807 





Total



 



65 852 



 



32 185 




3 405 




2 187 




3 049 




3 163 




3 961 




621




5 034 




6 491 




5 754 






Assigned Funds



 


 


 


 


 


 


 


 


 


 


 


 


 




 


8


10 376 


100 %


10 541 


(42)


8


(13)


(46)


(11)


(37)


(16)


(6)


(3)




 


9


15 289 


99 %


14 209 


997


476


9


(187)


(96)


(1)


(52)


(46)


(20)




 


10


20 125 


94 %


130


3 184 


2 820 


2 514 


3 460 


3 457 


2 687 


783


541


550




 


11


13 453 


45 %


 


 


 


 


 


 


731


3 293 


3 745 


5 684 





Total



 



59 242 



 



24 881 




4 140 




3 304 




2 509 




3 226 




3 350 




3 380 




4 008 




4 234 




6 211 






Payments



 


 


 


 


 


 


 


 


 


 


 


 


 




 


8


10 375 


100 %


9 930 


152


158


90


15


18


16


(3)


(0)


(1)




 


9


15 164 


98 %


10 011 


1 806 


1 304 


906


539


231


145


43


68


111




 


10


17 753 


83 %


90


1 111 


1 772 


1 879 


2 655 


2 718 


2 760 


2 024 


1 466 


1 277 




 


11


6 206 


21 %


 


 


 


 


 


 


595


1 024 


1 816 


2 770 





Total



 



49 497 



 



20 031 




3 069 




3 233 




2 874 




3 209 




2 967 




3 516 




3 088 




3 350 




4 158 











(*)


Negative figures represent decommitments









Table 2.2


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2017

















(EUR millions)




 


EDF




8


%


9


%


10


%


11


%


TOTAL


%





 (9)




 (9)




 (9)




 (9)




 (9)






Lomé




Sundry Income



 


 


 


 


 


 


 


 


 


 




Appropriations


35


 


 


 


 


 


 


 


35


 




Decisions


35


100


 


 


 


 


 


 


35


100




Assigned funds


35


100


 


 


 


 


 


 


35


100




Payments


35


100


 


 


 


 


 


 


35


100





Total indicative programmes



 


 


 


 


 


 


 


 


 


 




Appropriations


4 989 


 


 


 


 


 


 


 


4 989 


 




Decisions


4 987 


100


 


 


 


 


 


 


4 987 


100




Assigned funds


4 986 


100


 


 


 


 


 


 


4 986 


100




Payments


4 985 


100


 


 


 


 


 


 


4 985 


100





Total Non-Programmable Aid



 


 


 


 


 


 


 


 


 


 




Appropriations


4 711 


 


 


 


 


 


 


 


4 711 


 




Decisions


4 710 


100


 


 


 


 


 


 


4 710 


100




Assigned funds


4 706 


100


 


 


 


 


 


 


4 706 


100




Payments


4 706 


100


 


 


 


 


 


 


4 706 


100





Transfers from other funds



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


672


 


 


 


 


 


672


 




Decisions


 


 


671


100


 


 


 


 


671


100




Assigned funds


 


 


671


100


 


 


 


 


671


100




Payments


 


 


670


100


 


 


 


 


670


100





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




 


 





Cotonou




A Envelope — National Allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


417


 


8 861 


 


13 292 


 


15 729 


 


38 299 


 




Decisions


417


100


8 852 


100


13 212 


99


10 987 


70


33 468 


87




Assigned funds


417


100


8 834 


100


12 641 


95


6 944 


44


28 836 


75




Payments


417


100


8 800 


99


11 113 


84


2 960 


19


23 290 


61





B Envelope — National Allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


233


 


1 215 


 


2 019 


 


715


 


4 181 


 




Decisions


233


100


1 213 


100


2 017 


100


699


98


4 161 


100




Assigned funds


232


99


1 209 


100


1 994 


99


687


96


4 122 


99




Payments


231


99


1 203 


99


1 918 


95


472


66


3 823 


91





Cotonou




Bridging facility



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


 


 


(0)


 


(0)


 




Decisions


 


 


 


 


 


 


 


 


 


 




Assigned funds


 


 


 


 


 


 


 


 


 


 




Payments


 


 


 


 


 


 


 


 


 


 





CDE, CTA and Parliamentary Assembly



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


154


 


 


 


 


 


154


 




Decisions


 


 


154


100


 


 


 


 


154


100




Assigned funds


 


 


154


100


 


 


 


 


154


100




Payments


 


 


154


100


 


 


 


 


154


100





Implementation Costs and Interests Revenues



 


 


 


 


 


 


 


 


 


 




Appropriations


0


 


240


 


536


 


1 073 


 


1 849 


 




Decisions


 


 


240


100


506


94


552


51


1 299 


70




Assigned funds


 


 


240


100


503


94


499


47


1 243 


67




Payments


 


 


240


100


501


93


464


43


1 204 


65





Intra-ACP allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


2 955 


 


3 132 


 


3 497 


 


9 584 


 




Decisions


 


 


2 949 


100


3 128 


100


2 344 


67


8 421 


88




Assigned funds


 


 


2 937 


99


2 930 


94


1 786 


51


7 654 


80




Payments


 


 


2 921 


99


2 636 


84


1 365 


39


6 922 


72





Regional allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


812


 


1 996 


 


5 767 


 


8 575 


 




Decisions


 


 


808


100


1 989 


100


4 422 


77


7 219 


84




Assigned funds


 


 


792


98


1 864 


93


3 514 


61


6 170 


72




Payments


 


 


774


95


1 442 


72


943


16


3 160 


37





Special allocation R.D. Congo



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


105


 


 


 


 


 


105


 




Decisions


 


 


105


100


 


 


 


 


105


100




Assigned funds


 


 


105


100


 


 


 


 


105


100




Payments


 


 


105


100


 


 


 


 


105


100





Special allocation South Sudan



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


267


 


 


 


 


 


267


 




Decisions


 


 


266


100


 


 


 


 


266


100




Assigned funds


 


 


218


82


 


 


 


 


218


82




Payments


 


 


184


69


 


 


 


 


184


69





Cotonou




Special allocation Sudan



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


110


 


 


 


 


 


110


 




Decisions


 


 


109


98


 


 


 


 


109


98




Assigned funds


 


 


105


96


 


 


 


 


105


96




Payments


 


 


90


81


 


 


 


 


90


81





Voluntary contribution Peace facility



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


39


 


 


 


 


 


39


 




Decisions


 


 


24


62


 


 


 


 


24


62




Assigned funds


 


 


24


62


 


 


 


 


24


62




Payments


 


 


24


62


 


 


 


 


24


62





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





A Envelope — National Allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


187


 


22


 


209


 




Decisions


 


 


 


 


185


99


20


92


205


98




Assigned funds


 


 


 


 


178


95


20


92


199


95




Payments


 


 


 


 


131


70


 


 


131


63





Implementation Costs and Interests Revenues



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


5


 


1


 


6


 




Decisions


 


 


 


 


4


84


 


 


4


69




Assigned funds


 


 


 


 


2


45


 


 


2


37




Payments


 


 


 


 


1


28


 


 


1


23





Intra-ACP allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


12


 


1


 


13


 




Decisions


 


 


 


 


12


97


1


100


13


98




Assigned funds


 


 


 


 


11


91


1


100


12


92




Payments


 


 


 


 


11


88


1


100


12


89





Co-financing



 


 


 


 


 


 


 


 


 


 





Cotonou




A Envelope — National Allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


 


 


1


 


1


 




Decisions


 


 


 


 


 


 


1


71


1


71




Assigned funds


 


 


 


 


 


 


1


71


1


71




Payments


 


 


 


 


 


 


1


52


1


52





EC Internal SLA



 


 


 


 


 


 


 


 


 


 




 


 




 


Appropriations


8


%


9


%


10


%


11


%


TOTAL


%





 (9)




 (9)




 (9)




 (9)




 (9)






Cotonou



Country reserve


 


 


 


 



0



 



0



 



0



 




Intra-ACP Reserve


 


 


 


 



0



 



93



 



93



 




National allocations Reserve A Envelope Stabex


 


 


 


 



(0)



 



0



 



0



 




NIP/RIP reserve


 


 


 


 



0



 



2 515 



 



2 515 



 




Regional allocations reserve


 


 


 


 



0



 


 


 



0



 





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


 


 


 


 



309



 



206



 



515



 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 




 


 


8


%


9


%


10


%


11


%


TOTAL


%





 (9)




 (9)




 (9)




 (9)




 (9)





 


Appropriations


10 385 


 


15 430 


 


21 488 


 


29 621 


 


76 924 


 




Decisions


10 382 


100


15 391 


100


21 052 


98


19 027 


64


65 852 


86




Assigned funds


10 376 


100


15 289 


99


20 125 


94


13 453 


45


59 242 


77




Payments


10 375 


100


15 164 


98


17 753 


83


6 206 


21


49 497 


64





TOTAL: ALL ALLOCATIONS



 


 


 


 


 


 


 


 


 


 





Table 2.3


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2017


CLASS OF AID


ACP + PTOM — Eight EDF

















 (EUR millions)




 


 


CREDITS


DECISIONS


ASSIGNED FUNDS


PAYMENTS




AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%




(1)


(2)


 


(2):(1)


(3)


 


(3):(2)


(4)


 


(4):(3)





Lomé




ACP


Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




Utilisation of interest income


35


35


 


100


35


 


100


35


 


100





SUB TOTAL: SUNDRY INCOME




35




35



 



100




35



 



100




35



 



100





Total indicative programmes


4 954 


4 951 


(5)


100


4 950 


(2)


100


4 950 


(1)


100





SUB TOTAL: TOTAL INDICATIVE PROGRAMMES




4 954 




4 951 




(5)




100




4 950 




(2)




100




4 950 




(1)




100





Aid for refugees


100


100


(0)


100


100


(0)


100


100


 


100




Emergency aid (Lomé)


136


136


 


100


136


 


100


136


 


100




Heavily indebted poor countries (Lomé)


1 060 


1 060 


 


100


1 060 


 


100


1 060 


 


100




Interest-rate subsidies


69


69


(3)


100


68


(0)


100


68


(0)


100




Risk capital


1 015 


1 015 


 


100


1 012 


 


100


1 012 


 


100




Stabex


723


723


(0)


100


722


(0)


100


722


 


100




Structural adjustment


1 497 


1 497 


0


100


1 497 


(0)


100


1 497 


 


100




Sysmin


101


101


 


100


101


 


100


101


 


100





SUB TOTAL: TOTAL NON-PROGRAMMABLE AID




4 700 




4 699 




(4)




100




4 695 




(1)




100




4 695 




(0)




100






Cotonou




ACP


Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


417


417


 


100


417


 


100


417


 


100





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




417




417



 



100




417



 



100




417



 



100





B Envelope — National Allocations


233


 


 


 


 


 


 


 


 


 




Compensation export earnings


 


233


(0)


 


232


(0)


99


231


 


100





SUB TOTAL: B ENVELOPE — NATIONAL ALLOCATIONS




233




233




(0)




100




232




(0)




99




231



 



100





Interests and other receipts


0


 


 


 


 


 


 


 


 


 





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




0



 


 


 


 


 


 


 


 


 




 



TOTAL ACP (A)




10 339 




10 336 




(9)




100




10 330 




(3)




100




10 329 




(1)




100






Lomé




OCTs


Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




Total indicative programmes


35


35


(1)


100


35


 


100


35


 


100





SUB TOTAL: TOTAL INDICATIVE PROGRAMMES




35




35




(1)




100




35



 



100




35



 



100





Interest-rate subsidies


1


1


 


100


1


 


100


1


 


100




Risk capital


6


6


 


100


6


 


100


6


 


100




Stabex


1


1


 


100


1


 


100


1


 


100




Sysmin


2


2


 


100


2


 


100


2


 


100





SUB TOTAL: TOTAL NON-PROGRAMMABLE AID




10




10



 



100




10



 



100




10



 



100





 



TOTAL OCTs




46




46




(1)




100




46



 



100




46



 



100





 



TOTAL: ACP+OCTs (A+B)




10 385 




10 382 




(9)




100




10 376 




(3)




100




10 375 




(1)




100






Table 2.4


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2017


CLASS OF AID


ACP + PTOM — Ninth EDF

















 


(EUR millions)




 


 


CREDITS


DECISIONS


ASSIGNED FUNDS


PAYMENTS




AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%




(1)


(2)


 


(2):(1)


(3)


 


(3):(2)


(4)


 


(4):(3)





Lomé




ACP



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




Transfers from 6th EDF — Lomé


20


20


(0)


100


20


(0)


100


20


 


100




Transfers from 7th EDF — Lomé


649


648


(3)


100


647


(1)


100


647


(0)


100





SUB TOTAL: TRANSFERS FROM OTHER FUNDS




669




668




(3)




100




668




(1)




100




667




(0)




100






Cotonou




ACP



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


8 624 


8 615 


(16)


100


8 599 


(6)


100


8 566 


(3)


100





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




8 624 




8 615 




(16)




100




8 599 




(6)




100




8 566 




(3)




100





B Envelope — National Allocations


1 210 


 


 


 


 


 


 


 


 


 




Compensation export earnings


 


148


(1)


 


148


(1)


100


148


(1)


100




Emergency aid


 


1 050 


(1)


 


1 045 


1


100


1 040 


(0)


99




Heavily indebted poor countries


 


11


 


 


11


 


100


11


 


100





SUB TOTAL: B ENVELOPE — NATIONAL ALLOCATIONS




1 210 




1 208 




(2)




100




1 204 




0




100




1 198 




(1)




100






Cotonou



CDE, CTA and Parliamentary Assembly


154


154


 


100


154


 


100


154


 


100





SUB TOTAL: CDE, CTA AND PARLIAMENTARY ASSEMBLY




154




154



 



100




154



 



100




154



 



100





Implementation costs


177


177


 


100


177


0


100


177


1


100




Interests and other receipts


63


63


 


100


63


 


100


63


 


100





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




240




240



 



100




240




0




100




239




1




100





Other Intra-ACP allocations


2 602 


2 595 


(9)


100


2 584 


(6)


100


2 567 


(3)


99




Peace facility


354


354


 


100


353


 


100


353


 


100





SUB TOTAL: INTRA-ACP ALLOCATIONS




2 955 




2 949 




(9)




100




2 937 




(6)




100




2 921 




(3)




99





Regional allocations


765


763


(6)


100


747


(5)


98


729


3


98





SUB TOTAL: REGIONAL ALLOCATIONS




765




763




(6)




100




747




(5)




98




729




3




98





Special allocation R.D. Congo


105


105


 


100


105


 


100


105


 


100





SUB TOTAL: SPECIAL ALLOCATION R.D. CONGO




105




105



 



100




105



 



100




105



 



100





Special allocation South Sudan


267


266


0


100


218


1


82


184


107


84





SUB TOTAL: SPECIAL ALLOCATION SOUTH SUDAN




267




266




0




100




218




1




82




184




107




84





Special allocation Sudan


110


109


0


98


105


0


97


90


9


85





SUB TOTAL: SPECIAL ALLOCATION SUDAN




110




109




0




98




105




0




97




90




9




85





Voluntary contribution Peace facility


39


24


 


62


24


 


100


24


 


100





SUB TOTAL: VOLUNTARY CONTRIBUTION PEACE FACILITY




39




24



 



62




24



 



100




24



 



100





 



TOTAL: ACP (A)




15 138 




15 101 




(35)




100




15 001 




(17)




99




14 876 




112




99






Lomé




OCTs



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




Transfers from 6th EDF — Lomé


0


0


 


100


0


 


100


0


 


100




Transfers from 7th EDF — Lomé


3


3


 


100


3


 


100


3


 


100





SUB TOTAL: TRANSFERS FROM OTHER FUNDS




3




3



 



100




3



 



100




3



 



100






Cotonou




OCTs



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


237


237


(0)


100


235


(2)


99


235


(0)


100





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




237




237




(0)




100




235




(2)




99




235




(0)




100





B Envelope — National Allocations


4


 


 


 


 


 


 


 


 


 




Emergency aid


 


4


 


 


4


 


100


4


 


100





SUB TOTAL: B ENVELOPE — NATIONAL ALLOCATIONS




4




4



 



100




4



 



100




4



 



100





Studies/Technical assistance OCTs


1


1


 


100


1


 


100


1


 


100





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




1




1



 



100




1



 



100




1



 



100





Regional allocations


47


45


(3)


96


45


(1)


100


45


(1)


99





SUB TOTAL: REGIONAL ALLOCATIONS




47




45




(3)




96




45




(1)




100




45




(1)




99





 



TOTAL: OCTs




292




290




(3)




99




288




(3)




99




288




(1)




100





 



TOTAL: ACP+OCTs (A+B)




15 430 




15 391 




(38)




100




15 289 




(20)




99




15 164 




111




99






Table 2.5


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2017


CLASS OF AID


ACP + PTOM — 10th EDF
















(EUR millions)




 


CREDITS


DECISIONS


ASSIGNED FUNDS


PAYMENTS




AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%




(1)


(2)


 


(2):(1)


(3)


 


(3):(2)


(4)


 


(4):(3)





ACP



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


13 100 


13 021 


(200)


99


12 477 


176


96


10 983 


739


88





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




13 100 




13 021 




(200)




99




12 477 




176




96




10 983 




739




88





B Envelope — National Allocations


2 004 


 


 


 


 


 


 


 


 


 




Compensation export earnings


 


204


(0)


 


199


6


97


183


4


92




Emergency aid


 


844


(6)


 


836


5


99


791


24


95




Heavily indebted poor countries


 


49


 


 


49


0


100


49


0


100




Other chocs with budgetary impact


 


905


(0)


 


897


1


99


882


10


98





SUB TOTAL: B ENVELOPE — NATIONAL ALLOCATIONS




2 004 




2 002 




(6)




100




1 980 




12




99




1 904 




38




96





Implementation costs


445


433


1


97


431


2


100


429


2


100




Interests and other receipts


85


68


(1)


80


67


(0)


98


67


0


100





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




530




501




1




94




498




2




99




496




2




100





Institutional and support expenditure


232


232


(0)


100


230


(1)


99


211


(0)


91




Other Intra-ACP allocations


1 886 


1 882 


(7)


100


1 828 


4


97


1 611 


119


88




Peace facility


1 014 


1 014 


220


100


872


233


86


814


198


93





SUB TOTAL: INTRA-ACP ALLOCATIONS




3 132 




3 128 




213




100




2 930 




235




94




2 636 




317




90





Regional allocations


1 956 


1 950 


(10)


100


1 826 


49


94


1 410 


145


77





SUB TOTAL: REGIONAL ALLOCATIONS




1 956 




1 950 




(10)




100




1 826 




49




94




1 410 




145




77






Co-financing



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


187


185


(0)


99


178


43


97


131


16


74





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




187




185




(0)




99




178




43




97




131




16




74





Implementation costs


5


4


 


84


2


0


53


1


0


63





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




5




4



 



84




2




0




53




1




0




63





Other Intra-ACP allocations


12


11


0


97


10


(0)


94


10


0


96




Peace facility


1


1


 


100


1


 


99


1


 


100





SUB TOTAL: INTRA-ACP ALLOCATIONS




12




12




0




97




11




(0)




94




11




0




96






Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


286


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




286



 


 


 


 


 


 


 


 


 





OCTs



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


192


191


(2)


99


164


29


86


131


7


79





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




192




191




(2)




99




164




29




86




131




7




79





B Envelope — National Allocations


15


 


 


 


 


 


 


 


 


 




Emergency aid


 


9


(0)


 


8


2


95


7


0


84




Other chocs with budgetary impact


 


6


 


 


6


 


100


6


 


100





SUB TOTAL: B ENVELOPE — NATIONAL ALLOCATIONS




15




15




(0)




100




14




2




97




13




0




91





Studies/Technical assistance OCTs


5


5


(0)


100


5


(0)


99


5


0


98





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




5




5




(0)




100




5




(0)




99




5




0




98





Regional allocations


40


40


0


100


38


3


97


32


12


84





SUB TOTAL: REGIONAL ALLOCATIONS




40




40




0




100




38




3




97




32




12




84






Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


23


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




23



 


 


 


 


 


 


 


 


 





TOTAL: ACP+OCTs (INCL. RESERVES) (A+B)




21 488 




21 052 




(5)




98




20 125 




550




96




17 753 




1 277 




88






Table 2.6


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2017


CLASS OF AID


ACP + PTOM — 11th EDF
















(EUR millions)




 


CREDITS


DECISIONS


ASSIGNED FUNDS


PAYMENTS




AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%




(1)


(2)


 


(2):(1)


(3)


 


(3):(2)


(4)


 


(4):(3)





ACP



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


15 540 


10 890 


2 960 


70


6 856 


3 106 


63


2 931 


1 414 


43





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




15 540 




10 890 




2 960 




70




6 856 




3 106 




63




2 931 




1 414 




43





B Envelope — National Allocations


715


 


 


 


 


 


 


 


 


 




Emergency aid


 


590


91


 


578


247


98


443


205


77




Other chocs with budgetary impact


 


109


0


 


109


100


100


29


24


26





SUB TOTAL: B ENVELOPE — NATIONAL ALLOCATIONS




715




699




91




98




687




347




98




472




229




69





Bridging facility


0


 


 


 


 


 


 


 


 


 





SUB TOTAL: BRIDGING FACILITY




0



 


 


 


 


 


 


 


 


 




Implementation costs


1 053 


538


164


51


490


161


91


456


153


93




Interests and other receipts


16


10


2


62


6


0


63


6


0


93





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




1 068 




548




166




51




496




161




91




461




153




93





Institutional and support expenditure


246


106


0


43


91


14


86


70


10


76




Other Intra-ACP allocations


2 251 


1 245 


885


55


810


560


65


490


284


61




Peace facility


1 000 


994


94


99


885


7


89


805


74


91





SUB TOTAL: INTRA-ACP ALLOCATIONS




3 497 




2 344 




979




67




1 786 




580




76




1 365 




368




76





Regional allocations


5 766 


4 422 


1 536 


77


3 514 


1 408 


79


943


582


27





SUB TOTAL: REGIONAL ALLOCATIONS




5 766 




4 422 




1 536 




77




3 514 




1 408 




79




943




582




27






Co-financing



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


22


20


17


92


20


20


100


 


 


 





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




22




20




17




92




20




20




100



 


 


 




Implementation costs


1


 


 


 


 


 


 


 


 


 





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




1



 


 


 


 


 


 


 


 


 




Peace facility


1


1


 


100


1


0


100


1


1


100





SUB TOTAL: INTRA-ACP ALLOCATIONS




1




1



 



100




1




0




100




1




1




100






Mobilisable reserves



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




B Envelope reserve


0


 


 


 


 


 


 


 


 


 





SUB TOTAL: COUNTRY RESERVE




0



 


 


 


 


 


 


 


 


 




Intra-ACP Reserve


93


 


 


 


 


 


 


 


 


 





SUB TOTAL: INTRA-ACP RESERVE




93



 


 


 


 


 


 


 


 


 




National allocations Reserve A Envelope Stabex


0


 


 


 


 


 


 


 


 


 





SUB TOTAL: NATIONAL ALLOCATIONS RESERVE A ENVELOPE Stabex




0



 


 


 


 


 


 


 


 


 




NIP/RIP reserve


2 351 


 


 


 


 


 


 


 


 


 





SUB TOTAL: NIP/RIP RESERVE




2 351 



 


 


 


 


 


 


 


 


 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


201


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




201



 


 


 


 


 


 


 


 


 





EC Internal SLA



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


1


1


 


71


1


 


100


1


 


73





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




1




1



 



71




1



 



100




1



 



73






OCTs



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope — National Allocations


189


97


56


51


87


61


90


28


21


33





SUB TOTAL: A ENVELOPE — NATIONAL ALLOCATIONS




189




97




56




51




87




61




90




28




21




33





Bridging facility


0


 


 


 


 


 


 


 


 


 





SUB TOTAL: BRIDGING FACILITY




0



 


 


 


 


 


 


 


 


 




Studies/Technical assistance OCTs


5


5


2


94


4


1


75


2


1


66





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




5




5




2




94




4




1




75




2




1




66





Regional allocations


1


0


0


0


 


 


 


 


 


 





SUB TOTAL: REGIONAL ALLOCATIONS




1




0




0




0



 


 


 


 


 


 





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




NIP/RIP reserve


165


 


 


 


 


 


 


 


 


 





SUB TOTAL: NIP/RIP RESERVE




165



 


 


 


 


 


 


 


 


 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


5


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




5



 


 


 


 


 


 


 


 


 





TOTAL: ACP+OCTs (INCL. RESERVES) (A+B)




29 621 




19 027 




5 807 




64




13 453 




5 684 




71




6 206 




2 770 




46






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









EUROPEAN INVESTMENT BANK






CA/511/18


15 March 2018




 



Document 18/099







BOARD OF DIRECTORS







INVESTMENT FACILITY


FINANCIAL STATEMENTS


AS AT 31 DECEMBER 2017











—


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









STATEMENT OF FINANCIAL POSITION


AS AT 31 DECEMBER 2017









(in EUR ’000)




 


Notes


31.12.2017


31.12.2016





ASSETS



 


 


 




Cash and cash equivalents


5


549 101 


360 817 




Amounts receivable from contributors


9/16


150 000 


86 395 




Held-to-maturity financial assets


10


144 382 


169 398 




Derivative financial instruments


6


12 521 


6 920 




Loans and receivables


7


1 666 725 


1 729 380 




Available-for-sale financial assets


8


497 539 


516 884 




Other assets


11


4 385 


345





Total assets



 



3 024 653 




2 870 139 






LIABILITIES AND CONTRIBUTORS’ RESOURCES



 


 


 





LIABILITIES



 


 


 




Derivative financial instruments


6


1 153 


25 189 




Deferred income


12


25 802 


26 283 




Provisions for guarantees issued


13


484


625




Amounts owed to third parties


14


157 285 


116 114 




Other liabilities


15


2 462 


2 546 





Total liabilities



 



187 186 




170 757 






CONTRIBUTORS’ RESOURCES



 


 


 




Member States Contribution called


16


2 517 000 


2 377 000 




Fair value reserve


 


125 816 


142 884 




Retained earnings


 


194 651 


179 498 





Total contributors’ resources



 



2 837 467 




2 699 382 






Total liabilities and contributors’ resources



 



3 024 653 




2 870 139 









STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


FOR THE YEAR ENDED 31 DECEMBER 2017









(in EUR ’000)




 


Notes


From 1.1.2017


From 1.1.2016




to 31.12.2017


to 31.12.2016




Interest and similar income


18


101 406 


106 698 




Interest and similar expenses


18


-2 671 


-2 307 





Net interest and similar income



 



98 735 




104 391 





Fee and commission income


19


210


699




Fee and commission expenses


19


- 60


- 48





Net fee and commission income



 



150




651





Fair value change of derivative financial instruments


 


29 637 


-10 361 




Net realised gains on available-for-sale financial assets


20


2 711 


6 504 




Net foreign exchange loss


 


-38 165 


-14 995 





Net result on financial operations



 



-5 817 




-18 852 





Change in impairment on loans and receivables, net of reversal


7


-10 721 


44 365 




Change in provisions for guarantees


13


- 65


- 242




Impairment on available-for-sale financial assets


8


-22 024 


-2 493 




General administrative expenses


21


-45 105 


-43 483 





Profit/loss for the year



 



15 153 




84 337 






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






 


-31 034 


-14 624 










2.


Net amount transferred to profit or loss






 


13 966 


-6 485 





Total available-for-sale financial assets



 



-17 068 




-21 109 






Total other comprehensive income



 



-17 068 




-21 109 






Total comprehensive income for the year



 



-1 915 




63 228 









STATEMENT OF CHANGES IN CONTRIBUTORS’ RESOURCES


FOR THE YEAR ENDED 31 DECEMBER 2017











(in EUR ’000)




 


Notes


Contribution called


Fair value reserve


Retained earnings


Total





At 1 January 2017



 



2 377 000 




142 884 




179 498 




2 699 382 





Member States contribution called during the year


16


140 000 


—


—


140 000 




Profit for the year 2017


 


—


—


15 153 


15 153 




Total other comprehensive income for the year


 


—


-17 068 


—


-17 068 





Changes in contributors’ resources



 



140 000 




-17 068 




15 153 




138 085 






At 31 December 2017



 



2 517 000 




125 816 




194 651 




2 837 467 






At 1 January 2016



 



2 157 000 




163 993 




95 161 




2 416 154 





Member States contribution called during the year


16


220 000 


—


—


220 000 




Profit for the year 2016


 


—


—


84 337 


84 337 




Total other comprehensive income for the year


 


—


-21 109 


—


-21 109 





Changes in contributors’ resources



 



220 000 




-21 109 




84 337 




283 228 






At 31 December 2016



 



2 377 000 




142 884 




179 498 




2 699 382 









STATEMENT OF CASH FLOWS


FOR THE YEAR ENDED 31 DECEMBER 2017









(in EUR ’000)




 


Notes


From 1.1.2017 to 31.12.2017


From 1.1.2016 to 31.12.2016





OPERATING ACTIVITIES



 


 


 




Profit for the financial year


 


15 153 


84 337 




Adjustments made for:


 


 


 




Impairment on available-for-sale financial assets


8


22 024 


2 493 




Net change in impairment on loans and receivables


7


10 721 


-44 365 




Interest capitalised on loans and receivables


7


—


-7 183 




Change in accrued interest and amortised cost on loans and receivables


7


-1 198 


-5 843 




Net change in provisions for guarantees issued


13


- 141


625




Change in accrued interest and amortised cost on held-to-maturity financial assets


10


- 398


-1 126 




Change in deferred income


 


- 481


-3 042 




Effect of exchange rate changes on loans


7


168 304 


-35 025 




Effect of exchange rate changes on available-for-sale financial assets


 


-1 655 


-5 125 




Effect of exchange rate changes on cash held


 


-6 473 


-1 106 





Loss on operating activities before changes in operating assets and liabilities



 



205 856 




-15 360 





Loan disbursements


7


- 368 662 


- 528 376 




Repayments of loans


7


253 486 


351 468 




Change in accrued interest on cash and cash equivalent


5


63


2




Fair value changes on derivatives


 


-29 637 


10 361 




(Decrease) in held-to-maturity financial assets


10


-1 084 149 


-1 159 704 




Maturities of held-to-maturity financial assets


10


1 109 563 


1 219 953 




(Decrease) in available-for-sale financial assets


8


-62 660 


- 153 986 




Repayments/sales of available-for-sale financial assets


8


44 568 


37 978 




(Increase) in other assets


 


-4 040 


- 318




(Decrease)/increase in other liabilities


 


- 84


182




Increase in amounts payable to the European Investment Bank


 


2 202 


423





Net cash flows used from/in operating activities



 



66 506 




- 237 377 






FINANCING ACTIVITIES



 


 


 




Contribution received from Member States


16


76 395 


133 605 




Amounts received from Member States with regard to interest subsidies and technical assistance


 


60 000 


30 000 




Amounts paid on behalf of Member States with regard to interest subsidies and technical assistance


 


-21 026 


-15 510 





Net cash flows from financing activities



 



115 369 




148 095 






Net increase/(decrease) in cash and cash equivalents



 



181 875 




-89 282 






Summary statement of cash flows:



 


 


 





Cash and cash equivalents at the beginning of financial year



 



360 821 




448 998 





Net cash from:


 


 


 




Operating activities


 


66 506 


- 237 377 




Financing activities


 


115 369 


148 095 




Effects of exchange rate changes on cash and cash equivalents


 


6 473 


1 106 





Cash and cash equivalents at the end of financial year



 



549 169 




360 822 






Cash and cash equivalents are composed of:



 


 


 




Cash in hand


5


166 445 


51 462 




Term deposits (excluding accrued interest)


 


367 721 


259 342 




Commercial papers


5


15 003 


50 018 




 


 



549 169 




360 822 






Notes to the financial statements as at 31 December 2017

1.   General information

The Investment Facility (‘the Facility’ or ‘IF’) has been established within the framework of the Cotonou Agreement (the ‘Agreement’) on cooperation 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 22 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. EU Member States contribute with the amounts allocated to finance the IF and grants for the financing of the interest subsidies as provided for under the multi-annual financial frameworks (First Financial Protocol covering the period 2000-2007 and referred to as the 9th European Development Fund (EDF), Second Financial Protocol covering the period 2008-2013 and referred to as the 10th EDF and the Third Financial Protocol covering the period 2014-2020 referred to as the 11th EDF). The EIB is entrusted with the management of:






—


the Facility, a EUR 3 685,5 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 (‘OCTs countries’);










—


grants for the financing of interest subsidies worth max. EUR 1 220,85 million for ACP countries and max. EUR 8,5 million for OCTs countries. Up to 15 % of these subsidies can be used to fund project-related technical assistance (‘TA’).




The present financial statements cover the period from 1 January 2017 to 31 December 2017.
On a proposal from the Management Committee of EIB, the Board of Directors of EIB adopted the Financial Statements on 15 March 2018, and authorised their submission to the Board of Governors for approval by 27 April 2018.
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.

— Provisions on financial guarantees

The Facility reviews its guarantee contracts at each reporting date to assess whether a provision should be recorded in the statement of profit or loss and other comprehensive income. For determining the provision particular judgement is required in making estimates and assumptions about a number of factors, such as:






—


amount and timing of future cash flows;










—


utilisation level of the guarantees;










—


discount factors applied on the estimated cash flows.





— Valuation of unquoted available-for-sale equity investments

Valuation of unquoted available-for-sale equity investments is normally based on one of the following:






—


recent 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.

— Consolidation of entities in which the Facility holds interest

The Facility made significant judgements that none of the entities in which it holds interest, are controlled by the Facility. This is due to the fact that in all such entities, either the General Partner or the Fund Manager or the Management Board have the sole responsibility for the management and control of the activities and affairs of the partnership and have the power and authority to do all things necessary to carry out the purpose and objectives of the partnership complying with the investment and policy guidelines.
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.

Standards adopted


Amendments to IAS 7 ‘Statement of cash flows’ — Disclosure initiative;

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. Amendments are effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted.
Additional disclosures of relevance for the Facility include changes arising from:






—


cash flows, such as drawdowns and repayments of borrowings; and










—


non-cash changes, such as acquisitions, disposals and unrealised exchange differences.




Amendment to IAS 7 has been endorsed by the EU on 9 November 2017 and is effective for the annual reporting periods beginning on or after 1 January 2017.

Standards issued but not yet effective

The following standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017. The Facility has not applied the following new or amended standards in preparing these financial statements.

Annual improvements 2014-2016 Cycle — various standards (Amendments to IFRS 12)

This amendment clarifies that the disclosure requirement of IFRS 12 is applicable to interest in entities classified as held for sale except for summarised financial information. Previously, it was unclear whether all other IFRS 12 requirements were applicable for these interests.
The adoption of these amendments had no impact on the Facility`s financial statements.
It is worth noted that the aforementioned amendments have not been yet endorsed by EU according to the latest status of endorsement by EFRAG.

IFRS 9 Financial instruments


Estimated impact of the adoption of IFRS 9 — Financial instruments

The last part of the standard was issued on 24 July 2014 and replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces a new expected credit loss model for impairment on financial assets and introduces new rules for hedge accounting.
IFRS 9 has been endorsed by the EU on 22 November 2016 and is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Facility did not adopt the standard earlier than its effective date. The Facility has assessed the estimated impact that the initial application of IFRS 9 will have on its contributors resources’ in the financial statements.








In EUR ’000


As reported at 31 December 2017


Estimated adjustment to contributors` resources at
1 January 2018


Estimated adjusted opening balance at 1 January 2018





Net impact contributors‘ resources




2 837 467 




53 891 




2 783 576 





This impact is based on the assessments undertaken to date and is summarised below. The actual impacts of adopting IFRS 9 at 1 January 2018 may change because:






—


the Bank has not finalised the testing and assessment of controls over its new IT systems; and










—


The new accounting policies are subject to change until the Facility presents its first financial statements that include the date of initial application.





Classification and measurement

IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics.
IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost (‘AC’), fair value through other comprehensive income (‘FVOCI’) and fair value through profit or loss (‘FVTPL’). The standard eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available for sale.
In addition, under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification.
Based on its assessment, the Facility does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets and financial liabilities except for:






—


equity investments: There are two types of equity investments at the Facility: (i) direct equity investments and (ii) venture capital funds. At 31 December 2017, the Facility had classified equity investments, as available-for-sale with a fair value of EUR 497 million. Under IFRS 9, the Facility will designate these investments as measured at FVTPL. The related fair value reserve will be released against the retained earnings.










—


quasi-equity loans, which are a category of ‘debt’ bearing equity-type risks. The cash flows of those types of products have equity-type features that are unrelated to a basic lending arrangement. According to the requirements of IFRS 9, quasi-equity loans will be mandatorily reclassified from loans and receivables under IAS 39 to FVTPL under IFRS 9. The fair value of quasi-equity loans are EUR 1,4 million as at 31 December 2017. These net fair value adjustments amount to EUR 0,4 million.




IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities and the IF’s financial liabilies are measured at amortised under IAS39 and IFRS9 as well.

Impairment

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (‘ECL’) model. This will require judgement as to how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.
To comply with IFRS the EIB has developed an Expected Credit Loss (hereinafter ‘ECL’) model for the EIB`s IFRS group financial statements which is also applied to the IF.
The new impairment model will apply to financial assets measured at AC as well as to off-balance commitments
Under IFRS 9, loss allowances will be measured on either of the following bases:






—


12-month ECL’s: these are the ECLs that result from possible default events within the 12 months after the reporting date; and










—


Lifetime ECLs: these are the ECLs that result from all possible default events over the expected life of a financial instrument.




The IFRS 9 Standard sets out a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition. Financial instruments are classified in Stage 1 except for those instruments for which significant increase in credit risk (SICR) since initial recognition is identified. For determining whether there is a significant increase in credit risk since initial recognition, the Bank considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Facility’s historical experience and expert credit and including forward-looking information. If significant increase in credit risk has occurred, the financial instrument is moved to Stage 2 but is not yet deemed to be credit-impaired. If the financial instrument is credit-impaired, the financial instrument is then moved to Stage 3. The Bank’s assessment of the impairment Stage is based on a sequential approach using counterparty or instrument specific information (Internal Default Event, Special High Risk, Watch List, Rating deterioration, Days in arrears — more than 30 days past due).
Lifetime ECL measurement applies to Stage 2 and Stage 3 assets, while 12-month ECL measurement applies to Stage 1 assets.
It is expected that impairment losses are likely to increase and become more volatile for assets in the scope of the IFRS 9 impairment model. Based on the impairment methodology described below, the Facility has estimated that application of IFRS 9’s impairment requirements at 1 January 2018 results in additional impairment losses as follows:






In EUR ’000


Estimated additional impairment recognised at 1 January 2018




Loans and receivables


49 709 




Treasury assets


30




Undisbursed loans


4 152 





Gross additional impairment losses




53 891 





Treasury assets are composed of high credit quality securities, therefore, the Facility decided to make use of the IFRS 9 practical expedient for low credit risk financial instruments.
The expected credit losses were calculated based on the following variables:






—


Probability of default (PD),










—


Loss Given default (LGD),










—


Exposure at default (EAD).




The PD represents the likelihood of a counterpart defaulting on its financial obligation, either over the next 12 months, or over the remaining lifetime of the obligation. PD is estimated at a certain date, which are calculated based on statistical rating models, and assessed using rating tools tailored to the various categories of counterparties and exposures.
Ratings are primary input into the determination of the term structure of PD for exposures. Performance and default information about its credit risk exposures are collected. The collected data are segmented by type of industry and by type of region. Different industries and regions reacting in a homogenous manner to credit cycles are analysed together.
The EIB employs statistical models to analyse the data collected and generate estimates of the remaining lifetime PD of exposures and how these are expected to change as a result of the passage of time. This analysis includes the identification and calibration of relationships between changes in default rates and changes in key macroeconomic factors. The gross domestic product (GDP) growth is identified as the relevant macroeconomic factor. Based on projections of that variable, three macroeconomic scenarios are generated, which are then translated into credit cycles and finally into PDs.
The LGD represents the expectation of the extent of loss on a defaulted exposure. The LGD definition is derived from the following definition of Recovery rate (i.e. ‘1-LGD’): the recovery rate for each defaulted contract is the ratio between the discounted cash flows received after the default date and the capital outstanding at the default date. LGD varies by type of counterparty, type and seniority of claim and availability of collateral or other credit support. Recovery rates are defined across three main classes of borrowers: non-EU Sovereigns and Public Institutions, Financial Institutions and Corporates.
The EAD represents the expected exposure in the event of a default EAD and is based on the current exposure to the counterparty and potential changes to the current amount allowed under the contract including amortisation. The EAD of a financial asset is its gross carrying amount, the outstanding signed on-balance exposures. For lending commitments and financial guarantees, the EAD includes the amount drawn, as well as potential future amounts that may be drawn under the contract.
The Facility estimated that the application of IFRS 9 impairment requirements at 1 January 2018 results in an increase of EUR 53,9 million over the impairment recognised under IAS 39.
The following table provides information about the estimated exposure to credit and ECLs for loans and advances to credit institutions and customers and undisbursed loans: For an overview of credit risk on cash and cash equivalent and held-to-maturity financial assets, see note 3.2.









In EUR ’000


Disbursed amount


Undisbursed amount


Estimated impairment loss allowance


Credit impaired




Stage 1


1 265 945 


823 023 


21 727 


No




Stage 2


375 716 


20 615 


32 134 


No




Stage 3


138 319 


—


113 255 


Yes





Total




1 779 980 




843 638 




167 116 



 





Disclosures

IFRS 9 will require extensive new disclosures, in particular about credit risk and expected credit losses. Preliminary assessment included an analysis to identify data gaps against current processes. The Facility has planned to implement the system and controls changes that it believes will be necessary to capture the required data.

Transition

Changes in accounting policies resulting from the adoption of IFRS 9 will generally be applied retrospectively, except as described below:






—


The Facility will take advantage of the exemption allowing it not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 will generally be recognised in the contributors` resources as at 1 January 2018.










—


The following assessments have to be made on the basis of the facts and circumstances that exist at the date of initial application:






—


The determination of the business model within which a financial asset is held,










—


The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.









IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a five-step approach to revenue recognition:






—


Identify the contract with the customer;










—


Identify the performance obligations in the contract;










—


Determine the transaction price;










—


Allocate the transaction price to the performance obligations in the contracts;










—


Recognise revenue when (or as) the entity satisfies the performance obligation.




Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer.
Additional disclosures are required when IFRS 15 is to be effective.
The standard gives a range of possible transition methods including (i) a full retrospective approach, (ii) a modified retrospective approach with optional practical expedients and (iii) a cumulative effect method with no restatement of comparative information.
At this stage, the Facility is finalising the assessment of the effects of applying the new standard on the financial statements. The nature of the following three main income types has been further analysed whether the new standard applies to them:






—


Interest and similar income










—


Fee and commission income










—


Net financial result




The Facility’s analysis indicated that only fee and commission income is in scope of IFRS 15.
Regarding Fee and commission income, the Facility is currently performing an assessment per type of fee. The preliminary assessment is based on the fact that the fee which is an integral part of the effective interest rate calculation is considered as out of IFRS 15 scope (in scope of IFRS 9). For the types of fees that are in scope of IFRS 15, the Facility is assessing the revenue recognition pattern of each type according to the 5-step approach of IFRS 15 and compares it with the existing one.
IFRS 15 has been endorsed by the EU on 22 September 2016 and is effective for annual reporting periods beginning on or after 1 January 2018.
The Facility intends to adopt the standard using the modified retrospective approach which means that the cumulative impact of the adoption will be recognised in retained earnings as of 1 January 2018 and that comparatives will not be restated.
Based on the detailed assessment of the impact resulting from the application of IFRS 15 by the Facility, it is not expected that this new standard will have a significant impact on the Facility’s financial statements.

IFRS 16 Leases

IFRS 16 was issued in January 2016 and replaces the current guidance of IAS 17. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exemptions are short-term and low-value leases. The accounting for lessors will not significantly change.
IFRS 16 has been endorsed by the EU on 31 October 2017 and is effective for annual reporting periods beginning on or after 1 January 2019, with early adoption permitted if IFRS 15 is applied.
The Facility expects that this change will have no material impact on the Facility`s financial statements.

IFRIC 22 Foreign currency transactions and advance consideration

The Interpretation applies where an entity either pays or receives consideration in advance for foreign currency-denominated contract. It considers how to determine the date of the transaction when applying the standard on foreign currency transactions, IAS 21 and provides guidance whether the date of the transaction is the date when the asset, expense or income is initially recognised, or the earlier date on which the advance consideration is paid or received, resulting in recognition of a prepayment or deferred income.
The Interpretation has not yet been adopted by the EU. According to the latest update of EFRAG, endorsement is not expected by the end of the year.
The Facility does not plan to adopt this interpretation early and does not expect to cause any material impact on the Facility’s financial statements.
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 tems.
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 statement of financial position 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 date of the transaction.
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 statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of 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, and commercial papers with original maturities of more than three months.
Those bonds and commercial papers 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 instrument.
The Facility assesses at each statement of financial position 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 the statement of 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 and are initially recorded at fair value plus transaction costs.
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 IFRS 10 and IAS 28 over any of these investments, including those investments in which the Facility holds over 20 % of the voting rights.

— Guarantees

Financial guarantee contracts are contracts that require the Facility to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Under the existing rules, these guarantees do not meet the definition of an insurance contract (IFRS 4 Insurance Contracts) and are accounted for under IAS 39 Financial Instruments: Recognition and Measurement, either as ‘Derivatives’ or as ‘Financial Guarantees’, depending on their features and characteristics as defined by IAS 39.
The accounting policy for derivatives is disclosed under Note 2.4.5.
At initial recognition, the financial guarantees are recognised at fair value corresponding to the Net Present Value (NPV) of expected premium inflows and initial expected loss. This calculation is performed at the starting date of each transaction and is recognised on the statement of financial position 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 amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue and










—


the best estimate of expenditure required to settle any present financial obligation arising as a result of the guarantee, in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.




The best estimate of expenditure is determined in accordance with IAS 37. Financial guarantee provisions correspond to the cost of settling the obligation, which is the expected loss, estimated on the basis of all relevant factors and information existing at the statement of financial position date.
When a financial guarantee operation measured under IAS 39 is derecognised and treated under IAS 37, its value previously recorded under ‘Other liabilities’ is transferred to the caption ‘Provisions for guarantees issued’ on the statement of financial position.
The provision for financial guarantees (as measured per IAS 37) is recognised in the statement of profit or loss and other comprehensive income under ‘Change in provisions for guarantees, net of reversals’.
The premium received is recognised in the statement of profit or loss and other comprehensive income in ‘Fee and commission income’ on the basis of an amortisation schedule in accordance with IAS 18 over the life of the financial guarantee.
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 statement of financial position 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 statement of financial position 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 (‘FX 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 statement of profit and loss and other comprehensive income 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 subordinated to all other classes of instruments;










—


all financial instruments in the class of instruments that are subordinated 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.
Commitment fees are deferred and recognised in income using the effective interest method over the period from disbursement to repayment of the related loan, and are presented in the statement of profit or loss and other comprehensive income within interest and similar income.
2.4.8.   Interest subsidies and technical assistance

As part of its activity, the Facility manages interest subsidies and technical assistance on behalf of the Member States.
The part of the Member States contributions allocated to the payment of interest subsidies 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, while fees that are earned on the execution of a significant act are recognised as income when the significant act has been completed. These fees are presented in the statement of profit or loss and other comprehensive income within fee and commission income.
Dividends relating to available-for-sale financial assets are recognised when received and presented in the statement of profit or loss and other comprehensive income within net realised gains on available-for-sale financial assets.
2.5.   Taxation
The Protocol on the Privileges and Immunities of the European Union, appended to the Treaty on European Union and the Treaty on 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 is not able to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses;










—


market risk — 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.




3.1.   Risk management organisation
The European Investment Bank, as a manager of the Facility, adapts its risk management on an ongoing basis.
The Risk Management of EIB independently identifies, assesses, monitors and reports the 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. At EIB level the Director-General of Risk Management reports for risk matters to the designated Vice-President for Risk Management. The designated Vice-President is 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 the credit risk and expected loss with a view to quantify and price the risk. EIB has developed an Internal Rating Methodology (IRM) to determine the Internal Ratings of its credit-relevant borrower/guarantor 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 assigned an Internal Rating reflecting its probability of default foreign currency rating following an in-depth analysis of the counterpart’s business and financial risk profile and its country risk operating context.
The credit assessment of project finance and other structured limited recourse operations 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 an internal risk rating.
All Internal Ratings are monitored over loan life, and periodically updated.
All non-sovereign (or non sovereign guaranteed/assimilated) operations are subject to specific transaction-level and counterpart size limits. Counterpart limits are set at consolidated group exposure level, where applicable. Such limits typically reflect e.g. the size of counterparts own funds.
In order to mitigate credit risk the EIB uses, where appropriate and on a case by case basis, various credit enhancements which are:






—


Counterparty or 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) 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)


31.12.2017


31.12.2016





ASSETS



 


 




Cash and cash equivalents


549 101 


360 817 




Amounts receivable from contributors


150 000 


86 395 




Held-to-maturity financial assets


144 382 


169 398 




Derivative financial instruments


12 521 


6 920 




Loans and receivables


1 666 725 


1 729 380 




Other assets


4 385 


345





Total assets




2 527 114 




2 353 255 






OFF BALANCE SHEET



 


 




Contingent liabilities


 


 










—


Guarantees undrawn






74 569 


35 337 




Commitments


 


 










—


Undisbursed loans






869 983 


901 899 










—


Guarantees drawn






7 682 


8 627 





Total off balance sheet




952 234 




945 863 






Total credit exposure




3 479 348 




3 299 118 





3.2.3.   Credit risk on loans and receivables

3.2.3.1.   Credit risk measurement for loans and receivables

Each and every loan or guarantee undertaken by the Facility benefits from a comprehensive risk assessment and quantification of expected loss estimates that are reflected in a Loan Grading (‘LG’). Operations under the IFE (as described in Note 23), with the exception of intermediated loans, are not subject to the Credit Risk Policy Guidelines and are subject to a different procedure. 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: Risk Management 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:










(In EUR ’000)




At 31.12.2017


Guaranteed


Other credit enhancements


Not guaranteed


Total


% of Total




Banks


46 860 


11 651 


919 216 



977 727 




59 %





Corporates


145 914 


59 462 


285 492 



490 868 




29 %





Public institutions


30 882 


—


—



30 882 




2 %





States


—


3 218 


164 030 



167 248 




10 %






Total disbursed




223 656 




74 331 




1 368 738 




1 666 725 




100 %






Signed not disbursed




89 597 




—




780 385 




869 983 



 

















(In EUR ’000)




At 31.12.2016


Guaranteed


Other credit enhancements


Not guaranteed


Total


% of Total




Banks


22 691 


34 597 


933 609 



990 897 




57 %





Corporates


110 849 


97 213 


320 406 



528 468 




31 %





Public institutions


38 330 


—


—



38 330 




2 %





States


—


3 764 


167 921 



171 685 




10 %






Total disbursed




171 870 




135 574 




1 421 936 




1 729 380 




100 %






Signed not disbursed




94 976 




—




806 923 




901 899 



 




Transaction Management and Restructuring is tasked with the responsibility of performing borrower and guarantor monitoring, as well as project-related financial and contractual monitoring. Thus, the creditworthiness of the Facility’s loans, borrowers and guarantors are continually monitored, at least annually but more frequently on an as-needed basis and as a function of credit events taking place. In particular, Transaction Management and Restructuring reviews if contractual rights are met and, in case of a rating deterioration and/or contractual default, remedy action is taken. 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.
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 2017 and 31 December 2016 by the Loan Grading applications, based on the exposure signed (disbursed and un-disbursed):













(In EUR ’000)




At 31.12.2017


High Grade


Standard Grade


Min. Accept. Risk


High Risk


No grading


Total


% of Total




A to B-


C


D+


D- and below




Borrower


Banks


208 601 


187 225 


189 727 


870 912 


—



1 456 465 




58 %





Corporates


114 769 


8 018 


3 288 


533 382 


1 428 



660 885 




26 %





Public institutions


—


—


30 882 


—


—



30 882 




1 %





States


—


—


13 861 


374 614 


—



388 476 




15 %






Total




323 370 




195 243 




237 758 




1 778 908 




1 428 




2 536 708 




100 %





















(In EUR ’000)




At 31.12.2016


High Grade


Standard Grade


Min. Accept. Risk


High Risk


No grading


Total


% of Total




A to B-


C


D+


D- and below




Borrower


Banks


94 081 


53 970 


315 524 


1 038 705 


126 951 



1 629 231 




62 %





Corporates


125 810 


—


19 389 


393 877 


152 355 



691 431 




26 %





Public institutions


—


—


38 330 


—


—



38 330 




1 %





States


—


—


18 131 


254 156 


—



272 287 




11 %






Total




219 891 




53 970 




391 374 




1 686 738 




279 306 




2 631 279 




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


31.12.2017


31.12.2016




Kenya


331 891 


341 805 




Nigeria


230 042 


241 547 




Uganda


169 869 


175 424 




Tanzania


116 093 


115 239 




Jamaica


85 728 


90 237 




Burundi


74 703 


87 373 




Mauritania


64 007 


85 008 




Congo (Democratic Republic)


62 439 


47 122 




Dominican Republic


61 326 


81 230 




Ethiopia


51 719 


59 837 




Ghana


49 895 


45 715 




Togo


45 574 


64 605 




Rwanda


38 555 


29 918 




Mauritius


26 598 


31 518 




Barbados


25 124 


6 809 




Cameroon


25 012 


41 255 




Malawi


22 800 


11 493 




New Caledonia


21 670 


2 191 




Cape Verde


20 487 


23 029 




Mozambique


19 212 


22 389 




French Polynesia


17 235 


21 387 




Cayman Islands


14 958 


11 221 




Angola


14 850 


19




Senegal


13 881 


18 544 




Zambia


10 910 


11 079 




Botswana


7 618 


7 889 




Burkina Faso


6 041 


4 480 




Haiti


6 006 


6 879 




Niger


5 631 


523




Mali


5 612 


6 159 




Samoa


5 100 


6 356 




Seychelles


5 036 


2 058 




Vanuatu


2 162 


2 470 




Namibia


1 971 


—




Congo


1 730 


3 460 




Liberia


1 553 


1 759 




Palau


1 384 


1 929 




Micronesia


868


1 088 




Regional-ACP


751


15 640 




South Africa


653


1 336 




Tonga


31


46




Trinidad and Tobago


—


528




Saint Lucia


—


392




Bahamas


—


392




Sint Maarten


—


2





Total




1 666 725 




1 729 380 





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



31.12.2017




31.12.2016





Tertiary and other


991 282 


1 027 202 




Electricity, coal and others


290 364 


283 489 




Urban development, renovation and transport


194 101 


205 152 




Basic material and mining


59 462 


82 242 




Roads and motorways


40 960 


48 600 




Airports and air traffic management systems


30 882 


38 330 




Telecommunications


20 310 


1 981 




Food chain


15 586 


14 257 




Oil, gas and petroleum


12 466 


8 384 




Waste recuperation


8 018 


7 988 




Materials processing, construction


2 194 


8 691 




Social infrastructure, education and health


1 100 


2 280 




Consumer goods


—


784





Total




1 666 725 




1 729 380 





3.2.3.5.   Arrears on loans and impairments

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.
The monitoring process is structured in order to make sure that (i) potential arrears are detected and reported to the services in charge with minimum delay; (ii) critical cases are promptly escalated to the right operational and decision level; (iii) regular reporting to EIB management and to Member States is provided on the overall status of arrears and on the recovery measures already taken or to be taken.
The arrears and impairments on loans can be analysed as follows (in EUR '000):








 


 


Loans and receivables


Loans and receivables




Notes


31.12.2017


31.12.2016





Carrying amount



 



1 666 725 




1 729 380 






Individually impaired



 


 


 




Gross amount


 


136 827 


119 381 




Allowance for impairment


7


- 106 203 


- 117 640 





Carrying amount individually impaired



 



30 624 




1 741 






Collectively impaired



 


 


 




Gross amount


 


—


—




Allowance for impairment


 


—


—





Carrying amount collectively impaired



 


—


—





Past due but not impaired



 


 


 





Past due comprises



 


 


 




0-30 days


 


1 227 


1 620 




30-60 days


 


77


30




60-90 days


 


31


—




90-180 days


 


18


—




more 180 days


 


1


1





Carrying amount past due but not impaired



 



1 354 




1 651 






Carrying amount neither past due nor impaired



 



1 634 747 




1 725 988 






Total carrying amount loans and receivables



 



1 666 725 




1 729 380 





3.2.3.6.   Loan renegotiation and forbearance

The Facility considers loans to be forborne if in response to adverse changes in the financial position of a borrower the Facility renegotiates the original terms of the contractual arrangements with this borrower affecting directly the future cash flows of the financial instrument, which may result in a loss to the Facility. However, the financial impact of restructuring activities is in general limited to impairment losses, if any, as financial neutrality is generally applied by the Facility and reflected in the renegotiated pricing conditions of the operations restructured.
In the normal course of business, the Loan Grading (LG) of the loans in question would have deteriorated and the loan would have been included in the Watch List before renegotiation. Once renegotiated, the Facility will continue to closely monitor these loans. If the renegotiated payment terms will not recover the original carrying amount of the asset, it will be considered as impaired. The corresponding impairment losses will be calculated based on the forecasted cash flows discounted at the original effective interest rate. The need for impairment for all loans whose LG deteriorated to E- is assessed regularly; all loans with a LG of F require impairment. Once the Loan Grading of a loan has improved sufficiently, it will be removed from the Watch List in line with the procedures of the Facility.
Forbearance measures and practices undertaken by the Facility’s restructuring team during the reporting period includes extension of maturity, deferral of capital only, deferral of capital and interest and capitalisation of arrears. Such forbearance measures do not lead to the derecognition of the underlying operation.
Exposures subject to changes in contractual terms which do not affect future cash flows, such as collateral or other security arrangements or the waiver of contractual rights under covenants, are not considered as forborne and hence those events are not considered as sufficient to indicate impairment on their own.
Operations subject to forbearance measures are reported as such in the table below:







(In EUR ’000)




 



31.12.2017




31.12.2016





Number of operations subject to forbearance practices


27


22




Carrying values


136 973 


171 135 




of which impaired


112 423 


124 250 




Impairment recognised


107 256 


113 052 




Interest income in respect of forborn operations


8 418 


19 877 




Exposures written off (following the termination/sale of the operation)


9 395 


31 298 



















(In EUR ’000)




 


Forbearance measures




31.12.2016


Extension of maturities


Deferral of capital only


Deferral of capital and interest


Other


Contractual repayment and termination (17)



31.12.2017




Banks


37 276 


—


2 886 


—


5 490 


-15 305 


30 347 




Corporates


133 859 


10 062 


2 803 


—


3 013 


-43 111 


106 626 





Total




171 135 




10 062 




5 689 




—




8 503 




-58 416 




136 973 





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 2017 and 31 December 2016, investments were in the form of bank deposits, certificates of deposit and commercial papers.
The authorised entities have a rating similar to the short-term and long-term ratings required for the EIB’s own treasury placements. In case of different ratings being granted by more than one credit rating agency, the lowest rating governs. The maximum authorised limit for each authorised bank is currently EUR 50 000 000 (fifty million euro). An exception to this rule has been granted to Societe Generale where the Facility has its operational cash accounts. The short term credit limit for Societe Generale as at 31 December 2017 and 31 December 2016 amounts to EUR 110 000 000 (one hundred and ten million euro). The increased limit applies to the sum of the cash held at the operational cash accounts and the instruments issued by this counterpart and held by the treasury portfolio.
All investments have been done with authorised entities with a maximum tenor of three months from value date. As at 31 December 2017 and 31 December 2016 all term deposits, commercial papers and cash in hand 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 cash and cash equivalents including accrued interest (In EUR ’000):










Minimum short-term rating


Minimum long-term rating


31.12.2017


31.12.2016




(Moody’s term)


(Moody’s term)




P-1


Aaa


49 616 


9 %


37 949 


10 %




P-1


Aa2


—


0 %


46 963 


13 %




P-1


Aa3


89 971 


16 %


40 436 


11 %




P-1


A1


143 080 


26 %


100 012 


28 %




P-1


A2


266 434 


49 %


135 457 


38 %





Total




549 101 




100 %




360 817 




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 arranged 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 interest rate swaps, sub-divided according to their notional amount and fair value:










(In EUR ’000)




Swap contracts at 31.12.2017


less than


1 year


5 years


more than


Total 2017




1 year


to 5 years


to 10 years


to 10 years




Notional amount


—


8 098 


—


—



8 098 





Fair Value (i.e. net discounted value)


—


- 955


—


—



- 955


















(In EUR ’000)




Swap contracts at 31.12.2016


less than


1 year


5 years


more than


Total 2016




1 year


to 5 years


to 10 years


to 10 years




Notional amount


—


7 430 


—


—



7 430 





Fair Value (i.e. net discounted value)


—


-3 051 


—


—



-3 051 















—


The Facility enters into foreign exchange short term currency swaps (‘FX swaps’) contracts in order to hedge currency risk on loan disbursements in currencies other than EUR. FX swaps have a maturity of maximum three months and are regularly rolled-over. The notional amount of FX swaps stood at EUR 1 500,0 million at 31 December 2017 against EUR 1 611,0 million at 31 December 2016. The fair value of FX swaps amounts to EUR 12,0 million at 31 December 2017 against EUR -15,3 million at 31 December 2016.










—


The Facility enters into interest rate swap contracts in order to hedge the interest rate risk on loans disbursed. As at 31 December 2017 there are two interest rate swaps outstanding with a notional amount of EUR 31,7 million (2016: EUR 41,2 million) and a fair value of EUR 0,3 million (2016: EUR 0,1 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 treasury bills and bonds issued or guaranteed by Italy, Portugal and Spain with remaining maturities of up to three months. EU Member States, their agencies, banks and non-bank entities are eligible issuers. The maximum authorised 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


Minimum long-term rating



31.12.2017




31.12.2016





(Moody’s term)


(Moody’s term)




P-1


Aa2


—


0 %


18 012 


10 %




P-1


A1


—


0 %


30 002 


18 %




P-2


Non-Rated


—


0 %


20 025 


12 %




P-2


Baa2


94 353 


65 %


—


0 %




NP


Ba1


50 029 


35 %


50 005 


30 %




Non-Rated


Baa2


—


0 %


51 354 


30 %





Total




144 382 




100 %




169 398 




100 %





3.3.   Liquidity risk
Liquidity risk refers to an enitity’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 entity 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 entity 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 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.
In order to calculate Member States’ annual contributions, disbursement patterns 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 minimise 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 un-disbursed portions of the credit under signed loan agreements, of un-disbursed portions of signed capital subscription/investment agreements, of loan guarantees granted, or of committed interest subsidies and TA.
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.
Guarantees are not subject to specific disbursement commitments unless a guarantee is called. The amount of guarantees outstanding is reduced alongside the repayment schedule of guaranteed loans.
Committed interest subsidies’ cash outflows occur in the case of subsidised 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 un-disbursed interest subsidies. 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 un-disbursed 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 31.12.2017




Outflows for committed but un-disbursed loans


5 543 


—


—


—


864 440 


869 983 




Outflows for committed investment funds and share subscription


5 039 


—


—


—


316 656 


321 695 




Others (signed non-issued guarantees, issued guarantees)


—


—


—


—


82 251 


82 251 




Outflows for committed interest subsidies


1 245 


—


—


—


286 066 


287 311 




Outflows for committed TA


1 931 


—


—


—


24 720 


26 651 





Total




13 758 



—


—


—



1 574 133 




1 587 891 



















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 31.12.2016




Outflows for committed but un-disbursed loans


82 405 


—


—


—


819 494 


901 899 




Outflows for committed investment funds and share subscription


4 592 


—


—


—


239 458 


244 050 




Others (signed non-issued guarantees, issued guarantees)


—


—


—


—


43 964 


43 964 




Outflows for committed interest subsidies


—


—


—


—


275 917 


275 917 




Outflows for committed TA


2 671 


—


—


—


24 807 


27 478 





Total




89 668 



—


—


—



1 403 640 




1 493 308 


















Maturity profile of 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


Gross nominal inflow/outflow




In EUR ’000 as at 31.12.2017




CCS and CCIRS — Inflows


7


3 144 


5 122 


—


8 273 




CCS and CCIRS — Outflows


—


-4 051 


-5 959 


—


-10 010 




Short term currency swaps — Inflows


1 500 000 


—


—


—


1 500 000 




Short term currency swaps — Outflows


-1 493 987 


—


—


—


-1 493 987 




Interest Rate Swaps — Inflows


355


1 102 


4 138 


625


6 219 




Interest Rate Swaps — Outflows


—


-1 502 


-3 782 


- 556


-5 840 





Total




6 375 




-1 307 




- 482




69




4 655 


















Maturity profile of 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


Gross nominal inflow/outflow




In EUR ’000 as at 31.12.2016




CCS and CCIRS — Inflows


3


2 409 


5 222 


—


7 634 




CCS and CCIRS — Outflows


—


-3 688 


-7 377 


—


-11 065 




Short term currency swaps — Inflows


1 611 000 


—


—


—


1 611 000 




Short term currency swaps — Outflows


-1 636 001 


—


—


—


-1 636 001 




Interest Rate Swaps — Inflows


411


1 234 


5 529 


1 550 


8 724 




Interest Rate Swaps — Outflows


—


-1 962 


-5 316 


-1 329 


-8 607 





Total




-24 587 




-2 007 




-1 942 




221




-28 315 





3.3.3.   Long-term financial assets and liabilities

The following table sets out the carrying amounts of non-derivative financial assets and financial liabilities expected to be recovered or settled more than 12 months after the reporting date.







(In EUR ’000)




 



31.12.2017




31.12.2016






Financial assets:



 


 




Loans and receivables


1 608 488 


1 692 867 




Available-for-sale financial assets


497 539 


516 884 




Other assets


318


141





Total




2 106 345 




2 209 892 






Financial liabilities:



 


 




Provisions for guarantees issued


549


497




Amount owed to third parties


109 004 


69 960 





Total




109 553 




70 457 





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, interest rate bearing positions due to adverse movements in interest rates.
The Facility is not directly impacted by the fluctuation of its economic value or to pricing mismatches between different assets, liabilities and hedge instruments because (i) it does not have any direct borrowing costs or interest rate bearing liabilities and (ii) it accepts the impact of interest rate fluctuations on the revenues from its investments.
The Facility measures the sensitivity of its loan portfolio and micro hedging swaps to interest rate fluctuations via a Basis Point Value (BPV) calculation.
The BPV measures the gain or loss in the net present value of the relevant portfolio, due to a 1 basis point (0,01 %) increase in interest rates tenors ranging within a specified time bucket ‘money market — up to one year’, ‘very short — 2 to 3 years’, ‘short — 4 to 6 years’, ‘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 2017 would decrease by EUR 488k (as at 31 December 2016: decrease by EUR 516k) if all relevant interest rates curves are simultaneously shifted upwards in parallel by 1 basis point.












Basis point value


Money


Very Short


Short


Medium


Long


Extra Long


Total




In EUR ’000


Market




As at 31.12.2017


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


- 49


- 96


- 159


- 168


- 16


—


- 488



















Basis point value


Money


Very Short


Short


Medium


Long


Extra Long


Total




In EUR ’000


Market




As at 31.12.2016


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


- 46


- 101


- 164


- 175


- 30


—


- 516




3.4.2.   Foreign exchange risk

Foreign exchange (‘FX’) risk for the IF is the risk of loss in earnings or economic value due to adverse movements of FX rates.
Given a reference accounting currency (EUR for the IF), the Facility is exposed to FX risk whenever there is a mismatch between assets and liabilities denominated in a non-reference accounting currency. FX risk also includes the effect of changes in the value of future cash flows denominated in non-reference accounting currency, e.g. interest and dividend payments, 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 cross currency 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 subsidies can be denominated in EUR, USD or any other authorised 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 USD


The FX risk generated by IF operations denominated in USD shall be covered on an aggregated basis via the use of USD/EUR FX swaps, rolled over and adjusted in terms of amount on a periodic basis. The use of FX swaps serves a dual purpose. On one side the necessary liquidity for new disbursements (loans and equity) is generated and on the other side an FX macro hedging is maintained.
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.






—


On a monthly basis, the USD FX position shall be hedged, if exceeding the relevant limits, by means of a spot or forward operation.










—


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 converted into EUR if occurred from an increase of the FX position.




3.4.2.2.2.   
Hedging of operations denominated in currencies other than EUR or USD








—


IF operations denominated 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.










—


IF has operations denominated in currencies for which hedging possibilities are either not efficiently available or available at a high cost. These operations are denominated in local currencies (LCs) but settled in EUR or USD. IF’s financial risk framework, which was approved by the IF Committee on 22 January 2015, offers the possibility to hedge the FX exposure in LCs that exhibit a significant positive correlation with the USD synthetically via USD-denominated derivatives. The LCs hedged synthetically with USD denominated derivatives are reported in the table in section 3.4.2.2.3 below under item ‘Local currencies (under synthetic hedge)’, while the LCs not hedged synthetically with the USD are reported in the same table under item ‘Local currencies (not under synthetic hedge)’.




3.4.2.2.3.   
Foreign exchange position (in EUR '000)


The tables of this note show the Facility’s foreign exchange position.
The foreign exchange position is presented in the tables below in accordance with the IF’s Risk Policies (as described in the IF’s financial risk framework). The FX position as per Risk Policies is based on accounting figures and defined as the balance between selected assets and liabilities. The assets and liabilities defined in the FX position as per Risk Policies are selected so as to ensure that the earnings will only be converted into the reporting currency (EUR) when received.
The unrealised gains/losses and impairment on available-for-sale financial assets are included in the FX position as per Risk Policies, as well as impairments on loans and receivables. Derivatives included in the FX position as per Risk Policies are considered at their nominal value instead of their fair value, in order to be aligned with the retained value of the assets, considered also at their nominal value adjusted by the impairment for loans.
In the tables below the remaining part of the assets and liabilities, which includes mainly interest accruals on loans, derivatives and subsidies, is presented as ‘FX position excluded from Risk Policies’.









At 31 December 2017


Assets and liabilities


Commitments and contingent liabilities




Currencies


FX position as per Risk Policies


FX position excluded from Risk Policies


Balance sheet FX position





USD



- 206 535 


6 087 


- 200 448 


377 994 





Local currencies


(under synthetic hedge)
 (*2)



 


 


 


 





KES



88 532 


2 854 


91 386 


—





TZS



98 722 


1 820 


100 542 


—





DOP



37 785 


1 494 


39 279 


—





UGX



52 653 


1 505 


54 158 


—





RWF



32 714 


354


33 068 


—





Local currencies


(not under synthetic hedge)
 (*2)



 


 


 


 





HTG, MUR, MZN, XOF, ZMW, BWP



30 802 


183


30 985 


—





Total non-EUR currencies




134 673 




14 297 




148 970 




377 994 






EUR



—



2 688 497 




2 688 497 




1 278 511 






Total EUR and non-EUR




134 673 




2 702 794 




2 837 467 




1 656 505 

















At 31 December 2016


Assets and liabilities


Commitments and contingent liabilities




Currencies


FX position as per Risk Policies


FX position excluded from Risk Policies


Balance sheet FX position





USD



- 258 496 


7 578 


- 250 918 


282 991 





Local currencies


(under synthetic hedge)
 (*3)



 


 


 


 





KES



117 881 


3 869 


121 751 


—





TZS



97 116 


1 931 


99 046 


—





DOP



52 553 


2 013 


54 566 


—





UGX



36 776 


1 077 


37 854 


—





RWF



22 258 


194


22 452 


—





Local currencies


(not under synthetic hedge)
 (*3)



 


 


 


 





HTG, MUR, MZN, XOF, ZMW



22 534 


252


22 786 


246





Total non-EUR currencies




90 622 




16 914 




107 537 




283 237 






EUR



—



2 591 845 




2 591 845 




1 241 229 






Total EUR and non-EUR




90 622 




2 608 759 




2 699 382 




1 524 466 





3.4.2.3.   Foreign exchange sensitivity analysis

As at 31 December 2017 a 10 percent depreciation of EUR versus all non EUR currencies would result in an increase of the contributors’ resources amounting to EUR 16,6 million (31 December 2016: EUR 12,0 million). A 10 percent appreciation of the EUR versus all non-EUR currencies would result in a decrease of the contributors’ resources amounting to EUR 13,6 million (31 December 2016: EUR 9,9 million).
3.4.2.4.   Conversion rates

The following conversion rates were used for establishing the balance sheet at 31 December 2017 and 31 December 2016:







 


31 December 2017


31 December 2016





Non-EU currencies



 


 




Botswana Pula (BWP)


11,7512 


11,2657 




Dominican Republic Pesos (DOP)


57,1465 


48,7476 




Fiji Dollars (FJD)


2,4186 


2,1969 




Haitian Gourde (HTG)


75,69 


68,78 




Kenya Shillings (KES)


123,7 


108,06 




Mauritania Ouguiyas (MRO)


422,36 


375,79 




Mauritius Rupees (MUR)


40,07 


37,85 




Mozambican Metical (MZN)


70,09 


75,25 




Rwanda Francs (RWF)


1 003,37 


856,80 




Tanzania Shillings (TZS)


2 681,78 


2 296,99 




Uganda Shillings (UGX)


4 357,00 


3 805,00 




United States Dollars (USD)


1,1993 


1,0541 




Franc CFA Francs (XAF/XOF)


655,957 


655,957 




South Africa Rand (ZAR)


14,8054 


14,457 




Zambia Kvacha (ZMW)


11,965 


10,4653 




3.4.3.   Equity price risk

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 % change in the value of individual direct equity and venture capital investments, with all other variables held constant, is EUR 49,8 million respectively EUR -49,8 million as at 31 December 2017 (EUR 51,7 million respectively EUR -51,7 million as at 31 December 2016).
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 carried at fair value if the carrying amount is a reasonable approximation of fair value.















At 31 December 2017


Carrying amount


Fair value





In EUR ’000



Held for trading


Available-for-sale


Cash, loans and receivables


Held to maturity


Other financial liabilities


Total


Level 1


Level 2


Level 3


Total





Financial assets carried at fair value:



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


12 521 


—


—


—


—


12 521 


—


12 521 


—


12 521 




Venture Capital Funds


—


420 104 


—


—


—


420 104 


—


—


420 104 


420 104 




Direct Equity Investments


—


77 435 


—


—


—


77 435 


24 458 


—


52 977 


77 435 





Total




12 521 




497 539 



—


—


—



510 060 




24 458 




12 521 




473 081 




510 060 






Financial assets not carried at fair value:



 


 


 


 


 


 


 


 


 


 




Cash and cash equivalents


—


—


549 101 


—


—


549 101 


—


—


—


—




Loans and receivables


—


—


1 666 725 


—


—


1 666 725 


—


1 852 507 


—


1 852 507 




Amounts receivable from contributors


—


—


150 000 


—


—


150 000 


—


—


—


—




Bonds


—


—


—


144 382 


—


144 382 


144 382 


—


—


144 382 




Other assets


—


—


4 385 


—


—


4 385 


—


—


—


—





Total



—


—



2 370 211 




144 382 



—



2 514 593 




144 382 




1 852 507 



—



1 996 889 






Total financial assets




12 521 




497 539 




2 370 211 




144 382 



—



3 024 653 



 


 


 


 





Financial liabilities carried at fair value:



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


-1 153 


—


—


—


—


-1 153 


—


-1 153 


—


-1 153 





Total




-1 153 



—


—


—


—



-1 153 



—



-1 153 



—



-1 153 






Financial liabilities not carried at fair value:



 


 


 


 


 


 


 


 


 


 




Provisions for guarantees issued


—


—


—


—


- 484


- 484


 


 


 


 




Amounts owed to third parties


—


—


—


—


- 157 285 


- 157 285 


 


 


 


 




Other liabilities


—


—


—


—


-2 462 


-2 462 


 


 


 


 





Total



—


—


—


—



- 160 231 




- 160 231 



 


 


 


 





Total financial liabilities




-1 153 



—


—


—



- 160 231 




- 161 384 



 


 


 


 






















At 31 December 2016


Carrying amount


Fair value





In EUR ’000



Held for trading


Available-for-sale


Cash, loans and receivables


Held to maturity


Other financial liabilities


Total


Level 1


Level 2


Level 3


Total





Financial assets carried at fair value:



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


6 920 


—


—


—


—


6 920 


—


6 920 


—


6 920 




Venture Capital Funds


—


437 788 


—


—


—


437 788 


—


—


437 788 


437 788 




Direct Equity Investments


—


79 096 


—


—


—


79 096 


22 880 


—


56 216 


79 096 





Total




6 920 




516 884 



—


—


—



523 804 




22 880 




6 920 




494 004 




523 804 






Financial assets not carried at fair value:



 


 


 


 


 


 


 


 


 


 




Cash and cash equivalents


—


—


360 817 


—


—


360 817 


 


 


 


 




Loans and receivables


—


—


1 729 380 


—


—


1 729 380 


—


1 951 786 


—


1 951 786 




Amounts receivable from contributors


—


—


86 395 


—


—


86 395 


—


—


—


—




Bonds


—


—


—


169 398 


—


169 398 


120 123 


48 031 


—


168 154 




Other assets


—


—


345


—


—


345


—


—


—


—





Total



—


—



2 176 937 




169 398 



—



2 346 335 




120 123 




1 999 817 



—



2 119 940 






Total financial assets




6 920 




516 884 




2 176 937 




169 398 



—



2 870 139 



 


 


 


 





Financial liabilities carried at fair value:



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


-25 189 


—


—


—


—


-25 189 


—


-25 189 


—


-25 189 





Total




-25 189 



—


—


—


—



-25 189 



—



-25 189 



—



-25 189 






Financial liabilities not carried at fair value:



 


 


 


 


 


 


 


 


 


 




Provisions for guarantees issued


—


—


—


—


- 625


- 625


 


 


 


 




Amounts owed to third parties


—


—


—


—


- 116 114 


- 116 114 


 


 


 


 




Other liabilities


—


—


—


—


-2 546 


-2 546 


 


 


 


 





Total



—


—


—


—



- 119 285 




- 119 285 



 


 


 


 





Total financial liabilities




-25 189 



—


—


—



- 119 285 




- 144 474 



 


 


 


 




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 carried 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 carried 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.




Held-to-maturity financial assets


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 2017 and 2016, namely:






—


Credit valuation adjustments (CVA), reflecting counterparty credit risk on derivative transactions, amounting to EUR - 38k as at 31 December 2017 and to EUR -76,4k as at 31 December 2016.










—


Debit valuation adjustments (DVA), reflecting own credit risk on derivative transactions, amounting to EUR +29,5k as at 31 December 2017 and EUR +42,9k as at 31 December 2016.




4.2.2.   Transfers between Level 1 and 2

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.
In 2017 and 2016 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 2017 and 31 December 2016:






(In EUR ’000)




Available-for-sale financial assets





Balance at 1 January 2017




494 004 






Gains or losses included in profit or loss:



 










—


net realised gains on available-for-sale financial assets






2 711 










—


impairment on available-for-sale financial assets






-22 024 





Total




-19 313 






Gains or losses included in other comprehensive income:



 










—


net change in fair value of available-for-sale financial assets






-17 592 





Total




-17 592 





Disbursements


62 660 




Repayments


-44 568 




Write offs


-2 110 





Balance at 31 December 2017




473 081 














(In EUR ’000)




Available-for-sale financial assets





Balance at 1 January 2016




419 175 






Gains or losses included in profit or loss:



 










—


net realised gains on available-for-sale financial assets






-6 504 










—


impairment on available-for-sale financial assets






-2 493 





Total




-8 997 






Gains or losses included in other comprehensive income:



 










—


net change in fair value of available-for-sale financial assets






-24 628 





Total




-24 628 





Disbursements


153 986 




Repayments


-37 978 




Write offs


-7 554 





Balance at 31 December 2016




494 004 





In 2017 and 2016 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 2017


Increase


Decrease





(in EUR '000)





Direct Equity Investments


—


—














At 31 December 2016


Increase


Decrease





(in EUR '000)





Direct Equity Investments


10


- 10





Total




10




- 10





5.   Cash and cash equivalents (in EUR '000)

The cash and cash equivalents are composed of:







 


31.12.2017


31.12.2016




Cash in hand


166 445 


51 462 




Term deposits


367 653 


259 337 




Commercial papers


15 003 


50 018 





Cash and cash equivalents in the statement of financial position




549 101 




360 817 





Accrued interest


68


5





Cash and cash equivalents in the cash flow statement




549 169 




360 822 





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 2017


Fair Value


Notional amount




Assets


Liabilities




Cross currency interest rate swaps


149


-1 105 


8 098 




Interest rate swaps


393


- 48


31 711 




FX swaps


11 979 


—


1 500 000 





Total derivative financial instruments




12 521 




-1 153 




1 539 809 
















At 31 December 2016


Fair Value


Notional amount




Assets


Liabilities




Cross currency interest rate swaps


—


-3 051 


7 430 




Interest rate swaps


388


- 335


41 233 




FX swaps


6 532 


-21 803 


1 611 000 





Total derivative financial instruments




6 920 




-25 189 




1 659 663 





7.   Loans and receivables (in EUR '000)

The main components of loans and receivables are as follows:









 


Global loans (*4)



Senior loans


Subordinated loans


Total





Nominal as at 1 January 2017




994 527 




764 339 




71 563 




1 830 429 





Disbursements


305 059 


63 603 


—


368 662 




Write offs


-3 257 


-6 138 


—


-9 395 




Repayments


- 162 361 


-91 125 


—


- 253 486 




Interest capitalised


—


—


—


—




Foreign exchange rates differences


- 128 874 


-43 180 


-9 017 


- 181 071 





Nominal as at 31 December 2017




1 005 094 




687 499 




62 546 




1 755 139 






Impairment as at 1 January 2017




-18 185 




-28 294 




-71 161 




- 117 640 





Impairment recorded in statement of profit or loss and other comprehensive income


-5 105 


-11 572 


—


-16 677 




Write offs


3 257 


6 138 


—


9 395 




Reversal of impairment


2 204 


3 752 


—


5 956 




Foreign exchange rates differences


914


3 234 


8 615 


12 763 





Impairment as at 31 December 2017




-16 915 




-26 742 




-62 546 




- 106 203 





Amortised Cost


-3 802 


-3 408 


—


-7 210 




Interest


15 122 


9 877 


—


24 999 





Loans and receivables as at 31 December 2017




999 499 




667 226 




—




1 666 725 

















 


Global loans (*5)



Senior loans


Subordinated loans


Total





Nominal as at 1 January 2016




661 792 




818 007 




160 555 




1 640 354 





Disbursements


476 685 


51 691 


—


528 376 




Write offs


—


- 109


-31 189 


-31 298 




Repayments


- 178 282 


- 107 259 


-65 927 


- 351 468 




Interest capitalised


—


—


7 183 


7 183 




Foreign exchange rates differences


34 332 


2 009 


941


37 282 





Nominal as at 31 December 2016




994 527 




764 339 




71 563 




1 830 429 






Impairment as at 1 January 2016




-9 403 




-22 445 




- 159 198 




- 191 046 





Impairment recorded in statement of profit or loss and other comprehensive income


-8 794 


-11 999 


—


-20 793 




Write offs


—


109


31 189 


31 298 




Reversal of impairment


360


6 100 


58 698 


65 158 




Foreign exchange rates differences


- 348


- 59


-1 850 


-2 257 





Impairment as at 31 December 2016




-18 185 




-28 294 




-71 161 




- 117 640 





Amortised Cost


-3 906 


-3 682 


—


-7 588 




Interest


14 807 


9 371 


1


24 179 





Loans and receivables as at 31 December 2016




987 243 




741 734 




403




1 729 380 





8.   Available-for-sale financial assets (in EUR '000)

The main components of available-for-sale financial assets are as follows:








 


Venture Capital Funds


Direct Equity Investments


Total





Cost as at 1 January 2017




331 253 




72 636 




403 889 





Disbursements


62 660 


—


62 660 




Repayments/sales


-41 678 


-2 890 


-44 568 




Write offs


- 437


-1 673 


-2 110 




Foreign exchange rates differences on repayments/sales


1 600 


55


1 655 





Cost as at 31 December 2017




353 398 




68 128 




421 526 






Unrealised gains and losses as at 1 January 2017




129 427 




13 457 




142 884 





Net change in unrealised gains and losses


-18 242 


1 174 


-17 068 





Unrealised gains and losses as at 31 December 2017




111 185 




14 631 




125 816 






Impairment as at 1 January 2017




-22 892 




-6 997 




-29 889 





Impairment recorded in statement of profit or loss and other comprehensive income during the year


-22 024 


—


-22 024 




Write offs


437


1 673 


2 110 





Impairment as at 31 December 2017




-44 479 




-5 324 




-49 803 






Available-for-sale financial assets as at 31 December 2017




420 104 




77 435 




497 539 
















 


Venture Capital Funds


Direct Equity Investments


Total





Cost as at 1 January 2016




267 331 




22 979 




290 310 





Disbursements


101 323 


52 663 


153 986 




Repayments/sales


-37 948 


- 30


-37 978 




Write offs


-4 594 


-2 960 


-7 554 




Foreign exchange rates differences on repayments/sales


5 141 


- 16


5 125 





Cost as at 31 December 2016




331 253 




72 636 




403 889 






Unrealised gains and losses as at 1 January 2016




153 901 




10 092 




163 993 





Net change in unrealised gains and losses


-24 474 


3 365 


-21 109 





Unrealised gains and losses as at 31 December 2016




129 427 




13 457 




142 884 






Impairment as at 1 January 2016




-25 029 




-9 921 




-34 950 





Impairment recorded in statement of profit or loss and other comprehensive income during the year


-2 457 


- 36


-2 493 




Write offs


4 594 


2 960 


7 554 





Impairment as at 31 December 2016




-22 892 




-6 997 




-29 889 






Available-for-sale financial assets as at 31 December 2016




437 788 




79 096 




516 884 





9.   Amounts receivable from contributors (in EUR '000)

The amounts receivable from contributors are entirely composed of Member States contribution called but not paid.
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 2017




169 398 





Acquisitions


1 084 149 




Maturities


-1 109 563 




Change in amortisation of premium/discount


- 59




Change in accrued interest


457





Balance as at 31 December 2017




144 382 















Balance as at 1 January 2016




228 521 





Acquisitions


1 159 704 




Maturities


-1 219 953 




Change in amortisation of premium/discount


- 87




Change in accrued interest


1 213 





Balance as at 31 December 2016




169 398 





11.   Other assets (in EUR '000)

The main components of other assets are as follows:







 


31.12.2017


31.12.2016




Amount receivable from EIB


4 117 


1




Financial guarantees


268


344





Total other assets




4 385 




345





12.   Deferred income (in EUR '000)

The main components of deferred income are as follows:







 


31.12.2017


31.12.2016




Deferred interest subsidies


24 895 


25 884 




Deferred commissions on loans and receivables


907


399





Total deferred income




25 802 




26 283 





13.   Provisions for guarantees issued (in EUR '000)

The amount of provisions for guarantees issued is recognised using the best estimate of expenditure required to settle any present financial obligation arising as a result of the guarantees and represents the sum of:






—


the amounts initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue and










—


the excess over the above amounts, as measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.











 


2017


2016




Balance at 1 January


625


—




Additions recorded in statement of profit or loss and other comprehensive income


65


242




Utilised


- 206


—




Transfer from ‘Other liabilities’, financial guarantees


—


383





Balance at 31 December




484




625





14.   Amounts owed to third parties (in EUR '000)

The main components of amounts owed to third parties are as follows:







 


31.12.2017


31.12.2016




Net general administrative expenses payable to EIB


45 105 


43 483 




Other amounts payable to EIB


580


—




Interest subsidies and TA not yet disbursed owed to Member States


111 600 


72 631 





Total amounts owed to third parties




157 285 




116 114 





15.   Other liabilities (in EUR '000)

The main components of other liabilities are as follows:







 


31.12.2017


31.12.2016




Loan repayments received in advance


1 986 


2 081 




Deferred income from interest subsidies


436


458




Financial guarantees


40


7





Total other liabilities




2 462 




2 546 





16.   Member States Contribution called (in EUR '000)










Member States


Contribution to the Facility


Contribution to interest subsidies and technical assistance


Total contributed


Called and not paid (*6)





Austria


65 597 


8 387 


73 984 


3 615 




Belgium


96 872 


12 340 


109 212 


5 295 




Bulgaria


644


266


910


210




Cyprus


414


171


585


135




Czech Republic


2 346 


969


3 315 


765




Denmark


53 220 


6 875 


60 095 


3 000 




Estonia


230


95


325


75




Finland


37 206 


4 920 


42 126 


2 205 




France


589 781 


72 062 


661 843 


29 325 




Germany


574 815 


72 516 


647 331 


30 750 




Greece


32 475 


4 589 


37 064 


2 205 




Hungary


2 530 


1 045 


3 575 


825




Ireland


16 939 


2 620 


19 559 


1 365 




Italy


317 104 


42 453 


359 557 


19 290 




Latvia


322


133


455


105




Lithuania


552


228


780


180




Luxembourg


7 207 


930


8 137 


405




Malta


138


57


195


45




Netherlands


129 685 


16 715 


146 400 


7 275 




Poland


5 980 


2 470 


8 450 


1 950 




Portugal


25 243 


3 579 


28 822 


1 725 




Romania


1 702 


703


2 405 


555




Slovakia


966


399


1 365 


315




Slovenia


828


342


1 170 


270




Spain


156 239 


23 306 


179 545 


11 775 




Sweden


68 760 


9 129 


77 889 


4 110 




United Kingdom


329 205 


46 392 


375 597 


22 230 





Total as at 31 December 2017




2 517 000 




333 691 




2 850 691 




150 000 






Total as at 31 December 2016




2 377 000 




273 691 




2 650 691 




86 395 





17.   Contingent liabilities and commitments (in EUR '000)








 


31.12.2017


31.12.2016






Commitments




 


 




Un-disbursed loans


869 983 


901 899 




Un-disbursed commitment in respect of available-for-sale financial assets


321 695 


244 050 




Issued guarantees


7 682 


8 627 




Interest subsidies and technical assistance


382 576 


334 553 






Contingent liabilities




 


 




Signed non-issued guarantees


74 569 


35 337 





Total contingent liabilities and commitments




1 656 505 




1 524 466 





18.   Interest and similar income and expenses (in EUR '000)

The main components of interest and similar income are as follows:







 


From 1.1.2017


From 1.1.2016




 


to 31.12.2017


to 31.12.2016




Loans and receivables


97 440 


102 580 




Interest subsidies


3 966 


4 118 





Total interest and similar income




101 406 




106 698 





The main component of interest and similar expenses is as follows:







 


From 1.1.2017


From 1.1.2016




 


to 31.12.2017


to 31.12.2016




Derivative financial instruments


- 980


-1 142 




Cash and cash equivalents


-1 037 


- 752




Held-to-maturity financial assets


- 654


- 413





Total interest and similar expenses




-2 671 




-2 307 





19.   Fee and commission income and expenses (in EUR '000)

The main components of fee and commission income are as follows:







 


From 1.1.2017


From 1.1.2016




 


to 31.12.2017


to 31.12.2016




Fee and commission on loans and receivables


—


515




Fee and commission on financial guarantees


209


183




Other


1


1





Total fee and commission income




210




699





The main component of fee and commission expenses is as follows:







 


From 1.1.2017


From 1.1.2016




 


to 31.12.2017


to 31.12.2016




Commission paid to third parties with regard to available-for-sale financial assets


- 60


- 48





Total fee and commission expenses




- 60




- 48





20.   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 1.1.2017


From 1.1.2016




 


to 31.12.2017


to 31.12.2016




Net proceeds from available-for-sale financial assets


1 030 


2 159 




Dividend income


1 681 


4 345 





Net realised gains on available-for-sale financial assets




2 711 




6 504 





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 1.1.2017


From 1.1.2016




 


to 31.12.2017


to 31.12.2016




Actual cost incurred by the EIB


-48 285 


-45 858 




Income from appraisal fees directly charged to clients of the Facility


3 180 


2 375 





Total general administrative expenses




-45 105 




-43 483 





22.   Involvement with unconsolidated structured entities (in EUR '000)


Definition of a structured entity

A structured entity is one that has been designed so that voting or similar rights are not the dominant factor in deciding, who controls the-entity. IFRS 12 observes that a structured entity often has some or all of the following features:






—


Restricted activities;










—


A narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors;










—


Insufficient equity to permit the structured entity to finance its activities without subordinated financial support;










—


Financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).





Unconsolidated structured entities

The term ‘unconsolidated structured entities’ refers to all structured entities that are not controlled by the Facility and includes interests in structured entities that are not consolidated.

Definition of Interests in structured entities:

IFRS 12 defines ‘interests’ broadly to include any contractual or non-contractual involvement that exposes the reporting entity to variability in returns from the performance of the entity. Examples of such interests include the holding of equity interests and other forms of involvement such as the provision of funding, liquidity support, credit enhancements, commitments and guarantees to the other entity. IFRS 12 states that a reporting entity does not necessarily have an interest in another entity solely because of a typical customer supplier relationship.
The table below describes the types of structured entities that the Facility does not consolidate but in which it holds an interest.







Type of structured entity


Nature and purpose


Interest held by the Facility




Project Finance — lending to Special Purposes Vehicles (‘SPV’)


Project Finance Transactions (PF Operations) are transactions where the Facility relies for the servicing of its debt on a borrower whose sole or main source of revenue is generated by a single or limited number of assets being financed by such debt or other pre-existing assets contractually linked to the project. PF operations are often financed through SPV.


Net disbursed amounts;
Interest income.




Venture capital operations


The Facility finances venture capital and investment funds. Venture capital and investment funds pool and manage money from investors seeking private equity stakes in small and medium-size enterprises with strong growth potential as well as financing infrastructure projects.


Investments in units/shares issued by the venture capital entity;
Dividends received as dividend income.




The table below shows the carrying amounts of unconsolidated structured entities in which the Facility has an interest at the reporting date, as well as the Facility’s maximum exposure to loss in relation to those entities. The maximum exposure to loss includes the carrying amounts and the related un-disbursed commitments.










Type of structured entity


Caption


Carrying amount at 31.12.2017


Carrying amount at 31.12.2016


Maximum exposure to loss at 31.12.2017


Maximum exposure to loss at 31.12.2016




Venture capital funds


Available-for-sale financial assets


420 104 


437 788 


737 661 


672 222 





Total



 



420 104 




437 788 




737 661 




672 222 





23.   Impact financing envelope (in EUR '000)

In June 2013 the ACP-EU Joint Ministerial Council approved the new financial protocol for the 11th European Development Fund (EDF), covering the period 2014-2020.
A new EUR 500m endowment was agreed for the Investment Facility, the so called ‘impact financing envelope’ or ‘IFE’, enabling the Facility to support projects that promise a particularly high development impact whilst bearing the greater risks inherent in such investments. This envelope will present new possibilities for enhancing the Facility’s private sector lending through investments in the following instruments:

Social impact equity funds — promoted by an emerging population of private equity fund managers who put the alleviation of social or environmental issues at the core of their funds’ investment strategy but still target sustainability at the levels of both the fund and its investee companies.

Loans to financial intermediaries — (e.g. microfinance institutions, local banks and credit unions) operating in ACP countries in which the EIB cannot consider financing — in particular in local currency — under the existing credit risk guidelines, e.g. due to either high country risks, currency volatility or lack of pricing benchmarks. The main objective of such loans will be to fund projects with a high developmental impact, especially in the field of support to micro and small enterprises (MSEs) and agriculture, which generally do not qualify for IF financing.

Risk sharing facilitating instruments — which will take the form of first loss guarantees (‘first loss pieces’) that will facilitate risk sharing operations of the EIB with local financial intermediaries (mainly commercial banks) for the benefit of underserved SMEs and small projects that meet the Impact Financing Criteria in situations where a market gap has been identified in relation to the access of SMEs/small projects to finance. The first loss pieces would be structured as a counter-guarantee in favour of senior guarantee tranches funded by the EIB — under the Investment Facility — and by other International Financial Institutions/Development Financial Institutions, thus generating a substantial leverage effect.

Direct financing — through debt or equity instruments in projects with sound and experienced promoters and high developmental impacts, but that will, however, also entail higher expectations of losses and difficulties to recover the investment (equity type risk with higher than usual expectation of losses). The EIB will apply strict selection and eligibility criteria for this instrument, as these projects, notwithstanding their high developmental impact, would not be able to meet acceptable financing criteria (i.e. low expectation of recovering the investment or offsetting the losses through interest rates/equity returns).
The IFE will also allow diversification into new sectors, such as health and education, agriculture and food security, and the development of new and innovative risk-sharing instruments.
From a financial and accounting perspective the IFE forms part of the IF portfolio and is accounted for in the overall IF annual financial statements.
The following table represents the carrying amounts and the committed, but undisbursed amounts, per type of asset:










Type of IFE investment


Caption


Carrying amount at 31.12.2017


Carrying amount at 31.12.2016


Undisbursed amount at 31.12.2017


Undisbursed amount at 31.12.2016




Social impact equity funds


Available-for-sale financial assets


7 839 


5 021 


51 720 


19 567 




Loans to financial intermediaries


Loans and receivables


30 804 


23 702 


44 017 


46 958 




Risk sharing facilitating instruments


Issued guarantees


296


- 288


64 569 


33 719 




Direct financing — equity participations


Available-for-sale financial assets


42 981 


39 986 


4 014 


14





Total



 



81 920 




68 421 




164 320 




100 258 





24.   Subsequent events

There have been no material post balance sheet events which could require disclosure or adjustment to the 31 December 2017 financial statements.


(1)  OJ L 210, 6.8.2013, p. 1.

(2)  The creation of the Bridging Facility had been first proposed as an article of the 11th EDF Implementation Regulation (COM(2013) 445). The Commission however has proposed, as an alternative, the creation of the Bridging Facility by a specific Council decision (Proposal for a Council decision regarding transitional EDF management measures from 1 January 2014 until the entry into force of the 11th EDF European Development Fund, COM(2013) 663).

(3)  Council Regulation (EC) No 215/2008 of 18 February 2008 on the Financial Regulation applicable to the 10th EDF. OJ L 78, 19.2.2008, p. 1.

(4)  Council Regulation (EU) No 567/2014 of 26 May 2014 amending Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th EDF as regards the application of the transition period between the 10th EDF and the 11th EDF until the entry into force of the 11th EDF Internal Agreement. OJ L 157, 27.5.2014, p. 52.

(5)  Council Regulation (EU) 2015/323 of 2 March 2015 on the financial regulation applicable to the 11th European Development Fund. OJ L 58, 3.3.2015, p. 17.

(6)  Council Regulation (EU) 2015/322 of 2 March 2015 on the implementation of the 11th European Development Fund. OJ L 58, 3.3.2015, p. 1.

(7)  Council Regulation (EU) No 567/2014 of 26 May 2014 amending Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th EDF as regards the application of the transition period between the 10th EDF and the 11th EDF until the entry into force of the 11th EDF Internal Agreement. OJ L 157, 27.5.2014, Art. 43.

(1)  It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add up.

(8)  It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add up.

(*1)  From total assets, liabilities and net assets, liaison accounts should be deducted in order to reconcile them to the totals in the EDF Balance sheet

(9)  It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add up.

(10)  In accordance with Article 59 of the Financial Regulation applicable to the 11th European Development Fund, the treasury is presented in the balance sheet of the 11th EDF.

(11)  In accordance with Article 59 of the Financial Regulation applicable to the 11th European Development Fund, the treasury is presented in the balance sheet of the 11th EDF. The nature of the various bank accounts is outlined in Chapter 5, Financial Risk Management.

(12)  OJ L 173, 6.7.2017, p. 15.

(13)  It should be noted that due to the rounding of figures into thousands of euros, some financial data in the tables may appear not to add up.

(14)  It should be noted that due to the rounding of figures into thousands of euros, some financial data in the tables may appear not to add up.

(15)  It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add up.

(2)  All decreases are decommitments transferred to the non-mobilisable performance reserve of the 10th EDF

(3)  All decreases are decommitments transferred to the non-mobilisable performance reserve of the 10th EDF

(4)  Following Council Decision 2010/406/EU, 150 million was added from non-mobilisable performance reserve 10th EDF for Sudan (147 million to special allocation Sudan and 3 million to implementation costs)

(5)  Following Council Decision 2011/315/EU, 200 million was added from non-mobilisable performance reserve 10th EDF for Sudan (194 million to special allocation South Sudan and 6 million to implementation costs)

(6)  Transfer in decommitments from projects of the 9th and previous EDF’s to the non mobilisable performance reserve for 377 million less transfer out of reserves to South Sudan for 200 million (to 9th EDF). Year to date the total of the non-mobilisable reserve ACP created was 807 million, of which 350 million has been used (150 million for Sudan, 200 million for South Soudan, both transfered to 9th EDF).

(7)  Transfers in/from the 10th EDF reserves

(8)  For the co-financing, the table only presents the commitment appropriations

(16)  Council Decision No 2013/759/EU (3) established transitional European Development Fund (EDF) management measures (‘Bridging Facility’) to ensure the availability of funds for cooperation with African, Caribbean and Pacific (ACP) States and with Overseas Countries and Territories (OCTs), as well as for support expenditure, from 1 January 2014 until the entry into force of the 11th EDF Internal Agreement

(9)  % of appropriations

(17)  Decreases are explained by repayments of capital occurred during the year on operations already considered as forborne as of 31 December 2017 and by termination of forborn measures during the year.

(*2)  See section 3.4.2.2.2 for explanations on synthetic hedge.

(*3)  See section 3.4.2.2.2 for explanations on synthetic hedge.

(*4)  including agency agreements

(*5)  including agency agreements

(*6)  On 26 October 2017, the Council fixed the amount of financial contributions to be paid by each Member State by. As at 31 December 2017 EUR 150 000 000 were not paid in.