Communication from the Commission to the European Parliament, the Council and the Court of Auditors Annual accounts of the European Development Fund 2018
Date: 2019-09-30
Institutions: European Commission
Subjects: European Development Fund, balance sheet, closing of accounts, consolidated account, general budget (EU), implementation of the budget




C_2019326EN.01000101.xml










30.9.2019   


EN


Official Journal of the European Union


C 326/1






IV

(Notices)

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES
EUROPEAN COMMISSION

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS


Annual accounts of the European Development Fund 2018

(2019/C 326/01)

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
40








FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2018
41








FINAL ANNUAL ACCOUNTS OF THE EUTF AFRICA 2018
48








CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS
55








EDF REPORT ON FINANCIAL IMPLEMENTATION
59








ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK
89




CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2018 have been prepared in accordance with Title X 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 18 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


21 June 2019




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 2018, the Council adopted the Financial Regulation applicable to the 11th EDF (2) This repealed the previous regulation in force and is applicable to operations financed from previous EDFs without prejudice to existing legal commitments This Regulation does not apply to the Investment Facility under previous EDFs
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
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 intergovernmental 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 above mentioned contributions, it is also possible for Member States to enter into cofinancing arrangements or to make voluntary financial contributions to the EDF
3   YEAR-END REPORTING

3 1   ANNUAL ACCOUNTS

In accordance with Articles 18(3) 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 These 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 Commission’s Accounting Officer and are subject to external audit carried out by a private auditor The trust funds’ figures included in these annual accounts are provisional
The EDF 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 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 of the financial implementation of the EDF resources for a given financial year is the discharge 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 to questions and further information requests

FUNDS MANAGED BY THE EUROPEAN COMMISSION (3)


CONTENTS






FINANCIAL STATEMENTS OF THE EDF
8








EDF BALANCE SHEET
9








EDF STATEMENT OF FINANCIAL PERFORMANCE
10








EDF CASHFLOW 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
40








FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2018
41








BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND
42








BALANCE SHEET
45








STATEMENT OF FINANCIAL PERFORMANCE
46








CASHFLOW STATEMENT
46








STATEMENT OF CHANGES IN NET ASSETS
47








FINAL ANNUAL ACCOUNTS OF THE EUTF AFRICA 2018
48








BACKGROUND INFORMATION ON THE EUTF FOR AFRICA
49








BALANCE SHEET
52








STATEMENT OF FINANCIAL PERFORMANCE
53








CASHFLOW STATEMENT
53








STATEMENT OF CHANGES IN NET ASSETS
54








CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS
55








CONSOLIDATED BALANCE SHEET
56








CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
57








CONSOLIDATED CASH FLOW STATEMENT
57








CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
58








EDF REPORT ON FINANCIAL IMPLEMENTATION
59




FINANCIAL STATEMENTS OF THE EDF (4)


EDF BALANCE SHEET









EUR millions




 


Note


31 12 2018


31 12 2017





NON-CURRENT ASSETS



 


 


 





Pre-financing




2.1




887




582






Trust Fund contributions




2.2




201




163





 


 



1 088 




745






CURRENT ASSETS



 


 


 





Pre-financing




2.1




1 448 




1 518 






Exchange receivables and non-exchange recoverables




2.3




138




92






Cash and cash equivalents




2.4




387




347





 


 



1 973 




1 958 






TOTAL ASSETS



 



3 061 




2 703 






NON-CURRENT LIABILITIES



 


 


 




Provisions



2.5



—


(4)




Financial liabilities



2.6



(18)


(14)




 


 



(18)




(18)






CURRENT LIABILITIES



 


 


 




Payables



2.7



(241)


(563)




Accrued charges and deferred income



2.8



(1 281 )


(733)




 


 



(1 523 )




(1 296 )






TOTAL LIABILITIES



 



(1 540 )




(1 314 )






NET ASSETS



 



1 521 




1 389 






FUNDS & RESERVES



 


 


 




Called fund capital - active EDFs



2.9




50 423 




46 173 





Called fund capital from closed EDFs carried forward



2.9




2 252 




2 252 





Economic result carried forward from previous years


 


(47 037 )


(43 219 )




Economic result of the year


 


(4 118 )


(3 818 )





NET ASSETS



 



1 521 




1 389 






EDF STATEMENT OF FINANCIAL PERFORMANCE









EUR millions




 


Note


2018


2017





REVENUE



 


 


 





Revenue from non-exchange transactions




3.1



 


 




Recovery activities


 



4




61





 


 



4




61






Revenue from exchange transactions




3.2



 


 




Financial revenue


 



10




4





Other revenue


 



46




22





 


 



57




25






Total Revenue



 



60




87






EXPENSES



 


 


 





Aid instruments




3.3



(4 054 )


(3 700 )





Co-financing expenses




3.4




17



(42)





Finance costs




3.6




7



(8)





Other expenses




3.7



(148)


(154)





Total Expenses



 



(4 178 )




(3 904 )






ECONOMIC RESULT OF THE YEAR



 



(4 118 )




(3 818 )






EDF CASHFLOW STATEMENT









EUR millions




 


Note


2018


2017




Economic result of the year


 


(4 118 )


(3 818 )





Operating activities



 


 


 




Capital increase - contributions (net)


 



4 250 




3 850 





(Increase)/decrease in trust funds contributions


 


(38)


(66)




(Increase)/decrease in pre-financing


 


(235)


(319)




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


 


(46)



40





Increase/(decrease) in provisions


 


(4)


—




Increase/(decrease) in financial liabilities


 



3




8





Increase/(decrease) in payables


 


(322)



14





Increase/(decrease) in accrued charges and deferred income


 



548



(42)





NET CASHFLOW



 



40




(333)






Net increase/(decrease) in cash and cash equivalents



 



40




(333)






Cash and cash equivalents at the beginning of the year




2.4




347




680






Cash and cash equivalents at year-end




2.4




387




347






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 31.12.2016





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 





Capital increase - contributions


—


(4 250 )



4 250 



—


—



4 250 





Economic result of the year


—


—


—


(4 118 )


—


(4 118 )






BALANCE AS AT 31.12.2018





73 264 




22 840 




50 423 




(51 155 )




2 252 




1 521 






BALANCE SHEET BY EDF

















EUR millions




 


Note


31 12 2018


31 12 2017




Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total





NON-CURRENT ASSETS



 


 


 


 


 


 


 


 


 


 


 





Pre-financing




2.1



—



23




520




344




887



—



32




221




330




582






Trust Fund contributions




2.2



—


—


—



201




201



—



86



—



77




163





 


 


—



23




520




546




1 088 



—



118




221




407




745






CURRENT ASSETS



 


 


 


 


 


 


 


 


 


 


 





Pre-financing




2.1




0




19




445




984




1 448 




1




40




867




610




1 518 






Exchange receivables and non-exchange recoverables




2.3




1




65




36




36




138




0




64




17




11




92






Inter-EDF accounts




2.3




183




111




2 421 



—



2 715 




189




88




3 555 



—



3 832 






Cash and cash equivalents




2.4



—


—


—



387




387



—


—


—



347




347





 


 



184




195




2 902 




1 407 




4 689 




190




193




4 439 




968




5 791 






TOTAL ASSETS
 (*1)



 



184




218




3 422 




1 953 




5 777 




190




311




4 660 




1 375 




6 536 






NON-CURRENT LIABILITIES



 


 


 


 


 


 


 


 


 


 


 





Provisions




2.5



—


—


—


—


—


—


—


—


(4)


(4)





Financial liabilities




2.6



—


—


(1)


(16)


(18)


—


—


(7)


(7)


(14)




 


 


—


—



(1)




(16)




(18)



—


—



(7)




(11)




(18)






CURRENT LIABILITIES



 


 


 


 


 


 


 


 


 


 


 





Payables




2.7



(0)


(6)


(125)


(111)


(241)


(0)


(13)


(133)


(417)


(563)





Inter-EDF accounts




2.3



—


—


—


(2 715 )


(2 715 )


—


—


—


(3 833 )


(3 833 )





Accrued charges and deferred income




2.8



(0)


(83)


(358)


(840)


(1 281 )


(0)


(76)


(517)


(140)


(733)




 


 



(0)




(89)




(482)




(3 666 )




(4 237 )




(0)




(89)




(650)




(4 389 )




(5 128 )






TOTAL LIABILITIES
 (*1)



 



(0)




(89)




(484)




(3 682 )




(4 255 )




(0)




(89)




(657)




(4 401 )




(5 147 )






NET ASSETS
 (*1)



 



184




129




2 938 




(1 729 )




1 521 




190




222




4 003 




(3 025 )




1 389 






FUNDS & RESERVES



 


 


 


 


 


 


 


 


 


 


 





Called fund capital - active EDFs




2.9




12 164 




10 773 




20 960 




6 527 




50 423 




12 164 




10 773 




20 960 




2 277 




46 173 






Called fund capital from closed EDFs carried forward




2.9




627




1 625 



—


—



2 252 




627




1 625 



—


—



2 252 






Called fund capital transfers between active EDFs




2.9



(2 509 )



2 137 




55




317



—


(2 503 )



2 177 




120




206



—




Economic result carried forward from previous years


 


(10 098 )


(14 352 )


(17 078 )


(5 508 )


(47 037 )


(10 098 )


(14 339 )


(15 812 )


(2 969 )


(43 219 )




Economic result of the year


 



0



(53)


(1 000 )


(3 065 )


(4 118 )



0



(13)


(1 266 )


(2 539 )


(3 818 )





NET ASSETS



 



184




129




2 938 




(1 729 )




1 521 




190




222




4 003 




(3 025 )




1 389 






STATEMENT OF FINANCIAL PERFORMANCE BY EDF

















EUR millions




 


Note


2018


2017




Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total





REVENUE



 


 


 


 


 


 


 


 


 


 


 





Revenue from non-exchange transactions




3.1



 


 


 


 


 


 


 


 


 


 




Recovery activities


 



0




3



(3)



4




4




0




5




49




7




61





 


 



0




3




(3)




4




4




0




5




49




7




61






Revenue from exchange transactions




3.2



 


 


 


 


 


 


 


 


 


 




Financial revenue


 



0




2




8




1




10



(0)


(1)



4



(0)



4





Other revenue


 



1




6




27




12




46




1




5




13




4




22





 


 



1




8




35




13




57




1




4




17




4




25







Total revenue




 




1






11






32






17






60






1






9






66






11






87







EXPENSES



 


 


 


 


 


 


 


 


 


 


 





Aid instruments




3.3




0



(59)


(984)


(3 012 )


(4 054 )


(0)


(14)


(1 251 )


(2 435 )


(3 700 )





Co-financing expenses




3.4



—


—



18



(1)



17



—


—


(42)


(1)


(42)





Finance costs




3.6




0




1




5




1




7




1




1



(10)


(0)


(8)





Other expenses




3.7



(1)


(7)


(71)


(70)


(148)


(2)


(9)


(29)


(114)


(154)






Total expenses




 




(0)






(64)






(1 031 )






(3 082 )






(4 178 )






(1)






(22)






(1 332 )






(2 549 )






(3 904 )







ECONOMIC RESULT OF THE YEAR



 



0




(53)




(1 000 )




(3 065 )




(4 118 )




0




(13)




(1 266 )




(2 539 )




(3 818 )






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 31.12.2016




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





Transfers to/from the 10th EDF


 


 


—


 


 


(7)


(7)




Economic result of the year


 


 


—



0



 


—



0






BALANCE AS AT 31.12.2018




12 164 



—



12 164 




(10 098 )




627




(2 509 )




184




















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 31.12.2016




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)




Economic result of the year


 


 


—


(13)


 


 


(13)





BALANCE AS AT 31.12.2017




10 773 



—



10 773 




(14 352 )




1 625 




2 177 




222





Transfers to/from the 10th EDF


 


 


—


 


 


(40)


(40)




Transfers to/from the 11th EDF


 


 


—


 


 


—


—




Economic result of the year


 


 


—


(53)


 


—


(53)





BALANCE AS AT 31.12.2018




10 773 



—



10 773 




(14 406 )




1 625 




2 137 




129




















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 31.12.2016




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 





Transfers to/from the Eighth and Ninth EDF


 


 


—


 


 



47




47





Transfers to/from the 11th EDF


 


 


—


 


 


(112)


(112)




Economic result of the year


 


 


—


(1 000 )


 


—


(1 000 )





BALANCE AS AT 31.12.2018




20 960 



—



20 960 




(18 077 )



—



55




2 938 




















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 31.12.2016




29 367 




29 367 



—



(2 969 )



—



35




(2 934 )





Capital increase - contributions


 


(2 277 )



2 277 



 


 


—



2 277 





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


 


 


—


 


—



171




171





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 )





Capital increase - contributions


 


(4 250 )



4 250 



 


 



112




4 362 





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


 


 


—


 


 


—


—




Economic result of the year


 


 


—


(3 065 )


 


—


(3 065 )





BALANCE AS AT 31.12.2018




29 367 




22 840 




6 527 




(8 573 )



—



317




(1 729 )






NOTES TO THE FINANCIAL STATEMENTS OF THE EDF (5)

1   SIGNIFICANT ACCOUNTING POLICIES

1 1   ACCOUNTING PRINCIPLES

The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of users
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 2018


31 12 2017


Currency


31 12 2018


31 12 2017





BGN




1,9558 




1,9558 




PLN




4,3014 




4 177 






CZK




25,7240 




25,5350 




RON




4,6635 




4,6585 






DKK




7,4673 




7,4449 




SEK




10,2548 




9,8438 






GBP




0,8945 




0,8872 




CHF




1,1269 




1,1702 






HRK




7,4125 




7,4400 




JPY




125,8500 




135,01 






HUF




320,9800 




310,3300 




USD




1 145 




1,1993 





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 an 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
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 During this financial year, the entity did not hold any investments in this category

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 and loans are recognised when cash is deposited in a financial institution or advanced to borrowers 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 cashflows 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 from 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 are 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 nonexchange 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 nonexchange 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 conditions 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 twelve months of the reporting date are disclosed as current prefinancing 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 noncurrent assets












EUR millions




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Non-current pre-financing


2.1.1


—



23




520




344




887




582





Current pre-financing


2.1.2



0




19




445




984




1 448 




1 518 






Total



 



0




42




964




1 328 




2 335 




2 100 





The increase in non-current pre-financing was mainly caused by the extension up to 2023 (with 7 years disbursement period) of a contract that was supposed to end in 2017 In 2017 the total value of this contract had been expensed, whereas after the extension, the non-current pre-financing was estimated at EUR 217 million
The decrease in current pre-financing was caused by a decrease in the pre-financing payments made (by 10 %) and an increase in the level of clearings (mainly in the 10th EDF)
This decrease is in line with the lifecycle of the EDF Many contracts have been cleared and completed in the 10th EDF: this can be seen in the drop of their number – from 3,4k in 2017 to 2,6k in 2018
At the same time the number of open contracts in the 11th EDF increased from 1,6k in 2017 to 2,3k in 2018 The 11th EDF started in 2015 and 2018 was thus the fourth year of its existence The 11th EDF has reached maturity with regards to the implementation of adopted actions
2 1 1   Non-current pre-financing







EUR millions




 


31 12 2018


31 12 2017





Direct Management




188




159





Implemented by:


 


 




Commission



140




105





EU executive agencies



0




6





EU delegations



48




48






Indirect Management




698




423





Implemented by:


 


 




EIB and EIF



367




166





International organisations



280




189





Private law bodies with a public service mission



6




11





Public law bodies



24




37





Third countries



21




20





EU bodies and Public Private Partnership



0



—




Private law bodies implementing Public Private Partnership


—



0






Total




887




582





2 1 2   Current pre-financing











EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Pre-financing (gross)



1




113




2 034 




3 005 




5 153 




5 288 





Cleared via cut-off


(1)


(94)


(1 589 )


(2 021 )


(3 705 )


(3 770 )





Total




0




19




445




984




1 448 




1 518 















EUR millions




 


31 12 2018


31 12 2017





Direct Management




280




256





Implemented by:


 


 




Commission



102




86





EU executive agencies



8




10





Trust Funds



1



—




EU delegations



169




161






Indirect Management




1 169 




1 262 





Implemented by:


 


 




EIB and EIF



100




345





International organisations



658




563





Private law bodies with a public service mission



78




59





Public law bodies



124




108





Third countries



208




186





EU Bodies and Public Private Partnership



0



—




Private law bodies implementing Public Private Partnership



0




0






Total




1 448 




1 518 





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 2018 the guarantees received by the EDF in respect of pre-financing amounted to EUR 79 million (2017 EUR 54 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 2018 those guarantees amounted to EUR 534 million
2 2   TRUST FUND CONTRIBUTIONS

This heading represents the amount paid as contributions to the EU Trust Fund for Africa and the Bêkou EU Trust Fund 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 2017


Contributions paid in 2018


Allocation of TF’s net expenses 2018


Net contribution at 31 12 2018




Africa



148




345



(301)



192





Bêkou



16



—


(7)



9






Total




163




345




(308)




201





2 3   NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES









EUR millions




 


Note


31 12 2018


31 12 2017




Recoverables from non-exchange transactions


2.3.1



37




19





Receivables from exchange transactions


2.3.2



101




73






Total



 



138




92





2 3 1   Recoverables from non-exchange transactions











EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Member States


—


—


—



5




5




7





Customers



2




7




16




1




26




19





Public bodies



0




9




9




7




25




20





Third states



0




1




3




0




5




6





Write down


(2)


(15)


(10)


(0)


(27)


(34)




Inter-company accounts with EU institutions


—


—


—



3




3




2






Total




1




2




18




16




37




19





2 3 2   Receivables from exchange transactions











EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Accrued income



0




63




18




0




81




74





Receivable from EU


—


—


—



20




20



—




Inter-EDF accounts



183




111




2 421 



(2 715 )


(0)


(0)





Total




183




174




2 439 




(2 695 )




101




73





Included under accrued income are 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 18 million)
The receivable from the EU is the amount that was transferred to the trust account owned by the European Commission
For efficiency reasons, the single treasury covering all the EDFs is allocated to the 11th EDF; this leads to operations between the various EDFs, which are balanced out in the inter-EDF accounts between the various EDF balance sheets
Inter-EDF accounts are presented only in the individual EDFs The total of inter-EDF accounts is nil
2 4   CASH AND CASH EQUIVALENTS (6)












EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Central banks


—


—


—



276




276




105





Commercial banks


—


—


—



87




87




242





Cash belonging to financial instruments


—


—


—



24




24



—





Total



—


—


—



387




387




347





The total level of cash and cash equivalents remained stable However, the structure of the cash position has changed A significant decrease (EUR 136 million) was observed in the UK’s contribution account in the commercial bank Natwest It was mainly because at the end of 2017 the UK paid the first instalment of its 2018 contribution of EUR 170 million
On 31 12 2018 more cash was kept in the central banks, in order to limit counterparty risk (see note 5.4)

LIABILITIES

2 5   PROVISIONS












EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Provisions


—


—


—


—


—



4






Total



—


—


—


—


—



4





The provision for the Centre de Development (CDE) has been released as the court cases have been finished and no additional costs should be incurred
2 6   FINANCIAL LIABILITIES












EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Co-financing - payables


—


—



1




16




18




14






Total



—


—



1




16




18




14





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

2 7   PAYABLES













EUR millions




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Current payables


2.7.1



0




6




80




88




173




361





Sundry payables


2.7.2


—


—



45




23




68




202






Total



 



0




6




125




111




241




563





2 7 1   Current payables











EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Suppliers



0




5




65




32




102




133





Member States


—


—



0




1




1




12





Third states



0



—



6




31




37




146





Public bodies


—



2




10




30




43




83





Other current payables


(0)


(2)


(2)


(6)


(10)


(13)





Total




0




6




80




88




173




361





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 shown as other current payables
2 7 2   Sundry payables












EUR millions




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31 12 2018


31 12 2017




Co-financing payables


2.7.2.1


—


—



47




21




68




28





Deferred fund capital contributions


2.7.2.2


—


—


—


—


—



173





Other sundry payables


 


—


—


(2)



2



—



1






Total



 


—


—



45




23




68




202





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 2018


31 12 2017






Non-current co-financing




 


 


 


 


 


 




Austria


—


—


—



1




1



—




Belgium


—


—



0




2




2




2





Czechia


—


—


—



1




1



—




Denmark


—


—


—



3




3




0





Finland


—


—


—



1




1



—




France


—


—



1




1




2




4





Luxembourg


—


—


—



1




1



—




Netherlands


—


—


—



3




3



—




Portugal


—


—


—



0




0



—




Sweden


—


—



0



—



0




3





United Kingdom


—


—


—



2




2




1





Australia


—


—



0



—



0




0





USAID


—


—


—



2




2




4





 


—


—




1






16






18






14








Current co-financing




 


 


 


 


 


 




Austria


—


—


—



0




0



—




Belgium


—


—



4




0




4




3





Czechia


—


—


—



0




0



—




Denmark


—


—



0




2




3



(0)




Finland


—


—


—



0




0



—




France


—


—



21




1




22




12





Germany


—


—



1



—



1




0





Luxembourg


—


—


—



0




0



—




Netherlands


—


—



1




1




2




0





Poland


—


—



0



—



0



—




Portugal


—


—


—



0




0



—




Spain


—


—



2



—



2




1





Sweden


—


—



5




1




5




5





Switzerland


—


—



0



—



0




0





United Kingdom


—


—



13




12




25




4





Canada


—


—



0



—



0




0





Australia


—


—



0



—



0




1





USAID


—


—


—



4




4




2





 


—


—




47






21






68






28







Total



—


—



48




37




86




42





The total non-current and current co-financing payables increased by EUR 44 million compared to the previous reporting period
During 2018, a total of EUR 28 million new co-financing contributions were received
The total co-financing payables increased by EUR 17 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 2018


31 12 2017




United Kingdom


—


—


—


—


—



170





Lithuania


—


—


—


—


—



2






Total



—


—


—


—


—



173





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 2018


31 12 2017




Accrued charges



0




83




358




838




1 279 




730





Other accruals and deferrals


—


—


—



3




3




3






Total




0




83




358




840




1 281 




733





Accrued charges comprise estimated operating expenses for on-going or completed contracts without validated cost claims where the 2018 eligible expenses incurred by beneficiaries of EDF were estimated using the best available information 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)
Accrued charges increased mainly in the 11th EDF (from EUR 140 million in 2017 to EUR 840 million in 2018) This is in line with the increase in the number of contracts (from 1,6k in 2017 to 2,3k in 2018) The 11th EDF started in 2015 and 2018 was thus the fourth year of its existence The 11th EDF has reached maturity with regards to the implementation of adopted actions

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 




10 773 




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 





Fund capital



12 164 




10 773 




20 960 




29 367 




73 264 





Uncalled fund capital


—


—


—


(22 840 )


(22 840 )





Called fund capital 31.12.2018




12 164 




10 773 




20 960 




6 527 




50 423 





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 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)
2 9 2   Called and uncalled fund capital by Member State









EUR millions




Contributions 11th EDF


%


Uncalled capital 31 12 2017


Capital called in 2018


Uncalled capital 31 12 2018




Austria



2,40 




650



(102)



548





Belgium



3,25 




880



(138)



742





Bulgaria



0,22 




59



(9)



50





Croatia



0,23 




61



(10)



51





Cyprus



0,11 




30



(5)



25





Czechia



0,80 




216



(34)



182





Denmark



1,98 




537



(84)



452





Estonia



0,09 




23



(4)



20





Finland



1,51 




409



(64)



345





France



17,81 




4 826 



(757)



4 068 





Germany



20,58 




5 575 



(875)



4 700 





Greece



1,51 




408



(64)



344





Hungary



0,61 




166



(26)



140





Ireland



0,94 




255



(40)



215





Italy



12,53 




3 394 



(533)



2 862 





Latvia



0,12 




31



(5)



27





Lithuania



0,18 




49



(8)



41





Luxembourg



0,26 




69



(11)



58





Malta



0,04 




10



(2)



9





Netherlands



4,78 




1 294 



(203)



1 091 





Poland



2,01 




544



(85)



458





Portugal



1,20 




324



(51)



273





Romania



0,72 




195



(31)



164





Slovakia



0,38 




102



(16)



86





Slovenia



0,22 




61



(10)



51





Spain



7,93 




2 149 



(337)



1 812 





Sweden



2,94 




796



(125)



671





United Kingdom



14,68 




3 976 



(624)



3 353 






Total




100,00 




27 090 




(4 250 )




22 840 





In 2018 EUR 4 250 million has been called from the 11th EDF At 31 December 2018 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 2018


31 12 2017




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 31.12.2016




(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



—




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


(7)


(40)



47



—


—




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


—


—


(112)



112



—





Balance at 31.12.2018




(2 509 )




2 137 




55




317



—




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


2018


2017





Revenue from non-exchange transactions




3.1




4




61






Revenue from exchange transactions




3.2




57




25






Total



 



60




87





3 1   REVENUE FROM NON-EXCHANGE TRANSACTIONS













EUR millions




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2018


2017




Recovery of expenses


 



0




3




14




3




21




19





Recovery of STABEX funds


 


—


—



0



—



0




0





Co-financing revenue


3.1.1


—


—


(18)



1



(17)



42






Total



 



0




3




(3)




4




4




61





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







EUR millions




 


2018


2017





Direct Management




4




5





Implemented by:


 


 




Commission



1




1





EU delegations



3




4






Indirect Management




0




56





Implemented by:


 


 




Third countries


(13)



55





International organisations



12




2





Public law bodies



0




0





Private law bodies with a public service mission



1



(1)





Total




4




61





3 1 1   Co-financing revenue
The cofinancing 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 cofinancing 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


2018


2017




Financial revenue



0




2




8




1




10




4





Other revenue



1




6




27




12




46




22






Total




1




8




35




13




57




25





Financial revenue comprises interest from the Trust Funds 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


2018


2017




Programmable aid


(0)



1




532




1 468 




2 001 




2 150 





Macro-economic support


—



26



—


—



26




21





Sectoral policy


—



2



—


—



2



(9)




Intra ACP projects


—



27




389




410




827




1 112 





Emergency aid


—



3




60




811




873




289





Other aid programmes related to former EDFs


—



0



—


—



0



(1)




Institutional support


—


—



3




15




18




23





Compensation export receipts



0



(0)


—


—



0



(1)




Contributions to Trust Funds


—


—


—



307




307




114






Total




(0)




59




984




3 012 




4 054 




3 700 





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 mainly in the 11th EDF This is in line with the lifecycle of this EDF The 11th EDF started in 2015 and 2018 was thus the fourth year of its existence In 2018 the 11th EDF reached maturity with regards to the implementation of adopted actions and thus the expenses have increased compared to 2017 The number of open contracts in the 11th EDF increased from 1,6k in 2017 to 2,3k in 2018
This increase is in line with the increase in clearings of pre-financing and increase in accrued charges
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


2018


2017




Co-financing


—


—


(18)



1



(17)



42





Included under this heading are the expenses incurred on co-financing projects in 2018 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 2017 estimated expenses (EUR 52 million) exceeded the expenses incurred in 2018 (EUR 36 million), the co-financing expenses are negative for 2018
Corresponding negative 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




 


2018


2017





Direct Management




1 750 




1 447 





Implemented by:


 


 




Commission



122




122





EU executive agencies



31




26





Trust Funds



594




89





EU delegations



1 003 




1 209 






Indirect Management




2 287 




2 295 





Implemented by:


 


 




EIB and EIF



44




48





International organisations



920




1 171 





Private law bodies with a public service mission



114



(20)




Public law bodies



231




356





Third countries



977




739





EU bodies with Public Private Partnership



1



—




Private law bodies implementing Public Private Partnership



0




0






Total




4 037 




3 742 





3 6   FINANCE COSTS












EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2018


2017




Write-down of receivables


(0)


(1)


(5)


(1)


(7)



9





Other financial expenses


—


—


—


(0)


(0)


(1)





Total




(0)




(1)




(5)




(1)




(7)




8





The heading write-down of receivables comprises the estimate of expenses on irrecoverable receivables Because the estimate also includes reversals of the previous year’s estimation, the overall expenses were negative in 2018 (from EUR 34 million in 2017 to EUR 27 million in 2018 – see note 2.3.1)
3 7   OTHER EXPENSES












EUR millions




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2018


2017




Administrative and IT expenses


(0)


(0)



45




67




112




107





Provision for risks and charges


—


—


—


(4)


(4)


—




Realised losses on trade debtors



0




0




0



—



1




3





Exchange losses



0




6




26




7




39




44






Total




1




7




71




70




148




154





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 2018


31 12 2017




Performance guarantees


—



0




10




0




11




10





Retention guarantees


—



0




6



—



7




8






Total



—



1




16




0




17




18





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 2018 those guarantees amounted to EUR 501 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 2018


31 12 2017




Outstanding commitments not yet expensed



0




88




1 650 




8 009 




9 071 




8 508 






Total




0




88




1 650 




8 009 




9 071 




8 508 





At 31 December 2018 the budgetary RAL totalled EUR 10 616 million (2017: EUR 9 745 million)
4 2 2   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) In doing so it triggered Article 50 of the Treaty on European Union, which sets out the procedure for a Member State to withdraw from the Union

The negotiation process

On 19 March 2018 the Commission published a draft of the Withdrawal Agreement that outlined the progress made in the negotiations In the financial settlement part of the Withdrawal Agreement, the EU and the UK translated the progress achieved in the first phase of negotiations into a legal text
A Joint Report was published on 14 November 2018 reporting agreement at negotiators’ level on the full text of the draft Withdrawal Agreement, and on an outline of the Political Declaration on the framework for the future relationship between the United Kingdom and the European Union On the same day, this updated and agreed draft Withdrawal Agreement was published, in which the UK agreed to pay all its obligations under the current Multiannual Financial Framework (MFF) and previous financial perspectives as if it were still a Member State, including its share of the Union’s liabilities and contingent liabilities The UK government approved the draft Withdrawal Agreement on the 14 November and the European Council endorsed it on 25 November 2018 On 11 January 2019, the Council (Article 50) approved the decision on the conclusion of the Withdrawal Agreement and sent it to the European Parliament for its consent On the request of the United Kingdom, in accordance with the procedure set in the Article 50 of the TFEU, on 21 March 2019 the European Council agreed to extend the UK’s departure date to 22 May 2019, provided the Withdrawal Agreement was approved by the House of Commons by 29 March 2019 at the latest and to the 12 April 2019 if it was not the case (European Council Decision (EU) 2019/476 (7) Subsequent to this, the House of Commons did not approve the Withdrawal Agreement by 29 March 2019 and so, again on the request of the United Kingdom, on 10 April 2019 the European Council agreed to an extension to the UK’s departure until 31 October 2019 (European Council Decision (EU) 2019/584 (8) The withdrawal should take place on the first day of the month following the completion of the ratification procedures or on 1 November 2019, whichever is the earliest The United Kingdom will remain a Member State until the new withdrawal date, with full rights and obligations in accordance with Article 50 TEU, and the United Kingdom has a right to revoke its notification at any time

With regard to the EDF

The 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
At the time of the signature of these accounts, and in the absence of ratification by the United Kingdom, the actual departure date and manner of the departure (with or without agreement) is not yet known Based on this current situation, there is no financial impact to be reported in the EDF financial statements as at 31 December 2018
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:






(a)


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.










(b)


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.










(c)


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 2018


31 12 2017




USD


GBP


DKK


SEK


EUR


Other


Total


USD


GBP


DKK


SEK


EUR


Other


Total





Financial assets



 


 


 


 


 


 


 


 


 


 


 


 


 


 




Receivables and recoverables



63



—



0



—



67




8




138




64



—


—


—



26




2




92





Cash and cash equivalents



1




0



—


—



386



—



387




4




0



—


—



344



—



347





Total



64




0




0



—



453




8




525




68




0



—


—



370




2




439






Financial liabilities



 


 


 


 


 


 


 


 


 


 


 


 


 


 




Non-current financial liabilities


—


—


—


—


(18)


—


(18)


—


—


—


—


(14)


—


(14)




Payables


(1)


—


—


—


(218)


(22)


(241)



0



—


—


—


(533)


(30)


(563)




Total



(1)



—


—


—



(236)




(22)




(259)




0



—


—


—



(547)




(30)




(577)






Total




63




0




0



—



217




(14)




267




68




0



—


—



(177)




(28)




(138)





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 reflects 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 (9), 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 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



138




121




12




5



—





Total at 31.12.2018




138




121




12




5



—




Exchange receivables and non-exchange recoverables



92




92




0



—


—





Total at 31.12.2017




92




92




0



—


—








Financial assets by risk category:












EUR millions




 


31 12 2018


31 12 2017




Receivables


Cash


Total


Receivables


Cash


Total




Counterparties with external credit rating


 


 


 


 


 


 




Prime and high grade



5




303




308




3




103




106





Upper medium grade


—



80




80




0




240




240





Lower medium grade


—



4




4




3




4




7





Non- investment grade


—



0




0




1




0




2







Total






5






387






391






7






347






354






Counterparties without external credit rating


 


 


 


 


 


 




Group 1 (debtors without defaults in the past)



133




0




134




86




0




86





Group 2 (debtors with defaults in the past)


—


—


—


—


—


—






Total






133






0






134






86






0






86







Total




138




387




525




92




347




440





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 20(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 calls for tender 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



241




7




11




259






Total at 31.12.2018





241






7






11






259






Financial liabilities



563




13




1




577






Total at 31.12.2017





563






13






1






577






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’s treasury and the relevant spending departments
In addition to the above, in the context of the EDF’s 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 the Bêkou- and 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 signature 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




 


2018


2017





ECONOMIC RESULT OF THE YEAR




(4 118 )




(3 818 )






Revenue



 


 




Entitlements not affecting the budget result


(1)


(7)




Entitlements established in current year but not yet collected


(11)


(3)




Entitlements established in previous years and collected in current year



11




29





Net effect of pre-financing



36




57





Accrued revenue (net)


(39)


(62)




Other


(1)


(2)





Expenses



 


 




Expenses of the current year not yet paid



115




19





Expenses of previous years paid in the current year


(366)


(60)




Net effect of pre-financing


(179)


(685)




Accrued expenses (net)



484




373






BUDGET RESULT OF THE YEAR




(4 069 )




(4 158 )





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


FINAL ANNUAL ACCOUNTS OF THE BÊKOU EU TRUST FUND 2018 (10)


BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND


General background on Union Trust Funds

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (11) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (12), the European Commission may establish Union trust funds for external actions (‘Union trust funds’) The Union trust funds are constituted under an agreement concluded with other donors for emergency and post-emergency actions necessary to react to a crisis, or for thematic actions
Union trust funds are established by the European Commission with a decission after consulting or approval of the European Parliament and the Council This decission includes the constitutive agreement with other donors
Union trust funds are only established and implemented subject to the following conditions:






—


there is added value of the Union intervention: the objectives of Union trust funds, in particular by reason of their scale or potential effects, may be better achieved at Union level than at national level and the use of the existing financing instruments would not be sufficient to achieve policy objectives of the Union;










—


Union trust funds bring clear political visibility for the Union and managerial advantages as well as better control by the Union of risks and disbursements of the Union and other donors’ contributions;










—


Union trust funds do not duplicate other existing funding channels or similar instruments without providing any additionality;










—


the objectives of Union trust funds are aligned with the objectives of the Union instrument or budgetary item from which they are funded




A board chaired by the Commission is established for each Union trust fund to ensure a fair representation of the donors and to decide upon the use of the funds The board includes a representative of each non-contributing Member State as an observer The rules for the composition of the board and its internal rules shall be laid down in the constitutive agreement of the Union trust fund
Union trust funds are established for a limited duration as determined in their constitutive agreement That duration may be extended upon request of the board of the Union trust fund and upon presentation by the Commission of a report justifying the extension 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
The accounting officer of the Commission serves as the accounting officer of the Union trust funds The accounting officer is responsible for laying down accounting procedures and chart of accounts common to all Union trust funds The Commission’s internal auditor, OLAF and the Court of Auditors exercise the same powers over Union trust funds as they do in respect of other actions carried out by the Commission The Union trust funds are also subject to an independent external audit every year

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 Bêkou EU Trust Fund (Bêkou EUTF) aims to ensure access to basic services, support economic recovery and job creation, and promote social cohesion and reconciliation Since its creation, the Bêkou EUTF has adopted 16 programmes and has reached more than 2 million beneficiaries
Despite the existence of a democratically elected government and its efforts to return to stability, the security situation in the CAR remains volatile It is in this complex and fragile context, where the Bêkou EUTF takes full advantage of its comparative advantages of flexibility and adaptability to changing circumstances Additionally, the Bêkou EUTF remains the only instrument building resilience for both the population and the state, in a true Linking Relief Rehabilitation and Development (LRRD) approach
Given the current situation in CAR and in view of the expiration of the Bêkou EUTF in July 2019, in November 2018, the EUTF Board formally requested an extension of 18 months, thus bringing the total duration of the Bêkou EUTF from 60 months to 78 months The official procedure, which includes a consultation of the European Parliament and the Council, was launched in December 2018
The operational highlights of the 2018 are the following:






—


The Bêkou EUTF adopted a new action for a total amount of EUR 35 million in the sector of health and increased by EUR 2 million each the budget of two already adopted actions in the sectors of economic recovery and promotion of social cohesion, dialogue and reconciliation










—


The Bêkou EUTF Results Framework was adopted, responding to the Court of Auditors’ recommendation on the identification of SMART objectives at a EUTF level This strategic tool will better demonstrate the overall results of the Bêkou EUTF actions










—


The Bêkou EUTF projects were marked by the relative stability in the north-eastern and south-western parts of the country that called for additional interventions, the localised conflicts in Bangui and the hinterland, as well as the redeployment of public officials outside Bangui




On the financial side, by the end of 2018, pledges by EUTF contributors amounted to more than EUR 242 million This is an increase of EUR 6 million compared to 2017 Only EUR 5 million out of these EUR 242 million remain to be certified
In terms of contracts, the Bêkou EUTF signed 30 new contracts in 2018 for a total amount of nearly EUR 80 million (representing 48 % of the total amount contracted since its creation) They contribute to the implementation of its programmes in the sectors of health, economic recovery, rural resilience and job creation, water and sanitation, reconciliation and opening-up of regions
Last but not least, more than EUR 57 million (representing nearly 50 % of the total amount paid since the creation of Bêkou EUTF) was paid in 2018 on top of payments made during previous years; total disbursements have nearly reached EUR 119 million since the creation of the Bêkou EUTF
In the financial statements, the impact of the above mentioned activities are most visible when looking at:






—


Pre-financing: an increase of kEUR 24 839 resulting from the high number of new contracts signed and advances paid out;










—


Cash and cash equivalents: a decrease of kEUR 26 017 is mainly caused by the increased payments of pre-financing, highlighted above;










—


Outstanding commitments not yet expensed: an increase from kEUR 25 310 to 54 645 kEUR due to the new contracts





BALANCE SHEET








EUR ‘000




 


31 12 2018


31 12 2017





NON-CURRENT ASSETS



 


 




Pre-financing



3 443 




686





 



3 443 




686






CURRENT ASSETS



 


 




Pre-financing



29 546 




7 465 





Exchange receivables and non-exchange recoverables



1 138 




877





Cash and cash equivalents



13 926 




39 943 





 



44 611 




48 285 







TOTAL ASSETS






48 054 






48 971 







NON-CURRENT LIABILITIES



 


 




Financial liabilities


(42 737 )


(44 720 )




 



(42 737 )




(44 720 )






CURRENT LIABILITIES



 


 




Payables


(918)


(716)




Accrued charges and deferred revenue


(4 399 )


(3 536 )




 



(5 317 )




(4 252 )







TOTAL LIABILITIES






(48 054 )






(48 971 )







NET ASSETS



—


—





FUNDS & RESERVES



 


 




Accumulated surplus


—


—




Economic result of the year


—


—






NET ASSETS




—


—





STATEMENT OF FINANCIAL PERFORMANCE








EUR ‘000




 


2018


2017





REVENUE



 


 





Revenue from non-exchange transactions



 


 




Revenue from donations



33 682 




29 620 





 



33 682 




29 620 






Revenue from exchange transactions



 


 




Financial revenue



1




1





 



1




1






Total Revenue




33 683 




29 621 






EXPENSES



 


 




Operating expenses


(32 825 )


(28 918 )




Other expenses


(858)


(703)





Total Expenses




(33 683 )




(29 621 )






ECONOMIC RESULT OF THE YEAR



—


—





CASHFLOW STATEMENT








EUR ‘000




 


2018


2017




Economic result of the year


—


—





Operating activities



 


 




(Increase)/decrease in pre-financing


(24 839 )



7 912 





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


(261)



578





Increase/(decrease) in financial liabilities


(1 982 )


(14 620 )




Increase/(decrease) in payables



202




716





Increase/(decrease) in accrued charges and deferred revenue



863




2 321 






NET CASHFLOW




(26 017 )




(3 092 )





Net increase/(decrease) in cash and cash equivalents


(26 017 )


(3 092 )




Cash and cash equivalents at the beginning of the year



39 943 




43 036 





Cash and cash equivalents at year-end



13 926 




39 943 






STATEMENT OF CHANGES IN NET ASSETS









EUR ‘000




 


Accumulated surplus/
(deficit)


Economic result of the year


Net assets





BALANCE AS AT 31.12.2017



—


—


—




Economic result of the year


—


—


—





BALANCE AS AT 31.12.2018



—


—


—





FINAL ANNUAL ACCOUNTS OF THE EUTF AFRICA 2018 (13)


BACKGROUND INFORMATION ON THE EUTF FOR AFRICA


General background on Union Trust Funds

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (14) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (15), the European Commission may establish Union trust funds for external actions (‘Union trust funds’) The Union trust funds are constituted under an agreement concluded with other donors for emergency and post-emergency actions necessary to react to a crisis, or for thematic actions
Union trust funds are established by the European Commission with a decission after consulting or approval of the European Parliament and the Council This decission includes the constitutive agreement with other donors
Union trust funds are only established and implemented subject to the following conditions:






—


there is added value of the Union intervention: the objectives of Union trust funds, in particular by reason of their scale or potential effects, may be better achieved at Union level than at national level and the use of the existing financing instruments would not be sufficient to achieve policy objectives of the Union;










—


Union trust funds bring clear political visibility for the Union and managerial advantages as well as better control by the Union of risks and disbursements of the Union and other donors’ contributions;










—


Union trust funds do not duplicate other existing funding channels or similar instruments without providing any additionality;










—


the objectives of Union trust funds are aligned with the objectives of the Union instrument or budgetary item from which they are funded




A board chaired by the Commission is established for each Union trust fund to ensure a fair representation of the donors and to decide upon the use of the funds The board includes a representative of each non-contributing Member State as an observer The rules for the composition of the board and its internal rules shall be laid down in the constitutive agreement of the Union trust fund
Union trust funds are established for a limited duration as determined in their constitutive agreement That duration may be extended upon request of the board of the Union trust fund and upon presentation by the Commission of a report justifying the extension 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
The accounting officer of the Commission serves as the accounting officer of the Union trust funds The accounting officer is responsible for laying down accounting procedures and chart of accounts common to all Union trust funds The Commission’s internal auditor, OLAF and the Court of Auditors exercise the same powers over Union trust funds as they do in respect of other actions carried out by the Commission The Union trust funds are also subject to an independent external audit every year

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 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 projects 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 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 which is the responsibility of 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 2018, resources pledged to the EUTF Africa amounted to approximately EUR 4,2 billion This includes around EUR 3,7 billion from the European Development Fund (EDF) and EU financial instruments including the Development Cooperation Instrument (DCI), the European Neighbourhood Instrument (ENI), the Asylum, Migration and Integration Fund (AMIF) and funding from the Directorate-General for European Civil Protection and Humanitarian Aid Operations (DG ECHO), as well as EUR 489,5 million from EU Member States and other donors (Switzerland and Norway)
In the course of 2018, the overall resources of the EUTF Africa increased by EUR 902 million, including new pledges of EUR 674 million from the EDF and EUR 117 million from EU Budget The EUTF Africa received 24 new pledges from EU Member States and other donors amounting to EUR 110 million (EUR 49 million to the Sahel and Lake Chad window, EUR 47 million to the North of Africa window and EUR 14 million to the Horn of Africa window) All pledges from EU Member States and other donors made in 2018 plus an outstanding pledge of 2017 were certified by the end of 2018 The conclusions of the European Council of 28 June 2018 called on the EU and its Member States to provide additional funding to the EUTF Africa As a follow-up, the Commission adopted on 6 July a decision to transfer EUR 500 million from the 11th EDF reserve
With regards the state of implementation of the EUTF Africa in the year 2018, 45 new programmes were adopted as well as 13 top-ups across the three regions including cross-window programmes (16 in the Sahel/Lake Chad, 26 in the Horn of Africa and 9 in the North of Africa and 7 cross-window) This brings, as of the end of 2018, the total number of programmes approved by Operational committees to 187 for a total of EUR 3 590 million As of the end of 2018, contracts signed with implementing partners have reached 366, for an overall amount of EUR 2 461 million, of which 949,3 million in new operational contracts for 2018 only Modifications to old contracts bring the total operational contracted amount in 2018 to 959,9 million The contracting rate as of the end of 2018 has improved compared to the contracting rate as of the end of 2017 (69 % of signed contracts over approved funding as opposed to 62,9 %)
In the course of 2018, the EUTF Africa has further intensified its efforts together with its African and European partners, to foster stability and contribute to improved migration management in the Sahel and Lake Chad, the Horn of Africa and the North of Africa regions It continued addressing the root causes of destabilization, forced displacement and irregular migration, by promoting development and security During its third year, the EUTF Africa has further demonstrated its added-value as a swift and effective implementation tool which facilitates political dialogue with partner countries, applies innovative approaches and produces concrete results by pooling together funding and expertise from a variety of stakeholders
Through the EUTF Africa, over 5,3 million vulnerable people benefitted from basic services and food security and nutrition programmes Over 150 000 people were reached by information campaigns on resilience-building practices and basic rights and 96 000 migrants, or potential migrants, were reached out by information campaign on migration and risks linked to irregular migration Through the EU-IOM Initiative, the EUTF Africa has supported 42 628 vulnerable migrants voluntary returns mostly from Libya (18 329) and Niger (17 226), and more than 58 000 vulnerable migrants were assisted upon return to their country of origin Through the Better Migration Management programme in the Horn of Africa alone, the EUTF Africa has already assisted almost 11 000 migrants and forcibly displaced people and has trained nearly 1 600 persons on migration management
In the financial statements, the impact of this increased activity and new contracts is most visible when looking at:






—


Pre-financing: increased by kEUR 57 110 as advances on the new contracts were paid out;










—


Payables and accrued charges: increased by kEUR 81 753 as more cost claims are processed but also more expenses must be accrued for;










—


Expenses: increased from kEUR 279 299 in 2017 to kEUR 576 808 in 2018 as the Trust Fund is in its third year of existence and many more contracts are being implemented;










—


Outstanding commitments not yet expensed increased from kEUR 926 139 to kEUR 1 310 069 due to the new contracts





BALANCE SHEET








EUR ‘000




 


31 12 2018


31 12 2017





NON-CURRENT ASSETS



 


 




Pre-financing



34 144 




52 990 





 



34 144 




52 990 






CURRENT ASSETS



 


 




Pre-financing



273 214 




197 258 





Exchange receivables and non-exchange recoverables



16 656 




3 020 





Cash and cash equivalents



146 864 




162 571 





 



436 734 




362 849 







TOTAL ASSETS






470 878 






415 838 







NON-CURRENT LIABILITIES



 


 




Financial liabilities


(369 999 )


(396 713 )




 



(369 999 )




(396 713 )






CURRENT LIABILITIES



 


 




Payables


(12 733 )


(526)




Accrued charges and deferred revenue


(88 146 )


(18 600 )




 



(100 879 )




(19 126 )







TOTAL LIABILITIES






(470 878 )






(415 838 )







NET ASSETS



—


—





FUNDS & RESERVES



 


 




Accumulated surplus


—


—




Economic result of the year


—


—






NET ASSETS




—


—





STATEMENT OF FINANCIAL PERFORMANCE








EUR ‘000




 


2018


2017





REVENUE



 


 





Revenue from non-exchange transactions



 


 




Revenue from donations



576 802 




279 027 





 



576 802 




279 027 






Revenue from exchange transactions



 


 




Financial revenue



2




2





Other exchange revenue



5




270





 



6




271






Total revenue




576 808 




279 299 






EXPENSES



 


 




Operating expenses


(561 761 )


(271 669 )




Other expenses


(15 047 )


(7 630 )





Total expenses




(576 808 )




(279 299 )







ECONOMIC RESULT OF THE YEAR




—


—





CASHFLOW STATEMENT








EUR ‘000




 


2018


2017




Economic result of the year


—


—





Operating activities



 


 




(Increase)/decrease in pre-financing


(57 110 )


(134 662 )




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


(13 636 )



6 456 





Increase/(decrease) in financial liabilities


(26 713 )



258 211 





Increase/(decrease) in payables



12 207 



(177)




Increase/(decrease) in accrued charges and deferred revenue



69 546 




17 864 






NET CASHFLOW




(15 706 )




147 691 





Net increase/(decrease) in cash and cash equivalents


(15 706 )



147 691 





Cash and cash equivalents at the beginning of the year



162 571 




14 879 





Cash and cash equivalents at year-end



146 864 




162 571 






STATEMENT OF CHANGES IN NET ASSETS









EUR ‘000




 


Accumulated surplus/
(deficit)


Economic result of the year


Net assets





BALANCE AS AT 31.12.2017



—


—


—




Economic result of the year


—


—


—





BALANCE AS AT 31.12.2018



—


—


—





CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS (16)


CONSOLIDATED BALANCE SHEET








EUR millions




 


31 12 2018


31 12 2017





NON-CURRENT ASSETS



 


 




Pre-financing



924




636





 




924






636







CURRENT ASSETS



 


 




Pre-financing



1 751 




1 723 





Exchange receivables and non-exchange recoverables



156




96





Cash and cash equivalents



548




550





 



2 455 




2 369 






TOTAL ASSETS




3 379 




3 005 






NON-CURRENT LIABILITIES



 


 




Provisions


—


(4)




Financial liabilities


(229)


(292)




 




(229)






(296)







CURRENT LIABILITIES



 


 




Payables


(255)


(564)




Accrued charges and deferred income


(1 374 )


(755)




 



(1 629 )




(1 319 )






TOTAL LIABILITIES




(1 858 )




(1 615 )






NET ASSETS




1 521 




1 389 






FUNDS & RESERVES



 


 




Called fund capital - active EDFs



50 423 




46 173 





Called fund capital from closed EDFs carried forward



2 252 




2 252 





Economic result carried forward from previous years


(47 037 )


(43 219 )




Economic result of the year


(4 118 )


(3 818 )





NET ASSETS




1 521 




1 389 






CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE








EUR millions




 


2018


2017





REVENUE



 


 





Revenue from non-exchange transactions



 


 




Recovery activities



4




61





Revenue from trust funds donations



303




194





 




307






255







Revenue from exchange transactions



 


 




Financial revenue



10




4





Other revenue



46




22





 



57




26






Total Revenue




364




281






EXPENSES



 


 




Aid instruments


(3 747 )


(3 585 )




Expenses implemented by trust funds


(595)


(301)




Co-financing expenses



17



(42)




Finance costs



7



(8)




Other expenses


(164)


(162)





Total Expenses




(4 482 )




(4 099 )






ECONOMIC RESULT OF THE YEAR




(4 118 )




(3 818 )






CONSOLIDATED CASH FLOW STATEMENT








EUR milions




 


2018


2017




Economic result of the year


(4 118 )


(3 818 )





Operating activities



 


 




Capital increase - contributions



4 250 




3 850 





(Increase)/decrease in trust funds contributions


(0)


—




(Increase)/decrease in pre-financing


(317)


(446)




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


(60)



47





Increase/(decrease) in financial liabilities


(63)



186





Increase/(decrease) in payables


(309)



15





Increase/(decrease) in accrued charges and deferred income



618



(22)





NET CASHFLOW




(2)




(188)





Net increase/(decrease) in cash and cash equivalents


(2)


(188)




Cash and cash equivalents at the beginning of the year



550




738





Cash and cash equivalents at year-end



548




550






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 31.12.2016





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 





Capital increase - contributions


 


(4 250 )



4 250 



 


 



4 250 





Economic result of the year


 


 


—


(4 118 )


 


(4 118 )






BALANCE AS AT 31.12.2018





73 264 




22 840 




50 423 




(51 155 )




2 252 




1 521 






EDF REPORT ON FINANCIAL IMPLEMENTATION


INTRODUCTORY NOTE

1   Previous 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 and to ensure transparency in the presentation of the accounts, 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
In 2018 the Commission launched a special exercise for the closure of the remaining contracts under the eighth and ninth EDF A final report on the financial implementation of the eighth EDF should be available by the end of 2019 (and on the ninth EDF by the end of 2020)
2   11th 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 Council Decision 2001/822/EC of 27 November 2001 on the association of the overseas countries and territories (OCT) with the European Union (17) entered into force on 2 December 2001 This Decision was amended on 19 March 2007 (Decision 2007/249/EC (18)

The Internal Agreement on the financing of Community 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 Community in August 2013, entered into force in March 2015
Under the Cotonou Agreement, the third period (2014-2020) of Community aid to the ACP States and OCTs is 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 EUR 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





Remaining funds on non-mobilisable performance reserves at 31 December 2018

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 2018, 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 (EU) 2016/1337 (19), an amount of decommitted funds from the 10th EDF has been 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






EUR millions




Total available on non-mobilisable performance reserves


31 12 2018




Non-mobilisable reserve from decommitted funds under the eight and ninth EDF


157




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


318





Total




475






EDF Co-financing

Under the 10th and 11th EDF, transfer agreements for co-financing projects were signed and commitment appropriations were opened for an amount of EUR 241,9 million, while payment appropriations were opened for the cashed amounts totalling EUR 230,2 million
The situation of co-financing appropriations at 31 December 2018 is shown in the table below:







EUR millions




 


Commitments appropriations


Payment appropriations




Co-financing - A Envelope


211,5 


200,0 




Co-financing - Intra ACP


23,3 


23,2 




Co-financing – Administrative expenses


7 1


7,0 




 



241,9 




230,2 





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


8th EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2018


ANALYSIS OF CREDITS PER INSTRUMENT












 


INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2017


INCREASE OR DECREASE IN RESOURCES IN 2018


Notes


CURRENT LEVEL APPROPRIATION




ACP



Lomé



 


 


 


 


 






Regular MS Contributions






12 967 






(3 278 )






(7)




 




9 683 






Aid for refugees


120


(20)


—



 (20)



100




Emergency aid (Lomé)


140


(4)


 


 


136




Heavily indebted poor countries (Lomé)


—


1 060 


 


 


1 060 




Interest-rate subsidies


370


(301)


 


 


69




Risk capital


1 000 


15


(3)



 (20)



1 012 




Stabex


1 800 


(1 077 )


 


 


723




Structural adjustment


1 400 


97


 


 


1 497 




Sysmin


575


(474)


 


 


101




Total indicative programmes


7 562 


(2 608 )


(3)



 (20)



4 951 




Utilisation of interest income


—


35


 


 


35





Cotonou



 


 


 


 


 






Regular MS Contributions




—




650




 


 




650






A Envelope - National Allocations


—


417


 


 


417




B Envelope - National Allocations


—


233


 


 


233




Interests and other receipts


—


—


 


 


—




 


 


 


 


 


 





SUB TOTAL ACP




12 967 




(2 628 )




(7)



 



10 333 





OCT



Lomé



 


 


 


 


 






Regular MS Contributions




—




46




 


 




46






Interest-rate subsidies


—


1


 


 


1




Risk capital


—


6


 


 


6




Stabex


—


1


 


 


1




Sysmin


—


2


 


 


2




Total indicative programmes


—


35


 


 


35




 


 


 


 


 


 





SUB TOTAL OCT



—



46



 


 



46





 



TOTAL 8th EDF




12 967 




(2 582 )




(7)



 



10 379 









Table 1.2


9th EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2018


ANALYSIS OF CREDITS PER INSTRUMENT












EUR million




 


INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2017


INCREASE OR DECREASE IN RESOURCES IN 2018


Notes


CURRENT LEVEL APPROPRIATION




ACP



Lomé



 


 


 


 


 






Regular MS Contributions




—




669





 (22)



 




668






Transfers from 6th EDF - Lomé


—


20


—



 (21)



20




Transfers from 7th EDF - Lomé


—


649



 (22)




 (21)



647





Cotonou



 


 


 


 


 






Regular MS Contributions






8 919 






5 549 






(36)




 




14 433 






A Envelope - National Allocations


5 318 


3 306 


(16)



 (21)



8 608 




B Envelope - National Allocations


2 108 


(898)



 (22)




 (21)



1 208 




CDE, CTA and Parliamentary Assembly


164


(10)


 


 


154




Implementation costs


125


52


 


 


177




Interests and other receipts


—


63


 


 


63




Other Intra-ACP allocations


300


2 302 


(13)



 (21)



2 589 




Peace facility


—


354


—



 (21)



353




Regional allocations


904


(139)


(5)



 (21)



759




Special allocation R.D Congo


—


105


 


 


105




Special allocation South Sudan


—


267


 



 (23)



267




Special allocation Sudan


—


110


 



 (22)



110




Voluntary contribution Peace facility


—


39


 


 


39





SUB TOTAL ACP




8 919 




6 219 




(38)



 



15 100 





OCT



Lomé



 


 


 


 


 






Regular MS Contributions




—




3




 


 




3






Transfers from 6th EDF - Lomé


—


—


 


 


—




Transfers from 7th EDF - Lomé


—


3


 


 


3





Cotonou



 


 


 


 


 






Regular MS Contributions




—




289





 (22)



 




287






A Envelope - National Allocations


—


237


—



 (21)



237




OCT


B Envelope - National Allocations


—


4


 


 


4




Regional allocations


—


47



 (22)




 (21)



45




Studies / Technical assistance OCT


—


1


 


 


1





SUB TOTAL OCT



—



292




 (22)



 



290





 



TOTAL 9th EDF




8 919 




6 511 




(40)



 



15 390 









Table 1.3


10th EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2018


ANALYSIS OF CREDITS PER INSTRUMENT












 


INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2017


INCREASE OR DECREASE IN RESOURCES IN 2018


Notes


CURRENT LEVEL APPROPRIATION




ACP




Regular MS Contributions






20 896 






(87)






(65)




 




20 744 






A Envelope - National Allocations


—


13 100 


(177)



 (25)



12 922 




A Envelope reserve


13 500 


(13 500 )


 


 


—




B Envelope - National Allocations


—


2 004 


(4)



 (25)



2 000 




B Envelope reserve


1 800 


(1 800 )


 


 


—




Implementation costs


430


15


—



 (25)



445




Institutional and support expenditure


—


232



 (24)




 (25)



230




Interests and other receipts


—


85



 (24)




 (25)



85




Intra-ACP Reserve


2 700 


(2 700 )


 


 


—




National allocations Reserve A Envelope STABEX


—


—


 


 


—




NIP/RIP reserve


683


(683)


 


 


—




Non-mobilisable reserve


—


86


45



 (25)



131




Other Intra-ACP allocations


—


1 886 


(18)



 (25)



1 868 




Peace facility


—


1 014 


105


 


1 119 




Regional allocations


—


1 956 


(14)



 (25)



1 942 




Regional allocations reserve


1 783 


(1 783 )


 


 


—






Co-financing




—




204




—


 




204






A Envelope - National Allocations


—


187


—



 (26)



187




Implementation costs


—


5


—



 (26)



5




Other Intra-ACP allocations


—


12


 



 (26)



12




Peace facility


—


1


 



 (26)



1





SUB TOTAL ACP




20 896 




117




(65)



 



20 948 





OCT




Regular MS Contributions




—




275




—


 




275






A Envelope - National Allocations


—


192



 (25)




 (25)



190




A Envelope reserve


—


—


 


 


—




B Envelope - National Allocations


—


15


 


 


15




B Envelope reserve


—


—


 


 


—




National allocations Reserve A Envelope STABEX


—


—


 


 


—




Non-mobilisable reserve


—


23


2



 (25)



25




Regional allocations


—


40


 


 


40




OCT


Regional allocations reserve


—


—


 


 


—




Studies / Technical assistance OCT


—


5


 


 


5





SUB TOTAL OCT



—



275



—


 



275





 



TOTAL 10th EDF




20 896 




392




(65)



 



21 223 









Table 1.4


11th EDF


EVOLUTION OF APPROPRIATIONS: 31 December 2018


ANALYSIS OF CREDITS PER INSTRUMENT












EUR million




 


INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2017


INCREASE OR DECREASE IN RESOURCES IN 2018


Notes


CURRENT LEVEL APPROPRIATION




ACP




Regular MS Contributions






29 008 






224






110




 




29 342 






A Envelope - National Allocations


—


15 540 


(121)


 


15 419 




B Envelope - National Allocations


—


715


2


 


717




B Envelope reserve


—


—


 


 


—




Implementation costs


1 053 


—


 


 


1 053 




Institutional and support expenditure


—


246


 


 


246




Interests and other receipts


—


16


—


 


16




Intra-ACP Reserve


3 590 


(3 497 )


(24)


 


69




National allocations Reserve A Envelope STABEX


—


—


 


 


—




NIP/RIP reserve


24 365 


(22 014 )


(1 080 )


 


1 270 




Non-mobilisable reserve


—


201


110



 (27)



311




Other Intra-ACP allocations


—


2 251 


449


 


2 700 




Peace facility


—


1 000 


 


 


1 000 




Regional allocations


—


5 766 


775


 


6 541 






Co-financing




—




24






13




 




38






A Envelope - National Allocations


—


22


1


 


23




Implementation costs


—


1


1


 


2




Peace facility


—


1


10


 


11




Regional allocations


—


—


2


 


2






EC Internal SLA




—




1




 


 




1






A Envelope - National Allocations


—


1


 


 


1





SUB TOTAL ACP




29 008 




249



 


 



29 381 





OCT




Regular MS Contributions




—




358






(9)




 




350






A Envelope - National Allocations


—


183


13


 


196




B Envelope - National Allocations


—


—


8


 


8




NIP/RIP reserve


—


165


(116)


 


49




Non-mobilisable reserve


—


5


2



 (27)



7




OCT


Regional allocations


—


1


80


 


81




Studies / Technical assistance OCT


—


5


4


 


9






Co-financing




—


—


 


 


—




A Envelope - National Allocations


—


—


 


 


—






EC Internal SLA




—


—


 


 


—




A Envelope - National Allocations


—


—


 


 


—





SUB TOTAL OCT



—



358



 


 



350







Regular MS Contributions




—




6






11




 




17






A Envelope - National Allocations


—


6


4


 


10




B Envelope - National Allocations


—


—


7


 


7





SUB TOTAL



—



6



 


 



17





 



TOTAL 11th EDF



29 008 


614


126


 


29 747 





Table 2.1


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2018


PROGRESS REPORT












 


 


EUR million




 


ALLOCATION


EDF




8


9


10


11


TOTAL





Lomé



Sundry Income


35


 


 


 


35




Total indicative programmes


4 986 


 


 


 


4 986 




Total Non-Programmable Aid


4 707 


 


 


 


4 707 




Transfers from other funds


 


671


 


 


671





SUB TOTAL: REGULAR MS CONTRIBUTIONS



9 728 


671


 


 


10 399 





Cotonou



A Envelope - National Allocations


417


8 845 


13 113 


15 625 


38 000 




B Envelope - National Allocations


233


1 213 


2 015 


732


4 193 




Bridging facility


 


 


 


—


—




CDE, CTA and Parliamentary Assembly


 


154


 


 


154




Country reserve


 


 


—


—


—




Implementation Costs and Interests Revenues


—


240


535


1 077 


1 853 




Intra-ACP allocations


 


2 942 


3 218 


3 946 


10 106 




Intra-ACP Reserve


 


 


—


69


69




National allocations Reserve A Envelope STABEX


 


 


—


—


—




NIP/RIP reserve


 


 


—


1 320 


1 320 




Non-mobilisable reserve


 


 


156


318


475




Regional allocations


 


804


1 982 


6 622 


9 408 




Regional allocations reserve


 


 


—


 


—




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


14 719 


21 019 


29 709 


66 097 




A Envelope - National Allocations


 


 


 


1


1





SUB TOTAL: EC INTERNAL SLA



 


 


 


1


1




A Envelope - National Allocations


 


 


187


23


210




Implementation Costs and Interests Revenues


 


 


5


2


7




Intra-ACP allocations


 


 


12


11


23




Regional allocations


 


 


 


2


2





SUB TOTAL: CO-FINANCING



 


 


204


38


242




 



TOTAL



10 379 


15 390 


21 223 


29 747 


76 739 


























 


EDF


Aggregate Total


Cummulative Figures


Annual Figures




At 31/12/2018


% of allocation


2008


2009


2010


2011


2012


2013


2014


2015


2016


2017


2018





Decisions



8


10 377 


100 %


10 786 


(42)


(45)


(60)


(64)


(98)


(63)


(12)


(13)


(9)


(4)




 


9


15 357 


100 %


16 633 


(54)


(116)


(9)


(297)


(72)


(381)


(170)


(104)


(38)


(33)




 


10


20 905 


99 %


4 766 


3 501 


2 349 


3 118 


3 524 


4 131 


(95)


(156)


(80)


(5)


(147)




 


11


23 359 


79 %


 


 


 


 


 


 


1 160 


5 372 


6 688 


5 807 


4 332 





Total



 



69 998 



 



32 185 




3 405 




2 187 




3 049 




3 163 




3 961 




621




5 034 




6 491 




5 754 




4 147 






Assigned Funds



8


10 375 


100 %


10 541 


(42)


8


(13)


(46)


(11)


(37)


(16)


(6)


(3)


—




9


15 305 


99 %


14 209 


997


476


9


(187)


(96)


(1)


(52)


(46)


(20)


16




 


10


20 361 


96 %


130


3 184 


2 820 


2 514 


3 460 


3 457 


2 687 


783


541


550


236




 


11


18 140 


61 %


 


 


 


 


 


 


731


3 293 


3 745 


5 684 


4 687 





Total



 



64 182 



 



24 881 




4 140 




3 304 




2 509 




3 226 




3 350 




3 380 




4 008 




4 234 




6 211 




4 940 






Payments



8


10 375 


100 %


9 930 


152


158


90


15


18


16


(3)


—


(1)


—




 


9


15 187 


99 %


10 011 


1 806 


1 304 


906


539


231


145


43


68


111


23




 


10


18 829 


89 %


90


1 111 


1 772 


1 879 


2 655 


2 718 


2 760 


2 024 


1 466 


1 277 


1 076 




 


11


9 175 


31 %


 


 


 


 


 


 


595


1 024 


1 816 


2 770 


2 970 





Total



 



53 566 



 



20 031 




3 069 




3 233 




2 874 




3 209 




2 967 




3 516 




3 088 




3 350 




4 158 




4 069 





* Negative figures represent decommitments





Table 2.2


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2018


CLASS OF AID

















EUR million




 


EDF




8


%


9


%


10


%


11


%


TOTAL


%




 



 (28)




 (28)




 (28)




 (28)




 (28)






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


4 986 


 


 


 


 


 


 


 


4 986 


 




Decisions


4 986 


100 %


 


 


 


 


 


 


4 986 


100 %




Assigned funds


4 986 


100 %


 


 


 


 


 


 


4 986 


100 %




Payments


4 985 


100 %


 


 


 


 


 


 


4 985 


100 %





Total Non-Programmable Aid



 


 


 


 


 


 


 


 


 


 




Appropriations


4 707 


 


 


 


 


 


 


 


4 707 


 




Decisions


4 706 


100 %


 


 


 


 


 


 


4 706 


100 %




Assigned funds


4 706 


100 %


 


 


 


 


 


 


4 706 


100 %




Payments


4 706 


100 %


 


 


 


 


 


 


4 706 


100 %





Transfers from other funds



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


671


 


 


 


 


 


671


 




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


 


8 845 


 


13 113 


 


15 625 


 


38 000 


 




Decisions


417


100 %


8 837 


100 %


13 009 


99 %


12 822 


82 %


35 085 


92 %




Assigned funds


417


100 %


8 825 


100 %


12 663 


97 %


9 387 


60 %


31 292 


82 %




Payments


417


100 %


8 799 


99 %


11 712 


89 %


4 549 


29 %


25 478 


67 %





B Envelope - National Allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


233


 


1 213 


 


2 015 


 


732


 


4 193 


 




Decisions


233


100 %


1 213 


100 %


2 010 


100 %


707


97 %


4 162 


99 %




Assigned funds


231


99 %


1 209 


100 %


1 990 


99 %


704


96 %


4 134 


99 %




Payments


231


99 %


1 203 


99 %


1 952 


97 %


607


83 %


3 992 


95 %





Cotonou




Bridging facility



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


 


 


—


 


—


 




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


—


 


240


 


535


 


1 077 


 


1 853 


 




Decisions


 


 


240


100 %


510


95 %


715


66 %


1 464 


79 %




Assigned funds


 


 


240


100 %


508


95 %


658


61 %


1 405 


76 %




Payments


 


 


240


100 %


507


95 %


613


57 %


1 359 


73 %





Intra-ACP allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


2 942 


 


3 218 


 


3 946 


 


10 106 


 




Decisions


 


 


2 940 


100 %


3 212 


100 %


3 249 


82 %


9 401 


93 %




Assigned funds


 


 


2 931 


100 %


3 151 


98 %


2 391 


61 %


8 473 


84 %




Payments


 


 


2 922 


99 %


2 916 


91 %


1 843 


47 %


7 681 


76 %





Regional allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


804


 


1 982 


 


6 622 


 


9 408 


 




Decisions


 


 


801


100 %


1 965 


99 %


5 840 


88 %


8 605 


91 %




Assigned funds


 


 


789


98 %


1 855 


94 %


4 977 


75 %


7 622 


81 %




Payments


 


 


773


96 %


1 587 


80 %


1 561 


24 %


3 921 


42 %





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


 


 


253


95 %


 


 


 


 


253


95 %




Payments


 


 


200


75 %


 


 


 


 


200


75 %





Cotonou




Special allocation Sudan



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


110


 


 


 


 


 


110


 




Decisions


 


 


107


97 %


 


 


 


 


107


97 %




Assigned funds


 


 


105


95 %


 


 


 


 


105


95 %




Payments


 


 


97


88 %


 


 


 


 


97


88 %





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


 


23


 


210


 




Decisions


 


 


 


 


183


98 %


20


89 %


203


97 %




Assigned funds


 


 


 


 


179


95 %


20


89 %


199


95 %




Payments


 


 


 


 


143


76 %


1


5 %


144


69 %





Implementation Costs and Interests Revenues



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


5


 


2


 


7


 




Decisions


 


 


 


 


5


100 %


1


70 %


7


92 %




Assigned funds


 


 


 


 


3


62 %


 


 


3


46 %




Payments


 


 


 


 


2


40 %


 


 


2


29 %





Intra-ACP allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


12


 


11


 


23


 




Decisions


 


 


 


 


11


92 %


2


16 %


13


56 %




Assigned funds


 


 


 


 


11


91 %


2


16 %


13


55 %




Payments


 


 


 


 


11


89 %


1


11 %


12


52 %





Regional allocations



 


 


 


 


 


 


 


 


 


 




Appropriations


 


 


 


 


 


 


2


 


2


 




Decisions


 


 


 


 


 


 


2


100 %


2


100 %




Assigned funds


 


 


 


 


 


 


2


100 %


2


100 %




Payments


 


 


 


 


 


 


 


 


 


 





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


%




 



 (28)




 (28)




 (28)




 (28)




 (28)






Cotonou



Country reserve


 


 


 


 


—


 


—


 


—


 




Intra-ACP Reserve


 


 


 


 


—


 



69



 



69



 




National allocations Reserve A Envelope STABEX


 


 


 


 


—


 


—


 


—


 




NIP/RIP reserve


 


 


 


 


—


 



1 320 



 



1 320 



 




Regional allocations reserve


 


 


 


 


—


 


 


 


—


 





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


 


 


 


 



156



 



318



 



475



 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 




 


 


8


%


9


%


10


%


11


%


TOTAL


%




 



 (28)




 (28)




 (28)




 (28)




 (28)





Appropriations


10 379 


 


15 390 


 


21 223 


 


29 747 


 


76 739 


 




Decisions


10 377 


100 %


15 357 


100 %


20 905 


99 %


23 359 


79 %


69 998 


91 %




Assigned funds


10 375 


100 %


15 305 


99 %


20 361 


96 %


18 140 


61 %


64 182 


84 %




Payments


10 375 


100 %


15 187 


99 %


18 829 


89 %


9 175 


31 %


53 566 


70 %





TOTAL: ALL ALLOCATIONS



 


 


 


 


 


 


 


 


 


 





Table 2.3


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2018


CLASS OF AID


ACP + PTOM - 8 th EDF

















EUR million




 


 


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


4 951 


4 951 


(1)


100 %


4 950 


—


100 %


4 950 


—


100 %





SUB TOTAL: TOTAL INDICATIVE PROGRAMMES




4 951 




4 951 




(1)




100 %




4 950 



—



100 %




4 950 



—



100 %





Aid for refugees


100


100


 


100 %


100


 


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


 


100 %


68


 


100 %


68


 


100 %




Risk capital


1 012 


1 012 


(3)


100 %


1 012 


 


100 %


1 012 


 


100 %




Stabex


723


723


—


100 %


722


 


100 %


722


 


100 %




Structural adjustment


1 497 


1 497 


—


100 %


1 497 


 


100 %


1 497 


 


100 %




Sysmin


101


101


 


100 %


101


 


100 %


101


 


100 %





SUB TOTAL: TOTAL NON-PROGRAMMABLE AID




4 697 




4 696 




(3)




100 %




4 695 



 



100 %




4 695 



 



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


—


 


231


—


99 %


231


—


100 %





SUB TOTAL: B ENVELOPE - NATIONAL ALLOCATIONS




233




233



—



100 %




231



—



99 %




231



—



100 %





Interests and other receipts


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES



—


 


 


 


 


 


 


 


 


 




 



TOTAL ACP (A)




10 333 




10 332 




(4)




100 %




10 330 



—



100 %




10 329 



—



100 %






Lomé




OCT



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




Total indicative programmes


35


35


 


100 %


35


 


100 %


35


 


100 %





SUB TOTAL: TOTAL INDICATIVE PROGRAMMES




35




35



 



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 OCT




46




46



 



100 %




46



 



100 %




46



 



100 %






TOTAL: ACP+OCT (A+B)




10 379 




10 377 




(4)




100 %




10 375 



—



100 %




10 375 



—



100 %









Table 2.4


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2018


CLASS OF AID


ACP + PTOM - 9 th EDF

















EUR million




 


 


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


—


100 %


20


 


100 %


20


 


100 %




Transfers from 7th EDF - Lomé


647


647


—


100 %


647


 


100 %


647


 


100 %





SUB TOTAL: TRANSFERS FROM OTHER FUNDS




668




668



—



100 %




668



 



100 %




667



 



100 %






Cotonou




ACP



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


8 608 


8 600 


(15)


100 %


8 590 


(9)


100 %


8 565 


(1)


100 %





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




8 608 




8 600 




(15)




100 %




8 590 




(9)




100 %




8 565 




(1)




100 %





B Envelope - National Allocations


1 208 


 


 


 


 


 


 


 


 


 




Compensation export earnings


 


148


—


 


148


—


100 %


148


 


100 %




Emergency aid


 


1 049 


—


 


1 045 


—


100 %


1 040 


—


99 %




Heavily indebted poor countries


 


11


 


 


11


 


100 %


11


 


100 %





SUB TOTAL: B ENVELOPE - NATIONAL ALLOCATIONS




1 208 




1 208 



—



100 %




1 204 



—



100 %




1 198 



—



100 %





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 %






Cotonou



Implementation costs


177


177


(1)


100 %


177


—


100 %


177


 


100 %




Interests and other receipts


63


63


 


100 %


63


 


100 %


63


 


100 %





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




240




239




(1)




100 %




239



—



100 %




239



 



100 %





Other Intra-ACP allocations


2 589 


2 586 


(9)


100 %


2 577 


(7)


100 %


2 568 


1


100 %




Peace facility


353


353


—


100 %


353


 


100 %


353


 


100 %





SUB TOTAL: INTRA-ACP ALLOCATIONS




2 942 




2 940 




(9)




100 %




2 931 




(7)




100 %




2 922 




1




100 %





Regional allocations


759


756


(7)


100 %


745


(2)


99 %


729


(1)


98 %





SUB TOTAL: REGIONAL ALLOCATIONS




759




756




(7)




100 %




745




(2)




99 %




729




(1)




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


—


100 %


253


35


95 %


200


16


79 %





SUB TOTAL: SPECIAL ALLOCATION SOUTH SUDAN




267




266



—



100 %




253




35




95 %




200




16




79 %





Special allocation Sudan


110


107


(1)


97 %


105


—


98 %


97


8


93 %





SUB TOTAL: SPECIAL ALLOCATION SUDAN




110




107




(1)




97 %




105



—



98 %




97




8




93 %





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)




15 100 




15 067 




(33)




100 %




15 018 




17




100 %




14 900 




23




99 %






Lomé




OCT



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




Transfers from 6th EDF - Lomé


—


—


 


100 %


—


 


100 %


—


 


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




OCT



 


 


 


 


 


 


 


 


 


 





Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


237


237


 


100 %


235


 


99 %


235


 


100 %





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




237




237



 



100 %




235



 



99 %




235



 



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 OCT


1


1


 


100 %


1


 


100 %


1


 


100 %





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




1




1



 



100 %




1



 



100 %




1



 



100 %





Regional allocations


45


45


—


100 %


45


—


99 %


45


—


100 %





SUB TOTAL: REGIONAL ALLOCATIONS




45




45



—



100 %




45



—



99 %




45



—



100 %





 



TOTAL: OCT




290




290



—



100 %




288



—



99 %




288



—



100 %





 



TOTAL: ACP+OCT (A+B)




15 390 




15 357 




(33)




100 %




15 305 




16




100 %




15 187 




23




99 %









Table 2.5


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2018


CLASS OF AID


ACP + PTOM - 10 th EDF

















EUR million




 


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


12 922 


12 820 


(201)


99 %


12 482 


5


97 %


11 568 


586


93 %





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




12 922 




12 820 




(201)




99 %




12 482 




5




97 %




11 568 



 



586





B Envelope - National Allocations


2 000 


 


 


 


 


 


 


 


 


 




Compensation export earnings


 


203


(1)


 


200


2


99 %


190


 


8




Emergency aid


 


840


(4)


 


831


(5)


99 %


813


 


23




Heavily indebted poor countries


 


49


—


 


49


—


100 %


49


 


 




Other chocs with budgetary impact


 


904


(1)


 


896


(1)


99 %


886


 


4





SUB TOTAL: B ENVELOPE - NATIONAL ALLOCATIONS




2 000 




1 995 




(6)




100 %




1 976 




(4)




99 %




1 938 



 



34





Implementation costs


445


436


4


98 %


436


5


100 %


435


 


6




Interests and other receipts


85


68


—


80 %


67


—


98 %


67


 


—





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




530




504




4




95 %




503




5




100 %




502



 



6





Institutional and support expenditure


230


229


(3)


99 %


229


(1)


100 %


209


 


(2)




Other Intra-ACP allocations


1 868 


1 864 


(18)


100 %


1 823 


(4)


98 %


1 683 


 


73




Peace facility


1 119 


1 119 


105


100 %


1 099 


227


98 %


1 023 


 


209





SUB TOTAL: INTRA-ACP ALLOCATIONS




3 218 




3 212 




85




100 %




3 151 




221




98 %




2 916 



 



280






ACP



Regional allocations


1 942 


1 926 


(24)


99 %


1 818 


(8)


94 %


1 555 


 


144





SUB TOTAL: REGIONAL ALLOCATIONS




1 942 




1 926 




(24)




99 %




1 818 




(8)




94 %




1 555 



 



144






Co-financing



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


187


183


(1)


98 %


179


—


97 %


143


 


12





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




187




183




(1)




98 %




179



—



97 %




143



 



12





Implementation costs


5


5


1


100 %


3


1


62 %


2


 


1





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




5




5




1




100 %




3




1




62 %




2



 



1





Other Intra-ACP allocations


12


11


(1)


92 %


10


—


99 %


10


 


—




Peace facility


1


1


 


100 %


1


 


99 %


1


 


 





SUB TOTAL: INTRA-ACP ALLOCATIONS




12




11




(1)




92 %




11



—



99 %




11



 


—





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




A Envelope reserve


—


 


 


 


 


 


 


 


 


 




B Envelope reserve


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: COUNTRY RESERVE



—


 


 


 


 


 


 


 


 


 




Intra-ACP Reserve


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: INTRA-ACP RESERVE



—


 


 


 


 


 


 


 


 


 





ACP



National allocations Reserve A Envelope STABEX


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: NATIONAL ALLOCATIONS RESERVE A ENVELOPE STABEX



—


 


 


 


 


 


 


 


 


 




NIP/RIP reserve


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: NIP/RIP RESERVE



—


 


 


 


 


 


 


 


 


 




Regional allocations reserve


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: REGIONAL ALLOCATIONS RESERVE



—


 


 


 


 


 


 


 


 


 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


131


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




131



 


 


 


 


 


 


 


 


 





OCT




Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


190


189


(2)


99 %


182


17


96 %


144


13


79 %





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




190




189




(2)




99 %




182




17




96 %




144



 



13





B Envelope - National Allocations


15


 


 


 


 


 


 


 


 


 




Emergency aid


 


9


—


 


8


—


99 %


8


 


—




Other chocs with budgetary impact


 


6


 


 


6


 


100 %


6


 


 





SUB TOTAL: B ENVELOPE - NATIONAL ALLOCATIONS




15




15



—



98 %




14



—



99 %




14



 


—




Studies / Technical assistance OCT


5


5


—


100 %


5


—


98 %


5


 


—





OCT




SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




5




5



—



100 %




5



—



98 %




5



 


—




Regional allocations


40


39


(1)


98 %


37


(1)


95 %


32


 


—





SUB TOTAL: REGIONAL ALLOCATIONS




40




39




(1)




98 %




37




(1)




95 %




32



 


—





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




A Envelope reserve


—


 


 


 


 


 


 


 


 


 




B Envelope reserve


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: COUNTRY RESERVE



—


 


 


 


 


 


 


 


 


 




National allocations Reserve A Envelope STABEX


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: NATIONAL ALLOCATIONS RESERVE A ENVELOPE STABEX



—


 


 


 


 


 


 


 


 


 




Regional allocations reserve


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: REGIONAL ALLOCATIONS RESERVE



—


 


 


 


 


 


 


 


 


 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


25


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




25



 


 


 


 


 


 


 


 


 




 



TOTAL: ACP+OCT (INCL RESERVES) (A+B)




21 223 




20 905 




(147)




99 %




20 361 




236




97 %




18 829 




1 076 




92 %









Table 2.6


EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2018


CLASS OF AID


ACP + PTOM - 11 th EDF

















EUR million




 


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


15 419 


12 634 


1 743 


82 %


9 202 


2 346 


73 %


4 467 


1 536 


49 %





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




15 419 




12 634 




1 743 




82 %




9 202 




2 346 




73 %




4 467 



 



1 536 





B Envelope - National Allocations


717


 


 


 


 


 


 


 


 


 




Emergency aid


 


592


2


 


589


10


99 %


493


 


50




Other chocs with budgetary impact


 


109


 


 


109


—


100 %


109


 


80





SUB TOTAL: B ENVELOPE - NATIONAL ALLOCATIONS




717




701




2




98 %




698




10




100 %




601



 



130





Bridging facility


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: BRIDGING FACILITY



—


 


 


 


 


 


 


 


 


 




Implementation costs


1 053 


700


162


67 %


646


157


92 %


603


 


148




Interests and other receipts


16


10


—


59 %


7


1


71 %


6


 


—





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




1 069 




710




162




66 %




653




157




92 %




609



 



148





Institutional and support expenditure


246


133


27


54 %


98


7


74 %


85


 


16




Other Intra-ACP allocations


2 700 


2 116 


871


78 %


1 347 


537


64 %


899


 


408




Peace facility


1 000 


1 000 


6


100 %


946


61


95 %


859


 


54





SUB TOTAL: INTRA-ACP ALLOCATIONS




3 946 




3 249 




905




82 %




2 391 




604




74 %




1 843 



 



478





Regional allocations


6 541 


5 803 


1 381 


89 %


4 940 


1 426 


85 %


1 554 


 


610





SUB TOTAL: REGIONAL ALLOCATIONS




6 541 




5 803 




1 381 




89 %




4 940 




1 426 




85 %




1 554 



 



610






ACP




Co-financing



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


23


20


 


89 %


20


—


100 %


1


 


1





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




23




20



 



89 %




20



—



100 %




1



 



1





Implementation costs


2


1


1


70 %


 


 


 


 


 


 





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




2




1




1




70 %



 


 


 


 


 


 




Peace facility


11


2


1


16 %


2


1


100 %


1


 


 





SUB TOTAL: INTRA-ACP ALLOCATIONS




11




2




1




16 %




2




1




100 %




1



 


 




Regional allocations


2


2


2


100 %


2


2


100 %


 


 


 





SUB TOTAL: REGIONAL ALLOCATIONS




2




2




2




100 %




2




2




100 %



 


 


 





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




B Envelope reserve


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: COUNTRY RESERVE



—


 


 


 


 


 


 


 


 


 




Intra-ACP Reserve


69


 


 


 


 


 


 


 


 


 





SUB TOTAL: INTRA-ACP RESERVE




69



 


 


 


 


 


 


 


 


 




National allocations Reserve A Envelope STABEX


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: NATIONAL ALLOCATIONS RESERVE A ENVELOPE STABEX



—


 


 


 


 


 


 


 


 


 




NIP/RIP reserve


1 270 


 


 


 


 


 


 


 


 


 





SUB TOTAL: NIP/RIP RESERVE




1 270 



 


 


 


 


 


 


 


 


 





ACP




Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


311


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




311



 


 


 


 


 


 


 


 


 





EC Internal SLA



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


1


1


 


71 %


1


 


100 %


1


 


 





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




1




1



 



71 %




1



 



100 %




1



 


 





OCT




Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


196


183


92


93 %


179


97


98 %


76


50


43 %





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




196




183




92




93 %




179




97




98 %




76



 



50





B Envelope - National Allocations


8


 


 


 


 


 


 


 


 


 




Emergency aid


 


3


3


 


3


3


100 %


2


 


2




Other chocs with budgetary impact


 


3


3


 


3


3


100 %


3


 


3





SUB TOTAL: B ENVELOPE - NATIONAL ALLOCATIONS




8




6




6




75 %




6




6




100 %




5



 



5





Bridging facility


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: BRIDGING FACILITY



—


 


 


 


 


 


 


 


 


 




Studies / Technical assistance OCT


9


5


—


60 %


5


1


90 %


3


 


1





SUB TOTAL: IMPLEMENTATION COSTS AND INTERESTS REVENUES




9




5



—



60 %




5




1




90 %




3



 



1






OCT



Regional allocations


81


37


37


46 %


37


37


99 %


7


 


7





SUB TOTAL: REGIONAL ALLOCATIONS




81




37




37




46 %




37




37




99 %




7



 



7






Co-financing



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS



—


 


 


 


 


 


 


 


 


 





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




NIP/RIP reserve


49


 


 


 


 


 


 


 


 


 





SUB TOTAL: NIP/RIP RESERVE




49



 


 


 


 


 


 


 


 


 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




Non-mobilisable reserve


7


 


 


 


 


 


 


 


 


 





SUB TOTAL: NON-MOBILISABLE RESERVE




7



 


 


 


 


 


 


 


 


 





EC Internal SLA



 


 


 


 


 


 


 


 


 


 





Reserves



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


—


 


 


 


 


 


 


 


 


 





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS



—


 


 


 


 


 


 


 


 


 




AVS



Regular MS Contributions



 


 


 


 


 


 


 


 


 


 





Allocations



 


 


 


 


 


 


 


 


 


 




A Envelope - National Allocations


10


6


 


60 %


6


—


98 %


6


4


98 %





SUB TOTAL: A ENVELOPE - NATIONAL ALLOCATIONS




10




6



 



60 %




6



—



98 %




6



 



4





B Envelope - National Allocations


7


 


 


 


 


 


 


 


 


 





SUB TOTAL: B ENVELOPE - NATIONAL ALLOCATIONS




7



 


 


 


 


 


 


 


 


 




 



TOTAL: ACP+OCT (INCL RESERVES) (A+B)




29 747 




23 359 




4 332 




79 %




18 140 




4 687 




78 %




9 175 




2 970 




51 %






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









EUROPEAN INVESTMENT BANK






CA/521/19


14 March 2019




 



Document 19/092







BOARD OF DIRECTORS







INVESTMENT FACILITY


FINANCIAL STATEMENTS


AS AT 31 DECEMBER 2018











—


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









STATEMENT OF FINANCIAL POSITION


AS AT 31 DECEMBER 2018









in EUR’000




 


Notes


31 12 2018


31 12 2017





ASSETS



 


 


 




Cash and cash equivalents


5


573 708 


549 101 




Amounts receivable from contributions


9/17


100 000 


150 000 




Treasury financial assets


10


335 140 


144 382 




Derivative financial instruments


6


9 873 


12 521 




Loans and advances


7


1 540 991 


1 666 725 




Shares and other variable yield securities


8


567 292 


497 539 




Other assets


11


171


4 385 





Total assets



 



3 127 175 




3 024 653 






LIABILITIES AND CONTRIBUTORS’ RESOURCES



 


 


 





LIABILITIES



 


 


 




Derivative financial instruments


6


8 493 


1 153 




Deferred income


12


33 764 


25 802 




Provisions for guarantees issued


13


793


484




Provisions for loan commitments


14


23 822 


—




Amount owed to third parties


15


143 813 


157 285 




Other liabilities


16


2 493 


2 462 





Total liabilities



 



213 178 




187 186 






CONTRIBUTORS’ RESOURCES



 


 


 




Facility Member States Contribution called


17


2 697 000 


2 517 000 




Fair value reserve (IAS 39)


 


—


125 816 




Retained earnings


 


216 997 


194 651 





Total contributors’ resources



 



2 913 997 




2 837 467 






Total liabilities and contributors’ resources



 



3 127 175 




3 024 653 






STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


FOR THE YEAR ENDED 31 DECEMBER 2018









in EUR’000




 


Notes


From 1 1 2018


From 1 1 2017




to 31 12 2018


to 31 12 2017




Interest and similar income


19


96 730 


101 406 




Interest and similar expenses


19


-2 539 


-2 671 





Net interest and similar income



 



94 191 




98 735 





Fee and commission income


20


284


210




Fee and commission expenses


20


-106


-60





Net fee and commission income



 



178




150





Fair value change of derivative financial instruments


 


-9 987 


29 637 




Net result on shares and other variable yield securities (2017 AFS)


21


-10 179 


2 711 




Net result on loans and advances at FVTPL


21


-702


—




Net foreign exchange loss


 


-32 436 


-38 165 





Net result on financial operations



 



-53 304 




-5 817 





Change in impairment on loans and advances, net of reversal


7


-22 771 


-10 721 




Change in provisions for guarantees


13


-485


-65




Change in provisions for loan commitments


14


-19 612 


—




Impairment on available-for-sale financial assets (IAS 39)


8


—


-22 024 




General administrative expenses


22


-47 799 


-45 105 





(Loss)/profit for the year



 



-49 602 




15 153 






Other comprehensive income:



 


 


 




Items that are or may be reclassified to profit or loss:


 


 


 




Available-for-sale financial assets – Fair value reserve (IAS 39)


8


 


 




1 Net change in fair value of available-for-sale financial assets


 


—


-31 034 




2 Net amount transferred to profit or loss


 


—


13 966 





Total available-for-sale financial assets



 


—



-17 068 






Total other comprehensive (loss)



 


—



-17 068 






Total comprehensive (loss) for the year



 



-49 602 




-1 915 





(1) For the year ended 31 December 2018, interests and similar income include EUR 96,7 million calculated on assets held at amortised cost based on effective interest method





STATEMENT OF CHANGES IN CONTRIBUTORS’ RESOURCES


FOR THE YEAR ENDED 31 DECEMBER 2018











in EUR’000




 


 


Contribution called


Fair Value Reserve (*2)



Retained earnings (*2)



Total





At 1 January 2018




Notes




2 517 000 



—



266 599 




2 783 599 





Member States contribution called during the year


17


180 000 


—


—


180 000 




Loss for the year 2018


 


—


—


-49 602 


-49 602 





Changes in contributors’ resources



 



180 000 



—



-49 602 




130 398 






At 31 December 2018



 



2 697 000 



—



216 997 




2 913 997 





 


 


 


 


 


 




 


 


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


17


140 000 


—


—


140 000 




Profit for the year 2017


 


—


—


15 153 


15 153 




Total other comprehensive income for the year (*2)



 


—


-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 






STATEMENT OF CASH FLOWS


FOR THE YEAR ENDED 31 DECEMBER 2018









in EUR’000




 


Notes


From 1 1 2018 to 31 12 2018


From 1 1 2017 to 31 12 2017





OPERATING ACTIVITIES



 


 


 




(Loss)/Profit for the financial year


 


-49 602 


15 153 




Adjustments made for


 


 


 




Impairment on available-for-sale financial assets (IAS 39)


8


—


22 024 




Net result in fair value on shares and other variable yield securities


 


20 665 


—




Change in impairment on loans and advances, net of reversal


7


22 771 


10 721 




Net result on loans and advances at FVTPL


 


702


—




Change in accrued interest and amortised cost on loans and advances


7


-1 833 


-1 198 




Net change in provisions for guarantees issued


13


309


-141




Net change in provisions for loan commitments


 


19 666 


—




Change in accrued interest and amortised cost on treasury financial assets


10


-1 645 


-398




Change in deferred income


 


7 962 


-481




Effect of exchange rate changes on loans


7


-44 927 


168 304 




Effect of exchange rate changes on shares and other variable yield securities


 


-17 300 


-1 655 




Effect of exchange rate changes on cash held


 


2 561 


-6 473 





Loss on operating activities before changes in operating assets and liabilities



 



-40 671 




205 856 





Loan disbursements


7


- 259 214 


- 368 662 




Repayments of loans


7


354 855 


253 486 




Change in accrued interest on cash and cash equivalents


5


-178


63




Fair value changes on derivatives


 


9 987 


-29 637 




(Decrease) in treasury financial assets


10


-2 219 062 


-1 084 149 




Maturities of treasury financial assets


10


2 026 659 


1 109 563 




(Decrease) in shares and other variable yield securities


8


-95 434 


-62 660 




Repayments/sales of shares and other variable yield securities


 


32 802 


44 568 




(Increase) in other assets


 


-4 214 


-4 040 




(Decrease)/increase in other liabilities


 


31


-84




Increase in amounts payable to the European Investment Bank


 


2 168 


2 202 





Net cash flows used in/from operating activities



 



- 192 271 




66 506 






FINANCING ACTIVITIES



 


 


 




Contribution received from Member States


17


230 000 


76 395 




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


 


20 000 


60 000 




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


 


-35 641 


-21 026 





Net cash flows from financing activities



 



214 359 




115 369 






Net increase in cash and cash equivalents



 



22 088 




181 875 






Summary statement of cash flows:



 


 


 





Cash and cash equivalents at the beginning of financial year



 



549 169 




360 821 





Net cash from:


 


 


 




Operating activities


 


- 192 271 


66 506 




Financing activities


 


214 359 


115 369 




Effects of exchange rate changes on cash and cash equivalents


 


2 561 


6 473 





Cash and cash equivalents at the end of financial year



 



573 818 




549 169 






Cash and cash equivalents are composed of:



 


 


 




Cash in hand


5


51 936 


166 445 




Term deposits (excluding accrued interest)


5


521 882 


367 721 




Commercial papers


5


—


15 003 




 


 



573 818 




549 169 






Notes to the financial statements as at 31 December 2018

1   General information

The Investment Facility (“the Facility” or “IF”) has been established within the framework of the Cotonou Agreement (the “Agreement”) on co-operation and development assistance negotiated between the African, Caribbean and Pacific Group of States (the “ACP States”) and the European Union and its Member States on 23 June 2000, revised on 25 June 2005 and 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 (“OCT 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 OCT 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 2018 to 31 December 2018
On a proposal from the Management Committee of EIB, the Board of Directors of EIB adopted the Financial Statements on 14 March 2019, and authorised their submission to the Board of Governors for approval by 26 April 2019
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 value 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 2 and 4
—   Impairment losses on loans and advances

The expected credit loss (‘ECL’) measurement requires management to apply significant judgments, in particular, the assessment of a significant increase in credit risk since initial recognition, the incorporation of forward looking information and further the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses These estimates are driven by a number of factors, changes in which can result in significant changes to the timing and amount of allowance for credit loss to be recognized (Note 2 4 2)
—   Valuation of unquoted equity investments

Valuation of unquoted 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 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 equity investments (applicable before 1 January 2018)

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


IFRS 9 Financial Instruments

The Facility has adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of 1st January 2018, which resulted in changes in accounting policies and adjustments to the amounts previously recognized in the financial statements For more details refer to note 2 5
As permitted by the transitional provisions of IFRS 9, the Facility elected not to restate comparative periods Any adjustment to the carrying amounts of financial assets and liabilities resulting from the adoption of IFRS 9 were recognized in the reserve fund and the fair value reserve as of 1st January 2018 Accordingly, the information presented for 2017 under the applicability does not reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9

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 Facility adopted the standard using the modified retrospective approach which means that the cumulative impact of the adoption is recognised in retained earnings as of 1 January 2018 and the comparatives were not restated
The application of IFRS 15, did not have a significant impact on the Facility’s financial statements

IFRIC 22 Foreign currency transactions and advance consideration

The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration If there are multiple payments or receipts in advance, then the entity must determine the date of the transactions for each payment or receipt of advance consideration
This Interpretation adoption had no material impact on the Facility’s financial statements

Annual Improvements to IFRSs 2014-2016 Cycle (Amendments to IAS 28)


Amendments to IAS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice

The amendments clarify that an entity that is a venture capital organisation, or other qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss If an entity that is not itself an investment entity, has an interest in an associate or joint venture that is an investment entity, then it may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries This election is made separately for each investment entity associate or joint venture, at the later of the date on which: (a) the investment entity associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent
The Facility does not use have investment in in joint ventures Therefore, there is no impact on the Facility’s financial statements

Standards issued but not yet adopted


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
2 4   
Summary of significant accounting policies


The statement of financial position represents assets and liabilities in decreasing order of liquidity and does not distinguish between current and non-current items
2 4 1   Foreign currency translation
The Facility uses the Euro (EUR) for presenting its financial statements, which is also the functional currency Except as otherwise indicated, financial information presented in EUR has been rounded to the nearest thousand
Foreign currency transactions are translated, at the exchange rate prevailing on the date of the transaction
Monetary assets and liabilities denominated in currencies other than Euro are translated into Euro at the exchange rate prevailing at the 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   Financial assets other than derivatives
Non-derivative financial instruments are initially recognised using the settlement date basis

Classification and measurement


Financial assets - Policy applicable after 1 January 2018

On initial recognition, a financial asset is classified as measured at amortized cost (“AC”), fair value through other comprehensive income (“FVOCI”) or fair value through P&L (“FVTPL”) and a financial liability is classified as measured at AC or FVTPL
Under IFRS 9, classification starts with determining whether the financial asset shall be considered as a debt or equity instrument IFRS 9 refers to the definitions in IAS 32 Financial Instruments: Presentation
Debt instruments are those instruments that meet the definition of a financial liability from the counterparty’s perspective, such as loans, government and corporate bonds
A debt instrument is classified at AC if it meets both of the following conditions and is not designated as at FVTPL:






—


the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and










—


the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (SPPI criteria)




A debt instrument is classified at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL:






—


the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and










—


the contractual terms of the financial asset give rise on specific dates to cash flows that are fulfilling the SPPI criteria




The above requirements should be applied to an entire financial asset, even if it contains an embedded derivative
Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets Equity instruments are measured at FVTPL
On initial recognition of an equity investment that is not held for trading, the Facility may irrevocably elect to present subsequent changes in other comprehensive income This election is made on an investment-by-investment basis
All other financial assets are classified as measured at FVTPL

Business model assessment

The EIB, as a manager of the Facility, makes an assessment of the objective of a business model in which a debt instrument is held at a portfolio level because this best reflects the way the business is managed and information is provided to management The information considered includes:






—


the stated policies and objectives for the portfolio and the operation of those policies in practice In particular, whether management's strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;










—


how the performance of the portfolio is evaluated and reported to the Facility’s management;










—


the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and










—


the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectation about future sales activity




However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Facility stated objective for managing the financial assets is achieved and how cash flows are realised

Solely payment of principal and interests (‘SPPI’) criteria

For the purpose of this assessment, ‘principal’ is defined as the fair value of the debt instrument on initial recognition ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e g liquidity risk and administrative costs), as well as profit margin
In assessing whether the contractual cash flows are solely payments of principal and interest, the contractual terms of the instrument are considered This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition

Financial assets - Policy applicable before 1 January 2018

The Facility classified its financial assets into one of the following categories:






—


Loans and receivables (‘L&R’),










—


Held-to-maturity (‘HTM’),










—


Available-for-sale (‘AFS’),










—


at Fair Value through Profit or Loss (‘FVTPL’)





Derecognition

The Facility derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or which the Facility neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset
On derecognition of a financial asset or financial liability (Note 2 4 4), the difference between the carrying amount of the asset or liability (or the carrying amount allocated to the portion of the asset or liability derecognised) and the sum of (i) the consideration received or paid and (ii) any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss except for the cumulative gains or losses recognised in other comprehensive income for equity investments measured at fair value through other comprehensive income which are transferred to the reserve fund rather than profit or loss on disposal

Reclassification

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Facility changes its business model for managing financial assets

Measurement of fair values 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
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 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

Impairment on financial assets


Impairment - policy applicable after 1 January 2018

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (“ECL”) model This will require judgement to determine the underlying variable (PD, LGD, EAD) used in order to assess how changes in economic and other factors affect ECLs, which will be determined on a probability-weighted basis
The new impairment model will apply to financial assets measured at AC, to financial guarantee contracts, as well as to off-balance sheet 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 This includes both quantitative and qualitative information and analysis, based on the Bank’s expertise, including forward-looking information
Purchased or originated credit-impaired assets (‘POCI’) are the financial assets with exception to initial recognition of the ECLs as the POCI assets is always maintained in stage 3 For POCI financial assets, the cumulative changes in lifetime ECL since initial recognition are recognised in the statement of profit or loss
The Facility’s assessment of the Stage is based on a sequential approach which is consistent with the Credit Risk Guidelines (‘CRG’) and the Financial Monitoring Guidelines and Procedures (‘FMGs’), notably covering watch list, internal rating and arrears
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
To identify Stage 3 exposures, the Facility determines whether or not there is objective evidence of default event A financial asset is considered to be in default when the borrower is unlikely to pay its credit obligations to the Facility in full, without recourse by the Facility or the borrower is past due more than 90 days on any material credit obligation to the Facility
In this respect, a financial asset is considered impaired when it is determined that it is probable that the Facility will not be able to collect all amounts due according to the original contractual terms or an equivalent value Individual credit exposures are evaluated based upon the borrower’s characteristics, overall financial condition, resources and payment record, the prospects for support from any financially responsible guarantors and, where applicable, the realisable value of any collateral
All impaired claims are reviewed and analysed at least semi-annually Any subsequent changes to the amounts and timing of the expected future cash flows compared to the prior estimates will result in a change in the provision for credit losses and be charged or credited to the income statement An allowance for impairment is reversed only when the credit quality has improved such that there is reasonable assurance of timely collection of principal and interest in accordance with the original contractual terms of the claim agreement A write-off is made when all or part of a claim is deemed uncollectible or forgiven Write-offs are charged against previously established impairments or directly to the income statement and reduce the principal amount of a claim Recoveries in part or in full of amounts previously written off are credited to the income statement

Measuring ECL – Inputs, Assumptions and Techniques

Lifetime ECL measurement applies to stage 2 and stage 3 assets, while 12-month ECL measurement applies to stage 1 assets
The expected credit losses were calculated based on the following variables:






—


Probability of default (PD),










—


Loss Given default (LGD),










—


Exposure at default (EAD)




The probability of default 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 The EIB collects performance and default information about the Facility’s credit risk exposures 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
The loss given default represents the EIB’s expectation of the ratio of the loss on an exposure due to the default of a counterparty to the amount outstanding at default Loss given default can be also defined as “1 - Recovery Rate” LGD estimates are determined mainly by geography and by type of counterparty, with five main exposure classes: Sovereigns, Public Institutions, Financial Institutions, Corporate and Project Finance LGD values can be further adjusted based on the product and contract specific features of the exposure
The EIB incorporates forward-looking information into both its assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and its measurement of expected credit losses

Impairment - policy applicable before 1 January 2018

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 2 1   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 Cash and cash equivalents are carried at AC in the statement of financial position
2 4 2 2   Treasury financial assets
Treasury financial assets were presented as Held-to-maturity financial assets in the Investment Facility Financial Statements as at 31 December 2017
Treasury financial assets comprise quoted and unquoted bonds with the intention of holding them to maturity, and commercial papers with original maturities of more than three months and are consequently classified at AC
Those bonds and commercial papers are initially measured at cost, which is the 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
2 4 2 3   Loans and advances
Loans and advances were presented as loans and receivables in the Investment Facility Financial Statements as at 31 December 2017 and measured at amortised cost
Loans and advances include:






—


Loans and advances measured at AC










—


Loans and advances mandatorily measured at FVTPL




Loans originated by the Facility are recognised in the assets of the Facility when cash is advanced to borrowers Undisbursed parts of loans are recorded in the off-balance at their nominal value
Loans passing the SPPI test are initially recorded at cost (their 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 AC using the effective interest rate method
Loans not fulfilling the SPPI criterion are mandatorily measured at FVTPL
The fair value measurement technique used is based on a discounted cash flow technique
2 4 2 4   Shares and other variable yield securities
Shares and other variable yield securities were presented as available-for-sale financial assets in the Investment Facility Financial Statements as at 31 December 2017
There are two types of equity investments at the Facility: (i) direct equity investments and (ii) venture capital funds The shares and other variable yield securities are initially recognised at fair value plus transactions costs Subsequently changes in fair value, including foreign currency translation gains and losses, are recognised in the statement of profit or loss and other comprehensive income under the caption net result on shares and other variable yield securities
For unquoted investment, when the fair value cannot be derived from active markets, the fair value is determined by applying recognised valuation techniques (Note 4 2 1)
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
2 4 3   Financial 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)

Policy applicable after 1 January 2018

Financial guarantees are accounted for under IFRS 9 – Financial Instruments, either as “Derivatives” or as “Financial Guarantees”, depending on their features and characteristics as defined by IFRS 9
The accounting policy for derivatives is disclosed under Note 2 4 5
Financial guarantees are initially recognised in the statement of financial position under “Provisions for guarantees issued” at fair value plus transaction costs that are directly attributable to the issuance of the financial guarantees At initial recognition the obligation to pay corresponds to the Net Present Value (NPV) of expected premium inflows or the initial expected loss
Subsequent to initial recognition, financial guarantees are measured at the higher of:






—


The amount of the loss allowance as determined under IFRS 9; and










—


The premium initially recognised less income recognised in accordance with the principles of IFRS 15




Any increase or decrease in the net liability (as measured per IFRS 9) relating to financial guarantees other than the payment of guarantee calls is recognised in the statement of profit or loss and other comprehensive income under “Change in provisions for guarantees”
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 IFRS 15 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

Policy applicable before 1 January 2018

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”
2 4 4   Financial liabilities other than derivatives


Classification and measurement



Financial liabilities - Policy applicable after 1 January 2018

A financial liability is measured at amortised cost except for financial liabilities that meet the definition of held for trading (e g derivative liabilities)
IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities and the Facility’s financial liabilities are measured at AC under IAS 39 and IFRS 9 as well

Financial liabilities - Policy applicable before 1 January 2018

The Facility classified its financial liabilities into one of the following categories






—


measured at amortised cost (‘AC’),










—


at fair value through profit or loss (‘FVTPL’), and within this category as Held for trading (‘HFT’)





Derecognition

The Facility derecognises a financial liability when its contractual obligations are discharged, cancelled or expired
2 4 5   Derivative financial instruments
Derivative financial instruments include cross currency swaps, cross currency interest rate swaps, short term currency swaps (“FX swaps”) and interest rate swaps
Derivative financial instruments are initially recognised using the trade date basis
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
All derivatives are measured at FVTPL 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”
Under IFRS 9, bifurcation requirements embedded derivatives have been eliminated for financial assets or financial liabilities and therefore, the hybrid contract is treated as a whole for classification of financial assets or financial liability accordingly
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




Contributions are classified and measured at AC in the financial statements
2 4 7   Interest and similar income
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 in the statement of financial position (‘Loans and advances’) 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
Interest on the POCI loans is recorded in the statement of profit or loss and other comprehensive income (‘Interest and similar income’) and in the statement of financial position (‘Loans and advances’) on an accrual basis using the credit- adjusted effective interest rate through the whole life of the loan, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the loan to the amortised cost of the loan
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 shares and other variable yield securities are recognised when received and presented in the statement of profit or loss and other comprehensive income within net realised gains on shares and other variable yield securities
2 4 11   Taxation
The Protocol on the Privileges and Immunities of the European Union, appended to the treaty on the European Union and the treaty of the functioning of the European Union, stipulates that the assets, revenues and other property of the Institutions of the Union are exempt from all direct taxes
2 5   
Transition disclosures


The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for the Facility’s assets and liabilities as at 1 January 2018










in EUR ‘000




ASSETS




Statement of financial position as at 31 December 2017


Measurement Category IAS 39


Net carrying amount


Measurement category IFRS 9


Net carrying amount


Statement of financial position as from 1 January 2018










1


Cash and cash equivalents






L&R (Loans and receivables)


549 101 


AC (Amortised Cost)


549 101 








1


Cash and cash equivalents














2


Amounts receivable from contributors






L&R (Loans and receivables)


150 000 


AC (Amortised Cost)


150 000 








2


Amounts receivable from contributors














3


Held-to-maturity financial assets






HTM (Held to Maturity)


144 382 


AC (Amortised Cost)


144 382 








3


Treasury financial assets














4


Derivative financial instruments






FVTPL (Fair Value Through Profit and loss)


12 521 


FVTPL (Fair Value Through Profit and loss)


12 521 








4


Derivative financial instruments














5


Loans and receivables






L&R (Loans and receivables)


1 666 725 


AC (Amortised Cost)


1 615 589 








5


Loans and advances








FVTPL (Fair Value Through Profit and loss)


1 422 










6


Available-for-sale financial assets






AFS (Available for Sale)


497 539 


FVTPL (Fair Value Through Profit and loss)


497 539 








6


Shares and other variable yield securities














7


Other assets






L&R (Loans and receivables)


4 385 


AC (Amortised Cost)


4 385 








7


Other assets









Total Assets



 



3 024 653 



 



2 974 939 




Total Assets


















in EUR ‘000




LIABILITIES




Statement of financial position as at 31 December 2017


Measurement Category IAS 39


Net carrying amount


Measurement category IFRS 9


Net carrying amount


Statement of financial position as from 1 January 2018










8


Derivative financial instruments






FVTPL (Fair Value Through Profit and loss)


1 153 


FVTPL (Fair Value Through Profit and loss)


1 153 








8


Derivative financial instruments














9


Deferred income






AC (Amortised Cost)


25 802 


AC (Amortised Cost)


25 802 








9


Deferred income














10


Provisions for guarantees issued






Financial guarantees


484


Financial guarantees


484








10


Provisions for guarantees issued














11


Provisions for loan commitments






AC (Amortised Cost)


—


AC (Amortised Cost)


4 156 








11


Provisions for loan commitments














12


Amounts owed to third parties






AC (Amortised Cost)


157 285 


AC (Amortised Cost)


157 285 








12


Amounts owed to third parties














13


Other liabilities






AC (Amortised Cost)


2 462 


AC (Amortised Cost)


2 462 








13


Other liabilities









Total Liabilities



 



187 186 



 



191 342 




Total Liabilities











14


Contributors’ resources






 


 


 


 








14


Contributors’ resources














13 1


Member States Contribution called






 


2 517 000 


 


2 517 000 








13 1


Member States Contribution called














13 2


Fair value reserve






 


125 816 


 


—








13 2


Fair value reserve














13 3


Retained earnings






 


194 651 


 


266 597 








13 3


Retained earnings









Total Liabilities and Equity



 



3 024 653 



 



2 974 939 




Total Liabilities and Equity





The following table reconciles the carrying amounts of the Facility’s assets and liabilities from their previous measurement category under IAS 39 to their new measurement categories upon transition to IFRS 9 on 1st January 2018









in EUR ‘000




FINANCIAL ASSETS


IAS 39 carrying amount 31 12 2017


Reclassifications


Remeasurements


IFRS 9 carrying amount 1 1 2018





Amortized Cost



 


 


 


 










1


Cash and cash equivalents






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


549 101 


—


—


549 101 










2


Amounts receivable from contributors






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


150 000 


—


—


150 000 










3


Treasury financial assets






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


144 382 


—


—


144 382 










4


Derivative financial instruments






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


12 521 


—


—


12 521 










5


Loans and advances






 


 


 


 




Opening balance under IAS 39


1 666 725 


—


—


1 666 725 




Transfer from AC to FVTPL


—


-1 422 


—


-1 422 




Remeasurement: ECL allowance


—


—


-49 714 


-49 714 




Closing balance under IFRS 9


1 666 725 


-1 422 


-49 714 


1 615 589 










7


Other assets






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


4 385 


—


—


4 385 





Total financial assets measured at amortized cost




2 527 114 




-1 422 




-49 714 




2 475 978 

















in EUR ‘000




 


IAS 39 carrying amount 31 12 2017


Reclassifications


Remeasurements


IFRS 9 carrying amount 1 1 2018





Fair Value Through OCI / AFS



 


 


 


 










6


Shares and other variable yield securities






 


 


 


 




Opening balance under IAS 39


497 539 


—


—


497 539 




Transfer from AFS to FVTPL


—


- 497 539 


—


- 497 539 




Closing balance under IFRS 9


497 539 


- 497 539 


—


—





Total financial assets measured at Fair Value Through OCI




497 539 




- 497 539 



—


—





Fair Value Through Profit and Loss



 


 


 


 










5


Loans and advances






 


 


 


 




Opening balance under IAS 39


—


—


—


—




Transfer from AC to FVTPL


—


1 422 


—


1 422 




Remeasurement: ECL allowance


—


—


—


—




Closing balance under IFRS 9


—


1 422 


—


1 422 










6


Shares and other variable yield securities






 


 


 


 




Opening balance under IAS 39


—


—


—


—




Transfer from AFS to FVTPL


—


497 539 


—


497 539 




Closing balance under IFRS 9


—


497 539 


—


497 539 





Total financial assets measured at Fair Value Through Profit and Loss



—



498 961 



—



498 961 






Total financial assets




3 024 653 



—



-49 714 




2 974 939 

















in EUR ‘000




FINANCIAL LIABILITIES


IAS 39 carrying amount 31 12 2017


Reclassifications


Remeasurements


IFRS 9 carrying amount
1 1 2018





Amortized Cost



 


 


 


 










9


Deferred income






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


25 802 


—


—


25 802 










10


Provisions for loan commitments






 


 


 


 




Opening balance under IAS 39


—


—


—


 




Remeasurement ECL allowance


—


—


4 156 


4 156 




Closing balance under IFRS 9


 


—


4 156 


4 156 










11


Amounts owed to third parties






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


157 285 


—


—


157 285 










12


Other liabilities






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


2 462 


—


—


2 462 





Total financial liabilities measured at amortised cost




185 549 



—



4 156 




189 705 






Fair Value Through Profit and Loss



 


 


 


 










13


Derivative financial instruments






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


1 153 


—


—


1 153 










14


Provisions for guarantees issued






 


 


 


 




Opening balance under IAS 39 and closing balance under IFRS 9


484


—


—


484




Remeasurement ECL allowance


—


—


—


—




Closing balance under IFRS 9


484


—


—


484





Total financial liabilities measured at Fair Value Through Profit and Loss




1 637 



—


—



1 637 






Total financial liabilities




187 186 



—



4 156 




191 342 





The following table analyses the impact of transition to IFRS 9 on the Facility’s Contributors’ resources as at 1 January 2018 The impact relates to the fair value reserve There is no impact on other components of Contributors’ resources






in EUR ‘000




Fair value reserve





Closing balance under IAS 39 (31 December 2017)




125 816 





Reclassification of shares and other variable-yield securities from AFS to FVTPL


- 125 816 





Opening balance under IFRS 9 (1 January 2018)



—




 


Retained earnings





Closing balance under IAS 39 (31 December 2017)




194 651 





Reclassification of shares and other variable-yield securities from AFS to FVTPL


125 816 




Recognition of ECL under IFRS 9 (loans and advances)


-49 712 




Recognition of provisions under IFRS 9 (loan commitments)


-4 156 





Opening balance under IFRS 9 (1 January 2018)




266 599 






Total changes in equity due to adopting IFRS 9




-53 868 





The following table reconciles the closing impairment allowance measured in accordance with IAS 39 to the new impairment allowance measured in accordance with IFRS 9:










in EUR ‘000




 


1 1 2018


31 12 2017




Impairment allowance for


12-month ECL (stage 1)


Lifetime ECL not credit-impaired (stage 2)


Lifetime ECL credit-impaired (stage 3)


Total


Total










1


Cash and cash equivalents at AC under IAS 39 and IFRS 9






—


—


—


—


—










2


Treasury financial assets






—


—


—


—


—










3 1


Loans and advances - Balance Sheet






19 738 


29 976 


113 255 


162 969 


113 255 










3 2


Loan commitments - Off Balance Sheet






1 993 


2 163 


—


4 156 


—










4


Financial guarantee contracts issued






—


484


—


484


484





Total




21 731 




32 623 




113 255 




167 609 




113 739 





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 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







in EUR ‘000




Maximum exposure


31 12 2018


31 12 2017





ASSETS



 


 




Cash and cash equivalents


573 708 


549 101 




Amounts receivable from contributors


100 000 


150 000 




Treasury financial assets


335 140 


144 382 




Derivative financial instruments


9 873 


12 521 




Loans and advances


1 540 991 


1 666 725 




Other assets


171


4 385 





Total assets




2 559 883 




2 527 114 






Provisions for loan commitments




-23 822 



—





OFF BALANCE SHEET



 


 




OFF BALANCE SHEET


 


 




Contingent liabilities


 


 










—


Issued Guarantees






1 553 668 


74 569 




Commitments


 


 










—


Undisbursed loans






1 283 931 


869 983 










—


Non-issued guarantees






2 800 


7 682 





Total off balance sheet




2 840 399 




952 234 






Total credit exposure




5 376 460 




3 479 348 





3 2 3   Credit risk on loans and advances
3 2 3 1   Credit risk measurement for loans and advances
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 24), 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 (worse) 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 applicable recovery rate: being the amount assumed to be recovered following a default by the relevant counterpart expressed as a percentage of the relevant loan exposure










v)


The contractual framework: a sound contractual framework will add to the loan’s quality and enhance its internal grading.










vi)


The duration of the loan or, more generally, the cash-flows of the loan: 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 of which there are three sub-categories:






“A0”


comprising loans to or guaranteed by an EU Member State which have an expected loss of 0 % (based on the Bank’s preferred creditor status and statutory protection which are deemed to assure a full recovery of the Bank’s assets upon maturity).










“A+”


comprising loans granted to (or guaranteed by) entities other than EU Member States in respect of which there is no expectation of deterioration in quality over their term.










“A-”


includes those lending operations where there is some doubt about the maintenance of their current status but where any downside is expected to be 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 (net of ECL) 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 2018


Guaranteed


Other credit enhancements


Not guaranteed


Total


% of Total




Banks


88 263 


—


856 484 



944 747 




61 %





Corporates


147 551 


45 820 


205 198 



398 569 




26 %





Public institutions


29 182 


—


—



29 182 




2 %





States


—


2 647 


165 846 



168 493 




11 %






Total disbursed




264 996 




48 467 




1 227 528 




1 540 991 




100 %






Signed not disbursed




170 356 



—



1 089 753 




1 260 110 



 

















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 



—



780 386 




869 983 



 




Transaction Management and Restructuring Directorate 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 Directorate 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 2018 and 31 December 2017 by the Loan Grading applications, based on the exposure signed (disbursed and un-disbursed):













In EUR’000




At 31 12 2018


High Grade


Standard Grade


Min Accept Risk


High Risk


No grading


Total


% of Total




A to B-


C


D+


D- and below




Borrower


Banks


232 467 


238 619 


349 756 


698 562 


—



1 519 404 




54 %





 


Corporates


103 845 


7 564 


744


693 100 


50 000 



855 253 




31 %





 


Public institutions


—


—


29 182 


2 994 


—



32 176 




1 %





States


—


4 786 


7 681 


381 801 


—



394 268 




14 %






Total




336 312 




250 969 




387 363 




1 776 457 




50 000 




2 801 101 




100 %





















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 


870 913 


—



1 456 466 




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 


—



388 475 




15 %






Total




323 370 




195 243 




237 758 




1 778 909 




1 428 




2 536 708 




100 %





3 2 3 4   Risk concentrations of loans and advances
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 2018


31 12 2017




Kenya


233 269 


331 891 




Nigeria


172 515 


230 042 




Tanzania


124 718 


116 093 




Uganda


81 766 


169 869 




Burundi


77 568 


74 703 




Barbados


74 638 


25 124 




Egypt


74 431 


—




Jamaica


72 165 


85 728 




Congo (Democratic Republic)


62 708 


62 439 




Mauritius


55 564 


26 598 




Ethiopia


55 215 


51 719 




Dominican Republic


54 326 


61 326 




Mauritania


50 727 


64 007 




Ghana


39 246 


49 895 




Togo


30 634 


45 574 




Rwanda


28 704 


38 555 




Malawi


26 827 


22 800 




Regional-ACP


24 335 


751




New Caledonia


21 124 


21 670 




Angola


20 651 


14 850 




Cape Verde


18 923 


20 487 




Senegal


18 330 


13 881 




Zambia


17 700 


10 910 




French Polynesia


17 453 


17 235 




Cameroon


14 784 


25 012 




Mozambique


14 719 


19 212 




Cayman Islands


13 213 


14 958 




Niger


9 655 


5 631 




Botswana


7 278 


7 618 




Seychelles


4 786 


5 036 




Mali


4 767 


5 612 




Haiti


4 748 


6 006 




Burkina Faso


4 649 


6 041 




Samoa


3 986 


5 100 




Vanuatu


1 848 


2 162 




Liberia


1 153 


1 553 




Palau


1 107 


1 384 




Micronesia


759


868




South Africa


2


653




Namibia


—


1 971 




Congo


—


1 730 




Tonga


—


31





Total




1 540 991 




1 666 725 





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 2018


31 12 2017




Tertiary and other


957 602 


991 282 




Urban development, renovation and transport


192 400 


194 101 




Electricity, coal and others


181 317 


290 364 




Basic material and mining


45 820 


59 462 




Materials processing, construction


33 144 


2 194 




Roads and motorways


32 043 


40 960 




Airports and air traffic management systems


29 182 


30 882 




Telecommunications


26 095 


20 310 




Chemicals, plastics and pharmaceuticals


20 436 


—




Food chain


15 386 


15 586 




Waste recuperation


7 564 


8 018 




Social infrastructure, education and health


2


1 100 




Oil, gas and petroleum


—


12 466 





Total




1 540 991 




1 666 725 





3 2 3 5   Credit risk exposure for each internal risk rating
The Facility uses an internal rating methodology in line with the Internal ratings based approach under Basel III The majority of the Facility’s counterparties have been assigned an internal rating according to this methodology The table below shows a breakdown of the Facility’s loan portfolio by the better of the borrower’s or guarantor’s internal ratings, where available In cases where an internal rating is not available, the external rating has been used for this analysis
The table shows both the exposures signed (disbursed and undisbursed) and the risk-weighted exposures, based on an internal methodology that the Facility uses for limit management











in EUR ‘000




2018




 


12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


POCI


FVTPL


Total





Loans and advances at AC



 


 


 


 


 


 




Internal Rating 1 - minimal credit risk


—


90 875 


—


—


—


90 875 




Internal Rating 2 - very low credit risk


74 650 


—


—


—


—


74 650 




Internal Rating 3 - low credit risk


17 804 


—


—


—


—


17 804 




Internal Rating 4 - moderate credit risk


39 295 


18 783 


—


—


—


58 078 




Internal Rating 5 - financially weak counterpart


165 551 


—


—


—


—


165 551 




Internal Rating 6 - high credit risk


834 194 


94 749 


—


—


—


928 943 




Internal Rating 7 - very high credit risk


75 057 


134 701 


—


—


1 806 


211 564 




Internal Rating 8 - counterpart in default


—


—


185 273 


3 588 


—


188 861 




Loss allowance


-22 023 


-27 342 


- 143 092 


-1 794 


-1 084 


- 195 335 





Carrying amount




1 184 528 




311 766 




42 181 




1 794 




722




1 540 991 






Loan commitments



 


 


 


 


 


 




Internal Rating 1 - minimal credit risk


—


—


—


—


—


—




Internal Rating 2 - very low credit risk


102 092 


—


—


—


—


102 092 




Internal Rating 3 - low credit risk


12 000 


—


—


—


—


12 000 




Internal Rating 4 - moderate credit risk


12 463 


—


—


—


—


12 463 




Internal Rating 5 - financially weak counterpart


230 455 


—


—


—


—


230 455 




Internal Rating 6 - high credit risk


567 573 


22 467 


—


—


—


590 040 




Internal Rating 7 - very high credit risk


100 055 


96 074 


—


—


—


196 129 




Internal Rating 8 - counterpart in default


—


—


16 932 


—


—


16 932 




No internal rating (*3)



123 821 


—


—


—


—


123 821 




Loss allowance


-7 225 


-16 597 


—


—


—


-23 822 





Carrying amount




1 141 234 




101 944 




16 932 



—


—



1 260 110 





The Facility continually monitors events affecting its borrowers and guarantors, especially banks In particular, the Facility is assessing on a case-by-case basis its contractual rights in case of rating deterioration and is seeking mitigating measures It is also closely following the renewals of bank guarantees received for its loans to ensure that these are replaced or action is taken in a timely manner if need be
3 2 3 6   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 advances
31 12 2018


Loans and receivables
31 12 2017





Carrying amount



 



1 540 991 




1 666 725 






Lifetime ECL credit-impaired



 


 


 




Gross amount


 


188 861 


136 827 




Impairment- loss allowance


 


- 144 886 


- 106 203 





Carrying amount of lifetime ECL credit-impaired



 



43 975 




30 624 






Past due but not credit- impaired



 


 


 





Past due comprises



 


 


 




0-30 days


 


804


1 227 




30-60 days


 


—


77




60-90 days


 


—


31




90-180 days


 


—


18




more 180 days


 


1


1





Carrying amount past due but not credit- impaired



 



805




1 354 






Carrying amount neither past due nor credit- impaired



 



1 496 211 




1 634 747 






Total carrying amount loans and advances



 



1 540 991 




1 666 725 





3 2 3 7   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 Bank’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 unless the impact of the contractual changes on the net present value of the loan at the date of restructuring is considered significant If such newly recognised financial asset is credit-impaired, it would meet the definition of the POCI financial asset
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 2018


31 12 2017




Number of operations subject to forbearance practices


33


27




Carrying values


280 720 


136 973 




of which impaired


9 506 


112 423 




Impairment recognised


86 334 


107 256 




Interest income in respect of forborne operations


13 465 


8 418 




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


—


9 395 



















in EUR’000




Forbearance measures




 


31 12 2017


Extension of maturities


Deferral of capital only


Deferral of capital and interest


Other


Contractual repayment and termination (29)



31 12 2018




Banks


30 347 


—


290


5 654 


765


-9 464 


27 592 




Corporates


106 626 


3 463 


—


15 271 


143 261 


-15 493 


253 128 





Total




136 973 




3 463 




290




20 925 




144 026 




-24 957 




280 720 





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 2018 and 31 December 2017, investments were in the form of bank deposits, certificates of deposit and commercial papers
The authorized 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 authorized 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 2018 and 31 December 2017 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 All credit exposure limit breaches have been reported to the mandators As at 31 December 2018 all term deposits, commercial papers and cash in hand held by the treasury portfolio of the Facility had a minimum rating of at least P-2 (Moody’s equivalent) at settlement day As at 31 December 2017 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
(Moody’s term)


Minimum long-term rating
(Moody’s term)


31 12 2018


31 12 2017




P-1


Aaa


71 914 


13 %


49 616 


9 %




P-1


Aa3


49 972 


9 %


89 971 


16 %




P-1


A1


199 938 


34 %


143 080 


26 %




P-1


A2


201 899 


35 %


266 434 


49 %




P-2


A3


49 985 


9 %


—


0 %





Total




573 708 




100 %




549 101 




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 2018


less than


1 year


5 years


more than


Total 2018




1 year


to 5 years


to 10 years


to 10 years




Notional amount


—


5 245 


—


—



5 245 





Fair Value (i e net discounted value)


—


-325


—


—



-325


















 


 


 


 


 


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











—


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 1 460,6 million at 31 December 2018 against EUR 1 500,0 million at 31 December 2017 The fair value of FX swaps amounts to EUR 1,1 million at 31 December 2018 against EUR 12,0 million at 31 December 2017










—


The Facility enters into interest rate swap contracts in order to hedge the interest rate risk on loans disbursed As at 31 December 2018 there are two interest rate swaps outstanding with a notional amount of EUR 28,5 million (2017: EUR 31,7 million) and a fair value of EUR 0,7 million (2017: EUR 0,3 million)




3 2 6   Credit risk on treasury financial assets
The following table shows the situation of the treasury portfolio entirely composed of commercial papers issued by sub-sovereigns, banks and non-bank entities with remaining maturities of up to three months EU Member States, their agencies, banks and non-bank entities are eligible issuers The maximum authorized limit for each authorised issuer is EUR 50 000 000 (fifty million euro) Investments in medium and long-term bonds could also be eligible, according to the investment guidelines and depending on liquidity requirements:










Minimum short-term rating
(Moody’s term)


Minimum long-term rating
(Moody’s term)


31 12 2018


31 12 2017




P-1


Aa2


80 041 


24 %


—


0 %




P-1


Aa3


95 055 


29 %


—


0 %




P-1


A1


15 005 


4 %


—


0 %




P-1


A2


45 008 


13 %


—


0 %




P-2


A2


50 015 


15 %


—


0 %




P-2


A3


50 016 


15 %


—


0 %




P-2


Baa2


—


0 %


94 353 


65 %




NP


Ba1


—


0 %


50 029 


35 %





Total




335 140 




100 %




144 382 




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 minimize the liquidity risk, the Facility maintains a liquidity reserve sufficient to cover at any point in time forecasted cash disbursements, as communicated periodically by EIB’s Lending Department Funds are invested on the money market and bond markets in the form of interbank deposits and other short term financial instruments by taking into consideration the Facility’s cash disbursement obligations The Facility’s liquid assets are managed by the Bank’s Treasury Department with a view to maintain appropriate liquidity to enable the Facility to meet its obligations
In accordance with the principle of segregation of duties between the Front and Back Office, settlement operations related to the investment of these assets are under the responsibility of the EIB’s Planning and Settlement of Operations Department Furthermore, the authorisation of counterparts and limits for treasury investments, as well as the monitoring of such limits, are the responsibility of the Bank’s Risk Management Directorate
3 3 2   Liquidity risk measurement
The tables in this section analyse the financial liabilities of the Facility by maturity on the basis of the period remaining between the balance sheet date and the contractual maturity date (based on undiscounted cash flows)
In terms of non-derivative financial liabilities, the Facility holds commitments in form of 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 subsidized loans financed by the Bank’s own resources Therefore, reported outflows represent only commitments related to these loans rather than the total amount of committed 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
In EUR’000 as at 31 12 2018


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




Outflows for committed but un-disbursed loans


7 854 


—


—


—


1 276 077 


1 283 931 




Outflows for committed investment funds and share subscription


2 023 


—


—


—


345 144 


347 167 




Others (signed non-issued guarantees, issued guarantees)


—


—


—


—


1 556 468 


1 556 468 




Outflows for committed interest subsidies


—


—


—


—


360 655 


360 655 




Outflows for committed TA


2 373 


—


—


—


24 082 


26 455 





Total




12 250 



—


—


—



3 562 426 




3 574 676 



















Maturity profile of non-derivative financial liabilities
In EUR’000 as at 31 12 2017


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




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 derivative financial liabilities
In EUR’000 as at 31 12 2018


3 months or less


More than 3 months to 1 year


More than 1 year to 5 years


More than 5 years


Gross nominal inflow/outflow




CCS and CCIRS – Inflows


5


3 281 


1 816 


—


5 102 




CCS and CCIRS – Outflows


—


-4 081 


-1 770 


—


-5 851 




Short term currency swaps – Inflows


1 460 608 


—


—


—


1 460 608 




Short term currency swaps – Outflows


-1 465 498 


—


—


—


-1 465 498 




Interest Rate Swaps – Inflows


397


1 171 


3 473 


204


5 245 




Interest Rate Swaps - Outflows


—


-1 340 


-3 030 


-175


-4 545 





Total




-4 488 




-969




489




29




-4 939 


















Maturity profile of derivative financial liabilities
In EUR’000 as at 31 12 2017


3 months or less


More than 3 months to 1 year


More than 1 year to 5 years


More than 5 years


Gross nominal inflow/outflow




CCS and CCIRS – Inflows


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 





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 2018


31 12 2017





Financial assets:



 


 




Loans and advances


1 666 232 


1 608 488 




Shares and other variable yield securities


567 292 


497 539 




Other assets


171


318





Total




2 233 695 




2 106 345 






Financial liabilities:



 


 




Provisions for guarantees issued


793


549




Amount owed to third parties


93 641 


109 004 




Provisions for loan commitments


23 822 


—





Total




118 256 




109 553 





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 2018 would decrease by EUR 483k (as at 31 December 2017: decrease by EUR 488k) if all relevant interest rates curves are simultaneously shifted upwards in parallel by 1 basis point












in EUR’000




Basis point value
As at 31 12 2018


Money
Market
1 year


Very Short
2 to 3 years


Short
4 to 6 years


Medium
7 to 11 years


Long
12 to 20 years


Extra Long
21 years


Total




Total sensitivity of loans and micro hedging swaps


-38


-94


-168


-154


-29


—


-483



















in EUR’000




Basis point value


Money


Very Short


Short


Medium


Long


Extra Long


Total




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




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 authorized currency
A foreign exchange risk exposure (against the EUR reference currency) arises whenever transactions denominated in currencies other than the EUR are left un-hedged The IF’s foreign exchange risk hedging guidelines are set out below
3 4 2 2 1   Hedging of operations denominated in 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

Policy applicable before 1 January 2018

The unrealised gains/losses and impairment on available-for sale financial assets (IAS 39) 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

Policy applicable after 1 January 2018

The fair value change on shares and other variable yield securities are included in the FX position as per Risk Policies, as well as impairments on loans and advances 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 is 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 2018


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


- 157 177 


-52 111 


- 209 288 


600 271 





Local currencies


(under synthetic hedge) (*)



 


 


 


 




KES


35 806 


252


36 058 


—




TZS


71 195 


814


72 009 


—




DOP


35 311 


821


36 132 


—




UGX


45 731 


769


46 500 


—




RWF


24 176 


17


24 193 


—




HTG, MUR, MZN, XOF, ZMW, BWP, JMD, NGN, ZAR


74 265 


-432


73 833 


—





Total non-EUR currencies




129 307 




-49 870 




79 437 




600 271 






EUR



—



2 834 560 




2 834 560 




3 044 623 






Total EUR and non-EUR




129 307 




2 784 690 




2 913 997 




3 644 894 

















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) (*)


 


 


 


 




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) (*)


 


 


 


 




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 





3 4 2 3   Foreign exchange sensitivity analysis
As at 31 December 2018 a 10 percent depreciation of EUR versus all non-EUR currencies would result in an increase of the contributors’ resources amounting to EUR 8,8 million (31 December 2017: EUR 16,6 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 7,2 million (31 December 2017: EUR 13,6 million)
3 4 2 4   Conversion rates
The following conversion rates were used for establishing the balance sheet at 31 December 2018 and 31 December 2017:







 


31 December 2018


31 December 2017





Non-EU currencies



 


 




Botswana Pula (BWP)


12,2038 


11,7512 




Dominican Republic Pesos (DOP)


57,4037 


57,1465 




Fiji Dollars (FJD)


2,4104 


2,4186 




Haitian Gourde (HTG)


86,92 


75,69 




Jamaican Dollar (JMD)


144 081 


148,7032 




Kenya Shillings (KES)


116,24 


123,7 




Mauritania Ouguiyas (MRO) (*4)



—


422,36 




Mauritania Ouguiyas (MRU) (*4)



41 166 


—




Mauritius Rupees (MUR)


39,05 


40,07 




Mozambican Metical (MZN)


70,14 


70,09 




Nigerian Naira (NGN)


351,05 


367,44 




Rwanda Francs (RWF)


1 020,1 


1 003,37 




Tanzania Shillings (TZS)


2 624,33 


2 681,78 




Uganda Shillings (UGX)


4 239 


4 357 




United States Dollars (USD)


1,145 


1,1993 




Franc CFA Francs (XAF/XOF)


655,957 


655,957 




South Africa Rand (ZAR)


16,4594 


14,8054 




Zambia Kvacha (ZMW)


13,6077 


11,965 




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 equity instruments 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 56,7 million respectively EUR -56,7 million as at 31 December 2018 (EUR 49,8 million respectively EUR -49,8 million as at 31 December 2017)
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















in EUR’000




At 31 December 2018


Carrying amount


Fair value




 


Held for trading


Shares and other variable yield securities


Cash, loans and advances


Treasury financial assets


Other financial liabilities


Total


Level 1


Level 2


Level 3


Total





Financial assets mandatorily measured at FVTPL



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


9 873 


—


—


—


—


9 873 


—


9 873 


—


9 873 




Venture Capital Fund


—


467 152 


—


—


—


467 152 


—


—


467 152 


467 152 




Direct Equity Investment


—


100 140 


—


—


—


100 140 


16 675 


—


83 465 


100 140 




Loans and advances


—


—


720


—


—


720


—


720


—


720





Total




9 873 




567 292 




720



—


—



577 885 




16 675 




10 593 




550 617 




577 885 






Financial assets at AC



 


 


 


 


 


 


 


 


 


 




Cash and cash equivalents


—


—


573 708 


—


—


573 708 


—


—


—


—




Loans and advances


—


—


1 540 271 


—


—


1 540 271 


—


1 760 576 


—


1 760 576 




Amounts receivable from contributors


—


—


100 000 


—


—


100 000 


—


—


—


—




Treasury financial assets


—


—


—


335 140 


—


335 140 


191 475 


145 061 


—


336 536 




Other assets


—


—


171


—


—


171


—


—


—


—





Total



—


—



2 214 150 




335 140 



—



2 549 290 




191 475 




1 905 637 



—



2 097 112 






Total financial assets




9 873 




567 292 




2 214 870 




335 140 



—



3 127 175 



 


 


 


 





Financial liabilities mandatorily measured at FVTPL



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


-8 493 


—


—


—


—


-8 493 


—


-8 493 


—


-8 493 





Total




-8 493 



—


—


—


—



-8 493 



—



-8 493 



—



-8 493 






Financial liabilities at AC:



 


 


 


 


 


 


 


 


 


 




Provisions for guarantees issued


—


—


—


—


-793


-793


 


 


 


 




Provisions for loan commitments


—


—


—


—


-23 822 


-23 822 


 


 


 


 




Amounts owed to third parties


—


—


—


—


- 143 813 


- 143 813 


 


 


 


 




Other liabilities


—


—


—


—


-2 493 


-2 493 


 


 


 


 





Total



—


—


—


—



- 170 921 




- 170 921 



 


 


 


 





Total financial liabilities




-8 493 



—


—


—



- 170 921 




- 179 414 



 


 


 


 






















in EUR’000




At 31 December 2017


Carrying amount


Fair value




 


Held for trading


Available-for-sale


Cash, loans and receivables


Held to maturity


Other financial liabilities


Total


Level 1


Level 2


Level 3


Total




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 


—


—


—


—




Amounts receivable from contributors


—


—


150 000 


—


—


150 000 


—


1 852 507 


—


1 852 507 




Bonds


—


—


—


144 382 


—


144 382 


—


—


—


—




Other assets


—


—


4 385 


—


—


4 385 


144 382 


—


—


144 382 





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 



 


 


 


 




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 advances


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 advances.


Not applicable.


Not applicable.




Treasury 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 2018 and 2017, namely:






—


Credit valuation adjustments (CVA), reflecting counterparty credit risk on derivative transactions, amounting to EUR -37,4k as at 31 December 2018 and to EUR -38k as at 31 December 2017










—


Debit valuation adjustments (DVA), reflecting own credit risk on derivative transactions, amounting to EUR +15,1k as at 31 December 2018 and EUR +29,5k as at 31 December 2017




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 2018 and 2017 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 2018 and 31 December 2017:






in EUR’000




Shares and other variable yield securities





Balance at 1 January 2018




473 081 






Gains or losses included in profit or loss:



 










—


net realised gains on shares and other variable yield securities






-10 622 










—


net fair value change on shares and other variable yield securities






-13 411 





Total




-24 033 





Disbursements


95 434 




Repayments


-11 165 




Write offs


17 300 





Balance at 31 December 2018




550 617 














 


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 2018 and 2017 the Facility did not make transfers out or to Level 3 of the fair value hierarchy
5   Cash and cash equivalents

The cash and cash equivalents are composed of:







in EUR’000




 


31 12 2018


31 12 2017




Cash in hand


51 936 


166 445 




Term deposits


521 882 


367 653 




Commercial papers


—


15 003 





Cash and cash equivalents in the statement of financial position




573 818 




549 101 





Accrued interest


-110


68





Cash and cash equivalents in the cash flow statement




573 708 




549 169 





6   Derivative financial instruments

The main components of derivative financial instruments, classified as held for trading, are as follows:








in EUR’000




At 31 December 2018


Fair Value


Notional amount




 


Assets


Liabilities


 




Cross currency interest rate swaps


340


-665


5 245 




Interest rate swaps


654


—


28 470 




FX swaps


8 879 


-7 828 


1 460 608 





Total derivative financial instruments




9 873 




-8 493 




1 494 323 
















in EUR’000




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 





7   Loans and advances

7 1   
Loans and advances


The following table show reconciliation from the opening to the closing balance of the loans and advances with new ECL IFRS 9 impairment model Comparative impairment amounts for 2017 represent allowance account for credit losses and reflect measurement under IAS 39










in EUR’000




 


Global loans (*5)



Senior loans


Subordinated loans


POCI


Total





Nominal of loans at AC as at 1 January 2018




1 003 294 




687 499 




62 546 



—



1 753 339 





Disbursements


203 352 


52 274 


—


3 588 


259 214 




Write offs


—


—


—


—


—




Repayments


- 192 355 


- 157 952 


-4 548 


—


- 354 855 




Interest capitalised


—


—


—


—


—




Foreign exchange rates differences


37 026 


11 503 


2 719 


—


51 248 





Nominal of loans at AC as at 31 December 2018




1 051 317 




593 324 




60 717 




3 588 




1 708 946 






Impairment – loss allowance as at 1 January 2018




-35 082 




-57 911 




-62 546 



—



- 155 539 





Net changes of the 12 month ECL


-1 853 


288


—


—


-1 565 




Net changes of lifetime ECL not credit-impaired


4 696 


870


-2 146 


—


3 420 




Lifetime ECL credit-impaired


-71 204 


—


—


-1 794 


-72 998 




Reversal of lifetime ECL credit-impaired


2 214 


8 480 


37 678 


—


48 372 




Write offs


—


—


—


—


—




Foreign exchange rates differences


-2 639 


-1 336 


-2 346 


—


-6 321 





Impairment – loss allowance as at 31 December 2018




- 103 868 




-49 609 




-29 360 




-1 794 




- 184 631 






Loans and advances AC as at 31 December 2018




947 449 




543 715 




31 357 




1 794 




1 524 315 






Nominal of loans at FVTPL as at 1 January 2018




1 800 



—


—


—



1 800 





Disbursements


—


—


—


—


—




Repayments


—


—


—


—


—




Write offs


—


—


—


—


—




Foreign exchange rates differences


—


—


—


—


—





Nominal of loans at FVTPL as at 31 December 2018




1 800 



—


—


—



1 800 






Fair value adjustment as at 1 January 2018




-378



—


—


—



-378





Net FV change


-702


—


—


—


-702




Foreign exchange rates differences


—


—


—


—


—





Fair value adjustment as at 31 December 2018




-1 080 



—


—


—



-1 080 






Loans and advances at FVTPL as at 31 December 2018




720



—


—


—



720





Amortised Cost


-3 550 


-3 109 


11


—


-6 648 




Interest


12 330 


9 243 


1 031 


—


22 604 





Loans and advances as at 31 December 2018




956 949 




549 849 




32 399 




1 794 




1 540 991 

















in EUR’000




 


Global loans (*5)



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 




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 





7 2   
Impairment on loans and advances – Loss allowances












in EUR’000




2018




 


12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


POCI


Total





Loans and advances at AC



 


 


 


 


 




Balance at 1 January 2018


19 738 


29 975 


105 826 


—


155 539 




Transfer to 12-month ECL


2 285 


—


—


—


2 285 




Transfer to lifetime ECL not credit-impaired


—


-2 633 


—


—


-2 633 




Transfer to lifetime ECL credit-impaired


—


—


27 646 


1 794 


29 440 




Financial assets that have been derecognised


—


—


—


—


—




Write-offs


—


—


—


—


—





Balance at 31 December 2018




22 023 




27 342 




133 472 




1 794 




184 631 





8   Shares and other variable yield securities

The following table show reconciliation from the opening to the closing balance of the Equity investments with new measurement policy under IFRS 9 Comparative amounts for 2017 represent measurement under IAS 39 when equity instruments were classified under available-for-sale portfolio:








in EUR’000




 


Venture Capital Funds


Direct Equity Investments


Total





Cost as at 1 January 2018




356 086 




70 310 




426 396 





Disbursements


73 250 


22 184 


95 434 




Repayments / sales


-21 681 


-635


-22 316 




Foreign exchange rates differences on repayments / sales


13 938 


1 355 


15 293 





Cost as at 31 December 2018




421 593 




93 214 




514 807 






Unrealised gains and losses as at 1 January 2018




64 018 




7 125 




71 143 





Net change in unrealised gains and losses


-20 493 


-172


-20 665 




Foreign exchange rates differences on unrealised gains and losses


2 034 


-27


2 007 





Unrealised gains and losses as at 31 December 2018




45 559 




6 926 




52 485 






Shares and other variable yield securities as at 31 December 2018




467 152 




100 140 




567 292 
















in EUR’000




 


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


-38 990 


-708


-39 698 




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




356 086 




70 310 




426 396 






Unrealised gains and losses as at 1 January 2017




129 427 




13 457 




142 884 





Net change in unrealised gains and losses


-20 930 


-1 008 


-21 938 





Unrealised gains and losses as at 31 December 2017




108 497 




12 449 




120 946 






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 





9   Amounts receivable from contributors

The amounts of EUR 100 000 receivable from contributors are entirely composed of Member States contribution called but not paid
10   Treasury financial assets

The treasury 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 treasury portfolio:






 


in EUR’000





Balance as at 1 January 2018




144 382 





Acquisitions


2 219 062 




Maturities


-2 026 659 




Change in amortisation of premium/discount


149




Change in accrued interest


-1 794 





Balance as at 31 December 2018




335 140 














 


in EUR’000





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 





11   Other assets

The main components of other assets are as follows:







in EUR’000




 


31 12 2018


31 12 2017




Amount receivable from EIB


—


4 117 




Financial guarantees


171


268





Total other assets




171




4 385 





12   Deferred income

The main components of deferred income are as follows:







in EUR’000




 


31 12 2018


31 12 2017




Deferred interest subsidies


32 658 


24 895 




Deferred commissions on loans and advances


1 106 


907





Total deferred income




33 764 




25 802 





13   Provisions for guarantees issued

The following tables show reconciliation from the opening to the closing balance of the provision for financial guarantees under new ECL IFRS 9 model Comparative amounts for 2017 represent the provision for guarantees issued that has been recognized under IAS 39 as there is objective evidence that the Facility will have to incur a loss in respect of guarantees granted









in EUR’000




2018




 


12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


Total





Guarantees issued



 


 


 


 




Balance at 1 January


—


484


—


484




Transfer to 12-month ECL


94


—


—


94




Transfer to lifetime ECL not credit-impaired


—


391


—


391




Transfer to lifetime ECL credit-impaired


—


—


—


—




Guarantees that have been derecognised


—


—


—


—




Guarantee calls


—


—


—


—




Amortisation of upfront fees


—


-128


—


-128




Foreign exchange rates differences


—


-48


—


-48





Balance at 31 December




94




699



—



793














2017




Balance at 1 January


625




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


65




Utilised


-206




Transfer from “Other liabilities”, financial guarantees


—





Balance at 31 December




484





14   Provisions for loan commitments

The following table shows reconciliation from the opening to the closing balance of the loss allowance for undisbursed loans (loan commitments) under new ECL IFRS 9 model Comparative amounts for 2017 represent allowance account for credit losses and reflect measurement under IAS 39









in EUR’000




2018




 


12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


Total





Loans commitments



 


 


 


 




Balance at 1 January


1 993 


2 163 


—


4 156 




Transfer to 12-month ECL


5 192 


—


—


5 192 




Transfer to lifetime ECL not credit-impaired


—


14 420 


—


14 420 




Transfer to lifetime ECL credit-impaired


—


—


—


—




Foreign exchange rates differences


40


14


—


54





Balance at 31 December




7 225 




16 597 



—



23 822 





15   Amounts owed to third parties

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







in EUR’000




 


31 12 2018


31 12 2017




Net general administrative expenses payable to EIB


47 799 


45 105 




Other amounts payable to EIB


54


580




Interest subsidies and TA not yet disbursed owed to Member States


95 960 


111 600 





Total amounts owed to third parties




143 813 




157 285 





16   Other liabilities

The main components of other liabilities are as follows:







in EUR’000




 


31 12 2018


31 12 2017




Loan repayments received in advance


2 124 


1 986 




Deferred income from interest subsidies


369


436




Financial guarantees


—


40





Total other liabilities




2 493 




2 462 





17   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




Austria


69 935 


8 869 


78 804 


2 410 




Belgium


103 226 


13 046 


116 272 


3 530 




Bulgaria


896


294


1 190 


140




Cyprus


576


189


765


90




Czechia


3 264 


1 071 


4 335 


510




Denmark


56 820 


7 275 


64 095 


2 000 




Estonia


320


105


425


50




Finland


39 852 


5 214 


45 066 


1 470 




France


624 971 


75 972 


700 943 


19 550 




Germany


611 715 


76 616 


688 331 


20 500 




Greece


35 121 


4 883 


40 004 


1 470 




Hungary


3 520 


1 155 


4 675 


550




Ireland


18 577 


2 802 


21 379 


910




Italy


340 252 


45 025 


385 277 


12 860 




Latvia


448


147


595


70




Lithuania


768


252


1 020 


120




Luxembourg


7 693 


984


8 677 


270




Malta


192


63


255


30




Netherlands


138 415 


17 685 


156 100 


4 850 




Poland


8 320 


2 730 


11 050 


1 300 




Portugal


27 313 


3 809 


31 122 


1 150 




Romania


2 368 


777


3 145 


370




Slovakia


1 344 


441


1 785 


210




Slovenia


1 152 


378


1 530 


180




Spain


170 369 


24 876 


195 245 


7 850 




Sweden


73 692 


9 677 


83 369 


2 740 




United Kingdom


355 881 


49 356 


405 237 


14 820 





Total as at 31 December 2018




2 697 000 




353 691 




3 050 691 




100 000 






Total as at 31 December 2017




2 517 000 




333 691 




2 850 691 




150 000 





On 12 November 2018, the Council fixed the amount of financial contributions to be paid by each Member State by 21 January 2019 As at 31 December 2018 EUR 100 000 were not paid in
18   Contingent liabilities and commitments








in EUR’000




 


31 12 2018


31 12 2017






Commitments




 


 




Un-disbursed loans


1 283 931 


869 983 




Un-disbursed commitment in respect of shares and other variable yield securities


347 167 


321 695 




Issued guarantees


2 800 


7 682 




Interest subsidies and technical assistance


457 328 


382 576 






Contingent liabilities




 


 




Signed non-issued guarantees


1 553 668 


74 569 





Total contingent liabilities and commitments




3 644 894 




1 656 505 





19   Interest and similar income and expenses

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







in EUR’000




 


From 1 1 2018


From 1 1 2017




 


to 31 12 2018


to 31 12 2017




Loans and advances


92 506 


97 440 




Interest subsidies


4 224 


3 966 





Total interest and similar income




96 730 




101 406 





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







in EUR’000




 


From 1 1 2018


From 1 1 2017




 


to 31 12 2018


to 31 12 2017




Derivative financial instruments


-563


-980




Cash and cash equivalents


-654


-1 037 




Treasury financial assets


-1 322 


-654





Total interest and similar expense




-2 539 




-2 671 





20   Fee and commission income and expenses

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







in EUR’000




 


From 1 1 2018


From 1 1 2017




 


to 31 12 2018


to 31 12 2017




Fee and commission on loans and advances


107


—




Fee and commission on financial guarantees


170


209




Other


7


1





Total fee and commission income




284




210





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







in EUR’000




 


From 1 1 2018


From 1 1 2017




 


to 31 12 2018


to 31 12 2017




Commission paid to third parties with regard to shares and other variable yield securities


-106


-60





Total fee and commission expenses




-106




-60





21   Net result on shares and other variable yield securities

The main components of net realised gains on shares and other variable yield securities are as follows:







in EUR’000




 


From 1 1 2018


From 1 1 2017




 


to 31 12 2018


to 31 12 2017




Net proceeds from shares and other variable yield securities


3 166 


1 030 




Dividend income


7 320 


1 681 




Net fair value change


-20 665 


—





Net result on shares and other variable yield securities




-10 179 




2 711 





22   General administrative expenses

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







in EUR’000




 


From 1 1 2018


From 1 1 2017




 


to 31 12 2018


to 31 12 2017




Actual cost incurred by the EIB


-50 021 


-48 285 




Income from appraisal fees directly charged to clients of the Facility


2 222 


3 180 





Total general administrative expenses




-47 799 




-45 105 





23   Involvement with unconsolidated structured entities


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










in EUR’000




Type of structured entity


Caption


Carrying amount at 31 12 2018


Carrying amount at 31 12 2017


Maximum exposure to loss at 31 12 2018


Maximum exposure to loss at 31 12 2017




Venture capital funds


Shares and other variable yield securities


467 152 


420 104 


797 775 


737 661 





Total



 



467 152 




420 104 




797 775 




737 661 





24   Impact financing envelope

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:










in EUR’000




Type of IFE investment


Caption


Carrying amount at 31 12 2018


Carrying amount at 31 12 2017


Undisbursed amount at 31 12 2018


Undisbursed amount at 31 12 2017




Social impact equity funds


Shares and other variable yield securities


19 134 


7 839 


53 672 


51 720 




Loans to financial intermediaries


Loans and advances


36 277 


30 804 


139 329 


44 017 




Risk sharing facilitating instruments


Issued guarantees


-786


-296


43 668 


64 569 




Direct financing – equity participations


Shares and other variable yield securities


53 183 


42 981 


1 014 


4 014 





Total



 



107 808 




81 328 




237 683 




164 320 





25   Subsequent events

There have been no material post balance sheet events which could require disclosure or adjustment to the 31 December 2018 financial statements


(1)  OJ L 210, 6 8 2013, p 1


(2)  Council Regulation (EU) 2018/1877 of 26 November 2018 on the financial regulation applicable to the 11th European Development Fund, and repealing Regulation (EU) 2015/323 (OJ L 307, 3 12 2018, p 1)

(3)  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

(4)  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 and liabilities, inter-EDF accounts should be deducted in order to reconcile them to the totals on the EDF Balance sheet

(5)  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

(6)  In accordance with Article 53 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

(7)  OJ L 80I, 22 3 2019, p 1


(8)  OJ L 101, 11 4 2019, p 1


(9)  OJ L 149, 7 6 2016, p 1


(10)  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

(11)  Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30 7 2018, p 1)

(12)  Council Regulation (EU) 2018/1877

(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)  Regulation (EU, Euratom) 2018/1046

(15)  Council Regulation (EU) 2018/1877

(16)  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

(17)  OJ L 314, 30 11 2001, p 1


(18)  OJ L 109, 26 4 2007, p 33


(19)  OJ L 212, 5 8 2016, p 107


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

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

(22)  Following Council Decision 2010/406/EU (OJ L 189, 22 7 2010, p 14), 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)

(23)  Following Council Decision 2011/315/EU (OJ L 142, 28 5 2011, p 61), 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)

(24)  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 transferred to 9th EDF)

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

(26)  For the cofinancings, the table only presents the commitment appropriations

(27)  Council Decision No 2013/759/EU (OJ L 335, 14 12 2013, p 48) 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

(28)  % of appropriations

(*2)  As at 31 December 2017, the Facility had classified equity investments as available-for-sale, while from 1 January 2018, with the IFRS 9 adoption, the Facility has reclassified equity investments to shares and other variable yield securities measured at FVTPL The related fair value reserve of EUR 125 816 thousands as at 31 December 2017 has been released against the Facility’s retained earnings as an opening balance adjustment (Note 2 5) Additionally, EUR 49 712 thousands representing the ECL impairment recognised for performing, Stage 1 and Stage 2 operations of the debt lending portfolio, as well as EUR 4 156 thousands ECL provision for undisbursed exposures of performing, Stage 1 and Stage 2 operations of the debt portfolio were included in the Retained earnings 2018 opening balance For detailed reconciliation please refer to note 2 5

(*3)  agency agreements for which at reporting date there is no underlying counterparts

(29)  Decreases are explained by repayments of capital occurred during the year on operations already considered as forborne as of 31 December 2018 and by termination of forborne measures during the year

(*4)  The MRU was introduced as at 1 January 2018, replacing the old MRO at a rate of 1 MRU = 10 MRO

(*5)  including agency agreements