Communication from the Commission to the European Parliament, the Council and the Court of Auditors – Annual accounts of the European Development Fund 2020
Date: 2021-10-28
Institutions: European Commission
Subjects: European Development Fund, balance sheet, closing of accounts, consolidated account, general budget (EU), implementation of the budget




C_2021438EN.01000101.xml










28.10.2021   


EN


Official Journal of the European Union


C 438/1






COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS
Annual accounts of the European Development Fund 2020
(2021/C 438/01)

CONTENTS






CERTIFICATION OF THE ACCOUNTS
2








IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES
3








FUNDS MANAGED BY THE EUROPEAN COMMISSION
7








FINANCIAL STATEMENTS OF THE EDF
9








FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF
46








FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2020
47








FINANCIAL STATEMENTS OF THE EUTF AFRICA 2020
54








CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS
61








EDF REPORT ON FINANCIAL IMPLEMENTATION
66








ANNUAL REPORT ON IMPLEMENTATION — FUNDS MANAGED BY THE EUROPEAN INVESTMENT BANK
93




CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2020 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


22 June 2021




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 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 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 5 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, managed by the EIB, and 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 Council of 2 December 2013 adopted the Regulation (EU, Euratom) No 1311/2013 laying down the multiannual financial framework for 2014-2020 (3). In this context, it was decided that geographical cooperation with the ACP States would not be integrated into the EU budget, 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 in principle for 1 year. Unlike the EU Budget, the EDF is a fund operating based on multi-annuality, to implement development cooperation during a period of usually 5 years. As resources are allocated on a multi-annual basis, the allocated funds may be used over the period of the EDF. This multiannual approach 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 5 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 co-financing arrangements or to make voluntary financial contributions to the EDF.
3.   EDF ACTIVITIES AFTER 31 DECEMBER 2020

The 11th EDF has reached its final stage as the sunset clause came into effect on 31 December 2020. This clause sets a cut-off date for commitments under the 11th EDF. As of 2021 no further financing agreements can be signed under the 11th EDF. However, specific contracts for the existing financing agreements will still be signed until 31 December 2023.
To ensure continuity of the development programmes, from 2021, the EDF programmes will be included in the EU multi-annual financial framework (MFF). This means that while so far the EDF programmes were funded by the voluntary contributions of EU Member States as of 2021 development programmes will be funded through the EU budget. This also implies that the funding of development programmes will be subject to the authorisation of the European Parliament and that the transactions will have to comply with the EU financial regulations in the same way as other EU funding programmes.
4.   DEPARTURE OF UNITED KINGDOM FROM THE EUROPEAN UNION

On 1 February 2020, the United Kingdom ceased to be a Member State of the European Union. Following the conclusion of the Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (the ‘Withdrawal Agreement or WA’) between the two parties, the United Kingdom committed to pay all its obligations under the current MFF and previous financial perspectives as if it were still a Member State. The UK continued involvement with the EDF is dealt with under Part Five, Chapter 5 of the WA.
According to Article 152 of the WA, the United Kingdom remains party to the EDF until the closure of the 11th EDF and all previous unclosed EDFs, and assumes the same obligations as the Member States in this respect. UK beneficiaries remain eligible to participate in projects under the 11th EDF and previous EDFs under the same conditions as before. The UK may participate, as an observer, without voting rights, in the EDF Committee and the Investment Facility Committee (Article 152(2) WA). The UK share of the Investment Facility of the EDF shall be reimbursed to the UK as the investment matures. Unless agreed otherwise, the United Kingdom's capital share shall not be recommitted beyond the end of the 11th EDF commitment period or rolled over into subsequent periods (Article 152(4) WA).
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 the 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 the 11th EDF after 31 December 2020 (Article 153).
The UK remains liable in respect of the guarantees provided under all EDFs. At the same time it is entitled to its share of any amount recovered under the terms of the Member States' guarantees and to the balance of its Member State Call Account in proportion to its respective participation in each guarantee agreement (Article 154).
At the time of the transmission of these provisional accounts, and based on the WA concluded and already in operation, there is no financial impact to be reported in the EDF annual accounts.
5.   YEAR-END REPORTING

5.1.   ANNUAL ACCOUNTS

In accordance with Articles 18(3) of the EDF Financial Regulation, the EDF financial statements are prepared based on 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 also the Accounting Officer of the EDF. She ensures that the annual accounts of the 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 no later than 31 July of the year following the balance sheet date and presented to the European Parliament and to the Council for discharge.
6.   AUDIT AND DISCHARGE

6.1.   AUDIT

The EDF annual accounts are audited 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.
6.2.   DISCHARGE

The final control of the financial implementation of the EDF resources for a given financial year is the discharge. 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 of the discharge authority.

HIGHLIGHTS OF FINANCIAL IMPLEMENTATION 2020






Net amount, only 10th & 11th EDF.

Budget implementation

In 2020 the financial implementation (10th and 11th EDF) for decisions (global commitments: 2 687 million euros), contracts (individual commitments: 3 670 million euros) and payments (4 599 million euros) were all impacted by the EU response to the unpredicted crisis of COVID-19, which became a priority for the Commission. Therefore 2020 was a record year for payments, due to the increased disbursements to projects contributing to fighting the COVID crisis. This also led to the acceleration of the absorption period, which improved to 3 years in 2020. The sunset clause for the 11th EDF was reached on the 31st of December 2020. This means that as of 2021 there will be no further global commitments of projects under the 11th EDF (for the details please refer to Report on Financial Implementation section).

Impact of the activities in the financial statements

In the financial statements, the impact of the above mentioned activities is most visible when looking at:






—


Pre-financing (see note 2.2): an increase by EUR 29 million largely as a result of the new contracts signed and advances paid during 2020;










—


The aid instrumens expenses (see note 3.3): a substantial increase (by EUR 852 million) as a result of the increased activity during the year in order to combat the negative effects of the COVID-19 pandemic, in particular as projects were reoriented to deal with the crisis, but also due to the normal lifecycle of the EDF whereby the activities of the 11th EDF are peaking.










—


Cash and cash equivalents (see note 2.5): a decrease by EUR 451 million as a result of the significant increase in payments during the year to cover the augmented expenses and advances made on new contracts;










—


Accrued charges (see note 2.8): an increased by EUR 208 million as a result of the increase in the number of open contracts at the end of the year for which no cost claims were validated at the year end.





FUNDS MANAGED BY THE EUROPEAN COMMISSION


CONTENTS






FINANCIAL STATEMENTS OF THE EDF
9








EDF BALANCE SHEET
10








EDF STATEMENT OF FINANCIAL PERFORMANCE
11








EDF CASHFLOW STATEMENT
12








EDF STATEMENT OF CHANGES IN NET ASSETS
13








BALANCE SHEET BY EDF
14








STATEMENT OF FINANCIAL PERFORMANCE BY EDF
16








STATEMENT OF CHANGES IN NET ASSETS BY EDF
17








NOTES TO THE FINANCIAL STATEMENTS OF THE EDF
20








FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF
46








FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2020
47








BALANCE SHEET
52








STATEMENT OF FINANCIAL PERFORMANCE
53








CASHFLOW STATEMENT
53








FINANCIAL STATEMENTS OF THE EUTF AFRICA 2020
54








BALANCE SHEET
59








STATEMENT OF FINANCIAL PERFORMANCE
60








CASHFLOW STATEMENT
60








CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS
61








CONSOLIDATED BALANCE SHEET
62








CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
63








CONSOLIDATED CASH FLOW STATEMENT
64








CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
65








EDF REPORT ON FINANCIAL IMPLEMENTATION
66




FINANCIAL STATEMENTS OF THE EDF (4)


EDF BALANCE SHEET









EUR million




 


Note


31.12.2020


31.12.2019





NON-CURRENT ASSETS



 


 


 





Financial assets




2.1




33




36






Pre-financing




2.2




873




910






Trust Fund contributions




2.3




394




266





 


 



1 300 




1 213 






CURRENT ASSETS



 


 


 





Pre-financing




2.2




1 355 




1 288 






Exchange receivables and non-exchange recoverables




2.4




140




123






Cash and cash equivalents




2.5




728




1 179 





 


 



2 223 




2 590 






TOTAL ASSETS



 



3 523 




3 803 






NON-CURRENT LIABILITIES



 


 


 





Financial liabilities




2.6




(2)




(19)





 


 



(2)




(19)






CURRENT LIABILITIES



 


 


 





Payables




2.7




(615)




(516)






Accrued charges and deferred income




2.8




(1 527 )




(1 319 )





 


 



(2 143 )




(1 835 )






TOTAL LIABILITIES



 



(2 145 )




(1 854 )






NET ASSETS



 



1 379 




1 948 






FUNDS & RESERVES



 


 


 





Fair value reserve




2.9




(5)




(2)






Called fund capital — active EDFs




2.10




58 986 




54 809 






Called fund capital from closed EDFs carried forward




2.10




2 252 




2 252 






Economic result carried forward from previous years



 



(55 111 )




(51 155 )






Economic result of the year



 



(4 744 )




(3 956 )






NET ASSETS



 



1 379 




1 948 









EDF STATEMENT OF FINANCIAL PERFORMANCE









EUR million




 


Note


2020


2019





REVENUE



 


 


 





Revenue from non-exchange transactions




3.1



 


 





Recovery activities



 



92




28





 


 



92




28






Revenue from exchange transactions




3.2



 


 





Financial revenue



 



6




7






Other revenue



 



37




39





 


 



43




46






Total Revenue



 



135




74






EXPENSES



 


 


 





Aid instruments




3.3




(4 607 )




(3 755 )






Co-financing expenses




3.4




(53)




(14)






Finance costs




3.5




(21)




(1)






Other expenses




3.6




(197)




(260)






Total Expenses



 



(4 878 )




(4 030 )






ECONOMIC RESULT OF THE YEAR



 



(4 744 )




(3 956 )









EDF CASHFLOW STATEMENT









EUR million




 


Note


2020


2019





Economic result of the year



 



(4 744 )




(3 956 )






Operating activities



 


 


 





Capital increase — contributions (net)



 



4 177 




4 385 






(Increase)/decrease in trust funds contributions



 



(127)




(65)






(Increase)/decrease in pre-financing



 



(29)




136






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



 



(17)




15






Increase/(decrease) in financial liabilities



 



(17)




2






Increase/(decrease) in payables



 



99




275






Increase/(decrease) in accrued charges and deferred income



 



209




37






Other non-cash movements



 



(3)




(2)






Investing activities



 


 


 





(Increase)/decrease in available for sale financial assets



 



2




(36)






NET CASHFLOW



 



(452)




792






Net increase/(decrease) in cash and cash equivalents



 



(451)




792






Cash and cash equivalents at the beginning of the year




2.5




1 179 




387






Cash and cash equivalents at year-end




2.5




728




1 179 









EDF STATEMENT OF CHANGES IN NET ASSETS













EUR million




 


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)


Fair value reserve
(F)


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






BALANCE AS AT 31.12.2018





73 264 




22 840 




50 423 




(51 155 )




2 252 




—




1 521 






Fair value movements



 


 


 


 



(2)



 



(2)






Capital increase — contributions




—




(4 385 )




4 385 




—




—



 



4 385 






Economic result of the year




—




—




—




(3 956 )




—



 



(3 956 )







BALANCE AS AT 31.12.2019





73 264 




18 455 




54 809 




(55 111 )




2 252 




(2)




1 948 






Fair value movements



 


 


 


 


 



(3)




(3)






Capital increase — contributions




(223)




(4 400 )




4 177 




—




—



 



4 177 






Economic result of the year




—




—




—




(4 744 )




—



 



(4 744 )







BALANCE AS AT 31.12.2020





73 041 




14 055 




58 986 




(59 854 )




2 252 




(5)




1 378 









BALANCE SHEET BY EDF

















EUR million




 


 


31.12.2020


31.12.2019




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total





NON-CURRENT ASSETS



 


 


 


 


 


 


 


 


 


 


 





Financial assets




2.1




—




—




(2)




35




33




—




—




—




36




36






Pre-financing




2.2




—




3




292




578




873




—




6




325




580




910






Trust Fund contributions




2.3




—




29




9




355




394




—




—




—




266




266





 


 



—




33




299




969




1 300 




—




6




325




882




1 213 






CURRENT ASSETS



 


 


 


 


 


 


 


 


 


 


 





Pre-financing




2.2




—




9




341




1 005 




1 355 




—




26




441




821




1 288 






Exchange receivables and non-exchange recoverables




2.4




181




(177)




1 723 




(1 586 )




140




183




121




2 201 




(2 382 )




123






Inter-EDF accounts



 



181




(246)




1 663 




(1 598 )




—




182




53




2 160 




(2 395 )




—






Cash and cash equivalents




2.5




—




—




—




728




728




—




—




—




1 179 




1 179 





 


 



362




(414)




3 726 




(1 451 )




2 224 




365




201




4 801 




(2 777 )




2 590 






TOTAL ASSETS



 



362




(381)




4 025 




(483)




3 523 




365




207




5 127 




(1 896 )




3 803 







NON-CURRENT LIABILITIES




 


 


 


 


 


 


 


 


 


 


 





Financial liabilities




2.6




—




—




—




(2)




(2)




—




—




(1)




(18)




(19)





 


 



—




—




—




(2)




(2)




—




—




(1)




(18)




(19)






CURRENT LIABILITIES



 


 


 


 


 


 


 


 


 


 


 





Payables




2.7




—




(1)




(62)




(554)




(615)




—




(5)




(108)




(404)




(516)






Accrued charges and deferred income




2.8




—




(67)




(217)




(1 244 )




(1 527 )




—




(96)




(240)




(983)




(1 319 )





 


 



—




(67)




(279)




(1 798 )




(2 143 )




—




(101)




(348)




(1 386 )




(1 835 )






TOTAL LIABILITIES



 



—




(67)




(279)




(1 800 )




(2 145 )




—




(101)




(349)




(1 405 )




(1 854 )






NET ASSETS



 



362




(448)




3 747 




(2 282 )




1 379 




365




106




4 778 




(3 300 )




1 948 






Fair value reserves




2.9




—




—




(2)




(4)




(5)




—




—




—




(2)




(2)






Called fund capital — active EDFs




2.10




12 164 




10 535 




20 960 




15 327 




58 986 




12 164 




10 758 




20 960 




10 927 




54 809 






Called fund capital from closed EDFs carried forward




2.10




627




1 625 




—




—




2 252 




627




1 625 




—




—




2 252 






Called fund capital transfers between active EDFs




2.10




(2 512 )




2 041 




188




283




—




(2 510 )




2 109 




265




136




—






Economic result carried forward from previous years



 



(10 098 )




(14 440 )




(18 606 )




(11 966 )




(55 111 )




(10 098 )




(14 406 )




(18 077 )




(8 573 )




(51 155 )






Economic result of the year



 



—




36




(457)




(4 324 )




(4 744 )




—




(34)




(529)




(3 393 )




(3 956 )






NET ASSETS



 



181




(203)




2 084 




(683)




1 379 




183




53




2 618 




(905)




1 948 









STATEMENT OF FINANCIAL PERFORMANCE BY EDF

















EUR million




 


 


2020


2019




Note


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



 



(1)




5




69




19




92




—




—




18




10




28





 


 



(1)




5




69




19




92




—




—




18




10




28






Revenue from exchange transactions




3.2



 


 


 


 


 


 


 


 


 


 





Financial revenue



 



—




5




1




1




6




—




—




3




4




7






Other revenue



 



—




5




18




13




37




1




6




21




12




39





 


 



—




10




19




13




43




1




6




24




16




46






Total revenue



 



(1)




15




88




32




135




1




6




42




26




74






EXPENSES



 


 


 


 


 


 


 


 


 


 


 





Aid instruments




3.3




—




34




(462)




(4 179 )




(4 607 )




—




(35)




(579)




(3 141 )




(3 755 )






Co-financing expenses




3.4




—




—




(41)




(12)




(53)




—




—




(9)




(5)




(14)






Finance costs




3.5




1




(3)




(16)




(4)




(21)




—




2




(2)




(1)




(1)






Other expenses




3.6




—




(9)




(25)




(162)




(197)




(1)




(8)




20




(272)




(260)






Total expenses



 



1




21




(545)




(4 356 )




(4 878 )




(1)




(40)




(571)




(3 418 )




(4 030 )






ECONOMIC RESULT OF THE YEAR



 



—




36




(457)




(4 324 )




(4 744 )




—




(35)




(529)




(3 393 )




(3 956 )






STATEMENT OF CHANGES IN NET ASSETS BY EDF













EUR million




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 31.12.2018




12 164 




—




12 164 




(10 098 )




627




(2 509 )




184






Transfers to/from the 10th EDF



 


 



—



 


 



(1)




(1)






BALANCE AS AT 31.12.2019




12 164 




—




12 164 




(10 098 )




627




(2 510 )




183






Transfers to/from the 10th EDF



 


 



—



 


 



(2)




(2)






BALANCE AS AT 31.12.2020




12 164 




—




12 164 




(10 098 )




627




(2 512 )




181




















EUR million




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 31.12.2018




10 773 




—




10 773 




(14 406 )




1 625 




2 137 




129






Transfers to/from the 10th EDF



 



15




(15)



 


 


 



(15)






Transfers to/from the 10th EDF



 


 



—



 


 



(27)




(27)






Economic result of the year



 


 



—




(34)



 


 



(34)






BALANCE AS AT 31.12.2019




10 773 




15




10 758 




(14 440 )




1 625 




2 109 




53






Capital increase — contributions



 



—




—



 


 


 



—






Transfers to/from the 10th EDF



 


 



—



 


 



(69)




(69)






Refund to Member States




(223)



 



(223)



 


 


 


 





Economic result of the year



 


 



—




—



 



—




—






BALANCE AS AT 31.12.2020




10 550 




15




10 535 




(14 440 )




1 625 




2 041 




(203)




















EUR million




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 31.12.2018




20 960 




—




20 960 




(18 077 )




—




55




2 938 






Transfers to/from the Eighth and Ninth EDF



 


 



—



 


 



28




28






Transfers to/from the 11th EDF



 


 



—



 


 



181




181






Economic result of the year



 


 



—




(529)



 


 



(529)






BALANCE AS AT 31.12.2019




20 960 




—




20 960 




(18 606 )




—




265




2 618 






Transfers to/from the Eighth and Ninth EDF



 


 



—



 


 



71




71






Transfers to/from the 11th EDF



 


 



—



 


 



(147)




(147)






Economic result of the year



 


 



—




(457)



 



—




(457)






BALANCE AS AT 31.12.2020




20 960 




—




20 960 




(19 063 )




—




188




2 084 





















EUR million




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)


Fair value reserve
(G)


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





BALANCE AS AT 31.12.2018




29 367 




22 840 




6 527 




(8 573 )




—




317




—




(1 729 )






Fair value movements



 


 


 


 


 



—




(2)




(2)






Capital increase — contributions



 



(4 400 )




4 400 



 


 


 


 



4 400 






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



 


 



—



 



—




(181)



 



(181)






Economic result of the year



 


 



—




(3 393 )



 



—



 



(3 393 )






BALANCE AS AT 31.12.2019




29 367 




18 440 




10 927 




(11 966 )




—




136




(2)




(905)






Fair value movements



 


 


 


 


 


 



(2)




(2)






Capital increase — contributions



 



(4 400 )




4 400 



 


 



147



 



4 547 






Economic result of the year



 


 



—




(4 324 )



 



—



 



(4 324 )






BALANCE AS AT 31.12.2020




29 367 




14 040 




15 327 




(16 290 )




—




283




(4)




(683)






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 stakeholders.
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 thousands of euros, the euro being the EU’s functional 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


31.12.2020


31.12.2019


Currency


31.12.2020


31.12.2019





BGN




1,9558 




1,9558 




PLN




4,5597 




4,2568 






CZK




26,2420 




25,4080 




RON




4,8683 




4,783 






DKK




7,4409 




7,4715 




SEK




10,0343 




10,4468 






GBP




0,8990 




0,8508 




CHF




1,0802 




1,0854 






HRK




7,5519 




7,4395 




JPY




126,4900 




121,9400 






HUF




363,8900 




330,5300 




USD




1,2271 




1,1234 





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: amounts for employee benefit liabilities, accrued and deferred revenue and charges, provisions, financial risk on accounts receivable, 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.
1.2.4.   Application of new and amended European Union Accounting Rules (EAR)


New EAR which are effective for annual periods beginning on or after 1 January 2020

There are no new EAR which became effective for annual periods beginning on or after 1 January 2020.

New EAR adopted but not yet effective at 31 December 2020

On 17 December 2020 the Accounting Officer of the European Commission adopted the revised EAR 11 ‘Financial Instruments’, which is effective for accounting periods beginning on or after 1 January 2021. The revised EAR 11 has been updated in line with the new IPSAS 41 ‘Financial Instruments’ and establishes the principles for the financial reporting of the financial assets and financial liabilities held by the EU entities. For more information please refer to the EU annual accounts of 2020. No material impact of this change is expected due to the small amount of financial instruments in the financial statements of the entity.
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 presented 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 3 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 their trade date, i.e. 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. Thus, as the entity retains control over the pre-financing and is entitled to a refund for the ineligible part, the amount is recognised as an asset.
Pre-financing is initially recognised on the balance sheet when cash is transferred to the recipient. It is measured at the amount of the consideration given. In subsequent periods pre-financing is 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

The EU accounting rules require a separate presentation of exchange and non-exchange transactions. To distinguish between the two categories, the term ‘receivable’ is reserved for exchange transactions, whereas for non-exchange transactions, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange, the term ‘recoverables’ is used (e.g. recoverables from Member States related to own resources).
Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly.
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 3 months or less.
1.3.5.   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, or pre-financing received (see note 1.4.1).
Where grants or other funding are provided to the beneficiaries, the cost claims are recorded as payables for the requested amount, at the moment 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. The corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the entity.
1.3.6.   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, or 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. These 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, revenue 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. For the EU entities, transfers mostly comprise funds received from the Commission (e.g. balancing subsidy to the traditional agencies, operating subsidy for the delegation agreements).
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.
(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 the incurring of liabilities that result in decreases in net assets. They include both the expenses from exchange transactions and expenses from non-exchange transactions.
Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the entity. They are valued at the original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are recognised in the statement of financial performance.
Expenses from non-exchange transactions relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations. Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation or an agreement has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made.
When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expense.
1.5.   CONTINGENT ASSETS AND LIABILITIES

1.5.1.   Contingent assets

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

A contingent liability is either a possible obligation 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 where it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation.
A contingent liability also arises in the rare circumstances where a present obligation exists but cannot be measured with sufficient reliability.
Contingent liabilities are not recognised in the accounts. They are disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.
1.6.   FUND CAPITAL

The EDF member states provide contributions to the Fund for the implementation of EDF programmes as laid down in the Internal Agreement of each EDF. According to the applicable legal basis the capital calls, i.e. the requests for funding for a given year N, are decided by a Council Decision in year N-1, with the funds to be received clearly assigned to specified future periods.
The contributions meet the criteria of contribution from owners (EAR 1) and are thus treated as fund capital in the EDF financial statements. The fund capital represents the total amount of contributions to be received from the EDF members states. As the uncalled fund capital is openly deducted from the total fund capital (see Statement of Changes in Net Assets), only the called fund capital is recognised in the Balance Sheet.
As the agreed contributions are assigned to specified reporting periods, with the EDF’s legal claim against the EDF member states arising only in these periods, any amounts received in advance are recognised as deferred capital contributions under Payables rather than as called capital.
1.7.   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 the economic result of the year is nil.
2.   NOTES TO THE BALANCE SHEET


ASSETS

2.1.   FINANCIAL ASSETS

The financial assets of the EDF amounted to EUR 33 million at 31 December 2020 (2019: 36 million). They comprise available for sale financial assets that are almost entirely investments in equity instruments.
2.2.   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 based on progress reports. Pre-financing is normally paid in the currency of the country or territory where the project is executed.
The timing of use of pre-financing governs whether it is disclosed as a current or a non-current pre-financing. The use is defined by the project's underlying agreement. Any use due within 12 months after the reporting date are disclosed as current pre-financing. As many of the EDF projects are long-term in nature, it is necessary that the related advances are available for more than 1 year. Thus some pre-financing amounts are shown as non-current assets.












EUR million




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Non-current pre-financing



2.2.1


—



3




292




578




873




910






Current pre-financing



2.2.2



—




9




341




1 005 




1 355 




1 288 






Total



 



—




12




633




1 583 




2 228 




2 199 





The increase in total pre-financing by EUR 29 million at 31 December 2020 is a combined effect of the increase of pre-financing of the 11th EDF (2019: EUR 1 401 million) and decrease of pre-financing of the 10th EDF (2019: EUR766 million).
The increase of pre-financing in the 11th EDF can be largely explained by increase of advances paid out on new contracts signed during the year. The 11th EDF started in 2015 and in 2020 the contracting for the EDF activities reached a peak. As a result, the number of open contracts increased from around 3 400 in 2019 to 3 550 in 2020. This increase in pre-financing led to an increase in cash outflows and therefore to a decrease in cash and cash equivalents (see note 2.5).
The decrease of pre-financing in the 10th EDF is a consequence of the normal lifecycle of the EDF. As a result of phasing out of the 10th EDF many contracts were completed and closed. The number of open contracts under this EDF dropped from approximately 2 600 in 2019 to circa 2 500 in 2020. Consequently, the level of pre-financing payments made to beneficiaries decreased while the clearing of pre-financing increased.
2.2.1.   Non-current pre-financing by management mode








EUR million




 


31.12.2020


31.12.2019





Direct Management



 


 





Implemented by:



 


 










 



Commission








139




190











 



EU executive agencies








8




6











 



EU delegations








25




49





 



171




244






Indirect Management



 


 





Implemented by:



 


 










 



EIB and EIF








266




313











 



International organisations








347




291











 



Private law bodies with a public service mission








28




22











 



Public law bodies








49




22











 



Third countries








11




17











 



EU bodies and Public Private Partnership








1




1





 



702




666






Total




873




910





2.2.2.   Current pre-financing












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Pre-financing (gross)




—




98




1 527 




3 472 




5 097 




5 030 






Cleared via cut-off



—



(89)




(1 186 )




(2 467 )




(3 742 )




(3 742 )






Total




—




9




341




1 005 




1 355 




1 288 





2.2.3.   Current pre-financing by management mode








EUR million




 


31.12.2020


31.12.2019





Direct Management



 


 





Implemented by:



 


 










 



Commission








(40)




80











 



EU executive agencies








14




15











 



EU delegations








206




188





 



180




283






Indirect Management



 


 





Implemented by:



 


 










 



EIB and EIF








224




50











 



International organisations








572




569











 



Private law bodies with a public service mission








73




86











 



Public law bodies








146




119











 



Third countries








155




180











 



EU bodies and Public Private Partnership








4




1





 



1 175 




1 005 






Total




1 355 




1 288 





2.2.4.   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.








EUR million




 


 


31.12.2020


31.12.2019





Guarantees for Pre-financing



 



49




46





The increase of the pre-financing guarantees is a consequence of increase of pre-financing.
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.
2.3.   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 Commission under the direct management mode.









EUR million




 


Net contribution at 31.12.2019


Contributions paid in 2020


Allocation of TF's net expenses 2020


Net contribution at 31.12.2020





Africa




263




771




(649)




385






Bêkou




4




29




(24)




9






Total




266




800




(673)




394





The contributions to the trust funds increased from EUR 600 million in 2019 to EUR 800 million in 2020. The increase of the funding was necessary to cover the increased activity of the trust funds resulting in higher expenses in this area.
2.4.   NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES

Exchange transactions are transactions in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange. Non-exchange transactions are transactions in which an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.








EUR million




 


Note


31.12.2020


31.12.2019





Recoverables from non-exchange transactions



2.4.1



48




32






Receivables from exchange transactions



2.4.2



92




91






Total



 



140




123





2.4.1.   Recoverables from non-exchange transactions












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Member States



—


—


—


—


—



1






Customers




—




5




50




5




61




27






Public bodies



—



11




14




2




27




21






Third states




—




1




2




1




4




7






Write down




—




(15)




(28)




(4)




(49)




(27)






Inter-company accounts with EU institutions



—


—


—



4




4




5






Total




—




2




38




8




48




32





2.4.2.   Receivables from exchange transactions












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Accrued income




—




67




21




—




88




88






Inter-EDF accounts




181




(246)




1 663 




(1 598 )




—




—






Other




—




—




—




4




4




4






Total




181




(179)




1 684 




(1 594 )




92




91





Included under accrued income are amounts of accrued interest on pre-financing, namely an amount of EUR 62,6 million relating to a debt relief project with the World Bank and EUR 18 million relating to the EU Africa Infrastructure Fund with the EIB.
The heading ‘other’ entirely comprises a receivable to the Global Energy Efficiency and Renewable Energy Fund (GEEREF).
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 zero.
2.5.   CASH AND CASH EQUIVALENTS (6)












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Special accounts



 


 


 


 


 


 





Central banks



—


—


—



693




693




729





 


—


—


—



693




693




729






Current accounts



 


 


 


 


 


 





Commercial banks



—


—


—



8




8




421






Cash belonging to financial instruments



—


—


—



27




27




30





 


—


—


—



35




35




450






Total



—


—


—



728




728




1 179 





The decrease of amounts under this heading of EUR 451 million can be explained mainly by the increase in payments made from the commercial bank accounts which is in line with the increase in expenses (see note 3.3) and the increase in pre-financing (see note 2.2). EDF net payments reached a record high of EUR 4 605 million in 2020 (2019: EUR 3 910 million), mostly due to the impact of the COVID-19 pandemic. As a response to the pandemic, the EU is adapting its priorities and programmes with partner countries, which led to the increased disbursements, in particular to projects aimed at fighting the COVID crisis.
As in previous years and in order to limit counterparty risk more cash is kept in accounts with central banks than in the commercial banks (see note 5.1).

LIABILITIES

2.6.   FINANCIAL LIABILITIES

2.6.1.   Co-financing payables

Co-financing payables represent funds received by the EDF in relation to the co-financing agreements. The EDF is required to use these contributions to deliver agreed services to third parties and return the unused funds to the contributors. Timing of the use of the co-financing amounts determines whether they are disclosed as current or non-current.
At the year end a case-by-case assessment of all co-financing payables is performed and all amounts that are unlikely to be used in the following 12 months are considered non-current. Current amounts are shown under note 2.7.2.











EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Non-current co-financing payables



—


—



—




2




2




19






Current co-financing payables



—


—



10




32




42




69






Total



—


—



10




34




44




88





The decrease in total co-financing payables of EUR 44 million is mainly due to the increase in expenses incurred in respect of co-financed projects (EUR 53,2 million), namely related to 11th EDF (see note 3.4) which was partially offset by new co-financing projects of EUR 9 million. The substantial decrease of the non-current co-financing is in line with the life cycle of the co-financing projects: at the year-end a case by case analysis of the open co-financing is performed and only the amounts that will not be expensed next year are classified under non-current co-financing.
2.7.   PAYABLES













EUR million




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Current payables



2.7.1


—



1




53




291




345




182






Sundry payables



2.7.2


—



—




8




262




270




334






Total



 


—



1




62




553




615




516





2.7.1.   Current payables












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Suppliers



—



4




44




93




141




97






Member States



—



—




—




—




—




2






Third states




—



—



2




187




189




78






Public bodies



—



—




21




79




100




92






Other current payables




—




(4)




(13)




(68)




(85)




(88)






Total



—



—




53




291




345




182





Payables largely comprise cost statements received by the EDF in relation to grants provided to the beneficiaries. They are recorded at the moment when the cost statement is received and for the full amount of the cost statement. Following an eligibility check only the eligible amounts are paid to the beneficiaries. At the year-end the outstanding cost claims are analysed and the estimated eligible amounts related to those cost claims are recognised in the statement of financial performance. The estimated non-eligible amounts are shown under other current payables.
The increase in payables in particular for suppliers and third states is due to several invoices that have not been validated and paid before year-end.
2.7.2.   Sundry payables













EUR million




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Co-financing payables



2.6.1


—


—



10




32




42




69






Deferred capital contributions



2.7.2.1


—


—


—



223




223




264






Other sundry payables



 


—


—



(2)




7




5




1






Total



 


—


—



8




262




270




334





2.7.2.1.   Deferred capital contributions

At 31 December 2020, the entire amount of EUR 223 million relates to a refund to Member States from decommitted or unused funds from projects under the Eight and Ninth EDF (see note 2.10.1). The Member states agreed for the refund to be offset with the contributions from the 11th EDF during the first call for contributions in 2021.
At 31 December 2020 apart from the refund, there were no capital contributions paid in advance.
2.8.   ACCRUED CHARGES AND DEFERRED INCOME












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Accrued charges



—



67




217




1 243 




1 526 




1 318 






Other accruals and deferrals



—


—



—




1




1




1






Total



—



67




217




1 244 




1 527 




1 319 





Accrued charges comprise estimated operating expenses for on-going or completed contracts without validated cost claims where the eligible expenses incurred by beneficiaries 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 2.2 above).
The increase under this heading is a combined effect of an increase of accrued charges under the 11th EDF (2019: EUR 983 million) and a decrease of accrued charges under the 10th EDF (2019: EUR 240 million). This is in line with the lifecycle of the EDF and also related to the evolution of the number of open contracts under these EDFs: the 11th EDF was at full cruising speed in 2020 and there were thus significantly more open contracts at 31 December 2020, for which charges had to be estimated and accrued (see note 2.2).

NET ASSETS

2.9.   FAIR VALUE RESERVE

In accordance with the accounting rules, the adjustment to fair value of available for sale financial assets is accounted for through the fair value reserve.







EUR million




 


31.12.2020


31.12.2019





Fair value reserve




5




2





2.10.   FUND CAPITAL

2.10.1.   Called fund capital — active EDFs











EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total





Fund capital




12 164 




10 773 




20 960 




29 367 




73 264 






Uncalled fund capital



—



(15)




—




(18 440 )




(18 455 )






Called fund capital 31.12.2019




12 164 




10 758 




20 960 




10 927 




54 809 






Fund capital




12 164 




10 550 




20 960 




29 367 




73 041 






Uncalled fund capital



—



(15)




—




(14 040 )




(14 055 )






Called fund capital 31.12.2020




12 164 




10 535 




20 960 




15 327 




58 986 





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 amounts not yet called from Member States. The called fund capital represents the contributions, which have been called by the EDF and transferred to the treasury accounts by the Member States (see below).
By means of Council Decision (EU) 2020/1708 (7) the Member States' contributions set out in the Internal Agreements of the Eighth and Ninth EDF were reduced accordingly for an amount of EUR 223 million from funds decommitted under the Eighth and the Ninth EDF. As the funds decommitted under the Eighth EDF have been already transferred to the other EDFs, EUR 223 million was deducted from the capital of the Ninth EDF. Refunds arising from this reduction have been compensated against additional call for funds under the 11th EDF. In fact, the refund will be used against the first instalment of 2021 which explains the EUR 223 million of deferred capital (see note 2.7.2).
On 1 February 2020, the United Kingdom ceased to be a Member State of the European Union. While the United Kingdom remains party to the EDF until the closure of all programs, and assumes the same obligations as the Member States, in accordance with Article 153 of the Withdrawal Agreement, its share of uncommitted and decommitted funds from the Eight, Ninth and 10th EDF cannot be reused.
2.10.2.   Called and uncalled fund capital by Member States and the UK










EUR million




Contributions 11th EDF


%


Uncalled capital 31.12.2019


Capital called in 2020


Uncalled capital 31.12.2020





Austria




2,40 




442




(105)




337






Belgium




3,25 




599




(143)




456






Bulgaria




0,22 




40




(10)




31






Croatia




0,23 




42




(10)




32






Cyprus




0,11 




21




(5)




16






Czech Republic




0,80 




147




(35)




112






Denmark




1,98 




365




(87)




278






Estonia




0,09 




16




(4)




12






Finland




1,51 




278




(66)




212






France




17,81 




3 285 




(784)




2 501 






Germany




20,58 




3 795 




(906)




2 889 






Greece




1,51 




278




(66)




212






Hungary




0,61 




113




(27)




86






Ireland




0,94 




173




(41)




132






Italy




12,53 




2 311 




(551)




1 759 






Latvia




0,12 




21




(5)




16






Lithuania




0,18 




33




(8)




25






Luxemburg




0,26 




47




(11)




36






Malta




0,04 




7




(2)




5






Netherlands




4,78 




881




(210)




671






Poland




2,01 




370




(88)




282






Portugal




1,20 




221




(53)




168






Romania




0,72 




132




(32)




101






Slovakia




0,38 




69




(17)




53






Slovenia




0,22 




41




(10)




32






Spain




7,93 




1 463 




(349)




1 114 






Sweden




2,94 




542




(129)




413






United Kingdom




14,68 




2 707 




(646)




2 061 






Total




100,00 




18 440 




(4 400 )




14 040 





Since the capital of the Eighth, Ninth and 10th EDF has been called up and received in its entirety in previous years, in 2020, an amount of EUR 4 400 million has been called which relates entirely to the 11th EDF.
2.10.3.   Called fund capital from closed EDFs carried forward












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





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.
2.10.4.   Called fund capital transfers between active EDFs











EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


Total





Balance at 31.12.2018




(2 509 )




2 137 




55




317



—





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




(1)




(27)




28



—



—






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



—


—



181




(181)



—





Balance at 31.12.2019




(2 510 )




2 109 




265




136



—





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




(2)




(69)




71



—



—






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



—


—



(147)




147



—





Balance at 31.12.2020




(2 512 )




2 041 




188




283



—




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, as set out in the Internal Agreements.
3.   NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE


REVENUE









EUR million




 


Note


2020


2019





Revenue from non-exchange transactions



3.1



92




28






Revenue from exchange transactions



3.2



43




46






Total



 



135




74





3.1.   REVENUE FROM NON-EXCHANGE TRANSACTIONS













EUR million




 


Note


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2020


2019





Recovery of expenses



 



(1)




5




28




7




39




13






Co-financing revenue



3.1.1


—


—



41




12




53




14






Total



 



(1)




5




69




19




92




28





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







EUR million




 


2020


2019





Direct Management



 


 





Implemented by:



 


 










 



Commission








2




1











 



EU delegations








11




6





 



13




6






Indirect Management



 


 





Implemented by:



 


 










 



Third countries








42




15











 



Public law bodies








13



 










 



International organisations








17




5











 



Private law bodies with a public service mission








7




2





 



79




22






Total




92




28





3.1.1.   Co-financing revenue

The co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance. The contributions remain under liabilities (see note 2.6.1 & 2.7.2) 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 in the statement of financial performance as non-exchange revenue from co-financing. Consequently, the effect on the economic result of the year is zero.
3.2.   REVENUE FROM EXCHANGE TRANSACTIONS












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2020


2019





Financial revenue




—




5




1




1




6




7






Other revenue




—




5




18




13




37




39






Total




—




10




19




14




43




46





Financial revenue comprises essentially accrued interest on overdue recovery orders (EUR 1,5 million) and interest on pre-financing (EUR 4,7 million). Other revenue relates mainly to foreign exchange gains. The corresponding foreign exchange losses are recorded under other expenses (see note 3.6).

EXPENSES

Included under this heading are expenses incurred in relation to operational activities.
3.3.   AID INSTRUMENTS












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2020


2019





Programmable aid




—




—




244




2 646 




2 889 




2 120 






Macro-economic support



—



(8)



—


—



(8)




29






Sectoral policy



—



3



—


—



3




(0)






Intra ACP projects



—



(22)




212




829




1 019 




951






Emergency aid



—



(7)




5




21




19




112






Institutional support



—


—



2




10




13




7






Contributions to Trust Funds



—


—


—



673




673




535






Total




—




(33)




462




4 179 




4 607 




3 755 





The EDF operational expenditure covers various aid instruments and takes different forms, depending on how the money is paid out and managed.
In 2020, operational expenditure increased significantly by EUR 852 million mainly as a result of the increase in expenses under the 11th EDF (kEUR 3 141 in 2019 to kEUR 4 179 in 2020). The COVID-19 crisis led to an increase in expenses under the 11th EDF in particular as projects were reoriented to deal with the crisis. In addition, the changes in expenses under the 10th and 11th EDF are also in line with the lifecycle of the EDF and related to the evolution of the number of open contracts under these EDFs. The 11th EDF has reached maturity in 2020, which means that at year-end there were significantly more contracts under which expenses were incurred (see note 2.2). Conversely, many contracts were completed and closed under the 10th and previous EDF’s in 2020, which resulted in less expenses incurred under those EDF’s.
Under the 11th EDF, the increase in expenses comes mainly from the increase in the programmable aid (increase from kEUR 2 120 in 2019 to kEUR 2 889 in 2020) and the Contributions to the Trust funds (increase from EUR 535 million in 2019 to EUR 673 million in 2020). On the other hand expenses relating to emergency aid decreased by EUR 92 million. As noted above, primarily under the 11th EDF the structure of the aid instruments expenses changed compared to 2019 so as to address the needs triggered by the COVID 19 pandemic.
The negative amount under the Ninth EDF is mainly due to the reversal of 2019 closure bookings.
3.4.   CO-FINANCING EXPENSES












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2020


2019





Co-financing



—


—



41




12




53




14





Included under this heading are the expenses incurred on co-financing projects in 2020. 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).
In 2020, many co-financed projects under the 11th EDF have been finalised or reached maturity, which led to an increase in expenses and a decrease in co-financing liabilities (see note 2.6.1 & 2.7.2).
In line with the accounting rules on co-financing, the incurred amounts did not have any impact on the result of the year because they were recognised both in the co-financing expenses and in the co-financing revenue (note 3.1.1).

Aid instruments and co-financing expenses by management type








EUR million




 


2020


2019





Direct Management



 


 





Implemented by:



 


 










 



Commission








168




86











 



EU executive agencies








14




(13)











 



Trust Funds








19




483











 



EU delegations








1 969 




1 141 





 



2 170 




1 697 






Indirect Management



 


 





Implemented by:



 


 










 



EIB and EIF








(67)




145











 



International organisations








1 268 




1 003 











 



Private law bodies with a public service mission








243




126











 



Public law bodies








248




184











 



Third countries








795




613











 



EU bodies with Public Private Partnership








2




1





 



2 490 




2 073 






Total




4 660 




3 770 





3.5.   FINANCE COSTS












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2020


2019





Write-down of receivables




(1)




3




16




4




21




1





The increase under this heading is due to the increase in the estimated expenses on irrecoverable amounts arising from ageing recovery orders (over 2 years), bankruptcies and waivers.
3.6.   OTHER EXPENSES

The heading Administrative and IT expenses includes amounts that are based on the EDF internal agreement allocated to the Commission to cover the administrative costs incurred by both the Headquarters and the Delegations in respect to managing the EDF programmes. The so called ‘support expenditure’ relate mainly to expenses for preparation, follow-up, monitoring, and evaluation of projects as well as expenses for computer networks, technical assistance, financial management and forecasting etc.











EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


2020


2019





Administrative and IT expenses



—


—



—




120




120




220






Provision for risks and charges



—


—


—


—


—



—






Realised losses on trade debtors



—



4




1




—




4




3






Exchange losses




—




6




24




42




72




37






Total




(0)




9




25




162




196




260





The decrease under this heading is a combined effect of the significant decrease in the year-end estimation of administrative and IT expenses (2019: EUR 220 million) and the increase of expenses relating to exchange losses (2019: EUR 37 million).
4.   CONTINGENT ASSETS & LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES

4.1.   CONTINGENT ASSETS












EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Performance guarantees



—



7




4




—




12




15






Retention guarantees



—



5




3



—



9




9






Total



—



13




7




—




21




24





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 retention guarantees are disclosed as contingent assets.
For contracts managed under indirect management, the guarantees belong to a contracting authority other than the EDF and they are therefore not disclosed by the EDF.
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 multiannual programmes.











EUR million




 


Eighth EDF


Ninth EDF


10th EDF


11th EDF


31.12.2020


31.12.2019





Outstanding commitments not yet expensed




—




42




580




6 602 




7 224 




8 564 





At 31 December 2020 the budgetary RAL totalled EUR 9 286 million (2019: EUR 10 270 million).
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.










(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 million




 


31.12.2020


31.12.2019




 


USD


GBP


DKK


SEK


EUR


Other


Total


USD


GBP


DKK


SEK


EUR


Other


Total





Financial assets



 


 


 


 


 


 


 


 


 


 


 


 


 


 





Receivables and recoverables




65



—


—


—



69




6




140




—



—



—



—



115




8




123






Cash and cash equivalents




2



—


—


—



726



—



728




1




—



—


—



1 178 



—



1 179 





 



67



—


—


—



795




6




868




1




—




—



—



1 293 




8




1 302 






Financial liabilities



 


 


 


 


 


 


 


 


 


 


 


 


 


 





Non-current financial liabilities



—


—


—


—



(2)



—



(2)



—


—


—


—



(19)



—



(19)






Payables




(16)



—



(6)



—



(603)




10




(615)




(7)



—


—


—



(509)




—




(516)





 



(16)



—



(6)



—



(605)




10




(617)




(7)



—


—


—



(528)




—




(535)






Total




51



—



(6)



—



190




16




251




(6)




—




—



—



765




8




767





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 consequently it is not exposed to credit interest rate risk. However, since the ECB deposit facility rate is negative (-0,5 % since September 2019), deposits in EUR generate negative interests.
Contributions to the EDF budget are credited by each Member State to a special account opened with the financial institution designated by it. In accordance with Council Regulation (EU) 2016/888 (8), any negative remuneration on these accounts is borne by the relevant Member State.
Overnight balances held in commercial bank accounts are however subject to negative interest charges. The Commission, on behalf of the EDF, has therefore put in place cash management procedures to minimise balances kept on these accounts and limit as much as possible the negative interest costs. Interest charges are calculated based on variable market rates to which a contractual margin (positive or negative) is applied. Controls are in place to ensure that these interest charges are in line with contractual agreements.
5.4.   CREDIT RISK (COUNTERPARTY RISK)


Financial assets that are neither past due nor impaired:











EUR million




 


Total


Neither past due nor impaired


Past due but not impaired




< 1 year


1-5 years


> 5 years





Exchange receivables and non-exchange recoverables




140




124




7




9



—





Total at 31.12.2020




140




124




7




9



—





Exchange receivables and non-exchange recoverables




123




100




16




7



—





Total at 31.12.2019




123




100




16




7



—








Financial assets by risk category:












EUR million




 


31.12.2020


31.12.2019




Receivables


Cash


Total


Receivables


Cash


Total





Counterparties with external credit rating



 


 


 


 


 


 





Prime and high grade




9




372




381




7




958




965






Upper medium grade



—



211




211



—



220




220






Lower medium grade



—



145




145



—



1




1






Non- investment grade



—



—




—



—



—




—





 



9




728




737




7




1 179 




1 186 






Counterparties without external credit rating



 


 


 


 


 


 





Group 1 (debtors without defaults in the past)




131




—




131




116




—




116






Group 2 (debtors with defaults in the past)



—


—


—


—


—


—





Total




131




—




131




116




—




116






Total




140




728




868




123




1 179 




1 302 





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. Therefore 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 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 accepted in specific and duly justified circumstances.
5.5.   LIQUIDITY RISK


Maturity analysis of financial liabilities by remaining contractual maturity










EUR million




 


< 1 year


1-5 years


> 5 years


Total





Financial liabilities at 31.12.2020




615




2




—




617






Financial liabilities at 31.12.2019




516




2




17




535





Budget principles applied to the EDF ensure that overall cash resources for the budgetary period are always sufficient for the execution of 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 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 transmission 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 based on 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 reconciliable. The table below shows this reconciliation, highlighting the key reconciling amounts, split between revenue and expenditure items. The notes to the table provide additional information on the nature of the key reconciling items.







EUR million




 


2020


2019





ECONOMIC RESULT OF THE YEAR




(4 744 )




(3 956 )






Revenue



 


 





Entitlements not affecting the budget result




(2)




—






Entitlements established in current year but not yet collected




(23)




(16)






Entitlements established in previous years and collected in current year




13




23






Net effect of pre-financing




61




53






Accrued revenue (net)




(33)




(67)






Other




—




(3)






Expenses



 


 





Expenses of the current year not yet paid




119




107






Expenses of previous years paid in the current year




(817)




(672)






Net effect of pre-financing




(281)




(44)






Accrued expenses (net)




1 102 




719






BUDGET RESULT OF THE YEAR




(4 604 )




(3 856 )





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 line refers to clearing of pre-financing with amounts recovered from the beneficiaries. These cash receipts represent budgetary revenue but have no impact on the economic result and must be thus added for reconciliation purposes.
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 affect 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


FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2020 (9)


BACKGROUND INFORMATION ON THE BÊKOU EU TRUST FUND


General background on Union Trust Funds



Establishment


In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (10) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (11), the European Commission may establish Union trust funds for external actions (‘EU 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 by a decision after consultation or approval of the European Parliament and the Council. This decision 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.





Current EU Trust Funds

To date, the Commission has set up four EUTFs:






—


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










—


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






Mission


The EUTF Bêkou, was established, with the aim of promoting the stabilisation and reconstruction of the Central African Republic (CAR). Its main objective, as set out in the Constitutive Agreement, is ‘to provide consistent, targeted aid for the resilience of vulnerable groups and support for all aspects of the Central African Republic's exit from the crisis and reconstruction, to coordinate actions over the short, medium and long term and to help neighbouring countries cope with the consequences of the crisis’.


Main operational activities


The Union trust fund pools together resources from different donors to finance programmes on the basis of agreed objectives. Since its creation in July 2014, the EUTF Bêkou has adopted 22 programmes and has reached more than 2,5 million beneficiaries. The programmes are to assist the Central African Republic (CAR) and its population in the aftermath of the 2013 crisis. More specifically, the EUTF Bêkou aims to ensure access to basic services (mainly health, water and sanitation), support economic recovery and job creation, and promote social cohesion and reconciliation.


Governance


The management of the EUTF Bêkou is ensured by the European Commission, which also acts as the secretariat of its two governing bodies — the Trust Fund Board and the Operational Board. The Trust Fund Board and the Operational Committee of the EUTF Bêkou are composed of representatives of the donors, of the Commission, of the European Parliament, a representative of the Central African Republic’s authorities and observers. The rules for the composition of the board and its internal rules are laid down in the constitutive agreement of the Union trust fund.
The main task of the Board is to establish and review the overall strategy of the trust fund. The Operational Board is responsible for the selection of the actions financed by the Fund and supervises their implementation. It also approves the annual accounts and the annual reports on the activities financed by the trust fund.


Sources of financing


The EUTF Bêkou is financed through contributions from donors.

Annual accounts



Basis for preparation


The legal framework and the deadlines for the preparation of the annual accounts are set by the ‘Agreement establishing the European Union trust fund for the Central African Republic, “The Bêkou EU Trust Fund”, and its internal rules’ (‘Constitutive Agreement’). As per this Constitutive Agreement, the annual accounts are prepared in accordance with the rules adopted by the Accounting Officer of the Commission (EU Accounting Rules, EAR), which are based on internationally accepted accounting standards for the public sector (IPSAS).


Accounting Officer


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.


Composition of the annual accounts


The annual accounts cover the period from 1 January to 31 December and comprise the financial statements and the reports on the implementation of the budget. While the financial statements and the complementary notes are prepared on an accrual accounting basis, the budget implementation reports are primarily based on movements of cash.


Process from provisional accounts to discharge


The annual accounts are subject to independent external audit. The provisional annual accounts prepared by the Accounting Officer are transmitted, by the 1st of March of the following year, to the audit company selected by the entity following a tender procedure. Following the audit, the Accounting Officer prepares the final annual accounts and submits them to the Operational Committee for approval (Article 8.3.4(c)).
The annual accounts of the EUTF Bêkou are consolidated in the annual accounts of the European Developement Fund.

Operational highlights



Achievements of the year


The EU launched its first ever Trust Fund (EUTF), named Bêkou (meaning hope in Sango language), in July 2014 to assist the Central African Republic (CAR) and its population in the aftermath of the 2013 crisis. The EUTF Bêkou aims to ensure access to basic services (mainly health and water and sanitation), support rural development and economic recovery, and promote reconciliation. Since its creation, the EUTF Bêkou has adopted 23 programmes and has reached more than 2,8 million beneficiaries.
Despite the presence of a democratically elected government and the signature of a peace agreement in February 2019, the security situation in the CAR remains volatile. It is in this complex and fragile context that the EUTF Bêkou deploys its comparative advantages of flexibility and adaptability to changing circumstances. Additionally, the EUTF Bêkou remains currently the only instrument building resilience for both the population and the State, in a true LRRD (linking relief, rehabilitation and development) approach.
Operational highlights of the year 2020 include:






—


In April, the EUTF Bêkou adopted three new programmes by written procedure. These include the third phase of the Gender programme, the second phase of the Reconciliation action, which envisages the continuation of the support to Central African radios and notably Radio Ndeke Luka, as well as a new programme on Vocational Training in the rural sector.










—


In response to the COVID-19 outbreak, the EUTF Bêkou made substantial efforts to re-orient, accelerate and prioritise actions for the most effective response to the crisis. In this context, the Health and Water and Sanitation programmes were of critical importance for supporting the Team Europe’s response to the crisis that amplified existing needs in the two sectors. In June, the EUTF Bêkou approved a revision of the two actions, increasing the budget of the Health programme by EUR 2,2 million and that of the Water and Sanitation action by EUR 2 million.










—


In December, the EUTF Bêkou adopted a programme supporting the deployment of civil protection for a total amount of EUR 4 million. Moreover, in order to avoid any financing gap in the all-important health sector, the EUTF Bêkou increased again the budget of the on-going health programme (phase III) (additional EUR 10 million).










—


The implementation of EUTF Bêkou projects were marked by the volatile security context (localised conflicts in Bangui and the hinterland followed by periods of relative stability), as well as incertitude as the presidential elections of December 2020 were approaching.




In December 2020, following an official request from the EUTF Board, the EU decided an extension of the EUTF Bêkou until 31 December 2021, thus bringing its total duration from 78 months to 90 months. This will allow the EUTF Bêkou to commit and contract all received contributions in a timely way and responding to CAR’s needs. This is the second and last extension of the EUTF.
Budget and budget implementation
On the financial side, by the end of 2020, pledges by EUTF contributors amounted to nearly EUR 308,3 million. This is an increase of EUR 12,5 million compared to 2019. EUR 1 million out of these EUR 308,3 million is still to be certified.
In terms of contracts, the EUTF Bêkou signed 7 new contracts and 9 cost-extension contract riders in 2020 for a total amount of nearly EUR 53 million. They contribute to the implementation of its programmes in the sectors of health, water and sanitation, rural development and economic recovery, and reconciliation.
Last but not least, more than EUR 46 million was paid in 2020 on top of payments made during previous years; total disbursements have reached nearly EUR 197 million since the creation of the EUTF Bêkou.
The main impact of COVID-19 on the budget implementation of EUTF Bêkou in 2020 is a follows:






—


Less contracts as a result of difficulties to prepare actions;










—


Reduced expenses as a result of inability to implement projects and of difficulties to finalise financial reports and expenditure verification reports.






Impact of the activities in the financial statements


In the financial statements, the impact of the above mentioned activities is most visible when looking at:






—


Operating expenses (see note 3.3): which have overall decreased by kEUR 661; however the expenses relating to basic health have increased as a result of the increase in the budget in response to the additional challenges brought about by the COVID-19 pandemic;










—


Pre-financing (see notes 2.1): decreased by kEUR 3 685 as a result of less advances being paid out due to fewer contracts being signed (7 new contracts in 2020 compared to 11 in 2019);










—


Financial liabilities (see note 2.4): decreased by kEUR 11 889 mainly due to the fact that the cashed contributions from the donors are not sufficient to cover the yearly payment outflows. This also led to the shrinking of the cash and cash equivalents (see note 2.3).





BALANCE SHEET









EUR '000




 


Note


31.12.2020


31.12.2019





NON-CURRENT ASSETS



 


 


 





Pre-financing




2.1




2 418 




3 273 





 


 



2 418 




3 273 






CURRENT ASSETS



 


 


 





Pre-financing




2.1




15 482 




18 312 






Exchange receivables and non-exchange recoverables




2.2




5 340 




1 853 






Cash and cash equivalents




2.3




7 339 




17 432 





 


 



28 161 




37 597 






TOTAL ASSETS



 



30 579 




40 870 






NON-CURRENT LIABILITIES



 


 


 





Financial liabilities




2.4




(17 838 )




(29 727 )





 


 



(17 838 )




(29 727 )






CURRENT LIABILITIES



 


 


 





Payables




2.5




(795)




(10)






Accrued charges




2.6




(11 947 )




(11 133 )





 


 



(12 741 )




(11 143 )






TOTAL LIABILITIES



 



(30 579 )




(40 870 )






NET ASSETS



 


—


—





FUNDS & RESERVES



 


 


 





Contribution from Members



 


—


—





Accumulated surplus



 


—


—





Economic result of the year



 


—


—





NET ASSETS



 


—


—





STATEMENT OF FINANCIAL PERFORMANCE









EUR '000




 


Note


2020


2019





REVENUE



 


 


 





Revenue from non-exchange transactions



 


 


 





Revenue from donations




3.1




47 889 




48 343 






Recovery of expenses




3.2




115




68





 


 



48 004 




48 410 






Revenue from exchange transactions



 


 


 





Financial revenue



 



—




(2)





 


 



—




(2)






Total revenue



 



48 004 




48 408 






EXPENSES



 


 


 





Operating expenses




3.3




(46 959 )




(47 620 )






Finance costs




3.4




(68)




—






Other expenses




3.5




(978)




(789)






Total expenses



 



(48 004 )




(48 408 )






ECONOMIC RESULT OF THE YEAR



 


 


 





CASHFLOW STATEMENT








EUR '000




 


2020


2019





(Increase)/decrease in pre-financing




3 685 




11 405 






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




(3 487 )




(715)






Increase/(decrease) in financial liabilities




(11 889 )




(13 010 )






Increase/(decrease) in payables




784




(908)






Increase/(decrease) in accrued charges




814




6 734 






NET CASHFLOW




(10 093 )




3 506 






Net increase/(decrease) in cash and cash equivalents




(10 093 )




3 506 






Cash and cash equivalents at the beginning of the year




17 432 




13 926 






Cash and cash equivalents at year-end




7 339 




17 432 






FINANCIAL STATEMENTS OF THE EUTF AFRICA 2020 (12)


BACKGROUND INFORMATION ON THE EUTF AFRICA


General background on Union Trust Funds



Establishment


In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) (13) and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) (14), the European Commission may establish Union trust funds for external actions (‘EU 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 by a decision after consultation or approval of the European Parliament and the Council. This decision 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.





Current EU Trust Funds

To date, the Commission has set up four EUTFs:






—


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










—


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






Mission


The main objectives of the EUTF Africa are 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.


Main operational activities


The Union trust fund pools together resources from different donors to finance an action on the basis of agreed objectives. EUTF Africa operates in three main geographic areas, namely the Sahel region and Lake Chad area, the Horn of Africa and the North of Africa. 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, in order to provide a short and medium-term response to the challenges of the regions.


Governance


The management of the EUTF Africa is ensured by the European Commission, which also acts as the secretariat of its two governing bodies — the Trust Fund Board and the Operational Board. 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 rules for the composition of the board and its internal rules are laid down in the constitutive agreement of the Union trust fund.
The main task of the Board is to establish and review the overall strategy of the trust fund. The Operational Board is responsible for the selection of the actions financed by the Fund and supervises their implementation. It also approves the annual accounts and the annual reports on the activities financed by the trust fund.


Sources of financing


The EUTF Africa is financed through contributions from donors.

Annual accounts



Basis for preparation


The legal framework and the deadlines for the preparation of the annual accounts are set by 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’). As per this Constitutive Agreement, the annual accounts are prepared in accordance with the rules adopted by the Accounting Officer of the Commission (EU Accounting Rules, EAR), which are based on internationally accepted accounting standards for the public sector (IPSAS).


Accounting Officer


Based on the Constitutive Agreement, the Accounting Officer of the Commission serves as the Accounting Officer of the Trust Fund.


Composition of the annual accounts


The annual accounts cover the period from 1 January to 31 December and comprise the financial statements and the reports on the implementation of the budget. While the financial statements and the complementary notes are prepared on an accrual accounting basis, the budget implementation reports are primarily based on movements of cash.


Process from provisional accounts to discharge


The annual accounts are subject to independent external audit. The provisional annual accounts prepared by the Accounting Officer are transmitted, by the 1st of March of the following year, to the audit company selected by the entity following a tender procedure. Following the audit, the Accounting Officer prepares the final annual accounts and submits them to the Operational Committee for approval.
The annual accounts of the EUTF Africa are consolidated in the annual accounts of the European Developement Fund.

Operational highlights



Achievements of the year


In 2020, EUTF Africa further demonstrated itself to be a swift and effective implementation tool. It facilitated policy dialogue with African partner countries, applied innovative approaches, and produced tangible results across the three regions of the EUTF Africa (Sahel and Lake Chad, Horn of Africa and North of Africa) by pooling funding and expertise from a wide range of stakeholders.
The EUTF Africa further consolidated its achievements in partnership with EU Member States development agencies, UN organisations, NGOs and partner countries, with the approval of an additional 37 programmes and 26 ‘top-ups’ across the three regions by the operational committees for a total of EUR 560 million . This brings the total number of approved programmes to 254 including 4 cross-window programmes, for a total budget of over EUR 4,8 billion. New contracts worth over EUR 1 billion were signed in 2020 with implementing partners, bringing the total amount of signed contracts to over EUR 4,5 billion. By the end of 2020, payments had reached approximately EUR 3 billion.
In 2020, the EUTF Africa continued addressing the twin goals of fostering stability and handling the root causes of forced displacement and irregular migration in the Sahel and Lake Chad, Horn of Africa and North of Africa regions. The EUTF Africa continued to pursue a balanced approach in addressing the challenges of irregular migration, focusing on areas of mutual interest for the EU and Africa. These include the fight against smuggling of migrants and trafficking of human beings, and the support to voluntary return to, and sustainable reintegration of migrants in, their country of origin.
During the past year, the EUTF Africa benefitted from additional financial pledges of EUR 361,9 million, including EUR 29,2 million from EU Member States and other donors. As a result, the overall resources pledged to the EUTF Africa as of 31 December 2020 amounted to over EUR 5 billion, of which EUR 619,7 million were pledged by EU Member States and other donors (Norway and Switzerland).
The EUTF Africa has continued working in solid partnership with a wide range of implementing partners (agencies from Member States, UN and international organisations, local and international NGOs) along the same lines as in 2019.
The Mid-Tem Evaluation of the EUTF for Africa, launched in 2019 to provide the EU external co-operation services and the wider public with an overall independent mid-term assessment of the EUTF for Africa, was fully carried out in the course of 2020. The scope of the evaluation included over 200 out of 600 projects implemented between 2016 and 2019. All relevant Commission services, EEAS and EU Delegations across the three regions were consulted. Field visits were conducted in six countries: Ethiopia, Libya, Morocco, Niger, Senegal, and Somalia. The Final Report completed in 2020 will be published in spring 2021.
Throughout the year, the monitoring and learning system reports on the Sahel and Lake Chad and the Horn of Africa continued to show the tangible results achieved by the EUTF Africa in different areas of work. The Monitoring & Learning system of the North of Africa region generated two Monitoring Reports available on the EUTF website whose purpose is to analyze how EUTF-funded projects are contributing to the five strategic objectives of the EUTF in the North of Africa region
Accountability and transparency have been improved through increased communications including regular updates on the EUTF Africa website, publishing posts on social media and organising communication events.
In 2020, the COVID-19 pandemic had a profound impact, including in Africa. In response to the outbreak of the COVID-19 pandemic, in April 2020 the Commission adopted a Joint Communication on the Global EU response to COVID-19 that called to focus on the most vulnerable people, including migrants, refugees, internally displaced persons and their host communities. The EU and its Member States, acting together as ‘Team Europe’, took comprehensive and decisive actions to tackle the destructive impact of COVID-19, adapting priorities and programmes, including EUTF for Africa programmes, with partner countries to address the crisis.
In the Sahel and Lake Chad region, massive displacement, combined with climate change, uncontrollable population growth, endemic poverty and the COVID-19 pandemic aggravated the pre-existing pressure and had an increasing impact on migration and conflict. Throughout the year, increasing violence and mass forced displacement have led to rising levels of insecurity in the region. Against this background, the EUTF Africa’s operational committee has approved 15 new programmes and 10 top-ups, for a total of EUR 225,9 million . In order to improve governance and enhance social cohesion, 57 % of the EUTF for Africa actions approved in 2020 have been directed towards this stabilisation effort. Special attention has been dedicated also to helping stranded migrants and internally displaced populations. 24 % of new EUTF for Africa actions have been committed to strengthening resilience of beneficiaries by supporting food and nutrition security, protecting vulnerable livelihoods and promoting social protection schemes for the most vulnerable as well as IDPs, refugees and their host communities.
The onset of the COVID-19 pandemic in early 2020 further exacerbated fragilities across the Horn of Africa region already affected by consecutive droughts and floods; conflicts and insecurity; protracted refugee and internal displacement crises; and the worst desert locust outbreak in decades. All countries in the region suffered from a serious shortage of medical care and equipment, access to basic services was hampered by curfews and lockdowns, and several political developments were postponed, including general elections in Ethiopia. Several existing projects reoriented activities to combat the spread of the virus and mitigate economic effects of the pandemic. New commitments, reallocations and top-ups were made with this challenge in mind. Overall, 12 new programmes and 13 top-ups were approved by the operational committee in 2020 for a total of EUR 212,15 million .
In 2020, the EUTF for Africa had to respond comprehensively to challenges in the North of Africa region to save lives, protect the most vulnerable, support host communities, provide opportunities for safe and organised mobility and tackle the consequences of the COVID-19 pandemic. The North of Africa window has continued to work according to the strands of action agreed by the EUTF Strategic Board including support to improve migration governance; support for labour migration and mobility; protection of vulnerable migrants, voluntary return and sustainable reintegration as well as community stabilisation; and integrated border management. Overall, 10 new actions for a total of EUR 113,6 million were adopted in 2020 by the operational committee. This includes also EUR 30 million re-allocated funds from the Libya Border Management Programme (phase II) whose amount was reduced to EUR 15 million. In addition, EUR 12,3 million were adopted by the operational committee through three budgetary top-ups to existing actions.


Budget and budget implementation


The total amount of budgetary commitments in 2020 amounted to EUR 740,7 million, compared to EUR 722,7 million in 2019. The total amount contracted in 2020 amounted to EUR 1,1 billion, whereas it reached EUR 951,3 million in 2019.
In 2020, the budget implementation in terms of available commitments used by contracts reached 99 %, whereas payments in the reporting period exceeded EUR 1 billion. Total payments in 2020 were EUR 143 million higher than in 2019.
In the Sahel / Lake Chad, the combined effect of COVID-19 and rising violence put a significant strain on health services, and several EUTF programmes have been created or engaged in activities that aimed to support the pandemic response and address its economic consequences. Overall, EUR 377,6 million have been allocated to strengthen the health systems of partner countries, put in place emergency response and prevention and support the economic response to the COVID-19 pandemic.
In the Horn of Africa, right at the start of the pandemic, several EUTF for Africa projects reoriented activities to combat the spread of the virus, mitigate economic effects and support these vulnerable populations, including refugees and stranded migrants. In the region, the EUTF for Africa provided a total of EUR 56,1 million to hold up the health systems and EUR 144,05 million to address the economic impact of COVID-19.
In the face of the challenging situation created by COVID-19, the EUTF Africa has ensured the continuity of its ongoing actions in North Africa, including quick re-allocation of existing actions and adoption of new actions to address the consequences of the pandemic. In particular, the EUTF Africa has adopted very quickly a EUR 20 million COVID-19 response programme for Libya and a EUR 10 million Emergency Response Facility to coronavirus to cover North African countries focusing on the most vulnerable populations.


Impact of the activities in the financial statements


In the financial statements, the impact of the above mentioned activities is most visible when looking at:






—


Pre-financing (see note 2.1): an increase by kEUR 184 933 as a result of the new contracts signed and advances paid during 2020;










—


Operating expenses (see note 3.4): an increase by kEUR 133 110 as a result of the increased activity during the year in particular to combat the negative effects of the COVID pandemic;










—


Revenue from donations (see note 3.1): increased substiantially (increase of kEUR 146 923 compared to 2019) to fund the increase in expenses;










—


Financial liabilities (see note 2.4): increased by kEUR 161 968 mainly due to the increase in the cashed contributions received from donors during the year.





BALANCE SHEET









EUR '000




 


Note


31.12.2020


31.12.2019





NON-CURRENT ASSETS



 


 


 





Pre-financing




2.1




92 655 




48 539 





 


 



92 655 




48 539 






CURRENT ASSETS



 


 


 





Pre-financing




2.1




559 386 




418 569 






Exchange receivables and non-exchange recoverables




2.2




6 346 




18 471 






Cash and cash equivalents




2.3




57 971 




26 915 





 


 



623 703 




463 955 







TOTAL ASSETS




 



716 359 




512 495 






NON-CURRENT LIABILITIES



 


 


 





Financial liabilities




2.4




(546 379 )




(384 411 )





 


 



(546 379 )




(384 411 )






CURRENT LIABILITIES



 


 


 





Payables




2.5




(45 377 )




(25 969 )






Accrued charges




2.6




(124 602 )




(102 114 )





 


 



(169 979 )




(128 083 )







TOTAL LIABILITIES




 



(716 359 )




(512 495 )






NET ASSETS



 


—


—





FUNDS & RESERVES



 


 


 





Contribution from Members



 


—


—





Accumulated surplus



 


—


—





Economic result of the year



 


—


—





NET ASSETS



 


—


—





STATEMENT OF FINANCIAL PERFORMANCE









EUR '000




 


Note


2020


2019





REVENUE



 


 


 





Revenue from non-exchange transactions



 


 


 





Recovery of expenses



 



—




467






Revenue from donations




3.1




921 014 




774 090 





 


 



921 014 




774 557 






Revenue from exchange transactions



 


 


 





Financial revenue



 



—




(7)






Other exchange revenue




3.2




2 883 




1 855 





 


 



2 883 




1 848 






Total revenue



 



923 897 




776 405 






EXPENSES



 


 


 





Operating expenses




3.3




(889 014 )




(755 904 )






Finance cost




3.4




(518)




(9)






Other expenses




3.5




(34 365 )




(20 492 )






Total expenses



 



(923 897 )




(776 405 )






ECONOMIC RESULT OF THE YEAR



 



—




—






CASHFLOW STATEMENT








EUR '000




 


2020


2019





Economic result of the year



—


—





Operating activities



 


 





(Increase)/decrease in pre-financing




(184 933 )




(159 750 )






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




12 125 




(1 815 )






Increase/(decrease) in financial liabilities




161 968 




14 412 






Increase/(decrease) in payables




19 408 




13 236 






Increase/(decrease) in accrued charges




22 488 




13 968 






NET CASHFLOW




31 056 




(119 949 )






Net increase/(decrease) in cash and cash equivalents




31 056 




(119 949 )






Cash and cash equivalents at the beginning of the year




26 915 




146 864 






Cash and cash equivalents at year-end




57 971 




26 915 






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


CONSOLIDATED BALANCE SHEET








EUR million




 


31.12.2020


31.12.2019





NON-CURRENT ASSETS



 


 





Financial assets




33




36






Trust Funds contributions




(2)




—






Pre-financing




968




962





 



999




998






CURRENT ASSETS



 


 





Pre-financing




1 930 




1 725 






Exchange receivables and non-exchange recoverables




152




143






Cash and cash equivalents




793




1 223 





 



2 875 




3 092 






TOTAL ASSETS




3 874 




4 090 






NON-CURRENT LIABILITIES



 


 





Financial liabilities




(173)




(167)





 



(173)




(167)






CURRENT LIABILITIES



 


 





Payables




(661)




(542)






Accrued charges and deferred income




(1 664 )




(1 432 )





 



(2 325 )




(1 974 )






TOTAL LIABILITIES




(2 498 )




(2 141 )






NET ASSETS




1 376 




1 948 






FUNDS & RESERVES



 


 





Fair value reserve




(5)




(2)






Called fund capital — active EDFs




58 986 




54 809 






Called fund capital from closed EDFs carried forward




2 252 




2 252 






Economic result carried forward from previous years




(55 111 )




(51 155 )






Economic result of the year




(4 746 )




(3 956 )






NET ASSETS




1 376 




1 948 






CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE








EUR million




 


2020


2019





REVENUE



 


 





Revenue from non-exchange transactions



 


 





Recovery activities




92




28






Revenue from trust funds donations




296




287





 



388




316






Revenue from exchange transactions



 


 





Financial revenue




6




7






Other revenue




40




41





 



46




48






Total Revenue




434




364






EXPENSES



 


 





Aid instruments




(3 937 )




(3 220 )






Expenses implemented by trust funds




(936)




(804)






Co-financing expenses




(53)




(14)






Finance costs




(22)




(1)






Other expenses




(232)




(282)






Total Expenses




(5 180 )




(4 320 )






ECONOMIC RESULT OF THE YEAR




(4 746 )




(3 956 )






CONSOLIDATED CASH FLOW STATEMENT








EUR million




 


2020


2019





Economic result of the year




(4 746 )




(3 956 )






Operating activities



 


 





Capital increase — contributions




4 177 




4 385 






(Increase)/decrease in pre-financing




(210)




(12)






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




(7)




13






Increase/(decrease) in financial liabilities




6




(62)






Increase/(decrease) in payables




119




288






Increase/(decrease) in accrued charges and deferred income




232




58






Other non-cash movements




(3)




(2)






Investing activities



 


 





(Increase)/decrease in available for sale financial assets




2




(36)






NET CASHFLOW




(431)




676






Net increase/(decrease) in cash and cash equivalents




(430)




676






Cash and cash equivalents at the beginning of the year




1 223 




548






Cash and cash equivalents at year-end




793




1 223 






CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS













EUR million




 


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)


Fair value reserve
(F)


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






BALANCE AS AT 31.12.2018





73 264 




22 840 




50 423 




(51 155 )




2 252 




—




1 521 






Fair value movements



 


 


 


 


 



(2)




(2)






Capital increase — contributions



 



(4 385 )




4 385 



—


—


 



4 385 






Economic result of the year




—




—




—




(3 956 )




—



 



(3 956 )







BALANCE AS AT 31.12.2019





73 264 




18 455 




54 809 




(55 111 )




2 252 




(2)




1 948 






Fair value movements



 


 


 


 


 



(3)




(3)






Capital increase — contributions



 



(4 400 )




4 400 



 


 


 



4 400 






Refund to the Member States




(223)



 


 


 


 


 



—






Economic result of the year



 


 



—




(4 746 )



 


 



(4 746 )







BALANCE AS AT 31.12.2020





73 041 




14 055 




58 986 




(59 857 )




2 252 




(5)




1 376 






EDF REPORT ON FINANCIAL IMPLEMENTATION


CONTENTS








1.

BACKGROUND
68










1.1.

PREVIOUS EDFS
68










1.2.

10TH AND 11TH EDF
68










2.

FINANCIAL IMPLEMENTATION
70










2.1.

FINANCIAL OUTTURN
70










2.2.

REVENUE
76










2.3.

OPERATIONAL EXPENDITURE AND SPECIFIC PROGRAMMES
77










3.

GLOSSARY
88



1.   BACKGROUND

Launched in 1959, the European Development Fund is the main instrument for providing EU aid for development cooperation to the African, Caribbean and Pacific (ACP) States and Overseas Countries and Territories (OCTs). Its primary objective is to reduce and ultimately eradicate poverty.
The EDF is established by an Internal Agreement of the Representatives of the Member States and managed by a specific committee. The EDF resources are ‘ad hoc’ contributions from the EU Member States, who decide on an overall amount that will be allocated to the fund (over a period of 5 years). In addition to these contributions, it is also possible for Member States to enter into co-financing arrangements or to make voluntary financial contributions to the EDF. The European Commission is responsible for the financial implementation of the operations carried out with EDF resources. The European Investment Bank manages the Investment Facility.
The EDF is a fund operating based on multiannuality. Each EDF is concluded for a period of around 5 years and it 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.
The Internal Agreement establishing the last EDF, the 11th EDF (2014-2020), came into force on 1 March 2015. As of 2021, the cooperation with the ACP countries is included in the Neighbourhood, Development and International Cooperation Instrument (NDICI). However, the ongoing projects, funded under the EDF, will continue their implementation, under the respective EDF legal basis.
This report is produced in accordance with Article 39 of the Financial Regulation of 11th EDF (16). It presents a true and fair view of the revenue and expenditure operations of the EDF, with the focus on important events that had a significant impact on financial implementation of year 2020.
Given that there are no ongoing operations under previous EDFs (17), this report includes figures only for the 10th and 11th EDF.
1.1   PREVIOUS EDFS

The 6th EDF was closed in 2006 and the 7th EDF was closed in 2008. In 2019, the Commission closed the remaining outstanding transactions of the 8th EDF projects. A final report on the financial implementation of the 8th EDF is available with the 2019 annual accounts. The Commission aims to close the 9th EDF at the end of 2021.
In accordance with article 1(2)(b) of the Internal Agreement of the 9th EDF, balances and decommitments of previous EDFs have been transferred to the 9th EDF.
1.2   10TH AND 11TH EDF

The ACP-EC Partnership Agreement was 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). It entered into force on 1 April 2003 (establishing the 9th EDF). The Cotonou Agreement was amended twice, firstly by the agreement signed in Luxembourg on 25 June 2005 (establishing the 10th EDF), secondly by the agreement signed in Ouagadougou on 22 June 2010 (establishing the 11th EDF).
Council Decision 2001/822/EC (18) of 27 November 2001 on the association of the overseas countries and territories (OCT) with the European Community (‘Overseas Association Decision’) entered into force on 2 December 2001. This Decision was amended on 19 March 2007 (Decision 2007/249/EC) (19).
The Internal Agreement on the financing of Community aid under the multi-annual 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 on August 2013, entered into force on March 2015.
Under the Cotonou Agreement, for the second period (2008-2013), the 10th EDF an overall budget of EUR 22 682 million. Of this amount,






—


EUR 21 966 million were allocated to the ACP countries,










—


EUR 286 million to the OCT and










—


EUR 430 million to the Commission as support expenditure for programming and implementation of the EDF.




The amount for the ACP countries is divided accordingly:






—


EUR 17 766 million to national and regional indicative programmes,










—


EUR 2 700 million to intra-ACP and intra-regional cooperation and










—


EUR 1 500 million to Investment Facilities.




Notably, an increased share of the budget is devoted to regional programmes, thereby emphasising the importance of regional economic integration as the basic framework for national and local development. An innovation in the 10th EDF was the creation of ‘incentive amounts’ for each country.
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.
2.   FINANCIAL IMPLEMENTATION

2.1   FINANCIAL OUTTURN


EVOLUTION OF 10th EDF APPROPRIATIONS

10th EDF
EVOLUTION OF APPROPRIATIONS: 31 December 2020
ANALYSIS OF CREDITS PER INSTRUMENT











(EUR million)




 


INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2019


INCREASE OR DECREASE IN RESOURCES IN 2020


Notes


CURRENT LEVEL APPROPRIATION




ACP



Regular MS Contributions




20 896 




60




(340)



 



20 616 






Co-financing




0




202




(0)



 



202






SUB TOTAL ACP




20 896 




262




(340)



 



20 818 





OCT



Regular MS Contributions




0




271




(28)



 



243






SUB TOTAL OCT




0




271




(28)



 



243





 



TOTAL 10th EDF




20 896 




533




(368)



 



21 061 









EVOLUTION OF 11th EDF APPROPRIATIONS

11th EDF
EVOLUTION OF APPROPRIATIONS: 31 December 2020
ANALYSIS OF CREDITS PER INSTRUMENT











(EUR million)




 


INSTRUMENT


INITIAL APPROPRIATION


INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2019


INCREASE OR DECREASE IN RESOURCES IN 2020


Notes


CURRENT LEVEL APPROPRIATION




ACP



Regular MS Contributions




29 008 




172




124



 



29 304 






Co-financing




0




73




3



 



75






EC Internal SLA




0




1



 


 



1






SUB TOTAL ACP




29 008 




246




127



 



29 381 





OCT



Regular MS Contributions




0




355




(4)



 



351






Co-financing




0




0



 


 



0






EC Internal SLA




0




0



 


 



0






SUB TOTAL OCT




0




355




(4)



 



351





 



TOTAL 11th EDF




29 008 




601




123



 



29 731 









EVOLUTION OF COMMITMENTS, ASSIGNED FUNDS AND PAYMENTS FOR 10TH EDF

EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2020
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)




 



Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




ACP


NATIONAL ALLOCATIONS (enveloppe A) (programmed)


12 513 


12 500 


(150)


100 %


12 382 


(57)


99 %


12 047 


193


97 %




NATIONAL ALLOCATIONS (enveloppe B)(emergency)


1 980 


1 980 


(11)


100 %


1 968 


(2)


99 %


1 955 


5


99 %




IMPLEMENTATION COSTS AND INTERESTS REVENUES


529


526


18


99 %


522


15


99 %


507


 


97 %




INTRA-ACP ALLOCATIONS


3 691 


3 683 


83


100 %


3 460 


321


94 %


3 074 


100


89 %




REGIONAL ALLOCATIONS


1 857 


1 851 


(45)


100 %


1 807 


(20)


98 %


1 667 


43


92 %





Co-financing



 


 


 


 


 


 


 


 


 


 




NATIONAL ALLOCATIONS


185


180


(0)


97 %


177


0


98 %


161


9


91 %




IMPLEMENTATION COSTS AND INTERESTS REVENUES


5


5


0


111 %


3


0


65 %


3


0


87 %




INTRA-ACP ALLOCATIONS


12


11


(0)


91 %


11


0


100 %


11


 


100 %





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 




NON-MOBILISABLE RESERVE


46


 


 


 


 


 


 


 


 


 




 



Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




OCT


NATIONAL ALLOCATIONS


186


186


(0)


100 %


183


1


98 %


167


10


91 %




NATIONAL ALLOCATIONS


15


15


0


100 %


14


0


99 %


14


0


100 %




IMPLEMENTATION COSTS AND INTERESTS REVENUES


5


5


0


100 %


5


 


100 %


5


 


100 %




REGIONAL ALLOCATIONS


36


35


(3)


98 %


34


(2)


96 %


34


(0)


99 %





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 




NON-MOBILISABLE RESERVE


1


 


 


 


 


 


 


 


 


 




 



TOTAL: ACP+OCT (INCL RESERVES) (A+B)




21 061 




20 978 




(110)




100 %




20 567 




256




98 %




19 645 




360




96 %









EVOLUTION OF COMMITMENTS, ASSIGNED FUNDS AND PAYMENTS FOR 11TH EDF

EDF AGGREGATED ACCOUNTS AT 31 DECEMBER 2020
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)




 



Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




ACP


A ENVELOPE — NATIONAL ALLOCATIONS (programmed)


15 582 


15 555 


1 294 


100 %


13 093 


1 960 


84 %


8 332 


2 204 


64 %




B ENVELOPE — NATIONAL ALLOCATIONS (emergency)


1 072 


1 064 


219


99 %


926


200


87 %


744


107


80 %




IMPLEMENTATION COSTS AND INTERESTS REVENUES


1 071 


1 070 


206


100 %


873


42


82 %


803


27


92 %




INTRA-ACP ALLOCATIONS


4 014 


3 912 


389


97 %


3 443 


423


88 %


2 701 


445


78 %




REGIONAL ALLOCATIONS


7 317 


7 296 


647


100 %


6 398 


754


88 %


3 971 


1 380 


62 %





Co-financing



 


 


 


 


 


 


 


 


 


 




A ENVELOPE — NATIONAL ALLOCATIONS


42


42


10


100 %


41


10


98 %


6


4


15 %




IMPLEMENTATION COSTS AND INTERESTS REVENUES


4


4


1


100 %


1


0


21 %


0


0


47 %




INTRA-ACP ALLOCATIONS


26


26


4


100 %


24


2


91 %


22


5


93 %




REGIONAL ALLOCATIONS


4


4


2


100 %


4


2


100 %


4


2


100 %





Mobilisable reserves



 


 


 


 


 


 


 


 


 


 




INTRA-ACP RESERVE


1


 


 


 


 


 


 


 


 


 




NIP/RIP RESERVE


(100)


 


 


 


 


 


 


 


 


 





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 




NON-MOBILISABLE RESERVE


347


 


 


 


 


 


 


 


 


 





EC Internal SLA



 


 


 


 


 


 


 


 


 


 




A ENVELOPE — NATIONAL ALLOCATIONS


1


1


(0)


52 %


1


0


100 %


1


 


100 %




 



Regular MS Contributions



 


 


 


 


 


 


 


 


 


 




OCT


A ENVELOPE — NATIONAL ALLOCATIONS


213


213


17


100 %


193


1


91 %


171


51


88 %




B ENVELOPE — NATIONAL ALLOCATIONS


12


12


4


100 %


9


1


79 %


8


1


84 %




BRIDGING FACILITY


0


 


 


 


 


 


 


 


 


 




IMPLEMENTATION COSTS AND INTERESTS REVENUES


9


8


1


100 %


5


0


56 %


4


0


90 %




REGIONAL ALLOCATIONS


103


103


4


100 %


99


19


97 %


25


12


25 %





Non-mobilisable reserve



 


 


 


 


 


 


 


 


 


 




NON-MOBILISABLE RESERVE


15


 


 


 


 


 


 


 


 


 




 



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




29 731 




29 309 




2 798 




99 %




25 110 




3 413 




86 %




16 791 




4 239 




67 %





2.2   REVENUE


Nature of Revenue

The main revenue of the EDF is the Member States contributions. Three times per year, the European Commission and the European Investment Bank call the Member States to contribute to the EDF. The amount of the contributions called each year reflects the amount of payment to be covered during the year.

Overview of contributions by Member State






2.3   OPERATIONAL EXPENDITURE AND SPECIFIC PROGRAMMES


Nature of Expenditure

The amount available under the multiannual financial framework consists of 3 % allocated to Commission for support expenditure and 97 % allocated to the implementation of EDF projects. Amounts are set by each Internal Agreement and can be increased by voluntary contributions and income yielded from operations.

Breakdown of committed, contracted and paid amount per nature of expenditure
















 


CREDITS


DECISIONS


ASSIGNED FUNDS


PAYMENTS




AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%


AGGREG.


ANNUAL


%




(1)


(2)


 


(2):(1)


(3)


 


(3):(2)


(4)


 


(4):(3)




TOTAL: ADMINISTRATIVE IMPLEMENTATION COSTS AND INTERESTS REVENUES


1 622 


1 619 


226


100 %


1 409 


57


87 %


1 322 


28


81 %




TOTAL: OPERATIONNAL IMPLEMENTATION


49 170 


48 668 


2 461 


99 %


44 268 


3 613 


90 %


35 114 


4 571 


71 %





TOTAL 10+11th EDF: ACP+OCT (INCL. RESERVES) (A+B)




50 792 




50 287 




2 687 




99 %




45 677 




3 670 




91 %




36 436 




4 599 




80 %











Breakdown of committed, contracted and paid amount per region and country














 


 


EDF CUMULATIVE ACCOUNTS AT 31 DECEMBER 2020 BY COUNTRY % APPR.




10+11th EDF


TOTAL 10th and 11th EDF (EUR in million)




Cumulative 2020


Appropriations


Decisions


% of Appr.


Assigned funds


% of Appr.


Payments


% of Appr.





ACP



Administrative and financial expenditure


1 609 


1 605 


100 %


1 399 


87 %


1 313 


82 %




All ACP countries


2 846 


2 553 


90 %


2 553 


90 %


1 821 


64 %





Administrative and financial expenditure+ All ACP countries




4 455 




4 158 




93 %




3 952 




89 %




3 134 




70 %





Angola


349


349


100 %


309


88 %


239


68 %




Benin


741


739


100 %


685


92 %


623


84 %




Botswana


130


130


100 %


128


98 %


119


91 %




Burkina Faso


1 310 


1 310 


100 %


1 293 


99 %


1 183 


90 %




Burundi


579


572


99 %


544


94 %


425


73 %




Cabo Verde


147


147


100 %


146


99 %


144


98 %




Cameroon


522


522


100 %


489


94 %


384


74 %




Central African Republic


626


625


100 %


612


98 %


475


76 %




Chad


940


940


100 %


794


84 %


663


71 %




Comoros


80


80


99 %


68


85 %


62


78 %




Congo (Brazzaville)


164


164


100 %


145


88 %


99


60 %




Democratic Republic of Congo


1 430 


1 430 


100 %


1 223 


85 %


996


70 %




Djibouti


186


186


100 %


148


80 %


112


60 %




Eritrea


215


215


100 %


215


100 %


35


16 %




Ethiopia


1 656 


1 655 


100 %


1 530 


92 %


1 301 


79 %




Gabon


35


35


100 %


33


92 %


26


75 %




Gambia


316


316


100 %


307


97 %


226


72 %




Ghana


796


793


100 %


722


91 %


676


85 %




Guinea Bissau


186


186


100 %


185


99 %


141


76 %




Guinea (Conakry)


506


506


100 %


453


89 %


372


74 %




Ivory Coast


715


713


100 %


694


97 %


603


84 %




Kenya


881


881


100 %


834


95 %


583


66 %




Lesotho


259


259


100 %


241


93 %


165


64 %




Liberia


495


495


100 %


432


87 %


373


75 %




Madagascar


792


791


100 %


684


86 %


448


57 %




Malawi


1 026 


1 026 


100 %


893


87 %


726


71 %




Mali


1 425 


1 424 


100 %


1 390 


98 %


1 147 


80 %




Mauritania


349


349


100 %


319


91 %


246


70 %




Mauritius


83


83


100 %


81


98 %


77


93 %




Mozambique


1 476 


1 470 


100 %


1 135 


77 %


866


59 %




Namibia


189


189


100 %


174


92 %


155


82 %




Niger


1 294 


1 289 


100 %


1 258 


97 %


1 102 


85 %




Nigeria


1 187 


1 175 


99 %


1 138 


96 %


920


78 %




Rwanda


841


841


100 %


812


96 %


750


89 %




Sao Tome & Principe


56


56


100 %


44


79 %


39


70 %




Senegal


671


670


100 %


625


93 %


564


84 %




Seychelles


23


23


100 %


21


95 %


21


92 %




Sierra Leone


663


663


100 %


600


90 %


502


76 %




Somalia


905


902


100 %


898


99 %


653


72 %




South Soudan


92


91


100 %


91


100 %


91


100 %




Sudan


298


298


100 %


228


76 %


128


43 %




Swaziland


135


135


100 %


107


80 %


92


68 %




Tanzania


1 179 


1 179 


100 %


1 003 


85 %


844


72 %




Togo


379


378


100 %


354


93 %


315


83 %




Uganda


1 000 


1 000 


100 %


943


94 %


647


65 %




Zambia


837


837


100 %


682


81 %


498


59 %




Zimbabwe


472


472


100 %


466


99 %


409


87 %





Total Africa




28 638 




28 589 




100 %




26 176 




91 %




21 266 




74 %





Antigua & Barbuda


16


16


98 %


15


97 %


13


83 %




Barbados


22


22


100 %


18


83 %


17


79 %




Belize


43


43


100 %


28


67 %


21


48 %




Dominica


41


41


100 %


41


99 %


37


90 %




Dominican Republic


283


283


100 %


277


98 %


262


92 %




Grenada


21


21


100 %


20


97 %


20


95 %




Guyana


84


81


97 %


78


93 %


69


82 %




Haiti


1 031 


1 030 


100 %


829


80 %


690


67 %




Jamaica


243


243


100 %


236


97 %


202


83 %




Saint Kitts & Nevis


9


9


100 %


8


90 %


6


66 %




Saint Lucia


32


32


100 %


32


99 %


25


76 %




Saint Vincent & the Grenadines


27


27


100 %


26


96 %


22


80 %




Suriname


27


27


100 %


27


97 %


20


73 %




Trinidad & Tobago


29


29


100 %


28


99 %


22


75 %





Total Caribbean




1 909 




1 905 




100 %




1 665 




87 %




1 425 




75 %





Cook Islands


5


5


100 %


5


99 %


5


99 %




East Timor


175


174


99 %


172


98 %


129


74 %




Fiji


49


49


100 %


46


95 %


36


73 %




Kiribati


42


42


100 %


41


97 %


25


59 %




Marshall Islands


17


17


100 %


17


98 %


11


66 %




Micronesia


23


23


100 %


21


89 %


10


43 %




Nauru


4


4


100 %


4


96 %


4


89 %




Niue


3


3


100 %


3


98 %


3


96 %




Palau


5


5


100 %


4


70 %


3


60 %




Papua New Guinea


246


246


100 %


202


82 %


126


51 %




Solomon Islands


69


69


100 %


60


87 %


56


82 %




Tonga


29


28


100 %


28


99 %


28


98 %




Tuvalu


14


14


100 %


13


99 %


10


74 %




Vanuatu


55


55


100 %


49


90 %


35


65 %




Western Samoa


67


67


100 %


67


99 %


66


98 %





Total Pacific




804




803




100 %




732




91 %




548




68 %





Caribbean Region


540


531


98 %


429


80 %


283


52 %




Central Africa Region


556


556


100 %


461


83 %


291


52 %




Eastern, Southern Africa and the Indian Ocean


3 040 


3 032 


100 %


2 617 


86 %


1 727 


57 %




Intra ACP Allocations


7 744 


7 632 


99 %


6 938 


90 %


5 808 


75 %




Multiregional PALOP


62


62


99 %


59


94 %


45


72 %




Pacific Region


324


324


100 %


253


78 %


170


52 %




Southern Africa Region


142


142


100 %


142


100 %


134


95 %




West Africa Region


1 959 


1 951 


100 %


1 696 


87 %


1 171 


60 %





Total regional cooperation ACP




14 369 




14 230 




99 %




12 594 




88 %




9 629 




67 %






ACP




50 174 




49 686 




99 %




45 118 




90 %




36 002 




72 %






OCT



All OCT countries


30


14


46 %


10


33 %


9


31 %





All OCT countries




30




14




46 %




10




33 %




9




31 %





Anguilla


28


28


100 %


27


97 %


26


95 %




 


2


2


100 %


2


98 %


2


90 %




Falkland Islands


10


10


100 %


10


100 %


8


77 %




Montserrat


33


33


100 %


33


100 %


29


88 %




Pitcairn Islands


5


5


99 %


5


99 %


5


99 %




Saint Helena


38


38


100 %


38


100 %


35


92 %




Turks & Caicos Islands


33


33


100 %


32


100 %


31


95 %





Total British OCT




148




148




100 %




146




99 %




135




92 %





Aruba


21


21


100 %


21


99 %


14


66 %




Antilles néerlandaises — Bonaire


4


4


100 %


4


91 %


0


0 %




Antilles néerlandaises — Saba


4


4


100 %


3


97 %


3


97 %




Antilles néerlandaises — Sint-Eustatius


2


2


100 %


2


97 %


2


97 %




Netherlands Antilles


41


41


100 %


23


57 %


18


43 %




Sint Maarten


14


14


100 %


6


45 %


0


0 %





Total Dutch OCT




86




86




100 %




60




70 %




38




44 %





French Polynesia


51


51


100 %


49


97 %


45


89 %




Mayotte


29


29


100 %


29


100 %


29


100 %




New Caledonia


50


50


100 %


49


98 %


48


96 %




Saint Pierre & Miquelon


47


47


100 %


46


98 %


46


98 %




Wallis & Futuna


39


39


100 %


36


94 %


25


64 %





Total French OCT




215




215




100 %




209




97 %




193




90 %





Regional cooperation OCT


139


138


99 %


133


96 %


59


42 %





Total regional cooperation OCT




139




138




99 %




133




96 %




59




42 %






OCT




618




601




97 %




559




90 %




434




70 %





 



TOTAL: ACP+OCT




50 792 




50 287 




99 %




45 677 




90 %




36 436 




72 %









Breakdown of committed, contracted and paid amount by spending area for the 11th EDF

11TH EDF Breakdown of committed, contracted and paid amount by spending area (DAC sector codes) (20)









(EUR million)




Sector


Committed (21)



Contracted (21)



Paid (21)






Social infrastructure and services



 


 


 




110-Education


1 197,26 


1 038,76 


758,36 




120-Health


2 226,42 


2 323,60 


1 907,70 




130-Population policies/programmes and reproductive health


352,44 


38,39 


20,24 




140-Water and sanitation


775,90 


639,26 


283,71 




150-Government and civil society


5 905,39 


5 450,64 


4 156,20 




160-Other social infrastructure and services


979,35 


1 339,34 


1 128,02 





Social infrastructure and services TOTAL




11 436,77 




10 829,99 




8 254,24 






Economic infrastructure and services



 


 


 




210-Transport and storage


1 445,48 


1 827,48 


595,21 




220-Communications


140,96 


99,39 


64,78 




230-Energy


2 016,01 


1 566,30 


675,00 




240-Banking and financial services


93,93 


96,23 


38,59 




250-Business and other services


346,23 


178,15 


84,80 





Economic infrastructure and services TOTAL




4 042,59 




3 767,55 




1 458,38 






Production sectors



 


 


 




310-Agriculture, forestry and fishing


3 187,79 


2 509,57 


1 478,27 




320-Industry, mineral resources and mining, construction


623,58 


356,84 


115,46 




330-Trade and tourism


497,21 


353,36 


138,53 





Production sectors TOTAL




4 308,58 




3 219,77 




1 732,26 






Multisector/Cross-cutting



 


 


 




410-General environmental protection


999,94 


760,45 


390,13 




430-Other multisector


3 841,16 


2 343,95 


609,07 





Multisector/Cross-cutting TOTAL




4 841,10 




3 104,40 




999,19 






Commodity aid and general programme assistance



 


 


 




510-General budget support


3 116,32 


3 059,65 


2 345,18 




520-Developmental food assistance


614,50 


385,27 


332,91 





Commodity aid and general programme assistance TOTAL




3 730,82 




3 444,92 




2 678,10 






Action relating to debt



 


 


 




600-Action relating to debt


91,50 


—


—





Action relating to debt TOTAL




91,50 




—




—






Humanitarian aid



 


 


 




720-Emergency response


746,19 


505,17 


458,31 




730-Reconstruction relief and rehabilitation


137,83 


43,40 


33,36 




740-Disaster preparedness


133,29 


106,16 


69,14 





Humanitarian aid TOTAL




1 017,31 




654,72 




560,80 






Administrative costs of donors / Unallocated / Unspecified



 


 


 




910-Administrative costs of donors


978,02 


786,39 


739,89 




998-Unallocated / Unspecified


586,30 


434,28 


421,68 




N/A-Not Available


214,40 


0,64 


—





Administrative costs of donors / Unallocated / Unspecified TOTAL




1 778,72 




1 221,31 




1 161,57 






GRAND TOTAL OF 11TH EDF of committed, contracted and paid amount




31 247,39 




26 242,65 




16 844,55 






Evolution of cumulative Committed, Contracted and Paid amount by spending area for the 11th EDF
















3.   GLOSSARY


ABAC

This is the name given to the Commission’s accounting system, which since 2005 has been enriched by accrual accounting rules. Apart from the cash-based budget accounts, the Commission produces accrual-based accounts which recognise revenue when earned, rather than when collected. Expenses are recognised when incurred rather than when paid. This contrasts with cash basis budgetary accounting that recognises transactions and other events only when cash is received or paid.

Accounting

The act of recording and reporting financial transactions, including the creation of the transaction, its recognition, processing, and summarisation in the financial statements.

Accounting Officer

The role, powers and responsibilities of the accounting officer are set out in the Financial Regulation:






—


proper implementation of payments,










—


collection of revenue,










—


recovery of amounts and offsetting,










—


keeping, preparing and presenting the accounts,










—


laying down the accounting rules and methods and the chart of accounts,










—


laying down and validating the accounting systems and validating systems laid down by the authorising officer to supply or justify accounting information (local systems),










—


treasury management,










—


designation of the Imprest Administrators,










—


opening and closing bank accounts in the name of the Institution.





Adjustment

Amending budget or transfer of funds from one budget item to another.

Administrative appropriations

Administrative appropriations cover the running costs of the Institutions and entities (staff, buildings, office equipment).

Adopted budget

Draft budget becomes the adopted budget as soon as approved by the Budgetary Authority.
Cf. Budget

Agencies

EU bodies having a distinct legal personality, and to whom budget implementing powers may be delegated under strict conditions. They are subject to a distinct discharge from the discharge authority.

Amending budget

Decision adopted during the budget year to amend (increase, decrease, transfer) aspects of the adopted budget of that year.

Annuality

The budgetary principle according to which expenditure and revenue is programmed and authorised for 1 year, starting on 1 January and ending on 31 December.

Appropriations

Budget funding.
The budget forecasts both commitments (legal pledges to provide finance, provided that certain conditions are fulfilled) and payments (cash or bank transfers to the beneficiaries). Appropriations for commitments and payments often differ — differentiated appropriations — because multiannual programmes and projects are usually fully committed in the year they are decided and are paid over the years as the implementation of the programme and project progresses. Non-differentiated appropriations apply to administrative expenditure and commitment appropriations equal payment appropriations.

Assigned revenue External/Internal

Dedicated revenue received to finance specific items of expenditure.
Main sources of external assigned revenue are financial contributions from third countries to programmes financed by the Union.


Main sources of internal assigned revenue are revenue from third parties in respect of goods, services or work supplied at their request, revenue arising from the repayment of amounts wrongly paid and revenue from the sale of publications and films, including those on an electronic medium.

The complete list of items constituting assigned revenue is given in the Financial Regulation Article 21.

Authorising Officer by Delegation (AOD)

The AOD is responsible in each entity for authorising revenue and expenditure operations in accordance with the principles of sound financial management and for ensuring that the requirements of legality and regularity are complied with.
The AOD is responsible for taking all financial decision concerning actions under his/her responsibility. Particularly, he/she must take decisions to implement the budget based on his/her risk analysis.

Budget

Annual financial plan, drawn up according to budgetary principles, that provides forecasts and authorises, for each financial year, an estimate of future costs and revenue and expenditures and their detailed description and justification, the latter included in budgetary remarks.

Budget implementation

Consumption of the budget through expenditure and revenue operations.

Budget item / Budget line / Budget position

As far as the budget structure is concerned, revenue and expenditure are shown in the budget in accordance with a binding nomenclature, which reflects the nature and purpose of each item, as imposed by the budgetary authority. The individual headings (title, chapter, article or item) provide a formal description of the nomenclature.

Budget result

The difference between income received and amounts paid, including adjustments for carry-overs, cancellations and exchange rate differences.
For agencies, the resulting amount will have to be reimbursed to the funding authority as provided in the Financial Regulation for agencies.

Budgetary authority

Institutions with decisional powers on budgetary matters: for the EU institutions, the European Parliament and the Council of Ministers.
For the agencies and joint undertakings, their board is the budgetary authority.

Budgetary commitment

A budgetary commitment is a reservation of appropriations to cover for subsequent expenses.

Cancellation of appropriations

Unused appropriations that may no longer be used.

Carryover of appropriations

Exception to the principle of annuality in so far as appropriations that could not be used in a given budget year may, under strict conditions, be exceptionally carried over for use during the following year.

Commitment appropriations

Commitment appropriations cover the total cost of legal obligations (contracts, grant agreements/decisions) that could be signed in the current financial year. Financial Regulation Article 7: Commitment appropriations cover the total cost in the current financial year of legal obligations (contracts, grant agreements/decisions) entered into for operations extending over more than 1 year.


De-commitment

An act whereby a previous commitment (or part of it) is cancelled.

Differentiated appropriations

Differentiated appropriations are used to finance multiannual operations; they cover, for the current financial year, the total cost of the legal obligations entered into for operations whose implementation extends over more than one financial year. Financial Regulation Article 7: Differentiated appropriations are entered for multiannual operations. They consist of commitment appropriations and payment appropriations.


Earmarked revenue

Revenue earmarked for a specific purpose, such as income from foundations, subsidies, gifts and bequests, including the earmarked revenue specific to each institution.
Cf. Assigned revenue

Economic result

Impact on the balance sheet of expenditure and revenue based on accrual accounting rules.

Entitlements established

Entitlements are recovery orders that the European Union must establish for collecting income.

Exchange rate difference

The difference resulting from currency exchange rates applied to the transactions concerning countries outside the euro area, or from the revaluation of assets and liabilities in foreign currency at the closure.

Expenditure

Term used to describe spending the budget from all types of funds sources.

Financial regulation (FR)

Adopted through the ordinary legislative procedure after consulting the European Court of Auditors, this regulation lays down the rules for the establishment and implementation of the general budget of the European Union.
For reference, 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 (22).

Funds Source

Type of appropriations

Grants

Direct financial contributions, by way of donation, from the budget in order to finance either an action intended to help achieve an objective part of an EU policy or the functioning of a body, which pursues an aim of general European interest or has an objective forming part of an EU policy.

Implementation

Cf. Budget implementation

Income

Cf. Revenue

Joint Undertakings (JUs)

A legal EU-body established under the Treaty on the Functioning of the European Union. The term can be used to describe any collaborative structure proposed for the ‘efficient execution of Union research, technological development and demonstration programmes’.


Lapsing appropriations

Unused appropriations to be cancelled at the end of the financial year. Lapsing means the cancellation of all or part of the authorisation to make expenditures and/or incur liabilities, which is represented by an appropriation.
Only for joint undertakings, as specified in theirs Financial Rules, any unused appropriations may be entered in the estimate of revenue and expenditure of up to the following 3 financial years (the so-called ‘N+3’ rule). Hence, lapsing appropriations for JUs could be re-activated until financial year ‘N+3’.

Legal base (basic act)

The legal base or basis is, as a general rule, a law based on an article in the Treaty on the Functioning of the European Union giving competence to the Community for a specific policy area and setting out the conditions for fulfilling that competence including budget implementation. Certain articles from the treaty authorise the Commission to undertake certain actions, which imply spending, without there being a further legal act.

Legal commitment

A legal commitment establishes a legal obligation towards third parties.

Non-differentiated appropriations

Non-differentiated appropriations are for operations of an annual nature. (Financial Regulation Article 9). In the EU Budget, non-differentiated appropriations apply to administrative expenditure, for agricultural market support and direct payments.

Operational appropriations

Operational appropriations finance the different policies, mainly in the form of grants or procurement.

Outstanding commitment

Outstanding commitments (or RAL, from the French ‘reste à liquider’) are defined as the amount of appropriations committed that have not yet been paid or legal commitments having not fully given rise to liquidation by payments. They stem directly from the existence of multiannual programmes and the dissociation between commitment and payment appropriations.

Outturn

Cf. Budget result

Payment

A payment is a disbursement to honour legal obligations.

Payment appropriations

Payment appropriations cover expenditure due in the current year, arising from legal commitments entered in the current year and/or earlier years (Financial Regulation Article 7).

RAL

Sum of outstanding commitments. Cf. Outstanding commitments

Recovery

The recovery order is the procedure by which the Authorising officer by Delegation (AOD) registers an entitlement by the Commission in order to retrieve the amount, which is due. The entitlement is the right that the Commission has to claim the sum, which is due by a debtor, usually a beneficiary.

Result

Cf. Budget result

Revenue

Term used to describe income from all sources financing the budget.

Rules of application

Detailed rules for the implementation of the financial regulation. They are set out in a Commission regulation adopted after consulting all institutions and cannot alter the financial regulation upon which they depend.

Surplus

Positive difference between revenue and expenditure (Cf. Budget result) which has to be returned to the funding authority as provided in the Financial Regulation.

Transfer

Transfers between budget lines imply the relocation of appropriations from one budget line to another, in the course of the financial year, and thereby they constitute an exception to the budgetary principle of specification. However, they are expressly authorised by the Treaty on the Functioning of the European Union under the conditions laid down in the Financial Regulation. The Financial Regulation identifies different types of transfers depending on whether they are between or within budget titles, chapters, articles or headings and require different levels of authorisation.

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









EUROPEAN INVESTMENT BANK






CA/541/21


11 March 2021




 



Document 21/101







BOARD OF DIRECTORS







INVESTMENT FACILITY


FINANCIAL STATEMENTS


AS AT 31 DECEMBER 2020











a)


Statement of financial position










b)


Statement of profit or loss and other comprehensive income










c)


Statement of changes in contributors’ resources










d)


Statement of cash flows










e)


Notes to the financial statements










f)


Independent auditor’s report









STATEMENT OF FINANCIAL POSITION


AS AT 31 DECEMBER 2020









(in EUR’000)




 


Notes


31.12.2020


31.12.2019





ASSETS



 


 


 




Cash and cash equivalents


5


923 940 


837 777 




Amounts receivable from contributors


9/17


68 908 


86 330 




Treasury financial assets


10


351 873 


330 587 




Derivative financial instruments


6


33 584 


14 184 




Loans and advances


7


1 673 445 


1 518 675 




Shares and other variable yield securities


8


526 810 


619 928 




Other assets


11


109


—





Total assets



 



3 578 669 




3 407 481 






LIABILITIES AND CONTRIBUTORS' RESOURCES



 


 


 





LIABILITIES



 


 


 




Derivative financial instruments


6


642


191




Deferred income


12


29 732 


32 566 




Provisions for guarantees issued


13


851


628




Provisions for loan commitments


14


33 152 


37 269 




Amounts owed to third parties


15


152 378 


147 438 




Other liabilities


16


3 446 


2 353 





Total liabilities



 



220 201 




220 445 






CONTRIBUTORS' RESOURCES



 


 


 




Facility Member States Contribution called


17


3 221 695 


2 967 000 




Retained earnings


 


136 773 


220 036 





Total contributors' resources



 



3 358 468 




3 187 036 






Total liabilities and contributors' resources



 



3 578 669 




3 407 481 









STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


FOR THE YEAR ENDED 31 DECEMBER 2020









(in EUR’000)




 


Notes


From 01.01.2020


From 01.01.2019




to 31.12.2020


to 31.12.2019




Interest and similar income (1)



19


84 783 


93 923 




Interest and similar expenses


19


-5 250 


-2 948 





Net interest and similar income



 



79 533 




90 975 





Fee and commission income


20


353


4 438 




Fee and commission expenses


20


-225


-721





Net fee and commission income



 



128




3 717 





Fair value change of derivative financial instruments


 


18 949 


12 611 




Net result on shares and other variable yield securities


21


-46 717 


9 904 




Net result on loans and advances measured at FVTPL


7


-29 621 


-8 331 




Sale of loans and proceeds from recovery actions


 


2 362 


2 064 




Net foreign exchange result


 


-48 545 


-61 998 





Net result on financial operations



 



- 103 572 




-45 750 





Change in impairment on loans and advances net of reversals


7


-4 312 


17 243 




Change in provisions for guarantees net of reversals


13


-228


107




Change in provisions for loan commitments net of reversals


14


3 715 


-13 244 




General administrative expenses


22


-58 527 


-50 009 





(Loss) / profit for the year



 



-83 263 




3 039 






Other comprehensive income



 


—


—





Total comprehensive income (loss) / profit for the year



 



-83 263 




3 039 









STATEMENT OF CHANGES IN CONTRIBUTORS’ RESOURCES


FOR THE YEAR ENDED 31 DECEMBER 2020










(in EUR’000)




 


Notes


Contribution called


Retained earnings


Total





At 1 January 2020



 



2 967 000 




220 036 




3 187 036 





Member States contribution called during the year


17


209 614 


—


209 614 




Reallocation of 9th EDF Contribution to interest subsidies and technical assistance to Contributor’s resources


17


45 081 


—


45 081 




(Loss) for the year 2020


 


—


-83 263 


-83 263 





Changes in contributors’ resources



 



254 695 




-83 263 




171 432 






At 31 December 2020



 



3 221 695 




136 773 




3 358 468 






At 1 January 2019



 



2 697 000 




216 997 




2 913 997 





Member States contribution called during the year


17


270 000 


—


270 000 




Profit for the year 2019


 


—


3 039 


3 039 





Changes in contributors’ resources



 



270 000 




3 039 




273 039 






At 31 December 2019



 



2 967 000 




220 036 




3 187 036 









STATEMENT OF CASH FLOWS


FOR THE YEAR ENDED 31 DECEMBER 2020









(in EUR’000)




 


Notes


From 01.01.2020 to 31.12.2020


From 01.01.2019 to 31.12.2019





OPERATING ACTIVITIES



 


 


 




(Loss) / Profit for the year


 


-83 263 


3 039 




Adjustments made for


 


 


 




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


8


47 909 


-8 629 




Change in impairment on loans and advances, net of reversals


7


4 312 


-17 243 




Net result on loans and advances measured at FVTPL


 


29 621 


8 331 




Change in accrued interest and amortised cost on loans and advances


7


-5 202 


-5 087 




Net change in provisions for guarantees issued, net of reversals


13


228


-107




Net change in provisions for loan commitments, net of reversals


 


-4 117 


13 447 




Fair value changes on derivatives


 


-18 949 


-12 611 




Change in accrued interest and amortised cost on treasury financial assets


10


1 067 


331




Change in deferred income


 


-2 834 


-1 198 




Effect of exchange rate changes on loans


7


90 878 


-17 752 




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


8


33 616 


-6 812 




Effect of exchange rate changes on cash held


 


9 233 


2 369 





Profit / (Loss) on operating activities before changes in operating assets and liabilities



 



102 499 




-41 922 





Loan disbursements


7


- 560 291 


- 311 185 




Repayments of loans


7


276 101 


355 078 




Sale of loans and proceeds from recovery actions


 


2 362 


2 194 




Change in accrued interest on cash and cash equivalents


5


66


-93




(Increase) in treasury financial assets


10


-2 710 009 


-2 948 021 




Maturities of treasury financial assets


10


2 689 790 


2 952 905 




Decrease in shares and other variable yield securities


8


-85 305 


- 106 943 




Net proceeds from shares and other variable yield securities


 


85 477 


71 024 




Increase / (Decrease) in other assets


 


109


-171




(Increase) / Decrease in other liabilities


 


-1 093 


140




Increase in amounts payable to the European Investment Bank


 


8 543 


2 187 





Net cash flows used in operating activities



 



- 191 751 




-24 807 






FINANCING ACTIVITIES



 


 


 




Contribution received from Member States


 


227 035 


284 820 




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


 


60 387 


30 000 




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


 


-18 807 


-28 220 





Net cash flows from financing activities



 



268 615 




286 600 






Net increase in cash and cash equivalents



 



76 864 




261 793 






Summary statement of cash flows:



 


 


 





Cash and cash equivalents at the beginning of financial year



 



837 980 




573 818 






Net cash flows (used in) / from:



 


 


 




Operating activities


 


- 191 751 


-24 937 




Financing activities


 


268 615 


286 730 




Effects of exchange rate changes on cash and cash equivalents


 


9 233 


2 369 





Cash and cash equivalents at the end of financial year



 



924 077 




837 980 






Cash and cash equivalents are composed of:



 


 


 




Cash in hand


5


398 991 


72 166 




Term deposits (excluding accrued interest)


5


380 000 


622 991 




Commercial papers


5


145 086 


142 823 




 


 



924 077 




837 980 






Notes to the financial statements as at 31 December 2020

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 States 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 States 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 EU and ACP sides have agreed transitional arrangements that would allow the EIB to carry on signing operations in ACP region until the end of November 2021, or until the entry into force of a new ACP-EU Agreement, or the provisional application between the Union and the ACP States of the new Agreement, whichever comes first (Decision No 2/2020 of the ACP-EU Committee of Ambassadors of 4 December 2020 to amend Decision No 3/2019 of the ACP-EU Committee of Ambassadors to adopt transitional measures pursuant to Article 95(4) of the ACP-EU Partnership Agreement (23)).
Agreement was reached on 15 December 2020 on the Neighbourhood, Development and International Cooperation Instrument (‘NDICI’), covering external action of the EU for the period 2021-2027. This includes the integration of the current extra-budgetary EDF into the EU budget. The NDICI Regulation will provide the legal basis for the Commission to entrust future EU mandates to the EIB for its activity outside the EU. It will also provide the external investment framework for the Union to cooperate with partner institutions through grants or guarantees from the EU budget. The NDICI legal text is expected to be formally adopted in the spring of 2021.
On 23 December 2020, the Council decided to extend the current ACP Investment Facility commitment period by at least 6 months. Going forward, reflows from the ACP IF shall be deployed within the NDICI framework through a combination of a dedicated ACP private sector window under the European Fund for Sustainable Development (EFSD+) and a Trust Fund, both to be implemented by the EIB.
Following, the extension of the Investment Facility commitment period, the Bank will continue approving operations in line with its Mandate until 30 June 2021, or until the entry into force of a regulation establishing the external financing instrument, whichever is the later, and in any case no later than 30 November 2021 (24).
The financial statements have been prepared on a going concern basis, which assumes that the Investment Facility will be able to meet all monies payables under any operations. The duration of the Investment Facility is not determined. The 11th EDF Internal Agreement remains in force (pursuant to Article 14(3) thereof) so long as is necessary for all the operations financed under the ACP-EU Partnership Agreement, the Overseas Association Decision and the multi-annual financial framework to be fully executed.
The present financial statements cover the period from 1 January 2020 to 31 December 2020.
On a proposal from the EIB Management Committee and the EIB Board of Directors adopted the Financial Statements on 11 March 2021, and authorised their submission to the EIB Board of Governors for approval by 23 April 2021.
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.
a.   Significant accounting judgments and estimates

The preparation of financial statements requires the use of accounting estimates. It also requires the 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 (‘FA’) and financial liabilities (‘FL’) 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, which can result in significant changes to the timing and amount of allowance for credit loss to be recognized (Note 2.4.2). Relevant assumptions on the effects on impairment resulting from COVID–19 are detailed under Note 2.4.2 and Note 3.2.3.7.

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.

Consolidation of entities in which the Facility holds interest

The EIB 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.
b.   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

The following interpretations as well as the amendments to and revision of existing standards became effective for the Facility`s financial statements as of 1 January 2020:

Interest Rate Benchmark Reform — Amendments to IFRS 9, IAS 39 and IFRS 7

In September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7, which provide temporary reliefs that would enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate (a RFR).
The amendments to IFRS 9 include a number of reliefs, which apply to all hedging relationships that are directly affected by the interest rate benchmark reform. The first three reliefs provide for:






—


The assessment of whether a forecast transaction (or component thereof) is highly probable;










—


Assessing when to reclassify the amount in the cash flow hedge reserve to profit and loss;










—


The assessment of the economic relationship between the hedged item and the hedging instrument.




For each of these reliefs, it is assumed that the benchmark on which the hedged cash flows are based are not altered as a result of IBOR reform.
The fourth relief provides that a non-contractually specified risk component only needs to be separately identifiable need at initial hedge designation and not on ongoing basis.
Application of the reliefs is mandatory and the reliefs continue indefinitely in the absence of any of the events described in the amendments. The amendments also introduce specific disclosure requirements for hedging relationships to which the reliefs are applied. The amendments must be applied retrospectively. However, any hedge relationships that have previously been de-designated cannot be reinstated upon application, nor can any hedge relationships be designated with the benefit of hindsight.
The adoption of the amendments had no material impacts on the Facility’s financial statements.

Definition of Material — Amendments to IAS 1 ‘Presentation of financial statements’ and lAS 8 ‘Accounting policies, changes in accounting estimates and errors’.

The amendments clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards themselves. The amended definition states that ‘Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.’ The amendment also clarifies the meaning of ‘primary users of general purpose financial statements’ to whom those financial statements are directed, by defining them as ‘existing and potential investors, lenders and other creditors’ that must rely on general purpose financial statements for much of the financial information they need.
The amendments did not have a significant impact on the Facility’s financial statements.

Amendments to References to Conceptual Framework in IFRS Standards

The revised Conceptual Framework for Financial Reporting is not a standard, and none of the concepts override those in any standard or any requirements in a standard, but mainly has the purpose to assist the Board in developing standards, to help preparers develop consistent accounting policies if there is no applicable standard in place and to assist all parties to understand and interpret the standards. The Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts.
The Facility adopted the revised Conceptual Framework from 1 January 2020. The revised Conceptual Framework did not have a significant impact on the Facility’s financial statements.

Standards issued but not yet adopted


Interest Rate Benchmark Reform — Phase 2 — Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

On 27 August 2020, the IASB published Interest Rate Benchmark Reform — Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. With publication of the phase two amendments, the IASB has completed its work in response to IBOR reform.
The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR).
The amendments are effective for annual periods beginning on or after 1 January 2021. The Facility did not adopt these amendments early and a cross services IBOR working group is in place to assess the impact and manage its transition.
c.   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.
i.   
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.
ii.   
Financial assets other than derivatives


Non-derivative financial instruments are initially recognised using the settlement date basis.

Classification and measurement


Financial assets

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, loans and debt securities including bonds, notes or certificates issued by structured entities, government or corporates.
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.
The business model for the Impact Financing Envelope direct loan operations has been described and disclosed in Note 24.

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.

Derecognition

The Facility derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or the rights to receive the contractual cash flow are transferred in a transaction in which either the Facility transfers the risks and rewards of ownership of the financial asset or it retains substantially all of the risks and rewards of ownership but 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.

Modification

A financial asset measured at amortised cost is considered modified when its contractual cash flows are renegotiated or otherwise modified. Renegotiation or modification may or may not lead to derecognition of the old and recognition of the new financial instrument.
A substantial contractual modification on the cash flows of a financial asset measured at amortised cost which results in the derecognition of the financial asset, leads to the recognition of the new financial asset at its fair value, and the recording of the modification gain or loss impact in the consolidated income statement under ‘Result on financial operations’.
A contractual modification is deemed substantial if the discounted present value of the cash flows under the revised terms (discounted using the original effective interest rate) is at least 10 % different from the discounted present value of the remaining cash flows of the original financial asset. Qualitative factors such as a change in the currency on which the financial asset is denominated and conversion features are also considered.

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 Bank 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 Bank uses its 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

IFRS 9 is based on a forward-looking expected credit loss (‘ECL’) model. The EIB has established a framework to calculate ‘expected credit loss’ conditional on the state of the macro-economy. It involves the construction of point-in-time (‘PIT’”) credit risk parameters (Probability of default — ‘PD’ and Loss given default — ‘LGD’) based on a systematic factor (credit cycle) that is driven by the macro-economy and projected via macroeconomic forecasts or scenarios. The final ECL is a probability weighted average of the respective macro-economic scenario ECLs. This forward-looking impairment model is applied to financial assets measured at AC, to financial guarantee contracts, as well as to off-balance sheet commitments.
Under IFRS 9, loss allowances are 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 ECL’s: 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 which are, from the moment of initial recognition, deemed to be classified as 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 Bank’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 (‘FMGPs’), notably covering early warning triggers, Watch List (‘WL’), internal rating and arrears.
In line with guidance issued by standard setters and market practises, the EIB considers that the application of COVID-19 short-term forbearance measures to performing counterparties, aimed at addressing the adverse systemic economic impact of the COVID-19 pandemic, should not be considered by themselves as an automatic trigger to conclude that SICR has occurred. As disclosed under Note 3.2.3.8, the EIB applies expert judgement when assessing the credit risk of such counterparties.
The EIB considers that the COVID-19 pandemic effect is reflected within the existing forward-looking ECL model which is deemed sufficiently robust to factor in such extreme events. Notably, the respective impacts have been directly captured through the macroeconomic projections and the PD terms structures.
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 Bank determines whether or not there is objective evidence of a non-performing exposure. 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:






—


Credit rating and PIT Probability of default (‘PD’),










—


PIT Loss Given default (‘LGD’),










—


Exposure at default (‘EAD’).




The credit rating of a counterpart is determined at a certain date, using score-sheet models tailored to the various categories of counterparties and exposures.
Each credit rating maps to a specific PD that 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. Hence, ratings are primary input into the determination of the PIT 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 and given specific macro-economic scenarios.
The LGD 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. LGD 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 PIT and 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.
For the measurement of ECL, the EIB has developed a conditional modelling approach for calculating PD term structures involving:






—


the definition of an economically reasonable link function between the credit cycle and macroeconomic variables, and










—


a set of three macro-economic scenarios (one baseline and two scenarios reflecting downturn and upturn in the economy) with multi-year potential realisation for the GDP and their associated likelihoods.




To generate macroeconomic scenarios, the EIB uses a macro semi-structural multi-country and multi-equation model of the global economy with country specific blocks. The central / baseline scenario is designed to be consistent with the most recent European Commission forecasts. The positive and negative scenarios are designed around the central scenario by the deployment of the multi-country/multi-equation model. The scenarios are derived shocking GDP, which is the key measure of economic activity. The shocks to real GDP are calibrated to replicate the past volatility of the variable. Also expert judgment is applied, when appropriate, to refine the size and persistency of GDP shocks. As a result, shocks are determined together with a decay function to determine the impact of the shocks over time. Probabilities attached to each scenario are defined reflecting market (volatility) indicators and internally developed indicators/trackers deployed in a consistent manner over time to capture uncertainty.
The EAD represents the expected exposure in the event of a default and is based on the current exposure to the counterparty and potential changes to the current amount allowed under the contract including amortisation. The EAD of a financial asset is its gross carrying amount. For lending commitments and financial guarantees, the EAD includes the amount drawn.
In 2020, and in line with its ongoing model review and maintenance, the EIB has updated its PIT, PD and LGD models used to calculate the estimates of ECL. The nature of the update relates mostly to a change in data input sources, more specifically, credit and macroeconomic data used for credit cycle modelling to support the calculation of PIT ECL (lifetime and 12M). The credit cycle is now constructed from an external rating agency’s downgrade and default rates data and projected via annual growth rates of real GDP and spread between long and short-term interest rates, namely interest rate term premium, while the previous model version extracted the credit cycle from PIT PD measures provided by external data provider and included one single macroeconomic variable only, namely quarterly growth rates of real GDP.
The model update brings several upgrades, namely, the new credit cycle definition which comes with increased discrimination power across industry and region segments, the link to the macro-economic variables is stronger and allows for the incorporation of a second external explanatory variable (term premium). The model upgrade impact is disclosed in Notes 7.2 and 14.
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 3 months or less. Cash and cash equivalents are carried at AC in the statement of financial position.
2.   Treasury financial assets

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 3 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.
3.   Loans and advances

The loan and advances portfolio may consist of debt instruments such as loans and debt securities including bonds, notes or certificates issued by structured entities with the intention of holding them to maturity and to collect the contractual cash flows.
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.
Debt securities are recognised in the assets of the Facility when cash is advanced to the issuer and can take the form of a contractually linked or single tranche debt instrument. Undisbursed parts of debt securities are recorded in the off-balance at their nominal value. Debt securities are initially measured at cost, which is the fair value plus any directly attributable transaction cost, and are subsequently measured at AC using the effective interest rate method. The difference between entry price and redemption value is amortised in accordance with the effective interest method over the remaining life of the instrument.
The impairment policy on loans and advances is described under Note 2.4.2.
Loans and advances not fulfilling the SPPI criterion are mandatorily measured at FVTPL. The fair value measurement technique used is based on a discounted cash flow technique or liquidation value.
4.   Shares and other variable yield securities

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.
iii.   
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).
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.
iv.   
Financial liabilities other than derivatives




Classification and measurement



Financial liabilities

A financial liability is measured at amortised cost except for financial liabilities that meet the definition of held for trading (e.g. derivative liabilities).
The Facility derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
v.   
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 regarding 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.
vi.   
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.
vii.   
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.
Interest subsidies received for the Facility’s resources are deferred and recognised as an adjustment to the effective yield, being recorded under ‘Interest and similar income’ in the income statement over the period from disbursement to repayment of the subsidised 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.
viii.   
Interest subsidies and technical assistance


As part of its activity, the Facility manages interest subsidies and technical assistance (‘TA’)on behalf of the Member States.
The part of the Member States contributions allocated to the payment of interest subsidies and TA is not accounted for in the Facility’s contributors’ resources but is classified as amounts owed to third parties. The Facility operates the disbursement to the final beneficiaries and then decreases the amounts owed to third parties.
When amounts contributed with regard to interest subsidies and TA are not fully granted, they are reclassified as contribution to the Facility.
ix.   
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.
x.   
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.
xi.   
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.
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 EIB adapts the IF`s risk management framework on an ongoing basis.
The Risk Management Directorate of the 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 Office.
At EIB level, the Group Chief Risk Officer (‘GCRO’) reports on Group Risks to the EIB Management Committee under the oversight of the MC member in charge of risk. The GCRO has direct access to the Risk Policy Committee and can write directly to and communicate with the EIB Board of Directors on any matter of his/her field of attribution.
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, the EIB assesses the credit risk and expected loss with a view to quantify and price the risk. The 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, Financial Institutions, etc.). Taking into consideration both, Best Banking Practice applicable to the EIB 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 PD following an in-depth analysis of the counterpart’s business and financial risk profile and its country risk operating context. Expert adjustments are made when necessary under the consideration of the legal entities’ parental or government support, and the final rating allows for overrides to reflect information (e.g. market pricing) not considered in the scoring sheet.
The credit assessment of project finance and other structured limited recourse operations uses 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. Finally, Non-EU sovereigns are rated by the Economics Department based on a statistical model.
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


31.12.2020


31.12.2019





ASSETS



 


 




Cash and cash equivalents


923 940 


837 777 




Amounts receivable from contributors


68 908 


86 330 




Treasury financial assets


351 873 


330 587 




Derivative financial instruments


33 584 


14 184 




Loans and advances


1 673 445 


1 518 675 




Other assets


109


—





Total




3 051 859 




2 787 553 






Provisions for loan commitments




-33 152 




-37 269 






OFF BALANCE SHEET



 


 




Contingent liabilities


 


 










—


Issued Guarantees






998 560 


200 013 




Commitments


 


 










—


Undisbursed loans






1 722 618 


1 357 320 










—


Non-issued guarantees






554 686 


1 359 818 





Total off balance sheet




3 275 864 




2 917 151 






Total credit exposure




6 294 571 




5 667 435 





3.2.3   Credit risk on loans and advances

3.2.3.1   Credit risk measurement for loans and advances

Loans and advances 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 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 PD of the main obligors, the EAD 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 an indicator of credit risk variations for the purposes of prioritising monitoring efforts;










—


as a description of the loan’s portfolio quality at any given date;










—


as a benchmark for calculating the annual additions to the General loan reserve; and










—


as an input in risk-pricing decisions.




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 III Internal Ratings Based 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 LG.










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 %.










—


‘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 internal loan grading based 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 below the one at approval.
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 carrying amount) to credit risk on loans and advances signed (disbursed and undisbursed) nature of borrower taking into account guarantees provided by guarantors:










(in EUR ’000)




At 31.12.2020


Guaranteed


Other credit enhancements


Not guaranteed


Total


% of Total disbursed




Financial institutions


87 269 


—


963 366 



1 050 635 




64 %





Corporates


203 772 


27 026 


177 321 



408 119 




24 %





Public institutions


21 866 


—


1 057 



22 923 




1 %





States


—


1 506 


190 262 



191 768 




11 %






Total disbursed




312 907 




28 532 




1 332 006 




1 673 445 




100 %






Undisbursed




196 692 




—




1 492 774 




1 689 466 




—






Total disbursed and undisbursed




509 599 




28 532 




2 824 780 




3 362 911 




—


















(in EUR ’000)




At 31.12.2019


Guaranteed


Other credit enhancements


Not guaranteed


Total


% of Total disbursed




Financial institutions


111 806 


—


803 861 



915 667 




60 %





Corporates


190 006 


36 704 


172 082 



398 792 




26 %





Public institutions


26 908 


—


1 686 



28 594 




2 %





States


—


2 085 


173 537 



175 622 




12 %






Total disbursed




328 720 




38 789 




1 151 166 




1 518 675 




100 %






Undisbursed




191 191 




—




1 128 860 




1 320 051 




—






Total disbursed and undisbursed




519 911 




38 789 




2 280 026 




2 838 726 




—





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 2020 and 31 December 2019 by the Loan Grading applications, based on the exposure signed (disbursed and undisbursed):













(in EUR ’000)




At 31.12.2020


High Grade


Standard Grade


Min. Accept. Risk


High Risk


No grading (25)



Total


% of Total




A to B-


C


D+


D- and below




Borrower


Financial institutions


290 565 


90 445 


475 331 


815 120 


—



1 671 461 




50 %





Corporates


118 990 


46 861 


14 433 


512 142 


313 762 



1 006 188 




30 %





Public institutions


—


21 866 


—


—


1 057 



22 923 




1 %





States


—


4 865 


3 926 


653 548 


—



662 339 




19 %






Total




409 555 




164 037 




493 690 




1 980 810 




314 819 




3 362 911 




100 %





















(in EUR ’000)




At 31.12.2019


High Grade


Standard Grade


Min. Accept. Risk


High Risk


No grading (26)



Total


% of Total




A to B-


C


D+


D- and below




Borrower


Financial institutions


234 072 


219 467 


335 841 


817 894 


—



1 607 274 




57 %





Corporates


100 115 


49 458 


—


524 532 


95 925 



770 030 




27 %





Public institutions


—


26 908 


—


—


1 686 



28 594 




1 %





States


—


6 285 


4 486 


422 057 


—



432 828 




15 %






Total




334 187 




302 118 




340 327 




1 764 483 




97 611 




2 838 726 




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


31.12.2020


31.12.2019




Egypt


319 040 


101 316 




Nigeria


236 149 


179 499 




Kenya


195 917 


230 837 




Ethiopia


92 346 


62 005 




Mauritius


76 419 


96 014 




Barbados


75 037 


75 342 




Uganda


61 869 


64 882 




Tanzania


60 058 


96 640 




Rwanda


59 114 


48 839 




Congo (Democratic Republic)


56 527 


66 754 




Zambia


42 553 


43 036 




New Caledonia


41 224 


43 980 




Mauritania


38 131 


49 139 




Regional-ACP


37 497 


14 674 




Cameroon


36 749 


32 238 




Senegal


32 850 


42 750 




Dominican Republic


30 741 


45 393 




Jamaica


23 411 


33 436 




Ghana


21 249 


31 635 




Guinea


18 534 


20 399 




Malawi


17 349 


21 800 




Cape Verde


14 952 


17 226 




Angola


14 654 


19 269 




Mali


12 918 


4 234 




Mozambique


10 775 


12 709 




Togo


10 625 


18 022 




French Polynesia


8 783 


12 556 




Cayman Islands


8 027 


12 203 




Benin


3 932 


59




Seychelles


3 359 


4 201 




Micronesia


3 073 


648




Haiti


2 617 


3 345 




Niger


2 243 


5 399 




Samoa


1 898 


3 036 




Burkina Faso


1 267 


1 861 




Vanuatu


1 200 


1 527 




Palau


358


768




Botswana


—


1 004 





Total




1 673 445 




1 518 675 





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 ‘Tertiary and other’:







(in EUR ’000)




Industry sector of borrower



31.12.2020




31.12.2019





Tertiary and other


1 079 088 


932 901 




Electricity, coal and others


207 940 


226 314 




Urban development, renovation and transport


206 201 


195 042 




Chemicals, plastics and pharmaceuticals


89 495 


51 865 




Basic material and mining


34 292 


44 746 




Airports and air traffic management systems


21 866 


26 908 




Telecommunications


14 964 


21 546 




Investment goods, Consumer durables


11 531 


4 186 




Waste recuperation


6 063 


6 812 




Food chain


2 005 


8 355 





Total




1 673 445 




1 518 675 





3.2.3.5   Credit risk exposure for each internal risk rating

The EIB 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)




 


 


2020




 


Moody’s equiv. grade


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


Aaa


—


73 545 


—


—


—



73 545 





Internal Rating 2 — very low credit risk


Aa1 — Aa3


75 048 


—


—


—


—



75 048 





Internal Rating 3 — low credit risk


A1 — A3


2 087 


—


—


—


—



2 087 





Internal Rating 4 — moderate credit risk


Baa1 — Baa3


54 412 


6 087 


—


—


—



60 499 





Internal Rating 5 — financially weak counterpart


Ba1 — Ba3


392 787 


19 761 


—


—


—



412 548 





Internal Rating 6 — high credit risk


B1 — B3


581 607 


193 877 


32 032 


—


—



807 516 





Internal Rating 7 — very high credit risk


below Caa1


70 495 


177 919 


1 493 


—


—



249 907 





Internal Rating 8 — counterpart in default


below Caa1 but in default


—


5 693 


45 000 


—


—



50 693 






Loans and advances at FVTPL



 


—


—


—


—



92 436 




92 436 






Loss allowance and FV adjustment



 



-16 389 




-43 976 




-44 538 



—



-45 931 




- 150 834 






Carrying amount of loans and advances



 



1 160 047 




432 906 




33 987 



—



46 505 




1 673 445 






Loan commitments



 


 


 


 


 


 


 




Internal Rating 1 — minimal credit risk


Aaa


—


—


—


—


—


—




Internal Rating 2 — very low credit risk


Aa1 — Aa3


95 067 


—


—


—


—



95 067 





Internal Rating 3 — low credit risk


A1 — A3


87 000 


—


—


—


—



87 000 





Internal Rating 4 — moderate credit risk


Baa1 — Baa3


57 282 


—


—


—


—



57 282 





Internal Rating 5 — financially weak counterpart


Ba1 — Ba3


152 264 


—


—


—


—



152 264 





Internal Rating 6 — high credit risk


B1 — B3


675 365 


8 964 


—


—


—



684 329 





Internal Rating 7 — very high credit risk


below Caa1


72 500 


110 331 


—


—


—



182 831 





Internal Rating 8 — counterpart in default


below Caa1 but in default


—


—


38 497 


—


—



38 497 





No internal rating (27)



 


129 669 


27 365 


—


—


—



157 034 






Loans and advances at FVTPL



 


—


—


—


—



268 314 




268 314 






Loss allowance and FV adjustment



 



-6 817 




-26 335 



—


—


—



-33 152 






Carrying amount of loan commitments



 



1 262 330 




120 325 




38 497 



—



268 314 




1 689 466 




















(in EUR ’000)




 


 


2019




 


Moody’s equiv. grade


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


Aaa


—


82 211 


—


—


—



82 211 





Internal Rating 2 — very low credit risk


Aa1 — Aa3


75 352 


—


—


—


—



75 352 





Internal Rating 3 — low credit risk


A1 — A3


5 399 


—


—


—


—



5 399 





Internal Rating 4 — moderate credit risk


Baa1 — Baa3


60 385 


16 449 


—


—


—



76 834 





Internal Rating 5 — financially weak counterpart


Ba1 — Ba3


192 201 


6 199 


—


—


—



198 400 





Internal Rating 6 — high credit risk


B1 — B3


708 162 


159 858 


—


—


—



868 020 





Internal Rating 7 — very high credit risk


below Caa1


79 411 


145 176 


—


—


—



224 587 





Internal Rating 8 — counterpart in default


below Caa1 but in default


—


—


136 749 


—


—



136 749 






Loans and advances at FVTPL



 


—


—


—


—



37 366 




37 366 






Loss allowance and FV adjustment



 



-17 191 




-38 509 




- 114 307 




—




-16 236 




- 186 243 






Carrying amount of loans and advances



 



1 103 719 




371 384 




22 442 




—




21 130 




1 518 675 






Loan commitments



 


 


 


 


 


 


 




Internal Rating 2 — very low credit risk


Aa1 — Aa3


102 092 


—


—


—


—



102 092 





Internal Rating 3 — low credit risk


A1 — A3


12 000 


—


—


—


—



12 000 





Internal Rating 4 — moderate credit risk


Baa1 — Baa3


61 461 


—


—


—


—



61 461 





Internal Rating 5 — financially weak counterpart


Ba1 — Ba3


323 080 


—


—


—


—



323 080 





Internal Rating 6 — high credit risk


B1 — B3


405 773 


126 076 


—


—


—



531 849 





Internal Rating 7 — very high credit risk


below Caa1


14 883 


104 328 


—


—


—



119 211 





Internal Rating 8 — counterpart in default


below Caa1 but in default


—


—


51 377 


—


—



51 377 





No internal rating (28)



 


79 669 


—


—


—


—



79 669 






Loans and advances at FVTPL



 



—




—



—


—



76 581 




76 581 






Loss allowance and FV adjustment



 



-3 943 




-33 326 



—


—


—



-37 269 






Carrying amount of loan commitments



 



995 015 




197 078 




51 377 



—



76 581 




1 320 051 





The EIB continually monitors events affecting its borrowers and guarantors, especially banks. In particular, the EIB 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 the Facility management is provided on the overall status.
The arrears and impairments on loans and advances can be analysed as follows:







(in EUR ’000)




 


Loans and advances


Loans and advances




 


31.12.2020


31.12.2019





Carrying amount




1 673 445 




1 518 675 






Lifetime ECL credit- impaired



 


 




Gross amount


45 000 


136 749 




Impairment- loss allowance


-44 538 


- 114 307 





Carrying amount of lifetime ECL credit-impaired




462




22 442 






Past due but not credit- impaired



 


 





Past due comprises



 


 




0-30 days


2 008 


61




30-60 days


—


924




60-90 days


—


—




90-180 days


174


135




more than 180 days


—


26





Carrying amount past due but not credit- impaired




2 182 




1 146 






Carrying amount neither past due nor credit- impaired




1 670 801 




1 495 087 






Total carrying amount loans and advances




1 673 445 




1 518 675 





3.2.3.7   Sensitivity on ECL to future economic conditions (in EUR’000)

The ECL is sensitive to judgments and assumptions made regarding formulation of forward-looking scenarios. The EIB performs a sensitivity analysis on the ECL recognised on material classes of its assets.
The forecasts of future economic conditions (via macroeconomic scenarios) are inputs to forecasting model producing conditional risk parameters, which are an input to loss allowance calculation.
The scenarios are derived shocking GDP, which is the key measurement of economic activity. The shocks to real GDP are calibrated to replicate the past volatility of the variable. In addition, expert judgment is applied, when appropriate, to refine the size and persistency of GDP shocks. As a result, shocks are determined together with a decay function to determine the impact of the shocks over time. Probabilities attached to each scenario are defined reflecting market (volatility) indicators and internally developed indicators/trackers consistently deployed over time to capture uncertainty. The weighting of positive and negative shocks depends on the balance of risks in the economy, on average negative and positive shocks EUR — 20 533 (2019: EUR — 2 670) and EUR 17 658 (2019: EUR 2 396) were respectively applied on quarterly projections in the past exercise.
The table below shows the loss allowance on loans and advances under Stage 1 and 2. Each forward-looking scenario (e.g. baseline, positive and negative) was weighted 100 % instead of applying scenario probability weights across the three scenarios.








(in EUR ’000)




 


2020




Positive


Baseline


Negative




Gross exposure


3 063 652 


3 063 652 


3 063 652 




Loss allowance


70 645 


88 303 


108 836 















(in EUR ’000)




 


2019




Positive


Baseline


Negative




Gross exposure


2 748 523 


2 748 523 


2 748 523 




Loss allowance


89 255 


91 651 


94 321 




3.2.3.8   Loan renegotiation and forbearance

The EIB considers loans to be forborne loans (i.e. loans, debt securities and loan commitments) in respect of which forbearance measures have been extended. Forbearance measures consist of ‘concessions’ that the EIB decides to make towards an obligor who is considered unable to comply with the contractual debt service terms and conditions due to its financial difficulties, in order to enable the obligor to service the debt or to refinance, totally or partially, the contract. Exposures shall be treated as forborne if a concession has been made, irrespective of whether any amount is past-due, or the exposure is classified as defaulted. Exposures shall not be treated as forborne when the obligor is not in financial difficulties.
In the normal course of business, the LG of the loans in question would have deteriorated, the loans would have been included in the Watch List before renegotiation and the financial instrument would move from Stage 1 to Stage 2 in the three-stage model for impairment. Once renegotiated, the EIB would continue to closely monitor these loans and the financial instrument would be credit impaired and moved to Stage 3. If subsequently the LG of a loan improves sufficiently, the loan would be removed from the Watch List in line with the EIB’s procedures.
As part of its response to the economic effects of the COVID-19 pandemic, the Bank has decided to make a number of supportive measures available to its clients in certain circumstances, which include, among other things, (i) the temporary easing (including waivers) of financial covenants and other key clauses, (ii) the re-profiling of cash flows by setting new repayment schedules or the temporary standstill of repayment obligations and (iii) certain other complementary supportive measures, such as the signing of new contracts, accelerating loan disbursements and increasing amounts lent to borrowers. The Bank is assessing requests for such measures on a case-by-case basis within the limits of certain specific conditions. These measures are intended to be extended to clients who are temporarily affected by the economic effects of the COVID-19 pandemic but who are not experiencing any structural financial difficulties or solvency issues and are considered to be a going concern at the time of granting such measures. If, as a result of the assessment, a client does not meet these requirements or the Facility identifies risks for the long-term sustainability of the client’s business model, it will consider any other appropriate measures and, if necessary, follow the EIB’s standard restructuring processes.
Forbearance measures and practices undertaken by the EIB during the reporting period include, but are not limited to, extension of maturities, deferral of capital only, deferral of capital and interest, breach of material covenants and capitalisation of arrears.
Operations subject to forbearance measures are reported as such in the table below:









(in EUR ’000)




 


31.12.2020


31.12.2019




Performing


Non-Performing


Performing


Non-Performing




Number of contracts subject to forbearance practices


12


14


19


9




Carrying values (incl. interest and amounts in arrears)


169 274 


58 748 


182 619 


62 915 




ECL allowance recognised


19 311 


28 934 


7 916 


57 321 




Interest income in respect of forborne contracts


7 729 


5 099 


8 130 


854




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


—


49 472 


—


280



















(in EUR ’000)




 


Forbearance measures




 


31.12.2019


Extension of maturities


Deferral of capital and interest


Breach of material financial covenants


Other


Contractual repayment, termination and/or write off (29)



31.12.2020




Financial institutions


51 468 


-1 995 


11 989 


43 746 


—


-14 683 


90 525 




Corporates


194 066 


-1 074 


—


-3 515 


—


-51 980 


137 497 





Total




245 534 




-3 069 




11 989 




40 231 




—




-66 663 




228 022 





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 2020, and 31 December 2019, 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 2020 and 31 December 2019 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 3 months from value date. All credit exposure limit breaches have been reported to the mandators. As at 31 December 2020 and as at 31 December 2019 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.
The following table shows the situation of cash and cash equivalents including accrued interest (in EUR’000):










Minimum short-term rating


Minimum long-term rating


31.12.2020


31.12.2019




(Moody’s term)


(Moody’s term)




P-1


Aaa


49 988 


5 %


98 945 


12 %




P-1


Aa2


25 022 


3 %


67 799 


8 %




P-1


Aa3


130 024 


14 %


89 983 


11 %




P-1


A1


99 969 


11 %


213 914 


26 %




P-1


A2


119 972 


13 %


212 199 


25 %




P-1


A3


498 965 


54 %


104 944 


12 %




P-2


A3


—


—


49 993 


6 %





Total




923 940 




100 %




837 777 




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 EIB with an external counterpart. The swaps are arranged by the same Master Swap Agreements and Credit Support Annexes signed between the EIB and its external counterparts.
3.2.5.2   Credit risk measurement for derivatives

All the swaps executed by the EIB that are related to the Facility are treated within the same contractual framework and methodologies applied for the derivatives negotiated by the EIB for its own purposes. In particular, eligibility of swap counterparts is determined by the EIB based on the same eligibility conditions applied for its general swap purposes.
The EIB 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 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 3 months and are regularly rolled-over. The notional amount of FX swaps stood at EUR 1 480,0 million as at 31 December 2020 against EUR 1 545,0 million as at 31 December 2019. The fair value of FX swaps amounts to EUR 33,6 million as at 31 December 2020 against EUR 14,1 million as at 31 December 2019.
The Facility enters into interest rate swap contracts in order to hedge the interest rate risk on loans disbursed. As at 31 December 2020, there are two interest rate swaps outstanding with a notional amount of EUR 17,7 million (2019: EUR 24,2 million) and a fair value of EUR — 0,6 million (2019: EUR — 0,1 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 3 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:










(in EUR ’000)




Minimum short-term rating


Minimum long-term rating


31.12.2020


31.12.2019




(Moody’s term)


(Moody’s term)




P-1


Aa1


50 006 


14 %


50 046 


15 %




P-1


Aa2


50 040 


14 %


19 997 


6 %




P-1


Aa3


50 016 


14 %


11.. 50 025 


12.. 15 %




P-1


Aaa


51 705 


15 %


—


0 %




P-1


A1


—


0 %


55 050 


17 %




P-1


A2


50 058 


15 %


—


0 %




P-2


A3


—


0 %


85 027 


26 %




P-2


Baa1


50 035 


14 %


30 433 


9 %




P-2


Baa3


50 013 


14 %


40 009 


12 %





Total




351 873 




100 %




330 587 




100 %





3.3.   
Liquidity risk


Liquidity risk refers to an entity’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 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 PIT forecasted cash disbursements, as communicated periodically by the EIB’s Lending Department. Funds are invested on the money market and bond markets in the form of interbank deposits and other short-term financial instruments by taking into consideration the Facility’s cash disbursement obligations. The Facility’s liquid assets are managed by the Bank’s Treasury Department with a view to maintain appropriate liquidity to enable the Facility to meet its obligations.
In accordance with the principle of segregation of duties between the Front and Back Office, settlement operations related to the investment of these assets are under the responsibility of the EIB’s Planning and Settlement of Operations Department. Furthermore, the authorisation of counterparts and limits for treasury investments, as well as the monitoring of such limits, are the responsibility of the Bank’s Risk Management Directorate.
3.3.2.   Liquidity risk measurement

The tables in this section analyse the financial liabilities of the Facility by maturity on the basis of the period remaining between the balance sheet date and the contractual maturity date (based on undiscounted cash flows).
In terms of non-derivative financial liabilities, the Facility holds commitments in form of undisbursed portions of the credit under signed loan agreements, of undisbursed portions of signed capital subscription/investment agreements, of loan guarantees granted, or of committed interest 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 1 or 2 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 undisbursed 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 undisbursed portion of signed TA contracts. The disbursement time pattern is subject to a significant degree of uncertainty. Cash outflows classified in the ‘3 months or less’ bucket represent the amount of outstanding invoices received by the reporting date.
Commitments for non-derivative financial liabilities for which there is no defined contractual maturity date are classified under ‘Maturity Undefined’. Commitments, for which there is a recorded cash disbursement request at the reporting date, are classified under the relevant time bucket.
In terms of derivative financial liabilities, the maturity profile represents the contractual undiscounted gross cash flows of swap contracts including cross currency swaps (CCS), cross currency interest rate swaps (CCIRS), short-term currency swaps and interest rate swaps.











(in EUR ’000)




Maturity profile of non-derivative financial liabilities


3 months or less


More than 3 months to 1 year


More than 1 year to 5 years


More than 5 years


Maturity Undefined


Gross nominal outflow





as at 31.12.2020





Outflows for committed but undisbursed loans


199 006 


—


—


—


1 523 612 


1 722 618 




Outflows for committed investment funds and share subscription


1 043 


—


—


—


377 303 


378 347 




Others (signed non-issued guarantees, issued guarantees)


—


—


—


—


1 553 246 


1 553 246 




Outflows for committed interest subsidies


18 494 


—


—


—


356 391 


374 885 




Outflows for committed TA


2 504 


—


—


—


43 029 


45 533 





Total




221 047 



—


—


—



3 853 581 




4 074 629 



















(in EUR ’000)




Maturity profile of non-derivative financial liabilities


3 months or less


More than 3 months to 1 year


More than 1 year to 5 years


More than 5 years


Maturity Undefined


Gross nominal outflow





as at 31.12.2019





Outflows for committed but undisbursed loans


33 038 


—


—


—


1 324 282 


1 357 320 




Outflows for committed investment funds and share subscription


369


—


—


—


405 551 


405 920 




Others (signed non-issued guarantees, issued guarantees)


—


—


—


—


1 559 831 


1 559 831 




Outflows for committed interest subsidies


—


—


—


—


350 678 


350 678 




Outflows for committed TA


3 898 


—


—


—


21 166 


25 064 





Total




37 305 



—


—


—



3 661 508 




3 698 813 

















(in EUR ’000)




Maturity profile of derivative financial liabilities


3 months or less


More than 3 months to 1 year


More than 1 year to 5 years


Gross nominal inflow/outflow





as at 31.12.2020





Short-term currency swaps — Inflows


1 480 000 


—


—


1 480 000 




Short-term currency swaps — Outflows


-1 448 077 


—


—


-1 448 077 




Interest Rate Swaps — Inflows


147


394


775


1 317 




Interest Rate Swaps — Outflows


—


-815


-1 142 


-1 957 





Total




32 070 




-421




367




31 283 

















(in EUR ’000)




Maturity profile of derivative financial liabilities


3 months or less


More than 3 months to 1 year


More than 1 year to 5 years


Gross nominal inflow/outflow





as at 31.12.2019





Short-term currency swaps — Inflows


1 545 000 


—


—


1 545 000 




Short-term currency swaps — Outflows


-1 535 571 


—


—


-1 535 571 




Interest Rate Swaps — Inflows


310


820


2 045 


3 175 




Interest Rate Swaps — Outflows


—


-1 128 


-2 138 


-3 266 





Total




9 739 




-308




-93




9 338 





3.3.3.   Long term financial assets and liabilities

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







(in EUR ’000)




 


31.12.2020


31.12.2019





Financial assets:



 


 




Loans and advances


1 812 807 


1 636 520 




Shares and other variable yield securities


526 810 


619 928 




Other assets


109


—





Total




2 339 726 




2 256 448 






Financial liabilities:



 


 




Provisions for guarantees issued


851


628




Amount owed to third parties (30)



81 371 


93 531 




Provisions for loan commitments


33 152 


37 269 





Total




115 374 




131 428 





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 1 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 the 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 the 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 2020 would decrease by kEUR 697 (as at 31 December 2019: decrease by kEUR 533) if all relevant interest rates curves are simultaneously shifted upwards in parallel by 1 basis point.












(in EUR ’000)




Basis point value


Money


Very Short


Short


Medium


Long


Extra Long


Total




Market




As at 31.12.2020


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


-45


-113


-313


-215


-11


—



-697




















(in EUR ’000)




Basis point value


Money


Very Short


Short


Medium


Long


Extra Long


Total




Market




As at 31.12.2019


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


-42


-99


-172


-163


-57


—



-533





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 in either 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 EUR/USD 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 hedge 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 to ensure that the earnings will only be converted into the reporting currency (EUR) when received.
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, the remaining part of the assets and liabilities, which includes mainly interest accruals on loans, derivatives and subsidies, are presented under ‘FX position excluded from Risk Policies’.









As at 31 December 2020


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



- 117 144 


-51 893 


- 169 037 


479 103 





Local currencies


(under synthetic hedge)
 (2)



 


 


 


 





KES



23 439 


-960


22 479 


—





TZS



27 302 


272


27 574 


—





DOP



14 538 


320


14 858 


—





UGX



44 997 


572


45 569 


—





RWF



44 523 


-872


43 651 


—





Local currencies


(not under synthetic hedge)
 (2)



 


 


 


 





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



98 509 


-1 512 


96 997 


—





Total non-EUR currencies




136 164 




-54 073 




82 091 




479 103 






EUR



—



3 276 377 




3 276 377 




1 661 939 






Total EUR and non-EUR




136 164 




3 222 304 




3 358 468 




2 141 042 

















As at 31 December 2019


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



- 103 746 


-56 632 


- 160 378 


637 693 





Local currencies


(under synthetic hedge)
 (3)



 


 


 


 





KES



29 472 


464


29 936 


—





TZS



48 092 


354


48 446 


—





DOP



25 383 


602


25 985 


—





UGX



37 132 


574


37 706 


—





RWF



30 766 


47


30 813 


—





Local currencies


(not under synthetic hedge)
 (3)



 


 


 


 





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



99 864 


-530


99 334 


—





Total non-EUR currencies




166 963 




-55 121 




111 842 




637 693 






EUR



—



3 075 194 




3 075 194 




2 741 023 






Total EUR and non-EUR




166 963 




3 020 073 




3 187 036 




3 378 716 





3.4.2.3   Foreign exchange sensitivity analysis

As at 31 December 2020, a 10 percent depreciation of EUR versus all non-EUR currencies would result in an increase of the contributors’ resources amounting to EUR 9,1 million (31 December 2019: EUR 14,0 million). A 10 percent appreciation of the EUR versus all non EUR currencies would result in a decrease of the contributors’ resources amounting to EUR — 7,5 million (31 December 2019: EUR 11,4 million).
3.4.2.4   Conversion rates

The following conversion rates were used for establishing the balance sheet at 31 December 2020 and 31 December 2019:







 


31 December 2020


31 December 2019





Non-EU currencies



 


 




Botswana Pula (BWP)


13,2045 


11,8376 




Dominican Republic Pesos (DOP)


71,2661 


59,3644 




Fiji Dollars (FJD)


2,4584 


2,4045 




Haitian Gourde (HTG)


87,33 


100,99 




Jamaican Dollar (JMD)


172,0954 


147,6966 




Kenya Shillings (KES)


133,8 


113,63 




Mauritania Ouguiyas (MRU)


44,1396 


42,2135 




Mauritius Rupees (MUR)


48,52 


40,63 




Mozambican Metical (MZN)


91,02 


68,64 




Nigerian Naira (NGN)


466,78 


343,45 




Rwanda Francs (RWF)


1 210,77 


1 051,12 




Tanzania Shillings (TZS)


2 838,58 


2 573,66 




Uganda Shillings (UGX)


4 474 


4 108 




United States Dollars (USD)


1,2271 


1,1234 




Franc CFA Francs (XAF/XOF)


655,957 


655,957 




South Africa Rand (ZAR)


18,0219 


15,7773 




Zambia Kvacha (ZMW)


25,9324 


15,7894 




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 effect 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 52,7 million and EUR — 52,7 million respectively as at 31 December 2020 (EUR 62,0 million and EUR — 62,0 million respectively as at 31 December 2019).
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 2020


Carrying amount


Fair value




 


Derivative financial instruments


Shares and other variable yield securities


Cash, loans and advances


Treasury financial assets


Other financial assets/liabilities


Total


Level 1


Level 2


Level 3


Total





Financial assets mandatorily measured at FVTPL



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


33 584 


—


—


—


—



33 584 



—


33 584 


—



33 584 





Venture Capital Fund


—


437 142 


—


—


—



437 142 



—


—


437 142 



437 142 





Direct Equity Investments


—


89 668 


—


—


—



89 668 



—


—


89 668 



89 668 





Loans and advances


—


—


47 309 


—


—



47 309 



—


—


47 309 



47 309 






Total financial assets mandatorily measured at FVTPL




33 584 




526 810 




47 309 



—


—



607 703 




—




33 584 




574 119 




607 703 






Financial assets measured at AC



 


 


 


 


 


 


 


 


 


 




Cash and cash equivalents


—


—


923 940 


—


—



923 940 



—


—


—


—




Loans and advances


—


—


1 626 136 


—


—



1 626 136 



—


1 757 593 


—



1 757 593 





Amounts receivable from contributors


—


—


68 908 


—


—



68 908 



—


—


—


—




Treasury financial assets


—


—


—


351 873 


—



351 873 



300 174 


50 032 


—



350 206 





Other assets


—


—


—


—


109



109



—


—


—


—





Total financial assets measured at AC



—


—



2 618 984 




351 873 




109




2 970 966 




300 174 




1 807 625 



—



2 107 799 






Total financial assets




33 584 




526 810 




2 666 293 




351 873 




109




3 578 669 



 


 


 


 





Financial liabilities measured at FVTPL



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


-642


—


—


—


—



-642



—


-642


—



-642






Total financial liabilities measured at FVTPL




-642



—


—


—


—



-642



—



-642



—



-642






Financial liabilities at AC



 


 


 


 


 


 


 


 


 


 




Provisions for guarantees issued


—


—


—


—


-851



-851



 


 


 


 




Provisions for loan commitments


—


—


—


—


-33 152 



-33 152 



 


 


 


 




Amounts owed to third parties


—


—


—


—


- 152 378 



- 152 378 



 


 


 


 




Other liabilities


—


—


—


—


-3 446 



-3 446 



 


 


 


 





Total financial liabilities measured at AC



—


—


—


—



- 189 827 




- 189 827 



 


 


 


 





Total financial liabilities




-642



—


—


—



- 189 827 




- 190 469 



 


 


 


 






















(in EUR ’000)




As at 31 December 2019


Carrying amount


Fair value




 


Derivative financial instruments


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


14 184 


—


—


—


—



14 184 



—


14 184 


—



14 184 





Venture Capital Fund


—


504 694 


—


—


—



504 694 



362


—


504 332 



504 694 





Direct Equity Investment


—


115 234 


—


—


—



115 234 



15 255 


—


99 979 



115 234 





Loans and advances


—


—


21 702 


—


—



21 702 



—


—


21 702 



21 702 






Total financial assets mandatorily measured at FVTPL




14 184 




619 928 




21 702 



—


—



655 814 




15 617 




14 184 




626 013 




655 814 






Financial assets at AC



 


 


 


 


 


 


 


 


 


 




Cash and cash equivalents


—


—


837 777 


—


—



837 777 



—


—


—


—




Loans and advances


—


—


1 496 973 


—


—



1 496 973 



—


1 699 057 


—



1 699 057 





Amounts receivable from contributors


—


—


86 330 


—


—



86 330 



—


—


—


—




Treasury financial assets


—


—


—


330 587 


—



330 587 



144 097 


186 083 


—



330 180 





Other assets


—


—


—


—


—


—


—


—


—


—





Total financial assets measured at AC



—


—



2 421 080 




330 587 



—



2 751 667 




144 097 




1 885 140 



—



2 029 237 






Total financial assets




14 184 




619 928 




2 442 782 




330 587 



—



3 407 481 



 


 


 


 





Financial liabilities mandatorily measured at FVTPL



 


 


 


 


 


 


 


 


 


 




Derivative financial instruments


-191


—


—


—


—



-191



—


-191


—



-191






Total financial liabilities measured at FVTPL




-191



—


—


—


—



-191



—



-191



—



-191






Financial liabilities at AC



 


 


 


 


 


 


 


 


 


 




Provisions for guarantees issued


—


—


—


—


-628



-628



 


 


 


 




Provisions for loan commitments


—


—


—


—


-37 269 



-37 269 



 


 


 


 




Amounts owed to third parties


—


—


—


—


- 147 438 



- 147 438 



 


 


 


 




Other liabilities


—


—


—


—


-2 353 



-2 353 



 


 


 


 





Total financial liabilities measured at AC



—


—


—


—



- 187 688 




- 187 688 



 


 


 


 





Total financial liabilities




-191



—


—


—



- 187 688 




- 187 879 



 


 


 


 




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 higher the marketability discount, the lower the fair value.




 


 


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 %.


 




Loans at fair value (IFE)


For going concern borrowers: Discounted cash flow using contractual/expected future cash flows discounted with appropriate risk-adjusted discount rate that captures the risk inherent to the loan (including credit risk of the borrower). The discount rate is compared/assessed with any relevant market benchmark.
For borrowers not going concern: Net assets approach (liquidation value approach).


Components of the discount rate to reflect the credit risk of borrower compared to the risk-free market rates.


The higher the discount rate 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 as at 31 December 2020 and 2019, namely:






—


Credit valuation adjustments (CVA), reflecting counterparty credit risk on derivative transactions, amounting to kEUR — 34,3 as at 31 December 2020 and to kEUR — 32,8 as at 31 December 2019.










—


Debit valuation adjustments (DVA), reflecting own credit risk on derivative transactions, amounting to kEUR +21,8 as at 31 December 2020 and kEUR +28,7 as at 31 December 2019.




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 2020 and 2019 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 2020 and 31 December 2019:






(in EUR ’000)




Shares and other variable yield securities





Balance as at 1 January 2020




604 311 






Gains or losses included in profit or loss:



 




Realised fair value adjustment on sales


-15 632 




Net fair value change on shares and other variable yield securities


-47 909 





Total




-63 541 





Disbursements


85 305 




Repayments


-65 649 




Foreign exchange rates differences


-33 616 





Balance as at 31 December 2020




526 810 














(in EUR ’000)




Shares and other variable yield securities





Balance as at 1 January 2019




550 617 






Gains or losses included in profit or loss:



 




Foreign exchange rates differences


1 708 




Net fair value change on shares and other variable yield securities


17 666 





Total




19 374 





Disbursements


106 943 




Repayments


-79 435 




Foreign exchange rates differences


6 812 





Balance as at 31 December 2019




604 311 





In 2020 and 2019 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)




 


31.12.2020


31.12.2019




Cash in hand


398 991 


72 166 




Term deposits


380 000 


622 991 




Commercial papers


145 086 


142 823 





Cash and cash equivalents in the cash flow statement




924 077 




837 980 





Accrued interest


-137


-203





Cash and cash equivalents in the statement of financial position




923 940 




837 777 





6.   Derivative financial instruments

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








(in EUR ’000)




As at 31 December 2020


Fair Value


Notional amount




Assets


Liabilities




Interest rate swaps


—


-642


17 710 




FX swaps


33 584 


—


1 480 000 





Total derivative financial instruments




33 584 




-642




1 497 710 
















(in EUR ’000)




As at 31 December 2019


Fair Value


Notional amount




Assets


Liabilities




Interest rate swaps


99


-191


24 181 




FX swaps


14 085 


—


1 545 000 





Total derivative financial instruments




14 184 




-191




1 569 181 





7.   Loans and advances

7.1   
Loans and advances


The following table shows the reconciliation from the opening to the closing balance of loans and advances:










(in EUR ’000)




 


Global loans (4)



Senior loans


Subordinated loans


POCI


Total





Nominal of loans at AC as at 1 January 2020




1 021 556 




597 364 




27 714 




—




1 646 634 





Disbursements


433 466 


67 762 


—


—



501 228 





Write offs


-15 170 


-2 268 


-27 905 


—



-45 343 





Repayments


- 214 018 


-60 571 


—


—



- 274 589 





Foreign exchange rates differences


-74 436 


-29 423 


191


—



- 103 668 






Nominal of loans at AC as at 31 December 2020




1 151 398 




572 864 




—




—




1 724 262 






Impairment — loss allowance as at 1 January 2020




-96 166 




-36 650 




-27 714 




—




- 160 530 





Net changes of the 12 month ECL


-1 344 


-2 531 


—


—



-3 875 





Net changes of lifetime ECL not credit-impaired


-5 888 


-3 628 


—


—



-9 516 





Lifetime ECL credit-impaired


-12 373 


—


—


—



-12 373 





Reversal of lifetime ECL credit-impaired


19 565 


1 887 


—


—



21 452 





Write offs


15 170 


2 268 


27 905 


—



45 343 





Foreign exchange rates differences


12 793 


3 104 


-191


—



15 706 






Impairment — loss allowance as at 31 December 2020




-68 243 




-35 550 




—




—




- 103 793 






Loans and advances at AC as at 31 December 2020




1 083 155 




537 314 




—




—




1 620 469 






Nominal of loans at FVTPL as at 1 January 2020




1 080 




36 858 




—




—




37 938 





Disbursements


—


29 063 


30 000 


—



59 063 





Repayments


—


-1 512 


—


—



-1 512 





Foreign exchange rates differences


—


-2 916 


—


—



-2 916 






Nominal of loans at FVTPL as at 31 December 2020




1 080 




61 493 




30 000 




—




92 573 






Fair value adjustment as at 1 January 2020




-1 080 




-15 156 




—




—




-16 236 





Net FV change


—


-11 330 


-18 291 


—



-29 621 





Foreign exchange rates differences


—


593


—


—



593






Fair value adjustment as at 31 December 2020




-1 080 




-25 893 




-18 291 




—




-45 264 






Loans and advances at FVTPL as at 31 December 2020




—




35 600 




11 709 




—




47 309 





Amortised Cost


-3 578 


-5 100 


—


—



-8 678 





Interest


7 325 


7 020 


—


—



14 345 






Loans and advances as at 31 December 2020




1 086 902 




574 834 




11 709 




—




1 673 445 


















(in EUR ’000)




 


Global loans (5)



Senior loans


Subordinated loans


POCI


Total





Nominal of loans at AC as at 1 January 2019




1 051 317 




593 324 




60 717 




3 588 




1 708 946 





Disbursements


164 308 


123 416 


—


—



287 724 





Write offs


-2


-278


—


—



-280





Repayments


- 206 517 


- 113 100 


-34 496 


—



- 354 113 





Sale of loans


-2 591 


—


—


—



-2 591 





Business model change (IFE (6))


—


-10 062 


—


-3 588 



-13 650 





Foreign exchange rates differences


15 041 


4 064 


1 493 


—



20 598 






Nominal of loans at AC as at 31 December 2019




1 021 556 




597 364 




27 714 




—




1 646 634 






Impairment — loss allowance as at 1 January 2019




- 103 868 




-49 609 




-29 360 




-1 794 




- 184 631 





Net changes of the 12 month ECL


5 164 


-86


—


—



5 078 





Net changes of lifetime ECL not credit-impaired


-15 558 


2 559 


2 205 


—



-10 794 





Lifetime ECL credit-impaired


-4 397 


-47


—


—



-4 444 





Reversal of lifetime ECL credit-impaired


21 811 


5 592 


—


—



27 403 





Sale of loans


2 591 


—


—


—



2 591 





Business model change (IFE (6))


—


5 031 


—


1 794 



6 825 





Write offs


2


278


—


—



280





Foreign exchange rates differences


-1 911 


-368


-559


—



-2 838 






Impairment — loss allowance as at 31 December 2019




-96 166 




-36 650 




-27 714 




—




- 160 530 






Loans and advances at AC as at 31 December 2019




925 390 




560 714 




—




—




1 486 104 






Nominal of loans at FVTPL as at 1 January 2019




1 800 




—




—




—




1 800 





Disbursements


—


23 461 


—


—



23 461 





Business model change (IFE (6))


—


13 650 


—


—



13 650 





Repayments


-720


-245


—


—



-965





Foreign exchange rates differences


—


-8


—


—



-8






Nominal of loans at FVTPL as at 31 December 2019




1 080 




36 858 




—




—




37 938 






Fair value adjustment as at 1 January 2019




-1 080 




—




—




—




-1 080 





Net FV change


—


-8 331 


—


—



-8 331 





Business model change (IFE (6))


—


-6 825 


—


—



-6 825 






Fair value adjustment as at 31 December 2019




-1 080 




-15 156 




—




—




-16 236 






Loans and advances at FVTPL as at 31 December 2019




—




21 702 




—




—




21 702 





Amortised Cost


-3 545 


-4 950 


10


—



-8 485 





Interest


10 451 


8 903 


—


—



19 354 






Loans and advances as at 31 December 2019




932 296 




- 586 369 




10




—




1 518 675 





7.2   
Impairment on loans and advances — Loss allowances












(in EUR ’000)




 


2020




Lifetime ECL




12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


POCI


Total





Loans and advances at AC



 


 


 


 


 





Balance as at 1 January 2020
 (7)




17 191 




38 509 




104 830 




—




160 530 





Transfer to 12-month ECL


96


-167


—


—



-71





Transfer to lifetime ECL not credit-impaired


-732


6 380 



-6 080 



—



-432





Transfer to lifetime ECL credit-impaired


-127


-54



8 522 



—



8 341 





Net measurement of loss allowance


5 440 


3 010 



-6 554 



—



1 896 





Financial assets that have been derecognised


-802


347



-4 967 



—



-5 422 





Write-offs


—


—



-45 343 



—



-45 343 





Foreign exchange rates differences


-4 677 


-4 049 



-6 980 



—



-15 706 






Balance as at 31 December 2020




16 389 




43 976 




43 428 




—




103 793 


















(in EUR ’000)




 


2019




Lifetime ECL




12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


POCI


Total





Loans and advances at AC



 


 


 


 


 





Balance as at 1 January 2019




22 023 




27 342 




133 472 




1 794 




184 631 





Transfer to 12-month ECL


3 952 


—


—


—



3 952 





Transfer to lifetime ECL not credit-impaired


-4 005 


25 150 


—


—



21 145 





Transfer to lifetime ECL credit-impaired


—


-46


—


—



-46





Net measurement of loss allowance


-4 897 


-4 249 


-22 961 


—



-32 107 





Sale of loans


—


—


-2 591 


—



-2 591 





Business model change (IFE (31))


—


-10


-5 031 



-1 794 




-6 835 





Financial assets that have been derecognised


-129


-10 049 


—


—



-10 178 





Write-offs


—


—


-280


—



-280





Foreign exchange rates differences


247


371


2 221 


—



2 839 






Balance as at 31 December 2019




17 191 




38 509 




104 830 




—




160 530 





8.   Shares and other variable yield securities

The following table show reconciliation from the opening to the closing balance of the Equity investments:








(in EUR ’000)




 


Venture Capital Funds


Direct Equity Investments


Total





Cost as at 1 January 2020




462 304 




101 424 




563 728 





Disbursements


85 305 


—


85 305 




Repayments / sales


-66 011 


-18 274 


-84 285 




Foreign exchange rates differences


-29 437 


-6 892 


-36 329 





Cost as at 31 December 2020




452 161 




76 258 




528 419 






Unrealised gains and losses as at 1 January 2020




42 390 




13 810 




56 200 





Net change in unrealised gains and losses


-45 079 


-2 830 


-47 909 




Realised fair value adjustment on sales


-15 632 


3 019 


-12 613 




Foreign exchange rates differences


3 302 


-589


2 713 





Unrealised gains and losses as at 31 December 2020




-15 019 




13 410 




-1 609 






Shares and other variable yield securities as at 31 December 2020




437 142 




89 668 




526 810 
















(in EUR ’000)




 


Venture Capital Funds


Direct Equity Investments


Total





Cost as at 1 January 2019




421 593 




93 214 




514 807 





Disbursements


90 972 


15 971 


106 943 




Repayments / sales


-56 387 


-8 042 


-64 429 




Foreign exchange rates differences


6 126 


281


6 407 





Cost as at 31 December 2019




462 304 




101 424 




563 728 






Unrealised gains and losses as at 1 January 2019




45 559 




6 926 




52 485 





Net change in unrealised gains and losses


-3 488 


12 117 


8 629 




Realised fair value adjustment on sales


—


-5 319 


-5 319 




Foreign exchange rates differences


319


86


405





Unrealised gains and losses as at 31 December 2019




42 390 




13 810 




56 200 






Shares and other variable yield securities as at 31 December 2019




504 694 




115 234 




619 928 





9.   Amounts receivable from contributors

The amounts of EUR 68,9 million (2019: EUR 86,3 million) 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 3 months at reporting date. The following table shows the movements of the treasury portfolio:






(in EUR ’000)





Balance as at 1 January 2020




330 587 





Acquisitions


2 710 009 




Maturities


-2 689 790 




Change in amortisation of premium/discount


-208




Change in accrued interest


1 275 





Balance as at 31 December 2020




351 873 














(in EUR ’000)





Balance as at 1 January 2019




335 140 





Acquisitions


2 948 021 




Maturities


-2 952 905 




Change in amortisation of premium/discount


-93




Change in accrued interest


424





Balance as at 31 December 2019




330 587 





11.   Other assets

The main components of other assets are as follows:







(in EUR ’000)




 


31.12.2020


31.12.2019




Financial guarantees


109


—





Total other assets




109




—





12.   Deferred income

The main components of deferred income are as follows:







(in EUR ’000)




 


31.12.2020


31.12.2019




Deferred interest subsidies


28 788 


32 085 




Deferred commissions on loans and advances


944


481





Total deferred income




29 732 




32 566 





13.   Provisions for guarantees issued, net of reversals

The following tables show the reconciliation from the opening to the closing balance of the provision for financial guarantees.









(in EUR ’000)




 


2020




12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


Total





Guarantees issued



 


 


 


 





Balance as at 1 January




628




—




—




628





Transfer to 12-month ECL


—


—


—


—




Guarantees that have been derecognised


—


—


—


—




Net measurement of loss allowance


228


—


—



228





Guarantee calls


—


—


—


—




Amortisation of upfront fees


—


—


—


—




Foreign exchange rates differences


-5


—


—



-5






Balance as at 31 December




851




—




—




851

















(in EUR ’000)




 


2019




12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


Total





Guarantees issued



 


 


 


 





Balance as at 1 January




94




699




—




793





Transfer to 12-month ECL


534


—


—



534





Guarantees that have been derecognised


—


-588


—



-588





Guarantee calls


—


-53


—



-53





Amortisation of upfront fees


—


-71


—



-71





Foreign exchange rates differences


—


13


—



13






Balance as at 31 December




628




—




—




628





14.   Provisions for loan commitments

The following tables show the reconciliation from the opening to the closing balance of the loss allowance for undisbursed loans (loan commitments):









(in EUR ’000)




 


2020




12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


Total





Loans commitments



 


 


 


 





Balance as at 1 January (8)





3 943 




33 326 




—




37 269 





Transfer to 12-month ECL


4 067 


—


—



4 067 





Transfer to lifetime ECL not credit-impaired


—


2 773 


—



2 773 





Net measurement of loss allowance


388


-5 932 


—



-5 544 





Financial assets that have been derecognised


-1 158 


-3 853 


—



-5 011 





Foreign exchange rates differences


-423


21


—



-402






Balance as at 31 December




6 817 




26 335 




—




33 152 

















(in EUR ’000)




 


2019




12-month ECL


Lifetime ECL not credit-impaired


Lifetime ECL credit-impaired


Total





Loans commitments



 


 


 


 





Balance as at 1 January




7 225 




16 597 




—




23 822 





Transfer to 12-month ECL


1 669 


9 983 


—



11 652 





Transfer to lifetime ECL not credit-impaired


-836


15 138 


—



14 302 





Net measurement of loss allowance


696


773


—



1 469 





Business model change (IFE) (32)



-2 974 


-1 387 


—



-4 361 





Financial assets that have been derecognised


-1 960 


-7 858 


—



-9 818 





Foreign exchange rates differences


123


80


—



203






Balance as at 31 December




3 943 




33 326 




—




37 269 





15.   Amounts owed to third parties

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







(in EUR ’000)




 


31.12.2020


31.12.2019




Net general administrative expenses payable to the EIB


58 527 


50 009 




Other amounts payable to the EIB


56


31




Interest subsidies and TA not yet disbursed owed to Member States


93 795 


97 398 





Total amounts owed to third parties




152 378 




147 438 





16.   Other liabilities

The main components of other liabilities are as follows:







(in EUR ’000)




 


31.12.2020


31.12.2019




Loan repayments received in advance


3 166 


1 961 




Deferred income from interest subsidies


280


339




Financial guarantee calls


—


53





Total other liabilities




3 446 




2 353 





17.   Member States Contribution called (in EUR’000)










Member States


Contribution to the Facility (9)



Contribution to interest subsidies and technical assistance (9)



Total Contributed


Called and not paid (33)





Austria


82 689 


9 852 


92 541 


1 687 




Belgium


121 923 


14 470 


136 393 


2 471 




Bulgaria


1 567 


421


1 988 


98




Cyprus


1 008 


270


1 278 


—




Czech Republic


5 710 


1 532 


7 242 


357




Denmark


67 377 


8 118 


75 495 


1 400 




Estonia


560


150


710


35




Finland


47 569 


5 876 


53 445 


—




France


729 689 


82 689 


812 379 


13 685 




Germany


720 567 


84 614 


805 181 


14 350 




Greece


42 735 


5 648 


48 383 


1 029 




Hungary


6 158 


1 652 


7 810 


385




Ireland


23 221 


3 345 


26 566 


637




Italy


407 583 


50 996 


458 579 


9 002 




Latvia


784


210


994


49




Lithuania


1 344 


360


1 704 


84




Luxembourg


9 119 


1 097 


10 216 


189




Malta


336


90


426


21




Netherlands


164 029 


19 716 


183 745 


3 395 




Poland


14 555 


3 905 


18 460 


910




Portugal


33 266 


4 411 


37 677 


805




Romania


4 143 


1 111 


5 254 


259




Slovakia


2 351 


631


2 982 


147




Slovenia


2 015 


541


2 556 


126




Spain


210 652 


29 338 


239 990 


5 495 




Sweden


88 064 


10 923 


98 987 


1 918 




United Kingdom


432 681 


57 030 


489 711 


10 374 





Total as at 31 December 2020




3 221 695 




398 996 




3 620 692 




68 908 






Total as at 31 December 2019




2 967 000 




383 691 




3 350 691 




86 330 





18.   Commitments and contingent liabilities








(in EUR ’000)




 


31.12.2020


31.12.2019






Commitments




 


 




Undisbursed loans


1 722 618 


1 357 320 




Undisbursed commitment in respect of shares and other variable yield securities


378 347 


405 920 




Issued guarantees


998 560 


200 013 




Interest subsidies and technical assistance


483 897 


455 671 






Contingent liabilities




 


 




Signed non-issued guarantees


554 686 


1 359 818 





Total commitments and contingent liabilities




4 138 108 




3 778 742 





19.   Interest and similar income and expenses

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







(in EUR ’000)




 


From 01.01.2020


From 01.01.2019




 


to 31.12.2020


to 31.12.2019




Loans and advances


80 252 


89 244 




Interest subsidies


4 531 


4 679 





Total interest and similar income




84 783 




93 923 





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







(in EUR ’000)




 


From 01.01.2020


From 01.01.2019




 


to 31.12.2020


to 31.12.2019




Derivative financial instruments


-541


-261




Cash and cash equivalents


-2 961 


-722




Treasury financial assets


-1 748 


-1 965 





Total interest and similar expense




-5 250 




-2 948 





20.   Fee and commission income and expenses

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







(in EUR ’000)




 


From 01.01.2020


From 01.01.2019




 


to 31.12.2020


to 31.12.2019




Fee and commission on loans and advances


141


4 399 




Fee and commission on financial guarantees


211


39




Other


1


—





Total fee and commission income




353




4 438 





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







(in EUR ’000)




 


From 01.01.2020


From 01.01.2019




 


to 31.12.2020


to 31.12.2019




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


-225


-721





Total fee and commission expenses




-225




-721





21.   Net result on shares and other variable yield securities

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







(in EUR ’000)




 


From 01.01.2020


From 01.01.2019




 


to 31.12.2020


to 31.12.2019




Net realised result due to sales and exits


-3 069 


-133




Dividend income


4 261 


1 408 




Net fair value change


-47 909 


8 629 





Net result on shares and other variable yield securities




-46 717 




9 904 





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.
The main components of general administrative expenses are as follows:







(in EUR ’000)




 


From 01.01.2020


From 01.01.2019




 


to 31.12.2020


to 31.12.2019




Actual cost incurred by the EIB


-61 470 


-52 982 




Income from appraisal fees directly charged to clients of the Facility


2 943 


2 973 





Total general administrative expenses




-58 527 




-50 009 





23.   Involvement with unconsolidated structured entities (in EUR’000)


Definition of a structured entity

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






—


Restricted activities;










—


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










—


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










—


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





Unconsolidated structured entities

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

Definition of Interests in structured entities:

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







Type of structured entity


Nature and purpose


Interest held by the Facility




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


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


Net disbursed amounts;
Interest income.




Venture capital operations


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


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




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










Type of structured entity


Caption


Carrying amount at 31.12.2020


Carrying amount at 31.12.2019


Maximum exposure to loss at 31.12.2020


Maximum exposure to loss at 31.12.2019




Venture capital funds


Shares and other variable yield securities


437 142 


504 332 


437 142 


834 955 





Total



 



437 142 




504 332 




437 142 




834 955 





No support is provided to structured entities by the Facility beyond the respective financing.
24.   Impact financing envelope (in EUR’000)

In June 2013 the ACP-EU Joint Ministerial Council approved the new financial protocol for the 11th European Development Fund (EDF), covering the period 2014-2020.
A new EUR 500 million 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 presents 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 is 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 take the form of first loss guarantees (‘first loss pieces’) that 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 (i.e. loans) 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 applies 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 also allows diversification into new sectors, such as health and education, agriculture and food security, and the development of new and innovative risk-sharing instruments. In 2016, the IFE financing capacity was increased to EUR 800 million by making the IFE partially revolving.
From a financial and accounting perspective the IFE forms part of the IF portfolio and is accounted for in the overall IF annual financial statements.
The following table represents the carrying amounts and the committed, but undisbursed amounts, per type of asset:












Type of IFE investment


Caption


Measurement


Gross carrying amount as at 31.12.2020


Loss allowance / FV adj. amount as at 31.12.2020


Carrying amount as at 31.12.2020


Undisbursed amount as at 31.12.2020


OFF BS ECL adj. amount as at 31.12.2020




Loans to financial intermediaries


Loans and advances


AC


49 522 


-1 839 


47 683 


26 954 


-199




Direct loan operations


Loans and advances


FVTPL


91 186 


-44 681 


46 505 


98 314 


—




Social impact equity funds


Shares and other variable yield securities


FVTPL


41 885 


-4 778 


37 107 


73 362 


—




Direct equity participations


Shares and other variable yield securities


FVTPL


57 395 


9 195 


66 590 


14


—




Risk sharing facilitating instruments


Issued guarantees


higher of approach (10)



—


—


—


40 746 


—





Total



 


 



239 988 




-42 103 




197 885 




239 390 




-199




















Type of IFE investment


Caption


Measurement


Gross carrying amount as at 31.12.2019


Loss allowance / FV adj. amount as at 31.12.2019


Carrying amount as at 31.12.2019


Undisbursed amount as at 31.12.2019


OFF BS ECL adj. amount as at 31.12.2019




Loans to financial intermediaries


Loans and advances


AC


22 347 


-354


21 993 


42 400 


-1 251 




Direct loan operations


Loans and advances


FVTPL


37 136 


-15 156 


21 980 


75 700 


—




Social impact equity funds


Shares and other variable yield securities


FVTPL


33 417 


-3 175 


30 242 


66 840 


—




Direct equity participations


Shares and other variable yield securities


FVTPL


58 643 


19 626 


78 269 


14


—




Risk sharing facilitating instruments


Issued guarantees


higher of approach (11)



—


—


—


47 331 


-50





Total



 


 



151 543 




941




152 484 




232 285 




-1 301 





The EIB is applying the General Mandate Risk Principles to IFE direct loan operations (excluding Loans to financial intermediaries), as envisaged in the EIB’s Credit and Equity Risk Guidelines, and to monitor and report the risk associated with the IFE direct loan operations on the basis of their fair value. According to the methodology, the Bank performs a Qualitative Risk Assessment (QRA) aiming to assess the soundness of the investment rationale and plausible business viability of such operations.
25.   Subsequent events

In the context of the COVID-19 pandemic, the IF continues to monitor the situation closely notably as part of the subsequent event review. It is considered that there have been no material events after the balance sheet date that would require adjustment of, or disclosure in the financial statements as at 31 December 2020.


(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)  OJ L 347, 20.12.2013, p. 884.

(4)  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.

(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)  Council Decision (EU) 2020/1708 of 13 November 2020 on the financial contributions to be paid by Member States to finance the European Development Fund, including the ceiling for 2022, the annual amount for 2021, the first instalment for 2021 and an indicative and non-binding forecast for the expected annual amounts of contributions for the years 2023 and 2024 (OJ L 385, 17.11.2020, p. 13).

(8)  Council Regulation (EU) 2016/888 of 6 June 2016 amending Regulation (EU) 2015/323 on the financial regulation applicable to the 11th European Development Fund as regards payment of the instalments (OJ L 149, 7.6.2016, p. 1).

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

(10)  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).

(11)  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).

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

(13)  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).

(14)  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).

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

(16)  Council Regulation (EU) 2018/1877.

(17)  Except for operations in South-Sudan.

(18)  OJ L 314, 30.11.2001, p. 1.

(19)  OJ L 109, 26.4.2007, p. 33.

(20)  Gross amounts (i.e. excluding decommitments and recovery orders).

(21)  Amounts in columns Committed, Contracted, Paid are color weighted.

(22)  OJ L 193, 30.7.2018, p. 1.

(1)  For the year ended 31 December 2020, interest and similar income included EUR 77,9 million (2019: EUR 93,9 million) calculated on assets held at amortised cost based on effective interest method.

(23)  OJ L 420, 14.12.2020, p. 32.

(24)  Council Decision 2020/2233 of 23 December 2020 concerning the commitment of the funds stemming from reflows under the ACP Investment Facility from operations under the 9th, 10th and 11th European Development Funds (OJ L 437, 28.12.2020, p. 188).

(25)  Loan operations measured at FVTPL.

(26)  Loan operations measured at FVTPL.

(27)  Agency agreements for which there are no underlying counterparts at reporting date.

(28)  Agency agreements for which there are no underlying counterparts at reporting date

(29)  Decreases are explained by repayments of capital occurred during the year on operations already considered as forborne as of 31 December 2020 and by termination of forborne measures during the year.

(30)  The amounts owed to third parties are including the Interest subsidies and TA not yet disbursed owed to Member States, where the maturity is mainly undefined.

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

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

(4)  Including agency agreements

(5)  Including agency agreements

(6)  For details, please refer to Note 24.

(7)  Following the updated model versions referred in Note 2.4.2 opening balances for 12-month and Lifetime non-credit impaired ECL would be higher for EUR 0,3 million and EUR 1,5 million, respectively.

(31)  For details, please refer to Note 24.

(8)  Following the updated model versions referred in Note 2.4.2 opening balances for 12-month and Lifetime non-credit impaired ECL would be lower for EUR — 0,2 million and higher for EUR 1,1 million, respectively.

(32)  For details, please refer to Note 24.

(33)  On 10 November 2020, the Council fixed the amount of financial contributions to be paid by each Member State by 21 January 2021. As at 31 December 2020 EUR 68,9 million were not paid in.

(9)  On 14 July 2020, 9th EDF EUR 45,1 million unused commitments for interest rate subsidies and technical assistance were reallocated to the Contributors' Resources as per allocation key for 9th EDF contributions.

(10)  For details please refer to section subsequent measurement of Note 2.4.3.

(11)  For details, please refer to section subsequent measurement of Note 2.4.3.