# SWD_2018_0268_FIN.ENG.xhtml.1_EN_autre_document_travail_service_part1_v3.docx

european flagEUROPEAN COMMISSION

Brussels, 28.5.2018

SWD(2018) 268 final

COMMISSION STAFF WORKING DOCUMENT

Accompanying the document

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

ON THE MANAGEMENT OF THE GUARANTEE FUND OF THE EUROPEAN FUND FOR STRATEGIC INVESTMENTS IN 2017

{COM(2018) 345 final}

Table of Contents

1.
     INTRODUCTION

2.
     EFSI OPERATIONS SUPPORTED BY THE EU GUARANTEE

2.1
     EIB OPERATIONS

2.2
     EIF OPERATIONS

2.3
     BREAKDOWN OF EFSI OPERATIONS BY SECTOR AND COUNTRY

3.
     EFSI GF FINANCIAL STATEMENTS

4.
     ASSET MANAGEMENT

4.1
     COMPOSITION OF THE PORTFOLIO

4.2
     KEY RISK CHARACTERISTICS OF THE PORTFOLIO

1.INTRODUCTION

This Staff Working Document (SWD) accompanies the Report on the Management of the European Fund for Strategic Investments Guarantee Fund (EFSI GF) in 2017. The SWD provides further information and tables on (2) operations managed by EIB and EIF (signatures and disbursed amounts, breakdown by sector and country), (3) financial statements and (4) asset management.

2.EFSI OPERATIONS SUPPORTED BY THE EU GUARANTEE

This section provides a breakdown of the EFSI operations supported by the EU guarantee in terms of number of operations, investment volume (signature and investment mobilised) as well sector and country breakdown.

2.1EIB OPERATIONS

As of end-2017, EIB had signed 278 operations in 27 Member States. The total signatures amount to EUR 27.4 billion which is expected to mobilise investments of EUR 131.4 billion. Half of the signed operations in terms of volume were in the energy (28%) and research sector (22%), followed by the provision of financial support to SME’s and small Mid-Cap companies (18%) and transport (14%).

2.2EIF OPERATIONS

As of end-2017, the EIF signed 328 operations with 305 financial intermediaries in 28 Member States. The total EIF financing of EUR 10.0 billion is expected to mobilise investments of EUR 75.9 billion. The most important sectors in terms of amounts were research and development (70%) and digital (17%).

2.3BREAKDOWN OF EFSI OPERATIONS BY SECTOR AND COUNTRY

Table 1:
     Distribution of signed EFSI Infrastructure and Innovation Window ("IIW") and Small and Medium Enterprises Window ("SMEW") operations by sector at the end of 2017 (EUR million).

Note: Objective and subcategory as defined in Art.9 of EFSI Regulation.

Note: Objective and subcategory as defined in Art.9 of EFSI Regulation.

Table 2:
     Distribution of signed EFSI IIW and SMEW operations by country at the end of 2017 (EUR million).

Table 2:

3.EFSI GF FINANCIAL STATEMENTS

3.

EFSI GF FINANCIAL STATEMENTS

Balance sheet

Balance sheet

ASSETS

ASSETS

| | 31 December 2017 | 31 December 2016 |
| --- | --- | --- |
| | EUR | EUR |
| NON-CURRENT ASSETS | 3 070 600 996 | 833 258 147 |
| | | |
| Available for sale financial assets | 3 070 600 996 | 833 258 147 |
| | | |
| CURRENT ASSETS | 433 762 404 | 186 696 779 |
| | | |
| Available for sale financial assets | 343 757 854 | 114 825 355 |
| | | |
| Financial assets at fair value through surplus or deficit | 6 307 288 | 475 241 |
| | | |
| Short-term deposits (>3 months and ≤ 1 year)


  Including accrued negative interest | 39 991 422 | 45 000 000 |
| | | |
| Receivables (bond lending fees) | 8 456 | - |
| | | |
| Cash and cash equivalents | 43 697 384 | 26 396 182 |
| Current accounts | 18 683 831 | 1 395 113 |
| Cash equivalents (call-deposits incl. accrued interest) | 25 013 553 | 25 001 069 |
| | | |
| TOTAL ASSETS | 3 504 363 400 | 1 019 954 926 |

31 December 2017

31 December 2017

31 December 2016

31 December 2016

EUR

EUR

EUR

EUR

NON-CURRENT ASSETS

NON-CURRENT ASSETS

3 070 600 996

3 070 600 996

833 258 147

833 258 147

Available for sale financial assets

Available for sale financial assets

3 070 600 996

3 070 600 996

833 258 147

833 258 147

CURRENT ASSETS

CURRENT ASSETS

433 762 404

433 762 404

186 696 779

186 696 779

Available for sale financial assets

Available for sale financial assets

343 757 854

343 757 854

114 825 355

114 825 355

Financial assets at fair value through surplus or deficit

Financial assets at fair value through surplus or deficit

6 307 288

6 307 288

475 241

475 241

Short-term deposits (>3 months and ≤ 1 year)

Short-term deposits (>3 months and ≤ 1 year)

Including accrued negative interest

Including accrued negative interest

39 991 422

39 991 422

45 000 000

45 000 000

Receivables (bond lending fees)

Receivables (bond lending fees)

8 456

8 456

-

-

Cash and cash equivalents

Cash and cash equivalents

43 697 384

43 697 384

26 396 182

26 396 182

Current accounts

Current accounts

18 683 831

18 683 831

1 395 113

1 395 113

Cash equivalents (call-deposits incl. accrued interest)

Cash equivalents (call-deposits incl. accrued interest)

25 013 553

25 013 553

25 001 069

25 001 069

TOTAL ASSETS

TOTAL ASSETS

3 504 363 400

3 504 363 400

1 019 954 926

1 019 954 926

NET ASSETS AND LIABILITIES

NET ASSETS AND LIABILITIES

| | 31 December 2017 | 31 December 2016 |
| --- | --- | --- |
| | EUR | EUR |
| NET ASSETS | 3 504 263 077 | 1 018 968 395 |
| | | |
| Contribution from EU Budget | 3 507 682 256 | 1 018 037 889 |
| Fair value reserve | (6 783 279) | (3 388) |
| Retained earnings | 933 894 | - |
| Economic result of the year | 2 430 206 | 933 894 |
| | | |
| CURRENT LIABILITIES | 100 324 | 986 531 |
| | | |
| Financial liabilities at fair value through surplus or deficit | - | 902 827 |
| Other payables | 54 145 | 83 704 |
| Accrued charges | 46 179 | - |
| | | |
| TOTAL NET ASSETS AND LIABILITIES | 3 504 363 400 | 1 019 954 926 |

31 December 2017

31 December 2017

31 December 2016

31 December 2016

EUR

EUR

EUR

EUR

NET ASSETS

NET ASSETS

3 504 263 077

3 504 263 077

1 018 968 395

1 018 968 395

Contribution from EU Budget

Contribution from EU Budget

3 507 682 256

3 507 682 256

1 018 037 889

1 018 037 889

Fair value reserve

Fair value reserve

(6 783 279)

(6 783 279)

(3 388)

(3 388)

Retained earnings

Retained earnings

933 894

933 894

-

-

Economic result of the year

Economic result of the year

2 430 206

2 430 206

933 894

933 894

CURRENT LIABILITIES

CURRENT LIABILITIES

100 324

100 324

986 531

986 531

Financial liabilities at fair value through surplus or deficit

Financial liabilities at fair value through surplus or deficit

-

-

902 827

902 827

Other payables

Other payables

54 145

54 145

83 704

83 704

Accrued charges

Accrued charges

46 179

46 179

-

-

TOTAL NET ASSETS AND LIABILITIES

TOTAL NET ASSETS AND LIABILITIES

3 504 363 400

3 504 363 400

1 019 954 926

1 019 954 926

Statement of financial performance

| | 2017 | 2016 |
| --- | --- | --- |
| | EUR | EUR |
| Revenue from operating activities | 22 721 597 | 968 645 |
| Foreign exchange gains | 22 721 597 | 968 645 |
| | | |
| Expenses from operating activities | (60 846 316) | (757 198) |
| Foreign exchange losses | (60 742 759) | (681 319) |
| | | |
| Other expenses from operating activities | (103 557) | (75 879) |
| Audit fees | (15 000) | (33 500) |
| IT cost | (88 557) | (42 379) |
| | | |
| RESULT FROM OPERATING ACTIVITIES | (38 124 719) | 211 447 |
| | | |
| Financial revenue | 51 393 189 | 1 666 328 |
| | | |
| Interest revenue on: | 6 435 843 | 329 309 |
| Cash and cash equivalents | 53 004 | 1 389 |
| Available for sale assets | 6 382 100 | 327 434 |
| Other interest revenue | 739 | 486 |
| | | |
| Realised gains on sale of AFS assets | 4 135 733 | 861 762 |
| | | |
| Other financial income - fair value changes of derivatives | 40 754 819 | 475 241 |
| | | |
| Bond lending income | 66 794 | - |
| | | |
| Miscellaneous income | - | 16 |
| | | |
| Financial expenses | (10 838 265) | (943 881) |
| | | |
| Interest expenses on cash and cash equivalents | (63 603) | (2 039) |
| | | |
| Realised losses on sale of AFS assets | (386 120) | - |
| | | |
| Other financial expenses - fair value changes of derivatives ddefderdderivatives | (10 139 884) | (902 827) |
| | | |
| Custody fees and other financial expenses | (248 658) | (39 015) |
| | | |
| FINANCIAL RESULT | 40 554 924 | 722 447 |
| | | |
| ECONOMIC RESULT OF THE YEAR | 2 430 206 | 933 894 |

2017

2016

EUR

EUR

Revenue from operating activities

22 721 597

968 645

Foreign exchange gains

22 721 597

968 645

Expenses from operating activities

(60 846 316)

(757 198)

Foreign exchange losses

(60 742 759)

(681 319)

Other expenses from operating activities

(103 557)

(75 879)

Audit fees

(15 000)

(33 500)

IT cost

(88 557)

(42 379)

RESULT FROM OPERATING ACTIVITIES

(38 124 719)

211 447

Financial revenue

51 393 189

1 666 328

Interest revenue on:

6 435 843

329 309

Cash and cash equivalents

53 004

1 389

Available for sale assets

6 382 100

327 434

Other interest revenue

739

486

Realised gains on sale of AFS assets

4 135 733

861 762

Other financial income - fair value changes of derivatives

40 754 819

475 241

Bond lending income

66 794

-

Miscellaneous income

-

16

Financial expenses

(10 838 265)

(943 881)

Interest expenses on cash and cash equivalents

(63 603)

(2 039)

Realised losses on sale of AFS assets

(386 120)

-

Other financial expenses - fair value changes of derivatives ddefderdderivatives

(10 139 884)

(902 827)

Custody fees and other financial expenses

(248 658)

(39 015)

FINANCIAL RESULT

40 554 924

722 447

ECONOMIC RESULT OF THE YEAR

2 430 206

933 894

4.ASSET MANAGEMENT

The following sections provide some further details on the (a) composition of the portfolio and (b) key risk characteristics of the portfolio.

4.1COMPOSITION OF THE PORTFOLIO

The EFSI GF portfolio at the year-end is well diversified in terms of asset classes and rating categories. In addition, it is diversified in non-euro denominated securities (USD) in the form of an allocation to US Treasuries and other issuers (e.g. Supranational, other Sovereigns or Agencies) issuing in USD (about 18% of the portfolio). The currency risk is hedged.

As shown in the Figure, over 46.8% of the market value of the portfolio is invested in AAA securities and the rest is well distributed across the whole spectrum of the investment-grade scale. The AAA category includes for example securities issued by the US Government and covered bonds issued by several financial institutions.

In terms of main asset classes, 42.5% of the portfolio is invested in Government securities, 21.5% in sub-sovereigns, supra-nationals and agencies (SSA) and 25.5% in covered bonds while only 10.5% in bonds issued by corporates and financial institutions (other than covered bonds).

Figure: Portfolio exposure by asset class and rating

4.2KEY RISK CHARACTERISTICS OF THE PORTFOLIO

Market Risk

Market risk is, inter alia, assessed by way of calculating the duration
  1
  of the portfolio.

At the end of December 2017, the portfolio had a duration of 3.47 years.

Currency risk and hedging activities

USD investments represented 18% of the portfolio market value at the end of 2017. The currency risk of USD-denominated investments was hedged via forward contracts.

Credit Risk

The credit quality of the EFSI GF portfolio is high with an average rating of A-, suggesting a low default probability (0.07% at 1-year).

Liquidity characteristics of the portfolio

About 16% of the portfolio consists of bonds with a maturity below 1-year, floating rate notes and short-term money market instruments which provide a further liquidity buffer for the portfolio.

(1)


   
     Duration figures refer to 'modified duration' which measures the price sensitivity of a bond to interest rate movements.