COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 17.06.1996 
COM(96) 271 final 
ANNUAL STATUS REPORT BY THE COMMISSION ON THE GUARANTEE FUND AND ITS 
MANAGEMENT IN 1995 

CONTENTS 
1. LEGAL BASES........; 1 
2. POSITION OF THE FUND AT 31 DECEMBER 1995 1 
3. PAYMENTS INTO THE FUND '. 2 
(a) Payments from the general budget 2 
(b) Interest from financial investment of the Fund's liquid assets 3 
(c) Recovery from defaulting debtors 4 
4. THE FUND'S LIABILITIES 4 
(a) Default payments 4 
(b) EIB remuneration 4 
ANNEXES 
ANNEX I: LEGAL BASES FOR PAYMENTS FROM THE GENERAL 
BUDGET 
ANNEX H: EIB STATUS REPORT ON THE FUND AND ITS MANAGEMENT 
- REVENUE AND EXPENDITURE ACCOUNT AND BALANCE 
SHEET AT 31 DECEMBER 1995 
ANNEX IH: CONSOLIDATED FINANCIAL BALANCE-SHEET AT 
31 DECEMBER 1995 
Ou-
ANNUAL STATUS REPORT BY THE COMMISSION ON THE GUARANTEE FUND AND ITS 
MANAGEMENT IN 1995 
1. LEGAL BASES 
Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994 set up a Guarantee Fund 
for external actions to repay the Community's creditors in the event of default by beneficiaries 
of loans granted or guaranteed by the Community. 
In accordance with Article 6 of the Regulation the Commission entrusted financial 
management of the Fund to the European Investment Bank (EIB) under an agreement signed 
between the Community and the EIB on 23 November 1994 in Brussels and 
25 November 1994 in Luxembourg. 
Under Article 8.2 of the agreement, by 1 March each year the Bank must send the 
Commission a status report on the Fund and its management, the revenue and expenditure 
account and the financial statement for the Fund for the preceding year. An extract from the 
second report, covering 1995, is in Annex II. 
In addition, Article 7 of the Regulation establishing the Fund requires the Commission to send 
the European Parliament, the Council and the Court of Auditors a report on the situation of 
the Fund and its management for each financial year by 31 March of the following year. 
2. POSITION OF THE FUND AT 31 DECEMBER 1995 
At the close of the 1995 financial year, the Fund totalled ECU 300 847 830.50. This is the 
sum, since the Fund was established, of all budget payments (ECU 544 470 000), yearly net 
results (ECU 23 819 842.85) and late payments from non-member countries 
(ECU 35 630 568.55), minus calls on the Fund's resources (ECU 303 072 580.90). 
The total amount of the Fund's assets at the close of the financial year appears on the assets 
side of the consolidated balance sheet as ECU 574 036 593.68, which breaks down into 
ECU 254 000 000 in deposits, ECU 44 444 219.76 on current account, ECU 2 403 610.74 in 
receivables from credit institutions (interest accrued at 31 December 1995 and not paid) and 
ECU 273 188 763.18 in receivables from the recipients of loans granted or guaranteed by the 
Community, including ECU 267 442 012.35 in principal and interest due and 
ECU 5 746 750.83 in.default interest not received at 31 December 1995. 
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Article 3 of the Regulation establishing the Fund requires that the amount of the Fund has to 
reach an appropriate level (target amount) set at 10% of the total outstanding capital liabilities 
arising from each operation, plus unpaid interest due. 
Outstanding borrowing/lending operations for non-member countries plus unpaid interest due 
totalled ECU 5 882 million at 31 December 1995, of which ECU 31 million was accounted for 
by unpaid interest. 
The ratio between the Fund's resources and outstanding capital liabilities within the meaning 
of the Regulation was 5.1%. Since this is lower than the target amount of 10%, there was no 
surplus to be paid back to the general budget of the Communities, as provided for in the third 
paragraph of Article 3 of the Regulation. 
There was also no need to review the provisioning rate, as provided in Article 4 of the 
Regulation. 
The following sections describe developments affecting the Fund's resources and liabilities in 
1995. 
3. PAYMENTS INTO THE FUND 
(a) Payments from the general budget 
Articles 2 and 4 of the Regulation establishing the Fund stipulate that it is to be endowed by 
payments from the general budget equivalent to 14% of the capital value of loan and loan 
guarantee operations until the target amount is reached. Under Article 5 the provisioning rate 
rises to 15% for new operations if the Fund's resources fall below 75% of the target amount 
as a result of guarantees being activated to cover any default. 
The legal bases for the provisioning arrangements are described in Annex I. 
The Council Decision of 31 October 1994 concerning budgetary discipline authorized the 
entry in the general budget of a reserve for loan and loan guarantee operations. This item, 
which was allocated provisional appropriations of ECU 323 million in 1995, is intended to 
endow the Fund by transferring amounts into the budget item for payments into the Fund. 
On these legal bases, three transfers totalling ECU 250 750 000 were adopted by the 
budgetary authority in 1995 to endow the Guarantee Fund. 
- Transfer 2/95: ECU 190 750 000 
This first transfer at the beginning of the year was for payments into the Fund under 
the Council Decisions of 15 February 1993, 19 July 1993, 13 December 1993, 
24 January 1994 and 21 March 1994, in accordance with the arrangements set out in 
the Annex to the Regulation establishing the Fund (see Annex I). 
A 
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- Transfer 17/95: ECU 30 000 000 
This second transfer was for payments into the Fund in respect of loan operations 
adopted by the Council on 10 April and 1 June 1995. The decisions covered by this 
transfer are listed in Annex I. 
- Transfer 47/95: ECU 30 000 000 
This third transfer was for payments into the Fund in respect of loan operations 
adopted by the Council on 23 October 1995. The decision covered by this transfer is 
listed in Annex I. 
The three payments into the Fund were made on 12 April, 11 August and 29 December 1995 
respectively. 
(b) Interest from financial investment of the Fund's liquid assets 
The Fund's liquid assets are invested in accordance with the management principles laid down 
in the Annex to the Community/EIB Agreement. 
These principles state that during the Fund's first years of operation it will be treated as a 
money-market investment fund dealing solely in short-term instruments up to one year, 
provided that the total amount invested does not exceed ECU 300 million. As the amount of 
the Fund exceeded this ECU 300 million threshold in 1995, the Commission agreed with the 
EIB to amend the investment principles early in 1996. 
The list of banks authorized to receive deposits is agreed by the Commission and the EIB. The 
original list was revised during 1995 in the light of the latest changes in bank ratings. Most of 
the banks are members of the ecu clearance system. They all have a Moody's rating of at least 
Al for long-term investments and PI for short-term ones and investments made with them are 
governed by rules to ensure a good spread and avoid risk exposure. 
In 1995 interest on the Guarantee Fund's deposits and current account totalled 
ECU 23 539 827.79, broken down as follows: 
- deposits: ECU 23 189 444.30. This represents accrued interest at 31 December 1995 -
interest being paid not when the accounts are closed, but when investments mature -
minus interest for 1994 paid in 1995. 
- current account: ECU 350 383.49. This comprises ECU 338 151.72 in interest on 
current account balances and ECU 12 231.77 in interest on the liaison account. 
The interest received is entered in the results for the financial year. 
A 
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(c) Recovery from defaulting debtors 
Any late repayments by defaulting countries on operations where the Fund has honoured the 
guarantee are paid into the Fund. The amount recovered in 1995 totalled ECU 35 630 568.55 
(see point 2.1.2 of Annex II). 
4. THE FUND'S LIABILITIES 
(a) Default payments 
The Fund's guarantee was called in on ten occasions in 1995, involving a total of 
ECU 303 072 580.90 (see point 2.1.2 of Annex H). 
(b) EIB remuneration 
Article 6 of the management agreement between the Commission and the EIB sets an annual 
commission of 0.125% calculated on the basis of the Fund's average monthly balances. The 
figure is to be reviewed at the end of any year in which the Fund's liquid assets reach ECU 
300 million and no later than three years following the date of the first payment into the Fund, 
taking into account such things as the growth of the Fund's activities. 
As the Fund had reached ECU 300 million at the end of 1995, the EIB's remuneration was 
reviewed. Taking into account the Bank's experience of the workload involved in its 
management, it was decided by common agreement between the Bank and the Commission 
that the annual commission should be reduced to 0.05% and that this rate should be applied 
retrospectively. 
In 1995 the remuneration paid to the Bank was ECU 191 444.18, which is entered in the 
profit and loss account. 
- b -
ANNEXES 
ANNEX 1: LEGAL BASES FOR PAYMENTS FROM THE GENERAL 
BUDGET 
1. DECISIONS COVERED BY TRANSFER 2/95 1 
2. DECISIONS COVERED BY TRANSFER 17/95 2 
3. DECISION COVERED BY TRANSFER 47/95 2 
ANNEX II: EIB STATUS REPORT ON THE FUND AND ITS MANAGEMENT 
REVENUE AND EXPENDITURE ACCOUNT AND BALANCE 
SHEET AT 31 DECEMBER 1995 
1. BASIC ACCOUNTING PRINCIPLES ..3 
2. THE FUND'S RESOURCES. 3 
3. ANALYSIS OF INVESTMENTS MADE DURING 1995 ......5 
ANNEX m: CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 1995 11 
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ANNEXI 
LEGAL BASES FOR PAYMENTS FROM THE GENERAL BUDGET 
The Annex to the Regulation concerning arrangements for payments under the Guarantee 
Fund, stipulates that for borrowing/lending operations or guarantees to financial bodies 
under a framework facility spread over several years and with a micro-economic and 
structural purpose, payments will be made in annual tranches calculated on the basis of the 
annual amounts indicated in the financial statement attached to the Commission proposal, 
adapted, where appropriate, in the light of the Council decision. 
In the case of other borrowing/lending operations such as balance of payments loans to 
non-member countries, irrespective of whether they are made in one or more than one 
tranche, the amount to be paid into the Fund will be calculated on the basis of the total 
amount for the operation decided on by the Council. 
Four transfers were made under this procedure in 1995. 
L DECISIONS COVERED BY TRANSFER 2/95 
- Council Decision of 15 February 1993 calling on the EIB to grant loans for 
projects of mutual interest in certain non-member countries with which the 
Community has cooperation agreements, within a fixed ceiling of ECU 250 million 
a year for a period of three years. 
- Council Decision of 13 December 1993 renewing the Community guarantee of 
EIB loans in the countries of Central and Eastern Europe, with a ceiling of ECU 3 
billion over three years. 
- As part of the financial cooperation with the Mediterranean countries: 
- Council Decision of 19 July 1993 for a five-year loan of ECU 150 million 
for the Republic of Slovenia; 
- Council Decision of 24 January 1994 for a three-year loan of 
ECU 115 million for Syria. 
- Council Decision of 21 March 1994 empowering the Commission to contract 
Euratom loans to contribute to financing improvements in the safety and efficiency 
levels of the nuclear capacity of certain non-member countries for an amount of 
ECU! 100 million. 
5 
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2. DÉCISIONS COVERED BY TRANSFER 17/95 
- Council Decision of 1 June 1995 granting a Community guarantee for EIB loans in 
South Africa, with a ceiling of ECU 300 million over two years from the date of 
the Decision. 
- Council Decision of 10 April 1995 concerning the granting of macrofinancial aid 
of ECU 75 million to Belarus for ten years. 
3. DECISION COVERED BY TRANSFER 47/95 
- Council Decision of 23 October 1995 providing further macrofinancial assistance 
of ECU 200 million to Ukraine for ten years. 
5 
3-
ANNEXlI 
EBB STATUS REPORT ON THE FUND AND rrs MANAGEMENT 
REVENUE AND EXPENDITURE ACCOUNT AND BALANCE SHEET 
AT 31 DECEMBER 1995 
1. BASIC ACCOUNTING PRINCIPLES 
The Fund's liquid assets are managed on behalf of the Community at its own risk 
(Article 1 of the Agreement) in accordance with the following principles: 
The Fund operates in a single currency: the ecu. 
The available funds are managed so as to ensure a degree of liquidity and rapid 
mobilization in view of the commitments which the Fund may be called on to meet. 
The funds are invested in instruments and counterparts in accordance with the same credit 
criteria as applied by the EIB. 
2. THE FUND'S RESOURCES 
2.1 The Fund's account 
Two payments were made into the Fund's account at the end of 1994, and on 1 January 
1995 the Fund's assets stood at ECU 293.9 million. A third payment - of ECU 190.75 
million ~ was made on 12 April, a fourth - of ECU 30 million - on 11 August and a fifth 
- also of ECU 30 million - on 29 December 1995 
The Fund's total assets at 31 December 1995 were ECU 298.4 million, with 
ECU 254 million invested in short-term deposits and 44.4 million on current account. 
6 
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2.1.1 Payments made by the Fund up to 31 December 1995 
From 1 January the Fund's guarantee was called in for a total of ECU 303 million: 
JQAIEJOEJEAYMENT, 
11/01/1995 
20/0Ï/1995 
30/01/1995 
28/02/1995 
12/04/1995 
24/05/1995 
20/07/1995 
11/10/1995 
17/10/1995 
21/11/1995 AMOUNT 
5 297 222.07 
4 623 981.98 
53 636 023.92 
2 343 806.01 
2 181 421.01 
6 082 283.85 
3 967 469.82 
8 614 739.60 
2 346 828.80 
213 978 803.84 
TOTAL 303 072 580.901 
2-1. 2. Recovery from defaulting debtors 
Payments by defaulting debtors resulted in the recovery of ECU 35. 6 millions. 
J3AIEDF RECOVERY AMOUNT 
08/03/1995 
20/03/1995 
15/05/1995 
01/03/1995 
29/03/1995 
13/04/1995 
28/04/1995 
08/06/1995 
15/11/1995 704 696.00 
31925 800.00 
1 353 505.45 
150.67 
457.30 
18 193.05 
776 033.13 
75.00 
851 657.95 
TOTAL 35 630 568.55 
2.1.3. The net balance of operations amounted to ECU 267.4 million. 
2.2. Operating result 
The net result in 1995 amounted to ECU 23.3 million, compared with ECU 0.5 million in 
1994. 
2.3. Remuneration 
Article 6 of the Agreement between the Commission and the EIB sets the Bank's 
remuneration at 0.125% of the Fund's assets and provides that the figure is to be 
reviewed at the end of any year in which the Fund's liquid assets exceed ECU 300 million. 
6 
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Since the. Fund's liquid assets reached ECU 300 million during 1995, the Bank and the 
Commission decided to reduce the rate of remuneration to 0.05% retrospectively from 
December 1994 to December 1995. The Bank's remuneration thus came to 
ECU 0.191 million. 
3. ANALYSIS OF INVESTMENTS MADE DURING 1995 
3.1. Yield and performance 
Investments were made on the best terms available subject to the credit criteria; the 
average yield was 6.12%, in other words 27 points higher than the one-month Libid rate 
over the same period. 
MONTH 
January - December YIELD 
6.12% LIBID 
1 month 
5.85% MARGIN 
0.27 % 
6-
3.2. Average capital (million ecus) invested with banks in 1995, by country, for a 
total of ECU 373.2 million 
I AVERAGE CAPITAL | SITUATION AT 31.12.1995 
,__ (million) (million) 
- Germany: 22.7 
127 45.0 
35.4 45.0 
-Austria: 9.4 
-Belgium: 2.5 
47.6 20.0 
11.3 10.0 
4J 30Lfj 
65.5 60.0 
-Denmark: 12.0 24.0 
A2 _-
16.2 24.0 
- France: 35.4 
13.6 
11L2 700 
160.2 70.0 
-Luxembourg: 17.6 20.0 
4^ -
21.9 20.0 
- Netherlands: 53.3 35.0 
- United Kingdom: 7.6 
37 -
11.3 
TOTAL I 373.2 | 254.0 
b 
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3.3. Geographical distribution - end-of-month investment position (million ecus): 
(see Annex I) 
COUNTRY Jan 95 Feb 95 Mar 95 Apr 95 May 95 Jun 95 Jul 95 Aug 95 Sep 95 
Germany (MX) 0.00 OJÔÔ ÔUÔ" 0.00 53.50 53.50 5375Ô 74.00 
Austria 0.00 18.00 18.00 18.00 0.00 20.00 20.00 20.00 0.00 
Belgium 22.00 72.00 72.00 70.00 45.00 25.00 65.00 95.00 95.00 
Denmark 0.00 0.00 0.00 0.00 40.00 40.00 40.00 40.00 40.00 
France 188.00 118.00 68.00 284.25 284.25 250.75 135.00 135.00 135.00 
Luxembourg 20.00 20.00 20.00 20.00 20.00 0.00 20.00 40.00 40.00 
Netherlands 0.00 0.00 83.50 60.00 55.00 55.00 85.00 65.00 65.00 
UK 0.00 0.00 0.00 0.00 0.00 0.00 30.00 30.00 30.00 
TOTAL 230.00 228.00 261.50 452.25 444.25 444.25 448.50 478.50 479.00 
COUNTRY Oct 95 Nov 95 Dec 95 
Germany "~ "~ "" 104.00 ~~ 45.00 45.00 
Austria 0.00 0.00 0.00 
Belgium 90.00 65.00 60.00 
Denmark 40.00 24.00 24.00 
France 110.00 65.00 70.00 
Luxembourg 40.00 20.00 20.00 
Netherlands 60.00 35.00 35.00 
UK 25.00 0.00 0.00 
TOTAL 469.00 254.00 254.00 
3.4. The geographical distribution is significantly influenced by the reception given 
by banks to placements on the money markets 
Some banks cannot offer competitive returns on proposed investments by the Fund 
either because they are not interested in ecu deposits or because of the Fund's non-
banking status. 
In order to achieve a wider geographic spread of investments, the possibility of 
extending such activity to banks in the new Member States was also explored and 
contacts were pursued with banks on the approved list. In the last quarter of the year 
the list was revised - three banks that no longer satisfied the criteria were taken off, 
while two new ones were added (bringing the total to 40). 
3.5. The Fund's coverage of the risk of defaulting debtors 
Throughout the year the terms of most deposits were fixed in such a way that the Fund 
would be able to meet any potential guarantee operations, bearing in mind the quarterly 
scheduling of loans granted by the Commission. The Fund cannot overdraw its 
accounts and must always be in a position to respond within three months when its 
guarantee is called in (this is the period of notice between the date when a guarantee is 
called in and when it is actually paid). The number and scale of the payments made 
over the year as a whole, peaking at 214 million in November, required an investment 
5 
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policy principally geared to maintaining a sufficient level of liquidity to enable the 
Fund to meet commitments falling due without having \6 incur the costs entailed by 
breaking contracts with banks where it had made placements. 
3.6. Movement of the Fund's liquid assets 
MOVEMENT OF LIQUID ASSETS IN 1995 
500 j 
450-
400-
350-
300 4 
250 
200 
150 
100 -
50 -
0 
o 
CD 
Q 
CO c 
CO 
CO <D 
LX. 
CO 
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CO CO CO 
CO c 
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CO 1" s 
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As the graph shows, the Fund's resources passed the ECU 300 million threshold set in 
the agreement for altering investment principles. However, for the reasons described at 
3.5, it was considered advisable not to invest in fixed-interest securities during the 
period in question, as this would increase the liquidity and rate risk and might result in 
capital losses. 
e> 
Austria 
United Kingdom 
Denmark 
Luxembourg 
Germany 
Netherlands 
Belgium 
France 3 
I 
a 
§ 
•a 
B n 
3 
O 
Q -° 9 S 8 K K 8 § 2 -° -s 8 S 
8 8 8 8 8 8 
o5 
10 
POSITION OF THE GUARANTEE FUND AT 31 DECEMBER 1995 
ASSETS 31 December 1995 
Receivables with credit institutions 
CURRENT ACCOUNT 
FIXED-TERM DEPOSITS 
Other receivables 
ACCRUALS 
TOTAL 44 444 219.76 
254 000 000.00 
298 444 219.76 
2 403 610.74 
2 403 610.74 
300 847 830.50 
LIABILITIES 31 December 1995 
Guarantee Fund 
GUARANTEE FUND 
Result 
Carryover from 1994 
Result for 1995 
TOTAL 277 027 987.65 
277 027 987.65 
471 584.52 
23 348 258.33 
23 819 842.85 
300 847 830.50 
PROFIT AND LOSS AT 31.12.1995 
1. INCOME 
Interest and similar income 
Interest on liaison account 
Interest on current account 
SUB-TOTAL 
2. COSTS 
Commissions 
Financial charges 23 189 444.30 
12 231.77 
338 151.72 
23 539 827.79 
191 444.18 
125.28 
NET RESULT 23348 258.33 
5 
11-
ANNEXin 
CONSOLIDATED FINANCIAL BALANCE SHEET OF THE GUARANTEE FUND AT 
31 DECEMBER 1995 
The consolidated financial balance sheet at 31 December 1995 completes the position 
of the Guarantee Fund set out in Aimex II. The consolidated balance sheet includes, on 
the assets side, entitlements of ECU 273 188 763.18 receivable from recipients of loans 
granted or guaranteed by the Commission. Of this figure, ECU 267 442 012.35 is due 
for third countries' arrears on the payment of principal and interest and 
ECU 5 746 750.83 for default interest not received at 31 Pecember 1995. This default 
interest has been calculated in line with the penalty rates laid down in the loan 
contracts. 
6 
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CONSOLIDATED FINANCIAL BALANCE SHEET OF THE GUARANTEE FUND AT 
31 DECEMBER 1995 
ASSETS 31 December 1995 
Receivables with credit institutions 44 444 219.76 
CURRENT ACCOUNT 254 000 000.00 
FIXED-TERM DEPOSITS 
Receivables with recipients of loans granted or 
guaranteed bv the Community 
FUND OPERATIONS 267 442 012.35 
DEFAULT INTEREST DUE BUT NOT RECEIVED 5 746 750.83 
571 632 982.94 
Other receivables 
ACCRUALS 2 403 610.74 
2 403 610.74 
TOTAL 574 036 593.68 
LIABILITIES 31 December 1995 
Guarantee Fund 
PAYMENTS FROM THE BUDGET 544 470 000.00 
DEFAULT INTEREST DUE BUT NOT RECEIVED 5 746 750.83 
550 216 750.83 
471 584.52 
Result for 1995 23 348 258.33 Result 
Carryover from 1994 471584.52 
23 819 842.85 
TOTAL 574 036 593.68 
PROFIT AND LOSS AT 31.12.1995 
1. INCOME 
Interest and similar income 23 189 444.30 
Interest on liaison account 12 231.77 
interest on current account 338 151.72 
o SUB-TOTAL 23 539 827.79 
COSTS 
Commissions 191444.18 
Financial charges 125.28 
NET RESULT 23 348 258.33 
6 

ISSN 0254-1475 
COM(96) 271 final 
DOCUMENTS 
EN 01 
Catalogue number : CB-CO-96-281-EN-C 
ISBN 92-78-05468-2 
Office for Official Publications of the European Communities 
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