EN    EN EN 
2008/ECFIN/022 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 29.5.2008 
SEC(2008)1938 
  
COMMISSION STAFF WORKING DOCUMENT 
Annex to the  
 
Report from the Commission 
 
Annual Report from the Commission 
on the Guarantee Fund and its Management in 2007 
  
{COM(2008)327} 
 
EN 2   EN TABLE OF CONTENTS 
1. Guarantee Fund - Management Report at 31 December 2007..................................... 4 
1.1. Development of the Fund in 2007................................................................................ 4 1.2. Situation of the Fund.................................................................................................... 5  
1.2.1. The Fund's resources at 31 December 2007................................................................. 5 1.2.2. The Fund's assets at 31 December 2007 ...................................................................... 5 1.3. General and segmental analysis of the Fund................................................................ 6 1.3.1. Liquidity analysis...................................................................................................... ... 6 
1.3.2. General analysis of th e results of the Fund .................................................................. 6 
1.4. Analysis by segment .................................................................................................... 7 1.4.1. Analysis of money markets operations ........................................................................ 7 1.4.2. Analysis of bond portfolio results................................................................................ 8 1.5. Performance and interest  rate risk analysis................................................................ 13 
1.5.1 Interest rate risk....................................................................................................... ... 14 
1.5.2 Performance .............................................................................................................. . 16 
2. Statement of Financial Position of the Fund at 31 December 2007........................... 17 2.1 Economic Outturn Account (Statement of Fi nancial Performance) for the year ended 
31 December 2007 ..................................................................................................... 18 
2.2 Balance Sheet (Statement of Financia l Position) as at 31 December 2007 ............... 19 
2.3 Statement of changes in equity for the year ended 31 December 2007..................... 21 2.3 Cash Flow Statement as at 31 December 2007.......................................................... 22 3. Notes to the Financial Statements.............................................................................. 23 3.1 General disclosures .................................................................................................... 23 3.2 Significant accounting policies .................................................................................. 23 3.2.1 Basis of preparation.................................................................................................... 2 3 
3.2.2 Significant accounting and j udgments and estimates................................................. 23 
3.2.3 Summary of significan t accounting policies.............................................................. 24 
3.2.3.1 Foreign currency translation ...................................................................................... 24 3.2.3.2 Cash and cash equivalents.......................................................................................... 24 3.2.3.3 Short-term investments .............................................................................................. 24 
 
EN 3   EN 3.2.3.4 Taxation............................................................................................................... ....... 25 
3.2.3.5 Capital ................................................................................................................ ........ 25 
3.3 Financial Risk Management....................................................................................... 25 3.3.1 Interest Rate and Liquidity Risks............................................................................... 25 3.3.2 Credit Risk .............................................................................................................. ... 29 
3.4 Short-term Investments – Available For Sale Assets................................................. 31 3.5 Cash and Cash Equivalents ........................................................................................ 32 3.6 Current Liabilities ...................................................................................................... 33  
3.7 Financial operations revenues.................................................................................... 33 3.8 Financial operations expenses.................................................................................... 34 3.9 Subsequent events ...................................................................................................... 34 
 
EN 4   EN 1. G UARANTEE FUND - MANAGEMENT REPORT AT 31 D ECEMBER  20071 
1.1. Development of the Fund in 2007 
The total market value of the Guarantee F und’s (the “Fund”) holdings  (excluding accrued 
interest) stood at EUR 1 131.5 million at 31 December 2007 as against EUR 1 354.7 
million at 31 December 2006, a decrease of EUR 223.2 million. 
1075.01100.01125.01150.01175.01200.01225.01250.01275.01300.01325.01350.01375.01400.0
Jan Mar May Jul Sep Nov(millions euro)2006
2007
 
Figure 1: Development of  holdings in 2007 & 2006 
The decrease of the Fund's total market va lue was mainly due to the payment of an 
amount of € 260,940,124.72 which was paid to the Community budget on 14 February 
2007. The amount corresponds to 9% (the Fund's target rate) of the outstanding amount 
of guaranteed loans to two countries which became EU Member States on 1 January 2007 and therefore are no longer covered by the Guarantee Fund which is limited to non-
EU Member States. 
The net operating result amounted to € 52.9 million at 31 December 2007 compared with 
€ 52.1 million at 31 December 2006. Interest inco me on AFS assets (net of the premium / 
discount spread) amounted to € 40.8 million, representing 77 % of the total result recorded at 31 December 2007. Interest income  on cash & cash equivalents amounted to 
€ 10.0 million, or 19% of the total result. In 200 7 the sale of AFS assets generated a net 
realised gain of € 2.9 million, representing 5% of the total result of  the year. The rest (-
1%) reflects commissions and financial charges. 
                                                
 
1 Report prepared by the EIB. 
 
EN 5   EN 1.2. Situation of the Fund  
1.2.1. The Fund's resources at 31 December 2007 The Fund balance decreased by EUR 260.9 mi llion, or 33% from EUR 788.1 million at 
31 December 2006 to EUR 527.2 million at 31 December 2007. 
This is explained by the movements sin ce the Fund was established shown in the 
following table: 
Resources  Situation at  Movements Situation at 
  31/12/2006 in 2007 31/12/2007 
      
Provisioning + 2,805,005, 162.91 0.00 2,805,005,162.91
Repayment of surplus - (1, 775,870,000.00) 0.00 (1,775,870,000.00)
Activation of guarantee - (477,860,856.19) 0.00 (477,860,856.19)
Recovery of amounts guarantee d + 575,673,913.77 0.00 575,673,913.77
Repayment of Funds (9%)  -(338,831,402.07) (260,940,124.72) (599,771,526.79)
   
Balance  788,116,818.42 (260,940,124.72) 527,176,693.70
An amount of € 260,940,124.72 was paid to th e Community budget on 14 February 2007 
caused by the accession of two new EU Member stat es to the EU at the date of 1 January 
2007. This amount corresponds to 9% (the Fund' s target rate) of the outstanding amount 
of guaranteed loans to two countries which became EU Member St ates on 1 Janauary 
2007 and therefore are no longer covered by the Guarantee Fund which is limited to non-
Member States. 
1.2.2. The Fund's assets at 31 December 2007 
The Fund’s holdings at 31 December 2007 excluding accrued interest totalled  
EUR 1 131.5 million as detailed below. Th e Fund operates in one currency only, the 
Euro: 
EUR 246.6 million in the monetary portfolio (nom inal value of interbank term deposits); 
EUR 1.2 million in the current accounts; EUR 883.7 million in the Available For Sale (AFS) investment portfolio (the market value of fixed rate and variable rate securi ties (excluding accrued interest), see table in 
section 3.1). 
 
EN 6   EN 1.3. General and segmental analysis of the Fund 
1.3.1. Liquidity analysis The distribution of the Fund’s holdings at  31 December 2007 (market value excluding 
accrued interest) was as follows: 
Fixed rate investments 
Segments Less than 3 
months 
EUR 3 months to 1 
year 
EUR 1 to 10 years 
 
EUR Variable rate 
securities 
EUR TOTAL 
EUR 
Current accounts 1,232,834. 25 0.00 0.00 0.00 1,232,834.25 
Short-term  
deposits-nominal 246,600,000.00 0.00 0. 00 0.00 246,600,000.00 
AFS portfolio 25,484,880.00 83,951,180. 00 703,003,924.86 71,257, 053.00 883,697,037.86 
TOTAL 273,317,714.25 83,951,180.00 703,003, 924.86 71,257,053.00 1,131,529,872.11 
Percentage 24.15% 7.42%  62.13% 6.30% 100.00% 
1.3.2. General analysis of th e results of the Fund 
Overall, the Fund produced EUR 52.9 million in  net revenue. Investment income at 31 
December 2007 was as follows: 
Investment income at 31 December 2007 was as follows: 
  January – December 2007 
(in million EUR) 
   
Interest income on cash & cash equivalents  10.0 
Interest income on AFS assets  40.8 
Net realised gain on sale of AFS assets  2.9 Commission and financial charges  (0.8) 
   
Total  52.9 
The performance of the Fund portfolio was moni tored on a marked to market basis. Over 
2007, the portfolio delivered a 3.099% MTM return, under-perf orming its benchmark by 
16.5bps. 
 
EN 7   EN 1.4. Analysis by segment 
1.4.1. Analysis of money markets operations Money-market investments amounted to EUR 246.6 million at 31 December 2007, to be 
compared with EUR 436.5 million a year before. 
The EUR 189.9 million decrease mainly result s from the repayment to the Community 
budget of the reflow due to the EU enlarg ement to Bulgaria and Romania. This 
repayment occurred in early February 2007. 
• Evolution of money-market rates in 2007 
While the ECB reference rate remained unchang ed at 4% during the year (after two hikes 
of 25bps each in March and June), the m oney markets environment was extremely 
challenging, notably in the second half of the y ear after the explosion of the crisis in US 
sub-prime mortgage market resulted by the end of the summer in a full-blown worldwide 
liquidity crisis. Market participants becam e extremely cautious and unwilling to lend to 
each other except for very short-term matur ities. As a result, market spreads widened 
abnormally and EURIBOR fixings rose high above  Central Banks rates. The increase of 
the short-term money market rates benefited the short-term portfolio which invested in tenors up to 3 month. However, the in creasing volatility of money market rates 
resulting from the liquidity and credit crunc h forced the major Central Banks to organize 
during the last quarter of 2007 an  injection of massive amount s of liquidity in a largely 
successful operation to force downwards  the price of short-dated liquidity. 
The table below shows the evolution of the one- and three-month Eu ribid reference rates 
(i.e. Euribor -12.5bp). 
 
Money market rates (%)
33.23.43.63.844.24.44.64.85
01/01/2007 02/04/2007 02/07/2007 01/10/2007 31/12/2007Euibid 1M
Euribid 3M
Figure 2: Evolution of Money Market rates during 2007 
• Profile of counterparties 
In accordance with the agreement between the Community and the EIB on the 
management of the Fund, all banks with which deposits are placed should have a 
 
EN 8   EN minimum short-term credit rating of A1 (Moody's), or equivalent. The breakdown, 
including accrued interest, is as follows: 
A1
30%Aa3
41%
Aa1
8%Aa2
21%
 
Figure 3: Short-term interbank investments by type of counterparty at 31 December 2007 
• Geographical breakdown  
Regarding the diversification of counterpart location, the EIB is pursuing its objective of 
a better geographical distribution throughout the countries of the European Union by 
placing the short-term deposits in a number of  banks located in th e main EU financial 
centers. This allows to ensure competitive returns.  
1.4.2. Analysis of bond portfolio results 
The bond portfolio, seen as a long-term inve stment portfolio, is made up of euro-
denominated securities initially acquired with the intention of  holding them until 
maturity. Under IFRS (IAS), these securities ar e classified in the Financial Statements as 
Available For Sale (AFS). At 31 December 2007, the market value (excluding accrued interest) of fixed rate securities with a re sidual period to maturity of less than three 
months amounted to EUR 25.5 million, be tween 3 months and one year EUR 84.0 
million and between one and 10 years EUR 703.0 million. 
The starting value of the securities in this portfolio is the acquisition cost. The difference 
between the entry price and the redemption va lue is the premium/discount spread, which 
is divided pro rata temporis  over the remaining life of each of the securities using the 
effective interest rate me thod as specified under IFRS. 
At 31 December 2007, the nominal value of the investment portfolio (including floating 
rate notes) was EUR 889.1 million, agai nst a market value of EUR 883.7 million. 
The global (modified) duration of the bond po rtfolio increased over 2007 to reach 3.5 
years at the end of the year. As of 31 December 2007 the market value (excluding 
accrued interest) of the investment portfolio  came to EUR 883.7 million compared with a 
book value of EUR 887.6 million (including premiums/discounts), which gives an 
unrealised loss of EUR 3.9 million, compared with an unrealised gain of EUR 14.7 
million and a market value (excluding accrued interest) of EUR 917.0 million at 31 December 2006. 
 
EN 9   EN During 2007 the euro area 2- to 10-year yiel d curve spread steepened by 32 basis points 
from 5 basis points to 37 basis points. The movement occurred as a result of long-term 
yields increasing more than short- term yields as shown in figure 4. 
 
1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 
Figure 4: Euro area yield cu rve steepening during 2007 using G erman government benchmark bonds 
(source Bloomberg) 
In accordance with the 2007 investment stra tegy a total nominal amount of EUR 125 
million was invested in 6- to 10-year fixed coupon bonds. 
 
EN 10   EN 
 
Jan 31 Feb 30 Mar 30 Apr 30 May 31 Jun 29 Jul 31 Aug 31 Sep 28 Oct 31 Nov 30 Dec 31 
Figure 5: 2007 Graph of 10-year Bund YTD yield evolution with  investment dates 
(source Bloomberg) 
At 1 January 2007, a total of EUR 112.6 million of reimbursements (nominal value) on 
the securities portfolio were scheduled  for the year, split as follows: 
 EUR 107.5 million for the fixed rate, and  EUR 5.1 million for the variable rate. In addition, during 2007 seven pos itions of the fixed rate secu rities portfolio with a total 
of EUR 101.5 million (nominal value) were sold. The sale generated a net realised gain of EUR 2.9 million. The sales were effected in line with the agreed 2007 strategy that 
included the proposal for switch trades. The switches were executed in order to more 
closely align the actual portfolio maturity  structure with its target structure. 
• Breakdown of the investment portfolio between fixed rate and variable rate 
securities 
 
EN 11   EN Variable rate
8%
Fixed Rate
92%
 
Figure 6: Breakdown of the investme nt portfolio between fixed and variabl e rate securities at 31 December 2007 
 
EN 12   EN • Redemption profile of investme nt portfolio (nominal value) 
020406080100120140
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017(millions euro)Variable rate
Fixed Rate
Figure 7: Investment portfolio: Re demption profile at 31 December 2007 
The latest final maturity date fo r fixed rate securities is 15 May 2017.  
• Profile of issuers 
All the securities held meet the following criteria: 
– Either they are issued by States in, or  by institutions guara nteed by, the European 
Union, the G10 or supranational bodies; 
– Or they are issued by another soverei gn State with a rating of at least AA3; 
– Or they are issued by another issuer with a rating of AAA. 
 
EN 13   EN The profile of issuers at 31 December 2007 is as follows: 
Public Companies A2
1. 1%Special Purpose Vehicle Aaa
9.6%Public Companies Aaa
12 . 4 %
M ember States A3
0.4%Other Financial Institutions Aaa
4.6%
M ember States Baa1
1. 1%
M ember States A2
13 . 8 %Banks Aaa
20.1 %
M ember States A1
8.3%M ember States Aa3
9.2%M ember States Aa1
8.1 %M ember States Aaa
9.8%MDBs Aaa
0.6%Banks Aa1
0.6%
Government Body Aaa
0.4%
Figure 8: Investment portfolio: Pr ofile of issuers at 31 December 2007 
1.5. Performance and interest  rate risk analysis 
The performance of the Fund is monitored on a marked-to-market (MTM) basis against a 
composite index. This index is the result of the combination of the following sub-indices: 
– Euribid 1M for money-market operations 
– Euribid 3M for floating rate notes a nd fixed rate bond with less than one 
year to maturity 
– IBOXX EUR Sovereign indices for fixe d rate bonds issued by sovereign 
(or similar) issuers, sp lit by maturity buckets  
– IBOXX EUR Corporate indices for fi xed rate bonds issued by corporate 
(or similar) issuers, sp lit by maturity buckets 
Index weightings are based on portfolio co mposition and are reviewed every month. The 
table below shows the aver age weightings over 2007: 
 
EN 14   EN  
1.5.1 Interest rate risk 
The interest rate risk sensitivity of the MTM value of the portfolio mainly stems from its 
fixed rate exposure. A 1bp increase of intere st rates reduces the va lue of the portfolio by 
EUR 319,548, of which EUR 317,356 is related to the fixed rate bond exposure. The 
global duration of the fund arose, at the end of 2007, at 2.78 years. 
GF Sub- Portfolios Market Value 
(excluding accrued 
interest) Modified 
Duration 
(Years) Interest Rate 
Exposure 
(+/-1bp) 
Floating Rate Notes  71,257,053 0.17 -/+ 1,226 
Fixed Rate Bonds 812,439,990 3.83 -/+ 317,356 
Money Market Deposits  246,633,625 0.04 -/+ 965 
Cash account 1,939,7832 0 0 
                                                 
2 The EUR 1.9 million “cash account” balance reported in th is table does not include any payments relating to 
commissions or fees. This explains why it does not ma tch the EUR 1.2 million total balance of the “current 
account” balance reported in section 2.2. The “cash account” balance is however reset at the beginning of 
each year to match the total balance of the current accounts  Bucket (years) Performance Benchmark 
Sector  
Instrument 
 Percentage of Total 
portfolio (2007 average)
0-1 1 m Money Markey 20.7% 
 3 m FRN and Fixed Rate Bonds  
14.3% 
1-3 sovereign  16.0%  
 corporate  1.1% 
3-5 sovereign Fixed 14.5%  
 corporate Rate 1.7% 
5-7 sovereign Bonds 11.6%  
 corporate  1.2% 
7-10 sovereign  17.2%  
 corporate  1.7% 
Total   100% 
 
EN 15   EN Total GF 1,132,270,451  2.78 -/+ 319,548  
 
EN 16   EN 1.5.2 Performance 
Over 2007, the portfolio delivered a 3.099% MTM return. The evolution of the portfolio 
return and relative return vi s-à-vis its benchmark is pres ented in the following table. 
 Portfolio  Out-performance 
       
 Market Value  
(including accrued 
interest)  Monthly  
 return  
(absolute return in 
%) YTD  
 return  
(absolute return in 
%) 
 Monthly 
Excess Return  
(in %) YTD  
Excess Return 
(in %) 
31/01/2007  1,381,068,956 0.1168 0.1168  -0.0070 -0.0070 
28/02/2007  1,127,213,443 0.5957 0.7132  -0.0078 -0.0148 
31/03/2007  1,127,246,625 0.0029 0.7162  0.0033 -0.0115 
30/04/2007  1,128,410,186 0.1032 0.8202  0.0333 0.0220 
31/05/2007  1,123,220,782 -0.4599 0.3565  -0.0108 0.0109 
30/06/2007  1,121,356,368 -0.1660 0.1899  -0.0517 -0.0410 
31/07/2007  1,130,086,981 0.7786 0.9700  -0.0799 -0.1214 
31/08/2007  1,139,405,709 0.8246 1.8026  0.0013 -0.1211 
30/09/2007  1,141,908,780 0.2197 2.0262  0.0265 -0.0944 
31/10/2007  1,147,863,797 0.5215 2.5583  -0.0059 -0.1009 
30/11/2007  1,154,364,400 0.5663 3.1391  -0.1262 -0.2310 
31/12/2007  1,153,911,897 -0.0392 3.0987  0.0639 -0.1648 
Throughout the year, the evolution of medium and long-term rates re sulted in rather 
volatile portfolio monthly retu rns. Bond yields peaked at mid-year before starting to 
decline when the effects of the “sub-prime” crisis emerged in Europe. This evolution during the second half of the year was accompanied by a credit spread movement that 
negatively impacted the relative performan ce of the Guarantee Fund. In particular, 
unusual drops of the relative return were obs erved in July and November. These drops 
are mainly attributable to the combination of (1) the investments in Eastern European 
government bonds and covered bonds not cont ained in the Eurozone Sovereign Iboxx 
benchmarks, and (2) a widening of the yield spreads of the above-mentioned bonds vs the 
major European government bonds (Germany, France, Italy and Spain). A partial 
recovery was however obse rved in December, limiting the 2007 under-performance to 
16.5 bp. 
 
EN 17   EN 2. S TATEMENT OF FINANCIAL POSITION OF THE FUND AT 31 D ECEMBER  2007 
The Funds’ financial statements have been  prepared by the EIB in accordance with 
International Financial Reporting Standards (IF RS) and the accounting rules adopted by the 
European Commission, in particular “Accounting rule 11 – Financial assets and liabilities”, 
dated September 20043. These financial statements are presented in Euro. This is the financial 
statement for the Fund's assets managed by the EIB. The annual accounts of the Guarantee Fund for the year ending of 31
st December 2007, have been audited and certified by an 
Independent Auditor. 
                                                 
3 This is based on the revised standards IAS 32 and 39 as issued by the IASB on 18 December 2003 and consequently, does not 
integrate the carved out provisions as set out in the version of IAS 39 endorsed by the European Commission on 19 November 
2004. 
 
EN 18   EN 2.1 Economic Outturn Account (Statement of Financial Pe rformance) for the year 
ended 31 December 2007 
 Notes31.12.2007 
EUR 31.12.2006 
EUR 
Financial operations revenues 3.7  
Interest income  50,810,833.85 52,981,320.04
Interest income on cash and cash equivalents  10,018,308.25 11,443,127.48
Interest income on AFS assets  40,792,525.60 41,538,192.5
Exchange gains  2,900,301.39 0.00
Realised gains on sale of AFS assets  0.00
Reversal of impairment losses on AFS assets  0.00  0.00
Other financial income  0.00  0.00
Financial operations expenses 3.8  
Interest charges  0.00 0.00
Interest charges on cash and cash equivalents  0.00  0.00
Exchange losses  0.00  0.00
Realised losses on sale of AFS assets  0.00  0.00
Impairment losses on AFS assets  0.00  0.00
Other financial charges  (836,434.05) (903,894.45)
Thereof: Management fees  (678,951.39) (714,719.38)
SURPLUS FROM NON OPERATING ACTIVITIES  52,874,701.19 52,077,425.59
SURPLUS FROM ORDINARY ACTIVITIES  52,874,701.19 52,077,425.59
Extraordinary gains  0.00 0.00
Extraordinary losses  0.00 0.00
SURPLUS FROM EXTRAORDINARY ITEMS  0.00
ECONOMIC RESULT OF THE YEAR  52,874,701.19 52,077,425.59
The notes refer to the Notes to the Financial Statements. 
 
EN 19   EN 2.2 Balance Sheet (Statement of Financ ial Position) as at 31 December 2007  
ASSETS  Notes31.12.2007 
EUR 31.12.2006 
EUR 
CURRENT ASSETS    
Short-term Investments 3.2.3.3   
AFS Portfolio - cost  893,521,021.50 909,631,292.30
AFS Portfolio – actuarial difference  (5,928,251.48) (7,298,412.75)
AFS Portfolio – adjustment to fair value  (3,895,732.16) 14,654,734.60
AFS Portfolio - accruals  20,016,186.64 22,976,717.88
AFS Portfolio – impairment   0.00 0.00
Total Short-term Investments  903,713,224.50 939,964,332.03
Cash and Cash Equivalents 3.2.3.2   
Current accounts  1,232,834.25 1,158,007.44
Short-term deposits – nominal   246,600,000.00 436,500,000.00
Accrued interests on short-term deposits  1,427,886.27 2,075,352.42
Other cash equivalents – cost  0.00 0.00
Accrued interests on other cash equivalent s 0.00 0.00
Total Cash and cash equivalents  249,260,720.52 439,733,359.86
Total Current Assets   1,152,973,945.02 1,379,697,691.89
TOTAL  1,152,973,945.02 1,379,697,691.89
 
EN 20   EN  LIABILITIES  Notes 31.12.2007 
EUR 31.12.2006 
EUR 
A. EQUITY     
Capital (Guarantee Fund)   527,176,693.70 788,116,818.42
Reserves    
First Time application – Fair value reserv e  268,318.67 341,827.26
Change in fair value of AFS assets   (3,895,732.16) 14,654,734.60
Accumulated surplus / deficit     
Results brought forward   575,841,062.23 523,763,636.64
Economic result of the year   52,874,701.19 52,077,425.59
Total Equity   1,152,265,043.63 1,378,954,442.51
B. CURRENT LIABILITIES     
Accounts Payable 3.6   
Sundry Payables   0.00 0.00
Others  708,901.39 743,249.38
Total Current Liabilities    708,901.39 743,249.38
TOTAL   1,152,973,945.02 1,379,697,691.89
The notes refer to the Notes to the Financial Statements. 
 
EN 21   EN 2.3 Statement of changes in equity for the year ended 31 December 2007 
Reserves Equity 
(EUR) Capital 
Fair value reserveChanges in fair 
value of AFS  Accumulated Surplus 
/ Deficit Economic Result of 
the year Total 
Balance as of 01.01.2006 753,206,818.42 416,678.61 46,565,266.11 473,032,495.02 50,731,141.62 1,323,952,399.78
Fair value adjustment – AFS reserve 0.00 0.00 (31,910,531.51) 0.00 0.00 (31,910,531.51)
Fair value reserve 0.00 (74,851.35) 0.00 0.00 0.00 (74,851.35)
Payment from the European Union 34,910,000.00 0.00 0.00 0.00 0.00 34,910,000.00
Result of the year 2005 0.00 0.00 0.00 50,731,141.62 (50,731,141.62) 0.00
Result of the year 2006  0.00 0.00 0.00 0.00 52,077,425.59 52,077,425.59
Balance as of 31.12.2006 788,116,818.42 341,827.26 14,654,734.60 523,763,636.64 52,077,425.59 1,378,954,442.51
Fair value adjustment – AFS reserve 0.00 0.00 (18,550,466.76) 0.00 0.00 (18,550,466.76)
Fair value reserve 0.00 (73,508.59) 0.00 0.00 0.00 (73,508.59)
Payment to the European Union (260,940,124.72) 0.00 0.00 0.00 0.00 (260,940,124.72)
Allocation of the Economic result of 
the year 2006 0.00 0.00 0.00 52,077,425.59 (52,077,425.59) 0.00
Result of the year 2007 0.00 0.00 0.00 0.00 52,874,701.19 52,874,701.19
Balance as of 31.12.2007 527,176,693.70 268,318.67 (3,895,732.16) 575,841,062.23 52,874,701.79 1,152,265,043.63
 
EN 22   EN 2.3 Cash Flow Statement as at 31 December 2007 
 Year to 2007 
EUR Year to 2006 
EUR 
Investing activities  
 Interest received (current accounts, de posits, commercial 10,018,308.25 11,443,127.48
 Management fee paid during the year (714,719.38) (702,497.47)
 Bank charges paid during the year (156,062.66) (169,705.07)
  Purchase of investments - AFS portfolio (200,355,630.00) (115,177,650.00)
  Proceeds of investments - AFS portfolio 214,063,079.41 148,625,000.00
  Interest received - AFS bond portfolio 44,712,208.37 44,781,061.69
 Realised gains of AFS assets 2,900,301.39 0.00
 Net Cash Flows from investing activities 70,467,485.38 88,799,336.63
Financin g activities  
  Capital payment from Euro pean Union 0.00 34,910,000.00
  Capital re paid to Euro pean Union (260,940,124.72 ) 0.00
  Repayments of financial liabilities 0.00 0.00 
  Proceeds of financial liabilities 0.00 0.00 
  Extraordinary items 0.00 0.00 
 Net Cash Flows from financin g activities (260,940,124.72 )34,910,000.00
Net increase/(decrease) in cash and cash equivalents (190,472,639.34) 123,709,336.63
 Cash and cash equivalents at beginning of financial year 439,733,359.8 6316,024,023.23
 Cash and cash equivalent s at end of financial year 249,260,720.52 439,733,359.8 6
 
EN 23   EN 3. N OTES TO THE FINANCIAL STATEMENTS  
3.1 General disclosures 
The rules and principles for the management of  the Guarantee Fund (the “Fund”) are laid out 
in the Convention between the European Comm ission (the “Commission”) and the European 
Investment Bank (the “EIB”) dated 25 Novemb er 1994 and the subsequent amendments dated 
17/23 September 1996 and 8 May 2002. 
The main principles of the Fund, as extracted directly from the Convention, are as follows: 
• The Fund will operate in one single currency bei ng Euro (EUR). It will exclusively invest 
in this currency in order to avoid any exchange rate risk. 
• Management of the Fund will be based upon th e traditional rules of  prudence adhered to 
for financial activities. It will have to pay particular attention to reducing the risks and to 
ensuring that the managed assets have a suffi cient degree of liquidity and transferability, 
taking into account the commitme nts to which the Fund will have. 
• The Fund will be able to use all the hedging in struments against the market and interest 
risks, already used by the Po rtfolio Division of the EIB. 
• The portfolio management will be based on th e optimal duration and on the best possible 
allocation between short-term and long-term  investments, for consideration of both 
liquidity and return. 
3.2 Significant accounting policies 
3.2.1 Basis of preparation The Fund’s financial statements have been prep ared in accordance w ith the accounting rules 
adopted by the Accounting Officer of the Euro pean Commission, in particular “Accounting 
rule 11
4 – Financial assets and liabilities”, da ted December 2004 and updated in October 
2006. 
3.2.2 Significant accounting and judgments and estimates 
The preparation of financial statements in c onformity with the acc ounting rules adopted by 
the Accounting Officer of the European Commi ssion requires the use of certain critical 
accounting estimates. It also requires management to exercise its judgment in the process of 
applying the Fund’s accounting policies. The area involving a higher degr ee of judgment or 
complexity, or areas where assumptions and estimates are significant to the financial 
statements, are disclosed. 
The most significant use of judgmen ts and estimates are as follows: 
                                                 
4 This is based on the revised standards IAS 32 and 39 as issu ed by the IASB on 18 December 2003 and consequently, does not 
integrate the carved out provisions as set out in the version of IAS 39 endorsed by the European Commission on 19 November 
2004. 
 
EN 24   EN • Fair value of financial instruments 
Where the fair values of financial assets and fi nancial liabilities record ed on the balance sheet 
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 fa ir values. The judgments  include considerations of liquidity and 
model inputs such as correlation and volatility for longer dated derivatives. 
• Impairment losses on financial instruments 
The Fund reviews assesses at each  reporting date whether an a llowance for impairment should 
be recorded in the economic  outturn account. In particul ar, judgment by management is 
required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. 
The Fund shall assess at each bala nce sheet date whethe r there is any objective evidence that a 
financial asset or group of financial assets is impaired. If any such evidence exists, the entity 
shall apply different rules, depending on whether the financial assets is carried at amortised 
cost or classified as availa ble-for-sale, to determine the amount of any impairment loss. 
3.2.3 Summary of significant accounting policies 
3.2.3.1 Foreign currency translation 
These financial statements are presented in Eu ro (EUR), which is also the Fund’s functional 
and presentational currency. 
Monetary assets and liabilities denominated in currencies other than in Euro are translated into Euro at 
the exchange rate prevailing at the balance sheet date . The gain or loss arising from such translation is 
recorded in the economic outturn account. 
The elements of the economic outturn account ar e translated into Euro on the basis of the 
exchange rates prevailing at the end of each month 
3.2.3.2 Cash and cash equivalents The Fund defines cash equivalents as current acc ounts or short-term deposits with original 
maturities of three months or less. 
3.2.3.3 Short-term investments 
The bond portfolio, seen as a short-term investment portf olio, is made up of euro-
denominated securities. These securities are clas sified as Available For Sale (AFS) according 
to the accounting rules adopted by the Accounti ng Officer of the European Commission and 
consequently, are carried out at their fair valu e through equity. Unrealised gains or losses are 
reported in reserves until such security is sold , collected or otherwise disposed of, or until 
such security is determined to be impaired. If an  available for sale security is determined to be 
impaired, the cumulative unrealis ed gain or loss previously recognised in own funds is 
included in economic outturn account for the year . Quoted securities are considered impaired 
if the decline in market price below cost is of such a magnitude that rec overy of the cost value 
cannot be reasonably expected within the foreseeable future. 
 
EN 25   EN On disposal of an available for sale securit y, the accumulated unrealised gain or loss included 
in equity is transferred to the economic ou tturn account for the year. Interest income on 
available-for-sale securities is included in “interest income”. 
The determination of fair values of available fo r sale investments is generally based on quoted 
market rates in active markets. 
These securities are initially measured at their acquisition cost, being thei r fair value at this 
moment. The difference between the entry price and the redemption value, i.e. the premium/discount spread, is amortised over the re maining life of each of the securities using 
the effective interest rate method as  specified under Accounting Rule 11.  
The Fund treats available-for-sale fi nancial assets as impaired when a decline in the fair value 
of an available-for-sale asset ha s been recognised directly in equity and there is objective 
evidence that the asset is impaired. A financia l asset is impaired when  its carrying amount is 
greater than its estimated r ecoverable amount. The amount of  the cumulative loss that is 
removed from equity and recognised in profit  and loss shall be the difference between the 
acquisition cost and current fair value, less any impairment loss on that financial asset 
previously recognised in profit and loss. If in a subsequent period, the fair value of a debt 
instrument classified as available-for-sale incr eases and the increase can be objectively related 
to an event occurring after the impairment loss was recognised in profit and loss, the 
impairment loss shall be reversed, with the am ount of the reversal re cognised in profit and 
loss. 
Evidence of impairment is mainly about signi ficant financial difficulties of the issuer, a 
breach of contract, a restructuri ng of the debt of the issuer, a high probability of bankruptcy. It 
is important to stress that the disappearance of  an active market because  an entity’s financial 
instruments are no longer publicly  traded is not evidence of impairment. A downgrade of an 
entity’s credit rating is not, in itself, evidence  of impairment, although it may be evidence of 
impairment when considered with other availabl e information. A decline in the fair value of a 
financial asset below its cost or amortised cost  is not necessarily ev idence of impairment.  
3.2.3.4 Taxation The Protocol on the Privileges and Immunities of  the European Union, appended to the Treaty 
of 8 April 1965 establishing a Single Council  and a Single Commission of the European 
Communities, stipulates that the assets, revenues  and other property of the Institutions of the 
Union are exempt from all direct taxes. 
3.2.3.5 Capital Capital is composed of contribu tions received from the budget of the Eur opean Union and is 
recognized in the balance sheet on the date wh en payment of a cont ribution is received. 
3.3 Financial Risk Management 
3.3.1 Interest Rate and Liquidity Risks 
• Interest rate risk position 
 
EN 26   EN Theoretically, hedging instruments could be used to manage the interest rate (market) risk. 
However as agreed between the Commission and the EIB, no significant risk is currently taken and therefore hedg ing is not performed.  
As the transactions and operations are only  denominated in Euro, no other hedging is 
required. 
 
EN 27   EN The distribution of the Fund’s holdings at  31 December 2007 (market value excluding 
accrued interest) is detail ed in the table below: 
Fixed rate investments 
Segments Less than 3 
months 
EUR 3 months to 1 
year 
EUR 1 to 10 years 
 
EUR Variable rate 
securities 
EUR TOTAL 
EUR 
Current  
accounts 1,232,834.25 0.00 0.00 0.00 1,232,834.25
Short-term 
deposits nominal 246,600,000.00 0.00 0.00 0.00 246,600,000.00
AFS 
portfolio 25,484,880.00 83,951,180.00 703,003,924.86 71,257,053.00 883,697,037.86
TOTAL 273,317,714.25 83,951,180.00 703,003,924.86 71,257,053.00 1,131,529,872.11
Percenta ge 24.15% 7.42% 62.13% 6.30% 100.00%
The distribution of the Fund’s holdings at  31 December 2006 (market value excluding 
accrued interest) is detail ed in the table below: 
Fixed rate investments 
Segments Less than 3 
months 
EUR 3 months to 1 
year 
EUR 1 to 10 years 
 
EUR Variable rate 
securities 
EUR TOTAL 
EUR 
Current 
accounts 1,158,007.44 0.00 0.00 0.00 1,158,007.44
Short-term 
deposits -nominal 436,500,000.00 0.00 0.00 0.00 436,500,000.00
AFS 
portfolio 56,535,900.00 51,292,050.00 732,804,128.15 76,355,536.00 916,987,614.15
TOTAL 494,193,907.44 51,292,050.00 732,804,128.15 76,355,536.00 1,354,645,621.59
Percenta ge 36.48% 3.79% 54.09% 5.64% 100.00%
At 31 December 2007, for the Cash and Cash equi valents (fixed term deposits), the effective 
interest rate range is  between 4.12% and 4.80%. For the Ava ilable For Sale (AFS) securities 
portfolio, the effective interest ra te range is between 2.94% and 5.52%. 
 
EN 28   EN • Liquidity position 
The table below provides an analysis of certain assets, liabilities and equity into relevant 
maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. It is presented under the most prude nt consideration of maturity 
dates. Therefore, in the case of liabilities the earliest possible repayment date is shown, while for assets it is the latest possible repayment date. 
Those assets and liabilities that do not have a contractual maturity date are grouped together 
in the “Maturity undefined” category. 
Maturity Less than 3 
months 3 months to 1 
year 1 to 10 years Maturity 
undefined TOTAL 
Assets in 
EUR  
Current 
accounts 1,232,834.25 0.00 0.00 0.00 1,232,834.25 
Short-term 
deposits  248,027,886.27 0.00 0.00 0.00 248,027,886.27 
Of which: 
accrued interests 1,427,886.27 0.00 0.00 0.00 1,427,886.27  
AFS 
portfolio  37,778,336.60 108,684,422.04 754,125,764.86 3,124,701.00 903,713,224.50 
Of which: 
accrued interests 7,290,562.60 12,725,624.04 0.00 0.00 20,016,186.64 
TOTAL  287,039,057.12 108,684,422.04 754,125,764.86 3,124,701.00 1,152,973,945.02 
Liabilities 
in EUR       
Equity 0.00 0.00 0.00 1,152,294,993.63 1,152,294,993.63 
Account 
payable 678,951.39 0.00 0.00 0.00 678,951.39 
TOTAL  678,951.39 0 0 1,152,294,993.63 1,152,973,945.02 
Net 
liquidity position at 31.12.2007  286,360,105.73 108,684,422.04 754,125,764.86 (1,149,170,292.63) 0.00 
 
EN 29   EN Cumulative 
liquidity position at 31.12.2007 286,360,105.73 395,044,527.77 1,149,170,292.63 0.00  
Net 
liquidity 
position at 
31.12.2006 504,178,739.42 65,616,038.84 800,919,596.25 (1,370,714,374.51) 0.00 
Cumulative 
liquidity 
position at 
31.12.2006 504,178,739.42 569,794,778.26 1,370,714,374.51 0.00  
3.3.2 Credit Risk 
• Fixed Term Deposits - Profile of counterparties 
In accordance with the agreemen t between the Community and the EIB on the management of 
the Fund, all interbank investments should have a minimum short-term credit rating of A1. 
Short-term interbank investments, including ac crued interests, by type of counterparty at 
31 December 2007 are as follows: 
Rating 31.12.2007 
EUR 31.12.2006 
EUR 
A1 74,660,048.68 30.10% 171,276,161.81 39.05% 
Aa1 20,214,877.77 8.15% 44,158,408.19 10.07% 
Aa2 53,063,919.03 21.40% 56,470,517.56 12.88% 
Aa3 100,089,040.79 40.35% 166,670,264.86 38.00% 
Total 248 ,027,886.27 100.00% 438 ,575,352.42 100.00%
 
EN 30   EN • Available for Sale portfo lio - Profile of issuers 
All the securities held meet the following criteria: 
– Either they are issued by Stat es in, or by institutions guar anteed by, the European Union, 
the G10 or supranational bodies; 
– Or they are issued by another soverei gn State with a rating of at least AA3; 
– Or they are issued by another issuer with a rating of AAA. 
The profile of issuers, market value excludi ng accrued interests, at 31 December 2007 is as 
follows: 
Issuer 31.12.2007 
EUR 31.12.2006 
EUR 
Banks Aaa 182 ,561,476.19 20.67% 215 ,679,459.65 23.52%
Banks Aa1 4,915,010.00 0.56% 0.00 0.00% 
Government Body Aaa 3,124,701.00 0.35% 8,240,068.00 0.90% 
Multi Lateral Development Bank Aaa 0.00 0.00% 10,131,000.00 1.10% 
Member States Aaa 86,910,512.46 9.83% 98,055,010.00 10.69% 
Member States Aa1 71,605,941.05 8.10% 58,089,620.00 6.33% 
Member States Aa3 81,475,980.10 9.22% 66,610,240.00 7.26% 
Member States A1 73,552,307.35 8.32% 49,208,982.10 5.37% 
Member States A2 121,534,031.96 13.75% 111,374,580.00 12.15% 
Member States A3 3,694,547.60 0.42% 10,297,000.00 1.12% 
Member States Baa1 9,623,456.00 1.09% 9,750,500.00 1.06% 
Other Financial InstitutionsAaa 40,367,984.10 4.57% 55,623,830.00 6.07% 
Public Companies Aaa 109,410,776.75 12.38% 126,279,916.40 13.78% 
Public Companies A2 10,088,400.00 1.14% 10,327,000.00 1.13% 
Special Purpose VehicleAaa 84,831,913.30 9.60% 87,320,408.00 9.52% 
Total 883,697,037.86 100.00% 916,987,614.15 100.00% 
 
EN 31   EN 3.4 Short-term Investments – Available For Sale Assets 
The following table shows the situation of the Available For Sale Assets (including accrued 
interests) during 2007: 
  EUR
Amount at 1 Januar y 2007 939 ,964,332.03
Acquisitions 200 ,355,630.00
Disposals and withdrawals (o riginal acquisition cost) (216,465,900.80)
Transfer between headings 0.00
Exchange differences 0.00
Change in carrying amount (actuarial difference & change of accrual (1,590,369.97)
Revaluation surplus/(deficit) fair valu e adjustment transfer to equity (18,550,466.76)
Impairment loss 0.00
Amount at 31 December 2007 903 ,713,224.50
At 31 December 2007, the nominal value of th e investment portfolio was EUR 889.1 million, 
against a market value of EUR 883.7 million, without accrued interests. 
Two bonds held in the portfolio are issued by the European Community through the financial 
instrument “Macro-financial Assistance”. The position of these bond holdings at 31.12.2007 are as follows: 
– ISIN XS0083965748 Market Value EUR 3,124,701.00; accrued interest EUR 
53,646.72 
The accrued interests at 31 December  2007 amounting to EUR 20,016,186.64 (2006: EUR 
22,976,717.88) are split between: 
– Fixed rate notes EUR 19,572,460.14 (2006: EUR 22,485,430.44) 
– Floating rate notes EU R 443,726.50 (2006: EUR 491,287.44) 
 
EN 32   EN 3.5 Cash and Cash Equivalents 
The following table shows the split of the cash and cash equivalents: 
Description 31.12.2007 
EUR 31.12.2006 
EUR  
Unrestricted Cash  
A. Amounts with Treasuries 0.00 0.00
B. Accounts with Central Banks 0.00 0.00
C. Current Accounts 1,232,834.25 1,158,007.44
D. Imprest Accounts 0.00 0.00
E. Short-term Deposits 248,027,886.27 438,575,352.42
F. Cash in Hand 0.00 0.00
G. Transfers (Cash in transit) 0.00 0.00
H. Other Cash Equivalents (Commercial Papers <3 0.00 0.00
I. Funds in transit at year end 0.00 0.00
Total 249,260,720.52 439,733,359.86
 
EN 33   EN 3.6 Current Liabilities 
Description 31.12.2007 
EUR 31.12.2006 
EUR 
Accounts Pa yable   
Management fees 678,951.39 714,719.38
Other 29,950.00 28,530.00
Total 708 ,901.39 743 ,249.38
Management fees are payable to the EIB (hereafte r referred to as the management fees) on an 
annual basis. The management fees are calculate d as a percentage per annum of the average 
of Fund’s assets. This percentage is a d eclining rate dependin g on the Fund’s assets. 
3.7 Financial operations revenues 
  2007 
EUR 2006 
EUR 
 
Total amount, thereof: 50,810,833.85 52,981,320.04
Interest income, thereof:  50,810,833.85 52,981,320.04
Interest income from short-term investments and cas h
and cash equivalents 50,810,833.85 52,981,320.04
Other financial income, thereof:  2,900,301.39 0.00
Net realized gain on sale of financial (current & non -
current) assets 2,900,301.39 0.00
The net realized gain on sale  of financial assets EUR 2,900, 301.39 is made up of a total of 
seven sales during the year resulting in a gross gain on six sales of EUR 2,973,389.67 and a 
loss on one sale of EUR 73,088.28. 
 
EN 34   EN 3.8 Financial operations expenses 
  2007 
EUR 2006 
EUR 
 
Total amount, thereof: (836,434.05) (903,894.45)
Other financial expenses, thereof:  (836,434.05) (903,894.45)
Realized loss on sale of financial (current and non -
current) assets  0.00 0.00
Impairment losses on financial (current and non -
current) assets 0.00 0.00
3.9 Subsequent events 
There have been no material post-balance shee t events, which would require disclosure or 
adjustment to the 31 December 2007 financial state.