COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 17.05.1995 
COM(95)181 final 
ANNUAL STATUS REPORT 
ON THE GUARANTEE FUND AND ITS MANAGEMENT 
1994 

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ANNUAL STATUS REPORT BY THE COMMISSION ON THE GUARANTEE 
FUND AND ITS MANAGEMENT IN 1994 
1. LEGAL BASIS 
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 signed on 
23 November 1994 in Brussels and 25 November 1994 in Luxembourg. 
Article 8.2 of the agreement states that the Bank shall forward to the Commission 
before 1 March each year 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. The first report, which covers no more than a few days' operation 
of the Fund, is in Annex II. 
Article 7 of the Regulation establishing the Fund requires the Commission to send 
to the European Parliament, the Council and the Court of Auditors, by no later 
than 31 March of the following financial year, a report on the situation of the Fund 
and its management in the previous year. 
2. Endowment of the Fund 
(a) Payments from the general budget 
Articles 2 and 4 of the Regulation establishing the Fund stipulate that the 
Fund 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 
Fund reaches the target amount. Article 5 stipulates that the provisioning 
rate will be raised from 14% to 15% on new operations if, as a result of the 
activation of guarantees following default, the resources in the Fund stand 
below 75% of the target amount. 
Article 10 of the Regulation states that Article 4 is to apply to operations 
decided on and committed as from 1 January 1993. 
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, whether 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. 
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 318 million in 1994, is intended to endow the Fund 
by transferring amounts into the budget item for payments into the Fund. 
On these legal bases, two transfers for endowing the Guarantee Fund were 
adopted by the budgetary authority in 1994 for a total of 
ECU 293 720 000. This amount appears on the assets side of the balance 
sheet as ECU 293 000 000 in deposits and ECU 720 000 on current 
account. 
- Transfer 39/94 of ECU 235 620 000 
This first transfer covers all decisions enacted by the Council since 
1 January 1993 in accordance with the Regulation establishing the 
Fund. 
The decisions covered by this transfer are listed in Annex I. 
- Transfer 42/94 of ECU 58 100 000 
This second transfer is intended to endow the Fund on the basis of loan 
operations adopted by the Council on 22 December 1994. The 
decisions covered by this transfer are listed in Annex I. 
The first payment into the Fund was made on 23 December 1994 and the second 
on 30 December 1994. 
In 1994, since there were no calls on the resources of the Fund for guarantee 
operations (see 3 a below), the provisioning rate of 14% was applied to all the 
operations in accordance with Articles 4 and 5 of the Regulation. 
(b) Interest from financial investment of the Fund's liquid assets 
The Fund invests liquid assets in accordance with the liquid asset management 
principles îaid down in the Annex to the Community/EIB Agreement. 
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These principles stipulate that during the initial years of operation, provided that 
the total amount invested does not exceed ECU 300 million, the Fund will be 
deemed to be a money-market investment fund making investments exclusively in 
short-term instruments with a maximum term of a year. The amount invested in 
199 * did not exceed ECU 300 million (see point 4 below). 
The list of banks authorized to receive deposits was agreed by the Commission 
and the Bank; most of these 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. Investments made with these banks are governed by rules to 
ensure that they are spread and to avoid risk exposure. 
In 1994 interest on the Guarantee Fund's deposits and current account totalled 
ECU 478 331.26, broken down as follows: 
- deposits: ECU 329 541.66. This amount appears on the assets side of the 
balance sheet as an "accruals" item and represents the position at 31 December 
1994 as regards accrued interest. The interest had not been received when the 
accounts were closed, but will be received when the investments mature. 
- current account: ECU 148 789.60. Interest on the Fund's current account is 
entered on the assets side of the balance sheet as a "current account" item. 
This item totals ECU 868 789.60, made up of ECU 720 000, which is a 
portion of the ECU 293 720 000 paid into the Fund, and the ECU 148 789.60 
of interest on current account balances. 
(c) Recovery from defaulting debtors 
Any late payments by defaulting countries on operations where the Fund has 
honoured the guarantee are used to endow the Fund. There were no recoveries in 
1994. 
3. The Fund's liabilities 
(a) Default payments 
No guarantees were called in in 1994. 
(b) EIB remuneration 
The EIB's annual remuneration for management of the Fund is fixed by 
Article 6 of the management agreement between the Commission and the 
Bank. It is calculated on the basis of the Fund's average monthly balance 
and fixed at 0.125% a year. The remuneration will be reviewed at the end 
of any year in which the Fund's liquid assets exceed ECU 300 million or no 
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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. 
For 1994, the Bank's remuneration of ECU 6 746.74 was entered on the 
liabilities side of the balance sheet as an "accruals" item. The Bank was not 
actually paid its 1994 remuneration untH 1995, which is why it appears as 
an "accruals" item at 31 December 1994. 
4. Position of the Fund at 31 December 1994 
At the close of the 1994 financial year, the Fund totalled ECU 294 191 584.52. 
This amount is made up of all the payments to the Fund (ECU 293 720 000), plus 
the net result for the year (ECU 471 584.52). 
Article 3 of the Regulation establishing the Fund stipulates that the amount of the 
Fund has to reach an appropriate level (target amount) fixed at 10% of the total 
outstanding capital liabilities arising from each operation, plus unpaid interest due. 
At 31 December 1994, outstanding borrowing/lending operations for non-member 
countries, plus unpaid interest due totalled ECU 6 017 million. Unpaid interest due 
accounted for ECU 46 million of this. 
The Fund amounted to 4.9% of the outstanding capital liabilities within the 
meaning of the Regulation. Since this is lower than the target amount of 10%, 
there is no surplus to be paid back to the general budget of the Communities, as 
stipulated in the third paragraph of Article 3 of the Regulation. 
There is- also no need to review the pr©visioning rate, as provided in Article 4 of 
the Regulation. 
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ANNEXI 
1. DECISIONS COVERED BY TRANSFER 39/94 
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 
ECU1 100 million. 
Council Decision of 13 June 1994 concerning the granting of macrofinancial aid of 
ECU 45 million to Moldova for ten years. 
Council Decision of 20 June 1994 on the allocation of additional macrofinancial 
aid of ECU 125 million to Romania for seven years. 
2. DECISIONS COVERED BY TRANSFER 42/94 
Council Decisions of 22 December 1994: 
- concerning the granting of macrofinancial aid of ECU 200 million to Algeria; 
- concerning the granting of macrofinancial aid of ECU 130 million to Slovakia; 
- concerning the granting of macrofinancial aid of ECU 85 million to Ukraine. 
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ANNEXD 
EIB STATUS REPORT ON THE FUND AND ITS MANAGEMENT 
REVENUE AND EXPENDITURE ACCOUNT AND BALANCE SHEET 
1. CREATION OF THE GUARANTEE FUND 
The Guarantee Fund, which is intended to cover risks connected with loans and 
guarantees for loans granted to non-member countries or projects carried out in 
non-member countries was established by Council Regulation No 2728/94 of 
31 October 1994. The EIB was empowered by the Commission on 23 and 
25 November 1994 to manage the liquid assets of the Fund on behalf of the 
Commission and at the Commission's risk. 
2. SUMMARY OF THE BASIC ACCOUNTING PRINCIPLES 
1. The Fund operates in a single currency: the ECU; 
2. The available funds are managed so as to ensure a degree of liquidity and 
rapid mobilization in view of the commitments which the Fund is called on to 
handle. Provided that total amount invested does not exceed ECU 300 million, 
the Fund is deemed to be a money-market investment Fund; 
3. The commission is the amount of remuneration paid to the Bank for 
management of the Fund. 
3. MANAGEMENT REPORT 
The value date of the first endowment of the Guarantee Fund was 23 December 
1994. The management report therefore covers only a very short period of 8 
calendar days, or 3 working days during which 5 investment operations were 
carried out. 
The total fixed-term investments of the Fund at 31 December 1994 were ECU 293 
million, including ECU 123 million invested up to the beginning of 1995, ECU 70 
million on 2-month deposit and ECU 100 million on 3-month deposit. The last 
two terms were chosen in view of the fact that no call for funds was expected until 
the end of March 1995. These amounts were invested on the interbank market on 
the best possible terms (Libid) despite the lack of interest shown by the banks at 
the year-end i.e. when the accounts were being closed. 
POSITION OF THE GUARANTEE FUND AT 31 DECEMBER 1994 
ASSETS 31 December 1994 
Receivables with credit institutions 
CURRENT ACCOUNT 
FIXED-TERM DEPOSITS 
Other receivables 
ACCRUALS 
TOTAL 868 789.60 
293 000 000.00 
293 868 789.60 
329 541.66 
329 541.66 
294 198 331.26 
LIABILITIES 31 December 1994 
Guarantee Fund 
GUARANTEE FUND 
Other liabilities 
ACCRUALS 
Result 
TOTAL 293 720 000.00 
293 720 000.00 
6 746.74 
6 746.74 
471 584.52 
294 198 331.26 
PROFIT AND LOSS AT 31.12.1994 
1. Interest and similar amounts 
2. Commission paid 
NET RESULT 478 331.26 
- 6 746.74 
471 584.52 
3 
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COM(95) 181 final 
DOCUMENTS 
EN 01 
Catalogue number : CB-CO-95-201-EN-C 
ISBN 92-77-88721-4 
Office for Official Publications of the European Communities 
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