Report from the Commission - Annual status report from the Commission on the guarantee fund and its management in 1999
Date: 2000-04-27
Institutions: European Commission
Subjects: EIB loan, balance sheet, budgetary reserve (EU), financial year, report

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 27.04.2000
COM(2000) 246 final

REPORT FROM THE COMMISSION

Annual Status Report from the Commission on the
Guarantee Fund and its Management in 1999

TABLE OF CONTENTS

1. Legal bases............................................................................................................. 3

2. Position of the Fund at 31 December 1999 ............................................................. 3

3. Payments into the Fund .......................................................................................... 4

3.1.

3.2.

3.3.

Payments from the general budget in the course of the financial year............ 4

Interest from financial investment of the Fund’s liquid assets ....................... 5

Recovery from defaulting debtors................................................................. 6

4. The Fund's Liabilities ............................................................................................. 6

4.1.

4.2.

Default payments.......................................................................................... 6

EIB remuneration ......................................................................................... 6

Annexes............................................................................................................................ 7

Annex I:

Legal bases for payments to the Guarantee Fund from the general budget..... 8

1. Decisions covered by Transfer 5/99........................................................................ 8

2. Decisions covered by transfer 67/99 ....................................................................... 8

Annex II:

EIB Status Report on the Fund and its Management Revenue and

Expenditure Account and Balance Sheet at 31 December 1999 .................................. 10

1. Development of the Fund in 1999......................................................................... 10

2. Situation of the Fund ............................................................................................ 10

2.1.

2.2.

2.3.

Resources at 31 December 1999 ................................................................. 10

The Fund’s assets at 31 December 1999 ..................................................... 11

Liquidity risk .............................................................................................. 12

3. Guarantee Fund investment: Analysis of results and performance in 1999 ............ 12

3.1.

3.2.

3.2.1.

3.2.2.

General analysis.......................................................................................... 12

Sectoral analysis ......................................................................................... 13

Treasury operations ................................................................................ 13

Investment portfolio: .............................................................................. 16

Annex III: Consolidated financial balance sheet of

the Guarantee Fund at

31 December 1999 ..................................................................................................... 21

2

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 on
25 November 1994 in Luxembourg.

Under Article 8.2 of the agreement, by 1 March each year the Bank must send the
the revenue and
Commission a status report on the Fund and its management,
expenditure account and the financial statement for the Fund for the preceding year. An
extract from the report covering 1999 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 1999

the close of the 1999 financial year,

At
(Annex II). This is the sum, since the Fund was established, of all:

the Fund totalled EUR 1 313 736 732.83

– budget payments (EUR 1 638 413 000.00);

– incremental yearly net results (EUR 153 081 422.50);

– late payments from non-member countries (EUR 326 997 234.09);

– debts corresponding to the payments not made to the Bank (EUR 604 761.67);

– minus: calls on the Fund’s resources (EUR 441 559 685.43) and successive

repayments to the budget of the surplus in the Fund (EUR 363 800 000.00).

After the Bank's remuneration is deducted, the Fund total at 31 December 1999 comes to
EUR 1 313 131 971.16.

The total amount of the consolidated balance sheet (Annex III) is EUR 1 498 268 553.20,
which breaks down into EUR 480 000 000 in deposits, EUR 4 749 649.43 on current
account, EUR 813 073 283.47 in the securities portfolio, EUR 15 913 799.93 in interest
accrued and not paid at 31 December 1999 (EUR 2 156 579.72 in interest accrued and
not yet due on fixed-term deposits, EUR 13 757 220.21 in coupons accrued and not yet
due) and EUR 184 531 820.37 in receivables from the recipients of loans granted or
guaranteed by the Community, including EUR 147 242 798.63 in principal, interest due
and default
and
by guarantee
EUR 37 289 021.74 in default interest incurred but not received at 31 December 1999.

payments under

the Fund

covered

interest

3

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 lending and loan guarantee operations for non-member countries plus
unpaid interest due totalled EUR 12 052 million at 31 December 1999, of which
EUR 227 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 10.9%. Since this is higher than the target amount of
10%,
there had to be a repayment from the Fund to the general budget of the
Communities, as provided for in the third paragraph of Article 3 of the Regulation. The
amount to be repaid to the budget comes to EUR 107.9 million.

The following sections describe developments affecting the Fund’s resources and
liabilities in 1999.

3.

PAYMENTS INTO THE FUND

3.1.

Payments from the general budget in the course of the financial year

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
is reached. Under Article 5 the
the target amount
loan guarantee operations until
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 authorised the
entry in the general budget of a reserve for loan and loan guarantee operations. This item,
which was allocated provisional appropriations of EUR 346 million in 1999, is intended
to endow the Fund by transferring amounts into the budget item for payments into the
Fund.

On these legal bases, two transfers totalling EUR 300 069 000 were adopted by the
budgetary authority in 1999 to endow the Guarantee Fund.

– Transfer 5/99: EUR 229 089 000

This first transfer at the beginning of the year was for payments into the Fund
under the Council Decisions of 24 January 1994, 14 April 1997, 19 May 1998
and 14 December 1998, in accordance with the arrangements set out in the
Annex to the Regulation establishing the Fund (see Annex I).

– Transfer 67/99: EUR 70 980 000

This second transfer was for payments into the Fund in respect of loan operations
adopted by the Council on 22 April 1999, 10 May 1999, 8 November 1999 and
29 November 1999. The decisions covered by this transfer are given in Annex I.

The two transfers to the Fund were made in June and December 1999.

4

3.2.

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,
as long as 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 new management procedures are based in principle on a ratio of one third for one
year and two thirds for a maximum of 10 years, although at least EUR 150 million has to
be for short-term investment. The average term of investments from the Fund's assets
must not exceed five years.

The list of banks authorised to receive deposits is agreed by the Commission and the
EIB. The original list has been revised several times in the light of the latest changes in
bank ratings. Most of the banks are members of the euro clearing system. They all have a
Moody’s rating of at least A1 for long-term investments and P1 for short-term ones and
investments made with them are governed by rules to ensure a good spread and avoid
risk exposure.

In 1999 interest on deposits, the Guarantee Fund current account and securities totalled
EUR 48 562 534.63, broken down as follows:

– deposits: EUR 12 659 514.63. This represents the situation at 31 December including
interest received on bank deposits (EUR 16 600 243.29) and changes in interest
incurred (-EUR 3 940 728.66) in 1999. The interest accrued corresponds to interest
which has not been received by the Fund at the end of the year but will be paid at the
dates fixed for maturity of the investments. The interest accrued at 31 December 1999
(EUR 2 156 579.72) is deducted from the accrued interest entered in the accounts for
1998 but received in 1999 (EUR 6 097 308.38).

– current account: EUR: 219 810.68 , comprising interest recorded on the current

account.

– securities portfolio: EUR 34 868 824.65. The interest on securities is generated by
investments placed in the form of securities in accordance with the principles of
investment laid down in the Agreement giving the EIB the task of managing the
Fund’s
subtracted the
EUR 6 726 949.63 charged in the course of the year as the difference between the
entry price and the redemption value divided pro rata temporis over the remaining life
of the securities held (corresponding to the spread of the premium or discount entered
in the profit and losses account).

figure must, however, be

liquid assets. From this

– Appreciation on transfer of investment securities: EUR 814 384.67

The interest received is entered in the results for the financial year.

5

3.3.

Recovery from defaulting debtors

Any late repayments by defaulting countries on operations where the Fund has honoured
the guarantee
to
EUR 326 997 234.09 (see point 2.1 of Annex II) of which EUR 5 318 632.41 was
recovered in 1999.

are paid into the Fund. The

running total now comes

4.

THE FUND'S LIABILITIES

4.1.

Default payments

The Fund’s guarantee was called in on three occasions in 1999, involving a total of
EUR 16 247 803.27 (see point 2.1 of Annex II).

4.2.

EIB remuneration

Article 6 of the management agreement between the Commission and the EIB sets an
annual commission of 0.125% calculated on 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, a supplementary agreement dated 17 September and 23 September 1996 to
the Agreement on the financial management of the Fund took the annual payment to
0.05% of the Fund’s assets; this rate was applied retrospectively to 31 December 1994.

For 1999 the Bank’s remuneration was fixed at EUR 604 761.67 and entered in the profit
and loss account as accruals (liabilities) on the balance sheet. This payment was made to
the EIB on 14 February 2000.

6

ANNEXES

7

ANNEX I:

LEGAL BASES FOR PAYMENTS TO THE GUARANTEE FUND
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.

Two transfers were made under this procedure in 1999.

1.

DECISIONS COVERED BY TRANSFER 5/99

– As part of the financial cooperation with the Mediterranean countries:

– Council Decision of 24 January 1994 for

a

three-year

loan of

ECU 115 million for Syria.

– Council Decision of 14 April 1997 granting a Community guarantee to the EIB
against losses under loans for projects outside the Community (central and eastern
European countries, Mediterranean countries, Latin American and Asian countries and
South Africa).

– Council Decision of 19 May 1998 granting a Community guarantee to the EIB against
losses under loans for projects in the former Yugoslav Republic of Macedonia and
amending Decision 97/256/EC granting a Community guarantee to the European
losses under loans for projects outside the Community
Investment Bank against
(central and eastern European countries, Mediterranean countries, Latin American and
Asian countries and South Africa).

– Council Decision of 14 December 1998 amending Decision 97/256/EC so as to extend
the Community guarantee granted to the EIB to cover loans for projects in Bosnia and
Herzegovina.

2.

DECISIONS COVERED BY TRANSFER 67/99

– Council Decision of 22 April 1999 providing macro-financial assistance of

EUR 20 million to Albania.

– Council Decision of 10 May 1999 providing macro-financial assistance of

EUR 20 million for the loan component to Bosnia and Herzegovina.

8

– Council Decision of 8 November 1999 providing supplementary macro-financial

assistance of EUR 200 million to Romania.

– Council Decision of 8 November 1999 providing supplementary macro-financial

assistance of EUR 100 million to Bulgaria.

– Council Decision of 8 November 1999 providing supplementary macro-financial
assistance of EUR 50 million for the loan component to the former Yugoslav Republic
of Macedonia.

– Council Decision of 29 November 1999 granting a Community guarantee to the EIB
the

reconstruction

projects

under

loans

the

for

of

against
for
earthquake-stricken areas of Turkey.

losses

9

ANNEX II:

EIB STATUS REPORT ON THE FUND AND ITS MANAGEMENT
- REVENUE AND EXPENDITURE ACCOUNT AND BALANCE
SHEET AT 31 DECEMBER 1999

1.

DEVELOPMENT OF THE FUND IN 1999

As stated in point 2.3, the total holdings of the Fund stood at EUR 1 297.8 million at
31 December 1999 as against EUR 1 260.8 million at 31 December 1998, an increase of
EUR 37 million.

)
s
n
o

i
l
l
i

m
R
U
E

(

1400

1200

1000

800

600

400

200

0

1998

1999

9
9
/
1

9
9
/
2

9
9
/
3

9
9
/
4

9
9
/
5

9
9
/
6

9
9
/
7

9
9
/
8

9
9
/
9

9
9
/
0
1

9
9
/
1
1

9
9
/
2
1

Fig.1: Changes in assets in 1999 (January–December 1999)

The Fund surplus of 297.8 million at 31 December 1998 was repaid to the Commission
on 31 March 1999 under Article 7 of the agreement. The Fund’s resources were
increased by EUR 229.1 million on 14 June 1999 and by EUR 71 million on
30 December 1999.

The operating result came to EUR 41.1 million at 31 December 1999 as against
EUR 42.6 million at 31 December 1998. Portfolio income (net of current liabilities and
including appreciation on transfers of securities) reached EUR 29 million, representing
more than 70% of the revenue recorded at 31 December 1999.

2.

SITUATION OF THE FUND

2.1.

Resources at 31 December 1999

The Guarantee Fund balance fell by EUR 9 million,
EUR 1 169 million at 31 December 1998 to EUR 1 160 million at 31 December 1999.

less than 1% from

i.e.

10

This is due to the movements shown in the following table:

Resources

Situation at
31/12/98

Movements
in 1999

Situation at
31/12/99

Provisions

Repayment of surplus

Activation of guarantee

Recovery of amounts guaranteed

+

-

-

+

1 338 344 000.00

300 069 000.00

1 638 413 000.00

66 000 000.00

297 800 000.00

363 800 000.00

425 311 882.16

16 247 803.27

441 559 685.43

321 678 601.68

5 318 632.41

326 997 234.09

Account balance

1 168 710 719.52

- 8 660 170.86

1 160 050 548.66

EUR 4.7 million was paid from the Fund on 9 March 1999, EUR 4.6 million on
26 August 1999 and EUR 6.9 million on 21 December 1999, giving a total of
EUR 16.2 million.

Amounts recovered from defaulting debtors in 1999:

VALUE DATE

21/01/99

11/02/99

12/02/99

27/08/99

09/11/99

09/11/99

12/11/99

TOTAL

AMOUNT

5 000.21

16 496.85

723 631.53

470 145.74

2 966 842.20

992 818.75

143 697.13

5 318 632.41

2.2.

The Fund’s assets at 31 December 1999

The Fund’s assets at 31 December 1999 came to EUR 1 297.8 million, broken down as
follows. The Fund operates in one currency only - the euro.

– EUR 480 million invested in short-term monetary deposits;

– EUR 4.7 million on current account;

– EUR 813.1 million in the investment portfolio (see table in 2.3).

11

2.3.

Liquidity risk

In accordance with the strategy agreed with the Commission for the management of
Guarantee Fund assets in 1999, the funds available are distributed as follows:

Fixed-rate investments

Variable-rate

TOTALS

less than 3
months

3 months to 1
year

1 to 6 years

securities

Current accounts

4 749 649.43

Fixed-term deposits

1
480 000 000.00

4 749 649.43

480 000 000.00

Securities portfolio

13 515 683.20

64 909 933.31 323 564 278.97

411 083 387.99

813 073 283.47

TOTALS

in percentages

498 265 332.63

64 909 933.31 323 564 278.97

411 083 387.99 1 297 822 932.90

38.39

5.00

24.93

31.68

100.00

Cover of more than EUR 498 million2 at
less than three months is maintained to
correspond to the time by which the Commission must call on the Fund in the event of
defaults on loan repayments.

The remaining assets have been scheduled so that there is a regular flow of revenue and
sufficient liquidity. At 31 December 1999 the target structure - one third short-term and
two thirds divided equally into fixed-rate securities and variable-rate securities - had been
respected, down to EUR 80 million.

At 31 December 1999 the term of long-term fixed-rate investment came to 2.3 years
compared with the maximum 2.5 years authorised; the term for variable-rate securities
was 1.5 months.

3.

GUARANTEE FUND INVESTMENT: ANALYSIS OF RESULTS AND PERFORMANCE
IN 1999

3.1.

General analysis

income of EUR 41.1 million
Overall, Guarantee Fund operations produced net
(EUR 40.3 million not
including appreciation on transfers of securities), giving an
average yield of 3.43%3 (3.36% without appreciation on transfers of securities). The
average EURIBID 3 month rate over the same period was 2.84%, giving a positive
overall spread of 59 basis points above the reference benchmark.

1

2

3

Including EUR 80 million received at the end of December and invested for one month in cash deposit
accounts.
The minimum required by the management principles is EUR 150 million.
Basis for calculating overall yield: a/360.

12

Investment income at 31 December 1999 was as follows:

Interest on short-term investment

Interest on securities

Interest on current account

Appreciation on transfer of investment
securities

Spread of premium or discount

Commissions and financial charges

Total

3.2.

Sectoral analysis

3.2.1.

Treasury operations

1999
(EUR million)

12.7

34.8

0.2

0.8

-6.7

-0.7

41.1

in 1999 produced EUR 12.7 million in interest on capital averaging
Investment
EUR 419.9 million. The yield on investments in 1999 averaged 2.97%,4 as against 4.13%
at 31 December 1998, because of the fall in short-term rates. The EURIBID 3 month
benchmark rose in the final quarter as part of the transition to the year 2000, leading to a
drop in yield.

The spread obtained is 10 basis points above the three-month EURIBID rate.5

PERIOD

1999

YIELD

2.97%

EURIBID
three months

2.87%

SPREAD

0.10%

4

5

Basis for calculating short-term money market operations: a/360.
The "spread" measures the difference in rates between the actual rate of yield on an investment and the
benchmark rate corresponding to the EURIBID 3 month rate in accordance with the guidelines in force.

13

• Movements in yield and reference rates in 1999

The table below shows the rates obtained for short-term money-market investments as
compared with the three-month LIBID reference rate.

4
3.8
3.6
3.4
3.2
3
2.8
2.6
2.4
2.2
2

YIELD

EURIBID 3 MONTHS

9
9
/
1

9
9
/
2

9
9
/
3

9
9
/
4

9
9
/
5

9
9
/
6

9
9
/
7

9
9
/
8

9
9
/
9

9
9
/
0
1

9
9
/
1
1

9
9
/
2
1

Fig. 2: Yield in relation to the benchmark rate

Overall, the spread in relation to the benchmark rate was positive (an average of 10 basis
points) for short-term investments.

60

40

20

0

-20

-40

-60

)
s
t
n
i
o
p
s
i
s
a
b
(

EURIBID 3 MONTHS

9
9
/
1

9
9
/
2

9
9
/
3

9
9
/
4

9
9
/
5

9
9
/
6

9
9
/
7

9
9
/
8

9
9
/
9

9
9

/

0
1

9
9
/
1
1

9
9

/

2
1

Fig. 3: Yield spread

14

• Profile of counterparties

In accordance with the agreement between the Community and the Bank on the
management of the Guarantee Fund, all the securities held have a minimum credit rating
of A1.

Aa2
9%

Aa1
8%

A1
34%

Aa3
49%

Fig. 4: Breakdown of short-term investment by type of counterparty at 31/12/99

• Geographical breakdown

Geographical breakdown of the countries with which the Fund made fixed-term deposits
in 1999, with indication of the average capital:

120

100

80

60

40

20

0

)
n
o

i
l
l
i

m
R
U
E

(

l

y
a
t
I

i

m
u
g
e
B

l

e
c
n
a
r
F

k
r
a
m
n
e
D

d
n
a
e
r
I

l

s
d
n
a
l
r
e
h

t

e
N

g
r
u
o
b
m
e
x
u
L

m
o
d
g
n
i
K
d
e
t
i
n
U

y
n
a
m
r
e
G

i

n
a
p
S

n
e
d
e
w
S

e
c
e
e
r
G

d
n
a
n
F

i

l

Fig. 5: Short-term investment: geographical breakdown of average capital

The EIB is pursuing its objective of better geographical distribution while at the same
time maintaining the competitiveness of the yield obtained.

15

3.2.2.

Investment portfolio:

The securities portfolio, seen as an investment portfolio, is made up of securities in EUR
acquired with the intention of keeping them until maturity: at 31 December 1999 the
fixed-interest securities whose residual period to maturity is less than 3 months totalled
EUR 13.5 million. The other fixed-interest securities with a residual period to maturity of
between 3 months and 6 years) total EUR 388.5 million. The variable-rate securities total
EUR 411.1 million, giving an overall book value of EUR 813.1 million.

The starting value of the securities in this portfolio is the cost of acquisition. The
difference between the entry price and the redemption value is divided pro rata temporis
over the remaining life of each of the securities.

31 December 1999

At
portfolio was
value
EUR 803.9 million against a book value of EUR 813.1 million (including the premium to
be written off).

investment

nominal

the

the

of

The portfolio gave a result of EUR 28.1 million at 31 December 1999. This result breaks
down as follows:

Interest received

34 868 824.65

Spread of the premium

-6 726 949.63

28 141 875.02

The sale of an EDF (Electricité de France) security realised a gain of EUR 0.8 million.
This sale occurred after the S&P rating agency lowered the EDF rating from AAA to
AA+. Total revenue comes to EUR 29 million.

came

The book profit of the investment portfolio (not including appreciation on transfers of
securities)
4.44% at
31 December 1998. With a Salomon index reference benchmark for fixed-rate securities
and the Euribid 3 months for variable-rate securities, the overall spread is positive by
44 basis points in relation to the aggregate benchmark of 3.23% (see table below).

31 December 1999

compared with

3.68% at

to

YIELD FROM GUARANTEE FUND INVESTMENT PORTFOLIO

Entryprice
Averagecapital
EUR

Percentage
Variablerate

Percentage

Yield
Fixedrate Portfolio
a/365

Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.

658.499.488
701.817.873
711.089.492
710.006.610
711.320.129
752.692.718
823.102.738
822.488.702
821.690.251
821.663.892
821.883.742
822.345.770

Annual

764.883.450

40,7%
42,9%
44,4%
44,9%
46,2%
48,7%
49,8%
49,9%
49,9%
49,9%
49,9%
49,9%

47,5%

* Salomon index =

EGBI 1-3 yrs
EGBI 3-5 yrs
3 M eurodeposit

59,3%
57,1%
55,6%
55,1%
53,8%
51,3%
50,2%
50,1%
50,1%
50,1%
50,1%
50,1%

52,5%

45.0%
45.0%
10.0%

4,19%
3,98%
3,84%
3,81%
3,67%
3,51%
3,45%
3,47%
3,48%
3,52%
3,64%
3,76%

3,68%

16

Benchmark

Benchmark Benchmark, Spread

YTMSalomon* Libid3m

aggregate

a/365

3,29%
3,09%
3,31%
3,10%
2,94%
3,04%
3,49%
3,77%
3,87%
4,04%
4,30%
4,27%

3,54%

a/365

3,06%
3,01%
2,96%
2,63%
2,48%
2,53%
2,59%
2,61%
2,62%
3,27%
3,39%
3,38%

2,88%

bp

100
92
68
92
94
71
41
28
24
-14
-20
-6

44

3,20%
3,06%
3,15%
2,89%
2,73%
2,80%
3,04%
3,19%
3,24%
3,66%
3,84%
3,83%

3,23%

The aggregate benchmark came to 4.08% at 31 December 1998.

The bond portfolio is an investment portfolio and it is therefore the intention to keep the
securities in the portfolio until they mature. The Guarantee Fund has decided to invest a
proportion of its resources in this type of fixed-rate product which allows a higher yield
than monetary instruments. By way of information, at 31 December 1999 the market
value of the investment portfolio came to EUR 808.6 million compared with the entry
price of EUR 822.7 million (not including interest accrued and premiums/discounts and
appreciation on transfers of securities), an unrealised loss of EUR 14.1 million. This
unrealised loss is the result of the recovery of long-term rates in the second half of 1999.
As part of the aim to improve the overall yield of the Fund, the investment portfolio has
led to an increase from 2.97% (monetary component) to 3.43% (overall yield of the
Fund); thus satisfying the objective and still protecting the capital on maturity.

• Movement in the unrealised result in 1999 (not including interest or premiums

and discounts)

4

2

0

-2

-4

-6

-8

-10

-12

-14

-16

-18

)
s
n
o

i
l
l
i

m
R
U
E

(

8
9
/
2
1

9
9
/
1

9
9
/
2

9
9
/
3

9
9
/
4

9
9
/
5

9
9
/
6

9
9
/
7

9
9
/
8

9
9
/
9

9
9
/
0
1

9
9
/
1
1

9
9
/
2
1

Fig.6: Movements in the unrealised result in 1999

• Breakdown of the portfolio between fixed-rate and variable-rate securities

50.1%

49.9%

FIXED RATE

VARIABLE RATE

Fig.7: Breakdown of the investment portfolio between fixed-rate and variable-rate securities at 31/12/99

17

• Redemption of investment portfolio:

)
n
o

i
l
l
i

m
R
U
E

(

250

200

150

100

50

0

Variable
Fixed

2000 2001 2002 2003 2004 2005 2006 2007 2008

Fig.8: Investment portfolio: Redemption at 31/12/99

The last final maturity date for fixed-rate securities is 20 October 2004.

• Profile of issuers

All the securities held meet the following criteria:

– Either they are issued by the States and/or institutions guaranteed by the European

Union, the G10 or supranational bodies;

– or they are issued by another sovereign State with a rating of at least Aa3;

– or they are issued by another issuer with a rating of Aaa.

The profile of issuers was as follows at 31 December 1999:

Other
Issuers / Aaa
30%

Supra
26%

Gov./Agency
Gov.
44%

Fig. 9: Investment portfolio: Profile of issuers at 31/12/99

18

POSITION OF THE GUARANTEE FUND AT 31 DECEMBER 1999

31/12/1999

4.749.649,43
480.000.000,00
484.749.649,43

813.073.283,47
813.073.283,47

15.913.799,93
15.913.799,93

1.313.736.732,83

31/12/1999

1.160.050.548,66
1.160.050.548,66

604.761,67
604.761,67

111.950.328,60
41.131.093,90
153.081.422,50

1.313.736.732,83

34.868.824,65
814.384,67
12.659.514,63
219.810,68

48.562.534,63

- 6.726.949,63
- 604.761,67
- 99.729,43

- 7.431.440,73

41.131.093,90

ASSETS

Receivables with credit institutions
CURRENT ACCOUNT
FIXED-TERM DEPOSITS

Investment portfolio

SECURITIES PORTFOLIO

Other receivables
ACCRUALS

TOTAL

LIABILITIES

Guarantee Fund

GUARANTEE FUND

Other liabilities

ACCRUALS

Result
Result carried over
Result for 1999

TOTAL

PROFIT AND LOSS AT 31 December 1999

1. INCOME
Interest on securities
Appreciation on transfer of investment securities
Interest on investments
Interest on current account

SUB-TOTAL

2. COSTS
Spread of premium or discount
Commissions
Financial charges

SUB-TOTAL

NET RESULT

19

Position of the Guarantee Fund

Payments

Interest

Late repayments (**)

Credits

Drawn

EIB,other

Guarantee Default int.

Repaid to
budget

Debits

Annual

balance

(***)

a

b

c

d

e=(a+b+c+d)

f

g

h

i=(f+g+h)

j=(e-i)

(*)

Overall
default
k=(f-c)

293.720.000

478.331

294.198.331

0

0

2.699

2.699

294.195.633

250.750.000

23.539.828

35.312.571

317.997

309.920.396

303.072.581

195.618

303.268.198

6.652.198

267.760.010

235.390.000

19.842.550

49.145.897

6.569.307

310.947.754

52.540.497

1.849.279

54.389.775

256.557.979

271.154.609

286.095.000

34.506.566

34.107.641

10.925.641

365.634.848

54.290.854

6.962.746

61.253.600

304.381.249

272.389.000

50.185.883

172.445.144

12.854.403

507.874.430

15.407.951

7.592.489

66.000.000

89.000.440

418.873.990

300.069.000

48.562.535

3.305.633

2.012.999

353.950.167

16.247.803

7.431.441 297.800.000 321.479.244

32.470.923

291.337.822

134.300.629

147.242.799

Credits 1994
Debits 1994

Balance, 31.12.94

Credits 1995
Debits 1995

Balance, 31.12.95

Credits 1996
Debits 1996

Balance, 31.12.96

Credits 1997
Debits 1997

Balance, 31.12.97

Credits 1998
Debits 1998

Balance, 31.12.98

Credits 1999
Debits 1999

Balance, 31.12.99

Running total

1.638.413.000

177.115.693

294.316.887

32.680.347 2.142.525.927 441.559.685

24.034.270 363.800.000 829.393.956 1.313.131.971

(*) Actual overall default at year-end.
(**) The figure for repayments consists of the amount drawn from the Fund plus the default interest on late payment.
(***) The overall annual balance (EUR 1 313 131 971) is net of the EIB remuneration for 1999 (EUR 604 762).

20

ANNEX III: CONSOLIDATED FINANCIAL BALANCE SHEET OF THE

GUARANTEE FUND AT 31 DECEMBER 1999

The consolidated financial balance sheet at 31 December 1999 is provided to supplement
the position of the Guarantee Fund as set out in Annex II. The consolidated balance sheet
also includes an additional EUR 184 531 820.37 which breaks down as follows:

- on the assets side, receivables with recipients of loans granted or guaranteed by the
Commission totalling EUR 147 242 798.63 for third countries’ arrears on the payment
of principal, interest due and default interest covered by the Guarantee Fund and
EUR 37 289 021.74
at
interest
31 December 1999. This default interest has been calculated in line with the penalty
rates laid down in the loan contracts.

received

incurred

default

but

not

for

the Fund’s resources which still have to be replenished
- on the liabilities side,
(EUR 145 229 799.66),
received
incurred
interest
(EUR 37 289 021.74) and interest received on late recoveries (EUR 2 012 998.97)
entered in the profit and loss account.

default

but

not

21

CONSOLIDATED FINANCIAL BALANCE SHEET OF THE GUARANTEE FUND AT 31 DECEMBER 1999

ASSETS

Current account

Fixed-term deposits

Portfolio

Investment portfolio

Receivables with recipients of loans granted or guaranteed by the Community

Arrears covered by the Fund (1)

Default interest incurred but not received

Other receivables

Accruals

TOTAL ASSETS

LIABILITIES

Guarantee Fund

Payments from the budget (2)

- surplus to be paid to the budget

Default interest incurred but not received

Other liabilities

Accruals

Result

Result carried over (3)

Result for financial year

TOTAL LIABILITIES

PROFIT AND LOSS AT 31/12/99

1. INCOME

Interest on investment securities

Appreciation on transfer of investment securities

Interest on investments

Interest on current account

Default interest received on late recoveries

TOTAL INCOME (A)

2. COSTS

Spread of premium or discount

Commissions

Financial charges

TOTAL COSTS (B)

31.12.99

EUR

31.12.98

4.749.649,43

35.049.861,51

480.000.000,00

602.000.000,00

813.073.283,47

623.799.322,48

147.242.798,63

134.300.628,80

37.289.021,74

27.696.605,47

15.913.799,93

20.318.663,56

1.498.268.553,20

1.443.165.081,82

1.166.713.000,00

974.544.000,00

107.900.000,00

297.800.000,00

37.289.021,74

27.696.605,47

1.311.902.021,74

1.300.040.605,47

604.761,67

506.799,43

142.617.676,92

43.144.092,87

87.169.879,92

55.447.797,00

185.761.769,79

142.617.676,92

1.498.268.553,20

1.443.165.081,82

34.868.824,65

31.332.891,39

814.384,67

0,00

12.659.514,63

18.194.230,75

219.810,68

2.012.998,97

50.575.533,60

658.760,83

12.854.402,97

63.040.285,94

6.726.949,63

7.023.464,88

604.761,67

99.729,43

506.799,43

62.224,63

7.431.440,73

7.592.488,94

NET RESULT (A – B)
(1) Capital, interest, default interest covered by payments from the Fund.
(2) Reduced by EUR 363.8 million (the overall surplus repaid to the statement of revenue in the budget of the European

43.144.092,87

55.447.797,00

Communities in accordance with Article 3 of Regulation No 2728/94 establishing the Guarantee Fund).

(3) In the report at 31.12.98 the repayment of the Fund surplus to the budget was entered in the profit and loss account of the
balance sheet. The necessary adjustments have been made to make this consistent with the 1999 balance sheet. The gains
carried over have been increased by EUR 66 million.

22