Report from the Commission - Annual Report from the Commission on the Guarantee Fund and its Management in 2001
Date: 2002-06-13
Institutions: European Commission
Subjects: Community loan, European Investment Bank, activity report, balance sheet, credit guarantee, financial management, fund (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.06.2002
COM(2002) 305 final

REPORT FROM THE COMMISSION

Annual Report from the Commission on the Guarantee Fund and its
Management in 2001

CONTENTS

1.
2.
3.
3.1.
3.2.
3.3.
4.
4.1.
4.2.

Legal bases............................................................................................................... 3
Position of the Fund at 31 December 2001................................................................ 3
Payments into the Fund ............................................................................................ 4
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
The Fund's Liabilities ............................................................................................... 6
Default payments...................................................................................................... 6
EIB remuneration ..................................................................................................... 6

ANNEX I: Legal bases for payments to the Guarantee Fund from the general budget ............ 7

1.

2.

3.
4.

Decisions covered by Transfer 10/2001 .................................................................... 7

Decisions covered by Transfer 24/2001 .................................................................... 7

Decision covered by Transfer 49/2001...................................................................... 8
Decision covered by Transfer 48/2001...................................................................... 8

ANNEX II: EIB Status Report on the Fund and its management revenue and expenditure
account and balance sheet at 31 December 2001 .................................................................... 9

1.
2.
2.1.
2.2.
3.
3.1.
3.2.
3.3.
3.3.1.
3.3.2

Development of the Fund in 2001............................................................................. 9
Position of the Fund................................................................................................ 10
Resources at 31 December 2001 ............................................................................. 10
The Fund's assets at 31/12/01 ................................................................................. 10
Guarantee Fund Investments: General and detailed analysis ................................... 10
Liquidity analysis ................................................................................................... 10
General analysis of results ...................................................................................... 11
Detailed analysis..................................................................................................... 12
Performance analysis of treasury operations ........................................................... 12
Analysis of results .................................................................................................. 13

ANNEX III: Consolidated financial balance sheet of the Guarantee Fund at
31 December 2001 ............................................................................................................... 20

2

1.

LEGAL BASES

Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994 ("the
Regulation") set up a Guarantee Fund for external operations in order 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 (the "Agreement").

Under Article 8.2 of the Agreement, by 1 March each year the Bank must send the
Commission a status report on the Fund and its management, the revenue and
expenditure account and the financial statement for the Fund for the preceding year.
An extract from the report covering 2001 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 31.12.2001

At the close of the 2001 financial year, the Fund totalled EUR 1 775 228 997.43
(Annex II). This is the sum, since the Fund was established, of all:

budget payments to the Fund (EUR 2 031 879 500.00);

successive yearly net results (EUR 379 604 451.63), including commissions and
interest received on late recoveries;

late repayments from non-member countries (EUR 568 217 579.44);

debts corresponding to the repayments not made to the EIB (EUR 805 405.80);

ess: calls on the Fund's resources (EUR 468 662 140.15) and successive
repayments to the budget of the surplus in the Fund (EUR 637 060 000.00).

After the EIB's remuneration is deducted, the Fund total at 31 December 2001 comes
to EUR 1 774 423 951.63.

The total amount of
is EUR
the consolidated balance sheet
1 775 228 997.24, which breaks down principally into EUR 475 100 000.00 in
deposits, EUR 25 491 970.66 on current account and EUR 1 244 130 504.71 in the
securities portfolio

(Annex III)

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 9% of the total
outstanding capital liabilities arising from each operation, plus unpaid interest due.

3

Outstanding lending and loan guarantee operations for non-member countries plus
unpaid interest due totalled EUR 15 577.34 million at 31.12.2001, of which EUR
147.69 million was accounted for by interest due but not yet paid.

The ratio between the Fund's resources and outstanding capital liabilities within the
meaning of the Regulation was 11.39%. Since this is higher than the target amount of
9%, 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 came to EUR 372.46 million.

The following sections describe developments affecting the Fund's resources and
liabilities in 2001.

3.

PAYMENTS INTO THE FUND

3.1.

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

Article 1 of the Regulation of 25 May 1999 amending the Regulation establishing the
Fund stipulates that the Fund is to be endowed by payments from the general budget
equivalent to 9% of the capital value of loan and loan guarantee operations until the
target amount is reached. This Article also lays down that the provisioning rate is to
be raised to 10% 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 provisions of EUR 208 million in 2001, is
used for endowing the Fund by transferring amounts into the budget
item for
payments into the Fund.

On these legal bases, four transfers totalling EUR 207 176 000 to endow the
Guarantee Fund were adopted by the budgetary authority in 2001.

– Transfer 10/2001: EUR 169 151 000. This first transfer at the beginning of the
year was for payments into the Fund in respect of the Council Decisions of
24 January 1994, 19 May 1998 and 22 December 1999 in accordance with the
arrangements set out in the Annex to the Regulation establishing the Fund.

– Transfer 24/2001: EUR 20 250 000. This second transfer was for payments
into the Fund in respect of loan operations adopted by the Council on
16 July 2001. The decisions covered by this transfer are given in Annex I.

– Transfer 49/2001: EUR 8 775 000. This third transfer was for payments into
loan operations adopted by the Council on
the Fund in respect of
6 December 2001. The decisions covered by this transfer are given in Annex I.

– Transfer 48/2001: EUR 9 000 000. This fourth transfer was for payments into
loan operations adopted by the Council on

the Fund in respect of
6 November 2001. The decision covered by this transfer is given in Annex I.

4

The first of the four annual transfers to the Fund was made in August, the second in
November and the third and fourth in December 2001.

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
invested for one year and two thirds for a maximum of 10 years, although at least
EUR 150 million has to be short-term investments. The average term of investments
using 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 and P1 for short-term investments,
and investments made with them are governed by rules to ensure a good spread and
avoid the concentration of risk.

In 2001, interest on deposits, the Guarantee Fund current account and securities
totalled EUR 74 075 440.41, broken down as follows:

– deposits: EUR 21

824

represents

796.33. This

received on bank deposits

at
31 December 2001 including interest
(EUR
23 175 406.99) and changes in interest accrued (-EUR 1 350 610.66) in 2001.
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 2001 (EUR 2 720 154.34) is
reduced by the accrued interest entered in the accounts for 2000 but received in
2001 (EUR 4 070 765.00).

situation

the

– current accounts: EUR 159 108.52, comprising interest recorded on the current

account.

– securities portfolio: EUR 52 091 535.56. The interest on securities is generated
by investments placed in the form of securities in accordance with the
investment principles laid down in the Agreement giving the EIB the task of
managing the Fund's liquid assets. From this figure must, however, be
subtracted the EUR 3 547 010.86 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-loss account).

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 are paid into the Fund. The running total now comes to EUR
568 217 579.44 (see point 2.1 of Annex II).

4.

THE FUND'S LIABILITIES

4.1.

Default payments

The Fund's guarantee was called in on two occasions in 2001, involving a total of
EUR 9 746 825.23 (see point 2.1 of Annex II).

4.2.

EIB remuneration

Article 6 of the management agreement 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
supplementary agreement dated
workload involved in its management,
17 September and 23 September 1996 to the Agreement reduced the annual payment
to 0.05% of
rate was applied retrospectively to
31 December 1994.

the Fund's assets;

this

a

For 2001 the Bank's remuneration was fixed at EUR 805.045,80, entered in the
profit-and-loss account and as accruals (liabilities) on the balance sheet. This
payment will be made to the EIB in the first half of 2002.

6

ANNEX I

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

The Annex to the Regulation, which concerns the 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 by the Council.

Four transfers were made under this procedure in 2001.

1.

DECISIONS COVERED BY TRANSFER 10/2001

As part of the financial co-operation with the Mediterranean countries:

– Council Decision of 24 January 1994 for a three-year loan of ECU 115 million

for Syria.

– Council Decision of 19 May 1998 granting a Community guarantee to the EIB
losses on loans for projects in the former Yugoslav Republic of
against
Macedonia and amending Council Decision 97/256/EC of 14 April 1977
granting a Community guarantee to the EIB against losses on loans for projects
outside
countries,
Mediterranean countries, Latin American and Asian countries and South
Africa).

and Eastern European

the Community

(Central

– Council Decision of 22 December 1999 granting a Community guarantee to the
EIB against losses on loans for projects outside the Community (Central and
Eastern Europe, Mediterranean countries, Latin America and Asia and the
Republic of South Africa), which set an overall loan ceiling equivalent to EUR
18 410 million over a period of seven years, beginning on 1 February 2000 for
Central and Eastern Europe, the Mediterranean countries, Latin America and
Asia and on 1 July 2000 for the Republic of South Africa and ending for all
regions on 31 January 2007.

2.

DECISIONS COVERED BY TRANSFER 24/2001

Council Decision of 16 July 2001 (2001/549/EC) providing macro-financial
assistance. The amount of aid made available to the Federal Republic of Yugoslavia,
in the form of loans, is EUR 225 million.

7

3.

DECISION COVERED BY TRANSFER 49/2001

Council Decision of 6 November 2001 amending Decision 2000/24/EC so as to
extend the Community guarantee granted to the EIB to cover loans for projects
carried out in the Federal Republic of Yugoslavia. These loans are limited to an
overall ceiling of EUR 350 million, of which EUR 150 million in 2001.

4.

DECISION COVERED BY TRANSFER 48/2001

Council Decision of 6 November 2001 (2001/777/EC) granting a Community
guarantee to the EIB against
losses under a special lending action for selected
environmental projects in the Baltic Sea basin of Russia under the Northern
Dimension. This loan is limited to an overall ceiling of EUR 100 million.

8

1.

1.1.

1.2.

1.3.

ANNEX II

Guarantee Fund - Management report at 31 December 2001

DEVELOPMENT OF THE FUND IN 2001

As stated in point 2.2, the total holdings of the Fund stood at EUR 1 744.7
million at 31 December 2001 as against EUR 1 410.1 million at 31 December 2000,
an increase of EUR 334.6 million.

200

190

180

170

MIO

160

€

150

140

130

120

110

100

2001

2000

Jan Feb Mar Apr Ma Jun Jul Au

g

Oc No Dec

Sep
t

Fig.1 : Development of holdings in 2001

Total provisioning in 2001 amounted to EUR 207.2 million. On 29 August 2001, the
Fund received EUR 3.8 million as a result, on the one hand, of the repayment to the
Commission of the surplus of EUR 165.4 million at 31 December 2000 and, on the
other, of an allocation to the Fund of EUR 169.2 million. The allocations on
27 December 2001 and 28 December 2001 of EUR 17.8 million and EUR 20.2
million respectively took the total provisioning for the year to EUR 207.2 million.

Income in each segment was proportional to the breakdown of assets allocated to the
bond (2/3) and money-market (1/3) segments, as agreed between the EIB and the
Commission. The operating result
thus amounted to EUR 69.6 million at
31 December 2001, compared with EUR 57.4 million on 31 December 2000. Bond
portfolio income (net of the premiums/discounts spread) came to EUR 48.5 million,
representing some 69% of the revenue recorded at 31 December 2001. Monetary
portfolio income stood at EUR 21.8 million, or 31% of the total result.

9

2.

Position of the Fund

2.1.

Resources at 31 December 2001

The Guarantee Fund balance increased by EUR 273 million, or more than 22%, from
EUR 1 221 million at 31 December 2000 to EUR 1 494 million on 31 December
2001. This is due to the movements shown in the following table.

Resources

Situation at

Movements

Situation at

31/12/2000

in 2001

31/12/2001

Provisioning

Repayment of surplus

Activation of guarantee

Recovery of amounts guaranteed

+

-

-

+

1 824 703 500.00

207 176 000.00

2 031 879 500.00

471 700 000.00

165 360 000.00

637 060 000.00

458 915 314.92

9 746 825.23

468 662 140.15

326 997 369.48

241 220 209.96

568 217 579.44

Balance

1 221 085 554.56

273 289 384.73

1 494 374 939.29

EUR 9.7 million was paid out from the Fund in 2001.

Guaranteed amounts recovered from defaulting debtors in 2001 totalled EUR 241.2 million.

2.2.

The Fund's assets at 31 December 2001

The Fund's assets at 31 December 2001 came to EUR 1 744.7 million, broken down as below.
It should be remembered that the Fund operates in one currency only - the euro.

EUR 475.1 million in the monetary portfolio (interbank deposits)

EUR 25.5 million in the current account1

EUR 1 2441 million in the investment portfolio (fixed rate and floating rate
securities) (see table in 3.1).

3.

GENERAL AND SEGMENTAL ANALYSIS OF THE GUARANTEE FUND

3.1.

Liquidity analysis

The portfolio is now characterised by a bolstered fixed-rate segment, as agreed between the
EIB and the Commission in 2001. In the final quarter, the strategy of increasing the
proportion invested in this segment was gradually implemented, with the duration of
investment also being increased.

1

Exceptional situation following the payment into the account at end-December 2001 of an amount of
EUR 20 million pending reinvestment in monetary instruments and/or bonds.

10

the fixed-rate segment

At year's end,
two-thirds of bond
investment, whereas the strategy pursued in previous years had set this share at around 50%.
What is more, the term of maturity of this segment was almost 3.50 years, compared with a
level previously maintained at between 2.20 and 2.50 years, with investments being spread
over a curve of 0 to 10 years (in previous years, the maximum authorised term had been 5
years).

thus accounted for almost

The Guarantee Fund's liquid assets were distributed as follows in 2001:

Segments

Fixed-rate investments

Variable-rate

TOTALS

less than 3 months

3 months to 1 year

1 to 10 years

securities

Current accounts

25 491 970.66

Fixed-term deposits

384 700 000.00

90 400 000.00

25,491,970.66

475 100 000.00

Securities portfolio

0.00

108 328 246.02

775 660 592.64

360 141 666.05

1 244 130 504.71

TOTALS

410 191 970.66

198 728 246.02

775660 592.64

360 141 666.05

1 744 722 475.37

%

23.51

11.39

44.46

20.64

100,00

3.2.

General analysis of results

Overall, the Guarantee Fund produced EUR 69.6 million in net revenue, an overall average
yield of 4.49 %2 on average capital of EUR 1 529 million. The three-month Euribid reference
rate stood at 4.14% over the same period, giving an overall positive spread of 35 basis points
above the reference benchmark (cf. 3.3.1).

Investment income at 31 December 2001 was as follows:

January - December 2001

(EUR million)

Interest on interbank deposits

Interest on securities

Interest on current account

Spread of premiums or discounts

Commissions and financial charges

Total

21.8

52.1

0.2

-3.5

-1.0

69.6

2

The basis for calculating the overall yield is: act/360

11

3.3.

Analysis by segment

3.3.1.

Performance analysis of treasury operations

The average yield on money-market investments in 2001 stood at 4.45%., compared with a
benchmark average yield of 4.14%.

The spread calculated this way is 31 basis points above the three-month Euribid variable
reference rate3 for 2001, as against a spread of 13 basis points in 2000. This spread does not
reflect the margin obtained at the beginning of operations, and this margin is not taken into
consideration when calculating yield.

Period

Yield

Three-month Euribid

Spread

January - December
2001

4.45%

Reference

4.14%

0.31%

Interbank investments in 2001 (January to December) produced EUR 21.8 million in interest
on capital averaging EUR 480 million.

• Changes in yield and reference rates in 2001

• The table below shows the rates obtained for short-term money-market investments as

compared with the three-month Euribid reference rate.

4.90%

4.30%

3.70%

3.10%

Yield

3-mth Euribid

Jan-
01

Feb-01 Mar
-01

Apr-
01

May-
01

Jun
-01

Jul-
01

Aug-
01

Sep
-01

Oct-
01

Nov-
01

Dec-
01

Fig. 2 : Yield in relation to the benchmark rate

In a context of falling short-term interest rates, the monetary portfolio broadly outperformed
the benchmark, while in absolute terms the portfolio's yield followed the market trend and fell
1.42% in 2001. It should be borne in mind that the European Central Bank lowered its key

3

The treasury spread measures the difference between the actual interbank investment rate obtained and
the benchmark variable, which is the three-month Euribid rate for that day.

12

interest rates by 150 basis points over the course of the year, from 4.75% to 3.25%,
Considering that the reverse situation had occurred in 2000 (when key interest rates were
increased from 3.00% to 4.75%), it is interesting to note the smooth development of the
monetary segment, in both income and performance terms, over a two-year cycle. The
cumulated average overall yield for 2000 and 2001 stood at 4.98%, with a spread of 17 basis
points.

• Profile of counterparties

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

A1
18%

Aa1
4%

Aa2
21%

Aa3
57%

Fig. 3 : Breakdown of short-term deposits by type of counterparty at 31 December 2001. The
EIB is pursuing its objective of a better geographical distribution throughout the countries of
the European Union while at the same time maintaining the competitiveness of the yield
obtained.

3.3.2.

Analysis of bond portfolio results.

The bond portfolio, seen as a long-term investment portfolio, is made up of euro-denominated
securities acquired with the intention of keeping them until maturity. At 31 December 2001,
fixed-interest securities with a residual period to maturity of between three months and one
year totalled EUR 108.3 million; other fixed-rate securities with a residual period to maturity
of between 1 and 10 years amounted to EUR 775.7 million, while variable-rate securities
stood at EUR 360.1 million.

The portfolio yielded revenue of EUR 48.5 million at 31 December 2001, which breaks down as
follows:

Interest received
Premium / discount spread

52 091 535.56
3 547 010.86
48 544 524.70

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

13

At 31 December 2001, the nominal value of the investment portfolio was EUR 1 231.3
million, against a book value of EUR 1 244.1 million (including the premiums and discounts
to be written off).

The book yield on the investment portfolio came to 4.61%4at 31 December 2002, compared
with 4.34% at 31 December 2000. In terms of a Salomon index reference benchmark for
fixed-rate securities5 and the three-month Euribid for variable-rate securities, the overall
spread is positive by 35 basis points compared with the aggregate benchmark of 4.26% (cf.
Annex 2) This positive performance is largely explained by the general fall in interest rates in 2001.
The majority of new investments were in securities with a maturity of 5 to 10 years, which translates
into a significant lengthening of the portfolio's duration. It has to be borne in mind, however, that the
benchmark yield reflects actual changes in rates, while the portfolio's yield reflects an average based
on purchase prices.

German government bond rates in 2001 (source Bloomberg);

31/12/2000

31/03/2001

30/06/2001

30/09/2001

31/12/2001

Bund 3y

Bund 5y

Bund 7y

Bund 10y

4.47

4.51

4.73

4.85

4.21

4.33

4.53

4.71

4.34

4.59

4.91

5.10

3.67

4.06

4.46

4.79

3.90

4.40

4.80

4.99

By way of information, at 31 December 2001 the market value of the investment portfolio came to
EUR 1 248.8 million compared with a book value of EUR 1 244.1 million (including
premiums/discounts), which gives an unrealised gain of EUR 4.70 million, compared with an
unrealised loss of EUR 0.5 million and a book value of EUR 919.3 million at 31 December 2000.

• Market value compared to book value in 2001

€

(
mil
lio
n)

1,270

1,220

1,170

1,120

1,070

1,020

970

920

Jan
-01

Feb-
01

Mar-
01

Apr-
01

May-
01

Jun-
01

Jul-
01

Aug-
01 Sep
-01

Oct-
01

Nov-
01

Dec
-01

Book value

Market value

Fig. 5: Market value compared to book value in 2001

4

5

The basis for calculating the yield of the investment portfolio is: act/365
This benchmark will be adjusted once the new strategy has been officially adopted by the EIB and the
Commission in order to reflect the longer duration and the possibility of investing up to a maturity of
10 years.

14

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

VARIABLE-RATE
29%

FIXED-RATE

71%

Fig. 6: Breakdown of the investment portfolio between fixed-rate and variable-rate securities at 31 December 2001

• Redemption profile of investment portfolio:

€
(
mil
lio
n)

350

300

250

200

150

100

50

0

Var.-rate

Fixed-rate

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Fig. 7: Investment portfolio: Redemption profile at 31 December 2001

• The latest final maturity date for fixed-rate securities is 18 May 2011.

• Profile of issuers

All the securities held meet the following criteria:

–

either they are issued by States in or by institutions guaranteed by the European
Union, the G10 or supranational bodies;

15

–

–

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 2001:

Other issuers

(AAA rating)
42%

Supranational bodies

6%

Govs/Gov. agencies

52%

Fig.8: Investment portfolio: Profile of issuers at 31 December 2001

16

PERFORMANCE OF THE GUARANTEE FUND'S BOND INVESTMENT PORTFOLIO

Starting value
Average capital
ineuros

Percentage
Variable-rate

Percentage

Fixed.-
rate

Portfolio YTM Salomon*
yield

benchmark
a/365

a/365

Libid 3-mth Aggregate Spread

benchmark
en a/365

benchmark

in bp

Annual
2000

January
February

March

April
May
June
July
August
September
October
November
December

Annual
2001

900 051 060

45.4%

54.6%

4.34%

4.96%

4.32%

4.67%

-33

936 404 811
948 782 538
954 514 929
981 395 916
1 014 174 754
1 014 434 485
1 066 160 519
1 098 122 330
1 098 247882
1 104 334 630
1 188 723 688
1 248 491 404

42.4%
42.5%
42.3%
41.1%
39.8%
39.8%
42.3%
41.1%
40.4%
40.2%
37.3%
32.4%

57.6%
57.5%
57.7%
58.9%
60.2%
60.2%
57.7%
58.9%
59.6%
59.8%
62.7%
67.6%

4.78%
4.74%
4.68%
4.72%
4.65%
4.70%
4.66%
4.58%
4.61%
4.51%
4.35%
4.38%

4.65%
4.57%
4.54%
4.40%
4.78%
4.62%
4.51%
4.35%
4.09%
3.81%
3.48%
3.68%

4.72%
4.70%
4.65%
4.62%
4.58%
4.40%
4.40%
4.30%
3.94%
3.53%
3.33%
3.26%

4.68%
4.63%
4.59%
4.49%
4.70%
4.53%
4.46%
4.33%
4.03%
3.69%
3.42%
3.55%

1 055 173 356

39.9%

60.1%

4.61%

4.29%

4.20%

4.26%

9
11
9
23
-5
17
20
25
58
82
92
83

35

* Salomon index =

EGBI 1-3 yrs

EGBI 3-5 yrs
3 M eurodeposit

45.0%

45.0%
10.0%

17

POSITION OF THE GUARANTEE FUND AT 31 DECEMBER 2001

ASSETS

Claims on credit institutions

CURRENT ACCOUNT
Fixed-term deposits (Note A)

Portfolio

INVESTMENT PORTFOLIO (Note B)

Other assets

ACCRUALS (Note C)

LIABILITIES

Guarantee Fund

GUARANTEE FUND

ACCRUALS (Note D)

Other liabilitie

Result

RESULT CARRIED FORWARD
RESULT FOR 2001

PROFIT AND LOSS AT

1. Interest on securities

Interest on investments
Interest on current account

2. Premiums/discounts spread (Note E)

Commissions
Financial charges

RESULT

SUSPENSE ACCOUNTS AT

INVESTMENT PORTFOLIO
Purchase of securities

18

31/12/2001

25.491.970,66
475.100.000,00
500.591.970,66

1.244.130.504,71
1.244.130.504,71

30.506.522,06
30.506.522,06

TOTAL

1.775.228.997,43

31/12/2001

1.494.374.939,29
1.494.374.939,29

805.045,80
805.045,80

210.473.626,02
69.575.386,32
280.049.012,34

TOTAL

1.775.228.997,43

31/12/2001

52.091.535,56
21.824.796,33
159.108,52
-3.547.010,86
-805.045,80
-147.997,43

69.575.386,32

31/12/2001

0,00

Position of the Guarantee Fund at 31 December 2001
Position of the Guarantee Fund at 31 December 2001

€
€

Amounts in
Amounts in

Transfers
Transfers

Interest
Interest

Late repayments
Late repayments

Credits
Credits

Calls
Calls

EIB, misc.
EIB, misc.

Repaid to
Repaid to
budget
budget

Debits
Debits

Annual balance Cumulative (*)
Annual balance Cumulative (*)

a
a

b
b

(**
(**

c
c

d=(a+b+c)
d=(a+b+c)

e
e

f
f

g
g

h=(e+f+g)
h=(e+f+g)

i=(d-h)
i=(d-h)

defaults
defaults
j=(e-c)
j=(e-c)

Credits 1994
Credits 1994

Debits 1994
Debits 1994

Balance at 31.12.94
Balance at 31.12.94

Credits 1995
Credits 1995

Debits 1995
Debits 1995

Balance at 31.12.95
Balance at 31.12.95

Credits 1996
Credits 1996

Debits 1996
Debits 1996

Balance at 31.12.96
Balance at 31.12.96

Credits 1997
Credits 1997

Debits 1997
Debits 1997

Balance at 31.12.97
Balance at 31.12.97

Credits 1998
Credits 1998
Debits 1998
Debits 1998

Balance at 31.12.98
Balance at 31.12.98

Credits 1999
Credits 1999
Debits 1999
Debits 1999

Balance at 31.12.99
Balance at 31.12.99

Credits 2000
Credits 2000
Debits 2000
Debits 2000
Balance at 31.12.2000
Balance at 31.12.2000

Credits 2001
Credits 2001
Debits 2001
Debits 2001
Balance at 31.12.2001
Balance at 31.12.2001

293.720.000
293.720.000

478.331
478.331

294.198.331
294.198.331

0
0

0
0

2.699
2.699

2.699
2.699

294.195.633
294.195.633

250.750.000
250.750.000

23.539.828
23.539.828

35.630.568
35.630.568

309.920.396
309.920.396

235.390.000
235.390.000

19.842.550
19.842.550

55.715.204
55.715.204

310.947.754
310.947.754

286.095.000
286.095.000

34.506.566
34.506.566

45.033.282
45.033.282

365.634.849
365.634.849

272.389.000
272.389.000

50.185.883
50.185.883

185.299.547
185.299.547

507.874.430
507.874.430

300.069.000
300.069.000

48.562.535
48.562.535

5.318.632
5.318.632

353.950.167
353.950.167

186.290.500
186.290.500

62.692.917,51
62.692.917,51

135
135

248.983.553
248.983.553

303.072.581
303.072.581

195.618
195.618

303.268.198
303.268.198

6.652.197
6.652.197

267.760.010
267.760.010

52.540.497
52.540.497

1.849.279
1.849.279

54.389.775
54.389.775

256.557.979
256.557.979

271.154.609
271.154.609

54.290.854
54.290.854

6.962.746
6.962.746

61.253.600
61.253.600

304.381.249
304.381.249

291.337.822
291.337.822

15.407.951
15.407.951

7.592.489
7.592.489

66.000.000
66.000.000

89.000.440
89.000.440

418.873.990
418.873.990

134.300.629
134.300.629

16.247.803
16.247.803

7.431.441 297.800.000
7.431.441 297.800.000

321.479.244
321.479.244

32.470.923
32.470.923

145.229.800
145.229.800

17.355.629
17.355.629

6.105.759 107.900.000
6.105.759 107.900.000

131.361.389
131.361.389

117.622.164
117.622.164

162.585.294
162.585.294

207.176.000
207.176.000

74.075.440
74.075.440

241.220.210
241.220.210

522.471.650
522.471.650

9.746.825
9.746.825

3.695.008 165.360.000
3.695.008 165.360.000

178.801.834
178.801.834

343.669.817
343.669.817

Cumulative total
Cumulative total

2.031.879.500
2.031.879.500

313.884.050
313.884.050

568.217.579 2.913.981.129 468.662.140 33.835.038 637.060.000 1.139.557.178 1.774.423.952
568.217.579 2.913.981.129 468.662.140 33.835.038 637.060.000 1.139.557.178 1.774.423.952

(*) Actual cumulative amount of defaults at the end of each year.
(*) Actual cumulative amount of defaults at the end of each year.
(**) The amount of the reimbursements is made up of the amount of calls on the Fund plus the amount of default interest received on late reimbursements.
(**) The amount of the reimbursements is made up of the amount of calls on the Fund plus the amount of default interest received on late reimbursements.

19

ANNEX III

Consolidated financial balance sheet of the Guarantee Fund at 31 December 2001

The consolidated financial balance sheet at 31 December 2001 is provided to supplement the
position of the Guarantee Fund as set out in Annex II.

The position of the Fund and the consolidated balance sheet display a striking degree of
symmetry in accounting terms, in that the receivables have been recovered from the recipients
of loans granted or guaranteed by the Community. These comprise, on the one hand, non-
member countries' arrears on the payment of the principal and interest due at maturity and, on
the other, default interest covered by guarantee payments from the Fund and default interest
accrued but not received at 31 Decenber 2001.

20

CONSOLIDATED FINANCIAL BALANCE SHEET OF THE GUARANTEE FUND AT 31 DECEMBER 2001

ASSETS

31 December
2001

25 491 970.66
475 100 000.00

31 December
2000

1 864 299.31 Guarantee Fund

LIABILITIES

31 December 2001 31 December 2000

loans granted or

1 244 130 504.71

919 302 277.87

489 000 000.00

Payments from the budget (2)
- surplus to be paid to the budget
Default interest incurred but not received

1 022 359 500.00
372 460 000.00
0.00
1 394 819 500.00

1 187 643 500.00
165 390 000.00
50 496 420.98
1 403 499 920.98

805 045.80

689 783.78

250 041 413.12
129 563 038.51

185 761 769.79
57 392 338.90

0.00
0.00

164 598 428.11

Other liabilities
Accruals

50 496 420 98 Result

30 506 522.06

22 082 387.18

Result carried over
Result for financial year

Current account
Fixed-term deposits

Portfolio

Investment portfolio

Receivables from recipients of
guaranteed by the Community

Arrears covered by the Fund (1)
Default interest incurred but not received

Other receivables
Accruals

TOTAL ASSETS 1 775 228 997.43 1 647 343 813.45

TOTAL LIABILITIES

1 775 228 997.43

1 647 343 813.45

PROFIT AND LOSS AT 31/12/2001

INCOME

31 December
2001

31 December
2000

Interest on securities
Appreciation on transfer of investment securities
Interest on investments
Interest on current account
Default interest received on late recoveries (3)

52 091 535.56
0.00
21 824 796.33
159.108,52
59 987 652.19

43 573 845.83 Premiums/discounts spread

0.00
18 996 521.08

Commissions
Financial charges

157 806.60 TOTAL COSTS (B)

135.38

COSTS

31 December 2001 31 December 2000

3 547 010.86
805 045.80
147 997.43
4 500 054.09

4 521 285.47
689 783.78
124 900.74
5 335 969.99

TOTAL INCOME (A)

134 063 092.60

62 728 308.89

NET RESULT (A – B)

129 563 038.51

57 392 338.90

(1) Capital, interest, default interest covered by payments from the Fund.
(2) Reduced by EUR 637.1 million (the overall surplus repaid to the statement of revenue in the budget of the European Communities in accordance with Article 3 of Regulation No 2728/94 establishing the
Guarantee Fund).

(3) Share of interest, FRY, received in 2001 out of a total of

€

99 555 439.29 received on late recoveries that gave rise to calls and were posted in the accounts in previous financial years.

21