COMMISSION STAFF WORKING PAPER
Date: 2011-08-05
Institutions: European Commission
Subjects: activity report, credit guarantee, financial control, fund (EU)

EUROPEAN COMMISSION 

Brussels, 5.8.2011 
SEC(2011) 990 final 

COMMISSION STAFF WORKING PAPER 

Accompanying the document 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 
on the Guarantee Fund and the management thereof in 2010 

{COM(2011) 476 final} 

 
 
 
 
  
  
 
TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

Introduction...................................................................................................................3 

Guarantee Fund – Management Report as at 31 December 2010 ................................3 

Development of the Fund in 2010 - overview ..............................................................3 

Situation of the Fund ....................................................................................................4 

2.2.1.  The Fund’s resources at 31 December 2010.................................................................4 

2.2.2.  The Fund’s assets at 31 December 2010 ......................................................................4 

2.3. 

General and segmental analysis of the Fund ................................................................6 

2.3.1.  Liquidity analysis..........................................................................................................6 

2.3.2.  General analysis of the results of the Fund...................................................................7 

2.3.3.  Analysis by segment .....................................................................................................7 

2.3.3.1.  Analysis of money market operations ..........................................................................7 

2.3.3.2.  Analysis of bond portfolio results.................................................................................9 

2.4. 

Performance and interest rate risk analysis.................................................................13 

2.4.1. 

Interest rate risk ..........................................................................................................14 

2.4.2.  Performance ................................................................................................................16 

3. 

3.1. 

3.2. 

3.3. 

Statement of Financial Position of the Fund as at 31 December 2010 .......................18 

Economic outturn account (Statement of financial performance) for the year 
ending on 31 December 2010 .....................................................................................18 

Balance sheet (Statement of financial position) as at 31 December 2010..................19 

Statement of changes in contributors’ resources for the year ended 31 
December 2010 (in EUR) ...........................................................................................20 

3.4. 

Cash flow statement as at 31 December 2010 ............................................................21 

4. 

4.1. 

4.2. 

Notes on the Financial Statements..............................................................................21 

General disclosures .....................................................................................................21 

Significant accounting policies...................................................................................22 

4.2.1.  Basis of preparation ....................................................................................................22 

4.2.2.  Significant accounting and judgments and estimates .................................................22 

4.2.3.  Summary of significant accounting policies...............................................................22 

4.2.3.1.  Foreign currency conversion ......................................................................................22 

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4.2.3.2.  Cash and cash equivalents ..........................................................................................23 

4.2.3.3.  Short-term investments ...............................................................................................23 

4.2.3.4.  Contributions ..............................................................................................................24 

4.2.3.5.  Securities lending activity...........................................................................................24 

4.2.3.6.  Taxation ......................................................................................................................24 

4.3. 

Financial risk management .........................................................................................25 

4.3.1. 

Interest rate and liquidity risks....................................................................................25 

4.3.2.  Credit Risk ..................................................................................................................28 

4.4. 

4.5. 

4.6. 

4.7. 

4.8. 

4.9. 

Short-term Investments – Available For Sale portfolio..............................................30 

Cash and Cash Equivalents.........................................................................................30 

Contributions ..............................................................................................................31 

Current Liabilities .......................................................................................................31 

Financial operations revenues.....................................................................................31 

Financial operations expenses ....................................................................................32 

4.10. 

Subsequent events.......................................................................................................32 

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1. 

INTRODUCTION 

According to the Article 7 of the guarantee fund regulation, the financial management 
of  the  Guarantee  Fund  is  managed  by  the  EIB.  The  agreements  signed  between  the 
Commission and the EIB defines the principles governing the management of assets. 

Under Article 8(2) of the Agreement, by 1 March of each year the EIB must send the 
Commission  an  annual  status  report  on  the  Fund  and  the  management  thereof 
(‘Statement of financial performance’) and a financial statement for the Fund for the 
preceding year (‘Statement of financial position of the Fund’). 

The 'Statement of financial performance' prepared by the EIB has been attached in the 
section  2  of  the  Commission  staff  working  document.  The  ‘Statement  of  financial 
position of the Fund’ audited by an external auditor and approved by the EIB board of 
directors is included in section 3. 

2. 

GUARANTEE FUND – MANAGEMENT REPORT AS AT 31 DECEMBER 2010 

2.1. 

Development of the Fund in 2010 - overview 

As  at  31  December  2010  total  assets  (excluding  accrued  interest)  of  the 
1.1 
Guarantee Fund (the “Fund”) amounted to EUR 1,325.5 million against EUR 1,220.2 
million at 31 December 2009, an increase of EUR 105.3 million. 

2010

2009

)
o
r
u
e

s
n
o

i
l
l
i

m

(

1500
1475
1450
1425
1400
1375
1350
1325
1300
1275
1250
1225
1200
1175
1150
1125
1100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Fig.1: Development of total assets in 2010 and 2009 

The increase of total assets was mainly due to a capital payment from the European 
Commission on 10 February 2010 amounting to EUR 93.8 million and due to coupon 
payments of EUR 40.4 million, only partially re-invested in 2010. 

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The  net  operating  result  amounted  to  EUR  42.52  million  at  31  December  2010 
compared  with  EUR  40.9  million  at  31  December  2009.  Interest  income  on  AFS 
assets  (net  of  the  premium  /  discount  spread)  amounted  to  EUR  40.4  million, 
representing 95 % of the total result recorded at 31 December 2010. Interest income 
on cash & cash equivalents amounted to EUR 1.4 million, or 3 % of the total result. 
The  rest  (2%)  reflects  the  net  result  of  income  from  securities  lending  activity 
(amounting to EUR 80k) and other financial charges (amounting to EUR -850k).  

2.2. 

Situation of the Fund  

2.2.1.  The Fund’s resources at 31 December 2010 

The  Fund’s  resources  increased  by  EUR  93.8  million,  or  19%  from  EUR  494.4 
million at 31 December 2009 to 588.2 EUR million at 31 December 2010. 

This is explained by the movements shown in the following table: 

Resources 

Situation at  

Movements 

Situation at 

31/12/2009 

in 2010 

31/12/2010 

Provisioning 

+

2,896,965,162.91

93,810,000.00

2,990,775,162.91

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 guaranteed 

Repayment of Funds (9%) 

+

-

576,705,008.19

0.00

576,705,008.19

(725,521,526.79)

0.00

(725,521,526.79)

Balance 

494,417,788.12

93,810,000.00

588,227,788.12

The  European  Commission  initiated  a  capital  payment  on  10  February  2010 
amounting to EUR 93,810,000. 

2.2.2.  The Fund’s assets at 31 December 2010 

The Fund’s holdings at 31 December 2010 excluding accrued interest totalled  

EUR 1,325.5 million as detailed below: 

EUR 123.7 million in the monetary portfolio (nominal value of interbank term 
deposits); 
EUR 68.7 million in other cash equivalents (commercial papers at cost); 
EUR 1.4 million in the current accounts;  

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4 

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EUR 1,131.7 million in the Available For Sale (AFS) (market value of fixed rate and 
floating rate bonds and treasury bills with original maturity of more than 3 months) 
(excluding accrued interest) 

The Fund operates in one currency only, the Euro. 

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2.3. 

General and segmental analysis of the Fund 

2.3.1.  Liquidity analysis 

The  distribution  of  the  Fund’s  holdings  at  31  December  2010  (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 

Floating rate 
bonds EUR 

TOTAL 

EUR 

1,426,322.04 

123,637,000.00 

0.00

0.00

0.00

0.00

0.00 

1,426,322.04

0.00 

123,637,000.00

39,030,366.00 

114,224,420.00

897,381,041.00

81,089,410.00 

1,131,725,237.00

68,708,475.06 

0.00

0.00

0.00 

68,708,475.06

Current 
accounts 

term 
- 

Short 
deposits 
nominal 

AFS 
- 
portfolio 
at fair value 

Other  cash 
equivalents- 
at cost 

TOTAL 

232,802,163.10 

114,224,420.00

897,381,041.00

81,089,410.00 

1,325,497,034.10

Percentage 

17.56% 

8.62%

67.70%

6.12% 

100.00%

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2.3.2.  General analysis of the results of the Fund 

Overall, during  the  reporting  period  1 January 2010 to 31 December 2010 the Fund 
produced EUR 42.52 million in net revenue. Investment income at 31 December 2010 
was as follows: 

Interest income on cash & cash equivalents 

Interest income on AFS assets 

Net realised gain on sale of AFS assets 

Income from securities lending activity 

Commission and other charges 

Total 

January – December 2010 

(in million EUR) 

1.36 

40.35 

1.58 

0.08 

(0.85) 

42.52 

The performance of the Fund portfolio was monitored on a marked to market basis. 
Over  2010,  the  portfolio  delivered  a  1.06%  MTM  return,  underperforming  its 
benchmark by 13.26 bps. 

2.3.3.  Analysis by segment 

2.3.3.1.  Analysis of money market operations 

Money-market investments (excluding accrued interest) amount to EUR 212.7 million 
at 31 December 2010, to be compared with EUR 190.9 million a year before. 

•  Evolution of money-market rates in 2010 

The  ECB  reference  rate  has  been  kept  at  1%  during  the  whole  2010,  reflecting  the 
growing  concerns  about  the  economic  downturn  and  the  increased  liquidity  buffers 
that  market  counterparties  have  decided  to  keep  from  both  an  operational  and  a 
regulatory point of view. Market sentiment was affected by the sovereign debt crisis 
in  some  euro  area  Member  States  that  reached  its  high  in  May  2010.  In  order  to 
safeguard financial stability in the euro area as a whole, several measures have been 
taken by the EU, the euro group, the IMF, the ECB and regulators to cope with this 
crisis. A first step has been the conclusion of a coordinated bilateral loan for euro area 
Member Sates to Greece. Further steps have been taken by the ECB as well as major 
central banks, who injected substantial amounts of liquidity in the market to prevent a 
general  financial  system  failure.  Furthermore,  Euro  area  Member  States  created  the 

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EFSF1, a new vehicle for providing stability and liquidity for euro area Member States 
in difficulties. The EU has also created a new facility, the EFSM2 which is aimed at 
supporting  EU  Member  States,  including  Euro  area  Member  States.  The  market 
situation  has  been  monitored  on  a  daily  basis  by  EU  Regulatory  Bodies  in  order  to 
stabilize the situation and inject liquidity and confidence into the market. 

Figure 2 shows the evolution of the one- and three-month Euribor during 2010. 

1.20%

1.00%

0.80%

0.60%

0.40%

0.20%

0.00%

0
1

n
a
J

0
1

b
e
F

0
1

r
a
M

0
1

r
p
A

0
1

y
a
M

0
1

n
u
J

0
1

l

u
J

0
1

g
u
A

0
1

p
e
S

0
1

t
c
O

0
1

v
o
N

0
1

c
e
D

1m Eur

3m Eur

Fig. 2: Evolution of Money Market rates during 2010 (source Bloomberg) 

•  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 
minimum  short-term  credit  rating  of  P-1  (Moody's  or  equivalent).  The  breakdown, 
including accrued interest, is as follows: 

1 
2 

European Financial Stability Facility  
European Financial Stabilisation Mechanism  

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8 

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Aa3/P-1
54%

A1/P1
37%

Aa2/P-1
9%

Fig. 3: Short term interbank investments by type of counterparty at 31 December 2010 

•  Geographical breakdown 

As  regards  the  diversification  of  counterparty  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 
the main EU financial centers. This allows to search for better market conditions and 
to maintain the highest degree of competitiveness of the yield obtained. 

2.3.3.2.  Analysis of bond portfolio results 

The  bond  portfolio,  seen  as  a  long-term  investment  portfolio,  is  made  up  of  euro-
denominated  securities  initially  acquired  with  the  intention  of  holding  them  until 
maturity.  In  the  Fund’s  Financial  Statements  these  securities  are  classified  as 
Available  For  Sale  (AFS)  in  line  with  the  EC  accounting  rule  11.  At  31  December 
2010,  the  market  value  (excluding  accrued  interest)  of  fixed  rate  securities  with  a 
residual  period  to  maturity  of  less  than  three  months  amounted  to  EUR  39  million, 
between  3  months  and  one  year  EUR  114.2  million  and  between  one  and  10  years 
EUR 897.4 million. 

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  using  the  effective  interest  rate  method  as  specified  in  the  EC  accounting 
rules. 

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At 31 December 2010, the nominal value of the investment bond portfolio (fixed and 
FRN)  was  EUR  1,121.7  million3,  against  a  clean  market  value  of  EUR  1,116.7 
million. 

The  global  (modified)  duration  of  the  bond  portfolio  decreased  over  2010  to  reach 
2.36  years  at  the  end  of  the  year.  As  of  31  December  2010  the  market  value 
(excluding  accrued  interest)  of  the  investment  bond  portfolio  came  to  EUR 1,116.7 
(including 
million  compared  with  a  book  value  of  EUR 1,118.6  million 
premiums/discounts),  which  gives  an  unrealised  fair  value  loss  of  EUR 1.9  million, 
compared with an unrealised fair value gain of EUR 27.5 million and a market value 
(excluding accrued interest) of EUR 1,029.2 million at 31 December 2009. 

During 2010 the euro area 2- to 10-year yield curve spread steepened by 4 basis points 
to  the  level  of  210  basis  points.  The  movement  occurred  as  a  result  of  short-term 
yields declining by 46.7 basis points, whereas the long-term yields decreased by 42.4 
basis points as shown in figure 4. 

Fig.  4:  Euro  area  yield  curve  steepening  during  2010  using  German  government 
benchmark bonds (Source Bloomberg) 

In accordance with the 2010 approved investment strategy and in compliance with the 
guidelines,  a  total  nominal  amount  of  EUR  180.9  million  (excluding  coupon 
payments) was invested in fixed and floating rate sovereigns, government guaranteed 
paper, covered bonds and SSA securities within allowed maturities either on a switch 
basis or outright in the primary and secondary markets. All of the transactions were 
done  with  the  objective  of  maximising  the  expected  performance  and  maintaining 
relatively  conservative  risk  profile  with  respect  to  the  relative  country  allocation 

3 

This amount does not include zero coupon bonds consider as part of the AFS portfolio. 

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versus  the  corresponding  benchmark.  The  chart  below  outlines  the  total  2010 
investments as well as the country diversification of the portfolio. 

2010 Investments

2%

Country exposure

16%

18%

27%

Government
Guaranteed Bonds

SSA Bonds

39%

FLRN

Covered

3%

5% 4%

13%

18%

36%

19%

Ireland

Spain

France

Italy

Netherland

Norw ay

Denmark

Portugal

As of 1 January 2010, a total nominal amount of EUR 87.1 million of redemptions on 
the  securities  portfolio  was  scheduled  for  the  year  and  only  concerned  fixed  rate 
bonds. 

In  view  of  gradual  increasing  Euribor  rates  and  as  already  anticipated  in  the  2010 
investment strategy, investments in Floating Rate Notes were effected during the year 
2010 with EUR 45 million executed during the second quarter of 2010. 

•  Breakdown  of  the  investment  portfolio  between  fixed  rate  and  variable  rate 

securities (nominal value) 

Variable rate
8%

Fixed rate
92%

Fig. 6: Breakdown of the investment portfolio between fixed and variable rate securities at 31 December 2010 

•  Redemption profile of investment portfolio (nominal value) 

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)
o
r
u
e

n
o

i
l
l
i

m

(

250

200

150

100

50

0

Variable rate

Fixed rate

2011 2012 2013 2014 2015 2016 2017 2018

Fig.7: Investment portfolio: Redemption profile at 31 December 2010 

The latest final maturity date for fixed rate securities is 4 July 2018. 

•  Profile of issuers 

All the securities held in the portfolio are in line with the management guidelines and 
meet the following criteria for: 

–  Securities issued by Member States4: minimum rating Baa3 

–  Securities  issued  by  a  Supranational,  other  States  or  Public  Company:  minimum 

rating Aa2 

–  Covered Bonds: rating Aaa 

–  Securities issued by Banks and Corporates: minimum rating Aa2 

The profile of issuers at 31 December 2010 is as follows: 

4 

Member States securities (including securities guaranteed by Member States) may be kept in 
an event of downgrade below the minimum requirements. This applies also to cases where the 
rating downgrade would trigger a lower limit. 

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PUBLIC COMPANY Aaa
16.6%

CORPORATE Aa1
0.4%

BANKS Aaa
1.6%

COVERED BOND Aaa
14.8%

MEMBER STATE Aaa
28.1%

MEMBER STATE Baa3
6.7%

MEMBER STATE Baa1
2.3%

MEMBER STATE A2
6.4%

MEMBER STATE A1
6.9%

MEMBER STATE Aa1
9.1%

MEMBER STATE Aa2
6.9%

Fig. 8: Investment portfolio: Profile of issuers at 31 December 2010 

2.4. 

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 and fixed rate bond  with less than one year to 

maturity 

–  IBOXX  EUR  Sovereign  indices  for  fixed  rate  bonds  issued  by  sovereign  (or 

similar) issuers, split by maturity buckets  

–  IBOXX  EUR  Collateralized  Covered5  indices  for  fixed  rate  bonds  issued  by 

corporate (or similar) issuers, split by maturity buckets 

Index weightings are based on portfolio composition and are reviewed: 

–  at each end-month day: the dates which define the time buckets (up to 1y, from 1y 
to  3y,  from  3y  o  5y,  from  5y  to  7y  and  from  7y  to  10y)  are  updated.  As  a 
consequence, the shifts between buckets due to the aging of existing positions are 
accounted  only  once  per  month  at  end-month,  following  the  same  procedure 
underlying the managing of the IBOXX’s indexes; 

–  during the month, whenever a change higher then ±5% in one of the asset-classes 
(respect  to  the  last  benchmark’s  adjustment)  is  observed.  This  change  can  be  the 
result of: 

5 

The European Commission and the EIB have agreed to adopt the IBOXX Collateralized Covered indices instead of 
the IBOXX EUR AAA Corporate indices starting from 01/01/2009. 

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–  the  impact  of  a  contribution  from  the  European  Commission  to  the  portfolio 

(external cash flows from the European Commission); 

–  the  impact  of  a  withdrawal  from  the  portfolio  to  the  European  Commission 

(external cash flows to the European Commission); 

–  the impact of a transaction settled (sales and purchases); 

–  the impact of a redemption; 

–  the sum of the impacts of previous events accumulated from the last benchmark’s 
adjustment,  taking  also  into  consideration  the  changes  in  the  clean  values  of  the 
positions. 

Bucket (years) 

Performance 
Benchmark Sector 

Instrument 

0-1 

1-3 

3-5 

5-7 

7-10 

Total 

Money Markey 
FRN and Fixed Rate 
Bonds 

Fixed 
Rate 
Bonds 

1 m 

3 m 

sovereign 
covered bonds 
sovereign 
covered bonds 
sovereign 
covered bonds 
sovereign 
covered bonds 

Percentage of Total 
portfolio as of 
31/12/2010 
15.8% 

16.5% 

24.5% 
2.5% 
16.6% 
5.1% 
10.3% 
2.1% 
6.6% 
0.0% 
100% 

2.4.1. 

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  interest  rates  reduces  the  value  of  the 
portfolio  by  EUR  319,590,  of  which  EUR  315,514  is  related  to  the  fixed  rate  bond 
exposure. The global modified duration of the fund decreased during 2010 and stood 
at  2.36  years  as  of  31  December  2010,  compared  to  3.01  years  as  of  31  December 
2009. 

GF Sub- Portfolios 

,Market Value 
(excluding accrued 
interest) 

Modified 
Duration 
(Years) 

Floating Rate Notes  

81,089,410 

Fixed Rate Bonds 

1,035,658,189 

Money Market Instruments 

207,453,976 

0.21 

2.98 

0.11 

Interest Rate 
Exposure 

(+/-1bp) 

-/+1,810 

-/+315,514 

-/+2,266 

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Cash account 

1,470,847(6) 

Total GF 

1,325,672,422 

2.36 

-/+319,590 

6 

The  EUR  1.47  million  “cash  account”  balance  reported  in  this  table  does  not  include  any  payments 
relating  to  commissions,  fees  and  other  payments  not  strictly  depending  on  the  positions  in  the 
portfolio.This explains why it does not match the EUR 1.4 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. 

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2.4.2. 

 Performance 

Over  2010,  the  portfolio  delivered  a  1.06%  MTM  return.  The  evolution  of  the 
portfolio return and excess return vis-à-vis its benchmark is presented 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 %) 

31/01/2010 

1,245,031,747 

0.3156 

0.3156 

0.0418 

0.0418 

28/02/2010 

1,348,554,117 

0.7413 

1.0593 

31/03/2010 

1,356,372,573 

0.5798 

1.6452 

-0.0168 

0.1945 

0.0253 

0.2220 

30/04/2010 

1,345,731,250 

-0.7845 

0.8477 

-0.2953 

-0.0793 

31/05/2010 

1,358,700,770 

0.9638 

1.8197 

0.0545 

-0.0250 

30/06/2010 

1,353,152,984 

-0.4083 

1.4039 

-0.0381 

-0.0637 

31/07/2010 

1,359,222,271 

0.4995 

1.9104 

0.0796 

0.0168 

30/09/2010 

1,364,686,931 

-0.4744 

2.3202 

0.0209 

0.0149 

31/10/2010 

1,365,091,338 

0.0296 

2.3505 

0.1499 

0.1683 

30/11/2010 

1,349,094,965 

-1.1718 

1.1511 

-0.2018 

-0.0398 

31/12/2010 

1,347,937,302 

-0.0858 

1.0643 

-0.0917 

-0.1326 

During  Q1-2010,  the  evolution  of  the  EUR  yield  curve  over  the  same  period 
experienced  a  small  downward  shift  among  all  the  maturities,  which  positively 
impacted  the  return  of  the  securities-portfolio.  Over  Q1-2010,  the  credit  spread  on 
Greek bonds resumed its volatile behaviour, as observed since mid December 2009, 
and the prices of Greek securities continued to decline over that period. 

During Q2 2010, the sovereign debt crisis led by Greece heavily impacted the market 
value  of  the  securities-portfolio:  during  the  last  two  weeks  of  April  2010  the  credit 
spread  on  Greece  widened  substantially,  which  drove  the  GF-portfolio  and  its 
benchmark to a negative monthly performance. The higher concentration in Greece of 
the  portfolio  as  compared  to  its  benchmark,  explained  the  negative  excess  return 
observed at the end of April 2010. Significant price declines were observed also in the 
Irish, Portuguese, Spanish and Italian bonds over the same period. At the end of May 
2010, the credit spread on Greece tightened to the level observed at the beginning of 
April 2010, which positively impacted the performance of the GF’s portfolio. During 
June 2010, the credit spread on Greece started to widen again, negatively influencing 
the performance of the GF’s portfolio, which suffered also from the negative results 

EN 

16 

   EN

 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
of  the  bonds  issued  by  Hungary,  and  of  the  covered  bonds  issued  by  Depfa  ACS 
Bank. 

During Q3-2010, Greek bonds were the top performers in Europe, gaining for the first 
time  since  the  sovereign  debt  crisis.  Yields  on  Irish  bonds  widened  sharply  after 
Standard & Poor’s cut Ireland’s credit rating in August to AA- on the concern that the 
cost  of  supporting  the  nation’s  struggling  banks  would  have  swelled  the  budget 
deficit.  Portugal  joined  Greece  and  Ireland  as  one  of  the  peripheral  Eurozone 
countries not expected to meet their fiscal consolidation goals for 2010 and its credit 
risk  premium  compared  to  German  bunds  rose  to  record  levels.  Starting  from  July 
2010, Greek bonds became no longer eligible to be included in the basket of securities 
underlying the Iboxx Sovereign Indexes: the positive performance of Greek bonds, in 
which the GF’s portfolio had a concentration of 5.6% at the end of September 2010, 
mainly drove the GF-portfolio to the positive excess return observed at the end of Q3-
2010 

During Q4-2010, bond market contagion has spread from its initial source in Greece 
all  the  way  to  Italy  and  Belgium  via  Ireland,  Portugal  and  Spain  and  increased  the 
credit  spread  risk  of  bonds  issued  by  peripheral  sovereign  European  countries 
compared  to  German  Bunds.  The  exposure  in  bonds  issued  or  guaranteed  by  Italy, 
Ireland, Portugal, Spain, Greece and Belgium was the main driver of the GF-portfolio 
negative return and of the under performance versus its benchmark. 

EN 

17 

   EN

 
3. 

STATEMENT  OF  FINANCIAL  POSITION  OF  THE  FUND  AS  AT 
31 DECEMBER 2010 

The financial statements  for  the  Fund have been prepared by the EIB in accordance 
with  International  Financial  Reporting  Standards  (IFRS)  and  the  accounting  rules 
adopted by the European Commission, in particular ‘Accounting rule 11 — Financial 
assets  and  liabilities’,  dated  September  20047.  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 on 31 December 
2010 have been audited and certified by an independent auditor. 

3.1. 

Economic outturn account (Statement of financial performance) for the 
year ending on 31 December 2010 

Notes

From 01.01.2010 
 to 
 31.12.2010 
 EUR 

 From 01.01.2009 
 to 
 31.12.2009 
 EUR  

Financial operations revenues 

Interest income 

     Interest income on cash and cash equivalents 

     Interest income on Available For Sale Portfolio 
Realised gain on sale of Available For Sale Portfolio 
Income from securities lending activity 

Financial operations expenses 
Other financial charges 

8 

9 

           41,710,594.61   

            41,676,644.38  

            1,359,361.52   

              3,496,637.06  

          40,351,233.09   

1,576,548.78 

                  80,574.54   

            38,180,007.32  
                                 -  
                   77,047.72  

(850,345.40) 

(803,818.74) 

Thereof: Management fees 

(715,037.50) 

(687,539.60) 

SURPLUS FROM NON OPERATING ACTIVITIES

42,517,372.52 

             40,949,873.36  

SURPLUS FROM ORDINARY ACTIVITIES 

42,517,372.52 

            40,949,873.36  

ECONOMIC RESULT OF THE YEAR 

42,517,372.52 

40,949,873.36 

7

This is based on revised standards IAS 32 and 39, as issued by the IASB on 18 December 2003, and, consequently, 
does  not  integrate  the  provisions  set  out  in  the  version  of  IAS  39  endorsed  by  the  European  Commission  on  19 
November 2004. 

EN 

18 

   EN

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
  
  
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
                                                 
 
3.2. 

Balance sheet (Statement of financial position) as at 31 December 2010 

ASSETS 

CURRENT ASSETS 

Short-term Investments 

Available For Sale Portfolio - cost 
Available For Sale Portfolio – actuarial difference 
Available For Sale Portfolio – adjustment to fair value 
Available For Sale Portfolio – accrued interest 

Total Short-term Investments 

Short-term receivables 
      Other short term receivables 
      Thereof: Receivables from securities lending activity 
Total Short-term receivables 

Cash and Cash Equivalents 
Current accounts 
Short-term deposits – nominal  
Accrued interest on short-term deposits 
Other cash equivalents – cost 
Accrued interest on other cash equivalents 

Total Cash and Cash equivalents 

Total Current Assets  

TOTAL ASSETS 

Notes 

31.12.2010 
EUR 

31.12.2009 
EUR 

4 

5 

1,134,968,726.10 
(1,355,359.96) 
(1,888,129.14) 
21,594,414.66 
1,153,319,651.66 

1,004,786,115.50
(3,096,484.22)
27,525,747.60
20,197,940.31
1,049,413,319.19

- 
- 
- 

3,626.09
3,626.09
3,626.09

1,426,322.04 
123,637,000.00 
155,055.48 
68,708,475.06 
84,421.53 
194,011,274.11 

1,078,498.12
153,300,000.00
113,282.91
36,554,203.91
34,830.41
191,080,815.35

1,347,330,925.77 

1,240,497,760.63

1,347,330,925.77 

1,240,497,760.63

31.12.2010 
EUR 

31.12.2009 
EUR 

CONTRIBUTORS’ RESOURCES AND LIABILITIES 

Note 

A. CONTRIBUTORS’ RESOURCES 
Contributions  
Reserves 

 6 

588,227,788.12 

494,417,788.12

Available for sale reserve - First Time Application  
Available for sale reserve 

42,963.53 
(1,888,129.14) 

152,812.75
27,525,747.60

Accumulated surplus 

Results brought forward 
Economic result of the year 
Total Contributors’ resources 
B. CURRENT LIABILITIES 
Accounts Payable 

Others 

Total Current Liabilities  

717,683,872.56 
42,517,372.52 
1,346,583,867.59 

676,733,999.20
40,949,873.36
1,239,780,221.03

 7 

747,058.18  
747,058.18  

717,539.60
717,539.60

TOTAL CONTRIBUTORS’ RESOURCES AND 
LIABILITIES 

1,347,330,925.77 

1,240,497,760.63

EN 

19 

   EN

 
  
  
  
  
 
  
  
  
 
  
 
  
  
  
  
  
  
  
  
 
 
  
 
 
 
 
 
  
  
 
  
  
  
  
  
  
  
  
  
 
  
  
  
  
 
  
 
 
 
 
  
  
  
  
 
  
  
 
  
  
  
  
 
  
  
  
  
 
 
  
 
  
  
  
  
 
 
  
 
3.3. 

Statement of changes in contributors’ resources for the year ended 31 December 2010 (in EUR) 

Contributions 

Reserves 

Accumulated 
Surplus  

Economic Result of 
the year 

Total 
contributors’ resources 

Balance as at 01.01.2009 
Contributions received from  the European 
Commission 

First Time 
Application 
- Available 
For Sale  
reserve 
56,045.30

402,457,788.12

91,960,000.00

0.00

Change of First Time Application - Available For 
Sale reserve 

0.00

96,767.45

Available For 
Sale  
reserve 

11,509,579.98 628,715,763.42

48,018,235.78

1,090,757,412.60 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

91,960,000.00 

96,767.45 

16,016,167.62 

0.00

16,016,167.62

0.00

0.00

48,018,235.78

(48,018,235.78) 

0.00 

Change of Available For Sale reserve 

Allocation of the Economic result of the year 2008

Result of the year 2009 
Balance as at 31.12.2009 
Contributions received from the European 
Commission 
Change of First Time Application - Available For 
Sale reserve 

Change of Available For Sale reserve  

Allocation of the Economic result of the year 2009
Result of the year 2010 

0.00

0.00

0.00

0.00
0.00

0.00
494,417,788.12

0.00
152,812.75

0.00

0.00
27,525,747.60 676,733,999.20

40,949,873.36
40,949,873.36

40.949.873,36 
1,239,780,221.03 

93,810,000.00

0.00

0.00

(109,849.22)

0.00

0.00

0.00 (29,413,876.74)

0.00

0.00

0.00

0.00

0.00

0.00

93,810,000.00 

(109,849.22) 

(29,413,876.74) 

0.00
0.00

0.00
0.00

40,949,873.36
0.00

(40,949,873.36)

           42,517,372.52  

0.00 
          42,517,372.52 

Balance as at 31.12.2010 

   588,227,788.12   

42,963.53  

(1,888,129.14)

717,683,872.56  

          42,517,372.52  

           1,346,583,867.59 

EN 

20 

EN 

 
  
 
 
 
 
 
 
 
 
3.4. 

Cash flow statement as at 31 December 2010 

Investing activities 

Interest received on cash and cash equivalents 

   Management fee paid during the year 

Bank charges / audit fees paid during the year 

From 01.01.2010 
to 31.12.2010 

 From 01.01.2009 
to 31.12.2009 

EUR 

EUR 

1,267,997.83
(687,539.60)

(134,908.90)

4,236,711.81 
(658,322.32) 

(117,929.14) 

Purchase of investments - Available For Sale portfolio 

(202,164,895.00)

(228,822,855.00) 

Proceeds of investments - Available For Sale portfolio 

69,452,382.72

83,730,000.00 

Realised gains/losses on sale of Available For Sale assets 

1,576,548.78

0.00 

Interest received - Available For Sale portfolio 

Income from securities lending activity 

Net Cash Flows from investing activities 

Financing activities 

39,633,686.93

36,922,145.60 

85,822.31

73,421.63 

(90,970,904.93)

(104,636,827.42) 

Contributions received from the European Commission  

93,810,000.00

91,960,000.00 

 Net Cash Flows from financing activities 

93,810,000.00 

91,960,000.00 

Net increase/(decrease) in cash and cash equivalents 

2,839,095.07

(12,676,827.42) 

Cash and cash equivalents at beginning of financial year 

190,932,702.03 

203,609,529.45 

Cash and cash equivalents at the end of financial year 

      193,771,797.10   

190,932,702.03 

Cash and cash equivalents are composed of: 

Current accounts 

Short-term deposits  

Bills maturing within three months of issue 

Total cash and cash equivalents 

1,426,322.04  

1,078,498.12 

 123,637,000.00   

153,300,000.00 

68,708,475.06  

36,554,203.91 

 193,771,797.10   

190,932,702.03 

4. 

NOTES ON THE FINANCIAL STATEMENTS 

4.1. 

General disclosures 

The rules and principles for the management of the Guarantee Fund (the “Fund”) are 
laid  out  in  the  Convention  between  the  European  Commission  (the  “Commission”) 
and  the  European  Investment  Bank  (the  “EIB”)  dated  25  November  1994  and  the 
subsequent  amendments  dated  17/23  September  1996,  8  May  2002,  25  February 
2008, and 9 November 2010. 

The  main  principles  of  the  Fund,  as  extracted  directly  from  the  Convention,  are  as 
follows: 

The  Fund  will  operate  in  one  single  currency  being  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 the traditional rules of prudence 
adhered to for financial activities. It will have to pay particular attention to reducing 

EN 

21 

   EN

 
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
the risks and to ensuring that the managed assets have a sufficient degree of liquidity 
and transferability, taking into account the commitments to which the Fund will have. 

4.2. 

Significant accounting policies 

4.2.1.  Basis of preparation 

The  Fund’s  financial  statements  have  been  prepared  in  accordance  with  the 
accounting rules adopted by the Accounting Officer of the European Commission, in 
particular  “Accounting  rule  11  –  Financial  assets  and  liabilities”,  dated  December 
2004 and updated in October 2006 and December 2009. 

4.2.2. 

Significant accounting and judgments and estimates 

The  preparation  of  financial  statements  in  conformity  with  the  accounting  rules 
adopted by the Accounting Officer of the European Commission requires the use of 
certain critical accounting estimates. It also requires EIB Management to exercise its 
judgment  in  the  process  of  applying  the  Fund’s  accounting  policies.  The  areas 
involving a higher degree of judgment or complexity, or areas where assumptions and 
estimates are significant to the financial statements, are disclosed hereafter. 

The most significant use of judgments and estimates are as follows: 

•  Fair value of financial instruments  

Where  the  fair  values  of  financial  assets  and  financial  liabilities  recorded  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 fair 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 its financial instruments at each reporting date to assess whether an 
allowance  for  impairment  should  be  recorded  in  the  economic  outturn  account.  In 
particular, judgment by EIB Management is required in the estimation of the amount 
and timing of future cash flows when determining the level of allowance required. 

4.2.3. 

Summary of significant accounting policies 

4.2.3.1.  Foreign currency conversion 

The Fund uses the Euro (EUR) for presenting its financial statements, which is also 
the functional currency. 

Foreign  currency  transactions  are  translated  at  the  exchange  rate  prevailing  on  the 
date of the transaction.  

EN 

22 

   EN

 
Monetary  assets  and  liabilities  denominated  in  currencies  other  than  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. 

Non-monetary items that are measured in terms of historical cost in a foreign currency 
are  translated  using  the  exchange  rates  at  the  dates  of  the  initial  transactions.  Non-
monetary items measured at fair value in a foreign currency are translated using the 
exchange rates at the date when the fair value was determined. 

Exchange differences on non-monetary assets are a component of the change in their 
fair  value.  Depending  on  the  classification  of  a  non-monetary  financial  asset, 
exchange differences are either recognised in the economic outturn account or within 
the reserves. 

Exchange differences arising on the settlement of transactions at rates different from 
those  at  the  date  of  the  transaction,  and  unrealised  foreign  exchange  differences  on 
unsettled  foreign  currency  monetary  assets  and  liabilities,  are  recognised  in  the 
economic outturn account. 

The elements of the economic outturn account are translated into Euro on the basis of 
the exchange rates prevailing at the end of each month. 

4.2.3.2.  Cash and cash equivalents 

The Fund defines cash and cash equivalents as current accounts, short-term deposits 
with original maturities of three months or less and bills maturing within 3 months of 
issue. 

4.2.3.3.  Short-term investments 

The  bond  portfolio,  seen  as  a  short-term  investment  portfolio,  is  made  up  of  euro-
denominated  securities.  These  securities  are  classified  as  Available  For  Sale  (AFS) 
according to the accounting rules adopted by the Accounting Officer of the European 
Commission and consequently, are carried out at their fair value through contributors’ 
resources.  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.  Impairment  losses  identified  are  recognised  in  the  economic  outturn 
account for the year. 

On disposal of an available for sale security, the accumulated unrealised gain or loss 
included in contributors’ resources is transferred to the economic outturn account for 
the  year.  Interest  income  on  available-for-sale  securities  is  included  in  “interest 
income”. 

The determination of fair values of available for sale investments is generally based 
on quoted market rates in active markets. 

These securities are initially measured at their acquisition cost, being their 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  remaining  life  of  each  of  the 

EN 

23 

   EN

 
securities using the effective interest rate method as specified under Accounting Rule 
11. 

Securities  are  considered  impaired  if  there  is  objective  evidence  of  impairment  as  a 
result of one or more events that occurred after the initial recognition of the security 
(a “loss event”) and that loss event has an impact on the estimated future cash flows 
of the security that can be reliably estimated. 

Evidence of impairment is mainly about significant financial difficulties of the issuer, 
a  breach  of  contract,  a  restructuring  of  the  debt  of  the  issuer,  a  high  probability  of 
bankruptcy,  etc.  It  is  important  to  stress  that  the  disappearance  of  an  active  market 
because the 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 
available information. A decline in the fair value of a financial asset below its cost or 
amortised cost is not necessarily evidence of impairment. 

If in a subsequent  period, the fair  value of a debt instrument classified as available-
for-sale  increases  and  the  increase  can  be  objectively  related  to  an  event  occurring 
after  the  impairment  loss  was  recognised  in  the  economic  outturn  account,  the 
impairment loss shall be reversed, with the amount of the reversal recognised in the 
economic outturn account. 

4.2.3.4.  Contributions 

Contributions received from the European Commission or paid back to the European 
Commission  are  recognised  in  the  balance  sheet  on  the  date  when  payments  are 
received or made. 

4.2.3.5.  Securities lending activity 

In  April  2008  the  Fund  entered  into  an  automatic  securities  lending  program  with 
Euroclear  Bank  SA/NV  to  lend  assets  from  its  Available  for  Sale  bond  portfolio. 
Within this securities lending program all bonds from the Available for Sale portfolio 
are eligible to be lent out. 

Securities lent within the automatic securities lending program are not derecognized 
from the Fund’s balance sheet as the control of the contractual rights that comprises 
these securities are still held by the Fund itself. 

Income from securities lending activity is recorded in the economic outturn account 
on an accrual basis. 

4.2.3.6.  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. 

EN 

24 

   EN

 
4.3. 

Financial risk management 

4.3.1. 

Interest rate and liquidity risks 

•  Interest rate risk position 

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 hedging is not performed. 

As the transactions and operations are only denominated in Euro, no other hedging is 
required. 

The  distribution  of  the  Fund’s  holdings  at  31  December  2010  (excluding  accrued 
interest) is detailed in the table below: 

Fixed rate investments 

Segments 

Less than 3 
months 
EUR 

3 months to 1 
year 
EUR 

1 to 10 years 
EUR 

Floating rate 
bonds EUR 

TOTAL 

EUR 

Current accounts 
Short term deposits - 
nominal 

AFS portfolio - at 
fair value 

Other cash 
equivalents- 
at cost 

TOTAL 

Percentage 

1,426,322.04 
123,637,000.00 

0.00
0.00

0.00 
0.00 

0.00 
0.00 

1,426,322.04
123,637,000.00

39,030,366.00 

114,224,420.00 

897,381,041.00 

81,089,410.00 

1,131,725,237.00

68,708,475.06 

0.00

0.00 

0.00 

68,708,475.06

232,802,163.10 

114,224,420.00

897,381,041.00 

81,089,410.00  1,325,497,034.10

17.56% 

8.62%

67.70% 

6.12% 

100.00%

At 31  December 2010,  for  the  Cash  and Cash equivalents (fixed term deposits),  the 
interest rate range is between 0.85% and 1.25% (2009: between 0.45% and 0.74%). 

For the Available For Sale (AFS) securities portfolio, the effective interest rate range 
is between 1.09% and 5.90% (2009: between 2.11% and 5.52%). 

The  distribution  of  the  Fund’s  holdings  at  31  December  2009  (excluding  accrued 
interest) is detailed in the table below: 

EN 

25 

   EN

 
 
 
 
Segments 

Current accounts 
Short term deposits - 
nominal 

AFS portfolio - at fair 
value 

Other cash 
equivalents- 
at cost 
TOTAL 
Percentage 

Less than 3 
months 
EUR 

1,078,498.12

153,300,000.00

Fixed rate investments 

3 months to 1 
year 
EUR 

1 to 10 years 
EUR 

Floating rate 
bonds EUR 

TOTAL 
EUR 

0.00

0.00

0.00

0.00

0.00 

1,078,498.12

0.00 

153,300,000.00

15,164,224.80

73,514,480.00

901,281,274.08

39,255,400.00  1,029,215,378.88

36,554,203.91
206,096,926.83
16.88%

0.00
73,514,480.00
6.03%

0.00
901,281,274.08
73.87%

0.00 

36,554,203.91
39,255,400.00  1,220,148,080.91
100.00%

3.22% 

EN 

26 

   EN

 
  
  
 
 
•  Liquidity position 

Maturity 

( at 31 
December 
2010) 

Assets in EUR 

Current 
accounts 

Short term 
deposits 

of which: 
accrued interest 

Other cash 
equivalents 

of which: 
accrued interest 

Short-term 
Investments 

of which: 
accrued interest 

less than 3 
months 

3 months to 1 
year 

1 to 10 years 

maturity 
undefined 

TOTAL 

1,426,322.04 

123,792,055.48 

155,055.48 

68,792,896.59 

84,421.53 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

1,426,322.04 

0.00 

123,792,055.48 

0.00 

155,055.48 

0.00 

68,792,896.59 

0.00 

84,421.53 

39,819,241.34 

131,006,760.80

982,493,649.52

0.00 

1,153,319,651.66

788,875.34 

20,805,539.32 

0.00 

0.00 

21,594,414.66 

Total 

233,830,515.45 

131,006,760.80

982,493,649.52

0.00 

1,347,330,925.77

Contributors resources and Liabilities in EUR 

Contributors’ 
resources 

Accounts 
Payable 

Total 

0.00 

0.00 

0.00 

1,346,583,867.59 

1,346,583,867.59 

747,058.18 

0.00 

0.00 

0.00 

747,058.18 

747,058.18 

0.00

0.00

1,346,583,867.59 

1,347,330,925.77

EN 

27 

   EN

 
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity 

less than 3 
months 

3 months to 1 
year 

1 to 10 years 

maturity 
undefined 

TOTAL 

Assets in EUR 
Short term 
receivables 
Current 
accounts 
Short term 
deposits 
of which: 
accrued interest 
Other cash 
equivalents 
of which: 
accrued interest 
Short-term 
Investments 

of which: 
accrued interest 
Total 

3,626.09 

1,078,498.12 

153,413,282.91 

113,282.91 

36,589,034.32 

34,830.41 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 

0.00 

3,626.09

1,078,498.12

0.00 

153,413,282.91

0.00 

113,282.91

0.00 

36,589,034.32

0.00 

34,830.41

22,772,460.25 

86,104,184.86 

940,536,674.08 

0.00 

1,049,413,319.19

7,608,235.45 
213,856,901.69 

12,589,704.86
86,104,184.86

0.00
940,536,674.08 

0.00 
0.00 

20,197,940.31
1,240,497,760.63

Contributors’ resources and Liabilities in EUR  
Contributors’ 
resources 
Accounts 
Payable 

717,539.60 

0.00 

Total 

717,539.60 

0.00

0.00

0.00

0.00 

1,239,780,221.03 

1,239,780,221.03

0.00 

0.00 

0.00 

717,539.60

1,239,780,221.03 

1,240,497,760.63

4.3.2. 

Credit Risk 

•  Fixed Term Deposits - Profile of counterparties 

In  accordance  with  the  agreement  between  the  Community  and  the  EIB  on  the 
management  of  the  Fund,  all  interbank  investments  should  have  a  minimum  issuer 
short term rating from Moody's or equivalent of P-1. The following table shows the 
ratings  of  the  interbank  investments  as  at  31  December  2010  including  accrued 
interest. 

Long term 
rating  

 Short term 
rating  

31.12.2010 
EUR 

31.12.2009 
EUR 

P-1 
P-1 
P-1 
P-1 

Aa2 
Aa3 
A1 
A2 

Total 

3,402,247.78
58,608,907.72
61,780,899.98
0.00

2.75%
47.34%
49.91%
0.00%

20,007,916.67
93,487,631.85
18,913,641.39
21,004,093.00

13.04 %
60.94 %
12.33 %
13.69 %

123,792,055.48

100.00%

153,413,282.91

100.00 %

•  Other cash equivalents – profile of counterparties 

As at 31 December 2010, the Fund invested in four short term discount papers. The 
issuer profile, including accrued interest is as follows: 

EN 

28 

   EN

 
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
  
  
 
  
  
 
  
 
  
  
 
 
Long term rating  

 Short term 
rating  

31.12.2010 

EUR 

31.12.2009 

EUR 

Aaa 

Aa2 

Aa3 

A1 

Total 

P-1 

P-1 

P-1 

P-1 

0.00

0.00% 

10,493,735.01 

14,974,290.59

53,818,606.00

21.77% 

78.23% 

0.00 

7,998,681.86 

0.00

0.00% 

18,096,617.45 

28.68%

0.00%

21.86%

49.46%

68,792,896.59

100.00% 36,589,034.32 

100.00%

•  Available for Sale portfolio - Profile of issuers 

All  the  securities  held  in  the  portfolio  are  in  line  with  the  revised  management 
guidelines and meet the following criteria for: 
–  Securities issued or guaranteed by Member States8: minimum rating Baa3  

–  Securities  issued  by  a  Supranational,  other  States  or  Public  Company:  minimum 

rating Aa2  

–  Covered Bonds: rating Aaa  

–  Securities issued by Banks and Corporates: minimum rating Aa2  

As at 31 December 2010 and 31 December 2009 the profile of the available for sale 
portfolio by issuers and the market value excluding accrued interest are as follows: 

Issuer 

31.12.2010 

EUR 

31.12.2009 

EUR 

BANKS Aaa 

MEMBER STATE Aaa 

MEMBER STATE Aa1 

MEMBER STATE Aa2 

MEMBER STATE A1 

MEMBER STATE A2 

MEMBER STATE Baa1 

MEMBER STATE Baa3 

PUBLIC COMPANY Aaa 

CORPORATE Aa1 

COVERED BOND Aaa 

18,425,020.00 
314,269,578.00

101,983,335.00

76,806,315.00

92,398,760.00

71,826,480.00

25,256,160.00

74,576,694.00

1.63%

5,248,441.50

27.77%

345,569,222.84

9.01%

6.79%

8.16%

6.35%

2.23%

6.59%

37,671,628.40

126,846,827.20

27,683,049.00

91,259,008.94

26,120,568.10

0.00

185,788,890.00

16.42%

216,311,016.20

4,999,200.00

0.44%

4,947,500.00

165,394,805.00

14.61%

147,558,116.70

0.51% 

33.58% 

3.66% 

12.32% 

2.69% 

8.87% 

2.54% 

0.00% 

21.02% 

0.48% 

14.34% 

Total 

1,131,725,237.00

100.00

1,029,215,378.88

100.00% 

8 

Member States securities (including securities guaranteed by Member States) may be kept in 
an event of downgrade below the minimum requirements. This applies also to cases where the 
rating downgrade would trigger a lower limit. 

EN 

29 

   EN

 
  
  
 
 
  
 
  
  
 
 
  
 
  
 
 
  
  
 
 
 
  
  
 
  
 
 
                                                 
4.4. 

Short-term Investments – Available For Sale portfolio 

The following tables show the situation of the Available For Sale portfolio: 

Amount at 1 January 2009 

Acquisitions 

Disposals and withdrawals (original acquisition cost) 

Change in carrying amount -  actuarial difference 

Change in accrued interest 

Change in fair value 

Amount at 31 December 2009 

Amount at 1 January 2010 

Acquisitions 

Disposals and withdrawals (original acquisition cost) 

Change in carrying amount -  actuarial difference 

Change in accrued interest 

Change in fair value 

Amount at 31 December 2010 

EUR 

886,949,667.40 

228,822,855.00 

(81,328,791.00) 

(2,463,198.22) 

1,416,618.39 

16,016,167.62 

1,049,413,319.19 

EUR 

1,049,413,319.19 

261,842,896.10 

(131,660,285.50) 

1,741,124.26 

1,396,474.35 

(29,413,876.74) 

1,153,319,651.66 

At  31  December  2010,  the  nominal  value  of  the  investment  portfolio  was  EUR 
1,136.7 million9 (2009: EUR 1,003.9 million), against a market value of EUR 1,131.7 
million (2009: EUR 1,029.2 million), without accrued interest. 

Accrued interest at 31 December 2010 amounting to EUR 21,594,414.66 (2009: EUR 
20,197,940.31) is split between: 

–  •Fixed rate notes  EUR 21,512,925.38 (2009 EUR: 20,161,491.94) 

–  •Floating rate notes EUR 81,489.28 (2009: EUR: 36,448.37) 

As  at  31  December  2010  the  market  value  of  securities  lent  within  the  automatic 
security  lending  agreement  with  Euroclear  excluding  accrued  interest  amounts  to 
EUR 520,056,241.75 (2009: EUR 30,316,307.73). 

4.5. 

Cash and Cash Equivalents 

The following table shows the split of cash and cash equivalents (amounts including 
accrued interest): 

9 

Zero coupon bonds included 

EN 

30 

   EN

 
  
 
  
 
                                                 
Description 

Unrestricted Cash 

31.12.2010 
EUR 

31.12.2009 
EUR  

Current Accounts 
Short term deposits 
Other cash equivalents – bills maturing within 3 months of 
issue 
Total 

1,426,322.04
123,792,055.48
68,792,896.59

          1,078,498.12   
153,413,282.91 
36,589,034.32 

194,011,274.11

191,080,815.35 

4.6. 

Contributions 

Contributions  are  increased  by  contributions  received  from  the  budget  of  the 
European Union and by the recovery of previous interventions made by the Fund with 
regard  to  defaulted  guaranteed  loans.  Contributions  are  either  decreased  by 
repayments  requested  by  the  European  Commission  or  by  interventions  the  Fund  is 
paying  with  regard  to  defaulted  guaranteed  loans.  These  cash  movements  are 
recognised in the balance sheet on the date when payments are received or made. 

During the financial year 2010 the Fund received one contribution from the European 
Commission  amounting  to  EUR  93,810,000.00  compared  to  the  financial  year  2009 
when the Fund received EUR 91,960,000.00 from the European Commission. 

4.7. 

Current Liabilities 

Description 

31.12.2010 
EUR 

31.12.2009 
EUR 

Accounts Payable 

Management Fees 

Audit Fees 

Payable bond lending fees 

Total 

715,037.50 

30,399.00 

1,621.68 

747,058.18

687,539.60 

30,000.00 

0.00 

717,539.60 

Management  fees  are  payable  to  the  EIB  on  an  annual  basis.  The  management  fees 
are  calculated  as  a  percentage  per  annum  of  the  average  of  the  Fund’s  assets.  This 
percentage is based upon a declining rate dependent on the Fund’s assets. 
4.8. 

Financial operations revenues 

Description 

From 01.01.2010 to 
31.12.2010 
EUR 

From 01.01.2009 to 
31.12.2009 
EUR 

Total amount, thereof: 
Interest income, thereof:  

Interest income on cash and cash equivalents 

Interest income on Available For Sale Portfolio 

Other financial income, thereof:  

Realised gain on sale of Available For Sale Portfolio  

Income from securities lending activity 

43,367,717.92
41,710,594.61

1,359,361.52 

40,351,233.09 

1,657,123.32

1,576,548.78 

80,574.54 

41,753,692.10
41,676,644.38

3,496,637.06 

38,180,007.32 

77,047.72

0.00 

77,047.72 

EN 

31 

   EN

 
  
  
  
 
  
 
 
  
  
 
 
  
 
 
 
 
4.9. 

Financial operations expenses 

Description 

From 01.01.2010 to 
31.12.2010 
EUR 

From 01.01.2009 
to 31.12.2009 
EUR 

Total amount, thereof: 

Management fees 

Bank fees 

Audit fees 

4.10. 

Subsequent events 

(850,345.40)

(715,037.50)

(103,830.90)

(31,477.00)

(803,818.74) 

(687,539.60) 

(86,279.14) 

(30,000.00) 

There  have  been  no  material  post-balance  sheet  events,  which  would  require 
disclosure or adjustment to the 31 December 2010 financial statements. 

EN 

32 

   EN