COMMISSION STAFF WORKING DOCUMENT (SWD) Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL ON THE GUARANTEE FUND AND ITS MANAGEMENT IN 2011
Date: 2012-07-18
Institutions: European Commission
Subjects: credit guarantee, financial control, financial year, fund (EU), management

EUROPEAN COMMISSION 

Brussels, 18.7.2012  
SWD(2012) 217 final 

COMMISSION STAFF WORKING DOCUMENT 

(SWD) 

Accompanying the document 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

ON THE GUARANTEE FUND AND ITS MANAGEMENT IN 2011 

{COM(2012) 399 final} 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

Introduction .................................................................................................................. 4 

Guarantee Fund – Management Report as at 31 December 2011................................ 4 

Development of the Fund in 2011................................................................................ 4 

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

2.2.1.  Contributions paid in at 31 December 2011 ................................................................ 4 

2.2.2.  The Fund’s holdings net of accrued interest at 31 December 2011............................. 4 

2.3. 

General and segmental analysis of the Fund................................................................ 5 

2.3.1.  Liquidity analysis ......................................................................................................... 5 

2.3.2.  General analysis of the results of the Fund .................................................................. 6 

2.3.3.  Analysis by segment .................................................................................................... 6 

2.3.3.1.  Analysis of money market operations.......................................................................... 6 

2.3.3.2.  Analysis of bond portfolio results ................................................................................ 6 

2.4. 

Benchmarking, performance and interest rate risk analysis......................................... 6 

2.4.1.  Benchmarking .............................................................................................................. 6 

2.4.2.  Performance ................................................................................................................. 6 

2.4.3. 

Interest rate risk............................................................................................................ 6 

3. 

3.1. 

3.2. 

3.3. 

Statement of Financial Position of the Fund as at 31 December 2011 ........................ 6 

Economic Outturn Account for the year ended 31 December 2011 ............................ 6 

Balance Sheet as at 31 December 2011 ....................................................................... 6 

Statement of changes in contributors’ resources for the year ended 31 December 
2011 (in EUR) .............................................................................................................. 6 

3.4. 

Cash Flow statement for the year ended 31 December 2011....................................... 6 

4. 

4.1. 

4.2. 

Notes to the financial statements.................................................................................. 6 

General disclosures ...................................................................................................... 6 

Significant accounting policies .................................................................................... 6 

4.2.1.  Basis of preparation...................................................................................................... 6 

4.3. 

4.4. 

Significant accounting and judgments and estimates................................................... 6 

Summary of significant accounting policies ................................................................ 6 

4.4.1.  Changes in accounting policies.................................................................................... 6 

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4.4.2.  Foreign currency translation ........................................................................................ 6 

4.5. 

Cash and cash equivalents............................................................................................ 6 

4.5.1.  Short-term investments ................................................................................................ 6 

4.5.2.  Contributions................................................................................................................ 6 

4.6. 

4.7. 

4.8. 

Securities Lending Activity.......................................................................................... 6 

Taxation........................................................................................................................ 6 

Financial Risk Management......................................................................................... 6 

4.8.1. 

Interest Rate and Liquidity Risks................................................................................. 6 

4.9. 

Credit Risk ................................................................................................................... 6 

4.10. 

Short-term Investments – Available For Sale portfolio ............................................... 6 

4.11.  Cash and Cash Equivalents .......................................................................................... 6 

4.12.  Contributions................................................................................................................ 6 

4.13.  Current Liabilities ........................................................................................................ 6 

4.14. 

Financial operations revenues ...................................................................................... 6 

4.15. 

Financial operations expenses...................................................................................... 6 

4.16. 

Subsequent events ........................................................................................................ 6 

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1. 

INTRODUCTION 

According to the Article 7 of the guarantee fund regulation, the assets of the Guarantee Fund are 
managed  by  the  EIB.  The  agreement  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  has  to  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 is included in section 3. 

2. 

GUARANTEE FUND – MANAGEMENT REPORT AS AT 31 DECEMBER 2011 

2.1. 

Development of the Fund in 2011 

As  at  31  December  2011  total  assets  (excluding  accrued  interest)  of  the  Guarantee  Fund  (the 
“Fund”) amounted to EUR 1,734.71 million against EUR 1,464.4 million at 31 December 2010, an 
increase of EUR 270.3 million. 

)
o
r
u
e
s
n
o

i
l
l
i

m

(

2011

2010

1,800.0

1,740.0

1,680.0

1,620.0

1,560.0

1,500.0

1,440.0

1,380.0

1,320.0

1,260.0

1,200.0

Jan

Mar

May

Jul

Sep

Nov

Fig.1: Development of total assets in 2011 and 2010 

1 

The balance of total assets includes a contribution receivable of EUR 260.2 million (contribution due in 2012 
but  recognised  in  December  2011)  (2010:  EUR  138.8  million).  Since  2011  the  accounting  policy  is  that 
contributions are recognised or derecognised in the Fund’s balance sheet at the date when they become due or 
owed according to articles 3, 4, 5 and 6 of the Council Regulation (EC, Euratom) No 480/2009 of 25 May 
2009  establishing  a  Guarantee  Fund  for  external  actions  whereas  previously  the  recognition/derecognition 
was done on a cash-basis.  

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The  increase  of  total  assets  in  December  2011  mainly  reflects  the  inclusion  of  a  contribution 
receivable of EUR 260.2 million to be paid in early 2012.  

The  net  operating  result  amounted  to  EUR  42.15  million  at  31  December  2011  compared  with 
EUR 42.52 million at 31 December 2010.  

2.2. 

Situation of the Fund  

2.2.1.  Contributions paid in at 31 December 2011 

The  contributions  paid  into  the  Fund  by  the  European  Union  budget  increased  by  EUR  138.9 
million,  or  23.6%  from  EUR  588.2  million  at  31  December  2010  to  EUR  727.1  million  at  31 
December 2011.  

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

Contributions paid in (in EUR) 

Situation at 

Movements 

Situation at 

31/12/2010 

in 2011 

31/12/2011 

Provisioning 

Repayment of surplus 

Activation of guarantee 

Recovery of amounts guaranteed 

Repayment of Funds (9%) 

+ 

- 

- 

+ 

- 

2,990,775,162.91

138,880,000.00

3,129,655,162.91 

(1,775,870,000.00)

0.00

(1,775,870,000.00) 

(477,860,856.19)

0.00

(477,860,856.19) 

576,705,008.19

0.00

576,705,008.19 

(725,521,526.79)

0.00

(725,521,526.79) 

Balance 

588,227,788.12

138,880,000.00

727,107,788.12 

2.2.2.  The Fund’s holdings net of accrued interest at 31 December 2011 

The Fund’s holdings at 31 December 2011 excluding accrued interest and contributions receivable 
totalled  

EUR 1,474.5 million as detailed below: 

– 

– 

EN 

EUR 299.6 million in the monetary portfolio (nominal value of interbank term deposits); 

EUR 1.3 million in the current accounts;  

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– 

EUR  1,173.6  million  in  the  Available  For  Sale  (AFS)  (market  value  of  fixed  rate  and 
floating rate bonds excluding accrued interest) 

The Fund operates in one currency only, the Euro. 

2.3. 

General and segmental analysis of the Fund 

2.3.1.  Liquidity analysis 

The liquidity position of the Fund at 31 December 2011 is outlined in the table below (details can 
be found in section 4.8.1).  

less than 3 
months 

o 1 year 

1 to 10 years 

maturity 
undefined 

TOTAL 

Total Assets 

361,646,677.30 

400,411,46
0.76

994,147,018.0
0

0.00 

1,756,205,156.06

Contributors resources and Liabilities in EUR 

Total 
contributors’ 
resources  

Total 
Liabilities  

0.00 

771,059.84 

0.00

0.00

0.00

1,755,434,096.22 

1,755,434,096.22

0.00

0.00 

771,059.84

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2.3.2.  General analysis of the results of the Fund 

Overall, during the reporting period 1 January 2011 to 31 December 2011 the Fund achieved 
EUR  42.15  million  in  net  revenue.  The  following  table  outlines  the  net  revenue  earned  in 
2011 and compares it with that of 2010: 

In EUR millions 

December 2011 

December 2010 

Interest income on cash & cash equivalents 

Interest income on AFS assets 

Net realised gain on sale of AFS assets 

Income from securities lending activity 

Net realised loss on sale of AFS assets 

Commission and other charges 

4.12 

40.77 

0.00 

0.09 

-1.94 

-0.89 

9.8% 

96.7% 

0.0% 

0.2% 

-4.6% 

-2.1% 

1.36 

40.35 

1.58 

0.08 

0.00 

-0.85 

3.2% 

94.9% 

3.7% 

0.2% 

0.0% 

-2.0% 

Total 

42.15 

100.0% 

42.52 

100.0% 

2.3.3.  Analysis by segment 

2.3.3.1.  Analysis of money market operations 

Money-market investments (excluding accrued interest) amount to EUR 300.9 million at 31 
December 2011, as compared to EUR 212.7 million a year before. 

• 

Evolution of money-market rates in 2011 

In  light  of  sluggish  growth  in  the  Euro  area  and  prospects  of  slow  recovery  ahead,  the 
European Central Bank (ECB) decided to lower the reference rate in two consecutive steps, in 
November  2011  from  1.50%  to  1.25%  and  in  December  2011  from  1.25%  to  the  current 
1.00%. Market sentiment in 2011 was still affected by the problems of Euro-area peripheral 
countries,  with  particular  attention  to  the  details  of  a  potential  restructuring  of  the  Greek 
sovereign  debt.  The  EU  and  euro-area  authorities  took  measures  in  order  to  stabilize  the 
situation  and  inject  liquidity  and  confidence  into  the  market.  In  this  respect,  a  new  open 
market operation was launched by the ECB in December 2011, the 3-year LTRO, to provide 
liquidity to the financial system. The whole year 2011 was characterized by excess liquidity in 
the  system  which  kept  rates  at  low  levels,  with  high  volatility  at  regular  intervals.  EONIA 
kept  trading  with  quite  high  volatility,  despite  liquidity  conditions  remaining  ample  (excess 
cash in the market).  

Figure 2 shows the evolution of the one- and three-month Euribor during 2011. 

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1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

1
1
0
2
/
1
0
/
3
0

1
1
0
2
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2
0
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3
0

1
1
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3
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1
1
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4
0
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0

1
1
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2
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5
0
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3
0

1
1
0
2
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6
0
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7
0
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1
1
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2
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8
0
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3
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1
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2
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9
0
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1
1
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1
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2
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1
1
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3
0

1
1
0
2
/
2
1
/
3
0

Eur 1m

Eur 3m

Fig. 2: Evolution of Money Market rates during 2011 (source Bloomberg) 

• 

Profile of counterparties 

In  accordance  with  the  agreement  between  the  European  Union  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: 

Aa3/ P-1 
35.1%

A1/ P-1 
34.9%

A2/ P-1
 30.0%

Fig. 3: Short term interbank investments by type of counterparty at 31 December 2011 

• 

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 

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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  2011,  the  market  value  (excluding  accrued 
interest) of fixed rate securities with a residual period to maturity of less than three months 
amounted  to  EUR  44.1  million,  between  3  months  and  one  year  EUR  108.1  million  and 
between one and 10 years EUR 817.9 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. 

At 31 December 2011, the nominal value of the investment bond portfolio (fixed and FRN) 
was EUR 1,212.3 million, against a clean market value of EUR 1,173.6 million. 

The global (modified) duration of the bond portfolio decreased over 2011 to reach 1.81 years 
at the end of the year. As of 31 December 2011, the market value (excluding accrued interest) 
of the investment bond portfolio came to EUR 1,173.6 million (2010: EUR 1,116.7 million) 
compared with a book value (including premiums/discounts) of EUR 1,207.8 million (2010: 
EUR 1,118.6  million),  which  gives  a  unrealised  fair  value  loss  EUR -34.2  million  (2010: 
EUR -1.9 million).  

During 2011, the euro area 2- to 10-year yield curve spread flattened by 44 basis points to the 
level of 166 basis points. The movement occurred as a result of short-term yields declining by 
69.7 basis points, whereas the long-term yields decreased by 114.1 basis points as shown in 
figure 4.  

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Fig.  4:  Euro  area  yield  curve  flattened  during  2011  using  German  government  benchmark 
bonds  

(Source Bloomberg) 

In  accordance  with  the  2011  approved  investment  strategy  and  in  compliance  with  the 
guidelines, a total nominal amount of EUR 279.5 million (excluding coupon payments) was 
invested in fixed and floating rate SSA2 (48%) and sub-sovereign (14%) securities, covered 
bonds (36%) and corporate bonds (2%) 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  total  return  within  the  guidelines  by  taking  into  account  the 
general macroeconomic environment and maintaining relatively conservative risk profile with 
respect  to  the  relative  country  allocation  versus  the  corresponding  benchmark.  The  chart 
below  outlines  the  total  2011  investments  as  well  as  the  country  diversification  of  the 
portfolio. 

2011 Inve stments

14% 2%

36%

48%

SSA

Covered Bonds

Sub-Sovereign

Corporates

2 

Sovereign Supra and Agency 

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Country e xpos ure

4%

4%

4%

4% 2%

5%

7%

8%

9%

12%

41%

Germany 
France
The Netherlands
Supranational
Spain

Switzerland
Australia

Norway
Slovakia
UK
Austria

As of 1 January 2011, a total nominal amount of EUR 152.5 million of redemptions on the 
long-term  portfolio  was  scheduled  for  the  year  with  EUR  137.5  million  of  fixed  rate  bonds 
and EUR 15 million of Floating Rate Notes. 

Fitch is the only rating agency still attributing an AAA rating to the 2 covered bonds issued 
by  Depfa  ACS  Bank,  in  which  the  GF-portfolio  had  an  exposure  of  EUR  36  million.  In 
February  2011,  a  partial  sale  was  executed,  reducing  the  existing  position  of  the  Depfa 
4.375% 15/01/2015 by EUR 10.5 million. A realized gain of roughly EUR 0.522 million was 
reported for the life time of the investment (in addition to the coupon). 

It is worth mentioning that floating rate notes issued by core Euro area entities continued to 
remain an attractive investment opportunity for the portfolio throughout 2011 given that they 
offered very good returns, for example German Pfandbriefe and Laender in a floating format 
traded  at  much  higher  spreads  than  their  fixed  coupon  equivalents  of  comparable  maturity. 
For  that  reason,  most  of  the  total  investments  executed  during  2011  were  effected  in  the 
floating format with EUR 152 million or 54 % versus EUR 127.5 million or 46% in fixed rate 
bonds. As regards the country diversification, Germany was favoured with EUR 102 million 
or 67 % compared to 33% of the remaining position (Australia 10%, France, Switzerland and 
the UK 20% and The Netherlands 30%). 

The  credit  ratings  of  peripheral  countries  remained  under  pressure  during  2011,  so  as  for 
peripheral  covered  bonds.  On  3rd  August,  S&P  cut  the  AAA  rating  of  five  Spanish  AYT 
Cedulas held in the GF portfolio for a total nominal amount of EUR 49 million. According to 
the  guidelines,  these  Spanish  covered  bonds  were  no  longer  eligible  and  the  relevant  assets 
had  to  be  replaced  by  other  assets  of  adequate  quality  as  they  triggered  a  mandatory  sale 
notification  from  risk  management.  In  a  difficult  market  environment  and  in  order  to  avoid 
selling the positions at distressed prices, orders were left with only a few counterparties. As 
the market situation started to aggravate during the remaining summer period till December, 
no potential tradable market prices were available. However, by the end of December EUR 26 
million  were  sold.  The  remaining  position  of  EUR  23  million  was  sold  smoothly  at  the 
beginning of 2012 when markets started to stabilize. 

On  20  December,  S&P  lowered  the  rating  of  the  two  covered  bond  programmes  of  Westdeutsche 
Immobilienbank, following a downgrade of the issuer credit rating (ICR). The latter downgrade was 
based  on  its  “weak”  business  position,  “moderate”  risk  position,  “average”  funding,  and  hardly 
“adequate” liquidity, capital and earnings. 

A  mandatory  sale  notification  was  issued  after  the  downgrade  by  S&P  of  Westdeutsche 
Immobilienbank's  Mortgage  and  Public-Sector  covered  bonds  from  AAA  to  AA.  As  a  consequence, 
the position of € 10 million held in the GF-portfolio  was no longer eligible according to article 3.2.2.3 

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(2)  of  the  relevant  guidelines.  The  process  of  selling  the  bonds  was  executed  smoothly  at  the 
beginning of 2012. 

• 

Breakdown of the investment portfolio between fixed rate and variable rate securities 
(nominal value) 

Variable rate 
17%

Fixed rate 83%

Fig.  6:  Investment  portfolio  breakdown  between  fixed  and  variable  rate  securities  at  31 
December 2011. 

• 

Redemption profile of investment portfolio (nominal value) 

)
o
r
u
e

n
o

i
l
l
i

m

(

300

250

200

150

100

50

0

Variable rate

Fixed rate

2012

2013

2014

2015

2016

2017

2018

Fig.7: Investment portfolio: Redemption profile at 31 December 2011 

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 States: minimum rating Baa3 

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– 

– 

– 

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 2011 is as follows: 

EUROPEAN UNION Aaa
1.79%

COVERED BOND Aa2
1.92%

MEMBER STATE Baa3
3.32%

BANKS Aaa
1.57%

OTHER*
4.95%

MEMBER STATE Aa3
7.04%

MEMBER STATE A1
7.99%

MEMBER STATE Baa1
8.01%

PUBLIC COMPANY Aaa
24.70%

MEMBER STATE Aaa
23.63%

COVERED BOND Aaa
15.08%

Fig. 8: Investment portfolio: Profile of issuers at 31 December 2011 

2.4. 

Benchmarking, performance and interest rate risk analysis 

2.4.1.  Benchmarking 

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 Covered 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 

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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: 

– 

– 

– 

– 

– 

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 

Percentage of Total 
portfolio as of 31/12/2011 

0-1 

1-3 

3-5 

5-7 

1 m 

3 m 

Money Market 

FRN and Fixed Rate Bonds

sovereign 

covered bonds 

sovereign 

covered bonds 

sovereign 

covered bonds 

Fixed 

Rate 

Bonds 

7-10 

sovereign 

covered bonds 

Total 

2.4.2.  Performance 

22.1% 

18.6% 

23.3% 

2.5% 

15.0% 

4.5% 

10.0% 

1.3% 

2.7% 

0.0% 

100% 

The performance of the Fund portfolio was monitored on a marked-to-market basis. During 
2011, the portfolio delivered a 0.72% MTM yearly return, underperforming its benchmark by 
138.85 bps. 

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Portfolio 

Out-performance 

Market Value 

(including accrued 
interest) 

Monthly  
 return  
(absolute return in 
%) 

YTD  
 return  
(absolute return in 
%) 

Monthly 
Excess Return 
compared to 
benchmark 
(in %) 

YTD  
Excess Return 
(in %) 

31/01/2011

1,345,738,337 

-0.1598 

-0.1598 

0.1394 

0.1394 

28/02/2011

1,488,234,005 

0.2687 

0.1084 

31/03/2011

1,484,259,410 

-0.2671 

-0.1590 

0.1127 

-0.0332 

0.2521 

0.2182 

30/04/2011

1,482,154,433 

-0.1420 

-0.3007 

-0.3095 

-0.0904 

31/05/2011

1,491,407,462 

0.6244 

0.3219 

0.1378 

0.0466 

30/06/2011

1,488,950,915 

-0.1647 

0.1566 

-0.1958 

-0.1498 

31/07/2011

1,491,569,004 

0.1758 

0.3327 

0.1114 

-0.0384 

31/08/2011

1,507,271,529 

1.0528 

1.3890 

-0.1424 

-0.1817 

30/09/2011

1,503,336,151 

-0.2611 

1.1243 

-0.4329 

-0.6209 

31/10/2011

1,498,900,755 

-0.2950 

0.8259 

0.0382 

-0.5802 

30/11/2011

1,480,504,553 

-1.1776 

-0.3614 

-0.4085 

-0.9875 

31/12/2011

1,496,510,249 

1.0811 

0.7157 

-0.3878 

-1.3885 

During  Q1-2011,  the  money  market  rates  increased  and  the  3  month  EURIBOR  stood  at 
1.239%  as  of  31/03/2011,  compared  to  1.006%  as  of  31/12/2010.  During  the  same  period 
European  bond  yields  remained  volatile.  Two  different  evolutions  of  credit  spread  risk  of 
bonds issued by peripheral sovereign European countries compared to German Bunds could 
be observed in Q1-2011: the credit spreads for bonds issued by Portugal, Ireland and Greece 
continued  to  increase  whereas  the  credit  spreads  for  bonds  issued  by  Spain  and  Italy 
decreased. 

During Q2-2011, the exposure in bonds issued or guaranteed by Greece, Ireland and Portugal 
was the main driver of the negative GF-portfolio excess return. The GF portfolio delivered a 
positive return of 0.316% for Q2-2011. Bond issued or guaranteed by Germany, France and 
the Netherlands as well as bonds issued by DEPFA outperformed their benchmark. 

During  Q3-2011,  the  exposure  in  bonds  issued  or  guaranteed  by  Greece,  Italy  and  Portugal 
was the main driver of the negative GF-portfolio excess return. The GF portfolio delivered a 
positive return of 0.966% for Q3-2011. After the downgrade of the Republic of Portugal by 
Moody’s  on  06/07/2011,  government  Bonds  issued  by  Portugal  were  no  longer  included  in 
the IBOXX sovereign indexes from beginning of August. 

EN 

15 

   EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
During  Q4-2011,  the  exposure  in  bonds  issued  or  guaranteed  by  Greece,  Italy  and  Portugal 
was the main driver of the negative GF-portfolio excess return. The GF portfolio delivered a 
negative return of 0.404% for Q4-2011. 

2.4.3. 

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 
272,711.00, of which EUR 266,275.00 is related to the fixed rate bond exposure. The global 
modified  duration  of  the  fund  decreased  during  2011  and  stood  at  1.81  years  as  of  31 
December 2011, compared to 2.36 years as of 31 December 2010. 

GF Sub- Portfolios 

Market Value (excluding 
accrued interest) 

Modified Duration 
(Years) 

Floating Rate Notes  

203,463,660 

Fixed Rate Bonds 

970,145,310 

Money Market Instruments  

299,654,827 

Cash account 

1,362,766 (3) 

0.17 

2.67 

0.09 

Interest Rate Exposure 

(+/-1bp) 

-/+ 3,654 

-/+ 266,275 

-/+ 2,782 

Total GF 

1,474,626,563 

1.81 

-/+ 272,711 

3

EN 

The EUR 1.36 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 1.34 
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.  

16 

   EN 

 
 
 
 
                                                 
 
3. 

STATEMENT OF FINANCIAL POSITION OF THE FUND AS AT 31 DECEMBER 2011 

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 20044. 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  2011  have  been  audited  and  certified  by  an 
independent auditor. 

3.1. 

Economic Outturn Account for the year ended 31 December 2011 

Notes

From 

 From

01.01.2011 

01.01.2010

to 31.12.2011 
 EUR 

to 31.12.2010
 EUR 

Financial operations revenues 

Interest income 

Interest income on cash and cash equivalents 

Interest income on Available For Sale Portfolio 

Net realised gain on sale of Available For Sale Portfolio

Income from securities lending activity 

Financial operations expenses 

8 

9 

44,890,043.09 

41,710,594.61 

4,118,369.38  

1,359,361.52 

40,771,673.71  

40,351,233.09 

0.00  

1,576,548.78 

86,225.62  

80,574.54 

Net realised loss on sale of Available For Sale Portfolio 

(1,940,019.61)  

0.00 

Other financial charges 

Thereof: Management fees 

(883,448.14) 

(850,345.40) 

(739,809.98) 

(715,037.50)

ECONOMIC RESULT OF THE YEAR 

42,152,800.96 

42,517,372.52

The accompanying notes form an integral part of these financial statements.

4

EN 

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. 

17 

   EN 

 
 
  
  
  
  
 
  
  
  
 
  
 
  
  
  
  
  
 
 
 
  
 
  
 
 
  
  
  
 
 
 
 
                                                 
 
3.2. 

Balance Sheet as at 31 December 2011 

ASSETS 

Notes 

31.12.2011 

31.12.2010 

EUR 

EUR 

CURRENT ASSETS 

Short-term Investments 

4 

Available For Sale Portfolio - cost 

1,206,885,759.50  1,134,968,726.10

Available For Sale Portfolio – actuarial difference 

913,066.98 

(1,355,359.96)

Available For Sale Portfolio – adjustment to fair value 

(34,189,857.13) 

(1,888,129.14)

Available For Sale Portfolio – accrued interest 

20,943,684.79 

21,594,414.66

Total Short-term Investments 

Short-term receivables 

Contributions receivable 

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 

5 

1,194,552,654.14  1,153,319,651.66

260,170,000.00 

138,880,000.00

260,170,000.00 

138,880,000.00

1,340,446.23 

1,426,322.04

299,600,000.00 

123,637,000.00

542,055.69 

155,055.48

- 

- 

68,708,475.06

84,421.53

301,482,501.92 

194,011,274.11 

1,756,205,156.06  1,486,210,925.77

1,756,205,156.06  1,486,210,925.77

CONTRIBUTORS’ RESOURCES AND LIABILITIES 

Note 

31.12.2011 

31.12.2010 

A. CONTRIBUTORS’ RESOURCES 

Contributions  

Contributions paid in 

Contributions allocated but not yet paid in 

Reserves 

EUR 

EUR 

 6 

727,107,788.12 

588,227,788.12

260,170,000.00 

138,880,000.00

Available for sale reserve - First Time Application  

(7,630.95) 

42,963.53

Available for sale reserve 

Accumulated surplus 

Results brought forward 

(34,189,857.13) 

(1,888,129.14)

760,201,245.08 

717,683,872.56

EN 

18 

   EN 

 
  
  
 
 
 
  
  
 
  
 
  
  
  
  
  
 
  
 
 
 
 
  
  
 
  
  
  
  
  
  
  
  
 
 
 
 
 
  
  
  
  
 
 
 
 
  
 
 
  
  
  
 
 
  
Economic result of the year 

Total Contributors’ resources 

B. CURRENT LIABILITIES 

Accounts Payable 

Others 

Total Current Liabilities  

42,152,800.96 

42,517,372.52

1,755,434,346.08  1,485,463,867.59

 7 

770,809.98 

747,058.18 

770,809.98 

747,058.18 

TOTAL  CONTRIBUTORS’  RESOURCES  AND 
LIABILITIES 

1,756,205,156.06  1,486,210,925.77

The accompanying notes form an integral part of these financial statements

EN 

19 

   EN 

 
  
  
 
 
 
 
 
  
  
  
 
3.3. 

Statement of changes in contributors’ resources for the year ended 31 December 2011 (in EUR) 

Contributions 

Reserves 

Accumulated 
Surplus 

Economic Result of 
the year 

First Time 
Application - 
Available For 
Sale  

reserve 

Available For 
Sale  

reserve 

Total 

contributors’ 
resources 

Balance as at 01.01.2010 

588,227,788.12

152,812.75

27,525,747.60

676,733,999.20 

40,949,873.36

1,333,590,221.03 

Contributions received from the European Commission 
allocated but not yet paid 

Change of First Time Application - Available For Sale 
reserve 

Change of Available For Sale reserve 

Allocation of the Economic result of the year 2009 

Economic result of the year 2010 

138,880,000.00

0.00

(109,849.22)

0.00

0.00

0.00 

0.00 

0.00 

0.00

0.00

0.00

138,880,000.00 

(109,849.22) 

(29,413,876.74) 

40,949,873.36

(40,949,873.36)

0.00 

0.00 

42,517,372.52 

42,517,372.52  

0.00

0.00

0.00

(29,413,876.74)

0.00

0.00

0.00

0.00

0.00

0.00

Balance as at 31.12.2010 

727,107,788.12  

42,963.53 

(1,888,129.14)

717,683,872.56 

42,517,372.52 

1,485,463,867.59  

Contributions received from the European Commission 
allocated but not yet paid 

Change of First Time Application - Available For Sale 
reserve 

Change of Available For Sale reserve  

Allocation of the Economic result of the year 2010 

Economic result of the year 2011 

260,170,000.00

0.00

0.00

0.00

0.00

0.00

(50,594.48)

0.00

0.00

0.00

0.00

0.00

(32,301,727.99)

0.00

0.00

0.00 

0.00 

0.00 

0.00

0.00

0.00

260,170,00.00 

(50,594.48) 

(32,301,727.99) 

42,517,372.52

(42,517,372.52)

0.00 

0.00 

42,152,800.96

42,152,800.96 

Balance as at 31.12.2011 

987,277,788.12

(7,630.95)

(34,189,857.13)

760,201,245.08 

42,152,800.96

1,755,434,346.08 

The accompanying notes form an integral part of these financial statements.

EN 

20 

EN 

 
  
 
 
3.4. 

Cash Flow statement for the year ended 31 December 2011 

Investing activities 

Interest received on cash and cash equivalents 

   Management fee paid during the year 

Bank charges / audit fees paid during the year 

From 01.01.2011 
to 31.12.2011 

 From 01.01.2010 
to 31.12.2010 

EUR 

EUR 

3,815,079.42 

1,267,997.83

(715,037.50) 

(687,539.60)

(143,947.54) 

(134,908.90)

Purchase of investments - Available For Sale portfolio 

(278,687,734.50) 

(281,808,073.50)

Proceeds of investments - Available For Sale portfolio 

202,080,739.78 

150,672,110.00

Interest received - Available For Sale portfolio 

41,853,323.85 

39,633,686.93

Income from securities lending activity 

86,225.62 

85,822.31

Net Cash Flows from investing activities 

(31,711,350.87) 

(90,970,904.93)

Financing activities 

Contributions received from the European Commission  

138,880,000 

93,810,000.00

 Net Cash Flows from financing activities 

138,880,000 

93,810,000.00

Net increase in cash and cash equivalents 

107,168,649.13 

2,839,095.07

Cash and cash equivalents at beginning of financial year 

193,771,797.10 

190,932,702.03

Cash and cash equivalents at the end of financial year 

300,940,446.23 

193,771,797.10

Cash and cash equivalents are composed of 

(excluding accrued interest): 

Current accounts 

Short-term deposits  

Other cash equivalents 

Total cash and cash equivalents 

1,340,446.23 

1,426,322.04 

299,600,000.00 

 123,637,000.00 

0.00 

68,708,475.06 

300,940,446.23 

 193,771,797.10 

The accompanying notes form an integral part of these financial statements. 

EN 

21 

   EN 

 
 
  
  
  
  
  
  
  
  
  
  
  
  
 
  
  
  
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
4. 

NOTES TO 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,  20  October  2010  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 
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. 

The EIB’s management has authorized the financial statements for issue on 30 March 2012. 

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”5, dated December 2004 and updated in October 2006 
and December 2009. 

4.3. 

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 

5

EN 

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

22 

   EN 

 
 
                                                 
 
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. 

4.4. 

Summary of significant accounting policies 

4.4.1.  Changes in accounting policies 

For its financial statements 2011 the Fund has changed its accounting policy for contributions. 
According to the previous accounting policy applied up to 31 December 2010, contributions 
were recognised or derecognised in the Fund’s balance sheet at the date payments from or to 
the European Commissions were received or made. Under the new accounting policy applied 
since  1  January  2011,  contributions  are  recognised  or  derecognised  in  the  Fund’s  balance 
sheet  at  the  date  when  they  become  due  or  owed  according  to  articles  3,  4,  5  and  6  of  the 
Council  Regulation  (EC,  Euratom)  No  480/2009  of  25  May  2009  establishing  a  Guarantee 
Fund for external actions. 

The accounting policy change has been retrospectively applied and comparative information 
has  been  adjusted  accordingly.  The  accounting  policy  change  results  in  the  following 
adjustments to the balance sheet:  

• 

• 

Increase 
(Comparative figures 2010: an increase of EUR 138,880,000)  

in  current  assets  -  contributions  receivable  by  EUR  260,170,000 

Increase  in  contributions  allocated  but  not  yet  paid  in  by  EUR  260,170,000 
(comparative figures 2010: increase by EUR 138,880,000). 

4.4.2.  Foreign currency translation 

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.  

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. 

EN 

23 

   EN 

 
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. 

4.5. 

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. 

4.5.1. 

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 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.  

EN 

24 

   EN 

 
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. 

4.5.2.  Contributions 

Contributions to be received6 from the general budget of the European Union, or to be paid 
back to the general budget of the European Union are recognised in the balance sheet on the 
date  when  they  become  due  or  owed  according  to  articles  3,  4,  5  and  6  of  the  Council 
Regulation (EC, Euratom) No  480/2009  of  25  May 2009 establishing a Guarantee Fund for 
external actions (codified version). When it related to article 3, 5 and 6 the contributions to be 
paid  or  received,  based  on  the  year  end  n-1  difference  between  the  target  amount  and  the 
value  of  the  Fund’s  net  assets,  are  calculated  and  recorded  at  the  beginning  of  the  year  n. 
When article 4 applies, the contribution to be paid back is calculated and recorded at the date 
of accession of the new Member State to the European Union. 

4.6. 

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 is 
still held by the Fund itself. 

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

4.7. 

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. 

4.8. 

Financial Risk Management 

4.8.1. 

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. 

6 

[1]  The  interinstitutional  Agreement  between  the  European  Parliament,  the  Council  and  the 
Commission on budgetary discipline and sound financial management adopted on 17 May 2006 sets the 
multiannual financial framework of the European Union for the period 2007 to 2013.  

EN 

25 

   EN 

 
                                                 
The distribution of the Fund’s holdings at 31 December 2011 (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 

TOTAL 

EUR 

Floating  rate 
bonds EUR 

Current accounts 

1,340,446.23 

0.00 

299,600,000.00 

0.00 

0.00 

0.00 

0.00 

0.00 

1,340,446.23 

299,600,000.00 

Short term 
deposits - 
nominal 

AFS portfolio - at 
fair value 

44,136,700.00 

108,102,864.50 

817,905,744.85 

203,463,660.00  1,173,608,969.35 

TOTAL 

345,077,146.23 

108,102,864.50 

817,905,744.85 

203,463,660.00  1,474,549,415.58 

Percentage 

23.40% 

7.33% 

55.47% 

13.80% 

100.00% 

At 31 December 2011, for the Cash and Cash equivalents (fixed term deposits), the interest 
rate range is between 0.94% and 1.68% (2010: between 0.85% and 1.21%)  

For  the  Available  For  Sale  (AFS)  securities  portfolio,  the  effective  interest  rate  range  is 
between 1.42% and 5.88% (2010: between 1.08% and 5.88%). 

EN 

26 

   EN 

 
 
 
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 

Other cash 
equivalents-at 
cost 

AFS portfolio - 
at fair value 

1,426,322.04 

123,637,000.00 

68,708,475.06 

0.00

0.00

0.00

0.00

0.00

0.00

0.00 

1,426,322.04

0.00 

123,637,000.00

0.00 

68,708,475.06

39,030,366.00 

114,224,420.00

897,381,041.00

81,089,410.00 

1,131,725,237.00

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%

Liquidity position 

The  table  below  provides  an  analysis  of  assets,  liabilities  and  contributors’  resources  into 
relevant maturity groupings based on the remaining period from the balance sheet date to the 
contractual  maturity  date.  It  is  presented  under  the  most  prudent  consideration  of  maturity 
dates. Therefore, in the case of liabilities the earliest possible repayment date is shown, while 
for assets it is the latest possible repayment date. 

Those assets and liabilities that do not have a contractual maturity date are grouped together 
in the “Maturity undefined” category. 

EN 

27 

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The liquidity position is as shown below as at 31 December 2011: 

Maturity 

Assets in EUR 

Contributions 
Receivable 

Current 
accounts 

Short term 
deposits 

Of which: 
accrued interest 

Short-term 
Investments 

of which: 
accrued interest 

Total 

less than 3 
months 

3 months to 1 
year 

1 to 10 years 

maturity 
undefined 

TOTAL 

0.00 

260,170,000.00 

1,340,446.23 

300,142,055.69 

542,055.69 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

260,170,000.00 

0.00 

1,340,446.23 

0.00 

300,142,055.69 

0.00 

542,055.69 

60,164,175.38 

140,241,460.76 

994,147,018.00 

0.00 

1,194,552,654.14 

1,480,925.38 

2,340,296.26 

17,122,463.15 

0.00 

20,943,684.79 

361,646,677.30 

400,411,460.76

994,147,018.00

0.00 

1,756,205,156.06

Contributors resources and Liabilities in EUR 

Contributors’ 
resources 

Accounts 
Payable 

Total 

0.00 

770,809.98 

771,059.84 

0.00

0.00

0.00

0.00

1,755,434,346.08 

1,755,434,346.08

0.00

0.00 

770,809.98

0.00

1,755,434,096.22 

1,756,205,156.06

EN 

28 

   EN 

 
 
  
  
  
  
  
The liquidity position is as shown below as at 31 December 2010: 

Maturity 

less than 3 
months 

3 months to 1 
year 

1 to 10 years 

maturity 
undefined 

TOTAL 

Assets in EUR 

Contributions 
Receivable 

0.00 

138,880,000.00 

Current 
accounts 

Short 
deposits 

1,426,322.04 

term 

123,792,055.48 

155,055.48 

68,792,896.59 

84,421.53 

of which: 
accrued interest 

Other cash 
equivalents 

of which: 
accrued interest 

Short-term 
Investments 

of which: 
accrued interest 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

138,880,000.00 

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 

0.00 

1,153,319,651.66 

39,819,241.34 

131,006,760.80 

982,493,649.5
2 

788,875.34 

20,805,539.32 

0.00 

0.00 

21,594,414.66 

Total 

233,830,515.45 

269,886,760.80 

982,493,649.5
2 

0.00 

1,486,210,925.77 

Contributors’ resources and Liabilities in EUR  

Contributors’ 
resources 

Accounts 
Payable 

0.00 

747,058.18 

Total 

747,058.18 

0.00

0.00

0.00

0.00

1,346,583,867.59 

1,346,583,867.59

0.00

0.00 

747,058.18

0.00

1,346,583,867.59 

1,486,210,925.77

EN 

29 

   EN 

 
  
  
  
  
  
 
4.9. 

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 2011 (including accrued interest). 

Long term 
rating  

 Short term 
rating  

31.12.2011 

EUR 

31.12.2010 

EUR 

Aa2 

Aa3 

A1 

A2 

Total 

P-1 

P-1 

P-1 

P-1 

0.00

105,301,708.66

104,714,444.50

90,125,902.53

0.00%

35.08%

34.89%

30.03%

3,402,247.78 

58,608,907.72 

61,780,899.98 

0.00 

2.75%

47.34%

49.91%

0.00%

300,142,055.69

100.00%

123,792,055.48 

100.00 %

Other cash equivalents – profile of counterparties 

As at 31 December 2011, the Fund had no investments in short term discount papers. For the 
same  period  the  previous  year  the  Fund  had  invested  in  4  short  term  discount  papers.  The 
issuer profile, (including accrued interest) is as follows: 

Long term 
rating  

 Short term 
rating  

31.12.2011 

EUR 

31.12.2010 

EUR 

P-1 

P-1 

Aa2 

Aa3 

Total 

0.00

0.00

0.00

0.00%

0.00%

14,974,290.59 

53,818,606.00 

21.77%

78.23%

0.00%

68,792,896.59 

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: 

– 

– 

– 

7

Securities issued or guaranteed by Member States7: minimum rating Baa3  

Securities  issued  by  a  Supranational,  other  States  or  Public  Company:  minimum 
rating Aa2  

Covered Bonds: rating Aaa  

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 

30 

   EN 

 
 
  
  
 
 
  
 
  
  
 
 
  
 
  
 
  
  
 
 
  
  
 
 
  
 
  
                                                 
 
– 

Securities issued by Banks and Corporates: minimum rating Aa2  

As at 31 December 2011 and 31 December 2010 the profile of the available for sale portfolio 
by issuers and the market value (excluding accrued interest) are as follows: 

Issuer 

31.12.2011 

EUR 

31.12.2010 

EUR 

BANKS Aaa 

BANKS Aa2 

18,426,955.90 

4,914,850.00

EUROPEAN UNION Aaa 

21,041,064.90

1.57%

0.42%

1.79%

18,425,020.00 

1.63%

MEMBER STATE Aaa 

277,327,355.10

23.63%

314,269,578.00 

MEMBER STATE Aa1 

15,412,783.50

MEMBER STATE Aa2 

0.00

MEMBER STATE Aa3 

82,648,318.75

MEMBER STATE A1 

93,757,402.70

MEMBER STATE A2 

3,980,600.00

MEMBER STATE Baa1 

94,041,144.00

MEMBER STATE Baa3 

38,942,757.20

MEMBER STATE Caa2 

15,259,823.10

101,983,335.00 

76,806,315.00 

92,398,760.00 

71,826,480.00 

25,256,160.00 

74,576,694.00 

1.31%

0.00%

7.04%

7.99%

0.34%

8.01%

3.32%

1.30%

PUBLIC COMPANY Aaa 

289,912,245.90

24.70%

185,788,890.00 

CORPORATE Aa1 

0.00

0.00%

4,999,200.00 

COVERED BOND Aaa 

176,942,999.50

15.08%

165,394,805.00 

COVERED BOND Aa2*) 

22,527,620.00

COVERED BOND A2 *) 

6,411,070.40

SUPRANATIONAL Aaa 

12,061,978.40

1.92%

0.55%

1.03%

27.77%

9.01%

6.79%

8.16%

6.35%

2.23%

6.59%

16.42%

0.44%

14.61%

Total 

1,173,608,969.35

100.00% 1,131,725,237.00 

100.00%

*) The covered bonds rated Aa2 and A2 as at 31 December 2011 had the external rating Aaa 
at  acquisition,  in  line  with  the  revised  management  guidelines.  They  were  subsequently 
downgraded  in  2011  to  Aa2  and  A2  respectively  and  finally  sold  in  February  2012.

EN 

31 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
  
 
The following table shows the exposure against EU sovereign risk per underlying country: 

At 31.12.2011 

EU sovereigns 

Austria 

Belgium 

Czech Republic 

Denmark 

France 

Germany 

Greece 

Ireland 

Italy 

Luxembourg 

Lithuania 

Netherlands 

Poland 

Portugal 

Slovakia 

Slovenia 

Spain 

Sweden 
Total EU sovereigns 

Other sovereign or 
corporate bonds 

Purchase price

Value at final 
maturity

Book Value*

60,390,220.00 

59,100,000.00

35,146,520.00 

35,500,000.00 

10,420,000.00 

10,000,000.00 

6,497,790.00 

6,500,000.00 

217,308,690.00 

219,000,000.00 

181,716,564.50 

184,000,000.00 

51,285,415.00 

50,700,000.00 

87,368,380.00 

88,000,000.00 

60,680,137.40 

36,453,848.40 

10,447,342.00 

6,568,025.10 

227,077,017.80 

196,111,663.30 

15,259,823.10 

76,736,970.00 

71,146,535.00 

72,500,000.00 

               67,146,952.70 

1,986,040.00 

2,000,000.00 

17,622,600.00 

18,000,000.00 

 70,812,080.00 
3,716,000.00 

70,000,000.00 
4,000,000.00 

45,573,480.00 

46,000,000.00

26,617,750.00 

26,500,000.00 

4,996,050.00 

5,000,000.00 

73,033,590.00 

72,950,000.00 

2,057,078.40 

17,304,174.00 

71,793,257.40 
3,980,600.00 

38,942,757.20 

26,610,450.00 

5,009,500.00 

72,200,976.75 

4,996,050.00
965,637,704.50

5,000,000.00
969,750,000.00 

5,009,500.00
934,380,573.55

241,248,055.00 

242,500,000.00 

239.228.395.80

TOTAL 

1,206,885,759,50 1,212,250,000.00 

1,173,608,969,35

* The book value represents the clean market value of the assets 

The Fund  did  not  participate  in  any  private  sector  initiative  for  Greece  and  therefore  no 
impairment was recorded on its Greek sovereign and sovereign guaranteed exposure. 

EN 

32 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table shows the exposure against EU sovereign risk per underlying country: 

At 31.12.2010 

EU sovereigns 

Austria 

Belgium 

Czech Republic 

Denmark 

France 

Finland 

Germany 

Greece 

Hungary 

Ireland 

Italy 

Lithuania 

Netherlands 

Poland 

Portugal 

Slovakia 

Spain 

Purchase price

Value at final 
maturity

Book Value*

85,084,110.00 

83,200,000.00

27,377,950.00 

28,000,000.00 

10,420,000.00 

10,000,000.00 

6,497,790.00 

6,500,000.00 

85,940,235.00 

28,709,210.00 

10,447,342.00 

6,568,025.10 

202,667,890.00 

204,000,000.00 

212,950,185.00 

4,826,360.00

4,400,000.00

4,430,228.00

126,896,370.00 

129,000,000.00 

137,944,980.00

74,642,315.00 

73,700,000.00

10,390,000.00

10,000,000.00

92,348,880.00 

93,000,000.00

76,404,035.00 

77,500,000.00

17,622,600.00 

18,000,000.00 

45,850,980.00 
3,716,000.00 

45,000,000.00
4,000,000.00 

65,516,931.10 

66,000,000.00

16,661,450.00 

16,500,000.00

75,276,690.00 

74,950,000.00

64,662,894.00

9,913,800.00

80,516,300.00

76,806,315.00

17,565,860.00

47,122,520.00
3,999,680.00 

64,496,560.00

17,318,550.00

73,274,125.00

Sweden 
Total EU sovereigns 

Other sovereign or 
corporate bonds 

4,996,050.00
947,196,401.10

5,000,000.00
948,750,000.00 

5,102,200.00
947,905,262.00

187,772,325.00 

188,000,000.00 

183,819,825.00

TOTAL 

1,134,968,726.10 1,136,750,000.00 

1,131,725,087.00

*) The book value represents the clean market value of assets. 

EN 

33 

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4.10. 

Short-term Investments – Available For Sale portfolio 

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

Balance as 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 

Balance as amount at 31 December 2010 

Balance as amount at 1 January 2011 

Acquisitions 

Disposals and withdrawals (original acquisition cost) 

Change in carrying amount - actuarial difference 

Change in accrued interest 

Change in fair value 

Balance as amount at 31 December 2011 

EUR 

1,049,413,319.19 

281,808,073.50 

(151,625,462.90) 

1,741,124.26 

1,396,474.35 

(29,413,876.74) 

1,153,319,651.66 

EUR 

1,153,319,651.66 

278,687,734.50 

(206,770,701.10) 

2,268,426.94 

(650,729.86) 

(32,301,728.00) 

1,194,552,654.14 

At  31  December  2011,  the  nominal  value  of  the  investment  portfolio  was  EUR  1,212.3 
million (2010: EUR 1,136.7 million), against a market value of EUR 1,173.6 million (2010: 
EUR 1,131.7 million), excluding accrued interest. 

Accrued 
EUR 21,594,414.66) is split between: 

interest  at  31  December  2011  amounting 

to  EUR  20,943,684.79  (2010: 

• 

• 

Fixed rate notes 

EUR 20,548,372.11 (2010 EUR: 21,512,925.38) 

Floating rate notes  EUR 395,312.68 (2010: EUR: 81,489.28) 

As  at  31  December  2011  the  market  value  of  securities  lent  within  the  automatic  security 
lending  agreement  with  Euroclear  (excluding  accrued 
to  EUR 
21,801,851.66 (2010: EUR 5,200,562.41). 

interest)  amounts 

EN 

34 

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4.11.  Cash and Cash Equivalents 

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

Description 

Current Accounts 

Short term deposits 

Other  cash  equivalents  –  bills  maturing  within  3 
months of issue 

31.12.2011 

EUR 

31.12.2010 

EUR  

1,340,446.23

1,426,322.04

300,142,055.69

123,792,055.48

0.00

68,792,896.59

Total 

301,482,501.92

194,011,274.11

4.12.  Contributions 

Contributions are increased by contributions from the general 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 to the general budget of 
the  European  Union  or  by  interventions  the  Fund  is  paying  with  regard  to  defaulted 
guaranteed loans. Contributions to/from the budget of the European Union are recognised in 
the balance sheet on the date when they become due or owed according to articles 3, 4, 5 and 
6  of  the  Council  Regulation  (EC,  Euratom)  No  480/2009  of  25  May  2009  establishing  a 
Guarantee Fund for external actions. 

The  contribution  allocated  but  not  yet  paid  in  as  at  31  December  2010  amounting  to  EUR 
138,880,000 was paid in cash during the reporting period. In 2011, the fund received further 
contributions amounting to EUR 260,170,000.00 but not yet paid in as at 31 December 2011. 

4.13.  Current Liabilities 

Description 

Accounts Payable 

Management Fees 

Audit Fees 

Custodian Fees  

Total 

31.12.2011 
EUR 

31.12.2010 
EUR 

739,809.98 

31,000 

0.00 

770,809.98

715,037.50 

30,399.00 

1,621.68 

747,058.18 

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. 

EN 

35 

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4.14. 

Financial operations revenues 

Description 

Total amount, thereof: 

Interest income, thereof:  

Interest income on cash and cash equivalents 

From 01.01.2011 to 
31.12.2011 

From 01.01.2010 to 
31.12.2010 

EUR 

EUR 

44,976,268.71

44,890,043.09 

4,118,369.38 

43,367,717.93 

41,710,594.61 

1,359,361.52 

Interest income on Available For Sale Portfolio 

40,771,673.71 

40,351,233.09 

Other financial income, thereof:  

86,225.62 

1,657,123.32 

Net  realised  gain  on  sale  of  Available  For  Sale 

Portfolio  

0.00 

1,576,548.78 

Income from securities lending activity 

86,225.62 

80,574.54 

4.15. 

Financial operations expenses 

Description 

Total amount, thereof: 

Net realised loss on sale of Available For Sale Portfolio 

Management fees 

Bank fees 

Audit fees 

4.16. 

Subsequent events 

From 01.01.2011 to 
31.12.2011 

From 01.01.2010 to 
31.12.2010 

EUR 

EUR 

(2,823,467.75) 

(1,940,019.61)

(739,809.98)

(111,527.16)

(32,111.00)

(850,345.40)

0.00

(715,037.50)

(103,830.90)

(31,477.00)

There  have  been  no  material  post-balance  sheet  events,  which  would  require  disclosure  or 
adjustment to the 31 December 2011 financial statements. 

EN 

36 

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