COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL ON THE GUARANTEE FUND AND ITS MANAGEMENT IN 2013
Date: 2014-07-16
Institutions: European Commission
Subjects: Community loan, European Investment Bank, balance sheet, budgetary reserve (EU), credit guarantee, financial control, financial transaction, fund (EU), investment policy, publication of accounts













EUR-Lex - 52014SC0241 - EN











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52014SC0241

COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL ON THE GUARANTEE FUND AND ITS MANAGEMENT IN 2013 /* SWD/2014/0241 final */









Table of
Contents
1............ Introduction. 4
2............ Fund
Management report 4
2.1......... Development
of the Fund in 2013. 4
2.2......... Situation
of the Fund. 5
2.2.1...... Contributions
as at 31 December 2013. 5
2.2.2...... The Fund’s
holdings net of accrued interest at 31 December 2013. 5
2.3......... General
and segmental analyses 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
2.4......... Benchmarking,
performance and interest rate risk analysis. 13
2.4.1...... Benchmarking. 13
2.4.2...... Performance. 15
2.4.3...... Interest
rate risk. 15
3............ Fund
Financial Statements as at 31 December 2013. 16
3.1......... Economic
Outturn Account For the year ended 31 December 2013. 16
3.2......... Balance
sheet as at 31 December 2013. 17
3.3......... Statement
of changes in contributors' resources for the year ended 31 December 2013 (in
EUR) 18
3.4......... Cash
Flow statement for the year ended 31 December 2013. 19
3.5......... Notes
to the financial statements. 20
3.5.1...... General
disclosures. 20
3.5.2...... Significant
accounting policies. 20
3.5.3...... Financial
Risk Management 24
3.5.4...... Available
for Sale portfolio. 32
3.5.5...... Other
short term receivables. 32
3.5.6...... Cash and
Cash Equivalents. 33
3.5.7...... Contributions. 33
3.5.8...... Current
Liabilities. 34
3.5.9...... Financial
operations revenues. 34
3.5.10.... Financial
operations expenses. 34
3.5.11.... Subsequent
events. 34
1.           Introduction
According to the Article
7 of the Guarantee Fund Regulation, the assets of the Guarantee Fund (the "Fund")
are managed by the EIB (the "Bank"). The agreement signed between the
European Commission (the "Commission") and the Bank defines the
principles governing the management of assets.
Under
Article 8(2) of the Agreement, at the beginning of March of each year the Bank
has to send the Commission an annual status report on the Fund and the
management thereof and the financial statements of the Fund for the preceding
year.
The  management report
on the Fund is presented in the section 2 of this Commission Staff Working Document
(SWD). The financial statements audited by an external auditor are included in
section 3.
2.           Fund
Management report
2.1.        Development
of the Fund in 2013
As at 31 December
2013 total assets (excluding accrued interest) of the Fund amounted to EUR
1,987.4[1]
million against EUR 2,002.9 million as at 31 December 2012, a decrease of EUR
15.5 million.
Fig.1: Development
of total assets in 2013 and 2012
The net operating result amounted to EUR
31.94 million at 31 December 2013 compared with EUR 43.99 million at 31
December 2012 representing a decrease of 27.4%.
2.2.        Situation
of the Fund 
2.2.1.       Contributions
as at 31 December 2013
2.2.1.1.  Contributions paid in as at
31 December 2013
The net
contributions paid into the Fund by the European Union budget increased by EUR
64.7 million or 6.7% from EUR 965.4 million at 31 December 2012 to EUR 1,030.1
million at 31 December 2013. 
This is explained
by the movements shown in the following table:
 Contributions paid in (in EUR) || Situation at 31/12/2012 || Movements in 2013 || Situation at 31/12/2013 
 Provisioning || 3,389,825,163 || 155,660,000 || 3,545,485,163 
 Repayment of surplus || -1,775,870,000 || 0 || -1,775,870,000 
 Activation of guarantee calls || -501,883,829 || -60,628,847 || -562,512,676 
 Recovery of historic called amounts || 578,854,354 || 0 || 578,854,354 
 Repayment of funds[2] || -725,521,527 || -30,335,186 || -755,856,713 
   ||   ||   ||   
 Balance || 965,404,161 || 64,695,967 || 1,030,100,128 
2.2.1.2.  Contributions payable and
receivable as at 31 December 2013
As
at 31 December 2013 the Fund has recorded EUR 22.2 million (2012: EUR 18.0
million) as contribution payable representing the provisioning for three
guarantee calls made by the Bank in 2013 with regard to Syrian loan defaults
(2012: two guarantee calls). In addition, as at 31 December 2013 the Fund has
recorded EUR 58.4 million (2012: EUR 155.7 million) as contributions to be paid
in by the European Union.
2.2.2.     The
Fund’s holdings net of accrued interest at 31 December 2013
The Fund’s
holdings at 31 December 2013 excluding accrued interest and contributions
receivable totalled EUR 1,929.0 million as detailed below:
-         
EUR 150.9 million in
the monetary portfolio (nominal value of interbank term deposits);
-         
EUR 1.2 million in the
current accounts; 
-         
EUR 1,776.9 million in
the Available For Sale (AFS) (portfolio market value of fixed rate bonds,
floating rate bonds, inflation linked bonds and zero-coupon bonds, excluding
accrued interest).
The Fund operates in one currency only, the Euro.
2.3.        General
and segmental analyses of the Fund
2.3.1.     Liquidity analysis
The liquidity
position of the Fund at 31 December 2013 is outlined in the table below. The
liabilities shown in the column "maturity undefined" represent the
Contributor's (i.e. European Union's) resources. 
Liquidity
position as at 31 December 2013 (in EUR million):
 Maturity || less than 3 months || 3 months to 1 year || 1 to 10 years || maturity undefined || Total 
 Total Assets || 385 || 187 || 1,432 || 0 || 2,004 
 Total contributors’ resources || 0 || 0 || 0 || 1,981 || 1,981 
 Total Liabilities || 23 || 0 || 0 || 0 || 23 
 Total contributors’ resources and liabilities || 23 || 0 || 0 || 1,981 || 2,004 
2.3.2.     General
analysis of the results of the Fund
Overall, during
the reporting period 1 January 2013 to 31 December 2013 the Fund achieved EUR
31.94 million in net revenue. The
following table outlines the net revenue earned in 2013 and compares it with
2012:
 In EUR million || From 1 January to  31 December 2013 || From 1 January to 31 December 2012 
   ||   ||   ||   ||   
 Interest income on cash & cash equivalents || 0.21 || 0.7% || 2.15 || 4.9% 
 Interest income on AFS assets || 31.30 || 98.0% || 36.87 || 83.9% 
 Realised gain on sale of AFS assets || 1.36 || 4.2% || 8.60 || 19.5% 
 Income from securities lending activity || 0.08 || 0.3% || 0.10 || 0.2% 
 Realised loss on sale of AFS assets || 0.00 || 0.0% || -2.78 || -6.3% 
 Commission and other charges || -1.01 || -3.2% || -0.95 || -2.2% 
   ||   ||   ||   ||   
 Total || 31.94 || 100.0% || 43.99 || 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 152.1 million at 31 December 2013, as compared to EUR 250.1 million the year before.
·        
Evolution of
money-market rates in 2013
Market sentiment in 2013 was, as in 2012, still affected by recurring
fears of recession everywhere in the developed markets, linked with a slowdown
from emerging markets.  Growth prospects at the beginning of the year were
described as “weak” and the road to recovery as “long and arduous”.
In May the European Central Bank (ECB) cut interest rates for the first
time in 10 months and held out the possibility of further policy action to
support the recession-hit euro zone economy.  Responding to a drop in euro zone
inflation well below its target level and rising unemployment, the ECB lowered
its main rate by a quarter percentage point to a record low 0.50 percent.
The following months progressed with market’s speculations about
further cuts from the ECB given the not so positive macro data releases.  On
the other hand, the ECB itself was confirming to stand ready to act, if deemed
necessary, and to analyse other non-conventional measures.
In November, the ECB lowered benchmark interest rate to a new record
low 0.25 percent, maybe a little earlier than market thought and likely in
reaction to softening data, and strengthening Euro.  In justifying the move,
the ECB commented that it continued to expect a gradual recovery but risks to
the economic outlook remained to the downside.  It also expected underlying
price pressure to remain subdued.  In the European Central Bank's (ECB)view,
risks to inflation remained broadly balanced over the medium term.
The whole year 2013 was in general characterized by excess liquidity in
the system to alleviate market pressures on sluggish growth, a situation which
kept rates at extremely low levels.
Figure 2 shows the evolution of the one-and three-month Euribor during
2013.
Fig. 2: Evolution
of Money Market rates during 2013 (source Reuters)
·          
Profile of
counterparties
In accordance with
the agreement between the European Union and the Bank 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:
Fig. 3: Short term interbank investments by
profile of counterparty at 31 December 2013
·        
Geographical
breakdown
As regards the
diversification of counterparty location, despite the credit limit cut for
Italian and Spanish banks, the Bank is pursuing its objective of geographical
distribution throughout the countries of the European Union and complying with
the internal credit limits that make these counterparties available. This
allows searching for better market on a risk-return basis.
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 Commission accounting
rule 11. At 31 December 2013, the market value (excluding accrued interest) of
fixed rate securities with a residual period to maturity of
less than three months amounted to EUR 80.8 million, between 3 months and one
year EUR 128.9 million and between one and 10 years EUR 819.9 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 amortised over the remaining life of each of the securities
using the effective interest rate method as specified in the Commission
accounting rules.
At 31 December
2013, the nominal value of the investment bond portfolio was EUR 1,739.8
million, against a clean market value of EUR 1,776.9 million.
The global (modified) duration of the bond portfolio
decreased over 2013 to reach 1.53 years at the end of the year. As of 31
December 2013, the clean market value of the investment bond portfolio came to
EUR 1,776.9 million (2012: EUR 1,596.6 million) compared with a book value
(including premiums/discounts) of EUR 1,740.2 million (2012:
EUR 1,542.9 million), which gives an unrealised fair value result of
EUR +36.7 million (2012: EUR +53.7 million). 
With the combined effects of the improvement of the
eurozone’s economic environment and the Federal Reserve’s tapering, German long
rates started a gradual rise in Q4 2013 across the curve as shown in figure 4. 
Fig. 4: Euro sovereign yield declined during
2013 (Source Bloomberg)
In line with the 2013 approved investment strategy and
in compliance with the guidelines, a total nominal amount of EUR 481.8 million
(including the inflows) was invested in fixed and floating rate sovereign,
supranational and agency debt (SSA) (56%), covered bonds (36%) and corporate
bonds (8%) within allowed maturities either on an outright or switch basis,
both in the primary and secondary markets. All of the transactions were done to
meet the overall objectives of the portfolio. The charts below outline the
total 2013 investments as well as the country diversification of the portfolio
investments added during 2013.
Fig. 5: Investments
during 2013
Fig. 6: Country
exposure
As
of 1 January 2013, a total nominal amount of EUR 263 million of redemptions on
the long-term portfolio was scheduled for the year with EUR 174 million of
fixed rate bonds and EUR 89 million of Floating Rate Notes. At the end of 2013,
the remaining exposure (based on nominal values and by 
issuer
country name) to Greece, Ireland and Portugal accounted for EUR 17 million
(GR), EUR 30 million (IE) and EUR 16 million (PT) respectively,
whereas the less exposed countries like Italy and Spain amounted to EUR 57.5
million (IT) and EUR 27.5 million (ES) respectively. 
The 2013 asset allocation did not
deviate significantly from the 2012 strategy as the quest for yield was
decisive in the relative performance of asset classes, along with country of
origin.
In terms of asset classes, the
2013 strategy foresaw an increase of the share of FRN bonds, covered bonds,
SSA’s, small allocations to corporates and inflation-linked bonds as detailed
below. 
In order to
stabilize the performance of the portfolio within an environment of increasing
yields of high quality assets, leading to an underperformance of fixed rate
bonds, investments in the FRN format were continued. The 2013 purchases of FRNs
amounted to EUR 281 million in total or 58% versus EUR 200.8 million or 42% in
fixed rate bonds. They were spread among different asset classes as depicted in
figure 5 above. As regards the country diversification, Germany was favoured
with EUR 63 million or 22%, France 21%, The Netherlands 12%, Belgium and
Australia 9%, Norway, the Czech Republic, Slovenia, Slovakia and Luxembourg 4%,
Denmark 3%, whereas Sweden and Finland accounted for 2% each as depicted in
figure 6 above.
The covered bond purchases
amounted to a total sum of EUR 171.8 million, spread with a view of good
diversification among a variety of jurisdictions offering the best risk/reward
such as France, Germany, Netherlands, the Nordic Countries, Australia, New Zealand and United Kingdom. Particular emphasis has been put on pursuing investment
opportunities out of Eurozone (National Bank of Canada, The Royal Bank of Scotland
or New Zealand BNZ International Funding) and – in case of Eurozone issuers –
on staying within the safest Pfandbrief and in general northern universe,
avoiding more volatile issuers in current market environment. The few purchases
of French and Belgium covered bonds have been made on opportunistic basis due
to an attractive yield offered by respective papers (La Banque Postale (FR) and
Belfius Banque (BE)).
Due to their liquidity and
generally high credit quality, SSA assets formed with EUR 270 million the bulk
of the 2013 investments. The strongest jurisdictions have been favoured. It is
worth mentioning however that for diversification purposes, also new
jurisdictions have been considered, such as Slovakia, Slovenia and the Czech Republic.  
In line with last year’s
strategy, a small portion of corporates/financials (Rabobank) have been
purchased. They can be seen as the best source of diversification, however
there are relatively few of them being in line with the credit requirements of
the asset management guidelines.
No additional
investments in inflation-linked bonds were pursued due to the unexpected rapid
decline of inflation and the emergence of deflation talk in the euro area
rising towards the end of 2013.
In 2013, agencies
and supranational institutions suffered a wave of downgrades. French and Dutch
agencies, along with the EFSF, saw their ratings lowered by one notch by
S&P and Fitch in the wake of their respective sovereign downgrades. The
rating agencies actions however had no impact on the portfolio’s holdings and
did not trigger mandatory sales.  
In order to improve the average
yield carry of the portfolio, a few German, French and Danish government papers
and covered bonds of relatively short maturities, whose yield approached the 0%
yield level, have been sold.
·        
Breakdown of the
investment portfolio between fixed rate and variable rate securities (nominal
value)
Fig. 7: Investment portfolio breakdown between fixed3
and variable rate securities at 31 December 2013
·          
Redemption profile of
investment portfolio (nominal value)
Fig.8: Investment portfolio: Redemption profile at 31
December 2013
The latest final
maturity date for fixed rate securities is 5 September 2023.
·          
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 or guaranteed by Member States4: minimum rating Baa3;
–                        
Securities
issued by a Supranational, other States or Public Company: minimum rating Aa2;
–                        
Covered
Bonds or other legal bodies (including structured products): minimum rating
Aaa;
–                        
Securities
issued by Banks and Corporates: minimum rating Aa2.
The
profile of issuers by issuer type and long term rating5 of the
investment portfolio (nominal amount) at 31 December 2013 is as follows:
Fig.9: Investment portfolio: Profile of issuers at 31
December 20136
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 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 Commission to the portfolio (external cash flows from the
Commission);
–              
the impact of a
withdrawal from the portfolio to the Commission (external cash flows to the 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 || Average Clean Market Value Composition of 2013 
 0-1 || 1 m || Money Market || 14.5% 
 3 m || FRN and Fixed Rate Bonds || 42.7% 
 1-3 || sovereign ||   || 5.4% 
 covered bonds ||   || 5.0% 
  3-5 || sovereign || Fixed || 2.0% 
  covered bonds || Rate || 0.7% 
 5-7 || sovereign ||  Bonds || 12.8% 
 covered bonds ||   || 11.9% 
      7-10 || sovereign ||   || 4.2% 
   ||  covered bonds ||   || 0.8% 
 Total ||   ||   || 100% 
              
2.4.2.     Performance
The performance of
the Fund portfolio was monitored on a marked-to-market basis. During 2013, the
portfolio delivered a 0.7914% MTM yearly return, underperforming its benchmark
by -33.71 bps. 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 compared to benchmark (in%) || YTD Excess Return (in%) 
 31/01/2013 || 1,857,208,927 || -0.3326 || -0.3326 ||   || -0.2434 || -0.2434 
 28/02/2013 || 2,004,674,040 || 0.3717 || 0.0379 ||   || 0.1097 || -0.1347 
 31/03/2013 || 2,007,384,259 || 0.1053 || 0.1432 ||   || -0.0323 || -0.1672 
 30/04/2013 || 2,012,765,616 || 0.4270 || 0.5708 ||   || -0.0984 || -0.2666 
 31/05/2013 || 2,002,292,900 || -0.1077 || 0.4624 ||   || 0.0382 || -0.2278 
 30/06/2013 || 1,994,416,344 || -0.3516 || 0.1092 ||   || 0.0179 || -0.2090 
 31/07/2013 || 1,993,773,267 || 0.2179 || 0.3274 ||   || 0.0020 || -0.2074 
 31/08/2013 || 1,977,497,672 || -0.0680 || 0.2592 ||   || -0.0366 || -0.2440 
 30/09/2013 || 1,978,345,758 || 0.2092 || 0.4689 ||   || -0.0166 || -0.2612 
 31/10/2013 || 1,984,987,075 || 0.3357 || 0.8062 ||   || -0.0340 || -0.2963 
 30/11/2013 || 1,979,916,318 || 0.1456 || 0.9529 ||   || -0.0146 || -0.3115 
 31/12/2013 || 1,946,455,697 || -0.1600 || 0.7914 ||   || -0.0258 || -0.3371 
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 298,123 of which
EUR 285,264 is related to the fixed rate bond exposure. The global modified
duration of the fund decreased during 2013 and stood at 1.53 years as of 31
December 2013, compared to 1.64 years as of 31 December 2012.
 GF Sub- Portfolios || Market Value (excluding accrued interest) || Modified Duration (Years) || Interest Rate Exposure (+/-1bp) 
 Floating Rate Notes || 707,245,666 || 0.16 || -/+ 11,660 
 Fixed Rate Bonds || 1,029,643,817 || 2.73 || -/+ 285,264 
 Money Market Instruments || 190,866,970 || 0.06 || -/+ 1,199 
 Cash account || 1,266,7977 ||   ||   
 Total GF || 1,929,023,250 || 1.53 || -/+ 298,123 
3.           Fund Financial
Statements as at 31 December 2013
3.1.        Economic
Outturn Account For the year ended 31 December 2013
   || Notes || From || From 
  01.01.2013 ||  01.01.2012 
  to 31.12.2013 ||  to 31.12.2012 
  EUR ||  EUR 
   ||   ||   ||   
   ||   ||   ||   
 Financial operations revenues || 9 ||   ||   
 Interest income ||   || 31,507,572.30 || 39,022,011.60 
      Interest income on cash and cash equivalents ||   || 208,412.77 || 2,152,817.58 
      Net interest income on Available for Sale portfolio ||   || 31,299,159.53 || 36,869,194.02 
 Realised gain on sale of Available for Sale portfolio ||   || 1,364,029.81 || 8,596,018.53 
 Income from securities lending activity ||   || 83,827.76 || 104,765.51 
   ||   ||   ||   
 Financial operations expenses || 10 ||   ||   
 Realised loss on sale of Available for Sale portfolio ||   || 0.00 || -2,781,347.56 
 Other financial charges ||   || -1,014,843.31 || -951,832.57 
 Thereof: Management fees ||   || -841,299.43 || -805,306.70 
   ||   ||   ||   
 ECONOMIC RESULT OF THE YEAR ||   || 31,940,586.56 || 43,989,615.51 
   ||   ||   ||   
   ||   ||   ||   
 Items directly recognised in contributors’ resources 
 Net change in fair value of Available for Sale portfolio ||   || -15,411,253.21 || 91,322,572.14 
 Net amount transferred to profit or loss ||   || -1,604,945.84 || -3,443,811.19 
   ||   || -17,016,199.05 || 87,878,760.95 
 NET RESULT RECOGNISED IN CONTRIBUTORS’ RESOURCES 
   ||   ||   ||   
3.2.        Balance sheet as at 31
December 2013
 ASSETS || Notes || 31.12.2013 || 31.12.2012 
   ||   || EUR || EUR 
 NON-CURRENT ASSETS ||   ||   ||   
 Available for Sale portfolio || 4 ||   ||   
 Available for Sale portfolio – cost ||   || 1,394,349,787.68 || 1,277,457,029.68 
 Available for Sale portfolio – actuarial difference ||   || 2,830,052.94 || 1,937,127.51 
 Available for Sale portfolio – adjustment to fair value ||   || 35,027,112.52 || 52,128,946.59 
 Total Available for Sale portfolio ||   || 1,432,206,953.14 || 1,331,523,103.78 
 CURRENT ASSETS ||   ||   ||   
 Available for Sale portfolio || 4 ||   ||   
 Available for Sale portfolio – cost ||   || 345,762,688.23 || 265,916,314.50 
 Available for Sale portfolio – actuarial difference ||   || -2,717,150.48 || -2,383,541.31 
 Available for Sale portfolio – adjustment to fair value ||   || 1,635,647.34 || 1,540,460.39 
 Available for Sale portfolio – accrued interest ||   || 16,933,098.26 || 18,974,631.18 
 Total Available for Sale portfolio ||   || 361,614,283.35 || 284,047,864.76 
 Short-term receivables ||   ||   ||   
 Contributions receivable ||   || 58,432,294.00 || 155,660,000.00 
 Other short term receivables || 5 || 0.00 || 601,389.32 
 Total Short-term receivables ||   || 58,432,294.00 || 156,261,389.32 
 Cash and cash equivalents || 6 ||   ||   
 Current accounts ||   || 1,222,298.07 || 8,074,235.40 
 Short-term deposits – nominal ||   || 150,872,000.00 || 242,000,000.00 
 Accrued interest on short-term deposits ||   || 8,814.35 || 19,608.74 
 Total cash and cash equivalents ||   || 152,103,112.42 || 250,093,844.14 
 Total current assets ||   || 572,149,689.77 || 690,403,098.22 
 TOTAL ASSETS ||   || 2,004,356,642.91 || 2,021,926,202.00 
   ||   ||   ||   
 CONTRIBUTORS’ RESOURCES AND LIABILITIES || Notes || 31.12.2013 || 31.12.2012 
   ||   || EUR || EUR 
 CONTRIBUTORS’ RESOURCES ||   ||   ||   
 Contributions || 7 ||   ||   
 Net contributions paid in ||   || 1,030,100,127.55 || 965,404,160.88 
 Contributions payable as guarantee call ||   || -22,191,713.04 || -17,982,385.53 
 Contributions allocated but not yet paid in ||   || 58,432,294.00 || 155,660,000.00 
 Reserves ||   ||   ||   
 Available for Sale reserve - First Time Application ||   || 2,313.96 || 11,865.89 
 Available for Sale reserve ||   || 36,662,759.86 || 53,669,406.98 
 Accumulated surplus ||   ||   ||   
 Results brought forward ||   || 846,343,661.55 || 802,354,046.04 
 Economic result of the year ||   || 31,940,586.56 || 43,989,615.51 
 Total Contributors’ resources ||   || 1,981,290,030.44 || 2,003,106,709.77 
 CURRENT LIABILITIES || 8 ||   ||   
 Accounts Payable ||   ||   ||   
 Guarantee call payable || 7 || 22,191,713.04 || 17,982,385.53 
 Others ||   || 874,899.43 || 837,106.70 
 Total Current Liabilities ||   || 23,066,612.47 || 18,819,492.23 
 TOTAL CONTRIBUTORS’ RESOURCES AND LIABILITIES ||   || 2,004,356,642.91 || 2,021,926,202.00 
3.3.        Statement
of changes in contributors' resources for the year ended 31 December 2013 (in
EUR)
 || Notes || Contributions || Reserves || Accumulated Surplus || Economic Result of the year || Total contributors’ resources 
   || First Time Application  Available for Sale reserve || Available for Sale reserve 
 Balance as at 01.01.2012 ||   || 987,277,788.12 || -7,630.95 || -34,189,857.13 || 760,201,245.08 || 42,152,800.96 || 1,755,434,346.08 
 Contributions from the Commission allocated but not yet paid || 7 || 155,660,000.00 || 0.00 || 0.00 || 0.00 || 0.00 || 155,660,000.00 
 Contributions paid to the Bank as guarantee call net of recovered amounts || 7 || -21,873,627.24 || 0.00 || 0.00 || 0.00 || 0.00 || -21,873,627.24 
 Change of contributions payable as guarantee call || 7 || -17,982,385.53 || 0.00 || 0.00 || 0.00 || 0.00 || -17,982,385.53 
 Change of First Time Application - Available for Sale reserve ||   || 0.00 || 19,496.84 || 0.00 || 0.00 || 0.00 || 19,496.84 
 Change of Available for Sale reserve || 4 || 0.00 || 0.00 || 87,859,264.11 || 0.00 || 0.00 || 87,859,264.11 
 Allocation of the Economic result of the year 2011 ||   || 0.00 || 0.00 || 0.00 || 42,152,800.96 || -42,152,800.96 || 0.00 
 Economic result of the year 2012 ||   || 0.00 || 0.00 || 0.00 || 0.00 || 43,989,615.51 || 43,989,615.51 
 Balance as at 31.12.2012 ||   || 1,103,081,775.35 ||  11,865.89 ||  53,669,406.98 ||  802,354,046.04 || 43,989,615.51 ||  2,003,106,709.77 
 Contributions from the Commission allocated but not yet paid || 7 || 58,432,294.00 || 0.00 || 0.00 || 0.00 || 0.00 || 58,432,294.00 
 Contributions repaid to the Commission ||   || -30,335,185.93 || 0.00 || 0.00 || 0.00 || 0.00 || -30,335,185.93 
 Contributions paid to the Bank as guarantee call || 7 || -60,628,847.40 || 0.00 || 0.00 || 0.00 || 0.00 || -60,628,847.40 
 Change of contributions payable as guarantee call || 7 || -4,209,327.51 || 0.00 || 0.00 || 0.00 || 0.00 || -4,209,327.51 
 Change of First Time Application - Available for Sale reserve ||   || 0.00 || -9,551.93 || 0.00 || 0.00 || 0.00 || -9,551.93 
 Change of Available for Sale reserve || 4 || 0.00 || 0.00 || -17,006,647.12 || 0.00 || 0.00 || -17,006,647.12 
 Allocation of the Economic result of the year 2012 ||   || 0.00 || 0.00 || 0.00 || 43,989,615.51 || -43,989,615.51 || 0.00 
 Economic result of the year 2013 ||   || 0.00 || 0.00 || 0.00 || 0.00 || 31,940,586.56 || 31,940,586.56 
 Balance as at 31.12.2013 ||   || 1,066,340,708.51 || 2,313.96 || 36,662,759.86 || 846,343,661.55 || 31,940,586.56 || 1,981,290,030.44 
3.4.        Cash
Flow statement for the year ended 31 December 2013 
   ||   || From 01.01.2013 to 31.12.2013 ||  From 01.01.2012 to 31.12.2012 
   ||   || EUR || EUR 
 Operating activities ||   ||   
      Bank charges / audit fees paid during the year || -171,742.27 || -145,725.87 
      Contributions paid  as guarantee call || -60,628,847.40 || -24,022,972.83 
      Recovered amounts on guarantee call || 0.00 || 2,149,345.59 
 Net Cash Flows from operating activities || -60,800,589.67 || -22,019,353.11 
 Investing activities ||   ||   
   || Interest received on cash and cash equivalents || 219,205.55 || 2,675,264.53 
   || Treasury management fee paid during the year || -805,306.70 || -739,809.98 
   || Purchase of investments - Available for Sale portfolio || -523,078,195.53 || -736,980,629.68 
   || Proceeds of investments - Available for Sale portfolio || 324,477,096.51 || 407,099,445.00 
   || Interest received - Available for Sale portfolio || 36,599,210.68 || 38,824,106.90 
   || Income from securities lending activity || 83,827.76 || 104,765.51 
 Net Cash Flows from investing activities || -162,504,161.73 || -289,016,857.72 
 Financing activities ||   ||   
   || Contributions received from the Commission || 155,660,000.00 || 260,170,000.00 
       Contributions repaid to the Commission || -30,335,185.93 || 0.00 
  Net Cash Flows from financing activities || 125,324,814.07 || 260,170,000.00 
 Net decrease in cash and cash equivalents || -97,979,937.33 || -50,866,210.83 
 Cash and cash equivalents at beginning of the financial year || 250,074,235.40 || 300,940,446.23 
 Cash and cash equivalents at the end of the financial year || 152,094,298.07 || 250,074,235.40 
   ||   ||   
   ||   ||   
 Cash and cash equivalents are composed of (excluding accrued interest): ||   ||   
   ||   ||   
 Current accounts || 1,222,298.07 || 8,074,235.40 
 Short-term deposits || 150,872,000.00 || 242,000,000.00 
 Total cash and cash equivalents || 152,094,298.07 || 250,074,235.40 
3.5.        Notes
to the financial statements
3.5.1.     General
disclosures
The
rules and principles for the management of the Fund are laid out in the
Convention between the Commission and the Bank 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 “Convention”).
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.
·        
The
management of the Fund will be based upon the traditional rules of prudence
relating to financial activities. It needs to pay particular attention to
reduce the risks and to ensure that the managed assets have a sufficient degree
of liquidity and transferability while considering the Fund’s commitments.
The
present financial statements cover the period from 1 January 2013 to 31
December 2013.
The
financial statements have been prepared on a going concern basis, which assumes
that the Fund will be able to meet the mandatory payments of the guarantees. In
addition, according to article 6 of the Convention if, as a result of the
activation of guarantees following one or major default, resources in the Fund
fall below certain threshold, a request to replenish the Fund may be submitted.

Bank’s
management has authorized the financial statements for issue on 28 March 2014.
3.5.2.     Significant
accounting policies
3.5.2.1.  Basis
of preparation
The
Fund’s financial statements have been prepared in accordance with the
accounting rules adopted by the Accounting Officer of the Commission, in
particular “Accounting rule 11 – Financial assets and liabilities” dated
December 2004 and updated in October 2006, December 2009 and December 2011. The
updated rule is effective for periods beginning on or after 1 January 2012 with
the exception of the rules on disclosures in Chapter 9, which shall become
effective for periods beginning on or after 1 January 2014. 
The
amounts in the financial statements are not rounded except in the section
financial risk management where the amounts are rounded to the nearest thousand
EUR. 
3.5.2.2.  Significant
accounting and judgments and estimates
The preparation of
financial statements in conformity with the accounting rules adopted by the
Accounting Officer of the Commission requires the use of certain critical
accounting estimates. It also requires the Bank's 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 the Bank Management is required in the estimation of the amount and
timing of future cash flows when determining the level of allowance required.
3.5.2.3.  Changes
in the presentation
The
Fund has changed the presentation of its Available for Sale portfolio in the
balance sheet. 
Following
a decision
of the Accounting Officer of the Commission concerning the “Presentation of the
Guarantee Fund for external actions and other available for sale portfolios” on
31 January 2013, the Available for Sale financial instruments of the Fund’s
portfolio are categorised as current or non-current asset distinction of the EU
Accounting rule 2 according to their remaining contractual maturity at the
balance sheet date. Available for Sale investments with a remaining maturity of
less than a year and accrued interest with payment date less than a year are
presented in the balance sheet as current assets, while Available for Sale
investments with a remaining maturity of more than a year are presented in the
balance sheet as non-current assets. The presentation of the comparative
figures has been changed accordingly. This decision has no effect on the
economic outturn account.
3.5.2.4.  Changes
in accounting policies
There
are no changes regarding the accounting policies compared with the previous
financial year.
3.5.2.5.  Summary
of significant accounting policies
3.5.2.5.1 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.
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.
3.5.2.5.2 Cash and
cash equivalents
The Fund defines cash and cash equivalents
as current accounts, short-term deposits or treasury bills with original
maturities of three months or less.
3.5.2.5.3 Available
for Sale portfolio
The
bond portfolio, seen as Available for Sale portfolio, is composed 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 Commission and
consequently, are carried out at their fair value through contributors’
resources. 
In
accordance with the decision
of the Accounting Officer of the Commission concerning the
“Presentation of the Guarantee Fund for external actions and other available
for sale portfolios” on 31 January 2013, the Available for Sale financial
instruments of the Fund’s Portfolio are categorised as current or non-current
asset according to their remaining contractual maturity at the balance sheet
date. Available for Sale investments with a remaining maturity of less than a
year and accrued interest with due date less than a year are presented in the
balance sheet as current assets, while Available for Sale investments with a
remaining maturity of more than a year are presented in the balance sheet as
non-current assets.
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,
e.g. a breach of contract, a restructuring of the debt of the issuer or a high
probability of bankruptcy. 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.
The
sales and purchases of the securities are accounted for at settlement date.
3.5.2.5.4 Contributions
Contributions
are increased by:
-         
Payment
allocations made to the Fund by the general budget of the European Union;
-         
Guarantee
recoveries received from the Bank.
Contributions
are decreased by:
-         
Payment
allocations to be made from the Fund to the general budget of the European
Union;
-         
Guarantee
calls made by the Bank. 
Contributions
to be received from
the general budget of the European Union, or to be paid back to the general
budget of the European Union are recognized 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 (Commission, Euratom) No 480/2009 of 25 May 2009 establishing a
Guarantee Fund for external actions (codified version). When it relates to
articles 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.
Contributions
to be paid to the Bank in the context of guarantee calls in line with the
Guarantee Agreement between the European Union and the Bank in respect of loans
and loan guarantees granted by the Bank for projects outside the European Union
signed on 22 November 2011 (“Guarantee Agreement”) are derecognised from the
balance sheet on the date when the guarantee call becomes due.
Guarantee
recoveries paid from the Bank to the Fund in line with the Guarantee Agreement
are recognised in the balance sheet as contributions on the date when the guarantee
recovery becomes due.
3.5.2.5.5  Interest
income
Interest income covers interest earned on cash equivalents and
Available for Sale portfolio and is recorded in the economic outturn account on
an accrual basis.
3.5.2.5.6 Treasury
management fees
According to the Convention, the Bank shall receive a
treasury management fee which is calculated
on the basis of, in the case of securities, the average market value at the end
of each month, and in the case
of cash and money market deposits, the average nominal value at the end of each month.
Treasury
management fees are recorded in the economic outturn account on an accrual
basis.
3.5.2.5.7 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.
3.5.2.6.  Taxation
The Protocol on the Privileges and Immunities of the
European Communities, appended to the treaty on the European Union and the
treaty of the functioning of the European Union, stipulates that the assets,
revenues and other property of the Institutions of the Union are exempt from
all direct taxes.
3.5.3.     Financial
Risk Management
The Risk Management function of the Bank
ensures that the portfolio is managed in line with the agreed asset management
guidelines, especially in respect of the eligible investments in the Fund’s
portfolio, the maximum maturity, the interest rate risk and the credit risk
exposure of the Fund’s portfolio. In this respect quarterly reporting is also
delivered to the Commission concerning the risk and the performance of the
Fund’s portfolio. The reporting makes reference to breaches, if any, of the
limits set out in the Guarantee Fund Agreement and includes a comparison of the
valuations of the portfolio to a performance index taken as benchmark. 
3.5.3.1.  Credit
Risk
Current accounts - Profile of counterparty
The current accounts of the Fund are rated
A1 as at December 2013 and 31 December 2012. The Fund has two current accounts
opened with BNP Paribas Fortis and one current account opened with Euroclear Bank
as follows:
 Current accounts || 31.12.2013 EUR || 31.12.2012 EUR 
 BNP Paribas Fortis transitory account || 33,976.91 || 31,653.21 
 BNP Paribas Fortis current account || 1,144,843.27 || 8,019,682.63 
 Euroclear Bank current account || 43,477.89 || 22,899.56 
 Total || 1,222,298.07 || 8,074,235.40 
Fixed Short-Term Deposits - Profile of
counterparties
In accordance with the agreement between
the Commission and the Bank 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 2013 and as at 31 December 2012 (including
accrued interest).
 Long term rating ||  Short term rating || 31.12.2013 || 31.12.2012 
 EUR || EUR 
   ||   ||   ||   ||   ||   
 Aa2 || P-1 || 34,600,192.22 || 22.93% || 45,701,510.64 || 18.88% 
 Aa3 || P-1 || 0.00 || 0.00% || 17,001,728.34 || 7.02% 
 A1 || P-1 || 0.00 || 0.00% || 102,706,224.45 || 42.44% 
 A2 || P-1 || 72,706,329.42 || 48.19% || 76,610,145.31 || 31.66% 
 A3 || P-1 || 43,574,292.71 || 28.88% || 0.00  || 0.00% 
   ||   ||   ||   ||   ||   
 Total ||   || 150,880,814.35 || 100.00% || 242,019,608.74 || 100.00% 
Available for Sale portfolio -
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 or
guaranteed by Member States: minimum rating Baa3; 
-         
Securities issued by a
Supranational, other States or Public Company: minimum rating Aa2; 
-         
Covered Bonds or other legal bodies
(including structured products): minimum rating Aaa;
-         
Securities issued by
Banks and Corporates:  minimum rating Aa2. 
As at 31 December 2013 and 31
December 2012 the profile of the Available for Sale portfolio by issuer type
and long term rating is as follows - amounts are indicated at market value
excluding accrued interest:
 Issuer || 31.12.2013 || 31.12.2012 
   || EUR || EUR 
   ||   ||   ||   ||   
 Banks Aaa || 5,000,000.00 || 0.28% || 0.00 || 0.00% 
 Banks Aa2 || 58,283,384.80 || 3.28% || 40,723,849.10 || 2.55% 
 European Union Aaa || 21,507,242.10 || 1.21% || 22,032,900.75 || 1.38% 
 Member State Aaa || 190,199,502.20 || 10.70% || 275,538,052.25 || 17.26% 
 Member State Aa1 || 132,579,067.48 || 7.46% || 0.00 || 0.00% 
 Member State Aa2 || 109,897,057.00 || 6.18% || 60,795,547.30 || 3.81% 
 Member State Aa3 || 21,084,170.00 || 1.19% || 10,614,981.00 || 0.66% 
 Member State A1 || 17,197,780.00 || 0.97% || 17,833,500.00 || 1.12% 
 Member State A2 || 24,742,260.00 || 1.39% || 15,119,290.00 || 0.95% 
 Member State A3 || 9,835,700.00 || 0.55% || 74,463,489.20 || 4.66% 
 Member State Baa1 || 104,738,951.00 || 5.89% || 82,413,049.50 || 5.16% 
 Member State Baa2 || 27,856,375.00 || 1.57% || 37,556,767.25 || 2.35% 
 Member State Ba2 || 16,108,691.20 || 0.91% || 15,711,641.60 || 0.98% 
 Member State B3 || 16,984,122.69 || 0.96% || 16,486,020.63 || 1.03% 
 Covered Bond Aaa || 465,365,704.56 || 26.20% || 401,665,202.43 || 25.16% 
 Covered Bond Aa1 || 0.00 || 0.00% || 4,989,000.00 || 0.31% 
 Corporate Aaa || 10,019,700.00 || 0.56% || 0.00 || 0.00% 
 Public Institution Aaa || 363,705,421.20 || 20.48% || 452,279,794.95 || 28.33% 
 Public Institution Aa2 || 34,372,228.00 || 1.93% || 34,777,887.00 || 2.18% 
 Public Institution Aa1 || 115,731,761.40 || 6.51% || 10,588,000.00 || 0.67% 
 Supranational Aaa || 0.00 || 0.00% || 23,007,364.40 || 1.44% 
 Supranational Aa1 || 31,679,019.60 || 1.78% || 0.00 || 0.00% 
   ||   ||   ||   ||   
 Total || 1,776,888,138.23 || 100.00% || 1,596,596,337.36 || 100.00% 
The above
presented table is prepared according to the agreed asset management
guidelines. In particular, the issuer ratings of the AFS portfolio refer to the
best rating given by Moody’s, Standard & Poor’s or Fitch.
The following table shows the
portfolio structure by exposure towards EU sovereign (either directly or
indirectly) and exposure towards other entities as at 31 December 2013 (in
EUR):
 At 31.12.2013 || Purchase price || Value at maturity || Book Value*) 
 EU sovereigns ||   ||   ||   
 Austria ||  14,215,300.00 ||  14,000,000.00 ||  14,082,530.00 
 Belgium ||  88,493,581.53 ||  88,000,000.00 ||  89,864,657.00 
 Czech Republic ||  21,462,900.00 ||  21,000,000.00 ||  21,084,170.00 
 France ||  144,945,983.68 ||  146,000,000.00 ||  152,611,467.48 
 Germany ||  138,218,880.00 ||  139,500,000.00 ||  144,589,142.70 
 Greece ||  17,661,350.00 ||  17,000,000.00 ||  16,984,122.69 
 Ireland ||  29,619,200.00 ||  30,000,000.00 ||  30,571,261.00 
 Italy ||  56,022,535.00 ||  57,500,000.00 ||  60,525,522.50 
 Lithuania ||  12,460,600.00 ||  13,000,000.00 ||  13,642,167.50 
 Luxembourg ||  14,946,600.00 ||  15,000,000.00 ||  14,937,799.50 
 Netherlands ||  16,456,350.00 ||  16,500,000.00 ||  16,590,030.00 
 Poland ||  3,716,000.00 ||  4,000,000.00 ||  4,248,860.00 
 Portugal ||  16,032,480.00 ||  16,000,000.00 ||  16,108,691.20 
 Slovakia ||  36,422,750.00 ||  36,500,000.00 ||  37,691,180.00 
 Slovenia ||  10,000,000.00 ||  10,000,000.00 ||  9,835,700.00 
 Spain ||  27,432,225.00 ||  27,500,000.00 ||  27,856,375.00 
 European Union ||  20,429,270.00 ||  20,500,000.00 ||  21,507,242.10 
 EU Supranational ||  31,723,650.00 ||  31,000,000.00 ||  31,679,019.60 
 Total EU sovereigns || 700,259,655.21 || 703,000,000.00 || 724,409,938.27 
 Other sovereign or corporate bonds || 1,039,852,820.70 || 1,036,838,624.14 || 1,052,478,199.96 
 TOTAL || 1,740,112,475.91 || 1,739,838,624.14 || 1,776,888,138.23 
*) The book value
represents the clean market value of the assets excluding accrued interest.
In the tables
above “EU sovereigns” comprise of bonds issued or guaranteed by EU Member
States and EU Supranationals, while “others” comprise of bonds issued by
banks, covered bonds and bonds issued or guaranteed by non EU Supranationals or
EU and non EU Public Institutions.
The following
table shows the portfolio structure by exposure towards EU sovereign (either
directly or indirectly) and exposure towards other entities as at 31 December
2012 (in EUR):
 At 31.12.2012 || Purchase price || Value at maturity || Book Value*) 
 EU sovereigns ||   ||   ||   
 Austria || 19,346,300.00 || 19,000,000.00 || 19,573,496.90 
 Belgium || 23,357,250.00 || 23,000,000.00 || 25,661,697.30 
 Czech Republic || 10,420,000.00 || 10,000,000.00 || 10,614,981.00 
 Denmark || 6,497,790.00 || 6,500,000.00 || 6,520,150.00 
 France || 119,945,563.68 || 121,000,000.00 || 130,669,960.40 
 Germany || 126,988,710.00 || 128,500,000.00 || 136,782,077.35 
 Greece || 17,661,350.00 || 17,000,000.00 || 16,486,020.63 
 Ireland || 62,552,280.00 || 63,000,000.00 || 63,537,017.00 
 Italy || 71,146,535.00 || 72,500,000.00 || 74,463,489.20 
 Lithuania || 17,622,600.00 || 18,000,000.00 || 18,876,032.50 
 Netherlands || 16,456,350.00 || 16,500,000.00 || 17,126,217.60 
 Poland || 3,716,000.00 || 4,000,000.00 || 4,339,440.00 
 Portugal || 16,032,480.00 || 16,000,000.00 || 15,711,641.60 
 Slovakia || 26,617,750.00 || 26,500,000.00 || 28,613,350.00 
 Spain || 37,413,125.00 || 37,500,000.00 || 37,556,767.25 
 European Union || 20,429,270.00 || 20,500,000.00 || 22,032,900.75 
 EU Supranational || 22,681,540.00 || 22,000,000.00 || 23,007,364.40 
 Total EU sovereigns || 618,884,893.68 || 621,500,000.00 || 651,572,603.88 
 Other sovereign or corporate bonds ||  924,488,450.50 ||  919,700,000.00 ||  945,023,733.48 
 TOTAL || 1,543,373,344.18 || 1,541,200,000.00 || 1,596,596,337.36 
*) The book value
represents the clean market value of the assets excluding accrued interest.
The presentation for
“others” and “EU sovereigns” as at 31 December 2012 has been changed as the
bonds issued or guaranteed by EU Public Institutions were considered as EU
sovereigns in previous year financial statements.
3.5.3.2.  Market
Risk
Interest
rate risk position (in EUR’000)
The following table
shows the sensitivity of the three Guarantee Fund (GF) sub-portfolios to
interest rate variations. The GF sub-portfolios are as follows:
·        
GF
– Short term (Short term deposits, zero coupon bonds), 
·        
GF
– FRN (AFS Bond portfolio variable interest), and
·        
GF
– Long Term (AFS Bond portfolio fixed interest).
31 December 2013
 GF subportfolios || Nominal value in EUR'000 || Clean market value in EUR'000 || Modified Duration (Years) || IR Exposure (+/-1bp) in EUR'000 || IR Exposure (100bp) in EUR'000 || IR Exposure (-100bp) in  EUR'000 
 GF - Short term || 190,872 || 190,867 || 0.06 || -/+ 1.199 || - 119 || + 121 
 GF - FRN || 706,439 || 707,246 || 0.16 || -/+ 11.660 || - 1,161 || + 1,171 
 GF - Long term || 993,400 || 1,029,644 || 2.73 || -/+ 285.264 || - 27,789 || + 29,301 
 TOTAL GF || 1,890,711 || 1,927,756 || 1.53 || -/+ 298.123 || 29,069 || + 30,592 
31 December 2012
 GF subportfolios || Nominal value in EUR'000 || Clean market value in EUR'000 || Modified Duration (Years) || IR Exposure (+/-1bp) in EUR'000 || IR Exposure (100bp) in EUR'000 || IR Exposure (-100bp) in  EUR'000 
 GF - Short term || 242,000 || 241,996 || 0.11 || -/+ 2.860 || - 284 || + 288 
 GF - FRN || 519,500 || 520,334 || 0.16 || -/+ 8.560 || - 853 || + 860 
 GF - Long term || 1,021,700 || 1,076,262 || 2.69 || -/+ 294.311 || - 28,728 || + 30,165 
 TOTAL GF || 1,783,200 || 1,838,592 || 1.64 || -/+ 305.731 || - 29,865 || + 31,313 
The
clean market value of the GF-Short term sub-portfolio as reported
above represents the sum of clean market values calculated for short term
deposits and zero coupon bonds. Those clean market values are determined
as follows:
·        
Short term deposits: the sum of the nominal value and total
interest at maturity for each position is discounted from the maturity date to
the spot date, whereas the spot date equals the valuation date plus two
business days. Finally, accrued interest at spot date is subtracted from
the calculated market value of the position.

 Zero  coupon bonds : the
     nominal value  of  each  position  is 
     multiplied  with  the  observed  spot 
     quote/price.

The clean market values of the GF-FRN and GF-Long term sub-portfolios
as reported above represents the sum of clean market values calculated for
inflation linked, fixed and floating rate bonds. Those clean market values
are determined as follows:

 Fixed rate
     bonds: the nominal
     value of each position is multiplied by its market quote as observed at
     valuation date.
 Floating rate
     bonds (FRNs): the
     nominal value of each position is multiplied by its market quote as
     observed at valuation date.
 Inflation
     linked bonds: the
     nominal value of each position is multiplied by its market quote as
     observed at valuation date multiplied by the Inflation Index Ratio.

·        
Greek bonds: a model based valuation methodology is
applied at valuation date (ad-hoc market driven discounting methodology), as
described in note 3.2.
              
3.5.3.3.  Liquidity
Risk
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, while the
accrued interest is presented based on the due date of those cash flows. The
below table 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. 
As at 31 December 2013 the
accrued interest is classified on the basis of the due date of the respective
coupon date while in the previous financial statements they were presented in
line with the final maturity of the related bond positions. In the below table
the comparative figures have been changed in accordance with the change in
presentation. Those assets and
liabilities that do not have a contractual maturity date are grouped together
in the “Undefined maturity” category.
The liquidity position as at 31 December
2013 is as follows (in EUR):
 Maturity (at 31 December 2013) || Less than 3 months || 3 months to       1 year || 1 year to  10 years || Undefined maturity || TOTAL 
   ||   ||   ||   ||   ||   
 Assets ||   ||   ||   ||   ||   
 Available for Sale portfolio || 174,636,028.41 || 186,978,254.94 ||  1,432,206,953.14 || 0.00   ||  1,793,821,236.49 
 of which accrued interest || 8,858,962.41 || 8,074,135.85 || 0.00 || 0.00 || 16,933,098.26 
 Short term receivables || 58,432,294.00 || 0.00 || 0.00 || 0.00 || 58,432,294.00 
 Current accounts ||  1,222,298.07 || 0.00 || 0.00 || 0.00 || 1,222,298.07 
 Short term deposits || 150,880,814.35 || 0.00 || 0.00 || 0.00 || 150,880,814.35 
 of which accrued interest || 8,814.35 || 0.00 || 0.00 || 0.00 ||  8,814.35 
 Total assets || 385,171,434.83 || 186,978,254.94 || 1,432,206,953.14 || 0.00 || 2,004,356,642.91 
   ||   ||   ||   ||   ||   
 Contributors' resources ||   ||   ||   ||   ||   
 Contributors' resources || 0.00 || 0.00 || 0.00 || 1,981,290,030.44 || 1,981,290,030.44 
 Current liabilities ||   ||   ||   ||   ||   
 Amounts payable to the Bank || 23,066,612.47 || 0.00 || 0.00 || 0.00 || 23,066,612.47 
 Total contributors' resources and liabilities || 23,066,612.47 || 0.00 || 0.00 || 1,981,290,030.44 || 2,004,356,642.91 
The liquidity position as at 31
December 2012 is as follows (in EUR):
 Maturity (at 31 December 2012) || Less than 3 months || 3 months to      1 year || 1 year to  10 years || Undefined maturity || TOTAL 
   ||   ||   ||   ||   ||   
 Assets ||   ||   ||   ||   ||   
 Available for Sale portfolio || 119,868,431.15 || 164,179,433.61 || 1,331,523,103.78 || 0.00 || 1,615,570,968.54 
 of which accrued interest || 10,629,256.15 || 8,345,375.03 || 0.00 || 0.00 || 18,974,631.18 
 Short term receivables || 156,261,389.32 || 0.00 || 0.00 || 0.00 || 156,261,389.32 
 Current accounts || 8,074,235.40 || 0.00 || 0.00 || 0.00 || 8,074,235.40 
 Short term deposits || 242,019,608.74 ||                     0.00 || 0.00 || 0.00 || 242,019,608.74 
 of which accrued interest || 19.608,74 || 0.00 || 0.00 || 0.00 || 19,608.74 
 Total assets || 526,223,664.60 || 164,179,433.61 || 1,331,523,103.78 || 0.00 || 2,021,926,202.00 
   ||   ||   ||   ||   ||   
 Contributors' resources ||   ||   ||   ||   ||   
 Contributors' resources || 0.00 || 0.00 || 0.00 || 2,003,106,709.77 || 2,003,106,709.77 
 Current Liabilities ||   ||   ||   ||   ||   
 Amounts payable to  the Bank || 18,819,492.23 || 0.00 || 0.00 || 0.00 || 18,819,492.23 
 Total Contributors' resources and Liabilities || 18,819,492.23 || 0.00 || 0.00 || 2,003,106,709.77 || 2,021,926,202.00 
3.5.3.4.  Foreign
exchange risk exposure
As all assets and
liabilities of the Fund are denominated in Euro, the Fund is not exposed to
foreign exchange risk.
3.5.4.     Available
for Sale portfolio
The following tables show the movements of
the Available for Sale portfolio:
   || EUR 
 Balance as at 1 January 2012 || 1,194,552,654.14 
 Acquisitions ||   736,980,629.68 
 Disposals and withdrawals (original acquisition cost) || -400,493,045.00 
 Change in carrying amount -  actuarial difference || -1,359,480.78 
 Change in accrued interest || -1,969,053.61 
 Change in fair value ||  87,859,264.11 
 Balance as amount at 31 December 2012 || 1,615,570,968.54 
   || EUR 
 Balance as at 1 January 2013 || 1,615,570,968.54 
 Acquisitions || 523,078,195.53 
 Disposals and withdrawals (original acquisition cost) || -326,339,063.80 
 Change in carrying amount -  actuarial difference || 559,316.26 
 Change in accrued interest || -2,041,532.92 
 Change in fair value || -17,006,647.12 
 Balance as at 31 December 2013 || 1,793,821,236.49 
At
31 December 2013, the nominal value of the investment portfolio was EUR 1,739.8
million (2012: EUR 1,541.2 million), against a market value of EUR 1,776.9
million (2012: EUR 1,596.6 million), excluding accrued interest.
Accrued interest
at 31 December 2013 amounting to EUR 16,933,098.26 (2012:
EUR 18,974,631.18) is split between:

 Fixed rate notes           EUR
     16,405,005.93  (2012 EUR: 18,653,314.71)
 Floating rate notes        EUR  528,092.33 
     (2012: EUR: 321,316.47)

 
As at 31 December 2013
the market value of securities lent within the automatic security lending
agreement with Euroclear (excluding accrued interest) amounts to EUR
37,605,514.54 (2012: EUR 39,086,160.80).
3.5.5.     Other
short term receivables
Other short term receivables amount to EUR nil at 31
December 2013 and amounted to EUR 601,389.32 at 31 December 2012 representing
coupons due but unpaid at balance sheet date. 
3.5.6.     Cash
and Cash Equivalents
The following table shows the split of cash
and cash equivalents (including accrued interest):
 Description || 31.12.2013 EUR || 31.12.2012 EUR 
   ||   ||   
 Current accounts || 1,222,298.07 || 8,074,235.40 
 Short term deposits || 150,880,814.35 || 242,019,608.74 
 of which accrued interest || 8,814.35 || 19,608.74 
 Total || 152,103,112.42 || 250,093,844.14 
3.5.7.     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 (Commission, 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 2012 amounting to EUR
155,660,000.00 was paid in cash during the reporting period. In 2013, the Fund
has been allocated an additional contribution amount of EUR 58,432,294.00 which
has not been paid as at 31 December 2013. 
In December 2013
the Fund made a capital repayment of EUR 30,335,185.93 to the Commission
following the recent EU enlargement with a new member: the Republic of Croatia.
The following
table shows the movements of the contributions during the reporting period: 
   || EUR || 
 Balance as at 1 January 2012 || 987,277,788.12 || 
 Contributions from the Commission allocated but not paid in || 155,660,000.00 || 
 Contributions payable as guarantee call || -17,982,385.53 ||   
 Contributions paid to the Bank as guarantee call || -24,022,972.83 || 
 Recovery of historic called amount || 2,149,345.59 || 
 Balance as at 31 December 2012 || 1,103,081,775.35 || 
   || EUR || 
 Balance as at 1 January 2013 || 1,103,081,775.35 || 
 Contributions from the Commission allocated but not paid in || 58,432,294.00 || 
 Change of  contributions payable as guarantee call || -4,209,327.51 ||   
 Contributions paid to the Bank  as guarantee call || -60,628,847.40 || 
 Contributions repaid to the Commission || -30,335,185.93 || 
 Balance as at 31 December 2013 || 1,066,340,708.51 || 
3.5.8.     Current
Liabilities
 Description || 31.12.2013 EUR || 31.12.2012 EUR 
 Accounts Payable ||   ||   
 Guarantee call payable || 22,191,713.04 || 17,982,385.53 
 Treasury management fees || 841,299.43 || 805,306.70 
 Audit fees || 33,600.00 || 31,800.00 
 Total || 23,066,612.47 || 18,819,492.23 
Treasury management fees are payable to the
Bank on an annual basis. 
3.5.9.     Financial
operations revenues
   Description || From 01.01.2013 to 31.12.2013 || From 01.01.2012 to 31.12.2012 
 EUR || EUR 
   ||   ||   
 Total amount, thereof: || 32,955,429.87 || 47,722,795.64 
 Interest income, thereof: || 31,507,572.30 || 39,022,011.60 
 Interest income on cash and cash equivalents || 208,412.77 || 2,152,817.58 
 Interest income on Available for Sale portfolio || 31,299,159.53 || 36,869,194.02 
 Other financial income, thereof: || 1,447,857.57 || 8,700,784.04 
 Realised gain on sale of Available for Sale portfolio || 1,364,029.81 || 8,596,018.53 
 Income from securities lending activity || 83,827.76 || 104,765.51 
3.5.10.   Financial
operations expenses
   Description || From 01.01.2013  to 31.12.2013 || From 01.01.2012  to 31.12.2012 
 EUR || EUR 
   ||   ||   
 Total amount, thereof: || -1,014,843.31 || -3,733,180.13 
 Realised loss on sale of Available for Sale portfolio || 0.00 || -2,781,347.56 
 Treasury management fees || -841,299.43 || -805,306.70 
 Bank fees || -139,943.88 || -114,725.87 
 Audit fees || -33,600.00 || -31,800.00 
3.5.11.   Subsequent
events
There have been no material post-balance
sheet events, which would require disclosure or adjustment to the
31 December 2013 financial statements.
[1] The balance of total assets includes a
contribution receivable of EUR 58.4 million which is due to be paid in 2014
(2012: EUR 155.7 million). In the chart presented in figure 1 contributions
receivable are recognized as assets in December of the corresponding years.
[2] In December 2013 the Fund made a capital
repayment of EUR 30.3 million to the EU following the recent EU enlargement
with a new Member State: Croatia.
3 The
fixed rate portfolio includes the zero-coupon bonds.
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.
5 Reported ratings are ratings of the respective issues.
In the absence of all bond/issue ratings, the respective issuer ratings (in
case of guaranteed positions the guarantor ratings) have been reported.
6 The “Other” category presented in figure 
includes: Member States A2 (1.38%), Member States Aa3 (1.21%), European Communities
Aaa (1.18%), Member States B3 (0.98%), Member State A1 (0.95%), Member States Ba2
(0.92%), Member States A3 (0.57%), Corporates Aaa (0.57%),
Banks Aaa (0.29%)
7 The EUR 1.267 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 1.222  million total balance of the
“current account” balance reported in section 1.2. The “cash account” balance
is however reset at the beginning of each year to match the total balance of
the current accounts.