Page 92 - Annual Report 2010

The average effective interest rate on term deposit in EUR was 0.9% for 2010 (2009: 0.5%). The average ef fec-tive interest rate on the AFS securities port folio in EUR was 3.7% for 2010 (2009: 3.1%).

Sensitivity of earnings

The sensitivity of earnings is an estimate of the change over the next 12 months in the earnings of the EIF treasury port-folio managed by the EIB if all interest rate curves rise by one percentage point or fall by one percentage point. The sensitivity measure is computed by taking into consideration the coupon repricings of all the positions present in the EIF treasury portfolio on a deal by deal basis. Each fixed rate asset is assumed to be reinvested at maturity in a new asset with the same residual life as the previous one as of 31 De-cember 2010. Positions in floating rate assets are assumed to have quarterly repricings. For the positions in place as of 31 December 2009, the earnings of the EIF treasury portfolio would have increased by EUR 2.0m if interest rates rose by 100 basis points or decreased by the same amount if interest rates fell by 100 basis points. For the positions in place as of 31 December 2010, the earnings of the EIF treasury portfolio would increase by EUR 1.2m if interest rates rose by 100 basis points and decrease by the same amount if interest rates fell by 100 basis points.

Value at Risk

As of 31 December 2010, the Value at Risk of the EIF treasury port folio was EUR 2.9m (EUR 1.7m in 2009).

It was computed on the basis of the RiskMetrics VaR methodology, using a confidence level of 99.0% and a 1-day time horizon. This means that the VaR figure repre-sents the maximum loss over a one-day horizon such that the probability that the actual loss will be larger is 1.0%. Given the nature of the EIF treasury positions, the choice of the RiskMetrics methodology is deemed appropriate to measure their exposure to interest rate risk.

3.5.3.2. Market risk: foreign currency risk

EIF may invest in financial instruments denominated in cur-rencies other than its functional currency. Consequently, the Fund is exposed to risks that the exchange rate of its currency relative to other currencies may change in a manner that has an adverse effect on the value of that portion of the Fund’s assets or liabilities denominated in currencies other than euro (EUR).

The following section provides information on the risk that fair values and future cash flows of financial assets will fluctuate due to changes in foreign exchange rates.

The Fund’s objective is to reduce exchange rate risk by limiting its investment in non-euro denominated instruments. The Fund’s capital is denominated in EUR and the majority of its assets and liabilities are in that currency.

EUR At 31.12.2010 Fixed rate Variable rate Total

Less than 3 months

3 months

to 1 year 1 to 5 years More than

5 years

Cash and cash equivalents 73 603 254 0 0 0 0 73 603 254

AFS - Debt securities and other fixed income securities

26 070 241 100 987 208 518 442 047 178 168 380 39 911 005 863 578 881

Total 99 673 495 100 987 208 518 442 047 178 168 380 39 911 005 937 182 135 Percentage 10.6% 10.8% 55.3% 19.0% 4.3% 100.0%

EUR At 31.12.2009 Fixed rate Variable rate Total

Less than 3 months

3 months

to 1 year 1 to 5 years More than

5 years

Cash and cash equivalents 106 266 117 0 0 0 0 106 266 117

AFS - Debt securities and other fixed income securities

13 605 484 205 843 498 401 592 792 145 115 976 66 155 816 832 313 566

Total 119 871 601 205 843 498 401 592 792 145 115 976 66 155 816 938 579 683 Percentage 12.8% 21.9% 42.8% 15.5% 7.0% 100.0%