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69
Financial statements 2011
EUR m
31.12.2011
31.12.2010
Capital Charges
93.5
110.3
Guarantees Drawn
3 598.9
3 160.3
Guarantees Undrawn
85.8
48.6
Exposure at risk
2 879.8
2 580.2
Yearly guarantee calls
3.8
6.7
During 2011 the capital charge for the G&S port folio
decreased from EUR 110.3m to EUR 93.5m.
3.5.3 Market risk
Market risk is the risk that the net present value of future
cash flows of financial instruments will fluctuate due to
changes in market variables such as interest rates, foreign
exchange rates and security prices.
3.5.3.1. Market risk: interest rate risk
More than half of the Fund’s income and operating cash
flows are unaffected by changes in market interest rates.
The Fund’s interest rate risk arises mainly from cash and cash
equivalent positions as well as investments in debt securities.
3.5.3.1.A. Private Equity
As PE fund investments are financed by equity and are
not leveraged, direct sensitivity to interest rate is not a
consideration.
3.5.3.1.B. Portfolio Guarantees & Securitisation
Transactions in which EIF acts as guarantor are typically
in illiquid markets and representative market prices are not
Liquidity risk: Portfolio guarantees & securitisation
available. EIF has therefore developed a mark-to-model
approach to value these transactions, using external and
internal ratings, information gathered through regular
monitoring, and discounted cash flow analysis.
The value of guarantee transactions is not directly sub-
ject to fluctuations with interest rates during the life of the
transactions. The interest rate risk impact on underlying
portfolios is indirectly assessed during the quarterly review
of the transaction’s performance. A change of a transac-
tion rating usually implies a revision of the transaction’s
expected loss, capital charge and transaction valuation.
3.5.3.1.C. Treasury
Approximately 75.7 % of liquid assets held have an aver-
age duration of up to 5 years, thereby safeguarding the
Fund against the substantial fluctuations in its long- term
revenues (2010: 76.7%).
Moreover, speculative operations are not authorised.
Investment decisions are based on the interest rates avail-
able in the market at the time of investment.
The following table illustrates the Fund’s exposure to inter-
est rate risk (figures are presented at fair value) at the time
they reprice or mature:
EUR
At 31.12.2011
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
160 660 806
0
0
0
0 160 660 806
AFS - Debt securities and other
fixed income securities
49 125 502 108 071 804 392 872 281 162 192 745 66 106 266 778 368 598
Total
209 786 308 108 071 804 392 872 281 162 192 745 66 106 266 939 029 404
Percentage
22.3%
11.5%
41.9%
17.3%
7.0%
100.0%