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Annual report 2011
70
The average effective interest rate on term deposit in EUR
was 0.9 % for 2011 (2010: 0.9 %). The average effective
interest rate on the AFS securities port folio in EUR was
3.7 % for 2011 (2010: 3.7 %).
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
portfolio 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 consid-
eration 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 December 2011. Positions in floating rate
assets are assumed to have quarterly repricings. For the
positions in place as of 31 December 2010, the earn-
ings of the EIF treasury portfolio would have increased
by EUR 1.2m 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 Decem-
ber 2011, the earnings of the EIF treasury portfolio would
increase by EUR 1.9m 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 2011, the Value at Risk of the EIF
treasury port folio was EUR 2.3m (EUR 2.9m in 2010).
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
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%
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 the 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 exchange rate risk is kept at a low level (below
5% of net assets) through a policy of 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.
The table below shows the currency exposure (in EUR) of
EIF’s main financial assets and financial liabilities.