the eib group · net profit for year reserves and provisions activity in 2002 contracts signed...

The EIB GroupActivity Report 2002

Activity in 2002

Loans signedEuropean UnionAccession CountriesPartner Countries

Loans approvedEuropean UnionAccession CountriesPartner Countries

Loans disbursedFrom the Bank's resourcesFrom budgetary resources

Resources raised (after swaps)Community currenciesNon-Community currencies

European Investment Bank

EIB Group: key data(EUR million)

Situation as at 31.12.2002

Operational portfolioVenture capital (184 funds)Guarantees (109 operations)

Subscribed capitalof which paid in

Net profit for yearReserves and provisions

Activity in 2002

Contracts signedVenture capital (36 funds)Guarantees (32 operations)

Situation as at 31.12.2002

OutstandingsLoans from the Bank's resourcesGuarantees providedFinancing from budgetary resourcesShort, medium and long-term borrowings

Own fundsBalance sheet totalNet profit for yearSubscribed capital

of which paid in

European Investment Fund

39 61833 4433 6412 534

52 82442 8916 5893 344

35 21435 007

206

38 01629 1658 851

233 561466

2 590181 167

24 615220 769

1 294100 000

6 000

1 707472

1 236

6 9542 4504 5042 000

40019

162

Contents

Page

Message from the President

Operational background and overview 2002

The Corporate Operational Plan 2003-2005

EIB Group activity in 2002

Fostering balanced development throughout the Union

The “Innovation 2000 Initiative“

Protecting the environment

Preparing the future Member States of the Union

The new Euro-Mediterranean financial partnership

Cooperation with other partner countries

EIB Group support for SMEs

Financing Trans-European Networks

A top-flight financial intermediary

Activity on the capital markets

Capital market activities in Accession Country currencies

Cooperation with the banking sector

EIB Group administration and staff

A partner to the European institutions

in touch with civil society

EIB Governing Bodies

The Management Committee of the EIB

EIB Organisation Chart

EIF Governing Bodies and Structure


EIB Group: summarised balance sheet

Results for the year and Risk Management

The EIB prepares for its expansion

Projects eligible for financing by the EIB Group

EIB Group addresses

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Message from the President

IIn 2002, the EIB Group's operations strongly under-pinned the Union's economic and social priorities acrossa broad range of sectors. This activity, manifested in avolume of lending close on EUR 40 billion and borrow-ings of EUR 38 billion, reflects the policy lines mappedout by the successive European Councils and ourGovernors and embodied in our multiannual“Corporate Operational Plan”.

In keeping with this strategic framework - defining theEIB's identity as a policy-driven public bank - ourGovernors decided to increase our subscribed capitalfrom EUR 100 billion to EUR 150 billion with effect from1 January 2003. Achieved by converting reserves intopaid-in capital and hence without burdening the publicfinances of the Union or its Member States, this increaseraised the ceiling for EIB lending under the Bank'sStatute to EUR 375 billion. With this renewed endorse-ment from its shareholders, the Bank is well equippedto carry its activities forward and, in particular, to assistthe integration of the ten new Member Countries set tojoin us in the spring of 2004.

Clearly, the historic decision taken at the CopenhagenEuropean Council will have a far-reaching impact onboth the institutions and policies of the Union, espe-cially in terms of economic and social cohesion and soli-darity among the Member States. The EIB stands readyto play to the full its role in helping the Union to meet

these challenges. Accordingly, we shall take an activepart in the Commission's deliberations on cohesion poli-cies and the future trans-European networks.

Another of the Bank's tasks is to contribute to buildingan information and knowledge-based European econ-omy, in accordance with the strategy adopted by theLisbon European Council of March 2000. Considering2010 to be a time-line compatible with the objectivesset by the March 2002 Barcelona European Council, theBank has launched a new programme: the “Innovation2010 Initiative”. This is based on an integratedapproach, focusing on the links between knowledgecreation and the market and covering all phases of theinnovation process from education to research anddevelopment with its downstream effects in boostingproductivity and competitiveness. Between 2003 and2006, a new indicative lending package of EUR 20 bil-lion will be earmarked for furthering the Lisbon andBarcelona European Council objectives, particularly inthe field of R&D and its applications in the creation anddissemination of information and communications tech-nologies.

Environmental protection and improvement remain atop priority in all the Bank's fields of activity. In additionto financing environmental projects, which in 2002accounted for over 40% of loans (well above our 25-33% target range), the Bank actively contributes to

Philippe MaystadtPresident of the EIB Group

implementing the Union's environmentalpolicies, particularly as regards thereduction of greenhouse gas emissions,renewable energies and the EU WaterInitiative introduced at the 2002Johannesburg World Summit.

Outside the Union, the Bank will, underthe enhanced cooperation arrangementsdecided by the Council, continue to sup-port the three Candidate Countries instepping up their preparations for acces-sion.

In the Mediterranean region, the newFacility for Euro-Mediterranean Investment andPartnership (FEMIP) was formally inaugurated in theautumn of 2002 in response to the conclusions of theBarcelona European Council. Its prime objective is tohelp the Partner Countries meet the challenges of eco-nomic and social modernisation and regional integra-tion in the run-up to the creation of a customs union by2010. The facility will especially focus on private sectordevelopment, regional cooperation projects and invest-ment in health and education. At the same time, thePartner Countries are closely involved in FEMIP througha newly created Policy Dialogue and CoordinationCommittee.

In the ACP (African, Caribbean and Pacific) countries,the Bank, with the assistance of the Member States, theEuropean Commission and the ACP countries them-selves, prepared the launch of the EUR 2.2 billionInvestment Facility established under the CotonouAgreement. Alongside the planned lending of up toEUR 1.7 billion from the Bank's own resources over thenext five years, this revolving facility will contribute tothe key objective of poverty reduction in these coun-tries, with particular emphasis on small-scale private-sector projects and on health and education schemes.

The drive for operational efficiency must be matched bya commitment to transparency and accountability so as

to bring the EIB closer toEurope's citizens, the ulti-mate beneficiaries of itsactivities. Accordingly, dur-ing the past year the Bankintensified its political dia-logue with the EuropeanParliament and theUnion's Economic andSocial Committee. In addi-tion, it updated its policyon information and accessto documents, in line withthe most advancedCommunity legislation,

while continuing its dialogue with civil society, particu-larly through NGOs.

As is widely known, the EIB Group funds its operationsby maintaining a capital market presence worldwide. Itsshareholder and loan-book quality, combined with ajudicious balance of prudence and innovation in its bor-rowing and lending policies, has established the EIB as abenchmark borrower of quasi-sovereign status, as unan-imously acknowledged by the AAA credit rating that itcommands throughout EU, American and Asian capitalmarkets.

In accordance with its Statute and the mandates entrusted to it by the EuropeanCouncils, the EIB finances projects giving tangible expression to the economicand social priorities of the European Union. As a public bank, the EIB acts inclose cooperation with the other EU institutions.

In fulfilling its mission, the EIB is guided by two major principles: maximising thevalue added of operations and adopting a transparent approach. Financingdecisions, in particular, are based on clear-cut criteria, focusing mainly on eachoperation's contribution towards EU objectives, the quality and robustness ofthe project and the specific financial merit of recourse to EIB funds.

Against this background, the EIB took forward in 2002 initiatives responding tothe guidelines handed down by its Board of Governors and successive EuropeanCouncils:

• continued support for the economic advancement and integration of thefuture Member States (Helsinki - December 1999; Barcelona - March 2002;Copenhagen - December 2002);

• long-term development of an innovation-driven, knowledge-based Europeaneconomy (Lisbon - March 2000; Stockholm - March 2001; Seville - June 2002);

• backing for capital investment in sectors likely to underpin growth andemployment (Ghent - October 2001);

• revitalisation of the financial partnership with the Mediterranean PartnerCountries (”Facility for Euro-Mediterranean Investment and Partnership” -FEMIP) (Barcelona - March 2002; Seville - June 2002);

• establishment of the new ”Investment Facility” designed to promote private-sector development in the ACP Countries, in line with the goals of theCotonou Agreement, scheduled to enter into force in 2003 (Laeken - Decem-ber 2001).

The Bank's strategic guidelines were endorsed by the decision of its Board ofGovernors to boost its capital from 100 billion to 150 billion. This increase isbeing financed from the Bank's reserves, consequently avoiding recourse toMember States' budgetary resources. As from 1 January 2003, the statutory ceil-ing on loans has risen to 375 billion which should provide the Bank with head-room to cater for the growth in activity from its own resources over at least fiveyears.

Operational backgroundand overview 2002

Salient figures (1):

• In 2002, loans signed by the EIBtotalled 39.6 billion, as against 36.8billion in 2001. The rise reflects espe-cially the Bank's commitment to sup-porting the Accession Countries andEU aid and cooperation policiestowards non-Member Countries. Thebreakdown was as follows:

- 33.4 billion within the EuropeanUnion;

- 3.6 billion for the future Centraland Eastern European MemberStates along with Cyprus andMalta;

- 1.6 billion for the MediterraneanPartner Countries;

- 425 million in the Balkans;

- 298 million in the African,Caribbean and Pacific Countriesand the OCT;

- 50 million in South Africa;

- 174 million in Asia and Latin Amer-ica.

• Disbursements came to 35.2 billion,of which 60% were in euro.

• Almost 340 capital projects wereappraised by the Bank, resulting inloan approvals totalling 52.8 billion.

• Borrowings, after swaps, amountedto 38 billion. They involved 219 bondissues denominated in 14 currencies.After swaps, 59% of market opera-tions were in EUR, 21.7% in USD and16.4% in GBP.

• As at 31 December 2002, outstandinglending from own resources andguarantees amounted to 234 billion.Aggregate outstanding borrowingsran to 181.2 billion. The balancesheet total stood at 220.7 billion.

• The EIF (2) for its part continued itssupport for SME activity, acquiringparticipations in venture capitalfunds for close on 470 million andfurnishing guarantees worth some1.23 billion.

(1) Unless otherwise indicated, amounts in this report are expressed in EUR.

(2) This EIB Group activity report is supplemented by the EIF Annual Report, available on that institution'swebsite (www.eif.org).

On the CD-ROM enclosed with this brochure, readers will find all statistics on activity for 2002 and theperiod 1998-2002 together with the list of projects financed during the year by the EIB Group. These dataare also available under the ”Publications” section of the EIB's website (www.eib.org).

Disbursements, contracts signed

and projects approved by the EIB

(1998 - 2002)

(EUR million)

Disbursements

Signatures

Approvals

10

1998 1999 2000 2001 2002

20

30

50

60

0

40

Drawn up for the first time at the instigation of the Board of Governors in June 1998,the annual Corporate Operational Plan (COP) is a strategic document, approved by theBoard of Directors, for defining overall medium-term policy (3 years) and setting oper-ational priorities in the light of the objectives assigned to the Bank by its Governors.

Central to the work of the Bank's staff, the plan spans three years, although thestrategic projections may be adapted during this period in order to take account ofnew mandates and changes in the economic climate. The Corporate Operational Plan2002-2004 formed the basis of the report by the Board of Directors to the Board ofGovernors on recent developments in Bank activity and the likely evolution of opera-tions in preparation for the decision to increase the capital of the Bank as from1 January 2003.

The Corporate Operational Plan 2003-2005, adopted by the Board of Directors inDecember 2002, is the first to be based on the strategic framework provided by theBoard of Governors in June 2002. Under this plan, priority continues to be given tolending operations matching the following objectives:

• EU regional development and economic and social cohesion (the Bank's leading pri-ority);

• Implementation of the Innovation 2000 Initiative (i2i);

• Environmental protection and improvement;

• Preparation of Candidate Countries for accession;

• Support for EU development and cooperation policies with Partner Countries.

Alongside these main priorities, the Corporate Operational Plan also makes clear thatGroup financial support continues to be foreseen for small and medium-sized enter-prises, Trans-European Networks and other infrastructure as well as for projects in thehealth and education sectors.

Lending operations also continue to reflect the Bank's response to unforeseen events,such as the mid-2002 floods in parts of Central Europe and in the South of France, aswell as the coastal pollution in North-West Spain.

The EIF will continue to concentrate support to SMEs through the provision of venturecapital and guarantees via specialised financial intermediaries. Moreover, EIF intendsto develop new financial instruments and to expand the mandates it manages inorder to further develop this support.

The Corporate OperationalPlan 2003 - 2005

In deciding on the Corporate Operational Plan 2003-2005, the Board of Directors alsoapproved a global borrowing authorisation for 2003 of up to 42 billion, this being theamount needed for prudential coverage of maximum projected funding requirements. Ifneed be, its adjustment may be requested.

Strategy Map and Balanced Scorecard

The corporate Strategy Map and Balanced Scorecard system introduced in the Bank in2001 strengthened the overall planning function. In 2002, planning orientations and the2003 budget of the Bank were prepared together in a single process, enabling earlyidentification of new priority areas for allocation of additional available resources forthe coming year as well as existing core activities requiring some further resource sup-port. Priority initiatives thus identified were:

• Preparation for accession/enlargement;

• Implementation of the Mediterranean MED-FEMIP mandate;

• Implementation of the ACP-OCT Investment Facility mandate.

The EIB's Board of Directors

EIB Group activity in 2002

12.5 billion of individual loans withinthe Union for regional development

In 2002, the EIB granted individual loansworth 12.5 billion for projects to assistregions lagging behind in their eco-nomic development or grappling withstructural difficulties (Objective 1 and2 regions). The Objective 1 regionsalone absorbed 6.5 billion in individualloans. The main beneficiaries were Ger-many's eastern Länder (1.9 billion), theCohesion Countries - Spain, Portugal,Ireland and Greece - (5.6 billion) andItaly's Mezzogiorno (392 million).

Alongside this direct support for devel-opment of the poorest regions, theBank participated in financing a num-ber of projects partly or indirectly con-tributing to this goal but eligible underother headings. This applies, forinstance, in Spain, to the purchase ofcommunications satellites covering thewhole country; in France, to the LGV-Esteuropéenne high-speed rail line passing

through Champagne and Lorraine; andin Italy, to the upgrading of rollingstock, over a third of which destined forlines in the Mezzogiorno.

Multi-sectoral action in Objective 1regions

Attracting more than 30% of loans,transport is the main sector supportedin the Objective 1 regions. The projectsfinanced are helping to mitigate theeffects of geographical isolation andimprove internal services, so promotingthe physical integration of outlying andstructurally underdeveloped regions.

Upgrading of urban infrastructureaccounted for over 18% of operations,while loans for industry and servicestotalled 15%.

Lastly, health and education attractedalmost 7% of loans, clearly demonstrat-ing the Bank's commitment to helpingprovide the less favoured areas withhealth and education services of a level

Promoting the Union's economic and social cohesion is the Bank's prime task -originally assigned by the Treaty of Rome and reaffirmed by the Amsterdam Treaty(June 1997) - and constitutes the first priority objective of the Corporate Opera-tional Plan.

The Bank cooperates closely with the Commission, especially by complementing EUbudgetary grant aid, so as to maximise the effectiveness of the resources deployedby the two institutions. It is worth highlighting in this regard the Bank and Com-mission's cofinancing of regional operational programmes eligible for the 2000-2006 Community Support Frameworks: in 2002, such operations were mounted inregions of Italy (Puglia, Emilia-Romagna) and Spain (Andalusia, Cantabria,Asturias).

Channelling investment selectively towards those sectors or regions which need itmost, in recent years the Bank has continued to steer a significant amount of itsfinancing towards development of the less favoured regions, tying in this activitywith the overall goal of steady growth in lending within the Union.

Fostering balanced developmentthroughout the Union

Regional development within

the Union

Individual loans

1998 - 2002 : 66 billion

Objective 1

Objective 2

Multiregional

2002

2001

2000

1999

1998

5 10 15

comparable to that in the more developedregions, thereby fostering equal access forthe people of the Union to the mostadvanced educational and health care facil-ities.

The impact of global loans

Through its lines of credit to banks or finan-cial institutions, the EIB supports SMEs aswell as small-scale local infrastructure andenvironmental projects. The fact thatglobal loans have multiple objectivesshould not divert attention from their con-tribution to regional development. For2002, it may be estimated that global loansignatures in the Union's less favouredregions amounted to some 7.3 billion, ofwhich half went to Objective 1 regions.

Against this background, the EIB pressedahead with its policy of diversifying bank-ing intermediaries by selecting partnerswith a strong regional presence, especiallyin Italy, the United Kingdom, Austria andeastern Germany.

Integration of the Accession Countries

With a view to reducing the regional dis-parities between the Accession Countriesand the existing EU as quickly as possible,the EIB markedly stepped up its financingin the countries due to join the Union,applying the same project selection criteriawith reference to its objectives, especiallyregional development. In 2002, individualloans totalled 3.1 billion. Of this amount,Poland absorbed 28.7%, the Czech Republic27.3%, Hungary 12.6% and Romania11.3%.

The main beneficiary sectors were transport(53%), urban and composite infrastructure(21%) and energy (9%). Financing in thehealth and education sectors surged ahead

(230 million compared to 75 million in2001).

Lastly, global loans worth some 500 millionwill contribute to the financing of SMEsand small-scale local infrastructure.

Regional development within the UnionBreakdown of individual loans by sector(2002)

(EUR million)

Total

amount %

Energy

Communications

Water management and sundry

Urban development

Industry, agriculture

Health, education

Other services

Total individual loans

Global loans

2 086 17

4 281 34

1 071 9

2 221 18

1 216 10

873 7

705 6

12 452 100

7 300

Investment finance and employment

Investment in infrastructure

• Employment during the construction phase: Infrastructure and other fixed investment increase the demand for labour duringthe construction phase. Input-Output models show that EUR 1 billion in spending on construction and equipment directlyaffects employment by some 20 000 person-years simply through increased demand for labour. Through this demand effect,the Bank's annual lending for infrastructure - averaging EUR 19 billion annually in the past five years - supports some380 000 jobs in the construction phase. The effect may be larger if one takes into account that EIB-sponsored projects alsocontain an element of non-EIB funding, and that the employment-creation of investment tends to be higher in the relativelyless developed regions upon which the EIB is focusing its efforts.

• Employment in the operational phase: Beyond the demand effect of investment on employment, the longer-term relationshipbetween the two depends on the capital stock and the capital-labour ratio. If more investment leads to a higher capital stock,this should also lead to permanently higher employment. It was generally estimated that on average there were around 8 000to 10 000 jobs for every EUR 1 billion of capital stock. But, since the economy is steadily becoming more capital-intensiveover time, the marginal employment content of more capital is probably lower than this figure. A potential additional employ-ment effect, however, is that public infrastructure investment may generate multiplier effects through its impact on privateinvestment.

SME Investment

Small and medium sized enterprises (SMEs) account for the bulk of new job creation in the EU. There is empirical evidence thatshows, however, that the growth of SMEs is financially constrained. Public intervention aims at alleviating these constraints. TheEIB works to aid the financing of SMEs through two different channels.

The first is by extending financing through global loans that are intermediated via financial institutions. In 2002, more thanEUR 6.2 billion was made available in SME global loans. Assuming that the ratio of jobs to capital stock in the manufacturingsector is of some 8 000 jobs per billion invested, and bearing in mind that global loan financing accounts on average for 45-50%of external financing for SMEs' capital investment, the total value of SME investments co-funded from the EIB's global lendingin 2002 helped safeguard or create 95 000-100 000 stable jobs.

The second channel that the EIB Group uses to support SMEs takes the form of equity capital and guarantees. This role is per-formed by the European Investment Fund (EIF). At the end of 2002, a cumulative EUR 2.5 billion had been invested by theEIF in 184 venture capital funds, helping to secure some 10 billion own funds investment for SMEs in Europe. In addition, afurther EUR 4.5 billion was allocated to guarantees for SME loan portfolios held by banks, benefiting some 200 000 SMEs.Such risk participation helps to overcome credit rationing by banks and enables lending to innovative firms. However, theemployment impact of such venture capital and guarantee operations cannot be evaluated properly before the outcome of allinvestments made has been gauged.

The “Innovation 2000 Initiative” (“i2i”) was launched by the EIB Group in furtherance ofthe “Lisbon Strategy”, as charted by the European Council in March 2000, for building “aEuropean economy based on knowledge and innovation”.

Targeting five economic sectors, “i2i” operates through:

• medium or long-term EIB financing (where appropriate in the form of risk-sharing orstructured loans) and

• EIF participations in venture capital funds (VCFs) that furnish SMEs with equity resourcesin the form of venture capital.

Research and Development (R&D)

In 2002, the EIB ploughed 2.1 billion into15 R&D projects spanning 6 EU countries,with one pan-European international coop-eration project partly located in Switzer-land: the CERN particle accelerator inGeneva. Most of these are private-sectorprojects in the fields of electronic compo-nents, metallurgy, optics, biotechnology,aeronautics and telecommunications. Theseloans brought the EIB's R&D financing since2000 to a total of 3.9 billion.

Meanwhile, the EIF's investment strategycontinues to place emphasis on the financ-ing of funds downstream from researchand development. A notable example is theoperation signed by the EIF in 2002 withthe Heidelberg-based European MolecularBiology Laboratory. Such EIF investment inthe life sciences, is wholly consonant withthe concerns expressed by the “Competi-tiveness” Council in November 2002 aboutthe need for increased biotechnology fund-ing in Europe.

In November 2002, when the 6th ResearchFramework Programme was launched, theEIB and the Commission strengthened theircooperative efforts towards bringing aboutan increase in R&D investment within theUnion to 3% of Community GNP by 2010, atarget set by the Barcelona European Coun-cil (March 2002).

Development of SMEs andentrepreneurship

The EIF committed 472 million in 36 ven-ture capital funds (VCFs). This brought itstotal portfolio to more than 2.5 billioninvested in 184 funds, assisting the forma-tion of nearly 10 billion of investment capi-tal in over 1 800 SMEs.

Investments in regional funds and in onefund operating in several Accession Coun-tries continued to claim a large share ofresources. In total, the EIF invested 75 mil-lion in the Accession Countries.

Also worth highlighting are the stakestaken in 8 pan-European VCFs operating ona multi-country basis, which are contribut-ing to the emergence of a European ven-ture capital market.

In a clearly faltering market, the EIF man-aged to maintain a high level of investmentcapital, equal to around 20% of the sectortotal in Europe.

Information and CommunicationsTechnology (ICT) networks

The EIB lent 366 million for informationand communications technology in 2002, inBelgium, Greece, Slovenia and Spain. Alarge part of the network financing was fordiffusion by fibre-optic cables (Belgium,Spain), mobile telephony in disadvantaged

The “Innovation 2000 Initiative”

with improved access to the latest edu-cational and health care facilities.

Diffusion of innovation:“Audiovisual i2i”

In 2002, the EIB provided 146 million forARTE's new television centre (produc-tion, digitalisation and diffusion) inStrasbourg, for television programmeco-production by BBC-Worldwide and

for the financing of fiction films and cin-ema refurbishment by two specialistaudiovisual-industry intermediaries inSpain (ICF) and Italy (BNL-Audiovisual).These loans brought EIB financingsigned in the audiovisual sector to394 million as at 31 December 2002.

For its part, the EIF invested some66 million in 4 VCFs - pan-European orlocated in France and Spain - specialis-

SarajevoBelgrade

Niksic

^

‘

ZagrebLjubljana

Budapest

BratislavaWien

München

Roma

Tiranë

Sofia

Skopje Istanbul

Athinai

Bucuresti

Nicosia

Ankara

Barcelona

Madrid

Lyon

Madrid

Lisboa

Porto

Paris

London

Cork

Dublin

Belfast

Edinburgh

Bruxelles

AmsterdamBerlin

Frankfurt

Hamburg

København

Praha

Warszawa

OsloStockholm

Helsinki St Petersburg

Tallinn

Riga

Vilnuis

Minsk

Moskva

Kiyev

KishinevOdessa

Luxembourg

Islas Canarias

Milano

R&D

ICT

Education

Health

Audiovisual

Global loans

EIB lending under i2i

2000 -2002

areas (Greece, Slovenia) and the launchof a Spanish satellite.

Human capital formation

In 2002, the EIB invested 987 million in11 education and 2 health projects inAustria, eastern Germany, Finland,Spain and 4 Candidate Countries(Cyprus, Czech Republic, Hungary andTurkey). These focused mainly on thecreation of higher education or univer-sity infrastructure and the refurbish-ment and technological upgrading ofhospitals in Styria and Upper Austria.

Being located in assisted areas, theseprojects provide the local inhabitants

“i2i”: looking ahead to 2010

At the end of 2002, the EIB Group had virtually achieved the objectives set for it by the LisbonEuropean Council: in two and a half years it approved some 300 operations totalling almost17 billion (14.4 billion EIB + 2.5 billion EIF), carried out in all the Union's Member Countriesand the 10 Accession Countries; total loans signed ran to 10.8 billion (over 3.6 billion of this in2002) and the volume of EIF equity participations topped 2.5 billion (471.5 million in 2002).

Although the three-year term initially fixed for the programme by the Bank's Board of Directorsexpires in mid-2003, the objective set under the “Lisbon Strategy” not only remains valid but wasalso reaffirmed by the European Councils of Stockholm (March 2001) and Barcelona (March2002). Accordingly, the financing of innovation will remain a top priority for the Bank asfar ahead as 2010.

“i2i” achievements demonstrate that the EIB has succeeded in meeting a real economic demandby offering a range of financial products. In so doing, the Group has accorded priority to projectsbringing about a transfer of expertise to the less advanced regions and exemplifying the valueadded of its activity:

• Regional development: 66% of financing went towards projects helping the less advantagedregions and Accession Countries to gain access to state-of-the-art technologies, with schemesinvolving health, education and technology networks very much to the fore.

• Innovative content: since 2000, the innovative content of projects financed has burgeoned;research and development (R&D) projects, particularly in the life sciences, attracted 59% ofloans granted in 2002; education projects (26% of loans in 2002) have a large innovative com-ponent reflecting their use of ICT (e-learning) or application of fundamental R&D (univer-sities and university hospitals). Schemes featuring ICT networks (10% of loans in 2002) wereselected because of either their powerful impact on regional development or their role in dif-fusing innovation (digital technologies applied to the creation or distribution of audiovisualworks).

• Sectoral breakdown: the distribution between the different segments of “i2i” also underwent ashift: whereas in 2000 projects under appraisal related predominantly to telecommunications(59%), by end-2002 the sectoral breakdown of approved projects was as follows, in decreasingorder: education/e-learning (43%), R&D (39%), technology networks (10%) and diffusion ofinnovation/audiovisual (8%).

ing in strengthening the equity resources ofaudiovisual SMEs. With these operations,the total amount of EIF equity participa-

tions taken in the audiovisual sector sincethe launch of “i2i” rose to 119 million,spread across 10 VCFs.

Cooperation with the Commission

In May 2002, the EIB and the Commis-sion signed a memorandum of under-standing aimed at improving the effec-tiveness of their respective actions tofacilitate practical implementation ofthe EU's environmental commitments.

In this context, the Bank supports theUnion's climate change policy, notablyvia its loans for projects promotingrational energy use - e.g. through com-bined heat and power generation,industrial efficiency, public transport -and renewable energies.

Similarly, the EIB is associated with theEU's "Water for Life" initiative designedto help achieve the United Nations'

development objectives for the millen-nium in the water and sanitation sec-tors, as set out at the JohannesburgWorld Summit.

Lastly, the EIB and the European Com-mission join forces with their financing,especially in the Accession, Mediter-ranean Partner and ACP Countries. Syn-ergies between EIB loans and Commis-sion grant aid are of paramountimportance in ensuring a sustained flowof investment and an efficient transfer ofenvironmental expertise. In addition, theBank plays an advisory role for the Com-mission in the appraisal of projectsfinanced from EU budgetary resources bythe Cohesion Fund and ISPA (Instrumentfor Structural Policies for Pre-Accession).

Protecting the environmentProtecting and improving the environment ranks among the EIB's top priorities.Accordingly, the Bank has set itself the target of devoting between a quarterand one third of all its individual loans within the European Union and in theAccession Countries to projects safeguarding and enhancing the environment.The figures for 2002 more than meet this goal, with the proportion of suchloans reaching 44% within the Union and 41% in the Accession Countries.

As a public bank at the service of the Union, the EIB is also committed to takingforward the EU's environmental policies by implementing new strategies fur-thering fulfilment of the international undertakings entered into by the Union,especially concerning:

• the reduction in greenhouse gas emissions,

• the promotion of renewable energies,

• the Union's contribution to water sector initiatives launched at the Johannes-burg World Summit.

Environment and quality

of lifeIndividual loans1998 - 2002 : 32 billion

2002

2001

2000

1999

1998

2 6 10

Natural environment

Environment and health

Urban environment

Regional and world

environment

2002: a record year

In 2002, EIB individual loans for environ-mental projects within the European Unionamounted to 9.3 billion (up 56% comparedwith 2001). Furthermore, an additional 1.8billion in global loan allocations was pro-vided for small-scale environmental protec-tion schemes carried out by SMEs and localauthorities. Urban public transport and thewater sector attracted a significant share ofEIB loans (2.5 billion and 1.4 billion respec-tively). In the water sector, the Bank'sfinancing was decisive in enabling variousMember States to comply with EU environ-mental directives, the principal driver ofinvestment in this field.

In the Accession Countries, individual loansfor environmental projects in a range ofsectors came to 1.3 billion: reconstructionwork following the flood damage inPoland, the Czech Republic and Slovakia inAugust 2002 constituted a priority area ofEIB operations (460 million); the urbanenvironment, including public transport,urban regeneration and social housing,likewise attracted significant funding(311 million); projects in the areas of waterand sanitation (165 million), waste man-agement and soil protection (138 million)

Environmental report 2001-2002

In February 2003, the EIB published its first environmental report settingout the resources allocated by the Bank to this priority objective, its approachto environmental issues and its recent lending for the natural and urban envi-ronment.

This document will serve as a benchmark for future reporting and the basis for discussion of envi-ronmental matters between the EIB and its stakeholders.

It is available on the Bank's website: www.eib.org.

Environment and quality oflife within the UnionIndividual loans in 2002

* As certain projects meet several sub-

objectives, the various headings cannot

be added together

(EUR million)

Total

Natural environment

Environment and health

Urban environment

Regional and world

environment

Total individual loans

and energy saving and diversification(110 million) were also amply supported.Over the coming years, the Bank will con-tinue to pump substantial resources intothe Accession Countries to help them com-ply with EU environmental standards.

538

1 458

5 339

2 394

9 264*

Fostering environmental protection innon-Member Countries

In a bid to maximise the synergiesbetween the various sources of financ-ing available, the EIB coordinates itsactivity in non-Member Countries, notonly with the European Commission,but also with multi- and bilateral financ-ing institutions as well as the bankingand business communities. This givesrise to numerous operations to cofi-nance environmental projects.

In the Western Balkans, the EIB is par-ticipating in post-war reconstructionefforts and is currently extending thescope of its infrastructure lending toinclude water and other environmentalprojects, such as protection of theDanube river basin and wastewatermanagement in large cities. The Bank iscoordinating a key study into the eco-logical management of the Adriatic Seaand is actively involved in the “Danube-Black Sea Task Force” set up by theEuropean Commission.

In the Mediterranean Partner Countries,95 million was lent for sanitation pro-jects in 7 Moroccan cities, industrial pol-lution abatement in Tunisia and post-flood reconstruction works in GreaterAlgiers. The environment is one of thepriorities of the "Facility for Euro-Mediterranean Investment and Partner-ship" (FEMIP), launched in October 2002to foster economic development andpolitical and social stability in theregion. The instruments supportingthese aims include the 3% interest sub-sidy from the EU budget and theMediterranean Environmental TechnicalAssistance Programme (METAP), which

provides help in identifying and prepar-ing environmental projects.

In the ACP Countries, loans ran to35 million for water management net-works in Jamaica and Mauritius. To pro-mote this type of project, interest subsi-dies financed from the budgetaryresources of the Member States can bemade available for EIB loans. The Invest-ment Facility established under theCotonou Agreement will provide theEIB with new opportunities to con-tribute to environmental protection,especially with a view to achieving theobjectives set under the “Water forLife” initiative.

In Russia, the EIB is financing twowater and wastewater schemes in theSt Petersburg and Kaliningrad regionsunder a 100 million special lendingmandate assigned to it by the Board ofGovernors following the StockholmEuropean Council (March 2001). As partof the "Northern Dimension Environ-mental Partnership", in December 2002the Bank and the Russian Federationsigned a framework agreement govern-ing EIB lending in the region.

Improving the environment

The future Member States need to investheavily in order to comply with the EU'senvironmental protection standards. TheBank is supporting these efforts by financ-ing urban and regional transport projects,helping to reduce air pollution and improvethe quality of life, as well as an increasingnumber of water management systems inlarge urban centres. In 2002, a total of 1.3billion, or 36% of loans in these countries,was directed towards improving both thenatural and urban environments.

Cofinancing of transport and environmen-tal schemes, in a mix of EIB loans and Euro-pean Commission grants (under its ISPAprogramme), is growing steadily.

Solidarity with flood-stricken regions

The EIB reacted swiftly by providing anemergency framework loan of 1 billion atthe end of August 2002 to help repair thedevastation caused by the flooding in theElbe basin in eastern Germany, the CzechRepublic and Austria. Under this package,400 million in emergency financial aid wasgranted to the Czech Republic in 2002.

In addition, the Bank stands ready tofinance other reconstruction works andflood prevention schemes.

Strong and diversified backing for SMEs

The EIB has deepened and broadened itslending to the SME sector so as to underpin

Preparing the future MemberStates of the UnionSince 1990, the EIB has granted loans totalling over 20 billion in the Accession Countries:19.7 billion in the Central and Eastern European countries and 786 million in Cyprus andMalta. With 3.6 billion advanced in 2002 alone, significantly more than in 2001 (2.7 bil-lion), the Bank remains the leading external source of financing in the future MemberStates.

The EIB gives priority to projects enabling the Accession Countries to comply with currentEU standards and policies. It operates under:

• the lending mandate (associated with specific security arrangements linked to the Com-munity budget), which authorises it to grant loans of 8.68 billion during the period2000 - 2006;

• the three-year Pre-Accession Facility of 8.5 billion (2000 - 2003), set up at the Bank's owninitiative and risk, but not covered by the Community guarantee.

Since 2002, the EIB has applied the same objectives, evaluation criteria and risk manage-ment policies to projects in the Accession Countries as to operations in the current EUMember States.

Accession Countries1998 - 2002 : 12 billion

(EUR million)

3 641

2 659

2 948

2 373

2 375

2002

2001

2000

1999

1998

the substantial progress made by itspartner banks in financing the smallerfirms. Reflecting this, the average sizeof the EIB's contribution to funding SMEinvestment last year was EUR 600 000per project, compared to 1.4 million theprevious year.

In 2002, ongoing global loans (233 mil-lion) served to finance some 380 smalland medium-scale projects and the EIBgranted its partner banks close on 500million in new global loans.

Objective 2004 and beyond

In Spring 2004, the European Union will welcome ten new Member States. At theCopenhagen European Council (12-13 December 2002), the Union reaffirmed itsaim of embracing Bulgaria and Romania in 2007. Pre-accession aid for these twocountries will be significantly stepped up during 2004 - 2006 and bolstered by asustained volume of EIB lending.

The Copenhagen European Council also established the principle of opening pre-accession negotiations with Turkey as soon as possible, if this country, which hasbeen a candidate for EU membership since the Helsinki European Council (Decem-ber 1999), is found to meet the “Copenhagen criteria” when assessed at the end of2004.

Since 2001, Turkey has been included in the list of countries eligible for financingunder the Bank's three-year Pre-Accession Facility. At the same time, it is fully inte-grated into the “Barcelona Process” on which EU-Mediterranean relations are based.

The Bank's operations in Turkey are mounted under a raft of EIB Euro-Mediter-ranean mandates: Euromed II (expiring end-2007); the Euro-Mediterranean Facility(expiring end-2004); the TERRA Facility set up following the earthquakes inSeptember 2001; and the Special Action Programme to prepare for the customsunion (expiring end-2004).

Furthermore, Turkey is eligible for operations under the new "Facility for Euro-Mediterranean Investment and Partnership" (FEMIP) (see page 24).

As a candidate country and member of the Euro-Mediterranean Partnership, Turkeycan count on the EIB's assistance with modernising its economy and preparing forintegration. Given its geographical and demographic position, Turkey is destined toplay a special role in the "circle of the Union's friends from the Black Sea to thesouthern shores of the Mediterranean" evoked by Romano Prodi in his closingspeech at the Copenhagen European Council.

The emergence of a strong and competitiveSME sector in the Accession Countries is akey element in ensuring the convergence ofthe economies of the present and futureMember States. The EIB has thereforejoined forces with the European Commis-sion to launch a new SME Finance Facility.Under this partnership, the Commission ismaking available 30 million in grant aidwhile the Bank is providing 300 million inthe form of credit lines to selected banks inthe region.

The EIF, for its part, is also playing a grow-ing role in financing high-tech companiesin the future Member States. Last year, itacquired a stake in the Prague-based Gene-sis Private Equity Fund, thereby expandingits geographical coverage to the CzechRepublic and Slovakia. This brought thenumber of EIF participations in CentralEuropean venture capital funds to six andtotal EIF investment in the region to 75 mil-lion.

In early 2003, the EIF extended eligibilityfor its Multiannual Programme for Enter-prise (MAP 2001 - 2005) to the AccessionCountries (see “EIB Group support forSMEs”, page 28).

Underpinning direct investmentby large corporates

Direct investment by the Union's large cor-porates in the Accession Countries makes amajor contribution to modernising the lat-ter's economies, especially through thetransfer of managerial and technologicalknow-how brought about by such opera-tions.

To support such projects, the EIB hasadapted its range of financing possibilitiesby applying the same criteria for fundinglarge corporates in the Accession Countriesas within the Union. Framework or projectloans made available by the EIB may there-fore take the form of structured finance orinclude risk-sharing elements.

These new opportunities have led to theidentification of several capital projects anda number of operations are already wellunder way. For instance, a loan for buildinga refrigeration plant on the outskirts ofPrague was signed in 2002.

Accession CountriesLoans provided in 2002

(EUR million)

Poland

Czech Republic

Hungary

Romania

Slovenia

Latvia

Bulgaria

Slovakia

Estonia

Central Europe

Cyprus

Mediterranean

Accession Countries *

* of which Pre-Accession Facility:3 141 million

1 083

898

515

383

202

123

87

80

50

3 421

220

220

3 641

Forum 2002: “Countdown to EU Eastward Enlargement”

“The Accession Countries have earned EU membership and the momentum for enlargementis irreversibly building up towards success”, EU Commissioner Günter Verheugen told the550 participants at the 8th EIB Forum(1) held in Vienna on 7 and 8 November 2002. Withthe accession negotiations reaching their culmination in Copenhagen in December 2002, theEIB Forum proved particularly topical and attracted a great deal of attention on the part ofrepresentatives from the worlds of politics, business and banking both in the Union and theAccession Countries.

Opening the Forum, EIB President Philippe Maystadt highlighted the main aspects of theBank's activity in the Accession Countries: providing support for infrastructure projects andregional development and, in particular, encouraging foreign direct investment with the spin-off effect that this has in transferring expertise as well as capital.

Summing up, EIB Vice-Presidents Ewald Nowotny and Wolfgang Roth paid tribute to thehuge reform and modernisation efforts made by the Accession Countries, but pointed outthat certain tasks still remained to be tackled to boost direct investment. The main challengesahead were to strengthen the legal framework, implement legislation passed, eliminate over-regulation and red tape and adopt a bolder approach to corporate restructuring. Additionally,businesses needed to cooperate closely with colleges and universities in their regions in help-ing to create centres of excellence turning out a well-qualified and motivated workforce.

The Accession Countries fielded a strong contingent of speakers at the Forum. They includedMs Raseta-Vukosavljevic (Serbian Minister of Transport), Ms Tudor Mitrea (Romanian Minis-ter of Transport) and Ms Freyberg (Secretary of State in the Polish Economic Affairs Min-istry), and Messrs László (Hungarian Finance Minister), Isarescu (Governor of the CentralBank of Romania), Tosovsky (former Governor of the Czech Central Bank and President ofthe Financial Stability Institute in Switzerland) and Wilhelm, a member of the Board ofDirectors of Volkswagen Slovakia.

Guest of honour at the official dinner held in Vienna's City Hall was Aleksander Kwas-niewski, President of the Polish Republic. After looking back to the divided Europe of thepre-1989 era, he reminded his audience of the great strides made since then and reiteratedthat enlargement offered the best opportunity for ensuring security, trust, solidarity andprogress across the continent.

(1) For further information on the Forum's proceedings, see EIB Information n°112 or visit the Bank's websitewww.eib.org/forum.

Wolfgang Schüssel, Austrian Chancellorand Wolfgang Roth,

Vice-President of the EIB

Ewald Nowotny, Vice-President of the EIBand Aleksander Kwasniewski,

President of the Polish Republic

Philippe Maystadt, President of the EIB

Günter Verheugen,European Commissioner

for enlargement

Pat Cox, President of the European Par-liament and Karl-Heinz Grasser,

Austrian Finance Minister

FEMIP: new dimension to EIBfinancing in the MPC

FEMIP represents a major step forward ineconomic and financial cooperationbetween the Union and the MPC. Its prior-ities are:

• private-sector development, involvingboth local enterprises and direct invest-ment by EU companies in the MPC;

• assistance with the process of economicreform and privatisation in the MPC;

• increased support for regional coopera-tion projects and investment with asocial dimension (health, education andenvironmental schemes);

• provision of innovative financial prod-ucts, risk capital and technical assistancewith bringing projects to fruition.

One of the cornerstones of FEMIP is thebroad involvement of the MPC in thedeployment of EIB assistance through a Pol-icy Dialogue and Coordination Committee(PDCC) bringing together representativesof the EU Member States and beneficiary

Mediterranean countries twice a year. Inaddition, the Bank will establish closer linkswith economic operators and local authori-ties in the MPC by setting up regionaloffices. This first of these will be opened inCairo in 2003.

An initial set of loans in support of private-sector development - the facility's top pri-ority - were signed in 2002: for a car plantin Turkey and the first private-sectorcement plants in Tunisia and Algeria. At thesame time, various risk-capital operationsdesigned to build up the equity resourcesof firms in Egypt and Algeria weremounted.

All in all, private-sector financingaccounted for more than 30% of opera-tions approved in 2002.

The EIB is implementing FEMIP in closecooperation with all participants in theregion's development: the European Com-mission, the banking community in Europeand the beneficiary countries, multilateral(World Bank, IFC, AfDB, etc.) and bilateraldevelopment finance institutions.

The new Euro-Mediterraneanfinancial partnershipIn 2002, lending in the 10 Mediterranean Partner Countries (MPC) reached the record fig-ure of 1.6 billion (plus 220 million in Cyprus and Malta), confirming the Bank’s position asa major player in promoting the region’s economic development and stability.

This performance was achieved despite an economic climate marked by unrelenting po-litical tension in the region and underlines the Bank's pivotal role, assigned by theBarcelona European Council of March 2002, in revitalising the Euro-Mediterranean finan-cial partnership. At a meeting held in Barcelona on 18 October 2002 at the Bank's initia-tive, the Finance Ministers of the 27 EU Member States and Mediterranean Partner Coun-tries launched the Bank's new “Facility for Euro-Mediterranean Investment andPartnership" (FEMIP).

Mediterranean Countries1998 - 2002: 6 billion

EUR million)

1 588

1 401

1 214

802

886

2002

2001

2000

1999

1998

Laying the foundations forsustainable development

In 2002, EIB lending activity in the MPCwas characterised by the ongoingfinancing of projects creating the infra-structure for economic development(1 440 million): power generation anddistribution, communications, watermanagement and environmental pro-tection. Notable examples are loans forrebuilding infrastructure in GreaterAlgiers following the floods of Novem-ber 2001 (45 million), for improving thesewerage systems of seven towns innorthern and central Morocco (20 mil-lion) and for upgrading key power dis-tribution networks in Morocco, Tunisiaand Egypt.

Furthermore, some forty financial inter-mediaries established in the Mediter-ranean Partner Countries drew on EIBcredit lines to strengthen the equity andfinance the investment projects ofSMEs. These global loans (313 million in2002) help to develop the domesticfinancial sectors of the countries con-cerned by bolstering their technical andfinancial capacities; such activity will bepromoted under FEMIP.

In the field of social welfare infrastruc-ture (205 million), the EIB contributed,in particular, to constructing a campusfor the University of Nicosia in Cyprus,creating 6 800 IT classrooms in Turkishprimary schools and rehabilitating anddeveloping 18 hospitals in Syria.

Mediterranean Countries

Loans provided in 2002

(EUR million)

of which

risk

Total capital

Turkey

Tunisia

Algeria

Egypt

Morocco

Syria

Lebanon

Mediterranean

561 6

290

227 6

225 25

140

100

45

1 588 37

Inauguration of FEMIP (from left to right):Pedro Solbes, European Commissioner,

Jordi Pujol, President of the Generalitat deCatalunya,

Rodrigo Rato, Spanish Minister for the Economy,Philippe Maystadt, President of the EIB

Western Balkans

In 2002, the EIB boosted its financing toalmost 425 million (320 million in 2001).

Lending focused on transport and energynetworks (380 million). EIB-funded projectsare helping to build links, between regionsand with the EU and Accession Countries,and reconnect the - especially Yugoslav -power grid to that of the Union for theCoordination of Transmission of Electricity(UCTE).

Backing for private-sector development(45 million) was distinguished by the EIB'sfirst loan in support of foreign direct invest-ment (FDI) in the Western Balkans (Lukavaccement plant) and its first global loan forfinancing investment by private-sectorSMEs and local authorities in the FederalRepublic of Yugoslavia.

The EIB intends to maintain this level offinancing in the years ahead, allocating anaverage annual package of 400 million tothe region. While continuing to provideappropriate long-term finance for therebuilding and upgrading of basic regionaland municipal infrastructure (transport,

energy and environmental networks), theEIB will step up its support for private-sector development and help to cofinanceoperations targeting the health and educa-tion sectors.

African, Caribbean and Pacific (ACP) Statesand OCT

In 2002, the Bank mounted operations in15 different countries and also financed aregional project. Lending totalled almost298 million including 175 million from theMember States' budgetary resources.

Highlights include the financing of:

• air traffic control facilities in variousAfrican regions and Madagascar (33 mil-lion), improving air traffic safety

Cooperation with otherpartner countriesDovetailing with its activity in the Mediterranean Partner Countries, the EIB makesan active contribution towards implementing the European Union's developmentaid and cooperation policies in other non-member states.

BalkansLoans provided in 2002

(EUR million)

Total

Federal Republicof Yugoslavia

Croatia

Bosnia-Herzegovina

Balkans

(EUR million)

of which

risk

Total capital

Africa

Southern andIndian Ocean

West

Central andEquatorial

East

Regional Africa

Caribbean

Pacific

ACP-OCT

ACP-OCTLoans provided in 2002

270

130

25

425

213 130

50 20

48 28

42 42

40 40

33

81 41

4 4

298 175

between Africa and Europe and overthe Indian Ocean;

• rehabilitation and expansion of theurban power distribution networksof eight towns in Ethiopia (25 mil-lion);

• the fibre-optic submarine telephonecable (22 million) connecting Europeto a number of West African coastalstates and South Africa, with links toseveral land-locked countries.

South Africa

Loans totalling 50 million were directedtowards financing small and medium-scale ventures. In addition, the EIBlaunched, on behalf of the European

Commission, a EUR 58 million Risk Capi-tal Facility to provide equity and quasi-equity funding to entrepreneurs frompreviously disadvantaged communities.This programme is a high-profile com-ponent of the South African govern-ment's strategy for the sustainablelong-term development of the country.

Asia and Latin America

In 2002, lending amounted to 89.6 mil-lion in Asia and 84.6 million in LatinAmerica, a total of 174.2 million. TheEIB’s main objective is to strengthen theinternational presence of Europeancompanies and banks by supportingprojects of mutual benefit to the Unionand the countries concerned.

Preparations for the entry into effect of the Cotonou Investment Facility

The Lomé Convention, the framework for EIB financing in the ACP countries, has been replaced by theCotonou Agreement, which will enter into force on 1 April 2003. In this connection, the Member Stateshave entrusted the Bank with managing, over the next five years, an Investment Facility endowed with2.2 billion, to which 1.7 billion in EIB own resource lending will be added. As the prime objective ispoverty reduction, priority will be given to small-scale private-sector investment and schemes in the healthand education sectors. The Facility will operate as a revolving fund, meaning that the proceeds of repay-ments will be ploughed back into financing new projects.

The Bank has already made all the necessary organisational and administrative arrangements for implement-ing the Facility as soon as the Cotonou Agreement enters into force.

(EUR million)

Latin America

Brazil

Regional (Central America)

Asia

Indonesia

Sri Lanka

Asia and Latin America

Asia and Latin AmericaLoans provided in 2002

85

55

30

90

50

40

174

EIB global loans

Global loans advanced by the EIB in 2002amounted to 12.2 billion, of which nearly6.2 billion targeted ventures carried out bysome 30 000 SMEs.

Applying its policy of diversifying inter-mediary banks in order to fine-tune itsresponse to the needs of SMEs and othersectors, the EIB granted global loans for lessdeveloped regions (in Italy, the UnitedKingdom and Germany's eastern Länder)and specific policy areas (such as the envi-ronment, energy savings and the audio-visual industry). It also carried out a numberof securitisation operations complementingits standard global loans in Italy, Spain andFrance, thereby expanding the range of itstechniques for facilitating banking sectorsupport for SMEs.

EIF venture capital

Since 2000, the EIF has been the vehicle forcarrying out all the EIB Group's investmentin specialised venture capital funds. By pro-viding early-stage capital, these funds assistthe gestation and development of technol-

ogy-oriented businesses in the Union andthe Accession Countries. The EIF also man-ages the budgetary resources mobilised bythe European Commission (MultiannualProgramme for Enterprise, or “MAP 2001-2005”) to supply seed capital.

Its investment strategy revolves aroundthree main themes:

• support for European high technology(biotechnology, new materials, conver-gence);

• participation in funds furthering theobjective of regional development in theUnion (Southern Europe and the Acces-sion Countries);

• backing for funds operating on a pan-European scale.

In 2002, despite a patently languishingmarket, the EIF's commitments ran to 471.5million spread over 36 operations. At thesame time, the sharp downturn in the Euro-pean venture capital sector, and especiallythe collapse of new stock markets, led theEIB Group to post (mostly unrealised) lossesof 132 million.

EIB Group support for SMEs

The EIB Group is able to provide both medium and long-term financing via its globalloans and equity through venture capital financing. This covers the spectrum of resourcesnecessary for the development of SMEs in a changing economy.

Over the past five years, the EIB Group's support for SMEs in the Union and the AccessionCountries has been distributed as follows:

• 24.5 billion in global loans granted to 150 partner banks;• 2.5 billion in equity participations in 184 venture capital funds;• 4.5 billion in portfolio guarantees set up through 95 specialised banks.

The total number of SMEs benefiting from the EIB Group's assistance over that period isestimated at some 275 000.

At end-2002 the EIF's total portfolioamounted to 2.5 billion, invested in184 funds operating across the Unionand in a number of Accession Countries.These venture capital operations bene-fited over 1 800 businesses (out of anestimated 10 000 high-tech firms in theEU). The EIF has thus become a keyplayer in taking forward the LisbonStrategy objective of closing the Union'scompetitiveness gap, particularly inleading-edge technologies.

EIF SME guarantees

The second branch of the EIF's activity isthe provision of structured guaranteesfor portfolios of bank loans to SMEs.Financial institutions benefiting fromsuch guarantees are able to expandtheir capacity for lending to this targetcustomer group and reduce final losseson their SME loan books and hencetheir risk provisioning. These operationsare in part funded by EU budgetaryresources through the Multiannual Pro-gramme for Enterprise (“MAP 2001-2005”), which comprises a “SME Guar-antee Facility” with 4 windows:

• guarantees for high-growth SMEs,

• equity participations,

• investment in information and com-munications technologies (ICT),

• micro-credit. These guarantees, issuedfor credits of under 25 000 euro, gotoff to a promising start in 2002,enabling the EIF to play a significantrole in advancing the Communityobjective of economic and socialcohesion by nurturing the smallestbusinesses.

The EIF offers a complete range of guar-antee products: credit insurance andreinsurance (under the “SME GuaranteeFacility”), together with a self-fundedfacility for enhancing credit via securiti-sation of mezzanine or junior tranchesof SME debts. By raising the credit qual-ity of bond issues backed by securitisedSME loan portfolios, such operationsleave the banks concerned with morefunds available for lending to SMEs.

In 2002, 1 235 million was committed inguarantee operations (compared with958 million in 2001). The EIF's SME guar-antee portfolio exceeds 4.5 billion andencompasses 95 financial intermedi-aries. These operations exert a powerfulleverage effect, having enabled cover tobe provided for more than 170 000 busi-nesses (over 100 000 of these under the“SME Guarantee Facility” managedunder Community mandate).

New EIF consultancy activities

In order to achieve closer coordinationwith the European Commission, the EIFrecently concluded a framework agree-ment with DG REGIO aimed at under-pinning the policy of financial engineer-ing pursued by the Structural Funds.This new initiative, running separatelyfrom the EIF's activities as guarantorand investor, is intended particularly tofurnish regional development agencieswith technical assistance with regard tothe feasibility or structuring of funds.

7.5 billion in the Union

In 2002, total lending within the Union fortrans-European transport and telecommu-nications networks and infrastructure of EUbenefit ran to 7.5 billion.

In the transport sector, the principal financ-ing operations concerned:

• construction of high-speed rail lines suchas that linking Cologne to Frankfurt cityand airport (Germany), the Milan-Bologna link (Italy), LGV Est-Europe(France) and lines connecting Brussels toAntwerp and Liège and on to the Ger-man border (Belgium);

• improvements to road and motorwaynetworks, notably including: upgradingof the Bologna-Florence section of theA1 motorway linking northern Italy tothe Mezzogiorno; rebuilding of theTurin-Milan section of the A4 motorway;construction of a toll bridge in Millau(Aveyron) on the Paris-Béziers/Spainroute; safety enhancement on theFrench motorway network; constructionof motorway sections on the Egnatiatrunk road and a ring road north ofAthens in Greece; building of a motor-way between Pamplona and Logroño inSpain;

Economic integration of the Union and its future Member States calls for efficient com-munications, energy transfer and information networks. Accordingly, since 1993, in thewake of the various Community initiatives identifying priority Trans-European Networks(TENs) within the Union, and more recently in the Accession Countries, the Bank has builtup a powerful portfolio of lending for TENs and infrastructure of EU benefit.

As the leading source of bank finance for these major networks, the Bank contributesreal value added. It has the financial clout to:

• mobilise on the keenest terms the huge sums necessary to build this infrastructure;

• offer maturities (30 years and longer) tailored to the scale of the projects involved;

• where appropriate, provide structured finance as an adjunct to commercial bank andcapital market funding.

The catalytic effect of the Bank's input is especially illustrated by the large number ofpublic-private partnerships supported. In 2002, more than 1.6 billion was made availablein such operations for financing key projects such as the London Underground, Madridmetro (Metrosur), motorway construction in Portugal, the United Kingdom and Spain,and the Rostock tunnel (Germany).

Moreover, the EIB continues to work closely with the European Commission, the MemberStates and the Accession Countries in pinpointing priority trans-European network pro-jects as far ahead as 2020. This cooperation is reflected in particular by the Bank's partici-pation in the High-Level Group on the Trans-European Transport Network, chaired by for-mer Commission Vice-President, Karel Van Miert.

Financing Trans-EuropeanNetworks

Trans-European Networks1998 - 2002: 42 billion

The EIB has so far com-mitted 22.5 billion to

twelve of the fourteenpriority transport pro-jects and seven of the

ten priority energyschemes

Transport

Telecommunications

Energy

2002

2001

2000

1999

1998

2 106

St. Petersburg

IstanbuIstanIstanbulbu

OdessaOdessaOdessaOKishinhinevhin

Minsk

Moskva

Kiyev

Skopjeje

Belgraderade

TTiranT ëëë

Bucuresti

Budapestes

VililniusilV

Riga

Warszazawaza

Prahaha

Lisboa

Porto

Madrid

MüWien

Paris

LuxembourgLuxem

Barcelona

EdinburghEE

Roma

Lyon

Berlin

London

Oslo

HHelsinkiH

Cork

Strasbourgg

page 31

• upgrading of airport infrastructure inMadrid (Spain), Munich, Düsseldorf,Dresden and Leipzig (Germany), Lon-don Heathrow (United Kingdom),Amsterdam (Netherlands), Oporto(Portugal) and Billund (Denmark);

• expansion and modernisation of portfacilities in Italy (at some 20 ports),Spain (Barcelona and Valencia), Ger-many (Hamburg and Bremerhaven)and Denmark (Aarhus).

A further 300 million contributed tofinancing mobile and satellite-basedtelecommunications networks in Spain,Greece and Belgium.

1.6 billion in the Accession Countries

In the Accession Countries, whereinfrastructure development and reha-bilitation requirements are huge, trans-port and telecommunications networkprojects attracted 1.6 billion in 2002.

These centred on: motorways and roads(1.1 billion in Poland, Romania, theCzech Republic, Slovenia, Hungary andLatvia); port, airport and air traffic con-trol infrastructure (270 million inPoland, Bulgaria and Cyprus); and railand river transport (100 million in Hun-gary and Romania). Lastly, 52 millionwas advanced for a scheme to expandand modernise the mobile telephonenetwork in Slovenia.

Routes of priority Trans-European Net-works (TENs)

Sections of TENs concerned by financingcommitments

Other infrastructure and networks of EUbenefit financed

Road and rail corridors in Central andEastern Europe

Sections of corridors financed

EIB operations in support of Trans-European Networks and corridors in neighbouring countries 1993 - 2002

Road/Rail

Electricity

Gas

Airport

Intermodal hub

Port

Air traffic control

Development of oiland natural gas fields

A top-flight financial intermediary

In a year characterized by instability and volatility in the financial markets, inves-tors have increasingly implemented a strategy of ”flight to safety”. The unques-tionable credit quality combined with a strategic approach to markets has furtherconsolidated the EIB's status as a leading AAA rated non-sovereign benchmarkborrower that has merited the attention of investors worldwide. The EIB's effortsto extend the product range available to investors have been recently recognizedby the financial community in the form of Euroweek's award for the Most Innova-tive and Receptive Borrower to New Structures and Ideas.

Activity on the capital markets

Consolidated European SovereignIssuer

A cornerstone of the Bank's fundingstrategy remains the issuance of largeliquid benchmark bonds in EUR, USDand GBP. This enables the EIB to conti-nue broadening its investor base,increasing market penetration and reaf-firming its position as the consolidatedEuropean sovereign issuer. In parallel,singular prominence has been assignedto transparency. In the primary marketthis has been enhanced through the useof book-buildings and the pot syndica-tion methodology, while in the secon-dary market the Bank has made con-tinuous efforts to sponsor the electronictrading of its securities.

The Bank has also continued to showflexibility and innovation by the use ofbespoke products, specially arranged tomeet particular investor needs in a widearray of currencies. These issues coverthe whole range from ”plain vanillabonds” to sophisticated structured secu-rities adapted to the needs of specificinvestors. Structured bonds often incor-porate different types of options as wellas the linking of coupons and redemp-tion amounts to different indices and

currencies. These products serve theunique purpose of enhancing yields toinvestors on a platform of the highestcredit standing. Despite the complexityof these products, the EIB's risk mana-gement policy assures meticulous analy-sis and adequate hedging against thevarious types of risk embedded in theseissues.

The Bank has a pioneering role in thedevelopment of domestic capital mar-kets in particular those of the AccessionCountries, setting up domestic issuanceprogrammes and establishing treasurycapabilities, in order to on-lend in localcurrencies. These efforts have led the EIBto become the major external borrowerin these countries during 2002. The Bankis focusing on building up issues towardsliquid, benchmark size, extending ma-turity profiles and providing bothdomestic and international investors inthese currencies with new instruments.The first ever Hungarian Forint eurofungible issue by the EIB was cited as theBest Emerging Market Currencies BondIssue in Euroweek's 2002 awards.

The EIB is the largest supranational bor-rower, and its role as an important inter-national issuer is also reflected in its cur-

Borrowings signed in 2002

(amounts in EUR million)

Before swaps After swaps

Amount % Amount %

EUR

DKK

GBP

SEK

TotalEU

AUD

CZK

HKD

HUF

JPY

NOK

NZD

PLN

TWD

USD

ZAR

Totalnon-EU

TOTAL

13 305 35.0 22 441 59.0

54 0.1 135 0.4

6 180 16.3 6 227 16.4

0 0.0 362 1.0

19 539 51.4 29 165 76.7

1 284 3.4 0 0.0

232 0.6 407 1.1

161 0.4 0 0.0

139 0.4 105 0.3

1 245 3.3 0 0.0

250 0.7 65 0.2

50 0.1 0 0.0

162 0.4 13 0.0

458 1.2 0 0.0

14 383 37.8 8 231 21.7

109 0.3 30 0.1

18 473 48.6 8 851 23.3

38 012 100.0 38 016 100.0

rency diversification. This is demonstratedby the EIB's strong presence in Japan, theAsia/Pacific region, notably the Taiwaneseand Australian markets, and the South Afri-can market. The Bank has built up an excel-lent reputation and strong name recogni-tion amongst investors in these currencies.

As a policy driven public bank, the EIB hasalways made sustainable efforts towardsdisclosure and open communication withits investor base. The year 2002 saw a fur-ther emphasis in this direction throughmore intensive investor dialogue coveringthe widest possible retail and institutionalaudience. Extensive road shows wereconducted in most prominent investor loca-tions around the globe.

Borrowing activity on the markets

Total borrowings signed, before swaps,amounted to 38 012 million, representingan increase of 18% compared to the pre-vious year (32 305 million in 2001). Theshare of funds raised in EU currenciesremains stable at 51% (53% in 2001). Bondswere issued in 14 currencies (13 in 2001)and through 219 transactions (148 in 2001).

Resources raised after swaps totalled38 016 million in 10 currencies (32 172 mil-lion in 2001). 81% of issue volume (30 763million) were swapped. This reflected theneed to switch funding currencies toaccommodate loan demand as well as inter-est rate hedging.

After swaps, floating-rate resources(32 491 million compared with 25 818 mil-lion in 2001) accounted for 86% of the totalraised, whereas fixed-rate borrowingsdecreased from 6 354 million in 2001 to5 525 million. The average maturity profile

of borrowings stood at 6.1 years (6.3 yearsin 2001).

As part of its debt management, the Bankengaged in early redemptions and repur-chase operations worth 1 283 million(981 million in 2001).

EUR: 13 305 million before swaps /22 441 million after swaps

In 2002, EUR 13 305 million was raised via19 transactions, corresponding to 35% ofthe overall annual funding programme.

The Bank continued its benchmark policyby launching three EARN transactions,which followed the EIB's strategic issuanceapproach, characterised by full trans-parency and best market practice:

• a EUR 2 billion increase of the EARN3.875% due April 2005, (which broughtit to the EUR 5 billion threshold requiredfor trading on EuroMTS);

• a EUR 5 billion issue due October 2012and

• a EUR 5 billion issue due October 2005.

The launch of these benchmark transac-tions builds on the EIB's long-standing stra-tegy to provide sovereign-class liquidity inthe EUR market. At the end of 2002, theEARN curve comprised 11 benchmarks cov-ering maturities from 2003 to 2012 with atotal outstanding volume of over EUR50 billion. The entire yield curve was tradedon the MTS electronic platform with sevenbenchmarks (worth EUR 37 billion) also tra-ding on Euro-MTS. Market-making ar-rangements support the trading of EARNbenchmarks on this platform, ensuring

Amounts outstanding on EARN

issues as at 31 December 2002

Coupon Maturity Amount

% (EUR million)

4.500 15.02.2003 3 360

5.250 15.04.2004 6 190

3.875 15.04.2005 5 000

3.500 15.10.2005 5 000

4.875 15.04.2006 5 000

4.000 15.01.2007 5 000

5.750 15.02.2007 2 578

5.000 15.04.2008 6 082

4.000 15.04.2009 4 538

5.625 15.10.2010 3 000

5.375 15.10.2012 5 000

50 748

sovereign-class liquidity for dealers andminimal bid-offer spreads for end inves-tors.

In 2002, the Bank sharply increased itsissuance of non-benchmark EUR-de-nominated products. At year-end, totalissuance in this market segment wasEUR 1 305 million (via 16 transactions),as compared to the EUR 398 million(through 10 transactions) issued in theprevious year.

A wide variety of customised productshave been launched during the year, tosatisfy both institutional investors' andretail investors' requirements.

Total standard issues (4 transactions)reached the amount of EUR 775 million.Three of these issues (EUR 525 million)were mainly distributed in Italy, to alarge extent to institutional investors.The fourth was issued in the Beneluxmarket, also finding a good receptionwith smaller retail investors.

Structured bonds issuance (12 transac-tions) reached the amount of EUR530 million. In the first part of the year,several equity-linked products wereplaced among investors, while in thesecond part of the year a greaterdemand for interest rate products ledthe Bank to concentrate its issuance inthat market segment, focusing mainlyon structured floating rate, step-up cou-pon and inflation-linked notes.

USD: 12 920 million before swaps / 7 552 million after swaps(in EUR: 14 383 million / 8 231 million)

USD 12.92 billion (EUR 14.38 billion) wasraised through 36 operations in 2002,

representing the EIB's largest ever USDissuance in a year, corresponding to38% of total funding. The USD strategycontinues to be based on a foundationof liquidity, transparency and investordiversification, and comprises globalbond issuance, targeted issues andstructured transactions.

The Bank continued its strategy of of-fering large sized issues in global formaton a regular basis. Three global bondissues were brought to the market. Eachglobal issue had a size of USD 3 billion,which is the current market norm forliquid, benchmark transactions. Totalglobal bonds issued and outstandingsince January 2001 were USD 17 billion.All outstanding global benchmarkswere listed on the New York StockExchange during the year.

Targeted USD issues (Japan, Asia andEurope), which accounted for USD2.8 billion, have further contributed tothe diversification of the EIB's USDinvestor base. These include four Euro-dollar transactions and three retail tar-geted or ”Uridashi” issues. In addition,USD 1.1 billion in structured issues hasbeen raised in response to reverseenquiries from investors.

A curve of liquid benchmark issues hasbeen built with USD 28 billion outstan-ding and real-time prices quoted bymarket-makers on Reuters page”EIBUSD01” and on Bloomberg”EIB<GO>”. In line with promoting theliquidity and transparency of tradedprices in our bonds, the Bank has encou-raged secondary trading on inter-dealerand dealer-to-investor electronic plat-forms.

The admission of EIB bonds to the New York Stock Exchange enables the Bank to reach a wide span of investors

GBP: 3 872 million before swaps /3 905 million after swaps(in EUR: 6 180 million / 6 227 million)

Total sterling issuance by the EIB since itlaunched its first sterling issue 25 years ago(November 1977) amounts to GBP 38 bil-lion. Over 70% of this issuance was laun-ched in the period 1998-2002. The totaloutstanding of EIB sterling bonds at theend of 2002 stood at GBP 33 billion repre-senting over 11% of the non-gilt sterlingindex.

The EIB retained its position as the largestnon-gilt issuer in the sterling market withabout a 6% share of the market issuancevolume in 2002. This was achieved throughfurther diversification of the investor base.Insurance company primary market pur-chases of the EIB's sterling bonds fell fur-ther from over 50% of the EIB's sterlingissuance in 2000, 40% in 2001 and 27% in2002. Early indications are that this trendwill be reversed in 2003. Retail investors,local authorities and investment manage-ment groups all increased their share in theinvestor base. Non-UK investors increasedfrom 17% to 25% of total purchases. Thisdiversification was substantially achievedthrough the sterling retail programmelaunched in late 2001. The 5% 2006 retailtargeted issue was increased over the year

to a GBP 1.3 billion issue size and a newretail benchmark, the 4.5% 2008, was laun-ched and increased to GBP 400 million.One of the attractions of the EIB's retailissues is that they are also bought by insti-tutional and bank investors. This, togetherwith a retail dealer group of ten banks,many of which quote prices on their auto-matic execution systems and all of whichare committed to make markets in thebonds, provides the necessary conditionsfor fair secondary market prices at alltimes. Demand from money market fundsas well as commercial and central banksresulted in a GBP 1 billion 2005 FRN issue inthe early part of the year.

Continued emphasis was placed on main-taining liquidity in the EIB's institutionalbenchmarks through the 10 dealer banks.Taps of the institutional benchmarks 2004,2005, 2006, 2011, 2021, 2025 and 2032 wereachieved. Euroweek magazine stated, ”Byconsistently keeping a regular presence inthe market, and operating through its disci-plined benchmark and retail dealer groups,the EIB maintained its position as the back-bone of the Gilt-surrogate market”.

The inflation-linked issuance was supple-mented by a new 2013 maturity, which wasused to fund a corporate loan on a back-to-back basis.

European markets

In Norwegian krone, the EIB launchedNOK 1.9 billion (EUR 250m) in 6 transac-tions. In the Danish kroner market theDKK 400 million (EUR 54 million) 8-yearissue accounted for 16% of the totalDKK Eurobond market.

Central and Eastern European markets

A total of EUR 533 million equivalentwas issued in 20 transactions, anincrease of 75% over the previous year,divided as follows: CZK 7.165 billion(EUR 232 million), 7 transactions; HUF34 billion (EUR 139 million), 6 transac-tions; PLN 591 million (EUR 162 million),7 transactions. This made the EIB the lar-gest non-domestic government issuer inthe Central European Accession Coun-tries (ACC) during 2002 (see inset boxfor further information).

Asia/Pacific and South African markets

In total, the Asian/Pacific and SouthAfrican markets accounted for the equi-valent of EUR 3.3 billion. This comprisedhalf of the Bank's transactions and 9%of its funding volume in 2002.

The Asian market is also key to the EIB'sissuance strategy and the Bank conti-nues to benefit from its well-establishedprofile in the region through local cur-rency issuance. This provides the Bankwith the opportunity for investor diver-sification and product innovation.Issuance in Japan this year comprised:structured transactions off the Bank'sEMTN programme; an innovative struc-tured Samurai transaction (JPY145.8 billion or EUR 1 245 millionthrough 83 transactions); and 6 ”Urida-shi” issues in USD and AUD - for whichthis has been a record year. The Bank

was the largest supranational issuer inthe Taiwanese market in 2002, issuingNTD 15 billion (EUR 458 million). EIB wasawarded Euroweek's best Taiwanesedollar bond of the year.

In Australian Dollars, the Bank conclu-ded 3 ”Uridashi” transactions (EUR1.29 billion), the last of which was forAUD 1.285 billion (EUR 718 million) andrepresented the largest supranationalAUD transaction ever in terms of netproceeds. It was placed with more than34 000 retail investors in Japan. TheBank also completed 2 transactions inHong Kong Dollars and one in New Zea-land Dollars.

The EIB was again the largest interna-tional issuer in the Rand market. Totalissuance amounted to ZAR 1.1 billion(EUR 109 million) in 8 transactions.

Capital Market Activities in Accession Country Currencies (ACC)

Funding local currency lending in the future Member States of the European Union together withthe development of the respective capital markets have become major priorities of the Bank in recentyears. In 1996, the EIB launched its first bond issue in one of the Accession Country Currencies(CZK) and since then the Bank has constantly worked to pioneer and support the development ofthese markets.

In the early stages the Bank had to focus on the groundwork - discussing the relevant capital marketlegislation with market authorities and participants in order to establish effective ways to issue notonly in the international markets, but also in the largest domestic bond markets of the region. Thisled to the establishment of domestic Debt Issuance Programmes in Hungary, the Czech Republic andPoland between 1997 and 2001.

The ability to offer its bonds to both domestic and international investors has enabled the EIB tobecome the largest issuer in the region (domestic government issuers excepted) with a marketshare of nearly 13%. The Bank's total ACC issuance in 2002 was the equivalent of EUR 535 mil-lion, an increase in its annual issuance volume of over 75% from 2001. Compound growth in theBank's ACC issuance over the last four years has exceeded 50% per annum.

The Bank's strategy has now shifted to building up issues towards liquid, benchmark size, extendingand improving maturity profiles, and providing investors in the ACC with new instruments tochoose from. This has led to the Bank's issuance in 2002 of 15 and 20-year bonds in PLN and CZK,respectively. In June, the Bank launched the first ever HUF euro-tributary bond, a step-down euro-fungible issue designed to attract international investors looking for HUF/EUR convergence oppor-tunities. The issue was ranked number 1 in Euroweek's 2002 emerging currency awards.

As the Bank intends to expand its local currency lending in the region, continued growth of itsissuance activities in local currencies is anticipated for 2003 and beyond. At the same time, the Bankwill review further expansion of its capital market activities in other ACC.

The EIB's issuance in ACC (EUR million equivalent)

DomesticInternational

Total

1998 1999 2000 2001 2002

28 134 83 61 21273 66 121 243 323

101 200 204 304 535

In working together with the bankingsector, the Group deploys a varied andeffective range of financial products.

EIB global loans, an important means offostering smaller-scale investment, arecurrently deployed through some280 banks and other financial institu-tions both within and outside the EU.Apart from their impact on developingthe local financial sector, they enableSMEs and local authorities to maintainclose links with banks. The palette ofglobal loans is being broadened toencompass regional banks (in responseto the objective of supporting invest-ment in less favoured areas) and morespecialised intermediaries, for instancein the environmental, audiovisual andhigh-tech sectors.

The EIB also cofinances medium and lar-ger-scale projects. Complementing thebanking sector, EIB funding, predomi-

nantly long-term and sometimes takingthe form of structured or intermediatedfinancing, serves to diversify the sourcesand types of funding available to busi-nesses, so optimising their developmentplans. As part of its endeavours towiden the gamut of its products toaccommodate economic needs, the EIB,in cooperation with its partners in theEuropean banking sector, is givingthought to devising a new form offinancing tailored to intermediate-sizedfirms.

Lastly, operating both within and out-side the Union, the EIB is well equippedto work in tandem with the bankingsector in supporting the group strate-gies of major players by furthering theirprojects in the EU as well as theirforeign direct investment in non-mem-ber countries.

The EIF, for its part, also operates inclose association with the financial andbanking sector:

• either in channelling finance to ven-ture capital funds, partly run bybanking groups' specialist subsidia-ries;

• or by providing guarantee facilitiesfor banks' SME investment portfolios.

In both cases, the EIF supplies not onlyits expertise but also substantial valueadded.

Cooperation with the banking sector

The EIB Group works in very close cooperation with the banking sector, both with respect to its borrowings on the capi-tal markets and its lending, equity participation and guarantee activity. This provides an essential channel throughwhich the EIB Group can:

• contribute funding to a raft of large-scale individual projects, where appropriate via intermediated financing;

• obtain adequate security for funding private-sector individual projects, with one third of guarantees made avail-able to the EIB being furnished by banks or other financial institutions;

• on the strength of its experience in appraising long-term projects, act as a prime mover in arranging sound finan-cing packages offering the keenest interest rate and maturity terms;

• help to finance municipalities and promoters of small and medium-scale infrastructure schemes by providingglobal loans;

• by way of its global loans and the operations of its subsidiary the EIF, underpin the activities of SMEs by enhan-cing their financial environment and acting as a catalyst for bank investment in this sphere.

Partnership with the electedrepresentatives of Europe's citizens

In 2002, the EIB, on behalf of the Group,intensified its dialogue with the Euro-pean Parliament, as witnessed by theBank's participation in a number ofmeetings of Parliamentary Committees(notably the Committee on Economicand Monetary Affairs). The culminationof this dialogue was the examination inplenary session, in November 2002 andwith the participation of the Bank's President, of the EP's annual report on monitoring the EIB's activities.Exchanges of views between membersof the Bank's Management Committeeand Parliamentarians serve the twofoldpurpose of providing the elected repre-sentatives of the Union's citizens withmore detailed information on theGroup's operations and giving theGroup the opportunity to hear at firsthand the European Parliament's EU pol-icy priorities. This ongoing working rela-tionship also enables the Parliament totake account of the EIB Group's activityin discharging its legislative, budgetaryand political monitoring responsibilities.This enhances the consistency of the ini-

tiatives pursued by the Union for thebenefit of its citizens.

Alongside this strategy of openness, theEIB has also forged closer links with theEuropean Economic and Social Commit-tee so as to make the most of the Com-mittee's enhanced role under the Treatyof Nice as an interface between theUnion's institutions and civil society. Inthe wake of a visit to Luxembourg bythe Chairman and members of the Com-mittee, the Bank's President addressedthe plenary session of the ESC in Jan-uary.

A partner to the European institutions in touch with civil societyAs a public bank whose purpose is to further the Union's objectives by implement-ing financing guidelines laid down by its Governors within a framework mapped outby the European Councils, the EIB must reconcile the demand for operational effi-ciency with the need for effective communication and a commitment to forgingpartnerships with all its stakeholders.

Philippe Maystadt at the plenary session of theEuropean Parliament

Cooperation with the Council

Similarly, the Bank regularly participates inthe meetings of the Ecofin Council and itspreparatory bodies, making available itscapital investment financing expertise.

Also in 2002, the trend continued for theEuropean Council to look increasingly tothe Bank and the EIF for assistance in imple-menting new Community initiatives hing-ing on banking or financial instruments.This was the case at the Council meetingsheld in Barcelona in March and Seville inJune, which called on the EIB Group to stepup its activity in support of a knowledge-based, innovation-driven economy and tostrengthen the financial partnership withthe Mediterranean Partner Countries. Fur-thermore, in addition to finalising the insti-tutional and legal aspects of the new Mem-ber States' accession (including provisionson the EIB), the Copenhagen EuropeanCouncil in December emphasised the Bank'skey financing role in preparing the Acces-sion Countries for their future integration.

Lastly, in November, the “CompetitivenessCouncil“, bringing together the Ministersfor Industry and Research, invited theGroup to expand its operations to promotenew technologies, especially by bolsteringthe equity base of firms in their develop-ment phase.

Strengthened relations with the EuropeanCommission

The EIB Group has also strengthened itsoperational links with the Commission so asto enhance the interaction between theBank's lending, the EIF's operations and theUnion's budgetary resources in furtheringcommon objectives. More effective pro-cedures for consulting the Commission onEIB loan proposals have been defined and

two important agreements concluded inthe fields of environmental protection andthe information society. In addition, 2002saw the agreement on improving coordina-tion of the two institutions' operations insupport of R&D in Europe bear fruit, as wit-nessed by the synergies achieved under the6th Research Framework Programme and inthe cofinancing of several large-scale pro-jects in this sector.

Furthermore, the practice has now beenestablished of holding an annual meetingbetween the College of Commissioners andthe Bank's Management Committee, sup-plemented by some fifteen working meet-ings, at the level of the Directors General ofthe two institutions, designed to createcloser operational ties in the fields ofregional development, preparing theAccession Countries for EU membership,R&D, supporting corporate competitive-ness, the information society, educationand culture (including audiovisual produc-tion) and aid and cooperation policiestowards non-Member Countries, particu-larly Mediterranean and ACP.

Following a management agreement,signed in 2001, entrusting the EIF with ex-ecution of the Directorate-General forEnterprise's operational budget via the“Multiannual Programme for Enterprise“(MAP), the Fund and the Commission'sDirectorate-General for Regional Policyconcluded an agreement on the provisionof advisory services by the EIF for the devel-opment of venture capital and guaranteeactivity in support of SMEs in the Union'sleast advanced regions.

Transparency and dialogue with civilsociety

During the year, the Bank stepped up itspolicy of transparency, notably throughadopting a new information policystatement together with new rules onpublic access to its documents, in linewith the principles and limits laid downin the most recent Community legisla-tion in this field (EC Regulation1049/2001). Recognising the legitimacyof public interest in its workings, theBank has set itself the goal of providingas much information as possible on itsmodus operandi, activities and projects,while achieving a balance with the requisite banking confidentiality of itsoperations and the integrity of its deci-sion-making processes.

Against this backdrop, the EIB hassubstantially expanded its website(www.eib.org) which, with more than850 000 visitors each year, representsthe main interface between the Bankand the public. The EIB now publisheson its website:

• its operational strategies, makingavailable on-line its Corporate Opera-tional Plan and details of its sectoralpolicies, in particular those relatingto the environment, sustainabledevelopment, climate change, pro-motion of renewable energies andpreparing the Accession Countries forEU membership;

• a list of projects under appraisal, sub-ject, where applicable, to protectionof the Bank's and its counterparties'legitimate business confidentialityinterests; full information is providedon the parameters of each projectunder consideration;

• detailed explanatory notes on pro-jects already financed attractingparticular attention from interestgroups;

• information on appraisal proceduresand methods, the project life cycleand the monitoring arrangementsfor projects financed.

This drive for greater transparency isbacked up by ongoing dialogue withcivil society conducted via NGOs. In2002, the Bank participated in fourmeetings held by NGOs on sectoralaspects of its activities. It also organiseda round table in Copenhagen in June onthe issues of sustainable developmentand cleaning up the pollution affectingthe Baltic Sea. A special session wasorganised for NGOs on the EIB's newinformation policy. At the same time,the Bank pressed ahead with itsexchanges of correspondence and infor-mation with various organisations voic-ing their concern about projects likelyto attract financing and replied to anumber of requests for informationfrom academic researchers conductingstudies on EIB activity.

The Board of Governors consists of Minis-ters designated by each of the MemberStates, usually Finance Ministers. It laysdown credit policy guidelines, approves theannual accounts and balance sheet, decideson the Bank's participation in financing

operations outside theEuropean Union as wellas on capital increases. Itappoints members of theBoard of Directors, theManagement Committeeand the Audit Commit-tee.

The Board of Directorsensures that the Bank ismanaged in keeping withthe provisions of the

Treaty and the Statute and with the generaldirectives laid down by the Governors. Ithas sole power to take decisions in respectof loans, guarantees and borrowings. Itsmembers are appointed by the Governorsfor a renewable period of five years follow-ing nomination by the Member States andare responsible solely to the Bank. TheBoard of Directors consists of 25 Directorsand 13 Alternates, of whom 24 and 12respectively are nominated by the MemberStates; one Director and one Alternate arenominated by the European Commission.

The Management Committee is the Bank'spermanent collegiate executive body. It haseight members. Under the authority of thePresident and the supervision of the Boardof Directors, it oversees day-to-day runningof the EIB, recommends decisions to Direc-tors and ensures that these are imple-mented. The President chairs the meetingsof the Board of Directors. The members ofthe Management Committee are respon-sible solely to the Bank; they are appointedby the Board of Governors, on a proposalfrom the Board of Directors, for a period ofsix years.

The three members of the Audit Commit-tee are appointed by the Board of Gover-nors for a renewable mandate of threeyears. Since 1996, the Committee has alsoincluded an observer, appointed annuallyfor a mandate of one year. An independentbody answerable directly to the Board ofGovernors, the Audit Committee verifiesthat the operations of the Bank have beenconducted in compliance with the pro-cedures laid down in its Statute and itsbooks kept in a proper manner. The Gover-nors take note of the report of the AuditCommittee and its conclusions, and of theStatement by the Audit Committee, beforeapproving the Annual Report of the Boardof Directors.

EIB Governing Bodies

Meeting of the Board of Governors

The Audit Committee

The impact of enlargement on the EIB'sgoverning bodiesThe planned accession of ten new Member States to the European Union in 2004, with the prospect of two others join-ing later, required amendments to be made to the EIB's Statute as annexed to the Accession Treaty. Consequently, at itsmeeting on 5 November 2002 the Ecofin Council adopted conclusions designed to modify the Bank's capital and gover-nance. A Protocol annexed to the Accession Treaty will introduce the corresponding amendments to the EIB's Statute.

Capital: independently of the capitalincrease from EUR 100 to 150 billiondecided by the Board of Governors inJune 2002, which took effect on 1 Jan-uary 2003, it is envisaged that the tennew Member States will subscribe to theBank's capital when the AccessionTreaty enters into force on the sched-uled date of 1 May 2004. As with thecurrent Member States, their share willreflect their economic weight withinthe European Union (expressed in GNP),and the portion of subscribed capital tobe paid in will be so in eight instal-ments.

At that time, Spain will increase its shareof the subscribed capital to approxi-mately 10% through an additionalfinancial contribution, also in accor-dance with an eight-instalment sched-ule.

Overall, upon completion of these oper-ations, the Bank's subscribed capital willamount to more than EUR 163.7 billion.

Board of Governors: each new MemberState will have one representative onthe Board of Governors. This will gener-ally be its Finance Minister.

Board of Directors: to preserve theeffectiveness of this body by keeping itto a manageable size, it was decidedthat following the accession of the10 new countries, each Member Statewill be entitled to a single Director,bringing the total number to 25 plusone Director representing the European

Total:

(1) Amounts shown for the new Member Statesare indicative and based on provisional figures for

2002 published by Eurostat (New CRONOS).

10 000 000 00020 000 000 000 0

16.28%

9.77%

4.51%

2.99%

2.28%

1.29%

0.25%

0.05%

26 649 532 500 DE

26 649 532 500 FR

26 649 532 500 IT

26 649 532 500 GB

15 989 719 500 ES

7 387 065 000 BE

7 387 065 000 NL

4 900 585 500 SE

3 740 283 000 DK

3 666 973 500 AT

3 635 030 500 PL

2 106 816 000 FI

2 003 725 500 GR

1 291 287 000 PT

1 212 590 000 CZ

1 121 583 000 HU

935 070 000 IE

408 489 500 SK

379 429 000 SI

250 852 000 LT

187 015 500 LU

180 747 000 CY

156 192 500 LV

115 172 000 EE

73 849 000 MT

163 727 670 000 EUR

Commission. The number of Alternateswas set at 16, meaning that some ofthese positions will be shared by group-ings of States. These new arrangementswill be stipulated in the Bank's Statute.

Furthermore, in order to broaden theBoard of Directors' professional exper-tise in certain fields, it was also decidedthat the Board will be able to co-opt amaximum of 6 experts (3 Directors and3 Alternates), who will participate in theBoard meetings in an advisory capacity,without voting rights. When the Acces-sion Treaty enters into force, decisionswill be taken by a majority consisting ofat least one third of members entitledto vote and representing at least 50% ofthe subscribed capital.

Management Committee: The Bank'spermanent executive body will be bol-stered by the addition of one Vice-Pres-ident, taking the number of membersfrom 8 to 9. This increase also takesaccount of the second phase of enlarge-ment.

after 2004 (in euro1)

Future breakdown of the EIB's capital

The College of the Management Committee Members andtheir supervisory responsibilities

(situation at 06/03/2003)

Philippe MAYSTADTPresident of the Bank andChairman of its Board ofDirectors

- Relations with EuropeanParliament

- Institutional matters- Reporting by Financial

Controller and InternalAudit

- Credit risk- Human resources- Governor of EBRD

- Financing operations inUnited Kingdom

- Environmental protection- Relations with NGOs,

openness and transparency- Operational risks- Internal and external audit

and relations with AuditCommittee

- Relations with EuropeanCourt of Auditors

- Member of EIF Board ofDirectors

- Financing operations inAustria, Sweden, Finland,Iceland, Norway, Slovenia,Turkey and the Balkans;relations with Switzerland

- Economic and financialstudies

- Trans-European Networks- "Nordic Dimension" initia-

tive- Liaison with NIB

- Financing operations inGermany and in Centraland Eastern EuropeanAccession Countries

- Information and communi-cations policy

- Equal opportunities policy- Headquarters extension

and Buildings- Vice-Governor of EBRD

- Financing operations inSpain, Portugal, Belgium,Luxembourg, Asia andLatin America

- Structured finance andnew lending instruments;Securitisation

- Legal affairs (operationalaspects)

- Liaison with IADB andAsDB

- Financing operations inIreland, Denmark, theNetherlands, ACP Statesand South Africa

- Cotonou AgreementInvestment Facility

- Project appraisals and expost evaluations

- Regional development- Global loans (general

aspects)- Professional training- Liaison with AfDB

- Financing operations inItaly, Greece, Cyprus andMalta

- Budget- Accountancy and control

of financial risks- Information technologies

- Financing operations inFrance, Maghreb andMashreq countries, Israel,Gaza/ West Bank

- Facility for Euro-Mediter-ranean Investment andPartnership (FEMIP)

- Financial policies- Capital markets- Treasury

Wolfgang ROTHVice-President Ewald NOWOTNY

Vice-President

Peter SEDGWICKVice-President

Isabel MARTÍN CASTELLÁVice-President

Michael G. TUTTYVice-President

Gerlando GENUARDIVice-President

Philippe de FONTAINE VIVE CURTAZVice-President

The Management Committee of the EIB

Organisation Chart(Situation at 1 June 2003)

General Secretariat andLegal Affairs

Eberhard UHLMANNSecretary General andGeneral Counsel of Legal Affairs

Audit Enactment,EIB Group DevelopmentHelmut KUHRT

Resource Management and EnlargementFerdinand SASSEN

General Administration

Rémy JACOBDeputy Secretary General

Information and CommunicationsHenry MARTY-GAUQUIÉDirector

Communications and TransparencyAdam McDONAUGH

Patricia TIBBELS

Media RelationsPaul Gerd LÖSER

Records and Information ManagementMarie-Odile KLEIBERAssociate Director

Duncan LEVER

Purchasing and Administrative ServicesManfredo PAULUCCI de CALBOLI

Facilities ManagementAgustin AURÍA

TranslationGeorg AIGNER

Kenneth PETERSEN

Legal Support for Lending Operations

Alfonso QUEREJETADirector

Operational Policy and the BalkansRoderick DUNNETTAssociate Director

Germany, Austria, Accession CountriesGerhard HÜTZ

Gian Domenico SPOTA

Spain, PortugalIgnacio LACORZANA

United Kingdom, Ireland, Nordic CountriesPatrick Hugh CHAMBERLAIN

Belgium, France, Luxembourg, NetherlandsPierre ALBOUZE

Greece, Italy, Cyprus, MaltaManfredi TONCI OTTIERI

Mediterranean (FEMIP), Africa, Caribbean,Pacific (Cotonou Investment Facility), Asia andLatin AmericaRegan WYLIE-OTTE

Interinstitutional Affairs and BrusselsOfficeDominique de CRAYENCOURDirector

Jack REVERSADE

Legal Services for Community andFinancial AffairsMarc DUFRESNEDirector

Jean-Philippe MINNAERT(Data Protection Officer)

Luigi LA MARCA

Legal Aspects of Financial IssuesNicola BARR

Legal Aspects of Institutional and Staff IssuesCarlos GOMEZ DE LA CRUZ

Planning, Budget and ControlTheoharry GRAMMATIKOSAssociate Director

Institutional MattersEvelyne POURTEAUAssociate Director

Gudrun LEITHMANN-FRÜH

Governing Bodies, Secretariat, ProtocolHugo WOESTMANNAssociate Director

Directorate for LendingOperations - Europe

Terence BROWNDirector General

United Kingdom, Ireland, NordicCountriesThomas BARRETTDirector

Banking, Industry and SecuritisationBruno DENIS

InfrastructureTilman SEIBERT

Alain TERRAILLON

Structured Finance and PPPsCheryl FISHER

Nordic CountriesMichael O'HALLORAN

Spain, Portugal- - - - -Director

Spain - PPPs, Infrastructure, Social and UrbanSectorChristopher KNOWLES

Marguerite McMAHON

Spain - Banks, Industry, Energy andTelecommunicationsFernando de la FUENTE

Madrid OfficeAlberto BARRAGÁN

PortugalRui Artur MARTINS

Lisbon OfficeDavid COKER

France, BeneluxLaurent de MAUTORTDirector

France - InfrastructureJacques DIOT

France - EnterprisesConstantin SYNADINO

Belgium, Luxembourg, NetherlandsHenk DELSINGAssociate Director

Germany, AustriaJoachim LINKDirector

Berlin OfficeFranz-Josef VETTER

Germany (Northern Länder)Peggy NYLUND GREEN

Germany (Southern Länder)Heinz OLBERS

Austria, Energy and Telecommunications inGermanyPaolo MUNINI

Accession CountriesEmanuel MARAVICDirector

Estonia, Latvia, Lithuania, Poland, EuratomGrammatiki TSINGOU-PAPADOPETROUAssociate Director

Hungary, SloveniaCormac MURPHY

Bulgaria, RomaniaRainer SAERBECK

Czech Republic, SlovakiaJean VRLA

Foreign direct investment (FDI) and financialinstitutions- - - - -

Italy, Greece, Cyprus, MaltaThomas HACKETTDirector

InfrastructureBruno LAGOAssociate Director

Energy, Environment and TelecommunicationsAlexander ANDÒ

Industry and BanksJean-Christophe CHALINE

GreeceThemistoklis KOUVARAKIS

Operations Support

Jürgen MOEHRKEChief operational coordinator

CoordinationDominique COURBIN

Richard POWER

IT and Management InformationThomas FAHRTMANN

Business SupportRalph BAST

Directorate for LendingOperations -Other Countries

Jean-Louis BIANCARELLIDirector General

Development Economic Advisory ServiceDaniel OTTOLENGHIChief Development EconomistAssociate Director

Mediterranean / FEMIP andthe BalkansAntonio PUGLIESEDirector

Private Sector SupportAlain SÈVE

MaghrebBernard GORDON

Mashreq, Middle EastJane MACPHERSON

Cairo OfficeLuigi MARCON

Turkey, BalkansPatrick WALSH

Africa, Caribbean, Pacific(Cotonou Investment Facility)Martin CURWENDirector

Resources and DevelopmentJacqueline NOËLAssociate Director

David WHITE

Portfolio Management and StrategyFlavia PALANZA

West Africa and SahelGustaaf HEIM

Central and East AfricaTassilo HENDUS

Southern Africa and Indian OceanJustin LOASBY

Caribbean and PacificStephen McCARTHY

Asia and Latin AmericaClaudio CORTESEDirector

Latin America- - - - -

AsiaMatthias ZÖLLNER

FinanceDirectorate

René KARSENTIDirector General

Capital MarketsBarbara BARGAGLI PETRUCCIDirector

EuroCarlos FERREIRA DA SILVA

Europe (excluding euro), AfricaDavid CLARK

America, Asia, PacificCarlos GUILLE

Investor Relations and Marketing- - - - -

TreasuryAnneli PESHKOFFDirector

Liquidity ManagementFrancis ZEGHERS

Asset/Liability ManagementJean-Dominique POTOCKI

Portfolio ManagementJames RANAIVOSON

Planning and Settlementof OperationsFrancisco de PAULA COELHODirector

Back Office LoansGianmaria MUSELLA

Back Office TreasuryYves KIRPACH

Back Office BorrowingsErling CRONQVIST

Systems and Loans DatabasesCharles ANIZET

Financial Policy, ALM and Market RiskManagementAlain GODARD

Henricus SEERDEN

CoordinationHenri-Pierre SAUNIER

page 48

(Situation at 1 June 2003)

For regular updates on the latest developments in the organisation chart, readers are invited to visit the EIB's website: www.eib.org

page 49

ProjectsDirectorate

Michel DELEAUDirector General

Mateo TURRÓ CALVETAssociate Director(Trans-European Networks and PPPs)

Economic and Financial StudiesEric PERÉE

Policy SupportPatrice GÉRAUDDirector

Gianni CARBONARO(Regional Development)

Operational Lending PoliciesGuy CLAUSSE

Guy BAIRD (Brussels Office)

Project Quality and MonitoringAngelo BOIOLI

Resources ManagementDaphné VENTURASAssociate Director

Environmental UnitPeter CARTER

InfrastructureChristopher HURSTDirector

Andrew ALLEN(General Infrastructure and ResourceManagement)

Axel HÖRHAGER(Balkans and Economic Coordination)

Rail and RoadJosé Luis ALFARO

John SENIOR

Air, Maritime and Urban TransportPhilippe OSTENC(Procurement)

Water and WastewaterJosé FRADE

Energy, Telecommunications, WasteManagementGünter WESTERMANNDirector

Electricity, Renewable Energies and WasteManagementRené van ZONNEVELD

Heiko GEBHARDT

Oil and GasGerhardus van MUISWINKEL

François TREVOUX

Telecommunications and InformationTechnologyCarillo ROVERE

Industry and ServicesConstantin CHRISTOFIDISDirector

Bernard BÉLIER

Primary Resources and Life SciencesJean-Jacques MERTENS

John DAVIS

Manufacturing Industry and ServicesHans-Harald JAHN

Pedro OCHOAPeder PEDERSEN

Human CapitalStephen WRIGHT

Credit Risk

Pierluigi GILIBERTDirector General

OperationsPer JEDEFORSDirector

Infrastructure and IndustryStuart ROWLANDS

Project FinanceKlaus TRÖMEL

BankingGeorg HUBER

Credit Risk Methodologies and FinancialExposuresLuis GONZALEZ-PACHECO

Coordination and SupportElisabeth MATIZ

Human Resources

Andreas VERYKIOSDirector

Staff Budgets and Horizontal IntegrationZacharias ZACHARIADISAssociate Director

StaffingJörg-Alexander UEBBINGAssociate Director

DevelopmentLuis GARRIDO

AdministrationMichel GRILLI

OperationsEvaluation

Horst FEUERSTEINDirector

Juan ALARIO GASULLAGuy BERMANCampbell THOMSON

Financial Control

Patrick KLAEDTKEFinancial Controller

Luis BOTELLA MORALESDeputy Financial Controller

EIB Group Accounting

Third Party Accounting and Accounts PayableFrank TASSONE

Internal and Management ControlAntonio ROCA IGLESIAS

Information Technology

Luciano DI MATTIADirector

Existing Systems and Applications SupportJoseph FOY

Ernest FOUSSE

Core Business Packages(Luciano DI MATTIA)

Loans, Publishing, Intranet/Internet, BudgetSimon NORCROSS

InfrastructureJosé GRINCHO

Internal Audit

Peter MAERTENSHead of Internal Audit

Siward de VRIES

Management CommitteeAdviseron EIB Group Strategy andNegotiationsFrancis CARPENTERDirector General

Chief Economist

Alfred STEINHERR

The EIF is managed and administered by the following three authorities:

• the General Meeting of shareholders (EIB, European Union, 28 financial institutions),which meets at least once a year;

• the Board of Directors, composed of seven members, which decides on the Fund's oper-ations;

• the Chief Executive, who is responsible for the management of the Fund in accordancewith the provisions of its Statutes and the guidelines and directives adopted by theBoard of Directors.

The Fund's accounts are audited by a three-person Audit Board appointed by the GeneralMeeting.

EIF Structure

Chief Executive

Head of Division, Risk Management and Monitoring

Secretary General

Head of Division, Policy and Institutional

Coordination/Advisory Services

Head of Division, Legal Service

Human Resources and Facilities Management

Accounting and Treasury

Director of Operations

Head of Division, Venture Capital 1 (Belgium, Spain,

France, Greece, Italy, Luxembourg, Netherlands, United

Kingdom)

Head of Division, Venture Capital 2 (Germany, Austria,

Denmark, Finland, Ireland, Portugal, Sweden, Accession

Countries)

Head of Division, Guarantees

Head of Division, Product Development and Operations

Research

EIF Governing Bodies

Francis CARPENTER

Thomas MEYER

Robert WAGENER

Marc SCHUBLIN

Maria LEANDER

Susanne RASMUSSEN

Frédérique SCHEPENS

John A. HOLLOWAY

Jean-Philippe BURCKLEN

Kim KREILGAARD

Alessandro TAPPI

Frank TASSONE

In 2002, the Bank continued to developinitiatives to promote transparency,accountability and modernisation of itspersonnel policies. Decentralisation ofbudgetary and staff managementresponsibilities to the Directorates wassuccessfully implemented.

Organisation and structure

As from August 2002, Mr EberhardUhlmann has been appointed SecretaryGeneral and General Council of theBank. The Bank's organisation contin-ued to adapt during 2002, in particularto take account of the new strategicdevelopments (FEMIP, ACP InvestmentFacility and Enlargement of the Euro-pean Union). In view of the forthcomingenlargement of the Union, the Bankbegan to recruit nationals from theAccession Countries. The OrganisationChart, presented on page 47 and fol-lowing, is regularly updated on the EIB'swebsite (www.eib.org).

Staff Representation

In 2002, the College of Staff Represen-tatives (SR) carried on working with theHuman Resources Department (HR) onthe task of developing and updatingthe Staff Regulations. HR/SR coopera-tion is conducted via working groups -e.g. those concerned with the annualappraisal exercise and salaries - focusingon issues of importance to staff andmanagement alike. A large part of thediscussion between HR and SR is alsoheld within various Joint Committees.

These include the Joint Committee onHealth, Safety and Working Conditions,which stepped up its activities over thepast year with a view to bringing theBank's accident prevention and workerprotection provisions into line withEuropean best practice.

Equal Opportunities

The Joint Committee on Equal Opportu-nities (COPEC) oversees the implementa-tion of policy on equal opportunities interms of career development, recruit-ment, training and social welfare infras-tructure. Last year, the Committee con-tributed in particular to the successfulintroduction of the Bank's new parentalleave policy. It also highlighted the needto recruit a career development adviser,a proposal which was favourablyreceived.

Individual Development

The Bank continued to invest in thedevelopment of skills and learning of itsstaff. The “Management Skills Develop-ment“ Programme, a three-year pro-gramme focusing on people manage-ment and tailored to the needs of theBank's managers, was launched in 2002.

Personal Data Protection

The Bank appointed during 2002 a DataProtection Officer, in line with the pro-visions of the EC regulation on the pro-tection of individual rights in the pro-cessing of personal data.

Staff Complement

At end-December 2002, the Bank's staffcomplement stood at at 1 113, 1.5% upon the preceding year.

The EIF

On 1 August 2002, Mr Francis Carpenterwas appointed Chief Executive by theEIF's Board of Directors. The structure ofthe EIF was reorganised around threemain divisions and departments: RiskManagement, the General Secretariatand Operations. The EIF currently has astaff of 59 (18% more than in 2001),most of whom are employed in theOperations department.


16 100

1 530 847

118 4339 947 089

92 414 790

102 480 312

103 506 204– 175 000

103 331 204

3 376 5576 057 698

9 434 255

888 286

9 848

117 645

2821 088 401

13 594 484

14 683 167

2 185 440

234 677 104

0

1 182 667

1 182 667

193 210 101898 071

194 108 172

289 9541 036 001

46 9943 549 176

5 446 623

10 368 748

3 896 429

517 75542 357

560 112

217 732

100 000 000– 94 000 000

6 000 000

10 000 0003 571 323

750 000

14 321 323

250 000

1 499 091

1 105 000

1 192 830

– 25 000

1 167 830

234 677 104

page 52

EIB GroupSummarised balance sheet as at 31 December 2002 (in EUR ‘000)

LIABILITIES 31.12.2002

1. Amounts owed to credit institutions:

a) repayable on demandb) with agreed maturity dates or

periods of notice

2. Debts evidenced by certificates:

a) debt securities in issueb) others

3. Other liabilities:

a) interest subsidies received in advanceb) sundry creditorsc) sundry liabilitiesd) currency swap contracts

adjustment accounte) negative replacement values

4. Accruals and deferred income

5. Provisions for liabilities and charges:

a) staff pension fundb) provision for guarantees issued

6. Minority interests

7. Capital:

a) subscribedb) uncalled

8. Consolidated reserves:

a) reserve fundb) additional reservesc) special supplementary reserves

9. Funds allocated to structured finance facility

10. Funds allocated to venture capital operations

11. Fund for general banking risks after appropriation

12. Profit for the financial year

before appropriationappropriation for the year to Fund for general banking risks

Profit to be appropriated

ASSETS 31.12.2002

1. Cash in hand, balances with central banks and post office banks

2. Treasury bills eligible for refinancing with central banks

3. Loans and advances to credit institutions:

a) repayable on demandb) other loans and advancesc) loans

4. Loans and advances to customers:

* Loans* Specific provisions

5. Debt securities including fixed-income securities:

a) issued by public bodiesb) issued by other borrowers

6. Shares and other variable-yield securities

7. Intangible assets

8. Property, furniture and equipment

9. Other assets:

a) receivable in respect of EMS interest subsidies paid in advance

b) sundry debtorsc) positive replacement values

10. Prepayments and accrued income

Results for the Year 2002

Before provisions, write-downs andextraordinary result (after deduction ofminority interests), the profit for thefinancial year 2002 ran to EUR 1 347 mil-lion and net profit to EUR 1 168 million.

The transfer to the Fund for generalbanking risks is EUR 25 million for 2002,while, for venture capital operations,write-downs and the provision for guar-antees provided came to EUR 144 mil-lion in 2002.

Overall, treasury operations yielded netincome of 747 million in 2002, produc-ing an average overall return of 3.58%in 2002.

General administrative expensestogether with depreciation of tangibleand intangible assets amounted to 225 million in 2002.

Taking into account IAS 39, the fairvalue of derivatives had a negativeimpact of EUR 324 million on the EIBGroup's own funds. This negativeimpact corresponds to the recording in

the accounts, as at 31 December 2002,of a number of interest rate swapsentered into between 1999 and 2002 inorder to hedge the Bank's overall inter-est rate position. However, these deriva-tives do not comply with certain specificcriteria of IAS 39 which allow for hedge-accounting to be applied.

Risk Management

The Bank has aligned its risk manage-ment systems to changing economicand regulatory conditions and adaptsthem on an ongoing basis so as toachieve best market practice. Systemsare in place to control and report on themain risks inherent to its lines of busi-ness:

• the guiding principles for operationalrisk are modelled on those recom-mended by ”Basel II“. The guidelinesalso define responsibilities for meas-uring and managing operational riskwithin the various departments ofthe Bank and set out the applicablemanagement processes.

• the EIB's credit risk policy guidelinesset out credit quality levels for both

borrowers and guarantors in lendingoperations, as well as for treasuryand derivatives transactions. TheBank is also adopting EIB Group-widecredit risk management taking intoconsideration the exposure gener-ated by the SME guarantee activity ofits subsidiary, the European Invest-ment Fund.

• market risks are captured in the con-text of Market Risk and Asset and Lia-bility Management Systems (ALM).The applicable guidelines for ALMand market risk management definea structured process by which risksare identified, measured, managedand reported.

More detailed information on risk man-agement can be found in the EIBGroup's Financial Report 2002 (page72). This can also be found in the CD-ROM attached to this brochure.

International competition fora new building

The EIB is also planning to build a sec-ond extension within the grounds of itspresent headquarters.

Following an international architects-designers competition launched on12 July 2001, a jury chaired by RicardoBofill selected, from among 56 entries,the project submitted by the consortium“Ingenhoven Overdiek Architekten -Werner Sobek Ingenieure“.

The new building, to be built in a singlephase and delivered as from mid-2006,will have a capacity of around 800 workplaces and will be constructed withquality materials conforming to thenew HEQ (High Environmental Quality)norms. Functional yet welcoming, withparticular attention being paid to envi-

ronmental considerations, it will like-wise meet the highest standards asregards integration into its surround-ings, choice of materials, energy conser-vation and, during the constructionphase, minimising disturbance to thepublic and occupants of adjacent build-ings.

The EIB does not need the entire build-ing in the immediate future. It is alreadydiscussing the possibility of renting outspace surplus to its short to medium-term requirements with various institu-tions.

The EIB prepares for its expansionThe EIB's role in providing financial sup-port for attainment of the EuropeanUnion's objectives has led to a substan-tial increase in its activities in recentyears. To cater for its immediate officespace needs, the EIB recently purchaseda new building in Hamm, near Luxem-bourg city centre and about ten minutesfrom its Kirchberg headquarters. Thenew premises can accommodate some160 staff.

Certain Bank divisions and departmentshave been transferred to these newpremises, which are served by a regularshuttle bus. Mail services, switchboardarrangements and e-mail addressesremain unchanged.

The Hamm premises are configured as aback-up site ensuring business continu-ity in the event of an emergency.

New Building at Hamm

Model of the new extension

Within the European Union and in theAccession Countries, projects consid-ered for financing must contribute toone or more of the following objectives:

• strengthening economic and socialcohesion: promoting business activityto foster the economic advancementof the less favoured regions;

• furthering investment contributingto the development of a knowledge-based and innovation-driven society;

• improving infrastructure and servicesin the health and education sectors,key contributors to human capitalformation;

• developing transport, telecommuni-cations and energy transfer infra-structure networks with a Commu-nity dimension;

• preserving the environment andimproving the quality of life, notablyby drawing on renewable or alterna-tive energies;

• securing the energy supply base bymore rational use, harnessing ofindigenous resources and importdiversification;

• assisting the development of SMEs byenhancing the financial environmentin which they operate by means of:

- medium and long-term EIB globalloans;

- EIF venture capital operations;

- EIF SME guarantees.

In the Partner Countries, the Bank par-ticipates in implementing the Union'sdevelopment aid and cooperation poli-cies through long-term loans from ownresources or subordinated loans and riskcapital from EU or Member States' budgetary funds. It operates in:

• the non-member MediterraneanCountries by helping to attain theobjectives of the Euro-MediterraneanPartnership with a view to the cre-ation of a Customs Union by 2010;

• the African, Caribbean and PacificStates (ACP), South Africa and theOCT, where it promotes the develop-ment of basic infrastructure and thelocal private sector;

• Asia and Latin America where it sup-ports certain types of project ofmutual interest to the Union and thecountries concerned;

• the Balkans where it contributes tothe goals of the Stability Pact bydirecting its lending specificallytowards not only reconstruction ofbasic infrastructure and projects witha regional dimension but also privatesector development.

Projects eligible for financing by the EIB Group

Ciudad de las Artes y las Ciencias de Valencia (cover), Metro do Porto, SA (cover), Getty Images (cover, pp. 8, 9, 12, 13, 16, 17, 21, 25, 52), Scottish and Southern Energyplc (cover), Imedia (pp. 3, 4, 5, 9, 40, 44, 45, 46, 47, 48, 49, 51, 53, 55), Konrad Scheel (pp. 5, 46, 47, 48, 49, 53), Sade (p. 6), EC (pp. 7, 9, 20, 21, 22, 25, 41, 42, 43),Deutsche Bahn AG (p. 8), Sue Cunningham (pp. 9, 20, 22, 38), Digital Vision (pp. 10, 12, 14, 15, 28, 29, 31), Tramvía Metropolità, SA (p. 12), Barcs Endre (pp. 13, 23),Storebaelt (p. 13), Cern (pp. 14, 28, 29), Vamed Standortentwicklung und Engineering GmbH & Co KG (p. 15), Universitat d’Alicante (p. 16), Masterfile (pp. 17, 19, 30,31, 32, 33, 34, 35, 36, 39), Photodisc (p. 18), ASM Brescia (p. 18), Alexander Wulz (p. 23), Electricity Authority of Cyprus (p. 24), Generalitat de Catalunya (p. 25), BowinPower Company Ltd (p. 27), Songas Ltd Tanzania (p. 27), Corinth Pipeworks S.A. (p. 28), Flughafen Dresden GmbH (p. 30), La Vie du Rail (p. 31), Warnoquerung GmbH& Co. KG (p. 31), NYSE (p. 35), EP (p. 41), Blitz (p. 50), Ingenhoven Overdiek Architekten – Werner Sobek Ingenieure (p. 54).

The EIB wishes to thank the following promoters and agencies for the photographs illustrating this report:

EIB Group addresses

European Investment Bank100, boulevard Konrad AdenauerL-2950 LuxembourgTel. (+352) 43 79-1Fax (+352) 43 77 04

Website: www.eib.orgE-mail: [email protected]

Department for Interinstitutional AffairsBrussels Office:

Rue de la Loi 227B-1040 BruxellesTel. (+32-2) 235 00 70Fax (+32-2) 230 58 27

Athens Office:

364, Kifissias Ave & 1, DelfonGR-152 33 Halandri/AthensTel. (+30) 21 06 82 45 17Fax (+30) 21 06 82 45 20

London Office:

2 Royal Exchange BuildingsLondon EC3V 3LFUnited KingdomTel. (+44) 20 73 75 96 60Fax (+44) 20 73 75 96 99

Department for Lending Operations inItaly, Greece, Cyprus and Malta:

Via Sardegna 38I-00187 RomaTel. (+39) 06 47 19-1Fax (+39) 06 42 87 34 38

Berlin Office:

Lennéstraße 11D-10785 BerlinTel. (+49-30) 59 00 47 90Fax (+49-30) 59 00 47 99

Madrid Office:

Calle José Ortega y Gasset, 29E-28006 MadridTel. (+34) 914 31 13 40Fax (+34) 914 31 13 83

Lisbon Office:

Avenida da Liberdade, 144-156, 8°P-1250-146 LisboaTel. (+351) 213 42 89 89Fax (+351) 213 47 04 87

Cairo Office:

6 Boulos Hannah Street Dokki, Giza (Cairo)EgyptTel. (+20-2) 762 00 77

European Investment Fund43, avenue J.F. KennedyL-2968 LuxembourgTel. (+352) 42 66 88-1Fax (+352) 42 66 88-200

Website: www.eif.orgE-mail: [email protected]

the eib group · net profit for year reserves and provisions activity in 2002 contracts signed...

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