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Decree No. 278/1998 Coll.

Decree of the Ministry of Finance No. 278/1998 Coll.,

in the wording of Decree No. 88/2000 Coll., Decree No. 355/2001 Coll., Decree No. 29/2003 Coll. and Decree No. 407/2006 Coll.

Pursuant to Section 4(5) and (7), and Sections 6, 9 and 12 of Act No. 58/1995 Coll., on the Insurance and Financing of Exports with State Support and on the Supplement to Act No. 166/1993 Coll., on the Supreme Audit Office, as amended, as amended, [sic!] (hereinafter the "Act"), the Ministry of Finance decrees:

Section 1

repealed

Section 2
Method of Calculating the Insurance Capacity of the Export Insurance Company
(to Section 4(5) of the Act)

The calculation of the insurance capacity shall be carried out on the basis of a proposal from Exportní garanční a pojišťovací společnost, a.s. (Export Guarantee and Insurance Corporation - hereinafter the "Export Insurance Company") and it shall start from the aggregate value of export credit risks covered by valid insurance contracts reduced by amounts of expected repayment installments of insured credits, from the value of export credit risks covered by valid reinsurance policies issued by it and further from the value of export credit risks contained in insurance promise contracts and in not yet finalized insurance policies which can reasonably be expected to be issued in the year for which the State budget is being set. Data shall be shown broken down by expected risk ratios for occurrence of an insurance loss in individual business transactions, and also broken down by the expected maturity of the valid insurance contracts.

Section 3
Method of Creation of Funds for Insurance of Export Credit Risks
(to Section 4(7) of the Act)

1. Funds for the insurance of export credit risks which the Export Insurance Company sets up, shall be created separately from other funds depending on the sources of the funds, which shall be
   1. allocations from profits on the basis of a resolution of the General Meeting or of a shareholder acting in the capacity of the General Meeting,
   2. a subsidy from the State budget designated for the creation of these funds.
2. A request for a subsidy from the State budget under paragraph (1(b)) shall be made by the Export Insurance Company to the Ministry of Finance (hereinafter the "Ministry") during the drawing up of the State budget for the relevant fiscal year. This request shall be substantiated by an analysis of the balance of funds and provisions for the insurance of export credit risks depending on the development of outstanding insurance commitments.4)
3. When preparing the proposal for the amount of subsidy from the State budget for addition to the insurance funds, the basis shall be the balance of the funds for the insurance of export credit risks created from the State budget in previous years, expected changes in these funds after allocation from profits of the company, expected amount of payments of insurance claims, expected changes in the technical provisions and expected economic results in the current accounting period and in the year for which the State budget is being drawn up.
4. The approved subsidies from the State budget during a given year shall be released in stages in accordance with the decision of the Ministry on the basis of an application of the Export Insurance Company, in which the Export Insurance Company shall document the actual amount of outstanding insurance commitments as of the day of the application, the expectations for the forthcoming period of 90 days, taking into account the creation of provisions and funds from its own financial sources and considering the expected economics results in the current accounting period.
5. If there is a decrease in the balance of funds and provisions5) at the Export Insurance Company under the limit set forth in Section 4 as a result of a payment of an insurance claim in the course of the year, the Export Insurance Company shall ask the Ministry to add to the funds in accordance with paragraph (2).
6. The total sum of the funds and provisions5) shall not fall under the amount of CZK 1.5 billion for a period longer than 3 months.
7. In the event of an expected decrease of the funds and provisions under the limit set forth in paragraph (6), the Export Insurance Company shall act as follows:
   1. at the end of the calendar quarter, it shall report to the Ministry a summary list of expected payments of insurance claims,
   2. on the day of the protocol containing the results of investigation of an insurance loss, it shall report the dates and amounts of payment of the insurance claim,
   3. it shall submit to the Ministry a substantiated request for the addition to the funds in accordance with the procedure specified in paragraph (1(b)).
8. After an assessment of the justification of the request, the amount requested pursuant to the paragraph (7(c)) shall be released as a subsidy from the State budget designated for the creation of funds for the insurance of export credit risks.

Section 4
Ratio Between the Amount of Reserves and Funds and the Amount of Outstanding Insurance Commitments
(to Section 4(7) of the Act)

In order to ensure its safe operation, the Export Insurance Company shall keep the ratio of funds and provisions5) at the level of at least 8% of the outstanding insurance commitments4) reduced by outstanding insurance commitments covered by passive reinsurance . For insurance transactions with an extraordinary high insurance risk, the ratio of funds and provisions5) shall be stipulated at the level of at least 35 % of the volume of outstanding insurance commitments4) reduced by outstanding insurance commitments covered by passive reinsurance6)

Section 5
Participation of the Export Insurance Company in Payments of Insurance Claims Using Provisions and Funds for Insurance of Export Credit Risks
(to Section 4(7) of the Act)

In the event of a payment of an insurance claim, the resources of the Export Insurance Company shall be used in this order:

1. technical provisions for insurance claims of the Export Insurance Company from export credit risks,
2. funds created pursuant to Section 3(1)(a) and from undistributed profits from prior years up to their complete depletion, but exclusively for covering of a loss arising during the current accounting period from the insurance of export credit risks,
3. funds created pursuant to Section 3(1)(b), but exclusively for covering of a loss arising during the current accounting period from the insurance of export credit risks.

Section 6

repealed

Section 7
Method of Submission of Application for Subsidizing of Losses and Manner of Payment of Subsidies Covering Losses
(to Section 6(12) of the Act)

1. The application for a subsidy from the State budget for losses incurred by the Export Bank from the provision of officially supported financing (hereinafter the "subsidy covering losses") shall be submitted during the drawing up of the state budget for the relevant fiscal year. A summary of the amount of obligations arising under agreements for obtaining financial resources outstanding as of the day of the application, of the use of the financial resources, of the repayment of obtained financial resources and of the expected needs for obtaining financial resources shall be included with the application.
2. The subsidy covering losses shall be granted in the form of an advance in quarterly installments during the year on the actual basis as shown in the accounting books at the end of each quarter. The advance calculation of the subsidy covering losses shall be submitted by the Export Bank to the Ministry by the 20th day of the month following the end of the quarter. The payment of the subsidy covering losses for the relevant quarter shall be effected by the 15th day after the submission of the advance calculation of the subsidy covering losses. The advance calculation of the subsidy covering losses for the 4th quarter shall be submitted by the Export Bank to the Ministry in accordance with the preliminary reported results by the 10th of January of the following year at the latest. The Export Bank shall settle the subsidy covering losses for the relevant year with the Ministry pursuant to a separate legal regulation governing the use of funds from the State budget.

Section 8
Terms for and Determination of the Amount of Reimbursement of Interest Rate Differences and Procedures of the Export Bank in Making Reimbursements of the Interest Rate Differences
(to Section 6(9) of the Act)

1. The interest rate differences shall be calculated as the percentage ratio of the difference between the actual interest expense from the not yet repaid credit extended to an exporter by the bank of the exporter in a foreign currency for actually carried out export and the interest yield (calculated in accordance with the rate set forth in the payment in terms of the export contract) from the same amount of export supplier credit and for the same period of time. The lowest interest rate for the calculation of the interest yield shall be determined by the Export Bank at the level of the minimum interest rate usual in the international markets for state supported export credits declared as of the date of the conclusion of the credit contract between the exporter and the bank of the exporter and published on the premises of the Export Bank (hereinafter the "minimum interest rate"). In the event the export contract sets forth a lower interest rate than the minimum interest rate, then the minimum interest rate shall be used for the calculation of the interest yield.
2. The reimbursement of interest rate differences may be made only if the credit was extended in a currency for which a minimum interest rate has been declared and if there were no changes in the credit contract relating to principal installments and interest rates.
3. The specimen Calculation of interest rate differences in the attachment shall form the basis for the provision and determination of the amount of reimbursement of interest rate differences.
4. The amount of the reimbursement of interest rate differences provided to the exporter is determined with regard to the amount of funds available for the reimbursement of the interest rate differences in the State budget in the relevant calendar year and to the sum total of applications of the exporters for these reimbursements.
5. An application of the exporter for the reimbursement of interest rate differences inclusive of its attachments shall always be submitted by the exporter to the Ministry through the Export Bank for the prior calendar year always by 30 June at the latest.
6. The Export Bank shall check applications of the exporter for the reimbursement of interest rate differences for compliance with the provisions of the Act and this Decree and shall send the application to the Ministry with its own view thereof by 30 September of the relevant year at the latest.

Section 9

This Decree shall enter into force on the day of its promulgation.

***

Decree No. 88/2000 Coll. entered into force on the day of its promulgation (20.4.2000).
Decree No. 355/2001 Coll. entered into force on the day of its promulgation (10.10.2001).
Decree No. 29/2003 Coll. entered into force on the day of its promulgation (3.2.2003).

Attachment No. 2 Calculation of interest rate differences In CZK thousand*)

Note: *) conversion at the foreign exchange rate of CNB effective as of the last day of the year for which reimbursement of interest rates differences is requested.

Name, signature and position of a person authorized to act on behalf of the exporter:

Date: .........................................

Commentary to calculation of interest rate differences

Column 1 - Serial number of the credit
Column 2 - The date of the disbursement and repayment of the credit shall be reported
Column 3 - Amount of the drawn credit less domestic interest
Column 4 - Repayment of principal, i.e. installments of principal without interest
Column 5 - Balance of the principal, accounting balance as at the relevant date col. 5 = col. 3 - col. 4
Column 6 - Number of days during which the balance of the principal was in the amount reported
                in column 5
Column 7 - Amount of interest expense for the relevant period accounting balance as at the last day
                of the year (Section 7(1))
Column 8 - Amount of the accrued interest revenues for the relevant period
                col. 8 = percentage rate of foreign interest: 360 x col. 6 x col. 5 : 100
Column 9 - Loss from the difference between the domestic and foreign interest rates col. 9 = col. 7 - col. 8