Equity risk

With regard to equity risk that results from equity investments, a distinction can be made between:

• Exit risk, the risk that FMO's equity stake cannot be sold for a reasonable price and in a sufficiently liquid market.
• Equity risk, the risk that the fair value of an equity investment decreases.
  

FMO has a long-term view on its equity portfolio, usually selling its equity stake after several years. Equity investments are assessed by the Investment Committee in terms of specific obligor as well as country risk. The investment review committee assesses the valuation of the majority of equity investments semi-annually. The performance of the equity investments in the portfolio is periodically analyzed during the fair value process. Based on this performance and the market circumstances, exits are pursued in close cooperation with our co-investing partners. The total outstanding equity portfolio at December 31, 2011, amounted to €753,366 (2010: €637,802). The total outstanding investment in investment funds equals €592,433 (2010: €485,120).

It can be difficult to assess the fair value of the investment when market data is lacking or when the market is illiquid. Under these circumstances, FMO values equity investments at cost minus impairment. In total, €171,513 (2010: €161,365) of the equity portfolio is valued at cost minus impairment, of which the majority is quoted in US dollars: 48% (2010: 53%). The equity portfolio valued at cost minus impairment denominated in other currencies than euros is not revalued for the exchange rate movements. The equity portfolio valued at fair value is revalued for changes in the value of the equity investment and the movements in the exchange rates, which is accounted for in the available for sale (AFS) reserve.

Equity portfolio distributed by region and sector