Notes to the consolidated balance sheet: liabilities
12. Short-term credits
2018 | 2017 | |
Collateral received (related to derivative financial instruments) | 76,051 | 125,935 |
Balance at December 31 | 76,051 | 125,935 |
Short-term credits reflect the cash collateral received for derivative contracts we held with positive value. We also refer to the section 'Counterparty credit risk' in the Risk Management chapter.
13. Debentures and notes
Debentures and notes includes issued debt instruments in various currencies under FMO's Debt Issuance Programmes. In addition, a subordinated note of €175 million is also included in the Debenture and Notes. Under IFRS this note is classified as financial liability, but for regulatory purposes it is considered as Tier 2 capital. This note was issued on December 8, 2015 with a maturity of five years. The note is issued at 99.28% of the aggregated nominal amount at a fixed coupon rate of 1.5%. The note is non-convertible and can be called on first call date or the call date can be extended for another five years.
The movements can be summarized as follows:
2018 | 2017 | |
Balance at January 1 | 5,123,146 | 5,203,161 |
Amortization of premiums/discounts | 6,208 | 10,197 |
Proceeds from issuance | 984,758 | 1,229,760 |
Redemptions | -1,006,646 | -983,643 |
Changes in fair value | 6,099 | -4,853 |
Changes in accrued expense | 4,352 | -326 |
Exchange rate differences | 21,964 | -331,150 |
Balance at December 31 | 5,139,881 | 5,123,146 |
Line item 'changes in fair value' represents the fair value changes attributable to the hedge risk in connection with the debentures and notes used for hedge accounting purposes.
The following table summarizes the carrying value of the debentures and notes.
2018 | 2017 | |
Debentures and notes under hedge accounting | 2,697,095 | 2,602,676 |
Debentures and notes valued at AC | 2,442,786 | 2,520,470 |
Balance at December 31 | 5,139,881 | 5,123,146 |
The nominal amounts of the debentures and notes are as follows:
2018 | 2017 | |
Debentures and notes under hedge accounting | 2,605,045 | 2,460,448 |
Debentures and notes valued at AC | 2,451,277 | 2,647,332 |
Balance at December 31 | 5,056,322 | 5,107,780 |
14. Current accounts with State funds and other programs (liability)
2018 | 2017 | |
Current account MASSIF | - | 67 |
Current account PDF | - | 115 |
Current account Infrastructure Development Fund | 11 | - |
Current account Access to Energy Fund | 89 | - |
Current account Development Accelarator | 4,073 | - |
Balance at December 31 | 4,173 | 182 |
15. Other liabilities
2018 | 2017 | |
Amortized costs related to guarantees | 322 | 212 |
Other liabilities | 1,009 | 1,931 |
Balance at December 31 | 1,331 | 2,143 |
16. Accrued liabilities
2018 | 2017 | |
Other accrued liabilities | 10,086 | 8,586 |
Balance at December 31 | 10,086 | 8,586 |
17. Provisions
The amounts recognized in the balance sheet are as follows.
2018 | 2017 | |
Pension schemes | 45,876 | 46,313 |
Allowance for loan commitments | 4,485 | - |
Liabilities for guarantees | 3,009 | 2,896 |
Other provisions | 1,177 | 275 |
Balance at December 31 | 54,547 | 49,484 |
The movements in allowance for loan commitments and liabilities for guarantees are set out in Note 29.
Pension schemes
FMO’s pension schemes cover all its employees. The pension schemes are defined benefit plans and are mostly based on average-pay-schemes. FMO has a contract with a well established insurer, in which all nominal pension obligations are guaranteed. The net liability recognized in the statement of financial position in respect of these pension schemes is the fair value of the asset plan less the present value of the defined benefit obligation at the balance sheet date. This guaranteed contract arranged that all significant risks associated with investments lies with the insurer. These significant risks are amongst others credit risk, market risk and sufficient investment return to fund indexation of the defined benefit obligation.
Remaining risk for FMO is counterparty credit risk of the insurer and salary inflation for employees. All pension assets are managed by the insurance company and strict guidelines have been agreed with the asset manager. These assets are held independently of FMO’s assets in separately administered funds. Independent actuaries value the schemes every year using the projected unit credit method.
The amounts recognized in the balance sheet are as follows:
2018 | 2017 | |
Present value of funded defined benefit obligations | 220,941 | 200,777 |
Fair value of plan assets | -175,065 | -154,464 |
Liability in the balance sheet | 45,876 | 46,313 |
The movements in the present value of the defined benefit obligations can be summarized as follows:
2018 | 2017 | |
Present value at January 1 | 200,777 | 213,449 |
Service cost | 11,333 | 10,679 |
Interest cost | 4,017 | 4,070 |
Actuarial (gains)/losses due to changes in financial assumptions | -12,295 | -4,426 |
Actuarial (gains)/losses due to changes in demographic assumptions | -2,914 | -4,121 |
Actuarial (gains)/losses due to experience assumptions | 22,993 | -16,714 |
Benefits paid | -2,970 | -2,160 |
Present value at December 31 | 220,941 | 200,777 |
The movements in the fair value of plan assets can be summarized as follows:
2018 | 2017 | |
Fair value at January 1 | -154,464 | -168,053 |
Expected return on plan assets | -3,104 | -3,079 |
Employer contribution | -9,616 | -8,120 |
Plan participants’ contributions | -1,143 | -1,023 |
Actuarial (gains)/losses due to changes in financial assumptions | 9,125 | 6,312 |
Actuarial (gains)/losses due to changes in demographic assumptions | 3,592 | - |
Actuarial (gains)/losses due to experience assumptions | -22,425 | 17,339 |
Benefits paid | 2,970 | 2,160 |
Fair value at December 31 | -175,065 | -154,464 |
The actuarial gain on the pension liability amounts to €1,923 (2017: €1,610 gain) and is mainly due the increase of the discount rate to 2.2% (2017: 2.0%).
As per 1 January 2017, FMO’s investment account with the pension insurer has been terminated. No direct asset allocation is held in relation to the new pension insurance contract. Therefore, the fair value of the plan assets can no longer be determined based on a certain asset allocation. Due to this, paragraph 115 of IAS 19 has been applied in estimating the fair value of plan assets based on accrued pension rights and actuarial rates.
The movement in the liability recognized in the balance sheet is as follows:
2018 | 2017 | |
Balance at January 1 | 46,313 | 45,396 |
Annual expense | 11,819 | 11,283 |
Contributions paid | -10,333 | -8,756 |
Actuarial gains/losses | -1,923 | -1,610 |
Balance at December 31 | 45,876 | 46,313 |
The amounts recognized in the profit and loss account as net periodic pension cost are as follows:
2018 | 2017 | |
Current service cost | 12,049 | 14,652 |
Net interest cost | 913 | 991 |
Past service cost | - | -3,337 |
Subtotal | 12,962 | 12,306 |
Contribution by plan participants | -1,143 | -1,023 |
Total annual expense | 11,819 | 11,283 |
As from 1 January 2018 onwards, the formal retirement age in the applicable Dutch Tax framework has been adjusted from 67 to 68 years of age. As a result, FMO decided in December 2017 (after consultation with the Works Council) to adjust FMO’s pension scheme as of January 1, 2018. This increase of pension age from 67 years to 68 years resulted in a reduction of the defined benefit obligation of €3,337 which is recognized as past service cost.
The principal assumptions used for the purpose of the actuarial valuations at year-end are as follows:
2018 (%) | 2017 (%) | |
Discount rate | 2.2 | 2.0 |
Expected pension indexation for active participants | 1.7 | 1.8 |
Expected pension indexation for inactive participants | 0.6 | 0.6 |
Wage inflation | 1.5 | 1.5 |
Future salary growth | 0.5-3.5 | 0.5-3.5 |
The assumption for future salary growth is a range of percentages which are based on the age of individual employees. The pension indexation is conditional.
Significant actuarial assumptions are the discount rate, indexation for active participants and (general) wage inflation. Reasonably possible changes to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.
Increase (+0.5%) | Decrease (-0.5%) | |
Discount rate | -25,332 | 28,773 |
Increase indexation for active participants | 5,747 | -4,430 |
Future salary growth | 1,091 | -1,050 |
Other provisions
The other provisions are provisions for legal expenses and severance arrangements. This provision is determined using present value calculations.
2018 | 2017 | |
Balance at January 1 | 275 | 26 |
Addition | 1,177 | 278 |
Release | - | - |
Paid out | -275 | -29 |
Balance at December 31 | 1,177 | 275 |
18. Shareholders’ equity
Share capital
The authorized capital amounts to €45,380, consisting of 51% A shares of €22.69 each, which can only be held by the State, and 49% B shares, also of €22.69 each, which can be held by private investors. The voting rights for A shares and B shares are equal. In addition, the equity of the company comprises of three reserves, which result from the Agreement State-FMO of November 16, 1998. These are the share premium reserve, the development fund and the contractual reserve. As long as the company continues its activities, these reserves are not available to the shareholders. Upon liquidation of FMO these reserves fall to the State, after settlement of the contractual return to the shareholders.
2018 | 2017 | |
AUTHORIZED SHARE CAPITAL | ||
1,020,000 A shares x €22.69 | 23,144 | 23,144 |
980,000 B shares x €22.69 | 22,236 | 22,236 |
Balance at December 31 | 45,380 | 45,380 |
ISSUED AND PAID-UP SHARE CAPITAL | ||
204,000 A shares x €22.69 | 4,629 | 4,629 |
196,000 B shares x €22.69 | 4,447 | 4,447 |
Balance at December 31 | 9,076 | 9,076 |
Share premium reserve
Share premium reserve is sole contributed by Shareholders of A shares on the transfer to the company of investments administrated on behalf of the State at the time of the financial restructuring and amounts to €29,272 (2017: €29,272).
Contractual reserve
The addition relates to that part of the annual profit that FMO is obliged to reserve under the Agreement State-FMO of November 16, 1998 (see section ‘additional information’).
Development fund
This special purpose reserve contains the allocation of risk capital provided by the State to finance the portfolio of loans and equity investments. In 2005, FMO received the final contribution to the development fund under the Agreement State-FMO of November 16, 1998.
Available for sale reserve
Equity investments | Interest-bearing securities | Total available for sale reserve | |
IAS 39 Balance at January 1, 2017 | 562,368 | 8,707 | 571,075 |
Fair value changes | 81,977 | -5,639 | 76,338 |
Foreign exchange differences | -143,873 | - | -143,873 |
Transfers due to sale | -151,364 | -2,414 | -153,778 |
Transfers due to impairment | 46,919 | - | 46,919 |
Tax effect | 1,991 | 2,015 | 4,006 |
IAS 39 Balance at December 31, 2017 | 398,018 | 2,669 | 400,687 |
Adjustment from adoption of IFRS 9 (net of tax) | -398,018 | -2,669 | -400,687 |
Restated balance at January 1, 2018 | - | - | - |
IFRS 9 Balance at December 31, 2018 | - | - | - |
Fair value reserve
Total fair value reserve | |
IAS 39 Balance at December 31, 2017 | - |
Adjustment from adoption of IFRS 9 (net of tax) | 18,074 |
IFRS 9 Restated balance at January 1, 2018 | 18,074 |
Total other comprehensive income (net of tax) | -301 |
IFRS 9 Balance at December 31, 2018 | 17,773 |
Actuarial result pensions
Actuarial gains/losses on defined benefit plans | |
IAS 39 Balance at January 1, 2017 | -22,577 |
Gains/losses during the period | 1,208 |
IAS 39 Balance at December 31, 2017 | -21,369 |
Gains/losses during the period | 246 |
IFRS 9 Balance at December 31, 2018 | -21,123 |
Translation reserve
2018 | 2017 | |
Balance at January 1 | -16,696 | 9,221 |
Change | 9,938 | -25,917 |
Balance at December 31 | -6,758 | -16,696 |
Other reserves
Retained earnings | |
IAS 39 Balance at January 1, 2017 | 31,971 |
Gains/losses during the period | - |
IAS 39 Balance at December 31, 2017 | 31,971 |
Adjustment from adoption of IFRS 9 (net of tax) | 191 |
IFRS 9 Restated balance at January 1, 2018 | 32,162 |
Dividend | - |
IFRS 9 Balance at December 31, 2018 | 32,162 |
Non-controlling interests
Equis DFI Feeder L.P. | 2018 | 2017 |
Balance at January 1 | 7,071 | 2,991 |
Fair value changes | -815 | 1,150 |
Changes in subsidiary | -6,407 | 1,812 |
Share in net profit | 312 | 1,118 |
Balance at December 31 | 161 | 7,071 |