Segment reporting by operating segments

The Management Board sets performance targets, approves and monitors the budgets prepared by the front office servicing units. These shall therefore perform in accordance with the strategy and targets. Since the Management Board steers the performance based on front office servicing unit, the presentation of operating segments has been changed as of 2018. The operating segments are presented per front office servicing unit instead of strategic sector. The comparative figures have been adjusted accordingly. The strategic sectors are the industry sectors in which FMO is active according to its strategic objectives. These have not changed and will be presented as such in FMO's Annual Report. In 2018 there were no transactions between the operating segments.

FMO presents the results of its operating segments using a financial performance measure called underlying profit. Underlying profit excludes the currency effects of the results from equity investments, since all fair value changes including currency effects are now recorded in the profit and loss account due to the adoption of IFRS 9. FMO therefore believes that the underlying profit is more relevant for understanding FMO's financial performance.

Underlying profit as presented below is an alternative performance measure and not a measure of financial performance under IFRS. A reconciliation of the underlying net profit to the net profit as reported under IFRS is made. For 2017 the currency results and the fair value movements of the equity investments were not recorded in the profit and loss account but in the AFS reserve. Therefore the underlying profit of 2017 is equal to the profit as recorded under IFRS.