4 Financial Instruments

4.1 Accounting classification

The following table shows the carrying amounts of financial assets and financial liabilities.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which FMO has access at that date.

	June 30, 2025
	FVPL	Fair value hedging instruments	FVOCI-equity instruments	Amortized cost	Financial liabilities used as hedged items	Total
Financial assets
Cash balances with Banks	-	-	-	185,314	-	185,314
Current accounts with state funds and other programs	-	-	-	1,172	-	1,172
Short-term deposits	65,963	-	-	1,614,521	-	1,680,484
Other receivables	-	-	-	20,682	-	20,682
Interest-bearing securities	132,435	-	-	427,676	-	560,111
Derivative financial instruments	147,215	60,565	-	-	-	207,780
Loans to the private sector	641,478	-	-	4,612,867	-	5,254,345
Accrued assets	-	-	-	988	-	988
Equity investments	2,056,198	-	184,336	-	-	2,240,534
Total Financial assets	3,043,289	60,565	184,336	6,863,220	-	10,151,410
Financial liabilities
Short-term credits	-	-	-	267,599	-	267,599
Current accounts with state funds and other programs	-	-	-	10,547	-	10,547
Derivative financial instruments	172,234	68,965	-	-	-	241,199
Other financial liabilities	100,457	-	-	-	-	100,457
Debentures and notes	-	-	-	875,927	5,259,776	6,135,703
Accrued liabilities	-	-	-	86,963	-	86,963
Other liabilities	-	-	-	23,948	-	23,948
Total Financial liabilities	272,691	68,965	-	1,264,984	5,259,776	6,866,416

During the current period FMO acquired new interest bearing securities. Interest rate swaps are entered into to manage the risk associated with the securities and these swaps are measured at fair value through profit and loss. Therefore, to eliminate a possible accounting mismatch, the interest bearing securities are designated at fair value through profit and loss. The maximum credit exposure of the securities is €131 million and the cumulative change in fair value for the period is a gain of €1 million. The notional value of the swaps is €130 million, and the cumulative change in fair value for the period is a loss of €2 million. The movements in fair value are attributable nearly completely to market risk.

	December 31, 2024
	Fair Value P&L	Fair value hedging instruments	FVOCI-equity instruments	Amortized cost	Financial liabilities used as hedged items	Total
Financial assets
Cash balances with Banks	-	-	-	43,087	-	43,087
Current accounts with state funds and other programs	-	-	-	1,336	-	1,336
Short-term deposits	369,481	-	-	1,111,886	-	1,481,367
Other receivables	-	-	-	18,393	-	18,393
Interest-bearing securities	107,596	-	-	481,798	-	589,394
Derivative financial instruments	98,600	27,739	-	-	-	126,339
Loans to the private sector	652,061	-	-	5,190,518	-	5,842,579
Equity investments	2,355,626	-	201,287	-	-	2,556,913
Total Financial assets	3,583,364	27,739	201,287	6,846,946	-	10,659,408
Financial liabilities
Short-term credits	-	-	-	216,912	-	216,912
Current accounts with state funds and other programs	-	-	-	93	-	93
Derivative financial instruments	339,658	131,728	-	-	-	471,386
Other financial liabilities	121,715	-	-	-	-	121,715
Debentures and notes	-	-	-	863,404	5,472,577	6,335,981
Accrued liabilities	-	-	-	38,683	-	38,683
Other liabilities	-	-	-	18,923	-	18,923
Total Financial liabilities	461,373	131,728	-	1,137,953	5,472,577	7,203,693

In this condensed consolidated interim financial statements, immaterial presentation updates have been made to aggregate 'Wage tax assets' and 'Wage tax liabilities', which were presented separately in the 31 December 2024 consolidated annual financial statements, with 'Other receivables' and 'Other liabilities', respectively.

4.2 Short-term deposits

	June 30, 2025	December 31, 2024
Collateral delivered (related to derivative financial instruments)	189,914	381,245
Cash held at central bank	1,402,291	702,745
Mandatory reserve deposit with Dutch central bank	4,296	8,211
Collateral delivered to European Central Bank	2,946	2,946
Other short-term deposits	15,074	16,739
Short term deposits measured at AC	1,614,521	1,111,886
Commercial paper	-	240,726
Money market funds	65,963	128,755
Short term deposits measured at FVPL	65,963	369,481
Balance at December 31	1,680,484	1,481,367

Mandatory reserve represents the average daily target set by regulator and is not available for user in FMO’s day-to-day operations. Furthermore, FMO's investments in commercial paper matured during 2025.

4.3 Derivatives

FMO uses various derivatives to hedge its assets and liabilities against interest rate risk and market risk. During the first half of 2025, the derivatives position has decreased and is related to maturing or termination of interest rate swaps and cross - currency interest swaps (see tables below). Changes in the curves and FX were the main drivers for the changes in fair value.

The following table summarizes the notional amounts and the fair values of derivatives. Some derivatives are held to reduce interest rate risks and currency risks but do not meet the specified criteria to apply hedge accounting for the reporting period. The table also includes derivatives related to the asset portfolio.

	2025
	Carrying amount
	Notional amount	Assets	Liabilities	Change in fair value used for calculating hedge ineffectiveness	Ineffectiveness recorded in profit or loss	Line item in P&L that includes hedge ineffectiveness
Derivatives hedge accounting instruments:
Interest rate swaps	5,261,258	60,565	68,965	76,522	-3,814	Results from financial transactions

Derivatives other than hedge accounting instruments:
Currency swaps	410,968	466	4,363
Interest rate swaps	2,817,531	20,104	9,899
Cross-currency interest rate swaps	3,331,428	126,645	148,390
Subtotal	6,559,927	147,215	162,652
Embedded derivatives related to asset portfolio		-	9,582
Total derivative assets /(liabilities) other than hedge accounting instruments	6,559,927	147,215	172,234
Balance at June 30	11,821,185	207,780	241,199

	2024
	Carrying amount
	Notional amount	Assets	Liabilities	Change in fair value used for calculating hedge ineffectiveness	Ineffectiveness recorded in profit or loss	Line item in P&L that includes hedge ineffectiveness
Derivatives hedge accounting instruments:
Interest rate swaps	5,541,648	27,739	131,728	48,680	7,254	Results from financial transactions

Derivatives other than hedge accounting instruments:
Currency swaps	319,791	2,687	389
Interest rate swaps	3,055,885	41,008	5,537
Cross-currency interest rate swaps	3,349,386	54,905	321,490
Subtotal	6,725,062	98,600	327,416
Embedded derivatives related to asset portfolio		-	12,242
Total derivative assets /(liabilities) other than hedge accounting instruments	6,725,062	98,600	339,658
Balance at December 31	12,266,710	126,339	471,386

The amounts relating to items designated as hedged items were as follows:

	2025
	Carrying amount of the hedged item	Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item
Balance sheet line item	Liabilities	Assets	Liabilities	Change in fair value used for calculating hedge ineffectiveness	Accumulated amount remaining in the balance sheet for any hedged items that have ceased to be adjusted for hedging gains and losses
Debentures and notes	5,259,776	-	-	-80,336	-
Balance at June 30	5,259,776	-	-	-80,336	-

	2024
	Carrying amount of the hedged item	Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item
Balance sheet line item	Liabilities	Assets	Liabilities	Change in fair value used for calculating hedge ineffectiveness	Accumulated amount remaining in the balance sheet for any hedged items that have ceased to be adjusted for hedging gains and losses
Debentures and notes	5,472,577	-	-	-41,426	-
Balance at December 31	5,472,577	-	-	-41,426	-

4.4 Equity Investments

The overall change in fair value as per June 2025 is mainly driven by FX exchange results. Unrealized results from capital movement for FVPL positions is €13.9 million, please also refer to note 11.

	Equity measured at FVOCI	Equity measured at FVPL	Total
Net balance at January 1, 2025	201,287	2,355,626	2,556,913
Purchases and contributions	119	125,738	125,857
Conversion of loans to equity	-	3,311	3,311
Return of Capital (including sales)	-	-216,869	-216,869
Changes in fair value	-17,070	-211,608	-228,678
Total balance at June 30, 2025	184,336	2,056,198	2,240,534

	Equity measured at FVOCI	Equity measured at FVPL	Total
Balance at January 1, 2024	167,074	2,193,771	2,360,845
Purchases and contributions	120	329,824	329,944
Conversion of loans to equity	-	289	289
Transfer associate/FVPL	-	-	-
Return of capital (including sales)	-	-329,927	-329,927
Changes in fair value	34,093	161,669	195,762
Balance at December 31, 2024	201,287	2,355,626	2,556,913

4.5 Investments in associates & Joint Ventures

	June 30, 2025	December 31, 2024
Net balance	372,073	308,179
Purchases and contributions	15,367	7,338
Conversion from loans to equity	4,386	7,887
Conversion Associates/FVPL	-	-
Return of capital (including sales)	-2,769	-
Share in net results	34,152	39,483
Exchange rate differences	-57,538	9,186
Total	365,671	372,073

4.6 Other Financial Liabilities

	June 30, 2025	December 31, 2024
Net Balance	121,715	74,003
Purchases and contributions	2,417	7,280
Return of Capital (including sales)	-102	0
Changes in fair value through profit & loss	-13,510	-14,233
Other changes	-10,063	-200
Other additions	-	54,865
Total	100,457	121,715

The financial liabilities contained in this note relate to amounts payable to the Dutch government as a part of their participation in the program. Other changes relate to the recognition of liabilities for FMO's obligations to the public fund programs managed on behalf of the Dutch State. Other additions line item relates to the consolidation in 2024 of the Land Use Facility of the Dutch Fund for Climate Development (DFCD) and represents the amounts payable to the Dutch government as a result of their participation in the program.

4.7 Fair values

Fair value hierarchy

All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy, based on lowest level input that is significant to the fair value measurement as a whole, as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 – Valuation technique for which the lowest level input that is significant to the fair value measurement is unobservable.

Valuation processes

For recurring and non-recurring fair value measurements categorized within Level 3 of the fair value hierarchy, FMO uses the valuation processes to decide its valuation policies and procedures and analyze changes in fair value measurement from period to period.

FMO’s fair value methodology and governance over applied methods includes a number of controls and other procedures to ensure appropriate safeguards are in place to ensure quality and adequacy. The responsibility of ongoing measurement resides with the relevant departments. Once submitted, fair value estimates are also reviewed and challenged by the Financial Risk Committee (FRC). The FRC approves the fair values measured including the valuation techniques and other significant input parameters used. The appropriateness of the valuation techniques applicable to the underlying instruments is assessed as part of the valuation process and any potential changes between levels in the fair value hierarchy are considered.

Valuation techniques

When available, the fair value of an instrument is measured by using the quoted price in an active market for that instrument (level 1). A market is regarded as active if transactions of the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, valuation techniques are used that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Valuation techniques include:

Recent broker/ price quotations
Discounted cash flow models
Option-pricing models

The techniques incorporate current market and contractual prices, time to expiry, yield curves and volatility of the underlying instrument. Inputs used in pricing models are market observable (level 2) or are not market observable (level 3). A substantial part of fair value (level 3) is based on net asset values.

Investments are measured at fair value when a quoted market price in an active market is available or when fair value can be estimated reliably by using a valuation technique. The main part of the fair value measurement related to investments (level 3) is based on net asset values of investment funds as reported by the fund manager and are based on advanced valuation methods and practices. When available, these fund managers value the underlying investments based on quoted prices, if not available multiples are applied as input for the valuation.

The following table presents the carrying value and estimated fair value of FMO’s non fair value financial assets and liabilities.

The carrying values in the financial asset and liability categories are valued at amortized cost except for the funding in connection with hedge accounting.

Financial assets-liabilities not measured at fair value
	June 30, 2025		December 31, 2024
	Carrying amount	Fair value	Carrying amount	Fair value
Financial assets not measured at fair value
Short term deposits at AC	1,614,521	1,614,521	1,111,886	1,111,886
Cash balances with Banks	185,314	185,314	43,087	43,087
Interest-bearing securities	427,676	421,182	481,798	470,770
Loans to the private sector at AC	4,612,867	4,427,047	5,190,518	5,027,228
Current accounts with state funds and other programs	1,172	1,172	1,336	1,336
Other receivables	20,682	20,682	18,321	18,321
Total financial assets not measured at fair value	6,862,232	6,669,918	6,846,946	6,672,628
Financial liabilities not measured at fair value
Short-term credits	267,599	267,599	216,912	216,912
Debentures and notes	6,135,703	6,206,370	6,335,981	6,431,967
Current accounts with state funds and other programs	10,547	10,547	93	93
Accrued liabilities	86,963	86,963	38,683	38,683
Other liabilities	23,948	23,948	18,861	18,861
Total financial liabilities not measured at fair value	6,524,760	6,595,427	6,610,530	6,706,516

The valuation technique we use for the fair value determination of loans to the private sector and non-hedged funding is based on the discounted cash-flow method. The discount rate we apply is calculated per loan by transforming market-based data to match the characteristics of the assessed loan.

The following table gives an overview of the financial instruments valued at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.

June 30, 2025	Level 1	Level 2	Level 3	Total

Financial assets mandatorily at FVPL
Short-term deposits	65,963	-	-	65,963
Derivative financial instruments	-	207,780	-	207,780
Loans to the private sector	87,255	-	554,223	641,478
Equity investments	33,717	-	2,022,481	2,056,198

Financial assets designated at FVPL
Interest bearing securities	132,435	-	-	132,435

Financial assets at FVOCI
Equity investments	-	-	184,336	184,336
Total financial assets at fair value	319,370	207,780	2,761,040	3,288,190

Financial liabilities mandatorily at FVPL
Derivative financial instruments	-	231,617	9,582	241,199

Financial liabilities designated at FVPL
Other financial liabilities	-	-	100,457	100,457
Total financial liabilities at fair value	-	231,617	110,039	341,656

December 31, 2024	Level 1	Level 2	Level 3	Total

Financial assets mandatorily at FVPL
Short-term deposits	128,755	240,726	-	369,481
Derivative financial instruments	-	126,339	-	126,339
Loans to the private sector	99,857	-	552,204	652,061
Equity investments	23,881	-	2,331,745	2,355,626

Financial assets designated at FVPL
Interest-bearing securities at FVTPL	107,596	-	-	107,596

Financial assets at FVOCI
Equity investments	-	-	201,287	201,287
Total financial assets at fair value	360,089	367,065	3,085,236	3,812,390

Financial liabilities mandatorily at FVPL
Derivative financial instruments	-	459,144	12,242	471,386

Financial liabilities designated at FVPL
Other financial liabilities	-	-	121,715	121,715
Total financial liabilities at fair value	-	459,144	133,957	593,101

Movements in financial instruments measured at fair value based on level 3	Derivative financial instruments	Loans to the private sector	Equity investments	Total financial assets

Balance at Januari 1, 2024	-	500,458	2,327,880	2,828,338
Total gains or losses
-In profit and loss (changes In fair value)	-	2,863	51,875	54,738
-In other comprehensive income (changes in fair value)	-	-	34,093	34,093
Purchases /disbursements	-	56,064	329,945	386,009
Sales/repayments	-	-55,088	-326,091	-381,179
Interest capitalization	-	2,252	-	2,252
Write-offs	-	-1,603	-	-1,603
Accrued income	-	4,397	-	4,397
Exchange rate differences	-	28,217	115,041	143,258
Derecognition and/or restructuring FVPL versus AC	-	11,203	-	11,203
Conversion from loans to equity	-	-289	289	-
Conversion associate/FVPL	-	-	-	-
Transfers into level 3	-	3,730	-	3,730
Transfers out of level 3	-	-	-	-
Other changes	-	-	-	-
Balance at December 31, 2024	-	552,204	2,533,032	3,085,236
Total gains or losses
-In profit and loss (changes In fair value)	-	4,399	-7,546	-3,147
-In other comprehensive income (changes in fair value)	-	-	-17,070	-17,070
Purchases /disbursements	-	92,493	125,855	218,348
Sales/repayments	-	-14,244	-216,869	-231,113
Interest Capitalization	-	478	-	478
Write-offs	-	-10,873	-	-10,873
Accrued income	-	-5,889	-	-5,889
Reclassification Loans versus Equity	-	-1,202	3,311	2,109
Exchange rate differences	-	-63,143	-213,896	-277,039
Balance at June 30, 2025	-	554,223	2,206,817	2,761,040

Valuation techniques and unobservable inputs used measuring fair value of loans to the private sector

Type of debt investment	Fair value at June 30, 2025	Valuation technique	Range (weighted average) of significant unobservable inputs	Fair value measurement sensitivity to unobservable inputs

Loans	67,023	Discounted cash flow model	Based on client spread change for fixed rate loans at FVTPL	A decrease/increase of the used spreads with 1% will result is a higher/lower fair value of approx €2.0 million
	161,378	ECL measurement	Based on client rating for floating rate loans at FVTPL	An improvement / deterioration of the Client Rating with 1 notch wil result approx 0.4% increase/decrease
	35,328	Credit impairment	n/a	n/a
Debt Funds	290,494	Net Asset Value	n/a	n/a
Total	554,223

Valuation techniques and unobservable inputs used measuring fair value of equity investments

Type of equity investment	Fair value at June 30, 2025	Valuation technique	Range (weighted average) of significant unobservable inputs	Fair value measurement sensitivity to unobservable inputs of 10%

Private equity fund investments	1,247,390	Net Asset Value	Discounts applied ranging from 10 to 100%	Changes in the discounts applied would result in a lower/ higher fair value in valuation of EUR 4.3 million.
Private equity direct investments	47,674	Recent transactions	Discounts applied ranging from 50 to 75%	Changes in the discounts applied would result in a lower/ higher fair value in valuation of EUR 0.4 million.
	405,994	Book multiples	Discounts applied ranging from 10 to 90% Book multiple applied ranging from 0.82 to 1.2	Changes in the discounts applied would result in a lower/ higher fair value in valuation of EUR 2.2 million. Changes in the multiples applied would result in a lower/ higher fair value in valuation of EUR 40.6 million.
	218,055	Earning Multiples	Discounts applied ranging from 10 to 40% Earnings multiple applied ranging 1 to 17.9	Changes in the discounts applied would result in a lower/ higher fair value in valuation of EUR 2.0 million. Changes in the multiples applied would result in a lower/ higher fair value in valuation of EUR 21.8 million.
	107,090	Discounted Cash Flow (DCF)	Discounts applied ranging from 20 to 50% DCF model inputs: Discount rates applied ranging from 10.7% to 16,2% Expected monthly cash flows ranging from EUR 0.1 million to 2.6 million	Changes in the discounts applied would result in a lower/ higher fair value in valuation of EUR 0.2 million. Changes in the DCF model by lowering the discount rate and increasing the Cash flows would result in a positive change in fair value of EUR 24.8 mio. By increasing the discount rate and increasing the cash flows would result in a positive change in valuation of EUR 1.1 million.
	75,324	Put option	Discounts applied ranging from 10 to 29%	Changes in the discounts applied would result in a lower/ higher fair value in valuation of EUR 0.9 million.
	46,787	Firm offers	Discounts applied 10%	Changes in the discounts applied would result in a lower/ higher fair value in valuation of EUR 0.5 million.
	58,503	Cost	N/A	N/A
Total	2,206,817