Notes to the consolidated balance sheet: liabilities

14. Short-term credits

 

2017

2016

Collateral received (related to derivative financial instruments)

125,935

39,464

Balance at December 31

125,935

39,464

Short-term credits reflect the cash collateral received for derivative contracts we held with positive value. We also refer to the section treasury counterparty credit risk in the Risk Management paragraph.`

15. 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.

Important terms of our subordinated note includes:

  • Subordinated note amounts to €175 million and is denominated in Euro's.

  • Interest rate is 150BPS until December 8, 2020 (first call date). Interest rate between the first call date and December 8, 2025 (final maturity date) will be based on a reset interest plus 140BPS.

The movements can be summarized as follows:

 

2017

2016

Balance at January 1

5,180,977

5,347,614

Amortization of premiums/discounts

10,197

5,951

Proceeds from issuance

1,229,760

612,748

Redemptions

-983,643

-891,209

Changes in fair value

-4,853

10,887

Exchange rate differences

-331,150

94,986

Balance at December 31

5,101,288

5,180,977

Line items 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.

 

2017

2016

Debentures and notes under hedge accounting

2,512,930

3,270,265

Debentures and notes valued at amortized cost

2,588,358

1,910,712

Balance at December 31

5,101,288

5,180,977

The nominal amounts of the debentures and notes are as follows:

 

2017

2016

Debentures and notes under hedge accounting

2,460,448

3,520,606

Debentures and notes valued at amortized cost

2,647,332

1,648,491

Balance at December 31

5,107,779

5,169,097

16. Current accounts with State funds and other programs

 

2017

2016

Current account MASSIF

67

62

Current account Access to Energy Fund II

-

13

Current account PDF

115

-

Balance at December 31

182

75

17. Other liabilities

 

2017

2016

Amortized costs related to guarantees

212

266

Liabilities for guarantees

2,896

6,460

Other liabilities

1,931

715

Balance at December 31

5,039

7,441

The movements in liabilities for guarantees are set out in note 9.

18. Accrued liabilities

 

2017

2016

Accrued interest on banks, debt securities and debentures and notes

48,135

47,405

Other accrued liabilities

8,586

4,003

Balance at December 31

56,721

51,408

19. Provisions

The amounts recognized in the balance sheet are as follows.

 

2017

2016

Pension schemes

46,313

45,396

Other provisions

275

26

Balance at December 31

46,588

45,422

Pension schemes

FMO’s pension schemes cover all its employees. The pension schemes are defined benefit plans and most of these plans are average-pay-schemes. FMO has a contract with a well established insurer, in which all nominal pension obligations are guaranteed. This guaranteed contract arranged that all significant risks associated with investments lies with the insurer. These significant risks are amongst others Credit risks, market risks, sufficient investment return to fund indexation of the defined benefit obligation. As a result FMO’s pension plan is exposed to counterparty risk, interest rate risk (changes of discount rate), inflation and changes in the life expectancy for pensioners. The pension assets are managed by the insurance company and strict guidelines has been agreed with the asset manager. The assets of the funded plans are held independently of FMO’s assets by the insurance company 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:

 

2017

2016

Present value of funded defined benefit obligations

200,777

213,449

Fair value of plan assets

-154,464

-168,053

Liability in the balance sheet

46,313

45,396

The movements in the present value of the defined benefit obligations can be summarized as follows:

 

2017

2016

Present value at January 1

213,449

147,670

Service cost

10,679

9,591

Interest cost

4,070

4,187

Actuarial (gains)/losses due to changes in financial assumptions

-4,426

27,898

Actuarial (gains)/losses due to changes in demographic assumptions

-4,121

918

Actuarial (gains)/losses due to experience assumptions

-16,714

25,678

Benefits paid

-2,160

-2,493

Present value at December 31

200,777

213,449

The actuarial gain on the defined benefit obligation amounts to €25,261 (2016: €54,494 loss) and is mainly due the increase of the discount rate to 2.0% (2016: 1.8%).

The movements in the fair value of plan assets can be summarized as follows:

 

2017

2016

Fair value at January 1

-168,053

-145,964

Expected return on plan assets

-3,079

-3,971

Employer contribution

-8,120

-5,214

Plan participants’ contributions

-1,023

-653

Actuarial (gains)/losses due to changes in financial assumptions

6,312

-87

Actuarial (gains)/losses due to changes in demographic assumptions

-

-

Actuarial (gains)/losses due to experience assumptions

17,339

-14,657

Benefits paid

2,160

2,493

Fair value at December 31

-154,464

-168,053

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 as per 31 December 2017 based on accrued pension rights and actuarial rates.

The movement in the liability recognized in the balance sheet is as follows:

 

2017

2016

Balance at January 1

45,396

1,706

Annual expense

11,283

10,104

Contributions paid

-8,756

-6,164

Actuarial gains/losses

-1,610

39,750

Balance at December 31

46,313

45,396

The amounts recognized in the profit and loss account as net periodic pension cost are as follows:

 

2017

2016

Current service cost

14,652

10,541

Net interest cost

991

216

Past service cost

-3,337

-

Subtotal

12,306

10,757

Contribution by plan participants

-1,023

-653

Total annual expense

11,283

10,104

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:

 

2017 (%)

2016 (%)

Discount rate

2.0

1.8

Expected pension indexation for active participants

1.8

1.8

Expected pension indexation for inactive participants

0.6

0.5

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

-23,981

28,493

Increase indexation for active participants

1,208

-1,467

Future salary growth

5,355

-5,023

Other provisions

The other provisions are provisions for severance arrangements. This provision is determined using present value calculations.

 

2017

2016

Balance at January 1

26

-

Addition

278

26

Release

-

-

Paid out

-29

-

Balance at December 31

275

26

20. 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.

 

2017

2016

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 (2016: €29,272).

Other reserves

 

Retained earnings

Actuarial gains/losses on defined benefit plans

Total

Balance at January 1, 2016

31,971

7,236

39,207

Gains/losses during the period

-

-29,813

-29,813

Balance at December 31, 2016

31,971

-22,577

9,394

    

Gains/losses during the period

-

1,208

1,208

Balance at December 31, 2017

31,971

-21,369

10,602

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 ‘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

Balance at January 1, 2016

449,869

5,483

455,352

Fair value changes

64,375

5,131

69,506

Foreign exchange differences

59,426

-

59,426

Transfers due to sale

-38,192

-832

-39,024

Transfers due to impairment

37,666

-

37,666

Tax effect

-10,776

-1,075

-11,851

Balance at December 31, 2016

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

0

46,919

Tax effect

1,991

2,015

4,006

Balance at December 31, 2017

398,018

2,669

400,687

Included in the available for sale reserve is a negative amount of €11,978 (2016: €30,053) for fair value changes in equity investments that were previously impaired.

Translation reserve

 

2017

2016

Balance at January 1

9,221

4,111

Change

-25,917

5,110

Balance at December 31

-16,696

9,221

Non-controlling interests

Equis DFI Feeder L.P.

2017

2016

Balance at January 1

2,991

1,266

Fair value changes

1,150

-13

Changes in subsidiary

1,812

1,738

Share in net profit

1,118

-

Balance at December 31

7,071

2,991