Financial statements


Report of the Board of Directors

Mission and strategy

Finnfund, formally the Finnish Fund for Industrial Cooperation Ltd. (FINNFUND), is a development finance company in which the Finnish government has a majority holding; it belongs to the administrative sector of the Ministry for Foreign Affairs and has a special development policy mission. The mission of the company is to promote economic and social development in target countries by providing financing for private-sector projects involving Finnish interest. Finnfund provides long-term risk capital to complement funding obtained from the financial markets, and operates on a self-supporting basis. Finnfund targets financing at low-income and lower-middle-income developing countries, builds bridges between Finnish expertise and development needs, and augments the developmental impacts of investments catalysed by Finnfund.

In 2015, Finnfund continued to focus on balanced growth and risk management. The project preparation focus was still on financing in the form of loans for projects that generate regular cash flow, although more long-term equity investments were made than a year earlier. Regardless of Finnfund's role in any given project and the financial instruments used, the key requirement is the economic viability of the projects and their positive development impact in the target countries.

Funding and investments

Finnfund's portfolio continued to grow from the previous year, and cooperation with Finnish companies intensified, with companies participating in an increasingly large number of projects as technology suppliers or partners. The majority of Finnfund's new financing decisions involved projects with an excellent development impact potential and a positive effect on climate change, particularly in the renewable energy and forestry sectors.

In 2015, 18 (23 in 2014) new financing decisions were made, amounting to a total of EUR 83.5 million (EUR 115 million). The targeting of financing decisions at various income levels is shown in the table below.

Income level number % EUR
Least developed countries 7 38.9 38.7 46.3
Low-income countries 3 16.7 14.9 17.8
Lower-middle-income countries 6 33.3 27.4 32.8
Upper-middle-income countries 2 11.1 2.5 3.0
Russia 0 0 0 0
Total 18 100 83.5 100


The majority, or nine (16) of the financing decisions made involved investment loans, accounting for about 60 per cent (75 per cent) of the value of the decisions in euros.

According to Finnfund's risk management principles, equity investments must be covered from Finnfund's shareholders' equity. Shortage of shareholders' equity limited the opportunities for making equity investments but investments were still made due to the prospect of a significant increase in capital. Eleven (8) of the projects that were approved were equity investments or mezzanine financing, showing an increase from the previous year. When calculated in euros, they accounted for 32 per cent (16 per cent) of all approved projects. As in the previous year, the number of fund investment decisions remained modest, as planned, and only one (1) decision was made.

In terms of both the number and value of the financing decisions made, Africa with 7 (11) decisions and Asia with 8 (7) decisions were the leading continents. In terms of euros, Africa remained the leading target area with 44 per cent (49 per cent) of the funding. Asia grew significantly from the previous year, representing 40 per cent (16 per cent) of the total value of decisions in euros. Projects were evenly distributed between different countries to an exceptional extent. One decision per country was made, with the exception of Ethiopia which accounted for 2 (1) decisions.

The volume of disbursements grew to EUR 77 million from EUR 73 million, representing a historic high for Finnfund. Of this amount, EUR 53 million (EUR 37 million) was allocated to low-income countries or the least developed countries, EUR 8 million (EUR 16 million) to lower-middle-income countries, EUR 16 million (EUR 13 million) to upper-middle-income countries, and EUR 0.5 million (EUR 7 million) to Russia.

Finnfund is actively involved in European Financing Partners (EFP), founded in 2004 as a joint financing venture of European development finance institutions and the European Investment Bank (EIB), and in the Interact Climate Change Facility (ICCF) founded by the same actors and the French development funding provider AfD in 2011. ICCF invests in projects aimed at curbing climate change, such as renewable energy and energy efficiency. In 2015, a plan for the merger of ICCF with EFP was prepared. This is largely an administrative change, and EFP and ICCF portfolio management will continue to be separate within the new company. The execution of the merger will take place in 2016.

At the end of 2015, undisbursed commitments totalled EUR 131.5 million (EUR 146 million). In addition, EUR 104 million (EUR 75 million) were tied up in investment commitments that had not yet progressed to the agreement stage.

Development and priorities

An organisational reform was carried out in 2015 involving the establishment of a functional matrix organisation working in parallel with the funding process and focusing on project preparation and follow-up, complex project exits and reorganisations. The matrix organisation will supplement the traditional, hierarchical reporting-based organisation. The number of investment teams was reduced from three to two, and the remaining resources were strengthened with internal employee transfers and new recruitments. In addition, a new function focusing on project exits and complex reorganisations and a function for impact and communications were set up.

Internal processes were extensively assessed and developed throughout the year, with a special emphasis on internal cooperation and on the more efficient utilisation of electronic tools and processes.

A call for tenders covering Finnfund's case and document management system was arranged in 2015 and a decision was made to procure a system that would facilitate document management and improve efficiency. The system will be introduced in 2016. A new payroll accounting system was introduced at the end of 2015 and a decision was made to initiate the procurement process for a new CRM system in 2016. In addition, several system updates and version changes were implemented.

To streamline and enhance operations, several small changes were made to the documentation and policies essential to the financing process, and to the working practices of the internal investment committee. Electronic signature was adopted for several documents, which accelerated the approval process for e.g. disbursements.

Co-operation with other members of the European Development Finance Institutions (EDFI) continued as in earlier years, through both concrete projects and the sharing and harmonisation of operating methods.

In early 2016, majority of employees moved to new premises connected to those introduced in early 2014. The old premises, which have been in use since 2007, were divested. Following the relocation, all personnel now work in the same premises in central Helsinki.

The Finnpartnership programme

Finnfund administers a business partnership programme called Finnpartnership. Launched in June 2006, the programme is financed by the Ministry for Foreign Affairs. The programme period ended on 31 December 2015. A call for tenders for the administration of the revised programme was organised in autumn 2015. Finnfund was awarded the contract, which means that it will continue as the programme administrator, although with smaller resources, in 2016–2018 and, if the option is exercised, in 2019–2021.

In 2015, a total of 185 (113) business partnership support applications were processed. Of these, 168 (90) applications were approved. Total­ support granted amou­nted to EUR 7.4 million (EUR 4.3 million).

Business partnership support was paid out to 81 (54) projects, totalling EUR 1.5 million (EUR 1.0 million).

In 2015, the matchmaking service received 364 (222) business initiatives from companies in developing countries.

Risk management

The Finnfund Board of Directors confirms the company’s risk management principles and instruments. The company’s management is responsible for the practical implementation of risk management on the basis of the guidelines confirmed by the Board of Directors. Guidelines on asset and risk management are assessed annually. No changes were made to the risk management principles in 2015.

Owing to the nature of its activities, the company is exposed to greater than average risks. Risk management includes risk identification, hedging, and reporting to the company’s administrative bodies.

The risk classification system developed by Finnfund and in use since 2005 is a key instrument in the assessment and monitoring of project risks. A risk assessment is conducted on all projects in the Finnfund investment portfolio at least once a year, and more often if necessary, if it is estimated that the risk level has changed.

On 8 October 2012, the Ministry for Foreign Affairs decided on the introduction of special risk financing to share investment risks between Finnfund and the Finnish government. Special risk financing was provided on the basis of a loss compensation commitment adopted by the government on 20 September 2012, whereby the government undertook to compensate Finnfund for a maximum of 60 per cent of credit losses and investment losses in projects covered by special risk financing while the commitment remained valid. As of 31 December 2015, no new projects covered by special risk financing can be accepted. Projects accepted for coverage by the special risk financing during the term of the programme will be covered by Government risk-sharing until repayment or Finnfund's exit. To be eligible for special risk financing, an extremely high developmental impact aimed at low-income or lower-middle income countries was required of projects; or the risk was otherwise considered too high for the project to qualify for Finnfund financing.

In 2015, the Board of Directors decided to enter 10 (3) projects under special risk financing. The aggregate value of the commitments was EUR 55 million (EUR 2.7 million). The government is responsible for EUR 28 million (EUR 1.4 million), or 51 per cent (53 per cent) of the investment risk associated with commitments made in 2015. By the end of 2015, commitments with a value of EUR 111 million (EUR 52.8 million) had been made for projects under special risk financing. The government answers for EUR 50 million (EUR 26.5 million), or 45 per cent (50 per cent) of the risks involved in these commitments. The loss compensation commitment covers a maximum of EUR 5 million in compensation per year.

The objective with regard to interest and exchange rate risks is to identify and hedge against any risks. The company’s lending is either in euro or United States dollars and the objective is to cover the interest and exchange rate risks associated with lending fully and over the entire maturity of the loans. In 2015 the company did not lend in the local currencies of target countries. Basically the company does not cover exchange rate risks associated with equity and fund investments but may on a case-by-case basis cover currency positions that are certain or at least likely, and can be hedged at a reasonable cost.

In order to manage its liquidity risk, Finnfund maintains liquidity that is adequate in view of the anticipated volume of disbursements. Finnfund has a committed credit facility of EUR 50 million, non-committed credit facilities, and a commercial paper programme set up in 2010 totalling EUR 100 million. At the end of 2015, the value of commercial papers issued through the programme amounted to EUR 7 million. The credit facilities provided by banks were not in use at the end of 2015.

The refinancing risk associated with borrowing is managed by maintaining a sufficiently extensive group of financiers and a versatile range of instruments. An additional aim is that at least half of the borrowing should be long-term financing. At the end of the year under review, the average time to maturity of interest-bearing debt was 3.7 (3.5) years.

Finnfund maintains a continuous capacity for identifying, controlling, and combating data security risks.

Financial result and balance sheet 

For Finnfund, careful project preparation is essential to ensuring operational profitability in demanding operating conditions and groundbreaking projects. This goal was achieved in 2015.

In 2015, Finnfund made a profit of approximately EUR 5.1 million (approximately EUR 2.4 million). The result was stronger than a year earlier and over budget. This could be partly attributed to certain sales gains from 2014 being delayed and materializing under the year under review, and higher than expected income from certain fund investments.

The operational result is shown in the table below. Income from financing activities stood at EUR 13.5 million (EUR 11.1 million) and the result before value adjustment, sales and taxes was EUR 6.0 (EUR 4.3 million).

During the year under review, Finnfund exited four investments. Administrative expenses grew as planned from the previous year, mainly due to an increase in the number of personnel.

Operational result, EUR 1,000 2015 2014 Change
Financial income 16,168 12,929 3,239 25.1
Financial expenses -2,704 -1,802 -902 50.1
Income from financing activities 13,464 11,127 2,337 21.0
Other operating income 1,865 1,612 253 15.7
Administrative expenses, depriciation and other expenses -9,342 -8,419 -923 11.0
Result before value adjustment, sales and taxes 5,987 4,320 1,667 38,6
Value adjustment and sales -827 -1,877 1,050 -56,0
Income taxes -103 -35 -68 194.3
Net profit 5,057 2,408 2,649 110.0



Dividend income was EUR 0.2 million (EUR 0.3 million).

Interest income from investment loans came to EUR 7.5 million (EUR 5.6 million), and other interest income totalled EUR 0.3 million (EUR 0.5 million). Overall interest income amounted to EUR 7.8 million (EUR 6.1 million). Other interest income primarily consisted of interest income from liquid assets, which decreased from the previous year following the fall in liquidity.

Other income from long-term investment amounted to EUR 7.1 million (EUR 5.1 million), consisting of gains from fund investments. Capital gains from sale of investments of EUR 5.5 million (EUR 0.1 million) were recorded as income.

At EUR 1.1 million (EUR 1.4 million), other financial income excluding foreign exchange gains mainly consisted of arrangement fees, commitment fees, and other financing fees.

Investment income before taxes totalled EUR 21.7 million (EUR 12.8 million).

Foreign exchange gains amounted to EUR 15.3 million (EUR 11.0 million) and losses to EUR 15.2 million (EUR 11.0 million). The foreign exchange difference was EUR 0.1 million positive.

Other operating income amounted to EUR 1.9 million (EUR 1.6 million) and this comp­rises fees received for the administration of the Finnpartnership programme and other income from fe­es and charges.

Impairment losses

New recognised individual impairment losses amounted to EUR 10.2 million (EUR 6.7 million), representing about 3.1 per cent (2.3 per cent) of the balance sheet value of investment assets at the end of the year under review.

Reversals of previously recognised individual­ impairment­ losses amounted to EUR 5.2 million in 2015 (EUR 5.4 million).

The net effect of impairments on financial performance was approximately EUR -5.0 million (EUR -1.4 million).


Interest expenses were EUR 0.8 million and remained nearly unchanged from the previous year (EUR 0.7 million). Interest expenses were incurred through borrowing in US dollars, which is used to refinance Finnfund investment loans denominated in US dollars, and through euro-denominated commercial papers issued in 2015 and the bond issued in autumn 2013.

Other financial expenses were EUR 2.0 million (EUR 0.8 million), including management fees of EUR 1.4 million (EUR 0.6 million) associated with fund investments. These fees were incurred for funds whose investment period has ended. The increase in total fund expenditure is due to the fund portfolio lifecycle, in other words several funds have reached the exit point at the same time. Other financial expenses also include costs of EUR 0.4 million (EUR 0.08 million) from derivatives.

Investment and sales losses amounted to EUR 1.3 million (EUR 0.6 million), which is attributable to previously recognised individual impairment losses.

Administrative expenses totalled EUR 9.3 million (EUR 8.4 million). The increase in expenses consists of several items, the most significant ones being higher personnel costs and increased use of external services. The increase in the volume of operations and the resulting increase in operating costs were pre-planned.

Taxes recorded in the profit and loss account, totalling EUR 0.1 million (EUR 0.04 million), mainly consisted of sales gains taxes paid to the target countries.

Balance sheet

The balance sheet total stood at EUR 377.1 million (EUR 317.2 million) as at the end of the year under review.

The balance sheet value of investment assets was EUR 330.0 million (EUR 294.0 million) as at the end of the year under review, investment assets grew by about 12 per cent.

Loans (including subordinated loans and other mezzanine instruments) accounted for EUR 151.0 million or 46 per cent (129.2 million, 44 per cent), equity investments for EUR 89.4 million or 27 per cent (86.8 million, 30 per cent), and fund investments for EUR 89.3 million or 27 per cent (77.5 million, 26 per cent) of total investments assets.

Liquid assets stood at EUR 42.7 million (EUR 19.0 million) as at the end of the year under review. The liquid assets are invested in domestic bank deposits and money-market instruments in accordance with the treasury policy.

At the end of the financial period, the company’s equity (share capital and retained earnings) totalled EUR 250.8 million (EUR 235.7 million) or 67 per cent of the balance sheet total (74 per cent).

In 2015, the company executed one share issue. In the share issue, a maximum of 63,501 new shares were offered to existing shareholders in proportion to their existing holdings, at the issue price of EUR 170 per share. The subscription period was from 21 April to 5 June 2015. As a result of the share issue, the share capital was increased by EUR 9,999,910, representing the proportion of the Finnish government. A total of 58,823 new shares were issued pursuant to the decision. Finnvera plc and the Confederation of Finnish Industries EK did not subscribe to any of the new shares they were offered.

At the end of the financial period, the company’s registered share capital stood at EUR 166,989,130 with 982,289 shares, with the Finnish government accounting for 917,719 shares (93.4 per cent), Finnvera plc for 63,349 shares (6.5 per cent), and the Confederation of Finnish Industries EK for the remaining 1,221 shares (0.1 per cent).

The company’s shares have no nominal value. The equivalent value of a share in bookkeeping is EUR 170. The company has one share class. A minimum of 51 per cent of the company shares must be under the direct ownership and control of the Finnish government at all times. The company does not distribute its funds in dividends or in payments from its unrestricted equity fund; nor does it acquire or redeem its own shares.

At the end of the year under review, the company’s long-term interest-bearing debt stood at EUR 106.3 million (EUR 72.0 million) and short-term interest-bearing debt at EUR 11.9 million (EUR 4.7 million), totalling EUR 118.2 million (EUR 76.7 million). Long-term interest-bearing debt includes the EUR 50 million bond issued in autumn 2013. In other respects, the interest-bearing liabilities are mainly denominated in US dollars, used to re­finance Finn­fund investment loans denominated in US dollars.

Long-term debt as a percentage of all financing liabilities totalled approximately 90 per cent at the end of the period. Total financing liabilities increased by some 54 per cent on the previous year following the signing of a new 10-year USD-denominated loan agreement in August 2015 and commercial paper issues.

Finnfund had no guarantee commitments at the end of 2015 (EUR 0.0 million).

Key figures

  2015 2014 2013
Financial income, EUR million 36.9 23.5 13.5
Net profit, EUR million 5,1 2.4 2.7
Return on equity, % 2.0 1.1 1.3
Equity ratio, % 66.5 74.3 69.2


Return on equity = Result before extraordinary items – taxes x 100 %

Equity ratio =                           Equity                               x 100 %
                        Balance sheet total – advances received

Administration and personnel 

In 2015, the Supervisory Board met five times, the Board of Directors met 11 times, and the Audit Committee of the Board of Directors met four times.

The Annual General Meeting, held on 21 April 2015, addressed the matters listed in Article 11 of the Articles of Association and decided to increase the company’s share capital.

The following members were elected at the Annual General Meeting to the Supervisory Board for the period 2015–2018: Simo Karetie, Chief Policy Adviser; Antti Lindtman, Member of Parliament; Hanna Mäntylä, Member of Parliament; and Aila Paloniemi, Member of Parliament.

Members of the Board of Directors elected at the Annual General Meeting:

Ritva Laukkanen, Partner, Sagacitas Finance Partners Oy Ltd., Chair
Kari Alanko, Deputy Director General, Ministry for Foreign Affairs, Vice Chair
Tuukka Andersén, Director of Finance
Pekka Hukka, Counsellor
Pirita Mikkanen, Partner
Lars-Erik Schöring, CEO
Tuula Ylhäinen, CFO
Anne af Ursin, Senior Adviser

The members of the Board of Directors do not have deputy members.

The Board of Directors has an audit committee, with the following members since 22 April 2015:

Tuukka Andersén, Director of Finance, Chair
Tuula Ylhäinen, CFO`
Pirita Mikkanen, Partner

An extraordinary General Meeting was held on 28 September 2015. At the meeting, Johanna Kotaviita, practical nurse, was elected member of the Supervisory Board to replace Hanna Mäntylä who stepped down from the position, and Sinikka Antila, Ambassador, was elected member of the Board of Directors to replace Pekka Hukka, who stepped down from the position.

Another extraordinary General Meeting was held on 1 December 2015. At the meeting, the following were elected members of the Supervisory Board to replace members who had stepped down: Mika Raatikainen, Member of Parliament, to replace Seppo Toriseva; Erkki Tuomioja, Member of Parliament, to replace Antti Lindtman; and Johanna Karimäki, Member of Parliament, to replace Kalle Hyötynen.

The company’s auditors are Deloitte & Touche Oy, authorised public accountants, with Jukka Vattulainen, APA, as the principal auditor.

The company CEO is Jaakko Kangasniemi (Ph.D., Agricultural Economics).

During the year under review, the company employed an average of 56 people (51). At year-end, the number of employees in contractual employment was 57 (54), of whom 55 (52) worked full-time. Of the 52 employees, 40 were women and 17 were men.

Total wages and salaries paid to personnel in 2013-2015 were as follows:

  2015 2014 2013
Average number of personnel 56 51 49
Total wages and salaries, EUR 1,000 4,462 4,121 3,840


The final accounts for­ 2015 include a provision for incentive bonuses earned in 2015, amounting to 9.7 per cent of payroll expenses (7.1 per cent). Incentives are partly based on mee­ting performance targets at company and function level, and partly based on individual performance.

Outlook for 2016

In accordance with the guidelines specified in the State Ownership Policy, Finnfund aims to improve the positive developmental impacts of its financing and to focus primarily on low-income and lower-middle-income developing countries. Finnfund will intensify its co-operation with Finnish enterprises in these countries in particular. As before, priority will be assigned to projects where Finnish know-how and competence is used to curb climate change, to improve environmental conditions, and to improve the living conditions of poor people. Several project ideas with a significant expected impact are being investigated, some in extremely poor or fragile states, but their progress depends on the resources available to Finnfund.

The budget approved by the Parliament for 2016 includes EUR 140 million for financial investments in development co-operation. Details of the allocation and use of the funds are not yet available but according to the Ministry for Foreign Affairs a considerable amount, possibly as much as EUR 130 million, will be used to improve Finnfund's operating possibilities. Without additional resourcing, the company is facing a downscaling of operations, especially in high-risk investing activities, as the EUR 50 million special risk financing commitment expires.

Plans for 2016 are based on the assumption that additional resources will be available in one form or another. At the beginning of the year, a record number of projects are under way. We expect to see a notable increase in the number of decisions made compared to previous years. In uncertain circumstances, the focus of investments will remain on investments in the form of loans. If necessary, preparation of equity investments will be discontinued for the remainder of the year.

Liquidity is expected to remain good in 2016. If the planned additional resourcing does not move forward during the year, Finnfund will limit its project preparations to ensure the fulfilment of its commitments in any given situation.

The outlook for 2016 is positive, albeit slightly uncertain. The company’s financial performance will be crucially affected by how the estimated value of its investment assets changes during the financial period and whether any profitable exits from projects occur. Although these tend to be difficult to predict in development finance, the outlook is positive, even based on cautious assumptions.

With the contract for the Finnpartnership programme awarded to Finnfund in 2015, programme work will continue but with smaller resources. The Ministry for Foreign Affairs will be responsible for accepting and processing applications for business partnerships, but Finnfund will continue to provide the Ministry with support services related to the programme.

Proposal of the Board of Directors for the distribution of profit 

The company recorded a profit of EUR 5,057,148.41 in 2015. The Board of Directors proposes that the profit be transferred to the retained earnings account and set aside for disposal in accordance with Article 2 of the Articles of Association.


Finnish Fund for Industrial  
Cooperation Ltd. (FINNFUND)

Uudenmaankatu 16 B
P.O. Box 391 FI-00121 Helsinki, Finland
tel. +358 9 348 434
fax +358 9 3484 3346