EUR 1000
Other contingent liabilities
The company has entered into two long-term lease agreements of its office. The term of the agreement A began on 1 January 2014 as a fixed-term tenancy for the first three years until 31 December 2016 after which it will continue as a periodic lease with a 12 months' notice. The agreement B began on 1 January 2016 as a fixed-term tenancy for 3 + 2 + 2 years to be terminated on 31 December 2018, 31 December 2020 or 31 December 2022 after which it will continue as a periodic lease with a 12 months' notice. Rental payments started on 1 March 2016. | ||||||
2017 | 2016 | |||||
Payable in the next financial period | 518 | 517 | ||||
Payable later | 0 | 384 | ||||
Other commitments | ||||||
The company acts as a lender in financial arrangements amounting to USD 10.1 million, the risks have been contractually transferred to other financial institutions. | ||||||
Undisbursed commitments | ||||||
Contractual commitments | 178,100 | 147,000 | ||||
Special risk finance (cumulative) | ||||||
Decisions of the Board of Directors | 87,731 | 111,060 | ||||
Government's indemnity | 50,000 | 50,000 | ||||
Government's indemnity, % | 57% | 45% | ||||
Disbursements | 61,088 | 26,147 | ||||
Derivative contracts | ||||||
Fair values of derivatives in financial assets and liabilities
2017 | 2016 | |||||
Receivables | Short-term | Long-term | Total | Short-term | Long-term | Total |
Forward exchange agreements | 443,915.68 | 443,915.68 | 0.00 | |||
Interest rate swaps | 74,693.13 | 74,693.13 | 46,530.48 | 46,530.48 | ||
Currency and interest rate swaps | 6,800,106.71 | 6,800,106.71 | 0.00 | |||
Total | 443,915.68 | 6,874,799.84 | 7,318,715.52 | 0.00 | 46,530.48 | 46,530.48 |
Liabilities | Short-term | Long-term | Total | Short-term | Long-term | Total |
Forward exchange agreements | 17,686.40 | 17,686.40 | 1,125,953.56 | 1,125,953.56 | ||
Interest rate swaps | 18,158.00 | 18,158.00 | 0.00 | |||
Currency and interest rate swaps | 2,346,590.82 | 2,346,590.82 | 5,337,869.08 | 5,337,869.08 | ||
Total | 2,364,277.22 | 18,158.00 | 2,382,435.22 | 1,125,953.56 | 5,337,869.08 | 6,463,822.64 |
Fair value hierarchy of derivatives
Level 1) Fair values are based on the quoted (unadjusted) prices of identical assets or liabilities in active markets that the entity has access at the measurement date.
Level 2) Fair values are based on inputs obtained from active markets other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly. Fair values are determined based on these inputs using generally used valuation models for derivatives.
Level 3) Fair values are determined by means other than observable inputs on the asset or liability.
2017 | 2016 | |||||||
Receivables | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
Forward exchange agreements | 443,915.68 | 443,915.68 | 0.00 | |||||
Interest rate swaps | 74,693.13 | 74,693.13 | 46,530.48 | 46,530.48 | ||||
Currency and interest rate swaps | 6,800,106.71 | 6,800,106.71 | 0.00 | |||||
Total | 0.00 | 7,318,715.52 | 0.00 | 7,318,715.52 | 0.00 | 46,530.48 | 0.00 | 46,530.48 |
Liabilities | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
Forward exchange agreements | 17,686.40 | 17,686.40 | 1,125,953.56 | 1,125,953.56 | ||||
Interest rate swaps | 18,158.00 | 18,158.00 | 0.00 | |||||
Currency and interest rate swaps | 2,346,590.82 | 2,346,590.82 | 5,337,869.08 | 5,337,869.08 | ||||
Total | 0.00 | 2,382,435.22 | 0.00 | 2,382,435.22 | 0.00 | 6,463,822.64 | 0.00 | 6,463,822.64 |
Asset and risk management
The objective of asset and risk management is to mitigate the negative effects of market risks, i.e. changes in interest and exchange rates, on Finnfund’s earnings, and to ensure sufficient liquidity. The leading principles of asset and risk management are described in the asset and risk management guideline approved by the Board of Directors. Their implementation is the responsibility of the Associate Director, Treasury, of the Risk Management and Impact division.
Interest and exchange rate risks
Forward exchange agreements and interest rate and currency swap contracts are used as hedges against currency and interest rate risks resulting from investment loans granted by Finnfund. Interest derivatives are used as hedges against interest rate risks resulting from investment loans, when the interest basis of the investment loans deviates from that of Finnfund’s own funding.
Sensitivity analysis
The sensitivity analysis of the value of derivatives instruments presumes a change of +/- 1% in Euribor and Libor interest rates. Change of the EUR/USD exchange rate is presumed at +/- 10% (USD weakens/strengthens 10%). The impact of the changes on Finnfund’s financial result is described below.
Sensitivity analysis, derivatives
Effect on result, EUR 1000 | 2017 | 2016 |
Change of +/- 1% in EURIBOR interest | 159 / -159 | 160 / -160 |
Change of +/- 1% in LIBOR interest | -1,066 / 1,066 | -173 / 173 |
Change of +/- 10% in EUR-USD exchange rate | 11,846 / -11,846 | 2,482 / -2,482 |
Credit risk
Solvent Nordic banks comprise the contracting parties of Finnfund’s derivatives contracts.
Liquidity risk
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 100 million, non-committed credit facilities in Nordic banks, and a commercial paper programme set up in 2010 totalling EUR 300 million. The credit facilities provided by banks were not in use at the end of 2017.
Undiscounted cash flow resulting from derivatives
2017 | 2016 | |||||
Receivables | Under 1 year | 1 - 5 years | Total | Under 1 year | 1 - 5 years | Total |
Forward exchange agreements | 27,033,472.31 | 0.00 | 27,033,472.31 | 62,440,655.39 | 0.00 | 62,440,655.39 |
Interest rate swaps | 308,253.54 | 605,222.47 | 913,476.01 | 242,554.25 | 913,476.01 | 1,156,030.26 |
Currency and interest rate swaps | 20,144,707.54 | 102,500,000.00 | 122,644,707.54 | 64,687.15 | 19,519,707.54 | 19,584,394.69 |
Total | 47,486,433.39 | 103,105,222.47 | 150,591,655.86 | 62,747,896.79 | 20,433,183.55 | 83,181,080.34 |
2017 | 2016 | |||||
Liabilities | Under 1 year | 1 - 5 years | Total | Under 1 year | 1 - 5 years | Total |
Forward exchange agreements | 25,951,780.29 | 0.00 | 25,951,780.29 | 62,289,422.89 | 0.00 | 62,289,422.89 |
Interest rate swaps | 336,346.08 | 704,029.39 | 1,040,375.47 | 243,903.73 | 1,040,375.47 | 1,284,279.20 |
Currency and interest rate swaps | 24,294,035.00 | 100,115,284.46 | 124,409,319.46 | 496,938.18 | 21,773,136.13 | 22,270,074.31 |
Total | 50,582,161.37 | 100,819,313.85 | 151,401,475.22 | 63,030,264.80 | 22,813,511.60 | 85,843,776.40 |
Receivables, liabilities and transactions with related parties
There has been no related party transactions which come under the disclosure obligation during the financial year.
Off-balance sheet assets
As of 31 December 2017 there were EUR 1 310 415,13 of government's funds in the company's possession. The company manages government's funds according to the agreement with the Ministry for Foreign Affairs of the implementation of the Finnpartnership business partnership programme.
Exchange rate
31 December 2017 | EUR/USD | 1.1993 | ||||
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
www.finnfund.fi