AI assistant
ageas SA/NV Annual Report 2013
3905_10-k_2014-04-03_8744bef4-cbca-458b-824a-244985235a91.pdf
Annual Report
Open in viewerOpens in your device viewer
Annual Report 2013
Ageas Finance N.V.
Ageas Finance N.V.
Archimedeslaan 6
3584 BA Utrecht (the Netherlands)
Tel. +31 (0)30 252 53 04
Fax +31 (0)30 252 53 10
Your partner in Insurance
Utrecht
ageas
Contents
Annual Report 2013 Ageas Finance N.V. 1
Report of the Board of Directors of Ageas Finance N.V. on the 2013 financial year. 4
Financial statements 2013 7
Statement of Financial position 8
Income Statement and Statement of Comprehensive Income 9
Statement of changes in net equity 10
Statement of cash flows 11
General notes 13
Accounting policies 13
General 13
Notes to the financial statements 18
1. Due from group companies 19
2. Derivatives and other receivables 19
3. Cash and cash equivalents 19
4. Capital and reserves 20
5. Interest-bearing loans and borrowings 20
6. Due to banks 21
7. Accrued interest and other liabilities 22
8. Net financial margin 22
9. Operating expenses 23
10. Income taxes 23
11. Risk management 25
12. Related parties 28
13. Operating segments 28
14. Off-balance sheet items 28
15. Management remuneration 28
16. Contingent liabilities 29
17. Post-balance sheet date events 29
Other information 30
Provisions of the articles of association concerning profit appropriation 30
Profit appropriation 30
Independent auditor's report Error! Bookmark not defined.
All amounts in the tables of these Financial Statements are denominated in thousands of euros, unless stated otherwise.
Report of the Board of Directors of Ageas Finance N.V. on the 2013 financial year
Annual Report Ageas Finance N.V.
2013 | 3
ageas
Report of the Board of Directors of Ageas Finance N.V. on the 2013 financial year.
General
In the past Ageas Finance N.V. operated as the window to the financial markets for Ageas entities by issuing both short-term and long-term debt securities under a Belgian/Dutch Commercial Paper program and a Euro Medium Term Note (EMTN) program. Proceeds were primarily on-lent to Ageas holding entities, to finance leverage that existed at this level in the group. ageas SA/NV (former Fortis SA/NV) in Belgium provided several guarantees for debt issued by Ageas Finance N.V.
Confronted with the international financial crisis, Ageas has undergone a complete metamorphosis. In 2008 its Dutch banking and insurance activities have been sold to the Dutch State, while the other banking activities have been sold to the Belgian State, which in turn sold 75% of Fortis Bank NV/SA to BNP Paribas.
The sale of a number of material group companies stated above implied that a default was triggered under the EMTN program, which could not be cured. As a result, holders of Ageas Finance N.V. bonds are at all times entitled to demand the early redemption of their bonds in accordance with Conditions 7(a)(vii) and 7(a)(ix) of the Terms and Conditions. For all bonds other than structured notes, such redemption takes place at par value plus accrued interest until the date of effective early redemption. Ageas Finance N.V. has a quarterly early redemption request procedure in place to facilitate such redemptions. On 31 December 2013 EUR 68 million of the EMTN notes remained outstanding, versus EUR 187 million at year end 2012.
The loan that Ageas Finance N.V. granted in 2010 to Ageas Insurance International N.V. includes options to ask for early redemption at par, in case early redemption requests on the outstanding bonds emerge.
The shares of Ageas Finance N.V. are indirectly held by ageas SA/NV via Ageas Insurance International N.V. Ageas Insurance International N.V. is the direct and sole shareholder of Ageas Finance N.V.
International Financial Reporting Standards
The Ageas Finance N.V. Financial Statements, including the 2012 and 2011 comparative figures, are prepared in accordance with IFRS and its Interpretations – at 31 December 2013 and as adopted by the European Union. For IAS 39, Financial Instruments: Recognition and Measurement, the execution regarding hedge accounting (the so-called 'carve out') decreed by the European Union on 19 November 2004 is taken into account.
Where accounting policies are not specifically mentioned below, reference should be made to the IFRS as adopted by the European Union.
The accounting policies used to prepare the Financial Statements for 2013 are consistent with those applied in the Financial Statements for the year ended 31 December 2012.
According to the accounting policies Ageas opted to fair value part of its assets and liabilities, while other parts are valued at amortised cost. With a view at the early redemption process described above, whereby the EMTN debt is redeemable at par value, Ageas Finance N.V. assumed that this par value represents the best estimate of their fair value, except if trades in the publicly listed notes is observed on the Luxembourg stock exchange above 100%; in these cases the listed trade value is used.
4 | 2013
Annual Report Ageas Finance N.V.
ageas.
Results and appropriation of profit
The Board of Directors proposes to the General Meeting of Shareholders to allocate the 2013 net result to the Retained Earnings.
In 2013 Ageas Finance N.V. realised a net loss after tax of EUR 3,397,246 compared to a net loss of EUR 6,887,982 recorded in 2012 and a loss of EUR 5,320,790 in 2011. The recorded losses are predominantly due to the loss in value of Interest Rate Swaps (IRS). These IRS are used to hedge the interest position of the company, and they lose value due to the fact that these IRS get closer to their maturity date. Ageas Finance N.V. is part of the corporate income tax unity in the Netherlands. Due to the overall loss position of the tax unity and the lack of future tax basis, no tax compensation was possible.
Risk management
Exposure to interest rate risk arises in the normal course of Ageas Finance N.V. business. The board decided to use derivative financial instruments to economically hedge exposure to fluctuations in interest rates on a deal by deal basis. The early redemption of notes leads to open currency and interest positions. The board monitors these risks on a day by day basis and minimises the open positions if and when economically possible.
Ageas Finance N.V. has a significant concentration of credit risks. One loan granted to Ageas Insurance International N.V. represents 96% of Assets held at year end 2013. Ageas Insurance International N.V. is rated A-minus at Fitch Ratings, while its parent Ageas SA/NV is rated BBB- (Positive) by Standard & Poor's, Baa3 (Negative) by Moody's and BBB+ (Stable) by Fitch Ratings.
Prospects
The annual accounts are prepared based on the going concern assumption.
The outstanding debt of Ageas Finance is in default. Due to cross default language in the terms and conditions of the EMTN programme, any new issued loan would immediately default; Ageas Finance N.V. therefore will not issue new bonds until the last defaulted bond is redeemed, which could take up to 2015. After the last redemption, management will review the future for the company. If bonds remain outstanding up to their legal maturity, further losses are to be expected in the coming years. Management believes that the retained earnings of the company at year end 2013 are sufficient to cover for the expected future losses. Nevertheless, the sole shareholder Ageas Insurance International N.V. has provided capital support for an amount up to EUR 20 million at the moment that losses reduce the capital of the company below zero.
Employees
Ageas Finance N.V. has no employees of its own. Its activities are performed by employees of Ageas group companies.
Annual Report Ageas Finance N.V.
ageas.
Corporate Governance Statement
Given the size of the company, the board members of the company are directly involved with the day to day management of the company, while at least two Board members are required to sign for agreements or contracts that legally bind or commit the company. Governance therefore fully relies on the four eye principle.
Reporting is very much focussed on the management of liquidity, as well as managing interest positions arising from the decreasing asset and liability portfolio. The liquidity is monitored daily, while interest position are reported during each board meeting. The company grants loans only to other entities within the Ageas Group. Internal financial reports are produced on a monthly basis and reported in this frequency to the board. The board meets on a quarterly basis. Biannually the company publishes its financial statements, to comply with the transparency guidelines that apply for issuers of listed securities on regulated markets with notes with a par value below EUR 50,000. These half year and annual reports are respectively reviewed and audited by the external auditors. Issues are discussed between auditors and board.
Management representation
Management declares that, to the best of their knowledge, the financial statements prepared in accordance with the applicable set of accounting standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and that the management report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.
For the purpose of best practice provision II.1.5 in the Dutch Corporate Governance Code the Board considers that to the best of its knowledge, the internal risk management and control systems relating to financial reporting risks worked properly in the year under review and provide a reasonable assurance that the Ageas Finance N.V. Financial Statements 2013 do not contain errors of material importance. This statement cannot be construed as a statement in accordance with the requirements of Section 404 of the US Sarbanes-Oxley Act, which is not applicable to Ageas Finance N.V. The Board will continue its commitment to keep in place the internal risk management and control systems in line with the limited activities performed.
Utrecht (NL), 24 March 2014
The Board of Directors:
J.H. Brugman
C.F. Oosterloo
C. Boizard
Annual Report Ageas Finance N.V.
Financial statements 2013
Annual Report Ageas Finance N.V.
2013 | 7
ageas.
Statement of Financial position
(before appropriation of result)
| In thousands of euro | 31 December | 31 December | 31 December | |
|---|---|---|---|---|
| Note | 2013 | 2012 | 2011 | |
| Assets | ||||
| Current assets | ||||
| Due from group companies | 1 | 87,000 | 200,000 | 300,100 |
| Derivatives and other receivables | 2 | 3,254 | 10,598 | 22,879 |
| Cash and cash equivalents | 3 | 82 | 3,713 | 545 |
| Total assets | 90,336 | 214,311 | 323,524 | |
| Equity | ||||
| Issued capital | 125 | 125 | 125 | |
| Retained earnings | 22,520 | 29,408 | 34,729 | |
| Result for the year | (3,397) | (6,888) | (5,321) | |
| Total equity | 4 | 19,248 | 22,645 | 29,533 |
| Liabilities | ||||
| Current liabilities | ||||
| Interest-bearing loans and borrowings | 5 | 68,436 | 186,807 | 256,654 |
| Interest-bearing subordinated loans | - | - | 26,092 | |
| Bank overdrafts | 6 | 200 | - | 1,673 |
| Accrued interest and other liabilities | 7 | 2,452 | 4,859 | 9,572 |
| Total liabilities | 71,088 | 191,666 | 293,991 | |
| Total equity and liabilities | 90,336 | 214,311 | 323,524 |
Annual Report Ageas Finance N.V.
ageas.
Income Statement and Statement of Comprehensive Income
| In thousands of euro | Note | 2013 | 2012 | 2011 |
|---|---|---|---|---|
| Income | ||||
| Financial income | 8 | 8,622 | 11,884 | 38,140 |
| Financial expenses | 8 | (11,915) | (18,729) | (46,722) |
| Net financial margin | (3,293) | (6,845) | (8,582) | |
| Operating expenses | 9 | (104) | (156) | (114) |
| Operating result before tax | (3,397) | (7,001) | (8,696) | |
| Income tax | 10 | - | 113 | 3,375 |
| Result for the year | (3,397) | (6,888) | (5,321) | |
| Other comprehensive income | - | - | - | |
| Total comprehensive income | (3,397) | (6,888) | (5,321) | |
| Total result for the year attributable to shareholders | (3,397) | (6,888) | (5,321) | |
| Total comprehensive income attributable to shareholders | (3,397) | (6,888) | (5,321) |
Annual Report Ageas Finance N.V.
ageas
Statement of changes in net equity
| For the year ended 31 December | 2013 | 2012 | 2011 |
|---|---|---|---|
| In thousands of euro | |||
| Balance beginning of year | 22,645 | 29,533 | 34,854 |
| Profit or loss for the period | (3,397) | (6,888) | (5,321) |
| Balance end of year | 19,248 | 22,645 | 29,533 |
10 | 2013
Annual Report Ageas Finance N.V.
ageas.
Statement of cash flows
| For the year ended 31 December | 2013 | 2012 | 2011 |
|---|---|---|---|
| In thousands of euro | |||
| Cash and cash equivalents – Balance at 1 January | 3,713 | 545 | 1,205,979 |
| Bank Overdrafts – Balance at 1 January | - | (1,673) | (1,212,074) |
| Total cash and cash equivalents/ bank overdrafts at 1 January | 3,713 | (1,128) | (6,095) |
| Cash flows from operating activities | |||
| Net result | (3,397) | (6,888) | (5,321) |
| Net changes in operating assets and liabilities | 4,937 | 8,709 | (3,716) |
| Net cash from operating activities | 1,540 | 1,821 | (9,037) |
| Cash flows from Investing activities | |||
| Payments to customers or cash receipt from customers (deposits, long term loans) | 113,000 | 100,100 | 300,000 |
| Cash flows from financing activities | |||
| Proceeds from derivatives | - | - | 5,913 |
| Cash receipt or repayment of borrowings (subordinated, debt certificates, long term liabilities, straight loans) | (118,371) | (97,080) | (291,909) |
| Net cash from financing activities | (118,371) | (97,080) | (285,996) |
| Cash and cash equivalents– Balance at 31 December | 82 | 3,713 | 545 |
| Bank overdrafts – Balance at 31 December | (200) | - | (1,673) |
| Total cash and cash equivalents/ bank overdrafts at 31 December | (118) | 3,713 | (1,128) |
Annual Report Ageas Finance N.V.
ageas.
General Notes
12 | 2013
Annual Report Ageas Finance N.V.
ageas.
General notes
Ageas Finance N.V. is a company domiciled in The Netherlands. The address is Archimedeslaan 6, 3584 BA Utrecht.
The company is registered with the chamber of Commerce in Utrecht under number 30055940.
The shares of Ageas Finance N.V. are indirectly held by ageas SA/NV via Ageas Insurance International N.V. The latter is the direct and sole shareholder of Ageas Finance N.V.
The main activity of Ageas Finance N.V. is to provide funding to companies within the Ageas group. Funds borrowed in the market are either held in cash at current accounts at banks or lend-on to Ageas companies. Ageas Finance N.V. has relatively low exposure to interest and foreign currency risks.
Ageas Finance N.V. does not employ any personnel; all activities are performed by employees of other Ageas entities.
The financial statements were authorised for issue by the Board of Directors on 24 March 2014.
Accounting policies
General
The annual accounts are prepared based on the going concern assumption.
a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the European Community.
b) Basis of preparation
The financial statements are presented in euro, rounded to the nearest thousand. They are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, and certain interest-bearing loans and borrowings.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates are especially used in establishing the fair value of non market quoted financial instruments.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The accounting policies set out below have been applied consistently to all periods presented in these financial statements.
Annual Report Ageas Finance N.V.
ageas
Ageas Finance N.V. is the financing vehicle of the Ageas group. In principle all funding transactions were lend-on to Ageas Insurance International N.V.; to avoid liquidity risks, the on-loan includes options for Ageas Finance N.V. to ask for early redemption at par, in case early redemption requests on the outstanding bonds emerge. Interest rate risk is limited via usage of derivatives.
Ageas Finance N.V. does not apply hedge accounting.
c) Changes in accounting principles
The following new or revised standards, interpretations and amendments to standards and interpretations have become effective on 1 January, 2013 (and are endorsed by the EU) are applicable for Ageas Finance N.V.
Amendments to IAS 1 Presentation of Items of Other Comprehensive Income
These amendments will require entities to group items presented in other comprehensive income (OCI) on the basis of whether they would be reclassified to (recycled through) profit or loss at a later date, when specified conditions are met.
Amendments to IAS 12 Income taxes
The IASB has added another exception to the principles in IAS 12, the rebuttable presumption that investment property measured at fair value is recovered entirely by sale. The rebuttable presumption also applies to the deferred tax liabilities or assets that arise from investment properties acquired in a business combination, if the acquirer subsequently uses the fair value model to measure those investment properties. The amendment only affects jurisdictions in which there is a so called dual-tax base (the manner in which the carrying amount of an asset (or liability) is recovered, affects the applicable tax rate and/or base).
IFRS 13 Fair Value Measurement
FRS 13 Fair Value Measurement provides guidance on how to measure fair value, but does not change when fair value is required or permitted under IFRS. It introduces some new disclosures which also apply to the interim financial statements.
Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)
The new disclosures require information about:
- the gross amounts of financial assets and financial liabilities before offsetting;
- the amounts set off in accordance with the related offsetting model;
- the net amounts presented in the balance sheet;
- the effect of financial instruments subject to master netting arrangements or similar agreements not already set off in the balance sheet, including related rights to collateral;
- net amounts.
The accounting policies used to prepare these 2013 Financial Statements are consistent with those applied for the year ended 31 December 2012.
14 | 2013
Annual Report Ageas Finance N.V.
ageas.
d) Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to euro at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
e) Financial instruments
(i) Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
A financial instrument is recognised if the company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the company's contractual rights to the cash flows from the financial assets expire or if the company transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the company commits itself to purchase or sell the asset. Financial liabilities are derecognised if the company's obligations specified in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the company's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Accounting for finance income and expense is discussed in note g (Financial income and expenses).
Investments at fair value through profit or loss
An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the company manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.
Other
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.
Annual Report Ageas Finance N.V.
2013 | 15
ageas
(ii) Derivative financial instruments
The company holds derivative financial instruments to hedge its foreign currency, credit risk, equity risk and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised immediately in profit or loss.
f) Impairment
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in profit or loss.
g) Financial income and expenses
Finance income comprises interest income on funds invested, dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, foreign currency gains, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the company's right to receive payment is established, which in the case of quoted securities is the ex-dividend date.
Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, dividends on preference shares classified as liabilities, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method.
16 | 2013
Annual Report Ageas Finance N.V.
ageas.
h) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
i) Fair Value Calculations
A number of the company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Derivatives
The fair value of interest rate swaps is the estimated amount that Ageas Finance N.V. would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The estimate is based on the expected cash flows and the swap interest curve applicable at the moment of valuation. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.
Non-derivative financial instruments
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
Annual Report Ageas Finance N.V.
2013 | 17
Notes to the financial statements
Annual Report Ageas Finance N.V.
2013 | 18
ageas.
1. Due from group companies
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Floating rate loan to Ageas Insurance International N.V. | 87,000 | 200,000 | 300,000 |
| Other short term loans | - | - | 100 |
| Total | 87,000 | 200,000 | 300,100 |
The floating rate loan to Ageas Insurance International N.V. matures on 15 december 2015 and can be called partially with a two days notice by the lender and the loan bears an interest of 1 month euribor + 40 bp.
2. Derivatives and other receivables
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Accrued interest | 2,135 | 4,312 | 11,301 |
| Other receivables and pre-payments | - | - | 354 |
| Fair value derivatives (according to a level 2 valuation) | 1,119 | 6,286 | 11,224 |
| Total | 3,254 | 10,598 | 22,879 |
The derivatives relate to Interest rate swaps. Further details can be found in note 10 Risk Management.
3. Cash and cash equivalents
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Bank balances | 82 | 3,713 | 545 |
| Cash and cash equivalents | 82 | 3,713 | 545 |
Bank balances and are held at BNP Paribas Fortis SA/NV. Other Ageas group entities entrusted cash at accounts at the same bank, and these accounts jointly form a cash pool. In case of defaults of these group companies BNP Paribas Fortis SA/NV is entitled to compensate the cash balances of these entities.
Annual Report Ageas Finance N.V.
ageas.
4. Capital and reserves
The movements in capital and reserves for the years ended 2011, 2012 and 2013 are as follows:
| In thousands of euro | Share capital | Retained earnings | Result for the year | Total |
|---|---|---|---|---|
| Balance at 1 January 2011 | 125 | 37,000 | (2,271) | 34,854 |
| Allocation of profit | - | (2,271) | 2,271 | - |
| Total recognised income and expense | - | - | (5,321) | (5,321) |
| Balance at 31 December 2011 | 125 | 34,729 | (5,321) | 29,533 |
| Allocation of profit | - | (5,321) | 5,321 | - |
| Total recognised income and expense | - | - | (6,888) | (6,888) |
| Balance at 31 December 2012 | 125 | 29,408 | (6,888) | 22,645 |
| Allocation of profit | - | (6,888) | 6,888 | - |
| Total recognised income and expense | - | - | (3,397) | (3,397) |
| Balance at 31 December 2013 | 125 | 22,520 | (3,397) | 19,248 |
The authorised share capital comprised 1,000 ordinary shares, par value of EUR 500; 250 shares were issued and fully paid up. During 2011, 2012 and 2013 no new shares were issued nor bought back by the company.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares are held by Ageas Insurance International N.V.
5. Interest-bearing loans and borrowings
The loans and borrowings can be analysed as follows:
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Senior drawings under EMTN-program | 68,436 | 186,807 | 256,654 |
| Subordinated loans | - | - | 26,092 |
| Total interest bearing loans and borrowing | 68,436 | 186,807 | 282,746 |
| Loans and borrowings at fair value | 33,536 | 89,542 | 104,195 |
| Loans and borrowings at amortised cost | 34,900 | 97,265 | 178,551 |
| Total interest bearing loans and borrowings | 68,436 | 186,807 | 282,746 |
20 | 2013
Annual Report Ageas Finance N.V.
ageas.
The interest bearing loans and borrowings at year end 2013 can be detailed as follows:
| drawings under EMTN-program (by ISIN code) | Legal Maturity date | Nominal amount | Fair value |
|---|---|---|---|
| XS0189131435 | 28-04-2014 | 11,036 | 11,082 |
| XS0193224838 | 18-06-2014 | 19,934 | 20,259 |
| XS0181100834 | 22-12-2015 | 1,808 | 2,195 |
| Securities at fair value, according to a level 2 valuation | 32,778 | 33,536 | |
| XS0181533190 | 15-01-2014 | 24,880 | 24,908 |
| XS0183562957 | 17-02-2014 | 10,020 | 10,062 |
| Securities at amortised cost | 34,900 | 34,970 | |
| Total interest bearing loans and borrowings | 67,678 | 68,505 |
The sale of material group companies by the Fortis Group in 2008 implied that a default was triggered under the EMTN program which could not be cured. As a result, holders of Ageas Finance N.V. bonds are at all times entitled to demand the early redemption of their bonds in accordance with Conditions 7(a)(vii) and 7(a)(ix) of the Terms and Conditions. Such redemption takes place at par value plus accrued interest until the date of effective early redemption. It is assumed that these redemption values represent the proper amortised cost value or best estimate of the fair value, if applicable. However, some notes recorded at fair value may trade above their redemption values; in these cases the observed trading value at the reporting date was used.
The average interest paid on the loans and borrowings was 3.91% in 2013 (2012: 3.71%; 2011: 4.26%).
In note 10, all loans and borrowings are classified according to their legal maturity to represent the maximum Interest rate risk if bondholders await the scheduled redemption date of bonds, while all loans and borrowings are classified with a maturity less than 6 months to represent the maximum liquidity risk when bondholders would all immediately ask for early redemption.
6. Due to banks
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Bank balances | 200 | - | - |
Bank balances are due to ABN Amro Bank N.V. Other Ageas group entities entrusted cash at accounts at the same bank, and these accounts jointly form a cash pool. In case of defaults of these group companies ABN Amro Bank N.V. is entitled to compensate the cash balances of these entities.
Annual Report Ageas Finance N.V.
ageas
7. Accrued interest and other liabilities
| In thousands of euro | |||
|---|---|---|---|
| 2013 | 2012 | 2011 | |
| Accrued interest | 2,395 | 4,801 | 9,520 |
| Payables to group companies | 23 | 5 | - |
| Other payables and accrued expenses | 34 | 53 | 52 |
| Total | 2,452 | 4,859 | 9,572 |
8. Net financial margin
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Interest income loans | 765 | 1,867 | 7,211 |
| Interest income derivatives | 5,909 | 9,993 | 28,552 |
| Interest income cash and cash equivalents | - | - | 1,380 |
| Interest related income | - | 24 | - |
| Foreign exchange gains | - | - | 27 |
| Past prescription interest | 103 | - | - |
| Net gain on re-measurement from borrowings at fair value | 1,845 | - | 970 |
| Financial income | 8,622 | 11,884 | 38,140 |
| Interest expenses loans and borrowings | (5,957) | (9,321) | (17,957) |
| Amortisation costprice derivatives | - | - | (4,447) |
| Interest expenses subordinated loans | - | (273) | (1,639) |
| Interest expenses derivatives | (791) | (3,042) | (13,709) |
| Interest expenses cash and cash equivalents | - | (14) | (1,539) |
| (Un) realised loss on derivatives | (5,167) | (4,938) | (7,431) |
| Net loss on re-measurement from loans at fair value | - | (1,141) | - |
| Financial expenses | (11,915) | (18,729) | (46,722) |
| Net financial margin | (3,293) | (6,845) | (8,582) |
22 | 2013
Annual Report Ageas Finance N.V.
ageas.
9. Operating expenses
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Accounting office fees charged by group companies | 70 | 100 | 100 |
| Bank costs | 3 | 2 | 2 |
| Audit costs | 30 | 53 | 47 |
| Other | 2 | 1 | (35) |
| Total | 104 | 156 | 114 |
The audit costs relate to the fees charged by KPMG Accountants N.V. for the audit of the annual accounts (including half year review) and related matters. The accounting costs are not directly charged to Ageas Finance N.V. but charged via Ageas Insurance International N.V.
10. Income taxes
Ageas Finance N.V. is part of the tax unity for corporation tax Ageas Insurance International N.V. together with Ageas B.V. Ageas Insurance International N.V. acts as the head of this tax unity. Due to the fact that it is not expected that the fiscal unity will generate taxable profits in the coming years, no deferred tax asset has been recorded for unused tax losses. Within the tax unity entities making profit, account for the full tax charge and this amount is allocated to loss making entities based on the taxable losses to these entities.
Due to the fact that the tax unity made an overall tax loss in 2013 and all entities made a loss, no expected tax benefit could be recognised.
The timing differences on which deferred tax should be recognised when the fiscal unity was in a profit situation can be summarised as follows:
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Unrealised part of derivatives | 1,119 | 6,286 | 11,224 |
| Unrealised revaluation of loans | (762) | (2,641) | (1,506) |
| 357 | 3,645 | 9,718 |
Annual Report Ageas Finance N.V.
ageas
Recognised in the income statement
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Current tax | |||
| Current year tax income | - | 113 | 353 |
| Taxation previous years | - | - | 3,022 |
| - | 113 | 3,375 | |
| Total income tax in income statement | - | 113 | 3,375 |
Reconciliation of effective tax rate
| In thousands of euro | 2013 | 2012 | 2011 |
|---|---|---|---|
| Profit before tax(minus = loss) | (3,396) | (7,001) | (8,696) |
| Domestic corporate tax rate | 25.0% | 25.0% | 25.0% |
| Income tax using the domestic corporate tax rate | 849 | 1,750 | 2,149 |
| Reduction due to result in total fiscal unit | (849) | (1,637) | (1,796) |
| (Under) / over stated in prior years | - | - | 3,022 |
| Total income tax expense in income statement | (849) | 113 | 3,375 |
| Effective corporate tax rate | 0% | (1.6%) | (39.0%) |
24 | 2013
Annual Report Ageas Finance N.V.
ageas.
11. Risk management
Exposure to interest rate risk arises in the normal course of Ageas Finance N.V. business. The board decided to use derivative financial instruments to economically hedge exposure to fluctuations in interest rates on a deal by deal basis. The early redemption of notes leads to open interest positions. The open positions are minimised if and when economically possible.
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. Ageas Finance N.V. does not request collateral in respect of financial assets.
Transactions involving derivative financial instruments and cash held are with counterparties with sound credit ratings. Given their high credit ratings, management does not expect these counterparties to fail to meet its obligations. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.
Ageas Finance N.V. has a significant concentration of credit risks. One loan granted to Ageas Insurance International N.V. represents 93% of Assets held at year end 2012. Ageas Insurance International N.V. is rated at A-minus at Fitch Ratings and its parent Ageas SA/NV is rated BBB- (Positive) by Standard & Poor's, Baa3 (Negative) by Moody's and BBB+ (Stable) by Fitch Ratings.
Interest rate risk
In the cause of operations, Ageas Finance N.V. is potentially exposed to interest rate risks, especially since all outstanding bonds are early redeemable. With every early redemption, the interest position changes. Ageas Finance N.V. monitors these risks using duration techniques and gap analysis and manages the position with a view to close open positions that occur due to the early redemptions.
The following table indicates the earlier of contractual re-pricing or maturity of interest income-earning financial assets and interest-bearing financial liabilities as well as the derivatives for a number of time buckets. This does not take into consideration the fact that the loans given and taken are directly callable at year end.
Annual Report Ageas Finance N.V.
ageas
| 5 years | ||||||
|---|---|---|---|---|---|---|
| less than 6 months | 6 up to 12 months | 1 up to 2 years | 2 up to 5 years | And over | total | |
| At 31 December 2013 | ||||||
| In thousands of euro | ||||||
| Financial assets | 87,000 | - | - | - | - | 87,000 |
| Cash and cash equivalents/ bank overdrafts | (118) | - | - | - | - | (118) |
| Financial liabilities | (66,242) | (2,194) | - | (68,436) | ||
| Interest GAP on balance | 20,640 | - | (2,194) | - | - | 18,446 |
| Net interest GAP | 20,640 | (2,194) | - | - | 18,446 | |
| 5 years | ||||||
| At 31 December 2012 | less than 6 months | 6 up to 12 months | 1 up to 2 years | 2 up to 5 years | And over | total |
| In thousands of euro | ||||||
| Financial assets | 200,000 | - | - | - | - | 200,000 |
| Cash and cash equivalents | 3,713 | - | - | - | - | 3,713 |
| Financial liabilities | (60,075) | (55,478) | (68,867) | (2,387) | - | (186,807) |
| Interest GAP on balance | 143,638 | (55,478) | (68,867) | (2,387) | - | 16,906 |
| Derivatives | (125,000) | 50,000 | 75,000 | - | - | - |
| Net interest GAP | 18,638 | (5,478) | 6,133 | (2,387) | - | 16,906 |
| 5 years | ||||||
| At 31 December 2011 | less than 6 months | 6 up to 12 months | 1 up to 2 years | 2 up to 5 years | And over | total |
| In thousands of euro | ||||||
| Financial assets | 300,100 | - | - | - | - | 300,100 |
| Cash and cash equivalents/ bank overdrafts | (1,128) | - | - | - | - | (1,128) |
| Financial liabilities | (66,547) | (25,608) | (118,857) | (71,734) | - | (282,746) |
| Interest GAP on balance | 232,425 | (25,608) | (118,857) | (71,734) | - | 16,226 |
| Derivatives | (175,000) | - | 100,000 | 75,000 | - | - |
| Net interest GAP | 57,425 | (25,608) | (18,857) | 3,266 | - | 16,226 |
26 | 2013
Annual Report Ageas Finance N.V.
ageas.
Liquidity risk
Liquidity risk is the risk that Ageas Finance N.V. has not sufficient cash to pay loans when these become due. The following table indicates the maturity of interest income-earning financial assets and interest-bearing financial liabilities. Since the assets and liabilities became directly callable in the course of 2008, all assets and liabilities are since that moment classified with a maturity of less than 6 months:
| Maturity schedule 2013 | less than 6 months | 6 up to 12 months | 1 up to 2 years | 2 up to 5 years | 5 years And over | total |
|---|---|---|---|---|---|---|
| In thousands of euro | ||||||
| Due from group companies | 87,000 | - | - | - | - | 87,000 |
| Cash and cash equivalent/ bank overdrafts | (118) | - | - | - | - | (118) |
| Financial liabilities | (68,436) | - | - | - | - | (68,436) |
| Liquidity Excess (GAP) | 18,446 | - | - | - | - | 18,446 |
| Maturity schedule 2012 | less than 6 months | 6 up to 12 months | 1 up to 2 years | 2 up to 5 years | 5 years And over | Total |
| --- | --- | --- | --- | --- | --- | --- |
| In thousands of euro | ||||||
| Due from group companies | 200,000 | - | - | - | - | 200,000 |
| Cash and cash equivalent | 3,713 | - | - | - | - | 3,713 |
| Financial liabilities | (186,807) | - | - | - | - | (186,807) |
| Liquidity Excess (GAP) | 16,906 | - | - | - | - | 16,906 |
| Maturity schedule 2011 | less than 6 months | 6 up to 12 months | 1 up to 2 years | 2 up to 5 years | 5 years And over | Total |
| --- | --- | --- | --- | --- | --- | --- |
| In thousands of euro | ||||||
| Due from group companies | 300,100 | - | - | - | - | 300,100 |
| Cash and cash equivalents/ bank overdrafts | (1,128) | - | - | - | - | (1,128) |
| Financial liabilities | (282,746) | - | - | - | - | (282,746) |
| Liquidity Excess (GAP) | 16,226 | - | - | - | - | 16,226 |
Sensitivity analysis
In managing interest rate risks Ageas Finance N.V. aims to reduce the impact of fluctuations on the earnings. Due to the fact that the loans and borrowings are daily callable, a useful indication of the sensitivity at year end can not be given.
Annual Report Ageas Finance N.V.
ageas
12. Related parties
Parties related to Ageas Finance N.V. include Ageas group companies, Board Members, Executive Managers, close family members of any individual referred to above and other related entities.
Ageas Finance granted a EUR 900 million loan to Ageas insurance International N.V. in 2010, on the same commercial and market terms that apply to non-related parties. Partial early redemptions of the loan amounted to EUR 300 million in 2011, EUR 100 million in 2012 and EUR 113 mio in 2013, leading to EUR 68 million remaining outstanding at year end 2013; EUR 1 mio interest was received over the loan during 2013.
Ageas Finance N.V. has no employees of its own; all operational and management activities are performed by employees of other Ageas entities. The activities are charged to Ageas Finance N.V. based on Service level agreements.
13. Operating segments
Ageas Finance N.V., being an issuing vehicle of the Ageas Group, operated as one segment: it tapped the financial market for funding, that was on-lent to internal group entities. Given the default of the bonds that Ageas Finance N.V. issued, all internal clients redeemed their on-loans, although one new loan was granted. Besides paying coupons on debt outstanding, redeeming the principal of debt at maturity or earlier when bondholders request this and reducing the granted loan in function of these redemptions, the company is in-active.
14. Off-balance sheet items
Capital support
Given the uncertainty and the potential losses in the coming years the sole shareholder Ageas Insurance International N.V. has provided capital support for an amount up to EUR 20 million at the moment that losses reduce the capital of the company below zero.
Taxation unities
Ageas Finance N.V. is part of the tax unity for corporation tax Ageas Insurance International N.V. together with Ageas B.V. Ageas Insurance International N.V. acts as the head of this tax unity. Each of the companies is, in accordance with the standard conditions, jointly and severally liable for debts arising out of corporation tax on the part of the group tax unity as a whole. Within the tax unity, entities making profit, account for the full tax charge and this amount is allocated based on the taxable losses tot the other entities.
Ageas Finance N.V. is part of the "fiscale eenheid voor de omzetbelasting Ageas N.V. c.s." a fiscal unity for VAT (Value Added Tax) in the Netherlands.
15. Management remuneration
The board of directors receives their remuneration from other Ageas Group companies. No remunerations are charged directly to Ageas Finance N.V.
28 | 2013
Annual Report Ageas Finance N.V.
ageas.
16. Contingent liabilities
We have taken notice of the disclosure on Contingent Liabilities in the 2013 Consolidated Financial Statements of Ageas in which is mentioned that Ageas is or can be involved in a number of legal procedures as well as administrative and criminal investigations in Belgium, The Netherlands and the USA. Ageas Finance N.V. is of the opinion that these procedures are not likely to lead to a substantial claim liability for Ageas Finance N.V.
17. Post-balance sheet date events
There have been no material events after balance sheet date that would require adjustments to the financial statements as of 31 December 2013.
Utrecht (NL), 24 March 2014.
The Board of Directors:
J.H. Brugman
C.F. Oosterloo
C. Boizard
Annual Report Ageas Finance N.V.
ageas
Other information
Provisions of the articles of association concerning profit appropriation
Article 18, subsection 1 and 2, of the Articles of Association reads:
The company may make distributions to the shareholders and other persons entitled to the profit available for distribution only in so far as the equity capital of the company exceeds the aggregate of the paid-up and called-up part of the capital of the company and the reserves that have to be kept by law.
Profits may be distributed only after adoption of the annual accounts showing that such distribution is permissible.
The profit shown in the adopted annual accounts may be disposed of by the general meeting of shareholders as it sees fit.
Profit appropriation
The Board of Directors proposes to the General meeting of shareholders to deduct the loss from the Retained Earnings.
30 | 2013
Annual Report Ageas Finance N.V.
ageas.
Independent auditor's report
To: the General Meeting of Shareholders of Ageas Finance N.V.
Report on the financial statements
We have audited the accompanying financial statements 2013 of Ageas Finance N.V., Utrecht, which comprise the statement of financial position as at 31 December 2013, the statements of comprehensive income, changes in equity and cash flows for the year then ended and notes, comprising a summary of the significant accounting policies and other explanatory information.
Management's responsibility
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the annual report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of Ageas Finance N.V. as at 31 December 2013 and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirements under Section 2:393 sub 5 at e and f of the Netherlands Civil Code, we have no deficiencies to report as a result of our examination whether the annual report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b - h has been annexed. Further, we report that the annual report, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Netherlands Civil Code.
Amstelveen, 24 March 2014
KPMG Accountants N.V.
W.G. Bakker RA
Annual Report Ageas Finance N.V.