Notes to the consolidated balance sheet: liabilities

13. Short-term credits

2011

2010

Collateral received

296,880

231,431

Deposits placed by financial institutions

260,780

47,159

Short-term credits

557,660

278,590

14. Debt securities

Debt securities include all non-subordinated debt, not identified as debentures or other notes payable to banks. Debt securities do not include savings deposits.

Debt securities consist of loans and deposits raised in the international capital market from professional counterparties. The movements of debt securities are summarized as follows:

2011

2010

Balance at January 1

51,667

50,937

Amortization of premiums/discounts

-2,631

1,253

Proceeds from issuance

681

3,910

Redemptions

-27,335

-3,415

Changes in fair value

-887

-1,018

Exchange rate differences

934

-

Balance at December 31

22,429

51,667

The following table summarizes the carrying value of the debt securities.

2011

2010

Debt securities valued at fair value under hedge accounting

15,622

42,311

Debt securities valued at amortized costs

6,807

9,356

Balance at December 31

22,429

51,667

The nominal amounts of the debt securities are as follows:

2011

2010

Debt securities valued at fair value under hedge accounting

10,289

34,140

Debt securities valued at amortized costs

6,807

9,356

Balance at December 31

17,096

43,496

15. Debentures and notes

Debentures and notes consist of medium-term notes under the GMTN program and public issues in the Swiss franc (CHF) public market, the Japanese yen (JPY) Samurai market, the Australian dollar (AUD) market, and the Canadian dollar (CAD) market. The movements can be summarized as follows:

2011

2010

Balance at January 1

2,313,600

2,129,554

Amortization of premiums/discounts

2,964

7,248

Proceeds from issuance

460,556

432,888

Redemptions

-247,969

-484,348

Changes in fair value

22,193

-4,162

Exchange rate differences

104,767

232,420

Balance at December 31

2,656,111

2,313,600


The following table summarizes the carrying value of the debentures and notes.

2011

2010

Debentures and notes valued at fair value under the fair value option

-

36,011

Debentures and notes valued at fair value under hedge accounting

1,919,296

1,636,883

Debentures and notes valued at amortized costs

736,815

640,706

Balance at December 31

2,656,111

2,313,600

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

2011

2010

Debentures and notes valued at fair value under the fair value option

-

35,923

Debentures and notes valued at fair value under hedge accounting

1,845,135

1,566,404

Debentures and notes valued at amortized costs

736,815

640,706

Balance at December 31

2,581,950

2,243,033

16. Other liabilities

2011

2010

Amortized costs related to guarantees

644

881

Liabilities for guarantees

13,544

27,495

Other liabilities

-

262

Balance at December 31

14,188

28,638

17. Current accounts with State funds and other programs

2011

2010

Current account MASSIF

-

4

Current account European Investment Bank

624

1,244

Balance at December 31

624

1,248

18. Accrued liabilities

2011

2010

Accrued interest on banks, debt securities and debentures and notes

45,049

40,292

Other accrued liabilities

10,050

10,666

Balance at December 31

55,099

50,958

19. Provisions

The amounts recognized in the balance sheet are as follows.

2011

2010

Pension schemes

16,141

16,704

Other provisions

52

383

Balance at December 31

16,193

17,087

Pension schemes

FMO has established a number of pension schemes covering all its employees. Most of the pension schemes are average salary-defined benefit plans. FMO has outsourced the management of the pension assets to an asset manager. FMO has agreed strict guidelines 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 latest actuarial valuations were carried out as per December 31, 2011.

The amounts recognized in the balance sheet are as follows:

2011

2010

Present value of funded defined benefit obligations

88,224

83,344

Fair value of plan assets

-88,531

-74,023

-307

9,321

Unrecognized actuarial gains/(losses)

16,448

7,383

Liability in the balance sheet

16,141

16,704

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

2011

2010

Fair value at January 1

-74,023

-61,087

Expected return on plan assets

-3,795

-3,520

Employer contribution

-3,924

-4,529

Plan participants' contributions

-906

-860

Actuarial (gains) / losses

-7,670

-5,673

Benefits paid

1,787

1,646

Fair value at December 31

-88,531

-74,023

Determination of expected return on assets

An important element for financial reporting is the assumption for return on assets (ROA). The ROA is updated at least annually, taking into consideration the pension plan's asset allocation, historical returns on the types of assets held in the fund and the current economic environment. Based on these factors, it is expected that the fund's assets will earn an average percentage per year over the long term. This estimate takes into account a deduction for administrative expenses and investment manager's fees paid from the fund. For estimation purposes, it is assumed the long-term asset mix will be consistent with the current mix. Changes in the asset mix could impact the amount of recorded pension income or expense, the funded status of the plan, and the need for future cash contributions. The actual return on plan assets was 14.4% (2010: 14.3%).

The categories of the plan assets can be summarized as follows:

2011

(%)

2010

(%)

Equities

19

23

Fixed income

81

77

100

100

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

2011

2010

Present value at January 1

83,344

69,115

Service cost

4,442

3,817

Interest cost

3,883

3,620

Actuarial (gains) / losses

-1,658

8,438

Benefits paid

-1,787

-1,646

Present value at December 31

88,224

83,344

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

2011

2010

Current service cost

4,817

4,597

Interest cost

3,883

3,620

Actuarial (gains) / losses

-

-428

Expected return on plan assets

-3,795

-3,520

4,905

4,269

Contribution by plan participants

-906

-860

Total annual expense

3,999

3,409

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

2011

2010

Balance at January 1

16,704

18,545

Annual expense

3,999

3,409

Contributions paid

-4,092

-4,706

Other payments

-470

-544

Balance at December 31

16,141

16,704

The principal assumptions used for the purpose of the actuarial valuations at year-end were as follows:

2011

(%)

2010

(%)

Discount rate

4.5

4.5

Expected return on plan assets

4.9

5.0

Expected long-term wage inflation

2.0

2.0

Future pension increases

2.1

2.0

The assumption for future pension increases is based on all pension schemes included in FMO's pension liability.

Other provisions

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

2011

2010

Balance at January 1

383

120

Addition

52

383

Release

-8

-74

Paid out

-375

-46

Balance at December 31

52

383

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.

2011

2010

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

2011

2010

Share premium reserve shareholder A, contributed on the transfer to the company of investments administered on behalf of the State at the time of the financial restructuring

8,061

8,061

Share premium reserve shareholder B, contributed on the transfer to the company of investments administered on behalf of the State on the financial restructuring

21,211

21,211

Balance at December 31

29,272

29,272

Other reserves

Dividend distributed in 2011 to shareholders of A shares and B shares was equal and amounted to €4.66 (2010: €3.81) per share.

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 'other 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 (€37,260) 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, 2010

46,494

7,194

53,688

Fair value changes

54,591

3,960

58,551

Foreign exchange differences

18,436

-

18,436

Transfers due to sale

-15,963

-853

-16,816

Transfers due to impairment

5,031

-

5,031

Tax effect

-

-793

-793

Balance at December 31, 2010

108,589

9,508

118,097

Fair value changes

60,201

5,241

65,442

Foreign exchange differences

12,224

-

12,224

Transfers due to sale

-22,103

-

-22,103

Transfers due to impairment

3,786

-

3,786

Tax effect

-

-1,245

-1,245

Balance at December 31, 2011

162,697

13,504

176,201

Included in the available for sale reserve is an amount of €10,136 (2010: €178) for fair value changes in equity investments that were previously impaired.

Translation reserve

2011

2010

Balance at January 1

2,295

552

Change

1,209

1,565

Release due to sale

-

178

Balance at December 31

3,504

2,295

Non-controlling interests

Blauser S.A.

2011

2010

Balance at January 1

174

-

Acquisition by third party of non-controlling share

-13

8

Share in net profit

289

166

Currency translation movement

-29

-

Balance at December 31

421

174