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E Notes to the balance sheet
                     
E1 Loans and receivables from credit institutions
                     
              Finnvera Group Finnvera plc
(EUR 1,000)       31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Payable on demand       892,555 556,149 847,523 508,667
Other       29,936 31,975 7,555 7,873
Total       922,491 588,125 855,078 516,540
                     
                     
E2 Loans and receivables from customers
                     
              Finnvera Group Finnvera plc
(EUR 1,000)     31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Loans     5,827,299 5,347,182 1,067,468 1,130,813
- Subordinated loans     16,797 20,604 15,831 18,813
- Other loans     5,856,421 5,386,154 1,097,556 1,171,575
- Impairment losses     -45,919 -59,575 -45,919 -59,575
Loans to Group companies         2,500,398 1,641,451
Guarantee receivables     26,259 34,282 26,259 34,282
Receivables from export credit guarantee and special guarantee operations 224,476 12,164 224,476 12,164
- Fee and commission receivables   212 198 212 198
- Receivables from reinsurance   83,521 0 83,521 0
- Nominal value of recovery receivables   202,708 21,616 202,708 21,616
- Book value of recovery receivables on 31 Dec   133,444 3,587 133,444 3,587
- Impairment losses on recovery receivables   -69,264 -18,029 -69,264 -18,029
- Other export and recovery receivables   7,298 8,378 7,298 8,378
- Recovery receivables   224,264 11,966 224,264 11,966
Total   6,078,034 5,393,628 3,818,600 2,818,709
Impairment losses on loans          
Impairment losses at the beginning of the period   59,575 85,712 59,575 85,712
- Impairment losses on individually assessed loans   27,830 46,464 27,830 46,464
- Impairment losses on collectively assessed loans   31,745 39,248 31,745 39,248
Impairment losses recognised during the period   -9,142 -3,585 -9,142 -3,585
- Impairment losses on individually assessed loans   -368 9,796 -368 9,796
- Impairment losses on collectively assessed loans   -5,814 -7,503 -5,814 -7,503
- Reversal of impairment losses   -2,817 -4,078 -2,817 -4,078
- Other changes   -142 -1,800 -142 -1,800
Credit losses materialised on loans where impairment losses have been recognised -4,515 -22,553 -4,515 -22,553
Impairment losses at the end of the period   45,919 59,575 45,919 59,575
- Impairment losses on individually assessed loans   19,987 27,830 19,987 27,830
- Impairment losses on collectively assessed loans   25,932 31,745 25,932 31,745
 
An impairment loss on loans and other receivables is recognised when objective evidence of their impairment exists. The objective evidence of a customer's ability to fulfil its obligations is based on the customers' risk classification as well as on the Company's experience and the management's estimate of effect of defaults on the recovery of loan receivables.
                     
                     
E3 Investments
                     
              Finnvera Group Finnvera plc
(EUR 1,000) 31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Debt securities, available-for-sale            
Certificates of deposits and bonds     1,694,569 1,579,206 1,694,569 1,579,206
Commercial papers     193,425 164,020 193,425 164,020
Local authority paper     97,211 219,489 97,211 219,489
Other     57,216 51,671 57,216 51,671
Total     2,042,422 2,014,386 2,042,422 2,014,386
Investments in Group companies            
Acquisition cost at 31 Dec         128,403 192,818
- Acquisition cost at 1 Jan         192,818 177,818
- Investments         5,000 15,000
- Sales         -56,059 0
- Other deductions         -13,356 0
Accumulated impairment losses at 31 Dec         -44,935 -43,003
- Accumulated impairment losses at 1 Jan         -43,003 -18,003
- Impairment losses during the period         -1,932 -25,000
Total                 83,468 149,815
Investments in associated companies *)            
Acquisition cost at 31 Dec     23,748 71,830 0 0
- Acquisition cost at 1 Jan     71,830 65,676 0 349
- Sale of Seed Fund Vera Ltd to a buyer outside the Group     -43,194      
- Investments     2,426 5,838 0 0
- Sales     -7,314 317 0 -349
Equity adjustments at 31 Dec     -771 -14,294 0 0
- Reclassifications to assets held for sale (E23)     -8,003 -37,676    
Total     14,974 19,860 0 0
Other shares **)            
At fair value through profit or loss     0 0 0 0
Available-for-sale     37,392 24,409 27,409 14,520
Total     37,392 24,409 27,409 14,520
Investments total     2,094,788 2,058,655 2,153,299 2,178,721
                     
*) Investments in associated companies: investments by subsidiaries engaged in venture capital investments in the Group.
**) Other shares that are publicly quoted  
              Finnvera Group Finnvera plc
(EUR 1,000)       31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
- Other shares   10,314 10,340 331 451
                     
                     
E4 Intangible assets
                     
              Finnvera Group Finnvera plc
(EUR 1,000)       31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Acquisition cost at 31 Dec     44,039 40,302 43,917 40,166
- Acquisition cost at 1 Jan     40,302 38,650 40,166 38,487
- Additions     3,750 1,680 3,750 1,680
- Disposals     -70 -28 -57 0
Accumulated amortisation and impairment losses at 31 Dec     -36,920 -35,854 -36,800 -35,734
- Accumulated amortisation and impairment losses at 1 Jan     -35,854 -35,222 -35,734 -35,108
- Amortisation for the period     -1,066 -632 -1,066 -626
Carrying amount at 1 Jan     4,447 3,426 4,432 3,379
Carrying amount at 31 Dec     7,062 4,447 7,059 4,431
                     
                     
E5 Property, plant and equipment
                     
          Finnvera Group Finnvera plc
(EUR 1,000)   Properties Other tangible Total Properties Other tangible Total
31 Dec 2016              
Acquisition cost at 31 Dec   5,112 12,794 17,906 5,112 12,794 17,906
- Acquisition cost at 1 Jan   5,277 11,527 16,804 5,277 11,527 16,804
- Additions   0 1,333 1,333 0 1,333 1,333
- Disposals   -164 -66 -231 -164 -66 -231
Accumulated amortisation and impairment losses at 31 Dec   -5,112 -11,362 -16,475 -5,112 -11,362 -16,475
- Accumulated amortisation and impairment losses at 1 Jan   -5,112 -10,102 -15,214 -5,112 -10,102 -15,214
- Amortisation for the period   0 -1,260 -1,260 0 -1,260 -1,260
Carrying amount at 1 Jan   164 1,425 1,589 164 1,425 1,589
Carrying amount at 31 Dec   0 1,431 1,431 0 1,431 1,431
31 Dec 2015              
Acquisition cost at 31 Dec   7,054 11,527 18,581 7,054 11,527 18,581
- Acquisition cost at 1 Jan   7,054 10,894 17,948 7,054 10,894 17,948
- Additions   0 662 662 0 662 662
- Disposals   0 -29 -29 0 -29 -29
Accumulated amortisation and impairment losses at 31 Dec   -6,890 -10,102 -16,992 -6,890 -10,102 -16,992
- Accumulated amortisation and impairment losses at 1 Jan   -6,883 -9,723 -16,606 -6,883 -9,723 -16,606
- Amortisation for the period   -7 -379 -386 -7 -379 -386
Carrying amount at 1 Jan   171 1,171 1,342 171 1,171 1,342
Carrying amount at 31 Dec   164 1,425 1,589 164 1,425 1,589
                     
                     
E6 Other assets
                     
              Finnvera Group Finnvera plc
(EUR 1,000)       31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Credit loss receivables from the state and the ERDF     8,731 13,316 8,731 13,316
Other     2,328 4,790 11,607 1,914
Total     11,059 18,106 20,338 15,230
 
The state and the European Regional Development Fund (ERDF) has granted Finnvera commitments to partially compensate Finnvera for the credit and guarantee losses. The commitments enable Finnvera to take higher risks in domestic business than financiers operating on commercial grounds.
                     
                     
E7 Prepayments and accrued income
                     
              Finnvera Group Finnvera plc
(EUR 1,000)       31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Interest and interest subsidy receivables     51,643 30,452 30,255 15,012
Fee and commission receivables     3,332 4,798 4,046 5,921
Reinsurance premiums paid in advance     17,063 23,934 17,063 23,934
Security given for derivatives     156,080 86,710 156,080 86,710
Prepayments and other accrued income     5,938 2,731 4,087 2,531
Total     234,057 148,625 211,531 134,107
                     
                     
E8 Tax assets and liabilities
                     
                  Finnvera Group
(EUR 1,000)         31 Dec 2016 31 Dec 2015
Income tax assets       0 0
Deferred tax assets at 31 Dec       2,145 0
- Deferred tax assets at 1 Jan       0 0
- Increase/decrease to income statement during the period       2,145 0
- Increase/decrease to other items in comprehensive income during the period       0 0
Tax assets total       2,145 0
Current income tax liabilities       302 874
Deferred tax liabilities at 31 Dec       2,047 1,990
- Deferred tax liabilities at 1 Jan       1,990 2,609
- Increase/decrease to income statement during the period       42 -214
- Increase/decrease to other items in comprehensive income during the period       16 -405
Tax liabilities total       2,350 2,864
 
Deferred tax liability arisen when the venture capital investments of subsidiaries engaged in venture capital investment are carried at fair value and investments in funds are carried at fair value. Finnvera plc is exempt from income tax.
                     
                     
E9 Liabilities to credit and other institutions
                     
          Finnvera Group Finnvera plc
(EUR 1,000)   Nominal value Change in fair value Carrying amount Nominal value Change in fair value Carrying amount
31 Dec 2016              
Liabilities to credit institutions   213,452 0 213,452 213,452 0 213,452
Liabilities to other institutions              
- At fair value through profit or loss   40,519 957 41,476 0 0 0
- At amortised cost   2,297,067 0 2,297,067 75,793 0 75,793
Total   2,551,038 957 2,551,995 289,245 0 289,245
31 Dec 2015              
Liabilities to credit institutions   0 0 0 0 0 0
Liabilities to other institutions              
- At fair value through profit or loss   38,148 1,308 39,456 0 0 0
- At amortised cost   2,615,590 0 2,615,590 67,985 0 67,985
Total   2,653,738 1,308 2,655,046 67,985 0 67,985
                     
                     
E10 Debt securities in issue
                     
            Finnvera Group
(EUR 1,000)     Carrying amount 1 Jan Increase/ decrease Change in fair value Change in currency exchange rate Carrying amount 31 Dec
31 Dec 2016              
Bonds              
- At fair value through profit or loss     3,957,734 876,986 32,500 24,653 4,891,873
Total     3,957,734 876,986     4,891,873
Average interest rate *)             0.9050 %
31 Dec 2015              
Bonds            
- At fair value through profit or loss   2,564,141 1,233,414 9,431 150,749 3,957,734
Total   2,564,141 1,233,414     3,957,734
Average interest rate *)           0.9300 %
 
            Finnvera plc
(EUR 1,000)     Carrying amount 1 Jan Increase/ decrease Change in fair value Change in currency exchange rate Carrying amount 31 Dec
31 Dec 2016              
Bonds              
- At fair value through profit or loss     3,957,734 876,986 32,500 24,653 4,891,873
Total     3,957,734 876,986 32,500 24,653 4,891,873
Average interest rate *)             0.3360 %
31 Dec 2015              
Bonds              
- At fair value through profit or loss     2,564,141 1,233,414 9,431 150,749 3,957,734
Total     2,564,141 1,233,414 9,431 150,749 3,957,734
Average interest rate *)             0.2000 %
               
 
Liabilities have been measured at fair value when they have been hedged with derivatives (fair value option). An amount equaling the nominal value of a liability is repaid at the maturity date. The change in fair value does not include the change in credit risk because the liabilities have been guaranteed by the state of Finland, whose credit risk has not changed.
*) Average interest rate for the parent company and the Group is calculated as average interest rate for all interest-bearing loans.
                     
                     
E11 Derivatives
                     
(EUR 1,000)   Finnvera Group Finnvera plc
          Fair value Nominal value Fair value Nominal value
          Positive Negative Total Positive Negative Total
31 Dec 2016              
Contracts entered in hedging purposes              
- Interest rate swaps and foreign exchange derivatives   110,649 212,553 4,890,194 110,649 208,334 4,849,676
Total   110,649 212,553 4,890,194 110,649 208,334 4,849,676
31 Dec 2015              
Contracts entered in hedging purposes              
- Interest rate swaps and foreign exchange derivatives   115,791 144,228 3,975,430 114,543 144,228 3,937,282
Total   115,791 144,228 3,975,430 114,543 144,228 3,937,282
 
Derivatives hedge liabilities. The derivative contracts and the liabilities hedged with them have been measured at fair value and the changes in their fair values have been recognized in the income statement (fair value option).
Financial assets and liabilities encompassed by hedge accounting are presented in Note E20.
                     
                     
E12 Other liabilities
                     
              Finnvera Group Finnvera plc
(EUR 1,000)   31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Grants under repayment obligation   24,252 24,466 24,252 24,466
Grant from the Ministry of Employment and the Economy to Seed Fund Vera Ltd for venture capital investments 14,653 15,000 14,653 15,000
Prepayments received for ERDF financing   7,598 7,875 7,598 7,875
Accounts payable for debt securities   6,998 0 6,998 0
Other   2,624 4,442 2,581 4,197
Total   56,125 51,782 56,082 51,537
                     
                     
E13 Provisions
                     
              Finnvera Group Finnvera plc
(EUR 1,000)   31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Provision for export credit guarantee losses at 1 Jan   12,280 1,209 12,280 1,209
Provisions made during the period   8,457 8,782 8,457 8,782
Provisions used during the period   -1,053 -1,209 -1,053 -1,209
Other change   -7,729 3,498 -7,729 3,498
Provision for export credit guarantee losses at 31 Dec   11,954 12,280 11,954 12,280
Impairment losses on guarantees at 1 Jan   39,172 53,367 39,172 53,367
- of which individually assessed guarantees   20,519 33,147 20,519 33,147
- of which collectively assessed guarantees   18,653 20,220 18,653 20,220
Guarantee losses realized during the period on which an impairment loss has been earlier recognized -810 -22,619 -810 -22,619
Individually assessed impairment losses recognized during the period   1,830 13,319 1,830 13,319
Collectively assessed impairment losses recognized during the period   -3,775 -1,566 -3,775 -1,566
Reversal of impairment losses   -1,315 -3,417 -1,315 -3,417
Other change   -2,922 88 -2,922 88
Impairment losses on guarantees at 31 Dec   32,180 39,172 32,180 39,172
- of which individually assessed guarantees   17,302 20,519 17,302 20,519
- of which collectively assessed guarantees   14,878 18,653 14,878 18,653
Other provisions 31 Dec   2,653 716 2,653 716
Total   46,786 52,168 46,786 52,168
 
A provision for export credit guarantee losses is recognised when the Group has a constructive and legal obligation to pay a guarantee indemnity, the realisation of the obligation is probable and it can be measured reliably.
A provision for domestic guarantee losses is recognised when objective evidence exists of impairment of guarantees' value. The objective evidence of a customer's ability to fulfil its obligations is based on the customers' risk classification as well as on the Company's experience and the management's estimate of effect of defaults on the recovery of loan receivables.
For individually and collectively assessed provisions entered for the financial period, a negative figure indicates a decrease and a positive figure an increase in provisions.
                     
                     
E14 Operating leases
                     
              Finnvera Group Finnvera plc
(EUR 1,000)   31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Finnvera as the lessee, premises *)          
Non-cancellable minimum lease payments payable for premises eased under operating lease contracts          
Within one year   2,330 3,759 2,330 3,759
Between one and five years   5,217 8,280 5,217 8,280
Later than five years   1,979 1,342 1,979 1,342
Total   9,526 13,381 9,526 13,381
Finnvera as the lessor, premises          
Non-cancellable minimum lease payments payable for premises eased under operating lease contracts          
Within one year   7 36 45 86
Between one and five years   0 0 0 0
Later than five years   0 0 0 0
Total   7 36 45 86
 
*) In August 2016, Finnvera relocated with Finpro and Tekes to joint premises in Team Finland House in the Ruoholahti district of Helsinki.
                     
                     
E15 Accruals and deferred income
                     
              Finnvera Group Finnvera plc
(1 000 e)             31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Interest     37,413 16,488 17,370 2,570
Advance interest payments received     9,686 9,904 9,686 9,904
Guarantee premiums paid in advance *)     261,165 244,620 261,165 244,620
Security received for derivatives     45,400 68,700 45,400 68,700
Other accruals and deferred income     105,028 5,405 113,883 10,936
Total     458,691 345,117 447,505 336,730
 
*) Premiums on export guarantees are usually collected in advance for the entire guarantee period.
                     
E16 Subordinated liabilities, Finnvera plc
                     
                  Finnvera Group
Loan   Purpose of use       Interest rate% Loan period Balance (EUR 1,000)
(EUR 1,000)               31 Dec 2016 31 Dec 2015
Subordinated loan 2009-1 Increase in the share capital of Seed Fund Vera Ltd *) 0 15 years 0 10,589
Subordinated loan 2009-2 Increase in the share capital of Veraventure Ltd *) 0 15 years 7,500 7,500
Subordinated loan 2009-3 Raising Finnvera plc’s capital adequacy and improving the financing options **) 0 15 years 50,000 50,000
Subordinated loan 2013 Increase in the share capital of Seed Fund Vera Ltd *) 0 15 years 0 10,000
Subordinated loan 2014 Increase in the share capital of Seed Fund Vera Ltd *) 0 15 years 2,525 5,000
Subordinated loan 2015 Increase in the share capital of Seed Fund Vera Ltd *) 0 15 years 5,000 5,000
Subordinated loan 2016 Increase in the share capital of Seed Fund Vera Ltd *) 0 15 years 5,000 0
 
*) The loans have been granted to Finnvera for raising the share capital of Seed Fund Vera Ltd and Veraventure Ltd. The loans will be repaid in one instalment at maturity, provided that the sum of the company’s unrestricted equity and all subordinated loans at the time of payment exceeds the loss recorded on the balance sheet adopted for the company’s latest financial period or on a balance sheet included in more recent financial statements. In the event that the venture capital company’s financing operations show a loss, the corresponding amount will be deducted from the loan principals to be recovered. Owing to the loss recorded by Seed Fund Vera Ltd in the financial period 2015, in total EUR 13,911 million of the loans granted for raising the share capital of Seed Fund Vera in 2009 and 2013 were cancelled in 2016. In addition, a total of EUR 9,153 million of the subordinated loans granted in 2013 and 2014 were cancelled in 2016, in connection with the sale of the shares of Seed Fund Vera Ltd.
**) The loan was granted for raising the capital adequacy of Finnvera plc and for improving the company’s capacity to meet the demand for its products, especially counter-cyclical loans and guarantees, owing to the prolonged financial crisis. The loan will be repaid in one instalment at maturity, provided that the sum of the company’s unrestricted equity and all subordinated loans at the time of payment exceed the loss recorded on the balance sheet adopted for the company’s latest financial period or on a balance sheet included in more recent financial statements. The loan has not yet been repaid.
The subordinated loans granted for raising the share capital of Seed Fund Vera Ltd pertain to long-term assets available for sale (Note E23).
                     
                     
E17 Financial instruments classification and fair values
                     
(EUR 1,000) Finnvera Group Finnvera plc
Financial assets Loans and receivables Financial instruments carried at fair value Available for sale Total Fair value Loans and receivables Financial instruments carried at fair value Available for sale Total Fair value
31 Dec 2016                    
Loans and receivables from credit institutions 922,491     922,491 922,849 855,078     855,078 855,078
Loans and receivables from customers 6,078,034     6,078,034 6,215,475 3,818,600     3,818,600 3,816,768
Debt securities     2,042,422 2,042,422 2,042,422     2,042,422 2,042,422 2,042,422
Derivatives   110,649   110,649 110,649   110,649   110,649 110,649
Associated companies   14,973   14,973 14,973     0 0 0
Shares and participations     24,383 24,383 24,383     14,399 14,399 14,399
Assets available for sale 8,189 25,713 13,009 46,911       27,662 27,662 27,662
Other financial assets 219,809     219,809 219,809 199,135     199,135 199,135
Total 31 Dec 2016 7,228,523 151,336 2,079,814 9,459,673 9,550,561 4,872,813 110,649 2,084,484 7,067,946 7,066,113
31 Dec 2015                    
Loans and receivables from credit institutions 575,080     575,080 575,094 516,540     516,540 516,540
Loans and receivables from customers 5,393,628     5,393,628 5,494,098 2,818,709     2,818,709 2,817,490
Debt securities     2,014,386 2,014,386 2,014,386     2,014,386 2,014,386 2,014,386
Derivatives   115,791   115,791 115,791   114,543   114,543 114,543
Associated companies   19,860   19,860 19,860     0 0 0
Shares and participations     24,409 24,409 24,409     14,520 14,520 14,520
Assets available for sale 20,481 81,460   101,942       81,000 81,000 81,000
Other financial assets 154,250     154,250 154,250 139,933     139,933 139,933
Total 31 Dec 2015 6,143,439 217,111 2,038,795 8,399,345 8,397,888 3,475,182 114,543 2,109,905 5,699,630 5,698,411
 
Assets available for sale include the equity investments of Finnvera’s subsidiaries engaged in venture capital investment, as well as the parent company’s equity investments other than investments in Group companies.
The fair value of Finnfund, included in available for sale, cannot be determined reliably; the shares have therefore been valued at the original acquisition price.
 
(EUR 1,000)     Finnvera Group         Finnvera plc    
Financial liabilities Financial instruments carried at fair value Other financial liabilities Total Fair value   Financial instruments carried at fair value Other financial liabilities Total Fair value
31 Dec 2016                  
Liabilities to other institutions 41,476 2,297,067 2,338,543 2,425,850   0 75,793 75,793 75,793
Debt securities in issue 4,891,873   4,891,873 4,891,873   4,891,873   4,891,873 4,891,873
Derivatives 212,553   212,553 212,553   208,334   208,334 208,334
Other financial liabilities   462,512 462,512 462,512     442,463 442,463 442,463
Subordinated liabilities   57,500 57,500 57,500     57,500 57,500 57,500
Liabilities associated withassets available for sale   12,525 12,525 12,525     12,525 12,525 12,525
Total 31 Dec 2016 5,145,902 2,817,079 7,962,981 8,050,288   5,100,207 575,756 5,675,963 5,675,963
31 Dec 2015                  
Liabilities to other institutions 39,456 2,615,590 2,655,046 2,749,016   0 67,985 67,985 67,985
Debt securities in issue 3,957,734   3,957,734 3,957,734   3,957,734   3,957,734 3,957,734
Derivatives 144,228   144,228 144,228   144,228   144,228 144,228
Other financial liabilities   342,275 342,275 342,275     328,140 328,140 328,140
Subordinated liabilities   57,500 57,500 57,500     57,500 57,500 57,500
Liabilities associated withassets available for sale   30,589 30,589 30,589     30,589    
Total 31 Dec 2015 4,141,418 3,015,365 7,187,372 7,281,342   4,101,962 484,214 4,555,587 4,555,587
 
Classifications
Under IFRS rules, financial assets can be classified into four main categories: loans and receivables, financial assets at fair value through profit or loss, available-for-sale financial assets and held-to-maturity financial investments. Financial assets at fair value through profit or loss can be further divided into the following categories: classified as held for trading and upon initial recognition designated by the entity as at fair value through profit or loss. The Group has no financial assets to be held for trading or held until maturity.
Under IFRS rules, the Group's financial liabilities can be classified into two main categories: Financial liabilities at fair value through profit or loss and other financial liabilities. Other financial liabilities are measured at amortised cost using the effective interest method. Financial liabilities at fair value through profit or loss are presented in the same manner as financial assets, classified as being held for trading and upon initial recognition designated by the entity as at fair value through profit or loss. The Group has no financial liabilities to be held for trading.
 
Fair value measurement principles
 
1. Debt securities
The fair value of debt securities are based on the market quote on the end date of the financial period or the value of the discounted market interest rate on the end date of the financial period.
 
2. Derivatives
The fair values of interest rate and currency swaps and currency futures are specified using a method based on the current value of cash flows, in which the market interest rates on the end date of the financial period and other market information serve as the accounting principle. The Group uses common valuation techniques in determining the fair value of these instruments. Fair values are equivalent to average market prices in situations where the Group would transfer or sell derivatives in the course of normal business under market conditions on the end date of the financial period. The credit risk related to derivatives is mitigated by means of collateral arrangements. Fair values are monitored on a daily basis using calculations from counterparties and those made in-house.
 
3. Investments in associates
The fair value of subsidiaries involved in venture capital investment is determined using a valuation technique approved by the Board of Directors that complies with the International Equity and Venture Capital Valuation (IPEV) Guidelines and recommendations for early stage ventures. In this technique, the determination of the investment's fair value is based on the valuation and investments made by outside investors as well as on the portfolio company valuation approved by the fund's Board of Directors. The valuation of companies is done continuously throughout the year, with valuations being updated on a biannually basis, for Group reporting in a separate process, where investments are examined by investment portfolio.
 
In accordance with the government’s policy guidelines, Finnvera will give up its venture capital investments to a signifact extent. Finnvera has already initiatedmeasures to this end. In consequence, when the fair value of venture capital investments isdetermined, attention is also paid to how the management of both Finnvera and its subsidiaries engaged in venture capital investment assess the fair value of the investments.
 
4. Shares and participations
Shares and reserve shares listed on the NASDAQ OMX Helsinki stock exchange that are classified as available-for-sale shares and participations are measured at the exchange rate on the date of the financial statements. Unlisted shares classified as available-for-sale shares and participations are measured using the effective interest method. Because their measurement using fair value measurement models has not been possible, nor could the fair value of investments otherwise be reliably determined. The most notable item of this type consists of shares in Finnfund EUR 13.67 million (2015: EUR 13.67 million).
 
5. Financial liabilities at fair value through profit or loss
The fair value of liabilities are calculated using a method based on the current value of cash flows. In this method, market interest rates on the end date of the financial period and other accounting information serve as the accounting principle. The company's own credit risk is also taken into consideration in the measurement of liabilities.
                     
                     
E18 Hierarchy for carrying financing instruments at fair value
                     
(EUR 1,000)         Finnvera Group Finnvera plc
Financial assets 31 Dec 2016   Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Loans and other assets              
- Loans and receivables from credit institutions     922,491     855,078  
- Loans and receivables from customers     6,060,507 17,527   3,801,073 17,527
- Shares and holdings   10,314          
- Assets available for sale     8,189        
Financial instruments carried at fair value              
- Derivatives     110,649     110,649  
- Assets available for sale       25,713      
Available-for-sale              
- Debt securities     2,042,422     2,042,422  
- Associated companies       14,973      
- Shares and holdings       14,068 331   14,068
- Assets available for sale             13,009
Total   10,314 9,144,258 85,291 331 6,809,222 44,604
Financial liabilities 31 Dec 2016   Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Financial instruments carried at fair value              
- Liabilities to other institutions     41,476        
- Debt securities in issue     4,891,873     4,891,873  
- Derivatives     212,553     208,334  
Other financial liabilities              
- Liabilities to other institutions     2,297,067     0  
- Subordinated liabilities     57,500     57,500  
- Liabilities associated with assets available for sale     12,525     12,525  
Total     7,512,994     5,170,232  
 
            Finnvera Group     Finnvera plc  
Financial assets 31 Dec 2015   Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Loans and other assets              
- Loans and receivables from credit institutions     575,080     516,540  
- Loans and receivables from customers     5,379,269 14,359   2,804,350 14,359
- Shares and holdings   10,340          
Financial instruments carried at fair value              
- Derivatives     115,791     114,543  
- Associated companies              
- Shares and holdings              
- Assets available for sale       81,460      
Available-for-sale              
- Debt securities     2,014,386     2,014,386  
- Associated companies       19,860     0
- Shares and holdings       14,068 451   14,068
Total   10,340 8,084,525 129,747 451 5,449,819 28,427
Financial liabilities 31 Dec 2015   Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Financial instruments carried at fair value              
- Liabilities to other institutions     39,456        
- Debt securities in issue     3,957,734     3,957,734  
- Derivatives     144,228     144,228  
Other financial liabilities              
- Liabilities to other institutions     2,615,590     0  
- Subordinated liabilities     57,500     57,500  
- Liabilities associated with assets available for sale     30,589     30,589  
Total     6,845,097     4,190,051  
 
Hierarchy levels
Level 1: Investments in quoted shares and funds traded on the active market are valued at market price.
Level 2: The fair values of interest rate and currency swaps, currency futures and liabilities are specified using a method based on the current value of cash flows, in which the market interest rates at the closing of the financial period and other market information serve as the accounting principle. The fair values of debt securities are based on the market quote of the investments at the closing of the financial period or on the value discounted using the market interest rate at the closing of the financial period.
Level 3: The fair value of venture capital investments made by subsidiaries engaged in venture capital investment is based on the valuation and investments made by outside investors as well as on the portfolio company valuation approved by the fund. The method used complies with the International Private Equity and Venture Capital Valuation Guidelines (IPEV) for early-stage enterprises. In accordance with the government’s policy guidelines, Finnvera will give up its venture capital investments to a signifact extent. Finnvera has already initiatedmeasures to this end. In consequence, when the fair value of venture capital investments isdetermined, attention is also paid to how the management of both Finnvera and its subsidiaries engaged in venture capital investment assess the fair value of the investments.
 
Transfers between levels 1 and 2
There were no transfers between the fair-value hierarchy levels 1 and 2 during the financial period under review or the preceding financial period.
                     
E19 Specification of events at hierarchy level 3
                     
LEVEL 3, Financial assets       Finnvera Group Finnvera plc
(EUR 1,000)       31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Financial assets carried at fair value            
Balance at 1 Jan     129,747 128,870 28,427 14,068
Profits and losses entered in the income statement, in total     -9,646 -23,299 0 6
Acquisitions     11,449 15,726 0 0
Sales     -50,081 -8,928 0 0
Transfers to level 3     0 14,359 0 14,359
Transfers from level 3     0 0 0 0
Other     3,821 3,019 16,177 -6
Balance at 31 Dec   85,291 129,747 44,604 28,427
Profits and losses entered in the income statement for the instruments held by Finnvera   -2,688 -24,359 0 0
                     
E20 Financial assets and liabilities encompassed by hedge accounting and the net result of hedge accounting
                     
              Finnvera Group Finnvera plc
(EUR 1,000)     31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Financial assets            
Derivatives            
- Encompassed by hedge accounting     0 0 0 0
- Other     110,649 0 110,649 0
Total     110,649 0 110,649 0
Financial liabilities            
Derivatives            
- Encompassed by hedge accounting     984,000 0 984,000 0
- Other     3,907,873 0 3,907,873 0
Total     4,891,873 0 4,891,873 0
Derivatives            
- Encompassed by hedge accounting     16,710 0 16,710 0
- Other     191,623 0 191,623 0
Total     208,334 0 208,334 0
Net of hedge accounting            
Gains/losses from items carried at fair value            
- Derivatives encompassed by hedge accounting     6,087 0 6,087 0
- Debts encompassed by hedge accounting     -6,818 0 -6,818 0
Total     -731 0 -731 0
 
In 2016, hedge accounting was applied to the 10-year bond of one billion euros issued by Finnvera in April.
In its financial statements, Finnvera plc recognises Finnish Export Credit Ltd’s share of the change in the fair value of liabilities and derivatives either as a liability to or as a receivable from Finnish Export Credit Ltd, depending on the final outcome of the change. Finnish Export Credit is Finnvera’s subsidiary.
                     
E21 Financial instruments set off in the balance sheet or subject to netting agreements
                     
        Finnvera Group / Finnvera plc
(EUR 1,000)   Gross recognised financial assets Gross recognised financial liabilities set of in the balance sheet Net carrying amount in the balance sheet Financial instruments *) Financial instruments received as
collateral *)
Cash received as
collateral
*)
Net amount
*)
Financial assets 31 Dec 2016                
Derivatives   110,649 0 110,649 -69,850 0 -45,400 -4,601
Total   110,649 0 110,649 -69,850 0 -45,400 -4,601
Financial liabilities 31 Dec 2016                
Derivatives   208,334 0 208,334 -69,850 0 -156,080 -17,596
Total   208,334 0 208,334 -69,850 0 -156,080 -17,596
                 
Financial assets 31 Dec 2015                
Derivatives   114,543 0 114,543 -59,276 0 -68,700 -13,433
Total   114,543 0 114,543 -59,276 0 -68,700 -13,433
Financial liabilities 31 Dec 2015                
Derivatives   144,228 0 144,228 -59,276 0 -86,710 -1,758
Total   144,228 0 144,228 -59,276 0 -86,710 -1,758
 
*) Sums not subject to netting but included in the main netting agreements and similar arrangements.
                     
                     
E22 Equity
                     
      Finnvera Group Finnvera plc
(EUR 1,000) 31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015
Parent company's equity   196,605   196,605   196,605   196,605
Reserves                
- Share premium 51,036   51,036   51,036   51,036  
- Fair value reserve 3,488 54,524 -2,202 48,834 3,323 54,359 -2,304 48,732
Tied equity   251,129   245,439   250,964   245,337
Unrestricted reserves                
- Reserve for domestic operations 154,550   135,879   154,550   135,879  
- Reserve for export credit guarantee and special guarantee operations 668,440   536,064   668,440   536,064  
- Reserve for venture capital investments 15,252 838,242 16,570 688,513 15,252 838,242 16,570 688,513
Retained earnings                
- Profit/loss for previous periods 33,065   67,481   504   53,476  
- Profit/loss for the period 84,019 117,084 115,415 182,896 78,425 78,929 98,074 151,550
Unrestricted equity   955,327   871,410   917,171   840,063
Total   1,207,362   1,121,075   1,168,136   1,085,400
                 
Equity attributable to the parent company's shareholders   1,206,456   1,116,849        
Share of equity held by non-controlling interests   906   4,227        
 
Share capital and ownership: 31 Dec 2016 31 Dec 2015
Owner Share capital (EUR 1,000) Shares, nb Ownership Share capital (EUR 1,000) Shares, nb Ownership
- The Finnish state 196,605 11,565 100 % 196,605 11,565 100 %
 
Reserves:                    
 
Share premium
The share premium reserve has been formed before the new regulations of the Companies' Act came into force on 1 September 2006. The reserve includes the difference of EUR 42.9 million between the acquisition cost and the nominal value of KERA's shares and EUR 0.1 million that was generated in the transfer of assets of Takuukeskus and the acquisition of Fide Oy's shares as well as EUR 8.1 million generated by the raise of share capital of Finnvera as the shares of Finnish Export Credit Ltd were acquired.
 
Fund for domestic operations and fund for export credit guarantee and special guarantee operations
In 2006 the laws regulating the operations of Finnvera Plc were amended so that separate funds to cover future losses from domestic operations and from export credit guarantee and special guarantee operations were established in equity. Losses from export credit guarantee and special guarantee operations will be covered by resources from the State Guarantee Fund only when the export credit guarantee and special guarantee fund is insufficient. The retained earnings from the domestic operations were transferred to the fund for domestic operations and the retained earnings from the export credit guarantee and special guarantee operations were transferred to the fund for export credit guarantee and special guarantee operations.
                     
Fund for venture capital investments
In 2011, a reserve for venture capital investments was established in the unrestricted equity on the balance sheet. The purpose was to monitor the assets allocated for venture capital investments in accordance with the ERDF operational programmes. The Ministry of Economic Affairs and Employment allocated to Finnvera the sum of EUR 17.5 million, to be used for venture capital investments in accordance with the ERDF operational programmes during the programme period 2007-2013. These assets have been recognised in the above reserve.
                     
Fair value reserve
The reserve includes the fair value change of available-for-sale financial assets. The items recognised in the fair value reserve are taken to the income statement when an available-for-sale financial asset is disposed of or an impairment loss on such an asset is recognised.
 
The Group’s objectives and principles for capital management are presented in the Risk Management section.
                     
                     
E23 Long-term assets available for sale
 
Through a partial division, Seed Fund Vera Ltd, a former subsidiary of the Group, was split into Seed Fund Vera Ltd and ERDF Seed Fund Ltd on 15 July 2016. On 16 December 2016, Finnvera plc sold 80 per cent of its holding in Seed Fund Vera Ltd to a buyer outside the Group. With its holding of 19.99 per cent in the company, Finnvera remained a minority shareholder. Finnvera recorded a loss of EUR 7.221 million on the transaction. In the Group, EUR 0.839 million of this was recognised under other operating income. Underlying the sale was the policy outline made by the government, according to which Finnvera will give up venture capital investments.
Detailed information on the sale of the subsidiary is presented in the tables below (A–D). In the financial statements of 2015, Finnvera plc transferred the shares, the associated subordinated loans as well as the assets and liabilities of Seed Fund Vera Ltd in the consolidated balance sheet to long-term assets available for sale. After the partial division of Seed Fund Vera Ltd and the sale of its shares carried out in 2016, the long-term assets available for sale in the financial statements of 2016 still include the parent company’s remaining shares in Seed Fund Vera Ltd (19.99 per cent), the associated subordinated loans and the shares in ERDF-Seed Fund Ltd (94.59 per cent). The assets and liabilities of ERDF-Seed Fund Ltd are in the consolidated balance sheet.
The shares of Finnvera’s subsidiary Seed Fund Vera Ltd in the parent company’s financial statements and, correspondingly, the assets and liabilities of Seed Fund Vera Ltd in the consolidated financial statements have been transferred to long-term assets available for sale. With respect to Seed Fund Vera, Finnvera has a subordinated loan from the State, which has also been transferred to this item. The assets available for sale and the associated liabilities have been itemised in the following table:
                     
              Finnvera Group Finnvera plc Finnvera Group Finnvera plc
(EUR 1,000)     31 Dec 2016 31 Dec 2016 31 Dec 2015 31 Dec 2015
Assets            
Loans and receivables from credit institutions     6,004   13,045 0
Loans and receivables from customers     2,185   7,437 0
Investments     38,723 27,662 81,460 81,000
Prepayments and accrued income     83 0 241 0
Total     46,994 27,662 102,183 81,000
Liabilities            
Subordinated liabilities     12,525 12,525 30,589 30,589
Deferred tax liabilities     1,550 0 0 0
Total     14,075 12,525 30,589 30,589
                     
Each year Finnvera conducts an impairment test on the investments of its subsidiaries, as laid down by IAS 36. The valuation principles of long-term assets available for sale are presented in Note A13 to the financial statements.
                     
A) Information on financial performance and cash flows:
              Seed Fund Vera Ltd Seed Fund Vera Ltd
(EUR 1,000)   1 Jan-16 Dec 2016 31 Dec 2015
Interest income     1,341   463
Net interest income     1,341   463
Fee and commission income and expenses (net)     -1   -1
Gains/losses from items carried at fair value     -6,455   -19,582
Net income from investments     99   5
Other operating income     0   382
Administrative costs     -2,598   -2,982
Impairment losses on receivables, guarantee losses (-) / Reversal of impairment losses, net (+)   248   -1,378
Operating loss     -7,366   -23,093
Change in deferred tax liabilities     737   1,431
Loss for the year     -6,629   -21,662
                     
B) Sale of the subsidiary realised in 2016 from long-term assets available for sale:
                  Finnvera plc
(EUR 1,000)         1 Jan-16 Dec 2016
Consideration received           48,837
Fair value of the shares sold 16 Dec 2016           56,058
The parent company's loss from the sale of shares         -7,221
 
C) Impact of the sale on the Group's result:
                  Finnvera Group
(EUR 1,000)       1 Jan-16 Dec 2016
The parent company's loss from the sale of shares         -7,221
Exit of Seed Fund Vera Ltd from the consolidated balance sheet          
- The subsidiary's loss for the year         6,629
- The subsidiary's losses from previous years         1,431
- Impact from the sale of the subsidiary on the Group's profit         839
                     
D) The IFRS book values of the assets and liabilities of the sold subsidiary at the time of the transaction were:
                  Seed Fund Vera Ltd
(EUR 1,000)       Dec 16 2016
Assets          
Receivables from credit institutions         4,985
Reeivables from customers         1,743
Investments         56,528
Prepayments and accrued income         344
Total         63,600
           
Liabilities          
Liabilities         0
Total         0
                     
                     
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