Annual Report 2021

Financial Statements

7.1

Introduction

In front of you lies the financial statements of APG Group NV, in which we account for the financial year 2021, in accordance with laws and regulations. 

7.2 Consolidated financial statements

7.2.1 Consolidated balance sheet at December 31, 2021

before profit appropriation, in thousands of euros]

7.2.2 Consolidated profit & loss account for 2021

In thousands of euros

7.2.3 Consolidated cashflow statement for 2021

in thousands of euros

7.2.4 Basis of preparation and accounting policies

Introduction

The consolidated financial statements have been prepared in accordance with the legal provisions of Part 9, Book 2 of the Dutch Civil Code and the firm statements of the Dutch Accounting Standards Board guidelines for Annual Reporting, issued by the Dutch Accounting Standards Board.  

Activities
APG Groep NV (APG Group) provides management advice, asset management, pension administration, pension communication and employer services.

Group relationships
The financial statements are based on the legal entities of APG Group. APG Group was founded on February 29, 2008, is registered in the commercial register under number 14099616, and has its registered office at Oude Lindestraat 70, 6411 EJ Heerlen.

APG Groep NV is a company with a two-tier board structure and holds three wholly-owned subsidiaries: APG DWS en Fondsenbedrijf NV and APG Asset Management NV. APG Group also has a direct holding of 76 percent in Entis Holding BV. APG Group has a number of indirect equity interests. The complete structure is shown in the list of equity interests. This list is included as part of the notes to the company financial statements.

APG DWS en Fondsenbedrijf
APG DWS en Fondsenbedrijf is responsible for management advice, pension administration and pension communication for APG’s principals (pension funds, early retirement funds and social funds) in the public and private sectors. In 2021, APG Service Partners BV was merged with APG DWS en Fondsenbedrijf.

APG Asset Management
APG Asset Management is responsible for asset and fiduciary management and performs advisory activities for its client funds. APG is a long-term pension investor, which therefore needs to have a responsible investment policy. Execution of this policy forms an integral part of the asset management process.

APG Group has two shareholders: Stichting Pensioenfonds ABP (ABP) (92.16%) and Stichting Sociaal Fonds Bouwnijverheid (Stichting SFB) (7.84%).

Going concern
These financial statements have been prepared on a going-concern basis. From a business economic perspective, the Corona risks for the APG organization are small because the service to customers can be fully continued. Moreover, the credit risk of the most important customers is relatively limited and there are often price agreements that are independent of developments in the financial markets.

General

The financial statements relate tot the year 2021, ending on December 31, the date of the balance sheet, and have been prepared on the basis of financial reporting principles generally accepted in the Netherlands and the statutory provisions concerning financial statements contained in Title 9, Book 2 of the Dutch Civil Code. Article 2:402 of the Dutch Civil Code was applied for the format of the company profit and loss account. Consequently, in the company-only profit and loss account only the share in profit/(loss) of investees and other results after deduction of taxes are shown as individual items. All amounts in the financial statements are shown in thousands of euros, unless stated otherwise.

Comparison with the previous year
There have been no changes in the accounting principles with respect to the previous year. 

Estimates
Making accounting estimates is unavoidable when preparing the financial statements. Management estimates mainly relate to goodwill, client contracts and provisions. If there is a change in an estimate, this is mentioned in the note to the section of the heading in the financial statements concerned.

Basis of consolidation
In the consolidated financial statements, equity investments in entities in which APG Group can exercise control over management decisions and financial policy are fully consolidated.
Inter-company transactions and mutual financial obligations are eliminated. The results and identifiable assets and liabilities of newly acquired entities are included in the consolidated financial statements from the date of acquisition. The date of acquisition is the point in time when dominant control can be exercised over the relevant entity. Entities included in the consolidation continue to be consolidated until the time they are sold. Deconsolidation takes place at the time when decisive control is transferred. In that case, the relevant company is presented as a financial non-current asset.

A list of consolidated entities is included as part of the notes to the company financial statements. Joint ventures are not consolidated, but are included under financial non-current assets. Valuation principles of group companies are adjusted where necessary to make them consistent with the applicable accounting principles of APG Group.

Related parties
All entities over which APG Group exercises dominant or joint control, or significant influence, are designated as related parties. Entities that can exercise dominant control over APG Group are also designated as related parties. The statutory members of the Executive Board and the members of the Supervisory Board of APG Group are also designated as related parties.

Recognition
An asset is recognized on the balance sheet when it is probable that the future economic benefits of the asset will flow to the company and the amount of the asset can be measured reliably. A liability is recognized in the balance sheet when it is probable that an outflow of resources will result from its settlement and the amount thereof can be measured reliably.

An asset or liability is no longer recognized in the balance sheet if a transaction results in the transfer of all or virtually all rights to economic benefits or risks in relation to the asset or liability to a third party.

Income is recognized in the profit and loss account when an increase in future economic benefits related to an increase in an asset or a decrease in a liability has arisen that can be measured reliably.

Expenses are recognized when a decrease in future economic benefits is associated with a decrease in an asset or an increase in a liability has arisen that can be measured reliably.

Foreign currency translation
Transactions denominated in foreign currencies are, at first recognition, valued in the functional currency through conversion at the spot exchange rate prevailing on the date of the transaction between the functional currency and the foreign currency. Monetary assets and liabilities and non-monetary assets and liabilities denominated in foreign currencies, excluding goodwill, are converted into the functional currency at the rates in force on balance sheet date. Exchange rate differences arising from settlement and conversion are credited or debited to the profit and loss account, unless hedge accounting is applied. Goodwill valued at historical cost in a foreign currency is converted at the exchange rate in force on the transaction date.

Upon consolidation, the balance sheets of group companies prepared in a functional currency other than the euro are converted into euros at the exchange rate in force on balance sheet date. Results in foreign currency are converted at the average exchange rate during the year under review. Currency differences concerning the value of group companies included in the consolidation are recognized in the reserve for conversion differences.

Financial instruments
Financial instruments include investments in equities and bonds, trade and other receivables, cash, loans and other financing liabilities, derivative financial instruments and trade and other payables. The valuation of current receivables and payables is treated in the separate paragraphs.

The following categories of financial instruments are included in the financial statements: marketable securities, fixed-income investments, other investments, other financial liabilities and derivatives.

Financial assets and financial liabilities are recognized on the balance sheet from the moment contractual rights or liabilities arise with regard to that instrument. A financial instrument is no longer recognized on the balance sheet if a transaction results in the transfer of all or virtually all rights to economic benefits or risks in relation to the position to a third party. Financial instruments (and separate components of financial statements) are presented in the consolidated financial statements in accordance with the economic reality of the contractual provisions. Presentation is based on separate components of financial instruments as financial assets, financial liabilities, or equity capital. Financial and non-financial contracts may contain agreements that qualify as derivatives. Such agreements are separated from the basic contract and recognized as derivatives if their economic characteristics and risks are not closely related to the economic characteristics and risks of the basic contract, a separate instrument with the same terms would qualify as a derivative, and the combined instrument is not valued at fair value with recognition of changes of the value in the profit and loss account.

Financial instruments that are not separated from the contracts in which they are incorporated, are recognized in line with the basic contract.

Derivatives that have been separated from the basic contract will be recognized in line with the accounting policy for derivatives to which cost price hedge accounting is not applied, are stated at cost or fair value, whichever is lower.

Derivative financial instruments and hedge accounting
Derivative financial instruments are measured at the lower of cost and market value, unless hedge accounting is applied. APG Group has taken out forward exchange contracts to hedge the currency risk of its foreign subsidiaries’ expected future cash outflows in foreign currencies. These forward exchange contracts are measured at cost, using the hedge accounting method. As long as the hedged item has not yet been recognized in the balance sheet under cost-price hedge accounting, the hedge instrument is not revalued. Any ineffective component of a hedge is recognized in profit and loss as far as this concerns a loss. Internal derivatives relating to back-to-back agreements between APG Group and APG Asset Management are recognized in APG Group’s company financial statements at the lower of cost price or market value.

Valuation differences arising in the valuation of  the forward exchange contracts designated as hedges of net investment in foreign subsidiaries are recognized directly in equity, in the reserve for conversion differences, to the extent that the hedge is effective. The ineffective component is recognized in profit and loss.

Hedge accounting

When using cost price hedge accounting, the first valuation and the basis for recognizing the hedge instrument on the balance sheet and determining its result depends on the hedged position. If the hedged position is recognized on the balance sheet at cost price, the derivative is also carried at cost price.
If derivative instruments expire or are sold, the cumulative profit or loss until that point, which had not yet been recognized in the profit and loss account, will be included on the balance sheet as an accrued item until the hedged transactions take place. If the transactions are no longer expected to take place at all, the cumulative profit or loss will be transferred to the profit and loss account.

APG Group has documented its hedging strategy in writing. The assessment of whether, when using hedge accounting, the derivative financial instruments are effective in offsetting the currency results of the hedged items is documented in writing using generic documentation. Hedge relationships are terminated if the respective derivative instruments expire or are sold.
APG Group will conduct a quantitative effectiveness assessment, as a minimum at each formal reporting moment and upon inception of the hedge.

Risk paragraph

As a pension administrator, APG Group is faced, as regards financial flows and positions, with risks that may influence financial stability. These concern liquidity risk, credit or counterparty risk, concentration risk and interest and exchange rate risk. In order to limit these risks as far as possible APG Group has a policy of risk avoidance, in which preservation of capital takes precedence. Conditions have been established for placing surplus liquidity with external parties and on attracting deposits.

Liquidity risk
APG Groep monitors the liquidity position by means of successive liquidity budgets. Management sees to it that the organization always has sufficient liquidity available to be able to meet its commitments. This is also taken into account of the liquidity requirements imposed by regulators. Temporary surpluses of liquid assets are placed in the money market for a short time, while applying the risk-limiting conditions, with parties with at least an A-rating according to agencies Fitch and Moody's. 

Credit risk
Credit risk is defined as the risk that the counterparty to a financial instrument fails to fulfill its obligation, resulting in a financial loss for APG. The credit risk for APG is mainly limited to receivables from customers, group companies, related parties and banks. The receivables from clients are receivables that arise on a monthly basis with regard to the fees that APG receives for performed activities for asset management and pension administration. These receivables are settled monthly. With regard to banks, APG only uses products for liquidity management which, according to its treasury statutes, are permitted, such as deposits and cash with financial institutions that have at least an A-rating according to rating agencies Fitch and Moody's. The outstanding deposits and cash with banks is spread over various institutions to reduce counterparty risk. The credit risk on forward currency contracts is limited by through the exchange of cash collateral. The company runs a credit risk on loans and receivables included under financial fixed assets, trade and other receivables, cash and cash equivalents and the positive market value of derivative financial instruments. The maximum credit risk run by the company amounts to € 823.1 million per 31-12-2021.

Concentration risk
In the interest of risk diversification for the concentration risk on cash and cash equivalents, APG makes use of multiple financial institutions with at least an A-rating according to rating agencies Fitch and Moody's and strives to hold a maximum of 20 percent within one party.    

APG Group also runs a concentration risk if the company is dependent upon the provision of services of one client. APG Group has a concentration risk given the relative importance of the largest client. This risk is mitigated by giving substance to the strategic partnership in continuous dialogue with the biggest client and by means of active stakeholder management.

Interest rate risk
Interest rate risk is the risk that the value of investments may fluctuate due to changes in market interest rates. Since APG Group holds no bonds or equities and has no borrowings or loans at variable interest rates, the interest rate risk is very low.

Currency risk
APG Group has taken out forward exchange contracts to hedge the currency risk of its foreign subsidiaries’ expected future cash outflows in foreign currencies. These FX forwards are measured at cost, using the hedge accounting method.

Solvency risk
Capital requirements apply to the asset management activities of subsidiary APG Asset Management N.V.. These requirements are set out in the Alternative Investment Fund Managers Directive (AIFMD) and the Investment Firm Regulation and Directive (IFR/IFD). This legislation includes rules for calculating the required legal capital and rules for determining the available legal capital. APG Asset Management wants to have sufficient capital available to cover financial damage and losses resulting from the identified risks. In order to assess whether sufficient qualifying capital is available, APG determines the sufficiency using the ICLAAP (Internal Capital and Liquidity Adequacy Assessment Process). With the ICLAAP, APG Asset Management applies, in addition to the required calculations, a risk-based approach to assess the level of required capital. Historical financial data, a future-oriented business plan and scenario analysis are also used to determine whether the required capital is future-proof. During 2021, APG Asset Management has complied with the capital requirements according to the AIFMD as well as the IFR/IFD. 

7.2.5 Basis of valuation of assets and liabilities

General

In the notes to the receivables and liabilities to the company financial statements, the figures of 2020 have been reshuffled for comparison reasons. These are further breakdowns within the category of current assets and current liabilities.

Non-current assets

Intangible assets (1)
Intangible assets are valued at acquisition or manufacturing cost, net of straight-line amortization. The amortization term is based on the expected useful life. At each balance sheet date an assessment is carried out to determine whether there is any indication that an asset may be subject to a particular reduction in value. If there are indications that the recoverable amount (the greater of value in use and realizable value) is less than the carrying amount, an impairment is recognized in profit and loss and explained in the notes.
Reversals of earlier impairment losses are also recognized in profit and loss. Impairment losses on goodwill are not reversed in subsequent periods.

When a business is acquired, all identifiable assets and liabilities of the business acquired are recognized in the balance sheet at their fair value at acquisition date, except in the case of ‘common control’ transactions (transactions involving the purchase or sale of equity in group companies), which are recognized at their carrying amounts. The acquisition price consists of the monetary amount or equivalent that has been agreed for the acquisition of the acquired business. Goodwill arising on acquisition is initially recognized as the difference between the acquisition price and the fair value of the identifiable assets and liabilities, or the Group’s proportionate share thereof if applicable.

Research costs are recognized in profit and loss. Expenses for development projects are capitalized as part of the manufacturing cost if it is likely that the project will be commercially and technically successful (i.e. if it is likely that economic benefits will be obtained) and the costs can be reliably determined. A statutory reserve for capitalized development costs has been established in equity for the amount capitalized. Amortization of capitalized development costs starts as soon as commercial production has started and takes place over the expected useful life of the asset.

Property, plant and equipment (2)
Property, plant and equipment is valued at acquisition price after deduction of straight-line depreciation or at lower value in use. Assets are depreciated over their expected useful lives, taking account of any residual value. At each balance sheet date an assessment is carried out to determine whether there is any indication that an asset may be subject to a particular reduction in value. If there are indications that the recoverable amount (the greater of value in use and realizable value) is less than the carrying amount, an impairment is recognized in profit and loss and explained in the notes. Reversals of earlier impairment losses are also recognized in profit and loss.

Financial non-current assets (3)
Loans granted are are stated at fair value on initial recognition. They are subsequently measured at amortized cost based on the effective interest method. In the absence of premiums/discounts, this is the nominal value.

Equity interests in investees are measured at net asset value. This valuation stops as soon as this net asset value has become zero or lower. If the Group stands surety for all or part of the debts of investees, or there is an actual obligation to provide investees with financial support, a provision is recognized for this. Investees over which APG Group cannot exert any significant influence are shown under financial non-current assets and measured at the lower of acquisition price and market value.

Deferred tax assets, including receivables arising from tax loss carryforwards, are recognized in the balance sheet to the extent that it is likely that there will be future taxable profits against which temporary differences and tax loss carryforwards can be offset. The calculation takes account of tax rates applicable in future years to the extent that these have already been enacted. Recognition is at nominal value.

Financial instruments are initially recognized at fair value, while including premiums/discounts and the directly attributable transactions costs in this first valuation. If, however, financial instruments are subsequently recognized at fair value with value adjustments in the profit and loss account, the directly attributable transaction costs will be recognized in the profit and loss account at initial recognition. After first recognition, financial instruments are valued as described below.

At each balance sheet date an assessment is carried out to determine whether there is any indication that an asset may be subject to a particular reduction in value. If there are indications that the recoverable value of a financial non-current asset is lower than the carrying amount and likely to remain so, a special impairment is recognized and explained in the notes.

Current assets

Receivables and prepayments (4)
Receivables and prepayments are initially recognized at their fair value. They are subsequently valued at amortized cost. This value usually corresponds to the nominal value after deduction of any provision for non-recoverability.

Cash & cash equivalents (5)
Cash & cash equivalents are measured at nominal value.

Group equity (6)

Equity is explained in the notes to the company financial statements.

Provisions (7)

General 
Provisions concern liabilities or losses for which it is probable that they will have to be settled or taken, the amount of which can be reliably estimated and can be enforced in law. The size of the provision is determined by estimating the amounts necessary to offset the relevant liabilities and losses per balance sheet date and, insofar as long-term and material, are valued at the present value of the expected future expenditure. The actuarial interest is based on the interest rate at the end of the year of high-quality Dutch corporate bonds, taking into account the remaining term of the provisions.

Personnel-related provisions
Personnel-related provisions, including the restructuring provision, are valued at nominal value. The provision for long-service awards, are stated at the present value of the expected payments during the employment relationship. The calculation of the provision takes into account, among other things, expected salary increases, the likelihood of the employee’s remaining with the employer and (pro)rating. The discount rate used is based on the interest rate at the end of the year for investment-grade Dutch corporate bonds, taking into account the remaining duration of the provisions.

Reorganisation provision
The reorganisation provision is nominated at face value. The formation of this reorganisation provision occurs when a detailed plan of the reorganisation has been formalised and has been shared with those involved. Withdrawals from the provision are made at the moment when the relevant expenditures for voluntary leave and redundancy take place.

Provision for onerous contracts
The provision for onerous contracts concerns the negative difference between the expected benefits from the performance to be received by the company after the balance sheet date and the unavoidable costs to meet its obligations. The unavoidable costs are the minimal costs to be incurred to get rid of the agreement, being the lowest of the costs of meeting the obligations on the one hand and the fees or fines for not meeting the obligations on the other hand.

Provision for claims, disputes and lawsuits
A provision for claims, disputes and lawsuits is formed when it is probable that the company will be convicted in a lawsuit. The provision concerns the best estimate of the amount needed to settle the obligation and also includes the litigation costs.

Provision for repair costs
Costs of repair resulting from the installation of an asset are accounted for through the accrual of a provision over the useful life of the asset. Allocations to the provision are charged to the profit and loss account. The height of the provision to be created is the best estimate of the amounts necessary to settle the obligation.

Non-current liabilities (8)

Non-current liabilities are initially recognized at fair value. They are subsequently valued at amortized cost. This value usually corresponds to the nominal value.

Current liabilities and accruals (9)

Current liabilities and accruals are initially recognized at fair value. They are subsequently valued at amortized cost. This value usually corresponds to the nominal value.

7.2.6 Principles for determining results

General

Items in the profit and loss account are largely a function of the valuation principles used in the balance sheet for investments and the provision for insurance liabilities. Both realized and unrealized results are accounted for directly in profit and loss.
Income, expenses, and benefit payments are allocated to the period to which they relate.

Net turnover

Management fees (10)
Fees received from third parties for pension administration activities and asset management, minus any discounts, are allocated to the period to which they relate.

Other operating income (11)
Income from other services provided to third parties is recognized after deduction of any discounts and taxes levied on turnover. Income from services provided is recognized on a percentage completed basis at balance sheet date relative to the total services to be provided.

Operating expenses

Personnel costs (13)
Salaries and social charges are recognized in profit and loss based on the terms of employment insofar as they are payable to employees. Pension schemes are accounted for in accordance with the liabilities method on the basis of the applicable pension agreements; pension contributions due for the financial year are recognized in profit and loss as expense.

Amortization and depreciation of non-current assets (14)
Amortization and depreciation is recognized from first use onwards in proportion to the expected useful life and taking into account any residual value, using the straight-line method.

Other operating expenses (15)
Operating expenses are allocated to the period to which they relate.

Interest and similar income (16)

Interest and similar income is allocated to the reporting year. Where necessary, the effective interest rate of the relevant assets is taken into account. Interest income includes income from checking accounts and deposits.

Interest and similar expenses (17)

Interest and similar expenses are allocated to the reporting year. Where necessary, the effective interest rate of the relevant liabilities is taken into account. 

Taxes (18)

Taxes on profit are calculated on the result before taxes in the profit and loss account taking account of any available tax loss carryforwards (insofar as these are not included as part of deferred tax assets) and tax-exempt profit components, and after adding back any non-deductible costs. Temporary differences resulting from differences between accounting and tax valuation are expressed in (the development of) the deferred tax liability or asset.
In addition, changes in deferred tax assets and liabilities arising from changes in the applicable tax rates are taken into account.

Share of profit/(loss) of associates (19)

The result from investees is determined based on the change in the net asset value. This also includes any impairment losses on investees.

Leasing

Lease contracts in which the economic benefits and risks are not substantially transferred to the company as lessee are classified and recognized as operating leases. The lease payments are recognized in profit and loss over the contractual lease period on a straight-line basis, taking into account any compensation received from the lessor.

7.2.7 Principles of preparation of the cash flow statement

The cash flow statement has been drawn up using the indirect method and provides insight into the changes in the balance sheet item Cash and cash equivalents. Cash flows in foreign currency are converted at the average exchange rate.

7.2.8 Notes to the consolidated balance sheet

Non-current assets

Intangible assets (1)
Intangible assets include goodwill calculated upon the acquisition of business activities and equity interests, and the value of the client contracts identified with this acquisition. This item also includes purchased software. Movement in these items was as follows. 

The economic life of intangible assets, with the exception of purchased software, is based on the period over which future economic benefits from underlying long-term contractual agreements are derived. Of the goodwill recognized at year-end 2021, € 76.9 million (2020: €89.1 million) has a remaining useful life of approximately six years. Of the client contracts recognized at year-end 2021, € 36.7 million (2020: €68.2 million) has a remaining economic life of approximately one year.

At year-end 2021, the management had no indication that these assets were subject to any particular impairment.

Software includes intangible assets that have already been fully amortized but are still in use. There are no intangible assets with limited ownership rights and no intangible assets have been provided as security for debts. For the capital expenditure commitments for intangible and tangible fixed assets already entered, we refer to the notes to the off-balance sheet liabilities on page 121.

Property, plant and equipment (2)
Property, plant and equipment comprises the furniture and fittings and data processing equipment.
Movement in these items was as follows.

The investments in furniture and fittings in 2021 mainly relate to the renovations to the new rental property Edge West. In addition, investments have been made for renovations in Heerlen as well as in the offices abroad.

Financial non-current assets (3)
The financial non-current assets include a deferred tax asset resulting from differences between accounting and tax valuations, equity interests in non-consolidated investees and other financial non-current assets including a loan granted.

The list of investees not included in the consolidation is included as part of the notes to the company financial statements.

Movement in these items was as follows.

The item equity interests concerns the interests in Campus Heerlen Huisvesting BV and Campus Management & Development BV and the in 2020 acquired interests in Hyfen BV and Design Authority BV. In 2021, APG Group acquired an equity interest in Prikkl BV, aimed at getting a better grip on the financial condition of Dutch people by means of accessible and affordable coaching and advice. For this equity interest, the company does not have dominant control but significant influence, hence, this equity interest is valued at net asset value. Based on an analysis of the recoverable amount, based on the indirect net realisable value, an impairment has been performed on the equity interests.

The deferred taxation mainly relates to temporary differences between the accounting and tax valuation of the goodwill arising as a result of the statutory unbundling of pension funds and administrators in 2008 (and agreed on with the tax authorities). € 6.2 million is expected to be realized in 2022. A deferred tax asset or liability is recognized for any temporary differences in value at balance sheet date. In the case of a deferred tax asset, this asset will be included to the extent that when the valuation differences to which the deferred tax asset relates reverse, the associated tax loss can be expected to be offset by taxable profits within the applicable time limits. The loan granted mainly relates to Campus Huisvesting BV. The item other relates to investments in relation to long term remunerations.

Current assets

Related party receivables relate mainly to asset management services provided to mutual investment funds by APG Group. The mutual investment funds are collective investment entities to which assets are contributed by several clients with common investment goals and management is performed by APG Group.

In short-term receivables, an amount of €3.7 million (2020: 4.8 million) has a term of more than one year. No security has been provided and no interest was received on the receivables.

An amount of € 9.3 million (2020: € 8.0 million) of cash & cash equivalents is not freely available due to long-term obligations towards personnel. 

No other forms of security have been provided, nor have any supplementary terms and conditions been entered into. Given the nature of the deposits (short-term), the interest rate risk is very low. The deposits have been placed with creditworthy financial institutions with minimally an A-rating according to rating agencies Fitch and Moody's and have a term of 3 months. As a result, the credit risk is limited.

Group equity (6)

The composition of APG Group’s equity is explained in the notes to the balance sheet in the company financial statements.

Capital and dividend policy
Important starting points for the in 2021 applicable capital and dividend policy are: financial stability, room for possible strategic investments and a required return appropriate to a socially-minded organization. In 2021, the capital and dividend policy has been revised because the required return based on a Return on Equity objective no longer fits given the applicable tax transfer pricing agreements in the relationship between APG and its client ABP. In the new policy, the required return has been adjusted to take account of these tax transfer pricing agreements. The proposed dividend allocation is calculated annually based on an analysis of the available capital versus our required capital according to the capital and dividend policy. 

Movements in group equity
Movements in group equity and comprehensive income (group result and direct changes) were as follows.

Provisions (7)

Movement in other provisions was as follows.

Of the total amount €11.5 million (2020: € 19.9 million) has an expected remaining term of more than five years. € 18.9 million is expected to be settled in 2022 (2020: € 11.7 million).

Personnel-related provisions
This provision was created for liabilities following long-term personnel remunerations (long-service awards, bonus plan) and a provision for a mortgage facility for former employees. In 2021, there was a change in estimate in the provision for service anniversaries due to a recalibration of the parameters and methodology used. As a result of this change in estimate, the financial result for 2021 is approximately € 4.8 million higher than it would be based on last year's accounting policy. This includes the accrual of new rights and the release for expired rights.

Provision for reorganization
This provision was created to cover the costs of reorganizations related to voluntary departure schemes facilitated by the employer and redundancy analogous to the various stages of the change programs within the group. In 2021 there was an allocation of € 3.7 million (2020: € 13.8 million). In 2021 it transpired that the total expected disbursements for reorganization were lower than originally estimated, resulting in a release of € 7.8 million (2020: € 8.1 million).

Other provisions
The other provisions mainly concern a provision for an onerous rental contract of € 6.1 million for the old office building which is no longer in use for business activities. The rental contract became loss-making in 2021 due to changed market conditions, as a result of which it is expected to take longer to sublet the property. 

Non-current liabilities (8) 

The entire closing balance of € 10.9 million has a remaining term to maturity of more than five years (2020: €10.9 million). The interest rate is 7.5 percent p.a. (2020: 7.25 percent p.a.). No security has been provided. The fair value of the non-current liabilities is € 23.8 million (2020: €25.6 million). The repayment of the non-current liabilities takes place at the end of the term.

Current liabilities and accruals (9)

Liabilities to credit institutions concern cash collateral received in cover of the settlement risk of FX forwards. These were concluded to finance the future costs of the activities of the foreign investees. Current liabilities and accruals include an amount of € 15.4 million (2020: €6.6 million) falling due after more than one year. Related-party liabilities mainly relate to conducted asset management services and settlements with clients. In addition, a prepaid rental discount has been accounted for because of rented office buildings, which will be released over the term of the contract.

Off-balance sheet liabilities and assets

At balance sheet date, liabilities under current rental agreements in an amount of € 295.9 million were outstanding (2020: € 202.2 million), of which € 21.4 million was due within one year (2020: € 21.3 million), € 87.6 million at between one and five years (2020: € 86.5 million) and € 186.9 million at more than five years (2020: € 94.4 million). Rental costs of € 29.5 million were recognized in the reporting year (2020: € 20.5 million).

Liabilities in respect of long-term car leases total € 6.7 million (2020: €7.8 million), of which € 2.7 million due within one year of the end of the financial year (2020: € 3.1 million) and € 4.0 million at between one and five years (2020: € 4.7 million). There are no liabilities due beyond five years. In the reporting year € 3.0 million of leasing costs inclusive fuel costs were recognized (2020: € 3.7 million). The leasing liability is determined exclusive the fuel advance.

Liabilities in respect of maintenance and other contracts amounted to € 60.0 million (2020: € 32.5 million) of which € 20.1 million (2020: € 11.8 million) due within one year of the end of the financial year and € 39.9 million (2020: € 20.7 million) due at between one and five years. There are no liabilities due beyond five years.

At the end of the reporting year the group assumed investment commitments in respect of data processing equipment and software for € 11.1 million (2020: € 10.7 million).

In 2018, APG Group entered into a long-term contract for the purchase of professional services, ensuing from the sale of Inovita B.V. Liabilities in connection with this contract amounted to € 0.7 million (2020: € 1.0 million), which is due within one year of the end of the financial year. Minimum purchasing volumes were agreed in the contract. If the actual purchase volumes realized are lower than the minimum volume applicable at that time, APG Group is required to pay 30 percent of the difference.

Liabilities in respect of derivatives contracted to hedge the financing of foreign subsidiaries have a nominal value at balance sheet date of € 149.1 million (2020: € 126.6 million). The fair value of these derivatives at balance sheet date amounted to a positive € 2.9 million (2020: € 4.7 million negative). The liabilities have a term of less than one year. The contract conditions include the exchange of collateral to hedge the settlement risk.

There are tax groups within APG Group, specifically for corporate income tax and VAT. Within a tax group, the individual companies bear joint and several liability for each other's tax liabilities. Taxes are attributed to each company according to each company’s share in the total tax as if the companies were independently liable for the tax.

With regard to the performance results from investments made under old mandates at a former associate, there is an entitlement to payments yet to be received (carried interest notes; 2021: €0.1 million, 2020: €0.1 million). For this liability, an outflow is resources is not considered probable. 

APG Asset Management is being held liable by a client for damage resulting from an alleged error in performing services to this client. The outcome of this liability statement is uncertain and might result in future outflow of resources of APG Groep NV.

7.2.9 Notes to the consolidated profit and loss account

Net turnover

The management fees relate to the fees received for the performed asset management activities less custody fees and fees for pension management. The increase in asset management fees mainly relates to the increase in the assets under management and the increase in fixed fee due to increased strategic activities.

Other operating income (11)
This consists of realized income other than that arising directly from the administration contracts with pension funds and asset management for third parties.

Segmented information on net turnover

The segmented information is mainly in accordance with the legal structure of APG Group, whereby there is segmentation into APG Asset Management, APG DWS en Fondsenbedrijf and supporting services.

Operating expenses

Costs of outsourced work and other external costs (12)
This item includes the cost of hiring external staff, auditor’s costs, and consultancy costs.

Employee pension scheme
The pension scheme has been placed with Stichting Pensioenfonds ABP and PPF APG. Rights are accrued based on average pay and number of years of service, with conditional indexation. The pension scheme for the majority of the remaining employees has been placed with Stichting Personeelspensioenfonds APG. Rights are accrued based on average pay and number of years of service, with conditional indexation. APG Group has no obligation to make additional contributions in the event of shortfalls in these pension funds other than the payment of future contributions. Based on this so-called defined contribution scheme, it is sufficient for the company to report the contribution as a cost. The item Other personnel costs for the year 2021 includes the release of the provision for service anniversaries of € 4.8 million.

Specific schemes apply for most employees abroad.

Number of employees
In 2021 the group employed an average of 3,124 people (2020: 3,013), divided into the following segments.

In 2021 an average of 246 employees worked abroad (2020: 228). These employees are all employed by APG Asset Management.

Remuneration of Supervisory and Executive Board members (in euros)
The remuneration of Supervisory Board and Executive Board members is determined by the General Meeting of Shareholders.

Based on a decision of the State Secretary for Finance, the supervisory activities of the Supervisory Board members of APG will no longer be performed as VAT entrepreneur from May 7 2021 onward. Hence, the Supervisory Board members are no longer allowed to charge VAT for these activities. As a result, the amounts mentioned under 'Employer charges and taxes'  are lower in 2021 compared to 2020.

The column ‘direct salaries’ contains the fixed annual salary, the vacation allowance, and the year-end bonus. The column ‘compensation for reduction in pension accrual’ stems from a generic scheme at APG Group, whereby the reduction in the employer pension contribution due to the capping of pension accrual (2021: € 112,189 | 2020: € 110,111) accrues to the employee. The column ‘personnel charges’ contains the employer’s charges; the column ‘pension charges’ contains the charges for pension contributions. As of March 1 2021, Annette Mosman has been appointed as chairman of the Executive Board, which has resulted in an increase in remuneration for her.

The above table does not include compensation relating to mobility and vitality (2021: € 79,703 | 2020: € 98,349). The mobility and vitality allowances are both part of the Collective Labor Agreement, whereby with regard to mobility a choice can be made between a reimbursement whether a lease car and the vitality allowance contribute to an active and healthy lifestyle. 

All remuneration was unchanged except for the increase as per the collective labor agreement (CAO) which amounted to 1.5 percent for all APG Group employees in 2021. There are no early retirement schemes for members of the Executive Board.

Starting March 1st 2022, Ronald Wuijster will be re-appointed for a period of four years. Because of the performed achievements during his first term, his fixed remuneration will increase as of March 1, 2022 with € 40.000 per year (half of which in free time). This increase was carefully weighed against the social aspect of asset management services for the pension sector. With this increase, Mr. Wuijster is being remunerated below the market benchmarks. 

No loans, advances, or guarantees have been provided to current or former members of the Executive or Supervisory Board.

The increase in the item "Accommodation costs" in 2021 is a result of the move to a new office building which has caused double rental charges. In addition, the accommodation costs include an amount of € 6.1 million for the provision for the onerous rental contract for the old office building. 

Interest and similar income (16)

Interest income mainly relates to the revaluation of securities accounted for under financial non-current assets (2020: € 1.0 million). 

Interest and similar expenses (17)

The financial charges are mainly interest charges on current accounts. No interest or similar expenses pertained to related parties (2020: zero).

Taxes (18)
The taxes in the consolidated profit and loss account can be specified as follows.

The effective tax rate over 2021 was 23.4 percent, compared to a nominal rate applicable in the Netherlands of 25 percent. The lower effective tax rate in 2021 is mainly caused by deviating tax rates in the foreign countries in which APG operates and an incidental effect resulting from the change in tax rate in the Netherlands as of 2022. As of 2022, the tax rate in the Netherlands increases from 25 percent to 25.8 percent. As a result of this increase, APG has valued its deferred tax assets at year-end at 25.8%. Without this incidental effect, the effective tax rate is 24.3 percent. In the foreign countries in which APG operates, APG pays taxes according to the tax rates applicable there, which are lower than the current tax rate in the Netherlands.

Share of profit/(loss) of associates (19)
The result from investees is the result from investees not included in the consolidation including impairment losses on investees.

7.2.10 Notes to the consolidates cash flow statement

The statement of cash flows has been prepared using the indirect method. For a description of the composition of the cash, please refer to the notes to the consolidated balance sheet.

Interest on cash is included in the interest paid or received. These items are considered operational activities, and are therefore recognized as such.

The investments pertain to investments in furniture and fittings, data processing equipment, and software. 

The cash flow from financing activities includes the dividend payment in the course of the financial year.

7.2.11 Events after the reporting period

There have been no events after the reporting period with an impact on the financial position at December 31, 2021 with impact on the financials statements.

7.2.12 Other notes

Related parties transactions
Transactions with related parties are conducted on market terms and conditions.

Stichting Pensioenfonds ABP, APG Group NV, APG DWS en Fondsenbedrijf NV, APG Asset Management NV, APG Trading BV as well as Entis Holding BV and Entis BV together form a tax unit for VAT. This means that the company is jointly and severally liable for the turnover tax liabilities of the tax entity as a whole. As for the corporate income tax APG Group forms a tax entity with APG DWS en Fondsenbedrijf NV and APG Asset Management NV. This means that these legal entities are jointly and severally liable for each other's tax liabilities. The corporate income tax of the fiscal unit is allocated to each company belonging to the fiscal unit on the basis of a company's share in the total corporate income tax. Transactions between our client ABP and APG Group must comply with the tax transfer pricing agreements.

Independent auditor’s fees
KPMG Accountants N.V. has been the independent auditor of APG Group NV and its subsidiaries as of the financial year 2016. The auditor’s fees are recognized in the costs of outsourced work and other external costs.

The auditor’s fees for the audit of the financial statements are the costs that are attributable to the financial year.
The other audit assignments include € 1.4 million (2020: € 1.5 million) for audit-related work on reports to clients of APG Group NV in the context of the services provided by APG Group NV.

7.3 Company financial statements

7.3.1

Company balance sheet at December 31, 2021 (before appropriation of profit)

In thousands of euros

Company profit and loss account for 2021

In thousands of euros

7.3.2 Basis of valuation and determination of results

The company financial statements have been drawn up in accordance with the statutory provisions of Title 9, Book 2 of the Dutch Civil Code and the authoritative statements from the Annual Reporting Guidelines published by the Dutch Accounting Standards Board. The accounting policies for valuation and for the determination of the result for the company financial statements and the consolidated financial statements are the same, with the exception that equity interests in group companies are valued in accordance with the equity accounting method on the basis of net asset value.

For the accounting policies for the valuation of assets and liabilities and for the determination of the result, please see the basis of valuation and determination of results to the consolidated balance sheet and profit and loss account.

Where items from the company balance sheet and company profit and loss account are not further explained below, please see the notes to the consolidated balance sheet and profit and loss account.

7.3.3 Notes to the company financial statements

In thousands of euros

Non-current assets

Intangible fixed assets (1)

The intangible fixed assets relate to purchased software. The goodwill relates to the equity interest in Prikkl BV which was acquired in 2021.

Property, plant and equipment (2)

Property, plant and equipment comprises the furniture and fittings and data processing equipment. Movement in these items was as follows.

The investments in 2021 with regard to furniture and fittings mainly relate to the renovations in the new rental property Edge West. In addition, investments have been made for renovations in Heerlen.

Financial non-current assets (3)

Financial non-current assets concern equity interests in associates, active deferred taxation and loans granted. Movement in these items was as follows.

The closing balance includes an active deferred tax asset of € 6.4 million (2020: € 7.0 million) and a loan granted of € 2.4 million (2020: € 3.0 million). In 2021, APG Group NV acquired an equity interest in Prikkl BV, aimed at gaining more control over the financial fitness of the Dutch people through accessible and affordable coaching and advice. APG Group does not have dominant control over this equity interest but does have significance influence exists over this equity interest. Hence this equity interest is valued at net asset value. Based on an analysis of the recoverable amount, based on the indirect realizable value, an impairment has been applied to the equity interests. In addition, a capital contribution in subsidiary APG DWS en Fondsenbedrijf was made in 2021 of € 33.0 million. In addition a capital contribution has been applied of € 0.3 million in Campus Management & Development BV.

Current assets

The receivables, prepayments, and accrued income predominantly consist of receivables on group companies and prepaid amounts.  In the receivables an amount of € 3.4 million has a term of more than one year. No security has been provided and no interest was received on the receivables.

The cash & cash equivalents are at free disposal of the company.

Equity (6)

Paid-up and called-up share capital
In 2020, a reduction in the issued capital took place, with the nominal value has been reduced from € 1.00 per share to € 0.50 per share and the paid-up and called-up capital has been reduced by € 352.6 million in favor of the share premium. The deposited and
called-up capital, after reduction of the nominal value, concerns the issued capital at incorporation, consisting of 650,000,000 ordinary shares with a nominal value of € 0.50 and 55,297,170 ordinary shares of € 0.50 were issued in 2011 upon the acquisition of the minority interests in APG DWS en Fondsenbedrijf NV (formerly APG Algemene Pensioen Groep NV) and Loyalis NV.

Share premium
The share premium paid upon incorporation, as well as the share premium paid as a result of capital contributions and withdrawals, the contribution of a subsidiary at fair value as well as share premium from the conversion of loans from shareholders into equity capital in the context of the recapitalization of APG Group, were included as share contribution in previous years.

Legal and other reserves 
The legal and other reserves include direct changes in equity related to the development of the legal reserve for currency translation differences of € 1.7 million. The reserve for currency translation differences amounted to € 3.6 million at year-end 2021 (2020: € 1.9 million) and is included in respect of the foreign participating interests. 

Undistributed result for the financial year
This comprises the result for the year under review.

Share premium, other reserves and the undivided result for the financial year can, in principle, be freely disposed of. The stipulations from regulators for group companies can result in restrictions on the extent to which the company’s equity capital or APG Group’s equity capital may be distributed. These stipulations may require that the equity capital of group companies be at a certain level. APG Group takes the stipulations from regulators into account in determining the potential for paying a dividend.

Proposed appropriation of profit

In accordance with the policy adopted, a proposal will be submitted to the General Meeting of Shareholders that a dividend in the amount of € 120.0 million be distributed: € 77.8 million from the net result and the remaining amount of € 42.2 million from freely distributable reserves.

Provisions (7)

Of the total amount, € 2.9 million (2020: € 7.4 million) is expected to have a term of more than five years. € 8.1 million is expected to be settled in 2022 (2020: € 4.8 million). The addition mainly relates to the onerous rental contract of € 6.1 million for the office building which is no longer in use for business activities. The rental contract became loss-making in 2021 due to changes in market conditions, as a result of which it is expected to take longer to sublet the property. In 2021, a change in estimate took place on the provision for service anniversaries due to a revision in the parameters and methodology used. As a result of this change in estimate, the result in 2021 is approximately € 1.1 million higher than based on the accounting policies applied in the previous year. This includes the accrual of new rights and the release from expired rights.

Non-current liabilities (8)

At year-end 2021, no liabilities to related parties exist. The liabilities to a group company at year-end 2020 of € 2.5 million have been settled with an internal current account position. € 10.9 million of the closing balance has a longer term to maturity than five years (2020: € 10.9 million). The interest rate is 7.25 percent per year (2020: 7.25 percent per year). No securities have been provided. The fair value of the long-term liabilities to third parties amounts to € 23.8 million (2020: € 25.6 million).

Current liabilities and accruals (10)

With regard to the debts to group companies, there are no interest obligations nor securities. € 6.4 million of the current liabilities has a term of more than 1 year (2020: € 1.5 million).

Off-balance sheet liabilities and assets

At balance sheet date, liabilities under current rental agreements in an amount of € 232.6 million were outstanding (2020: € 158.6 million), of which € 14.4 million was due within one year (2020: € 16.5 million), € 58.5 million at between one and five years (2020: € 70.0 million) and € 159.7 million at more than five years (2020: € 72.1 million). Rental costs of € 22.8 million were recognized in the reporting year (2020: € 14.7 million).

Liabilities in respect of long-term car leases total € 6.6 million (2020: €7.8 million), of which € 2.7 million due within one year of the end of the financial year (2020: € 3.1 million) and € 3.9 million at between one and five years (2020: € 4.7 million). There are no liabilities due beyond five years. In the reporting year € 3.0 million of leasing costs inclusive fuel costs were recognized (2020: € 3.7 million). The leasing liability is detemined exclusive the fuel advance.

Liabilities in respect of maintenance and other contracts amounted to €26.6 million (2020: € 18.6 million) of which € 9.3 million (2020: € 6.9 million) due within one year of the end of the financial year and € 17.3 million (2020: € 11.7 million) due at between one and five years. There are no liabilities due beyond five years.

At the end of the reporting year the group assumed investment commitments in respect of data processing equipment and software for € 11.0 million (2020: € 10.7 million).

In 2018, APG Group entered into a long-term contract for the purchase of professional services, ensuing from the sale of Inovita BV. Liabilities in connection with this contract amounted to € 0.7 million (2020: € 1.6 million), of which € 0.7 million (2020: € 1.0 million) due within one year of the end of the financial year and € 0.0 million (2020: € 0.6 million) at between one and five years. Minimum purchasing volumes were agreed in the contract. If the actual purchase volumes realized are lower than the minimum volume applicable at that time, APG Group is required to pay 30 percent of the difference.

Liabilities in respect of derivatives contracted to hedge the financing of foreign subsidiaries amounted at balance sheet date to € 149.1 million (2020: € 126.6 million). The fair value of these derivatives at balance sheet date amounted to a positive € 2.9 million (2020: € 4.7 million negative). The liabilities have a term of less than one year. The contract conditions include the exchange of collateral to hedge the settlement risk. The contract terms include the exchange of collateral to cover the settlement risk. Directly related agreements between APG Groep NV and APS Asset Management NV have been formalized by means of back-to-back agreements.

Related party transactions
APG Group passes on costs to its subsidiaries APG Asset Management and APG DWS en Fondsenbedrijf. No profit mark-up is made on this allocation of costs, since these entities belong to the same tax group. The total amount passed on by APG Group in the year was € 161.3 million.

Liability statements
The company has issued liability statements for a number of subsidiaries included in the consolidation, as referred to in Articles 2,403 and 2.408 of the Dutch Civil Code The liability statements concern APG DWS en Fondsenbedrijf NV.

Liability of a tax group
There are tax groups in APG Group, specifically for corporate income tax and VAT. Within a tax group, the individual companies bear joint and several liability for each other's tax liabilities. Taxes are attributed to each company according to each company’s share in the total tax as if the companies were independently liable for the tax. This means that each subsidiary will reimburse the parent company for its share in the tax owed in proportion to each party’s taxable profit before the application of the loss set-off rules as stipulated in the Corporation Tax Act.

Number of employees
In 2021 APG Groep NV employed an average of 685 people (2020: 678), all in the Netherlands. 

Directors’ remuneration
For a description of the remuneration of Executive Board members, please refer to the consolidated balance sheet.

List of equity interests

In 2021, APG Service Partners BV was merged with APG DWS en Fondsenbedrijf NV and APG Groep NV has acquired an interest in Prikkl BV. APG Groep NV has the following equities interests:

Amsterdam/Heerlen, March 8, 2022 

Supervisory Board
Pieter Jongstra, chairman

Dick van Well, vice-chairman

José Meijer

Sarah Russell

Claudia Zuiderwijk

Executive Board
Annette Mosman, chairman

Jan Nijland a.i.

Francine Roelofsen - van Dierendonck

Ronald Wuijster

7.3.3.1