Development Bank of Minas Gerais S.A. – BDMG

Transcription

77
THAÍS QUEIRÓS MATTOSO VALLE TRADUTORA PÚBLICA – SWORN PUBLIC TRANSLATOR
INGLÊS - PORTUGUÊS
ENGLISH – PORTUGUESE CPF:680.029.476-49 JUCEMG Nº785
Rua Peru 100, Sion Belo Horizonte/MG - CEP-30.320-040
TEL/FAX: 55 31 3547-4505 – CEL: 55 31 9981-0908 e-mail: thamattoso@gmail.com
JUCEMG No 785
BOOK No 12
CPF:
TRANSLATION No 21
680.029.476-49
PAGES No 077 to 140
I, the undersigned, Thaís Queirós Mattoso Valle, Sworn
Public Translator and Commercial Interpreter of English,
admitted by the Board of Trade of the State of Minas
Gerais, on the 28th day of May, 2009, under number 785, do
hereby certify that a document written in Portuguese was
presented to me for translation into the English language,
which at the request of the interested party I have done,
to the best of my knowledge and ability, as follows:
-----------------------------------------------------------
Management’ Report and Interim Financial Statements
on 31 March, 2016 and
Independent Auditor Report
BOOK No.12
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78
[logo pwc]
Independent auditor’s report on the interim financial statements
To the Directors and Shareholders
Introduction
We have reviewed the interim financial statements of the Development Bank of Minas Gerais
S.A. – BDMG (“Bank”) regarding the quarterly period ended on 31 March, 2016, comprising the
balance sheet and the respective income statements, statements of shareholders’ equity and of
cash flows for the quarterly period ended on this date, as well as of the summary of the principal
accounting policies and further explanatory notes.
The management is responsible for the preparation of these interim financial statements in
compliance with the accounting principles adopted in Brazil applicable to the institutions
authorized to operate by the Central Bank of Brazil. Our responsibility is that of expressing a
conclusion on this interim accounting information based on our review.
Scope of the review
We have conducted our review according to the Brazilian and international standards of review
of interim information (NBC TR 2410 – Review of Interim Financial Information Performed by
the Independent Auditor of the Entity, respectively). A review of interim information consists of
making inquiries mainly to the people responsible for the financial and accounting issues and of
the analytical procedures and of other review procedures. The scope of a review is significantly
more limited than that of an audit conducted according to the audit standards and,
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consequently, it has not enabled us to be sure that we learnt about all the material issues which
could be identified during an audit. Therefore, we have not presented an audit opinion.
2
PricewaterhouseCoopers, Rua Inconfidentes, 911, 17th and 18th , Belo Horizonte, MG, Brazil 30140-120, PO BOX 289 T:
(31) 3269-1500, F: (31)3261-6950 www.pwc.com/br
[logo pwc]
Conclusion
Based on our review, we have not become aware of any fact which leads us to believe that the
interim accounting information contained in the interim financial statements referred to above
were not prepared, in all the relevant aspects, in compliance with the accounting principles
adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil
and presented according to the requirements by the Central Bank of Brazil.
Belo Horizonte, 10 May, 2016
[signature]
PricewaterhouseCoopers
Independent Auditor
CRC 2SP000160/O-5 “F”MG
[signature]
Carlos Augusto da Silva
Accountant CRC 1SP197007/O-2 “S”MG
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3
Translator’s Note: The pages of the original document as from the Management Report are
numbered from 1 of 58 to 58 of 58
Management Report – January to March 2016
1. The company
Established by State Law No. 2607, of 05/Jan/1962, the Development Bank of Minas Gerais
S.A. – BDMG is a financial institution for the promotion of sustainable development of Minas
Gerais and it integrates the development system of the State, coordinated by the State
Department of Economic Development. Its View is “To be recognized as strategic actor in the
process of economic and social development of Minas Gerais” and its Mission is “to promote the
sustainable and competitive socioeconomic development of Minas Gerais, generating more and
better jobs and the reduction of inequalities”.
The Strategic Planning for the period 2016-2019 defined a greater intention in the actions,
supporting projects which lead to the improvement in the competitiveness of Minas Gerais and
in its productive restructuring, a promotion of the environmental sustainability and regional
and social development as main guidelines.
2. Operating results
The total disbursement in the first quarter of 2016 amounted to 254.3 million BRL, of which
73% represent pass-through operations (185 million BRL of disbursement, divided in BNDES
pass-through operations, with 141 million BRL, other pass-through operations, like FINEP,
FAPEMIG, FUNCAFÉ). The operations of their own funds represented 27% of the total (70
million BRL).
The portfolio of active clients had an increase of 6% in relation to the first quarter of 2015,
reaching 23,678 clients, present in 89% of the municipalities in Minas Gerais (766 out of 853).
In terms of sector division, Trade and Services was the sector which registered the largest
participation, with 130 million BRL (51% of the total), followed by the sectors of Industry of
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Transformation, with 63 million BRL (25%), Industrial Public Utility Services (30 million BRL,
or 12%), Construction (25 million BRL, or 10%), Agriculture and Livestock Farming (6 million
BRL, or 2%). Considering the disbursement regarding the size of the company, the large and
medium size companies account for 68% of the total, while the microenterprises and small size
companies represent 22%. The loans to the public sector represented 10% of the disbursement
in the first quarter of 2016 and 0.3% were allocated to contribution in funds.
In terms of territorial division, the regions which presented growth in the disbursement in
relation to the 1st quarter of the previous year were the Southwest (49%), Metropolitan (20%),
Caparaó (16%) and Northwest (12%).
3. Interim Financial Statements
In March 2016, the net equity of the Bank amounts to 1,692 million BRL representing a growth
of 0.2% in relation to the balance of 1,689 million BRL recorded in the December 2015 balance
sheet.
The Bank’s credit operations portfolio reduced 0.9%, moving from 5,893 million BRL, on 31
December, 2015, to 5,840 million BRL on 31 March, 2016. The provision net portfolio moved, in
the same period, from 5,504 million BRL to 5,432 million BRL.
BDMG risk rates were downgraded, in February 2016, by the risk rating agencies Standard &
Poor’s and Moodys. The effect resulting from these downgrades are in the Interim Financial
Statements of 31 March 2016, in the Explanatory Note 13 – Obligations due to loans and passthrough operations (a) Abroad.
BDMG has securities recorded under “held to maturity date”, in the amount of 130 million BRL
and for which Management, in compliance with the Circular 3068/2001, declares having
financial capacity to hold them in portfolio to maturity.
4. Performance highlights
In the first quarter of 2016, aligned with the strategic planning guidelines, BDMG released new
finance facilities, changed existing products, established partnerships, expanded its
performance by means of structured operations and innovation.
BDMG began to make the funds from BNDES PER – Emergency Program of Reconstruction of
Municipalities Affected by Natural Disasters (January/2016) available. The purpose of the
program is to support the resuming of economic activities in municipalities affected by natural
disasters, by means of financing working capital and fixed capital for companies and
cooperatives, established in these places, with annual turnover of up to 90 million BRL.
We can highlight the creation of the Program for Financing Philanthropic Hospitals
(March/2016), which aims to promote the financial restructuring of hospitals and the funds, by
means of pass-through operations from BNDES, must be used for the payment of bank debts of
the health units. In total, 100 million BRL will be allocated to the philanthropic hospitals in
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Minas Gerais that provide service through the Single Health System (SUS), that have over 100
beds and have gross annual revenue over 10 million BRL.
Also in March/2016, Geraminas Social was launched offering credit in more attractive
conditions for companies in cities with Municipal Human Development Rate (IDHM) less than
the average IDH-M of municipalities in the State (0.667). In total, the companies located in 406
cities will have access to finance facility, which will have own funds from the Bank. This
initiative aims to contribute to reduction of regional inequalities.
Companies located in the 35 municipalities most impacted by the dam rupture disaster in
Mariana obtained longer term to request finance from BDMG. Initially foreseen to end on 29
February, the credit facility of the Program of Socioeconomic Restructuring of the Rio Doce
Water Basin was postponed to 30 April. 20 million BRL are available for the private sector. The
news is that branches of companies located in this region, but with main office in other
municipalities, will have access to the financing.
In order to support innovation, BDMG takes part as member of the fund Criatec 3, created by
BNDES in February and designated for investments in innovative companies. The fund has
equity of 200 million BRL.
In August 2015, in partnership with the State Government, they launched a bid notice in the
amount of 200 million BRL for financing investment projects and acquisition of equipment by
the municipal public administration in Minas Gerais, prioritizing those with smaller IDHM. At
the end of March/2016, the first lot of funds was released in the amount of 50.9 million BRL to
57 municipalities.
5. Acknowledgement
BDMG management thanks the support of all those who contributed to results obtained in the
first quarter of 2016 and, specially to the Minas Gerais society, which is the reason for all the
efforts made by the Bank in favor of the sustainable socioeconomic development of Minas
Gerais.
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DEVELOPMENT BANK OF MINAS GERAIS S.A. – BDMG] on the top part of the pages
of the document from 3 of 58 to 58 of 58.
Balance Sheet
In thousands of BRL
Balance on
Balance on
31/03/2016
31/03/2015
1,855,725
1,839,947
3,760
4,817
377,533
351,063
377,533
351,063
Assets
Current
Cash and cash equivalents (Note 4)
Liquidity interbank investments (Note 5)
Investments in open market
Investments in interbank deposits
(Allowance for losses)
Bonds and securities and derivative financial instruments (Note 6-7)
11,727
11,727
(11,727)
(11,727)
58,805
54,179
Own portfolio
46,568
44,575
Derivative financial instruments (Note 7)
12,237
9,604
1,334,923
1,332,247
1,578,734
1,555,515
Credit operations (Note 8)
Credit operations
Public sector
Private sector
(Allowance for doubtful receivables)
Other credits (Note 9)
154,975
154,281
1,423,759
1,401,234
(243,811)
(223,268)
80,486
97,455
Accounts receivable
Other
1,554
1,954
78,932
95,502
(Allowance Other Doubtful Receivables)
(1)
Other values and assets(Note 10)
218
Other values and assets
218
186
186
Noncurrent
5,416,697
5,460,704
Long-term receivables
5,307,556
5,351,761
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84
Bonds and securities and derivative financial instruments (Note 6-7)
Own portfolio
763,43
768,814
648,374
607,060
Subject to Guarantees
6,728
Derivative Financial instruments (Note 7)
Credit operations (Note 8)
Credit operations
Public sector
108,328
161,754
4,095,755
4,170,070
4,259,684
4,335,924
643,822
649,945
Private sector
3,615,862
3,685,979
(163,929)
(165,854)
Other credits (Note 9)
406,365
392,771
Accounts receivable
1,383
1,843
Specific credits
1,183
1,183
Other
416,101
402,047
(12,302)
(12,302)
42,006
20,106
Other values and assets (Note 10)
Other values and assets
44,081
22,180
(Allowance for devaluations)
(2,075)
(2,074)
109,141
108,943
78,69
78,683
79,527
79,52
Permanent (Note 11)
Investments
Other investments
(Allowance for losses)
(837)
(837)
Fixed assets
21,492
21,958
Real estate
43,788
43,787
Other fixed assets
12,787
12,908
(35,083)
(34,737)
(Accrued depreciations)
Intangible
Intangible assets
(Accrued amortizations)
8,959
8,302
13,93
12,729
(4,971
(4,427
Deferred
Organization and expansion expenses
(Accrued amortizations)
Total assets
1,610
1,610
(1,610)
(1,610)
7,272,422
7,300,651
Balance on
Balance on
31/03/2016
31/03/2015
1,397,961
1,047,417
Balance Sheet
In thousands of BRL
Liabilities
Current
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Deposits (Note 12 (a))
100,686
137,501
Interbank deposits
100,686
137,501
363,395
110,035
363,395
110,035
176,276
76,722
Funds from acceptance and issue of securities (Note 12(b))
Funds from financial drafts
Obligations by loan (Note 13 (a))
Loans abroad
Obligations by pass-throughs of the country – Official Instit (Note 13(b))
176,276
76,722
676,474
654,307
1,955
1,814
BNDES
National Treasury
366,333
355,446
FINAME
248,337
240,414
59,849
56,633
81,130
68,852
205
995
12,684
29,158
Other institutions
Other obligations (Note 14)
Collection and receipts of taxes and alike
Tax and social security
Financial and development funds
Sundry
Long-term liabilities
Funds from acceptance and issue of securities (Note 12(b))
Funds from financial drafts
Obligations by loan (Note 13 (a))
Loans abroad
Obligations due to pass-through operations in the country – Official Instit (Note 13(b))
National Treasury
1,263
1,222
66,978
37,477
4,170,197
4,551,599
325,494
571,883
325,494
571,883
579,856
751,341
579,856
751,341
2,777,968
2,780,149
10,819
10,694
BNDES
1,479,706
1,463,319
FINAME
1,228,987
1,246,570
58,456
59,566
Other institutions
Derivative Financial instruments
Derivative Financial instruments (Note 7)
19,140
19,140
Other obligations (Note 14)
467,739
448,226
185,192
175,864
Sundry
Unearned revenues (Note 15)
Unearned revenues
Net equity (Note 16)
15,975
12,617
266,572
259,745
12,214
12,939
12,214
12,939
1,692,050
1,688,696
1,793,685
1,793,685
Capital:
Capital of domiciled in the country
Appropriated retained earnings
Equity valuation adjustments
14,512
14,512
(116,346)
(119,501)
Accumulated profits
199
Total Liabilities
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TRANSLATION No.21
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7,300,651
86
The explanatory notes are integrating part of the quarterly financial information
Income statement
In thousands of BRL, except when otherwise indicated
Balance on
Balance on
31/03/2016
31/03/2015
(Restated)
Earnings of financial intermediation
132,738
257,225
174,677
154,472
36,764
26,025
(78,553)
60,266
Income of exchange operations
(150)
16,462
Financial intermediation expenses
(166,389)
(213,848)
Credit operations
Income of operations with bonds and securities (Note 20)
Income with Derivative Financial Instruments (Note 20)
Operations of fund raising in the market (Note 21)
(29,971)
(28,216)
Operations of loans and pass-throughs (Note 21)
(92,948)
(159,899)
Allowance for doubtful receivables (Note 8 (d))
(43,470)
(25,733)
(33,651)
43,377
40,900
(21,364)
Gross income of financial intermediation
Other earnings / operating expenses
Earnings of service rendering
8,752
8,553
(25,963)
(23,445)
Other administrative expenses (Note 22(a))
(7,554)
(9,069)
Tax expenses (Note 22 (b))
(6,036)
(5,311)
Personnel expenses
Other operating revenues (Note 22 (c))
100,906
23,877
Other operating expenses (Note 22 (d))
(29,205)
(15,969)
7,249
22,013
52
(683)
7,301
21,330
Operating income
Non-operating income
Earnings before tax on profit and interest
Income tax and social contribution (Note 23)
(7,102)
(8,127)
Allowance for income tax
(3,577)
(27,109)
Allowance for social contribution
(2,926)
(16,507)
(599)
35,489
-
(1,083)
-
(1,083)
199
12,120
Deferred tax asset
Profit sharing according to Articles of Incorporation
Employees’ profit sharing
Net income
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Profit per share (lot of 1000 shares) BRL
0.00003
0.000199
Statement of changes in the net equity
In thousands of BRL____________________________________________________________________
Statement of changes in the net equity
In thousands of BRL
Capital
On 31 December 2014
Revenue
Equity
Other Equity
Capital
reserves
Valuation
Valuation
increase Legal
Other
Adjustment Adjustment
1,771,693
Ratification of capital increase
3,530
3,53 38,021
18,462
(10,256)
Retained
Earnings Total
(112,374)
1,709,076
3,530
Equity valuation adjustment
(1,578)
(1,578)
Allocations
Reserves
1,164
22,122
23,286
Quarterly earnings
12,120
On 31 December 2015 (Restated)
1,775,223
39,185
On 31 December 2015
1,793,685
14,512
40,584
Equity valuation adjustment
12,120
(11,834)
(112,374)
12,12 1,742,904
(14,337)
(105,164)
1,688,696
3,155
3,155
Quarterly earnings
199
On 31 December 2016
1,793,685
14,512
(11,182)
(105,164)
199
199 1,692,050
Balance on
Cash flow of operating activities
31/03/2016
Balance on
31/03/2015
(Restated)
7,301
21,330
Earnings before interest and taxes
Adjustments of:
Depreciations and amortizations
956
941
Allowances and net liabilities
13,247
7,320
Allowances for doubtful receivables net of reversals
43,470
25,733
57
264
Allowances (reversals) for losses
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Appropriation of deferred income
(4,078)
(2,476)
Gains and losses due to exchange, net
(70,545)
68,878
Operating recoveries of credits recorded as loss
(10,737)
(2,057)
(6,977)
(4,017)
Revenues of inflation adjustment of long-term credit operations
Equity method income
(8)
278
(3,979)
(18,129)
(18,790)
(19,410)
(6,046)
(1,895)
(56,129)
76,760
Reduction (increase) of derivatives
74,829
(149,092)
Increase of credit operations
45,883
161,165
Market value adjustment of derivative instruments and hedging
Gain (Loss) in available-for-sale financial assets
Gain (Loss) in held-to-maturity financial assets
Adjusted net income (profit or loss)
Reduction of other credits and other values and assets
(22,300)
Reduction (Increase) of interbank deposits
(1,615)
(36,815)
43,676
Fund raising by means of financial bills
6,971
11,844
17,833
33,215
Increase of unearned income
3,354
2,027
Reduction of other obligations
29,252
394
Variation of assets and obligations
119,007
101,614
62,878
178,374
(16,409)
(27,112)
46,469
151,262
Increase of obligations due to loans and pass-through operations
Cash generated in the operations
Income tax and social contribution paid
Net cash generated by operating activities
Cash flow of investment activities
Acquisition of permanent assets (Translator’s Note: Permanent assets encompass:
investments, fixed assets and deferred charges)
Acquisition of available-for-sale financial assets
(1,148)
(647)
(31,344)
(82,139)
Collection of available-for-sale financial assets
8,573
Acquisition held-to-maturity of financial assets
Collection of held-to-maturity financial assets
Net cash (invested in) in investment activities
28,074
(30,241)
3,013
25,320
(20,906)
(59,633)
25,563
91,629
355,880
231,162
(150)
16,462
381,293
339,253
Net cash used in financial activities
Increase (reduction) of cash and cash equivalents, net
Cash and cash equivalents at the beginning of the period
Gains (losses) due to exchange on cash
Cash and cash equivalents at the end of the period
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[Explanatory notes regarding the interim financial statements
on 31 March 2016
In thousands of BRL, except when otherwise indicated] on the top part of pages 8 of 58 to 57 of 58
of the document
1. General information
The Development Bank of Minas Gerais – BDMG, a closely held corporation, is public company
controlled by the State of Minas Gerais and governed by the legislation of the corporations, by
the pertinent regulation of the National (Brazilian) Financial System and by the applicable
legislation established by the Government of the State of Minas Gerais.
The activities of BDMG, the basis of its purpose, are associated to the economic and social
development of the State of Minas Gerais. Within this focus, it performs activities related to
banks of development under the rules established by the National (Brazilian) Monetary Council
and acts as financial agent of funds constituted by the State in order to fund programs and
projects which promote the development of Minas Gerais. BDMG is also a financial agent
and/or manager of other funds which do not belong to the State which, in view of financing
projects located in Minas Gerais, promote its development. The Bank also renders technical
consulting and assistance to the Direct and Indirect Administration of the State and, it creates
opportunities for the implementation / expansion of companies of relevant interest for the
development of the State of Minas Gerais by means of investments in these companies through
its wholly-owned subsidiary BDMGTEC PARTICIPAÇÃO S.A., established in 2012.
The issue of the current financial statements was authorized by the Bank’s Management on 10
May 2016.
2. Summary of the main accounting policies
The financial statements were prepared according to the accounting principles adopted in
Brazil, which consider the accounting guidelines established by Law No. 6404/1976 and the
alterations introduced by Laws No. 11638/2007 and Law No. 11941/2009, for the accounting of
the operations, associated to the rules and instructions of the National Monetary Council (CMN)
and of the Central Bank of Brazil (Bacen), and they make evident all the standard relevant
information of financial statements, and only they, which are in compliance with the ones used
by the Management in its administration.
The Committee of Accounting Pronouncements – CPC issued pronouncements related to the
process of international accounting convergence, however not all of them were confirmed by the
Central Bank of Brazil (Bacen). Thus, the institution, in the preparation of the financial
statements, adopted the following pronouncements confirmed by the Bacen, until 31/03/2016:
Resolution CMN No. 3566/2008 – CPC 01 (R1) – Reduction in the Recoverable Value of Assets
Resolution CMN No. 3604/2008 – CPC 03 (R2) – Cash Flow Statements
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Resolution CMN No. 3750/2012 – CPC 05 (R1) – Disclosure on Related Parties
Resolution CMN No. 4007/2011 – CPC 23 - Accounting Policies, Changes in Estimates and
Correction of errors
Resolution CMN No. 3973/2011 – CPC 24 – Subsequent Event
Resolution CMN No. 3823/2012 – CPC 25 – Provisions, Contingent Liabilities and Contingent
Assets
Resolution CMN No. 4144/2012 – CPC 00 (R1) – Basic Conceptual Pronouncement
Resolution CMN No. 4424/2015 – CPC 33 (R1) – Benefits to Employees
2.1 Basis for preparation
The preparation of financial statements require the use of certain critical accounting estimates
and also the exercise of judgment by the management of BDMG.
2.2 Foreign Currency Translation
(a) Functional currency and presentation currency
The items included in BDMG’s financial statements are measured using the currency of the
main economic environment in which the company performs (“functional currency”). The
financial statements are presented in BRL, which is the functional and presentation currency of
the Bank
(b) Transactions and balances
The operations with foreign currencies are translated to the functional currency using the
exchange rates in force on the dates of the transactions or on the dates of assessment, when the
items are recalculated.
The gains and losses regarding the exchange resulting from the settlement of these transactions
and from the translation using the exchange rates of the end of the period, regarding the
monetary assets and liabilities in foreign currencies, are recorded in the income statement of the
period.
The gains and losses regarding the exchange related to loans, cash and cash equivalents are
recorded in the income statement of the period, as sub-item of the financial intermediation
income, except the debit balances resulting from the exchange rate change of credit operations
which are reclassified as other operating expenses and the credit balances resulting from the
exchange rate change of expenses with fund raising and obligations due to loans and passthroughs which are reclassified as other operating revenues.
The criterion for translation of asset and liability balances of the operations in foreign currencies
consists of the translation of these amounts to the national currency (BRL) at the exchange rate
in force on the date of the end of the period. On 31 March, 2016, the exchange rate applicable is:
1.00 USD = 3.5589 BRL (31/12/2015 – 1.00 USD = 3.9048) and 1.00 EUR = 4.0539 BRL
(31/12/2015 - 1.00 EUR = 4.2504 BRL).
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2.3 Cash and cash equivalents
Cash and cash equivalents, according to Resolution CMN No. 3604/2008, include cash in hand,
bank deposits in Brazil and abroad, short term high liquidity investments, with insignificant risk
of change in value and limits, with maturity period equal or less than 90 days, on the date of the
acquisition, which are used by the Bank for managing its short term obligations (Note 4).
2.4 Interbank investments with liquidity
The repos (repurchase agreements) executed with free transaction agreements are adjusted by
market value. The other assets are recorded at acquisition cost, plus the earnings assessed until
the date of the balance sheet, deducing the allowance for devaluation, when applicable.
2.5 Bonds and securities
In compliance with the Circular BACEN No. 3068/2001 and complementary regulations, the
bonds and securities, according to the intention of negotiation of the Management, are recorded
in the following categories, which follow the following accounting criteria:
(i) Bonds for negotiation – include bonds and securities acquired with the aim of being
frequently negotiated and in an active manner, recorded at market value, and the gains and the
losses regarding these bonds, realized and unrealized, are recorded directly in the result of the
period.
(ii) Available- for-sale securities – include bonds and securities used as part of the strategy for
the management of the cash flow. These bonds are recorded at market value, and their intrinsic
earnings (yield curve of the bond) recorded in the result and the gains and the losses resulting
from the market value variations, still unrealized, are recorded in the account Equity Valuation
Adjustment in the group Net Equity, net of the corresponding tax effects. The gains and the
losses, when realized, are recorded in the result by means of specific identification on the date of
the negotiation, the net equity corresponding entry, net of the corresponding tax effects.
(iii) Held-to-maturity bonds– include bonds and securities for which the Management have the
intention and the financial capacity to hold them to maturity, and they are recorded as
acquisition cost, plus intrinsic earnings which are recorded in the result. The financial capacity
is defined in cash flow forecasting, disregarding the possibility of anticipated redemption of
these securities. The reduction in the market value of these bonds and securities available- forsale and held to maturity, below their respective costs, related to reasons regarded not
temporary, are recorded in the result as realized losses.
The management establishes guidelines for the classification of Bonds and Securities among the
categories set forth in the Circular BACEN No 3068/2001. The classifications of the existing
bonds in the portfolio, as well as the ones acquired in the period, are periodically and
systematically assessed according to such guidelines. According to what is established in article
5 of the referred to circular, the reassessment regarding classification of bonds and securities
may only be performed at the time of the six month period trial balances. Additionally, in case of
BOOK No.12
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92
transfer of the category “held-to-maturity” for the others, can only occur due to specific, not
usual, not recurring and not foreseen reason, and which occurred after the date of the
classification.
2.6 Derivative Financial Instruments
According to the Circular BACEN No 3082/2002 and subsequent regulations, the derivative
financial instruments are classified for hedge purposes or not, according to the Management’s
intent.
BDMG, as from October, 2013, began to operate with derivative financial instruments of the
swap modality aiming at mitigating the risks resulting from the fluctuation of the values of the
foreign currencies and of the interest rates incurred on the funds of the financing agreed upon
abroad.
The derivatives are recorded at fair value and, as presented in Note 7, they are registered as
assets, when positive and, as liabilities when negative and the variations in the fair value are
recorded in the income statement.
On 31 March 2016, according to Note 6, the hedge operations performed are recorded by the
hedge accounting methodology, classified as hedge against market risk, according to the criteria
defined in the Circular BACEN No 3082/2002. According to this rule, the hedge instruments
and the corresponding hedge items are adjusted at market value and on the corresponding entry
the revenues or expenses recorded in the result of the period.
The managing and following up of the risk of the operations with derivative financial
instruments are in compliance with the Bank’s policies and strategies.
2.7 Credit operations and allowance for doubtful receivables
The credit operations are recorded by the realizable values, including, when applicable, the
earnings obtained, in a “pro-rata” daily basis, based on the variation of the index and the
interest rate agreed upon. The accrual of the operations overdue by the 59 th day of delay in
payment is recorded under revenues, and as from the 60th day, it is not appropriated, and its
recording in the result occurs upon the effective receipt of the installments, according to what is
set forth in article 9 of Resolution CMN No 2682/1999.
The renegotiated operations are held, at least, in the same level of risk in which they were
classified previous to the renegotiation. However, when relevant facts occur and which justify
the change in the risk level the renegotiated operation is reclassified to a category of less risk.
The credit operations already written off against the provision and recorded in memorandum
accounts, when renegotiated, they are classified in risk level “H”, and they can be reclassified,
later, in view of relevant fact, in a category of less risk. The eventual gains resulting from the
renegotiation are only recorded as revenue when they are effectively received.
The allowance for doubtful receivables is established by complying with the provisions of
Resolution CMN No 2682/1999, and it is based on the analysis of the outstanding balance of the
operations, on the guarantees, on the history of losses and on the risks of the portfolio, except
BOOK No.12
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93
for rural credit operations renegotiated under Resolution 2471/1998 of CMN regarding the
operations of PESA (Special Plan of Asset Restructuring). For these operations, which have the
principal value guaranteed by the National Treasury bonds, a supplementary allowance is
constituted as commented in Note 8 (c).
2.8
Credit assignment
The accounting practices set forth by the Central Bank of Brazil until 31 December, 2011
established that the credits assigned to other financial institutions or funds, with or without coobligation, should be written off from the portfolio at the moment of the sale, recording
immediately the gains in the income, and the operations assigned with co-obligations should be
recorded in set off accounts.
As from the 1 January, 2012, Resolution CMN No 3533/2008 started to be in force (postponed
by Resolutions CMN No 3673/2008 and 3895/2010) which changed the register of credit
assignment operations, realizable as from 2012, establishing procedures for the classification
and disclosure of the operations of sales or of transfer of financial assets. According to this new
rule, the maintenance or the writing off of the financial asset is related to the substantial
retention of risks and benefits of the operation.
For the balances assigned before 1 January 2012 there was no retroactive change in the criteria
for the accounting record of the credit assignments.
BDMG has not performed credit assignments as from 2012, therefore, these regulatory changes
have not caused impacts in its statements.
2.9
Other current assets and long-term receivables
These assets are presented by their realizable values, including, when applicable, the earnings
obtained, in a “pro-rata” daily basis, deduced from the corresponding income to be
appropriated.
2.10
Investments
The investment in the subsidiary is assessed by the equity method (Note 11 (a)). The other
investments are recorded by cost value and are adjusted at market value by establishing
allowance for effective loss.
2.11
Fixed and intangible assets
The goods which form the fixed assets, except those acquired before 1995, which were adjusted
for inflation according to regulation in force at the time, and the intangible assets are presented
at acquisition cost, net of the respective accrued depreciations and amortizations and adjusted
by impairment at recoverable amount, in case the test annually performed indicates that these
assets are recorded at an amount above its recoverable amount.
BOOK No.12
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94
The depreciation and amortization of these assets are calculated by using the straight line
method taking into consideration their cost and their residual values during the estimated useful
life, as follows:
Real estate
Facilities, chattel and equipment
Data processing system
Other
Software
______Years
20
10
5
10
5
The accounting value of an asset is immediately written off from its recoverable amount when
the accounting value of the asset is greater than its estimated recoverable amount (Note 11 (b)).
The gains and losses of the dispositions are determined by the comparison of the results with its
accounting value and they are recorded in “Non-operating result” in the income statement.
2.12
Impairment of non financial assets
Losses are recorded in the result of the period in case there is evidence that the assets were
assessed by the non recoverable amount. This procedure is performed annually.
2.13
Current and non-current liabilities
They are recorded by the values obtained and calculated, including, when applicable, the
charges incurred on “pro-rata” daily basis, deduced from the corresponding expenses to be
appropriated.
2.14 Contingent assets and liabilities and legal – tax and social security
obligations
They are assessed, recorded and disclosed according to the determinations set forth in
Resolution No 3823 of 16/12/2012, of CMN and Circular No 3429, of 11/02/2010 of Bacen and
they comply with the Technical Pronouncement CPC 25, issued by the Committee of Accounting
Pronouncements (CPC).
Contingent Assets – are not recorded in the accounting, except when the Management has total
control of the situation or when there are security interests or favorable rulings, on which there
are no more possibilities of appeals, characterizing the gain as practically certain and by the
confirmation of its recovery by receiving or off setting with other payables.
Contingent Liabilities – are recorded in the financial statements when, based on the opinion of
legal counsels and of the Management, the nature of the actions, the similarity of the previous
lawsuits, the precedents rendered by the Courts, the risk of losing a judicial or administrative
suit is probable, with the possibility of no appeals for the settlement of the obligations and when
the amounts involved are measurable with enough certainty. The contingent liabilities classified
as possible losses are not recorded in the accounting, and they are disclosed in the explanatory
BOOK No.12
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95
notes when they are individually relevant and provisions are not created and are not disclosed
for contingent liabilities classified as remote (Note 14).
Legal Obligations – Tax and Social Security – are a result from lawsuits related to tax
obligations, whose object of the answer is the legality or the constitutionality and, regardless of
assessment about the probability of success, the amounts are fully recorded in the financial
statements (Note 14).
2.15
Current and deferred income tax and social contribution
The provision for income tax is established at the base-rate of 15% of the taxable profit, plus the
additional of 10%. The provision for social contribution on the adjusted net income was
established at the rate of 15% until 31/Aug/2015, and at the rate of 20%, as from 01/Sept/2015,
according to what is set forth in the Provisional Presidential Decree 675/2015, converted into
Law 13169/2015 (Note 23 (a)).
The provisions relative to tax credits on temporary differences and tax losses and negative base
are established by the referred to rates considered for the provision of income tax and social
contribution.
The tax credits of income tax and social contribution are reviewed at each date of the balance
sheet and constituted on the temporary additions and exclusions and based on the legislation in
force at the date of its establishment. The realization of these tax credits will occur upon
effective use and/or reversal of the amounts on which they were constituted.
The deferred income tax and social contribution are recorded by using the method of the
liability on the temporary differences resulting from differences between the tax bases of the
assets and liabilities and the accounting amounts in the financial statements. The deferred
income tax and social contribution are determined by using the tax rates authorized, or
substantially authorized, on the date of the preparation of the financial statements, and which
must be applied when the respective asset deferred tax is realized or when the liability deferred
tax is settled.
The assets deferred income tax and social contribution are recorded in the proportion of the
probability of occurrence of future taxable profits and against which the temporary differences
can be used.
The assets and liabilities deferred income taxes are offset when there is a legal enforceable right
to offset the current tax assets against the current tax liabilities and when the assets and
liabilities deferred income taxes are related to the income taxes levied by the same tax authority
on the tax entity or the different taxable entities where there is the intent to settle the balances
in a net base.
2.16
Benefits to employees
The Bank provides to its active and assisted employees the following benefits:
BOOK No.12
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96
(i) Pension benefits – aims to provide the employees with the complementation of the pension
guaranteed by the General Regime of Social Security – RGPS. BDMG is the sponsor of pension
plans in the modalities: defined benefit (closed for new participants on 10 November, 2011) and
variable contribution;
(ii) Benefit of health care and dental care – this plan offers coverage of health and dental
expenses to its participants. BDMG ensures this benefit to active and assisted participants who
have subscribed to the plan, in the quality of active, until 10/0ct/2009, by means of partial
payment of the monthly contribution. To the employees who subscribed to the health care plan
as from 11/Oct/2009, BDMG sponsoring is guaranteed while the participants are active and,
when assisted, these employees can remain connected to the plan, and be responsible for the
total of the contribution due.
(iii) Life insurance – BDMG offers this benefit for active and assisted employees, by means of
payment of part of the premium of the life insurance policy in group;
(iv) Employee early retirement program – This program, implemented on 14 December, 2011,
was ended on 29 January, 2016 and it aimed to benefit employees in retirement conditions, who
met the requirements established by the Program.
(v)Other benefits – The Bank also grants its active employees other benefits which result from
profit sharing and maternity leave for the period of six months and it also grants benefit of life
annuity pension to an assisted employee.
The benefits granted by the Bank, except those listed as “other benefits”, to the active employees
are recorded according to the Brazilian Accounting Standard NBC TG 33 (R1) – Benefits to
Employees.
The information on the recording of the benefits to employees, in the period from 01/Jan/2016
to 31/03/2016, according to NBC TG 33 (R1) are specified in Note 28.
2.17
Employee’s profit sharing
It is defined in collective labor agreement and also by complying with the Target Plan, and
provided based on the percentage on the result and adjusted at the end of the year after the
assessment of the profit of the fiscal year and the assessment of the compliance with the targets.
2.18
Capital
The Bank’s capital, recorded in the net equity, consists of common registered shares and without
par value.
2.19
Recording the result
The result is assessed using the accrual basis accounting, adjusted by the attributable portions of
income tax and social contribution incurred on the taxable profit and, when applicable, by the
deferred income tax and social contribution which will be recovered or required in the following
BOOK No.12
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97
fiscal years, except in relation to the gain on credit operations renegotiated which is recorded in
the result using cash basis, as determined by Resolution CMN No 2682/1999.
2.20
Distribution of dividends and interest on own capital
A minimum dividend corresponding to 1% of the net income of the fiscal year, adjusted under
the Brazilian Law of Corporations and the Articles of Incorporation is assured to the
shareholders.
For the remuneration of the capital to its shareholders, BDMG adopts as a practice the
distribution of dividends or the payment of interest on own capital consistent with the result
assessed in the fiscal year.
2.21
Related parties
The disclosure in the explanatory Notes regarding the financial statements on related parties
complies with the determination of Resolution CMN nº 3.750/2009. According to this
Resolution the transactions occurred between the Bank and its related parties which may affect
its equity situation and its result are disclosed. The legal entities and individuals that fit in the
BDMG internal resolution No 209/2009, are regarded as related parties of the Bank and they
are the ones with whom the Bank conducted transactions in the period as mentioned in Note 24.
3
Restatement of financial statements of 31 March, 2015
The Central Bank sent BDMG, on April, 2015, an Official Communication determining the
restatement of the financial statements from June to December 2014, in view of the following
facts:
BDMG recorded, based on the Central Bank’s notification, in 1995, a provision corresponding to
the value adjusted for inflation of the financial costs on the non-collection of demand deposits in
that year, an issue claimed in lawsuit.
The provision recorded in the amount of 30,110 BRL, in June, 2014, was transferred in the first
semester of that year, based on legal opinion which estimated as remote the possibility of BDMG
losing the lawsuit.
The Central Bank, in its Official Communication, expressed the necessity of keeping the
accounting register of the provision in view of the level of uncertainties involving the final
decision of the lawsuit and due to the fact that it considers the issue under discussion a legal
obligation.
The Central Bank also set forth that the provisions in the CPC 23 be complied with and the
retrospective restatement of the Financial Statements of 30/June/2014 and 31/Dec/2014 be
made, at the time of the publication of the statements of 30/June/2015 and 31/12/2016, with
the necessary clarifications in explanatory note.
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
98
BDMG, in view of this determination, filed an administrative appeal in the Central Bank and,
later, in view of the overruling of the administrative appeal, it filed a Writ of Mandamus seeking
the concession of a preliminary injunction to produce an effect of supersedeas of the decision,
until the original claim is unappealable. Despite the decision granting the legal security
claimed, the internal legal assessment of this contingency as a possible loss and the opinion of
the external law firm which also classified this contingency as a potential loss, BDMG accepted
the Central Bank’s determination.
The effects resulting from the restatement of the Interim Financial Statements of 31 March,
2015 are presented as follows:
Original
balances
disclosed
Income statement
Earnings from the financial intermediation
Operating result
Non operating result
-
(213,848)
-
43,377
(20,466)
(898)
22,911
(898)
22,228
Income tax and social contribution
(1,083)
Net income of the quarterly period
12,658
Profit per share (lots of 1000 shares)
Capital
22,013
(683)
21,330
(898)
(8,487)
Profit sharing according to articles of incorporation
(21,364)
-
(683)
Result before taxation on/ profit and profit sharing
BOOK No.12
257,225
43,377
Other earnings/(operating expenses)
Effects of the write off of the
provision
-
(213,848)
Gross Income of the financial intermediation
Balances on 31 March,
2015 disclosed:
Adjusted
balances on
31/Mar/2015
257,225
Expenses of the financial intermediation
Statement of the changes
of the net equity
Effects of the
reversal of the
provision write
off
360
(8,127)
-
(1,083)
12,120
(538)
0.0002080
Profit
reserve –
legal
Adjustment
available-forsale
securities
Profit
reserve –
other
1,775,223
39,185
40,584
(11,834)
-
-
-
-
TRANSLATION No.21
0.000003
Other
adjustments
of equity
assessment
Accrued
Income
(112,374)
Total
12,658 1,743,442
-
(538)
PAGES 077 a 140
(538)
99
Balances on 31 March,
2015 adjusted:
1,775,223
39,185
40,584
Cash flow statements
(11,834)
(112,374)
12,120 1,742,904
Original
Balances
disclosed
Effects of the
reversal of the
write off of the
provision
22,228
(898)
941
-
6,422
898
25,733
-
264
-
(2,476)
-
68,878
-
(2,057)
-
(4,017)
-
278
-
(18,129)
-
-
(19,410)
-
(1,895)
98,065
(21,305)
(146,958)
146,958
80,876
80,289
(1,615)
-
43,676
-
Adjusted balances
on 31/Mar/2015
Operating activities cash flow
Net income before interest and taxes
21,330
Adjustments of
Depreciations and amortizations
Creation of provisions, net
Creation of provisions for doubtful receivables net of
reversals
Establishment of (reversal) of provisions for losses
Appropriation of deferred revenues
(Gains) of exchange rate change
Recoveries credit operations written off to loss
Revenues of adjustment for inflation of long-term credit
operations
Result of equity equivalence
Adjustment to market value of the derivative instruments
and hedging
Gain (L0ss) in available-for-sale financial assets
Gain(Loss) held-to-maturity financial assets
Adjusted net income
(Increase) of bonds and securities and derivative financial
statements
(Increase) of credit operations and lease with option to
purchase
(Increase) of other credits and other amounts and goods
Increase of interbank deposits
Increase of financial bills
BOOK No.12
941
7,320
25,733
264
(2,476)
68,878
(2,057)
(4,017)
278
(18,129)
(19,410)
(1,895)
76,760
161,165
(1,615)
43,676
11,844
TRANSLATION No.21
PAGES 077 a 140
100
Increase of obligations due to loans and pass-throughs
Increase of unearned revenues
Reduction of derivative instruments
(Reduction) of other obligations
Variation of assets and obligations
Cash generated in the operations
Income tax and social contribution paid
Net cash (invested in) by operating activities
11,844
-
33,215
-
2,027
-
(2,135)
(146,957)
394
-
21,324
80,290
119,389
80,290
(27,112)
-
92,277
-
(648)
-
-
(82,139)
-
28,074
-
(30,241)
-
25,320
(648)
(58,986)
91,629
(58,986)
33,215
2,027
(149,092)
394
101,614
178,374
(27,112)
151,262
Cash flow of investment activities
Acquisition of permanent assets
Acquisition of Available-for-sale Financial Assets
Earnings of Available-for-sale Financial Assets
Acquisition of Held-to-Maturity Financial Assets
Earnings of Held-to-Maturity Financial Assets
Net cash (invested in) investment activities
(647)
(82,139)
28,074
(30,241)
25,320
(59,633)
Cash flow of financing activities
Net cash generated by financing activities
Increase (Reduction) of cash and cash equivalents,
net
Cash and cash equivalents at the beginning of the
quarterly period (Note 4)
Losses on cash due to exchange rate change
Cash and cash equivalents at the end of the
quarterly period (Note 4)
4
91,629
91,629
91,629
231,162
231,162
16,462
16,462
339,253
339,253
Cash and cash equivalents
Cash and cash equivalents
BOOK No.12
TRANSLATION No.21
Balance on
31/03/2016
Balance on
31/12/2016
2,138
3,245
PAGES 077 a 140
101
Cash and cash equivalents in foreign currency
Interbank investments with liquidity
5
1,622
377,533
1,572
351,063
381,293
355,880
Interbank investments with liquidity
Investments in repo operations:
National Treasury Notes
National Treasury Bills
Investments in interbank deposits
Allowance for losses in interbank deposits (i)
Balance on
31/03/2016
Balance on
31/12/2016
277,428
100,105
11,727
(11,727)
213,919
137,144
11,727
(11,727)
377,533
351,063
(i) The allowance for losses results from the investment in interbank deposit issued by financial
institution currently in bankruptcy situation.
Maturity for interbank investments are presented as follows:
Up to 30
days
Overdue
NTN (National Treasury Notes)
LTN (National Treasury Bills)
CDI (Interbank Deposit Certificate)
Provisão para perdas
Total
11,727
(11,727)
277,428
100,105
-
277,428
100,105
11,727
(11,727)
-
377,533
377,533
351,063
351,063
Total – 31/03/2016
Total – 31/12/2016
6 Bonds and securities
(a) Portfolio composition
The bonds and securities portfolio consist of the following bonds/securities presented as
follows:
Balance on
31/03/2016
Quantity
BOOK No.12
Yield
curve
TRANSLATION No.21
Market Value
Quantity
Yield
curve
PAGES 077 a 140
Balance
31/12/2016
Market
Value
102
Unrestricted securities
National Treasury Bills
National Treasury Notes
Debentures
Funds’ Ownership Units
Emerging Companies Fund (FEE)
Interest (FIP)
Guaranteed Investment Fund (FIG)
47,320
361,947
361,642
44,200
327,502
327,289
102,900
297,895
290,908
102,900
293,293
280,767
30
27,649
27,649
30
29,502
29,502
125
14,102,399
579,520
1,788
12,276
679
1,788
12,276
679
125
13,317,452
579,520
1,791
11,609
677
1,791
11,609
677
702,234
694,942
664,374
651,635
6,734
6,728
-
-
708,968
701,670
664,374
651,635
Total unrestricted securities
Bonds associated to provision of
guarantees
Treasury Bonds (i)
Current
Non Current
(i)
(b)
46,568
655,102
44,575
607,060
These bonds refer to the guarantee differential margin payable in swap contract.
Classification of bonds and securities
Considering the Bank’s intent and financial capacity, the portfolio’s bonds and securities are
classified in the following categories, set forth by Circular BACEN No 3068/2001:
Available-for-sale bonds (i)
LFT (Treasury Bonds)
Above 360 days
NTN (National Treasury Notes)
From 91 to 180 days
From 181 to 360 days
Above 360 days
Investment funds’ units of ownership
No maturity
LFT (Treasury Bonds) associated to the provision
of guarantees
Above 360 days
Held-to-maturity bonds (ii)
NTN
Above 360 days
Debentures
Up to 30 days
From 31 to 60 days
From 61 to 90 days
From 91 to 180 days
From 181 to 360 days
Above 360 days
Yield
curve
Balance on
31/03/2016
Market
value
361,947
361,642
22,890
22,797
-
172,198
165,304
22,528
169,844
22,671
157,175
14,743
14,743
14,077
14,077
6,734
6,728
-
-
102,807
102,807
100,921
100,921
2,821
564
564
2,821
564
564
1,204
602
602
1,204
602
602
1,693
3,386
18,621
1,693
3,386
18,621
1,806
3,613
21,675
1,806
3,613
21,675
708,968
701,670
664,374
651,635
Current
Non-current
BOOK No.12
TRANSLATION No.21
Yield curve
327,502
Balance on
31/12/2016
Market
value
327,289
46,568
44,575
655,102
607,060
PAGES 077 a 140
103
(i)
Bonds classified in the available-for-sale category.
The mark-to-market of BDMG’s government bonds, classified as available-for-sale, considers
the quotations disclosed by the Brazilian Association of Financial and Capital Market Entities –
ANBIMA for the secondary market of these bonds.
(ii) Bonds classified in the held-to-maturity category.
The following bonds are classified in this category:
- Debentures
In January 2015, in direct negotiation with the issuer, the Bank acquired 30 non convertible
debentures and with maturity on 22/Dec/2019.
These bonds consist of a modality of financial support and not of financial investment.
- National Treasury Notes
The Bank reclassified the following bonds, on 30 June 2015, from the available-for-sale”
category to the “held-to-maturity category”:
NTN-B
NTN-B
Quantity
Maturity
date
Balance
21,000
15,000
15/08/2022
15/08/2018
69,587
46,231
115,818
Adjustment at market value
(13,011)
Current value
102,807
On the date of the reclassification, the amount of 15,178 BRL was recorded as item highlighted
in the net equity, regarding the unrealized gains and which, in view of the reclassification, will
be appropriated in the result until the maturity date of the bonds.
Until March 31, 2016, the amount of 2,167 BRL was appropriated from the value highlighted in
the net equity.
(c)
The bonds and securities are distributed in the following maturity periods:
No
maturity
BOOK No.12
Up to 30
days
From 31
to 60
days
TRANSLATION No.21
From 61
to 90
days
From 91
to 180
days
From
181 to
360 days
After
360 days
PAGES 077 a 140
Total
104
Federal Government Bonds
Debentures
Investment funds’ ownership
units
Total – 31/03/2016
Total – 31/12/2015
(d)
14,743
14,743
14,077
2,821
564
564
22,797
1,693
3,386
636,481
18,621
659,278
27,649
-
-
-
-
-
-
14,743
2,821
1,204
564
602
564
602
24,490
1,806
3,386
26,284
655,102
607,060
701,670
651,635
Equity valuation adjustments of bonds and securities
The amounts recorded in the net equity account “Equity valuation adjustments” which refer to
the Bank’s bonds classified as available-for-sale, presented the following transactions in the
period:
Balance on 31/12/2015
Adjustment in the period
7
Unrealized
Gains (losses)
Tax effects
Adjustment
at market
value
(26,473)
12,136
(14,337)
6,164
(3,009)
3,155
(20,309)
9,127
(11,182)
Derivative instruments
The Bank, as a result of external fund raising agreed as from the second semester of 2013, seeks
to protect itself from risks of the exposure of the exchange rate change of foreign currencies and
of the international interest rates set forth in the contracts. The coverage of risks is done by
means of derivative financial instruments in the swap modality, except for the operations in
which the external risks are transferred to the clients.
The derivative instruments contracts in progress were entered into exclusively for the hedge
against the risks associated to external fund raising and, for the contract of these instruments,
the risk control policy, the establishment of hedge strategies, the determination of limits and the
forms of following up the operations are taken into account.
The Bank’s derivatives, on 31 March, 2016, are classified in the category hedge against market
risk and they are recorded by the hedge accounting procedure once they check the effectiveness
condition according to the Circular BACEN 3082/2001.
BDMG performs the effectiveness test at the beginning of the operation, the initial prospective
testing of the hedge structure, and periodically assesses the effectiveness by means of
prospective and retrospective test, at the time of the preparation of the interim, semi-annual
and annual financial statements, by means of the calculation of the quotient the market value
variation of the hedge instrument asset position and the variation of the market value of the
hedge object.
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
105
All the swaps are registered in the CETIP (Clearing House for the Custody and Financial
Settlement of Securities) and the hedge presents similar conditions to those of the
corresponding fund raising - initial and maturity dates, fees and notional value.
The derivatives used by BDMG were established aiming to hedge against the risks fully assumed
by the Bank resulting from installments of the following external fundraisings commented on in
Note 13 (a):
(a)
External fundraisings (loans) hedged by derivative instruments:
Balance
on
31/03/
2016
Initial
date
Final
date
AFD
27/09/
2013
25/11/
2013
19/12/
2013
23/10/
2015
04/08/
2014
05/08/
2014
27/09/
2023
23/10/
2023
19/12/
2023
23/10/
2018
16/08/
2021
28/11/
2025
Bank of
Tokyo 1
26/12/
2014
27/12/
2018
Bank of
Tokyo 2
17/03/
2015
13/03/
2019
CAF 1
CAF 2
CAF3
CAF4
IDB
Index
Libor 6M + 3.65% p.a.
Libor 6M + 3,65% p.a.
Libor 6M + 3.65% p.a.
Libor 6M + 2.25% p.a.
Libor 6M + 2.25% p.a.
Euribor 6M + 2% aa.
Quarterly interest at
prefixed rate of 3.09% p.a.
and 3.19% p.a. after
31/12/2015.
Quarterly interest at
prefixed rate of 2.68%p.a.
and 2.78% from
14/03/2016.
Fund
Raising
US$
15,000
US$
30,000
US$
30,000
US$
23,500
US$
50,000
€$
5,000
Balance(Foreign
Currency)
Balance
on
31/12/
2015
Curve
Balance(Foreign
Currency)
Curve
13,240
47,113
14,272
55,720
28,765
102,354
28,467
111,142
28,587
101,723
28,270
110,372
23,806
84,708
23,632
92,263
50,190
178,591
50,523
197,252
5,033
20,399
5,008
21,277
25,018
97,674
25,032
97,729
US$
25,000
25,018
US$
25,000
25,033
89,021
89,074
712,983
Adjustment at market value
(7,121)
Market value
705,862
783,429
(8,037)
775,392
The derivatives established for hedging fundraising listed in the table above contemplate the
same items of the fundraising (initial, maturity dates and similar notional value) and are aligned
with each settlement (interest or amortization + interest) specified for the released funds.
In the recording of the operations in question the Bank uses the hedge accounting structure, in
the market risk category, aiming to neutralize the effects in its result resulting from the volatility
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
106
generated by the accounting valuation difference of the involved products: fundraising identified
by the curve and derivatives identified mark-to-market (MtM).
In compliance with the Circular Bacen No 3082/2001, the Bank has documental identification
regarding the risk of the hedge objects which contemplate the management of these risks in
compliance with the policies of risk control, the establishment of strategies and the
determination of limits and continuous follow-up manners for checking the effectiveness of the
hedge instrument operation.
The methodology adopted for the assessment of the market value of the active and passive
positions of the swaps is based on the use of weights which are calculated on the date of contract
and which match, on that date, the market value and the value of the curve of the operations.
The use of weights aims to mitigate the distortion of the credit spread risk in the assessment of
the market value.
(b)
Recorded amounts of the swaps
The positions recorded on 31 March of the derivative financial instruments are summarized as
follows:
(US$+ Libor+ Rate) x (BRL +%CDI
(Interbank Deposit Certificate) (1)
(EUR+Euribor+Rate) x (BRL+%CDI) (1)
(US$+Rate) x BRL+%CDI) (1)
(US$+Rate) x BRL+%CDI) (2)
Balance on
31/03/2016
Balance on
31/12/2015
Reference Value
(Offset account)
Value
Receivable /
Payable
(Equity
account)
Net effect
(Result
account)
Net effect
(Result
account)
290,967
88,783
(34,487)
47,081
15,210
2,851
(1,341)
1,071
148,693
28,931
(20,550)
12,113
198,700
(19,140)
(22,175)
-
653,570
101,425
(78,553)
60,265
Notes:
(1) differential receivable
(2) differential payable
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
107
Swaps by index:
(c)
Balance on
31/03/2016
Balance on
31/12/2015
Asset position – Differential receivable
Foreign currency
Interest
120,565
124,414
(3,849)
171,358
172,819
(1,461)
Liability position – Differential payable
Foreign currency
(19,140)
(19,140)
-
Net exposure
101,425
171,358
Swaps by maturity period:
Up to 30
days
From 31
to 180
days
From
181 to
360
days
After
360
days
Total
Foreign currency
Interest
9,047
-
1,166
-
2,024
-
112,177
(3,849)
124,414
(3,849)
Total – 31/03/2016
9,047
1,166
2,024
108,328
120,565
Total – 31/12/2015
-
5,053
4,551
161,754
171,358
Foreign currency
-
-
-
(19,140)
(19,140)
Total –31/03/2016
-
-
-
(19,140)
(19,140)
Net exposure – 31/12/2016
9,047
1,166
2,024
89,188
101,425
-
5,053
4,551
161,754
171,358
(d)
Swaps by index and reference value:
Reference
value
Value by
the curve
Adjustment at
market value
Market
value
(US$+ Libor+ Rate) x (BRL +%CDI)
(EUR+Euribor+Rate) x (BRL+%CDI)
US$+ Rate) x (BRL +%CDI)
290,967
15,210
148,693
100,304
4,402
28,712
(11,521)
(1,551)
219
88,783
2,851
28,931
Total – 31/03/2016
454,870
133,418
(12,853)
120,565
Total – 31/12/2015
657,983
186,281
(14,923)
171,358
(US$+ Libor+ Rate) x (BRL +%CDI)
198,700
(21,966)
2,826
(19,140)
Total – 31/03/2016
198,700
(21,966)
2,826
(19,140)
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
108
8
653,570
111,452
(10,027)
101,425
657,983
186,281
(14,923)
171,358
Credit operations and credits equivalent to credit operations
BDMG’s active credit portfolio presents the following position:
Valor total
Provision
Net Value
Credit operations
Credits equivalent to credit operations
5,838,418
1,634
(407,740)
-
5,430,678
1,634
Total - 31/03/2016
5,840,052
(407,740)
5,432,312
Total - 31/12/2015
5,893,114
(389,122)
5,503,992
On March 31, 2016, of the total balance of 5,838,418 BRL(31/12/2015 - 5,893,114 BRL) of the
credit operations, the amount of 2,205,042 BRL (31/12/2015 - 2,307,035 BRL) was conceded
with own funds and 3,635,010 BRL (31/12/2015 - 3,586,079 BRL), originally with funds of passthroughs obtained from other financial institutions. The accounting balance of the renegotiated
operations is 791,417 BRL (31/12/2015 – 694,738 BRL).
(a)
Classification by product and by activity sector
Balance on
31/03/2016
Balance on
31/12/2015
Loans
Industry
Commerce
Other services
1,424,281
680,276
306,557
437,448
1,477,698
681,027
314,055
482,616
Financing to the private sector
Industry
Commerce
Other services
Rural and agro-industry
Financial intermediary
Individuals
3,615,339
1,842,718
205,292
906,873
638,591
14,130
7,735
3,609,515
1,836,852
204,209
918,105
628,295
14,817
7,237
798,798
804,226
1,634
1,675
Financing to the public sector (Direct and indirect municipal
administrations)
Credits equivalent to credit operations
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
109
Subtotal
5,840,052
5,893,114
Allowance for doubtful receivables
(407,740)
(389,122)
5,432,312
5,503,992
1,335,301
4,097,011
1,332,614
4,171,378
Current
Non-current
(b)
Classification by period and risk levels
Overdue (in
days)
Balance on
Balance
on
31/03/2016
31/12/2015
Due (in days)
From 91 to 360
From
361 to
1.080
From
1.081 to
1.800
From
1.800 to
5.400
Total
Total
From 15
Until 14
Up to
90
AA
1,747,708
-
-
76,835
220,168
546,915
362,380
541,410
1,840,617
A
1,147,127
-
-
79,819
245,248
399,154
211,745
211,161
1,123,740
B
1,146,627
2,057
557
67,064
193,168
373,207
234,477
276,097
1,148,876
C
1,037,457
5,144
1,771
103,714
186,134
381,235
202,243
157,216
1,059,330
D
423,572
15,794
1,157
37,861
91,715
162,337
81,958
32,750
398,276
E
56,818
4,471
484
5,619
12,312
20,767
7,488
5,677
56,717
F
37,479
7,900
928
4,844
8,335
8,192
3,438
3,842
53,032
Risk
level:
(c)
G
38,173
17,581
84
1,331
7,268
6,749
3,912
1,248
14,555
H
205,091
169,281
397
2,631
7,440
11,689
8,021
5,632
197,971
5,840,052
222,228
5,378
379,718
971,788
1,910,245
1,115,662
1,235,033
5,893,114
Classification by risk levels and provisions
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
110
Balance on
31/03/2016
Portfolio
Risk level:
AA
A
B
C
D
E
F
G
H
%
0
0.5
1
3
10
30
50
70
100
Provision for credit
risks based on the
minimum
percentage required
Provision for
doubtful
receivables (i)
Balance on
31/12/2015
Portfolio
Provision for
doubtful
receivables
1,747,708
1,147,127
1,146,627
1,037,457
423,572
56,818
37,479
38,173
205,091
(5,736)
(11,466)
(31,124)
(42,357)
(17,046)
(18,740)
(26,721)
(205,090)
(49,460)
(5,736)
(11,466)
(31,124)
(42,357)
(17,046)
(18,740)
(26,721)
(205,090)
1,840,617
1,123,740
1,148,876
1,059,330
398,276
56,717
53,032
14,555
197,971
(48,716)
(5,619)
(11,489)
(31,780)
(39,828)
(17,015)
(26,516)
(10,188)
(197,971)
5,840,052
(358,280)
(407,740)
5,893,114
(389,122)
(i) Until November 2005, the credit operations regarding the PESA (Rural Credit, under
Resolution CMN No 2471/1998) were classified in level H. As from that date, BDMG’s
Management began to classify them in level AA. This risk reclassification considered the
particularities of these operations in relation to the credit risk mitigated by means of security
interests represented by government bonds. The Bank constituted supplementary provision for
these credit operations which is assessed by the difference between the principal balance
adjusted for inflation of the reclassified credit operations and the amounts of the bonds which
guarantee them. On 31 March, 2016 this additional provision is of 49,460 BRL (2015 - 48,716
BRL).
(e) Transaction of the provision for doubtful receivables of credit operations.
Balance on
31/03/2016
Initial balance
Creation of provision, net of reversals
Credits written off as loss
Final balance
(e)
Balance on
31/12/2015
389,122
217,838
43,470
(24,852)
285,879
(114,595)
407,740
389,122
Credit assignments
The balance of the operations assigned with co-obligation, recorded in offset accounts,
according to amounts presented below, refer to operations assigned until 31 December, 2011
(previous to Resolution CMN No 3533/2008):
Balance on
31/03/2016
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
Balance on
31/12/2015
111
Assignment previous to Resolution CMN No 3533/2008:
Co-obligations to be paid
Pass-through of paid obligations
9
27,851
313
27,479
290
28,164
27,769
Other credits
Balance on
31/03/2016
Tax credits (a)
Debtors with security deposits (b)
Securities and credit receivables (c)
Sundry debtors – country (d)
Income receivables (e)
Other
Allowance for doubtful receivables (f)
Current
Non-current
Balance on
31/12/2015
358,348
111,548
13,532
7,163
2,937
5,625
(12,302)
362,221
110,155
14,470
7,520
3,797
4,366
(12,303)
486,851
490,226
80,486
406,365
97,455
392,771
(a) The tax credits of income tax and social contribution on net income were constituted and
recorded as presented in Note 23 (a).
(b) The balance of debtors with security deposits include the deposits related to legal issues,
mainly of fiscal and tax nature presented in Note 14 (a), in which there is a connection
between the deposits in court with the respective legal issues.
(c) The balance of bonds and receivables correspond to: (i) remunerations in the amount of
11,119 BRL (31/12/2015 – 11,119 BRL) resulting from renegotiations supported by laws
regarding the operations of rural credit financed with funds from the National Treasury
Department –STN and they are provisioned as detailed in Note 9 (f); (ii) credit rights of
municipalities in the amount of 2,393 BRL (31/12/2015 - 3,331 BRL) e (iii) remuneration
of the Fund for the Defense of Coffee Industry Economy (Funcafé) in the amount of 20 BRL
(31/12/2015 –20 BRL).
(d) The balance of sundry debtors, on 31 March, 2016, constituted by the amount receivable of
7,153 BRL (2014 – 7,448 BRL) regarding the bonus for performance conceded by the Bank
to the clients of renegotiated rural operations according to provisions of Law 9138/1995
and its amendments.
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
112
(e) The balance of the accounts receivable, consisting substantially of the remuneration
receivable net of the respective provision, on credit operations performed with funds from
the development funds managed by BDMG whose amount is 2,895 BRL (31/12/2015 –
3,073 BRL). The maturity of the remuneration occurs at the time of the maturity of the
agreed installments and the provision is constituted on the amounts recorded, based on the
percentage referring to the risk level in which the operation is classified from which the
remuneration resulted.
This classification results from the policy adopted by the Bank to give the financial
operations financed with the managed funds, the same criteria established in Resolution
CMN No 2682/1999 for the credit operations of BDMG’s own portfolio.
(f)
10
The allowance for other doubtful receivables in the amount of 12,302 BRL (31/12/2015
12,303 BRL) refers substantially to amounts to be returned by the National Treasury Department
– STN which are used as provision based on the uncertainty regarding the term for payment of
these credits.
Other amounts and assets
Balance on
31/03/2016
Balance on
31/12/2015
Assets not for own use
Other
Subtotal
44,080
219
44,299
22,180
186
22,366
Provision for assets not for own use
(2,075)
(2,074)
42,224
20,292
218
42,006
186
20,106
Current
Non-current
11
Permanent
(a)
Investments
Balance on
31/03/2016
BDMGTEC Participações S.A. (i)
Other
Provision for losses, shares and ownership units
BOOK No.12
TRANSLATION No.21
Balance on
31/12/2015
78,203
1,325
(837)
78,196
1,324
(837)
78,691
78,683
PAGES 077 a 140
113
(i) The company BDMGTEC Participação S.A., BDMG’s wholly-owned subsidiary, established in
March, 2012, has as social purpose equity interest in companies of significant relevance to the
State as a means to promote its development.
(b)
Fixed assets in use
Cost
Real estates
Facilities, chattel and equipment
Data processing system
Other
Fixed assets in use
12
Accrued
Depreciation
Balance on
31/03/2016
Balance on
31/12/2015
Net Value
Net Value
43,788
6,076
5,897
583
231
(25,522)
(5,036)
(4,004)
(521)
18,266
1,040
1,893
62
231
18,427
1,094
2,065
58
314
56,575
(35,083)
21,492
21,958
Deposits and Funds of acceptance and issuance of securities
The funds raised in the country present the following composition:
Balance on
31/03/2016
Interbank deposits (a)
Financial Bills (b)
Current
Non-current
(a)
Balance on
31/12/2015
100,686
688,889
137,501
681,918
789,575
819,419
464,081
325,494
247,536
571,883
Interbank deposits
The balance of interbank deposit on 31 March, 2016 refers to fundraising performed in order to
meet the mitigation clause of credit risk in the contracts of derivatives which require from the
party with differential payable above a certain amount the maintenance of interbank deposits in
the counterparty institution of the operation.
These deposits are established at guarantee margin, and charges equal to the CDI (Interbank
Deposit Certificate) rate were agreed upon with maturity varying according to the amount
adjusted for the coverage of the differential receivable or payable of each of the agreed swaps.
(b)
Financial Bills
The fundraising by means of issuing financial bills present the following balances:
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
114
Maturity
Type of issue:
Government
Government
Private
Private
17/12/2017
14/03/2017
09/05/2016
23/12/2016
Quantity
Balance on
31/03/2016
Balance on
31/12/2015
1,250
1,238
275
100
325,494
249,363
87,390
26,642
313,055
258,828
84,314
25,721
2,863
688,889
681,918
363,395
325,494
110,035
571,883
Current
Non-current
The issues of financial bills are supported by Resolution CMN No 4143/2012, authorizing the
issuance of these bonds by development banks.
BDMG performed two issuances of financial bills with rating brAAA, attributed by Standard &
Poor’s Ratings Services (S&P) which was also the rating of the long-term credit issuer attributed
in the Brazil National Scale to BDMG.
In November, 2014, S&P downgraded BDMG’s rating in the Brazil National Scale, from
brAAA to brAA+. In December, 2015, S&P downgraded the rating of sovereign credit o
the Federative Republic of Brazil of several financial entities, among which, BDMG, and
the rating in the Brazil National Scale downgraded from brAA+ to brAA (negative
perspective), which consequently generated automatic downgrading of the ratings of
the issued financial bills.
In view of this fact and considering the review event set forth in clause 5.3.1 (g) of the Terms and
Conditions, BDMG consulted the Central Bank of Brazil regarding the understanding that the
downgrading of the initial rating of the issued financial bills does not generate anticipated
maturity of these bills, in view of the provisions contained in article 3 , IX, paragraph 5 as well as
article 41,VI of Law 12249/2010 and Resolution CMN 4132/12, a situation in which the referred
to bill is used for the performance of binding active operations. This condition does not apply to
the financial bills issued by BDMG since they aimed exclusively at raising funds.
13
Obligations from loans and pass-through operations
(a)
Abroad
On 31 March, 2016, the funds raised abroad by BDMG amount to 763,252 BRL (31/12/2015 –
836,101 BRL) at yield curve value and 756,132 BRL (31/12/2015 –828,063 BRL) at market
value, calculated for the fundraising with derivative instruments as hedge.
The balances of the external fundraising are presented as follows:
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
115
Curve
Institution:
CAF
IBD
AFD (French
Development Agency)
Bank of Tokyo
Current
Non-current
Balance on
31/03/2016
Market
Curve
Balance on
31/12/2015
Market
341,289
178,591
338,872
174,422
375,360
197,252
373,201
192,656
65,277
63,891
68,086
66,790
178,095
178,947
195,403
195,416
105,110
651,022
76,722
751,341
BDMG in order to hedge against exchange rate variation and international interest rates
associated to the external fundraising whose risks are not transferred to the borrower of the
fund in the domestic market, uses derivate financial instruments which are recorded using the
accounting hedge procedure. For the external fundraising with hedge and presented in Note 7,
the adjustment is calculated at market value for the use of that accounting procedure.
Both the contracts regarding the external fundraising and those regarding derivative
instruments which hedge the fundraising, have restrictive covenants which are observed and
complied with by the Bank.
In view of the downgrading of the rating of risk of the Bank by international agencies as
commented in the following paragraph, BDMG obtained from creditors whose contracts include
covenants regarding the downgrading of risk classification and which could generate an
anticipated maturity of the contracts. However, it is important to point out that, even
considering the possibility of this occurrence, the Bank’s internal studies prove that such events
would not affect, in a relevant manner, neither its liquidity nor the good progress of its
businesses.
BDMG’s risk rate, in a global scale, was reclassified on 19/02/2016, by the risk agency Standard
& Poor’s, from BB to BB- with negative perspective and on 25/02/2016, by the risk agency
Moody’s which reclassified the risk rate from Ba1 to Ba3, with negative perspective. These
reclassifications followed the downgrading of risk rates of the State of Minas Gerais by the two
agencies, and the reclassification of the risk rate of Brazil was the main reason for the actions of
rating adjustment by Moody’s and Standard & Poors for the state government. In local scale,
BDMG’s risk rate was reclassified from brA+ to brA by Standard & Poor’s and, from Aa2 to A2,
by Moody’s.
The funds raised abroad, by BDMG, are the following:
I
Corporación Andina de Fomento - CAF
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
116
The financing agreed upon with CAF, in August, 2014, may amount to up to 100 million USD, in
tranches of different amounts, with interest at libor rate of 6 months plus up to 3.65% p.a. and
the maturity period of up to 10 years.
The tranches already released are the following:
Balance on
31/03/2016
Tranches
Date of
disbursement
Final
Maturity
date
27/09/2013
27/09/2023
21/10/2013
23/10/2023
19/12/2013
19/12/2023
23/10/2015
23/10/2018
21/12/2015
21/12/2020
CAF 1
CAF 2
CAF 3
CAF 4
CAF 5 (*)
Balance on
31/12/2015
Disbursement
USD
Curve
BRL
Market
BRL
Curve
BRL
Market
BRL
15,000
47,113
45,435
55,720
54,124
30,000
102,354
99,637
111,142
108,572
30,000
101,723
102,109
110,372
111,242
23,500
84,708
86,300
92,264
93,401
1,500
5,391
5,391
5,862
5,862
100,000
341,289
338,872
375,360
373,201
(*) The market value corresponds to the curve value for funds whose external risks were fully
transferred to clients.
II
Agence Française de Développement - (AFD) – French Agency of Development
In December 2013, the Bank and AFD entered into a contract of 50 million Euros with interest
rate at Euribor rate of 6 months plus 2% p.a. and maturity period of 12 years, to be disbursed in
tranches of different amounts. This fundraising aims to fund projects of municipal
infrastructure addressed to climatic issues and to the globalization of basic services.
The positions of the released tranches are the following:
Balance on
31/03/2016
Tranches
AFD 1
1st
tranche
2nd
tranche
AFD 2
Date of
disbursement
Final
Maturity
final
22/07/2014
28/11/2025
22/07/2014
28/11/2025
22/07/2014
28/11/2025
13/10/2014
28/11/2025
Disbursement
EUR
Curve
BRL
Market
BRL
Curve
BRL
Market
BRL
9,000
36,718
35,332
38,298
37,002
4,000
16,319
16,319
17,021
17,021
5,000
20,399
19,013
21,277
19,981
7,000
28,559
28,559
29,788
29,788
63,891
68,086
66,790
16,000
BOOK No.12
Balance on 3
1/12/2015
TRANSLATION No.21
65,277
PAGES 077 a 140
117
III
IDB - Inter-American Development Bank
In June, 2014, BDMG made a loan with IDB which can be used up to the limit of 150 million
dollars, by means of disbursement to be made in three tranches. A variable interest rate will
incur on the used amount, payable semi-annually, and established by a percentage of 2.25% plus
the libor rate of six months, and this composition can present variations in view of the criteria
established in the contract for the performance of the disbursements requested for each tranche.
The position of the tranche released for disbursement is the following:
Balance
on
31/12/2015
Balance on
31/03/2016
Tranches
Date of
disbursement
Final
Maturity
date
04/08/2014
16/08/2021
IDB
IV
Disbursement
USD
Curve
BRL
Market
BRL
Curve
BRL
Market
BRL
50
178,591
174,422
197,252
192,656
Bank of Tokyo-Mitsubishi UFJ Ltd (BTMU) – (Bank of Tokyo)
In December, 2014, BDMG made a bilateral loan in the amount of 50 million dollars, with the
Bank of Tokyo, to be released in tranches in a period of four years and financial charges
consisting of quarterly interest at the pre-fixed rate of 3.09% p.a. until December/2015 and of
3.19% p.a., after this date, and the pro-rata calculation of the interest made according to criteria
set forth in the contract.
The tranches released for disbursement present the following positions:
Balance
on
31/12/2015
Balance on
31/03/2016
Tranches
Date of
disbursement
Final
Maturity
date
Disbursement
USD
26/12/2014
27/12/2018
25,000
17/03/2015
13/03/2019
25,000
Tokyo 1
Tokyo 2
50,000
Curve
BRL
89,021
89,074
178,095
Market
BRL
89,873
89,074
178,947
Curve
BRL
97,674
97,729
195,403
On 01 April, 2016, BDMG executed the anticipated payment of the tranche Tokyo 2 and the
effects relative to this payment recorded in the result of March 2016, the month in which the
agreement for pre-payment was executed by the parties.
(b)
Official institutions
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
Market
BRL
97,329
98,087
195,416
118
Correspond to the balances of funds obtained from official funds and programs transferred to
financing of undertakings in the State of Minas Gerais, and the maturity of the principal and the
charges extend to the year of 2029, with levies of financial charges defined in the operating
policies of each agency or fund institution which transfer funds.
The balances of these obligations are summarized as follows:
Balance on
31/03/2016
Balance
on
31/12/2015
1,846,039
1,818,765
1,477,323
1,486,984
BNB
23,767
25,511
National Treasury
12,774
12,508
FINEP
38,054
34,918
FUNCAFÉ
56,485
55,770
3,454,442
3,434,456
676,474
2,777,968
654,307
2,780,149
BNDES (i)
FINAME
Current
Non-current
The BNDES/FINAME system is the main source of funds for pass-through operations from
BDMG to its clients.
(i)
The BNDES funds – National Bank of Economic and Social Development are mainly addressed
to financing of long-term investment projects.
The funds transferred by BNDES originate from the following credit facilities:
BNDES Automatic PROGEREN
BNDES FINEM
BNDES Automatic TJLP
BNDES Automatic
BNDES Automatic PROCAP-AGRO
BNDES FINEM TJLP
BOOK No.12
TRANSLATION No.21
Balance on
31/03/2016
Balance on
31/12/2015
503,910
257,846
157,484
156,833
91,116
89,531
450,962
251,403
163,209
146,789
100,920
94,938
PAGES 077 a 140
119
BNDES Automatic PRODECOOP
BNDES FINEM PSI
Other
Current
Non-current
14
84,042
75,998
450,504
1,846,039
1,818,765
366,333
355,446
1,479,706
1,463,319
Balance on
31/03/2016
Balance on
31/12/2015
197,876
333,550
17,237
206
205,022
297,222
13,839
995
548,869
517,078
81,130
467,739
68,852
448,226
Other obligations
Tax and social security (a)
Sundry (b)
Financial and development funds (c)
Tax Collection
Current
Non-current
(a)
86,014
56,976
446,329
Balance on
31/03/2016
Provision for tax obligations (i) and (ii)
Provision for deferred taxes and contributions
Provision for taxes and contributions
Taxes and contributions payable
Current
Non-current
Balance on
31/12/2015
177,022
12,045
4,168
4,641
173,519
12,839
14,451
4,213
197,876
205,022
12,684
185,192
29,158
175,864
(i) The provision for tax obligations refer to liabilities related to taxes, comprising legal actions
and lawsuits of administrative nature in progress with the Brazilian Federal Revenue Service,
which are adjusted monthly by the SELIC rate. In the projection of BDMG’s result the
expectation of payment of the tax credits corresponding to this provision takes into
consideration its distribution in a period of 10 years.
The provision for tax obligations had the following transaction in the period:
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
120
Change of the calculation basis of COFINS – Law No 9718/1998
Change of the calculation basis of PIS/PASEP - Law No
9718/1998
Tax exemption regarding FINSOCIAL in the period from
December 1986 to March 1990
Other contingencies and legal obligations
Balance on
31/12/2015
Provision
Adjustment
Balance on
31/03/2016
112,567
-
2,488
115,055
54,202
-
924
55,126
4,828
1,922
12
48
31
4,876
1,965
173,519
12
3,491
177,022
(ii) In order to guarantee the tax suits mentioned above, the Bank has deposits in court in the
amount of the 108,344 BRL (31/12/2015 –106,487 BRL), recorded in the balance of 111,548
BRL (31/12/2015 – 110,155 BRL) of the item “Other credits – Debtors with Security Deposit”
(Note 9 (b)).
In the following table, the deposits in court for tax suits in progress:
Provision
Balance
on
31/12/2015
Deposits
Balance on
31/03/2016
Provision
Change of the calculation basis of COFINS – Law No 9718/1998
Change of the calculation basis of PIS/PASEP - Law No
9718/1998
Tax exemption regarding FINSOCIAL in the period from
December 1986 to March 1990
Other contingencies and legal obligations
Deposits
112,567
46,971
112,567
46,104
54,202
55,126
54,202
54,202
4,828
1,922
4,876
1,371
4,828
1,922
4,828
1,353
173,519
108,344
173,519
106,487
In the legal lawsuits regarding COFINS and PIS/PASEP, BDMG seeks the suspension of the
requirement of these contributions, under the terms published by Law No 9718/1998 which
besides establishing COFINS for financial institutions, it increased the calculation basis of
PIS/PASEP when setting forth that the revenue comprised the gross operating and nonoperating income. In view of the decisions in progress in the lawsuit, the Bank made a deposit in
court, until the accrual basis 12/2014 for covering the contributions of COFINS on the revenues
from services. As from 01/2015, when the alterations introduced by Law 12973/2014 began to
be in force, the company began to normally pay the collections of PIS/PASEP and COFINS on all
its revenues.
The tax and social contribution provisions made by the Bank are in compliance with the Circular
BACEN No 3429/2010 which sets forth the recording in the liabilities of the financial
institutions of the tax obligations for which the constitutionality of the laws which established
them is being discussed in the courts until the effective extinction of the corresponding tax
credits.
The contingent processes of fiscal and tax actions assessed as possible risk of losing are not
recorded in the accounts (See Note 2.14) and they are summarized below:
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
121



(b)
Notice of deficiency, issued by INSS – Social Security National Institute in 2006, regarding
triggering events subject to levy of social security. The installment of the notice of deficiency
on 31 March, 2016 is 5,713 BRL (31/12/2015 – 5,648 BRL).
Final order issued by Brazilian Federal Revenue Service on 11/12/2008, which did not ratify
offsets of income tax paid in 2004 and 2005. The value of the penalty on the non-offset
debts is 569 BRL (31/12/2015 –569 BRL).
Notice of deficiency, issued by Brazilian Federal Revenue Service in July 2010, relative to
divergence in the assessment of income tax and social contribution on net income in the
period from 2005 to 2007. The adjusted amount of the notice is of 8,846 BRL (31/12/2015
–8,686 BRL).
Sundry
Actuarial liabilities (iii)
Provision for other obligations (i)
Sundry creditors – Country (v)
Provision for payables (ii)
Appropriation for capital increase (iv)
Current
Non current
Balance on
31/03/2016
Balance on
31/12/2015
219,917
67,999
27,231
17,808
595
215,245
59,186
9,640
12,557
594
333,550
297,222
66,978
266,572
37,477
259,745
(i) The provision for other obligations have the composition presented as follows, with the
respective transactions occurred in the period:
Balance on
31/12/2015
Charges on compulsory deposit in the
Central Bank
Co-obligation assumed in credit
operations assigned to STN.
Lawsuits of civil nature
Lawsuits of labor and employment
nature
Attorney’s fees
Other
Recorded
provisions
Adjustments
(WriteOffs)
Balance on
31/03/2016
36,016
-
1,173
-
37,189
5,163
195
-
(23)
5,335
2,419
68
32
-
2,519
4,031
639
635
-
5,305
6,513
-
67
-
6,580
5,044
6,882
-
(855)
11,071
59,186
7,784
1,907
(878)
67,999
The Bank recorded the amount of 1,531 BRL (31/12/2015 – 1,990 BRL) in the item Other
Credits – Debtors with security deposits relative to deposits for filing appeals associated to
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
122
labor and employment claims and 1,673 BRL (31/12/2015 –1,678 BRL) for covering the risk of
lawsuits of civil nature.
The labor and employment and the civil contingencies whose losses for the Bank were classified
as likely, and for which there is no provision amounted to, on 31 March 2016, respectively, 1,028
BRL (31/12/2015 – 1,058 BRL) and 7,899 BRL (31/12/2015 – 6,757 BRL).
(ii) The provision for payables results from the following obligations:
Vacation, 13th salary and other charges
Other
Balance on
31/03/2016
Balance on
31/12/2015
12,673
11,884
673
5,135
17,808
12,557
(iii)The balance of the provision of actuarial liabilities which are detailed in Note 28,
refers to the following benefits sponsored by the Bank:
Actuarial liability relative to the Pension Plan
Actuarial liability relative to the Health Promotion Program (PROSAÚDE), medical and dental plan
Actuarial liability relative to life insurance
Balance on
31/03/2016
Balance on
31/12/2015
102,966
101,508
106,903
103,815
10,048
9,922
219,917
215,245
(iv) The balance of the item “Appropriation for capital increase” refers to the
percentage on return of financing agreed upon with the State Fund FUNDESE, for
capital increase applicable to the CREDPOP program, under State Law No
13,667/2000.
(v) The balance of sundry Creditors – Country results, mainly, from the clients’
value of credits to be offset in the total amount of 10,385 BRL (31/12/2015 –2,838
BRL), of pass-throughs earned to be classified in the amount of 10,000 BRL
(31/12/2105 – 0 BRL), from the sum of 2,933 BRL (31/12/2015 – 3,318 BRL) to be
transferred to the Minas Gerais Institute of Integrated Development - INDI and
from pending bank entries in the amount of 2,072 BRL (31/12/2015 – 1,525 BRL).
(c)
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
123
The amount of17,237 BRL (31/12/2015 – 13,839 BRL) refers substantially to amounts from
funds managed by BDMG (private funds and funds associated to official agencies), received
from clients and not yet transferred to the funds.
15
Unearned Revenues
The balance of 12,214 BRL (31/12/2015 – R$ 12,939 BRL) refers to the amount net of taxes of
the commissions on credit operations, earned in advance, and which are appropriated according
to the flow of the deadlines stipulated in the contracts.
16
Net income
(a)
Capital
BDMG’s subscribed and paid-up capital, represented by 60,854,432,385 (31/12/2015 –
60,854,432,385) registered common shares and with no par value, is of 1,793,685 BRL
(31/12/2015 –1.793.685 BRL).
On 31 March, 2016, the shareholders of the Bank are: the State of Minas Gerais which, with
89.76% of the capital, has the controlling interest of the Bank; Minas Gerais Economic
Development Company – CODEMIG, with 10.24% and that became shareholder as of the last
quarter of 2012; and the Minas Gerais State Highway Department / DER-MG which has been
shareholder since 1990, when the Bank changed from government agency to corporation with
interest of 0.01%.
(b)
Appropriated retained earnings
The appropriated retained earnings, consisting of legal reserve, with calculation basis of 5% on
assessed net income, up to the limit of 20% of the capital, presents balance of 14,512 BRL
(31/12/2015 – 14,512 BRL).
(c)
Equity Valuation Adjustment
The adjustments recorded are the following:
Adjustment at market value (i)
Other equity valuation adjustments (ii)
(i)
Balance on
31/03/2016
Balance on
31/12/2015
(11,182)
(105,164)
(14,337)
(105,164)
(116,346)
(119,501)
The adjustment at market value, net of tax effects, refers to the adjustment of securities
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
124
classified in the category available-for-sale bonds.
(ii) Other adjustments refer to the recording of costs inherent to the obligation with the
benefits to employees and which, by determination of NBC TG 33 (R1)– Benefits to
Employees, effective as from January 2013, must be adjusted in the net equity, net of tax
effects.
(d)
Dividends and interest on own capital
A minimum dividend equivalent to 1% of the net income of the fiscal year, adjusted under the
Brazilian Law of Corporation and the Articles of Incorporation, is guaranteed to the
shareholders.
For the remuneration of capital to its shareholders, BDMG has a policy of distribution of
dividends or payment of interest on own capital consistent with the result assessed in the fiscal
year.
17
Capital Management
In order to comply with the determinations of Resolution CMN No 3988/2011, BDMG
published the internal rules, Resolution No 213 and Instruction No 239, which define the policy
and the structure necessary for the management of the Bank’s capital. These rules create
guidelines aiming to ensure that the capital, by also meeting the established regulatory
requirements, maintains itself in adequate levels so as to permit that the Bank, even if in
different scenarios, can reach the constant targets of its strategic planning.
The considered scenarios take into account the possible changes in the market conditions, the
different operating and administrative activities of the Bank, the economic environment in
which it is inserted and the risks to which it is exposed.
The Bank, in compliance with the rules mentioned above and considering the definitions for
strategic planning, the premises for the proposed scenarios and the projections of the results,
prepared the capital plan for the period from 2016 to 2018. The Report on the Description of the
Capital Management Structure of BDMG can be consulted in the following address:
http://www.bdmg.mg.gov.br/Transparencia/Paginas/demonstracao-financeira.aspx.
BDMG, aiming to comply with Resolution CMN No 3988/2011, has an organizational structure
of capital management. The capital management structure comprises the following institution
departments: Controllership Area, responsible for the preparation of the capital plan and the
calculation of capital necessity to cover the credit and operating risks and the consolidation of
the information regarding the capital indicators and minimum requirements of capital; Risk
Management Area, responsible for performing the calculation of capital needs for covering
market risk and for performing stress tests for market risk segments; Planning Area, responsible
for describing the institution’s strategy; Financial Area, responsible for relevant information on
sources of capital and Internal Audit Area, which should periodically assess the capital
management process of the institution.
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
125
18
Regulatory capital
The rules for the calculation of regulatory capital establish the obligation of the financial
institutions to keep equity compatible with the risk level of its assets, according to the factors of
exposure weighting, risk mitigators and factors of credit conversion.
Resolution CMN No 4192/2013, together with a new regulatory set, regulated in Brazil as from
01/10/2013 the recommendations of the Basel Committee on Banking Supervision relative to
the capital structure of financial institutions known as Basel III. The new outline presented the
methodology of regulatory capital assessment and of assessment of capital maintenance with
minimum requirements of Reference Assets, level I Reference Assets and of base capital.
The assessment of reference assets and the calculation of capital indexes of the Bank are
presented as follows:
Regulatory capital - minimum requirements
Level I reference assets – RA of level I - (a)
Base Capital - BC
Shareholders’ equity
Capital highlighted for operations with the public sector - (b)
Reference assets for comparison with the RWA (a-b)
Total risk-weighted assets - (RWA)
Credit risk (RWAcpad)
19
Balance on
31/03/2016
Balance on
31/12/2015
1,688,180
1,686,491
1,688,180
1,686,491
1,692,050
1,688,696
700,000
700,000
988,180
986,491
6,656,238
6,492,994
5,612,562
5,582,321
Market risk (RWAmpad)
558,217
494,515
Operating risk (RWAopad)
485,459
416,158
Portion for interest rate risk coverage of non negotiable portfolio (Rban)
52,825
30,383
Basel Index (Reference Assets/RWA)
14.85%
15.19%
Broad Basel Index (Reference Assets/(RWA + RWA Rban))
13.74%
14.57%
Revenues of credit operations
Balance on
31/03/2016
Income of loans and financings
Recovered credits
20
168,544
6,133
151,210
3,262
174,677
154,472
Result with bonds and securities and derivative financial instruments
BOOK No.12
TRANSLATION No.21
Balance on
31/03/2015
PAGES 077 a 140
126
Income of fixed-income securities
Income of investments in repurchase agreements
Losses in investments in investment funds
Income of investments in interbank deposits
Result in swap operations
21
Balance on
31/03/2016
Balance on
31/03/2015
24,283
12,649
(168)
(78,553)
21,329
3,587
(25)
1,134
60,266
(41,789)
86,291
Expenses of financial intermediation
Balance on
31/03/2016
Expenses of financial bills
Expenses of BNDES and FINAME pass-through operations
Expenses of pass-through operations – Other Institutions
Expenses of loans abroad
Expenses of interbank deposits and repurchase agreements
Balance on
31/03/2015
(25,806)
(55,526)
(1,823)
(35,599)
(4,165)
(27,442)
(48,194)
(1,499)
(110,205)
(775)
(122,919)
(188,115)
22
Administrative expenses, tax expenses, other operating income (expenses)
(a)
Other administrative expenses
Outsourcing services and technical specialists
Depreciation and amortization
Maintenance and materials expenses
Data processing expenses
Publicity and communication expenses
Travel and transport expenses
Rent and infrastructure expenses
Other
(b)
Balance on
31/03/2016
Balance on
31/03/2015
(2,593)
(957)
(694)
(688)
(577)
(538)
(330)
(1,177)
(3,086)
(941)
(690)
(1,039)
(1,354)
(429)
(282)
(1,248)
(7,554)
(9,069)
Balance on
31/03/2016
Balance on
31/03/2015
Tax expenses
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
127
PIS and COFINS
ISSQN
Other
(c)
(4,386)
(452)
(473)
(6,036)
(5,311)
Other operating income
Income of exchange rate change
Revenue of market value adjustment of the hedge object
Reversal of various provisions
Revenue of equity method
Other
(d)
(4,903)
(438)
(695)
Balance on
31/03/2016
Balance on
31/03/2015
74,752
24,598
991
8
557
3,435
19,514
137
791
100,906
23,877
Other operating expenses
Balance on
31/03/2016
Balance on
31/03/2015
Exchange rate change
(6,907)
(3,720)
Expenses with suretyship
(6,843)
(11)
Provisions for tax, labor and employment and civil risks
Post-employment benefits – health care plan and life insurance
Expenses with bonus and discount on credit operations
(4,148)
(3,374)
(2,577)
(2,962)
(1,630)
(1,910)
Post-employment benefits – pension plan
(2,512)
(2,137)
Expenses of the agreement - INDI
(746)
165
Expenses of the BDMG Cultural agreement
(414)
(632)
Provisions for co-obligations in rural operations
(194)
(115)
Other long-term benefits
Expenses with granted discounts on renegotiations
Other
23
Income tax and social contribution
(a)
Deferred income tax and social contribution
(42)
(40)
(133)
(554)
(2,262)
(1,476)
(29,205)
(15,969)
Balance on
Balance on
The deferred tax credits present the following balances:
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
128
Temporary additions (i)
Adjustment at market value (Bonds and securities)
PIS/COFINS Credit
(i)
31/03/2016
31/12/2015
349,086
349.685
9,127
12.216
135
320
358,348
362.221
In view of the publication of the Provisional Presidential Decree 675/2015, converted into
Law 13169/2015, which increased the rate of the Social Contribution on Net Income –
CSLL from 15% to 20% during the period from 01/09/2015 to 31/12/2018, it was necessary
to proceed with the adjustment of recorded amounts of CSLL tax credit.
However, due to the increase of the rate having a defined period, the addition of 5% was
not recorded on the total balance of temporary differences assessed in the period, but only
on the balance payable, projected until the deadline of 31/12/2018.
The table below presents the composition of the tax credit of temporary additions related to the
provisions which they resulted from:
Doubtful receivables
COFINS – (change in calculation basis of Law No 9718/1998)
Compulsory deposit in the Central Bank (financial charges on deposit)
Civil, labor and employment and tax contingencies
Change in the calculation basis of PIS/PASEP set forth by Law No 9718/1998
Post-employment benefit
Co-obligation with the STN (National Treasury Department)
Other
Balance on
31/03/2016
Balance on
31/12/2015
213,499
37,699
14,875
6,999
10,203
57,720
2,198
5,893
215,587
37,052
14,406
6,385
10,203
59,234
2,120
4,698
349,086
349,685
The transactions of tax credits in the period are presented in the table as follows:
Adjustment
at market
value
Temporary
additions
PIS / COFINS
Credit
Total
Creation
Reversal
12,216
(3,089)
349,685
49,685
(50,284)
320
(185)
362,221
49,685
(53,558)
9,127
349,086
135
358,348
The recording of BDMG’s tax credits performed in compliance with Resolution CMN No
3355/2007 considers, in up to 10 years, the expectation of its payment, in view of the positive
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
129
tax results present in the projection of results which may undergo changes, once it is estimated
based on the internal premises and future economic scenarios.
The probable recovery of tax credits resulting from temporary additions is demonstrated as
follows:
Par value
Current
value
65,088
53,452
80,472
67,673
22,197
13,933
23,146
8,867
6,959
7,299
59,474
43,380
57,008
41,848
11,982
6,565
9,520
3,184
2,181
1,997
349,086
237,139
Year:
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
The current value of the tax credits was obtained by means of discount of the future flow of
recovery at the average rate of fundraising of pass-through funds agreed with BDMG of 14.56%
p.a. (31/12/2015 – 14.56% p.a.).
On 31 March, 2016, the Bank has remaining balances of tax credit of Income Tax and Social
Contribution temporary differences in the amount of 20,478 BRL (31/12/2015 – 18,474 BRL)
and 12,287 BRL (31/12/2015 - 11,084 BRL) respectively. These amounts are not recorded once
the expectation for its payment exceeds the period of ten years.
(b) Reconciliation of income tax and social contribution recorded in the result
Income tax
Balance on
31/03/2016
Social
Contribution
Income tax
Balance on
31/03/2015
Social
Contribution
Profit before income tax and social contribution
7,301
7,301
21,330
21,330
Interest on own capital
Net additions (exclusions)
Creation of provision of contingencies, net of reversals.
Taxes with suspended enforceability
Creation of provision for doubtful receivables and credit recovery written off as
loss, net
4,270
12
4,270
12
2,657
-
2,657
-
Effective losses of credit
Creation of provision of post-employment benefit (net of reversals)
Profit sharing set forth in Articles of Incorporation
Result of equity method
Exchange rate change – accrual-basis accounting
Other
Calculation basis
Tax according to effective rate
Income tax extra
Tax incentives
BOOK No.12
TRANSLATION No.21
37,647
37,647
23,609
23,609
(41,632)
4,672
(8)
2,435
(41,632)
4,672
(8)
2,366
(8,416)
3,963
(2,529)
(8,416)
3,963
(2,562)
14,697
14,628
40,614
40,581
(2,204)
(1,464)
91
(2,926)
(6,092)
(4,055)
404
(6,087)
PAGES 077 a 140
130
Sub-total of income tax and social contribution due
Provision for deferred taxes
Adjustment of due values in previous years
Total provision of due income tax and social contribution
Deferred tax credits (net of reversals) on temporary differences
Income tax and social contribution in the income statement
24
(3,577)
(2,926)
(9,743)
(6,087)
-
-
(17,366)
(10,420)
-
-
-
-
(3,577)
(2,926)
(27,109)
(16,507)
(171)
(428)
22,181
13,308
(3,748)
(3,354)
(4,928)
(3,199)
Related parties
BDMG performed the following transactions with related parties in the fiscal year:
Legal entities
State of Minas Gerais and directly and indirectly controlled companies:
 State of Minas Gerais – rendering of services as financial agent of state funds, and the
commission earned by the Bank an integrating part of the financial charges of the loan
agreements granted with capital from the funds;
 João Pinheiro Foundation, public institution connected to the State Department of Planning
and Management. The Bank, as set forth in its articles of incorporation and in compliance
with State Law No 11050/1993, is authorized to donate 5% of the net income of the fiscal year
to the Foundation.
BDMG has an employee seconded to the foundation, with burden. The expenses of the Bank
with this secondment, in the period, amounts to 60 BRL (31/03/2015 – 0 BRL);
(a) Minas Gerais Institute of Integrated Development (INDI), a private law legal entity, in the
form of a non-profit general partnership company, is connected to the State Department of
Economic Development and it is organized as an affiliate company of BDMG which, as the
controlling member with 25% of the units of ownership of the capital, accounts for 25% of the
company’s annual expenses. This commitment is complied with by the secondment of
employees and complementary financial contributions. The Bank’s expenses with INDI, in the
quarterly period, amount to 746 BRL (31/03/2015 – 0 BRL);
(b) BDMGTEC Participações S.A., a wholly-owned subsidiary created by BDMG in 2012, aiming to
have interest in the capital of companies with relevant importance to the development of the
State of Minas. On 31 March, 2016, BDMGTEC’s capital amounts to 77.658 BRL (31/12/2015 –
77.658 BRL), of which the amount of 76,584 BRL was subscribed and paid up by the Bank and
804 BRL resulted from the incorporation of the profit of the 2015 fiscal year;
(c) DESBAN – BDMG Foundation for Social Security, a non-profit closely held entity of
complementary pension, is sponsored by BDMG which, as detailed in Note 28, made
disbursements for the Foundation aiming to meet the benefits of pension and health care to its
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
131
employees. BDMG has an employee seconded to DESBAN that is responsible for the costs of this
employee;
(d) The Development Bank of Minas Gerais Cultural Institute – BDMG Cultural, a non-profit
association established under civil law, was created by BDMG together with the BDMG
Employees Association - AFBDMG for the establishment of a space to stimulate culture in Minas
Gerais. The Bank contributes to the maintenance of the BDMG Cultural by means of
secondment of employees without any burden to the Institute and contribution of funds which
amount to 414 BRL (31/03/2015 – 632 BRL) in the first quarter of 2016.
Individuals
The individuals, related parties, which form the key Administration staff of BDMG are
participants of the Board of Directors, of the Executive Management and of the Superintendence
(this latter only in 2015) and in the period they received fees with the following composition:
Balance on
31/03/2016
Remuneration (including social contributions charges and benefits)
Profit sharing
Contribution to the retirement plans and post-employment benefits
25
Balance on
31/12/2015
1,058
7
3,923
43
37
1,065
4,003
Insurance coverage (not revised)
The Bank, in order to face eventual losses which may occur with the goods of the fixed assets, it
has an insurance in the amount of 62,250 BRL (31/12/2015 – 62,250 BRL).
26
Risk management
Financial risk management policy
The Risk Management Policy, authorized by the Top Management, establishes guidelines and
limits aiming at the identification and mitigation of the Bank’s risks. It is directed to the
convergence of methodologies and internal models to the Basel Accords and to the compliance
with regulating agencies, aligned with the best practices of risk management.
The Bank’s Risk Management aims to mitigate the risks regarding credits, market, liquidity and
operations, so as to provide operating efficiency and its results. According to this objective,
practices of risk management adequate to the nature and the specificities of the operations
performed are adopted by the Bank.
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
132
The Bank followed the structure of the management of risks regarding credit, operations,
market and liquidity, in compliance with the Resolutions CMN No 3721, of 30/04/2012, No
3.380, of 29/06/2006, No 3464, of 26/06/2007 and No 4120, of 24/05/2012, respectively.
The structure of the risk management involves the whole Bank, and it is organized in the
following manner: Board of Directors and Supervisory Board, Audit Committee, Internal Audit,
External Audit, Executive Management, Credit and Risk Management, General Risk
Management (market, liquidity, credit risks and preventing external fraud in granting loans),
Internal Control Management (operating risk, compliance, internal controls, prevention of and
combating money laundering and financing terrorism and management of internal rules),
General Controllership Management (analysis of options of approach for the calculation of
capital required and application of the calculation) and other departments (primary
responsibility relative to operating risks, compliance and implemented controls).
The descriptions of the management structures of these risks, as well as other information on
the management are available in BDMG’s site (http://www.bdmg.mg.gov.br).
Operating risks
The operating risk management policy, in compliance with Resolution CMN No 3380/2006,
sets forth the roles, responsibilities and own methodology for the identification, assessment and
treatment of the operating risks inherent to the Bank’s activities.
Credit risk
The credit risk management policy sets forth the limits of exposure to credit risk by client,
economic group and of quality of the credit portfolio; decision competence and analysis criteria
and credit follow-up, seeking the selectivity of the operations, aiming to minimize the default
and its consequences.
Liquidity risk
The liquidity risk management policy sets forth roles and responsibilities, limits of exposure and
reporting levels aiming to prepare the Bank to face adverse scenarios, considering different time
horizons. It presents situations of contingency plan activation, which contemplates the set of
strategies and measures to be taken, aiming at the reframing the established limits. The policy
also foresees the monitoring of the defined action plans and the reporting of the results to the
Top Management.
Market risk
The Market Risk Management (GRM) Policy sets forth roles and responsibilities, operating
limits and reporting levels and the means which have to be worked on in order to minimize the
effects of this risk in its financial statements, cash flows and the adaptation to the limits of risk
exposure.
27
Management of development funds (Not reviewed)
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
133
The Bank has a structure addressed to the management of development funds. The balances
regarding the equity funds present the following amounts on 31 March, 2016 and 31 December,
2015:
Balance on
31/03/2016
State government funds
Private funds
Other funds
28
Balance on
31/12/2015
3,749,614
290
35,199
3,733,278
290
32,706
3,785,103
3,766,274
Benefits to employees
BDMG, as mentioned in Note 2.16 provides the following post-employment benefits to its
employees: pension benefits, health care and dental assistance, life insurance and benefit for
voluntary redundancy.
The recording of these benefits is performed according to the NBC TG 33 (R1) – Benefit to
Employees requiring the execution of actuarial analysis in order to base the records of these
obligations. The actuarial analysis in force was performed for the 31/12/2015 effective date.
(a)
Features of the benefit plans
(i)
Pension plan benefit
BDMG is the sponsor of the pension plans in the defined benefit modality and in the variable
contribution modality which are managed by DESBAN – BDMG Foundation for Social Security,
a non-profit closely held entity. The aim of both plans is to guarantee to its participant
employees the complementation of the value of the installments paid by the General Regime of
Social Security – RGPS. The pension plan in the defined benefit modality, closed for new
participants on 10 November, 2011, is based on the financial regime of capitalization for the
calculation and accrual of its reserves; and the plan in the variable contribution modality,
established on 13 January, 2011, consists of a defined contribution plan during the savings
creation phase, and it is transformed into a defined benefit, due to the guarantee of a lifetime
monthly income after the granting.
BDMG’s contribution for both plans is limited to the total of the normal contributions by the
participants, observing the particularities of each one, in compliance with the contribution
equivalence set forth in the Constitutional Amendment No 20/1998.
The number of BDMG’s participants in the pension plans is distributed as follows:
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
134
Balance on
31/03/2016
Plans:
Defined Benefit – DB Active Participants
Defined Benefit – DB Assisted Participants
Variable Contribution - VC Active Participants
(ii)
Balance on
31/12/2015
249
526
74
250
525
75
849
850
Health and dental care benefit
The Health Promotion Program (PRO-SAÚDE) which offers coverage for medical and dental
expenses for the active participant employees and their dependents, according to Note 2.16, is
managed by DESBAN and it works under the capitalization regime. This benefit is also
guaranteed by the Bank to the assisted participants who registered in the plan, in the quality of
active participants, until 10/10/2009.
(iii)
Life insurance
BDMG provides group life insurance to active and assisted employees who are interested in this
type of benefit. The Bank’s contribution corresponds to 50% of the value of the paid premium.
(iv)
Voluntary redundancy program
This Program, created by the Bank on 14 December, 2011 and ended on 29 January, 2016, aimed
at benefitting the employees in retirement condition and who met the requisites established in
the Program.
(b)
Bank’s commitments with the benefit plans
In compliance with the obligations regarding the benefit plans, BDMG made the following
contributions to the active and assisted employees:
Balance on
31/03/2016
Pension Benefit Plan – (DB Defined Benefit)
Pension Benefit Plan – (VC Variable Contribution)
Health Promotion Program PRÓ-SAÚDE
Group Life Insurance
Voluntary redundancy Program
(i)
2,172
123
1,345
212
-
9,023
469
4,599
919
1,527
3,852
16,537
Transactions of the current value of the obligation with defined benefit
BOOK No.12
TRANSLATION No.21
Balance on
31/12/2015
PAGES 077 a 140
135
On 31 March, 2016, the net values of the obligations regarding defined benefit plans, according
to NBC TG 33 (R1) resulted from the following transactions in the period:
(Liability) net on31/12/2015
Cost of the current service
Net cost of the interest
Pension Benefit
Plan -BD
Health
Promotion
Program
PRO-SAÚDE
Group Life
Insurance
Voluntary
Redundancy
Program
Total
(101,508)
(103,815)
(9,922)
-
(215,245)
(633)
(2,980)
(344)
(3,242)
(24)
(299)
-
(1,001)
(6,521)
2,155
(495)
993
197
-
(495)
3,345
(102,966)
(106,903)
(10,048)
-
(219,917)
Cost of past service
Expected contributions for administrative expenses
Sponsor contributions
(Liability) net on 31/03/2016
Cost of past service
Expected contributions for administrative expenses
Sponsor contributions
Remeasurements
Return on the plan’s assets, excluding interest
Actuarial gains – Changes of premises (salary growth
and turnover)
Actuarial gain – Changes of premises (discount fee)
(Loss) actuarial – Changes of premises (life tables)
Actuarial Gain / (Loss) – Experience adjustments
BOOK No.12
Pension Benefit
Plan -BD
Health
Promotion
Program
PRO-SAÚDE
Group Life
Insurance
Voluntary
Redundancy
Program
Total
(93,707)
(99,439)
(11,138)
(1,253)
(205,537)
(9)
(4,234)
(1,110)
(93)
(10,841)
(11,197)
(1,230)
8,972
(1,823)
3,394
(58,359)
(781)
5,556
98,778
(199)
(5,446)
(23,268)
(199)
(1,823)
14,802
(59,140)
909
1,527
20,439
38
1,077
-
5,594
120,294
(14,368)
(4,352)
(241)
-
(33,305)
(8,946)
756
(66)
(18,961)
(41,561)
(101,508)
(103,815)
(9,922)
-
(215,245)
TRANSLATION No.21
PAGES 077 a 140
136
(ii)
Amounts recorded in the Result
The expenses with defined benefit plans are specified in the table below:
Balance on
31/03/2016
Health
Promotion
Program
PRO-SAÚDE
Pension Benefit
Plan -DB
Group Life
Insurance
Voluntary
Redundancy
Program
Total
(633)
(344)
(24)
(1,001)
Expected contributions for
administrative expenses
(2,980)
(3,242)
(299)
(6,521)
(Expense) recorded in the
income statement (i)
(495)
(3,613)
(4,081)
(495)
(323)
-
(8,017)
Balance on
31/03/2015
Pension Benefit
Plan -DB
Health
Promotion
Program
PRO-SAÚDE
Group
Life
Insurance
Voluntary
Redundancy
Program
Total
(10,841)
(11,197)
(1,230)
-
(23,268)
Expected contributions for
administrative expenses
-
-
-
(Expense) recorded in the
income statement (i)
-
3,394
(10,841)
(7,803)
3,394
(1,230)
-
(19,874)
(i) The accounting record of the expenses was made in the following manner: 2,131 BRL
(31/03/2015 – 2,536 BRL) in the item “Personnel expenses” and 5,886 BRL (31/03/2015 –
5,099 BRL) in the item “Other operating expenses ”.
The monthly contributions of the sponsor for the Pension Benefit Plan in the Variable
Contribution –VC modality, in the period from January to March 2016, amount to 123 BR
(31/03/2015 – 99 BRL). These contributions are recorded on a monthly basis as Personnel
Expenses.
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
137
(c)
Actuarial analyses
The actuarial obligations were assessed by an independent actuary using the Projected Unit
Credit Method and, on 31 March, 2016, the analyses prepared for the 31 December, 2015
effective date are in force, presented as follows:
(i)
Net Amount Recorded in the Balance Sheet
On 31 December, 2015, the assessment of the net values of the obligations with the defined
benefit plans, according to NBC TG 33 (R1), recorded in the balance sheet are:
Pension Benefit
Plan -DB
Health
Promotion
Program
PRO-SAÚDE
Obligation regarding Defined Benefit
Assets of the Plan
(819,237)
717,729
(121,410)
17,595
(9,922)
(950,569)
735,324
(Liability) Net Actuarial
(101,508)
(103,815)
(9,922)
(215,245)
Pension Benefit
Plan -DB
Health
Promotion
Program
PRO-SAÚDE
(832,475)
738,768
(93,707)
Group Life
Insurance
Voluntary
Redundancy
Program
Total
Obligation regarding Defined Benefit
Assets of the Plan
(Liability) Net Actuarial
(ii)
Group Life
Insurance
Voluntary
Redundancy
Program
(118,700)
19,261
(11,138)
(1,253)
(963,566)
758,029
(99,439)
(11,138)
(1,253)
(205,537)
Total
Allocation of the fair value of the assets of the plan
The assets of the plans on 31 December, 2015 are allocated by assets category as follows:
31/12/2015
Pension Benefit Plan - DB
Health Promotion
Program
PRO-SAÚDE
Assets category:
Government Bonds
Private credits and deposits
Referenced Investment Funds
Shares and stock funds
Real estate investments
Loans and financings
Multi-market
Equity Investment Funds
Other
BOOK No.12
TRANSLATION No.21
57.92%
2.85%
13.65%
4.24%
5.74%
1.71%
1.04%
4.46%
8.39%
PAGES 077 a 140
80.49%
9.09%
9.97%
138
(iii)
Main Premises Used in the Actuarial Assessment
The actuarial analyses which present BDMG’s obligations on December, 2015, are based on the
following premises:
31/12/2015
Nominal discount rate for the actuarial obligations (1)
12.59%
Expected annual nominal rate of return on investments
12.59%
Estimated future annual inflation
4.94%
Future salary growth nominal rate:
BDMG (PCS)
8.21%
BDMG (CC)
6.38%
Annual Projection of real increase of medical expenses (2)
3.50%
Turnover:
Less than three years of length of service.
7.31%
From three to five years.
0.81%
Above five years.
General Mortality Rate in Life Table
Disability Rate in Life Table
Alvaro Vindas downsized by 70%.
Death Rate of Disabled in Life Table
Configuration of families in pension plan
Life expectancy for the calculation of the pension plan
welfare factor
Winklevoss downsized by 50%.
Active: Standard Family
Assisted: Actual Family.
IBGE 2013 Table.
All the participants retire in the 1st eligibility; zero
salary growth for the self-sponsored participants.
Other Hypotheses
Provision for inflation adjustment
(1)
AT-2000 (Basic table downsized by 10%) downsized
by 10% and separated by sex.
Of the Salaries: 2.3882% (accrued variation of the
IPCA (price index) of 09/11/2015) – Effective date
of the September adjustment.
Of the granted Benefits: 4.8354% (accrued variation
of the IPCA (price index) from 05/2015 to 11/2015)
– Effective date of the May adjustment.
Applicable only to the Health Care Plan.
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140
139
(iv)
Sensitivity analysis of the defined benefit obligation
The changes in the premises which give base to the actuarial analyses can have an effect on the
value of the defined benefit obligation.
The table below presents, in percentage, how the defined benefit obligation is affected in case
changes in the following actuarial premises take place:
Changed premise
Increase
of 0.5%
p.a.
in the
discount
rate
Downsizing of
the life table
mortality rate
in 1 year
Increase of
1% in the
salary
growth
ratel
0.90%
N/A
N/A
N/A
25.60%
4.50%
N/A
N/A
N/A
Pension Benefit Plan - DB
-4.70%
5.10%
1.50%
Health Promotion Program PRO-SAÚDE
-6.50%
6.90%
3.10%
Group Life Insurance
-4.20%
4.60%
1.80%
N/A
N/A
N/A
Voluntary redundancy Program
(v)
Reduction
of 0.5% p.a.
in the
discount
rate
Increase
of 0.01%
in the
insurance
premium
rate
N/A
Increase
of 1% in
the trend
rate of
medical
costs
Projected Cash Flow
The actuarial analyses performed for the December 2015 effective date present the following
estimates of payments of benefits and contributions by the sponsor for the 2016 fiscal year:
Pension
Benefit Plan –
DB (Defined
Benefit)
Payment of Expected
Benefits
Employer’s Expected
Contributions
Pension
Benefit Plan –
VC (Variable
Contribution)
Group
Life
Insurance
8,639
886
73,013
3,719
886
14,636
63,488
9,551
480
*
BOOK No.12
Health
Promotion
Program
PROSAÚDE
TRANSLATION No.21
*
Voluntary
Redundancy
Program
*
PAGES 077 a 140
Total
140
Executive Officers
Marco Aurélio Crocco Afonso
President
Luiz Guilherme Piva
Vice-President
Carlos Fernando da Silveira Vianna
Director
Carolina Marinho do Vale Duarte
Director
Otávio Silva Camargo
Director
Rogério Sobreira Bezerra
Director
Controllership Department
Giovani Rosemberg Ferreira Gomes – Accountant CRC-MG – 075701/O-5
---------------------------------------------------------------I certify the foregoing is a true and unabridged rendering into
English of the document presented to me, typed in 63 pages. In
Witness Whereof, I hereunto set my hand and seal, on this 24th
day of June, 2016, in the city of Belo Horizonte, Brazil.
_______________________________
Thaís Queirós Mattoso Valle
Sworn Public Translator
Translator’s note:
The present translation does not imply in the judgment on the
form, authenticity or content of the original document.
Characters with space: 134892
Fees Charged: R$ 8.953,15
fifty-three and fifteen)
BOOK No.12
(eight
TRANSLATION No.21
thousand
nine
hundred
PAGES 077 a 140
and
141
BOOK No.12
TRANSLATION No.21
PAGES 077 a 140

Development Bank of Minas Gerais S.A. – BDMG

Transcription

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