CONTENTS | PAGE |
ANNUAL REPORT | |
Directors’ report | |
Directors’ responsibility statement | 11 |
ANNUAL ACCOUNTS | |
12 | |
13 | |
14 | |
15 | |
16 | |
ADDITIONAL INFORMATION | |
Statutory rules concerning appropriation of the net result | 66 |
Independent auditors’ report | 67 |
B.A Carey | |
D. Diab | (Appointed on 19 February 2024) |
A. Doppenberg | (Resigned on 15 April 2025) |
D.C. Hiebendaal | (Appointed on 15 April 2025) |
T.J. van Rijn | (Appointed on 27 November 2024) |
S. Ibanez | (Resigned on 1 January 2024) |
P.J.G. de Reus | (Resigned on 27 November 2024) |
TMF Management B.V. |
Note | 2024 | 2023 | ||
€'000 | €'000 | |||
Net trading expense on financial assets | (137,801) | (49,708) | ||
Net trading income on financial liabilities | 118,593 | 677,554 | ||
Net trading (expense) / income | (19,208) | 627,846 | ||
Net income on other financial assets held at fair value | 420,773 | 406,994 | ||
Net expense on other financial liabilities held at fair value | (401,565) | (1,034,840) | ||
Net income / (expense) on other financial instruments held at fair value | 4 | 19,208 | (627,846) | |
Other revenue | 5 | 1,427 | 3,382 | |
Total non-interest revenue | 1,427 | 3,382 | ||
Interest income | 67,240 | 55,156 | ||
Interest expense | (53,842) | (56,982) | ||
Net interest income / (expense) | 6 | 13,398 | (1,826) | |
Net revenues | 14,825 | 1,556 | ||
Non-interest expense: | ||||
Other expense | 7 | (13,457) | (132) | |
Net reversal of impairment loss / (impairment loss) on financial instruments | 8 | 59 | (26) | |
PROFIT BEFORE INCOME TAX | 1,427 | 1,398 | ||
Income tax expense | 9 | (346) | (327) | |
PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 1,081 | 1,071 |
Note | 2024 | 2023 | ||
€'000 | €'000 | |||
Share capital - at 1 January and 31 December | 15 | 15,018 | 15,018 | |
Retained earnings - at 1 January | 18,963 | 17,892 | ||
Profit for the year | 1,081 | 1,071 | ||
Retained earnings - at 31 December | 20,044 | 18,963 | ||
Total equity at 31 December | 35,062 | 33,981 |
Note | 2024 | 2023 | |||
€'000 | €'000 | ||||
ASSETS | |||||
Cash and short-term deposits | 10 | 2,109 | 995 | ||
Trade and other receivables | 11 | 1,267,150 | 1,336,279 | ||
Trading financial assets | 10 | 384,883 | 390,413 | ||
Loans and advances | 10 | 7,937,678 | 7,920,801 | ||
Current tax asset | 1,725 | 1,187 | |||
TOTAL ASSETS | 9,593,545 | 9,649,675 | |||
LIABILITIES AND EQUITY | |||||
LIABILITIES | |||||
Trade and other payables | 12 | 90,834 | 174,796 | ||
Trading financial liabilities | 10 | 476,029 | 570,351 | ||
Debt and other borrowings | 13 | 7,866,339 | 7,745,266 | ||
Convertible preferred equity certificates | 14 | 1,125,281 | 1,125,281 | ||
TOTAL LIABILITIES | 9,558,483 | 9,615,694 | |||
EQUITY | |||||
Share capital | 15 | 15,018 | 15,018 | ||
Retained earnings | 20,044 | 18,963 | |||
Equity attributable to owners of the Company | 35,062 | 33,981 | |||
TOTAL EQUITY | 35,062 | 33,981 | |||
TOTAL LIABILITIES AND EQUITY | 9,593,545 | 9,649,675 |
Note | 2024 | 2023 | |
€'000 | €'000 | ||
NET CASH FLOWS FROM / (USED IN) OPERATING ACTIVITIES | 16 | 1,114 | (4,107) |
INVESTING ACTIVITY | |||
Repayment of interest from another Morgan Stanley Group undertaking | 56,857 | 20,820 | |
NET CASH FLOWS FROM INVESTING ACTIVITY | 56,857 | 20,820 | |
FINANCING ACTIVITIES | |||
Yield paid on convertible preferred equity certificates | (57,555) | (21,870) | |
Financing received from another Morgan Stanley Group undertaking | 698 | 1,050 | |
NET CASH FLOWS USED IN FINANCING ACTIVITIES | 16 | (56,857) | (20,820) |
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,114 | (4,107) | |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | 995 | 5,102 | |
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 16 | 2,109 | 995 |
2024 | 2023 | ||
€'000 | €'000 | ||
Net income/ (expense) on: | |||
Non-trading financial assets at FVPL: | |||
Trade and other receivables: | |||
Prepaid equity securities contracts | (218) | 5,007 | |
Financial assets designated at FVPL: | |||
Loans and advances: | |||
Loans | 420,991 | 401,987 | |
Financial liabilities designated at FVPL: | |||
Debt and other borrowings: | |||
Issued structured notes | (401,565) | (1,034,840) | |
19,208 | (627,846) |
2024 | 2023 | ||
€'000 | €'000 | ||
Management recharges to other Morgan Stanley Group undertakings | 1,427 | 2,287 | |
Net foreign exchange gains | — | 1,095 | |
1,427 | 3,382 |
2024 | 2023 | ||
€'000 | €'000 | ||
Auditors’ remuneration: | |||
Fees payable to the Company’s auditor and its associates for the audit of the Company’s financial statements | 145 | 95 | |
Bank charges | 43 | 37 | |
Net foreign exchange losses | 11,365 | — | |
Management charges from other Morgan Stanley Group undertakings | 1,676 | — | |
Other | 228 | — | |
13,457 | 131.808 |
2024 | 2023 | |||||
Forvis Mazars Accountants N.V. | Other Forvis Mazars Network | Total Forvis Mazars | Deloitte Accountants B.V. | Other Deloitte Network | Total Deloitte | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Statutory audit of financial statements | 145 | — | 145 | 95 | — | 95 |
2024 | 2023 | ||
€'000 | €'000 | ||
Trade and other receivables | (59) | 26 |
2024 | 2023 | ||
€'000 | €'000 | ||
Current tax | |||
Current year | 368 | 367 | |
Adjustments in respect of prior years | (22) | (40) | |
Income tax | 346 | 327 |
2024 | 2023 | ||
€'000 | €'000 | ||
Profit before income tax | 1,427 | 1,398 | |
Income tax using the average standard rate of corporation tax in the Netherlands of 25.8% (2023: 25.8%) | 368 | 361 | |
Impact on tax of: | |||
Tax over provided in prior years | (22) | (40) | |
Expenses not deductible for tax purposes | — | 6 | |
Total income tax in the statement of comprehensive income | 346 | 327 |
31 December 2024 | FVPL (mandatorily) | FVPL (designated) | Amortised cost | Total | |||
€'000 | €'000 | €'000 | €'000 | ||||
Cash and short-term deposits | — | — | 2,109 | 2,109 | |||
Trade and other receivables: | |||||||
Trade receivables | — | — | 26,849 | 26,849 | |||
Other receivables | — | — | 1,230,547 | 1,230,547 | |||
Prepaid equity securities contracts | 9,754 | — | — | 9,754 | |||
Trading financial assets: | |||||||
Derivatives | 384,883 | — | — | 384,883 | |||
Loans and advances: | |||||||
Loans | — | 7,937,678 | — | 7,937,678 | |||
Total financial assets | 394,637 | 7,937,678 | 1,259,505 | 9,591,820 | |||
Trade and other payables: | |||||||
Trade payables | — | — | 55,485 | 55,485 | |||
Other payables | — | — | 35,349 | 35,349 | |||
Trading financial liabilities: | |||||||
Derivatives | 476,029 | — | — | 476,029 | |||
Debt and other borrowings: | |||||||
Issued structured notes | — | 7,866,339 | — | 7,866,339 | |||
Convertible preferred equity certificates | — | — | 1,125,281 | 1,125,281 | |||
Total financial liabilities | 476,029 | 7,866,339 | 1,216,115 | 9,558,483 |
31 December 2023 | FVPL (mandatorily) | FVPL (designated) | Amortised cost | Total | |||
€'000 | €'000 | €'000 | €'000 | ||||
Cash and short-term deposits | — | — | 995 | 995 | |||
Trade and other receivables: | |||||||
Trade receivables | — | — | 14,038 | 14,038 | |||
Other receivables | — | — | 1,310,924 | 1,310,924 | |||
Prepaid equity securities contracts | 11,317 | — | — | 11,317 | |||
Trading financial assets: | |||||||
Derivatives | 390,413 | — | — | 390,413 | |||
Loans and advances: | |||||||
Loans | — | 7,920,801 | — | 7,920,801 | |||
Total financial assets | 401,730 | 7,920,801 | 1,325,957 | 9,648,488 | |||
Trade and other payables: | |||||||
Trade payables | — | — | 130,792 | 130,792 | |||
Other payables | — | — | 44,004 | 44,004 | |||
Trading financial liabilities: | |||||||
Derivatives | 570,351 | — | — | 570,351 | |||
Debt and other borrowings: | |||||||
Issued structured notes | — | 7,745,266 | — | 7,745,266 | |||
Convertible preferred equity certificates | — | — | 1,125,281 | 1,125,281 | |||
Total financial liabilities | 570,351 | 7,745,266 | 1,300,077 | 9,615,694 |
Gain or (loss) recognised in the statement of comprehensive income | Cumulative gain or (loss) recognised in the statement of comprehensive income | ||||||
2024 | 2023 | 2024 | 2023 | ||||
€'000 | €'000 | €'000 | €'000 | ||||
Issued structured notes | (5,441) | (31,576) | (38,163) | (32,722) | |||
Loans | 5,441 | 31,576 | 38,163 | 32,722 | |||
— | — | — | — |
Single name equities | Equity Indices | Equity portfolio | Other (1) | Total | |||||
€'000 | €'000 | €'000 | €'000 | €'000 | |||||
31 December 2024 | |||||||||
Certificates and warrants | 6,311 | 60,596 | 10,639 | 8,171 | 85,717 | ||||
Notes | 1,442,599 | 3,657,778 | 2,015,755 | 664,490 | 7,780,622 | ||||
Total debt and other borrowings | 1,448,910 | 3,718,374 | 2,026,394 | 672,661 | 7,866,339 |
31 December 2023 | |||||||||
Certificates and warrants | 8,743 | 1,126 | 26,865 | — | 36,734 | ||||
Notes | 1,679,403 | 3,687,301 | 1,697,015 | 644,813 | 7,708,532 | ||||
Total debt and other borrowings | 1,688,146 | 3,688,427 | 1,723,880 | 644,813 | 7,745,266 |
2024 | 2023 | ||
€'000 | €'000 | ||
Trade and other receivables (amortised cost) | |||
Trade receivables | |||
Amounts due from other Morgan Stanley Group undertakings | 26,849 | 14,038 | |
Other receivables | |||
Amounts due from other Morgan Stanley Group undertakings | 1,230,547 | 1,310,983 | |
Less: ECL allowance | — | (59) | |
1,230,547 | 1,310,924 | ||
Total trade and other receivables (amortised cost) | 1,257,396 | 1,324,962 | |
Other receivables (non-trading at FVPL) | |||
Prepaid equity securities contracts | 9,754 | 11,317 | |
Total | 1,267,150 | 1,336,279 |
2024 | 2023 | ||
€'000 | €'000 | ||
Trade and other payables (amortised cost) | |||
Trade payables: | |||
Amounts due to other Morgan Stanley Group undertakings | 55,485 | 130,792 | |
Other payables: | |||
Amounts due to other Morgan Stanley Group undertakings | 35,349 | 44,004 | |
90,834 | 174,796 |
2024 | 2023 | ||
€'000 | €'000 | ||
Debt and other borrowings (designated at FVPL) | |||
Issued structured notes | 7,866,339 | 7,745,266 |
Ordinary shares of €100 each | |
€'000 | |
Issued and fully paid | |
At 1 January 2023, 31 December 2023 and 31 December 2024 | 15,018 |
2024 | 2023 | ||
€'000 | €'000 | ||
Cash and short-term deposits | 2,109 | 995 | |
2,109 | 995 |
2024 | 2023 | ||
€'000 | €'000 | ||
Profit for the year | 1,081 | 1,071 | |
Adjustments for: | |||
Interest income | (67,240) | (55,156) | |
Interest expense | 53,842 | 56,982 | |
Income tax expense | 346 | 327 | |
Impairment loss on financial instruments | (59) | 26 | |
Operating cash flows before changes in operating assets and liabilities | (12,030) | 3,250 | |
Changes in operating assets: | |||
Decrease / (increase) in trading financial assets | 5,530 | (188,848) | |
(Increase) / decrease in loans and advances | (16,877) | 835,663 | |
Decrease in trade and other receivables | 78,836 | 178,320 | |
67,489 | 825,135 | ||
Changes in operating liabilities: | |||
Decrease in trading financial liabilities | (94,322) | (651,686) | |
Decrease in trade and other payables | (80,227) | (186,762) | |
Increase in debt and other borrowings | 121,073 | 7,280 | |
(53,476) | (831,168) | ||
Interest received | 37 | 40 | |
Interest paid | (22) | (6) | |
Income taxes paid | (884) | (1,358) | |
Net cash flows from / (used in) operating activities | 1,114 | (4,107) |
Balance at 1 January 2024 | Cash flows | Non-cash changes | Non-cash changes | Balance at 31 December 2024 | |
Accrued yield | Accrued financing | ||||
€'000 | €'000 | €'000 | €'000 | €'000 | |
Convertible preferred equity certificates | 1,125,281 | — | — | — | 1,125,281 |
Trade and other payables (1) | — | ||||
CPEC yield | 43,882 | (57,555) | 48,842 | — | 35,169 |
Amounts due to other Morgan Stanley Group undertakings (3) | — | (948) | — | 9,644 | 8,696 |
Total liabilities from financing activities | 1,169,163 | (58,503) | 48,842 | 9,644 | 1,169,146 |
Trade and other receivables (2) | |||||
Amounts due from other Morgan Stanley Group undertakings (3) | (1,646) | 1,646 | — | — | — |
Total assets from financing activities | (1,646) | 1,646 | — | — | — |
Balance at 1 January 2023 | Cash flows | Non-cash changes | Non-cash changes | Balance at 31 December 2023 | |
Accrued yield | Accrued financing | ||||
€'000 | €'000 | €'000 | €'000 | €'000 | |
Convertible preferred equity certificates | 1,125,281 | — | — | — | 1,125,281 |
Trade and other payables (1) | |||||
CPEC yield | 10,973 | (21,870) | 54,779 | — | 43,882 |
Amounts due to other Morgan Stanley Group undertakings (3) | 467 | 1,050 | — | (1,517) | — |
Total liabilities from financing activities | 1,136,721 | (20,820) | 54,779 | (1,517) | 1,169,163 |
Trade and other receivables (2) | |||||
Amounts due from other Morgan Stanley Group undertakings (3) | — | — | — | (1,646) | (1,646) |
Total assets from financing activities | — | — | — | (1,646) | (1,646) |
At 31 December 2024 | At 31 December 2023 | ||||||
Less than or equal to twelve months | More than twelve months | Total | Less than or equal to twelve months | More than twelve months | Total | ||
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | ||
ASSETS | |||||||
Cash and short-term deposits | 2,109 | — | 2,109 | 995 | — | 995 | |
Trade and other receivables | 1,257,396 | 9,754 | 1,267,150 | 199,681 | 1,136,598 | 1,336,279 | |
Trading financial assets | 146,763 | 238,120 | 384,883 | 86,281 | 304,132 | 390,413 | |
Loans and advances | 2,589,743 | 5,347,935 | 7,937,678 | 2,901,281 | 5,019,520 | 7,920,801 | |
Current tax assets | 1,725 | — | 1,725 | 1,187 | — | 1,187 | |
3,997,736 | 5,595,809 | 9,593,545 | 3,189,425 | 6,460,250 | 9,649,675 | ||
LIABILITIES | |||||||
Trade and other payables | 90,834 | — | 90,834 | 174,796 | — | 174,796 | |
Trading financial liabilities | 220,841 | 255,188 | 476,029 | 260,846 | 309,505 | 570,351 | |
Debt and other borrowings | 2,525,718 | 5,340,621 | 7,866,339 | 2,719,802 | 5,025,464 | 7,745,266 | |
Convertible preferred equity certificates | — | 1,125,281 | 1,125,281 | — | 1,125,281 | 1,125,281 | |
2,837,393 | 6,721,090 | 9,558,483 | 3,155,444 | 6,460,250 | 9,615,694 |
EMEA | Americas | Asia | Total | |||||
2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
External revenues (net of interest) | 14,188 | 958 | 535 | 470 | 102 | 128 | 14,825 | 1,556 |
Profit before income tax | 790 | 800 | 535 | 470 | 102 | 128 | 1,427 | 1,398 |
Total assets | 4,508,582 | 4,586,750 | 4,105,894 | 3,853,329 | 979,069 | 1,209,596 | 9,593,545 | 9,649,675 |
31 December 2024 | 31 December 2023 | ||||||
Class | Gross credit exposure(1) | Credit enhancem ents | Net credit exposure(2) | Gross credit exposure(1) | Credit enhancem ents | Net credit exposure(2) | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | ||
Subject to ECL: | |||||||
Cash and short-term deposits | 2,109 | — | 2,109 | 995 | — | 995 | |
Trade and other receivables(3) | 1,257,396 | — | 1,257,396 | 1,325,021 | — | 1,325,021 | |
Not subject to ECL: | |||||||
Trade and other receivables(3): | |||||||
Prepaid equity securities contracts | 9,754 | (9,754) | — | 11,317 | (11,317) | — | |
Trading financial assets(3) | 384,883 | (292,094) | 92,789 | 390,413 | (336,220) | 54,193 | |
Loans and advances | 7,937,678 | — | 7,937,678 | 7,920,801 | — | 7,920,801 | |
9,591,820 | (301,848) | 9,289,972 | 9,648,547 | (347,537) | 9,301,010 |
Investment grade | ||||||
31 December 2024 | AA | A | BBB | Total | Loss Allowance | Net of ECL |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Subject to ECL: | ||||||
Cash and short-term deposits | 336 | 1,773 | — | 2,109 | — | 2,109 |
Trade and other receivables(1) | — | 1,257,396 | — | 1,257,396 | — | 1,257,396 |
Total subject to ECL | 336 | 1,259,169 | — | 1,259,505 | — | 1,259,505 |
Not subject to ECL: | ||||||
Trade and other receivables: | ||||||
Prepaid equity securities contracts | — | 9,754 | — | 9,754 | — | 9,754 |
Trading financial assets – derivatives | — | 384,883 | — | 384,883 | — | 384,883 |
Loans and advances | — | 7,937,678 | — | 7,937,678 | — | 7,937,678 |
Total not subject to ECL | — | 8,332,315 | — | 8,332,315 | — | 8,332,315 |
Investment grade | ||||||
31 December 2023 | AA | A | BBB | Total | Loss Allowance | Net of ECL |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Subject to ECL: | ||||||
Cash and short-term deposits | 554 | 441 | — | 995 | — | 995 |
Trade and other receivables(1) | — | 1,325,021 | — | 1,325,021 | (59) | 1,324,962 |
Total subject to ECL | 554 | 1,325,462 | — | 1,326,016 | (59) | 1,325,957 |
Not subject to ECL: | ||||||
Trade and other receivables: | ||||||
Prepaid equity securities contracts | — | 11,317 | — | 11,317 | — | 11,317 |
Trading financial assets – derivatives | — | 386,878 | 3,535 | 390,413 | — | 390,413 |
Loans and advances | — | 7,920,801 | — | 7,920,801 | — | 7,920,801 |
Total not subject to ECL | — | 8,318,996 | 3,535 | 8,322,531 | — | 8,322,531 |
Gross carrying / nominal amount | Allowance for ECL | |||
€'000 | €'000 | |||
Other receivables | ||||
As at 1 January 2024 | 1,310,983 | 59 | ||
Derecognised due to repayment | (80,436) | — | ||
Changes in credit risk | — | (59) | ||
As at 31 December 2024 | 1,230,547 | — | ||
As at 1 January 2023 | 1,138,923 | 33 | ||
Derecognised due to repayment | 172,060 | — | ||
Changes in credit risk | — | 26 | ||
As at 31 December 2023 | 1,310,983 | 59 |
31 December 2024 | On demand | Less than 1 year | 1 year - 2 years | 2 years - 5 years | Greater than 5 years | Total |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Financial assets | ||||||
Cash and short-term deposits | 2,109 | — | — | — | — | 2,109 |
Trade and other receivables: | ||||||
Trade receivables | 26,849 | — | — | — | — | 26,849 |
Other receivables | 1,230,547 | — | — | — | — | 1,230,547 |
Prepaid equity securities contracts | 9,754 | — | — | — | — | 9,754 |
Trading financial assets: | ||||||
Derivatives | — | 146,764 | 51,991 | 146,178 | 39,950 | 384,883 |
Loans and advances: | ||||||
Loans | 598 | 2,589,743 | 1,242,177 | 2,378,068 | 1,727,092 | 7,937,678 |
Total financial assets | 1,269,857 | 2,736,507 | 1,294,168 | 2,524,246 | 1,767,042 | 9,591,820 |
Financial liabilities | ||||||
Trade and other payables: | ||||||
Trade payables | 55,485 | — | — | — | — | 55,485 |
Other payables | 35,349 | — | — | — | — | 35,349 |
Trading financial liabilities: | ||||||
Derivatives | 41 | 220,841 | 76,309 | 91,530 | 87,308 | 476,029 |
Debt and other borrowings: | ||||||
Issued structured notes | 10,312 | 2,525,718 | 1,217,859 | 2,432,716 | 1,679,734 | 7,866,339 |
Convertible preferred equity certificates | 1,125,281 | — | — | — | — | 1,125,281 |
Total financial liabilities | 1,226,468 | 2,746,559 | 1,294,168 | 2,524,246 | 1,767,042 | 9,558,483 |
31 December 2023 | On demand | Less than 1 year | 1 year - 2 years | 2 years - 5 years | Greater than 5 years | Total |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Financial assets | ||||||
Cash and short-term deposits | 995 | — | — | — | — | 995 |
Trade and other receivables: | ||||||
Trade receivables | 14,038 | — | — | — | — | 14,038 |
Other receivables | 1,310,924 | — | — | — | — | 1,310,924 |
Prepaid equity securities contracts | 11,317 | — | — | — | — | 11,317 |
Trading financial assets: | ||||||
Derivatives | — | 86,283 | 136,556 | 124,570 | 43,004 | 390,413 |
Loans and advances: | ||||||
Loans | 7,564 | 2,894,365 | 1,408,948 | 2,199,826 | 1,410,098 | 7,920,801 |
Total financial assets | 1,344,838 | 2,980,648 | 1,545,504 | 2,324,396 | 1,453,102 | 9,648,488 |
Financial liabilities | ||||||
Trade and other payables: | ||||||
Trade payables | 130,792 | — | — | — | — | 130,792 |
Other payables | 44,004 | — | — | — | — | 44,004 |
Trading financial liabilities: | ||||||
Derivatives | 69 | 260,847 | 181,595 | 60,281 | 67,559 | 570,351 |
Debt and other borrowings: | ||||||
Issued structured notes | 11,898 | 2,719,801 | 1,363,909 | 2,264,115 | 1,385,543 | 7,745,266 |
Convertible preferred equity certificates | 1,125,281 | — | — | — | — | 1,125,281 |
Total financial liabilities | 1,312,044 | 2,980,648 | 1,545,504 | 2,324,396 | 1,453,102 | 9,615,694 |
Gross and net amounts presented in the statement of financial position(1) | Amounts not offset in the statement of financial position(2) (4) | Net exposure | |
Cash collateral(3) | |||
€'000 | €'000 | €'000 | |
31 December 2024 | |||
Assets | |||
Trade and other receivables: | |||
Prepaid equity securities contracts | 9,754 | (9,754) | — |
Trading financial assets: | |||
Derivatives | 384,883 | (292,094) | 92,789 |
TOTAL | 394,637 | (301,848) | 92,789 |
Liabilities | |||
Trading financial liabilities: | |||
Derivatives | 476,029 | 216,454 | |
Debt and other borrowings: | |||
Issued structured notes | 7,866,339 | — | 7,866,339 |
TOTAL | 8,342,368 | (259,575) | 8,082,793 |
Gross and net amounts presented in the statement of financial position(1) | Amounts not offset in the statement of financial position(2) (4) | Net exposure | |
Cash collateral(3) | |||
€'000 | €'000 | €'000 | |
31 December 2023 | |||
Assets | |||
Trade and other receivables: | |||
Prepaid equity securities contracts | 11,317 | (11,317) | — |
Trading financial assets: | |||
Derivatives | 390,413 | (336,220) | 54,193 |
TOTAL | 401,730 | (347,537) | 54,193 |
Liabilities | |||
Trading financial liabilities: | |||
Derivatives | 570,351 | (230,864) | 339,487 |
Debt and other borrowings: | |||
Issued structured notes | 7,745,266 | — | 7,745,266 |
TOTAL | 8,315,617 | (230,864) | 8,084,753 |
31 December 2024 | Quoted prices in active market (Level 1) | Valuation techniques using observable inputs (Level 2) | Valuation techniques with significant unobservable inputs (Level 3) | Total | |||
€'000 | €'000 | €'000 | €'000 | ||||
Trade and other receivables: | |||||||
Prepaid equity securities contracts | — | 9,754 | — | 9,754 | |||
Trading financial assets: | |||||||
Derivatives: | |||||||
Interest rate contracts | — | 9,227 | — | 9,227 | |||
Equity contracts | — | 361,337 | 14,319 | 375,656 | |||
— | 370,564 | 14,319 | 384,883 | ||||
Loans and advances: | |||||||
Loans | — | 7,937,678 | — | 7,937,678 | |||
Total financial assets measured at fair value | — | 8,317,996 | 14,319 | 8,332,315 | |||
Trading financial liabilities: | |||||||
Derivatives: | |||||||
Interest rate contracts | — | 94,337 | 14,894 | 109,231 | |||
Equity contracts | — | 325,696 | 41,102 | 366,798 | |||
— | 420,033 | 55,996 | 476,029 | ||||
Debt and other borrowings: | |||||||
Certificates and warrants | — | 77,546 | 8,171 | 85,717 | |||
Notes | — | 7,709,622 | 71,000 | 7,780,622 | |||
Total debt and other borrowings | — | 7,787,168 | 79,171 | 7,866,339 | |||
Total financial liabilities measured at fair value | — | 8,207,201 | 135,167 | 8,342,368 |
31 December 2023 | Quoted prices in active market (Level 1) | Valuation techniques using observable inputs (Level 2) | Valuation techniques with significant unobservable inputs (Level 3) | Total | |||
€'000 | €'000 | €'000 | €'000 | ||||
Trade and other receivables: | |||||||
Prepaid equity securities contracts | — | 11,317 | — | 11,317 | |||
Trading financial assets: | |||||||
Derivatives: | |||||||
Interest rate contracts | — | 7,316 | 2,074 | 9,390 | |||
Equity contracts | — | 354,779 | 26,244 | 381,023 | |||
Commodity contracts | — | — | — | — | |||
— | 362,095 | 28,318 | 390,413 | ||||
Loans and advances: | |||||||
Loans | — | 7,920,801 | — | 7,920,801 | |||
Total financial assets measured at fair value | — | 8,294,213 | 28,318 | 8,322,531 | |||
Trading financial liabilities: | |||||||
Derivatives: | |||||||
Interest rate contracts | — | 28,288 | 9,709 | 37,997 | |||
Equity contracts | — | 491,841 | 40,513 | 532,354 | |||
Foreign exchange contracts | — | — | — | — | |||
— | 520,129 | 50,222 | 570,351 | ||||
Debt and other borrowings: | |||||||
Certificates and warrants | — | 36,734 | — | 36,734 | |||
Notes | — | 7,453,100 | 255,432 | 7,708,532 | |||
Total debt and other borrowings | — | 7,489,834 | 255,432 | 7,745,266 | |||
Total financial liabilities measured at fair value | — | 8,009,963 | 305,654 | 8,315,617 |
Derivatives | |
Asset and Liability / Valuation Techniques | Valuation Hierarchy Classification |
Derivatives | |
OTC Derivative Contracts • OTC derivative contracts include forward, swap and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices or commodity prices. • Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be modeled using a series of techniques, including closed-form analytic formulas, such as the Black- Scholes option-pricing model, simulation models or a combination thereof. Many pricing models do not entail material subjectivity as the methodologies employed do not necessitate significant judgement, since model inputs may be observed from actively quoted markets, as is the case for generic interest rate swaps, many equity, commodity and foreign currency option contracts and certain credit default swaps. In the case of more established derivative products, the pricing models used by the Company are widely accepted by the financial services industry. • More complex OTC derivative products are typically less liquid and require more judgement in the implementation of the valuation technique since direct trading activity or quotes are unobservable. This includes certain types of interest rate derivatives with both volatility and correlation exposure, commodity derivatives that are either longer-dated or include exposure to multiple underlyings and credit derivatives, including credit default swaps on certain mortgage or asset-back securities, basket CDS. Where these inputs are unobservable, relationships to observable data points, based on historic and/or implied observations, may be employed as a technique to estimate the model input values. | • Generally Level 2 - when valued using observable inputs supported by market liquidity, or where the unobservable input is not deemed significant. • Level 3 - when valued using observable inputs with limited market liquidity, or if an unobservable input is deemed significant. |
Prepaid equity securities contracts and issued structured notes | |
Prepaid equity securities contracts and issued structured notes designated at fair value through profit or loss • The Company issues structured notes and trades prepaid equity securities contracts which are primarily composed of instruments whose payments and redemption values are linked to the performance of a specific index, a basket of stocks, a specific security, a commodity, a credit exposure or basket of credit exposures, and instruments with various interest-rate-related features including step-ups, step-downs, and zero coupons. • Fair value of structured notes and traded prepaid equity securities contracts is determined using valuation models for the derivative and debt portions of the structured notes and traded prepaid equity securities contracts. These models incorporate observable inputs referencing identical or comparable securities, including prices to which the notes are linked, interest rate yield curves, option volatility and currency rates, and commodity or equity prices. • Independent, external and traded prices for the notes are considered as well as the impact of the Company’s own credit spreads which are based on observed secondary bond market spreads. | • Level 2 - when valued using observable inputs or where the unobservable input is not deemed significant • Level 3 - in instances where the unobservable inputs are deemed significant |
Prepaid equity securities contracts and issued structured notes (continued) | |
Issued Structured Notes • Notes give a risk exposure tailored to market views and risk appetite and mainly provide exposure to the underlying single name equity, equity index or portfolio of equities. Typically, the redemption payment of the note is significantly dependent on the value of embedded equity derivatives. In general, call and put options, digital options, straddles and callability features are combined to create a bespoke coupon rate or redemption payoff for each note issuance, with risk exposure to one or more equity underlyings or indices. The Company values the embedded derivatives using market standard models, which are assessed for appropriateness at least annually. Model inputs, such as equity forward rates, equity implied volatility and equity correlations are marked such that the fair value of the derivatives match prices observable in the inter-dealer markets. In arriving at fair value, the Company uses discount rates appropriate to the funding rates specific to the instrument. In general, this results in overnight rates being used to discount the Company assets and liabilities. In addition, since the notes bear Morgan Stanley’s credit risk, the Company considers this when assessing the fair value of the notes, by adjusting the discount rates to reflect the prevailing credit spread at the reporting date. • The Company has a small number of notes where the cash flows due on the notes is dependent on embedded derivatives linked to the interest rate, foreign exchange or commodity markets. The Company values these notes in the same way as for equity-linked notes, by using market standard models and marking the inputs to match prices observed in the inter-dealer OTC markets. Similarly to equity-linked notes, these issuances bear Morgan Stanley’s credit risk, and the valuation is assessed accordingly. | • Generally Level 2 • Level 3 - Notes with significant unobservable inputs |
Certificates and warrants • Certificates and warrants provide exposure to the underlying single name equity, equity index or portfolio of equities. They therefore provide risk exposure to the value of the underlying position and to the dividends paid or received. The Company values the underlying position using observable data where available (for instance, exchange closing prices), or alternatively using information from third parties (for example net asset values obtained from fund administrators) or using Morgan Stanley’s own valuation assumptions if required. The Company estimates future dividend payments using a variety of available data, including market prices for forwards and futures, analytical review and estimates of future tax rates, incorporating the Company’s own assumptions where required. The certificates and warrants can typically be redeemed at short notice and so the certificates and warrants provide minimal exposure to the credit risk of Morgan Stanley. | • Level 2 • Level 3 - in instances where the unobservable inputs are deemed significant |
Loans • The fair value of loans to other Morgan Stanley Group undertakings is estimated based on the present value of expected future cash flows using its best estimate of interest rate yield curves. | • Level 2 |
31 December 2024 | |||||||||
Balance at 1 January 2024 | Total gains or (losses) recognise d in statement of comprehe nsive income (1) | Purchases | Issuances | Settlements | Transfers into Level 3 (2) | Transfers out of Level 3 (2) | Balance at 31 December 2024 | Unrealise d gains or (losses) for Level 3 assets/ (liabilities ) outstandi ng as at 31 December 2024 (3) | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Trading financial liabilities: | |||||||||
Net derivative contracts (4) | (21,904) | (17,535) | 3,132 | (3,018) | 4,380 | (8,943) | 2,211 | (41,677) | (18,605) |
Debt and other borrowings: | |||||||||
Issued structured notes | (255,432) | 1,989 | — | (53,893) | 95,566 | (10,071) | 142,670 | (79,171) | 3,478 |
Total financial liabilities measured at fair value | (277,336) | (15,546) | 3,132 | (56,911) | 99,946 | (19,014) | 144,881 | (120,848) | (15,127) |
31 December 2023 | |||||||||
Balance at 1 January 2023 | Total gains or (losses) recognise d in statement of comprehe nsive income (1) | Purchases | Issuances | Settlements | Transfers into Level 3 (2) | Transfers out of Level 3 (2) | Balance at 31 December 2023 | Unrealise d gains or (losses) for Level 3 assets/ (liabilities ) outstandi ng as at 31 December 2023 (3) | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Trading financial liabilities: | |||||||||
Net derivative contracts (4) | (68,196) | 40,763 | 3,434 | (6,930) | 7,086 | (22,995) | 24,934 | (21,904) | 30,288 |
Debt and other borrowings: | |||||||||
Issued structured notes | (108,494) | (18,200) | — | (152,815) | 43,661 | (55,170) | 35,586 | (255,432) | (16,283) |
Total financial liabilities measured at fair value | (176,690) | 22,563 | 3,434 | (159,745) | 50,747 | (78,165) | 60,520 | (277,336) | 14,005 |
31 December 2024 | |||
Fair value €’000 | Predominant valuation techniques/ Significant unobservable inputs | Range (2) (Averages)(3) | |
LIABILITIES | |||
Net derivative contracts: (1) | |||
‘- Interest rate | (14,894) | Option model | |
Interest rate curve correlation | 23%-94% (81%) | ||
Net asset value (“NAV”) | N/M (N/M) | ||
‘- Equity | (26,783) | Option model | |
Equity volatility | 6% to 63% (20%) | ||
Equity volatility skew | ‘-2% to 0% (-1%) | ||
Equity - Equity correlation | 38% to 97% (77%) | ||
Equity - Foreign exchange correlation | ‘-68% to 45% (-20%) | ||
Debt and other borrowings: | |||
‘- Issued Structured Notes | (79,171) | Option model | |
Equity volatility | 12% to 60% (25%) | ||
Equity volatility skew | ‘-2% to 0% (0%) | ||
Equity - Equity correlation | 42% to 82% (76%) | ||
Equity - Foreign exchange correlation | ‘-60% to 5% (-37%) | ||
Interest rate curve correlation | N/M (N/M) | ||
(1) Net derivative contracts represent trading financial liabilities – derivative contracts net of trading financial assets – derivative contracts. | |||
(2) The ranges of significant unobservable inputs are represented in percentages. | |||
(3) Amounts represent weighted averages except where simple averages and the median of the inputs are provided when more relevant. |
31 December 2023 | |||
Fair value €’000 | Predominant valuation techniques/ Significant unobservable inputs | Range (2) (Averages)(3) | |
LIABILITIES | |||
Net derivative contracts: (1) | |||
‘- Interest rate | (7,635) | Option model | |
Interest rate curve correlation | 73%-87% (81%) | ||
Net asset value (“NAV”) | 152-152 (152%) | ||
‘- Equity | (14,269) | Option model | |
Equity volatility | 5% to 71% (19%) | ||
Equity volatility skew | ‘-1% to 0% (0%) | ||
Equity - Equity correlation | 40% to 96% (78%) | ||
Equity - Foreign exchange correlation | ‘-66% to 39% (-25%) | ||
Debt and other borrowings: | |||
‘- Issued Structured Notes | (255,432) | Option model | |
Equity volatility | 5% to 50% (19%) | ||
Equity volatility skew | ‘-2% to 0% (-1%) | ||
Equity - Equity correlation | 42% to 91% (78%) | ||
Equity - Foreign exchange correlation | ‘-50% to 12% (-35%) | ||
Interest rate curve correlation | N/M (N/M) | ||
(1) Net derivative contracts represent trading financial liabilities – derivative contracts net of trading financial assets – derivative contracts. | |||
(2) The ranges of significant unobservable inputs are represented in percentages. | |||
(3) Amounts represent weighted averages except where simple averages and the median of the inputs are provided when more relevant. |
2024 | 2023 | |||
Favourable changes (2) | Unfavourable changes (2) | Favourable changes (2) | Unfavourable changes (2) | |
€'000 | €'000 | €'000 | €'000 | |
Trading financial liabilities: | ||||
Net derivatives contracts(1) | 8,776 | (3,384) | 8,022 | (8,199) |
Debt and other borrowings: | ||||
Issued structured notes | 635 | (449) | 1,960 | (1,092) |
9,411 | (3,833) | 9,982 | (9,291) |
2024 | 2023 | ||
€'000 | €'000 | ||
Share capital | 15,018 | 15,018 | |
Retained earnings | 20,044 | 18,963 | |
35,062 | 33,981 |
2024 | 2023 | ||
€'000 | €'000 | ||
Short-term employee benefits | 122 | 37 | |
Post-employment benefits | 2 | 2 | |
Share-based payments | 6 | 2 | |
Termination benefits | 10 | 6 | |
140 | 47 |
2024 | 2023 | ||||||
Interest | Balance | Interest | Balance | ||||
€'000 | €'000 | €'000 | €'000 | ||||
Amounts due from the Company's indirect parent undertaking | 58,486 | 1,169,146 | 53,546 | 1,167,517 | |||
Amounts due from other Morgan Stanley Group undertakings | 8,418 | 61,401 | — | 143,408 | |||
66,904 | 1,230,547 | 53,546 | 1,310,925 | ||||
Amounts due to the Company’s direct parent undertaking | 48,842 | 1,160,450 | 54,779 | 1,169,163 | |||
Amounts due to other Morgan Stanley Group undertakings | — | 180 | 1,557 | 122 | |||
48,842 | 1,160,630 | 56,336 | 1,169,285 |
2024 | 2023 | ||||||
Interest | Balance | Interest | Balance | ||||
€'000 | €'000 | €'000 | €'000 | ||||
Amounts due from other Morgan Stanley Group undertakings | 300 | 8,359,164 | 1,572 | 8,336,569 | |||
Amounts due to other Morgan Stanley Group undertakings | 4,979 | 775,903 | 578 | 839,030 |
Description key audit matter | Summary of audit procedures performed |
Valuation of level 3 financial instruments Morgan Stanley B.V.’s financial instruments measured at fair value include “debt and other borrowings” and derivatives (“trading financial assets and liabilities”). Debt instruments issued by Morgan Stanley B.V. are instruments with a structured component (derivative element) linked to the performance of various market indices. The valuation of structured notes and derivatives is determined with valuation models. These valuation models and pricing inputs used are internally tested by Morgan Stanley. In particular for level 3 valuations, due to their nature, the valuation models and the input parameters used for the valuation of these financial instruments can be complex, judgmental and subject to management override. We therefore consider the level 3 valuations of financial instruments measured at fair value as a key audit matter. | Our audit procedures regarding level 3 valuations of financial instruments include: ▪ We obtained an understanding of the valuation methodology and the processes and controls with respect to the valuation. In addition, we assessed the appropriateness of the methodology and the models used by Morgan Stanley. ▪ Furthermore, our audit included testing of Morgan Stanley’s internal controls throughout the valuation process. This included test procedures on controls with respect to model validation and price verification. ▪ For a sample of level 3 valuations, we engaged valuation experts to substantively test the company’s valuation by comparing it with our own valuation using independent models and independently sourced inputs. ▪ We evaluated the adequacy of the disclosures relating to the valuation of financial instruments measured at fair value to assess compliance with disclosure requirements included in EU-IFRS. |
Amsterdam, 28 April 2025 | |
Forvis Mazars Accountants N.V. | |
J. C. van Oldenbeek MSC RA |