Notes to the annual accounts
1. Banks
2021 | 2020 | |
Banks | 8,476 | 17,257 |
Balance at December 31 | 8,476 | 17,257 |
The cash on bank accounts can be freely disposed of. All bank accounts are classified as Stage 1.
2. Current accounts (assets)
2021 | 2020 | |
Current account with FMO | 112 | 107 |
Balance at December 31 | 112 | 107 |
Current accounts can be freely disposed of and are classified as stage 1.
3. Short-term deposits
Short-term deposits are liquid accounts and are subject to an insignificant risk of changes in fair value. The Fund has on demand full access to the carrying amounts. Short-term deposits consist of MMF, which are measured at FVPL. Short-term deposits have a maturity of less than three months.
2021 | 2020 | |
Money market funds | 31,671 | 13,936 |
Balance at December 31 | 31,671 | 13,936 |
4. Loans portfolio
Loans originated by the Fund include loans to the private sector in developing countries for the account and risk of the Fund.
Loans measured at AC | Loans measured at FVPL | Total 2021 | |
Balance at January 1, 2021 | 176,323 | 30,867 | 207,190 |
Disbursements | 21,853 | 5,666 | 27,519 |
Conversion from loan to equity | - | - | - |
Repayments | -39,932 | -5,238 | -45,170 |
Interest Capitalization | - | - | - |
Derecognized and/or restructured loans | -62 | - | -62 |
Changes in amortizable fees | 42 | -23 | 19 |
Changes in fair value | - | -2,977 | -2,977 |
Changes in accrued income | -1,529 | -304 | -1,833 |
Exchange rate differences | 6,571 | 297 | 6,868 |
Balance at December 31, 2021 | 163,266 | 28,288 | 191,554 |
Impairment | -34,858 | - | -34,858 |
Total balance at December 31, 2021 | 128,408 | 28,288 | 156,696 |
Loans measured at AC | Loans measured at FVPL | Total 2020 | |
Balance at January 1, 2020 | 162,373 | 41,149 | 203,522 |
Disbursements | 42,358 | 812 | 43,170 |
Conversion from loan to equity | - | -1,552 | -1,552 |
Repayments | -17,283 | -6,455 | -23,738 |
Interest Capitalization | - | 150 | 150 |
Derecognized and/or restructured loans | 190 | - | 190 |
Changes in amortizable fees | 152 | -24 | 128 |
Changes in fair value | - | -1,193 | -1,193 |
Changes in accrued income | 1,633 | -492 | 1,141 |
Exchange rate differences | -13,100 | -1,528 | -14,628 |
Balance at December 31, 2020 | 176,323 | 30,867 | 207,190 |
Impairment | -24,968 | - | -24,968 |
Total balance at December 31, 2020 | 151,355 | 30,867 | 182,222 |
The following table summarizes the loans segmented by sector:
2021 | |||||
Loans segmented by sector | Stage 1 | Stage 2 | Stage 3 | Fair value | Total 2021 |
Financial Institutions | 70,838 | 27,462 | 24,422 | 22,058 | 144,780 |
Energy | - | 4,851 | - | 2,637 | 7,488 |
Agribusiness | - | - | 835 | 2,494 | 3,329 |
Multi-Sector Fund Investments | - | - | - | 1,099 | 1,099 |
Net balance at December 31 | 70,838 | 32,313 | 25,257 | 28,288 | 156,696 |
2020 | |||||
Loans segmented by sector | Stage 1 | Stage 2 | Stage 3 | Fair value | Total 2020 |
Financial Institutions | 90,112 | 37,175 | 17,776 | 22,209 | 167,272 |
Energy | 287 | 4,176 | - | 2,746 | 7,209 |
Agribusiness | 823 | 1,006 | - | 536 | 2,365 |
Multi-Sector Fund Investments | - | - | - | 5,376 | 5,376 |
Net balance at December 31 | 91,222 | 42,357 | 17,776 | 30,867 | 182,222 |
2021 | |||||
Loans segmented by geographical area | Stage 1 | Stage 2 | Stage 3 | Fair value | Total 2021 |
Africa | 17,942 | 23,890 | 10,339 | 7,736 | 59,907 |
Asia | 17,884 | - | 14,918 | 5,161 | 37,963 |
Latin America & the Carribbean | 20,312 | 3,575 | - | - | 23,887 |
Europe & Central Asia | 7,782 | - | - | 14,867 | 22,649 |
Non - region specific | 6,918 | 4,848 | - | 524 | 12,290 |
Net balance at December 31 | 70,838 | 32,313 | 25,257 | 28,288 | 156,696 |
2020 | |||||
Loans segmented by geographical area | Stage 1 | Stage 2 | Stage 3 | Fair value | Total 2020 |
Africa | 26,949 | 34,779 | 16,494 | 6,642 | 84,864 |
Asia | 32,358 | 7,578 | 1,282 | 8,658 | 49,876 |
Latin America & the Carribbean | 27,736 | - | - | 1,494 | 29,230 |
Europe & Central Asia | 4,179 | - | - | 13,823 | 18,002 |
Non - region specific | - | - | - | 250 | 250 |
Net balance at December 31 | 91,222 | 42,357 | 17,776 | 30,867 | 182,222 |
2021 | 2020 | ||||
Gross amount of loans to companies in which FMO has equity investments | 8,745 | 10,975 | |||
Gross amount of non-performing loans | 65,202 | 38,281 | |||
Gross amount of subordinated loans | 9,095 | 6,046 |
For definition and more details on non-performing loans, we refer to section 'Credit Risk' within the Risk Management paragraph.
The movements in the gross carrying amounts and ECL allowances for the loans at AC are as follows:
Changes in loans to the private sector at AC in 2021 | Stage 1 | Stage 2 | Stage 3 | Total | ||||
Gross carrying amount | ECL allowance | Gross carrying amount | ECL allowance | Gross carrying amount | ECL allowance | Gross carrying amount | ECL allowance | |
At December 31, 2020 | 93,909 | -2,687 | 44,133 | -1,776 | 38,281 | -20,505 | 176,323 | -24,968 |
Additions | 19,923 | -1,142 | 198 | -332 | 1,732 | - | 21,853 | -1,474 |
Exposures derecognised or matured / lapsed (excluding write-offs and modifications) | -16,025 | 147 | -20,836 | 415 | -3,071 | 505 | -39,932 | 1,067 |
Transfers to Stage 1 | 8,253 | -820 | -8,253 | 820 | - | - | - | - |
Transfers to Stage 2 | -21,253 | 1,028 | 21,253 | -1,028 | - | - | - | - |
Transfers to Stage 3 | -16,490 | 292 | -3,378 | 1,244 | 19,868 | -1,536 | - | - |
Modifications of financial assets (including derecognition) | -429 | - | -1,671 | - | 2,038 | - | -62 | - |
Changes in risk profile not related to transfers | - | 2,273 | - | -382 | - | -9,840 | - | -7,949 |
Changes in amortizable fees | -67 | - | 115 | - | -6 | - | 42 | - |
Changes in accrued income | 114 | - | -342 | - | -1,301 | - | -1,529 | - |
Foreign exchange adjustments | 3,863 | -51 | 2,198 | -65 | 510 | -1,418 | 6,571 | -1,534 |
At December 31, 2021 | 71,798 | -960 | 33,417 | -1,104 | 58,051 | -32,794 | 163,266 | -34,858 |
Changes in loans to the private sector at AC in 2020 | Stage 1 | Stage 2 | Stage 3 | Total | ||||
Gross carrying amount | ECL allowance | Gross carrying amount | ECL allowance | Gross carrying amount | ECL allowance | Gross carrying amount | ECL allowance | |
At December 31, 2019 | 113,742 | -1,881 | 13,695 | -572 | 34,936 | -17,609 | 162,373 | -20,062 |
Additions | 37,559 | -1,328 | 4,723 | -559 | - | - | 42,358 | -1,887 |
Exposures derecognised or matured / lapsed (excluding write-offs and modifications) | -13,201 | 482 | -4,006 | 224 | -76 | 2 | -17,283 | 708 |
Transfers to Stage 1 | 115 | -4 | - | - | -115 | 4 | - | - |
Transfers to Stage 2 | -33,516 | 373 | 33,383 | -373 | 133 | - | - | - |
Transfers to Stage 3 | -3,792 | 141 | - | - | 3,792 | -141 | - | - |
Modifications of financial assets (including derecognition) | - | - | 190 | - | - | - | 190 | - |
Changes in risk profile not related to transfers | - | -757 | - | -571 | - | -3,525 | - | -4,853 |
Changes in amortizable fees | 34 | - | 92 | - | 26 | - | 152 | - |
Changes in accrued income | 802 | - | 147 | - | 684 | - | 1,633 | - |
Foreign exchange adjustments | -7,834 | 287 | -4,091 | 75 | -1,175 | 764 | -13,100 | 1,126 |
At December 31, 2020 | 93,909 | -2,687 | 44,133 | -1,776 | 38,281 | -20,505 | 176,323 | -24,968 |
Total impairments on loans in the profit and loss account | ||
2021 | 2020 | |
Additions | -8,410 | -5,702 |
Balance at December 31 | -8,410 | -5,702 |
5. ECL allowances - assessment
ECL allowances are calculated for Interest bearing Securities, Loans at private sector at AC (including off balance loan
commitments) and Guarantees Given to customers. The movement in ECL allowances for each of these items is presented
in their relevant notes.
To demonstrate the sensitivity of the SICR criteria, the tables below presents the distribution of stage 2 impairments by
the criteria that triggered the migration to stage 2.
December 31, 2021 | |||
ECL allowance - Stage 2 trigger assessment | Loans to private sector | Loan commitments | Total |
More than 30 days past due | - | - | - |
Forbearance | -711 | -11 | -722 |
Deterioration in credit risk rating - financial difficulties | -394 | - | -394 |
Total | -1,105 | -11 | -1,116 |
December 31, 2020 | |||
ECL allowance - Stage 2 trigger assessment | Loans to private sector | Loan commitments | Total |
More than 30 days past due | -64 | - | -64 |
Forbearance | -794 | -3 | -797 |
Deterioration in credit risk rating - financial difficulties | -918 | - | -918 |
Total | -1,776 | -3 | -1,779 |
The following table shows the values of the IMF GDP forecasts used in each of the economic scenarios for the ECL calculations for 2021 and 2022. The upside and downside scenario calculations are derived from the base case scenario, adjusted based on an indicator of public debt to GDP in emerging markets.
The macroeconomic scenarios’ model was updated following the publication of the new macroeconomic outlook data by
the International Monetary Fund (IMF) in 2021. The updates of the model based on more optimistic GDP forecast, caused
new point-in-time adjustments to probability of defaults in the impairment model, leading to a release in combined
stage-1 and stage-2 impairment charge.
IMF GDP % Growth Forecasts | 2021 | 2022 |
Africa | -1.0% | 4.0% |
Nicaragua | -0.5% | 3.5% |
Cote d Ivoire | 6.2% | 6.5% |
Zimbabwe | 4.2% | 3.1% |
Kenya | 4.7% | 6.0% |
Georgia | 7.7% | -5.0% |
Myanmar | 5.7% | -0.1% |
Philippines | 3.2% | 6.3% |
Senegal | 5.2% | 5.5% |
Bangladesh | 4.4% | 6.5% |
Note that macroeconomic scenarios have been updated by using the latest available information by the IMF, as published
in October 2021.
December 31, 2021 | Total unweighted amount per ECL scenario | Probability | Loans to the private Sector | Guarantees | Total |
ECL Scenario: | |||||
Upside | 34,154 | 2% | 683 | - | 683 |
Base case | 34,960 | 50% | 17,474 | 6 | 17,480 |
Downside | 36,406 | 48% | 17,465 | 10 | 17,475 |
Total | 100% | 35,621 | 16 | 35,638 | |
December 31, 2020 | Total unweighted amount per ECL scenario | Probability | Loans to the private Sector | Guarantees | Total |
ECL Scenario: | |||||
Upside | 23,334 | 2% | 466 | 1 | 467 |
Base case | 25,007 | 50% | 12,488 | 16 | 12,504 |
Downside | 28,406 | 48% | 13,617 | 18 | 13,635 |
Total | 100% | 26,571 | 35 | 26,606 |
6. Equity investments
The equity investments in developing countries are for the Fund's account and risk. The movements in fair value of the equity investments are summarized in the following table. Equity investments are measured at FVPL.
Equity measured at FVPL | |
Net balance at January 1, 2021 | 252,341 |
Purchases and contributions | 23,319 |
Reclassification from loans | - |
Return of Capital | -17,535 |
Changes in fair value | 12,198 |
Net balance at December 31, 2021 | 270,323 |
Equity measured at FVPL | |
Net balance at January 1, 2020 | 256,042 |
Purchases and contributions | 31,752 |
Reclassification from loans | 1,550 |
Return of Capital | -34,280 |
Changes in fair value | -2,723 |
Net balance at December 31, 2020 | 252,341 |
The following table summarizes the equity investments segmented by sector:
2021 | 2020 | |
Financial Institutions | 144,579 | 155,220 |
Energy | 1,827 | 1,563 |
Agribusiness | 5,850 | 7,697 |
Multi-Sector Fund Investments | 106,506 | 77,121 |
Infrastructure, Manufacturing and Services | 11,561 | 10,740 |
Net balance at December 31 | 270,323 | 252,341 |
7. Investments in associates
The movements in net book value of the associates are summarized in the following table:
2021 | 2020 | |
Net balance at January 1 | 7,160 | 6,746 |
Purchases and contributions | 2,649 | - |
Share in net results | -1,468 | 999 |
Exchange rate differences | 510 | -585 |
Net balance at December 31 | 8,851 | 7,160 |
Investments in associates are valued based on the equity accounting method.
The following table summarizes the associates segmented by sector.
2021 | 2020 | |
Financial Institutions | 8,851 | 7,160 |
Net balance at December 31 | 8,851 | 7,160 |
The following table summarizes the share in the total assets, liabilities, total income and total net profit/loss of the associates
Associate | Carrying amount | Economic ownership % | Total assets | Total liabilities | Total income | Total profit/loss |
Teak Tree Investments | 4,777 | 29% | 19,406 | 14,629 | 2,096 | 420 |
SFC Finance Limited | 4,074 | 30% | 15,517 | 10,425 | 560 | 182 |
8. Other receivables
2021 | 2020 | |
Receivables related to equity disposals and dividends | 1,341 | 476 |
Fee receivables | 56 | 52 |
Balance at December 31 | 1,397 | 528 |
9. Accrued income
2021 | 2020 | |
Accrued income guarantee fee | 6 | - |
Balance at December 31 | 6 | - |
10. Other liabilities
2021 | 2020 | |
Amortized costs related to guarantees | 20 | 20 |
Balance at December 31 | 20 | 20 |
11. Accrued liabilities
2021 | 2020 | |
Suspense account | -1 | 128 |
Accrued costs capacity development | 5,403 | 5,540 |
Balance at December 31 | 5,402 | 5,668 |
12. Provisions
2021 | 2020 | |
Allowance for loan commitments | 89 | 8 |
Allowance for guarantees | 13 | 31 |
Balance at December 31 | 102 | 39 |
13. Contributed fund capital and reserves
2021 | 2020 | |
Contributed Fund Capital | 352,840 | 350,990 |
Initial contribution FMO | 7,778 | 7,778 |
Contribution DGIS current year | - | 1,850 |
Balance at December 31 | 360,618 | 360,618 |
The fund capital is revolvable (100% revolvability) when the current value of assets is equivalent or above the sum of the capital put into the fund by shareholders.
2021 | 2020 | |
Other reserves | 68,697 | 68,697 |
Balance at December 31 | 68,697 | 68,697 |
Undistributed results | 2021 | 2020 |
Balance at January 1 | 38,359 | 66,629 |
Net profit / (loss) | 3,674 | -28,270 |
Balance at December 31 | 42,033 | 38,359 |
14. Net interest income
Interest income
2021 | 2020 | |
Interest on loans measured at AC | 10,070 | 13,179 |
Total interest income from financial instruments measured at AC | 10,070 | 13,179 |
Interest on loans measured at FVPL | 914 | 2,193 |
Interest on short-term deposits | 9 | 160 |
Total interest income from financial instruments measured at FVPL | 923 | 2,353 |
Total interest income | 10,993 | 15,532 |
Interest expense
2021 | 2020 | |
Interest expenses related to banks (assets)1 | -31 | -41 |
Total interest expense | -31 | -41 |
15. Net fee and commission income
2021 | 2020 | |
Administration fees | 147 | 173 |
Other fees (arrangement, cancellation and waiver fees) | 33 | 7 |
Net fee and commission income | 180 | 180 |
16. Dividend income
Dividend income relates to income from equity investments including associates.
2021 | 2020 | |
Dividend income direct investments | 1,100 | 527 |
Dividend income fund investments | 492 | 859 |
Total dividend income | 1,592 | 1,386 |
17. Results from equity investments
2021 | 2020 | |
Results from equity investments: | ||
Unrealized results from FX conversions - cost price | 13,042 | 10,469 |
Unrealized results from FX conversions - capital results | -460 | 118 |
Unrealized results from capital results | -383 | -13,309 |
Results from Fair value re-measurements | 12,199 | -2,722 |
Results from sales & distributions: | ||
Realized results | -1,304 | -498 |
Release unrealized results | 257 | -2,191 |
Net results from sales | -1,047 | -2,689 |
Total results from equity investments | 11,152 | -5,411 |
18. Results from financial transactions
2021 | 2020 | |
Results on sales and valuations of FVPL loans | -2,977 | -1,193 |
Foreign exchange results | 7,328 | -16,084 |
Total results from financial transactions | 4,351 | -17,277 |
19. Expenses
2021 | 2020 | |
Remuneration FMO | -11,020 | -10,680 |
Capacity development expenses | -3,330 | -6,409 |
Evaluation expenses | -387 | -849 |
Total operating expenses | -14,737 | -17,938 |
Remuneration FMO relates to management fees paid to FMO.
Capacity development expenses relate to contracted contributions to beneficiaries in terms of the fund's objectives.
Evaluation costs relate to expenses made during frequent investigations and controls of existing investments and costs related to due diligence of new projects.
20. Off-Balance Sheet information
To meet the financial needs of borrowers, the Fund enters into various irrevocable commitments (loan commitments, equity commitments and guarantee commitments) and contingent liabilities. These contingent liabilities consist of financial guarantees, which commit the Fund to make payments on behalf of the borrowers in case the borrower fails to fulfill payment obligations. Though these obligations are not recognized on the balance sheet, they do obtain Credit Risk similar to loans to private sector. Therefore, provisions are calculated for financial guarantees and loan commitments according to ECL measurement methodology.
The outstanding amount for financial guarantees issued by the Fund is as follows:
2021 | 2020 | |
Contingent liabilities | ||
Effective guarantees issued | 1,456 | 556 |
Less: provisions, amortized costs and obligations for guarantees (presented under other liabilities/provisions) | -34 | -51 |
Total guarantees issued | 1,422 | 505 |
As agreed with the Dutch Ministry of Foreign Affairs, the fund shall maintain 1 euro for each euro of guarantee issued. The total amount of cash as per 31 December 2021 is adequately covering the total guarantees issued and hence meets the requirement set out by the Dutch Ministry of Foreign Affairs.
Nominal amounts for irrevocable facilities are as follows:
2021 | 2020 | |
Irrevocable facilities | ||
Contractual commitments for disbursements of: | ||
- Loans | 23,857 | 10,150 |
- Development contributions | 250 | 2,396 |
- Equity investments and associates | 57,467 | 69,356 |
Contractual commitments for financial guarantees given | 2,270 | - |
Total irrevocable facilities | 83,844 | 81,902 |
The movement in exposure for the financial guarantees issued (including contractual commitments) and ECL allowance is as follows:
Movement financial guarantees in 2021 | Stage 1 | Stage 2 | Stage 3 | Total | ||||
Outstanding exposure/Nominal amount | ECL allowance | Outstanding exposure/Nominal amount | ECL allowance | Outstanding exposure/Nominal amount | ECL allowance | Outstanding exposure/Nominal amount | ECL allowance | |
At January 1, 2021 | 2,694 | -31 | - | - | - | - | 2,694 | -31 |
Additions | 2,368 | -15 | - | - | - | - | 2,368 | -15 |
Exposures matured (excluding write-offs) | -1,486 | 14 | - | - | - | - | -1,486 | 14 |
Transfers to Stage 1 | - | - | - | - | - | - | - | - |
Transfers to Stage 2 | - | - | - | - | - | - | - | - |
Transfers to Stage 3 | - | - | - | - | - | - | - | - |
Changes to models and inputs used for ECL calculations | - | 20 | - | - | - | - | - | 20 |
Foreign exchange adjustments | 150 | -1 | - | - | - | - | 150 | -1 |
At December 31, 2021 | 3,726 | -13 | - | - | - | - | 3,726 | -13 |
Movement financial guarantees in 2020 | Stage 1 | Stage 2 | Stage 3 | Total | ||||
Outstanding exposure/Nominal amount | ECL allowance | Outstanding exposure/Nominal amount | ECL allowance | Outstanding exposure/Nominal amount | ECL allowance | Outstanding exposure/Nominal amount | ECL allowance | |
At January 1, 2020 | 2,699 | -37 | - | - | - | - | 2,699 | -37 |
Additions | 1,019 | -6 | - | - | - | - | 1,019 | -6 |
Exposures matured (excluding write-offs) | -802 | - | - | - | - | - | -802 | - |
Transfers to Stage 1 | - | - | - | - | - | - | - | - |
Transfers to Stage 2 | - | - | - | - | - | - | - | - |
Transfers to Stage 3 | - | - | - | - | - | - | - | - |
Changes to models and inputs used for ECL calculations | - | 9 | - | - | - | - | - | 9 |
Foreign exchange adjustments | -222 | 3 | - | - | - | - | -222 | 3 |
At December 31, 2020 | 2,694 | -31 | - | - | - | - | 2,694 | -31 |
The movement in exposure for the loan commitments is as follows:
Movement of loans commitments in 2021 | Stage 1 | Stage 2 | Stage 3 | Total | ||||
Nominal amount | ECL allowance | Nominal amount | ECL allowance | Nominal amount | ECL allowance | Nominal amount | ECL allowance | |
At January 1, 2021 | 650 | -5 | 859 | -3 | - | - | 1,509 | -8 |
Additions | 44,948 | -647 | 4,648 | -27 | 6,187 | - | 55,783 | -674 |
Exposures derecognised or matured (excluding write-offs) | -38,640 | 486 | -4,072 | 22 | -1,732 | - | -44,444 | 508 |
Transfers to Stage 1 | - | 77 | - | 162 | - | - | - | 239 |
Transfers to Stage 2 | - | - | - | - | - | - | - | - |
Transfers to Stage 3 | - | - | - | - | - | - | - | - |
Changes to models and inputs used for ECL calculations | - | 29 | - | -166 | - | - | - | -137 |
Amounts written off | - | - | - | - | - | - | - | - |
Foreign exchange adjustments | 512 | -18 | 122 | 1 | 378 | - | 1,012 | -17 |
At December 31, 2021 | 7,470 | -78 | 1,557 | -11 | 4,833 | - | 13,860 | -89 |
Movement of loans commitments in 2020 | Stage 1 | Stage 2 | Stage 3 | Total | ||||
Nominal amount | ECL allowance | Nominal amount | ECL allowance | Nominal amount | ECL allowance | Nominal amount | ECL allowance | |
At January 1, 2020 | 18,541 | -289 | 1,508 | -63 | - | - | 20,049 | -352 |
Additions | - | - | - | - | - | - | - | - |
Exposures derecognised or matured (excluding write-offs) | -16,163 | 549 | -1,243 | 126 | - | - | -17,406 | 675 |
Transfers to Stage 1 | 240 | -6 | -240 | 6 | - | - | - | - |
Transfers to Stage 2 | -859 | 5 | 859 | -5 | - | - | - | - |
Transfers to Stage 3 | - | - | - | - | - | - | - | - |
Changes to models and inputs used for ECL calculations | - | -275 | - | -71 | - | - | - | -346 |
Amounts written off | - | - | - | - | - | - | - | - |
Foreign exchange adjustments | -1,109 | 11 | -25 | 4 | - | - | -1,134 | 15 |
At December 31, 2020 | 650 | -5 | 859 | -3 | - | - | 1,509 | -8 |
21. Analysis of financial assets and liabilities by measurement basis
The significant accounting policies summary describes how the classes of financial instruments are measured and how income and expenses, including fair value gains and losses, are recognized. The following table gives a breakdown of the carrying amounts of the financial assets and financial liabilities by category as defined in under IFRS 9 and by balance sheet heading.
December 31, 2021 | FVPL - mandatory | Amortized cost | Total |
Financial assets measured at fair value | |||
Short-term deposits | 31,671 | - | 31,671 |
Loans to the private sector | 28,288 | - | 28,288 |
Equity investments | 270,323 | - | 270,323 |
Total | 330,282 | - | 330,282 |
Financial assets not measured at fair value | |||
Banks | - | 8,476 | 8,476 |
Loans to the private sector | - | 128,408 | 128,408 |
Current accounts | - | 112 | 112 |
Other receivables | - | 1,397 | 1,397 |
Total | - | 138,393 | 138,393 |
Financial liabilities not measured at fair value | |||
Other liabilities | - | 20 | 20 |
Accrued liabilities | - | 5,402 | 5,402 |
Total | - | 5,422 | 5,422 |
December 31, 2020 | FVPL - mandatory | Amortized cost | Total |
Financial assets measured at fair value | |||
Short-term deposits | 13,936 | - | 13,936 |
Loans to the private sector | 30,867 | - | 30,867 |
Equity investments | 252,341 | - | 252,341 |
Total | 297,144 | - | 297,144 |
Financial assets not measured at fair value | |||
Banks | - | 17,257 | 17,257 |
Loans to the private sector | - | 151,355 | 151,355 |
Current accounts | - | 107 | 107 |
Other receivables | - | 528 | 528 |
Total | - | 169,247 | 169,247 |
Financial liabilities not measured at fair value | |||
Other liabilities | - | 20 | 20 |
Accrued liabilities | - | 5,668 | 5,668 |
Total | - | 5,688 | 5,688 |
Fair value hierarchy
All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy, based on lowest level input that is significant to the fair value measurement as a whole, as follows:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
Level 3 – Valuation technique for which the lowest level input that is significant to the fair value measurement is unobservable.
Valuation process
For recurring and non-recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the Fund has a valuation process in place to decide its valuation policies and procedures and analyze changes in fair value measurement from period to period.
The Fund’s fair value methodology and governance over its methods includes a number of controls and other procedures to ensure appropriate safeguards are in place to ensure its quality and adequacy. The responsibility of ongoing measurement resides with the relevant departments. Once submitted, fair value estimates are also reviewed and challenged by the Investment Review Committee (IRC). The IRC approves the fair values measured including the valuation techniques and other significant input parameters used.
Valuation technique
When available, the fair value of an instrument is measured by using the quoted price in an active market for that instrument (level 1). A market is regarded as active if transactions of the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, valuation techniques are used that maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
Valuation techniques include:
Recent broker / price quotations
Discounted cash flow model
Option-pricing models
The techniques incorporate current market and contractual prices, time to expiry, yield curves and volatility of the underlying instrument. Inputs used in pricing models are market observable (level 2) or are not market observable (level 3). A substantial part of fair value (level 3) is based on net asset values.
Equity investments are measured at fair value when a quoted market price in an active market is available or when fair value can be estimated reliably by using a valuation technique. The main part of the fair value measurement related to equity investments (level 3) is based on net asset values of investment funds as reported by the fund manager and are based on advanced valuation methods and practices. When available, these fund managers value the underlying investments based on quoted prices, if not, multiples are applied as input for the valuation. For the valuation process of the equity investments we further refer to the accounting policies within these Annual Accounts as well as section 'Equity Risk', part of the Risk Management chapter. The determination of the timing of transfers is embedded in the quarterly valuation process, and therefore recorded at the end of each reporting period.
The table below presents the carrying value and estimated fair value of financial assets and liabilities not measured at fair value.
Carrying value financial assets | 2021 | 2020 | ||
At December 31 | Carrying value | Fair value | Carrying value | Fair value |
Banks | 8,476 | 8,476 | 17,257 | 17,257 |
Loans to the private sector at AC | 128,408 | 119,601 | 151,355 | 142,915 |
Total non fair value financial assets | 136,884 | 128,077 | 168,612 | 160,172 |
The following table gives an overview of the financial instruments measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
December 31, 2021 | Level 1 | Level 2 | Level 3 | Total |
Financial assets at FVPL | ||||
Short-term deposits mandatory at FVPL | 31,671 | - | - | 31,671 |
Loans to the private sector mandatory at FVPL | - | - | 28,288 | 28,288 |
Equity investments | 13,928 | - | 256,395 | 270,323 |
Total financial assets at fair value | 45,599 | - | 284,683 | 330,282 |
December 31, 2020 | Level 1 | Level 2 | Level 3 | Total |
Financial assets at FVPL | ||||
Short-term deposits mandatory at FVPL | 13,936 | - | - | 13,936 |
Loans to the private sector mandatory at FVPL | - | - | 30,867 | 30,867 |
Equity investments | 13,145 | - | 239,196 | 252,341 |
Total financial assets at fair value | 27,081 | - | 270,063 | 297,144 |
The following table shows the movements of financial assets measured at fair value based on level 3.
Loans to the private sector | Equity investments | Total | |
Balance at January 1, 2021 | 30,867 | 239,196 | 270,063 |
Total gains or losses | |||
ˑ In profit and loss (changes in fair value) | -2,977 | -755 | -3,732 |
Purchases/disbursements | 5,666 | 22,884 | 28,550 |
Sales/repayments | -5,238 | -17,535 | -22,773 |
Accrued income | -304 | - | -304 |
Exchange rate differences | 297 | 12,605 | 12,902 |
Changes in amortizable fees | -23 | - | -23 |
Reclassification Loans versus Equity | - | - | - |
Balance at December 31, 2021 | 28,288 | 256,395 | 284,683 |
Loans to the private sector | Equity investments | Total | |
Balance at January 1, 2020 | 41,149 | 244,962 | 286,111 |
Total gains or losses | |||
ˑ In profit and loss (changes in fair value) | -1,217 | 9,750 | 8,533 |
Purchases/disbursements | 812 | 30,805 | 31,617 |
Sales/repayments | -6,455 | -34,280 | -40,735 |
Accrued income | -492 | - | -492 |
Exchange rate differences | -1,528 | -13,591 | -15,119 |
Interest Capitalization | 150 | - | 150 |
Reclassification Loans versus Equity | -1,552 | 1,550 | -2 |
Balance at December 31, 2020 | 30,867 | 239,196 | 270,063 |
Type of debt investment | Fair value at December 31, 2021 | Valuation technique | Range (weighted average) of significant unobservable inputs | Fair value measurement sensitivity to unobservable inputs |
Loans | 991 | Discounted cash flow model | Based on client spread | A decrease/increase of the used spreads with 1% will result is a higher/lower fair value of approx €1k. |
439 | ECL measurement | Based on client rating | An improvement / deterioration of the Client Rating with 1 notch wil result 1% increase/decrease | |
3,331 | Credit impairment | n/a | n/a | |
Debt Funds | 23,527 | Net Asset Value | n/a | n/a |
Total | 28,288 |
Type of equity investment | Fair value at Dec 31, 2021 | Valuation technique | Range (weighted average) of significant unobservable inputs | Fair value measurement sensitivity to unobservable inputs |
Private equity fund investments | 155,069 | Net Asset Value | n/a | n/a |
Private equity direct investments | 50,792 | Book multiples | 1.0 | A decrease/increase of the book multiple with 10% will result in a lower/higher fair value of €51 million. |
36,588 | Earning Multiples | Depends on several unobservable data such as EBITDA multiples (range 1.0 - 1.3) | A decrease/increase of the used unobservable data with 10% will result in a lower/higher fair value of €37million. | |
5,898 | Put option | The guaranteed floor depends on several unobservable data such as IRR, EBITDA multiples, book multiples and Libor rates | A decrease/increase of the used unobservable data with 10% will result in a lower/higher fair value of €6 million. | |
8,048 | Firm offers | Based on offers received from external parties | n/a | |
Total | 256,395 |
22. Related party information
Dutch Government:
The Dutch Ministry of Foreign Affairs, Directoraat-generaal internationale Samenwerking sets up and administers the investments funds (“State Funds”), including MASSIF, according to the Dutch Government’s development agenda. Directoraat-generaal internationale Samenwerking is the main contributor to MASSIF, providing funding upon FMO’s request.
The Dutch development bank FMO supports sustainable private sector growth in developing and emerging markets by leveraging its expertise in agribusiness, food & water, energy, financial institutions, Dutch business focus areas to invest in impactful businesses. FMO is a public-private partnership, with 51% of FMO’s shares held by the Dutch State and 49% held by commercial banks, trade unions and other members of the private sector. FMO has a triple A rating from both Fitch and Standard & Poor’s.
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (“FMO”)
FMO has been entrusted by the Dutch Government to execute the mandates of the State Funds: Currently MASSIF, Building Prospects, Access to Energy – I, FOM, FOM-OS, Dutch Fund for Climate and Development Land Use Facility are under FMO’s direct management; the execution of Access to Energy – II and the other facilities of the Dutch Fund for Climate and Development are performed by third parties under FMO’s supervision.
FMO charges a management fee to the Dutch Ministry of Foreign Affairs and it is reimbursed accordingly from MASSIF’s subsidy amount (2021: € 11 million; 2020: € 11 million). FMO is also a minor contributor to the fund with a total contribution of € 8 million in 2021 (2020: € 8 million)
23. Subsequent events
On February 24, 2022 the Russian Federation started to invade Ukraine. At reporting date, the fund has no direct exposure to Ukraine, the Russian Federation or Belarus, therefore no material impact is expected on the financial statements.
There has been no significant subsequent event between the balance sheet date and the date of approval of these accounts which should be reported by the Fund.