Notes to the special purpose annual accounts

1. Banks

 

2020

2019

Banks

9,579

38,895

Balance at December 31

9,579

38,895

The cash in bank accounts can be freely disposed of.

2. Current accounts (liabilities)

 

2020

2019

Current account with FMO

448

356

Balance at December 31

448

356

Current account liabilities relate to amounts payable to FMO.

3. Loans

 The table below presents the movements in loans during 2020. The loan portfolio is measured at FVPL.

 

Loans measured at FVPL

Balance at January 1

-

Disbursements

3,412

Changes in fair value

-164

Changes in accrued income

85

Exchange rate differences

-170

Balance at December 31

3,163

Impairment

-

Net balance at December 31

3,163

4. 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

-

Purchases and contributions

6,633

Changes in fair value

-500

Net balance at December 31

6,133

The following table summarizes the equity investments segmented by sector:

 

2020

2019

Agribusiness

6,133

-

Net balance at December 31

6,133

-

5. Other receivables

 

2020

2019

Debtor commitment fee

12

-

Balance at December 31

12

-

6. Accrued liabilities

Accrued liabilities relate to expenses incurred.

 

2020

2019

Accrued liabilities

5

169

Balance at December 31

5

169

7. Net interest income

 

2020

2019

Interest on loans

98

-

Total interest income

98

-

8. Results from equity investments

 

2020

2019

Results from equity investments:

  

Unrealized results from changes in fair value

-500

-

Total results from equity investments

-500

-

9. Results from financial transactions

 

2020

2019

Results on sales and valuations of FVPL loans

-164

-

Foreign exchange results

-429

-

Total results from financial transactions

-593

-

10. Net interest expenses

 

2020

2019

Interest on banks

-112

-33

Total interest expenses

-112

-33

11. Operating expenses

The following table presents the operating expenses incurred in 2020. Next to direct personnel costs, direct project costs relate mainly to audit and advisory expenses. Furthermore, overhead costs incurred relate to legal fees and costs for support staff.

 

2020

2019

Direct Personnel costs

-1,442

-215

Other direct project costs

-243

-142

Overhead / indirect costs

-7

-167

Total operating costs

-1,692

-524

12. Off-Balance Sheet information

To meet the financial needs of borrowers, the Fund enters into various irrevocable commitments (loan commitments, equity, and grants).

Irrevocable facilities

2020

2019

Contractual commitments for disbursements of:

  

Loans

843

-

Total irrevocable facilities

843

-

13. 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 and by balance sheet heading.

December 31, 2020

FVPL - mandatory

Amortized cost

Total

    

Financial assets measured at fair value

   

Loan portfolio

3,163

-

3,163

Equity investments

6,133

-

6,133

Total

9,296

-

9,296

    

Financial assets not measured at fair value

   

Banks

-

9,579

9,579

Other receivables

-

12

12

Total

-

9,591

9,591

    

Financial liabilities not measured at fair value

   

Current accounts

-

448

448

Accrued liabilities

-

5

5

Total

-

453

453

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 uses the valuation processes to decide its valuation policies and procedures and analyze changes in fair value measurement from period to period.

The fair value methodology and governance over it’s 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 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 available 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 is therefore recorded at the end of each reporting period.

The table below presents the carrying value and estimated fair value of non fair value financial assets and liabilities.

 

2020

 

At December 31

Carrying value

Fair value

Banks

9,579

9,579

Total non fair value financial assets

9,579

9,579

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, 2020

Level 1

Level 2

Level 3

Total

Financial assets at FVPL

    

Loans portfolio

-

-

3,163

3,163

Equity investments

-

-

6,133

6,133

Total financial assets at fair value

-

-

9,296

9,296

The following table shows the movements of financial assets measured at fair value based on level 3.

 

Loans portfolio

Equity investments

Total

Balance at January 1, 2020

-

-

-

Total gains or losses

   

ˑ In profit and loss (changes in fair value)

-164

-500

-664

Purchases/disbursements

3,412

6,633

10,045

Accrued income

85

-

85

Exchange rate differences

-170

-

-170

Balance at December 31, 2020

3,163

6,133

9,296

Type of equity investment

Fair value at December 31, 2020

Valuation technique

Range (weighted average) of significant unobservable inputs

Fair value measurement sensitivity to unobservable inputs

Private equity direct investments

6,133

Book multiples

1.0

A decrease/increase of the book multiple with 10% will result in a lower/higher fair value of € 0.6 million.

Total

6,133

   

Type of debt investment

Fair value at December 31, 2020

Valuation technique

Range (weighted average) of significant unobservable inputs

Fair value measurement sensitivity to unobservable inputs

Loans

3,163

Discounted cash flow model

Based on client spread

A decrease/increase of the used spreads with 1% will result is a higher/lower fairvalue of approximately €3K.

Total

3,163

   

14. Related party information

The Fund defines the Dutch Government as related parties.

Dutch Government:

The Dutch Ministry of Foreign Affairs, in particular Directoraat-Generaal Internationale Samenwerking (DGIS), sets up and administers the investment funds (“State Funds”), including the DFCD Land-use Facility, according to the Dutch Government’s development agenda. DGIS is the main contributor to the DFCD facilities, providing funding upon FMO’s request for a net amount of €7.0 million in 2020 (2019: €38.9 million)

Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (“FMO”)

The Dutch development bank FMO supports sustainable private sector growth in developing and emerging markets by leveraging its expertise in focus areas - agribusiness, food & water, energy, financial institutions, Dutch business - 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.

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 and the Land Use Facility of DFCD are under FMO’s direct management; the execution of Access to Energy – II and the other facilities of DFCD are performed by third parties under FMO’s supervision.

15. Subsequent events

There has been significant subsequent event between the balance sheet date and the date of approval of these accounts which should be reported by the Fund.