Notes to the annual accounts

1. Banks

The cash on bank accounts can be freely disposed of. The bank account is held by FMO on behalf of the programme.

2. Short-term deposits

Short-term deposits are very liquid accounts with high credit ratings and are subject to an insignificant risk of changes in fair value. The programme has on demand full access to the carrying amounts.

3. Loan portfolio

Loans originated by the Program include loans to the private sector in developing countries for the account and risk of the Program.

Change in fair value is largely caused by one exposure, due to 1) a decrease in expected returns due to a one off loss in client asset portfolio and 2) a low fixed rate coupon compared to current yields.

4. Other receivables

5. Current account with FMO

The current account which can be freely disposed of.

6. Accrued liabilities

7. Provisions

8. Other liabilities

9. Total capital

10. Net interest income

11. Off-Balance Sheet information

To meet the financial needs of borrowers, the programme enters into various irrevocable commitments (loan commitments, equity commitments). Though these obligations are not recognized on the balance sheet, they do obtain Credit Risk similar to the loan portfolio. Therefore, provisions are calculated for commitments of AC loans according to the ECL measurement methodology.

Nominal amounts for irrevocable facilities are as follows:

12. Analysis of financial assets and liabilities by measurement basis

The significant accounting policies summary describes how 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 by balance sheet heading.

Fair value of financial assets and liabilities

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 processes

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 techniques

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.

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

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.

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

13. Related party information

The programme defines the UK Government, FMO and its Management Board and Supervisory Board as related parties.

UK Government

The Department for Energy, Security and Net Zero (DESNZ) of the UK Government has set up the MFF programme. DESNZ is the main contributor to MFF, providing funding upon FMO’s request (2023: $129.1 million; 2022: $128.0 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 agribusiness, food & water, energy, financial institutions and 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.

FMO has been entrusted by the Dutch Government to execute the mandates of several Dutch Government Funds and by the UK Government to execute the mandate of MFF. Currently MASSIF, Building Prospects, Access to Energy – I, FOM, FOM-OS, the Land Use Facility (of the Dutch Fund for Climate and Development, DFCD) and MFF are under FMO’s direct management; the execution of Access to Energy – II and the other facilities of DFCD are performed by third parties on behalf of FMO.

FMO charges a management fee to DESNZ and it is reimbursed accordingly from the subsidy amount of MFF. The management fee amounts up to $3.0 million in 2023 (2022: $3.0 million).

14. Subsequent events

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 programme.