Hivos-Triodos Fund Foundation

Transcription

1 Hivos-Triodos Fund Foundation Annual Report 2015 TLIM

2 Inclusive finance is the provision of financial services to people on low incomes. An inclusive financial sector in which everyone has access to these services provides a sustainable basis for balanced socio-economic development.

3 Hivos-Triodos Fund Foundation Annual Report 2015 Hivos-Triodos Fund Foundation is a joint initiative of Hivos and Triodos Bank. TLB Triodos Investment Management is wholly-owned by Triodos Bank and is the manager of Hivos-Triodos Fund.

4 Key figures amounts in euros At year-end 2015 At year-end 2014 Participations (managed for third parties) 29,547,792 25,805,251 Number of contracts Cumulative preference shares (excluding provisions) Number of contracts Loans provided 49,764,933 44,204,056 Number of contracts Subordinated loans provided 407,533 Number of contracts 1 1 Total portfolio before deduction of specific provisions and including receivables from loans and assets managed for third parties 82,216,975 70,464,421 Committed investments 4,404,426 4,173,582 Equity 13,112,868 12,587,572 Result In 2015 In 2014 Income 5,422,326 4,086,820 Expenditure -2,913,015-2,447,093 Operating profit 2,509,311 1,639,727 Addition to (subordinated) loan provision -1,103,387 Exchange rate result -880,628 1,757,397 Deficit in the Exchange Equalisation Reserve made up by Hivos Result 525,296 3,397,124 4

5 Contents Page General information 6 Report of the Board 7 Report of the Supervisory Board 18 Annual Accounts 2015 Hivos-Triodos Fund 19 Other information 39 Appendix: Hivos-Triodos Fund portfolio 42 Address and publication details 47 5

6 General information Hivos-Triodos Fund Foundation (Hivos-Triodos Fund) was formed on 22 December 1994 by the Hivos Foundation (Hivos) and the Triodos Fund Foundation. Its objective is described as follows in the articles of association: The Foundation s objective is to provide guarantees and loans to enterprises and institutions involved in development cooperation, as well as to bear the risk of participating in projects, all in the broadest sense. The Foundation is a non-profit organisation. Hivos-Triodos Fund has its registered office in Zeist. Board The Board of Hivos-Triodos Fund comprises: Pierre Aeby Peter Blom Both are members of the Executive Board of Triodos Bank NV. Supervisory Board The Supervisory Board is appointed by Hivos and comprises: Natasja van den Berg (Chair) Elsbeth Aubel-Bezemer Han de Groot Edwin Huizing Marcel Karman The original Annual Accounts were prepared in Dutch. This document is an English translation of the original annual accounts. Where there are discrepancies between the English and Dutch versions, the latter prevails. Manager Hivos-Triodos Fund is managed bytriodos Investment Management BV (Triodos Investment Management). Triodos Investment Management holds a licence under the Financial Supervision Act. The Board of Triodos Investment Management BV comprises: Marilou van Golstein Brouwers (Chair) Dick van Ommeren (Director since 1 February 2016) Laura Pool (Director Risk & Finance) Hivos, Triodos Bank, Triodos Investment Management BV and Hivos-Triodos Fund have entered into a Cooperation Agreement to implement the practical aspects of the policy. Fund Manager Triodos Investment Management has appointed a fund manager. Karel Nierop has been the Fund Manager of Hivos-Triodos Fonds since April Willem Enklaar held this position until April

7 Report of the Board Hivos-Triodos Fund was set up with the aim of contributing to sustainable socio-economic development in developing countries. Because access to financial services is an essential aspect of this, Hivos-Triodos Fund finances institutions that provide financial services to people in the lower income strata of society. Giving people access to loans, savings products, payment services and micro-insurance enables them to make a living, to utilise their talents and to create employment. An accessible, well-functioning financial services industry thus forms an important foundation for building a solid local economy. Hivos-Triodos Fund gives priority to financing financial institutions that are chiefly active in rural areas where access to finance is still limited. Since 2011, Hivos-Triodos Fund has been working on promoting access to renewable energy and contributing to the development of a sustainable agricultural sector in developing countries. As such, Hivos-Triodos Fund is building on the knowledge and experience of Hivos and Triodos Bank in these industries. Investments preferably take place through local financial institutions and funds that focus on small and medium-sized enterprises. In addition, Hivos-Triodos Fund is interested in investing directly in businesses and organisations active in sustainable agriculture and/or renewable energy. Below follows a brief explanation on the impact and activities of the fund in the area of microfinance, sustainable agriculture chains and renewable energy. Impact and activities in 2015 Microfinance Hivos-Triodos Fund provides finance exclusively to those financial institutions, companies and organisations that seek to balance people, planet and profit. This core of the investment policy of Hivos-Triodos Fund is embedded in the analysis and decision-making process. In this process, Hivos- Triodos Fund focuses on the interests of the consumer, the end customer. Major themes include difficult-to-reach target groups, a varied product range and care for the environment. Target groups that are difficult to reach Women in developing countries often find it difficult to access financial services. The same applies to people living in rural areas. Consequently, Hivos- Triodos Fund works with innovative financial institutions that accommodate these difficultto-reach target groups. In 2015, the number of loan clients that Hivos-Triodos Fund reached through funded financial institutions grew to 2.8 million, of which 81% are women and 51% live in rural areas. Key indicators of microfinance institutions in the portfolio of Hivos-Triodos Fund * Total loan clients reached by financial institutions 2,834,825 2,537,340 Total savers reached by financial institutions 1,990,617 1,960,011 Average loan amount EUR 521 EUR 553 Percentage of female loan customers 81% 78% Percentage of rural customers 51% 52% Staff employed by the financial institutions 18,173 16,126 * Customers reached through investments in Bank Andara, AfriCap Microfinance Investment Company, MFX Solutions, EcoEnterprises Fund II, Leapfrog Financial Inclusion Fund, Caspian Impact Investments, IntelleGrow, Novastar and Aldea Global have not been included in the key indicators 7

8 Varied product range For clients of financial institutions, it is essential that they have access to savings, insurance and payment services in addition to credit. Hivos-Triodos Fund analyses for each financial institution the diversity of the product range and whether the financial institution in addition to microfinance, also extends loans to companies in the small and medium-sized enterprises (SMEs) sector, especially to SMEs in renewable energy and agriculture. The SME sector is important for the development of the local economy through the jobs it creates and the taxes these companies pay. A growing number of financial institutions in the portfolio of the fund focuses on this target group. Financial services product diversification (percentage of financial institutions that provide other financial services, in addition to loans) Care for the environment Hivos-Triodos Fund also identifies which activities the financial institution initiates in order to make care for the environment a priority. For example, the fund analyses whether the financial institution provides green products and services to promote sustainable agriculture and renewable energy. Examples are loans to purchase solar panels, a biogas installation or an energy-efficient oven. In 2015, 14% of the financial institutions offered one of these green products. In 2015, Hivos-Triodos Fund also extended a loan to Optima Financial Services in El Salvador, for which it has been agreed that at least 25% of this loan is intended for renewable energy lending. Environment (percentage of financial institutions in the portfolio with activities relating to the environment) Exclusion list 46% Insurance products 42% Payment services 29% Savings products 29 % Non-financial services product diversification (percentage of financial institutions that provide non-financial services) Training in entrepreneurship 33% Adult education 31% Health education18% Women empowerment 18% Green office procedures 31% Green creditproducts 14% Environmental training for customers 14% Donations for the environment 8% * list of exclusion criteria used by financial institutions to grant loans to customers Sustainable agriculture chains Many people in developing countries earn their living in agriculture. Especially in this industry, access to adequate financial products is very limited. The uncertain cash flows and risks of crop failures and natural disasters make financial institutions cautious. Hivos-Triodos Fund encourages financial institutions to be active especially in this very important industry. Of the financial institutions that Hivos-Triodos Fund finances, 58% has more than 15% of the loan portfolio outstanding in the agricultural industry. 8

9 Breakdown by industry (as a percentage of the combined loan portfolio of the financial institutions in the portfolios) Trade 33% Agriculture 31% Services 24% Production 7% Other 5% Hivos-Triodos Fund underlines the importance of sustainable agriculture. In 2015, Hivos-Triodos Fund provided a long-term loan to Norandino, a fair trade and certified organic coffee cooperative in Peru. Land degradation forces the affiliated coffee farmers to renovate their plantations. This requires long-term financing. Norandino uses half of the Hivos-Triodos Fund loan for this renovation; the other half is used as working capital for the farmers. Access to markets is difficult for many small-scale farmers in developing countries. Partners of Hivos- Triodos Fund, such as Caspian Impact Investments and Intellegrow in India, increase access to markets by investing in companies that strengthen agricultural chains through services such as storage, processing, transportation, quality control and distribution. An example of such a company is Sresta, which has received funding from Caspian Impact Investments. Sresta buys agricultural products from farmers, helping them to obtain organic certification and sell their products in supermarkets. Renewable energy Worldwide, 2.4 billion people have no or very limited access to electricity and 2.7 billion people use mainly wood, charcoal and biomass as a primary energy source for their households. This impedes entrepreneurship, has a negative impact on health and contributes to deforestation and climate change. Hivos-Triodos Fund wants to contribute to a transition to a sustainable and accessible energy infrastructure. In 2015, Hivos-Triodos Fund extended a loan to M-KOPA, an innovative company that has since sold small-scale solar power systems to 300,000 households in rural Kenya, Uganda and Tanzania. Households pay these solar energy back through mobile telephony. This is the first time Hivos-Triodos Fund has financed a non-financial institution in the renewable energy sector. Market developments Economic developments 2015 was characterised by falling oil prices and volatility in the currency markets. Global economic growth declined in 2015, which was seen in a continued slowdown in emerging markets and a slower recovery in developed countries. The US economy strengthened further, while European economies lagged behind. China, Russia, Brazil and many other emerging economies experienced difficult times. Partly due to the growth of the US economy and the monetary policy of the US central bank, the value of the US dollar rose. This increase resulted in less capital flowing to emerging countries. That subsequently resulted in more difficult financial conditions in those countries. In Central Asia, a number of oil-exporting countries and countries with strong ties to Russia was hit hard. Oil-importing countries in South and East Asia, 35.6% percentage of the portfolio invested in Africa and the Middle East 9

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11 M-KOPA IN EAST AFRICA Each day M-KOPA welcomes 500 new customers. They now provide 300,000 families in Kenya, Uganda and Tanzania who have had no access to electricity with the energy they need. The product M-KOPA markets is simple. It consists of an 8-watt solar panel. With this, M-KOPA provides a battery, two LED lights, a radio and a device to recharge a mobile phone. Families pay back the product in instalments via mobile phone. Hivos-Triodos Fund has provided a loan to M-KOPA to realise their growth ambitions. 11

12 such as Cambodia and India, on the other hand showed further economic growth. The different economic outlooks and interest rate expectations for the US on the one hand and the euro zone on the other resulted in a significant increase in costs relating to entering into currency forward contracts for Hivos-Triodos Fund in the course of Access to financial services A wider range of financial services is the key to a financial services industry that is accessible to all sections of the population. This must be accompanied by an environment in which policies, legislation and institutional structures enable this access. The Microscope Index of The Economist Intelligence Unit of December 2015 shows that, based on a study in 55 countries, this access in general improves gradually. The positive trend does not apply to all individual countries; with two billion adults excluded from financial services in 2014, the exclusion from access to financial services remains widespread. Furthermore, there is still insufficient focus on protection and information for consumers. Worldwide, more than half of SMEs in developing countries have no or poor access to finance. There is a strong correlation between a healthy SME sector, economic growth and poverty reduction. From a structural perspective, and despite the expected slowdown in some developing countries, the need for both microfinance and SME funding remains large. In addition to regulations, technological progress has a positive impact on the development of an open financial sector. Thanks to developments in technology, the trends of mobile banking and banking via service centres continue. Portfolio development The total portfolio held by Hivos-Triodos Fund including assets managed for third parties rose by 17% to EUR 82.2 million. Main reasons for the increase are the value development of investments and growth in the loan portfolio. Hivos-Triodos Fund provided finance facilities to a total of 41 clients in 2015 (2014: 43). These are included in the appendix on page 42 and further. There is also a brief description of each relationship on com under Know where your money goes. Five largest positions* Regional spread Hivos-Triodos Fund has a highly diversified portfolio, in which the main difference between it and other investors in the industry is its relatively large share in Africa, namely 35.6%. Risk classification 2015 Centenary Bank, Uganda 24.5% Caspian Impact Investments, India 6.2% IDEPRO, Bolivia 4.6% Sembrar Sartawi, Bolivia 3.7% AMK, Cambodia 3.4% * as a percentage of the outstanding portfolio at market value Hivos-Triodos Fund uses a risk classification system that systematically grades risks. The entire portfolio is classified into risk classes 1 (low risk) to 5 (high risk). In so doing, various factors such as country risk, the degree of maturity of the financial sector and the level of supervision by the regulatory authority are assessed. Clients classified in risk class 5 are those for whom a provision has been made or whose continuity is at risk. The graph below shows that Hivos-Triodos Fund mainly provides finance facilities in the higher risk classes with the aim of supporting institutions at an 12

13 early stage of their development. As at 31 December 2015, 82% (31 December 2014: 92%) of the portfolio has risk profile 3, 4 or 5. Percentage of the financial institutions portfolio by risk class Risk 1 18 Risk 2 63 Risk 3 18 Risk Risk 5 * This bar graph assumes that participations are valued at the acquisition price. Investments in Bank Andara, AfriCap Microfinance Investment Company, MFX Solutions, EcoEnterprises Fund II, Leapfrog Financial Inclusion Fund, Caspian Impact Investments, Intellegrow, Novastar en Aldea Global are not included. Participations The participation portfolio of Hivos-Triodos Fund increased by 14.5% to EUR 29.5 million, mainly thanks to the positive value development of the investment in Centenary Bank in Uganda. Hivos- Triodos Fund acquired a new participation in 2015 in Novastar Ventures East Africa Fund (Novastar) that invests venture capital in small and medium-sized enterprises in East Africa. Novastar focuses on themes such as energy, education, health and agriculture. Sanergy in Kenya is one of the companies that received venture capital from Novastar. This company increases access to proper sanitation in slums by placing high-quality public toilets. Sanergy processes the biomass of the toilets (7.5 tons per day) into organic fertilisers for farmers. Loans The loan portfolio of Hivos-Triodos Fund increased by 10.7% to EUR 49.4 million in Hivos-Triodos Fund extended new loans to 18 financial institutions and companies. Four of these are new to the portfolio: Optima Financial Services in El Salvador, MicroCred Mali in Mali, M-KOPA in East Africa and Cooperativa de Ahorro y Crédito Norandino (Norandino) in Peru. Five financial institutions redeemed the loans from Hivos-Triodos Fund in their entirety in Four of these financial institutions have continued the relationship with Triodos Fair Share Fund and/or Triodos Microfinance Fund. Hivos-Triodos Fund is committed to this continued growth. Portfolio per region (amounts in thousands of euros) Number of customers % of portfolio Number of customers % of portfolio Latin America % % East Asia and Pacific % % Eastern Europe and Central Asia 0 0% 1 1.0% Africa and the Middle East % % South Asia % 2 4.3% Other 2 2.6% 2 2.3% Total % % 13

14 Life Cycle Model The partnership between Hivos and Triodos Bank enables Hivos-Triodos Fund to support an organisation at an early stage until it reaches institutional stability. To that end, Hivos-Triodos Fund and Hivos have jointly developed a life cycle model based on the needs of organisations in the various stages of their development. In the first stage, an organisation primarily needs donations to build capacity. At that point, the income earned is not enough to fund that. In the next stage of growth, Hivos-Triodos Fund can provide the organisation with funding to enable it to develop further. Even at this stage, financing the organisation is still a high-risk proposition. Once the organisation has grown and become more professional, it will be increasingly able to raise money on the capital market. Triodos Fair Share Fund and Triodos Microfinance Fund, which are also managed by Triodos Investment Management, are available for that purpose. This model ensures the regular release of financial resources that Hivos- Triodos Fund can use for innovative initiatives. Hivos-Triodos Fund views the development of clients as an important objective. In 2015, four financial institutions in the Hivos-Triodos Fund portfolio grew sufficiently to be financed by microfinance funds managed by Triodos Investment Management or other investors. Bad debt provisions In 2015, Hivos-Triodos Fund created a provision of EUR 1.1 million in respect of a financial institution in Latin America. Hivos-Triodos Fund is closely monitoring the situation and is in close contact with the institution, co-financiers and the local regulator. Result Net financial expense The income from loans of Hivos-Triodos Fund increased by 32.7% to EUR 5.4 million. Expenditure of EUR 2.9 million relates to financing costs, management fees, advertising expenses, auditor s fees and other expenses. The operating result after deducting these expenses rose by 53.0% to EUR 2.5 million. This increase is the result of a higher average loan volume throughout the year. This was possible partly because Hivos has converted the sales proceeds of participations in 2014 into a subordinated loan to Hivos-Triodos Fund. Exchange rate result As at year-end 2015, 68.6% of the loan portfolio had been issued in local currency and 31.4% in US dollars. The high percentage of loans in local currency is typical of Hivos-Triodos Fund. The exchange rate risk is hedged where possible. The exchange rate risk of the US dollar is always hedged, unless the structure of the investment makes this impossible. The table on page 24 shows the loan portfolio in local currency and in US dollars, and the hedging of the exchange rate risk. If hedging of the exchange rate risk is not possible or economically unfeasible, Hivos-Triodos Fund may decide to bear the risk itself. Hivos-Triodos Fund is able to bear this considerable risk partly because Hivos is prepared to assume responsibility for these exchange rate risks in the loan portfolio. This prevents the exchange rate risk from being passed on to the financial institutions clients. After setting off the result of currency forward contracts, exchange rate movements resulted in a negative exchange rate result for the loan portfolio of EUR 0.9 million (2014: EUR 1.8 million positive). This exchange rate result will be withdrawn from the Exchange Equalisation Reserve by way of profit appropriation in Exchange rate results on participations are not credited to or debited from the result of Hivos-Triodos Fund due to the special financing agreement between Hivos and Hivos- Triodos Fund. 14

15 North-South Plan Interested parties can become involved in funding projects in developing countries through the North-South Plan set up by Triodos Bank and Hivos. They can do so in two ways: By opening a North-South savings account at Triodos Bank. The money in these accounts is used as a source of funding for the loan Triodos Bank extends to Hivos-Triodos Fund. By issuing a guarantee to cover the facility that Triodos Bank provides to the fund. The volume of North-South savings rose by 4% to EUR 112 million in The number of savers remained virtually unchanged at 11,270 customers. The volume of North-South guarantees slightly fell to EUR 1.3 million. North-South savers may choose to donate some or all of the interest due to them to Hivos, giving Hivos a means of covering the additional costs associated with the North-South Plan. Outlook The formation of the Sustainable Development Objectives of the United Nations and the agreement of the Climate Conference in Paris in 2015 reflect a growing global awareness that sustainable change is necessary. Access to finance, access to sustainable energy and sustainable agriculture chains are recurring themes in these. Hivos-Triodos Fund will increasingly focus on these three issues in 2016 and beyond. Within that context, the Supervisory Board adopted the strategic plan of Hivos-Triodos Fund at the end of This plan provides details on the further repositioning towards investment in renewable energy and sustainable agriculture chains. For 2016 Hivos-Triodos Fund expects the financial institutions in all regions to continue their steady growth. Positive growth rates are anticipated for the majority of countries where the fund is active. That means that the need for financing of financial institutions continues and that a number of financial institutions will grow to other Triodos funds or other 81% Percentage female loan clients in the portfolio like-minded investors. Hivos-Triodos Fund will remain active in financing financial institutions. However, there will be greater emphasis on renewable energy and sustainable agriculture chains. In that, Hivos-Triodos Fund sees an important role for SMEs and in the coming years will work more closely with local partners to expand the funding within this sector, especially in Sub-Saharan Africa and South Asia. The starting point is to enhance the expertise and knowledge of Triodos Investment Management with local presence of networks and partners. Hivos-Triodos Fund does not make any predictions on the exchange result on loans in local currencies. The cost structure of Hivos-Triodos Fund will slightly change in 2016; this will not result in significant differences in costs in comparison with previous years. Zeist, 28 April 2016 Fund Manager of Hivos-Triodos Fund Karel Nierop Board of Hivos-Triodos Fund Pierre Aeby Peter Blom Board of Triodos Investment Management Marilou van Golstein Brouwers (Chair) Dick van Ommeren Laura Pool 15

16 Portfolio Hivos-Triodos Fund 31 December 2015 GLOBAL Leapfrog Financial Inclusion Fund MFX Solutions LATIN-AMERICA EcoEnterprises Fund II EAST-AFRICA Novastar Ventures M-Kopa EL SALVADOR l AMC Optima Financial Services HONDURAS l COMIXMUL NICARAGUA l Asociacion Fonde de Desarrollo Fundeser Aldea Global MALI l Microcred Mali UGANDA l Centenary Bank EFC Uganda ZAMBIA l Agora Microfinance FINCA Zambia ECUADOR l Banco Solidario CACMU Fundación FACES INSOTEC Maquita PERU l EDPYME Alternativa Fondesurco Norandino BOLIVIA l IDEPRO Sembrar Sartawi SOUTH AFRICA l Small Enterprise Foundation AfriCap 16

17 KENIA l M-KOPA Solar CAMBODIA l AMK IPR INDIA l Annapurna Microfinance Bhartiya Samruddhi Finance Caspian Impact Investments IntelleGrow TANZANIA l Akiba Commercial Bank FINCA Tanzania EAST-TIMOR l Tuba Rai Metin MALAWI l FINCA Malawi INDONESIA l KOMIDA MBK Bina Artha Ventura Bank Andara 17

18 Report of the Supervisory Board The Supervisory Board met twice in At these meetings the Supervisory Board assessed developments within Hivos-Triodos Fund in the light of policy. It also adopted the budget for The annual accounts were discussed at the meeting held on 18 April The strategy to be pursued by Hivos-Triodos Fund in 2015 was discussed at both meetings. The Supervisory Board was informed of the progress of talks between Hivos, Triodos Bank and Triodos Investment Management on that strategy. In its meeting on 18 April 2016, the Supervisory Board discussed the 2015 annual report and annual accounts of the Hivos-Triodos Fund. The result for 2015 was EUR 525,296 (2014: EUR 3,397,124). This amount comprises the operating result of EUR 2,509,311 (2014: EUR 1,639,727), an addition to the (subordinated) loans provision of EUR 1,103,387 (2014: EUR 0) and a negative exchange rate result of EUR 880,628 (2014: EUR 1,757,397 positive). The exchange rate result will be withdrawn from the Exchange Equalisation Reserve. After settlement the loss, equity in 2015 amounted to EUR 13,112,868. This is well above the agreed minimum of EUR 2,500,000. Consequently, the fund did not need to make any claim against the guarantors in Zeist, 28 April 2016 Elsbeth Aubel-Bezemer Natasja van den Berg (Chair) Han de Groot Edwin Huizing Marcel Karman 18

19 Annual Accounts 2015 Hivos-Triodos Fund Page Balance sheet as at 31 December Profit and Loss Account for Explanatory notes to the balance sheet and profit and loss account 23 19

20 Balance sheet as at 31 December 2015 before profit appropriation (in thousands of euros) Note* Assets Fixed assets Cumulative preference shares Loans provided 2 49,764,933 44,204,056 Subordinated loans provided 2 407,533 Currency hedging instruments 3-2,029,030-1,104,963 47,735,903 43,506,626 Current assets Receivables and prepayments 4 2,421,134 2,343,766 Liquid assets 5 1,998,104 7,321,751 4,419,238 9,665,517 Total assets 52,155,141 53,172,143 Liabilities Equity General reserve 7 10,830,175 9,190,448 Exchange Equalisation Reserve 7 1,757,397 Result for financial year 525,296 3,397,124 13,112,868 12,587,572 Long-term liabilities Loans 8 24,584,022 24,584,022 Subordinated loans 9. 10,012,751 10,012,751 Current liabilities Current liabilities, accruals and deferred income 10 4,445,500 3,422,703 Liabilities to credit institutions 6 2,565,725 Total liabilities 52,155,141 53,172,773 Off-balance sheet liabilities, assets and rulings 11 Committed investments Participations (relating to assets managed for third parties) 3,741,891 1,567,713 Loans provided 662,535 2,931,399 Assets managed for third parties Hivos participations 29,075,632 25,229,744 Cordaid participations 472, ,507 * See notes to the balance sheet 20

21 Profit and loss account for 2015 (amounts in euros) Note Income Income from cumulative preference shares 12 21,279 Income from loans and subordinated loans provided 13 5,419,372 4,057,267 Interest on liquid assets 14 2,410 7,420 Donations received Expenditure 5,422,326 4,086,820 Management fee 16 1,615,565 1,406,844 Auditor s fee and consultant s fee 17 20,162 20,862 Interest expenses 18 1,244,646 1,003,772 Other expenses 19 32,642 15,615 2,913,015 2,447,093 Operating profit 2,509,311 1,639,727 Addition to loans provided provision -678,838 Addition to subordinated loans provision -424,549 Exchange rate result ,628 1,757,397 Deficit in the Exchange Equalisation Reserve made up by Hivos Result 525,296 3,397,124 * See notes to the balance sheet and profit and loss account 21

22 Notes to the balance sheet and profit and loss account (amounts in euros) General The Foundation was formed on 22 December These annual accounts represent its twenty-first financial year, which ended on 31 December This report has been drawn up in line with the Guideline for Annual Reporting (Richtlijn voor Jaarverslaglegging (RJ)) 640 for not-for-profit organisations. The participations are financed by third parties. They are presented, together with the funding received from third parties, under off-balance sheet liabilities, assets and rulings and the relevant notes. Cumulative preference shares Cumulative preference shares are carried at nominal value net of specific bad debt provisions. Redemption of these shares takes place at nominal value. Dividends are accounted for when they are received. Loans and subordinated loans provided Loans and subordinated loans provided are carried at amortised cost net of specific bad debt provisions, taking account of exchange rates as at the balance sheet date. Projects financed with loans are by nature high-risk. Consequently, losses on the original investment must be taken into account. A specific provision is made for anticipated loan losses and the associated interest payable if a project is actually expected to be discontinued. Provisions are made based on estimates made by the Manager. The Manager will use the services of multidisciplinary credit and valuation committees acting independently from operational matters to make managerial assessments in the most objective way possible. Currency hedging instruments Currency hedging instruments are only arranged to hedge currency risk. The fund applies cost-price hedge accounting to process assets, liabilities and results arising from currency hedging instruments. This means that all receivables and liabilities arising from these instruments are carried at the exchange rates on the balance sheet date. Value changes in respect of these items are recognised in the profit and loss account under unrealised value adjustments. The result at the time these contracts are entered into will be amortised throughout the term of the contract. The fund has generic hedging and other documentation available for the application of cost-price hedge accounting. The effectiveness of the hedging is assessed throughout the reporting period. Other assets and liabilities Other assets are carried at income expected, taking account of a bad debt provision, if any, in the case of receivables. Other liabilities are carried at payments expected. A specific provision is made for expected claims on guarantees. Loss set-off If the fund s equity falls to below EUR 2.5 million, the guarantors will be called upon to pay part of their guarantee to cover loses in the portfolio of cumulative preference shares, loans and guarantees. If the exchange rate results at the end of the year produce a negative balance, this will be debited from the 22

23 Exchange Equalisation Reserve in the subsequent financial year, entered under equity, by means of proposed profit appropriation in the financial year. If the Exchange Equalisation Reserve is insufficient and cannot be made up from the operating result, the loss arising from exchange rate results will be charged to Hivos on the basis of the Cooperation Agreement between the parties involved. Foreign currency Assets and liabilities in foreign currency are converted using the year-end exchange rate. Changes in balance sheet items and in income and expenditure are converted into foreign currency at the average exchange rate in the month in which the changes are recognised. Any conversion differences that arise are debited or credited to the result. Currency hedging instruments are arranged, as described in note 4, to hedge foreign exchange differences on loans. Principles for determining the result The result is determined based on the allocation of income and expenditure to the corresponding period. Managing financial risks The use of financial derivatives and other financial instruments involves various financial risks. The policy pursued by the Manager of Hivos-Triodos Fund with respect to these risks is set out below. Market risk Market risk is the risk that the value of an investment will fluctuate as a result of variations in the following external factors: I. exchange rate (currency risk) II. interest rate (interest rate risk) III. market price (market risk) Sub I. At the end of 2015, the largest part of the loans extended by Hivos-Triodos Fund is in local currency. Most of these had not been hedged by currency hedging instruments. The finance facilities in US dollars are almost entirely hedged by means of these instruments. The composition of the loan portfolio is shown on the next page by currency and indicating whether or not it is hedged. Sub II. The Hivos-Triodos Fund result partly depends on developments on the capital market. Depending on the composition of the portfolio, a change in the capital market interest rate may have either a positive or a negative effect on the results of Hivos-Triodos Fund. Sub III. Investments in participations involve a market price risk. The value of this investment category is affected by a multiplicity of external factors, including prospects for macro-economic growth and the rate of inflation. The greater the fluctuation in the development of these factors, the greater the market risk. The fund cannot defend itself against macro-economic factors that affect the value of investments. Changes in the value of participations managed for third parties are borne by these. 23

24 Loan portfolio currency spread (amounts in euros) Volume of investments Hedged (or no exposure) Not hedged Percentage of the loan portfolio Bolivia, Bolivian bolivianos (BOB) 6,613,998 6,613, % Cambodia, Cambodian riel (KHR) 2,727,251 2,727, % Honduras, Honduran lempira (HNL) 293, , % Indonesia, Indonesian rupiah (IDR) 5,975,489 5,975, % India, Indian rupee (INR) 7,136,420 4,834,796 2,301, % Mali, West African franc (XOF) 1,978,549 1,978, % Malawi, Malawian kwacha (MWK) 689, , % Peru, Peruvian sol (PEN) 4,657,975 4,657, % Tanzania, Tanzanian shilling (TZS) 1,249,621 1,249, % Uganda, Ugandan shilling (UGX) 397, , , % South Africa, South African rand (ZAR) 817, , % Zambia, Zambian kwacha (ZMW) 1,376,033 1,376, % Total in local currency 33,912,587 5,023,978 28,888, % Total investments in US dollars 15,852,346 13,766,311 2,086, % Subtotal of portfolio excluding the value of the currency hedging instruments 49,764, % Currency hedging instruments -2,029, % Total value of the loan portfolio at year end ,735, % Credit risk Credit risk is the risk that a creditor or counterparty cannot or will not fulfil its obligations. The fund issues finance facilities that are almost exclusively risk-bearing and are generally not backed by mortgage or other collateral. Liquidity risk Liquidity risk is the risk that Hivos-Triodos Fund has no possibility of obtaining the financial means it needs to be able to fulfil its financial obligations at a certain moment. This scenario is not applicable in the short term, since the operating profit from operational activities is considered to be sufficient for the time being to cover current liabilities. Although investments made by the fund are illiquid, they could be sold if there is a need for resources in the short term. A standard part of every loan agreement is an assignment right for Hivos-Triodos Fund. This is the lender s right to transfer (sell) the loan to another party without requiring the permission of the borrower, and without the borrower being able to stop this. The fund may also 24

25 negotiate early repayment. The Manager had neither the wish nor the need to make use of the option to sell loans in Moreover, Hivos-Triodos Fund has a hold strategy for its investments. The fund s investment policy aims to maintain the finance facility for the entire term of the loan and not to sell it unless absolutely necessary for the sake of the management of the fund (liquidity risk). Cash flow risk Cash flow risk is the risk that future cash flows associated with a financial instrument will fluctuate in volume. Future income from participations is difficult to predict and can fluctuate. The fund has investments in loans with variable interest rates and is therefore exposed to a cash flow risk depending on future interest income. 25

26 Assets Fixed assets 1. Cumulative preference shares Cumulative preference shares As at 1 January 44,556 Foreign exchange differences 3,025 Write-down of preference shares -47,581 As at 31 December Provision for cumulative preference shares As at 1 January -44,556 Foreign exchange differences -3,025 Write-down of provision 47,581 As at 31 December The cumulative preference shares were written down in A settlement took place during the 2014 financial year and a sum of 21,279 was received. 2. Loans and subordinated loans provided Movement in loans As at 1 January 44,204,056 33,513,094 Advance 17,544,189 14,562,122 Repayment -13,026,639-7,203,097 Foreign exchange differences 1,336,527 3,331,937 As at 31 December 50,058,133 44,204,056 26

27 Subordinated loans As at 1 January Additions 678,838 Foreign exchange differences 3,238 Transfer of loan provision to debtor sub-ledger provision -388,876 As at 31 December 293,200 Subordinated loans As at 1 January 407, ,432 Advance Repayment -292,952 Foreign exchange differences 19,041 40,053 As at 31 December 426, ,533 Subordinated loan provision As at 1 January Additions 424,549 Foreign exchange differences 2,025 Transfer of loan provision to debtor sub-ledger provision As at 31 December 426,574 Remaining term of the loans (including subordinated loans), overdue (payable on demand) < 1 year 20,185,238 19,285,352 - > 1 year and < 2 years 21,291,678 17,949,031 - > 2 years and < 3 years 4,840,189 7,050,723 - > 3 years and < 4 years 407,533 - > 4 years and < 5 years 3,447,829 49,764,934 44,611,589 27

28 3. Currency hedging instruments Movements in currency hedging instruments As at 1 January -1,104, ,363 Movements relating to valuation of contracts -662,932-2,089,054 Movement in forward points (transaction result) -261, ,728 As at 31 December -2,029,030-1,104,963 The terms are divided as follows: Less than one year -1,275, ,070 One to five years -753, ,893-2,029,030-1,104,963 The fund used currency hedging instruments to the value of EUR -2,029,030 (2014: EUR -1,104,963) in the form of currency forward contracts solely to hedge the currency risk of its investments. These are contracts in which Hivos-Triodos Fund has made a commitment to buy or sell the agreed foreign currency amounts on the agreed dates. During 2015, sales contracts worth USD 9,374,999 had been entered into (2014: USD 16,625,000). During 2015, no sales contracts for KZT had been agreed (2014: KZT 100,694,405). During 2015, no sales contracts for INR had been agreed (2014: INR 348,700,000). During 2015, no sales contracts for UGX had been agreed (2014: UGX 693,110,000). Current assets 4. Receivables and prepayments Specification of receivables, prepayments and accrued income Interest due on loans 1,855,379 1,621,130 VAT receivable 3, ,136 Receivables on loans 562,460 80,860 Interest due on liquid assets 6,640 2,421,134 2,343,766 28

29 5. Liquid assets Triodos Bank, current accounts (EUR) 178,140 Rabobank, current accounts (EUR) 477, ,576 Rabobank, current accounts (USD) 329, ,176 Rabobank, current accounts (ZAR) Kotak Mahindra Bank, current account (INR) 1,012, ,976 Rabobank, deposit account (EUR) 6,500,000 1,998,104 7,321,751 The liquid assets are at the free disposal of Hivos-Triodos Fund. The balance of the Rabobank USD current accounts at year-end 2015 was USD 358,265 (2014: USD 370,470). The average interest rate on the Rabobank current account in EUR was nil (2014 nil): The average interest rate on the Rabobank current account in ZAR was 4.34 % (2014: 3.64%). No interest is paid on the Rabobank current accounts in USD or on the Kotak Mahindra Bank account in INR. 6. Liabilities to credit institutions This concerns the negative balance of cash at Triodos Bank. At year-end 2015, this amounted to EUR nil (year-end 2014: EUR -2,565,725). The debit interest on this account in 2015 was 4.00% on average (2014: 4.00%). Liabilities Equity 7. General reserve As at 1 January 9,190,448 9,190,448 Deficit cleared by Hivos 529,219 Movements in foreign exchange differences -2,101,008 Addition of result from last financial year 1,639,727 1,571,789 As at 31 December 10,830,175 9,190,448 29

30 Exchange Equalisation Reserve As at 1 January Addition of result from last financial year 1,757,397 As at 31 December 1,757,397 Long-term liabilities 8. Loans Interest rate Interest rate fixed until Triodos Bank, loan I, matures 1 January % 1 December ,084,022 4,084,022 Triodos Bank, loan II, matures 1 January % 1 January ,500,000 5,500,000 Triodos Bank, loan IV, matures 1 January % 4,000,000 4,000,000 Triodos Bank, loan V, matures 1 January % 1 July ,000,000 4,000,000 Triodos Bank, loan VI, matures 01 January % 1 January ,000,000 3,000,000 Triodos Bank, loan VII, matures 1 August % 1 August ,000,000 4,000,000 24,584,022 24,584,022 Hivos has provided guarantees amounting to EUR 20,398,279 for the loans provided by Triodos Bank to Hivos-Triodos Fund. In addition, private individuals and various institutions have provided guarantees for the loans provided by Triodos Bank. These amounted to EUR 1,282,392 as at 31 December

31 9. Subordinated loans Interest rate Interest rate fixed until Hivos Foundation maturity date 1 October % 1 October ,012,751 10,012,751 10,012,751 10,012,751 On 1 October 2014, Hivos extended a subordinated loan worth EUR 10,012,751 for the purpose of funding microfinance institutions and similar entities. The subordinated loan comprises EUR 8,242,868 which has been placed in a deposit account and EUR 1,769,883. The interest on the amount in the deposit account is the same as the interest rate paid on the deposit account; for 2015 this was % (2014: %). After the deposit term ends, an interest rate of 3% will be due on the sum with which the current account is cleared. If an amount remains after clearing, that amount will be used to open a new deposit on which the deposit interest rate will be owed. The interest on the sum of EUR 1,769,883 is 3% from 1 January Current liabilities 10. Current liabilities, accruals and deferred income Finance facilities received in advance from Hivos 2,910,833 1,381,827 Prepaid interest 622, ,528 Management fee 323, ,149 Interest payable on Hivos credit facility 302,334 22,328 Interest payable on Triodos Bank credit facility 228, ,298 Repayment of loans received in advance 225,950 Miscellaneous 31,846 34,948 Liabilities to guarantors 18,745 18,745 Auditor s fee and consultant s fee 7,650 15,300 4,445,500 3,422,073 At year-end 2015, the interest rate on the Triodos Bank current account credit facility was 4.00% (2014: 4.00%). The total current account credit facility provided by Triodos Bank amounts to EUR 7,000,000 (2014: EUR 7,050,808). The credit facilities provided by Triodos Bank, recognised under long-term and current liabilities, are hedged by third-party guarantees. Specific provisions will be made for losses suffered by Hivos-Triodos Fund as a consequence of bad debts in the portfolio. If the additions to the provisions exceed the operating profit, an appeal will be made to the General Reserve of Hivos-Triodos Fund on the provision that a minimum of EUR 2,500,000 remains in the General Reserve. If the Specific Provision would lead to a decrease in the General Reserve to a level below EUR 2,500,000, an appeal will be made to the guarantee Hivos has given to Triodos 31

32 Bank for the sum needed to maintain the General Reserve of Hivos-Triodos Fund at EUR 2,500,000. If the guarantee from Hivos is insufficient, an appeal will be made to the private guarantors. After paying, the guarantors will succeed to Triodos Bank s rights in this matter, which means that the sum will become a liability owed by Hivos-Triodos Fund to the guarantors. The fund assumes that the guarantors will waive this liability, clearing this waived amount from the General Reserve. At year-end 2015, debts owed to guarantors comprised amounts not yet waived by the guarantors in respect of carry-over losses for the period between 1995 and year-end Liabilities to private guarantors As of 2004, an explicit waiver is no longer necessary under the new contract of surety and Hivos-Triodos Fund assumes that the guarantors will waive the right to payment of the sum spent settling the losses. Legally, private guarantors with a guarantee agreement dating from prior to 2004 can still reclaim any waived amounts in the future. At year-end 2015, this possible liability was nil, given that no appeal had been made to private guarantors in the period between 2004 and Off-balance sheet liabilities, assets and rulings Participations managed for Hivos Participations, which are equity interests that do not serve the fund s long-term operations, are valued at the last known stock exchange quotation in the financial year if the participations involve securities quoted on an active stock exchange. The fair value of participations that do not involve securities quoted on an active stock exchange or that do not have a regular market quotation can be determined in various ways: firstly, on the basis of the most recent market quotation, taking new market developments into account; secondly, by using the profitability value, return value and/or net asset value, individually or in combination, which may be considered relevant in relation to the purpose for which the investment is maintained; thirdly, by using the market value of comparable investments for which there is an active market with regular market quotations. Hivos-Triodos Fund does not owe a management fee in respect of participations. Direct arrangements have been made for this between Hivos and Triodos Investment Management. Movements in participations As at 1 January 25,229,744 31,447,895 Acquisitions 599, ,774 Sales -90,978-11,860,439 Exchange differences -971,414 2,093,630 Revaluation 4,308,380 3,128,884 As at 31 December 29,075,632 25,229,744 32

33 Subordinated loan Hivos has provided Hivos-Triodos Fund with a subordinated loan to finance participations. This subordinated loan is interest-free and has no maturity date. When a participation is sold, Hivos-Triodos Fund repays that part of the subordinated loan that relates to the participation using the proceeds from the sale. If the proceeds from the sale of a participation are not sufficient to repay the subordinated loan, Hivos shall waive that part of the subordinated loan not covered by the proceeds from the sale of the participation. Proceeds from participations that exceed the value of the subordinated loan will be paid to Hivos after carried interest has been paid to Triodos Investment Management. Movements in subordinated loans As at 1 January 12,504,051 15,500,224 Movements relating to advances* 1,588,665 Movements relating to repayments* -2,996,173 As at 31 December 14,092,716 12,504,051 *Movements relating to repayments in respect of the following subordinated loans Dividends Dividends received by Hivos-Triodos Fund in 2015 will be at the disposal of Hivos in early 2016 and until then shall form part of Current liabilities, accruals and deferred income on the balance sheet. Movements in dividends Dividends received 862, ,626 Dividends passed on -766,626 As at 31 December 862,934 Currency hedging instruments for participants These currency hedging instruments relate to investments in participations. These contracts are only taken out to hedge the currency risk on participations managed by Hivos. Movements in currency hedging instruments As at 1 January -196,213-9,134 Movements relating to valuation of contracts -35, ,438 Movement in forward points (transaction result) 1, As at 31 December -229, ,213 33

34 The terms are divided as follows: Less than one year -229, ,370 One to five years -45, , ,213 Amounts to be adjusted Amounts to be adjusted relate to foreign exchange differences and positive and negative revaluations of participations. Movements in amounts to be set off As at 1 January 14,107,522 17,880,543 Movements relating to revaluation of participations 5,172, ,948,443. Movements relating to foreign exchange difference on participations -974,825 2,306,690 Movements relating to currency forward contracts -411, ,268 As at 31 December 17,893,750 14,107,522 The movements in connection with the revaluation of participations relate to both unrealised revaluations and the effect of the settlement with HIVOS as a result of the sale of various participations. The difference between the balance of the subordinated loan, the amounts to be set off and the value of the participations concerns funding for participations paid in advance by Hivos. This balance is recognised on the Hivos-Triodos Fund balance sheet under the balance sheet item Current liabilities, accruals and deferred income. 34

35 Other participations This concerns the investment for a participation made by Cordaid. Cordaid has provided Hivos-Triodos Fund with a subordinated loan as a means of financing this participation. This subordinated loan is interest-free and has no due date. When the participation is sold, Hivos-Triodos Fund will repay that part of the subordinated loan that relates to the participation using the proceeds from the sale. If the proceeds from the sale of the participation are insufficient to repay the subordinated loan, Cordaid will waive the deficit. Proceeds that exceed the value of the subordinated loan will be paid to Cordaid. Movements in other participations As at 1 January 575, ,153 Funds received to buy and manage a participation Movements relating to revaluation of participations -101, ,648 Movements relating to foreign exchange difference on participations -1,748 78,002 As at 31 December 472, ,507 Committed investments Committed finance facilities are loans and participations that Hivos-Triodos Fund has approved and/or committed to but which have not yet been (fully) taken up by the organisation receiving the investment. After payment, the committed participations will also be managed by Hivos. Committed loans provided Fundeser, Nicaragua 215,396 1,652,906 Bina Artha Ventura, Indonesia 663,866 Intean Poalroath Rongroeurng, Cambodia 447, ,227 EFC Uganda, Uganda 201, ,535 2,931,399 Committed participations Novastar, Mauritius 2,497,664 EcoEnterprises Fund II, United Kingdom 1,193,846 1,103,300 Leapfrog Financial Inclusion Fund, Mauritius 50, ,413 3,741,891 1,567,713 Other Hivos-Triodos Fund had talks with the Dutch Tax and Customs Administration in 2014 about Hivos-Triodos Fund s possible liability for corporate income tax. The outcome was that Hivos-Triodos Fund is not liable for corporate income tax up to and including The Dutch Tax and Customs Administration will re-evaluate the situation again in 2017 for the period after

36 Income 12. Income from participations and cumulative preference shares These relate to the proceeds from the bankrupt estate of CRAC San Martín. 13. Income from loans and subordinated loans provided Interest received on loans provided and subordinated loans provided, as well as arrangement fees charged to borrowers when loans are granted are recognised here. 14. Interest on liquid assets Interest received on liquid assets is recognised here. 15. Donations received The interest donated to Hivos-Triodos Fund by clients of Triodos Bank, as well as donations received from third parties are recognised here. Expenditure 16. Management fee The management fee paid to Triodos Investment Management BV comprises the following two elements: a fee of 3.25% (2014: 3.25%) of the value of cumulative preference shares, loans including foreign exchange differences on currency forward contracts relating to USD loans, guarantees and receivables from loans at the end of the financial year; a fee of 2.5% (2014: 2.5%) of the highest outstanding principal sum during the year for short-term trade finance with a maximum terms of 12 months. 17. Auditor s fee and consultants fees 2015 budget Auditor s fee 15,000 15,000 15,300 advisory costs 8,000 5,162 5,562 23,000 20,162 20,862 The consultants fees comprise fees for legal advice, tax advice and project-related costs. 18. Interest expenses Interest charges on loans from Triodos Bank entered under long-term and current liabilities are recognised here. 36

37 19. Other expenses 2015 budget Publicity expenses 15,000 10,000-1,449 Office costs 16,000 22,642 17,064 31,000 32,642 15,615 Office costs include the cost of foreign and domestic payment transactions, the cost of courier services, levies and contributions. Hivos-Triodos Fund Foundation pays no remuneration to current or former directors and/or supervisors. Furthermore, Hivos-Triodos Fund Foundation has not provided loans, advances or guarantees to current or former directors and supervisors. 20. Exchange rate result Unrealised changes in the value of loans 1,355,785 3,350,145 Exchange rate differences on currency forward contracts -1,803,827-1,558,491 Transaction results on currency forward contracts -368, ,123 Foreign exchange differences in cash at bank and in hand and other receivables -63, , ,628 1,757,397 Comparison of operating result with budget The Supervisory Board approved the budget for 2015 at the end of 2014, which showed a budgeted operating result of EUR 2,033,000. The actual operating result was EUR 2,509,311. The higher than budgeted result is in part the result of higher interest income on the loan portfolio and in part the result of lower management fees and interest charges. Affiliated parties Hivos-Triodos Fund has relationships with the following legal entities: 1 Triodos Investment Management BV manages Hivos-Triodos Fund for which it receives a competitive management fee. At the same time, Triodos Investment Management BV is entitled to receive carried interest on the sale of participations, if the conditions for this are met. 2 Triodos Bank NV is the sole shareholder of Triodos Investment Management BV. 37

38 3 Triodos Bank NV - Triodos Bank NV has made credit facilities available in a current account at market rates. - Triodos Bank NV has made six loans available at market rates. - Hivos-Triodos Fund concludes currency forward contracts with Triodos Bank NV at market rates. 4 Hivos-Triodos Fund, together with Triodos Sustainable Finance Foundation (formerly: Triodos-Doen), Triodos Fair Share Fund and Triodos SICAV II - Triodos Microfinance Fund grants finance facilities (syndicated loans) and participations managed by Triodos Investment Management BV. 5 Hivos provides contracts of suretyship for finance facilities extended by Triodos Bank NV to Hivos- Triodos Fund and subordinated loans for the purpose of funding participations. 6 Hivos-Triodos Fund is a shareholder in MFX Solutions. Currency forward contracts are also concluded with MFX Solutions. Zeist, 28 April 2016 Board of Hivos-Triodos Fund Pierre Aeby Peter Blom 38

39 Other information Profit appropriation The articles of association of Hivos-Triodos Fund contain no guidelines for profit appropriation. The result for 2015 was EUR 525,296 (2014: EUR 3,397,124). This amount comprises the operating result of EUR 2,509,311 (2014: EUR 1,639,727) less an addition to the provision for loans of EUR 1,103,387 (2014: nil) and a negative exchange rate result of EUR (2014: EUR 1,757,397). The operating result will be added to the general reserve and the exchange rate result will be added to the Exchange Equalisation Reserve. Post balance sheet events After the balance sheet date, no events occurred which affected the understanding and interpretation of the 2015 annual accounts. ANBI status Hivos-Triodos Fund has been granted charitable status by the Dutch Tax and Customs Administration (Algemeen Nut Beogende Instelling (ANBI)). The RSIN (Legal Entities and Partnerships Information Number) for Hivos-Triodos Fund is

40 Independent auditor s report To: the Board of Stichting Hivos-Triodos Fonds Report on the financial statements We have audited the accompanying financial statements 2015 of Stichting Hivos-Triodos Fonds, Zeist, the Netherlands, which comprise the balance sheet as at 31 December 2015, the profit and loss account for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information. The board of management s responsibility The board of management of the Foundation is responsible for the preparation and fair presentation of these financial statements and for the preparation of the Report of the Board, both in accordance with Dutch GAAP Directive 640 for non-profit organisations. Furthermore, the board of management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Foundation s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Foundation s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Stichting Hivos- Triodos Fonds as at 31 December 2015 and of its result for the year then ended in accordance with Dutch GAAP Directive 640 for non-profit organisations. Amstelveen, 28 April KPMG Accountants N.V. M. Frikkee RA 40

41 41

42 Appendix: Hivos-Triodos Fund Portfolio: microfinance institutions financed by Hivos-Triodos Fund as at 31 December 2015 and 2014 Percentage Number of loan customers of female loan customers Setting Country Agora Microfinance Zambia 9,561 7,382 58% 55% Akiba Commercial Bank Tanzania 31,192 29,249 60% 51% AMC El Salvador ** 10,746 56% Angkor Microfinance Kampuchea (AMK) Cambodia 323, ,597 82% 83% Annapurna Microfinance India 488, , % 100% Arariwa Peru ** 10,587 77% FDL Nicaragua 67,710 61,555 51% 50% Banco Solidario Ecuador 348, ,990 52% 51% Bereke Kazakhstan ** 5,523 90% Bhartiya Samruddhi Finance India ** ** CACMU Ecuador 4,384 3,668 57% 57% Centenary Bank Uganda 170, ,821 24% 24% COMIXMUL Honduras 12,753 16, % 100% Edpyme Alternativa Peru 31,259 27,470 45% 47% EFC Uganda Uganda % 40% FINCA Malawi Malawi 50,305 40,642 57% 58% FINCA Tanzania Tanzania 67,816 77,908 55% 55% FINCA Zambia Zambia 33,785 39,729 67% 67% FONDESURCO Peru 10,743 11,040 43% 42% FACES Ecuador 14,243 12,204 57% 57% Idepro Bolivia 13,255 12,795 36% 37% INSOTEC Ecuador 15,198 15,595 41% 41% IPR Cambodia 4,688 4,424 90% 85% Komida Indonesia 229, , % 100% La Cooperativa Maquita Cushunchic Ecuador 8,664 7,681 50% 46% MBK Indonesia 567, , % 100% Norandino Peru 4,956 *** 19% *** Bina Artha Ventura Indonesia 164, , % 100% Sembrar Sartawi Bolivia 20,334 19,834 51% 50% Small Enterprise Foundation South Africa 131, , % 100% 42

43 Loan portfolio (in thousands of euros) Average loan (in euros) Percentage of customers in rural areas Number of savings customers % 70% 0 * 38,122 34,742 1,222 1,188 0% 0% 197, ,712 16,970 1,579 71% * 105,744 79, % 96% 146, ,719 89,201 37, % 85% 0 * 4, % * 76,699 61,540 1,133 1,000 69% 68% 0 * 502, ,539 1,443 1,344 3% 3% 124,622 88,171 4, % * ** ** ** ** 15,663 12,547 3,573 3,421 85% 80% 20,599 18, , ,846 1,340 1,578 28% 33% 1,109,203 1,057,181 40,988 39,050 3,214 2,392 40% 38% 30,044 30,186 25,167 22, % 59% 0 * 3,854 2,559 4,158 3,624 0% 0% 0 * 10,029 6, % 54% 0 * 23,221 26, % 40% 0 * 11,222 13, % 15% 90, ,162 16,992 17,345 1,582 1,571 84% 84% 1,300 * 21,992 16,723 1,544 1,370 42% 42% 0 * 47,781 42,839 3,605 3,348 52% 52% 0 * 24,943 20,540 1,641 1,317 75% 79% 0 * 7,974 6,267 1,701 1,417 98% 98% 0 * 16,618 13, % 92% 239, ,917 25,498 21,682 2,943 2,823 2% 1% 15,330 14,688 54,781 47, % 90% 0 * 9,619 *** 1,941 *** 90% *** 8,039 *** 12,250 9, % 79% 0 * 40,517 34,483 1,993 1,739 58% 89% 0 * 16,238 21, % 100% 0 * 43

44 Percentage Number of loan customers of female loan customers Setting Country Tuba Rai Metin East Timor 9,148 6,797 94% 99% Ugafode Uganda ** 11,490 31% Total 2,834,825 2,519,309 81% 78% * Not applicable ** Loan repaid *** Not financed in 2014 Besides directly financing MFIs, Hivos-Triodos Fund holds shares in Caspian Impact Investments, an investment fund that extends loans to producer organisations in the agricultural sector, MFIs, financial institutions that focus on small and medium-sized enterprises and on affordable housing for the poor. Through its investments, Caspian Impact Investments currently reaches 4,009,109 loan clients (almost exclusively women), 63% of whom live in rural areas. Through its investments in the agricultural industry, Caspian Impact Investments reaches some 73,000 farmers; doubled compared to Hivos-Triodos Fund also has shares in Leapfrog Financial Inclusion Fund, which invests in insurance companies that focus on providing services to low-income groups; in MFX Solutions, which specialises in currency hedging instruments for the microfinance sector; in EcoEnterprises Fund II, which invests in sustainable SMEs in Latin America, including in the agricultural industry; and in Bank Andara, which extends loans to microfinance institutions in Indonesia. In 2015, Hivos-Triodos Fund invested in Novastar Ventures, which invests venture capital in sustainable SMEs in East Africa. Through this Novastar reaches, inter alia, 200,000 families who were able to buy a sustainable stove. In addition, Hivos-Triodos Fund extended a loan to Aldea Global and Norandino, both coffee farmer cooperatives. Furthermore, in 2015 Hivos- Triodos Fund extended a loan to M-KOPA in East Africa, which reaches 300,000 homes with solar energy. Finally, Hivos-Triodos Fund extended a loan to Intellegrow in India, which focuses on lending to sustainable SMEs in India. In 2015, Intellegrow s loan clients offered employment to approximately 35,000 people, of which 28% are women. 44

45 Loan portfolio (in thousands of euros) Average loan (in euros) Percentage of customers in rural areas Number of savings customers ,699 3, % 81% 6,433 3,847 7, % 25,500 1,476,044 1,389, % 67% 1,990,617 1,928,384 45

46 46

47 Address Hivos-Triodos Fund Foundation Nieuweroordweg 1 PO Box AB Zeist Telephone +31 (0) (customer contact) Telephone +31 (0) (general) Publication Details Hivos-Triodos Fund Foundation Annual Report 2015 Circulation 75 copies Published April 2016 Text Hivos-Triodos Fund Foundation, Zeist Graphic design Michael Nash Associates, London Layout Via Bertha, Utrecht, the Netherlands Photography M-Kopa, Kenya Printing Drukkerij LibertasPascal, Utrecht, the Netherlands If you have any comments or questions about this report, please contact Triodos Bank. This report can also be read or downloaded from: 47

48 TLB Hivos-Triodos Fund Foundation is a joint initiative of Hivos and Triodos Bank.