Triodos Sustainable Finance Foundation

Transcription

1 Triodos Sustainable Finance Foundation Annual report 2016 TLIM

2 Microfinance is the provision of financial services to low-income people in developing countries. An inclusive financial sector, where the majority of people have access to financial services, provides a sustainable basis for balanced socio-economic development.

3 Triodos Sustainable Finance Foundation Annual report 2016

4 Table of Contents Page Report by the Board of Management 5 General information 8 Annual accounts 9 Other information 25 Annex A: Investment portfolio breakdown by currency 30 Address and publication details 31 4

5 Report by the Board of Management This is the twenty-third annual report of Triodos Sustainable Finance Foundation ( the Foundation ), known as Triodos-Doen Foundation until December During the year 2016 the foundation continued to fulfill its original mission, which is to finance initiatives that accelerate sustainable development worldwide. The report by the board of management complies with the requirements as stated in the guidelines RJ C1 for small not for profit organisations. Strategic goals Triodos Sustainable Finance Foundation intends to remain a relevant, innovative player in the rapidly evolving impact investment industry. For quite a number of years, the foundation s main focus lay on the inclusive finance sector in developing countries, in which it played a pioneering role. As the inclusive finance sector has reached a certain scale and the established financial institutions have gained access to a broader investor base, the foundation decided to broaden its investment focus within its mission to include impact investments that accelerate sustainable development worldwide. For this reason, the foundation aims to reduce its portfolio in the inclusive finance sector which still has a focus on the higher risk segment and/or relatively untapped countries and/or countries characterised by relatively large unbanked populations. Portfolio developments Equity portfolio At year-end 2016 the value of the equity portfolio amounted to EUR 37.0 million (year-end 2015: EUR 32.3 million). The increase in the equity portfolio is mainly a result of the value increase of the investment in ACLEDA Bank in Cambodia, due to its ongoing good performance. Further to its more broad investment focus to include impact investments that accelerate sustainable development worldwide, an equity investment in Crowd Invest BV (Duurzaaminvesteren.nl) materialised in February Duurzaaminvesteren.nl is an crowd funding platform licensed by the Autoriteit Financiele Markten (AFM) for renewable energy projects in the Netherlands. Debt portfolio At year-end 2016, the value of the debt portfolio stood at EUR 19.1 million (year-end 2015: EUR 22.7 million). In general, Triodos Sustainable Finance Foundation has a targeted debt portfolio, stimulating existing investees to search alternative funding sources. As such, ten investees reimbursed their outstanding loan amounts while seven investees received (additional) debt funding. Five new microfinance institutions were added to the portfolio in 2016, amongst others OnePhunan in The Philippines and Alliance Group Leasing in Georgia. OnePuhunan focuses on small-scale entrepreneurs and with funding from Triodos Sustainable Finance Foundation, the institution aims to extend its lending practices and improve its 'green' products and create a more comprehensive environmental policy. Alliance Group Leasing (AGL) provides local businesses with access to proper productive equipment through financial and operational lease. Triodos Sustainable Finance Foundation is AGL s first international investor, and as such it helps AGL to improve its investment profile for potential funding from other international investors. Further to its more broad investment focus to include impact investments that accelerate sustainable development, Triodos Sustainable Finance Foundation decided to provide two loans to a public benefit organisation called Stichting People 4 Earth (SP4E) in One loan was disbursed in The other loan was disbursed in April SP4E will use the funding to further develop its product Agriplace, a platform for farmers, auditors and standard setting organisations, which aims to simplify compliance to healthy, social, environmental standards and as a result enhance transparency in the (organic) food and agriculture sector. 5

6 Financial results The total invested portfolio of Triodos Sustainable Finance Foundation, including the value of currency hedge instruments, grew from EUR 52.9 million to EUR 53.4 million in the course of This was driven by positive revaluations of the equity portfolio, currency effects and net investment activity. The revenues from the debt portfolio (interests earned on loans) were slightly lower than in 2015, reflecting the slight decrease of the foundation s total debt portfolio. In the course of the year, the foundation decided to provision four (senior) loans outstanding to several microfinance institutions in the African region. These provisions are mostly caused by negative macro-economic developments and related shortages in foreign currency in this region. These situations are closely monitored. The (unrealised) performance of the equity portfolio remained above expectations in Combined, this led to a net financial result of EUR 1.5 million as a result of which the foundation s net asset value grew to EUR 63.5 million by year-end 2016 (year-end 2015: EUR 62.0 million). Financial risks During the year 2016 the Foundation had to deal with various financial risks. The main risks emerged this year were: Currency risk The financial reporting of Triodos Sustainable Finance Foundation is in euro Investments by the Foundation and payments to the fund by the institutions invested are, however, largely made in local currency or in US dollars. The fund is therefore exposed to currency risk. The currency risk associated with investments in US dollars is largely hedged through forward foreign exchange contracts. The currency risk associated with local currency investments is, in principle, hedged, unless there are no opportunities for foreign exchange transactions or excessive costs. The exposure to volatile exchange rates may affect the value of the fund over short periods. At the end of 2016, 15.8% (2015: 21.6%) of the fund's portfolio was invested in unhedged local currency. Liquidity risk Liquidity risk is the risk that Triodos Sustainable Finance Foundation will not be able to obtain the financial resources needed to meet its financial obligations at any given time. To mitigate this risk, a number of measures have been taken: The Foundations investments are illiquid but can be sold. In the loan agreements, a so-called assignment right is usually included for Triodos Sustainable Finance Foundation. This is the lender's right to transfer (sell) the loan to another party without the consent of the borrower. The borrower cannot stop this either. The fund strives to maintain sufficient cash or cash equivalents to meet its obligations under normal circumstances. This percentage was 15.3% at the end of 2016 (2015: 16.0%). Cash and cash equivalents are largely held on current and savings accounts at Rabobank and Triodos Bank and are at free disposal. Country risk Country risk is inherent in the objective of the fund. Triodos Sustainable Finance Foundation invests, among others, in countries with high political risks, countries that are in economic recession and countries with a moderately developed legal framework. In addition, there may be countries that have a dependent economic structure through a limited number of income sources and dependence on external financing. Price developments on world markets and changes in international policy can therefore greatly affect the macroeconomic development of such a country. In addition, as a result of policy changes, political measures can be taken with significant impact on investments, such as interest rate maximization or currency-market restrictions. These influences can cause inflation 6

7 and devaluation of a currency. The strong correlation between country risk, inflation risk and currency risk is an important part of the risk analysis for Triodos Sustainable Finance Foundation. The risk is included in the pricing of funding. In order to limit land risk, Triodos Fair Share Fund aims to limit investments per country to a maximum of 20% of its Net Asset Value. Credit Risk Credit risk is the risk that borrowers of Triodos Sustainable Finance Foundation cannot fulfill their debt service obligations. Most of the foundation s investees are characterised by a relatively high credit risk profile. This is mitigated by the strategy to diversify the portfolio, limiting the exposure to one single investee and limiting the aggregate exposure to a single country (see also the paragraph on concentration risk above). In addition, the investments are subject to a strict approval and monitoring process. Portfolio-at-Risk (PAR) ratios (the percentage of non-performing loans in the total loan portfolio) of the financial institutions in the Triodos Sustainable Finance Foundation portfolio are a possible indicator of increased credit risk and are closely monitored on a continuous basis. Non-financial risks Triodos Investment Management carries out management activities for Triodos Sustainable Finance Foundation and has identified the risk management policy in an integral manner in order to control operational risks. Operational risks are the risk of financial losses due to inadequate or failing internal processes, people and systems or external events. Compliance risks are risks associated with non-compliance or inadequacy of laws and regulations. These risks are continuously determined, measured, managed and monitored through appropriate procedures and reports. Outlook and policy for 2017 and beyond Triodos Sustainable Finance Foundation continues to fulfill its original mission, which is to finance initiatives that accelerate sustainable development worldwide. In the years ahead, the foundation intends to focus on investments that accelerate the sustainable development worldwide in an innovative manner while reducing its portfolio in the inclusive finance sector. In this respect, the Board of Management plans to develop a new investment mandate in As was the case in the past, both debt and equity investments and both direct and fund-of-fund investments will be considered. In order to protect the net asset value in real terms, Triodos Sustainable Finance Foundation remains to aim at generating a net financial return that equals the inflation rate. Expected net financial returns remain heavily dependent on revaluations of equity participations. In addition, financial returns remain to some extent exposed to capital markets, including interest rate and currency fluctuations. Remuneration The Board of Management of Triodos Sustainable Finance Foundation did not receive any remuneration in Zeist, The Netherlands, 6 June 2017 Board of Management Pierre Aeby Peter Blom Jellie Banga 7

8 General information History Triodos Sustainable Finance Foundation is the successor to the Triodos-Doen Foundation. On 22 January 1994, the DOEN Foundation and Triodos Bank joined together to form Triodos-Doen Foundation to enable innovation that would accelerate sustainable development world-wide. Since then, its aims have evolved into anchoring sustainable banking in the microfinance sector in developing countries. On 10 December 2013, the Articles of Association were amended and its name was changed to Triodos Sustainable Finance Foundation. Under its new name, Triodos Sustainable Finance Foundation maintains its aim to finance initiatives that accelerate sustainable development worldwide, including but not limited to inclusive finance. Governance The Board of Management of Triodos Sustainable Finance Foundation consists of Pierre Aeby, Jellie Banga and Peter Blom. Triodos Investment Management BV, a wholly owned subsidiary of Triodos Bank, manages Triodos Sustainable Finance Foundation. Marilou van Golstein Brouwers is the Chair of the Management Board of Triodos Investment Management BV and responsible for Triodos Sustainable Finance Foundation. Laura Pool is Director Risk & Finance and Dick van Ommeren is Managing Director within Triodos Investment Management. José van Pul is the Fund Manager of Triodos Sustainable Finance Foundation. 8

9 Annual accounts Page Balance sheet at 31 December Profit and loss account for the year ended 31 December Cash flow statement for the year ended 31 December Notes to the balance sheet, profit and loss account and cash flow statement 13 9

10 Balance sheet at 31 December, 2016 Before appropriation of profit (amounts in EUR) Note Investments Participations 1 36,957,670 32,269,481 Subordinated loans 1 3,508,987 3,900,606 Senior loans 1 15,631,344 18,793,476 Currency hedging instruments positive 1, 2 642, ,485 Currency hedging instruments negative 1, 2-3,333,165-2,904,641 53,407,597 52,949,407 Current assets Receivables and deferred assets 3 1,877, ,680 Cash and cash equivalents 4 9,741,305 9,933,821 Short-term liabilities 5-1,491,126-1,616,054 Result current assets and short-term liabilities 10,127,544 9,069,447 Result total assets and short-term liabilities 63,535,141 62,018,854 Equity Capital 6 32,128,869 32,128,869 Revaluation reserves 7 19,279,866 21,928,280 Other reserves 8 10,610,119 4,767,906 Unappropriated result 9 1,516,287 3,193,799 Total long-term liabilities and equity 63,535,141 62,018,854 Off-balance sheet items Committed equity participations , ,267 The accompanying notes form an integral part of these financial statements. 10

11 Profit and loss account for the year ended 31 December 2016 (amounts in EUR) Note Revenues from investments Participations 11 3,625, ,230 (Subordinated) loans issued 12 2,129,119 2,674,167 5,754,388 3,439,397 Realised value adjustments of investments Participations -54, ,037 Unrealised value adjustments of investments Participations 1,328,197 5,216,558 (Subordinated) loans issued 37, ,761 Foreign exchange contracts -892,513-1,976, ,508 4,040,034 Other revenues Interest on cash and cash equivalents ,500 Total revenues 6,179,718 7,114,894 Expenses Management expenses 14 1,876,923 1,784,911 Transaction results foreign exchange contracts , ,712 Other expenses ,059 Interest expenses 16 5,967 26,066 Total expenses 2,522,788 2,544,748 Operating result 3,656,930 4,570,146 Exchange rate differences , ,733 Movement in provision for loans 18-1,659, ,998 Movement in provision for claims ,256 Corporate income tax , ,872 Net result 20 1,516,287 3,193,799 The accompanying notes form an integral part of these financial statements. 11

12 Cash flow statement for the year ended 31 December 2016 (amounts in EUR) Cash flow from investment activities 131, ,777 Receipt revenues from participations 1,817,829 2,212,220 Receipt revenues from (subordinated) loans -1,274,314-6,151,991 Receipt revenues from foreign exchange contracts -363,818-4,809,052 Investments in participations 104, ,345 Sales of participations -6,725,714-2,442,226 Disbursement of (subordinated) loans 7,926,362 4,891,422 Repayment of (subordinated) loans -1,569,006-1,904,683 Payment of management fees -1,569,006-1,904,683 Other payments and receipts -250, ,472 Total cash flow from investment activities -203,406-6,953,716 Net Cash Flow -203,406-6,953,716 Exchange and conversion differences on cash and cash equivalents 10,890 66,984 Cash flow -192,516-6,886,732 Cash and cash equivalents at 1 January 9,933,821 16,820,553 Cash flow -192,516-6,886,732 Cash and cash equivalents at 31 December 9,741,305 9,933,821 The accompanying notes form an integral part of these financial statements. 12

13 Notes to the balance sheet, profit and loss account and cash flow statement The Foundation was established as Stichting Triodos-Doen on 22 February It changed its name to Stichting Triodos Sustainable Finance Foundation on 10 December The Foundation has its headquarters in Zeist and is registered at the Chamber of Commerce under number These annual accounts represent its twenty-third financial year. As a consequence of the foundation s mission, the activities can be characterised as not-for profit-activities. Accounting principles The 2015 annual report was prepared in accordance with Dutch GAAP (guidelines RJ 640) for not for profit organisations. The 2016 annual report is prepared in accordance with Dutch GAAP guidelines RJ C1 for small not for profit organisations as the guideline RJ C1 directive is, based on the size criteria, more consistent with the size of the Fund. Change in presentation The basis of valuation and of the determination of results has been adjusted as follow in relation to the previous reporting period: The cost prices of investments in participations have been adjusted for stock dividends (dividends in the form of new shares). Due to the developments of financial institutions and reporting in emerging countries, there is a better connection with the Dutch reporting standards. The adjusted form of presentation of stock dividends reflects the proceeds and the course of the participations better. The presentation changes have no effect on the capital or results of the Foundation but relate to changes within the balance sheet and / or profit and loss account. General accounting principles Assets and liabilities in foreign currency are translated in euros at the period end exchange rate. The investment portfolio of Triodos Sustainable Finance Foundation consists of participations and loans (subordinated and senior). Other financial assets and currency hedging instruments are presented as financial fixed assets in the balance sheet. The investment portfolio is valued at fair value. Expenditure related to the purchase of investments are capitalized. Selling expenses on invested investments are charged to the transaction result through the profit and loss account. All adjustments to the fair value of investments are accounted for through the profit and loss account. The fair value is determined as follows: Participations Participations, being capital interests, are valued at the most recently known stock exchange quotation if they are securities quoted on an active stock exchange. The fair value of participations that are not securities listed on an active stock exchange, or without a regular market quotation, can be determined in various ways. Firstly, on the basis of the most recent market quotation taking into account recent market developments. Secondly, by using their profitability value, return value and/or net asset value that may, whether or not in combination, be deemed relevant in connection with the purpose for which the participation is maintained. Finally, by using the market value of comparable investments for which there is an active market with a regular market quotation. 13

14 Loans issued Loans are valued at amortized cost after deduction of specific provisions for bad debts in anticipation for non-recovery. Both loans and provisions are valued at the applicable exchange rate at the balance date. This method can be considered as the best estimate for the fair value of the loans. Currency hedging instruments Currency hedging instruments are used solely to hedge currency risk. The fund applies cost hedge accounting to recognise assets, liabilities and results arising from currency hedging instruments for loans. This means that all claims and obligations arising from these instruments are valued at the exchange rates at balance sheet date. Valuation changes in respect of these items are recognised in the profit and loss account through unrealised valuation changes. The forecast results of the currency hedging contracts are amortised over the entire term of the contract. The Foundation has generic documentation available describing the procedure applied to carry out cost price hedge accounting. The effectiveness of the hedge is assessed during the reporting period. Use of estimates The preparation of the annual accounts requires management to make judgments and estimates and assumptions. These assumptions determine how the annual accounts are reported. The actual outcomes may differ from the estimates made by the board of management. The estimates and assumptions are therefore reconsidered. If an estimate is reviewed then it becomes which was included in the relevant period. For the valuation of the investment portfolio, the board of management requires estimates and assumptions. The board of management uses multidisciplinary credit and valuation committees that are independent of operating the operational matters. They monitor the valuation methods and make the management estimates as thoughtful as possible. Other assets Other assets are valued at amortized cost. Provisions will be made for non-recoverable receivables. Cash and cash equivalents Cash and cash equivalents are valued at fair value and are partially at free disposal of the Foundation Accounts payable and deferred liabilities Accounts payable and deferred liabilities are valued at amortized cost, being the amount payable, taking into consideration transaction costs. Short term liabilities do have a maturity date within one year. Currency The annual accounts are presented in euros, the Foundation s functional currency. Transactions denominated in foreign currency are translated into euros at the exchange rate applying on the transaction date. Monetary assets and liabilities denominated in foreign currency are translated at the balance sheet date into to the functional currency at the average exchange rate applying in the relevant month. Non-monetary assets and liabilities in foreign currency that are stated at historical cost are translated into euros at the average exchange rate applying in the relevant month. Exchange rate gains and losses are also taken to the profit and loss account. 14

15 Principles for determination of profit The principle for determining profit is based on the attribution of income and expenses to the relevant period. The income from payments of profit on investments is accounted for in the year when payment is made available. The conversion of income and expenses into foreign currency occurs at the average exchange rate in the month the amount is attributed to the result. Unrealised value adjustments of investments, foreign exchange contracts, exchange rate differences and additions to and reversals of specific provisions are separately debited or credited to the profit and loss account. Unrealised positive revaluation results as a result of unrealized value adjustments of investments are added to the revaluation reserve. (Operational) expenditure Expenses are attributed to the corresponding period. When determining the accruals, expenditure paid in advance is also taken into consideration. Other income and expenses Other income and expenses are attributed to the corresponding period. Cashflow statement The cash flow statement is presented by using the direct method. Risks Management of financial risks The Foundation has a number of financial risks. The policy of Triodos Sustainable Finance Foundation regarding these risks is listed below. Market risk Market risk concerns the risk that the value of an investment fluctuates as a result of fluctuations of the following external factors, such as: I. Exchange rate (currency risk) II. Interest rate (interest rate risk) III. Market price (market price risk) Ad I: The reference currency for Triodos Sustainable Finance Foundation is EUR, while its investments are predominantly made in USD or local currency. It is Triodos Sustainable Finance Foundation s policy to hedge currency exposures when possible and appropriate and it limits its open currency exposure to any single local currency to 15% of the Foundation s Net Asset Value. An overview of hedged and open exposure to single currencies can be found in Annex A. Ad II: The result of Triodos Sustainable Finance Foundation is partly dependent on developments in the capital market. Depending on the composition of the portfolio, a change in the interest rate on the capital market may have a positive or negative effect on the results of Triodos Sustainable Finance Foundation. 15

16 Given the nature of the loans, the fact that there is no active market for these loans, the subjective assumptions regarding the interest rate determination and the relatively short interest rate periods, the interest rate changes have a limited effect on the valuation. As a result, the interest rate risk expired by Triodos Sustainable Finance Foundation is also limited. Ad III: Investments in participations involve market price risk. The value of these investments is influenced by external factors, such as the prospects of economic growth and inflation. The more fluctuation, the greater the market risk. The Foundation cannot defend itself from macroeconomic factors that affect the value of agricultural land and other financial investments. Concentration risk Triodos Sustainable Finance Foundation aims to keep single investee exposures below 10% and its single country exposure below 20% of its Net Asset Value. However, its exposure to ACLEDA Bank in Cambodia remains higher due to continuous positive revaluations. As the revaluations of equity participations are unrealised gains and do not comprise disbursements from Triodos Sustainable Finance Foundation, this so-called passive breach of concentration guideline is deemed acceptable. Valuation risk Valuation risk refers to the risk that the values of the participations do not reflect the fair market value because valuations are based on infrequent market-based data, assumptions and peer group comparisons. As Triodos Sustainable Finance Foundation invests almost exclusively in assets that are not traded on a regulated market and are not listed on any stock exchange, its investments may not have readily available prices and may be difficult to value. In order to determine the value of these investments, the foundation employs a consistent, transparent and appropriate valuation methodology, based on the International Private Equity and Venture Capital Valuation Guidelines (IPEV) as published by the IPEV Board and endorsed by the European Private Equity and Venture Capital Association (EVCA). To the extent that this methodology relies on periodic market-based data and peer group comparisons, the valuation of the assets may fluctuate with the variations in such data. Credit risk Credit risk is the risk that borrowers of Triodos Sustainable Finance Foundation cannot fulfill their debt service obligations. Most of the foundation s investees are characterised by a relatively high credit risk profile. This is mitigated by the strategy to diversify the portfolio, limiting the exposure to one single investee and limiting the aggregate exposure to a single country (see also the paragraph on concentration risk above). In addition, the investments are subject to a strict approval and monitoring process. Portfolioat-Risk (PAR) ratios (the percentage of non-performing loans in the total loan portfolio) of the financial institutions in the Triodos Sustainable Finance Foundation portfolio are a possible indicator of increased credit risk and are closely monitored on a continuous basis. 16

17 Liquidity risk The investment portfolio of Triodos Sustainable Finance Foundation is relatively illiquid: it consists of participations in privately owned businesses or loans for which there is no active secondary market. Liquidity risk, or the risk that Triodos Sustainable Finance Foundation will not be able to attract the financial means necessary to satisfy certain obligations, is however in line with risk appetite of the Foundation. Recurrent financial obligations are mainly management fees and, in past financial years, interest payable on outstanding debt. Management expenses (including management fees) are covered by expected revenues from interest-bearing investments (loans). More volatile financial obligations are related to settlement of foreign exchange contracts (which can lead to cash inflows or cash outflows). The value and due date of these contracts is monitored on a continuous basis and the Foundation maintains a minimum level of liquidity in order to ensure orderly settlement of such contracts. 17

18 Balance sheet at 31 December 2016 Assets 1. Investments Movements in the investments during 2016: Participations Subordinated loans Senior loans Currency hedging instruments* Total Position at 1 January 32,269,481 3,900,606 18,793,476-2,014,156 52,949,407 Investments / disburse ments / Additions 3,518,815 9,126,511 10,052,059 Sales / repayments / releases -158, ,787-10,392,331-10,998,941 Provision -1,507,122-1,507,122 Movement term points 311, ,083 Revaluations 1,328,197 3,921,464 Exchange rate differences 56, , ,331-1,320,353 Position at 31 December 36,957,670 3,508,987 15,631,344-2,690,404 53,407,597 * This consists of a positive amount (EUR 642,761) and negative amount (EUR 3,333,165) of currency hedging instruments. Movements in the investments during 2015: Participations Subordinated loans Senior loans Currency hedging instruments* Total Position at 1 January 23,021,832 1,135,015 23,570,773-3,004,141 44,723,479 Investments / disbursements / Additions 5,089,160 2,710,303 4,705,424 12,504,887 Sales / repayments / releases -939,973-9,739,554-10,679,527 Provision -487, ,640 Movement term points -254, ,698 Revaluations 5,098,462 5,098,462 Exchange rate differences 55, ,473 1,244,683 2,044,444 Position at 31 December 32,269,481 3,900,606 18,793,476-2,014,156 52,949,407 * This consists of a positive amount (EUR 890,485) and negative amount (EUR -2,904,641) of currency hedging instruments. 18

19 The remaining term of the loans varies from 0 to 150 months. The loans are mainly risk-bearing loans without mortgage security or other collateral. 2. Currency hedging instruments To receive EUR or USD 35,419,582 34,806,991 To pay foreign currency -38,678,809-37,078,888 Exchange difference -3,259,227-2,271,897 Term points 568, ,741-2,690,404-2,014,156 The maturity date of the currency hedging instruments is: Less than one year -2, ,384-1,851,810 One to five years -519, ,346-2,690,404-2,014,156 Triodos Sustainable Finance Foundation uses forward foreign exchange contracts and cross currency interest rate swaps only for hedging foreign exchange risks in outstanding investments or the cash flow of these investments. A breakdown of currency hedging of all investments and hedge contracts can be found on page Receivables and deferred assets Accrued interest on loans 659, ,840 Corporate Income Tax 602,140 Interest and repayments charged 502,366 Value added tax 113, ,840 1,877, ,680 Receivables are expected to be received in less than one year. 19

20 4. Cash and cash equivalents Triodos Bank, current account EUR 3,270,816 3,844,379 Triodos Bank, savings account EUR 5,003,025 Rabobank, current accounts EUR 6,642, ,078 Rabobank, current accounts USD 7, ,339 9,741,305 9,933,821 Cash and cash equivalents at 31 December 2016 are available for committed financings. The interest rate on the Triodos Bank current account was 0.00% (2015: 0.00%). The interest rate on the Triodos Bank savings account at 31 December 2016 was 0.00%, during 2016 the interest rate of 0.15% on the balance up to EUR 1,000,000 came down to 0.00% (2015: 0.15% up to EUR 1,000,000). The average interest rate in 2016 on the Rabobank EUR account and the Rabobank USD accounts was 0.00% and 0.00% respectively (2015: 0.00% and 0.00%). Liabilities 5. Short-term liabilities Management fee payable to Triodos Investment Management 930, ,618 Accounts Payable 544,291 34,543 Prepayment on loan repayment 298,009 Independent Auditor s and consultancy fees 9,991 8,000 Miscellaneous 5,959 12,652 Corporate Income tax 335,872 Share of cash dividend payable to Triodos Investment Management 30,759 Fees payable in relation to sale of Participations 27,632 Value added tax 19,969 1,491,126 1,616,054 The amounts payable are expected to be paid within one year. 20

21 6. Capital Position at 1 January 32,128,869 32,128,869 Result previous year Position at 31 December 32,128,869 32,128, Revaluation reserve Position at 1 January 21,928,280 16,241,223 Movement positive revaluations -2,648,414 5,687,057 Position at 31 December 19,279,866 21,928, Other reserves Position at 1 January 4,767,906 7,937,041 Movement positive revaluations 2,648,414-5,687,057 Result previous year 3,193,799 2,517,922 Position at 31 December 10,610,119 4,767, Unappropriated result Position at 1 January 3,193,799 2,517,922 Movement to other reserves -3,193,799-2,517,922 Unapproriated result current year 1,516,287 3,193,799 Position at 31 December 1,516,287 3,193,799 21

22 Off-balance sheet items 10. Committed equity participations LeapFrog Financial Inclusion Fund 344, ,267 Duurzaaminvesteren.nl - 300, , ,267 Profit and loss account for 2016 Income 11. Revenues from investments: participations This item comprises dividend payments (EUR 153,886) of three companies in which participations are held, a stock dividend (EUR 3,166,883) and a repayment of share premium on a partial sale (EUR 304,500). 12. Revenues from investments: (subordinated) loans issued This includes interest income on subordinated and senior loans provided. 13. Interest on cash and cash equivalents This relates to the interest earned on bank account balances. Expenses 14. Management & Other expenses Management expenses Management fee 1,822,354 1,716,785 Office expenses 19,863 28,443 Legal fees 18,547 22,431 Independent Auditor s fees 15,201 16,290 Publicity expenses ,876,923 1,784,911 22

23 This item contains the management fee for Triodos Investment Management BV, which is % (annually) of the value of the outstanding participations and convertible loans at the end of each quarter; % (annually) of the value of the outstanding subordinated and senior loans and (net) currency hedging instruments including, interest and repayments in arrears, at the end of each quarter; % (annually) of the value of the investments in funds managed by or loans to related parties, at the end of each quarter. 15. Transaction results foreign exchange contract This relates to the transaction costs on foreign exchange contracts. 16. Interest expenses This relates to the interest costs on current accounts and to corporate income tax. 17. Exchange rate differences Exchange rate differences on current assets, accounts payable, provisions, deferred liabilities and forward foreign exchange contracts are reported here. 18. Movement in provisions for loans and claims. Additions to, and reversals of the provisions are reported here. 19. Corporate income tax This includes an amount of corporate income tax to be received in 2017 as a result of a correction for 2015 and carry back of the fiscal loss in Appropriation of the result The result for 2016 of EUR 1,516,287 will be added to the other reserves. 21. Subsequent events There were no events after balance sheet date with material impact on the Fund or figures in this report. Related parties Triodos Sustainable Finance Foundation is related to other legal entities. The relevant related parties and corresponding transactions over 2016 and / or positions as at 31 December 2016 are: 1. Triodos Investment Management BV: Triodos Investment Management carries out management activities for Triodos Sustainable Finance Foundation and receives a competitive management fee and carried interest for these activities from the profit (after deduction of a hurdle rate) realised from sales of participations and over received dividends (amounting to EUR 1,822,354 for 2016; EUR 1,716,786 for 2015) 23

24 2. Triodos Bank NV: Triodos Bank NV is the sole shareholder of Triodos Investment Management BV. Triodos Sustainable Finance Foundation has deposited part of its cash and cash equivalents (34%) with Triodos Bank at arm s-length rates. Triodos Sustainable Finance Foundation concludes 91% of its forward foreign exchange contracts with Triodos Bank at arm s-length rates. 3. Triodos Organic Growth Fund: Triodos Organic Growth Fund is also managed by Triodos Investment Management BV. Triodos Sustainable Finance Foundation has made a EUR 3,000,000 investment in Triodos Organic Growth Fund. 4. Triodos Renewables Europe Fund: Triodos Renewables Europe Fund is also managed by Triodos Investment Management BV. Triodos Sustainable Finance Foundation has made a EUR 3,000,000 investment in Triodos Renewables Europe Fund. 5. Triodos Sustainable Trade Fund: Triodos Sustainable Trade Fund is also managed by Triodos Investment Management BV. Triodos Sustainable Finance Foundation has made a USD 3,000,000 disbursement of subordinated loan to Triodos Sustainable Trade Fund. 6. MFX Solutions LLC: MFX Solutions LLC is a financial institution with a focus on currency hedge instruments. Stichting Triodos Sustainable Finance Foundation has also has a minority stake in and fulfills supervisory tasks related to MFX Solutions LLC. Triodos Sustainable Finance Foundation has 9% of its currency instruments with this institution at arm s-length rates. 7. Triodos Sustainable Finance Foundation provided together with Triodos Fair Share Fund, Stichting Hivos- Triodos Fund and Triodos SICAV II-Triodos Microfinance Fund financing (syndicated loans) for EUR 6,500,000 million at year-end It also jointly occurred in investments in shares, EUR 22,700,000 million at year-end Triodos Investment Management acts as syndicate leader and carries out the management of these entities. Zeist, 6 June 2017 Board of Management Pierre Aeby Peter Blom Jellie Banga 24

25 Other information Agreement with DOEN Foundation As described in its articles of Triodos Sustainable Finance Foundation and referring to the agreement dated 22 December 2011, DOEN Foundation would become entitled to a supplementary grant amounting to EUR 10 million upon dissolution of Triodos Sustainable Finance Foundation. ANBI-status Stichting Triodos Sustainable Finance Foundation has a charitable status in the Netherlands (ANBI-status). Stichting Triodos Sustainable Finance Foundation is registered under RSIN: Independent auditor s report The indepent audors s report is included on the next page. 25

26 Independent auditor s report To: the board of management of Stichting Triodos Sustainable Finance Foundation Report on the financial statements 2016 Our opinion In our opinion the accompanying financial statements give a true and fair view of the financial position of Stichting Triodos Sustainable Finance Foundation as at 31 December 2016, and of its result for the year then ended in accordance with the Guideline for annual reporting C1 Small not-for-profit organisations of the Dutch Accounting Standards Board. What we have audited We have audited the accompanying financial statements 2016 of Stichting Triodos Sustainable Finance Foundation, Zeist ( the foundation ). The financial statements comprise: the balance sheet as at 31 December 2016; the profit and loss account for the year then ended; the notes, comprising a summary of the accounting policies and other explanatory information. The financial reporting framework that has been applied in the preparation of the financial statements is the Guideline for annual reporting C1 Small not-for-profit organisations of the Dutch Accounting Standards Board. The basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the section Our responsibilities for the audit of the financial statements of our report. Independence We are independent of Stichting Triodos Sustainable Finance Foundation in accordance with the Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 26

27 Report on the other information included in the annual report In addition to the financial statements and our auditor s report thereon, the annual report contains other information that consists of: report by the board of management; general information; other information; annex A: Investment portfolio breakdown by currency; and address and publication details. Based on the procedures performed as set out below, we conclude that the other information: is consistent with the financial statements and does not contain material misstatements; contains all information that is required by the Guideline for annual reporting C1 Small not-for-profit organisations of the Dutch Accounting Standards Board. We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing our procedures, we comply with the requirements of the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those performed in our audit of the financial statements. Responsibilities for the financial statements and the audit Responsibilities of the board of management The board of management is responsible for: the preparation and fair presentation of the financial statements in accordance with the Guideline for annual reporting C1 Small not-for-profit organisations of the Dutch Accounting Standards Board; and for such internal control as the board of management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of the financial statements, the board of management is responsible for assessing the foundation s ability to continue as a going concern. Based on the financial reporting framework mentioned, the board of management should prepare the financial statements using the going-concern basis of accounting unless the board of management either intends to liquidate the foundation or to cease operations, or has no realistic alternative but to do so. The board of management should disclose events and circumstances that may cast significant doubt on the foundation s ability to continue as a going concern in the financial statements. 27

28 Our responsibilities for the audit of the financial statements Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion. A more detailed description of our responsibilities is set out in the appendix to our report. Rotterdam, 6 June 2017 PricewaterhouseCoopers Accountants N.V. Original has been signed by drs. S. Barendregt-Roojers RA 28

29 Appendix to our auditor s report on the financial statements 2016 of Stichting Triodos Sustainable Finance Foundation In addition to what is included in our auditor s report we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves. The auditor s responsibilities for the audit of the financial statements We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted, among other things, of the following: Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control. Obtaining an understanding of internal control relevant to the audit 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. Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of management. Concluding on the appropriateness of the board of management s use of the going-concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the foundation s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the foundation to cease to continue as a going concern. Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the board of management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 29

30 Annex A: Investment portfolio breakdown by currency amounts in EUR Investments Hedged (or no exposure) Open exposure Percentage of total investment portfoio Bolivia, Bolivian Bolivianos (BOB) 492, , % Cambodia, Cambodian Riel, KHR 940, , % India, Indian Rupee (INR) 780, , % Jordan, Jordanian Dinar (JOD) 945, , % Kazakhastan, Kazakh Tenge (KZT) 968, , % Nigeria, Nigerian Naira (NGN) 688, , % Peru, Peruvian Sol (PEN) 1,220,627 1,505, , % Philippines, Philippine Peso, PHP 1,505,242 1,505, % Tajikistan, Tajik Somoni (TJS) 358, , % Tanzania, Tanzanian Shilling (TZS) 1,327,265 1,327, % Zambia, Zambian Kwacha (ZMK) 253, , % Total local currency 9,481,378 2,832,212 6,649, % EUR 8,557, % USD 38,058,708 35,846,597 2,212, % Subtotal portfolio excl, value of currency hedging instruments 56,098,001 38,678,809 8,861, % Value of currency hedging instruments -2,690, % Total value of investment portfolio 53,407, % 30

31 Address and publication details Address Triodos Sustainable Finance Foundation Nieuweroordweg 1 PO Box 55, 3700 AB Zeist The Netherlands Telephone Production Triodos Sustainable Finance Foundation Annual Report 2016 Published June 2017 Graphic design Michael Nash Associates, London, United Kingdom Design and lay-out Via Bertha, Utrecht, the Netherlands Contact If you have any comments or questions about this report, please contact Triodos Investment Management. This report can be downloaded from: 31

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