FMO ( NEDFIN ) INVESTOR PRESENTATION THE DUTCH DEVELOPMENT BANK October 2016 www.fmo.nl
CONTENTS I. About FMO 3 II. Strong Backing by the State 5 III. Investment Approach 9 IV. Financials & Risk Management 14 V. Liquidity Management & Funding 23 VI. Contact 28 VII. Appendix 30 Cookhouse wind farm, South Africa 2
I. ABOUT FMO 3
FMO AT A GLANCE The international development bank of the Netherlands - incorporated in 1970 Promoting sustainable private sector growth in developing markets focusing on green and inclusive development Strong backing by the State of the Netherlands AAA (Fitch), AAA (Standard & Poor s) credit ratings and industry leading sustainability ratings Licensed bank supervised by the Dutch Central Bank FMO is an eligible issuer under the Public-Sector Purchase Programme of the ECB WE EMPOWER ENTREPRENEURS TO BUILD A BETTER WORLD 4 4
II. STRONG BACKING BY THE STATE 5
DUTCH STATE IS MAIN PROVIDER OF CAPITAL Public Private Partnership The State owns 51% of the shares (A shares). Private sector entities own 49% of the shares (B shares) Voting rights for A shares and B shares are equal. A shares may only be issued to the State The State has an economic interest of more than 90% of shareholders equity Shareholders equity (in EUR mln, per June 30, 2016) Shareholders (per June 30, 2016) 628 7% 658 1,308 42% 51% Contractual Reserve Development Fund Share Capital, Share premium reserve and Other Components* Dutch State Dutch banks: ABN AMRO, ING, Rabobank Trade Unions, Employer's Federations, Companies, Individuals * Other components comprise of available for sale reserve, translation reserve, other reserves and undistributed profit, and minority interest. Differences may arise due to rounding 6
EXPLICIT DUTCH STATE SUPPORT Explicit support agreement* Documented in the bilateral Agreement State FMO of 16 November 1998 ** Art. 7: Maintenance Obligation: The Dutch State is committed to covering all losses from operations that cannot be covered by general or specific provisioning and reserves Art. 8: Financial Security Obligation: The Dutch State shall prevent situations arising in which FMO is unable to meet its commitments on time Valid for an indefinite period and may be cancelled subject to a twelve-year notice period *) http://www.rijksoverheid.nl/documenten-en-publicaties/notas/2013/10/18/nota-deelnemingenbeleid-rijksoverheid-2013.html **) This is a synopsis of the actual text. The State Agreement should be fully read for a complete understanding. A full copy of State Agreement available at www.fmo.nl 7
FMO MANAGES EUR 1,194 MLN IN GOVERNMENT FUNDS *) Off balance sheet funds for risk of the Dutch Government to finance high risk projects MASSIF: EUR 562 mln Resources for financial institutions to aid the development of Micro, Small and Medium-sized Enterprises (MSMEs) Infrastructure Development Fund: EUR 521 mln Long-term financing for infrastructure projects Access to Energy Fund : EUR 81 mln Private sector projects that create sustainable access to energy services * Committed per Dec. 31 st 2015; includes FOM-OS of EUR 30 mln 8
III. INVESTMENT APPROACH 9
FOCUS ON SECTORS WITH HIGHEST LONG-TERM IMPACT By supporting financial institutions, FMO paves the way for financing SMEs, microenterprises and individuals as well 31% 8% 38% Access to affordable energy is not just essential for everyday living it can also empower those who use it 23% Financial Institutions Energy Other Agribusiness Achieving long term sustainability in global agribusiness production requires large investments targeted at improving farming practices, increasing yields and reducing waste *Based on committed investment portfolio, excl. government funds, of EUR 7.7 bln per Jun 30 th, 2016 High-impact initiatives from other sectors can also benefit from FMO s services, expertise and global network 10
PROVIDING LONG TERM FINANCING Broad range of financing products Investment portfolio per currency* Third party financing through FMO Investment Management and syndicated loans 9% 13% Private equity: Fund investments, co-investments with funds and direct investments in focus sectors Typical holding period 5 10 years 78% Euro USD Local currency Investment portfolio per product* Private equity portfolio (per Jun 30 th 2016) Equity Loans Guarantees Mezzanine 3% 13% 55% 29% 38% 62% Private equity funds Direct investments * Based on committed investment portfolio, excl. government funds, of EUR 7.7 bln per Jun 30 th 2016 11
INVESTMENT PROCESS Credit Advice Credit Advice Credit Advice Credit Advice Clearance in Principle Term Sheet Due Diligence Finance Proposal Contract Disbursement Annual Review Provisioning SO Fair Value Changes Front Office Decision CR Decision IC Decision IC Advice IRC / CR Decision CR Decision MB Decision 12
INTEGRATED ESG APPROACH sustainability as a value driver SUSTAINABLE INVESTMENTS Environmental Impact Social Impact Corporate Governance Economic Impact Resource efficiency Energy efficiency Biodiversity Emissions to air Global energy issues Water/chemical usage Diversity Human rights Health & safety Community relations Equal opportunity Respect for individuals Board structure and accountability Internal controls, audit and risk management Management of conflicts of interest and related party transactions Accounting and disclosure practices Independence of external auditors Consistent profitable growth Shareholder value Risk management Ho chi minh city, Vietnam 13
IV. FINANCIALS & RISK MANAGEMENT 14
STEADY PORTFOLIO GROWTH Portfolio development 2005 Jun16 (in EUR mln) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Jun- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 16 Committed portfolio* 2,059 2,216 2,765 3,543 3,877 4,566 5,046 5,450 5,789 7,065 8,062 7,776 * Committed portfolio excludes government funds; CAGR: Compounded Annual Growth Rate 15
PROFITABLE THROUGHOUT THE CRISIS Income composition (in EUR mln) 350 300 250 200 150 100 50 0-50 -100-150 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun-16 Income 134 202 199 210 166 225 238 271 254 260 320 148 Value adjustments 8 6-36 -124-52 -29-59 -46-18 -51-29 -38 Net Profit 73 134 105 48 60 126 93 146 133 124 174 57 16
DIVERSIFIED BELOW INVESTMENT GRADE PORTFOLIO Portfolio breakdown per credit rating* 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 4% 6% 43% 41% 40% 40% 41% 38% BBB- and higher BB-, BB, BB+ B-, B, B+ CCC+ and lower ratings 12% 13% 16% Dec-13 Dec-14 Dec-15 Per Dec 2015 approx. 600 counterparties with approx. EUR 15 mln average exposure **) Credit ratings reflect counterparty credit quality Internal credit ratings are mapped versus Moody s Collateral is acquired on 29% of the gross loan amount *) Gross loan portfolio excluding government funds (disbursed) **) Number of counterparties and exposure relate to the gross loan portfolio 17
RECENT GRADUAL INCREASE IN NPL S; LOW WRITE-OFFS Non-performing loans development 16% 14% 12% 13.6% 12.4% NPL % of portfolio 10% 8% 6% 4% 2% 0% 0.3% 1.1% 8.1% 8.0% 6.8% 6.9% 6.0% 5.8% 4.9% 4.2% 3.6% 3.8% 3.2% 2.3% 3.4% 3.5% 4.1% 0.4% 0.2% 0.6% 0.5% 0.1% 0.5% 0.6% 0.7% 2008 2009 2010 2011 2012 2013 2014 2015 Jun-16 Principals with arrears > 90 days Write offs % of portfolio Recent increase in NPL s due to country and counterparty specific events Low write-downs as a result of active management and focus on recovery * NPL %: loans value adjusted and loans not value adjusted but past due more than 90 days as % of the gross loan portfolio excluding government funds (disbursed) 18
BACKED BY CONSERVATIVE PROVISIONING Loan provisioning 14.0% 12.0% 10.0% 8.0% 12.1% 12.5% 11.6% 11.0% 10.4% 9.2% 8.4% 7.8% 7.6% 6.0% 4.0% 2.0% 1.1% 3.6% 2.3% 3.4% 3.5% 4.1% 3.2% 3.8% 4.2% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 Jun-16 Principals with arrears > 90 days Value adjustments Value adjustments on loans consist of: Counterparty-specific value adjustments Group-specific value adjustments * As % of the gross loan portfolio excluding government funds (disbursed) 19
WELL DIVERSIFIED GLOBALLY Portfolio breakdown per country and sector 8% 7% 6% 5% 4% 3% 2% 1% 0% Other Agribusiness Energy Financial Sector Exposure spread over more than 85 countries 10 largest country exposures represent approx. 1/3 of the total portfolio Country limits based on country ratings and FMO s capital base Sector limits capped at 50% of country limit * Based on committed investment portfolio of EUR 7.7 bln as per June 30 th, 2016 excl. government funds and loans guaranteed by the Dutch State 20
EUR 7.7 BLN OF INVESTMENTS AROUND THE WORLD *) (Dark) No requirement for a relation with Dutch businesses EASTERN EUROPE & CENTRAL ASIA 1.0 BLN ASIA 2.2 BLN NON SPECIFIC REGION 0.4 BLN LATIN AMERICA & THE CARIBBEAN 1.8 BLN AFRICA 2.2 BLN * Per Jun 30 th, 2016. Committed portfolio excl. government funds and loans guaranteed by the Dutch State 21
SOLID CAPITAL BASE Regulatory Capital Ratios 2011 Jun16 35% 30% 25% 29.4% 29.0% 26.7% 26.1% 27.7% 24.7% 21.3% 23.6% 24.9% 22.9% 23.8% 21.3% 20% 15% 10% 5% 0% 2011 2012 2013 2014 2015 Jun-16 BIS ratio Core Tier I ratio Shareholders' equity / Total assets Risk Weighted Assets (RWA) = EUR 10.2 bln. (Dec-15) Over 95% of net profit is retained The Regulatory Capital Ratio is based on a 99.9% confidence level (A level) 22
V. LIQUIDITY MANAGEMENT & FUNDING 23
LOW RISK LIQUIDITY PORTFOLIO To meet conservative liquidity requirements Short term investments Long term bond portfolio: Fair value of EUR 638 mln (Jun-16) Buy and hold ECB-eligible Liquidity Coverage Ratio (LCR) of 594% Positive and negative ESG screening Investments in green bonds 26% Bond portfolio by country (per Jun 30 th 2016) 7% 6% Netherlands 3% Supra 35% Germany 13% Belgium Finland UK 7% France EU 15% 13% Bond portfolio by rating* (per Jun 30 th 2016) 31% 69% AAA AA * The lower of Fitch and S&P is used 24
FUNDING STRATEGY: DEMONSTRATED MARKET ACCESS Funding need of EUR 1.0 to 2.0 bln p.a. Funding per Currency (per Sep-30 th 2016) Funding secured though demonstrated 0.9% 8% 1% AUD market access as SSA borrower Public markets and private placements Focus on USD and EUR funding Duration matching (3Y 5Y) Max. tenor 12 years 38% 1% 5% 0.2% 0.1% 45% CHF EUR JPY KGS NZD USD ZAR ZMW Sustainability Bonds to finance: Green projects Inclusive finance projects FMO is an eligible issuer under the Public Sector Purchase Programme of the ECB 1,250 1,000 750 500 Redemption profile (per Sep-30 th 2016) 250 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 25
KEY FEATURES SUSTAINABILITY BONDS Industry leading Sustainability Ratings Sustainalytics Oekom Research Sustainability Bond allocations in EUR million (per Jun 30 th 2016) Member of the Green Bond Principles (GBP) 158 112 Use of proceeds reporting via Sustainability Bond Newsletter https://www.fmo.nl/susbonds IFI working group on Green Bond Impact reporting harmonization Project disclosure on FMO world map: https://www.fmo.nl/map 730 External assurance to confirm alignment with GBP - Sustainalytics 2nd opinion on FMO Sustainability Framework - Sustainalytics review of eligible projects Available funding Disbursed, green Disbursed, inclusive - KPMG: use of proceeds (financial perspective) FMO awarded First Green Bond Netherlands certificate by Climate Bond Initiatives (partnership per Feb-16) 26
BONDS OUTSTANDING Year Amount Tenor 2013 USD 500 mln, 1.50% 12/02/2018 5 year 2014 USD 500 mln, floater 12/06/2017 3 year 2014 USD 500 mln, floater 21/10/2019 5 year 2016 USD 500 mln, floater 18/04/2019 3 year 2013 EUR 500 mln, 1.25% 13/11/2018 (Sustainability) 5 year 2015 EUR 500 mln, 0.125% 20/04/2022 (Sustainability) 7 year 2015 EUR 500 mln, 0.125% 04/11/2020 5 year 2012 JPY 20 bln, 0.86% 02/03/2017 5 year 2010 CHF 100 mln, 1.755% 10/03/2017 7 year 2014 AUD 100 mln, 4.75% 11/09/2024 10.5 year 2014 AUD 70 mln, 5.00% 05/05/2026 12 year 2014 AUD 380 mln, 4.25% 08/07/2025 11 year 2014 NZD 100 mln, 4.75% 16/10/2019 5 year 27
VI. CONTACT 28
CONTACT INFORMATION Matthijs Pinxteren Director Treasury Direct +31 70 3149575 E-mail m.pinxteren@fmo.nl Arthur Leijgraaff Senior Treasury Officer Direct +31 70 3149852 E-mail a.leijgraaff@fmo.nl Anna van Saksenlaan 71 P.O. Box 93060 2509 AB The Hague The Netherlands www.fmo.nl BB ticker: NEDFIN Pim Arends Senior Treasury Officer Direct +31 70 3149416 E-mail p.arends@fmo.nl FMO s legal name is Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. FMO is also known as the Netherlands Development Finance Company 29
VII. APPENDIX 30
FINANCIAL OVERVIEW Balance sheet (EUR mln) 2009 2010 2011 2012 2013 2014 2015 Jun-16 Net loans 1,942 2,269 2,585 2,817 2,981 3,860 4,307 4,335 Equity investments portfolio 1 531 688 795 914 962 1,149 1,500 1,560 Shareholders' equity 1,327 1,514 1,665 1,815 1,963 2,138 2,511 2,594 Debt securities and debentures/notes 2,180 2,365 2,679 3,292 3,610 4,197 5,348 5,702 Total assets 3,772 4,305 5,059 5,564 6,184 7,088 8,421 8,820 Committed investment portfolio 2 4,598 5,292 5,874 6,281 6,633 8,013 9,256 8,948 of which are government funds 3 721 726 828 831 844 978 1,194 1,172 Profit and loss account (EUR mln) Income Net interest income 109 133 147 154 155 169 227 108 Income from equity investments 27 52 46 89 43 72 44 27 Other income including services 30 40 45 28 56 19 49 13 Total income 166 225 238 271 254 260 320 148 Expenses Operating expense 52-50- 52-57- 62-62- 79-42- Operating profit before value adjustments 114 175 186 214 192 198 241 106 Value adjustments - to loans and guarantees 46-18- 23-23- 4 36-10- 13- - to equity investments 6-11- 36-23- 22-15- 19-25- Total value adjustments 52-29- 59-46- 18-51- 29-38- Share in the results of subsidiaries & associates 1-5 9-4 5-2 3 0 Profit before tax (including results from subs./ass.) 61 151 118 172 169 149 215 68 Taxes 1-25- 25-27- 36-25- 41-11- Net profit 60 126 93 145 133 124 174 57 1) Including associates. 2) Committed investment portfolio concerns both investment for FMO's account and for government funds managed by FMO. 3) The government funds include Massif, Infrastructure Development Fund, Access to Energy Fund and NIMF (until 2007). 31
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