Notes to the annual accounts

1. Banks

The cash on bank accounts can be freely disposed of.

2. Current accounts

The cash on current accounts can be freely disposed of.

3. Loan portfolio

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

The following tables summarize the loans segmented by sector and geographical area:

For more details on non-performing loans, we refer to section 'Credit Risk' within the Risk Management chapter

The movements in the gross carrying amounts and ECL allowance for the loan portfolio measured at AC are as follows:

• 1 Movements in ECL related to partial repayments are included in the row "Changes in risk profile not related to transfers".

The table below show the values of the IMF GDP forecasts used in each of the economic scenarios for the ECL calculations for 2020. The upside and downside scenario calculations are derived from the base case scenario, adjusted based on an indicator of public debt to GDP in emerging markets.

The following tables outline the impact of multiple scenarios on the ECL allowance:

The table below represents sensitivity of ECL stage 2 allowance for loan portfolio and loan commitments.

Refer to 'Accounting Policies' chapter on macro-economic scenarios on PD estimates.

4. Equity investments

The equity investments in developing countries are for the Fund's account and risk. The movements in fair value of the equity investments are summarized in the following table. Equity investments are measured at FVPL.

The following table summarizes the equity investments segmented by sector:

5. Investments in associates

The movements in net book value of the associates are summarized in the following table:

The Fund invested in JCM Salima UK Ltd (“Salima”), a company incorporated in the U.K. and 75% owner of JCM Matswani Solar Corp Ltd, a Malawi Special Purpose Vehicle (the “Project Company”) established for the development of a 60 MWac solar PV plant located in the Salima district of Malawi (the “Project”). Salima is incorporated in the U.K. and is registered at 3 More London Riverside, London, United Kingdom, SE1 2AQ. AEF's share and voting rights in "Salima" is 31%.

Investments in associates are valued based on the equity accounting method.

The following table summarizes the associates segmented by sector.

The following table summarizes the share in the total assets, liabilities, total income and total net profit/loss of the associates:

6. Other receivables

7. Accrued liabilities

Accrued liabilities consist of accrued costs related to capacity development expenses.

8. Provisions

The amounts recognized in the balance sheet are as follows:

9. Contributed capital and reserves

10. Net interest income

11. Net fee and commission income

12. Dividend income

13. Results from equity investments

14. Results from financial transactions

15. Expenses

Remuneration FMO is the management fee paid by the fund to FMO.

Capacity Development expenses relate to grants or contributions paid to beneficiaries in terms of the fund's objectives.
Evaluation costs relate to expenses made during frequent investigations and controls of existing investments and costs for the due diligence of new projects.

16. Off-Balance Sheet information

To meet the financial needs of borrowers, the Fund enters into various irrevocable commitments (loan commitments, equity, and grants). Provisions for loan commitments are calculated according to ECL measurement methodology applied for on balance loan portfolio.

Nominal amounts for irrevocable facilities is as follows:

The movement in exposure for the loan commitments and ECL allowance is as follows:

17. Analysis of financial assets and liabilities by measurement basis

The summary of accounting policies describes how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognized. The following table gives a breakdown of the carrying amounts of the financial assets and financial liabilities by category as defined in under IFRS and by balance sheet heading.

Fair value hierarchy

All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy, based on lowest level input that is significant to the fair value measurement as a whole, as follows:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
Level 3 – Valuation technique for which the lowest level input that is significant to the fair value measurement is unobservable.

Valuation process

For recurring and non-recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the Fund uses the valuation processes to decide its valuation policies and procedures and analyze changes in fair value measurement from period to period.

The fair value methodology and governance over it’s methods includes a number of controls and other procedures to ensure appropriate safeguards are in place to ensure its quality and adequacy. The responsibility of ongoing measurement resides with the relevant departments. Once submitted, fair value estimates are also reviewed and challenged by the IRC. The IRC approves the fair values measured including the valuation techniques and other significant input parameters used.

Valuation technique

When available, the fair value of an instrument is measured by using the quoted price in an active market for that instrument (level 1). A market is regarded as active if transactions of the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, valuation techniques are used that maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

Valuation techniques include:

• Recent broker / price quotations

• Discounted cash flow model

• Option-pricing models

The techniques incorporate current market and contractual prices, time to expiry, yield curves and volatility of the underlying instrument. Inputs used in pricing models are market observable (level 2) or are not market observable (level 3). A substantial part of fair value (level 3) is based on net asset values.

Equity investments are measured at fair value when a quoted market price in an active market is available or when fair value can be estimated reliably by using a valuation technique. The main part of the fair value measurement related to equity investments (level 3) is based on net asset values of investment funds as reported by the fund manager and are based on advanced valuation methods and practices. When available, these fund managers value the underlying investments based on quoted prices, if not available multiples are applied as input for the valuation. For the valuation process of the equity investments we further refer to the accounting policies within these Annual Accounts as well as section 'Equity Risk', part of the Risk Management chapter. The determination of the timing of transfers is embedded in the quarterly valuation process, and is therefore recorded at the end of each reporting period.

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

The following table gives an overview of the financial instruments measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.

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

18. Related party information

The Fund defines the Dutch Government, FMO and its Management Board and Supervisory Board as related parties.

Dutch Government

The Dutch Ministry of Foreign Affairs, Directoraat-Generaal Internationale Samenwerking (DGIS) sets up and administers the Access to Energy Fund I, according to the Dutch Government’s development agenda. DGIS is the main contributor to AEF, providing funding upon FMO’s request (2020: €15 million; 2019: €0).

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

The Dutch development bank FMO supports sustainable private sector growth in developing and emerging markets by leveraging its expertise in agribusiness, food & water, energy, financial institutions and Dutch business focus areas to invest in impactful businesses. FMO is a public-private partnership, with 51% of FMO’s shares held by the Dutch State and 49% held by commercial banks, trade unions and other members of the private sector. FMO has a triple A rating from both Fitch and Standard & Poor’s. FMO has been entrusted by the Dutch Government to execute the mandates of the Funds. Currently MASSIF, Building Prospects, Access to Energy – I, FOM, FOM-OS and the Land Use Facility of the Dutch Fund for Climate and Development (DFCD) are under FMO’s direct management; the execution of Access to Energy – II and the other facilities of DFCD are performed by third parties under FMO’s supervision. FMO charges a management fee to the Dutch Ministry of Foreign Affairs and it is reimbursed accordingly from the subsidy amount of AEF. The management fee amounts up to €3.0 million in 2020 (2019: €2.2 million). In 2020 AEF has sold two exposures to FMO, of which a loan for €5.9 million (2019: €0) and an equity investment for €7.1 million (2019: €0).

19. Subsequent events

There has been no significant subsequent event between the balance sheet date and the date of approval of these accounts which should be reported by the Fund.