Related party information
FMO defines the Dutch State, its subsidiaries, associates, Government funds, the Management Board (MB) and Supervisory Board (SB) as related parties.
The Dutch State holds 51% of FMO’s share capital. The remaining 49% is held by commercial banks and other private investors. In 2005 FMO received its last contribution to the development fund from the Dutch State. FMO has a guarantee provision from the State, which is detailed in section ‘additional information’.
FMO stimulates the development of small and medium Dutch-sponsored enterprises in selected emerging markets through the ‘Faciliteit Opkomende Markten’. This facility is a joint initiative with the Dutch government. The Dutch State acts as a guarantor for 80% to 95% of the outstanding loans. As of 1 July 2016, the mandate of this facility has been transferred to the ‘Rijksdienst voor Ondernemend Nederland’ (RVO). After the transfer only existing loans in the portfolio and pipeline were serviced. These loans are included in the consolidated annual accounts under ‘Loans to the private sector’.
FMO manages several government funds and programs at the risk and expense of the Dutch State. Below is a description of the various funds and programs:
1. MASSIF: FMO manages the MASSIF fund on behalf of the Dutch government. MASSIF reaches out to end-beneficiaries through financing local financial intermediaries and institutions that can contribute to their development. FMO has a 2.17% (2018: 2.17%) stake in this fund. For 2019, FMO received a fixed remuneration for services provided of €10,896 (2018:€10,895). In 2019, no transfers related to loan and equity investments were conducted from MASSIF to FMO. This is in line with the transfer policy, agreed with the Dutch government.
2. Building Prospects: Through this fund, FMO concentrates on the development of the social and economic infrastructure in least developed countries. FMO aims to stimulate private investors to invest in private or public-private infrastructure projects in these countries. By providing risk capital, Building Prospects decreases risk for other financiers. As a result, additional private funds are attracted. For 2019, FMO received a fixed remuneration for services rendered of €8,095 (2018: €8,220) in accordance with the subsidy order. In 2019, no loans and no private equity investments were transferred from Building Prospects to FMO.
3. Access to Energy Fund (I and II): The Access to Energy Fund is jointly initiated by the Dutch government and FMO in 2007 to support private sector projects aimed at providing long-term access to energy services in Sub-Saharan Africa. Through this fund, FMO provides risk and concessional financing through equity, local currency loans, subordinated debt and grants to facilitate projects that generate, transmit or distribute sustainable energy. In 2017, the Access to Energy Fund II committed US$55.6 million to Climate Investor One, an investment vehicle with three interlinked funds that invest in projects during their whole lifetime. For 2019, FMO received a fixed remuneration for services rendered of €2,216 (2018: €2,165). In 2019, no loans and no private equity investments were transferred from the Access to Energy Fund to FMO.
4. FOM OS The program finances private sector companies with a strong focus on food security and water. For 2019, FMO received a fixed remuneration of €200 (2018: €300). The program has been closed for new commitments at the request of the Ministry of Foreign Trade and Development Corporation as per June 30, 2014.
5. Capacity Development Program: The Capacity Development Program invests in inclusive projects, focusing particularly on the themes of climate change and gender. For 2019, FMO received no remuneration for the services provided (2018: €337).
6. Partnership Development Facility: The Partnership Development Facility (PDF) was established in 2016 by the Dutch government and FMO. The facility is open for early stage projects in the food, water and energy climate segments in countries that are relevant for the local and Dutch economy. The main themes of the facility are food security and climate adaptation. For 2019, FMO received a reimbursement for travel costs and staff expenses of €483 (2018: €1,034)
7. Development Accelerator: The Development Accelerator (DA) was established in 2017 by the Dutch government and FMO. The facility is open for early stage projects in the food, water, education, health, and climate segments in low- and middle-income countries. The goal is to contribute to sustainable cities, climate mitigation and adaptation in order to contribute to the achievement of the Sustainable Development Goals and strengthening opportunities for the Dutch business community. For 2019, FMO received a reimbursement for travel costs and staff expenses of €1,834 (2018: nil).
8. Dutch Fund for Climate and Development : In 2019, the Dutch State awarded a tender to manage the €160 million Dutch Fund for Climate and Development (DFCD) to the consortium of FMO, Stichting SNV Nederlandse Ontwikkelingsorganisatie (SNV), Stichting Het Wereld Natuur Fonds-Nederland (WWF), and Coöperatief Climate Fund Managers U.A. (through Climate Investor Two). FMO is the lead partner in the DFCD consortium and is responsible for the management of the DFCD’s €55 million Land Use Facility. The Land Use Facility (LUF) provides growth financing, including equity, debt and grants, to companies active in agroforestry, sustainable land use and climate resilient food production. In 2019, the Dutch State provided an initial €13.75 million disbursement for the Land Use Facility, which will start to be deployed in 2020.
In our role of fund manager for the assets under management we hold current account positions with State funds. The balances of those current account positions are disclosed under Note 2 and Note 14
A part of our loan portfolio €16,417 (2018: €29,857) is funded under the FOM program from the Dutch State and recognized in our consolidated balance sheet (under Loans to the private sector). The credit risk of these loans is covered by Dutch State for 80%-95%. We refer to the section Guarantee provisions in the Agreement between the Dutch State and FMO of November 16, 1998 in the section 'Additional Information'. The results due to addition and release of specific impairments follow the accounting policy for Loans to the private sector.
The consolidated subsidiaries Nuevo Banco Comercial Holding B.V., Asia Participations B.V., FMO Medu II Investment Trust Ltd. and Equis DFI Feeder L.P. are used for intermediate holding purposes. The subsidiary FMO Investment Management B.V. carries out portfolio management activities for third party investment funds which are invested in FMO’s transactions in emerging and developing markets. Nedlinx B.V. has the focus on financing activities to Dutch SME companies investing abroad.
The transactions during the year are summarized in Note C of the Company balance sheet.
In line with our investment activities we hold stakes directly in private equity companies or indirectly via fund structures. Investments are treated as associates in case the applicable criteria in accordance with our accounting policies are met.
We refer to the significant accounting policies and Note 'Investments in associates' for transactions during the year.
Remuneration of the Management Board
FMO’s remuneration policy for the Management Board aims to offer a competitive remuneration allowing to attract, motivate and retain capable directors with sufficient knowledge and experience in international development finance. The remuneration policy is aligned with the mission of FMO, the corporate values, the strategy, the risk appetite as well as with the expectations of the various stakeholders. The remuneration policy for fixed salary and variable compensation (not applicable for FMO) is based on a market median, composed of two equal proportions of a private sector benchmark (Dutch Financial sector) and a public sector benchmark, taking into account the principles as applied by the State of the Netherlands as majority shareholder of FMO. The private sector benchmark is based on the median of the Dutch Financial sector for comparable management positions. Public sector benchmark for fixed salary is based on the "Wet Normering Topinkomens", where a cap is applied on fixed remuneration. Employment arrangements for other components of the remuneration (e.g. pension) are aligned with arrangement applicable to other FMO employees.
In principle, with effect from 2017, employment contracts of members of the Management Board are awarded for a definite period of time (with exception of internal appointments). In the event the employment contract is terminated before the expiry date, the maximum severance payment will amount one year’s salary, unless the board member resigns voluntary or the termination is the result of his or her actions.
The remuneration policy for the Management Board will be reviewed periodically (every 3-4 years) and amendments will be subject to approval of the AGM.
During the Annual General Meeting of 2019, a few elements of the remuneration policy have been adjusted in order to create alignment with updated regulations and with policies applicable to the rest of the staff of FMO. In summary, the following items have been amended:
Discontinuation of the profit-sharing scheme (for Management Board members, already effective from 1 January 2016 and for the entire FMO staff as from 1 January 2017);
For commuting in The Netherlands, members of the Management Board may also opt for a lease car, a NS business card or a fixed gross Mobility allowance;
Discontinuation of individual Pension allowance and Mortgage Allowance for all employees joining FMO as from 1 January 2016. (Grandfathering existing allowances granted before 1 January 2016, applicable to one of the current Management Board members);
Alignment of the applicable notice period.
The total remuneration consists of a fixed salary (including holiday allowance), a pension arrangement and other benefits. A summary of the employment arrangements and amounts constituting the total remuneration per Management Board member in 2019 are provided below.
Fixed salary remuneration
As per 1 January 2018, the maximum salary caps applicable to the Management Board members have increased with 2.5% (in conformity with the collective labor agreement, CLA Banks, of that date).
During 2019 the fixed remuneration for the CEO was equal to the maximum cap of €282 per year. For the other members of the Management Board this cap is set at €240 and for Directors a salary cap of €207 is applied. The remuneration level of members of the Management Board is based on the median, composed of two equal proportions of a private benchmarks and a public benchmark. For the CEO applies an absolute cap for the fixed remuneration of €282 per annum (2019). For the other members of the Management Board this cap amounts to €240 and €207 for the second echelon (Directors).
Due to agreements made before the introduction of the current maximum remuneration levels, the salary of one member of the Management Board is currently above the applicable maximum salary. In the future only structural salary adjustments as indicated by the CLA Banks, will be applicable.
Members of the senior management (Management Board members, Executive Committee members and Directors) and other members of the Identified staff are not entitled to any form of variable income (e.g. individual bonuses). On December 31, 2019 the Management Board consisted of three statutory members (2018: three). The members of the Management Board have no options, shares or loans related to the company.
In FMO's view, variable compensation should never constitute an incentive for the conduct of directors that is aimed at their own interest, or for taking risks that do not fit within the mission and established strategy of the company, or that leads to ‘rewarding’ behavior of failing directors upon discharge. Therefore, FMO does not provide variable compensation to senior management.
For pensionable salary up to the applicable threshold, which for 2019 amounted to €108, a defined benefit, average-pay pension scheme applies with a conditional indexation arrangement. The nominal pension obligations are guaranteed by our pension insurer. The participant contribution consists of 3.5% of the actual pension base.
Effective from 1 January 2015, no pension is accrued for tax purposes for the proportion of income in excess of €108 (2019). In alignment with the general practice in the Netherlands, FMO has compensated the employees concerned for this diminution. In 2019 one of the Management Board members received an individual fixed Allowance for retirement.
The other benefits consist accident and disability insurance, appropriate expense allowances and the use of a company car, NS business card or mobility allowance. The company has also taken out a directors’ and officers’ liability insurance on behalf of the Management Board members. The members of the Management Board have no options, shares or loans related to the company. Acceptance of ancillary positions requires the explicit approval of the Supervisory Board.
The members of the Management Board have no options, shares or loans related to the company. Acceptance of ancillary positions requires the explicit approval of the Supervisory Board.
All members of the Management Board are appointed for a period of 4 years, which can be renewed. One of the board members, Mrs Broekhuizen, has been internally re-appointed for a second term and has an employment contract for an indefinite period of time, the other two serve in their first term of appointment and have an employment contract for a definite period of time.
There are no employees at FMO who have a fixed remuneration more than the CEO. In accordance with the GRI Standards, the ratio between the total fixed remuneration of the highest-paid individual, the CEO, and the median of the rest remained 0.29 (2018: 0.29). Or in other words the highest-paid individual received a total fixed remuneration of 3.5 times the amount paid to the Median of (the rest of) the total staff population. Compared to what is seen in the financial sector in the Netherlands this ratio is relatively low.
The total remuneration of the Management Board in 2019 amounts to €978 (2018: €867) and is specified as follows:
Remuneration of the Management Board
Allowance for retirement
Other short term employee benefits
Peter van Mierlo
Allowance for retirement
Other short term employee benefits
Peter van Mierlo 1)
- 1 Peter van Mierlo started in the CEO role as per July 2018
Except for pensions of €107 (2018: €76) all components above are short term employee benefits.
Remuneration of Supervisory Board
The annual remuneration of the members of the Supervisory Board is as follows:
Remuneration 2019 1)
Committees 2019 2)
Thessa Menssen 3)
Dirk-Jan van den Berg 4)
- 1 As per January 1, 2019 the remuneration of SB has increased by 2.5%
- 2 As from July 1, 2019 an Impact Committee has been installed
- 3 Thessa Menssen is appointed as the chair of the Impact Committee as per July 1, 2019
- 4 Dirk - Jan van den Berg is a member of the Impact Committee as per July 1, 2019
- 5 Farah Karimi stepped down as member of the SB as per June 11, 2019
The remuneration policy for the Supervisory Board will be reviewed periodically, taking into account the principles as applied by the State of the Netherlands as majority shareholder. Amendments will be subject to the approval of the AGM. The members of the Supervisory Board have no shares, options, or loans related to the company.