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FMO Portfolio Developments

A priority of FMO’s 2009-2012 strategy was focusing on low-income countries, where access to long-term finance is even more limited than in other developing countries. The share of low-income countries in the FMO portfolio was 40% in 2012 compared to 41% in 2011. This was well above our long-term target of 35%, and compares with 34% in 2009.

Our average Economic Development Impact Score (EDIS) in 2012 was 65, above the target of 64 we set for each year of our 2009-2012 strategy.

Total income rose compared to 2011 and surpassed our expectations for 2012. Our investments in energy projects were innovative and satisfying, and we were pleased to act as mandated lead arranger in a number of transactions in that sector.

Our 2012 income was boosted by good results in private equity exits. Our overall portfolio quality remained in excellent shape, with only 3.5% of non-performing loans, and broad diversification of assets across geographies and sectors.

Among the countries to which FMO has major exposure, India saw some economic slowdown. It nevertheless continues to offer plentiful investment opportunities. Some sectors, such as solar, are showing signs of overcapacity. Turkey, where we had our biggest private equity exit last year, continued to flourish.

Nigeria remains a compelling market. We are heavily involved with its banking sector, and see opportunities in its energy industry, which is ripe for reform. South Africa has grown considerably as a share of our portfolio, especially in the renewable energy area.

Less promising were countries such as the Ukraine, which has considerable economic potential but is hamstrung by political instability. Argentina’s economic and political turmoil forced us to focus on supporting existing clients rather than courting new business.

The downside of European and US commercial banks’ withdrawal from developing markets is the difficulty of catalyzing commercial third-party funds to join our transactions. We therefore relied on other development finance institutions and Southern banks for our catalyzing activities in 2012.