Green Microfinance LMDF's financing of energy efficient equipment in Peru
Unaudited semi-annual report as at 30 September 2014 Rapport semestriel non révisé au 30 septembre 2014
Société d’Investissement à Capital Variable, Luxembourg
In collaboration with
Subscriptions for shares issued by the Fund may only be accepted on the basis of the current prospectus accompanied by the latest annual report and the latest semi-annual report, if more recent. Such documents can be obtained free of charge at the registered office of the Fund or downloaded from the website www.lmdf.lu
ISIN Codes / Codes ISIN Class C shares: LU0456967404
Class B shares: LU0456966935
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Content // Sommaire Page 04 LMDF in figures
LMDF en chiffres
06 Report of the board of directors to the shareholders
Rapport du conseil d’administration aux actionnaires
08 LMDF's Vision and Mission 09 Summary (Français / Deutsch) 10 Management report on activities
Rapport d’activité du gestionnaire
16 Microfinance institution in focus Présentation d'une institution de microfinance
16 // 1 Fondesurco, Peru
17 // 2 Four questions to Gabriel Meza Vásquez, General Manager of Fondesurco, Peru Quatre questions à Gabriel Meza Vásquez, directeur de Fondesucro, Pérou
22 Statutory information Organisation 24 Unaudited financial statements États financiers non révisés
24 // 1 Statement of net assets
État des actifs nets
26 // 2 Statement of operations and other changes in net assets
État des opérations et des variations des actifs nets
28 // 3 Statistical information
État du portefeuille-titres et autres actifs nets
32 // 5 Breakdown of microfinance investment and evolution of NAV
Informations statistiques
30 // 4 Statement of investments and other net assets
35
Répartition des investissements en microfinance et évolution de la VNI
// 6 Notes to the unaudited financial statements
Notes aux états financiers non révisés
The photos in the present report show clients and staff of the microfinance institution Fondesurco in Peru. Les photos présentées dans ce rapport montrent les clients et les employés de l’institution de microfinance Fondesurco au Pérou. © Photos: Gonzalo Charaja Ramos - Fondesurco // LMDF
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
02-03
LMDF in figures // en chiffres 30 September 2014 // 30 septembre 2014
EUR 14.3 million
72%
26
EUR 1,025
4
29,460
18
56
1
54%
57%
25%
21%
8%
20%
13%
2%
EUR 462,000
25%
1.3%
367,102
1.8%
EUR 180.1 million
1.3%
Investments in microfinance
Microfinance institutions financed directly
Regional funds and support structures
Countries
Service provider
Latin America
Southeast and Central Asia
Sub-Saharan and North Africa
Developed countries
Financing in local currency
Micro-entrepreneurs financed by partner MFIs
Total micro-loan portfolio of partner MFIs
Women
Average disbursed micro-loan
Micro-entrepreneurs financed by LMDF
Number of university students financed
Micro-loans for services and small trade
Agricultural activities
Production and crafts
Other uses
Average exposure per MFI
Return Class A shares - April to September 2014
Return Class B shares - April to September 2014
Return Class C shares - April to September 2014
Note: The figures stated in this section of the report relating to information received from microfinance institutions are as at 30 June 2014 and largely based on unaudited information. The calculations follow, wherever applicable, the Microfinance Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.
18 14
1 17 15 4 2 3
16 8 9
7
10
5 6
13 12
1 USA 2 El Salvador 3 Nicaragua 4 Honduras 5 Ecuador 6 Peru 7 Togo
11
MFX Solutions Higher Education Finance Fund LP PADECOMSM Crédito AMC OPTIMA Pro Mujer, Nicaragua PANA PANA Pilarh OPDF Fundación Alternativa Coop. Maquita Cushunchic FACES IDESI Nacional COAC CIDERURAL CREDIFLORIDA FONDESURCO CECA
8 Niger ASUSU 9 Cambodia Maxima Mikroheranhvatho KREDIT Intean Poalroath Rongroeurng 10 Philippines Gata Daku MPC KPS-SEED 11 South Africa Tembeka Social Investment 12 Uruguay Microfin 13 Argentina Pro Mujer 14 Azerbaijan FINCA 15 Guatemala ASDIR 16 Mali Soro Yiriwaso 17 Morocco AMSSF / MC INMAA 18 Mongolia Khan Bank
Learn more about LMDF's portfolio of MFIs: www.lmdf.lu
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
04-05
REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS The Board of Directors is pleased to present this report on the first half of its fifth year of operations. The net assets of the Fund have increased by 1.5% in the period from EUR 17 million to EUR 17.3 million. Investments in microfinance have grown by 12% from EUR 12.5 million at the last year end to EUR 14 million. This growth in the portfolio reflects the Fund’s focus on its main priority during this period which has been to reduce its excess liquidity, thereby maximising social impact and improving financial performance. Cash and cash equivalents have been reduced, and now represent 19.7% of net assets compared to 25% at the year end. This trend is expected to continue for the remainder of the year. Returns to investors for the six-month period stand at 1.3% (Class A), 1.8% (Class B) and 1.3% (Class C). Corporate governance At the AGM of the Fund held on 3 July 2014, the shareholders approved the appointment of Raoul Stefanetti (BIL) to the Board. The shareholders also approved the appointment of KPMG sàrl as independent auditor, in replacement of BDO Audit S.A. which has held the appointment since the Fund’s inception. At the Board meeting on 14 July, Marc Elvinger proposed to step down from the position of Vice-Chairman, and the Board approved the appointment of Hedda Pahlson-Möller to that position. In May 2014, the Fund’s revised Prospectus was approved, and a notice was issued to Shareholders outlining the main changes. There are no disclosures required to be made by the Fund in relation to changes in the Prospectus since May 2014. The Board of Directors is responsible, in accordance with the terms of the Articles of Association and the Prospectus for the overall management and control of the Fund and for implementing the Investment Objectives and Policy of the Fund. The day to day management of the Fund has been delegated to Kaspar Wansleben, Executive Director. The Board has selected and retained ADA (Appui au Développement Autonome a.s.b.l.) as its investment adviser to provide the services of identification, evaluation and selection of investment and disinvestment opportunities as well as the review, supervision and monitoring of its microfinance investments. The Board has established the following committees whose role is to support and make recommendations to the Board in their areas of activity. The Investment Committee, which has five members, considers recommendations from the investment adviser on investment and disinvestment opportunities. The Risk Committee, which has three members, provides direction, advice and oversight with regard to LMDF’s risk management and reporting framework, including risk policies, processes and controls. The Marketing Committee, which has two members, oversees the Fund’s marketing strategy including the development of the shareholder base. The Employment Committee, which has three members, reviews the objectives, performance and remuneration of management.
The Board has resolved that membership of the above Committees may be open to non-directors on a limited basis, to the extent that the majority of the members of each Committee are directors of the Fund. The members of the Board do not receive any remuneration as directors, apart from the reimbursement of expenses incurred for Fund business and approved in advance by the Board. The Alternative Investment Fund Managers Directive The Alternative Investment Fund Managers Directive (“AIMFD” or “the Directive”) was transposed into Luxembourg law on 12 July 2013 and became effective on 22 July 2013. In October 2013, the Fund has registered as a self managed Fund; as the net assets of the Fund remain below the threshold of EUR 100 million, the AIFMD reporting requirements for the Fund are limited. The Board wishes to thank the shareholders for their continued support. The Board of Directors November 2014
Kenneth Hay Chairman
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
06-07
Vision LMDF aims to contribute to the alleviation of poverty by supporting organisations that empower people and stimulate entrepreneurship, with a particular focus on the most excluded. The Fund facilitates access to responsible finance by building sustainable links between investors, microfinance institutions and ultimate beneficiaries.
Mission In order to realize its Vision, LMDF • Constitutes an attractive investment proposition by balancing stable financial returns to investors with the provision of responsible financial services to the poor. • Specializes in facilitating the growth of promising emerging microfinance institutions which address the financial needs of marginalized communities and individuals in developing countries. • Enables the development of micro-entrepreneurs in areas where unmet needs are largest, particularly among women, youth and rural populations. • Is accessible to public, institutional and retail investors and is accountable for reaching both social and financial objectives, and transparent in its reporting.
RÉSUMÉ / ZUSAMMENFASSUNG Le rapport semestriel du Luxembourg Microfinance and Development Fund se penche sur un thème d'actualité, qui est la microfinance et les défis environnementaux des pays en développement. LMDF a, en 2013, fait le choix de financer Fondesurco au Pérou, une institution de microfinance (IMF) offrant des prêts pour des produits écologiques à ses clients. Ce financement du Fonds leur a ainsi permis d'amplifier la commercialisation de leur deux premiers produits: les chauffeeau solaires et les fours énergétiquement efficaces. Au cours de ces six dernier mois, le Fonds a continué ses activités d'investissement. Trois crédits supplémentaires ont été attribués, dont deux augmentations du financement des partenaires existants et un en faveur d'une nouvelle IMF. La Mongolie se rajoute désormais au portefeuille du LMDF. Ainsi, comparé au début d’année, 81% de la valeur nette du Fonds sont investi en microfinance. Au 30 septembre, LMDF a 57% de ses investissements en Amérique latine, 20% en Afrique, 21% en Asie et 2% dans les pays développés. Dans l'ensemble, la valeur nette du Fonds, qui est à 17,3 millions d'euros, n'a pas évoluée de façon importante pendant les derniers six mois, alors que le volume d'investissement en microfinance du LMDF a augmenté de 12% pour atteindre 14,3 millions d'euros contre 12,5 millions en début d'année. Le résultat financier des six derniers mois s'est considérablement amélioré comparé à l'année précédente. Les principales raisons sont: les investissements supplémentaires dans les IMF et l'augmentation du dollar par rapport à l'euro. Le rendement semestriel est de 1,3% pour la classe A, 1,8% pour la classe B et 1,3% pour la classe C.
Der Halbjahresbericht des Luxembourg Microfinance and Development Fund widmet sich einem aktuellen Thema: Schnittstelle zwischen der Mikrofinanz und den ökologischen Herausforderungen in Entwicklungsländern. LMDF refinanziert seit 2013 das Kreditportfolio energieeffizienter Produkte der Mikrofinanzinstitution (MFI) Fondesurco in Peru. LMDF ermöglicht der MFI bis zu 2000 Pionierprodukte zu finanzieren: Solare Wassererwärmung und energieeffiziente Öfen. Der Fonds setzte im abgelaufenen Halbjahr seine Investitionstätigkeit fort. Es wurden drei Kredite vergeben, zwei zur Aufstockung der Finanzierung von bestehenden MFI Partnern und eine Finanzierung einer neuen MFI. LMDF investierte dabei zum ersten Mal in Mongolien. Zum Stichtag sind somit 81% des Nettovermögens in Mikrofinanz investiert, eine deutliche Steigerung im Vergleich zum Bilanzstichtag 31. März 2014 (73%). Geographisch verteilt sich das Portfolio auf: 57% in Lateinamerika, 20% in Afrika, 21% in Asien und 2% in entwickelten Ländern. Insgesamt erhöhten sich die Mikrofinanzinvestitionen des Fonds um 12% auf EUR 14,3 Millionen bei gleichzeitiger Stagnation des Nettovermögens (bei EUR 17,3 Millionen). Das finanzielle Ergebnis der ersten sechs Monate verbesserte sich im Vorjahresvergleich wesentlich. Die Ertragstreiber sind die höhere Investitionsquote des Fonds zusammen mit der Stärkung des US-Dollars gegenüber des Euros. Die Halbjahresrendite beträgt 1,3% für Klasse A und C Aktionäre und 1,8% für Klasse B. Das Risikoprofil des Fonds bleibt weitgehend unverändert mit keinen wesentlichen Einzelrisiken.
La revue des principaux risques auxquelles le Fonds est exposé n'a pas soulevé de risques particuliers.
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
08-09
MANAGEMENT REPORT ON ACTIVITIES The focus of this report is on one of the questions at the forefront of today’s discussion in microfinance: How can the sector contribute to climate change adaptation and the huge environmental challenges many developing countries face? LMDF presents a closer look at Fondesurco, a microfinance institution (MFI) in Peru offering financing of energy efficient products to its clients. The roll-out, since June 2013, of the first two such products has been backed by a loan from LMDF. We hope you enjoy the photos throughout this report, the description of Fondesurco and the interview with Gabriel Meza Vásquez, its General Manager. / Investment activities “[...] the immediate priority is clear: To undertake the necessary steps so that the Fund is fully invested, maximizing the social impact and improving the financial performance” was the closing statement in the last annual report. Progress has been made mid-year through our financial year. Of the Fund's net asset value, 81% is invested in microfinance, a substantial improvement over the 73% at the end of the last financial year. This was achieved mainly through additional loans to successful microfinance institutions (“MFI”) and one placement in a microfinance note. LMDF granted: • A senior loan to the MFI FACES (USD 500,000) to support the growth of the MFI active in the rural areas of southern Ecuador; • A senior loan to the MFI IPR (also USD 500,000) to re-finance the loan portfolio growth of the MFI, concentrated on the financing of agricultural activities in Cambodia. LMDF also subscribed USD 650,000 to a note issued by MSME Bonds in Luxembourg and backed by a loan to the MFI Khan Bank in Mongolia.
At the end of September, the Fund had 57% of its investments in Latin America, 20% in Africa, 21% in Asia and 2% in developed countries (Graph 1). In total, LMDF finances 29,460 micro-entrepreneurs through 31 MFIs in 18 countries. / Social objectives Earlier this year, LMDF refined and formulated its vision and mission. At the heart of our vision is our dedication to contribute to poverty alleviation and address the unmet needs of the most excluded. As an investment fund we achieve our vision through investments in promising microfinance institutions with positive social impact. Starting from the Fund’s vision and mission, LMDF is currently undertaking a social performance review of the last five years. We expect to publish the results in a separate report at the beginning of next year. Some insights from the analysis conducted so far are: •
•
•
• •
71% of the countries in which LMDF is invested belong to the bottom half of the Human Development Index, including countries like Niger, Mali and Togo, who belong to the group of the very least developed countries; The average loan sizes clearly situate LMDF in the microfinance segment dedicated to the bottom of the pyramid (Graph 2); 25% of micro-loans are destined to smallholder farmers, one of the most excluded groups globally (Graph 3); 72% of ultimate clients are women (Graph 4); and 20% of investments go to Africa.
LMDF also publishes the average interest rate charged by the MFIs to their clients (Graph 5). The average rate of 30% has not changed significantly over the last years. More than 20% of the total rate is used to meet the operating expenses of the MFIs.
GRAPH 1: MICROFINANCE INVESTMENTS BY REGION AND COUNTRY (in % of microfinance portfolio) Ecuador Peru El Salvador Nicaragua Uruguay Guatemala Honduras Latin America 57%
Argentina Cambodia
Southeast Asia 14%
Philippines Niger Mali South Africa Togo
Sub-Saharan Africa 14%
Morocco
North Africa 6%
Mongolia Azerbaijan
Central Asia 7%
USA 0
10
5
Developed countries 2% 20
15
Source: LMDF analysis as at 30/09/2014
GRAPH 2: AVERAGE OUTSTANDING MICRO-LOANS BY COUNTRY (in EUR and % of GDP per capita PPP) Average outstanding loan in % of GDP per capita (PPP, EUR)
Average outstanding by country (EUR)
2,500
42%
2,000
160%
17% 14%
1,500
17%
1,000
Average micro-loan amount LMDF
36% 7%
8%
6%
5%
1%
26%
3%
8% Mali
3%
Philippines
12% 500
Niger
Argentina
Nicaragua
Morocco
Guatemala
Uruguay
Honduras
Azerbaijan
Cambodia
El Salvador
Peru
Ecuador
Togo
Mongolia
0
Source: LMDF analysis of data submitted by MFIs as at 30 June 2014, excluding certain indirect investment in microfinance; International Monetary Fund estimated GDP per capita at purchasing-power-parity end of 2013, converted into EUR with current exchange rates.
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
10-11
The forthcoming social performance report will shed light on many of these areas and provide insights into how LMDF incorporates social criteria in its decision-making processes.
Return during the first six months of the year is 1.3% for Classes A and C and 1.8% for Class B shareholders.
/ Financial performance
As at 30 September, LMDF had no particular risk events to highlight. However, the Fund continues to closely monitor the situation of a number of MFIs and some countries through its risk management approach.
The Fund’s net asset value did not change materially since the beginning of the year whereas the investment portfolio grew by 12% (Graph 6). At the same time, the USDollar appreciated significantly in relation to the Euro. Both trends benefitted the Fund’s income and returns. Net income on microfinance and liquid assets exceeds half a million euro and constitutes 6.4% (annualized) of average net assets during the period (before foreign exchange, impairment and operating costs), an increase from 6.0% during the last financial year. Euro yields on microfinance loans have remained close to 8%.
/ Risk review
- Credit risks Average exposure to microfinance institutions has remained stable at 2.6% of total net assets with a maximum exposure of 5.8% to the MFI ASUSU in Niger. The average exposure is EUR 462,000 per MFI, which represents an increase of 8% compared to the year end at 31 March 2014. This is mainly explained by the additional senior loans to existing partner MFIs.
LMDF’s cost structure has improves slightly with a total expense ratio amounting to 3.2% (annualized) compared to 3.6% during the previous financial year.
In the last financial year the Fund made a provision on a loan granted to the MFI Crediflorida in Peru. Increased risks of default were caused by the impact of the coffee rust on many of the MFI’s clients, mostly smallholder coffee farmers.
GRAPH 3: ECONOMIC PURPOSE OF MICROCREDITS FINANCED BY LMDF (in %)
GRAPH 4: ACTIVE MICRO-ENTREPRENEURS FINANCED BY LMDF
Production/ crafts activities 8%
Consumption & others 13%
Women & others Consumption 21,211 (72%)
Men 8,249 (28%)
Production & craft activities Agricultural activities Services & trading activities
Agricultural activities 25%
Services/ trade activities 54%
Source: LMDF analysis of weighted average data provided by partner MFIs as at 30/06/2014
Total 29,460
Source: LMDF analysis of weighted average data provided by partner MFIs as at 30/06/2014
35 30 25 20 15 10
The use of the solar water heaters allow clients to save from 8 to 10 soles per week (EUR 2-6) // Fondesurco 5 0
As at 30 September 2014 Crediflorida's situation has stabilized but has not improved significantly. The provision of 10% of the principal amount outstanding remains unchanged pending further developments. - Currency risk The Fund was significantly impacted by the 8% appreciation of the US dollar in relation to the euro during the reporting period. US dollar denominated investments constitute 69% of the Fund’s total investments and a number of other currencies moved in close relation to the US dollar, including the Philippine peso, Peruvian nuevo sol and Nicaraguan córdobas.
slightly from 4.4% of total net assets at the -5 end of March to 4.6% at the end of September. The five most important countries concentrate 46.6% of total net assets, a significant increase over 42.8% of total net assets at the end of March.
GRAPH 5: COMPONENTS OF MFIs' INTEREST RATES CHARGED TO CLIENTS Risk costs & provisions Cost of financing Operating expenses Margin on micro-loan operations 35%
Total 29.6% LMDF continued its conservative approach to currency risks. Despite our systematic hedging, the broad currency appreciation benefited LMDF financially because of some hedging imperfections (for example, the use of forward instruments which cover only the loan principal).
30%
- Country risks During the reporting period, the Fund invested for the first time in Mongolia. Ecuador and Peru are the most important countries in LMDF’s portfolio, accounting for 11.4% and 11.0% of total net assets.
10%
The average country exposure increased
25% 20% 15%
5% 0% -5% Source: LMDF analysis of weighted average data provided by partner MFIs as at 30/06/2014
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
12-13
GRAPH 6: LIQUID ASSETS AND MICROFINANCE INVESTMENTS (in EUR) Liquid assets Microfinance investments
18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000
30/09/2014
30/06/2014
31/03/2014
31/12/2013
30/09/2013
0
Source: LMDF analysis
GRAPH 7: DEVELOPMENT OF NAV PER SHARE OF CLASS B AND CLASS C SHARES DURING THE LAST 12 MONTHS (in EUR) Class C Class B 104
103
102
101
100 30/09/2013 Source: LMDF analysis
31/12/2013
31/03/2014
30/06/2014
30/09/2014
The success of the products depends on the importance local communities attach to environmental protection // Fondesurco
/ Outlook Our immediate priorities remain unchanged: To get LMDF fully invested and prepare the ground for future growth. Halfway through our financial year, we see positive effects from this strategy on our financial returns, social mission and interim results, which bode well for this year. Yours sincerely, Kaspar Wansleben Executive Director (kaspar@lmdf.lu)
Note: The figures stated in this report are historical and partly based on unaudited information received from microfinance institutions. Such figures are not indicative of future performance. The calculations follow, wherever applicable, the Microfinance Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non rĂŠvisĂŠ au 30 septembre 2014
14-15
1 Microfinance institution in focus FONDESURCO, Peru
Fondesurco is a microfinance institution created in 1994 to address the financial needs of rural communities in southern Peru with a strong focus on financing of agricultural activities. The first credit operations were conducted under the group lending methodology. At the beginning of 2000, the MFI adopted individual lending. In Peru, Fondesurco is recognized as a pioneer organisation of microfinance in rural areas. Fondesurco operates in some of the poorest areas of Peru. Clients are low-income people who develop economic activities in trade and agriculture in small communities. The services are mainly provided in places where there are no other financial services, through agencies, mini-agencies, agents and services points. Fondesurco counts 20 agencies in the departments of Arequipa, Moquegua, Puno and Ayacucho. Fondesurco offers a range of credit products to its clients, such as loans for working capital, acquisition of fixed assets, loans for the agricultural cycle and credit destined at young microentrepreneurs. Clients have the possibility to subscribe a micro-insurance.
Fondesurco's department for development and innovation is working to develop new products with a high social value like the “green credits”. The pilot project FondeEnergía, developed in collaboration with ADA and MicroEnergy International, was created in order to finance solar water heaters and energy efficient ovens. Both products combine environmental benefits such as reduced emission of greenhouse gases with economic advantages for clients. Solar water heaters for example allow small hostels to increase room rates while reducing energy costs. From July 2013 to January 2014, LMDF granted two loans to Fondesurco of Peruvian soles 900.000 each (EUR 246,286) in order to expand the commercialisation of FondeEnergía.
12,682 credits disbursed in 2014
45% of the loans finance agriculture
USD 20,120,500 loan portfolio
42% of clients are women
20 agencies in 4 departments
633 green loans granted
Source: Data provided by Fondesurco
2 Four questions to Gabriel Meza Vásquez, General Manager of FONDESURCO
Mr. Gabriel Meza, can you briefly describe Fondesurco, and your motivations to launch the project SER-FondeEnergía? Fondesurco is a private development institution constituted in January 1994. Since its inception, we have specialized in providing micro-credits to clients active in rural areas of the southern regions of the country. Currently we have 20 offices located in the departments of Arequipa, Moquegua, Puno and Ayacucho. Fondesurco's mission is to provide access to financial services for lowincome people in rural areas to contribute to improve living standards.
aimed at achieving a balance between financial and social results. 3. Innovation: Fondesurco classifies innovation from three perspectives: First, to create or develop markets; second, to create products according to the rural economic cycle and to the needs of the clients; and third, to facilitate access to credit. 4. Green credits: Fondesurco acts responsibly within the communities we serve. This is why we develop loan products with the goal to preserve and conserve the environment. Rural areas are areas most vulnerable to the effects of climate change.
Fondesurco is active in remote rural areas with limited access to financial services and populations with higher incidences of poverty according to the “national poverty line.”
Within this strategic framework, Fondesurco develops credit products that respect the environment by creating appropriate credit policies for our employees and respond to the needs of our clients. The initiatives of Fondesurco are a combination of microfinance and clean and renewable energy.
As at September 2014, Fondesurco granted 12,682 credits, of which 42% have been disbursed to women; in line with our market orientation and our social mission, 86% of the clients are living in rural areas. Our loan portfolio has reached USD 20,1 million.
We promote the use of energy efficient and renewable energy equipment and create sustainable environmental benefits. By combining a focus on extreme poverty with the environmental benefits, we foster social and environmental sustainability.
To align its institutional priorities to the microfinance market, Fondesurco has defined four strategic pillars: 1. Rural: Fondesurco focuses its interventions in rural areas because that is where poverty and the need of access to financing is highest. 2. Social Performance: Fondesurco aligns its objectives and activities to its social mission: every decision we make is
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
16-17
"The key to the success of the products is the development of a ‘green culture’ within the organisation." FondeEnergía is a pilot project launched in 2011, which provides financing for the purchase of solar water heaters and energy efficient ovens. Who can benefit from it and under what conditions? What feedback do you receive from clients? In the case of solar heaters, two sectors benefited from it: Families or individuals and the microenterprise sector, which means mainly hotels, hostels, guest houses and room rentals requiring hot water. Clients have expressed their satisfaction with the solar water heater product and have a clear perception that they are saving money. Cost reductions are achieved through reduced consumption of wood, gas and electricity used to heat water. In the case of the solar heaters, the clients stated they would save between PEN 8 and PEN 20 per week (EUR 2 – 6). Guests who are renting a room also state that they are happier and not looking for another place. Feedback also suggests that clients save on medical expenses because children do not easily get sick from respiratory infections caused by cold water. The products also generally improve hygienic conditions and the health of the entire family. In the case of hostels, room charges increase substantially if warm water is provided.
The energy efficient ovens benefit two key clienteles: 1) Families and individuals and 2) the microenterprise sector involved in hospitality, such as small restaurants. For families, the main benefits include increased safety, namely because fewer accidents happen and there is a better extraction of smoke through the chimney, leading to less toxic gas in the house. Families also save on firewood because the energy efficient oven consumes less and heats much faster compared to traditional ovens. Apart from increased convenience, some clients have also reported that their status within the community has improved. Restaurants use the oven to prepare new dishes like roasted pork, cakes and pastries. Housewives have often found a source of additional income by preparing dishes to be sold in the neighbourhood or during special events.
What are the key success factors and lessons learned regarding the development and commercialization of the environmentally friendly credit products? We are facing diverse challenges in the development of these products. Key to the success of the products is the development of a “green culture” within the organization. Employees need to identify themselves with our activities and a green image of Fondesurco and commit to the protection of the environment.
"It is essential to sensitize the population to the importance of the protection of the environment and the need to adapt to climate change."
A related challenge is to train the sales staff on the non-financial aspects of the products. We need our staff to understand the technology behind the products. We also need to implement an incentive system that motivates employees in the different branches to sell green products. We would like to conduct market studies to better assess the needs of the population and the potential demand for products which require a credit for the purchase of environmentally friendly equipment. This study will allow us to select the additional technologies, to define the market to target, and the targeting of advocacy and marketing campaigns. As a result, we would like to increase the range of energy efficient products according to the needs of the rural population and ultimately increase our loan portfolio. In this context, it is essential to sensitize the population to the importance of the protection of the environment and the need to adapt to climate change. The success of our products critically depends on the importance local communities attach to environmental protection. Ultimately, we would like to implement functional loan products that unite all the actors involved in environmentally friendly products. The challenges are the validation of technologies, the selection of suppliers or ensuring efficient aftersales service, and the incorporation of all these elements into the regular business line of credit products we offer. Increasing demand and achieving significant numbers of products, especially since the amounts of the loans associated are low,
will diversify our portfolio and ultimately contribute to improved financial profitability.
When the project started, the goal was to provide more than 2,000 green loans to your customers by 2015. Where does Fondesurco stand in relation to this goal, what are the challenges and to what extent has the financing from LMDF helped? The financing of LMDF has contributed a great deal to the funding needed to finance the loan portfolio of clients purchasing energy efficient products under the SER program. The main focus of the program is to finance product acquisition by low income people and microenterprises in rural areas. The loans we grant facilitate access to clean, renewable and efficient products which would not be acquired under normal circumstances. The main reasons are that suppliers of these products do not sell on credit and often have no presence in rural areas. Since the end of 2013, the FondeEnergĂa product has been proposed systematically in all of Fondesurco's branches. As at September 2014, we have granted 633 loans, which is equivalent to 652 technologies, of which 375 are energy efficient ovens and 277 solar water heaters. This translates into 1,615 beneficiaries, taking into account all members of the family.
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non rĂŠvisĂŠ au 30 septembre 2014
18-19
Energy efficient ovens
Energy efficient ovens consume less wood and heat faster// Fondesurco
It is evident that we have not reached the goals in terms of number of products initially targeted. The project started in 2011 with three pilot agencies, and was only extended to all the other agencies at the end of 2013, which implies that the results obtained until now have been achieved in fewer than two years. Since our focus is to work in rural areas, the promotion of FondeEnergĂa is challenging because of the difficulty of gathering large numbers of potential clients. Often the promotion and the sale of the FondeEnergĂa products are made personally (one-to-one). We have also faced difficulties in exhibiting the SER products: Rural geography creates challenges in displaying the products. The client is motivated to buy when he has the opportunity to see the product and its functionality.
requirements of the clients. Since its implementation, the SER product has undergone a number of changes that made it more accessible to customers and to those who are responsible for selling it in the market. Despite these challenges, our institution will continue to promote the products to strive towards reaching the set goal. We believe that the benefits for the families that have purchased the products justify our continuation of this activity. It is important to say that in our desire to encourage more people to use environmentally friendly alternatives and to diversify our product range, we are planning to add to our range of products energy efficient kitchens, photovoltaic powered low-energy lamps, solar dryers and other products which will surely help to increase our loan portfolio. Translated from Spanish into English by LMDF.
Finally, the challenge to adapt the product to the internal processes of Fondesurco and the
Solar water heaters
Children get less sick from respiratory infections due to cold water and for the entire family the hygienic and health conditions improve // Fondesurco
Housewives have found a source of additional income by selling dishes in the neighbourhood or during special events // Fondesurco
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non rĂŠvisĂŠ au 30 septembre 2014
20-21
STATUTORY INFORMATION ORGANISATION Registered Office // Domicile 2, place de Metz L-1930 Luxembourg
Trade Register Number // Registre de commerce et des sociétés R.C.S. Luxembourg B 148.826
Board of Directors // Conseil d’administration Chairman - Président Kenneth Hay
Independent
Vice chairman - Vice président Hedda Pahlson-Möller Robert Wagener
Independent ADA - Appui au Développement Autonome asbl
Members - Membres Nima Ahmadzadeh Viviane Clauss Marc Elvinger Richard Philippart Raoul Stefanetti (1) Luc Vandeweerd Paolo Vinciarelli Kaspar Wansleben
Ministry of Finance Banque de Luxembourg Independent Development Cooperation Department, Ministry of Foreign Affairs Banque Internationale à Luxembourg ADA - Appui au Développement Autonome asbl Banque et Caisse d'Épargne de l'État Executive Director
Investment Committee Comité d'investissement Nima Ahmadzadeh Marc Elvinger Hedda Pahlson-Möller Richard Philippart Luc Vandeweerd
Risk Committee Comité de risque Kenneth Hay Raoul Stefanetti Paolo Vinciarelli
Marketing Committee Comité de marketing Viviane Clauss Hedda Pahlson-Möller
Employment Committee Comité d'emploi Nima Ahmadzadeh Kenneth Hay Richard Philippart
(1) From 3 July 2014
Investment advisor // Conseiller en investissement ADA - Appui au Développement Autonome asbl 39, rue Glesener L-1631 Luxembourg
Microfinance expertise // Expertise en microfinance Arranger and Servicer to Micro, Small & General Partner of the Higher Education Medium Enterprises Bonds S.A. Finance Fund LP Symbiotics SA OMTRIX Inc. 75, rue de Lyon Oficentro La Virgen No.2, Edificio 1, Piso 1 CH-1203 Geneva Zona Industrial de Pavas, San José, Costa Rica Custodian and Paying Agent // Banque dépositaire et agent de paiement Banque et Caisse d’Épargne de l’État 1, place de Metz L-2954 Luxembourg Administrative Agent, Registrar and Transfer Agent Administration centrale et agent de transfert European Fund Administration S.A. 2, rue d’Alsace L-1017 Luxembourg Auditors // Réviseur d’entreprises agréé KPMG Luxembourg S.à.r.l. 9, Allée Scheffer L-2520 Luxembourg
Legal Advisors // Conseiller légal Elvinger, Hoss & Prussen 2, place Winston Churchill L-2014 Luxembourg
Distributors // Distributeurs Banque de Luxembourg S.A. 14, boulevard Royal L-2449 Luxembourg
BGL BNP Paribas S.A. 50, avenue J.F. Kennedy L-2951 Luxembourg
Banque et Caisse d’Épargne de l’État 1, place de Metz L-2954 Luxembourg
Fortuna Banque s.c. 130, boulevard de la Pétrusse L-2330 Luxembourg
Foreign Currency Settlement Agent // Agent de compensation en devise INTL FCStone LTD, Moor House, 1st Floor, 120, London Wall London EC2Y 5ET United Kingdom Foreign Currency Hedging Provider // Contrepartie de couverture de risque de change MFX Solutions, Inc. Banque et Caisse d’Épargne 1050 17th St. NW, Suite 550 de l’État Washington DC, 20036 1, place de Metz United States of America L-2954 Luxembourg Identity numbers // Code d’identité Class B shares ISIN: LU0456966935 Bloomberg: LMDSVCB:LX Telekurs: 10633787
Class C shares ISIN: LU0456967404 Bloomberg: LMDSVCC:LX Telekurs: 10633788
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
22-23
UNAUDITED FINANCIAL STATEMENTS ÉTATS FINANCIERS NON RÉVISÉS // 1 Statement of net assets État des actifs nets as at 30 September 2014 // au 30 septembre 2014
Assets – Actif Notes EUR Shares (and equity-type securities) in regional microfinance 172,756 investment vehicles Actions (et instruments similaires) dans des structures régionales d'investissements en microfinance Shares (and equity-type securities) in microfinance institutions 168,494 and service providers Actions (et instruments similaires) dans des institutions de microfinance et structures de support Loan agreements with microfinance institutions 12,659,526 Contrats de prêt avec des institutions de microfinance Notes backed by loans to microfinance institutions Notes financées par des prêts aux institutions de microfinance
7
1,029,173
Unrealised appreciation on swap contracts 5 Plus-value non-réalisée sur contrats de swap
66,779
Cash at banks 1,716,351 Avoirs en banque Savings account 1,700,117 Compte d’épargne Income receivable on portfolio 311,642 À recevoir sur le portefeuille Interest receivable on bank accounts and term deposits 8,377 Intérêts à recevoir sur avoirs en banque et dépôts à terme
Total assets 17,833,215 Somme des actifs
The accompanying notes form an integral part of this report.
Trader and client of the microfinance institution // Fondesurco
Liabilities – Passif
Notes EUR
Accrued expenses Provision pour frais à payer
8
179,130
Unrealised depreciation on forward foreign exchange contracts Moins-value non réalisée sur contrats de change à terme
5
333,679
Total liabilities Somme des passifs
512,809
Net assets at the end of the period Actifs nets à la fin de la période
17,320,406
A Class shares outstanding Nombre d’actions en circulation de la Classe A
148,286.423
Net asset value per A Class share 24.80 Valeur nette d’inventaire par action de la Classe A B Class shares outstanding Nombre d’actions en circulation de la Classe B
114,738.110
Net asset value per B Class share 103.58 Valeur nette d’inventaire par action de la Classe B C Class shares outstanding Nombre d’actions en circulation de la Classe C
16,855.402
Net asset value per C Class share Valeur nette d’inventaire par action de la Classe C
104.28
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
24-25
// 2 Statement of operations and other changes in net assets État des opérations et des variations des actifs nets from 1 April 2014 to 30 September 2014 // du 1er avril 2014 au 30 septembre 2014
Income – Revenus
Notes EUR
Interest on microfinance loan agreements Intérêts sur contrats de prêt en microfinance
583,091
Net interest paid on swap contracts Intérêt net payé sur contrat swap
(39,096)
Net interest on microfinance loan agreements Intérêts nets sur contrats de prêts en microfinance
543,994
Commission on microfinance loan agreements 3,733 Commission sur contrats de prêts en microfinance Interest on bank accounts and term deposits Intérêts bancaires et dépôts à terme
6,691
Total income Somme des revenus
554,418
Expenses – Frais Advisory fees 3 Frais du conseiller en investissement
117,902
Salary and wages of the fund management 3, 11 Charges salariales de gestion du fonds
70,748
Custodian fees Commission de la banque dépositaire
7,500
Central administration costs Frais de l’administration centrale
38,508
Banking charges and other fees Frais bancaires et charges liées
394
Transaction fees Frais de transaction
4,750
Audit fees Frais de révision
8,338
Other administrative costs Autres charges administratives
32,295
Subscription duty Taxe d'abonnement
4
0
Total expenses 280,433 Total des frais Net investment income Résultat net d’investissement The accompanying notes form an integral part of this report.
273,985
Net realised gain/(loss) Bénéfice/(perte) net(te)
Notes EUR
On investments Sur investissements
(19)
On forward foreign exchange contracts Sur contrat de change à terme
(576,045)
On foreign currency transactions Sur change
(67,470)
Realised result Bénéfice/(perte) net(te) réalisé(e)
(643,534)
Net variation of the unrealised gain/(loss) Variation de la plus-value/(moins-value) nette non réalisée On investment portfolio / Sur portefeuille d'investissements Variation of impairment on microfinance loans Variation de provisions sur prêts microfinance
6
(4,624)
Variation of valuation of equity investments Variation de la valorisation des investissements en capital
(13,865)
Variation due to changes in the foreign exchange rate Variation due à l'évolution du taux de change
1,017,682
Total variation on investment portfolio 999,193 Variation totale sur portefeuille d'investissements On forward foreign exchange contracts (296,912) Sur contrats de change à terme On cross-currency swap contracts Sur contrats de swap de taux et change à terme
(76,760)
On foreign exchange Sur change
23,158
Unrealised result Bénéfice/(perte) net(te) non réalisé(e)
648,679
Result of operations Résultat net des opérations
279,130
Subscriptions 5,000 Souscriptions
Redemptions (34,154) Rachats Total changes in net assets Variation globale de la valeur nette d’inventaire
249,976
Total net assets at the beginning of the period Valeur nette d’inventaire au début de la période
17,070,429
Total net assets at the end of the period Valeur nette d’inventaire à la fin de la période
17,320,406
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
26-27
// 3 Statistical information Informations statistiques as at 30 September 2014 // au 30 septembre 2014 Total net assets – Actifs nets
EUR
As at 30.9.2014 17,320,406 Au 30.9.2014 Number of A Class shares – Nombre d’actions de la Classe A en circulation Outstanding at the beginning of the period Au début de la période
148,286.423
Issued 0.000 Émises
Redeemed 0.000 Rachetées Outstanding at the end of the period À la fin de la période
148,286.423
Net asset value per A Class share Valeur nette d'inventaire par action de la Classe A
As at 30.9.2014 24.80 Au 30.9.2014 Number of B Class shares – Nombre d’actions de la Classe B en circulation Outstanding at the beginning of the period 114,690.975 Au début de la période
Issued 49.135 Émises
Redeemed 0.000 Rachetées Outstanding at the end of the period À la fin de la période
114,739.110
Net asset value per B Class share Valeur nette d'inventaire par action de la Classe B As at 30.9.2014 Au 30.9.2014
The accompanying notes form an integral part of this report.
103.58
45% of the loans granted by Fondesurco finance agricultural activities // Fondesurco
Number of C Class shares – Nombre d’actions de la Classe C en circulation Outstanding at the beginning of the period 17,185.402 Au début de la période
Issued 0.000 Émises
Redeemed (330.000) Rachetées Outstanding at the end of the period À la fin de la période
16,855.402
Net asset value per C Class share Valeur nette d'inventaire par action de la Classe C As at 30.9.2014 Au 30.9.2014
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
104.28
28-29
// 4 Statement of investments and other net assets État du portefeuille-titres et autres actifs nets as at 30 September 2014 // au 30 septembre 2014
Instrument // Microfinance institution Notes Country Maturity
Financial instruments not admitted to an official stock-exchange listing nor dealt in on another regulated market Investments in regional microfinance funds or similar entities Higher Education Finance Fund LP USA N/A Shares (and equity-type securities) in microfinance institutions and service providers MFX Solutions LLC USA N/A Subordinated loan agreements with microfinance institutions Fundación Alternativa para el Desarrollo ECUADOR 30/6/16 Fundación Alternativa para el Desarrollo ECUADOR 28/2/18 Loan agreements with microfinance institutions with an option to convert the loan into share capital Maxima Mikroheranhvatho Co Ltd CAMBODIA 28/2/15 Loan agreements with microfinance institutions ASUSU SA NIGER 18/10/18 Sociedad Cooperativa de Ahorro y Crédito AMC de RL de CV EL SALVADOR 25/7/17 La Asociación Nacional de Institutos de Desarrollo del Sector Informal IDESI Nacional PERU 31/10/15 Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 22/10/17 Cooperativa de Ahorro y Crédito la Florida 6 PERU 30/11/17 L'Association Marocaine de Solidarité sans Frontières/Micro-Crédit MOROCCO 31/12/18 Soro Yiriwaso MALI 14/3/17 La Cooperativa de Ahorro y Crédito Maquita Cushunchic Ltda. ECUADOR 13/5/15 Microfinanzas del Uruguay SA URUGUAY 29/12/14 Optima Servicios Financieros , S.A EL SALVADOR 31/10/16 Fundación de Apoyo Comunitario y Social del Ecuador ECUADOR 13/7/18 Fundación de Apoyo Comunitario y Social del Ecuador ECUADOR 31/8/16 Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 31/8/18 Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 28/2/15 Microfinanzas del Uruguay SA URUGUAY 29/12/14 Proyectos y Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF HONDURAS 30/6/16 Cooperativa de Ahorro y Crédito para la Integración y Desarrollo Rural PERU 15/12/14 L'Institution Marocaine d'appui à la Micro-Entreprise MOROCCO 31/1/19 La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV EL SALVADOR 28/2/18 KREDIT Microfinance Institution Plc CAMBODIA 30/9/16 Asociación Fondo De Desarrollo Regional - FONDESURCO PERU 10/6/17 Asociación Fondo De Desarrollo Regional - FONDESURCO PERU 26/1/18 La Cooperativa de Ahorro y Crédito Maquita Cushunchic Ltda. ECUADOR 13/5/15 La Asociación de Desarrollo Integral Rural ASDIR GUATEMALA 29/11/18 Maxima Mikroheranhvatho Co Ltd CAMBODIA 15/8/15 La Asociación de Desarrollo Integral Rural ASDIR GUATEMALA 28/2/19 Tembeka Social Investment Company SOUTH AFRICA 31/1/16 Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 30/9/15 Gata Daku Multi-Purpose Cooperative PHILIPPINES 29/4/16 KPS- Small Enterprise and Economic Development Inc PHILIPPINES 31/1/17 La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV EL SALVADOR 30/4/15 Fundación Pro Mujer Argentina ARGENTINA 15/4/15 La Asociación para el Desarrollo de la Costa Atlantica NICARAGUA 15/2/18 Gata Daku Multi-Purpose Cooperative PHILIPPINES 29/4/15 Fundación Alternativa para el Desarrollo ECUADOR 15/3/15 Coopérative d'Epargne & Crédit des Artisans TOGO 30/11/14 Notes Micro, Small & Medium Enterprises Bonds SA - Khan Bank 7 MONGOLIA 7/3/17 Micro, Small & Medium Enterprises Bonds SA - FINCA 7 AZERBAIJAN 7/3/17
Sub total Net accrued interest on swap contract Sub-total Cash at banks, term deposits and savings accounts Other net assets / liabilities Total net assets The accompanying notes form an integral part of this report.
Currency
Interest rate // commission
Quantity // Valuation Value in EUR Nominal value
Accrued interest in EUR
Total value in EUR
% of NAV
USD - 315,570 0.6915 172,756 - 172,756 1.0% USD - 200,000 1.1376 168,494 - 168,494 1.0% USD 11.0% 200,000 100% 158,334 4,354 162,689 0.9% USD 11.0% 200,000 100% 158,334 1,451 159,786 0.9% USD 8.0% 225,000 100% 178,126 1,188 179,314 1.0% XOF 9.5% 650,000,000 100% 989,546 43,086 1,032,632 6.0% USD 7.2% 1,000,000 100% 791,672 10,536 802,207 4.6% USD 7.0% 700,000 100% 554,170 16,163 570,333 3.3% USD 8.0% 650,000 100% 514,587 18,068 532,654 3.1% USD 9.0% 700,000 90% 498,753 16,902 515,655 3.0% EUR 7.0% 500,000 100% 500,000 8,750 508,750 2.9% XOF 10.0% 325,000,000 100% 494,773 2,199 496,972 2.9% USD 7.5% 600,000 100% 475,003 9,104 484,107 2.8% USD 8.0% 550,000 100% 435,419 8,708 444,128 2.6% USD 7.9% 500,000 100% 395,836 13,290 409,126 2.4% USD 8.8% 500,000 100% 395,836 7,504 403,340 2.3% USD 9.0% 500,000 100% 395,836 3,167 399,002 2.3% USD 8.0% 500,000 100% 395,836 2,814 398,651 2.3% USD 8.0% 500,000 100% 395,836 2,639 398,475 2.3% USD 8.0% 450,000 100% 356,252 7,283 363,536 2.1% USD 8.0% 391,842 100% 310,210 6,204 316,414 1.8% PEN 10.5% 1,100,000 100% 301,016 9,219 310,234 1.8% EUR 7.0% 300,000 100% 300,000 3,500 303,500 1.8% USD 8.0% 350,000 100% 277,085 1,822 278,907 1.6% USD 8.0% 350,000 100% 277,085 0 277,085 1.6% PEN 11.2% 900,000 100% 246,286 8,505 254,791 1.5% PEN 13.0% 900,000 100% 246,286 5,781 252,067 1.5% USD 8.0% 300,000 100% 237,501 7,231 244,732 1.4% USD 8.0% 300,000 100% 237,501 6,544 244,046 1.4% USD 8.0% 300,000 100% 237,501 2,428 239,929 1.4% USD 8.0% 300,000 100% 237,501 1,583 239,085 1.4% ZAR 13.5% 3,200,000 100% 224,190 5,044 229,234 1.3% NIO 14.8% 7,500,000 100% 226,840 0 226,840 1.3% PHP 11.0% 12,000,000 100% 211,394 9,947 221,342 1.3% PHP 11.7% 11,000,000 100% 193,778 3,858 197,636 1.1% USD 8.0% 225,000 100% 178,126 5,938 184,064 1.1% ARS 53.0% 1,500,000 100% 140,061 34,023 174,084 1.0% USD 9.0% 200,000 100% 158,334 1,821 160,155 0.9% PHP 10.0% 8,000,000 100% 140,930 5,872 146,802 0.8% USD 8.0% 150,000 100% 118,751 396 119,147 0.7% EUR 8.5% 75,000 100% 75,000 2,107 77,107 0.4% USD 5.2% 650,000 100% 514,587 1,686 516,273 3.0% USD 5.7% 650,000 100% 514,587 1,593 516,180 3.0%
14,029,949 302,311 14,332,261 82.7% (32,630) (32,630) -0.2% 269,681 14,299,631 82.5% 3,424,844 19.8% (404,069) -2.3% 17,320,406 100.0%
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
30-31
// 5 Breakdown of microfinance investments and evolution of NAV Répartition des investissements en microfinance et évolution de la VNI / Total exposure per counterparty Exposition agrégée par contre-partie as at 30 September 2014 // au 30 september 2014 Aggregated exposure to ASUSU SA
Amount (EUR)
% of total net assets
1,032,632 6.0%
Microfinanzas del Uruguay SA
807,663
4.7%
Fundación de Apoyo Comunitario y Social del Ecuador
802,343
4.6%
Sociedad Cooperativa de Ahorro y Credito AMC de RL de CV
802,207
4.6%
Intean Poalroath Rongroeurng Co. Ltd.
797,125
4.6%
Pro Mujer Inc, sucursal de Nicaragua
759,494
4.4%
La Cooperativa de Ahorro y Crédito Maquita Cushunchic Ltda.
728,839
4.2%
La Asociación Nacional de Institutos de Desarrollo del Sector Informal IDESI Nacional
570,333
3.3%
MSME Bonds SA - Khan Bank Mongolia
516,273
3.0%
MSME Bonds SA - FINCA Azerbaijan
516,180
3.0%
Cooperativa de Ahorro y Crédito la Florida
515,655
3.0%
L'Association Marocaine de Solidarité sans Frontières/Micro-Crédit
508,750
2.9%
Asociación Fondo De Desarrollo Regional - FONDESURCO
506,857
2.9%
Soro Yiriwaso
496,972 2.9%
La Asociación de Desarrollo Integral Rural ASDIR
483,131
2.8%
La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV
462,971
2.7%
Fundación Alternativa para el Desarrollo
441,621
2.5%
Maxima Mikroheranhvatho Co Ltd
419,243
2.4%
Optima Servicios Financieros, S.A
409,126
2.4%
Gata Daku Multi-Purpose Cooperative
368,143
2.1%
Proyectos y Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF
316,414
1.8%
Cooperativa de Ahorro y Crédito para la Integración y Desarrollo Rural
310,234
1.8%
L'Institution Marocaine d'appui à la Micro-Entreprise
303,500
1.8%
KREDIT Microfinance Institution Plc
277,085
1.6%
Tembeka Social Investment Company
229,234
1.3%
KPS-Small Enterprise and Economic Development Inc
197,636
1.1%
Fundación Pro Mujer Argentina
174,084
1.0%
Higher Education Finance Fund LP
172,756
1.0%
MFX Solutions LLC
168,494
1.0%
La Asociación para el Desarrollo de la Costa Atlantica
160,155
0.9%
Coopérative d'Epargne & Crédit des Artisans
77,107
0.4%
Total Portfolio
The accompanying notes form an integral part of this report.
14,332,260 82.7%
/ Geographical breakdown of microfinance investments Répartition géographique des investissements en microfinance as at 30 September 2014 // au 30 september 2014 Geographical classification
Amount (EUR)
% of total net assets
ECUADOR
1,972,803 11,4%
PERU
1,903,080 11,0%
EL SALVADOR
1,674,304
CAMBODIA
1,493,453 8,6%
NIGER
1,032,632 6,0%
9,7%
NICARAGUA
919,649 5,3%
MOROCCO
812,250 4,7%
URUGUAY
807,663 4,7%
PHILIPPINES
565,779 3,3%
MONGOLIA
516,273 3,0%
AZERBAIJAN
516,180 3,0%
MALI
496,972 2,9%
GUATEMALA
483,131 2,8%
USA
341,250 2,0%
HONDURAS
316,414 1,8%
SOUTH AFRICA
229,234
ARGENTINA
174,084 1,0%
TOGO Total Portfolio
1,3%
77,107 0,4% 14,332,260
82.7%
/Breakdown of microfinance investments by currency Répartition des investissements en microfinance par devise as at 30 September 2014 // au 30 september 2014 Currency
Amount (EUR)
% of total net assets
United States Dollar
9,900,269
57,2%
West African CFA Franc
1,529,604
8,8%
Euro
889,357 5,1%
Peruvian Nuevo Sol
817,092
4,7%
Philippine Peso
565,779
3,3%
South African Rand
229,234
1,3%
Nicaraguan Córdoba
226,840
1,3%
Argentine Peso
174,084
1,0%
14,332,260
82.7%
Total Portfolio
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
32-33
Microentrepreneur at her fruit selling stand // Fondesurco
/ Evolution of the net asset value per share Évolution de la valeur nette d’inventaire par action in EUR en EUR
NAV/share as at 30.9.2014 VNI/action au 30.9.2014
Class A shares Actions de la Classe A
NAV/share as at 31.3.2014 VNI/action au 31.3.2014
24.80
NAV/share as at 31.3.2013 VNI/action au 31.3.2013
Initial subscription price Prix de souscription initial
24.49 24.39 25.00
Class B shares Actions de la Classe B
103.58
101.76 100.64 100.00
Class C shares Actions de la Classe C
104.28
102.95
17,320,406
17,070,429
Total net assets Actifs nets
102.54
100.00
14,327,282
Performance financial Performance financial Performance financial Performance since period 03 - 09 2014 year 2013 - 14 year 2012 - 13 inception Rendement Rendement Rendement Rendement de la période 03 - 09 2014 de l'année 2013 - 14 de l'année 2012 - 13 depuis lancement
Class A shares Actions de la Classe A
1.3%
0.4%
1.2%
(0.8%)
Class B shares Actions de la Classe B
1.8%
1.1% 2.2% 3.6%
Class C shares Actions de la Classe C
1.3%
0.4% 1.1% 4.3%
// 6 Notes to the unaudited financial statements Notes aux états financier non révisés as at 30 September 2014 // au 30 septembre 2014
GENERAL INFORMATION / A Structure of the Fund Luxembourg Microfinance and Development Fund, SICAV (the “Fund” or the “SICAV”) is an investment company organised as a public limited company (société anonyme) under the laws of the Grand Duchy of Luxembourg and qualified as a “société d’investissement à capital variable” (SICAV). The Fund is authorised as an undertaking for collective investment (“UCI”) under Part II of the law of 17 December 2010 relating to undertakings for collective investment (the “Law”). The Fund was incorporated in Luxembourg on 7 October 2009 with an initial capital of EUR 31,000 divided into 1,240 fully paid up shares with no par value. The capital of the Fund is equal at all times to the net assets of the Fund. The Articles were published in the Mémorial on 2 November 2009 and the Fund is registered under trade register number R.C.S. Luxembourg B 148826. The Fund is incorporated for an unlimited period. The Fund is an open-ended fund. Accordingly, the Fund is authorised to issue an unlimited number of shares, all of which are without par value. The Fund is an umbrella fund and as such may operate separate Sub-Funds, each of which is represented by one or more classes of shares (each, a “Class”). The Sub-Funds are distinguished by their specific investment policy or any other specific features. At the date of this report, the Fund had created one Sub-Fund, the Luxembourg Microfinance and Development Fund – Social Venture Capital Sub-Fund. The Fund may issue three classes of shares, namely Class A shares, Class B shares and Class C shares, each targeting different types of investors, evidencing a different level of risk, offering a target return and evidencing a different level of involvement in the Fund’s governance. The initial subscription period for Class A and Class B shares ended on 18 December 2009. The initial subscription period for Class C shares ended on 31 March 2010. The base currency of the Fund is the EUR and all the financial statements of the Fund are presented in EUR. The financial year of the Fund ends on 31 March in each year. Copies of the Articles, the latest financial reports and the latest annual report may be obtained without cost on request from the Fund.
Copies of the material agreements mentioned in the Prospectus may be reviewed during normal business hours on any business day at the registered office of the Fund. / B Investment Objective Luxembourg Microfinance and Development Fund aims at contributing to the alleviation of poverty in developing countries through the provision of permanent and adapted financial services to marginalized communities and individuals. The Fund invests in promising microfinance institutions ("MFIs") that have a positive social impact so that these institutions reach financial autonomy. In pursuance of its objectives, the Fund may invest in MFIs, in networks or associations of MFIs, in regional funds, in microfinance investment vehicles ("MIVs") and in other microfinance-related products. The Fund has two principal objectives, social and financial: help socially-oriented MFIs to become longterm viable enterprises that reach more poor people and offer better services, and generate sufficient income to sustain its own operations and give its shareholders a financial return that at least compensates for inflation. The Fund strives to provide tailor-made and innovative solutions to needy MFIs, coupling its own financial assistance with technical support from external consultants. It deliberately focuses on niche activities, activities where potential needs of MFIs are large, but current supply is scarce. The Sub-Fund does not directly engage with the end clients of the MFIs (micro-entrepreneurs, small savers and insurance policy holders). This activity requires local presence and local knowledge and is best done by locally implanted MFIs. The Fund invests primarily but not exclusively in the following financial instruments: - Various credit products such as senior loans, term deposits, promissory notes and bonds; - Equity and quasi-equity instruments; - Issuance of guarantees and letters of credit; - Participating interests in loans or guarantees to regional and other microfinance investment vehicles. The Sub-Fund invests in the developing countries of Africa, Asia and Latin America.
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
34-35
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES / A Presentation of Financial Statements The Fund invests a significant part of its assets in financial instruments denominated in currencies other than the euro. Often, the Fund contracts a cross-currency interest rate swap or forward foreign exchange contract to limit the exposure of the Fund to the movements of the currency in relation to the euro. In the case of debt instruments, the cost of hedging such exposure strongly influences the interest rate the Fund charges to microfinance institutions. The interest income on microfinance loan agreements in the statement of operation and other changes in net assets includes the interest charges to microfinance institutions to cover the hedging costs of the respective currency. The impact of the valuation of the hedging instruments is presented in the net realized gain/ loss and the variation of the unrealized gain/loss. / B Valuation of Financial Instruments Debt instruments not listed or dealt in on any stock exchange or any other regulated market that operates regularly, is recognized and open to the public will be valued at the nominal value plus accrued interest. Such value will be adjusted, if appropriate, to reflect e.g. major fluctuations in interest rates in the relevant markets or the appraisal by the Board of Directors on the credit worthiness of the relevant debt instrument. Capital participations not listed or dealt in on any stock exchange or any other regulated market that operates regularly, is recognized and open to the public will be valued at their reasonably foreseeable sales price determined prudently and in good faith pursuant to procedures established by the Board of Directors. Such procedures include, in order of preference: - Up to the first year following the Sub-Fund’s acquisi tion, the capital participations will be valued at cost; - After the first year of holding, the value of the capital participation will be estimated with reference to prices of equity transactions or issues of new shares involving the same MFI within a reasonable time period of the valuation date. Such a time period is determined by an assessment of the Board of Directors whether material changes within the MFI or in its operating environment have occurred since the date such transaction took place; - If such transactions are not available or deemed not representative of fair value, the value of the capital participation should be estimated with reference to the price-to-book ratio at which the Sub-Fund acquired the capital participation;
- In case the Sub-Fund has entered into negotiations to sell a capital participation to a third party, the capital participation may be valued at its expected sales price if the disclosure is judged appropriate by the Board of Directors in view of the ongoing negotiations. The value of any cash on hand or on deposit, bills and demand notes and accounts receivable, prepaid expenses, cash dividends and interest declared or accrued and not yet received is deemed to be the full amount thereof, unless in case the same is unlikely to be paid or received in full, in which case the value thereof is arrived at after making such discount as may be considered appropriate in such case to reflect the true value thereof. The value of securities that are listed on any stock exchange or dealt in on any regulated, recognized, open to the public and regularly functioning market is based on the last available price. The value of units or shares in UCIs is based on their last-stated net asset value. Other valuation methods may be used to adjust the price of these units or shares if, in the opinion of the Fund, there have been changes in the value since the net asset value had been calculated or the valuation method used by the UCIs is not appropriate to reflect the fair value thereof. Cross-currency SWAPs that are materially linked in notional, spot exchange rates, interest rates, maturities and other terms to any underlying loan instrument are valued using the spot exchange rate for the notional and accrued interest. Such valuation approach is changed if a credit risk materializes in the form of an impairment. The part of the SWAP notional then exceeding the valuation of the underlying loan is valued using a marked to market approach. Any material difference between the spot rate at which the SWAP was contracted and the spot rate at which the loan was disbursed is amortized over the period until expiration of the SWAP and recognized as interest income or expense. The value of all assets and liabilities not expressed in the reference currency of a Sub-Fund will be converted into the reference currency of such Sub-Fund at the rate of exchange ruling in Luxembourg as at the relevant Valuation Day. If such quotations are not available, the rate of exchange will be determined in good faith by or under procedures established by the Board of Directors. The Board of Directors, in its discretion, may permit some other methods of valuation to be used, if it considers that such valuation better reflects the fair value of any asset of the Fund.
/ C Allocation of Net Asset Value Among Share Classes Preferred Return on Class B shares The preferential return to Class B shares is allocated if and only if the Sub-Fund’s result of operations since the last valuation, both with and without impairment risk on microfinance, shows a profit. In such case, the net profit generated by the Sub-Fund since the last valuation day is first allocated to Class B shares until the first of the following is attained: - The remuneration reaches the total net profit since last valuation; - The equivalent of 1% p.a. interest on Class B shares’ NAV; - If an impairment provision booked before or on the last valuation day is reduced, the profit since the last valuation day without the income from reducing such provision. The remaining profit, if any, is allocated among the three share Classes according to their respective proportions in the Sub-Fund’s total NAV. Microfinance Impairment Risk Class A shares shall cover the net loss allocated to Class C shares since the last valuation day, if such loss arises from the impairment of microfinance related investments until Class A share capital is nil. Only a reduction in the Sub-Fund’s microfinance investments resulting from the deterioration of the financial conditions of the counterparty is considered as a microfinance impairment. The Fund reserves the right to suspend subscriptions in Class C shares within the Sub-Fund, if the NAV allocated to Class A shares is less than 20% of the combined NAV of Class C and Class A shares. / D Dividends The primary investment objective of the Fund is to achieve long-term growth. The Fund’s operating plan in general does not contemplate payment of dividends to shareholders.
NOTE 2 SHARES The Board is authorised, without limitation, to issue an unlimited number of fully paid up shares at any time without reserving a preferential right to subscribe for the shares to be issued for the existing shareholders. The following share Classes are available for subscription, each targeting different types of investors evidencing a different level of risk, offering a different target return and involvement in the Fund’s governance.
Luxembourg Government, ADA and such other investors as may be approved by the existing Class A shareholders. Class A shares entitle their holders to propose a common list of proposed directors for appointment to the Board by the General Meeting of shareholders. - Risk profile: Junior - Target return: Above inflation rate targeted by the ECB over the medium term Class B shares: No restrictions for investors in Class B shares exist. Class B shares entitle their holders to earn a 1 percentage point p.a. higher return than Class A shares and Class C shares to the extent possible. - Risk profile: Mezzanine - Target return: Above inflation rate targeted by the ECB over the medium term plus 1 percentage point p.a. Class C shares: Class C shares are reserved for subscription for private individuals and private non-profit organizations which are subject to the Board of Director’s consent. Class C shares entitle their holders to avoid under certain conditions risks emanating from impairment of the microfinance investments of the Sub-Fund which will be covered by Class A shares. - Risk profile: Senior - Target return: Above inflation rate targeted by the ECB over the medium term
NOTE 3 ADVISORY AND MANAGEMENT FEES / A Advisory fees On 15 December 2009, the SICAV concluded an investment advisory agreement with ADA - Appui au Développement Autonome a.s.b.l. Per such agreement, the investment advisor is entitled to receive, out of the assets of the Fund, a yearly fee of a maximum of 2% of the Sub-Fund average net asset value, 0.25% of which is linked to the performance of the microfinance assets of the SICAV. Total investment advisory and portfolio related fees amount, for the period ended, to EUR 117,902 or 1.4% (annualized) of the average net asset value of the SICAV. Of the total investment advisory fees, EUR 12,578 are linked to the performance of the microfinance assets.
Class A shares: Class A shares are reserved for subscription by the
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
36-37
/ B Management fees In consideration of the services rendered to the Fund, the Management and Support Team are entitled to receive a fee that, together with the fee paid to the investment advisor(s), is of maximum 3% of the Sub-Fund’s average net asset value per year. From 1 April 2014 until 30 September 2014, Management and Support Team fees amount to 0.8% (annualized). Total fees to investment advisor(s), Management and Support Team amount to 2.2% (annualized) of the average net asset value of the SICAV.
NOTE 4 SUBSCRIPTION DUTY / “TAXE D’ABONNEMENT” The SICAV is governed by Luxembourg tax law. Article 20 of the law of 18 December 2009 on the 2010 budget of the Luxembourg State and a Grand Ducal decree of 14 July 2010 abolishes the “Taxe d’Abonnement” for funds investing in microfinance with effect on 1 January 2010. On 15 October 2010, the Commission de Surveillance du Secteur Financier (“CSSF”) informed the Fund of their decision to include the SICAV in the list of investment funds in compliance with such decree.
NOTE 5 FORWARD FOREIGN EXCHANGE AND SWAP CONTRACTS / A Swap contracts The SICAV aims to provide, whenever feasible, loans to microfinance institutions in local currency. During the reporting period, the SICAV hedged loan instruments using cross-currency swaps, which allow the SICAV to significantly reduce the foreign currency risk associated with assets held in foreign currencies. SWAP contracts In relation to loan Notional Currency Paying Receiving Maturity Counter- Unrealized agreement with Leg Leg Date party appreciation/ (depreciation), (in EUR) Fundación 1,500,000 ARS Pro Mujer Argentina
53.1% 7.00% p.a., p.a., semi- semiannual annual payment payment
15/4/15
MFX Solutions Inc.
82,016
Gata Daku 8,000,000 PHP Multi-Purpose Cooperative
10.0% 8.1% p.a., p.a., semi- semiannual annual payment payment
29/4/15
MFX Solutions Inc.
(15,222)
Gata Daku 12,000,000 PHP Multi-Purpose Cooperative
10.9% 8.0% p.a., p.a., semi- semiannual annual payment payment
29/4/16
MFX Solutions Inc.
14,552
KPS-Small 11,000,000 PHP Enterprise and Economic Development, Inc.
11.7% 8.0% p.a., p.a., semi- semiannual annual payment payment
31/1/17
MFX Solutions Inc.
(14,567)
Total
66,779
/ B Forward foreign exchange contracts The Fund has also contracted foreign currency forwards to hedge currency exposures of the movements of the respective currencies in relation to EUR. The counterparty for trades in relation to such hedges is the Banque et Caisse d’Épargne de l’État (USD, ZAR) and MFX Solutions Inc.
Forward foreign exchange contracts Currency Amount Currency Amount Maturity purchased purchased sold sold date EUR
227,577 PEN
EUR
9,262,118 USD
EUR
137,466 PEN
Unrealized appreciation / (depreciation), (in EUR)
900,000 10/6/15
(18,708)
12,000,000 16/12/14 (233,045) 550,000 15/12/14
(13,042)
EUR
222,910 PEN
900,000 27/1/15 (23,375)
EUR
195,604 ZAR
3,200,000 30/1/15 (28,586)
EUR
159,095 XOF
107,500,000 16/3/15
(4,560)
EUR
947,234 XOF
650,000,000 20/4/15
(42,312)
EUR
154,080 XOF
107,500,000 14/3/16
(9,576)
EUR
150,838 XOF
110,000,000 14/3/17
(16,624)
Sub-total (389,830) Capitalized hedging costs, to be amortized until maturity of hedging instrument Total
56,151 (333,679)
NOTE 6 IMPAIRMENTS ON MICROFINANCE LOANS During the last financial year the Board of Directors of the Fund decided to provision 10% of the outstanding principal of the loan to the microfinance institution Crediflorida in Peru (USD 700,000 loan). Crediflorida’s activities are concentrated on the financing of coffee farmers which have been significantly impacted by unusual climatic conditions and coffee rust. During the first six months of the financial year the situation of Crediflorida has stabilized. The Board of Directors has decided to maintain the provision until the situation of the MFI improves substantially. The variation during the review period of impairment on microfinance loans results solely from fluctuations in foreign exchange rates.
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
38-39
NOTE 7 SUBSCRIBED NOTES ISSUED BY MICRO, SMALL & MEDIUM ENTERPRISES BONDS S.A., LUXEMBOURG The Board of Directors of the Fund resolved in their meeting on 19 March 2014 to authorize the subscription to Notes backed by loans to microfinance institutions issued by the Luxembourg company Micro, Small & Medium Enterprise Bonds S.A. (“MSME Bonds�) in several issues up to EUR 1,000,000. The Notes are listed on the official list of the Luxembourg Stock Exchange Euro MTF market. Arranger and Servicer to MSME Bonds is Symbiotics S.A., a Swiss-based, specialised microfinance advisor and asset manager. Subsequent to the decision of the Board of Directors, the Fund subscribed: USD 650,000 in Notes 11-L. The issue totals USD 8,650,000 (ISIN XS1051929831) and is backed by a loan granted by MSME Bonds to the microfinance institution FINCA Azerbaijan. USD 650,000 in Notes 12-L. The issue totals USD 8,900,000 (ISIN XS1055195322) and is backed by a loan granted by MSME Bonds to the microfinance institution Khan Bank LLC in Mongolia.
NOTE 8 DETAIL OF ACCRUED AND OTHER EXPENSES As at the reporting date, accrued and payable expenses consisted of the following (in EUR): Investment advisory fees Investment advisory fees linked to the performance of the microfinance assets Custodian fees Domiciliation fees Transaction related fees due to the custodian Audit fees Office rent and charges Administration fees VAT services fees Legal fees Transfer agency fees Representation fees Transaction related fees due to the administrator Information technology expenses
53,643 53,145 18,100 12,500 9,750 8,338 7,276 6,708 4,150 2,633 1,375 1,345 1,000 667
Total 180,630 For the reporting period, other administration costs consisted of the following (in EUR): Travel expenses Information technology Miscellaneous expenses Rating and labelling fees CSSF annual fee Post and telecommunication Marketing and public relations fees Membership fees Legal fees Board of directors and committee expenses Other fees Representation expenses
7,542 5,318 4,385 4,139 3,000 1,799 1,779 1,614 878 854 676 309
Total 32,295
20 offices located in 4 departments in Peru // Fondesurco
NOTE 9 TOTAL EXPENSE RATIO Average net asset value during the period (in EUR) Total expenses for the period 1 April 2014 until 30 September 2014 (in EUR) Total expense ratio (annualized)
17,261,218 280,433 3.2%
NOTE 10 FOREIGN EXCHANGE RATES The principal exchange rates rounded to four decimals applied at the reporting date are as follows:
1 EUR = 26.5893 1 EUR = 112.8625 1 EUR = 33.0630 1 EUR = 3.6543 1 EUR = 56.7660 1 EUR = 1.2632 1 EUR = 656.8670 1 EUR = 14.2736 1 EUR = 40.9640 1 EUR = 10.7096
HNL KES NIO PEN PHP USD XOF ZAR THB ARS
(Honduran Lempira) (Kenyan Shilling) (Nicaraguan Córdoba) (Peruvian Nuevo Sol) (Philippine Peso) (United States Dollar) (West African CFA Franc) (South African Rand) (Thai Baht) (Argentine Peso)
NOTE 11 STAFF During the reporting period, the SICAV employed one full-time staff recruited on 1 October 2009 and one part-time staff recruited on 5 November 2012. The SICAV also employed two interns from 1 September 2014 for six months. The employment contracts do not include any variable remuneration linked to the performance of the Fund.
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
40-41
NOTE 12 COMMITMENTS The Fund has concluded a number of subscription agreements with shareholders and other parties. According to the terms of such agreements, these shareholders and parties have committed to subscribe certain amounts in Class A and Class B shares. As at the reporting date, the following commitments have not yet been called upon: in EUR 1/1/2014 31/12/2014 Class A shares
500,000
Class B shares
1,525,000
Total 2,025,000 A number of commitments are contingent on the Fund reaching certain diversification thresholds in the shareholder structure. Subscription agreements concluded between the Fund and various shareholders indicate that such diversification covenants will be respected.
NOTE 13 RELATED PARTY TRANSACTIONS The SICAV considers each shareholder controlling 20% or more of total voting rights or any entity forming part of the key management of the Fund, including its directors, as a related party. During the reporting period, the SICAV has conducted the following material transactions with related parties, excluding subscription of shares and commitments to subscribe shares in the future: The SICAV has concluded an investment advisory agreement with ADA with the remuneration structure disclosed in Note 3. The SICAV also sub-leases an office in the “Maison de la Microfinance”, a building leased by ADA at 39, rue Glesener, Luxembourg Ville. The Board of Directors of the SICAV estimate the rent to correspond to a rent agreed in an arm’s length transaction with an unrelated party. The Executive Director of the Fund has been appointed as a board member of the microfinance currency risk management company MFX Solutions Inc. In its relations with all clients, MFX Solutions Inc. applies a standardized pricing model approved by a Pricing Committee. The Executive Director does not form part of such Pricing Committee.
NOTE 14 SHARE TRANSACTIONS OF DIRECTORS The directors of the SICAV have not undertaken share transactions during the reporting period. One close family member of a director has subscribed 390 Class C shares with the NAV 30 September 2014.
86% of the clients live in rural areas with limited access to financial services and are exposed to a higher incidence of poverty // Fondesurco
NOTE 15 SUBSEQUENT EVENTS TO 26 NOVEMBER 2014 The Fund continued its investment activties and disbursed three loans to MFIs for a total of USD 1.85 million between the end of the reporting period and the issuance of this report.
Imprint Conception and Layout binsfeld.lu / LMDF - Jennifer Urbain © Photos Gonzalo Charaja Ramos - Fondesurco / LMDF © The Luxembourg Microfinance and Development Fund − Social Venture Capital Sub-Fund, 2014 All rights reserved
Unaudited semi-annual report as at 30 September 2014 // Rapport semestriel non révisé au 30 septembre 2014
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Société d’Investissement à Capital Variable /// 2, place de Metz /// L-1930 Luxembourg T.: +352 27 47 35 /// F.: +352 27 47 35 72 /// info@lmdf.lu /// www.lmdf.lu