Triodos Microfinance Fund Audited annual report 2011 potx

TLIM Triodos Microfinance Fund Audited annual report 2011 Microfinance is the provision of financial services to low-income people in developing countries. An inclusive financial sector, where the majority of people have access to financial services, provides a sustainable basis for balanced socio-economic development. Société d’Investissement à Capital Variable organised under the laws of the Grand Duchy of Luxembourg The value of the investments may fluctuate. Past performance is no guarantee of future results. No subscription can be accepted on the basis of financial reports. Subscriptions are only valid if they are made on the basis of the latest published prospectus accompanied by the latest annual report and the most recent semi-annual report, if published thereafter. The prospectus is available free of charge at the registered office of Triodos SICAV II in Luxembourg and from Triodos Bank: www.triodos.com. Triodos Investment Management is a 100% subsidiary of Triodos Bank. Triodos Investment Management is the Investment Manager of Triodos Microfinance Fund and manages the assets on a day-to-day basis. Triodos SICAV II - Triodos Microfinance Fund Audited annual report 2011 4 Key figures (amounts in euros) 2011 2010 2009 Total net asset value at year-end 91,679,563 59,977,763 39,330,771 Income 4,844,089 3,062,474 1,226,263 Expenses -1,598,322 -1,181,811 -595,737 Net operating income 3,245,767 1,880,663 630,526 Realised and unrealised results on investments, swaps and foreign exchange contracts 1,337,110 616,267 -252,222 Net result 4,582,877 2,496,930 378,304 Total Expense Ratio per share class* I-cap (EUR) 2,11% 2.35% 2.20% I-dis (EUR) 2.13% 2.25% 2.17% B-cap (EUR) 3.05% 2.92% 3.97% B-dis (EUR) 2.62% 2.88% 3.86% R-cap (EUR) 2.84% 3.00% 2.92% R-dis (EUR) 2.81% 2.95% 2.68% KI-cap (GBP) 2.02% 2.19% 2.18% KI-dis (GBP) 2.12% 2.20% 2.19% KB-cap (GBP)** 2.85% 2.41% n.a. KB-dis (GBP)*** 2.86% 2.65% n.a. KR-cap (GBP)**** 2.83% 3.28% n.a. KR-dis (GBP) 2.85% 2.95% 3.08% * The total expense ratio (TER) includes all the costs that are charged to the result during the reporting period. The costs of securities transactions and the interest charges are disregarded. ** This share class was launched on April 1, 2010 *** This share class was launched on June 1, 2010 **** This share class was launched on November 1, 2010 Net asset value per share Share class 31.12.2011 31.12.2010 31.12.2009 I-cap (EUR) EUR 28.06 EUR 26.45 EUR 25.29 I-dis (EUR) EUR 26.54 EUR 25.91 EUR 25.31 B-cap (EUR) EUR 27.50 EUR 26.11 EUR 25.14 B-dis (EUR) EUR 26.35 EUR 25.80 EUR 25.14 R-cap (EUR) EUR 27.43 EUR 26.04 EUR 25.08 R-dis (EUR) EUR 26.39 EUR 25.77 EUR 25.08 KI-cap (GBP)* GBP 22.31 GBP 21.10 GBP 20.20 KI-dis (GBP)* GBP 19.71 GBP 20.97 GBP 20.19 KB-cap (GBP)* GBP 21.07 GBP 20.06 n.a. KB-dis (GBP)* GBP 20.65 GBP 19.77 n.a. KR-cap (GBP)* GBP 21.12 GBP 20.08 n.a. KR-dis (GBP)* GBP 19.76 GBP 20.81 GBP 20.18 * The GBP share classes are hedged against the euro. 5 Return 1 based on net asset value per share Share class Start date 1 year Average since inception p.a. I-cap (EUR) 01-04-2009 6.1% 4.4% I-dis (EUR) 02-03-2009 6.1% 4.3% B-cap (EUR) 02-06-2009 5.3% 3.9% B-dis (EUR) 02-06-2009 5.4% 3.9% R-cap (EUR) 01-07-2009 5.3% 3.9% R-dis (EUR) 01-07-2009 5.3% 3.9% KI-cap (GBP) 2 02-03-2009 5.7% 4.1% KI-dis (GBP) 2 02-03-2009 5.7% 4.1% KB-cap (GBP) 2 01-04-2010 5.0% 3.1% KB-dis (GBP) 2 01-06-2010 4.5% 2 .1% KR-cap (GBP) 2 01-11-2010 5.2% 4.8% KR-dis (GBP) 2 02-03-2009 5.1% 3.6% Source: RBC Dexia and vwd group 1 The return includes reinvestment of dividends and costs. 2 The GBP share classes are hedged against the euro. 6 Table of Contents Page Introduction 7 Report of the Board of Directors 8 General information 22 Summary of annual accounts 2011 24 Report of the réviseur d’entreprises agréé 43 Management and administration 45 Colophon 47 7 An estimated 2.7 billion people, or close to half the world’s population, have no access to formal financial services. They are unable to open a bank account, negotiate a loan to start a business or buy insurance. Having access to these financial services has a fundamental impact on the lives of millions of people. It enables them to build their assets gradually, develop micro-enterprises and improve their income earning capacity to help them save for school fees and provide a financial cushion for the future. While there is still a long way to go to make sure that everyone everywhere has access to a diverse range of financial services, the past ten years have seen tremendous growth in financial services being offered to poorer people by an increasing number and variety of financial institutions. The industry has proved that low income populations are bankable and can be offered financial services in a sustainable way. On the back of the microfinance industry's success, commercial banks in developing countries have partnered with microfinance institutions to reach lower income customers. In some markets, microfinance institutions (MFIs) have transformed into licensed banks, enabling them to further expand their services to small and medium-sized enterprises or provide mortgages. Significant challenges remain however, not least because millions of people are still excluded. As the microfinance sector becomes integrated into mainstream financial systems, it also inherits many of the industry’s existing problems. This means that as the industry matures it must address its challenges in a balanced way in order to shape an inclusive financial services industry that keeps the interests of its low-income clients at its core. Mission Triodos SICAV II - Triodos Microfinance Fund (Triodos Microfinance Fund) has been designed to offer investors the opportunity to actively contribute to the development of the microfinance sector into an inclusive financial sector in which the majority of people have access to financial services. The fund provides loans and equity to banks and microfinance institutions (MFIs) that demonstrate a sustainable approach toward providing financial services to underserved client groups. Triodos Microfinance Fund is an initiative of Triodos Investment Management, a wholly-owned subsidiary of Triodos Bank NV. Triodos Investment Management started investing in developing countries in 1994 because it recognised that sustainable development, and addressing poverty issues in particular, was a global issue. Since 1994, assets under management in the microfinance sector have increased to EUR 362 million, making Triodos Investment Management one of the leading investors in the industry. As an investor it wishes to contribute to the development of a sustainable financial sector in developing countries based on fair pricing, transparency, access for all and care for the earth. Introduction 8 Triodos SICAV II - Triodos Microfinance Fund’s net assets grew by 52.8% to EUR 91.7 million at the end of 2011, while its portfolio reached a value of EUR 71.2 million (77.6% of the fund’s net assets). The fund increased the number of its investments to 28 microfinance institutions (MFIs) and one investment fund and further diversified its geographical spread by adding three new countries to its portfolio, which now totals 19 countries in Latin America, Asia, Africa and Eastern Europe. Market Developments The quality of loan portfolios held by microfinance institutions (MFIs) stabilised or improved in 2011, leading to an increasing demand for funding. The sustained economic growth in many developing countries played a distinct role in this. A growing number of institutions aim to provide a broad range of services including savings and insurance products and are using innovative distribution channels to reach their clients. MFIs are also increasingly aiming their services at small and medium-sized enterprises. This is because successful micro-entrepreneurs have expanded into this sector, which is also frequently the driving force for jobs in the economy. 52.8% growth of net assets in 2011 All the players in the sector are increasingly aware of the growing pains that accompany the maturing of the microfinance sector. Overindebtedness among microfinance clients remains a major concern. Microfinance institutions, microfinance banks, investors, legislators and network organisations are working hard and often collaborating to ensure that the sector develops vigorously and sustainably, with the interests of the end-clients at its core. Keying into individual end clients’ needs and circumstances, motivating them to save in combination with offering responsible loans, transparent services, balanced growth and effective regulation and supervision are crucial in all this. The challenge for all parties including Triodos Microfinance Fund is continuing to maintain this balance. It is encouraging to see that microfinance is increasingly reaching people that were previously unbanked. It is important to guard against financial return becoming an end in itself, rather than an instrument for safeguarding the continuity and improvement of services. The aim remains to improve these clients’ living conditions. Their interests are the focal point. The sometimes stormy development of the microfinance sector in recent years with over-stretched growth and profit targets may come along with the risk that such interests fade into the background. When MFIs fail to align their credit methods and services with the needs of their clients, these clients can find themselves saddled with irresponsible and large debts. This is exactly the opposite of what microfinance stands for: offering financial services responsibly and transparently to people on low incomes in a way that enables them to improve their living conditions. Microfinance Transparency, the Smart Campaign and the Principles for Investors in Inclusive Finance 1 are examples of sector-wide initiatives that take the interests of microfinance clients as their starting point. Triodos Microfinance Fund wholeheartedly endorses these initiatives and is actively involved in them. The same applies to the Social Performance Taskforce of the Consultative Group to Assist the Poor (CGAP) 2 that focuses on further standardisation of indicators and ratios in order to clearly and unambiguously analyse the social impact of MFIs. Report of the Board of Directors 1 For more information: www.mftransparency.org; www.smartcampaign.org and www.unpri.org/piif 2 For more information: www.sptf.info and www.cgap.org 9 A growing number of MFIs were able to make use of a credit bureau in 2011. Centralised credit registration prevents microfinance clients from taking on too great a debt burden by making it easy for MFIs to see which financial liabilities the client has already taken on. This is a clear indication that microfinance is becoming embedded in the legislation and regulations of a growing number of developing countries. By 2011 the microfinance industry has established itself more firmly on a global scale. Nonetheless, there is still a long way to go before everyone in the world has access to formal financial services, such as opening a bank or savings account, taking out a loan to start a business or taking out insurance. An estimated 2.7 billion people, almost half of the world’s population, is excluded from such services. Triodos Microfinance Fund wants to make a contribution as an investor to offer a growing number of people access to these financial services in a responsible and transparent manner. Investments Triodos Microfinance Fund’s investment portfolio expanded to EUR 71.2 million in 2011 or 77.6% of the fund’s net assets (2010: EUR 50.8 million and 84.7%). The fund made 31 disbursements of both debt and equity in 2011 (2010: 26). By the end of 2011, Triodos Microfinance Fund had invested in 28 MFIs (2010: 21) and one microfinance investment fund in 19 different countries (2010: 17) across Latin America, Asia, Africa and Eastern Europe. At year-end 2011, the fund had outstanding commitments in relation to five loans and two equity investments. The committed loans are to AMRET in Cambodia, IMON in Tajikistan, Credinka in Peru, AzerCredit in Azerbaijan and the disbursement of the second and third tranches of a loan to Credo in Georgia. The committed equity participations are follow-on investments in shares of ACLEDA Bank in Cambodia and the India Financial Inclusion Fund (IFIF). The quality of the fund’s loan portfolio remained high and the fund made no provisions for non-performing loans in 2011. The equity portfolio increased from EUR 11.1 million in 2010 to EUR 15.5 million in 2011, EUR 2.8 million of which related to amounts invested during the year. The fund finalised one new equity investment in Mibanco in Peru during the last quarter of 2011. Mibanco is a successful microfinance bank that plays an innovative role in the Latin American microfinance sector. The institution issues working capital and loans to micro-entrepreneurs and small and medium-sized businesses. In addition, it offers current accounts, savings and deposit accounts to private individuals. A few years ago, Mibanco also added insurance products to its product range. The fund’s equity investment in ACLEDA Bank performed well, as the Cambodian institution Portfolio data, 31 December 2011 Net Asset Value EUR 91.7 million Microfinance portfolio EUR 71.2 million Number of MFIs 28 Number of investment funds 1 Number of loans 39 Number of subordinated loans 3 Number of equity investments 4 Number of countries 19 Source: Triodos Investment Management Portfolio allocation by assets (as % of NAV), 31 December 2011 56% DEBT 22% LIQUIDITY 17% EQUITY 5% SUBORDINATED DEBT Source: Triodos Investment Management 10 Overview of micronance institutions nanced by Triodos Micronance Fund as per 31 December 2011 and 2010 Number of borrowers Percentage women Loan portfolio (EUR x 1,000) Average loan (EUR) Percentage clients in rural areas Number of saving clients Micronance Institution Country 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 AccèsBanque Madagascar Madagascar 20,883 ** 56% ** 14,397 ** 689 ** 16% ** 71,183 ** AccessBank Azerbaijan 117,817 120,147 25% 27% 292,903 254,157 2,486 2,111 11% 12% 154,608 152,991 ACLEDA Bank Cambodia 272,316 265,937 54% 55% 778,323 556,758 2,858 2,094 85% 86% 821,900 703,151 AMRET Cambodia 247,006 ** 82% ** 76,624 ** 310 ** 98% ** 34,973 ** Bai Tushum Kyrgyzstan 35,833 ** 44% ** 42,710 ** 1,192 ** 81% ** **** ** Banco Ademi Dominican Republic 121,813 103,181 40% 41% 167,022 143,905 1,371 1,393 4% 4% 151,681 136,916 Banco D-MIRO* Ecuador 39,561 36,463 59% 62% 31,419 22,307 794 612 0% 0% **** **** Banco FIE Bolivia 175,579 146,816 54% 55% 452,227 311,983 2,576 2,125 1% 0% 557,763 461,591 Bank Sahabat Purba Danarta Indonesia *** 151,589 *** 73% *** 39,277 *** 259 *** 22% *** 44,895 Bhartiya Samruddhi Finance India 1,126,337 1,721,427 74% 73% 111,742 271,158 99 157 92% 91% **** **** BRAC Bank Bangladesh 160,492 36,655 8% 9% 858,708 894,679 5,350 5,619 30% 27% 674,652 586,573 Centenary Bank Uganda 129,659 97,434 30% 30% 160,577 128,354 1,238 1,156 39% 66% 690,203 731,191 Commercial Leasing Company Sri Lanka 56,361 ** 20% ** 153,482 ** 2,723 ** 48% ** **** ** Credo Georgia 64,526 43,172 39% 42% 42,549 24,958 659 578 54% 57% **** **** Edpyme Raíz Peru 87,876 ** 51% ** 128,808 ** 1,466 ** 8% ** **** ** Financiera Crear* Peru 106,401 87,076 51% 50% 138,183 97,916 1,299 1,122 0% 0% 7 **** FINCA Azerbaijan Azerbaijan 119,867 ** 32% ** 90,627 ** 756 ** 61% ** **** ** Financiera Edycar* Peru 356,099 284,825 48% 49% 391,867 266,631 1,100 933 0% 0% **** 1,717 FMM Popayán Colombia 417,479 352,592 66% 67% 267,294 205,708 640 583 21% 18% **** **** KazMicronance Kazakhstan 45,995 ** 75% ** 41,044 ** 892 ** 60% ** **** ** Kenya Women Finance Trust DTM Kenya 280,959 416,813 100% 100% 105,530 119,623 376 287 70% 71% 432,136 426,066 Kompanion Kyrgyzstan 137,310 ** 84% ** 46,175 ** 336 ** 100% ** **** ** LOLC Micro Credit Sri Lanka 108,494 45,094 48% 44% 81,089 41,911 747 929 91% 89% **** **** Mibanco Peru 435,531 394,915 55% 54% 1,194,786 969,692 2,743 2,412 13% 12% 479,730 384,680 PRASAC Cambodia 125,127 112,872 71% 60% 117,289 78,722 937 697 91% 94% 7,868 1,864 Prizma Mikro Bosnia Herzegovina 68,949 54,495 54% 60% 50,738 47,109 736 864 54% 47% **** **** Sathapana Cambodia 57,001 43,565 63% 67% 73,197 43,192 1,284 991 48% 44% 30,468 32,414 Visión Banco Paraguay 109,041 84,966 39% 38% 361,579 249,353 3,316 2,893 6% 15% 93,495 78,686 XacBank Mongolië 79,414 86,760 54% 57% 304,080 197,481 3,829 2,252 41% 37% 221,751 178,002 Grand Total 5,103,726 4,686,794 6,574,966 4,964,874 4,422,418 3,920,737 * This MFI focuses on urban areas only ** Not financed in 2010 *** Repayment in 2011 **** Not applicable [...]... sustainability as a driving force Triodos Microfinance Fund expects to be able to 21 General information Structure Investment policy Triodos Microfinance Fund was launched in March 2009 as a sub -fund of Triodos SICAV II, the first Luxembourg investment company to be launched by Triodos Bank The fund has an open end fund structure and is not quoted on any stock market Triodos Microfinance Fund has Euro as well... umbrella fund, which provides both institutional and retail investors with a variety of Sub-Funds, each of which relates to a separate portfolio of assets permitted by law and managed within specific investment objectives As at December 31, 2011 the SICAV has two Sub-Funds, namely Triodos Renewables Europe Fund and Triodos Microfinance Fund Triodos Microfinance Fund, to which the separate annual report. .. Sub -Fund which together with Triodos Microfinance Fund form a single entity An annual report which includes a complete description of both Sub-funds of the SICAV has been issued and can be obtained from Triodos Bank N.V For the purpose of the relations between shareholders, each Sub -Fund is deemed to be a separate entity The overall objective of Triodos SICAV II – Triodos Microfinance Fund (the “Sub -Fund )... Azerbaijan 4.1% Source: Triodos Investment Management Triodos Microfinance Fund is committed to keeping individual investments below 15% of the fund s assets The largest investment represents 12.4% of the fund s assets and is in ACLEDA Bank in Cambodia Financial results The net result of Triodos Microfinance Fund for 2011 is EUR 4.6 million (2010: EUR 2.5 million) Triodos Microfinance Funds’ largest source... Mémorial Triodos SICAV II publishes an integrated detailed audited report annually in Luxembourg Triodos SICAV II also publishes an integrated detailed semi -annual report in Luxembourg Separate reports for each sub -fund of Triodos SICAV II are published by Triodos Investment Management Copies may be obtained free of charge from the registered office of Triodos SICAV II and can be downloaded from Triodos. .. downloaded from Triodos Bank: www .triodos. com Triodos Microfinance Fund may enter into syndicated finance agreements with other funds managed by Triodos Group or managed by other entities 22 Fiscal aspects aspects, including the remuneration policy, are described in Triodos Bank’s annual report According to the law in force and current practice, Triodos Microfinance Fund is not subject to any Luxembourg... countries of origin The 2011 Annual Report of Triodos Bank is an integral sustainability report produced in line with the Global Reporting Initiative (GRI) sustainability reporting guidelines These guidelines provide an internationally consistent format for information about a company’s performance, particularly with regard to social and environmental issues For reporting in 2011, Triodos Bank used the... wholly-owned subsidiary of Triodos Bank NV The management of funds, including Triodos Microfinance Fund, that invest worldwide involves a lot of travelling, including intercontinental flights This has a direct impact on the environment The resulting CO2 emissions were fully compensated for All investment funds report separately on their financial performance in an annual report The co-workers involved... capital gains Dividends paid by Triodos Microfinance Fund are not subject to any Luxembourg withholding tax Since January 1, 2010 Triodos Microfinance Fund is no longer subject to any subscription tax In addition, the issue of shares in the SICAV is not subject to any registration duties or other taxes in Luxembourg Some dividend and interest income from Triodos Microfinance Fund s portfolio may be subject... the most fundamental risk to which the lending industry in general and the microfinance industry in particular is exposed Risk Triodos Microfinance Fund has a relatively high risk profile, mainly due to its sector-specific focus The main risks as identified are described in detail in the fund s prospectus Some of the risks are highlighted below Country and political risk Triodos Microfinance Fund invests . Manager of Triodos Microfinance Fund and manages the assets on a day-to-day basis. Triodos SICAV II - Triodos Microfinance Fund Audited annual report 2011 4 Key. TLIM Triodos Microfinance Fund Audited annual report 2011 Microfinance is the provision of financial services