audited annual report lmdf 31 march 2014

8/12/2019 Audited Annual Report LMDF 31 March 2014

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Socit dInvestissement

Capital Variable, Luxembourg

Audied annual repor as a 31 March 2014

Rapport annuel rvis au 31 mars 2014

Beyond MicrofinanceLMDF takes a second look at the holistic

development model pioneered by Pro Mujer Nicaragua


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In collaboration with

LMDF has been granted the LuxFLAG Microfinance

Label

Subscribe to LMDFs newsletter

Subscriptions for shares issued by the Fund may only be accepted on the basis of the current prospectus ac-

companied 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
http://www.lmdf.lu/http://www.lmdf.lu/


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Audited annual report as at 31 March 2014 // Rapport annuel rvis au 31 mars 2014 02-03

Content // Sommaire

Page

04 LMDF in figures

LMDF en chiffres

06 Report of the board of directors to the shareholders

Rapport du conseil dadministration aux actionnaires

08 LMDF's Vision and Mission

09 Summary (Franais / Deutsch)

10 Management report on activities

Rapport dactivit du gestionnaire

16 Microfinance institution in focus

Prsentation d'une institution de microfinance16 // 1 Pro Mujer, Nicaragua

17 // 2 Four questions to Gloria Amelia Ruiz Gutirrez, General Manager of Pro Mujer Nicaragua

Quatre questions Gloria Amelia Ruiz Gutirrez, directrice de Pro Mujer Nicaragua

22 Statutory informationOrganisation

24 Report of the independent auditor

Rapport du rviseur d'entreprises agre

26 Audited financial statementstats financiers rviss

26 // 1 Statement of net assets

tat des actifs nets

28 // 2 Statement of operations and other changes in net assets

tat des oprations et des variations des actifs nets

30 // 3 Statistical information Informations statistiques

32 // 4 Statement of investments and other net assets

tat du portefeuille-titres et autres actifs nets

34 // 5 Breakdown of microfinance investment and evolution of NAV

Rpartition des investissements en microfinance et volution de la VNI

37 // 6 Notes to the financial statements

Notes aux tats financiers

The photos in the present report show clients and staff of the microfinance institutionPro Mujer in Nicaragua.

Les photos prsentes dans ce rapport montrent les clients et les employs de linstitution de microfinancePro Mujer au Nicaragua.


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LMDF in figures // en chiffres31 March 14 // 31 mars 2014

Note: The figures stated in this section of the report relating to information received from microfinance institutions are as at31 December 2013 and largely based on unaudited information. The calculations follow, wherever applicable, the MicrofinanceInvestment Vehicles Disclosure Guidelines as published by CGAP in 2010.

EU 12,5 millionInvestments in microfinance25Microfinance institutions financed directly

4egional unds and support structures

17Countries

1Service provider59%Latin America

19%Southeast and Central Asia

20%Sub-Saharan and North Arica

2%Developed countries29%Financing in local currency

344,353Micro-entrepreneurs financed by partner MFIs

EU 173.4 millionTotal micro-loan portolio o par tner MFIs

72%WomenEU 1,018Average di sbursed micro-loan

31,007Micro-entrepreneurs financed by LM DF

41Number o university students financed

56%Micro-loans or services and small trade25%Agr icult ural activit ies

8%Production and crafs

11%Other uses

EU 427,951Average di rect investment per MFI0.4%eturn Class A shares

1.1%eturn Class B shares

0.4%eturn Class C shares


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1 USA MFX Solutions

Higher Education Finance Fund LP2 El Salvado r Padecomsm Credito

AMC

OPTIMA3 Nicaragua Pro Mujer, Nicaragua PANA PANA4 Honduras Pilarh OPDF

5 Ecuador Fundacin Alternativa Coop. Maquita Cushunchic FACES

6 Peru IDESI NacionalCOAC CIDEURL

CEDIFLOIDA FONDESUCO

7 Togo CECA

8 Niger ASUSU

9 Cambodia Maxima Mikroheranhvatho CBID Micro Finance Intean Poalroath ongroeurng

10 Philippines Gata Daku MPC KPS-SEED

11 South Afica Tembeka Social Investment12 Uruguay Microfin

13 Argentina Pro Mujer14 Azerbaijan FINCA

15 Guatemala ASDI16 Mali Soro Yiriwaso

17 Morocco AMSSF / MC INMAA

1

2 34

5

6

7

89 10

111213

14

15 16

17

Learn more about LMDF's port olio o M FIs: www.lmd.lu
http://www.lmdf.lu/index.php/en/invest-in-lmdf/our-investmentshttp://www.lmdf.lu/index.php/en/invest-in-lmdf/our-investments


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The Board of Directors is pleased to present this report on the fourth year of operations of the Fund.

As the growth of the Fund has continued in 2013/14, with net assets increasing by 19% and total income ex-ceeding EUR 900,000, your Board of Directors has also been working on building a strong platform upon whichto develop the Fund in the future. The Boards reflections have resulted in:

A clear statement of the Funds Vision, emphasising its aim to contribute to the alleviation of poverty The Mission statement, setting out the means used to realize the Vision, including the balancing of stable

financial returns to investors with the provision of financial services to the poor Proposed amendments to the Prospectus, required mainly to permit the Fund to respond to changes in the

rapidly evolving microfinance sector and develop its operations, while retaining its unique focus on sup-porting promising smaller microfinance institutions

These reflections will continue in 2014/15 as: the Board, Management and ADA, our investment adviser, work together on the completion of a compre-

hensive investment strategy adapted to the Funds future growth plans the Marketing Committee of the Board reviews and develops the Funds plans to extend the shareholder

base

The Funds investments in microfinance have grown by 23% from EUR 10.2 million in 2013 to EUR 12.5 millionin 2014, and now cover 30 microfinance institutions in 17 countries, reaching more than 30,000 entrepreneurs.Returns to investors for the year stand at 0.4% (Class A), 1.1% (Class B) and 0.4% (Class C). The limited returnsavailable on cash and bank deposits, which represent 25% of net assets at 31 March 2014, continue to have anegative impact on financial returns, and Managements focus is very much on ensuring that the Funds excessliquidity is invested, and on building a stable financial track record that is attractive to our target investor groups.

Corporate governance

At the AGM of the Fund in July 2013, two new members were introduced to the Board in replacement of outgo-ing directors and three further members were appointed to the Board. In November 2013, Mr Robert Wagener(Chairman of ADA) joined the Board in replacement of Mr. Axel de Ville. At the AGM of the Fund in July 2014, theshareholders will be asked to approve the appointment of Mr. Raoul Stefanetti (BIL) to the Board.

The Board of Directors is responsible, in accordance with the terms of the Articles of Association and the Pro-spectus 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 Dveloppement Autonome a.s.b.l.)as its investment adviser to provide the services of identification, evaluation and selection of investment anddisinvestment opportunities as well as the review, supervision and monitoring of its microfinance investments.

At its meeting on 19 March, 2014, the Board resolved to adopt the governance principles contained in the Codeof Conduct of ALFI (the Association of Luxembourg Investment Funds).The Board has established the following committees whose role is to support and make recommendations tothe Board in their areas of activity.

The Investment Committee, which has five members, considers recommendations from the investment ad-viser on investment and disinvestment opportunities.

The Risk Committee, which has three members, provides direction, advice and oversight with regard toLMDFs risk management and reporting framework, including risk policies, processes and controls.

EPO OF HE BOAD OF DIECOS O HE SHAEHOLDES


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The Marketing Committee, which has two members, oversees the Funds marketing strategy including thedevelopment of the shareholder base.

The Employment Committee, which has three members, reviews the objectives, performance and remunera-tion of management.

The Board has resolved that membership of the above Committees may be open to non-directors on a limitedbasis, 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 ex-penses incurred for Fund business and approved in advance by the Board.

Regulatory changes

The Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive (AIMFD or the Directive) was transposed into Luxem-bourg law on 12 July 2013 and became effective on 22 July 2013. In January 2014, the Fund received confirma-tion from the Commission de Surveillance du Secteur Financier (CSSF) of its registration as a self managedFund; as the net assets of the Fund remain below the threshold of EUR 100 million, the implications of the AIFMDon the operations of the Fund are limited.

FATCA

The United States Hiring Incentives to Restore Employment Act (the HIRE Act) was signed into US law inMarch 2010. It includes provisions generally known as the Foreign Account Tax Compliance Act (FATCA).The intention of these is that details of US investors holding assets outside the US will be reported by financialinstitutions to the US Internal Revenue Service, as a safeguard against US tax evasion. This regime will be ef-fective from 1 July 2014.

On 28 March 2014 Luxembourg signed an intergovernmental agreement (IGA) with the USA regarding FATCA.Luxembourg has adopted a Model 1 IGA approach, which requires the Fund to report relevant information tothe appropriate Luxembourg authorities which will facilitate exchange of information with the US authorities.The Funds ability to fulfil its obligations under the IGA between the US and Luxembourg will depend on eachshareholder providing the Fund with the information that the Fund determines is necessary. Each shareholderwill be required to agree to provide such information upon request by the Fund, and the failure to do so by anyshareholder may result in the redemption by the Fund, in its sole discretion, of such shareholders shares.

EMIR

The provisions of the European Market Infrastructure Regulation started to become effective in 2013 and 2014.The Fund qualifies as a financial counterparty and is required to comply with the regulation as regards centralclearing, risk mitigation and reporting for its foreign exchange contracts. The Fund has entered into agreementswith its derivative transactions counterparties to contractually define the different risk mitigation measures.The Fund has also delegated to its counterparties the reporting of derivative transactions to a trade repository.Management of the Fund is currently reviewing further operational impact of the regulation.

The Board wishes to thank the shareholders for their continued support.

The Board of Directors

Kenneth HayChairman


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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.

Constitutes an attractive investment proposition by balancing stable financialreturns 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 indeveloping countries.

Enables the development of micro-entrepreneurs in areas where unmet needs arelargest, particularly among women, youth and rural populations.

Is accessible to public, institutional and retail investors and is accountable forreaching both social and financial objectives, and transparent in its reporting.

Mission

In order to realize its Vision, LMDF

Vision

In March 2014, the Board of Directors of the Luxembourg Microfinance and Development Fund decided to

reconsider the expression of the Fund's Vision and Mission, in order to formulate a clear and robust expression of

its unique identity within an evolving and competitive microfinance industry. The Vision and Mission statements,

which reflect LMDF's experience since its inception in 2009, were approved in June 2014.


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Audited annual report as at 31 March 2014 // Rapport annuel rvis au 31 mars 2014

// 1 Rsum/Zusammenfassung

Le rapport annuel du Luxembourg Microfinanceand Development Fund se penche sur les activitsdes institutions de microfinance (IMF) au-del dela microfinance. Pro Mujer Nicaragua partenairedu Fonds depuis 2010, amliore la situation desfemmes dfavorises au Nicaragua. Cest pourcela, quun micro-crdit seul nest pas suffisant,les prts ne fonctionnant que si les emprunteurssont en bonne sant et capables de se concen-trer sur leurs activits en ayant confiance en eux

et disposant des connaissances de base afin derussir. Le modle de Pro Mujer sapplique cestrois points et a connait un succs considrable.

Dans lexercice pass, le Fonds a continu sesactivits d'investissement. 12 crdits ont tattribus, dont 5 pour augmenter ou poursuivredes engagements antrieurs avec les partenairesexistants et 7 en faveur de nouvelles IMF. Le LMDFa investi pour la premire fois au Maroc, au Guate-mala et en Azerbadjan. Ainsi, compar lanneprcdente, le portefeuille du Fonds est rpartiplus uniformment: 59% en Amrique latine,20% en Afrique, 19% en Asie et 2% dans les paysdvelopps.

Dans l'ensemble, le volume de financement duLMDF a augment de 23% 12,5 millions d'eurosen comparaison lanne prcdente. Le fondsa connu une croissance de 19% et l'actif net d-passe maintenant les 17 millions d'euros.

Le rsultat financier des douze derniers mois estbien en dessous des attentes. Les raisons princi-pales sont: la proportion relativement leve de li-

quidits, la force relative de l'euro et la structure decots d'un fonds rglement. Le LMDF a gale-ment provisionn 10% d'une position de crditdans son portefeuille. Les clients de cette IMF(Crediflorida au Prou) sont fortement affects parune infection fongique de leurs plantes de caf. Lerendement annuel est de 0,4% pour la classe A,1,1% pour la classe B et 0,4% pour la classe C.

Le profil de risque du fonds reste largement in-chang sans risques individuels importants et unediversification relativement grande des risques de

crdit et de pays, tout en minimisant le risque dechange par des oprations de couverture.

Der Jahresbericht des Luxembourg Microfinanceand Development Fund schaut sich die Ttigkeitenvon Mikrofinanzinstitutionen (MFI) jenseits derMikrofinanz an. Pro Mujer Nicaragua, Partnerdes Fonds seit 2010, verbessert die Situation vonbenachteiligten Frauen in Nicaragua. Dafr ist einMikrokredit allein nicht genug, Kredite funktion-ieren nur wenn die Kreditnehmer gesund sind undsich auf ihr Geschft konzentrieren knnen undwenn sie das Selbsvertrauen und Basiswissenhaben um erfolgreich zu sein. Das Modell von Pro

Mujer setzt an all diesen drei Punkten an und haterstaunliche Erfolge vorzuweisen.

Der Fonds setzte im vergangenen Geschftsjahrseine Investitionsttigkeit fort. Es wurden 12Kredite vergeben, 5 zur Aufstockung oder Fort-fhrung von vorigen Engagements an bestehendePartner und 7 an neue MFIs. LMDF investiertezum ersten Mal in Marokko, Guatemala undAzerbaijan. Damit ist das Portfolio im Vergleichzum Vorjahr etwas gleichmssiger verteilt: 59% inLateinamerika, 20% in Afrika, 19% in Asien und2% in entwickelten Lndern.

Insgesamt erhhte sich das Finanzierungsvolu-men des Fonds im Jahresvergleich um 23% aufEUR 12,5 Millionen. Der gesamte Fonds wuchs19% und das Nettoinventar bersteigt nun EUR 17Millionen.

Das finanzielle Ergebnis der letzten zwlf Monateliegt deutlich hinter den Erwartungen. Die Haupt-grnde sind die anhaltend hohe Liquidittsquote,die relative Strke des Euro sowie die Kostenstruk-tur eines regulierten Fonds. LMDF provisionierte

zudem 10% einer Kreditposition im Portfolio.Die Kunden dieser MFI (Crediflorida in Peru) sindstark durch einen Pilzbefall ihrer Kaffeepflanzenbetroffen. Die Jahresrendite betrgt 0,4% fr dieKlasse A, 1,1% fr die Klasse B und 0,4% fr dieKlasse C.

Das Risikoprofil des Fonds bleibt weitgehendunverndert mit keinen wesentlichen Einzelrisikenund einer vergleichsweisen hohen Diversifizierungder Lnder und Kreditrisiken bei gleichzeitigerMinimierung der Whrungsrisiken durch Absi-

cherungsgeschfte.

08-09


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Management report on activities

Rapport dactivit du gestionnaire

As outl ined in the report of the Board ofDirectors, the financial year 201314 sawimportant reflections on the strategy of theLuxembourg Microfinance and Develop-ment Fund Social Venture Capital Sub-Fund (LMDF or Fund). Updated Visionand Mission statements positioning LMDFin the wider microfinance and impact invest-

ment landscape are the first results of thisprocess.

We are particularly pleased that this reportillustrates what can be achieved in termsof growing promising microfinance institu-tions (MFI) in a short period of time. ProMujer Nicaragua, an MFI focused on thedevelopment of women, was featured in ourannual repor t 201011. The progress madesince is very impressive, not only in terms ofgrowth but also in refining a model stronglygeared towards the social impact on one ofthe most vulnerable groups in Nicaraguansociety (Please refer to page 16 for furtherdetails).

/ Investment activities

With 12 transactions closed, LMDF looksback to an active year. We are greatly en-couraged by the fact that 5 of those trans-actions originated from existing partnerMFIs. LMDF granted to existing partners:

- A senior loan in local currency equivalentto EUR 1,000,000 to the MFI ASUSU inNiger, building on our past track-record withthe MFI and contributing to the enormousdevelopment needs of one of the least de-veloped countries;- A senior loan in local currency equivalentto EUR 490,000 to the MFI Soro Yiriwaso inMali, following improved conditions after thearmed conflict in the northern par t of thecountry.

These investments increased the share ofthe portfolio in Sub-Saharan Africa from

6% at the end of September 2013 to 14%at the end of March 2014 and allow theFund to reach significantly more micro-entrepreneurs. By the end of March 2014,LMDF financed 31,007 micro-entrepreneurs,a 71% increase compared to the previousyear-end. The investments also illustrateLMDFs commitment to addressing theneeds of the most marginalized individualsand communities.

During the financial year, LMDF invested forthe first time in 7 MFIs. We highlight the fol-lowing transactions:

- A local currency loan equivalent to EUR480,000 financing the loan portfolio of energyefficient equipment for farmers and small en-trepreneurs of the MFI Fondesurco in Peru;- For the first time, LMDF has invested inNorthern Africa (in Morocco) by granting twosenior loans to the MFIs AMSSF/MC andINMAA;- The expansion of the portfolio in CentralAmerica to include Guatemala where a seniorloan has been granted to the MFI ASDIR,which is particularly active among the indig-enous population in rural areas.

Despite these transactions, the Fund had stillsignificant excess liquidity throughout thefinancial year and the Board of Directors de-cided in March 2014 to place part of the ex-cess funds through the Luxembourg-basedMicro, Small & Medium Enterprises Bondsstructure (MSME Bonds) for which Sym-

biotics, a Swiss-based microfinance assetmanager and advisor, serves as arranger andservicer. MSME Bonds allow LMDF to investin senior loans to larger MFIs. A first transac-tion was closed at the end of March and theFund placed USD 650,000 in a Note backedby a loan to the MFI FINCA in Azerbaijan.

The Fund continued to focus on senior, un-secured loans in terms of financing instru-ments used. At the end of the financial year,94% of the microfinance portfolio consisted

of senior loans with initial maturities be-tween three and five years.


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Source: LMDF analysis of data submitted by MFIs as at 31 December 2013, excluding certain indirect investment in microfinance;International Monetary Fund estimated GDP per capita at purchasing-power-parity end of 2013, converted into EUR with currentexchange rates.

Peru

El Salvador

Ecuador

Nicaragua

Uruguay

Guatemala

Honduras

Argentina

Cambodia

Philippines

Niger

Mali

South Africa

Togo

Morocco

Azerbaijan

USA

Latin America 59%

Southeast Asia 15%

Sub-Saharan Africa 14%

Developed countries 2%

0 5 10 15 20

North Africa 6%

Central Asia 4%

GRPH 1:MICOFINANCE INVESTMENTS BY EGION AND COUNTY(in % o microfinance portolio)

Source: LMDF analysis as at 31/03/2014

Average outstanding by country (EUR)

Average outstanding loan in % of GDP per capita (PPP, EUR)

Average micro-loan amount LMDF

0

500

1,000

1,500

2,500

Ecuador

Togo

Niger

ElSalvador

Peru

Cambodia

Azerbaijan

Honduras

Morocco

Guatemala

Uruguay

Nicaragua

Philippines

Argentina

Mali

24%

196%

16%

35%

7%

10% 10% 3%

14%

10%

2,000

7% 7% 2%

9%

193%

GRPH 2:AVERGE OUTSTANDING MICOLOANS BY COUNTY(in EU and % o GDP per capita PPP)


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Source: LMDF analysis of weighted average data providedby partner MFIs as at 31/12/2013

Source: LMDF analysis of weighted average data provided bypartner MFIs as at 31/12/2013

GRPH 3:ECONOMIC PUPOSE OF MICOCEDITS FINANCED BY LMDF (in %)

GRPH 4:ACTIVE MICOENTEPENEUSFINANCED BY LMDF

/ Social objectives

LMDFs mission statement expresses theFunds particular at tention on the mostexcluded individuals and communities. Itdraws particular attention to the prevailinghigh exclusion rates among women, youthand rural populations. LMDF continuesto incorporate the exclusion focus in itsinvestment decisions. End of March, 72%of final beneficiaries financed by LMDF

were women and 25% of all micro-loans areinvested in agricultural activities.

The financial inclusion of youth remainschallenging. Innovation is needed in orderto advance the microfinance sector in thisregard. We are proud to be among thefunders of the Higher Education FinanceFund (HEFF), rolling out pioneering creditproducts destined to finance higher educa-tion for the children of micro-entrepreneurs.HEFF enabled access to university andtechnical degrees of 413 students by theend of March 2014.

/ Financial performance

The Fund increased its net assets by 19% andits investment portfolio by 23% year on year.

This compares to a growth of the investmentportfolio of 50% during the previous financialyear. The growth fell short of the internaltargets of the Fund. The increase in thepercentage of microfinance assets in relationto total net assets from 71% (March 2013) to73% (March 2014) is still below the optimallevels for full achievement of the Funds socialobjectives and financial performance.

Almost half of all investments closed during

the first three months of 2014 and will benefitthe Funds bottom line later this year. TheFund also made a provision on one seniorloan to the MFI CrediFlorida (please refer tothe risk section below for more details).

Income from microfinance and liquid assetsexceeds EUR 900,000 or 6% of average netassets during the year (before hedging,foreign exchange, impairment and operatingcosts). Euro yields on microfinance loans haveremained close to 8% and have not signifi-cantly changed from the previous year. Thiscontrast with sector information suggestsfalling yields in the financing of larger microfi-nance institutions.

i

i i i i

i l l i i i

i i i i i

Services/

trade activities

56%

Agricultural

activities

25%

Production/

crafts activities

8%

Consumption

& others

11% Women22,397 (72%)

Men

8,610 (28%)

Total

31,007


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-5%

0%

5%

10%

15%

20%

25%

30%

35%

Margin on micro-loan operations

Operating expenses

Cost of financing

Risk costs & provisions

Total 29.9%

GRPH 5:COMPONENTS OF MFI'S INTEESTRTES CHAGED TO CLIENTS

Source: LMDF analysis of weighted average data provided bypartner MFIs as at 31/12/2013

LMDFs cost structure has remained largelystable with the total expense ratio amountingto 3.6%.

Year on year return is 0.4% for Class A andClass C shares and 1.1% for Class B shares,and remained below the Funds targets.

/ Risk review

The experience of the past years serves as a

reminder of the importance of diversificationas a primary risk mitigation instrument.

- Credit risks

Average exposure to microfinance institutionshas remained stable at 2.4% of NAV with amaximum exposure of 6% to the MFI ASUSUin Niger. Despite the larger size of the Fund,relative exposures have not changed materi-ally. This is mainly explained by increases inaverage investment amounts. The averageexposure at the end of March 2014 amountsto EUR 428,000 per MFI.

Last year, we reported increased risks ofdefault on the senior loans granted to the MFIPrestanic in Nicaragua. The Fund also madea provision against the exposure to the MFITaanadi (Niger) in June 2013. By the end ofthe financial year both MFIs had fully paidback all amounts due to LMDF.

The Fund made a provision in March 2014 onthe loan granted to the MFI CrediFlorida inPeru. Increased risks of default are caused by

the impact of the coffee rust fungus on manyof the MFIs clients, mostly smallholder cof-fee farmers. The provisions amount to EUR51,000 or 0.3% of the average NAV during theyear.

- Currency risk

The Fund saw very significant movements inseveral portfolio currencies in relation to theEuro during the past twelve months, particu-larly in Argentine Pesos (-41%), South AfricanRand (-19%), Thai Baht (-16%), Philippine

Pesos (-15%), Peruvian Soles (-14%) andNicaraguan Cordobas (-11%).

LMDFs conservative approach to currencyrisks paid off in this period of increasedvolatility. The relative strength of the Euro stillnegatively impacted the Fund financially sincemost currency hedges do not completelycompensate for the losses on the underlyinginstruments. This might, for example, be thecase if the Fund employs forward foreign ex-change contracts which protect the outstand-ing principal but not the interest income from

currency devaluations.

- Country risks

During the year the Fund invested for the firsttime in Guatemala, Morocco and Azerbai-jan whereas the only investment in Kenyamatured. Overall diversification of countryrisks improved. Peru concentrates the largestportfolio with assets accounting for 10.3%of the NAV. This compares to a maximumexposure of 11.6% (in Ecuador) at the yearend March 2013.

12-13


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GRPH 7:DEVELOPMENT OF NAV PE SHAE OF CLASS B AND CLASS C SHAES DUING THELAST 12 MONTHS in EU

31/03/

2014

31/03/

2013

30/06/

2013

30/09/

2013

31/12/

2013

Microfinance investments

Liquid assets

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

16,000,000

12,000,000

14,000,000

18,000,000

GRPH 6:LIQUID ASSETS AND MICOFINANCE INVESTMENTS (in EU)

Source: LMDF analysis

Source: LMDF analysis

Class C

Class B

100

101

102

103

31/12/201330/09/201330/06/201331/03/2013 31/03/2014

104


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The average country exposure also improved from 4.9% (March 2013) to 4.4% end of March2014. The five most important countries concentrate 42.8% of investments, a decrease from48% at the end of the previous financial year. Generally, country exposures remain well belowthe limit of 15% of NAV established in LMDFs Prospectus.

During the year the Fund paid particular attention to developments in Mali in the context of thefirst investment in the country after the conflict in the North and to developments in Argentina,marked by increasingly difficult investment conditions due to changing laws and regulations.

/ Outlook

The Funds Vision and Mission statements express our goals clearly. LMDF is a microfinancefund with a strong social impact orientation and an attractive investment proposition to share-holders. Several strategic initiatives are underway in order to realize the Funds Vision and Mis-

sion. Within this process the immediate priority is clear: To undertake the necessary steps sothat the Fund is fully invested, maximizing the social impact and improving the financial perfor-mance. We look forward to report the progress made to you in the coming reports.We very much welcome your comments and questions.

Yours sincerely,

Kaspar WanslebenExecutive Director([email protected])

Note: The figures stated in this report are historical and partly based on unaudited information received from microfinanceinstitutions. Such figures are not indicative of future performance. The calculations follow, wherever applicable, theMicrofinance Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.

A Pro Mujer client sells watermelons and sweets // Pro Mujer


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It is certainly true that Pro Mujer does a lotmore than microfinance, particularly in theareas of primary health care and businessand empowerment training. The three pillarsof microfinance, health and empowermentconstitute a holistic approach to developmentwith the different components re-enforcingeach other.

However, the drive to deliver all services in aprofessional and efficient manner and the ob-jective to render them financially self-sustain-able contains certainly a lot of lessons learnedfrom the microfinance sector.

Pro Mujer started in 1990 as a program toaddress the situation of poor and marginalizedwomen in Bolivia and today operates in Argen-tina, Bolivia, Mexico, Nicaragua and Peru. InNicaragua, Pro Mujer began operations in thepoorer neighbourhoods in 1996, mainly aroundthe cities of Len and Chinandega.

Due to its mountainous terrain and low popula-tion density, Pro Mujer's centers in Nicaraguaoperate differently from those in other coun-tries by having larger centers that reach up to

8,000 clients each and cover vast geographicregions. Clients often come from remote, ruralareas and service delivery is impacted by poorinfrastructure.

Pro Mujer's microfinance approach followsthe community banking model whereby thewomen themselves form groups of 15 to48 members who are jointly responsible forthe loans granted to the groups. Apart fromfinancial services, Pro Mujer Nicaragua offersbusiness skills training, primary health careservices including health awareness trainingand women specific cancer tests. Women haveaccess to small clinics located in the branchesat preferential tariffs.

The first loan granted by LMDF to Pro MujerNicaragua in 2010, in local currency, was ofNIO 10 million, followed 2 years later by a sec-ond loan of USD 650,000.

Today, Pro Mujer Nicaragua has considerably

evolved and is serving more than 56,000 cli-ents, of which 97% are women. The organiza-tion grew from 5 branches to 16, and from 122employees to 441.

1 Microfinance institution in ocus

Pro Mujer Nicaragua

I is ofen said ha Pro Mujer is no a microfinance insiuion. I is

a women developmen organizaion which happens o use micro-

credi as par o heir oolki.

0

10.000

20.000

30.000

40.000

50.000

60.000

Nbr

Clients:

2010 2011 2012 2013

+ 117%

Source: LMDF analysis of data provided by Pro Mujer Nicaragua


17/48


2 Four questions to

Gloria Amelia uiz Gutirrez,General Manager o Pro Mujer Nicaragua

Gloria, firs o all, congraula-

ions on he evoluion o Pro

Mujer Nicaragua over he pas

3 years. Wha were he major

achievemens ha riggered

his posiive developmen?

In the last three years we obtained the ratingSP2, awarded by the international ratingagency Moody's, which is the highest socialperformance rating in Latin America. Wehave also obtained a five diamonds statuson the MIX Market. Since 2012, Pro MujerNicaragua is the 2nd best microfinance or-ganization based on portfolio quality in LatinAmerica and we are ranked 36th among thetop 100 MFIs throughout the region, illustrat-ing outstanding performance in social objec-tives, transparency and efficiency, accordingto the ranking by the Multilateral InvestmentFund (MIF) and the Microfinance InformationExchange (MIX). The external recognitiontells a lot about the loyalty of our clients, of

potential of the village banking methodol-ogy that we apply and our overall goals topromote the development and empowermentof women.

These achievements are possible because ofthe highly motivated, committed and creativeteam we have at Pro Mujer Nicaragua. Basedon the guiding principle that "we care aboutyou as a person," we develop actions to get

to know our internal and external client andexecute a strategy to meet their needs. Thisis the philosophy on which our success is

built.

Tree years ago, Pro Mujer

Nicaraguas bigges challenge

was o develop a model ha al-

lows or a financially susaina-

ble offering o all your services:

Micro-credi, healh care andcapaciy building. How did his

model evolve? Did you reach

your objecive or is here sill a

long way o go?

Pro Mujer in Nicaragua has put in place astrategy of primary health care as one ofour flagship programs. Health care is an

integral part of the overall offering of micro-credit and training services. We started inthe department of Len with an ambitioushealth care model designed and adapted tothe needs of clients. Each beneficiary hasunlimited access to medical consultationslike dental care, eye care and discounts onconsultations with doctors of different spe-cializations. All this for a single fee of $ 32per client per year.


18/48

Currently this benefit package is accessiblein 5 departments and will be accessible soonin the north of the country as well. Since

December 2013 we have reached a 50%financial sustainability of the program andthis year we expect sustainability to increaseby 15%.

Pro Mujers health care program in Nicaraguahas saved the lives of thousands of women.In the past 13 years, through the training andhealth care, the deaths of more than 3,000women have been prevented by diagnosingcancer promptly in an initial stage. That'sone of the greatest achievements and whichillustrates Pro Mujer's interest in the welfareof our clients. This has allowed us to positionourselves as leaders in social impact in LatinAmerica and demonstrate that good financialresults come from the coordinated and wellplanned delivery of these services.

Significant challenges remain. The scaling ofthe health care model in all regions we serveand to bring health care closer to clients inremote rural areas. We are advancing in thesearch for the best strategy to achieve theseobjectives; there are already concrete actions

that have allowed us to advance-amongthese, the synergy with our mission partnerorganizations with whom we have estab-lished strategic partnerships and outreachservice points in distant areas.

Pro Mujer Nicaragua is one o

he pioneering MFIs in erms

o social perormance. Te

recen exernal social raings

by Microrae and Moodys are

esimony o your impressive

work. However, he repors

highligh some areas where Pro

Mujer Nicaragua may improve

urher: in impac measure-

men and consideraion o

environmenal opics. How do

you see he insiuions develop

in hese areas?

Moody's Analytic assigned Pro MujerNicaragua the SP2 rating, which is thesecond best social rating granted bythe rating agency to an MFI. This ratingsays a lot: That our financial products areadequately designed for clients and thatwe are realizing our mission to reduce

"Tis has allowed us o posiion ourselves as

leaders in social impac in Lain America."


19/48


poverty and improve the health of ourbeneficiaries. However the measurementof impact is a challenge faced by many

organizations. There is not yet a standard,efficient and practical method for measuringsocial impact. We are nevertheless makingsignificant efforts to develop a tool thatgenerates information influencing ourcommercial strategies and adjustment ofproducts and services, but also to allow us tomeasure the evolution of clients, the changesin the lives of women and their assets, andpolitical and social progress.

Another area of improvement as reportedby Moody's Analytics is about respect forthe environment. We are considering theestablishment of strategic alliances withinstitutions dedicated to green finance,allocating credit funds for the acquisition offixed assets for generation of a clean or moreefficient energy use and to reduce the use offirewood stoves.

In he rend rom micro-credi

o financial inclusion, do you

see he need o enlarge he

scope o services o include

savings o beter respond o he

needs o your cliens?

If we talk about financial inclusion, in additionto credit and other financial services, clientsshould have access to a variety of savings

products, which is a human right and a ser-vice that historically has been denied to thepoorest sectors of the population.

Yes, we are committed to a genuine and sus-tainable development of the most deprivedand we are convinced that savings is a pow-erful tool both to reduce vulnerability and todevelop and promote economic, political andsocial empowerment.

96% of Pro Mujers portfolio is under thevillage banking methodology, which includesthe promotion of a savings culture. However,we are not allowed to attract deposits andclients' deposits in commercial banks, whichare not well suited to meet the needs of thismarket segment, so one of the remainingchallenges is to create public policies in favorof true financial inclusion. Despite this limita-tion, we have managed to contribute to theculture of saving and clients appreciate thisservice, which constitutes a rainy day fundto be used in case of emergencies and forinvestments.

18-19

"In he pas 13 years, hrough he raining and

healh care, he deahs o more han 3,000 women

have been prevened by diagnosing cancerpromply in an iniial sage."


20/48

Dental care services are provided to clients // Pro Mujer

Clients have unlimited access to health services for an annual fee of $32 // Pro Mujer

Te health service is already offered in 5 departments // Pro Mujer

Primary health care


21/48


Group of women during a training session // Pro Mujer

Business & empowerment training


22/48

SAUOY INFOMAION

ORGANISAION

Board of Directors // Conseil dadministration

Chairman - Prsident

Kenneth Hay (1) Independent

Vice chairman- Vice prsidentMarc Elvinger IndependentRobert Wagener (2) ADA - Appui au Dveloppement Autonome asbl

Members- MembresNima Ahmadzadeh Ministry of FinanceViviane Clauss (1) Banque de LuxembourgHedda Pahlson-Mller (1) IndependentRichard Philippart (1) Development Cooperation Department,

Ministry of Foreign AffairsLuc Vandeweerd (1) ADA - Appui au Dveloppement Autonome asblPaolo Vinciarelli Banque et Caisse d'pargne de l'tatKaspar Wansleben Executive Director

Investment Committee Risk CommitteeComit d'investissement Comit de risque

Nima Ahmadzadeh Kenneth HayMarc Elvinger Paolo VinciarelliHedda Pahlson-Mller Raoul Stefanetti (Banque Internationale Richard Philippart Luxembourg)Luc VandeweerdMarketing Committee Employment CommitteeComit de marketing Comit d'emploi

Viviane Clauss Nima Ahmadzadeh

Hedda Pahlson-Mller Kenneth Hay Richard Philippart

Resigned Members- Membres dmissionairesMark Cunningham (4) ADA - Appui au Dveloppement Autonome asblAxel de Ville (3) ADA - Appui au Dveloppement Autonome asblDaniel Feypel (4) Development Cooperation Department,

Ministry of Foreign Affairs

(1) From 4 July 2013, (2) From 16 October 2013, (3) Until 20 September 2013, (4) Until 4 July 2013

Investment advisor // Conseiller en investissement

ADA - Appui au Dveloppement Autonome asbl39, rue GlesenerL-1631 Luxembourg, Luxembourg

Registered Office // Domicile

2, place de MetzL-1930 Luxembourg

Trade Register Number // Registre de

commerce et des socits

R.C.S. Luxembourg B 148.826


23/48


Custodian and Paying Agent // Banque dpositaire et agent de paiement

Banque et Caisse dpargne de ltat, Luxembourg

1, place de MetzL-2954 Luxembourg

Administrative Agent, Registrar and Transfer Agent

Administration centrale et agent de transfert

European Fund Administration S.A., Luxembourg2, rue dAlsaceL-1017 Luxembourg

Auditors // Rviseur dentreprises agr Legal Advisors // Conseiller lgal

BDO Audit, S.A. Luxembourg Elvinger, Hoss & Prussen, Luxembourg2, avenue Charles de Gaulle 2, place Winston ChurchillL-2013 Luxembourg L-2014 Luxembourg

Distributors // Distributeurs

22-23

Banque de Luxembourg S.A., Luxembourg14, boulevard RoyalL-2449 Luxembourg

Banque et Caisse dpargne de ltat,Luxembourg1, place de MetzL-2954 Luxembourg

BGL BNP Paribas S.A., Luxembourg50, avenue J.F. KennedyL-2951 Luxembourg

Fortuna Banque s.c., Luxembourg130, boulevard de la PtrusseL-2330 Luxembourg

Foreign Currency Settlement Agent //Agent de compensation en devise

INTL Global Currencies, Ltd., United KingdomMoor House, 1stFloor, 120, London WallLondon EC2Y 5ET

Foreign Currency Hedging Provider // Contrepartie de couverture de risque de change

MFX Solutions, Inc.,United States of America1050 17thSt., NW, Suite 550Washington DC, 20036

Banque et Caisse dpargnede ltat, Luxembourg1, place de MetzL-2954 Luxembourg

Identity numbers // Code didentit

Class B shares Class C shares

ISIN: LU0456966935 ISIN: LU0456967404Bloomberg: LMDSVCB:LX Bloomberg: LMDSVCC:LXTelekurs: 10633787 Telekurs: 10633788

Microfinance expertize // Expertise en microfinance

Arranger and Servicer to Micro, Small &

Medium Enterprises Bonds S.A.

Symbiotics SA75 rue de LyonCH-1203 Geneva, Switzerland

General partner of the Higher Education

Finance Fund LP

OMTRIX Inc.Oficentro La Virgen No.2, Edificio 1, Piso 1Zona Industrial de Pavas,San Jos, Costa Rica


24/48


25/48


26/48

AUDIED FINANCIAL SAEMENS

AS FINANCIERS RVISS

// 1 Statement of net assets

tat des actifs nets

as at 31 March 2014 (in EUR) //au 31 mars 2014 (en EUR)

Assets Actif Notes

Shares (and equity-type securities) in regional microfinance 165,759.26investment vehiclesActions (et instruments similaires) dans des structuresrgionales d'investissements en microfinance

Shares (and equity-type securities) in microfinance institutions 155,296.31and service providersActions (et instruments similaires) dans des institutionsde microfinance et structures de support

Loan agreements with microfinance institutions 11,750,535.42Contrats de prt avec des institutions de microfinance

Notes backed by loans to microfinance institutions 7 471,646.77Notes finances par des prts aux institutions de microfinance

Unrealised appreciation on swap contracts 5 143,539.68Plus-value non-ralise sur contrats de swap

Cash at banks 1,303,711.75Avoirs en banque

Savings account 3,000,000.00Compte dpargne

Income receivable on portfolio 282,607.64

recevoir sur le portefeuille

Interest receivable on bank accounts and term deposits 2,709.49Intrts recevoir sur avoirs en banque et dpts terme

Total assets 17,275,806.32

Somme des actifs

The accompanying notes form an integral part of this report.


27/48


Liabilities Passif

Accrued expenses 8 168,609.80Provision pour frais payer

Unrealised depreciation on forward foreign 5 36,767.15exchange contractsMoins-value non-ralise sur contrats dechange terme

Total liabilities 205,376.95

Somme des passifs

Net assets at the end of the period 17,070,429.37Actifs nets la fin de la priode

A Class shares outstanding 148,286.423Nombre dactions en circulation de la Classe A

Net asset value per A Class share 24.49Valeur nette dinventaire par action de la Classe A

B Class shares outstanding 114,688.975Nombre dactions en circulation de la Classe B

Net asset value per B Class share 101.76Valeur nette dinventaire par action de la Classe B

C Class shares outstanding 17,185.402Nombre dactions en circulation de la Classe C

Net asset value per C Class share 102.95Valeur nette dinventaire par action de la Classe C

26-27

Te group is collectively responsible for the credit repayment of each member // Pro Mujer


28/48

// 2 Statement of operations and other changes in net assets

tat des oprations et des variations des actifs nets

from 1 April 2013 to 31 March 2014 (in EUR) //

du 1eravril 2013 au 31 mars 2014 (en EUR)

Income Revenus Notes

Interest on microfinance loan agreements 970,860.54Intrts sur contrats de prt en microfinance

Net interest paid on swap contracts (100,584.62)Intrt net pay sur contrat swap

Net interest on microfinance loan agreements 870,275.92

Intrts nets sur contrats de prts en microfinance

Commission on microfinance loan agreements 31,130.34Commission sur contrats de prts en microfinance

Interest on bank accounts and term deposits 11,235.73Intrts bancaires et dpts terme

Other income 480.75Autres produits

Total income 913,122.74

Somme des revenus

Expenses Frais

Advisory fees 3 196,191.97Frais du conseiller en investissement

Salary and wages of the fund management 3, 12 140,414.63Charges salariales de gestion du fonds

Custodian fees 19,625.00Commission de la banque dpositaire

Central administration costs 74,795.19Frais de ladministration centrale

Banking charges and other fees 2,593.31Frais bancaires et charges lies

Transaction fees 18,500.00Frais de transaction

Audit fees 16,841.75Frais de rvision

Other administrative costs 8 76,321.33Autres charges administratives

Subscription duty 4 0.00Taxe d'abonnement

Total expenses 545,283.18Total des frais

Net investment income 367,839.56

Rsultat net dinvestissement



29/48


Net realised gain/(loss)

Bnfice/(perte) net(te)

On investments (311,645.53)Sur investissements

On forward foreign exchange contracts 389,257.49Sur contrat de change terme

On foreign currency transactions (15,720.05)Sur change

Realised result 61,891.91

Bnfice/(perte) net(te) ralis(e)

Net variation of the unrealised gain/(loss)

Variation de la plus-value/(moins-value) nette non ralise

On investment portfolio / Sur portefeuille d'investissements

Variation of impairment on microfinance loans 277,240.86Variation de provisions sur prts microfinance

Variation of valuation of equity investments (45,306.05)Variation de la valorisation des investissements en capital

Variation due to changes in the foreign exchange rate (911,032.78)Variation due l'volution du taux de change

Total variation on investment portfolio (679,097.97)

Variation totale sur portefeuille d'investissements

On forward foreign exchange contracts 197,972.18Sur contrats de change terme

On cross-currency swap contracts 174,137.71Sur contrats de swap de taux et change terme

On foreign exchange (933.91)Sur change

Unrealised result (307,921.99)

Bnfice/(perte) net(te) non ralis(e)

Result of operations 121,809.48Rsultat net des oprations

Subscriptions 2,758,146.50Souscriptions

Redemptions (136,809.04)Rachats

Total changes in net assets 2,743,146.94

Variation globale de la valeur nette dinventaire

Total net assets at the beginning of the period 14,327,282.43Valeur nette dinventaire au dbut de la priode

Total net assets at the end of the period 17,070,429.37Valeur nette dinventaire la fin de la priode


30/48

// 3 Statistical information

Informations statistiques


Total net assets Actifs nets

As at 31.3.2014 17,070,429.37Au 31.3.2014

Number of A Class shares Nombre dactions de la Classe A en circulation

Outstanding at the beginning of the period 127,894.906Au dbut de la priode

Issued 20,391.517mises

Redeemed 0.000Rachetes

Outstanding at the end of the period 148,286.423 la fin de la priode

Net asset value per A Class shareValeur nette d'inventaire par action de la Classe A

As at 31.3.2014 24.49Au 31.3.2014

Number of B Class shares Nombre dactions de la Classe B en circulation



Redeemed 0.000Rachetes


Net asset value per B Class shareValeur nette d'inventaire par action de la Classe B

As at 31.3.2014 101.76Au 31.3.2014



31/48


Number of C Class shares Nombre dactions de la Classe C en circulation



Redeemed (1,331.000)Rachetes


Net asset value per C Class shareValeur nette d'inventaire par action de la Classe C

As at 31.3.2014 102.95Au 31.3.2014

97% of Pro Mujer Nicaragua's clients are women // Pro Mujer


32/48

// 4 Statement of investments and other net assets

tat du portefeuille-titres et autres actifs nets



Instrument // Microfinance institution Note Countr y 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

Fundacin Alternativa para el Desarrollo ECUADOR 30/6/16


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 Crdito AMC de RL de CV EL SALVADOR 25/7/17

La Asociacin Nacional de Institutos de Desarrollo del Sector Informal IDESI Nacional PERU 31/10/15

L'Association Marocaine de Solidarit sans Frontires/Micro Crdit MOROCCO 31/12/18

Soro Yiriwaso MALI 14/3/17

Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 22/10/17

Cooperativa de Ahorro y Crdito La Florida PERU 30/11/17

La Cooperativa de Ahorro y Crdito 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

Fundacin de Apoyo Comunitario y Social del Ecuador ECUADOR 31/8/16Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 28/2/15

Microfinanzas del Uruguay SA URUGUAY 29/12/14

Institution Marocaine d'Appui la Micro-Entreprise MOROCCO 31/1/19

La Cooperativa de Ahorro y Crdito Maquita Cushunchic Ltda. ECUADOR 30/4/15

Cooperativa de Ahorro y Crdito para la Integracin y Desarrollo Rural PERU 15/12/14

La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV EL SALVADOR 28/2/18

Proyectos e Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF HONDURAS 30/6/16

Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 30/9/15

CBIRD MICRO FINANCE Co. Ltd. CAMBODIA 30/9/16

Asociacin Fondo De Desarrollo Regional - FONDESURCO PERU 10/6/17

Asociacin Fondo De Desarrollo Regional - FONDESURCO PERU 26/1/18

Tembeka Social Investment Company SOUTH AFRICA 31/1/16

Fundacin Pro Mujer Argentina ARGENTINA 15/4/15

La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV EL SALVADOR 30/4/15

La Asociacin de Desarrollo Integral Rural ASDIR GUATEMALA 29/11/18

Maxima Mikroheranhvatho Co Ltd CAMBODIA 15/8/2015

La Asociacin de Desarrollo Integral Rural ASDIR GUATEMALA 28/2/19

Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 30/4/14

Gata Daku Multi-Purpose Cooperative PHILIPPINES 29/4/16

KPS-Small Enterprise and Economic Development Inc PHILIPPINES 31/1/17

CBIRD MICRO FINANCE Co. Ltd. CAMBODIA 30/4/14

La Asociacin para el Desarrollo de la costa Atlantica NICARAGUA 15/2/18

Gata Daku Multi-Purpose Cooperative PHILIPPINES 29/4/15


Cooprative d'Epargne & Crdit des Artisans 9 TOGO 30/11/14

Notes

Micro, Small & Medium Enterprises Bonds SA - FINCA Azerbaijan 7 AZERBAIJAN 7/3/17

Sub total

Net accrued interest on swap contract

Sub-totalCash at banks, term deposits and savings accounts

Other net assets / liabilities

Total net assets


33/48


Currency Interest rate // Quantity // Valuation Value in EUR Accrued interest Total value % of NAV commission Nominal value in EUR in EUR

USD - 315,570 0.7239 165,759.26 - 165,759.26 1.0%

USD - 187,090 1.14395 155,296.31 - 155,296.31 0.9%

USD 11.0% 200,000 100% 145,122.08 3,990.86 149,112.94 0.9%

USD 11.0% 200,000 100% 145,122.08 1,374.63 146,496.71 0.9%

USD 8.0% 225,000 100% 163,262.34 1,160.98 164,423.32 1.0%

XOF 9.5% 650,000,000 100% 984,751.77 42,617.87 1,027,369.64 6.0%

USD 7.3% 1,000,000 100% 725,610.42 9,368.33 734,978.75 4.3%

USD 7.0% 700,000 100% 507,927.29 14,814.55 522,741.84 3.1%

EUR 7.0% 500,000 100% 500,000.00 5,833.33 505,833.33 3.0%

XOF 10.0% 325,000,000 100% 492,375.88 2,325.11 494,700.99 2.9%

USD 8.0% 650,000 100% 471,646.77 16,560.04 488,206.81 2.9%

USD 9.0% 700,000 90% 457,134.57 15,364.80 472,499.37 2.8%

USD 7.5% 600,000 100% 435,366.25 8,163.12 443,529.37 2.6%

USD 8.0% 550,000 100% 399,085.74 7,981.74 407,067.48 2.4%

USD 7.9% 500,000 100% 362,805.21 12,021.96 374,827.17 2.2%

USD 9.0% 500,000 100% 362,805.21 2,902.44 365,707.65 2.1%USD 8.0% 500,000 100% 362,805.21 2,499.32 365,304.53 2.1%

USD 8.0% 450,000 100% 326,524.69 6,603.05 333,127.74 2.0%

EUR 7.0% 300,000 100% 300,000.00 3,500.00 303,500.00 1.8%

USD 8.0% 400,000 100% 290,244.17 9,674.80 299,918.97 1.8%

PEN 11.0% 1,100,000 100% 284,198.49 8,703.58 292,902.07 1.7%

USD 8.0% 400,000 100% 290,244.17 1,972.07 292,216.24 1.7%

USD 8.0% 391,842 100% 284,324.53 5,686.49 290,011.02 1.7%

NIO 14.4% 10,000,000 100% 283,165.04 0.00 283,165.04 1.7%

USD 8.0% 350,000 100% 253,963.65 0.00 253,963.65 1.5%

PEN 11.2% 900,000 100% 232,526.04 7,957.56 240,483.60 1.4%

PEN 13.0% 900,000 100% 232,526.04 5,289.94 237,815.98 1.4%

ZAR 13.5% 3,200,000 100% 220,602.66 4,963.56 225,566.22 1.3%

ARS 53.1% 2,000,000 100% 180,995.37 43,966.79 224,962.16 1.3%

USD 8.0% 300,000 100% 217,683.13 7,256.10 224,939.23 1.3%

USD 8.0% 300,000 100% 217,683.12 5,901.63 223,584.75 1.3%

USD 8,0% 300 000 100% 217 683,13 2 128,45 219 811,58 1,3%

USD 8.0% 300,000 100% 217,683.12 1,354.48 219,037.60 1.3%

THB 11.0% 9,300,000 100% 208,148.57 9,472.19 217,620.76 1.3%

PHP 10.9% 12,000,000 100% 194,490.17 9,092.42 203,582.59 1.2%

PHP 11.7% 11,000,000 100% 178,282.66 3,433.18 181,715.84 1.1%

USD 8.0% 200,000 100% 145,122.08 1,902.71 147,024.79 0.9%

USD 9.0% 200,000 100% 145,122.09 1,596.34 146,718.43 0.9%

PHP 10.0% 8,000,000 100% 129,660.12 5,402.50 135,062.62 0.8%

USD 8.0% 150,000 100% 108,841.56 362.81 109,204.37 0.6%

EUR 8.5% 75,000 100% 75,000.00 2,107.29 77,107.29 0.5%

USD 5.7% 650,000 100% 471,646.77 0.00 471,646.77 2.8%

12,543,237.76 295,307.02 12,838,544.78 75.2%

(38,418.22) (38,418.22) -0.2%

256,888.80 12,800,126.56 75.0% 4,306,421.24 25.2%

(36,118.43) -0.2%

17,070,429.37 100.0%


34/48

// 5 Breakdown of microfinance investments and evolution of NAV

Rpartition des investissements en microfinance et volution de la VNI


/ Total exposure per counterparty

Exposition agrge par contre-partie

as at 31 March 2014 //au 31 mars 2014

Aggregated exposure to Amount (EUR) % of total net assets

ASUSU SA 1,027,369.64 6.0%

Pro Mujer Inc, sucursal de Nicaragua 771,371.85 4.5%

La Cooperativa de Ahorro y Crdito Maquita Cushunchic Ltda. 743,448.34 4.4%

Microfinanzas del Uruguay SA 740,195.22 4.3%

Sociedad Cooperativa de Ahorro y Crdito AMC de RL de CV 734,978.75 4.3%

Intean Poalroath Rongroeurng Co. Ltd 582,925.29 3.4%

La Asociacin Nacional de Institutos de Desarrollo del Sector Informal IDESI Nacional 522,741.84 3.1%

La Sociedad Cooperativa PADECOMSMCREDITO de Rl de CV 517,155.47 3.0%

L'Association Marocaine de Solidarit sans Frontires/Micro-Crdit 505,833.33 3.0%

Soro Yiriwaso 494,700.99 2.9%

Asociacin Fondo De Desarrollo Regional - FONDESURCO 478,299.58 2.8%

Cooperativa de Ahorro y Crdito la Florida 472,499.37 2.8%Micro, Small & Medium Enterprises Bonds SA - FINCA Azerbaijan 471,646.77 2.8%

La Asociacin de Desarrollo Integral Rural ASDIR 442,622.35 2.6%

Fundacin Alternativa para el Desarrollo 404,814.02 2.4%

CBIRD MICRO FINANCE Co. Ltd. 400,988.44 2.3%

Maxima Mikroheranhvatho Co Ltd 384,234.90 2.3%

Optima Servicios Financieros, S.A 374,827.17 2.2%

Fundacin de Apoyo Comunitario y Social del Ecuador 365,707.65 2.1%

Gata Daku Multi-Purpose Cooperative 338,645.21 2.0%

L'Institution Marocaine d'appui la Micro-Entreprise 303,500.00 1.8%

Cooperativa de Ahorro y Crdito para la Integracin y Desarrollo Rural 292,902.07 1.7%

Proyectos e Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF 290,011.02 1.7%Tembeka Social Investment Company 225,566.22 1.3%

Fundacin Pro Mujer Argentina 224,962.16 1.3%

KPS-Small Enterprise and Economic Development Inc 181,715.84 1.1%

Higher Education Finance Fund LP 165,759.26 1.0%

MFX Solutions LLC 155,296.31 0.9%

La Asociacin para el Desarrollo de la Costa Atlantica 146,718.43 0.9%

Cooprative d'pargne & Crdit des Artisans 77,107.29 0.5%

Total Portfolio 12,838,544.78 75.2%


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/ Geographical breakdown of microfinance investments

Rpartition gographique des investissements en microfinance


Geographical classification Amount (EUR) % of total net assets

PERU 1,766,442.85 10.3%

EL SALVADOR 1,626,961.39 9.5%

ECUADOR 1,513,970.01 8.9%

CAMBODIA 1,368,148.63 8.0%

NIGER 1,027,369.64 6.0%

NICARAGUA 918,090.28 5.4%

MOROCCO 809,333.33 4.7%

URUGUAY 740,195.19 4.3%

PHILIPPINES 520,361.05 3.0%

MALI 494,700.99 2.9%

AZERBAIJAN 471,646.77 2.8%

GUATEMALA 442,622.35 2.6%USA 321,055.57 1.9%

HONDURAS 290,011.06 1.7%

SOUTH AFRICA 225,566.22 1.3%

ARGENTINA 224,962.16 1.3%

TOGO 77,107.29 0.5%

Total Portfolio 12,838,544.78 75.2%

/Breakdown of microfinance investments by currency

Rpartition des investissements en microfinance par devise


Currency Amount (EUR) % of total net assets

United States Dollar 8,187,156.14 48.0%

West African CFA Franc 1,522,070.63 8.9%

Euro 886,440.62 5.2%

Peruvian Nuevo Sol 771,201.68 4.5%

Philippine Peso 520,361.05 3.0%

Nicaraguan Crdoba 283,165.04 1.7%

South African Rand 225,566.32 1.3%

Argentine Peso 224,962.16 1.3%

Thai Baht 217,621.14 1.3%Total Portfolio 12,838,544.78 75.2%

34-35


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/ Evolution of the net asset value per share

volution de la valeur nette dinventaire par action

in EUR NAV/share NAV/share NAV/share Initial

as at 31.3.2014 as at 31.3.2013 as at 31.3.2012 subscription price

en EUR VNI/action VNI/action VNI/action Prix de

au 31.3.2014 au 31.3.2013 au 31.3.2012 souscription initia l

Class A shares 24.49 24.39 24.11 25.00Actions de la Classe A

Class B shares 101.76 100.64 98.51 100.00Actions de la Classe B

Class C shares 102.95 102.54 101.38 100.00Actions de la Classe C

Total net assets 17,070,429.37 14,327,282.43 11,280,271.48

Actifs nets

Performance financial Performance financial Performance financial Performance since

year 2013 - 14 year 2012 - 13 year 2011 - 12 inception

Rendement Rendement Rendement Rendement

de l'anne 2013 - 14 de l'anne 2012 - 13 de l'anne 2011 - 12 depuis lancement

Class A shares 0.4% 1.2% -1.0% -2.4%

Actions de la Classe AClass B shares 1.1% 2.2% -0.4% 0.6%Actions de la Classe B

Class C shares 0.4% 1.1% 0.2% 2.5%Actions de la Classe C

Where your word counts // Pro Mujer


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// 6 Notes to the audited annual report

Notes au rapport annuel rvis


GENERL INFOMAION

// A Structure of the Fund

Luxembourg Microfinance and Development Fund,SICAV (the Fund or the SICAV) is an investmentcompany organised as a public limited company(socit anonyme) under the laws of the GrandDuchy of Luxembourg and qualified as a socitdinvestissement capital variable (SICAV). The Fundis authorised as an undertaking for collective invest-ment (UCI) under Part II of the law of 17 December2010 relating to undertakings for collective investment(the Law).

The Fund was incorporated in Luxembourg on7 October 2009 with an initial capital of EUR 31,000divided into 1,240 fully paid up shares with no parvalue. The capital of the Fund is equal at all times tothe net assets of the Fund. The Articles were publishedin the Mmorial on 2 November 2009 and the Fundis registered under trade register number R.C.S.Luxembourg B 148826. The Fund is incorporatedfor an unlimited period.

The Fund is an open-ended fund. Accordingly, theFund is authorised to issue an unlimited number ofshares, all of which are without par value.

The Fund is an umbrella fund and as such may operateseparate Sub-Funds, each of which is represented byone or more classes of shares (each, a Class). TheSub-Funds are distinguished by their specific invest-ment policy or any other specific features. At the dateof this report, the Fund had created one Sub-Fund, theLuxembourg Microfinance and Development Fund Social Venture Capital Sub-Fund.

The Fund may issue three classes of shares, namelyClass A shares, Class B shares and Class C shares,each targeting different types of investors, evidencinga different level of risk, offering a target return andevidencing a different level of involvement in theFunds governance. The initial subscription period forClass A and Class B shares ended on 18 December2009. The initial subscription period for Class Cshares ended on 31 March 2010.

The base currency of the Fund is the EUR and all thefinancial statements of the Fund are presented in EUR.The financial year of the Fund ends on 31 March ineach year.

Copies of the Articles, the latest financial reports andthe latest annual report may be obtained without coston request from the Fund.

Copies of the material agreements mentioned in theProspectus may be reviewed during normal businesshours on any business day at the registered office ofthe Fund.

// B Investment Objective

Luxembourg Microfinance and Development Fund

aims at contributing to the alleviation of poverty in de-veloping countries through the provision of permanentand adapted financial services to marginalized com-munities and individuals. The Fund invests in promis-ing microfinance institutions ("MFIs") that have apositive social impact so that these institutions reachfinancial autonomy. In pursuance of its objectives, theFund may invest in MFIs, in networks or associationsof MFIs, in regional funds, in microfinance investmentvehicles ("MIVs") and in other microfinance-relatedproducts.

The Fund has two principal objectives, social andfinancial: help socially-oriented MFIs to become long-term viable enterprises that reach more poor people

and offer better services, and generate sufficientincome to sustain its own operations and give itsshareholders a financial return that at least compen-sates for inflation.

The Fund strives to provide tailor-made and innovativesolutions to needy MFIs, coupling its own financialassistance with technical support from externalconsultants. It deliberately focuses on niche activities,activities where potential needs of MFIs are large, butcurrent supply is scarce.

The Sub-Fund does not directly engage with the endclients of the MFIs (micro-entrepreneurs, small saversand insurance policy holders). This activity requires

local presence and local knowledge and is best doneby locally implanted MFIs.

The Fund invests primarily but not exclusively in thefollowing financial instruments:

- Various credit products such as senior loans, termdeposits, promissory notes and bonds;- Equity and quasi-equity instruments;- Issuance of guarantees and letters of credit;- Participating interests in loans or guarantees toregional and other microfinance investment vehicles.

The Sub-Fund invests in the developing countries ofAfrica, Asia and Latin America.

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NOE 1

SUMMAY OF SIGNIFICAN

ACCOUNING POLICIES

// A Presentation of Financial Statements

The Fund invests a significant part of its assets infinancial instruments denominated in currencies otherthan the Euro. Often, the Fund contracts a cross-cur-rency interest rate swap or forward foreign exchangecontract to limit the exposure of the Fund to themovements of the currency in relation to the Euro. Inthe case of debt instruments, the cost of hedging suchexposure strongly influences the interest rate the Fundcharges to microfinance institutions.

The interest income on microfinance loan agreementsin the statement of operation and other changes in netassets includes the interest charges to microfinanceinstitutions to cover the hedging costs of the respect-ive currency. The impact of the valuation of the hedg-ing 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 stockexchange or any other regulated market that operatesregularly, is recognized and open to the public willbe valued at the nominal value plus accrued interest.Such value will be adjusted, if appropriate, to reflecte.g. major fluctuations in interest rates in the relevantmarkets or the appraisal by the Board of Directors onthe credit worthiness of the relevant debt instrument.

Capital participations not listed or dealt in on anystock exchange or any other regulated market thatoperates regularly, is recognized and open to the pub-lic will be valued at their reasonably foreseeable salesprice determined prudently and in good faith pursuantto procedures established by the Board of Directors.Such procedures include, in order of preference:

- Up to the first year following the Sub-Funds 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 pricesof equity transactions or issues of new shares involvingthe same MFI within a reasonable time period of thevaluation date. Such a time period is determined byan assessment of the Board of Directors whethermaterial changes within the MFI or in its operatingenvironment have occurred since the date suchtransaction took place;

- If such transactions are not available or deemed notrepresentative of fair value, the value of the capitalparticipation should be estimated with reference to

the price-to-book ratio at which the Sub-Fundacquired the capital participation;

- In case the Sub-Fund has entered into negotiationsto sell a capital participation to a third party, the capitalparticipation may be valued at its expected salesprice if the disclosure is judged appropriate by theBoard of Directors in view of the ongoing negotiations.

The value of any cash on hand or on deposit, billsand demand notes and accounts receivable, prepaidexpenses, cash dividends and interest declared oraccrued and not yet received is deemed to be the fullamount thereof, unless in case the same is unlikelyto be paid or received in full, in which case the valuethereof is arrived at after making such discount asmay be considered appropriate in such case to reflectthe true value thereof.

The value of securities that are listed on any stockexchange or dealt in on any regulated, recognised,open to the public and regularly functioning market isbased on the last available price.

The value of units or shares in UCIs is based on theirlast-stated net asset value. Other valuation methodsmay be used to adjust the price of these units orshares if, in the opinion of the Fund, there have beenchanges in the value since the net asset value hadbeen calculated or the valuation method used by theUCIs is not appropriate to reflect the fair value thereof.

Cross-currency SWAPs that are materially linkedin notional, spot exchange rates, interest rates,maturities and other terms to any underlying loaninstrument are valued using the spot exchange ratefor the notional and accrued interest. Such valuationapproach is changed if a credit risk materializes in theform of an impairment. The part of the SWAP notionalthen exceeding the valuation of the underlying loanis valued using a marked to market approach. Anymaterial difference between the spot rate at which theSWAP was contracted and the spot rate at which theloan was disbursed is amortized over the period untilexpiration of the SWAP and recognized as interest

income or expense.

The value of all assets and liabilities not expressedin the reference currency of a Sub-Fund will be con-verted into the reference currency of such Sub-Fundat the rate of exchange ruling in Luxembourg as atthe relevant Valuation Day. If such quotations are notavailable, the rate of exchange will be determined ingood faith by or under procedures established by theBoard of Directors.

The Board of Directors, in its discretion, may permitsome other methods of valuation to be used, if it con-siders that such valuation better reflects the fair valueof any asset of the Fund.


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// C Allocation of Net Asset Value Among

Share Classes

Preferred Return on Class B shares

The preferential return to Class B shares is allocatedif and only if the Sub-Funds result of operations sincethe last valuation, both with and without impairmentrisk on microfinance, shows a profit.

In such case, the net profit generated by the Sub-Fundsince the last valuation day is first allocated to Class Bshares 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 thelast valuation day without the income from reducingsuch provision.

The remaining profit, if any, is allocated among thethree share Classes according to their respectiveproportions in the Sub-Funds total NAV.

Microfinance Impairment Risk

Class A shares shall cover the net loss allocated toClass C shares since the last valuation day, if such lossarises from the impairment of microfinance relatedinvestments until Class A share capital is nil. Only areduction in the Sub-Funds microfinance investmentsresulting from the deterioration of the financialconditions of the counterparty is considered as amicrofinance impairment.

The Fund reserves the right to suspend subscriptionsin Class C shares within the Sub-Fund, if the NAVallocated to Class A shares is less than 20% of thecombined NAV of Class C and Class A shares.

// D Dividends

The primary investment objective of the Fund is to

achieve long-term growth. The Funds operating planin general does not contemplate payment of dividendsto shareholders.

NOE 2

SHAES

The Board is authorised, without limitation, to issue anunlimited number of fully paid up shares at any timewithout reserving a preferential right to subscribe forthe shares to be issued for the existing shareholders.The following share Classes are available for subscriptioneach targeting different types of investors evidencing adifferent level of risk, offering a different target returnand involvement in the Funds governance.

Class A shares:

Class A shares are reserved for subscription by theLuxembourg Government, ADA and such otherinvestors as may be approved by the existing Class Ashareholders. Class A shares entitle their holdersto propose a common list of proposed directors forappointment to the Board by the General Meetingof 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 per-

centage point p.a. higher return than Class A sharesand 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 pri-vate individuals and private non-profit organizationswhich are subject to the Board of Directors consent.Class C shares entitle their holders to avoid undercertain conditions risks emanating from impairment ofthe microfinance investments of the Sub-Fund whichwill be covered by Class A shares.

- Risk profile: Senior- Target return: Above inflation rate targeted by the

ECB over the medium term

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SWAP contracts

In relation to loan Notional Currency Paying Receiving Maturity Counter- Unrealized

agreement with Leg Leg Date party appreciation/

(depreciation),

(in EUR)

Pro Mujer 2,000,000 ARS 53.05% 7.00% 15/4/15 MFX Solutions Inc. 115,107.91Argentina p.a., p.a.,

semi- semi- annual annual payment payment

Gata Daku 8,000,000 PHP 10.00% 8.10% 29/4/15 MFX Solutions Inc. (3,953.02)Multi-Purpose p.a., p.a.,Cooperative semi- semi- annual annual payment payment

Gata Daku 12,000,000 PHP 10.90% 8.00% 29/4/16 MFX Solutions Inc. 31,455.98Multi-Purpose p.a., p.a.,Cooperative semi- semi- annual annual payment payment

KPS-Small 11,000,000 PHP 11.70% 8.00% 31/1/17 MFX Solutions Inc. 928.81Enterprise and p.a., p.a.,

Economic semi- semi-Development, annual annualInc payment payment

Total 143,539.68

NOE 5

FOWAD FOEIGN EXCHANGE AND SWAP CONRCS

// 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.

NOE 3ADVISOY AND MANAGEMEN FEES

// A Advisor y fees

On 15 December 2009, the SICAV concluded an investment advisory agreement with ADA - Appui au Dveloppement Autonomea.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 port folio related fees amount, for the period ended, to EUR 196,191.97 or 1.3% of the average netasset value of the SICAV. Of the total investment advisory fees, EUR 25,976.72 are linked to the performance of the microfinanceassets.

// B Management fees

In consideration of the services rendered to the Fund, the Management is entitled to receive a fee of maximum 1.75% of the Sub-Funds average net asset value per year. From 1 April 2013 until 31 March 2014, management fees amount to 0.9% of the averagenet asset value of the SICAV.

NOE 4SUBSCIPION DUY / AXE DABONNEMEN)

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 July2010 abolishes the Taxe dAbonnement 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 listof investment funds in compliance with such decree.


41/48


Forward foreign exchange contracts

Currency Amount Currency Amount Maturity Unrealized

purchased purchased sold sold date appreciation /

(depreciation),

(in EUR)

EUR 235,463.90 THB 9,300,000.00 30/4/2014 27,315.32

EUR 240,025.60 PEN 900,000.00 10/6/2014 7,499.56EUR 7,488,479.26 USD 10,400,000.00 18/6/2014 (58,710.97)

EUR 472,589.79 USD 650,000.00 18/6/2014 889.89

EUR 283,252.23 NIO 10,000,000.00 30/9/2014 87.19

EUR 137,465.6 3 PEN 550,000.00 15/12/2014 (4,633.62)

EUR 222,910.22 PEN 900,000.00 27/1/2015 (9,615.82)

EUR 195,603.80 ZAR 3,200,000.00 30/1/2015 (24,998.86)

EUR 159,095.45 XOF 107,500,000.00 16/3/2015 (3,767.34)

EUR 947,234.24 XOF 650,000,000.00 20/4/2015 (37,517.53)

EUR 154,079.54 XOF 107,500,000.00 14/3/2016 (8,783.25)

EUR 150,837.55 XOF 110,000,000.00 14/3/2017 (15,812.75)

Sub-total (128,048.18)

Capitalized hedging costs, to be amortized until maturity of hedging instrument 91,281.03

Total (36,767.15)

// 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 dpargne de ltat (USD, ZAR) and MFX

Solutions, Inc.

Pro Mujer's head office in Len, Nicaragua// Pro Mujer


42/48

NOE 6

OHE DEIVAIVE CONRCS

The SICAV and ADA entered into an option contract granting the Fund the right to sell all rights arising from theloan contract between the Fund and the Association Miselini in Mali against a payment of EUR 250,000. On 16October 2013, the Board of Directors of the Fund decided to exercise the option.

NOE 7

SUBSCIBED NOES ISSUED BY MICO, SMALL & MEDIUM ENEPISES BONDS

S.A., LUXEMBOUG

The Board of Directors of the Fund resolved in their meeting on 19 March 2014 to authorize subscription of Notes

backed by loans to microfinance institutions issued by the Luxembourg company Micro, Small & MediumEnterprise Bonds S.A. (MSME Bonds) in several issues up to EUR 1,000,000. The objective is to address theissue of excess liquidity of the Fund. Notes are listed on the official list of the Luxembourg Stock Exchange EuroMTF market. Arranger and Servicer to MSME Bonds is Symbiotics S.A., a Swiss-based, specialised microfi-nance advisor and asset manager. Subsequent to the decision of the Board of Directors, the Fund subscribed:

USD 650,000 in Notes 11-L. The issuance totals USD 8,650,000 (ISIN XS1051929831) and is backed by aloan granted by MSME Bonds to the microfinance institution FINCA Azerbaijan.

NOE 8

DEAIL OF ACCUED AND OHE EXPENSES

As at the reporting date, accrued and payable expenses consisted of the following (in EUR):

Investment advisory fees 46,587.81Investment related fees to the investment advisor 44,670.08

Administration fees 19,760.39Audit fees 16,675.00Custodian fees 10,600.00Transaction related fees due to the custodian 7,500.00Domiciliation fees 6,250.00Transaction related fees due to the administrator 6,000.00Transfer agency fees 4,125.00Office rent and charges 3,141.75Legal fees 2,632.94Information technology expenses 666.83

Total 168,609.80

For the reporting period, other administration costs consisted of the following (in EUR):

Information technology 14,231.60Marketing and public relation fees 12,874.46Board of directors and committee expenses 12,713.34Travel Expenses 9,528.14Membership fees 7,146.91CSSF annual fee 6,000.00Post and telecommunication 5,920.76Rating and labelling fees 3,000.00Representation expenses 2,131.52Miscellaneous expenses 842.14Publication fees 678.09Legal fees 368.22Printing fees 282.40VAT on custodian fees 232.95Other fees 219.99

Transaction costs 148.81Total 76,321.33


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NOE 9

COUNY ISKS

In view of reducing the exposure to risks inherent in certain countries, the Fund had contracted twoinsurance policies with the Luxembourg Office du Ducroire covering the risk of expropriation and governmentinterference for two loan investments in the Togolese Republic for the period from 10 November 2010 until 30September 2013 and 9 November 2013, respectively. The underlying investments covered by the insurancepolicies have matured in 2013 except for a last tranche of EUR 75,000 of a loan granted to the MFI CECAwhich will mature in November 2014. This last tranche is not covered by the insurance policy

NOE 10

OAL EXPENSE RIO

Average net asset value during the period (in EUR) 15,130,627.14Total expenses for the period 1 April 2013 until 31 March 2014 (in EUR) 545,283.18

Total expense ratio (annualized) 3.6%

NOE 11FOEIGN EXCHANGE RES

The principal exchange rates rounded to four decimals applied at the reporting date are as follows:

1 EUR = 26.4880 HNL (Honduran Lempira)1 EUR = 118.9343 KES (Kenyan Shilling)1 EUR = 35.3151 NIO (Nicaraguan Crdoba)1 EUR = 3.8705 PEN (Peruvian Nuevo Sol)1 EUR = 61.6998 PHP (Philippine Peso)1 EUR = 1.3782 USD (United States Dollar)1 EUR = 660.0648 XOF (West African CFA Franc)1 EUR = 14.5057 ZAR (South African

audited annual report lmdf 31 march 2014

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