soros economic development fund annual...

Soros Economic Development Fund ANNUAL REPORT

2013

Advancing Opportunities for

Economic & Social change

This report contains information that has been provided by the applicable organizations. While the information

contained here is believed to be reliable, no representation or warranty is made by Soros Economic

Development Fund as to the accuracy or completeness of such information.

Copyright © 2014 by the Soros Economic Development Fund. All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by

any means without the prior written permission of the publisher.

Published by:

Soros Economic Development Fund

224 West 57th Street, 9th Floor

New York, NY 10019

USA

Contents

From Our Chairman 4

About SEDF 5

SEDF Investment Map 6

SEDF Investment Model 8

SEDF Investment Highlights 10

SEDF Financials 20

SEDF Officers 22

SEDF Board of Directors 23

3

From our Chairman

Dear Friends,

In 2013, the Soros Economic Development Fund (SEDF) continued its commitment to create maximum

social impact through its investment activities. Our program related investments provide access to

affordable products and services to underserved and marginalized populations and create jobs for low-

income households in developing and post-conflict countries. We reviewed current sector and geographic

investment strategies within our three industry sectors: agriculture, finance and logistics, to identify scalable

enterprises for growth capital. In doing so, we realized that our investments require more focus on and

assistance in the implementation of their growth strategies. Analyses such as these serve to strengthen our

ability to create sustainable and scalable solutions to alleviate global poverty and community

deterioration.

We maintained our two-tier strategy of investing directly into enterprises and via platforms with local investment

professionals who fit well with our culture and mission. Through our platforms, SEDF enjoys access to markets

and transactions which are only achievable with personalized and highly developed networks of

experienced local people, and we enjoy working closely with them through the platform investment

committees. For our direct investments, we have further refined our approach to invest larger amounts,

exceeding US $5 million per transaction. We believe that with this two-tier strategy, we can reach our social

goals more effectively and have even greater impact.

In 2013, we also strengthened our team by recruiting several high caliber younger talents with top-notch

professional credentials and degrees from major universities throughout the United States, Europe and South

Africa. 2013 also heralded a successful launch of our London office. SEDF will increasingly work across all

of our existing offices in New York, Johannesburg and London as a well-organized global network of one

fund with one vision.

In 2014, Stewart Paperin, President of SEDF retired after 17 years as SEDF’s leader. Stewart and his team grew

SEDF into what it is today. His imagination, diligence and energy will always be remembered and

appreciated.

Michel Zaleski

Chairman

About SEDF

The Soros Economic Development Fund (SEDF) is a private foundation that makes program

related investments in frontier markets. Established in 1997, by philanthropist George Soros

and the Open Society Foundations, SEDF has over $350 million in investment capital and

has a team of 19 people in New York, Johannesburg, London and Freetown. We invest in

sustainable businesses that alleviate poverty by: providing access to goods and services

for underserved populations and creating jobs and other economic opportunities for

those at the bottom of the pyramid. We believe that the social goals of our investments

are best met when the business grows successfully. Our investments in agribusiness,

logistics and financial services serve as a testament to that core belief. Through our

portfolio investments, we hope to pave the way for private capital investors to join us in

the fight against global poverty and to realize the vision of a food secure world.

M

5

SEDF Investment Map

SEDF invests in small and medium enterprises, investment funds, holding

companies and financial companies along the West, South and East Africa

Corridors, Europe and South Asia.

Niger

Burkina Faso

Bulgaria

Palestine

Moldova

Mexico Haiti Mali Nigeria

India

30 projects

Côte d’Ivoire

Sierra Leone

Liberia

Ghana

Uganda

Malawi

Kenya

Tanzania Mozambique

Zimbabwe

South Africa

7 6

9

SEDF Investment model

It is SEDF’s fundamental premise that sound and

sustainable portfolio companies achieve scalable and

measurable social impact. Our Investment Model reflects

this belief, and seeks to maximize charitable impact while

managing risk.

Identify the Entrepreneur

and/or opportunity

Conduct rigorous & thoughtful

due diligence

Make the debt or equity

investment when

specific criteria are

met

Monitor, mentor & scale the investment

Exit &

recycle funds into new social

impact investments

We invest in locally based

companies that deliver

affordable goods & services

targeted specifically for our

target class

We demonstrate that

selective investments can

catalyze significant economic

benefits for low income

populations by investing in

businesses which employ

lower skilled workers

We provide investment

capital for a growing class

of entrepreneurs

We provide investment capital

for the sme industry which is

currently underserved by the

existing financial institutions

and are the engines for

job creation

We demonstrate that poverty

can be reduced through the

right balance of scalability

and profitability

8

Non-bank financial companies

and Housing finance companies

& the flow of goods for the

underserved

SEDF Investment Highlights

Injaro Agricultural Capital Holdings Ltd WEST AFRICA

In 2013, Injaro expanded their portfolio of four seed producers

in Mali, Ghana, Niger and Burkina Faso and one cashew

processor in Ghana to include a shea butter processor in

Ghana and a poultry input supplier in Côte d’Ivoire. These

additional investments brought the Injaro portfolio up to seven

companies that we expect will have a direct social impact

on SEDF’s target class of poor and low-income families

and individuals. The Injaro portfolio generated over US $6.9

million in revenue. The addition of the new investments

coupled with Injaro’s value add operational guidance,

strong portfolio monitoring and SEDF funded capital calls

totaling US $1.2 million reached close to 10,000

smallholder farmers and helped improve their standard of

living.

EMPOWERING SMALLHOLDER FARMERS IN WEST AFRICA

GHANA, MALI, BURKINA FASO NIGER AND CôTE D’IVOIRE

Highlights

10

Clients Served

JOBS

Since

11

226


IGNIA Fund MEX ICO


LeapFrog Financial Inclusion Fund GHANA, INDIA, KENYA, NIGERIA, SOUTH AFRICA, TANZANIA, UGANDA

In 2013, SEDF funded capital calls totaling US $1.0 million to

IGNIA a venture capital investment fund focused on

alleviating poverty and community deterioration in Mexico

and other Latin American countries. Within the IGNIA portfolio,

MiMoni (formerly known as MiCel), a service that provides online

access to capital to unbanked Mexican consumers at

competitive interest rates, processed over 18,000 loan

applications and disbursed 7,200 loans and continued to

support entrepreneurship and empowerment in the region.

MiMoni continues to innovate, launching a debit card to

disburse loans more efficiently. Ver de verdad developed a

SUPPORTING INNOVATIVE SOLUTIONS TO ALLEVIATE POVERTY IN LATIN AMERICA

1,284,046 CLIENTS SERVED IN 2013

LeapFrog’s portfolio companies provide insurance, savings

and pensions products to over 21 million low income people

in seven countries in Africa. In 2013, the fund saw a 35%

increase in the fair value of its portfolio over the prior year and

successfully exited Express Insurance (Ghana), a high-growth

Ghanaian savings and life insurance provider. The sale of

Express Insurance to Prudential PLC marked Prudential’s entry

into the growing African insurance market and achieved

a gross LRR of 82% for LeapFrog. LeapFrog’s outstanding

turnaround and exit of Express Insurance was featured in a

case study by the Emerging Markets Private Equity

PROVIDING LIFE INSURANCE FOR VULNERABLE POPULATIONS Express Insurance REACHED

730,000 people via

small chain of eye-care shops to provide low income populations with high quality affordable eye glasses. With the

with key investments in

Agriculture, Logistics, Housing

Association (EMPEA). In 2012 LeapFrog’s initial investment of

US $5.0 million rescued a failing business and protected the

opening of a third in-store unit in Mexico City and a 7%

increase in average prices, sales in dollar value increased

25% over the prior quarter, and 50% compared to 4Q12. Sales

for the entire year, while 13% under budget, grew 156%

compared to the prior year. Mexvi, a leading provider in

Mexico of integral solutions for self-construction of low-

income homes in rural and semi-urban settings launched its

new brand identity, a result of a 6-month long process that

gathered information around low-income family needs

and their perceptions about housing. This coupled with

Government subsidies allowed Mexvi to build 226 houses in

the Campeche region, all of which were built on schedule

and on budget.

12

& Healthcare

1,053 RECEIVED JOB TRAINING

HOMES BUILT IN 2013

insurance and savings of 60,000 people. Under the

stewardship of a new management team, a product

redesign, and a tie-up with mobile insurance distributor

BIMA, Express Insurance reached 730,000 people in 2013.

350,000

policyholders

13


Juhudi Kilimo KENYA


Siraj Palestine Fund PALESTINE

In 2013, SEDF, made an investment of US $1.0 million in Juhudi

Kilimo, a micro-finance company that serves farmers in deep

rural Kenya. Juhudi provides agriculture loans that empower

farmers and rural enterprises to increase their incomes and

create sustainable businesses. 59% of incoming Juhudi clients

earn less than $2 per day. By extending credit to smallholder

farmers, Juhudi bridges the gap between subsistence and

commercial farming. Loans are used to acquire of assets

inclusive of dairy cows, poultry, irrigation equipment, and

greenhouses. Juhudi dispersed US $6.7 million via 10,996 loans

in 2013.

LIFE CHANGING LOANS FOR FARMERS IN KENYA

Income generated from

milk by farmers in 2013

$3,800,000

In 2013, SEDF funded capital calls totaling US $0.7 million to

Siraj. The fund’s primary objective is to create jobs, develop

viable businesses, and enhance the overall economic and

political stability in the region. Through its investment in

PalLease, the first licensed company to provide capital and

operational leasing services within the Palestinian market,

Siraj provided financing solutions for underbanked

individuals and small businesses. WebTeb, an online

platform that provides health information to Arabic

speakers, created jobs for Information and

Communications Technology specialists in Palestine,

who without the opportunity would have traditionally left the

region due to lack of work. Ziadah, a leading engineering

firm in Ramallah, increased its employee base from 55 to

110 people, all of whom are no longer low income

employees as a direct result of employment with Ziadah.

In 2013, Nakheel, a company that produces and sells

Medjool dates created 60 permanent and 150 seasonal

jobs, predominately for women from rural areas in the

Jordan valley. Siraj continues, with these and its other

four investments, to drive economic growth and raise the

income bar in Palestine by investing in businesses that

create jobs, thereby helping to revitalize a region deeply

affected by political and economic strife.

CREATING JOBS IN PALESTINE

WASSEL GROUP

620 employees

54% are low income employees

PALGAZ

34 employees 44% are low-income

ZIADAH

110 employees

All are now above low-income

NAKHEEL

60 employees

32% are low-income

PALLEASE

14 employees

43% are low-income

PHC

24 employees

29% are low-income

WEBTEB

16 employees

All are above low-income

HD VISION

15 employees

7% are low-income

TOTAL

901 employees

14 15


SONG Investment Company INDIA


Aspada Investment Company INDIA

In 2013, SEDF funded US $0.8 million in capital calls to SONG to

ensure that SONG continues to fund early stage Indian

businesses focused on affordable healthcare, agricultural

supply chain, logistics, and access to finance. SV Agri is the

leading player in managing the agricultural supply chain for

potato in India. By providing support and creating end-to-

end market linkages, the company has helped thousands

of small-hold farmers to significantly improve yield and

increase their incomes. SV offers farm extension services

(cropping techniques, insurance, financing support) and

quality agricultural inputs (seeds, organic fertilizer) to small-

hold farmers through an extended network of over 80

company managed village storefronts in India. EyeQ is a

leading chain of specialty eye-care hospitals, operating a

network of over 25 hospitals across India. EyeQ is rated best-

in-class and provides quality eye care at affordable prices

for rural, low-income populations in North and West India.

PROVIDING ESSENTIAL PRODUCTS & SERVICES IN RURAL INDIA

EYEQ PATIENTS TREATED:

175,000

NUMBER OF SV AGRI FRANCHISEES:

65

2500

In 2013, SEDF established Aspada, an India-focused holding

company specializing in healthcare, agriculture, education,

logistics and financial services investments. SEDF committed

$10.0 million to Aspada of which $2.4 million was funded in

2013. Aspada’s mission is to increase economic and

employment opportunities for low-income persons, provide

essential services to underserved communities, develop

activities that promote community and local infrastructure

improvements, and offer equity and debt funding for

small businesses. Aspada marks SEDF’s second fund

investment in India. Aspada made its first investment in April

2013 in LEAF an end-to-end fresh fruit and vegetable

supply chain company in South India. LEAF aggregates,

processes, and distributes produce and vegetables from

smallholder farmers to major retailers in a branded,

packaged format. Aspada was the subject of a Harvard

Business School case study in impact investing.

HELPING SMALLHOLDER FARMERS IN INDIA GO TO MARKET

LEAF CURRENTLY WORKS WITH OVER

1,200

LEAF SUPPLIES TO OVER

100

16 17

SMALLHOLDER FARMERS IN THE SV AGRI NETWORK:

SUPERMARKET STORES IN

SOUTH INDIA

FARMERS IN THE NILGRIS REGION


DSM Corridor Group TANZANIA

DCG is a logistics, warehousing, and transportation services

company operating in the Tanzanian Ports of Dar es Salaam

and Tanga. DCG owns the only purpose built bulk terminal for

handling fertilizers in Sub-Saharan Africa. This is a vital service as

the Dar es Salaam Port provides a gateway for 95% of Tanzanian

trade and serves as the access route to import dependent

landlocked nations such as Malawi, Zambia, Burundi,

Rwanda, and Uganda, and Eastern DRC. By moving fertilizer

and grains more efficiently in and out of the port, DCG helps

improve the delivery time and cost of these goods in the

relevant countries, thereby contributing to food security in

the region.

In 2013, SEDF made an equity investment of US $1.3 million

to purchase preferred shares in DCG and a debt investment

of US $2.0 million. This landmark transaction, SEDF’s first

in Tanzania, contributed to the creation of 115 new jobs.

In addition, SEDF was one of DCG’s investors that, received

an award from Private Equity Africa for Best East Africa

Logistics Deal for DSM Corridor.

NEW FULL-TIME JOBS CREATED

115

IMPROVING FOOD SECURITY IN SUB-SAHARAN AFRICA

19 18

SEDF Financials

Consolidated statements of financial position

December 31, 2013 And 2012

Consolidated statements of Activities

December 31, 2013 And 2012

Cash and cash equivalents $ 577,435 4,835,035

Interest receivable and other assets 1,246,490 879,551

Investment 316,426,545 181,346,274

Program-related investments 52,551,076 52,888,306

Less allowance for estimated losses (2,519,728) (5,962,254)

Program-related investments, net 50,031,348 46,926,052

Total assets $ 368,281,818 233,986,912

Liabilities And Net Assets

Liabilities:

Program-related investment activities:

Interest on loans $ 1,313,128 1,503,182

Equity interest in net loss of investees (1,098,333) (801,335)

Loss on disposal/write off of equity interests (1,670,580) (1,395,000)

Loss on foreign currency transactions (1,273,326) (301,067)

Net investment loss (2,729,111) (994,220)

Provision for estimated loss on program-related investments (1,577,939) (2,885,122)

Loan payable $ 10,200,000 4,300,000

Expenses

Program expenses:

Accrued expenses 1,884,850 3,113,221

Deferred federal excise tax 4,786,512 2,061,308

Allowance for estimated losses on and fair value of

guarantees under program-related investments 1,399,333 1,760,000

Total liabilities 18,270,695 11,234,529

Grant expenses

75,463

168,140

Net assets: Other 3,239,360 2,828,007

Net assets – unrestricted 350,567,242

223,354,721

3,314,823 2,996,147

Cumulative translation adjustment (556,119) (602,338) General and administrative expenses 977,179 605,228

Total net assets 350,011,123 222,752,383 Federal excise tax expense 2,651,257 400,822

Total liabilities and net assets $ 368,281,818 233,986,912 Total expenses 6,943,259 4,002,197

Increase in net assets 127,212,521 15,828,176

Net assets, beginning of year 222,752,383 206,899,184

Foreign currency translation gain 46,219 25,023

Net assets, end of year 350,011,123 222,752,383

see Accompanying notes to Consolidated Financial statements.

20

21

2013 2012

Assets

2013

2012

Net loss on program-related investment activities (4,307,050) (3,879,342)

Contributions from Open Society Institute 1,382,559 2,867,157

Contributions from Soros Charitable Foundation dissolution — 2,338,069

Net realized and unrealized gain on investments 137,080,271 18,504,489

Total revenue, gains, and other support 134,155,780 19,830,373

SEDF officers

Cedric de Beer VICE PRESIDENT AND HEAD OF OPERATING COMMITTEE

Neal DeLaurentis VICE PRESIDENT

Fawzia Naqvi VICE PRESIDENT

James Beaver TREASURER AND FINANCE DIRECTOR

Maria Santos Valentin SECRETARY AND GENERAL COUNSEL

SEDF Board of Directors

Michel Zaleski BOARD CHAIR

Reuben Abraham

Richard Atterbury

Maria Cattaui

W. Bowman Cutter

Leslie Maasdorp

Robert Soros

22 23

Company Information

UNITED STATES

Soros Economic Development Fund

224 West 57th Street, 9th Floor

New York, New York 10019

T: (212) 548-0111

www.sedfny.org

SOUTH AFRICA

1st Floor, President Place,

1 Hood Avenue Rosebank,

Johannesburg

T: +27 11 587 5033

SIERRA LEONE

31, Murray Town road

Murray Town, Freetown

Sierra Leone

UNITED KINGDOM

7th Floor Millbank Tower, 21-24 Millbank

London, SW1P 4QP

United kingdom

T: +44 20 7031 0200

http://www.sedfny.org/

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