2013 Annual Report MEF Annual Report 2013 Page 2

2013 Annual report MEF Annual report 2013 page 2

The Mission, the Fund page 3 Client Stories page 16 Edpyme Alternativa page 16 Content The Structure page 4 Small grocery in Peru page 17 AMRET page 18 Letter of the Chairperson page 5 Farmer in Cambodia page 19 Supported by Three Investment Managers page 7 AccessBankTanzania Limited (ABT) page 20 Crickets farm in Cambodia page 21 BlueOrchard Finance S.A. page 7 Cyrano Management S.A. page 8 The Portfolio page 22 ResponsAbility Social Investment AG page 9 · Country distribution A facility enhancing MFIs page 10 · Regional distribution · Investment Manager distribution a. Key Figures · Currency distribution Portfolio in detail page 10 Portfolio evolution page 11 The Investors page 23 b. Impact Indicators page 12 Financial Information page 24 Activity Reports page 13 Balance Sheet page 24 BlueOrchard Finance S.A. page 13 Income Statement page 25 Cyrano Management S.A. page 14 ResponsAbility Investment AG page 15 MEF Annual report 2013 page 3

THE MISSION Recognised as an efficient and As a demand oriented fund, seeking THE FUND Mission of Initiated by KfW Entwicklungsbank responsible microfinance debt fund to respond to the needs of the market MEF aims to support economic (“KfW”) and International Finance providing stability to the microfinance and of individual MFIs, it opens the development and prosperity globally Corporation (“IFC”), a member of the market, MEF has an important possibility to provide financing to more through the provision of additional the fund World Bank Group, co-managed by three signalling effect and contributes to than 100 microfinance institutions development finance to micro- leading private investment managers the stabilisation of the microfinance in up to 40 countries and to support enterprises, via qualified financial (BlueOrchard Finance S.A., Cyrano sector. In times of uncertainty, a lending to as many as 60 million low institutions. Management S.A. and responsAbility vehicle that can respond quickly and income borrowers in many of the Social Investments AG), Microfinance decisively, such as MEF, can provide a world’s poorest countries. In pursuing its development goal MEF Enhancement Facility S.A., SICAV-SIF stable source of funding. observes principles of sustainability and (“MEF”) was setup in February 2009 The investment managers are led additionality, combining development as a USD 500 million facility to provide As a complement to existing sources by MEF’s Investment Committee, and market orientations. short and medium-term financing to of funding, MEF focuses on providing convening on a monthly basis and microfinance institutions (“MFIs”) liquidity that the market does not composed of reputable professionals facing difficulties in securing financing offer. MEF is a flexible vehicle of the microfinance industry, Mr. Syed as a result of the global financial crisis structured to meet the needs of MFIs, Aftab Ahmed, Mr. Karlo de Waal, and and, in particular, the 2008/2009 without crowding out private sector Dr. Klaus Glaubitt. liquidity crisis. initiatives. Initiated by

Investors

as placing agent

Board of Directors

General Secretary Investment Committee Innpact S.à r.l.

Administrative Agent Investment Managers Credit Suisse Fund Services (Luxembourg) S.A. BlueOrchard Finance S.A.

Auditor Ernst & Young S.A. Cyrano Management S.A.

Legal Counsel responsAbility Arendt & Medernach Investments AG MEF Annual report 2013 page Custodian Hedging Advisor Credit Suisse (Luxembourg) S.A. Chatham Financial 4 The Structure

Board of Directors Investment Committee

Chairperson Chairman Ms. Monika BECK Dr. Klaus GLAUBITT

Directors Members Mr. Robert Peck CHRISTEN Mr. Syed Aftab AHMED Ms. Andrea HAGMANN Mr. Karlo DE WAAL Mr. Tassilo HENDUS Mr. Martin HOLTMANN Mr. Karl VON KLITZING MEF Annual report 2013 page 5

This report documents another very Despite the slowdown of private capital very closely these developments and Letter dynamic year during which the MEF inflows into the emerging markets in has further increased its focus on continued on its strong growth path. mid-2013 and although the continuing responsible finance in particular the Positioned as an efficient microfinance recession in the Eurozone weighed on prevention of clients’ over-indebtedness of the debt fund the MEF was again able to microfinance activity in Southeastern and on strong risk management in its respond to the strong demand of MFIs Europe, strong economic growth in investment decision process. in 2013. The portfolio grew by 20% Sub-Saharan Africa and developing Asia Chairperson in 2013 to USD 441 million up from contributed to the rapid expansion In 2013, the MEF financed 13 new MFIs USD 365 million at the end of 2012. of microfinance activities in these in 9 countries. The MEF portfolio shows In response to the increasing funding markets. a very high degree of diversification needs of the market and thanks to its with its 86 MFIs in 33 countries at the innovative and flexible architecture, the Pursuing the trend from 2012, MFIs end of 2013 with no investment in MEF successfully attracted substantial have continued their effort to improve default. The total expense ratio (1.73%) investments from the private sector in their corporate governance and risk remained at low level of industry 2013. With the support of Deutsche Bank, management methodology as well as standard in spite of the adverse effect the MEF issued in December 2013 Notes their social performance practices. of the EUR exchange rate. The local for USD 75 million confirming its role as Credit bureaus, considered as a key currency portfolio, fully hedged to an efficient public private partnership element for MFIs, have recently the USD, increased to USD 80 million platform for the microfinance sector. been setup or improved in important invested in 17 currencies. Particularly microfinance markets such as Cambodia noteworthy in 2013, the MEF realised or Azerbaijan. The MEF has followed its first investment in a securitisation MEF Annual report 2013 page 6

transaction issued by Procredit Ecuador covered. This is made possible by and responsibly to entrepreneurs in Letter and continued its support to the Indian the strong support the Fund receives developing countries. sector by adding two new MFIs in its from its long term investors and more portfolio. The MEF played furthermore recently from private sector investors. On behalf of the Board, I would like of the its market stabilisation role through the In this report, we have highlighted to take the opportunity to express my financing of microfinance institutions three microfinance institutions, Edpyme thanks to the staff of the Fund’s service in Cambodia during the liquidity crisis Alternativa (Peru), AMRET (Cambodia) providers as well as to MEF’s investors, Chairperson that severely hit the country during the and AccessBank Tanzania Limited stakeholders and partner institutions second semester of 2013. (Tanzania) that have partnered with for their efforts and dedication in the MEF and also the stories of a small supporting the development of the MEF The expected growth of the sector in grocery in Peru as well as a farmer and and for their commitment to the Fund’s 2014 and of its strong MFIs reinforces a crickets farm in Cambodia who have mission. the continued need for efficient benefitted from micro-loans from MFIs lending platforms such as the MEF funded by the MEF. offering stability to the market. As a consequence, the portfolio of the Fund We look forward to pursuing in 2014 is expected to continue to rise in 2014 the MEF’s active and catalytic role in by diversifying its outreach in terms of supporting local financial institutions Ms. Monika Beck types of MFIs, countries, and currencies by providing financing efficiently Chairperson of the Board of Directors MEF Annual report 2013 page 7

BlueOrchard Finance S.A. was founded Investors in BlueOrchard-managed Supported by in 2001 as the first commercial manager funds including private and institutional of microfinance debt investments. Over investors, supranational institutions as well the subsequent 13 years, BlueOrchard as renowned foundations. The company Three Investment has grown significantly and has to this employs up to 50 staff internationally day deployed up to USD 2bn in loans including 28 investment professionals to microfinance institutions, while in Geneva, Zurich, Luxembourg, Lima, Managers handling In-depth market knowledge Phnom Penh, Tbilisi and Nairobi. and relationships with +250 MFIs in more than 50 countries, enhanced by BlueOrchard Finance S.A. local presence on 4 continents round the Globe.

Portfolio MEF - BlueOrchard

Portfolio managed as of 31 December 2013 USD % total MEF portfolio Portfolio 164,073,431 37 % MEF Annual report 2013 page 8 © Cyrano

Cyrano is a pioneer fund manager America (LA-CIF), created the only The assets managed by Cyrano overall Supported by specialized in the microfinance industry mezzanine fund in microfinance are currently invested in 29 companies in emerging markets. Cyrano has (Solidus) and one of the most successful in 17 countries (as at 31 December 2013). developed a rigorous loan methodology and solvent global funds (GMF). Cyrano Three Investment to analyze in-situ and monitor on a also manages WMF, a local currency monthly basis the qualitative and fund fully devoted to MFIs Ghana. quantitative risks of all portfolio MFIs. Its Managers key strengths are its loan methodology and risk monitoring. Cyrano managed the first credit fund for MFIs in Latin Cyrano Management S.A.

Portfolio MEF - Cyrano

Portfolio managed as of 31 December 2013 USD % total MEF portfolio Portfolio 163,427,384 37 % MEF Annual report 2013 page 9

responsAbility Investments AG is one both institutional and private investors, a broad range of reputable institutions Supported by of the world’s leading independent responsAbility offers professionally- in the Swiss financial market as well asset managers specializing in the managed investment solutions. as its own employees. responsAbility development-related sectors of is authorized by the Swiss Financial Three Investment emerging economies such as finance, Founded in 2003, responsAbility Market Supervisory Authority FINMA. agriculture, health, education and currently has assets under energy. responsAbility provides debt management of USD 1.8 billion, which Managers and equity financing to non-listed are invested in over 400 companies in companies with business models that around 80 countries. responsAbility target the lower-income segment of the is headquartered in Zurich and has ResponsAbility Investment AG population and can thus drive economic local entities in Paris, Lima, Mumbai growth and social progress. Serving and Nairobi. Its shareholders include

Portfolio MEF - responsAbility

Portfolio managed as of 31 December 2013 USD % total MEF portfolio Portfolio 113,507,090 26 % MEF Annual report 2013 page 10 A facility Portfolio in detail Cumulative December 2013 December 2012 disbursements enhancing MFIs Microfinance investment portfolio USD 441 MM USD 364.7 MM USD 650.9 MM

Key Figures Short term investments * USD 62.5 MM USD 23.6 MM - Total assets USD 503.5 MM USD 388.4 MM - as at 31 December 2013 Microfinance portfolio as a % of total assets 87.6 % 93.9 % -

Total net asset value USD 410.3 MM USD 376.6 MM -

Number of MFIs 86 77 99

Number of loans 150 116 214

Number of countries 33 32 33

* Composed of cash and other assets MEF Annual report 2013 page 11 A facility Portfolio evolution since launch Total assets 550 enhancing MFIs Microfinance investment portfolio 500 450 Key Figures 400 350 as at 31 December 2013 300 250 200 Equivalent USD MM 150 100 50

Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Sector Distribution of Portfolio Level of adherence to the Client Protection Principles (self reported) Other Agriculture, 18% livestock & ﬁshing 19% Appropriate product design and delivery 4.46 Prevention of over-indebtedness 4.48 Service 20% Transparency 4.61 Responsible pricing 4.58 Manufacturing & Production Fair and respectful treatment of clients 4.61 9% Privacy of Client Data 4.61 Mechanisms for complaint resolution 4.21

1 2 3 4 5 Commerce & Trade 34%

NB: Six MFIs out of 77 have not provided the information The diagram highlights the good scores of MEF’s MFIs MEF Annual report 2013 related to sectors distribution. regarding the adherence to the Client Protection Principles. page 12

Adherence to social A facility Microfinance Institutions Reach and environmental criteria Borrowers reached Adherence to the Client Protection Principles (CPP) Total, number 339.280 MFIs having formally adopted the CPP 80% enhancing MFIs Percentage of women 48% Adherence to exclusion list Percentage of loans in rural areas 50% Violations of the exclusion list None Loans Impact Indicators Average loan balance (in USD) 3.620 Client Type Percentage of portfolio as at 31 December 2013 Microfinance 73% Productive loans - USD 70% Mortgage 4% Consumer 14% Other 11% Product Type MFIs offer microfinance through Direct loans 84% Group guaranteed loans 16%

All figures are weighted by the exposure of each MFI in MEF portfolio. MEF Annual report 2013 page 13

MARKET REVIEW Fund Performance MARKET OUTLOOK Activity Report Microfinance markets during 2013 The proof of BlueOrchard continuous strive The outlook for the microfinance sectors continued to evolve with remarkable for its local footprint and market coverage remains favorable supported by expected growth in outreach and scale worldwide. was the opening of two new offices in growth in several emerging market BlueOrchard 2013 Activity Report Markets like Central Asia benefited from Nairobi and Tbilisi with teams, covering economies, by a continuous movement increasing growth, while others like MENA&SSA and Eurasia, respectively. to improved transparency, and increased Eastern Europe were still recovering regulatory requirements and oversight. from the last financial crisis. In the During the reporting period, BlueOrchard Caucasus concerns were raised about Pool disbursed USD 61.2 million in 25 saturation and over-indebtedness in loans across 16 countries. Innovative particular in the main urban centres. transactions like the ProCredit Ecuador The microfinance market in Africa securitisation and NCDs in India were was marked by the development and also part of the disbursed portfolio. The expansion of green-field MFIs in key BlueOrchard pool reached USD 166.1 markets such as Nigeria, Tanzania, million as of 31 December 2013. Cameroun, Cote D’Ivoire and DRC. These will potentially provide new investment In 2013 the successful management and opportunities for MEF in 2014. Overall, completion of a limited number of work- the MFI portfolio growth rate in 2013 outs in Bosnia Herzegovina and Kosovo varied from 20 % to 40 % depending on was also the result of attentive monitoring the regions. and supervision by BlueOrchard. MEF Annual report 2013 page 14

MARKET REVIEW Pool performance This implies that there is a need to take Activity Report During 2013 Microfinance Institutions Cyrano’s portfolio pool has not a more conservative position in regards (MFIs) in Cyrano’s pool in MEF have experienced a single day of arrears, to Capital Adequacy Ratios and to the maintained adequate levels of solvency nor any defaults. Consequently, no level of provision protection of the Cyrano 2013 Activity Report and growth despite the uncertainties provisions were required. portfolio, (iii) The increasing proportion in international and local economies. of large loans extended to SMEs may also In addition, the competition among MARKET OUTLOOK jeopardize the portfolio quality. lenders in some urban markets has For 2014, Cyrano considers that the resulted in a reduction of portfolio following uncertainties in emerging For these reasons, Cyrano will continue yields and in the corresponding margin economies pose risks that may affect to monitor very closely the countries and generation. Furthermore, large loan the solvency of MFIs: (i) some emerging MFIs in its pool in order to prevent any amounts extended to small enterprises markets may be impacted by the potential negative impact these factors have the potential to rapidly increase changes in the monetary policy of USA may have on MEF’s portfolio. the level of portfolio in arrears. and Europe, (ii) Very strong competition among MFIs in some markets may reduce the assets growth and increase the level of non‐performing loans. MEF Annual report 2013 page 15 © responsAbility

MARKET REVIEW the continuing recession in the Eurozone MARKET OUTLOOK tend to be healthier than banks in advanced Activity 2013 was another year in which the global weighed on microfinance activity in The global economy is set to grow faster economies and 2) the microfinance segment economy was beset by nervousness, Eastern Europe, strong economic growth in 2014 than in 2013, while being much is particularly well rooted in low-income as could be seen mid-year during the in Sub-Saharan Africa and developing Asia less threatened by potential turmoil in local economies – microfinance markets Report abrupt slowdown of private capital contributed to the rapid expansion of the Eurozone or by political paralysis in are less crisis-prone than the countries inflows into the emerging markets. microfinance activities in these markets. the US. Compared to the BRIC, smaller commonly referred to as “emerging The announcement itself was hardly developing and emerging economies – markets”. Microfinance countries also responsAbility 2013 surprising but it had a major impact. POOL PERFORMANCE where microfinance plays an important grow at a faster rate: according to IMF The prospect of an imminent end to responsAbility invested a total amount role – appear to be much less exposed to forecasts for the 15 countries to which Activity Report the extremely loose monetary policy of USD 60 million for MEF during 2013, negative fallout from major advanced responsAbility’s managed portfolio has in the US caused a flight of capital out covering 14 Institutions in 8 countries. economies due to their lower correlation the largest exposures, the GDP of these of the emerging markets in mid-2013. Some of these investments were done with the world markets. The IMF’s list of economies is expected to increase to Investors suffered massive losses on in the local currency of the MFI (i.e. the 15 emerging markets with the largest 5.6% in 2014 from 5.3% in 2013. Moreover, equity and bond investments in emerging Kazakhstan Tenge, Peruvian Peso). relative general government financing need these economies are set to consistently economies, and the value of many local over the coming year includes only two grow by more than 5% until the end of the currencies fell sharply against the US The main developments of the countries (India and Mexico) that are part IMF’s forecasting horizon in 2018. There is dollar. As responsAbility predicted last responsAbility pool were reflected in: of the 15 microfinance markets to which therefore every reason to expect relentless year, the microfinance sector fortunately • Portfolio growth of 71% in 2013 responsAbility’s managed portfolio has the demand in this sector. In 2014, we expect remained largely unaffected by this • The addition of 5 new MFIs largest exposures. This means that even at global growth in the microfinance industry climate of uncertainty, with overall loan • The expansion of the geographical a macro level – before taking account of of 15% to 20%. The actual growth rate may volumes growing by almost 20%. Although coverage to 13 countries (9 in 2012) the fact that 1) banks in emerging markets vary, depending on the region. MEF Annual report 2013 page 16

Edpyme Alternativa is a dynamically program’s success, in 2000 the Chamber of exclusive clients. In addition, the Client growing microfinance organization of Commerce and Production of quality of portfolio improved from which was founded in Lambayeque, a Lambayeque decided to create Edpyme 11.5% (Dec 2012) to 6.55% (Nov 2013). commercially vibrant region in northern Alternativa. Today, the MFI is supported Alternativa finances different activities story Peru. Alternativa has been active in this by additional shareholders, which are as agriculture, production, trade and market for more than 23 years. Today the international players Microvest and services. Alternativa has a concentration Alternativa is working with a network of Microventure and Abaco, an important in trade (46% of the portfolio) and Edpyme Alternativa ten branches which offer the MFI a solid Peruvian-Japanese Cooperative. services (34% of the portfolio). position in the Microfinance market in Peru the North of Peru. Alternativa provides loans to micro and The support of MEF is important in the small enterprises through an individual development of the institution because Alternativa was created as a local lending methodology. Alternativa has due to the legal form of Edpyme, initiative, starting as a Financial 26,000 clients and the average loan is Alternativa is not allowed to take Program and Technical Assistance USD1,000. savings. Therefore, their activities are for micro entrepreneurs and small depending on external funding from enterprises promoted by IADB and the During 2013, Alternativa experienced a local and international sources. Chamber of Commerce and Production growth of 30% in portfolio and 40% in of Lambayeque. As a result of the active clients with a high percentage MEF Annual report 2013 page 17

She is 40 years old. She lives with her In 2011, she had a small grocery in She wants to continue her business and Client family in a town named Moshoqueque her town with limited products. Now she wants to increase the services that located in Northern part of Lima, in she has a bakery and a small grocery. she offers to the community. And also Chiclayo, Lambayeque. In addition, her small business has she wants to continue working with story given to Gloria the financial support Edpyme Alternativa because she feels She began to work with this financial to give to her three sons a professional that it is a company that trusts on her institution in 2012. She was bancarized education. And also, she finished to and it is committed to give her a good Small grocery in Peru by Edpyme Alternativa. Until now, she build her house. service. is recognized for being a good payment record in the MFI. MEF Annual report 2013 page 18

AMRET was established in 1991 as Currently, AMRET is the second largest Total assets as of Nov-13 reached USD Client an experimental project launched microfinance institution in Cambodia. 251 million. AMRET has well managed by GRET, a French NGO established AMRET has developed financial products the growth of savings collection. In two to deliver micro loans to the rural and service, especially small scale years savings finance nearly half of its story population of Cambodia. AMRET loan for people in the rural areas and portfolio. obtained its MFI license from the medium scale loan for small and medium National Bank of Cambodia in 2001 and enterprises. AMRET offers Solidarity MEF has extended three senior loans AMRET the corresponding authorization to Credit (joint liability group loan) and to AMRET for a total amount of USD collect deposits in January 2009. Individual Credit (mainly business, 12 million, which were disbursed during Cambodia consumption and home improvement). 2012 and 2013, with the objective to AMRET has the strong support of a AMRET has over 300,000 of loans consolidate the microfinance portfolio very committed group of shareholders outstanding with 116 branches and 2,556 growth. conformed by ADVANS, GRET, Proparco employees. and FMO. MEF Annual report 2013 page 19

Aunt BY Chhon, 51 years old, Amret support her living as her family livelihood which she planted rubber seedlings on two Client client, residing in Samakum village, Krek was bad. In 2010, she decided to take out hectares of arable land and also expanded commune, Ponhea Krek district, Kampong a first loan of USD 1,000 from AMRET in her daughter’s hair salon. Cham province, revealed that “Nowadays, order to expand her agricultural business. story I have a husband, named HUL Thol, 51 Because her agricultural business improved, To date, her family livelihood has improved years old, a farmer, and three children she took out a second loan of USD 2,000 and she continues to take out loans from (one son and two daughters), of whom the from AMRET in 2011 in order to further AMRET. At her daughter’s hair salon more Farmer in Cambodia oldest daughter, a hairdresser, is widowed invest in the agricultural sector. Moreover, clients are coming to have their hair and the other two children are working as in the same year, in order for her oldest styled and permed, and she is therefore rubber plant tappers. I therefore bought daughter to have occupational skill and continuing to expand the salon. As for her a plot of land at Phlak Samraong market, better help support the family livelihood, rubber seedlings, they have also grown Memot district, in order to construct a hair she decided to take out an additional loan well. salon for my oldest daughter and I opened of USD 8,000 from AMRET with the aim of this business for her more than one year purchasing a plot of land at Phlak Samraong Aunt BY Chhon showed a happy face and ago already.” Market and constructing a hair salon for stated that “I am very proud of my success her daughter. The loan did not end then. and improvement nowadays and I express She also added that, at first, she was a At the end of 2013, she decided to take out my heartfelt thanks to AMRET for giving farmer and had two hectares of paddy land a fourth loan of USD 8,000 from AMRET in loans to me. This is a huge contribution to and arable land. She did the farming to order to expand her agricultural sector, in reducing the hardship I used to face.” MEF Annual report 2013 page 20

AccessBank Tanzania Limited (ABT) was with 9 affiliates within Africa and Asia. meet the financing needs of smallholder Client formed in 2007 as a commercial bank The holding supports its affiliates through farmers and the intended diversification focusing on the microfinance sector. technical assistance, capacity building of its network outreach into rural ABT is the largest microfinance bank in and additional equity injections when areas. As a Smart Campaign endorser, story Tanzania providing exclusively services warranted. ABT upholds the principles of customer to individual customers and small and protection and maintains fairness and medium-sized enterprises (MSMEs). The ABT has a network of 10 branches, integrity in its dealings with its clientele. AccessBank Tanzania bank seeks to provide its clients with a with 578 employees serving over MEF has an outstanding exposure of USD wide range of suitable financial services 24,000 borrowers and 135,000 savers. It 4 million in ABT. Limited (ABT) through its simplified loan products, fast leverages on strong network support and loan processing and full transparency on thorough credit underwriting procedures Tanzania pricing. to grow its business. ABT’s products are aligned to customer needs and the ABT is part of the AccessHolding institution is constantly seeking for new Microfinance Group which is a globally ways to improve its products to meet expanding network of commercial banks customer expectations. This includes with special focus on microfinance and the introduction of an agro product to MEF Annual report 2013 page 21

Crickets have been a delicacy in Khmer the enterpreneur. “You simply need another business in his backyard. His Client cuisine for centuries, so starting a to know your trade, love the animals oldest daughter now proudly wears a cricket farm with a microloan seemed and protect them against their natural school uniform, and he and his wife are like an attractive business opportunity predators.” This explains why bowls adamant to send the younger ones to story to Mr. Sophal Ung when he and his wife filled with motor oil can be found school as well. “All it takes to achieve had their third child, and the family’s underneath each leg of the breeders. one’s goals is good health, some needs were growing. business ideas, and a loan,” says Mr. Crickets farm “Ants can’t fly, so if you prevent Ung, a smile on his face and delicious Today, crickets in different stages of them from crawling up the cages, the dish of chili-fried crickets on the table. in Cambodia their life cycle occupy the ground floor cricket eggs will be safe… and their and the second floor of his house. At a biggest enemy kept at bay”. selling price of KHR 8,000 (equivalent of USD 2) per kilogram, Mr. Ung Despite his success, Mr. Ung is not generates attractive revenues – and ready to stop here. Together with profits. “The cost of breeding crickets his brother-in-law, he has started is surprising low, especially as I weld producing fish cages for sale to the breeding cages myself,” chuckles fishermen, and he is contemplating yet Country distribution Regional distribution in % Microfinance investment portfolio Microfinance investment portfolio Equivalent USD MM MENA SA 2% 6% Azerbaijan 57.0 13% SSA EECA Cambodia 50.4 11% 7% 50% Peru 42.1 10%

Georgia 35.0 8% Ecuador 34.0 8% EAP Kyrgyz Republic 28.0 6% 12% Equivalent USD MM Armenia 27.7 6%

Mongolia 4%27.5 6%

Tajikistan 22.0 5% LAC India 16.0 4% 23% MEF Annual report 2013 EECA : Eastern Europe and Central Asia Others 101.2 23% LAC : Latin America and the Caribbean EAP : East Asia and the Pacific page SSA : Sub-Saharan Africa SA : South Asia 22 MENA : Middle East and North Africa

Investment Manager distribution in % Currency distribution in % Microfinance investment portfolio - Equivalent USD Total portfolio The Portfolio All investments hedged to USD responsAbility as at 31 December 2013 AZN 1% 113,507,090 26% AMD 1% NGN 1% KHR 2% EUR 3% INR 3% All investments hedged to USD BlueOrchard PEN 4% 164,073,431 OTHER 5% 37%

Cyrano USD 80% 163,427,384 37%

Other includes : COP, MXN, THB, RUB, XOF, GHS, ZMK, XAF, KZT MEF Annual report 2013 page 23 The Investors

as placing agent Financial Information

Balance Sheet *

ASSETS as at 31 December 2013 as at 31 December 2012

Loans to MFIs 441,007,904 364,704,321 MEF Annual report 2013 Current assets 60,166,424 27,322,739 page 24 of which : cash & cash equivalent 49,431,930 21,173,237 Other assets 1,268,135 5,430

Total Assets 502,442,463 392,032,490

LIABILITIES as at 31 December 2013 as at 31 December 2012

Current liabilities 17,100,364 15,457,640

of which : cash & cash equivalent 14,293,551 10,161,137 Accruals and deferred income ------

Total Liabilities 92,100,364 15,457,640

Net Assets 410,342,099 376,574,850 * in USD Financial Information

Income Statement *

INCOME 2013 2012 Interest on loans 26,927,975 18,797,253 Upfront fees 1,544,662 2,035,513 Other income 252,745 105,554 Total Income 28,725,382 20,938,320

MEF Annual report 2013 EXPENSES 2013 2012 Management fees (4,822,885) (3,656,707) page Legal, advisory and audit fees (501,279) (386,211) 25 Administration, custodian and domiciliation fees (464,457) (399,531) Other expenses (1,766,741) (1,443,491) Total Expenses (7,555,362) (5,885,940)

NET OPERATING RESULTS 2013 2012 Net income from investments 21,170,020 15,052,380 Net realized and unrealized gains/losses on foreign exchange (4,486,156) 2,417,536 Net realized and unrealized gains/losses on swaps and forwards 1,116,599 (6,672,325) Value adjustments relating to loans 260,337 (1,009,726) Net increase/decrease in Net Assets as result of operations for the year/period 18,060,800 9,787,865

MOVEMENT IN CAPITAL 2013 2012 Subscription of shares 30,000,000 160,504,950 Redemption of shares ------Advance of dividend (14,293,551) (10,161,137)

NET ASSETS AT THE END OF THE YEAR/PERIOD 410,342,099 376,574,850 * in USD MEF Annual report 2013 page 26

5, Rue Jean Monnet Investment Managers: General Secretary: Microfinance L - 2180 Luxembourg · BlueOrchard Finance S.A. Innpact 32 rue de Malatrex 5 rue Jean Bertels Enhancement Facility 1201 Geneva Switzerland 1230 Luxembourg Luxembourg · Cyrano Management S.A. SA, SICAV-SIF Calle Bolivar # 472 / Ofic. 702 - 703 Miraflores Lima 18 Peru

· responsAbility Investments AG Josefstrasse 59 8005 Zurich Switzerland

DISCLAIMER: thereof (‘US Persons’) other than in accordance without taking into account any placement or All rights reserved. This fund is reserved for eligible with the laws of the United States. The information redemption fees and assuming constant reinvestments investors within the meaning of article 2 of the given in this document does not constitute an offer of dividends. This is not a fund prospectus as specified Luxembourg law of 13 February 2007 on specialized nor a product recommendation, it is provided for by law. All pictures are copyrighted © KFW except if investment funds, as amended or supplemented from individual information purposes only. No guarantee is otherwise indicated. Trademarks, commercial names time to time. Units in this investment fund may not given or intended as to the completeness, timeliness and logos used and reproduced are regulated by be offered, sold or transferred, directly or indirectly, or adequacy of the information provided herein. Past current laws in force. in the USA or its territories or possessions or areas performance is no guarantee for future results. The subject to its jurisdiction, or to citizens or residents value of the fund and its share classes is calculated