Audited Annual Report LMDF 31 March 2014

Socit dInvestissement
Capital Variable, Luxembourg

Audited annual report as at 31 March 2014
Rapport annuel rvis au 31 mars 2014
Beyond Microfnance
LMDF takes a second look at the holistic
development model pioneered by Pro Mujer Nicaragua
In collaboration with
LMDF has been granted the LuxFLAG Microfnance
Label
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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 offce of the Fund or downloaded from the website www.lmdf.lu
Audited annual report as at 31 March 2014 // Rapport annuel rvis au 31 mars 2014 02-03
Content // Sommaire
Page
04 LMDF in fgures
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 Microfnance institution in focus
Prsentation d'une institution de microfnance
16 // 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 information
Organisation
24 Report of the independent auditor
Rapport du rviseur d'entreprises agre
26 Audited fnancial statements
tats fnanciers 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 microfnance investment and evolution of NAV
Rpartition des investissements en microfnance et volution de la VNI
37 // 6 Notes to the fnancial statements
Notes aux tats fnanciers
The photos in the present report show clients and staff of the microfnance institution
Pro Mujer in Nicaragua.
Les photos prsentes dans ce rapport montrent les clients et les employs de linstitution de microfnance
Pro Mujer au Nicaragua.
LMDF in fgures // en chiffres
31 March 14 // 31 mars 2014
Note: The fgures stated in this section of the report relating to information received from microfnance institutions are as at
31 December 2013 and largely based on unaudited information. The calculations follow, wherever applicable, the Microfnance
Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.
EUR 12,5 million
Investments in microfnance
25
Microfnance institutions fnanced directly
4
Regional funds and support structures
17
Countries
1
Service provider
59%
Latin America
19%
Southeast and Central Asia
20%
Sub-Saharan and North Africa
2%
Developed countries
29%
Financing in local currency
344,353
Micro-entrepreneurs fnanced by partner MFIs
EUR 173.4 million
Total micro-loan portfolio of partner MFIs
72%
Women
EUR 1,018
Average disbursed micro-loan
31,007
Micro-entrepreneurs fnanced by LMDF
41
Number of university students fnanced
56%
Micro-loans for services and small trade
25%
Agricultural activities
8%
Production and crafs
11%
Other uses
EUR 427,951
Average direct investment per MFI
0.4%
Return Class A shares
1.1%
Return Class B shares
0.4%
Return Class C shares
1 USA MFX Solutions
Higher Education Finance Fund LP
2 El Salvador Padecomsm Credito
AMC
OPTIMA
3 Nicaragua Pro Mujer, Nicaragua
PANA PANA
4 Honduras Pilarh OPDF
5 Ecuador Fundacin Alternativa
Coop. Maquita Cushunchic
FACES
6 Peru IDESI Nacional
COAC CIDERURL
CREDIFLORIDA
FONDESURCO
7 Togo CECA
8 Niger ASUSU
9 Cambodia Maxima Mikroheranhvatho
CBIRD Micro Finance
Intean Poalroath Rongroeurng
10 Philippines Gata Daku MPC
KPS-SEED
11 South Afica Tembeka Social Investment
12 Uruguay Microfn
13 Argentina Pro Mujer
14 Azerbaijan FINCA
15 Guatemala ASDIR
16 Mali Soro Yiriwaso
17 Morocco AMSSF / MC
INMAA
1
2 3
4
5
6
7
8
9
10
11 12 13
14
15 16
17
Learn more about LMDF's portfolio of MFIs: www.lmdf.lu
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 which
to develop the Fund in the future. The Boards refections 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
fnancial returns to investors with the provision of fnancial services to the poor
Proposed amendments to the Prospectus, required mainly to permit the Fund to respond to changes in the
rapidly evolving microfnance sector and develop its operations, while retaining its unique focus on sup-
porting promising smaller microfnance institutions
These refections 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 microfnance have grown by 23% from EUR 10.2 million in 2013 to EUR 12.5 million
in 2014, and now cover 30 microfnance 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 returns
available on cash and bank deposits, which represent 25% of net assets at 31 March 2014, continue to have a
negative impact on fnancial returns, and Managements focus is very much on ensuring that the Funds excess
liquidity is invested, and on building a stable fnancial 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, the
shareholders 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 identifcation, evaluation and selection of investment and
disinvestment opportunities as well as the review, supervision and monitoring of its microfnance investments.
At its meeting on 19 March, 2014, the Board resolved to adopt the governance principles contained in the Code
of Conduct of ALFI (the Association of Luxembourg Investment Funds).
The Board has established the following committees whose role is to support and make recommendations to
the Board in their areas of activity.
The Investment Committee, which has fve 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 to
LMDFs risk management and reporting framework, including risk policies, processes and controls.
REPORT OF THE BOARD OF DIRECTORS TO THE SHAREHOLDERS
The Marketing Committee, which has two members, oversees the Funds marketing strategy including the
development 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 limited
basis, to the extent that the majority of the members of each Committee are directors of the Fund.
The members of the Board do not receive any remuneration as directors, apart from the reimbursement of 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 confrma-
tion from the Commission de Surveillance du Secteur Financier (CSSF) of its registration as a self managed
Fund; as the net assets of the Fund remain below the threshold of EUR 100 million, the implications of the AIFMD
on 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 in
March 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 fnancial
institutions 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 to
the appropriate Luxembourg authorities which will facilitate exchange of information with the US authorities.
The Funds ability to fulfl its obligations under the IGA between the US and Luxembourg will depend on each
shareholder providing the Fund with the information that the Fund determines is necessary. Each shareholder
will be required to agree to provide such information upon request by the Fund, and the failure to do so by any
shareholder 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 qualifes as a fnancial counterparty and is required to comply with the regulation as regards central
clearing, risk mitigation and reporting for its foreign exchange contracts. The Fund has entered into agreements
with its derivative transactions counterparties to contractually defne 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 Hay
Chairman
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 fnance by building sustainable
links between investors, microfnance institutions and ultimate benefciaries.
Constitutes an attractive investment proposition by balancing stable fnancial
returns to investors with the provision of responsible fnancial services to the poor.
Specializes in facilitating the growth of promising emerging microfnance institutions
which address the fnancial needs of marginalized communities and individuals in
developing countries.
Enables the development of micro-entrepreneurs in areas where unmet needs are
largest, particularly among women, youth and rural populations.
Is accessible to public, institutional and retail investors and is accountable for
reaching both social and fnancial 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 Microfnance 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 microfnance industry. The Vision and Mission statements,
which refect LMDF's experience since its inception in 2009, were approved in June 2014.
Audited annual report as at 31 March 2014 // Rapport annuel rvis au 31 mars 2014
// 1 Rsum/Zusammenfassung
Le rapport annuel du Luxembourg Microfnance
and Development Fund se penche sur les activits
des institutions de microfnance (IMF) au-del de
la microfnance. Pro Mujer Nicaragua partenaire
du Fonds depuis 2010, amliore la situation des
femmes dfavorises au Nicaragua. Cest pour
cela, quun micro-crdit seul nest pas suffsant,
les prts ne fonctionnant que si les emprunteurs
sont en bonne sant et capables de se concen-
trer sur leurs activits en ayant confance en eux
et disposant des connaissances de base afn de
russir. Le modle de Pro Mujer sapplique ces
trois points et a connait un succs considrable.
Dans lexercice pass, le Fonds a continu ses
activits d'investissement. 12 crdits ont t
attribus, dont 5 pour augmenter ou poursuivre
des engagements antrieurs avec les partenaires
existants et 7 en faveur de nouvelles IMF. Le LMDF
a investi pour la premire fois au Maroc, au Guate-
mala et en Azerbadjan. Ainsi, compar lanne
prcdente, le portefeuille du Fonds est rparti
plus uniformment: 59% en Amrique latine,
20% en Afrique, 19% en Asie et 2% dans les pays
dvelopps.
Dans l'ensemble, le volume de fnancement du
LMDF a augment de 23% 12,5 millions d'euros
en comparaison lanne prcdente. Le fonds
a connu une croissance de 19% et l'actif net d-
passe maintenant les 17 millions d'euros.
Le rsultat fnancier des douze derniers mois est
bien 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 de
cots d'un fonds rglement. Le LMDF a gale-
ment provisionn 10% d'une position de crdit
dans son portefeuille. Les clients de cette IMF
(Crediforida au Prou) sont fortement affects par
une infection fongique de leurs plantes de caf. Le
rendement annuel est de 0,4% pour la classe A,
1,1% pour la classe B et 0,4% pour la classe C.
Le profl de risque du fonds reste largement in-
chang sans risques individuels importants et une
diversifcation relativement grande des risques de
crdit et de pays, tout en minimisant le risque de
change par des oprations de couverture.
Der Jahresbericht des Luxembourg Microfnance
and Development Fund schaut sich die Ttigkeiten
von Mikrofnanzinstitutionen (MFI) jenseits der
Mikrofnanz an. Pro Mujer Nicaragua, Partner
des Fonds seit 2010, verbessert die Situation von
benachteiligten Frauen in Nicaragua. Dafr ist ein
Mikrokredit allein nicht genug, Kredite funktion-
ieren nur wenn die Kreditnehmer gesund sind und
sich auf ihr Geschft konzentrieren knnen und
wenn sie das Selbsvertrauen und Basiswissen
haben um erfolgreich zu sein. Das Modell von Pro
Mujer setzt an all diesen drei Punkten an und hat
erstaunliche Erfolge vorzuweisen.
Der Fonds setzte im vergangenen Geschftsjahr
seine Investitionsttigkeit fort. Es wurden 12
Kredite vergeben, 5 zur Aufstockung oder Fort-
fhrung von vorigen Engagements an bestehende
Partner und 7 an neue MFIs. LMDF investierte
zum ersten Mal in Marokko, Guatemala und
Azerbaijan. Damit ist das Portfolio im Vergleich
zum Vorjahr etwas gleichmssiger verteilt: 59% in
Lateinamerika, 20% in Afrika, 19% in Asien und
2% in entwickelten Lndern.
Insgesamt erhhte sich das Finanzierungsvolu-
men des Fonds im Jahresvergleich um 23% auf
EUR 12,5 Millionen. Der gesamte Fonds wuchs
19% und das Nettoinventar bersteigt nun EUR 17
Millionen.
Das fnanzielle Ergebnis der letzten zwlf Monate
liegt 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 (Crediforida in Peru) sind
stark durch einen Pilzbefall ihrer Kaffeepfanzen
betroffen. Die Jahresrendite betrgt 0,4% fr die
Klasse A, 1,1% fr die Klasse B und 0,4% fr die
Klasse C.
Das Risikoprofl des Fonds bleibt weitgehend
unverndert mit keinen wesentlichen Einzelrisiken
und einer vergleichsweisen hohen Diversifzierung
der Lnder und Kreditrisiken bei gleichzeitiger
Minimierung der Whrungsrisiken durch Absi-
cherungsgeschfte.
08-09
Management report on activities
Rapport dactivit du gestionnaire
As outlined in the report of the Board of
Directors, the fnancial year 201314 saw
important refections on the strategy of the
Luxembourg Microfnance and Develop-
ment Fund Social Venture Capital Sub-
Fund (LMDF or Fund). Updated Vision
and Mission statements positioning LMDF
in the wider microfnance and impact invest-
ment landscape are the frst results of this
process.
We are particularly pleased that this report
illustrates what can be achieved in terms
of growing promising microfnance institu-
tions (MFI) in a short period of time. Pro
Mujer Nicaragua, an MFI focused on the
development of women, was featured in our
annual report 201011. The progress made
since is very impressive, not only in terms of
growth but also in refning a model strongly
geared towards the social impact on one of
the most vulnerable groups in Nicaraguan
society (Please refer to page 16 for further
details).
/ Investment activities
With 12 transactions closed, LMDF looks
back to an active year. We are greatly en-
couraged by the fact that 5 of those trans-
actions originated from existing partner
MFIs. LMDF granted to existing partners:
- A senior loan in local currency equivalent
to EUR 1,000,000 to the MFI ASUSU in
Niger, building on our past track-record with
the MFI and contributing to the enormous
development needs of one of the least de-
veloped countries;
- A senior loan in local currency equivalent
to EUR 490,000 to the MFI Soro Yiriwaso in
Mali, following improved conditions after the
armed confict in the northern part of the
country.
These investments increased the share of
the portfolio in Sub-Saharan Africa from
6% at the end of September 2013 to 14%
at the end of March 2014 and allow the
Fund to reach signifcantly more micro-
entrepreneurs. By the end of March 2014,
LMDF fnanced 31,007 micro-entrepreneurs,
a 71% increase compared to the previous
year-end. The investments also illustrate
LMDFs commitment to addressing the
needs of the most marginalized individuals
and communities.
During the fnancial year, LMDF invested for
the frst time in 7 MFIs. We highlight the fol-
lowing transactions:
- A local currency loan equivalent to EUR
480,000 fnancing the loan portfolio of energy
effcient equipment for farmers and small en-
trepreneurs of the MFI Fondesurco in Peru;
- For the frst time, LMDF has invested in
Northern Africa (in Morocco) by granting two
senior loans to the MFIs AMSSF/MC and
INMAA;
- The expansion of the portfolio in Central
America to include Guatemala where a senior
loan 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 still
signifcant excess liquidity throughout the
fnancial year and the Board of Directors de-
cided in March 2014 to place part of the ex-
cess funds through the Luxembourg-based
Micro, Small & Medium Enterprises Bonds
structure (MSME Bonds) for which Sym-
biotics, a Swiss-based microfnance asset
manager and advisor, serves as arranger and
servicer. MSME Bonds allow LMDF to invest
in senior loans to larger MFIs. A frst transac-
tion was closed at the end of March and the
Fund placed USD 650,000 in a Note backed
by a loan to the MFI FINCA in Azerbaijan.
The Fund continued to focus on senior, un-
secured loans in terms of fnancing instru-
ments used. At the end of the fnancial year,
94% of the microfnance portfolio consisted
of senior loans with initial maturities be-
tween three and fve years.
Source: LMDF analysis of data submitted by MFIs as at 31 December 2013, excluding certain indirect investment in microfnance;
International Monetary Fund estimated GDP per capita at purchasing-power-parity end of 2013, converted into EUR with current
exchange 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:
MICROFINANCE INVESTMENTS BY REGION AND COUNTRY
(in % of microfnance portfolio)
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
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24%
196%
16%
35%
7%
10%
10% 3%
14%
10%
2,000
7%
7%
2%
9%
193%
GRPH 2:
AVERGE OUTSTANDING MICRO-LOANS BY COUNTRY
(in EUR and % of GDP per capita PPP)
Source: LMDF analysis of weighted average data provided
by partner MFIs as at 31/12/2013
Source: LMDF analysis of weighted average data provided by
partner MFIs as at 31/12/2013
GRPH 3:
ECONOMIC PURPOSE OF MICRO-
CREDITS FINANCED BY LMDF (in %)
GRPH 4:
ACTIVE MICRO-ENTREPRENEURS
FINANCED BY LMDF
/ Social objectives
LMDFs mission statement expresses the
Funds particular attention on the most
excluded individuals and communities. It
draws particular attention to the prevailing
high exclusion rates among women, youth
and rural populations. LMDF continues
to incorporate the exclusion focus in its
investment decisions. End of March, 72%
of fnal benefciaries fnanced by LMDF
were women and 25% of all micro-loans are
invested in agricultural activities.
The fnancial inclusion of youth remains
challenging. Innovation is needed in order
to advance the microfnance sector in this
regard. We are proud to be among the
funders of the Higher Education Finance
Fund (HEFF), rolling out pioneering credit
products destined to fnance higher educa-
tion for the children of micro-entrepreneurs.
HEFF enabled access to university and
technical degrees of 413 students by the
end of March 2014.
/ Financial performance
The Fund increased its net assets by 19% and
its investment portfolio by 23% year on year.
This compares to a growth of the investment
portfolio of 50% during the previous fnancial
year. The growth fell short of the internal
targets of the Fund. The increase in the
percentage of microfnance assets in relation
to total net assets from 71% (March 2013) to
73% (March 2014) is still below the optimal
levels for full achievement of the Funds social
objectives and fnancial performance.
Almost half of all investments closed during
the frst three months of 2014 and will beneft
the Funds bottom line later this year. The
Fund also made a provision on one senior
loan to the MFI CrediFlorida (please refer to
the risk section below for more details).
Income from microfnance and liquid assets
exceeds EUR 900,000 or 6% of average net
assets during the year (before hedging,
foreign exchange, impairment and operating
costs). Euro yields on microfnance loans have
remained close to 8% and have not signif-
cantly changed from the previous year. This
contrast with sector information suggests
falling yields in the fnancing of larger microf-
nance institutions.
Consumption & others
Production & craft activities
Agricultural activities
Services & trading activities
Services/
trade activities
56%
Agricultural
activities
25%
Production/
crafts activities
8%
Consumption
& others
11% Women
22,397 (72%)
Men
8,610 (28%)
Total
31,007
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Margin on micro-loan operations
Operating expenses
Cost of fnancing
Risk costs & provisions
Total 29.9%
GRPH 5:
COMPONENTS OF MFI'S INTEREST
RTES CHARGED TO CLIENTS
Source: LMDF analysis of weighted average data provided by
partner MFIs as at 31/12/2013
LMDFs cost structure has remained largely
stable with the total expense ratio amounting
to 3.6%.
Year on year return is 0.4% for Class A and
Class 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 diversifcation
as a primary risk mitigation instrument.
- Credit risks
Average exposure to microfnance institutions
has remained stable at 2.4% of NAV with a
maximum exposure of 6% to the MFI ASUSU
in Niger. Despite the larger size of the Fund,
relative exposures have not changed materi-
ally. This is mainly explained by increases in
average investment amounts. The average
exposure at the end of March 2014 amounts
to EUR 428,000 per MFI.
Last year, we reported increased risks of
default on the senior loans granted to the MFI
Prestanic in Nicaragua. The Fund also made
a provision against the exposure to the MFI
Taanadi (Niger) in June 2013. By the end of
the fnancial year both MFIs had fully paid
back all amounts due to LMDF.
The Fund made a provision in March 2014 on
the loan granted to the MFI CrediFlorida in
Peru. Increased risks of default are caused by
the impact of the coffee rust fungus on many
of the MFIs clients, mostly smallholder cof-
fee farmers. The provisions amount to EUR
51,000 or 0.3% of the average NAV during the
year.
- Currency risk
The Fund saw very signifcant movements in
several portfolio currencies in relation to the
Euro during the past twelve months, particu-
larly in Argentine Pesos (-41%), South African
Rand (-19%), Thai Baht (-16%), Philippine
Pesos (-15%), Peruvian Soles (-14%) and
Nicaraguan Cordobas (-11%).
LMDFs conservative approach to currency
risks paid off in this period of increased
volatility. The relative strength of the Euro still
negatively impacted the Fund fnancially since
most currency hedges do not completely
compensate for the losses on the underlying
instruments. This might, for example, be the
case 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 frst
time in Guatemala, Morocco and Azerbai-
jan whereas the only investment in Kenya
matured. Overall diversifcation of country
risks improved. Peru concentrates the largest
portfolio with assets accounting for 10.3%
of the NAV. This compares to a maximum
exposure of 11.6% (in Ecuador) at the year
end March 2013.
12-13
GRPH 7:
DEVELOPMENT OF NAV PER SHARE OF CLASS B AND CLASS C SHARES DURING THE
LAST 12 MONTHS (in EUR)
3
1
/
0
3
/
2
0
1
4
3
1
/
0
3
/
2
0
1
3
3
0
/
0
6
/
2
0
1
3
3
0
/
0
9
/
2
0
1
3
3
1
/
1
2
/
2
0
1
3
Microfnance 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 MICROFINANCE INVESTMENTS (in EUR)
Source: LMDF analysis
Source: LMDF analysis
Class C
Class B
100
101
102
103
31/12/2013 30/09/2013 30/06/2013 31/03/2013 31/03/2014
104
The average country exposure also improved from 4.9% (March 2013) to 4.4% end of March
2014. The fve most important countries concentrate 42.8% of investments, a decrease from
48% at the end of the previous fnancial year. Generally, country exposures remain well below
the 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 the
frst investment in the country after the confict in the North and to developments in Argentina,
marked by increasingly diffcult investment conditions due to changing laws and regulations.
/ Outlook
The Funds Vision and Mission statements express our goals clearly. LMDF is a microfnance
fund 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 so
that the Fund is fully invested, maximizing the social impact and improving the fnancial 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 Wansleben
Executive Director
(kaspar@lmdf.lu)
Note: The fgures stated in this report are historical and partly based on unaudited information received from microfnance
institutions. Such fgures are not indicative of future performance. The calculations follow, wherever applicable, the
Microfnance Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.
A Pro Mujer client sells watermelons and sweets // Pro Mujer
It is certainly true that Pro Mujer does a lot
more than microfnance, particularly in the
areas of primary health care and business
and empowerment training. The three pillars
of microfnance, health and empowerment
constitute a holistic approach to development
with the different components re-enforcing
each other.
However, the drive to deliver all services in a
professional and effcient manner and the ob-
jective to render them fnancially self-sustain-
able contains certainly a lot of lessons learned
from the microfnance sector.
Pro Mujer started in 1990 as a program to
address the situation of poor and marginalized
women in Bolivia and today operates in Argen-
tina, Bolivia, Mexico, Nicaragua and Peru. In
Nicaragua, Pro Mujer began operations in the
poorer neighbourhoods in 1996, mainly around
the cities of Len and Chinandega.
Due to its mountainous terrain and low popula-
tion density, Pro Mujer's centers in Nicaragua
operate differently from those in other coun-
tries by having larger centers that reach up to
8,000 clients each and cover vast geographic
regions. Clients often come from remote, rural
areas and service delivery is impacted by poor
infrastructure.
Pro Mujer's microfnance approach follows
the community banking model whereby the
women themselves form groups of 15 to
48 members who are jointly responsible for
the loans granted to the groups. Apart from
fnancial services, Pro Mujer Nicaragua offers
business skills training, primary health care
services including health awareness training
and women specifc cancer tests. Women have
access to small clinics located in the branches
at preferential tariffs.
The frst loan granted by LMDF to Pro Mujer
Nicaragua in 2010, in local currency, was of
NIO 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 122
employees to 441.
1 Microfnance institution in focus
Pro Mujer Nicaragua
It is ofen said that Pro Mujer is not a microfnance institution. It is
a women development organization which happens to use micro-
credit as part of their toolkit.
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
2 Four questions to
Gloria Amelia Ruiz Gutirrez,
General Manager of Pro Mujer Nicaragua
Gloria, frst of all, congratula-
tions on the evolution of Pro
Mujer Nicaragua over the past
3 years. What were the major
achievements that triggered
this positive development?
In the last three years we obtained the rating
SP2, awarded by the international rating
agency Moody's, which is the highest social
performance rating in Latin America. We
have also obtained a fve diamonds status
on the MIX Market. Since 2012, Pro Mujer
Nicaragua is the 2nd best microfnance or-
ganization based on portfolio quality in Latin
America and we are ranked 36th among the
top 100 MFIs throughout the region, illustrat-
ing outstanding performance in social objec-
tives, transparency and effciency, according
to the ranking by the Multilateral Investment
Fund (MIF) and the Microfnance Information
Exchange (MIX). The external recognition
tells a lot about the loyalty of our clients, of
potential of the village banking methodol-
ogy that we apply and our overall goals to
promote the development and empowerment
of women.
These achievements are possible because of
the highly motivated, committed and creative
team we have at Pro Mujer Nicaragua. Based
on the guiding principle that "we care about
you as a person," we develop actions to get
to know our internal and external client and
execute a strategy to meet their needs. This
is the philosophy on which our success is
built.
Tree years ago, Pro Mujer
Nicaraguas biggest challenge
was to develop a model that al-
lows for a fnancially sustaina-
ble ofering of all your services:
Micro-credit, health care and
capacity building. How did this
model evolve? Did you reach
your objective or is there still a
long way to go?
Pro Mujer in Nicaragua has put in place a
strategy of primary health care as one of
our fagship programs. Health care is an
integral part of the overall offering of micro-
credit and training services. We started in
the department of Len with an ambitious
health care model designed and adapted to
the needs of clients. Each benefciary has
unlimited access to medical consultations
like dental care, eye care and discounts on
consultations with doctors of different spe-
cializations. All this for a single fee of $ 32
per client per year.
Currently this beneft package is accessible
in 5 departments and will be accessible soon
in the north of the country as well. Since
December 2013 we have reached a 50%
fnancial sustainability of the program and
this year we expect sustainability to increase
by 15%.
Pro Mujers health care program in Nicaragua
has saved the lives of thousands of women.
In the past 13 years, through the training and
health care, the deaths of more than 3,000
women have been prevented by diagnosing
cancer promptly in an initial stage. That's
one of the greatest achievements and which
illustrates Pro Mujer's interest in the welfare
of our clients. This has allowed us to position
ourselves as leaders in social impact in Latin
America and demonstrate that good fnancial
results come from the coordinated and well
planned delivery of these services.
Signifcant challenges remain. The scaling of
the health care model in all regions we serve
and to bring health care closer to clients in
remote rural areas. We are advancing in the
search for the best strategy to achieve these
objectives; there are already concrete actions
that have allowed us to advance-among
these, the synergy with our mission partner
organizations with whom we have estab-
lished strategic partnerships and outreach
service points in distant areas.
Pro Mujer Nicaragua is one of
the pioneering MFIs in terms
of social performance. Te
recent external social ratings
by Microrate and Moodys are
testimony to your impressive
work. However, the reports
highlight some areas where Pro
Mujer Nicaragua may improve
further: in impact measure-
ment and consideration of
environmental topics. How do
you see the institutions develop
in these areas?
Moody's Analytic assigned Pro Mujer
Nicaragua the SP2 rating, which is the
second best social rating granted by
the rating agency to an MFI. This rating
says a lot: That our fnancial products are
adequately designed for clients and that
we are realizing our mission to reduce
"Tis has allowed us to position ourselves as
leaders in social impact in Latin America."
poverty and improve the health of our
benefciaries. However the measurement
of impact is a challenge faced by many
organizations. There is not yet a standard,
effcient and practical method for measuring
social impact. We are nevertheless making
signifcant efforts to develop a tool that
generates information infuencing our
commercial strategies and adjustment of
products and services, but also to allow us to
measure the evolution of clients, the changes
in the lives of women and their assets, and
political and social progress.
Another area of improvement as reported
by Moody's Analytics is about respect for
the environment. We are considering the
establishment of strategic alliances with
institutions dedicated to green fnance,
allocating credit funds for the acquisition of
fxed assets for generation of a clean or more
effcient energy use and to reduce the use of
frewood stoves.
In the trend from micro-credit
to fnancial inclusion, do you
see the need to enlarge the
scope of services to include
savings to beter respond to the
needs of your clients?
If we talk about fnancial inclusion, in addition
to credit and other fnancial services, clients
should have access to a variety of savings
products, which is a human right and a ser-
vice that historically has been denied to the
poorest sectors of the population.
Yes, we are committed to a genuine and sus-
tainable development of the most deprived
and we are convinced that savings is a pow-
erful tool both to reduce vulnerability and to
develop and promote economic, political and
social empowerment.
96% of Pro Mujers portfolio is under the
village banking methodology, which includes
the promotion of a savings culture. However,
we are not allowed to attract deposits and
clients' deposits in commercial banks, which
are not well suited to meet the needs of this
market segment, so one of the remaining
challenges is to create public policies in favor
of true fnancial inclusion. Despite this limita-
tion, we have managed to contribute to the
culture of saving and clients appreciate this
service, which constitutes a rainy day fund
to be used in case of emergencies and for
investments.
18-19
"In the past 13 years, through the training and
health care, the deaths of more than 3,000 women
have been prevented by diagnosing cancer
promptly in an initial stage."
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 ofered in 5 departments // Pro Mujer
Primary health care
Group of women during a training session // Pro Mujer
Business & empowerment training
STATUTORY INFORMATION
ORGANISATION
Board of Directors // Conseil dadministration
Chairman - Prsident
Kenneth Hay
(1)
Independent
Vice chairman - Vice prsident
Marc Elvinger Independent
Robert Wagener
(2)
ADA - Appui au Dveloppement Autonome asbl
Members - Membres
Nima Ahmadzadeh Ministry of Finance
Viviane Clauss
(1)
Banque de Luxembourg
Hedda Pahlson-Mller
(1)
Independent
Richard Philippart
(1)
Development Cooperation Department,
Ministry of Foreign Affairs
Luc Vandeweerd
(1)
Paolo Vinciarelli Banque et Caisse d'pargne de l'tat
Kaspar Wansleben Executive Director
Investment Committee Risk Committee
Comit d'investissement Comit de risque
Nima Ahmadzadeh Kenneth Hay
Marc Elvinger Paolo Vinciarelli
Hedda Pahlson-Mller Raoul Stefanetti (Banque Internationale
Richard Philippart Luxembourg)
Luc Vandeweerd

Marketing Committee Employment Committee
Comit de marketing Comit d'emploi
Viviane Clauss Nima Ahmadzadeh
Hedda Pahlson-Mller Kenneth Hay
Richard Philippart
Resigned Members - Membres dmissionaires
Mark Cunningham
(4)
Axel de Ville
(3)
Daniel 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
39, rue Glesener
L-1631 Luxembourg, Luxembourg
Registered Offce // Domicile
2, place de Metz
L-1930 Luxembourg
Trade Register Number // Registre de
commerce et des socits
R.C.S. Luxembourg B 148.826
Custodian and Paying Agent // Banque dpositaire et agent de paiement
Banque et Caisse dpargne de ltat, Luxembourg
1, place de Metz
L-2954 Luxembourg
Administrative Agent, Registrar and Transfer Agent
Administration centrale et agent de transfert
European Fund Administration S.A., Luxembourg
2, rue dAlsace
L-1017 Luxembourg
Auditors // Rviseur dentreprises agr Legal Advisors // Conseiller lgal
BDO Audit, S.A. Luxembourg Elvinger, Hoss & Prussen, Luxembourg
2, avenue Charles de Gaulle 2, place Winston Churchill
L-2013 Luxembourg L-2014 Luxembourg
Distributors // Distributeurs
22-23
Banque de Luxembourg S.A., Luxembourg
14, boulevard Royal
L-2449 Luxembourg
Banque et Caisse dpargne de ltat,
Luxembourg
1, place de Metz
L-2954 Luxembourg
BGL BNP Paribas S.A., Luxembourg
50, avenue J.F. Kennedy
L-2951 Luxembourg
Fortuna Banque s.c., Luxembourg
130, boulevard de la Ptrusse
L-2330 Luxembourg
Foreign Currency Settlement Agent // Agent de compensation en devise
INTL Global Currencies, Ltd., United Kingdom
Moor House, 1
st
Floor, 120, London Wall
London EC2Y 5ET
Foreign Currency Hedging Provider // Contrepartie de couverture de risque de change
MFX Solutions, Inc.,
United States of America
1050 17
th
St., NW, Suite 550
Washington DC, 20036
Banque et Caisse dpargne
de ltat, Luxembourg
1, place de Metz
L-2954 Luxembourg
Identity numbers // Code didentit
Class B shares Class C shares
ISIN: LU0456966935 ISIN: LU0456967404
Bloomberg: LMDSVCB:LX Bloomberg: LMDSVCC:LX
Telekurs: 10633787 Telekurs: 10633788
Microfnance expertize // Expertise en microfnance
Arranger and Servicer to Micro, Small &
Medium Enterprises Bonds S.A.
Symbiotics SA
75 rue de Lyon
CH-1203 Geneva, Switzerland
General partner of the Higher Education
Finance Fund LP
OMTRIX Inc.
Ofcentro La Virgen No.2, Edifcio 1, Piso 1
Zona Industrial de Pavas,
San Jos, Costa Rica
AUDITED FINANCIAL STATEMENTS
TATS 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 microfnance 165,759.26
investment vehicles
Actions (et instruments similaires) dans des structures
rgionales d'investissements en microfnance

Shares (and equity-type securities) in microfnance institutions 155,296.31
and service providers
Actions (et instruments similaires) dans des institutions
de microfnance et structures de support

Loan agreements with microfnance institutions 11,750,535.42
Contrats de prt avec des institutions de microfnance
Notes backed by loans to microfnance institutions 7 471,646.77
Notes fnances par des prts aux institutions de microfnance
Unrealised appreciation on swap contracts 5 143,539.68
Plus-value non-ralise sur contrats de swap
Cash at banks 1,303,711.75
Avoirs en banque

Savings account 3,000,000.00
Compte dpargne

Income receivable on portfolio 282,607.64
recevoir sur le portefeuille

Interest receivable on bank accounts and term deposits 2,709.49
Intrts 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.
Liabilities Passif

Accrued expenses 8 168,609.80
Provision pour frais payer
Unrealised depreciation on forward foreign 5 36,767.15
exchange contracts
Moins-value non-ralise sur contrats de
change terme
Total liabilities 205,376.95
Somme des passifs
Net assets at the end of the period 17,070,429.37
Actifs nets la fn de la priode
A Class shares outstanding 148,286.423
Nombre dactions en circulation de la Classe A
Net asset value per A Class share 24.49
Valeur nette dinventaire par action de la Classe A

B Class shares outstanding 114,688.975
Nombre dactions en circulation de la Classe B
Net asset value per B Class share 101.76
Valeur nette dinventaire par action de la Classe B

C Class shares outstanding 17,185.402
Nombre dactions en circulation de la Classe C
Net asset value per C Class share 102.95
Valeur nette dinventaire par action de la Classe C
26-27
Te group is collectively responsible for the credit repayment of each member // Pro Mujer
// 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 1
er
avril 2013 au 31 mars 2014 (en EUR)
Income Revenus Notes
Interest on microfnance loan agreements 970,860.54
Intrts sur contrats de prt en microfnance
Net interest paid on swap contracts (100,584.62)
Intrt net pay sur contrat swap
Net interest on microfnance loan agreements 870,275.92
Intrts nets sur contrats de prts en microfnance
Commission on microfnance loan agreements 31,130.34
Commission sur contrats de prts en microfnance
Interest on bank accounts and term deposits 11,235.73
Intrts bancaires et dpts terme
Other income 480.75
Autres produits
Total income 913,122.74
Somme des revenus
Expenses Frais
Advisory fees 3 196,191.97
Frais du conseiller en investissement
Salary and wages of the fund management 3, 12 140,414.63
Charges salariales de gestion du fonds
Custodian fees 19,625.00
Commission de la banque dpositaire
Central administration costs 74,795.19
Frais de ladministration centrale
Banking charges and other fees 2,593.31
Frais bancaires et charges lies
Transaction fees 18,500.00
Frais de transaction
Audit fees 16,841.75
Frais de rvision
Other administrative costs 8 76,321.33
Autres charges administratives
Subscription duty 4 0.00
Taxe d'abonnement
Total expenses 545,283.18
Total des frais
Net investment income 367,839.56
Rsultat net dinvestissement
Net realised gain/(loss)
Bnfce/(perte) net(te)
On investments (311,645.53)
Sur investissements
On forward foreign exchange contracts 389,257.49
Sur contrat de change terme
On foreign currency transactions (15,720.05)
Sur change
Realised result 61,891.91
Bnfce/(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 microfnance loans 277,240.86
Variation de provisions sur prts microfnance
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 197,972.18
Sur contrats de change terme
On cross-currency swap contracts 174,137.71
Sur contrats de swap de taux et change terme
On foreign exchange (933.91)
Sur change
Unrealised result (307,921.99)
Bnfce/(perte) net(te) non ralis(e)
Result of operations 121,809.48
Rsultat net des oprations
Subscriptions 2,758,146.50
Souscriptions
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 14,327,282.43
Valeur nette dinventaire au dbut de la priode
Total net assets at the end of the period 17,070,429.37
Valeur nette dinventaire la fn de la priode
// 3 Statistical information
Informations statistiques
Total net assets Actifs nets
As at 31.3.2014 17,070,429.37
Au 31.3.2014

Number of A Class shares Nombre dactions de la Classe A en circulation
Outstanding at the beginning of the period 127,894.906
Au dbut de la priode
Issued 20,391.517
mises
Redeemed 0.000
Rachetes
Outstanding at the end of the period 148,286.423
la fn de la priode
Net asset value per A Class share
Valeur nette d'inventaire par action de la Classe A
As at 31.3.2014 24.49
Au 31.3.2014

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

Issued 20,180.226
mises
Redeemed 0.000
Rachetes
la fn de la priode
Net asset value per B Class share
Valeur nette d'inventaire par action de la Classe B
As at 31.3.2014 101.76
Au 31.3.2014
Number of C Class shares Nombre dactions de la Classe C en circulation

Issued 1,975.000
mises
Redeemed (1,331.000)
Rachetes
la fn de la priode
Net asset value per C Class share
Valeur nette d'inventaire par action de la Classe C
As at 31.3.2014 102.95
Au 31.3.2014
97% of Pro Mujer Nicaragua's clients are women // Pro Mujer
// 4 Statement of investments and other net assets
tat du portefeuille-titres et autres actifs nets
Instrument // Microfnance institution Note Country Maturity Currency Interest rate // Quantity // Valuation Value in EUR Accrued interest Total value % of NAV
commission Nominal value in EUR in EUR
Financial instruments not admitted to an offcial stock-exchange listing nor dealt in on another regulated market
Investments in regional microfnance funds or similar entities
Higher Education Finance Fund LP USA N/A USD - 315,570 0.7239 165,759.26 - 165,759.26 1.0%
Shares (and equity-type securities) in microfnance institutions and service providers
MFX Solutions LLC USA N/A USD - 187,090 1.14395 155,296.31 - 155,296.31 0.9%
Subordinated loan agreements with microfnance institutions
Fundacin Alternativa para el Desarrollo ECUADOR 30/6/16 USD 11.0% 200,000 100% 145,122.08 3,990.86 149,112.94 0.9%
Loan agreements with microfnance institutions with an option to convert the loan into share capital
Maxima Mikroheranhvatho Co Ltd CAMBODIA 28/2/15 USD 8.0% 225,000 100% 163,262.34 1,160.98 164,423.32 1.0%
Loan agreements with microfnance institutions
Asusu SA NIGER 18/10/18 XOF 9.5% 650,000,000 100% 984,751.77 42,617.87 1,027,369.64 6.0%
Sociedad Cooperativa de Ahorro y Crdito AMC de RL de CV EL SALVADOR 25/7/17 USD 7.3% 1,000,000 100% 725,610.42 9,368.33 734,978.75 4.3%
La Asociacin Nacional de Institutos de Desarrollo del Sector Informal IDESI Nacional PERU 31/10/15 USD 7.0% 700,000 100% 507,927.29 14,814.55 522,741.84 3.1%
L'Association Marocaine de Solidarit sans Frontires/Micro Crdit MOROCCO 31/12/18 EUR 7.0% 500,000 100% 500,000.00 5,833.33 505,833.33 3.0%
Soro Yiriwaso MALI 14/3/17 XOF 10.0% 325,000,000 100% 492,375.88 2,325.11 494,700.99 2.9%
Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 22/10/17 USD 8.0% 650,000 100% 471,646.77 16,560.04 488,206.81 2.9%
Cooperativa de Ahorro y Crdito La Florida PERU 30/11/17 USD 9.0% 700,000 90% 457,134.57 15,364.80 472,499.37 2.8%
La Cooperativa de Ahorro y Crdito Maquita Cushunchic Ltda. ECUADOR 13/5/15 USD 7.5% 600,000 100% 435,366.25 8,163.12 443,529.37 2.6%
Microfnanzas del Uruguay SA URUGUAY 29/12/14 USD 8.0% 550,000 100% 399,085.74 7,981.74 407,067.48 2.4%
Optima Servicios Financieros, S.A EL SALVADOR 31/10/16 USD 7.9% 500,000 100% 362,805.21 12,021.96 374,827.17 2.2%
Fundacin de Apoyo Comunitario y Social del Ecuador ECUADOR 31/8/16 USD 9.0% 500,000 100% 362,805.21 2,902.44 365,707.65 2.1%
Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 28/2/15 USD 8.0% 500,000 100% 362,805.21 2,499.32 365,304.53 2.1%
Institution Marocaine d'Appui la Micro-Entreprise MOROCCO 31/1/19 EUR 7.0% 300,000 100% 300,000.00 3,500.00 303,500.00 1.8%
Cooperativa de Ahorro y Crdito para la Integracin y Desarrollo Rural PERU 15/12/14 PEN 11.0% 1,100,000 100% 284,198.49 8,703.58 292,902.07 1.7%
La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV EL SALVADOR 28/2/18 USD 8.0% 400,000 100% 290,244.17 1,972.07 292,216.24 1.7%
Proyectos e Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF HONDURAS 30/6/16 USD 8.0% 391,842 100% 284,324.53 5,686.49 290,011.02 1.7%
Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 30/9/15 NIO 14.4% 10,000,000 100% 283,165.04 0.00 283,165.04 1.7%
CBIRD MICRO FINANCE Co. Ltd. CAMBODIA 30/9/16 USD 8.0% 350,000 100% 253,963.65 0.00 253,963.65 1.5%
Asociacin Fondo De Desarrollo Regional - FONDESURCO PERU 10/6/17 PEN 11.2% 900,000 100% 232,526.04 7,957.56 240,483.60 1.4%
Tembeka Social Investment Company SOUTH AFRICA 31/1/16 ZAR 13.5% 3,200,000 100% 220,602.66 4,963.56 225,566.22 1.3%
Fundacin Pro Mujer Argentina ARGENTINA 15/4/15 ARS 53.1% 2,000,000 100% 180,995.37 43,966.79 224,962.16 1.3%
La Asociacin de Desarrollo Integral Rural ASDIR GUATEMALA 29/11/18 USD 8.0% 300,000 100% 217,683.12 5,901.63 223,584.75 1.3%
Maxima Mikroheranhvatho Co Ltd CAMBODIA 15/8/2015 USD 8,0% 300 000 100% 217 683,13 2 128,45 219 811,58 1,3%
Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 30/4/14 THB 11.0% 9,300,000 100% 208,148.57 9,472.19 217,620.76 1.3%
Gata Daku Multi-Purpose Cooperative PHILIPPINES 29/4/16 PHP 10.9% 12,000,000 100% 194,490.17 9,092.42 203,582.59 1.2%
KPS-Small Enterprise and Economic Development Inc PHILIPPINES 31/1/17 PHP 11.7% 11,000,000 100% 178,282.66 3,433.18 181,715.84 1.1%
CBIRD MICRO FINANCE Co. Ltd. CAMBODIA 30/4/14 USD 8.0% 200,000 100% 145,122.08 1,902.71 147,024.79 0.9%
La Asociacin para el Desarrollo de la costa Atlantica NICARAGUA 15/2/18 USD 9.0% 200,000 100% 145,122.09 1,596.34 146,718.43 0.9%
Fundacin Alternativa para el Desarrollo ECUADOR 15/3/15 USD 8.0% 150,000 100% 108,841.56 362.81 109,204.37 0.6%
Cooprative d'Epargne & Crdit des Artisans 9 TOGO 30/11/14 EUR 8.5% 75,000 100% 75,000.00 2,107.29 77,107.29 0.5%
Notes
Micro, Small & Medium Enterprises Bonds SA - FINCA Azerbaijan 7 AZERBAIJAN 7/3/17 USD 5.7% 650,000 100% 471,646.77 0.00 471,646.77 2.8%
Sub total 12,543,237.76 295,307.02 12,838,544.78 75.2%
Net accrued interest on swap contract (38,418.22) (38,418.22) -0.2%
Sub-total 256,888.80 12,800,126.56 75.0%
Cash at banks, term deposits and savings accounts 4,306,421.24 25.2%
Other net assets / liabilities (36,118.43) -0.2%

Total net assets 17,070,429.37 100.0%
Instrument // Microfnance institution Note Country Maturity Currency Interest rate // Quantity // Valuation Value in EUR Accrued interest Total value % of NAV
commission Nominal value in EUR in EUR
Financial instruments not admitted to an offcial stock-exchange listing nor dealt in on another regulated market
Investments in regional microfnance funds or similar entities
Higher Education Finance Fund LP USA N/A USD - 315,570 0.7239 165,759.26 - 165,759.26 1.0%
Shares (and equity-type securities) in microfnance institutions and service providers
MFX Solutions LLC USA N/A USD - 187,090 1.14395 155,296.31 - 155,296.31 0.9%
Subordinated loan agreements with microfnance institutions
Loan agreements with microfnance institutions with an option to convert the loan into share capital
Maxima Mikroheranhvatho Co Ltd CAMBODIA 28/2/15 USD 8.0% 225,000 100% 163,262.34 1,160.98 164,423.32 1.0%
Loan agreements with microfnance institutions
Asusu SA NIGER 18/10/18 XOF 9.5% 650,000,000 100% 984,751.77 42,617.87 1,027,369.64 6.0%
Sociedad Cooperativa de Ahorro y Crdito AMC de RL de CV EL SALVADOR 25/7/17 USD 7.3% 1,000,000 100% 725,610.42 9,368.33 734,978.75 4.3%
La Asociacin Nacional de Institutos de Desarrollo del Sector Informal IDESI Nacional PERU 31/10/15 USD 7.0% 700,000 100% 507,927.29 14,814.55 522,741.84 3.1%
L'Association Marocaine de Solidarit sans Frontires/Micro Crdit MOROCCO 31/12/18 EUR 7.0% 500,000 100% 500,000.00 5,833.33 505,833.33 3.0%
Soro Yiriwaso MALI 14/3/17 XOF 10.0% 325,000,000 100% 492,375.88 2,325.11 494,700.99 2.9%
Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 22/10/17 USD 8.0% 650,000 100% 471,646.77 16,560.04 488,206.81 2.9%
Cooperativa de Ahorro y Crdito La Florida PERU 30/11/17 USD 9.0% 700,000 90% 457,134.57 15,364.80 472,499.37 2.8%
Optima Servicios Financieros, S.A EL SALVADOR 31/10/16 USD 7.9% 500,000 100% 362,805.21 12,021.96 374,827.17 2.2%
Fundacin de Apoyo Comunitario y Social del Ecuador ECUADOR 31/8/16 USD 9.0% 500,000 100% 362,805.21 2,902.44 365,707.65 2.1%
Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 28/2/15 USD 8.0% 500,000 100% 362,805.21 2,499.32 365,304.53 2.1%
Institution Marocaine d'Appui la Micro-Entreprise MOROCCO 31/1/19 EUR 7.0% 300,000 100% 300,000.00 3,500.00 303,500.00 1.8%
Cooperativa de Ahorro y Crdito para la Integracin y Desarrollo Rural PERU 15/12/14 PEN 11.0% 1,100,000 100% 284,198.49 8,703.58 292,902.07 1.7%
Proyectos e Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF HONDURAS 30/6/16 USD 8.0% 391,842 100% 284,324.53 5,686.49 290,011.02 1.7%
Pro Mujer Inc, sucursal de Nicaragua NICARAGUA 30/9/15 NIO 14.4% 10,000,000 100% 283,165.04 0.00 283,165.04 1.7%
CBIRD MICRO FINANCE Co. Ltd. CAMBODIA 30/9/16 USD 8.0% 350,000 100% 253,963.65 0.00 253,963.65 1.5%
Tembeka Social Investment Company SOUTH AFRICA 31/1/16 ZAR 13.5% 3,200,000 100% 220,602.66 4,963.56 225,566.22 1.3%
Fundacin Pro Mujer Argentina ARGENTINA 15/4/15 ARS 53.1% 2,000,000 100% 180,995.37 43,966.79 224,962.16 1.3%
Maxima Mikroheranhvatho Co Ltd CAMBODIA 15/8/2015 USD 8,0% 300 000 100% 217 683,13 2 128,45 219 811,58 1,3%
Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 30/4/14 THB 11.0% 9,300,000 100% 208,148.57 9,472.19 217,620.76 1.3%
KPS-Small Enterprise and Economic Development Inc PHILIPPINES 31/1/17 PHP 11.7% 11,000,000 100% 178,282.66 3,433.18 181,715.84 1.1%
CBIRD MICRO FINANCE Co. Ltd. CAMBODIA 30/4/14 USD 8.0% 200,000 100% 145,122.08 1,902.71 147,024.79 0.9%
La Asociacin para el Desarrollo de la costa Atlantica NICARAGUA 15/2/18 USD 9.0% 200,000 100% 145,122.09 1,596.34 146,718.43 0.9%
Fundacin Alternativa para el Desarrollo ECUADOR 15/3/15 USD 8.0% 150,000 100% 108,841.56 362.81 109,204.37 0.6%
Cooprative d'Epargne & Crdit des Artisans 9 TOGO 30/11/14 EUR 8.5% 75,000 100% 75,000.00 2,107.29 77,107.29 0.5%
Notes
Micro, Small & Medium Enterprises Bonds SA - FINCA Azerbaijan 7 AZERBAIJAN 7/3/17 USD 5.7% 650,000 100% 471,646.77 0.00 471,646.77 2.8%
Sub total 12,543,237.76 295,307.02 12,838,544.78 75.2%
Net accrued interest on swap contract (38,418.22) (38,418.22) -0.2%
Sub-total 256,888.80 12,800,126.56 75.0%
Cash at banks, term deposits and savings accounts 4,306,421.24 25.2%
Other net assets / liabilities (36,118.43) -0.2%

Total net assets 17,070,429.37 100.0%
// 5 Breakdown of microfnance investments and evolution of NAV
Rpartition des investissements en microfnance 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%
Microfnanzas 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%
/ Geographical breakdown of microfnance investments
Rpartition gographique des investissements en microfnance

Geographical classifcation 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%
/Breakdown of microfnance investments by currency
Rpartition des investissements en microfnance 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%
34-35
/ 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 initial
Class A shares 24.49 24.39 24.11 25.00
Actions de la Classe A
Class B shares 101.76 100.64 98.51 100.00
Actions de la Classe B
Class C shares 102.95 102.54 101.38 100.00
Actions de la Classe C
Total net assets 17,070,429.37 14,327,282.43 11,280,271.48
Actifs nets
Performance fnancial Performance fnancial Performance fnancial 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 A
Class 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
// 6 Notes to the audited annual report
Notes au rapport annuel rvis
GENERL INFORMATION
// A Structure of the Fund
Luxembourg Microfnance and Development Fund,
SICAV (the Fund or the SICAV) is an investment
company organised as a public limited company
(socit anonyme) under the laws of the Grand
Duchy of Luxembourg and qualifed as a socit
dinvestissement capital variable (SICAV). The Fund
is authorised as an undertaking for collective invest-
ment (UCI) under Part II of the law of 17 December
2010 relating to undertakings for collective investment
(the Law).
The Fund was incorporated in Luxembourg on
7 October 2009 with an initial capital of EUR 31,000
divided into 1,240 fully paid up shares with no par
value. The capital of the Fund is equal at all times to
the net assets of the Fund. The Articles were published
in the Mmorial on 2 November 2009 and the Fund
is registered under trade register number R.C.S.
Luxembourg B 148826. The Fund is incorporated
for an unlimited period.
The Fund is an open-ended fund. Accordingly, the
Fund is authorised to issue an unlimited number of
shares, all of which are without par value.
The Fund is an umbrella fund and as such may operate
separate Sub-Funds, each of which is represented by
one or more classes of shares (each, a Class). The
Sub-Funds are distinguished by their specifc invest-
ment policy or any other specifc features. At the date
of this report, the Fund had created one Sub-Fund, the
Luxembourg Microfnance and Development Fund
Social Venture Capital Sub-Fund.
The Fund may issue three classes of shares, namely
Class A shares, Class B shares and Class C shares,
each targeting different types of investors, evidencing
a different level of risk, offering a target return and
evidencing a different level of involvement in the
Funds governance. The initial subscription period for
Class A and Class B shares ended on 18 December
2009. The initial subscription period for Class C
shares ended on 31 March 2010.
The base currency of the Fund is the EUR and all the
fnancial statements of the Fund are presented in EUR.
The fnancial year of the Fund ends on 31 March in
each year.
Copies of the Articles, the latest fnancial reports and
the latest annual report may be obtained without cost
on request from the Fund.
Copies of the material agreements mentioned in the
Prospectus may be reviewed during normal business
hours on any business day at the registered offce of
the Fund.
// B Investment Objective
Luxembourg Microfnance and Development Fund
aims at contributing to the alleviation of poverty in de-
veloping countries through the provision of permanent
and adapted fnancial services to marginalized com-
munities and individuals. The Fund invests in promis-
ing microfnance institutions ("MFIs") that have a
positive social impact so that these institutions reach
fnancial autonomy. In pursuance of its objectives, the
Fund may invest in MFIs, in networks or associations
of MFIs, in regional funds, in microfnance investment
vehicles ("MIVs") and in other microfnance-related
products.
The Fund has two principal objectives, social and
fnancial: help socially-oriented MFIs to become long-
term viable enterprises that reach more poor people
and offer better services, and generate suffcient
income to sustain its own operations and give its
shareholders a fnancial return that at least compen-
sates for infation.
The Fund strives to provide tailor-made and innovative
solutions to needy MFIs, coupling its own fnancial
assistance with technical support from external
consultants. It deliberately focuses on niche activities,
activities where potential needs of MFIs are large, but
current supply is scarce.
The Sub-Fund does not directly engage with the end
clients of the MFIs (micro-entrepreneurs, small savers
and insurance policy holders). This activity requires
local presence and local knowledge and is best done
by locally implanted MFIs.
The Fund invests primarily but not exclusively in the
following fnancial instruments:
- Various credit products such as senior loans, term
deposits, promissory notes and bonds;
- Equity and quasi-equity instruments;
- Issuance of guarantees and letters of credit;
- Participating interests in loans or guarantees to
regional and other microfnance investment vehicles.
The Sub-Fund invests in the developing countries of
Africa, Asia and Latin America.
36-37
NOTE 1
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
// A Presentation of Financial Statements
The Fund invests a signifcant part of its assets in
fnancial instruments denominated in currencies other
than the Euro. Often, the Fund contracts a cross-cur-
rency interest rate swap or forward foreign exchange
contract to limit the exposure of the Fund to the
movements of the currency in relation to the Euro. In
the case of debt instruments, the cost of hedging such
exposure strongly infuences the interest rate the Fund
charges to microfnance institutions.
The interest income on microfnance loan agreements
in the statement of operation and other changes in net
assets includes the interest charges to microfnance
institutions 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 stock
exchange or any other regulated market that operates
regularly, is recognized and open to the public will
be valued at the nominal value plus accrued interest.
Such value will be adjusted, if appropriate, to refect
e.g. major fuctuations in interest rates in the relevant
markets or the appraisal by the Board of Directors on
the credit worthiness of the relevant debt instrument.
Capital participations not listed or dealt in on any
stock exchange or any other regulated market that
operates regularly, is recognized and open to the pub-
lic will be valued at their reasonably foreseeable sales
price determined prudently and in good faith pursuant
to procedures established by the Board of Directors.
Such procedures include, in order of preference:
- Up to the frst year following the Sub-Funds acquisi-
tion, the capital participations will be valued at cost;
- After the frst year of holding, the value of the capital
participation will be estimated with reference to prices
of equity transactions or issues of new shares involving
the same MFI within a reasonable time period of the
valuation date. Such a time period is determined by
an assessment of the Board of Directors whether
material changes within the MFI or in its operating
environment have occurred since the date such
transaction took place;
- If such transactions are not available or deemed not
representative of fair value, the value of the capital
participation should be estimated with reference to
the price-to-book ratio at which the Sub-Fund
acquired the capital participation;
- In case the Sub-Fund has entered into negotiations
to sell a capital participation to a third party, the capital
participation may be valued at its expected sales
price if the disclosure is judged appropriate by the
Board of Directors in view of the ongoing negotiations.
The value of any cash on hand or on deposit, bills
and demand notes and accounts receivable, prepaid
expenses, cash dividends and interest declared or
accrued and not yet received is deemed to be the full
amount thereof, unless in case the same is unlikely
to be paid or received in full, in which case the value
thereof is arrived at after making such discount as
may be considered appropriate in such case to refect
the true value thereof.
The value of securities that are listed on any stock
exchange or dealt in on any regulated, recognised,
open to the public and regularly functioning market is
based on the last available price.
The value of units or shares in UCIs is based on their
last-stated net asset value. Other valuation methods
may be used to adjust the price of these units or
shares if, in the opinion of the Fund, there have been
changes in the value since the net asset value had
been calculated or the valuation method used by the
UCIs is not appropriate to refect the fair value thereof.
Cross-currency SWAPs that are materially linked
in notional, spot exchange rates, interest rates,
maturities and other terms to any underlying loan
instrument are valued using the spot exchange rate
for the notional and accrued interest. Such valuation
approach is changed if a credit risk materializes in the
form of an impairment. The part of the SWAP notional
then exceeding the valuation of the underlying loan
is valued using a marked to market approach. Any
material difference between the spot rate at which the
SWAP was contracted and the spot rate at which the
loan was disbursed is amortized over the period until
expiration of the SWAP and recognized as interest
income or expense.
The value of all assets and liabilities not expressed
in the reference currency of a Sub-Fund will be con-
verted into the reference currency of such Sub-Fund
at the rate of exchange ruling in Luxembourg as at
the relevant Valuation Day. If such quotations are not
available, the rate of exchange will be determined in
good faith by or under procedures established by the
Board of Directors.
The Board of Directors, in its discretion, may permit
some other methods of valuation to be used, if it con-
siders that such valuation better refects the fair value
of any asset of the Fund.
// C Allocation of Net Asset Value Among
Share Classes
Preferred Return on Class B shares
The preferential return to Class B shares is allocated
if and only if the Sub-Funds result of operations since
the last valuation, both with and without impairment
risk on microfnance, shows a proft.
In such case, the net proft generated by the Sub-Fund
since the last valuation day is frst allocated to Class B
shares until the frst of the following is attained:
- The remuneration reaches the total net proft 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 proft since the
last valuation day without the income from reducing
such provision.
The remaining proft, if any, is allocated among the
three share Classes according to their respective
proportions in the Sub-Funds total NAV.
Microfnance Impairment Risk
Class A shares shall cover the net loss allocated to
Class C shares since the last valuation day, if such loss
arises from the impairment of microfnance related
investments until Class A share capital is nil. Only a
reduction in the Sub-Funds microfnance investments
resulting from the deterioration of the fnancial
conditions of the counterparty is considered as a
microfnance impairment.
The Fund reserves the right to suspend subscriptions
in Class C shares within the Sub-Fund, if the NAV
allocated to Class A shares is less than 20% of the
combined NAV of Class C and Class A shares.
// D Dividends
The primary investment objective of the Fund is to
achieve long-term growth. The Funds operating plan
in general does not contemplate payment of dividends
to shareholders.
NOTE 2
SHARES
The Board is authorised, without limitation, to issue an
unlimited number of fully paid up shares at any time
without reserving a preferential right to subscribe for
the shares to be issued for the existing shareholders.
The following share Classes are available for subscription
each targeting different types of investors evidencing a
different level of risk, offering a different target return
and involvement in the Funds governance.
Class A shares:
Class A shares are reserved for subscription by the
Luxembourg Government, ADA and such other
investors as may be approved by the existing Class A
shareholders. Class A shares entitle their holders
to propose a common list of proposed directors for
appointment to the Board by the General Meeting
of shareholders.
- Risk profle: Junior
- Target return: Above infation 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 shares
and Class C shares to the extent possible.
- Risk profle: Mezzanine
- Target return: Above infation 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-proft organizations
which are subject to the Board of Directors consent.
Class C shares entitle their holders to avoid under
certain conditions risks emanating from impairment of
the microfnance investments of the Sub-Fund which
will be covered by Class A shares.
- Risk profle: Senior
- Target return: Above infation rate targeted by the
ECB over the medium term
38-39
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. 115,107.91
Argentina 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. 31,455.98
Multi-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. 928.81
Enterprise and p.a., p.a.,
Economic semi- semi-
Development, annual annual
Inc payment payment
Total 143,539.68
NOTE 5
FORWARD FOREIGN EXCHANGE AND SWAP CONTRCTS
// A Swap contracts
The SICAV aims to provide, whenever feasible, loans to microfnance institutions in local currency. During the reporting period, the SICAV
hedged loan instruments using cross-currency swaps, which allow the SICAV to signifcantly reduce the foreign currency risk associated
with assets held in foreign currencies.
NOTE 3
ADVISORY AND MANAGEMENT FEES
// A Advisory fees
On 15 December 2009, the SICAV concluded an investment advisory agreement with ADA - Appui au Dveloppement Autonome
a.s.b.l.
Per such agreement, the investment advisor is entitled to receive, out of the assets of the Fund, a yearly fee of a maximum of 2%
of the Sub-Fund average net asset value, 0.25% of which is linked to the performance of the microfnance assets of the SICAV.
Total investment advisory and portfolio related fees amount, for the period ended, to EUR 196,191.97 or 1.3% of the average net
asset value of the SICAV. Of the total investment advisory fees, EUR 25,976.72 are linked to the performance of the microfnance
assets.
// 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 average
net asset value of the SICAV.
NOTE 4
SUBSCRIPTION DUTY / TAXE DABONNEMENT)
The SICAV is governed by Luxembourg tax law.
Article 20 of the law of 18 December 2009 on the 2010 budget of the Luxembourg State and a Grand Ducal decree of 14 July
2010 abolishes the Taxe dAbonnement for funds investing in microfnance with effect on 1 January 2010. On 15 October 2010,
the Commission de Surveillance du Secteur Financier (CSSF) informed the Fund of their decision to include the SICAV in the list
of investment funds in compliance with such decree.
40-41
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 7,499.56
EUR 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 137,465.63 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 ofce in Len, Nicaragua// Pro Mujer
NOTE 6
OTHER DERIVATIVE CONTRCTS
The SICAV and ADA entered into an option contract granting the Fund the right to sell all rights arising from the
loan contract between the Fund and the Association Miselini in Mali against a payment of EUR 250,000. On 16
October 2013, the Board of Directors of the Fund decided to exercise the option.
NOTE 7
SUBSCRIBED NOTES ISSUED BY MICRO, SMALL & MEDIUM ENTERPRISES BONDS
S.A., LUXEMBOURG
The Board of Directors of the Fund resolved in their meeting on 19 March 2014 to authorize subscription of Notes
backed by loans to microfnance institutions issued by the Luxembourg company Micro, Small & Medium
Enterprise Bonds S.A. (MSME Bonds) in several issues up to EUR 1,000,000. The objective is to address the
issue of excess liquidity of the Fund. Notes are listed on the offcial list of the Luxembourg Stock Exchange Euro
MTF market. Arranger and Servicer to MSME Bonds is Symbiotics S.A., a Swiss-based, specialised microf-
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 a
loan granted by MSME Bonds to the microfnance institution FINCA Azerbaijan.
NOTE 8
DETAIL OF ACCRUED AND OTHER EXPENSES
As at the reporting date, accrued and payable expenses consisted of the following (in EUR):
Investment advisory fees 46,587.81
Investment related fees to the investment advisor 44,670.08
Administration fees 19,760.39
Audit fees 16,675.00
Custodian fees 10,600.00
Transaction related fees due to the custodian 7,500.00
Domiciliation fees 6,250.00
Transaction related fees due to the administrator 6,000.00
Transfer agency fees 4,125.00
Offce rent and charges 3,141.75
Legal fees 2,632.94
Information technology expenses 666.83
Total 168,609.80
For the reporting period, other administration costs consisted of the following (in EUR):
Information technology 14,231.60
Marketing and public relation fees 12,874.46
Board of directors and committee expenses 12,713.34
Travel Expenses 9,528.14
Membership fees 7,146.91
CSSF annual fee 6,000.00
Post and telecommunication 5,920.76
Rating and labelling fees 3,000.00
Representation expenses 2,131.52
Miscellaneous expenses 842.14
Publication fees 678.09
Legal fees 368.22
Printing fees 282.40
VAT on custodian fees 232.95
Other fees 219.99
Transaction costs 148.81
Total 76,321.33
NOTE 9
COUNTRY RISKS
In view of reducing the exposure to risks inherent in certain countries, the Fund had contracted two
insurance policies with the Luxembourg Offce du Ducroire covering the risk of expropriation and government
interference for two loan investments in the Togolese Republic for the period from 10 November 2010 until 30
September 2013 and 9 November 2013, respectively. The underlying investments covered by the insurance
policies have matured in 2013 except for a last tranche of EUR 75,000 of a loan granted to the MFI CECA
which will mature in November 2014. This last tranche is not covered by the insurance policy
NOTE 10
TOTAL EXPENSE RTIO
Average net asset value during the period (in EUR) 15,130,627.14
Total expenses for the period 1 April 2013 until 31 March 2014 (in EUR) 545,283.18
Total expense ratio (annualized) 3.6%
NOTE 11
FOREIGN EXCHANGE RTES
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 Rand)
1 EUR = 44.6796 THB (Thai Baht)
1 EUR = 11.05000 ARS (Argentine Peso)
NOTE 12
STAFF
During the reporting period, the SICAV employed one full-time staff and one part-time staff. The respective employ-
ment contracts do not include a variable remuneration linked to the performance of the Fund.
NOTE 13
COMMITMENTS
The Fund has concluded a number of subscription agreements with shareholders and other parties. According
to the terms of such agreements these shareholders and parties have committed to subscribe certain amounts in
Class A and Class B shares. As at the reporting date, the following commitments have not yet been called upon:
in EUR 1/1/2014 -
31/12/2014
Class A shares 500,000
Class B shares 1,525,000
Total 2,025,000
A number of commitments are contingent on the Fund reaching certain diversifcation thresholds in the share-
holder structure. Subscription agreements concluded between the Fund and various shareholders indicate that
such diversifcation covenants will be respected.
NOTE 14
RELATED PARTY TRNSACTIONS
The SICAV considers each shareholder controlling 20% or more of total voting rights or any entity forming part of
the key management of the Fund, including its directors, as related party. During the reporting period, the SICAV
has conducted the following material transactions with related parties, excluding subscription of shares and com-
mitments to subscribe shares in the future:
The SICAV has concluded an investment advisory agreement with ADA with the remuneration structure disclosed
in Note 3.
The SICAV and ADA entered into an option contract disclosed in Note 6.
The SICAV also sub-leases an offce in the Maison de la Microfnance, a building leased by ADA at 39, rue Gle-
sener, Luxembourg Ville. The Board of Directors of the SICAV estimate the rent to correspond to a rent agreed in
an arms length transaction with an unrelated party.
The Executive Director of the Fund has been appointed as a board member of the microfnance currency risk
management company MFX Solutions Inc. In its relations with all clients, MFX Solutions Inc. applies a standar-
dized pricing model approved by a Pricing Committee. The Executive Director does not form part of such Pricing
Committee.
NOTE 15
SHARE TRNSACTIONS OF DIRECTORS
The directors of the SICAV have not undertaken share transactions during the reporting period.
NOTE 16
SUBSEQUENT EVENTS
The Board of Directors of the Fund resolved in their meeting on 23 April 2014 to amend the Prospectus of the
SICAV. Important changes include a defnition of the different tiers in microfnance and a clarifcation of the
investment focus on tier 2 microfnance institutions, use of debt instruments as principal investment instruments,
strengthening of diversifcation rules, reducing the counterparty exposure limit from 15% to 5% of NAV and a
reduction in the maximum management and advisory fees from 3.75% to 3% of NAV. The proposed changes have
been submitted to the CSSF.
44-45
Pro Mujer facilitates access to local banks for savings // Pro Mujer
Solidarity is an important element in Pro Mujer's work // Pro Mujer
Imprint
Conception and Layout
binsfeld.lu / LMDF - Jennifer Urbain
Photos
Pro Mujer Nicaragua / LMDF
The Luxembourg Microfnance and Development Fund
Social Venture Capital Sub-Fund, 2014
All rights reserved
Socit dInvestissement Capital Variable /// 2, place de Metz /// L-1930 Luxembourg
T.: +352 27 47 35 /// F.: +352 27 47 35 72 /// info@lmdf.lu /// www.lmdf.lu

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