Talking to Investors - LMDF · 16 Talking to Investors 16 // 1 Investor in Focus - Œuvre Nationale...

Unaudited semi-annual report as at 30 September 2017Rapport semestriel non révisé au 30 septembre 2017

Talking to InvestorsInterview with the Œuvre Grande-Duchesse Charlotte

In collaboration with

LMDF has been granted the LuxFLAG Microfinance Label

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

accompanied by the latest annual report and the latest semi-annual report, if more recent. Such documents can

be obtained free of charge at the registered office of the Fund or downloaded from the website www.lmdf.lu

ISIN Codes / Codes ISIN

Class C shares: LU0456967404 Class B shares: LU0456966935

http://www.lmdf.lu

Unaudited semi-annual report as at 30 September 2017 // Rapport semestriel non révisé au 30 septembre 2017 02-03

Content // Sommaire

Page

04 LMDF in figures

LMDF en chiffres

06 Report of the board of directors to the shareholders

Rapport du conseil d’administration aux actionnaires

08 LMDF's Vision and Mission

09 Summary (Français / Deutsch)

10 Management report on activities

Rapport d’activité du gestionnaire

16 Talking to Investors

16 // 1 Investor in Focus - Œuvre Nationale de Secours Grande-Duchesse Charlotte

17 // 2 Three questions to Claudine Lorang, Executive Advisor, Œuvre

20 // 3 Messages from our investors

22 Statutory information

Organisation

24 Unaudited semi-annual financial statements

États financiers semestriels non révisés

24 // 1 Statement of net assets

État des actifs nets

26 // 2 Statement of operations and other changes in net assets

État des opérations et des variations des actifs nets

28 // 3 Statistical information

Informations statistiques

30 // 4 Statement of investments and other net assets

État du portefeuille-titres et autres actifs nets

32 // 5 Breakdown of microfinance investments and evolution of NAV

Répartition des investissements en microfinance et évolution de la VNI

35 // 6 Notes to the unaudited financial statements

Notes aux états financiers non révisés

The pictures in this present report show clients of LMDF's partner MFIs as well as featured investors. Les photos présentées dans ce rapport montrent les clients des IMF partenaires du LMDF ainsi que les investisseurs présentés.

© Images: LMDF // PAMF Burkina Faso // Pana Pana // Gonzalo Charaja Ramos - Fondesurco // Génésis // Pro Mujer Nicaragua // Asusu // Kredit // INMAA // Claudine Lorang // Doris de Paoli // Patrick Bilbault // Mark Uldall // Esther Meyer

LMDF in figures // en chiffres 30 September 2017// 30 septembre 2017

Note: The figures stated in this section of the report relating to information received from microfinance institutions are as at 30 June 2017 and largely based on unaudited information. The calculations follow, wherever applicable, the Microfinance Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.

EUR 21.9 million Investments in microfinance

40Microfinance institutions financed directly

1Regional fund and support structure

20Countries

1 Service provider

60% Latin America

22% Southeast and Central Asia

11% Sub-Saharan and North Africa

7%Developed countries

44% Financing in local currency of MFI country

9.79 millionMicro-entrepreneurs financed by partner MFIs

EUR 535 millionTotal micro-loan portfolio of partner MFIs

EUR 1,333Average disbursed micro-loan

78%Women

8,564Employees of partner MFIs

35,346Micro-entrepreneurs financed by LMDF

508Number of university students financed

50%Micro-loans for services and small trade

30%Agricultural activities

7%Production and crafts

13%Other uses

EUR 509,696Average exposure per MFI

1.8% Twelve month return Class A shares

0.6% Three month return Class Abis shares

1.9% Twelve month return Class B shares1.9% 0.8%Twelve month return Class C shares


1 USA MFX Solutions Higher Education Finance Fund LP2 El Salvador PADECOMSMCREDITO Óptima Servicios Financieros3 Nicaragua Pro Mujer Pana Pana MiCrédito Fundeser Fundenuse4 Honduras Pilarh OPDF AMC Honduras FAMA5 Ecuador Coop. Maquita Cushunchic FACES INSOTEC6 Peru Crediflorida Fondesurco Arariwa PRISMA7 Niger Asusu8 Cambodia Intean Poalroath Rongroeurng

SAMIC Chamroeun Microfinance Maxima 9 Azerbaijan FINCA10 Guatemala ADISA FUNDAP REFICOM11 Morocco AMSSF / MC Al Karama12 Haiti ACME13 East Timor KIF14 Benin PEBCO - BETHESDA Comuba15 Indonesia KOMIDA16 Ivory Coast PAMF Côte d'Ivoire17 Burkina Faso PAMF Burkina Faso18 Colombia ECLOF19 Kyrgyzstan Salym Oxus20 Argentina Fie Gran Poder OMLA

1

2 34

5

6

78

9

10

11

Learn more about LMDF's portfolio of MFIs: www.lmdf.lu

12

13

14

15

1617

18

20

19

http://www.lmdf.lu/index.php/en/invest-in-lmdf/our-investments

http://www.lmdf.lu/index.php/en/invest-in-lmdf/our-investments

The Board of Directors is pleased to present this report on the first half of its eighth year of operations.

The Fund continues to attract new shareholders, and as a result, net assets have grown by almost 11% in the half-year, to pass the total of EUR 30 million for the first time. Our revised investment strategy is now being implemented, and returns to shareholders over the last 12 months are starting to show an upward trend in what is still a difficult period for the microfinance sector. Returns to investors over the last twelve months stand at 1.8% (Class A), 1.9% (Class B) and 0.8% (Class C), compared to 0.3%, 0.9% and 0.5% respectively for the year ended 31 March 2017. The level of liquid assets remains high, and the Board and the Investment Adviser, ADA, will continue to focus on the goal of reducing excess liquidity substantially by the end of the current financial year.

In each previous annual and semi-annual report, the Fund has illustrated its social impact by introducing and presenting the activities of some of its microfinance beneficiaries. As our second Social Performance report is currently being finalised for release in early 2018, we focus in this report on the views of our Investors, who represent the growing numbers of those who look beyond financial returns and seek also to align their investment assets with their values and principles.

Corporate governance

The Board of Directors is responsible, in accordance with the terms of the Articles of Association and the Prospectus, 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.

In the period under review, the name of the umbrella entity was changed to Investing for Development SICAV to reflect its wider scope upon the formation of a second Sub-Fund, the Forestry and Climate Change Fund (FCCF), which was launched on 20 October 2017. Your microfinance Sub-Fund retains the name and recognised brand of LMDF.

The Board of Directors has established the following committees whose role is to support and make recommendations to the Board in their areas of activity across all the activities of Investing for Development SICAV.

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

The Marketing Committee, which has four members, oversees the marketing strategy including the development of the shareholder base.

Report of the Board of Directors to the shareholders


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

The Appointment Committee, which has three members, assists the Board in ensuring that its composition is aligned with the objectives of the Fund.

Each Sub-Fund now has its own Investment Committee with a membership which collectively possesses a range of skills and experience relevant to the activities of the Sub-Fund. Each Investment Committee will consider recommendations from the Investment Adviser on investment and disinvestment opportunities, and will have the authority, delegated by the Board of Directors, to take investment-related decisions.

The Board has resolved that membership of the above Committees may be open to non-directors.

The Board has selected and retained ADA (Appui au Développement Autonome a.s.b.l.) as the Investment Adviser to LMDF to provide the services of identification, evaluation and selection of investment and disinvestment opportunities as well as the review, supervision and monitoring of its microfinance investments.

The members of the Board do not receive any remuneration as directors, apart from

the reimbursement of expenses incurred for Fund business and approved in advance by the Board.

There are no disclosures required to be made by the Fund in relation to changes in the Prospectus since October 2017.

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

The Board of Directors24 November 2017

Kenneth HayChairman

LMDF aims to contribute to the alleviation of poverty by supporting organizations that

empower people and stimulate entrepreneurship, with a particular focus on the most

excluded. The Fund facilitates access to responsible finance by building sustainable

links between investors, microfinance institutions and ultimate beneficiaries.

• Constitutes an attractive investment proposition by balancing stable financial returns to investors with the provision of responsible financial services to the poor.

• Specializes in facilitating the growth of promising emerging microfinance institutions which address the financial needs of marginalized communities and individuals 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; is accountable for reaching both social and financial objectives; and is transparent in its reporting.

Mission

In order to realize its Vision, LMDF

Vision

Unaudited semi-annual report as at 30 September 2017 // Rapport semestriel non révisé au 30 septembre 2017

Résumé / ZusammenfassungLe rapport semestriel non révisé du LMDF couvre la période d’avril à septembre 2017. Pendant l’exercice précédent, la stratégie d'investissement du LMDF a été modifiée en vue d’un environnement en évolu-tion. En ligne avec notre mission, l'accent a été mis sur les petites institutions de microfinance de tier 3, sur l'expansion géographique, surtout en Asie, et sur l’offre de produits financiers plus attrayants. Au cours de ce semestre, le portefeuille microfinance du fonds a augmenté de 6% pour atteindre EUR 21.9 millions. Le niveau de liquidité s’est également stabilisé depuis la mise en œuvre de la nouvelle stratégie, et a commencé à diminuer.

D’importants progrès dans l'expansion du modèle de collecte de fonds ont été faits, notamment pour les souscriptions des actionnaires de la classe C qui totalisent 29% de la VNI (26% fin mars 2017). Les actions de la classe C bénéficient d’une protec-tion de risque de la part de la classe A et Abis. Les actions de ADA ont été converties dans la classe Abis au lancement de cette dernière. LMDF travaille actuellement sur sa deuxième édition du rapport sur la performance sociale, un rapport qui lui per-mettra d’identifier ses forces et ses faiblesses dans l’implémentation de sa vision et mission, et ainsi de mesurer ses résultats.

L’excès de liquidité continue de négativement im-pacter le fonds. L’une des priorités stratégiques est d’améliorer l'efficience opérationnelle du LMDF. Le TER a significativement diminué, passant de 3.2% à 2.6% (annualisés) au cours de cette période. Cette baisse est due au haut niveau de liquidité qui a mené à une rémunération moins élevée du conseiller en in-vestissement (payé sur base des investissements en microfinance) et à l’absence de pertes importantes sur le portefeuille. Au cours de ces six derniers mois, les rendements nets ont été de 1.0% pour la classe A, 0.6% pour la classe Abis, 0.8% pour la classe C et 1.4% pour la classe B. Cela se compare à -0.2% de rendement de l'indice de dette de microfinance courant pour la même période (SMX Symbiotics Euro Index).

Le 20 octobre 2017, Investing for Development SICAV a lancé le Forestry and Climate Change Fund, un fonds axé sur la réduction de la déforestation et l’atténuation des changements climatiques en Amérique centrale.

Der ungeprüfte Halbjahresbericht des LMDF umfasst den Zeitraum von April bis September 2017. Die Prioritäten für dieses Semester waren eine Neuausrichtung der Anlagestrategien um den Fonds dem sich ändernden Marktumfeld anzupassen. Die neuen Schwerpunkte liegen auf der Finanzierung der kleineren Mikrofinanzinstitutionen (Tier 3), der geografischen Expansion vor allem in Asien und der Komplettierung der Produktpalette. In diesem Semester stieg das Mikrofinanzportfolio des Fonds um 6% auf EUR 21,9 Milionen. Der Liquiditätsstand hat sich mit der Umsetzung der neuen Strategie ebenfalls stabilisiert.

Deutliche Fortschritte wurden im Vertrieb des Fonds erzielt, insbesondere bei Anteilszeichnern der Klasse C. Der Anteil von privaten Einzelinvestoren betrug am Nettoinventarwert 29% (26% Ende März 2017). Aktien der Klasse C genießen einen Risikoschutz von Klasse A und Abis. Abis ist eine neue Aktienklasse im Hinblick auf ein weiteres Wachstum der Klasse C. Zur Gründung übertrug ADA seine Aktien in die neue Abis-Klasse. LMDF arbeitet derzeit an seiner zweiten Ausgabe des Social Performance Report, einem Bericht, der dem Fonds ermöglicht, seine Stärken und Schwächen bei der Umsetzung seiner Vision und Mission zu identifizieren und den nicht-finanziellen Erfolg zu messen.

Die überschüssige Liquidität wirkt sich finanziell weiterhin negativ auf den Fonds aus. Eine der strategischen Prioritäten ist die Verbesserung der Kosteneffizienz des LMDF. Die TER ging im Berichtszeitraum von 3,2% auf 2,6% (annualisiert) deutlich zurück. Dieser Rückgang ist teilweise auf die hohe Liquidität zurückzuführen, die zu einer niedrigeren Vergütung des Anlageberaters führte (nur auf Basis von Mikrofinanzanlagen). Zum Anderem trug der Fonds keine wesentlichen Risikokosten aus seinen Anlagen. In den sechs Monaten betrugen die Nettoerträge für die Klasse A 1,0%, für die Klasse Abis 0,6%, für die Klasse C 0,8% und für die Klasse B 1,4%. Im Vergleichszeitraum entwickelte sich der Vergleichsindex um -0,2% (SMX Symbiotics Euro Index).

Am 20. Oktober 2017 legte Investing for Development SICAV den Forestry and Climate Change Fund auf, der sich mit innovativen Geschäftsmodelle mit positiven Auswirkungen auf die Reduktion der Entwaldungsraten in Zentralamerika konzentriert.

08-09

As at the reporting date, the Luxembourg Mi-crofinance and Development Fund (LMDF or Fund) was the sole Sub-Fund of the Investing for Development SICAV. The financial year of the Fund ends in March 2018. This report covers the first half of the financial year from 1 April – 30 September 2017.

/ Implementing a revised strategy

During the last financial year, the Fund’s investment adviser, ADA, proposed a revised investment strategy for the Fund to adapt its model to changes in the market. The focus during the first six months of this financial year has been on the implementation of the revised strategy:

• Geographic expansion: LMDF has started to expand its investment horizon to include Central and South Asia and has made two investments in Kirgizstan amounting to 2.5% of NAV.

• Tier 3: The Fund wants to maintain its focus on microfinance institutions (MFIs) without sufficient access to financing and has increased the share of smaller MFIs (so called Tier 3s) from 4% to 7% of the portfolio.

• Attractive products: The Fund has reviewed its terms and conditions and created a specific financing line of EUR 5 million for more mature MFIs. So far, the Fund has allocated 22% of the total offering of this financing line.

During the last six months, the microfinance portfolio grew from EUR 20.7mn to EUR 21.9mn (an increase of 6%). The level of liquid assets held by the Fund has stabilized and started to slowly decrease. As at the

reporting date, the Fund had excess liquidity of 17% of total net assets. The implementa-tion of the revised strategy should lead to a further substantial decrease of excess liquid-ity by the end of the financial year 2017/18.

/ Continued net inflows from retail shareholders and creation of a new share class

Total net assets increased by almost 11% during the past six months due to net inflows from private and institutional shareholders. Class C shares (for private and not-for-profit investors), which benefit from a risk protec-tion from Class A and Class Abis shares, now constitute 29% of total net assets (compared to 26% at the last financial year-end).

A new Abis share class has been launched in June to further develop the Fund’s risk mitigation offering for private shareholders (invested in Class C shares). The new share class offers further protection in addition to the existing Class A shares. Abis shares assume risk mitigation if Class A is depleted. Contrary to Class A shares, Class Abis shares are redeemable subject to a sufficient risk mitigation remaining for Class C sharehold-ers after redemption.

The Class A shares of the Fund’s investment adviser, ADA, have been converted into Abis shares to launch the share class.

/ Social Performance: A detail report forthcoming

The Fund has advanced in drafting the second comprehensive Social Performance Report following the first edition published in 2015. The report identifies LMDF’s strength

Management report on activities

Unaudited semi-annual report as at 30 September 2017 // Rapport semestriel non révisé au 30 septembre 2017 10-11Source: LMDF analysis of data submitted by MFIs as at 30 June 2017, excluding certain indirect investments in microfinance.

GRAPH 1: MICROFINANCE INVESTMENTS BY COUNTRY AND HUMAN DEVELOPMENT INDEX (% of microfinance portfolio)

*Includes investment in regional fund investing in Latin American countries. / **ACP Countries: African, Caribbean and Pacific Group of States // Source: LMDF analysis as at 30/09/2017. Human Development Index 2015 by UNDP.

GRAPH 2: MARKET FOCUSAVERAGE LOAN DISBURSED BY COUNTRY (in EUR)

Low Human Development 9%

0% 5% 10%

Medium Human Development 66%

High Human Development 15%

Others 7%

Niger

Burkina Faso

Ivory Coast

Benin

Haiti

Cambodia

East-Timor

Honduras

Guatemala

Nicaragua

Kyrgyzstan

Morocco

El Salvador

Indonesia

Colombia

Ecuador

Peru

Azerbaijan

Argentina

USA*

ACP**

Very High Human Development 3%

12%

Hig

hLo

wH

uman

Dev

elop

men

t

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Ecua

dor

El S

alva

dor

Gua

tem

ala

Cam

bod

ia

East

Tim

or

Nig

er

Col

omb

ia

Nic

arag

ua

Peru

Aze

rbai

jan

Mor

occo

Hai

ti

Ben

in

Hon

dur

as

Ivor

y C

oast

Burk

ina

Faso

Ind

ones

ia

Arg

enti

na

Kyrg

yzst

an

Source: LMDF analysis of weighted average data provided by partner MFIs as at 30/06/2017


GRAPH 3: ECONOMIC PURPOSE OF MICRO- CREDITS FINANCED BY LMDF (in %)

GRAPH 4: ACTIVE MICRO-ENTREPRENEURS FINANCED BY LMDF

and weaknesses in implementing our vision and mission operationally and measures results. The report will be published later in early in 2018.

/ Improving financial performance and TER at 2.6%

Excess liquidity continues to negatively im-pact the Fund’s income. Gross income from microfinance and liquid assets decreased from 6.1% of average net assets during the previous financial year to 5.6% during the reporting period (annualized).

One of the strategic priorities is the improve-ment of the operational efficiency of the Fund. The total expense ratio decreased substantially from 3.2% in the previous finan-cial year to 2.6% during this financial period (annualized percentage). This is partly due to the high level of liquidity which leads to a lower remuneration of the investment adviser (paid only on microfinance investments).

After facing substantial provisions and write-offs during the year 2016/17, the Fund provided 0.1% of average net assets for risks during the reporting period.

Net returns were driven by lower operat-ing and risk costs. During the six months the NAV/Share increased by 1.0% for Class A, 0.6% for Class Abis, 0.8% for Class C and 1.4% for Class B shareholders (Graph 7). This compares favourably to a negative -0.2% return of the mainstream microfinance debt index for the same period (Symbiotics SMX Euro Index).

/ Risk review

- Credit risks

Note 6 of this report provides a qualitative and quantitative view of the credit risks of the Fund. LMDF made provisions against the exposure to the MFI Chamroeun in Cambo-dia (EUR 41,237) in view of a change in local regulation and Chamroeun having entered a comprehensive restructuring process.

The Fund’s risk diversification improved dur-ing the financial period. The average expo-sure to MFIs decreased from 2.0% of total net assets end of March 2017 to 1.6% at the end of September 2017. The Fund’s largest exposures towards microfinance institutions decreased slightly from 4.2% to 4.0% of net

Services/ trade activities50%

Agriculturalactivities

30%

Production/craft activities

7%

Consumption & others 13% Women

27,570 (78%)Men7,776 (22%)

Total35,346


assets. LMDF’s average exposure to MFIs is about EUR 500,000 in line with our focus on emerging microfinance institutions.

- Currency risk

The Fund maintained its conservative approach to currency risks in volatile markets. 48% of the Fund’s total net assets are invested in instruments denominated in USD, a significant decrease from 58% at the end of March 2017. The USD-EUR market risk is a significant risk for the Fund and continues to be hedged through short term forward foreign exchange instruments. This policy has been beneficial in view of a strengthening Euro during the reporting period.

The Fund hedges other foreign currency exposures through cross-currency interest rate swaps and forwards, including its exposures to West Africa Franc CFA, the Indonesian Rupiah, the Guatemalan Quetzal, the Argentine and Colombian Pesos and one loan to a MFI in Cambodia denominated in Thai Baht.

- Country risk

At the end of the year LMDF is invested in 21 countries. The biggest exposure is towards Nicaragua (10.2% of net assets), Honduras

(8.3%), Cambodia (6.8%) and El Salvador (5.5%). Five countries concentrate 36% of investments, a decrease from 41% at the end of March 2017.

12-13

0%

5%

10%

15%

20%

25%

30%

Margin on micro-loan operationsOperating expensesCost of �nancingRisk costs & provisions

Total 27.7%

GRAPH 5: COMPONENTS OF MFI'S INTEREST RATES CHARGED TO CLIENTS


Green microfinance: The success of the products depends on the importance local communities attach to environmental protection // Fondesurco

GRAPH 7: DEVELOPMENT OF NAV PER SHARE OF CLASS B AND CLASS C SHARES DURING THE LAST 12 MONTHS (in EUR)

GRAPH 6: NET ASSET VALUE BY SHARE CLASS (in EUR MN)

Source: LMDF analysis

0

6

12

18

24

30

Class B Shares (institutional)

Class A Shares (public)

Class C Shares (retail)

30/06/2017 30/09/2017

11%

57%

29%

31/03/2017

3%

Class Abis Shares (philantrophic)

30/09/201730/06/201731/03/2017

Class CClass B

+ 0.8%

+ 1.9%

10830/06/201731/03/201731/12/201630/09/2016 30/09/2017

109

110

111

112

SMX Benchmark

+ 0.2%

146

30/06/201731/03/201731/12/201630/09/2016 30/09/2017

148

149

147

150

Source: LMDF analysis

Source: Syminvest

QUARTERLY PERFORMANCE OF THE SYMBIOTICS MICROFINANCE DEBT INDEX - EUROS (SMX EUR) DURING THE LAST 12 MONTHS


/ Outlook

On 20 October 2017, Investing for Development launched a new Sub-Fund, the Forestry and Climate Change Fund, focusing on reduction of deforestation and mitigation of climate change in tropical countries. Central resources and overhead costs will be shared between sub-funds, leading to increased efficiency.

The Fund’s Prospectus has been revised in October 2017 alongside the launch of the new Sub-Fund. New provisions include the delegation of additional decision making powers to the investment committee which is now chaired by board member Raoul Stefanetti.

As always, we very much welcome your comments or questions,

Kaspar Wansleben

Executive Director([email protected])

Launch of the Forestry and Climate Change Fund on the 20 October 2017 // FCCF

Focus on our Investors Œuvre Nationale de Secours Grande-Duchesse Charlotte

1

Their Mission The Œuvre Nationale de Secours Grande-Duchesse Charlotte is a public institution under the supervision of the Prime Minister of Luxembourg. It runs and organises the National Lottery. Its mission is to promote philanthropy in Luxembourg. Its initial purpose of aiding victims of World War II has been broadened over the years to support the many philanthropic activities and projects conducted by organisations in the fields of social issues, culture, environmental protection and sport.

Their Values

The Œuvre’s goals and values can be summarised as the protection of the most vulnerable, providing aid to the

disadvantaged, and in general to promote the well-being of individuals and the community. To do so, the Œuvre is in touch with those active in the field and regularly involves itself in investigations with key players in the network of associations. In order to identify and meet the needs that exist in our society, the Œuvre launches calls for projects such as “Actions Addictions”, “Respect”, “Yes We Care” and “mateneen”.

Their Activities

Social issues: Actions Addictions, RespectCulture: The stART-up FundEnvironment: Yes We CareSport-Health: Sport-Santé initiative mateneen: civil society and refugees

www.oeuvre.lu

239 projects submitted 157 projects

supportedEUR 35.5 mn (+49%) of aids paid

The Œuvre Nationale de Secours Grande-Duchesse Charlotte is a shareholder of LMDF since 2016 and expands the list of pioneering philantrophic actors who are aligning the investment assets they hold more closely with their values and principles. The following description and interview provide more details of how the Œuvre sees LMDF and how it links to its vision and mission.

Source: Œuvre, 2016 figures


The Œuvre is an important actor of the Luxembourg’s social sector. What motivated you to invest in LMDF? At the Œuvre, we put a special emphasis on investing with an impact. The intentionality of investing in LMDF has to do with the mission of the Œuvre itself and its intention to generate social and environmental impact.

With our investment in LMDF the Œuvre is happy to contribute to leveraging greater assets to help LMDF address their core social goal while at the same time maintaining or even growing their initial endowment.

Among LMDF’s social goals is a particular focus on investing in entrepreneurial women in developing countries. Was that an

important factor in making your investment decision?

With its focus on microfinance and development, LMDF’s aim to contribute to the alleviation of poverty by supporting organisations that stimulate entrepreneurship through providing credit services that empower the poorest was guiding the thinking process.

As a matter of fact, it is an overall consensus that the predominance of women in this market of self-employment and micro-businesses is a very positive element as women, although being more vulnerable and definitely more exposed to taking responsibility for raising children, are trustworthy and reliable partners and counterparties.

By granting access to capital for women through providing very small loans to help them start and grow their own businesses, the original investment helps provide better social and economic outcomes for women, their children and families.

Three questions to Claudine Lorang, Executive Advisor - Œuvre

2

What do you think about LMDFs financial and – very important – non-financial reporting to shareholders, particularly in view of the forthcoming publication of a second social performance report?

LMDF’s financial reporting is very accurate and objective and serves the major purpose of internal reporting on the investment itself, primarily in order to determine whether the investment will be sold or continue to be held.

Non-financial reporting to shareholders is not a common measure in itself as it provides in depth information about the

business model in a conscious effort to raise awareness about LMDF’s substantial contribution towards their shareholders. Integrated reporting adds value by highlighting how the ethical and social values drive long-term growth.

It is also a proof of good governance and accountability by providing insights and in-depth information about benefits and challenges. Instead of just focusing on ratios and yield, the investor is enabled to consider his investment in another light as he is handed over means to assess human, social and environmental values and endeavors for example.

The focus is to get the bigger picture and to acquire a holistic view of the company’s long-term value and activity. On top, it helps the shareholder understand the very needs of the final user.

Solidarity is an important element in Pro Mujer's work to empower women // Pro Mujer


LMDF is active since 2010 in Niger, one of the poorest countries in the world // Asusu

30% of our microfinance portfolio is dedicated to agricultural financing // LMDF

Messages from our investors Why did you invest in LMDF?

3

LMDF’s vision is to facilitate access to responsible finance and its mission statement elaborates that LMDF is accessible to public, institutional and retail investors. The Fund has made substantial progress in realising its vision and mission with close to 30% of funds invested in Class C shares by a wide range of retail and not-for-profit investors. These shareholders have different views and priorities – this is why we wanted to dedicate this report to the investor’s view on LMDF.

Patrick Bilbault

I have decided to invest money in 2016 in LMDF units for my nephews aged 10 and 13 and for my godchild aged 16. As this is money that should be kept safe for up to 10 years until they need it for example for university, I was very happy to find out that class C units enjoy a special protection mechanism.

But I also wanted an investment I could use to explain the children what a SICAV is and how one can invest and contribute to improving the world at the same time. The children are enthusiastic about helping poor people in Burkina Faso or Peru open a business. As I have been

very interested in microfinance as a tool for helping people out of poverty for years, LMDF has proven the perfect vehicle for impact investment.

Doris de Paoli

Being fortunate to be able to make savings seems to me to be a grace, knowing that very few human beings on our planet are in such a comfortable situation. Investing them sustainably, in this case in the LMDF fund, seems to me to be obvious.

There are many convincing arguments. The two strongest which persuaded me? First of all I want to know the destiny of my savings and secondly I allow the LMDF to give microcredits to the most deprived so that they can build a suitable income and support their families.

Personally, I have to find correct and beneficial investments in favor of a double objective.


Mark Uldall

I have been active in the financial markets for more than 20 years as an equity and bond trader. After the crisis of 2008, where my employer went bust, I steered my career towards Private Banking. This was a major change in my life and after many years of just growing the balance sheet of wealthy people, I knew the time had come for me to act and find out how I could help.

I wanted to contribute in a social manner but not just by “giving away” my money, I wanted to empower people, privilege education, encourage entrepreneurship, allow people who have no access to regular banking services to

be able to get a fresh start or make their dreams come alive. If this could be done in a sustain-able way with a little yield and a certain security for the investor, this would be perfect.

This is where LMDF came in, offering the possibility of supporting financially the poor, giving a regular decent yield, partly guaranteed by the Luxemburgish State and the priceless feel-ing…..Philanthropy.

Esther Meyer, Fondation de Luxembourg

There are various aspects we have to take into consideration when we prepare the investment decisions for the foundations under our aegis, such as the lifetime of the foundation, the expected annual transfers of funds to projects as well as our strong preference for sustainable investment solutions.

One of the most important criteria is the level of portfolio risk. In order to ensure a low level of risk, diversification across as-set classes and of the underlying investments is of utmost im-portance. For microfinance investments we trust the expertise of the LMDF team in regards to due diligence and the selection of the underlying microfinance institutions. The fund also pro-

vides sufficient liquidity, a low but stable return and, considering the guaranteed share class, which excludes parts of the risks for the investor, we feel comfortable with the investment. For a foundation seeking coherence between its investments and the cause it supports, the social profile of the fund, its low level of risk and stable return are attractive features.

Board of Directors and Committees // Conseil d’administration et comités

Chair - Président

Kenneth Hay Independent

Members - Membres

Gilles Franck (until 11/07/2017) ADA - Appui au Développement Autonome

Michel Haas Ministry of Finance

Patrick Losch (from 11/07/2017) Independent

Max Meyer ADA - Appui au Développement Autonome

Patricia Pommerell (from 11/07/2017) Development Cooperation Department,

Ministry of Foreign and European Affairs (MAEE)

Raoul Stefanetti Banque Internationale à Luxembourg (BIL)

Dzemal Tomic Banque et Caisse d'Épargne de l'État (BCEE)

Manuel Tonnar (until 11/07/2017) Development Cooperation Department,

Ministry of Foreign and European Affairs (MAEE)

Kaspar Wansleben Executive Director

Investment Committee LMDF* Risk Committee

Comité d'investissement LMDF Comité de risque

Raoul Stefanetti - BIL, Committee Chair Dzemal Tomic - BCEE, Committee Chair

Marc Elvinger - Independent Kenneth Hay - Independent

Gilles Franck - ADA Max Meyer - ADA

Michel Haas - Minstry of Finance Raoul Stefanetti - BIL

Thomas Lammar - Minstry of Finance (from 3/07/2017)

Philippe Mores - MAEE (until 3/07/2017)

Olivier Selis - BGL BNP Paribas

Kaspar Wansleben - Executive Director

*A separate investment committee has been constituted for FCCF

Marketing Committee

Comité de marketing

Viviane Clauss - BdL, Committee Chair

Hedda Pahlson-Moller - Independent

Didier Richter - BIL

Patrick Bilbault - Independent

Registered Office // Domicile

2, place de Metz

L-1930 Luxembourg

Trade Register Number // Registre de commerce

et des sociétés

R.C.S. Luxembourg B 148.826

Statutory information Organisation

Appointment Committee

Comité de nomination

Patricia Pommerell - MAEE, Committee Chair (from 11/07/2017)

Michel Haas - Ministry of Finance

Kenneth Hay - Independent

Manuel Tonnar - MAEE (until 11/07/2017)

Employment Committee // Comité d'emploi

Michel Haas - Ministry of Finance, Committee Chair


Dzemal Tomic - BCEE


Custodian and Paying Agent Administrative Agent, Registrar and Transfer Agent

Banque dépositaire et agent de paiement Administration centrale et agent de transfert

Banque et Caisse d’Épargne de l’État European Fund Administration S.A.

1, place de Metz 2, rue d’Alsace

L-2954 Luxembourg L-1017 Luxembourg

Auditors // Réviseur d’entreprises agréé Legal Advisors // Conseiller légal

KPMG Luxembourg, Société coopérative Elvinger Hoss Prussen

39, Avenue John F. Kennedy 2, place Winston Churchill

L-1855 Luxembourg L-1340 Luxembourg

Distributors // Distributeurs

22-23

Banque de Luxembourg S.A.

14, boulevard Royal

L-2449 Luxembourg

Banque et Caisse d’Épargne de l’État

1, place de Metz

L-2954 Luxembourg

Banque Raiffeisen s.c.

4, rue Léon Laval

L-3372 Luxembourg

BGL BNP Paribas S.A.

50, avenue J.F. Kennedy

L-2951 Luxembourg

Fortuna Banque s.c.

130, boulevard de la Pétrusse

L-2330 Luxembourg

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

MFX Solutions, Inc.

1050 17th St. NW, Suite 550

Washington DC, 20036

United States of America

Banque et Caisse d’Épargne

de l’État

1, place de Metz

L-2954 Luxembourg

Identity numbers // Code d’identité

Class B shares Class C shares

ISIN: LU0456966935 ISIN: LU0456967404

Bloomberg: LMDSVCB:LX Bloomberg: LMDSVCC:LX

Telekurs: 10633787 Telekurs: 10633788

Microfinance expertise // Expertise en microfinance

General Partner of the Higher Education

Finance Fund LP

OMTRIX Inc.

Oficentro La Virgen No.2, Edificio 1, Piso 1

Zona Industrial de Pavas,

San José, Costa Rica

Patricia Pommerell - MAEE, Committee Chair (from 11/07/2017)

Michel Haas - Ministry of Finance


Manuel Tonnar - MAEE (until 11/07/2017)

Investment advisor // Conseiller en investissement

ADA - Appui au Développement Autonome asbl

39, rue Glesener

L-1631 Luxembourg

Assets – Actif Notes EUR Shares (and equity-type securities) in regional microfinance 1,205,126investment vehicles Actions (et instruments similaires) dans des structures régionales d'investissements en microfinance Shares (and equity-type securities) in microfinance institutions 258,574and service providers Actions (et instruments similaires) dans des institutions de microfinance et structures de support Loan agreements with microfinance institutions 6, 9 19,823,432Contrats de prêt avec des institutions de microfinance

Notes backed by loans to microfinance institutions 6, 7 50,060Notes financées par des prêts aux institutions de microfinance

Deferred charges 8 1,791Charges payées d'avance

Cash at banks 3,367,997Avoir en banques Savings account 4,700,085Compte d’épargne

Unrealised appreciation on swap contract 5 167,583Plus-value non réalisée sur contrat swap

Unrealised appreciation on forward foreign exchange contract 5 552,135Plus-value non réalisée sur contrat de change à terme Income receivable on portfolio 456,997A recevoir sur le portefeuille

Interest receivable on bank accounts and term deposits 4,715Intérêts à recevoir sur avoirs en banque et dépôts à terme

Other receivables and assets 8 114,720Autres créances et à recevoir

Total assets 30,703,215Somme d'actifsLiabilities – Passif Notes EURThe accompanying notes form an integral part of this report.

Unaudited financial statements Etats financiers non révisés

as at 30 September 2017 // au 30 septembre 2017

// 1 Statement of net assets État des actifs nets


Liabilities - Passif Notes EUR

Subscriptions received in advance 166,667Souscriptions reçues d'avance

Accrued expenses 8 299,133Provision pour frais à payer

Total liabilities 465,800Somme des passifs

Net assets at the end of the period 30,237,415Actifs nets à la fin de la période

A Class shares outstanding 131,347.257Nombre d’actions en circulation de la Classe A

Net asset value per A Class share 26.16Valeur nette d’inventaire par action de la Classe A

Abis Class shares outstanding 38,322.661Nombre d’actions en circulation de la Classe Abis

Net asset value per Abis Class share 25.16Valeur nette d’inventaire par action de la Classe Abis

B Class shares outstanding 153,447.358Nombre d’actions en circulation de la Classe B

Net asset value per B Class share 111.39Valeur nette d’inventaire par action de la Classe B

C Class shares outstanding 80,019.247Nombre d’actions en circulation de la Classe C

Net asset value per C Class share 109.28Valeur nette d’inventaire par action de la Classe C

Financial inclusion remains a key challenge in Africa // LMDF

24-25

Income – Revenus Notes EUR

Interest on microfinance loan agreements 895,535Intérêts sur contrats de prêt en microfinance

Net interest paid on swap contracts (131,747)Intérêts nets payés sur contrat swaps

Net interest on microfinance loan agreements 763,788Intérêts nets sur contrats de prêts en microfinance

Commissions on microfinance loan agreements 57,093Commissions sur contrats de prêts microfinance

Other income 8,575Autres produits

Total income 829,456Somme des revenus

Expenses – Frais

Advisory fees 3 155,078Frais du conseiller en investissement

Salary and wages of the fund management and support team 3, 13 95,186 Charges salariales de gestion du fonds et de l'équipe de support

Custodian fees 13,064Commission de la banque dépositaire

Central administration costs 37,200Frais de l’administration centrale

Bank charges and other fees 2,580Frais bancaires et charges liées

Transaction fees 17,527Frais de transaction

Audit fees 11,439Frais de révision

Other administrative costs 8 52,118Autres charges administratives

Total expenses 384,192Total des frais

Net investment income 445,264Résultat net d’investissement

The accompanying notes form an integral part of this report.

from 1 April 2017 to 30 September 2017du 1er avril 2017 au 30 septembre 2017

// 2 Statement of operations and other changes in net assets État des opérations et des variations des actifs nets


Net realised gain/(loss)Bénéfice/(perte) net(te) Notes EUR

On investments 0Sur investissements

On forward foreign exchange contracts 933,192Sur contrats de change à terme

On foreign currency transactions 254,827Sur transactions en devises

Realised result 1,188,019Bénéfice/(perte) net(te) réalisé(e)

Net variation of the unrealised gain/(loss) Variation de la plus-value/(moins-value) nette non réalisée

On investment portfolio / Sur portefeuille d'investissements

Variation of impairment on microfinance loans (30,129)Variation de provisions sur prêts microfinance

Variation of valuation of equity investments 82,184Variation de la valorisation des investissements en capital

Variation due to changes in the foreign exchange rate (1,960,747)Variation due à l'évolution du taux de change

Total variation on investment portfolio (1,908,692)Variation totale sur portefeuille d'investissements On forward foreign exchange contracts 443,976Sur contrats de change à terme

On cross-currency swap contracts 175,051Sur contrats de swap de taux et change à terme

On foreign exchange transactions (832)Sur transactions en devises

Unrealised result (1,290,497)Bénéfice/(perte) net(te) non réalisé(e)

Result of operations 342,786Résultat net des opérations

Subscriptions 3,597,075Souscriptions

Redemptions (985,712)Rachats

Total changes in net assets 2,954,149Variation globale de la valeur nette d’inventaire

Total net assets at the beginning of the period 27,283,266Valeur nette d’inventaire au début de la période

Total net assets at the end of the period 30,237,415Valeur nette d’inventaire à la fin de la période

Total net assets – Actifs nets EUR

As at 30/09/2017 30,237,415Au 30/09/2017

Number of A Class shares – Nombre d’actions de la Classe A en circulation

Outstanding at the beginning of the period 168,238.537Au début de la période

Issued during the period 0.000Émises durant la période

Redeemed during the period (36,891.280)Rachetées durant la période

Outstanding at the end of the period 131,347.257À la fin de la période

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

As at 30/09/2017 26.16Au 30/09/2017

Number of Abis Class shares – Nombre d’actions de la Classe Abis en circulation Outstanding at the beginning of the period 0.000Au début de la période

Issued during the period 38,322.661Émises durant la période

Redeemed during the period 0.000Rachetées durant la période


Net asset value per Abis Class share Valeur nette d'inventaire par action de la Classe Abis

As at 30/09/2017 25.16Au 30/09/2017



// 3 Statistical information Informations statistiques


Number of B Class shares – Nombre d’actions de la Classe B en circulation Outstanding at the beginning of the period 144,346.521Au début de la période


Redeemed during the period 0.000Rachetées durant la période


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

As at 30/09/2017 111.39Au 30/09/2017

Number of C Class shares – Nombre d’actions de la Classe C en circulation Outstanding at the beginning of the period 65,171.788Au début de la période


Redeemed during the period (255.000)Rachetées durant la période


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

As at 30/09/2017 109.28Au 30/09/2017


// 4 Statement of investments and other net assets État du portefeuille-titres et autres actifs nets


Instrument // Microfinance institution Note Country Maturity Currency Quantity // Nominal value

Total value (in EUR)

% of NAV

Financial instruments not admitted to an official stock-exchange listing nor dealt in on another regulated market

Investments in regional microfinance funds or similar entities

Higher Education Finance Fund LP USA N/A USD 1,500,000 1,205,126 4.0%

Shares (and equity-type securities) in microfinance institutions and service providers

MFX Solutions LLC USA N/A USD 187,090 258,574 0.9%

Loan agreements with microfinance institutions

Asociacion Familia y Medioambiente OPDF - FAMA OPDF HONDURAS 10/10/2019 HNL 30,000,000 1,088,413 3.6%

Koperasi Mitra Dhuafa - KOMIDA INDONESIA 10/04/2019 IDR 15,000,000,000 1,016,540 3.4%

Cooperativa Integral de Ahorro y Crédito "Red de Fundos Comunitarios" GUATEMALA 10/04/2021 GTQ 7,400,000 911,630 3.0%

SAMIC Plc CAMBODIA 31/10/2018 USD 1,000,000 878,235 2.9%

Financiera Fundeser S.A. NICARAGUA 12/12/2018 USD 1.000,000 867,850 2.9%

Microfinance Company Salym Finance KYRGYZSTAN 10/10/2020 USD 900,000 766,516 2.5%

Instituto para el Desarrollo Hondureño HONDURAS 10/10/2020 HNL 20,000,000 725,689 2.4%

La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV EL SALVADOR 10/01/2022 USD 810,000 697,648 2.3%

Óptima Servicios Financieros, S.A. EL SALVADOR 10/01/2020 USD 750,000 645,610 2.1%

Proyectos y Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF

HONDURAS 10/07/2020 USD 700,000 602,569 2.0%

Fie Gran Poder S.A. ARGENTINA 10/07/2020 ARS 9,700,000 512,134 1.7%

L'Association Marocaine de Solidarité sans Frontières/Micro-Crédit MOROCCO 31/12/2018 EUR 500,000 508,750 1.7%

Cooperativa de Ahorro y Crédito la Florida PERU 31/11/2017 USD 525,000 457,632 1.5%

Fundenuse, S.A. NICARAGUA 10/04/2021 USD 500,000 439,200 1.5%

Empresa para el apoyo y desarrollo de la micro y pequena empresa urbana y rural (MICREDITO) S.A.

NICARAGUA 10/04/2021 USD 500,000 437,790 1.5%

Empresa para el apoyo y desarrollo de la micro y pequena empresa urbana y rural (MICREDITO) S.A.

NICARAGUA 15/01/2019 USD 500,000 431,082 1.4%

Fundación de Apoyo Comunitario y Social del Ecuador ECUADOR 13/07/2018 USD 500,000 430,959 1.4%

Pro Mujer NICARAGUA, LLC NICARAGUA 22/10/2017 USD 487,500 426,845 1.4%

Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 31/08/2018 USD 500,000 425,760 1.4%

Fundenuse, S.A. NICARAGUA 10/10/2021 USD 500,000 425,008 1.4%

La Cooperativa de Ahorro y Crédito Maquita Cushunchic Ltda. ECUADOR 14/11/2017 USD 450,000 391,669 1.3%

Asusu SA 9 NIGER 18/10/2018 XOF 243,750,000 384,952 1.3%

Chamroeun Microfinance LTD CAMBODIA 31/03/2018 USD 487,500 371,130 1.2%

OXUS Micro-Credit Company KYRGYZSTAN 10/07/2019 USD 430,000 368,813 1.2%

Fundación para el desarrollo integral de programas socioeco-nomicos FUNDAP

GUATEMALA 10/10/2019 USD 400,000 351,766 1.2%

Action pour la coopération avec la microentreprise S.A. ACME HAITI 10/04/2019 USD 500,000 351,116 1.2%

Asociación para el Desarrollo Integral de San Antonio Ilontenango GUATEMALA 16/03/2019 USD 380,000 322,435 1.1%

Cooperative des Membres Unis Bethel Actions (COMUBA) BENIN 10/04/2020 XOF 200,000,000 317,762 1.1%

L'association pour la promotion de l'épargne crédit à base communautaire - BETHESDA

BENIN 10/01/2019 XOF 200,000,000 310,469 1.0%

Première agence de microfinance Burkina Faso BURKINA FASO

10/07/2018 XOF 200,000,000 309,987 1.0%

Fondation al Karama pour la micro finance MOROCCO 10/10/2018 EUR 300,000 309,917 1.0%

El Instituto de Investigaciones Socio-economicas y Tecnologicas INSOTEC

ECUADOR 10/07/2019 USD 333,329 287,416 1.0%


Instrument // Microfinance institution Note Country Maturity Currency Quantity // Nominal value

Total value (in EUR)

% of NAV

El Instituto de Investigaciones Socio-economicas y Tecnologi-cas INSOTEC

ECUADOR 10/07/2019 USD 333,329 287,416 1.0%

Oportunidad Microfinanciera Latinoamericana OMLA, S.A. ARGENTINA 10/07/2020 ARS 5,200,000 274,933 0.9%

Première agence de microfinance Côte d'Ivoire S.A. IVORY COAST 10/01/2019 XOF 173,334,000 268,656 0.9%

Óptima Servicios Financieros, S.A EL SALVADOR 31/10/2017 USD 300,000 262,284 0.9%

Maxima Microfinance Plc CAMBODIA 10/01/2019 USD 300,000 258,895 0.9%

Asociacion Arariwa para la Promoción Tecnico Cultural Andina PERU 10/04/2019 USD 266,667 236,408 0.8%

ECLOF Colombia SAS COLOMBIA 10/04/2020 COP 730,000,000 255,731 0.8%

Cooperativa de Ahorro y Crédito Fondesurco PERU 26/01/2018 USD 259,740 222,883 0.7%

Kaebuak Investimentu no Finansa TIMOR LESTE 10/10/2018 USD 250,000 219,092 0.7%



Cooperativa de Ahorro y Crédito Fondesurco PERU 10/04/2019 USD 200,000 175,477 0.6%

Cooperativa de Ahorro y Crédito Microfinanzas Prisma PERU 10/01/2020 USD 200,000 172,548 0.6%

Cooperativa de Ahorro y Crédito la Florida PERU 10/01/2019 USD 175,000 150,916 0.5%

Intean Poalroath Rongroeurng Co. Ltd. CAMBODIA 28/02/2018 THB 5,333,334 136,652 0.5%

Cooperativa de Ahorro y Crédito Microfinanzas Prisma PERU 10/07/2020 USD 130,000 110,766 0.4%

Adel Microcreditos S.A. de C.V. HONDURAS 10/07/2018 USD 100,000 86,322 0.3%

La Asociación para el Desarrollo de la costa Atlantica NICARAGUA 15/02/2018 USD 75,000 64,171 0.2%

La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV EL SALVADOR 28/02/2018 USD 50,000 42,572 0.1%

Notes backed by loans to microfinance institutions

Micro, Small & Medium Enterprises Bonds SA - FINCA Azerbaijan

6, 7 AZERBAIJAN N/A USD 236,726 50,060 0.2%

Sub-total 21,916,949 72.5%

Net accrued interest on swap contract (122,759) (0.4)%

Sub-total 21,794,190 72.1%

Cash at banks, term deposits and savings accounts 8,068,082 26.7%

Other net assets / liabilities 375,143 1.2%

Total net assets 30,237,415 100.0%

The use of the solar water heaters allow clients to save from 8 to 10 soles per week (EUR 2-6) // Fondesurco Peru

/Geographical breakdown of microfinance investments Répartition géographique des investissements en microfinance

/Breakdown of microfinance investments by currency Répartition des investissements en microfinance par devise

Currency Amount (EUR) % of total net assetsUnited States Dollar 14,614,734 48.3%

Honduras Lempira 1,814,102 6.0%

West African CFA Franc 1,591,826 5.3%

Indonesian Rupiah 1,016,540 3.4%

Guatemala Quetzal 911,630 3.0%

Euro 818,667 2.7%

Argentine Peso 787,067 2.6%

Colombian Peso 225,731 0.8%

Thai Baht 136,652 0.5%

Total Portfolio 21,916,949 72.5%

Average exposure per currency 2,435,217 8.1%



// 5 Breakdown of microfinance investments and evolution of NAV Répartition des investissements en microfinance et évolution de la VNI


Geographical classification Note Amount (EUR) % of total net assets

NICARAGUA 3,091,946 10.2%

HONDURAS 2,502,993 8.3%

CAMBODIA 2,070,672 6.8%

EL SALVADOR 1,648,114 5.5%

GUATEMALA 1,585,831 5.2%

PERU 1,526,630 5.0%

USA 1,463,700 4.8%

ECUADOR 1,397,460 4.6%

KYRGYZSTAN 1,135,329 3.8%

INDONESIA 1,016,540 3.4%

MOROCCO 818,667 2.7%

ARGENTINA 787,067 2.6%

TIMOR LESTE 653,267 2.2%

BENIN 628,231 2.1%

NIGER 9 384,952 1.3%

HAITI 351,116 1.2%

BURKINA FASO 309,987 1.0%

IVORY COAST 268,656 0.9%

COLOMBIA 225,731 0.7%

AZERBAIJAN 50,060 0.2%


Average exposure per country 1,095,847 3.6%


/ Total exposure per counterparty as at 30 September2017 Exposition agrégée par contrepartie au 30 septembre 2017

Aggregated exposure to Notes Amount EUR

% of totalnet assets

Higher Education Finance Fund LP 1,205,126 4.0%

Asociacion Familia y Medioambiente OPDF - FAMA OPDF 1,088,413 3.6%

Koperasi Mitra Dhuafa - KOMIDA 1,016,540 3.4%

Cooperativa Integral de Ahorro y Crédito "Red de Fundos Comunitarios" 911,630 3.0%

Óptima Servicios Financieros , S.A. 907,894 3.0%

SAMIC Plc 878,235 2.9%

Empresa para el apoyo y desarrollo de la micro y pequena empresa urbana y rural (MICREDITO) S.A. 868,872 2.9%

Financiera Fundeser S.A. 867,850 2.9%

Fundenuse, S.A. 864,208 2.9%

Microfinance Company Salym Finance 766,516 2.5%

La Sociedad Cooperativa PADECOMSMCREDITO de RL de CV 740,220 2.5%

Instituto para el Desarrollo Hondureño 725,689 2.4%

Kaebuak Investimentu no Finansa 653,267 2.2%

Cooperativa de Ahorro y Crédito la Florida 608,548 2.0%

Proyectos y Iniciativas Locales para el Autodesarrollo Regional de Honduras OPDF 602,569 2.0%

El Instituto de Investigaciones Socio-economicas y Tecnologicas INSOTEC 574,832 1.9%

Intean Poalroath Rongroeurng Co. Ltd. 562,412 1.9%

Fie Gran Poder S.A. 512,134 1.7%

L'Association Marocaine de Solidarité sans Frontières/Micro-Crédit 508,750 1.7%

Fundación de Apoyo Comunitario y Social del Ecuador 430,959 1.4%

Pro Mujer NICARAGUA, LLC 426,845 1.4%

Cooperativa de Ahorro y Crédito Fondesurco 398,360 1.3%

La Cooperativa de Ahorro y Crédito Maquita Cushunchic Ltda. 391,669 1.3%

Asusu SA 9 384,952 1.3%

Chamroeun Microfinance LTD 6 371,130 1.2%

OXUS Micro-Credit Company 368,813 1.2%

Fundación para el desarrollo integral de programas socioeconomicos FUNDAP 351,766 1.2%

Action pour la coopération avec la microentreprise S.A. ACME 351,116 1.2%

Asociación para el Desarrollo Integral de San Antonio Ilontenango 322,435 1.1%

Cooperative des Membres Unis Bethel Actions (COMUBA) 317,762 1.1%

L'association pour la promotion de l'épargne crédit à base communautaire - BETHESDA 310,469 1.0%

Première agence de microfinance Burkina Faso 309,987 1.0%

Fondation al Karama pour la micro finance 309,917 1.0%

Cooperativa de Ahorro y Crédito Microfinanzas Prisma 283,314 0.9%

Oportunidad Microfinanciera Latinoamericana OMLA, S.A. 274,933 0.9%

Première agence de microfinance Côte d'Ivoire S.A. 268,656 0.9%

Maxima Microfinance Plc 258,895 0.9%

MFX Solutions LLC 258,574 0.9%

Asociacion Arariwa para la Promoción Tecnico Cultural Andina 236,408 0.8%

ECLOF Colombia SAS 225,731 0.8%

Adel Microcreditos S.A. de C.V. 86,322 0.3%

La Asociación para el Desarrollo de la costa Atlantica 64,171 0.2%

Micro, Small & Medium Enterprises Bonds SA - FINCA Azerbaijan 6, 7 50,060 0.2%


Average exposure per microfinance institution 509,696 1.7%

/Evolution of the net asset value per share Évolution de la valeur nette d’inventaire par action

in EUR NAV/share NAV/share NAV/share Initial as at 30/09/2017 as at 31/03/2017 as at 31/03/2016 subscription priceen EUR VNI/action VNI/action VNI/action Prix de au 30/09/2017 au 31/03/2017 au 31/03/2016 souscription initial

Class A shares 26.16 25.90 25.82 25.00 Actions de la Classe A

Class Abis shares 25.16 N/A N/A 25.00Actions de la Classe Abis

Class B shares 111.39 109.88 108.93 100.00Actions de la Classe B

Class C shares 109.28 108.39 107.85 100.00 Actions de la Classe C

Performance period Performance financial Performance financial Performance since 03/2017 - 09/2017 year 2016 - 17 year 2015 - 16 inception Rendement Rendement Rendement Rendement période 03/2017 - 09/2017 de l'année 2016 - 17 de l'année 2015 - 16 depuis lancement

Class A shares 1.0% 0.3% 2.3% 4.6%Actions de la Classe A

Class Abis shares 0.6% N/A N/A 0.6%Actions de la Classe Abis

Class B shares 1.4% 0.9% 2.8% 11.4% Actions de la Classe B

Class C shares 0.8% 0.5% 1.7% 9.3% Actions de la Classe C

Total net assets (EUR) 30,237,415 27,283,265 22,547,963Actifs netsGrowth in total net assets 10.8% 21.0% 13.7% Croissance des actifs nets

Small shops play an important role in the Moroccan economy // LMDF


GENERAL INFORMATION/ A Structure of the FundThe Investing for Development SICAV - Luxembourg Microfinance and Development Fund (the “Fund” or the “SICAV”) is an investment company organised as a public limited company (société anonyme) under the laws of the Grand Duchy of Luxembourg and qualified as a “société d’investissement à capital variable” (SICAV). The Fund is authorised as an undertaking for collective investment (“UCI”) under Part II of the law of 17 December 2010 relating to undertakings for collec-tive investment (the “Law”). The Fund is internally man-aged and has been registered on 31 January 2014 by the CSSF as an Alternative Investment Fund Manager (“AIFM”) falling under the de-minimus rule of Article 3 of the Luxembourg law of 12 July 2013 (“AIFM Law”).

The Fund was incorporated in Luxembourg on 7 October 2009 with an initial capital of EUR 31,000 di-vided 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 Mémorial on 2 November 2009 and the Fund is registered under trade register number R.C.S. Lux-embourg B 148826. The Fund is incorporated for an unlimited period.

On 16 May 2017, the Fund held an extraordinary general meeting of shareholders (“EGM”). The EGM adopted a number of amendments to the Articles of Incorporation, among them to change the name of the Fund from Luxembourg Microfinance and Develop-ment Fund SICAV – Social Venture Capital Sub-Fund to Investing for Development SICAV – Luxembourg Microfinance and Development Fund.

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 specific invest-ment policy or any other specific features. As at 30 September 2017, the Fund had created one Sub-Fund, the Luxembourg Microfinance and Development Fund.

The Fund may issue four classes of shares, namely Class A shares, Class Abis 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 involve-ment in the Fund’s 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 initial subscription period for Class Abis shares ended on 30 June 2017.

The base currency of the Fund is the Euro and the financial statements of the Fund are presented in Euro. The financial year of the Fund ends on 31 March of each year.

Copies of the Articles, the latest financial 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 office of the Fund.

/ B Investment ObjectiveThe Fund aims at contributing to the alleviation of pov-erty in developing countries through the provision of permanent and adapted financial services to marginal-ised communities and individuals. The Fund invests in promising microfinance institutions ("MFIs") that have a positive social impact so that these institutions reach financial autonomy. In pursuance of its objectives, the Fund may invest in MFIs, in networks or associations of MFIs, in regional funds, in microfinance investment vehicles ("MIVs") and in other microfinance-related products.

The Fund has two principal objectives, social and financial: (1) help socially-oriented MFIs to become long-term viable enterprises that reach more poor people and offer better services, and (2) generate sufficient income to sustain its own operations and give its shareholders a financial return that at least compensates for inflation.

The Fund invests primarily in various credit products such as senior loans, term deposits, promissory notes, bonds or other interest-bearing instruments. The Fund may invest up to 10% of its net assets in equity instru-ments.

The Fund invests in developing countries in Africa, Asia and Latin America.

NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES / A Presentation of Financial StatementsThe Fund invests a significant part of its assets in

34-35


// 6 Notes to the unaudited financial statements Notes aux états financiers non révisés

financial instruments denominated in currencies other than the Euro. Often, the Fund contracts cross-cur-rency interest rate swaps or forward foreign exchange contracts to limit the exposure of the Fund to the move-ments of the foreign currency in relation to the Euro. In the case of debt instruments, the cost of hedging such exposure strongly influences the interest rate the Fund charges to microfinance institutions.

The interest income on microfinance loan agreements in the statement of operations and other changes in net assets includes the interest charges to microfinance institutions to cover the hedging costs of the respective currency. The impact of the valuation of the hedging instruments is presented in the net realised gain/loss and the variation of the unrealised gain/loss.

/ B Valuation of Financial InstrumentsDebt instruments not listed or dealt in on any stock exchange or any other regulated market that operates regularly, is recognised and open to the public, will be valued at the nominal value. Accrued interest from microfinance loan agreements is presented separately. Such value will be adjusted, if appropriate, to reflect, for instance, major fluctuations in interest rates in the relevant markets or the appraisal by the Board of Directors of 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 recognised and open to the public, 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 first year following the Sub-Fund’s acquisition, the capital participations will be valued at cost;- After the first year of holding, the value of the capital participation will be estimated with reference to 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 of whether material changes within the MFI or in its operating environment have occurred since the date such transactions took place;- If such transactions are not available or deemed not representative of fair value, the value of the capi-tal participation should be estimated with reference to the price-to-book ratio at which the Sub-Fund acquired the capital participation;- If 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 negotia-tions.

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 the same is unlikely to be paid or received in full, in which case the value thereof is arrived at after making such discounts as may be considered appropriate in such a case to reflect the true value thereof.

The value of securities that are listed on any stock ex-change 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 calcu-lated or the valuation method used by the UCIs is not appropriate to reflect the fair value thereof.

Cross-currency swaps or foreign forward exchange contracts that are materially linked to any underlying loan instrument are valued using the spot exchange rate for the notional. The difference between the spot and forward rates is amortised until the maturity of the instrument. Such valuation approach is changed if a credit risk materialises in the form of an impairment. The part of the SWAP or forward foreign exchange contract notional then exceeding the valuation of the underlying loan is valued using a mark to market ap-proach, if the position cannot be closed.

The value of all assets and liabilities not denominated in the reference currency of a Sub-Fund will be trans-lated 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 avail-able, the rate of exchange will be determined in good faith by or under procedures established by the Board of Directors.

The Board of Directors, at its discretion, may permit some other methods of valuation to be used, if it con-siders that such valuation better reflects 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-Fund’s result of operations since the last valuation day, both with and without impair-ment risk on microfinance, shows a profit.

In such a case, the net profit generated by the Sub-Fund since the last valuation day is first allocated to Class B shares until the first of the following is attained:


- The remuneration reaches the total net profit since last valuation;- The equivalent of 1% p.a. interest on Class B shares’ NAV.

The release of excess impairment provisions is not included in net profits allocated to Class B shares on a preferential basis.

The remaining profit, if any, is allocated among the three share Classes according to their respective pro-portions in the Sub-Fund’s total NAV.

Microfinance Impairment RiskClass A shares and Class Abis shares shall cover the net loss allocated to Class C shares since the last valuation day, if such loss arises from the impairment of microfi-nance related investments, until Class A share capital is nil and Class Abis capital is nil. Only a reduction in the Fund’s microfinance investments resulting from the deterioration of the financial conditions of the counter-party is considered as a microfinance impairment.

The Fund reserves the right to suspend subscriptions in Class C shares within the Fund, if the NAV allocated to Class A shares plus Class Abis shares is less than 20% of the combined NAV of Class C, Class A and Class Abis shares.

/ D DividendsThe primary investment objective of the Fund is to achieve long-term growth. The Fund’s operating plan in general does not contemplate payment of dividends to shareholders.

NOTE 2SHARES

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 to the existing shareholders. The following share Classes are available for subscrip-tion, each targeting different types of investors evidencing a different level of risk, offering a different target return and involvement in the Fund’s govern-ance. Class A shares:Class A shares are reserved for subscription by the Luxembourg Government 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. Class A shares are not redeemable.

- Risk profile: Junior- Target return: Above inflation rate targeted by the ECB over the medium term

Class Abis shares:Class Abis shares are open for subscription by philanthropic or other investors seeking a financial leverage on an investment with developmental impact. Class Abis shares are junior and cover risks for Class C shares, yet senior to Class A shares. Class Abis shares are redeemable subject to an 18 month notice period and the condition that after such redemption, the combined Net Asset Value of Class A and Class Abis shares amounts to at least 25% of the sum of the Net Asset Values of Class A, Abis and C Shares.

- Risk profile: Junior- Target return: Above inflation rate targeted by the ECB over the medium term

Class B shares:No restrictions for investors in Class B shares exist.Class B shares entitle their holders to earn a 1 percent p.a. higher return than Class A shares, Class Abis shares and Class C shares to the extent possible.

- Risk profile: Mezzanine- Target return: Above inflation rate targeted by the ECB over the medium term plus 1 percentage point p.a.

Class C shares:Class C shares are reserved for subscription for private individuals and private non-profit organizations which are subject to the consent of the Board of Directors. Class C shares entitle their holders to avoid under certain conditions risks emanating from impairment of the microfinance investments of the Sub-Fund which will be covered by Class A shares.

- Risk profile: Senior - Target return: Above inflation rate targeted by the - ECB over the medium term

NOTE 3ADVISORY FEES AND MANAGEMENT/ TEAM REMUNERATION

/ A Advisory feesOn 15 December 2009, the Fund concluded an investment advisory agreement with ADA - Appui au Développement Autonome a.s.b.l., amended on 1 October 2015.Per the agreement the investment adviser is entitled to receive, out of the assets of the Fund, a yearly fee of:

- 1.5% p.a. of the Sub-Fund's average microfinance assets under advice plus 0.25% p.a. remuneration linked to the performance of the microfinance assets of the Fund until the assets managed by the adviser reach EUR 25 million and;

- 1.35% of the Sub-Fund's average microfinance assets under advice plus 0.25% p.a. remuneration

36-37

NOTE 5FORWARD FOREIGN EXCHANGE AND SWAP CONTRACTS

/ A Swap contractsThe Fund aims to provide, whenever feasible, loans to microfinance institutions in local currency. During the reporting period, the Fund hedged loan instruments using cross-currency swaps, which allow the Fund to significantly reduce the foreign currency risk associated with assets held in foreign currencies. On some occasions and depending on pricing and liquidity of swap instruments, the Fund has hedged the foreign currency against USD. Such exposure to the USD is then hedged using forward foreign exchange contracts.

linked to the performance of the microfinance assets of the Fund when the assets managed by the adviser exceed EUR 25 million.

Total investment advisery and portfolio related fees amount, for the period ended, to EUR 155,078 or 1.1% (annualised) of the average net asset value of the Fund. Of the total investment advisory fees, EUR 20,982 are linked to the performance of the microfinance assets.

/ B Management/team remunerationIn consideration of the services rendered to the Fund, the Management and Support Team are entitled to receive remuneration that, together with the fee paid to the investment adviser(s), is at maximum 3% of the Sub-Fund’s average net asset value per year.

From 1 April 2017 until 30 September 2017, the remuneration of the Management and Support Team amounted to 0.6% (annualised). Total remuneration paid to the investment adviser(s), and the Management and Support Team amounted to 1.7% of the average net asset value of the Fund.

NOTE 4SUBSCRIPTION DUTY / “TAXE D’ABONNEMENT” The Fund 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 abolished the “Taxe d’Abonnement” for funds investing in microfinance with effect on 1 Janu-ary 2010. On 15 October 2010, the Commission de Surveillance du Secteur Financier (“CSSF”) informed the Fund of their decision to include the Fund in the list of investment funds in compliance with such decree.

SWAP contracts

In relation to loan agreement with

Notional Paying currency

Receiving currency

Paying Leg Receiving Leg Maturity Date

Counter-party

Unrealized appreciation / (deprecia-

tion), (in EUR)

Cooperativa integral de Ahorro y credito "Red de Fundos Comunitarios"

7,400,000 GTQ EUR 12.50% p.a., semi-annual payment

6.01% p.a., semi-annual payment

10/04/2021 MFX Solu-tions Inc.

93,108

Intean Poalroath Ron-groeurng Co. Ltd.

5,333,333 THB USD 11.40% p.a., semi-annual payment



3,137

L'association pour la promotion de l'épargne crédit à base commu-nautaire - BETHESDA

200,000,000 XOF EUR 11.30% p.a., semi-annual payment



1,315

Première agence de microfinance Côte d'Ivoire S.A.

173,333,333 XOF EUR 10.60% p.a., semi-annual payment



1,918

Koperasi Mitra Dhuafa - KOMIDA

15,000,000,000 IDR USD 16.50% p.a., semi-annual payment



(8,902)

Instituto para el Desar-rollo Hondureño

20,000,000 HNL EUR 14.00% p.a., semi-annual payment



(10,586)

Asociacion Familia y Medioambiente OPDF - FAMA OPDF

30,000,000 HNL EUR 13.50% p.a., semi-annual payment



(15,879)

Fie Gran Poder S.A. 9,700,000 ARS EUR 27.10% p.a., semi-annual payment



67,361

Oportunidad Microfi-nanciera Latinoameri-cana OMLA, S.A.

5,200,000 ARS EUR 27.80% p.a., semi-annual payment



36,111

Total 167,583


/ 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 counterparties for trades in relation to such hedges are the Banque et Caisse d’Épargne de l’État and MFX

Solutions Inc.

Forward foreign exchange contracts

In relation to loan with MFI Cur-rency pur-chased

Amount pur-chased

Currency sold

Amount sold Maturity date Unrealized appreciation / (depreciation),

(in EUR)

Remaining amortization

of notional until maturity (in

EUR)

Loans in USD EUR 16,641,850 USD 19,000,000 10/10/2017 576,348 N/A

Loans in XOF EUR 213,281 XOF 150,000,000 10/10/2018 (13,729) 10,233

ECLOF Colombia SAS EUR 199,563 COP 730,000,000 10/04/2019 (10,673) 27,280

ASUSU S.A. EUR 222,603 XOF 162,500,000 18/04/2018 (23,324) 4,436

COMUBA EUR 251,572 XOF 200,000,000 10/04/2020 (51,106) 43,779

PAMF BF EUR 283,994 XOF 200,000,000 10/07/2018 (18,684) 7,575

SUB-TOTAL 458,832 93,303

Total 552,135

NOTE 6IMPAIRMENTS AND WRITE-OFFS OF MICROFINANCE LOANS

The Board of Directors reviewed USD 650,000 (EUR 570,175) of notes issued by MSME Bonds (please refer to Note 7 for details)

which expose the Fund to the microfinance institution FINCA Azerbaijan Non-Bank Credit Organization (“FINCA AZ”). FINCA AZ is

facing significant uncertainties in its micro-credit led business model in a difficult economic and political environment. As at the

reporting date, the Fund had received USD 413,274 or 64% of principal in five repayments. The Fund expects to receive a further 25%

of the remaining outstanding to be repaid. The Fund does not expect to recover interest accrued on the note.

During the reporting period, LMDF’s Board of Directors decided to establish a provision of 10% against the remaining outstanding of

a senior, unsecured loan of USD 487,500 granted to the MFI Chamroeun Microfinance Ltd. in Cambodia (“Chamroeun”). Chamroeun

needs to undertake a substantial restructuring of its micro-credit lending business model. As a supportive measure, Chamroeun’s

creditors agreed on a stand-still of principal repayments and temporary waiver of certain loan covenants.

Variation of impairments on microfinance loans Unrealised gain/loss

Microfinance institution 31/03/2017 30/09/2017

Micro, Small & Medium Enterprises Bonds SA - FINCA Azerbaijan (161,290) (150,182)

Chamroeun Microfinance LTD 0 (41,237)

Total (161,290) (191,419)

Net variation of impairments (30,129)

NOTE 7SUBSCRIBED 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 the subscription to Notes backed by loans to microfinance institutions issued by the Luxembourg company Micro, Small & Medium Enterprise Bonds S.A. (“MSME Bonds”). Such Notes are listed on the official list of the Luxembourg Stock Exchange Euro MTF market. Arranger and Servicer to MSME Bonds is Symbiotics S.A., a Swiss-based, specialised microfinance advisor and asset manager. As at the reporting date, the Fund is exposed to a remaining unpaid principal and interest on a USD 650,000 Note 11-L. The total note issue is USD 8,650,000 (ISIN XS1051929831) and is backed by a loan granted by MSME Bonds to the microfinance institution FINCA Azerbaijan. Please refer to Note 6 for more details.

NOTE 8DETAILS OF EXPENSES, ACCRUED CHARGES AND OTHER ASSETS

As at the reporting date, accrued and payable expenses consisted of the following (in EUR):Accrued investment advisory fees contingent on the performance of microfinance assets 89,045Investment advisory fees 66,910Administration fees 37,760Legal fees 15,000VAT services fees 13,097Transaction related fees due to the custodian 13,000Transaction related fees due to the administrator 12,527Audit fees 11,439Information technology expenses 11,418Transfer agency fees 8,333Wages and salaries 7,639Custodian fees 6,320Domiciliation fees 3,125Representation fees 2,213Marketing fees 1,000Office rent and charges 308

Total 299,133

For the reporting period, other administrative costs consisted of the following (in EUR):Information technology 8,341Travel expenses 6,722Insurances 6,208Representation expenses 5,732VAT services 5,419Legal fees 5,206Membership fees 4,879CSSF annual fee 3,000Other fees 2,196Marketing and public relation fees 1,468Post and telecommunication 1,661Audit fees 1,053Board of directors and committee expenses 233

Total 52,118

As at the reporting date, other receivables and assets consisted of the following (in EUR):Receivable on incorporation of new sub-fund* 81,437VAT receivable 33,283

Total 114,720

As at the reporting date, deferred charges consisted in the following (in EUR):CSSF taxes 1,500Insurance 291

Total 1,791

*Recoverable expenses related to the constitution of the Forestry and Climate Change Fund which has been launched on 20 October 2017.


Quality of education and access to secondary education remain a considerable challenge in developping countries // LMDF

NOTE 9COUNTRY RISK INSURANCE

In view of reducing the exposure to risks inherent in certain countries, the Fund contracted “Assurances des Investissements” insurance policies from the Luxembourg Office du Ducroire covering the risks of war and “effet du prince” of the outstanding loan to Asusu in Niger.

NOTE 10ASSET – LIABILITY RISK MITIGATION

The Fund grants loans to microfinance institutions with maturities from 2 – 5 years. On 19 February 2016 the Fund has contracted a EUR 500,000 stand-by credit line with the Banque et Caisse d’Epargne de l’Etat to manage the asset-liability mismatch between assets and potential quarterly liquidity requirements for share redemptions. The Board of Directors decided that the sole purpose of the credit line is to honour redemption requests which may exceed the minimum 10% liquid asset threshold the Fund’s Prospectus foresees. The credit line may not be used to finance investments in microfinance institutions. The Fund's investment portfolio is pledged as a guarantee for this credit line.

NOTE 12FOREIGN EXCHANGE RATES

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

1 EUR = 20,53 ARS ( Argentine Peso)1 EUR = 3 472,30 COP ( Colombian Peso )1 EUR = 8,68 GTQ ( Guatemala Quetzal )1 EUR = 27,65 HNL ( Honduras Lempira)1 EUR = 15 925,96 IDR ( Indonesian Rupiah )1 EUR = 39,40 THB ( Thai Baht )1 EUR = 1,18 USD ( United States Dollar )1 EUR = 660,77 XOF ( West African CFA Franc )

NOTE 13STAFFDuring the reporting period ended on 30 September 2017, the Fund employed three full-time staff. The Fund also offers internships to interested students. The Fund’s Board of Directors adopted a Remuneration Policy for the fixed and variable remuneration of the Fund’s staff and which is available for public consultation on the website www.lmdf.lu or at the registered office of the Fund.

NOTE 14COMMITMENTS

/ A Commitments of shareholders to subscribe shares

As at the reporting date, the Fund has outstanding commitments with investors to subscribe Class B shares for a total amount of EUR 4,333,333. EUR 4,000,000 of the commitments is callable to finance LMDF’s microfinance investments in the Asian, African and Pacific States who are parties to the Cotonou Agreement. The remaining commitment is callable in two equal tranches during the calendar years 2017 and 2018.

/ B Commitments of the Fund to invest

As at the reporting date, the Fund has no outstanding commitments to invest in financial instruments.

NOTE 15RELATED PARTY TRANSACTIONS

The Fund 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 a related party. During the reporting period, the Fund conducted the following material transactions with related parties, excluding subscription of shares and commitments to subscribe for shares in the future:

The Fund has concluded an investment advisory agreement with ADA with the remuneration structure disclo-sed in Note 3.

NOTE 11TOTAL EXPENSE RATIO

Average net asset value during the period (in EUR) 29,694,463Total expenses for the period 1 April 2017 until 30 September 2017 (in EUR) 384,192

Total expense ratio (annualised) 2.6%


The Fund also sub-leases an office and certain services in the “Maison de la Microfinance”, a building leased by ADA at 39, rue Glesener, Luxembourg Ville. The Board of Directors of the Fund estimate the rent to corre-spond to a rent agreed in an arm’s length transaction with an unrelated party.

The Executive Director of the Fund has been appointed as a board member of the microfinance 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 is not a member of the Pricing Committee. The Executive Director’s mandate ended in June 2017.

NOTE 16SHARE TRANSACTIONS OF DIRECTORS The directors of the Fund have not undertaken share transactions during the reporting period.

NOTE 17SUBSEQUENT EVENTS BETWEEN THE YEAR END UNTIL 24 NOVEMBER 2017

In October 2017, the Board of Directors resolved to amend the Prospectus of the Fund. Among these amend-ments are additional decision making powers granted to the investment committee of the Fund to ensure an efficient investment process.

The Forestry and Climate Change Fund, a second compartment of the Investing for Development SICAV has been launched on 20 October 2017.

42-43

Imprint

Conception and Layout : binsfeld.lu / LMDF - Jennifer Urbain

© Images: LMDF // PAMF Burkina Faso // Pana Pana // Gonzalo Charaja Ramos - Fondesurco // Génésis // Pro Mujer Nicaragua // Asusu // Kredit // INMAA // Claudine Lorang // Doris de Paoli // Patrick Bilbault // Mark Uldall // Esther Meyer© Luxembourg Microfinance and Development Fund − Sub-Fund of Investing for Developmet SICAV, 2017 // All rights reserved.

2, place de Metz /// L-1930 LuxembourgT.: +352 27 47 35 /// F.: +352 27 47 35 72 /// [email protected] /// www.lmdf.lu

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