Results

17.1%

growth of the
net assets
in 2016

Triodos Microfinance Fund’s total assets grew by 17.1% to EUR 357.1 million as at the end of 2016 (2015: EUR 305.0 million). The 2016 net result of Triodos Microfinance Fund amounts to EUR 10.8 million (2015: EUR 8.4 million). The fund’s interest income from loan investments increased by 5.4% to EUR 16.4 million (2015: EUR 15.6 million), which is in line with the expansion of the debt portfolio. In addition, the fund almost doubled its dividend income from equity investments, to EUR 2.7 million (2015: EUR 1.5 million).

The fund realised a gain of EUR 5.0 million (2015: EUR 2.2 million) on debt and equity investments. The gains were largely the result of capital redemptions in the Indian Financial Inclusion Fund. This fund is in the exit stage and has made a number of successful exits from MFIs in India. The realised losses on investments amounted to EUR 2.8 million (2015: EUR 0.2 million), of which EUR 1.8 million constituted currency exchange losses on loans maturing during the year.

During 2016, the fund suffered a net loss of EUR 7.9 million on foreign exchange contracts (2015: EUR 12.6 million). Hedging costs for both US dollar swaps and local currency loans remained high in 2016, because of the divergence between interest rates in the eurozone and the US. The net change in unrealised appreciation of investments was EUR 9.3 million for both debt and equity investments (2015: EUR 8.7 million). This amount includes an additional EUR 1.3 million in provisions for loans and accrued interest in Azerbaijan, Nigeria and Bosnia Herzegovina and an increase of EUR 2.9 million in unrealised foreign exchange gains.

Total operating expenses in 2016 came to EUR 6.5 million (2015: EUR 5.4 million). The majority of these expenses consist of management, distribution and service fees, which rose to EUR 5.9 million (2015: EUR 4.9 million). This increase is in line with the growth of the net assets of the fund.

Return based on net asset value (NAV) per share*

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Share class

1-year
return p.a.

3-year
return p.a.

5-year
return p.a.

Return p.a.
since inception

*

NAV per share is based on share prices as per December 30, 2016, i.e. the last price at which shares were traded in the reporting period.

**

The Z share class and K-Z share class have a limited history. Returns prior to the launch date of the Z share class and the K-Z share class are based on the returns of the comparable R share class and K-B share class.

***

The GPB-denominated share classes are hedged against the euro.

 

 

 

 

 

B-cap (EUR)

3.6%

3.8%

5.1%

4.7%

B-dis (EUR)

3.6%

3.8%

5.1%

4.7%

I-cap (EUR)

4.3%

4.5%

5.9%

5.3%

I-dis (EUR)

4.3%

4.5%

5.9%

5.2%

R-cap (EUR)

3.6%

3.8%

5.1%

4.7%

R-dis (EUR)

3.6%

3.8%

5.1%

4.7%

Z-cap (EUR)

4.1%

4.3%

5.5%**

4.9%**

Z-dis (EUR)

4.1%

4.3%

5.5%**

4.9%**

K-B-cap (GBP)***

4.3%

4.1%

5.4%

4.8%

K-B-dis (GBP)***

4.2%

4.1%

5.4%

4.6%

K-I-dis (GBP)***

5.1%

4.9%

6.2%

5.4%

K-R-dis (GBP)***

4.3%

4.2%

5.5%

4.7%

K-Z-cap (GBP)***

4.8%

4.6%

5.8%**

5.1%**

K-Z-dis (GBP)***

4.9%

4.7%

5.8%**

4.9%**

 

 

 

 

 

Provisions

In May 2016, the fund increased the provision for its position in Prizma in Bosnia Herzegovina from 95% to 100%, following disappointing debt collection levels. The total amount of provisions for Finca Azerbaijan was partly reversed during the year, because of higher-than-anticipated collections on the outstanding loan portfolio. In Nigeria, the fund established provisions for positions outstanding after facing interest payment arrears due to a shortage of hard currency. The fund is faced with non-payment of interest by AB Microfinance Bank and Fortis Microfinance Bank in Nigeria.

As at December 31, 2016, the total provisions for loans outstanding amounted to EUR 5.1 million, which is 1.4% of the fund’s total assets (2015: respectively EUR 3.8 million and 1.3%).

Return

The return of the EUR-denominated institutional share class amounted to 4.3% (2015: 3.3%).

Both the equity and debt portfolio contributed positively to the return. The return was negatively affected by the provisions the fund has established for part of its loan portfolios in Azerbaijan, Nigeria and Bosnia-Herzegovina. Differences in performance between the share classes are mainly attributable to the different cost bases, as explained below in the section on Costs.

Liquidity

Triodos Microfinance Fund aims to retain a minimum of 10% of its net assets in cash or cash equivalents, in order to facilitate redemptions in the fund. The fund’s liquidity ratio at year-end amounted to 17.6% of the net assets. The cash position has improved compared to last year, when the liquidity ratio was 22.5%.

Costs

The largest item in the cost structure of Triodos Microfinance Fund is the management fee paid to the investment manager. Triodos Investment Management uses this fee primarily to cover staff costs, including travel expenses incurred in connection with providing new finance facilities and managing existing finance facilities. This is generally quite a labour-intensive process, especially the management of the fund’s equity investments, which requires frequent trips to the countries where investments are made. The lead times for first investments are relatively long because of the thorough due diligence analysis that is required. Other significant costs are the fees paid to RBC Investors Services Bank, for instance for its depositary and administrative services. The ongoing charges for Triodos Microfinance Fund, which include the management fee, ranged from 1.92% to 2.00% for the institutional share classes (2015: 1.94% to 2.00%) and from 2.11% to 2.63% for the other share classes (2015: 2.13% to 2.78%). More detailed information on management fees and ongoing charges can be found in the (PDF:) Notes to the financial statements.

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