Market Commentaries April 2012

Dual Return Fund - Vision Microfinance

The Dual Return Fund – Vision Microfinance has successfully renewed its application (April 2012) for the LuxFLAG Microfinance Label. The purpose of the Label is to promote the raising of capital in microfinance by reassuring investors that the Microfinance Investment Vehicle (MIV) really invests in microfinance. In order to obtain a LuxFLAG Microfinance Label a fund must comply with a number of criteria set by LuxFLAG, such as having a microfinance portfolio corresponding to at least 50% of the MIV's total assets, having at least 25% of its microfinance portfolio invested in MFIs rated by a microfinance rating agency recognized by LuxFLAG, seeking a return on investment and complying with some legal and governance criteria. Also the MIV must duly complete the “social performance” questionnaire as part of eligibility criteria for the Microfinance Label. Find more information about The Luxembourg Fund Labelling Agency (LuxFLAG) at www.luxflag.org.

In April the Fund was almost fully invested in microfinance. We registered steady funding demand from MFIs, which was coming mostly from Latin America and Asia. The fund’s total microfinance investment portfolio yield was 7,8% p.a., and a modified duration: 0,8. The fund registered stronger than usual monthly performance: 0,43% for EUR (P) Share Class and 0,50% for EUR (I) Share Class, mainly due to the recovery of previously provisioned loan positions in Nicaragua and Bosnia as well as owing to its high investment level in the month under review.

The Fund’s MFIs show a sound financial and operational performance and deliver a positive social impact by improving the economic conditions of unbanked clients in many countries. The Dual Return Fund - Vision Microfinance portfolio is well positioned in comparison to SYM50 industry benchmark, outperforming the index particularly in terms of portfolio at risk and return on equity ratios.

Dual Return Fund - Vision Microfinance Local Currency

The policy of the Vision Microfinance Local Currency Fund is to contribute to sustainable growth of microfinance institutions in emerging and frontier markets and provide investors with competitive financial and social returns derived from a portfolio of investments broadly diversified across many currencies, MFIs and micro-entrepreneurs.

In April the Fund disbursed an equivalent to 2.5 m USD in Armenian dram, Mongolian tugrik and Azerbaijani manat in the form of direct loans to two new to the Fund MFIs from Mongolia and Azerbaijan, and one existing MFI from Armenia – FINCA Armenia. The FINCA Armenia’s vision is to become a local network and to collectively serve more low income entrepreneurs than any other MFI in Armenia while operating in line with sound commercial performance and sustainability principles. FINCA Armenia has one of the widest branch networks amongst Armenian MFIs, covering almost all regions of the Republic of Armenia, and operates in relatively remote areas serving a lower market segment with the average credit per borrower of around USD 800.

Fund’s April performance was 0,55% for USD (I) Share Class. During the month under review the Fund’s total microfinance investment portfolio yield was about 11% p.a., and a modified duration of 0,8. We continued booking more deals for further disbursement in the coming months to keep the Fund invested in microfinance.

In April developments in the global currency market were influenced mostly by growth and sovereign debt sustainability fears for Europe, high oil prices, accelerating US economic activity and investor expectations on China's soft landing.

The prevailing FX upside of higher exposure local currencies, such as COP, PHP, RUB and PEN in the Fund’s portfolio against the U.S. dollar, especially in the second half of the month, had a positive impact on the monthly performance of the Fund’s share classes.