Market Commentaries Dec. 2011

Dual Return Fund - Vision Microfinance

In 2011 as well as during the past few years we have been sticking to our strategy of investing in microfinance asset class irrespectively of world economic trends, in accordance with our Vision Microfinance Fund’s investment policy and objectives.

So far over 240 m USD have been distributed in the form of 253 loans to 113 different MFIs in 38 countries. The Fund investments reach out to an estimated more than 250,000 micro entrepreneurs including their families, through the provision of credit.

In December the Fund’s investee MFIs showed strong financial, operational and social performance. The fund’s total microfinance investment portfolio yield was 7,9% p.a., and a modified duration – 1,0. Fund’s December performance was 0,26% for EUR (P) Share Class and 0,33% for EUR (I) Share Class. In 2011 the Fund provided investors with a net return of 2,51% for EUR (P) and 3,23% for EUR (I) share classes outperforming the SMX EUR Microfinance Index.

The general market outlook for microfinance for 2012 is positive overall. After all the negative media and in spite of a conservative stance taken by some investors towards the microfinance in 2011 the industry keeps working and it looks promising. Largely the microfinance sector is back to growth, the MFIs showing improvement in portfolio quality, profitability and governance. Favorable outlook for sustained economic growth in a number of emerging and frontier markets stimulate the increased demand for microfinance loans.

Microfinance is evolving and our expectation of it has to evolve as well. After the period of rapid growth in the past and recent set-backs, the microfinance industry enters a new stage of its development – stage of a more sustainable and responsible growth. A high degree of confidence exists that the stakeholders of microfinance will be capable to address different challenges microfinance currently faces by adopting best practice solutions to mitigate risk of over-indebtedness, to better protect clients and to enhance transparency.

We would like to thank all our stakeholders for your cooperation throughout 2011 and wish you a prosperous and peaceful 2012!

Dual Return Fund - Vision Microfinance Local Currency

Throughout 2011 the Vision Microfinance Local Currency has been sticking to its strategy of investing in local currency microfinance debt in accordance with the Fund’s investment policy and objectives, irrespectively of world economic tendencies.

During 2011 the Fund’s investee MFIs exhibited sound financial, operational and social performance overall. The MFIs adhere to their strong social missions and objectives, they strengthen their corporate governance and controls, and develop their product offering – expanding in both urban and rural areas.

Despite some near term uncertainties the longer term economic fundamentals of emerging and frontier markets still stay strong. Emerging and frontier markets in general are projected to remain the main driving force of global growth in the medium term providing a reasonable basis for sustainable appreciation of the local currencies. Favorable outlook for sustained economic growth in a number of emerging and frontier markets stimulate the increased demand for microfinance loans. The Vision Microfinance Local Currency Fund is well positioned within the EM universe to offer a diversified portfolio of two distinct sources of return - currency and MFI promissory notes yields.

In December developments in the global currency market were influenced mostly by the ongoing debt crisis in Europe, loose monetary policy in most countries, sovereign and bank credit ratings downgrade in developed economies, asset-price adjustments in emerging markets and flight to liquidity.

During the month under review, local currencies in the fund’s portfolio saw mostly strong to flat performance. The prevailing FX upside of most local currencies in the Fund’s portfolio against the U.S. dollar during December had a positive impact on the monthly performance of the Fund’s share classes.

In 2011 Vision Microfinance Local Currency Fund showed strong performance posting 4,55% net return to investors in USD (I) Share Class. We would like to thank all our stakeholders for your cooperation and support to our Fund throughout 2011 and wish you a prosperous and peaceful 2012!