Results

7.7%

growth of the
net assets
in 2017

Financial results

Triodos Microfinance Fund’s net assets grew by 7.7% to EUR 365.3 million at the end of 2017 (2016: EUR 339.2 million). The 2017 net result of Triodos Microfinance Fund amounts to EUR 2.4 million (2016: EUR 10.8 million). The fund’s interest income from loan investments increased by 18.2% to EUR 19.4 million (2016: EUR 16.4 million), which is in line with the expansion of the debt portfolio. Dividend income from equity investments in 2017 was EUR 2.7 million, in line with the previous year (2016: EUR 2.7 million).

The fund realised a gain of EUR 5.1 million (2016: EUR 5.0 million) on debt and equity investments. The realised losses on investments amounted to EUR 2.1 million (2016: EUR 2.8 million), of which EUR 1.8 million constituted currency exchange losses on loans maturing during the year.

During 2017, the fund suffered a net loss of EUR 0.6 million on foreign exchange contracts (2016: EUR 7.9 million). The net change in unrealised depreciation of investments was EUR 31.9 million for both debt and equity investments (net change in unrealised appreciation of investments in 2016: EUR 9.3 million). This amount mainly includes unrealised losses on currency movements due to the appreciation of the euro against the US dollar and most other currencies in the investment portfolio.

Total operating expenses in 2017 came to EUR 7.4 million (2016: EUR 6.5 million). Most of these expenses consist of management, distribution and service fees, which rose to EUR 6.5 million (2016: EUR 5.9 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 29, 2017, i.e. the last price at which shares were traded in the reporting period.

**

The I-II-share class was launched on April 28, 2017. Annual returns are therefore not available.

***

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 the K-B-share class (which were closed on June 30, 2017) respectively.

****

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

 

 

 

 

 

B-cap (EUR)

0.2%

2.1%

3.6%

4.1%

B-dis (EUR)

0.2%

2.1%

3.6%

4.1%

I-cap (EUR)

0.9%

2.8%

4.3%

4.8%

I-dis (EUR)

0.9%

2.8%

4.3%

4.7%

I-II-cap (EUR)**

 

 

 

 

I-II-dis (EUR)**

 

 

 

 

R-cap (EUR)

0.2%

2.1%

3.6%

4.1%

R-dis (EUR)

0.2%

2.1%

3.6%

4.1%

Z-cap (EUR)

0.7%

2.6%

4.0%***

4.4%***

Z-dis (EUR)

0.7%

2.6%

4.0%***

4.4%***

K-I-dis (GBP)****

1.3%

3.3%

4.7%

4.9%

K-Z-cap (GBP)****

1.2%

3.1%

4.4%***

4.6%***

K-Z-dis (GBP)****

1.1%

3.1%

4.4%***

4.4%***

 

 

 

 

 

Provisions

In 2017 the fund increased the provision for a debt position in Nigeria, due to an increase in the credit risk profile of the institution. The total amount of provisions for one investee in Azerbaijan and another investee in Nigeria were fully reversed during the year, as the loans were fully repaid. The fund partially reversed provisions for an MFI in Azerbaijan due to higher-than-anticipated collections on the debt portfolio.

As at December 31, 2017, the total provisions for loans outstanding has decreased to EUR 4.1 million, 1.1% of the fund’s net assets (2016: EUR 5.1 million, 1.5% of the fund’s net assets).

Return

In 2017, the return of the EUR-denominated institutional share class amounted to 0.9% (2016: 4.3%). The equity and debt portfolios contributed negatively to the return calculated in euro but not in local currency terms. Hedging contracts, on the other hand, had a positive impact and offset part of the unrealised and realised losses due to currency movements. Since the fund also maintains open positions, the hedge contracts only partially compensated for the incurred unrealised losses. The return was further positively affected by the reversal of provisions the fund had established for part of its loans in Azerbaijan, Bosnia-Herzegovina and Nigeria.

The lower fund performance in 2017 and the negative performance of the debt and equity portfolios was mainly driven by the sharp appreciation of the euro relative to most local currencies and the US dollar. The operational performance of the underlying investment portfolio in local currency remained positive, however. The operational performance of the equity investees remained strong, although the results were not sufficient to offset the full depreciation effects on a portfolio level. Interest income from the debt portfolio increased beyond the previous year’s levels, in line with the growth of the debt portfolio. Overall provision levels have decreased, as the fund is receiving repayments of amounts it had previously deemed uncollectible.

Differences in performance between the share classes are mainly attributable to the different management fees and the result of the share class hedging for the GBP-denominated share classes.

Liquidity

Triodos Microfinance Fund aims to retain sufficient buffers in cash or cash equivalents in order to facilitate redemptions in the fund. The fund’s liquidity ratio at year-end 2017 amounted to 13.8% of the fund’s net assets (2016: 16.7% of the fund’s net assets).

Costs

The largest item in the cost structure of Triodos Microfinance Fund is the management fee paid to the AIFM, Triodos Investment Management. The AIFM uses this fee primarily to cover staff-related costs, including travel expenses incurred in connection with the labour-intensive investment process. This is particularly true for 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 costs include the fees paid to RBC Investor Services Bank for their depositary and administrative services.

The ongoing charges for Triodos Microfinance Fund, which include the management fee, ranged from 1.76% to 1.92% for the institutional share classes (2016: 1.92% to 2.00%) and from 2.11% to 2.65% for the other share classes (2016: 2.11% to 2.63%) as per December 31, 2017. More detailed information about management fees and ongoing charges can be found in the (PDF:) Notes to the financial statements.

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