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Sample REPORT

Sample - “ABC” Fund
Luxembourg │ October 2011

Legal name: ABC Fund Investment Approach
Registered domicile: ABC Location
Legal structure: ABC The Fund invests, directly or indirectly, in the equity,
Asset class: Open-ended hybrid MIV subordinated debt, senior debt and other debt instruments
of qualifying MFIs and other applicable financial institutions
Inception date: February XX, 20XX
that have a track record, have gone through the first phase
Maturity date: None
of rapid growth and are financially sustainable. The Fund
Fund manager: ABC Manager
may also invest in Greenfield MFIs.
Investment advisor: ABC Advisor
Sponsor: ABC Sponsor Debt financing is structured in local currency, U.S. dollars,
Custodian: ABC Bank, XYZ Bank and euros. Equity investments are primarily denominated in
LuxFLAG labeled1: Yes local currency. Investments in local currencies may be
Share classes: 12 institutional/retail classes are offered2 hedged at the Fund Manager’s discretion (up to 60% may
Target annual return: 6-9% be unhedged).
Open to new investors: Yes
MIV Classification

About The Fund Debt Hybrid Equity
Large(>$200m)
Launched in early 20XX, the Fund aims to increase access
to financial services for low-income people in developing Mid ($30-200m)
countries by providing loans and equity to microfinance Small (<$30m)
institutions (MFIs) and seeks to achieve an attractive
financial return for investors.
Regional Breakdown (% of Portfolio)
The Fund is organized as an open-ended fund and is one of
two so-called “Sub-Funds” of a larger “Umbrella Fund”,
ABC Fund. This organizational arrangement enables the
Latin America &
Fund Manager to maintain two distinct investment 6% Caribbean
portfolios, each with its own objectives, target markets, and 10%
East Asia & Pacific
risk profiles, while benefitting from shared administrative
costs. 3 40%
15% South Asia
During 20XX, the Fund’s net assets grew by 52.5% to
€XXX million, consisting of 26 holdings in 18 countries in Europe & Central Asia
Latin America, Asia, Africa and Eastern Europe.
28%
Sub-Saharan Africa
The Fund is managed by ABC Management (the ABC
Advisor). The ABC Advisor is an experienced microfinance
investment manager with approximately €XXX million in
microfinance assets under management and has been
providing capital to the microfinance sector since 19XX.

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XXX XXX Total . 102 101  Over the mid to long term (approximately 7 years) 100 targeted annual asset returns are 6-9%. XXX XXX  Foreign exchange/equity investment earnings ($) volatility Cash ($) .luminis. Hence. and is FUND 3-month Libor projected to grow to €XXX million by year end 2011.com a service of MicroRate Incorporated Page 2 of 10 .expense levels are among the lowest in the peer group.9% of portfolio) are an area of While the Fund is relatively new. 103 the results thus far are encouraging. host of political. and capital market Additionally. Andhra Pradesh (see Sovereign Risk). the Fund has posted Net income . Assuming 99 continued solid portfolio performance. competitive. XXX XXX liabilities ($) Total equity . losses of €XXX. www. team and good expense controls . the losses represent a substantial percentage (XX%) of the cumulative reported pre. having been launched in particular concern due to the political and regulatory 20XX. the Fund has posted cumulative since the fund is still relatively young and has yet to realized and unrealized foreign exchange (FX) related achieve its intended target size of €XXX million. loan delinquencies have risen in Indian related challenges.000. particularly if the Fund’s 104 equity investments continue to perform well. overall. It was €XXX million as of December 31. XXX XXX ($) positive returns. credit.ABC FUND │ Luxembourg │ October 2011 This level of asset inflows should support continued Performance positive returns as well as the achievement of targeted rates. Much of the credit for the positive and Peruvian MFIs during 2010 as growth moderated performance is due to the experience of the management somewhat in many developing economies. which is impressive  Since its inception. While swings in FX results can be expected.  Positive operating results since 20XX launch  Very strong follow-on subscription results despite challenging market conditions Figure 1: Financial Highlights  Excellent expense management Dec-08 Dec-09 Dec-10 Weaknesses Total assets . return on assets (ROA) for fiscal year end (FYE) 2010 were a strong 4.tax Strengths profits of the Fund to date. Even Figure 2: Annual Return the results during the start-up year (20XX) produced an ROA of 1.  Portfolio MFIs have not gone completely unscathed Rationale during the global economic crisis. 106 Overall. 97 2009 2010  The Fund has grown rapidly since inception. The Fund’s investments in India (3. the 2010 performance is indicative of the Fund’s 105 top tier performance potential. 2010. XXX XXX  Some recent deterioration in borrower ($) delinquency statistics in the MFI loan portfolio Portfolio . these targets 98 appear to be achievable.2% .this reflects positively on the organizational 107 capabilities of the ABC Advisor. provided the growth does not significantly diminish portfolio quality. these results are well below peer averages. results to date have been encouraging despite a challenges facing the country’s largest microfinance market.9% as the Fund benefitted from significant unrealized gains on its equity investments. XXX XXX FINANCIAL RESULTS4 ($) Since its inception in February 20XX.

. Figure 5: Fees & Expenses  Investment income from collateral and cash accounts grew from €XXX million in 2009 to €XXX million during Fund Peer group 2010.3 Operating expense (%) . . MicroRate notes however EFFICIENCY that equity investments can be a volatile earnings source.luminis.0 4. During 2010. 1.0 .0 5. dollar and the euro).0 EARNINGS QUALITY Return on assets (%) . As the Fund’s plans call for continued growth in Total expense ratio (%) 1.ABC FUND │ Luxembourg │ October 2011 Figure 3: Performance Summary yet to record a single provisioning expense related to its loan portfolio. -0. .5% for retail share classes issued and outstanding percentage of total assets) shows good progress from and up to 1. Tax. new subscriptions and outstanding.  The Fund’s “core” 2010 profitability of 2% (based solely on the interest earnings generated by the Fund’s  The ABC Advisor receives management fees of up to investments net of operating expenses. Fund which commenced operations recently and has yet to reach its target asset size.9 The Fund has experienced positive. 3. asset returns would have ratio (“TER”) at or below 2%. 0.S. to date. . .0 0. 0. During 2010.3 8.2 Return on assets (%) . Other income (%) . Accounting.  While the Fund expressed concerns in its 2010 annual report with respect to its equity investments in the Indian state of Andhra Pradesh. losses totaled €XXX in spite of realized gains of €XXX. . earnings were supported by €XXX million in unrealized gains on equity investments – a sign the Fund is off to a good start. - FX income (%) . - Interest expense (%) . the Fund also managed to channel much  Program expenses (Audit. which represents a majority of its total Since investments (80%) 5 10 inceptio YTD 1 yr 3 yrs yrs yrs n (27- Feb-09) Figure 4: Earnings Indicators (% of total assets) Return (%) 5. . . the Fund has www. . the Fund has kept its total expense Had these gains not occurred.2 +/. as a 2. .0 Dec-08 Dec-09 Dec-10 Portfolio income (%) . .9 - assets under management (the Fund is only 65% of the way to its target size of €XXX million). 2. Deferred sales charges None -  The Fund has experienced moderate losses relating to FX management.3 +/. For two straight years.0 0.9%).5 0. 1.Peer group (%) . Nevertheless. Other) more of its funds to productive investments – holdings appear to be below peer averages due to scale of low yielding cash equivalents as a percentage of economies achieved by the ABC Advisor.5 2.75% for institutional share classes issued 2009 results of 1. The decision to realize some gains on existing FX contracts is an indication that the Fund may have decided to reduce the overall level of local currency hedging (perhaps due to continued strengthening of emerging market currencies against the U. . total assets fell from 43% at the end of 2009 to 19%.2%. . . Indeed. During 2010. this growth trend Front end sales charges None - should continue to improve over the near term. .Peer group (%) . 0.com a service of MicroRate Incorporated Page 3 of 10 . this is one of the been in the 2% range during 2010 (as opposed to reported lowest TERs in the industry and an impressive result for a results of 4.4 -1.0 Provision expense (%) . caused the Fund’s assets to swell by 52%. but varied results since inception.

6 The portfolio is composed of €XXX million of loans and Figure 7: Top 10 Countries €XXX million in equity investments to 26 entities around the world. Rationale  The Fund’s weighted average sovereign rating is BB- (S&P scale). Strengths to date.  The Fund adheres to its own internal guidelines of diversification by country.3 lower-middle income and upper-middle income countries. which denotes below average country risk The Fund benefits from lower than average sovereign risk. the investment flexibility MicroScope Index5 is also used to help more fully gauge the country risk and investment climate Weaknesses specifically for microfinance. On the other hand. Overall. an absence of debt. However.2 3% Country7 4. which is  Redemption risk well above average (again indicating a more favorable  Potential local currency risk sovereign risk profile compared to its peers).XX. East Asia and the Pacific. as a complement. and good liquidity. Herzegovina (1.3 Country3 11.  Payment performance track record (zero defaults to date)  It is important to note that sovereign ratings alone do  Good liquidity position not capture all the risks of MFIs’ operating  Absence of short/long term debt gives Fund environments.6 Country6 4.9%) and Bosnia and equates to an above average risk score. compared to other MIVs.ABC FUND │ Luxembourg │ October 2011 SOVEREIGN RISK Risk The loan and equity investment portfolio is spread across 18 countries mainly from the regions of Latin America and the Caribbean. which suggests greater geographic PORTFOLIO COMPOSITION dispersion than its peers. peers overbanked and poised to moderate. peers markets for several years but could be somewhat  Above average portfolio loan quality vs.7%) have recently experienced adversity.luminis. Country2 20.8 Figure 6: Portfolio composition (% of portfolio) Country4 10.com a service of MicroRate Incorporated Page 4 of 10 .2 MFI equity Country10 3. While the Fund also has exposure to Country3 (11. this Nicaragua. India (3.8%).4 Country5 4. Its Herfindahl-Hirschman Index (HHI) is 0. % of portfolio The majority of institutions are medium sized MFI’s serving Country1 21. and Europe and Central Asia.0 71% Equity in other MIVs www. the fund is subject to redemption risk and has the ability to  Notably. investments here have performed well. Therefore. the Fund’s weighted average score was 53. there is no exposure to the high risk country of incur significant open local currency risk.2 MFI loans 26% Country8 3.9 Country9 3. According to this scale. which has also experienced stress. Country4 and Country5 have been strong microfinance  Lower overall sovereign risk compared to.

0 Figure 9: Top 10 Holdings LEVERAGE % of portfolio To date.g.0 retained earnings).06 for single name exposure is very sound. which compares range.9%) portion of its AAA to BB+ to B to D assets in cash and cash equivalents.2 million in capital (accumulated net subscriptions and Holding4 6. all Fund capital is comprised of paid- in capital (unfunded capital commitments are  Similar to its country concentration limits.to β+ (average risk) facilities provided by commercial banks).8 commitments and positive earnings to date.  The weighted average tenor of the Fund’s loan portfolio is 69 months from issue. 9% 2% α+ to α (low risk) alternatively. Figure 10: Liquidity Indicators  Although the Fund’s top 10 holdings account for 66. This is above BBB.2 Figure 11: Leverage Indicators Holding7 5. Holding1 15. n/a n/a Rest of portfolio (16 holdings) 33. mismatches exist through the life of the assets. the Fund’s HHI score of 0. redemption risk (see Structural  The weighted average financial strength rating (FSR) of Risks) is a potential material source of ALM risk. as an open end fund. Also. the obligors are generally medium risk liability management (ALM) financing issues . standby liquidity 18% 48% 3% α. which indicates moderate institutional credit risk.ABC FUND │ Luxembourg │ October 2011 PORTFOLIO RISK LIQUIDITY / ASSET-LIABILITY MANAGEMENT The Fund primarily targets larger. apply across all funds under management by the ABC Advisor. capacity to offer flexible loan terms to its clients.2 Dec-08 Dec-09 Dec-10 Holding8 4. the Fund’s MFI partners is β. the Fund commonly associated with closed end funds and adheres to single-institution diversification limits that private equity funds).8 Holding6 5.3% of the portfolio.6 Debt / available capital . Given the Fund’s lack of borrowing.3 As an open-end fund with no debt or unfunded Holding2 9. the Fund has zero asset- funders. well established With no debt outstanding and very modest liabilities related institutions with successful track records as commercial to foreign exchange contracts. indicating Interest coverage ratio . 100. or 61 months remaining as of  Exposure to high risk institutions with FSRs of β or 2010 year-end. but longer dated loans may lead to increased credit risks Figure 8: FSR versus Sovereign rating (% of portfolio) over time. B+ peer averages. Paid-in capital / committed capital (%) . to arrange for other forms of liquidity which can act as a substitute (e.9 concentration when compared to peers.2 Holding10 3.8% Dec-08 Dec-09 Dec-10 of the total portfolio. 3% 16% 5% β to γ (high risk) interest coverage metrics are not applicable. it has the favorably to peers. n/a n/a Holding9 4. As such.  Because the fund has no outstanding debt at this time.  The Fund maintains a substantial (15. the Fund maintains a very strong capital position consisting of €XXX Holding3 7.6 Debt / equity . whose loan maturities are closer to the 36 month comprise 10. The Fund’s stated policy is to maintain a minimum of 10% in liquid assets at all times or.2 www. However. 43. Holding5 5. the Fund has not employed the use of leverage.com a service of MicroRate Incorporated Page 5 of 10 . n/a n/a significantly lower than average overall client Cash ratio (%) .luminis. with respect to structure.0 15. This is somewhat greater than peer below in countries with sovereign ratings of B or below funds.no maturity MFIs located in lower risk countries.0 100.

However.com a service of MicroRate Incorporated Page 6 of 10 .2%). and satisfy any such request and thus represents a material Country3 (2.8%). realized gains of redemptions versus €XXX million in new subscriptions. Figure 12: Net currency exposure (% of assets) COVENANT COMPLIANCE The Fund’s stated policy is to maintain a minimum of 10% in liquid assets at all times or. - yielding subordinated loan yields with the lower yielding senior loans. whereas the loans may be of shorter maturity. . Its policy is to make fixed rate loans. . While the open-end architecture As of FYE 2010. 24. of which 58.9 % of the Fund’s investments were provides liquidity advantages for shareholders. required to accommodate early redemption requests and euro hedged. the investment policy permits up to redemption requests (closed-end fund structures are not 60% of the Fund’s local currency investments to be non.6% blending the higher . Country2 (2. net interest and dividend income provides for a high net yield on investments of 5. During 2010. funded with fixed rate term Amount in Loss Recovery funding. to arrange for UGX other forms of liquidity which can act as a substitute (e. it is hedging – while the Fund states that local currency will expected to accommodate occasional shareholder generally be hedged. The largest unhedged local currency management to maintain sufficient liquidity to promptly exposures include Country1 (3. DOP PYG PAYMENT PERFORMANCE INR The Fund has experienced no loan defaults since inception. INTEREST RATE RISK Figure 13: Payment Performance  The Fund takes significant interest rate risk. The performance is also a reflection of the management team’s extensive microfinance experience. 10. alternatively.g. due to the made in local currencies. BDT standby liquidity facilities provided by commercial banks). and vice versa.7% were unhedged inherent illiquid nature of the majority of the Fund’s – hence. www. - the margin over the cost of funds could diminish. However.3% of the Fund’s portfolio was exposed to investments it also places a significant burden on open currency risk. given the low leverage. . €XXX were more than offset by €XXX million in unrealized losses.ABC FUND │ Luxembourg │ October 2011 MARKET RISK STRUCTURAL RISKS CURRENCY RISK REDEMPTION RISK The Fund has significant latitude with respect to currency Because the Fund has an open-end structure. especially given recent challenging -4% -3% -2% -1% 0% 1% 2% 3% global economic conditions.luminis. typically only accommodate redemptions in an emergency and at a hefty exit cost). MGA This is encouraging.0%). . The Fund has experienced losses relating to its FX To date. this is approximately equal to the fund’s cost of borrowing.  The current yield on loans is 5. the Fund has experienced only €XXX in currency management.5%. structural risk for the Fund. . and consistent with the strong Assets Liabilities overall asset quality metrics noted in the Risk section of this report. the term of the funding is 5-10 default (P+I) realized status years. Should the prevailing market rates for loans decrease.

the Fund nevertheless exhibits very good ABC Program in order to contribute to the embedding of socially responsible investment in this sector. have gone through the first phase of rapid growth and are financially sustainable. The study was conducted by Strengths the University of XYZ and published in January 2011. in demonstrates a high level of commitment to fully conjunction with the XYZ and PQR took the initiative integrating its social mission. and environmental protection. environment. indicates the extent to which the MFI has a clear vision The Fund conducts itself in a highly ethical manner and and objective for each of these dimensions. Corporate Social Responsibility (CSR) relates to the The Sustainability Management System classifies MFIs in standards of corporate behavior to which the institution terms of four dimensions: products & services. banking. expertise and experience as a small scale lender to strengthen the governance and transfer triple bottom line The Fund’s investment advisor has developed a practices of the Fund’s microfinance clients.it aims to increase access to financial services for low-income people in developing countries by providing loans and equity to MFIs SOCIAL PROCESS/ORIGINATION that have a track record. social performance results which are consistent with its triple bottom line mission and objectives. Rationale  In early 2010. Sustainability Management System as part of its investment process to help clarify the social and environmental performance of clients as well as their CORPORATE SOCIAL RESPONSIBILITY (CSR) attitude towards over-indebtedness and transparency. The score transparency. ABC Management. presently. the fund  The Fund’s sponsor. Overall.ABC FUND │ Luxembourg │ October 2011  The Fund has signed and committed to the CPP – an Social ethical code with the objective of protecting microfinance clients for their benefit and the benefit of the microfinance sector as a whole. the Fund does not require its clients to endorse these principles or obtain a social rating. www. how this is expressed in their day-to-day operations. The Fund The Fund has a high-level commitment to its social benefits from its affiliation with ABC Bank.com a service of MicroRate Incorporated Page 7 of 10 . which contributes mission. responsible subscribes and seeks to enforce such as client protection.luminis. and social responsibility. However.  Triple bottom line social mission Figure 14: Client Protection  Outreach results align with mission (MFI tier level and geography) MFI Endorsement of the Client Protection Principles No  Management commitment to Client Protection Principles (CPP) and Principles for Investors in Tracking of the Client Protection Principles Yes Inclusive Finance (PIIF)  Strong internal social metrics scoring process MIV Endorsement of the Principles for Investors Yes in Inclusive Finance Weaknesses Tracking of the Principles for Investors in Inclusive Finance Yes  MFI clients are not required to have a social rating nor endorse the CPP SOCIAL PERFORMANCE MANAGEMENT (SPM) Social Performance Management (SPM) relates to the SOCIAL MISSION processes and procedures employed by the Fund ensure that its mission and values are translated into practice The Fund has a broad social mandate . the degree to complies with the majority of CSR principles and best which these are embedded in processes and systems and practices. a group of investors that included ABC Although the Fund is somewhat less socially oriented than Management and Country1 took the initiative to set up several peers. in 2010 to investigate the extent of over indebtedness in a number of markets.

com a service of MicroRate Incorporated Page 8 of 10 . The reports include social indicators such Lower-middle- as number of voluntary savers. However. the average deal size is just Tier 2 MFI ($5-30m) 0% over €XXX million. Government lending 0% TM 7  The Social Dollar Index of XXXX is well above Education lending 6% peer results and suggests that the fund is in fact Financial instituions lending 14% achieving its stated social mission despite targeting more established. This Deposits 17% suggests the Fund is reaching its targeted MFIs which are often established. income countries 34% High-income countries SOCIAL RESULTS Social Results focuses on the demographic and geographic outreach results of the MIV’s process. commercially successful MFIs. Additionally. A rather modest percentage of funds are 0% 10% 20% 30% 40% 50% 60% 70% being directed at the neediest MFIs (17% to Tier 3. the Fund has disbursed €XXX Tier 1 MFI (>$30m) 80% million to 25 MFIs and 1 microfinance investment fund in 18 countries. On an annual basis the Fund’s investment officers evaluate indicators Low income countries including as variety of financial and non-financial services 48% offered. transparency. Mortgage lending 31% MARKET LEADERSHIP/ OUTREACH Consumption lending 44% Household finance lending 50% Figures 15 and 16 illustrate the social success the Fund has realized. rural versus urban clients. commercially successful entities Other Financial Services 64% serving underserved microentrepreneurs. which is below peer averages).  Since its inception. and (2) a large equity investment in XYZ Bank. and policies regarding fair pricing. which is above average (typical MIV deal size is around $1 million). based in Country1. Upper-middle- the environment. and prevention of over-indebtedness. www. a majority of the Fund’s clients offer multiple financial services/products to the local customer base. which is viewed by the 0% 20% 40% 60% 80% 100% Fund as one of the worldwide leaders in sustainable microfinance. a majority of funds are being deployed in the poorest countries (82% to lower- middle and lower income countries). The discrepancy is due to (1) the Fund’s overall size/successful capital Tier 3 MFI (<$5m) 17% raising activities.ABC FUND │ Luxembourg │ October 2011 RESULTS VERIFICATION AND REMEDIAL ACTION Figure 15: Country Wealth Breakdown (% of portfolio) The Fund’s investment partners are required to report on financial as well as non-financial indicators on a both a 0% quarterly basis. Figure 17: % of portfolio MFIs offering the following:  The average loan size/GNI per capita (91%) is one of the higher results observed among peers. and then evaluates Figure 16: MFI Type the extent to which it measures and achieves its desired social/economic outcomes.luminis. number of women active 19% income countries borrowers. Currently.

Emerging Markets. University of XYZ  Experienced management and staff with a Other funds managed None successful long-term track record  Robust on site/desk due diligence Total AUM €XXX million  Prudent portfolio monitoring and risk management Weaknesses PORTFOLIO MANAGEMENT  Board lacks shareholder representation The ABC Advisor. it ranks above its peers. currently ABC Auditor. the Board members have as much as or more and dedication of the ABC Advisor in microfinance investing direct microfinance experience as any specialized has played a significant factor in the Fund’s ability to microfinance fund. connection with the management of the assets and has discretion to purchase and sell assets as it deems  As is typical of many retail oriented open-end funds. reports. The Fund benefits greatly from the Investment Advisor’s Socially Responsible Investments). external auditor. The Fund is governed by a five-member Board comprised The firm’s four MIVs often share many of the same portfolio of a Chairman. www.ABC FUND │ Luxembourg │ October 2011 Figure 18: Management Management Investment advisor ABC Advisor Other funds managed 20 mutual funds for private and institutional investors (Funds invest in: Climate and Energy. positions. a wholly owned subsidiary of ABC Bank. The Board has broad authority to generate positive returns. ABC served as Fund Manager for XYZ Fund.com a service of MicroRate Incorporated Page 9 of 10 .  The Fund is dependent upon the expertise of a few highly experienced individuals who also help to co. Ms. one independent member. is a seasoned manage other funds for the investment advisor. and recommendations in objectives. ABC Management provides the undertake any necessary steps to achieve its investment Board with advice. experience. staff turnover has not been an issue for the from XYZ Bank. Sustainable Real Estate. The experience Collectively. Board lacks shareholder representation and is dominated by employees of the Fund’s investment The investment team is comprised of fifteen key staff advisor and ABC Bank. microfinance professional who joined the team in 20XX Fortunately.luminis. which is a concern. Portfolio manager ABC Strengths Active since February 20XX (since inception) Education Masters in XX. two ABC Bank holdings and can thereby leverage the available capital to employees. Rationale Food and Agriculture.  The Fund’s Portfolio Manager. ABC. Arts and Culture. the appropriate. The latter is attributable to the economies of scale it achieves by managing 20 funds GOVERNANCE with a combined value of nearly €XXX billion. Overall. negotiate favorable terms and conditions. a debt-equity based  Annual reports and annual accounts are audited by an MIV. Prior to her present position. is a leading microfinance investment firm with a proven ability to generate consistent returns while maintaining a lean staff and low cost structure. members with responsibility for three other microfinance funds with approximately €XXX million in combined assets. and one ABC Management employee. rigorous investment process. and prudent risk Total AUM €XXX billion management it adheres to for all funds under Total staff 15 management. where she held several management Fund’s advisor over the past several years.

luminis. the ABC 5 The Microfinance Microscope is a collaboration between the Advisor’s Risk Manager. Board participation is required to align management interests with the Fund’s goals. 4 All performance results provided in Figure 1-4 reflect the Fund’s balance sheet performance. Individual share class results vary among www.  Investees submit to quarterly financial reporting that is processed by the ABC Advisor’s monitoring and data collection software. In case of a breach. 1 In September 2010. the Fund obtained the LuxFLAG Microfinance Label. the Fund’s loan classification and provisioning policies are more subjective and flexible. The LuxFLAG Microfinance Label is intended for MIVs which have a commercial objective. and the Deputy Director for Economist Intelligence Unit (EIU) and the Inter-American Development the ABC Advisor’s microfinance portfolios.  In practice.  In the case of equity and subordinated debt investments. the ABC Advisor requests the investee to submit monthly reports so that the situation can be monitored closely. least annually for existing holdings. The purpose of the Label is to promote the raising of capital in microfinance by reassuring investors that the MIV really invests in microfinance. 2 The Fund currently has 12 separate classes of shares outstanding denominated in either British pounds or euros and made available to a variety of institutional and retail investors. 3 ABC Fund currently allocates investments among two “Sub-Funds”: PQR Fund and XYZ Fund. PORTFOLIO MONITORING Overall. Bank (IDB).ABC FUND │ Luxembourg │ October 2011 the 12 different share classes offered and are not reflected in these  Ms. which are made possible due to the substantial scale and resources of the Fund’s ABC Advisor. the fund benefits from very sound portfolio monitoring procedures. nine investment officers. ABC is supported by three senior executives and Figures.  Portfolio monitoring is a continuous process.com a service of MicroRate Incorporated Page 10 of 10 . 6 The Herfindahl-Hirschman Index is a commonly accepted measure of market concentration which takes into account the relative size and INVESTMENT PROCESS distribution of risk exposures and approaches zero when the exposures are comprised of a large number of entities of relatively The Fund employs a rigorous process of investment equal size. while portfolio monitoring is rigorous. evaluation with on-the-ground due diligence a prerequisite 7 Average amount the MIV invests in each micro-entrepreneur that for all potential investments and on-site visits performed at borrows from the MFI’s in the MIV’s portfolio. All aspects of the investment process are in line with best practices. The senior executives include the Managing Director of the ABC Advisor.