MICROFINANCE LEADERS*

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1 MICROFINANCE LEADERS* Summary Market Review US interest rates continue to rise National Bank of Cambodia caps interest rates at 18% recovery of Russia s economy may prompt rebound in other countries across the region economic and political situation in Sub-Saharan Africa remains challenging Fund Activity Fund Performance USD 13.8 million invested during the reporting quarter 14 institutions across 8 countries received financing Asia-Pacific with highest investment volume Elevated cash level due to continuation of lower placement capacity and active risk-off strategy provisions and equity investments with negative impact on quarterly return Key Figures Outlook Equity Portfolio Focus Fund volume (USD) 285'740'703 Net performance 1Q (class I, USD, %) Net performance 12 months (class I, USD, %) 1.78 Microentrepreneurs reached 180'226 Higher interest rates in the US could lead to stronger US dollar potentially being detrimental to some emerging markets good opportunities seen to increase Fund s exposure to Asia continuation of investment selection which diversifies portfolio in line with investment strategy Small follow-on investment completed during the reporting quarter equity investments with negative impact on quarterly return investments in microfinance institutions in India and Kazakhstan as well as in Russian bank expected during second quarter of the year Shaping the future capturing new opportunities *For qualified and professional investors only

2 Market Review US interest rates continue to rise National Bank of Cambodia caps interest rates at 18% recovery of Russia s economy may prompt rebound in other countries across the region economic and political situation in Sub-Saharan Africa remains challenging In line with numerous central banks around the world, the Federal Reserve (Fed) has fought to stimulate the US economy with an extremely expansionary monetary policy that has included historically low interest rates and quantitative easing. In December 2016, the Fed raised interest rates for the first time since the global financial crisis. A second rate hike followed as early as March 2017 amid continued indications of stronger US labour market data including solid job growth as well as an increase in headline and core inflation above the 2% target. Both rate hikes have led to a steady increase in the US dollar cost of financing, with the US 2-year swap rate rising from less than 1% back in September 2016 to over 1.5% at the end of the first quarter of In Europe, the European Central Bank (ECB) decided in March to keep interest rates unchanged at zero while the inflation rate hit the 2% target for the first time since early Despite continued bad press, the Eurozone economy has now grown for 14 consecutive quarters, meaning that rate hikes this year cannot be ruled out. As the region s economy remains under pressure following Brexit and the rise of nationalist, anti-european movements across Europe, the election defeat of the Dutch anti-immigration, anti-eu Party for Freedom with its xenophobic populism was good news for the Eurozone. Energy prices, especially oil and gas prices, are important economic factors in developing countries not just in the Fund s export-dependent investment countries such as Kazakhstan and Colombia. As the examples of Argentina and Peru showed in the previous quarter, energy prices can also play a key role through their impact on headline inflation. The first quarter of 2017 saw Brent oil futures stabilising some way off recent highs, in the USD per barrel range. The actions and policies of Donald Trump, inaugurated as 45th president of the United States in January of this year, dominated headlines around the world in the first quarter as markets and nations alike tried to understand and predict his plans. The Middle East is one of the regions that could be most affected. Indeed, Trump s comment that he is not necessarily committed to a two-state Israel-Palestine solution promptly ignited uncertainty in the region. We continue to closely monitor current and potential investments in the region and especially in Palestine. However, although the country has experienced turmoil for years, the local economy still functions to a certain extent. In Asia, China recorded its slowest growth in 26 years in 2016 at an official GDP growth rate of 6.7%. The Chinese government targets an economic expansion of 6.5% for 2017 as it continues to implement proactive fiscal policies and attempts to maintain prudent monetary policy. Trade policy also remains an important topic here amid Donald Trump s America first rhetoric. In India, the Reserve Bank of India (RBI) kept its key repo rate unchanged at 6.25% for the second time in February against expectations of a 25bps cut. This could end the current rate cutting cycle following a steady reduction in the repo rate from 8% over the last couple of years. India remains a key country for the Fund. Following a temporary postponement of several disbursements in the previous quarter, it was again one of the leading countries in terms of disbursements in the first quarter of Investments were made in institutions that are less affected by the impact of demonetisation - which caused severe cash shortages in the economy - or have strong risk mitigants in place to withstand temporary disruption. The pressure on availability of new currency eased in Q However, repayment rates of client loans in certain districts remained low because of opportunistic political interference and local elections. Investments in Indian institutions operating in these districts remain on hold until a clearer picture emerges about the consequences of demonetisation. While the demonetisation shock is considered to be a one-off event, it will likely take most of 2017 to absorb the impacts on the portfolio quality of some of our investees. However, most Indian institutions in our portfolio had strong capitalisation prior to demonetisation and thus good loss absorption capacity. So far, none of our Indian counterparties has had liquidity issues related to lower collection rates. Cambodia continued to experience strong credit growth. However, to avoid the overheating risks in this country, the Fund has sought to keep its exposure at recent levels. This proved prudent as in March the National Bank of Cambodia (NBC) issued a Prakas (decree) to cap interest rates at 18% per annum, applicable for all microfinance institutions, microfinance deposit-taking institutions and credit operators, and all new loans provided from 1 April This came as a surprise for the sector and can clearly be interpreted as an electoral manoeuvre aimed at gaining easy votes in view of the upcoming local elections in June. As this could put pressure on certain microfinance institutions, specifically adapted stress tests were carried out at an institutional level before the Fund made any further disbursements. The fund management continues to monitor the economic situation in the Caucasus and Central Asia region, particularly the risk it poses to individual institutions. The ongoing restructuring of deals in Azerbaijan remains challenging. responsability Microfinance Leaders Quarterly Report 2

3 The slow turnaround of Russia s economy saw the country s economy return to growth, albeit at a modest GDP growth of 0.3% in the last quarter of A slow recovery to 1.4% is expected for 2017, with average growth of 1.5% per annum from 2018 to This may also prompt a moderate rebound in other countries across the region. The economic and political situation in Sub-Saharan Africa remains challenging. Amid higher country risks and concerns over portfolio quality, the Fund made no disbursements in the region during the first quarter of Fund Activity USD 13.8 million invested during the reporting quarter 14 institutions across 8 countries received financing Asia-Pacific with highest investment volume With total disbursements amounting to around USD 13.8 million during the reporting quarter, the investment volume decreased by about USD 5 million from the previous quarter and was around USD 4 million lower compared to the amount invested in the first quarter of The lower disbursement volume in the first quarter of 2017 compared to the previous quarter was due in part to a challenging environment where some deals were not renewed due to a change in the risk of certain institutions and also due to counterparties pricing demand. Deals were furthermore evaluated not only on their performance merits but also on the diversification they offer to the portfolio. There are signs that global economic growth is slowly starting to pick up pace. However, as US interest rates increase, so too does the cost of financing for many microfinance institutions in developing countries. The current challenge is to negotiate deals that meet microfinance institutions funding needs and match the Fund s risk-return profile. Here regional and country differences remain pronounced, as reflected in this quarter s placements. During the reporting period, the Fund invested in 14 different institutions in a total of eight countries. On a regional level, USD 7.9 million was invested in Asia-Pacific, followed by USD 3.0 million in South America, USD 1.6 million in Central Asia, USD 0.8 million in Central America and USD 0.5 million in Eastern Europe. Despite the continued economic challenges in the Caucasus and Central Asia region, the Fund was still able to disburse to one stable counterparty in the region. No disbursements were carried out in the Sub- Saharan Africa or Middle East and North Africa regions due to either increased uncertainty at a country level or difficulty in aligning the risk-return profile of the Fund with counterparties pricing demand. Over the reporting quarter, the Fund provided financing to seven new microfinance institutions primarily in South America and Asia-Pacific. The biggest investment during the quarter was a USD 3.0 million transaction with a financial institution in South America. Local currency investments accounted for 9% of the Fund s investment volume during the first quarter of The Fund s strategy of generally hedging positions in local currencies against the fund currency remains unchanged. Debt instruments with a floating rate coupon accounted for 34% of the Fund s investment volume during the quarter under review. The Fund decreased its allocation to subordinated debt from 9.3% at the end of the previous quarter to 8.3% as of the end of the first quarter 2017 as no new such deals were carried out during the reporting quarter. In the private equity area, a small follow-on investment in a holding was completed at favourable terms during the first quarter of For further information on the private equity investments please refer to the Equity Portfolio section of this report. Fund Performance Elevated cash level due to continuation of lower placement capacity and active risk-off strategy provisions and equity investments with negative impact on quarterly return The Fund's cash position increased to 14.5% as of the end of the first quarter of 2017 compared to 11.7% at the end of the previous quarter. In comparison to the first quarter of 2016, the Fund s cash position has decreased by 7.8 percentage points. The Fund chose not to disburse as much volume as in the previous quarter as placing money in line with the Funds risk-return profile proved more difficult. At a current level of 14.5%, the cash position continues to dilute the Fund s total income but also reduces its risk. The continued elevated cash level is due to the Fund s lower placement capacity amid slower growth across certain regions as well as an active riskoff strategy as some regions did not meet our risk-return criteria and were therefore excluded from new investments. The overall fund volume increased to around USD 286 million as of the end of the first quarter of 2017 from USD 278 million at the end of the previous quarter. The US dollar net return of the I (USD) share class amounted to -0.18% for the reporting quarter compared to +0.86% in the previous quarter and +0.14% in the first quarter of The returns of the S (CHF) and S (EUR) share classes were % and -0.55%, respectively. The hedging costs continue to hamper the performance of the CHF and EUR share classes as the relevant interest rate differentials increase. Newly created provisions in the debt portfolio increased marginally from the previous quarter and had a negative impact on responsability Microfinance Leaders Quarterly Report 3

4 the Fund s return of -0.27% for the reporting quarter (compared to a negative impact on the Fund s return of -0.24% in Q4 2016). The provisions created during the reporting quarter were mainly related to debt-financed investees in Sub-Saharan Africa. The Fund s equity investments had a negative impact of % on its quarterly return. For further information on the private equity investments please refer to the Equity Portfolio section of this report. responsability Microfinance Leaders Quarterly Report 4

5 Key Figures Overall Portfolio as of 1Q 2017 Fund data/net performance (1) Class I (USD) Class S (CHF) Class S (EUR) Class I-II (USD) Class I-II (EUR) Class I-II (CHF) Class I-II (NOK) Class I-III (NOK) Quarterly return (%) n/a n/a n/a n/a Return year to date 2017 (%) n/a n/a Since inception (%) (2) n/a n/a Return (p.a.) since inception (%) n/a n/a 1 year n/a 0.17 n/a n/a n/a 3 years n/a n/a n/a n/a n/a 5 years n/a n/a n/a n/a n/a Strongest month since inception (%) n/a 0.01 n/a Weakest month since inception (%) n/a n/a No. of months with positive performance n/a 1 n/a No. of months with negative performance n/a 1 n/a Fund volume (USD) 285'740'703 Return volatility (USD, %) (3) 1.23 Sharpe Ratio (USD) (4) 2.08 (1) Past performance is not a guarantee or indicator of current or future performance. This performance data is calculated net of all fees and commissions but it does not take into account the commissions and costs incurred on the issue and redemption of units. (2) August 2010 (class I (USD) and class S (CHF); October 2010 (class S (EUR)); (3) annualized since inception; (4) calculated by taking into account the annualized monthly return volatility since inception and the average 6mth LIBOR USD rate (risk free) Track record of (closed) class Q (4) Class Q (USD) Selected assets correlation ( ) responsability Microfinance Leaders (USD) Net return since inception (%) MSCI World Index Return (p.a.) since inception (%) mths US Libor No. of months with positive performance 71 MSCI FM Frontier Markets (USD) No. of months with negative performance 9 (4) Class Q was launched in November 2006 and closed in July 2013 Largest country exposure In % NAV Geographical allocation In % of investments India 9.9 Asia Pacific 26.4 Georgia 5.9 South America 18.4 Costa Rica 5.7 Central Asia 16.3 Cambodia 5.3 Central America 13.6 Armenia 4.8 Sub-Saharan Africa 9.8 Ecuador 4.2 Eastern Europe 7.3 Peru 3.9 Middle East & North Africa 6.6 Kenya 2.8 Other 1.6 Sri Lanka 2.8 Bolivia 2.6 Total no. of countries 72 Currency allocation (5) In % of investments Asset allocation In % NAV USD 72.3 Fixed Income 74.1 EUR 12.4 Cash (6) 14.5 PEN 2.6 Equity 11.4 THB 1.9 (6) Cash: Cash current accounts and money market 13.8% ZAR 1.8 BOB 1.4 Other 7.6 (5) Generally positions hedged against fund currency Cash equivalent: Value of hedging contracts, collateral cash, accrued interest investments, other assets and liabilities 0.7% Social performance indicators 1Q Q 2016 No. of MFI (6) No. microentrepreneurs reached 180' '458 Average loan size (USD) 1'965 1'517 Rural / urban clients (%) 48/52 69/31 Female / Male (%) 82/18 83/17 (6) MFI: Microfinance institutions responsability Microfinance Leaders Quarterly Report 5

6 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Volume in millions USD Development of Overall Portfolio Performance (net) (1) and fund volume Fund volume NAV USD NAV EUR NAV CHF NAV Q-class (closed) (1) Past performance is not a guarantee or indicator of current or future performance. This performance data is calculated net of all fees and commissions but it does not take into account the commissions and costs incurred on the issue and redemption of units. Maturity breakdown as of 1Q % 25% 20% 15% 10% 5% 0% < 6 months 6-12 months months months months months > 36 months Average time to maturity: months responsability Microfinance Leaders Quarterly Report 6

7 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Development of country allocation 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% Development of geographical allocation 100% 80% 60% 40% 20% 0% 0.00% 1Q Q 2017 Asia Pacific Central Asia Middle East & North Africa South America Central America Eastern Europe Other Sub-Saharan Africa Development of asset classes 100% Development of currency allocation 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% Fixed income Equity Cash & cash equivalent¹ USD EUR PEN THB NGN BOB Others (1) Cash: Cash current accounts and money market 13.8% Cash equivalent: Value of hedging contracts, collateral cash, accrued interest investments, other assets and liabilities 0.7% Further portfolio data will be sent to interested investors on request. Please with your name and the name of the fund you are interested in. responsability Microfinance Leaders Quarterly Report 7

8 Outlook Higher interest rates in the US could lead to stronger US dollar potentially being detrimental to some emerging markets good opportunities seen to increase Fund s exposure to Asia continuation of investment selection which diversifies portfolio in line with investment strategy The election of Donald Trump was greeted by a strong rally in the equity markets primarily on the back of expectations of increased future fiscal spending and decreased regulation. This will however, take time, and since his inauguration towards the end of January much has remained the same. The geopolitical landscape could furthermore change with Trump in office and the effects it will have on both developed and developing markets will need to be closely monitored. The US is not only important as the world s largest economy, but also the dollar as the world s currency reserve and its interest rate environment have global implications, this is especially true in developing countries. The Fed increased interest rates for the second time in three months in March and currently two to three further rate hikes are expected by the end of the year. Higher interest rates in the US could lead to an even stronger US dollar, which could be detrimental to emerging markets through increased borrowing costs for countries borrowing in US dollar, as well as through increased pressure for countries which peg their national currency to the US dollar to increase rates to reduce pressure on the peg. The ECB, which left interest rates at zero in the first quarter of 2017 and continued its asset-buying program, could also raise interest rates this year having taken a more hawkish stance. In March Mario Draghi, President of the ECB, said the risks of deflation have receded and the ECB upwardly revised both its inflation and growth forecasts for the coming years. Whilst he also indicated he is not anxious of upcoming general elections in France and Germany, the outcomes of these events still have the potential to severely disrupt the Eurozone. The British Prime Minister Theresa May triggered article 50 at the end of March, formally starting the process of Britain s departure from the EU. Whilst this occurrence will have limited direct impact on the Fund, it has the potential to influence events across the world. We will continue to assess the impact it could have at both an institution and country level through in-house credit assessments. In the coming quarters we see good opportunities to increase the Fund s exposure to Asia. In India we expect to adjust the Fund s allocation and disburse to new microfinance institutions as the effects of demonetisation become clearer and risks decrease further. The market continues to be characterised by local currency lending needs and we will continue to disburse in local currency and hedge the exposure against the Fund currency. In the region, we also expect to increase exposure to Sri Lanka in the coming months, however, the requirement for institutions to go through a complex registration process heavily reduces the speed at which we are able to disburse. In Cambodia we will carefully analyse the effect the recently introduced interest rate cap has for microfinance institutions. Specific stress tests will and are being carried out at an institutional level before any renewal or new financing is approved, this is to ensure the institution can withstand the additional burden or restrictions the interest rate cap could create. Furthermore, we plan to renew maturing deals as well as increase exposure to key financial institutions in China in the second quarter of Mongolia is also a country where we see the potential to increase exposure. Here we had temporarily halted disbursing amid stability concerns, however, the agreement of an IMF-led financing package should restore economic stability and debt sustainability and we will once again review potential disbursements in the country. In Sub-Saharan Africa the broader issues affecting many of the region s countries remain political uncertainty, dependence on commodity prices as well as the poor economic performance of The Kenyan economy enjoyed robust growth in the first three quarters of 2016, however, this growth could be muted in the future following the introduction of an interest rate cap in the third quarter of The local office we have in Nairobi in Kenya provides us with close connections in the region and the ability to carry out in depth local due diligences on investees. The extent to which this exposure increases will depend largely on the pricing, which must be in-line with the risk return profile of the Fund. The Fund will continue to select investments which diversify the portfolio in-line with the investment strategy. Diversification continues to be targeted at an institutional level to ensure the negative impact from single defaulting institutions is limited. Furthermore diversification is also carried out on a country and regional level to ensure the Fund is adequately protected from sudden regulation changes or government initiatives and from factors which can affect an entire region, such as the recent economic slowdown in Russia. The tenor of deals is also taken into account to protect the Fund from interest rate changes. Moreover diversification of the type of counterparties is taken into account as is the type of instruments used, such as senior debt and subordinated debt as well as equity. responsability Microfinance Leaders Quarterly Report 8

9 Equity Portfolio Small follow-on investment completed during the reporting quarter equity investments with negative impact on quarterly return investments in microfinance institutions in India and Kazakhstan as well as in Russian bank expected during second quarter of the year Portfolio activity During the first quarter of 2017, a small follow-on investment in a holding was completed at favourable terms. Portfolio performance The Fund s equity investments had a negative impact of % on the Fund s quarterly return. The key factor behind the negative performance attribution in the reporting quarter was the decrease in the market price of one investee following the listing of its shares on the stock exchange in December The trading volumes of the listed shares of this portfolio company remain extremely low, which results in a relatively high volatility of its market price. Until the volume of the listed shares is sufficiently high to consider the market price of the listed shares alone as fair value for the holding, the valuation will be based on a combination of a dividend discount model analysis, the investee s book value and the market price of the listed shares. While this makes the price of the listed shares only one out of three contributors to our valuation, the relatively high price volatility of the listed shares still makes it an important driver of the current performance volatility of the Fund s equity portfolio. The negative performance contribution was partly compensated by the positive development of investee valuations in Kazakhstan and Bolivia. Both of these companies outperformed the business plan of the previous year, which is now reflected in the current valuation. Furthermore, in the case of the investment in Kazakhstan, higher valuations of peer multiples in the country provided additional uplift to the valuation of this investee. The other portfolio institutions are generally developing according to plan. Key Figures 1Q 2017 Class I (USD) Current fair value equity portfolio Equity contribution 1Q (%) Allocation equity portfolio in % of fonds volume 11.4 Equity contribution YTD (%) No. of investments 11 Geographical allocation Type of investment 28.8% South America 11.4% Asia Pacific 72.2% direct Equity 23.5% Eastern Europe 19.0% Central Asia 27.8% indirect (via FoF) 6.4% Sub-Saharan Africa 3.0% Central America 7.8% Other Outlook We project no more than a slight improvement in the economic situation in the Caucasus and Central Asia region over the coming quarters. The previous and current valuations of our equity investee companies reflect this outlook. As a result, we do not expect any additional negative impact on the Fund s equity portfolio in 2017 from investments with exposure to this region. The investee company that went public in December 2016 should see the market price of its shares stabilise at about the current price level once their trading volume increases. This is also taken into account in the current valuation. responsability Microfinance Leaders Quarterly Report 9

10 For the second quarter of the year we expect to execute investments in microfinance institutions in India and Kazakhstan as well as in a bank in Russia. This will bring the Fund s private equity allocation closer to target. Furthermore, active work on a number of investments planned for the second half of the year has progressed, including investments in microfinance institutions in Colombia and Sri Lanka. responsability Microfinance Leaders Quarterly Report 10

11 Focus Shaping the future capturing new opportunities Previous versions of the sales prospectuses for some of our finance funds were out of date in various respects. Most notably, this was driven by developments in our investment market. Consequently, we wanted to provide investors with an update, and communicate the effects that these developments have had on the funds, by adjusting the relevant sales prospectuses accordingly. The amendments to the sales prospectuses have been approved by the Commission de Surveillance du Secteur Financier (CSSF) which supervises the professionals and products of the Luxembourg financial sector and entered into force on 1 April How it all started When we began operating our first finance fund, the responsability Global Microfinance Fund, back in 2003, we wanted to contribute to financial sector development in developing and emerging countries. This was responsability s key objective from the outset. Back then, the main means to achieving this was through microfinance. While we looked at various financial sectors, we mostly invested in microfinance companies. Our fund names reflected that focus: We branded our approach as microfinance investments. While most of our finance funds current investments are still in microfinance, this component at least in relative terms is becoming smaller, while others are gaining in importance. and how our investment market, fund portfolio as well as fund investees all evolved over time The evolution of our investment market can be seen in our fund portfolio today. Microfinance institutions continue to play an important role. However, in line with what the prospectus allows, we are increasingly financing other types of financial intermediaries as well. They complement microfinance institutions with their offerings and/or reach a broader client base. In particular, the share of financial institutions in our portfolio that are focused more, or even exclusively, on small and medium-sized enterprises ( SMEs ) has steadily increased in recent years. As of the end of March 2017, the share of SME-focused financial institutions reached 26.8% of the amount invested by responsability SICAV (Lux) Microfinance Leaders compared with 16.2% and 12.7%at the end of 2015 and 2014, respectively. This development can be attributed to maturing financial sectors in which microfinance has increasingly been established, and by the SMEs need for financing, thus allowing our funds to broaden their investment universe to include sizeable SMEfocused financial institutions. Furthermore, microfinance organisations in our portfolio have often grown into financial institutions with a considerable SME portfolio. This is very positive and a clear result of the financial-sector development that our funds have been contributing to. SMEs need for financing, and the investment opportunity at hand SMEs find themselves in the missing middle. They are often too big to be served by microfinance institutions, but too small for large corporate banks. SMEs across the world describe the lack of access to finance as their biggest impediment to growth. McKinsey and the International Finance Corporation estimate the global credit gap for formal SMEs in developing countries to be around USD 1 trillion, and some 20 million SMEs in developing countries are financially constrained. However, SMEs are the backbone of the economy also in developing countries. They play a crucial part in driving economic growth and sustainable development. Access to finance for SMEs can unlock significant growth potential in developing countries. In low-income nations, the informal sector still plays an important role. Strong SMEs usually boost the economy and create formal employment and therefore have a considerable impact on the formalisation of an economy. Both microfinance providers and SME-focused financial institutions create access to finance for many economic players. The increased inclusion of SME-focused financial institutions in our fund portfolio is, therefore, an essential part of the funds objective to drive financial sector development. By targeting such institutions and microfinance organisations, our funds continue to pursue this objective. The broader investment universe that opened up to our funds, spurred by the development in our investment market, means more choice and more diversification while investors can expect to make a greater development impact. The changes Since the wording of the previous versions of the sales prospectuses focused mainly on microfinance, the changes take into account the funds investments in SME-focused financial institutions, not just its microfinance investments. The sales prospectuses now cover financial institutions focused on micro, small and medium-sized enterprises to more accurately describe the funds investments.in addition, the funds names have changed. As of 1 April 2017, the name of the responsability SICAV (Lux) Microfinance Leaders responsability SICAV (Lux) Micro and SME Finance Leaders. The updated April 2017 version (in German) of the responsability SICAV (Lux) Micro and SME Finance Leaders sales prospectus is available at: responsability SICAV-Lux Sales Prospectus April 2017 DE and an English translation can be found at: responsability SICAV-Lux Sales Prospectus April 2017 EN responsability Microfinance Leaders Quarterly Report 11

12 Fund Facts Fund name Fund domicile and type Portfolio manager Management company Central administration Custodian bank responsability SICAV (Lux) Microfinance Leaders Luxembourg, SICAV (Société d Investissement à Capital Variable) responsability Investments AG, Zurich responsability Management Company S.A., Luxembourg Credit Suisse Fund Services (Luxembourg) S.A., Luxembourg Credit Suisse (Luxembourg) S. A., Luxembourg Inception date (fund) 15 November 2006 Fund currency Target net return in fund currency Distribution Valuation (NAV calculation) Subscription of shares Redemption of shares Approved for distribution to professional, semiprofessional and qualified investors Minimum subscription Sales restrictions Retrocessions USD, hedged EUR, CHF and NOK share classes available 4 7% p.a. over a horizon of five years. The target return is not a projection, prediction, or guarantee of future performance, and there is no guarantee that the target return will be achieved. No distribution, returns are reinvested On the last Luxembourg banking day of each month Monthly, requests must be submitted three banking days before the respective value date Monthly, subject to 90 calendar days notice Switzerland, Germany, France, Luxembourg, Netherlands, Norway, Sweden, Denmark, Finland I (USD) and S (EUR,CHF) / I-II (USD,EUR,CHF) I-II (NOK) / I-III (NOK) The fund is open to qualified investors in the sense of the Swiss Federal Act on Collective Investment Schemes No retrocession fee is paid Share classes Valor ISIN Total Expense Ratio (TER) Inception date (classes) I (USD) LU Approx. 1.4% August 2010 S (CHF) LU Approx. 1.4% August 2010 S (EUR) LU Approx. 1.4% October 2010 I-II (USD) LU Approx. 1.7% January 2017 I-II (EUR) LU Approx. 1.7% February 2016 I-II (CHF) LU Approx. 1.7% n/a I-II (NOK) LU Approx. 1.7% January 2017 I-III (NOK) LU Approx. 1.4% n/a responsability Microfinance Leaders Quarterly Report 12

13 Risks: The risk and return profile of the fund does not reflect the risk under future conditions that are different from the situation in the past. Detailed description of the fund risks can be found in the prospectus. Legal disclaimer: This information material was produced by responsability Investments AG (hereinafter responsability ). This information material relates to responsability SICAV (Lux) Microfinance Leaders (further referred to as the Product ). The information contained in this information material (hereinafter information ) is based on sources considered to be reliable, but its accuracy and completeness are not guaranteed. The information is subject to change at any time and without obligation to notify the investors. Unless otherwise indicated, all figures are unaudited and are not guaranteed. Any action derived from this information is always at the investors own risk. This information material is for information purposes only, and is not an official confirmation of terms. The value of an investment and any income from it are not guaranteed. Changes in the assumptions may have a substantial impact on the return. Past performance is no indication of current or future performance, and the performance data do not take account of the commissions and costs incurred on the issue and redemption of shares. An annual fee shall be charged for the administration, asset management and distribution services provided as part of this financial product. The maximum amount of this management fee shall be based on the prospectus. Furthermore, responsability shall not receive or pay either one-time or recurring remuneration to other distributors in connection with this financial product. This information is not intended as an offer or a recommendation or an invitation to purchase or sell financial instruments or financial services and does not release the recipient from making his/her own assessment. In particular, the recipient is advised to assess the information, with the assistance of an advisor if necessary, with regard to its compatibility with his/her own circumstances in view of any legal, regulatory, tax, investment-related, and other implications. Investments held by the financial product described in this information material are associated with a higher risk than investments in more developed markets or countries. Investors are expressly made aware of the risks described in the prospectus and the lower liquidity and greater difficulty in determining the value of the fund s investments (which are generally unlisted and not traded), and must also be prepared to accept substantial price losses including the entire loss of their investment. responsability and/or the members of its board of directors and employees may hold shares in the financial product (or any related investments) mentioned in this information material and may add to or sell these positions from time to time. Additionally, the members of the board of directors and employees of responsability may serve as members of boards of directors of the investments in which the financial product is invested. This information material is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under applicable law. The financial product specified in this information material is not licensed for distribution in the United States of America. As a result, it may not be offered, sold, or delivered there. Neither the present information material nor copies thereof shall be sent or taken to the United States of America, or issued in the US or to a US person (in the terms of Regulation S of the United States Securities Act of 1933, in the respective current version). Subscriptions are only valid on the basis of the current sales prospectus and the most recent annual report (or semiannual report, if this is more recent). The prospectus, the management regulations, and the annual and semiannual reports may be obtained free of charge from responsability Management Company S.A., Luxembourg, from the Swiss representative, the paying agent and from any distribution partner. This information material may not be reproduced, stored in a retrieval system, or transmitted, in part or in full, in any form or by any means, whether electronically, mechanically, photocopied, recorded, or otherwise, without the prior written consent of responsability. Germany: The Product is registered for distribution to professional/semi-professional investors in Germany. France: The Product is an alternative investment fund (AIF) within the meaning of Directive 2011/61/EU (AIFMD), which is authorized to be marketed to professional investors in France in accordance with Articles L and D to of the French Code monétaire et financier, Articles 421-1A to of the General Regulation of the Autorité des marchés financiers and Instruction of the Autorité des marchés financiers. This marketing material constitutes promotional material as defined in Article of the General Regulation of the Autorité des marchés financiers. It is provided for information purposes only and may not be relied upon to make an investment decision. No decision to invest in Product should be made without prior review of the complete investor information documents required by applicable laws and regulations, which are available free of charge in the English language at This marketing material is intended exclusively for, and may only be distributed to professional investors as defined in Articles L , D and D of the French Code monétaire et financier. Luxembourg: The product was approved by the Commission de Surveillance du Secteur Financier ("CSSF") in Luxembourg for distribution to the Professional investors under the Chapter 1 Article 53 of the Law of 12 July 2013 on alternative investment fund managers. Custodian is Credit Suisse (Luxembourg) S.A. 5, rue Jean MonnetL-2180 Luxembourg and Distributor is Credit Suisse Fund Services (Luxembourg) S.A., 5, rue Jean Monnet, L-2180 Luxembourg. The Netherlands: The Product described herein is registered for distribution in the Netherlands to professional investors within the meaning of the Dutch Act on Financial Supervision and the interests in the Product described herein may therefore only be offered upon issue or thereafter, and whether directly or indirectly, to professional investor within the meaning of the Dutch Act on Financial Supervision. Norway: The Product is authorised for distribution to professional investors defined under the Section 10-2 of the Regulations to the Securities Trading Act in Norway and regulated by Finanstilsynet, the Financial Supervisory Authority of Norway. responsability Nordics AS is authorised in Norway and regulated by Finanstilsynet, the Financial Supervisory Authority of Norway. Switzerland: This Product is not authorized for distribution to the public in Switzerland. The present information material is therefore strictly limited to internal use and may not be passed on to any third party, unless (i) such third party has solicited so on its own initiative, or (ii) such third party is a qualified investor under the terms of the Swiss Federal Act on Collective Investment Schemes and related regulations. The representative of the Fund in Switzerland is Credit Suisse Funds AG, Zurich. The paying agent in Switzerland is Credit SuisseAG, Zurich. responsability Investments AG, All rights reserved. responsability Investments AG Josefstrasse Zürich responsability Management Company S.A. 23, Avenue de la Liberté, L-1931 Luxemburg responsability Microfinance Leaders Quarterly Report 13