SRCF Q3 2016 Report

SRCF Q3 2016 Report

Dear MEDA Colleagues,

We are very pleased to bring you this quarterly report on MEDA’s development investment portfolio. This report, which includes financial data to 30 June 2016, also coincides with MEDA’s year-end, and is therefore an appropriate time for reflection.

The portfolio has experienced a fair amount of volatility in the last year and, as can be seen from the portfolio highlights listed on page six, there are quite a number of transactions that have recently been, or soon will be closed. Many of those transactions have been relatively small, and originated from within MEDA’s programs. The investments are part of larger MEDA programs in various countries, where it is deemed that the investment can help achieve the program’s goals.

While MEDA’s SRCF portfolio generated dividends and realised gains of $320,000 during the year, it also booked unrealised losses of $540,000. Those unrealised losses were influenced most heavily by an $800,000 reduction in the value of IMON (Tajikistan). Not only did IMON suffer along with the rest of the Tajik economy, but the drop in the currency negatively affected the investment value. Other significant movements include gains of $260,000 and $170,000 in the value of MiCredito and MicroVest, respectively, and a $190,000 drop in the value of Sarona Frontier Markets Fund 1.

It is noteworthy that, because MEDA uses not-for-profit accounting principles, the financial statements may not reflect the true value of the investments. Overall, we believe that the portfolio is achieving MEDA’s financial targets. As of 30 June, Sarona’s estimation of the portfolio’s fair market value exceeded MEDA’s accounting value by over $5 million.

Whether one applies non-profit accounting rules or fair market value rules to the portfolio, one thing is clear: These investments positively affect the social and environmental outcomes in communities around the world. We see the positive effects of these values at three distinct levels. Firstly, we are pleased with how the investee companies are creating jobs, improving job quality, empowering women, improving governance, environmental strategies, and building sustainable communities. Secondly, we believe that our work with our investment partners in emerging markets changes the way business leaders make decisions and run companies. And finally, we are very pleased to be a leader in the global discourse on achieving the world’s development goals through private sector investment. To that end, we have been representing the private sector in various meetings and conferences with the UN, OECD, and numerous national governments. On the next page, you will see a reprint of one speech we recently delivered at the UN. We believe that by reaching across the aisle – by partnering with the public sector – we can achieve both financial goals and the world’s development goals.

We trust that this report will provide a comprehensive understanding of MEDA’s investment portfolio, but we encourage you to call us to discuss any questions you might have.

Gerhard Pries
CEO and Managing Partner
Sarona Asset Management