Q&A – What you should know

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LMDF is a regulated SICAV and you become a shareholder

The Luxembourg Microfinance and Development Fund – Social Venture Capital Sub-Fund (LMDF or Fund) is a regulated investment fund (SICAV Part II) in accordance with the Luxembourg law of  17 December 2010.

Investing in LMDF means that you subscribe a certain number of shares and become a shareholder in the Fund. LMDF offers different types of investors different share classes. Class C Shares have been structured to allow individuals and not-for-profit structures to invest in microfinance without too much risk exposure (learn more about the risk protection here).

What does the Fund invest in?

LMDF invests in emerging microfinance institutions (MFIs) located in Asia, Africa and Latin America with a strong social mission. We mainly provide debt financing used by the MFIs to lend to micro-entrepreneurs. The Fund may also invest in capital or issue guarantees in favor of MFIs.

Am I the typical investor?

The typical investor is interested in microfinance and development and subscribes to the double objective of social impact and financial return. In order for the Fund to realize its social mission it invests in microfinance institutions with instruments having medium (3 – 5 years) or long term maturities (> 5 years). Investors in LMDF should invest for the medium to long term, LMDF is not suited for short term placements.

The LMDF has been only authorised to distribute its shares in the Grand Duchy of Luxembourg. If you live outside of Luxembourg you need to verify if you can become a shareholder in LMDF within full compliance of local law. LMDF is not registered in any country apart from Luxembourg. LMDF’s shares may not be offered or sold, directly or indirectly in the USA nor to a US-person or US taxpayer.

How can I invest in the fund?

There are 3 options for those looking to invest in LMDF. You can invest through your bank, directly or set up a personalised investment plan.

Further information is available here and if you need any advice, please consult your stockbroker, bank manager, solicitor, accountant or other financial advisor.

Subscriptions for shares issued by the Fund may only be accepted on the basis of the current prospectus accompanied by the latest annual report and the latest semi-annual report, if more recent.  Read more

When can I invest?

Subscriptions for each quarter must be made before the deadline which is published on the homepage of the Fund. For further information about other subscription dates, please refer to the calendar.

Is a minimum investment required?

No, you can invest as much or as little as you would like. Banks may have a minimum investment requirement.

How much financial return?

LMDF wants to be an attractive investment proposition and targets at least 2% annual return for Class C investors. In practice this means we want to deliver very stable returns of between 2% and 3% with a low volatility.

Because of fiscal reasons we do not pay a dividend. You will note the return through the increase in the value of each share you have bought.

Is LMDF a risky investment?

As a shareholder in Class C shares you are protected against losses arising from a credit or counterparty risks of microfinance institutions through a first loss tranche of capital subscribed by the Luxembourg State and our investment advisor, ADA. The Prospectus prescribes that this protection should be at least 20% of the Class C capital, i.e. we can loose more than 1/5th of our diversified portfolio before you start loosing money.

However all investors are exposed to country, currency, liquidity, valuation and operational risks as described in the Prospectus.

How can I get my money back?

The Fund buys back your shares at their current value (their net asset value per share) each quarter (end of June, September, December and March) if you need your investment back. The Fund keeps 10% of its assets in liquid instruments to ensure that we are able to honor all shareholder redemption requests. To help us plan the liquidity needed to buy back all the shares you have to submit your request 1.5 months (45 calendar days) before the end of the quarter.

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