Incofin

1
Annual Financial Report 2012

cvso
Annual Financial Report 2012
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Annual Financial Report 2012
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Annual Financial Report 2012

Contents Preface

1. Key figures 2
An ambitious future
2. Corporate governance
2.1. General Meeting 4
4
for over 2 million
2.2. Board of Directors
2.3. Executive Committee
4
4
small entrepreneurs
2.4. Investment Committee 5
2.5. Audit Committee 5 As Incofin cvso’s investments have been proving for years now,
2.6. Auditor 5
financial and social returns go hand in hand. Thanks to the
3. Annual accounts at 31.12.2012 6 resources provided by the fund to microfinance institutions
3.1. Balance sheet 6 (MFIs) worldwide, over 2 million small entrepreneurs now have
3.2. Profit & Loss Account 6
access to financial services such as micro loans.
3.3. Cash flow 6

4. Notes 7
4.1. Financing structure 7
4.2. Portfolio summary 9
5. Compliance 11
5.1. Fund policy 11
5.2. Compliance 11
6. Valuation rules 12
6.1. Assets 12
6.2. Liabilities 12
6.3. Foreign currency translation (Article 34) 13
7. Report of the Board of Directors 14
7.1. Explanatory notes to the 2012 Incofin profit
and loss account 14
7.2. Risks and uncertainties 15
7.3. Social performance 15
7.4. Directors 15
7.5. Auditor 15
7.6. Appointments 15
7.7. Reappointments 15
7.8. Resignation/end of period of office 15
8. Report of the statutory auditor 16
9. Risk management 16
9.1. Risks inherent in offering and holding shares 16
9.2. Risks inherent in the business of Incofin 16
The microfinance sector has huge growth potential. The knowl-
edge and experience of our management team allow us to con-
tinue to identify opportunities and tap new markets. As of 2012,
we have new microfinance partners in Armenia, Kazakhstan,
Ecuador and Cambodia, but Africa represents huge potential for
Incofin cvso as well. We have big plans for the future.
That future consists of more than just growth – diversification
will play a major role as well, as evidenced by the establishment
of the Fairtrade Access Fund and the first actual investments in
farming cooperatives with a Fairtrade label in Latin America.
Incofin cvso is hoping to help to build a sustainable future for
micro-entrepreneurs throughout the world for many years to
come. Along the way, we will continue to be inspired by the tan-
gible results of our investments.
Frans Verheeke
Chairman of the Board of Directors
Incofin cvso

10. Advisory role of Incofin Investment Management 18

10.1 The strengths of Incofin IM 18
10.2. ECHOS©: a measuring tool that scores social
performance 18
10.3.Incofin IM and social performance in the sector 18

All figures are in k€ unless otherwise stated.

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Annual Financial Report 2012

1. Key figures
2012 2011 Return 2012 2011
Balance sheet total 36,443 30,625 Return on loan portfolio (IRR) 7.40 % 7.60 %
Portfolio 35,099 29,626 Weighted average financing charge 3.50 % 3.70 %
Participations 11,737 9,504 Dividend 2.50 % 2.50 %
Loans 23,362 20,122
Average investment in MFIs 903 792
Average loan amount to MFIs 708 629 MFI performance 2012 2011
Equity 21,529 18,254 MFI portfolio (€ m.) 1,920 1,555
Capital 18,914 16,026 Average loan amount (€) 769 776
Debt financing 14,085 11,408 Total number of clients reached 2,411,992 2,068,781
Available (uncalled) 3,915 3,593 % women 74% 76%
Proportion of loan finance 65% 62% Portfolio at risk – 30 days (PAR30) 1.70 % 1.80 %
General provision for loan portfolio 702 459 # MFIs 33 31
% balance total 3.0% 2.3% # countries 20 21

Graph: MFI portfolio per country Graph: Portfolio per MFI

Portfolio k€ Portfolio k€

Bolivia Banco FIE

HKL
Cambodia FIE Gran Poder
ABN Microfinance
Ecuador Finca Armenia
Kazmicrofinance
Armenia
TPC
Nigeria TenGer Financial Group
Lapo
Argentina Financiera Confianza
Credo
Peru
Espoir
SEF International
Kazakhstan
Finca Tanzania
Tanzania Edpymes Proempresa
Azercredit
Mongolia Acme
MBK Ventura
Georgia
Finca Ecuador

Azerbaijan Finca Congo

Fodemi
Haiti Finca Guatemala
Finca Honduras
Indonesia CRECER
Finca Jordan
Congo, DRC
Akiba Commercial Bank
Guatemala Semisol
Maquita
Honduras Kamurj
Proempresa
Jordan
Asian Credit Fund
ACEP Burkina SA
Mexico
Fundacion Alternativa
Burkina Faso Credit Mongol

0 1,000 2,000 3,000 4,000 5,000

0 1,000 2,000 3,000 4,000 5,000 6,000

* The sum of the panels (32) gives the total number of MFIs in which Incofin has invested. No data for ACEP Burkina Faso were
included in the figures on the next page.
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Annual Financial Report 2012

MFI portfolio per region

47 %
Latin America and
19 %
Eastern Europe
17 %
South Asia
15
Africa
% 2%
Middle East &
the Caribbean North Africa

Portfolio by average MFI loan sum

12
Low average loan
8
Medium average
6
High average loan
6
Very low average
sum (€ 1,000 > ALS loan sum (€ 2,000 > sum (ALS > € 2,000) loan sum
> € 500) ALS > € 1,000) (€ 500 > ALS)

Portfolio by MFI size

17
Large MFIs
13
Medium MFIs
2
Small MFIs
(Portfolio > €20 m.) (€20 m. > Portfolio > (€5 m. > Portfolio)
€5 m.)

Portfolio by number of MFI client

22
Large number of
6
Medium number
4
Low number of
clients (clients > of clients (20,000 > clients (10,000 >
20,000) clients > 10,000) clients)

MFI portfolio per product

73
Loans
% 27%
Participations
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Annual Financial Report 2012
2. Corporate
governance
2.1. General Meeting
The General Shareholders’ Meeting takes place annually on the
last Wednesday in April. In 2012, it fell on 25 April.
2.2. Board of Directors
The Board of Directors met twice in 2012. During these meet-
ings, they discussed the financial figures, the annual budget
and the general operations of Incofin cvso.
At the meeting in October 2012 the Board of Directors gave
its approval to the agreement in principle with Gimv and
Incoteam and the new investment guidelines were discussed
and approved.
The agreement in principle with Gimv and Incoteam has result-
ed in the following: (i) the majority interest in Incofin IM has
been reduced to 10%, whereby the shares still retained by In-
cofin cvso form a new category of preferential Incofin IM shares
and (ii) Incofin cvso and Gimv have each granted Incofin IM a
subordinated convertible 30-year loan of (each) 1 m EUR (after
the previous loan was repaid by Incofin IM to Incofin cvso).
Members of the Board of Directors receive no remuneration or
fringe benefits of any kind.
The composition of the Board of Directors at the end of 2012
was as follows:
Chairman
··Frans Verheeke - Independent ∙ Chairman, Volksvermogen; Chairman,
University College Ghent
Bestuurders ··Bart Vannetelbosch - Sociaal Fonds Arbeiders Voedingsnijverheid ∙
··Willy Bosmans - WB Management BVBA ∙ Business manager
··Benoît Braeckman - Suez / Fonds Maria Janssens-Braeckman ∙ Former
head of asset management, Electrabel
··Jos Daniëls - VKW Synergia vzw ∙ Honorary chairman of the Board of
Directors, KBC Verzekeringen
··Eric Delecluyse - ACV Voeding en Diensten ∙ Former chairman, ACV
Voeding en Diensten
··Majin de Froidmont - Individual
··Frank De Leenheer - Gimv ∙ Investor Relations & Corporate
Communications Manager
··Johan De Schamphelaere - VDK Spaarbank ∙ Director, VDK Spaarbank
··Rein De Tremerie - Volksvermogen ∙ General secretary, ACV-CSC Metea
··Emmanuel Doutrepont - Sociaal Fonds Bedienden Voedingsnijverheid ∙
Vice chairman, Sociaal Fonds Voedingsnijverheid
··Yvan Dupon - Yvan Dupon Consult BVBA ∙ Business manager
··Michiel Geers - Volksvermogen ∙ General secretary, Volksvermogen
··Tony Janssen - ACV-CSC Metea ∙ Former Chairman, ACV Metal and
European Metal Association
··Fanny Machiels - Group Machiels ∙ Managing Director, Group Machiels
··Guy Pourveur - Families Anonymous ∙ Company Director
··André Sarens - Electrabel ∙ Grid Participations Manager
··Ignace Schatteman - VDK Spaarbank ∙ Loans Director
··Paul Steppe - KBC Group ∙ Honorary Chairman, Management Committee
Centea
··Marc Timbremont - Volksvermogen ∙ Former Managing Director
Huisvesting Het Volk
··Walter Vandepitte - MRBB & AVEVE ∙ Honorary Director, AVEVE Group
··Peter Van den Brock - Pax-Bank ∙ Former Director a.D. Paxbank,
Executive Board Member, Pax-Bank-Stiftung
··Roland Van der Elst - Former professor, EHSAL
··Luc Van Dessel - ACV-Bouw - Industry & Energy ∙ Former Chairman
··Herman Van de Velde - VKW ∙ Managing Director, Van de Velde
··Ann Van Impe - VDK Spaarbank ∙ Compliance Officer VDK Spaarbank
··Henri Vansweevelt - Bekaert ∙ Former Vice-president, Bekaert Group
··Frank Vereecken - VDK Spaarbank ∙ Assistant Manager, Stocks
Department, VDK Spaarbank
··Lyn Verelst - Solid ∙ General Manager, Solid
··Martine Verluyten - Umicore ∙ Independent consultant
··Dirk Vyncke - Vyncke Energietechniek n.v. ∙ Honorary Chairman, Vyncke
Energietechniek n.v.
··Thomas Brenninkmeijer - Brenninkmeijer family ∙ Managing Director
Belux, C&A Belgium
··Marc Hofman - Sociaal Fonds Arbeiders Voedingsnijverheid ∙ Managing
Director, Ter Beke
··Leen Van den Neste - VDK Spaarbank ∙ Chairman, Management
Committee, VDK Spaarbank
Honorary Directors
··Jan Bevernaege - Volksvermogen ∙ Member of the Board of Directors,
Volksvermogen
··Frank Lambert - Antwerp Management Business School ∙ Chairman,
Antwerp Management School Fund for Sustainable and Innovative
Entrepreneurship.
··Guido Lamote - Director, Trias
··Erik Bruyland - Roularta Media Group ∙ Former senior journalist on
Trends magazine
To be appointed
··Frans Samyn - Tabor ∙ Chairman
··Greet Moerman - Sociaal Fonds Bedienden Voedingsnijverheid ∙ Manager
National Secretary, ACV Voeding en Diensten
··Erik Brijs - Umicore ∙ Vice-president Accounting & Control
At the Board of Directors’ meeting of 25 April 2012, Eric Bruy-
land resigned as director. Subsequent to his resignation, he was
appointed as honorary director by the Board.
2.3. Executive Committee
The Executive Committee is responsible for preparation and
follow-up of the current and long-term strategies, objectives,
plans and budgets, and for monitoring the general affairs of the
company. The Executive Committee met three times in 2012.
The Executive Committee is composed as follows:
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Annual Financial Report 2012

·· Frans Verheeke (Chairman) Members of the Investment Committee receive no remunera-

·· Willy Bosmans tion. During the year, Ignace Schatteman was appointed as a
·· Jos Daniëls member of the Investment Committee.
·· Eric Delecluyse
·· Yvan Dupon 2.5. Audit Committee
·· Paul Steppe The Audit Committee supervises the company’s procedures
·· Leen Van den Neste and processes, as well as all aspects related to risks and their
·· Ann Van Impe management. The Audit Committee is composed of members
of the Board of Directors and meets in principle twice a year, as
Members of the Executive Committee receive no remuneration. happened in 2012.
During the past financial year, Leen Van den Neste (VDK ·· Roland Van der Elst (Chairman)
Spaarbank) was appointed as a replacement for Johan De ·· Marc Timbremont
Schamphelaere (VDK Spaarbank). ·· Henri Vansweevelt

2.4. Investment Committee Members of the Audit Committee receive no remuneration.

The Investment Committee is responsible for implementation
of the company’s investment policy, as set out in the invest- 2.6. Auditor
ment guidelines. The Investment Committee is composed of Deloitte Bedrijfsrevisoren, represented by Frank Verhaegen and
members of the Board of Directors specialising in financial Maurice Vrolix, was appointed by the General Shareholders’
affairs and development issues. The Committee met nine times Meeting of 27 April 2011 as auditor of Incofin cvso for a period
in 2012. of three years.
The members of the Investment Committee are:
·· Frans Verheeke (Chairman)
·· Johan De Schamphelaere
·· Tony Janssen
·· Walter Vandepitte
·· Michiel Geers
·· Peter Van den Brock
·· Ignace Schatteman

Back row: Ignace Schatteman, Andre Sarens, Frans Samyn, Tony Janssen, Yvan Dupon, Marc Timbremont, Jos Daniels, Frank Vereecken,
Henri Vansweevelt, Walter Vandepitte, Michiel Geers
Front row: Luc Van Dessel, Ann Van Impe, Benoît Braeckman, Guy Pourveur, Frans Verheeke, Leen Van den Neste, Willy Bosmans, Eric Delecluyse
6
Annual Financial Report 2012

3. Annual accounts 3.2. Profit & Loss Account

at 31.12.2012 Profit & Loss Account 12/2012 12/2011

OPERATING INCOME 2,391 1,992

Participations portfolio 1,037 623

Cash dividends 24 50
3.1. Balance sheet
Stock dividends 744 572
Gains/(losses) on sale 155 0
Assets 12/2012 12/2011
Reversal of impairments 114 0
Participations portfolio 11,737 9,504
Loan portfolio 1,311 1,265
Acquisition value 9,030 7,656
Interest 1,479 1,495
Stock dividends 2,706 1,962
Upfront fees 75 69
Impairment -114
Impairments 0 -100
Loan portfolio 22,661 19,663
General provision -243 -199
Loan portfolio > 1 Year 13,024 10,902
Other income 43 104
Loan portfolio < 1 Year 10,338 9,220
ONDD compensation payment 0 112
General provision -702 -459
Other 43 -8
Other amounts receivable 82 214
OPERATIONAL EXPENSES -1,059 -854
Cash and cash equivalents 1,645 1,012
Incofin IM management fees -650 -516
Prepayments and accrued income 318 232
Assets 36,443 30,625
Portfolio insurance -113 -94
Technical Assistance Contribution (TA) -29 -50
Other goods and services -267 -193
Net operating result 1,332 1,139
Liabilities 12/2012 12/2011
FINANCIAL RESULTS -443 -684
Equity 21,529 18,257
Interest -486 -452
Capital 18,914 16,026
Miscellaneous 43 -232
Legal reserves 226 185
Income before tax 889 454
Other reserves 757 757
Corporation tax 0 0
Result carried forward 1,632 1,289
Withholding tax interest -73 -58
Provisions for Technical Assistance (TA) 79 50
Income after tax 816 396
Loan capital 14,835 12,319
Debt financing > 1 Year 7,785 8,200
Debt financing < 1 Year 6,300 3,208
3.3. Cash flow
Other debts 132 379
Dividends 431 382
Cash flow 12/2012
Accruals and deferred income 186 151
Net income after tax 816
Liabilities 36,443 30,625
General provision 243
Provisions for Technical Assistance (TA) 29
Reversal of impairment -114
Stock dividends -744
Cash flow on net-income basis 229

(Rising)/falling participations portfolio -1,374

(Rising)/falling loan portfolio -3,240
(Rising)/falling accruals and deferrals -50
Other (rising)/falling amounts receivable/debts -114
Free cash flow -4,551

Rising/(falling) capital 2,888

Dividends -382
Rising/(falling) debt financing 2,678
Net cash flow 633

Cash and cash equivalents at 31.12.2011 1,012

Cash and cash equivalents at 31.12.2012 1,645
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Annual Financial Report 2012

4. Notes Graph: Capital variations

Paid-up capital k€ #Shareholders

4.1. Financing structure

1992
4.1.1. Capital
1997

2000
In 2012 the shareholders’ equity rose by k€ 2,888 to k€18,914.
695 shareholders contributed equity, an increase of 34% 2001

since 2011. 2002

2003

This rise is mainly attributable to an increase in private inves- 2004

tors. At 31 December 2012 they represented 31% of the equity 2005

of Incofin cvso. 2006

2007
Shareholder summary
2008
Shareholders having more than 1% of equity
2009
Volksvermogen Banks & Holdings 1,510,320 8.0 %
ACV-CSC Metea Professional associations 1,262,940 6.7% 2010

VDK Spaarbank Banks & Holdings 1,145,760 6.1% 2011

Sociaal Fonds Bedienden Professional associations 726,516 3.8% 2012

Voedingsnijverheid
(Anoniem) Foundations, associations 593,712 3.1%
and cooperatives 0 5,000 10,000 15,000 20,000
KBC Banks & Holdings 558,558 3.0 %
0 200 400 600 800

Gimv Banks & Holdings 520,800 2.8%

ACV Voeding en Diensten Professional associations 520,800 2.8%
Tradicor Industry & Businesses 468,720 2.5%
Umicore Industry & Businesses 398,412 2.1%
Yvan Dupon Consult BVBA Private individuals 325,500 1.7%
WB Management Private individuals 304,668 1.6%
Pax-Bank Banks & Holdings 299,460 1.6%
VKW Synergia vzw Professional associations 276,675 1.5%
Sociaal Fonds Arbeiders Professional associations 273,420 1.4%
Voedingsnijverheid  
Electrabel Industry & Businesses 263,004 1.4%
Van der Elst Roland Private individuals 260,400 1.4%
Stiftungfonds Kirche und Banks & Holdings 260,400 1.4%
Caritas der Bank im Bistum
Essen
Tabor vzw Foundations, associations 260,400 1.4%
and cooperatives
(Anoniem) Private individuals 260,400 1.4%
ACV Bouw - Industrie & Professional associations 260,400 1.4%
Energie
Brenninkmeijer Anthony Private individuals 260,400 1.4%
Vandersanden Constant Private individuals 260,400 1.4%
Koning Boudewijnstichting Foundations, associations 249,984 1.3%
and cooperatives
Koinon Industry & Businesses 249,984 1.3%
Stichting Gillès Foundations, associations 226,548 1.2%
and cooperatives
Stichting Maria Janssens Foundations, associations 212,486 1.1%
Braeckman and cooperatives
Kauffmann Didier Private individuals 200,508 1.1%
Shareholders < 1% of equity 6,502,577 34.4%

18,914,152 100.0%
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Annual Financial Report 2012

Rotary club wetteren

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Annual Financial Report 2012

4.1.2. Debt financing

> 1 Year < 1 Year Book value

12/2011 +/- 12/2012 12/2011 +/- 12/2012 12/2011 12/2012

LBC 500 -500 500 500 500 500

KBC 3,400 -865 2,535 1,658 1,193 2,850 5,058 5,385
ACV Metea 2,000 -500 1,500 500 500 2,000 2,000
Hef boom 500 500 500 500 500 1,000
VDK 1,800 450 2,250 1,050 400 1,450 2,850 3,700
Belfius 1,000 1,000 500 500 500 1,500
Total 8,200 -415 7,785 3,208 3,093 6,300 11,408 14,085

4.1.3. Proportion of loan finance

12/2012
Equity 21,529
Debt financing 14,085
Proportion of loan finance (max 100%) 65.4 %
Max. increase in debt financing 7,444
Available credit lines 3,915

4.2. Portfolio summary

4.2.1. Participations portfolio

Date
MFI Investment Currency Country Acquisition value Stock dividends Impairments Book value
12/2011 +/- 12/2012 12/2011 +/- 12/2012 12/2011 +/- 12/2012 12/2011 12/2012

MFI portfolio 5,163 873 6,036 1,962 744 2,706 -114 114 7,011 8,742

Akiba Commercial Bank 30/04/2008 TZS Tanzania 530 530 47 47 -45 45 532 577
Financiera Confianza 4/06/2009 PEN Peru 543 543 380 380 923 923
FIE Gran Poder 11/08/2009 ARS Argentina 898 291 1,189 193 153 346 1,091 1,534
Banco FIE 28/08/2008 BOB Bolivia 2,062 402 2,463 1,342 592 1,934 3,404 4,397
Acme 14/07/2009 HTG Haiti 782 782 -69 69 713 782
ACEP Burkina SA 25/09/2009 XOF Burkina Faso 63 181 244 63 244
Proempresa 25/08/2010 PEN Peru 284 284 284 284
non-MFI portfolio 2,493 501 2,994 2,493 2,994

Impulse 16/11/2005 EUR Belgium 1,000 1,000 1,000 1,000

Rural Impulse Fund 15/10/2008 USD Luxembourg 1,037 1,037 1,037 1,037
MFX LLC 25/06/2009 USD United States 355 355 355 355
Incofin IM 23/07/2009 EUR Belgium 102 -82 20 102 20
Fairtrade Access Fund 3/09/2012 USD Luxembourg 583 583 583

Participations portfolio 7,656 1,374 9,030 1,962 744 2,706 -114 114 9,504 11,737

During the past financial year, the fund took part in a capital increase in FIE Gran Poder, Banco FIE and ACEP Burkina Faso, while
the shareholder percentage in Incofin IM was reduced from 51% to 10%. The fund realised a gain on this sale of k€ 155. In 2012 In-
cofin cvso took a 31% stake in the equity of the newly established Fairtrade Access Fund. Finally, the improved financial situations
of Akiba and Acme in the last two years (2010-2012) have made possible the sustainable reversal of the impairments recognised.
 10
Annual Financial Report 2012

4.2.2. Loan portfolio

MFI Date Investment Currency Country > 1 Year < 1 Year Book value
12/2011 +/- 12/2012 12/2011 +/- 12/2012 12/2011 12/2012
MFI portfolio 10,902 1,872 12,774 8,944 1,394 10,338 19,846 23,112

Existing loans
CRECER 9/06/2008 USD Bolivia 482 -482 482 482 482 482
CRECER 26/09/2008 USD Bolivia 173 -173 173 173 173 173
Credo 7/06/2010 USD Georgia 835 -835 835 835 835 835
Espoir 8/06/2010 USD Ecuador 835 -835 835 835 835 835
Finca Jordan 22/07/2010 USD Jordan 580 -580 193 387 580 774 580
TenGer Financial Group 30/12/2010 USD Mongolia 1,132 -1,132 1,132 1,132 1,132 1,132
Fodemi 28/03/2011 USD Ecuador 711 711 711 711
Maquita 3/05/2011 USD Ecuador 507 -304 203 304 304 507 507
Lapo 22/06/2011 NGN Nigeria 332 -332 332 -32 300 664 300
Finca Guatemala 28/06/2011 USD Guatemala 701 701 701 701
HKL 25/07/2011 THB Cambodia 708 -708 708 708 708 708
FIE Gran Poder 27/07/2011 USD Argentina 692 -346 346 346 346 692 692
Finca Honduras 1/09/2011 HNL Honduras 696 -696 696 696 696 696
Semisol 24/10/2011 MXN Mexico 541 -541 541 541 541 541
Credit Mongol 2/12/2011 USD Mongolia 186 -186 186 186 372 186
Finca Congo 12/12/2011 USD Congo, DRC 746 -746 746 746 746 746
Fundacion Alternativa 20/12/2011 USD Ecuador 230 -230 230 230 230 230
Finca Tanzania 21/12/2011 TZS Tanzania 816 -816 816 816 816 816
Renewed
HKL 26/10/2007 USD Cambodia 352 -352 352
HKL 25/10/2012 USD Cambodia 767 767 767
AZERCREDIT 29/07/2009 USD Azerbaijan 529 -529 529
AZERCREDIT 29/07/2012 USD Azerbaijan 813 813 813
MBK Ventura 22/12/2009 IDR Indonesia 733 -733 733
MBK Ventura 24/12/2012 IDR Indonesia 781 781 781
AB Nigeria 12/04/2010 NGN Nigeria 748 -748 748
AB Nigeria 17/04/2012 NGN Nigeria 1,448 1,448 1,448
SEF International 22/07/2010 USD Armenia 774 -774 774
SEF International 24/07/2012 USD Armenia 826 826 826
Proempresa 23/07/2010 USD Peru 774 -774 774
Proempresa 23/07/2012 PEN Peru 816 816 816
Finca Armenia 22/02/2011 AMD Armenia 1,608 -1,608 1,608
Finca Armenia 22/02/2012 AMD Armenia 1,428 1,428 1,428
Asian Credit Fund 23/11/2011 KZT Kazakhstan 221 -221 221
Asian Credit Fund 23/11/2012 KZT Kazakhstan 282 282 282
New loans
Finca Ecuador 22/02/2012 USD Ecuador 754 754 754
HKL 28/03/2012 USD Cambodia 756 756 756
Lapo 24/08/2012 NGN Nigeria 758 758 758
Kamurj 15/10/2012 USD Armenia 386 386 386
Kazmicrofinance 8/11/2012 KZT Kazakhstan 1,294 1,294 1,294
TPC 20/12/2012 USD Cambodia 1,133 1,133 1,133
Repaid
CRECER 28/09/2009 USD Bolivia 1,025 -1,025 1,025
Forjadores 22/11/2010 MXN Mexico 298 -298 298
Acorde 26/11/2010 CRC Costa Rica 740 -740 740
Forjadores 21/02/2011 MXN Mexico 432 -432 432
non-MFI portfolio 250 250 276 -276 276 250

Renewed
Incofin IM 30/06/2010 EUR Belgium 200 -200 200
Incofin IM 19/11/2012 EUR Belgium 250 250 250
Repaid
Incofin IM 30/06/2009 EUR Belgium 76 -76 76

In 2012 the quality of the loan portfolio was very good, and there were no specific impairments. All loans in foreign currency were
hedged against possible exchange rate losses.
 11 
Annual Financial Report 2012

5. Compliance

5.1. Fund policy Graph: Book value per country

·· In accordance with fund policies, the
Book value k€ Stock dividends k€
following risk spread was established:
% Balance total Max. book value
the book value per country and per
MFI must not exceed 15% and 10%
16% 6.000
respectively of Incofin’s total assets.
·· Incofin limits its participations in 14% 5.250
MFIs and other funds to a maximum
of 75% of its equity. 12% 4.500

10% 3.750
5.2. Compliance
5.2.1. Portfolio risk spread 8% 3.000

6% 2.250
The exceeding of the maximum book
value in Banco Fie is a consequence
4% 1.500
of the stock dividends received in the
sum of k€ 1.934; the acquisition value 2% 750

of Banco FIE still lies beneath the 10%

0 0
threshold.
Bolivia

Cambodia

Ecuador

Armenia

Nigeria

Argentina

Peru

Luxembourg

Kazachstan

Tanzania

Mongolia

Belgium

Georgia

Azerbaijan

Haiti

Indonesia

Congo, DRC

Guatemala

Honduras

Jordan

Mexico

United States

Burkina Faso
5.2.2. Book value of participations
portfolio

12/2012
Eigen vermogen 21,529
Max boekwaarde (75%) 16,147
Graph: Book value per MFI

Book value k€ Stock dividends k€

Deelnemingsportefeuille 11,737
% Balance total Max. book value
Actuele boekwaarde (%) 55%

14% 4,900
Max verhoging boekwaarde 4,410

12% 4,200

10% 3,500

8% 2,800

6% 2,100

4% 1,400

2% 700

0
Banco FIE
HKL
FIE Gran Poder
ABN Microfinance
Finca Armenia
Kazmicrofinance
TPC
TenGer Financial Group
Lapo
Rural Impulse Fund
Impulse
Financiera Confianza
Credo
Espoir
SEF International
Finca Tanzania
Edpymes Proempresa
Azercredit
Acme
MBK Ventura
Finca Ecuador
Finca Congo
Fodemi
Finca Guatemala
Finca Honduras
CRECER
Fairtrade Access Fund
Fairtrade Access Fund
Akiba Commercial Bank
Semisol
Maquita
Kamurj
MFX LLC
Proempresa
Asian Credit Fund
Incofin IM
ACEP Burkina SA
Fundacion Alternativa
Credit Mongol
 12
Annual Financial Report 2012
6. Valuation rules
Without prejudice to the specific valuation rules mentioned
below, the valuation rules that apply are those that were
established pursuant to the provisions of the Royal Decree of
30 January, 2001 in implementation of the Companies Code,
more particularly Book II, title I, chapter II relating to valuation
rules. Unless stated otherwise, the article numbers refer to the
corresponding articles in the Royal Decree of 30 January 2001.
6.1. Assets
Without prejudice to the specific valuation rules mentioned
below, each asset item is valued separately at its acquisition
cost and recognised in the balance sheet at that amount, after
deduction of the depreciation and impairments on the asset
item in question (Article 35, first paragraph).
6.1.1. Intangible fixed assets
Intangible fixed assets are valued at their acquisition cost,
exclusive of additional costs. They are amortized over the
economic lifetime of the asset, and over five years in the case of
software.
6.1.2. Tangible fixed assets
Tangible fixed assets are valued at their acquisition cost, exclu-
sive of additional costs. They are amortized over the economic
lifetime of the asset, as follows:
·· Office equipment 5 years
·· C omputers 3 years
·· Furniture 10 years
6.1.3. Participations and shares
Participations and shares are valued at their acquisition price,
exclusive of additional costs (Article 41, paragraph 2). Impair-
ments are recognised in the event of sustained loss of value,
as evidenced by the status, profitability, or prospects of the
company in which participations or shares are held (Article
66, paragraph 2 of the Royal Decree of 30 January 2001).
Participations and shares that are recognised under financial
fixed assets are not revalued (Article 57, paragraph 1). Once a
participation has been impaired, it will be revalued at no more
than the original acquisition value, if the status, profitability
or prospects of the company so justify in the judgment of the
Board of Directors.
6.1.4. Fixed-interest securities
Fixed-interest securities are valued at their acquisition price.
The difference between the acquisition value and the redemp-
tion value is recognised in the income statement on a straight-
line pro rata basis.
6.1.5. Amounts receivable at more than one year and
within one year
Without prejudice to the provisions of Articles 67, paragraph
2, 68 and 73, receivables are recognised at their nominal value
(Article 67, paragraph 1) on the final day of the financial year.
Under Article 68 impairments are applied where repayment of
all or part of the receivable on the repayment date is uncertain.
To make allowance for the special credit and currency risk that
arises from extending credit to high-risk countries with unsta-
ble economic and political climates, global depreciation of 1%
is applied annually to the receivables in the outstanding invest-
ment portfolio, weighted by the ECA risk scores published for
each country. This depreciation is applied in accordance with
Article 47 of the Royal Decree, given the similar technical and
legal characteristics of these receivables.
The level of this depreciation can be adapted on the basis of
historical loss data.
6.1.6. Investments and cash and cash equivalents
These are recognised at the lesser of their acquisition cost or the
realisable value at the reporting date (Article 74).
6.2. Liabilities
6.2.1. Provisions for risks and expenses
Provisions are set aside to cover losses or expenses of a clearly
defined nature that are probable or certain at the balance date,
but the amount of which is not known (Article 50, Royal De-
cree of 30.01.2001).
6.2.2. Amounts payable at more than one year and
within one year
Without prejudice to the remaining provisions of Articles 77,
67, paragraph 2 and 73, amounts payable are recognised at
their nominal value (Article 67, paragraph 1).
 13 
Annual Financial Report 2012

6.3. Foreign currency translation (Article 34)

Transactions in foreign currency are recognised at the exchange

rate applicable on the transaction date.

All amounts receivable or payable in foreign currency are

hedged against possible exchange rate differences via cross-cur-
rency contracts or forward contracts. These amounts receivable
or payable are valued at the contractually agreed hedging rate.

Other financial assets and liabilities in foreign currency are

translated at the closing rate on the balance date. Gains and
losses arising from foreign currency transactions and from
the translation of monetary assets and liabilities into foreign
currency are recognised in profit or loss. Non-monetary items
valued at their acquisition price in a foreign currency are trans-
lated at the exchange rate applicable on the date on which the
acquisition price was determined.

Positive and negative exchange rate differences are entered in

the financial results on a net basis.
 14
Annual Financial Report 2012
7. Report of the Board
of Directors
We hereby present our report on the financial year 2012 and ask
you to approve the annual accounts at the balance date of 31
December 2012. The Board has monitored the activities of the
company, with attention for its special social purpose.
At the end of 2012 Incofin’s assets stood at k€ 36,443, an increase
of 19% on the previous year. At the end of the financial year, the
equity of Incofin cvso stood at k€ 21,529 in comparison with k€
18,257 at the end of the 2011 financial period. The subscribed
capital rose by k€ 2,888 to k€ 18,914 thanks to the arrival of new
shareholders. The Board of Directors proposes to offer Incofin
shareholders a capital remuneration of k€ 431 for 2012. Partners
who have increased their capital during the course of the year
will be remunerated pro rata in accordance with Article 34 of the
Articles of Incorporation.
Debt in the form of short and long term loans increased by k€
2,678 during the course of 2012 as a consequence of the increase
in the portfolio. At the end of 2012, Incofin had k€ 14,085 of loans
effectively outstanding, representing 65% of its equity. It also had
undrawn credit lines totalling k€ 3,915. Within the guidelines set
by the Board of Directors, these credit lines may be drawn down
to a maximum of 100% of the amount of the shareholders’ equity.
On the asset side of the balance sheet, the gross investment
portfolio (before general and specific impairments) stood at k€
35,099 at the end of the year. This portfolio consists of k€ 11,737
in participations and k€ 23,362 in loans. Overall the loan portfo-
lio grew by k€ 5,359 in 2012, with new investments in Ecuador,
Armenia, Kazakhstan and Cambodia and further strengthening
of MFIs already present in the portfolio.
During 2012 participations rose by k€ 2,233 to k€ 11,737. This
increase is due to (i) follow-on investments in Argentina, Bolivia
and Burkina Faso, amounting to k€ 873; (ii) the payment of stock
dividends at Fie Gran Poder and Fie FFP Bolivia amounting to k€
744; (iii) the investment of k€ 583 in the newly established Fair-
trade Access Fund and (iv) the reversal of previously recognised
impairments on ACME and Akiba amounting to k€ 114.
In addition, the controlling interest in Incofin IM was reduced
from 51% to 10% by the sale of 410 shares to Incoteam cv (310)
and Gimv NV (100), whereby the remaining shares still held by
Incofin cvso (100) together with the shares held by Gimv NV
(100) form a new category of preferential shares in Incofin IM.
This transaction realised a gain of k€ 155. Simultaneously with
this sale a subordinate 30-year loan of k€ 1,000 was granted to
Incofin IM of which k€ 250 has already been drawn down, and
a partnership agreement has been signed to formalise the future
collaboration of the parties.
The net loan portfolio (after general and specific impairments)
stood at k€ 22,661 at the end of the financial year. At the end of
2012 Incofin cvso applied a general impairment in the sum of
k€ 702. After consultation with FSMA the “general provision for
risks” was recognised as an impairment on the assets side of the
balance sheet. During 2012 k€ 243 was allocated to this general
impairment by building up the general provision on the basis of
ECA scores.
At the end of the financial year, the gross investment portfolio
represented 94% of the assets. Cash and cash equivalents stood at
k€ 1,645 at the end of the financial year. This corresponds to 4.5%
of the Incofin cvso balance sheet total. The remainder consists
mainly of expected interest on the loan portfolio of k€ 318 and
other receivables amounting to k€ 72 (mainly recoverable VAT).
Off-balance sheet obligations of Incofin at the end of 2012 include
the cross currency interest rate swaps and forward currency
contracts contracted with KBC Bank and MFX Solutions to hedge
exchange rate risks for the outstanding loans to MFIs. These hedge
all non-euro interest and capital flows for loans made by Incofin
in local currency with a cross currency swap. At the end of 2012
Incofin had exchange rate hedging products outstanding in a total
notional sum of k€ 23,112 at the hedging rate, being 100% of the
outstanding loan portfolio. Hedged loans to MFIs in exotic cur-
rencies in 2012 represented 43% of hedged loans. The remaining
57% consisted of USD loans to MFIs.
7.1. Explanatory notes to the 2012 Incofin profit
and loss account
Incofin ended the financial year with net post-tax profits of
k€ 816. This result is significantly higher than in the previous
year and can mainly be explained by the gains realised on the
sale of shares in Incofin IM for k€ 155 in 2012 and the negative
exchange rate difference on the sale of the k€ 241 holding in
Confianza in 2011.
The total income of Incofin (operating income, financial
income and extraordinary income) stands at k€ 2,561. In 2012
92% of this was financial income, 7% extraordinary income
and 1% operating income. Total outgoings (operating expenses,
financial expenses and taxes) stood at k€ 1,745 in 2012. These
outgoings consist of 68% operating expenses (including the
fund manager’s remuneration, ONDD insurance costs, general
and specific impairments and communication costs), 28%

financial charges and 4% taxes related to non-recoverable with-
holding tax deducted on interest received from abroad.
Allocations to the general provision amounted to 1% of the
current gross investment portfolio in the form of receivables
weighted on the basis of ECA risk scores. This general impair-
ment is applied to offset possible future defaults and foreign
currency fluctuations.
The financial income amounted to k€ 1,877, principally
composed of interest received on MFI loans at k€ 1,480, stock
dividends at k€ 744 and financing charges at k€ 483. The re-
maining financial income primarily consists of cash dividends,
upfront fees, bank charges and the revaluation of cash on bank
accounts at closing date.
We ask you to kindly approve the annual accounts at 31
December 2012. After approval we propose to appropriate the
profit for the financial year and the profit carried forward from
the previous financial year as follows:
Profit available for appropriation €2,105,008
Profit for the financial year available for appropriation €815,767
Profit carried forward from the previous financial year €1,289,241
Allocation to capital and reserves €40,788
Allocation to the legal reserve €40,788
Allocation to unavailable reserves €0
Allocation to capital and issue premiums €0
Retained earnings to be carried forward €1,632,821
Retained profit to be carried forward €1,632,821
Profit for distribution €431,399
Return on capital €431,399
7.2. Risks and uncertainties
As a result of its activity, Incofin cvso is subject to a range of
risks including credit risks, country-specific risks, exchange rate
risks and liquidity risks. The Board of Directors pays the neces-
sary attention to monitoring these risks and is of the opinion
that the risks are limited and more than adequately covered.
7.3. Social performance
Incofin cvso invests in 34 MFIs in 20 countries. Together these
MFIs reach 2,371,409 clients (in 2011: 1,849,905), 75% of
whom are women. The involvement of these local intermediar-
ies creates a very powerful leverage effect for Incofin invest-
ments. The combined loan portfolios of the institutions in
which Incofin invests amount to k€ 1,878.
15 
Annual Financial Report 2012
Microfinance institutions in the Incofin portfolio are sound
and efficient financial institutions: they have good quality loan
portfolios (with limited late payments), they keep their general
costs under control, and they are profitable.
7.4. Directors
Please pronounce on the discharge to be given to the Board of
Directors and to all the directors individually for the perfor-
mance of their mandate during the past financial year.
7.5. Auditor
Please pronounce on the discharge to be given to the auditor
for the performance of his mandate during the past financial
year.
7.6. Appointments
·· M rs Greet Moerman was put forward by the Sociaal fonds
Bedienden Voedingsnijverheid to replace Mr Emmanuel
Doutrepont. Mrs Greet Moerman will serve the remainder of
Mr Doutrepont’s period of office.
·· Mr Bart Vannetelbosch was put forward by the Sociaal fonds
Arbeiders Voedingsnijverheid to replace Mr Marc Hofman.
Mr Bart Vannetelbosch will serve the remainder of Mr Hof-
man’s period of office.
·· Mr Eric Brijs was put forward by Umicore to replace Mrs
Martine Verluyten. Mr Eric Brijs will serve the remainder of
Mrs Verluyten’s period of office.
Consequent upon the subscription of at least 100 shares, a six-
year period of office is proposed for:
·· M r Frans Samyn (Tabor vzw)
7.7. Reappointments
·· The period of office of Mr Tony Janssen expires on the day of
the 2013 General Meeting. It is proposed to reappoint him
for a new six-year period.
·· The period of office of Mr Peter van den Brock expires on the
day of the 2013 General Meeting. It is proposed to reappoint
him for a new six-year period.
7.8. Resignation/end of period of office
·· Mr Emmanuel Doutrepont, Sociaal fonds Bedienden Voe-
dingsnijverheid.
·· Mr Marc Hofman, Sociaal fonds Arbeiders Voedingsnijver-
heid
·· M rs Martine Verluyten, Umicore.
·· The period of office of Mrs Lyn Verelst (Solid) expires on the
day of the 2013 General Meeting. It will not be renewed.
 16
Annual Financial Report 2012
8. Report of the
statutory auditor
The statutory auditor Deloitte Bedrijfsrevisoren BVCBA, rep-
resented by Frank Verhaegen and Maurice Vrolix, delivered an
unqualified audit opinion on the financial statements. The fi-
nancial statements as of 31 December 2012 give a true and fair
view of the company’s assets, liabilities, financial position and
results in accordance with the accounting principles applicable
in Belgium.
9. Risk management
9.1. Risks inherent in offering and holding shares
9.1.1. Risks inherent in investing in shares
There are economic risks inherent in an investment in Incofin
shares, as in any investment in equities. When considering an
investment decision, investors must remember that they could
lose their entire investment in shares.
9.1.2. Limited liquidity of Incofin shares
There is no secondary market on which Incofin shares are
traded. Although it is possible for a shareholder to withdraw in
accordance with the procedure set out in the Articles of Incor-
poration, there is relatively limited liquidity. In addition, the
funds raised by Incofin are reinvested as efficiently as possible
in core activities. These resources are employed by MFIs under
a series of contracts for a fixed time as working capital for
financing the micro-entrepreneurs, and are thus not immedi-
ately available for withdrawal.
Under Article 10 of the Articles of Incorporation, partners may
only withdraw or seek a partial repayment of their shares in
the first six months of the financial year, after approval by the
Board. Finally, shares may only be transferred with the Board’s
prior consent.
9.1.3. Risks of future dividend changes
Past gains offer no guarantee for the future, and no guarantee
is given as to future gains. The dividend may rise to a maxi-
mum of 6 % as set out in the Act of 20/7/1955 for cooperative
partnerships recognised by the National Council for Coopera-
tion (NRC). Incofin makes no forecasts or estimates of dividend
yields.
9.2. Risks inherent in the business of Incofin
Incofin is a specialist player in the micro-finance sector. Incofin
invests directly and indirectly in MFIs in developing countries,
which offer microloans and financial services to small local
entrepreneurs. Incofin’s investment decisions are taken by the
Investment Committee, which is made up of a qualified team
of experts with broad financial and legal expertise. They have
experience of the microfinancing sector and are well able to
assess the risks of an investment. The Investment Committee
closely monitors the evolution and management of all of these
risks.
 17 
Annual Financial Report 2012

9.2.1. Credit risks 9.2.4. Exchange rate risks

Incofin invests in microfinance institutions and organisations
in the fair trade sector – MFIs, which, in their turn, grant loans
to individuals who can often offer no real collateral. It cannot
therefore be excluded that the microfinance institutions in
which Incofin invest may at some time become insolvent, in
which event Incofin’s investment would be lost. Incofin man-
ages this risk by:
·· conducting a rigorous financial analysis;
·· e valuating their business plans;
·· e valuating their management and directors;
·· c alling for regular reporting of developments in their activi-
ties;
·· regular on-site follow-up.
9.2.2. Country-specific risks
Incofin invests in developing countries, which are subject to
country-specific risks. These risks include political risks (e.g.
war or civil war) and transfer risks (the inability to repatri-
ate funds invested in the country owing to foreign exchange
shortages or other government measures). To cover these risks,
Incofin has taken out an insurance policy with the Belgian
national export credit insurer ONDD which covers its entire
investment portfolio against these risks.
Incofin diversifies its investment portfolio (consisting of equity
investments and loans) and spreads its risks in a prudent man-
ner based on the risk distribution policy established by the
Investment Committee. This policy states that the exposure
to any one country or MFI should not exceed 15% and 10%
respectively of Incofin’s total assets.
Incofin actively manages its currency risk using hedging tech-
niques (such as cross currency swaps, forwards etc.). The ex-
change rate risk on investments in local currency is not actively
hedged. In these cases, it is expected that the return on invest-
ment will off-set the depreciation of the currency concerned.
9.2.5. Interest rate risk
On the one hand Incofin attracts debt financing, and on the
other it places loans with MFIs in foreign currencies. The inter-
est rates at which these operations take place are subject to
market influences over time. Incofin will always ensure that the
margin between debit and credit interest rates remains large
enough to allow Incofin to continue to grow. The fund manager
manages this risk by (i) applying fixed rates to both incoming
and outgoing transactions and (ii) determining a “minimum”
return for all loan transactions.
9.2.6. Liquidity risk
The liquidity risk of the fund is relatively low given the high
liquidity and maturity of the loan portfolio. The cash available
(including available credit lines) and the outstanding loans
which will reach maturity during the coming year will always
be amply sufficient in order to meet the financial obligations
and to absorb any loan defaults.

9.2.3. Market risks

These investments are also exposed to market and environmen-
tal risks, which are not insurable. These risks include economic
environmental factors, legal certainty and the quality of the
local regulation of microfinance institutions. Incofin analyses
these issues carefully and also applies a sound geographic
spread in the portfolio composition, to limit this risk as much
as possible.

Despite the fund manager’s experience in the microfinance

business, there is no guarantee of the identification of adequate
attractive investments or of an optimal spread in the portfolio.
Each contract is the result of negotiation, and the agreement
of both the Investment Committee and the MFI in question is
required to complete a transaction.
 18
Annual Financial Report 2012
10. Advisory role of
Incofin Investment
Management
Incofin Investment Management (Incofin IM) advises Incofin
cvso and seven other funds worth a total of more than €350
million.
10.1. The strengths of Incofin IM
With a multilingual and international team of 35 experts,
Incofin Investment Management offers adapted financial
services. Incofin has extensive experience with microfinance in
international markets and with the maintenance of links with
investors worldwide.
The methods used by Incofin IM are fully in line with those of
Incofin cvso. Incofin IM also aims for a ‘double bottom line’
approach, with equal attention to financial and social perfor-
mance. This is measured using the ECHOS© tool and the CRS
risk management tool.
10.2. ECHOS©: a measuring tool that scores social
performance
Just investing in MFIs is not enough in order to be recognised
as ‘social investor’. Incofin IM wants first and foremost to invest
in MFIs which can demonstrate high social performance.
Incofin measures the social performance of MFIs with the
ECHOS© tool which was developed by Incofin IM itself.
MFIs with a score below 55% do not qualify for financing by
Incofin. Further analysis has demonstrated a close correlation
between the financial health of an MFI and its social perfor-
mance. MFIs which are financially sound also score well on
social parameters.
10.3. Incofin IM and social performance in the sector
Incofin IM is involved in and supports the following sectoral
initiatives:
·· Client Protection Principles - www.smartcampaign.org
·· Social Performance Task Force: Best practices for social per-
formance management and reporting - www.sptf.info
·· Microfinance Transparency: Transparency in price setting -
www.mftransparency.org
·· Principles for Investors in Inclusive Finance - http://www.
unpri.org/files/2011_01_piif_principles.pdf;
Incofin IM is also a founding member of the Global Impact
Investing Network (GIIN), a not-for-profit organization
dedicated to increasing the scale and effectiveness of
impact investing.
http://iris.thegiin.org/incofin-investment-management
 19 
Annual Financial Report 2012
 20
Annual Financial Report 2012

Colofon

Publisher
Michiel Sallaets, Communications Manager,
Incofin Investment Management (www.incofin.com).

Concept, layout, editing and coordination

Cantilis (www.cantilis.be).

Printing

Drukkerij Bema-Graphics. This annual report is printed on

Amber Graphic, a paper with the Forest Stewardship Council
certificate.

Contact

Incofin Investment Management

Sneeuwbeslaan 20, PB 2
2610 Antwerpen
 21 
Annual Financial Report 2012

 
 

Committed Beyond Investment