Soros Economic Development Fund ANNUAL REPORT 2013

Soros Economic
Development Fund
ANNUAL
REPORT
2013
Advancing Opportunities for
Economic & Social change
This report contains information that has been provided by the applicable organizations. While the information
contained here is believed to be reliable, no representation or warranty is made by Soros Economic
Development Fund as to the accuracy or completeness of such information.
Copyright © 2014 by the Soros Economic Development Fund. All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by
any means without the prior written permission of the publisher.
Published by:
Soros Economic Development Fund
224 West 57th Street, 9th Floor
New York, NY 10019
USA
Contents
From Our Chairman
About SEDF
4
5
SEDF Investment Map
SEDF Investment Model
6
8
SEDF Investment Highlights
SEDF Financials
SEDF Officers
10
20
22
SEDF Board of Directors
23
3
From our Chairman
About SEDF
Dear Friends,
The Soros Economic Development Fund (SEDF) is a private foundation that makes program
related investments in frontier markets. Established in 1997, by philanthropist George Soros
and the Open Society Foundations, SEDF has over $350 million in investment capital and
has a team of 19 people in New York, Johannesburg, London and Freetown. We invest in
sustainable businesses that alleviate poverty by: providing access to goods and services
for underserved populations and creating jobs and other economic opportunities for
those at the bottom of the pyramid. We believe that the social goals of our investments
are best met when the business grows successfully. Our investments in agribusiness,
In 2013, the Soros Economic Development Fund (SEDF) continued its commitment to create maximum
social impact through its investment activities. Our program related investments provide access to
affordable products and services to underserved and marginalized populations and create jobs for lowincome households in developing and post-conflict countries. We reviewed current sector and geographic
investment strategies within our three industry sectors: agriculture, finance and logistics, to identify scalable
enterprises for growth capital. In doing so, we realized that our investments require more focus on and
assistance in the implementation of their growth strategies. Analyses such as these serve to strengthen our
ability to create sustainable and scalable solutions to alleviate global poverty and community
deterioration.
We maintained our two-tier strategy of investing directly into enterprises and via platforms with local investment
logistics and financial services serve as a testament to that core belief. Through our
portfolio investments, we hope to pave the way for private capital investors to join us in
the fight against global poverty and to realize the vision of a food secure world.
professionals who fit well with our culture and mission. Through our platforms, SEDF enjoys access to markets
and transactions which are only achievable with personalized and highly developed networks of
experienced local people, and we enjoy working closely with them through the platform investment
committees. For our direct investments, we have further refined our approach to invest larger amounts,
exceeding US $5 million per transaction. We believe that with this two-tier strategy, we can reach our social
goals more effectively and have even greater impact.
In 2013, we also strengthened our team by recruiting several high caliber younger talents with top-notch
professional credentials and degrees from major universities throughout the United States, Europe and South
Africa. 2013 also heralded a successful launch of our London office. SEDF will increasingly work across all
of our existing offices in New York, Johannesburg and London as a well-organized global network of one
fund with one vision.
In 2014, Stewart Paperin, President of SEDF retired after 17 years as SEDF’s leader. Stewart and his team grew
SEDF into what it is today. His imagination, diligence and energy will always be remembered and
appreciated.
Michel Zaleski
Chairman
M
5
SEDF Investment Map
SEDF invests in small and medium enterprises, investment funds, holding
companies and financial companies along the West, South and East Africa
Corridors, Europe and South Asia.
Burkina
Faso
Bulgaria
Niger
Mexico
30 projects
Haiti
Liberia
Palestine
India
Mali
Côte d’Ivoire
Sierra Leone
Moldova
Ghana
Uganda
Malawi
Nigeria
Kenya
Tanzania
Mozambique
Zimbabwe
South Africa
6
7
SEDF Investment model
It is SEDF’s fundamental premise that sound and
s u s t a i n a b l e portfolio companies achieve scalable and
measurable social impact. Our Investment Model reflects
this belief, and seeks to maximize charitable impact while
managing risk.
Identify the
Entrepreneur
and/or
opportunity
8
Conduct
rigorous &
thoughtful
due
diligence
Make the
debt or
equity
investment
when
specific
criteria are
met
Monitor,
mentor &
scale the
investment
Exit &
recycle
funds into
new social
impact
investments
& the flow of goods for the
underserved
Non-bank financial companies
and Housing finance companies
We invest in locally based
companies that deliver
affordable goods & services
targeted specifically for our
target class
We demonstrate that
selective investments can
catalyze significant economic
benefits for low income
populations by investing in
businesses which employ
lower skilled workers
We provide investment capital
for the sme industry which is
currently underserved by the
existing financial institutions
and are the engines for
job creation
We demonstrate that poverty
can be reduced through the
right balance of scalability
and profitability
We provide investment
capital for a growing class
of entrepreneurs
9
SEDF Investment Highlights
Injaro Agricultural Capital Holdings Ltd
WEST AFRICA
In 2013, Injaro expanded their portfolio of four seed producers
in Mali, Ghana, Niger and Burkina Faso and one cashew
processor in Ghana to include a shea butter processor in
Ghana and a poultry input supplier in Côte d’Ivoire. These
additional investments brought the Injaro portfolio up to seven
companies that we expect will have a direct social impact
on SEDF’s target class of poor and low-income families
and individuals. The Injaro portfolio generated over US $6.9
million in revenue. The addition of the new investments
coupled with Injaro’s value add operational guidance,
strong portfolio monitoring and SEDF funded capital calls
totaling US $1.2 million reached close to 10,000
smallholder farmers and helped improve their standard of
living.
Highlights
EMPOWERING
SMALLHOLDER
FARMERS IN
WEST AFRICA
GHANA, MALI, BURKINA FASO
NIGER AND CôTE D’IVOIRE
Clients
Served
JOBS
Since
10
11
SEDF Investment Highlights
SEDF Investment Highlights
IGNIA Fund
LeapFrog Financial Inclusion Fund
MEX ICO
In 2013, SEDF funded capital calls totaling US $1.0 million to
IGNIA a venture capital investment fund focused on
alleviating poverty and community deterioration in Mexico
and other Latin American countries. Within the IGNIA portfolio,
MiMoni (formerly known as MiCel), a service that provides online
access to capital to unbanked Mexican consumers at
competitive interest rates, processed over 18,000 loan
applications and disbursed 7,200 loans and continued to
support entrepreneurship and empowerment in the region.
MiMoni continues to innovate, launching a debit card to
disburse loans more efficiently. Ver de verdad developed a
small chain of eye-care shops to provide low income
populations with high quality affordable eye glasses. With the
opening of a third in-store unit in Mexico City and a 7%
increase in average prices, sales in dollar value increased
25% over the prior quarter, and 50% compared to 4Q12. Sales
for the entire year, while 13% under budget, grew 156%
compared to the prior year. Mexvi, a leading provider in
Mexico of integral solutions for self-construction of lowincome homes in rural and semi-urban settings launched its
new brand identity, a result of a 6-month long process that
gathered information around low-income family needs
and their perceptions about housing. This coupled with
Government subsidies allowed Mexvi to build 226 houses in
the Campeche region, all of which were built on schedule
and on budget.
12
GHANA, INDIA, KENYA, NIGERIA, SOUTH AFRICA, TANZANIA, UGANDA
SUPPORTING
INNOVATIVE SOLUTIONS
TO ALLEVIATE POVERTY
IN LATIN AMERICA
1,284,046
CLIENTS SERVED IN 2013
with key investments in
Agriculture, Logistics, Housing
& Healthcare
1,053
LeapFrog’s portfolio companies provide insurance, savings
and pensions products to over 21 million low income people
in seven countries in Africa. In 2013, the fund saw a 35%
increase in the fair value of its portfolio over the prior year and
successfully exited Express Insurance (Ghana), a high-growth
Ghanaian savings and life insurance provider. The sale of
Express Insurance to Prudential PLC marked Prudential’s entry
into the growing African insurance market and achieved
a gross LRR of 82% for LeapFrog. LeapFrog’s outstanding
turnaround and exit of Express Insurance was featured in a
case study by the Emerging Markets Private Equity
Association (EMPEA). In 2012 LeapFrog’s initial investment of
US $5.0 million rescued a failing business and protected the
insurance and savings of 60,000 people. Under the
stewardship of a new management team, a product
redesign, and a tie-up with mobile insurance distributor
BIMA, Express Insurance reached 730,000 people in 2013.
PROVIDING LIFE
INSURANCE FOR
VULNERABLE
POPULATIONS
Express Insurance REACHED
730,000
people via
350,000
policyholders
RECEIVED JOB TRAINING
226
HOMES BUILT IN 2013
13
SEDF Investment Highlights
SEDF Investment Highlights
Juhudi Kilimo
Siraj Palestine Fund
KENYA
In 2013, SEDF, made an investment of US $1.0 million in Juhudi
Kilimo, a micro-finance company that serves farmers in deep
rural Kenya. Juhudi provides agriculture loans that empower
farmers and rural enterprises to increase their incomes and
create sustainable businesses. 59% of incoming Juhudi clients
earn less than $2 per day. By extending credit to smallholder
farmers, Juhudi bridges the gap between subsistence and
commercial farming. Loans are used to acquire of assets
inclusive of dairy cows, poultry, irrigation equipment, and
greenhouses. Juhudi dispersed US $6.7 million via 10,996 loans
in 2013.
PALESTINE
LIFE CHANGING LOANS
FOR FARMERS IN
KENYA
In 2013, SEDF funded capital calls totaling US $0.7 million to
Siraj. The fund’s primary objective is to create jobs, develop
viable businesses, and enhance the overall economic and
political stability in the region. Through its investment in
PalLease, the first licensed company to provide capital and
operational leasing services within the Palestinian market,
Siraj provided financing solutions for underbanked
individuals and small businesses. WebTeb, an online
platform that provides health information to Arabic
speakers,
created
jobs
for
Information
and
Communications Technology specialists in
Palestine,
who without the opportunity would have traditionally left the
region due to lack of work. Ziadah, a leading engineering
firm in Ramallah, increased its employee base from 55 to
110 people, all of whom are no longer low income
employees as a direct result of employment with Ziadah.
In 2013, Nakheel, a company that produces and sells
Medjool dates created 60 permanent and 150 seasonal
jobs, predominately for women from rural areas in the
Jordan valley. Siraj continues, with these and its other
four investments, to drive economic growth and raise the
income bar in Palestine by investing in businesses that
create jobs, thereby helping to revitalize a region deeply
affected by political and economic strife.
CREATING JOBS
IN PALESTINE
WASSEL GROUP
620 employees
54% are low income employees
PALGAZ
34 employees
44% are low-income
ZIADAH
110 employees
All are now above low-income
NAKHEEL
60 employees
32% are low-income
PALLEASE
14 employees
43% are low-income
PHC
24 employees
29% are low-income
WEBTEB
16 employees
All are above low-income
HD VISION
15 employees
7% are low-income
TOTAL
901 employees
14
Income generated from
milk by farmers in 2013
$3,800,000
15
SEDF Investment Highlights
SEDF Investment Highlights
SONG Investment Company
Aspada Investment Company
INDIA
In 2013, SEDF funded US $0.8 million in capital calls to SONG to
ensure that SONG continues to fund early stage Indian
businesses focused on affordable healthcare, agricultural
supply chain, logistics, and access to finance. SV Agri is the
leading player in managing the agricultural supply chain for
potato in India. By providing support and creating end-toend market linkages, the company has helped thousands
of small-hold farmers to significantly improve yield and
increase their incomes. SV offers farm extension services
(cropping techniques, insurance, financing support) and
quality agricultural inputs (seeds, organic fertilizer) to smallhold farmers through an extended network of over 80
company managed village storefronts in India. EyeQ is a
leading chain of specialty eye-care hospitals, operating a
network of over 25 hospitals across India. EyeQ is rated bestin-class and provides quality eye care at affordable prices
for rural, low-income populations in North and West India.
INDIA
PROVIDING ESSENTIAL
PRODUCTS & SERVICES
IN RURAL INDIA
EYEQ PATIENTS TREATED:
175,000
65
NUMBER OF SV AGRI FRANCHISEES:
SMALLHOLDER FARMERS IN THE
SV AGRI NETWORK:
2500
16
In 2013, SEDF established Aspada, an India-focused holding
company specializing in healthcare, agriculture, education,
logistics and financial services investments. SEDF committed
$10.0 million to Aspada of which $2.4 million was funded in
2013. Aspada’s mission is to increase economic and
employment opportunities for low-income persons, provide
essential services to underserved communities, develop
activities that promote community and local infrastructure
improvements, and offer equity and debt funding for
small businesses. Aspada marks SEDF’s second fund
investment in India. Aspada made its first investment in April
2013 in LEAF an end-to-end fresh fruit and vegetable
supply chain company in South India. LEAF aggregates,
processes, and distributes produce and vegetables from
smallholder farmers to major retailers in a branded,
packaged format. Aspada was the subject of a Harvard
Business School case study in impact investing.
HELPING SMALLHOLDER
FARMERS IN INDIA GO
TO MARKET
LEAF CURRENTLY WORKS WITH OVER
1,200
FARMERS IN THE NILGRIS REGION
100
LEAF SUPPLIES TO OVER
SUPERMARKET STORES IN
SOUTH INDIA
17
SEDF Investment Highlights
DSM Corridor Group
TANZANIA
DCG is a logistics, warehousing, and transportation services
company operating in the Tanzanian Ports of Dar es Salaam
and Tanga. DCG owns the only purpose built bulk terminal for
handling fertilizers in Sub-Saharan Africa. This is a vital service as
the Dar es Salaam Port provides a gateway for 95% of Tanzanian
trade and serves as the access route to import dependent
landlocked nations such as Malawi, Zambia, Burundi,
Rwanda, and Uganda, and Eastern DRC. By moving fertilizer
and grains more efficiently in and out of the port, DCG helps
improve the delivery time and cost of these goods in the
relevant countries, thereby contributing
to food security in
the
region.
In 2013, SEDF made an equity investment of US $1.3 million
to purchase preferred shares in DCG and a debt investment
of US $2.0 million. This landmark transaction, SEDF’s first
in Tanzania, contributed to the creation of 115 new jobs.
In addition, SEDF was one of DCG’s investors that, received
an award from Private Equity Africa for Best East Africa
Logistics Deal for DSM Corridor.
18
NEW FULL-TIME
JOBS CREATED
115
IMPROVING FOOD SECURITY
IN SUB-SAHARAN AFRICA
19
SEDF Financials
Consolidated statements of financial position
December 31, 2013 And 2012
2013
2012
577,435
4,835,035
Consolidated statements of Activities
December 31, 2013 And 2012
2013
2012
1,313,128
1,503,182
Assets
Cash and cash equivalents
$
Program-related investment activities:
Interest receivable and other assets
1,246,490
879,551
Interest on loans
Investment
316,426,545
181,346,274
Equity interest in net loss of investees
(1,098,333)
(801,335)
Program-related investments
52,551,076
52,888,306
Loss on disposal/write off of equity interests
(1,670,580)
(1,395,000)
(2,519,728)
(5,962,254)
Loss on foreign currency transactions
(1,273,326)
(301,067)
50,031,348
46,926,052
(2,729,111)
(994,220)
368,281,818
233,986,912
(1,577,939)
(2,885,122)
(4,307,050)
(3,879,342)
1,382,559
2,867,157
—
2,338,069
137,080,271
18,504,489
134,155,780
19,830,373
75,463
168,140
3,239,360
2,828,007
3,314,823
2,996,147
977,179
605,228
2,651,257
400,822
6,943,259
4,002,197
127,212,521
15,828,176
222,752,383
206,899,184
46,219
25,023
350,011,123
222,752,383
Less allowance for estimated losses
Program-related investments, net
Total assets
$
$
Net investment loss
Provision for estimated loss on program-related investments
Net loss on program-related investment activities
Liabilities And Net Assets
Contributions from Open Society Institute
Liabilities:
Contributions from Soros Charitable Foundation dissolution
Loan payable
$
10,200,000
4,300,000
Accrued expenses
1,884,850
3,113,221
Deferred federal excise tax
4,786,512
2,061,308
Allowance for estimated losses on and fair value of
guarantees under program-related investments
1,399,333
1,760,000
18,270,695
11,234,529
Total liabilities
Net assets:
Net realized and unrealized gain on investments
Total revenue, gains, and other support
Expenses
Program expenses:
Grant expenses
Other
Net assets – unrestricted
Cumulative translation adjustment
Total net assets
Total liabilities and net assets
$
350,567,242
223,354,721
(556,119)
(602,338)
350,011,123
222,752,383
368,281,818
233,986,912
General and administrative expenses
Federal excise tax expense
Total expenses
Increase in net assets
Net assets, beginning of year
Foreign currency translation gain
Net assets, end of year
see Accompanying notes to Consolidated Financial statements.
20
21
SEDF officers
SEDF Board of Directors
Cedric de Beer
Michel Zaleski
VICE PRESIDENT AND HEAD OF
OPERATING COMMITTEE
Neal DeLaurentis
VICE PRESIDENT
Fawzia Naqvi
BOARD CHAIR
Reuben Abraham
Richard Atterbury
VICE PRESIDENT
Maria Cattaui
James Beaver
W. Bowman Cutter
TREASURER AND FINANCE DIRECTOR
Maria Santos Valentin
SECRETARY AND GENERAL
COUNSEL
22
Leslie Maasdorp
Robert Soros
23
Company Information
UNITED STATES
Soros Economic Development Fund
224 West 57th Street, 9th Floor
New York, New York 10019
T: (212) 548-0111
www.sedfny.org
SOUTH AFRICA
1st Floor, President Place,
1 Hood Avenue Rosebank,
Johannesburg
T: +27 11 587 5033
SIERRA LEONE
31, Murray Town road
Murray Town, Freetown
Sierra Leone
UNITED KINGDOM
7th Floor Millbank Tower, 21-24 Millbank
London, SW1P 4QP
United kingdom
T: +44 20 7031 0200