*For qualified and professional investors only

MICRO AND SME FINANCE LEADERS*

Summary

Market Review Third consecutive quarterly increase of federal funds rate – Macron’s election victory removes major short-term risk for the Eurozone – Chinese growth figures for Q2 continue to impress

Fund Activity USD 28.4 million disbursed during the reporting quarter – investments in 25 different institu-tions across 24 countries – highest investment volume in South America, followed by Central America and Middle East & North Africa

Fund Performance Acceleration in placement activity with drop in cash levels expected – fund volume exceeds USD 300 million for the first time – creation of provisions in debt portfolio decreases

Key Figures

302'508'697 1.07 2.03

Microentrepreneurs reached 165'372

Net performance 2Q (class I, USD, %)Fund volume (USD)

Net performance 12 months (class I, USD, %)

Outlook Fed expected to continue hiking US interest rates, while ECB likely to remain accommodative for some time longer – lower oil prices continue to put pressure on oil exporting markets, while net energy importers will continue to benefit – Fund’s exposure in Asia expected to increase

Equity Portfolio Two private equity investments completed during reporting quarter – valuation adjustments de-tracted from Fund’s quarterly performance – overall positive performance of equity portfolio ex-pected in H2 – private equity investments in Sri Lanka and Uganda expected to be executed

Focus Important Trends for Development Investments – Interview with Rochus Mommartz, CEO re-sponsAbility Investments AG

responsAbility Micro and SME Finance Leaders – Quarterly Report 2

Market Review Third consecutive quarterly increase of federal funds rate – Macron’s election victory removes major short-term risk for the Eurozone – Chinese growth figures for Q2 continue to impress

While the structural low-yield environment essentially contin-ues, the US Federal Reserve (Fed) in June carried out its widely expected third consecutive quarterly rate hike, raising the federal funds rate by 0.25% to a target range of 1% to 1.25%. This happened on the back of optimism and hopes for reflation in the US economy due to normalising growth rates. However, this latest rate hike did not lead to an equivalent, broadly based increase in the dollar cost of financing. At 1.6% at the end of the second quarter of 2017, the two-year swap rate in the US, for example, was unchanged from the end of the previous quarter, as the rate hike had already been priced in. The projected path of US interest rates is likely to steepen as the actions and policies of the Trump government impact yields at the long end of the US yield curve through higher in-flation risk and a higher term premium while the Fed contin-ues its gradual tightening of monetary policy. A further in-crease in US rates, all other things being equal, would cause interest rate differentials between the US and the investee countries to narrow and thus reduce the cost of hedging local currency investments against the US dollar. However, for all fund classes not denominated in US dollar this would imply a further increase in the cost of hedging the Fund’s US dollar exposure.

Turmoil surrounding the administration of US president Don-ald Trump – the dismissal of the director of the FBI, investiga-tions into links between the Trump campaign and the Russian government, failure to pass healthcare reform – have increased uncertainty and sapped the government of the political capital required to enact legislation. From an economic standpoint, it thus seems increasingly unlikely that Trump will be able to im-plement the vast infrastructure spending programme promised in his campaign. Trump’s first overseas trip received mixed re-views amid attempts to brand his governing philosophy “Amer-ica first”. In Europe, he rattled allies by declining to endorse the NATO alliance’s bedrock common defence pledge and re-jecting the Paris climate accord. Such behaviour underlines the volatility of the geopolitical landscape under the Trump government, with uncertainty spreading to consumer and busi-ness sentiment. The Fund will need to closely monitor poten-tial effects on both developed and developing markets.

After the European Central Bank’s (ECB) pledge of potentially unlimited bond buying had marked the turning point in the EU sovereign debt crisis, ECB President Mario Draghi has once again set the tone, this time by indicating that the central bank could start tapering its asset purchases. However, the ECB is unlikely to put its balance sheet on autopilot, with as-sets rolling off gradually, as it has to balance this process with

low inflation fluctuating around 1% compared to the 2% tar-get. The result of the French election, with centrist Emmanuel Macron’s victory over right-wing populist Marine Le Pen (an advocate of France’s exit from the Eurozone) has removed a major short-term risk for the Eurozone.

The pace of economic restructuring in China continues to dominate discussions surrounding emerging markets. Instruc-tions to banks to reduce lending to inefficient state-owned en-terprises, as well as aggressive moves to regulate the shadow banking industry, are expected to dampen growth in the sec-ond half of the year. However, growth figures for Q2 continue to impress at 6.9%, suggesting the possibility of a first in-crease in year-on-year growth since 2010. Should growth slow into next year, this could have repercussions for countries that heavily depend on China as a key export market, and impact global growth.

Commodity prices, notably energy prices, play a significant role in many developing economies. The second quarter of 2017 proved to be an uncertain time for commodity prices and – amid oversupply concerns – for energy prices in particular, as the key takeaway of the last months was “buy anything” apart from commodities.

The Reserve Bank of India (RBI) reiterated its cautious view on inflation at its April 2017 policy review meeting and, as ex-pected, kept the key policy rate unchanged. At the same time, the RBI narrowed the liquidity adjustment facility (LAF) corri-dor to contain the fall in short-term yields owing to high inter-bank liquidity. However, the bank did not announce any spe-cific move to reduce this liquidity. India is a key country for our Fund although we temporarily postponed several disburse-ments over the last quarter as we sought to gain a better un-derstanding of the impact of demonetisation at an institutional level. With the impact apparently quite limited, India will be our main focus country for the second half of 2017.

Cambodia continued to experience strong credit growth. How-ever, to avoid the risk of overheating in this country, the Fund has aimed to keep its exposure at recent levels.

Elsewhere, we are continuing to monitor the economic situa-tion in the Caucasus and Central Asia region closely as growth in Russia (a key driver for the region) has improved somewhat. We have observed some discrepancies between the region’s countries. The Fund has been focusing its investments on Ar-menia and Georgia, with Azerbaijan in a restructuring phase and the Fund’s strategy in Tajikistan limited to moderate in-vestments in a small number of strong institutions. With Rus-sia’s economy beginning to recover, the country is again being considered for investments. After slipping into a deep reces-sion amid plunging oil prices, Russia had been excluded from new investments since early 2015.

responsAbility Micro and SME Finance Leaders – Quarterly Report 3

In Eastern Europe, the market for financing has been very competitive, with some investors moving funds there from the Caucasus region. Spreads have been decreasing and it has been difficult to find demand at a reasonable risk-return pro-file.

Fund Activity USD 28.4 million disbursed during the reporting quarter – in-vestments in 25 different institutions across 24 countries – highest investment volume in South America, followed by Cen-tral America and Middle East & North Africa

With total disbursements amounting to around USD 28.4 mil-lion in the reporting quarter, the investment volume increased by about USD 15 million from the first quarter of 2017 but decreased by about USD 5 million from the second quarter of 2016.

During the reporting period, the Fund invested in 25 different institutions in a total of 24 countries.

On a regional level, USD 9.7 million was invested in South America, followed by USD 6 million in Central America, USD 5.1 million in the Middle East & North Africa and USD 2.3 million in Eastern Europe. Less than USD 2 million each were disbursed in the other regions due to either increased uncer-tainty at a country level or difficulty in aligning the Fund’s risk-return profile with counterparties’ pricing demand. In the second quarter of 2017, the Fund made a disbursement in the Sub-Saharan Africa region for the first time this year, providing financing to a strong bank focused on SME clients in Burkina Faso.

Over the reporting quarter, the Fund provided financing to 10 new microfinance institutions primarily in South America and Asia-Pacific. The largest disbursement during the quarter was a transaction of USD 6 million with a financial institution in South America.

Local currency investments accounted for 11% of the Fund’s investment volume during the second quarter of 2017. The Fund’s strategy of generally hedging positions in local curren-cies against the fund currency remains unchanged.

Debt instruments with a floating rate coupon accounted for 33% of the Fund’s investment volume during the quarter un-der review.

The Fund’s allocation to subordinated debt decreased from 8.3% at the end of the previous quarter to 7.7% as of the end of the second quarter of 2017 as no new such deals were car-ried out during the reporting quarter.

In the private equity area, an investment of around USD 2.2 million in a regional bank in Russia as well as a follow-on in-vestment of around USD 1.8 million in a microfinance institu-tion in Kazakhstan were completed during the second quarter of 2017. For further information on the private equity invest-

ments, please refer to the “Equity Portfolio” section of this re-port.

Fund Performance Acceleration in placement activity with drop in cash levels ex-pected – fund volume exceeds USD 300 million for the first time – creation of provisions in debt portfolio decreases

The Fund's cash position increased to 16.7% as of the end of the second quarter of 2017 compared to 14.5% at the end of the previous quarter. The Fund’s cash position remained stable compared to the second quarter of 2016. At a current level of 16.7%, the cash position continues to dilute the Fund’s total income while also reducing its risk. The elevated cash level re-mained due to the Fund’s lower placement capacity amid slower growth across certain regions as well as an active risk-off strategy. Some regions did not meet our investment criteria in terms of risk-return patterns and were therefore excluded from new investments. However, 2017 has already seen an ac-celeration in activity, a trend that we expect to continue over the rest of the year and beyond. This is in part driven by im-proving fundamentals. Growth has picked up overall, with un-derperforming markets stabilising or rebounding. In addition, responsAbility has made several changes to the Fund’s invest-ment strategy that we believe are starting to bear fruit. These include a higher allocation to SME finance institutions, larger ticket sizes and greater flexibility in terms of other asset clas-ses (e.g. sub-debt). As a result, responsAbility expects the ac-celeration in placements to continue over the next 12 months, with cash levels dropping accordingly.

The overall fund volume increased to around USD 302.5 mil-lion as of the end of the second quarter of 2017 from USD 285.7 million at the end of the previous quarter.

The US dollar net return of the I (USD) share class amounted to +1.07% for the reporting quarter compared to -0.18% in the previous quarter and +0.82% in the second quarter of 2016. The returns of the S (CHF) and S (EUR) share classes were +0.51% and +0.59%, respectively. Hedging costs con-tinue to hamper the performance of the CHF and EUR share classes as the relevant interest rate differentials are increas-ing.

The creation of provisions in the debt portfolio decreased from the previous quarter, with the negative impact of provisions on the Fund’s return amounting to -0.14% in the reporting quar-ter. This is a reduction from the negative performance impact of provisions during the previous quarter (negative impact on the Fund’s return of -0.27% in Q1 2017). The provisions cre-ated during the reporting quarter were mainly related to debt-financed investees in Sub-Saharan Africa.

At -0.12% overall, valuation adjustments to positions in the private equity portfolio detracted from the Fund’s quarterly performance. For further information on the Fund’s private eq-uity investments, please refer to the “Equity Portfolio” section of this report.

responsAbility Micro and SME Finance Leaders – Quarterly Report 4

Key Figures as of 2Q 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 (%) 1.07 0.51 0.59 0.99 0.52 n/a 0.88 n/a Return YTD 2017 (%) 0.89 -0.20 0.04 0.78 -0.10 n/a 0.61 n/a Since inception (%)(2) 23.99 15.39 19.02 0.78 0.21 n/a 0.61 n/a ø Return (p.a.) since inception (%) 3.20 2.12 2.65 1.88 0.16 n/a 1.47 n/a 1 year 2.03 -0.10 0.45 n/a 0.16 n/a n/a n/a 3 years 9.37 4.65 6.42 n/a n/a n/a n/a n/a 5 years 16.30 10.13 12.61 n/a n/a n/a n/a n/a Strongest month since inception (%) 1.47 1.39 1.44 0.54 0.85 n/a 0.44 n/a Weakest month since inception (%) -0.82 -0.85 -0.77 -0.22 -0.54 n/a -0.28 n/a No. of months with positive performance 68 60 60 4 7 n/a 4 n/a No. of months with negative performance 14 21 17 1 9 n/a 1 n/a Fonds volume (USD) 302'508'697 Return volatility (USD, %)(3) 1.21

Sharpe ratio (USD)(4) 2.11 (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(5) Class Q (USD) Selected assets correlation (2006–2017)

responsAbility Micro and SME Finance Leaders (USD)

Net return since inception (%) 32.2 MSCI World Index 0.0097 ø Return (p.a.) since inception (%) 4.3 6mths USD Libor -0.0714

No. of months with positive performance 71 MSCI FM Frontier Markets

(USD) -0.0128

No. of months with negative performance 9.0 (5) Class Q was launched in November 2006 and closed in July 2013

Largest country exposure in % NAV Geographical allocation in % of investments India 7.8 Asia Pacific 21.5 Costa Rica 5.8 South America 21.0 Georgia 5.3 Central Asia 16.3 Ecuador 5.1 Central America 14.4 Cambodia 4.8 Sub-Saharan Africa 9.8 Armenia 4.4 Eastern Europe 7.2 Peru 3.3 Middle East & North Africa 7.1 Brazil 3.1 Other 2.7 Panama 2.7

Sri Lanka 2.7

Total no. of countries 73

Currency allocation(6) in % of

investments Asset allocation

in % NAV

USD 70.3 Fixed income 70.8 EUR 14.1 Cash(7) 16.7 PEN 2.3 Equity 12.4 KZT 2.0 (7) Cash: Cash current accounts and money market 16.4%

THB 1.9 Cash equivalent: Value of hedging contracts, collat-eral cash, accrued interest investments, other assets and liabilities

0.4%

ZAR 1.7

Other 7.8 (6) Generally positions hedged against fund currency

Social performance indicators 2Q 2017 2Q 2016

No. of institutions 226 216

No. of microentrepreneurs reached 165'372 172'123

Average loan size (USD) 2'529 1'543

Rural / urban clients (%) 49/51 68/32

Female / male (%) 83/17 83/17

responsAbility Micro and SME Finance Leaders – Quarterly Report 5

Development of Overall Portfolio Performance (net) (1) and fund volume

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50

100

150

200

250

300

350

100

105

110

115

120

125

130

135

Sep

-06

Dec

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Mar

-07

Jun-

07

Sep

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-08

Jun-

08

Sep

-08

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-08

Mar

-09

Jun-

09

Sep

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-10

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10

Sep

-10

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Mar

-11

Jun-

11

Sep

-11

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12

Sep

-12

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-12

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-13

Jun-

13

Sep

-13

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-13

Mar

-14

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14

Sep

-14

Dec

-14

Mar

-15

Jun-

15

Sep

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Dec

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Mar

-16

Jun-

16

Sep

-16

Dec

-16

Mar

-17

Jun-

17

Volu

me

in m

illio

ns U

SD

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 com-missions but it does not take into account the commissions and costs incurred on the issue and redemption of units.

Maturity breakdown as of 2Q 2017

0%

5%

10%

15%

20%

25%

30%

< 6 months 6-12 months 12-18 months 18-24 months 24-30 months 30-36 months > 36 months

Average time to maturity: 24.2 months

responsAbility Micro and SME Finance Leaders – Quarterly Report 6

Development of country allocation

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

2Q 2016 2Q 2017

Development of geographical allocation

0%

20%

40%

60%

80%

100%

Apr

-08

Sep

-08

Feb-

09Ju

l-09

Dec

-09

May

-10

Oct

-10

Mar

-11

Aug

-11

Jan-

12Ju

n-1

2N

ov-1

2A

pr-1

3S

ep-1

3Fe

b-14

Jul-1

4D

ec-1

4M

ay-1

5O

ct-1

5M

ar-1

6A

ug-1

6Ja

n-17

Jun-

17

Asia Pacific Central America

Central Asia Eastern Europe

Middle East & North Africa Other

South America Sub-Saharan Africa

Development of asset classes

0%

20%

40%

60%

80%

100%

Apr

-08

Sep

-08

Feb-

09Ju

l-09

Dec

-09

May

-10

Oct

-10

Mar

-11

Aug

-11

Jan-

12Ju

n-1

2N

ov-1

2A

pr-1

3S

ep-1

3Fe

b-14

Jul-1

4D

ec-1

4M

ay-1

5O

ct-1

5M

ar-1

6A

ug-1

6Ja

n-17

Jun-

17

Fixed income Equity Cash & cash equivalent¹

Development of currency allocation

0%

20%

40%

60%

80%

100%M

ar-1

1Ju

n-1

1S

ep-1

1D

ec-1

1M

ar-1

2Ju

n-1

2S

ep-1

2D

ec-1

2M

ar-1

3Ju

n-1

3S

ep-1

3D

ec-1

3M

ar-1

4Ju

n-1

4S

ep-1

4D

ec-1

4M

ar-1

5Ju

n-1

5S

ep-1

5D

ec-1

5M

ar-1

6Ju

n-1

6S

ep-1

6D

ec-1

6M

ar-1

7Ju

n-1

7

USD EUR PEN THB NGN BOB Others

(1) Cash: Cash current accounts and money market 16.4%

Cash equivalent: Value of hedging contracts, collateral cash, accrued interest investments, other assets and liabili-ties

0.4%

Further portfolio data will be sent to interested investors on request. Please e-mail quarterly@responsAbility.com with your name and the name of the fund you are interested in.

responsAbility Micro and SME Finance Leaders – Quarterly Report 7

Outlook Fed expected to continue hiking US interest rates, while ECB likely to remain accommodative for some time longer – lower oil prices continue to put pressure on oil exporting markets, while net energy importers will continue to benefit – Fund’s ex-posure in Asia expected to increase

Taken together, the global macro story remains broadly un-changed. The world economy is expected to accelerate moder-ately, inducing major central banks to withdraw some mone-tary stimulus, but only very gradually. As a result, benchmark yields are expected to rise moderately. Among the major cen-tral banks, attention will be focused on the US Federal Re-serve (Fed) and the European Central Bank (ECB). In addition to continuing its rate hikes, the Fed is likely to start reducing its balance sheet by gradually phasing out reinvestments of principals from maturing securities. It remains questionable, though, whether the signalled pace of rate hikes (another in-crease in 2017 followed by three 0.25% hikes in both 2018 and 2019) paired with balance sheet reductions is consistent with reaching the inflation target. Even if the Fed ultimately opts for more moderate tightening, the direction has been set. Meanwhile, the ECB continues to signal that its policy rate will remain at the current low level for an extended period of time. Given the muted inflation outlook, this claim seems credible, and markets have only priced in a 0.25% hike in two years. The focus, however, will be on the ECB’s asset purchase pro-gramme, which, according to the current guidance, will run at the current pace at least until year-end. At that point, asset purchases will not come to a halt abruptly. Instead, the ECB is likely to phase out its asset purchases over several quarters. Although this means that the ECB’s policy is likely to remain accommodative for some time, markets have focused on the forthcoming withdrawal of monetary stimulus and have started pricing in a stronger currency and higher yields. However, given the risk of another delay in reaching its inflation target, the ECB will probably tolerate only a limited degree of tighten-ing in financial conditions. As a result, the upside for both the euro and yields in the Eurozone should also be limited, at least in the short run.

Investors are currently stuck in neutrality land, with some in-vestor surveys suggesting almost record-high levels of neutral-ity. Meanwhile, another important election in Europe – the German vote in September – provides for a certain amount of political uncertainty although the populist threat is much less evident here than in previous European elections. In addition, the two-year Brexit negotiating clock is fast ticking away. How-ever, the impact of Brexit is not expected to have a significant influence on the Fund’s investee countries.

Oil prices, which softened meaningfully in June, seem unlikely to trend much lower from current levels, as such levels would slow supply growth meaningfully. Yet the upside potential is also limited, with prices above USD 55 per barrel potentially triggering a sizable increase in supply by US shale drillers.

This will continue to put pressure on several oil exporting mar-kets in which the Fund is invested, notably Ecuador, Nigeria, Azerbaijan and Kazakhstan. However, many of these markets have responded with significant economic and fiscal reforms. In addition, the Fund has reduced the relative weight of such countries in its portfolio over the past few years. It is also worth noting that many other countries in our portfolio that are net energy importers will continue to benefit from low prices, notably Kenya, India, Georgia and Cambodia.

We currently see good opportunities to increase our exposure in Asia until the end of the year and beyond. With the mon-soon proving reasonable, and the effects of demonetisation slowly fading, the economic outlook for India has become even more positive. Credit growth has also moderated, while infla-tion has stabilised. Consequently, significant disbursements are planned for the third quarter of the year. In addition, the narrowing of interest rate differentials between India and the US has reduced hedging costs for deals in Indian rupee, which facilitates access to the market and increases our ability to compete with local funding sources.

Elsewhere in the region, we had also expected to increase ex-posure to Sri Lanka in the coming months. However, the an-nouncement of a potential introduction of a withholding tax for foreign investors, due to be presented to parliament for a vote in September/October 2017, has created some uncertainty re-garding our investment pipeline in the country.

In Mongolia, the outlook for the banking sector has improved in the second quarter of 2017 from negative to stable due to events at a sovereign level. An International Monetary Fund (IMF) agreement was put in place to ensure liquidity and en-hance support to systemic entities, improving the institutional framework and the overall economic outlook. We see some po-tential to increase the Fund’s exposure to the country in the future.

In Sub-Saharan Africa, the broader issues affecting several countries remain political uncertainty and dependence on commodity prices. The Kenyan election scheduled for 8 Au-gust is a good example of the former category. However, we are currently not planning to increase our exposure to Kenya or its immediate neighbours, but to focus more on West Africa. For example, we are planning disbursements in euro and the local currency, the CFA franc (XOF), in Senegal, Ivory Coast and Cameroon.

Latin America is a region characterised by a mixture of oppor-tunity and risk. In Costa Rica, the economy is projected to continue expanding at a robust pace, owing to higher external demand and increasing public investment.

The Fund continues to select investments by prudently focus-ing on three key factors of diversification: at an institutional

responsAbility Micro and SME Finance Leaders – Quarterly Report 8

level, to limit the impact of potential provisions related to indi-vidual institutions; on a country level, to ensure the Fund is adequately protected from issues relating to individual econo-mies as well as sudden regulatory changes; and at a regional level, to protect against broader economic, political or even cli-matic events that can negatively affect an entire region. Ulti-mately, the key goal is to deliver the best return for an appro-priate level of risk, and the best possible value to our inves-tors.

responsAbility Micro and SME Finance Leaders – Quarterly Report 9

Equity PortfolioTwo private equity investments completed during reporting quarter – valuation adjustments detracted from Fund’s quar-terly performance – overall positive performance of equity port-folio expected in H2 – private equity investments in Sri Lanka and Uganda expected to be executed

Portfolio activity

During the second quarter of 2017, the Fund completed an in-vestment of around USD 2.2 million in a regional bank in Rus-sia with a significant focus on the SME and agriculture sectors as well as a follow-on investment of around USD 1.8 million in a microfinance institution in Kazakhstan at attractive terms.

Portfolio performance

At -0.12% overall, valuation adjustments to positions in the equity portfolio detracted from the Fund’s quarterly perfor-mance. The negative performance impact was due, in particu-lar, to revaluations of an indirect holding in a private equity fund investing in the Balkan region, a position in a pan-African leasing group as well as an investment in a holding company managing banks in Eastern Europe and Latin America. The lower valuation of the indirect private equity fund holding fo-

cusing on the Balkans was caused by an offer made for the en-tire fund holdings to be purchased at a price slightly below the price assumption factored into our previous portfolio valuation. The lower valuation of the pan-African leasing group was due to the investee’s reduced book value, which was caused by a worsening performance of several of its subsidiaries. The value of the holding company managing banks in Eastern Europe and Latin America was negatively affected by the decreased market price of its listed shares, which is one of the contribu-tors to our valuation of this holding. However, this negative performance impact of the revaluation of the holding company was more than compensated by a positive FX effect due to the strengthening of the euro (the currency in which the shares of the investee are denominated and traded) versus the fund cur-rency US dollar. A significant uplift in valuation of one inves-tee company in Kazakhstan – which occurred after a capital in-crease in which the Fund participated – as well as stable per-formance of most of the remaining investees in the equity port-folio could only partially mitigate the overall negative perfor-mance impact of valuation adjustments in the portfolio.

Key Figures

2Q 2017 Class I (USD)

Current fair value equity portfolio 35’905’223 Equity contribution 2Q (%) -0.12 Allocation equity portfolio in % of fonds volume 12.4 Equity contribution YTD (%) -0.88 No. of investments 12

Outlook The trading volumes of the holding company which had its shares listed on the stock exchange in December 2016 remain thin, which is reflected in continued elevated volatility of the market price of its shares as well as of our valuation of the po-sition in the investee. In the long term, we expect the market price of the shares to stabilise at about the current price level

once their trading volume increases. The remaining portfolio companies show stable growth and profitability in line with the business plans taken into account for the valuations and we expect the overall portfolio to perform positively in the second half of the year.

Geographical allocation

25.5% South America

9.7% Asia Pacific

20.8% Eastern Europe

29.2% Central Asia

5.6% Sub-Saharan Africa

2.6% Central America

6.6% Other

Type of investment

76.5% direct Equity

23.5% indirect (via FoF)

responsAbility Micro and SME Finance Leaders – Quarterly Report 10

In the second half of 2017, we expect to execute an invest-ment in one of Sri Lanka’s leading non-bank micro-finance and leasing institutions as well as in a bank focused on SME clients in Uganda. This will bring the Fund’s private equity al-

location closer to target. As a result, no further larger invest-ments are expected for the remainder of the year. The Fund has several additional transactions in its mid- to longer-term pipeline. However, their implementation will also depend on the future development of the Fund’s net assets.

responsAbility Micro and SME Finance Leaders – Quarterly Report 11

Focus

Important Trends for Development Investments – Interview with Rochus Mommartz, CEO responsAbility Investments AG

Awareness about the need and opportunities for investment

Private sector investors are discovering opportunities to invest with purpose and without sacrificing returns for impact. And that is still a relatively new phenomenon.

Awareness about such opportunities is only just emerging and it is certainly to soon to draw any conclusions about the rele-vance of this process. However, the signs seem to indicate that even institutional investors see development investments as being more than just a fancy marketing trend. The forces at work are complex, but the trends all point in the same direc-tion: more funding for development investments. The public sector, which started to “invest” in developing countries dec-ades ago, is pushing the agenda via the Sustainable Develop-ment Goals (SDG), as it is becoming increasingly apparent that without the private sector it will be impossible to overcome the imbalances within a reasonable timeframe.

The rapidly growing number of ultra high net worth individuals – 2016 saw a total of 1,810 billionaires worldwide and there have never been so many wealthy young people – is often char-acterised by a youthful new spirit of “giving back”. This trend is seeing many prosperous individuals focusing on investments that have a positive impact and who want to help the world to advance through investment.

These young wealthy people are often entrepreneurs who be-lieve in the power of investments to instigate change. Business and entrepreneurship is their medium for change. Added to this are the large institutional investors who are having a tough time achieving their target returns in the current low-interest environment. Some are also facing pressure from their constit-uents regarding their investment “ethics” or are simply taken by the charm of the longer-term opportunity. Increased inte-gration of economic, social and environmental (ESG) criteria is a clear sign of this, as is the start of SDG-related portfolio allo-cation.

Post-crisis trend towards more patient capital

Completely independently from development investments, there is a clear industry trend towards more patient capital. Asset managers have been taking a more long-term approach since the crash. In 2015, long-term vehicles provided more fi-nancing to start-ups in the UK than the traditional venture capital structures. But more “patient” forms of investment are also in vogue with the largest asset managers; this trend is very supportive of development investments because it is helping to mainstream the approach, which often needs longer-term in-vestment horizons. In terms of figures, this approach entails an investment horizon of 15 to 20 years instead of the usual

private equity targets with a planned exit within 3 to 5 years. Average annual net returns of 12% are accepted, while in the past this usually had to be around 20% or more. While it’s still early days, we see it as a signal that points towards the emer-gence of new strategies which align well with the spirit of de-velopment investments.

Success implies a lot of change

Successful developing countries have rapidly growing econo-mies. For development investors this is a sign of confirmation that represents both a challenge and an opportunity. It is a challenge because success always implies change. Take micro-finance, for example. Once a cluster of microfinance providers starts to enjoy success in a specific regional market, their orig-inal business approach becomes less relevant, as their clients are developing from typical microentrepreneurs into small business owners. Both have different requirements with regard to financial services and the microfinance institutions have to adapt. This is because growing prosperity is automatically as-sociated with growth in society, the economy and people’s ex-pectations. In the financial sector, a shift in demand is typi-cally observed from the classic microfinance business towards SME banking services. New players – often regional providers – also begin to enter the market. Established financial institu-tions respond by adjusting their business models, for example by providing financing for the new regional financial services companies. This pattern is repeated without exception in every economy when it begins to gather momentum. For asset man-agers like respons– Ability, the changes that result from evolv-ing clients inevitably present a big challenge. It’s a challenge that I welcome, as it brings clarity to the market place about whether or not its players are fit and up to the task. It also rep-resents an opportunity because new types of needs and de-mands emerge.

Standardisation and compliance require companies of scale

First the financial crisis, then tougher regulations. These de-velopments have resulted in fierce standardisation and compli-ance costs, requiring companies to become institutions of scale. Financial services providers have faced waves of new regulations since the last financial crisis. The costs of compli-ance also demand a critical mass. This is true for all segments of financial services and development investments are no ex-ception. Effective cost management – especially in light of higher regulatory standards – is just as important for special-ised asset managers as it is for general asset managers. More efficient use of administrative, processing and distribution structures is key. For responsAbility, this means building a platform that is as lean as possible, via which we can serve a landscape of development investment products across three sectors: agriculture, energy and finance.

Technology accelerates growth and development

Modern technologies have always been a catalyst for develop-ment. But the current dynamic may be surpassing anything we

responsAbility Micro and SME Finance Leaders – Quarterly Report 12

have ever seen before. Rural areas are invariably disadvan-taged by a shortage of basic daily products and services. The reason for this is usually the high costs of the last mile. For ex-ample, centrally controlled landline telephone networks where the costs for connecting individual homes to the network were too high. Typically, the provision of health care services de-creases with the remoteness of an area due to cost factors. De-velopments in technology suddenly eliminated part of this hur-dle: thanks to mobile networks, people that have never had a telephone line in their homes and never will are now using mo-bile telecommunications. Soon they will also have basic health care diagnostics via the same channel. This phenomenon of skipping a development step is called leap frogging. We are seeing a similar trend today in the supply of energy. For dec-ades the focus was on connecting households to centralised grids. Recently, however, the prices for photovoltaic technology and batteries have dropped to a level that makes self-suffi-ciency affordable in decentralised systems. Internet and smartphones have now become part of the mobile communica-tions industry. The leap frogging effect here is that for many people the smartphone will be the first computer they ever have. The lack of financial resources in developing countries means new technologies have to be operated more cheaply than in OECD countries. These additional restrictions give rise to particularly radical innovations. As a result, the most ad-vanced financial services in mobile banking are coming di-rectly from the enterprising heart of developing countries. We are observing with interest how the health and education sec-tors are developing. The current state of key technologies is looking very promising for the future.

Rochus Mommartz has been the CEO of responsAbility since 2016. He was in-strumental as a consultant when the company was founded in 2003 and was one of its first employees.

For more development impact related articles please refer to responsAbility’s latest annual publication Perspectives 2017/2018

responsAbility Micro and SME Finance Leaders – Quarterly Report 13

Fund Facts

Fund name responsAbility SICAV (Lux) Micro and SME Finance Leaders

Fund domicile and type Luxembourg, SICAV (Société d’Investissement à Capital Variable)

Portfolio manager responsAbility Investments AG, Zurich

Management company responsAbility Management Company S.A., Luxembourg

Central administration Credit Suisse Fund Services (Luxembourg) S.A., Luxembourg

Custodian bank Credit Suisse (Luxembourg) S. A., Luxembourg

Inception date (fund) 15 November 2006

Fund currency USD, hedged EUR, CHF and NOK share classes available

Target net return in fund currency 4–7% p.a. over a horizon of five years. The target return is not a projection, prediction, or guar-antee of future performance, and there is no guarantee that the target return will be achieved.

Distribution No distribution, returns are reinvested

Valuation (NAV calculation) On the last Luxembourg banking day of each month

Subscription of shares Monthly, requests must be submitted three banking days before the respective value date

Redemption of shares Monthly, subject to 90 calendar days’ notice

Approved for distribution to professional, semiprofessional and qualified investors

Switzerland, Germany, France, Luxembourg, Netherlands, Norway, Sweden, Denmark, Finland

Minimum subscription I (USD) and S (EUR,CHF) 1’000’000 / I-II (USD,EUR,CHF) 250’000 I-II (NOK) 2’000’000 / I-III (NOK) 8’000’000

Sales restrictions The fund is open to qualified investors in the sense of the Swiss Federal Act on Collective Invest-ment Schemes

Retrocessions No retrocession fee is paid

Share classes Valor ISIN Total Expense Ratio (TER) Inception date (classes)

I (USD) 11475927 LU0520962514 Approx. 1.4% August 2010

S (CHF) 11475931 LU0520962605 Approx. 1.4% August 2010

S (EUR) 11475934 LU0520963082 Approx. 1.4% October 2010

I-II (USD) 29992186 LU1303876830 Approx. 1.7% January 2017

I-II (EUR) 29992187 LU1303876913 Approx. 1.7% February 2016

I-II (CHF) 29992188 LU1303877051 Approx. 1.7% n/a

I-II (NOK) 29992189 LU1303877135 Approx. 1.7% January 2017

I-III (NOK) 29992190 LU1303877218 Approx. 1.4% n/a

responsAbility Micro and SME Finance Leaders – Quarterly Report 14

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 re-sponsAbility SICAV (Lux) Micro and SME Finance 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 perfor-mance 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 manage-ment 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 pur-chase 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 cir-cumstances 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 invest-ments (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 re-lated 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 distri-bution 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 representa-tive, 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. 214-24-1 and D. 214-32 to 214-32-4-1 of the French Code monétaire et financier, Articles 421-1A to 421-37 of the General Regulation of the Autorité des marchés financiers and Instruction 2014-03 of the Autorité des marchés financiers. This marketing material constitutes promotional material as defined in Article 421-25 of the General Regulation of the Autorité des marchés financi-ers. 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 avail-able free of charge in the English language at www.responsability.com . This marketing material is intended exclusively for, and may only be dis-tributed to professional investors as defined in Articles L.533-16, D.533-11 and D.533-12 of the French Code monétaire et financier. Luxem-bourg: The product was approved by the Commission de Surveillance du Secteur Financier ("CSSF") in Luxembourg for distribution to the Profes-sional 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 Mon-net, L-2180 Luxembourg. The Netherlands: The Product described herein is registered for distribution in the Netherlands to professional inves-tors 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, 2017. All rights reserved.

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rresponsAbility Management Company S.A. 23, Avenue de la Liberté, L-1931 Luxemburg