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Jal Dhara Society, a non-profit organisation, raised funds on the Social Stock Exchange through a Zero Coupon Zero Principal instrument for a drinking water project. At year-end it files an impact report showing the target of 20,000 households and 12,000 reached, but files no explanation. A reviewer says the disclosure is incomplete. Which reading is best supported?

The disclosure is incomplete because the impact report must show progress against declared targets and explain shortfalls. Since a Zero Coupon Zero Principal instrument gives the funder no financial return, the impact achieved is the key information, so the missing explanation weakens the report.

  1. AIt is acceptable, since shortfall explanations are never required
  2. BIt is acceptable because the instrument carries no principal repayment
  3. CIt must be rejected because the target must be fully met
  4. DIt is incomplete, as the report should disclose progress against targets with reasons for any shortfall, since the investor's interest lies in the impact achievedCorrect

Explanation

Impact reporting compares achievement with targets declared at fund raising, and a reader needs to know why there is a gap. Lack of principal repayment does not remove the reporting duty; indeed the return to the funder is impact. Missing targets does not by itself mean rejection.

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