Amsterdam, September 4, 2007. A global partnership of financiers, led by Dutch development bank FMO, creates a large and innovative fund to develop local currency products in developing countries worldwide. The Currency Exchange Fund N.V. (TCX) will start up with a transaction capacity of US$ 1.2 billion for long-term local currency financing by its investors. The result: drastically reduced default probability, improved business sustainability and a major contribution to the development of local capital markets.

TCX will be launched in Amsterdam tomorrow, in a closing ceremony attended by senior representatives of the eleven participating institutions.*

The technicalities

This fund is created to offer long-term currency and interest rate hedging in (sub)emerging market currencies to international investors. These parties will use these hedges to create and/or increase their local currency denominated product offering to clients in developing countries and emerging markets.

TCX is a unique cooperative effort of a large number of (sub) emerging market investors, enjoying clear benefits of size and scope. The investors joining TCX in the first close will commit in aggregate approximately US$ 300 million in equity. Initial transaction capacity will reach up to US$ 1.2 billion, increasing with expected further commitments in the short term.

TCX investors will pay special attention to the Sub-Sahara Africa region, and to the microfinance, housing and infrastructure sectors.

Addressing Market Failure

Numerous financial crises attest to the real existence of the currency risk to entrepreneurs and their local banks. Well-known hyper-devaluations in Asia, Turkey, Russia and Argentina in the late 1990s and early 2000s illustrate the devastating effects that unstable financial systems can have on the local and regional economy. Many companies found themselves unable to service suddenly very expensive dollar and euro debt after such a crisis. This instability also has a profound effect on the economy and society as a whole: it can take a developing country up to 10 years to recover from such a set back.

A solution to this problem has now been found by FMO. TCX assumes the currency risks previously transferred by international financiers to the local entrepreneurs and their local banks, and by doing so improves their business sustainability and reduces defaults. The upsides are profound to both financier and companies alike. Companies are no longer exposed to currency risks that they cannot manage and systemic risk becomes limited. At the same time, financiers have a much broader commercial market to address with long-term local currency products.

Spread the risk

TCX research proves that the risk of investing in a spread portfolio including a large number of currencies and interest rates, diversified across all regions in the developing world, is only 25% of the risk of investing in any single currency. In other words: true global risk diversification works much better than regional diversification, especially under very stressed market circumstances. By pooling local currency risk, TCX is the first to introduce the concept of a well diversified portfolio of developing country currencies.

Competition needed

The market for local currency financing is large, and TCX will not be able to provide for it alone. It is expected that the initiative will spark interest from others who will follow suit rapidly. Local currency hedging mechanisms such as TCX have the potential to create very positive economic impact in developing countries. Furthermore, TCX’s substantial hedging requirements will have a substantial effect development of local capital markets.

Note for the editor:

For more information regarding The Currency Exchange Fund, please contact Bernadette Blom at b.blom@fmo.nl. Mobile number: +31 (0)6 2269 5620.

TCX Investors

FMO: The Netherlands Development Finance Company

FMO is the international development bank of the Netherlands. FMO invests risk capital in companies and financial institutions in developing countries. FMO's investment portfolio is EUR 2.7 billion and FMO is one of the largest bilateral development banks worldwide. Thanks in part to its relationship with the Dutch government, FMO is able to take risks which commercial financiers are not - or not yet - prepared to take. FMO's mission: to create flourishing enterprises, which can serve as engines of sustainable growth in their countries. www.fmo.nl

Dutch Ministry of Foreign Affairs

The Ministry of Foreign Affairs coordinates and carries out Dutch foreign policy, including European cooperation and International development, at its headquarters in The Hague and through its missions abroad. The Minister for Development Cooperation, Bert Koenders, is fully committed to the Millennium Development Goals and strives to improve the quality and effectiveness of the Dutch contribution. To this end, the minister promotes partnerships with civil society organizations, enterprises and knowledge institutes in rich and poor countries alike. www.minbuza.nl

ABN Amro

Netherlands-based ABN AMRO is a leading international bank with total assets of EUR 1,120.1 bln (as at 30 June 2007). It has more than 4,500 branches in 53 countries, and has a staff of more than 107,000 full-time equivalents worldwide. ABN AMRO is listed on Euronext and the New York Stock Exchange. www.abnamro.com

OikoCredit

Oikocredit is a co-operative financial institution that offers loans or investment capital for microfinance institutions, co-operatives and small and medium sized enterprises in developing countries, aimed at development financing. Oikocredit is privately financed; individuals and organisations invest in Oikocredit shares. Direct members of the co-operative are churches, church-affiliated organisations, project members and Oikocredit support associations; individuals invest through support associations. Oikocredit pays its shareholders a modest yearly dividend. www.oikocredit.org

BIO, Belgian Investment Company for Developing Countries

BIO is a Development Finance Institution established in 2001, set up as a public-private partnership between the Belgian Government, through the department of Development Cooperation, and the Belgian Corporation for International Investment [BMI/SBI], each holding 50 % of the capital. BIO’s mission is to promote and to support the private sector in developing and emerging countries through direct and indirect investments, by providing long-term financing to SMEs and microfinance institutions, in order to achieve sustainable economic and social prosperity and alleviate poverty. BIO acts as an additional partner to the local financial institutions and looks for projects with a demonstrated balance between financial return and development impact. BIO is a member of EDFI (European Development Finance Institutions).

For more information, please visit our website at www.bio-invest.be.

Development Bank of Southern Africa

The Development Bank of Southern Africa is a leading Development Finance Institution (DFI) in Africa, South of the Sahara, playing the roles of Financier, Advisor, Partner, Implementer and Integrator. The Bank maximizes its contribution to sustainable development by mobilizing financial knowledge and human capital to support Government and other development role-players in improving the quality of life of people in the region through funding infrastructure projects; accelerating the sustainable reduction of poverty and dependency; and promoting broad-based economic growth and regional economic integration. www.dbsa.org