May 25-26,2006TBLI Conference, Bangkok

Investing in sustainable development:

The experience of a Development Bank

1.160

577

512

134

Financial Sector 49%

I nfrastructure 24%

Trade & I ndustry 21%

Other 6%

Portfolio FMO Finance by Sector EUR million, committed by year end 2005

Source: FMO

EUR 2,4 bln

Commercial banks, NBFIs, MFIs, leasing companies, investment funds, etc;

22% of financial sector portfolio is targeting micro and SME’s (EUR 250 mln, of which EUR 60 mln micro finance);

All financial institutions are trained and required to implement an Environmental and Social Management System (ESMS)

Characteristics

Micro and small enterprises, low income households;

EUR 210 mln committed portfolio, sustainable returns;

Mainly (60%) local currency, 26 currencies;

Supporting 122 institutions in 43 countries;

With debt (64%) and equity (36%);

Features of SME-fund (MASSIF) (since 1986)

Total disbursed amount since 1986: € 398 mln (303 projects)

Expired projects: € 148 mln

Total profit excluding unrealized gains: € 36 mln

Total profit including unrealized gains: € 59 mln

Forex loss: € 38 mln

Write offs: € 4 mln (2.7%), provisions €19 mln

Recent evaluation of performance of MASSIF(mixed fund, preliminary results)

Measurement of investment return: times cost

Times cost = (Profit + Disbursed) / Disbursed

Times cost overall portfolio = 1.15

Average return p.a. 2.8%

Some provisions will certainly be released in the future;

Performance (mixed fund)

Disbursed amount: € 83 mln

Portfolio outstanding: € 66 mln

Times cost on equity excluding unrealised gains: 1

Times cost on equity including unrealised gains: 1.2 (4% p.a.)

Times cost on debt: 1.1 (hard and local currency)

Performance: equity

Not loss-making but generating a small profit

Geographic diversification

Small, relatively ‘isolated’ economies, i.e. no big currencies movements

Small amounts (no concentration risks)

Forex losses vs credit risk: interest rate determination

Patience and active investor approach

Conclusions

FMO’s investments in Private Equity Funds

Euro ‘000 Cash out Cash In FMV Profit Times cost TOTAL -80,329 43,730 47,155 10,556 1.13 Regional Africa -8,484 2,727 7,302 1,545 1.18 Asia -16,153 9,125 2,748 -4,280 0.74 Eastern Europe -32,087 23,557 25,511 16,981 1.53 Latin America -23,605 8,321 11,594 -3,690 0.84 TOTAL -80,329 43,730 47,155 10,556 Chronological 1990-2000 -62,013 35,332 29,004 2,323 1.04 2001-2003 -18,316 8,398 18,151 8,233 1.45 -80,329 43,730 47,155 10,556

FMO’s investments in Private Equity Funds

Year 2000 shows change in policy:

Preference for proven track record

Strong local fund manager

Preferred involvement of international private equity players

Active investor with board and/or investment committee participation or strong break-up clause and co-financing

Questions?

Contact details

Els BoerhofManager Micro and Small Enterprise Fund (MASSIF)Telephone (direct): +31 70 314 9849Mobile: +31 6 5122 5913E-mail: e.boerhof@fmo.nlwww.fmo.nl

Thank you