New Opportunities in Pro-Poor FinanceForum for the Future

October 24th, 2006

2

Developing World Marketslinks investors to microfinance and other

socially motivated organizations in the developing world

through innovative financial instruments

3

What is Microfinance?Financial services for the poor entrepreneurs

Credit

Remittances

“Effective and powerful tool for poverty alleviation”*

Strong growth potential & an under-serviced market **

Total demand: $150 -$200 billion

Total supply: $10 - $15 billion

3 billion people live on under $2 a day

Over 90% of borrowers are women

Average loan ranges $100-$1,500

Low default rate; Attractive ROEs and ROAsTechnological, regulatory and capital markets changes are driving growth

** Source: CGAP, The MIX, DWM estimates* Presentation on Analysis of Effects of Poverty Reduction by Jonathan Murdoch, NYU Professor, 2001

SavingsInsurance

4

Microfinance Investment Vehicles (MIV)

There are ~54 Microfinance Funds globally

$1.4 billion raised by MIVs

Close to 2000 active MF investments

Types of fund: Debt, quasi-debt, equity

Supply: $15 – 20 billion

Demand: $150 – 200 billion

5

Sustainable Wealth Creation Cycle

MicrofinanceInstruments MFIs

Microcredit Borrowers

Investors

Flow of Funds

MIVs

6

Auto loans

Structuring Microfinance Debt TransactionsClassic Securitization

Originator

Special Purpose Vehicle

Investors

Sale of assets

SPV holds assets, issues certificates to investors,

collect & dispenses monies

$

$

Issuance of asset-backed securities, e.g. debt, equity

Original Cash Flows Mortgages Credit card

loans LeasesIntellectual

property

7

Structuring MF Debt TransactionsMarket Rate Returns & Risk Reduction

EquityEquity

Senior NotesSenior Notes

Mezzanine NotesMezzanine Notes

Junior NotesJunior Notes

Lowest Yield, Most Protected

Highest Yield, Least Protected

Securitized payment stream from microloanswith spreads off US Treasuries & German Bonds

8

Issues & Challenges of Microfinance Assets

Understanding the Asset Class

Liquidity

Ratings

Correlation

Diversification & Risk Management

”Nuts & Bolts”

ISN #sCUSIPsPricing

9

lkdfjMicrofinance: Emerging Market Returns with Reduced Portfolio beta

-0.49%+0.67%MFIs

-1.24%-0.33%Commercial Banks

Effect of 1% decline in Country GDP on ROE (2)

Effect of 1% decline in S&P 500 on NOI (1)

(1) Net Operating Income(2) Return on Equity

Data: New York University study: 388 Commercial Banks and MFIs in 65 developing countries

Conclusion: MFIs perform better than banks during economic downturn

Implication: MFIs can reduce volatility in emerging markets portfolios compared to traditional assets like banks

Example from study: Two measures of MFI performance in downturn

Source: The Systemic Risk of Microfinance, Nicolas Krauss, NYU Stern Business School (draft)

10

lkdfj

Risk Reduction through DiversificationPortfolios Diversified by MFI & Country

Targeted Geographic Distribution*

Targeted MFI Distribution

Country exposure ranges 2 – 15% MFI exposure ranges 2 – 8.3%

MFI 1MFI 2MFI 3MFI 4MFI 5

MFI 6MFI 7

MFI 8MFI 9MFI 10

MFI 11MFI 21

MFI 22

MFI 23MFI 24

MFI 25MFI 26MFI 27MFI 28MFI 29 MFI 30

MFI 13MFI 14

MFI 15MFI 16

MFI 17

Cash Reserve

MFI 20MFI 19MFI 18 MFI 12

Cambodia Nicaragua

RussiaNicaragua

Mongolia

KyrgyztanMexico

El Salvador

Cash Reserve

Peru

Kosovo

Georgia

Kazakhstan

JordanBosniaAzerbaijan

MFI exposure 2 - 8%

11

Investor Profiles

Mutual FundsPension FundsFoundationsIndividuals

BanksUniversitiesMicrofinance Funds

TIAA-CREF Creates $100 Million Global Microfinance Investment Program, First Investment is $43 Million Private Equity Stake in ProCredit Holding AG

Largest equity investment in microfinance by a major US-based asset management companyNew York, September 19, 2006 -- TIAA-CREF, the leading provider of retirement savings products and services in the academic, medical and cultural fields, today announced the creation of a $100 million Global Microfinance Investment Program (GMIP) to invest in selected Microfinance Institutions (MFI’s) worldwide. Concurrently, TIAA-CREF also announced GMIP’s first investment – a $43 million private equity stake in ProCredit Holding AG, one of the world’s leading microfinance companies.

Investor base includes:

12

lkdfj

Powerful Social Leverage

30 MFIs

Bosnia Kosovo PeruRussia Senegal MoroccoPhilippinesColombiaMexico

DWM Vehicle$60 million

A $60 million DWM vehicle has channeled 30 loans to microfinance institutions (MFIs) in developing countries, which will in turn generate approximately 300,000 loans to

microentrepreneurs in those countries over 5 years

60,000 microloans / year

300,000 microloans

5 years

A partial list of countries

13

DWM “Firsts” - A Microfinance Pioneer

The first multi-tranche debt fund for smaller MFIs - Global Partnerships 2005

The first private equity microfinance fund in southeastern Europe - the

Balkans fund, 2005

The first credit rating for a microfinance CDO - senior tranche of MFS, 2006

The first major equity investment in microfinance by a mainstream asset

manager - TIAA CREF/ ProCredit, 2006

The first emerging markets IPO fund - DWM I Fund, L.P. 1998-present

The first capital markets transaction for microfinance -BlueOrchard collateralized debt obligation, 2004

14

Volume Leader in Microfinance Capital Markets

Microfinance transactions closed to date: Approx $250 million

Equity investments in banks lending to SMEsDec 2005€25 mm Balkans

Balkans Financial Sector Equity Fund (1st

closing) c

Equity investments in MFIsMar 2006$9 mmIndia, Latin AmericaUnitus Equity Fund (1st closing)

Loans to 8 MFIsSept 2005$2 mmCentral AmericaGlobal Partnerships Microfinance Fund 2005

Equity investment in MF companySept 2006$43 mmE Europe, Lat Am,

Africa ProCredit Holding

Loans to 5 MFIs

Loans to 9 MFIs

Loans to 14 MFIs

Loans to 25+ MFIs

Use of Proceeds

Dec 1999$3 mmLatin AmericaPro Mujer Loan Fund

June 2006$60 mmLat Am, E Europe MidEast & Asia

MicroFinance Securities XXEB

Jul 2004$40 mmLatAm, E. Europe, SE AsiaBOMSI, 1st closing

May 2005$47 mm LatAm, E. Europe, SE AsiaBOMSI, 2nd closing

DateSizeRegionMicrofinance Assets

15

Use of Proceeds

Developing World Markets381 Post Road, Darien, Connecticut 06854, USA

www.dwmarkets.comTel: 1 203 655 5453 Fax: 1 203 656 9528

Roger Frankroger@dwmarkets.comM 1 917 327 7215

Contact Information:

Simone Leesimone@dwmarkets.comM 1 267 577 8878

17

THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY AN INTEREST IN THE DWM TRANSACTIONS DESCRIBED HEREIN. NO SUCH OFFER OR SOLICITATION WILL BE MADE PRIOR TO THE DELIVERY OF AN OFFERING MEMORANDUM AND OTHER MATERIALS

RELATING TO THE MATTERS MENTIONED HEREIN.

THIS DOCUMENT CONTAINS A SUMMARY OF THE PURPOSE OF THE DWM TRANSACTIONS; THIS SUMMARY DOES NOT PUPORT TO BE COMPLETE, IS FOR

DISCUSSION PURPOSES ONLY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED DISCUSSION CONTAINED IN THE ACTUAL

OFFERING MATERIALS.

NO REPRESENTATION OR WARRANTY IS MADE BY DEVELOPING WORLD MARKETS OR ANY OF ITS AFFLIATES (COLLECTIVELY, DWM), INCLUDING ANY

OF ITS AGENTS OR OTHER REPRESENTATIVES, AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN. ONLY THOSE

PARTICULAR REPRESENTATIONS AND WARRANTIES WHICH MAY BE MADE IN DEFINITIVE AGREEMENTS, WHEN, AS AND IF EXECUTED, AND SUBJECT TO

SUCH LIMITATIONS AND RESTRICTIONS AS MAY BE SPECIFIED IN SUCH DEFINITIVE AGREEMENTS, SHALL HAVE ANY LEGAL EFFECT.

THIS DOCUMENT IS BEING PROVIDED TO YOU ON A CONFIDENTIAL BASIS, ACCORDINGLY, THIS DOCUMENT MAY NOT BE REPRODUCED IN WHOLE OR IN

PART, AND MAY NOT BE DELIVERED TO ANY PERSON WITHOUT THE PRIOR WRITTEN CONSENT OF DWM.