TCX Fund

active

The proposed transaction consists of an IFC investment of USD 30 million in The Currency Exchange Fund N.V (“TCX” or the Fund) as straight equity, representing circa 5% of current shareholder capital. This investment will allow IFC to get access to TCX products as a client. TCX is an innovative financial institution which provides long-term local currency (“LCY”) and interest rate derivatives in emerging countries without active swap markets. TCX’s objective is to promote long-term LCY financing for those borrowers in developing countries that do not have hard currency income, thereby contributing to a reduction in currency mismatches in the local market. TCX commenced with operations in February 2008. TCX’s swap portfolio is naturally long emerging market currencies and short USD, because, unlike commercial providers of hedging products, TCX does not operate on a “matched book” principle but instead relies on global portfolio diversification as the primary risk mitigation tool. TCX is structured to help its investors hedge exchange and interest rate risks associated with long-term investing in developing country currencies. These risks are transferred to TCX by means of medium to long-term swap agreements. TCX pools market risk from multiple investors with diversified geographical business. The resulting global diversification should lead to a risk reduction and economies of scale and scope. TCX is currently rated A- by Standard and Poors.