1. Afternoon Delight “The way to succeed is by being a better evaluator and manager of risk than competition” Glenn C. Albert

2. 60 YEARS OF DEVELOPMENTAL BANKING

3. MAJOR PROVIDER OF MEDIUM TO LONG - TERM FUNDS FOR: - INFRASTRUCTURE AND LOGISTICS - ENVIRONMENT - SMALL AND MEDIUM ENTERPRISE DEV’T. - SOCIAL SERVICES (HOUSING, HEALTH CARE, EDUCATION) FIRST PHILIPPINE BANK TO BE ISO 14OO1 FINANCIAL INDICATORS AS OF 12-31-O6 - P235 BILLION IN RESOURCES - P 35 BILLION AUTHORIZED CAPITAL - P 3.7 BILLION NET INCOME COUNTRY’S PREMIERE DEVELOPMENT FINANCIAL INSTITUTION

4. DBP HEDGING PROGRAM FOR EXPORTERS TO HELP EXPORTERS HEDGE THEIR US DOLLAR INFLOWS AGAINST THE FLUCTUATIONS OF FX RATES

5. I.FOREIGN EXCHANGE INSURANCE PROTECTION II.FOREIGN EXCHANGE FORWARD RATE PROTECTION

6. ALLOWS THE EXPORTER THE RIGHT BUT NOT THE OBLIGATION TO SELL HIS US DOLLARS AGAINST PHILIPPINE PESOS TO DBP AT A SPECIFIED PRICE ON A SPECIFIED DATE TERM OF 1 TO 3 MONTHS MINIMUM AMOUNT OF $1O,OOO.OO PROTECTION RATE INSURANCE FEE BASED ON MARKET RATE

7. On DAY 1, exporter and DBP agree on the following: Protection Rate : USD/PHP 46.00 Protection Rate : USD/PHP 46.00 USD/PHP Rate at Trade Date : USD/PHP 46.20 USD/PHP Rate at Trade Date : USD/PHP 46.20 Notional Amount : $ 10,000.00 Notional Amount : $ 10,000.00 Insurance Fee : To be determined ( based on market conditions) Insurance Fee : To be determined ( based on market conditions) *Assuming rate of option fee based on market conditions is : 0.80% Insurance fee in USD = 0.8% x Notional Amount Insurance fee in USD = 0.8% x Notional Amount = 0.8% x $10,000 = 0.8% x $10,000 = $ 80 = $ 80 EXAMPLE OF FOREIGN EXCHANGE INSURANCE PROTECTION EXAMPLE OF FOREIGN EXCHANGE INSURANCE PROTECTION EXPORTERS HEDGING PROGRAM

8. On MATURITY DATE, USD/PHP exchange rate :46.40 Protection Rate :46.00 SCENARIO 1: Peso Depreciates from 46.20 46.40 Exporter gains, he may sell his $10,000 at 46.40 to DBP ACTUAL GAIN = (Exchange Rate at MATURITY) – (Protection Rate) – (Protection Rate) – (Insurance Fee in FX TERMS) (Insurance Fee in FX TERMS) = P 46.40 – P46.00 – P 0.37 ($80 x P46.20)/$10,000 = P 46.40 – P46.00 – P 0.37 ($80 x P46.20)/$10,000 = P 0.03 per dollar = P 0.03 per dollar EXAMPLE OF FOREIGN EXCHANGE INSURANCE PROTECTION EXAMPLE OF FOREIGN EXCHANGE INSURANCE PROTECTION EXPORTERS HEDGING PROGRAM

9. On MATURITY DATE, USD/PHP exchange rate :45.00 Protection Rate :46.00 SCENARIO 2: Peso Appreciates from 46.20 45.00 Exporter is covered at the protection rate, he sells his $10,000 at 46.00 to DBP OPPORTUNITY GAIN = (Protection Rate) (Exchange Rate at MATURITY) - (Exchange Rate at MATURITY) - (Insurance fee in FX TERMS) - (Insurance fee in FX TERMS) = P 46.00 – P45.00 – P 0.37 = P 46.00 – P45.00 – P 0.37 = P 0.63 per dollar = P 0.63 per dollar EXAMPLE OF FOREIGN EXCHANGE INSURANCE PROTECTION EXPORTERS HEDGING PROGRAM

10. FOREIGN EXCHANGE FORWARD RATE PROTECTION A foreign exchange contract where only the net difference between the agreed dollar/peso forward rate and the market rate shall be settled at maturity

11. FOREIGN EXCHANGE FORWARD RATE PROTECTION TERM OF 3O DAYS TO 12 MONTHS MINIMUM AMOUNT OF $1O,OOO NEEDS CREDIT APPROVAL FROM DBP

12.  FIXING RATE is the USD/PHP RATE at Fixing Date  Fixing Date - One business day prior to Maturity Date  Fixing Rate is obtained from the AM PDS weighted average rate on the REUTERS page PDSPESO1 PESO NET SETTLEMENT Peso Net Settlement Amount = Fixing Rate – NDF Rate  Peso Net Settlement Amount will be paid on the maturity date of the NDF Contract FOREIGN EXCHANGE FORWARD RATE PROTECTION EXPORTERS HEDGING PROGRAM

13. EXPORTERDBP Exporter Pays P 0.28 x Notional Amount to DBP ON SETTLEMENT DATE FX Forward Rate : 46.22 (computed in previous example) USD/PHP Rate (Fixing Rate) : 46.50 EXAMPLE: FX Forward Rate: 46.22Notional Amount : $1O,OOO Exchange Rate : 46.5O Exporter Pays: (46.5O - 46.22) x $1O,OOO = P 2,8OO  If Fixing Rate > FX Forward Rate, then FOREIGN EXCHANGE FORWARD RATE PROTECTION EXPORTERS HEDGING PROGRAM

14. EXPORTERDBP DBP Pays P 0.22 x Notional Amount to Exporter ON SETTLEMENT DATE EXAMPLE: FX Forwrd Rate = P 46.22Notional Amount = $1O,OOO USD/PHP Rate = 46.OO DBP Pays:(46.22 - 46.OO) x $1O,OOO = P 2,2OO FX Forward Rate : 46.22 USD/PHP Rate (Fixing Rate) : 46.00  If Fixing Rate < FX Forward Rate, then FOREIGN EXCHANGE FORWARD RATE PROTECTION EXPORTERS HEDGING PROGRAM

15. Evaluation Criteria   DBP shall finance projects which are technically, financially and economically viable and environment-friendly

16. CAMP ANALYSIS CASH Financial ratios Balance sheet items ADMINISTRATION Mgmt. Experience Owner’s health Succession plan Personal networth Attitude towards banks MARKET Market Conditions Clientele Growth in sales PRODUCTION No. of suppliers Inventory turnover Potential to increase production and service capacity Quality of business location

17.  Does due diligence on the borrower’s: √ S tability √ E ntrepreneurship √ R eputation √ R epayment Behavior  Sources information from character references, background and credit investigation

18. Please Contact: Senior Vice President Corazon D. Conde Head, SME Department Development Bank of the Philippines Tel. No. 815-1520 OR SAVP Dulce Ranosa Celia S. Patilan Tel. Nos. 818-9511 locals 2557/2529 (Trunkline) 840-3435/ 892-5727 (Direct Line)