<PAGE>
FILE NO. 1-3431
REGULATION BW
RULE 3
October 10, 1996
VIA EDGAR
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to Rule 3 of Regulation BW, please find attached (i) a
Report dated October 10, 1996 of the International Bank for
Reconstruction and Development (the "Bank") with respect to one or
more proposed issues of debt securities of the Bank and (ii) a
Supplemental Report dated October 10, 1996 of the Bank with respect to
the Bank's Short-Term Notes.
Sincerely yours,
Scott B. White
Chief Counsel, Finance
Attachments
<PAGE>
FILE NO. 1-3431
REGULATION BW
RULE 3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
REPORT OF
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
With respect to one or more proposed issues
of debt securities of the Bank
Filed pursuant to Rule 3 of Regulation BW
Dated: October 10, 1996
<PAGE>
The following information is being filed pursuant to Rule 3 of Regulation
BW with respect to one or more proposed issues of debt securities of the
International Bank for Reconstruction and Development. As authorized by Rule 4
of Regulation BW, certain information is to be provided in the form of an
Information Statement, attached as Exhibit A. Certain information specified in
Schedule A to Regulation BW is not available at the date of this Report.
Items 1-6. Not yet known. This information will be included in the
prospectus for a particular issue.
Item 7. EXHIBIT
Exhibit A: Information Statement dated September 23, 1996.
1
<PAGE>
INFORMATION STATEMENT
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
[WORLD BANK LOGO]
The Bank intends from time to time to issue its notes and bonds with
maturities and on terms determined by market conditions at the time of sale. The
notes and bonds may be sold to dealers or underwriters, who may resell them in
public offerings or otherwise, or they may be sold by the Bank, directly or
through agents.
The specific currency, aggregate principal amount, maturity, interest rate
or method for determining such rate, interest payment dates, if any, purchase
price to be paid to the Bank, any terms for redemption or other special terms,
form and denomination of such notes and bonds, information as to stock exchange
listing and the names of the dealers, underwriters or agents in connection with
the sale of such notes and bonds being offered at a particular time, as well as
any other information that may be required, will be set forth in a prospectus or
supplemental information statement.
AVAILABILITY OF INFORMATION
This Information Statement will be filed with the U.S. Securities and
Exchange Commission electronically through the EDGAR system and will be
available at the Internet address: http://www.sec.gov/ edgarhp.htm.
The Bank will provide without charge additional copies of this Information
Statement upon request. Written or telephone requests should be directed to the
Bank's principal office at 1818 H Street, N.W., Washington, D.C. 20433,
Attention: Treasury Finance Department, tel: (202) 458-0746, or to the following
regional offices of the Bank: 66 Avenue d'Iena, 75116 Paris, France, tel: (331)
40-69-30-09; New Zealand House, 15th Floor, Haymarket, London SW1 Y4TE, England,
tel: (44171) 930-8511; and Kokusai Building, Room 916, 1-1, Marunouchi 3-chome,
Chiyoda-ku, Tokyo 100, Japan, tel: (813) 3214-5001 (after December 1, 1996:
Fukoku Seimei Building 10F, 2-2-2 Uchisaiwai-cho, Chiyoda-ku, Tokyo 100, Japan).
RECIPIENTS OF THIS INFORMATION STATEMENT SHOULD RETAIN IT FOR FUTURE
REFERENCE, SINCE IT IS INTENDED THAT EACH PROSPECTUS AND ANY SUPPLEMENTAL
INFORMATION STATEMENT WILL REFER TO THIS INFORMATION STATEMENT FOR A DESCRIPTION
OF THE BANK AND ITS FINANCIAL CONDITION.
September 23, 1996
<PAGE>
SUMMARY INFORMATION
EXCEPT AS OTHERWISE INDICATED, ALL DATA ARE AS OF JUNE 30, 1996.
The Bank is an international organization which commenced business in 1946.
The principal purpose of the Bank is to promote the economic development of its
member countries, primarily by providing loans and related technical assistance
for specific projects and for programs of economic reform in developing member
countries. The Bank's capital stock is owned by its 180 member countries (as of
September 23, 1996). Its five largest shareholders are: the United States (with
17.20% of the total voting power), Japan (6.10%), Germany (4.71%), France
(4.52%) and the United Kingdom (4.52%).
The financial strength of the Bank is based principally on the quality of
its loan portfolio, the size of its liquid assets, its diversified sources of
finance, its substantial equity and its consistent profitability.
ASSETS
LOAN PORTFOLIO. The Bank's principal asset is its portfolio of outstanding
loans. Bank loans are either made directly to or guaranteed by a member. The
Bank's loan portfolio is diversified by country and sector. No loans are made
which, in the Bank's opinion, cannot be justified on economic grounds or which
would be for countries not deemed creditworthy. Creditworthiness of all
borrowing members is kept under continuous review. New loans are made at
interest rates based on the Bank's cost of borrowings, or at market reference
rates adjusted to reflect the Bank's cost of borrowings relative to such rates.
The Bank does not reschedule interest or principal payments on its loans or
participate in debt rescheduling agreements with respect to its loans. However,
in the special case of Bosnia and Herzegovina, the accumulated arrears on loans
to the former Socialist Federal Republic of Yugoslavia assumed by it were
cleared through the extension of three new consolidation loans by the Bank.
Under the Bank's Articles of Agreement, the total amount outstanding of
direct loans, participations in loans and callable guarantees made by the Bank
may not be increased to an amount exceeding 100% of the sum of subscribed
capital, reserves and surplus ($201.1 billion). Such percentage was 54.9%;
disbursed and outstanding loans amounted to $110.2 billion and callable
guarantees were $123 million.
Loans made to or guaranteed by six member countries of the Bank (Bosnia and
Herzegovina, Iraq, Liberia, Sudan, Syrian Arab Republic and Zaire) and one other
country -- the Federal Republic of Yugoslavia (Serbia and Montenegro) --
representing 2.3% of the Bank's loan portfolio, were in nonaccrual status. The
aggregate principal balance outstanding in respect of these loans was $2,520
million, of which $1,227 million was overdue. The Bank's accumulated loan loss
provision in respect of its overall portfolio was $3,340 million.
LIQUID ASSETS. The Bank's other major asset is its portfolio of liquid
investments ($15.9 billion, of which $1.2 billion was classified as
held-to-maturity). The Bank has a policy of targeting fiscal year-end liquid
holdings of at least 45% of projected net cash requirements for the succeeding
three years in order to assure flexibility in its borrowing decisions. Such
liquidity ratio was 42.5%; liquidity was equivalent to approximately 16.2% of
outstanding borrowings after swaps.
LIABILITIES AND EQUITY
LIABILITIES. The Bank diversifies its borrowings by currency, country,
source and maturity to provide maximum flexibility in funding. It has borrowed
in all of the world's major capital markets and also borrows directly from
member governments and central banks. The Bank's borrowings ($96.7 billion) were
denominated in 22 currencies or currency units and included $79.9 billion of
fixed rate medium- to long-term borrowings and $16.8 billion of short-term and
variable rate borrowings. The Bank also undertakes a substantial volume of
currency and interest rate swap transactions in connection with its borrowing
operations. The principal amount payable under outstanding currency swaps
aggregated $19.4 billion, and the notional principal amount of outstanding
interest rate swaps aggregated $26.4 billion.
EQUITY. The Bank's authorized capital was $188.0 billion, of which $180.6
billion was subscribed. Of the Bank's subscribed capital, approximately $11.0
billion (6.1%) was paid in (of which $8.0 billion was available for lending);
the balance was callable. Shareholders are obligated on the uncalled portion of
their subscriptions ($169.6 billion), which may only be called to meet
obligations of the Bank for money borrowed or on any guarantees; it may not be
used for making loans. The Bank's equity also included $16.1 billion of retained
earnings, plus $1.1 billion for cumulative translation adjustment.
The Bank seeks to avoid exchange risks by matching its liabilities in
various currencies with assets in those same currencies and by matching the
currencies of its retained earnings and accumulated provision for loan losses
with those of its outstanding loans.
PROFITABILITY. The Bank has earned profits every year since 1947. Net
income for the fiscal year ended June 30, 1996 was $1,187 million, which
represented an annualized return of 0.91% on average earning assets.
THE ABOVE INFORMATION IS QUALIFIED BY THE DETAILED INFORMATION
AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS INFORMATION STATEMENT.
2
<PAGE>
SELECTED FINANCIAL DATA
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and liquid investments (including investments classified as held-
to-maturity, net of commitments for settlement and cash collateral
received)............................................................ $ 15,898 $ 18,274 $ 19,095
Loans:
Disbursed and outstanding (1)..................................... 110,246 123,499 109,291
Undisbursed variable rate loans................................... 52,173 54,308 54,713
Undisbursed fixed rate loans (1).................................. 2,347 1,646 296
Accumulated provision for loan losses................................. 3,340 3,740 3,324
Borrowings (net of discount/premium):
Short-term........................................................ 4,328 3,898 3,304
Medium- and long-term............................................. 92,391 104,392 95,511
Equity:
Paid in capital available for lending, retained earnings and
cumulative translation adjustment................................ 25,129 27,132 23,630
Callable capital.................................................. 169,636 165,580 159,338
INCOME STATEMENT DATA:
Total Income.......................................................... $ 8,720 $ 9,362 $ 8,590
Net Income (2)........................................................ 1,187 1,354 1,051
RETURN, COST AND RATIO ANALYSIS:
Average interest rate on:
Disbursed and outstanding loans during the fiscal year (3)........ 6.81% 7.02% 7.34%
Commitment charge on undisbursed loans............................ 0.25 0.25 0.25
Net income as a percentage of average earning assets.................. 0.91 1.00 0.85
Financial return on average investments............................... 4.43 5.69 3.53
Return on:
Average disbursed and outstanding loans........................... 6.92 7.12 7.45
Average earning assets............................................ 6.62 6.94 6.82
Average cost (after swaps) of:
New medium- and long-term borrowings drawn down during the fiscal
year............................................................. 5.28 6.31 4.99
Fixed rate borrowings........................................... 5.73 6.32 5.03
Variable rate borrowings........................................ 4.69 5.92 3.12
Total borrowings outstanding during the fiscal year............... 6.44 6.62 6.74
Short-term.................................................... 5.55 5.92 3.89
Medium- and long-term......................................... 6.48 6.64 6.84
Total borrowings and other funds available during the fiscal
year............................................................. 5.15 5.35 5.49
Cash and liquid investments as a percentage of borrowings outstanding
after swaps--end of the fiscal year.................................. 16.20 16.38 18.92
Outstanding loans, participations and callable guarantees as a
percentage of subscribed capital, reserves and surplus--end of the
fiscal year (4)...................................................... 54.88 62.15 57.90
Average life (years) of:
Loans outstanding--end of the fiscal year (5)..................... 5.4 5.3 5.3
Medium- and long-term borrowings outstanding--end of the fiscal
year............................................................. 5.3 5.6 5.9
</TABLE>
- ----------
(1) Includes loans to the International Finance Corporation.
(2) The combined effect of interest waivers and commitment fee waiver was to
reduce Net Income by $521 million for the fiscal year ended June 30, 1996,
$484 million for fiscal year ended June 30, 1995 and $463 million for fiscal
year ended June 30, 1994.
(3) Includes variable rate loans on which the interest rate is adjusted every
six months.
(4) Under the Articles, the total amount outstanding of callable guarantees,
participations in loans and direct loans made by the Bank may not be
increased to an amount exceeding 100% of the sum of subscribed capital,
reserves and surplus.
(5) Computed based on average daily maturities; previously computed based on
average annual maturities.
THE ABOVE INFORMATION IS QUALIFIED BY THE DETAILED INFORMATION
AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS INFORMATION STATEMENT.
3
<PAGE>
THE BANK
The World Bank, officially known as the International Bank for
Reconstruction and Development (the Bank), is an international organization
which was established and has been operating since 1946 under the Articles of
Agreement (the Articles) signed by the governments of its member countries. The
principal office of the Bank is located at 1818 H Street, N.W., Washington, D.C.
20433.
The Bank's principal purpose is to promote the economic development of its
member countries in the interest of fostering the long-term growth of
international trade and improved standards of living. Its principal activity is
providing loans and related technical assistance for specific projects and for
programs of economic reform in developing member countries.
One hundred and eighty countries are now members of the Bank. A list of the
members as of June 30, 1996, showing the voting power of each and the amount of
the subscription of each to the Bank's capital stock, is set forth in Financial
Statements--Statement of Subscriptions to Capital Stock and Voting Power.
The activities of the Bank are complemented by those of three affiliated
international organizations, the International Finance Corporation (IFC), the
International Development Association (IDA) and the Multilateral Investment
Guarantee Agency (MIGA). (See "Affiliated Organizations".)
RESOURCES OF THE BANK
The Bank's resources are derived from its capital, borrowings and
accumulated earnings in the various currencies of its members. In order to
minimize exchange-rate risk in a multicurrency environment, the Bank matches its
borrowing obligations in any one currency (after swap activities) with assets in
the same currency, as prescribed by its Articles, primarily by holding or
lending the proceeds of its borrowings in the same currencies in which they were
borrowed. In addition, the Bank undertakes currency conversions periodically to
match the currencies of the Bank's retained earnings and accumulated provision
for loan losses with those of the Bank's outstanding loans. With respect to its
other resources, the Bank does not convert one currency into another except for
small amounts required to meet certain obligations and operational needs of the
Bank. (See Notes to Financial Statements.)
EQUITY
The following table shows the equity of the Bank as of June 30, 1996:
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<S> <C> <C>
Subscribed capital stock............................................................. $ 180,630
Less--Uncalled portion of subscriptions.............................................. 169,636
---------
Capital stock paid in
Available for lending............................................. $ 7,974
Not available for lending......................................... 3,020 10,994
---------
Deferred Amounts to Maintain Value of Currency Holdings.............................. 136
Payments on Account of Pending Subscriptions......................................... 15
Retained Earnings (1)................................................................ 16,099
Cumulative Translation Adjustment.................................................... 1,056
---------
Total............................................................................ $ 28,300
---------
---------
</TABLE>
- ---------
(1) See the Notes to Financial Statements--Note F.
In accordance with a decision of the Executive Directors of the Bank in
October 1986, the capital stock of the Bank is expressed in U.S. dollars and
valued with reference to the Special Drawing Right (SDR) of the International
Monetary Fund (IMF) on a fixed basis of 1.20635 U.S. dollars for one SDR. (See
Notes to Financial Statements--"Valuation of Capital Stock".)
4
<PAGE>
On the foregoing basis, the authorized capital of the Bank as of June 30,
1996 was 1,558,478 shares, equal to $188.0 billion, of which 1,497,325 shares,
equal to $180.6 billion, had been subscribed. This includes capital increases
that became effective in April 1988 and April 1992 aggregating 710,748 shares,
equal to $85.7 billion, of which 684,747 shares equal to $82.6 billion had been
subscribed. (See Notes to Financial Statements--Note A.) Actual increases in the
Bank's capital take place as members subscribe to shares made available for
subscription under the authorized increases. The subscription period for the two
pending capital increases is scheduled to end on September 30, 1996.
Of the subscribed capital, $10,994 million had been paid in and $169,636
million was callable. The four paragraphs which follow describe the terms of
payment of the paid in and callable capital and the restrictions on its use,
which are derived from the Articles and Resolutions of the Bank's Board of
Governors.
(a) $2,296 million, which was initially paid in gold or U.S. dollars, or
converted by the subscribing members into U.S. dollars, may, under
the Articles, be freely used by the Bank in any of its operations.
(b) $8,698 million, which was paid in the currencies of the subscribing
members, may, under the Articles, be lent only with the consent of
the member whose currency is involved. As of June 30, 1996, $5,522 million
was, in accordance with such consents, available for use in the Bank's
lending operations. Under the Articles, these amounts are subject to
maintenance of value obligations. (See Notes to Financial Statements--Note
A.)
(c) $144,504 million may, under the Articles, be called only when
required to meet obligations of the Bank for funds borrowed or on
loans guaranteed by it. This amount is thus not available for use by the
Bank in making loans. Payment on any such call may be made, at the option of
the particular member, either in gold, in U.S. dollars or in the currency
required to discharge the obligations of the Bank for which the call is
made. No calls have been made on this portion of the subscribed capital.
(d) $25,132 million is to be called only when required to meet
obligations of the Bank for funds borrowed or on loans guaranteed by
it, pursuant to resolutions of the Board of Governors of the Bank. Of this
amount, 10% would be payable in gold or U.S. dollars and 90% in the
currencies of the subscribing members. While these resolutions are not
legally binding on future Boards of Governors, they do record an
understanding among members that this amount will not be called for use by
the Bank in its lending activities or for administrative purposes.
The uncalled amount of the subscribed capital referred to in (c) and (d)
above is a resource of the Bank of which the Bank is bound to avail itself when
and to the extent necessary to meet obligations of the Bank for funds borrowed
or on any loans which have been guaranteed by it. Calls on unpaid subscriptions
are required to be uniform, but the obligations of the members of the Bank to
make payment on such calls are independent of each other. A failure of one or
more members to make payment on such a call would not excuse any other member
from its obligation to make payment; and if the amount received on a call is
insufficient to meet the obligations of the Bank for which the call is made, the
Bank has the right and is bound to make further successive calls until the
amounts received are sufficient to meet such obligations. However, no member may
be required on any such call or calls to pay more than the unpaid balance of its
capital subscription.
As of June 30, 1996, $98.5 billion (58.0%) of the Bank's uncalled capital
was callable from the member countries of the Bank that are also members of the
Development Assistance Committee of the Organization
5
<PAGE>
for Economic Cooperation and Development. This amount was equal to 100.3% of the
Bank's outstanding borrowings after swaps at that date. The capital
subscriptions of those countries, in order of size of subscription, and the
uncalled portion of their subscriptions are set out below:
<TABLE>
<CAPTION>
TOTAL UNCALLED
MEMBER CAPITAL PORTION OF
COUNTRY (1) SUBSCRIPTION SUBSCRIPTION
- ------------------------------------------------------------ ------------ ------------
EXPRESSED IN MILLIONS
OF U.S. DOLLARS
<S> <C> <C>
United States............................................... $ 31,965 $ 29,966
Japan....................................................... 11,312 10,608
Germany..................................................... 8,734 8,191
France...................................................... 8,372 7,851
United Kingdom.............................................. 8,372 7,832
Italy....................................................... 5,404 5,069
Canada...................................................... 5,404 5,069
Netherlands................................................. 4,283 4,018
Belgium..................................................... 3,496 3,281
Switzerland................................................. 3,210 3,012
Spain....................................................... 2,857 2,682
Australia................................................... 2,607 2,436
Sweden...................................................... 1,806 1,696
Austria..................................................... 1,335 1,254
Denmark..................................................... 1,237 1,162
Norway...................................................... 1,204 1,132
Finland..................................................... 1,033 971
New Zealand................................................. 873 821
Portugal.................................................... 659 620
Ireland..................................................... 636 599
Luxembourg.................................................. 199 190
------------ ------------
Total................................................... $ 104,998 $ 98,460
------------ ------------
------------ ------------
</TABLE>
-----------------------
(1) Details regarding the capital subscriptions of all members of
the Bank as of June 30, 1996 may be found in Financial
Statements--Statement of Subscriptions to Capital Stock and
Voting Power.
As of June 30, 1996, the total subscription of the United States, the Bank's
largest shareholder, was $31,965 million, of which the uncalled portion was
$29,966 million. Under the Bretton Woods Agreements Act, the Par Value
Modification Act and other U.S. legislation, the Secretary of the U.S. Treasury
is authorized to pay up to $7,663 million in respect of the uncalled portion of
the subscription of the United States, if it were called by the Bank, without
any requirement of further Congressional action. The balance of the U.S.
subscription to the uncalled portion, $22,303 million, has been authorized by
the U.S. Congress but not appropriated. Further Congressional action would be
required to enable the Secretary of the Treasury to pay any portion of this
balance if it were called by the Bank. The General Counsel of the U.S.
Department of the Treasury has rendered an opinion to the effect that the entire
uncalled portion of the U.S. subscription is an obligation backed by the full
faith and credit of the United States, notwithstanding that Congressional
appropriations have not been obtained with respect to certain portions of the
subscription.
6
<PAGE>
BORROWINGS (AFTER SWAPS)
The following table shows the borrowings after swaps of the Bank as of June
30, 1996:
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<S> <C> <C>
BORROWINGS: (1)
Short-term
Payable in:
U.S. dollars.................................................. $ 4,286
Deutsche mark................................................. 74
---------
Sub-total................................................... 4,360
Less--Net unamortized discounts............................... 32 $ 4,328
---------
Medium- and long-term
Payable in:
Japanese yen.................................................. 30,048
Deutsche mark................................................. 26,435
U.S. dollars.................................................. 26,234
Swiss francs.................................................. 7,538
Other currencies.............................................. 3,566
---------
Sub-total................................................... 93,821
Less--Net unamortized discounts............................... 13 93,808
--------- ---------
Total....................................................... $ 98,136
---------
---------
</TABLE>
- ---------
(1) See also Financial Statements--Summary Statement of Borrowings.
The Bank's policy is to diversify the markets for its securities by offering
them to private and governmental buyers in as many markets as offer terms
acceptable to the Bank. During the five fiscal years 1992 through 1996, the Bank
sold its securities to underwriters or other nongovernmental purchasers in the
markets of approximately 25 countries and borrowed directly from official
sources in more than 90 countries. Official sources are governments, central
banks and other governmental institutions.
The Bank undertakes fixed rate and variable rate medium- and long-term
borrowings as well as short-term borrowings. Current policy guidelines
established by the Bank's Executive Directors provide that the total amount of
short-term borrowings should not exceed 10% of the Bank's total debt
outstanding. As of June 30, 1996, the Bank's short-term borrowings outstanding
aggregated $4.3 billion (4.4% of total debt), of which $2.6 billion was placed
directly with official sources.
In connection with its borrowing and liability management operations, the
Bank also undertakes a substantial volume of currency and interest rate swap
transactions. To achieve the desired currency and interest rate composition of
its funding, the Bank compares the cost of direct borrowings in the desired
currencies on a fixed or floating rate basis with the cost of obtaining the same
result through swap-related borrowings. The Bank normally will use borrowings
coupled with currency swaps and/or interest rate swaps where a threshold level
of cost savings can be obtained as compared to direct borrowings. As of June 30,
1996, the principal amount payable under outstanding currency swap transactions
aggregated $19.4 billion and the notional principal amount of outstanding
interest rate swap transactions aggregated $26.4 billion.
With respect to the Bank's medium- and long-term borrowings, the following
table shows (a) the total amount of such borrowings and net borrowings during
the fiscal years 1994 through 1996, (b) the maturity structure of these
borrowings outstanding as of June 30, 1996 and (c) the average life of these
borrowings at the end of these periods.
7
<PAGE>
EXPRESSED IN MILLIONS OF U.S. DOLLARS
NET MEDIUM AND LONG-TERM BORROWINGS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Total Borrowings................................................................. $ 10,394 $ 10,880 $ 8,175
Less:
Prepayments.................................................................... 221 661 1,155
Maturities..................................................................... 9,922 10,916 7,967
--------- --------- ---------
Net Borrowings............................................................... $ 251 $ (697) $ (947)
--------- --------- ---------
--------- --------- ---------
</TABLE>
MATURITY STRUCTURE (1)
AS OF JUNE 30, 1996
<TABLE>
<S> <C>
Not more than 5 years.............................................................. $ 57,733
More than 5 but not more than 10 years............................................. 25,886
More than 10 years................................................................. 8,785
---------
Total.......................................................................... $ 92,404
---------
---------
</TABLE>
AVERAGE LIFE (YEARS)
<TABLE>
<CAPTION>
AS OF JUNE 30,
-------------------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Total Borrowings Outstanding............................................................... 5.3 5.6 5.9
</TABLE>
- ---------
(1) For a more detailed description of the maturity structure of medium- and
long-term borrowings outstanding, see Financial Statements--Summary
Statement of Borrowings.
Under the Articles, the Bank may borrow only with the approval of the member
in whose markets the funds are raised and the member in whose currency the
borrowing is denominated, and only if each such member agrees that the proceeds
may be exchanged for the currency of any other member without restriction.
From time to time, the Bank may purchase its outstanding securities both
during the period of distribution of any of its securities and thereafter. Such
purchases may be made in open market or individually negotiated transactions.
8
<PAGE>
STATEMENTS OF INCOME
Following are the statements of income relating to the operations of the
Bank for the five fiscal years ended June 30, 1996. The statements should be
read in conjunction with the other financial statements and the related notes.
(See Index to Financial Statements.)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<S> <C> <C> <C> <C> <C>
INCOME
Income from loans:
Interest............................................................ $ 7,804 $ 8,069 $ 7,707 $ 7,957 $ 7,773
Commitment charges.................................................. 118 118 115 124 115
Income from investments
Trading
Interest.......................................................... 673 881 827 1,079 1,360
Net gains/(losses)
Realized........................................................ 31 (23) (29) 170 141
Unrealized...................................................... (83) 168 (127) 19 114
Held-to-maturity
Interest.......................................................... 100 78 -- -- --
Income from securities purchased under resale agreements.............. 66 61 86 84 148
Other income.......................................................... 11 10 11 9 12
--------- --------- --------- --------- ---------
Total Income...................................................... 8,720 9,362 8,590 9,442 9,663
--------- --------- --------- --------- ---------
EXPENSES
Borrowing expenses:
Interest (1)........................................................ 6,455 6,832 6,539 6,645 6,645
Prepayment costs.................................................... 9 7 31 60 41
Amortization of issuance costs and other borrowing costs............ 106 105 76 157 170
Interest on securities sold under agreements to repurchase and payable
for cash collateral received......................................... 67 83 46 81 127
Administrative expenses (2)........................................... 733 842 731 679 612
Provision for loan losses............................................. 42 12 -- 578 353
Other expenses........................................................ 8 8 6 6 6
--------- --------- --------- --------- ---------
Total Expenses.................................................... 7,420 7,889 7,429 8,206 7,954
--------- --------- --------- --------- ---------
OPERATING INCOME........................................................ 1,300 1,473 1,161 1,236 1,709
Less contributions to special programs (3)............................ 113 119 110 106 64
--------- --------- --------- --------- ---------
NET INCOME (4).......................................................... $ 1,187 $ 1,354 $ 1,051 $ 1,130 $ 1,645
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------
(1) Net of $170 million--June 30, 1996, $157 million--June 30, 1995, $234
million--June 30, 1994, $367 million--June 30, 1993, $483 million--June 30,
1992, reflecting a reduction of costs resulting from swaps.
(2) The administrative expenses shown are net of the management fee charged to
IDA, the allocated charges to IFC and MIGA and reimbursements from other
cost-sharing arrangements as follows (in millions):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Management fee................................................. $ 508 $ 571 $ 545 $ 467 $ 395
Allocated Charges.............................................. 23 22 22 21 21
Reimbursements from other cost-sharing arrangements............ 79 89 85 74 80
</TABLE>
(3) Contributions to special programs represent grants for agricultural
research, the control of onchocerciasis and other developmental activities.
(4) On August 1, 1996, the Executive Directors allocated $250 million of the
net income earned in the fiscal year ended June 30, 1996 to the General
Reserve. The Executive Directors also recommended to the Board of Governors
that: (a) an amount equivalent to $600 million in SDRs as of June 30, 1996
be transferred as an immediate grant to IDA, $300 million to be transferred
out of fiscal year 1996 unallocated net income and $300 million from
surplus, and (b) any excess of fiscal year 1996 net income over $550
million be retained as surplus, provided that, of the resulting total
amount in surplus, amounts of up to $500 million be transferred from
surplus, by way of grant, to a Trust Fund for the debt relief of Heavily
Indebted Poor Countries (HIPC) or to other arrangements established in
support of the HIPC Debt Initiative when other creditors of the eligible
beneficiary countries are determined by the Bank to have agreed to meet
their share of the costs envisaged within the framework of this initiative
(see page 12).
9
<PAGE>
The Bank has earned a profit in each year since 1947. Profitability depends
principally on the cost of the Bank's borrowings, the amount of paid in capital
and retained earnings available for lending and investment, the level of
interest and other charges earned on the Bank's loans, the timely receipt of
interest and other charges and the rate of return earned on its liquid assets.
During the fiscal year ended June 30, 1996, the average cost of borrowings and
other funds available was 5.15%, and the return on average earning assets was
6.62%. (See "Operations of the Bank--Loan Operations and Lending
Policy"--"Return on Average Earning Assets and Cost of Funds".) Net income as a
percentage of average earning assets was 0.91% for the fiscal year ended June
30, 1996. These matters are described elsewhere in this Information Statement.
On August 1, 1995, the Executive Directors approved a target
reserves-to-loans ratio of 14.25% for fiscal year-end 1996 (net of the amount
allocated to the General Reserve as prefunding for the effect of loan interest
waivers). The target ratio is subject to annual review. The reserves-to-loans
ratio on this basis at June 30, 1996 equaled 14.1%. On August 1, 1996, the
Executive Directors approved a target reserves-to-loans ratio of 14.0% for
fiscal year-end 1997, a target range for that ratio of 13% to 15% for fiscal
years 1997 and 1998, and the maintenance of additional reserves of 1% of
outstanding fixed rate single currency loans at the end of fiscal year 1997. For
allocations to General Reserve, see page 9, "Statement of Income", note (4).
OPERATIONS OF THE BANK
LOAN OPERATIONS AND LENDING POLICY
From its establishment to June 30, 1996, the Bank had approved loans in the
aggregate amount of $286.6 billion to finance projects or programs in 128
countries, including loans to IFC. (See "Affiliated Organizations--IFC".) The
loans held by the Bank (including loans approved but not yet effective) as of
June 30, 1996 totalled $164.7 billion, of which $110.2 billion was disbursed and
$54.5 billion was undisbursed. Cumulative loan repayments as of June 30, 1996,
based on exchange rates at the time of disbursement, were $100.5 billion.
Under the Articles as applied, the total amount outstanding of guarantees,
participations in loans and direct loans made by the Bank may not be increased
to an amount exceeding 100% of the sum of subscribed capital, reserves and
surplus. As of June 30, 1996, such total amount was $110.4 billion, or 54.9% of
such sum. The Bank's Executive Directors have issued guidelines pursuant to
which all guarantees issued by the Bank will be counted towards such total
amount at the time they may first become callable irrespective of the likelihood
of an actual call.
In March 1991, the Executive Directors decided that discussions on an
additional capital increase would be initiated if the Bank's lending commitments
during any fiscal year reach 80% of the sustainable level of lending (the
commitment level that in the Bank's judgment could be sustained by it without
the need for additional capital). The Bank's lending commitments for the fiscal
year ended June 30, 1996 were $14.7 billion, or 49.5% of the sustainable level
of lending.
The Bank's lending operations have conformed generally to five principles
derived from the Articles. These principles, taken together, seek to ensure that
Bank loans are made in member countries for financially and economically sound
purposes to which those countries have assigned high priority and that funds
lent are utilized as intended. The five principles are:
(a) The Bank makes loans either to members or governmental authorities or
private enterprises in the territories of member countries. A loan
which is not made directly to the member in whose territories the project
being financed is located must be guaranteed as to principal, interest and
other charges by the member or its central bank or a comparable agency of
the member acceptable to the Bank. A guarantee by the member itself has been
obtained in all such cases to date. (See, however, "Affiliated
Organizations--IFC".)
(b) The Bank's loans are designed to promote the use of resources for
productive purposes in its member countries. The Bank does not make
loans which, in its opinion, cannot be justified on economic grounds.
10
<PAGE>
(c) In making loans, the Bank must act prudently and pay due regard to
the prospects of repayment. Before making a loan, the Bank studies,
among other things, a country's economic structure and makes an assessment
of the country's natural resources, the state of its basic infrastructure,
industry and agriculture, the quality of its public administration, its
trade patterns and its balance of payments position. In addition, on the
basis of information supplied by the country, the Bank estimates the
country's existing and prospective debt service obligations and assesses its
ability to generate sufficient foreign exchange to meet them.
(d) The Bank must be satisfied that in the prevailing market conditions
(taking into account the member's overall external financing
requirements) the borrower would be unable to obtain financing under
conditions which, in the opinion of the Bank, are reasonable for the
borrower. The Bank is intended to promote private investment, not to compete
with it.
(e) The use of loan proceeds is supervised. The Bank makes arrangements
to ensure that funds lent are used only for authorized purposes with
due attention to considerations of economy and efficiency. This policy is
enforced primarily by requiring borrowers (i) to submit documentation
establishing, to the Bank's satisfaction, that the expenditures financed
with the proceeds of loans are made in conformity with the applicable
lending agreements and (ii) to procure goods and services through
procedures, including international competitive bidding, which the Bank
judges to be likely to lead to cost-efficient procurement.
Within the scope permitted by the Articles, these policies must necessarily
be developed and adjusted in the light of experience and changing conditions.
The Bank does not reschedule interest or principal payments on its loans or
participate in debt rescheduling agreements with respect to its loans. In
exceptional cases, however, such as when implementation of a financed project
has been delayed, the loan amortization schedule may be modified to avoid
substantial repayments prior to project completion. In addition, on March 12,
1996, based on a precedent established by the Bank in 1975 after Bangladesh
became independent from Pakistan, the Bank's Executive Directors authorized the
Bank in the special case of Bosnia and Herzegovina to enter into an agreement
with that country with respect to a plan for the clearance of arrears under
loans to the former Socialist Federal Republic of Yugoslavia (SFRY) for which
Bosnia and Herzegovina accepts liability. The Bank's Executive Directors
required agreement on a plan to this effect as a condition to Bosnia and
Herzegovina's membership in the Bank. On June 14, 1996, the accumulated arrears
on loans to the former SFRY assumed by Bosnia and Herzegovina were cleared
through the extension of three new loans by the Bank consolidating all
outstanding principal and overdue interest on the loans assumed by Bosnia and
Herzegovina. All three consolidation loans have a final maturity of 30 years,
which includes a five-year grace period. The assumed loans had final maturity
dates ranging from 1992 to 2001.
The Bank's special treatment of the case of Bosnia and Herzegovina was based
on the following criteria: the country has emerged from a current or former
member of the Bank; it is assuming responsibility for a share of the debt of
such member; because of a major armed conflict in its territory involving
extensive destruction of physical assets, it has limited creditworthiness for
servicing the debt it is assuming; and a refinancing/rescheduling would result
in a significant improvement in its repayment capacity, if appropriate
supporting measures are taken. The Bank does not believe any countries other
than Bosnia and Herzegovina meet such criteria at present.
The Bank keeps under continuous review the creditworthiness of its member
countries which have obligations to the Bank as borrowers and adjusts its
overall country programs and lending operations to reflect the results of these
reviews. The poorer countries, which have the least flexibility to adapt to
adverse conditions, borrow mainly from IDA. (See "Affiliated
Organizations--IDA".) IDA was established in 1960, as a separate and distinct
entity for whose obligations the Bank is not liable, to provide funds on highly
concessionary terms to these countries.
Under an IDA program established in September 1988, supplementary IDA
credits are provided to countries that are no longer able to borrow on Bank
terms, have outstanding Bank loans approved prior to
11
<PAGE>
that date and have in place an IDA-supported structural adjustment program. Such
supplementary IDA credits are allocated to IDA-eligible countries that meet
specific conditions, in proportion to each country's interest payments due that
year on such Bank loans. Country eligibility requirements include not being more
than 60 days overdue on debt-service payments to the Bank and not having had a
Bank loan approved within the last twelve months. As of June 30, 1996, IDA had
approved credits of $1,379 million under this program from its inception, of
which $1,327 million had been disbursed and is outstanding.
The Bank and the IMF have proposed an initiative for addressing the debt
problems of a group of countries identified as highly indebted poor countries
(HIPCs) to ensure that reform efforts of these countries will not be put at risk
by continued high external debt burdens. Under the initiative, creditors would
provide enhanced debt relief for those countries that demonstrated good policy
performance over an extended period in order to bring their debt service burdens
to sustainable levels.
In this context, the Bank's Executive Directors have recommended to its
Board of Governors that the Bank set aside $500 million of Bank surplus for
transfer to a HIPC trust fund or similar arrangements when the Bank determines
that other creditors of the eligible beneficiary countries have agreed to meet
their share of the projected costs of the initiative. These funds would be
earmarked to help beneficiaries service their IDA debt. IDA also may make
selective use of grants for this purpose in place of normal development credits.
For certain countries that have unusually heavy debt service to the Bank but
that are not expected to require enhanced debt relief to achieve debt
sustainability, IDA may also consider providing supplemental IDA credits as a
proportion of such Bank debt service, provided the countries meet certain policy
performance criteria.
Details of the HIPC initiative could be substantially changed before it is
finalized, and the Bank's involvement in the initiative will be subject to final
approval by its Executive Directors.
The standard conditions applicable to the Bank's loan agreements include a
negative pledge clause that generally prohibits borrowers from creating liens or
priorities on public assets unless the Bank is equally and ratably secured.
Waivers of the negative pledge clause may be considered by the Bank on a
case-by-case basis. Since 1990, a limited waiver has been granted in connection
with the use of Bank resources by several member countries to support commercial
debt and debt-service reduction operations.
In December 1993, the Bank's Executive Directors approved a temporary waiver
of the negative pledge clause to be made available on a country-by-country basis
for new loans to eligible member countries in transition from command to market
economies, in order to enable such countries to enter into financial
relationships with private lenders. The waiver applies to countries approved as
eligible by the Executive Directors based on the fulfillment of several
criteria, including at least 75% of the country's income producing assets being
in the public sector. A waiver is granted for an initial period of two years,
with a possible extension for a further two-year period upon review by the
Executive Directors by the end of the first year. The waiver applies only to new
project financings that meet specified conditions, including that liens secure
repayment of external debt under loans with original maturities of not less than
five years. One country--Uzbekistan--is currently eligible for such a waiver.
The Russian Federation and Kazakstan also were approved for two-year waivers
that expired in December 1995 and May 1996, respectively.
PROJECT LENDING
The process of identifying and appraising a project, and of approving and
disbursing a project loan, often extends over seven to ten years. It takes, on
average, more than two years to identify and appraise a project before it is
presented to the Bank's Executive Directors for loan approval. The appraisal of
projects is carried out by the Bank's operational staff (engineers, other sector
specialists and financial analysts), economists and country specialists. After
approval of the loan agreement and any associated agreements (such as a
guarantee agreement), an additional period averaging eight months elapses before
the Bank declares the loan agreement effective. Loan effectiveness depends on
the satisfaction of legal requirements designed to ensure that domestic loan
approval or ratification requirements have been met and, in some cases, the
fulfillment of other conditions concerning the efficient implementation of the
project. Since loan disbursements under project loans are made on the basis of
project expenditures, the disbursement period
12
<PAGE>
frequently extends over six to nine years. During this period of project
implementation, Bank staff with experience in the sector or the country involved
periodically visit project sites to review progress, to monitor compliance with
the Bank's policies and to assist in resolving any problems which may arise.
Subsequent to completion, the project is evaluated to determine the extent to
which productivity and other goals were met. Similar appraisal, approval,
supervision and evaluation procedures apply in the case of Bank structural and
sectoral adjustment and other non-project loans, but such loans are usually
disbursed more quickly than project loans.
A summary statement of the Bank's loans as of June 30, 1996 is set forth in
Financial Statements-- Summary Statement of Loans. A breakdown by sector of the
Bank's total loans outstanding as of June 30, 1996 and loans approved in each of
the last three fiscal years is as follows (in millions):
<TABLE>
<CAPTION>
LOANS APPROVED
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL LOANS
OUTSTANDING AS OF FISCAL YEARS ENDED JUNE 30,
JUNE 30, -------------------------------------------------------
SECTORS 1996 1996 1995 1994
- -------------------------------------------- --------------------- --------------------- --------------------- ---------
Agriculture................................. $ 15,806 14% $ 1,161 8% $ 1,171 7% $ 2,194
Education................................... 4,673 4 921 6 1,281 7 1,500
Electric Power and Other Energy............. 15,222 14 2,899 20 1,803 11 1,613
Environment................................. 723 1 348 2 557 3 680
Finance..................................... 12,871 12 1,199 8 2,935 17 1,094
Industry.................................... 6,428 6 217 2 175 1 375
Mining and Other Extractive................. 998 1 571 4 -- -- 14
Multi-Sector................................ 18,945 17 906 6 2,295 14 606
Oil and Gas................................. 4,789 4 30 * 462 3 957
Population, Health and Nutrition............ 1,556 1 1,495 11 451 3 366
Public Sector Management.................... 3,272 3 1,036 7 636 4 378
Social...................................... 547 * 240 2 597 3 130
Telecommunications and Informatics.......... 1,424 1 35 * 325 2 405
Tourism..................................... 64 * -- -- -- -- --
Transportation.............................. 13,243 12 2,237 15 2,027 12 2,203
Urban Development........................... 5,371 5 632 4 1,466 9 857
Water Supply and Sanitation................. 3,522 3 729 5 672 4 872
--------- --- --------- --- --------- --- ---------
Total (1)**................................. $ 109,453 100% $ 14,656 100% $ 16,853 100% $ 14,244
--------- --- --------- --- --------- --- ---------
--------- --- --------- --- --------- --- ---------
<CAPTION>
<S> <C>
SECTORS
- --------------------------------------------
Agriculture................................. 15%
Education................................... 11
Electric Power and Other Energy............. 11
Environment................................. 5
Finance..................................... 8
Industry.................................... 2
Mining and Other Extractive................. *
Multi-Sector................................ 4
Oil and Gas................................. 7
Population, Health and Nutrition............ 3
Public Sector Management.................... 3
Social...................................... 1
Telecommunications and Informatics.......... 3
Tourism..................................... --
Transportation.............................. 15
Urban Development........................... 6
Water Supply and Sanitation................. 6
---
Total (1)**................................. 100%
---
---
</TABLE>
- ------------
(1) Excludes loans to the International Finance Corporation.
* Indicates amounts less than 0.5%.
** May differ from sum of individual figures shown because of rounding.
ADJUSTMENT AND DEBT REDUCTION LENDING
Most Bank loans are for specific projects. In addition to relying on the
development impact of these projects, the Bank makes structural adjustment and
sectoral adjustment loans to member countries which are designed to support the
introduction of basic changes in economic, financial and other policies of key
importance for the economic development of member countries. Structural
adjustment loans support general reforms of policies and institutions, while
sectoral adjustment loans are made to achieve structural adjustment for a
particular sector. Changes supported through adjustment efforts normally include
a greater reliance on market forces, reduction of government price interventions
and subsidies, limitation on the role of the public sector in industrial and
agricultural production, improvement in the business environment, greater
reliance on the private sector, and a more open trading system to stimulate
competition and improve resource allocation.
Current operating guidelines in this area provide that such loans will not
exceed 25% of Bank lending by a significant amount in any fiscal year without a
reexamination of this area by the Bank's Executive Directors. In any single
fiscal year, however, developments in the Bank's lending program can have an
impact on this figure.
13
<PAGE>
A breakdown of the Bank's adjustment lending approved in each of the last
three fiscal years is as follows (in millions):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-------------------------------------------------------------
AS A AS A
% OF TOTAL % OF TOTAL
INSTRUMENT 1996 LOANS 1995 LOANS 1994
- ------------------------------------------------------ --------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Rehabilitation loans(1)............................... $ -- -- $ 1,260 7 $ 360
Sectoral adjustment loans............................. 2,450 17 1,230 7 160
Structural adjustment loans........................... 350 2 1,390 8 350
Total............................................. $ 2,800 19 $ 3,880 22 $ 870
--------- --- --------- --- ---------
--------- --- --------- --- ---------
<CAPTION>
AS A
% OF TOTAL
INSTRUMENT LOANS
- ------------------------------------------------------ ---------------
<S> <C>
Rehabilitation loans(1)............................... 3
Sectoral adjustment loans............................. 1
Structural adjustment loans........................... 2
Total............................................. 6
-
-
</TABLE>
- ------------
(1) Representing loans that have provided support for economic adjustment of
transition economies.
In May 1989, the Executive Directors of the Bank approved guidelines
governing the use of Bank resources to support reduction of commercial debt and
debt service by the Bank's developing member countries. Under these guidelines,
the Bank provides support for debt and debt service reduction to developing
member countries which have a large external debt burden and which (a) have
adopted a medium-term adjustment program satisfactory to the Bank, (b)
demonstrate a clear need for debt or debt service reduction to achieve their
medium-term objectives and (c) have developed a financing plan showing
significant benefits from debt reduction, with resulting material enhancement of
their development prospects.
In support of such debt reduction operations, Bank funds are made available
over an approximately three-year period on customary Bank terms, with the
borrower using the proceeds for approved debt reduction and credit enhancement
programs. For each eligible country, the Bank supports principal reduction by
setting aside approximately 25% of the country's existing adjustment lending
program over the relevant three-year period, or 10% of its overall lending
program for such period where the Bank is concentrating on investment lending
and there is little adjustment lending to such country. These set-asides for
principal reduction are a part of the Bank's existing lending program. The
guidelines also contemplate Bank support for interest relief by providing
additional resources of up to 15% of the country's overall three-year lending
program. This 15% limit can be exceeded, in special circumstances, if the excess
amounts are deducted from the country's lending program so there is no further
increase in the Bank's net commitment. Guarantees are not used for principal or
interest relief, absent exceptional circumstances providing strong justification
for such use.
The guidelines indicate that additional Bank exposure in connection with
debt and debt service reduction may not exceed $6 billion. As of June 30, 1996,
the Bank had approved loans for debt and debt service reduction totaling $2.5
billion. The Bank's lending for this purpose in the fiscal year ended June 30,
1996 was $30 million ($375 million--June 30, 1995).
LOAN PRODUCTS AND CHARGES; GUARANTEES
The Bank provides loans and guarantees. The Bank offers three types of
loans: currency pool loans, fixed-rate single currency loans and floating-rate
single currency loans. Single currency loans were offered in 1993 as a pilot
program and, beginning in May 1995, as a standard product. All loans carry a
multi-year grace period and thereafter amortize over a period that in most cases
ranges from 12 to 20 years.
CURRENCY POOL LOANS. The currency composition of currency pool loans is
determined on the basis of a pool, which provides a currency composition that is
the same for all loans in the pool. Pursuant to a policy established by the
Bank's Executive Directors in 1989 and confirmed in June 1996, at least 90% of
this pool is in fixed currency ratios of one U.S. dollar to 125 Japanese yen to
two Deutsche mark equivalent. These targeted currency ratios are next expected
to be reviewed by the Executive Directors in 2001.
The lending rate on these loans is variable, adjusted every six months to
reflect the semester-average interest cost of outstanding borrowings allocated
to fund these loans, weighted by the composition of the currency pool. The Bank
adds its standard spread of 1/2 of 1% to that average interest cost.
14
<PAGE>
As of June 30, 1996, $92,527 million of disbursed and outstanding loans and
$44,307 million of undisbursed loans carried these terms. For interest payment
periods from July 1 through December 31, 1996, the applicable lending rate is
6.94%.
SINGLE CURRENCY LOANS. The Bank currently offers single currency loans in
U.S. dollars, Japanese yen, Deutsche mark, French francs, pounds sterling, Swiss
francs and Netherlands guilders and will consider borrower requests for such
loans in other currencies. Access to single currency loans is available to all
Bank borrowers in a member country, provided that: (a) such member country has
converted all its currency pool loans that were subject to a variable interest
rate formula in effect from 1982 to 1989 to the variable interest rate formula
established in 1989 or to single currency pool terms (see below) and (b) an
individual borrower, if not the member country, has converted such currency pool
loans to such 1989 variable interest rate formula or to single currency pool
terms. As of June 30, 1996, there was $1,718 million of such loans outstanding
that had not been authorized for conversion.
Fixed-rate single currency loans carry a lending rate that is set on
semi-annual rate fixing dates and that applies to all amounts disbursed during
the preceding six months. The lending rate is comprised of a base rate, which
reflects market interest rates for the applicable currency on the rate-fixing
date for the equivalent loan maturity, plus a spread. The spread consists of (a)
the Bank's funding cost margin relative to the base rate for these loans, (b) a
risk premium to compensate the Bank for market risks it incurs in funding these
loans and (c) the Bank's standard spread of 1/2 of 1%. As of June 30, 1996,
$1,307 million in fixed rate single currency loans in U.S. dollars and French
francs was disbursed and outstanding, $2,335 million was undisbursed.
Floating-rate single currency loans carry a lending rate that is reset
semi-annually. The lending rate consists of a base rate, which is the prevailing
six month interbank offered rate for the applicable currency on the loan's rate
reset date, plus a spread. The spread consists of (a) the Bank's average cost
margin for funding allocated to these loans relative to the base rate, plus (b)
the Bank's standard spread of 1/2 of 1%. As of June 30, 1996, $957 million in
floating-rate single currency loans in U.S. dollars was disbursed and
outstanding; $7,387 million was undisbursed.
In addition to its other loan products, the Bank since September 1996 has
offered its borrowers the option to convert undisbursed currency pool loan
amounts to single currency loan terms. Further, borrowers have the option to
convert disbursed and undisbursed currency pool loan amounts to new single
currency pool terms. Borrowers selecting single currency pool terms have their
choice of four different pools (U.S. dollars, Japanese yen, Deutsche mark or
Swiss-francs). Conversion to single currency pool terms will be implemented on
one of three conversion dates--July 1, 1997, January 1, 1998 or July 1,
1998--depending upon when the conversion request is approved by the Bank. Each
single currency pool will be a multi-currency pool at inception, but will be
adjusted to reach a level of at least 90 percent in the designated currency by
July 1, 1999 and will be maintained at or above that level thereafter.
GUARANTEES
The Bank issues partial guarantees as a catalyst to support debt financing
from private investors. Such guarantees may be for a part of the debt financing
(partial credit guarantees) or may cover specific risks of non-performance of
sovereign contractual obligations in respect of a private sector project
financed by such debt (partial risk guarantees). Any payments made by the Bank
under a called guarantee would result in a repayment obligation to the Bank from
the relevant member country. As of June 30, 1996, the Bank's exposure on its
guarantees (i.e., the present value in terms of their first call date) was
$1,057 million; the face value of such guarantees was $1,537 million, of which
$122 million was subject to call.
15
<PAGE>
CHARGES ON LOANS AND GUARANTEES
The Bank does not differentiate among borrowers in the spread of 1/2 of 1%
it charges on its outstanding loans. In addition, all loans carry a commitment
charge of 3/4 of 1% per annum on undisbursed amounts.
On August 1, 1996, the Executive Directors approved a one-year waiver of 25
basis points of interest owed by all eligible borrowers for all payment periods
commencing in the fiscal year ending June 30, 1997. The same waiver was in
effect for the fiscal year ended June 30, 1996. On the same date, the Executive
Directors also approved a one-year waiver of 50 basis points of the commitment
charge owed on undisbursed portions of loans made to or guaranteed by members. A
borrower is eligible for an interest waiver if it has serviced all Bank loans
within 30 days of due dates that occurred during the six months preceding the
waiver date. The Bank currently collects a fee of 25 basis points on the
exposure on guarantees.
RETURN ON AVERAGE EARNING ASSETS AND COST OF FUNDS
For the fiscal years 1994 through 1996, the average interest rate on the
Bank's loans, the return on average earning assets and the average cost of the
Bank's borrowings and other funds were as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Average interest rate on:
All disbursed and outstanding loans during the fiscal year (1)..................... 6.81% 7.02% 7.34%
Return on:
Average loans disbursed and outstanding (2)........................................ 6.92 7.12 7.45
Average earning assets (3)......................................................... 6.62 6.94 6.82
Average cost (after swaps) of:
New medium- and long-term borrowings drawn down during the fiscal year............. 5.28 6.31 4.99
Fixed rate borrowings............................................................ 5.73 6.32 5.03
Variable rate borrowings......................................................... 4.69 5.92 3.12
Total borrowings outstanding during the fiscal year (4)............................ 6.44 6.62 6.74
Total borrowings and other funds available during the fiscal year (5).............. 5.15 5.35 5.49
</TABLE>
- ---------
(1) Computed on the basis of month-end amounts. Does not include commitment
charges accruing on undisbursed loans. Undisbursed loans include loans
approved but not yet effective. Interest accrues only on disbursed loan
amounts.
(2) Interest on disbursed and outstanding loans and commitment charges on
undisbursed loans as a percentage of disbursed and outstanding loans
(computed on the basis of month-end amounts).
(3) Interest, net realized gains or losses and other income (net) on liquid
investments and securities loans, interest on disbursed and outstanding
loans, and commitment charges on undisbursed loans as a percentage of
average liquid investments (see "Liquid Assets and Liquidity Policy") and of
average disbursed and outstanding loans (computed on the basis of month-end
amounts).
(4) Interest expense (net of income from currency swaps), including net
amortization of discounts, premiums and issuance and other costs, as a
percentage of average borrowings outstanding (computed on the basis of
month-end amounts).
(5) Interest expense (net of income from currency swaps), including net
amortization of discounts, premiums and issuance and other expenses, as a
percentage of average total funds available to the Bank (computed on the
basis of month-end amounts). Total funds as of June 30, 1996 were: borrowed
funds, including net payable for currency swaps ($98.1 billion), capital
available for lending ($8.0 billion), retained earnings ($16.1 billion) and
cumulative translation adjustment ($1.1 billion).
16
<PAGE>
MATURITY STRUCTURE OF LOANS
The average life of loans outstanding was 5.4 years as of June 30, 1996 and
5.3 years as of June 30, 1995 and 1994. As of June 30, 1996, the maturity
structure of the Bank's outstanding loans was as follows (in millions):
<TABLE>
<S> <C>
Not more than 5 years............................................. $ 58,514
More than 5 but not more than 10 years............................ 37,095
More than 10 years................................................ 14,637
---------
Total (1)..................................................... $ 110,246
---------
---------
</TABLE>
- ---------
(1) For a more detailed description of the maturity structure of loans, see
Financial Statements--Summary Statement of Loans, "Maturity Structure of
Loans Outstanding".
OVERDUE AND NON-PERFORMING LOANS
It is the Bank's policy that if a payment of principal, interest or other
charges with respect to a Bank loan or IDA credit becomes 30 days overdue, no
new loans to the borrower, or to any other borrower in that member country if
the member country is the borrower, will be presented to the Bank's Executive
Directors for approval, nor will any previously approved loan be signed, until
payment for all amounts 30 days overdue or longer has been received. In
addition, if such payments become 60 days overdue, disbursements on all loans to
or guaranteed by that member country are suspended until all overdue amounts
have been paid. Where the member country is not the borrower, the time period
for suspension of approval and signing of new loans to or guaranteed by the
member country is 45 days and the time period for suspension of disbursements is
60 days. As of the date hereof, no Bank loan, other than those in nonaccrual
status, was subject to suspension of disbursements.
It is the policy of the Bank to place in nonaccrual status all loans made to
or guaranteed by a member of the Bank, if principal, interest or other charges
with respect to any such loan are overdue by more than six months, unless the
Bank's management determines that the overdue amount will be collected in the
immediate future. Interest and other charges on nonaccruing loans are included
in income only to the extent that payments have actually been received by the
Bank.
In connection with the Bosnia and Herzegovina arrears clearance plan
referred to on page 11, the Bank has decided that loans to that country will
remain in nonaccrual status until a suitable period of payment performance under
its new consolidated loan has elapsed. Consequently, as a matter of financial
policy, if a Bank member with nonaccruing loans refinances/reschedules those
loans so that no amounts remain overdue or if collectibility risk is considered
to be particularly high at the time of arrears clearance, its loans will not
automatically emerge from nonaccrual status, even though its eligibility for new
loans would have been restored. The previously overdue interest and other
charges would not be recognized in income in the period the
refinancing/rescheduling occurs, but rather would be deferred until the
country's loans emerged from nonaccrual status, at which time the Bank would
determine how the income would be recognized. (See Notes to the Financial
Statements--Loans).
The Bank determines the loan loss provision based on an assessment of
collectibility risk in the total loan portfolio, including loans in nonaccrual
status. As of June 30, 1996, the accumulated loan loss provision was $3,340
million (approximately 3% of the overall portfolio). For the fiscal year ending
June 30, 1997, the accumulated loan loss provision will be maintained at
approximately three percent of total loans outstanding and the present value of
callable guarantees. The adequacy of the provisioning rate and the accumulated
provision for loan losses will be reviewed before the end of the fiscal year and
as circumstances warrant.
As of June 30, 1996, loans made to or guaranteed by six member countries of
the Bank (Bosnia and Herzegovina, Iraq, Liberia, Sudan, Syrian Arab Republic and
Zaire) and one other country--the Federal Republic of Yugoslavia (Serbia and
Montenegro)--were in nonaccrual status. The aggregate principal balance
outstanding in respect of these loans was $2,520 million, of which $1,227
million was overdue. As of such date, overdue interest and other charges in
respect of these loans totalled $808 million, of which $188 million had been
excluded from net income for the fiscal year ended June 30, 1996.
17
<PAGE>
In February 1993, the Bank's Executive Directors decided that the Socialist
Federal Republic of Yugoslavia (SFRY) had ceased to be a member of the Bank and
that the Republic of Bosnia and Herzegovina (now called Bosnia and Herzegovina),
the Republic of Croatia, the former Yugoslav Republic of Macedonia, the Republic
of Slovenia and the Federal Republic of Yugoslavia (Serbia and Montenegro) (FRY)
were authorized to succeed to the SFRY's membership when certain requirements
were met, including entering into a final agreement with the Bank on the Bank's
loans made to or guaranteed by the SFRY which the particular successor Republic
assumed.
Four of the five successor Republics--Bosnia and Herzegovina, the Republic
of Croatia, the Republic of Slovenia and the former Yugoslav Republic of
Macedonia--have since become members of the Bank. With respect to the FRY, in
February 1993 the Bank reached an agreement with that Republic for the
apportionment and service of debt due to the Bank on loans made to or guaranteed
by the SFRY and assumed by the FRY, which confirmed a February 1992 interim
agreement between the SFRY (then consisting of the Republics of Bosnia and
Herzegovina, Macedonia, Montenegro and Serbia) and the Bank pertaining, among
other things, to such loans. As of June 30, 1996, no debt service payments had
been received by the Bank from the FRY. (See Notes to Financial
Statements--Notes A and C).
The Bank has never written off any of its outstanding loans and retains the
expectation that each of its loans will be repaid and, consequently, has no
expectation of writing off outstanding loans in the future. The Bank maintains a
dialogue with every borrower whose loans experience significant payment delays,
including each of the members whose loans are in nonaccrual status. For details
concerning Bank loans in nonaccrual status and provisions for losses on loans as
of June 30, 1996, see Notes to Financial Statements--Note C.
In April 1991, the Bank's Executive Directors adopted a policy to assist
members with protracted arrears to the Bank in mobilizing sufficient resources
to clear their arrears and to support a sustainable growth-oriented adjustment
program over the medium term. Under this policy, the Bank will develop a lending
strategy and will process loans, but not sign or disburse such loans, during a
pre-clearance performance period with respect to members that (a) agree to and
implement a medium-term, growth-oriented structural adjustment program agreed
with the Bank, (b) undertake a stabilization program endorsed by the IMF, or
supported by the IMF, where the member has significant arrears to the IMF, (c)
agree to a financing plan to clear arrears fully to the Bank in the context of
the structural adjustment program and (d) make debt service payments on a
current basis on Bank loans during the performance period. The signing,
effectiveness and disbursement of such loans will not take place until the
member's arrears to the Bank have been fully cleared. An exception was made in
the case of Peru, permitting Bank loans to be signed prior to full arrears
clearance in March 1993 so that the loans could be submitted to the Peruvian
Congress for approval in accordance with Peruvian law.
OTHER ACTIVITIES
In addition to its financial operations, the Bank has furnished technical
assistance to its member countries, both in connection with and independently of
loan operations. Such assistance has taken a variety of forms, including the
assignment of qualified technicians to survey development possibilities of
member countries, to analyze their fiscal and economic problems, to assist
member countries in drawing up development programs, to appraise projects
suitable for investment and to assist member countries in improving their asset
and liability management techniques. To assist the developing countries, the
Bank has also established an Economic Development Institute, which provides
courses and other training activities regarding economic policy, development and
administration for selected groups of government officials, and has made
contributions for research and other developmental activities. (See page 9,
"Statement of Income", note (3).) Furthermore, the Bank has on a number of
occasions, at the request of members concerned, lent its good offices in
connection with the settlement of international economic and financial problems.
LIQUID ASSETS AND LIQUIDITY POLICY
Under its current liquidity policy, the Bank targets fiscal year-end liquid
holdings of at least 45% of its projected net cash requirements for the
succeeding three years. The purpose of this liquidity policy is to enable the
Bank to forego new borrowings from time to time when costs and available
maturities are considered inappropriate. As of June 30, 1996, the Bank's cash
and liquid investments amounted to
18
<PAGE>
$15.9 billion (including investments of $1.2 billion classified as
held-to-maturity), or 42.5% of the next three years' estimated net cash
requirements; this amount was equivalent to approximately 16.2% of the Bank's
outstanding borrowings after swaps. Pursuant to a resolution of the Bank's
Executive Directors, the Bank's cash and liquid investments are invested
principally in obligations of governments and other official entities, time
deposits and other unconditional obligations of banks and financial
institutions, and futures and options contracts pertaining to such obligations.
The financial returns on average investments in the Bank's trading portfolio for
the fiscal years 1994 through 1996 were 3.53%, 5.56% and 4.11% respectively, and
in its held-to-maturity portfolio for the fiscal years ended June 30, 1995 and
1996 were 8.11% and 8.35%, respectively. The returns for the Bank's trading
portfolio include interest, net realized and unrealized gains or losses, fees
for securities loaned and net sale prices under resale agreements as a
percentage of average liquid investments and exclude investment securities
agreed to be purchased and collateral held in connection with securities loaned.
The returns for its held-to-maturity portfolio reflect interest earned.
DERIVATIVES
USE OF DERIVATIVES
The Bank uses derivative instruments in connection with its borrowing
operations and liability management activities and in connection with its
liquidity management. In general, the Bank uses derivative instruments such as
currency and interest rate swaps, swap spread-locks (in which the Bank agrees
with a counterparty on a swap spread to be added to the specific reference rate
which will apply to a future interest rate swap), foreign exchange forwards,
exchange-traded futures, options and deferred and anticipatory rate setting
contracts. Notes D and E to the Financial Statements provide details of the
outstanding principal and notional principal amounts of derivative financial
instruments as of June 30, 1996.
To a limited extent, the Bank also uses structured swaps to produce
conventional fixed or floating rate funding from structured borrowings. Such
transactions amounted to approximately 6% of the total outstanding swap
portfolio as of June 30, 1996. Structured borrowings and structured swaps are
transactions whose interest and/or principal payments (in the case of
borrowings) and whose payables and receivables (in the case of swaps) are
determined as a function of specified indices, such as exchange rates or
reference interest rates.
DERIVATIVES USAGE IN CONNECTION WITH BORROWING OPERATIONS AND LIABILITY
MANAGEMENT
The Bank uses derivative instruments in connection with its borrowing
operations and liability management for several purposes.
One purpose is to take advantage of arbitrage opportunities across capital
markets to reduce funding costs below the levels that would be achievable
through direct fixed rate or floating rate borrowings in the currencies in which
the Bank's loans are made. The Bank borrows when it believes opportunities are
attractive in market sectors and segments and swaps those borrowings into
obligations suitable for funding its loan portfolio. Derivatives that are
included in the terms of its structured borrowings are hedged to produce
conventional fixed or floating rate funding using structured swaps, swaptions
and interest rate caps. Another purpose is to delink the time at which the
Bank's borrowing costs are fixed from the timing of the actual market
borrowings, in order to preserve flexibility for borrowing transactions to be
launched at opportune times. In addition, the Bank's use of derivatives in
connection with liability management is designed to establish an appropriate
match between the liability and the loan and liquidity portfolios in terms of
their currency and interest rate characteristics. However, some residual market
risk may arise, as a result of cash flow or timing mismatches. Internal
operating guidelines are designed to limit the scope of such mismatches.
19
<PAGE>
The main risk to the Bank from these over-the-counter derivatives is the
credit risk. This credit risk is controlled through application of eligibility
criteria, volume limits for transactions with individual counterparties, and
through the expanding use of mark-to-market collateral arrangements. The
following table gives details of the Bank's estimated credit exposure--by
counterparty rating category--on its swaps.
ESTIMATED SWAP CREDIT EXPOSURE BY COUNTERPARTY RATING AS OF JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
NOTIONAL
PRINCIPAL CURRENT EXPOSURE (2)
PRINCIPAL INTEREST ------------------------------- ESTIMATED
CURRENCY SWAPS- RATE GROSS POSITIVE GROSS NEGATIVE POTENTIAL
RATING CATEGORY (1) RECEIVABLES SWAPS (3) (RECEIVABLES) (PAYABLES) EXPOSURE (4)
- ----------------------------------- ----------------- ------------ --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
AAA................................ $ 4,601 $ 13,417 $ 142 $ (742) $ 2,039
AA................................. 8,734 11,255 418 (1,146) 2,613
A.................................. 4,005 1,704 59 (573) 744
BBB................................ 670 50 205 (65) 352
------- ------------ ----- ------- ------
Total.............................. $ 18,010 $ 26,426 $ 824 $ (2,526) $ 5,748
------- ------------ ----- ------- ------
------- ------------ ----- ------- ------
</TABLE>
- ------------
(1) As determined by the Bank, based on ratings by Moody's Investors Services,
Standard and Poor's, Thomson BankWatch Inc. and IBCA Limited.
(2) Based on the market value of each swap transaction in accordance with
internal Bank valuation methodology; does not take into account the effects
of netting provisions in master swap agreements or the effects of
mark-to-market collateral and offset arrangements.
(3) Includes swaptions.
(4) At 95% confidence level, based on an internal Bank model that takes into
account factors such as historical exchange and interest rate volatilities;
does not take into account the effects of netting provisions in master swap
agreements or the effects of mark-to-market collateral and offset
arrangements.
DERIVATIVES USAGE IN CONNECTION WITH LIQUIDITY MANAGEMENT
The Bank uses derivative products in its liquidity management to take
advantage of profitable trading opportunities, and as a proxy for cash
securities. The derivative instruments used for liquidity management include
short-term, over-the-counter foreign exchange forwards, and exchange-traded
futures and options on fixed-income instruments.
Short-term foreign exchange forwards are used with offsetting spot foreign
exchange transactions to take advantage of currency-hedged investment
opportunities across different markets. They do not pose currency risk to the
Bank, while the credit risk is controlled and monitored by the Bank.
Exchange-traded futures and options are used mainly to take advantage of
opportunities for trading spreads or differentials between different
instruments. Futures are also used as a proxy for cash instruments. The Bank
only trades contracts listed on certain internally approved futures and options
exchanges. Furthermore, the Bank applies eligibility criteria and exposure
limits with regard to brokers and clearing agents for these contracts.
Specific limitations established by the Bank to control market risk
emanating from the use of derivative instruments in its investment portfolio
include the following:
(a) LEVERAGE RISK: The overall portfolio duration limits designed to
control market risk are calculated with reference to the size of the base
or unleveraged portfolio, effectively prohibiting the use of futures
transactions to establish risk positions in excess of the level achievable
solely through cash transactions; and
(b) SHORT OPTIONS: Short options may be held only when matched with
corresponding long options in the underlying contract, so that the
maximum potential loss on such matched positions is limited and known at the
time the short position is contracted.
20
<PAGE>
AFFILIATED ORGANIZATIONS
The activities of the Bank are complemented by those of three affiliated
international organizations, the International Finance Corporation (IFC), the
International Development Association (IDA) and the Multilateral Investment
Guarantee Agency (MIGA), which work closely with the Bank in achieving common
objectives. Membership in these organizations is open only to members of the
Bank. Each of these organizations is legally and financially independent from
the Bank, with separate assets and liabilities, and the Bank is not liable for
their respective obligations. Executive Directors of the Bank serve EX OFFICIO
on the Board of Directors of IFC and as Executive Directors of IDA if they
represent at least one country which is a member of these organizations. As of
of June 30, 1996, 21 of the Bank's Executive Directors or Alternate Executive
Directors had been elected to serve on MIGA's Board of Directors, which at that
date comprised 23 members. The President of the Bank is also the President of
IFC, IDA and MIGA. IDA and the Bank have the same staff. While IFC and MIGA
share some staff members with the Bank, each employs its own management and
staff. For fees which IFC, IDA and MIGA pay the Bank for services and
management, see page 9, "Statements of Income", note (2).
IFC
IFC's purpose is to encourage the growth of productive private enterprises
in its member countries through loans and equity investments in such
enterprises, without a member's guarantee. One hundred seventy countries are now
members of IFC. The disbursed and outstanding loans and equity investments held
by IFC as of June 30, 1996 totalled $7,817 million. In December 1992, IFC's
Board of Governors approved a resolution which increased the Corporation's
capital stock from $2,300 million to $2,450 million, of which $2,076 million had
been subscribed and paid in as of June 30, 1996.
Under its Articles, the Bank is permitted to make loans to IFC without
guarantee by a member, subject to the limitation that the Bank may not lend IFC
any amount which would increase IFC's total outstanding debt incurred from any
source (including the guarantee of any debt) to an amount exceeding four times
the total of IFC's unimpaired subscribed capital and surplus, such total as of
June 30, 1996, being $4,420 million. As of June 30, 1996, IFC's total
outstanding borrowings (including the net effect of receivables and payables
from currency swaps) were $9,105 million, of which $791 million was due to the
Bank, and undrawn lending commitments from the Bank to IFC were $12 million.
IDA
IDA's purpose is to promote economic development in the less developed areas
of the world included in IDA's membership by providing finance on terms which
are more flexible and bear less heavily on the balance of payments than those of
conventional loans. IDA may not borrow from the Bank. Rather, it is financed by
capital subscriptions and contributions from its members.
One hundred and fifty-nine countries are now members of IDA. As of June 30,
1996 their subscriptions and contributions totaled the equivalent of $91,413
million, of which $572 million was not yet due. The disbursed and outstanding
development credits held by IDA as of June 30, 1996 totalled $72,821 million.
Under a statement of policy of the Bank's Board of Governors, the Bank may
make grants to IDA only out of net income which (a) accrued during the fiscal
year in respect of which the transfer is made and (b) is not needed for
allocation to reserves or otherwise required to be retained in the Bank's
business. Grants may also be made out of Net Income previously transferred to
Surplus, upon the approval of the Board of Governors. Such grants to date have
aggregated the equivalent of $4,823 million. As of June 30, 1996, the entire
amount of these grants had been paid to IDA.
In September 1989, the Bank's Board of Governors approved the transfer by
way of grant of $100 million of the Bank's net income for the fiscal year ended
June 30, 1989 to a special facility to be administered by IDA to provide grants
to assist in the reduction of commercial debt of eligible members of IDA. In
September 1993, the Board of Governors approved a further transfer of $100
million by way of grant to the Debt Reduction Facility for IDA-Only Countries
(DRF). On June 22, 1995, the Executive Directors extended the availability of
DRF resources through July 31, 1998. Any funds not disbursed within that period
21
<PAGE>
will revert to IDA and be available for use in its general operations. On
October 12, 1995, the Board of Governors approved a transfer to the DRF, by way
of grant, of $100 million out of Net Income for the fiscal year ended June 30,
1995. At June 30, 1996, $119 million had not yet been paid to the special
facility.
On June 26, 1996, the Board of Governors of IDA adopted resolutions
authorizing the Eleventh Replenishment of IDA's resources. The Eleventh
Replenishment provides IDA with resources to fund credits and grants committed
during the period from July 1, 1996 to June 30, 1999. The total amount of donor
contributions during this period, including supplementary contributions provided
by certain members, is equivalent to SDR 6,894 million. The Eleventh
Replenishment will become effective when IDA has received commitments for
subscriptions and contributions of SDR 3,746 million.
As part of the Eleventh Replenishment, an Interim Trust Fund consisting of
donor contributions equivalent to SDR 2,211 million will be established and
admininstered by IDA. The Interim Trust Fund will help fund operations during
the period July 1, 1996 to June 30, 1997, and contributions will have a separate
legal, procurement and accounting status. The Interim Trust Fund will become
effective when contributions totaling SDR 400 million from at least seven donors
have been received. Credits financed by the Interim Trust Fund will be made on
the same terms and conditions as those of IDA credits except for procurement and
decision-making. The Interim Trust Fund will terminate by decision of IDA's
Executive Directors, when the credits it financed have been substantially
disbursed. Upon termination, its assets and liabilities will be transferred to
IDA.
MIGA
MIGA was established in 1988 to encourage the flow of investments for
productive purposes among member countries and, in particular, to developing
member countries. To serve this objective, it provides guarantees against
noncommercial risks for foreign investment in its developing member countries;
it also carries out consultative, advisory, technical assistance and investment
promotion activities. One hundred and thirty-seven countries are now members of
MIGA, and an additional eighteen countries have signed the MIGA Convention. As
of June 30, 1996, the authorized capital of MIGA was $1,082 million, of which
$1,059 million had been subscribed. MIGA's maximum amount of contingent
liability for guarantees issued and outstanding totalled $2,277 million as of
June 30, 1996 and the estimate of its actual exposure to insurance claims
exclusive of standby coverage was $1,547 million. MIGA may not borrow from the
Bank.
ADMINISTRATION OF THE BANK
The Bank's administration is composed of the Board of Governors, the
Executive Directors and the President, other officers and staff.
All the powers of the Bank are vested in the Board of Governors which
consists of a Governor and an Alternate Governor appointed by each member of the
Bank, who exercise the voting power to which that member is entitled. Each
member is entitled to 250 votes plus one vote for each share held. The Board of
Governors holds regular annual meetings.
There are, at present, twenty-four Executive Directors. Five of these are
appointed, one by each of the five members having the largest number of shares
of capital stock at the time of such appointment (the United States, Japan,
Germany, France and the United Kingdom), and nineteen are elected by the
Governors representing the other members. The Board of Governors has delegated
to the Executive Directors authority to exercise all the powers of the Bank
except those reserved to the Governors under the Articles. The Executive
Directors function as a board, and each Executive Director is entitled to cast
the number of votes of the member or members by which he is appointed or
elected.
22
<PAGE>
The following is an alphabetical list of the Executive Directors of the Bank
and the member countries by which they were appointed or elected:
<TABLE>
<S> <C>
Khalid H. Alyahya................. Saudi Arabia
Khalid M. Al-Saad................. Bahrain, Arab Republic of Egypt, Jordan, Kuwait,
Lebanon, Libya, Maldives, Oman, Qatar, Syrian Arab
Republic, United Arab Emirates, Republic of Yemen
Marc-Antoine Autheman............. France
Ali Bourhane...................... Benin, Burkina Faso, Cameroon, Cape Verde, Central
African Republic, Chad, Comoros, Congo, Cote d'Ivoire,
Djibouti, Equatorial Guinea, Gabon, Guinea-Bissau,
Madagascar, Mali, Mauritania, Mauritius, Niger, Rwanda,
Sao Tome and Principe, Senegal, Somalia (informally),
Togo, Zaire
Andrei Bugrov..................... Russian Federation
Marcos C. de Paiva................ Brazil, Colombia, Dominican Republic, Ecuador, Haiti,
Philippines, Suriname, Trinidad and Tobago
Huw Evans......................... United Kingdom
Jean-Daniel Gerber................ Azerbaijan, Kyrgyz Republic, Poland, Switzerland,
Tajikistan, Turkmenistan, Uzbekistan
Leonard Good...................... Antigua and Barbuda, The Bahamas, Barbados, Belize,
Canada, Dominica, Grenada, Guyana, Ireland, Jamaica, St.
Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines
Eveline Herfkens.................. Armenia, Bosnia and Herzegovina (informally), Bulgaria,
Croatia, Cyprus, Georgia, Israel, former Yugoslav
Republic of Macedonia, Moldova, Netherlands, Romania,
Ukraine
Ruth Jacoby....................... Denmark, Estonia, Finland, Iceland, Latvia, Lithuania,
Norway, Sweden
Yong Li........................... China
Abdul Karim Lodhi................. Afghanistan, Algeria, Ghana, Islamic Republic of Iran,
Morocco, Pakistan, Tunisia
Leonard Mseka..................... Angola, Botswana, Burundi, Eritrea, Ethiopia, The
Gambia, Guinea, Kenya, Lesotho, Liberia, Malawi,
Mozambique, Namibia, Nigeria, Seychelles, Sierra Leone,
South Africa (informally), Sudan, Swaziland, Tanzania,
Uganda, Zambia, Zimbabwe
Peter W. E. Nicholl............... Australia, Cambodia, Federated States of Micronesia,
Kiribati, Republic of Korea, Marshall Islands, Mongolia,
New Zealand, Papua New Guinea, Solomon Islands, Vanuatu,
Western Samoa
Atsuo Nishihara................... Japan
Julio Nogues...................... Argentina, Bolivia, Chile, Paraguay, Peru, Uruguay
Franco Passacantando.............. Albania, Greece, Italy, Malta, Portugal
Jan Piercy........................ United States
Walter Rill....................... Austria, Belarus, Belgium, Czech Republic, Hungary,
Kazakstan, Luxembourg, Slovak Republic, Slovenia, Turkey
Helmut Schaffer................... Germany
Surendra Singh.................... Bangladesh, Bhutan, India, Sri Lanka
Pasugswad Suwan................... Brunei Darussalam (informally), Fiji, Indonesia, Lao
People's Democratic Republic, Malaysia, Myanmar, Nepal,
Singapore, Thailand, Tonga, Vietnam
Jorge Terrazas.................... Costa Rica, El Salvador, Guatemala, Honduras, Mexico,
Nicaragua, Panama, Spain, Venezuela
</TABLE>
The President is selected by the Executive Directors. Subject to their
direction on questions of policy, he is responsible for the conduct of the
ordinary business of the Bank and for the organization, appointment and
dismissal of its officers and staff.
23
<PAGE>
The following is a list of the principal officers of the Bank:
<TABLE>
<S> <C>
President........................................................... James D. Wolfensohn
Managing Director, Finance & Resource Mobilization.................. Jessica P. Einhorn
Managing Director, Chairman, Private Sector Development Group....... Richard H. Frank
Managing Director, Operations....................................... Gautam S. Kaji
Managing Director, Operations....................................... Caio K. Koch-Weser
Managing Director, Corporate Planning & Resource Management......... Sven Sandstrom
Senior Vice President and General Counsel........................... Ibrahim F. I. Shihata
Vice President, Human Resources..................................... Dorothy H. Berry
Vice President, External Affairs.................................... Mark Malloch Brown
Vice President, Development Economics and Chief Economist........... Michael P. Bruno
Vice President, Latin America and the Caribbean Regional Office..... Shahid Javed Burki
Vice President, East Asia and Pacific Regional Office............... Russell J. Cheetham
(1)
Vice President, Human Capital Development and Operations Policy..... Armeane M. Choksi (1)
Vice President, Middle East and North Africa Regional Office........ Kemal Dervis
Vice President, Resource Mobilization and Cofinancing and Financial
Advisory Services.................................................. Hiroo Fukui
Vice President, Europe and Central Asia Regional Office............. Johannes F. Linn
Vice Presidents, Africa Regional Office............................. Callisto E. Madavo and
Jean-Louis Sarbib
Vice President and Controller....................................... Jules W. Muis
Vice President and Treasurer........................................ Gary L. Perlin
Vice President, Finance and Private Sector Development.............. Jean-Francois Rischard
Vice President, Environmentally Sustainable Development............. Ismail Serageldin
Vice President, Financial Policy and Institutional Strategy......... Brian Wilson
Vice President, South Asia Regional Office.......................... D. Joseph Wood
Vice President and Secretary........................................ Shengman Zhang
Director-General, Operations Evaluation............................. Robert Picciotto
</TABLE>
- ---------
(1) Mr. Cheetham will retire effective October 1, 1996, and Mr. Choksi effective
November 18, 1996.
THE ARTICLES OF AGREEMENT
The Articles constitute the Bank's governing charter. They establish the
status, privileges and immunities of the Bank, prescribe the Bank's purposes,
capital structure and organization, authorize the operations in which it may
engage and prescribe limitations on the carrying on of those operations. The
Articles also contain, among other things, provisions with respect to the
admission of additional members, the increase of the authorized capital stock of
the Bank, the terms and conditions under which the Bank may make or guarantee
loans, the use of currencies held by the Bank, the distribution of net income of
the Bank to its members, the withdrawal and suspension of members, and the
suspension of operations of the Bank.
The Articles provide that they may be amended (except for certain provisions
the amendment of which requires acceptance by all members) by consent of
three-fifths of the members having 85% of the total voting power. The Articles
further provide that questions of interpretation of provisions of the Articles
arising between any member and the Bank or between members of the Bank shall be
decided by the Executive Directors. Their decisions may be referred by any
member to the Board of Governors, whose decision is final. Pending the result of
such reference, the Bank may act on the basis of the decision of the Executive
Directors.
The Articles and the decisions made by the Executive Directors on questions
of interpretation may be obtained from the Bank.
24
<PAGE>
LEGAL STATUS, PRIVILEGES AND IMMUNITIES
The Articles contain provisions which accord to the Bank, in the territories
of each of its members, legal status and certain privileges and immunities. The
following is a summary of the more important of these provisions.
The Bank has full juridical personality with capacity to make contracts, to
acquire and dispose of property and to sue and be sued. Actions may be brought
against the Bank in a court of competent jurisdiction in territories of any
member in which the Bank has an office, has appointed an agent for accepting
service or notice of process or has issued or guaranteed securities, but no
actions against the Bank may be brought by its members or persons acting for or
deriving claims from its members.
The Governors and Executive Directors, and their Alternates, and the
officers and employees of the Bank are immune from legal process for acts
performed by them in their official capacity, except when the Bank waives such
immunity.
The archives of the Bank are inviolable. The assets of the Bank are immune
from seizure, attachment or execution prior to delivery of final judgment
against the Bank.
The Bank, its assets, property and income, and its operations and
transactions authorized by the Articles, are immune from all taxation and from
all customs duties. The Bank is also immune from liability for the collection or
payment of any tax or duty.
The securities issued by the Bank and the interest thereon are not exempt
from taxation generally.
Under the Articles, securities issued by the Bank and the interest thereon
are not subject to any tax by a member (a) which tax discriminates against such
securities solely because they are issued by the Bank, or (b) if the sole
jurisdictional basis for the tax is the place or currency in which such
securities are issued, made payable or paid, or the location of any office or
place of business maintained by the Bank. Also, under the Articles, the Bank is
not under any obligation to withhold or pay any tax on any interest on such
securities.
FISCAL YEAR, ANNOUNCEMENTS AND ALLOCATION OF NET INCOME
FISCAL YEAR
The Bank's fiscal year runs from July 1 to June 30.
ANNOUNCEMENTS
The Bank publishes pursuant to the Articles an annual report which contains
its audited financial statements and also submits to its members quarterly
financial statements.
ALLOCATION OF NET INCOME
The Board of Governors determines annually what part of the Bank's net
income, after making provisions for reserves, shall be allocated to surplus and
what part, if any, shall be distributed.
If any part is distributed, up to 2% noncumulative shall be paid, as a first
charge against the distribution for any year, to each member on the basis of the
average amount of the loans outstanding during the year out of currency
corresponding to its subscription. If 2% is paid as a first charge, any balance
remaining to be distributed shall be paid to all members in proportion to their
shares.
Since its inception, the Bank has neither declared nor paid any dividend to
its member countries. However, the Bank has periodically transferred as a grant
a portion of its net income to IDA or to other uses that promote the purposes of
the Bank. (See "Affiliated Organization--IDA".)
25
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... 27
Balance Sheet--June 30, 1996 and June 30, 1995............................................................. 28
Statement of Income for the three fiscal years ended June 30, 1996......................................... 30
Statement of Changes in Retained Earnings for the three fiscal years ended June 30, 1996................... 31
Statement of Changes in Cumulative Translation Adjustment for the three fiscal years ended June 30, 1996... 31
Statement of Cash Flows for the three fiscal years ended June 30, 1996..................................... 32
Summary Statement of Loans--June 30, 1996.................................................................. 33
Summary Statement of Borrowings--June 30, 1996............................................................. 38
Statement of Subscriptions to Capital Stock and Voting Power--June 30, 1996................................ 41
Notes to Financial Statements.............................................................................. 45
</TABLE>
INFORMATION CONCERNING CERTAIN EVENTS THAT OCCURRED SUBSEQUENT TO JUNE 30,
1996 IS NOT REFLECTED IN THE FINANCIAL STATEMENTS BUT IS INCLUDED ELSEWHERE IN
THIS INFORMATION STATEMENT.
26
<PAGE>
[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
President and Board of Governors
International Bank for Reconstruction
and Development
In our opinion, the financial statements listed on page 26 present fairly,
in all material respects, in terms of United States dollars, the financial
position of the International Bank for Reconstruction and Development at June
30, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended June 30, 1996, in conformity with
generally accepted accounting principles in the United States and with
International Accounting Standards. These financial statements are the
responsibility of management of the International Bank for Reconstruction and
Development; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards, including International
Standards on Auditing, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
[SIG]
July 31, 1996
27
<PAGE>
BALANCE SHEET
JUNE 30, 1996 AND JUNE 30, 1995
EXPRESSED IN MILLIONS OF U.S. DOLLARS
ASSETS
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
DUE FROM BANKS
Unrestricted currencies.................................................................. $ 27 $ 40
Currencies subject to restrictions--Note A............................................... 612 549
---------- ----------
639 589
---------- ----------
INVESTMENTS--Notes B and E
Trading.................................................................................. 15,001 19,821
Held-to-maturity......................................................................... 1,169 1,203
---------- ----------
16,170 21,024
---------- ----------
SECURITIES PURCHASED UNDER RESALE AGREEMENTS--Note B....................................... 1,282 246
NONNEGOTIABLE, NONINTEREST-BEARING DEMAND OBLIGATIONS ON ACCOUNT OF SUBSCRIBED
CAPITAL--Note A........................................................................... 1,765 1,610
AMOUNTS RECEIVABLE TO MAINTAIN VALUE OF CURRENCY HOLDINGS--Note A.......................... 732 1,106
OTHER RECEIVABLES
Amounts receivable from currency swaps--Notes D and E.................................... 18,010 16,735
Amounts receivable from investment securities traded..................................... 2,365 1,762
Amounts receivable from covered forwards--Notes B and E.................................. 204 1,307
Accrued income on loans.................................................................. 2,127 2,538
Accrued interest on investments.......................................................... 92 159
---------- ----------
22,798 22,501
---------- ----------
LOANS OUTSTANDING (see Summary Statement of Loans, Note C)
Total loans.............................................................................. 164,766 179,453
Less loans approved but not yet effective................................................ 9,500 11,982
Less undisbursed balance of effective loans.............................................. 45,020 43,972
---------- ----------
Loans outstanding...................................................................... 110,246 123,499
Less accumulated provision for loan losses............................................... 3,340 3,740
---------- ----------
Loans outstanding net of accumulated provision......................................... 106,906 119,759
---------- ----------
OTHER ASSETS
Unamortized issuance costs of borrowings................................................. 412 485
Miscellaneous............................................................................ 1,300 1,259
---------- ----------
1,712 1,744
---------- ----------
TOTAL ASSETS............................................................................... $ 152,004 $ 168,579
---------- ----------
---------- ----------
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
28
<PAGE>
BALANCE SHEET (CONTINUED)
JUNE 30, 1996 AND JUNE 30, 1995
EXPRESSED IN MILLIONS OF U.S. DOLLARS
LIABILITIES
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
BORROWINGS (see Summary Statement of Borrowings, Notes D and E)
Short-term............................................................................... $ 4,328 $ 3,898
Medium- and long-term.................................................................... 92,391 104,392
---------- ----------
96,719 108,290
---------- ----------
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND PAYABLE FOR CASH COLLATERAL
RECEIVED--Note B.......................................................................... 2,439 2,567
AMOUNTS PAYABLE TO MAINTAIN VALUE OF CURRENCY HOLDINGS--Note A............................. 4 24
OTHER LIABILITIES
Amounts payable for currency swaps--Notes D and E........................................ 19,427 19,985
Amounts payable for investment securities purchased...................................... 1,508 2,231
Amounts payable for covered forwards--Notes B and E...................................... 202 1,306
Accrued charges on borrowings............................................................ 2,352 2,857
Payable for Board of Governors-approved transfers--Note F................................ 205 135
Accounts payable and miscellaneous liabilities........................................... 848 723
---------- ----------
24,542 27,237
---------- ----------
TOTAL LIABILITIES.......................................................................... 123,704 138,118
---------- ----------
EQUITY
CAPITAL STOCK (see Statement of Subscriptions to Capital Stock and Voting Power, Note A)
Authorized capital (1,558,478 shares--June 30, 1996; 1,525,248 shares June 30, 1995)
Subscribed capital (1,497,325 shares--June 30, 1996; 1,462,574 shares-- June 30,
1995)................................................................................. 180,630 176,438
Less uncalled portion of subscriptions................................................. 169,636 165,580
---------- ----------
10,994 10,858
DEFERRED AMOUNTS TO MAINTAIN VALUE OF CURRENCY HOLDINGS--Note A............................ 136 770
PAYMENTS ON ACCOUNT OF PENDING SUBSCRIPTIONS--Note A....................................... 15 23
RETAINED EARNINGS (see Statement of Changes in Retained Earnings, Note F).................. 16,099 15,502
CUMULATIVE TRANSLATION ADJUSTMENT (see Statement of Changes in Cumulative Translation
Adjustment)............................................................................... 1,056 3,308
---------- ----------
TOTAL EQUITY............................................................................... 28,300 30,461
---------- ----------
TOTAL LIABILITIES AND EQUITY............................................................... $ 152,004 $ 168,579
---------- ----------
---------- ----------
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
29
<PAGE>
STATEMENT OF INCOME
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
INCOME
Income from loans--Note C
Interest......................................................................... $ 7,804 $ 8,069 $ 7,707
Commitment charges............................................................... 118 118 115
Income from investments--Note B
Trading
Interest....................................................................... 673 881 827
Net gains/(losses)
Realized..................................................................... 31 (23) (29)
Unrealized................................................................... (83) 168 (127)
Held-to-maturity
Interest....................................................................... 100 78 --
Income from securities purchased under resale agreements........................... 66 61 86
Other income....................................................................... 11 10 11
--------- --------- ---------
Total income..................................................................... 8,720 9,362 8,590
--------- --------- ---------
EXPENSES
Borrowing expenses--Note D
Interest......................................................................... 6,455 6,832 6,539
Prepayment costs................................................................. 9 7 31
Amortization of issuance costs and other borrowing costs......................... 106 105 76
Interest on securities sold under agreements to repurchase and payable for cash
collateral received............................................................... 67 83 46
Administrative expenses--Notes G, H, I and J....................................... 733 842 731
Provision for loan losses--Note C.................................................. 42 12 --
Other expenses..................................................................... 8 8 6
--------- --------- ---------
Total expenses................................................................... 7,420 7,889 7,429
--------- --------- ---------
OPERATING INCOME..................................................................... 1,300 1,473 1,161
Less contributions to special programs--Note G....................................... 113 119 110
--------- --------- ---------
NET INCOME........................................................................... $ 1,187 $ 1,354 $ 1,051
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
30
<PAGE>
STATEMENT OF CHANGES IN RETAINED EARNINGS
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Retained earnings at beginning of the fiscal year................................ $ 15,502 $ 14,468 $ 14,032
Board of Governors-approved transfers--Note F
To International Development Association..................................... (250) (300) (465)
To Debt Reduction Facility for IDA-Only Countries............................ (100) -- (100)
To Trust Fund for Gaza and West Bank......................................... (90) -- (50)
For Emergency Assistance for Rwanda.......................................... -- (20) --
To Trust Fund for Bosnia and Herzegovina..................................... (150) -- --
Net income for the fiscal year................................................. 1,187 1,354 1,051
--------- --------- ---------
Retained earnings at end of the fiscal year...................................... $ 16,099 $ 15,502 $ 14,468
--------- --------- ---------
--------- --------- ---------
</TABLE>
STATEMENT OF CHANGES IN CUMULATIVE TRANSLATION ADJUSTMENT
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cumulative translation adjustment at beginning of the fiscal year................... $ 3,308 $ 1,394 $ 541
Translation adjustment for the fiscal year........................................ (2,252) 1,914 853
--------- --------- ---------
Cumulative translation adjustment at end of the fiscal year......................... $ 1,056 $ 3,308 $ 1,394
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
31
<PAGE>
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from lending and investing activities
Loans
Disbursements................................................................... $ (13,321) $ (12,803) $ (10,502)
Principal repayments............................................................ 11,494 11,301 10,350
Principal prepayments........................................................... 812 625 970
Investments: Held-to-maturity
Purchases....................................................................... (5,417) (8,160) --
Maturities...................................................................... 5,422 6,952 --
--------- --------- ---------
Net cash used in/provided by lending and investing activities............... (1,010) (2,085) 818
--------- --------- ---------
Cash flows from Board of Governors-approved transfers to/for
International Development Association............................................. (250) (1,427) (452)
Debt Reduction Facility for IDA-Only Countries.................................... (86) (25) (23)
Trust Fund for Gaza and West Bank, Trust Fund for Bosnia and Herzegovina and
Emergency Assistance for Rwanda................................................ (179) (45) --
--------- --------- ---------
Net cash used in Board of Governors-approved transfers...................... (515) (1,497) (475)
--------- --------- ---------
Cash flows from financing activities
Medium- and long-term borrowings
New issues...................................................................... 9,851 9,979 8,177
Retirements..................................................................... (10,330) (11,579) (9,127)
Net short-term borrowings......................................................... 340 563 (504)
Net currency swaps................................................................ (649) (413) (171)
Net capital stock transactions.................................................... 111 107 199
--------- --------- ---------
Net cash used in financing activities....................................... (677) (1,343) (1,426)
--------- --------- ---------
Cash flows from operating activities
Net income........................................................................ 1,187 1,354 1,051
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization................................................... 399 281 203
Provision for loan losses....................................................... 42 12 --
Changes in other assets and liabilities
Decrease (increase) in accrued income on loans and investments................ 176 (59) 90
Increase in miscellaneous assets.............................................. (80) (98) (98)
Decrease in accrued charges on borrowings..................................... (214) (186) (180)
(Decrease) increase in accounts payable and miscellaneous liabilities......... (18) 109 154
--------- --------- ---------
Net cash provided by operating activities................................... 1,492 1,413 1,220
--------- --------- ---------
Effect of exchange rate changes on unrestricted cash and liquid investments......... (1,632) 1,489 580
--------- --------- ---------
Net decrease in unrestricted cash and liquid investments............................ (2,342) (2,023) 717
Unrestricted cash and liquid investments at beginning of the fiscal year............ 17,072 19,095 18,378
--------- --------- ---------
Unrestricted cash and liquid investments at end of the fiscal year.................. $ 14,730 $ 17,072 $ 19,095
--------- --------- ---------
--------- --------- ---------
Composed of
Investments held in trading portfolio............................................. $ 15,001 $ 19,821 $ 21,202
Unrestricted currencies........................................................... 27 40 216
Net receivable (payable) for investment securities traded/purchased............... 857 (469) (992)
Net receivable from covered forwards.............................................. 2 1 19
Net payable for securities purchased/sold under resale/repurchase agreements and
payable for cash collateral received............................................. (1,157) (2,321) (1,350)
--------- --------- ---------
$ 14,730 $ 17,072 $ 19,095
--------- --------- ---------
--------- --------- ---------
Supplemental disclosure
Increase (decrease) in ending balances resulting from exchange rate fluctuations
Loans outstanding............................................................... $ (14,436) $ 13,331 $ 5,658
Borrowings...................................................................... (11,731) 10,269 3,931
Currency swaps.................................................................. (1,184) 1,553 1,084
Investments: Held-to-maturity................................................... (29) (5) --
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
32
<PAGE>
SUMMARY STATEMENT OF LOANS
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
LOANS
APPROVED BUT UNDISBURSED PERCENTAGE
NOT YET BALANCE OF LOANS OF TOTAL
TOTAL EFFECTIVE EFFECTIVE OUTSTANDING LOANS
BORROWER OR GUARANTOR LOANS (1) LOANS (2) (3) OUTSTANDING
- --------------------------------------------------- ---------- ------------ ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
Algeria............................................ $ 2,987 $ 128 $ 793 $ 2,066 1.87%
Argentina.......................................... 7,964 561 2,591 4,812 4.36
Armenia............................................ 12 -- 5 7 0.01
Bahamas, The....................................... 11 -- -- 11 0.01
Bangladesh......................................... 50 -- -- 50 0.05
Barbados........................................... 39 -- 22 17 0.02
Belarus............................................ 169 -- 48 121 0.11
Belize............................................. 54 -- 24 30 0.03
Bolivia............................................ 77 -- -- 77 0.07
Bosnia and Herzegovina (4)......................... 621 -- -- 621 0.56
Botswana........................................... 80 -- -- 80 0.07
Brazil............................................. 10,037 927 3,309 5,801 5.26
Bulgaria........................................... 844 26 389 429 0.39
Cameroon........................................... 603 -- 31 572 0.52
Chile.............................................. 1,746 50 442 1,254 1.14
China.............................................. 15,082 1,820 5,930 7,332 6.65
Colombia........................................... 3,323 85 897 2,341 2.12
Congo.............................................. 95 -- 3 92 0.08
Costa Rica......................................... 355 -- 86 269 0.24
Cote d'Ivoire...................................... 1,442 -- 21 1,421 1.29
Croatia............................................ 350 31 175 144 0.13
Cyprus............................................. 124 -- 55 69 0.06
Czech Republic..................................... 561 -- 139 422 0.38
Dominica........................................... 4 4 -- -- --
Dominican Republic................................. 352 65 27 260 0.24
Ecuador............................................ 1,396 15 347 1,034 0.94
Egypt, Arab Republic of............................ 1,502 47 274 1,181 1.07
El Salvador........................................ 491 115 86 290 0.26
Estonia............................................ 123 14 55 54 0.05
Fiji............................................... 51 -- 19 32 0.03
Gabon.............................................. 120 -- 21 99 0.09
Ghana.............................................. 50 -- -- 50 0.05
Grenada............................................ 4 -- 4 -- --
Guatemala.......................................... 252 -- 52 200 0.18
Guyana............................................. 30 -- -- 30 0.03
Honduras........................................... 389 -- -- 389 0.35
Hungary............................................ 2,556 -- 523 2,033 1.84
Iceland............................................ 3 -- -- 3 *
India.............................................. 13,842 804 3,440 9,598 8.71
Indonesia.......................................... 16,658 460 4,423 11,775 10.68
</TABLE>
33
<PAGE>
SUMMARY STATEMENT OF LOANS (CONTINUED)
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
LOANS
APPROVED BUT UNDISBURSED PERCENTAGE
NOT YET BALANCE OF LOANS OF TOTAL
TOTAL EFFECTIVE EFFECTIVE OUTSTANDING LOANS
BORROWER OR GUARANTOR LOANS (1) LOANS (2) (3) OUTSTANDING
- --------------------------------------------------- ---------- ------------ ------------ -------------- -----------
Iran, Islamic Republic of.......................... $ 851 $ -- $ 509 $ 342 0.31%
<S> <C> <C> <C> <C> <C>
Iraq............................................... 50 -- -- 50 0.05
Jamaica............................................ 689 -- 142 547 0.50
Jordan............................................. 917 -- 218 699 0.63
Kazakstan.......................................... 807 260 161 386 0.35
Kenya.............................................. 367 -- -- 367 0.33
Korea, Republic of................................. 2,581 -- 628 1,953 1.77
Latvia............................................. 148 -- 88 60 0.05
Lebanon............................................ 419 105 196 118 0.11
Lesotho............................................ 110 -- 55 55 0.05
Liberia............................................ 152 -- -- 152 0.14
Lithuania.......................................... 161 42 58 61 0.06
Macedonia, former Yugoslav Republic of............. 101 12 3 86 0.08
Madagascar......................................... 9 -- -- 9 0.01
Malawi............................................. 48 -- -- 48 0.04
Malaysia........................................... 1,146 -- 195 951 0.86
Mauritania......................................... 9 -- -- 9 0.01
Mauritius.......................................... 209 7 74 128 0.12
Mexico............................................. 16,716 187 3,706 12,823 11.63
Moldova............................................ 229 54 30 145 0.13
Morocco............................................ 5,101 190 1,140 3,771 3.42
Nicaragua.......................................... 51 -- -- 51 0.05
Nigeria............................................ 3,616 -- 642 2,974 2.70
Oman............................................... 22 -- -- 22 0.02
Pakistan........................................... 4,432 -- 1,441 2,991 2.71
Panama............................................. 355 65 110 180 0.16
Papua New Guinea................................... 403 -- 117 286 0.26
Paraguay........................................... 384 -- 244 140 0.13
Peru............................................... 2,370 -- 713 1,657 1.50
Philippines........................................ 6,200 307 1,099 4,794 4.35
Poland............................................. 3,479 21 1,201 2,257 2.05
Portugal........................................... 96 -- 2 94 0.09
Romania............................................ 1,924 120 838 966 0.88
Russian Federation................................. 6,413 1,899 2,824 1,690 1.53
St. Kitts and Nevis................................ 3 2 -- 1 *
St. Lucia.......................................... 10 2 5 3 *
St. Vincent and the Grenadines..................... 3 2 1 -- --
Senegal............................................ 28 -- -- 28 0.03
Seychelles......................................... 7 -- 2 5 *
Sierra Leone....................................... 2 -- -- 2 *
</TABLE>
34
<PAGE>
SUMMARY STATEMENT OF LOANS (CONTINUED)
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
LOANS
APPROVED BUT UNDISBURSED PERCENTAGE
NOT YET BALANCE OF LOANS OF TOTAL
TOTAL EFFECTIVE EFFECTIVE OUTSTANDING LOANS
BORROWER OR GUARANTOR LOANS (1) LOANS (2) (3) OUTSTANDING
- --------------------------------------------------- ---------- ------------ ------------ -------------- -----------
Slovak Republic.................................... $ 293 $ -- $ 37 $ 256 0.23%
<S> <C> <C> <C> <C> <C>
Slovenia........................................... 202 23 12 167 0.15
Sri Lanka.......................................... 44 -- -- 44 0.04
Sudan.............................................. 6 -- -- 6 0.01
Swaziland.......................................... 43 -- 27 16 0.01
Syrian Arab Republic............................... 399 -- -- 399 0.36
Tanzania........................................... 69 -- -- 69 0.06
Thailand........................................... 2,401 114 603 1,684 1.53
Trinidad and Tobago................................ 170 51 44 75 0.07
Tunisia............................................ 2,320 99 609 1,612 1.46
Turkey............................................. 6,228 250 1,382 4,596 4.17
Turkmenistan....................................... 25 -- 23 2 *
Ukraine............................................ 982 375 137 470 0.43
Uruguay............................................ 772 125 178 469 0.43
Uzbekistan......................................... 234 -- 81 153 0.14
Venezuela.......................................... 2,552 39 1,008 1,505 1.37
Yugoslavia, Federal Republic of (Serbia/
Montenegro) (4)................................... 1,204 -- -- 1,204 1.09
Zaire.............................................. 88 -- -- 88 0.08
Zambia............................................. 131 -- -- 131 0.12
Zimbabwe........................................... 698 -- 164 534 0.48
---------- ------------ ------------ -------------- -----------
Subtotal**......................................... 163,924 9,500 44,978 109,446 99.27
Caribbean Development Bank (5)..................... 39 -- 30 9 0.01
International Finance Corporation.................. 803 -- 12 791 0.72
---------- ------------ ------------ -------------- -----------
Total--June 30, 1996**............................. $ 164,766 $ 9,500 $ 45,020 $ 110,246 100.00%
---------- ------------ ------------ -------------- -----------
---------- ------------ ------------ -------------- -----------
Total--June 30, 1995............................... $ 179,453 $ 11,982 $ 43,972 $ 123,499
---------- ------------ ------------ --------------
---------- ------------ ------------ --------------
</TABLE>
- ---------
*Indicates amounts less than 0.005 percent.
**May differ from the sum of individual figures shown because of rounding.
NOTES
(1) Loans totaling $5,170 million ($5,198 million--June 30, 1995) have been
approved by IBRD but the related agreements have not been signed. Loan
agreements totaling $4,330 million ($6,784 million--June 30, 1995) have
been signed, but the loans do not become effective and disbursements
thereunder do not start until the borrowers and guarantors, if any, take
certain actions and furnish certain documents to IBRD.
(2) Of the undisbursed balance, IBRD has entered into irrevocable commitments
to disburse $2,258 million ($1,834 million--June 30, 1995).
(3) Total loans outstanding at June 30, 1996 include $98,047 million ($106,371
million--June 30, 1995) at variable interest rates and $12,199 million
($17,128 million--June 30, 1995) at fixed interest rates.
(4) See Notes to Financial Statements--Notes A and C.
(5) These loans are for the benefit of The Bahamas, Barbados, Grenada, Guyana,
Jamaica, Trinidad and Tobago, and territories of the United Kingdom
(Associated States and Dependencies) in the Caribbean Region, who are
severally liable as guarantors to the extent of subloans made in their
territories.
35
<PAGE>
SUMMARY STATEMENT OF LOANS (CONTINUED)
JUNE 30, 1996 AND JUNE 30, 1995
EXPRESSED IN MILLIONS OF U.S. DOLLARS
SUMMARY OF CURRENCIES
REPAYABLE ON LOANS OUTSTANDING
<TABLE>
<CAPTION>
CURRENCY 1996 1995
- --------------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Austrian schillings.................................................................... $ 196 $ 216
Belgian francs......................................................................... 242 268
Canadian dollars....................................................................... 167 165
Danish kroner.......................................................................... 80 87
Deutsche mark.......................................................................... 29,949 30,053
European currency units................................................................ 13 16
Finnish markkaa........................................................................ 54 59
French francs.......................................................................... 847 861
Indian rupees.......................................................................... 23 26
Irish pounds........................................................................... 28 29
Italian lire........................................................................... 187 176
Japanese yen........................................................................... 34,353 44,722
Kuwaiti dinars......................................................................... 52 52
Luxembourg francs...................................................................... 14 41
Malaysian ringgit...................................................................... 45 46
Netherlands guilders................................................................... 2,170 3,016
Norwegian kroner....................................................................... 67 72
Portuguese escudos..................................................................... 23 25
Pounds sterling........................................................................ 255 263
Saudi Arabian riyals................................................................... 90 90
South African rand..................................................................... 34 41
Spanish pesetas........................................................................ 118 126
Swedish kronor......................................................................... 83 75
Swiss francs........................................................................... 9,018 13,068
U. S. dollars.......................................................................... 32,121 29,886
Other currencies....................................................................... 17 20
---------- ----------
Loans outstanding...................................................................... $ 110,246 $ 123,499
---------- ----------
---------- ----------
</TABLE>
36
<PAGE>
SUMMARY STATEMENT OF LOANS (CONTINUED)
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
MATURITY STRUCTURE OF LOANS OUTSTANDING
<TABLE>
<CAPTION>
PERIOD
- ------------------------------------------------------------------------------------------------------
<S> <C>
July 1, 1996 through June 30, 1997.................................................................... $ 12,705
July 1, 1997 through June 30, 1998.................................................................... 11,675
July 1, 1998 through June 30, 1999.................................................................... 11,839
July 1, 1999 through June 30, 2000.................................................................... 11,534
July 1, 2000 through June 30, 2001.................................................................... 10,761
July 1, 2001 through June 30, 2006.................................................................... 37,095
July 1, 2006 through June 30, 2011.................................................................... 13,275
July 1, 2011 through June 30, 2016.................................................................... 1,108
July 1, 2016 through June 30, 2021.................................................................... 124
July 1, 2021 through June 30, 2026.................................................................... 124
July 1, 2026 through June 30, 2031.................................................................... 6
----------
Total................................................................................................. $ 110,246
----------
----------
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
37
<PAGE>
SUMMARY STATEMENT OF BORROWINGS
JUNE 30, 1996 AND JUNE 30, 1995
EXPRESSED IN MILLIONS OF U.S. DOLLARS
MEDIUM- AND LONG-TERM BORROWINGS AND SWAPS
<TABLE>
<CAPTION>
SWAP AGREEMENTS (A,C)
MEDIUM- AND LONG-TERM BORROWINGS ---------------------------------
WEIGHTED
---------------------------------- AVERAGE
WEIGHTED CURRENCY SWAP COST
PRINCIPAL OUTSTANDING AVERAGE PAYABLES (RETURN) NET CURRENCY
(B,D) COST (%) (RECEIVABLES) (%) OBLIGATIONS (F)
--------------------- ----------- -------------------- ----------- ---------------------
1996 1995 1996 1996 1995 1996 1996 1995
--------- ---------- ----------- --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Australian dollars......... $ 1,041 $ 322 7.69 $ (1,029) $ (319) (7.70) $ 12 $ 3
Austrian schillings........ 186 205 7.81 -- -- -- 186 205
Belgian francs............. 159 353 7.42 (153) (339) (7.80) 6 14
Canadian dollars........... 1,394 1,549 8.28 (1,196) (1,348) (7.93) 198 201
Czech koruny............... 91 -- 10.02 (90) -- (10.02) 1 --
Deutsche mark.............. 14,516 14,456 6.72 11,919 11,826 5.97 26,435 26,282
European currency units.... 1,277 1,701 5.13 (1,257) (1,518) (5.28) 20 183
Finnish markkaa............ -- 141 -- -- (139) -- -- 2
French francs.............. 966 1,169 8.81 (526) (821) (8.52) 440 348
Greek drachmas............. 144 66 14.59 (144) (66) (14.59) -- --
Hong Kong dollars.......... 323 336 6.44 (320) (333) (6.42) 3 3
Irish pounds............... 63 65 7.75 (63) (65) (7.75) -- --
Italian lire............... 4,917 3,642 10.25 (4,876) (3,615) (10.26) 41 27
Japanese yen............... 30,698 42,039 5.11 406 690 3.27
(1,056) (1,246) (5.61) 30,048 41,483
Luxembourg francs.......... 95 140 7.09 (95) (105) (7.46) -- 35
Netherlands guilders....... 2,837 3,259 7.23 91 500 6.31
(1,447) (1,597) (7.70) 1,481 2,162
New Zealand dollars........ 306 168 10.67 (304) (167) (10.67) 2 1
Norwegian kroner........... -- 40 -- -- -- -- -- 40
Portuguese escudos......... 341 296 10.36 (337) (293) (10.51) 4 3
Pounds sterling............ 2,404 2,308 9.12 (1,241) (1,130) (8.08) 1,163 1,178
Spanish pesetas............ 816 866 10.16 (808) (856) (10.16) 8 10
Swedish kronor............. 76 124 9.84 (75) (123) (9.84) 1 1
Swiss francs............... 4,996 6,077 6.04 3,415 4,729 5.36
(873) -- (6.47) 7,538 10,806
U. S. dollars.............. 24,758 25,053 7.66 3,522 2,146 5.44
(2,046) (2,569) (7.32) 26,234 24,630
--------- ---------- --------- --------- --------- ----------
At face value.............. 92,404 104,375 6.80(e) 93,821 107,617
Net unamortized (discounts)
premiums.................. (13) 17 (13) 17
--------- ---------- --------- --------- --------- ----------
Total $ 92,391 $ 104,392 $ 1,417 $ 3,242 $ 93,808 $ 107,634
--------- ---------- --------- --------- --------- ----------
--------- ---------- --------- --------- --------- ----------
</TABLE>
38
<PAGE>
SUMMARY STATEMENT OF BORROWINGS (CONTINUED)
JUNE 30, 1996 AND JUNE 30, 1995
MEDIUM AND LONG-TERM BORROWINGS AND SWAPS
a. See Notes to Financial Statements--Notes D and E.
b. Includes zero-coupon borrowings which have been recorded at their discounted
values. The aggregate face amounts and discounted values of these borrowings
at June 30, 1996 and June 30, 1995 are:
<TABLE>
<CAPTION>
In millions of U.S. dollar equivalents
<S> <C> <C> <C> <C>
AGGREGATE FACE
AMOUNT DISCOUNTED VALUE
-------------------- --------------------
CURRENCY 1996 1995 1996 1995
- -------------------------------------------- --------- --------- --------- ---------
Australian dollars.......................... $ 317 $ -- $ 249 $ --
Canadian dollars............................ -- 145 -- 132
Deutsche mark............................... 2,092 2,303 471 486
Italian lire................................ 847 184 443 167
Japanese yen................................ 916 1,189 822 1,033
Swiss francs................................ 968 1,130 278 310
U. S. dollars............................... 2,894 2,634 750 476
</TABLE>
c. Includes income and expense from interest rate swaps. At June 30, 1996, IBRD
has entered into interest rate swap agreements with respect to notional
principal amounts as follows:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C> <C>
U.S. DOLLAR
CURRENCY AMOUNT EQUIVALENT
-------------------- --------------------
CURRENCY 1996 1995 1996 1995
- ------------------------------------ --------- --------- --------- ---------
Canadian dollars.................... -- 149 $ -- $ 109
Deutsche mark....................... 16,436 14,293 10,744 10,289
French francs....................... 1,669 984 322 202
Italian lire........................ 200,000 200,000 130 123
Japanese yen........................ 420,979 155,038 3,857 1,843
Pounds sterling..................... -- 100 -- 158
Swiss francs........................ 1,124 1,124 892 977
U. S. dollars....................... 10,451 2,435 10,451 2,435
</TABLE>
d. Includes the following variable rate borrowings at June 30, 1996 and June
30, 1995, before swaps:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C> <C>
U.S. DOLLAR
CURRENCY AMOUNT EQUIVALENT
-------------------- --------------------
CURRENCY 1996 1995 1996 1995
- -------------------------------------- --------- --------- --------- ---------
Canadian dollars...................... 100 100 $ 73 $ 73
Deutsche mark......................... 550 550 360 396
European currency units............... 640 640 802 857
Greek drachmas........................ 20,000 -- 82 --
Italian lire.......................... 650,000 550,000 423 337
Japanese yen.......................... 134,500 144,500 1,232 1,718
Pounds sterling....................... 25 25 39 40
U. S. dollars......................... 1,452 1,563 1,452 1,563
</TABLE>
e. The weighted average cost of medium- and long-term borrowings outstanding at
June 30, 1996, after adjustment for swap activities, was 6.26 percent (6.53
percent--June 30, 1995).
39
<PAGE>
SUMMARY STATEMENT OF BORROWINGS (CONTINUED)
JUNE 30, 1996 AND JUNE 30, 1995
MEDIUM AND LONG-TERM BORROWINGS AND SWAPS
f. Includes the following variable rate borrowings after interest rate swaps at
June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C> <C>
U.S. DOLLAR
CURRENCY AMOUNT EQUIVALENT
-------------------- --------------------
CURRENCY 1996 1995 1996 1995
- ------------------------------------------- --------- --------- --------- ---------
Deutsche mark.............................. 5,645 -- $ 3,690 $ --
French francs.............................. 316 -- 61 --
Japanese yen............................... 265,941 -- 2,436 --
U. S. dollars.............................. 6,309 408 6,309 408
</TABLE>
MATURITY STRUCTURE OF MEDIUM- AND LONG-TERM BORROWINGS
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
PERIOD
- -------------------------------------------------------------------------------------------------------
<S> <C>
July 1, 1996 through June 30, 1997..................................................................... $ 12,467
July 1, 1997 through June 30, 1998..................................................................... 13,949
July 1, 1998 through June 30, 1999..................................................................... 9,526
July 1, 1999 through June 30, 2000..................................................................... 14,262
July 1, 2000 through June 30, 2001..................................................................... 7,529
July 1, 2001 through June 30, 2006..................................................................... 25,886
July 1, 2006 through June 30, 2011..................................................................... 2,490
July 1, 2011 through June 30, 2016..................................................................... 2,622
July 1, 2016 through June 30, 2021..................................................................... 1,660
July 1, 2021 through June 30, 2026..................................................................... 1,693
Thereafter............................................................................................. 320
---------
Total.................................................................................................. $ 92,404
---------
---------
</TABLE>
SHORT-TERM BORROWINGS AND SWAPS
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
WEIGHTED
CURRENCY SWAP AVERAGE COST
PRINCIPAL PAYABLES (AFTER SWAPS) NET CURRENCY
OUTSTANDING (RECEIVABLES)(A) (%) OBLIGATIONS
-------------------- -------------------- --------------- --------------------
1996 1995 1996 1995 1996 1996 1995
--------- --------- --------- --------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Short-term Notes (U. S. dollars).......... $ 1,369 $ 1,192 $ -- $ -- 5.46 $ 1,369 $ 1,192
--------- --------- --------- --------- --------- ---------
Global Multicurrency Notes
Czech koruny............................ 54 -- (54) -- -- -- --
Deutsche mark........................... -- -- 74 94 3.06 74 94
Italian lire............................ 20 86 (20) (86) -- -- --
U. S. dollars........................... 299 20 -- -- 5.52 299 20
--------- --------- --------- --------- --------- ---------
Subtotal.............................. 373 106 -- 8 5.03 373 114
--------- --------- --------- --------- --------- ---------
Central Bank Facility (U. S. dollars)..... 2,586 2,600 -- -- 5.47 2,586 2,600
--------- --------- --------- --------- --------- ---------
Total..................................... $ 4,328 $ 3,898 $ -- $ 8 5.43 $ 4,328 $ 3,906
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
(a) See Notes to Financial Statements--Notes D and E.
The Notes to Financial Statements are an integral part of these Statements.
40
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS
-----------------------------------------------------------
AMOUNTS VOTING POWER
AMOUNTS SUBJECT TO -----------------------
PERCENTAGE TOTAL PAID IN CALL (NOTE NUMBER OF PERCENTAGE
MEMBER SHARES OF TOTAL AMOUNTS (NOTE A) A) VOTES OF TOTAL
- --------------------------------------- ---------- ----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Afghanistan............................ 300 0.02 $ 36.2 $ 3.6 $ 32.6 550 0.04
Albania................................ 830 0.06 100.1 3.6 96.5 1,080 0.07
Algeria................................ 9,252 0.62 1,116.1 67.1 1,049.0 9,502 0.62
Angola................................. 2,676 0.18 322.8 17.5 305.4 2,926 0.19
Antigua and Barbuda.................... 520 0.03 62.7 1.3 61.5 770 0.05
Argentina.............................. 17,911 1.20 2,160.7 132.2 2,028.4 18,161 1.18
Armenia................................ 1,139 0.08 137.4 5.9 131.5 1,389 0.09
Australia.............................. 21,610 1.44 2,606.9 171.4 2,435.5 21,860 1.42
Austria................................ 11,063 0.74 1,334.6 80.7 1,253.9 11,313 0.73
Azerbaijan............................. 1,646 0.11 198.6 9.7 188.8 1,896 0.12
Bahamas, The........................... 1,071 0.07 129.2 5.4 123.8 1,321 0.09
Bahrain................................ 1,103 0.07 133.1 5.7 127.4 1,353 0.09
Bangladesh............................. 4,854 0.32 585.6 33.9 551.6 5,104 0.33
Barbados............................... 948 0.06 114.4 4.5 109.9 1,198 0.08
Belarus................................ 3,323 0.22 400.9 22.3 378.5 3,573 0.23
Belgium................................ 28,983 1.94 3,496.4 215.8 3,280.6 29,233 1.90
Belize................................. 586 0.04 70.7 1.8 68.9 836 0.05
Benin.................................. 487 0.03 58.7 2.5 56.2 737 0.05
Bhutan................................. 479 0.03 57.8 1.0 56.8 729 0.05
Bolivia................................ 1,785 0.12 215.3 10.8 204.5 2,035 0.13
Bosnia and Herzegovina................. 549 0.04 66.2 5.8 60.4 799 0.05
Botswana............................... 615 0.04 74.2 2.0 72.2 865 0.06
Brazil................................. 24,946 1.67 3,009.4 185.1 2,824.2 25,196 1.63
Brunei Darussalam...................... 2,373 0.16 286.3 15.2 271.1 2,623 0.17
Bulgaria............................... 5,215 0.35 629.1 36.5 592.6 5,465 0.35
Burkina Faso........................... 868 0.06 104.7 3.9 100.8 1,118 0.07
Burundi................................ 716 0.05 86.4 3.0 83.4 966 0.06
Cambodia............................... 214 0.01 25.8 2.6 23.2 464 0.03
Cameroon............................... 857 0.06 103.4 6.6 96.8 1,107 0.07
Canada................................. 44,795 2.99 5,403.8 334.9 5,068.9 45,045 2.92
Cape Verde............................. 508 0.03 61.3 1.2 60.1 758 0.05
Central African Republic............... 484 0.03 58.4 2.5 55.9 734 0.05
Chad................................... 484 0.03 58.4 2.5 55.9 734 0.05
Chile.................................. 6,931 0.46 836.1 49.6 786.6 7,181 0.47
China.................................. 44,799 2.99 5,404.3 335.0 5,069.3 45,049 2.92
Colombia............................... 6,352 0.42 766.3 45.2 721.1 6,602 0.43
Comoros................................ 282 0.02 34.0 0.3 33.7 532 0.03
Congo.................................. 520 0.03 62.7 2.9 59.9 770 0.05
Costa Rica............................. 233 0.02 28.1 1.9 26.2 483 0.03
Cote d'Ivoire.......................... 2,516 0.17 303.5 16.4 287.1 2,766 0.18
Croatia................................ 2,293 0.15 276.6 17.3 259.3 2,543 0.16
Cyprus................................. 1,461 0.10 176.2 8.4 167.9 1,711 0.11
Czech Republic......................... 6,308 0.42 761.0 45.9 715.0 6,558 0.43
Denmark................................ 10,251 0.68 1,236.6 74.6 1,162.0 10,501 0.68
Djibouti............................... 314 0.02 37.9 0.7 37.2 564 0.04
Dominica............................... 504 0.03 60.8 1.1 59.7 754 0.05
Dominican Republic..................... 1,174 0.08 141.6 9.8 131.8 1,424 0.09
Ecuador................................ 2,771 0.19 334.3 18.2 316.1 3,021 0.20
Egypt, Arab Republic of................ 7,108 0.47 857.5 50.9 806.6 7,358 0.48
El Salvador............................ 141 0.01 17.0 1.7 15.3 391 0.03
</TABLE>
41
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (CONTINUED)
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS
-----------------------------------------------------------
AMOUNTS VOTING POWER
AMOUNTS SUBJECT TO -----------------------
PERCENTAGE TOTAL PAID IN CALL (NOTE NUMBER OF PERCENTAGE
MEMBER SHARES OF TOTAL AMOUNTS (NOTE A) A) VOTES OF TOTAL
- --------------------------------------- ---------- ----------- ---------- ---------- ---------- ---------- -----------
Equatorial Guinea...................... 401 0.03 $ 48.4 $ 1.6 $ 46.8 651 0.04
<S> <C> <C> <C> <C> <C> <C> <C>
Eritrea................................ 593 0.04 71.5 1.8 69.7 843 0.05
Estonia................................ 923 0.06 111.3 4.3 107.1 1,173 0.08
Ethiopia............................... 978 0.07 118.0 4.7 113.3 1,228 0.08
Fiji................................... 987 0.07 119.1 4.8 114.3 1,237 0.08
Finland................................ 8,560 0.57 1,032.6 61.9 970.8 8,810 0.57
France................................. 69,397 4.63 8,371.7 520.4 7,851.3 69,647 4.52
Gabon.................................. 554 0.04 66.8 3.6 63.3 804 0.05
Gambia, The............................ 305 0.02 36.8 0.7 36.1 555 0.04
Georgia................................ 1,584 0.11 191.1 9.3 181.8 1,834 0.12
Germany................................ 72,399 4.84 8,733.9 542.9 8,190.9 72,649 4.71
Ghana.................................. 856 0.06 103.3 10.3 92.9 1,106 0.07
Greece................................. 945 0.06 114.0 11.4 102.6 1,195 0.08
Grenada................................ 531 0.04 64.1 1.4 62.7 781 0.05
Guatemala.............................. 2,001 0.13 241.4 12.4 229.0 2,251 0.15
Guinea................................. 725 0.05 87.5 5.0 82.4 975 0.06
Guinea-Bissau.......................... 303 0.02 36.6 0.6 36.0 553 0.04
Guyana................................. 1,058 0.07 127.6 5.3 122.3 1,308 0.08
Haiti.................................. 1,067 0.07 128.7 5.4 123.3 1,317 0.09
Honduras............................... 641 0.04 77.3 2.3 75.0 891 0.06
Hungary................................ 8,050 0.54 971.1 58.0 913.1 8,300 0.54
Iceland................................ 1,258 0.08 151.8 6.8 144.9 1,508 0.10
India.................................. 44,795 2.99 5,403.8 333.7 5,070.1 45,045 2.92
Indonesia.............................. 14,981 1.00 1,807.2 110.3 1,697.0 15,231 0.99
Iran, Islamic Republic of.............. 23,686 1.58 2,857.4 175.8 2,681.5 23,936 1.55
Iraq................................... 2,808 0.19 338.7 27.1 311.6 3,058 0.20
Ireland................................ 5,271 0.35 635.9 37.1 598.8 5,521 0.36
Israel................................. 4,750 0.32 573.0 33.2 539.8 5,000 0.32
Italy.................................. 44,795 2.99 5,403.8 334.8 5,069.0 45,045 2.92
Jamaica................................ 2,578 0.17 311.0 16.8 294.2 2,828 0.18
Japan.................................. 93,770 6.26 11,311.9 703.5 10,608.5 94,020 6.10
Jordan................................. 1,388 0.09 167.4 7.8 159.6 1,638 0.11
Kazakstan.............................. 2,985 0.20 360.1 19.8 340.3 3,235 0.21
Kenya.................................. 2,461 0.16 296.9 15.9 281.0 2,711 0.18
Kiribati............................... 465 0.03 56.1 0.9 55.2 715 0.05
Korea, Republic of..................... 9,372 0.63 1,130.6 67.9 1,062.7 9,622 0.62
Kuwait................................. 13,280 0.89 1,602.0 97.4 1,504.6 13,530 0.88
Kyrgyz Republic........................ 1,107 0.07 133.5 5.7 127.9 1,357 0.09
Lao People's Democratic Republic....... 178 0.01 21.5 1.5 20.0 428 0.03
Latvia................................. 1,384 0.09 167.0 7.8 159.2 1,634 0.11
Lebanon................................ 340 0.02 41.0 1.1 39.9 590 0.04
Lesotho................................ 663 0.04 80.0 2.3 77.6 913 0.06
Liberia................................ 463 0.03 55.9 2.6 53.3 713 0.05
Libya.................................. 7,840 0.52 945.8 57.0 888.8 8,090 0.52
Lithuania.............................. 846 0.06 102.1 6.3 95.8 1,096 0.07
</TABLE>
42
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (CONTINUED)
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS
-----------------------------------------------------------
AMOUNTS VOTING POWER
AMOUNTS SUBJECT TO -----------------------
PERCENTAGE TOTAL PAID IN CALL (NOTE NUMBER OF PERCENTAGE
MEMBER SHARES OF TOTAL AMOUNTS (NOTE A) A) VOTES OF TOTAL
- --------------------------------------- ---------- ----------- ---------- ---------- ---------- ---------- -----------
Luxembourg............................. 1,652 0.11 $ 199.3 $ 9.8 $ 189.5 1,902 0.12
<S> <C> <C> <C> <C> <C> <C> <C>
Macedonia, former Yugoslav Republic
of.................................... 427 0.03 51.5 3.2 48.3 677 0.04
Madagascar............................. 1,422 0.09 171.5 8.1 163.5 1,672 0.11
Malawi................................. 1,094 0.07 132.0 5.6 126.4 1,344 0.09
Malaysia............................... 8,244 0.55 994.5 59.5 935.0 8,494 0.55
Maldives............................... 469 0.03 56.6 0.9 55.7 719 0.05
Mali................................... 1,162 0.08 140.2 6.1 134.1 1,412 0.09
Malta.................................. 1,074 0.07 129.6 5.4 124.1 1,324 0.09
Marshall Islands....................... 469 0.03 56.6 0.9 55.7 719 0.05
Mauritania............................. 505 0.03 60.9 2.7 58.2 755 0.05
Mauritius.............................. 1,242 0.08 149.8 6.7 143.1 1,492 0.10
Mexico................................. 18,804 1.26 2,268.4 139.0 2,129.4 19,054 1.24
Micronesia, Federated States of........ 479 0.03 57.8 1.0 56.8 729 0.05
Moldova................................ 1,368 0.09 165.0 7.6 157.4 1,618 0.10
Mongolia............................... 466 0.03 56.2 2.3 53.9 716 0.05
Morocco................................ 4,973 0.33 599.9 34.8 565.1 5,223 0.34
Mozambique............................. 930 0.06 112.2 4.8 107.4 1,180 0.08
Myanmar................................ 2,484 0.17 299.7 16.1 283.6 2,734 0.18
Namibia................................ 1,523 0.10 183.7 8.8 174.9 1,773 0.11
Nepal.................................. 968 0.06 116.8 4.6 112.1 1,218 0.08
Netherlands............................ 35,503 2.37 4,282.9 264.8 4,018.1 35,753 2.32
New Zealand............................ 7,236 0.48 872.9 51.9 821.0 7,486 0.49
Nicaragua.............................. 608 0.04 73.3 2.1 71.3 858 0.06
Niger.................................. 478 0.03 57.7 2.4 55.2 728 0.05
Nigeria................................ 12,655 0.85 1,526.6 92.7 1,433.9 12,905 0.84
Norway................................. 9,982 0.67 1,204.2 72.6 1,131.6 10,232 0.66
Oman................................... 1,561 0.10 188.3 9.1 179.2 1,811 0.12
Pakistan............................... 9,339 0.62 1,126.6 67.8 1,058.9 9,589 0.62
Panama................................. 385 0.03 46.4 3.2 43.2 635 0.04
Papua New Guinea....................... 726 0.05 87.6 5.0 82.5 976 0.06
Paraguay............................... 1,229 0.08 148.3 6.6 141.6 1,479 0.10
Peru................................... 5,331 0.36 643.1 37.5 605.6 5,581 0.36
Philippines............................ 6,844 0.46 825.6 48.9 776.7 7,094 0.46
Poland................................. 10,908 0.73 1,315.9 79.6 1,236.3 11,158 0.72
Portugal............................... 5,460 0.36 658.7 38.5 620.2 5,710 0.37
Qatar.................................. 1,096 0.07 132.2 9.0 123.3 1,346 0.09
Romania................................ 4,011 0.27 483.9 30.5 453.4 4,261 0.28
Russian Federation..................... 44,795 2.99 5,403.8 333.9 5,070.0 45,045 2.92
Rwanda................................. 587 0.04 70.8 3.6 67.2 837 0.05
St. Kitts and Nevis.................... 275 0.02 33.2 0.3 32.9 525 0.03
St. Lucia.............................. 552 0.04 66.6 1.5 65.1 802 0.05
St. Vincent and the Grenadines......... 278 0.02 33.5 0.3 33.2 528 0.03
Sao Tome and Principe.................. 278 0.02 33.5 0.3 33.2 528 0.03
Saudi Arabia........................... 44,795 2.99 5,403.8 335.0 5,068.9 45,045 2.92
Senegal................................ 2,072 0.14 250.0 13.0 237.0 2,322 0.15
</TABLE>
43
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (CONTINUED)
JUNE 30, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS
-----------------------------------------------------------
AMOUNTS VOTING POWER
AMOUNTS SUBJECT TO -----------------------
PERCENTAGE TOTAL PAID IN CALL (NOTE NUMBER OF PERCENTAGE
MEMBER SHARES OF TOTAL AMOUNTS (NOTE A) A) VOTES OF TOTAL
- --------------------------------------- ---------- ----------- ---------- ---------- ---------- ---------- -----------
Seychelles............................. 263 0.02 $ 31.7 $ 0.2 $ 31.6 513 0.03
<S> <C> <C> <C> <C> <C> <C> <C>
Sierra Leone........................... 403 0.03 48.6 1.8 46.8 653 0.04
Singapore.............................. 320 0.02 38.6 3.9 34.7 570 0.04
Slovak Republic........................ 3,216 0.21 388.0 23.0 365.0 3,466 0.22
Slovenia............................... 1,261 0.08 152.1 9.5 142.6 1,511 0.10
Solomon Islands........................ 513 0.03 61.9 1.2 60.7 763 0.05
Somalia................................ 552 0.04 66.6 3.3 63.3 802 0.05
South Africa........................... 13,462 0.90 1,624.0 98.8 1,525.2 13,712 0.89
Spain.................................. 23,686 1.58 2,857.4 175.6 2,681.7 23,936 1.55
Sri Lanka.............................. 3,817 0.25 460.5 26.1 434.3 4,067 0.26
Sudan.................................. 850 0.06 102.5 7.2 95.3 1,100 0.07
Suriname............................... 412 0.03 49.7 2.0 47.7 662 0.04
Swaziland.............................. 440 0.03 53.1 2.0 51.1 690 0.04
Sweden................................. 14,974 1.00 1,806.4 110.2 1,696.2 15,224 0.99
Switzerland............................ 26,606 1.78 3,209.6 197.2 3,012.4 26,856 1.74
Syrian Arab Republic................... 1,236 0.08 149.1 10.5 138.6 1,486 0.10
Tajikistan............................. 1,060 0.07 127.9 5.3 122.5 1,310 0.08
Tanzania............................... 727 0.05 87.7 7.9 79.8 977 0.06
Thailand............................... 6,349 0.42 765.9 45.2 720.7 6,599 0.43
Togo................................... 620 0.04 74.8 3.9 70.9 870 0.06
Tonga.................................. 277 0.02 33.4 0.3 33.1 527 0.03
Trinidad and Tobago.................... 2,664 0.18 321.4 17.6 303.7 2,914 0.19
Tunisia................................ 719 0.05 86.7 5.7 81.1 969 0.06
Turkey................................. 7,379 0.49 890.2 52.9 837.2 7,629 0.49
Turkmenistan........................... 526 0.04 63.5 2.9 60.5 776 0.05
Uganda................................. 617 0.04 74.4 4.4 70.1 867 0.06
Ukraine................................ 10,908 0.73 1,315.9 79.3 1,236.6 11,158 0.72
United Arab Emirates................... 2,385 0.16 287.7 22.6 265.1 2,635 0.17
United Kingdom......................... 69,397 4.63 8,371.7 539.5 7,832.2 69,647 4.52
United States.......................... 264,969 17.70 31,964.5 1,998.4 29,966.2 265,219 17.20
Uruguay................................ 2,812 0.19 339.2 18.6 320.7 3,062 0.20
Uzbekistan............................. 2,493 0.17 300.7 16.1 284.7 2,743 0.18
Vanuatu................................ 586 0.04 70.7 1.8 68.9 836 0.05
Venezuela.............................. 20,361 1.36 2,456.2 150.8 2,305.5 20,611 1.34
Vietnam................................ 968 0.06 116.8 8.1 108.7 1,218 0.08
Western Samoa.......................... 298 0.02 35.9 0.5 35.4 548 0.04
Yemen, Republic of..................... 2,212 0.15 266.8 14.0 252.8 2,462 0.16
Zaire.................................. 2,643 0.18 318.8 25.4 293.5 2,893 0.19
Zambia................................. 2,810 0.19 339.0 20.0 319.0 3,060 0.20
Zimbabwe............................... 3,325 0.22 401.1 22.4 378.7 3,575 0.23
---------- ----------- ---------- ---------- ---------- ---------- -----------
Total--June 30, 1996*.................. 1,497,325 100.00 $ 180,630 $ 10,993.7 $ 169,636 1,542,325 100.00
---------- ----------- ---------- ---------- ---------- ---------- -----------
---------- ----------- ---------- ---------- ---------- ---------- -----------
Total--June 30, 1995................... 1,462,574 100.00 $ 176,438 $ 10,857.5 $ 165,580 1,507,074
---------- ----------- ---------- ---------- ---------- ----------
---------- ----------- ---------- ---------- ---------- ----------
</TABLE>
*May differ from the sum of individual figures due to rounding.
The Notes to Financial Statements are an integral part of these Statements.
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PURPOSE AND AFFILIATED ORGANIZATIONS
The International Bank for Reconstruction and Development (IBRD) is an
international organization which commenced business in 1946. The principal
purpose of IBRD is to promote economic development in its member countries,
primarily by providing loans and related technical assistance for specific
projects and for programs of economic reform in developing member countries. The
activities of IBRD are complemented by those of three affiliated organizations,
the International Development Association (IDA), the International Finance
Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA).
IDA's purpose is to promote economic development in the less developed areas of
the world included in IDA's membership by providing financing on concessionary
terms. IFC's purpose is to encourage the growth of productive private
enterprises in its member countries through loans and equity investments in such
enterprises without a member's guarantee. MIGA was established to encourage the
flow of investments for productive purposes among member countries and, in
particular, to developing member countries by providing guarantees against
noncommercial risks for foreign investment in its developing member countries.
SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIES
IBRD's financial statements are prepared in conformity with the accounting
principles generally accepted in the United States and with International
Accounting Standards.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates. Significant judgements
have been used in the computation of estimated and fair values of loans and
borrowings, respectively, the adequacy of the accumulated provision for loan
losses, and the present value of obligations under the Staff Retirement and
Retired Staff Benefits Plans.
Certain reclassifications of the prior year's information have been made to
conform to the current period's presentation.
TRANSLATION OF CURRENCIES: IBRD's financial statements are expressed in
terms of U.S. dollars solely for the purpose of summarizing IBRD's financial
position and the results of its operations for the convenience of its members
and other interested parties.
IBRD is an international organization which conducts its business in the
currencies of all of its members. IBRD's resources are derived from its capital,
borrowings, and accumulated earnings in those various currencies. IBRD has a
number of general policies aimed at minimizing exchange-rate risk in a
multicurrency environment. IBRD matches its borrowing obligations in any one
currency (after swap activities) with assets in the same currency, as prescribed
by its Articles of Agreement, primarily by holding or lending the proceeds of
its borrowings (after swaps) in the same currencies in which they are borrowed.
In addition, IBRD periodically undertakes currency conversions to more closely
match the currencies underlying its Retained Earnings with those of the
outstanding loans.
Assets and liabilities are translated at market exchange rates at the end of
the year. Income and expenses are translated at the market exchange rate on the
dates on which they are recognized or at average market exchange rates in effect
during each month. Translation adjustments are charged or credited to Equity.
VALUATION OF CAPITAL STOCK: In the Articles of Agreement, the capital stock
of IBRD is expressed in terms of "U.S. dollars of the weight and fineness in
effect on July 1, 1944" (1944 dollars). Following the abolition of gold as a
common denominator of the monetary system and the repeal of the provision of the
U.S. law defining the par value of the U.S. dollar in terms of gold, the
pre-existing basis for translating 1944 dollars into current dollars or into any
other currency disappeared. The Executive Directors of IBRD have decided, until
such time as the relevant provisions of the Articles of Agreement are amended,
that the words
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
"U.S. dollars of the weight and fineness in effect on July 1, 1944" in Article
II, Section 2(a) of the Articles of Agreement of IBRD are interpreted to mean
the Special Drawing Right (SDR) introduced by the International Monetary Fund,
as the SDR was valued in terms of U.S. dollars immediately before the
introduction of the basket method of valuing the SDR on July 1, 1974, such value
being $1.20635 for one SDR.
RETAINED EARNINGS: Retained Earnings consists of allocated amounts (Special
Reserve, General Reserve, and Surplus) and unallocated Net Income.
The Special Reserve consists of loan commissions set aside pursuant to
Article IV, Section 6 of the Articles of Agreement which are to be held in
liquid assets. These assets may be used only for the purpose of meeting
liabilities of IBRD on its borrowings and guarantees in the event of defaults on
loans made, participated in, or guaranteed by IBRD. The Special Reserve assets
are included under Investments held in the Trading portfolio, comprising
obligations of the United States Government, its agencies, and other official
entities. The allocation of such commissions to the Special Reserve was
discontinued in 1964 with respect to subsequent loans and no further additions
are being made to it.
The General Reserve consists of earnings from prior fiscal years which, in
the judgment of the Executive Directors, should be retained in IBRD's business.
Surplus consists of earnings from prior fiscal years which are retained by
IBRD until a further decision is made on their disposition or the conditions of
transfer for specified uses have been met.
Unallocated Net Income consists of earnings in the current fiscal year.
Commencing in 1950, a portion or all of the unallocated Net Income has been
allocated to the General Reserve. The Board of Governors, consisting of one
Governor appointed by each member, periodically approves transfers out of
Retained Earnings, after an assessment by the Executive Directors of IBRD's
reserve needs, to various entities for development purposes consistent with
IBRD's Articles of Agreement. Transfers have been made out of unallocated Net
Income and Surplus to IDA (or facilities administered by IDA), for Emergency
Assistance for Rwanda, the Global Environment Trust Fund, the Technical
Assistance Trust Fund for the Union of Soviet Socialist Republics, the Trust
Fund for Bosnia and Herzegovina, and the Trust Fund for Gaza and West Bank.
LOANS: All of IBRD's loans are made to or guaranteed by members, except
loans to IFC. The majority of IBRD's loans have repayment obligations in various
currencies determined on the basis of a currency pooling system, which is
designed to equalize exchange-rate risks among borrowers. IBRD also offers
single currency loans. Except for certain loans which were converted to the
currency pooling system, loans negotiated prior to July 1980 and all single
currency loans are repayable in the currencies disbursed.
Incremental direct costs associated with originating loans are expensed as
incurred as such amounts are considered immaterial.
IBRD's policy is to not reschedule interest or principal payments on its
loans or participate in debt rescheduling agreements with respect to its loans.
In exceptional cases, however, such as when implementation of a financed project
has been delayed, the loan amortization schedule may be modified to avoid
substantial repayments prior to project completion. In addition, in the special
case of Bosnia and Herzegovina, IBRD has refinanced/rescheduled, through three
new IBRD consolidation loans, certain loans made to the former Socialist Federal
Republic of Yugoslavia (SFRY) for which Bosnia and Herzegovina has accepted
liability. IBRD's special treatment in this case was based on the following
criteria: the country (i) has emerged from a current, or former, member of IBRD,
(ii) is assuming responsibility for a share of the debt of that member, (iii)
has limited creditworthiness for servicing the debt that it assumes, because of
a major armed conflict in its territory involving extensive destruction of
physical assets, and (iv) can improve significantly its repayment capacity
through refinancing/rescheduling, if appropriate supporting measures are taken.
At the Balance Sheet date no other country met these criteria.
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
It is the policy of IBRD to place in nonaccrual status all loans made to or
guaranteed by a member of IBRD if principal, interest, or other charges with
respect to any such loan are overdue by more than six months, unless IBRD
management determines that the overdue amount will be collected in the immediate
future. In addition, if development credits made by IDA to a member government
are placed in nonaccrual status, all loans to that member government will also
be placed in nonaccrual status by IBRD. On the date a member's loans are placed
in nonaccrual status, unpaid interest and other charges accrued on loans
outstanding to the member are deducted from the income of the current period.
Interest and other charges on nonaccruing loans are included in income only to
the extent that payments have actually been received by IBRD. If collectibility
risk is considered to be particularly high at the time of arrears clearance or
if IBRD refinances/reschedules nonaccruing loans to a member so that no
debt-service payments remain overdue, its loans would not automatically emerge
from nonaccrual status, even though its eligibility for new loans would have
been restored. The previously overdue interest and other charges would not be
recognized as income in the period the refinancing/rescheduling occurs. After a
suitable period of payment performance has passed from the time of arrears
clearance, a decision on the restoration of accrual status would be made on a
case-by-case basis.
IBRD determines the Accumulated Provision for Loan Losses based on an
assessment of collectibility risk in the total loan portfolio, including loans
in nonaccrual status. The accumulated provision is periodically adjusted based
on a review of the prevailing circumstances and would be used to meet actual
losses on loans. Adjustments to the accumulated provision are recorded as a
charge or credit to income.
During the first quarter of fiscal year 1996, IBRD adopted a new accounting
standard which prescribes the methodology for calculating the accumulated
provision for loan losses for impaired loans. The adoption of the new accounting
standard had no impact on IBRD's Accumulated Provision for Loan Losses or on its
results of operations. In the context of determining the adequacy of the
accumulated provision for loan losses, IBRD considers the present value of
expected cash flows relative to the contractual cash flows for loans in making
the required assessment.
INVESTMENTS: In fiscal year 1995, IBRD began holding certain securities to
maturity to align the investment portfolio with the debt funding these
investments in specific currencies. Remaining investment securities are held in
a trading portfolio and classified as an element of liquidity in the Statement
of Cash Flows due to their nature and IBRD's policies governing the level and
use of such investments.
IBRD carries its investment securities and related financial instruments
classified as its trading portfolio at market value and investment securities in
the held-to-maturity portfolio at amortized cost. From time to time, IBRD enters
into forward contracts for the sale or purchase of investment securities; these
transactions are recorded at the time of commitment.
FAIR VALUE DISCLOSURES: Financial instruments for which market quotations
are available have been valued at the prevailing market value. Financial
instruments for which market quotations are not readily available have been
valued using methodologies and assumptions that necessarily require the use of
subjective judgments. Accordingly, the actual value at which such financial
instruments could be exchanged in a current transaction or whether they are
actually exchangeable is not determinable.
NOTE A--CAPITAL STOCK, RESTRICTED CURRENCIES, MAINTENANCE OF VALUE, AND
MEMBERSHIP
CAPITAL STOCK: At June 30, 1996, IBRD's capital comprised 1,558,478
(1,525,248--June 30, 1995) authorized shares, of which 1,497,325
(1,462,574--June 30, 1995) shares had been subscribed. Each share has a par
value of 0.1 million 1974 SDRs, valued at the rate of $1.20635 per 1974 SDR. Of
the subscribed capital, $10,994 million ($10,858 million--June 30, 1995) has
been paid in, and the remaining $169,636 million ($165,580 million--June 30,
1995) is subject to call only when required to meet the obligations of IBRD
created by borrowing or guaranteeing loans. As to $144,504 million ($141,150
million--June 30, 1995) the restriction on calls is imposed by the Articles of
Agreement and as to $25,132 million ($24,430 million-- June 30, 1995) by
resolutions of the Board of Governors.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RESTRICTED CURRENCIES: The portion of capital subscriptions paid in to IBRD
is divided into two parts: (1) $1,100 million ($1,086 million--June 30, 1995)
initially paid in gold or U.S. dollars and (2) $9,894 million ($9,772
million--June 30, 1995) paid in cash or noninterest-bearing demand obligations
denominated either in the currencies of the respective members or in U.S.
dollars. The amounts mentioned in (1) above, and (i) $777 million ($774
million--June 30, 1995) which were repurchased by members with U.S. dollars, and
(ii) $419 million ($364 million--June 30, 1995) which were the proceeds from
encashments of U.S. dollar-denominated notes which are included in the amounts
mentioned in (2) above, are freely usable by IBRD in any of its operations. The
portion of the amounts paid in U.S. dollar-denominated notes are encashed by
IBRD in accordance with the schedules agreed between the members and IBRD. The
remaining amounts paid in the currencies of the members, referred to as
restricted currencies, are usable by IBRD in its lending operations only with
the consent of the respective members, and for administrative expenses. The
equivalent of $5,522 million ($5,967 million--June 30, 1995) has been used for
lending purposes, with such consent.
MAINTENANCE OF VALUE: Article II, Section 9 of the Articles of Agreement
provides for maintenance of the value, at the time of subscription, of such
restricted currencies, requiring (1) the member to make additional payments to
IBRD in the event that the par value of its currency is reduced or the foreign
exchange value of its currency has, in the opinion of IBRD, depreciated to a
significant extent in its territories and (2) IBRD to reimburse the member in
the event that the par value of its currency is increased.
Since currencies no longer have par values, maintenance of value amounts are
determined by measuring the foreign exchange value of a member's currency
against the standard of value of IBRD capital based on the 1974 SDR. Members are
required to make payments to IBRD if their currencies depreciate significantly
relative to the standard of value. Furthermore, the Executive Directors have
adopted a policy of reimbursing members whose currencies appreciate
significantly in terms of the standard of value.
The net maintenance of value amounts relating to restricted currencies out
on loan are included in Deferred Amounts to Maintain Value of Currency Holdings
and shown as a component of Equity since maintenance of value becomes effective
only as such currencies are repaid to IBRD.
MEMBERSHIP: In February 1993 IBRD's Executive Directors decided that the
SFRY had ceased to be a member of IBRD and that the Republic of Bosnia and
Herzegovina (now called Bosnia and Herzegovina), the Republic of Croatia, the
former Yugoslav Republic of Macedonia, the Republic of Slovenia and the Federal
Republic of Yugoslavia (Serbia and Montenegro) (FRY) are authorized to succeed
to the SFRY's membership when certain requirements are met including entering
into a final agreement with IBRD on IBRD's loans made to or guaranteed by the
SFRY which the particular successor Republic would assume. Four of the five
successor Republics--Bosnia and Herzegovina, the Republic of Croatia, the
Republic of Slovenia and the former Yugoslav Republic of Macedonia--have become
members of IBRD. The paid-in portion of the SFRY's subscribed capital allocated
to the FRY is included under Payments on Account of Pending Subscriptions until
the requirements of succession are met.
NOTE B--INVESTMENTS
As part of its overall portfolio management strategy, IBRD invests in
government and agency obligations, time deposits and related financial
instruments with off-balance sheet risk including futures, forward contracts,
covered forward contracts, options, and short sales.
GOVERNMENT AND AGENCY OBLIGATIONS: These obligations include marketable
bonds, notes and other obligations. Obligations issued or unconditionally
guaranteed by governments of countries require a minimum credit rating of AA, if
denominated in a currency other than the home currency of the issuer, otherwise
no rating is required. Obligations issued by an agency or instrumentality of a
government of a country, a multilateral organization or any other official
entity require a credit rating of AAA.
TIME DEPOSITS: Time deposits include certificates of deposit, bankers'
acceptances, and other obligations issued or unconditionally guaranteed by banks
and other financial institutions.
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FUTURES AND FORWARDS: Futures and forward contracts are contracts for
delayed delivery of securities or money market instruments in which the seller
agrees to make delivery at a specified future date of a specified instrument, at
a specified price or yield. Futures contracts are traded on regulated United
States and international exchanges. IBRD generally closes out most open
positions in futures contracts prior to maturity. Therefore, cash receipts or
payments are mostly limited to the change in market value of the futures
contracts. Futures contracts generally entail daily settlement of the net cash
margin.
COVERED FORWARDS: Covered forwards are agreements in which cash in one
currency is converted into a different currency and, simultaneously, a forward
exchange agreement is executed providing for a future exchange of the two
currencies in order to recover the currency converted.
OPTIONS: Options are contracts that allow the holder of the option to
purchase or sell a financial instrument at a specified price within a specified
period of time from or to the seller of the option. The purchaser of an option
pays a premium at the outset to the seller of the option, who then bears the
risk of an unfavorable change in the price of the financial instrument
underlying the option. IBRD only invests in exchange-traded options. The initial
price of an option contract is equal to the premium paid by the purchaser and is
significantly less than the contract or notional amount. IBRD does not write
uncovered option contracts.
SHORT SALES: Short sales are sales of securities not held in IBRD's
portfolio at the time of the sale. IBRD must purchase the security at a later
date and bears the risk that the market value of the security will move
adversely between the time of the sale and the time the security must be
delivered.
REPURCHASE AND RESALE AGREEMENTS AND SECURITIES LOANS: Repurchase
agreements are contracts under which a party sells securities and simultaneously
agrees to repurchase the same securities at a specified future date at a fixed
price. The reverse of this transaction is called a resale agreement. Securities
loans are contracts under which securities are lent up to a future specified
date at a fixed price.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TRADING PORTFOLIO: A summary of IBRD's position in trading instruments at
June 30, 1996 and June 30, 1995 is as follows:
<TABLE>
<CAPTION>
In millions of U.S. dollars
equivalent
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEUTSCHE MARK OTHER CURRENCIES
JAPANESE YEN U.S. DOLLARS
-------------------- -------------------- -------------------- --------------------
FY96 FY95 FY96 FY95 FY96 FY95 FY96 FY95
--------- --------- --------- --------- --------- --------- --------- ---------
INVESTMENTS
Trading:
Government and agency
obligations:
Carrying value............... 524 1,118 1,119 5,642 3,536 4,280 238 265
Average balance during
period...................... 879 1,019 2,738 4,198 3,473 4,263 257 529
Net gains (losses) for the
period...................... 19 5 (45) 106 (41) 69 7 (5)
Average yield (%)............ 4.60 5.43 1.35 1.43 5.03 5.95 4.82 5.65
Average maturity (years)..... 5.10 4.16 2.94 1.93 3.80 2.80 8.40 1.70
Time deposits:
Carrying value............... 1,041 520 1,775 1,221 5,822 6,055 942 711
Average balance during
period...................... 411 316 1,562 2,305 3,793 4,819 1,035 1,259
Net gains (losses) for the
period...................... -- -- -- -- -- (*) (*) --
Average yield (%)............ 3.38 4.73 0.50 1.26 5.52 6.28 3.96 6.01
Average maturity (years)..... 0.02 0.03 0.07 0.04 0.01 0.03 0.02 0.02
Futures and forwards:
Carrying value............... 1 * 3 9 -- -- * *
Average balance during
period...................... 1 1 3 9 -- -- * 1
Net gains (losses) for the
period...................... (2) (2) (3) (26) 15 (1) (*) 2
Options:
Carrying value............... -- -- * * (*) -- * *
Average balance during
period...................... -- -- * * * * * *
Net gains (losses) for the
period...................... (*) (*) (*) (1) (2) (2) (*) (*)
TOTAL TRADING INVESTMENTS
Carrying value................... 1,566 1,638 2,897 6,872 9,358 10,335 1,180 976
Average balance during period.... 1,291 1,336 4,303 6,512 7,266 9,082 1,292 1,789
Net gains (losses) for the
period.......................... 17 3 (48) 79 (28) 66 7 (3)
REPURCHASE AGREEMENTS AND
SECURITIES LOANS:
Carrying value................... -- (167) -- -- (2,394) (2,400) (45) --
Average balance during period.... (142) (81) -- -- (1,406) (1,525) (27) (6)
Average yield (%)................ -- 3.60 -- -- 5.20 6.12 4.06 --
Average maturity (years)......... -- 0.08 -- -- 0.02 0.01 0.02 --
RESALE AGREEMENTS:
Carrying value................... 571 122 -- -- 655 88 56 36
Average balance during period.... 463 637 -- -- 775 557 68 21
Average yield (%)................ 3.49 4.44 -- -- 5.17 6.17 4.40 7.40
Average maturity (years)......... 0.01 0.03 -- -- 0.03 0.01 ** 0.02
SHORT SALES
Carrying value................... (25) (77) -- -- (54) (*) (*) --
Average balance during period.... (44) (37) (5) (55) (133) (349) (12) (3)
NET COVERED FORWARDS:
Carrying value................... 60 587 (91) (106) (17) (763) 50 283
Average balance during period.... 162 301 (88) 8 (423) (611) 348 303
Average yield (%)................ 3.33 4.62 0.43 1.42 5.40 6.05 3.17 5.14
Average maturity (years)......... 0.01 0.06 0.04 0.16 0.02 0.06 0.01 0.02
<CAPTION>
In millions of U.S. dollars
equivalent
<S> <C> <C>
ALL CURRENCIES
--------------------
FY96 FY95
--------- ---------
INVESTMENTS
Trading:
Government and agency
obligations:
Carrying value............... 5,417 11,305
Average balance during
period...................... 7,347 10,009
Net gains (losses) for the
period...................... (60) 175
Average yield (%)............ 4.12 3.75
Average maturity (years)..... 3.87 2.55
Time deposits:
Carrying value............... 9,580 8,507
Average balance during
period...................... 6,801 8,699
Net gains (losses) for the
period...................... (*) (*)
Average yield (%)............ 4.21 5.45
Average maturity (years)..... 0.03 0.03
Futures and forwards:
Carrying value............... 4 9
Average balance during
period...................... 4 11
Net gains (losses) for the
period...................... 10 (27)
Options:
Carrying value............... * *
Average balance during
period...................... * *
Net gains (losses) for the
period...................... (2) (3)
TOTAL TRADING INVESTMENTS
Carrying value................... 15,001 19,821
Average balance during period.... 14,152 18,719
Net gains (losses) for the
period.......................... (52) 145
REPURCHASE AGREEMENTS AND
SECURITIES LOANS:
Carrying value................... (2,439) (2,567)
Average balance during period.... (1,575) (1,612)
Average yield (%)................ 5.18 5.95
Average maturity (years)......... 0.02 0.02
RESALE AGREEMENTS:
Carrying value................... 1,282 246
Average balance during period.... 1,306 1,215
Average yield (%)................ 4.39 5.49
Average maturity (years)......... 0.02 0.02
SHORT SALES
Carrying value................... (79) (77)
Average balance during period.... (194) (444)
NET COVERED FORWARDS:
Carrying value................... 2 1
Average balance during period.... (1) 1
Average yield (%)................ 3.69 4.83
Average maturity (years)......... 0.02 0.05
</TABLE>
- ------------
*Less than $0.5 million.
**Less than 0.005 years.
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HELD-TO-MATURITY PORTFOLIO: The carrying and fair values of investment
securities in the Held-to-maturity portfolio at June 30, 1996 and June 30, 1995
are as follows:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C> <C> <C>
JUNE 30, 1996
-----------------------------------------------------------------
GROSS GROSS
CARRYING AVERAGE UNREALIZED UNREALIZED FAIR
VALUE YIELD (%) GAINS LOSSES VALUE
----------- ----------- ------------- ------------- ---------
Government and agency obligations............... $ 1,055 8.74 $ 56 $ -- $ 1,111
Time deposits................................... 114 5.81 -- -- 114
----------- --- --- --- ---------
Total........................................... $ 1,169 8.46 $ 56 $ -- $ 1,225
----------- --- --- --- ---------
----------- --- --- --- ---------
<CAPTION>
In millions
JUNE 30, 1995
-----------------------------------------------------------------
GROSS GROSS
CARRYING AVERAGE UNREALIZED UNREALIZED FAIR
VALUE YIELD (%) GAINS LOSSES VALUE
----------- ----------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Government and agency obligations............... $ 1,085 8.75 $ 19 $ -- $ 1,104
Time deposits................................... 118 6.50 -- -- 118
----------- --- --- --- ---------
Total........................................... $ 1,203 8.53 $ 19 $ -- $ 1,222
----------- --- --- --- ---------
----------- --- --- --- ---------
</TABLE>
At June 30, 1996 and June 30, 1995 the Held-to-maturity portfolio was
comprised of investments in pounds sterling only. The annualized rate of return
on average investments in the Held-to-maturity portfolio, held during the fiscal
year ended June 30, 1996, was 8.35 percent (8.11 percent--June 30, 1995).
The expected maturities of investment securities in the Held-to-maturity
portfolio at June 30, 1996 are summarized below:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C>
JUNE 30, 1996
-------------------------------------
NET
CARRYING FAIR UNREALIZED
VALUE VALUE GAINS
----------- --------- -------------
July 1, 1996 through June 30, 1997............................... $ 114 $ 114 $ --
July 1, 1997 through June 30, 2001............................... 162 170 8
July 1, 2001 through June 30, 2006............................... 236 252 16
Thereafter....................................................... 657 689 32
----------- --------- ---
Total............................................................ $ 1,169 $ 1,225 $ 56
----------- --------- ---
----------- --------- ---
</TABLE>
NOTE C--LOANS, COFINANCING AND GUARANTEES
LOANS: On August 1, 1995, IBRD's Executive Directors approved a one-year
interest waiver of 25 basis points on disbursed and outstanding loans for all
payment periods commencing in the fiscal year ending June 30, 1996 for all
eligible borrowers. A similar waiver was in effect for the fiscal year ended
June 30, 1995. In fiscal year 1995, IBRD's Executive Directors approved a
one-time 10 basis point interest waiver, for two consecutive six-month interest
periods, on currency pool loans which a borrower converts from loan terms in
effect between 1982 and 1989 to loan terms in effect since 1989. For the fiscal
year ended June 30, 1996 the combined effect of these waivers was to reduce Net
Income by $286 million ($251 million--June 30, 1995, $238 million--June 30,
1994).
Also, on August 1, 1995, the Executive Directors approved a one-year
commitment fee waiver of 50 basis points on undisbursed loans to all borrowers
for all payment periods commencing in the fiscal year
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ending June 30, 1996. A similar waiver was in effect for the fiscal year ended
June 30, 1995. For the fiscal year ended June 30, 1996 the effect of the
commitment fee waiver was to reduce Net Income by $235 million ($233
million--June 30, 1995, $225 million--June 30, 1994).
In connection with the cessation of the membership of the SFRY discussed in
Note A, in February 1993 IBRD reached an agreement with the FRY for the
apportionment and service of debt due to IBRD on loans made to or guaranteed by
the SFRY and assumed by the FRY, which confirmed a February 1992 interim
agreement between the SFRY (then consisting of the Republics of Bosnia and
Herzegovina, Macedonia, Montenegro and Serbia) and IBRD pertaining, among other
things, to such loans. As of the date hereof, no debt-service payments have been
received by IBRD from the FRY.
On June 14, 1996, the accumulated arrears on loans to the former SFRY
assumed by Bosnia and Herzegovina were cleared through three new consolidation
loans extended by IBRD. These new loans consolidated all outstanding principal
and overdue interest on the loans assumed by Bosnia and Herzegovina. This
resulted in an increase in loans outstanding of $168 million and the deferral of
the recognition of the related interest income. The first consolidation loan is
a currency pool loan of $29 million carrying IBRD's adjustable lending rate for
such loans, currently 6.98 percent, plus 41 basis points. The second
consolidation loan is also a currency pool loan in the amount of $285 million
carrying IBRD's adjustable lending rate for such loans, currently 6.98 percent,
plus 4 basis points. The third consolidation loan is a U. S. dollar LIBOR-based
single currency loan of $307 million carrying IBRD's lending rate for such
loans, currently 5.38 percent. All three consolidation loans have a final
maturity of 30 years, which includes a five-year grace period. The consolidation
loans aggregated the existing assumed loans which had final maturities ranging
from April 1, 1992 to May 15, 2001 and a combined weighted-average interest rate
of 7.95 percent.
At June 30, 1996, no loans payable to IBRD other than those referred to in
the following paragraphs were overdue by more than three months.
At June 30, 1996, the loans made to or guaranteed by certain member
countries and the FRY with an aggregate principal balance outstanding of $2,520
million ($2,618 million--June 30, 1995), of which $1,227 million ($1,411
million--June 30, 1995) was overdue, were in nonaccrual status. At such date,
overdue interest and other charges in respect of these loans totaled $808
million ($864 million--June 30, 1995). If these loans had not been in nonaccrual
status, income from loans for the fiscal year ended June 30, 1996 would have
been higher by $188 million ($156 million--June 39, 1995, $149 million--June 30,
1994). A summary of countries with loans or guarantees in nonaccrual status
follows:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C>
JUNE 30, 1996
--------------------------------------------
PRINCIPAL PRINCIPAL AND NONACCRUAL
BORROWER OUTSTANDING CHARGES OVERDUE SINCE
- -------------------------------------------------- ----------- --------------- --------------
WITH OVERDUES
Federal Republic of Yugoslavia.................. $ 1,204 $ 1,143 September 1992
Iraq............................................ 50 66 December 1990
Liberia......................................... 152 250 June 1987
Sudan........................................... 6 3 January 1994
Syrian Arab Republic............................ 399 514 February 1987
Zaire........................................... 88 59 November 1993
----------- ------
Total............................................. 1,899 2,035
WITHOUT OVERDUES
Bosnia and Herzegovina.......................... 621 -- September 1992
----------- ------
Total............................................. $ 2,520 $ 2,035
----------- ------
----------- ------
</TABLE>
52
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The average recorded investment in nonaccruing loans during the fiscal year
ended June 30, 1996 was $2,453 million ($2,474 million--June 30, 1995).
During the fiscal years ended June 30, 1996 and June 30, 1995, no loans came
out of nonaccrual status. For the fiscal year ended June 30, 1994, the increase
in loan income from loans to countries coming out of nonaccrual status during
the fiscal year was $52 million.
An analysis of the changes to the Accumulated Provision for Loan Losses for
the fiscal years ended June 30, 1996 and June 30, 1995 appears below:
<TABLE>
<CAPTION>
In millions
<S> <C> <C>
1996 1995
--------- ---------
Balance, beginning of the fiscal year....................... $ 3,740 $ 3,324
Provision for loan losses................................... 42 12
Translation adjustment...................................... (442) 404
--------- ---------
Balance, end of the fiscal year............................. $ 3,340 $ 3,740
--------- ---------
--------- ---------
</TABLE>
Under an IDA program established in September 1988, a portion of principal
repayments to IDA are allocated on an annual basis to provide supplementary IDA
credits to IDA-eligible countries that are no longer able to borrow on IBRD
terms, but have outstanding IBRD loans approved prior to September 1988 and have
in place an IDA-supported structural adjustment program. Such supplementary IDA
credits are allocated to countries that meet specified conditions, in proportion
to each country's interest payments due that year on its pre-September 1988 IBRD
loans. To be eligible for such IDA supplemental credits, a member country must
meet IDA's eligibility criteria for lending, must be ineligible for IBRD lending
and must not have had an IBRD loan approved within the last twelve months. To
receive a supplemental credit from the program, a member country cannot be more
than 60 days overdue on its debt-service payments to IBRD or IDA. At June 30,
1996, IDA had approved credits of $1,379 million ($1,179 million--June 30, 1995)
under this program from inception, of which $1,327 million ($1,128 million--June
30, 1995) had been disbursed to the eligible countries.
COFINANCING AND GUARANTEES: IBRD has taken direct participations in, or
provided partial guarantees of, loans syndicated by other financial institutions
for projects or programs also financed by IBRD through regular loans. IBRD also
has provided partial guarantees of securities issued by an entity eligible for
IBRD loans. IBRD's partial guarantees of bond issues are included in the
guarantees amount mentioned below. IBRD's direct participations in syndicated
loans are included in reported loan balances.
Guarantees of loan principal of $1,537 million at June 30, 1996 ($1,610
million--June 30, 1995) were not included in reported loan balances. $122
million of these guarantees were subject to call at June 30, 1996 ($173
million--June 30, 1995). IBRD has partially guaranteed the timely payment of
interest amounts on certain loans that have been sold. At June 30, 1996, these
guarantees, approximating $1 million ($4 million-- June 30, 1995), were subject
to call.
ESTIMATED VALUE OF LOANS: All of IBRD's loans are made to or guaranteed by
countries that are members of IBRD, except for those loans made to IFC. IBRD
does not currently sell its loans, nor is there a market of loans comparable to
those made by IBRD. IBRD has never suffered a loss on any of its loans, although
from time to time certain borrowers have found it difficult to make timely
payments for protracted periods, resulting in their loans being placed in
nonaccrual status. Several borrowers have emerged from nonaccrual status after a
period of time by bringing up-to-date all principal payments and all interest
payments, including interest and other charges on overdue principal payments. In
an attempt to recognize the risk inherent in these overdue payments, IBRD
maintains a provision for loan losses. The balance of the Accumulated Provision
for Loan Losses at June 30, 1996 was $3,340 million ($3,740 million--June 30,
1995).
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIXED RATE LOANS: On loans negotiated prior to July 1982, IBRD charges
interest at fixed rates. The estimated value of these loans has been based on
discounted future cash flows using the rate at which IBRD could undertake
borrowings of comparable maturities at June 30, 1996 plus a 50 basis point
spread.
ADJUSTABLE RATE LOANS: In 1982 IBRD mitigated its interest rate risk by
moving from fixed rate to adjustable rate lending. This rate, reset twice a
year, is based on IBRD's own cost of qualified borrowings plus a 50 basis point
spread, resulting in a pass-through of its average borrowing costs to those
members that benefit from IBRD loans. Since the interest rate for adjustable
rate loans is based on the interest rate of the qualified borrowings, the
estimated value of adjustable rate loans has been based on the relationship of
the fair value to the carrying value of the underlying borrowings.
SINGLE CURRENCY LOANS: IBRD introduced variable rate single currency loans
in 1993 and fixed rate single currency loans in 1995.
The rates charged on variable rate single currency loans are a direct
pass-through of IBRD's cost of funding for these loans, and are reset
semi-annually. They comprise a base rate equal to the six-month reference
interbank offered rate for the applicable currency on the rate reset date and a
total spread consisting of (a) IBRD's average funding cost margin for these
loans and (b) a spread of 50 basis points. The estimated value of variable rate
single currency loans has been based on the relationship of the fair value to
the carrying value of the underlying borrowings.
The rates charged on fixed rate single currency loans are set on semi-annual
rate fixing dates for loan amounts disbursed during the preceding six-month
period and remain fixed for such disbursed amounts until they are repaid. For
the interim period from the date each disbursement is made until its rate fixing
date, interest accrues at a rate equal to the rate on variable rate single
currency loans applicable for such interim period. The fixed lending rate
comprises a base rate reflecting medium- to long-term market rates on the rate
fixing date, plus a total spread consisting of (a) IBRD's funding cost margin
for these loans, (b) a risk premium (intended to compensate IBRD for market
risks incurred in funding these loans), and (c) a spread of 50 basis points. The
estimated value of these loans has been based on discounted future cash flows
using the rate at which IBRD could make similar loans of comparable maturities
at June 30, 1996.
In addition to its other loan products, beginning on September 1, 1996, IBRD
will offer its borrowers the option to convert undisbursed currency pool loan
amounts to single currency loan terms. Further, borrowers will be given the
option to convert disbursed and undisbursed currency pool loan balances to
single currency pool loans. Borrowers selecting single currency pool loans will
have their choice of four different pools (U. S. dollars, Japanese yen, deutsche
mark or Swiss francs) each of which will be a multi-currency pool at inception,
but will be adjusted to reach a level of at least 90 percent in the designated
currency by July 1, 1999 and will be maintained at or above that level
thereafter.
The following table reflects the carrying and estimated values of the loan
portfolio based on current borrowing rates net of the Accumulated Provision for
Loan Losses at June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C> <C>
1996 1995
-------------------- --------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
Fixed rate loans............................ $ 11,126 $ 12,469 $ 17,128 $ 19,065
Adjustable rate loans....................... 96,856 102,994 106,137 114,141
Single currency loans....................... 2,264 2,175 234 235
--------- --------- --------- ---------
Total....................................... 110,246 117,638 123,499 133,441
Less accumulated provision for loan
losses..................................... 3,340 3,340 3,740 3,740
--------- --------- --------- ---------
$ 106,906 $ 114,298 $ 119,759 $ 129,701
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
STATUTORY LENDING LIMIT: Under the Articles of Agreement, the total amount
outstanding of guarantees, participations in loans, and direct loans made by
IBRD may not be increased to an amount exceeding 100 percent of the sum of
Subscribed Capital, reserves, and surplus. At June 30, 1996 and June 30, 1995,
the status of the statutory lending limit is as follows:
<TABLE>
<CAPTION>
In millions
<S> <C> <C>
1996 1995
--------- ---------
Statutory Lending Limit
Subscribed capital............................................ $ 180,630 $ 176,438
Retained earnings............................................. 16,099 15,502
Cumulative translation adjustment............................. 1,056 3,308
Accumulated provision for loan losses......................... 3,340 3,740
--------- ---------
$ 201,125 $ 198,988
--------- ---------
--------- ---------
Loans and Guarantees Outstanding
Loans outstanding............................................. $ 110,246 $ 123,499
Principal guarantees callable................................. 122 173
Interest guarantees callable.................................. 1 4
--------- ---------
$ 110,369 $ 123,676
--------- ---------
--------- ---------
Loans and guarantees outstanding as a percentage of statutory
lending limit.................................................. 55% 62%
</TABLE>
NOTE D--BORROWINGS
Providing liquidity and minimizing the cost of funds are key objectives to
IBRD's overall borrowing strategy. IBRD uses swaps in its borrowing strategy to
lower the overall cost of its borrowings for those members who benefit from IBRD
loans. IBRD undertakes swap transactions with a list of authorized
counterparties. Credit and maturity limits have been established for each
counterparty.
Swaps are used to modify the interest rate and/or currency characteristics
of the borrowing portfolio and are linked to the related borrowings at inception
and remain so throughout the terms of their contracts. The interest component of
a swap is recognized as an adjustment to the borrowing cost over the life of the
contract. Upon termination, the change in a swap's market value is recorded as
an adjustment to the carrying value of the underlying borrowing and recognized
as an adjustment of the borrowing cost over the expected remaining life of the
borrowing. In instances where the underlying borrowing is prepaid, the change in
the associated swap's market value is recognized immediately as an adjustment to
the cost of the underlying borrowing instrument.
CURRENCY SWAPS: Currency swaps are agreements in which proceeds of a
borrowing are converted into a different currency and, simultaneously, a forward
exchange agreement is executed providing for a schedule of future exchanges of
the two currencies in order to recover the currency converted. The combination
of a borrowing and a currency swap produces the financial equivalent of
substituting a borrowing in the currency obtained in the initial conversion for
the original borrowing.
INTEREST RATE SWAPS: Interest rate swaps are agreements which transform a
fixed rate payment obligation in a particular currency into a floating rate
obligation in that currency and vice-versa.
FORWARD INTEREST RATE SWAPS: A forward interest rate swap is an agreement
under which the cash flow exchanges of the underlying interest rate swaps would
begin to take effect from a specified date.
SWAPTIONS: A swaption is an option that gives the holder the right to enter
into an interest rate or currency swap at a certain future date.
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DEFERRED RATE SETTING AGREEMENTS: IBRD enters into deferred rate setting
agreements in conjunction with some of its bond issues. These agreements provide
for payments to be made to or by IBRD reflecting gain or loss on one or more
government securities or related financial instruments. These agreements allow
IBRD to fix the effective interest cost to IBRD of all or a portion of the
issues over a specified period of time after the issue date of the respective
bond. The potential credit loss to IBRD from nonperformance is limited to any
amounts due, but unsettled, from the financial intermediary. However, periodic
mark-to-market settlements on these agreements limit this risk. At June 30, 1996
and June 30, 1995 the effective interest cost of all principal amounts had been
fixed.
The following table reflects the carrying and estimated fair values of the
borrowing portfolio at June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C> <C>
1996 1995
-------------------- --------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
Short-term.................................. $ 4,328 $ 4,371 $ 3,898 $ 3,898
Medium- and long-term....................... 92,391 99,250 104,392 112,977
Swaps
Currency
Payable................................. 19,427 19,841 19,985 20,495
Receivable.............................. (18,010) (19,203) (16,735) (17,717)
Interest rate............................. -- 1,064 -- 1,059
Forward interest rate..................... -- -- -- 23
Swaptions................................... -- 1 -- --
--------- --------- --------- ---------
Total....................................... $ 98,136 $ 105,324 $ 111,540 $ 120,735
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The estimated fair values are based on quoted market prices where such
prices are available. Where no quoted market price is available, the fair value
is estimated based on the cost at which IBRD could currently undertake
borrowings with similar terms and remaining maturities, using the secondary
market yield curve. The fair value of swaps represents the estimated cost of
replacing these contracts on that date.
The average cost of borrowings outstanding during the fiscal year ended June
30, 1996 was 6.44 percent (6.62 percent--June 30, 1995, 6.74 percent--June 30,
1994), reflecting a reduction in interest expense of $170 million ($157
million--June 30, 1995, $234 million--June 30, 1994) as a result of swaps.
NOTE E--CREDIT RISK
COUNTRY CREDIT RISK: Country credit risk is risk of loss including loss due
to protracted arrears on payments from borrowers. IBRD manages country credit
risk through individual country exposure limits according to creditworthiness.
These exposure limits are tied to performance on macroeconomic and structural
policies. In addition, IBRD establishes absolute limits on the share of
outstanding loans to any individual borrower. The country credit risk is further
managed by financial incentives such as pricing loans using IBRD's own cost of
borrowing and partial interest charge waivers conditioned on timely payment that
give borrowers self-interest in IBRD's continued strong intermediation capacity.
Collectibility risk is covered by the Accumulated Provision for Loan Losses.
IBRD also uses a simulation model to assess the adequacy of its reserves in the
case a major borrower, or group of borrowers, stops servicing its loans for an
extended period of time.
COMMERCIAL CREDIT RISK: For the purpose of risk management, IBRD is party
to a variety of financial instruments, certain of which involve elements of
credit risk in excess of the amount recorded on the balance sheet. Credit risk
exposure represents the maximum potential accounting loss due to possible
nonperformance by obligors and counterparties under the terms of the contracts.
Additionally, the nature of the
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
instruments involve contract value and notional principal amounts that are not
reflected in the basic financial statements. For both on- and off-balance sheet
securities, IBRD limits trading to a list of authorized dealers and
counterparties. Credit limits have been established for each counterparty by
type of instrument and maturity category.
The contract value/notional amounts and credit risk exposure, as applicable,
of these financial instruments at June 30, 1996 and June 30, 1995 are given
below:
<TABLE>
<CAPTION>
In millions
<S> <C> <C>
1996 1995
--------- ---------
INVESTMENTS -- TRADING PORTFOLIO
Futures and Forwards
- Long position........................................................ $ 1,499 $ 4,039
- Short position....................................................... 5,875 8,051
- Credit exposure due to potential nonperformance by counterparties.... 2 6
Options
- Long position........................................................ 679 19
- Short position....................................................... 429 --
Covered forwards
- Credit exposure due to potential nonperformance by counterparties.... 2 7
BORROWINGS
Currency swaps
- Credit exposure due to potential nonperformance by counterparties.... 728 713
Interest rate swaps
- Notional principal................................................... 26,396 16,136
- Credit exposure due to potential nonperformance by counterparties.... 96 57
Forward interest rate swaps
- Notional principal................................................... -- 300
- Credit exposure due to potential nonperformance by counterparties.... -- --
Swaptions
- Notional principal................................................... 30 --
- Credit exposure due to potential nonperformance by counterparties.... -- --
</TABLE>
NOTE F--RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS
RETAINED EARNINGS: Retained Earnings is comprised of the following elements
at June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
In millions
<S> <C> <C>
1996 1995
--------- ---------
Special Reserve................................................... $ 293 $ 293
General Reserve................................................... 13,909 13,629
Surplus........................................................... 710 226
Unallocated Net Income............................................ 1,187 1,354
--------- ---------
Total............................................................. $ 16,099 $ 15,502
--------- ---------
--------- ---------
</TABLE>
On August 1, 1995, the Executive Directors allocated $280 million of the net
income earned in the fiscal year ended June 30, 1995 to the General Reserve. On
October 12, 1995, the Board of Governors approved the following transfers, by
way of grant, out of Unallocated Net Income: $250 million in an equivalent
amount in SDRs to IDA, $100 million to the Debt Reduction Facility for IDA-Only
Countries, and $90 million to the Trust Fund for Gaza and West Bank. On the same
day, the Board of Governors also approved a
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
transfer of $634 million to Surplus. On February 23, 1996, the Board of
Governors approved a transfer from Surplus, by way of grant, of $150 million to
a trust fund administered by IDA to finance an emergency reconstruction program
in Bosnia and Herzegovina.
TRANSFERS TO INTERNATIONAL DEVELOPMENT ASSOCIATION: The Board of Governors
has approved aggregate transfers to IDA totaling $4,573 million from Unallocated
Net Income through June 30, 1994. On October 12, 1995, the Board of Governors
approved a transfer to IDA, by way of grant, of $250 million in an equivalent
amount in SDRs out of Unallocated Net Income. At June 30, 1996 and June 30,
1995, all transfers to IDA had been paid.
TRANSFERS TO DEBT REDUCTION FACILITY FOR IDA-ONLY COUNTRIES: The Board of
Governors has approved aggregate transfers to the Debt Reduction Facility for
IDA-Only Countries (DRF) totaling $200 million through June 30, 1994. On October
12, 1995, the Board of Governors approved a transfer to the DRF, by way of
grant, of $100 million out of Unallocated Net Income. At June 30, 1996, $119
million ($105 million-- June 30, 1995) remained payable.
TRANSFER TO TRUST FUND FOR GAZA AND WEST BANK: The Board of Governors has
approved aggregate transfers to the Trust Fund for Gaza and West Bank (TFG),
totaling $50 million through June 30, 1994. On October 12, 1995, the Board of
Governors approved a transfer to the TFG, by way of grant, of $90 million out of
Unallocated Net Income. At June 30, 1996, $70 million ($25 million--June 30,
1995) remained payable.
TRANSFER FOR EMERGENCY ASSISTANCE FOR RWANDA: In November 1994 the Board of
Governors approved a transfer of $20 million for Emergency Assistance for Rwanda
out of Surplus. At June 30, 1996, the transfer for the Emergency Assistance for
Rwanda had been made. At June 30, 1995, $5 million remained payable.
TRANSFER TO TRUST FUND FOR BOSNIA AND HERZEGOVINA: On February 23, 1996,
the Board of Governors approved a transfer from Surplus, by way of grant, of
$150 million to a trust fund administered by IDA to finance an emergency
reconstruction program in Bosnia and Herzegovina. At June 30, 1996, $16 million
remained payable.
NOTE G--ADMINISTRATIVE EXPENSES AND CONTRIBUTIONS TO SPECIAL PROGRAMS
In February 1995, the Executive Directors authorized expenditures for costs
associated with planned staff reductions. During fiscal year 1995, IBRD charged
to expense $131 million for these reductions, of which $53 million was charged
to IDA. The reductions are designed to improve IBRD's and IDA's efficiency,
adjust the staffing skills mix and thereby better meet client demands. The
planned staff reductions are expected to lower future years' administrative
expenses by an amount greater than the associated cost. On October 31, 1995, the
program for planned staff reductions was brought to a close when all affected
staff had been identified and informed. Under this program 608 staff were
identified as redundant at a total cost of $112 million. The difference of $19
million has been taken back as a reduction of administrative expenses, of which
$8 million has been allocated to IDA as a reduction to the management fee
charged to IDA. At June 30, 1996, $26 million ($1 million--June 30, 1995) has
been charged against the accrual of $112 million. This accrual included costs
associated with job search assistance, training, outplacement consulting,
pension plan contributions, medical insurance contributions and related tax
allowances.
Administrative Expenses are net of the management fee of $508 million ($571
million--June 30, 1995, $545 million--June 30, 1994) charged to IDA and $102
million ($111 million--June 30, 1995, $107 million-- June 30, 1994) charged to
reimbursable programs. Included in the amounts charged to reimbursable programs
are allocated charges of $22 million ($21 million--June 30, 1995 and June 30,
1994) charged to IFC and $1 million ($1 million--June 30, 1995 and June 30,
1994) charged to MIGA.
Contributions to special programs represent grants for agricultural
research, the control of onchocerciasis, and other developmental activities.
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE H--TRUST FUNDS
IBRD, alone or jointly with IDA, administers on behalf of donors, including
members, their agencies and other entities, funds restricted for specific uses
which include the cofinancing of IBRD lending projects, debt reduction
operations, technical assistance for borrowers including feasibility studies and
project preparation, global and regional programs and research and training
programs. These funds are placed in trust and are not included in the assets of
IBRD. The distribution of trust fund assets by executing agent at June 30, 1996
and June 30, 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
TOTAL TOTAL
FIDUCIARY NUMBER OF FIDUCIARY NUMBER OF
ASSETS TRUST FUND ASSETS TRUST FUND
(IN MILLIONS) ACCOUNTS (IN MILLIONS) ACCOUNTS
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
IBRD Executed...................................... $ 548 1,314 $ 645 1,294
Recipient Executed................................. 1,308 935 1,270 684
------ ----------- ------ -----------
Total.............................................. $ 1,856 2,249 $ 1,915 1,978
------ ----------- ------ -----------
------ ----------- ------ -----------
</TABLE>
The responsibilities of IBRD under these arrangements vary and range from
services normally provided under its own lending projects to full project
implementation including procurement of goods and services. During the fiscal
year ended June 30, 1996, IBRD received $15 million ($19 million--June 30, 1995,
$17 million--June 30, 1994) as fees for administering trust funds. These fees
have been recorded as a reduction of administrative expenses.
NOTE I--STAFF RETIREMENT PLAN
IBRD has a defined benefit retirement plan (the Plan) covering substantially
all of its staff. The Plan also covers substantially all the staff of IFC and
MIGA. Under the Plan, benefits are based on the years of contributory service
and the highest three-year average of pensionable remuneration as defined in the
Plan, with the staff contributing a fixed percentage of pensionable
remuneration, and IBRD contributing the remainder of the actuarially determined
cost of future Plan benefits. The actuarial present values of Plan obligations
throughout the fiscal year are determined at the beginning of the fiscal year by
the Plan's actuary. All contributions to the Plan and all other assets and
income held for the purposes of the Plan are held by IBRD separately from the
other assets and income of IBRD, IDA, IFC and MIGA and can be used only for the
benefit of the participants in the Plan and their beneficiaries, until all
liabilities to them have been paid or provided for. Plan assets consist
primarily of equity and fixed income securities, with smaller holdings of cash,
real estate and other investments.
Net periodic pension cost for IBRD participants for the fiscal years ended
June 30, 1996 and June 30, 1995 consisted of the following components:
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Service cost--benefits earned during the fiscal year.......... $ 216 $ 186 $ 185
Interest cost on projected benefit obligation................. 360 348 310
Actual return on plan assets.................................. (917) (428) (342)
Net amortization and deferral................................. 437 (3) (50)
--------- --------- ---------
Net periodic pension cost..................................... $ 96 $ 103 $ 103
--------- --------- ---------
--------- --------- ---------
</TABLE>
The portion of this cost that relates to IBRD and is included in
Administrative Expenses for the fiscal year ended June 30, 1996 is $60 million
($65 million--June 30, 1995, $63 million--June 30, 1994). The balance has been
included in the management fee charged to IDA.
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the Plan's funded status at June 30, 1996 and
June 30, 1995:
<TABLE>
<CAPTION>
In millions
<S> <C> <C>
1996 1995
--------- ---------
Actuarial present value of benefit obligations
Accumulated benefit obligation
Vested........................................................ $ (3,543) $ (3,551)
Nonvested..................................................... (36) (22)
--------- ---------
Subtotal.................................................... (3,579) (3,573)
Effect of projected compensation levels......................... (1,718) (1,866)
--------- ---------
Projected benefit obligation.................................. (5,297) (5,439)
Plan assets at fair value......................................... 7,033 5,925
--------- ---------
Plan assets in excess of projected benefit obligation............. 1,736 486
Remaining unrecognized net transition asset....................... (91) (104)
Unrecognized prior service cost................................... 74 82
Unrecognized net gain from past experience different from that
assumed and from changes in assumptions.......................... (1,719) (464)
--------- ---------
Prepaid pension cost.............................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.5 percent (7.5 percent--June 30,
1995). The effect of projected compensation levels was calculated based on a
scale that provides for a decreasing rate of salary increase depending on age,
beginning with 13.3 percent at age 20 and decreasing to 6.8 percent at age 64.
The expected long-term rate of return on assets was 9 percent (9 percent--June
30, 1995).
NOTE J--RETIRED STAFF BENEFITS PLAN
IBRD has a Retired Staff Benefits Plan (RSBP) that provides certain health
care and life insurance benefits to retirees. All staff who are enrolled in the
insurance programs while in active service and who meet certain requirements are
eligible for benefits when they reach early or normal retirement age while
working for IBRD. The RSBP also covers the staff of IFC and MIGA.
Retirees contribute a level amount toward life insurance based on the amount
of coverage. Retiree contributions toward health care are based on length of
service and age at retirement. IBRD annually contributes the remainder of the
actuarially determined cost for future benefits. The actuarial present values of
RSBP obligations throughout the fiscal year are determined at the beginning of
the fiscal year by the RSBP's actuary. All contributions to the RSBP and all
other assets and income held for purposes of the RSBP are held by IBRD
separately from the other assets and income of IBRD, IDA, IFC, and MIGA and can
be used only for the benefit of the participants in the RSBP and their
beneficiaries until all liabilities to them have been paid or provided for. RSBP
assets consist primarily of fixed income and equity securities.
Net periodic postretirement benefits cost for IBRD participants for the
fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994 consisted of
the following components: In millions
<TABLE>
<CAPTION>
In millions
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Service cost--benefits earned during the fiscal year............ $ 32 $ 28 $ 25
Interest cost on accumulated postretirement benefit
obligation..................................................... 45 48 39
Actual return on plan assets.................................... (130) (40) (49)
Net amortization and deferral................................... 87 1 19
--------- --- ---
$ 34 $ 37 $ 34
--------- --- ---
--------- --- ---
</TABLE>
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The portion of this cost that relates to IBRD and is included in
Administrative Expenses for the fiscal year ended June 30, 1996 is $22 million
($23 million--June 30, 1995, $21 million--June 30, 1994). The balance has been
included in the management fee charged to IDA.
The following table sets forth the RSBP's funded status at June 30, 1996 and
June 30, 1995:
<TABLE>
<CAPTION>
In millions
<S> <C> <C>
1996 1995
--------- ---------
Accumulated postretirement benefit obligation
Retirees........................................................... $ (293) $ (257)
Fully eligible active plan participants............................ (128) (125)
Other active plan participants..................................... (285) (292)
--------- ---------
(706) (674)
Plan assets at fair value............................................ 937 770
--------- ---------
Plan assets in excess of accumulated postretirement benefit
obligation.......................................................... 231 96
Unrecognized prior service costs..................................... (12) (14)
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions............................. 107 250
--------- ---------
Prepaid postretirement benefit cost.................................. $ 326 $ 332
--------- ---------
--------- ---------
</TABLE>
Of the $326 million prepaid at June 30, 1996 ($332 million--June 30, 1995),
$295 million is attributable to IBRD ($301 million--June 30, 1995) and is
included in Miscellaneous Assets on the Balance Sheet. The remainder has been
attributed to IFC and MIGA.
For June 30, 1996, the accumulated plan benefit obligation (APBO) was
determined using health care cost trend rates of 14.4 percent to 11.2 percent,
decreasing gradually to 5.5 percent in 2010 and thereafter. The health care cost
trend rate used for June 30, 1995 was 15.1 percent to 11.2 percent decreasing
gradually to 5.1 percent in 2010 and thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point would increase the APBO at June 30, 1996 by $145
million and the net periodic postretirement benefit cost for the fiscal year
then ended by $20 million.
The weighted average discount rate used in determining the APBO was 8
percent (7.5 percent-- June 30, 1995). The expected long-term rate of return on
plan assets was 8 percent (8.25 percent--June 30, 1995).
61
<PAGE>
INFORMATION STATEMENT
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
[WORLD BANK LOGO]
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS INFORMATION STATEMENT, ANY SUPPLEMENTAL
INFORMATION STATEMENT OR ANY PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
BANK OR BY ANY DEALER, UNDERWRITER OR AGENT OF THE BANK. NEITHER THIS
INFORMATION STATEMENT NOR ANY SUPPLEMENTAL INFORMATION STATEMENT OR PROSPECTUS
CONSTITUTES AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SECURITIES IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION IN SUCH JURISDICTION.
------------------------
EXCEPT AS OTHERWISE INDICATED, (1) ALL AMOUNTS CONTAINED IN THIS INFORMATION
STATEMENT AND IN THE FINANCIAL STATEMENTS ARE STATED IN CURRENT UNITED STATES
DOLLARS TRANSLATED AS INDICATED IN "EQUITY" AND THE NOTES TO FINANCIAL
STATEMENTS AND (2) ALL INFORMATION IN THIS INFORMATION STATEMENT IS GIVEN AS OF
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Availability of Information................................................................. 1
Summary Information......................................................................... 2
Selected Financial Data..................................................................... 3
The Bank.................................................................................... 4
Resources of the Bank....................................................................... 4
Equity.................................................................................... 4
Borrowings (After Swaps).................................................................. 7
Statements of Income...................................................................... 9
Operations of the Bank...................................................................... 10
Loan Operations and Lending Policy........................................................ 10
Liquid Assets and Liquidity Policy........................................................ 18
Derivatives............................................................................... 19
Affiliated Organizations.................................................................... 21
Administration of the Bank.................................................................. 22
The Articles of Agreement................................................................... 24
Legal Status, Privileges and Immunities..................................................... 25
Fiscal Year, Announcements and Allocation of Net Income..................................... 25
Index to Financial Statements............................................................... 26
</TABLE>
<PAGE>
FILE NO. 1-3431
REGULATION BW
RULE 3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
SUPPLEMENTAL REPORT OF
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
With respect to its
Short-Term Notes
Filed pursuant to Rule 3 of Regulation BW
Dated: October 10, 1996
<PAGE>
The following information regarding the Short-Term Notes (the "Notes") of
International Bank for Reconstruction and Development (the "Bank") is being
filed pursuant to Rule 3 of Regulation BW. As authorized by Rule 4 of
Regulation BW, certain information is to be provided in the form of a
Supplemental Information Statement, attached as Exhibit A (the "Supplemental
Information Statement").
Item 1. DESCRIPTION OF OBLIGATIONS
- See Supplemental Information Statement.
- Short-Term Notes, to be offered on a continuous basis at a
discount and with maturities of 360 days or less.
- Federal Reserve Bank of New York, 33 Liberty Street, New
York, is the Fiscal Agent.
Item 2. DISTRIBUTION OF OBLIGATIONS
- See Supplemental Information Statement, cover page.
- The Notes will be offered on a continuous basis with
pricing, distribution and commission arrangements as set out
in the Selling Group Agreements dated September 27, 1981, as
amended, between the Bank and each of the dealers listed on
the cover page of the Supplemental Information Statement
(the "Selling Group Agreements").
Item 3. DISTRIBUTION SPREAD
- See Supplemental Information Statement, cover page.
- See Selling Group Agreements, page 5.
Item 4. DISCOUNTS AND COMMISSIONS TO SUB-UNDERWRITERS AND DEALERS
- See Item 2.
Item 5. OTHER EXPENSES OF DISTRIBUTION
- As the Notes will be offered on a continuous basis, precise
expense amounts are not known. Approximate annual pricing
costs are $5,000. The fiscal agency fees charged to the Bank
for services rendered by the Fiscal Agent with respect to
all of the Bank's domestic borrowings is currently about
$600,000 on an annualized basis. While the precise amount
of such fiscal agency fees attributable to the Short-Term
Notes is not determinable, the Bank estimates that between 5
and 10 percent of such fees should be so allocated.
1
<PAGE>
Item 6. APPLICATION OF PROCEEDS
- See Supplemental Information Statement, page 3.
Item 7. EXHIBIT
- Exhibit A: Supplemental Information Statement dated
September 23, 1996.
- See also the Bank's Information Statement dated September
23, 1996, filed as Exhibit A to the Bank's Report dated
October 10, 1996 with respect to one or more proposed issues
of debt securities of the Bank.
2
<PAGE>
SUPPLEMENTAL INFORMATION STATEMENT
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
[WORLD BANK LOGO]
DISCOUNT NOTES
The World Bank, officially known as the International Bank for
Reconstruction and Development (the Bank), intends to offer on a continuous
basis notes (Discount Notes) represented by certificates, in bearer form only,
or in uncertificated form (Bookentry Discount Notes) with maturities of 360 days
or less at a discount and, in the case of Discount Notes in certificated form
only, on an interest-bearing basis. The Discount Notes are offered through a
group of dealers consisting of CS First Boston Corporation; Goldman, Sachs &
Co.; Lehman Brothers Inc.; and Merrill Lynch Government Securities Inc. (the
Dealers). The Discount Notes may be offered in the United States and Eurodollar
markets. The Dealers will not accept any customer's order for Discount Notes to
be issued by the Bank for less than $50,000 aggregate face amount per maturity
date. Bookentry Discount Notes are available in denominations of $5,000 and
integral multiples thereof. Discount Notes in certificated form are available in
denominations of $5,000, $25,000, $100,000 and $1,000,000. The maturities of
Discount Notes offered by the Bank and the discount rate for various maturities
will be established from time to time by the Bank. Information as to the
maturities available and such discount rates (as well as the corresponding
interest rates for Discount Notes to be sold on an interest-bearing basis) may
be obtained from the Dealers.
Each of the Dealers has undertaken to the Bank to use its best efforts to
maintain a secondary market for the Discount Notes.
The Federal Reserve Bank of New York acts as Fiscal Agent of the Bank with
respect to Discount Notes pursuant to a Fiscal Agency Agreement. On original
issuance, all Discount Notes will be issued through the office of the Fiscal
Agent in New York. Bookentry Discount Notes will be held by Holding Institutions
designated by the Dealers including Morgan Guaranty Trust Company of New York
and The Chase Manhattan Bank as depositaries for Morgan Guaranty Trust Company
of New York, Brussels branch, as operator of the Euroclear System, and Cedel
Bank S.A., respectively. After original issuance, all Bookentry Discount Notes
will continue to be held by such Holding Institutions unless a purchaser
arranges for the transfer of its Bookentry Bonds to another Holding Institution.
There will be no conversions from Bookentry Discount Notes to Discount Notes in
certificated form or vice versa. Payment of the purchase price for Discount
Notes and payment of Discount Notes at maturity are to be made in immediately
available funds to accounts of Holding Institutions.
The Discount Notes will not be obligations of any government.
The validity and the terms and conditions of the Discount Notes will be
governed by the law of the State of New York.
September 23, 1996
<PAGE>
BOOKENTRY SYSTEM
The Federal Reserve Bank of New York will take delivery of and hold
Bookentry Discount Notes as record owner and custodian, but only for other
Federal Reserve Banks and Holding Institutions located in the Second Federal
Reserve District. Holding Institutions located in other Federal Reserve
Districts can hold Bookentry Discount Notes through their respective Federal
Reserve Bank or Branch. A Holding Institution is a depository institution that
has an appropriate bookentry account with a Federal Reserve Bank or Branch.
Transfers of Bookentry Discount Notes between Holding Institutions can be made
through the Federal Reserve Communications System.
The aggregate holdings of Bookentry Discount Notes of each Holding
Institution will be reflected in the bookentry account of such Holding
Institution with its Federal Reserve Bank or Branch. Each Holding Institution,
and each other intermediate holder in the chain to the ultimate beneficial
owner, will have the responsibility of establishing and maintaining accounts for
its customers having interests in Bookentry Discount Notes. Federal Reserve
Banks will be responsible only for maintaining the bookentry accounts of Holding
Institutions, effecting transfers on their books and ensuring that payments from
the Bank, through the Federal Reserve Bank of New York, are credited to
appropriate Holding Institutions. With respect to Bookentry Discount Notes,
Federal Reserve Banks will act only on the instructions of Holding Institutions
for which they maintain such Bookentry Discount Notes. The Federal Reserve Banks
will not record pledges of Bookentry Discount Notes.
The Bank will not impose fees in respect of Bookentry Discount Notes.
However, owners of Bookentry Discount Notes may incur fees payable in respect of
the maintenance and operation of the bookentry accounts in which such Bookentry
Discount Notes are held.
UNITED STATES MEMBERSHIP IN THE BANK
The United States became a shareholder of the Bank pursuant to an Act of
Congress (Bretton Woods Agreements Act, 22 U.S.C. SectionSection 286 et seq.).
The United States is the Bank's largest shareholder, having 17.70% of its shares
and 17.20% of the total voting power at June 30, 1996. The United States is
represented on the Bank's Board of Governors by the Secretary of the Treasury.
The United States also selects one of the Bank's 24 Executive Directors, who is
appointed by the President of the United States with the advice and consent of
the Senate. The Bank is an instrumentality of its member governments including
the United States Government.
ELIGIBILITY FOR INVESTMENT
The Discount Notes may be accepted as security at their face amount for all
fiduciary, trust, and public funds, the investment or deposit of which are under
the authority and control of the United States or any officers thereof (31
C.F.R. Section 202.6(b)(2)). The Discount Notes are also acceptable as
collateral for Treasury tax and loan accounts at their face amount (31 C.F.R.
Section 203.14(d)(2)).
The Discount Notes are eligible as security for advances for periods not
exceeding 90 days by Federal Reserve Banks to member banks (12 U.S.C. Section
347). National banks and state member banks of the Federal Reserve System may,
under Federal law, deal in the Discount Notes without limitation and may hold
Discount Notes for their own account subject to a limit of 10% of their
unimpaired capital and surplus (12 U.S.C. Section 24 (Seventh)). Surplus and
reserve funds of Federal Home Loan Banks may be invested in the Discount Notes
if obligations of the Bank are eligible investments for fiduciary and trust
funds under the laws of the state where the Federal Home Loan Bank is located
(12 U.S.C. SectionSection 1431(h) and 1436(a)). The Discount Notes are eligible
for purchase by federally chartered savings associations in an amount not
exceeding 30% of association assets (12 U.S.C. Section 1464(c)(2)(D)). Under the
laws of many states, the Discount Notes and other obligations of the Bank are
legal investments for fiduciary and trust funds, savings banks and insurance
companies.
APPROVAL OF THE UNITED STATES GOVERNMENT
As required by its Articles of Agreement, the Bank has obtained the approval
of the United States Government to the raising of funds in or outside the United
States through the issuance of the Discount Notes.
STATUS UNDER SECURITIES ACTS
Under the provisions of Section 15(a) of the Bretton Woods Agreements Act,
as amended, the Discount Notes are exempted securities within the meaning of
Section 3(a)(2) of the Securities Act of 1933, as amended, and Section 3(a)(12)
of the Securities Exchange Act of 1934, as amended.
2
<PAGE>
LEGAL MATTERS
The legality of the Discount Notes has been passed upon by the Vice
President and General Counsel of the Bank and by Brown & Wood, counsel for the
Dealers, who, with respect to certain matters, have relied upon the opinion of
the counsel of the Bank.
USE OF PROCEEDS
The net proceeds to the Bank from the sale of Discount Notes will be used in
the general operations of the Bank.
TAX MATTERS
The following is a summary of the provisions of the Articles affecting the
taxation of Discount Notes and of certain anticipated United States Federal
income, withholding and estate tax consequences resulting from the ownership of
Discount Notes. This is a limited summary based upon certain generally
applicable United States Federal income, withholding and estate tax laws as now
in effect and as currently interpreted and does not include any description of
the tax laws of any state, local or foreign government that may apply. It is not
intended as tax advice to any person, and all persons considering the purchase
of Discount Notes should consult their own tax counsel or other expert.
Discount Notes and the interest and original issue discount ("OID") thereon
generally will be subject to taxation, including United States Federal income
and estate taxation. Under the Internal Revenue Code of 1986, as amended (the
"Code"), a United States citizen or resident alien individual, as well as a
United States domestic corporation, trust or estate, will be taxable on the
interest and OID accrued or received with respect to Discount Notes depending on
such taxpayer's method of accounting and any special rules applicable to such
taxpayer. Accrual-basis taxpayers generally will be required to include OID in
income ratably over the period in which a Discount Note is held, under methods
provided in the Code. For cash-basis taxpayers generally, OID will not be
subject to ratable inclusion, but gain on the sale or redemption of Discount
Notes will be treated as ordinary income to the extent of the OID attributable
to the period during which the selling taxpayer held such Discount Notes.
The United States Treasury Department has issued to the Bank rulings dated
May 4, 1988 and May 5, 1989 (the "Rulings") regarding certain United States tax
consequences under the Code of the receipt of interest on securities issued by
the Bank. The Rulings provide that interest paid by the Bank on such securities,
including accrued OID, constitutes income from sources outside the United
States.
Under the Rulings, the Bank's payments of interest and original issue
discount ordinarily would not be subject to United States Federal income tax, if
paid to a nonresident alien individual (or foreign partnership, estate or trust)
or to a foreign corporation, whether or not such person is engaged in trade or
business in the United States. However, absent any special statutory or treaty
exception, such payments would be subject to United States Federal income tax
if: (a) such payments are derived by such person in the active conduct of a
banking, financing or similar business within the United States or are received
by a corporation the principal business of which is trading in stock or
securities for its own account, and in either case such payments are
attributable to an office or other fixed place of business of such person within
the United States; or (b) such person is a foreign corporation taxable as an
insurance company carrying on a United States insurance business and such
payments are attributable to its United States business.
The Bank's Articles provide that the Bank's securities and interest, if any,
thereon are not subject to any tax by a member (a) which tax discriminates
against the securities solely because they are issued by the Bank or (b) if the
sole jurisdictional basis for the tax is the place or currency in which the
securities are issued, made payable or paid, or the location of any office or
place of business maintained by the Bank. The imposition of United States
Federal income tax in the manner described above is not inconsistent with the
Bank's Articles.
Under its Articles, the Bank is not under any obligation to withhold or pay
any taxes on any interest on the securities it issues. The Rulings accordingly
determined that neither the Bank nor an agent appointed by it for the purpose of
paying interest on securities issued by the Bank is required to withhold tax on
interest paid by the Bank. Payments of interest and accrued OID on Discount
Notes will be made by the Fiscal Agent without deduction in respect of any such
tax.
Furthermore, the Bank is not subject to the reporting requirements that are
imposed by United States tax law with respect to certain payments of interest
and principal and accruals of OID on debt obligations. Neither the Bank nor the
Fiscal Agent is required to implement backup withholding with respect to such
payments and accruals, as confirmed by
3
<PAGE>
temporary regulations issued by the Internal Revenue Service. However, the
Fiscal Agent may file information returns with the Internal Revenue Service with
respect to payments of interest and principal and accruals of OID within the
United States to certain non-corporate United States persons as if such returns
were required of it.
In addition, brokers, trustees, custodians and other intermediaries within
the United States are subject to the reporting and backup withholding
requirements with respect to certain payments of interest and principal and
accruals of OID on Discount Notes held for the account of certain non-corporate
United States persons. Foreign persons holding Discount Notes within the United
States through such intermediaries may be required to establish their status in
order to avoid information reporting and backup withholding of tax by such
intermediaries in respect of payments and accruals on such Discount Notes.
In the case of United States Federal estate tax, the Rulings determined
that, unless an applicable death tax convention with a foreign country provides
otherwise, securities of the Bank are deemed to be situated outside the United
States for purposes of the United States Federal estate tax and are not
includable in the value of the gross estate for purposes of such tax in the case
of the estate of a nonresident of the United States who is not a citizen of the
United States.
AVAILABILITY OF INFORMATION AND INCORPORATION BY REFERENCE
The Bank is subject to certain informational requirements of Regulation BW,
promulgated by the Securities and Exchange Commission (the Commission) under
Section 15(a) of the Bretton Woods Agreements Act, and in accordance therewith
files its regular quarterly financial statements, the annual report of the Bank
to its Board of Governors and other information with the Commission.
In addition the Bank periodically files with the Commission an information
statement which describes the Bank, its capital, operations, administration,
Articles of Agreement, legal status and certain features of its debt securities
(the "Information Statement"). Each Information Statement also includes the
Bank's latest audited financial statements and its latest unaudited quarterly
financial statements, if any. The current Information Statement dated September
23, 1996 contains the Bank's audited financial statements as of June 30, 1996.
The Information Statement and such regular quarterly and audited financial
statements, reports and other information can be inspected and copied at the
offices of the Commission at Room 1026, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of such material can be obtained from the Public Reference
Section of the Commission at the above address at prescribed rates. The
Information Statement, annual reports and financial statements also may be
inspected at the SEC Library of the New York Stock Exchange.
The Information Statement dated September 23, 1996 and any Information
Statement and any quarterly or annual financial statements filed by the Bank
pursuant to Regulation BW subsequent to September 23, 1996 and prior to the
termination of the offering of Discount Notes under this Supplemental
Information Statement shall be deemed to be incorporated by reference into this
Supplemental Information Statement and to be a part hereof. The Bank will
provide without charge copies of the Information Statement and any quarterly or
annual financial statements incorporated herein by reference. Written or
telephone requests should be directed to the World Bank, 1818 H Street, N.W.,
Washington, D.C. 20433, ATTENTION: Financial Operations Department, (202)
458-0765.
4
