<PAGE>
International Bank for 1818 H Street, N.W. (202) 477-1234
Reconstruction and Washington, D.C. 20433 Cable Address: INTBAFRAD
Development U.S.A.
FILE NO. 1-3431
REGULATION BW
RULE 3
April 23, 1997
VIA EDGAR
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to Rule 3 of Regulation BW, please find attached a Report
dated April 23, 1997 of the International Bank for Reconstruction and
Development (the "Bank") with respect to one or more proposed issues of
debt securities of the Bank.
Sincerely yours,
/s/ Scott B. White
----------------------
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: April 23, 1997
<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 March 31, 1997.
<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, 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) 458-8800, 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 Fukoku Seimei Building 10F, 2-2-2 Uchisaiwai-cho,
Chiyoda-ku, Tokyo 100, Japan, tel: (813) 3597-6662.
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.
March 31, 1997
<PAGE>
SUMMARY INFORMATION
AS OF DECEMBER 31, 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. Its
five largest shareholders are: the United States (with 17.04% of the total
voting power), Japan (6.04%), Germany (4.67%), France (4.48%) and the United
Kingdom (4.48%).
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.
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 ($198.5 billion). Such percentage was 54.8%;
disbursed and outstanding loans amounted to $108.6 billion and callable
guarantees were $151 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 2.2% of the Bank's loan portfolio, were in nonaccrual status. The
aggregate principal balance outstanding in respect of these loans was $2,437
million, of which $1,279 million was overdue. The Bank's accumulated loan loss
provision in respect of its overall portfolio was $3,290 million.
LIQUID ASSETS. The Bank's other major asset is its portfolio of liquid
investments ($16.9 billion, of which $1.3 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 43.1%; liquidity was equivalent to approximately 17.2% 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 ($97.3 billion) were
denominated in 23 currencies or currency units and included $87.5 billion of
fixed rate medium- to long-term borrowings and $9.8 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 $23.1 billion, and the notional principal amount of outstanding
interest rate swaps aggregated $33.7 billion.
EQUITY. The Bank's authorized capital was $188.0 billion, of which $182.3
billion was subscribed. Of the Bank's subscribed capital, approximately $11.0
billion (6.1%) was paid in (of which $7.9 billion was available for lending);
the balance was callable. Shareholders are obligated on the uncalled portion of
their subscriptions ($171.3 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 $16.2 billion of retained
earnings, plus $0.6 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 six months ended December 31, 1996 was $675 million, which
represented an annualized return of 1.06% 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>
SIX MONTHS
ENDED FISCAL YEARS ENDED JUNE 30,
DECEMBER 31, -------------------------------------
1996 1996 1995 1994
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and liquid investments (including investments
classified as held-to-maturity, net of commitments for
settlement and cash collateral received).............. $ 16,850 $ 15,898 $ 18,274 $ 19,095
Loans:
Disbursed and outstanding (1)...................... 108,579 110,246 123,499 109,291
Undisbursed variable rate loans.................... 48,170 52,173 54,308 54,713
Undisbursed fixed rate loans (1)................... 2,977 2,347 1,646 296
Accumulated provision for loan losses.................. 3,290 3,340 3,740 3,324
Borrowings (net of discount/premium):
Short-term......................................... 5,418 4,328 3,898 3,304
Medium- and long-term.............................. 91,888 92,391 104,392 95,511
Equity:
Paid-in capital available for lending, retained
earnings and cumulative translation adjustment.... 24,734 25,129 27,132 23,630
Callable capital................................... 171,245 169,636 165,580 159,338
INCOME STATEMENT DATA:
Total Income........................................... $ 4,232 $ 8,720 $ 9,362 $ 8,590
Net Income (2)......................................... 675 1,187 1,354 1,051
RETURN, COST AND RATIO ANALYSIS:
Average interest rate on disbursed and outstanding
loans during the period............................... 6.71% 6.81% 7.02% 7.34%
Commitment charge on undisbursed loans................. 0.25 0.25 0.25 0.25
Net income as a percentage of average earning assets... 1.06 0.91 1.00 0.85
Financial return on average investments................ 4.87 4.43 5.69 3.53
Return on:
Average disbursed and outstanding loans............ 6.87 6.92 7.12 7.45
Average earning assets............................. 6.62 6.62 6.94 6.82
Average cost (after swaps) of:
New medium- and long-term borrowings drawn down
during the period................................. 4.56 5.28 6.31 4.99
Fixed rate borrowings.......................... 2.12 5.73 6.32 5.03
Variable rate borrowings....................... 5.11 4.69 5.92 3.12
Total borrowings outstanding during the period..... 6.24 6.44 6.62 6.74
Short-term..................................... 5.42 5.55 5.92 3.89
Medium- and long-term.......................... 6.28 6.48 6.64 6.84
Total borrowings and other funds available during
the period........................................ 4.97 5.15 5.35 5.49
Cash and liquid investments as a percentage of
borrowings outstanding after swaps--end of the
period................................................ 17.16 16.20 16.38 18.92
Outstanding loans, participations and callable
guarantees as a percentage of subscribed capital,
reserves and surplus--end of the period (3)........... 54.77 54.88 62.15 57.90
Average life (years) of:
Loans outstanding--end of the period............... 5.3 5.4 5.3 5.3
Medium- and long-term borrowings outstanding-- end
of the period..................................... 5.3 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 waivers was to
reduce Net Income by $246 million for the six months ended December 31,
1996, $521 million for 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) 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.
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 eighty countries are now members of the Bank. A list of the
members as of December 31, 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 cumulative translation
adjustments 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 December 31, 1996:
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<S> <C> <C>
Subscribed capital stock............................................................. $ 182,289
Less--Uncalled portion of subscriptions.............................................. 171,245
---------
Capital stock paid in
Available for lending............................................. $ 7,927
Not available for lending......................................... 3,117 11,044
---------
Deferred Amounts to Maintain Value of Currency Holdings.............................. (53)
Payments on Account of Pending Subscriptions......................................... 8
Retained Earnings (1)................................................................ 16,174
Cumulative Translation Adjustment.................................................... 633
---------
Total............................................................................ $ 27,806
---------
---------
</TABLE>
- ---------
(1) See 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 February 1,
1997 was 1,558,478 shares, equal to $188,007 million, of which 1,512,211 shares,
equal to $182,426 million, had been subscribed. Of the subscribed capital,
$11,048 million had been paid in and $171,378 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) $2,305 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) $8,743 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 December 31, 1996, $5,461
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) $145,940 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) $25,438 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 December 31, 1996, $98,793 million (57.7%) 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
5
<PAGE>
Organization for Economic Cooperation and Development. This amount was equal to
100.6% 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
Australia................................................... 2,951 2,769
Spain....................................................... 2,857 2,682
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................................................... $ 105,342 $ 98,793
------------ ------------
------------ ------------
</TABLE>
-----------------------
(1)Details regarding the capital subscriptions of all members of
the Bank as of December 31, 1996 may be found in Financial
Statements--Statement of Subscriptions to Capital Stock and
Voting Power.
As of December 31, 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 Bank's borrowings after swaps as of December
31, 1996:
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<S> <C> <C>
BORROWINGS: (1)
Short-term
Payable in:
U.S. dollars.................................................. $ 5,176
Deutsche mark................................................. 158
Japanese yen.................................................. 87
---------
Sub-total................................................... 5,421
Less--Net unamortized discounts............................... 5 $ 5,416
---------
Medium- and long-term
Payable in:
U.S. dollars.................................................. 30,802
Japanese yen.................................................. 26,912
Deutsche mark................................................. 25,849
Swiss francs.................................................. 5,617
Other currencies.............................................. 3,590
---------
Sub-total................................................... 92,770
Less--Net unamortized discounts............................... 20 92,750
--------- ---------
Total....................................................... $ 98,166
---------
---------
</TABLE>
- ---------
(1) See also Notes to Financial Statements--Note D.
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. As of December 31, 1996, the Bank's borrowings were
denominated in 23 currencies or currency units. 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 December 31, 1996, the Bank's short-term borrowings
outstanding aggregated $5.4 billion (5.5% of total debt), of which $2.4 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 December
31, 1996, the principal amount payable under outstanding currency swap
transactions aggregated $23.1 billion and the notional principal amount of
outstanding interest rate swap transactions aggregated $33.7 billion.
7
<PAGE>
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 and the six months ended December 31, 1996,
(b) the maturity structure of these borrowings outstanding as of December 31,
1996 and (c) the average life of these borrowings at the end of these periods.
EXPRESSED IN MILLIONS OF U.S. DOLLARS
NET MEDIUM- AND LONG-TERM BORROWINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED JUNE 30,
DECEMBER 31, -------------------------------
1996 1996 1995 1994
---------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total Borrowings.............................................. $ 11,212 $ 10,394 $ 10,880 $ 8,175
Less:
Prepayments................................................. 552 221 661 1,155
Maturities.................................................. 6,419 9,922 10,916 7,967
------- --------- --------- ---------
Net Borrowings............................................ $ 4,241 $ 251 $ (697) $ (947)
------- --------- --------- ---------
------- --------- --------- ---------
</TABLE>
MATURITY STRUCTURE (1)
AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
Not more than 5 years.............................................................. $ 56,571
More than 5 but not more than 10 years............................................. 26,153
More than 10 years................................................................. 9,184
---------
Total.......................................................................... $ 91,908
---------
---------
</TABLE>
AVERAGE LIFE (YEARS)
<TABLE>
<CAPTION>
AS OF AS OF JUNE 30,
DECEMBER 31, ------------------------
1996 1996 1995
----------------- ----- -----
<S> <C> <C> <C>
Total Borrowings Outstanding................................................ 5.3 5.3 5.6
<CAPTION>
1994
-----
<S> <C>
Total Borrowings Outstanding................................................ 5.9
</TABLE>
- ---------
(1) For a more detailed description of the maturity structure of medium- and
long-term borrowings outstanding, see Notes to Financial Statements--Note
D.
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 six-month periods ended December 31, 1996 and 1995 and 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>
SIX MONTHS
ENDED
DECEMBER 31, FISCAL YEARS ENDED JUNE 30,
-------------- --------------------------------------
1996 1995 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
Income from loans:
Interest.......................................................... $3,741 $4,035 $7,804 $8,069 $7,707 $7,957 $7,773
Commitment charges................................................ 58 60 118 118 115 124 115
Income from investments:
Trading
Interest........................................................ 327 388 673 881 827 1,079 1,360
Net gains/(losses)
Realized...................................................... 48 65 31 (23) (29) 170 141
Unrealized.................................................... (36) (29) (83) 168 (127) 19 114
Held-to-maturity
Interest........................................................ 51 51 100 78 -- -- --
Income from securities purchased under resale
agreements......................................................... 38 38 66 61 86 84 148
Other income........................................................ 5 7 11 10 11 9 12
------ ------ ------ ------ ------ ------ ------
Total Income.................................................... 4,232 4,615 8,720 9,362 8,590 9,442 9,663
------ ------ ------ ------ ------ ------ ------
EXPENSES
Borrowing expenses:
Interest (1)...................................................... 3,028 3,352 6,455 6,832 6,539 6,645 6,645
Prepayment costs.................................................. 13 1 9 7 31 60 41
Amortization of issuance costs and other borrowing
costs............................................................ 44 53 106 105 76 157 170
Interest on securities sold under agreements to repurchase and
payable for cash collateral received............................... 26 40 67 83 46 81 127
Administrative expenses (2)......................................... 343 379 733 842 731 679 612
Provision for loan losses........................................... 39 31 42 12 -- 578 353
Other expenses...................................................... 4 4 8 8 6 6 6
------ ------ ------ ------ ------ ------ ------
Total Expenses.................................................. 3,497 3,860 7,420 7,889 7,429 8,206 7,954
------ ------ ------ ------ ------ ------ ------
OPERATING INCOME...................................................... 735 755 1,300 1,473 1,161 1,236 1,709
Less contributions to special programs (3).......................... 60 87 113 119 110 106 64
------ ------ ------ ------ ------ ------ ------
NET INCOME (4)........................................................ $ 675 $ 668 $1,187 $1,354 $1,051 $1,130 $1,645
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
</TABLE>
- -------------
(1) Net of $229 million--December 31, 1996, $70 million--December 31, 1995,
$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>
SIX MONTHS
ENDED
DECEMBER 31, FISCAL YEARS ENDED JUNE 30,
-------------------- -----------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Management fee.................................. $ 244 $ 256 $ 508 $ 571 $ 545 $ 467 $ 395
Allocated Charges............................... 12 11 23 22 22 21 21
Reimbursements from other cost-sharing
arrangements................................... 40 39 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. On October 3, 1996, the Board of Governors approved the following
transfers out of unallocated Net Income: an amount equivalent to $300
million in SDRs (valued at June 30, 1996) to IDA, by way of grant, and $637
million to Surplus. On the same day, the Board of Governors approved the
following transfers, by way of grant, out of Surplus: an amount equivalent
to $300 million in SDRs (valued at June 30, 1996) to IDA and amounts up to
$500 million to the HIPC Debt Initiative Trust Fund (the HIPC Trust Fund)
or other arrangements in support of the Heavily Indebted Poor Countries
(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 the Initiative. On February 3,
1997, the Board of Governors approved a transfer from Surplus, by way of
grant, in the amount of $90 million to the Trust Fund for Gaza and West
Bank.
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%. During the six months ended December 31, 1996, such cost and return
(annualized) were 4.97% and 6.62%, respectively. (See page 16, "Return on
Average Earning Assets and Cost of Funds".) Net income as a percentage of
average earning assets was 1.06% (annualized) for the six months ended December
31, 1996 and 0.91% for the fiscal year ended June 30, 1996. These matters are
described elsewhere in this Information Statement.
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. The reserves-to-loans ratio on this basis at June 30,
1996 equaled 14.1%. The target ratio is subject to annual review. For
allocations to General Reserve, see page 9, "Statement of Income", note (4).
On March 31, 1997, the Bank's Executive Directors approved a medium-term
framework for the Bank's future direction and resource needs, to enable it to
increase its development impact in a cost-effective manner. The net costs of the
initiative, together with associated staff redundancy costs, estimated at about
$205 million (in 1997 dollars), are expected to be phased over a period of four
fiscal years starting with fiscal year 1997.
OPERATIONS OF THE BANK
LOAN OPERATIONS AND LENDING POLICY
From its establishment to December 31, 1996, the Bank had approved loans in
the aggregate amount of $292.6 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
December 31, 1996 totaled $159.7 billion, of which $108.6 billion was disbursed
and $51.1 billion was undisbursed. Cumulative loan repayments as of December 31,
1996, based on exchange rates at the time of disbursement, were $105.7 billion.
Under the Articles as applied, 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. As of December 31, 1996, such total amount was $108.7 billion, or
54.8% 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.
Until recently the Bank had been using an internal guideline, flexibly
applied, to determine the ceiling for its lending to individual countries. On
January 28, 1997, the Bank's Executive Directors approved a new approach to
portfolio concentration under which the Bank's exposure to its largest borrowing
country will be restricted to the lower of an equitable access limit or a
concentration risk limit.
The equitable access limit will be equal to 10% of the Bank's subscribed
capital, reserves and unallocated surplus. The concentration risk limit will be
based on the adequacy of the Bank's equity capital (usable paid-in capital,
reserves and unallocated surplus) relative to its exposure to its largest
borrowing country. The concentration risk limit will be set taking into account
not only current exposure but also that projected over the ensuing three- to
five-year period. It will be determined by the Executive Directors each year at
the time (typically in late July or August) they consider the Bank's reserves
adequacy and the allocation of the Bank's net income for the preceding fiscal
year. For the next several years, the concentration risk limit is expected to be
substantially lower than the equitable access limit (about $19.9 billion as of
December 31, 1996). The Bank's exposure to its largest borrowing country as of
December 31, 1996 was $13.1 billion, including the present value of callable
guarantees.
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, in March 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. In June 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
11
<PAGE>
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 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 December 31, 1996, IDA had approved credits of
$1,530 million under this program from its inception, of which $1,391 million
had been disbursed and is outstanding.
The Bank and the IMF have endorsed an initiative for addressing the debt
problems of a group of countries identified as heavily 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 are to
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.
On October 3, 1996, the Board of Governors approved the transfer from
surplus, by way of grant, of amounts up to $500 million to the HIPC Trust Fund,
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 the Initiative. The HIPC Trust Fund was established on November 7,
1996. The HIPC Trust Fund will help beneficiaries service their debt, including
IDA debt. IDA also may make selective use of grants in the future 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.
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
12
<PAGE>
(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 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 December 31, 1996 is set forth
in Financial Statements--Summary Statement of Loans. A breakdown by sector of
the Bank's total loans outstanding as of December 31, 1996 and loans approved in
the six months ended December 31, 1996 and in each of the last three fiscal
years is as follows (in millions):
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL LOANS
OUTSTANDING AS
OF DECEMBER
31,
SECTORS 1996
- ------------------------------------------------------------ --------------
Agriculture................................................. $ 14,971 14%
Education................................................... 4,806 4
Electric Power and Other Energy............................. 14,762 14
Environment................................................. 856 1
Finance..................................................... 13,168 12
Industry.................................................... 5,908 5
Mining and Other Extractive................................. 1,585 1
Multi-Sector................................................ 17,793 16
Oil and Gas................................................. 4,787 4
Population, Health and Nutrition............................ 1,803 2
Public Sector Management.................................... 3,621 3
Social...................................................... 627 1
Telecommunications and Informatics.......................... 1,323 1
Transportation.............................................. 13,059 12
Urban Development........................................... 5,338 5
Water Supply and Sanitation................................. 3,485 4
-------- ----
Total (1)**................................................. $107,890 100%
-------- ----
-------- ----
<CAPTION>
LOANS APPROVED
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS
ENDED FISCAL YEARS ENDED JUNE 30,
DECEMBER 31, ---------------------------------------------
SECTORS 1996 1996 1995 1994
- ------------------------------------------------------------ ------------ ------------- ------------- -------------
Agriculture................................................. $ 700 12% $ 1,161 8% $ 1,171 7% $ 2,194 15%
Education................................................... 427 7 921 6 1,281 7 1,500 11
Electric Power and Other Energy............................. 482 8 2,899 20 1,803 11 1,613 11
Environment................................................. -- -- 348 2 557 3 680 5
Finance..................................................... 674 12 1,199 8 2,935 17 1,094 8
Industry.................................................... 60 1 217 2 175 1 375 2
Mining and Other Extractive................................. 300 5 571 4 -- -- 14 *
Multi-Sector................................................ 312 5 906 6 2,295 14 606 4
Oil and Gas................................................. 114 2 30 * 462 3 957 7
Population, Health and Nutrition............................ 50 1 1,495 11 451 3 366 3
Public Sector Management.................................... 472 8 1,036 7 636 4 378 3
Social...................................................... 197 3 240 2 597 3 130 1
Telecommunications and Informatics.......................... -- -- 35 * 325 2 405 3
Transportation.............................................. 1,360 24 2,237 15 2,027 12 2,203 15
Urban Development........................................... 355 6 632 4 1,466 9 857 6
Water Supply and Sanitation................................. 237 4 729 5 672 4 872 6
------ ---- ------- ---- ------- ---- ------- ----
Total (1)**................................................. $5,739 100% $14,656 100% $16,853 100% $14,244 100%
------ ---- ------- ---- ------- ---- ------- ----
------ ---- ------- ---- ------- ---- ------- ----
</TABLE>
- -------------
(1) Excludes loans to the IFC.
* 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. These loans 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 the six months
ended December 31, 1996 and in each of the last three fiscal years is as follows
(in millions):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED AS A
DECEMBER 31, % OF TOTAL
INSTRUMENT 1996 LOANS
- --------------------------------------------- ------------------- ------------------
<S> <C> <C>
Rehabilitation loans (1)..................... $ 30 1
Sectoral adjustment loans.................... 820 14
Structural adjustment loans.................. 515 9
------ ---
Total.................................... $ 1,365 24
------ ---
------ ---
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
------------------------------------------------------------------------------------
AS A AS A AS A
% OF TOTAL % OF TOTAL % OF TOTAL
INSTRUMENT 1996 LOANS 1995 LOANS 1994 LOANS
- --------------------------------------------- ------ ------------------ ------ ------------------ ------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Rehabilitation loans (1)..................... $ -- -- $1,260 7 $ 360 3
Sectoral adjustment loans.................... 2,450 17 1,230 7 160 1
Structural adjustment loans.................. 350 2 1,390 8 350 2
------ --- ------ --- ------ ---
Total.................................... $2,800 19 $3,880 22 $ 870 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 December 31,
1996, the Bank had approved loans for debt and debt service reduction totaling
$2.5 billion. The Bank did not make any new lending commitments for this purpose
in the six months ended December 31, 1996. In the fiscal year ended June 30,
1996, the Bank's commitment for this purpose 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 first offered in 1993 as a
pilot program and, since May 1995, have been available 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.
14
<PAGE>
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.
As of December 31, 1996, $93,251 million of disbursed and outstanding loans
and $38,379 million of undisbursed loans carried these terms. For interest
payment periods commencing in the six months ending June 30, 1997, the
applicable lending rate is 6.70%.
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 December 31, 1996, there was $1,384 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 December 31, 1996,
$2,050 million in fixed rate single currency loans in U.S. dollars and French
francs was disbursed and outstanding; $2,767 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 December 31, 1996, $2,761 million
in floating-rate single currency loans in U.S. dollars, French francs and
Deutsche mark was disbursed and outstanding; $9,777 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. At
February 28, 1997, $2,490 million of undisbursed currency pool loans had been
converted to single currency loan terms and $569 million of disbursed and
outstanding currency pool loans had been approved for conversion to single
currency pool terms on July 1, 1997.
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 December 31, 1996, the Bank's exposure on its
guarantees (i.e., the present value in terms of their first call date) was
$1,145 million; the face value of such guarantees was $1,604 million, of which
$150 million was subject to call.
15
<PAGE>
CHARGES ON LOANS AND GUARANTEES
The Bank does not differentiate among borrowers with respect to 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. A similar waiver was in
effect for the fiscal year ended June 30, 1996. Also on August 1, 1996, the
Executive Directors 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 six months ended December 31, 1996 and 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>
SIX MONTHS FISCAL YEARS ENDED JUNE 30,
ENDED
DECEMBER 31, -------------------------------
1996 1996 1995 1994
--------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average interest rate on:
All disbursed and outstanding loans during the fiscal year (1)........... 6.71% 6.81% 7.02% 7.34%
Return on:
Average loans disbursed and outstanding (2).............................. 6.87 6.92 7.12 7.45
Average earning assets (3)............................................... 6.62 6.62 6.94 6.82
Average cost (after swaps) of:
New medium- and long-term borrowings drawn down during the fiscal year... 4.56 5.28 6.31 4.99
Fixed rate borrowings.................................................. 2.12 5.73 6.32 5.03
Variable rate borrowings............................................... 5.11 4.69 5.92 3.12
Total borrowings outstanding during the fiscal year (4).................. 6.24 6.44 6.62 6.74
Total borrowings and other funds available during the fiscal year (5).... 4.97 5.15 5.35 5.49
</TABLE>
- ---------
(1) Computed on the basis of month-end amounts.
(2) Interest on disbursed and outstanding loans and commitment charges on
undisbursed loans, expressed 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 December 31, 1996 were:
borrowed funds, including net payable for currency swaps ($98.2 billion),
capital available for lending ($7.9 billion), retained earnings ($16.2
billion) and cumulative translation adjustment ($0.6 billion).
16
<PAGE>
MATURITY STRUCTURE OF LOANS
The average life of loans outstanding was 5.3 years as of December 31, 1996,
5.4 years as of June 30, 1996 and 5.3 years as of June 30, 1995 and 1994. As of
December 31, 1996, the maturity structure of the Bank's outstanding loans was as
follows (in millions):
<TABLE>
<S> <C>
Not more than 5 years............................................. $ 56,836
More than 5 but not more than 10 years............................ 37,760
More than 10 years................................................ 13,983
---------
Total (1)..................................................... $ 108,579
---------
---------
</TABLE>
- ---------
(1) For a more detailed description of the maturity structure of loans, see
Notes to Financial Statements--Note C.
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 consolidation loans 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 December 31, 1996, the accumulated loan loss provision was $3,290
million (approximately 3.0% 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 the sum of total loans outstanding plus 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 December 31, 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 $2,437 million, of which $1,279
million was overdue. As of such date, overdue interest and other charges in
respect of these loans totaled $856 million
17
<PAGE>
($808 million--June 30, 1996, $864 million--June 30, 1995, $628 million--June
30, 1994), of which $80 million ($188 million--June 30, 1996, $156 million--June
30, 1995, $149 million--June 30, 1994) had been excluded from net income for the
six months ended December 31, 1996.
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 December 31, 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 December 31, 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,
"Statements 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.
18
<PAGE>
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 forgo new borrowings from time to time when costs and available
maturities are considered inappropriate. As of December 31, 1996, the Bank's
cash and liquid investments amounted to $16.9 billion (including investments of
$1.3 billion classified as held-to-maturity), or 43.1% of the next three years'
estimated net cash requirements; this amount was equivalent to approximately
17.2% 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 annualized financial returns on average investments in the Bank's trading
portfolio for the fiscal years 1994 through 1996 and the six months ended
December 31, 1996 were 3.53%, 5.56%, 4.11% and 4.60%, respectively, and in its
held-to-maturity portfolio for the fiscal years 1995 and 1996 and the six months
ended December 31, 1996 were 8.11%, 8.35%, and 8.28%, 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 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 December 31, 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 7.6% of the total outstanding swap
portfolio as of December 31, 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 assets are held. 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 DECEMBER 31, 1996
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
NOTIONAL CURRENT EXPOSURE (3)
PRINCIPAL -----------------------------
PRINCIPAL INTEREST GROSS ESTIMATED
CURRENCY SWAPS- RATE POSITIVE GROSS NEGATIVE POTENTIAL
RATING CATEGORY (1) RECEIVABLES SWAPS (2) RECEIVABLES (PAYABLES) EXPOSURE (4)
- ----------------------------------- ----------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
AAA................................ $ 7,972 $ 18,716 $ 711 $ (953) $ 4,523
AA................................. 10,431 13,711 647 (917) 3,989
A.................................. 3,284 1,248 121 (224) 719
BBB................................ 554 50 144 (56) 248
------- ------------ ------ ------- ------
Total.............................. $ 22,241 $ 33,725 $ 1,623 $ (2,150) $ 9,479
------- ------------ ------ ------- ------
------- ------------ ------ ------- ------
</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) Includes swaptions.
(3) 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.
(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, IFC, IDA and 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 December 31, 1996, 24 of the Bank's Executive Directors
had been elected to serve on MIGA's Board of Directors, which at that date
comprised 24 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-one countries are
now members of IFC. The disbursed and outstanding loans and equity investments
held by IFC as of December 31, 1996 totalled $8,398 million. In December 1992,
IFC's Board of Governors approved a resolution which increased IFC's capital
stock from $2,300 million to $2,450 million, of which $2,196 million had been
subscribed and paid in as of December 31, 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
December 31, 1996 being $4,688 million. As of December 31, 1996, IFC's total
outstanding borrowings (including the net effect of receivables and payables
from currency swaps) were $9,940 million, of which $689 million was due to the
Bank, and undrawn lending commitments from the Bank to IFC were $110 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 financing 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 fifty-nine countries are now members of IDA. As of December 31,
1996, their subscriptions and contributions totaled the equivalent of $91,108
million, of which $461 million was not yet due. The disbursed and outstanding
development credits held by IDA as of December 31, 1996 totaled $75,420 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 $5,423 million. As of December 31, 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 December 31, 1996, $118 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, in June 1996, an Interim Trust Fund
consisting of donor contributions equivalent to SDR 2,211 million was
established. The Interim Trust Fund, administered by IDA, will help fund
operations during the period from July 1, 1996 to June 30, 1997, and
contributions have a separate legal, procurement and accounting status. The
Interim Trust Fund became effective on November 14, 1996, when contributions
totaling over SDR 400 million from seven donors were received. Credits financed
by the Interim Trust Fund are 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 forty-one countries are now members of MIGA,
and an additional seventeen countries have signed the MIGA Convention. As of
December 31, 1996, the authorized capital of MIGA was $1,082 million, of which
$1,064 million had been subscribed. MIGA's maximum amount of contingent
liability for guarantees issued and outstanding totaled $2,266 million as of
December 31, 1996. The Bank may not lend to MIGA.
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 24 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 19 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 such person 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 M. Al-Saad................. Bahrain, Arab Republic of Egypt, Jordan, Kuwait,
Lebanon, Libya, Maldives, Oman, Qatar, Syrian Arab
Republic, United Arab Emirates, Republic of Yemen
Khalid H. Alyahya................. Saudi Arabia
Juanita D. Amatong................ Brazil, Colombia, Dominican Republic, Ecuador, Haiti,
Philippines, Suriname, Trinidad and Tobago
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,
Guinea-Bissau, Madagascar, Mali, Mauritania, Mauritius,
Niger, Rwanda, Sao Tome and Principe, Senegal, Somalia
(informally), Togo, Zaire
Kacim Brachemi.................... Afghanistan, Algeria, Ghana, Islamic Republic of Iran,
Iraq, Morocco, Pakistan, Tunisia
Andrei Bugrov..................... Russian Federation
Juan Cariaga...................... Argentina, Bolivia, Chile, Paraguay, Peru, Uruguay
Joaquim R. Carvalho............... Angola, Botswana, Burundi, Eritrea, Ethiopia, The
Gambia, Kenya, Lesotho, Liberia, Malawi, Mozambique,
Namibia, Nigeria, Seychelles, Sierra Leone, South
Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia,
Zimbabwe
Enzo Del Bufalo................... Costa Rica, El Salvador, Guatemala, Honduras, Mexico,
Nicaragua, Panama, Spain, Venezuela
Gus O'Donnell..................... 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
Luc Hubloue....................... Austria, Belarus, Belgium, Czech Republic, Hungary,
Kazakstan, Luxembourg, Slovak Republic, Slovenia, Turkey
Jannes Hutagalung................. Brunei Darussalam, Fiji, Indonesia, Lao People's
Democratic Republic, Malaysia, Myanmar, Nepal,
Singapore, Thailand, Tonga, Vietnam
Ruth Jacoby....................... Denmark, Estonia, Finland, Iceland, Latvia, Lithuania,
Norway, Sweden
Yong Li........................... China
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
Franco Passacantando.............. Albania, Greece, Italy, Malta, Portugal
Jan Piercy........................ United States
Helmut Schaffer................... Germany
Surendra Singh.................... Bangladesh, Bhutan, India, Sri Lanka
Pieter Stek....................... Armenia, Bosnia and Herzegovina, Bulgaria, Croatia,
Cyprus, Georgia, Israel, former Yugoslav Republic of
Macedonia, Moldova, Netherlands, Romania, Ukraine
</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 and 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 and Resource Management....... Sven Sandstrom
Senior Vice President and General Counsel........................... Ibrahim F. I. Shihata
Senior Vice President, Development Economics and Chief Economist.... Joseph E. Stiglitz
Vice President, Strategy and Resource Management.................... Mark Baird
Vice President, Human Resources..................................... Dorothy Hamachi Berry
Vice President, Latin America and the Caribbean Regional Office..... Shahid Javed Burki
Vice President, Middle East and North Africa Regional Office........ Kemal Dervis
Vice President, Resource Mobilization and Cofinancing............... 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, External Affairs.................................... Mark Malloch Brown
Vice President and Controller....................................... Jules W. Muis
Vice President, South Asia Regional Office.......................... Mieko Nishimizu
Vice President and Treasurer........................................ Gary L. Perlin
Director-General, Operations Evaluation............................. Robert Picciotto
Vice President, Finance and Private Sector Development.............. Jean-Francois Rischard
Vice President, Environmentally Sustainable Development............. Ismail Serageldin
Vice President, East Asia and Pacific Regional Office............... Jean-Michel Severino
Vice President, Financial Policy and Risk Management................ Brian Wilson
Vice President and Secretary........................................ Shengman Zhang
</TABLE>
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.
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.
24
<PAGE>
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, EXTERNAL AUDITORS, ANNOUNCEMENTS AND ALLOCATION OF NET INCOME
FISCAL YEAR
The Bank's fiscal year runs from July 1 to June 30.
EXTERNAL AUDITORS
The Bank has appointed Deloitte Touche Tohmatsu International as its
external auditors, beginning with fiscal year 1998. The selection was made on
the basis of an international competitive bidding process following a decision
by the Bank's Executive Directors that, as a matter of principle, the Bank
should periodically rotate its external auditors, commencing with fiscal year
1998.
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--December 31, 1996 (Unaudited) June 30, 1996 and June 30, 1995............................... 28
Statement of Income for the six months ended December 31, 1996 (Unaudited) and the three fiscal years ended
June 30, 1996............................................................................................ 30
Statement of Changes in Retained Earnings for the six months ended December 31, 1996 (Unaudited) and the
three fiscal years ended June 30, 1996................................................................... 31
Statement of Changes in Cumulative Translation Adjustment for the six months ended December 31, 1996
(Unaudited) and the three fiscal years ended June 30, 1996............................................... 31
Statement of Cash Flows for the six months ended December 31, 1996 (Unaudited) and the three fiscal years
ended June 30, 1996...................................................................................... 32
Summary Statement of Loans--December 31, 1996 (Unaudited) and June 30, 1996................................ 33
Statement of Subscriptions to Capital Stock and Voting Power--December 31, 1996 (Unaudited) and June 30,
1996..................................................................................................... 36
Notes to Financial Statements.............................................................................. 40
</TABLE>
INFORMATION CONCERNING CERTAIN EVENTS THAT OCCURRED SUBSEQUENT TO DECEMBER
31, 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.
[LOGO]
July 31, 1996
27
<PAGE>
BALANCE SHEET
DECEMBER 31, 1996 (UNAUDITED), JUNE 30, 1996 AND JUNE 30, 1995
EXPRESSED IN MILLIONS OF U.S. DOLLARS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
(UNAUDITED)
DUE FROM BANKS
Unrestricted currencies.................................................. $ 34 $ 27 $ 40
Currencies subject to restrictions--Note A............................... 608 612 549
------------ ---------- ----------
642 639 589
------------ ---------- ----------
INVESTMENTS--Notes B and E
Trading.................................................................. 16,677 15,001 19,821
Held-to-maturity......................................................... 1,256 1,169 1,203
------------ ---------- ----------
17,933 16,170 21,024
------------ ---------- ----------
SECURITIES PURCHASED UNDER RESALE AGREEMENTS--Note B....................... 514 1,282 246
NONNEGOTIABLE, NONINTEREST-BEARING DEMAND OBLIGATIONS ON ACCOUNT OF
SUBSCRIBED CAPITAL-- Note A............................................... 1,919 1,765 1,610
AMOUNTS RECEIVABLE TO MAINTAIN VALUE OF CURRENCY HOLDINGS--Note A.......... 463 732 1,106
OTHER RECEIVABLES
Amounts receivable from currency swaps--Notes D and E.................... 22,241 18,010 16,735
Amounts receivable from investment securities traded..................... 258 2,365 1,762
Amounts receivable from covered forwards--Notes B and E.................. 1,159 204 1,307
Accrued income on loans.................................................. 2,092 2,127 2,538
Accrued interest on investments.......................................... 126 92 159
------------ ---------- ----------
25,876 22,798 22,501
------------ ---------- ----------
LOANS OUTSTANDING (see Summary Statement of Loans, Notes C and E)
Total loans.............................................................. 159,725 164,766 179,453
Less undisbursed balance................................................. 51,146 54,520 55,954
------------ ---------- ----------
Loans outstanding...................................................... 108,579 110,246 123,499
Less accumulated provision for loan losses............................... 3,290 3,340 3,740
------------ ---------- ----------
Loans outstanding net of accumulated provision......................... 105,289 106,906 119,759
------------ ---------- ----------
OTHER ASSETS
Unamortized issuance costs of borrowings................................. 488 412 485
Miscellaneous............................................................ 1,385 1,300 1,259
------------ ---------- ----------
1,873 1,712 1,744
------------ ---------- ----------
TOTAL ASSETS............................................................... $ 154,509 $ 152,004 $ 168,579
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
28
<PAGE>
BALANCE SHEET (CONTINUED)
DECEMBER 31, 1996 (UNAUDITED), JUNE 30, 1996 AND JUNE 30, 1995
EXPRESSED IN MILLIONS OF U.S. DOLLARS
LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
(UNAUDITED)
BORROWINGS--Notes D and E
Short-term............................................................... $ 5,418 $ 4,328 $ 3,898
Medium- and long-term.................................................... 91,888 92,391 104,392
------------ ---------- ----------
97,306 96,719 108,290
------------ ---------- ----------
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND PAYABLE FOR CASH
COLLATERAL RECEIVED--Note B............................................... 1,200 2,439 2,567
AMOUNTS PAYABLE TO MAINTAIN VALUE OF CURRENCY HOLDINGS--Note A............. 5 4 24
OTHER LIABILITIES
Amounts payable for currency swaps--Notes D and E........................ 23,101 19,427 19,985
Amounts payable for investment securities purchased...................... 732 1,508 2,231
Amounts payable for covered forwards--Notes B and E...................... 1,116 202 1,306
Accrued charges on borrowings............................................ 2,270 2,352 2,857
Payable for Board of Governors-approved transfers--Note F................ 123 205 135
Accounts payable and miscellaneous liabilities........................... 850 848 723
------------ ---------- ----------
28,192 24,542 27,237
------------ ---------- ----------
TOTAL LIABILITIES.......................................................... 126,703 123,704 138,118
------------ ---------- ----------
EQUITY
CAPITAL STOCK (see Statement of Subscriptions to Capital Stock and Voting
Power, Note A)
Authorized capital (1,558,478 shares--December 31, 1996 and June 30,
1996; 1,525,248 shares--June 30, 1995)
Subscribed capital (1,511,076 shares--December 31, 1996; 1,497,325
shares--June 30, 1996; 1,462,574 shares--June 30, 1995)............... 182,289 180,630 176,438
Less uncalled portion of subscriptions................................. 171,245 169,636 165,580
------------ ---------- ----------
11,044 10,994 10,858
DEFERRED AMOUNTS TO MAINTAIN VALUE OF CURRENCY HOLDINGS--Note A............ (53) 136 770
PAYMENTS ON ACCOUNT OF PENDING SUBSCRIPTIONS-- Note A...................... 8 15 23
RETAINED EARNINGS (see Statement of Changes in Retained Earnings, Note
F)........................................................................ 16,174 16,099 15,502
CUMULATIVE TRANSLATION ADJUSTMENT (see Statement of Changes in Cumulative
Translation Adjustment)................................................... 633 1,056 3,308
------------ ---------- ----------
TOTAL EQUITY............................................................... 27,806 28,300 30,461
------------ ---------- ----------
TOTAL LIABILITIES AND EQUITY............................................... $ 154,509 $ 152,004 $ 168,579
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
29
<PAGE>
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) AND
THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEARS ENDED JUNE 30,
DECEMBER 31, -------------------------------
1996 1996 1995 1994
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
INCOME
Income from loans--Note C
Interest.......................................................... $ 3,741 $ 7,804 $ 8,069 $ 7,707
Commitment charges................................................ 58 118 118 115
Income from investments--Note B
Trading
Interest........................................................ 327 673 881 827
Net gains/(losses)
Realized...................................................... 48 31 (23) (29)
Unrealized.................................................... (36) (83) 168 (127)
Held-to-maturity
Interest........................................................ 51 100 78 --
Income from securities purchased under resale agreements............ 38 66 61 86
Other income........................................................ 5 11 10 11
------ --------- --------- ---------
Total Income.................................................... 4,232 8,720 9,362 8,590
------ --------- --------- ---------
EXPENSES
Borrowing expenses--Note D
Interest.......................................................... 3,028 6,455 6,832 6,539
Prepayment costs.................................................. 13 9 7 31
Amortization of issuance and other borrowing costs................ 44 106 105 76
Interest on securities sold under agreements to repurchase and
payable for cash collateral received............................... 26 67 83 46
Administrative expenses--Notes G, H, I and J........................ 343 733 842 731
Provision for loan losses--Note C................................... 39 42 12 --
Other expenses...................................................... 4 8 8 6
------ --------- --------- ---------
Total expenses.................................................. 3,497 7,420 7,889 7,429
------ --------- --------- ---------
OPERATING INCOME...................................................... 735 1,300 1,473 1,161
Less contributions to special programs--Note G........................ 60 113 119 110
------ --------- --------- ---------
NET INCOME............................................................ $ 675 $ 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 SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) AND
THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEARS ENDED JUNE 30,
DECEMBER 31, -------------------------------
1996 1996 1995 1994
------------ --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
Retained earnings at beginning of the fiscal year................. $ 16,099 $ 15,502 $ 14,468 $ 14,302
Board of Governors-approved transfers to/for--Note F............
International Development Association......................... (600) (250) (300) (465)
Debt Reduction Facility for IDA-Only Countries................ -- (100) -- (100)
Trust Fund for Gaza and West Bank............................. -- (90) -- (50)
Emergency Assistance for Rwanda............................... -- -- (20) --
Trust Fund for Bosnia and Herzegovina......................... -- (150) -- --
Net income for the period....................................... 675 1,187 1,354 1,051
------------ --------- --------- ---------
Retained earnings at end of the period............................ $ 16,174 $ 16,099 $ 15,502 $ 14,468
------------ --------- --------- ---------
------------ --------- --------- ---------
</TABLE>
STATEMENT OF CHANGES IN CUMULATIVE TRANSLATION ADJUSTMENT
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) AND
THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEARS ENDED JUNE 30,
DECEMBER 31, -------------------------------
1996 1996 1995 1994
------------ --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cumulative translation adjustment at
beginning of the fiscal year.................................... $ 1,056 $ 3,308 $ 1,394 $ 541
Translation adjustment for the period........................... (423) (2,252) 1,914 853
------------ --------- --------- ---------
Cumulative translation adjustment at end of the period............ $ 633 $ 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 SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) AND
THE FISCAL YEARS ENDED JUNE 30, 1996, JUNE 30, 1995 AND JUNE 30, 1994
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEARS ENDED JUNE 30,
DECEMBER 31, -------------------------------
1996 1996 1995 1994
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from lending and investing activities
Loans
Disbursements................................................... $ (7,451) $ (13,321) $ (12,803) $ (10,502)
Principal repayments............................................ 5,534 11,494 11,301 10,350
Principal prepayments........................................... 782 812 625 970
Investments: Held-to-maturity
Purchases....................................................... (3,889) (5,417) (8,160) --
Maturities...................................................... 3,907 5,422 6,952 --
------------- --------- --------- ---------
Net cash (used in) provided by lending and investing
activities................................................ (1,117) (1,010) (2,085) 818
------------- --------- --------- ---------
Cash flows from Board of Governors-approved transfers to
International Development Association............................. (599) (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 for Emergency Assistance for Rwanda............ (81) (179) (45) --
------------- --------- --------- ---------
Net cash used in Board of Governors-approved transfers...... (680) (515) (1,497) (475)
------------- --------- --------- ---------
Cash flows from financing activities
Medium-and long-term borrowings
New issues...................................................... 8,123 9,851 9,979 8,177
Retirements..................................................... (6,976) (10,330) (11,579) (9,127)
Net short-term borrowings......................................... 1,038 340 563 (504)
Net currency swaps................................................ (197) (649) (413) (171)
Net capital stock transactions.................................... 44 111 107 199
------------- --------- --------- ---------
Net cash provided by (used in) financing activities......... 2,032 (677) (1,343) (1,426)
------------- --------- --------- ---------
Cash flows from operating activities
Net income........................................................ 675 1,187 1,354 1,051
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization................................... 218 399 281 203
Provision for loan losses....................................... 39 42 12 --
Changes in other assets and liabilities
(Increase) decrease in accrued income on loans and
investments................................................. (51) 176 (59) 90
Increase in miscellaneous assets.............................. (98) (80) (98) (98)
Decrease in accrued charges on borrowings..................... (39) (214) (186) (180)
Increase (decrease) in accounts payable and miscellaneous
liabilities................................................. 16 (18) 109 154
------------- --------- --------- ---------
Net cash provided by operating activities................... 760 1,492 1,413 1,220
------------- --------- --------- ---------
Effect of exchange rate changes on unrestricted cash and liquid
investments........................................................ (131) (1,632) 1,489 580
------------- --------- --------- ---------
Net increase (decrease) in unrestricted cash and liquid
investments........................................................ 864 (2,342) (2,023) 717
Unrestricted cash and liquid investments at beginning of the fiscal
year............................................................... 14,730 17,072 19,095 18,378
------------- --------- --------- ---------
Unrestricted cash and liquid investments at end of the period....... $ 15,594 $ 14,730 $ 17,072 $ 19,095
------------- --------- --------- ---------
------------- --------- --------- ---------
Composed of
Investments held in trading portfolio............................. $ 16,677 $ 15,001 $ 19,821 $ 21,202
Unrestricted currencies........................................... 34 27 40 216
Net (payable) receivable for investment securities
traded/purchased................................................ (474) 857 (469) (992)
Net receivable from covered forwards.............................. 43 2 1 19
Net payable for securities purchased/sold under resale/repurchase
agreements and payable for cash collateral received................ (686) (1,157) (2,321) (1,350)
------------- --------- --------- ---------
$ 15,594 $ 14,730 $ 17,072 $ 19,095
------------- --------- --------- ---------
------------- --------- --------- ---------
Supplemental disclosure
Increase (decrease) in ending balances resulting from exchange
rate fluctuations
Loans outstanding............................................... $ (2,802) $ (14,436) $ 13,331 $ 5,658
Borrowings...................................................... (1,879) (11,731) 10,269 3,931
Currency swaps.................................................. (360) (1,184) 1,553 1,084
Investments: Held-to-maturity................................... 105 (29) (5) --
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
32
<PAGE>
SUMMARY STATEMENT OF LOANS
DECEMBER 31, 1996 (UNAUDITED)
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
LOANS
APPROVED UNDISBURSED PERCENTAGE
BUT NOT YET BALANCE OF OF TOTAL
TOTAL EFFECTIVE EFFECTIVE LOANS LOANS
BORROWER OR GUARANTOR LOANS (1) LOANS (2) OUTSTANDING OUTSTANDING
- -------------------------------------------------------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Algeria................................................. $ 2,737 $ 78 $ 720 $ 1,939 1.79
Argentina............................................... 8,518 751 2,395 5,372 4.95
Armenia................................................. 12 -- 2 10 0.01
Bahamas, The............................................ 9 -- -- 9 0.01
Bangladesh.............................................. 46 -- -- 46 0.04
Barbados................................................ 37 -- 22 15 0.01
Belarus................................................. 163 -- 42 121 0.11
Belize.................................................. 52 -- 20 32 0.03
Bolivia................................................. 61 -- -- 61 0.06
Bosnia and Herzegovina (3).............................. 589 -- -- 589 0.54
Botswana................................................ 69 -- -- 69 0.06
Brazil.................................................. 9,369 568 2,925 5,876 5.41
Bulgaria................................................ 839 24 362 453 0.42
Cameroon................................................ 548 -- 28 520 0.48
Chile................................................... 1,530 -- 437 1,093 1.01
China................................................... 15,408 1,515 6,277 7,616 7.01
Colombia................................................ 3,075 -- 898 2,177 2.00
Congo................................................... 83 -- 1 82 0.08
Costa Rica.............................................. 326 -- 81 245 0.23
Cote d'Ivoire........................................... 1,317 -- 6 1,311 1.21
Croatia................................................. 476 139 142 195 0.18
Cyprus.................................................. 118 -- 54 64 0.06
Czech Republic.......................................... 549 -- 114 435 0.40
Dominica................................................ 4 1 3 -- --
Dominican Republic...................................... 403 140 19 244 0.22
Ecuador................................................. 1,343 32 331 980 0.90
Egypt, Arab Republic of................................. 1,379 20 284 1,075 0.99
El Salvador............................................. 494 139 73 282 0.26
Estonia................................................. 121 14 45 62 0.06
Fiji.................................................... 48 -- 15 33 0.03
Gabon................................................... 112 -- 20 92 0.08
Ghana................................................... 44 -- -- 44 0.04
Grenada................................................. 4 -- 4 -- --
Guatemala............................................... 241 -- 41 200 0.18
Guyana.................................................. 27 -- -- 27 0.02
Honduras................................................ 350 -- * 350 0.32
Hungary................................................. 2,090 8 432 1,650 1.52
India................................................... 12,759 196 3,378 9,185 8.46
Indonesia............................................... 16,175 527 4,521 11,127 10.25
Iran, Islamic Republic of............................... 821 -- 419 402 0.37
Iraq.................................................... 49 -- -- 49 0.05
Jamaica................................................. 711 28 168 515 0.47
Jordan.................................................. 998 20 201 777 0.72
Kazakstan............................................... 924 116 318 490 0.45
Kenya................................................... 312 -- -- 312 0.29
Korea, Republic of...................................... 2,339 -- 521 1,818 1.67
Latvia.................................................. 204 58 71 75 0.07
Lebanon................................................. 551 188 231 132 0.12
Lesotho................................................. 89 -- 32 57 0.05
Liberia................................................. 146 -- -- 146 0.13
</TABLE>
33
<PAGE>
SUMMARY STATEMENT OF LOANS (CONTINUED)
DECEMBER 31, 1996 (UNAUDITED)
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
LOANS
APPROVED UNDISBURSED PERCENTAGE
BUT NOT YET BALANCE OF OF TOTAL
TOTAL EFFECTIVE EFFECTIVE LOANS LOANS
BORROWER OR GUARANTOR LOANS (1) LOANS (2) OUTSTANDING OUTSTANDING
- -------------------------------------------------------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Lithuania............................................... $ 267 $ -- $ 166 $ 101 0.09
Macedonia, former Yugoslav Republic of.................. 92 12 2 78 0.07
Madagascar.............................................. 7 -- -- 7 0.01
Malawi.................................................. 42 -- -- 42 0.04
Malaysia................................................ 1,046 -- 153 893 0.82
Mauritania.............................................. 8 -- -- 8 0.01
Mauritius............................................... 196 -- 72 124 0.11
Mexico.................................................. 15,933 617 2,748 12,568 11.57
Moldova................................................. 226 20 64 142 0.13
Morocco................................................. 4,806 95 979 3,732 3.44
Nicaragua............................................... 44 -- -- 44 0.04
Nigeria................................................. 3,234 -- 472 2,762 2.54
Oman.................................................... 19 -- -- 19 0.02
Pakistan................................................ 4,207 -- 1,200 3,007 2.77
Panama.................................................. 336 -- 137 199 0.18
Papua New Guinea........................................ 376 -- 106 270 0.25
Paraguay................................................ 387 22 227 138 0.13
Peru.................................................... 2,524 85 806 1,633 1.50
Philippines............................................. 6,146 338 1,142 4,666 4.30
Poland.................................................. 3,262 20 1,067 2,175 2.00
Portugal................................................ 57 -- 2 55 0.05
Romania................................................. 1,974 50 915 1,009 0.93
Russian Federation...................................... 6,119 629 2,978 2,512 2.31
St. Kitts and Nevis..................................... 3 2 * 1 *
St. Lucia............................................... 10 2 4 4 *
St. Vincent and the Grenadines.......................... 3 2 1 * *
Senegal................................................. 23 -- -- 23 0.02
Seychelles.............................................. 6 -- 2 4 *
Sierra Leone............................................ 2 -- -- 2 *
Slovak Republic......................................... 286 -- 36 250 0.23
Slovenia................................................ 234 48 31 155 0.14
Sri Lanka............................................... 40 -- -- 40 0.04
Sudan................................................... 6 -- -- 6 0.01
Swaziland............................................... 40 -- 26 14 0.01
Syrian Arab Republic.................................... 382 -- -- 382 0.35
Tanzania................................................ 56 -- -- 56 0.05
Thailand................................................ 2,366 214 552 1,600 1.47
Trinidad and Tobago..................................... 165 -- 87 78 0.07
Tunisia................................................. 2,256 37 609 1,610 1.48
Turkey.................................................. 5,710 5 1,441 4,264 3.93
Turkmenistan............................................ 25 -- 22 3 *
Ukraine................................................. 1,955 406 690 859 0.79
Uruguay................................................. 690 125 119 446 0.41
Uzbekistan.............................................. 235 5 75 155 0.14
Venezuela............................................... 2,288 -- 880 1,408 1.30
</TABLE>
34
<PAGE>
SUMMARY STATEMENT OF LOANS (CONTINUED)
DECEMBER 31, 1996 (UNAUDITED)
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
LOANS
APPROVED UNDISBURSED PERCENTAGE
BUT NOT YET BALANCE OF OF TOTAL
TOTAL EFFECTIVE EFFECTIVE LOANS LOANS
BORROWER OR GUARANTOR LOANS (1) LOANS (2) OUTSTANDING OUTSTANDING
- -------------------------------------------------------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Yugoslavia, Federal Republic of (Serbia/ Montenegro)
(3).................................................... $ 1,178 $ -- $ -- $ 1,178 1.08
Zaire................................................... 87 -- -- 87 0.08
Zambia.................................................. 105 -- -- 105 0.10
Zimbabwe................................................ 661 -- 148 513 0.47
---------- ----------- ------------ ----------- -----------
Subtotal (5)............................................ 158,788 7,295 43,612 107,881 99.36
Caribbean Development Bank (4).......................... 38 -- 29 9 0.01
International Finance Corporation....................... 899 -- 210 689 0.63
---------- ----------- ------------ ----------- -----------
Total--December 31, 1996 (5)............................ $ 159,725 $ 7,295 $ 43,851 $ 108,579 100.00
---------- ----------- ------------ ----------- -----------
---------- ----------- ------------ ----------- -----------
Total--June 30, 1996.................................... $ 164,766 $ 9,500 $ 45,020 $ 110,246
---------- ----------- ------------ -----------
---------- ----------- ------------ -----------
</TABLE>
- ---------
* Indicates amount less than $0.5 million or less than 0.005 percent.
NOTES
(1) Loans totaling $3,748 million ($5,170 million--June 30, 1996) have been
approved by IBRD, but the related agreements have not been signed. Loan
agreements totaling $3,547 million ($4,330 million--June 30, 1996) 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 $2,067 million ($2,258 million--June 30, 1996).
(3) See Notes to Financial Statements--Notes A and C.
(4) 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.
(5) May differ from the sum of individual figures shown due to rounding.
The Notes to Financial Statements are an integral part of these Statements.
35
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER
DECEMBER 31, 1996 (UNAUDITED)
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS VOTING POWER
----------------------------------------------------------- ----------------------
PERCENTAGE AMOUNTS NUMBER PERCENTAGE
OF TOTAL AMOUNTS SUBJECT OF OF
MEMBER SHARES TOTAL AMOUNTS PAID IN (1) TO CALL (1) VOTES TOTAL
- ---------------------------------------- --------- ----------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Afghanistan............................. 300 0.02 $ 36.2 $ 3.6 $ 32.6 550 0.04
Albania................................. 830 0.05 100.1 3.6 96.5 1,080 0.07
Algeria................................. 9,252 0.61 1,116.1 67.1 1,049.0 9,502 0.61
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 1.19 2,160.7 132.2 2,028.4 18,161 1.17
Armenia................................. 1,139 0.08 137.4 5.9 131.5 1,389 0.09
Australia............................... 24,464 1.62 2,951.2 181.8 2,769.5 24,714 1.59
Austria................................. 11,063 0.73 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 0.08
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 1.92 3,496.4 215.8 3,280.6 29,233 1.88
Belize.................................. 586 0.04 70.7 1.8 68.9 836 0.05
Benin................................... 868 0.06 104.7 3.9 100.8 1,118 0.07
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 1.65 3,009.4 185.1 2,824.2 25,196 1.62
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................................ 1,527 0.10 184.2 9.0 175.2 1,777 0.11
Canada.................................. 44,795 2.96 5,403.8 334.9 5,068.9 45,045 2.89
Cape Verde.............................. 508 0.03 61.3 1.2 60.1 758 0.05
Central African Republic................ 862 0.06 104.0 3.9 100.1 1,112 0.07
Chad.................................... 862 0.06 104.0 3.9 100.1 1,112 0.07
Chile................................... 6,931 0.46 836.1 49.6 786.6 7,181 0.46
China................................... 44,799 2.96 5,404.3 335.0 5,069.3 45,049 2.90
Colombia................................ 6,352 0.42 766.3 45.2 721.1 6,602 0.42
Comoros................................. 282 0.02 34.0 0.3 33.7 532 0.03
Congo................................... 927 0.06 111.8 4.3 107.5 1,177 0.08
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 0.42
Denmark................................. 10,251 0.68 1,236.6 74.6 1,162.0 10,501 0.67
Djibouti................................ 559 0.04 67.4 1.6 65.9 809 0.05
Dominica................................ 504 0.03 60.8 1.1 59.7 754 0.05
Dominican Republic...................... 2,092 0.14 252.4 13.1 239.3 2,342 0.15
Ecuador................................. 2,771 0.18 334.3 18.2 316.1 3,021 0.19
Egypt, Arab Republic of................. 7,108 0.47 857.5 50.9 806.6 7,358 0.47
El Salvador............................. 141 0.01 17.0 1.7 15.3 391 0.03
</TABLE>
36
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (CONTINUED)
DECEMBER 31, 1996 (UNAUDITED)
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS VOTING POWER
----------------------------------------------------------- ----------------------
PERCENTAGE AMOUNTS NUMBER PERCENTAGE
OF TOTAL AMOUNTS SUBJECT OF OF
MEMBER SHARES TOTAL AMOUNTS PAID IN (1) TO CALL (1) VOTES TOTAL
- ---------------------------------------- --------- ----------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Equatorial Guinea....................... 715 0.05 $ 86.3 $ 2.7 $ 83.5 965 0.06
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 0.06 118.0 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 4.59 8,371.7 520.4 7,851.3 69,647 4.48
Gabon................................... 987 0.07 119.1 5.1 113.9 1,237 0.08
Gambia, The............................. 543 0.04 65.5 1.5 64.0 793 0.05
Georgia................................. 1,584 0.10 191.1 9.3 181.8 1,834 0.12
Germany................................. 72,399 4.79 8,733.9 542.9 8,190.9 72,649 4.67
Ghana................................... 1,525 0.10 184.0 12.7 171.2 1,775 0.11
Greece.................................. 1,684 0.11 203.1 14.1 189.1 1,934 0.12
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 0.14
Guinea.................................. 725 0.05 87.5 5.0 82.4 975 0.06
Guinea-Bissau........................... 540 0.04 65.1 1.4 63.7 790 0.05
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 0.08
Honduras................................ 641 0.04 77.3 2.3 75.0 891 0.06
Hungary................................. 8,050 0.53 971.1 58.0 913.1 8,300 0.53
Iceland................................. 1,258 0.08 151.8 6.8 144.9 1,508 0.10
India................................... 44,795 2.96 5,403.8 333.7 5,070.1 45,045 2.89
Indonesia............................... 14,981 0.99 1,807.2 110.3 1,697.0 15,231 0.98
Iran, Islamic Republic of............... 23,686 1.57 2,857.4 175.8 2,681.5 23,936 1.54
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 0.35
Israel.................................. 4,750 0.31 573.0 33.2 539.8 5,000 0.32
Italy................................... 44,795 2.96 5,403.8 334.8 5,069.0 45,045 2.89
Jamaica................................. 2,578 0.17 311.0 16.8 294.2 2,828 0.18
Japan................................... 93,770 6.21 11,311.9 703.5 10,608.5 94,020 6.04
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 0.17
Kiribati................................ 465 0.03 56.1 0.9 55.2 715 0.05
Korea, Republic of...................... 9,372 0.62 1,130.6 67.9 1,062.7 9,622 0.62
Kuwait.................................. 13,280 0.88 1,602.0 97.4 1,504.6 13,530 0.87
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............................... 1,507 0.10 181.8 8.7 173.1 1,757 0.11
</TABLE>
37
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (CONTINUED)
DECEMBER 31, 1996 (UNAUDITED)
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS VOTING POWER
----------------------------------------------------------- ----------------------
PERCENTAGE AMOUNTS NUMBER PERCENTAGE
OF TOTAL AMOUNTS SUBJECT OF OF
MEMBER SHARES TOTAL AMOUNTS PAID IN (1) TO CALL (1) VOTES TOTAL
- ---------------------------------------- --------- ----------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Luxembourg.............................. 1,652 0.11 $ 199.3 $ 9.8 $ 189.5 1,902 0.12
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.............................. 900 0.06 108.6 4.1 104.4 1,150 0.07
Mauritius............................... 1,242 0.08 149.8 6.7 143.1 1,492 0.10
Mexico.................................. 18,804 1.24 2,268.4 139.0 2,129.4 19,054 1.22
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 0.16 299.7 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 2.35 4,282.9 264.8 4,018.1 35,753 2.30
New Zealand............................. 7,236 0.48 872.9 51.9 821.0 7,486 0.48
Nicaragua............................... 608 0.04 73.3 2.1 71.3 858 0.06
Niger................................... 852 0.06 102.8 3.8 99.0 1,102 0.07
Nigeria................................. 12,655 0.84 1,526.6 92.7 1,433.9 12,905 0.83
Norway.................................. 9,982 0.66 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 0.35 643.1 37.5 605.6 5,581 0.36
Philippines............................. 6,844 0.45 825.6 48.9 776.7 7,094 0.46
Poland.................................. 10,908 0.72 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 0.27
Russian Federation...................... 44,795 2.96 5,403.8 333.9 5,070.0 45,045 2.89
Rwanda.................................. 1,046 0.07 126.2 5.2 120.9 1,296 0.08
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................... 495 0.03 59.7 1.1 58.6 745 0.05
Saudi Arabia............................ 44,795 2.96 5,403.8 335.0 5,068.9 45,045 2.89
Senegal................................. 2,072 0.14 250.0 13.0 237.0 2,322 0.15
</TABLE>
38
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (CONTINUED)
DECEMBER 31, 1996 (UNAUDITED)
EXPRESSED IN MILLIONS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SUBSCRIPTIONS VOTING POWER
----------------------------------------------------------- ----------------------
PERCENTAGE AMOUNTS NUMBER PERCENTAGE
OF TOTAL AMOUNTS SUBJECT OF OF
MEMBER SHARES TOTAL AMOUNTS PAID IN (1) TO CALL (1) VOTES TOTAL
- ---------------------------------------- --------- ----------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Seychelles.............................. 263 0.02 $ 31.7 $ 0.2 $ 31.6 513 0.03
Sierra Leone............................ 718 0.05 86.6 3.0 83.6 968 0.06
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 0.89 1,624.0 98.8 1,525.2 13,712 0.88
Spain................................... 23,686 1.57 2,857.4 175.6 2,681.7 23,936 1.54
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 0.99 1,806.4 110.2 1,696.2 15,224 0.98
Switzerland............................. 26,606 1.76 3,209.6 197.2 3,012.4 26,856 1.73
Syrian Arab Republic.................... 2,202 0.15 265.6 14.0 251.7 2,452 0.16
Tajikistan.............................. 1,060 0.07 127.9 5.3 122.5 1,310 0.08
Tanzania................................ 1,295 0.09 156.2 10.0 146.2 1,545 0.10
Thailand................................ 6,349 0.42 765.9 45.2 720.7 6,599 0.42
Togo.................................... 1,105 0.07 133.3 5.7 127.6 1,355 0.09
Tonga................................... 494 0.03 59.6 1.1 58.5 744 0.05
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 0.03 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 0.72 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 4.59 8,371.7 539.5 7,832.2 69,647 4.48
United States........................... 264,969 17.54 31,964.5 1,998.4 29,966.2 265,219 17.04
Uruguay................................. 2,812 0.19 339.2 18.6 320.7 3,062 0.20
Uzbekistan.............................. 2,493 0.16 300.7 16.1 284.7 2,743 0.18
Vanuatu................................. 586 0.04 70.7 1.8 68.9 836 0.05
Venezuela............................... 20,361 1.35 2,456.2 150.8 2,305.5 20,611 1.32
Vietnam................................. 968 0.06 116.8 8.1 108.7 1,218 0.08
Western Samoa........................... 531 0.04 64.1 1.4 62.7 781 0.05
Yemen, Republic of...................... 2,212 0.15 266.8 14.0 252.8 2,462 0.16
Zaire................................... 2,643 0.17 318.8 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--December 31, 1996 (2)............ 1,511,076 100.00 $ 182,289 $ 11,044 $ 171,245 1,556,076 100.00
--------- ----------- --------- ----------- ----------- --------- -----------
--------- ----------- --------- ----------- ----------- --------- -----------
Total--June 30, 1996.................... 1,497,325 100.00 $ 180,630 $ 10,994 $ 169,636 1,542,325
--------- ----------- --------- ----------- ----------- ---------
--------- ----------- --------- ----------- ----------- ---------
</TABLE>
- ---------
NOTES
(1) See Notes to Financial Statements--Note A.
(2) May differ from the sum of individual figures shown due to rounding.
The Notes to Financial Statements are an integral part of these Statements.
39
<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). Each
of these organizations is legally and financially independent from IBRD, with
separate assets and liabilities, and IBRD is not liable for their respective
obligations. 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 judgments
have been used in the computation of estimated and fair values of loans and
borrowings, the adequacy of the Accumulated Provision for Loan Losses, and the
present value of obligations under the Staff Retirement and Retired Staff
Benefits Plans.
During the first quarter of fiscal year 1997, IBRD adopted prospectively the
Statement of Financial Accounting Standards No. 121, entitled Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of ,
which prescribes that long-lived assets and certain intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This accounting standard
does not apply to financial instruments. The adoption of this standard had no
impact on IBRD's financial statements.
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 swaps) 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 period. Income and expenses are translated at the market exchange rates 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.
40
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 "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
unallocated Net Income and Surplus, components 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.
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 dates no other country met these criteria.
41
<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 may not automatically emerge
from nonaccrual status, even though its eligibility for new loans may have been
restored. The previously overdue interest and other charges are not 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 is 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. 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.
BORROWINGS: To ensure funds are available for lending and liquidity
purposes, IBRD borrows in the worldwide capital markets offering its securities
to private and governmental buyers. IBRD issues short-term and medium- and
long-term debt instruments denominated in various currencies with both fixed and
adjustable interest rates. Borrowings are carried on the balance sheet at their
par value (face value) adjusted for any unamortized premiums or discounts.
Issuance costs associated with a bond offering are deferred and amortized over
the period during which the related indebtedness is outstanding. The unamortized
balance of the issuance costs is included in Other Assets on the balance sheet,
and the issuance costs amortization is presented as a separate element under
Borrowing Expenses on the income statement. Amortization of discounts and
premiums is included in interest under Borrowing Expenses on the income
statement.
In connection with its borrowing and liability management operations, IBRD
also undertakes a substantial volume of currency and interest rate swap
transactions. Currency swap payables and receivables are recorded on a
historical cost basis and are separate items on the balance sheet. The notional
principal on interest rate swaps is treated as an off-balance sheet item. Income
and expenses from swaps are included in Interest under Borrowing Expenses on the
income statement. Gains and losses on termination of swaps that are designated
and performing as hedges, where the hedged borrowings remain in place, are
deferred and amortized as adjustments to interest expense.
42
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 December 31, 1996, IBRD's capital comprised 1,558,478
(1,558,478--June 30, 1996, 1,525,248--June 30, 1995) authorized shares, of which
1,511,076 (1,497,325--June 30, 1996, 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, $11,044 million
($10,994 million--June 30, 1996, $10,858 million--June 30, 1995) has been paid
in, and the remaining $171,245 million ($169,636 million--June 30, 1996,
$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
$145,831 million ($144,504 million--June 30, 1996, $141,150 million--June 30,
1995) the restriction on calls is imposed by the Articles of Agreement and as to
$25,414 million ($25,132 million--June 30, 1996, $24,430 million--June 30, 1995)
by resolutions of the Board of Governors.
RESTRICTED CURRENCIES: The portion of capital subscriptions paid in to IBRD
is divided into two parts: (1) $1,105 million ($1,100 million--June 30, 1996,
$1,086 million--June 30, 1995) initially paid in gold or U.S. dollars and (2)
$9,939 million ($9,894 million--June 30, 1996, $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 ($777 million-- June 30, 1996, $774
million--June 30, 1995) which were repurchased by members with U.S. dollars, and
(ii) $423 million ($419 million--June 30, 1996, $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 $5,461 million ($5,522 million--June
30, 1996, $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.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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.
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.
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.
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.
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.
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TRADING PORTFOLIO: A summary of IBRD's position in trading instruments at
December 31, 1996 and June 30, 1996 is as follows:
<TABLE>
<CAPTION>
DEUTSCHE MARK
JAPANESE YEN U.S. DOLLARS
-------------- -------------- ---------------
DEC. JUN. DEC. JUN. DEC. JUN.
1996 1996 1996 1996 1996 1996
------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
IN MILLIONS OF U.S. DOLLARS EQUIVALENT
TRADING:
Government and agency obligations:
Carrying value..................................... 191 524 114 1,119 2,862 3,536
Average balance during fiscal year to date......... 429 879 503 2,738 2,496 3,473
Net gains (losses) for the fiscal year to date..... (*) 19 (*) (45) 7 (41)
Average yield (%).................................. 3.09 4.60 1.84 1.35 5.62 5.03
Average maturity (years)........................... 2.27 5.10 0.71 2.94 4.15 3.80
Time deposits:
Carrying value..................................... 894 1,041 2,148 1,775 9,002 5,822
Average balance during fiscal year to date......... 792 411 2,360 1,562 6,660 3,793
Net gains (losses) for the fiscal year to date..... -- -- -- -- -- --
Average yield (%).................................. 3.79 3.38 0.49 0.50 6.26 5.52
Average maturity (years)........................... 0.05 0.02 0.09 0.07 0.04 0.01
Futures and forwards:
Carrying value..................................... * 1 1 3 -- --
Average balance during fiscal year to date......... 1 1 2 3 -- --
Net gains (losses) for the fiscal year to date..... * (2) 1 (3) (6) 15
Options:
Carrying value..................................... -- -- * * * (*)
Average balance during fiscal year to date......... -- -- * * * *
Net gains (losses) for the fiscal year to date..... (*) (*) (*) (*) (*) (2)
TOTAL TRADING INVESTMENTS:***
Carrying value....................................... 1,085 1,566 2,263 2,897 11,864 9,358
Average balance during fiscal year to date........... 1,222 1,291 2,865 4,303 9,157 7,266
Net gains (losses) for the fiscal year to date * 17 1 (48) 1 (28)
REPURCHASE AGREEMENTS AND SECURITIES LOANS:
Carrying value....................................... -- -- -- -- (1,108) (2,394)
Average balance during fiscal year to date........... (61) (142) -- -- (958) (1,406)
Average yield (%).................................... -- -- -- -- 5.73 5.20
Average maturity (years)............................. -- -- -- -- 0.09 0.02
RESALE AGREEMENTS:
Carrying value....................................... 116 571 -- -- 278 655
Average balance during fiscal year to date........... 510 463 -- -- 1,085 775
Average yield (%).................................... 4.00 3.49 -- -- 5.12 5.17
Average maturity (years)............................. 0.01 0.01 -- -- 0.05 0.03
SHORT SALES:
Carrying value....................................... -- (25) -- -- (217) (54)
Average balance during fiscal year to date........... (77) (44) -- (5) (184) (133)
NET COVERED FORWARDS:
Carrying value....................................... (159) 60 (705) (91) 1,088 (17)
Average balance during fiscal year to date........... (223) 162 (465) (88) 747 (423)
Average yield (%).................................... 3.21 3.33 0.44 0.43 5.60 5.40
Average maturity (years)............................. 0.18 0.01 0.17 0.04 0.16 0.02
<CAPTION>
OTHER ALL
CURRENCIES CURRENCIES
-------------- ----------------
DEC. JUN. DEC. JUN.
1996 1996 1996 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
TRADING:
Government and agency obligations:
Carrying value..................................... 172 238 3,339 5,417
Average balance during fiscal year to date......... 234 257 3,662 7,347
Net gains (losses) for the fiscal year to date..... 10 7 17 (60)
Average yield (%).................................. 5.12 4.82 5.01 4.12
Average maturity (years)........................... 2.98 8.40 3.59 3.87
Time deposits:
Carrying value..................................... 1,293 942 13,337 9,580
Average balance during fiscal year to date......... 1,059 1,035 10,871 6,801
Net gains (losses) for the fiscal year to date..... -- (*) -- (*)
Average yield (%).................................. 3.96 3.96 4.94 4.21
Average maturity (years)........................... 0.08 0.02 0.06 0.03
Futures and forwards:
Carrying value..................................... * * 1 4
Average balance during fiscal year to date......... * * 3 4
Net gains (losses) for the fiscal year to date..... * (*) (4) 10
Options:
Carrying value..................................... * * * *
Average balance during fiscal year to date......... * * * *
Net gains (losses) for the fiscal year to date..... * (*) (*) (2)
TOTAL TRADING INVESTMENTS:***
Carrying value....................................... 1,465 1,180 16,677 15,001
Average balance during fiscal year to date........... 1,292 1,292 14,536 14,152
Net gains (losses) for the fiscal year to date 10 7 12 (52)
REPURCHASE AGREEMENTS AND SECURITIES LOANS:
Carrying value....................................... (92) (45) (1,200) (2,439)
Average balance during fiscal year to date........... (51) (27) (1,070) (1,575)
Average yield (%).................................... 2.92 4.06 5.51 5.18
Average maturity (years)............................. 0.02 0.02 0.08 0.02
RESALE AGREEMENTS:
Carrying value....................................... 120 56 514 1,282
Average balance during fiscal year to date........... 62 68 1,657 1,306
Average yield (%).................................... 3.07 4.40 4.39 4.39
Average maturity (years)............................. 0.03 ** 0.03 0.02
SHORT SALES:
Carrying value....................................... (34) (*) (251) (79)
Average balance during fiscal year to date........... (19) (12) (280) (194)
NET COVERED FORWARDS:
Carrying value....................................... (181) 50 43 2
Average balance during fiscal year to date........... (47) 348 12 (1)
Average yield (%).................................... 4.55 3.17 3.68 3.69
Average maturity (years)............................. 0.20 0.01 0.16 0.02
</TABLE>
- ---------
* Less than $0.5 million.
** Less than 0.005 years.
*** May differ from the sum of individual figures due to rounding.
45
<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 December 31, 1996 and June 30,
1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------------------------
AVERAGE GROSS GROSS
CARRYING YIELD UNREALIZED UNREALIZED FAIR
VALUE (%) GAINS LOSSES VALUE
----------- ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
IN MILLIONS
Government and agency obligations............................ $ 1,151 8.74 $ 85 $ -- $ 1,236
Time deposits................................................ 105 5.96 -- -- 105
----------- --- --- ----------- ---------
Total........................................................ $ 1,256 8.51 $ 85 $ -- $ 1,341
----------- --- --- ----------- ---------
----------- --- --- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30
---------------------------------------------------------------------
AVERAGE GROSS GROSS
YIELD UNREALIZED UNREALIZED FAIR
CARRYING VALUE (%) GAINS LOSSES VALUE
--------------- ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
IN MILLIONS
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
------ --- --- ----------- ---------
------ --- --- ----------- ---------
</TABLE>
At December 31, 1996 and June 30, 1996, 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 six
months ended December 31, 1996, was 8.28 percent (8.35 percent-- June 30, 1996,
8.11 percent--June 30, 1995).
The expected maturities of investment securities in the Held-to-maturity
portfolio at December 31, 1996 and June 30, 1996 are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------
NET
CARRYING FAIR UNREALIZED
VALUE VALUE GAINS
----------- --------- -------------
<S> <C> <C> <C>
IN MILLIONS
January 1, 1997 through December 31, 1997.......................................... $ 105 $ 105 $ --
January 1, 1998 through December 31, 2001.......................................... 176 182 6
January 1, 2002 through December 31, 2006.......................................... 257 277 20
Thereafter......................................................................... 718 777 59
----------- --------- ---
Total.............................................................................. $ 1,256 $ 1,341 $ 85
----------- --------- ---
----------- --------- ---
</TABLE>
<TABLE>
<CAPTION>
JUNE 30
-------------------------------------
NET
CARRYING FAIR UNREALIZED
VALUE VALUE GAINS
----------- --------- -------------
<S> <C> <C> <C>
IN MILLIONS
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>
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE C--LOANS, COFINANCING AND GUARANTEES
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.
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.
MULTICURRENCY LOANS
FIXED RATE LOANS: On loans negotiated prior to July 1982, IBRD charges
interest at fixed rates.
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.
SINGLE CURRENCY LOANS
FIXED RATE LOANS: IBRD introduced fixed rate single currency loans in 1995.
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 LIBOR-based single
currency loans (PIBOR-based for French franc denominated 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.
LIBOR-BASED LOANS: IBRD introduced LIBOR-based single currency loans in
1993. The rates charged on LIBOR-based 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.
Since September 1, 1996, IBRD has offered its borrowers, in addition to its
loan products, the option to convert undisbursed multicurrency pool loan amounts
to single currency loan terms. Further, borrowers have the option to convert
disbursed and undisbursed multicurrency pool loan amounts to new single currency
pool loans. Borrowers selecting single currency pool loans have their choice of
four different pools (U. S. dollars, Japanese yen, Deutsche mark or Swiss
francs). Each single currency pool will be a multicurrency 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. Conversions to the new single currency pool loans will be
implemented on one of three conversion dates (July 1, 1997, January 1, 1998 or
July 1, 1998) depending upon the date the conversion request is approved by
IBRD.
WAIVERS OF LOAN INTEREST AND CHARGES
On August 1, 1996, 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, 1997 for all eligible
borrowers. A similar waiver of 25 basis points was in effect for the fiscal year
ended June 30, 1996. In fiscal year 1995 IBRD's Executive Directors approved a
one-time 10 basis point interest
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
waiver, for two consecutive six-month interest periods, on currency pool loans
which a borrower converts from loan interest rate terms in effect between 1982
and 1989 to interest rate terms in effect since 1989. For the six months ended
December 31, 1996 the combined effect of these waivers was to reduce Net Income
by $131 million ($286 million--June 30, 1996, $251 million--June 30, 1995, $238
million--June 30, 1994).
Further, on August 1, 1996, 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 ending June 30, 1997. A
similar waiver of 50 basis points was in effect for the fiscal year ended June
30, 1996. For the six months ended December 31, 1996, the effect of the
commitment fee waiver was to reduce Net Income by $115 million ($235
million--June 30, 1996, $233 million--June 30, 1995, $225 million--June 30,
1994).
A summary of IBRD's outstanding loans by currency and product at December
31, 1996 and June 30, 1996 follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MULTICURRENCY LOANS SINGLE CURRENCY LOANS TOTAL LOANS
------------------------- ------------------------------------- -------------------------
<CAPTION>
WEIGHTED WEIGHTED AVERAGE WEIGHTED
RATE AVERAGE AVERAGE MATURITY AVERAGE
CURRENCY TYPE AMOUNT RATE (%)* AMOUNT RATE (%)* (YEARS) AMOUNT RATE (%)*
- -------------------- ----------- ---------- ------------- --------- ------------- ----------- ---------- -------------
IN MILLIONS OF U.S. DOLLARS EQUIVALENT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deutsche mark....... Fixed $ 2,619 8.70 $ -- -- -- $ 2,619 8.70
Adjustable 28,268 6.94 3 3.56 6.12 28,271 6.94
Japanese yen........ Fixed 2,451 8.84 -- -- -- 2,451 8.84
Adjustable 29,702 6.94 -- -- -- 29,702 6.94
Netherlands Fixed 253 8.48 -- -- -- 253 8.48
guilders.......... Adjustable 1,557 6.94 -- -- -- 1,557 6.94
Swiss francs........ Fixed 1,494 8.10 -- -- -- 1,494 8.10
Adjustable 5,128 6.94 -- -- -- 5,128 6.94
U.S. dollars........ Fixed 1,925 8.79 2,001 7.01 7.04 3,926 7.88
Adjustable 27,813 6.94 2,661 5.96 9.34 30,474 6.85
Others.............. Fixed 206 9.13 49 7.22 6.79 255 8.77
Adjustable 2,352 6.94 97 3.82 8.10 2,449 6.82
---------- --- --------- --- --- ---------- ---
Loans outstanding... Fixed 8,948 8.66 2,050 7.01 7.03 10,998 8.35
Adjustable 94,820 6.94 2,761 5.89 9.30 97,581 6.91
---------- --- --------- --- --- ---------- ---
Total $ 103,768 7.09 $ 4,811 6.37 8.33 108,579 7.06
---------- --- --------- --- --- ---
---------- --- --------- --- --- ---
Less accumulated provision for
loan losses.................... 3,290
----------
Loans outstanding net of
accumulated provision.......... $ 105,289
----------
----------
</TABLE>
- ---------
* Excludes effects of any waivers of loan interest.
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MULTICURRENCY LOANS SINGLE CURRENCY LOANS TOTAL LOANS
------------------- ---------------------------- -------------------
<CAPTION>
WEIGHTED WEIGHTED AVERAGE WEIGHTED
RATE AVERAGE AVERAGE MATURITY AVERAGE
CURRENCY TYPE AMOUNT RATE (%)* AMOUNT RATE (%)* (YEARS) AMOUNT RATE (%)*
- ---------------------------------------- ---------- -------- --------- ------ --------- -------- -------- ---------
IN MILLIONS OF U.S. DOLLARS EQUIVALENT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deutsche mark........................... Fixed $ 3,111 8.68 $-- -- -- $ 3,111 8.68
Adjustable 26,838 6.98 -- -- -- 26,838 6.98
Japanese yen............................ Fixed 3,093 8.88 -- -- -- 3,093 8.88
Adjustable 31,259 6.98 -- -- -- 31,259 6.98
Netherlands guilders.................... Fixed 325 8.58 -- -- -- 325 8.58
Adjustable 1,845 6.98 -- -- -- 1,845 6.98
Swiss francs............................ Fixed 1,989 8.18 -- -- -- 1,989 8.18
Adjustable 7,029 6.98 -- -- -- 7,029 6.98
U. S. dollars........................... Fixed 2,266 8.85 1,119 6.79 7.17 3,385 8.17
Adjustable 27,640 6.98 1,096 5.66 10.11 28,736 6.93
Others.................................. Fixed 255 9.16 42 7.29 7.20 297 8.89
Adjustable 2,331 6.98 8 5.07 7.80 2,339 6.97
-------- --- ------ --- -------- -------- ---
Loans outstanding....................... Fixed 11,039 8.69 1,161 6.81 7.17 12,200 8.51
Adjustable 96,942 6.98 1,104 5.66 10.09 98,046 6.96
-------- --- ------ --- -------- -------- ---
Total $107,981 7.15 $2,265 6.25 8.59 110,246 7.13
-------- --- ------ --- -------- ---
-------- --- ------ --- -------- ---
Less accumulated provision for loan losses 3,340
--------
Loans outstanding net of accumulated provision $106,906
--------
--------
</TABLE>
- ------------
* Excludes effects of any waivers of loan interest.
IBRD maintains a targeted currency composition in its multicurrency loans.
The present target ratio is one U.S. dollar for every 125 Japanese yen and two
Deutsche mark equivalents (consisting of Deutsche mark, Netherlands guilders and
Swiss francs). These five major currencies comprise at least 90 percent of the
multicurrency loans' U.S. dollar equivalent value, with the remainder in other
currencies. This ratio has been maintained since 1991, and is reviewed
periodically. The composition of the multicurrency loans is affected by the
selection of currencies for disbursements on those loans and by the currencies
selected for the billing of the principal repayments. Along with the selection
of disbursement currencies, IBRD manages the selection of repayment currencies
to maintain the alignment of the multicurrency loans' composition with the
target ratio. The selection of currencies for repayment billing by IBRD
precludes the determination of average maturity information for multicurrency
loans by individual currency. Accordingly, IBRD only discloses the maturity
periods for its multicurrency loans on a combined U.S. dollars equivalent basis.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The maturity structure of IBRD's loans outstanding, by product, at December
31, 1996 and June 30, 1996 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------------------
MULTICURRENCY SINGLE CURRENCY
LOANS LOANS ALL LOANS
RATE ------------------ ------------------ ------------------------------
PERIOD TYPE: FIXED ADJUSTABLE FIXED ADJUSTABLE FIXED ADJUSTABLE TOTAL
- --------------------------------------------------- ----- ------ ---------- ------ ---------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IN MILLIONS
January 1, 1997 through December 31, 1997.......... $3,367 $ 9,047 $ -- $ -- $ 3,367 $ 9,047 $ 12,414
January 1, 1998 through December 31, 2001.......... 5,033 38,428 565 396 5,598 38,824 44,422
January 1, 2002 through December 31, 2006.......... 528 34,679 1,140 1,413 1,668 36,092 37,760
Thereafter......................................... 20 12,666 345 952 365 13,618 13,983
------ ---------- ------ ---------- ------- ---------- --------
Loans outstanding.................................. $8,948 $94,820 $2,050 $2,761 $10,998 $97,581 $108,579
------ ---------- ------ ---------- ------- ---------- --------
------ ---------- ------ ---------- ------- ---------- --------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30
------------------------------------------------------------------------
MULTICURRENCY SINGLE CURRENCY
LOANS LOANS ALL LOANS
RATE ------------------ ------------------ ------------------------------
PERIOD TYPE: FIXED ADJUSTABLE FIXED ADJUSTABLE FIXED ADJUSTABLE TOTAL
- -------------------------------------------------- ----- ------ ---------- ------ ---------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IN MILLIONS
July 1, 1996 through June 30, 1997................ $3,837 $ 8,868 $ -- $ -- $ 3,837 $ 8,868 $ 12,705
July 1, 1997 through June 30, 2001................ 6,437 38,825 302 245 6,739 39,070 45,809
July 1, 2001 through June 30, 2006................ 734 35,281 646 433 1,380 35,714 37,094
Thereafter........................................ 31 13,968 213 426 244 14,394 14,638
------ ---------- ------ ---------- ------- ---------- --------
Loans outstanding................................. $11,039 $96,942 $1,161 $1,104 $12,200 $98,046 $110,246
------ ---------- ------ ---------- ------- ---------- --------
------ ---------- ------ ---------- ------- ---------- --------
</TABLE>
ESTIMATED VALUE OF LOANS
MULTICURRENCY LOANS: The estimated value of fixed rate loans negotiated
prior to July 1982 has been based on discounted future cash flows using the rate
at which IBRD could undertake borrowings of comparable maturities at December
31, 1996 plus a 50 basis point spread. The estimated value of adjustable rate
multicurrency loans is based on the relationship of the fair value to the
carrying value of the underlying qualified borrowings, since the interest rate
for such loans is based on the interest rate of the qualified borrowings.
SINGLE CURRENCY LOANS: The estimated value of fixed rate single currency
loans has been based on discounted future cash flows using the rate at which
IBRD could make similar loans of comparable maturities at December 31, 1996. The
estimated value of LIBOR-based single currency loans has been based on the
relationship of the fair value to the carrying value of the underlying
borrowings funding these loans.
IBRD has never suffered a loss on any of its loans, although 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 overdue service payments, including
interest and other charges. 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 December 31, 1996 was $3,290
million ($3,340 million--June 30, 1996, $3,740 million--June 30, 1995).
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 December 31, 1996, June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 30, 1995
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CARRYING ESTIMATED CARRYING ESTIMATED CARRYING ESTIMATED
VALUE VALUE VALUE VALUE VALUE VALUE
-------- --------- -------- --------- -------- ---------
<CAPTION>
IN MILLIONS
<S> <C> <C> <C> <C> <C> <C>
Multicurrency loans
Fixed..................................................... $ 8,948 $ 10,093 $11,039 $ 12,383 $17,128 $ 19,065
Adjustable................................................ 94,820 102,765 96,942 103,080 106,137 114,141
Single currency loans
Fixed..................................................... 2,050 2,082 1,161 1,067 -- --
Adjustable................................................ 2,761 2,854 1,104 1,108 234 235
-------- --------- -------- --------- -------- ---------
Total loans
Fixed..................................................... 10,998 12,175 12,200 13,450 17,128 19,065
Adjustable................................................ 97,581 105,619 98,046 104,188 106,371 114,376
-------- --------- -------- --------- -------- ---------
108,579 117,794 110,246 117,638 123,499 133,441
Less accumulated provision for loan losses.................. 3,290 3,290 3,340 3,340 3,740 3,740
-------- --------- -------- --------- -------- ---------
Loans outstanding net of accumulated provision.............. $105,289 $114,504 $106,906 $114,298 $119,759 $129,701
-------- --------- -------- --------- -------- ---------
-------- --------- -------- --------- -------- ---------
</TABLE>
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 the reported loan balances.
Guarantees of loan principal of $1,604 million at December 31, 1996 ($1,537
million--June 30, 1996, $1,610 million--June 30, 1995) were not included in
reported loan balances. At December 31, 1996, $150 million of these guarantees
were subject to call ($122 million--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 December 31, 1996, these guarantees, approximating
$1 million ($1 million--June 30, 1996, $4 million-- June 30, 1995), were subject
to call.
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 December 31, 1996, June 30, 1996 and June 30, 1995, the status of
the statutory lending limit is as follows:
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
IN MILLIONS
Statutory lending limit
Subscribed capital....................................................... $ 182,289 $ 180,630 $ 176,438
Retained earnings........................................................ 15,584(a) 16,099 15,502
Cumulative translation adjustment........................................ 633 1,056 3,308
------------ ---------- ----------
$ 198,506 $ 197,785 $ 195,248
------------ ---------- ----------
------------ ---------- ----------
Loans and guarantees outstanding
Loans outstanding........................................................ $ 108,579 $ 110,246 $ 123,499
Principal guarantees callable............................................ 150 122 173
Interest guarantees callable............................................. 1 1 4
------------ ---------- ----------
$ 108,730 $ 110,369 $ 123,676
------------ ---------- ----------
------------ ---------- ----------
Loans and guarantees outstanding as a percentage of statutory lending
limit.................................................................. 55% 56% 63%
</TABLE>
- ---------
(a) Excludes allocations of $500 million for the Highly Indebted Poor Countries
Trust Fund and $90 million to the Trust Fund for Gaza and West Bank. See
Note F.
OVERDUE AMOUNTS
At December 31, 1996, no loans payable to IBRD other than those referred to
in the following paragraphs were overdue by more than three months.
At December 31, 1996, the loans made to or guaranteed by certain member
countries and the FRY with an aggregate principal balance outstanding of $2,437
million ($2,520 million--June 30, 1996, $2,618 million--June 30, 1995), of which
$1,279 million ($1,227 million--June 30, 1996, $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 $856 million ($808 million--June 30,
1996, $864 million--June 30, 1995, $628 million-- June 30, 1994). If these loans
had not been in nonaccrual status, income from loans for the six months ended
December 31, 1996 would have been higher by $80 million ($188 million--June 30,
1996, $156 million--June 30, 1995, $149 million--June 30, 1994).
A summary of countries with loans or guarantees in nonaccrual status
follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------
PRINCIPAL PRINCIPAL AND NONACCRUAL
BORROWER OUTSTANDING CHARGES OVERDUE SINCE
- ---------------------------------------------------------------- ----------- --------------- ------------------
<S> <C> <C> <C>
IN MILLIONS
With overdues
Federal Republic of Yugoslavia................................ $ 1,178 $ 1,226 September 1992
Iraq.......................................................... 49 69 December 1990
Liberia....................................................... 146 252 June 1987
Sudan......................................................... 6 3 January 1994
Syrian Arab Republic.......................................... 382 519 February 1987
Zaire......................................................... 87 66 November 1993
----------- ------
Total......................................................... 1,848 2,135
Without overdues
Bosnia and Herzegovina........................................ 589 -- September 1992
----------- ------
Total......................................................... $ 2,437 $ 2,135
----------- ------
----------- ------
</TABLE>
52
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In June 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 was a
currency pool loan of $29 million carrying IBRD's adjustable lending rate for
such loans at the time, 6.98 percent, plus 41 basis points. The second
consolidation loan was also a currency pool loan in the amount of $285 million
carrying IBRD's adjustable lending rate for such loans at the time, 6.98
percent, plus 4 basis points. The third consolidation loan was a U. S. dollar
LIBOR-based single currency loan of $307 million carrying IBRD's lending rate
for such loans at the time, 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.
The average recorded investment in nonaccruing loans during the six months
ended December 31, 1996 was $2,506 million ($2,453 million--June 30, 1996,
$2,474 million--June 30, 1995).
During the six months ended December 31, 1996 and the fiscal years ended
June 30, 1996 and June 30, 1995, no loans came out of nonaccrual status.
ACCUMULATED PROVISION FOR LOAN LOSSES
An analysis of the changes to the Accumulated Provision for Loan Losses for
the six months ended December 31, 1996 and the fiscal years ended June 30, 1996
and June 30, 1995 appears below:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
IN MILLIONS
Balance, beginning of the fiscal year.......................................... $ 3,340 $ 3,740 $ 3,324
Provision for loan losses...................................................... 39 42 12
Translation adjustment......................................................... (89) (442) 404
------ ----------- -----------
Balance, end of period......................................................... $ 3,290 $ 3,340 $ 3,740
------ ----------- -----------
------ ----------- -----------
</TABLE>
FIFTH DIMENSION PROGRAM
Under IDA's Fifth Dimension 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 December 31, 1996, IDA had approved credits
of $1,530 million ($1,379 million--June 30, 1996, $1,179 million--June 30, 1995)
under this program from inception, of which $1,391 million ($1,327 million--June
30, 1996, $1,128 million--June 30, 1995) had been disbursed to the eligible
countries.
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.
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 comprised of a conversion of
the proceeds of a borrowing into a different currency and a forward exchange
agreement 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.
DEFERRED RATE SETTING (DRS) AGREEMENTS: DRS allows an entity to fix the
effective interest cost of all or a portion of debt issues over a specified
period of time after the issue date of the respective debt issues. IBRD enters
into DRS agreements in conjunction with some of its bond issues. The 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. 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 December 31, 1996 and June
30, 1996, the effective interest cost of all principal amounts had been fixed.
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
A summary of IBRD's borrowings portfolio at December 31, 1996 and June 30,
1996 follows: MEDIUM- AND LONG-TERM BORROWINGS AND SWAPS AT DECEMBER 31, 1996
IN MILLIONS OF U.S. DOLLARS EQUIVALENT
<TABLE>
<CAPTION>
CURRENCY
DIRECT BORROWINGS SWAP AGREEMENTS
------------------------- -------------------------------
WGTD. WGTD.
AVG. AVERAGE AMOUNT AVG. AVERAGE
RATE COST MATURITY PAYABLE COST MATURITY
CURRENCY TYPE AMOUNT (%) (YEARS) (RECEIVABLE) (%) (YEARS)
------------ ---------- ------- ----- -------- ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Deutsche
mark Fixed $13,873 6.65 5.55 $ 2,009 7.72 2.31
(178) 6.57 19.87
Adjustable 225 7.47 6.61 9,920 2.97 3.30
Japanese
yen Fixed 26,306 5.20 4.64 237 5.49 2.08
(1,303) 6.23 5.60
Adjustable 1,170 1.74 2.70 502 0.06 1.70
Netherlands
guilders Fixed 2,560 7.27 3.10 89 6.31 0.69
(1,420) 7.70 2.26
Swiss
francs Fixed 4,415 6.09 5.78 2,070 5.18 3.31
(1,701) 6.10 3.49
Adjustable -- -- -- 833 1.12 3.20
U. S.
dollars Fixed 25,080 7.59 6.64 178 8.98 3.49
(1,095) 9.11 3.43
Adjustable 1,213 4.92 4.09 6,722 5.21 6.21
(1,296) 5.09 3.34
Others Fixed 15,299 8.99 4.42
(12,750) 8.91 3.93
Adjustable 1,767 6.41 4.46
(1,955) 5.95 4.34
------- ----- --- ------------
Total Fixed 87,533 6.88 5.33 4,583
(18,447)
Adjustable.. 4,375 4.79 4.00 17,977
(3,251)
------- ----- --- ------------
Principal at face value 91,908 862
Net unamortized discounts
(20 ) --
------- ----- --- ------------
Total $91,888 6.78 5.27 $ 862
------- ----- --- ------------
------- ----- --- ------------
<CAPTION>
INTEREST RATE
SWAP AGREEMENTS NET CURRENCY OBLIGATIONS
------------------------------- -------------------------------
NOTIONAL WGTD. WGTD.
AMOUNT AVG. AVERAGE AMOUNT AVG. AVERAGE
PAYABLE COST MATURITY PAYABLE COST MATURITY
CURRENCY (RECEIVABLE) (%) (YEARS) (RECEIVABLE) (%) (YEARS)
------------ ------------ ----- -------- ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Deutsche
mark $ 7,946 7.00 3.08 $ 23,828 6.86 4.46
(2,847) 5.25 4.95 (3,025) 5.33 5.82
2,911 3.16 5.00 13,056 3.09 3.74
(8,010) 3.38 3.12 (8,010) 3.38 3.12
Japanese
yen 1,957 3.84 2.40 28,500 5.11 4.46
(3,154) 2.99 4.80 (4,457) 3.93 5.04
3,154 0.47 4.80 4,826 0.74 3.97
(1,957) 1.37 2.40 (1,957) 1.37 2.40
Netherlands
guilders -- -- -- 2,649 7.24 3.02
(1,420) 7.70 2.26
Swiss
francs 833 7.11 3.27 7,318 5.95 4.80
(1,701) 6.10 3.49
833 1.12 3.20
(833) 2.34 3.27 (833) 2.34 3.27
U. S.
dollars 5,197 6.95 4.05 30,455 7.49 6.18
(10,073) 6.28 6.20 (11,168) 6.56 5.93
10,201 5.73 6.15 18,136 5.48 6.03
(5,325) 5.70 3.99 (6,621) 5.58 3.87
Others 42 6.57 6.79 15,341 8.99 4.43
(454) 7.14 6.09 (13,204) 8.85 4.01
584 4.71 5.73 2,351 5.98 4.78
(172) 8.45 5.05 (2,127) 6.16 4.40
------------ ------------ ----- ---
Total 15,975 108,091 6.83 4.93
(16,528) (34,975) 7.01 4.81
16,850 39,202 4.04 4.88
(16,297) (19,548) 4.18 3.44
------------ ------------ ----- ---
Principal at face value -- 92,770
Net unamortized discounts
(20)
------------ ------------ ----- ---
Total $ -- $ 92,750 6.13 5.27
------------ ------------ ----- ---
------------ ------------ ----- ---
</TABLE>
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MEDIUM- AND LONG-TERM BORROWINGS AND SWAPS AT JUNE 30, 1996
IN MILLIONS OF U.S. DOLLARS EQUIVALENT
<TABLE>
<CAPTION>
CURRENCY
DIRECT BORROWINGS SWAP AGREEMENTS
------------------------- -------------------------------
WGTD. WGTD.
COST AVERAGE AMOUNT AVG. AVERAGE
RATE (%) MATURITY PAYABLE COST MATURITY
CURRENCY TYPE AMOUNT AVG. (YEARS) (RECEIVABLE) (%) (YEARS)
----------- ---------- ------- ----- -------- ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Deutsche
mark Fixed $14,287 6.71 5.58 $ 2,000 7.75 2.51
Adjustable 229 7.54 7.12 9,919 2.93 3.53
Japanese
yen Fixed 29,466 5.24 4.78 335 5.51 2.21
(964) 6.12 8.07
Adjustable 1,232 2.04 3.21 71 0.03 1.59
(92) 0.25 0.48
Netherlands
guilders Fixed 2,837 7.23 3.33 91 6.31 1.19
(1,447) 7.70 2.77
Swiss
francs Fixed 4,996 6.04 6.28 2,523 5.19 3.39
(873) 6.47 3.46
Adjustable -- -- -- 892 0.84 3.70
U.S.
dollars Fixed 23,305 7.84 6.91 178 8.98 3.99
(1,198) 9.02 3.73
Adjustable 1,453 4.90 3.87 3,344 5.06 4.49
(848) 4.94 4.66
Others Fixed 13,180 9.30 3.72
(10,904) 9.25 2.97
Adjustable 1,419 6.38 4.62
(1,610) 5.97 4.51
------- ----- --- ------------
Total Fixed 88,071 6.90 5.36 5,127
(15,386)
Adjustable.. 4,333 4.70 4.10 14,226
(2,550)
------- ----- --- ------------
Principal at face value 92,404 1,417
Net unamortized discounts
(13 )
------- ----- --- ------------
Total $92,391 6.80 5.29 $ 1,417
------- ----- --- ------------
------- ----- --- ------------
<CAPTION>
INTEREST RATE
SWAP AGREEMENTS NET CURRENCY OBLIGATIONS
------------------------------- -------------------------------
NOTIONAL WGTD. WGTD.
AMOUNT AVG. AVERAGE AMOUNT AVG. AVERAGE
PAYABLE COST MATURITY PAYABLE COST MATURITY
CURRENCY (RECEIVABLE) (%) (YEARS) (RECEIVABLE) (%) (YEARS)
----------- ------------ ----- -------- ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Deutsche
mark $ 8,544 7.08 3.41 $ 24,831 6.92 4.59
(2,134) 5.26 5.51 (2,134) 5.26 5.51
2,199 3.37 5.57 12,347 3.09 3.96
(8,609) 3.47 3.45 (8,609) 3.47 3.45
Japanese
yen 1,329 5.49 3.15 31,130 5.26 4.68
(2,528) 2.64 5.72 (3,492) 3.59 6.36
2,528 0.67 5.72 3,831 1.09 4.83
(1,329) 2.09 3.15 (1,421) 1.97 2.97
Netherlands
guilders -- -- -- 2,928 7.20 3.26
(1,447) 7.70 2.77
Swiss
francs 892 7.11 3.77 8,411 5.90 5.15
(873) 6.47 3.46
892 0.84 3.70
(892) 2.08 3.77 (892) 2.08 3.77
U.S.
dollars 4,002 7.10 3.72 27,485 7.74 6.43
(6,211) 6.45 7.50 (7,409) 6.87 6.89
6,449 5.55 7.27 11,246 5.32 6.00
(4,240) 5.53 3.58 (5,088) 5.43 3.76
Others 36 6.62 7.20 13,216 9.29 3.73
(287) 7.43 4.37 (11,191) 9.21 3.01
417 5.24 4.57 1,836 6.12 4.61
(166) 8.74 5.47 (1,776) 6.22 4.60
------------ ------------ ----- ---
Total 14,803 108,001 6.87 4.98
(11,160) (26,546) 7.33 4.74
11,593 30,152 3.79 4.87
(15,236) (17,786) 4.12 3.59
------------ ------------ ----- ---
Principal at face value -- 93,821
Net unamortized discounts
(13)
------------ ------------ ----- ---
Total $ -- $ 93,808 6.26 5.29
------------ ------------ ----- ---
------------ ------------ ----- ---
</TABLE>
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SHORT-TERM BORROWINGS AND SWAPS AT DECEMBER 31, 1996 AND JUNE 30, 1996
IN MILLIONS OF U. S. DOLLARS EQUIVALENT
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
INTEREST
CURRENCY RATE WGTD.
SWAP SWAP NET AVG.
RATE PRINCIPAL PAYABLE PAYABLE CURRENCY COST
CURRENCY TYPE OUTSTANDING (RECEIVABLE) (RECEIVABLE) OBLIGATIONS (%)
------------ ---------- ----------- ------------ ------------ ----------- -----
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM NOTES
U. S. dollars Fixed $1,106 $ -- $ -- $1,106 5.53
GLOBAL MULTICURRENCY NOTES
Czech koruny Fixed 165 (165) -- -- --
Deutsche mark Fixed -- -- -- -- --
Adjustable -- 158 -- 158 2.99
Italian lire Fixed 150 (150) -- -- --
Japanese yen Fixed 87 (87) -- -- --
87 -- 87 0.16
New Zealand dollars Fixed 141 (141) -- -- --
U. S. dollars Fixed 1,400 120 (900) 620 5.61
Adjustable -- 176 900 1,076 5.23
CENTRAL BANK FACILITY
U. S. dollars Adjustable 2,374 -- -- 2,374 5.18
----------- ----- ----- ----------- -----
TOTAL Fixed 3,049 207 1,813 5.29
(543) (900)
Adjustable 2,374 334 900 3,608 5.10
----------- ----- ----- ----------- -----
Principal at face value 5,423 (2) -- 5,421
Net unamortized discounts
(5) (5)
----------- ----- ----- ----------- -----
TOTAL $5,418 $ (2) $ -- $5,416 5.16
----------- ----- ----- ----------- -----
----------- ----- ----- ----------- -----
<CAPTION>
JUNE 30
---------------------------------------------------------------
INTEREST
CURRENCY RATE WGTD.
SWAP SWAP NET AVG.
PRINCIPAL PAYABLE PAYABLE CURRENCY COST
CURRENCY OUTSTANDING (RECEIVABLE) (RECEIVABLE) OBLIGATIONS (%)
------------ ----------- ------------ ------------ ----------- -----
<S> <C> <C> <C> <C> <C>
SHORT-TERM NOTES
U. S. dollars $1,400 $ -- $ -- $1,400 5.46
GLOBAL MULTICURRENCY NOTES
Czech koruny 54 (54) -- -- --
Deutsche mark -- 20 -- 20 3.09
-- 54 -- 54 3.05
Italian lire 20 (20) -- -- --
Japanese yen -- -- -- -- --
-- -- -- -- --
New Zealand dollars -- -- -- -- --
U. S. dollars 300 -- -- 300 5.52
-- -- -- -- --
CENTRAL BANK FACILITY
U. S. dollars 2,586 -- -- 2,586 5.47
----------- ----- ----- ----------- -----
TOTAL 1,774 20 -- 1,720 5.44
(74)
2,586 54 -- 2,640 5.42
----------- ----- ----- ----------- -----
Principal at face value 4,360 -- -- 4,360
Net unamortized discounts
(32) (32)
----------- ----- ----- ----------- -----
TOTAL $4,328 $ -- $ -- $4,328 5.43
----------- ----- ----- ----------- -----
----------- ----- ----- ----------- -----
</TABLE>
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The maturity structure of IBRD's Medium-and Long-term borrowings outstanding
at December 31, 1996 and June 30, 1996 is as follows:
<TABLE>
<CAPTION>
PERIOD
- -------------------------------------------------------------------------------- DECEMBER 31
------------
IN MILLIONS
<S> <C>
January 1, 1997 through December 31, 1997....................................... $ 14,470
January 1, 1998 through December 31, 1998....................................... 11,230
January 1, 1999 through December 31, 1999....................................... 15,798
January 1, 2000 through December 31, 2000....................................... 8,026
January 1, 2001 through December 31, 2001....................................... 7,047
January 1, 2002 through December 31, 2006....................................... 26,153
Thereafter...................................................................... 9,184
------------
Total........................................................................... $ 91,908
------------
------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD
- ---------------------------------------------------------------------------------- JUNE 30
-----------
IN MILLIONS
<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
Thereafter........................................................................ 8,785
-----------
Total............................................................................. $ 92,404
-----------
-----------
</TABLE>
The following table reflects the carrying and estimated fair values of the
borrowings portfolio at December 31, 1996, June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 30, 1995
----------------------- ----------------------- -----------------------
CARRYING ESTIMATED CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE VALUE FAIR VALUE
---------- ----------- ---------- ----------- ---------- -----------
IN MILLIONS
<S> <C> <C> <C> <C> <C> <C>
Short-term.................................... $ 5,418 $ 5,447 $ 4,328 $ 4,371 $ 3,898 $ 3,898
Medium- and long-term......................... 91,888 99,989 92,391 99,250 104,392 112,977
Swaps
Currency
Payable................................... 23,101 23,593 19,427 19,841 19,985 20,495
Receivable................................ (22,241) (23,927) (18,010) (19,203) (16,735) (17,717)
Interest rate............................... -- 862 -- 1,064 -- 1,059
Forward interest rate -- -- -- -- -- 23
---------- ----------- ---------- ----------- ---------- -----------
Swaptions................................... -- 1 -- 1 -- --
---------- ----------- ---------- ----------- ---------- -----------
Total......................................... $ 98,166 $ 105,965 $ 98,136 $ 105,324 $ 111,540 $ 120,735
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
</TABLE>
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 six months ended
December 31, 1996 was 6.24 percent (6.44 percent--June 30, 1996, 6.62
percent--June 30, 1995, 6.74 percent--June 30, 1994), reflecting a reduction in
interest expense of $229 million ($170 million--June 30, 1996, $157
million--June 30, 1995, $234 million--June 30, 1994) as a result of swaps.
NOTE E--CREDIT RISK
COUNTRY CREDIT RISK: This risk includes potential losses arising from
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 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 December 31, 1996, June 30, 1996 and June 30,
1995 are given below:
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ --------- ---------
IN MILLIONS
<S> <C> <C> <C>
INVESTMENTS -- TRADING PORTFOLIO
Futures and forwards
- Long position............................................................ $ 12,176 $ 1,499 $ 4,039
- Short position........................................................... 931 5,875 8,051
- Credit exposure due to potential nonperformance
by counterparties......................................................... 5 2 6
Options
- Long position............................................................ 650 679 19
- Short position........................................................... 510 429 --
Covered forwards
- Credit exposure due to potential nonperformance
by counterparties......................................................... 57 2 7
BORROWINGS
Currency swaps
- Credit exposure due to potential nonperformance
by counterparties......................................................... 1,205 728 713
Interest rate swaps
- Notional principal....................................................... 33,725 26,396 16,136
- Credit exposure due to potential nonperformance
by counterparties......................................................... 418 96 57
Forward interest rate swaps
- Notional principal....................................................... -- -- 300
- Credit exposure due to potential nonperformance
by counterparties -- -- --
Swaptions
- Notional principal....................................................... 73 30 --
- Credit exposure due to potential nonperformance
by counterparties -- -- --
</TABLE>
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F--RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS
RETAINED EARNINGS: Retained Earnings is comprised of the following elements
at December 31, 1996, June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ --------- ---------
IN MILLIONS
<S> <C> <C> <C>
Special reserve.................................................................. $ 293 $ 293 $ 293
General reserve.................................................................. 14,159 13,909 13,629
Surplus.......................................................................... 1,047 710 226
Unallocated net income........................................................... 675 1,187 1,354
------------ --------- ---------
Total............................................................................ $ 16,174 $ 16,099 $ 15,502
------------ --------- ---------
------------ --------- ---------
</TABLE>
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. On
October 3, 1996, the Board of Governors approved the following transfers, out of
unallocated Net Income: an amount equivalent to $300 million in SDRs (valued at
June 30, 1996) to IDA, by way of grant, and $637 million to Surplus. On the same
day, the Board of Governors approved the following transfers, by way of grant,
out of Surplus: an amount equivalent to $300 million in SDRs (valued at June 30,
1996) to IDA and amounts up to $500 million to the Highly Indebted Poor
Countries (HIPC) Trust Fund or other arrangements in support of the HIPC Debt
Initiative when other creditors of the eligible beneficiary countries are
determined by IBRD to have agreed to meet their share of the costs envisaged
within the framework of the initiative. On December 19, 1996, the Executive
Directors recommended that the Board of Governors approve a transfer from
Surplus, by way of grant, in the amount of $90 million to the Trust Fund for
Gaza and West Bank.
TRANSFERS TO INTERNATIONAL DEVELOPMENT ASSOCIATION: The Board of Governors
has approved aggregate transfers to IDA totaling $4,823 million from unallocated
Net Income through June 30, 1995. On October 3, 1996, the Board of Governors
approved a transfer to IDA, by way of grant, of $300 million in an equivalent
amount in SDRs out of unallocated Net Income. On the same day, the Board of
Governors approved a transfer, by way of grant, out of Surplus of $300 million
in an equivalent amount in SDRs. At December 31, 1996, June 30, 1996 and June
30, 1995, all transfers 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 $300 million through June 30, 1995. At
December 31, 1996, $118 million ($119 million--June 30, 1996, $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 $140 million through June 30, 1995. At December 31, 1996, $5 million
($70 million--June 30, 1996, $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: In February 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 December 31, 1996, all
transfers had been paid. At June 30, 1996, $16 million remained payable.
TRANSFERS TO THE HIGHLY INDEBTED POOR COUNTRIES TRUST FUND: The HIPC Trust
Fund was established on November 7, 1996, and is administered by IDA in support
of the HIPC Debt Initiative. On October 3, 1996, the Board of Governors approved
a transfer from Surplus, by way of grant, of amounts up to $500 million to
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the HIPC Trust Fund contingent upon IBRD's determination that the other
creditors of the eligible beneficiary countries have agreed to meet their share
of the costs envisaged under the HIPC Debt Initiative. At December 31, 1996, no
funds had been transferred to the HIPC Trust Fund.
NOTE G--ADMINISTRATIVE EXPENSES AND CONTRIBUTIONS TO SPECIAL PROGRAMS
In fiscal year 1995 the Executive Directors authorized expenditures for
costs associated with planned staff reductions. The total cost of this program
was $112 million, of which $45 million was charged to IDA. At December 31, 1996,
$46 million ($26 million--June 30, 1996, $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 for the six months ended December 31, 1996 are net
of the management fee of $244 million ($508 million--June 30, 1996, $571
million--June 30, 1995, $545 million--June 30, 1994) charged to IDA and $52
million ($102 million--June 30, 1996, $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 $12 million
($22 million--June 30, 1996, $21 million--June 30, 1995 and June 30, 1994)
charged to IFC and $0.4 million ($1 million--June 30, 1996, 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.
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 December 31,
1996, June 30, 1996 and June 30, 1995 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 30, 1995
-------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL TOTAL TOTAL
FIDUCIARY NUMBER OF FIDUCIARY NUMBER OF FIDUCIARY NUMBER OF
ASSETS TRUST FUND ASSETS TRUST FUND ASSETS TRUST FUND
(IN MILLIONS) ACCOUNTS (IN MILLIONS) ACCOUNTS (IN MILLIONS) ACCOUNTS
------------- ----------- ------------- ----------- ------------- -----------
IBRD executed............................... $ 507 1,322 $ 548 1,314 $ 645 1,294
Recipient executed.......................... 1,441 1,078 1,308 935 1,270 684
------ ----- ------ ----- ------ -----
Total....................................... $ 1,948 2,400 $ 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 six
months ended December 31, 1996, IBRD received $8 million ($15 million--June 30,
1996, $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.
62
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
IBRD has not charged any pension expense to its income for the six months
ended December 31, 1996 because it believes it is less than probable that any
expense will be incurred. IBRD management will review the pension expense
accrual methodology upon completion of a reevaluation of the funding assumptions
of IBRD's pension plan. While IBRD does not anticipate recording any pension
expense during the fiscal year, this does not preclude IBRD from making a
contribution to the pension plan. If any income impact results from the
reevaluation, it will be recognized in the period it is determined. Therefore,
disclosures have not been provided for the six months ended December 31, 1996.
Net periodic pension cost for IBRD participants for the fiscal years ended
June 30, 1996, June 30, 1995 and June 30, 1994 consisted of the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
IN MILLIONS
Service cost-benefits earned during the period............................... $ 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.
The following table sets forth the Plan's funded status at June 30, 1996 and
June 30, 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
IN MILLIONS
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>
At June 30, 1996, 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
63
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 at June 30, 1996 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 six
months ended December 31, 1996 and the fiscal years ended June 30, 1996, June
30, 1995 and June 30, 1994 consisted of the following components:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1996 1996 1996 1996
------------ -------- -------- --------
<S> <C> <C> <C> <C>
IN MILLIONS
Service cost-benefits earned during the period.................................. $19 $ 32 $28 $25
Interest cost on accumulated postretirement benefit obligation.................. 24 45 48 39
Actual return on plan assets.................................................... (70) (130) (40) (49)
Net amortization and deferral................................................... 39 87 1 19
--- -------- --- ---
$12 $ 34 $37 $34
--- -------- --- ---
--- -------- --- ---
</TABLE>
The portion of this cost that relates to IBRD and is included in
Administrative Expenses for the six months ended December 31, 1996 is $8 million
($22 million--June 30, 1996, $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 December 31,
1996, June 30, 1996 and June 30, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1996
------------ -------- --------
<S> <C> <C> <C>
IN MILLIONS
Accumulated postretirement benefit obligation
Retirees........................................................................... $(307) $(293) $(257)
Fully eligible active plan participants............................................ (134) (128) (125)
Other active plan participants..................................................... (298) (285) (292)
------ -------- --------
(739) (706) (674)
Plan assets at fair value............................................................ 1,039 937 770
------ -------- --------
Plan assets in excess of accumulated postretirement benefit obligation............... 300 231 96
Unrecognized prior service costs..................................................... (10) (12) (14)
Unrecognized net loss from past experience different from that assumed and from
changes in assumptions.............................................................. 53 107 250
------ -------- --------
Prepaid postretirement benefit cost.................................................. $ 343 $ 326 $ 332
------ -------- --------
------ -------- --------
</TABLE>
64
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Of the $343 million prepaid at December 31, 1996 ($326 million--June 30,
1996, $332 million--June 30, 1995), $309 million is attributable to IBRD ($295
million--June 30, 1996, $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 December 31, 1996, the accumulated plan benefit obligation (APBO) was
determined using health care cost trend rates of 13.9 percent to 10.7 percent,
decreasing gradually to 5.0 percent in 2010 and thereafter. The health care cost
trend rates used for June 30, 1996 was 14.4 percent to 11.2 percent decreasing
gradually to 5.5 percent in 2010 and thereafter.
The health care cost trend rates 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 December 31, 1996 by
$148 million and the net periodic postretirement benefit cost for the six months
then ended by $11 million.
The weighted average discount rate used in determining the APBO was 7.5
percent (8 percent-- June 30, 1996, 7.5 percent--June 30, 1995). The expected
long--term rate of return on plan assets was 7.5 percent (8 percent--June 30,
1996, 8.25 percent--June 30, 1995).
65
<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........................................................ 19
Derivatives............................................................................... 19
Affiliated Organizations.................................................................... 21
Administration of the Bank.................................................................. 22
The Articles of Agreement................................................................... 24
Legal Status, Privileges and Immunities..................................................... 24
Fiscal Year, External Auditors, Announcements and Allocation of Net Income.................. 25
Index to Financial Statements............................................................... 26
</TABLE>
