<PAGE>
International Bank for Reconstruction and
Development
Management's Discussion & Analysis
and
Financial Statements
June 30, 2000
<PAGE>
INTERNATIONAL BANK FOR RECONSTRUCTION AND
DEVELOPMENT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2000
Section 1: Financial Overview 3
Section 2: Development Activities 3
Loans 4
Guarantees 10
Other Activities 11
Section 3: Financial Risk Management 12
Credit Risk 12
Asset/Liability Management 15
Operating Risk 17
Section 4: Liquidity Management 17
Section 5: Funding Resources 18
Equity 18
Borrowings 20
Section 6: Results of Operations 21
Glossary of Terms 25
<PAGE>
--------------------------------------------------------------------------------
Box 1: Selected Financial Data
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
For the Year (U.S. $ millions)
-------------------------------------------
Loan Income (comprised of) 8,153 7,649 6,881 7,235 7,922
Interest 8,041 7,535 6,775 7,122 7,804
Commitment Charges 112 114 106 113 118
Provision for Loan Losses 166 (246) (251) (63) (42)
Investment Income 1,589 1,684 1,233 834 720
Borrowing Expenses (7,128) (6,846) (6,144) (5,952) (6,570)
Net Noninterest Expense (789) (723) (476) (769) (843)
Net Income 1,991 1,518 1,243 1,285 1,187
Performance Ratios (%)
-------------------------------------------
Net Return on Average Earning Assets(1) 1.34 1.05 0.96 1.02 0.89
Gross Return on:
Average Earning Assets(a) 6.53 6.47 6.29 6.41 6.50
Average Outstanding Loans(a) 6.71 6.58 6.43 6.62 6.78
Average Cash and Investments 5.74 6.00 5.63 5.02 4.47
Cost of Average Borrowings (after
swaps) 5.92 5.92 6.01 6.06 6.31
Interest Coverage Ratio 1.28 1.22 1.20 1.22 1.18
Return on Equity 7.73 6.16 5.29 5.21 4.61
Equity Capital-to-Loans Ratio(b) 21.23 20.65 21.44 22.06 21.80
Total at Year-end (U.S. $ millions)
-------------------------------------------
Total Assets 227,810 230,445 204,808 161,786 151,837
Cash and Liquid Investments(c) 24,331 30,122 24,837 18,250 15,990
Loans Outstanding 120,104 117,228 106,576 105,805 110,246
Accumulated Provision for Loan Losses (3,400) (3,560) (3,240) (3,210) (3,340)
Borrowings Outstanding(d) 110,379 115,739 103,477 96,679 96,719
Total Equity 29,289 28,021 26,514 27,228 28,300
---------------------------------------------------------------------------------------------------
</TABLE>
a. Includes income from commitment charges.
b. See Section 5: Funding Resources, Equity for additional discussion.
c. Includes investments designated as held-to-maturity for fiscal years 1996-98.
d. Outstanding borrowings, before swaps, net of premium/discount.
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--------------------------------------------------------------------------------
Throughout Management's Discussion and Analysis, terms in boldface type
are defined in the Glossary of Terms on page 25.
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--------------------------------------------------------------------------------
The Management's Discussion and Analysis may contain forward looking
statements. Such statements are based on current expectations which are
subject to risks and uncertainties. Consequently, actual results could
differ materially from those currently anticipated.
--------------------------------------------------------------------------------
2 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
1. FINANCIAL OVERVIEW
The International Bank for Reconstruction and Development (IBRD) is an
international organization established in 1945 and is owned by its member
countries. IBRD's main goal is reducing poverty by promoting sustainable
economic development. It pursues this goal primarily by providing loans,
guarantees and related technical assistance for projects and programs in its
developing member countries. IBRD's ability to intermediate funds from
international capital markets for lending to its developing member countries is
an important element in achieving its development goals. IBRD's objective is not
to maximize profit, but to earn adequate net income to ensure its financial
strength and to sustain its development activities. Box 1 presents selected
financial data for the last five fiscal years.
The financial strength of IBRD is based on the support it receives from its
shareholders and on its array of financial policies and practices. Shareholder
support for IBRD is reflected in the capital backing it has received from its
members and in the record of its borrowing members in meeting their debt-service
obligations to it. IBRD's financial policies and practices have led it to build
reserves, to diversify its funding sources, to hold a large portfolio of liquid
investments, and to limit a variety of risks, including credit, market and
liquidity risks.
IBRD's principal assets are its loans to member countries. The majority of
IBRD's outstanding loans are priced on a cost pass-through basis, in which the
cost of funding the loans, plus a lending spread, is passed through to the
borrower.
To raise funds, IBRD issues debt securities in a variety of currencies to both
institutional and retail investors. These borrowings, together with IBRD's
equity, are used to fund its lending and investment activities, as well as
general operations.
IBRD holds its assets and liabilities primarily in U.S. dollars, euro (and its
national currency units), and Japanese yen. IBRD mitigates its exposure to
exchange rate risks by matching the currencies of its assets with those of its
liabilities and reserves; however, the reported levels of its assets,
liabilities and income in the financial statements are affected by exchange rate
movements of major currencies compared to IBRD's reporting currency, the U.S.
dollar. This financial statement reporting effect does not impact IBRD's risk
bearing capacity.
FY 1998 and FY 1999 were marked by unprecedented growth in the loan portfolio as
IBRD responded to the financial crisis that had begun in East and Southeast Asia
and spread to other parts of the developing world. While the global financial
crisis led to an increase in lending activity in FY 1998 and FY 1999, the number
of loans and the volume of lending commitments fell sharply in FY 2000,
returning to pre-crisis levels. This decline was due partly to the recovery from
financial crises and country specific circumstances. Many of the borrowers
directly affected by the financial crisis have stabilized, in part because of
the quick and flexible response of the international community. Lower
commitments also reflected a general trend in demand from borrowers for smaller
average lending operations.
In the context of assessing changes in IBRD's operating environment, it is
management's practice to recommend each year the allocation of net income to
augment reserves, waivers of loan charges to eligible borrowers, and grants from
net income to support developmental activities.
As part of this annual review, in July 1998, IBRD's Executive Directors took
several actions to augment its financial capacity. These measures included
increasing the contractual charges on new loans, and reducing the interest
waiver for FY 1999 from 25 basis points to 5 basis points on old loans. These
pricing changes effectively brought the net spread for FY 1999 to 45 basis
points on old loans and to 50 basis points on new loans. Also, a front-end fee
of 100 basis points, payable for each such loan at the time it becomes
effective, was introduced. In July 1999, the Executive Directors allocated $955
million of FY 1999 income to reserves and maintained the FY 1999 loan pricing
strategy and interest waivers for FY 2000.
FY 2000 net income was $1,991 million, $473 million higher than the preceding
year. An FY 2000 reduction in the loan loss provision contributed $412 million
to this increase. Income was further bolstered by the impact of interest rate
resets on loans. These increases to net income were partially offset by the
absence in FY 2000 of a one time gain of $237 million, resulting from the
liquidation in FY 1999 of the held-to-maturity portfolio.
On August 1, 2000, the Executive Directors approved the allocation of $1,280
million of FY 2000 net income to reserves, and recommended to IBRD's Board of
Governors the transfer of $635 million from unallocated net income to other
development purposes, and that the remainder be retained as surplus. For FY
2001, an increase to 15 basis points in the interest waiver was approved for old
loans so that the net lending spread will be 35 basis points. For new loans, the
interest waiver of 25 basis points was maintained. FY 2001 waivers of commitment
charges were also maintained at the FY 2000 level.
IBRD continues to evaluate alternative strategies to enhance its risk-bearing
capacity to ensure that it can respond to borrowers as needed, while preserving
its financial strength.
2. DEVELOPMENT ACTIVITIES
IBRD offers loans, related hedging products, and guarantees to its borrowing
member countries to help meet their development needs. It also provides tech-
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 3
<PAGE>
nical assistance and other services to support poverty reduction in these
countries.
Loans
From its establishment through June 30, 2000, IBRD had approved loans, net of
cancellations, totaling $309,839 million to borrowers in 129 countries. The
loans held by IBRD, including loans approved but not yet effective, at June 30,
2000, totaled $164,858 million, of which $120,104 million was outstanding and
$44,754 million was undisbursed. Cumulative loan repayments at June 30, 2000,
based on U.S. dollar equivalents at the time of receipt, were $141,265 million.
The amount of loans outstanding at June 30, 2000 was $2,876 million higher than
that at June 30,1999. The increase is primarily attributable to net
disbursements of $2,750 million.
During FY 2000, commitments of new loans to member countries were $10,919
million, down from $22,182 million in FY 1999. In FY 1998 and FY 1999, IBRD's
commitments had reached unprecedented levels. FY 2000 commitments have declined
from these levels, most notably in adjustment lending. Three types of factors
have contributed to this decrease in lending commitments:
o Cyclical Factors: Emerging market economies have stabilized after the
global financial crisis;
o Long-term Factors: There is a continuing trend toward smaller average
project size;
o Country-specific Factors: A number of country-specific factors such as
political transitions, conflicts, and country performance.
Compared to the preceding fiscal year, the relative regional composition of
commitments in FY 2000 shifted away from East Asia and slightly more towards
Eastern Europe, Central Asia and Latin America.
Under IBRD's Articles of Agreement (the Articles), as applied, the total amount
outstanding of direct loans made by IBRD, participation in loans and callable
guarantees may not exceed the statutory lending limit. At June 30, 2000,
outstanding loans and callable guarantees (net of the accumulated loan loss
provision) totaled $117,181 million, equal to 57% of the statutory lending
limit.
IBRD's lending operations have conformed generally to five principles derived
from its Articles. These principles, taken together, seek to ensure that IBRD
loans are made to 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 described in Box 2.
Within the scope permitted by the Articles, application of these principles must
be developed and adjusted in light of experience and changing conditions.
The process of identifying and appraising a project and approving and disbursing
a loan often extends over several years. However, on numerous occasions IBRD has
shortened the preparation and approval cycle in response to emergency situations
such as natural disasters in Turkey and Central America, as well as the
financial crisis in Asia.
Generally, the appraisal of projects is carried out by IBRD's operational staff
(engineers, financial analysts, economists and other sector and country
specialists). With certain exceptions, each loan must be approved by IBRD's
Executive Directors (See Box 3, Adaptable Program Loans and Learning and
Innovation Loans). Loan disbursements are subject to the fulfillment of
conditions set out in the loan agreement. During project implementation, IBRD
staff with experience in the sector or the country involved periodically visit
project sites to review progress, monitor compliance with IBRD policies and
assist in resolving any problems that may arise. After completion, projects are
evaluated by an independent unit and the findings reported directly to the
Executive Directors to determine the extent to which the project's major
objectives were met. Similar appraisal, approval, supervision and evaluation
procedures apply in the case of IBRD adjustment and other non-project loans.
Lending Instruments
IBRD lending generally falls into one of two categories: investment or
adjustment lending. Historically, most IBRD loans have been for investment
projects or programs. Figure 1 presents IBRD lending by category for the last
eight fiscal years, as a percentage of total loans approved.
Figure 1:
IBRD Leading Commitments
[GRAPHIC OMITTED]
4 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
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Box 2: Lending Operations Principles
(i) IBRD makes loans to governments, governmental authorities or private
enterprises in the territories of member countries. A loan that is not
made directly to the member in whose territories the project 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 IBRD. A guarantee by the member itself has been obtained in all such
cases to date.
(ii) IBRD's loans are designed to promote the use of resources for productive
purposes in its member countries. Projects financed by IBRD loans are
required to meet IBRD's standards for technical, economic, financial,
institutional and environmental soundness.
(iii) In making loans, IBRD must act prudently and pay due regard to the
prospects of repayment. Decisions to make loans are based upon, among
other things, studies by IBRD of a member country's economic structure,
including assessments of its resources and ability to generate sufficient
foreign exchange to meet debt-service obligations.
(iv) IBRD 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 IBRD, are reasonable for the borrower. IBRD is intended to
promote private investment, not to compete with it.
(v) The use of loan proceeds is supervised. IBRD makes arrangements to ensure
that funds loaned are used only for authorized purposes and, where
relevant, with due attention to considerations of cost-effectiveness. This
policy is enforced primarily by requiring borrowers (a) to submit
documentation establishing, to IBRD's satisfaction, that the expenditures
financed with the proceeds of loans are made in conformity with the
applicable lending agreements and (b) to maximize competition in the
procurement of goods and services by using, wherever possible,
international competitive bidding or, when it is not appropriate, other
procedures that ensure maximum economy and efficiency.
--------------------------------------------------------------------------------
Current operating guidelines state that adjustment lending, excluding debt and
debt-service reduction loans, will normally not exceed 25% of total IBRD
lending. This guideline was established with the understanding that it was
likely to be exceeded if world economic conditions worsened. This guideline is
not a rigid limit but rather a trigger for a reevaluation of such lending. As a
result of several large adjustment loans made by IBRD during FY 1999, 63% of
IBRD's lending in that year consisted of such loans (47% for FY 1998). In FY
2000, this proportion decreased to 41% as fewer adjustment loans were necessary.
The lower commitments for adjustment lending reflect the general improvement in
global financial circumstances compared to the two prior fiscal years. The
Executive Directors are aware that, in light of recent financial circumstances
in the world, the guideline has been exceeded in recent years, and may possibly
be exceeded again in subsequent years.
Investment Lending
IBRD has several lending instruments that support investment activities, either
discrete projects or programs of investment. Investment lending committed for FY
2000 totaled $6,493 million ( $8,245 million--FY 1999; $11,151 million--FY
1998). Box 3 presents a description of each investment lending instrument and a
breakdown of IBRD's investment lending approved in FY 2000 and in each of the
two preceding fiscal years.
Adjustment Lending
IBRD also makes adjustment loans designed to support the introduction of basic
changes in economic, financial and other policies of key importance for the
economic development of member countries. Disbursements on these loans are
conditioned on certain performance objectives. Adjustment lending committed for
FY 2000 totaled $4,426 million ( $13,937 million--FY 1999; $9,935 million--FY
1998.) Box 4 provides a description of each adjustment lending instrument and
the details of IBRD's adjustment lending approved in FY 2000 and each of the two
preceding fiscal years.
Enclave Lending
On rare occasions, IBRD will lend for a large, foreign exchange generating
project in a member country usually eligible only for loans from the
International Development Association (IDA). In these circumstances appropriate
risk mitigation measures are incorporated (including off-shore escrow accounts
and debt-service reserves acceptable to IBRD) to ensure that the risks to IBRD
are minimized. At June 30, 2000, IBRD had $170 million in outstanding loans for
enclave projects. In FY 2000, IBRD approved enclave loans totalling $93 million.
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 5
<PAGE>
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Box 3: Investment Lending (in millions of U.S. dollars)
Specific Investment
[GRAPHIC OMITTED]
o Specific Investment Loans fund the creation,
rehabilitation and maintenance of economic,
social and institutional infrastructure.
Emergency Recovery
[GRAPHIC OMITTED]
o Emergency Recovery Loans restore assets and
productivity immediately after a major
emergency (such as war, civil disturbance,
or natural disaster) that seriously disrupts
a member country's economy.
Adaptable Program
[GRAPHIC OMITTED]
o Adaptable Program Loans provide phased
support for long-term development programs
through a series of operations. Succeeding
operations are committed on the basis of
satisfactory performance on agreed
milestones, indicators, periodic reviews,
and the evaluation of implementation
progress and emerging needs. Authority for
approval of subsequent adaptable program
loans under programs approved by the
Executive Directors is with IBRD's
management, subject to oversight and review
by the Executive Directors.
Financial Intermediary
[GRAPHIC OMITTED]
o Financial Intermediary Loans provide
long-term resources to local financial
institutions, helping to develop sound
financial sector policies and institutions,
promoting the operational efficiency of
those institutions, and improving the terms
of credit available to enterprises and
households.
Sector Investment & Maintenance
[GRAPHIC OMITTED]
o Sector Investment and Maintenance Loans aim
to bring sector expenditures, policies and
performance in line with a country's
development priorities.
Technical Assistance
[GRAPHIC OMITTED]
o Technical Assistance Loans are used to build
institutional capacity in the borrowing
country. They are used to build capacity in
entities concerned with promoting economic
and social development, as well as public
sector reform.
Learning and Innovation
[GRAPHIC OMITTED]
o Learning and Innovation Loans support small,
pilot-type investment and capacity-building
projects that, if successful, could lead to
larger projects that would mainstream the
learning and results of the loan. These
loans do not exceed $5 million and are
normally implemented over two to three
years. Approvals of specific individual
loans are at the management level rather
than at the Executive Director level.
[GRAPHIC OMITTED]
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6 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
--------------------------------------------------------------------------------
Box 4: Adjustment Lending (in millions of U.S. dollars)
Structural Adjustment
[GRAPHIC OMITTED]
o Structural Adjustment Loans support specific
policy changes and institutional reforms.
These loans require agreement on a
satisfactory macroeconomic framework and
policy actions that can be monitored on a
specific schedule. FY 1998 commitments
included a $3,000 million economic
reconstruction loan.
Special Structural and Sector Adjustment
[GRAPHIC OMITTED]
o Special Structural and Sector Adjustment
Loans are fast-disbursing loans which
provide support to countries facing a
sectoral or economy-wide crisis with a
substantial structural dimension. These
instruments were introduced in FY 1999.
Sector Adjustment
[GRAPHIC OMITTED]
o Sector Adjustment Loans support
comprehensive policy changes and
institutional reforms in major sectors. They
also require agreement on a satisfactory
macroeconomic framework and its
implementation, and a specific program that
can be monitored.
Programmatic Structural Adjustment
[GRAPHIC OMITTED]
o Programmatic Structural Adjustment Loans
support governmental programs of structural
and social reforms that involve continuous,
incremental policy changes and institution
building through a series of loans. These
loans rely on a solid foundation of
completed or parallel analytic and advisory
work in related areas. The first of these
instruments was approved in FY 2000.
Debt and Debt-Service Reduction
[GRAPHIC OMITTED]
o Debt Reduction Loans help eligible,
highly-indebted member countries reduce
commercial debt and debt service to a
No approvals FY 1998-2000 manageable level as part of a medium-term
financing plan. IBRD did not make any
commitments of this type during FY 1998-FY
2000.
Rehabilitation
[GRAPHIC OMITTED]
o Rehabilitation Loans support government
policy reform programs to assist the private
sector where foreign exchange is required
No approvals FY 1998-2000 for urgent rehabilitation of key
infrastructure and productive facilities.
IBRD did not make any commitments of this
type during FY 1998-FY 2000.
[GRAPHIC OMITTED]
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IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 7
<PAGE>
Financial Terms of Loans
In recent years, IBRD has offered new loans with three types of financial terms:
multicurrency pool loans, variable-spread single currency loans, and fixed-rate
single currency loans. Beginning September 1, 1999, IBRD also made available a
new LIBOR-based fixed spread loan product and, effective December 1, 1999, the
offer of fixed-rate single currency loans was terminated. This choice of
financial terms is intended to provide borrowers with the flexibility to select
terms that are both compatible with their debt management strategy and suited to
their debt-servicing capability. Most multicurrency pool loans and variable
spread single currency loans mature over a period that ranges from fifteen to
twenty years and carry a three- to five-year grace period for principal. While
fixed-spread loans offer more flexible repayment terms, this flexibility is
subject to limits aimed at maintaining a similar average loan maturity across
all loan products for a given borrower.
For most products, IBRD charges a lending rate composed of its average cost of
borrowings plus a spread. Until July 31, 1998, that spread was 50 basis points.
However, during the first quarter of fiscal year 1999, the lending spread was
increased to 75 basis points for new loans. Also, a front-end fee of 100 basis
points, payable for each such loan at the time it becomes effective, was
introduced. In addition, most loans carry a commitment charge of 75 basis points
on undisbursed amounts. However, the fixed-spread loans carry a commitment
charge of 85 basis points for the first four years and 75 basis points
thereafter.
Waivers of a portion of interest owed by all eligible borrowers are determined
annually and have been in effect for each of the previous nine fiscal years.
Waivers of a portion of the commitment charge owed on the undisbursed portion of
loans are also determined annually and have been in effect for each of the last
eleven fiscal years. For interest periods beginning during FY 2000, the interest
waiver was 5 basis points for old loans and 25 basis points for new loans. The
commitment charge waiver for FY 2000 was 50 basis points on all loans. Interest
waivers for FY 2001 are 25 basis points for new loans and 15 basis points for
old loans. Commitment charge waivers for FY 2001 remain at 50 basis points.
Further details are provided in the Notes to Financial Statements-Note C.
Multicurrency Pool Loans
The currency composition of multicurrency 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 Executive Directors and
subject to their periodic review, at least 90% of the U.S. dollar equivalent
value of the pool is in a fixed ratio of one U.S. dollar to 125 Japanese yen to
one euro.
The lending rate on these cost pass-through loans is variable, adjusted every
six months to reflect the previous semester's average cost of outstanding
borrowings allocated to fund these loans, weighted by the average currency
composition of the pool. IBRD adds its lending spread to that average cost.
Multicurrency Pool Loan Conversion Options
In FY 1997, in response to borrower demand for broader currency choice, the
Executive Directors approved the offer of currency choice for all IBRD
multicurrency pool loans for which the invitation to negotiate was issued before
September 1, 1996. The purpose of this invitation was to provide borrowers the
flexibility to amend the terms of their existing multicurrency pool loans to
reflect their choice of the offered currencies by converting multicurrency pool
loans to single currency loan terms or single currency pool terms. Those options
expired on July 1, 1998. Single currency pool terms are not available for new
commitments.
Single Currency Loans
For new commitments, borrowers may select LIBOR-based, variable spread single
currency terms. Fixed-rate single currency loan terms were available for loans
if the invitation to negotiate was issued before December 1, 1999.
Variable-Spread Single Currency Loans
IBRD currently offers variable-spread single currency loans in U.S. dollars,
Japanese yen, euro, pounds sterling and Swiss francs, and will consider borrower
requests for loans in other currencies. Variable-spread single currency loans
carry a lending rate that is reset semi-annually. The lending rate consists of a
base rate, which is LIBOR for the applicable currency plus a spread. The spread
consists of: (a) IBRD's weighted average cost margin for funding for the
preceding semester allocated to these loans relative to LIBOR; and (b) IBRD's
lending spread. These variable rate loans are designed to pass IBRD's funding
spread to LIBOR through to its borrowers. This spread is set every six months,
in January and July. At June 30, 2000, the proportion of outstanding
variable-spread single currency loans denominated in U.S. dollars was 96.1%
(92.3% at June 30, 1999).
Non-standard Single Currency Loans
In response to the global financial crises, IBRD approved and disbursed several
large loans totaling $7,000 million on non-standard single currency loan terms
during FY 1998 and FY 1999. These loans carry a six-month U.S. dollar LIBOR
interest rate plus a fixed spread ranging from 75 to 100 basis points and a
front-end fee. None of these loans is eligible for waivers of interest or
commitment charges.
Subsequent to the disbursement of these loans, during FY 1999 IBRD introduced a
new type of loan tailored
8 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
to be part of a broad financial support package for borrowing countries. These
special structural and sector adjustment loans also carry non-standard single
currency loan terms. As of June 30, 2000, IBRD had approved a total of $5,051
million of special structural or sector adjustment loans. At June 30, 2000,
$4,051 million of this amount had been disbursed. Their terms include a
six-month U.S. dollar LIBOR interest rate plus a minimum fixed spread, currently
set at 400 basis points, which may vary for new loans over time depending on
IBRD's overall risk-bearing capacity and market conditions. These loans have a
five year maturity with a three-year grace period on principal, and a front-end
fee of one percent of the principal amount payable on effectiveness. Special
structural and adjustment loans are not eligible for waivers of interest or
commitment charges.
Fixed-rate Single Currency Loans
As of December 1, 1999, fixed-rate single currency loans were no longer
available for new commitments. Fixed-rate single currency loans carry lending
rates that are set on specified semi-annual rate fixing dates for amounts
disbursed during the preceding six months. The lending rate consists 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) IBRD's funding cost margin relative to the base rate for these
loans; (b) a risk premium to compensate IBRD for market risks it incurs in
funding these loans; and (c) IBRD's lending spread.
Fixed-Spread Loans
During the first quarter of FY 2000, IBRD introduced the fixed-spread loan,
designed in response to the borrowers' desire for more flexible financial
products. Fixed-spread loans can be tailored to meet the needs of individual
projects and programs and support borrowers' debt management strategies.
Fixed-spread loans are currently offered in U.S. dollars, Japanese yen and euro.
Requests for other currencies will also be considered.
These fixed-spread loans carry an interest rate of LIBOR, plus a spread that is
fixed at loan signing for the life of the loan. At June 30, 2000, the fixed
spread was 55 basis points for U.S. dollar and euro denominated loans and 45
basis points for Japanese yen. The fixed spread consists of (a) IBRD's projected
funding cost margin relative to U.S. dollar LIBOR, with a basis swap adjustment
for non-U.S. dollar loans; (b) a market risk premium of 5 basis points; and (c)
IBRD's standard lending spread. The fixed-spread offered will be evaluated from
time to time and may be reset when market changes warrant. Fixed-spread loans
carry IBRD's standard loan charges for new commitments, including a 100 basis
point front-end fee on the loan amount and a 75 basis point commitment fee on
undisbursed loan amounts. In addition, these loans carry a commitment charge
risk premium of 10 basis points on undisbursed loan amounts for the first four
years of the loan's life. This premium, along with the market risk premium in
the interest spread, compensates IBRD for funding and refinancing risk.
Borrowers selecting this product may change the currency or interest rate basis
over the life of the loan and have more flexibility in selecting loan
maturities. Effective February 1, 2000, a borrower may choose to include the
following conversion features in the loan contract:
o option to change the currency at market rates of all or a part of the
undisbursed or disbursed loan amounts (for a fee);
o option to fix the interest rate at market rates on all or a part of the
disbursed amounts (without charge) for rate fixings for up to the full
maturity of the loan, and for amounts up to the outstanding loan amount;
o option to unfix or re-fix the interest rate at market rates on all or part
of disbursed loan amounts (for a fee);
o option to cap or collar the floating interest rate on all or a part of
disbursed loan amounts (for a fee).
Transaction fees range from 12.5 to 25 basis points of the notional transaction
amount. Repayment terms are more flexible than for prior products, subject to
certain constraints on the average repayment maturity and final maturity on a
country basis. Within these constraints, borrowers have flexibility to configure
grace periods and maturity profiles in a manner consistent with the purpose of
the loan. Repayment profiles may be level repayment of principal, an annuity
type schedule, a bullet repayment or a customized schedule. Repayment profiles
cannot be changed after a loan is signed. Table 1 presents a breakdown of IBRD's
loan portfolio by loan product.
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 9
<PAGE>
Table 1:
<TABLE>
<CAPTION>
In millions of U.S. dollars
----------------------------------------------------------------------------------------------------------------------------------
FY 2000 FY 1999 FY 1998
----------------------- ------------------------- -------------------------
Principal As a % of Principal As a % of Principal As a % of
Loan Product Balance Total Loans Balance Total Loans Balance Total Loans
------------------------------------------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Adjustable-rate Multicurrency Pool Loans
Outstanding $ 35,542 30 $ 37,203 32 $ 56,274 53
Undisbursed 4,567 10 6,344 12 8,765 17
Single Currency Pool Loans
Outstanding 35,422 29 40,693 35 25,658 24
Undisbursed 241 1 374 * 131 *
Variable-Spread Single Currency Loans(a)
Outstanding 33,078 28 25,462 22 15,018 14
Undisbursed 29,486 66 33,862 66 29,801 58
Fixed-Rate Single Currency Loans
Outstanding(b) 13,636 11 11,238 9 5,683 5
Undisbursed 8,273 18 10,787 21 12,356 24
Fixed-Spread Loans
Outstanding 968 1
Undisbursed 2,187 5
Other Loans
Outstanding 1,458 1 2,631 2 3,943 4
Undisbursed -- -- 5 * 12 *
--------- ----------- --------- ----------- --------- -----------
Total **
Outstanding loans $120,104 100 $117,228 100 $106,576 100
Undisbursed loans $44,754 100 $51,372 100 $51,065 100
========= =========== ========= =========== ========= ===========
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
a. Of which single currency loans with non-standard terms represent $10,801
million outstanding ($9,035 million--June 30, 1999 and $5,000
million--June 30, 1998). At June 30, 2000, $1,000 million was undisbursed.
b. Includes fixed-rate single currency loans for which the rate had not yet
been fixed at fiscal year-end.
* Indicates amounts less than 0.5%
** May differ from the sum of individual figures due to rounding.
For more information, see the Notes to Financial Statements-Note C.
Hedging Products
Along with the approval of the introduction of the fixed-spread loan product,
IBRD also approved the offer of new hedging products for its borrowers to
respond to their needs for access to better risk management tools. These
products assist borrowers in hedging their risks on individual loans made to
them by IBRD. These hedging products include interest rate and currency swaps,
and interest rate caps and collars. On a case-by-case basis, commodity-linked
swaps may also be considered.
Each request from a borrower for execution of a hedging product must include an
explanation of its suitability for risk management purposes. IBRD will serve as
a financial intermediary, passing through the market cost of the instrument to
the borrower, and will charge an administrative fee which varies from 12.5 to
37.5 basis points of the notional principal involved. These instruments may be
executed either under a master derivatives agreement which substantially
conforms to industry standards, or in individually negotiated transactions. IBRD
is in the process of making these instruments available.
Guarantees
IBRD offers guarantees on loans from private investors for projects in countries
eligible to borrow from IBRD. In exceptional cases, IBRD may offer enclave
guarantees for loans for foreign-exchange generating projects in a member
country usually eligible only for credits from IDA. IBRD guarantees are flexible
instruments that provide the credit enhancement required to mobilize private
sector financing for individual projects through targeted and limited support,
thus enhancing IBRD's developmental impact by catalyzing private sector
participation. On a pilot basis, guarantees are being made available to support
agreed-upon policies and reforms in certain member countries. IBRD applies the
same country creditworthiness and project evaluation criteria to guarantees as
it applies to loans. Projects in any member country that is eligible for IBRD
lending are also eligible for IBRD guarantees.
10 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
IBRD guarantees can be customized to suit varying country and project
circumstances. They can be targeted to mitigate specific risks, generally risks
relating to political, regulatory and government performance, which the private
sector is not normally in a position to absorb or manage. Three basic types of
guarantees are offered:
o Partial risk guarantees cover debt-service defaults on a loan that may
result from nonperformance of government obligations. These are defined in
the contracts negotiated between the government or a government-sponsored
entity and the private company responsible for implementing the project.
The IBRD guarantee is limited to backing the government's obligations; the
obligations of the private company contained in the project agreements are
not covered and thus the private lenders assume the risk of nonperformance
by the private company.
o Partial credit guarantees are used for public sector projects when there
is a need to extend loan maturities and guarantee specified interest or
principal payments on loan to the government or its instrumentalities.
This approach may be most appropriate when the lenders are not willing to
accept the sovereign risk of the host government for a term long enough to
meet the needs of the project. By guaranteeing later maturities, such
partial credit guarantees help induce the market to extend the term to the
maximum risk it can bear.
o Policy-based guarantees are partial credit guarantees that cover a portion
of debt-service on a borrowing by an eligible member country from private
foreign creditors in support of agreed structural, institutional and
social policies and reforms. These guarantees are an extension of partial
credit guarantees for projects. The guaranteed portion of the debt-service
could consist of a combination of interest and principal payments, but the
actual structure is determined on a case-by-case basis. Eligibility for
IBRD adjustment lending is a necessary condition for eligibility for this
type of instrument. The terms of this instrument are the same as
project-based partial credit guarantees. Maturity and level of fees will
be standard if the guarantee is made in situations comparable to those
under which a structural adjustment loan would be made; however, if the
guarantee is made in connection with a special structural adjustment loan,
then it will be at special structural adjustment loan equivalent terms.
This guarantee product was launched in FY 1999. Initially, IBRD is
proceeding with a pilot program of up to $2,000 million. Once the $2,000
million level is reached, the Executive Directors will review the program.
At June 30, 2000, IBRD had approved guarantees of $250 million under this
program.
IBRD may also provide partial risk guarantees for export-oriented projects in an
IDA-only country (enclave guarantees) if the project is expected to generate
foreign exchange outside the country, and IBRD determines that the country will
have adequate foreign exchange to meet its obligations under the
counter-guarantee if the guarantee is called. A project covered by an enclave
guarantee includes security arrangements with appropriate risk mitigation
measures, such as offshore revenue escrow accounts and debt-service reserves
acceptable to IBRD, to minimize IBRD's exposure and the risk of a call on the
guarantee. The commitment of enclave guarantees is initially limited to an
aggregate guaranteed amount of $300 million.
Each guarantee requires the counter-guarantee of the member government.
Guarantees are priced within a limited range to reflect the risks involved, and
preparation fees may be charged where there are exceptional costs involved for
IBRD. IBRD prices guarantees consistent with the way it prices its loans.
IBRD's exposure at June 30, 2000 on its guarantees (measured as their present
value in terms of their first call date) was $1,376 million. For additional
information see the Notes to Financial Statements-Note C.
Other Activities
Consultation: In addition to its financial operations, IBRD provides technical
assistance to its member countries, both in connection with, and independently
of, loan operations. There is a growing demand from borrowers for strategic
advice, knowledge transfer, and capacity building. Such assistance includes
assigning qualified professionals to survey developmental opportunities in
member countries, analyzing their fiscal, economic and developmental
environment, assisting member countries in devising coordinated development
programs, appraising projects suitable for investment and assisting member
countries in improving their asset and liability management techniques.
Research and Training: To assist its developing member countries, IBRD--through
the World Bank Institute--provides courses and other training activities related
to economic policy development and administration for governments and
organizations that work closely with IBRD. The World Bank Institute also makes
contributions for research and other developmental activities.
Trust Fund Administration: IBRD, alone or jointly with IDA, administers on
behalf of donors, funds restricted for specific uses. These funds are held in
trust and are not included in the assets of IBRD. See the Notes to Financial
Statements-Note H.
Investment Management: IBRD has leveraged its treasury management capacity and
infrastructure to provide investment management services to an external
institution for a fee. These funds are not included in the assets of IBRD.
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 11
<PAGE>
3. FINANCIAL RISK MANAGEMENT
IBRD assumes various kinds of risk in the process of providing development
banking services. Its activities can give rise to four major types of financial
risk: credit risk; market risk (interest rate and exchange rate); liquidity
risk; and operating risk. The major inherent risk to IBRD is country credit
risk, or loan portfolio risk.
The risk management governance structure includes an Asset/Liability Management
Committee chaired by the Chief Financial Officer. This committee makes decisions
and recommendations to senior management in the areas of financial policy, the
adequacy and allocation of risk capital, and oversight of financial reporting.
The Market Risk and Currency Management Subcommittee reports to the
Asset/Liability Management Committee. This subcommittee develops and monitors
the policies under which market and commercial credit risks faced by IBRD are
measured, reported and managed. The subcommittee also monitors compliance with
policies governing commercial credit exposure and currency management. Specific
areas of activity include establishing guidelines for limiting balance sheet and
market risks, the use of derivative instruments, and monitoring matches between
assets and their funding.
For the day-to-day management of financial risk, IBRD's risk management
structure extends into its business units. Risk management processes have been
established to facilitate, control and monitor risk-taking. These processes are
built on a foundation of initial identification and measurement of risks by each
of the business units.
The processes and procedures by which IBRD manages its risk profile continually
evolve as its activities change in response to market, credit, product, and
other developments. The Executive Directors periodically review trends in IBRD's
risk profiles and performance, as well as any significant developments in risk
management policies and controls.
Credit Risk
Credit risk, the risk of loss from default by a borrower or counterparty, is
inherent in IBRD's development activities. Under the direction of the
Asset/Liability Management Committee, policies and procedures for measuring and
managing such risks are formulated, approved and communicated throughout IBRD.
Senior managers represented on the committee are responsible for maintaining
sound credit assessments, addressing transaction and product risk issues,
providing an independent review function and monitoring the loans, investments
and borrowings portfolios.
Country Credit Risk
Country credit risk is the primary risk faced by IBRD and is overseen by the
Chief Credit Officer who leads the Country Credit Risk Deparment. It has three
components as described below. Probable expected losses from all three
components are covered by the accumulated provision for loan losses, while
unexpected losses are covered by IBRD's income generating capacity and
risk-bearing capital. IBRD continuously reviews the creditworthiness of its
borrowing member countries and adjusts its overall country programs and lending
operations to reflect the results of these reviews.
(i) The first component is idiosyncratic risk. This is the risk that
individual countries will accumulate extended debt-service arrears, or
move closer to accumulating extended debt-service arrears, for country
specific reasons.
(ii) The second component is covariance risk. This is the risk that one or more
borrowers will accumulate extended payment arrears, or move closer to
accumulating extended payment arrears, as a result of a common external
shock. This shock could be, for example, a regional political crisis or an
adverse change in the global environment (such as a fall in commodity
prices or a rise in global interest rates).
(iii) The third component is portfolio concentration risk, which arises when a
small group of borrowers account for a large share of loans outstanding.
Portfolio concentration increases the potential financial impact of
idiosyncratic and covariance risk. Portfolio concentration risk is managed
using the portfolio concentration limit described below.
In 1997, the Executive Directors approved an approach to portfolio concentration
under which IBRD's largest loan portfolio exposure to a single borrowing country
is restricted to the lower of an equitable access limit or a concentration risk
limit. The equitable access limit is equal to 10% of IBRD's subscribed capital,
reserves and unallocated surplus. The concentration risk limit is based on the
adequacy of IBRD's risk-bearing capacity relative to its largest loan portfolio
exposure to a single borrowing country. The concentration risk limit takes into
account not only current exposure (loans outstanding, plus the present value of
guarantees), but also projected exposure over the ensuing three- to five-year
period. The limit is determined by the Executive Directors each year at the time
they consider IBRD's reserves adequacy and the allocation of its net income from
the preceding fiscal year. For FY 2001 the concentration risk limit is $13.5
billion, unchanged from FY 2000. The equitable access limit is $20.7 billion.
IBRD's largest loan portfolio exposure (including the present value of
guarantees) to a single borrowing country was $11.8 billion at June 30, 2000.
12 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
Overdue and Non-performing Loans
It is IBRD's policy that if a payment of principal, interest or other charges on
an IBRD loan or IDA credit becomes 30 days overdue, no new loans to that member
country, or to any other borrower in that country, will be presented to the
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 payment becomes 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 the 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. It is the policy of IBRD to place all loans made to
or guaranteed by a member of IBRD in nonaccrual status, if principal, interest
or other charges on any such loan are overdue by more than six months, unless
IBRD determines that the overdue amount will be collected in the immediate
future. IBRD maintains an accumulated provision for loan losses to recognize the
risk inherent in the portfolio. The methodology for determining the accumulated
provision for loan losses is discussed in the following paragraphs. Additional
information on IBRD's loan loss provisioning policy and status of nonaccrual
loans can be found in the Notes to Financial Statements-Summary of Significant
Accounting and Related Policies, and Note C.
In 1991, the Executive Directors adopted a policy to assist members with
protracted arrears to IBRD to mobilize sufficient resources to clear their
arrears and to support a sustainable growth-oriented adjustment program over the
medium term. Under this policy, IBRD 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 endorsed by IBRD; (b)
undertake a stabilization program, if necessary, endorsed, or financially
supported, by the International Monetary Fund; (c) agree to a financing plan to
clear all arrears to IBRD and other multilateral creditors in the context of a
medium-term structural adjustment program; and (d) make debt-service payments as
they fall due on IBRD loans during the performance period. The signing,
effectiveness and disbursement of such loans will not take place until the
member's arrears to IBRD have been fully cleared.
Accumulated Provision for Loan Losses
IBRD's accumulated provision for loan losses reflects the following:
o Management's assessment of the overall collectibility risk on accruing
loans (which includes callable guarantees); and
o The present value losses on nonaccruing loans. Such losses are equal to
the difference between the discounted present value of the debt-service
payments on a loan at its contractual terms and the expected cash flows on
that loan.
Management determines the adequacy of the accumulated provision for loan losses
by assessing the amount required to cover probable expected losses in the
accrual portfolio and losses inherent in the nonaccrual portfolio as of the
balance sheet date. The amount required to cover probable expected losses in the
accrual portfolio is related to the mean of the distribution of losses facing
the institution over the next three years, which has been developed to estimate
the probable losses inherent in the accrual portfolio at the balance sheet date.
This is calculated using a risk-adjusted capital allocation framework that takes
into account the concentration and covariance risk in the portfolio. The amount
required to cover losses inherent in the nonaccrual portfolio is based on the
calculation of the discounted present value of future cash flows.
Estimating probable expected losses is inherently uncertain and depends on many
factors. IBRD periodically reviews such factors and reassesses the adequacy of
the accumulated provision for loan losses accordingly. Actual losses may differ
from expected losses due to unforeseen changes in general macroeconomic and
political conditions, unexpected correlations within the portfolio, and other
external factors.
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 13
<PAGE>
Commercial Credit Risk
IBRD's commercial credit risk is concentrated in investments in debt instruments
issued by sovereigns, agencies, banks and corporate entities. The majority of
these investments are in AAA and AA rated instruments.
In the normal course of its business, IBRD utilizes various derivatives and
foreign exchange financial instruments to meet the financial needs of its
borrowers, to generate income through its investment activities and to manage
its exposure to fluctuations in interest and currency rates.
Derivative and foreign exchange transactions involve credit risk. The effective
management of credit risk is vital to the success of IBRD's funding, investment
and asset/liability management activities. The monitoring and managing of these
risks is a continuous process due to changing market environments.
IBRD controls the credit risk arising from derivatives and foreign exchange
transactions through its credit approval process, the use of collateral
agreements and risk limits, and monitoring procedures. The credit approval
process involves evaluating counterparty creditworthiness, assigning credit
limits and determining the risk profile of specific transactions. Credit limits
are calculated and monitored on the basis of potential exposures taking into
consideration current market values, estimates of potential future movements in
those values and collateral agreements with counterparties. If there is a
collateral agreement with the counterparty to reduce credit risk, then the
amount of collateral obtained is based on the credit rating of the counterparty.
Collateral held includes cash and government securities.
IBRD treats the credit risk exposure as the replacement cost of the derivative
or foreign exchange product. This is also referred to as replacement risk or the
mark-to-market exposure amount. While contractual principal amount is the most
commonly used volume measure in the derivative and foreign exchange markets, it
is not a measure of credit or market risk.
Mark-to-market exposure is a measure, at a point in time, of the value of a
derivative or foreign exchange contract in the open market. When the
mark-to-market is positive, it indicates the counterparty owes IBRD and,
therefore, creates an exposure for IBRD. When the mark-to-market is negative,
IBRD owes the counterparty and does not have replacement risk.
When IBRD has more than one transaction outstanding with a counterparty, and
there exists a legally-enforceable master derivatives agreement with the
counterparty, the "net" mark-to-market exposure represents the netting of the
positive and negative exposures with the same counterparty. If this net
mark-to-market is negative, then IBRD's exposure to the counterparty is
considered to be zero. Net mark-to-market is, in IBRD's view, the best measure
of credit risk when there is a legally enforceable master derivatives agreement
between IBRD and the counterparty which contains legally enforceable close-out
netting provisions. For the contractual value, notional amounts and related
credit risk exposure amounts by instrument, see the Notes to Financial
Statements-Note E.
Table 2 provides details of IBRD's estimated credit exposure on its investments
and swaps, net of collateral held, by counterparty rating category. The swap
credit exposure, net by counterparty, of $440 million, for swap activity
associated with investments and borrowings, is offset by collateral of $329
million, which results in a total net swap exposure of $111 million.
The FY 2000 decline in credit exposure parallels the decrease in the size of the
investment portfolio. The credit exposure from swaps, net of collateral held,
declined from $230 million to $111 million during the year.
The FY 1999 increase in credit exposure over that of FY 1998 reflected the
growth in the size of the investment portfolio. The net credit exposure from
swaps declined from FY 1998 to FY 1999 by $387 million to $230 million.
<TABLE>
<CAPTION>
In millions of U.S. dollars
-----------------------------------------------------------------------------------------------------------------------------------
At June 30, 2000 At June 30, 1999 At June 30, 1998
---------------------------------------------------------------- ---------------------- -----------------------
Investments
------------------------
Agencies, Total Exposure Total Exposure Total Exposure
Counterparty Banks & Net Swap on Investments % of on Investments % of on Investments % of
Rating Sovereigns Corporates Exposure and Swaps Total and Swaps Total and Swaps Total
------------ ---------- ---------- -------- -------------- ----- -------------- ----- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AAA $3,791 $8,516 $-- $12,307 49 $12,513 41 $9,740 37
AA 2,019 8,813 85 10,917 44 15,449 51 14,725 56
A -- 1,776 26 1,802 7 2,311 8 1,939 7
---------- ---------- -------- -------------- ----- -------------- ----- -------------- -----
Total $5,810 $19,105 $111 $25,026 100 $30,273 100 $26,404 100
========== ========== ======== ============== ===== ============== ===== ============== =====
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
Asset/Liability Management
The objective of asset/liability management for IBRD is to ensure adequate
funding for each product at the most attractive available cost, and to manage
the currency composition, maturity profile and interest rate sensitivity
characteristics of the portfolio of liabilities supporting each lending product
in accordance with the particular requirements for that product and within
prescribed risk parameters. IBRD's Risk Management Department is charged with
identifying, measuring and monitoring market risks, liquidity risks, and
counterparty credit risks in IBRD's financial operations.
Interest Rate Risk
There are two potential sources of interest rate risk to IBRD. The first is the
interest rate sensitivity associated with the net spread between the rate IBRD
earns on its assets and the cost of borrowings which fund those assets. The
second is the interest rate sensitivity of the income earned from funding a
portion of IBRD assets with equity. The borrowing cost pass-through formulation
incorporated in the lending rates charged on most of IBRD's existing loans has
traditionally helped limit the interest rate sensitivity of the net spread
earnings on its loan portfolio. Such cost pass-through loans currently account
for more than 84% of the existing outstanding loan portfolio (82% at the end of
FY 1999). However, the majority of cost pass-through loans do entail some
residual interest rate risk, given the lag inherent in the lending rate
calculation. If new borrowings are at interest rates above the average of those
already in the debt pool, the higher average debt costs would not be passed
through to the lending rate charged to the borrowers and thus would not affect
the interest income generated on cost pass-through loans until the following
semester. The reverse is true when market interest rates decline.
Another potential risk arises because the cost pass-through currency pool
products have traditionally been funded with a large share of medium- and
long-term fixed rate borrowings, to provide the borrowers with a reasonably
stable interest basis. Given that the cumulative impact of interest rate changes
over the last decade has resulted in a decline in the level of interest rates,
the cost of these historical fixed-rate borrowings in the multicurrency pool and
the single currency pools is currently considerably higher than IBRD's new
borrowing costs. Recent interest rate increases in the market have mitigated
this difference to some extent. However, the amount of "above market" debt
allocated to the multicurrency pool debt, in aggregate terms, still exceeds the
outstanding multicurrency pool loans beyond FY 2011, i.e. the pool is
over-funded beyond FY 2011. The present value of this over-funded portion of the
above-market debt is about $230 million as of June 30, 2000. Over-funding
reaches a maximum of approximately $5.6 billion in FY 2015. Strategies for
managing this risk include changing the rate fixity of the overfunded portion of
the debt from fixed to floating rates. During FY 2000, IBRD completed two
forward interest rate swap transactions and plans to enter into additional swap
transactions until the over-funded portion of the above-market fixed-rate debt
is completely swapped to floating rates. A portion of the loss attributable to
the combined position will be passed as a rate adjustment to the multicurrency
pool loans.
Interest rate risk on non-cost pass-through products, which currently account
for 16% of the existing loan portfolio (18% at the end of FY 1999), is managed
by using interest rate swaps to closely align the rate sensitivity
characteristics of the loan portfolio with those of their underlying funding. As
the portfolio of fixed-spread loans increases, the proportion of non-cost
pass-though products will grow. The interest rate risk on IBRD's liquid
portfolio is managed within specified duration-mismatch limits and is further
limited by stop-loss limits.
Because equity funds a portion of outstanding loans, IBRD's level of net income
is sensitive to movements in the level of nominal interest rates. In general,
lower nominal interest rates result in lower lending rates which, in turn,
reduce the nominal earnings on IBRD's equity.
Interest rate risk also arises from a variety of other factors, including
differences in the timing between the contractual maturity or repricing of
IBRD's assets, liabilities and derivative financial instruments. On floating
rate assets and liabilities, IBRD is exposed to timing mismatches between the
re-set dates on its floating rate receivables and payables.
As part of its asset/liability management process, IBRD employs interest rate
swaps to manage and align the rate sensitivity characteristics of its assets and
liabilities. IBRD uses derivative instruments to adjust the interest rate
repricing characteristics of specific balance sheet assets and liabilities, or
groups of assets and liabilities with similar repricing characteristics.
Exchange Rate Risk
In order to minimize exchange rate risk in a multicurrency environment, IBRD
matches its borrowing obligations in any one currency (after swap activities)
with assets in the same currency, as prescribed by the Articles. In addition,
IBRD's policy is to minimize the exchange rate sensitivity of its
reserves-to-loans ratio. It carries out this policy by undertaking currency
conversions periodically to align the currency composition of its reserves to
that of its outstanding loans. This policy is designed to minimize the impact of
market rate fluctuations on the reserves-to-loans ratio, thereby preserving
IBRD's ability to better absorb potential losses from arrears regardless of the
market environment. IBRD is constantly evaluating alternative strategies to
better manage its exchange rate risk.
Figure 2 presents the currency composition of significant balance sheet
components (net of swaps) at the end of FY 2000 and FY 1999.
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 15
<PAGE>
Figure 2: Relative Currency Composition of Significant Balance Sheet Components
At June 30, 2000
[GRAPHIC OMITTED]
Assets Liabilities & Equity
Loans 83% Borrowings 81%
Investments 17% Equity 19%
--- ---
100% 100%
=== ===
At June 30, 1999
[GRAPHIC OMITTED]
Assets Liabilities & Equity
Loans 78% Borrowings 82%
Investments 22% Equity 18%
--- ---
100% 100%
=== ===
16 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
Operating Risk
Operating risk is the potential for loss arising from internal activities or
external events caused by breakdowns in information, communication, physical
safeguards, business continuity, supervision, transaction processing, settlement
systems and procedures and the execution of legal, fiduciary and agency
responsibilities. IBRD, like all financial institutions, is exposed to many
types of operating risks, including the risk of fraud by staff or outsiders.
IBRD attempts to mitigate operating risk by maintaining a system of internal
controls that is designed to keep operating risk at appropriate levels in view
of the financial strength of IBRD and the characteristics of the activities and
markets in which IBRD operates. In the past, IBRD has suffered certain minor
financial losses from operating risk and while it maintains an adequate system
of internal controls, there can be no absolute assurance that IBRD will not
suffer such losses in the future.
In FY 1996, IBRD adopted the COSO(a) control framework and a self-assessment
methodology to evaluate the effectiveness of its internal controls over
financial reporting, and it has an on-going program in place to assess all major
business units. In each of the last four fiscal years, IBRD obtained an
attestation report from its external auditors that IBRD's assertion that, as of
June 30 of each of these fiscal years, its system of internal control over its
external financial reporting met the criteria for effective internal control
over external financial reporting described in COSO, is fairly stated in all
material respects.
Economic and Monetary Union in Europe
Since January 1, 1999, in the normal course of business as a multicurrency
organization, IBRD has been conducting euro-denominated transactions in paying
and receiving, investments, bond issuance, loan disbursements, loan billing and
new lending commitments.
IBRD has adopted a gradual approach to redenominate national currency unit
balance sheet items and IBRD-administered donor trust funds to euro during the
transition period, before their automatic conversion to euro on January 1, 2002.
Year 2000 Update
The Year 2000 issue was the result of computer programs using two digits rather
than four to define the applicable year. Without remediation or replacement,
this could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions. Modification and replacement of software and hardware
and coordination with third party providers enabled IBRD to operate normally
across the globe without experiencing any material interruptions in any critical
systems during the roll over and thereafter. The total cost of Year 2000
preparation was estimated at approximately $17 million. The cost of certain
major systems replacements and enhancements already planned were not considered
Year 2000 costs.
While ongoing tracking continues, no latent Year 2000 issues have arisen. Nor
have there been indications from any borrowers that they have experienced any
serious disruptions to national infrastructure or public administration due to
Year 2000 problems which could affect their ability to continue to service IBRD
loans.
4. LIQUIDITY MANAGEMENT
Liquidity risk arises in the general funding of IBRD's activities and in the
management of its financial positions. It includes the risk of being unable to
fund its portfolio of assets at appropriate maturities and rates and the risk of
being unable to liquidate a position in a timely manner at a reasonable price.
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of IBRD's financial commitments.
The cumulative performance of the liquid asset portfolio in FY 2000 compared to
FY 1999 is presented in Table 3. These returns exclude investment assets funding
certain other postemployment benefits.
Table 3:
-----------------------------------------------------
Annualized
Financial Return (%)
----------------------
FY 2000 FY 1999
--------- ----------
IBRD Overall Portfolio 5.75 6.00
Stable Portfolio of which:
Actively Managed 5.93 5.35
Held-to-maturity
Portfolio -- 82.96
Operational Portfolio 5.39 4.48
Discretionary Portfolio 5.27 5.23
-----------------------------------------------------
The returns for FY 1999 were heavily affected by IBRD's liquidation, in FY 1999,
of the sterling U.K. government securities in the held-to-maturity portfolio. At
the time of liquidation the securities in the held-to-maturity portfolio had a
fair value of $1,389 million and a carrying value of $1,152 million. This
liquidation resulted in a realized gain of $237 million.
Under IBRD's liquidity management policy, aggregate liquid asset holdings should
be kept at or above a specified prudential minimum. That minimum is equal to the
highest consecutive six months of debt service obligations for the fiscal year,
plus one-half of net approved loan disbursements as projected for the fiscal
year. The FY 2001 prudential minimum liquidity level has been set $18.4 billion,
representing a $400
----------
a. In 1992, the Committe of Sponsoring Organizations of the Treadway Commission
(COSO) issued its Internal Control-Integrated Framework, which provided a common
definition of internal control and guidance on judging its effectiveness.
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 17
<PAGE>
million increase over that for FY 2000. IBRD also holds liquid assets over the
specified minimum to provide flexibility in timing its borrowing transactions
and to meet working capital needs.
IBRD's liquid assets are held principally in obligations of governments and
other official entities, time deposits and other unconditional obligations of
banks and financial institutions, asset-backed securities, and futures and
options contracts pertaining to such obligations.
Liquid assets are held in three distinct sub-portfolios: stable; operational;
and discretionary, each with different risk profiles, funding, structures and
performance benchmarks. The stable portfolio is principally an investment
portfolio holding the prudential minimum level of liquidity, which is set at the
beginning of each fiscal year. The operational portfolio provides working
capital for IBRD's day-to-day cash flow requirements. The discretionary
portfolio provides flexibility for the execution of IBRD's borrowing program and
can be used to take advantage of attractive market opportunities. The
discretionary portfolio was gradually liquidated over the first half of FY 2000.
This liquidation provided the funding necessary to meet an unusually large
concentration of debt service payments during this period. Figure 3 represents
IBRD's liquid asset portfolio size and structure at the end of FY 2000 and FY
1999, excluding investment assets associated with certain other postemployment
benefits.
At the end of FY 2000, the aggregate size of the IBRD liquid asset portfolio
stood at $24,193 million, a decrease of $5,817 million over FY 1999. The higher
volume of liquid assets at June 30, 1999 included the proceeds from the
borrowing program undertaken to pre-fund the large amount of debt maturing in FY
2000. The IBRD liquid asset portfolio is largely composed of U.S. dollars, with
the currency composition of the operational portfolio varying the most as a
result of the cash flows generated by disbursements, debt-service payments, new
borrowings and reserves conversions.
5. FUNDING RESOURCES
Equity
Total shareholders' equity at June 30, 2000 was $29,289 million compared with
$28,021 million at June 30, 1999. The increase from FY 1999 primarily reflects
the increase in retained earnings of $1,318 million, the reduction in restricted
paid-in capital of $180 million due primarily to encashments of demand
obligations, and the increase in paid-in capital of $23 million. Table 4
presents the composition of equity at June 30, 2000 and 1999.
IBRD's equity base plays a critical role in securing its financial objectives.
By enabling IBRD to absorb risk out of its own resources, its equity base
protects shareholders from a possible call on callable capital. The adequacy of
IBRD's equity capital is judged on the basis of its ability to generate future
net income sufficient to absorb plausible risks and support normal loan growth,
without reliance on additional shareholder capital. IBRD uses the equity
capital-to-loans measure as a summary statistic for financial capacity. Cash
flow analysis is the basis by which IBRD measures its income generating capacity
and its capital adequacy. IBRD continues to consider additional methodologies
for evaluating its risk-bearing capacity.
Figure 3:
--------------------------------------------------------------------------------
(In millions of U.S. dollars)
June 30, 3000
Stable Portfolio $18,544 77%
[PIE CHART]
Operational Portfolio $ 5,649 23%
June 30, 1999
Stable Portfolio $18,794 63%
[PIE CHART]
Discretionary Portfolio $ 3,596 12%
Operational Portfolio $ 7,620 25%
--------------------------------------------------------------------------------
18 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
Table 4:
<TABLE>
<CAPTION>
In millions of U.S. dollars
-------------------------------------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
-------------- ---------------
<S> <C> <C>
Usable Paid-in Capital
Paid-in Capital $11,418 $11,395
Net Receivable for Maintenance of Value (898) (869)
Restricted Paid-in Capital (2,328) (2,509)
----------- -----------
Total Usable Paid-in Capital 8,192 8,017
Retained Earnings and Cumulative Translation Adjustments 18,386 17,072
Equity Excluded from Equity Capital-to-Loans Ratio
Surplus (85) (195)
Pension Reserve (549) (294)
Prospective allocation of FY 2000/FY 1999 net income, other than to
General Reserve (877) (818)
----------- -----------
Equity Capital Used in Equity Capital-to-Loans Ratio $25,067 $23,782
=========== ===========
-------------------------------------------------------------------------------------------------------------
</TABLE>
As a result of higher net income and the increase in reserves, shareholders'
equity grew at a faster pace than the loan portfolio, compared to the prior
year. As a result, the ratio of equity capital-to-loans rose to 21.23% at June
30, 2000, from 20.65% one year earlier. In accordance with the financial policy
defining this ratio, the amount of transfer to general reserves of $1,114
million approved on August 1, 2000 was included in this ratio at June 30, 2000
($700 million--June 30, 1999). Figure 4 depicts this ratio over the last five
years.
Figure 4:
Equity-to-Loans Ratio
[GRAPHIC OMITTED]
Capital
The authorized capital of IBRD at June 30, 2000 was $190,811 million, of which
$188,606 million had been subscribed. Of the subscribed capital, $11,418 million
had been paid in and $177,188 million was callable. Of the paid-in capital,
$8,168 million was available for lending and $3,250 million was not available
for lending. The terms of payment of IBRD's capital and the restrictions on its
use that are derived from the Articles and from resolutions of IBRD's Board of
Governors are:
(i) $2,563 million of IBRD's capital was initially paid in gold or U.S.
dollars or was converted by the subscribing members into U.S. dollars.
This amount may, under the Articles, be freely used by IBRD in its
operations.
(ii) $8,855 million of IBRD's capital was paid in the currencies of the
subscribing members. Under the Articles this amount is subject to
maintenance of value obligations and may be loaned only with the consent
of the member whose currency is involved. In accordance with such
consents, $5,301 million of this amount had been used in IBRD's lending
operations at June 30, 2000.
(iii) $150,885 million of IBRD's capital may, under the Articles, be called only
when required to meet obligations of IBRD for funds borrowed or on loans
guaranteed by it. This amount is thus not available for use by IBRD 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 IBRD for which the call is made.
(iv) $26,303 million of IBRD's capital is to be called only when required to
meet obligations of IBRD for funds borrowed or on loans guaranteed by it,
pursuant to resolutions of IBRD's Board of Governors (though such
conditions are not required by the Articles). Of this amount, 10% would be
payable in gold or U.S. dollars and 90% in the cur-
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 19
<PAGE>
rencies 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
IBRD in its lending activities or for administrative purposes.
No call has ever been made on IBRD's callable capital. Any calls on unpaid
subscriptions are required to be uniform, but the obligations of the members of
IBRD to make payment on such calls are independent of each other. If the amount
received on a call is insufficient to meet the obligations of IBRD for which the
call is made, IBRD has the right and is bound to make further 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.
At June 30, 2000, $103,115 million (58%) of the uncalled capital was callable
from the member countries of IBRD that are also members of the Development
Assistance Committee of the Organization for Economic Cooperation and
Development. This amount was equal to 90.4% of IBRD's outstanding borrowings
after swaps at June 30, 2000. Table 5 sets out the capital subscriptions of
those countries and the callable amounts.
Table 5:
In millions of U.S. dollars
---------------------------------------------------------------
Total Capital Uncalled Portion
Member Country(a) Subscription of Subscription
---------------------- ---------------- ---------------------
United States $31,965 $29,966
Japan 15,321 14,377
Germany 8,734 8,191
France 8,372 7,851
United Kingdom 8,372 7,832
Canada 5,404 5,069
Italy 5,404 5,069
Netherlands 4,283 4,018
Belgium 3,496 3,281
Switzerland 3,210 3,012
Australia 2,951 2,770
Spain 2,857 2,682
Sweden 1,806 1,696
Denmark 1,623 1,525
Austria 1,335 1,254
Norway 1,204 1,132
Finland 1,033 971
New Zealand 873 821
Portugal 659 620
Ireland 636 599
Greece 203 189
Luxembourg 199 190
-------- --------
Total $109,940 $103,115
======== ========
---------------------------------------------------------------
a. See details regarding the capital subscriptions of all members of IBRD at
June 30, 2000 in Financial Statements-Statement of Subscriptions to
Capital Stock and Voting Power.
The United States is IBRD's largest shareholder. Under the Bretton Woods
Agreements Act, the Par Value Modification Act and other U.S. legislation, the
Secretary of the U.S. Treasury is permitted to pay up to $7,663 million of the
uncalled portion of the subscription of the United States, if it were called by
IBRD, without any requirement of further congressional action. The balance of
the uncalled portion of the U.S subscription, $22,303 million, has been
authorized by the U.S. Congress but not appropriated. Further action by the U.S.
Congress would be required to enable the Secretary of the Treasury to pay any
portion of this balance. The General Counsel of the U.S Treasury has rendered an
opinion 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
For a further discussion of capital stock, restricted currencies, maintenance of
value and membership refer to the Notes to Financial Statements-Summary of
Significant Accounting and Related Policies and Note A.
Borrowings
Source of Funding
IBRD diversifies its sources of funding by offering its securities to
institutional and retail investors globally on terms acceptable to IBRD. Under
its Articles, IBRD 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.
Funding Operations
In FY 2000 medium- and long-term debt raised directly in financial markets by
IBRD amounted to $15,789 million compared to $22,443 million in FY 1999. Table 6
summarizes IBRD's funding operations for FY 2000 and FY 1999. Funding raised in
any given year is used for IBRD's general operations, including loan
disbursements, refinancing of maturing debt and prefunding of future lending
activities. All proceeds from new funding are initially invested in the liquid
asset portfolio and subsequently allocated to the different debt pools funding
loans as necessary in accordance with operating guidelines. In FY 2000, IBRD
followed a strategy of selective bond issuance, composed of cost-effective
private placements, largely pre-sold institutional public issues and retail
targeted transactions.
IBRD strategically repurchases or prepays its debt to reduce the cost of
borrowings and to reduce exposure to refunding requirements in a particular year
or meet other operational needs. During FY 2000, IBRD
20 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
repurchased or prepaid a total of $807 million of its outstanding borrowings.
Table 6:
--------------------------------------------------------------
FY 2000 FY 1999
------------------------
Total Medium- and Long-term
Borrowings(a) (USD million) $15,789 $22,443
Average Maturity (years) 5.8 6.7
Number of Transactions 148 186
Number of Currencies 13 12
--------------------------------------------------------------
(a) Includes one-year notes and represents net proceeds on a trade date basis.
Use of Derivatives
IBRD engages in a combination of interest rate and currency swaps to convert
direct borrowings into a desired interest rate structure and currency
composition. Interest rate and currency swaps are also used for asset/liability
management purposes to match the pool of liabilities as closely as possible to
the interest rate and currency characteristics of liquid assets and loans.
In FY 2000 the majority of new funding continued to be initially swapped into
floating rate U.S. dollars, with conversion to other currencies or fixed rate
funding being carried out subsequently in accordance with funding requirements.
Composition of Borrowings
Of the borrowings outstanding after swaps at June 30, 2000, 55% was at variable
rates (54% at June 30, 1999). The currency composition continues to be
concentrated in U.S. dollars, with its share at the end of June 30, 2000 at 80%
of the borrowings portfolio (79% at June 30, 1999). This reflects IBRD
borrowers' preference for U.S. dollar-denominated loans and the corresponding
currency composition of the liquid asset portfolio.
A more detailed analysis of borrowings outstanding is provided in the Notes to
Financial Statements-Note D.
6. RESULTS OF OPERATIONS
IBRD's net income can be seen as broadly comprising a spread on earning assets,
plus the contribution of equity, less provisions for loan losses and
administrative expenses. Table 7 shows a breakdown of income, net of funding
costs.
FY 2000 versus FY 1999
FY 2000 net income was $1,991 million, $473 million higher than in FY 1999. The
majority of this change was due to the following:
o A $412 million reduction in loan loss provision expense resulting
primarily from a reassessment of the possible losses inherent in the loan
portfolio. That assessment concluded that a general improvement in credit
quality for certain large borrowers, as well as for the accrual portfolio
as a whole, warranted a $243 million reduction in the accumulated
provision for loan losses. The remaining $169 million decrease in expense
is attributable to a reduction in the growth of the loan portfolio.
o A $345 million increase in loan interest income, net of funding costs,
resulting from an increase in the average outstanding loan balance,
especially in the higher-yielding special adjustment loans, as well as the
improved net returns from the single currency pool loans. Net returns from
the single currency pool loans recovered because the higher U.S. dollar
borrowing costs were not fully passed through to borrowers in FY 1999. The
lower interest waivers and higher front-end fees in effect for the full FY
2000 also contributed to the increase in net returns from the loan
portfolio.
o A $208 million reduction in investment income, net of funding costs,
primarily as a result of the non-recurring $237 million gain realized in
FY 1999 from the liquidation of the held-to-maturity portfolio.
o A $66 million increase in net noninterest expenses, due primarily to a
decrease in pension and postretirement income.
FY 1999 versus FY 1998
FY 1999 net income was $1,518 million, $275 million higher than FY 1998. This
increase was primarily attributable to:
o A $237 million gain realized upon liquidation of the held-to-maturity
portfolio during the first quarter of the fiscal year.
o A $233 million increase in loan interest income, net of funding costs,
resulting from the changes in loan pricing. During the year IBRD reduced
its interest waiver on existing loans, introduced a front-end fee on new
loans and earned higher loan spreads on the special adjustment loans
disbursed during the year.
o Offset in part by an increase of $247 million in net noninterest expense
due primarily to a decrease in pension and postretirement income.
Net Interest Income
IBRD's primary interest earning assets are its loans and liquid asset
investments. Table 8 provides a breakdown of the gross interest income on
earning assets (including other loan income). Table 9 provides a breakdown of
gross borrowing costs.
FY 2000 versus FY 1999
Loan interest income increased by $504 million to $8,153 million in FY 2000 due
primarily to the higher average balance of loans outstanding during the year.
This increased volume resulted in an additional $354 million of net income.
Additionally, an increase in the average return from loans contributed another
$150
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 21
<PAGE>
million to the increase in income. This increase in the weighted average return
were mainly due to four factors: i) a higher average rate on the LIBOR-based
loans in a rising interest rate environment; ii) the full year effect of the
pass through of higher U.S. dollar borrowing costs funding single currency pool
loans, iii) a larger proportion of the higher-yielding special adjustment loans
during the year; and iv) having lower interest waivers and higher front-end fees
in effect for the full fiscal year.
Investment income decreased by $95 million in FY 2000 to $1,589 million
primarily due to two factors. In FY 1999, a $237 million one-time gain was
realized upon liquidation of the securities in the held-to-maturity portfolio.
This was partially offset by $165 million increase in income from higher returns
achieved in the increasing interest rate environment seen over the past year.
The cost of borrowing increased by $282 million to $7,128 million in FY 2000,
due to higher average borrowings outstanding. The maturity of higher-cost debt
in FY 2000 just offset the increase in borrowing costs resulting from interest
rate resets on variable rate debt.
FY 1999 versus FY 1998
The main factor contributing to the increase in loan interest income of $768
million was the higher average balance of loans outstanding in terms of U.S.
dollars. A higher volume of loans outstanding, representing $607 million of the
increased income, was the result of increased net disbursements and the effect
of translation into U.S. dollar terms for reporting purposes. Additionally,
increases in loan pricing contributed $161 million.
Two significant factors contributed to the increase of $451 million in
investment income. In FY 1999 a gain of $237 million was realized upon
liquidation of the securities in the held-to-maturity portfolio. Additionally,
income increased by $214 million reflecting increases in the average investment
balance, offset by the effect of slightly lower market interest rates.
The cost of borrowings increased $702 million. While a falling interest rate
environment reduced the cost of borrowings from 6.01% to 5.92%, total costs
increased because of the higher average borrowings balance.
Table 7:
<TABLE>
<CAPTION>
In millions of U.S. dollars
-------------------------------------------------------------------------------------
FY 2000 FY 1999 FY 1998
--------- --------- ---------
<S> <C> <C> <C>
Loan interest income, net of funding costs
Debt funded $ 678 $ 387 $ 374
Equity funded 1,771 1,717 1,497
-------- -------- --------
Total loan interest income, net of funding costs 2,449 2,104 1,871
Other loan charges 49 59 22
Loan loss provision 166 (246) (251)
Investment income, net of funding costs 116 324 77
Net noninterest expense (789) (723) (476)
-------- -------- --------
Net Income $1,991 $1,518 $1,243
======== ======== ========
-------------------------------------------------------------------------------------
</TABLE>
22 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
Table 8:
<TABLE>
<CAPTION>
In millions of U.S. dollars
-----------------------------------------------------------------------------------------------------------------------------------
FY 2000 FY 1999 FY 1998
------------------------------- ------------------------------- --------------------------------
Interest Income Interest Income Interest Income
------------------- ------------------ -------------------
Average Return Average Return Average Return
Volume Amount % Volume Amount % Volume Amount %
------------------------------- ---------- -------- --------- ----------- --------- ------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans by Product
Multicurrency Pool $37,654 $2,074 5.51 $39,607 $2,361 5.96 $ 70,047 $ 4,335 6.19
Single Currency Pools 38,824 3,104 8.00 43,687 3,199 7.32 18,136 1,250 6.89
Variable-Spread Single
Currency Loans 20,791 1,189 5.72 14,970 777 5.19 8,061 448 5.56
Fixed-Rate Single Currency
Loans 11,855 742 6.26 7,468 468 6.27 3,330 218 6.55
Nonstandard Variable-
Spread Single Currency
Loans 9,676 773 7.99 6,833 477 6.98 2,165 158 7.30
Fixed-Spread Loans 383 23 6.00 -- -- -- -- -- --
Other Fixed Rate 2,272 199 8.76 3,618 308 8.51 5,323 450 8.45
Other Loan Income 49 59 22
---------- -------- -------- ---------- -------- ------- ----------- --------- -------
Total Loans 121,455 8,153 6.71 116,183 7,649 6.58 107,062 6,881 6.43
Cash and Investments 27,652 1,589 5.74 28,049 1,684 6.00 21,895 1,233 5.63
---------- -------- -------- ---------- -------- ------- ----------- --------- -------
Total Earning Assets $149,107 $9,742 6.53 $144,232 $9,333 6.47 $128,957 $8,114 6.29
========== ======== ======== ========== ======== ======= =========== ========= =======
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 9:
<TABLE>
<CAPTION>
In millions of U.S. dollars
---------------------------------------------------------------------------------------------------------------------------------
FY 2000 FY 1999 FY 1998
------------------------------- ------------------------------- ------------------------------
Borrowing Cost Borrowing Cost Borrowing Cost
------------------- ------------------ -----------------
Average Cost Average Cost Average Cost
Volume Amount % Volume Amount % Volume Amount %
------------------------------- ---------- -------- --------- ----------- --------- ------- ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Borrowing Portfolio by Debt Pools
Multicurrency Pool $ 26,475 $1,169 4.42 $29,640 $1,514 5.11 $ 54,266 $3,092 5.70
Single Currency Pools 28,598 2,213 7.74 33,832 2,507 7.41 14,252 1,012 7.10
Variable-Spread Single
Currency Loans 16,828 906 5.38 11,961 581 4.86 6,341 348 5.49
Fixed-Rate Single
Currency Loans 10,162 588 5.79 6,143 367 5.97 2,767 169 6.11
Nonstandard Variable-
Spread Single Currency
Loans 8,909 501 5.62 5,578 284 5.09 2,164 117 5.41
Fixed-Spread Loans 423 18 4.26 -- -- -- -- -- --
Other Debt Funding 29,060 1,733 5.96 28,541 1,593 5.58 22,382 1,406 6.28
---------- -------- -------- ---------- -------- ------ ---------- ------- -----
Total Borrowings $120,455 $7,128 5.92 $115,695 $6,846 5.92 $102,172 $6,144 6.01
========== ======== ======== ========== ======== ====== ========== ======= =====
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 23
<PAGE>
Net Noninterest Expense
The main components of net noninterest expense are presented in Table 10.
FY 2000 versus FY 1999
Overall gross administrative expenses decreased by $33 million (see Notes to
Financial Statements--Note G). Net noninterest expense increased $66 million.
The major factor was that the contribution of income from pension and
postretirement benefits dropped by $89 million, as a result of the decrease in
the actuarially determined Staff Retirement Plan income.
FY 1999 versus FY 1998
Overall gross administrative expenses increased only slightly. From FY 1998 to
FY 1999 net noninterest expense increased by $243 million, generally returning
to FY 1997 levels. Staff costs increased 15%; however, the majority of the
increase in expense is attributable to the FY 1998 non-recurring reduction in
expense realized as a result of the change in accounting for other
postretirement benefits. See Notes to the Financial Statements--Note I for a
detailed discussion of those changes.
Table 10:
In millions of U.S. dollars
--------------------------------------------------------------------------------
FY 2000 FY 1999 FY 1998
--------- ---------- ---------
Gross Administrative Expenses
Staff Costs $ 489 $538 $466
Consultant Fees 88 97 91
Operational Travel 92 94 94
Other Expenses 392 365 328
--------- --------- ---------
Total Gross Administrative Expenses 1,061 1,094 979
Less: Contribution to Special Programs 126 129 112
--------- --------- ---------
Total Net Administrative Expenses 935 965 867
Contribution to Special Programs 126 129 112
Service Fee Revenues (118) (116) (104)
Pension & Postretirement Benefit Income (156) (245) (399)
Net Other Expense (Income) 2 (10) --
--------- --------- ---------
Total Net Noninterest Expense $789 $723 $476
========= ========= =========
--------------------------------------------------------------------------------
24 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
Glossary of Terms
Asset-backed Securities: Asset-backed securities are instruments whose cash flow
is based on the cash flows of a pool of underlying assets managed by a trust.
Cross-Currency Interest Rate Swaps: Cross-currency interest rate swaps are
currency swaps where one set of cash flows reflects a fixed rate of interest and
the other reflects a floating rate of interest.
Currency Swaps: Currency swaps are agreements between two parties to exchange
cash flows denominated in different currencies at one or more certain times in
the future. The cash flows are based on a predetermined formula reflecting rates
of interest and an exchange of principal.
Equity Capital-to-Loans: This ratio is the sum of usable capital plus the
special and general reserves, cumulative translation adjustment and the proposed
transfer from unallocated net income to general reserves divided by the sum of
loans outstanding, the present value of guarantees, net of the accumulated
provision for loan losses.
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.
Futures and Forwards: Futures and forward contracts are contracts for 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 U.S. and international regulated
exchanges.
Government and Agency Obligations: These obligations include marketable bonds,
notes and other obligations issued by governments.
Interest Rate Swaps: Interest rate swaps are agreements involving the exchange
of periodic interest payments of differing character, based on an underlying
notional principal amount for a specified time.
LIBOR: London interbank offer rate.
Maintenance of Value: Agreements with members provide for the maintenance of the
value, from the time of subscription, of certain restricted currencies.
Additional payments to (or from) IBRD are required in the event the par value of
the currency is reduced (or increased) to a significant extent, in the opinion
of IBRD.
Net Disbursements: Loan disbursements net of repayments and prepayments.
New Loans: Loans for which the invitation to negotiate was issued on or after
July 31, 1998.
Old Loans: Loans for which the invitation to negotiate was issued prior to July
31, 1998.
Options: Options are contracts that allow the holder of the option the right,
but not the obligation, 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
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. A resale agreement
involves the purchase of securities with a simultaneous agreement to sell back
the same securities at a stated price on a stated date. Securities loans are
contracts under which securities are lent for a specified period of time at a
fixed price.
Return on Equity: This return is computed as net income divided by the average
equity balance during the year.
Risk Bearing Capacity: The ability to absorb risks in the balance sheet while
continuing normal operations without having to call on callable capital.
Short Sales: Short sales are sales of securities not held in the seller's
portfolio at the time of the sale. The seller 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.
Statutory Lending Limit: Under IBRD's Articles of Agreement, as applied, the
total amount outstanding of loans, participations in loans, and callable
guarantees may not exceed the sum of subscribed capital, reserves and surplus.
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.
Time Deposits: Time deposits include certificates of deposit, bankers'
acceptances, and other obligations issued or unconditionally guaranteed by banks
and other financial institutions.
IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS: JUNE 30, 2000 25
<PAGE>
26 IBRD'S MANAGEMENT DISCUSSION AND ANALYSIS: JUNE 30, 2000
<PAGE>
International Bank for Reconstruction and
Development
<PAGE>
INTERNATIONAL BANK FOR RECONSTRUCTION AND
DEVELOPMENT
FINANCIAL STATEMENTS
JUNE 30, 2000
Balance Sheet 30
Statement of Income 32
Statement of Comprehensive Income 33
Statement of Changes in Retained Earnings 33
Statement of Cash Flows 34
Summary Statement of Loans 36
Statement of Subscriptions to Capital Stock and Voting Power 39
Notes to Financial Statements 43
Report of Independent Accountants 68
<PAGE>
BALANCE SHEET
June 30, 2000 and June 30, 1999
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Assets
Due from Banks
Unrestricted currencies $ 32 $ 33
Currencies subject to restrictions--Note A 659 664
-------- --------
691 697
-------- --------
Investments--Trading--Notes B and E 24,941 30,345
Securities Purchased Under Resale Agreements--Trading--Note B 101 6
Nonnegotiable, Noninterest-bearing Demand Obligations on Account of
Subscribed Capital 1,670 1,846
Amounts Receivable from Currency Swaps
Investments--Trading--Notes B and E 11,317 11,420
Borrowings--Notes D and E 67,231 67,592
-------- --------
78,548 79,012
-------- --------
Amounts Receivable to Maintain Value of Currency Holdings on Account
of Subscribed Capital 432 527
Other Receivables
Amounts receivable from investment securities traded 189 88
Accrued income on loans 2,196 2,100
-------- --------
2,385 2,188
-------- --------
Loans Outstanding (see Summary Statement of Loans, Notes C and E)
Total loans 164,858 168,600
Less undisbursed balance 44,754 51,372
-------- --------
Loans outstanding 120,104 117,228
Less:
Accumulated provision for loan losses 3,400 3,560
Deferred loan income 460 363
-------- --------
Net loans outstanding 116,244 113,305
-------- --------
Other Assets
Unamortized issuance costs of borrowings 608 712
Miscellaneous--Note I 2,190 1,807
-------- --------
2,798 2,519
-------- --------
Total assets $227,810 $230,445
======== ========
</TABLE>
30 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Liabilities
Borrowings--Notes D and E
Short-term $ 4,730 $ 5,328
Medium- and long-term 105,649 110,411
-------- --------
110,379 115,739
-------- --------
Securities Sold Under Repurchase Agreements and Payable for
Cash Collateral Received--Trading--Note B -- 102
Amounts Payable for Currency Swaps
Investments--Trading--Notes B and E 11,720 11,501
Borrowings--Notes D and E 70,864 70,484
-------- --------
82,584 81,985
-------- --------
Amounts Payable to Maintain Value of Currency Holdings on Account
of Subscribed Capital 56 111
Other Liabilities
Amounts payable for investment securities purchased 529 167
Accrued charges on borrowings 3,312 3,012
Payable for Board of Governors-approved transfers--Note F 861 607
Liabilities under other postretirement benefits plans--Note I 119 103
Accounts payable and miscellaneous liabilities 681 598
-------- --------
5,502 4,487
-------- --------
Total liabilities 198,521 202,424
-------- --------
Equity
Capital Stock (see Statement of Subscriptions to Capital Stock and Voting
Power, Note A)
Authorized capital (1,581,724 shares--June 30, 2000 and June 30, 1999)
Subscribed capital
(1,563,443 shares--June 30, 2000; 1,560,243 shares--June 30, 1999) 188,606 188,220
Less uncalled portion of subscriptions 177,188 176,825
-------- --------
11,418 11,395
Amounts to Maintain Value of Currency Holdings--Note A (522) (453)
Payments on Account of Pending Subscriptions--Note A 7 7
Retained Earnings (see Statement of Changes in Retained Earnings, Note F) 19,027 17,709
Accumulated Other Comprehensive Income--Note K (641) (637)
-------- --------
Total equity 29,289 28,021
-------- --------
Total liabilities and equity $227,810 $230,445
======== ========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 31
<PAGE>
STATEMENT OF INCOME
For the fiscal years ended June 30, 2000, June 30, 1999 and June 30, 1998
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Income
Income from loans--Note C
Interest $ 8,041 $ 7,535 $ 6,775
Commitment charges 112 114 106
Income from investments--Note B
Trading
Interest 1,575 1,425 1,107
Net gains (losses)
Realized 3 1 (10)
Unrealized 3 (5) 1
Held-to-maturity
Interest -- 47 176
Realized gains -- 237 --
Income from securities purchased under resale agreements--Note B 12 15 59
Income from assets designated for other postretirement
benefits plans--Notes B and I -- -- 107
Income from Staff Retirement Plan--Note I 166 255 182
Other income--Notes G and H 133 134 114
------- ------- -------
Total income 10,045 9,758 8,617
------- ------- -------
Expenses
Borrowing expenses--Note D
Interest 6,979 6,704 5,993
Amortization of issuance and other borrowing costs 149 142 151
Interest on securities sold under repurchase agreements and payable for
cash collateral received--Note B 4 36 100
Administrative expenses--Notes G and H 935 965 867
Contributions to special programs--Note G 126 129 112
Other postretirement benefits expense--Note I 10 10 50
Provision for loan losses--Note C (166) 246 251
Other expenses 17 8 10
------- ------- -------
Total expenses 8,054 8,240 7,534
------- ------- -------
Operating Income 1,991 1,518 1,083
Effect of accounting change--Note I -- -- 160
------- ------- -------
Net Income $ 1,991 $ 1,518 $ 1,243
======= ======= =======
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
32 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
STATEMENT OF COMPREHENSIVE INCOME
For the fiscal years ended June 30, 2000, June 30, 1999 and June 30, 1998
Expressed in millions of U.S. dollars
2000 1999 1998
------- ------- -------
Net income $ 1,991 $ 1,518 $ 1,243
Other comprehensive income--Note K
Currency translation adjustments (4) 323 (1,045)
------- ------- -------
Total other comprehensive income (loss) (4) 323 (1,045)
------- ------- -------
Comprehensive income $ 1,987 $ 1,841 $ 198
======= ======= =======
STATEMENT OF CHANGES IN RETAINED EARNINGS
For the fiscal years ended June 30, 2000, June 30, 1999 and June 30, 1998
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Retained earnings at beginning of the fiscal year $17,709 $16,733 $16,194
Board of Governors-approved transfers to--Note F
International Development Association (348) (352) (304)
Trust Fund for Gaza and West Bank (60) (90) --
Trust Fund for East Timor (10) -- --
Heavily Indebted Poor Countries Debt Initiative Trust Fund (200) (100) (250)
Multilateral Investment Guarantee Agency -- -- (150)
Capacity building in Africa (30) -- --
Trust Fund for Kosovo (25) -- --
Net income for the fiscal year 1,991 1,518 1,243
------- ------- -------
Retained earnings at end of the fiscal year $19,027 $17,709 $16,733
======= ======= =======
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 33
<PAGE>
STATEMENT OF CASH FLOWS
For the fiscal years ended June 30, 2000, June 30, 1999 and June 30, 1998
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from lending and investing activities
Loans
Disbursements $(13,222) $(18,100) $(19,193)
Principal repayments 9,973 9,988 10,146
Principal prepayments 499 94 1,372
Loan origination fees received 19 32 --
Investments: Held-to-maturity
Purchases of securities and repayments of securities sold under
repurchase agreements -- (13,266) (33,202)
Maturities of securities and proceeds from securities sold under
repurchase agreements -- 13,426 33,184
Proceeds from sale of held-to-maturity portfolio net of securities sold
under repurchase agreements -- 1,389 --
-------- -------- --------
Net cash used in lending and investing activities (2,731) (6,437) (7,693)
-------- -------- --------
Cash flows from Board of Governors-approved transfers to
International Development Association (50) -- (298)
Debt Reduction Facility for IDA-Only Countries (19) -- (18)
Trust Fund for Gaza and West Bank (83) (62) (60)
Heavily Indebted Poor Countries Debt Initiative Trust Fund (200) -- (250)
Multilateral Investment Guarantee Agency -- -- (150)
Trust Fund for East Timor, Trust Fund for Kosovo, and
capacity building in Africa (65) -- --
-------- -------- --------
Net cash used in Board of Governors-approved transfers (417) (62) (776)
-------- -------- --------
Cash flows from financing activities
Medium- and long-term borrowings
New issues 15,206 21,846 27,748
Retirements (19,211) (10,034) (13,569)
Net short-term borrowings (917) (1,512) (1,009)
Net currency swaps--Borrowings (454) (340) (300)
Net capital stock transactions 154 175 217
-------- -------- --------
Net cash (used in) provided by financing activities (5,222) 10,135 13,087
-------- -------- --------
Cash flows from operating activities
Net income 1,991 1,518 1,243
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization 884 819 855
Amortization of deferred loan income (30) (20) (8)
Provision for loan losses (166) 246 251
Income from Staff Retirement Plan (166) (255) (182)
Gain on sale of held-to-maturity portfolio -- (237) --
Changes in other assets and liabilities
Increase in accrued income on loans and held-to-maturity investments (99) (46) (157)
(Increase) decrease in miscellaneous assets (269) (130) 190
Increase in net assets associated with other postretirement benefits -- -- (739)
Increase in accrued charges on borrowings 322 470 448
Increase (decrease) in accounts payable and miscellaneous liabilities 135 (258) 253
-------- -------- --------
Net cash provided by operating activities 2,602 2,107 2,154
-------- -------- --------
</TABLE>
34 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Effect on liquid investments due to decrease in net assets associated with
other postretirement benefits $ -- $ 650 $ --
Effect of exchange rate changes on unrestricted cash and liquid investments (23) 224 (207)
------- ------- -------
Net (decrease) increase in unrestricted cash and liquid investments (5,791) 6,617 6,565
Unrestricted cash and liquid investments at beginning of the fiscal year 30,122 23,505 16,940
------- ------- -------
Unrestricted cash and liquid investments at end of the fiscal year $24,331 $30,122 $23,505
======= ======= =======
Composition of unrestricted cash and liquid investments:
Investments held in trading portfolio $24,941 $30,345 $23,441
Unrestricted currencies 32 33 55
Net (payable) receivable for investment securities
traded/purchased--Trading (340) (79) 7
Net (payable) receivable from currency swaps--Investments (403) (81) 397
Net receivable (payable) for securities purchased/sold under resale/repur-
chase agreements and payable for cash collateral received 101 (96) (395)
------- ------- -------
$24,331 $30,122 $23,505
======= ======= =======
Supplemental disclosure
Increase (decrease) in ending balances resulting from exchange rate
fluctuations
Loans outstanding $ 16 $ 2,519 ($6,994)
Investments--Held-to-maturity -- 13 2
Borrowings (1,173) 1,010 (7,239)
Currency swaps--Borrowings 1,195 1,244 1,632
Capitalized loan origination fees included in total loans 110 115 90
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 35
<PAGE>
SUMMARY STATEMENT OF LOANS
June 30, 2000
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
Loans approved Undisbursed Percentage of
but not yet balance of Loans total loans
Borrower or guarantor Total loans effective(1) effective loans(2) outstanding outstanding
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Algeria $ 2,045 $ 97 $ 459 $ 1,489 1.24%
Argentina 11,374 87 2,995 8,292 6.90
Armenia 9 -- -- 9 0.01
Bahamas, The 3 -- -- 3 *
Bangladesh 27 -- -- 27 0.02
Barbados 17 -- 2 15 0.01
Belarus 125 -- 13 112 0.09
Belize 45 -- 4 41 0.03
Bolivia 5 -- -- 5 *
Bosnia and Herzegovina 569 -- -- 569 0.48
Botswana 19 -- -- 19 0.02
Brazil 10,747 544 2,580 7,623 6.35
Bulgaria 1,059 72 167 820 0.68
Cameroon 298 53 -- 245 0.21
Chad 40 40 -- -- --
Chile 1,026 -- 174 852 0.71
China 19,769 1,829 7,221 10,719 8.93
Colombia 2,936 125 927 1,884 1.57
Congo, Democratic Republic of 81 -- -- 81 0.07
Congo, Republic of 67 -- -- 67 0.06
Costa Rica 182 33 14 135 0.11
Cote d'Ivoire 625 -- -- 625 0.52
Croatia 656 -- 270 386 0.32
Cyprus 41 -- -- 41 0.04
Czech Republic 287 -- -- 287 0.24
Dominica 7 -- 5 2 *
Dominican Republic 460 17 162 281 0.24
Ecuador 1,187 162 175 850 0.71
Egypt, Arab Republic of 1,149 395 56 698 0.58
El Salvador 525 -- 228 297 0.25
Estonia 108 23 5 80 0.07
Fiji 22 -- -- 22 0.02
Gabon 82 -- 16 66 0.05
Ghana 14 -- -- 14 0.01
Grenada 5 -- 4 1 *
Guatemala 500 54 180 266 0.22
Guyana 10 -- -- 10 0.01
Honduras 165 -- -- 165 0.14
Hungary 773 -- 198 575 0.48
India 11,071 808 2,755 7,508 6.25
Indonesia 14,354 -- 2,599 11,755 9.79
Iran, Islamic Republic of 835 232 163 440 0.37
Iraq 38 -- -- 38 0.03
Jamaica 417 -- 50 367 0.31
Jordan 1,033 35 185 813 0.68
Kazakhstan 1,708 17 629 1,062 0.88
Kenya 62 -- -- 62 0.05
Korea, Republic of 8,296 -- 136 8,160 6.79
Latvia 304 -- 70 234 0.19
Lebanon 703 136 324 243 0.20
</TABLE>
36 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
<TABLE>
<CAPTION>
Loans approved Undisbursed Percentage of
but not yet balance of Loans total loans
Borrower or guarantor Total loans effective(1) effective loans(2) outstanding outstanding
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lesotho $ 96 $ -- $ 38 $ 58 0.05%
Liberia 133 -- -- 133 0.11
Lithuania 325 53 69 203 0.17
Macedonia, former Yugoslav Republic of 171 -- 65 106 0.09
Malawi 13 -- -- 13 0.01
Malaysia 1,189 -- 331 858 0.71
Mauritania 1 -- -- 1 *
Mauritius 115 5 14 96 0.08
Mexico 14,075 58 2,906 11,111 9.25
Moldova 213 -- 19 194 0.16
Morocco 3,380 7 448 2,925 2.44
Nicaragua 7 -- -- 7 0.01
Nigeria 1,844 -- 40 1,804 1.50
Oman 4 -- -- 4 *
Pakistan 3,462 -- 287 3,175 2.64
Panama 365 -- 80 285 0.24
Papua New Guinea 392 17 118 257 0.21
Paraguay 322 -- 132 190 0.16
Peru 2,986 95 427 2,464 2.05
Philippines 5,070 150 1,090 3,830 3.19
Poland 3,019 148 766 2,105 1.75
Romania 2,642 68 784 1,790 1.49
Russian Federation 9,982 90 3,171 6,721 5.60
St. Kitts and Nevis 13 -- 9 4 *
St. Lucia 14 -- 8 6 *
St. Vincent and the Grenadines 3 -- 3 * *
Senegal 3 -- -- 3 *
Seychelles 3 -- * 3 *
Slovak Republic 206 -- 5 201 0.17
Slovenia 122 9 13 100 0.08
South Africa 25 -- 23 2 *
Sri Lanka 16 -- * 16 0.01
Sudan 1 -- -- 1 *
Swaziland 30 -- 21 9 0.01
Syrian Arab Republic 31 -- -- 31 0.03
Tanzania 14 -- -- 14 0.01
Thailand 3,832 -- 1,083 2,749 2.29
Trinidad and Tobago 133 -- 45 88 0.07
Tunisia 1,966 204 516 1,246 1.04
Turkey 5,695 -- 2,419 3,276 2.73
</TABLE>
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 37
<PAGE>
SUMMARY STATEMENT OF LOANS (Continued)
June 30, 2000
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
Loans approved Undisbursed Percentage of
but not yet balance of Loans total loans
Borrower or guarantor Total loans effective(1) effective loans(2) outstanding outstanding
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Turkmenistan $ 70 $ -- $ 46 $ 24 0.02%
Ukraine 2,471 18 503 1,950 1.62
Uruguay 797 27 216 554 0.46
Uzbekistan 429 29 192 208 0.17
Venezuela, Republica Bolivariana de 1,414 23 336 1,055 0.88
Yugoslavia, Federal Republic of
(Serbia/Montenegro)(3) 1,111 -- -- 1,111 0.93
Zambia 28 -- -- 28 0.02
Zimbabwe 465 -- 5 460 0.38
------------- ----------- ------------ ------------- -----------
Subtotal(5) 164,578 5,760 38,994 119,824 99.76
Caribbean Development Bank(4) 7 -- -- 7 0.01
International Finance
Corporation 273 -- -- 273 0.23
------------- ----------- ------------ ------------- -----------
Total--June 30, 2000(5) $164,858 $5,760 $38,994 $120,104 100.00%
============= =========== ============ ============= ===========
Total--June 30, 1999 $168,600 $8,355 $43,017 $117,228
============= =========== ============ =============
</TABLE>
*Indicates amount less than $0.5 million or less than 0.005 percent.
NOTES
1. Loans totaling $4,754 million ($4,371 million--June 30, 1999) have been
approved by IBRD, but the related agreements have not been signed. Loan
agreements totaling $1,006 million ($3,984 million--June 30, 1999) 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 $1,165 million ($1,301 million--June 30, 1999).
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, that 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.
38 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO
CAPITAL STOCK AND VOTING POWER
June 30, 2000
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Subscriptions Voting Power
------------------------------------------------------------ -----------------------
------------------------------------------------------------------------------------------------------------------------------
Percentage Amounts Number
of Total Amounts subject of Percentage
Member Shares total amounts paid in(1) to call(1,2) votes of total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Afghanistan 300 0.02% $ 36.2 $ 3.6 $ 32.6 550 0.03%
Albania 830 0.05 100.1 3.6 96.5 1,080 0.07
Algeria 9,252 0.59 1,116.1 67.1 1,049.0 9,502 0.59
Angola 2,676 0.17 322.8 17.5 305.4 2,926 0.18
Antigua and Barbuda 520 0.03 62.7 1.3 61.5 770 0.05
Argentina 17,911 1.15 2,160.7 132.2 2,028.4 18,161 1.13
Armenia 1,139 0.07 137.4 5.9 131.5 1,389 0.09
Australia 24,464 1.56 2,951.2 181.8 2,769.5 24,714 1.54
Austria 11,063 0.71 1,334.6 80.7 1,253.9 11,313 0.70
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 0.08
Bangladesh 4,854 0.31 585.6 33.9 551.6 5,104 0.32
Barbados 948 0.06 114.4 4.5 109.9 1,198 0.07
Belarus 3,323 0.21 400.9 22.3 378.5 3,573 0.22
Belgium 28,983 1.85 3,496.4 215.8 3,280.6 29,233 1.82
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 0.11 215.3 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 0.05
Brazil 33,287 2.13 4,015.6 245.5 3,770.1 33,537 2.08
Brunei Darussalam 2,373 0.15 286.3 15.2 271.1 2,623 0.16
Bulgaria 5,215 0.33 629.1 36.5 592.6 5,465 0.34
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 2.87 5,403.8 334.9 5,068.9 45,045 2.80
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 0.44 836.1 49.6 786.6 7,181 0.45
China 44,799 2.87 5,404.3 335.0 5,069.3 45,049 2.80
Colombia 6,352 0.41 766.3 45.2 721.1 6,602 0.41
Comoros 282 0.02 34.0 0.3 33.7 532 0.03
Congo, Democratic Republic of 2,643 0.17 318.8 25.4 293.5 2,893 0.18
Congo, Republic of 927 0.06 111.8 4.3 107.5 1,177 0.07
Costa Rica 233 0.01 28.1 1.9 26.2 483 0.03
Cote d'Ivoire 2,516 0.16 303.5 16.4 287.1 2,766 0.17
Croatia 2,293 0.15 276.6 17.3 259.3 2,543 0.16
Cyprus 1,461 0.09 176.2 8.4 167.9 1,711 0.11
Czech Republic 6,308 0.40 761.0 45.9 715.0 6,558 0.41
Denmark 13,451 0.86 1,622.7 97.8 1,524.9 13,701 0.85
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 0.13 252.4 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 0.45 857.5 50.9 806.6 7,358 0.46
</TABLE>
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 39
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO
CAPITAL STOCK AND VOTING POWER (Continued)
June 30, 2000
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Subscriptions Voting Power
------------------------------------------------------------ -----------------------
------------------------------------------------------------------------------------------------------------------------------
Percentage Amounts Number
of Total Amounts subject of Percentage
Member Shares total amounts paid in(1) to call(1,2) votes of total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
El Salvador 141 0.01% $ 17.0 $ 1.7 $ 15.3 391 0.02%
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 0.07
Ethiopia 978 0.06 118.0 4.7 113.3 1,228 0.08
Fiji 987 0.06 119.1 4.8 114.3 1,237 0.08
Finland 8,560 0.55 1,032.6 61.9 970.8 8,810 0.55
France 69,397 4.44 8,371.7 520.4 7,851.3 69,647 4.33
Gabon 987 0.06 119.1 5.1 113.9 1,237 0.08
Gambia, The 543 0.03 65.5 1.5 64.0 793 0.05
Georgia 1,584 0.10 191.1 9.3 181.8 1,834 0.11
Germany 72,399 4.63 8,733.9 542.9 8,190.9 72,649 4.52
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 0.03 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 1,292 0.08 155.9 7.1 148.8 1,542 0.10
Guinea-Bissau 540 0.03 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 0.51 971.1 58.0 913.1 8,300 0.52
Iceland 1,258 0.08 151.8 6.8 144.9 1,508 0.09
India 44,795 2.87 5,403.8 333.7 5,070.1 45,045 2.80
Indonesia 14,981 0.96 1,807.2 110.3 1,697.0 15,231 0.95
Iran, Islamic Republic of 23,686 1.51 2,857.4 175.8 2,681.5 23,936 1.49
Iraq 2,808 0.18 338.7 27.1 311.6 3,058 0.19
Ireland 5,271 0.34 635.9 37.1 598.8 5,521 0.34
Israel 4,750 0.30 573.0 33.2 539.8 5,000 0.31
Italy 44,795 2.87 5,403.8 334.8 5,069.0 45,045 2.80
Jamaica 2,578 0.16 311.0 16.8 294.2 2,828 0.18
Japan 127,000 8.12 15,320.6 944.0 14,376.7 127,250 7.91
Jordan 1,388 0.09 167.4 7.8 159.6 1,638 0.10
Kazakhstan 2,985 0.19 360.1 19.8 340.3 3,235 0.20
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 0.04
Korea, Republic of 15,817 1.01 1,908.1 114.5 1,793.5 16,067 1.00
Kuwait 13,280 0.85 1,602.0 97.4 1,504.6 13,530 0.84
Kyrgyz Republic 1,107 0.07 133.5 5.7 127.9 1,357 0.08
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 0.10
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 0.04
Libya 7,840 0.50 945.8 57.0 888.8 8,090 0.50
Lithuania 1,507 0.10 181.8 8.7 173.1 1,757 0.11
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 0.10
Malawi 1,094 0.07 132.0 5.6 126.4 1,344 0.08
</TABLE>
40 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Subscriptions Voting Power
------------------------------------------------------------ -----------------------
------------------------------------------------------------------------------------------------------------------------------
Percentage Amounts Number
of Total Amounts subject of Percentage
Member Shares total amounts paid in(1) to call(1,2) votes of total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Malaysia 8,244 0.53% $ 994.5 $ 59.5 $ 935.0 8,494 0.53%
Maldives 469 0.03 56.6 0.9 55.7 719 0.04
Mali 1,162 0.07 140.2 6.1 134.1 1,412 0.09
Malta 1,074 0.07 129.6 5.4 124.1 1,324 0.08
Marshall Islands 469 0.03 56.6 0.9 55.7 719 0.04
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 0.09
Mexico 18,804 1.20 2,268.4 139.0 2,129.4 19,054 1.18
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 0.04
Morocco 4,973 0.32 599.9 34.8 565.1 5,223 0.32
Mozambique 930 0.06 112.2 4.8 107.4 1,180 0.07
Myanmar 2,484 0.16 299.7 16.1 283.6 2,734 0.17
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 2.27 4,282.9 264.8 4,018.1 35,753 2.22
New Zealand 7,236 0.46 872.9 51.9 821.0 7,486 0.47
Nicaragua 608 0.04 73.3 2.1 71.3 858 0.05
Niger 852 0.05 102.8 3.8 99.0 1,102 0.07
Nigeria 12,655 0.81 1,526.6 92.7 1,433.9 12,905 0.80
Norway 9,982 0.64 1,204.2 72.6 1,131.6 10,232 0.64
Oman 1,561 0.10 188.3 9.1 179.2 1,811 0.11
Pakistan 9,339 0.60 1,126.6 67.8 1,058.9 9,589 0.60
Palau, Republic of 16 * 1.9 0.2 1.8 266 0.02
Panama 385 0.02 46.4 3.2 43.2 635 0.04
Papua New Guinea 1,294 0.08 156.1 7.1 149.0 1,544 0.10
Paraguay 1,229 0.08 148.3 6.6 141.6 1,479 0.09
Peru 5,331 0.34 643.1 37.5 605.6 5,581 0.35
Philippines 6,844 0.44 825.6 48.9 776.7 7,094 0.44
Poland 10,908 0.70 1,315.9 79.6 1,236.3 11,158 0.69
Portugal 5,460 0.35 658.7 38.5 620.2 5,710 0.35
Qatar 1,096 0.07 132.2 9.0 123.3 1,346 0.08
Romania 4,011 0.26 483.9 30.5 453.4 4,261 0.26
Russian Federation 44,795 2.87 5,403.8 333.9 5,070.0 45,045 2.80
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
Samoa 531 0.03 64.1 1.4 62.7 781 0.05
Sao Tome and Principe 495 0.03 59.7 1.1 58.6 745 0.05
Saudi Arabia 44,795 2.87 5,403.8 335.0 5,068.9 45,045 2.80
Senegal 2,072 0.13 250.0 13.0 237.0 2,322 0.14
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 0.09
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
</TABLE>
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 41
<PAGE>
STATEMENT OF SUBSCRIPTIONS TO
CAPITAL STOCK AND VOTING POWER (Continued)
June 30, 2000
Expressed in millions of U.S. dollars
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Subscriptions Voting Power
------------------------------------------------------------ -----------------------
------------------------------------------------------------------------------------------------------------------------------
Percentage Amounts Number
of Total Amounts subject of Percentage
Member Shares total amounts paid in(1) to call(1,2) votes of total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
South Africa 13,462 0.86% $ 1,624.0 $ 98.8 $ 1,525.2 13,712 0.85%
Spain 23,686 1.51 2,857.4 175.6 2,681.7 23,936 1.49
Sri Lanka 3,817 0.24 460.5 26.1 434.3 4,067 0.25
Sudan 850 0.05 102.5 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 0.96 1,806.4 110.2 1,696.2 15,224 0.95
Switzerland 26,606 1.70 3,209.6 197.2 3,012.4 26,856 1.67
Syrian Arab Republic 2,202 0.14 265.6 14.0 251.7 2,452 0.15
Tajikistan 1,060 0.07 127.9 5.3 122.5 1,310 0.08
Tanzania 1,295 0.08 156.2 10.0 146.2 1,545 0.10
Thailand 6,349 0.41 765.9 45.2 720.7 6,599 0.41
Togo 1,105 0.07 133.3 5.7 127.6 1,355 0.08
Tonga 494 0.03 59.6 1.1 58.5 744 0.05
Trinidad and Tobago 2,664 0.17 321.4 17.6 303.7 2,914 0.18
Tunisia 719 0.05 86.7 5.7 81.1 969 0.06
Turkey 7,379 0.47 890.2 52.9 837.2 7,629 0.47
Turkmenistan 526 0.03 63.5 2.9 60.5 776 0.05
Uganda 617 0.04 74.4 4.4 70.1 867 0.05
Ukraine 10,908 0.70 1,315.9 79.3 1,236.6 11,158 0.69
United Arab Emirates 2,385 0.15 287.7 22.6 265.1 2,635 0.16
United Kingdom 69,397 4.44 8,371.7 539.5 7,832.2 69,647 4.33
United States 264,969 16.95 31,964.5 1,998.4 29,966.2 265,219 16.49
Uruguay 2,812 0.18 339.2 18.6 320.7 3,062 0.19
Uzbekistan 2,493 0.16 300.7 16.1 284.7 2,743 0.17
Vanuatu 586 0.04 70.7 1.8 68.9 836 0.05
Venezuela, Republica Bolivariana de 20,361 1.30 2,456.2 150.8 2,305.5 20,611 1.28
Vietnam 968 0.06 116.8 8.1 108.7 1,218 0.08
Yemen, Republic of 2,212 0.14 266.8 14.0 252.8 2,462 0.15
Zambia 2,810 0.18 339.0 20.0 319.0 3,060 0.19
Zimbabwe 3,325 0.21 401.1 22.4 378.7 3,575 0.22
----------- --------- ---------- ---------- ----------- ----------- ---------
Total--June 30, 2000(2) 1,563,443 100.00% $188,606 $11,418 $177,188 1,608,693 100.00%
=========== ========= ========== ========== =========== =========== =========
Total--June 30, 1999 1,560,243 100.00% $188,220 $11,395 $176,825 1,605,493
=========== ========= ========== ========== =========== ===========
</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.
42 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PURPOSE AND AFFILIATED ORGANIZATIONS
The International Bank for Reconstruction and Development (IBRD) is an
international organization which commenced operations in 1946. The principal
purpose of IBRD is to reduce poverty through promoting sustainable 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). IBRD, IDA, IFC, and MIGA are collectively
known as the World Bank Group. Each of these other organizations in the World
Bank Group is legally and financially independent from IBRD, with separate
assets and liabilities, and IBRD is not liable for their respective obligations.
IDA's main goal is to reduce poverty through promoting 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 of America and with
International Accounting Standards.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates. Significant judgements have been used
in the computation of estimated and fair values of loans and borrowings, the
determination of the adequacy of the Accumulated Provision for Loan Losses, the
determination of net periodic income from pension and other postretirement
benefits plans, and the present value of benefit obligations.
Certain reclassifications of the prior years' information have been made to
conform to the current year'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 operations 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 in effect at the
end of the period. Income and expenses are translated at either the market
exchange rates in effect on the dates on which they are recognized or at an
average of the market exchange rates in effect during each month. Translation
adjustments are charged or credited to Accumulated Other Comprehensive Income.
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.
Maintenance of Value: Article II, Section 9 of the Articles of Agreement
provides for maintenance of the value (MOV), at the time of subscription, of
such restricted currencies (see Note A), 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
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 43
<PAGE>
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 MOV amounts relating to restricted currencies out on loan, and amounts
that have been reclassified from receivables for those countries that have been
in arrears for two years or more, are included in Amounts to Maintain Value of
Currency Holdings. For amounts on loan, these MOV amounts are shown as a
component of Equity since MOV becomes effective only as such currencies are
repaid to IBRD.
Retained Earnings: Retained Earnings consists of allocated amounts (Special
Reserve, General Reserve, Pension 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 operations.
The Pension Reserve consists of the difference between actual funding of the
Staff Retirement Plan (SRP) and the SRP's accounting income. This Pension
Reserve would be reduced if in any future fiscal year pension accounting
expenses were to exceed the actual funding of the SRP.
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 after an assessment by the Executive Directors
of IBRD's reserve needs. Upon recommendation by the Executive Directors, the
Board of Governors, consisting of one Governor appointed by each member,
periodically approves transfers out of unallocated Net Income and Surplus 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 based on specific
currencies. IBRD also offers multicurrency loans which have repayment
obligations in various currencies determined on the basis of a currency pooling
system.
Any loan origination fees incorporated in a loan's terms are deferred and
recognized over the life of the loan as an adjustment of yield. However,
incremental direct costs associated with originating loans are expensed as
incurred as such amounts are considered immaterial. The unamortized balance of
loan origination fees is included as a reduction of Loans Outstanding on the
balance sheet, and the loan origination fees amortization is included in
Interest under Income from Loans on the income statement.
It is IBRD's practice not to 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. Delays in receiving loan
payments result in present value losses to IBRD since it does not charge fees or
additional interest on any overdue interest or loan charges. These present value
losses are equal to the difference between the present value of payments for
interest and charges made according to the related loan's contractual terms and
the present value of its expected future cash flows. Such present value losses
are considered in the determination of the Accumulated Provision for Loan
Losses. IBRD has not written off any of its outstanding loans.
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 made to or guaranteed by 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
44 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
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, the member's loans may not automatically emerge from
nonaccrual status, even though the member's eligibility for new loans may have
been restored. A decision on the restoration of accrual status is made on a
case-by-case basis after a suitable period of payment performance has passed
from the time of arrears clearance.
IBRD determines the Accumulated Provision for Loan Losses based on an assessment
of collectibility risk in the total loan and callable guarantees portfolio,
including loans in nonaccrual status. The accumulated provision is periodically
adjusted based on a review of the prevailing circumstances. Adjustments to the
accumulated provision are recorded as a charge or addition 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.
Investments: Investment securities are classified based on management's
intention on the date of purchase. Securities which management has the intention
and ability to hold until maturity are classified as Held-to-maturity and
reported at amortized cost. Securities designated for other postretirement
benefits are carried and reported at market value or at their estimated fair
values. The changes in the values of the securities designated for other
postretirement benefits are included in the determination of net income. All
other 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. Investment
securities and related financial instruments held in IBRD's Trading portfolio
are carried and reported at market value. Unrealized gains and losses for
investment securities and related financial instruments held in the Trading
portfolio are included in income. Derivative instruments are used in liquidity
management to take advantage of profitable trading opportunities and as a proxy
for cash securities. These instruments include short-term, over-the-counter
foreign exchange forwards, currency swaps, cross-currency interest rate swaps,
interest rate swaps, and exchange-traded futures and options on fixed income
instruments. These derivatives are carried at market value. 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.
Securities Purchased Under Resale Agreements and Securities Sold Under
Repurchase Agreements and Payable for Cash Collateral Received: Securities
purchased under resale agreements and securities sold under repurchase
agreements are recorded at historical cost. IBRD takes possession of securities
purchased under resale agreements, monitors the fair value of the securities
and, if necessary, requires additional collateral.
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.
IBRD uses derivatives in its borrowing and liability management activities to
create synthetic debt instruments to take advantage of cost saving opportunities
across capital markets and lower its funding costs, to delink the time at which
its borrowing costs are fixed from the timing of the actual market borrowings,
and to establish an appropriate match between the currency and interest rate
characteristics of its assets and liabilities. These instruments include
currency and interest rate swaps, swap spread-locks, foreign exchange forwards,
exchange-traded futures and options. These derivatives 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 these derivatives is recognized as
an adjustment to the borrowing cost over the life of the derivative contract and
included in Interest under Borrowing Expenses on the income statement. Upon
termination, the change in the derivative'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 remaining life of the borrowing. In
instances where the underlying borrowing is prepaid, the change in the
associated derivative's market value is recognized immediately as an adjustment
to the cost of the underlying borrowing instrument and accordingly in the
determination of net income. 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.
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
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 45
<PAGE>
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.
Accounting and Reporting Developments
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement will significantly change
accounting and reporting standards for all derivative instruments, and hedging
activities. It requires a company to recognize all derivatives as either assets
or liabilities on the balance sheet and to measure those instruments at fair
value. The effective date of this standard was delayed by one year, to fiscal
years beginning after June 15, 2000 by the issuance of SFAS No. 137. In June
2000, SFAS No. 133 was further amended by SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" which addresses a limited
number of implementation issues.
In addition, in December 1998, the International Accounting Standards Committee
(IASC) issued International Accounting Standard (IAS) 39 "Financial Instruments:
Recognition and Measurement". IAS 39 requires that all financial assets and
liabilities, including derivatives, be included on the balance sheet and is
effective for fiscal years beginning on or after January 1, 2001 although
earlier application is permitted. IBRD intends to adopt the provisions of IAS 39
in fiscal year 2001. Therefore, for IBRD, IAS 39 and SFAS No.133 along with its
amendments under SFAS No. 138 will be effective for the fiscal year beginning
July 1, 2000. IBRD is currently in the process of evaluating the potential
impact, including transition adjustment, of these standards on its financial
statements.
NOTE A--CAPITAL STOCK, RESTRICTED CURRENCIES, MAINTENANCE OF VALUE, AND
MEMBERSHIP
Capital Stock: At June 30, 2000, IBRD's capital comprised 1,581,724
(1,581,724--June 30, 1999) authorized shares, of which 1,563,443
(1,560,243--June 30, 1999) 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, $11,418 million ($11,395 million--June 30, 1999) has
been paid in, and the remaining $177,188 million ($176,825 million--June 30,
1999) is subject to call only when required to meet the obligations of IBRD
created by borrowing or guaranteeing loans.
Currencies Subject to Restrictions: A portion of capital subscriptions paid in
to IBRD has been paid in the local currencies of the members. These amounts,
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.
Maintenance of Value: Of the total amount of $522 million ($453 million--June
30, 1999) included in Amounts to Maintain Value of Currency Holdings, which has
been deducted from equity, $169 million ($87 million--June 30, 1999) represents
MOV receivables for countries that have amounts in arrears for two years or
more. IBRD still considers these MOV receivables in arrears as obligations due
from the members concerned. The remaining $353 million ($366 million--June 30,
1999) represents net MOV amounts relating to restricted currencies out on loan
that become payable under the same terms as other MOV obligations only after
such currencies are repaid to IBRD.
Membership: In February 1993, IBRD's Executive Directors decided that the former
Socialist Federal Republic of Yugoslavia (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, Croatia, 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, asset-backed securities, repurchase
agreements, securities loans, resale agreements and related financial
instruments with off-balance sheet risk including futures, forward contracts,
currency swaps, cross-currency interest rate swaps, interest rate swaps, options
and short sales.
For government and agency obligations, IBRD may only invest in obligations
issued or unconditionally guaranteed by governments of countries with a minimum
credit rating of AA; however, if such obligations are denominated in the home
currency of the issuer,
46 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
no rating is required. IBRD may only invest in obligations issued by an agency
or instrumentality of a government of a country, a multilateral organization or
any other official entity with a minimum credit rating of AA. For asset-backed
securities, IBRD may only invest in securities with a AAA credit rating.
With respect to futures and options, IBRD generally closes out most open
positions prior to maturity. Therefore, cash receipts or payments are mostly
limited to the change in market value of the futures and options contracts.
Futures contracts generally entail daily settlement of the net cash margin.
For options, 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 as part of its investment portfolio strategy.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 47
<PAGE>
Liquid Portfolio: A summary of IBRD's position in trading and other liquid
portfolio instruments at June 30, 2000 and June 30, 1999 is as follows:
<TABLE>
<CAPTION>
In millions of U.S. dollars equivalent
--------------------------------------------------------------------------------------------------------------------------------
Euro(a) Japanese yen U.S. dollars Other currencies All currencies
---------------- ----------------- ----------------- ----------------- ----------------
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
------ ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Trading:
Government and agency
obligations:
Carrying value 3,386 1,601 3,596 4,415 911 1,368 34 80 7,927 7,464
Average balance
during fiscal year 2,253 1,569 4,266 4,618 1,020 1618 53 294 7,592 8,099
Net gains (losses)
for the fiscal year (56) (39) (50) (19) (12) 13 * * (118) (45)
Average yield (%) 4.87 4.03 (0.18) 0.14 6.77 5.44 6.31 7.67 2.77 1.98
Average maturity
(years) 1.52 1.31 1.09 1.62 1.08 1.31 1.27 1.23 1.27 1.54
Time deposits:
Carrying value 3,252 3,072 289 1,110 7,289 14,406 1,611 1,217 12,441 19,805
Average balance
during fiscal year 2,895 3,046 564 1,772 11,790 11,439 1,339 1,363 16,588 17,620
Net gains (losses)
for the fiscal year -- -- -- -- -- -- -- -- -- --
Average yield (%) 4.31 2.73 0.08 0.05 6.95 5.42 5.19 2.95 5.87 4.51
Average maturity
(years) 0.26 0.18 0.15 0.11 0.13 0.04 0.16 0.20 0.17 0.08
Asset-backed securities:
Carrying value -- -- -- -- 4,573 3,076 -- -- 4,573 3,076
Average balance
during fiscal year -- -- -- -- 3,966 2,398 -- -- 3,966 2,398
Net gains (losses)
for the fiscal year -- -- -- -- (1) (6) -- -- (1) (6)
Average yield (%) -- -- -- -- 6.60 5.39 -- -- 6.60 5.39
Average maturity
(years) -- -- -- -- 7.55 6.21 -- -- 7.55 6.21
Options, futures and
forwards:
Carrying value (*) * * * -- -- -- * (*) *
Average balance
during fiscal year 2 * * * * (*) * * 2 *
Net gains (losses)
for the fiscal year 1 (*) (*) * 1 1 (*) * 2 1
Total Trading Investments**
Carrying value 6,638 4,673 3,885 5,525 12,773 18,850 1,645 1,297 24,941 30,345
Average balance
during fiscal year 5,150 4,615 4,830 6,390 16,776 15,456 1,392 1,657 28,148 28,118
Net gains (losses)
for the fiscal year(b) (55) (39) (50) (19) (12) 8 * * (117) (50)
--------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements &
securities loans:
Carrying value -- -- -- -- -- (102) -- -- -- (102)
Average balance during
fiscal year -- (26) -- -- (76) (272) -- (12) (76) (310)
Average cost (%) -- -- -- -- -- 4.91 -- -- -- 4.91
Average maturity (years) -- -- -- -- -- * -- -- -- *
--------------------------------------------------------------------------------------------------------------------------------
Resale agreements:
Carrying value -- -- -- -- 101 6 -- -- 101 6
Average balance
during fiscal year 3 39 -- -- 204 265 -- 11 207 315
Average yield (%) -- -- -- -- 6.50 4.10 -- -- 6.50 4.10
Average maturity (years) -- -- -- -- 2.38 * -- -- 2.38 *
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
48 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
<TABLE>
<CAPTION>
In millions of U.S. dollars equivalent
--------------------------------------------------------------------------------------------------------------------------------
Euro(a) Japanese yen U.S. dollars Other currencies All currencies
---------------- ----------------- ----------------- ----------------- ----------------
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
------ ------- ------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short sales:(c)
Carrying value -- -- -- -- (100) (46) -- -- (100) (46)
Average balance during
fiscal year -- (*) -- -- (35) (1) -- (*) (35) (1)
--------------------------------------------------------------------------------------------------------------------------------
Currency swaps receivable:
Carrying value -- -- -- -- 4,189 5,087 -- -- 4,189 5,087
Average balance during
fiscal year 1 3 -- 10 3,819 5,017 27 26 3,847 5,056
Average yield (%) -- -- -- -- 6.71 5.02 -- -- 6.71 5.02
Average maturity (years) -- -- -- -- 0.27 0.19 -- -- 0.27 0.19
--------------------------------------------------------------------------------------------------------------------------------
Currency swaps payable:
Carrying value (2,907) (2,942) (103) (1,002) -- -- (1,164) (990) (4,174) (4,934)
Average balance
during fiscal year (2,482) (2,413) (302) (1,485) (28) (31) (991) (1,135) (3,803) (5,064)
Average cost (%) 4.28 2.70 0.14 0.05 -- -- 5.39 2.56 4.48 2.14
Average maturity (years) 0.30 0.18 0.39 0.16 -- -- 0.22 0.25 0.28 0.19
--------------------------------------------------------------------------------------------------------------------------------
Cross-currency interest rate
swaps receivable:(d)
Carrying value -- -- 291 245 6,837 6,088 -- -- 7,128 6,333
Average balance during
fiscal year -- -- 277 38 6,232 5,863 -- -- 6,509 5,901
Net gains (losses) for the
fiscal year(b) -- -- (3) (2) (*) 5 -- -- (3) 3
Average yield (%) -- -- 0.41 0.48 6.50 5.12 -- -- 6.25 4.94
Average maturity (years) -- -- 1.12 1.68 1.30 1.53 -- -- 1.30 1.54
--------------------------------------------------------------------------------------------------------------------------------
Cross-currency interest rate
swaps payable:(d)
Carrying value (3,381) (1,593) (3,882) (4,651) (258) (238) (21) (67) (7,542) (6,549)
Average balance
during fiscal year (2,251) (1,590) (4,535) (4,234) (251) (112) (55) (283) (7,092) (6,219)
Net gains (losses)
for the fiscal year(b) 56 39 54 22 (*) * (1) (*) 109 61
Average cost (%) 4.87 4.03 (0.14) 0.19 6.50 5.07 6.31 7.67 2.33 1.37
Average maturity (years) 1.54 1.33 1.12 1.63 1.28 1.64 1.27 1.23 1.31 1.55
--------------------------------------------------------------------------------------------------------------------------------
Net Interest rate swaps:(d)
Carrying value -- -- -- -- (4) (18) -- -- (4) (18)
Average balance
during fiscal year -- -- -- -- (10) (47) -- -- (10) (47)
Net gains (losses)
for the fiscal year(b) -- -- -- -- 17 (18) -- -- 17 (18)
Average cost (%) -- -- -- -- (0.07) (0.09) -- -- (0.07) (0.09)
Average maturity (years) -- -- -- -- 1.18 1.66 -- -- 1.18 1.66
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
a. Effective January 1, 1999, the euro was introduced. For reporting
purposes, holdings in the eleven national currencies that are consid ered
national currency units of the euro have been aggregated with the euro and
reported as euro in both the current and prior year.
b. Included in Net gains (losses) on the Trading portfolio in the income
statement.
c. Included in Amounts Payable for Investment Securities Purchased on the
balance sheet.
d. Included in Currency Swaps--Trading on the balance sheet.
* Less than $0.5 million, 0.005 percent, or 0.05 years.
** May differ from the sum of individual figures due to rounding.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 49
<PAGE>
Held-to-maturity portfolio: During fiscal year 1999, IBRD liquidated the
securities in the held-to-maturity portfolio and thereby realized a gain of $237
million.
Assets designated for other postretirement benefits plans: During fiscal year
1999, the Retired Staff Benefits Plan (RSBP) was modified and as a result, the
assets and liabilities designated for the health and life insurance accounts
were removed from the balance sheet.
NOTE C--LOANS, COFINANCING AND GUARANTEES
IBRD's loan portfolio includes multicurrency loans, single currency pool loans,
single currency loans, and fixed spread loans. Each of these is described below.
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 lending spread(a),
resulting in a pass-through of its average borrowing costs to those members that
benefit from IBRD loans.
Single Currency Pool Loans
In fiscal year 1997, IBRD offered its borrowers the opportunity to convert their
existing multicurrency pool loans to single currency pools. These pools were
available in four currencies (U.S. dollar, Japanese yen, Deutsche mark, or Swiss
franc). At inception, each single currency pool reflected the composition of the
multicurrency pool. However, as of June 30, 1999, all of the pools had exceeded
the 90% target in the designated currency. All adjustable rate multicurrency
pool loans that were converted to single currency pools carry the applicable
pool's adjustable lending rate, reset semi-annually to reflect the previous
semester average cost of outstanding borrowings allocated to fund that pool
weighted by the shares of currencies in the pool, plus a spread of 50 basis
points. Any fixed rate multicurrency pool loans that were converted to single
currency pools continued to carry their fixed rate.
----------
a. Until July 31, 1998, the lending spread was 50 basis points. However,
during the first quarter of fiscal year 1999, the lending spread charged
by IBRD to its borrowers was increased by 25 basis points to 75 basis
points for loans where the invitation to negotiate was issued on or after
July 31, 1998. In addition, a front-end fee of 100 basis points, payable
for each such loan at the time it becomes effective, was introduced.
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 variable rate equal to the rate on LIBOR-based
single currency loans applicable for such interim period. The fixed lending rate
comprises a base rate reflecting medium- to long-term market rates on the
semi-annual rate-fixing date for loan amounts disbursed during the preceding
six-month period, plus a total spread consisting of (a) IBRD's funding cost
margin for these loans in the loan currency, (b) a market risk premium (intended
to compensate IBRD for market risks incurred in funding these loans), and (c) a
lending spread.
Variable Spread loans: IBRD introduced variable spread single currency loans in
1993. The rates charged on variable spread single currency loans are a
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 lending spread.
Certain variable spread single currency loans, including the Special Structural
and Sector Adjustment Loans introduced in fiscal year 1999, have non-standard
terms. These loans have a fixed spread ranging from 75 to 400 basis points over
LIBOR, a front-end fee, and are not eligible for waivers of interest or
commitment charges.
Fixed Spread Loans
During the first quarter of fiscal year 2000, IBRD introduced fixed-spread
loans. These loans have an interest rate based on LIBOR plus a spread that will
be fixed for the life of the loan. The spread is currently 55 basis points for
U.S. dollar and euro denominated loans, and 45 basis points for Japanese yen
denominated loans. A commitment charge premium of 10 basis points over the
standard 75 basis points charged on other IBRD loans will be included for the
first four years from the date the commitment charge begins to accrue.
Borrowers selecting this product have the flexibility to change the currency or
interest rate basis over the life of the loan, subject to certain conditions.
50 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
Waivers of Loan Interest and Commitment Charges
For payment periods beginning during the fiscal year ended June 30, 2000, an
interest waiver of five basis points on disbursed and outstanding loans to
eligible borrowers was in effect, except that for new loans where the invitation
to negotiate was issued on or after July 31, 1998, which carry a 75 basis points
lending spread, the interest waiver was 25 basis points. A similar waiver was in
effect for the fiscal year ended June 30, 1999. For the fiscal year ended June
30, 1998, a waiver of 25 basis points was in effect. For the fiscal year ended
June 30, 2000, the combined effect of these waivers was to reduce Net Income by
$59 million ($102 million--June 30, 1999, $241 million-- June 30, 1998).
A one-year commitment charge waiver of 50 basis points was in effect on all
eligible undisbursed loans to all borrowers for all payment periods commencing
in the fiscal year ending June 30, 2000. A similar waiver of 50 basis points was
in effect for the fiscal years ended June 30, 1999 and June 30, 1998. For the
fiscal year ended June 30, 2000, the effect of the commitment charge waiver was
to reduce Net Income by $207 million ($229 million--June 30, 1999, $211
million--June 30, 1998).
A summary of IBRD's outstanding loans by currency and product at June 30, 2000
and June 30, 1999 follows:
In millions of U.S. dollars equivalent
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
2000
---------------------------------------------------------------------------------------------
Euro(a) Japanese yen U.S. dollars Others Loans Outstanding
--------------- -------------- ---------------- ------------- -----------------
Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Total
---------------------- ------ ------- ----- ------- ------- ------- ----- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multicurrency loans(b)
Amount $ 386 $10,004 $ 364 $12,622 $ 479 $11,283 $ 221 $1,641 $ 1,450 $ 35,550 $ 37,000
Weighted average
rate (%)(c) 8.28 5.23 8.30 5.23 8.08 5.28 7.92 5.23 8.16 5.24 5.36
Single currency pools
Amount $ 7 $ 3,860 $ -- $ 68 $ 63 $31,424 $ -- $ -- $ 70 $ 35,352 $ 35,422
Weighted average
rate (%)(c) 10.61 6.71 -- 4.05 11.06 8.66 -- -- 11.01 8.44 8.44
Average Maturity
(years) 0.85 4.31 -- 3.50 0.84 4.63 -- -- 0.84 4.59 4.59
Single currency loans
Amount $ 463 $ 1,126 $ -- $ 160 $12,486 $32,476 $ -- $ 3 $12,949 $ 33,765 $ 46,714
Weighted average
rate (%)(c) 5.46 4.50 -- 0.35 6.76 7.29 -- 3.25 6.71 7.16 7.04
Average Maturity
(years) 5.20 6.81 -- 7.84 5.45 6.47 -- 4.97 5.44 6.48 6.20
Fixed Spread Loans
Amount $ 229 $ -- $ -- $ -- $ -- $ 739 $ -- $ -- $ 229 $ 739 $ 968
Weighted average
rate (%)(c) 6.38 -- -- -- -- 7.57 -- -- 6.36 7.57 7.28
---------------------------------------------------------------------------------------------
Total loans
Amount $1,085 $14,990 $ 364 $12,850 $13,028 $75,922 $ 221 $1,644 $14,698 $105,406 $120,104
Weighted average
rate (%)(c) 6.69 5.55 8.30 5.16 6.83 7.56 7.92 5.23 6.87 6.95 6.94
--------
Total loans $120,104
Less accumulated provision for loan losses and deferred loan income 3,860
--------
Net loans outstanding $116,244
========
----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: For footnotes see following page.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 51
<PAGE>
In millions of U.S. dollars equivalent
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
1999
--------------------------------------------------------------------------------------------
Euro(a) Japanese yen U.S. dollars Others Loans Outstanding
--------------- -------------- --------------- -------------- -----------------
Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Fixed Adjust. Total
---------------------- ------ ------- ----- ------- ------ ------- ----- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multicurrency loans(b)
Amount $ 786 $11,815 $ 661 $11,756 $ 774 $11,949 $ 390 $1,704 $ 2,611 $ 37,224 $ 39,835
Weighted average
rate (%)(c) 8.81 6.04 8.85 6.04 8.46 6.06 8.12 6.04 8.61 6.05 6.21
Single currency pools
Amount $ 18 $ 5,067 $ -- $ 74 $ 149 $35,385 $ -- $ -- $ 167 $ 40,526 $ 40,693
Weighted average
rate (%)(c) 10.83 6.45 -- 5.42 10.54 7.97 -- -- 10.58 7.78 7.79
Average Maturity
(years) 0.96 4.61 -- 3.73 0.94 5.03 -- -- 0.95 4.98 4.96
Single currency loans
Amount $ 360 $ 719 $ -- $ 132 $8,759 $26,727 $ -- $ 3 $ 9,119 $ 27,581 $ 36,700
Weighted average
rate (%)(c) 5.30 2.92 -- 0.33 6.45 5.70 -- 1.27 6.41 5.60 5.80
Average Maturity
(years) 5.63 6.60 -- 8.62 5.85 7.26 -- 4.61 5.84 7.24 6.90
--------------------------------------------------------------------------------------------
Total loans
Amount $1,164 $17,601 $ 661 $11,962 $9,682 $74,061 $ 390 $1,707 $11,897 $105,331 $117,228
Weighted average
rate (%)(c) 7.76 6.03 8.85 5.97 6.67 6.84 8.12 6.03 6.95 6.60 6.63
--------
Total loans $117,228
Less accumulated provision for loan losses and deferred loan income 3,923
--------
Net loans outstanding $113,305
========
--------------------------------------------------------------------------------------------------------------------
</TABLE>
a. Effective January 1, 1999, the euro was introduced. For reporting
purposes, amounts in the eleven national currencies that are considered
national currency units of the euro have been aggregated with the euro and
reported as euro in both the current and prior year.
b. Average Maturity - Multicurrency loans. 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 one euro. These three major
currencies comprise at least 90% of the multicurrency loans' U.S. dollar
equivalent value, with the remainder in other currencies. This ratio was
changed in January 1999 as a result of the introduction of the euro. The
com position 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 pre cludes the determination of average maturity
information for multicurrency loans by individual currency. Accordingly,
IBRD only discloses the matu rity periods for its multicurrency loans on a
combined U.S. dollars equivalent basis.
c. Excludes effects of any waivers of loan interest.
52 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
The maturity structure of IBRD's loans at June 30, 2000 and June 30, 1999 is as
follows:
In millions
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
2000
--------------------------------------------------------------------------------------------------------
July 1, 2000 through July 1, 2001 through July 1, 2005 through
Product/Rate Type June 30, 2001 June 30, 2005 June 30, 2010 Thereafter Total
------------------------ --------------------- ---------------------- ---------------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Multicurrency loans
Fixed $ 960 $ 429 $ 61 $ -- $ 1,450
Adjustable 4,531 15,097 12,717 3,205 35,550
Single currency pools
Fixed 42 28 -- -- 70
Adjustable 4,728 16,157 11,949 2,518 35,352
Single currency loans
Fixed 324 5,790 6,130 705 12,949
Adjustable 684 13,504 13,491 6,086 33,765
Fixed Spread Loans
Fixed -- 10 95 124 229
Adjustable -- -- 687 52 739
------- ------- ------- ------- --------
All Loans
Fixed 1,326 6,257 6,286 829 14,698
Adjustable 9,943 44,758 38,844 11,861 105,406
------- ------- ------- ------- --------
Total loans outstanding $11,269 $51,015 $45,130 $12,690 $120,104
======= ======= ======= ======= ========
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In millions
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------------------------------
July 1, 1999 through July 1, 2000 through July 1, 2004 through
Product/Rate Type June 30, 2000 June 30, 2004 June 30, 2009 Thereafter Total
------------------------ --------------------- ---------------------- ---------------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Multicurrency loans
Fixed $ 1,452 $ 1,041 $ 117 $ 1 $ 2,611
Adjustable 4,283 15,072 13,546 4,323 37,224
Single currency pools
Fixed 97 70 -- -- 167
Adjustable 4,823 17,496 14,307 3,900 40,526
Single currency loans
Fixed 178 3,660 4,623 658 9,119
Adjustable 395 8,543 12,495 6,148 27,581
------- ------- ------- ------- --------
All Loans
Fixed 1,727 4,771 4,740 659 11,897
Adjustable 9,501 41,111 40,348 14,371 105,331
------- ------- ------- ------- --------
Total loans outstanding $11,228 $45,882 $45,088 $15,030 $117,228
======= ======= ======= ======= ========
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Estimated Value of Loans
All of IBRD's loans are made to or guaranteed by countries that are members of
IBRD, except for those loans made to IFC. IBRD does not currently sell its
loans, nor is there a market for loans comparable to those made by IBRD.
The estimated value of all loans is based on a discounted cash flow method. The
estimated cash flows from principal repayments and interest are discounted by
the applicable market yield curves plus IBRD's relevant basis point lending
spread adjusted for waivers.
The following table reflects the carrying and estimated values of the loan
portfolio at June 30, 2000 and June 30, 1999:
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 53
<PAGE>
In millions
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
2000 1999
--------------------- ---------------------
Carrying Estimated Carrying Estimated
value value value value
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Multicurrency loans
Fixed $ 1,450 $ 1,480 $ 2,611 $ 2,763
Adjustable 35,550 37,487 37,224 39,940
Single currency pools
Fixed 70 73 167 174
Adjustable 35,352 36,603 40,526 43,646
Single currency loans
Fixed 12,949 12,433 9,119 8,873
Adjustable(a) 33,765 33,735 27,581 27,547
Fixed Spread loans
Fixed 229 231 -- --
Adjustable 739 739 -- --
-------- -------- -------- --------
Total loans
Fixed 14,698 14,217 11,897 11,810
Adjustable 105,406 108,564 105,331 111,133
-------- -------- -------- --------
Total loans outstanding 120,104 122,781 117,228 122,943
Less accumulated provision for loan losses
and deferred loan income 3,860 3,860 3,923 3,923
-------- -------- -------- --------
Net loans outstanding $116,244 $118,921 $113,305 $119,020
======== ======== ======== ========
-----------------------------------------------------------------------------------------------
</TABLE>
a. Amount includes carrying value of $10,800 million ($9,035 million--June
30, 1999) and estimated value of $10,789 million ($9,024 million--June 30,
1999) for non-standard single currency loans.
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 $1,661 million at June 30, 2000 ($1,973
million--June 30, 1999), were not included in reported loan balances. At June
30, 2000, $467 million of these guarantees were subject to call ($466
million--June 30, 1999). In some cases, IBRD guarantees have included interest
payments in addition to principal. At June 30, 2000, interest guarantees of $10
million ($3 million--June 30, 1999) were subject to call.
Overdue Amounts
At June 30, 2000, in addition to those loans referred to in the following
paragraph, principal installments of $3 million and charges of $2 million
payable to IBRD on loans, were overdue by more than three months. At June 30,
2000, the aggregate principal amounts outstanding on all loans to any borrower,
other than those referred to in the following paragraph, with any loan overdue
by more than three months, was $460 million.
At June 30, 2000, the loans made to or guaranteed by certain member countries
and the FRY with an aggregate principal balance outstanding of $2,031 million
($2,053 million--June 30, 1999), of which $1,302 million ($1,249 million--June
30, 1999) was overdue, were in nonaccrual status. At such date, overdue interest
and other charges in respect of these loans totaled $1,060 million ($1,011
million--June 30, 1999). If these loans had not been in nonaccrual status,
income from loans for the fiscal year ended June 30, 2000, would have been
higher by $52 million ($55 million--June 30, 1999, $84 million--June 30, 1998).
54 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
A summary of countries with loans or guarantees in nonaccrual status follows:
In millions
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
2000
-------------------------------------------------------
Principal Principal and Nonaccrual
Borrower outstanding charges overdue since
-------------------------------------------------- --------------- ------------------- ---------------
<S> <C> <C> <C>
With overdues
Congo, Democratic Republic of $ 81 $ 113 November 1993
Congo, Republic of 67 55 November 1997
Iraq 38 66 December 1990
Liberia 133 291 June 1987
Syrian Arab Republic 31 130(a) February 1987
Yugoslavia, Federal Republic of (Serbia/
Montenegro) 1,111 1,707 September 1992
--------- ---------
Total 1,461 2,362
Without overdues
Bosnia and Herzegovina 569 -- September 1992
Sudan 1 -- January 1994
--------- ---------
Total $2,031 $2,362
========= =========
------------------------------------------------------------------------------------------------------------
</TABLE>
a. Represents interest and charges overdue.
During fiscal year 1999, Sudan reached an understanding with IBRD and IDA under
which Sudan agreed to make regular monthly payments of $1 million commencing in
July 1999. These payments are being applied first to IBRD arrears and then to
arrears with IDA. As of June 30, 2000, Sudan had paid off all of its arrears to
IBRD.
During fiscal year 1998, the Syrian Arab Republic and IBRD entered into an
agreement covering, among other things, the application of payments by Syria of
its overdue principal, interest, and charges. Under this agreement, Syria paid
the overdue principal to IBRD in one payment of $263 million on September 2,
1997 and has been making monthly payments to IBRD since then.
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.
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 average recorded investment in nonaccruing loans during the fiscal year
ended June 30, 2000, was $2,057 million ($2,084 million--June 30, 1999, $2,138
million--June 30, 1998).
During the fiscal years ended June 30, 2000, and June 30, 1999, no loans went
into or came out of nonaccrual status.
Accumulated Provision for Loan Losses
IBRD has never suffered a loss on any of its loans, with the exception of losses
resulting from the difference between the discounted present value of expected
payments for interest and charges according to the related loan's contractual
terms and the actual cash flows. 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 sta-
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 55
<PAGE>
tus 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 and any other potential overdue payments,
IBRD maintains an accumulated provision for loan losses. Of the Accumulated
Provision for Loan Losses of $3,400 million at June 30, 2000 ($3,560
million--June 30, 1999), $700 million is attributable to the nonaccruing loan
portfolio ($700 million--June 30, 1999).
Changes to the Accumulated Provision for Loan Losses for the fiscal years ended
June 30, 2000, June 30, 1999 and June 30, 1998 are summarized below:
In millions
-------------------------------------------------------------------------------
2000 1999 1998
------ ------ ------
Balance, beginning of
the fiscal year $3,560 $3,240 $3,210
Provision for loan losses (166) 246 251
Translation adjustment 6 74 (221)
------ ------ ------
Balance, end of the
fiscal year $3,400 $3,560 $3,240
====== ====== ======
-------------------------------------------------------------------------------
During fiscal year 2000, an assessment of the probable losses inherent in the
portfolio at June 30, 2000, compared to June 30, 1999, resulted in a reduction
of the provisioning requirements, due to a decline in the credit risk of certain
large borrowers. As a result, the corresponding reduction in the accumulated
provision for loan losses for this fiscal year resulted in an increase in net
income.
IBRD has endorsed a multilateral initiative for addressing the debt problems of
a group of countries, identified as heavily indebted poor countries (HIPCs), to
ensure that the reform efforts of these countries will not be put at risk by
unsustainable external debt burdens. Under this initiative, creditors are to
provide debt relief for those countries that demonstrated good policy
performance over an extended period to bring their debt burdens to sustainable
levels. IBRD has taken the situation of these countries into account in its
review of the adequacy of the Accumulated Provision for Loan Losses.
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 June 30, 2000, IDA had approved credits
of $1,659 million ($1,623 million--June 30, 1999) under this program from
inception, of which $1,630 million ($1,604 million--June 30, 1999) 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 limits have been established for each counterparty. Swaps
include currency swaps, interest rate swaps, forward interest rate swaps, and
swaptions.
56 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
A summary of IBRD's borrowings portfolio at June 30, 2000 and June 30, 1999
follows:
Medium- and Long-term Borrowings and Swaps at June 30, 2000
In millions of U.S. dollars equivalent
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Currency
Direct borrowings swap agreements(a)
---------------------------- --------------------------------
Wgtd. Wgtd.
avg. Average Amount avg. Average
cost maturity payable cost maturity
Currency/ Rate type Amount (%) (years) (receivable) (%) (years)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Euro(c)
Fixed $ 14,418 6.71 5.53 $ 2,944 7.11 1.66
(13,050) 6.90 4.87
Adjustable 5,707 5.43 8.97 8,477 4.08 2.54
(6,481) 5.19 8.43
Japanese yen
Fixed 12,334 4.97 4.82 51 4.98 1.41
(8,268) 5.05 4.14
Adjustable 2,857 3.70 10.99 5,174 (0.22) 0.90
(2,805) 2.10 11.57
U. S. dollars
Fixed 45,816 6.48 5.22 13,629 9.16 3.20
(1,158) 8.26 1.09
Adjustable 1,757 6.58 4.86 38,452 6.46 6.45
(12,055) 6.46 1.84
Others
Fixed 22,522 7.37 5.04 1,296 5.64 0.73
(22,881) 7.27 4.54
Adjustable 243 7.46 0.55 390 1.58 1.23
(401) 8.36 2.80
----------------------------------------
Total
Fixed 95,090 6.53 5.17 17,920
(45,357)
Adjustable 10,564 5.20 8.64 52,493
(21,742)
----------------------------------------
Principal at face value 105,654 6.39 5.52 3,314
Net unamortized premium
(discount) (5) 186
----------------------------------------
Total $105,649 6.39 5.52 $ 3,500
========================================
------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------
Interest rate
swap agreements Net currency obligations
------------------------------ -----------------------------------
Notional Wgtd. Wgtd.
amount avg. Average Amount avg. Average
payable cost maturity payable cost maturity(b)
Currency/ Rate type (receivable) (%) (years) (receivable) (%) (years)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Euro(c)
Fixed $ 3,731 6.38 3.51 $ 21,093 6.70 4.64
(1,591) 5.62 3.47 (14,641) 6.76 4.72
Adjustable 1,564 4.49 3.26 15,748 4.61 4.94
(3,711) 4.33 3.45 (10,192) 4.88 6.62
Japanese yen
Fixed 4,761 0.84 1.21 17,146 3.82 3.80
(3,123) 2.74 4.45 (11,391) 4.42 4.22
Adjustable 3,123 0.07 4.45 11,154 0.86 4.48
(4,761) 0.12 1.21 (7,566) 0.86 5.05
U. S. dollars
Fixed 15,448 5.98 7.84 74,893 6.86 5.39
(40,011) 5.93 4.46 (41,169) 6.00 4.37
Adjustable 39,762 6.39 4.37 79,971 6.43 5.38
(15,223) 6.60 7.68 (27,278) 6.54 5.10
Others
Fixed 390 7.08 1.30 24,208 7.27 4.75
(158) 6.66 6.26 (23,039) 7.27 4.56
Adjustable 158 5.85 6.26 791 4.24 2.02
(390) 3.10 1.30 (791) 5.76 2.06
-------- -----------------------------
Total
Fixed 24,330 137,340 6.53 4.97
(44,883) (90,240) 6.25 4.45
Adjustable 44,607 107,664 5.57 5.20
(24,085) (45,827) 5.22 5.37
-------- -------------------
Principal at face value (31) 108,937 6.37
Net unamortized premium
(discount) 159 340
-------- -------------------
Total $ 128 $109,277 6.37
======== ===================
-------------------------------------------------------------------------------------------------
</TABLE>
a. Currency swap agreements include cross-currency interest rate swaps.
b. At June 30, 2000, the average repricing period of the net currency
obligations for adjustable rate borrowings was three months.
c. Effective January 1, 1999, the euro was introduced. For reporting
purposes, amounts in the eleven national currencies that are considered
national currency units of the euro have been aggregated with the euro and
reported as euro in both the current and prior year.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 57
<PAGE>
Medium- and Long-term Borrowings and Swaps at June 30, 1999
In millions of U.S. dollars equivalent
----------------------------------------------------------------------------
Currency
Direct borrowings swap agreements(a)
-------------------------- -------------------------------
Wgtd. Wgtd.
avg. Average Amount avg. Average
Currency/ cost maturity payable cost maturity
Rate type Amount (%) (years) (receivable) (%) (years)
------------------------------------------- -------------------------------
Euro(c)
Fixed $ 19,054 6.85 5.39 $ 3,550 7.70 1.80
(15,106) 6.91 5.47
Adjustable 6,840 7.00 9.89 7,172 2.87 2.58
(7,720) 6.36 9.11
Japanese yen
Fixed 15,119 4.97 4.16 63 5.15 2.43
(8,894) 5.14 4.03
Adjustable 1,969 3.42 8.09 2,780 (0.11) 1.31
(1,629) 0.97 9.90
U. S. dollars
Fixed 42,239 6.45 5.61 16,431 9.15 3.60
(1,802) 6.97 1.50
Adjustable 1,430 4.99 6.08 37,298 4.94 6.65
(7,062) 4.91 1.60
Others
Fixed 23,283 7.50 5.06 1,641 5.66 1.49
(24,078) 7.38 4.50
Adjustable 355 6.51 1.42 417 0.01 2.23
(450) 7.07 3.44
--------------------------------------
Total
Fixed 99,695 6.55 5.22 21,685
(49,880)
Adjustable 10,594 6.05 8.76 47,667
(16,861)
--------------------------------------
Principal at
face value 110,289 6.50 5.56 2,611
Net unamor-
tized premium 122 167
--------------------------------------
Total $110,411 6.50 5.56 $ 2,778
======================================
----------------------------------------------------------------------------
--------------------------------------------------------------------------------
Interest rate
swap agreements Net currency obligations
------------------------------- -------------------------------
Notional Wgtd. Wgtd.
amount avg. Average Amount avg. Average
Currency/ payable cost maturity payable cost maturity(b)
Rate type (receivable) (%) (years) (receivable) (%) (years)
----------------------------------------------- -------------------------------
Euro(c)
Fixed $ 3,445 7.20 3.23 $ 26,049 7.01 4.62
(2,838) 5.56 2.95 (17,944) 6.70 5.07
Adjustable 2,867 2.66 2.90 16,879 4.51 5.60
(3,463) 3.06 3.22 (11,183) 5.34 7.29
Japanese yen
Fixed 2,811 1.01 1.88 17,993 4.35 3.80
(2,792) 2.72 5.34 (11,686) 4.56 4.34
Adjustable 2,792 0.14 5.34 7,541 0.90 4.57
(2,811) 0.15 1.88 (4,440) 0.45 4.82
U. S. dollars
Fixed 10,149 6.18 7.88 68,819 7.05 5.46
(32,292) 5.84 5.08 (34,094) 5.90 4.89
Adjustable 32,977 4.94 5.20 71,705 4.94 5.97
(10,862) 5.18 8.07 (17,924) 5.07 5.52
Others
Fixed 416 7.08 2.30 25,340 7.37 4.78
(159) 6.66 7.26 (24,237) 7.38 4.52
Adjustable 159 4.82 7.26 931 3.31 2.78
(416) 1.25 2.30 (866) 4.27 2.89
-------- --------------------------
Total
Fixed 16,821 138,201 6.75 4.96
(38,081) (87,961) 6.29 4.75
Adjustable 38,795 97,056 4.54 5.77
(17,552) (34,413) 4.54 5.94
-------- ----------------
Principal at
face value (17) 112,883 5.88
Net unamor-
tized premium 157 446
-------- ----------------
Total $ 140 $113,329 5.88
======== ================
--------------------------------------------------------------------------------
a. Currency swap agreements include cross-currency interest rate swaps.
b. At June 30, 2000, the average repricing period of the net currency
obligations for adjustable rate borrowings was three months.
c. Effective January 1, 1999, the euro was introduced. For reporting
purposes, amounts in the eleven national currencies that are considered
national currency units of the euro have been aggregated with the euro and
reported as euro in both the current and prior year.
58 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
Short-term Borrowings and Swaps at June 30, 2000 and June 30, 1999
In millions of U.S. dollars equivalent
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
2000
---------------------------------------------------------------------
Interest
Currency rate Wgtd.
swap(a) swap Net avg.
Currency/ Principal payable payable currency cost
Rate type outstanding (receivable) (receivable) obligations(b) (%)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro(c)
Fixed $ -- $ -- $ -- $ -- --
Hong Kong dollars
Fixed -- -- -- -- --
-- -- -- --
Japanese yen
Fixed -- -- 556 556 0.21
-- -- -- --
Adjustable -- -- -- -- --
-- (556) (556) 0.20
Polish zlotys
Fixed 215 -- -- 215 16.13
(215) -- (215) 16.13
U. S. dollars
Fixed 3,319 -- -- 3,319 6.59
-- (95) (95) 6.65
Adjustable 1,196 220 100 1,516 5.98
-- (6) (6) 1.67
South African rand
Fixed -- -- -- -- --
-- -- -- --
-------------------------------------------------------------------
Total
Fixed 3,534 -- 556 4,090 6.23
(215) (95) (310) 13.22
Adjustable 1,196 220 100 1,516 5.98
-- (562) (562) 0.22
-------------------------------------------------------------------
Principal at face value 4,730 5 (1) 4,734 6.40
Net unamortized premium -- 1 -- 1
-------------------------------------------------------------------
Total $ 4,730 $ 6 $ (1) $ 4,735 6.40
===================================================================
---------------------------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------------------------
1999
---------------------------------------------------------------------
Interest
Currency rate Wgtd.
swap(a) swap avg.
Currency/ Principal payable payable Net currency cost
Rate type outstanding (receivable) (receivable) obligations (%)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro(c)
Fixed $ -- $ 281 $ -- $ 281 4.71
Hong Kong dollars
Fixed 451 -- -- 451 12.33
(451) -- (451) 12.33
Japanese yen
Fixed -- 12 -- 12 1.83
(278) -- (278) 5.29
Adjustable -- -- -- -- --
-- -- -- --
Polish zlotys
Fixed -- -- -- -- --
-- -- -- --
U. S. dollars
Fixed 3,606 289 -- 3,895 5.31
(332) -- (332) 6.06
Adjustable 1,188 536 -- 1,724 4.71
-- -- -- --
South African rand
Fixed 83 -- -- 83 15.96
(83) -- (83) 15.96
---------------------------------------------------------------------
Total
Fixed 4,140 582 -- 4,722 6.12
(1,144) -- (1,144) 9.06
Adjustable 1,188 536 -- 1,724 4.71
-- -- -- --
---------------------------------------------------------------------
Principal at face value 5,328 (26) -- 5,302 5.02
Net unamortized premium -- -- -- --
---------------------------------------------------------------------
Total $ 5,328 $ (26) $ -- $ 5,302 5.02
=====================================================================
---------------------------------------------------------------------------------------------
</TABLE>
a. Currency swap agreements include cross-currency interest rate swaps.
b. At June 30, 2000, the average repricing period of the net currency
obligations for short-term borrowings was one month (less than one
month--June 30, 1999.)
c. Effective January 1, 1999, the euro was introduced. For reporting
purposes, amounts in the eleven national currencies that are considered
national currency units of the euro have been aggregated with the euro and
reported as euro in both the current and prior year.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 59
<PAGE>
The maturity structure of IBRD's Medium-and Long-term borrowings outstanding at
June 30, 2000 and June 30, 1999 is as follows:
In millions
--------------------------------------------------------------------------------
Period 2000
---------------------------------------------------------- ----------
July 1, 2000 through June 30, 2001 $ 14,181
July 1, 2001 through June 30, 2002 18,431
July 1, 2002 through June 30, 2003 17,669
July 1, 2003 through June 30, 2004 8,408
July 1, 2004 through June 30, 2005 9,515
July 1, 2005 through June 30, 2010 22,568
Thereafter 14,882
----------
Total $105,654
==========
--------------------------------------------------------------------------------
In millions
--------------------------------------------------------------------------------
Period 1999
---------------------------------------------------------- ----------
July 1, 1999 through June 30, 2000 $ 17,900
July 1, 2000 through June 30, 2001 14,319
July 1, 2001 through June 30, 2002 14,682
July 1, 2002 through June 30, 2003 15,000
July 1, 2003 through June 30, 2004 8,644
July 1, 2004 through June 30, 2009 25,016
Thereafter 14,728
----------
Total $110,289
==========
--------------------------------------------------------------------------------
The following table reflects the carrying and estimated fair values of the
borrowings portfolio at June 30, 2000 and June 30, 1999:
In millions
--------------------------------------------------------------------------------
2000 1999
----------------------- -----------------------
Carrying Estimated Carrying Estimated
value(a) fair value value(a) fair value
---------- ---------- ---------- ----------
Short-term $ 4,729 $ 4,726 $ 5,353 $ 5,338
Medium- and long-term 105,042 106,584 109,674 117,858
Swaps
Currency
Payable 70,632 71,384 70,467 73,736
Receivable (67,126) (68,018) (67,715) (72,371)
Interest rate 127 777 140 458
---------- ---------- ---------- ----------
Total $113,404 $115,453 $117,919 $125,019
========== ========== ========== ==========
--------------------------------------------------------------------------------
a. The carrying value is net of unamortized issuance costs of borrowings.
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.
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 equity including reserves in 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
60 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
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 risk is controlled through application of
eligibility criteria and volume limits for transactions with individual
counterparties and through the use of mark-to-market collateral arrangements for
swap transactions. IBRD may require collateral in the form of cash or other
approved liquid securities from individual counterparties in order to mitigate
its credit exposure. In addition, IBRD has entered into master derivatives
agreements which contain legally enforceable close-out netting provisions. These
agreements may further reduce the gross credit risk exposure related to the
swaps shown below. Credit risk with financial assets subject to a master
derivatives arrangement is eliminated only to the extent that financial
liabilities to the same counterparty are settled after the assets are realized.
Because the exposure is affected by each transaction subject to the arrangement,
the extent of the reduction in exposure may change substantially within a short
period of time following the balance sheet date.
The contract value/notional amounts and credit risk exposure, as applicable, of
these financial instruments at June 30, 2000 and June 30, 1999 (prior to taking
into account any master derivatives or collateral arrangements that have been
entered into) are given below:
<TABLE>
<CAPTION>
In millions
-----------------------------------------------------------------------------------------------------------------
2000 1999
--------- ---------
<S> <C> <C>
INVESTMENTS - TRADING PORTFOLIO
Options, futures and forwards
o Long position $ 805 $ 3,433
o Short position 1,250 3,653
o Credit exposure due to potential nonperformance by counterparties * 1
Currency swaps
o Credit exposure due to potential nonperformance by counterparties 77 182
Cross-currency interest rate swaps
o Credit exposure due to potential nonperformance by counterparties 306 100
Interest rate swaps
o Notional principal 13,687 12,924
o Credit exposure due to potential nonperformance by counterparties 3 1
BORROWING PORTFOLIO
Currency swaps
o Credit exposure due to potential nonperformance by counterparties 3,863 2,051
Interest rate swaps
o Notional principal 69,625 55,633
o Credit exposure due to potential nonperformance by counterparties 869 731
-----------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than $0.5 million.
NOTE F--RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS
Retained Earnings: Retained Earnings comprises the following elements at June
30, 2000 and June 30, 1999:
In millions
--------------------------------------------------------------------------------
2000 1999
------- -------
Special reserve $ 293 $ 293
General reserve 16,109 15,409
Pension reserve 549 294
Surplus 85 195
Unallocated net income 1,991 1,518
------- -------
Total $19,027 $17,709
======= =======
--------------------------------------------------------------------------------
On July 29, 1999, the Executive Directors allocated $700 million of the net
income earned in the fiscal year ended June 30, 1999 to the General Reserve and
$255 million to the Pension Reserve, representing the difference between actual
funding of the Staff Retirement Plan (SRP) and its accounting income for the
fiscal year 1999. This Pension Reserve would be reduced if, in any future fiscal
year, pension accounting expenses were to exceed the actual funding of the SRP.
On September 30, 1999, the Board of Governors approved the following transfers
out of unallocated Net Income: an amount equivalent to $273 million in SDRs
(valued at June 30, 1999) to IDA, $200 million to the Heavily Indebted Poor
Countries (HIPC) Debt Initiative Trust Fund, $60 million to the Trust Fund for
Gaza and West Bank, and $30 million for capacity building in Africa. In
addition, the Board of Governors approved the following transfers out of
Surplus: $75 million in SDRs (valued at June 30, 1999) to IDA and $25 million
for
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 61
<PAGE>
emergency rehabilitation assistance for Kosovo. Of the total amount of these
transfers by IBRD to IDA ($348 million in SDRs valued at June 30, 1999) $300
million is to be drawn down in fiscal year 2005; the remaining $48 million was
transferred in October 1999 as a reimbursement of IDA's share of the fiscal year
1999 cost of implementing the Strategic Compact of IBRD and IDA. On March 13,
2000, the Board of Governors approved a $10 million transfer out of Surplus to
the Trust Fund for East Timor.
The aggregate transfers and amounts payable for these Board of
Governors-approved transfers at June 30, 2000 and June 30, 1999 are included in
the following table:
In millions of U.S dollars equivalent
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2000 Amount Payable
Transfers from at June 30
----------------------------------------
Aggregate Transfers Unallocated
Transfers to through June 30, 1999 Net Income Surplus 2000 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Development Association(a) $6,087 $273 $75 $650 $354
Debt Reduction Facility for IDA-only Countries 300 -- -- 81 100
Trust Fund for Gaza and West Bank 320 60 -- 30 53
Heavily Indebted Poor Countries Debt Initiative Trust Fund 850 200 -- 100 100
Capacity building in Africa -- 30 -- -- --
Trust Fund for Kosovo -- -- 25 -- --
Trust Fund for East Timor -- -- 10 -- --
Multilateral Investment Guarantee Agency 150 -- -- -- --
--------- -------
$861 $607
========= =======
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
a. All amounts are approved in an equivalent amount of SDRs.
NOTE G--ADMINISTRATIVE EXPENSES, CONTRIBUTIONS TO SPECIAL PROGRAMS, AND OTHER
INCOME
In fiscal year 1995 the Executive Directors authorized expenditures for costs
associated with planned staff reductions. The cost of this program charged
through fiscal year 1997 was $112 million, of which $45 million was allocated to
IDA. During fiscal year 1998 all remaining staff previously identified for
separation under this program began receiving severance payments. The total cost
under this program was $87 million. The difference of $25 million was taken back
into income as a reduction of administrative expenses, for fiscal year 1998, of
which $10 million had been allocated to IDA as a reduction of the management fee
charged to IDA. At June 30, 2000, $86 million ($86 million--June 30, 1999, $82
million--June 30, 1998) had been charged against the accrual of $87 million.
This accrual included costs associated with job search assistance, training,
outplacement consulting, pension plan contributions, medical insurance
contributions and related tax allowances.
In March 1997 the Executive Directors approved a multiyear program of
institutional renewal to improve IBRD's and IDA's business processes, products
and services, strengthen their human resources through more skilled and better
trained staff, and achieve a higher level of development effectiveness.
Implementation of this program resulted in costs associated with staff
reductions during the fiscal years 1997 through 2000. Through June 30, 2000, 745
staff had been identified for separation at a cumulative cost of $114 million.
Included in the total charge of $114 million are costs associated with
outplacement consulting, job search assistance, training, medical insurance plan
contributions and related tax allowances. Of the total cumulative charge of $114
million, $45 million has been charged to IDA. Of the total fiscal year charge of
$36 million, $15 million has been charged to IDA for the fiscal year ended June
30, 2000, consistent with normal cost apportionment procedures applied in the
calculation of the management fee.
Administrative Expenses for the fiscal year ended June 30, 2000 are net of the
management fee charged to IDA of $549 million ($518 million--June 30, 1999, $474
million--June 30, 1998).
Contributions to special programs represent grants for agricultural research,
and other developmental activities.
IBRD recovers certain of its administrative expenses by billing third parties
for services rendered. Prior to fiscal year 2000, these amounts were included as
a reduction to Administrative Expenses. However, in fiscal year 2000, it was
decided that these amounts should be included in Other Income. The prior years'
figures have been restated to reflect this change. For the fiscal years ending
June 30, 2000, June 30, 1999,
62 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
and June 30, 1998, the amount of fee revenue associated with administrative
services is as follows:
In millions
--------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
Service fee revenue $118 $116 $104
Included in these amounts are
the following:
Fees charged to IFC 16 17 14
Fees charged to MIGA 1 1 1
--------------------------------------------------------------------------------
During fiscal year 2000 IBRD began offering investment management services to an
institution outside the World Bank Group. Under this arrangement, IBRD is
responsible for managing investment account assets on behalf of this
institution, and in return receives a quarterly fee based on the average value
of the portfolio. This fee income is included in service fee revenues noted
previously. At June 30, 2000, the assets managed under this agreement had a
value of $5,158 million. These funds are not included in the assets of IBRD.
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 held in trust and are not included in the assets of
IBRD. The trust fund assets by executing agent at June 30, 2000 and June 30,
1999 are summarized below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
2000 1999
------------------------------------------- ------------------------------------------
Number of
Total fiduciary Number of trust Total fiduciary trust fund
assets (In millions) fund accounts assets (In millions) accounts
---------------------- ----------------- ---------------------- ----------------
<S> <C> <C> <C> <C>
IBRD executed $ 447 1,184 $ 605 1,503
Recipient executed 2,088 2,093 1,635 1,287
---------------------- ----------------- ---------------------- ----------------
Total $2,535 3,277 $2,240 2,790
====================== ================= ====================== ================
------------------------------------------------------------------------------------------------------------------
</TABLE>
The responsibilities of IBRD under these arrangements vary and range from
services normally provided under its own lending projects to full project
implementation including procurement of goods and services. During the fiscal
year ended June 30, 2000, IBRD received $17 million ($19 million--June 30, 1999
and $14 million--June 30, 1998) as fees for administering trust funds. These
fees have been recorded as Other Income.
NOTE I--PENSION AND OTHER POSTRETIREMENT BENEFITS
IBRD has a defined benefit Staff Retirement Plan (SRP) that covers substantially
all of its staff. The SRP also covers substantially all the staff of IFC and
MIGA. In addition, IBRD provides other postretirement benefits for eligible
active and retired staff through a Retired Staff Benefits Plan (RSBP) and a
Post-Employment Benefits Plan (PEBP).
During the fiscal year ended June 30, 1998, IBRD reviewed the status of the RSBP
and PEBP accounts and determined that the assets and liabilities did not qualify
for off-balance sheet accounting. At June 30, 1998, the assets and liabilities
were recorded on IBRD's balance sheet, resulting in net income to IBRD of $113
million, of which $56 million related to the cumulative effect of prior periods
on retained earnings at June 30, 1997, and has been included in Effect of
Accounting Change on the income statement.
During the first quarter of fiscal year 1999, the RSBP was modified so that some
of the assets designated for other postretirement benefits met the requirements
for plan assets prescribed under SFAS 106 "Employer's Accounting for
Postretirement Benefits Other than Pensions". Accordingly, the RSBP assets and
liabilities were removed from the balance sheet. As a result, the assets and
liabilities designated on the balance sheet for other postretirement benefits
were reduced by $806 million and $620 million, respectively. The $650 million of
assets that remained on the balance sheet were incorporated into Trading
investments. At June 30, 2000, liabilities of $119 million ($103 million--June
30, 1999) for the PEBP shown on the balance sheet represent pension benefits
administered outside the SRP.
The difference between the RSBP assets and liabilities represents a prepaid
postretirement benefits cost. The portion of this asset that is attributable to
IBRD has been included in Other Assets on the balance sheet.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 63
<PAGE>
The following table summarizes the benefit costs associated with the SRP, RSBP,
and PEBP for IBRD and IDA for the fiscal years ended June 30, 2000, June 30,
1999, and June 30, 1998:
In millions
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
SRP RSBP PEBP
------------------------ ------------------------- ----------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
------------------------ ------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Benefit Cost
Service cost $ 230 $ 186 $ 184 $ 24 $ 25 $ 24 $ 9 $ 5 $ --
Interest cost 391 324 353 42 36 37 9 7 6
Expected return on plan assets (773) (738) (669) (67) (65) -- -- -- --
Amortization of prior
service cost 7 7 7 -- -- (2) -- -- --
Amortization of unrecognized
net (gain) loss (121) (175) (161) -- -- -- -- 3 12
Amortization of Transition
Asset (11) (11) (11) -- -- -- -- -- --
------------------------ ------------------------- ----------------------
Net periodic pension
(income) cost $(277) $(407) $(297) $ (1) $ (4) $ 59 $ 18 $ 15 $ 18
======================== ========================= ======================
----------------------------------------------------------------------------------------------------------------
</TABLE>
The portion of the SRP income related to IBRD that has been included in income
for the fiscal year ended June 30, 2000 is $166 million ($255 million--June 30,
1999; $182 million--June 30, 1998). The balance has been included as a payable
to IDA. The portion of the cost for the RSBP and PEBP related to IBRD that has
been included in income for the fiscal year ended June 30, 2000 is $10 million
($10 million--June 30, 1999; $50 million--June 30, 1998). The balance has been
included as a receivable from IDA.
64 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
The following table summarizes the benefit obligations, plan assets, funded
status and rate assumptions associated with the SRP, RSBP, and PEBP for the
World Bank Group for the fiscal years ended June 30, 2000, June 30, 1999, and
June 30, 1998.
In millions
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
SRP RSBP PEBP
---------------------------- ---------------------------- ---------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Benefit Obligation
Beginning of year $ 6,483 $ 5,890 $ 5,516 $ 662 $ 627 $ 739 $ 142 $ 90 $ 75
Service cost 271 217 213 27 28 28 10 6 --
Interest cost 461 378 406 47 40 55 10 8 5
Employee contributions 64 61 58 5 5 5 -- -- --
Amendments -- -- -- -- -- 18 -- -- --
Benefits paid (244) (231) (206) (17) (18) (17) (4) (5) (5)
Actuarial (gain) loss (84) 168 (97) 7 (20) (201) (69) 43 15
---------------------------- ---------------------------- ---------------------------
End of year 6,951 6,483 5,890 731 662 627 89 142 90
---------------------------- ---------------------------- ---------------------------
Fair value of plan assets
Beginning of year 10,226 9,608 8,613 846 -- -- -- -- --
Assets transferred to the Plan -- -- -- -- 806 -- -- -- --
Employee contributions 64 61 58 5 5 -- -- -- --
Actual return on assets 1,516 788 1,143 141 53 -- -- -- --
Employer contributions -- -- -- -- -- -- -- -- --
Benefits paid (244) (231) (206) (17) (18) -- -- -- --
---------------------------- ---------------------------- ---------------------------
End of year 11,562 10,226 9,608 975 846 -- -- -- --
---------------------------- ---------------------------- ---------------------------
Funded status
Plan assets in excess of
projected benefit obligation 4,611 3,743 3,718 244 184 (627) (89) (142) (90)
Unrecognized net (gain) loss
from past experience different
from that assumed and
from changes in assumptions (3,258) (2,713) (3,158) (53) 6 -- (30) 39 --
Unrecognized prior service
cost 41 50 58 -- -- -- -- -- --
Remaining unrecognized net
transition asset (39) (52) (65) -- -- -- -- -- --
---------------------------- ---------------------------- ---------------------------
Prepaid (accrued) pension
cost $ 1,355 $ 1,028 $ 553 $ 191 $ 190 $ (627) $ (119) $ (103) $ (90)
============================ ============================ ===========================
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Of the $1,355 million prepaid SRP cost at June 30, 2000 ($1,028 million --June
30, 1999), $712 million was attributable to IBRD ($546 million--June 30, 1999)
and is included in Miscellaneous Assets on the balance sheet. The remainder has
been attributed to IDA, IFC and MIGA.
Of the $191 million prepaid RSBP cost at June 30, 2000 ($190 million--June 30,
1999), $106 million was attributable to IBRD ($105 million--June 30, 1999) and
is included in Miscellaneous Assets on the balance sheet. The remainder has been
attributed to IDA, IFC and MIGA.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 65
<PAGE>
Assumptions
The actuarial assumptions used are based on financial market interest rates,
past experience, and management's best estimate of future benefit changes and
economic conditions. Changes in these assumptions will impact future benefit
costs and obligations. The weighted-average assumptions used in determining
expense and benefit obligations for the fiscal years ended June 30, 2000, June
30, 1999, and June 30, 1998 are as follows:
In percent
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
SRP RSBP PEBP
----------------------------- ----------------------------- ----------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
----------------------------- ----------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Discount rate 7.75 7.25 6.50 7.75 7.25 6.50 7.75 7.25 6.50
Expected return on plan assets 9.00 9.00 9.00 9.00 9.00
Rate of compensation increase(a) 5.75 - 5.25 - 4.50 -
12.25 11.75 11.00
Health care growth rates
- at end of fiscal year 7.25 6.25 5.00
- to year 2011 and thereafter 5.75 5.25 4.50
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
a. The effect of projected compensation levels was calculated based on a
scale that provides for a decreasing rate of salary increase depending on
age, beginning with 12.25% (11.75%--June 30, 1999; 11.00%--June 30, 1998)
at age 20 and decreasing to 5.75% (5.25%--June 30, 1999; 4.50%--June 30,
1998) at age 64.
The medical cost trend rate can significantly affect the reported postretirement
benefit income or costs and benefit obligations. The following table shows the
effects of a one-percentage-point change in the assumed healthcare cost trend
rate:
In millions
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
One percentage point increase One percentage point decrease
--------------------------------------------------------------------------
<S> <C> <C>
Effect on total service and interest cost $ 17 $ (13)
Effect on postretirement benefit obligation 141 (112)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
During the fiscal year ended June 30, 1998, health care cost trend rates were
reduced after completing a five years' experience study, reducing the accrued
liability at June 30, 1998, from $808 million to $619 million. This change in
the health care cost trend rate resulted in income of $104 million for IBRD,
which has been included in Effect of Accounting Change on the income statement.
The balance was attributable to IDA, IFC, and MIGA.
NOTE J--SEGMENT REPORTING
Based on an evaluation of IBRD's operations, management has determined that IBRD
has only one reportable segment since IBRD does not manage its operations by
allocating resources based on a determination of the contribution to net income
from individual borrowers. In addition, given the nature of IBRD, the risk and
return profiles are sufficiently similar among borrowers that IBRD does not
differentiate between the nature of the products or services provided, the
preparation process, or the method for providing the services among individual
countries.
For fiscal year 2000, loans to two countries individually generated in excess of
10 percent of loan income. Loan income from these two countries was $916 million
and $852 million respectively.
66 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
Note K--Comprehensive Income
Comprehensive income consists of net income and other gains and losses affecting
equity that, under generally accepted accounting principles, are excluded from
net income. For IBRD, comprehensive income comprises currency translation
adjustments and net income. These items are presented in the Statement of
Comprehensive Income. The following table presents the changes in Accumulated
Other Comprehensive Income balances for the fiscal years ended June 30, 2000,
June 30, 1999, and June 30, 1998:
In millions
--------------------------------------------------------------------------------
Accumulated Other Comprehensive Income(a)
-----------------------------------------
2000 1999 1998
------- ------- -------
Balance, beginning of the fiscal year $ (637) $ (960) $ 85
Changes from period activity (4) 323 (1,045)
------- ------- -------
Balance, end of the fiscal year $ (641) $ (637) $ (960)
======= ======= =======
--------------------------------------------------------------------------------
a. The total accumulated other comprehensive income represents the cumulative
translation adjustment.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2000 67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[Letterhead of Deloitte Touche Tohmatsu (International Firm)]
President and Board of Governors
International Bank for Reconstruction and Development
We have audited the accompanying balance sheets of the International Bank for
Reconstruction and Development as of June 30, 2000 and 1999, including the
summary statement of loans and the statement of subscriptions to capital stock
and voting power as of June 30, 2000, and the related statements of income,
comprehensive income, changes in retained earnings, and cash flows for each of
the three fiscal years in the period ended June 30, 2000. These financial
statements are the responsibility of the International Bank for Reconstruction
and Development's management. Our responsibility is to express an opinion of
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and International Standards on Auditing. Those
standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the International Bank for Construction and
Development as of June 30, 2000 and 1999, and the results of its operations and
its cash flows for each of the three fiscal years in the period ended June 30,
2000, in conformity with accounting principles generally accepted in the United
States of America and International Accounting Standards.
/s/ Deloitte Touche Tohmatsu (International Firm)
July 31, 2000
68 IBRD FINANCIAL STATEMENTS: JUNE 30, 2000
<PAGE>
[WORLD BANK LOGO]
TREREP_ACC_008
International Bank for Reconstruction and Development
Treasury Asset Liablity Risk System (TALRS)
SEC Report - Changes in Borrowings
Borrowings (MLT) April 01, 2000 thru June 30, 2000
Page 1 of 5
<TABLE>
<CAPTION>
DESK: IBRD
Borrowing Type Description Trade ID Currency External ID Currency Amount US$ Equivalent Settlement Maturity
-------------- ----------- -------- -------- ----------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
New Borrowings
MTBOC
Chilean Peso
BOND/SELL CLP/IBRD/0605CLPSTR 0000004546 CLP 55,000,000,000 104,038,585 14-Jun-2000 14-Jun-2005
Total By Currency 104,038,585
Euro Currency
BOND/SELL EUR/IBRD/0905EUR04.25 0000004519 EUR 50,000,000 45,545,000 15-May-2000 08-Sep-2005
Total By Currency 45,545,000
Pound Sterling
BOND/SELL GBP/IBRD/0621GBP05.40 0000004509 GBP 50,000,000 76,412,500 10-May-2000 07-Jun-2021
BOND/SELL GBP/IBRD/1228GBP04.87 0000004516 GBP 50,000,000 75,055,000 18-May-2000 07-Dec-2028
Total By Currency 151,467,500
Hong Kong Dollar
BOND/SELL HKD/IBRD/0603HKD07.90 0000004540 HKD 2,000,000,000 256,657,042 26-Jun-2000 26-Jun-2003
Total By Currency 256,657,042
Japanese Yen
BOND/SELL JPY/IBRD/0410JPYSTR01 0000004407 JPY 1,000,000,000 9,486,316 06-Apr-2000 06-Apr-2010
BOND/SELL JPY/IBRD/0320JPYSTR07 0000004425 JPY 1,400,000,000 13,292,191 07-Apr-2000 26-Mar-2020
BOND/SELL JPY/IBRD/0410JPYSTR02 0000004416 JPY 1,000,000,000 9,407,780 12-Apr-2000 12-Apr-2010
BOND/SELL JPY/IBRD/0320JPYSTR08 0000004492 JPY 2,700,000,000 25,570,603 27-Apr-2000 30-Mar-2020
BOND/SELL JPY/IBRD/0520JPYSTR 0000004494 JPY 1,400,000,000 12,800,000 11-May-2000 11-May-2020
BOND/SELL JPY/IBRD/0520JPYSTR01 0000004506 JPY 0520JPYSTR01 1,300,000,000 11,912,944 18-May-2000 18-May-2020
BOND/SELL JPY/IBRD/0710JPYSTR 0000004500 JPY 1,000,000,000 9,149,549 22-May-2000 06-Jul-2010
BOND/SELL JPY/IBRD/0620JPYSTR01 0000004528 JPY 20,000,000,000 187,978,758 01-Jun-2000 31-May-2020
BOND/SELL JPY/IBRD/0620JPYSTR 0000004524 JPY 4,000,000,000 36,818,851 05-Jun-2000 05-Jun-2020
BOND/SELL JPY/IBRD/0320JPYSTR09 0000004543 JPY 1,800,000,000 16,891,099 15-Jun-2000 26-Mar-2020
BOND/SELL JPY/IBRD/0610JPYSTR 0000004542 JPY 1,000,000,000 9,460,290 21-Jun-2000 21-Jun-2010
BOND/SELL JPY/IBRD/0620JPYSTR02 0000004573 JPY 2,000,000,000 18,947,468 26-Jun-2000 26-Jun-2020
BOND/SELL JPY/IBRD/0620JPYSTR03 0000004577 JPY 2,100,000,000 19,894,842 26-Jun-2000 26-Jun-2020
Total By Currency 381,610,693
</TABLE>
<PAGE>
[WORLD BANK LOGO]
TREREP_ACC_008
International Bank for Reconstruction and Development
Treasury Asset Liablity Risk System (TALRS)
SEC Report - Changes in Borrowings
Borrowings (MLT) April 01, 2000 thru June 30, 2000
Page 2 of 5
<TABLE>
<CAPTION>
DESK: IBRD
Borrowing Type Description Trade ID Currency External ID Currency Amount US$ Equivalent Settlement Maturity
-------------- ----------- -------- -------- ----------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
United States Dollar
BOND/SELL USD/IBRD/0701USD06.95 0000004502 USD 110,000,000 110,000,000 05-May-2000 05-Jul-2001
BOND/SELL USD/IBRD/0510USDSTR 0000004496 USD 20,000,000 20,000,000 10-May-2000 10-May-2010
BOND/SELL USD/IBRD/0503USDSTR 0000004518 USD 100,000,000 100,000,000 15-May-2000 15-May-2003
BOND/SELL USD/IBRD/0515USDSTR 0000004504 USD 25,000,000 25,000,000 22-May-2000 22-May-2015
BOND/SELL USD/IBRD/0502USDSTR 0000004526 USD USD0840GDI01 100,000,000 100,000,000 22-May-2000 22-May-2002
BOND/SELL USD/IBRD/0603USD07.26 0000004538 USD 10,000,000 10,000,000 05-Jun-2000 05-Jun-2003
BOND/SELL USD/IBRD/0605USDSTR 0000004536 USD 0605USDSTR 100,000,000 100,000,000 08-Jun-2000 08-Jun-2005
BOND/SELL USD/IBRD/0109USD05.25 0000004557 USD 200,000,000 200,000,000 15-Jun-2000 12-Jan-2009
BOND/SELL USD/IBRD/0610USDSTR 0000004559 USD 250,000,000 250,000,000 21-Jun-2000 21-Jun-2010
BOND/SELL USD/IBRD/0610USD07.12 0000004569 USD 1,000,000,000 1,000,000,000 21-Jun-2000 21-Jun-2010
Total By Currency 1,915,000,000
South African Rand
BOND/SELL ZAR/IBRD/0610ZAR13.38 0000004534 ZAR 100,000,000 14,416,492 26-Jun-2000 28-Jun-2010
Total By Currency 14,416,492
Total 2,868,735,312
MTBOZ
Polish Zloty
BOND/SELL PLN/IBRD/0328PLNSTR 0000004508 PLN 3,000,000,000 653,879,686 10-May-2000 20-Mar-2028
Total By Currency 653,879,686
United States Dollar
BOND/SELL USD/IBRD/0530USDSTR 0000004530 USD 100,000,000 100,000,000 19-May-2000 01-May-2030
Total By Currency 100,000,000
Total 753,879,686
</TABLE>
<PAGE>
[WORLD BANK LOGO]
TREREP_ACC_008
International Bank for Reconstruction and Development
Treasury Asset Liablity Risk System (TALRS)
SEC Report - Changes in Borrowings
Borrowings (MLT) April 01, 2000 thru June 30, 2000
Page 3 of 5
<TABLE>
<CAPTION>
DESK: IBRD
Borrowing Type Description Trade ID Currency External ID Currency Amount US$ Equivalent Settlement Maturity
-------------- ----------- -------- -------- ----------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Maturing Borrowings
MTBOC
AUSTRIAN SCHILLING
BOND/SELL ATS/IBRD/0600ATS08.88 0000000036 ATS ATS0012MLT01 1,000,000,000 68,755,768 08-Jun-1990 08-Jun-2000
Total By Currency 68,755,768
Swiss Franc
BOND/SELL CHF/IBRD/0500CHF07.50 0000000072 CHF CHF0222MLT01 100,000,000 57,252,455 23-May-1990 23-May-2000
Total By Currency 57,252,455
Deutsche Mark
BOND/SELL DEM/IBRD/0400DEM08.751 0000000106 DEM DEM0264MLT01 500,000,000 245,062,199 19-Apr-1990 19-Apr-2000
BOND/SELL DEM/IBRD/0400DEM08.752 0000000107 DEM DEM0265MLT02 750,000,000 367,593,298 10-May-1990 19-Apr-2000
BOND/SELL DEM/IBRD/0600DEM08.88 0000000108 DEM DEM0266MLT01 250,000,000 118,971,230 01-Jun-1990 02-Jun-2000
BOND/SELL DEM/IBRD/0600DEM09.00 0000000109 DEM DEM0267MLT01 92,385,000 44,394,473 29-Jun-1990 29-Jun-2000
BOND/SELL DEM/IBRD/0500DEMSTR 0000000098 DEM DEM0032GMT01 100,000,000 45,988,148 09-May-1997 09-May-2000
BOND/SELL DEM/IBRD/0600DEM09.00 0000000110 DEM DEM0267MLT02 61,225,000 29,420,919 29-Jun-1994 29-Jun-2000
BOND/SELL DEM/IBRD/0600DEM09.00 0000000111 DEM DEM0267MLT03 45,640,000 21,931,739 29-Jun-1995 29-Jun-2000
Total By Currency 873,362,006
Spanish peseta
BOND/SELL ESP/IBRD/0500ESP05.38 0000000151 ESP ESP0018MLT01 15,000,000,000 81,087,051 09-May-1997 09-May-2000
Total By Currency 81,087,051
Pound Sterling
BOND/SELL GBP/IBRD/0400GBPSTR 0000001099 GBP JPY0577GMT01 76,238,700 120,552,444 24-Apr-1997 25-Apr-2000
Total By Currency 120,552,444
Hong Kong Dollar
BOND/SELL HKD/IBRD/0600HKD09.75 0000000211 HKD HKD0700GDI01 1,000,000,000 128,287,364 30-Jun-1998 30-Jun-2000
BOND/SELL HKD/IBRD/0600HKD10.20 0000000214 HKD HKD0709GDI01 1,500,000,000 192,431,046 30-Jun-1998 30-Jun-2000
BOND/SELL HKD/IBRD/0600HKD10.20 0000000215 HKD HKD0709GDI02 1,000,000,000 128,287,364 30-Jun-1998 30-Jun-2000
Total By Currency 449,005,773
Japanese Yen
BOND/SELL JPY/IBRD/1200JPY02.50 0000000315 JPY JPY0124MLT01 3,600,000,000 34,063,491 01-Apr-1987 22-Jun-2000
BOND/SELL JPY/IBRD/0400JPY02.30 0000000322 JPY JPY0132MLT01 3,000,000,000 28,359,408 30-Dec-1987 17-Apr-2000
BOND/SELL JPY/IBRD/0600JPY04.50 0000000353 JPY JPY0210MLT01 225,000,000,000 2,119,941,584 12-Jul-1993 20-Jun-2000
BOND/SELL JPY/IBRD/0600JPYSTR01 0000003766 JPY 12,500,000,000 115,111,889 27-May-1999 06-Jun-2000
Total By Currency 2,297,476,371
</TABLE>
<PAGE>
[WORLD BANK LOGO]
TREREP_ACC_008
International Bank for Reconstruction and Development
Treasury Asset Liablity Risk System (TALRS)
SEC Report - Changes in Borrowings
Borrowings (MLT) April 01, 2000 thru June 30, 2000
Page 4 of 5
<TABLE>
<CAPTION>
DESK: IBRD
Borrowing Type Description Trade ID Currency External ID Currency Amount US$ Equivalent Settlement Maturity
-------------- ----------- -------- -------- ----------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Netherlands Guilder
BOND/SELL NLG/IBRD/0504NLG09.13 0000000372 NLG NLG0054MLT01 6,500,000 2,672,754 02-May-1984 02-May-2000
BOND/SELL NLG/IBRD/0500NLG08.13 0000000377 NLG NLG0071MLT01 10,000,000 4,028,661 24-May-1985 23-May-2000
Total By Currency 6,701,415
New Zealand Dollar
BOND/SELL NZD/IBRD/0400NZD07.50 0000000394 NZD NZD0571GMT01 100,000,000 49,435,000 04-Apr-1997 04-Apr-2000
BOND/SELL NZD/IBRD/0500NZD08.25 0000000395 NZD NZD0584GMT01 100,000,000 47,440,000 15-May-1997 15-May-2000
Total By Currency 96,875,000
United States Dollar
BOND/SELL USD/IBRD/0400USD08.06 0000000628 USD USD0675COL01 5,000,000 5,000,000 16-Sep-1988 03-Apr-2000
BOND/SELL USD/IBRD/0400USD08.04 0000000664 USD USD0869COL01 10,000,000 10,000,000 11-Jan-1989 03-Apr-2000
BOND/SELL USD/IBRD/0600USD09.08 0000000702 USD USD1123COL01 50,000 50,000 01-Jun-1989 01-Jun-2000
BOND/SELL USD/IBRD/0600USD08.65 0000000711 USD USD1157COL01 1,000,000 1,000,000 21-Jun-1989 21-Jun-2000
BOND/SELL USD/IBRD/0400USD09.03 0000000766 USD USD1403COL01 25,000 25,000 05-Apr-1990 05-Apr-2000
BOND/SELL USD/IBRD/0500USD09.50 0000000770 USD USD1411COL01 40,000 40,000 04-May-1990 04-May-2000
BOND/SELL USD/IBRD/0500USD07.38 0000000772 USD USD1421COL01 430,000 430,000 15-May-1990 10-May-2000
BOND/SELL USD/IBRD/0600USD08.85 0000000790 USD USD1445COL01 200,000 200,000 12-Jun-1990 12-Jun-2000
BOND/SELL USD/IBRD/0400USD08.33 0000000820 USD USD1531COL01 125,000 125,000 16-Apr-1991 17-Apr-2000
Total By Currency 16,870,000
South African Rand
BOND/SELL ZAR/IBRD/0600ZAR14.63 0000000875 ZAR ZAR0592GMT01 200,000,000 28,826,752 19-Jun-1997 19-Jun-2000
Total By Currency 28,826,752
Total 4,045,412,378
</TABLE>
<PAGE>
[WORLD BANK LOGO]
TREREP_ACC_008
International Bank for Reconstruction and Development
Treasury Asset Liablity Risk System (TALRS)
SEC Report - Changes in Borrowings
Borrowings (MLT) April 01, 2000 thru June 30, 2000
Page 5 of 5
<TABLE>
<CAPTION>
DESK: IBRD
Borrowing Type Description Trade ID Currency External ID Currency Amount US$ Equivalent Settlement Maturity
-------------- ----------- -------- -------- ----------- --------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Early Retirement
MTBOC
Hong Kong Dollar
BOND/BUY HKD/IBRD/0402HKDSTR 0000004428 HKD 300,000,000 38,522,780 14-Apr-2000 14-Apr-2002
Total By Currency 38,522,780
Total 38,522,780
</TABLE>
