AFRICAN DEVELOPMENT BANK Investor Marketing Presentation March 3rd

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African Development Bank
Financial and Operational Analysis
May 2005
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Highlights 2000 to 2004 Highlights 2000 to 2004
2004 Commission for Africa established and UN Millennium Project launched The tenth replenishment of the African Development Fund (ADF) was the highest ever Launched US 14.2 billion Rural Water Supply and Sanitation Initiative to accelerate access to safe water for Africa Post conflict country facility (PCCF) established Reaffirmation of AAA credit ratings by Fitch, JCR, Moodys and Standard Poors Highest level of operations and income as well as lowest cost of funds ever achieved in the capital markets
2003 African Ministers Council on Water (AMCOW) appoints Bank Group as host of the African Water Facility Successful execution of business continuity plan and smooth relocation to back up facilities Nigeria creates a Technical Co-operation Fund to promote intra-Africa technical cooperation Upgrade by Standard Poor's to 'AAA' The largest bond transaction by the Bank - USD 1 billion global
2002 Monterrey Consensus on Financing for Development Ninth replenishment of the ADF New organization structure and Strategic Plan 2003-2007 to enhance selectivity and responsiveness Initiated the establishment of the African Law Institute Championed a donor coordinated initiative to clear arrears owed by Democratic Republic Congo, the bulk of arrears owed to the Bank Group International Financing Review's (IFR) Agency/Supranational Bond of the Year Award received for first global bond (US 500 million)
2001 New Partnership for Africa's Development (NEPAD) launched by African Heads of State NEPAD appoints the Bank Group as leader on infrastructure, banking and financial standards First Bank Group Annual meeting outside Africa - Valencia, Spain International Accounting Standard (IAS) 39 adopted by the Bank Unlimited Global Debt Issuance Facility set up to enhance flexibility with respect to capital markets activities First Hong Kong dollar and Singapore dollar bond transactions by the Bank
2000 Millennium Development Goals adopted Creation of the African Union Omar Kabbaj re-elected as President of the Bank Group New financial products, including guarantees and risk management products, approved First guarantee transaction executed (a local currency syndicated loan to MTN-Cameroon) JPY 50 billion bond transaction by the Bank
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Highlights 1995 to 1999 Highlights 1995 to 1999
1999 Enhanced Highly Indebted Poor Country Initiative (HIPC) implemented Established Joint Africa Institute with World Bank and IMF Developed Bank Group's Vision Statement through broad consultations with all stakeholders Eight replenishment of ADF One billion Euro-commercial Paper facility established
1998 Fifth General Capital Increase raised authorized capital by 35 to US 34 billion Project AFRICA, a bankwide initiative to streamline business processes using SAP as platform First Rand denominated line of credit to Development Bank of South Africa First Rand denominated bond issue
1997 Uganda becomes the first country to qualify for HIPC New loan products offering clients interest rate and currency choice South African Rand introduced as a borrowing and lending currency First Yen structured private placement bond transaction issued by the Bank
1996 HIPC Initiative approved African Heads of State meet to deliberate on the future of the Bank Group Seventh replenishment of ADF Financial reforms initiated FRF 2 billion bond transaction by the Bank
1995 New Credit Policy adopted Accession of Republic of South Africa to Bank membership Omar Kabbaj elected as President of the Bank Group Strategic renewal and Institutional reforms initiated AAA credit ratings by Fitch, JCR, Moodys, AA by Standard Poors US 400 million subordinated debt issued in Yankee market
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Table of Contents

• Bank Group Profile (1995 2004)
• Bank Group Action Plan for the Future
• ADB Financial Profile
• Appendices
• ADB Financial Statements
• Africa at a Glance

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I. Bank Group Profile (1995 2004)
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The Bank Group embodies an effective partnership
for the development of Africa
Africa
Europe
Austria Belgium Denmark Finland France Germany It
aly
Netherlands Norway Portugal Spain Sweden Switzerla
nd UK

• African Development Bank (ADB)
• Established in 1964
• Subscribed capital - US 33.54 billion
• 53 African and 24 non-African countries
• African Development Fund (ADF)
• Established in 1972
• Subscriptions - US 19.98 billion
• Primarily financed by non-African countries
• Nigeria Trust Fund (NTF)
• Established by Nigeria in 1976
• Total assets of US 572 million

Libya Madagascar Malawi Mali Mauritania Mauritius
Morocco Mozambique Namibia Niger Nigeria Rwanda S.
Tome Principe Senegal Seychelles Sierra
Leone Somalia South Africa Sudan Swaziland Tanzani
a Togo Tunisia Uganda Zambia Zimbabwe
Algeria Angola Benin Botswana Burkina
Faso Burundi Cameroon Cape Verde Central African
Rep. Chad Comoros Congo Cote dIvoire D. R.
Congo Djibouti Egypt Equatorial
Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea
Guinea Bissau Kenya Lesotho Liberia
North South America
Argentina Brazil
Canada USA
Middle East
Kuwait Saudi Arabia
Asia
China Korea
India Japan
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Through its three constituent windows, the Bank
Group addresses the diverse needs of African
countries

• African Development Bank
• Up to 20 years maturity including 5-year grace
  period
• Market-based lending terms
• African Development Fund
• Up to 50 years maturity including 10-year grace
  period
• Service charge of 75 bp and commitment fee of 50
  bp starting 120 days after signature
• Grants represent 44 of ADF-X resources
• Nigeria Trust Fund
• All African countries are eligible to NTF funding
  
• Up to 25 years maturity including 5-year grace
  period
• Interest rate of 2 to 4 and commitment fee of
  75 bp starting 120 days after signature

• Eligible to ADB funding (13
  countries)
• Eligible to ADF funding (38 countries)
• Eligible to ADB and ADF funding (2 countries)

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The Bank Group supports critical sectors in all
regions of Africa
Over 3,000 cumulative approvals amounting to USD
52 billion as of 31 December 2004
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Bank Group financial assistance is maintained at
a level that ensures high quality operations
In SDR million

• 2004 APPROVALS IN US
• Bank Group approvals amounted to US 4.33
  billion
• Heavily Indebted Poor Countries (HIPC) approvals
  amounted to US 1.57 billion including US 905
  million for Democratic Republic of Congo
• ADB approvals excluding HIPC amounted to US 1.26
  billion1
• ADF approvals excluding HIPC amounted to US 1.49
  billion
• NTF approvals amounted to US 14.4
  million

2 787
2 374
2 039
1 766
540
10
Country ownership, greater selectivity and
rigorous project selection have resulted in a
high quality portfolio

• Credit policy directs ADB market-based lending to
  lower risk countries, while ADF concessional
  resources are directed at the low income
  countries
• Heavily Indebted Poor Countries (HIPC) debt
  relief effectively guarantees debt service on
  market-based ADB loans made to low income
  countries prior to the adoption of the credit
  policy in 1995

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Development of competitive private sector across
Africa is a strategic priority for the Bank Group
Weighted average risk rating
Approvals in SDR million
Sector Distribution

• Continue to emphasize financial intermediation,
  focusing on lines of credit with technical
  assistance, syndication, leasing and trade
  finance
• Expand infrastructure intervention through public
  private partnerships, focusing on renewable
  energy such as hydro, wind, water purification in
  rural areas
• Expand franchising, support to women
  entrepreneurs, corporate governance and corporate
  social responsibility
• Co-financing with partners to share risk and
  expertise

• Non-sovereign guaranteed lending accounts for 6
  of the total ADB portfolio
• New private sector strategy leverages the Banks
  experience with sovereign guaranteed operations
• Introduction of private sector country profiles,
  a country by country comprehensive analysis of
  private sector issues to be included in the
  Banks country strategy
• Dedicated portfolio management group to monitor
  projects

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The significant increase in the ADF replenishment
level demonstrates support of the donor community
to Africa

• KEY HIGHLIGHTS OF ADF-X
• Grant resources more than doubled from 21 under
  ADF-IX to 44
• To curtail their debt burden 26 countries will
  receive 100 of assistance in the form of grants
  instead of loans
• Initial allocation of SDR 100 million
  (US 155 million) made to the Banks
  Post-Conflict Country Facility (PCCF), with the
  possibility of further increases, if need be
• Up to 30 of the financial requirements of the
  Rural Water Supply and Sanitation Initiative will
  be provided by ADF
• Allocation to multinational projects increased
  from 10 to15 in the context of regional
  integration and NEPAD

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The Banks largest shareholder, Nigeria, supports
the Bank Group and continent through the Nigeria
Trust Fund

• NTF has approved 72 projects for US 402 million
  in 30 countries since 1976
• Concessionality of loans extended by reducing
  interest rates in 2003 to a minimum of 2
• Participate in the HIPC Trust Fund through 10
  net income allocation
• Nigeria created a US 25 million technical
  cooperation fund in 2004

Sector Distribution
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Cofinancing and partnership are critical elements
of the Bank Groups strategy

• Since inception, 833 projects have benefited from
  cofinancing with US 74 billion mobilised from
  sources other than the Bank Group
• In 2004, 31 projects benefited from cofinancing
  with US 3.1 billion raised from other sources
  and implying a leverage of more than 2.3 times
  the Bank Groups resources
• Memorandum of Understanding with various
  multilateral agencies. 25 technical cooperation
  grants managed by the Bank Group

Sector Distribution
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The Bank Group champions critical initiatives for
the continent
International Comparison Program
HIPC Initiative
Rural Water Supply and Sanitation
Initiative African Water Facility
African peer review mechanism
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The Banks governance activities include the
promotion of transparency, responsibility and
accountability
Credit ratings

• 19 countries already rated by international
  credit rating agencies while some other countries
  are in the process
• United Nations Development Program (UNDP) and the
  United States (US) sponsored initiatives
  facilitate the process

African Peer Review Mechanism

• 24 countries have so far acceded to the African
  Peer Review Mechanism (APRM), a voluntary self
  monitoring governance mechanism
• The Bank Group is an APRM strategic partner in
  economic and corporate governance and country
  assessment

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II. Bank Group Action Plan for the Future
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Most African countries will not achieve the
Millennium Development Goals if development
efforts are not accelerated
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The Bank Group is well positioned to scale up its
activities to meet Africas development challenges
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The Banks comprehensive approach to
re-engineering its operations is reflected in the
shareholder support for its Action Plan
1996 to 1999
2000 to 2004
2005 to 2007

• Three-year phased approach to leverage the Banks
  experience with managing corporate growth
• Over 400 additional staff including 300 for field
  offices by 2007

• US 80 million increase by 2007 in Bank Group
  administrative budget to enhance institutional
  capacity
• Number of field offices to be increased from 9 to
  25 by 2006

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Objectives of the Action Plan, a comprehensive
time-bound program that consolidates the Banks
achievements over the last decade

• Enhancing development effectiveness by
• strengthening diagnostic studies and country
  programming
• managing for results
• establishing the Bank as a leading knowledge
  institution
• pursuing harmonization and alignment
• Strategic positioning through initiatives such as
• New Partnership for Africa Development (NEPAD)
• Rural Water Supply and Sanitation Initiative
  (RWSSI)
• building strategic partnerships
• Building institutional capacity to deliver
  mandate by
• realigning resources to corporate priorities
• increasing staffing for key activities
• reinforcing the control framework
• streamlining business processes.
• Accelerated decentralization program and new
  corporate governance functions
• 16 offices in 2005-2006 for total of 25
• inspection function
• compliance review
• anti-fraud and anti-corruption mechanisms.

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III. ADB Financial Profile
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ADB Summary Financial Information
(in SDR million)3 1995 2001 2002 2003 2004 2004 US million
Approvals including HIPC 454 987 1,068 746 1,520 2,360
Assets 9,553 8,873 8,197 10,034 10,044 15,598
Subscribed Capital4 15,750 21,491 21,510 21,564 21,597 33,542
Paid in Capital net of CEAS5,6 1,445 1,770 1,803 1,866 1,920 2,982
Reserves before IAS 397,8 Adjustment 604 1,195 1,356 1,480 1,572 2,441
Net Income before IAS 398 Adjustment 69 125 189 178 220 341

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The Banks strong risk bearing capacity is
reflected in the growth in its reserves to which
more has been added in the past decade than in
the first three decades
In SDR million
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The Bank continues to allocate increasing amounts
of net income9 to development initiatives to
accelerate development
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• HIPC initiative 23 African countries out of 32
  eligible have received US 4.2 billion in
  debt relief
• PCCF facilitates the reconstruction efforts of
  post-conflict countries including arrears
  clearance. Burundi and Congo benefited in 2004
• Increased contribution to the Middle Income
  Country (MIC) Technical Assistance Trust Fund to
  enhance competitiveness of operations in Middle
  Income Countries

In SDR million
115
57
22
13
12
10
11
14
() Proposed allocation for 2004
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Strong shareholder support underscores the Banks
strong financial and operational condition
In SDR million

• The Fifth General Capital increase in 1998 raised
  authorized capital base by 35 to US 34 billion
• Shareholding of non-regional countries increased
  form one-third to 40
• Revised share transfer rules link subscription to
  economic capacity of member countries and curtail
  subscription arrears.

21166
21178
21249
21294
15746
1998
2,021
3,059
1,373
763
4,999
4,151
3,767
3,508
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The Bank has substantially improved its risk15
bearing capacity
In SDR million
3 942
3 815
3 651
3 459
, its financial position has never been
healthier and its risk-bearing capacity is
sufficient enough to meet expanding
operations Japan Credit Rating Agency, 2004
2 292
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The Banks ratios are well within conservative
interest coverage16 and debt limits
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Bank wide financial controls and risk management
culture lead to effective mitigation of non-core
risks
Loan management practices
Capital adequacy and provisioning policy18

• ADB capital adequacy policy is derived from the
  Basle Capital Accord and links its capital
  requirements to the risk profile of the portfolio
• ADB ensures that adequate provisions are made for
  impaired loans

• Strict sanctions practices including suspension
  of loan disbursements to clients in arrears for
  at least 30 days
• No write-off on public sector loans

Market risk
Operational risks

• Liquidity risk addressed by holding sufficient
  liquid assets to meet future cash requirements
  for at least one year
• Interest rate risk management strategy stabilizes
  the Banks net interest margin
• Statutory prohibition on taking foreign exchange
  risk

• Operational risks are addressed by periodic
  review of internal controls and back-up
  procedures
• Detailed and tested business continuity plan
• COSO control framework under implementation

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The Bank maintains conservative gearing and
leverage ratios
Source Standard Poors Supranationals Report
October 2004
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The Banks portfolio is better diversified than
those of other MDBs
Source Standard Poors Supranationals Report
October 2004
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The Bank uses the derivatives market to provide
the most attractive funding to its clients
Before Swaps
After Swaps
Borrowing portfolio amounted to US 8.8 billion
as of 31 December 2004
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The Banks effective communication strategy is
facilitating investor understanding of its strong
credit story
Spread against USD Libor
ADB US 1 billion Global Bond - 1 August 2008
Source Bloomberg
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The Bank is committed to the development of local
capital markets

• South African Rand (ZAR) Full treasury operation
  and third largest lending currency after US and
  EUR
• Communauté Financière Africaine (CFA) Euro 13
  million equivalent guarantee for a private sector
  project
• Egyptian Pound (EGP) USD 27 million equivalent
  in Equity participation in Egypt
• Actively preparing to launch benchmark issues in
  several local capital markets

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The Bank nurtures a diversified investor base
with presence across capital markets
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The Bank leverages its AAA credit rating to
accelerate economic and social development in
Africa
Membership Support Preferred Creditor
Status Franchise Value Strong Operational and
Financial Condition Prudent Financial Policies
and Management Cooperation With Partners
JCR The ratings reflect the strong support that
the African Development Bank (the Bank) draws
from its members, particularly the industrialized
countries, its solid capital base and sound
financial position resulting from prudent
operations and conservative risk management, and
the preferred creditor status that it enjoys
FITCH Capitalisation is sound at AfDB, ranking
among the highest of the MDBs
MOODYs Indeed, the AfDBs indicators of
risk-adjusted assets are on a par with or compare
favourably to those of other Aaa-rated
multilateral institutions
SP In sum, while Africa remains a challenging
environment in which to operate, the bank's
management in recent years has greatly
strengthened the bank's financial profile. AFDB's
capital and liquidity, as well as its qualitative
features, place it solidly in the 'AAA' rating
category.
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More information is available at www.afdb.org

• Financial and Operational Analysis
• Documentation for Debt Programs
• Rating Agencies Reports
• Financial Products for Borrowers
• Exchange Rates
• Annual Report

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I. ADB Financial Statements
Appendices
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ADB Statement of Income and Expenses
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ADB Balance Sheet Highlights
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II. Africa at a Glance
Appendices
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Steady and broad based economic growth across
Africa
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Sound macroeconomic policies are leading to a
sharp decline in fiscal deficit
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The era of high inflation rates in Africa is over
()
45
Official Development Assistance to Africa is
increasing albeit below what is needed to achieve
the Millennium Development Goals
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Africas key social indicators are below the
average for developing countries
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The Millennium Development Goals
Source ADB Statistics Division, UNESCO database
2004, UN Population Division, World Bank
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Notes and Glossary