AFRICAN DEVELOPMENT BANK Investor Marketing Presentation March 3rd

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African Development Bank
Financial and Operational Analysis 2003
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Highlights of 2003

• Global economic recovery in a low interest rate
  environment
• Africas GDP growth rate estimated at 3.7
  compared to 2.9 in 2002
• Steady progress on resolving some of Africas
  long-standing conflicts
• Smooth relocation of the Bank Group to its
  back-up offices in Tunis
• Bank Group financial assistance increased by
  11.1 over 2002
• Uniform AAA credit ratings, with upgrade by
  Standard Poors
• First ADB US 1billion global benchmark bond
  transaction

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Table of Contents

• Bank Group Activities
• ADB Financial Profile
• ADB Capital Market Activities
• Highlights of 2004
• Appendices
• ADB Financial Statements
• Africa at a Glance

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I. Bank Group Activities
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The Bank Group completes four decades of
dedicated service to the continent
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Leveraging all the resources of the Bank Group to
assist African countries with realizing
Millennium Development Goals

• The Bank Group, Africas premier financial
  institution comprises ADB, ADF and NTF
• ADB provides financial assistance using funds
  raised primarily from capital markets
• ADF provides financial assistance using funds
  raised from the donor community
• NTF provides concessional funding to assist
  development efforts of all African countries

• Can borrow from ADB (13 countries)
• Can borrow from ADF (38 countries)
• Can borrow from both ADB and ADF (2 countries)

7
The Bank Groups grassroots approach ensures an
indelible improvement in the lives of Africans
Private Sector Development
Health and Education
Regional Integration Infrastructure
Agriculture and Rural Development

• will Insert Examples

• will Insert Examples

• will Insert Examples

• will Insert Examples

Palm project in Guinea
Railroad project in Cameroon
Education project in Cote dIvoire
SASOL natural gas pipeline project in
Mozambique/South Africa
Contribute to the economic development and
social progress of its regional members -
individually and jointly - Article 1
8
The Bank Group maintains its franchise value by
supporting all African countries in critical
sectors
Bank Group Cumulative Operations 1967-2003
2,885 approvals amounting to over USD 47 billion
as of 31 December 2003
9
Growth in Bank Group financial assistance is
supported by prudent project selection and
management
In USD million
2,622
In USD million

• Bank Group approvals amounted to US 2.62
  billion in 20031
• ADB approvals at US 1.11 billion in 2003,
  maintain the trend
• ADF approvals totalled US 1.48
  billion in 2003, an increase of 50 over 2002
• NTF approvals amounted to US 33.43 million
  in 2003 compared to US 13.79 million in 2002

2,158
2,211
1, 741
1,645
10
Institutional reforms have resulted in a
continuous improvement in the credit risk profile
of the ADB portfolio
ADB Public Sector Portfolio Risk Profile 2000-2003

• Country eligibility policy directs new ADB
  lending towards lower risk countries while ADF
  concessional resources are directed at low-income
  countries with a higher credit risk
• HIPC debt relief effectively guarantees debt
  service on market-based ADB loans made to low
  income countries prior to the adoption of a
  country eligibility policy
• Rigorous project selection in the context of a
  comprehensive country strategy development process

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Improvement in the risk profile of the private
sector portfolio is due to careful selection and
management of projects
Private Sector Portfolio Approvals and Risk
Profile
Approvals in USD million
Weighted average risk rating
Sector Distribution

• Catalyse private investment and improve operating
  environment
• Co-financing with partners to share risk and
  expertise
• Dedicated portfolio management group to monitor
  projects
• Future activities include syndications,
  franchising, small and medium scale enterprises

12
The Bank Group fulfils its mandate by focusing on
critical initiatives for the continent
NEPAD
Water Initiative
Bank Group
HIPC
Post Conflict Initiative
International Comparison Program
Governance
13
Post Conflict Initiative and HIPC debt relief
will facilitate the reconstruction efforts of
post conflict countries
Post-Conflict Initiative

• Enable post conflict countries rebuild their
  economies
• Enable post conflict countries become eligible
  for HIPC debt relief
• Bank Group expects to raise donor resources to
  complement its contribution to a proposed post
  conflict country facility

HIPC Debt Relief Initiative

• Bank Group HIPC debt relief approvals amounted to
  US 2.2 billion2 as at 31
  December 2003
• As at 31 December 2003, 22 African countries had
  received HIPC debt relief from the Bank Group
• Debt relief covers up to 80 of annual debt
  service owed to the Bank Group

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Bank Group support to NEPAD and governance
enhances the operating environment
NEPAD Activities in 2003
Governance

• Lead advisor on infrastructure and banking
  financial standards
• Bank Group already approved US 372.5 million for
  NEPAD infrastructure projects.
• Bank Group to provide financing totalling US 580
  million for projects under preparation
• Framework for financial standards adopted
• Bank Group established dedicated NEPAD unit in
  December 2003

• Good governance integral to sustainable
  development and will fuel capital flows
• Developed instruments for corporate governance
  assessments under NEPAD
• Key role in preparing the African Union
  Convention on Combating Corruption
• The African Law Institute, an institute
  established by the Bank Group in 2002, issued the
  first model law on investments in 2003. Model Law
  endorsed by four key regional institutions in
  Africa3

15
The Bank Group leverages its experience in the
water sector

• At least 40 of Africans lack access to safe
  water and sanitation despite abundant water
  resources in Africa
• Bank Group launched the Rural Water Supply and
  Sanitation Initiative in 2003 to address the
  needs of the rural population or 70 of Africas
  total population
• Bank Group selected to host US 615 million Water
  Facility, an initiative that has already been
  endorsed by African Ministers of Water Resources

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Bank Group uses co-financing and partnerships as
a strategic tool to broaden the resources and
expertise mobilised for Africa

• In cumulative terms, 802 projects have benefited
  from co-financing with US 67.8 billion
  mobilised from sources other than the Bank Group
• In 2003, 28 projects benefited from co-financing
  with US 3.7 billion raised from other sources
  and implying a leverage of more than three times
  the Bank Groups financings to those projects
• Twenty-three technical cooperation grants managed
  by the Bank Group including the recently
  established US 25 million Nigeria Technical
  Cooperation Fund
• Memorandum of Understanding with various
  multilateral agencies including the UN agencies
  and the World Bank to share skills and expertise

Sector Distribution
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Bank Group leads the International Comparison
Program (ICP) in Africa, an initiative to enhance
economic data quality, collection and management

• Fifty-one African countries already participating
  in ICP
• Bank Group contributing 54 of the total
  estimated cost of US 40.5 million
• Improve economic data quality, integrity,
  usability and accessibility
• Strengthen national statistical generation and
  monitoring capacity
• Outputs include reliable and comprehensive
  national accounts and expenditure data
  on African countries
• Promote investor confidence, private capital
  flows and regional
  integration

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Bank Group activities remain focused on
addressing Africas development needs effectively
Commitment to the Environment

• Bank Group committed to environmental and social
  issues in project evaluation
• Awarded the International Association for Impact
  Assessment (IAIA) Institutional Award for
  exceptional environmental commitment

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II. ADB Financial Profile
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ADB Summary Financial Information
2003
2002
2001
2000
1999
In USD million5
1,108
1,452
1,239
1,099
1,089
Approvals
14,911
11,373
11,144
11,152
11,414
Assets
32,043
29,243
26,985
26,772
22,976
Subscribed Capital6
2,759
2,451
2,223
2,208
2,238
Paid in Capital7 Net of CEAS8
2,200
1,843
1,500
1,451
1,393
Reserves9 Net of CCTA10
265
257
157
152
169
Net Income Before IAS 39 Adjustment11
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Strong membership support facilitates the Banks
ability to provide quality assistance to African
countries
Capital
In USD million
In USD million
1998
2,021
3,059
1,373
763
4,999
4,151
3,767
3,508
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Proposed 2003 Income Allocation to Development
Initiatives
Proposed Allocation12

• Support the donor community's efforts with
  respect to providing resources to African
  countries on concessional terms
• Participate actively in debt relief initiatives
  given the importance of alleviating the debt
  burden of African countries
• Facilitate the reconstruction efforts of
  post-conflict countries
• Assist countries affected by disasters
• Strengthen the risk bearing capacity of the Bank.

ADF-IX Contribution13 US 14.9 million
HIPC Debt Relief14 US 8.9 million
DRC Special Account15 US 79.7 million
Post-Conflict Country Facility16 US 66.9 million
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Reserves have tripled in the last decade,
enhancing the Banks risk bearing capacity
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In USD million
24
Risk Capital bolsters the Banks ability to
operate in a challenging environment
Risk Capital19
Risk Capital / Outstanding Loans
In USD million
25
Prudent portfolio management policies and
practices sustain the Banks capacity to fulfil
its development mandate
Loan Management Practices
Capital Adequacy Framework and Provisioning
Policy

• Strict sanctions practices including suspension
  of loan disbursements to clients in arrears for
  at least 30 days
• Accrued interest due from clients in arrears for
  at least 6 months are not recognised in the
  Banks net income
• No write-off on public sector loans

• ADB capital adequacy policy is derived from the
  Basle Capital Accord and links its capital
  requirements to the risk profile of the portfolio
• Integrated credit risk ratings and provisioning
  framework for all ADB assets
• ADB ensures that accumulated general provisions
  adequately covers the estimated level of expected
  losses or the collectibility risk
• Prudent country exposure ceilings minimize
  concentration risk

Initiatives

• Debt relief mechanisms such as HIPC encourage
  countries to become current on their
  obligations
• Cooperation with development partners including
  cross-default rules with Bretton Woods
  institutions have helped to contain arrears

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The Banks strong financial condition protects
its bondholders
Interest Coverage Ratio20 Benchmark 1.25
Debt to Usable Capital21 Statutory Limit 100
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Conservative gearing and leverage ratios
Leverage and Gearing Ratios
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Source Standard Poors Supranationals Report,
September 2003
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The Banks portfolio is more well diversified
than those of other MDBs
Concentration Risk Ratio
Source Standard Poors Supranationals Report,
September 2003
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The efficiency of the Banks activities compares
favourably with those of other MDBs
Expense Ratio
Source Standard Poors Supranationals Report,
September 2003
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III. ADB Capital Market Activities
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The Banks borrowing strategy enables it to
provide African countries cost-effective resources
Structures
Debt Programs

• Private placements
• Public issues
• Loans

• Unlimited Global Debt Issuance Facility
• Euro 1 billion Commercial Paper program

Capital Markets
Currencies

• Euro
• Domestic
• Global

• Euro
• Hong Kong dollar
• Japanese yen
• Pound sterling

• Singapore dollar
• South African rand
• Swiss franc
• US dollar

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The Bank is able to meet client needs while
remaining responsive to investor requirements
After Swaps
Before Swaps
Borrowing portfolio amounted to US 8.6 billion
as of 31 December 2003
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In 2003, the Bank was able to finance its
activities at competitive levels by targeting
diverse capital markets

• US 3 billion borrowed in 2003 through diverse
  instruments and in various markets
• Global benchmark USD 1 billion issue in July 2003
• CHF 300 million domestic bond issued in March
  2003 after a 13 year absence
• Maiden Uridashi transactions in February and June
  2003
• Structured private placements and other arbitrage
  driven transactions

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Investor understanding of the Banks strong
credit story should continue to facilitate the
improvement of Banks funding levels
ADB US 1 billion Global Bond - 1 August 2008
Source Bloomberg
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IV. Highlights of 2004
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Funding strategy for 2004 - Building on success

• Borrowing program of up to US 1.5 billion in
  2004
• Invest in expanding the Banks global investor
  base
• Responsive and flexible in order to address
  investor needs
• Benchmark bond in the public debt markets
• Strategic issues in domestic markets
• Arbitrage driven transactions
• Bonds denominated in African currencies

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Operational Highlights

• Fuelled by the global economic recovery, African
  economies are forecast to do better in 2004
• Continued implementation of NEPAD, Water Facility
  and other critical initiatives affecting the
  continent
• Post-conflict initiative to assist post-conflict
  countries with their reconstruction efforts
• Discussions on tenth replenishment of ADF
  expected to be concluded by year end
• Increased presence in member countries including
  opening country offices

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A strong financial and operational condition
enables the Bank to support economic and social
development in Africa
FITCH AAA AfDB capitalisation is one of the
highest among the MDBs
JCR - AAA Smooth relocation to temporary site
in Tunis
Membership Support Preferred Creditor
Status Franchise Value Strong Operational and
Financial Condition Prudent Financial Policies
and Management Cooperation with Partners
Moodys - Aaa member countries support has
been demonstrated visibly
SP - AAA The banks franchise value should
remain high and its capital position strong ...
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Lead managers - arrangers - swap counterparties -
dealers - depository and asset managers

• ABN Amro
• American Express
• Bank of New York
• Banque AIG
• Banque de lHabitat
• Banque Belgolaise
• BNP Paribas
• CDC- IXIS

• Société Générale
• Standard Bank
• Sandard Chartered Bank
• Tokyo Mitsubishi International
• Toronto Dominium
• UBS
• UFJ
• West LB

• JP Morgan Chase
• Lehman Brothers
• Merril Lynch
• Mizuho International
• Morgan Stanley
• Nomura International
• Rand Merchant Bank
• Royal Bank of Canada

• Citi Group
• Crédit Agricole
• Daiwa SBCM
• Deutsche Bank
• Doley Securities
• Dresdner Kleinworth Benson
• Goldman Sachs
• HSBC
• ING

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Appendices
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I. ADB Financial Statements
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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
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Africa - 1970 compared to 2003
Indicators 1970 2003
Total population 357 million 849 million
Population growth 2.9 2.2
Real GDP per capita (US)23 659 769
Life expectancy 45.9 years 50.7 years
Literacy rate 71.2 63.1
Source UNESCO, ADB Statistics Division
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Key Social Indicators
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Economic Growth Indicators

• Trends
• At 3.7 in 2003, Africas growth rate continues
  to remain way below the 7 required to attain the
  millennium development goals
• 18 countries achieved growth rates higher than 5
  
• Six countries experienced negative growth rates

• Drivers of Growth
• Governments continue to pursue prudent
  macroeconomic policies
• Oil and primary commodity prices remained high
• Increase in exports
• Resolution of some long-standing conflicts

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Key Trade Indicators

• Trends
• Exports increased in value terms by 17 in 2003
• Substantial improvements in trade and current
  account balance

• Drivers
• High primary commodity prices, including oil
• Weak dollar

()

• Actions required
• Progress in the WTO Doha Development Agenda
• Phasing out of subsidies that distort global
  trade

()
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Foreign Direct Investment

• Trends
• FDI24 is heavily concentrated on natural
  resources industries and in a few countries
• Slower pace of privatization in some of the
  larger countries

• Drivers
• Decline in 2002 occurred at a time of global
  slump in FDI flows
• Perceived risks of policy reversals, especially
  in infrastructure services, also dampened FDI
• Perceived riskiness of the business environment
  in Africa

• Actions required
• Improve operating environment, especially with
  respect to governance
• Enhance guarantee schemes
• Disseminate accurate information on the business
  opportunities in the continent

Source UNCTAD
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ODA remains crucial to augmenting capital flows
In USD billion

• Trends
• In 2002 ODA25 rose substantially to
  US 21.2 billion
• Focus on increasing effectiveness of ODA
• ODA needs to double for progress on MDGs

• Issues
• Growing concern that MDGs will not be met by 2015
  in many African countries
• Budgetary constraints of donor countries
• Diversion of resources to reconstruction in
  Middle-East
• Increased focus on assistance to humanitarian /
  peace-keeping efforts in Africa

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Notes and Glossary