Investor Presentation The African Development Bank Group

May 2014

Table of Contents

1

Overview of the Bank Group

----- 3

2

Financial Profile of the African Development Bank

----- 30

3

Capital Market Activities

----- 43

4

Appendix

----- 57

2

The African Development Bank Group

Africa is a continent of contrast, rich in natural resources yet its people are among the poorest in the world. The image of Africa that gets projected in the world is that of a continent with disease, hunger, corruption and the need for aid beyond foreseeable future. But, there is another story that is less told which acknowledges the challenges faced by the continent but also recognizes the progress made in terms of more children going to school, less war, growing quest for better governance and an expanding middle class. The African Development Bank is part of that story.

1

Overview of the Bank Group 3

Africa’s premier development financial institution The AfDB Group: three constituent institutions, separate legally and financially, with a common goal…

• • • • • •

African Development Bank (“AfDB”)

African Development Fund (“ADF”)

Established in 1964 78 member countries Authorized capital: US$ 103 billion Resources raised from capital markets 0% risk weighting under Basel II Level 1 under Basel III

• Concessional financing, established in 1972 • Financed by 26 countries participants and 4 regional donors • Subscription: US$ 35 billion • Focus on low income countries • Replenished every 3 years

Nigeria Trust Fund (“NTF”) • •

• •

Established in 1976 by Nigeria Targeted at the Bank’s needier countries Maturing in 2018 Total resources: US$ 242 million

Governance and Oversight • Board of Governors: • Highest decision making body, • Composed of Ministers of Finance and Ministers of Cooperation of the Bank’s member countries

• Board of Directors : • 20 Executive Directors elected by the Board of Governors • Oversees the general operations of the Bank

• Decisions by both Boards require two third majority or 70% should any member require so

…focused on combating poverty, and improving living conditions on the continent

4

AfDB, the keystone of the Bank Group PARTNER OF CHOICE

STRONG FINANCIAL STANCE

• Increased operations and leadership of continent-wide initiatives for greater regional integration and sustainable development

• Increased capacity to deliver on our mandate

• Leveraging scarce resources

• Careful balance between maximizing development effectiveness and maintaining our long term financial soundness

• Voice of Africa on development issues

• High level panel on Fragile States

AAA RATING DRIVERS • Strong commitment from shareholders • Preferred creditor status

• Strong liquidity and capital position • Franchise value

• Prudent financial management and policies 5

Africa’s own triple A rated institution

AAA/Stable/A-1+

Aaa/Stable/P-1

The African Development Bank (AFDB) benefits from a solid

AfDB’s robust capitalisation, ample liquidity buffers and sound

liquidity and capital position, along with wide support from its

risk-management framework help to offset the existing risks that

member countries, including 'AAA' rated sovereigns.

the AfDB carries on its balance sheet and creates substantial headroom in risk-bearing capacity to further expand its lending.

19 December 2013

Aaa/Stable

30 September 2013

AAA/Stable/F1+

The ratings mainly reflect the strong support the Bank enjoys

AfDB’s capitalisation is extremely strong, and is one of the key

from African and non-African member countries; its solid

factors supporting its ratings. The equity to asset ratio stood at

financial base; its prudent financial and risk management

25.2% at end-2012. The ratio of usable capital to required capital

policies; and its status as a "preferred creditor“.

ratio, at 16.2x at end-2012, is also higher than for most peers.

10 July 2013

16 August 2013

6

Global partnership for the development of Africa Americas Argentina Brazil Canada U.S.A

Europe 0.1% 0.5% 3.8% 6.5%

Austria Belgium Denmark Finland France Germany Italy Netherlands Norway Portugal Spain Sweden Switzerland U.K.

Africa Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Cent.Afr.Rep. Chad Comoros Congo Cote D'ivoire Dem.Rep.Congo Djibouti Egypt Eq.Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia

4.2% 1.2% 0.2% 1.1% 0.4% 0.2% 1.1% 0.1% 0.1% 0.1% 0.02% 0.5% 3.7% 1.0% 0.03% 5.4% 0.2% 0.04% 1.6% 1.2% 0.2% 2.3% 0.4% 0.04% 1.4% 0.1% 0.2%

Libya Madagascar Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda Sao Tome & P. Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

4.0% 0.7% 0.3% 0.4% 0.1% 0.7% 3.5% 0.6% 0.3% 0.3% 9.2% 0.1% 0.1% 1.1% 0.04% 0.2% 0.04% 4.8% 0.4% 0.1% 0.8% 0.2% 1.4% 0.5% 1.3% 2.0%

0.5% 0.6% 1.2% 0.5% 3.7% 4.1% 2.4% 0.9% 1.2% 0.2% 1.1% 1.5% 1.5% 1.7%

Middle East Kuwait Saudi Arabia Turkey

0.5% 0.2% 0.1%

G-7 Shareholding: 28%

Asia In October 2013, the Republic of Turkey became the 78th member of the AfDB and the 26th participant in ADF

China India Japan Korea

1.1% 0.2% 5.5% 0.5%

Note: Data as of 31 January 2014

7

Overwhelming support for a tripling of the capital Capital Structure of the Bank 70,000

(in USD million)

248

60,000 50,000 40,000 30,000

60,265

200% capital increase with 6% paid-in portion raising the capital to around USD 100 billion

Reinforce the Bank’s franchise value, key prudential ratios and AAA credit rating

27

20,000 10,000

2,712

0

4,978

12,830

Paid-in Capital

AAA Callable Capital

31-Mar-14

20,311 AA+ to AOther Callable Callable Capital Capital

Callable capital is the commitment by each shareholder to make additional capital available to the institution in case of financial distress

Remaining subscription expected

Demonstrated strong shareholders support The Bank’s General Capital Increase (GCI) 66,059 (in USD million)

16,311

76

213

574

1,684

Initial 1963

GCI-I 1974

GCI-II 1976

GCI-III 1981

GCI-IV 1987

8,563 GCI-V 1998

GCI-VI 2010

Additional special capital increases made to admit new members

Capacity to meet increased level of future demand and support the business growth plan

There has never been a call on the capital of the Bank

8

The Bank Group addresses the diverse needs of the continent AfDB Sovereign Operations 15 middle-income countries eligible to receive AfDB funding

Criteria: • GNI per capita • Country’s creditworthiness

Additionality and Development Outcome Assessment-Core indicators • • • •

Job creation Government revenues Financial return Foreign currency earnings

Private Sector Operations Viable enterprises and multinational projects, additionality and development outcome

Blend Countries Countries eligible for AfDB and ADF Funding

• • • •

Direct loans Lines of credits Equity participation Guarantees

ADF Concessional Financing 37 low-income countries eligible to loans and grants

Enclave Finance Self-sustaining, export oriented project, located in an ADF-eligible country

Preserving the long-term financial integrity of the AfDB

9

Financing solutions to Africa’s challenges Infrastructure that unlocks the growth and development potential of Africa remains key

Promoting social & human development by focusing on skills development and science & technology for job creation

Focusing on interventions aligned to Africa’s priorities Water Supply & Sanitation 8.4%

Finance 8.1%

Communic Environme ation nt 1.0% 0.3%

Social 9.4%

Multisector operations which broadly cover public sector management and poverty reducing budget support, bear closely on the success of other interventions

Continuing interest in rural development and actions to combat poverty through increased approvals for agriculture and rural development

Transport 32.2%

Agriculture 12.0% Multisector 12.6%

Providing resources to financial intermediaries

Energy 16.0%

2013 approvals

Delivering vital resources for scaling up access to safe water and sanitation

Africa’s preferred financial partner (in USD million)

12,590

12,000 3,805

10,000

8,476

8,000 6,000

4,000 2,000

6,218

5,348 2,565

8,785

2812

2,243

2,783

3,975

2008

2009* 2010 ADB Approvals **

6,102

6,316

2,905

3,495

3,197

2,821

2012

2013***

5,664

-

2011 ADF Approvals **

* A year of exceptional demand for Bank Group resources due to the global financial crisis ** Including loans, grants, equity investments, emergency operations, HIPC debt relief, loan reallocations and guarantee, Fragile States Facility

10 *** Provisional

Powering the infrastructure that drives growth Infrastructure development as a key enabler of regional integration

Africa’s infrastructure needs remain substantial •

Energy USD 1.37 billion

Africa’s infrastructure financing requirements, mostly for power and energy, in the USD trillions in the longer term

•

About 30 countries affected by chronic power problems

•

Transportation costs increase the price of African goods by 75%

•

Poor infrastructure depresses productivity in fragile states by an

•

Water USD 452 million

estimated 40%.

USD 2.7 billion

The continent invests only 4% of GDP on infrastructure, compared

•

Promoting regional economic integration

with 14% in China

•

Reduction in energy costs and increasing access

•

Reducing transport costs

•

Enhancing water and food security

•

Boosting ICT services and connectivity

Transformational infrastructure connecting African roads, railways, oil and gas pipelines, power networks, and ICT Program for Infrastructure Development in Africa (PIDA) estimated at USD 360 billion by 2040 Africa’s Priority Action Program (2012-2020) Projects •

51 immediately actionable programs, including the 40,000 MW Inga power plant in DRC, promoting regional integration

Innovative financing •

Africa50 Fund will bring additional resources and capacity to the continent

11

Investing in people: one billion opportunities Building skills and raising employability more pertinent than ever 20 to 25% unemployment across Africa vs. 9% worldwide

AfDB’s Human Capital Strategy for Africa to transform teaching, learning, and health services for one billion Africans (2013-2017)

Youth account for about 60% of the unemployed Job-creating growth

Number of university graduates in Sub-Saharan Africa more than tripled (1999 to 2009) but funding increased more slowly hindering educational quality Most of underemployed young are in low productivity household enterprises or the informal economy

25% of the 25-34 with higher education is unemployed; one-fifth is employed in the informal sector

USD 807 million approved in 2012 focusing on skills and entrepreneurship in higher education, science and technology, in close partnership with the productive sectors and using modern technologies Ghana

Kenya Tunisia

Malawi Uganda

Skills development

Development of safety nets to protect against economic and social shocks

Giving voice to all citizens for improved quality of public services and efficiency of public spending Contributing to Africa’s education over 2010-2012 •

Over 4 million students and scholars reached

•

4,501 classrooms and educational support facilities constructed/rehabilitated

•

Over 10 million textbooks and teaching materials supplied

•

Over 56,000 teachers and other staff recruited/trained

•

Over 656,000 students newly enrolled

AfDB supports universities and regional centers of excellence

12

Strengthening accountability and transparency USD 750 million approved in 2012 for 42 operations across 22 countries Quality of governance critical to development

Sustaining Malawi’s reforms to stabilise the economy Restoration of Fiscal Stability and Social Protection budget support programme (USD 40 million)

Program based operations

Institutional support program

Analytical and advisory services

Strengthening public financial management systems

Promotion of sound macroeconomic management

Sound climate for business and investment

Governance of natural resources

•

Macroeconomic management improved: low budget deficits and realistic and stable exchange rates

• •

Tax revenue has risen from 10.5% to 14.7% of GDP Time to start a business halved & time for contract enforcement fallen by 50 days

•

Support to RMCs to improve natural resource governance across value chain, including EITI in 8 countries in 2012

•

Alleviating foreign exchange shortages

•

Promote fiscal and macro-economic stability

•

Protect social spending

Hosted by the AfDB

Complex commercial transaction negotiations

Combating vulture funds

Capacity building

USD 5.23 million approved in 2012 across 11 projects in Burkina Faso, Djibouti, DRC, Ghana, Guinea, Kenya, Tunisia and Zambia

13

Sowing the seeds for productivity and food security Africa is the only continent where per capita food production has declined over the past 30 years

Agriculture employs 65-70% of the African workforce

Women make up more than half of Africa’s farmers and produce up to 90% of the continent’s food

Promoting agricultural production a way to drive inclusive growth and reduce poverty

Construction of access and feeder roads

Strengthening capacity for the delivery of agricultural services

Market infrastructure and storage facilities Support to climate change adaptation measures

Increased productivity & income for agro-pastoralists

Food security

Accounts for roughly a third of the continent’s GDP

USD 587 million approved in 2012 for 18 operations covering 16 countries Rehabilitation of agricultural infrastructure

Drought Resilience and Sustainable Livelihoods Programme in the Horn of Africa Development of agro-industry & market infrastructure

First phase in 2013 to focus on Djibouti, Ethiopia, and Kenya Improved water control & distribution systems

Improved road networks

Enhanced regional cooperation & coordination

Response to the Food Crisis in the Sahel Programme • •

Targeting 800,000 small farmers who provide 90% of the food needs in the region USD 351 million programme to restore food security covering 12 countries

Contributing to Africa’s agriculture sector (2010-2012)

Livelihood interventions

Climate change adaptation

• • • •

Building rural infrastructure

Disaster risk reduction measures

4,937 rural facilities constructed/rehabilitated Over 1.5 million livestock provided/vaccinated Over 2.8 million plants introduced 4,581 community-based projects executed

14

Addressing Africa’s water and sanitation needs USD 452 million approved in 2012 to scale up access to safe water and sanitation, promoting innovative technologies, and supporting knowledge management activities in RMCs

Rural Water Supply and Sanitation Initiative •

Provided water supply to 56 million people and sanitation access to 41 million people since 2003

•

Accelerate access to drinking water supply and sanitation in rural Africa to attain the African Water Vision of 2025 and the MDG targets 6 projects approved in 2012 for a total amount of USD 83 million across the Gambia, Chad, Liberia, CAR, Djibouti and Mauritania

•

African Water Facility •

Initiative of the African Ministers’ Council on Water, administered by the Bank

•

Established to help countries achieve the objectives of the Africa Water Vision of 2025

•

75 operations approved amounting to USD 118 million since 2006

•

6 projects approved in 2012 for a total amount of USD 12 million

The Africa Water Vision for 2025

Equitable and sustainable use and management of water resources Strengthening governance of water resources

Improving water wisdom

Meeting urgent water needs

Strengthening the financial base for the desired water future

USD 4 million grant from the African Water Facility for water provision in the Darfur region

15

Helped the lives of victims of Gender Based Violence (GBV) through USD 31 million grant

• Created an innovative referral and counterreferral system through which the country could begin paying more attention to GBV • Raised awareness of GBV for over 1.5 million community members. • Established baseline data and indicators on gender equality (access to education, employment and health, GBV data, etc.) • Rehabilitated and equipped the gynecological and obstetrical departments of two regional hospital centers, and several health centers

USD 45 million support to increasing agricultural productivity and ensuring markets function

Uganda: Community Agricultural Infrastructure Improvement Programme

Côte d’Ivoire: Emerging from Conflict/Multisector Support Project

US Treasury Awards for Development Impact

• Halved the cost to transport produce to major towns and halved the journey time • Reduced post-harvest losses by approximately 20%, especially for perishables such as cabbage, tomatoes, pineapples, and watermelons • Farm gate price increases of staple products (maize, Milk, bananas) demonstrate the success of the programme

AfDB is the first multilateral development bank to receive recognition for two projects in the same year 16

At the apex of development initiatives on the continent

Infrastructure Project Preparation Facility

NEPAD

Debt Relief HIPC, MDRI Fragile States Facility

Rural Water Supply & Sanitation Initiative

Connect Africa Initiative to bridge gaps in ICT infrastructure

Infrastructure Consortium For Africa

Africa Water Facility

Making Finance Work for Africa

Investment Climate Facility

Extractive Industries Transparency Initiative

Multi Donor Water Partnership Program

African Financing Partnership

Trade Finance Initiative

17

At the heart of Africa’s transformation

Two objectives to support transformation

Inclusive growth Five core operational priorities:

Age

Gender

Geography

Transition to green growth Building resilience

Managing natural resources

• • • • •

Infrastructure development Regional integration Private sector development Governance Skills & technology

Three areas of special emphasis

Fragile States

Agriculture & Food Security

Gender

A continuum & regional approach

Supporting value chains Economic empowerment , legal & property rights

Sustainable infrastructure

18

AfDB Green Bond: Eligible projects Greenfield Renewable Energy Generation (e.g. solar, wind, geothermal, and ocean power)

Biosphere conservation projects (reduce emissions from deforestation and degradation of ecosystems)

Solid Waste Management (e.g. incineration of waste, landfill gas capture and landfill gas combustion)

Vehicle energy efficiency fleet retrofit or urban transport modal change

Demand-side Brownfield and Greenfield Energy Efficiency (e.g. energy efficiency improvements in lighting and equipment; retrofit of transmission lines, substations or distribution systems to reduce technical losses)

Fugitive emissions and carbon capture (e.g. carbon capture and storage, reduction of gas flaring or methane fugitive emissions in the oil and gas industry, coal mine methane capture) Industrial Processes (reduce GHG emissions from industrial processes improvements and cleaner production)

Water Supply and Access (e.g. water saving measures such as introduction of less water intensive crops or preservation of soil moisture and fertility)

Urban Development (e.g. rehabilitation and upgrade of urban water drainage systems in areas vulnerable to frequency and/or severity of flash floods and storm surges brought by climate change)

19

Morocco Africa’s largest Concentrated Solar Power Plant Ouarzazate I Concentrated Solar Power (CSP) Project AfDB financing: USD 240 million

Key expected results: • •

160 MW of CSP capacity (by end 2014) Curb CO2 emissions by 6 million tons

With the 160 MW CSP Plant: • Annual GHG reductions of 0.250 MT CO2e per year • Creation of 800 jobs between 2012 and 2014 and 50 permanent jobs thereafter • Increase in the share of renewable energies in Morocco’s energy supply by 2020 • Trade balance improved

20

South Africa Eskom Sere Wind Farm – tapping into vast wind potential Eskom Western Cape Province Wind Energy Facility AfDB financing: USD 235 million

Key expected results: • •

100 MW of Wind capacity Curb CO2 emissions by 4.8 million tons

• The purpose of the Eskom wind power program is to scale up the wind power program from the current level of 100MW to 800MW over 5 years and to 2,000MW by 2020 • With the 100 MW Wind Plant: • Annual GHG reductions of 0.240 MT CO2e per year • Creation of 1500 jobs during construction • Enhance power supply and energy security • Development of the first utility-scale wind power plant in South Africa 21

Morocco ONE Integrated Wind/Hydro Energy Program ONE Integrated Wind/Hydro Programme AfDB financing: USD 450 million

Key expected results: • • •

750 MW of Wind capacity Curb CO2 emissions by 65 million tons 86,000 new rural household connections

• The purpose of the program is to construct three wind farms of 100-300MW capacity and two hydro facilities to supply base-load power • With the program: • Annual GHG reductions of 3.2 MT CO2e per year • Creation of 4000 jobs during construction and 350 permanent jobs • Achieve the large scale commercialization of wind energy in Morocco • The project will ultimately contribute to a more diversified energy sector and greatly reduced CO2 emissions 22

Zambia Itezhi Tezhi Hydro Generation Project – innovative PPP structure Itezhi Tezhi Hydro Project AfDB financing: USD 35 million

Key expected results: • •

120 MW of Hydro capacity Curb CO2 emissions by 14.4 million tons

• The objective of the project is to design, construction and operation of a 120 MW independent power plant through a concession agreement under a publicprivate partnership (PPP). • With the 120 MW hydro plant: • Annual GHG reductions of 0.360 MT CO2e per year • Creation of 120 permanent jobs • 5% increase in electricity access • The project will reduce poverty through the supply of household, commercial and industrial electricity and create an enabling environment for business 23

Cape Verde Wind power drives public-private collaboration in Cape Verde Cabeólica Wind Power Project AfDB financing: EUR 15 million

Key expected results: • •

25.5 MW of Wind capacity Curb CO2 emissions by 2.1 million tons

• The purpose of this project is to drive up the share of renewable energy in the national energy mix • With the 25.5 MW 4 Wind plants: • Annual GHG reductions of 0.85 MT CO2e per year • Creation of 80 jobs during construction and 10 permanent jobs • Making up the first RE public private partnership in the Cape Verdean infrastructure sector • Help achieve government objective of sourcing 50% of total energy generation from renewable sources by 2020

24

Third Party Assurance An independent research institute, the Center for International Climate and Environmental Research (CICERO) based in Oslo, has provided a second opinion on the Bank’s green bond framework and its approach to climate financing

“A clear impression of an institution that is well aware of the challenges posed by climate change as well as other environmental and social concerns that may be associated with investments projects. In particular we are pleased with the consciousness shown towards the external impacts of projects both across space and time” CICERO, 1st September 2013 25

Green Bond framework: Project evaluation & selection All projects

Joint MDB Mitigation/Adaptation Climate Finance Tracking principles

Bank’s Environmental Strategy permeates design of all projects

AfDB’s detailed Methodology for Tracking Climate Mitigation and Adaptation Finance Overall screening and selection of projects (phase 1)

• Energy, Environment and Climate Change Department with operational departments evaluate and select climate change projects according to the Bank’s climate finance tracking methodology

Phase 1

• Energy, Environment and Climate Change Department with Treasury Department evaluate and select projects for the green bond portfolio according to the Bank’s green bond framework

Phase 2

Application of green bond framework (phase 2)

Green Bond Project Portfolio

26

Green Bond framework: Allocation of proceeds

•

An amount equal to the net proceeds of the bonds will be allocated within the treasury’s liquidity portfolio, to a subportfolio, that will be linked to the AfDB’s lending operations in the fields of climate change adaptation and mitigation (“eligible projects”)

•

So long as the bonds are outstanding, the balance of this subportfolio will be reduced, at the end of each semester, under the Bank’s debt allocation framework, by amounts matching the disbursements made during the semester in respect of eligible projects

27

Green Bond framework: Reporting To enable investors to follow the implementation of AfDB’s Green Bond Program, a dedicated website has been established which includes, among other things: Progress status report on the selection and implementation of the projects which are part of the green bond portfolio (e.g. information on implementation status, disbursement status and other relevant indicators as they are collected as part of the Bank’s project monitoring procedures) Key information about the AfDB’s Green Bond Program and Framework, including project selection criteria Key documents related to AfDB’s Green Bond Program and links to other relevant Bank documents such as the Long-Term Strategy and the Environment Policy

http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/green-bond-program/

28

The African Development Bank

The financial position of the AfDB is very strong. Thanks to its solid capitalization, ample liquidity buffers and prudent riskmanagement framework the institution has the capacity to absorb potential shocks emanating from the turbulent operating environment. The Bank has substantial headroom in risk- bearing capacity to further expand its lending. Continued financial and operational prudence will remain key.

2

Financial Profile of the African Development Bank

29

AfDB Summary Financial Information

2008

2009

2010

2011

2012

2013

19,363

26,940

29,483

31,107

32,605

32,335

Loans

8,987

11,658

12,596

14,210

16,928

17,842

Investments

7,048

11,620

11,448

11,653

9,971

9,372

Borrowings

10,331

16,587

18,450

19,810

20,408

19,939

Equity

7,178

7,433

7,423

7,494

8,207

8,980

Paid-in Capital net of CEAS*

3,365

3,431

3,377

3,601

4,108

4,581

Reserves

3,813

4,002

4,046

3,894

4,100

4,400

469

362

329

253

301

278

33,524

34,203

33,600

57,300

100,230

100,424

(in USD million) Assets

Income before distributions Subscribed Capital * Cumulative Exchange Adjustment on Subscriptions

Note: Data converted from UA (SDR) to USD at period-end exchange rates of each year

30

Safeguarding the sustainability of operations Risk Class AfDB

Very Low Risk

Low Risk

Moderate Risk

High Risk

Very High Risk

Internal Rating

Moody’s Equivalent

Sovereign Risk Charges

1+

A1 and above

1 12+ 2 23+ 3 34+ 4 45+ 5 56+ 6 67 8 9 10

A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca C

Non-Sovereign Risk Charges Senior secured

Unsecured

0.6%

1.7%

2.0%

0.8% 1.5% 2.4% 3.3% 4.9% 10.8% 13.0% 15.5% 18.5% 20.2% 22.1% 49.3% 55.2% 60.4% 65.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

2.3% 4.4% 6.9% 9.4% 15.0% 21.6% 25.6% 29.3% 33.1% 35.0% 38.3% 42.7% 47.8% 52.4% 57.0% 61.6% 65.8% 71.2% 72.0% 100.0% 100.0%

2.7% 5.1% 7.9% 10.9% 17.3% 25.0% 29.6% 33.8% 38.2% 40.4% 44.1% 49.3% 55.2% 60.4% 65.8% 71.1% 76.0% 82.2% 83.1% 100.0% 100.0%

Optimize utilization of risk capital while supporting the Bank's AAA rating

Credit risks related to lending activities are managed through integrated policies, guidelines and procedures, and is based on a systematic assessment of the credit mapped to an internal rating scale

31

Careful management of development-related exposure •

Sovereign risk credit rating derived from an assessment of macroeconomic performance, debt sustainability, socio-

•

political factors, business environment and the Bank’s portfolio performance •

industry outlook, competitive position, management strength

and host country risk rating •

WARR of 2.73 at the end of December 2013

Non-sovereign risk rating derived on the basis of several predetermined critical factors including overall financial strength,

WARR of 3.58 at the end of December 2013

Sovereign Portfolio risk profile

Non-Sovereign Portfolio risk profile

100%

100%

80%

80%

60%

60%

40%

40%

20%

20%

0%

0% 2008

very low risk

2009 low risk

2010

2011

moderate risk

2012 high risk

2013 very high risk

2008 very low risk

2009 low risk

2010

2011

moderate risk

2012

high risk

2013

very high risk

Note: In 2011, the Bank changed from a 10 point rating scale to a 22 point scale that allowed more granularity

32

Expanded capacity to assume core business risks Growing capital base …

…allowing for greater support to Africa

(in USD million)

(in USD million)

7,179 3,365

7,433 3,431

7,494

7,424 3,377

3,600

8,207

4,100

17,418

8,981 12,983

12,447

2008

4,002

2009

4,047

2010

3,893

2011

Paid-in capital

4,108

8,896 963

4,581

9,928

13,225

14,077

2.7

2.7

3.0

2011

2012

2013

3,219

11,728

10,213

Target rating of 3 to 4 * 2.8

2012

4,654

2,769

2,519 3,814

4,193

14,947 4,400

18,731

2013

7,933

Reserves

2008

2.6

2.3

2009

2010

Sovereign Portfolio

Non-Sovereign Portfolio

Weighted Average Risk Rating

* Equivalent to Moody’s Ba1 to B2

Capital usage focused on development activities 8,818

3,159

(in USD million) 949 788

Risk Capital

Sovereign Loan Risk

Non-Sovereign Loan Risk

Equity Risk

420

Treasury Risk

80

276

Operational Risk

Benfit Plan Risk

- 239

Diversification

3,383

Available Risk Capital

33

Safeguarding stakeholders interests Strong capitalization

Conservative leverage

Prudential Limit (100%)

Prudential Limit (100%)

86%

41%

2008

60%

2009

58%

60%

58%

55%

62%

2008 2010

84%

60%

2011

2012

2013

Risk Capital Utilization Rate Risk Capital Utilization Rate = Σ ((Exposure) x (Risk capital charge)) / Total risk capital

2009

2010

2011

50%

2012

48%

2013

Debt to Usable Capital Usable Capital = Σ (Paid-in capital, Reserves, Callable capital of non-borrowing countries rated A- and above)

Annual paid-in capital from GCI-6 will range from USD 467 million to USD 72 million from 2014 to 2023

34

Financial policies that mitigate non-core risks Counterparty Credit Risk •

Currency Risk

Mitigate counterparty credit risk through minimum credit ratings and exposure limits and collateral exchange agreements for derivatives

•

Match the currency composition of assets with that of liabilities and hedge the net asset position to minimize currency translation risk

•

Prohibited from taking direct FX exposure

Interest Rate Risk

Liquidity Risk

•

Protect the Bank’s net interest margin from fluctuations in interest rates

•

Matching the characteristics of assets with liabilities

•

Minimizing liquidity risk by holding one year of liquid resources at all times

Operational Risk •

COSO internal framework to regularly evaluate the effectiveness and efficiencies of the internal controls of significant business operations 35

Prudence and performance in the midst of financial turmoil Liquid assets to meet operational needs of the Bank 60%

Prudent investment strategy

51%

40%

•

Our investment philosophy: capital preservation, liquidity and reasonable returns

•

Investment strategy adapted to market conditions to strengthen credit quality and improve liquidity profile of investment portfolio while limiting volatility of returns

•

Strong performance in 2013

30%

20% 8%

6%

5%

0%

As of 31 December 2013

Fair value portfolio: USD 4.6 billion

Longer term assets to stabilize Net Interest Margin 100%

Treasury investments aligned with ALM guidelines

90% GBP 12%

80% 60%

EUR 36%

40% 20%

Other 2%

5%

1%

4%

USD 50%

0%

As of 31 December 2013

Amortized cost portfolio: USD 4.8 billion

As of 31 December 2013

36

Investment portfolio exposure Defensive asset mix targeting top quality investments 60%

52% 43%

40% 20% 5% 0% AAA

AA

A and below

As of 31 December 2013

AfDB’s exposure by country 1,400.00 1,200.00 1,000.00 800.00 600.00 400.00 200.00 0.00

(in USD million)

AAA As of 31 December 2013

AA

A

BBB+ and below

37

Building Africa, maintaining financial strength Allocating income Ensuring financial sustainability and resilience to shock •

411 37

375 44

Goal is to maintain risk capital utilization rate below 100% limit over the 10-year planning horizon

(in USD million)

Allocable income 364 36

339 13

295

150

251

190

159

123

141

169

137

177

2008

2009

2010

2011

2012

52% of allocable income retained in reserves for 2012 against 46% in 2011

•

Building up reserves while supporting development initiatives

Reserves

Development Initiatives

158

Surplus Account

Allocable Income

Distribution to initiatives with the highest development impact, consistent with the Bank’s strategic objectives.

Guiding principles of net income allocation •

First priority to reserves

•

Distribution to fulfill mandatory commitments:

ADF

Special Relief fund

Investment Climate Facility

Fragile States Facility

African Legal Support Facility

NEPAD

African Water Facility

African technical assistance centers

Dem. Rep. of Congo Debt Relief

ADF USD 54 million and DRC USD 96 million •

Surplus account with clear criteria for prioritization, use limited to high impact development initiatives

Africa Food Crisis Response

Africa Capacity Building Foundation

38

Risk

Capitalisation

Shareholders’ Support

Financial ratios compare favorably to peers AfDB (Aaa/AAA)

ADB (Aaa/AAA)

IADB (Aaa/AAA)

IBRD (AAA/Aaa)

Average rating of shareholders

A-

A+

A-

A

Average rating of key shareholders

A

AA

A

AA

Share of 'AAA'-'AA' callable capital (%)

28.7

47.1

42.8

48.0

'AAA'-'AA' callable capital /debt (%)

130.1

113.5

73.2

62.2

Equity to asset (%)

25.2

13.2

22.0

10.8

Paid-in to subscribed capital (%)

7.4

5

4

6.0

248.75

396.25

321.3

406.3

Average rating of loans & guarantees

BB+

BBB-

BB

BBB-

Impaired loans/gross loans (%)

1.17

0.04

0.4

0.3

Share of non-sovereign exposure (%)

24.86

11.43

6.5

0.0

Equity stakes/(loans + equity stakes) (%)

3.82

1.76

0.0

0.0

Five largest exposure/total loans (%)

64.37

80.25

66.6

44.8

Share of 'AAA'-'AA' treasury assets (%)

88.0

49.5

82.0

78.5

Debt to equity (%)

Source: Fitch (16 August 2013)

39

Financial ratios compare favorably to peers (contd.)

Liquid Assets (Cash + Investments) as a % of Total Assets (as of December 2012)

Usable Capital + Callable Capital of Aaa/Aa Members a % of Risk Assets (as of December 2012)

Source: Moody’s (30 September 2013)

40

The African Development Bank

3

Capital Market Activities

41

Financing development through bond issuance

Funding in line with operations

Capital market resources within and outside the continent to fulfill the Bank’s mandate

(in USD million)

2,011 5,596 3,772

3,844

2,770

2010

Leveraging its AAA rating to attract cost effective resources to support Bank operations

2,698

2011

2012 2013 Actual Borrowing Limit

2014*

2014 borrowing program of USD 4.7 billion

* Amount raised as of 30 April 2014

Raising cost effective funding for the benefit of African nations 42

Tapping into diversified funding sources 2013 issuance by currency

2013 issuance by market segment

African Currency Private Placement Linked 2.1% 6.8%

Global 61.1%

Uridashi 4.6%

USD 74.3%

Green Bond 9.0% African Domestic Issue 0.1%

Public Domestic Issue 16.3%

UGX 0.1% TRY 0.1% MXN 1.6%

GHS 2.1%

BRL 4.1% CLP 1.5%

AUD 16.3%

Swapped to meet disbursements and for asset/liability management purposes 43

Consistent presence in the US dollar global benchmark market USD 2.175 billion 0.875% due March 2018

USD 1 billion 0.875% due May 2017

Distribution by investor type Corporates 3%

Distribution by investor type

Asset Managers 7%

Asset Managers 19% Banks 23%

Central Bank / OIs* 67%

Central Bank / OIs* 67%

• •

Priced at 20.45 bps over US Treasuries Latest re-opening at 12.1 bps over US Treasuries

•

Priced at 22.85 bps over US Treasuries

Distribution by region

Distribution by region

41%

37%

32%

29%

23% 14%

11%

Africa

Banks 14%

Americas

Asia

Europe

5%

4%

Middle East

Africa

4% Americas

Asia

Europe

Middle East

*Official Institutions

Outstanding Global benchmarks • US$ 1.125 billion due May 2014 • US$ 1 billion due May 2017 • US$ 1 billion due Mar 2016 • US$ 2.175 billion due Mar 2018 • US$ 1.25 billion due Sep 2016 • US$ 1 billion due October 2018 • US$ 1.7 billion due Mar 2017

AfDB bonds, safety with yield 44

Inaugural syndicated US dollar Green Bond in 2013 USD 500 million 0.75% Green Bond due October 2016 52%

Distribution by region 39%

9%

Americas

•

Asia

EMEA

Priced at 15.5 bps over US Treasuries and MS+5 bps Examples of eligible projects

• • • • •

Morocco: Africa’s largest Concentrated Solar Power Plant South Africa: Eskom Sere Wind Farm – tapping into vast wind potential Morocco: ONE Integrated Wind/Hydro Energy Program Zambia: Itezhi-Tezhi Hydro Generation Project – innovative PPP structure Cape Verde: Wind power drives public-private collaboration in Cape Verde

Oversubscribed with 84% bought by investors motivated by the green format including: • • • • • • • • • • • •

•

Third Swedish National Pension Fund AP4 BlackRock California State Teachers’ Retirement System (CalSTRS) Calvert Investment Management Nordea Investment Management Pictet Asset Management Praxis Intermediate Income Fund State Street Global Advisors (SSgA) participating in buying the bond for their High Quality Green Bond Fund TIAA-CREF Trillium Asset Management In February 2014, the Bank launched its second Green Bond o SEK 1 billion 5-year FRN o Priced at 3m Stibor flat In March 2014, the Bank launched its third Green Bond o SEK 1 billion 5-year fixed-rate note o Priced at MS flat 45

Growing presence in the Australian Kangaroo market Largest ever AfDB Kangaroo issue AUD 1,000 million 5.25% due March 2022

Longest ever AfDB Kangaroo issue AUD 600 million 4.75% due March 2024

Distribution by investor type

Distribution by investor type Asset Managers 58%

Insurance Companies 15%

Banks 24%

Banks 3%

Central Banks/Ois 1% Insurance Companies 39%

Asset Managers 60% March 2012

August 2013

Distribution by region

52%

Distribution by region 46.9%

46.1%

23% 17% 1%

Asia

Japan

Australia

Europe

Outstanding Kangaroo benchmarks • A$500 million due Jan 2016 • A$500 million due Jan 2018 • A$100 million FRN due May 2018

7%

Americas

• A$250 million due Feb 2019 • A$1,000 million due Mar 2022 • A$525 million due Mar 2024

0.3%

Japan

Australia

Europe

6.7%

Americas

AUD is the Bank’s second funding currency

46

Bank’s first sterling deal since 1991 GBP 250 million 1.125% due December 2016 Distribution by investor type Institutions/Pr ivate Fund 6%

Distribution by region 73%

Corporate 2% Central Bank/OIs 34%

10%

10%

5%

2% Banks 48%

Asset Managers 10%

•

3-year sterling benchmark bond

•

Launched in January 2014 for an amount of GBP 250 million

•

Priced at UKT 4% Sep 2016 + 35bps

Africa

Americas

Asia

Europe

UK/Ireland

o Tap by an addition GBP 100 million in April 2014 o Priced at UKT 4% Sep 2016 + 34bps 47

Satisfying individual Japanese investors’ appetite for Socially Responsible Investments

AUD 10mn due 2020 (Clean Energy)

AUD 63mn due Nov 2014 (Water bond)

BRL 37mn due 2017 (Clean Energy)

In line with our core operational priorities

BRL 17mn due Mar 2018 (Education)

BRL 2.8mn due Mar 2017 (Education)

ZAR 22.6mn due Mar 2017 (Education)

BRL 515mn due Sep 2016 (Education)

TRY 128mn due Mar 2015 (Education)

An amount equal to the net proceeds are directed to finance projects in the respective fields on a ‘best-efforts’ basis

48

A natural issuer of African currency-linked bonds Key drivers

Strong strategic interest

•

Favourable growth story and macroeconomic fundamentals

•

Providing visibility to African countries among international investors

•

Triple-A rating enables the Bank to be an issuer of choice for emerging market investors

•

Investors looking into Africa for opportunities TZS

Selected AfDB African currency-linked transactions

BWP NGN 1.63 Billion 10.85% due February 2015

GHS 68.25 Million due March 2018

January 2014

March 2013

Prior transactions in African currencies ZMK

UGX 34.892 Billion 10.0% due Dec 2017 December 2012

Nearly

NGN 2.36 Billion 10.5% due April 2014 April 2012

KES

USD 200 million issued since 2012 in Nigerian Naira, Uganda Shilling and Ghanaian Cedi

49

Multi-pronged approach to developing African capital markets Major breakthrough in the capital markets of Uganda Ugandan Shilling designated as one of the Bank’s lending currencies in September 2011

Expanding the Bank’s African lending currencies

Established a UGX 125 billion Medium Term Note program

Issued a 10 year, UGX 12.5 billion bond in July 2012, with coupon pegged at 85% of Uganda 2-year Treasury bond yield and to be re-priced at 2-year intervals Fully placed domestically with 50% oversubscription

Bond proceeds kept in local currency to fund a domestic mortgage lender

Exploring domestic African capital markets Establishing local bond issuance programs

•

Targeting selected African capital markets Ghana

Kenya Tanzania

Nigeria Zambia

XOF

XAF

UGX

TZS

NGN

KES

GHS

The success of the Bank’s experience in Uganda sets the stage for further local market issuance in 2013

•

ZAR

ZMW

EGP

Partnering with sister institutions •

ISDA+ Master Agreement signed with the International Finance Corporation to facilitate local currency lending and bond issuance in Africa

•

Enables bilateral collaboration on local currency issuance, enhances local currency funding capacity to support development projects

50 +

International Swaps and Derivatives Association

Positioning closer to stakeholders Tunisia (TRA)

Morocco

Opening of Customized Liaison Office in Mauritius and Asia External Representation Office in Tokyo

Algeria Egypt

Japan

Mali

Sudan Chad

Increased field presence in Benin, Guinea (Conakry), Guinea Bissau, Mauritania, and Sao Tome and Principe

Senegal

Burkina Faso

Sierra Leone

South Sudan

Nigeria

Togo Liberia

CAR

Ghana Ivory Coast (HQ)

Cameroon

• •

Better integration and oversight Proactivity and responsiveness Reduced procurement turnaround time Better utilization of resources Reduced costs of doing business

Kenya

Decentralization with delegation & safeguards • • •

Presence in 37 countries 38% of operations staff work from the field 50% of projects managed by field offices

Uganda

DRC

Gabon

• • •

Ethiopia

Rwanda Tanzania

Burundi

Angola

Zambia

Malawi

Madagascar Zimbabwe Mozambique

Mauritius

South Africa

Demand for field presence is growing

= Regional Resource Center

51

One Bank directing its strength and capabilities towards Africa

Re-affirmed AAA rating

Providing valuable policy advice and technical assistance to support development efforts

Strengthened risk-bearing capacity & resources level

Capacity to adapt and swiftly address emerging challenges in line with core priorities

Building on expertise and achievements to meet the needs of clients

Africa’s Preferred Partner

A catalyst for development finance and solutions

Setting the continent on the path to greener, more inclusive growth, cutting across national borders and led by a vibrant private sector

52

The trusted partner for Africa’s development

“Nous sommes confiants que cette institution saura, grâce à la mobilisation de toutes ses compétences, préserver ses acquis et assurer son avenir avec plus d'optimisme et avec davantage de rayonnement à l'échelle continentale et internationale.” His Majesty Mohammed VI, King of Morocco, 2012 His Majesty Mohammed VI King of Morocco

Her Excellency Ellen Johnson Sirleaf President of Liberia

“…the best advocate for Africa in achieving the MDGs.” Her Excellency Ellen Johnson Sirleaf, President of Liberia, 2013 “AfDB has been Africa’s dependable partner in development since its establishment in 1964.” His Excellency Jakaya Mrisho Kikwete, President of Tanzania, 2012

His Excellency Jakaya Mrisho Kikwete President of Tanzania

“African Development Bank has become the darling of all of us in Africa.” His Excellency Olusegun Obasanjo, Former President of Nigeria, 2012

His Excellency Olusegun Obasanjo Former President of Nigeria

53

More information on the Bank Group is available at www.afdb.org •

Financial and Operational Analysis

•

Documentation for Debt Programs

•

Rating Agency Reports

•

Financial Products for Borrowers

•

Annual Report

www.afdb.org

[email protected] Investor Contact: [email protected] +(216) 71 10 39 00 +(216) 71 35 19 33 afdb_acc

African Development Bank Group

AfDB_Group

54

4

Appendix

55

AfDB: Income statement (UA million) 2013

2012

2011

2010

2009

2008

335.01 126.45 3.95 465.41 (302.99) 111.85

351.16 197.65 4.83 553.64 (356.41) 139.16

314.92 168.85 5.41 489.18 (316.82) 112.16

293.36 219.22 6.74 519.32 (303.04) 126.27

288.24 222.96 7.68 518.88 (306.32) 73.28

352.28 202.88 9.29 564.45 (251.83) (65.79)

92.50

(30.45)

(13.00)

(27.61)

17.38

12.43

(58.39)

20.28

9.96

(13.33)

(20.30)

(16.68)

Provision for Impairment on Loan Principal and Charges Receivable Provision for Impairment on Equity Investments Provision for Impairment on Investments Translation (Losses)/Gains Other Income Net Operational Income Administrative Expenses Depreciation – Property, Equipment and Intangible Assets Sundry (Expenses)/Income Total Other Expenses

(41.14) 0.76 9.19 13.33 12.46 302.98 (110.97) (6.70) (4.98) (122.65)

(29.69) (0.05) 0.29 (2.27) 15.29 309.79 (104.64) (4.59) (1.94) (111.17)

(17.68) (0.15) 6.39 (27.95) 4.46 246.55 (79.50) (4.47) 1.93 (82.04)

(26.76) (0.90) 18.58 4.87 (1.72) 295.66 (75.00) (4.59) (2.41) (82.00)

(11.29) (2.32) 3.39 19.63 7.34 299.67 (63.06) (4.68) (0.77) (68.51)

163.28 (18.46) (38.13) (9.17) 18.65 358.75 (46.78) (5.20) (2.11) (54.09)

Income Before Distributions Approved by the Board of Governors

180.33

195.72

164.51

213.66

231.16

304.66

(107.50)

(110.00)

(113.00)

(146.37)

(162.68)

(257.30)

72.83

88.62

51.51

67.29

68.48

47.36

As of 31 December

Operational Income and Expenses Income from Loans Income from Investments and Related Derivatives Income from Others Debt Securities Total Income from Loans and Investments Interest and Amortized Issuance Costs Net Interest on Borrowing-Related Derivatives Unrealized Gains/(Losses) on Fair-Valued Borrowings and Related Derivatives Unrealized Gains/(Losses) on Non Fair-Valued Borrowings and Others

Distributions of Income Approved by the Board of Governors Net Income for the year

1 UA = 1 SDR = 1.54027 USD (2008) = 1.56769 USD (2009) = 1.54003 USD (2010) = 1.53527 USD (2011) = 1.53692 USD (2012) = 1.54000 USD (2013)

56

AfDB: Balance sheet highlights (UA million) As of 31 December

2013

2012

2011

2010

2009

2008

Assets Due from Banks Demand Obligations Treasury Investments Derivative Assets Non-Negotiable Instruments on Account of Capital Accounts Receivable Outstanding Loans Hedged Loans- Fair Value Adjustment Accumulated Provision for Impairment on Loans Equity Participations, Net Other Debt Securities Other Assets

954.13 3.80 6,085.45 985.96 1.20 843.86 11,585.84 32.49 (145.14) 525.01 82.90 41.22

881.45 3.80 6,487.51 1,558.33 1.97 762.67 11,014.31 86.85 (128.51) 438.56 76.54 31.06

344.16 3.80 7,590.47 1,696.68 3.04 914.85 9,373.52 49.87 (118.03) 309.76 79.99 13.34

395.72 3.80 7,433.53 1,421.48 4.62 1,341.66 8,293.01 (114.21) 272.24 79.75 12.69

318.83 3.80 7,412.25 764.00 8.19 924.16 7,538.20 (101.92) 234.48 70.81 11.89

592.64 3.80 4,575.76 736.09 11.86 649.01 5,834.62 (102.64) 188.78 68.80 12.23

Total Assets

20,996.72

21,214.55

20,261.45

19,144.29

17,184.69

12,570.95

1,246.11

2,083.07

1,974.68

2,015.04

1,385.68

843.12

971.85

512.60

502.29

328.30

477.12

360.30

Borrowings Capital Subscriptions Paid Cumulative Exchange Adjustment on Subscriptions Reserves

12,947.44 3,147.08 (172.65) 2,856.88

13,278.80 2,839.48 (166.82) 2,667.44

12,902.96 2,505.97 (160.63) 2,536.18

11,980.56 2,355.68 (162.57) 2,627.28

10,580.64 2,350.26 (161.97) 2,552.96

6,707.28 2,345.81 (161.03) 2,475.47

Total Liabilities, Capital and Reserves

20,996.72

21,214.55

20,261.45

19,144.29

17,184.69

12,570.95

Liabilities, Capital and Reserves Accounts Payable Derivative Liabilities

1 UA = 1 SDR = 1.54027 USD (2008) = 1.56769 USD (2009) = 1.54003 USD (2010) = 1.53527 USD (2011) = 1.53692 USD (2012) = 1.54000 USD (2013)

57

Disclaimer

This presentation has been prepared by the African Development Bank (“AfDB”) for information purposes only. Any opinions expressed in this presentation reflect the judgment of AfDB at the date and time hereof and are subject to change without notice and AfDB has no obligation to inform any recipient when opinions or information in this presentation change. The AfDB makes no representation, warranty or assurance of any kind, express or implied, as to the accuracy or completeness of any of the information contained herein. This presentation is not an offer for sale, or a solicitation of an offer to buy, any notes or other securities of AfDB. It does not take into account the particular investment objectives, financial situations, or needs of individual investors. The price and value of the investments referred to in this presentation may fluctuate. Past performance is not a guide to future performance and future returns are not guaranteed. Each recipient of this presentation is deemed to acknowledge that this presentation is a proprietary document of AfDB and by receipt hereof agrees to treat it as confidential and not disclose it, or permit disclosure of it, to third parties without the prior written consent of the AfDB. All content (including, without limitation, the graphics, icons, and overall appearance of the presentation and its content) are the property of the AfDB. The AfDB does not waive any of its proprietary rights therein including, but not limited to, copyrights, trademarks and other intellectual property rights. 58