government investment officers association (gioa ... connecticut avenue nw washington, dc 20433 usa...

George Richardson

Head of Capital Markets, Treasury

The World Bank (IBRD)

1225 Connecticut Avenue NW

Washington, DC 20433 USAhttp://treasury.worldbank.org/capitalmarkets

March 2015

Government Investment Officers Association (GIOA) Conference

SupranationalsFlora Chao

Senior Funding Officer, Treasury

International Finance Corporation (IFC)

2121 Pennsylvania Avenue NW

Washington, DC 20433 USAhttp://www.ifc.org/

Laura Fan

Head of Funding, Treasury

Inter-American Development Bank (IADB)

1300 New York Avenue NW

Washington, DC 20577 USA http://www.iadb.org/

Supranationals (or “multilaterals”) are…

…international development institutions that provide financing, advisory

services, and/or other financial services to their member countries to achieve

overall goal of improving living standards through sustainable economic growth.

Summary of Key Features• Triple-A rated: financial strength based on

− diversified, sovereign shareholders

− conservative risk management

− quality loan portfolio (preferred creditor status)

− substantial liquidity and consistent profitability

− strong capitalization (many have unique paid-in / callable capital structure)

• 0% risk weighting with Basle II and III. Level 1 HQLA (High Quality Liquid Asset)

with no haircut vs Level 2A for GSE issuers under new Federal Reserve rule

effective Jan 2015

• Issuers of US$ global benchmarks included in major USD and global indices

• Some issue other instruments of possible interest to US government and official

sector investors (e.g., US$ callables, FRNs, etc.)

What are “AAA Supranationals”?

2

InternationalFinance

Corporation (IFC)


European Bank for Reconstruction and

Development (EBRD)

European Investment Bank (EIB)

Nordic Investment Bank (NIB)

African Development Bank (AfDB)

Asian Development Bank (AsDB)

* Yellow outline highlights the AAA/Aaa supranationals that have the US as a shareholder.

Who are “AAA Supranationals”?

International Bank for Reconstruction and Development

(IBRD)

3

4

Over half of the funding program in each of the “Washington Supras” is in USD.

All three have maintained their triple-A credit ratings.

World Bank

(IBRD)

International Finance

Corporation (IFC)

Inter-American

Development Bank (IADB)

Development

purpose

Global source of funding to

member governments

Global source of finance for private

enterprise in developing countries.

Regional source of development finance for

Latin America and the Caribbean.

Membership Global – 188 members Global – 184 members 48 members, of which 26 are

Latin American/Caribbean countries

Year established 1944 1956 1959

Largest shareholder United States – 16% United States – 24% United States – 30%

Balance Sheet USD 359 billion USD 84.1 billion USD 97 billion

Annual Funding

Program

USD 40-50 billion USD 18 billion USD 21 billion

SEC Exemption* Yes Yes Yes, but still required to file certain information

with SEC under SEC Regulation IA

Act of Congress

Authorizing

US Membership

Bretton Woods

Act 22 USC 286 et. Seq.

International Finance Corporation


Inter-American Development Bank


Type of Lending Preferred Creditor Status

(PCS) Lending to Sovereigns

or Sovereign guaranteed only

Lending to or equity investment in

Emerging Market private sector

entities

PCS Lending to Sovereign or Sovereign

guaranteed (approximately 92%) plus Lending

to private sector

WashingtonSupras

* Exemptions refer to the Securities Act of 1993 and Securities Exchange Act of 1934.

IBRD IFC IADB

5

Strong Credit Quality

Quality Loan Portfolio

Prudent Risk Management

Substantial Liquidity

Diversified Shareholder Base

IADB, IBRD, and IFC’s main headquarters are in Washington, D.C.

A supranational’s Aaa/AAA rating is based on a solid financial structure, conservative financial policies and consistent performance, as well as support and capital backing from its shareholders.

Supranational

Financial Strength

IBRD

IFC

IADB

These institutions were established by international treaties known as

its Articles of Agreement (“the Articles”).

The Articles was incorporated into US federal law by Congressional Act

– federal statutes that

— authorized the United States’ membership and participation

in the institution

— recognizes its immunities and privileges

IADB, IFC and IBRD securities are exempted securities within the

meaning of Section 3(a)(2) of the U.S. Securities Act of 1933, as

amended, and Section 3(a)(12) of the U.S. Securities Exchange Act of

1934, as amended.

The US Secretary of the Treasury sits on the Board of Governors of

each of these institutions

Supranational

Instrumentality of the United States

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7

Supranational USD Global bonds are always immediately available to U.S. investors

regardless of where they are listed.

Supranational issuers who do not have the U.S. as a shareholder are permitted to issue into the U.S. market after filing a shelf registration statement pursuant to Schedule B to the Securities Act of 1933.* (Note to US investors: Can buy only Globals. Can buy Eurobonds only after they have seasoned.)

Supranationals issuers whose membership includes the U.S. are SEC exempt by the federal statutes that authorizes U.S. membership and participation. (Note to US investors: Can buy any.)

*Schedule B to the Securities Act of 1933 states the requirements for the registration of securities by foreign governments or

political subdivisions thereof, updating the shelf by incorporating by reference the latest annual report.”

Supranational Acts of Congress

World Bank (IBRD) Bretton Woods Act 22 USC 286 et. Seq.

International Finance Corporation (IFC) International Finance Corporation Act 22 USC 282 et. Seq.

Inter-American Development Bank (IADB) Inter-American Development Bank Act 22 USC 283 et Seq.

Asian Development Bank (ADB) Asian Development Bank Act 22 USC 285

European Bank for Reconstruction and Development

(EBRD)

European Bank for Reconstruction and Development Act 22 USC 290l

African Development Bank (AfDB) African Development Bank Act 22 USC 290i et. Seq.

Under the provisions of Section 15(a) of the Bretton Woods Agreements Act, as amended, Notes are

exempted securities within the meaning of Section 3(a)(2) of the U.S. Securities Act of 1933, as amended,

and Section 3(a)(12) of the U.S. Securities Exchange Act of 1934, as amended.

Can US Investors buy

Supranational Bonds?

8

Asset

Quality

Equity

Capital

Risk

Management

Government

Ownership /

Guarantee

GSE’s

Covered Bonds

USAID

Guaranteed

Bonds

KfW / EDC

Supranationals

Supranational IssuersKey Drivers Behind the SSA Supranational’sAAA

9

US investors have historically relied on GSE paper as a means to access high quality credit investments

AAA-rated supranational paper can add a form of diversification especially since GSE-issued paper continues to decline and their future remains uncertain

Supranationals have been issuing in the global debt capital markets for decades

Form of

Diversification

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Supras and GSEs

Similarities• High quality credit

• Safe haven investment /

flight to quality performance

• Natural “home” bid

• Yields are in the same

“ballpark”

• Similar product types (plain

vanilla benchmark, callables,

etc.)

Differences• Supras are AAA, GSEs are

AA+/AAA

• Sponsorship for Washington-

based Supras includes US

as major shareholder

• Oversight by board composed

of member countries vs Federal

Housing Finance Agency

• Mission of supras is poverty

allevation and reduction in

inequality vs US residential

property

11

What do Supras do?

Washington-based AAA-rated supras share a common mission of reducing poverty and inequality

We also focus on financing projects that are environmentally and socially sustainable

Your investment in supra paper helps support development in underdeveloped communities worldwide through project loans

Earn “social” returns, in addition to financial returns

12

IFC Project:Kinote’s Story

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IADB Project:Improving early childhood education in Ayacucho, Huancavelica and Huanuco (Peru)

IADB approved a loan to Peru for a Program to improve Early Childhood Education in

Ayacucho, Huancavelica and Huanuco

the Program will foster safe schools, improve teaching methods and support the

participation of parents in the educational development of children 3 to 5 years of age

the Program is being carried out in these three departments because they have high

poverty levels as well as high rates of grade repetition among schoolchildren

The program will include equipping, rehabilitating or replacing 190 education centers

The program will also include training teachers in improving communication skills and

instructional methods, use of teaching materials, multiculturalism and bilingualism

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World Bank Project Video:Colombia Transportation System

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Funding Programs Funding volumes have grown as a result of financing increased lending volumes

following the global financial crises.

Increased volume and number of USD global benchmarks

2005 2015

IADB $4.9 bln $17 bln

IFC $2.1 bln $18-20 bln

World Bank (IBRD) $12 bln $45 bln

2005 2014

IADB $1 bln

1 bond

Maturity: 10 years

$10.75 bln

5 bonds

Maturity: 2-30 years

IFC $1 bln

1 bond

Maturity: 5 years

$3 bln

1 bond

Maturity: 5 years

World Bank (IBRD) $750 mn

1 bond

Maturity: 30 years

$25.3 bln

8 bonds

Maturity: 2-10 years

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IADB/IFC/World Bank

Debt Products

Benchmark Bonds, Global Bonds

Other Plain Vanilla Notes

Structured Notes

Discount Notes

Socially Responsible Bonds

1

2

3

4

5

By GeographyBy Investor Type

Active USD SSA Investor Base2013-2014 YTD USD AAA-Rated Supra Benchmarks

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Central Banks44.6%

AM/Ins/Pen27.5%

Banks25.8%

Other2.1%

Americas30.9%

EMEA42.0%

Asia26.3%

Other0.8%

Source: Dealogic, Bloomberg, Euroweek

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Benchmark Bonds, Global Bonds1

Broad sponsorship from underwriters with solid primary placement

Diversified investor base

Strong dealer commitment to secondary market support

Characteristics:

1. Issue size is typically USD1-4 billion

2. Maturities generally range between 2-10 years

IADB/IFC/World Bank bonds are represented in the following major indices:

― Barclays Capital Global Aggregate Index

― Bank of America Merrill Lynch Global Broad Market Quasi-Govt Index

― Citigroup World Broad Investment-Grade (WorldBIG) Bond Index

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Other Plain Vanilla Notes2

Smaller MTN transactions customized to meet specific investor needs

Various formats, including fixed and floating rate notes (FRNs)

Structured Notes3

Capital Protection and AAA/Aaa rating

Tailor Made Solutions

Buyback Alternative to enhance liquidity

Confidentiality

Standardized documentation

Pricing comparable to GSEs

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Discount Notes4

Inter-American

Development Bank

(IADB)

International Finance

Corporation (IFC)

World Bank

(IBRD)

Ratings A–1+ by S&P and P–1 by Moody’s

Maturities 360 days or less

Documentation Governed by Discount Note Offering Circular

Clearing Book entry form through the Federal Reserve Bank of NY

Bloomberg Page IADN<GO> IFC<GO> WBDN<GO>

Outstanding

Amount (as of March 6, 2015)

USD 635 million USD 1.3 billion USD 5.6 billion

Dealers Bank of America

Securities

Barclays Capital

Credit Suisse Securities

Goldman Sachs

HSBC Securities

Morgan Stanley

Barclays Capital

Goldman Sachs

HSBC

Jefferies

JP Morgan Securities

Merrill Lynch

Nomura

UBS

Barclays Capital

CastleOak Securities

FTN Financial

Goldman Sachs

Jefferies

JP Morgan Securites

Mizuho Securities

UBS Securities

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Socially Responsible Bonds5

Earn “social” returns, in addition to financial returns

Investors select financial terms like currency, size and maturity

Benefit from IADB/IFC/World Bank “due diligence” for projects

IADB EYE (Education/Youth/Employment) bonds

• Support primary and secondary education and programs to integrate youth into the

employment market

IFC SRI bonds

• Green (focused on climate change), Banking on Women (focused on financing for

women-led businesses) and Inclusive Business (focused on supporting the world's

poorest people).

World Bank Green Bonds

• Support mitigation and adaptation (including climate resilience) projects

For More Information, Contact Us

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Laura Fan, Head of Funding

[email protected]

Phone: 202-623-3772

http://www.iadb.org/en/idb-finance/investors/investors,1977.html

International Finance Corporation (IFC)

Ben Powell, Head of Funding

[email protected]

Phone: 202-473-1642

Flora Chao, Senior Funding Officer

[email protected]

Phone: 202-473-7355

www.ifc.org/investors

The World Bank (IBRD)

George Richardson, Head of Capital Markets

[email protected]

Phone: 202-473-0368

Urvi Mehta, Investor Relations

[email protected]

Phone: 202-477-2860

http://treasury.worldbank.org/capitalmarkets

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Mary Christine Jackman

Director of Treasury Management

Maryland State Treasurer's Office

80 Calvert Street

Annapolis, MD 21401 USAhttp://www.treasurer.state.md.us

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• 2006 Began push to diversify Eligible Investments

• 2007 FHLMC in news for not buying subprime mortgages

― (This is where the St. Louis Federal Reserve dates the beginning of the

financial crisis).

• 2008 Crisis

• 2009 More Crisis.

• 2010 The crisis continues.

• 2011 April 13, 2011

― U.S. Permanent Subcommittee on Investigations releases its final report on

its inquiry into key causes of the financial crisis.

• 2012 FNMA and FHLMC portfolios shrinking, need alternatives.

• 2013 “Will the world end if we do not pursue at this time?”

• 2014 Reelection in 2015 – no new legislation.

• 2015 New Governor and reelection of Treasurer.

― Counties begin to ask for expansion of Eligible Investments.

• 2016 ?????

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Karen Adams, CPA

Treasurer-Tax Collector

Merced County

2222 M Street, 1st Floor

Merced, California 95340 USAhttp://www.MercedTaxCollector.org

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1. Merced Drafts Proposal to Amend CA Gov Code § 53601

a. Proposed to add Washington based Supras

i. International Bank for Reconstruction and Development (IBRD)

ii. International Finance Corporation (IFC)

iii. Inter-American Development Bank (IADB)

b. Restricted to Washington Supras because US Dollar-denominated

30

2. Merced Proposal to California Association of County Treasurers & Tax

Collectors (CACTTC) Legislative Committee

a. CACTTC Leg Committee Rejected unless Amended

b. Merced Amends for Resubmission

i. Adds “senior unsecured unsubordinated obligations issued or

unconditionally guaranteed….”

c. CACTTC Leg Committee Approves

(q) U.S. Dollar-denominated senior unsecured unsubordinated obligations

issued or unconditionally guaranteed by the International Bank for

Reconstruction and Development (IBRD) or the World Bank as IBRD is known,

International Finance Corporation (IFC), or Inter-American Development Bank

(IADB), with a maximum remaining maturity of five years or less, and eligible

for purchase and sale within the United States. Investments under this

subdivision shall be rated “AA” or better by an NRSRO and may not exceed 30

percent of the agency’s moneys that may be invested pursuant to this section.

31

3. CACTTC SLGS Vetted language with Legislative Council

a. CACTTC SLGS shops for Authorship

b. Merced Presents to Assembly Member Levine & others

c. Asm Member Levine Authors Bill – AB 1933

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World Bank Investor Brief

Who are we?• International organization owned by 188 countries• World’slargestsourceofdevelopmentfinance• World’s largest resource for development expertise and

coordination services• Frequent bond issuer rated triple-A

What’s our objective?• Work with our members so they can meet their

development goals, and achieve major, sustainable improvements in standards of living for their people

How do we help our members achieve their development goals?By providing:• Financialsolutions,includingfinancing,guarantees,and

risk management tools to support their development-related investment programs; and

• Expertise in areas such as agriculture, health, education,transportation,energy,andlegal,financialmarket,andinstitutionalreform,sothattheycanfindsolutions to national, regional and global problems

About Us

Basic InformationISSUER: “World Bank” or “IBRD” (International Bank for Reconstruction and Development)

RATINGS: AAA/Stable/A-1+ (S&P) Aaa/Stable/Prime-1 (Moody’s)

LOCATION: Washington, DC (Headquarters) and120+officesworldwidePRESIDENT: Jim Yong Kim Former President of Dartmouth University;

former Director at World Health Organization (WHO)

THE WORLD BANK TREASURY │ WORLD BANK INVESTOR BRIEF2


Financial Position

The U.S. is the largest shareholder of the World Bank with 16.05% of its capital shares. Every World Bank president since its inception has been a U.S. citizen.

The World Bank’s mission to fight poverty in a sustainable way, through education, health, environment, and infrastructure make World Bank bonds suitable for investors with investment strategies that aim to maximize social and financial returns. These strategies are known as “socially responsible”, “sustainable”, or “ethical” investment strategies.

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What are the underpinnings of the World Bank’s triple-A rating? • Qualityloanportfoliothatbenefitsfrompreferred

creditor status• Prudent risk management • Substantialliquidityandconsistentprofitability• Diversifiedshareholderbase

Who are the World Bank’s shareholders and how much capital do they own? • 188 member countries have subscribed to US$223.2

billion of subscribed capital (paid in capital + callable capital)

• The largest shareholders include the United States (16.05% of total subscribed capital), Japan (8.94%), China (5.76%), Germany (4.73%), and France and the United Kingdom (with 4.22% each)

What is the World Bank’s gearing ratio limit?• The maximum gearing ratio is 1:1 – outstanding loans

and guarantees may not exceed subscribed capital, reserves and surplus

What does the World Bank’s loan portfolio look like?• Lending is limited to sovereigns or sovereign-guaranteed

projects in eligible member countries• Only countries with at least US$1,205 of annual per

capita income are eligible (poorer countries receive concessionalfinancingfromaseparateentityintheWorld Bank Group)

• Currently, the six largest country exposures are Mexico, Turkey, China, Indonesia, India, and Brazil.

What’s the World Bank’s liquidity policy?• Largeamountofliquiditysupportsflexibility• Actual liquidity is always greater than the minimum

liquidity target, calculated as the highest consecutive six months of debt service plus half of the estimated loan disbursements that year

Is the World Bank profitable?• Yes,althoughwearenotaprofit-maximizinginstitution,

strongfinancialperformanceisimportanttosustainablysupport development goals


How much does the World Bank borrow each year? • Approximately USD30 billion per year

What are the key components of the World Bank’s funding strategy?• Meet investor needs by offering a broad product mix• Ensure high standards of execution

What are the main features of the World Bank’s debt offerings?• The World Bank has been rated triple-A for over 50

years.• World Bank debt has 0% risk weighting (Basel II and III) • World Bank bonds have been offered in over 55

different currencies, with a wide variety of maturities as “plain vanilla” bonds or structured note

Does the World Bank issue liquid, global bonds?• USD1-6 billion in size, benchmark maturities• USD, EUR, and other currencies• World Bank bonds are part of major indices such as

Barclays Capital Global Aggregate, Bank of America Merrill Lynch Global Broad Market Quasi-Government, and Citigroup World Broad Investment-Grade (WorldBIG)

What tailor-made products does the World Bank offer? • A wide variety of plain vanilla and structured notes in

many different sizes and maturities• Green bonds and other climate-focused products to

meetspecificinvestorpreferences

Capital Markets

Recent IssuesUSD 3 billion 0.375% 2-year global bond due 11/2015 USD 4.25 billion 0.5% 3-year global bond due 4/2016USD 5 billion 0.5% 2-year global bond due 5/2016USD 5 billion 0.875% 5-year global bond due 4/2017 USD 2.25 billion 1.375% 4-year global bond due 4/2018 USD 4 billion 1.875% 4-year global bond due 3/2019 USD 3 billion 2.125% 7-year global bond due 11/2020 USD 750 million 2.125% 10-year global bond due 2/2023

WebsiteGeneral http://www.worldbank.org

Investorshttp://treasury.worldbank.org/capitalmarkets

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U.S. Treasury Secretary Henry Morgenthau speaking at the Bretton Woods Conference on July 8, 1944.

DISCLAIMER: This investor update has been prepared by the World Bank (International Bank for Reconstruction and Development, IBRD) for information purposes only, and the IBRD 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 investor brief may include information relating to certain IBRD securities. Any such information is provided only for general informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy any IBRD securities. The securities mentioned herein may not be eligible for sale in certain jurisdictions or to certain persons.

GENERAL INQUIRIES, please e-mail: [email protected] World Bank Treasury, INVESTOR RELATIONS, Capital Markets Department, 1818 H Street NW, MSN C7-710, Washington, DC 20433, USATel:+12024772880│Fax:+12025227450│Website:http://treasury.worldbank.org

• IBRD was created in 1944 to rebuild Europe after World War II

• IBRD has been referred to as “World Bank” almost as soon as it was established. The term was initially coined by the media -- including The Economist and The Washington Post

• IBRDapproveditsfirstloanintheamountofUSD250million to France for reconstruction purposes. This was one of the largest loans in real terms made by the World Bankinitsfirstfiftyyears.

History


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PROVIDING VALUE TO US DOLLAR INVESTORS

IFC’s current annual funding program is $16 billion across a

range of markets and currencies, with the majority of

borrowings raised in US dollars. We have issued US dollar

benchmark bonds in global format annually since 2000,

with a focus on timing, lead manager selection, price

discovery and continued secondary performance.

IFC currently has nine US dollar global transactions

outstanding totalling $20.5 billion in volume.

Recent pricing for global transactions:

• IFC 1.750% September 2019, US$3.0 billion launched at mid-swaps +1 bp / US Treasuries +14.3 bps

• IFC 1.750% September 2018, US$3.5 billion launched at mid-swaps +2 bps / US Treasuries +21.1 bps

• IFC 0.875% June 2018, US$2 billion launched at mid-swaps -3 bps / US Treasuries + 20.3 bps

In addition to our global benchmarks, we offer structured

notes with or without call options. IFC tailors transactions

based on reverse inquiries.

IFC bonds offer value as a US Treasury-plus investment

and an alternative to US Agencies.

IFC, a member of the World Bank Group, is the largest global

development institution focused exclusively on the private

sector.

We help developing countries achieve sustainable growth by

financing private sector investment, mobilizing capital in

international financial markets, and providing advisory

services to businesses and governments.

We play a catalytic role by demonstrating the profitability of

investments in emerging markets.

IFC’s vision is that people should have the opportunity to

escape poverty and improve their lives.

A Triple-A US Dollar Investment Alternative

IFC’S VALUE PROPOSITION

• Member of the World Bank Group

• Only supranational with fully paid-in capital

• Strong financial profile with substantial capital and high

liquidity

• Highly diversified global portfolio with debt and equity

exposure in 126 countries and over 2,000 companies

• IFC has a 0% risk weighting under the Basel framework

• IFC is owned by governments of 184 member countries,

with approximately 70% of capital held by AAA/AA

sovereigns

• IFC is consistently rated AAA/Aaa (stable outlook) by

Standard & Poor’s and Moody’s

ABOUT IFC

• IFC issues bonds in the global capital markets to fund

our investments in the private sector in emerging

markets

• Our funding book is maintained in floating rate US

dollars; IFC lends in US dollars and a variety of other

currencies

• IFC's accounts are published according to US GAAP

• Notes issued by IFC are not required to be registered

under the US Securities Act of 1933

• IFC headquarters are in Washington, DC

• The US government is IFC's single largest shareholder

• Commensurate with its level of share capital, the US has

the largest voting power (22%) among IFC’s member

countries on our Board of Directors

FINANCIAL FUNDAMENTALS

• IFC has one of the lowest ratios of debt to net worth of

any supranational

• IFC’s growth is financed by retained earnings

• Duration of funding matches maturity of IFC’s loan portfolio

• IFC’s equity investments are funded by IFC’s net worth,

not borrowings

Shareholding structure

TRIPLE-A RATING CONSIDERATIONS

• Member of World Bank Group

• Sovereign sponsorship with fully paid-in capital

• Strong financial profile with substantial capital and

high liquidity

• Conservative statutory and management policies

• 0% risk weighting under the Basel framework

US 22.8%

Japan 6.5%

174 other

countries

38.8%

France 4.8%

UK 4.8%

India 4.1% Russia 4.1%

Germany 5.2%

Canada 3.3%

Italy 3.3% China 2.5%

0%

25%

50%

75%

100%

$0

$5

$10

$15

$20

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Leverage

Risk-adjusted capital (in billions)

Liquidity ratio (percentage of estimated net cash

requirements for the next 3 years)

78%

actual

45%

min

figures as of 30 June 2014

AAA Long-term rating (Dec13)

Outlook: Stable

We believe IFC benefits from strong access to

capital markets, bolstered by frequent issuance

in many markets and currencies. IFC has no

callable capital, unlike most MLIs, so our ICRs

reflect our ‘aaa’ Stand Alone Credit Profile.

Standard & Poor’s

Aaa Long-term rating (Dec13)

Outlook: Stable

The International Finance Corporation’s (IFC)

Aaa rating with a stable outlook is based on its

robust capital adequacy and liquidity, preferred

creditor status, and strong shareholder support.

Moody’s

CONTACTS

Funding Ben Powell ∙ Head of Funding ∙ +1 202 473 1642 ∙ [email protected] Marcin Bill ∙ Financial Officer∙ +1 202 473 7364 ∙ [email protected] Flora Chao ∙ Senior Financial Officer ∙ +1 202 473 7355 ∙ [email protected] Elena Panomarenko∙ Senior Financial Officer ∙ +1 202 473-0862∙ [email protected]

Investor Relations Denise Odaro ∙ Investor Relations Officer ∙ +1 202 473 0958 ∙ [email protected] Kenichiro Shiozawa ∙ Senior Investor Relations Officer∙ +81 3 3579 6699 ∙ [email protected]

Media Alexandra Klöpfer ∙ Communications Officer ∙ +1 202 473 4645 ∙ [email protected]

www.ifc.org/investors Bloomberg: IFC<GO> @ifc_investors

IFC ∙ 2121 Pennsylvania Avenue NW ∙ Washington, DC 20433 USA ∙ +1 202 473 8392

This document does not constitute an offer or a recommendation to purchase any notes issued by IFC. Please refer to our website, www.ifc.org/investors, for additional information. January 2015

Borrowings by currency for fiscal year ended 30 June 2014

USD

53%

JPY 5%

BRL 5%

AUD

10%

INR 8%

GBP 6%

EUR

4%

NZD 4%

CNY 2% MXN 1%

TRY 1% ZAR 1%

CAD 1%

ZMW <1% RWF <1%

UYU <1% AMD <1%

CACTTC 2014 LEGISLATIVE PLATFORM WORKSHEET

Strategic Local Government Services, LLC 1415 L Street, Suite 1000 ~ Sacramento, CA 95814

(916) 441-1850 ~ (916) 441-6178 Fax

E-mail: [email protected] ~ www.slgs.org

1. BRIEF DESCRIPTION OF WHY A BILL IS NEEDED: The universe of liquid triple-A bond issuers available to local agencies has reduced dramatically in addition to the diminishing supply of government sponsored enterprises (GSE) such as Fannie and Freddie federal agency securities. Government Investment Officers need alternative investment options that provide safety and diversification for managed investment pools. The triple-A supranational, or “supra” sector is an option for portfolio manager that offers high credit quality and a stable return at spreads above US Treasuries. Supranationals are international institutions that provide development financing, advisory services and/or other financial services to their member countries to achieve overall goal of improving living standards through sustainable economic growth. A subgroup of supranationals is the Washington Supras. The Washington Supras are headquartered in Washington, DC and are of interest for US investors with conservative investment strategies due to their triple-A credit, the fact that the US is their largest shareholder, and because they issue similar products to those issued by GSEs, like US$ benchmark bonds, callables and short-term discount notes. These Washington Supras are the following:

The World Bank (officially called International Bank for Reconstruction and Development, IBRD) is the largest part of the World Bank Group and finances activities by issuing bonds in the capital markets. Established in 1944, it works with member countries to promote equitable and sustainable economic growth, by providing financing and risk management solutions directly to sovereign governments - globally. International Finance Corporation (IFC), part of the World Bank Group, created in 1956, provides investments and advisory services to build the private sector in developing countries. Inter-American Development Bank (IADB), established in 1959, supports efforts by Latin America and the Caribbean countries to reduce poverty and inequality.

The relationship between the U.S. government and the World Bank is most similar to that between the government and an instrumentality. The US Secretary of the Treasury sits on the World Bank’s Board of Governors, the World Bank’s highest governing body. The World Bank is treated as an “exempt issuer” under the US securities laws since 1949 in recognition of its status as an international organization in which the U.S. is the largest



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shareholder (with about 17%). The United States’ membership in the World Bank was authorized by a federal statute known as the Bretton Woods Agreements Act (22 U.S.C. 286 et seq.) The States of New York, New Jersey, North Carolina, South Carolina, Colorado, California and Texas include Supras as a permissable investment option in their state codes. These states actually include all Supras that the US Secretary of the Treasury is a member. CA Gov Code § 7514.1 grants permissible to state or local public retirement systems to invest in any supra with US membership and concludes the list of supras with, “or other obligations when due and in which the United States is a member.”

2. RECOMMENDED STATUTORY CHANGE (please note code section): a. SPECIFIC CHANGES TO CODE SECTION BEING RECOMMENDED (please use

strikethrough to reflect proposed deletions and italics/underline to reflect additions to code):

GOVERNMENT CODE - GOV

TITLE 5. LOCAL AGENCIES [50001 - 57550] DIVISION 2. CITIES, COUNTIES, AND OTHER AGENCIES [53000 - 55821]

PART 1. POWERS AND DUTIES COMMON TO CITIES, COUNTIES, AND OTHER AGENCIES [53000 - 54999.7] CHAPTER 4. Financial Affairs [53600 - 53997]

ARTICLE 1. Investment of Surplus [53600 - 53610] ( Article 1 added by Stats. 1949, Ch. 81. )

Sec 53601. This section shall apply to a local agency that is a city, a district, or other local agency that does not pool money in deposits or investments with other local agencies, other than local agencies that have the same governing body. However, Section 53635 shall apply to all local agencies that pool money in deposits or investments with other local agencies that have separate governing bodies. The legislative body of a local agency having moneys in a sinking fund or moneys in its treasury not required for the immediate needs of the local agency may invest any portion of the moneys that it deems wise or expedient in those investments set forth below. A local agency purchasing or obtaining any securities prescribed in this section, in a negotiable, bearer, registered, or nonregistered format, shall require delivery of the securities to the local agency, including those purchased for the agency by financial advisers, consultants, or managers using the agency’s funds, by book entry, physical delivery, or by third-party custodial agreement. The transfer of securities to the counterparty bank’s customer book entry account may be used for book entry delivery. For purposes of this section, “counterparty” means the other party to the transaction. A counterparty bank’s trust department or separate safekeeping department may be used for the physical delivery of the security if the security is held in the name of the local agency. Where this section specifies a percentage limitation for a particular category of investment, that



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percentage is applicable only at the date of purchase. Where this section does not specify a limitation on the term or remaining maturity at the time of the investment, no investment shall be made in any security, other than a security underlying a repurchase or reverse repurchase agreement or securities lending agreement authorized by this section, that at the time of the investment has a term remaining to maturity in excess of five years, unless the legislative body has granted express authority to make that investment either specifically or as a part of an investment program approved by the legislative body no less than three months prior to the investment: (a) … (p)

(q) U.S. Dollar-denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development (IBRD) or the World Bank as IBRD is known, International Finance Corporation (IFC), or Inter-American Development Bank (IADB), with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated “AA” or better by an NRSRO and may not exceed 30 percent of the agency’s moneys that may be invested pursuant to this section.

b. GENERAL EXPLANATION FOR WHAT THESE CHANGES WILL DO: The addition of Washington Supranationals, “World Bank” securities, will provide additional diversification to the portfolio while maintaining safety of principal for preservation of capital investment.

3. FISCAL IMPACT OR MANDATED COSTS None – not applicable. 4. POTENTIAL IMPACTS ON OTHER COUNTY OR STATE DEPARTMENTS OR

AGENCIES: Education for government investment officers will assist in dispelling any concern that may exist on evaluating this new investment option.

5. HISTORY OF PRIOR LEGISLATIVE EFFORTS: CA Gov Code § 16430(l) includes a list

of Supra eligible for state monies pursuant to GC Part 2. State Funds [§ 16300 – 16649.95] and relates to monies received into the [state] treasury and not required by law to be credited to any other fund. CA Gov Code § 7514.1 grants permissible to state or local public retirement systems. No permissible code makes Supras eligible securities for local governments.

NAME: KAREN ADAMS, Treasurer-Tax Collector COUNTY: MERCED

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