As filed with the Securities and Exchange Commission on December 27, 2007
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT
UNDER SCHEDULE B
OF
THE SECURITIES ACT OF 1933
Corporación Andina de Fomento
(Name of Registrant)
Name and Address of Authorized Agent in the United States:
Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19711
Copies to:
Robert S. Risoleo, Esq. Sullivan & Cromwell LLP 1701 Pennsylvania Avenue, N.W. Washington, D.C. 20006 United States of America | Hugo Sarmiento Chief Financial Officer Corporación Andina de Fomento Torre CAF Avenida Luis Roche, Altamira Caracas, Venezuela | Meredith B. Cross, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 1875 Pennsylvania Avenue, N.W. Washington, D.C. 20006 United States of America |
Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.
The securities being registered pursuant to this Registration Statement are to be offered on a delayed or continuous basis pursuant to Release Nos. 33-6240 and 33-6424 under the Securities Act of 1933.
CALCULATION OF REGISTRATION FEE
Title of Each Class of | Proposed Maximum | Amount of | ||||
Securities to be Registered | Aggregate Offering Price | Registration Fee(2) | ||||
Debt Securities | (1) | — | ||||
Guarantees | (1) | — | ||||
Total | $500,000,000(3) | $15,350 | ||||
(1) | The securities registered hereunder and under the additional registration statement noted in note (2) below shall not have an aggregate offering price which exceeds $1,000,000,000 in United States dollars or the equivalent in any other currency. | |
(2) | Pursuant to Rule 429(b), the prospectus filed as part of this Registration Statement also relates to the remaining unsold $500,000,000 principal amount of securities registered on the Registrant’s previously filed Registration Statement under Schedule B (File No. 333-123224), originally filed on March 9, 2005. The Registrant paid a filing fee of $44,250 with respect to those previously registered securities. | |
(3) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This preliminary prospectus is not an offer to sell and does not seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
SUBJECT TO COMPLETION.
PRELIMINARY PROSPECTUS DATED DECEMBER 27, 2007.
$1,000,000,000
Corporación Andina de Fomento
Debt Securities
Guarantees
We may from time to time offer up to $1,000,000,000 (or its equivalent in other currencies) aggregate principal amount of the securities described in this prospectus. The securities may be debentures, notes, guarantees or other unsecured evidences of indebtedness. In the case of debt securities sold at an original issue discount, we may issue a higher principal amount up to an initial public offering price of $1,000,000,000 (or its equivalent).
We may offer the securities from time to time as separate issues. In connection with any offering, we will provide a prospectus supplement describing the amounts, prices, maturities, rates and other terms of the securities we are offering in each issue.
We may sell the securities directly to or through underwriters, and may also sell securities directly to other purchasers or through agents.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Prospectus dated , 2007
TABLE OF CONTENTS
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S-1 |
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, which we refer to as the Securities Act, using a “shelf” registration process. Under the shelf process, we may from time to time sell any combination of the securities described in this prospectus in one or more offerings up to a total dollar amount of $1,000,000,000 or the equivalent of this amount in foreign currencies or foreign currency units.
This prospectus provides you with a general description of our business and of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of the securities in that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement before purchasing our securities. If the information in the prospectus supplement differs from the information in this prospectus or in the registration statement, you should rely on the information in the prospectus supplement.
The registration statement, any post-effective amendment to the registration statement and their various exhibits contain additional information about Corporación Andina de Fomento (“CAF”), the securities we may issue and other matters. All of these documents may be inspected at the offices of the Securities and Exchange Commission.
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You should rely only on the information in this prospectus or in other documents to which we have referred you in making your investment decision. We have not authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date specified on the cover of this document.
Except as otherwise specified, all amounts in this prospectus are expressed in United States dollars (“dollars,” “$,” “US$” or “U.S. dollars”).
Certain amounts that appear in this prospectus may not sum because of rounding adjustments.
This prospectus may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Securities Exchange Act. Statements that are not historical facts are statements about our beliefs and expectations and may include forward-looking statements. These statements are identified by words such as “believe”, “expect”, “anticipate”, “should” and words of similar meaning. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual financial and other results may differ materially from the results discussed in the forward-looking statements. Therefore, you should not place undue reliance on them. Factors that might cause such a difference include, but are not limited to, those discussed in this prospectus, such as the effects of economic or political turmoil in one or more of our member countries.
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CAF was established in 1968 pursuant to the Agreement establishing the Corporación Andina de Fomento (the “Constitutive Agreement”), an international treaty, to foster and promote economic development within the Andean region. CAF is a multilateral financial institution the principal shareholders of which are the contracting parties to the Constitutive Agreement — the Republics of Bolivia, Colombia, Ecuador, Peru and the Bolivarian Republic of Venezuela, each of which we refer to in this prospectus as a regional shareholder country and which we refer to collectively in this prospectus as the regional shareholder countries. The regional shareholder countries collectively accounted for 89.1% of the nominal value of the paid-in capital at December 31, 2006. As of that date, our non-regional shareholders included Argentina, Brazil, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Panama, Paraguay, Spain, Trinidad and Tobago, and Uruguay, each of which we refer to in this prospectus as a non-regional shareholder country and which we refer to collectively in this prospectus as the non-regional shareholder countries. Our non-regional shareholder countries collectively accounted for 10.8% of the nominal value of the paid-in capital at December 31, 2006. Our shares are also held by 15 financial institutions based in the regional shareholder countries, which collectively accounted for 0.1% of the nominal value of the paid-in capital at December 31, 2006. CAF commenced operations in 1970. Our headquarters are in Caracas, Venezuela, and we have regional offices in the capital cities of each of the other four regional shareholder countries, Brazil and Spain.
We offer financial and related services to the governments of, and public and private institutions, corporations and joint ventures in, our shareholder countries. Primarily, we provide short, medium and long-term loans and guarantees; to a lesser extent, we also participate as a limited equity investor in corporations and investment funds, and provide technical and financial assistance, as well as administrative services for certain regional funds.
The Constitutive Agreement generally delegates to our Board of Directors the power to establish and direct our financial, credit and economic policies. Our Board of Directors has adopted a formal statement of our financial and operational policies, the Políticas de Gestión. These operational policies provide our management with guidance as to significant financial and operational issues, and they may not be amended by the Board of Directors in any manner inconsistent with the Constitutive Agreement. In 1996, the Constitutive Agreement was amended to include and further increase certain lending and borrowing limitations previously set forth in these operational policies. See “Operations of CAF — Credit Policies”.
We raise funds for operations both within and outside our shareholder countries. Our strategy with respect to funding, to the extent possible under prevailing market conditions, is to match the maturities of our liabilities to the maturities of our loan portfolio.
Our objective is to support sustainable development and economic integration within the Andean region by helping the regional shareholder countries make their economies diversified, competitive and more responsive to social needs.
As an international treaty organization, we are a legal entity under public international law. We have our own legal personality, which permits us to enter into contracts, acquire and dispose of property and take legal action. The Constitutive Agreement has been ratified by the legislature in each of the regional shareholder countries. We have been granted the following immunities and privileges in each regional shareholder country:
(1) | immunity from expropriation, search, requisition, confiscation, seizure, sequestration, attachment, retention or any other form of forceful seizure by reason of executive or administrative action by any of the regional shareholder countries and immunity from enforcement of judicial proceedings by any party prior to final judgment; | |
(2) | free convertibility and transferability of our assets; | |
(3) | exemption from all taxes and tariffs on income, properties or assets, and from any liability involving payment, withholding or collection of any taxes; and |
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(4) | exemption from any restrictions, regulations, controls or moratoria with respect to our property or assets. |
In addition, we have entered into agreements with each of our non-regional shareholder countries, except Chile. Pursuant to these agreements, each country has agreed to extend to us, with respect to our activities in and concerning that country, immunities and privileges similar to those we have been granted in the regional shareholder countries.
Unless otherwise specified in the accompanying prospectus supplement, we will use the net proceeds of the sale of the securities to fund our lending operations.
The following table sets forth our capitalization and indebtedness at September 30, 2007 and does not give effect to any transaction since that date.
At September 30, | ||||
2007 | ||||
(in U.S.$ millions) | ||||
Short-term debt(1) | $ | 2,616.4 | ||
Long-term debt (maturities over one year) | $ | 4,439.6 | ||
Shareholders’ Equity | ||||
Capital | ||||
Subscribed capital, paid-in and receivable (authorized capital $5.0 billion)(2) | 2,026.3 | |||
Less: Capital receivable | (32.2 | ) | ||
Paid-in capital | 1,994.1 | |||
Additional paid-in capital | 201.1 | |||
Total Capital | 2,195.2 | |||
Reserves | ||||
Mandatory reserve | 287.5 | |||
General reserve | 1,189.9 | |||
Total reserves | 1,477.4 | |||
Retained earnings | 254.2 | |||
Total shareholders’ equity | 3,926.7 | |||
Total long-term debt and shareholders’ equity | $ | 8,366.4 | ||
(1) | Includes deposits, commercial paper, advances and short-term borrowings, the current portion of bonds, borrowings and other obligations, accrued interest and commissions payable. | |
(2) | In addition to subscribed capital shown in the table, CAF’s subscribed capital included callable capital of $1.1 billion at September 30, 2007. |
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General
Our authorized capital is $5.0 billion, of which $3.1 billion will be paid-in capital and $1.9 billion will be callable capital.
Our shares are divided into Series “A” shares, Series “B” shares and Series “C” shares.
Series “A” shares may be owned only by regional shareholder countries. Each regional shareholder country owns one Series “A” share, which is held by the government, either directly or through a government-designated social or public purpose institution. Each of the five regional shareholder countries owning Series “A” shares is entitled to elect one director and one alternate director to our Board of Directors.
Series “B” shares are also owned by regional shareholder countries and are held by the governments either directly or through designated governmental entities, except for certain Series “B” shares, constituting 0.1% of our outstanding shares, which are owned by 15 private sector financial institutions in the regional shareholder countries. We offered and sold Series “B” shares to private sector financial institutions in 1989 in order to obtain the benefit of their views in the deliberations of our Board of Directors. The five regional shareholder countries owning Series “B” shares are entitled to elect a total of five additional directors and five alternate directors through cumulative voting, and the 15 private sector owners of Series “B” shares separately are entitled to elect one director and one alternate director.
Series “C” shares are currently owned by 12 countries that are non-regional shareholder countries: Argentina, Brazil, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Panama, Paraguay, Spain, Trinidad and Tobago and Uruguay. We make available Series “C” shares for subscription by countries outside the Andean region in order to strengthen links between these countries and the regional shareholder countries. Ownership of our Series “C” shares by countries outside the Andean region makes entities in these countries that deal with entities in regional shareholder countries eligible to receive loans from us with respect to these dealings. At December 31, 2006, holders of Series “C” shares collectively were entitled to elect two directors and two alternate directors. Our Board of Directors is comprised of 13 directors.
Under the Constitutive Agreement, Series “A” shares may be held by or transferred only to governments or government-designated social or public purpose institutions. Series “B” shares also may be held by or transferred to such entities and, in addition, may be held by or transferred to private corporations or individuals, except that no more than 49% of the Series “B” shares within any country may be held by private shareholders. Series “C” shares may be held by or transferred to public or private entities outside the regional shareholder countries. Unless a member withdraws, shares may be transferred only to entities in the same country.
On June 6, 2005, at a shareholders’ extraordinary general meeting, our shareholders adopted a resolution recommending to the regional shareholder countries an amendment to the Constitutive Agreement that would (i) allow, under certain circumstances, Latin American and Caribbean countries, including those that are currently non-regional shareholder countries, to own Series “A” shares and (ii) expand our formal purpose to include supporting sustainable development and economic integration within all of Latin America, as opposed to within only the Andean region. To become effective, the amendment must be ratified by the legislature of, or the appropriate competent governmental body in, all of the five regional shareholder countries. Although four of the five regional shareholder countries have ratified the amendment, there can be no assurance that the legislature of or competent governmental body in the remaining regional shareholder country will ratify the amendment.
Argentina, Brazil and Uruguay have each formally expressed an intention to become a contracting party to the Constitutive Agreement and a Series “A” shareholder. If the amendment to the Constitutive Agreement described in the preceding paragraph is ratified by the legislature of, or the appropriate competent governmental body in, all of the five regional shareholder countries and becomes effective, it is expected that each of Argentina, Brazil and Uruguay would, upon satisfaction of certain conditions precedent, become a party to the Constitutive Agreement and be issued one Series “A” share. See “— Paid-in Capital and Capital Receivable”.
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Paid-in Capital and Capital Receivable
At December 31, 2006, CAF’s subscribed paid-in and receivable capital was $1.9 billion, of which $1.8 billion was paid-in capital and $62.2 million was capital receivable in installments. Over the years, we have had several increases of subscribed capital. Our most recent capital increases occurred in 2001, 2002, 2003, 2004, 2005 and 2007.
In 2001, Uruguay subscribed to paid-in capital of $5.0 million, which was paid in full in January 2004. Also in 2001, Argentina subscribed to paid-in capital of $25.0 million, which was paid in full in 2005.
In 2002, the regional shareholder countries subscribed to a paid-in capital increase of $250.0 million. Some countries will pay in four annual installments and others in five or six annual installments. Also in 2002, Spain subscribed to paid-in capital of $100.0 million, which it has paid in full. Spain also subscribed to callable capital of $200.0 million. In addition, Uruguay subscribed to an additional $15.0 million of paid-in capital, which was paid in full in December 2006. Finally, that year, Costa Rica paid in full its subscribed capital of $20.0 million.
In 2003, Brazil subscribed to an additional capital contribution of $50.0 million, which was paid in full in 2005.
In 2004, Uruguay subscribed to an additional capital contribution of $20.0 million, of which it has paid $8.0 million with the balance to be paid in three semi-annual installments, ending in December 2008. Also in 2004, the Dominican Republic entered into an agreement to purchase Series “C” shares for a total capital contribution of $50.0 million, of which it has paid $25.0 million with the balance to be paid in two equal installments ending in June 2009.
In 2005, Argentina subscribed to a paid-in capital increase of $75.0 million, of which it has paid $2.0 million in 2005, $24.3 million in 2006 and $24.3 million in May, 2007; the balance of $24.3 million is due in 2008. Also in 2005, Panama subscribed to an additional capital contribution of $10.0 million, of which it has paid $4.0 million. The balance is payable in three annual installments of $2.0 million each, the last of which will be paid in 2009.
On October 5, 2007, the Republic of Argentina entered into an agreement to subscribe to an additional $543.0 million in Series “C” shares, such agreement to take effect upon satisfaction by Argentina of certain internal legal requirements. Argentina has formally expressed its intention to become a contracting party to the Constitutive Agreement. Subject to the satisfaction of certain conditions precedent, including ratification of the amendment to the Constitutive Agreement by the legislature of, or the appropriate competent governmental body in, all of the five regional shareholder countries to allow the issuance of Series “A” shares to countries other than the regional shareholder countries, the subscription agreement contemplates the issuance of one Series “A” share to Argentina.
On November 9, 2007, the Republic of Chile subscribed to an additional $50.0 million in Series “C” shares, which it has paid in full.
On December 18, 2007, Uruguay entered into an agreement to subscribe to an additional $137.0 million in Series “C” shares, such agreement to take effect thirty days following its execution. Uruguay has formally expressed its intention to become a contracting party to the Constitutive Agreement. Subject to the satisfaction of certain conditions precedent, including ratification of the amendment to the Constitutive Agreement by the legislature of, or the appropriate competent governmental body in, all of the five regional shareholder countries to allow the issuance of Series “A” shares to countries other than the regional shareholder countries, the subscription agreement contemplates the issuance of one Series “A” share to Uruguay.
Also on December 18, 2007, Brazil entered into an agreement to subscribe to an additional $467.0 million in Series “C” shares, such agreement to take effect upon its formal ratification by the Federative Republic of Brazil. Brazil has formally expressed its intention to become a contracting party to the Constitutive Agreement. Subject to the satisfaction of certain conditions precedent, including ratification of the amendment to the Constitutive Agreement by the legislature of, or the appropriate competent governmental body in, all of the five regional shareholder countries to allow the issuance of Series “A” shares to countries other than the
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regional shareholder countries, the subscription agreement contemplates the issuance of one Series “A” share to Brazil.
Since 1990, capital contributions to CAF have included a premium (valor patrimonial) paid on each share purchased. This premium is in addition to the nominal $5,000 per share value established by CAF’s by-laws. The premium is determined at the beginning of each subscription and applies to all payments under that subscription.
As of December 31, 2006, all of the regional shareholder countries were current in their capital payments. The following table sets out the nominal value of our subscribed paid-in capital and capital receivable as of December 31, 2006:
Shareholders | Paid-in Capital | Capital Receivable | ||||||
(in U.S.$ thousands) | ||||||||
Series “A” Shares | ||||||||
Bolivia | $ | 1,200 | $ | — | ||||
Colombia | 1,200 | — | ||||||
Ecuador | 1,200 | — | ||||||
Peru | 1,200 | — | ||||||
Venezuela | 1,200 | — | ||||||
Series “B” Shares: | ||||||||
Bolivia | 125,275 | 7,260 | ||||||
Colombia | 460,990 | 8,270 | ||||||
Ecuador | 133,160 | 0 | ||||||
Peru | 470,605 | 0 | ||||||
Venezuela | 470,600 | 0 | ||||||
Private sector financial institutions | 1,305 | 0 | ||||||
Series “C” Shares: | ||||||||
Argentina | 24,450 | 20,535 | ||||||
Brazil | 59,620 | 0 | ||||||
Chile | 1,550 | 0 | ||||||
Costa Rica | 11,630 | 0 | ||||||
Dominican Republic | 5,505 | 16,520 | ||||||
Jamaica | 650 | 0 | ||||||
Mexico | 16,665 | 0 | ||||||
Panama | 8,315 | 2,530 | ||||||
Paraguay | 6,460 | 0 | ||||||
Spain | 55,175 | 0 | ||||||
Trinidad and Tobago | 735 | 0 | ||||||
Uruguay | 11,925 | 7,050 | ||||||
Total | $ | 1,870,615 | $ | 62,165 | ||||
Reserves
Article 42 of the Constitutive Agreement requires that at least 10% of our net income in each year be allocated to a mandatory reserve until that reserve amounts to 50% of subscribed capital. The mandatory reserve can be used only to offset losses. We also maintain a general reserve to cover contingent events and as a source of funding of last resort in the event of temporary illiquidity or when funding in the international markets is not available or is impractical. The general reserve is invested in short-term securities and certificates of deposit that are easily convertible into cash. The mandatory reserve is an accounting reserve.
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At December 31, 2006, our reserves totaled $1.2 billion. At such date, the mandatory reserve amounted to $255.4 million, or 13.2% of subscribed capital, and the general reserve amounted to $989.4 million.
Callable Capital
In addition to our subscribed paid-in and receivable capital, our shareholders have subscribed to callable capital totaling $1.1 billion at December 31, 2006. Our callable capital may be called by the Board of Directors to meet our obligations only to the extent that we are unable to meet such obligations with our own resources.
The Constitutive Agreement provides that the obligation of shareholders to pay for the shares of callable capital, upon demand by the Board of Directors, continues until such callable capital is paid in full. Thus, we consider members’ obligations to pay for callable capital subscriptions to be binding obligations backed by the full faith and credit of the respective member governments. If the callable capital were to be called, the Constitutive Agreement requires that the call be prorated among shareholders in proportion to their shareholdings.
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The following selected financial information as of and for the years ended December 31, 2006, 2005 and 2004 has been derived from our financial statements for those periods, which have been audited by KPMG, independent accountants. Our method of accounting conforms to U.S. Generally Accepted Accounting Principles (GAAP). The selected financial information as of and for the nine-month periods ended September 30, 2007 and September 30, 2006 has been derived from our unaudited interim financial information and includes adjustments, consisting of normal recurring adjustments, that we consider necessary for a fair presentation of our financial position at such dates and our results of operations for such periods. The results of the nine-month period ended September 30, 2007 are not necessarily indicative of results to be expected for the full year 2007. The selected financial information should be read in conjunction with our audited financial statements and notes thereto, our unaudited interim financial information and the notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus.
Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in U.S. $ thousands, except ratios) | ||||||||||||||||||||
Income Statement Data | ||||||||||||||||||||
Interest income | $ | 735,506 | $ | 547,572 | $ | 378,707 | $ | 613,015 | $ | 540,669 | ||||||||||
Interest expense | (364,073 | ) | (255,585 | ) | (160,866 | ) | (304,813 | ) | (251,546 | ) | ||||||||||
Net interest income | 371,433 | 291,987 | 217,841 | 308,202 | 289,123 | |||||||||||||||
Provision (credit) for loan losses | 19,000 | (14,500 | ) | (18,555 | ) | 27,000 | (10,100 | ) | ||||||||||||
Net interest income after provision (credit) | 352,433 | 306,487 | 236,396 | 281,202 | 299,223 | |||||||||||||||
Non-interest income | 14,987 | 19,747 | 11,399 | 13,207 | 10,030 | |||||||||||||||
Non-interest expenses | (46,767 | ) | (42,996 | ) | (40,042 | ) | (40,224 | ) | (40,937 | ) | ||||||||||
Net income | $ | 320,653 | $ | 283,238 | $ | 207,753 | $ | 254,185 | $ | 268,316 | ||||||||||
Balance Sheet Data (end of period) | ||||||||||||||||||||
Current assets (net of allowance) | $ | 3,367,055 | $ | 3,175,406 | $ | 4,323,231 | ||||||||||||||
Non-current assets | 7,072,438 | 6,306,923 | 7,172,104 | |||||||||||||||||
Total assets | $ | 10,439,493 | $ | 9,482,329 | $ | 11,495,335 | ||||||||||||||
Current liabilities | $ | 2,303,758 | $ | 2,022,568 | $ | 2,746,145 | ||||||||||||||
Long-term liabilities | 4,443,008 | 4,222,600 | 4,822,483 | |||||||||||||||||
Total liabilities | 6,746,766 | 6,245,168 | 7,568,628 | |||||||||||||||||
Total shareholders’ equity | 3,692,727 | 3,237,161 | 3,926,707 | |||||||||||||||||
Total liabilities and shareholders’ equity | $ | 10,439,493 | $ | 9,482,329 | $ | 11,495,335 | ||||||||||||||
Loan Portfolio and Equity Investments | ||||||||||||||||||||
Total loans | $ | 8,097,472 | $ | 7,346,978 | $ | 7,104,123 | $ | 9,054,872 | $ | 7,426,482 | ||||||||||
Allowance for loan losses | 188,608 | 161,629 | 181,801 | 218,035 | 159,445 | |||||||||||||||
Equity investments | 93,426 | 114,646 | 112,135 | 92,894 | 95,793 | |||||||||||||||
Selected Financial Ratios | ||||||||||||||||||||
Return on average total shareholders’ equity(1) | 9.4 | % | 9.6 | % | 8.2 | % | 8.7 | % | 10.7 | % | ||||||||||
Return on average paid-in capital(2) | 18.0 | % | 17.7 | % | 14.7 | % | 17.1 | % | 20.4 | % | ||||||||||
Return on average assets(3) | 3.3 | % | 3.0 | % | 2.3 | % | 4.1 | % | 3.8 | % | ||||||||||
Administrative expenses divided by average assets* | 0.5 | % | 0.5 | % | 0.4 | % | 0.4 | % | 0.4 | % | ||||||||||
Overdue loan principal as a percentage of loan portfolio (excluding non-accrual loans) | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||
Non-accrual loans as a percentage of loan portfolio | 0.00 | % | 0.02 | % | 0.28 | % | 0.00 | % | 0.00 | % | ||||||||||
Allowance for losses as a percentage of loan portfolio | 2.3 | % | 2.2 | % | 2.6 | % | 2.4 | % | 2.2 | % |
(1) | Net income divided by average total shareholders’ equity.* | |
(2) | Net income divided by average subscribed and paid-in capital.* | |
(3) | Net income divided by average total assets.* | |
* | For the nine-month periods, the amounts have been annualized. |
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The following discussion should be read in conjunction with our audited financial statements and notes thereto beginning on page F-3 and the unaudited interim financial information and notes thereto beginning on page F-31 of this prospectus.
Summary of Results
During the three years ended December 31, 2006, our net income increased at a compound average annual rate of approximately 24.2%. Our net income for the year ended December 31, 2006 was $320.7 million, representing an increase of $37.4 million, or 13.2%, over net income of $283.2 million for 2005. This increase resulted principally from an increase in interest rates and growth in our interest-earning assets. For the year ended December 31, 2005, our net income was $283.2 million, representing an increase of $75.5 million, or 36.3%, over net income of $207.8 million for 2004. This increase resulted principally from an increase in interest rates, a credit for loan losses due to an improvement in the credit quality of the loan portfolio and growth in our interest-earning assets.
Our net income for the nine-month period ended September 30, 2007 was $254.2 million, representing a decrease of $14.1 million, or 5.3%, compared to net income of $268.3 million for the corresponding period in 2006. This decrease resulted principally from a decrease in interest rates, a higher provision for loan losses and a decrease in commissions related to loan prepayment fees.
The percentage increase in GDP during 2006 compared to 2005 for each of the regional shareholder countries was as follows: Bolivia, 4.6; Colombia, 6.8; Ecuador, 4.3; Peru, 8.0; and Venezuela, 10.3.
Management anticipates that our loan portfolio will continue to grow as a result of our strategy to expand our shareholder base, both by issuing shares to new shareholder countries and by additional capital subscriptions by existing shareholder countries, which may result in increased loan demand for projects in such countries.
Critical Accounting Policies
General
Our financial statements and reported results are based on U.S. GAAP, which requires us in some cases to use estimates and assumptions that may affect our reported results and disclosures. We describe our significant accounting policies in Note 1 (“Significant Accounting Policies”) to our audited financial statements. We believe that some of the more significant accounting policies we use to present our financial results, discussed below, involve the use of accounting estimates that we consider to be critical because: (1) they require significant management judgment and assumptions about matters that are complex and inherently uncertain; and (2) the use of a different estimate or a change in estimate could have a material impact on our reported results of operations or financial condition. Specifically, the estimates we use to determine the adequacy of the allowance for loan losses are critical accounting estimates.
Allowance for Loan Losses
We maintain an allowance for losses on our loan portfolio at levels that management believes to be adequate but not excessive to absorb probable losses inherent in the portfolio at the balance sheet date. In general, the evaluation for allowance for loan losses is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The use of different estimates or assumptions as well as changes in external factors could produce materially higher or lower net income for the period in which the estimate is made. Although we expect that our loans will ultimately be repaid, amounts may not be repaid on their original terms. As a result, we can suffer losses resulting from the difference between the discounted present value of expected payments for interest and charges according to the related contractual terms and the actual cash flow.
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In particular, the general allowance for loan losses is established by us based on the individual risk rating for the long-term foreign currency debt of the borrower countries which is assigned by the international risk rating agencies as of the date of preparation of the financial statements. This country risk rating considers a default probability. In the case of the sovereign loan portfolio a factor of preferred creditor status is also considered.
Income Statement
Interest Income
Nine Months Ended September 30, 2007 and 2006. For the nine-month period ended September 30, 2007, our interest income was $613.0 million, representing an increase of $72.3 million, or 13.4%, over interest income of $540.7 million for the corresponding period in 2006. This increase resulted principally from growth in our loan portfolio.
2006, 2005 and 2004. For the year ended December 31, 2006, our interest income was $735.5 million, representing an increase of $187.9 million, or 34.3%, over interest income of $547.6 million for the year ended December 31, 2005. This increase resulted principally from an increase in interest rates and growth in our interest-earning assets. Interest income for the year ended December 31, 2005 represented an increase of $168.9 million, or 44.6%, from our interest income of $378.7 million for the year ended December 31, 2004. This increase resulted principally from an increase in interest rates.
Interest Expense
Nine Months Ended September 30, 2007 and 2006. For the nine-month period ended September 30, 2007, our interest expense was $304.8 million, representing an increase of $53.3 million, or 21.1%, over interest expense of $251.6 million for the corresponding period in 2006. This increase resulted principally from an increase in interest rates compared to the corresponding period in 2006, as well as from an increase in financial liabilities.
2006, 2005 and 2004. For the year ended December 31, 2006, our interest expense was $364.1 million, representing an increase of $108.5 million, or 42.5%, over interest expense of $255.6 million for the year ended December 31, 2005. This growth resulted primarily from an increase in interest rates. Interest expense for the year ended December 31, 2005 represented an increase of $94.7 million, or 58.9%, from our interest expense of $160.9 million for the year ended December 31, 2004. This increase resulted primarily from an increase in interest rates.
Net Interest Income
Nine Months Ended September 30, 2007 and 2006. For the nine-month period ended September 30, 2007, our net interest income was $308.2 million, representing a decrease of $19.1 million, or 6.6%, compared to net interest income of $289.1 million for the corresponding period in 2006. Our net interest income margin decreased to 4.1% for the nine-month period ended September 30, 2007, as compared to 4.3% for the corresponding period in 2006, principally as a result of a decrease in interest rates.
2006, 2005 and 2004. For the year ended December 31, 2006, our net interest income was $371.4 million, representing an increase of $79.5 million, or 27.2%, over net interest income of $292.0 million for the year ended December 31, 2005, which, in turn, represented an increase of $74.1 million, or 34.0%, from our net interest income of $217.8 million for the year ended December 31, 2004. Our net interest income margin increased to 4.1% in 2006, as compared to 3.4% in 2005 and 2.6% in 2004, principally as a result of an increase in interest rates.
Provision for Loan Losses
Nine Months Ended September 30, 2007 and 2006. For the nine-month period ended September 30, 2007, we recorded a provision for loan losses of $27.0 million, compared to a credit for loan losses of $10.1 million for the same period in 2006. Changes in the provision for loan losses were mainly due to
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changes in the credit ratings of our shareholder countries. These have a significant impact given that approximately 90% of our loan portfolio is sovereign-risk concentrated. The allowance for loan losses as a percentage of the loan portfolio was 2.4% at September 30, 2007, compared to 2.2% at September 30, 2006.
2006, 2005 and 2004. For the year ended December 31, 2006, we recorded a provision for loan losses of $19.0 million, compared to a credit for loan losses of $14.5 million for the year ended December 31, 2005 and a credit for loan losses of $18.6 million for the year ended December 31, 2004. Changes in the provision for loan losses were mainly due to changes in the credit ratings of our shareholder countries. These have a significant impact given that approximately 90% of our loan portfolio is sovereign-risk concentrated. The allowance for loan losses as a percentage of the loan portfolio was 2.3% at December 31, 2006, 2.2% at December 31, 2005 and 2.6% at December 31, 2004.
The credits and provisions in the periods described above reflect management’s estimates for both general and specific provisions. The specific provision is related to loans that have been adversely classified. The calculation of the amount set aside as the general provision is based on the sovereign ratings of the shareholder countries and their related probabilities of default, as provided by the major rating agencies, adjusted to take into account CAF’s privileges and immunities within the Andean region. The specific provision is calculated according to FAS 114 and 118 guidelines.
Non-Interest Income
Our non-interest income consists principally of commissions, dividends and equity in earnings of investments and other income.
Nine Months Ended September 30, 2007 and 2006. For the nine-month period ended September 30, 2007, our non-interest income was $13.2 million, representing an increase of $3.2 million, or 31.7%, compared to non-interest income of $10.0 million for the corresponding period in 2006. This increase resulted principally from an increase in dividends from equity investments.
2006, 2005 and 2004. For the year ended December 31, 2006, our total non-interest income was $15.0 million, representing a decrease of $4.8 million, or 24.1%, compared to total non-interest income of $19.7 million for the year ended December 31, 2005, which in turn represented an increase of $8.3 million, or 57.7%, over total non-interest income of $11.4 million for the year ended December 31, 2004. The decrease in our total non-interest income in 2006 over 2005 resulted principally from a decrease in dividends from equity investments, while the increase in 2005 over 2004, resulted principally from an increase in dividends from equity investments.
Non-Interest Expenses
Our non-interest expenses consist principally of administrative expenses.
Nine Months Ended September 30, 2007 and 2006. For the nine-month period ended September 30, 2007, our non-interest expenses totaled $40.2 million, representing a decrease of $0.7 million, or 1.7%, compared to non-interest expenses of $40.9 million for the corresponding period in 2006. More than 81% and 72% of non-interest expenses was comprised of administrative expenses for the nine-month periods ended September 30, 2007 and 2006, respectively. From September 30, 2006 to September 30, 2007, our general and administrative expenses as a percentage of our total average assets have remained stable at 0.41%.
2006, 2005 and 2004. For the year ended December 31, 2006, our total non-interest expenses were $46.8 million, representing an increase of $3.8 million, or 8.8%, over total non-interest expenses of $43.0 million for the year ended December 31, 2005, which in turn represented an increase of $2.9 million, or 7.4%, over total non-interest expenses of $40.0 million for the year ended December 31, 2004.
For the year ended December 31, 2006, administrative expenses were $46.4 million, or 0.5% of our total average assets, representing an increase of $3.8 million over administrative expenses for the year ended December 31, 2005. For the year ended December 31, 2005, administrative expenses were $42.6 million, or 0.45% of total average assets, representing an increase of $4.5 million over administrative expenses of
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$38.1 million for the year ended December 31, 2004. These movements resulted largely from the impact of local currency expenses in Venezuela. Nevertheless, from December 31, 2004 to December 31, 2006, our general and administrative expenses have remained stable as a percentage of our total average assets.
Equity investments in which CAF has a participation of less than 20% of the investee’s equity are required to be recorded at cost according to U.S. GAAP. Also, management is required to assess the value of these investments and determine whether any value impairment is temporary or other than temporary. Impairment charges must be taken once management has determined that the loss of value is other than temporary. As a result of the analysis of these equity investments, management determined impairment charges as follows: $190,000 in 2006, $24,000 in 2005 and $1.7 million in 2004. These impairment charges represented 0.08%, 0.02% and 1.5% of our equity investments at December 31, 2006, 2005 and 2004, respectively.
The impairment charges were distributed as follows according to the type of investment:
2006 | 2005 | 2004 | ||||||||||
(In U.S.$ thousands) | ||||||||||||
Single companies | $ | — | $ | 24 | $ | 1,051 | ||||||
Investment funds | $ | 190 | $ | — | $ | 643 | ||||||
Total | $ | 190 | $ | 24 | $ | 1,694 | ||||||
Balance Sheet
Total Assets and Liabilities
September 30, 2007. At September 30, 2007, our total assets were $11.5 billion, representing an increase of $1.1 billion, or 9.2%, from total assets of $10.4 billion at December 31, 2006. At September 30, 2007, our total liabilities were $7.6 billion, representing an increase of $0.8 billion, or 12.2%, from total liabilities of $6.8 billion at December 31, 2006. These increases primarily resulted from loan disbursements and related borrowings during the nine-month period ended September 30, 2007.
2006 and 2005. At December 31, 2006, our total assets were $10.4 billion, representing an increase of $957.2 million, or 10.1%, over total assets of $9.5 billion as of December 31, 2005. The increase in our total assets principally reflected an increase in our loan portfolio as well as an increase in marketable securities held by us. At December 31, 2006, our total liabilities were $6.8 billion, representing an increase of $501.6 million, or 8.0%, over total liabilities of $6.3 billion as of December 31, 2005. The increase in our total liabilities principally reflected the need to raise capital in the international capital markets to fund our operations.
Asset Quality
Overdue Loans
September 30, 2007. There were no overdue loans at September 30, 2007 or December 31, 2006 (not including non-accrual loans in overdue status).
2006 and 2005. There were no overdue loans at December 31, 2006 or December 31, 2005 (not including non-accrual loans in overdue status).
Non-Accrual Loans
September 30, 2007. There were no loans in non-accrual status at September 30, 2007 or December 31, 2006.
2006 and 2005. At December 31, 2006, there were no loans in non-accrual status, compared to $1.3 million, or 0.02% of the total loan portfolio, at December 31, 2005. For the year ended December 31, 2006, $16,000 of overdue interest and other charges in respect of non-accrual status loans was excluded from net income.
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Restructured Loans
September 30, 2007. At September 30, 2007, the total principal amount of outstanding restructured loans was $3.6 million, or 0.08% of the total loan portfolio, all of which represented one loan to a private sector borrower in Bolivia. This represented a $1.0 million decrease from the total principal amount of outstanding restructured loans at December 31, 2006, which was $4.6 million, or 0.06% of the total loan portfolio.
2006 and 2005. At December 31, 2006, the total principal amount of outstanding restructured loans was $4.6 million, or 0.06% of the total loan portfolio. The total amount represented one loan to a private sector borrower in Peru. This represented a decrease from the total principal amount of outstanding restructured loans at December 31, 2005, which was $5.7 million, or 0.08% of the total loan portfolio.
Loan Write-offs and Recoveries
September 30, 2007. A total of $0.2 million of the principal amount of two loans was written off during the nine-month period ended September 30, 2007, representing a decrease of $0.9 million compared to total write-offs of $1.2 million in the corresponding period of 2006. We booked recoveries for $2.6 million during the nine-month period ended September 30, 2007 and $8.9 million during the corresponding period of 2006.
2006 and 2005. A total of $1.1 million of the principal amount of three loans was written off in 2006, representing a decrease of $9.2 million, or 90%, compared to total write-offs of $10.4 million in 2005. Some of these write-offs comprise portions of the non-accrual loans referred to above. We booked recoveries of $9.0 million and $4.7 million during 2006 and 2005, respectively.
See “Operations of CAF — Asset Quality” for further information regarding our asset quality. See “Operations of CAF — Loan Portfolio” for details regarding the distribution of our loans by country and economic sector.
Off-Balance Sheet Transactions
We enter into off-balance sheet arrangements in the normal course of our business to facilitate our business and objectives and reduce our exposure to interest rate and foreign exchange rate fluctuations. These arrangements, which may involve elements of credit and interest rate risk in excess of amounts recognized on our balance sheet, primarily include (1) credit agreements subscribed and pending disbursement, (2) lines and letters of credit for foreign trade and (3) partial credit guarantees of member country obligations. For further discussion of these arrangements, see Note 19 (“Commitments and Contingencies”) to our audited financial statements.
Liquidity
CAF seeks to ensure adequate liquidity by maintaining liquid assets greater than the higher of:
(1) 45% of total undisbursed project loan commitments and
(2) 35% of the sum of our next 12 months’
(a) estimated debt service, plus
(b) estimated project loan disbursements.
Our investment policy requires that at least 80% of our liquid assets be held in the form of investment grade instruments. The remaining portion may be invested in unrated or non-investment grade instruments.
September 30, 2007. At September 30, 2007, our liquid assets consisted of $1.9 billion of cash, time deposits and securities, of which 92.0% was invested in investment grade instruments. At September 30, 2007, 77.5% of our liquid assets was invested in time deposits in financial institutions or securities rated “A” or better by a U.S. nationally recognized statistical rating organization.
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2006 and 2005. At December 31, 2006, our liquid assets consisted of $1.9 billion of cash, time deposits and securities, of which 92.1% was invested in investment grade instruments. At December 31, 2006, 90.6% of our liquid assets was invested in time deposits in financial institutions or securities rated “A” or better by a U.S. nationally recognized statistical rating organization. At December 31, 2005, our liquid assets amounted to $1.8 billion, of which 93.2% was invested in investment grade instruments. Our investment policy emphasizes security and liquidity over yield.
Strategy and Capital Resources
Our business strategy is to provide financing for projects, trade and investment in the regional shareholder countries. Management expects our assets to grow in the future, which will increase our need for additional funding; likewise, maturing debt obligations will need to be replaced. In addition to scheduled capital increases, management anticipates a need to increase funds raised in the international capital markets and to maintain funding through borrowings from multilateral and other financial institutions. While the substantial majority of our equity will continue to be held by regional shareholder countries, we intend to continue offering equity participation to countries other than the regional shareholder countries through the issuances of Series “C” shares to such countries. See “Capital Structure”.
We intend to continue our programs to foster sustainable growth within the regional shareholder countries, and to increase our support for the private sector within our markets, either directly or through financial intermediaries. See “Operations of CAF” below.
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CAF’s purpose is to foster and promote economic development, social development and integration within the regional shareholder countries through the efficient use of financial resources in conjunction with both private sector and public sector entities. To accomplish our objective, we primarily engage in short, medium and long-term loans and guarantees. To a lesser extent, we make limited equity investments in funds and companies, and provide technical and financial assistance, as well as administrative services for certain regional funds.
CAF also provides lending for projects in non-regional shareholder countries, including but not limited to projects that promote trade or integration with regional shareholder countries.
Business Management of CAF
Our business management is divided into two broad functions: client relationship management and financial management.
Client Relationship Management
Our client relationship management function is conducted by a group of relationship managers and sector and product specialists who are responsible for the development, structuring, appraisal and implementation of our lending activities. Clients are identified through direct contact, referrals from our representative offices and referrals from third parties such as shareholders, multilateral institutions, international financial institutions and other clients.
Our client relationship management function is currently fulfilled by the following five departments, each headed by a Vice President:
• | Country Programs, which is responsible for our relationships with governments, public sector corporations and financial institutions and for the development of a global approach to business activities in each of the member countries; | |
• | Infrastructure, which is responsible for the financing of public infrastructure projects and the analysis of public policies within the different development sectors; | |
• | Corporate Finance and Investment Banking, which is responsible for our relationships with private sector corporations, while simultaneously furnishing advisory services to our clients; | |
• | Social and Environmental Development, which is responsible for investments in social and environmental areas and in micro, small and medium size enterprises; and | |
• | Financial Systems, which is responsible for our relationships with financial institutions and regional capital markets, as well as seeking new ways to strengthen the financial systems in the region through effective structures and regulations. |
The client relationship management group is also responsible for reviewing and developing lending policies and procedures and for monitoring the quality of the loan portfolio on an ongoing basis. In these duties, the client management group is assisted by our Credit Administration Office and our Corporate Comptroller Office. Also, the client relationship management function is supported by our Office of Public Policies and Competitiveness, which is responsible for the creation of a knowledge base and innovative projects source that will influence the creation and execution of public policies designed to strengthen the region’s competitiveness. The Office of Public Policies and Competitivenessis is also responsible for anticipating risks and opportunities within the economic, political and social environments of the region so as to advise our business units and support our strategic planning process.
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Financial Management
Our financial management group is responsible for managing our funded debt, as well as our liquid assets. This group is responsible for developing, structuring, appraising and implementing our borrowing activities. It is also responsible for reviewing and developing policies and procedures for the monitoring of our financial well-being and for the proper management of liquidity. The financial management group is headed by the Vice President of Finance.
The asset distribution group is a part of the financial management group, and it has two basic responsibilities:
(1) structuring A/B loan transactions in which we loan a portion of the total amount and other financial institutions loan the remainder; and
(2) selling loans to international banks interested in increasing their exposure in the regional shareholder countries.
The staff of our financial management group works in close coordination with our client relationship managers. Our client relationship management group and financial management group are supported by the financial control and budget, human resources, information systems and legal departments.
Loan Portfolio
We extend medium-term and long-term loans to finance both public sector and private sector projects in the regional shareholder countries, either directly to a project or through a financial intermediary in a regional shareholder country that lends the funds to the appropriate project. To a lesser extent, we also provide loans to finance trade by and among the members of the regional shareholder countries. Loans may be used for any component of a project, subject to exceptions relating to, among other things, the acquisition of land and the payment of taxes. We endeavor to concentrate our lending activities on national and multinational economic development projects, especially those involving electricity, gas and water supply, transport or communications in two or more regional shareholder countries and those that generate foreign exchange.
We provide credit lines to financial institutions in the regional shareholder countries. The purpose of these credit lines is to enable these institutions to finance projects that fall within our overall objectives, but that are not sufficiently large to justify our being directly involved in the project. The relevant financial institutions are thereby provided with funds that enable them to strengthen their financial resources within parameters previously agreed to with us. Under such multisectoral credit lines, we take the credit risk of the financial intermediary and also have recourse to the underlying borrowers. The financial intermediaries are responsible for repayment of their loans from us regardless of whether the underlying borrower repays the financial intermediary.
We endeavor to strengthen trade by and among regional shareholder countries and to assist companies in the regional shareholder countries to access world markets. Our trade-financing activities are complementary to those of the export credit agencies of regional shareholder countries because we finance qualifying import or export operations, whereas those agencies generally are limited to providing financing only for goods exported from the respective countries. Through trade-financing, we finance the movement of merchandise. We also provide credit support to trade activities through the confirmation of letters of credit in situations where the issuing local bank would not be perceived as sufficiently creditworthy by financial institutions in the beneficiary’s country.
In 1997, we began making a portion of our loans through an “A/B” loan program. The “A” portion of the loan is made directly to the borrower by us. Under the “B” portion, banks provide the funding and assume the credit risk. Because we act as the lender of record for the entire loan, commercial banks are exempted from country risk provisions and, therefore, the borrower receives an interest rate that is generally lower than the rate available in the commercial markets. The lower interest rate is a result, among other factors, of the reduced inherent risk resulting from our status as a multilateral financial institution.
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Our loan pricing is typically based on our cost of funds plus a spread to cover operational costs and credit risks. All sovereign-risk loans are made at the same spread for comparable maturities. Generally, our loans are made on a floating interest rate basis. Under certain exceptional circumstances, loans may be made at fixed interest rates, provided that the corresponding funding is obtained at fixed interest rates. We generally charge a loan origination fee equal to 0.35% of the total loan amount and a commitment fee equal to 0.25% per annum on undisbursed loan balances. Substantially all loans are denominated in U.S. dollars.
Our policies generally require that loans to public sector entities have the benefit of sovereign guarantees. Exceptions have been made for a few highly-capitalized entities. Loans to private sector entities other than banks generally must have the benefit of bank or other guarantees, or other collateral acceptable to us.
During the three-year period ended December 31, 2006, our total assets grew at a compound average annual rate of 4.4%, in part reflecting the economic growth in most of the regional shareholder countries. At December 31, 2006, our total assets were $10.4 billion, of which $8.1 billion, or 77.5%, were disbursed and outstanding loans. At December 31, 2006, the “B” loan portion of our “A/B” loan transactions totaled $482.0 million. The tables on loan exposure that follow reflect only the “A” portion of the respective “A/B” loan transactions since we only assume the credit risk of the “A” loan portion. During this three-year period, our lending portfolio grew at a compound average annual rate of 6.8%. Our management expects further loan growth to be funded by additional borrowings and deposits, retained earnings and planned capital increases.
Loans to Public and Private Sector Borrowers
Our total loan portfolio outstanding, classified by public sector and private sector borrowers, was as follows:
At December 31, | ||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||
(in U.S.$ millions) | ||||||||||||||||
Public Sector | 86.4 | % | 6,992.7 | 6,552.5 | 6,414.4 | |||||||||||
Private Sector | 13.6 | % | 1,104.7 | 824.1 | 691.4 | |||||||||||
100.0 | % | 8,097.4 | 7,346.6 | 7,105.8 | ||||||||||||
Fair value adjustments on hedging activities | 0.0 | (0.3 | ) | (1.7 | ) | |||||||||||
Total | 8,097.4 | 7,347.0 | 7,104.1 | |||||||||||||
The percentage of our total loan portfolio represented by public sector loans decreased between 2004 and 2006 from 90.2% to 86.4%. Management expects the proportion of public sector and private sector loans during 2007 to remain approximately constant with 2006 levels.
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Loans by Borrowing Country
Our total loan portfolio outstanding, classified on a country-by-country basis, according to the location of the borrower, was as follows:
At December 31, | ||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||
(in U.S. $ millions) | ||||||||||||||||
Bolivia | 12.6 | % | 1,024.3 | 981.6 | 929.2 | |||||||||||
Colombia | 20.0 | % | 1,619.5 | 1,899.5 | 1,701.9 | |||||||||||
Ecuador | 16.9 | % | 1,370.8 | 1,230.5 | 1,224.2 | |||||||||||
Peru | 22.3 | % | 1,801.7 | 1,712.3 | 1,649.8 | |||||||||||
Venezuela | 21.3 | % | 1,723.5 | 1,134.7 | 1,197.0 | |||||||||||
Other(1) | 6.9 | % | 557.6 | 388.0 | 403.6 | |||||||||||
100.0 | % | 8,097.4 | 7,346.6 | 7,105.8 | ||||||||||||
Fair value adjustments on hedging activities | 0.0 | 0.3 | (1.7 | ) | ||||||||||||
Total | 8,097.4 | 7,347.0 | 7,104.1 | |||||||||||||
(1) | Loans outside the regional shareholder countries. |
Loans Approved and Disbursed by Country
Our loan approval process is described under “— Credit Policies”. After approval, disbursements of a loan proceed in accordance with the contractual conditions of the loan agreement.
Set forth below is a table of the amount of loans approved and loans disbursed, classified by country, for each of the years indicated:
Approved | Disbursed(1) | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
(in U.S.$ millions) | ||||||||||||||||||||||||
Bolivia | 396.9 | 523.2 | 498.8 | 188.8 | 198.5 | 232.8 | ||||||||||||||||||
Colombia | 1,001.0 | 1,236.6 | 922.1 | 653.6 | 687.9 | 532.6 | ||||||||||||||||||
Ecuador | 1,024.2 | 815.4 | 338.0 | 504.4 | 339.9 | 297.5 | ||||||||||||||||||
Peru | 941.4 | 416.8 | 603.9 | 483.9 | 255.0 | 464.1 | ||||||||||||||||||
Venezuela | 841.6 | 627.1 | 821.2 | 845.2 | 208.4 | 308.7 | ||||||||||||||||||
Other(2) | 1,315.8 | 1,127.3 | 318.7 | 330.4 | 170.2 | 52.0 | ||||||||||||||||||
Total | 5,520.9 | 4,746.3 | 3,502.7 | 3,006.3 | 1,859.9 | 1,887.7 | ||||||||||||||||||
(1) | Includes short-term loans in the amounts of $933.2 million, $478.3 million and $226.2 million, respectively, for each of the years in the three-year period ended December 31, 2006. | |
(2) | Loans outside the regional shareholder countries, of which $579.0 million was approved to entities in Brazil and $580.0 million was approved to entities in Argentina in 2006. |
During the three years ended December 31, 2006, the growth rate of loans by country was as follows: Bolivia, 4.5%; Colombia, -2.4%; Ecuador, 5.8%; Peru, 4.5%; and Venezuela, 19.9%. The growth of the loan portfolio during the three-year period reflects increases in loan approvals as a result of the region’s economic growth during the period and our increased share of infrastructure financings in the region. Loans to non-regional shareholder countries holding Series “C” shares (as described under “Capital Structure — General”) totaled $557.6 million in 2006, compared to $388.0 million and $403.6 million in 2005 and 2004, respectively. To date, our loans in non-regional shareholder countries have primarily been to Brazilian and Argentinean
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borrowers. Management expects loans to non-regional shareholder countries to increase as a percentage of the total loan portfolio.
Management anticipates that our loan portfolio will continue to grow as a result of our strategy to expand our shareholder base, both by issuing shares to new shareholder countries and by additional capital subscriptions by existing shareholder countries, which may result in increased loan demand for projects in such countries.
Distribution of Loans by Industry
At December 31, 2006, our loan portfolio outstanding was distributed by industry as follows:
Total by | % of | |||||||||||||||||||||||||||||||
Bolivia | Colombia | Ecuador | Peru | Venezuela | Others | Sector | Total | |||||||||||||||||||||||||
(in U.S.$ millions) | ||||||||||||||||||||||||||||||||
Agriculture, hunting and forestry | 0.0 | 52.1 | 8.7 | 81.2 | 0.0 | 0.0 | 142.0 | 1.8% | ||||||||||||||||||||||||
Exploitation of mines and quarries | 40.0 | 0.0 | 0.0 | 0.0 | 0.0 | 20.0 | 60.0 | 0.7% | ||||||||||||||||||||||||
Manufacturing industry | 22.9 | 46.9 | 33.2 | 10.3 | 0.0 | 80.0 | 193.3 | 2.4% | ||||||||||||||||||||||||
Supply of electricity, gas and water | 81.2 | 19.9 | 147.9 | 78.3 | 529.0 | 51.9 | 908.2 | 11.2% | ||||||||||||||||||||||||
Transport, warehousing and communications | 424.5 | 507.9 | 508.9 | 491.9 | 928.7 | 328.1 | 3,190.0 | 39.4% | ||||||||||||||||||||||||
Financial intermediaries(1) | 101.5 | 151.6 | 175.5 | 191.3 | 29.1 | 77.6 | 726.5 | 9.0% | ||||||||||||||||||||||||
Social and other infrastructure programs | 351.2 | 841.1 | 485.0 | 936.7 | 236.7 | 0.0 | 2,850.8 | 35.2% | ||||||||||||||||||||||||
Other activities | 2.9 | 0.0 | 11.6 | 12.0 | 0.0 | 0.0 | 26.5 | 0.3% | ||||||||||||||||||||||||
Total | 1,024.2 | 1,619.5 | 1,370.8 | 1,801.7 | 1,723.5 | 557.6 | 8,097.2 | (2) | 100.0% | |||||||||||||||||||||||
(1) | Multisectoral credit lines to public sector development banks, private banks and other institutions. | |
(2) | Does not include fair value adjustment on hedging activities of $0.3 million. |
Maturity of Loans
At December 31, 2006, our outstanding loans were scheduled to mature as follows:
2007 | 2008 | 2009 | 2010 | 2011 | 2012-2021 | |||||||||||||||||||
(in U.S.$ millions) | ||||||||||||||||||||||||
Principal amount(1) | 1,438 | 997.8 | 991.2 | 848.4 | 839.4 | 2,982.6 |
(1) | Does not include fair value adjustment on hedging activities of $0.3 million. |
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Ten Largest Borrowers
The following table sets forth the aggregate principal amount of loans to our ten largest borrowers, and the percentage such loans represented of the total loan portfolio, at December 31, 2006:
As a Percentage | ||||||||
of Total Loan | ||||||||
Borrower | Amount | Portfolio | ||||||
(in U.S.$ millions) | ||||||||
Republic of Venezuela | 1,711.4 | 21.1% | ||||||
Republic of Peru | 1,450.5 | 17.9% | ||||||
Republic of Colombia | 1,424.7 | 17.6% | ||||||
Republic of Ecuador | 1,031.7 | 12.7% | ||||||
Republic of Bolivia | 798.9 | 9.9% | ||||||
Republic of Argentina | 97.6 | 1.2% | ||||||
Banco de Credito del Peru (Peru)(1) | 85.0 | 1.0% | ||||||
Alcaldía Mayor Distrito Capital Santafé De Bogotá (Colômbia) | 71.4 | 0.9% | ||||||
Municipio De Guayaquil (Ecuador) | 68.2 | 0.8% | ||||||
Transportadora Brasileira Gasoduto Bolivia-Brasil S.A. (Brazil)(2) | 62.2 | 0.8% | ||||||
Total | 6,801.7 | 84.0% | ||||||
(1) | Privately owned financial intermediary. | |
(2) | Company related to the Bolivia-Brazil gas pipeline. |
Selected Projects
Set out below are examples of projects approved by CAF during 2006 and the respective loan approval amounts.
Bolivia
Republic of Bolivia/Bolivian Road Administration (ABC) — $120 million loan for the improvement of the roads within southern Bolivia, thereby allowing economic and political integration and facilitating the exchange of goods and services.
Republic of Bolivia/Bolivian Road Administration (ABC) — $75 million loan to finance a road project between Potosí and Uyuni, to promote the development of commercial, productive and tourism activities in the neighboring regions.
Colombia
Water Enterprises of Magdalena — $58.1 million loan program for the improvement of the coverage, quality and efficiency of the potable water and sewage systems in the Department of Magdalena.
Ecuador
Republic of Ecuador/Municipality of the Metropolitan District of Quito — $50 million loan for the improvement of the road conditions and the mass transportation system in Quito.
Peru
Concessionary Interoceánica Sur S.A.— $211 million loan to support important infrastructure projects needed for the development of the country, decentralization, territorial compensation and social equity.
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Venezuela
Bolivarian Republic of Venezuela/Ministry of Finance — $400 million loan to support an investment plan for housing developments, which is intended to approve housing conditions for low-income families.
Bolivarian Republic of Venezuela/Ministry of Finance — $400 million loan to support a mass transportation project that is expected to offer fast and efficient transportation services to the community.
Argentina
Republic of Argentina — $300 million loan to support the development of the transportation system, as outlined in Argentina’s federal transportation plan.
Panama
Republic of Panama — $53 million loan to Panama’s Transit and Transportation Authority aimed at improving traffic conditions, thereby reducing both travel time and the number of traffic accidents.
Brazil
Republic of Brazil — $200 million loan program to finance the improvement of the national road network’s infrastructure, construction of water systems, preservation of the environment, water treatment, and other services for eligible municipalities.
Other Activities
Treasury Operations
Our investment policy requires that at least 80% of our liquid assets be held in the form of investment grade instruments. The remaining portion may be invested in unrated or non-investment grade instruments. At December 31, 2006, our liquid assets consisted of $1.9 billion of cash, time deposits and securities, of which 92.1% were rated investment grade.
Equity Shareholdings
We may acquire equity shareholdings in new or existing companies within the regional shareholder countries, either directly or through investment funds focused on Latin America. Our equity participation in any one company is limited to 1% of our total shareholders’ equity. Our policies do not permit us to be a company’s largest individual shareholder. In addition, the aggregate amount of our equity investments cannot exceed 10% of our total shareholders’ equity. At December 31, 2006, the carrying value of our equity investments totaled $93.4 million, representing 2.5% of our total shareholders’ equity. As of December 31, 2006, 88.9% of our equity portfolio was held through investment funds.
Credit Guarantees
We have developed our credit guarantee product as part of our role of attracting international financing for our member countries. As such, we may offer guarantees of private credit agreements or we may offer public guarantees of obligations of the securities of third party issuers. We generally offer only partial credit guarantees with the intention that private lenders or holders of securities share the risk along with us.
The emphasis of the credit guarantees is to aid in the financing of public sector projects, though we do not have any internal policies limiting our credit guarantees to public sector projects. Also, although we generally intend to guarantee approximately 25% of the financing for a given project, we may guarantee up to the full amount of the financing, subject to our other credit policies. Our internal policies limit the aggregate outstanding amount of our credit guarantees to a maximum amount equivalent to 20% of our net worth. The amount of credit guarantees outstanding was $544.6 million as of December 31, 2006, representing the guarantee of two public sector projects in Bolivia, one public sector project and six public sector but non-
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sovereign risk projects in Colombia, nine public sector projects in Ecuador and one private and three public sector projects in Peru.
Promotion of Regional Development
As part of our role in advancing regional integration, we evaluate on an ongoing basis new investment opportunities intended to benefit the regional shareholder countries. We also provide technical and financial assistance for the planning and implementation of binational and multinational projects, help obtain capital and technology for these projects and assist companies in developing and implementing modernization, expansion and organizational development programs.
Fund Administration
At December 31, 2006, we acted as fund administrator for several funds, totaling $151.1 million in the aggregate, which are funded, in whole or in part, through allocations made each year by our shareholders from our prior year’s net income. In 2006, 2005 and 2004, shareholders allocated to these funds $71.0 million, $41.4 million, and $22.0 million from the net income of 2005, 2004 and 2003, respectively. These funds are not part of our accounts.
At December 31, 2006, the funds were the Technical Co-operation Fund, the Fund for Human Development, the Compensatory Financing Fund, the HIPC Fund for Bolivia, the Fund for the Development of Small and Medium Enterprises, the Latin American Carbon Program and the Fund for the Promotion of Sustainable Infrastructure Projects (PROINFRA).
Technical Co-operation Fund
At December 31, 2006, the Technical Co-operation Fund had a balance of $21.5 million. The purpose of this fund is to finance research and development studies that may lead to the identification of project investment opportunities and also, on occasion, to provide grants, that are typically less than $100,000 each, to facilitate the implementation of those projects.
Fund for Human Development
At December 31, 2006, the Fund for Human Development had a balance of $18.5 million. This fund is devoted to assist projects intended to promote sustainable development in socially excluded communities, as well as support micro-enterprises through the financing of intermediary institutions that offer direct loans to rural and urban micro-entrepreneurs.
Compensatory Financing Fund
At December 31, 2006, the Compensatory Financing Fund had a balance of $83.1 million. This fund was created to provide interest rate compensation when a project providing social or developmental benefits is otherwise unable to sustain market interest rates.
HIPC Fund for Bolivia
At December 31, 2006, the HIPC Fund for Bolivia had a balance of $0.5 million. The debt reduction initiative for Heavily Indebted Poor Countries (“HIPC”) has the purpose of increasing the resources of beneficiary countries to accelerate reform by reducing their external debt. This fund was created as part of the application of the World Bank’s HIPC initiative for Bolivia.
Fund for the Development of Small and Medium Enterprises
At December 31, 2006, the Fund for the Development of Small and Medium Enterprises had a balance of $15.0 million. The purpose of this fund is to finance and, in general, support initiatives that aid the development of an entrepreneurial class in the region.
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Latin American Carbon Program
At December 31, 2006, the Latin American Carbon Program had a balance of $2.2 million. This program is dedicated to the implementation of market mechanisms that allow developing countries to participate in the environmental services market. The program is engaged in the emerging greenhouse gasses reductions market in the Latin American and Caribbean markets through several mechanisms, including those allowed by the Kyoto Protocol.
Fund for the Promotion of Sustainable Infrastructure Projects (PROINFRA)
The Fund for the Promotion of Sustainable Infrastructure Projects (PROINFRA) was established in March 2006 with an initial allocation of $10 million. The purpose of this fund is to finance studies for the preparation of infrastructure investment projects to support regional integration and/or to implement new and innovative financing mechanisms for infrastructure projects. At December 31, 2006, the Fund for the Promotion of Sustainable Infrastructure Projects (PROINFRA) had a balance of $10.3 million.
Credit Policies
The Constitutive Agreement limits the total amount of disbursed and outstanding loans, guarantees and equity investments to 4.0 times shareholders’ equity. Our actual ratio on December 31, 2006 was 2.4 times shareholders’ equity. The guidelines of the Basle Committee on Supervisory Practices and Banking Regulations require a capitalization ratio, defined as shareholders’ equity divided by risk-weighted assets plus risk-weighted off-balance sheet items, of not less than 8% for those institutions to which those guidelines are applicable. Our policy requires this capitalization ratio to be at least 30%. Our actual capitalization ratio was 40.9% on December 31, 2006.
We apply commercial banking standards for credit approvals and maintain policies and procedures regarding risk assessment and credit policy. Relationship managers perform an initial screening of each potential client and transaction to ensure that the proposed extension of credit falls within our policies. Proposed project loans are evaluated in accordance with our Operational Policies, which set out detailed eligibility and evaluation guidelines. Loans to a private sector borrower are approved taking into consideration both the individual loan and the total exposure to the borrower.
The Loans and Investments Committee recommends approvals of loans and investments. The members of this Committee are the Vice Presidents, the Chief Legal Counsel and the Head of Credit Administration. The committee is chaired by the Executive Vice President. The Secretary of the Committee is an officer from the Credit Administration Office. The Executive President, upon the recommendation of the Loans and Investments Committee, may approve loans of up to $75.0 million for sovereign credits, up to $50.0 million for private credits, up to $25.0 million for equity investments, up to $30.0 million for investments in liquid assets for each issuer (unless the issuer is investment grade, in which case the investment may be up to $120.0 million), and up to $1.0 million for technical cooperation credits. In excess of these amounts, loans of up to $150.0 million for sovereign credits, up to $80.0 million for private credits, up to $50.0 million for equity investments, up to $50.0 million for investments in liquid assets for each issuer (unless the issuer is investment grade, in which case the investment may be up to $150.0 million), and up to $2.0 million for technical cooperation credits must be approved by the Executive Committee of our Board of Directors or the Board of Directors itself. Loans in excess of the aforementioned Executive Committee’s limits require the approval of our Board of Directors.
Our policies also impose limitations on loan concentration by country and by type of risk. Loans to entities in any one regional shareholder country may not exceed either 30% of our loan portfolio or 100% of our shareholders’ equity. Aggregate loans to entities in any non-regional shareholder country currently may not exceed eight times the total of such country’s paid-in capital contribution to us plus any assets entrusted by the country to us under a fiduciary relationship. This limit does not apply to trade loan financing with regional shareholder countries. Additionally, no more than four times the country’s paid-in capital contribution to us plus any assets entrusted to us under a fiduciary relationship may be committed to operations essentially national in character. The same limitation applies to our total loan portfolio in relation to our shareholders’
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equity. Loans to a public sector or mixed-capital entity not considered a sovereign risk are limited in the aggregate to 15% of our shareholders’ equity, and loans to any private sector entity are limited in the aggregate to 10% of our shareholders’ equity.
Operations in which we extend credit to entities in Series “C” shareholder countries outside the Andean region must generally be related to activities of such entities in, or related to, the regional shareholder countries. The aggregate total of outstanding loans to entities in such countries for purely local activities may not exceed four times the amount of paid-in capital contributed by that country.
Our policies permit us to provide up to 100% of the total project costs with respect to short-term loans. For medium-and long-term loans, we determine the appropriate level of financing on a case-by-case basis; however, limited-recourse financing in such loans may not exceed 50% of project costs. In practice, however, we typically limit our loans to a smaller percentage of total project costs and generally require a larger percentage of financial support by the borrower than required by our credit policies.
Asset Quality
We classify a loan as overdue whenever payment is not made on its due date. We charge interest on the overdue payment from the due date and immediately suspend disbursements on all loans to the borrower and to any other borrowers of which the overdue borrower is a guarantor. The entire principal amount of a loan is placed in non-accrual status when collection or recovery is doubtful or when any payment, including principal, interest, fees or other charges in respect of the loan, is more than 90 days overdue in the case of a private sector loan or more than 180 days overdue in the case of a public sector loan. Interest and other charges on non-accruing loans are included in income only to the extent that payments have actually been received by us.
Not including non-accrual loans, at December 31, 2006, we had no overdue loans. At that date, there were no loans in non-accrual status, compared to $1.3 million in principal amount of loans in non-accrual status at December 31, 2005. For the year ended December 31, 2006, $16,000 of overdue interest and other charges in respect of loans in non-accrual status was excluded from net income.
Not including non-accrual loans, at December 31, 2005, we had no overdue loans. At that date, the total principal amount of loans in non-accrual status was $1.3 million, or 0.02% of our total loan portfolio, representing a decrease of $18.6 million compared to December 31, 2004. At December 31, 2005, the only loan in non-accrual status was related to a private sector borrower in Bolivia that was in the process of restructuring its debts, including its debts to us. For the year ended December 31, 2005, $0.6 million of overdue interest and other charges in respect of non-accrual status loans was excluded from net income.
At December 31, 2006, our total loan write-offs since our inception amounted to $162.9 million, of which $1.1 million, representing portions of loans made to two borrowers, occurred in 2006. Since inception, we have not suffered any individually significant losses on our loan portfolio. Although our loans do not enjoy any legal preference over those of other creditors, we do enjoy a de facto preferred creditor status arising from our status as a multilateral financial institution and from the interest of our borrowers in maintaining their credit standing with us.
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Quality of Loan Portfolio
The following table shows our overdue loan principal, loans in non-accrual status, and the total allowance for loan losses and their percentages of our total loan portfolio at the respective dates indicated, as well as loans written-off during each period:
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in U.S.$ millions) | ||||||||||||
Total loan portfolio | 8,097.5 | 7,347.0 | 7,104.1 | |||||||||
Overdue loan principal | 0.0 | 0.0 | 0.0 | |||||||||
Loans in non-accrual status | 0.0 | 1.3 | 20.0 | |||||||||
Loans written-off during period | 1.1 | 10.4 | 12.9 | |||||||||
Allowance for loan losses | 188.6 | 161.6 | 181.8 | |||||||||
Overdue principal payment as a percentage of loan portfolio (excluding non-accrual loans) | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
Non-accrual loans as a percentage of loan portfolio | 0.00 | % | 0.02 | % | 0.28 | % | ||||||
Allowance for loan losses as a percentage of loan portfolio | 2.33 | % | 2.20 | % | 2.56 | % |
The Constitutive Agreement requires that at least 10% of our net income in each year be allocated to our mandatory reserve until that reserve amounts to 50% of subscribed capital. In addition, we have a general reserve that can be used to cover contingent events and as a source of funding of last resort in the event of temporary illiquidity or when funding in the international markets is unavailable or impractical. At December 31, 2006, the mandatory reserve was $255.4 million, the general reserve was $989.4 million and the allowance for loan losses was $188.6 million, totaling $1.4 billion.
See “Capital Structure — Reserves” for more information about our policies on reserves.
Funding Strategy
We raise funds for operations primarily in the international financial markets, although a relatively small part is raised within the regional shareholder countries. Our strategy with respect to funding, to the extent possible under prevailing market conditions, is to match the maturities of our liabilities to the maturities of our loan portfolio. In order to diversify our funding sources and to offer potential borrowers a wide range of credit facilities, we raise funds through bond issues in both the regional shareholder countries and the international capital markets. We also take deposits and obtain loans and credit lines from central banks, commercial banks and, to the extent of imports related to projects funded by us, export credit agencies.
Within the regional shareholder countries, we raise funds from central banks and financial institutions and by means of regional bond issues. Outside the region, we obtain funding from public sector development and credit agencies, from multilateral development banks, from various North American, European and Japanese commercial banks, from capital markets and from the U.S. and European commercial paper markets.
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Sources of Funded Debt
The breakdown of our outstanding funded debt, both within and outside the regional shareholder countries, at each of the dates indicated below was as follows:
At December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in U.S.$ millions) | ||||||||||||
Within the regional shareholder countries: | ||||||||||||
Term deposits | 449.8 | 386.4 | 205.3 | |||||||||
Bonds | 449.2 | 320.0 | 353.1 | |||||||||
899.0 | 706.4 | 558.4 | ||||||||||
Outside the regional shareholder countries: | ||||||||||||
Deposits, acceptances and advances, commercial paper, and repurchase agreements | 1,112.6 | 1,154.0 | 1,212.0 | |||||||||
Loans and lines of credit | 558.6 | 488.4 | 567.9 | |||||||||
Bonds | 3,703.3 | 3,526.9 | 3,634.2 | |||||||||
5,374.5 | 5,169.3 | 5,414.0 | ||||||||||
6,273.5 | 5,875.7 | 5,972.4 | ||||||||||
Variation effect between spot and original FX rate | 213.4 | 139.3 | 457.2 | |||||||||
Fair value adjustments on hedging activities | (3.2 | ) | 76.5 | 167.0 | ||||||||
Total | 6,483.7 | 6,091.5 | 6,596.6 | |||||||||
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Maturity of Funded Debt
The breakdown of our outstanding funded debt, by instrument and maturity, at each of the dates indicated below was as follows:
At December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in U.S.$ millions) | ||||||||||||
Term deposits: | ||||||||||||
Up to 1 year | 449.8 | 386.4 | 205.3 | |||||||||
Acceptances, advances and commercial paper and repurchase agreements: | ||||||||||||
Up to 1 year | 1,112.6 | 1,154.0 | 1,212.0 | |||||||||
Loans and lines of credit: | ||||||||||||
Up to 1 year | 104.9 | 76.8 | 99.0 | |||||||||
Between 1 and 3 years | 201.7 | 165.1 | 177.3 | |||||||||
Between 3 and 5 years | 134.9 | 173.4 | 139.6 | |||||||||
More than 5 years | 117.1 | 73.0 | 151.9 | |||||||||
558.6 | 488.4 | 567.8 | ||||||||||
Bonds: | ||||||||||||
Up to 1 year | 499.6 | 294.4 | 723.7 | |||||||||
Between 1 and 3 years | 872.4 | 787.4 | 793.8 | |||||||||
Between 3 and 5 years | 946.5 | 956.7 | 584.9 | |||||||||
More than 5 years | 1,833.9 | 1,808.5 | 1,884.9 | |||||||||
4,152.4 | 3,846.9 | 3,987.3 | ||||||||||
Totals: | ||||||||||||
Up to 1 year | 2,166.9 | 1,911.6 | 2,240.0 | |||||||||
Between 1 and 3 years | 1,074.1 | 952.5 | 971.1 | |||||||||
Between 3 and 5 years | 1,081.4 | 1,130.1 | 724.5 | |||||||||
More than 5 years | 1,951.0 | 1,881.5 | 2,036.8 | |||||||||
6,273.4 | 5,875.7 | 5,972.4 | ||||||||||
Variation effect between spot and original FX rate | 213.4 | 139.3 | 457.2 | |||||||||
Fair value adjustments on hedging activities | (3.2 | ) | 76.5 | 167.0 | ||||||||
Total | 6,483.7 | 6,091.5 | 6,596.6 | |||||||||
Our borrowings are primarily U.S. dollar-based: 68.5% of our total borrowings, or 98.4% of borrowings after swaps, were denominated in U.S. dollars at December 31, 2006. The principal amount of non-U.S. dollar borrowings outstanding at December 31, 2006 included 21.5 billion Yen, 1.1 billion Euro, 60.7 million Pounds Sterling, 30.7 million Australian Dollars, 272.2 billion Colombian Pesos, 248.4 million Peruvian Soles, 2.1 million Canadian Dollars and 215.0 billion Venezuelan Bolivares; all of such non-U.S. dollar borrowings are swapped or otherwise hedged.
We have never defaulted on the payment of principal of, or premium or interest on, any debt security we have issued, and we have always met all of our debt obligations on a timely basis.
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We reduce our sensitivity to interest rate risk by extending our loans on a floating rather than a fixed interest rate basis. As a result, at December 31, 2006, 99.0% of our outstanding loans were based on LIBOR and subject to interest rate adjustments at least every six months. The liabilities that fund these loans are also contracted at, or swapped into, floating interest rates. When we make loans at fixed interest rates, we also obtain the corresponding funding on a fixed interest rate basis.
We require that counterparties with which we enter into swap agreements be rated “A” or better by two U.S. nationally recognized statistical rating organizations. At December 31, 2006, we were party to swap agreements with an aggregate notional amount of $3.9 billion.
We seek, to the extent possible under prevailing market conditions, to match the maturities of our liabilities to the maturities of our loan portfolio. At December 31, 2006, the weighted average life of our financial assets was 4.06 years and the weighted average life of our financial liabilities was 4.11 years. Based on our asset and liability structure at December 31, 2006, we have a positive cumulative gap over a 10 year horizon. This positive gap denotes asset sensitivity, which means that decreases in the general level of interest rates should have a negative effect on our net financial income and, conversely, increases in the general level of interest rates should have a positive effect on our net financial income.
Our management expects the weighted average life of our financial assets to increase gradually, as we make more longer-term loans for infrastructure development and similar purposes. At the same time, our management expects that the weighted average life of our liabilities will also increase as a result of our strategy of increasing our presence in the international long-term bond market as market conditions permit.
At December 31, 2006, approximately 99.9% of our assets and 67.3% of our liabilities were denominated in U.S. dollars, with the remainder of our liabilities being denominated principally in Euro, Yen and Pounds Sterling, which liabilities were swapped. After swaps, 99.9% of our liabilities were denominated in U.S. dollars. Generally, funding that is contracted in currencies other than the U.S. dollar is swapped into U.S. dollars. In some cases, we extend our loans in the same non-U.S. dollar currencies as debt is incurred in order to minimize exchange risks. Our shareholders’ equity is denominated entirely in U.S. dollars.
We do not trade derivatives for our own account. Under our asset-liability management policies, we enter into swap agreements to hedge interest rate and currency risks.
We are governed and administered by the bodies and officials detailed below:
Shareholders’ General Meeting
The shareholders’ general meeting is the ultimate decision-making body within CAF. Shareholders’ general meetings can be ordinary or extraordinary and are governed by the requirement for the presence of a quorum and compliance with other conditions set out in the Constitutive Agreement.
Shareholders’ ordinary general meetings are held once a year, within 90 days of the close of the financial year, and are convened by the Executive President. The shareholders’ ordinary general meeting:
(1) | considers the Board of Directors’ annual report and our financial statements, receives the independent auditors’ report and allocates our net income; | |
(2) | elects the Board of Directors according to the Constitutive Agreement; | |
(3) | appoints external auditors; | |
(4) | determines compensation for the Board of Directors and the external auditors; and | |
(5) | may consider any other matter expressly submitted to it which is not within the purview of any other body of CAF. |
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Shareholders’ extraordinary general meetings may be convened by resolution adopted at a shareholders’ ordinary general meeting, by the Board of Directors, by the Executive President, by any two Series “A” shareholders or by any shareholders representing at least 25% of paid-in capital. The shareholders’ extraordinary general meeting may:
(1) | increase, reduce or replenish our capital in accordance with the Constitutive Agreement; | |
(2) | dissolve CAF; | |
(3) | change the headquarters of CAF when the Board of Directors so proposes; and | |
(4) | consider any other matter that has been expressly submitted to it that is not within the purview of any other body of CAF. |
Resolutions before shareholders’ ordinary general meetings are passed by the votes of at least three Series “A” shareholders, together with a majority of the votes of the other shares represented at the meeting. Resolutions passed at shareholders’ extraordinary general meetings (including a decision to dissolve CAF) require the votes of four Series “A” shareholders, together with a majority of the votes of the other shares represented at the meeting, except for resolutions concerning modifications to the Constitutive Agreement, in which case an affirmative vote of all five Series “A” shareholders is required, together with a majority of the votes of the other shares represented at the meeting. In the event of adjournment for lack of a quorum, which consists of at least four Series “A” shareholders and a simple majority of the other shareholders, at either an ordinary or extraordinary general meeting, two Series “A” shareholders, plus a majority of the other shares represented at the meeting, may deliberate and approve decisions at a reconvened meeting.
Board of Directors
Our Board of Directors is composed of 13 directors, each of whom is elected for a term of three years and may be re-elected. Each of the five Series “A” shareholders is represented by one director. Five directors represent the governments or governmental institutions holding Series “B” shares and one director represents the private financial institutions holding Series “B” shares. Holders of Series “C” shares are entitled to elect two directors. In the event of a vacancy in a director position, the corresponding alternate director serves as director until such vacancy has been filled. Responsibilities of our Board of Directors include:
(1) | establishing and directing our credit and economic policies; | |
(2) | approving our budget; | |
(3) | approving our borrowing limits; | |
(4) | approving credits granted by us in excess of a specified limit; | |
(5) | establishing or modifying internal regulations; and | |
(6) | appointing the Executive President. |
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All of our directors are non-executive. As of December 4, 2007, the composition of the Board of Directors was as follows:
Directors (and their alternates) representing Series “A” shareholders:
Bolivia | Gabriel Loza (José Camargo Torrez) | Minister of Development Planning (Vice Minister of Public Investment and External Financing) | ||
Colombia | Oscar Iván Zuluaga (Luis Guillermo Plata) | Minister of Treasury and Public Credit (Minister of Foreign Trade) | ||
Ecuador | Eduardo Valencia (Raúl Sagasti L.) | President of the Board of Corporación Financiera Nacional (Ministry of Industries and Competitiveness) | ||
Peru | Mercedes Rosalba Araóz F. (Luis Carranza U.) | Minister of Foreign Trade and Tourism (Minister of Economy and Finance) | ||
Venezuela | Rodrigo Cabeza (Jorge Giordani) | Minister of the Popular Power for Finance (Minister of the Popular Power for Planning and Development) |
Directors (and their alternates) representing the Series “B” shareholders:
Bolivia | Luis Alberto Arce (Oscar Navarro) | Minister of Treasury (Vice Minister of Treasury and Public Credit) | ||
Colombia | José Dario Uribe (Carolina Rentaría R.) | General Manager of Banco de la República (Director of the National Planning Department) | ||
Ecuador | Fausto Ortiz (Marcos López) | Minister of Economy and Finance (Board Member of Banco Central del Ecuador) | ||
Peru | Luis Rebolledo S. (José Berley Arista Arbildo) | President of the Board of Corporación Financiera de Desarrollo (COFIDE) (Vice Minister of Treasury) | ||
Venezuela | María Cristina Iglesias (Rafael Isea) | Minister of the Popular Power for Light Industries and Commerce (President of Banco de Desarrollo Económico y Social) | ||
Private Financial Institutions | Gustavo Marturet (Juan Emilio Unzueta) | President of Banco Mercantil de Venezuela (President of the Board of Directors of Banco Mercantil-Santa Cruz S.A. de Bolivia) |
The directors representing the Series “C” shareholders are Alexandre Meire da Rosa, Secretary of International Affairs of Brazil from the Ministry of Planning, Budget and Process, and Pedro Solbes Mira, Second Vice President of the Government and Minister of the Economy and Treasury for Spain. Their alternates are Oscar Tangelson, Secretary of Political Economy and Vice Minister of Economy of Argentina, and Francisco de Paula Gutiérrez, President of the Central Bank of Costa Rica.
The business address of each of the directors and each of the alternate directors listed above is Torre CAF, Piso 9, Avenida Luis Roche, Altamira, Caracas, Venezuela.
Our Board of Directors annually elects a Chairman to preside over the meetings of the Board of Directors and the shareholders’ general meeting. Currently, Fausto Ortiz is the Chairman until March 31, 2008.
Executive Committee
The Board of Directors delegates certain functions, including credit approvals within specified limits, to the Executive Committee. This Committee is composed of six directors, one from each regional shareholder country plus a director representing the Series “C” shareholders, and CAF’s Executive President, who presides over the Committee (unless the Chairman of the Board of Directors is part of the Committee, in which case she or he will preside).
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Executive President
The Executive President is our legal representative and chief executive officer. He is empowered to decide all matters not expressly reserved to the shareholders’ general meeting, the Board of Directors or the Executive Committee. The Executive President is elected by the Board of Directors for a period of five years and may be re-elected.
Our Executive President, L. Enrique García, was re-elected in June 2006 for a fourth five-year term that will expire in December 2011. Before becoming our Executive President in November 1991, Mr. García was Minister of Planning and Coordination and Head of the Economic and Social Cabinet in his native Bolivia. Between 1989 and 1991, he represented Bolivia as Governor to the World Bank, the Inter-American Development Bank (“IADB”) and as a member of the Development Committee of the World Bank. He was also Chairman of the Board of Directors of CAF from 1990 to 1991. Previously, Mr. García held senior positions during a 17-year tenure at the IADB, including Treasurer.
Officers
L. Enrique García | Executive President | |
Luis Enrique Berrizbeitia | Executive Vice President | |
Lilliana Canale | Vice President of Country Programs | |
Antonio Juan Sosa | Vice President of Infrastructure | |
Peter Vonk | Vice President of Corporate Finance and Investment Banking | |
Mauricio Yepez | Vice President of Financial Systems | |
Hugo Sarmiento | Vice President of Finance | |
Bernardo Requena (acting) | Vice President of Social and Environmental Development | |
Fernando Dongilio | Chief Legal Counsel | |
Marcello Zalles | Corporate Comptroller |
Employees
At December 31, 2006, we employed 260 professionals and 75 support staff. The senior positions of Executive Vice President, Vice President of Finance, Vice President of Country Programs, Vice President of Infrastructure, Vice President of Corporate Finance and Investment Banking, Vice President of Financial Systems and Vice President of Social and Environmental Development are appointed by the Executive President, subject to ratification by the Board of Directors.
Our management believes that the salaries and other benefits of our professional staff are competitive and that the local support staff are paid at levels above the prevailing local rates. Although we are not subject to local labor laws, we provide our employees with benefits and safeguards at least equivalent to those required under the law of the country where they normally work and reside. We offer technical and professional training opportunities through courses and seminars in Venezuela and abroad for our employees. Management considers its relationship with CAF’s employees to be good. There is no employee union and there have been no strikes in the history of CAF.
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Certain of the following information has been extracted from publicly available sources. We believe that the information is accurate but we have not independently verified it.
The Andean region occupied by the regional shareholder countries is bordered by the Atlantic Ocean on the northeast, the Caribbean Sea on the north and the Pacific Ocean on the west, and covers approximately 4.7 million square kilometers in Northern and Western South America, approximately 20% of the continent.
Selected Demographic and Economic Data*
The following table presents selected demographic and economic data for the regional shareholder countries for the years indicated:
Bolivia | Colombia | Ecuador | Peru | Venezuela | ||||||
Population (in millions) | ||||||||||
2006 | 9.6 | 46.8 | 13.4 | 27.2 | 27.2 | |||||
2005 | 9.4 | 46.0 | 13.2 | 27.9 | 26.6 | |||||
2004 | 9.2 | 45.3 | 13.0 | 27.5 | 26.1 | |||||
2003 | 8.9 | 44.5 | 12.7 | 27.1 | 25.5 | |||||
2002 | 8.7 | 43.7 | 12.4 | 26.7 | 25.1 | |||||
Life expectancy at birth (years) (1) | ||||||||||
2000-2005 (average) | 66 | 73 | 74 | 70 | 73 | |||||
2003 | 64 | 72 | 74 | 70 | 73 | |||||
2002 | 64 | 72 | 71 | 70 | 74 | |||||
2001 | 63 | 72 | 71 | 69 | 74 | |||||
GDP (U.S.$ in millions) (2) | ||||||||||
2006 | 10,582 | 134,291 | 40,892 | 93,330 | 176,463 | |||||
2005 | 9,707 | 123,259 | 33,062 | 78,422 | 147,870 | |||||
2004 | 8,762 | 98,370 | 28,667 | 68,641 | 133,580 | |||||
2003 | 8,024 | 77,559 | 26,913 | 61,011 | 84,793 | |||||
2002 | 7,801 | 80,595 | 24,311 | 56,517 | 94,340 | |||||
GDP per capita (U.S.$) (2) | ||||||||||
2006 | 1,099 | 2,871 | 3,050 | 3,429 | 6,480 | |||||
2005 | 1,030 | 2,677 | 2,342 | 2,881 | 5,559 | |||||
2004 | 950 | 2,170 | 2,325 | 2,559 | 5,118 | |||||
2003 | 902 | 1,743 | 2,119 | 2,251 | 3,325 | |||||
2002 | 897 | 1,844 | 1,961 | 2,117 | 3,759 | |||||
Gross reserves (excluding gold) (U.S.$ in millions) (3) | ||||||||||
2006 | 3,179 | 15,125 | 2,820 | 17,275 | 36,606 | |||||
2005 | 1,714 | 14,947 | 1,667 | 14,097 | 30,368 | |||||
2004 | 1,123 | 13,535 | 1,549 | 12,631 | 23,462 | |||||
2003 | 717 | 10,921 | 903 | 10,201 | 24,208 | |||||
2002 | 854 | 10,454 | 1,008 | 9,685 | 11,929 |
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Bolivia | Colombia | Ecuador | Peru | Venezuela | ||||||
Consumer price index growth (4) | ||||||||||
2006 | 5.0% | 4.5% | 2.1% | 1.1% | 17.0% | |||||
2005 | 5.4% | 5.1% | 2.1% | 1.6% | 16.0% | |||||
2004 | 4.4% | 5.9% | 2.8% | 3.7% | 21.9% | |||||
2003 | 3.4% | 7.1% | 7.9% | 2.3% | 31.1% | |||||
2002 | 0.9% | 6.3% | 12.5% | 0.2% | 22.4% | |||||
Exports of Goods (f.o.b.) (U.S.$ in millions) | ||||||||||
2006 | 3,863 | 23,897 | 12,281 | 23,750 | 64,568 | |||||
2005 | 2,671 | 21,187 | 9,701 | 17,247 | 55,487 | |||||
2004 | 2,146 | 16,464 | 7,528 | 12,617 | 38,748 | |||||
2003 | 1,573 | 13,395 | 6,004 | 8,954 | 27,170 | |||||
2002 | 1,319 | 12,285 | 5,192 | 7,647 | 26,219 | |||||
Imports of Goods (f.o.b.) (U.S.$ in millions) | ||||||||||
2006 | 2,640 | 23,996 | 10,330 | 14,897 | 31,344 | |||||
2005 | 2,191 | 19,779 | 9,064 | 12,084 | 23,955 | |||||
2004 | 1,950 | 15,324 | 7,293 | 9,824 | 17,318 | |||||
2003 | 1,613 | 13,136 | 6,098 | 8,244 | 10,707 | |||||
2002 | 1,520 | 12,153 | 6,196 | 7,440 | 12,280 |
* | Sources: Official government sources (including but not limited to the ministries of finance of the regional shareholder countries) and estimates from Business Monitor International. | |
(1) | This information is extracted from the United Nations Human Development Indicators produced by the Human Development Report office of the United Nations. | |
(2) | Expressed in current U.S. dollars. | |
(3) | At December 31. | |
(4) | Average annual growth rates. |
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The following description sets forth certain general terms and provisions of the debt securities to which any prospectus supplement may relate. The particular terms of the debt securities being offered and the extent to which such general provisions may apply will be described in a prospectus supplement relating to such debt securities.
The debt securities will be issued pursuant to a fiscal agency agreement, dated as of March 17, 1998, between CAF and The Bank of New York (as successor in interest to JPMorgan Chase Bank), as fiscal agent. The following statements briefly summarize some of the terms of the debt securities and the fiscal agency agreement (a copy of which has been filed as an exhibit to the registration statement). These statements do not purport to be complete and are qualified in their entirety by reference to all provisions of the fiscal agency agreement and such debt securities.
General
The debt securities will constitute our direct, unconditional, unsecured and general obligations. The debt securities will rank equally with all of our other unsecured Indebtedness. “Indebtedness” means all of our indebtedness in respect of monies borrowed by us and guarantees given by us for monies borrowed by others.
The accompanying prospectus supplement will describe the following terms of the debt securities, as applicable:
(1) | the title; | |
(2) | the price or prices at which we will issue the debt securities; | |
(3) | any limit on the aggregate principal amount of the debt securities or the series of which they are a part; | |
(4) | the currency or currency units for which the debt securities may be purchased and in which payments of principal and interest will be made; | |
(5) | the date or dates on which principal and interest will be payable; | |
(6) | the rate or rates at which any of the debt securities will bear interest, the date or dates from which any interest will accrue, and the record dates and interest payment dates; | |
(7) | the place or places where principal and interest payments will be made; | |
(8) | the time and price limitations on redemption of the debt securities; | |
(9) | our obligation, if any, to redeem or purchase the debt securities at the option of the holder; |
(10) | the denominations in which any of the debt securities will be issuable, if other than denominations of $1,000; | |
(11) | if the amount of principal or interest on any of the debt securities is determinable according to an index or a formula, the manner in which such amounts will be determined; | |
(12) | whether and under what circumstances we will issue the debt securities as global debt securities; and | |
(13) | any other specific terms of the debt securities. |
Certain debt securities will be treated for United States federal income tax purposes as original issue discount notes (“Discount Notes”) if the excess of the debt security’s “stated redemption price at maturity” over its issue price is more than a “de minimis amount” (as defined for United States federal income tax purposes). If applicable, the prospectus supplement will describe the United States federal income tax consequences of the ownership of Discount Notes and any special rules regarding debt securities.
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Denominations, Registration and Transfer
The debt securities of each series will be issuable only in fully registered form, without coupons, and, unless otherwise specified in the prospectus supplement, only in denominations of $1,000 and integral multiples thereof.
At the option of the holder, subject to the terms of the fiscal agency agreement and the limitations applicable to global debt securities, debt securities of each series will be exchangeable for other debt securities of the same series of any authorized denomination and of a like tenor and aggregate principal amount.
Debt securities may be presented for exchange and for registration of transfer in the manner, at the places and subject to the restrictions set forth in the debt securities and as summarized in the prospectus supplement. Such services will be provided without charge, other than any tax or other governmental charge payable in connection therewith, but subject to the limitations provided in the terms of the debt securities.
If any definitive notes are issued and at that time the notes are listed on the Luxembourg Stock Exchange, we will appoint a transfer agent in Luxembourg, which we anticipate being the same entity that serves as our Luxembourg paying agent. In such circumstances, transfers or exchanges of any definitive notes may be made at the office of our Luxembourg transfer agent (in addition to the corporate trust office of the fiscal agent).
Global Debt Securities
Some or all of the debt securities of any series may be represented, in whole or in part, by one or more global debt securities that will have an aggregate principal amount equal to that of the debt securities they represent. If applicable, each global debt security will be:
(1) | registered in the name of a depositary or its nominee identified in the prospectus supplement; | |
(2) | deposited with the depositary or nominee or the depositary’s custodian; and | |
(3) | printed with a legend regarding the restrictions on exchanges and registration of transfer of the security, and any other matters required by the fiscal agency agreement and the terms of the debt securities and summarized in the prospectus supplement. |
Payment and Paying Agent
Unless otherwise indicated in the prospectus supplement, we will make payments of principal and interest on debt securities:
(1) | through the fiscal agent; | |
(2) | to the person in whose name the debt securities are registered at the close of business on the regular record date for the payments; and | |
(3) | at the office of the paying agent or agents designated by us; unless |
• | at our option, payment is mailed to the registered holder, or | |
• | at the request of a registered holder of more than $1,000,000 principal amount of the securities, payment is made by wire transfer. |
Unless otherwise indicated in the prospectus supplement, our sole paying agent for payments on the debt securities will be the corporate trust office of the fiscal agent in the City of New York.
Any monies we pay to our fiscal agent or any paying agent for the payment of the principal of or interest on any debt securities that remains unclaimed at the end of two years after such principal or interest has become due and payable will be repaid to us by such agent. Upon such repayment, all liability of our fiscal agent or any paying agent with respect to such monies shall thereupon cease, without, however, limiting in any way our unconditional obligation to pay principal of or any interest on the debt securities when due.
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Negative Pledge
As long as any of the debt securities are outstanding and unpaid, but only up to the time amounts sufficient for payment of all principal and interest have been placed at the disposal of the fiscal agent, we will not cause or permit to be created on any of our property or assets any mortgage, pledge or other lien or charge as security for any bonds, notes or other evidences of indebtedness heretofore or hereafter issued, assumed or guaranteed by us for money borrowed (other than purchase money mortgages, pledges or liens on property purchased by us as security for all or part of the purchase price thereof), unless the debt securities are secured by such mortgage, pledge or other lien or charge equally and ratably with such other bonds, notes or evidences of indebtedness.
Default; Acceleration of Maturity
Each of the following will constitute an “event of default” with respect to the debt securities of any series:
(1) | a failure to pay any principal of or interest on any debt securities of that series when due and the continuance of the failure for 30 days; | |
(2) | a failure to perform or observe any material obligation under or in respect of any debt securities of that series or the fiscal agency agreement and the continuance of the failure for a period of 90 days after written notice of the failure has been delivered to CAF and to the fiscal agent by the holder of any debt security of that series; | |
(3) | a failure to pay any amount in excess of $20,000,000 (or its equivalent in any other currency or currencies) of principal or interest or premium in respect of any indebtedness incurred, assumed or guaranteed by CAF as and when such amount becomes due and payable and the continuance of the failure until the expiration of any applicable grace period or 30 days, whichever is longer; or | |
(4) | the acceleration of any indebtedness incurred or assumed by CAF with an aggregate principal amount in excess of $20,000,000 (or its equivalent in any other currency or currencies) by any holder or holders thereof. |
If an event of default occurs with respect to the debt securities of any series at the time outstanding, each holder of any debt security of that series may, by written notice to CAF and the fiscal agent, declare the principal of and any accrued interest on all the debt securities of that series held by it to be, and the principal and accrued interest shall thereupon become, immediately due and payable, unless prior to receipt of the notice by CAF all events of default in respect of such series of debt securities are cured. If all the events of default are cured following the declaration, the declaration may be rescinded by any such holder with respect to the previously accelerated series of debt securities upon delivery of written notice of the rescission to CAF and the fiscal agent.
Additional Payments by CAF
All amounts payable (whether in respect of principal, interest or otherwise) in respect of the debt securities will be made free and clear of and without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of any of the regional shareholder countries or any political subdivision thereof or any authority or agency therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event, we will pay such additional amounts as may be necessary in order that the net amounts receivable by the holder of debt securities of any series after the withholding or deduction will equal the respective amounts that would have been receivable by the holder in the absence of the withholding or deduction, except that no additional amounts will be payable in relation to any payment in respect of any debt security:
(1) | to, or to a third party on behalf of, a holder of a debt security of any series who is liable for such taxes, duties, assessments or governmental charges in respect of such debt security by reason of his |
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having some connection with any of the regional shareholder countries other than the mere holding of the debt security; or |
(2) | presented for payment more than 30 days after the “Relevant Date” (as defined in the next paragraph), except to the extent that the relevant holder would have been entitled to the additional amounts on presenting the same for payment on the expiry of the period of 30 days. |
As used in this prospectus, the “Relevant Date” means, in respect of any payment, the date on which such payment first becomes due and payable, but if the full amount of the moneys payable has not been received by the fiscal agent on or prior to the due date, it means the first date on which, the full amount of the moneys having been so received and being available for payment to holders of debt securities of any series, notice to that effect will have been duly published as set forth below under “— Notices”.
Modification and Amendment
Each and every holder of the debt securities in a series must consent to any amendment of a provision of the debt securities or the fiscal agency agreement that would:
(1) | change the due date of the principal of or interest on any series of debt securities; or | |
(2) | reduce the principal amount, interest rate or amount payable upon acceleration of the due date of the debt securities of a series; or | |
(3) | change the currency or place of payment of principal of or interest on the debt securities of a series; or | |
(4) | reduce the proportion of the principal amount of the debt securities of a series that must be held by any of the holders to vote to amend or supplement the terms of the fiscal agency agreement or the debt securities; or | |
(5) | change our obligation to pay additional amounts. |
We may, however, with the written consent of the holders of 662/3% of the principal amount of the debt securities of a series, modify any of the other terms or provisions of the debt securities of a series or the fiscal agency agreement (as it applies to that series). Also, we and the fiscal agent may, without the consent of the holders of the debt securities of a series, modify any of the terms and conditions of the fiscal agency agreement and the debt securities of that series, for the purpose of:
(1) | adding to our covenants for the benefit of the holders of the debt securities; or | |
(2) | surrendering any right or power conferred on CAF; or | |
(3) | securing the debt securities of that series; or | |
(4) | curing any ambiguity or correcting or supplementing any defective provision of the fiscal agency agreement or the debt securities; or | |
(5) | for any purpose that we and the fiscal agent may consider necessary or desirable that does not adversely affect the interests of the holders of the debt securities of that series in any material respect. |
Notices
All notices will be delivered in writing to each holder of the debt securities of any series. If at the time of such notice the debt securities of a series are represented by global debt securities, the notice shall be delivered to the applicable depositary therefor and shall be deemed to have been given three business days after delivery to such depositary. If at the time of the notice the debt securities of a series are not represented by global debt securities, the notice shall be delivered to the registered holders of the debt securities of the series and in that case shall be deemed to have been given three business days after the mailing of the notice by first class mail.
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Further Issues
We may from time to time without the consent of holders of the debt securities create and issue further debt securities so as to form a single series with an outstanding series of debt securities.
Governing Law; Submission to Jurisdiction; Waiver of Immunity
The debt securities are governed by, and shall be construed in accordance with, the laws of the State of New York. We will accept the jurisdiction of any state or federal court in the Borough of Manhattan, The City of New York, in respect of any action arising out of or based on the debt securities that may be instituted by any holder of a debt security. We will appoint CT Corporation System in The City of New York as our authorized agent upon which process in any such action may be served. We will irrevocably waive any immunity to which we might otherwise be entitled in any action arising out of or based on the debt securities brought in any state or federal court in the Borough of Manhattan, The City of New York. CT Corporation System will not be an agent for service of process for actions brought under the United States securities laws, and our waiver of immunity will not extend to such actions.
From time to time we may issue under this prospectus and applicable prospectus supplement guarantees for the benefit of holders of specified securities of third parties. The issuers of the underlying securities may or may not be affiliated with us. A holder of a primary security will also have the benefit of our guarantee related to the primary security.
The terms and conditions of any guarantee will vary with the terms and conditions of the underlying securities. A complete description of the terms and conditions of any guarantee issued pursuant to this prospectus will be set forth in the prospectus supplement for the issue of the guarantees.
We may provide guarantees with respect to the certain obligations of an issuer under its securities, including without limitation:
• | payment of any accrued and unpaid distributions which are required to be paid under the terms of the securities; | |
• | payment of the redemption price of the securities, including all accrued and unpaid distributions to the date of the redemption; | |
• | payment of any accrued and unpaid interest payments, or payment of any premium which are required to be made on the securities; and | |
• | any obligation of the issuer pursuant to a warrant, option or other rights. |
Unless otherwise specified in the applicable prospectus supplement, guarantees issued under this prospectus will rank equally with all of our other unsecured general debt obligations, and will be governed by the laws of the State of New York.
Regional Shareholder Country Taxation
Under the terms of the Constitutive Agreement, we are exempt from all types of taxes levied by each of the regional shareholder countries on our income, property and other assets, and on operations we carry out in accordance with that treaty, and we are exempt from all liability related to the payment, retention or collection of any taxes, contributions or tariffs.
Payments of principal and interest in respect of the debt securities to a non-resident of the regional shareholder countries will therefore not be subject to taxation in any of the regional shareholder countries, nor will any withholding for tax of any of the regional shareholder countries be required on any such payments to
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any holder of debt securities. In the event of the imposition of withholding taxes by any of the regional shareholder countries, we have undertaken to pay additional amounts in respect of any payments subject to such withholding, subject to certain exceptions, as described under “Description of the Debt Securities — Additional Payments by CAF”.
United States Taxation
This section describes the material United States federal income tax consequences of owning the debt securities we are offering. It is the opinion of Sullivan & Cromwell LLP, our counsel. It applies to you only if you acquire debt securities in the offering at the offering price and you hold your debt securities as capital assets for tax purposes. This section does not apply to you if you are a member of a class of holders subject to special rules, such as:
• | a dealer in securities or currencies, | |
• | a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, | |
• | a bank, | |
• | a life insurance company, | |
• | a tax-exempt organization, | |
• | a person that owns debt securities that are a hedge or that are hedged against interest rate risks, | |
• | a person that owns debt securities as part of a straddle or conversion transaction for tax purposes, or | |
• | a United States holder (as defined below) whose functional currency for tax purposes is not the U.S. dollar. |
This discussion deals only with debt securities that are due to mature 30 years or less from the date on which they are issued. The United States federal income tax consequences of owning debt securities that are due to mature more than 30 years from their date of issue will be discussed in an applicable prospectus supplement.
This discussion assumes that the debt securities will be issued at par and that all principal and interest payments on the debt securities will be denominated in United States dollars. The United States federal income tax consequences of owning Discount Notes (as defined in “Description of the Debt Securities — General” above) and/or debt securities denominated in a currency other than United States dollars will be discussed in an applicable prospectus supplement.
If a partnership holds the debt securities, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the debt securities should consult its tax advisor with regard to the United States federal income tax treatment of an investment in the debt securities.
If you purchase debt securities at a price other than the offering price, the amortizable bond premium or market discount rules may also apply to you. You should consult your tax advisor regarding this possibility.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning these debt securities in your particular circumstances under the Internal Revenue Code and the laws of any other taxing jurisdiction.
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United States Holders
This subsection describes the tax consequences to a United States holder. You are a United States holder if you are a beneficial owner of a debt security and you are:
• | a citizen or resident of the United States, | |
• | a domestic corporation or an entity treated as a domestic corporation for purposes of the Internal Revenue Code, | |
• | an estate whose income is subject to United States federal income tax regardless of its source, or | |
• | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
If you are not a United States holder, this subsection does not apply to you and you should refer to “United States Alien Holders” below.
Payments of Interest. You will be taxed on interest on your debt security as ordinary income at the time you receive the interest or when it accrues, depending on your method of accounting for tax purposes.
Interest paid by us on the debt securities is income from sources outside the United States, subject to the rules regarding the foreign tax credit allowable to a United States holder. Under the foreign tax credit rules, interest paid will, depending on your circumstances, generally be either “passive” or “general” income for purposes of computing the foreign tax credit allowed to you.
Purchase, Sale and Retirement of the Debt Securities. Your tax basis in your debt security generally will be its cost. You will generally recognize capital gain or loss on the sale or retirement of your debt securities equal to the difference between the amount you realize on the sale or retirement, excluding any amounts attributable to accrued but unpaid interest, and your tax basis in your debt securities. Capital gain of a noncorporate United States holder that is recognized in taxable years beginning before January 1, 2011 is generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year.
United States Alien Holders
This subsection describes the tax consequences to a United States alien holder. You are a United States alien holder if you are a beneficial owner of a debt security and you are, for United States federal income tax purposes:
• | a nonresident alien individual, | |
• | a foreign corporation, | |
• | a foreign partnership, or | |
• | an estate or trust that in either case is not subject to United States federal income tax on a net income basis on income or gain from a debt security. |
If you are a United States holder, this subsection does not apply to you.
Under United States federal income and estate tax law, and subject to the discussion of backup withholding below, if you are a United States alien holder of a debt security, interest on a debt security paid to you is exempt from United States federal income tax, including withholding tax, whether or not you are engaged in a trade or business in the United States, unless:
• | you are an insurance company carrying on a United States insurance business to which the interest is attributable, within the meaning of the Internal Revenue Code, or | |
• | you both |
• | have an office or other fixed place of business in the United States to which the interest is attributable and |
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• | derive the interest in the active conduct of a banking, financing or similar business within the United States. |
Purchase, Sale, Retirement and Other Disposition of the Debt Securities. If you are a United States alien holder of a debt security, you generally will not be subject to United States federal income tax on gain realized on the sale, exchange or retirement of a debt security unless:
• | the gain is effectively connected with your conduct of a trade or business in the United States or | |
• | you are an individual, you are present in the United States for 183 or more days during the taxable year in which the gain is realized and certain other conditions exist. |
For purposes of the United States federal estate tax, the debt securities will be treated as situated outside the United States and will not be includible in the gross estate of a holder who is neither a citizen nor a resident of the United States at the time of death.
Backup Withholding and Information Reporting
If you are a noncorporate United States holder, information reporting requirements, on Internal Revenue Service Form 1099, generally will apply to:
• | payments of principal and interest on a debt security within the United States, including payments made by wire transfer from outside the United States to an account you maintain in the United States, and | |
• | the payment of the proceeds from the sale of a debt security effected at a United States office of a broker. |
Additionally, backup withholding will apply to such payments if you are a noncorporate United States holder that:
• | fails to provide an accurate taxpayer identification number, | |
• | is notified by the Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your federal income tax returns, or | |
• | in certain circumstances, fails to comply with applicable certification requirements. |
If you are a United States alien holder, you are generally exempt from backup withholding and information reporting requirements with respect to:
• | payments of principal and interest made to you outside the United States by us or another non-United States payor and | |
• | other payments of principal and interest and the payment of the proceeds from the sale of a debt security effected at a United States office of a broker, as long as the income associated with such payments is otherwise exempt from United States federal income tax, and: |
• | the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished to the payor or broker: |
• | an Internal Revenue Service Form W-8BEN or an acceptable substitute form upon which you certify, under penalties of perjury, that you are a non-United States person, or | |
• | other documentation upon which it may rely to treat the payments as made to a non-United States person in accordance with U.S. Treasury regulations, or |
• | you otherwise establish an exemption. |
Payment of the proceeds from the sale of a debt security effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of a debt security that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if:
• | the proceeds are transferred to an account maintained by you in the United States, |
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• | the payment of proceeds or the confirmation of the sale is mailed to you at a United States address, or | |
• | the sale has some other specified connection with the United States as provided in U.S. Treasury regulations, |
unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption.
In addition, a sale of a debt security effected at a foreign office of a broker will be subject to information reporting if the broker is:
• | a United States person, | |
• | a controlled foreign corporation for United States tax purposes, | |
• | a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period, or | |
• | a foreign partnership, if at any time during its tax year: |
• | one or more of its partners are “U.S. persons”, as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or | |
• | such foreign partnership is engaged in the conduct of a United States trade or business, |
unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a United States person.
We may sell the securities described in this prospectus to one or more underwriters for public offering and sale by them or may sell the securities to investors directly or through agents, which agents may be affiliated with us. Any such underwriter or agent involved in the offer and sale of the securities will be named in the accompanying prospectus supplement.
We may sell our guarantees separately from our debt securities to guarantee certain obligations associated with the securities of third party issuers. In such cases, we may sell the guarantees in the same transaction as the sale of the underlying security or we may sell the guarantee independently to guarantee the obligations of outstanding securities of third party issuers.
Sales of securities offered pursuant to any prospectus supplement may be effected from time to time in one or more transactions at a fixed price or prices which may be changed, at prices related to the prevailing market prices at the time of sale or at negotiated prices. We also may, from time to time, authorize underwriters, acting as our agents, to offer and sell securities upon the terms and conditions set forth in the prospectus supplement. In connection with the sale of securities, underwriters may be deemed to have received compensation from us in the form of underwriting discounts or commissions and may also receive commissions from purchasers of securities for whom they may act as agent. Underwriters may sell securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from purchasers of securities for whom they may act as agent.
Any underwriting compensation we pay to underwriters or agents in connection with the offering of securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in the prospectus supplement. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be underwriters, and any discounts, concessions or commissions received by them and any profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions under the U.S. Securities Act of 1933. Underwriters, dealers and agents may be
43
entitled, under agreements entered into with CAF, to indemnification against and contribution toward certain civil liabilities, including liabilities under the U.S. Securities Act of 1933.
Unless otherwise specified in the prospectus supplement, each series of securities will be a new issue with no established trading market. We may elect to list any series of securities on any exchange, but we are not obligated to do so.
One or more underwriters may make a market in a series of securities, but they will not be obligated to do so and may discontinue any market making at any time without notice. Neither we nor any underwriter can give assurances as to the liquidity of the trading market for the securities.
Certain of the underwriters, agents and their affiliates may be customers of, engage in transactions with and perform services for CAF in the ordinary course of business.
Sullivan & Cromwell LLP, Washington, D.C., will pass upon the validity of the debt securities on our behalf. Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C., will pass upon the validity of the debt securities on behalf of the underwriters. Sullivan & Cromwell LLP and Wilmer Cutler Pickering Hale and Dorr LLP may rely as to certain matters on the opinion of our Chief Legal Counsel.
The validity of the guarantees will be passed upon on behalf of us by counsel to be named in the applicable prospectus supplement. The validity of the guarantees will be passed upon on behalf of the underwriters by counsel to be named in the applicable prospectus supplement.
The balance sheets as of December 31, 2006 and 2005 and the related statements of income, stockholders’ equity and cash flows for each of the years in the three year period ended December 31, 2006 included in this prospectus, have been audited by KPMG, independent registered public accounting firm, as stated in their report appearing elsewhere herein.
Our authorized representative in the United States of America is Puglisi & Associates. The address of the authorized representative in the United States is 850 Library Avenue, Suite 204, Newark, Delaware 19711.
This registration statement of which the prospectus forms a part, including its various exhibits, is available to the public over the internet at the SEC’s website: http://www.sec.gov. You may also read and copy these documents at the Securities and Exchange Commission’s Public Reference Room, at the following address:
SEC Public Reference Room
100 F Street, N.E.
Washington, D.C. 20549
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information about how to access the documents we have filed with it.
44
The information set forth herein, except the information appearing in the section entitled “The Regional Shareholder Countries”, is stated on the authority of the Acting Executive President of CAF, in his duly authorized capacity as Acting Executive President.
CORPORACIÓN ANDINA DE FOMENTO
By: | /s/ Luis Enrique Berrizbeitia |
Luis Enrique Berrizbeitia
Acting Executive President
45
F-2 | ||||
F-3 | ||||
F-27 |
F-1
The Board of Directors and Stockholders of
Corporación Andina de Fomento (CAF):
We have audited the accompanying balance sheets of Corporación Andina de Fomento (CAF) as of December 31, 2006 and 2005, and the related statements of income, stockholders’ equity and cash flows for each of the years in the three year period ended December 31, 2006. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Corporación Andina de Fomento (CAF) as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2006 in accordance with U.S generally accepted accounting principles.
KPMG
January 30, 2007
Caracas, Venezuela
Caracas, Venezuela
F-2
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Balance Sheets
December 31, 2006 and 2005
(In thousands of U.S. dollars)
Balance Sheets
December 31, 2006 and 2005
(In thousands of U.S. dollars)
ASSETS
Note | 2006 | 2005 | ||||||||||
Cash and due from banks | 8,997 | 1,740 | ||||||||||
Deposits with banks | 2 | 353,442 | 334,571 | |||||||||
Marketable securities | ||||||||||||
Trading | 3 | 1,001,618 | 1,105,568 | |||||||||
Held-to-maturity | 3 | 356,128 | 87,885 | |||||||||
Other investments | 2 | 210,430 | 258,576 | |||||||||
Loans | 4 | 8,097,472 | 7,346,978 | |||||||||
Less loan commissions, net of origination costs | 59,982 | 57,023 | ||||||||||
Less allowance for losses | 4 | 188,608 | 161,629 | |||||||||
Loans, net | 7,848,882 | 7,128,326 | ||||||||||
Equity investments | 5 | 93,426 | 114,646 | |||||||||
Interest and commissions receivable | 226,530 | 181,939 | ||||||||||
Property and equipment | 6 | 23,931 | 10,986 | |||||||||
Other assets | 7 | 316,109 | 258,092 | |||||||||
Total assets | 10,439,493 | 9,482,329 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Deposits | 8 | 449,797 | 386,419 | |||||||||
Commercial paper | 9 | 773,354 | 710,270 | |||||||||
Advances and short-term borrowings | 339,256 | 443,707 | ||||||||||
Bonds | 10 | 4,362,161 | 4,061,108 | |||||||||
Borrowings and other obligations | 11 | 559,135 | 489,972 | |||||||||
Accrued interest and commissions payable | 136,878 | 110,954 | ||||||||||
Accrued expenses and other liabilities | 12 | 126,185 | 42,738 | |||||||||
Total liabilities | 6,746,766 | 6,245,168 | ||||||||||
Subscribed and paid-in capital (authorized capital US$5,000 million) | 1,870,615 | 1,681,885 | ||||||||||
Additional paid-in capital | 256,707 | 239,524 | ||||||||||
Reserves | 1,244,752 | 1,032,514 | ||||||||||
Retained earnings | 320,653 | 283,238 | ||||||||||
Total stockholders’ equity | 14 | 3,692,727 | 3,237,161 | |||||||||
Total liabilities and stockholders’ equity | 10,439,493 | 9,482,329 | ||||||||||
See accompanying notes to the financial statements.
F-3
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Statements of Income
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Statements of Income
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Note | 2006 | 2005 | 2004 | |||||||||||||
Interest income | ||||||||||||||||
Loans | 1 | (f) | 600,784 | 462,716 | 327,363 | |||||||||||
Investments and deposits with banks | 1 | (e) | 95,830 | 59,433 | 27,992 | |||||||||||
Loan commissions | 1 | (f) | 38,892 | 25,423 | 23,352 | |||||||||||
Total interest income | 735,506 | 547,572 | 378,707 | |||||||||||||
Interest expense | ||||||||||||||||
Deposits | 20,587 | 12,319 | 3,359 | |||||||||||||
Commercial paper | 28,831 | 15,789 | 8,852 | |||||||||||||
Advances and short-term borrowings | 13,804 | 12,986 | 8,250 | |||||||||||||
Bonds | 264,424 | 188,551 | 123,919 | |||||||||||||
Borrowings and other obligations | 31,077 | 21,069 | 11,392 | |||||||||||||
Commissions | 5,350 | 4,871 | 5,094 | |||||||||||||
Total interest expense | 364,073 | 255,585 | 160,866 | |||||||||||||
Net interest income | 371,433 | 291,987 | 217,841 | |||||||||||||
Provision for (credit to) allowance for loan losses | 4 | 19,000 | (14,500 | ) | (18,555 | ) | ||||||||||
Net interest income, after provision for (credit to) allowance for loan losses | 352,433 | 306,487 | 236,396 | |||||||||||||
Non-interest income | ||||||||||||||||
Other commissions | 4,090 | 5,814 | 2,548 | |||||||||||||
Dividends and equity in earnings of investees | 5,126 | 13,358 | 8,137 | |||||||||||||
Ineffectiveness arising from fair value hedges | 4,372 | (1,146 | ) | (828 | ) | |||||||||||
Other income | 1,399 | 1,721 | 1,542 | |||||||||||||
Total non-interest income | 14,987 | 19,747 | 11,399 | |||||||||||||
Non-interest expenses | ||||||||||||||||
Administrative expenses | 46,414 | 42,640 | 38,120 | |||||||||||||
Impairment charge for equity investments | 5 | 190 | 24 | 1,694 | ||||||||||||
Other expenses | 163 | 332 | 228 | |||||||||||||
Total non-interest expenses | 46,767 | 42,996 | 40,042 | |||||||||||||
Net income | 320,653 | 283,238 | 207,753 | |||||||||||||
See accompanying notes to the financial statements.
F-4
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Statements of Stockholders’ Equity
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Statements of Stockholders’ Equity
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Total | ||||||||||||||||||||||||||||||||
Subscribed | Additional | Reserve pursuant to | stock- | |||||||||||||||||||||||||||||
and paid- | paid-in | General | Article No. 42 | Total | Retained | holders’ | ||||||||||||||||||||||||||
Note | in capital | capital | reserve | of by-laws | reserves | earnings | equity | |||||||||||||||||||||||||
Balances at December 31, 2003 | 1,318,555 | 173,460 | 560,088 | 192,520 | 752,608 | 135,533 | 2,380,156 | |||||||||||||||||||||||||
Capital increase | 14 | 106,915 | 119,817 | — | — | — | — | 226,732 | ||||||||||||||||||||||||
Stock dividends | 14 | 73,205 | (73,205 | ) | — | — | — | — | — | |||||||||||||||||||||||
Net income | 14 | — | — | — | — | — | 207,753 | 207,753 | ||||||||||||||||||||||||
Appropriated for general reserve | 14 | — | — | 99,979 | — | 99,979 | (99,979 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to Article No. 42 of by-laws | 14 | — | — | — | 13,554 | 13,554 | (13,554 | ) | — | |||||||||||||||||||||||
Distributions to stockholders’ funds | 15 | — | — | — | — | — | (22,000 | ) | (22,000 | ) | ||||||||||||||||||||||
Balances at December 31, 2004 | 1,498,675 | 220,072 | 660,067 | 206,074 | 866,141 | 207,753 | 2,792,641 | |||||||||||||||||||||||||
Capital increase | 14 | 95,110 | 107,552 | — | — | — | — | 202,662 | ||||||||||||||||||||||||
Stock dividends | 14 | 88,100 | (88,100 | ) | — | — | — | — | — | |||||||||||||||||||||||
Net income | 14 | — | — | — | — | — | 283,238 | 283,238 | ||||||||||||||||||||||||
Appropriated for general reserve | 14 | — | — | 145,573 | — | 145,573 | (145,573 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to Article No. 42 of by-laws | 14 | — | — | — | 20,800 | 20,800 | (20,800 | ) | — | |||||||||||||||||||||||
Distributions to stockholders’ funds | 15 | — | — | — | — | — | (41,380 | ) | (41,380 | ) | ||||||||||||||||||||||
Balances at December 31, 2005 | 1,681,885 | 239,524 | 805,640 | 226,874 | 1,032,514 | 283,238 | 3,237,161 | |||||||||||||||||||||||||
Capital increase | 14 | 95,355 | 110,558 | — | — | — | — | 205,913 | ||||||||||||||||||||||||
Stock dividends | 14 | 93,375 | (93,375 | ) | — | — | — | — | — | |||||||||||||||||||||||
Net income | 14 | — | — | — | — | — | 320,653 | 320,653 | ||||||||||||||||||||||||
Appropriated for general reserve | 14 | — | — | 183,738 | — | 183,738 | (183,738 | ) | — | |||||||||||||||||||||||
Appropriated for reserve pursuant to Article No. 42 of by-laws | 14 | — | — | — | 28,500 | 28,500 | (28,500 | ) | — | |||||||||||||||||||||||
Distributions to stockholders’ funds | 15 | — | — | — | — | — | (71,000 | ) | (71,000 | ) | ||||||||||||||||||||||
Balances at December 31, 2006 | 1,870,615 | 256,707 | 989,378 | 255,374 | 1,244,752 | 320,653 | 3,692,727 | |||||||||||||||||||||||||
See accompanying notes to the financial statements.
F-5
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Statements of Cash Flows
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Statements of Cash Flows
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Note | 2006 | 2005 | 2004 | |||||||||||||
Cash flows from operating activities — | ||||||||||||||||
Net income | 320,653 | 283,238 | 207,753 | |||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities — | ||||||||||||||||
Loss (gain) on sale of trading securities | 3 | (4 | ) | (56 | ) | 2,019 | ||||||||||
Amortization of loan commissions, net of origination costs | (13,764 | ) | (13,655 | ) | (13,841 | ) | ||||||||||
Provision for (credit to) allowance for loan losses | 4 | 19,000 | (14,500 | ) | (18,555 | ) | ||||||||||
Impairment charge for equity investments | 5 | 190 | 24 | 1,694 | ||||||||||||
Equity in earnings of investees | (2,447 | ) | (8,273 | ) | (6,138 | ) | ||||||||||
Amortization of deferred charges | 2,971 | 3,138 | 2,764 | |||||||||||||
Depreciation of property and equipment | 6 | 3,234 | 3,115 | 2,735 | ||||||||||||
Loss on sale of property and equipment | — | 37 | — | |||||||||||||
Provision for employees’ severance indemnities and benefits | 5,476 | 4,544 | 3,775 | |||||||||||||
Provision for employees’ savings plan | 1,491 | 1,497 | 1,464 | |||||||||||||
Net changes in operating assets and liabilities | ||||||||||||||||
Securities purchased under resale agreements | — | — | 25,000 | |||||||||||||
Severance indemnities paid or advanced | (3,055 | ) | (2,863 | ) | (1,875 | ) | ||||||||||
Employees’ savings plan paid or advanced | (606 | ) | (1,532 | ) | (559 | ) | ||||||||||
Trading securities, net | 3 | 103,954 | (87,796 | ) | (381,876 | ) | ||||||||||
Interest and commissions receivable | (44,591 | ) | (30,892 | ) | (15,846 | ) | ||||||||||
Other assets | 5,987 | (11,517 | ) | 22,748 | ||||||||||||
Accrued interest and commissions payable | 25,924 | 15,097 | (2,320 | ) | ||||||||||||
Accrued expenses and other liabilities | (46,261 | ) | (61,395 | ) | (60,825 | ) | ||||||||||
Total adjustments and net changes in operating assets and liabilities | 57,499 | (205,027 | ) | (439,636 | ) | |||||||||||
Net cash provided by (used in) operating activities | 378,152 | 78,211 | (231,883 | ) | ||||||||||||
Cash flows from investing activities — | ||||||||||||||||
Purchases of held-to-maturity securities | 3 | (1,692,804 | ) | (732,383 | ) | (471,688 | ) | |||||||||
Maturities of held-to-maturity securities | 3 | 1,424,561 | 810,860 | 622,330 | ||||||||||||
Purchases of other investments | 2 | (588,132 | ) | (634,244 | ) | (170,521 | ) | |||||||||
Maturities of other investments | 2 | 636,278 | 546,189 | 95,506 | ||||||||||||
Loan origination and principal collections, net | 4 | (669,082 | ) | (175,832 | ) | (455,283 | ) | |||||||||
Equity investments | 5 | 23,477 | 5,738 | 7,336 | ||||||||||||
Purchases of property and equipment | 6 | (16,179 | ) | (1,489 | ) | (5,016 | ) | |||||||||
Net cash used in investing activities | (881,881 | ) | (181,161 | ) | (377,336 | ) | ||||||||||
Carried forward | (503,729 | ) | (102,950 | ) | (609,219 | ) | ||||||||||
See accompanying notes to the financial statements.
F-6
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Statements of Cash Flows, Continued
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Statements of Cash Flows, Continued
Years ended December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Note | 2006 | 2005 | 2004 | |||||||||||||
Brought forward | (503,729 | ) | (102,950 | ) | (609,219 | ) | ||||||||||
Cash flows from financing activities — | ||||||||||||||||
Net increase in deposits | 63,378 | 181,073 | (72,826 | ) | ||||||||||||
Net increase in commercial paper | 60,182 | 3,213 | 35,790 | |||||||||||||
Proceeds from advances and short-term borrowings | 864,993 | 997,624 | 1,179,022 | |||||||||||||
Repayment of advances and short-term borrowings | (969,444 | ) | (1,056,878 | ) | (1,142,046 | ) | ||||||||||
Proceeds from issuance of bonds | 10 | 810,228 | 584,332 | 657,500 | ||||||||||||
Repayment of bonds | 10 | (504,678 | ) | (724,624 | ) | (644,534 | ) | |||||||||
Proceeds from borrowings and other obligations | 11 | 154,227 | 20,000 | 244,166 | ||||||||||||
Repayment of borrowings and other obligations | 11 | (83,942 | ) | (99,504 | ) | (87,531 | ) | |||||||||
Distributions to stockholders’ funds | 15 | (71,000 | ) | (41,380 | ) | (22,000 | ) | |||||||||
Proceeds from issuance of shares | 14 | 205,913 | 202,662 | 226,732 | ||||||||||||
Net cash provided by financing activities | 529,857 | 66,518 | 374,273 | |||||||||||||
Net increase (decrease) in cash and cash equivalents | 26,128 | (36,432 | ) | (234,946 | ) | |||||||||||
Cash and cash equivalents at beginning of year | 336,311 | 372,743 | 607,689 | |||||||||||||
Cash and cash equivalents at end of year | 362,439 | 336,311 | 372,743 | |||||||||||||
Consisting of: | ||||||||||||||||
Cash and due from banks | 8,997 | 1,740 | 2,753 | |||||||||||||
Deposits with banks | 353,442 | 334,571 | 369,990 | |||||||||||||
362,439 | 336,311 | 372,743 | ||||||||||||||
Supplemental disclosure — | ||||||||||||||||
Interest paid during the year | 327,725 | 235,717 | 157,993 | |||||||||||||
Noncash financing activities — | ||||||||||||||||
Change in other assets due to fair value hedging relationships | 70,044 | (410,761 | ) | 196,372 | ||||||||||||
Change in other liabilities due to fair value hedging relationships | 68,077 | 2,781 | (107,688 | ) | ||||||||||||
See accompanying notes to the financial statements.
F-7
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
(1) | Significant Accounting Policies |
(a) | Description of Business |
Corporación Andina de Fomento (“CAF” or the “Corporation”) commenced operations on June 8, 1970 and is a multilateral financial institution established under public international law which abides by the provisions of its by-laws. Series “A” and “B” Shareholder countries are: Bolivia, Colombia, Ecuador, Peru and Venezuela. Series “C” Shareholder countries are: Argentina, Brazil, Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Paraguay, Panama, Spain, Trinidad and Tobago and Uruguay. In addition, there are 15 banks which are Series “B” shareholders. The Corporation has its headquarters in Caracas, Venezuela.
The Corporation’s principal activity is to provide short, medium and long-term loans to finance projects, working capital, trade activities and to undertake feasibility studies for investment opportunities in its member countries.
(b) | Financial Statements Presentation |
The financial statements have been prepared in accordance with U.S. generally accepted accounting principles and the functional currency is the U.S. dollar.
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain amounts in the 2005 and 2004 financial statements have been reclassified to conform to the current year’s presentation.
(c) | Foreign Currency Transactions |
Transactions in currencies other than U.S. dollars are translated at exchange rates prevailing on the international market at the dates of the transactions. Foreign currency balances are translated at year-end exchange rates. Any gains or losses on foreign exchange including related hedge effects are included the statement of income and are not significant.
(d) | Cash Equivalents |
Cash equivalents are defined as cash, due from banks and deposits with banks.
(e) | Marketable Securities |
The Corporation classifies its debt securities in one of two categories: trading or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities which the Corporation has the ability and intent to hold until maturity.
Trading securities are recorded at fair value. Unrealized gains and losses on trading securities are included in earnings.
Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. A decline in the market value of any held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount. The impairment is charged to income and a new cost basis for the security is established. Premiums and discounts are amortized or accreted
F-8
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method.
Dividend and interest income are recognized when received and earned, respectively.
(f) | Loans |
The Corporation grants short, medium and long-term loans to finance projects, working capital, trade activities and undertake feasibility studies for investment opportunities in its member countries. Loans are reported at their outstanding unpaid principal balances adjusted for charge-offs, less the allowance for loan losses and loan commissions net of origination costs. Interest income is accrued on the unpaid principal balance. Loan commission fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method and are presented as loan commissions in the statement of income.
The accrual of interest on loans is discontinued at the time a private sector loan is 90 days (180 days for public sector loans) delinquent unless the credit is well-secured and in process of collection.
All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
The nonaccrual loans are considered impaired. Factors considered by management in determining impairment include payments status, collateral value, and the probability of collecting scheduled principal and interest payments when due.
(g) | Equity Investments |
CAF participates with equity investments in companies and investment funds in strategic sectors, with a view to promoting the development of such companies and their participation in the securities markets and to serve as a catalytic agent in attracting resources into the Shareholder countries.
Equity investments are accounted for using the equity method or at cost. If the Corporation has the ability to exercise significant influence over the operating and financial policies of the investee, which is generally presumed to exist at a 20% of equity ownership level, the equity investments are accounted for using the equity method. Under the equity method, the carrying value of the equity investment is adjusted for its proportionate share of earnings or losses, dividends received and certain other transactions of the investee company.
A decline in the market value of any equity investment accounted for at cost, that is deemed to be other than temporary, results in a reduction in carrying amount to fair value. The impairment is charged to income and a new cost basis for the investment is established.
(h) | Allowance for Loan Losses |
The allowance for loan losses is maintained at a level the Corporation believes is adequate but not excessive to absorb probable losses inherent in the loan portfolio as of the date of the financial statements. The general allowance for loan losses is established by the Corporation based on the individual risk rating for the long term foreign currency debt of the borrower countries which is assigned by the international risk rating agencies as of the date of the financial statements preparation. This country risk rating considers a default probability. In the case of sovereign loan portfolio a factor of preferred creditor status is also considered.
F-9
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
A specific allowance is established by the Corporation for those loans that are considered impaired. A loan is considered as impaired when based on currently available information and events, there exists the probability that CAF will not recover the total amount of principal and interest as agreed in the terms of the original loan contract. The impairment of loans is determined on a loan by loan basis based on the present value of expected future cash flows, discounted at the loans effective interest rate.
Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
(i) | Property and Equipment |
Property and equipment are stated at cost less accumulated depreciation. Depreciation, calculated on the straight-line method, is charged to operations over the estimated useful lives of assets.
(j) Employees’ Severance Indemnities
The Corporation accrues for employees’ severance indemnities in accordance with the Corporation’s personnel regulations and the Partial Reform of the Organic Labor Law of the Bolivarian Republic of Venezuela, which establish that employees are entitled to an indemnity upon the termination of employment, equivalent to five days remuneration for each month of service, plus two days for each year of service up to a maximum of 30 days, commencing from the second year. Under certain circumstances the reformed law also provides for the payment for unjustified dismissal. The accrual is presented net of advances and interest is paid annually on the outstanding balance.
(k) | Pension Plan |
The Corporation established in March 2005 a defined benefit pension plan (the Plan). The Plan is contributory and the benefits are based on years of service and the average employee’s salary for the three consecutive years of service with the highest salary.
(l) | Derivative Instruments and Hedging Activities |
All derivatives are recognized on the balance sheet at their fair value. On the date the derivative contract is entered into, the Corporation designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value” hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), or a foreign-currency fair-value or cash-flow hedge (“foreign currency” hedge). The Corporation formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair-value, cash-flow, or foreign-currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Corporation also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Corporation discontinues hedge accounting prospectively.
Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm commitment of the hedged item that is attributable to the hedged risk, are recorded in income. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in
F-10
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
other comprehensive income, until income is affected by the variability in cash flows of the designated hedged item. Changes in the fair value of derivatives that are highly effective as hedges and that are designated and qualify as foreign-currency hedges are recorded in either income or other comprehensive income, depending on whether the hedge transaction is a fair-value hedge or a cash-flow hedge.
The Corporation discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative expires or is sold, terminated, or exercised, the derivative is de-designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur, a hedged firm commitment no longer meets the definition of a firm commitment, or management determines that designation of the derivative as a hedging instrument is no longer appropriate.
When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the Corporation continues to carry the derivative on the balance sheet at its fair value, and no longer adjusts the hedged asset or liability for changes in fair value. The adjustment of the carrying amount of the hedged asset or liability is accounted for in the same manner as other components of the carrying amount of that asset or liability. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Corporation continues to carry the derivative on the balance sheet at its fair value, removes any asset or liability that was recorded pursuant to recognition of the firm commitment from the balance sheet and recognizes any gain or loss in income. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the Corporation continues to carry the derivative on the balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive income are recognized immediately in income. In all situations in which hedge accounting is discontinued, the Corporation continues to carry the derivative at its fair value on the balance sheet, and recognizes any changes in its fair value in income.
(2) | Deposits with Banks and Other Investments |
Deposits with banks mature in three months or less and include the following:
December 31, | ||||||||
2006 | 2005 | |||||||
U.S. dollars | 350,820 | 331,098 | ||||||
Other currencies | 2,622 | 3,473 | ||||||
353,442 | 334,571 | |||||||
Deposits with maturities over 90 days are reported in the balance sheets as other investments.
F-11
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
(3) | Marketable Securities |
Trading Securities
A summary of trading securities follows:
Average | ||||||||||||
maturity | Average | |||||||||||
Amount | (years) | yield (%) | ||||||||||
At December 31, 2006 — | ||||||||||||
U. S. Treasury Notes | 49,904 | 0.42 | 3.24 | |||||||||
Bonds of non-U.S. governments and government entities | 149,648 | 1.61 | 6.07 | |||||||||
Financial institutions and corporate securities | 802,066 | 1.53 | 5.47 | |||||||||
1,001,618 | 1.49 | 5.45 | ||||||||||
At December 31, 2005 — | ||||||||||||
U. S. Treasury Notes | 39,762 | 0.37 | 3.56 | |||||||||
Bonds of non-U.S. governments and government entities | 237,616 | 1.47 | 3.66 | |||||||||
Financial institutions and corporate securities | 828,190 | 1.83 | 4.04 | |||||||||
1,105,568 | 1.70 | 3.94 | ||||||||||
Trading securities include net unrealized gains of US$167, US$332 and US$391 at December 31, 2006, 2005 and 2004, respectively.
Held-to-Maturity Securities
A summary of held-to-maturity securities follows:
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
Amortized | holding | holding | ||||||||||||||
cost | gains | losses | Fair value | |||||||||||||
At December 31, 2006 — | ||||||||||||||||
Bonds of non-U.S. governments and government entities | 60,483 | 17 | — | 60,500 | ||||||||||||
Financial institutions and corporate securities | 295,645 | — | — | 295,645 | ||||||||||||
356,128 | 17 | — | 356,145 | |||||||||||||
At December 31, 2005 — | ||||||||||||||||
U. S. Treasury Notes | 5,001 | — | (21 | ) | 4,980 | |||||||||||
Bonds of non-U.S. governments and government entities | 37,884 | 5 | (21 | ) | 37,868 | |||||||||||
Financial institutions and corporate securities | 45,000 | — | — | 45,000 | ||||||||||||
87,885 | 5 | (42 | ) | 87,848 | ||||||||||||
F-12
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Held-to-maturity securities mature as follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Remaining Maturities — | ||||||||
Less than one year | 316,644 | 80,373 | ||||||
Between one and two years | 14,996 | 7,512 | ||||||
Between two and three years | 10,496 | — | ||||||
Between three and four years | 13,992 | — | ||||||
356,128 | 87,885 | |||||||
(4) | Loans |
Loans include short, medium and long-term loans to finance projects, working capital and trade activities. The majority of the loan contracts have been subscribed with the Series “A” and “B” Shareholder countries, or with private institutions or companies of these countries.
Loans by country are summarized as follows:
At December 31, 2006 —
Bolivia | Colombia | Ecuador | Peru | Venezuela | Other | Total | ||||||||||||||||||||||
Loans | 1,024,293 | 1,619,530 | 1,370,785 | 1,801,741 | 1,723,523 | 557,573 | 8,097,445 | |||||||||||||||||||||
Fair value adjustments on hedging activities | 27 | |||||||||||||||||||||||||||
Carrying value of loans | 8,097,472 | |||||||||||||||||||||||||||
At December 31, 2005 — | ||||||||||||||||||||||||||||
Loans | 981,643 | 1,899,517 | 1,230,543 | 1,712,262 | 1,134,678 | 387,995 | 7,346,638 | |||||||||||||||||||||
Fair value adjustments on hedging activities | 340 | |||||||||||||||||||||||||||
Carrying value of loans | 7,346,978 | |||||||||||||||||||||||||||
Fair value adjustments to the carrying value of loans represent adjustments to the carrying value of transactions in designated fair value hedging relationships.
At December 31, 2006, loans in other currencies were granted for an equivalent of US$4,006, principally in Peruvian nuevos soles. At December 31, 2006 and 2005, loans include fixed interest rate loans of US$78,987 and US$104,052, respectively.
F-13
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
The loan portfolio composition and average yield of loans disbursed and outstanding are summarized below:
December 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
Average | Average | |||||||||||||||
Amount | yield (%) | Amount | yield (%) | |||||||||||||
Loans | 8,097,445 | 8.19 | 7,346,638 | 7.42 | ||||||||||||
Loans by industry segments are as follows:
December 31, | ||||||||||||||||
2006 | % | 2005 | % | |||||||||||||
Agriculture, hunting and forestry | 142,056 | 2 | 220,279 | 3 | ||||||||||||
Exploitation of mines and quarries | 60,000 | 1 | 10,000 | 1 | ||||||||||||
Manufacturing industry | 193,379 | 2 | 168,633 | 2 | ||||||||||||
Supply of electricity, gas and water | 908,160 | 11 | 838,646 | 11 | ||||||||||||
Transport, warehousing and communications | 3,189,947 | 39 | 2,751,072 | 37 | ||||||||||||
Commercial banks | 460,089 | 6 | 492,515 | 7 | ||||||||||||
Development banks | 266,468 | 3 | 252,742 | 3 | ||||||||||||
Social and other infrastructure programs | 2,850,809 | 35 | 2,582,288 | 35 | ||||||||||||
Other activities | 26,537 | 1 | 30,463 | 1 | ||||||||||||
8,097,445 | 100 | 7,346,638 | 100 | |||||||||||||
Loans mature as follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Remaining Maturities - | ||||||||
Less than one year | 1,438,002 | 1,374,268 | ||||||
Between one and two years | 997,762 | 996,721 | ||||||
Between two and three years | 991,247 | 910,545 | ||||||
Between three and four years | 848,419 | 764,184 | ||||||
Between four and five years | 839,428 | 722,714 | ||||||
Over five years | 2,982,587 | 2,578,206 | ||||||
8,097,445 | 7,346,638 | |||||||
At December 31, 2006 and 2005, all loans were performing except for certain loans which were classified as impaired and were in nonaccrual status. At December 31, 2005, the carrying value of impaired loans was approximately US$1,332. The average recorded investment in impaired loans during the years ended December 31, 2006 and 2005 was approximately US$199 and US$9,331, respectively.
Had these loans not been in impairment status, income for the years ended December 31, 2006 and 2005 would have increased by US$16 and US$577, respectively. During the year ended December 31, 2005, there were interest collections against impaired loans amounting to US$76.
F-14
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Loan Participations and A/B Loans
The Corporation administers loan participations provided to clients, and assumes the credit risk only for that portion of the loan owned by the Corporation. During 2006 and 2005, the Corporation administered loans of this nature whereby other financial institutions provided funds amounting to US$69,833 and US$441,221, respectively.
Allowance for Loan Losses
Movements of the allowance for loan losses follow:
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Balances at beginning of year | 161,629 | 181,801 | 209,766 | |||||||||
Provision for (credit to) results of operations | 19,000 | (14,500 | ) | (18,555 | ) | |||||||
Recoveries | 9,043 | 4,696 | 3,522 | |||||||||
Loans charged-off | (1,064 | ) | (10,368 | ) | (12,932 | ) | ||||||
Balances at end of year | 188,608 | 161,629 | 181,801 | |||||||||
(5) | Equity Investments |
A summary of equity investments follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Direct investments in companies (including investments accounted for using the equity method of US$5,668 and US$5,456, at December 31, 2006 and 2005, respectively) | 10,371 | 10,640 | ||||||
Investment funds (including investments accounted for using the equity method of US$62,197 and US$72,826, at December 31, 2006 and 2005, respectively) | 83,055 | 104,006 | ||||||
93,426 | 114,646 | |||||||
The Corporation recorded an impairment charge of US$190, US$24 and US$1,694 for the years ended December 31, 2006, 2005 and 2004, respectively, related to equity investments accounted for at cost.
F-15
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
(6) | Property and Equipment |
A summary of property and equipment follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Land | 14,069 | 796 | ||||||
Buildings | 19,353 | 19,353 | ||||||
Buildings improvements | 10,939 | 10,035 | ||||||
Furniture and equipment | 8,298 | 6,323 | ||||||
Vehicles | 328 | 328 | ||||||
52,987 | 36,835 | |||||||
Less accumulated depreciation | 29,056 | 25,849 | ||||||
23,931 | 10,986 | |||||||
Depreciation is provided for property and equipment on the straight-line method over the estimated useful lives of the respective classes of assets, as follows:
Buildings | 15 years | |||
Buildings improvements | 5 years | |||
Furniture and equipment | 2 to 5 years | |||
Vehicles | 5 years | |||
(7) | Other Assets |
A summary of other assets follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Deferred charges | 27,170 | 36,629 | ||||||
Derivative assets (see note 17) | 285,364 | 215,320 | ||||||
Other assets | 3,575 | 6,143 | ||||||
316,109 | 258,092 | |||||||
(8) | Deposits |
The Corporation’s deposits of US$449,797 at December 31, 2006 mature in 2007 (US$386,419 at December 31, 2005 — mature in 2006).
(9) | Commercial Paper |
The Corporation’s commercial paper of US$773,354 at December 31, 2006 matures in 2007 (US$710,270 at December 31, 2005 — matures in 2006). At December 31, 2006 and 2005, the interest rates on commercial paper ranged from 3.62% to 5.43% and from 4.23% to 4.60%, respectively.
F-16
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
(10) | Bonds |
An analysis of bonds follows:
December 31, | ||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Principal outstanding | average | Principal outstanding | average | |||||||||||||||||||||
At original | At spot | cost, after | At original | At spot | cost, after | |||||||||||||||||||
exchange | exchange | swaps (%) | exchange | exchange | swaps (%) | |||||||||||||||||||
rate | rate | (Year-end) | rate | rate | (Year-end) | |||||||||||||||||||
U.S. dollars | 2,630,340 | 2,630,340 | 6.34 | 2,451,128 | 2,451,128 | 5.31 | ||||||||||||||||||
Yen | 184,332 | 168,011 | 5.96 | 385,945 | 382,231 | 4.49 | ||||||||||||||||||
Colombian Pesos | 100,000 | 121,500 | 5.43 | 100,000 | 119,003 | 4.65 | ||||||||||||||||||
Pounds Sterling | 63,405 | 79,783 | 7.97 | 272,193 | 300,982 | 7.23 | ||||||||||||||||||
Euros | 998,659 | 1,187,727 | 6.25 | 637,668 | 731,227 | 5.61 | ||||||||||||||||||
Peruvian Nuevos Soles | 75,748 | 77,698 | 5.87 | — | — | — | ||||||||||||||||||
Venezuelan Bolivars | 100,000 | 100,000 | 5.28 | — | — | — | ||||||||||||||||||
4,152,484 | 4,365,059 | 3,846,934 | 3,984,571 | |||||||||||||||||||||
Fair value adjustments on hedging activities | (2,898 | ) | 76,537 | |||||||||||||||||||||
Carrying value of bonds | 4,362,161 | 4,061,108 | ||||||||||||||||||||||
Fair value adjustments to the carrying value of bonds represent adjustments to the carrying value of transactions in designated fair value hedging relationships.
A summary of the bonds issued, by remaining maturities, follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Remaining maturities — | ||||||||
Less than one year | 499,593 | 294,379 | ||||||
Between one and two years | 137,646 | 499,655 | ||||||
Between two and three years | 734,703 | 287,704 | ||||||
Between three and four years | 162,709 | 584,770 | ||||||
Between four and five years | 783,869 | 371,948 | ||||||
Over five years | 1,833,964 | 1,808,478 | ||||||
4,152,484 | 3,846,934 | |||||||
At December 31, 2006 and 2005, fixed interest rate bonds amounted to US$2,894,621 and US$3,003,082, respectively, of which US$758,896 and US$1,117,357, respectively, are denominated in yen, pounds sterling, Colombian pesos, euros and Peruvian nuevos soles.
F-17
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
(11) | Borrowings and Other Obligations |
An analysis of borrowings and other obligations and their weighted average cost, follows:
December 31, | ||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Principal outstanding | average | Principal outstanding | average | |||||||||||||||||||||
At original | At spot | cost, after | At original | At spot | cost, after | |||||||||||||||||||
exchange | exchange | swaps (%) | exchange | exchange | swaps (%) | |||||||||||||||||||
rate | rate | (Year-end) | rate | rate | (Year-end) | |||||||||||||||||||
U.S. dollars | 539,092 | 539,092 | 5.84 | 463,245 | 463,245 | 4.84 | ||||||||||||||||||
Yen | 11,766 | 12,601 | 4.18 | 19,610 | 21,235 | 4.17 | ||||||||||||||||||
Euros (at spot rate) | 1,899 | 1,899 | 5.41 | 3,574 | 3,574 | 5.81 | ||||||||||||||||||
Peruvian Nuevos Soles | 4,066 | 4,066 | 5.99 | — | — | — | ||||||||||||||||||
Other currencies (at spot rate) | 1,823 | 1,823 | — | 1,932 | 1,932 | — | ||||||||||||||||||
— | ||||||||||||||||||||||||
558,646 | 559,481 | 488,361 | 489,986 | |||||||||||||||||||||
Fair value adjustments on hedging activities | (346 | ) | (14 | ) | ||||||||||||||||||||
Carrying value of borrowings and other obligations | 559,135 | 489,972 | ||||||||||||||||||||||
Fair value adjustments to the carrying value of borrowings and other obligations represent adjustments to the carrying value of transactions in designated fair value hedging relationships.
At December 31, 2006 and 2005, there are fixed interest-bearing borrowings and other obligations amounting to US$20,322 and US$20,945, respectively.
Borrowings and other obligations, by remaining maturities, are summarized below:
December 31, | ||||||||
2006 | 2005 | |||||||
Remaining maturities — | ||||||||
Less than one year | 104,880 | 76,839 | ||||||
Between one and two years | 57,072 | 110,006 | ||||||
Between two and three years | 144,703 | 55,133 | ||||||
Between three and four years | 28,996 | 143,890 | ||||||
Between four and five years | 105,889 | 29,496 | ||||||
Over five years | 117,106 | 72,997 | ||||||
558,646 | 488,361 | |||||||
Some borrowing agreements contain covenants conditioning the use of the funds for specific purposes or projects.
At December 31, 2006 and 2005 there were unused term credit facilities amounting to US$227,700 and US$128,000, respectively.
F-18
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
(12) | Accrued Expenses and Other Liabilities |
A summary of accrued expenses and other liabilities follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Employees’ severance indemnities, benefits and savings plan | 42,157 | 34,346 | ||||||
Derivative liabilities (see note 17) | 70,858 | 2,781 | ||||||
Deferred income | 2,442 | 2,859 | ||||||
Other liabilities | 10,728 | 2,752 | ||||||
126,185 | 42,738 | |||||||
(13) | Pension Plan |
The Corporation established in March 2005 a defined benefit pension plan (the Plan) which is mandatory for all new employees as of the date of implementation of the Plan and voluntary for all other employees. The Plan is contributory and the benefits are based on years of service and the average employee’s salary for the three consecutive years of service with the highest salary. The employees make monthly contributions to the Plan equal to 7% of their salary. Voluntary participants must contribute to the Plan certain withheld benefits. The Plan has 55 participants.
The measurement date used to determine pension benefit measures for the Plan is December 31.
The Plan’s benefit obligation (PBO) and assets as of December 31, 2006 and 2005 follow:
December 31, | ||||||||
2006 | 2005 | |||||||
Plan’s benefit obligation (PBO) | 189 | 644 | ||||||
Assets | 189 | 639 | ||||||
Weighted-average assumptions used to determine net benefit cost from the origination of the Plan to December 31, 2006 and 2005 follow:
Discount rate | 4 | % | ||
Expected long-term rate of return on Plan assets | 4 | % | ||
Rate of salary increase | 3 | % | ||
(14) | Stockholders’ Equity |
Authorized Capital
The authorized capital of the Corporation at December 31, 2006, 2005 and 2004, amounts to US$5,000,000, distributed among Series “A”, “B” and “C” shares.
Subscribed Callable Capital
The payment of subscribed callable capital will be as required, with prior approval of the Board of Directors, in order to meet financial obligations of the Corporation, when internal resources are inadequate.
F-19
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Shares
The Corporation’s shares are classified as follows:
Series “A” shares: Subscribed by the governments or public-sector institutions, semipublic or private entities with social or public objectives of: Bolivia, Colombia, Ecuador, Peru and Venezuela. These shares grant the right of representation on the Corporation’s board of one principal director and one alternate director per share. Series “A” shares have a par value of US$1,200.
Series “B” shares: Subscribed by the governments or public-sector institutions, semipublic or private entities and commercial banks of: Bolivia, Colombia, Ecuador, Peru and Venezuela. These shares grant the right of representation on the Corporation’s board of one principal director and one alternate director. Also, the commercial banks are entitled to one principal director and one alternate director on the board. Series “B” shares have a par value of US$5.
Series “C” shares: Subscribed by legal entities or individuals belonging to countries other than Bolivia, Colombia, Ecuador, Peru and Venezuela. These shares provide for representation on the board of directors of the Corporation of two principal directors and their respective alternates, who are elected by the holders of these shares. Series “C” shares have a par value of US$5.
A summary of the movement in subscribed and paid-in capital for the years ended December 31, 2006, 2005 and 2004, follows:
Number of Shares | Amounts | |||||||||||||||||||||||||||
Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | ||||||||||||||||||||||
At December 31, 2003 | 5 | 241,505 | 21,006 | 6,000 | 1,207,525 | 105,030 | 1,318,555 | |||||||||||||||||||||
Dividends in shares | — | 13,478 | 1,163 | — | 67,390 | 5,815 | 73,205 | |||||||||||||||||||||
Issued for cash | — | 14,739 | 6,644 | — | 73,695 | 33,220 | 106,915 | |||||||||||||||||||||
At December 31, 2004 | 5 | 269,722 | 28,813 | 6,000 | 1,348,610 | 144,065 | 1,498,675 | |||||||||||||||||||||
Dividends in shares | — | 15,931 | 1,689 | — | 79,655 | 8,445 | 88,100 | |||||||||||||||||||||
Issued for cash | — | 14,926 | 4,096 | — | 74,630 | 20,480 | 95,110 | |||||||||||||||||||||
At December 31, 2005 | 5 | 300,579 | 34,598 | 6,000 | 1,502,895 | 172,990 | 1,681,885 | |||||||||||||||||||||
Dividends in shares | — | 16,747 | 1,928 | — | 83,735 | 9,640 | 93,375 | |||||||||||||||||||||
Issued for cash | — | 15,061 | 4,010 | — | 75,305 | 20,050 | 95,355 | |||||||||||||||||||||
At December 31, 2006 | 5 | 332,387 | 40,536 | 6,000 | 1,661,935 | 202,680 | 1,870,615 | |||||||||||||||||||||
F-20
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Subscribed and paid-in capital is held as follows at December 31, 2006:
Number of Shares | Amounts | |||||||||||||||||||||||||||
Stockholder | Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | |||||||||||||||||||||
Bolivia | 1 | 25,055 | — | 1,200 | 125,275 | — | 126,475 | |||||||||||||||||||||
Colombia | 1 | 92,198 | — | 1,200 | 460,990 | — | 462,190 | |||||||||||||||||||||
Ecuador | 1 | 26,632 | — | 1,200 | 133,160 | — | 134,360 | |||||||||||||||||||||
Peru | 1 | 94,121 | — | 1,200 | 470,605 | — | 471,805 | |||||||||||||||||||||
Venezuela | 1 | 94,120 | — | 1,200 | 470,600 | — | 471,800 | |||||||||||||||||||||
Argentina | — | — | 4,890 | — | — | 24,450 | 24,450 | |||||||||||||||||||||
Brazil | — | — | 11,924 | — | — | 59,620 | 59,620 | |||||||||||||||||||||
Chile | — | — | 310 | — | — | 1,550 | 1,550 | |||||||||||||||||||||
Costa Rica | — | — | 2,326 | — | — | 11,630 | 11,630 | |||||||||||||||||||||
Dominican Republic | — | — | 1,101 | — | — | 5,505 | 5,505 | |||||||||||||||||||||
Jamaica | — | — | 130 | — | — | 650 | 650 | |||||||||||||||||||||
Mexico | — | — | 3,333 | — | — | 16,665 | 16,665 | |||||||||||||||||||||
Panama | — | — | 1,663 | — | — | 8,315 | 8,315 | |||||||||||||||||||||
Paraguay | — | — | 1,292 | — | — | 6,460 | 6,460 | |||||||||||||||||||||
Spain | — | — | 11,035 | — | — | 55,175 | 55,175 | |||||||||||||||||||||
Trinidad & Tobago | — | — | 147 | — | — | 735 | 735 | |||||||||||||||||||||
Uruguay | — | — | 2,385 | — | — | 11,925 | 11,925 | |||||||||||||||||||||
Commercial banks | — | 261 | — | — | 1,305 | — | 1,305 | |||||||||||||||||||||
5 | 332,387 | 40,536 | 6,000 | 1,661,935 | 202,680 | 1,870,615 | ||||||||||||||||||||||
At December 31, 2006, the distribution of unpaid subscribed capital and of subscribed callable capital is presented below:
Unpaid Subscribed Capital | Subscribed Callable Capital | |||||||||||||||||||||||||||||||
Series “B” | Series “C” | Series “B” | Series “C” | |||||||||||||||||||||||||||||
Number of | Number of | Number | Number | |||||||||||||||||||||||||||||
Stockholder | shares | Amount | shares | Amount | of shares | Amount | of shares | Amount | ||||||||||||||||||||||||
Bolivia | 1,452 | 7,260 | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Colombia | 1,654 | 8,270 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Ecuador | — | — | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Peru | — | — | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Venezuela | — | — | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Argentina | — | — | 4,107 | 20,535 | — | — | — | — | ||||||||||||||||||||||||
Chile | — | — | — | — | — | — | 800 | 4,000 | ||||||||||||||||||||||||
Dominican Republic | — | — | 3,304 | 16,520 | — | — | — | — | ||||||||||||||||||||||||
Mexico | — | — | — | — | — | — | 1,600 | 8,000 | ||||||||||||||||||||||||
Panama | — | — | 506 | 2,530 | — | — | — | — | ||||||||||||||||||||||||
Spain | — | — | — | — | — | — | 40,000 | 200,000 | ||||||||||||||||||||||||
Uruguay | — | — | 1,410 | 7,050 | — | — | — | — | ||||||||||||||||||||||||
3,106 | 15,530 | 9,327 | 46,635 | 180,000 | 900,000 | 42,400 | 212,000 | |||||||||||||||||||||||||
F-21
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Subscribed and paid-in capital is held as follows at December 31, 2005:
Number of Shares | Amounts | |||||||||||||||||||||||||||
Stockholder | Series “A” | Series “B” | Series “C” | Series “A” | Series “B” | Series “C” | Total | |||||||||||||||||||||
Bolivia | 1 | 22,911 | — | 1,200 | 114,555 | — | 115,755 | |||||||||||||||||||||
Colombia | 1 | 83,275 | — | 1,200 | 416,375 | — | 417,575 | |||||||||||||||||||||
Ecuador | 1 | 24,050 | — | 1,200 | 120,250 | — | 121,450 | |||||||||||||||||||||
Peru | 1 | 85,047 | — | 1,200 | 425,235 | — | 426,435 | |||||||||||||||||||||
Venezuela | 1 | 85,047 | — | 1,200 | 425,235 | — | 426,435 | |||||||||||||||||||||
Argentina | — | — | 2,687 | — | — | 13,435 | 13,435 | |||||||||||||||||||||
Brazil | — | — | 11,297 | — | — | 56,485 | 56,485 | |||||||||||||||||||||
Chile | — | — | 294 | — | — | 1,470 | 1,470 | |||||||||||||||||||||
Costa Rica | — | — | 2,204 | — | — | 11,020 | 11,020 | |||||||||||||||||||||
Jamaica | — | — | 124 | — | — | 620 | 620 | |||||||||||||||||||||
Mexico | — | — | 3,158 | — | — | 15,790 | 15,790 | |||||||||||||||||||||
Panama | — | — | 1,416 | — | — | 7,080 | 7,080 | |||||||||||||||||||||
Paraguay | — | — | 1,224 | — | — | 6,120 | 6,120 | |||||||||||||||||||||
Spain | — | — | 10,455 | — | — | 52,275 | 52,275 | |||||||||||||||||||||
Trinidad & Tobago | — | — | 140 | — | — | 700 | 700 | |||||||||||||||||||||
Uruguay | — | — | 1,599 | — | — | 7,995 | 7,995 | |||||||||||||||||||||
Commercial banks | — | 249 | — | — | 1,245 | — | 1,245 | |||||||||||||||||||||
5 | 300,579 | 34,598 | 6,000 | 1,502,895 | 172,990 | 1,681,885 | ||||||||||||||||||||||
At December 31, 2005, the distribution of unpaid subscribed capital and of subscribed callable capital is presented below:
Unpaid Subscribed Capital | Subscribed Callable Capital | |||||||||||||||||||||||||||||||
Series “B” | Series “C” | Series “B” | Series “C” | |||||||||||||||||||||||||||||
Number of | Number of | Number of | Number of | |||||||||||||||||||||||||||||
Stockholder | shares | Amount | shares | Amount | shares | Amount | shares | Amount | ||||||||||||||||||||||||
Bolivia | 2,311 | 11,555 | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Colombia | 5,938 | 29,690 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Ecuador | 1,234 | 6,170 | — | — | 14,400 | 72,000 | — | — | ||||||||||||||||||||||||
Peru | 4,336 | 21,680 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Venezuela | 4,336 | 21,680 | — | — | 50,400 | 252,000 | — | — | ||||||||||||||||||||||||
Argentina | — | — | 6,161 | 30,805 | — | — | — | — | ||||||||||||||||||||||||
Chile | — | — | — | — | — | — | 800 | 4,000 | ||||||||||||||||||||||||
Mexico | — | — | — | — | — | — | 1,600 | 8,000 | ||||||||||||||||||||||||
Panama | — | — | 675 | 3,375 | — | — | — | — | ||||||||||||||||||||||||
Spain | — | — | — | — | — | — | 40,000 | 200,000 | ||||||||||||||||||||||||
Uruguay | — | — | 2,108 | 10,540 | — | — | — | — | ||||||||||||||||||||||||
18,155 | 90,775 | 8,944 | 44,720 | 180,000 | 900,000 | 42,400 | 212,000 | |||||||||||||||||||||||||
F-22
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
General Reserve
The general reserve was set-up to cover possible contingencies. The stockholders decided to increase the reserve by US$183,738, US$145,573 and US$99,979 during the years ended December 31, 2006, 2005 and 2004, by appropriations from net income for the years ended December 31, 2005, 2004 and 2003, respectively.
Reserve Pursuant to Article No. 42 of the By-laws
The Corporation’s by-laws establish that at least 10% of annual net income is to be allocated to a reserve fund until that fund amounts to 50% of the subscribed capital. Additional allocations may be approved by the stockholders. At the stockholders meetings in March 2006, 2005 and 2004, it was authorized to increase the reserve by US$28,500, US$20,800 and US$13,554, from net income for the years ended December 31, 2005, 2004 and 2003, respectively.
(15) | Distributions to Stockholders’ Funds |
The Corporation’s board distributes a portion of retained earnings to special funds, created to promote technical cooperation, sustainable human development and management of poverty relief funds.
In March 2006, 2005 and 2004, the stockholders agreed to allocate US$71,000, US$41,380 and US$22,000, from retained earnings at December 31, 2005, 2004 and 2003, respectively, to the stockholders’ funds.
(16) | Tax Exemptions |
The Corporation is exempt from all taxes on income, properties and other assets. It is also exempt from liability related to the payment, withholding or collection of any tax or other levy.
(17) | Derivative Instruments and Hedging Activities |
The Corporation seeks to match the maturities of its liabilities to the maturities of its loan portfolio. The Corporation utilizes derivative financial instruments to reduce exposure to interest rate risk and foreign currency risk. The Corporation does not hold or issue derivative financial instruments for trading or speculative purposes.
By using derivative financial instruments to hedge exposures to changes in interest rate and foreign exchange rates, the Corporation exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Corporation, which creates credit risk for the Corporation. When the fair value of a derivative contract is negative, the Corporation owes the counterparty and, therefore, it does not possess credit risk. The Corporation minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties whose credit rating is “A” or higher.
The market risk associated with interest rate and currency risk is managed by swapping loans and borrowings subject to fixed interest rates and denominated in foreign currency into floating interest rate instruments denominated in U.S. dollars. The Corporation enters into derivative instruments with market risk characteristics that are expected to change in a manner that will offset the economic change in value of specifically identified loans, bonds or borrowings and other obligations. Derivative contracts held by the Corporation consist of interest rate and cross-currency swaps and are designated as fair value hedges of
F-23
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
specifically identified loans, bonds or borrowings and other obligations with fixed interest rates or non U.S. currency exposure.
The following table presents the notional amount and fair values of interest rate swaps and cross-currency swaps and the underlying hedged items at December 31, 2006 and 2005:
Notional amount | Fair value | |||||||||||||||
Interest rate | Cross- | Derivative | Derivative | |||||||||||||
swap | currency swap | assets | liabilities | |||||||||||||
At December 31, 2006 — | ||||||||||||||||
Loans | 15,000 | — | — | 32 | ||||||||||||
Bonds | 2,200,725 | — | — | 45,902 | ||||||||||||
Bonds | — | 1,521,876 | 282,809 | 23,877 | ||||||||||||
Borrowings and other obligations | — | 11,766 | 641 | 309 | ||||||||||||
Commercial paper | — | 192,263 | 1,914 | 738 | ||||||||||||
2,215,725 | 1,725,905 | 285,364 | 70,858 | |||||||||||||
At December 31, 2005 — | ||||||||||||||||
Loans | 30,000 | — | — | 294 | ||||||||||||
Bonds | 1,950,725 | — | 6,071 | — | ||||||||||||
Bonds | — | 1,396,059 | 207,359 | 237 | ||||||||||||
Borrowings and other obligations | — | 19,611 | 1,462 | — | ||||||||||||
Commercial paper | — | 173,844 | 428 | 2,250 | ||||||||||||
1,980,725 | 1,589,514 | 215,320 | 2,781 | |||||||||||||
For the years ended December 31, 2006, 2005 and 2004 all of the Corporations’ derivatives which have been designated in hedging relationships were considered fair value hedges. The change in fair value of such derivative instruments and the change in fair value of hedged items attributable to risk being hedged is included in the statements of income.
F-24
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
(18) | Fair Value |
The following table presents the carrying amounts and estimated fair values of the Corporation’s financial instruments at December 31, 2006 and 2005. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties:
December 31, | ||||||||||||||||
2006 | 2005 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
amount | fair value | amount | fair value | |||||||||||||
Financial assets: | ||||||||||||||||
Cash and due from banks | 8,997 | 8,997 | 1,740 | 1,740 | ||||||||||||
Deposits with banks | 353,442 | 353,442 | 334,571 | 334,571 | ||||||||||||
Trading securities | 1,001,618 | 1,001,618 | 1,105,568 | 1,105,568 | ||||||||||||
Held-to-maturity securities | 356,128 | 356,145 | 87,885 | 87,848 | ||||||||||||
Other investments | 210,430 | 210,430 | 258,576 | 258,576 | ||||||||||||
Loans, net | 7,848,882 | 7,853,270 | 7,128,326 | 7,132,482 | ||||||||||||
Equity investments | 93,426 | 93,426 | 114,646 | 114,646 | ||||||||||||
Interest and commissions receivable | 226,530 | 226,530 | 181,939 | 181,939 | ||||||||||||
Derivative contracts (included in other assets) | 285,364 | 285,364 | 215,320 | 215,320 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposits | 449,797 | 449,797 | 386,419 | 386,419 | ||||||||||||
Commercial paper | 773,354 | 773,354 | 710,270 | 710,270 | ||||||||||||
Advances and short-term borrowings | 339,256 | 339,256 | 443,707 | 443,707 | ||||||||||||
Bonds | 4,362,161 | 4,366,054 | 4,061,108 | 4,065,155 | ||||||||||||
Borrowings and other obligations | 559,135 | 558,280 | 489,972 | 489,227 | ||||||||||||
Derivative contracts (included in accrued expenses and other liabilities) | 70,858 | 70,858 | 2,781 | 2,781 | ||||||||||||
Accrued interest and commissions payable | 136,878 | 136,878 | 110,954 | 110,954 | ||||||||||||
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Cash and due from banks, deposits with banks, other assets, deposits, commercial paper, advances and short-term borrowings, accrued interest and commissions, accrued expenses: The carrying amounts approximate fair value because of the short maturity of these instruments.
Marketable securities: The fair values of held-to-maturity securities are based on quoted market prices at the reporting date for those or similar securities. Trading securities are carried at fair value based on quoted market prices.
Loans: The Corporation is one of the few institutions that offer loans for development in the stockholder countries. A secondary market does not exist for the type of loans granted by the Corporation. As rates on variable rate loans and loan commitments are reset on a semiannual basis, the carrying value, adjusted for credit risk, was determined to be the best estimate of fair value. The fair value of fixed rate loans is determined using the current variable interest rate for similar loans.
F-25
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Notes to Financial Statements
December 31, 2006, 2005 and 2004
(In thousands of U.S. dollars)
Equity investments: The fair value of equity investments is determined based on a financial analysis of the investees.
Derivative assets and liabilities: Current market prices obtained from third party banks were used to estimate fair values of interest rate and foreign currency swap agreements.
Bonds, borrowings and other obligations: The fair value of bonds, borrowings and other obligations is determined using either broker quotes or current rates offered to the Corporation for similar debt of the same remaining maturities.
(19) | Commitments and Contingencies |
Commitments and contingencies include the following:
December 31, | ||||||||
2006 | 2005 | |||||||
Credit agreements subscribed | 2,133,410 | 2,121,192 | ||||||
Lines of credit | 1,232,221 | 811,790 | ||||||
Letters of credit | 20,065 | 11,946 | ||||||
Guarantees | 544,630 | 203,789 | ||||||
These commitments and contingencies result from the normal course of the Corporation’s business and are related principally to loans and loan equivalents that have been approved or committed for disbursement.
In the ordinary course of business the Corporation has entered into commitments to extend credit. Such financial instruments are recorded as commitments upon signing the corresponding contract and are reported in the financial statements when disbursements are made.
The contracts to extend credit have fixed expiration dates and in some cases expire without making disbursements. Also based on experience, parts of the disbursements are made up to two years after the signing of the contract. Therefore, the total commitment amounts do not necessarily represent future cash requirements.
In the event the credit lines are not utilized, no additional cost is incurred by the Corporation.
Guarantees mature as follows:
December 31, | ||||||||
2006 | 2005 | |||||||
Less than one year | 273,480 | 2,850 | ||||||
Between one and two years | — | 85,333 | ||||||
Between two and three years | 109,540 | — | ||||||
Over five years | 161,610 | 115,606 | ||||||
544,630 | 203,789 | |||||||
Guarantees result from the normal course of the Corporation’s business and usually take the form of partial guarantees to CAF’s clients, as a credit enhancement for their liabilities, as well as guarantees to third parties on behalf of the Corporation’s clients. CAF’s responsibility is usually limited to payment up to the amount of the guarantee upon default by the client. The carrying value of the guarantees at December 31, 2006 and 2005 was nil.
F-26
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Interim Financial Information
As of September 30, 2007 and December 31, 2006
Unaudited Interim Financial Information
As of September 30, 2007 and December 31, 2006
Balance Sheets
(In thousands of U.S. dollars)
(In thousands of U.S. dollars)
September 30, | December 31, | |||||||
2007 | 2006 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Cash and due from banks | 3,071 | 8,997 | ||||||
Deposits with banks | 256,792 | 353,442 | ||||||
Marketable securities | ||||||||
Trading | 897,418 | 1,001,618 | ||||||
Held-to-maturity | 583,431 | 356,128 | ||||||
Securities purchased under resale agreements | 44,400 | — | ||||||
Other investments | 149,166 | 210,430 | ||||||
Loans | 9,054,872 | 8,097,472 | ||||||
Less loan commissions, net of origination costs | 48,262 | 59,982 | ||||||
Less allowance for losses | 218,035 | 188,608 | ||||||
Loans, net of allowance for losses | 8,788,575 | 7,848,882 | ||||||
Equity investments | 92,894 | 93,426 | ||||||
Interest and commissions receivable | 257,570 | 226,530 | ||||||
Property and equipment | 24,564 | 23,931 | ||||||
Other assets | 397,454 | 316,109 | ||||||
Total assets | 11,495,335 | 10,439,493 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Deposits | 879,551 | 449,797 | ||||||
Commercial paper | 1,045,437 | 773,354 | ||||||
Advances and short-term borrowings | 466,499 | 339,256 | ||||||
Bonds | 4,402,603 | 4,362,161 | ||||||
Borrowings and other obligations | 580,036 | 559,135 | ||||||
Accrued interest and commissions payable | 129,783 | 136,878 | ||||||
Accrued expenses and other liabilities | 64,719 | 126,185 | ||||||
Total liabilities | 7,568,628 | 6,746,766 | ||||||
Subscribed and paid-in capital (authorized capital US$5,000 million) | 1,994,050 | 1,870,615 | ||||||
Additional paid-in capital | 201,067 | 256,707 | ||||||
Reserves | 1,477,405 | 1,244,752 | ||||||
Retained earnings | 254,185 | 320,653 | ||||||
Total stockholders’ equity | 3,926,707 | 3,692,727 | ||||||
Total liabilities and stockholders’ equity | 11,495,335 | 10,439,493 | ||||||
F-27
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Interim Financial Information for
the Nine-Month Periods Ended September 30, 2007 and 2006
Statements of Income
(In thousands of U.S. dollars)
(In thousands of U.S. dollars)
Nine Months Ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
Interest income | ||||||||
Loans | 522,356 | 440,015 | ||||||
Investments and deposits with banks | 67,308 | 69,507 | ||||||
Loan commissions | 23,351 | 31,147 | ||||||
Total interest income | 613,015 | 540,669 | ||||||
Interest expense | ||||||||
Deposits | 18,812 | 15,708 | ||||||
Commercial paper | 37,894 | 21,196 | ||||||
Advances and short-term borrowings | 17,324 | 10,362 | ||||||
Bonds | 200,272 | 178,129 | ||||||
Borrowings and other obligations | 27,024 | 22,739 | ||||||
Commissions | 3,487 | 3,412 | ||||||
Total interest expense | 304,813 | 251,546 | ||||||
Net interest income | 308,202 | 289,123 | ||||||
Provision (credit) for loan losses | 27,000 | (10,100 | ) | |||||
Net interest income, after provision (credit) for loan losses | 281,202 | 299,223 | ||||||
Non-interest income | ||||||||
Other commissions | 1,958 | 4,036 | ||||||
Dividends and equity in earnings of investees | 9,678 | 4,880 | ||||||
Ineffectiveness arising from fair value hedges | — | — | ||||||
Other income | 1,571 | 1,114 | ||||||
Total non-interest income | 13,207 | 10,030 | ||||||
Non-interest expenses | ||||||||
Administrative expenses | 32,774 | 29,498 | ||||||
Ineffectiveness arising from fair value hedges | 7,368 | 11,184 | ||||||
Impairment charge for equity investment | 82 | 109 | ||||||
Other expenses | — | 146 | ||||||
Total non-interest expenses | 40,224 | 40,937 | ||||||
Net income | 254,185 | 268,316 | ||||||
F-28
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Interim Financial Information for
the Nine-Month Periods Ended September 30, 2007 and 2006
Statements of Cash Flows
(In thousands of U.S. dollars)
(In thousands of U.S. dollars)
Nine Months Ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
Cash flows from operating activities | ||||||||
Net income | 254,185 | 268,316 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities | ||||||||
Net gain of trading securities | 415 | 10 | ||||||
Amortization of loan commissions, net of origination costs | (13,490 | ) | (9,394 | ) | ||||
Provision (credit) for loan losses | 27,000 | (10,100 | ) | |||||
Impairment charge for equity investments | 82 | 109 | ||||||
Equity in earnings of investees | (2,584 | ) | (2,676 | ) | ||||
Depreciation of property and equipment | 2,656 | 2,299 | ||||||
Amortization of deferred charges | 1,782 | 2,146 | ||||||
Provision for employees’ severance indemnities and benefits | 3,950 | 3,400 | ||||||
Provisions for employees’ savings plan | 1,104 | 1,117 | ||||||
Net changes in operating assets and liabilities | ||||||||
Severance indemnities paid or advanced | (2,065 | ) | (2,115 | ) | ||||
Employees’ savings plan paid or advanced | (929 | ) | (984 | ) | ||||
Trading securities, net | 104,801 | 80,542 | ||||||
Interest and commissions receivable | (31,040 | ) | (53,882 | ) | ||||
Other assets | (23,714 | ) | 24,984 | |||||
Accrued interest and commissions payable | (7,095 | ) | 21,736 | |||||
Accrued expenses and other liabilities | (8,925 | ) | 1,172 | |||||
Total adjustments and net changes in operating assets and liabilities | 51,948 | 58,364 | ||||||
Net cash provided by (used in) operating activities | 306,133 | 326,680 | ||||||
Cash flows from investing activities | ||||||||
Purchases of held-to-maturity securities | (1,679,499 | ) | (1,341,688 | ) | ||||
Maturities of held-to-maturity securities | 1,452,196 | 1,178,479 | ||||||
Securities purchased under resale agreements | (44,400 | ) | — | |||||
Purchases of other investments | (306,618 | ) | (439,993 | ) | ||||
Maturities of other investments | 367,882 | 496,764 | ||||||
Loan origination and principal collections, net | (953,216 | ) | (62,159 | ) | ||||
Equity investments | 3,034 | 21,420 | ||||||
Purchases of property and equipment | (3,289 | ) | (15,152 | ) | ||||
Net cash provided by investing activities | (1,163,910 | ) | (162,329 | ) | ||||
Carried forward | (857,777 | ) | 164,351 | |||||
F-29
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Unaudited Interim Financial Information for
the Nine-Month Periods Ended September 30, 2007 and 2006
Statements of Cash Flows, Continued
(In thousands of U.S. dollars)
(In thousands of U.S. dollars)
Nine Months Ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
Brought forward | (857,777 | ) | 164,351 | |||||
Cash flows from financing activities | ||||||||
Net increase (decrease) in deposits | 429,754 | (73,505 | ) | |||||
Net increase (decrease) in commercial paper | 268,345 | (214,977 | ) | |||||
Net increase in advances and short-term borrowings | 1,007,117 | 669,908 | ||||||
Repayment of advances and short term borrowings | (883,124 | ) | (841,116 | ) | ||||
Proceeds from issuance of bonds | 604,000 | 425,748 | ||||||
Repayment of bonds | (671,661 | ) | (296,051 | ) | ||||
Proceeds from borrowings and other obligations | 90,043 | 100,000 | ||||||
Repayment of borrowings and other obligations | (69,068 | ) | (54,103 | ) | ||||
Allocations to stockholders’ funds | (88,000 | ) | (71,000 | ) | ||||
Proceeds from issuance of shares | 67,795 | 187,253 | ||||||
Net cash provided by (used in) financing activities | 755,201 | (167,843 | ) | |||||
Net decrease in cash and cash equivalents | (102,576 | ) | (3,492 | ) | ||||
Cash and cash equivalents at beginning of period | 362,439 | 336,311 | ||||||
Cash and cash equivalents at end of period | 259,863 | 332,819 | ||||||
Consisting of: | ||||||||
Cash and due from banks | 3,071 | 2,173 | ||||||
Deposits with banks | 256,792 | 330,646 | ||||||
259,863 | 332,819 | |||||||
Supplemental disclosure | ||||||||
Interest paid during the period | 303,010 | 224,688 | ||||||
Non-cash financing activities | ||||||||
Change in other assets due to fair value hedging relationships | 52,045 | 30,914 | ||||||
Change in other liabilities due to fair value hedging relationships | (54,600 | ) | 17,942 |
F-30
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Unaudited Interim Financial Information
September 30, 2007 and 2006
(1) | Basis of Presentation |
The interim financial information as of September 30, 2007 and for the nine-month periods ended September 30, 2007 and 2006 is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, such interim financial information includes all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the results of the interim periods. The results of operations for the nine-month period ended September 30, 2007 are not necessarily an indication of the results to be expected for the full year 2007.
This interim financial information should be read in conjunction with the Corporation’s financial statements as of December 31, 2006 and 2005 and for each of the years in the three-year period ended December 31, 2006 and the notes thereto presented in the prospectus.
(2) | Allowance for Loan Losses |
Due to the increase in the loan portfolio, the Corporation’s provision for loan losses was $27.0 million for the nine-month period ended September 30, 2007, which was the primary cause for an increase in CAF’s allowance for loan losses from $188.6 million at December 31, 2006 to $218.0 million at September 30, 2007.
The allowance for loan losses is maintained at a level the Corporation believes is adequate but not excessive to absorb probable losses inherent in the loan portfolio as of the date of the financial statements. The general allowance for loan losses is established by the Corporation based on the individual risk rating for the long term foreign currency debt of the borrower countries which is assigned by the international risk rating agencies as of the date of the financial statements preparation. This country risk rating considers a default probability. In the case of sovereign loan portfolio a factor of preferred creditor status is also considered.
A specific allowance is established by the Corporation for those loans that are considered impaired. A loan is considered as impaired when based on currently available information and events, there exists the probability that CAF will not recover the total amount of principal and interest as agreed in the terms of the original loan contract. The impairment of loans is determined on a loan by loan basis based on the present value of expected future cash flows, discounted at the loan’s effective interest rate.
Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
(3) | Commitments and Contingencies |
Commitments and contingencies include the following (in thousands of U.S. dollars):
September 30, | ||||||||
2007 | 2006 | |||||||
Credit agreements subscribed | 2,069,674 | 2,070,729 | ||||||
Lines of credit for foreign trade | 1,675,993 | 1,116,579 | ||||||
Letters of credit for foreign trade | 26,125 | 25,357 | ||||||
Guarantees | 396,276 | 490,150 |
These commitments and contingencies result from the normal course of the Corporation’s business and are related principally to loans and loan equivalents that have been approved or committed for disbursement.
In the ordinary course of business the Corporation has entered into commitments to extend credit. Such financial instruments are recorded as commitments upon signing the corresponding contract and are reported in the financial statements when disbursements are made.
F-31
CORPORACIÓN ANDINA DE FOMENTO (CAF)
Notes to Unaudited Interim Financial Information
September 30, 2007 and 2006
The contracts to extend credit have fixed expiration dates and in some cases expire without making disbursements. Also based on experience, part of the disbursements are made up to two years after the signing of the contract. Therefore, the total commitment amounts do not necessarily represent future cash requirements.
In the event the credit lines are not utilized, no additional cost is incurred by the Corporation.
Guarantees primarily consist of partial credit guarantees given to the Republics of Bolivia, Colombia, Ecuador and Peru for the payment of principal and interest up to the following amounts (in thousands of U.S. dollars):
September 30, | ||||||||
2007 | 2006 | |||||||
2006 | — | 26,730 | ||||||
2007 | 103,761 | 201,007 | ||||||
2008 | 81,942 | — | ||||||
2009 | 49,540 | 109,540 | ||||||
2018 | 133,033 | 124,873 | ||||||
2025 | 28,000 | 28,000 | ||||||
396,276 | 490,150 | |||||||
F-32
CORPORACIÓN ANDINA DE FOMENTO (CAF)
BONDS
Principal Amount | ||||||||||||
Date of | Year of | Outstanding at | ||||||||||
Interest | Agreement of | Final | September 30, | |||||||||
Title | Rate | Issue | Maturity | Currency | 2007 | |||||||
(In millions) | ||||||||||||
7.79% Yankee Bonds | Fixed | 1997 | 2017 | US | 50.0 | |||||||
73/8% Yankee Global Bonds | Fixed | 2001 | 2011 | US | 300.0 | |||||||
67/8% Yankee Bonds | Fixed | 2002 | 2012 | US | 350.0 | |||||||
63/8% Euro Bonds | Fixed | 2002 | 2009 | EUR(1) | 350.0 | |||||||
75/8% Euro GBP Bonds | Fixed | 2002 | 2010 | GBP(2) | 40.7 | |||||||
77/8% Yankee Bonds | Fixed | 2002 | 2022 | US | 85.0 | |||||||
67/8% Yankee Bonds | Fixed | 2003 | 2012 | US | 200.0 | |||||||
63/8% Euro Bonds | Fixed | 2003 | 2009 | EUR | 100.0 | |||||||
51/5% Yankee Bonds | Fixed | 2003 | 2013 | US | 500.0 | |||||||
Extendible Notes | Floating | 2004 | 2009 | US | 150.0 | |||||||
5.8175% Euro Bonds | Fixed | 2004 | 2014 | US | 29.0 | |||||||
Colombian Peso Bonds | Floating | 2004 | 2010 | COP(3) | 272,220.0 | |||||||
0.58% Samurai Bonds | Fixed | 2005 | 2008 | JPY(4) | 15,000.0 | |||||||
Euro Dollar Bonds | Floating | 2005 | 2009 | USD | 150.0 | |||||||
1.31% Samurai Bonds | Fixed | 2005 | 2012 | JPY | 5,000.0 | |||||||
51/8% Yankee Bonds | Fixed | 2005 | 2015 | USD | 250.0 | |||||||
7.53125% Peruvian Soles Bonds | Fixed | 2006 | 2018 | PEN(5) | 248.4 | |||||||
Venezuelan Bolivares Bonds | Floating | 2006 | 2011 | VEB(6) | 215,000.0 | |||||||
5.75% Yankee Bonds | Fixed | 2006 | 2017 | USD | 250.0 | |||||||
Euro Dollar Bonds | Floating | 2006 | 2011 | EUR | 300.0 | |||||||
5.75% Yankee Bonds | Fixed | 2007 | 2017 | USD | 250.0 | |||||||
Venezuelan Bolivares Bonds | Floating | 2007 | 2012 | VEB | 107,500.0 | |||||||
Venezuelan Bolivares Bonds | Floating | 2007 | 2012 | VEB | 127,500.0 | |||||||
1.67% Samurai Bonds | Fixed | 2007 | 2010 | JPY | 20,000.0 | |||||||
2.32% Samurai Bonds | Fixed | 2007 | 2014 | JPY | 10,000.0 | |||||||
1.47% Samurai Bonds | Fixed | 2007 | 2010 | JPY | 5,000.0 | |||||||
Mexican Pesos Bonds | Floating | 2007 | 2014 | MXN(7) | 750.0 |
(1) | Euro. | |
(2) | Sterling Pounds. | |
(3) | Colombian Pesos. | |
(4) | Yen. | |
(5) | Peruvian Soles. | |
(6) | Venuezuelan Bolivares. | |
(7) | Mexican Pesos. |
S-1
CORPORACIÓN ANDINA DE FOMENTO (CAF)
SUPPLEMENTARY INFORMATION
LOANS FROM COMMERCIAL BANKS, ADVANCES, DEPOSITS,
COMMERCIAL PAPER AND REPURCHASE AGREEMENTS
Date of | Year of | Principal Amount | ||||||||||
Interest | Agreement of | Final | Outstanding at | |||||||||
Title | Rate | Issue | Maturity | Currency | September 30, 2007 | |||||||
(in US$ millions) | ||||||||||||
Medium and Long-term Loans | Various | Various | Various | Various | 579.6 | |||||||
Advances and Short-term Loans | Floating | Various | Various | US | 466.5 | |||||||
Deposits | Floating | Various | Various | US | 879.6 | |||||||
Commercial Paper | Floating | Various | Various | Various | 1,045.4 |
LOANS FROM MULTILATERALS AND BILATERALS, EXIMS AND EXPORT CREDIT AGENCIES
Date of | Year of | Principal Amount | ||||||||||
Interest | Agreement | Final | Outstanding at | |||||||||
Title | Rate | of Issue | Maturity | Currency | September 30, 2007 | |||||||
(In millions) | ||||||||||||
IADB | Variable | Various | Various | US | 49.6 | |||||||
ACDI (Canada) | 0% | 3/29/74 | 9/30/23 | CAN(1) | 2.0 | |||||||
KfW (Germany) | Variable | 3/22/03 | 12/28/12 | US | 78.6 | |||||||
AID (U.S.A.) | 3% | 10/10/72 | 11/27/14 | US | 3.3 | |||||||
JBIC (Japan) | Variable | 3/17/97 | 02/15/08 | JPY(2) | 500.0 | |||||||
JBIC (Japan) | Variable | 3/17/97 | 02/15/08 | US | 4.1 | |||||||
Nordic Investment Bank | Variable | Various | 7/17/21 | US | 40.0 | |||||||
European Investment Bank | Various | 10/16/97 | 12/15/13 | US | 20.6 |
(1) | Canadian dollars. | |
(2) | Yen. |
S-2
CORPORACIÓN ANDINA DE FOMENTO (CAF)
SUPPLEMENTARY INFORMATION
GUARANTEED DEBT
Year of | Principal Amount | |||||||||||
Date of | Final | Outstanding at | ||||||||||
Borrower | Issue | Maturity | September 30, 2007 | |||||||||
(in U.S. $ millions) | ||||||||||||
Republic of Bolivia | 10/03/01 | 04/03/18 | 47.1 | |||||||||
Republic of Bolivia | 05/22/04 | 05/22/18 | 85.9 | |||||||||
Republic of Peru | 04/17/06 | 02/13/25 | 28.0 | |||||||||
Republic of Peru | 06/08/06 | 09/05/09 | 49.5 | |||||||||
Fondo Nacional de Garantía de Colombia | 12/15/05 | 06/15/07 | 2.0 | |||||||||
Fondo Nacional de Garantía de Colombia | 01/18/06 | 07/18/07 | 2.0 | |||||||||
Fondo Nacional de Garantía de Colombia | 02/09/06 | 08/09/07 | 2.0 | |||||||||
Fondo Nacional de Garantía de Colombia | 03/17/06 | 09/17/07 | 1.4 | |||||||||
Fondo Nacional de Garantía de Colombia | 04/28/06 | 10/28/07 | 1.6 | |||||||||
Fondo Nacional de Garantía de Colombia | 06/28/06 | 12/28/07 | 0.7 | |||||||||
Banco Central del Ecuador | 06/29/07 | 11/01/07 | 21.6 | |||||||||
Banco Central del Ecuador | 07/10/07 | 11/12/07 | 13.5 | |||||||||
Banco Central del Ecuador | 07/24/07 | 11/26/07 | 21.8 | |||||||||
Banco Central del Ecuador | 08/13/07 | 12/16/07 | 15.4 | |||||||||
Banco Central del Ecuador | 08/24/07 | 12/27/07 | 21.4 | |||||||||
Banco Central del Ecuador | 09/05/07 | 01/08/08 | 14.0 | |||||||||
Banco Central del Ecuador | 09/07/07 | 01/10/08 | 21.7 | |||||||||
Banco Central del Ecuador | 09/20/07 | 01/23/08 | 24.7 | |||||||||
Banco Central del Ecuador | 09/20/07 | �� | 01/23/08 | 21.5 |
S-3
$1,000,000,000
![[CAFL LOGO]](https://capedge.com/proxy/S-B/0000950133-07-005107/w44310w4431000.gif)
Corporación Andina de Fomento
, 2007
PART II
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate of the Registrant’s expenses in connection with the issuance of the Securities that are the subject of this registration statement:
Securities and Exchange Commission Registration Fee | $ | 15,350 | ||
Fiscal and Paying Agent Fees | 10,000 | |||
Fees of rating agencies | 250,000 | |||
Legal fees | 150,000 | |||
Printing of registration statement, prospectus and other documents | 100,000 | |||
Blue Sky expenses (including counsel fees) | 15,000 | |||
Other | 15,000 | |||
Total | $ | 555,350 | ||
UNDERTAKINGS
The Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;
provided, however, that paragraphs (i), (ii) and (iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this registration statement.
(b) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
II-1
(d) That, for purposes of determining any liability under the Securities Act of 1933 to any purchaser:
If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to the purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(e) That, for purposes of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
II-2
CONTENTS
The registration statement comprises:
(1) The facing sheet.
(2) The prospectus.
(3) Part II consisting of pages II-1 to II-6.
(4) The following exhibits:
1.1 | Form of Underwriting Agreement for Debt Securities (incorporated by reference to our registration statement No. 333-11970) | |||
1.2 | Form of Underwriting Agreement Pertaining to Guarantees1 | |||
4.1 | Form of Fiscal Agency Agreement, including form of certain Debt Securities (incorporated by reference to our registration statement No. 333-11970) | |||
4.2 | Form of Guarantee Agreement, including the form of Guarantee1 | |||
5.1 | Opinion and consent of Fernando Dongilio, Chief Legal Counsel to CAF | |||
8.1 | Opinion and consent of Sullivan & Cromwell LLP | |||
23.1 | Consent of KPMG | |||
23.2 | Consent of CAF’s Chief Legal Counsel (included in Exhibit 5.1) | |||
23.3 | Consent of Sullivan & Cromwell LLP (included in Exhibit 8.1) | |||
99.1 | List of names and addresses of the underwriters for Debt Securities (incorporated by reference to Exhibit (v) to our registration statement No. 333-88404) | |||
99.2 | List of names and addresses of the underwriters for Guarantees1 |
(1) | To be filed by post-effective amendment. |
II-3
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant, Corporación Andina de Fomento, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Caracas, Venezuela, on the 27th day of December 2007.
CORPORACIÓN ANDINA DE FOMENTO
By: | /s/ Luis Enrique Berrizbeitia |
Name: Luis Enrique Berrizbeitia
Title: | Acting Executive President |
II-4
SIGNATURE OF AUTHORIZED AGENT IN THE UNITED STATES
Pursuant to the requirements of the Securities Act of 1933, as amended, appearing below is the signature of the Corporación Andina de Fomento’s authorized agent in the United States, thereunto duly authorized, in Newark, Delaware, on the 27th day of December 2007.
PUGLISI & ASSOCIATES
By: | /s/ Donald J. Puglisi |
Name: Donald J. Puglisi
Title: | Managing Director |
II-5
EXHIBITS
Exhibit | Sequentially | |||||||
Number | Exhibits | Numbered Page | ||||||
1.1 | Form of Underwriting Agreement for Debt Securities (incorporated by reference to our registration statement No. 333-11970) | |||||||
1.2 | Form of Underwriting Agreement pertaining to Guarantees | * | ||||||
4.1 | Form of Fiscal Agency Agreement, including form of certain Debt Securities (incorporated by reference to our registration statement No. 333-11970) | |||||||
4.2 | Form of Guarantee Agreement, including the form of Guarantee | * | ||||||
5.1 | Opinion and consent of Fernando Dongilio, Chief Legal Counsel to CAF | |||||||
8.1 | Opinion and consent of Sullivan & Cromwell LLP | |||||||
23.1 | Consent of KPMG | |||||||
23.2 | Consent of CAF’s Chief Legal Counsel | ** | ||||||
23.3 | Consent of Sullivan & Cromwell LLP | *** | ||||||
99.1 | List of names and addresses of the underwriters for Debt Securities (incorporated by reference to Exhibit (v) to our registration statement No. 333-88404) | |||||||
99.2 | List of names and addresses of the underwriters for Guarantees | * |
* | To be filed by post-effective amendment. | |
** | included in Exhibit 5.1 | |
*** | included in Exhibit 8.1 |
II-6