94490 THE WORLD BANK Wsngton. D.C 20433 U.SA .COP4'iU SAE January 12, 1987 KD TO THE EXECUTIVE DIRECTORS MUMAND( Capital Stock Subject: Increases in Subscriptions of Certain Members to of 1. During the discussion of the memorandum entitled 'Modalities 23, 1986), Executive the General Capital Increase' (R86-176, dated June a realignment of relative positions among Directors accepted in principle positions were certain shareholders provided that other members' link between IDA protected. While rejecting any explicit and direct Directors were prepared contributions and IBRD shareholdings, a majority of in conjunction to support special share allocations for certain members members' support these with the IDA8 negotiations reflecting more broadly Group in various forms, including cofinancing and access to the World Bank to development assistance to their capital markets, and their contribution Executive as well as their general positions in the world economy. of the Articles Directors were also prepared to go along with an amendment required to voting power of Agreement to increase the special majority of the unanimous amend the Articles (except for those provisions requiring consent of the members) from 80% to 85%. governments of 2. At the time of the GCI Modalities discussion, the their support for the IDA8 Japan and Italy had indicated that the extent of or not special IBRD replenishment depended, for various reasons, on whether of Canada, The governments share allocations could be agreed at this time. consideration of for the Netherlands and Korea have made similar requests are as The special share allocations requested special share allocations. follows: Number of Shares Canada 1,382 Italy 2,544 Japan 11,796 Korea 393 Netherlands 2,544 broad 3. The requested special allocations are in line with the GCI Modalities criteria accepted by the Executive Directors during the shareholdings of these members do not adequately discussion. The relative contributions to reflect their positions in the world economy nor do their Bank Group. Although development assistance including support to the World the realignment based the requested adjustments would not fully accomplish in this direction. on these criteria, their implehaentation would be a step -2- has 4. In connection with these requests, the United States unsubscribed shares indicated that it is prepared to release 15,722 for the requested currently allocated to it. This will make it possible as a realignment among increases for Canada, Italy and Japan to be treated members. these shareholders, not affecting the voting power of other the United States is predicated on However, the release of the shares by the special amendment to the Bank's Articles of Agreenent increasing to 85%. Canada, Italy majority required for amending the Articles from 80% additional shares and Japan would thus be authorized to subscribe these of the release of 15,722 only when the Bank receives the notification shares from the United States. a 5. The proposed reallocation would give both Canada and Italy While Saudi total of 25,140 shares each, the same as Saudi Arabia. to be seventh among Bank members, India's Arabia's ranking would continue tenth. India has position would go down from the current eighth to the in its ranking requested a special allocation that would avoid a change A special allocation of 717 shares would relative to Canada and Italy. and Saudi bring India's shareholding to the same level as Canada, Italy Atabia. United 6. Given that the number of shares to be released by the for the proposed States would be the same as the number of shares needed special special allocations to Canada, Italy and Japan, the proposed be made from to allocations to India, Korea and the Netherlands would need On members. shares which become available through releases by other in for reallocation January 1, 1987, a total of 2,647 shares were released and accordance with Resolution No. 398 of the Board 2of Governors,l/ result, 2,749 Resolution No. 85-45 of the Executive Directors. / As a to desirable shares are currently unallocated. However, it would be reserve 102 shares--as was the case before January 1, 1987-for subscription by new members. The total number of shares that may be US share release allocated to India, Korea and the Netherlands upon the by that time. would thus be 2,647, if no further share releases take place special for the This total may be compared to the 3,654 shares required allocations to these three members. adopted 1/ Paragraph 3 of Resolution No. 398 of the Board of Governors, September 12, 1984. 2/ Paragraph 3 of Resolution No. 85-45 of the Executive Directors, adopted May 16, 1985. -3- 7. It would be appropriate co give India priority in the allocation of available shares, in view of the fact that the need for a special share allocation to India is triggered by special allocations to other members (Canada and Italy), and to give the next priority to the Netherlands. However, the timing of authorization of subscription by India should and correspond to the timing of authorization of subscription by Canada receipt of the US Italy. Accordingly, it is recommended that, upon to notification of the release of 15,722 shares, India would be authorized subscribe 7-17 shares, and the Netherlands, 1,930 shares. 8. The Executive Directors would authorize the Netherlands and Korea to subscribe up to 614 and 393 shares respectively, as and when shares become available for this purpose. The special allocations to these of shares members would be completed as soon as possible, after the release to complete them before the by the United States. If it is not possible capital stock authorized in next General Capital Increase, a part of the that General Capital Increase would be used for the purpose. 9. In accordance with the Executive Directors' decision of October 14, 1986 on the valuation of the Bank's capital, subscriptions recent would be accepted at $120,635 per share. As in the case of-other allocations of shares, the paid-in portion would be 8.75% of the in U.S. subscription price, with 0.875% of the subscription price payable in the currency-of the member. The dollars and the other 7.875% payable would start on the day the Bank sends subscription period for each meaber a notification to the concerned member that it is authorized to subscribe number of shares and end 29 months thereafter. The Executive Directors it would be authorized to extend the subscription period if they deem necessary* 10. The effects of the proposed special share allocations on the based on potential voting power of members are illustrated in Attachment I, be completed before an increase in the the assumption that they will the draft authorized capital. The draft report of the Executive Directors, resolution of the Board of Governors, and the draft letter of transmittal are presented in Attachments II, III and IV, respectively. 11. It should be noted that during the GCI Modalities discussion, as part of most Executive Directors indicated their support for restorirg, a GCI, the aggregate voting power of Part II countries as a whole to the level prevailing immdiately before the 1984 Selective Capital Increase. The reduction in the voting power of Part II countries that might result to be from the special share allocations now proposed is therefore expected temporary. 12. 1 recommend that: (a) the Executive Directors of the Bank authorize the Vice President and Secretary to transmit to the Board of Governors for a vote without meeting the report and draft resolution set out in -4- transmittal set Attachments II and III under cover of a letter of out in Attachment IV; and (b) the Vice President and Secretary canvass the votes cast record the report thereon to the Executive Directors who will results; and as he deems (c) the Vice President and Secretary take such action purpose of this vote. necessary or appropriate to carry out the Attachments - I - ii I I -2Z~~~~~~- Itji1I~~~~~~~~~ ru:P Z 0""; -000010 00000 3 ~~~~s j , f0000 0..|g...l.-^¢ ~-----° - --------- --- °F°!^ - ° ° ° ° - ! s Ii a | | | |- lt 1w sX Y \, s- A - - - - - - - - - - -- 10 0 - -!- - - - - - -N° °°° ! -° ! |SIEl-------' X --------------- 3 '~~~~~! ° - -- ------- - 1t*i| oo °-°°°°-5 : |_ j , 0000 .O 0 S00 0 0X 0 0 0 0s^0s a 0 C - 30 # g I~~~~~~ I ~~~~~~~ ~~~~j II 13) !- oo i!|!17 0 00 s 0 !g riIiilO OOf- li 000.O1 ei Od1 -gap, I !s i~~~~~~~~I 00~~***~~* ; a l + t: f- D, - ' i s -3 - b- °- ¢'- ! -- ^<--" 4¢¢¢|£ gwS-; tr r o, E t' -. - - H rh S j2 2 .-.t. .-: £ a t s 8t- ^s s t E j n E ffi i " ', @°: s § 9 J ', ' | v v o rb s E t - oa i - - ° ° ° ° ° ! f ° - " ° XX° I g X° 6 ° ° I - ° ! - I | S* g R | 2 g i ^ r i | _ j s g t | ji 5;ffi S i 1 | fl § * | E " h It | t | d d S 5 | \ ° ° ° ° ° ° 1 ° ° ° S ° ° - ° 1 g ---°° !° -^ °'^ ° -° ° ° !- ' - ° ° ° 1° ° ° ° ° 1° - ' ° ° ° i ° ° -° ° ' | - ' ° - ° ° ° ' | - =, | | X tz | i _ I i X |gl'8n'.91- °°°° -!° °°°-°°°I- °°°°°1° °°°°1° °°°°°1° Zs t | j, j | | g\ r ° °°°°°I ° °- ! °°° - I ° °°°°°! ° °°°- 1 | lla;,i§-nj-. °°° °°! °° ° °°!° °°°°°!° ° ° !° - !° t |ai,iti.jf -°°°°! °°°-°!° °°° ! -°--1- °--° !° xtfisetxl:lelelelx ss,"^oco jg S'e°-'g!u ^nOa-ln - *'^X^!-- #."-g--K"'1q tr^^_S aEi3: 1 g §s E | b ^it<> ! t i§eii I R 3,l S = r . j_ i t gil$lEm; rC I t li " | | Ei £ 0 S X" S to t g |g fa 6* | 0 £sSK ! 5 #-g-¢ I- i"°ffis- ! 2 §-^,Et£ ! # §du^ ! .w"fisR 1 § ii ! R Z ss , ,sy ,, | j 5 | | | ffi { i * S 5 i 1 * | 3| s g | i i Xi i # l- 5 i 8 -t- - - --- I 1}W.ol-----------Es s e--fl ......S! f ' A VtaII 00000000000 |-°°dI- 'I -~~~~~~~~~~~~~~~ - j-Sj 3 iI j0P000000 dS u I °°°'°°°°°°°°-°°°°°°°I° °°°°'°I° s 00 000000j0-°°-w-°°t °°° _r -IE .°;ooSooooooooooeoS So j.l4 o_s I I~ 000000000000000000S1 i ^1g |Zla§§4;||9i!|ilsllX ;inlE i - - ~~~~00a-0o-0- 00*0 - - - - I *~~~~~ - - - - - - - - - - - - - - >T; * £} Ta # - j3tIOf_l _. 3 1 - 1 a--v------- | ' --------- --- 1- i#ee£0c0 0 o_oeeooe_oe o00°~°°° I jjXl d °°-°°o.oo tl r-!~~~~~~~~~~~~~ ! !~~U X l - i i g S l;r ^~~~~~ |3.;l°°-°°°°°°°°° °°°°! - !i ? ' ° °° °° ° - °° °° ° ° °° °° ° °° o -t .o ° ° $° °° ° ! I ~~~~~r ~ -@Xo ~ A- s'~~~~ Z Is i - ---- - ---- - - ' !4_44444 ---------- - 0i I i. ij _ t I. _ OOO .O000 CO O I ~ 01I 010I !I~°| r |~~~~. °° .. *i''-| -°°°°°°° ! ! i|§ n1 °°-° - °* °-- - s '^ Ws 1 SrZ>¢qa-oX |~~m~ 33.u ii 3 OOO o. U U I~~~~~~~~~~. U WR!i 3F3 au a;e -g :ig|!It 1v a I 7 ; :; __ ] X:- ! = g°: -- i, w .g'v -I* is I,,, 0 I !' , w ISlst t----: - .I !- V38 :ia ° X 7~ l i a 1w;$!!- | 3is l -: . .s - 5I | j ~~~~~ j . ' a J I I i j| - | Xj7 I - ^g " g! i -ag|§§s 2st iX2 jg i Y! yag5ji ~ !- izaI i -IIa ' Xl33 - X ~~~~~~~- 11 - Attachment II Page 1 of 3 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (DRAFT) REPORT OF THE EXECUTm DIRECTORS TO THE BOARD OF GOVERNORS Increases in Subscri2tions of Certain Members to Capital Stock 1. In their discussions on the modalitiis of the next general capital increase, the Executive Directors expressed support for a realignment of share holdings among certain shareholders to better reflect their general position in the world economy, their support to the World Bank Group (while rejecting any explicit link between members, contributions to IDA and their shareholdings in the Bank) and their contribution to development assistance, provided that other members' positions were protected. The Executive Directors also expressed their willingness to propose an amendment to the Articles of Agreement to increase the special majority of the total voting power required to accept amendments of the Articles (except for those provisions requiring the unanimous acceptance of the members) from 80 percent to 85 percent. 2. After discussions among such shareholders, the Executive Directors recommend that the Board of Governors authorize each member listed below to subscribe the number of shares shown opposite its name, subject to the conditions specified in the next paragraph, in the event - 12 - Attachment II Page 2 of 3 that it will not subscribe that the United States notifies the Bank by previous resolutions of 15,722 shares it is authorized to subscribe the Board of Governors: Canada 1,382 India 717 Italy 2,544 Japan 11,796 Korea 393 Netherlands 2,544 Bank's capital were 3. As of January 1, 1987, 2,749 shares of the recommend that 102 not allocated to members. The Exoecutive Directors shares be reserved for new members. The Executive Directors also recom- be authorized to subscribe the mend that Canada, India, Italy and Japan nam in the table above upon total numbor of shares shown against their subscribe 15,722 shares and notification that the United States will not authorized to subscribe 1,930 that at that time, the Netherlands be that they be authorized to shares. The Executive Directors recommend when shares are available for notify the Netherlands and Korea, as and and 393 shares, respectively. the purpose, that they may subscribe 614 accordance with the 4. The subscription price would be par. In 14, 1986 on the valuation of Executive Directors' decision of October at $120,635 per share. Bank capital, subscriptions would be accepted of the subscription price, The paid-in portion would be 8.75 percent and the other 7.875 percent with 0.875 percent payable in U.S. dollars -13 - Page 3 of 3 payable in the member's currency. The subscription period for any group of shares would start on the day the Bank dispatches notification to the concerned member thae it is authorized to subscribe such shares and would end 29 months thereafter. The Executive Directors would be authorized to extend the subscription period if they deemed it necessary. 5. The Executive Directors recommend that the Board of Governors adopt the attached resolution. - 14 - Attachment III Page 1 of 3 DEVELOPMENT INTERNATIONAL BANK FOR RECONSTRUCTION AND (DRAFT) RESOLUTION NO. _ to Caoital Stock Increase in SubscriRtion of Certain Members RESOLVED: 3(b) of the Articles of That, pursuant to Article II, Section hereby authorized to accept addi- Agreement of the Bank, the Bank is capital stock upon the following tional subscriptions to shares of its conditions: table below may sub- 1. Each member of the Bank listed in the stock of the Bank set forth scribe up to the number of shares of capital opposite its name: Canada 1,382 India 717 Italy 2,544 Japan 11,796 Korea 393 Netherlands 2,544 such shares only after: provided, however that members may subscribe -15- Attachment III Page 2 of 3 (i) the Bank has dispatched notification to the members that the United States will not subscribe 15,722 shares which it is authorized to subscribe by a resolution or resolu- tions adopted by the Board of Governors before the date this resolution is adopted; and (ii) with respect to the shares to be subscribed by Korea and 614 of the shares to be subscribed by the Netherlands, that the Bank shall have dispatched notification to the said members that they may subscribe such shares as - decided by the Executive Directors on the basis of a determination by the Executive Directors that shares are available for the purpose. 2. Each subscription authorized pursuant to paragraph 1 above, shall be on the following terms and conditions: (a) the subscription price per share shall be par; (b) a member may subscribe from time to time prior to a date 29 months after the date of dispatch of the notification referred to in paragraph 1 (i) (or, with respect to shares to which paragraph 1 (ii) above applies, the date of the dispatch of the notification referred to in said paragraph 1 (ii)), or such later date as the Executive Directors may determine; - 16 - Attachment IIII Page 3 of 3 shall pay to the Bank under (c) the subscribing member of Article II,Section 7 (i) of the Bank's Articles dollars equal to Agreement (i) gold or United States price of the shares 0.875 percent of the subscription its own currency equal subscribed and (ii) an amount in price; to 7.875 percent of such subscription of subscriptions payable (d) the Bank shall call the amounts Section 7 i), which are not under the said Article II, 3(c) above, only when required to be paid undar paragraph tha Bank for funds required to meet obligations of it, and not for use by borrowed or on loans guaranteed by or for administrative the Bank in its lending activities expenses; and be accepted by the Bank, (e) before any subscription shall taken: the following action shall have been all action necessary to (i) the member shall have taken shall furnish to authorize such subscription and as the Bank may the Bank such information thereon request; and provided (ii) the members shall have made the payments for in paragraph 3(c) above. Legal Department January 9, 1987 -17 - ATTACHMENT Iv Page 1 of 2 (Letter of Transmittal) (DRAFT) (Date) (TO ALL MEMBERS) Increases in Subscriptions of Certain Members to Capital Stock Dear Member: 1. I have been directed by the Executive Directors of the International Bank for Reconstruction and Development (Bank) to send you the following: Attachment 1 - Report dated , 1987, from the Executive Directors to the Board of Governors regarding proposed increases in subscriptions of certain members to the capital stock of the Bank. Attachment 2 - Draft revolution entitled "Increases in Sub- scriptions of Certain Members to Capital Stock". 2. It will be appreciated if you vill transmit the report and draft resolution to the Governor of the Bank representing your country for a vote without meeting pursuant to Section 12 of the By-Laws of the Bank. No particular form of vote is required as long as a clear indication, in writing, is received as to whether or not the Governor approves the resolution. 3. The requirements for adoption of the resolution are as follows: - For purposes of a quorum, replies must be received from a majority of Governors exercising not less than two-thirds of the total voting power; and - 18 - ATTACHMENT IV Page 2 of 2 - In addition, the resolution must receive the approval of a majority of the votes cast. valid, votes must be cast by Governors or 4. in order to be and must be received by my office by 6:00 p.m. Alternate Governors Washington time on , 1987, unless the Executive Directors shall have extended the period of voting. Votes not received by the terminal date shall be void. the voting period 5. If at any date prior to the termination of Governors exercising the required voting majority shall have approved date, the resolution, it shall be deemed to have been adopted on that vho have not yet done so provided hovever that in si*ch event Governors that date and until the may cast their vote on the resolution after terminal date of voting. the resolution shall be held by the Vice 6. Votes cast on President and Secretary until counted. The Vice President and Secretary canvass the votes so cast and report thereon to the Executive shall Directors, vho shall record the results. All members shall be informed of the results of the voting. The Vice President and Secretary shall necessary or appropriate in take such further action as he shall deem the circumstances. Yours sincerely, T.T. Thahane Vice President and Secretary Attachments