SEoVENTH AVMNUL REPORT 1962-1963 2 1366 l. U - U INTERNATIONL FINANCE CORPORATION seventh annual report co nte nts LETTER OF TRANSMITTAL . . . . . . . . . 2 PRINCIPAL ACTIVITIES . . . . . . . . I . 3 FINANCIAL RECORD . . . . . . . . . . . 11 THE YEAR'S INVESTMENTS . . . . . . . . . 12 FINANCIAL STATEMENTS A Balance Sheet . . . . . . . . . . . 26 B Comparative Statement of Income and Expenses . . 27 C Statement of Operational Investments and Standby and Underwriting Commitments . . . . . 28 D Notes to Financial Statements. . . . . . . 34 OPINION OF INDEPENDENT AUDITOR . . . . . . 36 OTHER APPENDICES E Subscriptions to Capital Stock and Voting Power . 37 F Governors and Alternates . . . . . . . . 38 G Directors and Alternates and their Voting Power . 39 H Officers . . . . . . . . . . . . . 40 INTERNATIONAL FINANCE CORPORATION 1818 H Street, N. W. Washington, D. C. 20433 September 30, 1963 My Dear Mr. Chairman: The Seventh Annual Report of the International Finance Corporation for the period July 1, 1962 to June 30, 1963, is submitted to the Board of Governors by the Board of Direc- tors herewith in accordance with Section 8 of the By-Laws of the Corporation. Sincerely yours, GEORGE D. WOODS President Chairman, Board of Governzors Interznational Finance Corporation PRINCIPAL ACTIVITIES The principal features of IFC'S operations during the year were the exercise of its new power to invest in capital shares, its progress in render- ing assistance to institutions for financing industrial development (often in combination with the World Bank), and its success in encouraging private investors to join in its operations. During the year, IFC made 11 commitments totaling $18 million for the financing of private enterprises in 10 countries, including two standby commitments amounting to $5.1 million. Seven of these commitments involved investments in industrial companies. The remaining four were in investments intended to strengthen industrial development finance companies. The simultaneous participation of private investors in IFC's new commitments, together with sales of already existing investments, amounted to a record total of $6.7 million. In addition, private investors took up some $2.8 million of IFC'S standby and underwriting commitments. The amendment to IFC'S charter, approved by the Board of Governors in September 1961, permitting IFC to invest in the share capital of private enterprises, has conferred a new flexibility on IFC operations. The share capital investments made by IFC relieve local enterprises of the exchange risks associated with international loans; and the simplified forms of investment that IFC is now able to make, in straight loan and straight equity form, for example, have the advantage of being both familiar and acceptable to entrepreneurs. IFC and Capital Markets Another benefit flowing from IFc's new ability to invest in equity is the contribution that IFC can now make to the growth of capital markets in the underdeveloped world. Through its ability to underwrite new issues of capital shares, through the help it can give by sponsoring inter- national underwriting syndicates, and through standby arrangements in support of local issuing houses and underwriters, IFC is uniquely placed 3 among public international institutions to assist the strengthening of capital markets and the growth of private entrepreneurship and investment. IFC also leads the way for other investors by acting, in effect, as a trustee for private capital: by selling off its investments to private buyers whenever suitable opportunity presents and, in countries where the habit of industrial investment is not well established, by setting aside some of its shareholdings for domestic purchasers who may appear once a new enterprise has begun to produce tangible results. During the year covered in this Report, IFC continued to sell off its own investments in industrial companies as suitable opportunity presented. The $6.7 million sold was composed of sales of parts of 13 investments. Industrial Development Finance Companies The operations undertaken in the past 12 months reflect the greater range of investment activities now open to IFC. One example is to be seen in the Corporation's assistance to industrial financing companies. Since the beginning of 1962, IFC has taken the lead for the World Bank Group- the Bank, the International Development Association and IFC itself-in considering proposals for the establishment of new industrial develop- ment finance companies predominantly private in character, or for finan- cial and technical assistance to such companies. During the year under review, the Bank and IFC embarked on combined operations in this field: the Bank provided loans and IFC subscribed share capital to develop- ment corporations in Morocco, Pakistan and the Philippines. In a fourth case, IFC agreed to invest in a newly established institution in Spain without World Bank participation. Several other proposals, for invest- ments in new or existing institutions in Finland, Malaya, Nigeria, Thai- land, Turkey and Venezuela are at an advanced stage of consideration. There is a growing recognition among governments and private businessmen of the need for institutions of this kind, and since World War II, they have made a growing contribution to economic development. If soundly constituted and efficiently directed, they can foster the estab- lishment and growth of private industrial ventures, can mobilize local 4 capital and can encourage a wider flow of investment. In many countries, these development companies are the only private organizations able to provide medium and long-term finance. They can also offer technical and managerial assistance and can act as a channel through which private capital and advanced technical knowledge from abroad can reach the new indus- tries of the developing countries. The aim of IFC as part of the World Bank Group is to help to estab- lish or reorganize industrial finance companies on a broad basis of private ownership, and to see that they are both independently operated and financially viable. IFC supplies scarce share capital, which these institu- tions need both as a basis for their borrowings and to permit them to make equity investments. And IFC actively helps these institutions to obtain participation in their share capital by private foreign investors. Examples of this policy are to be seen in the international support that IFc helped to obtain for the first capital stock issue of the Private Develop- ment Corporation of the Philippines and in the response of foreign investors to the prospective reorganization of the Malayan Industrial Development Finance Limited. It is also to be observed in the increased interest of foreign investors in two Colombian financieras after IFC had invested in them. On the other hand, IFC is also concerned to preserve the national character of these institutions: it believes that domestic shareholdings should be as widely distributed as is consistent with the potentialities of the local capital market; if necessary, it is prepared to regard its own share participation as a domestic holding, and to agree to sell its shares only to domestic nationals, so as to ensure that these institutions are not controlled from abroad and that the autonomy of national interests is preserved. New Investments Of IFC's $18 million of new commitments during the year, $11.4 million were for investments in seven industrial enterprises. Three included both share subscriptions and loans, one was a loan at a fixed interest rate plus additional payments related to sales, two were in the 5 form of loans carrying stock option rights, and the remaining operation was a convertible debenture subscription. Each of the year's commit- ments in industrial finance companies was for share subscriptions, and one included a standby operation as well. Investments in Industrial Finance Companies The first combined World Bank-IFC assistance to industrial finance companies was undertaken in the case of the Banque Nationale pour le Developpement Economique of Morocco (BNDE). IFC subscribed to shares valued at 7.5 million Moroccan dirhams (equivalent to $1.5 million) out of a new stock issue of Dh 10 million by BNDE. Also a participant in the issue was an American bank which, together with banks from Belgium, France, Germany and Italy already was a shareholder in the BNDE. As a consequence of the new issue, the Government was able to reduce its holdings of BNDE stock to a minority position, thus fulfilling one of the requirements necessary for qualifying for combined World Bank and IFC assistance. IFC was one of the subscribers of an issue of 10 million rupees of capital stock by The Pakistan Industrial Credit and Investment Corpora- tion, Limited; the existing American, British, Canadian, German and Japanese shareholders waived part of their rights to the new issue so that IFC could take up Rs. 2 million of shares (equivalent to $449,400). The World Bank had taken a leading role in 1957 in the planning and organization of Picic, and has made loans to it amounting to nearly $50 million. During the year, IFC also took part in the formation of two new investment institutions. The Corporation agreed to subscribe 17.5 mil- lion pesetas (equivalent to approximately $292,000) in shares of the Banco del Desarrollo Economico Espanol, S.A., an investment house being established in Spain by a leading Spanish commercial bank and by financial institutions in France, Germany, Italy, the United Kingdom and the United States. In the case of the Private Development Corporation of the Philippines, IFC played a leading role both in organizing and financing a new industrial development bank. Joint World Bank-IFc missions to the Philippines were instrumental in stirring the interest of 6 the private business community in the idea of such an institution and in helping business leaders to organize the enterprise; and JFC helped create wide interest among overseas investors in the new institution. Thereafter the World Bank lent $15 million to PDCP; and IFC supported the sub- scription of PDCP's capital stock, amounting to 25 million pesos ($6.4 million), by subscribing to shares in the amount of 800,000 pesos, by undertaking a standby commitment for further shares valued at 4.2 million pesos, and by covering PDCP against failure of other subscribers to complete payment of the 60% remaining unpaid on their subscrip- tions. In addition to IFC and Philippine investors, the issue attracted 18 overseas investors. Investments in Industrial Companies Among industrial investments was a $3.5 million loan and share subscription to NPK Engrais S.A.T., a new company being founded in Tunisia by Swedish interests to establish a phosphate fertilizer plant at Sfax. In Colombia, IFC lent $2 million to COLTEJER, one of the prin- cipal textile manufacturing companies in Latin America, and was able to enlist the participation of banks in Germany, Switzerland and the United States in about seven-eighths of this total. IFC also participated during the year in the first sale of convertible debentures to be made by a Mexican company under new Mexican law: of a $5 million issue placed outside Mexico by a New York house for Tubos de Acero de Mexico, S.A., the sole manufacturer of seamless steel tube products in Mexico, IFC purchased $250,000 outright and took up $150,000 more under a total standby commitment of $750,000. A $3 million loan to Compania Manufacturera de Papeles y Cartones, S.A., of Chile, to help expand pulp and paper production, was the first IFC investment to be made in combination with a loan from the Inter- American Development Bank (IDB). IFC and IDB also joined in financing a sodium sulphate plant to be built in Mexico by Quimica del Rey, S.A.; more than 80%, of IFC'S investment of $750,000 was taken up by private financial institutions in Belgium, Italy, Switzerland and the United States. Other industrial investments included a $898,000 loan and share subscription to Precision Bearings India Limited, a new company being 7 established by Indian, Danish and American interests to produce ball and roller bearings. A loan and share subscription, amounting to $269,529, was made to Productos de Concreto, S.A., of Costa Rica to expand its production of concrete pipes, blocks and other products for which there is a growing demand. Profit and Loss on Investments IFc has now made investments in some 59 enterprises in 24 different countries, to supply funds that otherwise would not have been available on reasonable terms. It has made its commitments in combination with private entrepreneurs and private investors; and its investments are sub- ject to the same kind of risks and rewards as those of private investors doing business abroad. During the year, IFC made profits of $445,000 from its sales of investments; at the same time it experienced default in certain payments due to it, as mentioned hereafter. Profitable sales of investments, among others, induded the sale of IFC's stock option in Adamjee Industries Ltd., a Pakistan company to which IFC made a loan in 1958 to help finance the expansion of the company's textile manufacturing capacity. Other sales were made of investments in Chile, Colombia, El Salvador and Mexico. In Peru, two of IFC'S smaller investments, made in 1959 in Durisol del Peru, S.A. and in Luren, S.A. and Ladrillos Calcareos, S.A., encountered serious difficulties and were unable to meet their obligations to IFC. In each of these cases, IFC is cooperating with the sponsors in search of a solution to the problems of the companies either through reorganization or by merger with related industrial interests. During the year, IFC also agreed to liquidation arrangements which will at completion result in a loss of about $100,000 in accrued interest and principal on its investment in Rubbertex (Australia) Proprietary, Ltd., of which $272,250 in principal amount was outstanding on June 30, 1963. IFC'S net income is allocated to a reserve against losses, and this reserve rose to $17 million at June 30 from $13.3 million at the end of the previous fiscal year. 8 Management and Administration As of January 1, 1963, Mr. George D. Woods became President and Chairman of the International Finance Corporation as well as of the World Bank and the International Development Association. Mr. Eugene R. Black, who formerly had held these offices in the three institutions, retired at the end of 1962. Mr. Leonard Hall, who had been Director of Investments for Africa, Asia and the Middle East, was appointed Adviser on Special Projects. He was succeeded by Mr. A. G. El Emary, who returned to the staff after having been granted leave of absence to assist the Economic Commission for Africa in drawing up plans for a projected African Development Bank. Mr. William Diamond, of the staff of the World Bank, was appointed to the post of Director of Development Bank Services, which previously had been held by Mr. El Emary. Mr. George L. Martin, Director of Marketing for the World Bank, was appointed Director of Marketing for IFC as well. Mr. Howard Johnson, formerly of United States Steel Corporation, became Man- ager of Portfolio Sales and Participations for both the Bank and IFC. IFC continued to depend on the Bank's staff for a wide range of admin- istrative and other services. IFC Advisers In June, Mr. Woods announced that Dr. Raffaele Mattioli, Chair- man of the Banca Commerciale Italiana, had agreed to serve on the panel of international investment bankers established in February 1962 to act as advisers to IFC. Other members of the panel are Hermann J. Abs, Director, Deutsche Bank A. G. Frankfurt; The Viscount Harcourt, Managing Director, Morgan Grenfell & Co., London; Andre Meyer, Senior Partner, Lazard Freres & Company, New York; and Baron Guy de Rothschild, a partner in de Rothschild Freres, Paris. 9 New Member Countries Ten countries joined IFC during the year, increasing the subscribed capital by $1,729,000. At the close of the year 73 countries were mem- bers of IFc and their paid-in subscriptions totaled $98,198,000. The new member countries are: Country Subscriptions Date of joining IVORY COAST ........................ $111,000 March 11, 1963 KUWAIT ............................ 369,000 September 13, 1962 MOROCCO .......................... 388,000 August 30, 1962 SAUDI ARABIA ............ ........... 111,000 September 18, 1962 SENEGAL ........................... 184,000 August 31, 1962 SIERRA LEONE ....................... 83,000 September 10, 1962 SOMALIA ........................... 83,000 August 31, 1962 TANGANYIKA ............... ........ 184,000 September 10, 1962 TOGO .... 83,000 September 4, 1962 TUNISIA ............................ 133,000 July 25, 1962 10 RESOURCES 140 0 SALES AND REPAYMENTS EARNINGS AND PROFITS 120 F I N A N C I A L RECORD * CAPITAL PAID IN 160 The total of funds that have been available i* to IFC for operational activities since the begin- 160 nling of its operations grew during the year to r. . : $135.8 million, an increase of $15.0 million from the previous year. The details are as follows: 40 Fiscal Year 20 1962-63 Cumulative (in millions) '57 '58 '59 '60 '61 '62 '63 Earnings ........... $ 3.3 $ 16.1 Sales of investments 6.7 16.9 Profits on sales of COMMITMENTS investments ....... .4 .9 90 Repayments on invest- COMMITMENTS ments ............ 2.9 3.7 * DISBURSEMENTS 80 Paid-in capital ....... 1.7 98.2 70 $15.0 $135.8 60 New investment commitments during the year 50 were $18.0 million, including underwriting and 40 standby commitments of $5.1 million. 30 Cumulative net commitments reached $80.0 million. Gross commitments grew to $90.6 20 million, including $8.1 million in standby and 10 underwriting commitments. Of these, $7.8 mil- lion have been cancelled, and $2.8 million of the '51 '58 '59 '60 '61 '62 63 standby and underwriting commitments were acquired by others. Due in considerable part to the high volume of investments sold, there was a small increase in the amount of uncommitted funds available for FUNDS AVAILABLE operational activities. The total as of June 30, 140 1963, was $55.8 million, as against $55.3 million 0 AVAILABLE FOR INVESTMENT a year earlier. 0 DISBURSED OR COMMITTED 120 Net income for the year was $3.3 million. __ - Disbursements were $15.9 million, bringing _ 160 the cumulative total of funds disbursed as of - June 30, 1963, to $60.9 million. 60 I 40 Chart figures are as of June 30, _ expressed in millions of U.S. dollars 20 '51 '59 '59 '60 '61 '62 '63 THE YEAR'S INVESTMENTS C H I L E $3 million-Compania Manufacturera de Papeles y Cartones, S.A. In November IFC joined with the Inter-American Development Bank in the financing of a $32 million expansion program of Compania Manu- facturera de Papeles y Cartones, S.A., a privately owned Chilean stock corporation and one of the largest pulp and paper manufacturers in Latin America. The IFC investment amounts to $3 million; the IDB loan is for the equivalent of $16 million. The balance of the financing required for the expansion program is coming from suppliers' credits and from the firm's own capital resources. Since it first began production at a plant at Puente Alto, near Santiago, in 1923, the company has considerably expanded its production capacity by the acquisition of other plants, or the construction of new units in various parts of Chile. In 1953 the company received a World Bank loan of $20 million to help build a newsprint mill near Concepcion and a chemical pulp plant at Laja, about 40 miles away. The enlargement of the plant at Laja is considered of high priority in Chile's ten-year development program. Over the past years Papeles y Cartones has been able to meet virtually all of Chile's needs for newsprint, pulp and paper and produce a surplus for export, mostly to customers in Latin America. The expansion program is expected to make the produc- tion of pulp considerably more economical and strengthen the company's competitive position in the export market. It is expected that up to 140,000 tons of the production of the mill will be exported yearly to Latin American countries, thereby making an important contribution to Chile's foreign exchange earnings. IFC's investment of $3 million will help meet local expenditures which the company could not finance from other sources on suitable terms. The investment is for a term of 10 years and is represented by two series 12 of unsecured notes-Series A in the amount of $2 million, and Series B in the amount of $1 million. The Corporation has an option to purchase 2,857,142 shares of common stock payable either in dollars or Series B notes. COLOMBIA $2 million-Compania Colombiana de Tejidos, S.A. (COLTEJER) In July 1962, IFC made a commitment to invest $2 million in COLTEJER, the largest cotton textile manufacturer in Latin America. Nearly seven- eighths of the commitment was taken up by six United States and Euro- pean banking houses. Founded in 1907, COLTEJER is owned by some 30,000 shareholders, and employs about 8,200 persons at its textile and other plants, located in the Medellin area. Together with its subsidiary companies, it forms an integrated textile group; it spins, weaves and finishes cotton and synthetic fabrics, and manufactures yarn and thread. COLTEJER supplies nearly half of all cotton goods consumed in Colombia, and recently has begun to export its products to other Latin American countries and to Africa. IFC'S investment makes it possible to complete a program of modern- ization and expansion, begun in 1959, that had been jeopardized by subsequent difficulties in raising finance in Colombia's limited capital market. The investment also serves to link banking houses on two continents with one of the pioneer industrial companies of Colombia, and channels both United States and European capital into Latin American development at a time when broadened financial support is one of the objectives of the Western Hemisphere nations cooperating in the Alliance for Progress. The six participants, which together took up $1,725,000 of IFC's commitment, are Chemical Overseas Finance Corporation; New World Development Corporation Limited; Handelsfinanz A. G. (Zurich); Bankhaus Burkhardt & Co. (Essen); First Pennsylvania Overseas Finance Corporation; and Continental International Finance Corporation. The investment is represented by two series of unsecured notes, Series A and Series B, each in the amount of $1,000,000. Series B notes carry with them an option to purchase capital stock of the Company, payable either in cash or in Series B notes. 13 COSTA RICA $269,529-Productos de Concreto, S.A. This investment, IFC'S first in Costa Rica, has provided the country's chief producer of concrete products with additional working capital and has enabled it to expand its manufacturing capacity. IFC's investment indudes a loan of $194,000 and the purchase of 5,000 shares of common stock of 100 colones par value each (equivalent to about $76,000). Bamerical International Financial Corporation, New York, a wholly-owned subsidiary of the Bank of America, N.T. & S.A., participated in the investment to the extent of one-third of the loan and the shares. Productos de Concreto, originally formed in 1950, has grown rapidly and now accounts for about half of all sales of concrete products in Costa Rica. It is thus an important supplier for construction projects throughout the country. In the last seven years, the company has found it difficult to keep up with demand. The present three-year expansion program should enable Productos de Concreto to increase the value of its output by nearly 50%, through greatly increased capacity for the manu- facture of concrete blocks, pre-stressed light poles, and pipe. IFC'S investment in permanent working capital provides financing of a kind extremely difficult to obtain in Costa Rica. The Corporation's investment should make it possible for the company to attract new share- holders, and will thereby contribute to the development of a capital market. '' -. D iArt Se9p .Ofi--Fme^;- ne.-.inEs india Limnited In this investment, IFC joined with United States, Indian and European interests to establish a new Indian company that will manufacture anti- friction ball and roller bearings and components for use in industrial machinery, tractors and vehicles, pumps, motors and other types of engines. The output of the new company, expected to begin early next year with the completion of a plant at Baroda, will be sold entirely in India. It will help to meet the rising demand for bearings occasioned by the growth in India's manufacturing industry, and will aid the country's 14 balance of payments by saving foreign exchange that otherwise would have to be spent on imported bearings. The American sponsor of the project is Norma-Hoffmann Bearings Corporation, a division of Universal American Corporation of New York. Norma-Hoffmann is providing assistance in planning and constructing the plant, and also will provide an eight-man management and production staff during the initial period of operations. The originator of the project is K. P. Joshi & Co. of Bombay, a family partnership which is an importer and distributor of ball and roller bearings in India, and the third sponsor is East Asiatic Company (India) Private Ltd., also of Bombay, a subsidiary of East Asiatic Company Ltd. of Denmark. The total cost of the Precision Bearings project is estimated at $4,800,000, of which $2,200,000 will be share capital. Norma-Hoffmann Bearings Corporation is participating in the shares of the new company to the extent of $630,000, East Asiatic to the extent of $240,000 and Joshi & Co. to the extent of $160,000. IFC is investing $898,000 in the new company-$378,000 in shares and $520,000 in the form of a loan repayable over a ten-year period. Irving Trust Company of New York is participating in part of the IFC investment. Additional financing is being provided by share and loan capital invested by the privately owned Industrial Credit and Investment Corporation of India Ltd. (icici), by the proceeds of a public offering, managed by icici, of shares in the new company, and by loans from the United States Agency for International Development. MEXICO $1 million (including standby commitment)-Tubos de Acero de Mexico, S.A. (TAMSA) IFC made a commitment in October 1962 to participate in the sale of the first issue of convertible debentures to be made by a Mexican company, under a new Mexican law. The issue, made in February, consisted of $5,000,000 of 71/2% convertible debentures due in 1975, and was made by Tubos de Acero de Mexico, S.A. (TAMSA), Mexico's sole manufac- turer of seamless tubular steel products. Kidder, Peabody & Co., of New York, negotiated the private place- ment of the issue with a number of leading international institutional 15 investors. They included corporations, international investment affiliates of American commercial banks, pension funds, fiduciary institutions and IFC. IFC committed itself at an early date in the preparation of the financing to purchase outright $250,000 of the new convertible deben- tures, and further undertook a standby arrangement under which it agreed to purchase up to $750,000 principal amount of debentures not sold to other investors. Under the standby IFC purchased $150,000 of the issue, bringing its total investment in TAMSA to $400,000. The 1975 debentures will be convertible into 821/4 shares of Series A and 821/4 shares of Series B stock of TAMSA for each $1,000 principal amount of debentures. TAMSA plans to use the proceeds from the sale of the debentures to finance its current expansion program and to improve its working capital position. TAMSA was founded in January 1952 and began production late in 1954 upon completion of its plant near the port city of Vera Cruz. It manufactures seamless pipe through the Mannesman-Calmes process, which employs steel ingots as raw material poured directly from the furnaces. TAMSA makes its own ingots from steel scrap in its electric furnaces. $750,000-Quimica del Rey, S.A. IFC's second joint investment operation with the Inter-American Develop- ment Bank (IDB) was announced in April when IFC, IDB and the Bank of America N.T. & S.A., of San Francisco, agreed to assist Quimica del Rey, S.A., in financing the construction of a $2,750,000 sodium sulphate plant in Mexico. The IDB made a loan equivalent to $500,000 from its ordinary resources, IFC agreed to invest $750,000, and the Bank of America N.T. & S.A. lent $500,000 to finance a 10-mile railroad spur from the plant to the Mexican National Railroad line. Quimica del Rey, S.A. is a subsidiary of Metalurgica Mexicana Penoles, S.A. (Metmex), which is an important producer of lead, gold, silver and other refined metals, and of zinc, lead and copper concentrates, with headquarters in Monterrey, in the State of Nuevo Leon. Fifty-one per cent of the stock of Metmex is owned by Mexican investors and the rest by American Metal Climax, Inc., a United States company which is a pro- 16 ducer of non-ferrous metals. Metmex will contribute $1,000,000 in equity toward the financing of the project. The new plant will use the brines from vast deposits in Laguna del Rey, a dry lake in the State of Coahuila. It will have an initial production capacity of 75,000 tons of crude salt cake and anhydrous sodium sulphate a year, and will be designed to allow for eventual expansion to 100,000 tons. With the sulphate production, the company expects to supply a large part of the needs of Mexico's growing detergent industry and of the local glass industry; the output of sulphate also will enable the country to dispense with imports, which in 1961 amounted to 13,000 tons. The firm also expects to export a substantial part of its crude salt cake production. The export production will be marketed by American Metal Climax, Inc. At full capacity, the substitution of imports and expected exports would save or earn annually about $1,500,000 in foreign exchange for Mexico. The IFC investment is in the form of a loan represented by dollar notes. Four institutions, one in the United States and three in Europe, agreed to take up $602,000 of the loan, or more than 80% of the IFC commitment. They are: Irving International Financing Corporation, a subsidiary of the Irving Trust Company of New York; Banca Nazionale del Lavoro of Rome, Italy, through its New York subsidiary The Italian Economic Corporation (TIEC); Handelsfinanz A.G., of Zurich, Switzer- land; and the Societe Financiere de Transports et d'Entreprises Indus- trielles, S.A. (SOFINA) of Brussels, Belgium. MOROCCO $1,485,692-Banque Nationale pour le Developpement Economique (BNDE) In January, IFC made a commitment to join the Government of Morocco, private Moroccan investors and leading financial institutions in Europe and the United States as a shareholder in the BNDE. This operation was the first investment in which IFC had combined with its parent organiza- tion, the World Bank, in a joint financing of an industrial finance com- pany. The World Bank made a loan of $15 million, while IFC subscribed to shares in the BNDE amounting to the equivalent of $1.5 million. BNDE was established by the Government of Morocco in 1959 as part of a program to encourage investment and economic development. It is the only institutional source of long-term industrial financing in 17 Morocco; it may also make medium-term loans, discount medium-term credits made by commercial banks, establish enterprises on its own initia- tive, subscribe to shares in new or expanding enterprises, and guarantee investments by others. From its inception in mid-1959 to mid-1962, BNDE had made direct loans amounting to 63 million dirhams. It has assisted in the development of both public and private enterprises in the fields of electric power, transportation, agriculture, textiles, food and beverages, chemicals, leather, paper, petroleum, refractory materials, car and truck assembly plants and other metallurgical works. IFC'S investment was in the form of a subscription to Dh 7.5 million in shares of the BNDE, part of a new stock issue to raise BNDE'S capital by Dh 10 million (equivalent to $2 million) to Dh 30 million. The remainder of the capital increase was subscribed by the Moroccan Govern- ment, which took up Dh 2 million and the Morgan Guaranty Inter- national Finance Corporation of New York, already a shareholder, which took up Dh 500,000. BNDE already included among its share- holders other institutions domiciled in France, Italy, the Federal Republic of Germany and Belgium. The French group consists of a number of autonomous financial agencies of the French Government, including Caisse de Depots et Consignations and Caisse Centrale de Cooperation Economique. The other institutions are well known banks, as follows: in Italy, Banca Nazionale del Lavoro, Istituto Mobiliare Italiano and Banca Commerciale Italiana; in the Federal Republic of Germany, Deutsche Bank A.G., Dresdner Bank, Commerzbank and the West- falenbank; and in Belgium, Banque Lambert. Shares are held in Morocco by the Government, which continues to be the largest single shareholder, by Moroccan nationals and by 18 Moroccan subsidiaries of foreign banks and insurance companies. PA KiSTAN S449.400--The -ak:stan industrna Credit and investment Corporation Limited kPICIC) This investment took the form of a subscription by IFC for 200,000 ordinary shares of Picic at 107% of their par value of Rs.10 per share, the 7% premium being in recognition of a market price of about Rs. 11.50 per share. Thus the cost of the shares to IFC was Rs.2,140,000, equivalent 18 to $449,400. The premium of Rs.140,000 has been added to Picic's reserves. PICIC was organized in 1957 by private Pakistani and foreign investors. The World Bank took a leading role in its planning and organ- ization, and has made loans to the Corporation amounting to nearly $50 million, including a loan of $20 million in February 1963. IFC'S par- ticipation in Picic's share capital places IFC and the World Bank in complementary roles, with JFC helping to broaden the capital base of Picic while the Bank helps meet its need for borrowed funds. Pakistan interests hold 60%1o of the share capital of Picic and the balance is dis- tributed among British, Canadian, German, Japanese and United States holders, as well as IFC. Picic is the main private institution in Pakistan providing long and medium-term industrial financing. In addition to investing in new and expanding industries, PicIC arranges investment by others through under- writing public offerings of securities and through private placements of securities with investors both in Pakistan and abroad. It also helps indus- trial companies in Pakistan to obtain managerial, technical and administra- tive services. By the end of 1962, PIcic had approved 311 loans amounting to Rs.401 million (equivalent to $84.2 million) to a variety of industrial enterprises. In addition, at the end of 1962, PICIC held Rs.14 million of shares in industrial companies and had underwritten offerings of Rs.15 million. It had also helped to find $10 million of foreign investment for Pakistani enterprises, comprising $7.5 million in loans and $2.5 million in equity capital. HFLI P NES I4 3-.900i bs',:dhvAarmXtrne. Corpo-at - r& In February, the World Bank and lFC announced that they had agreed to provide loan and share capital for the Private Development Corporation of the Philippines, a new privately owned corporation organized with the assistance of the World Bank and IFC to help the expansion of private industry in the Philippines. PDCP will make long and medium-term loans to privately controlled industry and other productive enterprises, invest in the equity of private 19 enterprises, underwrite new issues of securities, guarantee loans from other investment sources, and provide managerial and technical advice and assistance. It will sell its investments whenever it can do so on satisfactory terms, thereby revolving its own capital for further investment. PDCP was established in February 1963 through subscription by the original incorporators for 500,000 Class A shares. In June, PDCP suc- cessfully closed a public offering of the remainder of its authorized capital stock. The offering consisted of 1,250,000 Class A shares (for offering to Philippine citizens, to corporations with at least 60%'o of their shares owned by Philippine citizens and to IFC) and 750,000 Class B shares available for subscription without restriction. Both classes of shares were offered at the par value of 10 pesos. IFC undertook to subscribe 500,000 Class A shares, with a commit- ment to take 80,000 shares initially and an additional 420,000 shares on a standby basis, depending on the response of Philippine investors to the offer. The success of the issue has relieved IFC of this standby commit- ment, thus reducing its investment to 800,000 pesos, equivalent to $205,155. However, the Class A and Class B shares, induding the 500,000 Class A shares subscribed by the original incorporators, have been paid only to the extent of 40% and IFC has agreed, in the event of default by any subscriber in the subsequent payments extending to March 20, 1964, to pay the defaulted balance (a maximum of 14,520,000 pesos) in return for the unpaid shares if no more favorable bid is received from others. The Class B shares were subscribed principally by 18 leading financial institutions outside the Philippines. This is the largest group of inter- national investors with which IFC has ever been associated in an initial stock issue, and is one of the largest ever to participate in the capital of an industrial finance company. PDCP now has total resources of 111 million pesos, including a loan of $15 million from the World Bank, a loan of 27.5 million pesos from the U.S. Agency for International Development, subscription by founding shareholders and the proceeds of the stock issue. The principal overseas participants in the PDcP included 14 Ameri- can investment and banking institutions, 2 British banks, a German bank and a Japanese bank as follows: 20 The American Express Company, Inc. The Hongkong and Shanghai Banking Bank of America N.T. & S.A. Corporation The Bank of Tokyo, Ltd. Irving International Financing Bankers International Financing Corporation Company, Inc. Lehman Brothers Boston Overseas Financial Corporation Manufacturers Hanover International BoTon Ovaerseas Financial Corporation Finance Corporation The Chartered Bank Morgan Guaranty International Finance Chemical International Finance Ltd. Corporation Continental International Finance New York Hanseatic Corporation Corporation Philadelphia International Investment Deutsche Bank A.G. Corporation First National City Overseas Wells Fargo Bank International Investment Corporation Corporation SPAIN $291,667-Banco del Desarrollo Economico Espanol, S.A. (BANDESCO) In January, IFC made a commitment to join with Banco Espanol de Credito, a leading Spanish commercial bank, and with a number of other financial institutions in France, Germany, Italy, the United Kingdom and the United States, in establishing a new industrial investment institu- tion in Spain. With strong Spanish sponsorship, and international con- nections, BANDESCO should add significantly to the resources of the Spanish capital market at a time when improved industrial financing is an important need for the country's economic development. Banco Espanol de Credito is to be the largest single shareholder in BANDESCO, and its dose affiliate, Banco Guipuzcoano, also will hold stock. IFC'S participation in the share capital will be 17.5 million pesetas. The other shareholders will be Banca Commerciale Italiana, of Italy; Barclays Bank D.C.O., of the United Kingdom; Deutsche Bank A.G., of the Federal Republic of Germany; Morgan Guaranty International Finance Corporation, a subsidiary of Morgan Guaranty Trust Company of New York; and de Rothschild Freres, of France. The principal long-term objective of BANDESCO will be to assist in broadening the capital market in Spain. An economic survey mission organized by the World Bank at the request of the Spanish Government conduded that a broadening of the market, and improved access to medium and long-term capital, was the most pressing financial need of Spanish industry. BANDESCO will underwrite and distribute shares of industrial 21 companies, and will sell its own investments to other private investors whenever it can do so on satisfactory terms and with due regard to the interest of other parties in the investment sold. It will be the new bank's policy to choose projects which offer the best prospects in this regard, and which will make a contribution to the industrial growth of Spain. BANDESCO will also provide technical advice on financing and manage- ment to industrial enterprises. TUNISIA $3.5 million-NPK Engrais S.A.T. With this investment IFC helped to complete the financing of a new $14 million project for the construction, equipment and operation of a triple superphosphate fertilizer plant at the Port of Sfax. The IFC com- mitment, its first in North Africa, is in the form of a mixed loan and share investment in the amount of $3.5 million. Associated in the financing of the Company, NPK Engrais S.A.T., are Aktiebolaget Forenade Superfosfatfabriker of Helsingborg, Sweden, the original sponsor of the project and the leading Swedish producer of sulphuric and phosphoric acids, and Freeport International Incorporated, New York, an investment subsidiary of a major American sulphur pro- ducer. Forenade agreed to buy $3.5 million of NPK shares and to lend the company $2,150,000; Freeport International undertook to purchase $1 million of shares and lend $600,000 and the IFC commitment was. for the purchase of $1.5 million of shares and a loan of $2 million. The remaining funds to complete the financing are expected to come from mortgage loans and suppliers' credits negotiated by the NPK. A unique feature of the company's capitalization is that each of the participants in this financing has agreed to reserve one-tenth of its NPK stock for sale to Tunisian private investors, initially at a price of par. NPK's plant will have an annual capacity of approximately 150,000 metric tons of triple superphosphate, to be produced from local deposits of rock phosphate. It will begin operations in 1965, and the production will be exported from Tunisia to growing markets abroad, partly under long-term contracts with Forenade for distribution in Sweden. It is expected that much of the remainder will be sold in the developing countries of Africa and Asia. 22 Dutch, Swedish and American interests are participating in IFC'S part of the investment. New World Development Corporation Limited, an affiliate of the Philadelphia National Bank, and Algemene Commerciele Associatie N.V., a Dutch banking house closely connected with Hambros Bank in London, have agreed to take up NPK stock in the aggregate amount of about $254,000; and New World Development Corporation, the Bank of America N.T. & S.A. and Svenska Handelsbanken have agreed to take up a total of $572,000 of IFC's loan to NPK. 23 appendices FINANCIAL STATEMENTS Balance Sheet . . . . . . . . . . . . A Comparative Statement of Income and Expenses . . B Statement of Operational Investments and Standby and Underwriting Commitments . . . . . C Notes to Financial Statements . . . . . . . D OPINION OF INDEPENDENT AUDITOR OTHER APPENDICES Subscriptions to Capital Stock and Voting Power E Governors and Alternates . . . . . . . . F Directors and Altemates and their Voting Power .. G Officers . . . . . . . . . . . . . H 25 APPENDIX A BALANCE SHEET JUNE 30, 1963 EXPRESSED IN UNITED STATES CURRENCY-See Notes to Financial Statements, Appendix D ASSETS DUE FROM BANKS ....................................... $ 131,433 INVESTMENTS United States Government obligations (at cost or amortized cost) Face amount $59,636,000 ....................... $ 59,328,049 Time deposits maturing within six months-United States dollars ............................................. 12,000,000 Accrued interest ...................................... 820,640 72,148,689 EFFECTIVE LOANS AND EQUITY INVESTMENTS HELD BY CORPO- RATION (See Appendix C-Note B (Including undisbursed balance of $9,399,357) Loans ............................................... $ 42,354,234 Equity (at cost) ....................................... 8,839,041 51,193,275 ACCRUED INCOME ON LOANS, EQUITY INVESTMENTS AND UNDER- WRITING COMMITMENTS-Note B ...................... 940,171 RECEIVABLE FROM PURCHASERS ON ACCOUNT OF EFFECTIVE LOANS AND EQUITY INVESTMENTS AGREED TO BE SOLD (Including undisbursed balance of $417,000) ............ 703,734 OTHER AssETs ............... 64,623 TOTAL ASSETS ............................... $125,181,925 . !1 i t i F V rS E A, N D C A P I T A L LIABILITIES Accounts payable and other liabilities ................... $ 164,862 Undisbursed balance of effective loans and equity invest- ment agreements (See Appendix C) Held by Corporation .............................. $ 9,399,357 Agreed to be sold ................. 417,000 9,816,357 RESERVE AGAINST LOSSEs-Note C ........ 17,002,706 CAPITAL Capital stock-Note D Authorized 100,000 shares of $1,000 par value each Subscribed 98,198 shares ........................ 98,198,000 OUTSTANDING STANDBY COMMITMENTS- Note E.................................... $3,723,077 TOTAL LIABILITIES, RESERVE AND CAPITAL ................................... $125,181,925 26 APPENDIX B COMPARATIVE STATEMENT OF INCOME AND EXPENSES FOR THE FISCAL YEARS ENDED JUNE 30, 1962 AND JUNE 30, 1963 EXPRESSED IN UNITED STATES CURRENCY-See Notes to Financial Statements, Appendix D July l-June 30 1961-1962 1962-1963 INCOME Income from United States Government obligations and time deposits ............................................. $2,318,299 $2,367,154 Income from loans, equity investments and standby and under- writing commitments .................................. 2,279,216 3,105,252 Other income .......................................... 2,430 3,312 GRoss INCOME .................................. $4,599,945 $5,475,718 EXPENSES Administrative expenses: Personal services ...................................... $1,100,793 $1,215,939 Contributions to staff benefits ....... ................... 141,500 170,130 Fees and compensation ................................ 141,988 100,624 Representation ....................................... 29,235 15,070 Travel ............................................... 284,765 345,252 Supplies and material ................................. 18,668 15,675 Office occupancy ..................................... 121,104 124,314 Communication services ............................... 54,222 58,566 Furniture and equipment .............................. 20,052 45,976 Books and library services ............................. 18,117 19,358 Printing ............................................. 30,459 36,008 Insurance ............................................ 8,376 14,426 Other expenses ....................................... 655 574 GROSs EXPENSES ................................ $1,969,934 $2,161,912 NET INCOME-Allocated to Reserve Against Losses-Note C ... $2,630,011 $3,313,806 27 APPENDIX C STATEMENT OF OPERATIONAL INVESTMENTS AND JUNE 30, EXPRESSED IN UNITED STATES CURRENCY- Operational investments Acquisition and by others of Original principal amount standby and securities underwriting Outstanding covered by Standby and commitments standby and standby and Cancella- COUNTRY Operational underwriting not yet underwriting underwriting tions and and Obligor investments commitments effectivel commitments commitments terminations ARGENTINA ACINDAR INDUSTRIA ARGENTINA DE ACEROS, S.A ................. $ 3,660,000 $ - $ - $ - $ - $ - PAPELERA RIO PARANA, S.A ......... 3,000,000 - - - - 3,000,000 FABRICA ARGENTINA DE ENGRANAJES, S.A.I.C ............. 1,500,000 - - - - - PASA, PETROQUIMICA ARGENTINA, S.A.LC .............. 3,050,000 - - - - - TOTAL .................. 11,210,000 - - - - 3,000,000 AUSTRALIA DUNCAN'S HOLDINGS, LTD .......... 660,000 - RUBBERTEX (AUSTRALIA) PROPRIETARY, LTD .............. 315,000 TOTAL .................. 975,000 BRAZIL SIEMENS DO BRASIL CIA. DE ELETRICIDADE ............... 2,000,000 - - - - 1,000,000 OLINKRAFT, S.A. CELULOSE E PAPEL. . 1,200,000 - - - - 243.000 D.L.R. PLASTICOS DO BRASIL, S.A ..... 450,000 - - - - - WILLYS-OVERLAND DO BRASIL, S.A., INDUSTRIA E COMERCIO .......... 2,450,000 - - - - - COMPANHIA MINEIRA DE CIMENTO PORTLAND, S.A .......... 1,200,000 - - - - - CHAMPION CELULOSE, S.A ........... 4,000,000 - - - - - TOTAL .................. 11,300,000 - - - - 1,243,000 CHILE EMPRESA MINERA DE MANTOS BLANCOS, S.A ................... 3,100,000 - - - - - COMPANIA MOLINOS Y FIDEOS CAROZZI 1,500,000 - - - - - CEMENTOS BIO-BIO, S.A ............. 1,200,000 - - - - - COMPANIA MANUFACTURERA DE PAPELES Y CARTONES, S.A ......... 3,000,000 - 3,000,000 - - - TOTAL .................. 8,800,000 - 3,000,000 - - - COLOMBIA LAMINAS DEL CARIBE, S.A ........... 500,000 - - - - FABRICA DE GALLETAS Y CONFITES NOEL, S.A .............. 1,000,000 - - - - - ENVASES COLOMBIANOS, S.A ......... 700,000 - - - - 400,000 BERRY, SELVEY Y CIA, S.A ........... 170,000 - - - - - ELECTROMANUFACTURAS, S.A ........ 500,000 - - 289,625 CORPORACION FINANCIERA COLOM- BIANA DE DESARROLLO INDUSTRIAL 2,023,730 - - - - 514 CORPORACION FINANCIERA NACIONAL 2,042,000 - - - - 34 COMPANIA COLOMBIANA DE TEJIDOS, S.A. 2,000,000 - - - - - TOTAL .................. 8,935,730 - - - - 690,173 COSTA RICA PRODUCTOS DE CONCRETO, S.A ...... 269,529 - - - - - 28 APPENDIX C STANDBY AND UNDERWRITING COMMITMENTS 1 9 6 3 See Notes to Financial Statements, Appendix D Undisbursed balance of effective Principal Loans and Loans loans Held by Corporation repayments equity sold converted Principal and equity to or agreed into amount investment Total loans Corporation to be sold equity disbursed agreements2 Loans Equity and equity $ - $ - $ - $ 3,660,000 $ - $ 3,660,000 S = $ 3,660,000 750,000 750,000 1,500,000 - 1,500,000 305,000 2,745,000 3,050,000 3,050,000 4,715,000 3,495,000 8,210,000 - 8,210,000 200,000 - - 660,000 - 460,000 - 460,000 42,750 - - 315,000 - 272,250 - 272,250 242,750 - - 975,000 - 732,250 - 732,250 140,000 860,000 - 1,000,000 - - - - 957,000 - 957,000 - - - - 25,000 - - 450,000 - 425,000 425,000 350,000 - - 2,450,000 - 2,100,000 - 2,100,000 - 1,200,000 - 1,200,000 - - - - - 3,175,000 - 4,000,000 - 825,000 - 825,000 515,000 6,192,000 - 10,057,000 - 3,350,000 - 3,350,000 - 350,000 - 3,100,000 - 2,750,000 - 2,750,000 75,000 - - 1,500,000 - 1,425,000 - 1,425,000 - - - 1,200,000 - 1,200,000 - 1,200,000 - Note 6 - _ - - - - 75,000 350,000 - 5,800,000 - 5,375,000 - 5,375,000 122,000 - - 500,000 - 378,000 - 378,000 500,000 - - 1,000,000 - 500,000 - 500,000 203,571 96,429 - 300,000 - - - - - - - 170,000 - 170,000 Note 3 170,000 - 210,375 - 210,375 - - - - - 1,999,486 2,023,216 - - 2,023,216 2,023,216 - - 1,819,605 2,041,966 - 180,361 1,861,605 2,041,966 7,000 1,725,000 - 2,000,000 - 268,000 - 268,000 832,571 2,031,804 3,819,091 8,245,557 - 1,496,361 3,884,821 5,381,182 - 89,848 - 269,529 - 129,333 50,348 179,681 29 APPENDIX C STATEMENT OF OPERATIONAL INVESTMENTS AND JUNE 30, EXPRESSED IN UNITED STATES CURRENCY- Operational investments Acquisition and by others of Original principal amount standby and securities underwriting Outstanding covered by Standby and commitments standby and standby and Cancella- COUNTRY Operational underwriting not yet underwriting underwriting tions and and Obligor investments commitments effectivel commitments commitments terminations EL SALVADOR INDUSTRIAS TEXTILES, S.A ........... $ 140,000 $ - $ - $ - $ - $ - FINLAND OY KUTOMOTUOTE AB, TRICOL OY, TOLI OY ....................... 156,000 RAUMA-REPOLA OY ........ ........ 1,875,000 TOTAL .................. 2,031,000 - GREECE AEVOL INDUSTRIAL COMPANY OF ORGANIC FERTILIZERS, S.A.. 600,000 - 600,000 GUATEMALA INDUSTRIA HARINERA GUATEMALTECA, S.A ............. 200,000 - - INDIA REPUBLIC FORGE COMPANY, LTD..... 1,500,000 - - - - 1,500,000 KIRLOSKAR OIL ENGINES, LTD ....... 850,000 - - - - 850,000 ASSAM SILLIMANITE, LTD ............ 1,365,000 - - - - KSB PUMPS, LTD .................. 210,000 - - - - - PRECISION BEARINGS INDIA, LTD..... 898,000 - 898,000 - - - TOTAL .................. 4,823,000 - 898,000 - - 2,350,000 IRAN SHERKATE SAHAMI KAHKASHAN ...... 300,000 - - - - tTALY MAGRINI MERIDIONALE, S.P.A ........ 960,000 - - - - JAMAICA JAMAICA PRE-MIX, LTD ............. 224,000 - - - - MEXICO INDUSTRIAS PERFECT CIRCLE, S.A... 800,000 - - - - 200,000 BRISTOL DE MEXICO, S.A ............ 520,000 - - - - - ACERO SOLAR, S.A ................. 280,000 - - - - - COMPANIA FUNDIDORA DE FIERRO Y ACERO DE MONTERREY, S.A ........ 1 ,127,302 2,944,856 - - 1,782,206 - TUBOS DE ACERO DE MEXICO, S.A..... 250,000 750,000 - - 600,000 - QUIMICA DEL REY, S.A .............. 750,000 - 750,000 - - - TOTAL ................ 3,727,302 3,694,856 750,000 - 2,382,206 200,000 MOROCCO BANQUE NATIONALE POUR LE DEVELOPPEMENT ECONOMIQUE..... 1,485,692 - - - - - 30 APPENDIX C STANDBY AND UNDERWRITING COMMITMENTS (CONTINUED') 1963 See Notes to Financial Statements, Appendix D Undisbursed balance of effective Principal Loans and Loans loans Held by Corporation repayments equity sold converted Principal and equity to or agreed into amount investment rotal loans Corporation to be sold equity disbursed agreements2 Loans Equity and equity $ 140,000 $ - _ $140,000 $ - $ - $ - $ 24,000 - - 156,000 - 132,000 - 132,000 495,000 1,290,000 - 1,875,000 - 90,000 - 90,000 519,000 1,290,000 - 2,031,000 - 222,000 - 222,000 33,000 - - 200,000 - 167,000 - 167,000 - - - 886,276 478,724 1,365,000 = 1,365,000 _ -_- 200,000 10,000 210,000 - 210,000 Note 5 - - - - - - - - - 1,086,276 488,724 1,575,000 - 1,575,000 50,000 - - 300,000 - 250,000 - 250,000 - - - 960,000 - 960,000 - 960,000 - - - 224,000 - 224,000 - 224,000 180,000 - - 600,000 - 420,000 - 420,000 240,000 - - 520,000 - 280,000 - 280,000 - 280,000 - 280,000 - - - - - 1,224,300 - 2,289,952 - - 1,065,652 1,065,652 - - - 400,000 - 400,000 - 400,000 - Note 4 - - - - - - 420,000 1,504,300 - 4,089,952 - 1,100,000 1,065,652 2,165,652 - - - 374,140 1,111,552 - 1,485,692 1,485,692 31 APPENDIX C STATEMENT OF OPERATIONAL INVESTMENTS AND JUNE 30, EXPRESSED IN UNITED STATES CURRENCY- Operational investments Acquisition and by others of Original principal amount standby and securities underwriting Outstanding covered by Standby and commitments standby and standby and Cancella- COUNTRY Operational underwriting not yet underwriting underwriting tions and and Obligor investments commitments effectivel commitments commitments terminations PAKISTAN STEEL CORPORATION OF PAKISTAN, LTD. $ 630,000 $ - $ - $ - $ - $ - ADAMJEE INDUSTRIES, LTD .......... 750,000 - - - - 295 ISMAIL CEMENT INDUSTRIES, LTD ..... 4,000,000 - - - - - THE PAKISTAN INDUSTRIAL CREDIT AND INVESTMENT CORPORATION, LTD.. 449,400 - - - - - TOTAL .................. 5,829,400 - - - - 295 PERU INDUSTRIAS REUNIDAS, S.A .......... 250,000 - - - - - LUREN, S.A. AND LADRILLOS CALCAREOS, S.A ................. 280,000 - - - - - DURISOL DEL PERU, S.A ............. 300,000 - - - - - FERTILIZANTES SINTETICOS, S.A ...... 4,083,290 - - - - CEMENTO ANDINO, S.A .............. 2,400,000 - - - - - TOTAL .................. 7,313,290 - - - - - PHILIPPINES PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES ...... ....... - 4,359,001 - 3,723,077 430,769 - SPAIN FABRICA ESPANOLA MAGNETOS, S.A.. . 3,001,815 - - - - BANCO DEL DESARROLLO ECONOMICO ESPANOL, S.A ................... 291,667 - 291,667 - - - TOTAL .................. 3,293,482 - 291,667 - - - TANGANYIKA KILOMBERO SUGAR COMPANY, LTD.. . 2,800,000 - - - - - THAILAND THE CONCRETE PRODUCTS AND AGGREGATE COMPANY, LTD ....... 300,000 - - - - - TUNISIA NPK ENGRAIS, S.A.T ................ 3,500,000 - - - - - VENEZUELA SIDERURGICA VENEZOLANA, S.A. 3,000,000 - - - - - DIABLITOS VENEZOLANOS, C.A ....... 500,000 - - - - 324,000 TOTAL .................. 3,500,000 - - - - 324,000 GRAND TOTAL ........... $82,517,425 $8,053,857 $5,539,667 $3,723,077 $2,812,975 $7,807,468 $90,571,282 Note 1 - In these cases, certain legal formalities must be completed and other conditions fulfilled before fund. may be withdrawn on account of the investment or before disbursements are required for commitment underwritten. Note 2- This includes $417,000 of effective loans and equity investment agreements which the Corporation ha. agreed to sell. Note 3 - In these cases, the Corporation has received equity shares at no cost. Note 4 - The Corporation has agreed to sell $602,000 of this investment. Note 5 - The Corporation has agreed to sell $260,000 of this investment. Note 6 - The Corporation has agreed to sell $225,000 of this investment. 32 APPENDIX C STANDBY AND UNDERWRITING COMMITMENTS (CONTINUED) See Notes to Financial Statements, Appendix D Undisbursed balance of effectiv Principal Loans and Loans loans Held by Corporation repayments equity sold converted Principal and equdty to or agreed into amount investment Total loans Corporation to be sold equity disbursed agreements2 Loans Equity and equity $ - $ - $ - $ 630,000 $ 630,000 $ - $ 630,000 449,705 - - 749,705 - 300,000 - 300,000 - 172,000 - 3,045,581 954,419 3,828,000 - 3,828,000 - - - 449,400 - - 449,400 449,400 449,705 172,000 - 4,874,686 954,419 4,758,000 449,400 5,207,400 50,000 - - 250,000 - 200,000 - 200,000 - - - 280,000 - 280,000 - 280,000 - - - 300,000 - 300,000 - 300,000 - 2,264,000 - 4,083,290 - 1,819,290 - 1,819,290 - - - 1,800,000 600,000 2,400,000 - 2,400,000 50,000 2,264,000 - 6,713,290 600,000 4,999,290 - 4,999,290 - - - 82,078 123,077 - 205,155 205,155 597,182 - 3,001,815 - 1,953,000 451,633 2,404,633 597,182 - 3,001,815 - 1,953,000 451,633 2,404,633 - - - 2,800,000 - 2,800,000 Note 3 2,800,000 300,000 - 300,000 - - - - - 825,660 - 456,415 3,043,585 1,428,000 1,246,340 2,674,340 375,000 - - 3,000,000 - 2,625,000 - 2,625,000 - 176,000 - 176,000 - - - - 375,000 176,000 - 3,176,000 - 2,625,000 - 2,625,000 $3,702,026 $15,792,794 $3,819,091 $60,871,738 $9,816,357 $42,354,234 $8,839,041 $51,193,275 SUMMARY OF CURRENCIES IN WHICH EFFECTIVE LOANS AND EQUITY INVESTMENTS HELD BY CORPORATION ARE DENOMINATED (EXPRESSED IN UNITED STATES CURRENCY) Currency Loans Equity (at cost) Colombian pesos . . . . . . . . . . . $ 180,361 $3,884,821 Costa Rican colones . . . . . . . . . . - 50,348 Italian lire . . . 480,000 - Mexican pesos .140,000 1,065,652 Moroccan dirhams . . . . . . . . . . . - 1,485,692 Pakistan rupees . . . . . - 449,400 Philippine pesos. . . . - 205,155 Pounds sterling . . . . 1,400,000 Spanish pesetas. . . . 451,633 Tunisian dinars . . . . . . . . . . . . - 1.246,340 United States dollars . . . . . . . . . . 40,153,873 - $42,354,234 $8,839,041 33 APPENDIX D NOTES TO FINANCIAL STATEMENTS JUNE 30, 1963 NOTE A NOTE C The undisbursed balances of commitments made Pursuant to action of the Directors, the net in- in currencies other than United States dollars come of the Corporation has been allocated to a have been translated into United States dollars reserve against losses; and the future net income at the par values as specified in the "Schedule of of the Corporation will, until further action by Par Values", published by the International the Directors or the Board of Governors, be Monetary Fund, or in the case of Philippine allocated to this reserve. During the fiscal year pesos, at the rate of 3.90 to I United States dollar. this reserve has also been credited with $445,318, representing net profit on sales of loans and Amounts disbursed and/or repayable in curren- equity investments and charged with $61,231, cies other than United States dollars have been representing deferrable interest accrued in pre- translated into United States dollars at the vious fiscal years and cancelled pursuant to the following rates: revised terms of an Investment Agreement. Currency Unit Currency per U.S. dollar In December 1962, the Corporation gave notice to Rubbertex (Australia) Proprietary Limited, a Colombian pesos . . . . 8.939 wholly owned subsidiary of Rubbertex Industries Italian lire . . . . . . . 6625000 Limited, declaring the full principal amount of Mexican pesos . . . . . 12.491 all notes outstanding under the investment agree- Moroccan dirhams . . . . . 5.011 ment, $272,250, to be due and payable immedi- Pakistan rupees . 14762 ately. Interest has not been paid since February 1, Philippine pesos . . . . . 32899 1962. Hardie Rubber Company Pty. Limited, ap- Pounds sterling . . . . . 0.357 proached the shareholders of Rubbertex Indus- Spanish pesetas . . . . . 059783 tries Limited with an offer to take over the com- Tunisian dinars . . . . . . 0.417 pany on the following terms applicable to the Corporation: Payment of 65% of the notes out- Accrued interest, commitment and other charges standing plus 65%o of accrued interest to the date receivable in currencies other than United States of acceptance of the takeover offer by the share- dollars, have been translated into United States holders and the performance of other terms and dollars at the approximate market rates. conditions of the Takeover Scheme. In addition, Hardie Rubber Company offered 1,600 Australian No representation is made that any currency pounds for the Corporation's options to subscribe held by the Corporation is convertible into any for ordinary shares of Rubbertex Industries other currency at any rate or rates. Limited. The Corporation agreed to these terms and has been advised that the Takeover Scheme N 0 T E B became effective July 19, 1963. The principal disbursed and outstanding on Durisol del Peru, S.A., has not paid interest due effective loans and equity investments and the since December 15, 1961 on $300,000 principal accruals for interest, commitment charge and outstanding. The Company's plant has been other charges on such loans and equity invest- closed for over a year. The amount of recovery, ments and on underwriting commitments are if any, in respect of this investment and the inter- denominated in United States dollars except the est accrued thereon cannot presently be deter- following amounts for which the dollar equiva- mined. lent is shown: Luren, S.A. and Ladrillos Calcareos, S.A., have Principal outstanding . . . . $8,606,189 not paid interest due since October 15, 1962 on Accrued interest, commitment and $280,000 principal outstanding and also failed to other charges . . . . . . 326,954 make the first principal repayment of $20,000 due Total . . . . . . . $8,933,143 April 15, 1963. During 1961 and 1962 the opera- tions of the Companies resulted in losses. The 34 APPENDIX D NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1963 amount of recovery, if any, in respect of this in- shares was subscribed at par (10 Philippine pesos vestment and the interest accrued thereon cannot per share) of which 80,000 shares were subscribed presently be determined. by the Corporation. Of the total subscription price, 40% was paid at the time of subscription and 60% is to be paid in four equal installments N OT E D at intervals of 60 days after allotment. If any subscriber fails to pay the 60% part of the sub- On April 25, 1963, the Board of Directors recom- scription price, the Corporation has agreed, under mended to the Board of Governors that the Cor- certain circumstances, to pay the amount of un- poration's authorized capital be increased from paid subscription price in consideration for the S100 million to $110 million. The Board of transfer to it of the shares for which such pay- Governors has until September 3, 1963 to vote ment is made. on the recommended increase. GENERAL NOTE E The operational investments are represented by In accordance with the terms of an agreement, both loans and equity. In addition, in certain the Corporation gave certain standby commit- investments, the Corporation has the right to ments to Private Development Corporation of the acquire shares and /or participate in the profits of Philippines in connection with its stock offering the enterprise. which ended in June 1963. A total of 2,500,000 35 OPINION OF INDEPENDENT AUDITOR 1710 H STREET, N.W. WASHINGTON 6, D. C. AUGUST 2, 1963 To INTERNATIONAL FINANCE CORPORATION WASHINGTON, D. C. In our opinion, the accompanying financial statements present fairly, in terms of United States currency, the financial position of International Finance Corpora- tion at June 30, 1963, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Our examination of these statements was made in accordance with generally accepted auditing standards, and accord- ingly included such tests of the accounting records and such other auditing pro- cedures as we considered necessary. PRICE WATERHOUSE & CO. FINANC;AL STATEMENTS COVERED BY THE FOREGOING OPINION BALANCE SHEET ........................................ APPENDIX A COMPARATIVE STATEMENT OF INCOME AND EXPENSES ......... APPENDIX B STATEMENT OF OPERATIONAL INVESTMENTS AND STANDBY AND UNDERWRITING COMMITMENTS ..... ...... APPENDIX C NOTES TO FINANCIAL STATEMENTS ........... APPENDIX D 36 APPENDIX E STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER June 30, 1963 Subscriptions Voting Power Amount Member Countries (in thousands Percent Number Percent of dollars) of total of votes of total Afghanistan . ................................... 111 .11 361 .31 Argentina ...................................... 1,662 1.69 1,912 1.64 Australia ....................................... 2,215 2.26 2,465 2.12 Austria ........................................ 554 .56 804 .69 Belgium ........................................ 2,492 2.54 2,742 2.35 Bolivia ......................................... 78 .09 328 .28 Brazil .......................................... 1,163 1.18 1,413 1.21 Burma ......................................... 166 .17 416 .36 Canada ........................................ 3,600 3.67 3,850 3.31 Ceylon ......................................... 166 .17 416 .36 Chile .......................................... 388 .40 638 .55 Colombia ...................................... 388 .40 638 .55 Costa Rica ..................................... 22 .02 272 .23 Cyprus ......................................... 83 .08 333 .29 Denmark ....... 753 .77 1,003 .86 Dominican Republic .......................................... 22 .02 272 .23 Ecuador ........................................ 35 .04 285 .24 El Salvador ..................................... 11 .01 261 .22 Ethiopia ....................................... 33 .03 283 .24 Finland ........................................ 421 .43 671 .58 France ......................................... 5,815 5.92 6,065 5.21 Germany ....................................... 3,655 3.72 3,905 3.35 Ghana ......................................... 166 .17 416 .36 Greece ......................................... 277 .28 527 .45 Guatemala ..................................... 22 .02 272 .23 Haiti .......................................... 22 .02 272 .23 Honduras . ..................................... I I .01 261 .22 Iceland ........................................ 11 .01 261 .22 India .......................................... 4,431 4.51 4,681 4.02 Iran .......................................... 372 .38 622 .53 Iraq .......................................... 67 .07 317 .27 Ireland ......................................... 332 .34 582 .51 Israel .......................................... 50 .05 300 .26 Italy .......................................... 1,994 2.03 2,244 1.93 Ivory Coast ..................................... 111 .11 361 .31 Japan .... 2,769 2.82 3,019 2.59 Jordan ......................................... 33 .03 283 .24 Kuwait ...... . 369 .39 619 .53 Lebanon .... 50 .05 300 .26 Liberia ...... . 83 .08 333 .29 Libya ............,. 55 .06 305 .26 Luxembourg .................................... Ill .11 361 .31 Malaya ........................................ 277 .28 527 .45 Mexico ........................................ 720 .73 970 .83 Morocco . ...................................... 388 .40 638 .55 Netherlands ................................... 3,046 3.10 3,296 2.83 New Zealand ................................... 923 .94 1,173 1.01 Nicaragua ................ 9 .01 259 .22 Nigeria ........................................ 369 .39 619 .53 Norway ........................................ 554 .56 804 .69 Pakistan ....................................... 1,108 1.13 1,358 1.17 Panama ....................................... 2 * 252 .22 Paraguay ....................................... 16 .02 266 .23 Peru .......................................... 194 .20 444 .38 Philippines ......... 166 .17 416 .36 Saudi Arabia ................................... 111 .11 361 .31 Senegal ........................................ 184 .19 434 .37 Sierra Leone .................................... 83 .08 333 .29 Somalia .... 83 .08 333 .29 South Africa .................................... 1,108 1.13 1,358 1.17 Spain .......................................... 1,108 1.13 1,358 1.17 Sudan ......................................... Ill .11 361 .31 Sweden ............... 1,108 1.13 1,358 1.17 Syrian Arab Republic ............... 72 .07 322 .28 Tanganyika ..................................... 184 .19 434 .37 Thailand ....................................... 139 .14 389 .33 Togo .... 83 .08 333 .29 Tunisia ........................................ 133 .14 383 .33 Turkey ......................................... 476 .48 726 .62 United Arab Republic ................5 590 .60 840 .72 United Kingdom ................................ 14,400 14.66 14,650 12.58 United States ................................... 35,168 35.81 35,418 30.42 Venezuela ...................................... 116 .12 366 .31 Total ............................... $98,198 100.00 116,448 100.00 * Less than .005 per cent. 37 APPENDIX F GOVERNORS AND ALTERNATES June 30, 1963 Member Government Governor Alternate Afghanistan . . . . . Abdullah Malikyar Abdul Hai Aziz Argentina . . . . . Luis M. Otero Monsegur Pedro Eduardo Real Australia . . . . Harold H-olt Sir Roland Wilson Austria . . . . . . Franz Korinek Hugo Rottky Belgium . . . . . . Andre Dequae Hubert Ansiaux Bolivia . . . . . . Raul Lema Pelaez Adolfo Linares Brazil . . . . . . Francisco Clementino San Tiago Dantas Octavio Augusto Dias Carneiro Burma . . . . . . U Kyaw Nyein U Kyaw Nyun Canada . . . . . . Walter L. Gordon Louis Rasminsky Ceylon . . . . . . T. B. Illangaratne H. S. Amerasinghe Chile . . . . . . . Felix Ruiz Alvaro Orrego Barros Colombia . . . . . Carlos Sanz de Santamaria Jorge Mejia-Salazar Costa Rica . . . . . Alvaro Castro Alvaro Vargas Cyprus . . . . . . Renos Solomides M. E. Guven Denmark . . . . . Otto Muller Poul Bjorn Olsen Dominican Republic . . Diogenes H. Fernandez Luis Scheker Ecuador . . . . . . Guillermo Arosemena Neftali Ponce-Miranda El Salvador . . . . . Francisco Aquino Luis Escalante-Arce Ethiopia . . . . . . Menasse Lemma Bulcha Demeksa Finland . . . . . . R. v. Fieandt Esko Rekola France . . . . . . Minister of Finance Pierre-Paul Schweitzer Germany . . . . . Ludwig Erhard Heinz Starke Ghana . . . . . . F. K. D. Goka W. M. Q. Halm Greece . . . . . . Lambros Eutaxias loannis Paraskevopoulos Guatemala . . . . . Manuel A. Bendfeldt J. Max Jimenez Pinto Haiti . . . . . . . Herve Boyer Antonio Andre Honduras . . . . . Celeo Davila Ricardo Alduvin Abaunza Iceland . . . . . . Petur Benediktsson Thor Thors India . . . . . . . Morarji R. Desai L. K. Jha Iran . . . . . . . Abdol Hossein Behnia Djalaledin Aghili Iraq . . . . . . . Mohammed J. Oboosy Abdul Hassan Zalzalah Ireland . . . . . . Seamas 0 Riain T. K. Whitaker Israel . . . . . . David Horowitz Jacob Arnon Italy . . . . . . Guido Carli Donato Menichella Ivory Coast . . . . . Raphael Saller Mohamed Diawara Japan . . . . . . Kakuei Tanaka Masamichi Yamagiwa Jordan . . . . . . Khatil Salem Adeeb Sughayer Kuwait . . . . . . Sheikh Jabir Al-Ahmad Al-Jabir Abdlatif Y. Al-Hamad Lebanon . . . . . . Elias Sarkis Raja Himadeh Liberia . . . . . . Charles Dunbar Sherman James Milton Weeks Libya . . . . . . Mansur Ben Gaddara A. A. Attiga Luxembourg . . . . Pierre Werner Pierre Guill Malaya . . . . . . Tan Siew Sin Dato' Abdul Jamil bin Abdul Rais Mexico . . . . . . Antonio Ortiz Mena Jose Hernandez Delgado Morocco . . . . . Driss Slaoui Mohamed Amine Bengeloun Netherlands . . . . . J. Zijlstra S. Posthuma New Zealand . . . . H. R. Lake E. L. Greensmith Nicaragua . . . . . Guillermo Sevilla-Sacasa Andres Garcia Nigeria . . . . . . Chief Festus Sam Okotie-Eboh Reginald A. Clarke Norway . . . . . . Oscar Christian Gundersen Thomas Lovold Pakistan . . . . . Mohamed Shoaib Aftab Ahmad Khan Panama . . . . . . Augusto Guillermo Arango Carlos A. Velarde Paraguay . . . . . Cesar Romeo Acosta Oscar Stark Rivarola Peru . . . . . . . Fernando Berckemeyer Tulio De Andrea Philippines . . . . . Andres V. Castillo Bienvenido Y. Dizon Saudi Arabia . . . . Ahmed Zaki Saad Mahjoob Hassanain Senegal . . . . . . Karim Gaye Jean Duhamel Sierra Leone . . . . A. M. Margai John Taylor Somalia . . . . . . Abdulcadir Mohamed Aden Francesco Palamenghi-Crispi South Africa . . . . T. E. Donges M. H. de Kock Spain . . . . . . Mariano Navarro Rubio Juan Antonio Ortiz Gracia Sudan . . . . . . Abdel Magid Ahmed Abdel Rahim Mirghani Sweden . . . . . . G. E. Straeng N. G. Lange Syrian Arab Republic . . George Tomeh Kamal Ghali Tanganyika . . . . . Paul Bomani C. de N. Hill Thailand . . . . . Sunthorn Hongladarom Boonma Wongswan Togo . .Antoine Meatchi Jean Tevi Tunisia . . . . . . Ahmed Ben Salah Abdesselam Ben Ayed Turkey. . . . Ferit Melen Ziya Kayla United Arab Republic . Abdel Moneim El Kaissouni Hamed Abdel Latif El Sayeh United Kingdom . . . The Earl of Cromer I Sir Denis Rickett United States . . . . Dougtas Dillon George W. Ball Venezuela . . . . . Rafael Alfonzo Ravard Miguel Herrera Romero I Effective July 21, 1963. 38 APPENDIX G DIRECTORS AND ALTERNATES AND THEIR VOTING POWER June 30, 1963 Director Alternate Casting votes of Total votes APPOINTED John C. Bullitt Erle Cocke, Jr. United States 35,418 David B. Pitblado N. M. P. Reilly United Kingdom 14,650 Rene Larre Jacques Waitzenegger France 6,065 C. S. Krishna Moorthi* Arun K. Ghosh India 4,681 Otto Donner Helmut Abramowski Germany 3,905 ELECTED Mumtaz Mirza Ali Akbar Khosropur Pakistan, United Arab Republic, Iran, 5,999 (Pakistan) (Iran) Kuwait, Sudan, Saudi Arabia, Somalia, Syrian Arab Republic, Iraq, Lebanon, Ethiopia, Jordan John M. Garland A. J. J. van Vuuren Australia, South Africa, New Zealand 4,996 (Australia) (South Africa) Andre van Campenhout Franz Oellerer Belgium, Austria, Turkey, Luxembourg 4,633 (Belgium) (Austria) A. F. W. Plumptre L. Denis Hudon Canada, Ireland 4,432 (Canada) (Canada) Gengo Suzuki M. Kumashiro Japan, Burma, Ceylon, Thailand 4,240 (Japan) (Japan) Joaquin Gutierrez Cano Sergio Siglienti Ttaly, Spain, Greece 4,129 (Spain) (Italy) Alice Brun Eino Suomela Sweden, Denmark, Norway, Finland, 4,097 (Denmark) (Finland) Iceland Pieter Lieftinck Aleksandar Bogoev Netherlands, Cyprus, Israel 3,929 (Netherlands) (Yugoslavia) Luis Machado Lempira E. Bonilla Mexico, Peru, Venezuela, Costa Rica, 3,629 (Cuba) (Honduras) Haiti, Guatemala, El Salvador, Hon- duras, Nicaragua, Panama Fernando Illanes Carlos S. Brignone Argentina, Chile, Bolivia, Paraguay 3,144 (Chile) (Argentina) Jorge Mejia-Palacio Jose Camacho Brazil, Colombia, Philippines, Ecuador, 3,024 (Colombia) (Colombia) Dominican Republic Abderrahman Tazi Ismail Khelil Morocco, Malaya, Ghana, Tunisia, 2,630 (Morocco) (Tunisia) Afghanistan, Libya In addition to the Directors and Alternates shown in the foregoing list, the following also served as Director or Alternate after Novemnber 1, 1962; End of Period of End of Period of Director Service Alternate Director Service Jose Aragones (Spain) January 31, 1963 Tyge Dahlgaard (Denmark) December 31, 1962 Mohamed Shoaib (Pakistan) February 28, 1963 Helmut Koinzer (Germany) January 15, 1963 Jaakko Lassila (Finland) November 30, 1962 Ernst A. Rott (Austria) November 7, 1962 * To be succeeded by K. S. Sundara Rajan, effective August 1, 1963. 39 APPENDIX H OFFICERS June 30, 1963 GEORGE D. WOODS ................. President MARTIN M. ROSEN ................. Executive Vice President J. G. BEEVOR ................. Vice President WILLIAM DIAMOND ................. Director of Development Bank Services J. DAVID DODD ................. Senior Entgineer A. G. EL EMARY ................. Director of Investments, Africa, Asia and Middle East HON. LEONARD HALL ................. Adviser on Special Projects NEIL J. PATERSON .......... Director of Investments, Latin America, Europe and Australasia R. B. J. RICHARDS ................. General Counsel ................... Accounting Adviser R. W. CAVANAUGH ................. Treasurer HAROLD N. GRAVES, JR ................. Director of Information W. F. HOWELL ................. Director of Administration HOWARD C. JOHNSON .................... Manager of Portfolio Sales and Participations GEORGE L. MARTIN ................. Director of Marketing M. M. MENDELS ................. Secretary JAMES H. DARTON ................. Special Representative-Europe 40 OFFICES The International Finance Corporation is located in Washington, D.C. IFC maintains offices also in New York, London and Paris. Addresses are as follows: 1818 H Street, N. W ................. Washington, D.C. 20433, U. S. A. 33 Liberty Street ................... New York, N.Y. 10005, U. S. A. New Zealand House, Haymarket ................ London S.W.1, England 4 Avenue d'1ena ........................ Paris 16e, France 41