1

2

Highlights of Year 2006

Africa

• Real GDP growth exceeds 5% for the third consecutive year propelled by prudent macroeconomic policies, improved terms of trade, a supportive global environment and increased benefit from debt relief

Bank Group

• Excellent operational and financial results

• Year of transformation and institutional reforms to enhance development effectiveness

• Establishment of High Level Panel to advise on strategic vision

• Increased successes in local currency operations with issuance of bonds linked to Tanzanian Shilling, Ghanaian Cedi and Nigerian Naira

3

Bank Financial Profile

Bank Group’s Activities

Capital Market Activities

Appendices

1

2

3

4

4

Bank Group’s Activities1

5

The Bank Group embodies an effective partnership across continents for the development of Africa

AustriaBelgiumDenmarkFinlandFranceGermanyItaly

Netherlands NorwayPortugalSpainSwedenSwitzerlandUK

Argentina Brazil

Canada USA

Kuwait Saudi Arabia

ChinaKorea

IndiaJapan

LibyaMadagascarMalawiMaliMauritaniaMauritiusMoroccoMozambiqueNamibiaNigerNigeriaRwandaS. Tome & PrincipeSenegal SeychellesSierra LeoneSomaliaSouth AfricaSudanSwazilandTanzaniaTogo TunisiaUgandaZambiaZimbabwe

AlgeriaAngolaBeninBotswanaBurkina FasoBurundiCameroonCape VerdeCentral African Rep.ChadComorosCongoCôte d’Ivoire D. R. CongoDjiboutiEgyptEquatorial GuineaEritreaEthiopiaGabonGambiaGhanaGuineaGuinea BissauKenyaLesothoLiberia

African Development Bank (AfDB)

• Established in 1964

• Subscribed capital - US$ 33 billion

• 53 African and 24 non-African countries

• Raises funds in the capital markets

• Provides assistance at market interest rates

African Development Fund (AfDF)

• Established in 1972

• Subscriptions - US$ 23 billion

• Financed by donor countries

• Provides assistance on concessional terms

Europe

North and South America

Middle East

Asia

Africa

6

Approvals reflect customized assistance …

The Bank

• Approvals increased by 20.3% in 2006

• Rise in policy based lending by 178% and private sector operations by 55%

• Major sectors: finance (53.0%), infrastructure (23.9%) and multisector operations (7.8%)

The Fund

• Approvals increased by 8.6% in 2006

• 80 operations in 32 countries and 20 multinational projects in 2006

• UA 2.22 billion committed under AfDF-X by end-2006

• AfDF-XI replenishment discussions with donors commenced in March 2007

Bank Group approvals (excluding HIPC) on a growing trend

In UA million

US$ 2.8 billion

US$ 2.6 billion

US$ 4.3 billion

US$ 3.3 billion

US$ 3.9 billion

7

… diversified across all regions and critical sectors

Total Approvals since inception: US$ 59 billion

By Region By Sector

8

Through co-financing and partnership, the Bank Group amplifies the impact of its own resources

• 34 projects for UA 11.7 billion co-financed in 2006

• Development assistance from the Bank Group was leveraged more than 4.2 times through assistance from donors

• Enhanced emphasis on multisector operations indicates the importance of public sector management and institutional support in Bank’s operations

• Standardization and reform program for technical cooperation fund adopted in 2006

Sector Distribution in 2006

9

The 2006 Multilateral Debt Relief Initiative (MDRI) has contributed to a reduction in the continent’s debt burden

• MDRI became effective for AfDF on 1 September 2006

• MDRI complements HIPC initiative by providing 100% irrevocable cancellation of eligible AfDF debt for countries that reach completion point

• Bank Group has mobilized US$ 8.54 billion for MDRI related relief over a 50 year period

• 17 of the 33 HIPC eligible countries in Africa have reached completion point at end-2006

External Debt to GDP (%) MDRI

Debt Service (% of Exports)

52.8%

49.0%

43.0%

34.4%

25.3%

25%

35%

45%

55%

2002 2003 2004 2005 2006

13.9%

12.4%

10.4%

10.0%

7.3%

6%

7%

8%

9%

10%

11%

12%

13%

14%

2002 2003 2004 2005 2006

10

The ongoing institutional reforms will enable the Bank Group to better deliver on its development mandate

• Shifts resources to operations (lending departments)

• Builds organizational capacity in line with greater decentralization with 21 offices established as at end 2006

• Reinforces the Bank’s knowledge leadership

• Focus on infrastructure sector (Water sector initiatives, Infrastructure Consortium for Africa, NEPAD etc.)

• Promote regional integration and good governance

• Strengthen private sector development and competitiveness

• Increased selectivity and improved client-focus through decentralization

Appointment of an independent High Level Panel to advise the Bank on its strategic vision at a time of new opportunities for Africa

New Organizational Structure Operational Priorities

11

Infrastructure development and regional integration are key drivers for sustainable growth in Africa

Rural Water Supply and Sanitation Initiative aims to provide safe water and basic sanitation to 80% of rural population by 2015. 13 programs and funding of US$ 536 million approved by end 2006.

African Water Facility is an initiative to improve water sector management and attract investments in water sector. Donor commitment of UA 52.5 million achieved and 14 operational activities approved in 2006.

13 regional projects approved with Bank financing of US$ 460 million as at 31 December 2006. Preparation of 8 regional infrastructure projects funded by the Bank Group.

The Bank hosts the Secretariat of ICA, a tripartite body comprising G8 bilateral donors, major multilaterals and African institutions. US$ 7.7 billion committed by ICA members to the infrastructure sector in Africa in 2006 (2005: US$ 7.0 billion).

Water Sector Initiatives

Infrastructure Consortium

for Africa (ICA)

NEPAD

12

Private sector is key to economic growth leading to poverty reduction in the continent

• Approved 7 private sector operations and a guarantee for UA 278.5 million (US$ 418.97 million) in 2006 (2005: UA 180.1 million)

• Establishment of Enhanced Private Sector Assistance for Africa Initiative in collaboration with Government of Japan. First loan signed in 2007 for an amount of JPY 11.5 billion

Private Sector Portfolio - Approvals by Sector and Instrument

0.2%1.5%

1.2%0.8%

55.3%

11.0%

13.2%

8.2%

16.6%

Agribusiness Manufacturing

Health Tourism

Financial Intermediation Mining

Infrastructure Oil & Gas Funds

Infrastructure (Power, Shipyard)

5.0%

52.9%

1.5%

31.6%

0.4%8.2%0.3%

Equity Funds Quasi-Equity

Loans Guarantee

Lines of Credit Enclave Projects

Private Equity

13

Decentralization brings the Bank closer to its clients

Mali

Morocco

Mozambique

Nigeria

Rwanda

Senegal

Sierra Leone

Tanzania

Uganda

Zambia

Burkina Faso

Cameroon

Chad

DRC

Egypt

Ethiopia

Ghana

Gabon

Kenya

Madagascar

Malawi

• Field offices are intended to be the

operative arm of the Bank Group in member

countries with mandates for:

- Project and program implementation

- Country dialogue

- Aid coordination and liaison with other

institution

• 21 Country Offices out of 25 planned have

been established at end of 2006

• Internal processes being streamlined to

empower field offices with appropriate

delegation of authority

Offices Established

14

Bank Financial Profile2

15

The Bank enjoys strong support from its shareholders

As at 31 December 2006

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

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

2,147

5,503

13,934

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Paid-in Capital AAA CallableCapital

Other CallableCapital

Amount in UA (million)

16

The Bank’s strong financial condition protects its bondholders

* Not restated. The Bank defines “usable capital” as the sum of paid-in capital, reserves, and callable capital of countries rated double-A and above

Leverage

17

The Bank’s risk bearing capacity allows room to expand operations

• Based on the effects of the revised IFRS, effective 1 January 2005, the nature of loan loss provisions has changed from ‘general’ to ‘specific’; accordingly, loan loss provisions represent a reduction in the exposure to the relevant country, not a source of risk capital. Therefore, the main components of the Total Risk Capital are Paid-in Capital and Reserves

• The Bank’s capital adequacy policy has graduated capital requirements with the most risky assets requiring 75% capital backing against 25% capital requirement for the least risky assets

2006 Risk capital Paid-in capital: US$ 3,230 million

Reserves: US$ 3,468 million

As at 31 December 2006

Equity (Risk Capital) Uses of Risk Capital

18

The Bank is allocating increasing amounts of income to development initiatives

* Subject to approval by Board of Governors

Income Allocation (%) 2005 and 2006* Income Allocation (UA million)

30

64 65 66

78

0

100

2002 2003 2004 2005 2006*

Proportion of Allocable Income allocated toDevelopment Initiatives

68

11 220 0

251565

2214 10

220 0

DRC SpecialAccount

HIPC TrustFund

AfricanDevelopment

Fund

Middle IncomeCountry

TechnicalAssistance

Fund

SurplusAccount

Post-ConflictCountryFacility

Special ReliefFund

2006 Total: UA 132 million 2005 Total: UA 139 million

19

Financial ratios anchor the Bank among the healthiest members of its peer group

* Source: Fitch

** Source: Standard & Poor’s

*** Source: Moody’s

All data is as at 31 December 2005, except for IBRD, which is as at 30 June 2006

AsDB IADB IBRD AfDB

Five largest exposures to equity (%) * 178 184 127 80

Operating income / Average assets + guarantees (%) **

0.8 1.1 0.8 2.0

Usable capital/Risk assets (%) *** 84 47 57 101

20

Capital Market Activities3

21

The Bank’s borrowing strategy provides African countries with cost effective resources

Diversified currency strategy to raise resources and active use of the swap market to meet client requirements

22

Established track record in several capital market segments

Outstanding borrowings of UA 5.87 billion (US$ 8.83 billion) as at 31 December 2006

23

The Bank continuously endeavours to widen its investor base in various segments of the capital market

• US$ 500 million 4.875% global bond in November 2006 achieved broad

investor distribution

– Asia (ex-Japan) 37%; North America 24%; Japan 20% and Europe 19%

• Transactions targeted at retail Japanese investors

• The Bank is working closely with Japanese securities houses to increase flow of such transactions

• Arbitrage driven market• Strong investor recognition established over the years through demonstrated

responsiveness and flexibility

• Strategically important as the Bank can issue in benchmark size• Maiden Kangaroo bond issue of AUD 300 million in Australian domestic

market in 2006

– Australia 60%; Japan 34% and Europe 6%

US$ Global

DomesticMarkets

PrivatePlacements

Uridashis

24

Initiative to issue bonds denominated in African currencies is attracting support from countries

The Bank requires the consent of member countries to issue debt denominated in their respective currencies

Approvals are requested when the Bank foresees an issuance possibility and are currently awaited from:

Egypt

Morocco

Tunisia

Uganda

Zambia

WAEMU countries (except Mali whose consent has been received)

* Approval to tap the Euro-ZAR market

Mali

South Africa*

Botswana

Kenya

Tanzania

Nigeria

Ghana

Approval received

Approval requested

Mauritius

25

Successes in the Local Currency project bring increased investor attention to Africa

• Develop and bring visibility to African currencies and bond markets

• Address need for local currency loans that eliminate currency risk for borrowers

• Promote international best practices

• Bond issues in Botswana Pula, Tanzanian Shilling, Ghanaian Cedi and Nigerian Naira

• BWP 300 million due January 2007

• US$ 10 million linked to TZS due Feb 07

• US$ 45 million linked to GHC due Oct 08

• US$ 100 million linked to NGN due Jan08

GHC Transaction awarded The Banker Magazine’s “DEAL OF THE YEAR”

Achievements

Objectives

26

The Bank enjoys the highest credit rating

Prudent Financial Management Excellent Liquidity

Franchise ValuePrudent Financial Management

Excellent LiquidityFranchise Value

Strong Membership SupportHealthy Capital AdequacyPreferred Creditor Status

AAA

27

African Economic Outlook

Appendices4

A

28

Summary of macroeconomic performance and outlook

• Africa has registered its longest period of economic expansion in the past two decades with annual real GDP growth rate exceeding 5% during the last three years

• Economic growth is broad-based across sectors and supported by both domestic and external factors

• Domestic: Prudent policy framework and improving business climate promote macroeconomic stability and resilience to external shocks

• External: better terms of trade, supportive global economic environment, increased aid flows and rise in private capital inflows

• Continued benefit from debt relief measures under HIPC and MDRI initiative

• Economic outlook for 2007 is generally positive with expectations of another year of growth of over 5%

• Significant challenges remain

- Increasing the pace of economic growth and ensuring that it is sustainable to reduce poverty

- Accelerating development of basic infrastructure

- Consolidating macroeconomic stability and promoting growth of private sector

- Contain and reverse the HIV/AIDS pandemic and spread of other diseases

29

Africa’s 2006 real GDP growth rate exceeded 5% for the third consecutive year with growth becoming broad-based

DriversMacroeconomic stability – Debt relief

Continued global expansion

23 countries achieved GDP growth rate of above 5 % in 2006

15 countries achieved GDP growth rate between 3% to 5% in 2006

Real GDP Growth

4.6%

5.4%

5.2%

5.5%

4.2%

3.6%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

2001 2002 2003 2004 2005 2006

30

High commodity prices lead to continued favourable terms of trade and increased current account surplus

Terms of Trade

Current Accounts as % of GDP

31

Fiscal balance has improved due to increased savings among oil exporters and increased aid flows while inflationary pressures

have remained relatively contained

Fiscal Balance as % of GDP Inflation

32

Official Development Assistance flows to Africa have risen from recent lows but only to the levels seen in early nineties

and well below the 0.7% GNP target for countries of the Development Assistance Committee (DAC).

1990-2005 (US$ billion)33.7

27.625.2

20.2

15.6

15.0

15.5

17.1

17.1

18.821.2

22.4

20.5

23.8

24.1

24.4

0

5

10

15

20

25

30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

33

Bank’s Financial Statements

Appendices4

B

34

AfDB: Statement of income and expenses (UA million)

* 2005 has been restated** The information presented above for 2004 and prior years have not been restated and therefore are not comparable to 2005 and 2006

Years Ended 31 December 2006 2005* 2004** 2003** 2002**

Operational Income and Expenses

Income from loans 329.03 324.23 323.11 325.46 414.82

Income from investments and related derivatives 213.82 155.37 123.57 99.77 74.01

Total income from loans and investments 542.85 479.60 446.68 425.23 488.83

Interest and amortized issuance costs (245.41) (218.52) (197.08) (219.59) (258.69)

Net interest on borrowing related derivatives (35.14) 1.40 - - -

Unrealized gain/(loss) on fair valued borrowings and related derivatives

10.67 (30.77) (7.70) (81.65) 37.20

Unrealized gain/(loss) on non fair valued borrowings and others 21.07 7.22 (10.35) - -

Provision for impairment on loan principal and charges receivables (51.69) 13.85 (53.86) 21.51 (3.49)

Provision for equity investments (34.74) 0.75 3.31 (1.68) (0.06)

Translation gains 4.10 1.58 - - -

Other income 23.74 15.73 7.40 2.61 1.25

Net operational income 235.45 270.84 188.39 146.43 265.04

Administrative expenses (36.86) (41.67) (37.61) (45.14) (32.27)

Depreciation – Property, equipment and intangible assets (6.23) (7.10) (6.42) (5.57) (5.51)

Sundry expenses 1.68 (0.74) (0.84) 0.98 (1.20)

Total other expenses (41.41) (49.52) (44.87) (49.73) (38.98)

Income before transfers of income approved by the Board of Governors

194.03 221.32 143.52 - -

Transfer of income approved by the Board of Governors (139.20) (144.00) (114.64) - -

Net income 54.83 77.32 28.88 96.70 226.06

35

AfDB: Balance sheet highlights (UA million)

* The information presented above for 2004 and prior years have not been restated and therefore are not comparable to 2005 and 2006

Years Ended 31 December 2006 2005 2004* 2003* 2002*

Assets

Due from banks 129.33 70.34 43.80 66.54 89.18

Demand obligations 3.80 3.80 3.91 3.80 6.83

Investments 6,093.36 5,155.05 4,435.42 4,135.88 1,972.62

Derivative asset 273.31 285.93 274.79 253.90 149.11

Non-negotiable instruments 20.38 25.90 31.18 41.81 57.48

Accounts receivable 600.97 556.38 397.48 203.91 265.18

Outstanding loans 5,290.95 5,512.44 5,640.43 5,612.24 5,967.66

Accumulated provision for loan losses (214.18) (194.60) (213.59) (469.09) (491.66)

Equity participations, net 119.12 168.70 160.60 164.22 163.84

Other assets 14.95 16.98 18.14 21.34 16.69

12,332.00 11,600.91 10,792.16 10,034.55 8,196.93

Liabilities, Capital and Reserves

Accounts payable 648.96 498.22 377.17 194.77 232.34

Securities sold under agreements to repurchase and payable for cash collateral received

877.83 466.96 9.30 113.91 0.00

Derivative liability 481.94 317.25 513.89 396.09 61.83

Borrowings 5,870.47 5,940.40 5,638.89 5,799.11 4,455.04

Capital 2,303.06 2,263.45 2,213.51 2,168.50 2,125.07

Cumulative exchange adjustment on subscriptions (155.74) (151.76) (147.20) (145.33) (141.99)

Reserves 2,305.48 2,266.39 2,654.58 1,959.21 1,919.47

Cumulative currency translation adjustment reserve - - (467.97) (451.71) (454.83)

12,332.00 11,600.90 10,792.16 10,034.55 8,196.93

36

Revised accounting treatment of transfers from Net Income

• Prior to 2006, the Bank accounted for transfers of net income approved by Board of Governors as a direct reduction in equity

• Recent developments in financial reporting and auditing standards and MDB industry practice led the Bank to revise the treatment of transfers from net income in 2006

• Net income transfers are now reported as reductions in net income on the Income Statement

• Two main arguments against the previous treatment of distributions of net income as direct reduction to equity

- Distributions are not paid directly to member countries

- If a member country disagrees with a proposed distribution, the distribution would still be effected, if the majority of member countries support the proposal

• New accounting treatment of transfers from net income is consistent with emerging MDB industry practice

37

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

• Financial and Operational Analysis

• Documentation for Debt Programs

• Rating Agencies Reports

• Financial Products for Borrowers

• Exchange Rates

• Annual Report

Financial Information in Japanese for investors is available at www.afdb-org.jp