##l announcement in june 1999 of its intention to sell 1300 tonnes of its gold reserves certainly contributed to setting in motion the process that led to the september 1999 joint statement issued by the fifteen european central banks. iii. selling strategy the washington agreement now set the parameters for the snb ’ s selling program. the practical details were negotiated in the months following the signature of the agreement. annual quotas were assigned for each period going from october to the following september. as you can see in figure 4, the snb was allowed to sell 120 tonnes of gold between october 1999 and september 2000, 200 tonnes for the next 12 months, 283 tonnes between october 2001 and september 2002, 283 tonnes again between october 2002 and september 2003, 284 tonnes between october 2003 and september 2004 and 130 tonnes after september 2004. the participating central banks agreed to eliminate the possibility of hedging the gold price risk for the entire five year period. however, flexibility was maintained in hedging the gold price risk for the selling quota within each current 12 - month subperiod. in other words, forward sales or option programs were possible for the annual allocations only. on the other hand, there were no limitations on hedging currency risk. the snb was therefore free to hedge the expected usd proceeds from the sales against the swiss franc. at the outset, the snb decided to use the bis as its selling agent. between may 2000 and march 2001, the bis sold 220 tonnes on behalf of the snb. for the first 120 tonnes, the snb paid the bis a fixed commission while the performance risk resided with the snb. for the next 100 tonnes, the bis agreed to pay the average price of the am and pm london gold fixing plus a small fixed premium. in april 2001, the governing board decided that there was no reason to continue to sell through the bis. the snb now had the necessary professionals, know - how, trading resources and contacts to the international gold market to trade directly. two types of selling operations were subsequently pursued : spot sales in the market and sales programs with price caps. over the next three and a half years, 730 tonnes were sold directly in the spot market. for these sales, the snb used 25 counterparties in four different continents. in an effort to receive consistently competitive pricing, the governing board allowed the snb traders to become two - way participants in the market. in other words, traders were allowed to buy gold on an intra - day

of the option programs, the spot sales and the sales through the bis. snb spot sales were realized at a price corresponding to the fixing plus 22 cents, whereas the average premium over the fixing for the cap sales was usd 1. 9. iv. lessons and conclusions last week, the snb ’ s general assembly approved the 2004 accounts of the snb, thereby formalizing the disbursement of the chf 21. 1bn proceeds of the 1300 tonnes of gold. one third of that amount will go to the federal government and two thirds to the 26 cantons. beginning on may 12, the snb will disburse the money in ten weekly tranches. the disbursements will have no impact on the swiss yield curve or the exchange rate as the necessary portfolio adjustments were made in the run up to the pay out. with the final tranche on july 14, the disbursement of the proceeds from the gold sales will have been completed, representing the largest financial transaction in the history of the swiss national bank. in my view, the most important lesson to be drawn from the snb ’ s gold sales is that the decision to sell official gold holdings should be made separately from any consideration on how to use the proceeds. the history of the snb sales shows that notwithstanding the constitutional and legal complexities i referred to earlier, the time between the expert opinion about the snb ’ s excess reserve capital and the first sales was two and a half years. switzerland ’ s politicians, on the other hand, failed to reach a consensus on what to do with the proceeds. after eight years of relentless debates and a squarely rejected referendum on the swiss foundation for solidarity in 2002, the funds will be disbursed according to the constitutional distribution key for the snb ’ s regular profits. i don ’ t want to burden you with the intricacies of the swiss political debate around the gold proceeds. let me simply say that it was not for lack of creative ideas that a consensus failed to emerge. this lesson strikes me as relevant with regard to potential renewed discussions about imf gold sales. such discussions should exclusively be conducted on the basis of a thorough examination of the solidity of the imf ’ s financial position and not become entangled with proposals on how to allocate any expected proceeds. finally, let me offer a couple of specific lessons from the snb ’ s gold sales that underline the benefits of transparency. total official gold holdings