Overseas Private Investment - DFC

Making

a difference

by supporting

investment in

developing

countries

2001 Annual Report refocusedOverseas

Private

Investment

Corporation

Table of contents

President’s message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A sharper agenda that matters more than ever . . . . . . . . . 7

Creating opportunities abroad . . . . . . . . . . . . . . . . . 9

Putting America’s best face forward. . . . . . . . . . . . . 15

Fostering entrepreneurial success at home . . . . . . . . 19

Leveraging investments and results . . . . . . . . . . . . . 23

2001 investment projects . . . . . . . . . . . . . . . . . . . . . . . . 25

2001 investment funds’ projects . . . . . . . . . . . . . . . . . . . 28

OPIC countries and areas. . . . . . . . . . . . . . . . . . . . . . . . 30

Financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Board of directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Officers and management. . . . . . . . . . . . . . . . . . . . . . . . 41

Photography credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

ing private U.S. capital to spur sus-tainable development in new andemerging markets. OPIC’s success infulfilling this mandate has given lifeto the proposition that governmentleadership in managing the risks asso-ciated with foreign direct investmentcould effectively mobilize capital andhuman resources for development.These resources would not otherwisehave been made available. One meas-ure of OPIC’s success is the growth

of some of the countriesthat OPIC has helpeddevelop into mature,open and democraticmarket economies.

OPIC has accomplished thismandate on a self-sustaining basis,with room to spare. OPIC now is in a strong position to face the continu-ing challenges wrought by the tragicevents of September 11 and the eco-nomic uncertainties exacerbated bythose events.

My key priority in refocusingOPIC is to strengthen the agency’sconsciousness of its developmentalmission and to ensure that OPIC’sproducts are complementary, notcompetitive, with the private sector.The challenge is not static. Not everyinvestment in a developing country is developmental per se. The type of investment that is effective in onecountry may not provide the same balance of costs and benefits inanother. What works in one phase

page 1

Having originallyserved OPIC inthe early days ofthe first Bushadministration, Ijoined anew last

year with a firm belief in the agency’spossibilities. It was a belief that tookroot a decade ago from the perspec-tive of that experience, and one thathas only grown stronger as I havehad ample opportunity to observe

OPIC from other vantage points.This agency has had a long-standingimpact in fostering economic devel-opment abroad while helping tostrengthen the U.S. economy athome. When President George W.Bush asked me to serve his adminis-tration as president and CEO ofOPIC, I accepted the assignment withenthusiasm. I rejoined OPIC with anappreciation of the organization’soutstanding record of accomplish-ments as well as a belief that theagency can do more and, with a refo-cused strategic plan, can do it evenbetter.

During the past 30 years, OPIChas demonstrated its unique value asan instrument of U.S. internationaleconomic policy. First and foremost,OPIC has been a catalyst for mobiliz-

My key priority

in refocusing

OPIC is to

strengthen

the agency’s

consciousness of

its developmental

mission and

to ensure that

OPIC’s products

are complementary,

not competitive,

with the

private sector.

A refocused strategic plan

President’s message

of a country’s economic developmentmay not be as effective in other cir-cumstances. I intend to strengthenOPIC’s developmental mandate byexamining critically each proposedinvestment in terms of its develop-mental impact, using the most

advanced methodologies and the bene-fit of OPIC’s experience and portfo-lio. With that knowledge, we willrefocus OPIC’s outreach towardunderserved regions like sub-SaharanAfrica, as well as countries and sec-tors where the developmental benefitsare likely to be the greatest.

I recognize that using ourresources to support more develop-mental projects may pose someadded risks. This means that OPICcontinually must improve its under-standing of and capacity to managerisk. Toward that end, I amstrengthening the risk managementfunction at OPIC by bringing innew staff resources and technologyto better manage OPIC’s exposureon both a portfolio and a projectlevel. I also am exploring how

OPIC’s policies on corporate socialresponsibility and its agreementswith host governments can furtherreduce risk.

While some of the risks thatOPIC faces can be identified readilyas political or commercial in origin,other sources of risk may arise fromunintended environmental and socialimpacts. With guidance from theU.S. Congress and successive admin-istrations, OPIC has exercised lead-ership in finding ways to promoteeconomic and social development,while at the same time protecting theenvironment, workers rights andhuman rights in developing coun-tries. OPIC’s leadership in this areahas been recognized by other officialand private lenders and insurers thathave come to see the value of inte-grating environmental and socialconsiderations into their lending andinsurance policies. Now that the pri-vate markets have “gotten the mes-sage,” many private companies aregoing beyond the requirements oflaw and are taking proactive meas-ures to enhance their relationshipswith local communities.

Exercising leadership in thisarea means that OPIC must strive tolearn from the best practices of the

Outreach toward underserved regions

most progressive companies and touse those practices in its approach toissues of corporate social responsi-bility. The practice of corporatesocial responsibility is an integralpart of risk management. As part ofthe reallocation of OPIC’s staffresources, I have combined the riskmanagement, environmental andlabor rights, and economic analysisand project monitoring units into anew office headed by a vice presi-dent for investment policy. Thisoffice will have the same status asOPIC’s product divisions.

OPIC recognizes that the privatesector is in the best position to recog-nize and respond to business oppor-tunities and risks in developing and

emerging markets. OPIC thereforeneeds to work in tandem with privatebusiness to leverage private sources offinancing and insurance to the maxi-mum extent possible, while function-ing as the “market of last resort” forprojects that private investors andinsurers would not or could not sup-port on their own.

To enhance OPIC’s cooperationwith the private market, I have takensteps to initiate a much greater levelof cooperation between OPIC and the private insurance markets. OPICneeds to do things that the privatemarket will not — such as offeringgreater tolerance for risky countries

1996

1981

1986

1991

1974

200164,684

52,782

28,919

19,158

6,310687

U.S. Exportscumulative in millions

of dollars

253,128

221,878

147,201

115,508

72,765

4,712

1996

1981

1986

1991

1974

2001

U.S. JobCreation

cumulativenumber of

jobs created

or projects, longer tenor, or larger per project capacity.

To show our good faith indemonstrating that we are not com-peting with the private market, weplan to initiate a program that willhelp to ensure that OPIC’s involve-ment is necessary — not a substitutefor what already is available in theprivate market. From now on,anyone applying for OPIC insurancewill have to demonstrate that a validattempt was made to place the cover-age in the private market and thatsuch coverage was either not avail-able at all or not available at terms,conditions or rates that would allowthe investment to proceed.

This new test of additionalitywill help to fulfill OPIC’s responsibil-ity to find avenues for cooperationwith the private market. It willrespond to OPIC’s need to comple-ment, not compete with, the private

sector. And it will provide an oppor-tunity to refocus our activities tobetter reflect our mission by helpingto mitigate risk and support invest-ment in the emerging markets. Inother words, everyone will win.

Both overseas development andU.S. economic growth increasinglyare dependent on the vital role ofthe small and entrepreneurial busi-ness sector. Despite its small staff,OPIC has done remarkably well inreaching out to small and medium-sized enterprises (SMEs), which con-stitute a growing percentage ofproject participants. In addition,thousands of SMEs participate assuppliers to OPIC-supported proj-ects. However, OPIC’s location inour nation’s capital does not leave it well positioned to support compa-nies that are geographically remotefrom Washington and are at thesmaller end of the SME spectrum.Therefore, one of my first actions at OPIC has been to create a struc-tured arrangement with the U.S.Small Business Administration(SBA). This arrangement is designedto complement SBA’s capacity toreach and support small businesswith OPIC’s international expertise.

Finally, as both a governmentagency and a business, OPIC has anincreasing obligation toward its stake-holders to operate in a fully transpar-ent manner. New telecommunications

82

61

45

25

12

2001

1998

1999

2000

1997

Numberof SmallBusinessProjects

technologies, including but not limitedto the Internet, have created greaterexpectations among the public forincreased disclosure of all informa-tion, with the important exception ofthat which is vital to national securityor business confidentiality. I am com-mitted to enhancing the transparencyof OPIC’s reporting and disclosures,as should be evident in this annualreport.

Peter S. Watson President and CEO

OPIC has

exercised

leadership in

finding ways to

promote economic

and social

development,

while at the same

time protecting the

environment,

workers rights and

human rights in

developing

countries.

Our work is

well aligned

with U.S.

economic,

foreign,

environmental

and labor

policies.

page 6

Streamlining the agency

OPIC has taken measures to make our work more transparent tothe public and to make it easier for businesses to access resourcesand results. We responded to customer satisfaction surveys bymaking more information available electronically, includingpublications, press releases and application forms. Now, business-people can learn about OPIC products and services in a matter ofminutes. And they can use the investor’s gateway section of ourWeb site to link to other sources of information about the countriesin which OPIC operates. Online training programs for smallbusinesses supply customized information. Doing business withOPIC has never been easier. www.opic.gov

Know this about OPIC: No otherAmerican public or private organiza-tion invests in developing countrieswith the scope and focus that we do.We operate in more than 140 coun-tries — financing economic develop-ment projects large and small andmitigating economic and politicalrisks. And we operate at no net costto American taxpayers. Over our 30-year history, OPIC has built upreserves of more than $4 billion andhas recovered or settled more than 94percent of our insurance claims.

We make it possible for parchedcommunities in Kenya to drill forpotable water and meet a basic humanneed. We enable farmers in Guatemalato cultivate a new coffee plant, build afamily-owned business, provide train-ing and health care to workers, andtransport children to school. In CentralEurope, we pave the way for advancedmedical diagnostic facilities and skilledjobs, while in Asia and Latin America,our support leads to affordable hous-ing and the new beginnings it offers.We make it possible for emerging mar-kets to develop the infrastructure ofairports, utilities and telecommunica-tions that will bring millions of peopleinto the global economy. We accom-plished this and much more in 2001.

OPIC plays an uncommon andindispensable leadership rolein developing emerging markets, expanding global commerce and fos-tering democratic values worldwide.The unprecedented events of 2001brought a fresh relevance to ourwork. People who have the economicand social opportunities that lead to prosperity are far less likely tobecome estranged from society orengage in violence than people with-out these opportunities. A strongdefense against terrorism, then, isinvesting in the developing countriesthat may harbor terrorists and forg-ing strong, positive bonds with thosenations. For 30 years, this has beenour core mission, and it matters morethan ever in today’s uncertain times.

In 2001, we sharpened ourfocus, renewing our commitment toeconomic development in placeswhere it makes a profound differenceto human welfare. We are well posi-tioned to strengthen this impact inthe future. Our work is well alignedwith U.S. economic, foreign, environ-mental and labor policies. In short,OPIC is good for the world and goodfor America.

page 7

A sharper agenda that matters more than ever

Economic

opportunity can

lift people out

of poverty,

improve their

quality of life,

and steer them

toward

productivity

and prosperity.

page 8

Economic development in emergingmarkets around the world

The essence of OPIC is mobilizing privateinvestments in eco-nomic development,which creates oppor-tunities for the under-

privileged of the world. There arecompelling political, economic andsocial reasons to make these invest-ments.

For many, the concept of a“land of opportunity” is utterlyunfathomable. Millions of peoplewho share the planet with us live in poverty or economic uncertainty,with few prospects for improvingtheir lot. The fruits of the globaleconomy are beyond their reach —an increasingly untenable conditionin a world with widening gapsbetween the haves in advancednations and the have-nots in theThird World. The United States mustfind ways to help developing coun-tries participate in the global econ-omy — or risk contempt and unrestfrom their growing populations.

Americans know well that busi-ness is the engine of economic oppor-tunity. Only free market forces cansustain a trajectory of genuine eco-nomic progress. Private enterprisecreates jobs and fosters hard work,ingenuity and entrepreneurial spirit.OPIC brings this familiar formula foreconomic growth to developing coun-tries through political risk insurance,investment guaranty and funds pro-

grams. OPIC itself makes no equityinvestments, and except for someprojects involving U.S. small busi-nesses, OPIC does not directly lendmoney for investment purposes.Rather, we create incentives for private investment by insuring orguaranteeing such investments indeveloping countries. Economicopportunity can lift people out ofpoverty, improve their quality of life,and steer them toward productivityand prosperity.

Leadership and landmarkagreementsOPIC plays a leadership role in creat-ing the economic and political condi-tions for economic developmentabroad. In 2001, for example, OPICfor the first time began offeringfinancing to U.S. businesses investingin Mexico. This historic break-through was hailed on both sides of the border for its potential tostrengthen America’s second-largesttrading partner. At the same time,SMEs in the United States now haveaccess to OPIC financing for invest-ment projects in Mexico.

To facilitate such projects, OPICalso agreed to cooperate with thelargest development bank in Mexicoand Latin America, NacionalFinanciera (NAFIN). The principlesof cooperation recognize the impor-tance of sharing information aboutprivate investment opportunities;

Creating opportunities abroad

sharing technical knowledge, particu-larly concerning risk mitigation andmanagement; and encouraging jointventures in developing economies.OPIC and NAFIN also recognize thatall OPIC-supported investments mustrespect the environment, humanrights and worker safety.

Also in 2001, OPIC reached anagreement with Yugoslavia permittingOPIC to support U.S. investment —an important first step that will leadto economic development projects.The agreement underscores OPIC’scritical role in rebuilding countriesravaged by war or political upheaval.Already, OPIC is setting the stage fora similar role in Afghanistan, work-ing in partnership with U.S. compa-nies to participate in a post-Talibaneconomy, and is supporting invest-ment in Pakistan.

Moreover, OPIC is workingaggressively to mobilize private-sectorinvestment. In 2001, we convenedforums to outline investment oppor-

tunities in both Yugoslavia andAfghanistan for high-level govern-ment officials and senior businessleaders. This unparalleled outreach is helping to chart the course forreconstruction and economic growthin these countries.

The value of U.S. involvement on the ground in emerging marketeconomies cannot be overstated.Through highly developmental proj-ects, countries reap benefits that gofar beyond tangible dollars and centsor bricks and mortar. Equally impor-tant, people in these countries acquirenew, marketable skills. They gain anunderstanding of business principlesand practices by working collabora-tively with American businesspeopleand OPIC professionals. They areempowered to build productive busi-nesses and thriving communities.Indeed, economic activity enablesbusinesses to make socially responsi-ble investments — in education,training, health facilities and childcare, for example.

Magnifying positive resultsOPIC projects produce a ripple effectin local economies — and, in the bestof circumstances, the U.S. and globaleconomies as well. Expanding thenumber of routes serviced by NevisExpress Airport on the island nationof Saint Christopher and Nevis in theCaribbean, for example, should be a catalyst for economic growth. Anincrease in the availability of air

673,691

598,810

446,344

352,925

243,192

61,763

1996

1981

1986

1991

1974

2001

Host CountryJob Creation

cumulative

service will attract more tourists,which should result in eventualexpansion of the airport. Contractorswill procure supplies from local andU.S. businesses to build new facilitiesto accommodate growth.

OPIC’s initial support, then,helps leverage more investments,commitments and growth. OPICprojects often bring important bene-fits to U.S. business as well — open-ing new markets, developing newtrade partners and creating U.S. jobs.OPIC analyzes project proposals andconducts follow-up monitoring toensure that the projects we invest indo not displace U.S. jobs.

OPIC paves the way for U.S.businesses to operate in emergingnations. By nature, there are risksand challenges to investing abroad,particularly in developing countries.American companies are taking achance in unknown territories withoften unpredictable political climatesthat can determine whether anybusiness undertaking will work. Thepotential for losses from currencycontrols, seizure of assets, politicalunrest or other unpredictable eventsremains. Not surprisingly, U.S.investors and insurance companiesview these risks and challenges with trepidation. That’s why OPIC is the lender and insurer of lastresort — we will not compete withprivate-sector investment or risk mit-igation providers when we help fillthis need.

Often, doing business in develop-ing countries takes special knowledgeand expertise that potential investorsdo not have. OPIC can be instrumen-tal in bridging the gap between U.S.businesses and host-country govern-ments. Many companies simply couldnot afford to undertake the chal-lenges of investing in developingcountries without this critical supportfrom OPIC.

In Africa, OPICcommitted a$227.5 millionloan guaranty tothe new AfricaMillennium Fund,a private equityfund that willenable U.S. compa-nies and others toinvest in sorely

needed infrastructure projects in sub-Saharan Africa. OPIC selected AfricaMillennium Managers, a consortiumof private investment firms, to managethe fund and raise $122.5 million in equity to meet our goal of $350 million in capital. This fund replacesthe New Africa Infrastructure Fund,which was approved in 1999 but neverconsummated.

The fund, mandated by theAfrica Growth and Opportunity Actof 2000, demonstrates deep U.S.commitment to strengthening tradeand investment, increasing prosperity,and combating poverty in Africa. The

Making adifferenceProject

highlights

in economic

development

Africa Millennium Fund will targetsectors such as telecommunications,transportation, electricity, water andsanitation — the essential founda-tions for economic growth.

Also in Africa, OPIC providedpolitical risk insurance to privatizedflour mills in Lesotho and Mozam-bique. Seaboard Overseas Limited — a subsidiary of Seaboard Corpor-ation, an agribusiness and oceantransportation company headquar-tered in Shawnee Mission, Kansas — has been taking advantage ofopportunities to privatize formerlystate-run facilities in Africa. Over theyears, OPIC has supported Seaboardwith insurance coverage in severalAfrican locations.

With this insurance in place,Seaboard has been able to join withAfrican business partners to modern-ize and provide working capital for

the flour mills. The company alsotrains local workers to operate newequipment safely and manage theplants in an environmentally respon-sible manner. Expanded productionof wheat and maize flour and manu-factured animal feed in Lesotho,Mozambique and Zambia hasincreased the availability of basicfood products in local markets.

In Latin America, OPIC continued its critical role in fulfillingthe dream of home ownership, whichenhances sustainable growth and long-term stability in emerging economies.However, interest rates vary widelythroughout Latin America, the mortgage market is unpredictable and loans sometimes are not easily available. Without affordable and accessible mortgages, home ownershipis impossible for the vast majority ofpeople in the developing world.

OPIC is helping to improve thissituation by bringing U.S. capital andexperience to bear on mortgage mar-kets in Latin America. OPIC’s sup-port gives Latin American banks anincentive to offer construction loans.OPIC support for mortgage lendingwill increase home ownership in thedeveloping world — and this willcreate an untapped and potentiallyattractive market for U.S. investorsand the U.S. homebuilding industry.

Specific OPIC projects in 2001include: • $22.5 million for residential

housing and mortgages in theDominican Republic. The OPICloan will add mortgage loan origi-nation capacity to this small market.

• $2.5 million for microcredit loansto low-income homeowners inMexico for home improvements.The North American Free TradeAgreement (NAFTA) presentstremendous opportunity for fueling

Investing strategically

economic growth on the border withMexico; with increasing employment,housing is necessary for those work-ers. CHF, through Fundacion Habitaty Vivienda A.C., continues to addressthe current situation of substandardhousing for Mexican workers.

Also in Latin America, OPICinvested strategically in bringing ade-quate power to developing nations.Affordable, reliable sources of energyand telecommunications services areprerequisites for economic growth.Specific projects include:• $190 million in insurance to Bank

of America, N.A., as trustee for asyndicated loan to a gas pipelineexpansion in Argentina.

• $85 million in inconvertibilityinsurance and a Foreign ExchangeLiquidity Facility Guaranty, whichallowed a subsidiary of The AESCorporation of Arlington, Virginia,to refinance the high-cost midtermdebt that it used to acquire a priva-tized hydroelectric generation busi-ness in Sao Paulo, Brazil.

• $50 million in insurance to Bank-Boston, N.A., to support more reli-able Internet services, includingWeb hosting and dial-up accessservices, in Brazil. BankBoston,N.A., is the corporate name underwhich Fleet National Bank,FleetBoston Financial’s principalbanking subsidiary, operates inLatin America.

In Europe and Central Asia,OPIC’s New Century CapitalPartners, L.P., invested in severalregional telecommunications compa-nies in Russia to assist with theirongoing privatization. The fund’sinvestment will help to capitalizethese companies, enabling them toupgrade the communications infra-structure throughout Russia. Thefund made a similar investment inLithuanian Telecom, with the samedevelopmental benefit anticipated.

OPIC also provided $15 millionin insurance to a group of Armenian-Americans to privatize the MarriottHotel Armenia, a historic hotel in theCaucasus region. OPIC has supportedsimilar hotel projects, such as restor-ing the Ritz-Carlton Istanbul and theHotel Tbilisi Marriott in Georgia, ahotel built in the early 20th centuryand destroyed during the Georgiancivil war of the 1990s. The Tbilisiprivatization project will provide thefirst Western-owned and -operatedfive-star accommodations for busi-ness travelers interested in investingin Georgia — and it will expand thecountry’s capacity to accommodatetourists.

“We welcome

OPIC’s participation

in fostering joint

ventures between

Mexican and U.S.

companies. This will

allow Mexico and

the United States

to deepen an already

thriving economic

relationship [and]

creat[e] new jobs

for more Mexicans.”— President Vicente Fox

Quesada of Mexico

OPIC staff

members

and U.S.

businesspeople

effectively serve

as ambassadors

for American

business

practices,

putting a

human face on

capitalism and

democracy.

Good corporate citizenship and host-country governance

Putting America’s best face forward

Done well and doneright, economicdevelopment projectsin developing nationsshowcase Americanleadership and stew-

ardship in the world. Done badly,otherwise beneficial projects actuallycan hinder development. For thisreason, OPIC strongly encourages allproject participants in the UnitedStates and abroad to follow bestindustry practices. We back up ourwords with actions.

With OPIC as a partner, U.S.companies, host-country firms andgovernment officials conduct businesswith scrupulous attention to interna-tional standards that protect the envi-ronment, human rights and laborrights. We maintain a highly qualifiedstaff of professionals who conductdue diligence work on these issuesbefore projects are approved. In theirwork abroad, OPIC staff membersand U.S. businesspeople effectivelyserve as ambassadors for Americanbusiness practices, putting a humanface on capitalism and democracy.

In Panama, for example, OPICprovided insurance coverage to the ElPaso Energy Corporation for a hydro-electric power plant acquired throughprivatization, which provides afford-able and reliable electricity to localresidents. Given the sensitivity of theproject’s location — within a tropicalforest reserve — OPIC, prior to issu-ing coverage, conducted an in-depth

evaluation of the environmentalimpacts of the project on the area,including an environmental audit ofthe power plant’s operations and asafety evaluation of the dam. Toensure that the biodiversity of the areawas protected, the sponsors agreed totake corrective actions to bring thefacility up to international standardsfor environmental protection.

Public advocacy, successful resultsWhen necessary, OPIC acts as apublic advocate, stepping in toencourage good corporate citizenshipand good host-country governance.OPIC has extensive experience inresolving disputes that may arise inits projects.

In 2001, for example, OPIC successfully negotiated with the government of the Philippines toencourage a government-charteredcorporation to fulfill its obligationsconcerning a project sponsored byBechtel Enterprises. The Filipino corporation had failed to adhere toits agreement on the rate structure for water and sewerage rates and had declined to honor an interna-tional arbitration award requiring it to do so. OPIC communicated itsconcerns to the Philippine ministry of finance, and the problem ulti-mately was resolved to the satisfac-tion of all parties.

OPIC also maintains an extensivemonitoring program, conducting site

visits for projects all over the world.Through these visits, we monitorprogress over the long term, notingwhether companies and host countriesare following the letter and the spiritof their agreements with OPIC.

In Central Asiain 2001, OPICencouragedUzbekistan tocontinue economicreforms to helpattract additionalU.S. investment.Specifically, OPICurged senior Uzbekgovernmentofficials to abolishthe dual exchangerates and to offerfull currencyconvertibility for

SMEs. In recommending this courseof action, OPIC underscored theincreased investment that couldresult, particularly as Uzbekistanmoves to privatize large parts of itseconomy.

OPIC, which has provided over$200 million in insurance to projectsin Uzbekistan over the past few years,signed a bilateral investment agree-ment with the emerging nation in1992. OPIC is a joint-venture partnerwith the U.S. Trade and DevelopmentAgency and the Export-Import Bankof the United States at the CaspianFinance Center, a regional officebased in Ankara, Turkey, that is

responsible for the Caucasus andCentral Asia, including Uzbekistan.

Also this year, OPIC’s GlobalEnvironment Emerging MarketsFund, II, is involved in significantdevelopment activities. An investmentcommitment to a Southeast Asianentity, for example, provided the cap-ital to upgrade and expand the onlynonhazardous waste disposal facilityin Indonesia and to develop a newindustrial waste disposal facility inThailand — the only environmentallycompliant one in the country.

Several smaller projects exem-plify the spirit of good corporate citi-zenship and host-country governanceas well, including:• A $300,000 OPIC loan for a pilot

program to market solar ovens inUganda — and train women touse them. The Global Sun Oven®,manufactured by Sun OvensInternational of Elburn, Illinois, isan alternate, environmentallyfriendly cooking technology forfamilies who normally rely onscarce wood or expensive oil astheir fuel sources. An organizationfor rural women, founded by FirstLady of Uganda Janet Museveni,will promote use of the solar ovens.Transferring this technology to adeveloping nation addresses therapidly expanding problems ofdeforestation and populationgrowth with solar approaches toeveryday living.

• A $300,000 OPIC loan for improv-ing production at a family-owned


highlights

demonstrating

good

corporate

citizenship

and host-

country

governance

coffee farm in Guatemala. TheOriflama Coffee Farm will expandexisting coffee production andswitch to a new, improved varietyof high-quality arabica coffee, amove expected to increase revenuesby 20 percent and create 133 jobsin the local economy within fiveyears. The business is environmen-tally friendly, using an innovativerecycling and conservation processfor water used in growing andcleaning the coffee and the parch-ment used to dry it. It also uses cul-tivation techniques that supporthabitats for resident and migratorybirds, amphibians, and otherwildlife. The business treats work-ers and their families with dignity,providing training and supportingmedical services for workers andmaking sure they are registered forGuatemalan social security. Thebusiness also has provided trans-portation to school for children.Oriflama is a model farm thatreceived international recognitionfor its excellent coffee in the 2001Cup of Excellence competition.

• A $200,000 OPIC loan for drillingof potable water wells in Kenya.A serious shortage of drinkingwater in Kenya makes drillingequipment from Living WaterInternational (LWI) a vital compo-nent of basic survival. OPIC’s loanto LWI will enable LWI’s affiliate,Living Water Kenya, to drill anadditional 20 water wells per year.In the past decade, Living Waterhas drilled 125 water wells inKenya for a fee, and such fees arethe primary source of repayment of OPIC’s loan. Local citizens aretrained to maintain the wells,pumps and storage tanks — andthey learn about basic hygiene andfood preparation to prevent con-tamination of the wells. Water com-mittees, generally made up ofwomen, are encouraged to sell thewater for about a penny a gallon toraise funds for maintenance and togive people a sense of ownership ofthe wells.

“The comfort that

comes from this

insurance induces

many American

exporters, small

or large, to bid on

projects they would

otherwise avoid . . .

OPIC’s prestige

goes a long way in

ensuring that foreign

governments treat

American exporters

fairly.”— Peter A. Bowe,

president,

Ellicott International,

a small business in

Baltimore, Maryland

OPIC financing

and insurance

give small

businesses the

support they

need to conduct

business in

developing

nations with

confidence.

page 18

Benefits to U.S. small business

By design, OPIC’s mostsignificant results restbeyond U.S. borders.Significantly, however,OPIC projects also con-tribute to the success of

U.S. companies — particularly SMEs.A growing percentage of our projectportfolio involves U.S. companieswith annual revenues of less than$250 million. In 2001, 57 percent ofour new projects were small businessprojects.

We make it possible for smalland medium-sized firms to break intoforeign markets. This is important inthe global economy, with companiesincreasingly relying on foreign mar-kets to grow their businesses. Afiercely competitive business environ-ment requires even small companiesto gain new footholds in interna-tional markets to survive.

The many barriers and risks todoing business in developing nationscan seem insurmountable for smallbusinesses, which often do not havethe resources or expertise to exploreventures in unknown lands. The politi-cal, economic and cultural laws andpractices may be profoundly differentin countries without the traditions and

Fostering entrepreneurial success at home

An OPIC loan in 2000 to a Fort Worth, Texas, company paid offwith a top industry award for the firm in 2001.

Abamedia, L.P., an internationalmedia development and productioncompany, developed an electronic cata-log and Web site to preserve multimediaworks in the Russian archives. Asearchable database puts once-secret

historical information, precious documents, works of art and moreat the fingertips of students, teachers, historians, artists and othersinterested in this treasure trove of resources.

OPIC supported this multiyear venture, which included a PBSdocumentary film, The Red Files, Secrets of the Russian Archive.The film won the 2000 International Documentary AssociationAward for a limited series, which was screened at the Director’sGuild of America in Los Angeles, California, after the awards cere-mony last October.

Long-term results

1981

57%

18%

30%

45%

31%

1996

1986

1991

2001

Percentage of OPICProjects That AreSmall Businesses

1981–2001

systems that exist in more establishedeconomies. And, unlike large corpora-tions, small companies will find itmore difficult to meet any unexpectedchallenges brought on by the uncer-tainty of the political climate.

OPIC financing and insurancegive small businesses the support theyneed to conduct business in develop-ing nations with confidence. In 2001,OPIC took this message to minority-owned businesses in Washington, DC,in a forum that encouraged overseasinvestments and introduced OPIC’sservices.

An OPIC loan to DVI, Inc., of Jamison,Pennsylvania, will bring moresophisticated med-ical care to peoplein Central andEastern Europeand Turkey. DVI

specializes in leasing and installingstate-of-the-art diagnostic medicalequipment — such as magnetic reso-nance imaging (MRI scans), comput-erized tomography (CT scans),ultrasound, radiation and gammaknife equipment — in hospitals, clinics and other specialized patientcenters. With private sector fundingunavailable, OPIC’s loan helps DVImeet its corporate strategy ofresponding to growing internationalmarkets.

At the same time, OPIC financ-ing fills a need in developing coun-tries, where financing for high-techmedical equipment is inadequate ornonexistent. Doctors and technicianswill receive professional training touse the equipment, which is expectedto result in better preventive healthcare, lower medical costs and fewerprocedures for patients.

Moreover, the project furthersOPIC’s pivotal role in mobilizing pri-vate investment and implementingU.S. foreign policy in the region. TheSoutheast Europe Initiative seeks toachieve a peaceful and stable regionby promoting investment, trade andeconomic growth. Already, OPIC hasestablished an office in the region anda $150 million Southeast EuropeEquity Fund, which invests inAlbania, Bulgaria, Bosnia and Herzegovina, Croatia,Macedonia, Romania, Slovenia,Montenegro, and Turkey.In 2001, this fund made its first commitment — $20 million for the privatization of the largest telecom-munications provider in Macedonia.

Elsewhere, OPIC provided $1.5million in political risk insurance to asmall U.S. company providing life andhealth insurance to previously unin-sured local companies and individualsin Venezuela. BMI Venezuela, a sub-sidiary of BMI Financial Group, Inc.,of Coral Gables, Florida, is usingpolitical risk insurance to cover itsinvestment. In addition, the OPIC


highlights

for small

business

insurance is enabling another sub-sidiary, BMI Services, Inc., to providetraining to BMI Venezuela employeesin cost management techniques, sys-tems expertise and health coverageenhancement programs. This OPICproject continues a trend of foreigninvestment that has turned around the insurance industry in Venezuela,which experienced a crisis caused by severe problems in the bankingindustry in 1994.

Dexter Safety & IndustrialProducts, Inc., in Brownsville, Texas,meanwhile, will use a $100,000

OPIC loan to distribute safety equip-ment to companies in Mexico. Itsgloves, protective garments, uniforms,respirators, facemasks and eyeglasseswill protect industrial workers andenable companies to comply withhealth and safety standards.

Solar Electric Light Company,Inc., of Chevy Chase, Maryland, willprovide solar electric systems forhomes and businesses in Sri Lankawith a $100,000 OPIC loan. Thesmall power systems provide electric-ity to people who otherwise wouldhave none.

The civil war in Rwanda in the early 1990s devastated the country.After the war, an OPIC-supported tea factory was well positioned

to make a comeback. Thisfactory was one of the firstto resume production,paying taxes to the countryand providing the onlysource of cash income to

some 35,000 people. The project supports 3,500 independent teagrowers and employs 200 permanent staff and 1,000 seasonalworkers.

Joseph H. Wertheim, president of Tea Importers, Inc., a smallbusiness in Westport, Connecticut, credits OPIC with enabling hiscompany to make investments in tea plantations in Rwanda andEcuador. During the Rwandan civil war, the company’s tea process-ing factory was shelled and looted, but OPIC’s payment of politicalviolence claims for losses of nearly $250,000 enabled the companyto stay and rebuild.

As a result, Rwanda continues to benefit from the economiccontribution made by the Tea Importers project, and the TeaImporters company continues to benefit from the improving situa-tion in Rwanda. In the post-civil war period, schools have beenbuilt, health care is provided, housing is improved and, accordingto a World Bank study, the farmers in the area have a better incomeper acre of land than in other parts of the country.

Long-term results

Acting as the

steadying

anchor, OPIC

can attract

private-sector

partners willing

to share the

risk and

potential

rewards of

investing in

fledgling

economies.

page 22

Partnerships withthe private sector

OPIC’s willingnessand ability to support high-riskinvestments enableus to mobilize private-sector

financing that would not otherwisebe available. Our history and per-formance in highly developmentalprojects inspire confidence from private-sector partners in the UnitedStates, in host countries and through-out the world. Acting as the steadyinganchor, OPIC can attract private-sector partners willing to share therisk and potential rewards of invest-ing in fledgling economies.

In 2001, OPIC committed toredoubling its efforts on this front.There is strength in numbers. We areactively seeking partnerships withbusinesses and organizations that canincrease U.S. investments in develop-ing nations. To that end, we forgedan important partnership in 2001with the Inter-American Agency forCooperation and Development(IACD). Together, OPIC and IACDare promoting private-sector invest-ment and participation in social andeconomic development projects inLatin America and the Caribbean.Already, countries in this region rep-resent the biggest portion of OPIC’sportfolio. This pioneering agreementhas the potential to leverage more

investment and launch more projectsin our hemisphere.

An example of a project usingpublic-private partnerships is the pri-vatization and expansion of the wire-less telecommunications sector inBrazil. In fiscal year 2000, OPICprovided $200 million of insurancecoverage to BCP, S.A., one of thelargest wireless operators in LatinAmerica, whose major shareholdersare the BellSouth Corporation ofAtlanta, Georgia, and the SafraGroup of Brazil. In 1999, tenors forbank loans in Brazil were limited toone to two years, and the totalamount of financing available wasseverely constrained. A consortiumof public and private insurers, whichconsisted of OPIC, the Multilateral

Sourcesof Project

Investmentfiscal year 2001

66%

18%

14%

2%

UnitedStates

HostCountry

ThirdCountry

MultilateralInstitutions

Leveraging investments and results

Investment Guarantee Agency(MIGA), American InternationalGroup (AIG) and the ExportDevelopment Corporation (EDC),provided more than $800 million inpolitical risk insurance. This enabledBCP to raise the necessary long-termcapital through a syndicate of privatebanks to meet its financing needs.

In LatinAmerica, a $106 millionOPIC loan willsupport the priva-tization, rehabili-tation andexpansion of theJorge ChavezInternationalAirport in Lima,

Peru. The airport is the largest andmost active in the nation, accountingfor virtually all of the internationalair traffic and cargo and one-third ofthe domestic passengers.

Alterra Partners Ltd., an affiliateof Bechtel Enterprises, Inc., of SanFrancisco, California, is working inpartnership with Frankfurt Airport inGermany and COSAPI, a Peruvianconstruction company, to implementthe project. The project will generate$65 million in annual revenue for thePeruvian government and 70 perma-nent local jobs. In addition, it willgenerate a positive net impact on theU.S. balance of payments of $64.2

million — and help leverage addi-tional investment for the airport andPeru.

In this project, OPIC is support-ing the growth of the physical infra-structure necessary for the economicdevelopment of our partners inemerging markets. Promoting trans-portation not only assists the devel-opment of Peru, but also sends astrong message of confidence in thelong-term investment climate to U.S.investors.

In Asia, OPIC launched a jointtrade and finance initiative with theExport-Import (Ex-Im) Bank of theUnited States and the U.S. Trade andDevelopment Agency (TDA) to sup-port U.S. investments in and exportsto Indonesia.

The three agencies will providefinancing to promote trade and investment opportunities in Indonesia.Ex-Im Bank will provide financing to support U.S. exports of goods andservices in the oil and gas sector.OPIC will provide loans, guarantiesand insurance for projects in the oiland gas sector, and TDA funds willbe used to identify and develop proj-ects in various industry sectors forEx-Im Bank and OPIC loans andguaranties.

page 24


highlights

with

private-sector

partnerships

Africa and the Middle EastCote d’IvoireMondoil Enterprises LLC Oil and gas field exploration, $25,000,000 Insurance

(Foxtrot International LDC) development and production

KenyaLiving Water International Drilling potable water wells $200,000 Finance

(Living Water International)

NigeriaAtlanta Global Resources, Inc. Import and marketing of cement $4,770,000 Insurance

(Atlanta Global Resources Nigeria Limited)

UgandaTucson Transatlantic Trade, Inc. Assembly and sale of solar ovens $300,000 Finance

(Tucson Transatlantic Trade, Inc.)

ZambiaQuarry Investment Partners, LLC Agribusiness $1,512,000 Insurance

(Best Value Zambia, Limited)

The AmericasArgentinaBank of America, N.A. Gas pipeline expansion $190,000,000 Insurance

(Transportadora se Gas del Sur, S.A.)

Citibank, N.A. Mortgage lending $50,000,000 Insurance(Banco Rio de la Plata, S.A.)

Eligible U.S. Investors Mortgage-backed bond issuance $60,000,000 Finance(BACS II Mortgage Trust, Series 2001–02)

Tishman Speyer/Travelers Office and retail complex $40,950,000 FinanceReal Estate Venture III, LLC(Tishman Speyer/Travelers and Austral Financial)

BoliviaAccion International Financing of microloans $1,000,000 Finance

(Banco Solidario, S.A.)

BrazilThe AES Corporation Hydroelectric power $85,000,000 Insurance

(Companhia de Geração de $50,000,000 FinanceEnergia Electrica Tietê)

BankBoston, N.A. Internet service $50,000,000 Insurance(BankBoston, N.A. Sao Paulo Branch)

2001 investment projects*

COMPANY PROJECT DESCRIPTION SUPPORT

AMOUNT TYPE

*The status of the projects listed here may change in the future.


AMOUNT TYPE

Citibank, N.A. Upgrade and expansion of cellular service $49,000,000 Insurance(Tele Norte Celular Participacoes S.A.)

El Paso Energy Corporation Combined gas-fired power plant $36,000,000 Insurance (UEG Araucária Ltda.) $100,000,000 Finance

Enron Corp. Simple-cycle gas-fired power plant $190,000,000 Finance(Sociedade Fluminense de Energia Ltda.)

Marriott International, Inc. Business/tourist hotel $45,439,200 Insurance(Renaissance do Brazil Hotelaria Ltda.)

Signs Now Corporation (Franchisor) Franchise sign printer $1,055,000 Finance(NH Serviços de Sinalização Ltda.)

ColombiaChase Manhattan Bank Cellular telecommunications $99,500,000 Insurance

(Celummovil S.A.) expansion and refinancing

Kimberly-Clark Corporation Disposable tissue products $10,000,000 Insurance(Colombiana Kimberly Colpapel S.A.)

Costa RicaColite Outdoor, LLC Billboard advertising $500,000 Insurance

(Colite Costa Rica, S.A.)

Dominican RepublicFort Point Real Estate Company Residential housing/mortgages $22,500,000 Finance

(World Mortgage)

El SalvadorColite Outdoor, LLC Billboard advertising $1,080,000 Insurance

(Colite El Salvador, S.A.)

GuatemalaWalter Randolph Adams, et al. Production/introduction $300,000 Finance

(Flama de Oro, S.A.) of new coffee variety

MexicoAccion International Financing of microloans $1,000,000 Finance

(Financiera Compartamos S.A. de C.V., Societdad Financiera de Objeto Limitado)

Agroenlinea.com, Inc. Online agricultural commodity exchange $1,200,000 Finance(Agroenlinea.com S.A. de C.V.)

Cooperative Housing Foundation Microcredit loans to individual $2,500,000 Finance(Cooperative Housing Foundation) homeowners for home improvements

Dexter Safety and Industrial Products, Inc. Industrial protection products $100,000 Finance(Dexter Safety and Industrial Products, Inc.)

PanamaEl Paso Energy Corporation Hydroelectric power project privatization $24,300,000 Insurance

(Empresa de Generacion Electrica Fortuna, S.A.)

PeruBechtel Enterprises Inc. Airport privatization $106,000,000 Finance

(Alterra Partners Ltd.) (Lima Airport Partners S.R.L.)

Kimberly-Clark Corporation Expansion of diaper $2,430,000 Insurance(Kimberly-Clark Peru S.A.) manufacturing facility

St. Christopher-Nevis Allen Haddadi Airline expansion, construction $735,000 Finance

(Daystar Airways Ltd. [DBA Nevis Express]) of airport hangar facilities

VenezuelaBMI Financial Group, Inc. Life and health insurance $1,380,000 Insurance

(BMI Compania de Seguros de Venezuela, C.A.)

The Williams Companies, Inc. Gas compression facility $140,000,000 Finance(Wilpro Energy Services [Pigap II] Ltd.)

Asia and the PacificSri LankaSolar Electric Light Company, Inc. Solar energy home system $100,000 Finance

(Solar Electric Light Company)

Europe and the New Independent StatesArmeniaMarriott International, Inc. Business/tourist hotel $15,344,171 Insurance

(Armenia Hotel Complex)

Europe RegionalDVI, Inc. Diagnostic medical equipment $28,000,000 Finance

(DVI-Poland) leasing and financing operation

RussiaAPI Glass Partners L.P. Glass bottle manufacturing expansion $29,500,000 Finance

(Russian American Glass Company)

GlobalGreat Circle Capital, LLC Private equity investment $130,000,000 Funds

(The Great Circle Fund L.P.) fund — maritime industry


AMOUNT TYPE

OPIC-supported, privately managed, private equity investment funds providelong-term growth capital, management expertise and new technologies whilesupporting adoption of international standards of reporting, transparency, andenvironmental and workers rights sensitivity. They promote private-sectorenhancement fundamental to the development of emerging market economies.OPIC’s funds operate in every region of the world. Current OPIC fundsinclude:*

page 28

Africa Millennium FundAgribusiness Partners InternationalAIG Brunswick Millennium FundAllied Small Business FundAqua International PartnersAsia Development Partners, L.P. Asia Pacific Growth FundBancroft Eastern Europe FundCaucasus FundDraper International IndiaEmerging Europe Fund Global Environment Emerging Markets FundGlobal Environment Emerging Markets Fund, II Great Circle FundIndia Private Equity Fund InterArab Investment FundIsrael Growth Fund

Modern Africa Growth and Investment Fund New Century Capital Partners, L.P.Newbridge Andean Partners, L.P.Poland Partners, L.P.Russia PartnersSouth America Private Equity Growth FundSoutheast Europe Equity FundWest Bank/Gaza & Jordan FundZM Africa Investment Fund

*This list does not include two OPIC funds that havecompleted operations.

2001 investment funds’ projects

In 2001, OPIC-supported funds invested $251 million in 124 projects worldwide, with an average investment of more than $2 million per project.Highlights from these projects are:*

Africa and the Middle East Songhai Financial Holdings Ghana Investment banking

and brokerage Bayt.com, Inc. Jordan Internet portal Flamingo Holdings Ltd. Kenya Horticultural company Africa Broadcast Network South Africa Media/communications South Africa Plywood (Pty) Ltd. South Africa Wood products

The AmericasAmerica Latina Logistica Brazil Railroad transportation International Hospital Corporation N.V. Brazil Healthcare services Modulo Security Solutions Brazil Information retrieval services Sanepar PN Brazil Water and utility Newbridge Telebright Investors Chile Computer Renewable Resources Holding Chile Power generation/ natural

Co. of Chile resources

Asia and the PacificNiko Resources Ltd India Natural gas Verdaine Indonesia Palm oil plantation First Pacific Company Limited Philippines, Thailand Consumer goods

and Indonesia Modern Asia Environmental Holdings, Inc. Southeast Asia Waste management Metering Technology Corporation Thailand Utility meters and counters

Europe and the New Independent States Kabelovna Decin-Podmokly, a.s. Czech Republic Cable wire producer Euromedic International, N.V. Eastern Europe Healthcare services Lithuanian Telecom Lithuania Telecommunications Makedonski Telekomunikacil AD Macedonia Telecommunications MobiFon, S.A. Romania Wireless communication Telerus Russia Telecommunications

*This is a sampling of projects in which OPIC-supported investment funds were invested during fiscal year 2001.

page 29

PORTFOLIO COMPANY COUNTRY DESCRIPTION

Africa and theMiddle East AlgeriaAngolaBahrainBeninBotswanaBurkina FasoCameroonCape VerdeCentral African RepublicChadCongoCongo, Democratic

Republic of DjiboutiEgyptEquatorial GuineaEritreaEthiopiaGabonGhanaGuineaIsraelJordanKenyaKuwaitLebanonLesothoMadagascarMalawiMaliMauritaniaMauritiusMoroccoMozambiqueNamibiaNigerNigeriaOmanRwanda

São Tomé and PríncipeSenegalSierra LeoneSomaliaSouth AfricaSwazilandTanzaniaTogoTunisiaUgandaWest Bank and GazaYemenZambiaZimbabwe

The AmericasAnguillaAntigua and BarbudaArgentinaAruba BahamasBarbadosBelizeBoliviaBrazilChileColombiaCosta RicaDominicaDominican RepublicEcuadorEl SalvadorFrench GuianaGrenadaGuatemalaGuyanaHaitiHondurasJamaicaMexico*Netherlands AntillesNicaragua

PanamaParaguayPeruSt. Kitts and NevisSt. LuciaSt. Vincent and The

GrenadinesSurinameTrinidad and TobagoTurks and CaicosUruguayVenezuela

Asia and thePacificAfghanistanBangladeshCambodiaCook IslandsFijiIndia IndonesiaKiribatiKoreaLaosMalaysiaMarshall IslandsMicronesia, Federated

States ofMongoliaNepalPakistanPapua New GuineaPhilippinesSingaporeSri LankaTaiwanThailandTongaVietnamWestern Samoa

Europe and the NewIndependentStatesAlbania ArmeniaAzerbaijanBosnia and HerzegovinaBulgariaCroatiaCyprusCzech RepublicEstonia GeorgiaGreeceHungaryIrelandKazakhstanKyrgyzstanLatviaLithuaniaMacedonia, Former

Yugoslav Republic ofMaltaMoldovaMontenegroNorthern IrelandPolandPortugalRomaniaRussiaSlovakiaSloveniaTajikistanTurkeyTurkmenistanUkraineUzbekistanYugoslavia, Federal

Republic of

OPIC programs encourage U.S. private investment in some 140 countriesand areas around the world, contributing to economic growth at homeand abroad.

OPIC programs generally are available in the approximately 140countries and areas listed below. From time to time, statutory and policyconstraints may limit the availability of OPIC programs in certain coun-tries, or countries where programs previously were unavailable maybecome eligible. Investors are urged to contact OPIC directly for up-to-date information on the availability of OPIC services in specific countries,as well as information on program availability in countries not listed.

OPIC countries and areas

*In Mexico, OPIC’s programs are limited to direct loans to projects that significantly involve U.S. small businessesor cooperatives.

OVERSEAS PRIVATE INVESTMENT CORPORATIONAt September 30 ($ in thousands)

2001 2000

ASSETS

Fund Balance with U.S. Treasury (Notes 2 and 4) $ 678,570 $ 594,544 U.S. Treasury securities, at amortized cost plus related receivables (Notes 2 and 7) 3,524,168 3,302,888 Direct loans outstanding of $74,385 and $52,987 less allowance for uncollectible

loans of $9,085 and $9,202 in FY 2001 and FY 2000 (Notes 2 and 10) 65,300 43,785 Accounts receivable resulting from investment guaranties of $69,808 and $57,366 less

allowance for doubtful recoveries of $29,576 and $26,935 in FY 2001 and FY 2000 (Notes 2 and 11) 40,232 30,431

Assets acquired in insurance claims settlements of $239,776 and $246,014 less allowance for doubtful recoveries of $97,690 and $102,284 in FY 2001 andFY 2000 (Notes 2 and 11) 142,086 143,730

Accrued interest and fees 19,176 15,073 Accounts receivable 61 122 Furniture, equipment and leasehold improvements at cost less accumulated

depreciation and amortization of $10,201 in FY 2001 and $8,257 in FY 2000 (Notes 2, 14 and 19) 8,273 10,516

TOTAL ASSETS $4,477,866 $4,141,089

LIABILITIES, CAPITAL AND RETAINED EARNINGS

Liabilities:Reserve for political risk insurance (Note 2) $ 260,000 $ 220,000 Reserve for investment guaranties (Note 2) 550,000 460,000 Accounts payable and accrued expenses 8,475 8,916 Customer deposits and deferred income 35,717 35,447Borrowings from U.S. Treasury (Note 6) 57,763 62,926 Unearned premiums 18,565 20,390 Deferred rent and rent incentives from lessor of $20,486 and $20,525

net of accumulated amortization of $9,618 and $8,324 in FY 2001 and FY 2000 (Note 14) 10,868 12,201

941,388 819,880 Contingent liabilities (Notes 9, 10, 17 and 18)

Capital and retained earnings:Contributed capital 50,000 50,000 Credit funding (Note 5) 79,896 96,308 Interagency transfers 1,147 1,085 Retained earnings statutorily reserved:

Insurance (Notes 9 and 12) 1,846,826 1,883,973 Guaranty (Notes 10 and 12) 1,558,609 1,289,843

3,536,478 3,321,209

TOTAL LIABILITIES, CAPITAL AND RETAINED EARNINGS $4,477,866 $4,141,089

See accompanying notes to the financial statements.

Balance sheets

OVERSEAS PRIVATE INVESTMENT CORPORATIONFor the years ended September 30 ($ in thousands)

2001 2000

REVENUES

Political risk insurance (Note 9) $ 66,577 $ 84,385 Investment financing 93,501 87,850 Other operating income 30,958 25,287 Interest on U.S. Treasury securities 227,557 212,103

418,593 409,625

EXPENSES

Provisions for reserves:Political risk insurance (Note 2) 43,848 102,968 Investment financing (Notes 2 and 10) 103,411 68,429

Salaries and benefits (Notes 15 and 16) 19,078 18,950 Rent, communications and utilities (Note 14) 5,126 5,464 Contractual services 23,814 14,123 Travel 1,431 1,583 Interest on borrowings from U.S. Treasury (Note 6) 3,738 3,815 Depreciation and amortization (Note 2) 1,965 1,944 Writedown of internally developed software (Note 19) 0 5,098 Other general and administrative expenses 1,563 2,101

203,974 224,475

NET INCOME $214,619 $185,150


Statements of income

Statements of capital and retained earnings


Contributed Credit Interagency RetainedCapital Funding Transfers Statutory Reserves Earnings Total

Insurance Guaranty(Notes 9 and 12) (Notes 10 and 12)

Balance September 30, 1999 $50,000 $190,569 $3,525 $1,974,828 $1,017,336 $ 0 $3,236,258

Net income (93,870) 271,998 7,022 185,150Return of expired credit funding (83,998) (83,998)Credit funding received from:

Accumulated earnings 28,022 (28,022) 0Credit funding used (38,085) 17,085 21,000 0Dividend to Treasury (16,576) (16,576)Interagency transfers (200) (2,440) 3,015 375

Balance September 30, 2000 $50,000 $ 96,308 $1,085 $1,883,973 $1,289,843 $ 0 $3,321,209

Net income (36,935) 251,554 214,619Credit funding received from:

Accumulated earnings 23,750 (1,000) (22,750) 0Credit funding used (39,962) 17,212 22,750 0Interagency transfers (200) 62 788 650

Balance September 30, 2001 $50,000 $ 79,896 $1,147 $1,846,826 $1,558,609 $ 0 $3,536,478



2001 2000

Cash Flows from Operating Activities:Net Income $214,619 $185,150 Adjustments to reconcile net income to net cash provided by operating activities:

Provisions for:Political risk insurance 43,848 102,968Investment financing 103,411 68,429

Amortization of premiums on U.S. securities 18,205 18,506Accretion of discounts on U.S. securities (4,064) (3,688)Depreciation and amortization of furniture, equipment and leasehold improvements 2,043 1,944Write down of internally developed software 0 5,098Increase (Decrease) in assets:

Accrued interest and fees (6,520) (5,213)Accounts receivable 61 814 Assets acquired in claims settlements (32,817) (51,817)Recoveries on assets acquired in claims settlements 8,464 6,792

Increase (Decrease) in liabilities:Accounts payable and accrued expenses (441) 1,660 Customer deposits and deferred income 270 1,170Unearned premiums (1,825) (8,267)Deferred rent and rental incentives (1,333) (571)Insurance claim payments (2,812) (219,340)Recoveries against insurance nonspecific reserve claim payments 270 0

Cash Provided by Operating Activities 341,379 103,635

Cash Flows from Investing Activities: Sale and maturity of U.S. securities 401,190 337,062 Purchase of U.S. securities (634,194) (379,631)Repayment of direct loans 27,844 10,116 Disbursement of direct loans (47,880) (3,900)Acquisition of furniture and equipment 200 (544)

Cash Used in Investing Activities (252,840) (36,897)

Cash Flows from Financing Activities:Dividend to U.S. Treasury 0 (16,576)Interagency transfers 650 375 Return of expired credit funding 0 (83,998)Credit Reform (repayments to) borrowings from U.S. Treasury (5,163) 379

Cash Provided by Financing Activities (4,513) (99,820)

NET INCREASE (DECREASE) IN CASH 84,026 (33,082)

CASH AT BEGINNING OF YEAR 594,544 627,626

CASH AT END OF PERIOD $678,570 $594,544


Statements of cash flows

OVERSEAS PRIVATE INVESTMENT CORPORATIONSeptember 30, 2001 and 2000

1. Statement of Corporate PurposeThe Overseas Private Investment Corporation (OPIC) is a self-sustaining U.S. Government corporation created under the ForeignAssistance Act of 1961 (FAA), as amended, to facilitate U.S. private investment in developing countries and emerging marketeconomies, primarily by offering political risk insurance, invest-ment guaranties, and direct loans. As a government corporation,OPIC is not subject to income tax.

2. Summary of Significant Accounting PoliciesBASIS OF PRESENTATION: These financial statements have been pre-pared to report the financial position, results of operations, andcash flows of OPIC. OPIC’s accounting policies conform to gener-ally accepted accounting principles. OPIC’s financial statements arepresented on the accrual basis of accounting. Under the accrualbasis, revenues are recognized when earned and expenses are recog-nized when a liability is incurred, without regard to receipt or pay-ment of cash.

REVENUE RECOGNITION: Facility fees are received in advance andrecognized as deferred income, then amortized over the applicableloan period. Interest on loans and guaranty fees on investmentguaranties are accrued based on the principal amount outstanding.Revenue from both loan interest payments and guaranty fees that is more than 90 days past due is recognized only when cash isreceived. Revenue from political risk insurance premiums is recog-nized on a pro-rata basis over the contract coverage period.Accretion of premium and discount on investment securities isamortized into income under a method approximating the effectiveyield method.

RESERVES FOR POLITICAL RISK INSURANCE AND INVESTMENTGUARANTIES: The reserves for political risk insurance and invest-ment guaranties provide for losses inherent in those operations.These reserves are general reserves, available to absorb lossesrelated to the total insurance and guaranties outstanding, which areoff-balance-sheet commitments. The reserves are increased by pro-visions charged to expense and decreased for claims settlements.The provisions for political risk insurance and investment guar-anties are based on management’s evaluation of the adequacy ofthe related reserves. This evaluation encompasses consideration ofpast loss experience, changes in the composition and volume of theinsurance and guaranties outstanding, worldwide economic andpolitical conditions, and project-specific risk factors.

ALLOWANCE FOR UNCOLLECTIBLE LOANS: The allowance foruncollectible loan amounts and related accounts receivable isbased on management’s periodic evaluations of the loan portfolio.In its evaluation, management considers numerous factors,including, but not limited to, general economic conditions, loanportfolio composition, prior loan loss experience, the estimatedfair value of any collateral, and the present value of expectedfuture cash flows.

FUND BALANCE WITH U.S. TREASURY: Substantially all of OPIC’sreceipts and disbursements are processed by the U.S. Treasurywhich, in effect, maintains OPIC’s bank accounts. For purposes ofthe Statement of Cash Flows, fund balance with U.S. Treasury isconsidered cash.

INVESTMENT IN U.S. TREASURY SECURITIES: By statute, OPIC isauthorized to invest funds derived from fees and other revenuesrelated to its insurance and preinvestment programs in U.S.Treasury securities. Investments are carried at face value, net ofunamortized discount or premium, and are generally held to matu-rity. OPIC has the ability and intent to hold its investments untilmaturity or until the carrying cost can be otherwise recovered.

VALUATION OF ASSETS ACQUIRED IN CLAIMS SETTLEMENTS: Assetsacquired in claims settlements are valued at the lower of manage-ment’s estimate of the net realizable value of recovery or the cost ofacquisition.

OPIC acquires foreign currency in settlement of inconvertibilityclaims when an insured foreign enterprise is unable to convert for-eign currency into U.S. dollars as well as in some direct loan andinvestment guaranty collection efforts. The U.S. dollar equivalent isrecorded until the foreign currency is utilized by OPIC or otheragencies of the United States Government or until it is exchangedfor U.S. dollars by the foreign government.

DEPRECIATION AND AMORTIZATION: OPIC capitalizes property andequipment at historical cost for acquisitions exceeding $5 thousand.Depreciation and amortization of fixed assets, leasehold improve-ments, and lease incentives are computed using the straight-linemethod over the estimated useful life of the asset or lease term,whichever is shorter, with periods ranging from 5 to 15 years.

ACQUISITION COSTS: Costs of acquiring new insurance or financebusiness are expensed in the year incurred as such costs are notconsidered material.

RECLASSIFICATIONS: Certain FY 2000 balances have been reclassi-fied to conform to FY 2001 financial statement presentations.

USE OF ESTIMATES: The preparation of financial statements requiresmanagement to make estimates and assumptions that affect thereported amounts of assets and liabilities, the disclosure of contin-gent assets and liabilities at the date of the financial statements, andthe reported amounts of revenue and expenses during the reportingperiod. Actual results could differ from these estimates.

3. Intragovernmental Financial ActivitiesOPIC, as a U.S. Government corporation, is subject to financialdecisions and management controls of the Office of Managementand Budget. As a result of this relationship, OPIC’s operations maynot be conducted nor its financial position reported as they wouldbe if OPIC were not a government corporation. Furthermore, inaccordance with international agreements relating to its programs,as well as internal U.S. Government operating procedures, foreigncurrency acquired by OPIC can be used for U.S. Governmentexpenses. This facility constitutes an additional means, which wouldotherwise be unavailable, by which OPIC can recover U.S. dollarswith respect to its insurance and investment financing programs.

4. Fund Balance with U.S. TreasuryOPIC is restricted in its uses of certain cash balances, as describedbelow. The fund balance with U.S. Treasury as of September 30,2001 and 2000 consists of the following (dollars in thousands):

Fund Balance with U.S. Treasury2001 2000

Restricted:Pre-Credit Reform $ 861 $ 3,694Credit Reform 661,041 589,728Interagency fund transfers 2 252

Unrestricted: 16,666 870

Total $678,570 $594,544

The Federal Credit Reform Act of 1990 established separateaccounts for cash flows associated with investment financing activ-ity approved prior to implementation of the Act and investmentfinancing activity subject to the Act. With the advent of CreditReform, OPIC is not permitted to invest its pre-Credit Reform cashbalances. These balances grow over time, and when they are deter-mined to be no longer needed for the liquidation of the remainingpre-Credit Reform direct loans and investment guaranties, they aretransferred to OPIC’s noncredit insurance account. During 2001and 2000, OPIC transferred $5 million and $4.5 million to thenoncredit insurance account. Credit Reform balances are alsomaintained in the form of uninvested funds. The U.S. Treasurypays OPIC interest on those cash balances except for undisbursedcredit funding. Those balances are also expected to grow as thevolume of Credit Reform financings grows over time.

From time to time the Agency for International Development(A.I.D.) has entered into various memoranda of understanding withOPIC that provide for the transfer of funds from A.I.D. to OPIC to

Notes to financial statements

carry out specific programs. These cash balances may not be com-mingled with other OPIC cash and are available solely for the pur-poses of the individual agreements.

5. Credit FundingOPIC’s finance activities are subject to the Federal Credit ReformAct of 1990, which was implemented as of October 1, 1991.Credit Reform requires agencies to estimate the long-term cost tothe government of each fiscal year’s new credit transactions and toobtain funding through the appropriations process equal to the netpresent value of such costs at the beginning of the year. OPIC’scredit funding is available for two years. In addition, the Actrequires the administrative costs related to its credit program to be displayed.

In fiscal year 2001, OPIC’s appropriations legislation authorizedthe corporation to use $24 million of its accumulated earnings tocover the future costs of credit transactions committed in fiscalyears 2001 and 2002. In addition to the credit funding allocateddirectly to OPIC through the appropriations process, OPIC hasreceived a total of $67 million in net transfers from other agenciesto be used exclusively to finance projects in the New IndependentStates (NIS).

The following table shows the status of funding for credit activities(dollars in thousands):

2001 2000

Balance carried forward $96,308 $190,569Return of expired credit funding 0 (83,998)Transferred from earnings 23,750 28,022Interagency transfers (net) (200) (200) Credit funding used (39,962) (38,085)

Credit Funding Remaining $79,896 $ 96,308

In fiscal year 2000, OPIC paid a dividend to the U.S. Treasury of$16.6 million. With this dividend and dividends paid in prior years,OPIC had returned to the General Fund an amount equal to all thedirect appropriations used for credit funding since the inception ofcredit reform. These dividends were paid because although OPIChad been required in certain years to fund its credit activitiesthrough direct appropriations, it has been able to meet the costs ofthose activities from current operations. Also in FY 2000, OPICreturned the balance of unused direct appropriations, totaling $84million, to the General Fund.

6. Borrowings From the U.S. TreasuryIn accordance with the Federal Credit Reform Act of 1990, theportion of investment financing activities not funded through theappropriations process must be funded by borrowings from theU.S. Treasury. Borrowings for Credit Reform financings totaled$41.9 million in 2001 and $3.4 million in 2000, all of which havebeen disbursed. OPIC paid a total of $3.7 million and $3.8 millionin interest to the U.S. Treasury during fiscal years 2001 and 2000,respectively, and principal repayments of $47.1 million and $3.1million were made in 2001 and 2000 under OPIC’s borrowingagreement with the U.S. Treasury. Future payments and interestrates for borrowings outstanding at September 30, 2001 are as fol-lows (dollars in thousands):

PrincipalPayment due in: Interest Rate Amount Due

Fiscal year 2002 n/a $ 0Fiscal year 2003 n/a 0Fiscal year 2004 n/a 0Fiscal year 2005 6.5% 1,823Fiscal year 2006 4.76%–6.53% 15,143Therreaeafter 4.89%–6.38% 40,797

Total $57,763

7. Investment in U.S. Treasury SecuritiesThe composition of investments and related receivables atSeptember 30, 2001 and 2000 is as follows (dollars in thousands):

2001 2000

Investments, amortized cost $3,447,289 $3,244,147Matured investment receivables 15,721 0Interest receivable 61,158 58,741

Total $3,524,168 $3,302,888

The investment receivable at year end includes two investments thatmatured on Saturday, September 30, 2001, but were not redeemedby the U.S. Treasury until the first business day of fiscal year 2002.

The amortized cost and estimated fair value of investments in U.S.Treasury securities are as follows (dollars in thousands):

Gross Gross Gross EstimatedAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

At September 30, 2000

$3,244,147 $130,676 $(10,735) $3,364,088

At September 30, 2001

$3,447,289 $323,070 $ (1,121) $3,769,238

At September 30, 2001, the securities held at year end had an inter-est range of 5 percent to 13.8 percent and a maturity period fromabout 4 days to almost 23 years.

The amortized cost and estimated fair value of U.S. Treasury secu-rities at September 30, 2001, by contractual maturity, are shownbelow. OPIC generally holds its securities to maturity. Expectedmaturities would differ from contractual maturities if OPIC were tosell securities prior to maturity (dollars in thousands):

EstimatedAmortized Fair

Cost Value

Due in one year or less $ 359,361 $ 365,466 Due after one year through five years 1,180,974 1,278,080Due after five years through ten years 1,136,772 1,207,737Due after ten years 770,182 917,955

Total $3,447,289 $3,769,238

8. Statutory Limitations on the Issuance of Insurance and FinanceOPIC issues insurance and financing under a single limit for bothprograms fixed by statute in the Foreign Assistance Act (FAA). AtSeptember 30, 2001, this combined limit was $29 billion, of whichcombined insurance and finance utilization was $15.2 billion.

9. Political Risk Insurance Insurance revenues include the following components (dollars inthousands):

As of September 30 2001 2000

Political risk insurance premiums $66,212 $83,909Miscellaneous insurance income 365 476

Total Insurance Revenue $66,577 $84,385

OPIC’s capital, retained earnings, and reserves available for insur-ance at September 30, 2001 and 2000 totaled $2.3 billion and $2.2billion, respectively. Charges against retained earnings could arisefrom (A) outstanding political risk insurance contracts, (B) pendingclaims under insurance contracts, and (C) guaranties issued in set-tlement of claims arising under insurance contracts.

(A) POLITICAL RISK INVESTMENT INSURANCE: OPIC insures invest-ments for up to 20 years against three different risks: inconvertibil-ity of currency, expropriation, and political violence. Insurancecoverage against inconvertibility protects the investor fromincreased restrictions on the investor’s ability to convert local cur-rency into U.S. dollars. Inconvertibility insurance does not protectagainst devaluation of a country’s currency.

Expropriation coverage provides compensation for losses due toconfiscation, nationalization, or other governmental actions thatdeprive investors of their fundamental rights in the investment.

Insurance against political violence insures investors against lossescaused by politically motivated acts of violence (war, revolution,insurrection, or civil strife, including terrorism and sabotage).

Under most OPIC insurance contracts, investors may obtain allthree coverages, but claim payments may not exceed the singlehighest coverage amount. Claim payments are limited by the valueof the investment and the amount of current coverage in force atthe time of the loss and may be reduced by the insured’s recoveriesfrom other sources. In addition, in certain contracts, OPIC’srequirement to pay up to the single highest coverage amount is fur-ther reduced by stop-loss agreements. Finally, losses on insuranceclaims may be reduced by recoveries by OPIC as subrogee of theinsured’s claim against the host government.

OPIC’s Maximum Contingent Liability at September 30, 2001 and2000 was $8.2 billion and $9.96 billion. This amount is OPIC’sestimate of maximum exposure to insurance claims, which includesstandby coverage for which OPIC is committed but not currently atrisk. A more realistic measure of OPIC’s actual exposure to insur-ance claims is the sum of each single highest “current” coverage for all contracts in force, or Current Exposure to Claims (CEC).OPIC’s CEC at September 30, 2001 and 2000 was $5.3 billion and$6.4 billion.

(B) PENDING CLAIMS: At September 30, 2001, the total amount ofcompensation formally requested in insurance claims for which nodetermination of specific liability had yet been made was approxi-mately $19.5 million. In addition to requiring formal applicationsfor claimed compensation, OPIC’s contracts generally requireinvestors to notify OPIC promptly of host government action thatthe investor has reason to believe is or may become a claim.Compliance with this notice provision sometimes results in thefiling of notice of events that do not mature into claims.

The highly speculative nature of such notice, both as to the likeli-hood that the event referred to will ripen into a claim and theamount, if any, of compensation that may become due, leads OPICto follow a policy of not recording a specific liability related tosuch notices in its financial statements. Any claims that might arisefrom these situations are factored into the reserves for political riskinsurance.

(C) CLAIMS SETTLEMENT GUARANTIES AND INDEMNITIES: OPIC alsohas off-balance-sheet risk in connection with one claim settlement.OPIC settled a claim in 1991 through a guaranty of $30 million ofhost government obligations. Payments by the host governmenthave reduced OPIC’s exposure to $12.4 million at September 30,2001. Any claims that might arise from these situations are fac-tored into the nonspecific reserve for political risk insurance.

10. Investment FinancingOPIC provides investment financing through both project and cor-porate finance and investment funds. Project financing providesmedium- to long-term funding through direct loans and investmentguaranties to ventures involving significant equity and/or manage-ment participation by U.S. businesses. Project financing looks forrepayment from the cash flows generated by projects, and as such,sponsors need not pledge their own general credit beyond therequired project completion period.

Investment funds use direct loans and investment guaranties to sup-port the creation and capitalization of investment funds that makedirect equity and equity-related investments in new, expanding, orprivatizing companies in emerging market economies. The fundmanagers, selected by OPIC, are experienced, private investmentprofessionals. OPIC’s participation in a fund takes the form oflong-term, secured loans and loan guaranties that supplement thefund’s privately raised equity. OPIC’s guaranty may be applied onlyto the debt portion of the fund’s capital and, for certain funds, toaccrued interest on that debt. OPIC does not guarantee any of thefund’s equity, and all equity investments in OPIC-backed funds arefully at risk.

OPIC’s authorization to make direct loans and investment guar-anties can be found in sections 234(c) and 234(b) of the ForeignAssistance Act (FAA), respectively. Direct loans and investmentguaranties are committed in accordance with the Federal CreditReform Act of 1990, pursuant to which loan disbursements andany claim payments for these commitments have been fundedthrough appropriations actions, borrowings from the U.S. Treasury,and the accumulation of earnings or collection of fees. In fiscalyears 2001 and 2000, $24 million was made available for creditfunding costs. OPIC is in compliance with all relevant limitationsand credit funding appropriations guidance. OPIC’s capital,retained earnings, and reserves available for claims on its invest-ment financing at September 30, 2001 and 2000 totaled $2.1 billion and $1.8 billion, respectively.

DIRECT LOANS: Direct loans are made for projects in developingand other eligible countries involving U.S. small business or cooper-atives, on terms and conditions established by OPIC. Direct loanexposure including capitalized interest at September 30, 2001totaled $392 million, of which $75 million was outstanding.

Interest income is not accrued on direct loans that have paymentsthat are more than 90 days past due. Loans with payments morethan 90 days past due totaled $12.8 million at September 30, 2001and $18.2 million at September 30, 2000. If interest income hadbeen accrued on those loans, it would have approximated$600,000 during fiscal year 2001 and $1.1 million during fiscalyear 2000. Interest collected on delinquent loans and recorded asincome when received amounted to $1.3 million and $471,000 forfiscal years 2001 and 2000, respectively.

Changes in the allowance for uncollectible loans during fiscal years2001 and 2000 were as follows (dollars in thousands):

As of September 30 2001 2000

Beginning balance $9,202 $16,953

Charge-offs (1,880) (7,010)Recoveries 3,242 68Reduction in provisions (1,479) (809)

Ending Balance $9,085 $ 9,202

INVESTMENT GUARANTIES: OPIC’s investment guaranty covers therisk of default for any reason. In the event of a claim on OPIC’sguaranty, OPIC makes payments of principal and interest to thelender. The loans that are guaranteed can bear either fixed or float-ing rates of interest and are payable in U.S. dollars. OPIC’s losseson payment of a guaranty are reduced by the amount of any recov-ery from the borrower, the host government, or through dispositionof assets acquired upon payment of a claim. Guaranties extendfrom 5 to 17 years for project finance and from 10 to 12 years forinvestment funds.

Credit risk represents the maximum potential loss due to possiblenonperformance by borrowers under terms of the contracts. OPIC’sexposure to credit risk under investment guaranties was $6.6 bil-lion at September 30, 2001, of which $3.4 billion was outstanding.Of the $6.6 billion, $3.6 billion related to project finance and $3.0billion related to investment fund guaranties. Included in the $3.0billion of investment fund exposure is $824 million of estimatedinterest that could accrue to the guaranteed lender. This interestgenerally accrues over a 10-year period, payable upon maturity.Upon complete nonperformance by the borrower, OPIC would beliable for principal outstanding and interest accrued on disbursedinvestment funds. At September 30, 2001, $239 million of the$824 million had actually accrued to the guaranteed lender on dis-bursed investment funds; the remainder represents an estimate ofinterest that could accrue to the guaranteed lender over the remain-ing investment fund term.

Section 235 of the FAA requires OPIC to maintain a GuarantyReserve, which is reflected in the Capital and Retained Earningssection of the balance sheet under the heading “Retained earningsstatutorily reserved.”

11. Assets Acquired in Claim SettlementsClaim related assets may result from payments on claims undereither the insurance program or the investment financing program.Under the financing program, when OPIC pays a guaranteed partya receivable is created. Under the insurance program, similarreceivables reflect the value of assets, generally shares of stock,local currency, or host country notes, that may be acquired as aresult of a claim settlement. These receivables are generally col-lected over a period of 5 to 15 years. On November 17, 1999,OPIC paid two insurance claims totaling $217.5 million. OPIC’spotential loss on these claims is included in allowance for doubtfulrecoveries at September 30, 2001 and 2000. In fiscal year 2001,OPIC entered into an agreement related to these claims with thehost government of Indonesia to recover, over a 14-year period,the outstanding receivable plus interest that is due on these twoclaims. Collections scheduled to commence in August of 2002 areto be received semi-annually.

12. Statutory Reserves and Full Faith and Credit Section 235(c) of the FAA established a fund with separate accountsknown as the Insurance Reserve and the Guaranty Reserve for therespective discharge of liabilities arising from investment insuranceor from guaranties issued under Section 234(b) of the FAA. Thesereserves are reflected on the balance sheet under “Retained earningsstatutorily reserved.” These amounts may be increased by transfersfrom retained earnings or by appropriations. In FY 2001, OPIC’sBoard of Directors authorized the allocation of all retained earningsto these statutory reserves, thereby reflecting OPIC’s increased abil-ity to absorb potential losses without having to seek appropriatedfunds. The allocation of retained earnings to the Insurance Reserveand the Guaranty Reserve is based on the amount of maximumexposure outstanding for insurance and guaranties, respectively.

All valid claims arising from investment insurance and guarantiesissued by OPIC constitute obligations on which the full faith andcredit of the United States of America is pledged for full payment.At September 30, 2001 and 2000, the statutory Insurance Reservetotaled $1.8 billion and $1.9 billion, respectively, and the statutoryGuaranty Reserve totaled $1.6 billion and $1.3 billion respectively.Should funds in OPIC’s reserves not be sufficient to discharge obli-gations arising under investment insurance, and if OPIC exceeds its$100 million borrowing authority authorized by statute for itsinsurance program, funds would have to be appropriated to fulfillthe pledge of full faith and credit to which such obligations areentitled. Standing authority for such appropriations is contained inSection 235(f) of the FAA. The Federal Credit Reform Act of 1990authorizes permanent, indefinite appropriations and borrowingsfrom the U.S. Treasury, as appropriate, to carry out all obligationsresulting from the investment financing program.

13. Disclosures About Fair Value of Financial InstrumentsThe estimated values of each class of financial instrument forwhich it is practicable to estimate a fair value at September 30,2001 are as follows (dollars in thousands):

Carrying FairAmount Value

Financial AssetsCash $ 678,570 $ 678,570U.S. Treasury securities 3,447,289 3,769,238Interest receivable on securities 61,158 61,158Direct loans 65,300 65,300Accounts receivable from

investment guaranties 40,232 40,232Assets acquired in insurance

claims settlements 142,086 142,086Financial LiabilitiesBorrowings from the U.S. Treasury 57,763 57,763

The methods and assumptions used to estimate the fair value ofeach class of financial instrument are described below:

CASH: The carrying amount approximates fair value because of theliquid nature of the cash, including restricted cash.

U.S. TREASURY SECURITIES: The fair values of the U.S. TreasurySecurities are estimated based on quoted prices for Treasury securi-ties of the same maturity available to the public. (OPIC is notauthorized, however, to sell its securities to the public, but isinstead restricted to direct transactions with the U.S. Treasury.)Interest receivable on the securities is due within 6 months and isconsidered to be stated at its fair value.

DIRECT LOANS, ACCOUNTS RECEIVABLE RESULTING FROMINVESTMENT GUARANTIES, AND ASSETS ACQUIRED IN INSURANCECLAIMS SETTLEMENTS: These assets are stated on the balance sheetat the present value of the amount expected to be realized. Thisvalue is based on management’s quarterly review of the portfolioand considers specific factors related to each individual receivableand its collateral. The stated value on the balance sheet is alsomanagement’s best estimate of fair value for these instruments.

BORROWINGS FROM THE U.S. TREASURY: The fair value of borrow-ings from the U.S. Treasury is estimated based on the face value ofborrowings discounted over their term at year-end rates. These bor-rowings were required by the Federal Credit Reform Act, andrepayment terms are fixed by the U.S. Treasury in accordance withthat Act.

INVESTMENT GUARANTIES COMMITTED AND OUTSTANDING: OPIC’sinvestment guaranties are intended to provide a means of mobiliz-ing private capital in markets where private lenders would beunwilling to lend without the full faith and credit of the U.S.Government. Given the absence of a market for comparable instru-ments, it is not meaningful to calculate their fair value.

14. Operating LeaseMinimum future rental expenses under the 15-year lease at 1100New York Avenue, N.W. will be approximately $5.1 million annu-ally, with additional adjustments tied to the consumer price index.Lease incentives related to OPIC’s 1992 move to this locationtotaled $16.7 million. The value of these incentives is deferred inthe balance sheets and is being amortized to reduce rent expense on a straight-line basis over the 15-year life of the lease. Rentalexpense for 2001 and 2000 was approximately $4.5 million and$4.3 million.

15. PensionsOPIC’s permanent employees are covered by the Civil ServiceRetirement System (CSRS) or the Federal Employee RetirementSystem (FERS). For CSRS, OPIC withheld 7.0 percent of employ-ees’ gross 2001 earnings. In 2001, OPIC contributed 8.51 percentof employees’ gross earnings, and the sum was transferred to theCivil Service Retirement Fund from which this employee group willreceive retirement benefits. For FERS, OPIC withheld 0.80 percentof employees’ gross earnings. In 2001, OPIC contributed 10.7 per-cent of employees’ gross earnings. This sum is transferred to theFERS fund from which the employee group will receive retirementbenefits. An additional 6.2 percent of the FERS employees’ grossearnings is withheld; that plus matching contributions by OPIC aresent to the Social Security System from which the FERS employeegroup will receive social security benefits. OPIC occasionally hiresemployees on temporary appointments, and those employees arecovered by the Social Security System under which 6.2 percent ofearnings is withheld and matched by OPIC.

FERS (after an initial eligibility period) and CSRS employees mayelect to participate in the Thrift Savings Plan (TSP). Based onemployee elections, 0 to 6 percent of gross CSRS earnings is with-held and 0 to 11 percent of gross FERS earnings is withheld.FERS employees receive an automatic 1 percent contributionfrom OPIC. Amounts withheld for FERS employees are matchedby OPIC, up to an additional 4 percent, for a total of 5 percent.

Although OPIC funds a portion of employee pension benefits underthe CSRS, the FERS, and the TSP, and makes necessary payrollwithholdings, it has no liability for future payments to employeesunder these programs. Furthermore, separate information related toOPIC’s participation in these plans is not available for disclosure inthe financial statements. Paying retirement benefits and reportingplan assets and actuarial information is the responsibility of the U.S.

Office of Personnel Management and the Federal Retirement ThriftInvestment Board, which administer these plans. Data regarding theCSRS and FERS actuarial present value of accumulated benefits,assets available for benefits, and unfunded pension liability are notallocated to individual departments and agencies.

16. Postretirement Benefits OPIC sponsors three defined benefit postretirement plans thatcover qualifying employees. The three plans provide major medicalcoverage, dental and vision coverage, and life insurance. The med-ical and the dental and vision plans are both contributory plans.The life insurance plan includes options that are contributory andnoncontributory.

Shown below is disclosure information for the years endedSeptember 30, 2001 and 2000 (dollars in thousands):

2001 2000

Reconciliation of Accrued Benefit CostBenefit liability at end of year $(3,324) $(3,032)Fair value of plan assets at end of year 0 0Funded Status at year end $(3,324) $(3,032) Unrecognized net actuarial gain (812) (942)Accrued benefit cost $(4,136) $(3,974)

Components of Net Periodic Benefit CostService cost $ 107 $ 117 Interest cost 228 224Expected return on plan assets 0 0 Recognized net actuarial loss (69) (43) Net periodic benefit cost $ 266 $ 298

Effect of Health Care TrendAssumed health care cost trend rates have a significant effect on theamounts reported for the health care plans. A one-percentage-pointchange in assumed health care cost trend rates would have the fol-lowing effects as of or for the year ended September 30, 2001 (dol-lars in thousands):

1 Percentage 1 PercentagePoint Increase Point Decrease

Effects on total service cost and interest cost components $ 50 $ (41)

Effect on postretirement benefit liability 474 (371)

Change in Benefit Liability 2001 2000

Benefit liability at beginning of year $(3,032) $(3,049) Service cost (107) (118) Interest cost (228) (224) Actuarial gain/(loss) (62) 247Benefits paid 105 112Benefit liability at end of year $(3,324) $(3,032)Weighted-average discount rate

assumption as of September 30 7.50% 8.00%

For measurement purposes, a 10 percent annual rate of increase inthe per capita cost of medical benefits was assumed for 2001. Therate was assumed to decrease gradually to 9 percent for 2002, 8percent in 2003, 7 percent in 2004, 6 percent in 2005, 5.5 percentin 2006 and remain at that level thereafter. The per capita cost fordental benefits was assumed to increase by 5.5 percent for each year.

17. Concentration of RiskOPIC is subject to certain risks associated with financial instrumentsnot reflected in its balance sheet. These financial instruments includepolitical risk insurance, loan guaranties, and committed-but-undisbursed direct loans.

With respect to political risk insurance, OPIC insures against cur-rency inconvertibility, expropriation of assets, and political vio-lence. Additionally, OPIC provides investment financing throughdirect loans and investment guaranties.

OPIC’s credit policy is to take a senior security position in theassets of the projects or transactions it guarantees. The nature andrecoverable value of the collateral pledged to OPIC varies fromtransaction to transaction and may include tangible assets, cashcollateral or equivalents, and/or a pledge of shares in the project

company as well as personal and corporate guaranties. OPIC takesall necessary steps to protect its position in such collateral andretains the ability to enforce its rights as a secured lender if suchaction becomes necessary.

The following is a summary of OPIC’s off-balance-sheet risk atSeptember 30, 2001 and 2000 (dollars in thousands):

2001 UnusedTotal Outstanding Commitments

Guaranties $6,498,216 $3,378,881 $3,119,335Undisbursed direct loans 317,590 ------- 317,590Insurance 8,246,003 5,323,861 2,922,142

2000 UnusedTotal Outstanding Commitments

Guaranties $6,521,979 $3,199,636 $3,322,343Undisbursed direct loans 186,024 ------- 186,024Insurance 9,957,534 6,363,020 3,594,514

OPIC’s off-balance-sheet finance and insurance exposure involvescoverage outside of the United States. The following is a break-down of such total commitments at September 30, 2001 by majorgeographical area (dollars in thousands):

UndisbursedLoan Portion on

Guaranties Direct Loans Insurance

Africa $ 713,825 $ 26,000 $ 274,868Asia 732,712 111,932 1,371,853Europe 860,914 29,979 634,653Latin America 2,549,479 67,179 5,287,285Middle East 160,807 8,000 378,862NIS (New Independent States) 865,816 72,000 548,722Worldwide 614,663 2,500 0Insurance Stop-loss Adjustment 0 0

$6,498,216 $317,590 $8,246,003

OPIC has several client-specific contracts with stop-loss limits that are less than the aggregate coverage amounts. The insurancestop-loss adjustment represents the difference between the aggre-gate coverage amount and OPIC’s actual exposure under these contracts.

At September 30, 2001, OPIC’s largest finance and insurance exposure was in the following countries and sectors (dollars inthousands):

Country Sector

Brazil $2,330,384 Power Generation $4,740,442Argentina 1,636,462 Financial Services 4,422,046Turkey 1,048,148 Oil & Gas Services 1,895,008Venezuela 999,625 Manufacturing 1,567,435Colombia 690,036 Communications 1,129,548

18. Other ContingenciesOPIC is currently involved in certain legal claims and has receivednotifications of potential claims in the normal course of business.Management believes that the resolution of these matters will nothave a material adverse impact on OPIC.

19. Writedown of Internally Developed SoftwareIn fiscal year 2000, management analyzed previously capitalizedcosts associated with internally developed software and determinedthat a portion of those costs would no longer be of future benefitand should be written down by $5.1 million. The writedown wascalculated as the difference between the carrying amount less costsidentified by management as having future economic benefit, inaccordance with FAS 121, “Accounting for Impairment of Long-lived Assets.” There was no writedown in fiscal year 2001.

20. Statutory CovenantsOPIC’s enabling statute stipulates both operating and financialrequirements with which OPIC must comply. In management’sopinion, OPIC is in compliance with all such requirements.

(250,240)

BOARD OF DIRECTORS

ANDREW S. NATSIOS

AdministratorAgency for International

Development

JON M. HUNTSMAN, JR.Deputy U.S. Trade

RepresentativeOffice of the U.S. Trade

Representative

PETER S. WATSON

President and CEOOverseas Private Investment

Corporation

VACANT

VACANT

ALAN P. LARSON

Under Secretary of State for Economic, Businessand Agricultural Affairs

U.S. Department of State

VACANT

U.S. Department of Labor

LOTTIE L. SHACKELFORD

Executive Vice PresidentGlobal USA, Inc.Little Rock, AR

GEORGE J. KOURPIAS

Retired PresidentInternational Association of

Machinists and Aerospace Workers

Silver Spring, MD

JOHN J. PIKARSKI, JR.Gordon and PikarskiChicago, IL

MELVIN E. CLARK, JR.President and CEOMetroplex CorporationWashington, DC

GARY A. BARRON

PresidentStrategic Alliance PartnersAventura, FL

GEORGE DARDEN

PartnerLong, Aldridge and Norman,

LLPAtlanta, GA

MIGUEL D. LAUSELL

Attorney and Counselor at LawSan Juan, Puerto Rico

ROBERT M. LYFORD

Senior Vice President and General Counsel

Arkansas Electric Cooperative Corporation

Little Rock, AR

OFFICERS AND MANAGEMENT

Office of the PresidentPETER S. WATSON

President and CEO

ROSS J. CONNELLY

Executive Vice President & COO

JOSEPH E. FLYNN

Chief of Staff

DULCE A. ZAHNISER

Senior Advisor to the President

Insurance DepartmentROD MORRIS

Vice President

EDITH P. QUINTRELL

Manager — Technical Operations

MARK A. STUCKART

Regional Manager — Asia, South America, Central America, Latin America and Caribbean

JAMES C. WILLIAMS

Regional Manager — Africa, Europe, Eurasia, Middle East, Russia, NIS

Finance DepartmentROBERT B. DRUMHELLERVice President

JOHN R. ALDONAS

Director — Project Managementand Special Assets

RALPH A. MATHEUS

Director — Small Business Programs

ALFREDO M. RODRIGUEZ

Director — Credit Policy and Analysis

DAVID G. FRANTZ

Manager — Project Finance

JAMES C. POLAN


NANCY A. RIVERA


BRIAN W. TREADWELL


TRACEY L. WEBB


DAVID C. SCHMITZER

Manager — Project Monitoring

OVE B. WESTERHEIM

Manager — Project Monitoring

CHRISTINA K. HALPERN

Administrative Manager

Investment Funds DepartmentCYNTHIA L. HOSTETLER

Vice President

BARBARA F. BRERETON

Manager — Investment Funds

STEVEN J. COWAN


JAMES F. HANSLEY


EUGENE V. POHREN


Investment Development andEconomic Growth DepartmentDANIEL A. NICHOLS

Vice President

PETER H. BALLINGER

Director — Investment Services(Ankara, Turkey)

JOAN J. EDWARDS

Director — Investment ServicesProgram Development

F. CARL REINHARDT

Director — Investment Services

JAMES E. GALE

Manager — Investment Development

DEBORAH S. MORONESE


SAMUEL D. SMOOTS


ABED R. TARBUSH


Office of the Chief Financial OfficerGARY A. KEEL

Vice President

ROSEMARY G. ALLEN

Director — Human Resources

MARTHA C. EDMONDSON

Director — Financial Management

THOMAS H. ENGE

Budget Officer

LENA M. PAULSEN

Manager — Information Center

SHERYL S. SWISHER

Manager — Financial Accounting

CAROLINE M. TUNISON

Manager — Portfolio Services

GREGORY Q. WILLIAMS

Manager — Contract and Administrative Services

Legal Affairs DepartmentMARK A. GARFINKEL

Vice President and General Counsel

W. GEOFFREY ANDERSON, JR.Deputy General Counsel

JANE H. CHALMERS

Associate General Counsel — Special Assets

LAURA H. HILLS

Associate General Counsel — Finance

MARC H. MONHEIMER

Associate General Counsel — Insurance

MELISSA D. OBEGI

Associate General Counsel — Investment Funds

ROBERT C. O’SULLIVAN

Associate General Counsel — Insurance Claims

DEV JAGADESAN

Assistant General Counsel — Operational Evaluations

RUMU SARKAR

Assistant General Counsel — Administrative Affairs

BRIAN CHRISTALDI

Assistant General Counsel

RONALD N. JONKERS


MERLIN LIU


THOMAS J. MAHAFFEY


ELI H. LANDY

Counsel for Administrative Affairs and FOIA Director

CONNIE M. DOWNS

Corporate Secretary and Office Manager

Office of External AffairsCHRISTOPHER COUGHLIN

Vice President

RICHARD C. HORANBURG

Director — Congressional Affairs

LAWRENCE SPINELLI

Director — Communications

Office of Investment PolicyVIRGINIA D. GREEN

Vice President

HARVEY HIMBERG

Deputy Vice PresidentDirector — Environmental

Affairs

RICHARD CORRIGAN

Director — Risk Management

ANTHONY N. IERONIMO

Director — Economic Analysis and Project Monitoring

CoverGregory Maggio (Guatemala)

page 1Chris Astriab

page 2Gregory Maggio (top, Guatemala)Ruth Stern (middle, Cartagena, Colombia)Michael Messer (bottom, India)

page 5Gregory Maggio (middle, Syktyvkar, Komi

Republic, Russia; bottom, Guatemala)

page 6Gregory Maggio (top, Guatemala)Lori Leonard (middle, Vilnius, Lithuania)Sue Bush (bottom, Cottonwood, Arizona)Michael Messer (large, Ulaanbaatar, Mongolia)

page 8Gregory Maggio (top, Guatemala; middle,

Yaroslave, Russia )Deborah Smith (bottom, Dominican

Republic)

page 11(top, Barranquilla, Colombia)Nora Petkovich (middle, Johannesburg, South

Africa; bottom, Rabale, Uganda)

page 12David C. Schmitzer (top, Botswana; middle,

Esenyurt, Turkey)Gregory Maggio (bottom, Syktyvkar, Komi

Republic, Russia)

page 14Nora Petkovich (top, Singapore)William Silverman (middle, Quito, Ecuador)David C. Schmitzer (bottom, Island of Leyte,

Philippines)Gregory Maggio (large, Equatorial Guinea)

page 16David C. Schmitzer (top, Botswana)Andrew McCabe (middle, Maturin,

Venezuela)Michael Messer (bottom, India)

page 17Gregory Maggio (all, Guatemala)

page 18Gregory Maggio (top, Guatemala)Nora Petkovich (middle, Johannesburg, South

Africa; bottom, KaioShung, Taiwan)Michael Messer (large, Moscow, Russia)

page 20Michele Pereira (top, San Pedro, Dominican

Republic)Nora Petkovich (middle, Manila, Philippines)Lynn Nguyen (bottom, Island of Leyte,

Philippines)

page 22Michael Messer (top, Borisoglebsky, Russia)(middle, Barranquilla, Colombia)Nora Petkovich (bottom, Valasske Mezirici,

Czech Republic)Gregory Maggio (large, Guatemala)

page 24Nora Petkovich (top, KaioShung, Taiwan;

middle, Singapore; bottom, ValasskeMezirici, Czech Republic)

Photography credits

This annual report is printed on

kenaf “tree-free” paper. Kenaf, a

member of the hibiscus family

related to cotton and okra, is a

4,000-year-old “new” crop with

roots in ancient Africa.

Now grown on farms in the

United States, kenaf was chosen by

the U.S. Department of Agriculture

as “the most viable replacement for

trees for commercial pulp and paper

making in the United States.” Kenaf

provides opportunities for new

business development in rural

communities in an environmentally

sound manner.

Vision Paper of Albuquerque,

New Mexico, manufactures kenaf

without dioxins or other chlorine

compounds in strict compliance with

U.S. Environmental Protection

Agency regulations.

Editorial and design by KSA-Plus Communications, Inc.

Printing by Fontana Lithograph, Inc.

Overseas Private

Investment Corporation

An agency of the United States Government

1100 New York Avenue, N.W.

Washington, D.C. 20527

InfoLine: 202-336-8799

www.opic.gov

Overseas Private Investment - DFC

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