Table of Contents

1 President’s Message: A Stronger partner for a changing world

4 {1} Increasing international opportunities for U.S. small business

6 {2} Enabling competitive private investment without competing against private markets

8 {3} Leveraging investment in areas of strategic importance

10 {4} Helping to build a better world, one home at a time

12 {5} Proving that we make a difference, with meaningful and measurable results

16 2003 investment projects

22 OPIC countries and areas

25 Independent Auditors’ Report on Financial Statements

26 Balance Sheets

27 Statements of Income

28 Statements of Capital and Retained Earnings

29 Statements of Cash Flows

30 Notes to Financial Statements

38 OPIC Board and Staff members

40 Credits & Acknowledgements

This did not happen merely by opening the SBC’s doors: it happened by working with partners

all across the United States. In an unprecedented nationwide outreach effort, OPIC staff

actively sought project applicants by going on the road to tell our story in as many ways as

possible: through the media, in college and university sponsored programs, with the assistance

of local government and Congressional offices, and in numerous meetings with the small 

business community. We believe that reaching out and making it easier for U.S. small businesses

to expand into challenging overseas markets represents OPIC at its best. As you will read in

this annual report, the projects they are involved in represent entrepreneurial America at its best.

We continued to complement, not compete with, the private markets as a way to increase 

foreign direct investment. We worked hard to be a better partner by working with the private

sector and by looking to see where we could help to mobilize capital. We launched a new

stand-alone terrorism insurance product that cost-effectively provides American businesses

access to valuable protection previously available only under OPIC’s broader political violence

coverage. To ensure that U.S. businesses have easy access to OPIC programs, we forged a new

partnership between OPIC and the U.S. Foreign Commercial Service of the Department of

Commerce, which has offices throughout the world. 

We helped developing nations meet their populations’ basic human needs, particularly

housing, and channeled investment to strategically important regions. I am especially

proud that we looked for innovative partnerships to find and support projects that promise 

a better life to those with the greatest need. In one noteworthy example of this type of work,

OPIC is supporting a truly groundbreaking project in which two nonprofit organizations will

provide treatment for HIV-positive homeowners in South Africa and at the same time enable

them to keep their homes by guaranteeing banks against the risk of defaulted mortgage payments.

In Central America, we financed a project that will provide affordable daily nutrition for up 

to one million children. And OPIC support is allowing a unique joint venture of California

and Russian companies to employ former Soviet nuclear scientists to develop medical 

prosthetics and state-of-the-art burn treatments under a U.S. Department of Energy 

program to reduce weapons proliferation. 

We demonstrated that projects supported by OPIC result in real and measurable 

developmental impact. Last year, we developed specific criteria for evaluating the development

contribution of any project. In 2003, we began applying this measurement tool. By scoring

and rating projects on a weighted total of its development indicators, this new tool strengthens

and simplifies our decision-making on projects brought to us for possible support. It allows 

us to judge empirically the value of our commitments, and, for the first time, evaluate our 

supported projects’ results. It also makes us better partners because one important result of the

measurement tool itself is that applicants — aware of our higher standards — are bringing us

projects that deliver more significant development impacts. With higher-quality projects to

consider, we are better able to achieve our targeted development objectives.





LEVERAGING INVESTMENT 

IN AREAS OF STRATEGIC IMPORTANCE 

As the primary U.S. government agency focused on private investment in the developing world, 

OPIC supports U.S. foreign policy oqjectives by leveraging and steering private investment to 

countries committed to economic freedom, good governance and a healthy and educated 

citizenry - on prqjects that advance U.S. values and serve our interests. 

Few nations currently have more strategic importance to the United States than Afghanistan, 

where OPIC committed more than $54 million in support of new prqjects in 2003. 

The 

in 

OPIC committed up to 

is actively participating* 

* Information has been Redacted in accordance with the two principled exceptions of the Foreign Aid

Transparency and Accountability Act (FAT AA) of 2016; including the health and security of implementing

partners, as well as national interest of the United States.


Also on the African continent, an agreement signed with the government of Kenya pledges OPIC's 

support in helping the country provide 150,000 new residential units as a major step towards 

solving its acute housing shortage. And an OPIC loan will help an American-owned company 

complete 24 partially constructed houses of an anticipated 60 in the Ghanaian capital city of Accra. 

American-owned Mid-American Group Europe will build as many as 18 apartment buildings, 

providing nearly 800 residential units, in war-torn Mostar and other parts of Bosnia. Supported 

by an OPIC loan, the prqject will generate up to 200 construction jobs during its six years. GHP 

Honduras. L.L.C./Global Housing Development of Florida, with the help of OPIC's political risk 

insurance and financing, is building 519 medium-priced, earthquake- and hurricane-resistant, 

homes in Honduras. and introducing an environmentally sound wastewater treatment technology 

that produces irrigation-quality water. With OPIC-supported U.S. private investment in 

Bread should become more plentiful and affordable in Angola now that an affiliate of Seaboard 

Corporation of Shawnee Mission. Kansas. has more than tripled the capacity of its flour mill near 

Luanda. OPIC political risk insurance allowed the company to rehabilitate the mill and increase 

output to 200 metric tons per day, helping alleviate a scarcity of domestically produced food. 

For Estonia. FOODPRO International, lnc.'s state of the art flour milling and mixing facility, 

supported by OPIC financing, will provide high-quality flour and frozen bakery products. 

The California-based company hopes to tap into markets throughout the Baltic region. 

A nutritious drink made from rice bran - usually discarded in the milling process - will help 

four Central American countries prevent malnutrition in one million children for about six cents 

each a day. RiceX. a California biotech company, is using an OPIC loan to establish a plant in 

Guatemala to manufacture the drink for distribution through preschool lunch programs in 

Nicaragua, Honduras, Guatemala and El Salvador. 

Healthcare systems in Bulgaria, Croatia, Romania and Serbia will benefit from new research 

infrastructure after AbC.R.O., Inc. of Virginia opens or expands pharmaceutical research facilities 

with the help of a $300,000 OPIC loan. Already the leading contract research organization in 

southeastern Europe, AbC.R.O. will soon offer larger populations the ability to participate in 

Phase II to Phase IV clinical trials of state of the art medicines. 

* Information has been Redacted in accordance with the two principled exceptions of the Foreign Aid 

Transparency and Accountability Act (FAT AA) of 2016; including the health and security of 

implementing partners, as well as national interest of the United States. 

Forging New Partnerships / 11 




AFRICA AND THE MIDDLE EAST

ANGOLA

Seaboard Overseas Ltd. Flour mill and commodity trading operations $5,990,962 Insurance

(KWABA - Sociedade Industrial e 

Comercial, S.A.R.L.)

GHANA

Amoah, George K. & Chicken George Farms LLC Poultry production and distribution $16,977,600 Insurance

(Farmer George Limited)

Dara Salam Estate Developers Completion of 24 partially constructed houses $1,200,000 Finance

(Dara Salam Real Estate Developers)

KENYA

JNP Properties, Inc. Housing construction $4,860,000 Insurance

(Jopa Villas Kenya Ltd.)

MOZAMBIQUE

Herbert, David F. Resort $3,668,850 Insurance

(Mercury Investments, Limitada - 

c/o H. Gamito, Couto)

NIGERIA

AES Nigeria Holdings, Ltd. Emergency power barges $200,000,000 Insurance

(AES Nigeria Barge Limited)

NIS Corporation Telecommunications $2,000,000 Insurance

(NIS Technology Solutions Limited)

SIERRA LEONE

U.S. Titanium, Inc. Development and expansion of rutile mine $25,000,000 Finance

(Sierra Rutile Limited)

SOUTH AFRICA

Shared Interest, Inc. Financial services $250,000,000 Finance

(Housing For HIV, Inc.)

Young, John R. Game park and guest lodge resort $742,500 Insurance

(Granton Safaris CC)

AFRICA REGIONAL

Citibank Framework Guaranty 

Facility Agreement On-lending facility $125,000,000 Finance

2003 INVESTMENT PROJECTS
ASIA AND THE PACIFIC 

AFGHANISTAN 

PHILIPPINES 

TLC Beatrice, LLC Coostruction/operation of meat 

(TLC Beatrice, LLC/TLC Beatrice Foods Philipp) processing facilities 

U.S. Bank National Associatioo 

(National Power COIJ)O'ation) (" NAPOCOR ") 

THAILAND 

Deep Sea Adventure Tw-s, Inc. 

(Pht!et Sul:marine, Ltd) 

GMI Capital Cocporation 

(GMI Asia) 

VIETNAM 

GE Energy Rentals Inc. 

(Kidwell lnternatiooal Power Vietnam 

Company Limited) 

ASIA REGIONAL 

Domes lnternatiooal, Inc. 

(Domes International, Inc.) 

Privatization of power company 

lkxlerwater submarine reef tw-s 

Invest in small cap technology companies 

Power geoeratioo 

Modular hocne manufactll'ing 

--

-

-

-

-

-

--

-

--

$2,000,000 Finance 

$250,000,000 lnstKance 

$2,430,000 lnstKance 

$25,000,000 Finance 

$12,314,398 lnstKance 

$1,200,000 Finance 

Forging New Partnerships / 17

*

* Information has been Redacted in accordance with the two principled exceptions of 

the Foreign Aid Transparency and Accountability Act (FATAA) of 2016; including 

the health and security of implementing partners, as well as national interest of the 

United States.
EUROPE AND THE NEW INDEPENDENT STATES

AZERBAIJAN

Shore Overseas Corporation Medium-term mortgage, home improvement $2,500,000 Finance

(Shore Overseas Azerbaijan) loans in local market

BOSNIA & HERZEGOVINA

Masserant, Laurence/Mid-American Gunite, Inc. Construction/sale of multifamily, condominium- $5,400,000 Insurance

(Mid-American Group Europe ) style residential buildings in Mostar $2,500,000 Finance

CROATIA

Adriatic Investment Management, LLC Investment fund management company $4,500,000 Insurance

(Expandia Fund d.d. Closed-End 

Investment Fund, Inc.)

ESTONIA

FOODPRO International, Inc. Flour milling and prepared dough $9,385,000 Finance

(Golden Sierra Partners, LLC) products operation

GEORGIA

Pacific Island Aviation, Inc. (PIA) Regional airline in the Caucasus region $4,600,000 Finance

(Pacific International Holdings, Inc.)

HUNGARY

Barna, Jim Log home manufacturing facility $1,050,000 Finance

(Barna and Company)

KAZAKHSTAN

Pride International, Inc. Oil and gas wells $150,000,000 Insurance

(Pride Forasol, S.A.S.)

KYRGYZ REPUBLIC

Hyatt International Corporation Hotel $9,700,000 Insurance

(Joint Venture Italkyr CJSC)

MOLDOVA

International Communications Systems, Inc. Telecommunications $680,000 Insurance

(“International Communication 

Systems Inc.,” S.R.L.)

POLAND

Emerging Europe Fund for Large-scale urban renewal project $10,000,000 Finance

Sustainable Development, L.P.

(Synergia SP. Z.O.O.)

Investment Projects continued
Forging New Partnerships | 19

RUSSIA

Baring Vostok Private Equity Fund Expansion of leases to small/medium $30,000,000 Finance

(ZAO DeltaLeasing) businesses in Russia

HBK Investments L.P. Construction and operation of a crude oil $130,000,000 Finance

(RPK-Vysotsk “Lukoil-II”) and petroleum products export terminal 

on the Gulf of Finland north of St. Petersburg

Numotech, Inc. Medical components manufacturing facility $25,000,000 Insurance

(Numotech, Inc.) $10,000,000 Finance

Nypro Inc. Injection molding facility $2,700,000 Finance

(ZAO Nypro)

TURKEY

Carter, James E. Health and fitness club $750,000 Finance

(Sports International Bilkent Fitness 

Ve Spor Merkezi A.S.)

YUGOSLAVIA

St. Michael Enterprises, d.o.o. Aerated concrete factory $90,000 Insurance

(Privatization Agency of the Republic of Serbia)

St. Michael Enterprises Lime and stone quarry $135,000 Insurance

(Privatization Agency of the Republic of Serbia)

Motorola Communications Israel, Ltd. Information technology $14,000,000 Insurance

(Ministry of Interior, Republic of Serbia)

EUROPE REGIONAL

AbC.R.O., Inc. Clinical research studies $300,000 Finance

(AbC.R.O., Inc.)

NIS REGIONAL

Siguler Guff & Company, L.L.C. Investing in Russia Federation and NIS $70,000,000 Funds

(Russia Partners II “O” Series, L.P.)

THE AMERICAS

BOLIVIA

Fondo Capital Activo Bolivia LLC (FCAB) Paper and plastic packaging materials $1,400,000 Finance

(Grupo Landivar, S.A.) manufacturing facility

Western Wireless International Corporation Wireless communications $50,000,000 Finance

(Nuevatel)
BRAZIL

BankBoston NA Branch banking $44,100,000 Insurance

(BankBoston Leasing S.A. - 

Arrendamento Mercantil)

Brazilian Emeralds, Inc. Commercial development of a gemstone reserve $3,300,000 Finance

(Brazilian Emeralds, Inc.)

El Paso Corporation 895 MW natural gas-fired power plant $200,000,000 Finance

(El Paso Rio Claro Ltda.)

GE Energy Rentals, Inc. Power generation $12,103,321 Insurance

(Termoelectrica Potiguar, S.A.)

Global Railroad Leasing, LLC Railroad car rental $7,475,000 Finance

(Global Railroad Leasing, LLC)

COSTA RICA

Central American Bank for Mortgage lending $10,000,000 Insurance

Economic Integration (CABEI)

(Central American Bank for 

Economic Integration (CABEI))

Zamora, Roberto Origination of residential mortgage loans $10,000,000 Finance

(Banco Lafise S.A.)

ECUADOR

HAS Development Corporation Develop, construction, and operation $200,000,000 Finance

(Corporacion Quiport, S.A.) of new international airport

EL SALVADOR

Central American Bank for Mortgage lending $5,000,000 Insurance

Economic Integration (CABEI)

(Central American Bank for 

Economic Integration (CABEI))

Dicasa, SA on behalf of eligible lenders Loan for real estate receivables $24,600,000 Insurance

(Dicasa, S.A.)

Mercury Mortgage Finance, Ltd. Home mortgage loans $10,000,000 Insurance

(TBD)

GUATEMALA

Central American Bank for Mortgage lending $3,000,000 Insurance

Economic Integration (CABEI)

(Central American Bank for 

Economic Integration (CABEI)

Casas Encantadas Holding, S.A. Refurbishment and expansion of hotel $375,000 Finance

(Casas Encantadas Holding, S.A.)

RiceX Company Manufacture rice-based nutritional drink $6,000,000 Finance

(RiceX Central America)

Investment Projects continued



AFRICA GROWTH FUND

AFRICA MILLENNIUM FUND

AGRIBUSINESS PARTNERS INTERNATIONAL

AIG BRUNSWICK MILLENNIUM FUND

ALLIED SMALL BUSINESS FUND

AQUA INTERNATIONAL PARTNERS

ASIA DEVELOPMENT PARTNERS 

ASIA PACIFIC GROWTH FUND

BANCROFT EASTERN EUROPE FUND

DRAPER INTERNATIONAL 

EMERGING EUROPE FUND 

GAZA/ WEST BANK/JORDAN

GLOBAL ENVIRONMENT EMERGING MARKETS FUND

GLOBAL ENVIRONMENT EMERGING MARKETS FUND, II

GREAT CIRCLE FUND

INDIA PRIVATE EQUITY FUND

INTERARAB INVESTMENT FUND

ISRAEL GROWTH FUND

MODERN AFRICA GROWTH AND INVESTMENT FUND 

NEWBRIDGE ANDEAN PARTNERS

NEW CENTURY CAPITAL PARTNERS

POLAND PARTNERS

RUSSIA PARTNERS A 

RUSSIA PARTNERS B

RUSSIA PARTNERS II

SOUTH AMERICA PRIVATE EQUITY GROWTH FUND

SOROS INVESTMENT CAPITAL LTD.

ZM AFRICA INVESTMENT FUND

OPIC-supported privately managed private equity investment funds provide long-term growth

capital, management expertise, and new technologies, while supporting adoption of international

standards of reporting and transparency and environmental and worker rights sensitivity; all 

to promote private sector enhancement fundamental to the development of emerging market

economies. OPIC’s funds operate in every region of the world. Current OPIC funds include: 

In 2003, OPIC-supported funds invested $97.0 million in 14 projects around the world, 

with an average investment of $6.9 million per project. Highlights from these projects are:1:

REGION PORTFOLIO COMPANY COUNTRY DESCRIPTION

AFRICA AND THE MIDDLE EAST Unikom Turkey Edible oil manufacturing

ASIA AND THE PACIFIC Verdaine Indonesia Palm oil plantation

Jain Irrigation Systems India Water Irrigation Systems

THE AMERICAS AND CARIBBEAN Emerald Bay Water Company Bahamas Desalination

Grupo Rotoplas Mexico Water products & equipment

NEW INDEPENDENT STATES AND EUROPE Naftrans Georgia Oil terminal

Digital City Media Croatia Cable TV

KDS Serbia Cable TV

Efes Regional Beverage

TBC Bank Georgia Commercial bank

1 These projects are a sampling of projects in which OPIC-supported investment funds invested during fiscal year 2003. 

2003 INVESTMENT FUNDS’ PROJECTS
To the Board of Directors

Overseas Private Investment Corporation:

We have audited the accompanying balance sheets of the Overseas Private Investment Corporation

(OPIC) as of September 30, 2003 and 2002, and the related statements of income, capital and

retained earnings, and cash flows for the years then ended. These financial statements are the

responsibility of OPIC’s management. Our responsibility is to express an opinion on these

financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally accepted in the United

States of America and Government Auditing Standards, issued by the Comptroller General 

of the United States. Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures

in the financial statements. An audit also includes assessing the accounting principles used

and significant estimates made by management, as well as evaluating the overall financial

statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,

the financial position of OPIC at September 30, 2003 and 2002 and the results of its operations

and its cash flows for the years then ended in conformity with accounting principles generally

accepted in the United States of America.

As discussed in note 2 of the financial statements, OPIC changed its amortization method 

of discounts and premiums for Treasury securities.

In accordance with Government Auditing Standards, we have also issued our reports dated

December 19, 2003 on our consideration of OPIC’s internal control over financial reporting

and its compliance with laws and regulations. Those reports are an integral part of an audit

conducted in accordance with Government Auditing Standards and should be read in conjunction

with this report in considering the results of our audit.

December 19, 2003

KPMG LLP a U S limited liability partnership is the U S 

member firm of KPMG International a Swiss cooperative 

2001 M Street NW 

Washington, DC 20036 

INDEPENDENT AUDITORS’ REPORT ON FINANCIAL STATEMENTS
ASSETS 2003 2002

Fund Balance with U.S. Treasury (notes 2 and 4) $ 909,934 $ 661,696

U.S. Treasury securities, at amortized cost plus related receivables

(notes 2 and 7) 3,801,695 3,629,543

Direct loans outstanding of $190,265 and $138,601 less allowance for

uncollectible loans of $34,766 and $19,373 in FY2003 and FY2002

(notes 2 and 10) 155,499 119,228

Accounts receivable resulting from investment guaranties of

$122,719 and $115,371 less allowance for doubtful recoveries of

$44,675 and $45,261 in FY2003 and FY2002 (notes 2 and 11) 78,044 70,110

Assets acquired in insurance claims settlements of $240,565 and

$220,843 less allowance for doubtful recoveries of $62,477 and

$89,808 in FY2003 and FY2002 (notes 2 and 11) 178,088 131,035

Guaranty Receivable (Notes 2 and 19) 70,000 0

Accrued interest and fees and other 23,532 18,888

Furniture, equipment and leasehold improvements at cost less

accumulated depreciation and amortization of $11,925 in FY2003

and $11,000 in FY2002 (notes 2, 14, and 20) 1,390 3,409

Total Assets $ 5,218,182 $ 4,633,909

LIABILITIES, CAPITAL, AND RETAINED EARNINGS

Liabilities:

Reserve for political risk insurance (note 9) $ 260,000 $ 275,000

Reserve for investment guaranties (notes 10 and 11) 630,000 570,000

Accounts payable and accrued expenses 5,443 8,304

Guaranty liability (Notes 2 and 19) 70,000 0

Customer deposits and deferred income 35,280 32,918

Borrowings from U.S. Treasury (notes 6 and 13) 196,453 131,529

Unearned premiums 13,897 13,071

Deferred rent & rent incentives from lessor of $19,796 and

$20,418 net of accumulated amortization of $12,327 and

$10,921 in FY2003 and FY2002 (note 14) 7,632 9,497

1,218,705 1,040,319

Contingent liabilities (notes 9, 10, 17 and 18)

Capital and retained earnings:

Contributed capital 50,000 50,000

Credit funding (note 5) 166,082 148,427

Interagency transfers 814 1,072

Retained earnings and statutory reserves:

Insurance (notes 9 and 12) 1,965,841 1,801,177

Guaranty (notes 10 and 12) 1,816,740 1,418,115

Retained earnings 0 174,799

3,999,477 3,593,590

Total liabilities, capital, and retained earnings $ 5,218,182 $ 4,633,909

See accompanying notes to financial statements.

Balance Sheets

OVERSEAS PRIVATE INVESTMENT CORPORATION { SEPTEMBER 30, 2003 AND 2002 }

( $ in thousands )
Forging New Partnerships | 27

REVENUES 2003 2002

Political risk insurance premiums and fees (note 9) $ 46,739 $ 57,651

Investment financing interest and fees 88,510 91,706

Interest on finance program deposits 37,706 32,345

Other operating income 1,336 1

Interest on U.S. Treasury securities 185,108 223,186

359,399 404,889

EXPENSES

Provisions for reserves:

Political risk insurance (notes 2 and 9) (41,817) 11,710

Investment financing (notes 2 and 10) 72,163 162,162

Salaries and benefits (notes 15 and 16) 22,421 21,098

Rent, communications and utilities (note 14) 5,380 5,406

Contractual services 11,033 15,291

Travel 2,836 1,632

Interest on borrowings from U.S. Treasury (note 6) 10,724 5,245

Depreciation and amortization (note 2) 925 1,001

Write-down of internally developed software (note 20) 1,488 4,358

Other general and administrative expenses 2,442 2,187

87,595 230,090

Net Income before cumulative effect of change in amortization

method of discounts and premiums 271, 804 174,799

Cumulative effect on prior year of changing to different amortization

method of discounts and premiums (note 2) 23,932 —

Net income $ 295,736 $ 174,799

See accompanying notes to financial statements.

Statements of Income

OVERSEAS PRIVATE INVESTMENT CORPORATION { SEPTEMBER 30, 2003 AND 2002 }

( $ in thousands )
STATUTORY RESERVES

INSURANCE GUARANTY

CONTRIBUTED CREDIT INTERAGENCY (NOTES 9 (NOTES 10 RETAINED

CAPITAL FUNDING TRANSFERS AND 12) AND 12) EARNINGS TOTAL

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

Net income — — — — — 174,799 174,799

Return credit funding

to U.S. Treasury — — — — (135,420) — (135,420)

Credit funding received from:

Accumulated earnings — 69,862 — (46,697) — (23,165) 0

Credit appropriations — 127,806 — — — — 127,806

Credit funding used — (128,664) — — 105,499 23,165 0

Dividend to U.S.Treasury — — — — (110,573) — (110,573)

Interagency transfers — (473) (75) 1,048 — — 500

Balance, September 30, 2002 $ 50,000 $ 148,427 $ 1,072 $ 1,801,177 $ 1,418,115 $ 174,799 $ 3,593,590

Net income — — — 100,151 195,585 — 295,736

Allocate retained earnings

to statutory reserves — — — 87,399 87,400 (174,799) 0

Return credit funding

to U.S. Treasury — — — — (58,421) — (58,421)

Credit funding received from:

Accumulated earnings — 47,775 — (23,844) — (23,931) 0

Credit appropriations — 168,322 — — — — 168,322

Credit funding used — (197,992) — — 174,061 23,931 0

Interagency transfers — (450) (258) 958 — — 250

Balance, September 30, 2003 $ 50,000 $ 166,082 $ 814 $ 1,965,841 $ 1,816,740 $ 0 $ 3,999,477

See accompanying notes to financial statements.

Statements of Capital and Retained Earnings

OVERSEAS PRIVATE INVESTMENT CORPORATION { SEPTEMBER 30, 2003 AND 2002 }

( $ in thousands )


Forging New Partnerships | 31

Use of Estimates: The preparation of financial statements requires 

management to make estimates and assumptions that affect the reported

amounts of assets and liabilities, the disclosure of contingent assets and

liabilities at the date of the financial statements, and the reported

amounts of revenue and expenses during the reporting period. Actual

results could differ from these estimates.

{3} INTRAGOVERNMENTAL FINANCIAL ACTIVITIES

OPIC, as a U.S. Government corporation, is subject to financial 

decisions and management controls of the Office of Management and

Budget. As a result of this relationship, OPIC’s operations may not be

conducted, nor its financial position reported, as they would be if

OPIC were not a government corporation. Furthermore, in accordance

with international agreements relating to its programs, as well as internal

U.S. Government operating procedures, foreign currency acquired 

by OPIC can be used for U.S. Government expenses. This facility 

constitutes an additional means, which would otherwise be unavailable,

by which OPIC can recover U.S. dollars with respect to its insurance

and investment financing programs.

{4} FUND BALANCE WITH U.S. TREASURY

OPIC is restricted in its uses of certain cash balances, as described below.

The fund balance with U.S. Treasury as of September 30, 2003 and

2002 consists of the following (dollars in thousands):

2003 2002

RESTRICTED:

PRECREDIT REFORM $ 5,525 3,655

CREDIT REFORM 897,751 652,741

INTERAGENCY FUND TRANSFERS 1 1

UNRESTRICTED 6,657 5,299

TOTAL $ 909,934 661,696

The Federal Credit Reform Act of 1990 established separate accounts

for cash flows associated with investment financing activity approved

prior to implementation of the Act and investment financing activity

subject to the Act. With the advent of Credit Reform, OPIC is not 

permitted to invest its pre-Credit Reform cash balances. These balances

grow over time, and when they are determined to be no longer needed

for the liquidation of the remaining pre-Credit Reform direct loans and

investment guaranties, they are transferred to OPIC’s unrestricted 

noncredit insurance account. In 2003, OPIC transferred $ 2.8 million

to the noncredit insurance account. No funds were transferred in 2002.

Credit Reform balances are also maintained in the form of uninvested

funds. The U.S. Treasury pays OPIC interest on those cash balances

except for undisbursed credit funding. Those balances are also expected

to grow as the volume of Credit Reform financings grows over time.

{5} CREDIT FUNDING

OPIC’s finance activities are subject to the Federal Credit Reform Act

of 1990, which was implemented as of October 1, 1991. Credit Reform

requires agencies to estimate the long-term cost to the government of

each fiscal year’s new credit transactions and to obtain funding through 

the appropriations process equal to the net present value of such costs

at the beginning of the year. OPIC’s credit funding is available for two

years. In addition, the Act requires the administrative costs related to 

its credit program to be displayed.

In fiscal year 2003, OPIC’s appropriations legislation authorized the

corporation to use $24 million of its accumulated earnings to cover the

future costs of credit transactions committed in fiscal years 2003 and

2004. In fiscal year 2002, OPIC received no credit funding authority

for new loan commitments; however, approximately $19 million in 

carryover 2001 credit authority was available for use in fiscal year 2002.

In addition to the credit funding allocated directly to OPIC through

the appropriations process, OPIC has received a total of $67 million 

in net transfers from other agencies to be used exclusively to finance 

projects in the New Independent States (NIS). 

The following table shows the status of funding for credit activities

(dollars in thousands):

2003 2002

BALANCE CARRIED FORWARD $ 148,427 79,896

UPWARD REESTIMATES 168,322 127,806

TRANSFERRED FROM EARNINGS 47,775 69,862

INTERAGENCY TRANSFERS (NET) (450) (473)

CREDIT FUNDING USED (197,992) (128,664)

CREDIT FUNDING REMAINING $ 166,082 148,427

Changes in financial and economic factors over time can affect the 

subsidy estimates made at the time of loan commitments. Therefore, in

accordance with OMB guidelines, OPIC reestimates subsidy costs for

each group of loans obligated in a given fiscal year to account for those

changing factors. Reestimates that result in increases to subsidy costs are

funded with additional appropriated funds that are made automatically

available while decreases to subsidy costs result in excess funds that are

transferred to the U.S. Treasury. OPIC incurred increased subsidy costs of

$168.3 million and $127.8 million and decreases in subsidy costs of $58.3

million and $135.4 million in fiscal years 2003 and 2002, respectively.

The way in which OPIC calculates the subsidy cost of its loans for credit

reform purposes differs from the way it calculates its loss reserves and

net finance income in accordance with generally accepted accounting

arinciples (GAAP) for financial statement purposes. While both the

subsidy calculations and the GAAP loss allowances factor into the risk

of individual credits, the GAAP loss allowances do not recognize the

present value of future interest and fees, as to do so would effectively

record revenue prior to realization. 

{6} BORROWINGS FROM THE U.S. TREASURY

In accordance with the Federal Credit Reform Act of 1990, the portion

of investment financing activities not funded through the appropriations

process must be funded by borrowings from the U.S. Treasury.

Borrowings for Credit Reform financings totaled $64.9 million in

2003 and $73.8 million in 2002, all of which have been disbursed.

OPIC paid a total of $ 10.7 million and $5.2 million in interest to 
the U.S. Treasury during fiscal years 2003 and 2002, respectively. No

repayments were made in 2003 or 2002. Future payments, excluding

interest, for borrowings outstanding at September 30, 2003 are as 

follows (dollars in thousands):

PRINCIPAL AMOUNT DUE

PAYMENT DUE IN:

FISCAL YEAR 2004 $ —

FISCAL YEAR 2005 1,823

FISCAL YEAR 2006 16,010

FISCAL YEAR 2007 31,240

FISCAL YEAR 2008 30,850

THEREAFTER 116,483

TOTAL $ 196,406

{7} INVESTMENT IN U.S. TREASURY SECURITIES

The composition of investments and related receivables at September

30, 2003 and 2002 is as follows (dollars in thousands):

2003 2002

INVESTMENTS, AMORTIZED COST $ 3,745,490 3,570,586

INTEREST RECEIVABLE 56,205 58,957

TOTAL $ 3,801,695 3,629,543

The amortized cost and estimated fair value of investments in U.S.

Treasury securities are as follows (dollars in thousands):

GROSS GROSS GROSS

AMORTIZED UNREALIZED UNREALIZED OTHER ESTIMATED

COST GAINS LOSSES ADJUSTMENTS FAIR VALUE

AT SEPT. 30, 2003 $ 3,745,490 434,077 (62,204) 6,408 4,123,771

AT SEPT. 30, 2002 $ 3,570,586 452,661 (411) 0 4,022,836

At September 30, 2003, the securities held at year end had an interest

range of 0% to 13.875% and a maturity period from one month to

almost 25 years.

OPIC holds its securities to maturity. The amortized cost and estimated

fair value of U.S. Treasury securities at September 30, 2003, by 

contractual maturity, are shown below (dollars in thousands):

AMORTIZED COST ESTIMATED FAIR VALUE

DUE IN ONE YEAR OR LESS $ 624,725 705,213

DUE AFTER ONE YEAR THROUGH FIVE YEARS 1,337,564 1,539,941

DUE AFTER FIVE YEARS THROUGH 10 YEARS 1,113,198 1,207,978

DUE AFTER 10 YEARS 676,411 670,639

TOTAL $ 3,751,898 4,123,771

{8} STATUTORY LIMITATIONS ON THE ISSUANCE OF INSURANCE AND FINANCE

OPIC issues insurance and financing under a single limit for both 

programs fixed by statute in the FAA. At September 30, 2003, this

combined limit was $29 billion, of which combined insurance and

finance utilization was $13.3 billion.

{9} POLITICAL RISK INSURANCE 

Insurance revenues include the following components for the years

ended September 30 (dollars in thousands):

2003 2002

POLITICAL RISK INSURANCE PREMIUMS $ 46,602 55,080

MISCELLANEOUS INSURANCE INCOME 137 2,571

TOTAL INSURANCE REVENUE $ 46,739 57,651

OPIC’s capital, retained earnings, and reserves available for insurance at

both September 30, 2003 and 2002 totaled $2.3 billion. Charges against

retained earnings could arise from (A) outstanding political risk insurance

contracts, (B) pending claims under insurance contracts, and (C) guaranties issued in settlement of claims arising under insurance contracts.

(a) Political Risk Insurance

OPIC insures investments for up to 20 years against three different

risks: inconvertibility of currency, expropriation, and political violence.

Insurance coverage against inconvertibility protects the investor from

increased restrictions on the investor’s ability to convert local currency

into U.S. dollars. Inconvertibility insurance does not protect against

devaluation of a country’s currency.

Expropriation coverage provides compensation for losses due to 

confiscation, nationalization, or other governmental actions that

deprive investors of their fundamental rights in the investment.

Insurance against political violence insures investors against losses

caused by politically motivated acts of violence (war, revolution, 

insurrection, or civil strife, including terrorism and sabotage).

Under most OPIC insurance contracts, investors may obtain all three

coverages, but claim payments may not exceed the single highest coverage amount. Claim payments are limited by the value of the investment

and the amount of current coverage in force at the time of the loss and

may be reduced by the insured’s recoveries from other sources. In addition,

in certain contracts, OPIC’s requirement to pay up to the single highest coverage amount is further reduced by stop-loss and risk-sharing

agreements. Finally, losses on insurance claims may be reduced by

recoveries by OPIC as subrogee of the insured’s claim against the host

government. Payments made under insurance contracts that result in

recoverable assets are reported as assets acquired in insurance settlements.

OPIC’s Maximum Contingent Liability at September 30, 2003 and

2002 was $ 6.9 billion and $6.8 billion. This amount is OPIC’s estimate

of maximum exposure to insurance claims, which includes standby

coverage for which OPIC is committed but not currently at risk. A more

realistic measure of OPIC’s actual exposure to insurance 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,

2003 and 2002 was $ 4.9 billion and $4.8 billion, respectively.

Notes to Financial Statements continued
Forging New Partnerships | 33

(b) Pending Claims

At September 30, 2003 and 2002, the total amount of compensation

formally requested in insurance claims for which no determination of

specific liability had yet been made was approximately $291.2 million

and $349.6 million, respectively. In addition to requiring formal 

applications for claimed compensation, OPIC’s contracts generally

require investors to notify OPIC promptly of host government action

that the investor has reason to believe is or may become a claim.

Compliance with this notice provision sometimes results in the filing

of notice of events that do not mature into claims.

The highly speculative nature of such notice, both as to the likelihood

that the event referred to will ripen into a claim and the amount, if

any, of compensation that may become due, leads OPIC to follow a

policy of not recording a specific liability related to such notices in its

financial statements. Any claims that might arise from these situations

are factored into the reserves for political risk insurance.

(c) Claims Settlement Guaranties and Indemnities

OPIC also has off-balance-sheet risk in connection with one claim

settlement. OPIC settled a claim in 1991 through a guaranty of $30

million of host government obligations. Payments by the host government

have reduced OPIC’s exposure to $8 million and $10.2 million at

September 30, 2003 and 2002, respectively. Any claims that might

arise from these situations are factored into the nonspecific reserve 

for political risk insurance. In 2003, OPIC benefited both from large

installment payments of claims and improvements in the risk ratings 

of the host country government, thus allowing for a reduction in the

allowance held against these insurance claims receivable and a reduction

in the associated provisions for political risk insurance. 

Changes in the reserve for political risk insurance during fiscal years

2003 and 2002 were as follows (dollars in thousands):

2003 2002

BEGINNING BALANCE $ 275,000 260,000

CHARGE OFFS (514) (2,431)

RECOVERIES — 61

INCREASE (DECREASE) IN PROVISIONS (41,817) 11,710

TRANSFERS FROM OTHER RESERVES 27,331 5,660

ENDING BALANCE $ 260,000 275,000

{10} INVESTMENT FINANCING

OPIC is authorized to provide investment financing to projects through

direct loans and investment guaranties. Project financing provides

medium- to long-term funding through direct loans and investment

guaranties to ventures involving significant equity and/or management

participation by U.S. businesses. Project financing looks for repayment

from the cash flows generated by projects, and as such, sponsors 

need not pledge their own general credit beyond the required project

completion period.

Investment funds use direct loans and investment guaranties to support

the creation and capitalization of investment funds that make direct

equity and equity-related investments in new, expanding, or privatizing

companies in emerging market economies. The fund managers, selected

by OPIC, are experienced, private investment professionals. OPIC’s

participation in a fund takes the form of long-term, secured loans and

loan guaranties that supplement the fund’s privately raised equity.

OPIC’s guaranty may be applied only to the debt portion of the fund’s

capital and, for certain funds, to accrued interest on that debt. OPIC

does not guaranty any of the fund’s equity, and all equity investments

in OPIC-backed funds are fully at risk.

OPIC’s authorization to make direct loans and investment guaranties

can be found in sections 234(c) and 234 (b) of the Foreign Assistance

Act (FAA), respectively. Direct loans and investment guaranties are

committed in accordance with the Federal Credit Reform Act of 1990,

pursuant to which loan disbursements and any claim payments for

these commitments have been funded through appropriations actions,

borrowings from the U.S. Treasury, and the accumulation of earnings or

collection of fees. In fiscal year 2003, $24 million was made available for

credit funding costs. In fiscal year 2002, OPIC received no credit funding

authority for new loan commitments; however, approximately $19 m llion

in carryover 2001 credit authority was available for use in fiscal year

2002. OPIC is in compliance with all relevant limitations and credit

funding appropriations guidance. OPIC’s capital, retained earnings, and

reserves available for claims on its investment financing at September

30, 2003 and 2002 totaled $2.6 billion and $2.1 billion, respectively.

Direct Loans: Direct loans are made for projects in developing and

other eligible countries involving U.S. small business or cooperatives,

on terms and conditions established by OPIC. Direct loan exposure 

at September 30, 2003 totaled $716 million, of which $190 million

was outstanding.

Interest income is not accrued on direct loans that have payments that

are more than 90 days past due. Loans with payments more than 90 days

past due totaled $23.8 million at September 30, 2003 and $21.7 million

at September 30, 2002. If interest income had been accrued on those

loans, it would have approximated $600,000 during fiscal year 2003

and $800,000 during fiscal year 2002. Interest collected on delinquent

loans and recorded as income when received amounted to $1.2 million

and $1.1 million for fiscal years 2003 and 2002, respectively.

Changes in the allowance for uncollectible loans during fiscal years

2003 and 2002 were as follows (dollars in thousands):

2003 2002

BEGINNING BALANCE $ 19,373 10,079

CHARGE OFFS (313) (920)

RECOVERIES 1,815 2,536

INCREASE IN PROVISIONS 13,303 7,482

PROVISION FOR CAPITALIZED INTEREST 588 196

ENDING BALANCE $ 34,766 19,373
Investment Guaranties: OPIC’s investment guaranty covers the risk 

of default for any reason. In the event of a claim on OPIC’s guaranty,

OPIC makes payments of principal and interest to the lender. These

payments are recorded as accounts receivable resulting from investment

guaranties. The loans that are guaranteed can bear either fixed or floating

rates of interest and are payable in U.S. dollars. OPIC’s losses on payment

of a guaranty are reduced by the amount of any recovery from the 

borrower, the host government, or through disposition of assets

acquired upon payment of a claim. Guaranties extend from 5 to 17

years for project finance and from 10 to 12 years for investment funds.

Credit risk represents the maximum potential loss due to possible 

nonperformance by borrowers under terms of the contracts. OPIC’s

exposure to credit risk under investment guaranties, including claimrelated assets, was $5.7 billion at September 30, 2003, of which $3.1

billion was outstanding. Of the $3.1 billion, $1.9 billion related to

project finance and $1.2 billion related to investment fund guaranties.

Included in the $1.2 billion of investment fund exposure is $682 million

of estimated interest that could accrue to the guaranty lender. This

interest generally accrues over a 10-year period, payable upon maturity.

Upon complete nonperformance by the borrower, OPIC would be

liable for principal outstanding and interest accrued on disbursed

investment funds. At September 30, 2003, $274 million of the $682

million had actually accrued to the guaranteed lender on disbursed

investment funds; the remainder represents an estimate of interest 

that could accrue to the guaranteed lender over the remaining 

investment fund term.

Changes in the reserve for investment guaranties during fiscal years

2003 and 2002 were as follows (dollars in thousands):

2003 2002

BEGINNING BALANCE $ 570,000 550,000

CHARGE OFFS — (119,485)

RECOVERIES 79 —

INCREASE IN PROVISIONS 59,921 139,485

ENDING BALANCE $ 630,000 570,000

{11} CLAIM-RELATED ASSETS

Claim related assets may result from payments on claims under either

the insurance program or the investment financing program. Under

the investment financing program, when OPIC pays a guaranteed

party, a receivable is created. Under the insurance program, similar

receivables reflect the value of assets, generally shares of stock, local

currency, or host country notes, that may be acquired as a result of 

a claim settlement. These receivables are generally collected over a 

period of 5 to 15 years. 

Changes in the allowance for doubtful recoveries for assets resulting

from investment guaranties during fiscal years 2003 and 2002 were 

as follows (dollars in thousands):

2003 2002

BEGINNING BALANCE $ 45,261 29,576

INCREASE (DECREASE) IN PROVISIONS (1,061) 15,195

RECOVERIES 475 490

ENDING BALANCE $ 44,675 45,261

Changes in the allowance for doubtful recoveries for assets acquired in

insurance claims settlements during fiscal years 2003 and 2002 were 

as follows (dollars in thousands):

2003 2002

BEGINNING BALANCE $ 89,808 97,690

RECOVERIES OF CAPITALIZED INTEREST — (2,222)

TRANSFERS TO OTHER RESERVES (27,331) (5,660)

ENDING BALANCE $ 62,477 89,808

{12} STATUTORY RESERVES AND FULL FAITH AND CREDIT 

Section 235(c) of the FAA established a fund with separate accounts

known as the Insurance Reserve and the Guaranty Reserve for the

respective discharge of potential future liabilities arising from insurance

or from guaranties issued under Section 234(b) of the FAA. These

amounts may be increased by transfers from retained earnings or by

appropriations. In FY2003, OPIC’s Board of Directors authorized the

allocation of all retained earnings to these statutory reserves, thereby

reflecting OPIC’s increased ability to absorb potential losses without

having to seek appropriated funds. The allocation of retained earnings

to the Insurance Reserve and the Guaranty Reserve is based on the

amount of maximum exposure outstanding for insurance and guaranties,

respectively. In FY2002, no allocation of retained earnings was made.

The allocation of retained earnings to the Insurance Reserve and the

Guaranty Reserve was based on the amount of maximum exposure

outstanding for insurance and guaranties, respectively.

All valid claims arising from insurance and guaranties issued by OPIC

constitute obligations on which the full faith and credit of the United

States of America is pledged for full payment. At September 30, 2003

and 2002, the statutory Insurance Reserve totaled $2 billion and $1.8

billion, respectively, and the statutory Guaranty Reserve totaled $1.8

billion and $1.4 billion, respectively. Should funds in OPIC’s reserves

not be sufficient to discharge obligations arising under insurance, and

if OPIC exceeds its $100 million borrowing authority authorized by

statute for its insurance program, funds would have to be appropriated

to fulfill the pledge of full faith and credit to which such obligations

are entitled. Standing authority for such appropriations is contained in

Section 235(f) of the FAA. The Federal Credit Reform Act of 1990

authorizes permanent, indefinite appropriations and borrowings from

the U.S. Treasury, as appropriate, to carry out all obligations resulting

from the investment financing program.

Notes to Financial Statements continued
Forging New Partnerships | 35

{13} DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated values of each class of financial instrument for which 

it is practicable to estimate a fair value at September 30, 2003 are as

follows (dollars in thousands):

CARRYING AMOUNT FAIR VALUE

FINANCIAL ASSETS:

CASH $ 909,934 909,934

U.S. TREASURY SECURITIES 3,745,490 4,123,771

INTEREST RECEIVABLE ON SECURITIES 56,205 56,205

DIRECT LOANS 155,499 155,499

ACCOUNTS RECEIVABLE FROM

INVESTMENT GUARANTIES 78,044 78,044

ASSETS ACQUIRED IN INSURANCE

CLAIMS SETTLEMENTS 178,088 178,088

FINANCIAL LIABILITIES:

BORROWINGS FROM THE U.S. TREASURY

AND RELATED INTEREST PAYABLE $ 196,453 202,173

The methods and assumptions used to estimate the fair value of each

class of financial instrument are described below:

Cash: The carrying amount approximates fair value because of the 

liquid nature of the cash, including restricted cash.

U.S. Treasury Securities: The fair values of the U.S. Treasury securities

are estimated based on quoted prices for Treasury securities of the same

maturity available to the public. (OPIC is not authorized, however, to

sell its securities to the public, but is instead restricted to direct transactions with the U.S. Treasury.) Interest receivable on the securities is

due within 6 months and is considered to be stated at its fair value.

Direct Loans, Accounts Receivable Resulting from Investment

Guaranties, and Assets Acquired in Insurance Claims Settlements:

These assets are stated on the balance sheet at the present value of the

amount expected to be realized. This value is based on management’s

quarterly review of the portfolio and considers specific factors related

to each individual receivable and its collateral. The stated value on 

the balance sheet is also management’s best estimate of fair value 

for these instruments.

Borrowings from the U.S. Treasury: The fair value of borrowings from

the U.S. Treasury is estimated based on the face value of borrowings

discounted over their term at year-end rates. These borrowings were

required by the Federal Credit Reform Act, and repayment terms are

fixed by the U.S. Treasury in accordance with that Act.

Investment Guaranties Committed and Outstanding: OPIC’s investment

guaranties are intended to provide a means of mobilizing private capital

in markets where private lenders would be unwilling to lend without

the full faith and credit of the U.S. Government. Given the absence 

of a market for comparable instruments, it is not meaningful to 

calculate their fair value.

{14} OPERATING LEASE

Minimum future rental payments under the 15-year lease at 1100 New

York Avenue, N.W. will be approximately $5 million annually, with

additional adjustments tied to the consumer price index. Lease incentives

related to OPIC’s 1992 move to this location totaled $16.7 million.

The value of these incentives is deferred in the balance sheets and is

being amortized to reduce rent expense on a straight-line basis over 

the 15-year life of the lease. Rental expense for 2003 and 2002 was

approximately $5.1 million and $5.0 million, respectively.

{15} PENSIONS

OPIC’s permanent employees are covered by the Civil Service

Retirement System (CSRS) or the Federal Employee Retirement

System (FERS). For CSRS, OPIC withheld 7.0% of employees’ gross

2003 earnings. In 2002 through January 11, 2003, OPIC contributed

7.5% of employees’ gross earnings, and on and after January 12, 2003,

7.0%. The sums were transferred to the Civil Service Retirement Fund

from which this employee group will receive retirement benefits. For

FERS, OPIC withheld 0.80% of employees’ gross earnings. In 2003

and 2002, OPIC contributed 10.7% of employees’ gross earnings. This

sum is transferred to the FERS fund from which the employee group

will receive retirement benefits. An additional 6.2% of the FERS

employees’ gross earnings is withheld, and that, plus matching contributions by OPIC, are sent to the Social Security System from which

the FERS employee group will receive social security benefits. OPIC

occasionally hires employees on temporary appointments, and those

employees are covered by the social security system under which 6.2%

of earnings is withheld and matched by OPIC.

FERS (after an initial eligibility period) and CSRS employees may elect

to participate in the Thrift Savings Plan (TSP). Based on employee

elections, 0% to 8% of gross CSRS earnings is withheld and 0% to

13% of gross FERS earnings is withheld subject to the IRS elective

deferral limit for the tax year. FERS employees receive an automatic

1% contribution from OPIC. Amounts withheld for FERS employees

are matched by OPIC, up to an additional 4%, for a total of 5%.

Although OPIC funds a portion of employee pension benefits under

the CSRS, the FERS, and the TSP, and makes necessary payroll withholdings, it has no liability for future payments to employees under

these programs. Furthermore, separate information related to OPIC’s

participation in these plans is not available for disclosure in the financial

statements. Paying retirement benefits and reporting plan assets 

and actuarial information is the responsibility of the U.S. Office of

Personnel Management and the Federal Retirement Thrift Investment

Board, which administer these plans. Data regarding the CSRS and

FERS actuarial present value of accumulated benefits, assets available

for benefits, and unfunded pension liability are not allocated to 

individual departments and agencies.
{16} POSTRETIREMENT BENEFITS 

Until January 25, 2003, OPIC sponsored three defined benefit 

postretirement plans that covered qualifying employees. On that date,

OPIC’s plans providing major medical coverage and dental and vision

coverage were discontinued. The plan providing life insurance remains

in effect. The medical and the dental and vision plans were both 

contributory plans. The life insurance plan includes options that are

contributory and noncontributory.

Shown below is disclosure information for the year ended September

30, 2002 (dollars in thousands):

2002

RECONCILIATION OF ACCRUED BENEFIT COST:

BENEFIT LIABILITY AT END OF YEAR $ (3,332)

FAIR VALUE OF PLAN ASSETS AT END OF YEAR —

FUNDED STATUS AT YEAR-END (3,332)

UNRECOGNIZED NET ACTUARIAL GAIN (907)

ACCRUED BENEFIT COST $ (4,239)

COMPONENTS OF NET PERIODIC BENEFIT COST:

SERVICE COST $100

INTEREST COST 206

EXPECTED RETURN ON PLAN ASSETS —

RECOGNIZED NET ACTUARIAL LOSS (96)

NET PERIODIC BENEFIT COST $ 210

Of the $4.2 million accrued benefit cost, approximately $4 million

relates to the major medical plan and the vision and dental plans with

the remainder relating to the OPIC-sponsored life insurance program.

To ensure that OPIC employees and retirees would not lose eligibility

for health care benefits in retirement, OPIC paid the Office of

Personnel Management (OPM) the actuarial cost of transferring 

those employees into the Federal Employees Health Benefit Program

(FEHBP). The $2.7 million cost of the transfer was charged against

the $4 million accrued benefit cost for the medical and vision and 

dental plans. The remaining accrued benefit cost of $1.3 million 

represents a gain on the closeout of the plans and is recorded in net

income for FY 2003.

Change in benefit liability:

2,003 2002

BENEFIT LIABILITY AT BEGINNING OF YEAR $ (3,332) (3,324)

SERVICE COST — (100)

INTEREST COST — (206)

ACTUARIAL GAIN/LOSS 3,332 191

BENEFITS PAID — 107

BENEFIT LIABILITY AT END OF YEAR $ 0 (3,332)

{17 } CONCENTRATION OF RISK

OPIC is subject to certain risks associated with financial instruments 

not reflected in its balance sheet. These financial instruments include

political risk insurance, loan guaranties, and committed-but-undisbursed

direct loans. 

With respect to political risk insurance, OPIC insures against currency

inconvertibility, expropriation of assets, and political violence.

Additionally, OPIC provides investment financing through direct 

loans and investment guaranties.

OPIC’s credit policy is to take a senior security position in the assets 

of the projects or transactions it guaranties. The nature and recoverable

value of the collateral pledged to OPIC varies from transaction to

transaction and may include tangible assets, cash collateral or equivalents,

and/or a pledge of shares in the project company as well as personal

and corporate guaranties. OPIC takes all necessary steps to protect its

position in such collateral and retains the ability to enforce its rights 

as a secured lender if such action becomes necessary.

The following is a summary of OPIC’s off-balance-sheet risk at

September 30, 2003 and 2002 (dollars in thousands):

2003 UNUSED

TOTAL OUTSTANDING COMMITMENTS

GUARANTIES $ 5,530,542 2,990,630 2,539,912

UNDISBURSED DIRECT LOANS 525,870 — 525,870

INSURANCE 6,890,413 4,919,103 1,971,310

2003 UNUSED

TOTAL OUTSTANDING COMMITMENTS

GUARANTIES $ 5,717,443 3,027,938 2,689,505

UNDISBURSED DIRECT LOANS 222,943 — 222,943

INSURANCE 6,810,941 4,829,428 1,981,513

OPIC’s off-balance-sheet finance and insurance exposure involves 

coverage outside of the United States. The following is a breakdown of

such total commitments at September 30, 2003 by major geographical

area (dollars in thousands):

UNDISBURSED

LOAN PORTION ON

GUARANTIES DIRECT LOANS INSURANCE

AFRICA $ 379,724 272,930 522,593

ASIA 981,303 92,271 1,441,529

EUROPE 705,371 22,530 690,465

LATIN AMERICA 1,694,317 71,739 3,587,590

MIDDLE EAST 149,943 — 305,150

NIS (NEW INDEPENDENT STATES) 943,928 63,900 343,086

WORLDWIDE 675,956 2,500

$ 5,530,542 525,870 6,890,413

Notes to Financial Statements continued
Forging New Partnerships | 37

At September 30, 2003, OPIC’s largest finance and insurance exposure

was in the following countries and sectors (dollars in thousands):

COUNTRY SECTOR

BRAZIL $ 1,203,576 POWER GENERATION $ 4,182,879

TURKEY 1,042,415 FINANCIAL SERVICES 3,650,048

VENEZUELA 999,999 OIL AND GAS SERVICES 2,160,388

INDONESIA 794,019 MANUFACTURING 1,044,497

ARGENTINA 783,341 COMMUNICATIONS 588,012

{18} OTHER CONTINGENCIES

OPIC is currently involved in certain legal claims and has received

notifications of potential claims in the normal course of business.

Management believes that the resolution of these matters will not 

have a material adverse impact on OPIC.

{19} ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTIES

In FY 2003, OPIC recognized a guaranty liability and a guaranty fee

receivable of $70 million. OPIC received $270,000 of guaranty fee and

other income on the investment guaranties issued since December 31,

2002, all of which represents guaranty fee income.

{20} WRITE-DOWN OF INTERNALLY DEVELOPED SOFTWARE

In fiscal years 2003 and 2002, management analyzed previously 

capitalized costs associated with internally developed software and

determined that portions of those costs would no longer be of future

benefit and should be written down by $1.5 million and $4.4 million,

respectively. The write-down was calculated as the difference between

the carrying amount less costs identified by management as having

future economic benefit, in accordance with FAS 144, “Accounting 

for Impairment or Disposal of Long-lived Assets.”

{21} STATUTORY COVENANTS

OPIC’s enabling statute stipulates both operating and financial 

requirements with which OPIC must comply. In management’s 

opinion, OPIC is in compliance with all such requirements.

Forging New Partnerships | 39

INVESTMENT FUNDS DEPARTMENT 

CYNTHIA HOSTETLER

VICE PRESIDENT

BARBARA BRERETON

DIRECTOR, PRIVATE EQUITY 

STEVEN COWAN

DIRECTOR, PRIVATE EQUITY

JAMES HANSLEY

DIRECTOR, PRIVATE EQUITY

BERNARD MCGUIRE

DIRECTOR, PRIVATE EQUITY

EUGENE POHREN

DIRECTOR, PRIVATE EQUITY

STEPHEN FEENEY

DIRECTOR, CAPITAL MARKETS

INVESTMENT DEVELOPMENT 

AND ECONOMIC GROWTH DEPARTMENT

DANIEL NICHOLS 

VICE PRESIDENT

PETER BALLINGER

DIRECTOR, INVESTMENT SERVICES 

(ANKARA, TURKEY)

JOAN EDWARDS

DIRECTOR, INVESTMENT SERVICES 

& PROGRAM DEVELOPMENT

CARL REINHARDT

DIRECTOR, INVESTMENT SERVICES

KAREN ROBERTS

DIRECTOR, BUSINESS DEVELOPMENT

OFFICE OF THE CHIEF 

FINANCIAL OFFICER

GARY KEEL

VICE PRESIDENT 

ROSEMARY ALLEN

DIRECTOR, OPERATIONS

RICHARD CORRIGAN

DIRECTOR, PROJECT MONITORING

MARTHA EDMONDSON

DIRECTOR, FINANCIAL MANAGEMENT

RUDY MAZARIEGOS

DIRECTOR, IT SERVICES

LENA PAULSEN

DIRECTOR, SECURITY & 

ADMINISTRATIVE SERVICES

RICHARD WESTFIELD

DIRECTOR, IT PROGRAM MANAGEMENT

ALLAN VILLABROZA

BUDGET OFFICER

LEGAL AFFAIRS DEPARTMENT 

MARK GARFINKEL

VICE PRESIDENT & GENERAL COUNSEL

GEOFFREY ANDERSON

DEPUTY GENERAL COUNSEL 

MICHAEL ABBEY

ASSOCIATE GENERAL COUNSEL, 

INVESTMENT FUNDS

BRIAN CHRISTALDI

ASSOCIATE GENERAL COUNSEL, 

PROJECT FINANCE

DEV JAGADESAN

ASSOCIATE GENERAL COUNSEL,

ADMINISTRATIVE LAW

MERLIN LIU

ASSOCIATE GENERAL COUNSEL, 

DIRECT LOANS & HOUSING FINANCE

THOMAS MAHAFFEY

ASSOCIATE GENERAL COUNSEL, 

SPECIAL ASSETS

MARC MONHEIMER

ASSOCIATE GENERAL COUNSEL, 

INSURANCE

ROBERT O’SULLIVAN

ASSOCIATE GENERAL COUNSEL, 

INSURANCE CLAIMS

OFFICE OF EXTERNAL AFFAIRS

CHRISTOPHER COUGHLIN

VICE PRESIDENT

RICHARD HORANBURG

DIRECTOR, LEGISLATIVE AFFAIRS

LAWRENCE SPINELLI

DIRECTOR, COMMUNICATIONS

OFFICE OF INVESTMENT POLICY

VIRGINIA GREEN

VICE PRESIDENT

HARVEY HIMBERG

DIRECTOR, ENVIRONMENTAL AFFAIRS

ANTHONY IERONIMO

DIRECTOR, ECONOMIC ANALYSIS 

& PROJECT MONITORING
Credits & Acknowledgements

COVER

Joe Wozniak OPIC – top

Thinkstock/Picturequest – bottom

PAGE 1

Christopher Astriab OPIC – left

PAGE 4

The World Bank Group – top & bottom left

PAGE 5

Domes International – bottom left

Greg Ruth OPIC – top right

PAGE 6

The World Bank Group – top

James Polan OPIC – bottom left

PAGE 7

Sanjay Nayyar, El Paso Corporation – left

Studio K – St. Petersburg – right top & bottom

PAGE 8

The World Bank Group – top

John Aldonas OPIC – bottom left

PAGE 9

James Polan OPIC – top right

John Aldonas OPIC – bottom left

InterOil Corp – bottom right

PAGE 10

The World Bank Group – top & bottom left

PAGE 11

The World Bank Group – top three right

AbC.R.O., Inc – bottom right and left

PAGE 12

The World Bank Group – top

Tim Harwood OPIC – bottom

PAGE 13

Nora Petkovich OPIC – left

The World Bank Group – right

PAGE 14

Shaun Christian, Caucasus Airlines/Pacific Islands

Holdings – top right / left & bottom

PAGE 15

The World Bank Group – top right

Quiport’s Design Engineers – middle

REPORT DESIGN: LOMANGINO STUDIO, INC.

PRINTING: FONTANA LITHOGRAPH, INC.