81792 v1 ANNUAL REPORT 2013 Insuring investments r Ensuring opportunities MIGA’s Mission contents 2 MIGA Fiscal Year 2013 Highlights 4 World Bank Group Fiscal Year 2013 Highlights 5 Message from World Bank Group President 7 MIGA Board 8 Message from MIGA Executive Vice President 11 MIGA Management Team 12 MIGA Development Impact 20 MIGA Business Operational Overview Research and Knowledge Regional Activities To promote foreign direct Technical Assistance Independent Evaluation Group Compliance Advisor/Ombudsman 58 Management’s Discussion and Analysis and Financial Statements investment into developing 108 Appendices 122 MIGA Contact Information countries to support economic acronyms CAO Compliance Advisor/Ombudsman CUP Cooperative Underwriting Program growth, reduce poverty, and DEIS Development Effectiveness Indicator System DIFC Dubai International Financial Centre FDI Foreign Direct Investment FIAS Facility for Investment Climate Advisory Services improve people’s lives. IBRD International Bank for Reconstruction and Development ICSID International Centre for Settlement of Investment Disputes IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation MD&A Management’s Discussion and Analysis MENA Middle East and North Africa OPIC Overseas Private Investment Corporation PRI Political Risk Insurance SIP Small Investment Program SSA Sub-Saharan Africa SOE State-Owned Enterprise B | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 1 Highlights Operational Highlights MIGA provided coverage for projects in the following areas in fiscal year 2013: fiscal year 2013 Number of projects Share of projects Amount of guarantees Share of projects supported supported (%) issued ($M) $ volume (%) In fiscal year 2013, we issued a total of $2.8 billion in guarantees for projects in MIGA’s developing Priority area1 member countries. An additional $3.5 million was issued under MIGA-administered trust funds. AR chapter box colors IDA-eligible countries2 21 70 2047.3 74 This year marked the third consecutive year of record issuance by MIGA, with 82 percent of this “South-South” investments3,4 7 23 357.0 12 new issuance falling into at least one of MIGA’s strategic priority areas. At the Figure end 9 of the year, Figurecountries Conflict-affected 7 7 23 1150.3 41 Increased market Figure 1 opportunities Complex projects5 Austria 23.9 11 37 1924.4 69 MIGA’s gross exposure was $10.8 billion, continuing a six-year trend of growth. United Kingdom 12.5 One year of political stability France 10.0 Region United States 9.2 12 Of particular note, this year MIGA-supported investments received an unprecedented number of Improved Germany 7.3 gross exposure macroeconomic Asia and the South Pacific Africa 5.3 4 13 492.3 net exposure 18 stability 10 industry awards for highly innovative and important transactions. Luxembourg 4.1 Decrease in corruption Europe and Central Finland Asia 2.8 6 20 537.1 19 Latin America Switzerland and the 2.6Caribbean 3 10 67.1 3 8 More favorable Greece 2.3 The Agency also received approval from our Board of Directors to extend our non-honoring of gov’t regulations Middle East and North 2.3Africa 6 3 10 172.9 6 Singapore Increased access United Arab Emirates 2.1 6 financial obligations coverage to include state-owned enterprises. to financing Sub-Saharan Africa 1.6 14 47 1,511.6 54 Canada Improved infrastructure Mauritius 1.5 4 capacity Sector Korea, Republic of 1.4 MIGA paid no claims this fiscal year. Spain 1.3 Increased access Cayman Islands 1.1 2 to qualified staff Agribusiness, manufacturing, Slovenia 1.0 and services6 14 47 385.0 14 Other Financial Bermuda 0.9 5 17 471.6 17 0 Guarantees Issued 2009 2010 2011 2012 2013 FY90-13 Senegal 0.7 03 04 05 06 07 08 09 10 11 12 13 0 10 20 30 40 Infrastructure Egypt, Arab Republic of 0.7 9 30 1,272.3 46 Figure 8 Cyprus 0.7 Number of projects supported 26 19 38 50 30 1 727 Oil, gas, and mining 2 6 652.1 23 Netherlands 0.7 Over the next 12 months Sweden 0.7 New projects2 20 16 35 38 26 - Total Japan 0.7 30 2,780.7 Others 2.7 46% Infrastructure Projects previously supported3 6 3 3 12 4 - Macroeconomic 1. Some projects address more than one priority area instability 2. The world’s poorest countries 23% Oil, gas, and mining Others: Nigeria, Poland, China, Thailand, Norway, Ecuador, Tanzania, Turkey, Fig 2 Number of guarantee contracts issued 30 28 50 66 47 Access1143 3. Investments Romania, made from Kenya, Ireland, oneMali, MIGA Belgium, developing India, Lebanon, Tunisia, (category member two) Italy, St. Kitts country to another and Fig 5 to financing 4. These Nevis, figures Denmark, represent Panama, projects Virgin involving Islands (British),one or more South-based investor Colombia 17% Financial Amount of new issuance, total ($B)4 1.4 1.5 2.1 2.7 2.8 30.0 staff Access to qualified 5. Complex projects including in infrastructure, extractive industries, and financial structure 14% Agribusiness, * Numbers may not add to 100 percent due to guarantee holders domiciled in two 6. countriestotalling $3.5 million were also supported under the MIGA-administered West Bank and Gaza Investment Guarantee Two projects different Trust Fund manufacturing, Gross exposure ($B) 4 7.3 7.7 9.1 10.3 10.8 Political - risk and services Infrastructure capacity Net exposure (less reinsurance) ($B)5 4.0 4.3 5.2 6.3 6.4 - This year, MIGA’s operating income was $19.1 million, compared with $17.8 million in fiscal year 2012 (see 54% MD&AAfrica Sub-Saharan Limited market opportunities for details). 19% Europe and Central Asia Corruption Fig 1 fin 1. Two additional projects were supported under the MIGA-administered West Bank and Gaza Investment Guarantee Trust Fund Fig 3 18% Asia and the Pacific 2. Projects receiving MIGA support for the first time in FY13 (including expansions) Increased government Earned Premium, Fees, and Investment Income ($M) 6% Middle East and 3. Projects supported by MIGA in FY13 as well as in previous years Eearned premium regulation in the aftermath North Africa* 4. Includes amounts leveraged through the Cooperative Underwriting Program (CUP) of the global financial crisis 3% Latin America and 5. Gross exposure is the maximum aggregate liability. Net exposure is the gross exposure less reinsurance 2013 66.3 33.6 the Caribbean Other 2012 61.7 36.9 0 10 20 30 2011 50.8 13.9 47% Sub-Saharan Africa 2010 46.0 24.1 20% Europe and Over the next three years Central Asia 2009 43.6 36.9 13% Asia and the Pacific Fig 4 10% Middle East and Political risk Premium and fee income North Africa* Investment income Macroeconomic instability 10% Latin America and the Caribbean Access to qualified staff 2 | MIGA ANNUAL REPORT 2013 Access to financing MIGA ANNUAL REPORT 2013 | 3 41% Europe and Corruption Central Asia world bank group fiscal year 2013 Leadership Perspectives highlights A T I O N L BA N VELOPME DE A L I N ION AL CE E R N NA K N I V E AT TR ER F T N N A N E R L T T O S O TE TE IN RNA IONA L FO R T P O R AT I T I • IN AS M R • WORLD BANK IC R E N T M U L S O C I AT N AT I O SI SETTL UTES T D REC EN T • • SP OR EM G TE ON PM Y DI IO A U N EN L N C ST T O R N T C R A FINANCE UC EN E I L N V A E OF TIO E N T G INV ESTM N AND D E E A The World Bank Group is a major source of financial and technical assistance to developing Message from Dr. Jim Yong Kim, countries around the world. Its member institutions work together and complement each World Bank Group President other’s activities to achieve their shared goals of ending extreme poverty and promoting shared We are at an auspicious moment in history. prosperity. The Bank Group shares knowledge and supports projects in agriculture, trade, Thanks to the successes of the past few finance, health, poverty reduction, education, infrastructure, governance, climate change, and decades and a favorable economic outlook, in other areas to benefit people in developing countries. developing countries now have an unprece- dented opportunity: the chance to end extreme The World Bank Group committed $52.6 billion in fiscal The World Bank Group comprises five poverty within a generation. This opportunity year 2013. closely associated institutions: must not be squandered. The World Bank, comprising IDA and IBRD, committed $31.5 billion in loans and grants to its member countries. International Bank for Reconstruction and Development Of this, IDA commitments to the world’s poorest (IBRD), which lends to governments of middle-income countries were $16.3 billion. and creditworthy low-income countries Earlier this year, we in the World Bank Group set two with unpredictable costs in terms of lives and financial specific and measurable goals for ourselves and our resources. IFC committed $18.3 billion and mobilized an additional International Development Association (IDA), which partners in the development community: effectively ending $6.5 billion for private sector development in developing provides interest-free loans, or credits, and grants to extreme poverty by shrinking the share of people living on Yet, I remain optimistic that achieving the goals is within countries. Nearly half of the total went to IDA countries. governments of the poorest countries less than $1.25 a day to 3 percent by 2030, and promoting our reach. Doing so will require systemic and relentless shared prosperity by raising the incomes of the poorest 40 collaboration from the World Bank Group, our 188 MIGA issued $2.8 billion in guarantees in support of International Finance Corporation (IFC), which provides percent of the population in every developing country. member countries, and other partners. investments in developing countries. Nearly three- loans, equity, and advisory services to stimulate private quarters of the guarantees went to IDA countries. The sector investment in developing countries These are ambitious goals, and success is far from We have noted that, especially in the current environment, Agency welcomed two new members, São Tomé and inevitable. Nearly five years after the global financial governments cannot depend only on development Principe and Comoros, during the fiscal year. Multilateral Investment Guarantee Agency (MIGA), which crisis began, in 2008, the world’s economic recovery assistance to achieve their commitments to citizens. The provides political risk insurance or guarantees against remains fragile. Developed countries struggle with high private sector has an enormous role to play, whether on losses caused by non-commercial risks to facilitate foreign unemployment and weak economic growth. Developing its own or in tandem with governments through public- World Bank Group Cooperation direct investment (FDI) in developing countries countries are growing more slowly than before the private partnerships. Here, MIGA plays a significant role, crisis. Moreover, the fight against poverty will become by catalyzing foreign direct investment that supports Joint projects and programs of the Bank Group’s insti- International Centre for Settlement of Investment increasingly difficult as we push toward our target, since economic growth, reduces poverty, and improves people’s tutions focus on promoting sustainable development Disputes (ICSID), which provides international facilities for those who remain poor will be the hardest to reach. lives in places where it’s needed most. by expanding financial markets, issuing guarantees conciliation and arbitration of investment disputes. to investors and commercial lenders, and providing Other challenges could pose new threats to poverty This year, MIGA issued a record $2.8 billion in political risk advisory services to create better investment conditions in reduction. Conflict and political instability present major guarantees, underpinning investments across diversified developing countries. Working together, the World Bank, risks, because they increase poverty and create long-term sectors and regions. Seventy-four percent went to the IFC, and MIGA catalyze projects that make resources obstacles to development. Moreover, a warming planet poorest countries served by the International Development available to clients through greater innovation and respon- could increase the prevalence and size of drought-affected Association. Fifty-four percent supported private sector siveness. A number of these are highlighted in this report. areas, and make extreme weather events more frequent, development in sub-Saharan Africa and 41 percent 4 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 5 miga board A Council of Governors and a Board of Directors, representing 179 member countries, guide the programs and activities of MIGA. Each country appoints one governor and one alternate. MIGA’s corporate powers are vested in the Council of Governors, which delegates most of its powers to supported transformational projects in fragile or conflict- tenure at the helm of MIGA recently came to an end. affected countries. This Annual Report demonstrates the Her innovative and tireless leadership, coupled with the a Board of 25 directors. considerable development impact of MIGA’s support, and professionalism and commitment of MIGA’s management its ability to build effective partnerships, both externally and staff, allowed the Agency to achieve extraordinary Voting power is weighted according to the share of capital rr Audit Committee and across the World Bank Group. results. I look forward to working with Keiko Honda, each director represents. The directors meet regularly at the rr Budget Committee Izumi’s successor, to continue MIGA’s strong momentum World Bank Group headquarters in Washington, DC, where rr Committee on Development Effectiveness Several MIGA projects over the past year underscore in the years to come. they review and decide on investment projects and oversee rr Committee on Governance and Administrative Matters the World Bank Group’s strengthened collaboration to general management policies. rr Human Resources Committee achieve our objectives. The outcomes of this collaboration demonstrate how, together, we can use our considerable Directors also serve on one or more of several standing These committees help the Board discharge its oversight expertise and resources to help countries and other committees: responsibilities through in-depth examinations of policies partners find creative and integrated solutions to and procedures. development challenges. MIGA’s support of transformational projects in Côte Jim Yong Kim d’Ivoire is particularly noteworthy. This year, the Agency, World Bank Group President along with IFC and IDA, supported the Azito thermal June 30, 2013 power plant that brings energy capacity to the country. Along with IDA, MIGA also supported the construction and operation of an offshore oil and gas facility that will reduce the country’s energy costs and limit the use of foreign reserves for energy imports. These transformational projects complemented the Henri Konan Bedié toll bridge in Abidjan—the first public-private partnership since the end of the civil conflict in 2011— that MIGA supported last year. MIGA’s support for these investments alone has catalyzed over $2 billion in foreign direct investment, a significant amount for this conflict- affected country. MIGA’s performance this year has made a strong contribution to helping us reach our goals of ending extreme poverty by 2030 and promoting shared prosperity. I particularly want to thank Izumi Kobayashi, whose MIGA’s Board of Executive Directors, as of June 30, 2013 9 9 18 18 6 76 7 12 1214 14 5 5 8 8 15 15 19 19 22 22 23 23 1: Merza Hasan; 2: Agapito Mendes Dias; 3: Satu Santala; 4: Roberto B. Tan; 4 4 10 10 13 13 20 20 16 16 24 24 2 2 11 11 3 3 1 1 17 17 21 21 5: John Whitehead; 6: Marie-Lucie Morin; 7: Shaolin Yang; 8: Gwen Hines; 9: 25 25 Vadim Grishin; 10: Mukesh N. Prasad; 11: Mansur Muhtar; 12: Piero Cipollone; 13: Omar Bougara; 14: Ibrahim M. Alturki (alternate); 15: Gino Alzetta; 16: Hideaki Suzuki; 17: Ingrid-Gabriela Hoven; 18: Denny H. Kalyalya; 19: César Guido Forcieri; 20: Juan José Bravo; 21: Sara Aviel (alternate); 22: Hervé de Villeroché; 23: Frank Heemskerk; 24: Jörg Frieden; 25: Sundaran Annamalai 6 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 7 Message from Izumi Kobayashi, The Agency’s sector diversification shows strong gains needs and streamlining processes to enable more flex- with complex projects in infrastructure and extractive ibility and responsiveness to our clients. We continued to MIGA Executive Vice President, industries rising to 69 percent of new volume compared place an emphasis on building a diverse and talented staff to 60 percent in fiscal year 2012. Underlying these strong of professionals. This past year we welcomed four new 2008-2013 business results is the transformational nature of many of staff members under our successful MIGA Professionals these projects, which help bring power, transportation, and Program. more efficient technologies into our developing member There are signs the global economy is at a countries, and are particularly important for fragile and I have come to the end of my tenure at MIGA. I want conflict-affected economies that have the greatest need for to thank the Board of Directors and other partners, as turning point—the real risks we saw in recent investment. well as our clients, for their guidance and support in advancing the work of this important institution. As I leave, years have receded and the situation is less The impact of the projects we support again demonstrates I feel confident that MIGA is well-positioned to fulfill our the powerful role the private sector can play in alleviating mandate of facilitating investment that furthers growth volatile. While high-income countries still poverty by mobilizing private capital into sectors with and improves people’s lives. I want to thank President Jim broad developmental impact, such as infrastructure, Yong Kim for his leadership. Most of all, I want to express face modest economic growth of about 1.2 agribusiness, and manufacturing. With the private sector my sincere gratitude to MIGA’s management and staff for stepping in to provide these much-needed investments, their professionalism and commitment throughout my percent in 2013, developing countries are pro- host-government efforts are complemented in building term to deliver MIGA’s mission in the countries we serve. the foundation for more productive economic activity that It has been my privilege to work with you. jected to grow 5.1 percent. creates jobs and growth. Additionally, these investments are playing an important role in contributing to economic and social sustainability in surrounding communities. We also reached out to existing and new external partners This relative growth in developing countries continues to I note our continued efforts to ramp up business to share knowledge on industry practices and devel- make them increasingly attractive to foreign investors. This development, including strengthened outreach to sub- opment solutions. This outreach included activities such is one of the reasons why we have seen growing demand Saharan Africa and the Middle East and North Africa, as conferences on managing global political risk, senior Izumi Kobayashi for our risk-mitigation products, as investors seek returns as countries seek more ways to attract private financing executive outreach, and visits to projects that we have sup- June 30, 2013 in more challenging environments. Against this backdrop, and investment. Our expanded operations in Asia and ported—including a trip I made to Iraq and the Palestinian MIGA celebrated its 25th anniversary this year with another our presence in Europe helped contribute to another Territories, both areas hit by conflict and fragility. We also excellent performance, issuing $2.8 billion in new guar- year of positive business results. We remained focused participated in the World Bank Group’s groundbreaking antees. on our strategic priority areas: support for investment in mission to Myanmar and together we hope to help reduce the world’s poorest countries served by the World Bank’s poverty and boost growth through energy infrastructure MIGA’s mandate to catalyze foreign direct investment into International Development Association (IDA), in fragile development and other reforms. developing countries has increased in relevance as part of and conflict-affected environments, in complex projects, the World Bank Group’s overall mission to end extreme and South-South investments. Over three-quarters of This past fiscal year we further strengthened our part- poverty and promote shared prosperity. We recognize the the projects MIGA backed address at least one strategic nerships across the World Bank Group, working on ways to private sector has an important role to play in assisting priority area, accounting for 82 percent of new business enhance collaboration in our strategic priority areas. In par- development. Our challenge is to ensure we facilitate the volume. ticular, the IFC/MIGA Business Development Partnership right investments that create value for the private sector, has matured into a strong business model that has helped and are sustainable in order to yield lasting development Our business diversification remained strong this past stimulate joint business development and knowledge- benefits for host countries. This report highlights our year. Regionally, MIGA’s projects in sub-Saharan Africa sharing while providing optimal solutions to our clients. positive results this year—both in new business and in accounted for the largest portion of new business volume development impact from existing projects that have at 54 percent, over twice last year’s level of 24 percent, Internally, we remained focused on strengthening our improved people’s lives across the globe. and over four times the fiscal year 2011 level of 12 percent. information technology systems to serve anticipated 8 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 9 miga management team Message from Keiko Honda, MIGA Executive Vice President I am pleased to transmit MIGA’s 2013 Annual Report, which highlights the Agency’s strong performance over the past year. This is a very exciting time to be joining the World Bank Izumi Kobayashi Michel Wormser Ana-Mita Betancourt Kevin W. Lu Group and sharing in the noble purpose of ending extreme Executive Vice President Vice President and Director and General Regional Director, poverty and promoting shared prosperity. Chief Operating Officer Counsel, Legal Affairs and Asia Pacific Claims We are committed to working with our clients and devel- opment partners to deliver the solutions that will help us achieve these goals. MIGA’s risk-mitigation instruments can play an essential role in mobilizing the financing nec- essary to deliver transformational infrastructure projects, build job-generating enterprises, and provide access to finance. I look forward to working with our Board, our partners, and staff to meet these goals. I am honored to contribute to this important work. Keiko Honda July 15, 2013 Edith P. Quintrell Lakshmi Shyam-Sunder Ravi Vish Marcus S. D. Williams Director, Operations Director and Chief Economist and Chief, Strategy, Chief Financial Officer, Director, Economics and Communications and Finance and Risk Sustainability Partnerships Management 10 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 11 Development Impact There are signs that global economic activity is slowly picking up. These signs are supported by low interest rates, increased global liquidity, improved global financial conditions, the accelerating growth of global trade, and stronger domestic demand. The World Bank’s outlook for the global Foreign Direct Investment economic environment is predicting Trends global growth to come in at a relatively weak 2.2 percent in 2013. It will gradually In this still somewhat fragile global strengthen to 3.0 percent and 3.3 percent environment, foreign direct investment in 2014 and 2015. Importantly, according (FDI) inflows to developing countries to the World Bank, the global economy declined by an estimated 4.5 percent in 2012 to reach $670 billion. A rebound is anticipated for 2013, when FDI inflows into developing countries are forecast to bounce back to $719 billion. Flows to developing countries continue to account for a substantial share of global FDI: they reached 45 percent of inflows in 2012. Of particular interest, FDI outflows from developing countries reached a new record in 2012—an estimated $238 billion—continuing the upward trend of recent years. They are forecast to be $275 billion in 2013. About a quarter of the outward FDI stock of developing countries goes into other developing countries (“South-South” investment). These South-South flows are outpacing traditional investment as a source of new FDI, as investors in Europe and the United States have felt the brunt of the recent economic slowdown and the crisis in the euro zone. With respect to investor sentiment, the is transitioning into what is likely to be a relative growth in developing countries smoother and less volatile period. continues to make these economies increasingly attractive to foreign Although acute risks in high-income investors. According to a 2012 Economist countries are down, more modest Intelligence Unit survey commissioned downside risks linger as these by MIGA for our annual World Investment economies continue to adjust. A slow and Political Risk report, investors remain acceleration in growth is expected in the optimistic about their prospects in next several years. In the meantime, as developing countries. In fact, more than the developed world progresses toward half of the survey’s respondents expected recovery, developing economies remain to increase their investments there in the the primary drivers of global growth— short term. though we note that they are expanding more slowly than last year. 12 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 13 MIGA’s Role inspection services in Madagascar and Niger, and several agribusiness investments in Zambia. box 1 MIGA’s insurance against noncommercial risks in developing countries is a powerful tool for many investors Our strategic focus on conflict-affected and fragile Mobilizing Investment in Côte and lenders as they enter these markets. In many cases, economies underlines MIGA’s key role in these countries’ MIGA guarantees help them address hesitations that may rebuilding efforts, particularly during the crucial period d’Ivoire affect the decision to move forward with an investment, of transition as they seek to establish stability after years particularly in countries perceived as high-risk. Indeed, of turmoil. This focus also points to MIGA’s ability to the presence of MIGA guarantees can often make the guarantee projects where other insurers may be off-cover. difference between a go and a no-go decision for some Three transformational projects in Côte d’Ivoire—detailed investments. Increasingly, MIGA guarantees are also later in this report—show how MIGA is prepared to The West African nation of Côte throughout the crisis, and at times, being used as a credit-enhancement tool that helps clients act as a catalyst for private sector investment very d’Ivoire is eager to rebuild its employees guarded the plant around secure financing with better terms and longer tenors. soon after conflict wanes. Also this year, our support infrastructure and reclaim its the clock. to manufacturing projects in the West Bank and Gaza reputation as a regional economic MIGA promotes the flow of FDI into developing countries demonstrates the Agency’s commitment to this priority power. MIGA is playing a significant With financing from the International in service of our mission: supporting economic growth, area. Projects in conflict-affected and fragile countries and role in mobilizing the massive Finance Corporation and a MIGA reducing poverty, and improving people’s lives. With our territories represented 41 percent of MIGA’s new volume amount of private sector investment guarantee of $116 million covering World Bank Group colleagues, we work with investors to this year. that is needed to help Côte d’Ivoire equity sponsor Globeleq, the structure projects in ways that benefit all parties and foster meet its ambitious goals. Together, company has broken ground on positive relationships with local communities. MIGA’s MIGA received approval from our Board of Directors MIGA’s guarantees in support a project to convert its existing collaboration with the World Bank and the International this fiscal year to create a Conflict-Affected and Fragile of three large transformational simple-cycle plant to combined-cycle, Finance Corporation (IFC) has borne fruit in several highly Economies Facility to even further deepen the Agency’s infrastructure projects are mobilizing increasing total capacity from 290 to developmental projects including the Bujagali hydropower support to this priority area. In addition to MIGA more than $2 billion in foreign direct approximately 430 megawatts. This dam in Uganda commissioned this year and the Azito guarantees, the facility will use donor contributions investment. means that the company will be able thermal power plant expansion in Côte d’Ivoire (see box 1). and guarantees to provide an initial loss layer to insure to increase its output substantially At a broader level, MIGA’s collaboration across the World investment projects in difficult contexts. The facility was In fiscal year 2012, MIGA provided without using any additional gas. Bank Group ensures that the Agency’s support to any launched in June, together with the governments of investment guarantees for the investment is consistent with the Group’s strategy for the Canada and Sweden, which committed funding in support construction of the Henri Konan Bedié Moving up the electricity supply host country. Our ability to leverage the Group’s expertise of this initiative. Discussions are advanced with other toll bridge. This was an important chain, MIGA is also backing the on environmental and social standards is often a sig- potential donors to support the facility. breakthrough for Côte d’Ivoire as this offshore gas facility that delivers dry nificant value to our clients and to the development impact public-private partnership had to be natural gas directly to Côte d’Ivoire’s of the investments we insure. Another priority area where we have a distinct competitive put on hold for more than 15 years power plants, including Azito. Foxtrot advantage is complex projects. This year, in addition as a result of the civil conflict the International’s oil and gas production This year, MIGA is pleased to celebrate our 25th anniversary to issuing guarantees for oil and gas as well as power country experienced. Construction platform in the Gulf of Guinea has a (see box 3). This milestone is a good occasion to reflect generation investments in Côte d’Ivoire, MIGA supported of the bridge is now well under daily production capacity of between on our achievements up until now and oportunities for power generation in Angola. These complex projects are way and the opening is planned for 110 and 120 million cubic feet of the next 25 years. Since our inception we have issued often transformational for countries and may increasingly December 2014. Every element of natural gas, more than half the $30 billion in guarantees for projects in a wide variety of include the participation of several parts of the World Bank the bridge, including the 100-ton national output. Foxtrot currently sectors, covering all regions of the world. Going forward, Group. In these cases, MIGA guarantees can complement concrete columns, is being built in operates six gas wells, and the new we will continue to focus on insuring projects where we IFC financing and the World Bank’s lending and guarantee Côte d’Ivoire—the construction site investments backed by MIGA will have the most impact, especially those that are in line with instruments to bring the full suite of products to bear also functions as a factory where 800 allow drilling of seven new wells by our strategic priorities detailed next. so that these projects can be realized. MIGA’s support workers will be employed at its peak. the end of 2014. The company will to complex projects accounted for 69 percent of 2013’s also construct a new platform in its volume. In fiscal year 2013, MIGA issued Marlin gas field, which is expected Strategic Focus guarantees for two investments that to go online in 2015. This project is As South-South investments become an increasingly will help Côte d’Ivoire meet its growing further supported by an IDA partial Four strategic priorities guide MIGA’s work. These pri- important source of FDI, MIGA continues to support demand for energy. The government risk guarantee of $60 million, back- orities have been shaped by the World Bank Group’s them as another strategic priority. This year, 13 percent of is aiming to boost electricity output stopping payments under a Gas mission to end extreme poverty and promote shared our business involved FDI from one developing country by around 80 percent over the next Supply and Purchase Agreement prosperity, the development needs of MIGA’s member to another. Examples of MIGA-insured South-South six years. Even considering the recent between the government and the countries, and the need for the Agency to focus on its investments include a manufacturing plant in Libya and a conflict, Côte d’Ivoire’s power sector investors. comparative advantage and complement other insurers. power project in Kenya. has a solid track record by regional standards and already exports Taken together, these newly mobilized MIGA’s first priority is encouraging FDI into the world’s Put together, projects in MIGA’s priority areas accounted electricity to several neighboring investments of more than $2 billion poorest countries. In fiscal year 2013, 74 percent of our for 82 percent of new business volume for 2013. countries. The Azito thermal power will keep the lights on, get people guarantee volume fell into this category. Examples that plant was commissioned in 2000 and to work and school faster, generate address this priority include MIGA’s support to power From a regional perspective, MIGA focused on provides the state power utility with employment, and potentially generation in Uganda and Bangladesh, a commercial sub-Saharan Africa as well as the Middle East and North more than a third of its electricity. bring countless benefits through bamboo plantation in Nicaragua (see box 2), customs Africa this year. This independent power producer community development programs. continued to deliver electricity 14 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 15 Sub-Saharan Africa is a top priority for the World Bank Environmental and Social Standards Group and MIGA guarantees play a significant role in box 2 mobilizing developmentally beneficial FDI to the region. Sound environmental performance, sustainability with The Agency has a strong focus on closing the energy and respect to natural resource management, and social When Business is Good for the infrastructure gaps that are exacerbated by limited public responsibility are critical to an investment’s success and funding sources. The World Bank estimates that Africa its contribution to the host country’s development. MIGA Environment: Ecoplanet Bamboo needs to spend $38 billion a year to address its infra- structure deficit. By facilitating access to private capital and applies a comprehensive set of performance standards for all guaranteed investments and the Agency’s envi- in Nicaragua using innovative structures like public-private partnerships, ronmental and social specialists evaluate the potential MIGA has helped direct investment toward projects that impacts of MIGA-supported projects, advising clients as to affect large parts of the continent’s population. Fifty-four how to minimize and mitigate them. In an effort to achieve percent of MIGA’s volume was for projects in the region harmonization across the private-sector arms of the World this year. Bank Group, MIGA is updating its policy and performance standards following a similar review undertaken by the IFC. More than 17 percent of carbon bringing jobs to one of the poorest This fiscal year we also continued our focus on the Middle dioxide emissions result from forest regions of the country, the remote East and North Africa (MENA). The region’s recent uncer- The MIGA-administered Environmental and Social deforestation, making it the third Southern Atlantic Autonomous tainties are compounded by the fact that many countries Challenges Fund for Africa financed by the Japanese gov- largest source of greenhouse gas Region. The relatively new project’s have traditionally relied on investment from Europe, which ernment continues to serve as a mechanism to provide emissions. Substituting hardwoods impact on the local economy— has been grappling with its own financial challenges. As technical advice to cross-border investors in the region. for a sustainable alternative would including employment generation, a result, the need for capital that creates jobs and oppor- The fund is open on a case-by-case basis to investors be an easy way to reduce emissions. land improvement, and workers’ tunity is greater than ever. For MIGA, this has been an already receiving MIGA guarantees or being considered skills upgrading—is already evident. important moment for the Agency to fill in gaps that the for support. Through it, investors can receive expert MIGA-supported EcoPlanet Bamboo The company’s initial investment private sector cannot address. At the end of fiscal year 2011 advice from MIGA and external consultants with the aim has plans to create a steady and into Nicaragua has generated over we made a commitment to mobilize $1 billion in insurance to ensure that projects improve their environmental and significant supply of raw material 300 jobs in a region with high capacity to retain and encourage FDI into the region. With social performance. This fiscal year, the Environmental and to industries that use traditional unemployment and has restored $605.8 million of guarantees in MENA issued since then, Social Challenges Fund for Africa supported two MIGA wood. Its investment in Nicaragua, 4,800 acres of degraded land into MIGA is making strong progress toward that goal. This projects in Ethiopia: africaJUICE developed a fair trade backed by MIGA guarantees of $27 bamboo plantations—improving year, MIGA supported five projects in the region, including farmers union and National Cement created a robust envi- million, is financing the purchase biodiversity and reducing pressure two manufacturing projects through the West Bank and ronmental and social management system. and conversion of degraded on surrounding forests. EcoPlanet Gaza Investment Guarantee Trust Fund. These projects will land into commercial bamboo Bamboo is diligent about sourcing bring jobs and business activity to this difficult context. plantations for the sale and export from local suppliers and creating Development Effectiveness of bamboo fiber. The company plans indirect employment. The company’s to establish a pre-processing facility philosophy ensures that women are Lowering Carbon Footprints By having a better understanding of the development for the production and sale of its an important part of its workforce outcomes of the investments that MIGA insures, the Forest Stewardship Council-certified and that contributions to the local Countries are making significant investments and Agency is able to focus our efforts more sharply and bamboo fiber. The fiber will be communities foster good relations, developing expertise in renewable energy and efficiency as achieve a higher level of impact. As a result, we continue targeted for U.S. and multinational support education, and improve well as low-carbon urban transport. The private sector is to strengthen and measure our development effectiveness, timber manufacturers for use livelihoods. essential to delivering solutions to support these countries’ as well as learn valuable lessons from previous projects in industries such as laminates efforts. Yet, high up-front costs and perceived political risks that can be applied to our current work. and composites for construction In a major milestone for both the often affect investors’ decisions to move forward in many and furniture, pulp and paper forestry and climate change arenas, markets. This fiscal year is the third anniversary of the launch of production, and the generation of last November EcoPlanet Bamboo MIGA’s Development Effectiveness Indicator System renewable energy. became the first company to From geothermal energy in Kenya, waste-to-energy in (DEIS) devised to measure and track the development receive carbon validation through China, and hydropower in Albania, Angola, and Pakistan— impact of projects that the Agency insures. Through MIGA’s insurance was critical to the Verified Carbon Standard for its MIGA is supporting energy transformation by insuring this, MIGA measures a common set of indicators across this client: “Put simply, MIGA’s bamboo plantations in Nicaragua. sustainable power investments in all regions of the world. all projects: investment supported, direct employment, backing gave us the ability to double In a country and category that have MIGA has also recently supported mass transit projects in training expenditures, locally procured goods, and com- our investment in Nicaragua,” traditionally not benefitted from Panama and Turkey. munity investments. We also measure sector-specific indi- said EcoPlanet Bamboo CEO Troy significant carbon finance, this cators. Results show that MIGA mobilized $5.4 billion in Wiseman. achievement solidifies the social This fiscal year the Agency signed guarantees for a wind investment in fiscal year 2013, representing nearly double and environmental impacts that energy project in Nicaragua in addition to projects in Côte the value of guarantees issued. The development profile of this the company is making locally, d’Ivoire and Bangladesh that involve the conversion of investment is very strong: it is regionally, and internationally. power plants from simple-cycle to combined-cycle. The The DEIS also puts into place a process to measure latter projects produce more electricity for those countries projects’ actual development outcomes three years from without additional use of gas, resulting in significant the time of contract signing. Starting in fiscal year 2014, we carbon dioxide emissions avoidance per year. will begin reporting this data for the cohort of active guar- antees that MIGA signed in fiscal year 2011. 16 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 17 MIGA continues to improve its measurement of devel- MIGA’s integrity due diligence procedures help reduce opment effectiveness. The Agency is also collaborating the possibility of corruption in projects we support. In with other development finance institutions in an effort to addition, the Agency’s anti-corruption provisions are standardize indicators. integrated into our contract of guarantee. MIGA expects our clients and partners to abide by national laws, comply box 3 Another useful tool in enhancing MIGA’s understanding of with relevant trade and procurement rules, and also development effectiveness is the Agency’s self-evaluation adhere to World Bank Group anti-corruption standards. MIGA History program. These evaluations include in-depth monitoring of project results looking at the following criteria: business In 2012, information about projects supported by MIGA performance, economic sustainability, private sector was included in a newly developed mobile application development impact, development outcomes, and envi- that enables users to confidentially report concerns of ronmental and social outcomes. These are undertaken in fraud and corruption in its projects to the World Bank addition to evaluations conducted by the World Bank’s Group’s Integrity Vice Presidency. The mobile application The idea for a multilateral political MIGA’s original 29 members were: Independent Evaluation Group (IEG)—discussed later in also enables users to identify projects based on country, risk insurance provider was floated Bahrain, Bangladesh, Barbados, this report—and ongoing monitoring of projects by MIGA type of activity, or keyword and send images. In addition, long before MIGA’s establishment— Canada, Chile, Cyprus, Denmark, staff. This year, the Agency conducted self-evaluations of the mobile application provides access to the World Bank as far back as 1948. But it was not Ecuador, Egypt, Germany, Grenada, six projects. Group’s list of debarred firms and individuals. until September 1985 that this idea Indonesia, Jamaica, Japan, Jordan, started to become a reality. At that Korea, Kuwait, Lesotho, Malawi, This past year, IEG conducted an evaluation on World time the World Bank’s Board of Netherlands, Nigeria, Pakistan, Bank Group Support for Innovation and Entrepreneurship Governors began the process of Samoa, Saudi Arabia, Senegal, in developing countries. The report underscored that inno- creating a new investment insurance Sweden, Switzerland, United vation is not only critical for economic growth, but is also affiliate by endorsing the MIGA Kingdom, and United States. becoming increasingly important for addressing major convention that defined its core development challenges, such as those related to inclusion mission: “to enhance the flow to MIGA was created to complement and sustainability. IEG found many cases where MIGA’s developing countries of capital and public and private sources of support for firm-level technology upgrading (through tech- technology for productive purposes investment insurance against non- nology transfer, technology diffusion, and acquisition of under conditions consistent with commercial risks in developing new technology) helped promote innovation, skills devel- their developmental needs, policies countries. MIGA’s multilateral opment, and growth of the private sector. The report also and objectives, on the basis of fair character and joint sponsorship by highlighted how MIGA’s guarantees helped jump start FDI and stable standards to the developed and developing countries in post-conflict situations, and supported South-South treatment of foreign investment.” were seen as significantly enhancing technology transfer and knowledge flows. confidence among cross-border On April 12, 1988 an international investors. convention established MIGA as the MIGA and Corporate Integrity newest member of the World Bank Today, MIGA’s mission remains Group. The Agency opened for straightforward: to promote foreign According to one recent estimate, $20-$40 billion is business as a legally separate and direct investment into developing siphoned from developing countries each year as a result financially independent entity. countries to support economic of corruption. Corruption also adds to the cost of doing Membership was open to all IBRD growth, reduce poverty, and improve business in many countries, undermines their investment members, and the Agency began people’s lives. climate, and weakens their rule of law. This recognition with capital stock of $1 billion. of the impact of corruption has inspired the conventions, laws, and policies that now govern business activities around the world, MIGA’s clients, as well as host and originating countries. Applying high standards of corporate integrity is an important way MIGA supports positive sustainable FDI. MIGA developed an integrity strategy in 2011 to help safeguard the development impact of investments we insure. In 2012, MIGA formalized a framework as part of our underwriting process to identify potential risks asso- ciated with unethical or illegal activities such as bribery, corruption, fraud, collusion, and money laundering. MIGA’s integrity due diligence requires consideration of the specifics of the transaction, but always includes an analysis of the project structure, its licensing or tendering process, and potential integrity or reputational risks presented by the project enterprise and the project’s par- ticipants. 18 | MIGA ANNUAL REPORT 2013 Business Operational Overview In fiscal year 2013, MIGA issued $2.8 billion in new guarantees. Of this, $1.3 billion was ceded to MIGA’s reinsurance partners. An additional $3.5 million in coverage was issued through the MIGA- administered West Bank and Gaza Investment Guarantee Trust Fund. Total portfolio runoff (contract cancellations, expiries, reductions, and translation adjustment) for the fiscal year was $2.4 billion. An increased volume of cancellations support to the financial sector in 2009 this year was largely the result of loan and 2010, particularly in Europe and repayments for shareholder loans insured Central Asia, a region severely impacted during the peak of the financial crisis. by the crisis that began in 2008. From 2010, as the global economy gradually showed signs of recovery, MIGA saw renewed interest from investors in other sectors, particularly infrastructure, manufacturing, and extractive industries. In 2011, overall foreign direct investment (FDI) flows to emerging markets declined because of the sovereign debt crisis in Europe, ongoing political turmoil in the Middle East, and volatility in certain parts of Africa. Yet even as global perceptions of risks worsened, investors searched for opportunities in frontier markets, attracted by the prospect of higher returns. This trend, coupled with recent amendments to MIGA’s Convention that expanded the scope of investments the Agency could support, has resulted in a doubling of MIGA’s business volume in the last four years. This year MIGA’s Board of Executive Directors further broadened the scope of MIGA’s product offerings by At the close of the fiscal year, the authorizing the Agency to extend our Agency’s gross exposure was $10.8 non-honoring of financial obligations billion, another all-time high continuing a cover for lending to credit-worthy three-year trend (see figure 1). state-owned enterprises (SOEs). This occurred in response to demand from commercial and investment banks seeking to fund projects carried out MIGA’s Operating by financially sound SOEs without a Environment government guarantee. MIGA continues to see high demand for the non- The global financial crisis shaped much honoring product introduced in 2009, of MIGA’s business over the past several which allows governments, and now years. The Agency provided much-needed SOEs, to access long-term commercial 20 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 21 public of 4.11.4 10 0 mbourg Senegal 0.7 03 04 05 06 07 08 09 10 11 12 13 Spain Finland igure 7 1.3 2.8 0 10 20 30 40 Egypt, Arab Republic of 0.7 n Islands tzerland Figure 8 1.1 2.6 Figure 1 0.7 Cyprus 2 8 Slovenia Austria Greece 2.3 1.0 23.9 Netherlands 0.7 Bermuda Kingdom ngapore Over 0.9 12.5 the next 12 months 2.3 Sweden 0.7 0.7 0 Senegal France 2.1 Emirates 10.0 03 04 05 06Japan 07 08 0.709 10 11 12 13 6 public 0.7 of 9.2 Infrastructure 59%magazine. d States Canada 1.6 debt for critical infrastructure projects (see box 2). Others 2.7 12 in countries eligible for concessional lending from the 46% Infrastructure Deal of the Year 2012 by Project Finance This Cyprus 0.7 Macroeconomic Availability of commercial debt is particularly important for Figure 2 – Guarantees Issued in FY 13, by International Development Association (IDA), investments partnership transaction is the first public-private 22% in Africa Germany 7.3 Mauritius 1.5 instability gross exposure Oil, gas, and mining herlands th publicAfrica of 1.40.7 5.3 IDA-eligible countries in light of decreased aid budgets. Others:sector Nigeria, net (by $ volume) Poland, exposure China, Thailand, Norway, Ecuador, 4 Tanzania, Turkey, 23% Oil, gas, and mining Fig 2 in fragile and conflict-affected economies, investments in to use a minimum revenue guarantee. Romania, Kenya, Ireland, Belgium, Mali, India, Lebanon, Tunisia, Italy, St. Kitts and Fig 5 10% Agribusiness, 0.7 10 complex projects, and South-South investments. Spain Access Sweden mbourg 4.1 1.3 to financing Nevis, Denmark, Panama, Virgin Islands (British), Colombia 17% Financial manufacturing, Japan 2.8 0.7 MIGA is also beginning to see new structures combining Trade Finance magazine acknowledged two MIGA- n Finland IslandsAccess 1.1 to qualified staff the non-honoring product with capital market transactions * Numbers may not add to 100 percent due to guarantee holders 2 domiciled in two terms In 59% of regional diversification, Infrastructure Agribusiness, 14% MIGA’s projects in and services supported investments. The magazine awarded the Asia Others tzerland 2.6 Slovenia 2.7 1.0 different countries underpinned by an eligible infrastructure investment. This 46% Infrastructure 8 sub-Saharan Africa again accountedmanufacturing, for the largest portion Pacific Deal of the Year to the Ashuganj9% Financial Power Station Greece 0.9 Bermuda 2.3 Political risk 22% Oil, gas, and mining and services oland, China, approach Thailand, Norway, widens Ecuador, MIGA’s business Tanzania, from the traditional Turkey, 23% Oil, gas, and mining of new business volume in fiscal year 2013 at 54 percent, Company Ltd. in Bangladesh. The project was recognized ngapore 2.3 Mali, 0.7 Fig 2 0 Senegal reland, Infrastructure Belgium, application capacity India, of guarantees Lebanon, that directly Tunisia, Italy, St. Kittssupport and infra- 03 04 05 06 07 08 09 10 11 12 13 Fig 5 more than double the fiscal year 2012 volume of 24 10% Agribusiness, as pioneering in many respects, particularly for the broad Panama, 2.1Islands Virgin (British), Colombia 17% Financial 6 54% Sub-Saharan Africa 31% Money Market/Cash Emirates public of 0.7 structure investments. percentmanufacturing, (see figure 3). participation of commercial lenders, export credit agencies, Limited Canada market 1.6 0.7 opportunities and services 19% Europe and and MIGA (see box 2). The Panama19% MetroMortgage-backed Line One Securities ot Cyprus add to 100 percent due to guarantee holders domiciled in two 14% Agribusiness, s Mauritius 1.5 Against this backdrop, the political risk insurance industry manufacturing, New business Central Asia by sector has shifted dramatically from the was named Americas Deal of the Year 17% 2012, withGovernment in Domestic the herlands 0.7 Corruption 4 9% Financial continues to enjoy robust growth and overall capacity is Fig 1 fin use of a MIGA guarantee16% public Sweden of 1.4 0.7 and services Fig 3financial sector (at 17 percent of new 18% volume Asia year thisPacific and the innovative by the project’s Global com- Equities 1.3 Increased ample. Investment government insurance provided by Berne Union compared to 89 percent in 2009) 6%to infrastructure East and(at Middle mercial lenders deemed particularly 10% noteworthy. Agency Spain Japan 0.7 Eearned premium members has increased by 40 percent since 2008. 54% Sub-Saharan Africa 31% 4659% percent Money Market/Cash of new Infrastructurevolume this year) and oil and gas (23 regulation n Islands Others 2.7 1.1 in the aftermath 2 North Africa* 4% Asset-backed Securities However, private insurers remain closed for business or 46% 19% Infrastructure Europe and percent). this breakdown. See figure 2 for Securities 19% Mortgage-backed This is Africa magazine recently launched its “Beyond 1.0 financial of the global Slovenia crisis 22% Oil, gas, and mining 3% Latin America and 3% Sovereign/Govt work under very narrow terms with limited tenors in many 2013 23% Oil, Central gas, andAsia mining66.3 17% Domestic Government Business Awards,” recognizing the companies that are Guarantee oland, China, Bermuda 0.9 Thailand, Norway, Ecuador, Tanzania, Turkey, instability. MIGA Fig 33.6 the Caribbean countries, especially Other those experiencing is 2 Fig15fin Fig Underlying 10% these results is the transformational nature of developing the sustainable business practices, including reland, Belgium, Mali, Senegal 0.7 India, Lebanon, Tunisia, Italy, St. Kitts and Fig 3 18% Asia and the Pacific 0 16% Agribusiness, Global Equities anama, often Virgin Islands able to (British), fill this gap in the market because of its devel- 2012 Colombia 03 04 05 06 07 08 0917% 10 Financial 11 12 13 61.7 36.9 many of these projects manufacturing, that help bring power, transpor- attention to corporate and social responsibility. MIGA Figure 3 – Guarantees 6%Issued Middlein EastFY and13, by Agency 10% and mium of 0.7 public opment mandate 0 (see 10box 1). 20 30 14% Agribusiness, tation, more efficient technologies into countries that services client Chayton Africa was recognized for work in Zambia ot add to 100 percent due to guarantee holders domiciled in two 2011 region (by $ volume) North Africa* 13.9 4% Asset-backed Securities s Cyprus 0.7 50.8 manufacturing, have the greatest need 9% Financial for investment. Governments 47% Sub-Saharan also Africa where they are introducing modern and sustainable herlands 0.7 3% Latin America and services and have demonstrated increased 3% Sovereign/Govt Guarantee interest and need to engage farming practices and improving adoption of these Figure 1 – Guarantees Portfolio, Gross 2010 46.0 24.1 20% Europe and 66.3 33.6 the Caribbean with the private sector in public-private partnerships in practices by small-scale farmers. Sweden 0.7 Figure 1 Central Asia Over the next and yearsOutstanding Exposure ($M) three Net 54% 43.6 Sub-Saharan Africa 31%to order achieve Money their development goals. Market/Cash Japan 0.7 61.7 36.9 2009 36.9 13% Asia and the Pacific 19% Europe and Fig 4 19% Infrastructure 59% Mortgage-backed Securities Others 2.7 46% Infrastructure 10% Middle East and Political50.8 risk 13.9 47% Central Sub-Saharan AsiaAfrica Figure 22% Domestic 17% 5 – Outstanding Oil, gas, Government and mining Portfolio Premium and fee income North Africa* Strengthening Partnerships, oland, China, Thailand, Norway, Ecuador, Tanzania, Turkey, 23% 18% Oil, gas, and mining Fig 1 fin Macroeconomic 46.0 Lebanon, Tunisia, 24.1 instability Fig 2 12 Fig 3 Investment 20%Asia and and income Europe the Pacific Fig 5 Distribution 16% Global by Equities 10% Agribusiness, Host Region Percent of Expanding Global Presence reland, Belgium, Mali, India, Italy, St. Kitts and 10% Latin America and anama, Virgin Islands (British), gross Colombia exposure Financial 17%Middle 6% EastAsia Central and GrossAgencyExposure 10% manufacturing, mium 43.6 staff 36.9 the Caribbean Access to qualified andAfrica* North 13% Agribusiness, Asia the Pacific and services Securities 4% Asset-backed MIGA has undertaken several initiatives to expand our ot add to 100 percent due to net exposure guarantee holders domiciled in two Fig 4 14% s 10 3% Latin America 10%manufacturing, Middle East andand 3% client base and increase our impact in the countries with Access to financing 9% Sovereign/Govt Financial Guarantee Premium and fee income 66.3 33.6 and services the Caribbean 41% Europe and the greatest need. These include growing the Agency’s North Africa* InvestmentCorruptionincome Central Asia presence outside our Washington headquarters to be 61.7 36.9 8 10%Sub-Saharan Latin America 54% and Africa 31% Money Market/Cash closer to both investors and host countries. We have also the Caribbean 26% Sub-Saharan Africa Infrastructure capacity 19% * Excludes two projects supported under Europe the MIGA- and 19% Mortgage-backed Securities strengthened our collaboration with World Bank Group 50.8 13.9 15% Asia and the Pacific administered West Bank and Gaza47% Sub-Saharan Investment Guarantee Central Asia Africa Fig 6 17% Domestic Government 10% Latin America and counterparts and other development partners. Limited market opportunities 6 46.0 24.1 Trust Fund 20% Europe and Fig 1 fin Fig 3 41%Asia 18% Europe the Pacific andand 16% Global Equities the Caribbean Increased government Central Asia MIGA’s Asia hub, based in Singapore, continues to 43.6 36.9 6% Middle EastAsia Central and 10% Agency broaden its reach with the appointment of a represen- miumregulation in the aftermath 4 Fig 4 13% 8% Middle East and 26%Asia and the Pacific Sub-Saharan North Africa* Africa 4% Asset-backed Securities tative in Seoul where the World Bank Group has opened a of the global financial crisis 10% Middle East and North Africa Premium and fee income Figure 4 – Guarantees 15% 3% Asia and Latin America Issued the Pacific FY and inAfrica*13, by 3% Sovereign/Govt Guarantee new office focused on strengthening its efforts to work in North Investment income Other 66.3 2 Fig 6 region (by number of 10% 33.6 the Latin projects) Caribbean America and tandem with the government of Korea to find sustainable 10% LatintheAmerica Caribbean and development solutions for emerging countries. MIGA also 061.7 10 20 30 36.9 the Caribbean has staff in Beijing; Hong Kong SAR, China; and Tokyo. 0 8% Middle East and 13.9 MIGA-Supported Investments Receive The Asia hub contributes to guarantee operations in terms 0350.8 04 05 06 07 08 09 10 11 12 13 North Africa 47% Sub-Saharan Africa of both underwriting and business development, and 41% 20% Europe Europe and and Industry Awards supports the Agency’s knowledge agenda in the region, 46.0 24.1 Asia Central Asia Central working closely with colleagues from the World Bank and 43.6 36.9 26% Sub-Saharan 13% Asia and the PacificAfrica This year MIGA-supported investments received an IFC. Fig 4 MIGA’s Portfolio 15% Asia and Pacific the and unprecedented number of industry awards for pioneering 10% Middle East Premium and fee income Fig 6 59% 10% Latin Infrastructure America and and innovative transactions. Project Finance International The hub carries out systematic discussions with host- North Africa* Investment addition to shifting global demand In income 46%and new product Infrastructure and Infrastructure Journal both recognized the Azito country governments as well as World Bank Group country 10% Latin the Caribbean 22% America and mining Oil, gas, and offerings, the transformation of MIGA’s portfolio has Thermal Power Plant and Expansion in Côte d’Ivoire. The offices to identify priority needs. Hub staff also work to 23% Oil, gas, and mining 8% Middle East and Fig 2 shaped by stepped-up business development been the Caribbean 10% Agribusiness, transaction, involving the expansion of the plant from identify projects where private sector financing may be and Fig 5 17% Financial efforts focusing on the Agency’s strategic priority areas. North Africa manufacturing, single to combined cycle, was named African Power Deal needed and where MIGA could add value by addressing Twenty-seven out of 32 projects supported by MIGA 14% Agribusiness, and services of the Year 2012 and Power Deal of the Year 2012, respec- the perception of country risks. In addition to its part- o * Excludes two projects supported under 41% the MIGA- and Europe (including the West Bank and Gaza Trust Fund) this year manufacturing, tively. Another transformational project in Côte d’Ivoire, the nerships with the governments of the Philippines and administered West Bank and Gaza Investment9% Financial Guarantee Central Asia fell into one or more of these priorities: investments and services Trust Fund Henri Konan Bedié Bridge was named African Transport Indonesia, MIGA has entered into high-level talks with 26% Sub-Saharan Africa 54% Sub-Saharan Africa 15% Asia31%and the Market/Cash Money Pacific 19% Europe and Fig 6 19% Mortgage-backed 10% Latin America and Securities Central Asia theDomestic 17% Caribbean Government 22 3 | MIGA ANNUAL REPORT 2013 18% Asia and the Pacific Fig 1 fin 16% Global Equities MIGA ANNUAL REPORT 2013 | 23 Fig 8% Middle East and 6% Middle East and 10% Agency North Africa North Africa* government officials of Mongolia, Myanmar, Vietnam, and Reinsurance Partners other countries in the region. MIGA uses reinsurance to increase the amount of The hub also focuses on building long-term client rela- coverage we can provide, to manage the risk profile of tionships based on frequent interactions with investors our portfolio, and to cooperate with other insurers as and banks aimed at developing business with potential required under the Agency’s Convention. The primary South-South investors, such as those from China and benefits of reinsurance accrue to our clients, the investors India, as well as new investor bases such as Korea. MIGA who gain access to increased capacity to insure projects has already seen an increase in inquiries from Korean in developing countries, and the recipient countries that box 1 investors for projects around the world, including in benefit from higher levels of FDI. Africa, the Middle East, and South Asia. Korean outbound Filling the Private Market Gap investment accounted for $20 billion in 2011—the fifth Reinsurance arrangements increase our capacity to largest source of outbound FDI from Asia. support large projects. As a result of our risk-mitigation in Egypt effect, MIGA’s involvement encourages other insurers to MIGA established our Europe, Middle East, and Africa participate in projects in frontier markets. It also enables hub in Paris in fiscal year 2012. The hub is located with the other insurers to underwrite transactions with longer AR chapter box colors World Bank and IFC offices, and MIGA works closely with tenors than they would normally consider. These insurers our World Bank Group partners to effectively leverage our benefit from our expertise in risk analysis and dispute reso- Egypt had long been perceived long-term reinsurance because shared presence in the region. MIGA’s presence in Europe lution, as well as claims handling and recovery procedures. by investors as a relatively stable the private insurance market allows the Agency to more effectively serve and develop As of June 30, 2013, $4.3 billion of MIGA’s total gross place to do business. This all had partially withdrawn from our client base. Many of these European project sponsors exposure was reinsured. gure 9 Figure 7 changed with the onset of the Egypt as a result of political on countries are focused Figure 1 that are within MIGA’s strategic Increased market civil uprising in 2011. That year opportunities unrest. priority areas, especially in sub-Saharan Africa. MIGA is an active member of the Berne Union, the brought a net divestment in Austria 23.9 leading international association for the export credit and One yearEgypt of of $483 million. Apache MIGA is now providing Kingdom 12.5 United$150 The IFC/MIGA Business Development Partnership investment insurance industry. In fiscal year 2013, MIGA Corporation, an oil and gas political stability million in reinsurance for this France 10.0 launched in fiscal year 2012 has matured into a strong participated in the Berne Union’s annual meetings as exploration and production United project for a period of up to 13States 9.2 business model for World Bank Group collaboration12 that well as in a number of technical panel discussions for Improved company based in the United years against the risks Germany of 7.3 helped stimulate joint business development and has exposure gross the Investment Insurance Committee. During the fiscal macroeconomicStates, had an existing expropriation and breach SouthofAfrica 5.3 knowledge-sharing net exposure while providing exceptional solutions to year, MIGA continued to work with its treaty reinsurance stability investment in the country that contract. Although the coverage our clients. 10 partners, ACE Bermuda Insurance Co. Ltd., XL Re Ltd, Luxembourg 4.1 was covered by the Overseas Decrease in corruption was for an existing investment, Finland 2.8 Hannover Re, and ONDD­ —the Belgian export credit Private Investment Corporation the investor had demonstrated Following a strong fiscal year 2012, the volume of joint agency. Switzerland 2.6 8 trend to (OPIC) of the United States. More favorable a long-term commitment to the IFC and MIGA projects has continued its upward When the company wanted gov’t regulations country and the investment had Greece 2.3 reach $584.7 million in 2013. The partnership will continue continued coverage for its a high development impact. Singapore 2.3 to focus its efforts in strategic priority areas including IDA- Increased access United Arab Emirates 2.1 6 MIGA’s Capital Position existing investment as well as These characteristics made the eligible countries, fragile and conflict-affected economies, to financing future exploration, development, investment eligible under Canada 1.6 and South-South investment, with an emphasis on agri- Our measures of capital adequacy and risk-bearing and production of crude oil, MIGA’s Convention, which Mauritius was 1.5 business, financial, and infrastructure sectors. capacity include economic capital consumed by the Improved infrastructure natural gas, and condensate, amended in 2010Korea, to broaden 4 guarantee portfolio. Modeled economic capital is the capacity Republic of 1.4 OPIC approached MIGA for the pool of eligible investments.Spain 1.3 There is also increasing collaboration across the World portion of MIGA’s capital that is placed at risk by the Increased access Cayman Islands 1.1 Bank Group institutions. Together, we offer financial 2 guarantee portfolio exposure (see figure 6 for consumption to qualified staff instruments and technical assistance that countries of economic capital by sector). The guarantee portfolio as Slovenia 1.0 need to achieve their development goals. Many of the a whole consumed 44 percent of MIGA’s available capital Other Bermuda 0.9 projects supported by MIGA this year involved extensive as of June 30, 2013. 0 Senegal 0.7 03 World 04 05 06Group Bank 07 08 09 10 during cooperation 11 12 the 13 underwriting 0 10 20 30 40 Egypt, Arab Republic of 0.7 process or the use of MIGA guarantees alongside IFC gure 8 Cyprus 0.7 loans or World Bank guarantee instruments. These include Figure 6 – Consumption of MIGA’s Netherlands 0.7 transformative projects such as the Azito thermal power Economic Capital by Sector in FY13 Over the next 12 months Sweden 0.7 plant and the Foxtrot and Marlin oil and gas production Japan 0.7 platforms in Côte d’Ivoire. MIGA, IFC, and the World Bank also undertook a joint country visit to Myanmar in order 59% Infrastructure Others 2.7 46% Infrastructure Macroeconomic to understand the country’s needs and present the World instability 22% Oil, gas, and mining Others: Nigeria, Poland, China, Thailand, Norway, Ecuador, Tanzania, Turkey, to assist Bank Group’s capabilities 23% and mining as it the government Oil, gas, Fig 2 continues its integration with the global economy. Fig 5 10% Agribusiness, Access to financing Romania, Kenya, Ireland, Belgium, Mali, India, Lebanon, Tunisia, Italy, St. Kitts and Nevis, Denmark, Panama, Virgin Islands (British), Colombia 17% Financial manufacturing, Access to qualified staff 14% Agribusiness, and services * Numbers may not add to 100 percent due to guarantee holders domiciled in two different countries manufacturing, 9% Financial Political risk and services Infrastructure capacity 54% Sub-Saharan Africa 31% Money Market/Cash ted market opportunities 19% Europe and 19% Mortgage-backed Securities Central Asia 17% Domestic Government Corruption 24 | MIGA ANNUAL REPORT 2013 Fig 1 fin Fig 3 18% Asia and the Pacific MIGA ANNUAL REPORT 16% Global 2013 | 25 Equities Increased government 6% Middle East and 10% Agency Eearned premium North Africa* Dispute Resolution and Pre-Claims Assistance: Keeping Investments and Benefits on Track When problems or disputes have a potentially adverse box 2 impact on MIGA-supported investments or the host country’s ability to attract future investment, we collaborate Bringing Power to Countries closely with all parties involved. In fiscal year 2013, we continued to effectively assist member governments and that Need it Most investors in resolving long-standing disputes, whether or not those disputes could have resulted in valid claims. Since inception, MIGA has participated in discussions on more than 100 disputes of this type. Our work on these matters has helped the parties to mitigate concerns that Angola has vast indigenous energy Power Station Company Limited could have led to failure of the project, withdrawal of resources, but the country’s energy (APSCL), a state-owned utility. The the investment and, possibly, a claim. Our management infrastructure is underdeveloped, and financing is for the construction of of potential claims and similar matters enables MIGA- only 30 percent of the country’s the 450-megawatt combined-cycle supported projects to continue operating in host countries, population has access to electric gas-fired Ashuganj South power preserving value for the investor and ensuring that projects power. MIGA is providing coverage plant, which is expected to provide continue to contribute to economies throughout the world. against non-honoring of sovereign nearly 12,000 households with financial obligations to the electricity. While we encourage investors to seek a resolution of a commercial lenders financing the dispute when possible, if a claim is made, MIGA’s pro- expansion of the Cambambe MIGA’s guarantees of $251.4 million cedures ensure that it is evaluated promptly and that the hydroelectric power plant. are providing coverage against the claimant is given an adequate opportunity to present an risk of non-honoring of sovereign argument in full. As a result of this approach, MIGA has HSBC Bank plc, Société Générale, financial obligations for a period of never had a dispute with a claimant regarding our determi- and BHF-Bank Aktiengesellschaft up to 13 and a half years. The Ministry nation. have arranged €391.7 million in debt of Finance of Bangladesh has financing to the government of provided an unconditional sovereign An expropriation claim that had been pending at the Angola for the Cambambe plant, one guarantee covering payment beginning of the year was withdrawn after the parties of two hydroelectric power stations obligations of APSCL under its debt finalized a settlement that was reached with MIGA’s active operating on the Kwanza River. The financing and swap arrangement assistance. expansion involves the construction with HSBC. This transaction of a second powerhouse with four represented the country’s first power There were no claims payments during fiscal year 2013. additional turbine generators with a sector credit facility agreement. total additional capacity of 700 megawatts. The project will contribute enormously to the country’s power This expansion will bring a clean sector objectives, adding clean source of energy to a country that is generation capacity through an still rebuilding after conflict and indigenous fuel source. MIGA’s contribute to Angola’s effort to involvement was crucial for this diversify its economy. important project to move forward, as insurance in the private market In Bangladesh, MIGA is backing a was limited due to the lengthy tenor financing package arranged by HSBC of the loan. of the United Kingdom to Ashuganj 26 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 27 AR chapter box colors Table 1 – Outstanding Portfolio Distribution by Sector (percent of Gross Exposure) Figure 7 – Outstanding Portfolio Distribution, by Investor Country (Percent of Gross Exposure)* FY07 FY08 FY09 FY10 FY11 FY12 Figure 9 FY13 Figure 7 Increased market Fi Infrastructure 41 41 35 30 33 38 44 opportunities Austria 23.9 Financial 29 37 47 52 49 41 32 One year of United Kingdom 12.5 political stability France 10.0 Oil, gas, and mining 13 9 7 7 5 6 11 United States 9.2 Improved Germany 7.3 gross exposure Agribusiness, manufacturing, and services 17 13 11 11 13 15 13 macroeconomic South Africa 5.3 net exposure stability Total 100 100 100 100 100 100 100 Luxembourg 4.1 Decrease in corruption Finland 2.8 Switzerland 2.6 More favorable gov’t regulations Greece 2.3 Singapore 2.3 Increased access United Arab Emirates 2.1 to financing Canada 1.6 Improved infrastructure Mauritius 1.5 Table 2 – Ten Largest Outstanding Country Exposures in MIGA Portfolio Korea, Republic of 1.4 capacity Spain 1.3 Host Country Gross Exposure ($M) % of Gross Net Exposure ($M) % of Net Increased access Cayman Islands 1.1 to qualified staff Slovenia 1.0 Croatia 934.4 8.7 400.6 6.3 Other Bermuda 0.9 Côte d’Ivoire 751.4 7.0 271.7 4.2 Senegal 0.7 03 04 05 06 0 10 20 30 40 Egypt, Arab Republic of 0.7 Ukraine 743.5 6.9 366.0 5.7 Figure 8 Cyprus 0.7 Russian Federation 677.2 6.3 343.8 5.4 Netherlands 0.7 Over the next 12 months Sweden 0.7 Serbia 558.4 5.2 409.3 6.4 Japan 0.7 Others 2.7 Angola 524.7 4.9 77.5 1.2 Macroeconomic instability Indonesia 524.3 4.9 278.0 4.3 Others: Nigeria, Poland, China, Thailand, Norway, Ecuador, Tanzania, Turkey, Fig 2 Access to financing Romania, Kenya, Ireland, Belgium, Mali, India, Lebanon, Tunisia, Italy, St. Kitts and Nevis, Denmark, Panama, Virgin Islands (British), Colombia Turkey 453.7 4.2 252.2 3.9 Access to qualified staff * Numbers may not add to 100 percent due to guarantee holders domiciled in two Ghana 341.7 3.2 309.4 4.8 different countries Political risk Bangladesh 329.6 3.1 150.3 2.3 Infrastructure capacity Limited market opportunities Corruption Fig 3 Increased government Eearned premium regulation in the aftermath of the global financial crisis 2013 66.3 33.6 Other 2012 61.7 36.9 0 10 20 30 2011 50.8 13.9 2010 46.0 24.1 Over the next three years 43.6 36.9 2009 Fig 4 Political risk Premium and fee income Investment income Macroeconomic instability 28 | MIGA ANNUAL REPORT 2013 Access to qualified staff MIGA ANNUAL REPORT 2013 | 29 Access to financing Table 3 – MIGA’s Outstanding Guarantee Portfolio in IDA-Eligible Countries Table 4 – Projects Supported in Fiscal Year 2013 IDA-eligible Amount $M Gross Exposure ($M) % of Gross Net Exposure ($M) % of Net countries Host Country Guarantee Holder Investor Country Sector (Gross Priority Area1 Côte d'Ivoire 751.4 7.0 271.7 4.2 Exposure) Angola 524.7 4.9 77.5 1.2 Ghana 341.7 3.2 309.4 4.8 Bangladesh 329.6 3.1 150.3 2.3 Asia and the Pacific Pakistan* 305.2 2.8 215.0 3.4 Afghanistan Traitex International SA Belgium Agribusiness 1.2 CA, IDA Kenya 251.9 2.3 217.1 3.4 Vietnam* 181.9 1.7 124.3 1.9 Bangladesh HSBC Bank plc United Kingdom, Power 251.4 IDA, COM, S-S China Djibouti 177.3 1.6 70.1 1.1 Uganda 161.1 1.5 82.6 1.3 Pakistan Stora Enso South Asia Sweden Manufacturing 72.0 IDA (blend)2 Afghanistan 151.9 1.4 103.3 1.6 Holdings AB Senegal 148.3 1.4 123.3 1.9 Vietnam JPMorgan Chase Bank United States Manufacturing 167.7 IDA (blend)2 Rwanda 119.6 1.1 104.3 1.6 NA Uzbekistan* 119.5 1.1 80.0 1.2 Total 492.3 Mozambique 118.0 1.1 92.0 1.4 Bosnia and Herzegovina* 96.8 0.9 96.8 1.5 Zambia 85.8 0.8 85.8 1.3 Lao People's Democratic Republic 65.6 0.6 32.8 0.5 Europe and Central Asia Nicaragua 61.9 0.6 59.1 0.9 Georgia Principals of a micro- United States Banking 1.8 IDA Guinea 51.9 0.5 46.7 0.7 finance organization (blend)2 Kosovo 49.7 0.5 49.7 0.8 operating in Georgia Central African Republic 31.4 0.3 31.4 0.5 Moldova Raiffeisen Bank SA* Romania Leasing 6.0 IDA, S-S Congo, Democratic Republic of 30.1 0.3 30.1 0.5 Georgia* 24.3 0.2 24.3 0.4 Serbia Erste Group Bank AG Austria Banking 73.9 Mali 16.2 0.2 14.6 0.2 Serbia Eurobank Ergasias S.A. Greece Banking 247.4 Ethiopia 16.1 0.1 16.1 0.3 Turkey ING Bank, a Branch of Germany Transportation 65.5 COM Moldova 16.0 0.1 16.0 0.3 ING-DiBa AG Nigeria 15.7 0.1 13.9 0.2 Ukraine Raiffeisen Bank Austria Banking 142.5 Madagascar 15.7 0.1 15.7 0.2 International AG Nepal 11.9 0.1 3.0 0.0 Guinea-Bissau 11.3 0.1 10.2 0.2 Total 537.1 Bolivia 10.8 0.1 10.8 0.2 Sierra Leone 9.9 0.1 9.9 0.2 Benin 8.7 0.1 8.6 0.1 Latin America and the Caribbean Cameroon 6.7 0.1 6.7 0.1 Honduras 6.2 0.1 6.2 0.1 El Salvador Cotecna SA Switzerland Services 23.8 Niger 6.1 0.1 6.1 0.1 Nicaragua Globeleq Mesoamérica Bermuda Power 16.3 IDA, COM Kyrgyz Republic 5.8 0.1 5.8 0.1 Energy (Wind) Limited Mauritania 5.4 0.1 4.9 0.1 Congo, Republic of 5.0 0.0 5.0 0.1 Nicaragua EcoPlanet Bamboo United States Agribusiness 27.0 IDA Group LLC Togo 4.2 0.0 4.2 0.1 Armenia* 3.7 0.0 3.7 0.1 Total 67.1 Burundi 0.7 0.0 0.7 0.0 Burkina Faso 0.7 0.0 0.6 0.0 Grand Total 4,356.3 40.5 2,639.9 41.2 * IDA-eligible, but creditworthy enough to borrow from IBRD 30 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 31 Table 4 – Projects Supported in Fiscal Year 2013 (cont’d) Table 4 – Projects Supported in Fiscal Year 2013 (cont’d) Amount $M Amount $M Host Country Guarantee Holder Investor Country Sector (Gross PriorityArea1 Host Country Guarantee Holder Investor Country Sector (Gross Priority Area1 Exposure) Exposure) Middle East and North Africa Sub-Saharan Africa Egypt Overseas Private Investment United States Oil and Gas 150.0 COM Angola HSBC Bank PLC United Kingdom Power 511.8 CA, IDA, COM Corporation Côte d’Ivoire Azalaï Hotels SA Mali Tourism 7.4 CA, IDA, S-S Jordan Suez Environnement, SA; Infilco United States, Water and 13.1 COM Degremont, Inc.; Morganti France Wastewater Côte d’Ivoire SCDM Energie; HSBC Bank plc France, United Oil and Gas 502.1 CA, IDA, COM Group, Inc. Kingdom Libya Inter MIMS Investment Limited Mauritius Manufacturing 9.8 CA, S-S Côte d’Ivoire Globeleq Holdings (Azito) Limited Bermuda Power 116.1 CA, IDA, COM West Bank and Veldkamp Technische Netherlands, West Manufacturing 1.8 CA, IDA, S-S Gabon Cotecna Inspection SA Switzerland Services 7.5 Gaza3 Ondersteuning B.V.; Bank and Gaza Al-Jebrini Dairy and Food Industry Ghana Daye Water Investment (Ghana), Netherlands, Water Supply 179.2 IDA, COM, S-S Co. BV; Abengoa Water Investments South Africa Ghana, BV; Standard Bank of West Bank and Ms. Hovestadt Pieternella (Meaf Netherlands, West Manufacturing 2.7 CA, IDA, S-S South Africa Ltd. Gaza3 Machines B.V.); Al Haram Plastic Bank and Gaza Company; Mr. Mohammad Kamel Kenya The Standard Bank of South South Africa, Power 113.6 IDA, COM, S-S I. M. Hassouneh; Mr. Hatem A.A. Africa Limited; CFC Stanbic Kenya, China Abudayya Bank Limited; Industrial and Commercial Bank of China Total 176.4 Madagascar SGS Société Générale de Switzerland Services 2.9 IDA Surveillance* Niger Cotecna Inspection Services S.A. Switzerland Services 6.2 IDA Sierra Leone Groupe Europe Handling S.A.S. France Services 1.9 CA, IDA Uganda World Power Holdings Luxembourg Power 5.3 IDA, COM Luxembourg S.à.r.l.* Zambia Chayton Africa Mauritius Agribusiness 45.9 IDA, S-S Zambia Liongate Venture Fund I SPC Cayman Islands Agribusiness 2.9 IDA Zambia Silverlands Ireland Holdings Ltd. Ireland Agribusiness 8.8 IDA Total 1,511.6 * Additional coverage provided to projects underwritten in previous fiscal years and counted as a “new project” in previous fiscal years and as a “project supported” in FY13 1. Projects in priority areas, as follows: CA: conflict-affected country; IDA: IDA-eligible country; COM: complex project in infrastructure or extractive industries; S-S: South-South investment between MIGA’s developing-member (category two) countries; SIP: project underwritten through the Small Investment Program 2. Blend countries: IDA-eligible but creditworthy enough to borrow from IBRD 3. Underwritten through the MIGA-Administered West Bank and Gaza Investment Guarantee Trust Fund 32 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 33 Singapore 2.3 Increased access United Arab Emirates 2.1 to financing Canada 1.6 Improved infrastructure Mauritius 1.5 capacity Korea, Republic of 1.4 Spain 1.3 Increased access Cayman Islands 1.1 to qualified staff Figure 9 – primary reasons in- for1.0 Slovenia Figure 8 – Ranking of the most Impor- Research and Knowledge Other tant Constraints for FDI in Developing Bermuda vesting more, or Reinvesting, in Senegal 0.9 0.7 Countries (Percent of Respondents) the Middle East and North Africa AR chapter bo 0 10 20 30 40 Egypt, Arab Republic of 0.7 (Percent of Respondents) Figure 8 Cyprus 0.7 Netherlands 0.7 Over the next 12 months Figure 9 Sweden 0.7 Increased market Japan 0.7 opportunities Others 2.7 Macroeconomic instability One year of Poland, China, Thailand, Norway, Ecuador, Tanzania Others: Nigeria, political stability Romania, Kenya, Ireland, Belgium, Mali, India, Lebanon, Tunisia, Ital Access to financing Nevis, Denmark, Panama, Virgin Islands (British), Colombia Improved Access to qualified staff * Numbers may not add to 100 percent due to guarantee holders dom macroeconomic different countries stability Political risk As part of our research and knowledge industry. In addition, it reported on Infrastructure capacity Decrease in corruption agenda, this fiscal year we published corporate perceptions of political risk More favorable MIGA’s fourth annual World and risk-mitigation strategies that Limited market opportunities gov’t regulations Investment and Political Risk report resulted from our annual MIGA-EIU Corruption on political risk perceptions and foreign investor survey. The findings Increased access Unit management. The report looked at of the survey emphasized the ongoing Increased government to financing Eearned premium sovereign default and expropriation, weakness and instability in the global regulation in the aftermath Improved infrastructure both risks with high demand for economy as a top constraint for of the global financial crisis capacity K investor protection. Specifically, the foreign investors’ plans to expand in 2013 66.3 report examined the empirical developing countries in the short Other Increased access relationship between sovereign credit term (see figure 8), and affirmed that 2012 staff to qualified 61.7 0 10 20 30 risk—typically caused by adverse political risk, over the medium term, 2011 Other 50.8 13.9 economic shocks—and expropriation was the most significant constraint to over time and highlighted some investing in developing countries 2010 0 10 20 30 46.0 40 Egypt, 24. regularities between the two types of (see figure 9). Over the next three years Figure 8 risk. 2009 43.6 The survey paid special attention Over the next 12 months A principal finding of the report was again this year to the reaction of Political risk Premium and fee income that, at a country level, the two types multinational enterprises to the Macroeconomic instability Source: MIGA-EIU Political Risk Survey 2012 Investment income of events happen in waves. The political turmoil and events in the Macroeconomic Access to qualified staff instability report highlighted that the recent Middle East and North Africa. Others: global economic crisis in high- Findings showed that political and Access to financing Romania Access to financing Nevis, D income economies has increased economic stability would induce a political risk perceptions for emerging return of corporate investors and that Access to qualified staff * Numb Corruption differen economies. Meanwhile, since the presence of investment Political risk emerging economies now tend to opportunities is important for Infrastructure capacity rely more on foreign direct investment investor re-engagement. Infrastructure capacity Limited market opportunities (FDI) and less on sovereign bond Limited market opportunities issuance as a source of foreign MIGA c ontinues to ex plor e Increased government capital, the risk of expropriation is partnerships within the World Bank regulation in the aftermath Corruption higher relative to sovereign default in Group and with external institutions of the global financial crisis Increased government Eea these economies. to address political economy issues Other regulation in the aftermath associated with the triggers of of the global financial crisis World Investment and Political Risk political risks, as well as operational 0 10 20 30 2013 also addressed general trends in the aspects directly related to political Other global economy and FDI, as well as risk insurance coverage. 2012 trends in the political risk insurance 0 10 20 30 2011 2010 Source: MIGA-EIU Political Risk Survey 2012 Over the next three years 2009 Political risk Macroeconomic instability Access to qualified staff 34 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 35 Access to financing guarantees stimulate greater harvesting of cashmere goats and meet the country‘s growing demand for power, using a Asia and the Pacific and increase income for local herders. The project will also create 35 permanent, local jobs in an area with limited domestic gas resource and efficient technology. South Asia employment opportunities and will provide training to Afghan staff. MIGA’s participation in this transaction is critical to mobilizing the debt financing for this project. Support to the power plant is consistent with MIGA’s strategic pri- The project is consistent with MIGA’s strategic priorities orities of supporting investment into IDA countries and Economies in the East Asia and Pacific 4.8 percent from 7.3 percent in 2011 of supporting investment into conflict-affected countries complex projects. region have done well given the current as a result of the euro-zone debt crisis and in countries eligible for concessional lending from the global economic environment. GDP and weakening global growth. Growth International Development Association. growth in East Asia and the Pacific has in the region is estimated to increase remained strong, though it slowed to marginally to 5.2 percent in 2013. MIGA’s support for this investment is aligned with the Pakistan 7.5 percent in 2012 and is estimated India, which accounts for 80 percent World Bank Group’s strategy for Afghanistan, particularly to remain at a similar level of 7.3 of the region’s GDP, is estimated to with regard to providing domestic sources of growth and Project name: Bulleh Shah Packaging (Private) percent in 2013. For China, the biggest grow by 5.7 percent in 2013. Net FDI jobs. Limited economy in the region, growth slowed inflows into South Asia declined to an to 7.8 percent in 2012, the weakest rate estimated $28 billion in 2012, but are The project is underwritten through MIGA’s Small Guarantee holder: Stora Enso South Asia Holdings AB since 1999. It is estimated to be 7.7 projected to rebound to $37 billion in Investment Program. percent in 2013. Excluding China, the 2013. On May 31, 2013, MIGA issued a guarantee of $72 region’s economies have been resilient million covering an investment by Stora Enso South to global economic developments, Both regions continue to be attractive Asia Holdings AB of Sweden in Bulleh Shah Packaging with GDP growth accelerating to 6.2 destinations for FDI, with investors Bangladesh (Private) Limited in Pakistan. The coverage is for a period percent in 2012 and estimated to drawn mostly to the fast-growing of up to 15 years against the risks of transfer restriction, reach 5.7 percent in 2013. Following an economies of China, India, Indonesia, Project name: Ashuganj Power Station Company Ltd. expropriation, and war and civil disturbance. increase in 2012, net FDI inflows into and Malaysia. (APSCL) East Asia and the Pacific are forecast The project entails the investment in a newly formed joint to decline marginally in 2013 to $303 During fiscal year 2013 MIGA provided Guarantee holder: HSBC Bank plc venture limited liability company, Bulleh Shah Packaging billion. In 2012, China became the guarantees for four projects in Asia. (Private) Limited. The investment will be made by Stora largest FDI recipient in the world. At year-end MIGA’s gross guarantee On December 28, 2012, MIGA issued a guarantee Enso Oyj, Finland, via its wholly owned subsidiary, Stora exposure for the region stood at $1.6 of $221.4 million to Hong Kong Shanghai Banking Enso South Asia Holdings AB, Sweden and Packages South Asia witnessed a slowdown in billion, equivalent to 15 percent of the Corporation (HSBC) of the United Kingdom to cover Limited of Pakistan. The joint venture will own and 2012, with GDP growth declining to Agency’s outstanding portfolio. its non-shareholder loan to Ashuganj Power Station operate Packages Limited’s paper, paperboard, and cor- Company Ltd. (APSCL) in Bangladesh. HSBC coor- rugated carton mills in Kasur and Karachi. dinated and arranged a $406-million financing package to APSCL for the project. On March 8, 2013, MIGA issued The joint venture sponsors intend to undertake an additional coverage of $30 million covering a swap investment program to rebuild and increase the capacity arrangement to hedge against long-term interest rate risk. of the existing facilities and set up a bio-energy plant to MIGA’s guarantees are for a period of up to 13.5 years create a sustainable source of energy for their operations. against the risk of non-honoring of sovereign financial obligations. The Ministry of Finance of Bangladesh has The project will ensure the continued sustainability of provided an unconditional sovereign guarantee covering assets that currently provide direct employment to nearly payment obligations of APSCL under the debt financing one thousand people. The sponsors’ investments will and the swap. expand capacity, introduce greater efficiencies, widen Afghanistan for export. Until now Afghanistan has exported almost product application, and enhance product quality. all of its cashmere in its raw form, as no significant pro- The project consists of the construction of a 450- This will create the potential for the project to grow its Project name: Traitex Afghanistan cessing has taken place within the country. megawatt combined cycle gas-fired plant on the basis customer base. of a contract awarded by APSCL to a consortium of Guarantee holder: Traitex International PLC The cashmere sector is currently underdeveloped in TSK Electronica y Electricidad S.A. (Spain) and Inelectra The planned investment program is expected to create Afghanistan. This is due in part to the fact that the high International AB (Sweden). This project will replace 840 jobs for local hires during the construction period On June 28, 2013, MIGA issued a guarantee of $1.2 percentage of waste material in raw cashmere increases certain existing units in the Ashuganj facility that will be in addition to the staff currently employed by the mills. million covering an investment by Traitex International its weight and therefore transport costs. Competition from decommissioned once the new plant is completed. Most of these jobs are expected to be created around PLC of Belgium in Traitex Afghanistan. The coverage is other countries where the sector is more developed has the Kasur region, which is relatively underdeveloped. The for a period of up to 10 years against the risks of transfer meant that Afghan producers and traders have had to Bangladesh currently faces an acute shortage of power project will train key local personnel to ensure transfer of restriction, expropriation, and war and civil disturbance. keep their prices low. generation capacity. This impairs the country’s economic technical skills. and social development and constrains growth. The gov- The project consists of the set up and operation of a The establishment of Traitex Afghanistan’s scouring and ernment of Bangladesh has made energy a high priority Benefits that accrue along the supply chain will include cashmere-scouring and disinfection facility in the Fibers disinfection line in Herat will allow traders to command and recently adopted an updated Power Sector Master locally-sourced wastepaper and biofuels (wheat straw)— and Textiles Industrial Park in Herat to process the fiber a higher net price for Afghan cashmere, which could Plan, which includes this project. This project will help both of which provide additional income sources to the 36 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 37 guarantees local farming community and people involved in the col- The International Finance Corporation (IFC) is also con- lection, distribution, and supply of wastepaper. sidering an investment of up to $150 million for the Ma San expansion program. Europe and Central Asia Packages Limited has undertaken various community development projects including supporting local The project’s expected development impacts include schools by renovating buildings and providing safe increased food security and safety, job creation, sig- drinking water and sanitary facilities. The company also nificant tax revenues, and improved environmental and arranges medical services for employees and the sur- social standards. rounding community, grants educational scholarships, Growth in Europe and Central Net FDI inflows in Europe and and organizes professional training, sports events, and The project will also benefit small and medium enter- Asia in 2012 declined to 2.7 Central Asia decreased by an festivals. The project puts a process and organization in prises (SMEs), as the company currently purchases raw percent, mostly on account of the estimated 8 percent in 2012 to $109 place to map the supply chains, identify social issues, fish sauce from 40 traders who in turn source from over ongoing challenges in the euro billion, but they are projected to and develop further actions to strengthen the commu- 100 producers. Its products are sold by 130,000 SME zone, which continues to be in a increase to $133 billion in 2013. The nities that are impacted by the project. retailers through 100 independent SME distributors recession. Growth in the region 2012 decline in FDI was primarily operating in all 64 cities and provinces of Vietnam. is estimated to be 2.8 percent in driven by the euro-zone recession. MIGA’s support for this investment is aligned with 2013. Robust domestic demand, the World Bank Group’s country partnership strategy The project is in line with the World Bank Group’s which had fostered growth earlier, During the fiscal year, MIGA for Pakistan, particularly with regard to providing strategy to support private sector growth through IFC was held back on account of fiscal provided guarantees for six projects employment opportunities. lending and MIGA guarantees. tightening and high unemployment. in Europe and Central Asia. MIGA’s A slowly recovering global economy gross guarantee exposure in this MIGA’s participation in the project is also aligned with a positively affected export demand region this fiscal year stood at $4.4 key agency priority, encouraging investment in countries for commodities in countries that billion, or 41 percent of the Agency’s eligible for concessional lending from the International are rich in resources. total outstanding portfolio. Development Association. Vietnam Project name: Ma San Group Consumer Products Expansion Project Guarantee holder: JPMorgan Chase Bank N.A. (Hong Kong SAR, China branch) On June 28, 2013, MIGA issued a guarantee of $167.7 million covering a non-shareholder loan by the Hong Kong SAR, China branch of JPMorgan Chase Bank N.A. (JPM) of the United States and other financial insti- tutions yet to be identified. JPM will act as the political risk insurance facility agent for a loan to support the expansion and improvement of Ma San Group’s consumer products business in Vietnam. The coverage is for a three-year period, against the risks of transfer restriction, expropriation, and war and civil disturbance. The guarantee covers a $150-million loan to refinance Georgia existing debt and general corporate purposes (including The project involves investment in the creation and investments in fixed assets) in addition to an estimated Project name: GeoCapital, Georgia subsequent expansion of operations of GeoCapital $26.5 million for associated interest. Microfinance Organization LLC (GC), a fast-growing micro- Guarantee holder: Principals of a microfinance finance institution in Kutaisi (Imereti region), Georgia. The project will help Ma San Group Corporation organization operating in Georgia GC offers small loans primarily to individuals but also to underpin its current consumer products operations in micro and small businesses. The purpose of the loans is Vietnam, diversify its products portfolio, and increase On May 29, 2013, MIGA issued guarantees totaling $1.8 to provide working capital for small businesses, house its production capacity in the food and beverage retail million covering equity investments and shareholder remodeling/repairs, education and medical expenses, and sectors. loans by two individual American investors in GeoCapital, other general purposes. These loans are extended to the Georgia. The coverage is for a period of up to three years large population of households and businesses that have against the risks of transfer restriction, expropriation, and had no or limited access to credit. war and civil disturbance. 38 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 39 In Georgia, access to finance is one of the main con- enterprise sector, encourage more investment activity, and strates Erste Serbia’s ability to find alternate sources of temically important subsidiary contributed to supporting straints for both companies and individuals. GC is helping promote the expansion of small and medium enterprises. funding in a credit-constrained environment. the Serbian economy in the aftermath of the financial a part of the “unbankable” population gain access to credit crisis. Capital adequacy well in excess of the regulatory and loans for purposes ranging from home equity loans The project underscores MIGA’s strategy of promoting MIGA’s coverage to Erste is consistent with the goals of requirement provides Eurobank Beograd in Serbia with a to medical, educational, and income-generation loans. As investments into countries eligible for concessional the second Joint IFI Action Plan for Europe and Central cushion to withstand potential shocks and helps position a large portion of these loans are extended to individuals, lending from the International Development Association Asia, through which MIGA seeks to support banks active the bank for future growth. they enhance Georgians’ capacity to pay for social services. and South-South investments. in the region. The project also contributes to the World Bank Group’s strategy of encouraging private sector devel- MIGA’s coverage to Eurobank is consistent with the goals GC’s loans carry a lower interest rate than other micro- The project is underwritten through MIGA’s Small opment in the country. of the crisis response initiative for the ECA region launched finance institutions operating in the country. This compe- Investment Program. by the World Bank Group in January 2012. As part of the tition has resulted in other institutions’ reductions in their initiative, MIGA seeks to support capital-constrained rates by an annual average of 20 percent—to the benefit of banks active in the region. The project is also aligned with low-income consumers. Serbia the World Bank Group’s strategy for Serbia as it seeks to Serbia address the spillover from the financial crisis. Since its establishment in 2011, GC has opened three Project name: Eurobank AD Beograd – Central Bank branches and employs 30 people. The company has plans Project name: Erste Bank a.d. Novi Sad Mandatory Reserves Coverage to open 17 new branches within the next three years. Guarantee holder: Erste Group Bank AG Guarantee holder: Eurobank Ergasias S.A. Turkey The World Bank Group Country Partnership Strategy for Georgia recognizes that credit constraints are severe in the On May 24, 2013, MIGA issued guarantees totaling $73.9 On March 1, 2013, MIGA issued a guarantee totaling Project name: Izmir Marine Transportation Project country, and the project addresses this concern. MIGA’s million covering loan guarantees by Erste Group Bank AG €190.0 million ($247.4 million) covering an investment by support for this investment is also aligned with the of Austria (Erste) issued in support of funding raised by its Eurobank Ergasias S.A. (Eurobank) of Greece in its Serbian Guarantee holder: ING Bank, a Branch of ING-DiBa AG Agency’s strategy of supporting investments into countries Serbian subsidiary Erste Bank a.d. Novi Sad (Erste Serbia). subsidiary, Eurobank AD Beograd. The coverage is for a eligible for concessional lending from the International The coverage is for a period of up to 15 years against the period of three years against the risk of expropriation of On June 27, 2013, MIGA issued guarantees of $65.5 million Development Association. risks of transfer restriction, expropriation, and war and civil funds for mandatory reserves held by the subsidiary in the covering non-shareholder loans by ING Bank, a branch disturbance. central bank of its jurisdiction. of ING-DiBa AG (ING) of Germany, to the Metropolitan The project is underwritten through MIGA’s Small Municipality of Izmir (MMI) for the Izmir Marine Investment Program. The project involves the expansion of lending by Erste Eurobank is a universal banking group with a significant Transportation Project in Turkey. The coverage is for a Serbia, targeting primarily micro, small, and medium network of retail banks across Central, Eastern, and period of up to 10 years against the risk of non-honoring of enterprises (MSMEs) and other priority segments in the Southeastern Europe. The group’s subsidiary banks are sovereign financial obligations. The ING loan will finance Serbian market. The project is financed by a €60 million required to maintain mandatory reserves at the central up to six ferries in support of the project. Moldova funding package, consisting of two loans: €50 million from banks of their respective jurisdictions, generally based the European Investment Bank and €10 million from KfW. on the volume of customer deposits that these subsid- This project is part of a larger effort to acquire ferries Project name: I.C.S. Raiffeisen Leasing S.R.L. These loans are supported by two loan guarantees from iaries hold. The banks are thereby exposed to the risk of and renovate wharves in the Metropolitan Municipality Erste, which will be covered by MIGA. expropriation of funds by the respective central bank. This of Izmir (MMI). The World Bank’s International Finance Guarantee holder: Raiffeisen Bank S.A. exposure leads to higher risk weights on these assets at Corporation (IFC) acted as the loan arranger for this The package is expected to improve access to finance at the consolidated level, resulting in increased capital allo- project. Other lenders include the European Bank of On November 9, 2012, MIGA issued a guarantee totaling favorable conditions for projects undertaken by MSMEs cation for country risk exposure. At the consolidated group Reconstruction and Development (EBRD) and Agence €4.75 million ($6.0 million) covering a shareholder loan and for projects in several priority areas in the Serbian level, the risk weighting determines the amount of equity Française de Développement (AFD). by Raiffeisen Bank S.A. of Romania to I.C.S. Raiffeisen economy, contributing to economic growth and job required to maintain a specified capital adequacy ratio Leasing S.R.L in Moldova (RLMD). The coverage is for a creation. (CAR) in accordance with Greek banking law. The current ferries in service in Izmir have reached the period of up to five years against the risks of war and civil end of their operating lives and therefore have high main- disturbance, transfer restriction, and expropriation. Erste Serbia will earmark a minimum of €40 million MIGA’s guarantee will help Eurobank obtain capital tenance costs and outdated technology. The new ferries for projects promoted by MSMEs as well as mid-cap relief from the CAR requirements. By obtaining MIGA’s will be significantly faster, more fuel efficient, environ- Raiffeisen Bank S.A.’s shareholder loan of €5.0 million enterprises. In addition, up to €20 million will be slated insurance against the risk of expropriation of funds, the mentally friendlier, and safer. As a result, ferry boat service is aimed at enhancing the capacity of I.C.S. Raiffeisen for investments in areas that are key for the country’s risk weighting for mandatory reserves held at the central will increase the share of sea transportation in Izmir’s Leasing S.R.L. to provide operating leases for motor economic and social development and fundamental to bank can be reduced. This will free up equity tied up for integrated public transportation system, easing road traffic vehicles, machinery, and equipment in the Moldovan strengthening its competitiveness as Serbia prepares for country risk purposes, which can be deployed to support congestion and pollution, as well as enhancing public market. MIGA has provided earlier support for RLMD’s European Union accession. These areas are knowledge its subsidiary’s franchise in Serbia. Eurobank Beograd’s safety and security. start up and expansion. economy/innovation capacity; environmental protection role in supporting productive businesses, including small and sustainability; energy efficiency and renewable energy; and medium enterprises, through credit extension helps The project is aligned with the World Bank Group’s This project is expected to contribute to further devel- health; and education. stimulate growth, employment generation, and—ulti- Country Partnership Strategy for Turkey. Improving trans- opment of the financial sector in Moldova by widening mately—poverty reduction in Serbia. portation infrastructure is a key component of the Bank financing sources, particularly to segments of the economy The financial conditions applied to most on-lending will Group’s focus on helping Turkey improve its competi- that are currently underserved. Moldova’s credit pen- reflect the financial advantage of this funding package, As a participant of the European Bank Coordination tiveness and employment opportunities. etration is low compared to other countries in the region. making the loans more affordable. Supporting productive Initiative (also known as the Vienna initiative), Eurobank It is also aligned with the World Bank Group’s Country businesses through the extension of affordable credit pledged to support its Serbian subsidiary, keeping it well MIGA’s support for this investment is also aligned with the Partnership Strategy for Moldova that emphasizes will stimulate growth, generate employment, and reduce capitalized. Eurobank’s continuing support for its sys- Agency’s strategy of supporting complex projects. the need to enhance competitiveness of the country’s poverty in the country. In addition, the project demon- 40 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 41 guarantees Ukraine Latin America and Project name: Raiffeisen Bank AVAL the Caribbean Guarantee holder: Raiffeisen Bank International AG On June 24, 2013, MIGA issued a guarantee of $142.5 million covering a loan guarantee by Raiffeisen Bank International AG (RBI) of Austria in support of funds Economic growth in Latin America Net FDI inflows to the region raised by its Ukrainian subsidiary Raiffeisen Bank AVAL and the Caribbean decreased in increased to $176 billion in 2012 and (RBAV). The coverage is for a period of up to seven years 2012 to 3 percent due to a still are projected to increase again to against the risks of transfer restriction and expropriation of weak external environment and a $192 billion in 2013. Brazil remains funds. contraction in domestic demand. a favorite investment destination, GDP growth is estimated to second to China among developing The state of Ukraine’s economy continues to remain increase marginally to 3.3 percent countries. delicate in the aftermath of the 2008 financial crisis as a in 2013. In Brazil, the region’s result of spillover effects from its euro-zone neighbors. biggest economy, GDP growth During this fiscal year, MIGA is estimated to accelerate to provided guarantees for three The project will continue to bolster the capital base of a 2.9 percent in 2013, from 0.9 projects in Latin America and the systemically important bank, strengthening the banking percent in 2012, in response to Caribbean. At year-end, MIGA’s sector in Ukraine in a difficult macroeconomic envi- countercyclical monetary and gross guarantee exposure in ronment. fiscal policies. the region stood at $1.1 billion, equivalent to 10 percent of the RBAV provides new credit to the economy—in particular to Agency’s outstanding portfolio. corporates, farms, and small and medium enterprises that create jobs and foster economic activity and growth. MIGA’s guarantee to the project is fully consistent with the World Bank Group’s Country Partnership Strategy for Ukraine that calls for job creation and the attraction of foreign direct investment to improve productivity and international competitiveness. It is also consistent with the goals of the Vienna 2 Initiative for countries of Central, Eastern and Southeastern Europe—through which MIGA seeks to support Western banks active in the region. El Salvador contract. The contract involves the financing, pro- curement, installation, and operation of import inspection Project name: Cotecna de El Salvador S.A. de C.V. equipment, including nine high-energy x-ray scanners, six pallet scanners for air freight, seven trace detectors, four Guarantee holder: Cotecna S.A. truck weighbridges, and one data control center that will coordinate and centralize all scanning operation centers in On June 27, 2013, MIGA issued a guarantee of $23.8 real time. million covering a shareholder loan from Cotecna S.A. of Switzerland (COSA) to Cotecna de El Salvador S.A. de C.V. The project will introduce scanning technology that will The coverage is for a period of up to 12 years against the reduce the clearance time for imported goods, thereby risks of transfer restriction, expropriation, war and civil dis- helping to reduce the cost of doing business for importers turbance, and breach of contract. and their clients and contributing to international trade. The technology will also help prevent duty evasion and A consortium established by COSA has been contracted result in a more accurate assessment of the value of to provide import verification services to the government imported goods. of El Salvador under a 10-year build, operate, and transfer 42 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 43 The project is fully in line with the priorities of the govern- guarantees ment’s 2012 Reform Act aimed at simplifying customs Nicaragua processes. At the end of the 10-year service contract, best- practice import verification equipment and technology will Project name: Eolo Wind Farm Middle East and North Africa be transferred to the government. Cotecna El Salvador will provide training to the Customs Administration to prepare Guarantee holder: Globeleq Mesoamérica Energy capacity for their eventual future takeover of operations. (Wind) Limited Political turmoil, transitions, expected to resume. However, a Cotecna El Salvador plans to employ about 135 local staff. and conflict in the Middle East return to FDI growth for countries On August 10, 2012, MIGA issued guarantees of $16.3 and North Africa continue to directly affected by the political million to Globeleq Mesoamérica Energy (Wind) Limited disrupt economic activity in select turmoil will depend on a return to of Bermuda to cover its equity investment in Eolo Wind countries—affecting growth, trade, stability, rebuilding of confidence, Nicaragua Farm in Nicaragua. The coverage is for a period of up to tourism, and FDI. Nevertheless, and ensuring that the business 20 years against the risks of transfer restriction, expro- the Middle East and North Africa’s environment remains open to Project name: EcoPlanet Bamboo priation, and war and civil disturbance. GDP growth in 2012 increased investment. to 3.5 percent, but is estimated Guarantee holder: EcoPlanet Bamboo Group, LLC The Eolo project involves the construction of a 44 to decelerate to 2.5 percent in During this fiscal year, MIGA megawatt wind farm in Rivas Province on the shores 2013. Oil-importing transition stepped up its efforts in the region On December 21, 2012, MIGA issued guarantees of $27 of Lake Nicaragua. Eolo consists of 22 Gamesa G90 2 countries, especially those where to prevent flight of established million to EcoPlanet Bamboo Group (EPB Group), LLC megawatt wind turbine generators, as well as the facilities political uncertainty remains, face investors and to encourage new of the United States for its investment in Nicaragua. The and equipment required to connect the generators to a significant challenges from the investments. The Agency provided coverage is for a period of up to 15 years against the risks high-voltage substation. It is estimated that Eolo will be slowdown in economic activity, guarantees for three projects, of expropriation and war and civil disturbance. able to generate approximately 169.6 gigawatt hours of growing fiscal imbalances, including one that represents the electricity per year, without requiring any fossil fuel supply. depleting foreign exchange first use of a World Bank Group The project consists of the purchase and conversion of The wind farm is expected to start operations by December reserves, and high unemployment lending or guarantee instrument in degraded land in the El Rama area into comercial bamboo of 2012 and the electricity will be purchased by local distri- rates. A strong dependency on Libya. An additional two projects plantations for the sale and export of sustainably grown bution companies Distribuidora de Electricidad del Norte, Europe for trade, where growth is were underwritten through the and harvested bamboo fiber. EPB Group plans to establish S.A. (Disnorte) and Distribuidora de Electricidad del Sur, also subdued, is contributing to MIGA-administered West Bank a pre-processing facility for the production and sale of S.A. (Dissur). these challenges. and Gaza Investment Guarantee its Forest Stewardship Council-certified bamboo fiber to Trust Fund. U.S. and multinational timber manfacturers for use in Nicaragua’s electrification rate is among the lowest in Net FDI inflows in the Middle industries such as laminates and composites for con- Central America. Additionally, reliance on thermal (oil-fired) East and North Africa increased At fiscal year-end, MIGA’s gross struction and furniture, pulp and paper production, and generating plants has made the long-term marginal costs in 2012 to $19 billion, but are guarantee exposure in the region the generation of renewable energy. Waste and lower value the highest in the region. This project aims to provide projected to fall back to $15 billion stood at $883 million, equivalent culms will be used for biomass energy to fuel the com- additional generation capacity that is not only renewable for 2013. As the political turmoil to 8 percent of the Agency’s pany’s needs, with excess being sold to the local grid. and clean, but also helps reduce the average marginal cost subsides, stronger FDI flows are outstanding portfolio. of generation, resulting in an overall reduced cost of elec- EPB’s initial investment into Nicaragua has generated over tricity to users. 500 jobs in a region with high unemployment and restored 3,750 acres of degraded land into bamboo plantations, MIGA’s participation in the project is aligned with the improving biodiversity and reducing pressure on sur- Agency’s commitment to support investment in complex rounding forests. infrastructure and into countries eligible for concessional lending from the International Development Association. EPB Group is also committed to investing in training programs and supporting local community development crude oil, natural gas, and condensate for which multiple initiatives. Egypt concession agreements have been granted by the gov- ernment of Egypt. The project is aligned with the World Bank Group’s Project name: Apache Egypt Country Assistance Strategy for Nicaragua, which aims to MIGA’s support to OPIC is in accordance with the accelerate private sector development—including through Guarantee holder: Overseas Private Investment Agency’s mandate to cooperate with national entities of assistance to exporters and hard currency earners such as Corporation its member countries, as stated in MIGA’s Convention. By agribusiness projects. providing facultative reinsurance, MIGA is enabling OPIC On October 2, 2012, MIGA issued a guarantee of $150 to provide the amount of coverage Apache requested and MIGA’s participation in the project is also aligned with million providing reinsurance for the Overseas Private was not available from private-market insurers. the Agency’s commitment to support investment into Investment Corporation’s (OPIC) coverage to Apache countries eligible for concessional lending from the Corporation of the United States. The coverage is for This project entails the reinsurance of a pool of new and International Development Association. Apache’s investments into its subsidiaries in Egypt. existing investments by Apache, an oil and gas exploration MIGA’s reinsurance coverage is for a period of up to 13 and production company. Apache, through its existing and years against the risks of expropriation and breach of planned additional investments, has signaled its intention contract. The project covered by OPIC involves existing to stay in Egypt and to expand operations. Apache also and future exploration and development and production of provides technical training in new technologies to Egyptian 44 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 45 nationals working in the joint ventures, contributes to the generating employment; transferring skills and technology; In this regard, the project is consistent with MIGA’s This project is aligned with MIGA’s objective of facilitating modernization and efficiency of the oil and gas production contributing to government revenues; and increasing strategic priorities of supporting investment into conflict- investments in conflict-affected environments as well sector, and is playing a critical role in helping Egypt’s demand for local goods and services. affected countries and South-South investments, as well as as entities eligible for assistance from the International supply of energy products keep up with domestic demand. the Agency’s commitment to the Middle East and North Development Association. By supporting these investments, MIGA is underscoring The project is aligned with the World Bank Group’s Africa given recent events in the region. its support for companies investing in Egypt during a time Country Partnership Strategy for Jordan, which calls for The project was underwritten through MIGA’s Small of transition. promotion of private sector development. This project is The project was underwritten through MIGA’s Small Investment Program. also aligned with MIGA’s strategic priority of supporting Investment Program. The project is also consistent with MIGA’s efforts to investments in complex infrastructure projects and with mobilize $1 billion in insurance capacity to support foreign the Agency’s efforts to mobilize $1 billion in insurance direct investment into the Middle East and North Africa. capacity to support foreign direct investment into the West Bank and Gaza Middle East and North Africa. West Bank and Gaza Project name: Al Jebrini Cheese Industry Project name: Al Haram Modern Plastic Products Industry Jordan Company Guarantee holders: Veldkamp Technische Ondersteuning Libya B.V.; Al-Jebrini Dairy and Food Industry Co. Project name: AS Samra Wastewater Treatment Project Guarantee holders: Ms. Hovestadt Pieternella (Meaf Project name: Jafara Co. for Food Production Machines B.V.); Al Haram Plastic Company; Mr. The MIGA-administered West Bank and Gaza Investment Guarantee holders: Suez Environnement, SA; Infilco Mohammad Kamel I. M. Hassouneh; Mr. Hatem A.A. Guarantee Trust Fund has issued two guarantees totalling Degremont, Inc.; Morganti Group, Inc. Guarantee holder: Inter MIMS Investment Limited Abudayya €1.35 million (approximately $1.7 million) covering an investment by Veldkamp Technische Ondersteuning B.V. of On June 27, 2013, MIGA issued guarantees of $13.1 million On September 28, 2012, MIGA issued a guarantee of $9.8 The MIGA-administered West Bank and Gaza Investment the Netherlands and Al-Jebrini Dairy and Food Industries covering equity investments (including future retained million to Inter MIMS Investment Limited of Mauritius Guarantee Trust Fund has issued a guarantee of €1.35 of the West Bank and Gaza in Al Jebrini Cheese Industry earnings and performance bond) by Suez Environnement, for its shareholder loan to Jafara Group Limited in Libya. million (approximately $1.7 million) covering an equity in the West Bank. The coverage is for a period of up to 10 SA (Suez), Infilco Degremont, Inc. (IDI), and Morganti The coverage is for a period of up to 10 years against the investment by Ms. Hovestadt Pieternella (Meaf Machines years against the risks of transfer restriction, expropriation, Group Inc. (Morganti) in the AS Samra Wastewater risks of transfer restriction, expropriation, and war and civil B.V.) of the Netherlands and Al Haram Plastic Company, and war and civil disturbance. Treatment Project in Jordan. The coverage is for a period of disturbance. Mr. Mohammad Kamel I. M. Hassouneh, and Mr. Hatem up to 20 years against the risk of breach of contract. A.A. Abudayya of the West Bank and Gaza in Al Haram The project involves the establishment of a greenfield Jafara is a company involved in the production, bottling, Modern Plastic Products Industry Company. The coverage company, Al Jebrini Cheese Industry, in the West Bank The project involves the expansion of the existing and distribution of drinking water and juice products in is for a period of up to three years against the risks of by Veldkamp Technische Ondersteuning B.V. of the wastewater treatment plant at AS-Samra, northeast of Libya. The company is now the fourth largest manufacturer transfer restriction, expropriation, and war and civil dis- Netherlands and Al Jebrini Dairy and Food Industries, a Amman, by Samra Wastewater Treatment Plant Company, of juices in the Libyan market and has established two turbance. local investor in the West Bank. The company will produce Ltd. on an extended 25-year build-operate-transfer (BOT) Tetra Pak juice lines, a polyethylene terephthalate (PET) and supply high-quality dairy products, including cheese basis. The total investment for the expansion is estimated mineral water production line, and canned fruit juices/ The project involves the establishment of a greenfield and cream cheese. at $205.3 million. The project will increase the wastewater sodas. Inter MIMS is a wholly-owned subsidiary of the company in the Tarqumiya Industrial Zone that will treatment capacity by some 37 percent, from the current MIMS group of Bosnia and Herzegovina. The company’s produce and supply plastic cups and containers in various This project is supported by the PSI Plus program of the 267,000 m³ per day to 365,000 m³ per day, to meet the shareholder loan will support the expansion of Jafara’s sizes for local dairy products. The company will use a new Netherlands Ministry of Foreign Affairs with a grant to needs of the population from 2015 to 2025. The expansion production capacity. Planned improvements include the technology, “extrusion and thermoforming,” to produce cover up to 60 percent of the project cost and an addi- will include the addition of two more treatment lines to construction of an additional warehouse, the purchase of high-quality plastic dairy packaging. tional amount to cover the MIGA political risk insurance the existing four treatment lines. The sludge treatment equipment for glass bottling, and a new air conditioning premium for the first three years. capacity will also be increased by approximately 80 system for the factory. There is a flourishing dairy industry in the West Bank, percent. Construction of the expansion is scheduled for but Palestinian dairy companies have to import plastic The project is expected to have a positive impact on the completion by the end of June 2015. The project’s key development impacts include the packaging materials from Turkey, Israel, and Europe as local economy by expanding the dairy sector and creating addition of new permanent jobs (158 staff employed by there are currently no local companies able to produce approximately 50 local jobs. It will also bring technical Jordan is one of the water-poorest countries in the world. the project in total), taxes paid to the government after high-quality plastic cups for dairy products. A study con- know-how to the local food-processing industry. There are The best use of its very limited water resources, including the expiration of the tax holiday, and significant local ducted by one of the investors estimates that the annual currently no companies in the West Bank that can produce renewable water resources, is a top priority for the gov- sourcing. Inputs sourced in the local market include sugar, volume of imports is over 53 million plastic cups with a processed cheese products due to lack of technological ernment. Wastewater used for irrigation or discharged pre-forms, caps, cartons, stretch folio, pallets, and glue. value of about $2.7 million. This adds significantly to the knowledge, lack of required quality and hygiene standards, into rivers and other water bodies has caused major envi- The company estimates that it spends €6.5 million yearly dairy industry’s production costs. and high investment costs. The project will produce ronmental and health concerns. The existing AS Samra on the purchase of local goods and services. In addition, healthy processed cheese products by using state-of-the- Wastewater Treatment Project built in 2008 has played a Jafara provides free water and juice to local hospitals and This project is supported by the PSI Plus program of the art technologies and ensuring high quality and hygiene critical role in wastewater treatment. However, given its schools. Netherlands Ministry of Foreign Affairs with a grant to standards, and sell these products on the domestic market limited capacity, the plant can only meet the demand of cover up to 60 percent of the project cost and an addi- at lower prices than imported processed cheese products. the population through 2015. This project will also have an important catalyzing effect tional amount to cover the MIGA political risk insurance for foreign direct investment into Libya. Investment premium for the first three years. This project is aligned with MIGA’s objective of facilitating The project will have a strong development impact by into the country dropped dramatically as the 2011 civil investments in conflict-affected environments as well increasing wastewater treatment capacity and sludge war unfolded and is only now at the very early stages of The project will create approximately 30 local jobs and as entities eligible for assistance from the International treatment capacity; introducing additional investment; recovery. MIGA’s guarantee will help signal that Libya is a transfer skills and modern technologies for plastic pro- Development Association. improving the local environment; promoting re-use of viable investment destination, despite the ongoing chal- duction. It will also strengthen the dairy industry by treated wastewater to meet increasing water demand; lenges the country is facing. reducing the need for costly imported packaging materials. The project was underwritten through MIGA’s Small Investment Program. 46 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 47 guarantees hampering the country’s economic development. A recent Côte d’Ivoire Sub-Saharan Africa government policy document, Policy and National Energy Security Strategy, estimated that only 30 percent of the Project name: Azito Thermal Power Plant and population has access to the power distribution network. Expansion This project will offer an economic and efficient means of increasing the electricity supply. Guarantee holder: Globeleq Holdings (Azito) Limited Rebuilding and improving critical infrastructure is a pillar In December 2012, MIGA issued guarantees totaling of the World Bank’s strategy for Angola’s development. $116.1 million covering an investment by Globeleq Despite the weak global recovery, Net FDI inflows into sub-Saharan The project is also aligned with MIGA’s strategic priorities Holdings (Azito) Limited of Bermuda in the Azito economic growth in sub-Saharan Africa declined in 2012 to $32 of supporting investments in complex infrastructure Thermal Power Plant in Côte d’Ivoire. The coverage is for Africa has remained strong. GDP billion, but are projected to rise in projects as well as in countries affected by conflict. a period of up to 20 years against the risk of breach of growth estimates indicate an 2013 to 40 billion. High commodity contract. expansion of 4.9 percent in 2013, prices have contributed to the following another expansion of 4.4 growth of FDI in the natural The project involves the conversion of the existing Azito percent in 2012. The region’s growth resource sector. Côte d’Ivoire Thermal Power Plant from simple-cycle to combined- is projected to accelerate over the cycle. This will include the addition of a steam turbine next couple of years to over 5 percent. During this fiscal year MIGA Project name: Azalaï Abidjan Hotel generator and heat recovery systems as well as the Excluding South Africa, the largest provided guarantees for 14 facilities and equipment required to connect the gen- economy in sub-Saharan Africa, projects in the region. At year Guarantee holder: Azalaï Hotels S.A. of Mali erator to the plant’s 225 kV substation. The project will growth was at the robust rate of 5.4 end, MIGA’s gross exposure in add approximately 140 megawatts of installed capacity percent in 2012 and this is projected sub-Saharan Africa stood at $2.8 On June 28, 2013, MIGA issued a guarantee of €5.7 to the grid, without requiring any additional gas supply, to be 6.2 percent in 2013. Strong billion, equivalent to 26 percent of million ($7.4 million equivalent) covering an investment for a total plant installed capacity of approximately 430 domestic demand, high commodity the Agency’s outstanding portfolio. by Azalaï Hotels S.A. of Mali in Azalaï Abidjan Hotel in megawatts. Since the expansion from a simple-cycle prices, and increased export volume Côte d’Ivoire. MIGA’s coverage is for a period of up to 10 to a combined-cycle plant was foreseen when the first have been important drivers of growth. years against the risks of expropriation and war and civil phase of the project was completed in 1999, the related disturbance. facilities and transmission line were designed to accom- modate the full plant expansion and output. The project consists of the development of a 180-room, four-star business hotel in Abidjan. It will be developed Côte d’Ivoire’s energy infrastructure suffers from lack of under the recently created Compagnie Hôteliére de la maintenance, system overload, and financial difficulties. Lagune S.A (CHL), a joint-venture that is 60 percent Due to limited access, over three-quarters of households owned by Azalaï Hotels S.A. of Mali and 40 percent are dependent on cheap wood charcoal, though this has owned by SIFCOM, a part of the Sifca group in Côte environmental and health costs in the long term. The d’Ivoire. The hotel will be located in a commercial district project is aligned with the World Bank Group’s Country between the airport and downtown Abidjan. Construction Assistance Strategy for Côte d’Ivoire, which stresses the is expected to be completed in 2015. critical importance of building energy capacity to sustain economic progress. The total cost of the project is approximately €26.3 million, which will be financed with sponsor equity, local MIGA’s support for this investment is also aligned bank loans, and two development finance institutions: with the Agency’s strategy of supporting investments the International Finance Corporation and Banque Ouest into countries eligible for concessional lending from Africaine de Développement (BOAD). the International Development Association, countries affected by conflict, and complex infrastructure projects. Angola The project involves the construction of a second pow- The project will provide modern hotel facilities to meet erhouse with four additional turbine generators with a the increasing volume of business travelers in the Project name: Cambambe Hydroelectric total additional capacity of 700 megawatts on the basis of country. It will create employment for about 160 staff and Project-Phase II an engineering, procurement, and construction contract contribute tax revenues and foreign exchange earnings. Côte d’Ivoire awarded to Odebrecht SA of Brazil. The Cambambe Guarantee holder: HSBC Bank Plc. plant is one of two hydroelectric power stations currently The project is aligned with MIGA’s strategic priorities of Project name: Block CI 27 Expansion Program in operation on the Kwanza River. The project is part supporting investments into fragile and conflict-affected On June 28, 2013, MIGA issued a guarantee of €391.7 of a larger rehabilitation and expansion program being countries and countries eligible for concessional lending Guarantee holders: SCDM Energie; HSBC million ($511.8 million equivalent) to lead arranger HSBC undertaken by the government of Angola, under which from the International Development Association. It is Bank Plc. covering a non-shareholder loan and interest to the country’s generation capacity is set to increase from also aligned with MIGA’s strategic priority of supporting In December 2012, MIGA issued guarantees of up to $437 the Ministry of Finance of Angola for the expansion of the around 1,500 megawatts to over 5,000 megawatts. South-South investments. million covering an equity investment by SCDM Energie Cambambe hydroelectric power station. The coverage is SAS of France and a non-shareholder loan from HSBC of for a period of 13 years against the risk of non-honoring of After decades of underinvestment in the power sector, The project was underwritten through MIGA’s Small the United Kingdom and a syndicate of commercial banks sovereign financial obligations. Angola suffers from chronic electricity shortages that are Investment Program. for the CI 27 gas field in Côte d’Ivoire. In April 2013, MIGA increased the equity investment cover by $8.1 million, and in June 2013 issued an additional guarantee of $57 48 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 49 million covering SCDM’s shareholder loan to the project The project is expected to contribute to trade facili- need resulting from rapid urbanization. It will also improve for lending from the International Development enterprise. The coverage is for a period of up to seven tation through a more efficient and rapid verification of the security and quality of the water supply. The project will Association, investments in complex projects, and years against the risks of transfer restriction, expropriation, imported goods, which replaces in most cases the tradi- generate other development impacts, such as the intro- South-South investments. war and civil disturbance, and breach of contract. tional physical inspection. It also will protect government duction of seawater treatment technology and increased revenues through the reduction of opportunities for employment and government revenues. The project consists of the construction and operation of fraud and fiscal evasion; strengthen security at the ports Block CI 27 on/offshore oil and gas facilities including an by ensuring that containerized goods are not illegal; The project supports MIGA’s strategy of promoting Madagascar existing production platform (Foxtrot), gas transportation create some 50 local jobs, and transfer technology at the South-South investments, investment in complex infra- and onshore facilities, and a greenfield platform (Marlin). end of the project. structure projects, and investments in countries eligible Project name: Malagasy Community Network for assistance from the International Development Services S.A. – GasyNet The Block CI 27 expansion project aims to meet the The project is aligned with the World Bank Group’s Association. country’s growing energy demand. Côte d’Ivoire’s energy Country Partnership Strategy for Gabon, which calls for Guarantee holder: SGS S.A. sector has suffered from a lack of investment during the improved governance and public sector capacity and last 10 years, as the country struggled with civil conflict. increasing the country’s competitiveness and creating On April 26, 2013, MIGA issued a guarantee of $2.9 Now that the country’s situation is improving, a significant employment. Kenya million to SGS S.A. of Switzerland covering its loan increase in energy investment is necessary to meet the guarantee to BNI-Madagascar for its loan to Malagasy population’s needs and support further development. Project name: Triumph Power Generating Company Community Network Services S.A. – Gasynet in Tapping Côte d’Ivoire’s gas resources will reduce the Limited Madagascar. The coverage is for a period of up to 12 country’s energy costs and limit the use of foreign reserves Ghana months against the risks of transfer restriction, expro- for energy imports. Guarantee holders: Industrial and Commercial Bank priation, war and civil disturbance, and breach of contract. Project name: Seawater Desalination Project of China, Standard Bank of South Africa, CfC Stanbic The project is aligned with the World Bank Group’s Bank The project involves the provision of import and export Country Assistance Strategy for Côte d’Ivoire, which Guarantee holders: Abengoa Water Investments good verification and the deployment of TradeNet software stresses the critical importance of building energy capacity Ghana, BV; Daye Water Investment (Ghana), BV; On June 27, 2013, MIGA issued guarantees of $102.5 application to the government of Madagascar. The MIGA to sustain economic progress. Standard Bank of South Africa Ltd. million to Industrial and Commercial Bank of China and coverage is for an existing project approved by MIGA’s Standard Bank of South Africa covering their-non share- Board of Directors in October 2007. MIGA’s support for this investment is also aligned with the On October 25, 2012, MIGA issued guarantees totaling holder loans to Triumph Power Generating Company Agency’s strategy of supporting investments in countries $179.2 million covering an equity investment and a share- Limited in Kenya. MIGA also issued a guarantee of $11.1 MIGA’s continued support for the project will help to eligible for concessional financing by the International holder loan by Abengoa Water Investments Ghana, BV million to CfC Stanbic Bank, a subsidiary of Standard improve port governance and transparency of the country’s Development Association, countries affected by conflict, of the Netherlands; an equity investment and a share- Bank of South Africa, covering its swap arrangement trade transactions. The project is also consistent with and complex infrastructure projects. holder loan by Daye Water Investment (Ghana), BV of the with Triumph to hedge against long-term interest rate MIGA’s strategic priority of supporting investments into Netherlands; and a non-shareholder loan and an interest risk. The coverage to all guarantee holders is for a period countries eligible for concessional financing from the rate swap agreement by Standard Bank of South Africa for of up to 12 years against the risk of breach of contract. International Development Association. the Seawater Desalination Project in Ghana. Gabon The project consists of the construction of an 83 The coverage is against the risks of transfer restriction, megawatt heavy fuel oil plant on a build, own, and Project name: Société de Scanning du Gabon S.A. expropriation, breach of contract, and war and civil operate basis. The plant will be located at Kitengela, near Niger disturbance. The tenors are 20 years for the equity the Athi River, approximately 25 kilometers from Nairobi. Guarantee holder: Cotecna Inspection S.A. investments, 14 years for the shareholder loans, and 12 Triumph will enter into a 20-year power purchase Project name: Cotecna Inspection S.A., Niamey years for the non-shareholder loans (including interest and agreement with Kenya Power and Lighting Company. Liaison Office On June 27, 2013, MIGA issued guarantees of €5.8 swap). million ($7.5 million equivalent) covering Cotecna The World Bank’s Africa Infrastructure Country Guarantee holder: Cotecna Inspection Services S.A. Inspections S.A. of Switzerland (COINS)’ equity The project involves the construction and operation Diagnostic found that the lack of adequate, reliable elec- investment in, and shareholder loan to, Société de of a seawater desalination plant in Accra by Befesa tricity supply is Kenya’s largest infrastructure challenge On December 19, 2012 MIGA issued a guarantee of $6.2 Scanning du Gabon S.A, a joint venture between COINS Desalination Developments Ghana Ltd, a joint venture and a key constraint to economic growth (contributing to million covering an investment by Cotecna Inspection and the government of Gabon. The coverage is for a company of Abengoa Water Investments Ghana, BV; Daye economic losses of an estimated 2 percent of GDP). The Services S.A. (COINS) of Switzerland in Cotecna period of up to 10 years against the risks of transfer Water Investment (Ghana), BV; and their local partner project will help Kenya achieve a more diversified energy Inspection S.A., Niamey Liaison Office in Niger. The restriction, expropriation, war and civil disturbance, and Hydrocol Ltd. The plant will be built on a 25-year build- mix and stability to its power generation. The country coverage is for a period of up to six years against the risks breach of contract. own-operate-transfer (BOOT) basis and is expected to remains heavily dependent on hydropower, which is of transfer restriction, expropriation, war and civil dis- supply 60,000 cubic meters of potable water per day to frequently negatively impacted by drought. Installed turbance, and breach of contract. COINS has been contracted to provide inspection the residents and businesses in the project area. thermal capacity provides a less expensive alternative to services to the government of Gabon under a six-year investments in emergency diesel-fired plants. COINS will provide services to the government of Niger build, operate, and transfer contract. This contract Accra is one of the major cities in Ghana that is experi- on a build-operate-transfer basis in return for a monthly involves the financing, procurement, installation, and encing rapid urbanization and population growth. Many The project is further supported by a partial risk operating and management service fee. These services operation of import inspection equipment, including residents in the city lack access to piped or safe water, guarantee from the World Bank’s International include pre-shipment inspection and document verifi- two high-energy mobile x-ray scanners at the Ports of and many old settlement areas and urban suburbs are Development Association that backstops a letter of cation at origin; the provision, installation, operation, and Libreville-Owendo and Gentil; maintenance and technical facing water shortages. The project will provide potable credit from JP Morgan Bank of London. maintenance of three high-energy scanners at three sites assistance to the operation; and training and transfer to water to up to 500,000 residents in the Teshie-Nungua (Niamey Route, Niamey Rive Droite, and Maradi); goods the government at the end of the six-year contract. catchment of Accra and help meet some of the immense MIGA’s guarantees are aligned with the Agency’s verification, inspection, and valuation; training and logistic strategy of supporting investments in countries eligible assistance to the government for the modernization of 50 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 51 national customs with the objective of enhancing bud- MIGA’s support for this investment is aligned with the getary revenues and security; and the eventual transfer of World Bank Group’s country partnership strategy for Sierra Zambia Zambia the scanners to the government. Leone, particularly with regard to supporting the devel- opment of a competitive private sector. Project name: Chobe Agrivision Company Ltd. Project name: Silverlands Ranching Limited The project will introduce greater transparency and effi- ciency into Niger’s import verification processes. The MIGA’s participation in the project is also aligned with key Guarantee holder: Chayton Africa Guarantee holder: Silverlands Ireland Holdings (Z2) transparent audit trail provided by scanning data will Agency priorities, which include encouraging investment Limited also help the government secure revenues through the in post-conflict countries and countries eligible for con- On June 27, 2013, MIGA issued a guarantee of $45.9 elimination of opportunities for fraud and fiscal evasion. cessional lending from the International Development million to Chayton Africa of Mauritius covering its On May 22, 2013, MIGA issued a guarantee of $8.8 million Security at points of entry will also be enhanced by Association. The project was underwritten through MIGA’s investment in Chobe Agrivision Company Ltd. in Zambia. covering an equity investment by Silverlands Ireland ensuring that containerized goods are not illegal. In Small Investment Program. MIGA’s coverage is for a period of up to 15 years against Holdings (Z2) Limited of Ireland in Silverlands Ranching addition, the proposed project will facilitate trade through the risks of transfer restriction, expropriation, war and civil Limited in Zambia. The coverage is for a period of up to 10 more efficient and rapid verification of imported goods. disturbance, and breach of contract. years against the risks of transfer restriction, expropriation, and war and civil disturbance. COINS will provide training and build capacity for the Uganda The project involves an investment by Chayton Africa (CA) government’s future takeover of operations and improve to acquire and improve Somawhe Estates, an existing The project involves the acquisition of the assets of public resource management. The operations will sustain Project name: Bujagali Energy Ltd. 12,822 hectare commercial farm in the Mpongwe Farm Foresythe Estates Limited, an existing 19,090 hectare 136 local jobs. Block in the Copperbelt Province of Zambia. Approximately cattle farm, located in Zimba, in the southern province Guarantee holder: World Power Holdings Luxembourg 2,874 hectares of land are cleared with 2,611 hectares of Zambia. The farm has been in operation for over 100 The World Bank Group’s areas of focus in Niger include S.à.r.l. under pivot irrigation. CA intends to bring an additional years and exclusively breeds, rears, and sells live cattle. increasing transparency and governance as well as 1,800 hectares under irrigation. The farm cultivates soya, The new owners intend to improve and expand the farm’s improving cross-border trade. This project supports On July 27, 2012, MIGA amended an existing guarantee by maize, wheat, and barley for consumption in Zambia. operations, including enlarging the current cattle herd and both these objectives. It is also aligned with MIGA’s $5.3 million for World Power Holdings Luxembourg S.à.r.l. adding irrigation and feedlots. strategic priority of supporting investments into countries (WPH), an affiliate of Sithe Global (USA), covering their CA plans to implement efficient agricultural practices eligible for concessional lending from the International additional equity investment in the Bujagali hydropower such as crop rotation and zero tillage, soil and water man- Promoting agricultural growth and diversification has been Development Association. This is the first guarantee MIGA project. In 2007, MIGA issued a guarantee of $115 million agement, and additional improvements to increase pro- identified as a key development challenge in the World has issued for an investment in Niger since the country covering WPH’s initial investment in the plant. The ductivity and sustainable crop yields. As well as improving Bank Group’s Country Partnership Strategy for Zambia. became a MIGA member in 2012. investor has increased its equity investment due to addi- productivity of the land, the introduction of new tech- The vast majority of the very poor derive their livelihoods tional costs associated with the project. The coverage is nologies and methods offers the chance for substantial from subsistence smallholder agriculture, and overall for a period of up to 20 years against the risk of breach demonstration effects. The agricultural sector has been agricultural productivity remains low. The Zambian govern- of contract. This additional coverage brings MIGA’s gross identified by both the Zambian government (in its national ment’s Sixth National Development Plan specifically iden- Sierra Leone exposure under the project to $120.3 million. development plan) and in the World Bank’s Country tifies agriculture and livestock as potential growth areas Partnership Strategy as a key area where there is potential that could unlock Zambia’s natural resource endowments Project name: Sky Handling Partner Sierra Leone The project consists of the construction and operation to contribute to development and economic growth. to provide a basis for development. Limited of a 250 megawatt, run-of-the-river hydropower plant on Although 58 percent of the land in Zambia (75 million the Victoria Nile by Bujagali Energy Ltd. (BEL), of which hectares) is classified as having medium to high potential In addition to contributing to Zambia’s overall agricultural Guarantee holder: Groupe Europe Handling S.A.S. WPH is a partner. It was developed on a build-own- for agriculture, only about 14 percent of arable land is cul- development strategy, Silverlands Ranching Limited will operate-transfer basis and reuses water flowing from two tivated. The project will also contribute to increased food offer assistance to smallholder farmers regarding immu- On December 6, 2012, MIGA issued a guarantee of €1.43 existing upstream facilities to generate electricity. The first security in the region. According to the World Bank, food nization strategies for cattle belonging to local villagers, million ($1.9 million) covering a shareholder loan from generating unit was commissioned in February 2012 and production in Africa needs to double by 2050 to avoid where mortality rates are much higher and calving rates Groupe Europe Handling S.A.S. of France to Sky Handling the project reached full capacity in June 2012. The project widespread starvation. are lower than commercial farms. This assistance to small- Partner Sierra Leone Limited. The coverage is for a period also includes an associated Interconnection Project, which scale farmers in the area will help improve the quality of of up to 10 years against the risks of transfer restriction, consists of a series of transmission lines to be owned and The project is aligned with MIGA’s strategic priorities traditional cattle and will have a significant impact on expropriation, and war and civil disturbance. operated by the Uganda Electricity Transmission Company. of supporting investments into countries eligible for Zambia’s overall production. assistance from the International Development Association The project involves modernization and expansion of the Reliable and accessible electricity is critical for Uganda’s and South-South investments. The new owners will also make significant investments current cargo-handling services in the Freetown-Lungi social and economic development. Daily power shortages to improve the farm’s infrastructure, including improving International Airport (FNA) by Sky Handling Partner Sierra have stunted economic growth by an estimated one staff housing and sanitation and enhanced environmental Leone Limited. The new cargo terminal is being built to percent of the country’s gross domestic product. The management measures. The farm is expected to employ international standards and will accommodate a maximum Bujagali project has increased supply to the national power 125 local staff. capacity of 7,000 tons of cargo per year. The terminal will grid and reduced the need for more costly thermal power. have a separate import and export area, where cold tem- The project was underwritten through MIGA’s Small perature rooms, dangerous goods storage, and security In addition to MIGA’s guarantee, the World Bank Group Investment Program and is aligned with MIGA’s strategic rooms will be installed. is supporting the project with $130 million in loans priority of supporting investments into countries eligible from the IFC and a partial risk guarantee of up to $115 for assistance from the International Development The project is expected to have a positive catalytic effect million from the International Development Association. Association. on local businesses by providing the country’s first airport MIGA’s guarantee was essential to securing Sithe Global’s cargo handling and storage facilities and services meeting investment. international standards. 52 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 53 Zambia Technical Assistance Project name: Yalelo Limited Guarantee holder: Liongate Venture Fund I SPC On March 12, 2013, MIGA issued a guarantee of $2.9 million covering an equity investment by Liongate Venture Fund I SPC of the Cayman Islands in Yalelo Limited in MIGA’s technical assistance mandate is implemented under the Zambia. The coverage is for a period of up to 10 years against the risks of transfer restriction, expropriation, and umbrella of FIAS, the World Bank Group’s multi-donor Facility war and civil disturbance. for Investment Climate Advisory Services. The project involves the establishment of an aquaculture facility on the Zambian side of Lake Kariba in Siovonga province. The project will harvest the local species of tilapia for sale in Lusaka. The project is expected to produce 2,500 tons of tilapia in the first year, increasing to 7,600 tons by year three. Fish production in Zambia is not meeting local demand Through its financial support to this partnership and advised the government on the ratification of the MIGA and the country imports over 40,000 tons of frozen fish funding vehicle, MIGA contributed to advisory services Convention, which had been signed two years before. per year. Yalelo will contribute to Zambian food security by that help developing countries level the playing field for Together with MIGA, the team provided technical infor- providing a local source of tilapia on a commercial scale. businesses, make markets more competitive, deliver mation and facilitation during several stages of the mem- The project is also expected to generate 100 local jobs. reforms in strategic sectors, and facilitate international bership process. trade and investment. The project was underwritten through MIGA’s Small Another example is Rwanda, an IDA-eligible country, Investment Program and is aligned with MIGA’s strategic In calendar year 2012, FIAS projects contributed to 76 sig- where the FIAS team is helping the government attract priorities of supporting investments into countries nificant investment climate improvements in 41 countries. investments in horticulture and tea to boost employment eligible for concessional lending from the International Of these improvements, 72 percent were in IDA countries opportunities and exports in these key sectors. It helped Development Association. and 34 percent in conflict-affected states—both MIGA develop crucial reform proposals on a green leaf pricing priority areas. FIAS’ strategy over the next four years mechanism expected to strengthen sustainability of the tea emphasizes sector-specific investment climate reform and sector and help pave the way for a $200-million expansion is designed to unlock investment opportunities in MIGA plan that could result in doubling the area under pro- and World Bank Group priority sectors and industries, duction and export volume. The reform is also expected especially in fragile and conflict-affected countries where to significantly improve the income of 65,000 farmers and MIGA’s guarantee services are of particular relevance to their families active in the sector. investors. For example, with FIAS support the fragile state of Comoros deepened reform efforts and became a member of MIGA this fiscal year. The FIAS-supported team directly 54 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 55 Independent Evaluation Group Compliance Advisor/Ombudsman The Independent Evaluation Group (IEG) assesses MIGA’s strategies, policies, and The Office of the Compliance Advisor Ombudsman (CAO) is the independent projects to improve the Agency’s development results. IEG is independent of accountability mechanism for MIGA and IFC and reports directly to the President MIGA management and reports its findings to MIGA’s Board of Directors and the of the World Bank Group. Committee on Development Effectiveness. In fiscal year 2013 IEG included evaluation of MIGA’s work findings and lessons from its evaluation work. IEG and The CAO responds to complaints from people affected by further consideration. The CAO is monitoring actions in in its country program evaluations for Afghanistan. MIGA’s MIGA continued work on refining practice standards for MIGA and IFC-supported business activities, with the goal response to the audit findings. work was also assessed in IEG’s evaluations of World Bank MIGA evaluations, using the Good Practice Standards of enhancing social and environmental outcomes on the Group support to forestry, infrastructure, and innovation. developed by the Evaluation Cooperation Group. ground and fostering greater public accountability of both In 2011, the CAO received two complaints regarding IEG’s Biennial Report on Operations Evaluation focusing agencies. the Bujagali power plant in Uganda, supported by IFC on the private sector noted that MIGA has upgraded its IEG also started conducting cluster evaluations of projects and by MIGA in 2007 and by MIGA in 2013. The first development performance assessment system, while also underwritten though MIGA’s Small Investment Program. The CAO has three roles. The CAO’s dispute resolution complaint was filed by former employees involved in the emphasizing the need to find a cost-effective way of mea- arm works to identify the causes of conflict and helps construction of the project regarding injuries sustained suring the development effectiveness of MIGA projects IEG’s reports and recommendations are publicly disclosed stakeholders resolve concerns using a flexible, problem- in the course of their work; the second was filed by local consistent with MIGA’s business model as a political risk on its website at http://ieg.worldbankgroup.org. solving approach. The CAO’s compliance arm oversees community members concerned about project impacts insurer. investigations of MIGA’s and IFC’s social and environ- during construction. The company and complainants mental performance to ensure compliance with applicable agreed to undertake a collaborative process to address the IEG’s most recent review of the World Bank Group’s policies, guidelines, procedures, and systems. In its concerns, and the CAO continues to work with the parties results and performance concluded that 69 percent of a advisory role, the CAO provides independent advice to to help them resolve the remaining issues raised in the sample of 26 evaluated MIGA projects had achieved satis- the World Bank Group President as well as MIGA and IFC complaints. In April of this fiscal year, the CAO received a factory development outcomes or better—that is, they met management on systemic environmental and social issues. third complaint about the project from former construction or exceeded MIGA’s financial, economic, environmental, workers raising concerns about unpaid wages and benefits. and social benchmarks. Successful projects provided The CAO released a compliance audit in April 2013 related This complaint is in assessment. services and products unavailable in local markets and to a 2010 complaint regarding the Mozal Aluminum showed high levels of productivity. Smelter in Mozambique, which MIGA guaranteed in In October 2012 and February 2013, the CAO received two 1998. The complaint raised concerns about the impacts of complaints from local communities regarding the Oyu IEG continues to validate MIGA’s self-evaluations of its increased emissions during a period when the smelter’s Tolgoi mining project in Mongolia, for which MIGA and guarantee projects using a methodology that was jointly fume treatment centers were shut down for maintenance. IFC have disclosed plans to support. During the CAO’s developed by IEG and MIGA. IEG also conducts inde- Agreement was not reached through a CAO mediation assessment, the parties expressed an interest in partici- pendent evaluations of MIGA as part of its micro-eval- process and the case was transferred to the CAO’s com- pating in a dispute resolution process facilitated by the uation work. During this fiscal year, IEG reviewed six MIGA pliance function in December 2011. The compliance audit CAO to help address their concerns. The CAO is currently self-evaluations and completed two direct evaluations of found that more proactive supervision of risks related to working with the parties to finalize the way forward in this MIGA-supported projects. the failure of Mozal’s fume treatment centers would have regard. been appropriate. MIGA’s involvement in this project came IEG and MIGA continue to collaborate on a joint working to an end during the audit process. In its response IFC, Visit www.cao-ombudsman.org for more information group to strengthen MIGA’s self-evaluation system. IEG which provided financing, acknowledged that the issues about these cases and the CAO’s activities. conducted several events for MIGA staff on topics covering identified by the audit are important ones and warrant 56 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 57 Management’s Discussion and Analysis (FY13) Overview Established in 1988, the Multilateral MIGA is committed to promoting projects Investment Guarantee Agency (MIGA or that are economically, environmentally, and Financial Statements “the Agency”) is a member of the World Bank Group. The World Bank Group also includes the International Bank for socially sustainable, and that promise a strong development impact. By providing PRI for FDI in developing countries, MIGA is able to play Reconstruction and Development (IBRD), a critical role in supporting the World Bank the International Development Association Group’s broad strategic priorities of ending (IDA), the International Finance Corporation extreme poverty and promoting shared pros- (IFC), and the International Centre for perity. Settlement of Investment Disputes (ICSID). MIGA is a legal entity separate and distinct Since its inception, MIGA has issued $30 from IBRD, IDA, IFC, and ICSID, with its billion of guarantees (including amounts issued own charter (the “Convention”), share under the Cooperative Underwriting Program), capital, financial structure, management, in support of 729 projects in 108 member and staff. Membership in the Agency, which countries. The Agency has also supported currently stands at 179 countries, is open to numerous technical assistance activities, as all members of IBRD. well as multiple programs at regional and global levels in member countries. MIGA’s mission is to promote foreign direct investment (FDI) into developing countries MIGA is financially self-sustaining, and its activities are supported by a strong capital base and a comprehensive risk management framework. The Agency prepares its financial statements in accordance with accounting prin- ciples generally accepted in the United States of America (U.S. GAAP) as well as International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Development Activities Summary of Business Segments MIGA seeks to fulfill its mission in developing member countries by offering: PRI, technical assistance, research and knowledge services, and investment dispute resolution. Political Risk Insurance MIGA provides investment guarantees against certain non-commercial and sovereign risks to eligible foreign investors for qualified investments in developing member countries and offers coverage against the risks of: 1) transfer restriction Management’s Discussion Financial Statements and inconvertibility, 2) expropriation, 3) breach of and Analysis (FY13) contract, 4) war and civil disturbance, 5) the non- Independent Auditor’s Report honoring of a sovereign financial obligation, and Overview Balance Sheet 6) the non-honoring of financial obligation by a Development Activities Statement of Operations state-owned enterprise. Investors may choose any to support economic growth, reduce poverty, Summary of Business Statement of Comprehensive Income combination of these covers1 (see Box 1). MIGA and improve people’s lives. To this end, the Segments Statement of Changes in Shareholders’ Equity Agency acts as a risk mitigator, providing insures new and existing cross-border investments Outlook and Challenges Statement of Cash Flows originating in any MIGA member country, destined investors and lenders in the international Funding Sources for any developing member country. Types of Statement of Subscriptions to Capital Stock investment community with the level of investments that can be covered include equity, Capital Management and Voting Power comfort necessary to invest in developing shareholder and non-shareholder loans, and loan Investment Management Statement of Guarantees Outstanding countries. MIGA’s core business is the pro- guarantees (provided the loans have a minimum Critical Accounting Policies vision of political risk insurance (PRI). In Notes to Financial Statements maturity of more than one year). Other forms addition, as part of its mandate, the Agency Results of Operations carries out complementary activities such as of investments—such as technical assistance Corporate Governance and management contracts, or franchising and providing technical assistance, research and licensing agreements—may also be eligible. Table knowledge services, and dispute resolution 1 contains a summary of cumulative guarantees to support FDI. issued in member countries. 1 Smaller guarantees may be underwritten through the MIGA’s Small Investment Program (SIP), but SIP coverage is limited to the risks of transfer restriction, expropriation, and war and civil disturbance. 58 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 59 Table 3 shows the sector distribution of MIGA’s gross and net guarantee exposures at the end of each of the past three fiscal years. The percentage of net exposure in the Oil & Gas, Infrastructure and Manufacturing sectors increased by 2.4 percent, 4.1 percent, and 2.7 percent respectively from Box 1 – Risks Covered by MIGA Guarantees the previous fiscal year. In contrast, the net exposure in the Financial and Tourism, Construction and Services sectors decreased by 5.3 percent and 4.0 percent, respectively, in FY13. The decrease in net exposure to the Financial sector is attributable mainly to the maturing contracts that MIGA provides PRI to eligible investors and lenders against the following non-commercial risks: supported the Agency’s FY08-09 Financial Sector Initiative, particularly in Europe and Central Asia, as noted previously. rr Transfer restriction and inconvertibility – the risk of inconvertibility of local currency into foreign exchange for transfer outside the host country. Currency depreciation is not covered. Table 3 – Sector Distribution of Gross and Net Exposure ($M) rr Expropriation – the risk of partial or total loss of the insured investment as a result of acts by the host government that may reduce or eliminate ownership of, control over, or rights to the insured investment. Gross Net % of Total Net Exposure rr War and civil disturbance – the risk of damage to, or the destruction or disappearance of, tangible covered assets caused by politically FY13 FY12 FY11 FY13 FY12 FY11 FY13 FY12 FY11 motivated acts of war or civil disturbance in the host country, including revolution, insurrection, coups d’état, sabotage and terrorism. rr Breach of contract – the risk of being unable to obtain or enforce an arbitral or judicial decision recognizing the breach of an obligation Agribusiness 212 224 246 208 197 187 3.2 3.1 3.6 by the host government. Financial 3,430 4,297 4,456 1,988 2,270 2,341 31.0 36.3 44.7 rr Non-honoring of a sovereign financial obligation – the risk that a sovereign fails to honor an unconditional financial payment Infrastructure 4,719 3,920 2,961 2,757 2,436 1,694 43.0 38.9 32.3 obligation or guarantee, where the underlying project meets all of MIGA’s eligibility requirements. Unlike MIGA’s breach of contract Manufacturing 999 774 790 641 457 472 10.0 7.3 9.0 coverage, this coverage does not require a final arbitral award or court decision as a condition of payment of a claim. Mining 239 241 243 170 171 172 2.7 2.7 3.3 rr Non-honoring of financial obligation by a state-owned enterprise – the risk that a state-owned enterprise fails to honor an Oil & Gas 931 336 234 420 261 195 6.6 4.2 3.7 unconditional financial payment obligation or guarantee, where the underlying project meets all of MIGA’s eligibility requirements. This Tourism, Const and Services 228 554 193 226 469 177 3.5 7.5 3.4 coverage does not require a final arbitral award or court decision as a condition of payment of a claim. Total 10,758 10,346 9,122 6,410 6,262 5,239 100.0 100.0 100.0 Note: numbers may not add up due to rounding. Table 1 – Cumulative Guarantees Issued in Member Countries MIGA is able to provide investors with a higher level of investment insurance coverage through the use of reinsurance arrangements with public and private insurers. On a programmatic basis, MIGA cedes exposure to its reinsurance partners, thereby enhancing its capacity and allowing it FY13 FY12 FY11 FY10 FY09 to better manage its risk profile, project and country exposure levels. Whereas MIGA assumes the credit risk for its reinsurance partners under facultative reinsurance arrangements, this risk is borne by the investor under the Cooperative Underwriting Program (CUP). MIGA may also act as Cumulative Guarantees Issued ($B)* 30.0 27.2 24.5 22.4 20.9 a reinsurer, assuming investment portfolio exposure from both public (e.g. export credit agencies) and private insurers – thereby freeing up their Host Countries 108 105 104 100 99 capacity and allowing them to offer additional support to their policyholders. An example of this was MIGA’s support of $150 million reinsurance to OPIC for the Apache Corporation project in Egypt. * Includes amounts from Cooperative Underwriting Program. Technical Assistance (TA) The total gross and net exposures at June 30, 2013 amounted to $10.8 billion and $6.4 billion compared to $10.3 billion and $6.3 billion, respec- MIGA supports the multi-donor Investment Climate Advisory Services of the World Bank Group, which helps governments design and implement tively, at June 30, 2012. During FY13, MIGA supported 30 projects2 of which 25 projects were in one or more priority areas identified in the Agency’s reforms to improve their business environment and attract domestic and foreign investment. Investment Climate Advisory Services remains business strategy. This includes guarantees issued for $2,047.3 million in support of 21 projects in IDA-eligible countries, $1,924.3 million in focused on IDA and conflict-affected countries. support of 11 complex projects, $1,150.3 million in support of seven projects in conflict affected countries and $357 million in support of seven projects with South-South investments. MIGA’s financial contribution has supported projects that reduce policy impediments and provide support to governments in attracting new investors as well as retaining and expanding existing investments. Table 2 details the regional distribution of MIGA’s gross and net guarantee exposures at the end of each of the past three fiscal years. The percentage of net exposure in the Africa and Asia regions increased by 5.3 percent, and 1.2 percent, respectively, from the previous fiscal year, Research and Knowledge Services while the net exposure in the Europe and Central Asia region decreased by 7.9 percent in FY13. The increase in the Africa and Asia’s percentage MIGA carries out research and disseminates information to promote investment in its developing member countries. This year’s annual World of net exposure can be attributed to several projects supporting Oil & Gas, Infrastructure, Services and Manufacturing sectors in these regions. Investment and Political Risk Report by MIGA looked at the risk of sovereign defaults, typically caused by adverse economic shocks, and how Conversely, the decrease in the exposure in Europe and Central Asia is attributable mainly to the maturing contracts relating to MIGA’s FY08-09 it relates to expropriation. Both the risks of sovereign default and expropriation remain significant issues for foreign investors amid the global Financial Sector Initiative. economic slowdown and continued political instability. The report also addressed FDI in the Middle East and North Africa in light of the Arab Spring, as well as the reaction of multinational enterprises to those developments. Table 2 – Regional Distribution of Gross and Net Exposure ($M) Investment Dispute Resolution Consistent with Article 23 of the MIGA Convention, the Agency seeks both to remove impediments to the flow of investment to developing Gross Net % of Total Net Exposure member countries and to encourage the settlement of disputes between investors and host governments. MIGA actively pursues the resolution of disputes affecting MIGA-supported projects. In many cases, these efforts focus on situations in which either a claim has been or is expected to be filed, but MIGA will also assist in resolving problems that are not related to its cover. During FY13, MIGA engaged with investors or governments FY13 FY12 FY11 FY13 FY12 FY11 FY13 FY12 FY11 in relation to projects located in Argentina, Central African Republic, China, Ethiopia, Guinea, Mali, Rwanda, Sierra Leone, Syria, and Uganda. Africa 2,777 1,574 1,102 1,628 1,258 886 25.4 20.1 16.9 Asia 1,621 1,392 1,296 954 861 759 14.9 13.7 14.5 In appropriate circumstances, the Agency will mediate disputes between states and investors not guaranteed by MIGA if such disputes inhibit the flow of additional investment to the country. In such circumstances, MIGA may seek compensation for these services and reimbursement for its Europe and Central Asia 4,408 5,543 5,432 2,583 3,018 2,844 40.3 48.2 54.3 costs in conducting the mediation. Latin America and 1,069 1,069 1,006 673 642 569 10.5 10.3 10.8 the Caribbean Outlook and Challenges Middle East and North Africa 883 768 416 572 483 246 8.9 7.7 4.7 Market Trends Adjustment for Dual Country In recent years, FDI to emerging markets has been impacted by the sovereign debt crisis in Europe, ongoing political turmoil in the Middle - - -130 - - -65 - -1.2 and Master Agreements* East, and volatility in certain parts of Africa. These events, along with the search for new opportunities as reflected in increased South-South Total 10,758 10,346 9,122 6,410 6,262 5,239 100.0 100.0 100.0 investments, have resulted in stable demand for MIGA’s guarantees consonant with MIGA’s operational priorities. Note: numbers may not add up due to rounding. Operational Priorities * Master Agreements are guarantee contracts that cover projects in more than two host countries, up to a single maximum exposure amount. In FY11, MIGA’s Board of Directors approved the Operational Directions paper, FY12-14 Strategy: Achieving Value-Driven Volume, which reaffirmed MIGA’s operational priorities namely: The adjustment compensates for counting the same exposure more than once. rr Investments in IDA countries, a key area of comparative advantage for MIGA. 2 In addition, MIGA is supporting two projects executed through the West Bank and Gaza Trust Fund during FY13. rr Investments in conflict-affected countries, an area of increased engagement for the Agency over the past few years and where MIGA remains strongly relevant. 60 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 61 rr Investments in complex projects, mostly in infrastructure and the extractive industries, often involving government intervention and Capital Adequacy resulting in a delicate balance of risk-sharing by stakeholders. Following the adoption of the Economic Capital-based capital adequacy framework in FY07, MIGA’s measures of capital adequacy and risk-bearing rr Support for investments between MIGA Category Two countries3 (e.g. South-South investments), given the growing proportion of FDI coming capacity include economic capital consumed by the guarantee portfolio. It provides an analytically rigorous measure for assessing the con- from developing countries and the need to provide underserved corporations with PRI. sumption of risk capital by the core guarantee business, and incorporates the effects from portfolio diversification and concentration. In addition, MIGA estimates the minimum amount of capital that should be held against operational risk in the Agency. These priority areas, or strategic pillars, were shaped by the needs of MIGA’s member countries, the demands of a changing FDI environment and PRI market, and the need for the Agency to focus on its comparative advantage and complement other insurers and institutions that provide Total economic capital defined as capital consumption from both the guarantee portfolio and operational risk4 represents a broader measure of similar services. MIGA’s capital adequacy. As of June 30, 2013, the economic capital consumed by the guarantee portfolio amounted to $519 million and the total economic capital for the Agency amounted to $550 million, compared to $459 million and $487 million, respectively, as of June 30, 2012. The increase reflects the changes to the composition of MIGA’s guarantee portfolio, which increasingly represents transactions in strategic priority Funding Sources areas. Subscribed Capital MIGA derives its financial strength primarily from the capital it receives from its shareholders and its retained earnings. Through an annual exercise of gauging the capital adequacy position, the current amount of economic capital consumed by MIGA’s activities is calculated to measure how much of available operating capital is currently utilized. In addition, as part of the capital adequacy framework, MIGA MIGA’s Convention initially established its authorized capital stock (membership shares) at 100,000 shares—equivalent to $1,082 million—with a assesses how much economic capital is projected to be potentially utilized in the future under various scenarios of growth and development of provision that the authorized capital stock shall automatically increase upon the admission of a new member to the extent that the total number of the guarantee portfolio. These are stress-test scenarios, estimating the economic capital consumed under assumptions of continued growth to authorized shares are sufficient to allow subscription by the new member. During FY13, the total authorized shares increased to 186,359 as of June MIGA’s portfolio over five years, in combination with increased concentration of exposures, country rating downgrades, and regional and global 30, 2013, equivalent to $2,016.4 million. Comoros and Sao Tome and Principe completed their membership requirements during FY13, bringing contagion effects. the total number of member countries to 179 as of June 30, 2013. Throughout the year, MIGA’s management monitors the level and utilization of available operating capital. This includes paid-in-capital, retained As of June 30, 2013, the initial subscribed shares totaled 107,800, equivalent to $1,166.4 million. Of the initial membership shares subscribed, 20 earnings, and the insurance portfolio reserve, net of the corresponding reinsurance recoverable. MIGA management’s objective is to have suf- percent or $233.3 million had been paid-in and the remaining 80 percent or $933.1 million was subject to call when needed by MIGA to meet its ficient operating capital to sustain losses associated with claims and to support the ongoing business without facing a significant risk of having obligations. As of June 30, 2013, $112.4 million of paid-in capital is in the form of nonnegotiable, non-interest bearing demand obligations (prom- to avail itself of the callable capital. As measures of the current utilization of this capital, by the guarantee portfolio and by the Agency as a issory notes). The notes are denominated in freely convertible currencies and are due on demand to meet MIGA’s obligations. Since inception, whole, Table 5 shows the ratios of guarantee portfolio and total economic capital to operating capital over the past three years. These ratios have MIGA has not encashed any of the promissory notes. increased to 44.0 percent and 46.7 percent, respectively, in FY13 compared with 40.8 percent and 43.3 percent as of June 30, 2012. Table 5 also shows the ratio of guarantee portfolio economic capital to portfolio net exposure, to gauge year-on-year changes to the relative risk-level of the As of June 30, 2013, cumulative subscriptions to the General Capital Increase (GCI) totaled 69,303 shares, equivalent to $749.9 million, and GCI guarantee portfolio. As of June 30, 2013, this ratio stood at 8.1 percent compared to 7.3 percent at end-FY12. The ratios indicate a strong and stable shares reserved through instruments of contribution totaled 6,959 shares, equivalent to $75.3 million. Of the GCI shares subscribed, $132.3 million capital position for the Agency at the end of FY13. has been paid-in and $617.5 million is callable. As of June 30, 2013, MIGA’s total subscribed capital amounted to $1,916.3 million, of which $365.6 million was paid-in and $1,550.6 million was Table 5 – Capital Adequacy Summary (FY11-13, $M) callable. Since its inception, no call has been made on MIGA’s callable capital. Any calls on unpaid subscriptions are uniform on all shares. If FY13 FY12 FY11 the amount received by MIGA on a call is insufficient to meet the obligations which necessitated the call, MIGA may make further calls until the amounts received are sufficient to meet such obligations. The liability of a member on a call or calls is limited to the unpaid balance of its capital Guarantee Portfolio Economic Capital 519 459 374 subscription. Total Economic Capital 550 487 399 Equity Insurance Portfolio Reserve (net ) 267 220 175 Total shareholders’ equity as reported in MIGA’s balance sheet as of June 30, 2013 was $910.7 million compared with $905.2 million as of June 30, 2012. This amount consists of paid-in capital and retained earnings, net of accumulated other comprehensive loss. The increase of $5.4 million in Retained Earnings and Accumulated Other Comp. Income 545 540 559 FY13 primarily reflects the decrease in accumulated other comprehensive loss of $9.5 million and an increase in subscribed capital of $0.2 million, Paid-in Capital 366 365 365 partially offset by the decrease in retained earnings of $4.3 million, representing the net loss for the year. Operating Capital 1,178 1,125 1,099 Capital Management Net Exposure 6,410 6,262 5,239 Underwriting Capacity MIGA’s equity base ensures the financial sustainability of the Agency over both the short-term and long-term. The subscribed capital and retained Guarantee Portfolio Economic Capital/Operating Capital 44.0% 40.8% 34.0% earnings determine the Agency’s statutory underwriting capacity. The Council of Governors and the Board of Directors have set the maximum Total Economic Capital/Operating Capital 46.7% 43.3% 36.3% amount of contingent liability that may be assumed by MIGA as 350 percent of the sum of its unimpaired subscribed capital and reserves and retained earnings, and 100 percent of the ceded exposure. In other words, the maximum amount of net guarantee exposure is determined by Guarantee Portfolio Economic Capital/Net Exposure 8.1% 7.3% 7.1% the amount of available capital, and the statutory underwriting capacity is expressed on a gross exposure basis by adding the current amount of Note: numbers may not add up due to rounding portfolio reinsurance. As of June 30, 2013, MIGA’s underwriting capacity was $13,897 million, as follows: Table 4 – Current Underwriting Capacity ($M) – June 30, 2013 Investment Management MIGA’s investment policy sets the objectives and constraints for managing MIGA’s investment account assets. As claims arise, MIGA’s invested Subscribed Capital 1,916 assets will be liquidated to pay claims on a pre-recovery basis. Retained Earnings 568 The portfolio consists of two tranches. Tranche 1 is managed with target duration between one to two years to support potential claims, and Accumulated Other Comprehensive Income (loss) (23) consists of investments in cash, treasury securities, agency securities, mortgage-backed securities (MBS), asset-backed securities (ABS) and sov- Insurance Portfolio Reserve (net) 267 ereign securities. Tranche 2 supports long-term capital growth, by investing in assets such as global equities. Portfolio management activities for Total 2,728 MIGA’s fixed income assets, as well as trading, risk analytics and reporting, are provided by IBRD’s Treasury Investment Management Department. 350% of Subscribed Capital, Retained Earnings, Other Comprehensive Income and Reserve 9,548 As of June 30, 2013, the investment portfolio consisted of cash, treasury securities, agency securities, MBS, ABS, sovereign and government 100% of Exposure Ceded 4,349 guaranteed securities, global equities, and derivatives (see Figure 1). Although primarily USD-denominated, the portfolio also held cash and Statutory Underwriting Capacity - June 30, 2013 13,897 government securities denominated in currencies other than USD. The annual portfolio yield was 3.1 percent in FY13 versus 3.6 percent in FY12. The market value of MIGA’s portfolio was $1,157 million as of June 30, 2013, with the non-US dollar denominated component accounting for $73 As of June 30, 2013, MIGA’s gross exposure was $10,758 million and represented 77 percent of MIGA’s statutory underwriting capacity. million. 4 3 Operational risk capital is now based on the Basel II methodology for calculating operational risk capital as a percentage of gross revenues and MIGA’s categorization for developing countries; see MIGA Member Countries list in the Appendices section of the Annual Report. amounted to $31 million as of June 30, 2013. Previously, operational risk capital was calculated as a percentage of gross exposure under Basel I and would have been $108 million as of June 30, 2013. 62 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 63 46% Infrastructure 22% Oil, gas, and mining 23% Oil, gas, and mining Fig 5 10% Agribusiness, 17% Financial manufacturing, 14% Agribusiness, and services manufacturing,Figure 1: Portfolio Composition of MIGA’s Total Holdings (as of June 30, 2013) Table 6 – Analysis of Operating Income and Net Income (Loss) ($M) 9% Financial and services FY13 FY12 FY11 54% Sub-Saharan Africa 31% Money Market/Cash Total Guarantees Issued 1 2,781 2,657 2,099 19% Europe and 19% Mortgage-backed Securities Gross Exposure 10,758 10,346 9,122 Central Asia 17% Domestic Government Net Exposure 6,410 6,262 5,239 18% Asia and the Pacific Fig 1 fin 16% Global Equities Premium Income 97.2 89.2 75.2 6% Middle East and 10% Agency Premium Ceded (37.7) (33.7) (30.6) North Africa* 4% Asset-backed Securities Fees and Commissions 6.8 6.2 6.3 3% Latin America and 3% Sovereign/Govt Guarantee Net Premium Income 66.3 61.7 50.8 the Caribbean Administrative and Other Expenses (41.2) (41.1) (37.5) Pension Accounting Expense (5.9) (2.8) (3.6) 2 19.2 17.8 9.7 Operating Income Critical Accounting Policies 47% Sub-Saharan Africa Income from Investmentst 33.6 36.9 13.9 The footnotes to MIGA’s financial statements contain a detailed summary of MIGA’s accounting policies. Described below are those accounting 20% Europe andpolicies which involve significant management judgment and estimates when preparing the Agency’s financial statements and accompanying Release of (Provision for) Claims3 (56.7) (37.3) 1.7 notes to conform to both U.S. GAAP and IFRS. Accounting estimates generally involve the establishment of parameters by management based Central Asia on judgments about the probable outcome of future conditions, transactions, or events. Because these are projections, actual results may differ Net (Loss) Income (4.3) 5.9 43.1 Pacific 13% Asia and thefrom those estimates in a variety of areas. The area which management deems most critical with respect to the application of estimates and Operating Capital 1,178 1,125 1,099 assumptions is the establishment of MIGA’s loss reserves. 10% Middle East and Guarantee Portfolio Economic Capital (EC) 519 459 374 North Africa* Reserve for Claims ROOC4 (before provisions) 4.5% 3.8% 3.8% MIGA’s provisioning methodology builds on portfolio risk quantification models that use both individually assessed loss probabilities for projects 10% Latin America and at risk and rating-based loss probabilities that are applied to the entire guarantee portfolio. Under this methodology, for the purpose of presen- ROOC (after provisions) (0.4%) 0.5% 3.9% the Caribbean tation in the financial statements, MIGA’s reserve consists of two primary components, the Specific Reserve and the Insurance Portfolio Reserve.5 5 ROCU 3.7% 3.9% 2.6% Reserves are presented on a gross basis on the liability side of the balance sheet, and the associated reinsurance assets on the asset side, since Note: numbers may not add up due to rounding reinsurance does not relieve MIGA of its primary liability to the insured. A detailed summary of MIGA’s provisioning policy can be found in the 1 Including Cooperative Underwriting Program contracts 41% Europe and Notes to Financial Statements – Note A, Summary of Significant Accounting and Related Policies. 2 Operating Income = Net Premium Income less Administrative and Other Expenses; Prior FY calculations Central Asia Pension and Other Postretirement Benefits were adjusted to reflect this definition, and now exclude Investment Income 26% Sub-Saharan Africa Along with IBRD and IFC, MIGA participates in a number of pension and post-retirement benefit plans that cover almost all of their staff 3 Provisions are net of currency translation effect 15% Asia and the Pacific All costs, assets, and liabilities associated with these plans are allocated among IBRD, IFC, and MIGA based upon their employees’ members. 4 Return on Operating Capital = Net Income/Operating Capital respective participation in the plans. The underlying actuarial assumptions, fair value of plan assets, and funded status associated with these plans 10% Latin America and on financial market interest rates, past experience, and management’s best estimate of future benefit changes and economic conditions. are based 5 Return on Capital Utilized = (Net Premium Income-Administrative and Other Expenses)/Economic Capital Utilized by the Guarantee Portfolio the Caribbean For further details, please refer to the Notes to Financial Statements – Note F, Pension and Other Post Retirement Benefits. FY13 versus FY12 8% Middle East and The factors contributing to the higher operating income and a net loss in FY13 are discussed further below. Results of Operations North Africa Operating Income and Net Income Net Premium Income FY13 operating income was $19.2 million, an increase of $1.4 million compared to FY12, primarily due to higher net premium income of $4.6 MIGA issued $2.8 billion in guarantees during FY13 compared to $2.7 billion in FY12, with the net guarantee exposure increasing slightly to million, partially offset by higher expense from pension and other postretirement benefit plans of $3.1 million. FY13 net loss of $4.3 million repre- $6.4 billion as of June 30, 2013, after considering the significant net portfolio exposure run-off during FY13 totaling $1.4 billion. In FY13, gross sented a decrease of $10.2 million compared to net income of $5.9 million in FY12, mainly due to higher provisioning pertaining to FY13 issued exposure and gross premium income increased by $412 million and $8 million, respectively. Premium amounts ceded to reinsurers increased by guarantees. Table 6 shows the breakdown of MIGA’s operating income and net income over the past three years. $4.1 million. The gross premium income growth reflects a higher portfolio premium rate, consistent with the shift in the risk composition of the portfolio associated with the pursuit of MIGA’s strategic priorities, and higher average gross exposure. Income from Investments MIGA’s investment portfolio generated $33.6 million of investment income in FY13, compared with $36.9 million in FY12. The yield was 3.1 percent in FY13 compared with 3.6 percent in FY12, with the returns from global equities significantly contributing to the FY13 investment income. Expense from pension and other postretirement benefit plans Of the $3.1 million increase in FY13 to $5.9 million compared to $2.8 million in FY12, $1.8 million relates to the higher amortization of unrec- ognized net actuarial losses on benefit plans. Provision for Claims MIGA recorded an increase in net reserves for claims of $56.7 million in FY13 compared to $37.3 million in FY12. The higher charge in FY13 pri- marily reflects the effect of new issuance and the related shift in the portfolio risk composition. 5 The Insurance Portfolio Reserve is calculated as the 95th percentile loss less the mean loss from the Economic Capital Model 64 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 65 Corporate Governance Code of Conduct and Business Conduct Framework Staff members’ ethical obligations to the institution are embodied in its Core values and Principles of Staff Employment. As a member organi- General Governance zation, MIGA has adopted the updated World Bank Group Code of Conduct, Living our Values (the Code), which is a practical guide to assist staff in making the Bank Group’s Core Values a part of what staff does every day. The Code applies to all staff worldwide and is available on IBRD’s Board Membership website, www.worldbank.org. All MIGA staff have completed the mandatory training course which includes an acknowledgement from staff to MIGA’s Board of Directors consists of 25 members. In accordance with the Convention establishing MIGA, all members of the Board are elected abide by the tenets of the Code. every two years by their member governments. Directors are neither officers, nor staff of MIGA. The President serves as the presiding officer, is the only management member of the Board of Directors, and ordinarily has no vote except a deciding vote in the case of an equal division. The Board In addition to the Code, the business conduct obligations of staff are articulated in the Staff Manual (Principles of Staff Employment, Staff Rules), has established five standing committees which are each chaired by a Director: (i) Committee on Development Effectiveness or CODE, (ii) Audit Administrative Manual, and other guidelines. The Principles and Staff Rules require that all staff avoid or properly manage conflicts of interest. Committee, (iii) Budget Committee, (iv) Human Resources Committee or HRC, and (v) Committee on Governance and Administrative Matters To protect individual staff in MIGA from apparent and real (potential or actual) conflicts of interest, senior managers are required to complete an or COGAM. The Directors maintain an Ethics Committee to consider matters relating to the interpretation or application of the Code of Conduct annual financial disclosure statement with the Office of Ethics and Business Conduct. for Board Officials which took effect in November 1, 2007. Guidance for staff is also provided through programs, training materials, and other resources. Managers are responsible for ensuring that internal The Directors and their committees operate in continuous session at the principal offices of the World Bank Group, and meet in accordance with systems, policies, and procedures are consistently aligned with MIGA’s business conduct framework. The following World Bank Group units assist the Agency’s business needs. Each committee’s terms of reference establishes its respective roles and responsibilities. Their role is primarily to in communicating business conduct expectations to staff: help the full Board of Directors discharge its oversight responsibilities through in-depth examination of policies and practices. rr The Office of Ethics and Business Conduct (EBC) provides leadership, management and oversight for MIGA’s ethics infrastructure Senior Management Changes including the Ethics HelpLine, a consolidated conflicts of interest disclosure/resolution system, financial disclosure, ongoing training to On June 30, 2013, Ms. Izumi Kobayashi completed her term as the Executive Vice President of MIGA. both internal and external audi-ences, and communication resources. This office has the mandate to review and assist in the resolution of allegations of staff misconduct. Effective July 15, 2013, Ms. Keiko Honda is the Executive Vice President of MIGA. rr The Integrity Vice Presidency (INT) is charged with investigating allegations of fraud and corruption in projects benefiting from World Bank Group funding or guarantees. It also trains and educates staff and clients in detecting and reporting fraud and corruption. Audit Committee Both EBC and INT report directly to the President and is composed of professionals from a range of disciplines including financial analysts, re- Membership searchers, investigators, lawyers, prosecutors, forensic accountants, and staff with operational experience across the World Bank Group. These The Audit Committee consists of eight members of the Board of Directors. Membership on the Committee is determined by the Board of units maintain comprehensive websites to provide guidance on how to handle concerns. Directors, based upon nominations by the Chairman of the Board, following informal consultation with the Directors. In addition, the composition of the Committee is expected to reflect the economic and geographic diversity of MIGA’s member countries. Other relevant selection criteria Auditor Independence include seniority, continuity, and relevant experience. Some or all of the responsibilities of individual Committee members are performed by their The appointment of the external auditor of MIGA is governed by a set of Board-approved principles. Key features of those principles include: alternates or advisors. Generally, Committee members are appointed for a two-year term; reappointment to a second term, when possible, is desirable for continuity. Audit Committee meetings are generally open to any member of the Board who wishes to attend, and non-Committee rr Prohibition of the external auditor from the provision of all non-audit related services members of the Board may participate in the discussion but cannot vote. In addition, the Chairman of the Audit Committee may speak in that rr All audit-related services must be pre-approved on a case-by-case basis by the Board of Directors, upon recommendation by the Audit Com- capacity at meetings of the Board of Directors, with respect to discussions held at the Audit Committee. mittee rr Mandatory rebidding of the external audit contract every five years, with a limitation of two consecutive terms and mandatory rotation Key Responsibilities thereafter The Audit Committee has a mandate to assist the Board of Directors in overseeing MIGA’s finances, accounting, risk management, and internal rr An evaluation of the performance of the external auditor at the mid-point of the five year term. controls. This mandate includes the review and oversight of MIGA’s financial statements and financial reporting related to trust funds. The Audit Committee is also responsible for recommending to the Board of Directors the appointment of the external auditor, as well as monitoring the The external auditor is appointed to a five-year term of service. This is subject to annual reappointment based on the recommendation of the Audit performance and independence of the external auditor. The Audit Committee oversees the internal audit function, including reviewing the respon- Committee and approval of a resolution by the Directors. sibilities, staffing, annual internal audit plan, and effectiveness of internal audit. In the execution of its role, the Committee discusses with man- agement, the external auditors, and internal auditors, financial issues and policies which have an impact on the Agency’s financial position and As standard practice, the external auditor is invited as an observer to attend all Audit Committee meetings and is frequently asked to present its risk-bearing capacity. The Committee also reviews with the external auditor the financial statements prior to their publication and recommends perspective on issues. In addition, the Audit Committee meets periodically with the external auditor in private sessions without the presence of the annual audited financial statements for approval to the Directors. The Audit Committee monitors the evolution of developments in corporate management. Communication between the external auditor and the Audit Committee is ongoing, as frequently as is deemed necessary by either governance and encourages continuous improvement of, and adherence to MIGA’s policies, procedures, and practices. party. MIGA’s external auditors follow the communication requirements with audit committees set out under US Generally Accepted Auditing Standards and International Standards on Auditing. In keeping with these standards, significant formal communications include: Communications The Audit Committee communicates regularly with the full Board of Directors through distribution of the following documents: rr Quarterly and annual financial statement reporting rr Annual appointment of the external auditors rr The minutes of its meetings. rr Presentation of the external audit plan rr Reports of the Audit Committee prepared by the Chairman, which document discussions held. These reports are distributed to the rr Presentation of control recommendations and discussion of the Internal Control over Financial Reporting (ICFR) attestation and report Directors, Alternates Directors, World Bank Group Senior Management, and MIGA Senior Management. rr Presentation of a statement regarding independence rr “Statement(s) of the Chairman” and state¬ments issued by other members of the Audit Committee. rr The Annual Report to the Board of Directors, which provides an overview of the main issues addressed by the committee over the year. In addition to committee meetings, individual members of the Audit Committee have independent access to the external auditor. The Audit Committee’s communications with the external auditor are described in the Auditor Independence section. Internal Control Executive Sessions Internal Control Over Financial Reporting Under the Audit Committee’s Terms of Reference, members of the Audit Committee shall meet periodically in separate executive or, where spe- Management makes an annual assertion whether, as of June 30 of each fiscal year, the organization’s system of internal control over its external cifically required, closed sessions with management, the Auditor General, the External Auditor, and the Vice President for Institutional Integrity, to financial reporting has met the criteria for effective internal control over external financial reporting as described in the 1992 Internal Control – discuss any matters that the Committee or any of the foregoing believes should be discussed privately. Integrated Framework issued by The Committee of the Sponsoring Organizations of the Treadway Commission (COSO).6 Access to Resources and to Management Concurrently, MIGA’s external auditor provides an attestation report on whether Management’s assertion regarding the effectiveness of internal Throughout the year, the Audit Committee receives a large volume of information, with respect to the financial position, financial statement control over external financial reporting is fairly stated in all material respects. presentations, risk assessment, and risk management, as well as matters regarding governance and controls. The Audit Committee meets both formally and informally throughout the year to discuss finance, accounting, risk management, and internal controls matters. The Directors have unrestricted access to management. The Audit Committee reviews and discusses with management the quarterly and annual financial statements. The committee also reviews with the external auditor the financial statements prior to their publication and recommends these for approval to the Board of Directors. 6 The Audit Committee has the capacity, under exceptional circumstances, to obtain advice and assistance from outside legal, accounting, or other COSO was formed in 1985 to sponsor the National Commission on Fraudulent Financial Reporting, an independent private-sector initiative advisors as deemed appropriate. which studied the casual factors that can lead to fraudulent financial reporting. In 1992, COSO issued its Internal Control-Integrated Framework, which provided a common definition of internal control and guidance on judging its effectiveness. 66 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 67 Management’s Report Regarding Effectiveness of Internal Controls Over External Financial Reporting Management’s Report Regarding Effectiveness of Internal Controls Over External Financial Reporting (cont’d) 68 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 69 Report of Independent Auditors on Management Assertion Regarding Report Of Independent Auditors on Management Assertion Regarding Effectiveness of Internal Controls Over External Financial Reporting Effectiveness Of Internal Controls Over External Financial Reporting (cont’d) KPMG LLP Suite 12000 Multilateral Investment Guarantee Agency 1801 K Street, NW Washington, DC 20006 August 7, 2013 In our opinion, management’s assertion that MIGA maintained effective internal control over financial Independent Auditors’ Report reporting as of June 30, 2013 is fairly stated, in all material respects, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). President and Board of Directors We also have audited, in accordance with auditing standards generally accepted in the United States of Multilateral Investment Guarantee Agency: America and International Standards on Auditing, the financial statements of MIGA, which comprise the balance sheets as of June 30, 2013 and 2012, and the related statements of operations, comprehensive We have examined management’s assertion, included in the accompanying Management’s Report income, changes in shareholders’ equity, and cash flows for the years then ended, and our report dated Regarding Effectiveness of Internal Control Over External Financial Reporting, that the Multilateral August 7, 2013 expressed an unqualified opinion on those financial statements. Investment Guarantee Agency (MIGA) maintained effective internal control over financial reporting as of June 30, 2013, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). MIGA’s management is responsible for maintaining effective internal control over financial reporting, and for its assertion on the Washington, D.C. effectiveness of internal control over financial reporting, included in the accompanying Management’s Report Regarding Effectiveness of Internal Control Over External Financial Reporting. Our responsibility August 7, 2013 is to express an opinion on management’s assertion based on our examination. We conducted our examination in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our examination included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our examination also included performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. An entity’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States of America and International Financial Reporting Standards as issued by the International Accounting Standards Board. An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. 70 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 71 Independent Auditors’ Report Independent Auditors’ Report (cont’d) KPMG LLP Suite 12000 1801 K Street, NW Washington, DC 20006 Other Matters Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The statement of subscriptions to capital stock and voting power and the statement of guarantees outstanding as Independent Auditors’ Report of June 30, 2013 are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The President and Board of Directors information has been subjected to the auditing procedures applied in the audit of the financial statements Multilateral Investment Guarantee Agency: and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally Report on the Financial Statements accepted in the United States of America and International Standards on Auditing. In our opinion, the We have audited the accompanying financial statements of the Multilateral Investment Guarantee Agency information is fairly stated in all material respects in relation to the financial statements as a whole. (MIGA), which comprise the balance sheets as of June 30, 2013 and 2012, and the related statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for the years then We also have examined in accordance with attestation standards established by the American Institute of ended, and the related notes to the financial statements. Certified Public Accountants, management’s assertion, included in the accompanying Management’s Report Regarding Effectiveness of Internal Control Over External Financial Reporting, that MIGA Management’s Responsibility for the Financial Statements maintained effective internal control over financial reporting as of June 30, 2013, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Management is responsible for the preparation and fair presentation of these financial statements in Organizations of the Treadway Commission (COSO) and our report dated August 7, 2013 expressed an accordance with accounting principles generally accepted in the United States of America and International unqualified opinion on management’s assertion. Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Washington, D.C. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted August 7, 2013 our audits in accordance with auditing standards generally accepted in the United States of America and in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MIGA as of June 30, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America and International Financial Reporting Standards as issued by the International Accounting Standards Board. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. 72 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 73 Balance Sheet Statement of Operations June 30, 2013 and June 30, 2012, expressed in thousands of US dollars For the fiscal years ended June 30, 2013 and June 30, 2012, expressed in thousands of US dollars FY13 FY12 FY13 FY12 ASSETS INCOME CASH $11,841 $10,485 Income from guarantees INVESTMENTS - Trading (including securities transferred Premium income - Note D $97,222 $89,179 1,152,915 1,091,326 Premium ceded - Note D (37,749) (33,681) under repurchase agreements) - Note B Fees and commissions 6,799 6,206 Securites purchased under resale agreements - Note B 20,000 13,000 Total 66,272 61,704 Derivative Assets - Note B 364,997 282,918 NONNEGOTIABLE, NONINTEREST-BEARING DEMAND OBLIGATIONS - Note C 112,384 113,794 Income from investments - Note B 33,577 36,898 OTHER ASSETS Translation losses - Investments and other assets (296) (11,523) Receivable for investment securities sold - Note B 4,674 1,475 Total income 99,553 87,079 Estimated reinsurance recoverables - Note E 99,100 52,900 EXPENSES Prepaid premiums ceded to reinsurers 52,290 34,384 Provision for claims - Note E Net assets under retirement benefits plans - Note F 15,700 9,248 Increase in net reserves, excluding translation losses (gains) 54,400 48,700 Miscellaneous 14,624 12,908 Translation losses (gains) 2,300 (11,400) 186,388 110,915 Provision for claims, net 56,700 37,300 TOTAL ASSETS $1,848,525 $1,622,438 Administrative expenses 41,250 41,074 Liabilities and Shareholders’ Equity Expense from pension and other post retirement benefit plans - Note F 5,882 2,810 LIABILITIES Payable for investment securities purchased - Note B $12,182 $4,641 Total expenses 103,832 81,184 Securities sold under repurchase agreements - Note B 11,426 15,190 Derivative liabilities - Note B 364,990 282,050 NET (LOSS) INCOME ($4,279) $5,895 Accounts payable and accrued expenses 43,736 43,695 Unearned premiums and commitment fees 124,436 93,432 Reserve for claims - Note E Specific reserve for claims 17,700 7,700 Insurance portfolio reserve 363,400 270,500 Statement of Comprehensive Income Reserve for claims - gross 381,100 278,200 For the fiscal years ended June 30, 2013 and June 30, 2012, expressed in thousands of US dollars Total liabilities 937,870 717,208 FY13 FY12 CONTINGENT LIABILITIES - Note D NET (LOSS) INCOME - Note H ($4,279) $5,895 SHAREHOLDERS’ EQUITY Capital stock - Note C Authorized capital (186,359 shares - June 30, 2013; 186,259 shares-June 30, 2012) OTHER COMPREHENSIVE INCOME (LOSS) Subscribed capital (177,103 shares- June 30, 2013; 177,003 shares-June 30, 2012) 1,916,254 1,915,172 Change in unrecognized net actuarial gains (losses) on benefit plans 9,431 (23,758) Less uncalled portion of subscriptions 1,550,625 1,549,759 Change in unrecognized prior service credits (costs) on benefit plans 57 (1,356) Total other comprehensive income (loss) 9,488 (25,114) 365,629 365,413 COMPREHENSIVE INCOME (LOSS) $5,209 ($19,219) Retained earnings 567,992 572,271 See accompanying notes to the financial statements Accumulated other comprehensive loss - Note H (22,966) (32,454) Total shareholders’ equity 910,655 905,230 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,848,525 $1,622,438 See accompanying notes to the financial statements 74 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 75 Statement of Changes in Shareholders’ Equity Statement of Subscriptions to Capital Stock and Voting Power For the fiscal years ended June 30, 2013 and June 30, 2012, expressed in thousands of US dollars As of June 30, 2013, expressed in thousands of US dollars FY13 FY12 Subscriptions – Note C Voting power CAPITAL STOCK Members Shares1 Total Amount Amount Number % Balance at beginning of the fiscal year $365,413 $365,010 Subscribed Paid-in Subject to Call of Votes of Total Paid-In subscriptions 216 403 Afghanistan $118 $1,277 $255 $1,022 350 0.16 Albania 102 1,104 210 894 334 0.15 Ending Balance $365,629 $365,413 Algeria 1,144 12,378 2,350 10,028 1,376 0.63 RETAINED EARNINGS Angola 187 2,023 405 1,618 419 0.19 Balance at beginning of the fiscal year 572,271 566,376 Antigua and Barbuda 50 541 108 433 282 0.13 Argentina 2,210 23,912 4,539 19,373 2,442 1.12 Net (loss) income (4,279) 5,895 Armenia 80 866 173 693 312 0.14 Ending Balance 567,992 572,271 Australia 3,019 32,666 6,201 26,465 3,251 1.49 ACCUMULATED OTHER COMPREHENSIVE LOSS Austria 1,366 14,780 2,806 11,974 1,598 0.73 Balance at beginning of the fiscal year (32,454) (7,340) Azerbaijan 115 1,244 249 995 347 0.16 Bahamas, The 176 1,904 362 1,542 408 0.19 Other comprehensive income (loss) 9,488 (25,114) Bahrain 136 1,472 279 1,193 368 0.17 Ending Balance (22,966) (32,454) Bangladesh 599 6,481 1,230 5,251 831 0.38 Barbados 120 1,298 246 1,052 352 0.16 TOTAL SHAREHOLDERS’ EQUITY $910,655 $905,230 Belarus 233 2,521 504 2,017 465 0.21 Belgium 3,577 38,703 7,347 31,356 3,809 1.74 Belize 88 952 181 771 320 0.15 Benin 108 1,169 222 947 340 0.16 Bolivia 220 2,380 452 1,928 452 0.21 Bosnia and Herzegovina 80 866 173 693 312 0.14 Statement of Cash Flows Botswana 88 952 181 771 320 0.15 For the fiscal years ended June 30, 2013 and June 30, 2012, expressed in thousands of US dollars Brazil 2,606 28,197 5,353 22,844 2,838 1.30 Bulgaria 643 6,957 1,321 5,636 875 0.40 FY13 FY12 Burkina Faso 61 660 132 528 293 0.13 CASH FLOWS FROM OPERATING ACTIVITIES: Burundi 74 801 160 641 306 0.14 Net (loss) income $(4,279) $5,895 Cambodia 164 1,774 337 1,437 396 0.18 Adjustments to reconcile net income to net cash provided by operating activities: Cameroon 107 1,158 232 926 339 0.16 Provision for claims - Note E 56,700 37,300 Canada 5,225 56,535 10,732 45,803 5,457 2.50 Translation losses - Investments and other assets 296 11,523 Cape Verde 50 541 108 433 282 0.13 Net changes in: Central African Rep 60 649 130 519 292 0.13 Investments - Trading, net (64,655) (52,951) Chad 60 649 130 519 292 0.13 Chile 855 9,251 1,756 7,495 1,087 0.50 Other assets (27,641) (2,424) China 5,530 59,835 11,359 48,476 5,762 2.64 Accounts payable and accrued expenses 9,918 (29,371) Colombia 770 8,331 1,582 6,749 1,002 0.46 Unearned premiums and commitment fees 31,277 30,254 Comoros 50 541 108 433 282 0.13 Net cash provided by operating activities 1,616 226 Congo, Democratic Republic of 596 6,449 1,224 5,225 828 0.38 Congo, Republic of 115 1,244 236 1,008 347 0.16 Costa Rica 206 2,229 423 1,806 438 0.20 CASH FLOWS FROM FINANCING ACTIVITIES: Cote d'Ivoire 310 3,354 637 2,717 542 0.25 Capital subscription payments 108 168 Croatia 330 3,571 678 2,893 562 0.26 Net cash provided by financing activities 108 168 Cyprus 183 1,980 376 1,604 415 0.19 Czech Republic 784 8,483 1,610 6,873 1,016 0.46 EFFECT OF EXCHANGE RATE CHANGES ON CASH (368) (958) Denmark 1,265 13,687 2,598 11,089 1,497 0.68 Net increase (decrease) in cash 1,356 (564) Djibouti 50 541 108 433 282 0.13 Cash at beginning of the fiscal year 10,485 11,049 Dominica 50 541 108 433 282 0.13 Dominican Republic 147 1,591 318 1,273 379 0.17 CASH AT END OF THE FISCAL YEAR $11,841 $10,485 Ecuador 321 3,473 659 2,814 553 0.25 Egypt, Arab Republic of 809 8,753 1,662 7,091 1,041 0.48 See accompanying notes to the financial statements El Salvador 122 1,320 264 1,056 354 0.16 Equatorial Guinea 50 $541 $108 $433 282 0.13 Eritrea 50 541 108 433 282 0.13 Estonia 115 1,244 236 1,008 347 0.16 See accompanying notes to the financial statements 76 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 77 Statement of Subscriptions to Capital Stock and Voting Power (cont’d) Statement of Subscriptions to Capital Stock and Voting Power (cont’d) As of June 30, 2013, expressed in thousands of US dollars As of June 30, 2013, expressed in thousands of US dollars Subscriptions – Note C Voting power Subscriptions – Note C Voting power Members Total Amount Amount Number % Members Total Amount Amount Number % Shares1 Subscribed Paid-in Subject to Call of Votes of Total Shares1 Subscribed Paid-in Subject to Call of Votes of Total Ethiopia 123 1,331 253 1,078 355 0.16 Mauritius 153 1,655 314 1,341 385 0.18 Fiji 71 768 154 614 303 0.14 Mexico 1,192 12,897 2,579 10,318 1,424 0.65 Finland 1,057 11,437 2,171 9,266 1,289 0.59 Micronesia, Fed. States of 50 541 108 433 282 0.13 France 8,565 92,673 17,593 75,080 8,797 4.02 Moldova 96 1,039 208 831 328 0.15 Gabon 169 1,829 347 1,482 401 0.18 Mongolia 58 628 126 502 290 0.13 Gambia, The 50 541 108 433 282 0.13 Montenegro 61 660 132 528 293 0.13 Georgia 111 1,201 240 961 343 0.16 Morocco 613 6,633 1,259 5,374 845 0.39 Germany 8,936 96,688 18,355 78,333 9,168 4.19 Mozambique 171 1,850 351 1,499 403 0.18 Ghana 432 4,674 887 3,787 664 0.30 Namibia 107 1,158 232 926 339 0.16 Greece 493 5,334 1,013 4,321 725 0.33 Nepal 122 1,320 251 1,069 354 0.16 Grenada 50 541 108 433 282 0.13 Netherlands 3,822 41,354 7,850 33,504 4,054 1.85 Guatemala 140 1,515 303 1,212 372 0.17 New Zealand 513 5,551 1,110 4,441 745 0.34 Guinea 91 985 197 788 323 0.15 Nicaragua 180 1,948 370 1,578 412 0.19 Guinea-Bissau 50 541 108 433 282 0.13 Niger 62 671 134 537 294 0.13 Guyana 84 909 182 727 316 0.14 Nigeria 1,487 16,089 3,054 13,035 1,719 0.79 Haiti 75 812 162 650 307 0.14 Norway 1,232 13,330 2,531 10,799 1,464 0.67 Honduras 178 1,926 366 1,560 410 0.19 Oman 166 1,796 341 1,455 398 0.18 Hungary 994 10,755 2,042 8,713 1,226 0.56 Pakistan 1,163 12,584 2,389 10,195 1,395 0.64 Iceland 90 974 195 779 322 0.15 Palau 50 541 108 433 282 0.13 India 5,371 58,114 11,032 47,082 5,603 2.56 Panama 231 2,499 474 2,025 463 0.21 Indonesia 1,849 20,006 3,798 16,208 2,081 0.95 Papua New Guinea 96 1,039 208 831 328 0.15 Iran, Islamic Rep 1,659 17,950 3,590 14,360 1,891 0.86 Iraq 350 3,787 757 3,030 582 0.27 Paraguay 141 1,526 290 1,236 373 0.17 Ireland 650 7,033 1,335 5,698 882 0.40 Peru 657 7,109 1,350 5,759 889 0.41 Israel 835 9,035 1,715 7,320 1,067 0.49 Philippines 853 9,229 1,752 7,477 1,085 0.50 Italy 4,970 53,775 10,208 43,567 5,202 2.38 Poland 764 8,266 1,653 6,613 996 0.46 Jamaica 319 3,452 655 2,797 551 0.25 Portugal 673 7,282 1,382 5,900 905 0.41 Japan 8,979 97,153 18,443 78,710 9,211 4.21 Qatar 241 2,608 495 2,113 473 0.22 Jordan 171 1,850 351 1,499 403 0.18 Romania 978 10,582 2,009 8,573 1,210 0.55 Kazakhstan 368 3,982 756 3,226 600 0.27 Russian Federation 5,528 59,813 11,355 48,458 5,760 2.63 Kenya 303 3,278 622 2,656 535 0.24 Rwanda 132 1,428 271 1,157 364 0.17 Korea, Republic of 791 8,559 1,625 6,934 1,023 0.47 St. Kitts & Nevis 50 541 108 433 282 0.13 Kosovo 96 1,039 208 831 328 0.15 St. Lucia 88 952 181 771 320 0.15 Kuwait 1,639 17,734 3,367 14,367 1,871 0.86 St. Vincent and the Grenadines 88 952 181 771 320 0.15 Kyrgyz Republic 77 833 167 666 309 0.14 Samoa 50 541 108 433 282 0.13 Lao People's Dem 60 649 130 519 292 0.13 Sao Tome & Principe 50 541 108 433 282 0.13 Latvia 171 1,850 351 1,499 403 0.18 Saudi Arabia 5,528 59,813 11,355 48,458 5,760 2.63 Lebanon 250 2,705 514 2,191 482 0.22 Senegal 256 2,770 526 2,244 488 0.22 Lesotho 88 952 181 771 320 0.15 Serbia 407 4,404 836 3,568 639 0.29 Liberia 84 909 182 727 316 0.14 Seychelles 50 541 108 433 282 0.13 Libya 549 5,940 1,188 4,752 781 0.36 Sierra Leone 132 1,428 271 1,157 364 0.17 Lithuania 187 2,023 384 1,639 419 0.19 Singapore 272 2,943 559 2,384 504 0.23 Luxembourg 204 2,207 419 1,788 436 0.20 Slovak Republic 391 4,231 803 3,428 623 0.28 Macedonia, FYR 88 952 181 771 320 0.15 Slovenia 180 1,948 370 1,578 412 0.19 Madagascar 176 1,904 362 1,542 408 0.19 Solomon Islands 50 $541 $108 $433 282 0.13 Malawi 77 $833 $167 $666 309 0.14 South Africa 1,662 17,983 3,414 14,569 1,894 0.87 Malaysia 1,020 11,036 2,095 8,941 1,252 0.57 South Sudan 155 1,677 335 1,342 387 0.18 Maldives 50 541 108 433 282 0.13 Spain 2,265 24,507 4,652 19,855 2,497 1.14 Mali 143 1,547 294 1,253 375 0.17 Sri Lanka 478 5,172 982 4,190 710 0.32 Malta 132 1,428 271 1,157 364 0.17 Sudan 206 2,229 446 1,783 438 0.20 Mauritania 111 1,201 228 973 343 0.16 Suriname 82 887 177 710 314 0.14 See accompanying notes to the financial statements See accompanying notes to the financial statements 78 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 79 Statement of Subscriptions to Capital Stock and Voting Power (cont’d) Statement of Guarantees Outstanding As of June 30, 2013, expressed in thousands of US dollars As of June 30, 2013, expressed in thousands of US dollars Subscriptions – Note C Voting power Gross Exposure – Note D Members Shares1 Total Amount Amount Number % Host Country US Euro Swiss British Total Reinsurance – Net Subscribed Paid-in Subject to Call of Votes of Total Dollars Franc Pound Note D Exposure Swaziland 58 628 126 502 290 0.13 Afghanistan $151,943 $- $- $- $151,943 $48,676 $103,266 Sweden 1,849 20,006 3,798 16,208 2,081 0.95 Albania 1,565 183,468 - - 185,033 79,008 106,025 Switzerland 2,643 28,597 5,429 23,168 2,875 1.32 Algeria - - - - - - - Syrian Arab Republic 296 3,203 608 2,595 528 0.24 Angola 12,900 511,829 - - 524,729 447,180 77,549 Tajikistan 130 1,407 267 1,140 362 0.17 Argentina - - - - - - - Tanzania 248 2,683 509 2,174 480 0.22 Armenia - 3,724 - - 3,724 - 3,724 Thailand 742 8,028 1,524 6,504 974 0.45 Bangladesh 329,637 - - - 329,637 179,326 150,310 Timor-Leste 50 541 108 433 282 0.13 Benin 1,026 7,704 - - 8,730 103 8,627 Togo 77 833 167 666 309 0.14 Bolivia 10,777 - - - 10,777 - 10,777 Trinidad and Tobago 358 3,874 735 3,139 590 0.27 Bosnia and Herzegovina - 96,781 - - 96,781 - 96,781 Tunisia 275 2,976 565 2,411 507 0.23 Botswana 5,000 - - - 5,000 - 5,000 Turkey 814 8,807 1,672 7,135 1,046 0.48 Brazil - - - - - - - Turkmenistan 66 714 143 571 298 0.14 Bulgaria - 104,875 - - 104,875 52,437 52,437 Uganda 233 2,521 479 2,042 465 0.21 Burkina Faso - 652 - - 652 65 587 Ukraine 1,346 14,564 2,765 11,799 1,578 0.72 Burundi - 665 - - 665 - 665 United Arab Emirates 656 7,098 1,347 5,751 888 0.41 Cameroon - 6,718 - - 6,718 - 6,718 United Kingdom 8,565 92,673 17,593 75,080 8,797 4.02 Central African Republic - 31,367 - - 31,367 - 31,367 United States 32,564 352,342 67,406 284,936 32,796 15.00 China 50,583 - - - 50,583 2,821 47,762 Uruguay 202 2,186 437 1,749 434 0.20 Colombia - 2,607 - - 2,607 - 2,607 Uzbekistan 175 1,894 379 1,515 407 0.19 Congo, Democratic Vanuatu 50 541 108 433 282 0.13 25,150 4,966 - - 30,116 - 30,116 Republic of Venezuela, R.B. de 1,427 15,440 3,088 12,352 1,659 0.76 Congo, Republic of - 5,043 - - 5,043 - 5,043 Vietnam 388 4,198 797 3,401 620 0.28 Costa Rica 126,074 - - - 126,074 73,810 52,264 Yemen, Republic of 155 1,677 335 1,342 387 0.18 Cote d'Ivoire 674,345 77,092 - - 751,437 479,746 271,691 Zambia 318 3,441 688 2,753 550 0.25 Croatia - 934,391 - - 934,391 533,821 400,570 Zimbabwe 236 2,554 511 2,043 468 0.21 Djibouti 177,332 - - - 177,332 107,273 70,059 2 177,103 $1,916,254 $365,629 $1,550,625 218,631 100.00 Dominican Republic 99,635 - - - 99,635 14,945 84,690 Total – June 30, 2013 Ecuador 11,092 - - - 11,092 - 11,092 Total – June 30, 2012 177,003 $1,915,172 $365,413 $1,549,759 218,775 100.00 Egypt, Arab Republic of 150,000 - - - 150,000 50,000 100,000 El Salvador 46,587 - - - 46,587 - 46,587 1 Subscribed shares pertaining to the General Capital Increase include only those shares for which the subscription process has been com- Ethiopia 13,344 - - 2,742 16,086 - 16,085 pleted, i.e., for which required payment has been received. Gabon - 7,540 - - 7,540 - 7,540 2 May differ from the sum of individual figures shown because of rounding. Georgia 24,262 - - - 24,262 - 24,262 See accompanying notes to the financial statements Ghana 340,035 1,638 - - 341,672 32,231 309,441 Guinea - 51,865 - - 51,865 5,186 46,678 Guinea-Bissau - 11,324 - - 11,324 1,132 10,192 Honduras - 6,207 - - 6,207 - 6,207 Hungary - 248,283 - - 248,283 56,978 191,305 Indonesia 524,333 - - - 524,333 246,370 277,963 Iran, Islamic Republic of 81,852 - - - 81,852 8,185 73,666 Iraq 2,514 - - - 2,514 - 2,514 Jamaica 64,358 - - - 64,358 12,872 51,487 Jordan 212,922 - - - 212,922 79,800 133,122 Kazakhstan 2,264 - - - 2,264 - 2,264 Kenya 194,667 57,245 - - 251,912 34,785 217,126 Kosovo - 49,657 - - 49,657 - 49,657 Kyrgyz Republic 5,763 - - - 5,763 - 5,763 Lao People's Democratic 65,553 - - - 65,553 32,777 32,777 Republic Latvia - 155,177 - - 155,177 - 155,177 Liberia - - - - - - - Libya - 9,931 - - 9,931 - 9,931 Macedonia, FYR - 12,414 - - 12,414 - 12,414 Madagascar - 15,714 - - 15,714 - 15,714 See accompanying notes to the financial statements 80 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 81 Statement of Guarantees Outstanding (cont’d) Notes to Financial Statements As of June 30, 2013, expressed in thousands of US dollars Purpose Gross Exposure – Note D The Multilateral Investment Guarantee Agency (MIGA), established on April 12, 1988 and located in Washington D.C., is a member of the World Host Country US Euro Swiss British Total Reinsurance – Net Bank Group which also includes the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), Dollars Franc Pound Note D the International Development Association (IDA), and the International Center for Settlement of Investment Disputes (ICSID). MIGA’s activities Exposure are closely coordinated with and complement the overall development objectives of the other World Bank institutions. MIGA is designed to help Mali $16,200 $- $- $- $16,200 $1,620 $14,580 developing countries attract productive foreign investment by both private investors and commercially operated public sector companies. Its Mauritania 5,400 - - - 5,400 540 4,860 facilities include guarantees or insurance against noncommercial risks and a program of advisory services and technical assistance to support Moldova - 16,039 - - 16,039 - 16,039 member countries’ efforts to attract and retain foreign direct investment. Morocco - 5,897 - - 5,897 - 5,897 MIGA is immune from taxation pursuant to Article VII, Section 47, of the Convention establishing the Agency. Mozambique 115,500 2,483 - - 117,983 26,025 91,958 Nepal 11,898 - - - 11,898 8,924 2,975 Nicaragua 61,909 - - - 61,909 2,850 59,060 Note A: Summary of Significant Accounting and Related Policies Niger - 6,127 - - 6,127 - 6,127 Nigeria 15,716 - - - 15,716 1,802 13,913 Basis of Preparation Pakistan 220,500 - 84,678 - 305,178 90,143 215,036 MIGA’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and with accounting principles generally accepted in the United States of America (U.S. Panama 315,710 - - - 315,710 98,659 217,050 GAAP). The policy adopted is that considered most appropriate to the circumstances of MIGA having regard to its legal requirements and to Peru 24,194 - - - 24,194 1,239 22,956 the practices of other international insurance entities. Poland - 129 - - 129 - 129 Romania - 5,320 - - 5,320 1,729 3,591 On August 7, 2013, the Executive Vice President and the Chief Financial Officer authorized the financial statements for issue, which was also the Russian Federation 620,685 56,480 - - 677,165 333,402 343,763 date through which MIGA’s management evaluated subsequent events. Rwanda 119,643 - - - 119,643 15,378 104,265 Accounting and Reporting Developments Senegal 99,000 49,297 - - 148,297 25,046 123,251 In November 2009, IASB issued IFRS 9, Financial Instruments as a first step as part of a wider project to replace International Accounting Serbia - 558,374 - - 558,374 149,026 409,347 Standards (IAS) 39, Financial Instruments: Recognition and Measurement. The November 2009 issuance of IFRS 9 focuses on the classification Sierra Leone 8,006 1,862 - - 9,868 - 9,868 and measurement of financial assets where it retains but simplifies the mixed measurement model and establishes two primary measurement cat- South Africa 14,337 - 11,908 - 26,245 - 26,245 egories for financial assets: amortized cost and fair value. The basis of classification depends on the entity’s business model and the contractual Swaziland 14,075 - - - 14,075 7,038 7,038 cash flow characteristics of the financial assets. Requirements for financial liabilities were added to IFRS 9 in October 2010, most of which were carried forward unchanged from IAS 39. However, some changes were made to the fair value option for financial liabilities to address the issue of Syrian Arab Republic 75,000 - - - 75,000 7,500 67,500 own credit risk. The standard is effective for annual periods beginning on or after January 1, 2015. MIGA is currently assessing the impact of this Thailand 60,553 - - - 60,553 30,277 30,277 standard on its financial statements Togo - 4,163 - - 4,163 - 4,163 Tunisia - 167,933 - - 167,933 58,533 109,400 In June 2011, the IASB issued amendments to IAS 19, Employee Benefits, effective for annual periods beginning on or after January 1, 2013 (For Turkey 77,798 375,888 - - 453,686 201,507 252,179 MIGA, fiscal year commencing July 1, 2013). The key changes introduced by amended IAS 19 are: immediate recognition of the actuarial gains Turkmenistan 11,477 - - - 11,477 - 11,477 and losses through other comprehensive income (OCI) and the prohibition of recycling through profit or loss; a new approach to calculating and presenting interest income or expense on the net defined benefit liability or asset as a single net interest figure based on the discount rate that is Uganda 160,726 339 - - 161,065 78,425 82,640 used to measure the defined benefit obligations, replacing the interest cost and expected return on plan assets; and unvested past service costs Ukraine 733,956 9,559 - - 743,514 377,563 365,951 can no longer be deferred and recognized over the future vesting period. While not effective for MIGA as of June 30, 2013, the application of IAS Uruguay 300,000 - - - 300,000 192,000 108,000 19 revisions is not expected to have a material impact on MIGA’s financial statements. Uzbekistan 119,500 - - - 119,500 39,500 80,000 Vietnam 181,858 - - - 181,858 57,600 124,258 In June 2011, the FASB issued Accounting Standards Update (ASU ) 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Zambia 85,752 - - - 85,752 - 85,752 Income. The ASU requires comprehensive income to be reported in either a single statement or in two consecutive statements. The ASU does not change which items are reported in other comprehensive income or existing requirements to reclassify items from other comprehensive income 6,874,904 $3,858,767 $96,586 $2,742 $10,832,999 $4,385,853 $6,447,146 to net income. The ASU is effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter for non-public entities and did not have an effect on MIGA’s financial statement disclosures as MIGA is already in compliance with one of the options allowed under ASU 2011-05. Adjustment for Dual-Country Contracts:1 Lao PDR/Thailand (60,553) - - - (60,553) (30,277) (30,277) In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The ASU clarifies the scope of the balance sheet offsetting disclosures in ASU 2011-01 issued in December 2011 to apply to derivatives, repurchase Mozambique/Swaziland (14,075) - - - (14,075) (7,038) (7,038) agreements, securities borrowings and securities lending transactions that are either offset in the financial statements or are subject to an (74,629) - - - (74,629) (37,314) (37,314) enforceable master netting arrangement or similar agreement. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and the interim periods within those annual periods, and retrospectively for all comparative periods presented. As MIGA currently presents its derivative instruments on a gross basis on the balance sheet, this ASU is not expected to have an impact on its financial statements. Total – June 30, 20132 $6,800,276 $3,858,767 $96,586 $2,742 $10,758,370 $4,348,538 $6,409,832 Total – June 30, 2012 $6,710,662 $3,536,890 $95,505 $2,809 $10,345,866 $4,084,201 $6,261,664 In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income. The ASU introduces new presentation requirements about the amounts reclassified out of AOCI. It requires an entity to 1 present information about the reclassified amounts by components and to provide additional details about such reclassifications. The ASU does For contracts where there are two host countries, MIGA is at risk for losses in both countries up to the maximum amount of liability under not change the current requirements for reporting net income or other comprehensive income in the financial statements or which items could the contract. As such, the aggregate exposure is reported in both host countries and an adjustment is made to adjust for double-counting. be reclassified from other comprehensive income to net income. For nonpublic entities, the amendments are effective prospectively for reporting 2 May differ from the sum of individual figures shown because of rounding. periods beginning after December 15, 2013, and interim and annual periods thereafter. This ASU is not expected to have a material impact on See accompanying notes to the financial statements MIGA’s financial statements. 82 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 83 In June 2013, the IASB issued its targeted re-exposure draft on insurance contracts jointly developed with the FASB and aimed at implementing Reserve for Claims a common insurance reporting framework. The draft introduces a revised current value measurement model, updated from the initial proposals MIGA’s reserve consists of two primary components, the Specific Reserve and the Insurance Portfolio Reserve. These components are compre- released in 2010, including a proposal to recognize the effects of changes in discount rates on insurance liabilities in other comprehensive income hensive and mutually exclusive with respect to risk of losses that may develop from each guarantee contract, and from the contingent liability for (OCI), rather than profit or loss to reduce volatility in the Income Statement. In addition to a new presentation approach for both the statement the portfolio as a whole. of profit or loss and OCI and the statement of financial position, other major changes include: an unlocked contractual service margin, which would change the timing of profit recognition; a mirroring approach, which would better align the measurement of participating contracts with The Specific Reserve is calculated based on contract-specific parameters that are reviewed every quarter by MIGA’s management for contracts their underlying items; and a retrospective approach for the transition to the new standard. that have known difficulties. The Insurance Portfolio Reserve is calculated based on the long-term historical experiences of the political risk insurance industry. Concurrently, the FASB issued a proposed ASU in June 2013 that would require entities to measure insurance contracts under one of two mea- surement models; the building block approach or the premium allocation approach. Under the building block approach, contracts would generally Assumptions and parameters used in the calculations are intended to serve as the basis for an objective reserve for probable claims. Key assumptions, be measured in a way that portrays a current assessment of the insurance contract based on two components, namely: (1) The present value of including frequency of claim, severity, and expected recovery have been quantitatively derived from the political risk insurance industry’s historical the unbiased probability-weighted mean of the future net cash flows (“expected value”) that the entity expects in fulfilling the contract, and (2) A claims data. The principal sources of data used as inputs for the assumptions include the Berne Union and the Overseas Private Investment margin representing profit at risk, which is deferred and recognized as income as the uncertainty in the cash flows decreases. Under the premium Corporation (OPIC). The historical analysis of the data from those sources is further augmented by an internal econometric scoring analysis in allocation approach, an entity would initially measure its liability for remaining coverage as the contractual premiums that are within the boundary order to derive risk-differentiated parameters with term structure effects over time. The historical and econometric analyses cover periods that are of the existing contract and in the subsequent periods, would reduce the measurement of the liability for remaining coverage on the basis of the over 30 years, and the derived parameters are considered stable in the short term; however the parameters are reviewed periodically. Short-term risk expected timing of incurred claims and benefits and would recognize the amount of that reduction as insurance contract revenue. When insured changes are captured by changes in internal risk ratings for countries and contracts on a quarterly basis. For the purpose of claims provisioning, events occur, an entity generally would measure a separate liability for incurred claims as the expected value of future cash flows to settle the MIGA factors in the time value of money of potential cash flows, using representative risk-free interest rates as the discount rates. claims and related expenses. For the purpose of the presentation of the financial statements, insurance liabilities (or reserves) are presented on a gross basis and not net Differences between US GAAP and IFRS of reinsurance. Therefore, MIGA’s reserves are shown on a gross basis on the liability side of the balance sheet, while establishing reinsurance MIGA’s accounting policy is to follow the Compensation Retirement Benefits Topic of the FASB Accounting Standards Codification (ASC) 715-30, recoverable assets on the asset side. Reinsurance does not relieve MIGA of its primary liability to the insured. which requires employers to recognize on their balance sheets the funded status of their defined benefit postretirement plans, measured as the difference between the fair value of the plan assets and the projected benefit obligation. Actuarial gains or losses and prior service costs or credits Currency Translation that arise during the period are recognized as part of Other Comprehensive Income to the extent they are not recognized as components of the net Assets and liabilities denominated in foreign currencies are translated at market exchange rates in effect at the end of the reporting period. Income periodic benefit cost. Additionally, ASC 715-30 requires unrecognized net actuarial gains or losses and unrecognized prior service costs to be rec- and expenses are translated at either the market exchange rates in effect on the dates on which they are recognized or at an average of the market ognized in the ending balance of Accumulated Other Comprehensive Income. These amounts will be adjusted as they are subsequently recognized exchange rates in effect during each month. Translation adjustments are reflected in the Statement of Operations. as components of net periodic benefit cost. MIGA has in place a system for active management of exposures to foreign currencies, under which the amounts of non-U.S. dollar assets are MIGA’s accounting policy under IAS 19, Employee Benefits is to recognize all actuarial gains and losses in the period in which they occur—but outside matched to non-U.S. dollar insurance portfolio reserve components. The objective is to align the currency compositions of MIGA’s assets and profit or loss—“in a statement of changes in shareholder’s equity.” This is a permitted alternative available under IAS 19 and MIGA considers that this liabilities to minimize the sensitivity of MIGA’s net income to movements in foreign currency exchange rates. will allow it to show the over/under funded position on the balance sheet thereby making its financial statements more relevant and complete. ASC 715-30 and IAS 19 differ in the treatment of amortization of unrecognized actuarial gains or losses. ASC 715 30 requires the unrecognized actuarial Valuation of Capital Stock gains or losses to be amortized to the Statement of Operations, and IAS 19 option applied by MIGA requires the unrecognized actuarial gains or Under the MIGA Convention, all payments from members subscribing to the capital stock of MIGA shall be settled on the basis of the average losses to be immediately recognized in Equity through Other Comprehensive Income. MIGA does not believe the differences are material. value of the Special Drawing Rights (SDR) introduced by the International Monetary Fund, as valued in terms of United States dollars for the period January 1, 1981 to June 30, 1985, such value being equal to $1.082 for one SDR. Use of Estimates The preparation of financial statements in conformity with IFRS and U.S. GAAP requires management to make estimates and assumptions that Revenue Recognition affect the amounts reported in the financial statements. Actual results could differ from these estimates. Premium amounts received on direct insurance contracts and reinsurance contracts assumed can be annual, semi-annual or quarterly and are recorded as unearned premium. Premiums are recognized as earned on a pro rata basis over the contract period. A receivable for premium is Significant judgments have been made in areas which management views as most critical with respect to the establishment of its loss reserves, recorded when the contract has been renewed and coverage amounts have been identified. the valuation of certain financial instruments at fair value and valuation of pension and post-retirement benefits-related liabilities and the related net periodic cost of such benefit plans. MIGA cedes to reinsurers in the normal course of business by obtaining treaty and facultative reinsurance to augment its underwriting capacity and to mitigate its risk by protecting portions of its insurance portfolio. Premiums ceded follow the same approach as for direct insurance con- The significant accounting policies employed by MIGA are summarized below. tracts and are recognized as expenses on a pro rata basis over the contract period. Investments Fee and commissions income for MIGA primarily consists of administrative fees, arrangement fees, facility fees, renewal fees, commitment (offer) MIGA manages its investment portfolio both for the purpose of providing liquidity for potential claims and for capital growth. MIGA invests in fees, and ceding commissions. Fees and commissions received upon renewal are recognized as income on a pro rata basis over the contract period. global equity securities, time deposits, mortgage/asset-backed securities (ABS) and government and agency obligations based on its investment authorization approved by the Board. Government and agency obligations include highly rated fixed-rate bonds, notes, bills and other obligations Statement of Cash Flows issued or unconditionally guaranteed by governments of countries or other official entities, including government agencies or by multilateral For the purpose of MIGA’s Statement of Cash Flows, cash is defined as the amounts of unrestricted currencies due from Banks. organizations. MIGA makes use of derivatives contracts such as exchange traded futures, options and covered forward contracts to manage its investment portfolio. The purposes of these transactions are to enhance the return and manage the overall duration of the portfolio. With respect to futures and options, MIGA generally closes out most open positions prior to expiration. Futures are settled on a daily basis. Note B: Investments MIGA has classified all investment securities as trading. Investments classified as trading securities are reported at fair value using trade-date The investment securities held by MIGA are carried and reported at fair value, or at face value which approximates fair value. As of June 30, 2013, accounting. Securities purchased or sold may have a settlement date that is different from the trade-date. A liability is recorded for securities the majority of the Investments – Trading is comprised of time deposits and government and agency obligations (37.7% and 29.5%, respectively), purchased but not settled before the reporting dates. Similarly, a receivable (Other Assets) is recorded for securities sold but not settled before with all instruments classified as Level 1 and Level 2 within the fair value hierarchy. the reporting dates. A summary of MIGA’s investment portfolio at June 30, 2013 and June 30, 2012 are as follows: For trading securities, unrealized net gains and losses are recognized in earnings. Income from investments includes net gains and losses, dividend income and interest income. In thousands of US dollars Fair Value June 30, 2013 June 30, 2012 Nonnegotiable, Noninterest-bearing Demand Obligations on Account of Subscribed Capital Payments on these instruments are due to MIGA upon demand and are held in bank accounts which bear MIGA’s name. Accordingly, these Equity securities $95,366 $79,368 instruments are carried and reported at face value as assets on the Balance Sheet. Equity securities - non US 78,491 66,237 Comingled funds 12,505 9,062 Impairment of Reinsurance Assets Government obligations 339,697 399,730 MIGA assesses at each balance sheet date whether there is objective evidence that the reinsurance asset is impaired, and makes a provision Time deposits 435,023 306,418 for such impairment. Objective evidence may be in the form of observable data that comes to MIGA’s attention periodically. If impairment is determined, the carrying amount of the reinsurance asset is reduced through the use of an allowance account and the amount of the loss is Asset backed securities 191,833 230,511 recognized in the Statement of Operations. Total Investments - Trading $1,152,915 $1,091,326 84 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 85 MIGA manages its investments on a net portfolio basis. The following table summarizes MIGA’s net portfolio position as of June 30, 2013 and Fair Value Measurements June 30, 2012: FASB’s ASC 820-10, Fair Value Measurements and Disclosures and IFRS 7, Financial Instruments: Disclosures, define fair value, establish a consistent framework for measuring fair value, establish a fair value hierarchy based on the quality of inputs used to measure fair value and expand disclosure requirements about fair value measurements. In thousands of US dollars Fair Value MIGA has an established process for determining fair values. Fair value is based upon quoted market prices, where available. Examples include June 30, 2013 June 30, 2012 exchange-traded equity securities and most government and agency securities. Investments – trading $1,152,915 $1,091,326 For financial instruments for which quoted market prices are not readily available, fair values are determined using model-based valuation tech- Cash held in investment portfolioa 2,977 2,868 niques, whether internally generated or vendor supplied, that include the standard discounted cash flow method using market observable inputs Securities purchased under resale agreements 20,000 13,000 such as yield curves, foreign exchange rates, constant prepayment rates; and credit spreads. Where applicable, unobservable inputs such as Receivable for investment securities sold 4,674 1,475 constant prepayment rates, probability of default, and loss severity are used. Unless quoted prices are available, time deposits are valued at face value, which approximates fair value. 1,180,566 1,108,669 Derivative assets To ensure that the valuations are appropriate where internally-developed models are used, MIGA has various controls in place, which include Currency forward contracts 364,943 282,732 periodic verification and review. Othersb 54 186 364,997 282,918 Fair Value Hierarchy ASC 820-10 and IFRS 7 establish a three-level fair value hierarchy under which financial instruments are categorized based on the priority of the Derivative liabilities inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabili- Currency forward contracts (363,927) (282,031) ties (Level 1), the next highest priority to observable market-based inputs or inputs that are corroborated by market data (Level 2) and the lowest Othersb (1,063) (19) priority to unobservable inputs that are not corroborated by market data (Level 3). When the inputs used to measure fair value fall within different (364,990) (282,050) levels of the hierarchy, the level within which fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable and unobservable. Additionally, Payable for investment securities purchased (12,182) (4,641) ASC 820-10 requires that the valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of Securities sold under repurchase agreements (11,426) (15,190) unobservable inputs. Net investment portfolio $1,156,965 $1,089,706 a. Financial assets and liabilities at fair value are categorized based on the inputs to the valuation techniques as follows: This amount is included under Cash in the Balance Sheet b. These relate to To-Be-Announced (TBA) securities Level 1: Financial assets whose values are based on unadjusted quoted prices for identical assets or liabilities in active markets. As of June 30, 2013, investments are denominated primarily in United States dollars with instruments in non-dollar currencies representing 6.3 percent (8.6 percent – June 30, 2012) of the portfolio. Level 2: Financial assets and liabilities whose values are based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in non-active markets; or pricing models for which all significant inputs are observable, either directly or MIGA classifies all investment securities as trading. Investments classified as trading securities are reported at fair value with unrealized gains or indirectly for substantially the full term of the asset or liability. losses included in income from investments. The unrealized net gains included in Income from investments for the fiscal years ended June 30, 2013 and June 30, 2012 amounted to $12,564,000 and $7,420,000 respectively. Level 3: Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. The following table summarizes MIGA’s Income from investments in the Statement of Operations: The following tables present MIGA’s fair value hierarchy for investment assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 and June 30, 2012: In thousands of US dollars Fiscal Year ended June 30, 2013 June 30, 2012 In thousands of US dollars Fair Value Measurements on a Recurring Basis, as of June 30, 2013 Interest income $12,787 $15,074 Level 1 Level 2 Level 3 Total Dividend income 5,031 4,050 Assets: Gains - realized/unrealized 43,330 28,233 Equity securities $95,366 $- $- $95,366 Losses - realized/unrealized (27,571) (10,459) Equity securities - non US 78,491 - - 78,491 $33,577 $36,898 Commingled funds - 12,505 - 12,505 Income (losses) from derivative instruments related to interest income, realized and unrealized gains and losses and included in the table above, Government obligations 159,668 180,029 - 339,697 for the fiscal years ended June 30, 2013 and June 30, 2012 amounted to $396,000 and $409,000, respectively. Income (losses) from derivative Time deposits 22,845 412,178 - 435,023 instruments mainly relates to interest rate futures, options and covered forwards. Asset backed securities - 191,833 - 191,833 Total investments - trading 356,370 796,545 - 1,152,915 Securities Lending MIGA may engage in securities lending and repurchases, against adequate collateral, as well as securities borrowing and reverse repurchases Securities purchased under resale 20,000 - - 20,000 (resale) of government and agency obligations and asset-backed securities. Transfers of securities by MIGA to counterparties are not accounted agreements for as sales as the accounting criteria for the treatment as sale have not been met. Counterparties are permitted to re-pledge these securities until Derivative assets the repurchase date. Currency forward contracts - 364,943 - 364,943 The following is a summary of the carrying amount of the securities transferred under repurchase agreements, and the related liabilities: Othersa - 54 - 54 Total derivative assets - 364,997 - 364,997 Total $376,370 $1,161,542 $- $1,537,912 In thousands of US dollars Liabilities: June 30, 2013 June 30, 2012 Securities sold under repurchase $- $11,426 $- $11,426 Securities transferred under repurchase agreements $11,411 $15,186 agreements Liabilities relating to securities transferred under repurchase agreements $11,426 $15,190 Derivative liabilities Currency forward contracts - 363,927 - 363,927 In the case of resale agreements, MIGA receives collateral in the form of liquid securities and is permitted to re-pledge these securities. While these transactions are legally considered to be true purchases and sales, the securities received are not recorded as Investments on MIGA’s Othersa - 1,063 - 1,063 Balance Sheet as the accounting criteria for treatment as a sale have not been met. As of June 30, 2013, MIGA had received securities amounting Total derivative liabilities - 364,990 - 364,990 to $20,000,000 ($13,000,000 - June 30, 2012) under resale agreements. Total $- $376,416 $- $376,416 a. These relate to (TBA) securities 86 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 87 Level 3 Financial Instruments: In thousands of US dollars Fair Value Measurements on a Recurring Basis, as of June 30, 2012 The following table provides a summary of changes in the fair value of MIGA’s Level 3 financial assets during the fiscal years ended June 30, 2013 and June 30, 2012. Level 1 Level 2 Level 3 Total Assets: In thousands of US dollars Fisal Year ended Equity securities $79,368 $- $- $79,368 June 30, 2013 June 30, 2012 Equity securities - non US 66,237 - - 66,237 Asset-backed Securities Beginning of the fiscal year $2,114 $4,005 Commingled funds - 9,062 - 9,062 Total realized/unrealized income (loss) 493 (174) Government obligations 323,741 75,989 - 399,730 Transfers out (2,448) (1,427) Settlements/Maturity (159) (290) Time deposits 122,300 184,118 - 306,418 End of the period $- $2,114 Asset backed securities - 228,397 2,114 230,511 The following table provides information on the unrealized gains or losses included in income for the fiscal years ended June 30, 2013 and June Total investments - trading 591,646 497,566 2,114 1,091,326 30, 2012, relating to MIGA’s Level 3 Instruments - Trading assets still held at the reporting date, as well as where those amounts are included in Securities purchased under the Statement of Operations: 13,000 - - 13,000 resale agreements Derivative assets In thousands of US dollars Fiscal Year ended Currency forward contracts - 282,732 - 282,732 June 30, 2013 June 30, 2012 Othersa - 186 - 186 Unrealized gains (losses) Total derivative assets - 282,918 - 282,918 Statement of Income Location Total $604,646 $780,484 $2,114 $1,387,244 Income from Investments $- $(94) Liabilities: Securities sold under The fair value of Level 3 instruments (asset-backed securities) in the investment portfolio are estimated using valuation models that incorporate $3,544 $11,646 $- $15,190 observable market inputs and unobservable inputs. The significant unobservable inputs include constant prepayment rate, probability of default, repurchase agreements Derivative liabilities and loss severity. The constant prepayment rate is an annualized expected rate of principal prepayment for a pool of asset-backed securities. The probability of default is an estimate of the expected likelihood of not collecting contractual amounts owed. Loss severity is the present value of Currency forward contracts - 282,031 - 282,031 lifetime losses (both interest and principal) as a percentage of the principal balance. Othersa - 19 - 19 Significant increases (decreases) in the assumptions used for these inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the Total derivative liabilities - 282,050 - 282,050 assumption used for the loss severity and a directionally opposite change in the assumption used for constant prepayment rates. Total $3,544 $293,696 $- $297,240 The following table provides a summary of the valuation technique applied in determining fair values of these Level 3 instruments and quantitative a. information regarding the significant unobservable inputs used: These relate to (TBA) securities Inter-Level Transfers MIGA’s policy is to recognize transfers in and transfers out of levels as of the end of the reporting period in which they occur. The table below In thousands of US dollars provides the details of inter-level transfers for the fiscal year ended June 30, 2013 and June 30, 2012: Range Range Fair value Valuation Unobservable In thousands of US dollars Fiscal Year ended June 30, 2013 Fiscal Year ended June 30, 2012 Portfolio (weighted average) (weighted average) at June 30 technique input June 30, 2013 June 30, 2012 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 2013 2012 Asset backed securities Investments Constant Prepayment Rate n/a 0.5%– 4% (2.05%) Transfers (out of) into $- $- $- $- $(1,036) $1,036 (Asset backed Discounted Probability of Default n/a 1.0%– 10% (6.01%) - $2,114 securities) Cash Flow Loss Severity n/a 5.0% - 75.0% (57.3%) Transfers into (out of) - 2,448 (2,448) - 2,463 (2,463) $- $2,448 $(2,448) $- $1,427 $(1,427) The maximum credit exposure of investments closely approximates the fair values of the financial instruments. MIGA uses currency forward contracts to manage the currency risk embedded in its insurance portfolio reserve and to enhance the returns from and manage the currency risk in the investment portfolio. 88 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 89 The following table provides information on the credit exposure and notional amounts of the derivative instruments: Membership: On December 20, 2012, Sao Tome and Principe became the 178th member of MIGA with a subscription of 50 shares. in thousands of Dollars On February 25, 2013, Comoros became the 179th member of MIGA with a subscription of 50 shares. Type of contracts June 30, 2013 June 30, 2012 Currency forward contract Note D: Guarantees Credit exposure $2,181 $2,431 Exchange traded options and futuresa Guarantee Program MIGA offers guarantees or insurance against loss caused by non-commercial risks (political risk insurance) to eligible investors on qualified Notional long position 6,827 31,025 investments in developing member countries. MIGA insures investments for up to 20 years against five different categories of risk: currency Notional short position 133,600 93,800 inconvertibility and transfer restriction, expropriation, war and civil disturbance, breach of contract, and non-honoring of a sovereign financial Othersb obligation. Currency inconvertibility and transfer restriction coverage protects the investor against inconvertibility of local currency into foreign Notional long position 83,000 53,000 exchange for transfer outside the host country. Currency depreciation is not covered. Expropriation coverage protects the investor against partial Notional short position 5,000 3,000 or total loss of the insured investment as a result of acts by the host government that may reduce or eliminate ownership of, control over, or rights to the insured investment. War and civil disturbance coverage protects the investor against losses from damage to, or the destruction or Credit exposure 53 186 disappearance of, tangible covered assets, as well as a total loss due to business interruption extending for a period of at least 180 days, caused a. by politically motivated acts of war or civil disturbance in the host country including revolution, insurrection, coup d’etat, sabotage and terrorism. Exchange traded instruments are generally subject to daily margin requirements and are deemed to have no material credit risk. All options and future contracts are interest rate contracts Breach of contract coverage protects the investor against the inability to enforce an award arising out of an arbitral or judicial decision recognizing b. These relate to (TBA) securities the breach of a covered obligation by the host government. Non-honoring of a sovereign financial obligation coverage protects the investor against the failure of a sovereign to honor an unconditional financial payment obligation or guarantee, where the underlying project meets all of Asset backed securities (ABS) are diversified among credit cards, student loans, home equity loans and mortgage backed securities. Since these MIGA’s normal eligibility requirements. Unlike MIGA’s breach of contract coverage, this coverage does not require a final arbitral award or court holdings are investment grade, neither concentration risk nor credit risk represents a significant risk to MIGA as of June 30, 2013. However, market decision as a precondition to payment of a claim. Investors may insure projects by purchasing any combination of the five coverage types. A sixth deterioration could cause this to change in future periods. category of risk, non-honoring of financial obligations by a state-owned enterprise, was approved by the Board of Directors on June 26, 2013. This new coverage protects the investor against losses resulting from the failure of a state-owned enterprise to make a payment when due under an unconditional financial payment obligation or guarantee given in favor of a project that otherwise meets all of MIGA’s eligibility requirements. Note C: Capital Stock Premium rates applicable are set forth in the contracts. Payments against all claims under a guarantee may not exceed the maximum amount of coverage issued under the guarantee. Under breach of contract coverage, payments against claims may not exceed the lesser of the amount of The MIGA Convention established MIGA’s authorized capital stock at 100,000 shares with a provision that the authorized capital stock shall guarantee and the arbitration award. automatically increase on the admission of a new member to the extent that the then authorized shares are insufficient to provide the shares to be subscribed by such member. At June 30, 2013, the initial authorized capital stock was 186,359 (186,259 – June 30, 2012) shares. The Convention MIGA also acts as administrator of some investment guarantee trust funds. MIGA, on behalf of the trust funds, issues guarantees against loss further states that 10 percent of the members’ initial subscription be paid in cash, in freely convertible currencies, except that developing member caused by non-commercial risks to eligible investors on qualified investments in the countries specified in the trust fund agreements. Under the countries may pay up to a quarter of the 10 percent in their own currencies. An additional 10 percent of the initial subscription shall be paid in trust fund agreements, MIGA, as administrator of the trust funds, is not liable on its own account for payment of any claims under contracts the form of non-negotiable, non-interest bearing promissory notes. The notes are denominated in freely convertible currencies and are due on of guarantees issued by MIGA on behalf of such trust funds. Contract of guarantees issued by MIGA on behalf of trust funds at June 30, 2013, demand to meet MIGA’s obligations. The remaining 80 percent is subject to call when required by MIGA to meet its obligations. amounts to $15,994,000 ($14,731,000 – June 30, 2012). On March 29, 1999, the Council of Governors approved a General Capital Increase (GCI) resolution increasing the authorized capital stock of MIGA by 78,559 shares to be subscribed by members during the subscription period ending March 28, 2002. Of the additional capital, 17.65 Contingent Liability percent is to be paid in cash, in freely usable currency. The remaining 82.35 percent is subject to call when required by MIGA to meet its obli- The maximum amount of contingent liability (gross exposure) of MIGA under guarantees issued and outstanding at June 30, 2013 totaled gations. On May 6, 2002, the Council of Governors adopted a resolution to extend the GCI subscription period to March 28, 2003. On March 17, $10,758,370,000 ($10,345,866,000 – June 30, 2012). A contract of guarantee issued by MIGA may permit the guarantee holder, at the start of each 2003, the Council of Governors approved an amendment to the GCI resolution allowing eligible countries to subscribe to the GCI shares allocated contract period, to elect coverage and place amounts both on current and standby. MIGA is currently at risk for amounts placed on current. The to them by submitting an Instrument of Contribution before the GCI deadline of March 28, 2003, and requesting such countries to pay for their maximum amount of contingent liability is MIGA’s maximum exposure to insurance claims, which includes “standby” coverage for which MIGA is GCI shares as soon as possible. The reserved shares will be issued and corresponding voting power will accrue when the subscription process committed but not currently at risk. At June 30, 2013, MIGA’s actual exposure to insurance claims, exclusive of standby coverage is $8,342,274,000 has been completed. ($8,447,510,000 – June 30, 2012). During the fiscal year ended June 30, 2013, 100 shares (217 shares – fiscal year end June 30, 2012) were subscribed. Reinsurance MIGA obtains treaty and facultative reinsurance (both public and private) to augment its underwriting capacity and to mitigate its risk by pro- At June 30, 2013, MIGA’s authorized capital stock comprised 186,359 (186,259 – June 30, 2012) shares, of which 177,103 (177,003 – June 30, 2012) tecting portions of its insurance portfolio, and not for speculative reasons. All reinsurance contracts are ceded on a proportionate basis. However, shares had been subscribed. Each share has a par value of SDR10,000, valued at the rate of $1.082 per SDR. Of the subscribed capital as of June MIGA is exposed to reinsurance non-performance risk in the event that reinsurers fail to pay their proportionate share of the loss in case of a 30, 2013, $365,629,000 ($365,413,000 – June 30, 2012) has been paid in; and the remaining $1,550,625,000 ($1,549,759,000 - June 30, 2012) claim. MIGA manages this risk by requiring that private sector reinsurers be rated by at least two of the four major rating agencies (Standard is subject to call. At June 30, 2013, MIGA had $112,384,000 ($113,794,000 – June 30, 2012) in the form of non-negotiable, non-interest bearing & Poor’s, A.M. Best, Moody’s and Fitch), and that such ratings be above a minimum threshold. In addition, MIGA may also place reinsurance demand obligations (promissory notes). with public insurers of member countries that operate under and benefit from the full faith and credit of their governments and with multilateral agencies that represent an acceptable counterparty risk. MIGA has established limits, at both the project and portfolio levels, which restrict the A summary of MIGA’s authorized and subscribed capital at June 30, 2013 and June 30, 2012 is as follows: amount of reinsurance that may be ceded. The project limit states that MIGA may cede no more than 90 percent of any individual project. The portfolio limit states that MIGA may not reinsure more than 50 percent of its aggregate gross exposure. Initial Capital Capital Increase Total Of the $10,758,370,000 outstanding contingent liability (gross exposure) as at June 30, 2013 ($10,345,866,000 – June 30, 2012), $4,348,538,000 was ceded through contracts of reinsurance ($4,084,201,000 – June 30, 2012). Net exposure amounted to $6,409,832,000 as at June 30, 2013 Shares (US$000) Shares (US$000) Shares (US$000) ($6,261,665,000– June 30, 2012). At June 30, 2013 Authorized 107,800 $1,166,396 78,559 $850,008 186,359 $2,016,404 Subscribed 107,800 $1,166,396 69,303 $749,858 177,103 $1,916,254 At June 30, 2012 Authorized 107,700 $1,165,314 78,559 $850,008 186,259 $2,015,322 Subscribed 107,700 $1,165,314 69,303 $749,858 177,003 $1,915,172 90 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 91 MIGA can also provide both public (official) and private insurers with facultative reinsurance. As of June 30, 2013, total insurance assumed by A regionally diversified portfolio is desirable for MIGA as an insurer, because correlations of claims occurrences are typically higher within a region MIGA, primarily with official investment insurers, amounted to $257,041,000 ($496,169,000 – June 30, 2012). than between regions. When a correlation is higher, the probability of simultaneous occurrences of claims will be higher. Premiums relating to direct, assumed, and ceded contracts for the fiscal years ended June 30, 2013 and June 30, 2012 were as follows: The regional distribution of MIGA’s portfolio at June 30, 2013 and June 30, 2012 is as follows: In thousands of US dollars Fiscal Year ended June 30, 2013 Fiscal Year ended June 30, 2012 In thousands of US dollars June 30, 2013 June 30, 2012 Premiums Written Gross Net % of Total Gross Net % of Total Direct $121,864 $105,308 Region Exposure Exposure Net Exposure Exposure Exposure Net Exposure Assumed 2,520 3,315 Ceded (71,769) (34,738) Africa $2,777,029 $1,627,764 25.4 $1,573,908 $1,257,866 20.1 Premiums Earned Asia 1,620,983 954,346 14.9 1,391,723 861,415 13.8 Direct 95,372 86,340 Europe and Central Asia 4,407,826 2,582,856 40.3 5,543,471 3,017,803 48.2 Assumed 1,850 2,839 Latin America and Caribbean 1,069,151 672,776 10.5 1,068,547 641,601 10.2 $97,222 $89,179 Middle East and North Africa 883,381 572,090 8.9 768,217 482,979 7.7 Ceded $(37,749) $(33,681) $10,758,370 $6,409,832 100.0 $10,345,866 $6,261,664 100.0 Portfolio Risk Management Controlled acceptance of political risk in developing countries is MIGA’s core business. The underwriting of such risk requires a comprehensive The sectoral distribution of MIGA’s portfolio at June 30, 2013 and June 30, 2012 is shown in the following table: risk management framework to analyze, measure, mitigate and control risk exposures. Claims risk, the largest risk for MIGA, is the risk of incurring a financial loss as a result of a claimable political risk event in developing countries. In thousands of US dollars June 30, 2013 June 30, 2012 Political risk assessment forms an integral part of MIGA’s underwriting process and includes the analysis of both country-related and project- related risks. Gross Net % of Total Net Gross Net % of Total Sector Exposure Exposure Exposure Exposure Exposure Net Exposure Country risk assessment is a combination of quantitative and qualitative analysis. Ratings are assigned individually to each risk for which MIGA Agribusiness $211,844 $207,810 3.2 $223,682 $197,366 3.1 provides insurance coverage in a country. Country ratings are reviewed and updated every quarter. Country risk assessment forms the basis of the underwriting of insurance contracts, setting of premium levels, capital adequacy assessment and provisioning for claims. Financial 3,429,899 1,987,985 31.0 4,297,098 2,270,426 36.3 Infrastructure 4,719,038 2,757,082 43.0 3,920,267 2,435,811 38.9 Project-specific risk assessment is performed by a cross-functional team. Based on the analysis of project-specific risk factors within the country context, the final project risk ratings can be higher or lower than the country ratings of a specific coverage. The decision to issue an insurance Manufacturing 999,491 640,533 10.0 774,027 457,205 7.3 contract is subject to approval by MIGA’s Senior Management and concurrence by the Board of Directors. In order to avoid excessive risk con- Mining 239,525 170,115 2.7 241,368 171,221 2.7 centration, MIGA sets exposure limits per country and per project. The maximum net exposure which may be assumed by MIGA is $720 million ($720 million – June 30, 2012) in each host country and $220 million ($220 million – June 30, 2012) for each project. Oil and Gas 930,838 420,388 6.6 335,879 260,573 4.2 Tourism, Construction and Services 227,735 225,919 3.5 553,545 469,062 7.5 As approved by the Board of Directors and the Council of Governors, the maximum aggregate amount of contingent liabilities that may be assumed by MIGA is 350 percent of the sum of MIGA’s unimpaired subscribed capital and its retained earnings, and insurance portfolio reserve Total $10,758,370 $6,409,832 100.0 $10,345,866 $6,261,664 100.0 plus such portion of the insurance ceded by MIGA through contracts of reinsurance as the Board of Directors may determine. Accordingly, at June 30, 2013, the maximum level of guarantees outstanding (including reinsurance) may not exceed $13,897 million ($13,093 million – June 30, 2012). Portfolio Diversification Note E: Claims MIGA aims to diversify its guarantee portfolio so as to limit the concentration of exposure to loss in a host country, region, or sector. The portfolio shares of the top five and top ten largest exposure countries provide an indicator of concentration risk. The gross and net exposures of the top Reserve for Claims five and top ten countries at June 30, 2013 and June 30, 2012 are as follows: MIGA’s gross reserve for claims at June 30, 2013 amounted to $381,100,000 ($278,200,000- June 30, 2012) and estimated reinsurance recov- erables amounted to $99,100,000 ($52,900,000 -June 30, 2012). In thousands of US dollars June 30, 2013 June 30, 2012 An analysis of the changes to the gross reserve for claims for the fiscal years ended June 30, 2013 and June 30, 2012 appears in the table below: Exposure in Exposure in Exposure in Exposure in Top Five Countries Top Ten Countries Top Five Countries Top Ten Countries In thousands of US dollars June 30, 2013 June 30, 2012 Gross Exposure $3,664,881 $5,838,938 $4,096,598 $5,949,433 % of Total Gross Exposure 34.1 54.3 39.6 57.5 Gross reserve balance $278,200 $228,300 Net Exposure $1,829,073 $3,065,083 $1,918,072 $3,051,252 Less: Estimated reinsurance recoverables 52,900 40,300 % of Total Net Exposure 28.5 47.8 30.6 48.7 Net reserve balance, beginning of the period 225,300 188,000 Increase to net reserves before translation adjustments 54,400 48,700 Foreign currency translation adjustments 2,300 (11,400) Provision for claims - net of reinsurance 56,700 37,300 Net reserve balance 282,000 225,300 Add: Estimated reinsurance recoverables 99,100 52,900 Gross reserve balance, end of the period $381,100 $278,200 92 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 93 The provision for claims for the fiscal year ended June 30, 2013 and June 30, 2012 reflected the following changes in the Insurance portfolio reserve and Specific reserve for claims: Note F: Pension and Other Post Retirement Benefits In thousands of US dollars Fiscal Year ended MIGA, IBRD and IFC participate in a defined benefit Staff Retirement Plan (SRP), a Retired Staff Benefits Plan (RSBP) and a Post-Employment Benefits Plan (PEBP) that cover substantially all of their staff members. June 30, 2013 June 30, 2012 The SRP provides regular pension benefits and includes a cash balance plan. The RSBP provides certain health and life insurance benefits to Provision for claims: eligible retirees. The PEBP provides certain pension benefits administered outside the SRP. Insurance portfolio reserve $47,100 $44,500 Specific reserve for claims 9,600 (7,200) MIGA uses a June 30 measurement date for its pension and other postretirement benefit plans. Increase, net $56,700 $37,300 All costs, assets and liabilities associated with these pension plans are allocated between MIGA, IBRD, and IFC based upon their employees’ respective participation in the plans. In addition, MIGA and IFC reimburse IBRD for their proportionate share of any contributions made to these The foreign currency translation adjustment reflects the impact on MIGA’s reserves arising from the revaluation of guarantee contracts denom- plans by IBRD. Contributions to these plans are calculated as a percentage of salary. inated in currencies other than US dollar. The foreign currency translation impact on reserve is effectively managed through MIGA’s system for managing exposures to foreign currencies. The amount by which the reserve increased (decreased) as a result of translation adjustment is offset The amounts presented below reflect MIGA’s respective share of the costs, assets, and liabilities of the plans. by the translation gains (losses) on MIGA’s investment portfolio and other assets, reported on the Statement of Operations. The following table summarizes the benefit costs associated with the SRP, RSBP, and PEBP for MIGA for the fiscal years ended June 30, 2013 and Specific Reserve for Claims June 30, 2012: The specific reserve for claims is composed of reserves for pending claims and reserves for contracts where a claimable event, or events that may give rise to a claimable event, may have occurred, but in relation to which no claim has been filed, but where a loss is probable. The parameters used in calculating the specific reserves, i.e., claims probability, severity and expected recovery, are assessed for each contract placed in the specific reserves on a quarterly basis. At June 30, 2013, the specific reserves amounted to $17,700,000 ($7,700,000 – June 30, 2012) on a gross basis and In thousands of US dollars Fiscal Year ended June 30, 2013 Fiscal Year ended June 30, 2012 $15,137,000 ($5,600,000 – June 30, 2012) net of reinsurance. Benefit Cost SRP RSBP PEBP Total SRP RSBP PEBP Total The following table shows how the estimates of the specific reserves for each reporting period have developed over the past eleven fiscal years: Service cost $4,328 $1,042 $458 $5,828 $3,456 $830 $370 $4,656 Specific Reserve development over past eleven fiscal years Interest cost 4,951 893 353 6,197 5,540 902 374 6,816 In thousands of US dollars Expected return on plan assets (8,015) (913) - (8,928) (8,604) (941) - (9,545) Amortization of prior service cost 75 135 7 217 99 - 7 106 Reporting Period FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Amortization of unrecognized net loss 1,761 361 446 2,568 309 178 290 777 Est. of Cumulative Net periodic pension cost $3,100 $1,518 $1,264 $5,882 $800 $969 $1,041 $2,810 Claims: at end of reporting period 121,800 9,900 37,800 27,610 1,062 - 2,800 13 30,300 5,000 4,200 5,200 The following table summarizes the projected benefit obligations, fair value of plan assets, and funded status associated with the SRP, RSBP and One year later 68,600 4,600 23,550 40,380 - - 1,491 13 2,900 - 9,100 PEBP for MIGA for the fiscal years ended June 30, 2013 and June 30, 2012. While contributions made to SRP and RSBP are irrevocable, contri- Two years later 3,000 4,530 8,343 45,900 - - 2,291 13 - - butions made to PEBP are revocable. As a result, the assets for PEBP do not qualify for off-balance sheet accounting and are included in IBRD’s investment portfolio, with MIGA’s portion reflected in receivable from IBRD under Note G (Transactions with Affiliated Organizations). The assets Three years later 5,650 3,279 6,800 45,600 - - 2,500 13 - of the PEBP are invested in fixed income and equity instruments. Four years later 5,775 700 1,300 15,100 - - 491 13 Five years later 5,700 700 1,200 - - - 491 Six years later 5,500 700 - - - In thousands of US dollars Fiscal Year ended June 30, 2013 Fiscal Year ended June 30, 2012 Seven years later 7,200 700 - - Projected Benefit Obligation SRP RSBP PEBP Total SRP RSBP PEBP Total Eight years later 7,000 700 - Nine years later 6,700 700 Beginning of year $129,861 $21,740 $9,385 $160,986 $107,784 $16,518 $7,418 $131,720 Ten years later 3,500 700 Service cost 4,328 1,042 458 5,828 3,456 830 370 4,656 Eleven years later 3,400 Interest cost 4,951 893 353 6,197 5,540 902 374 6,816 Participant contributions 1,141 118 12 1,271 1,009 96 20 1,125 Specific reserves at June 30, 2013 Federal subsidy received n.a 18 n.a 18 n.a 32 n.a 32 Plan amendments n.a 160 n.a 160 n.a 1,462 n.a 1,462 Fiscal Year FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Total Benefits paid (5,221) (469) (343) (6,033) (4,945) (377) (231) (5,553) Estimate of cumulative claims Actuarial (gain) loss (2,640) (1,545) (21) (4,206) 17,017 2,277 1,434 20,728 at July 1, 2012 3,400 700 - - - - 491 13 - - 9,100 5,200 18,904 End of year $132,420 $21,957 $9,844 $164,221 $129,861 $21,740 $9,385 $160,986 Cumulative payments - (700) - - - - (491) (13) - - - - (1,204) Specific reserves at 3,400 - - - - - - - - - 9,100 5,200 17,700 June 30, 2013 Pending Claims During the fiscal year ended June 30, 2013, MIGA received one claim under its War and Civil Disturbance coverage for a project in Mali. There were no claims paid during the fiscal year ended June 30, 2013. The claim filed in FY2010, which related to a project in Sierra Leone, was withdrawn. Appropriate reserves are maintained for these matters. 94 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 95 Assumptions In thousands of US dollars Fiscal Year ended June 30, 2013 Fiscal Year ended June 30, 2012 The actuarial assumptions used are based on financial market interest rates, inflation expectations, past experience, and management’s best estimate of future benefit changes and economic conditions. Changes in these assumptions will impact future benefit costs and obligations. Fair Value of Plan Assets SRP RSBP PEBP Total SRP RSBP PEBP Total Beginning of year $139,109 $14,671 $153,780 $135,330 $13,700 $149,030 The expected long-term rate of return for the SRP assets is a weighted average of the expected long term (10 years or more) returns for the various asset classes, weighted by the portfolio allocation. Asset class returns are developed using a forward-looking building block approach and are not Participant contributions 1,141 118 1,259 1,009 96 1,105 strictly based on historical returns. Equity returns are generally developed as the sum of expected inflation, expected real earnings growth and Actual return on assets 10,419 1,166 11,585 5,450 288 5,738 expected long-term dividend yield. Bond returns are generally developed as the sum of expected inflation, real bond yield, and risk premium/ spread (as appropriate). Other asset class returns are derived from their relationship to equity and bond markets. The expected long-term rate of Employer contributions 2,672 1,065 3,737 2,265 964 3,229 return for the RSBP is computed using procedures similar to those used for the SRP. The discount rate used in determining the benefit obligation Benefits paid (5,221) (469) (5,690) (4,945) (377) (5,322) is selected by reference to the year-end yields of AA corporate bonds. End of year $148,120 $16,551 $- $164,671 $139,109 $14,671 $- $153,780 Actuarial gains and losses occur when actual results are different from expected results. Amortization of these unrecognized gains and losses Funded status1 $15,700 $(5,406) $(9,844) $450 $9,248 $(7,069) $(9,385) $(7,206) will be included in income if, at the beginning of the fiscal year, they exceed 10 percent of the greater of the projected benefit obligation or the Accumulated Benefit Obligation $107,706 $21,957 $8,455 $138,118 $103,986 $21,740 $8,115 $133,841 market-related value of plan assets. If required, the unrecognized gains and losses are amortized over the expected average remaining service lives of the employee group. 1 Net amount recognized is reported as Net assets under retirement benefits plans or as Liabilities under Accounts payable and accrued expenses under Total Liabilities on the Balance Sheet. The following tables present the weighted-average assumptions used in determining the projected benefit obligations and the net periodic pension costs for the fiscal years ended June 30, 2013 and June 30, 2012: During the fiscal year ended June 30, 2012, amendments were made to the RSBP. These included: (i) Providing reimbursements for standard and income-related premiums paid by eligible Medicare B participants effective on July 1, 2012, (ii) moving from the current Retirement Drug Subsidy (RDS) arrangement to an Employer Group Waiver Plan (EGWP) effective January 1, 2013, (iii) providing reimbursements of Medicare Part In percent SRP RSBP PEBP D income-related premium amounts once the plan moved to the EGWP arrangement, and (iv) eliminating the Medicare savings feature. The combined effect of these changes was a $1,462,000 increase to the projected benefit obligation at June 30, 2012. 2013 2012 2013 2012 2013 2012 During the fiscal year ended June 30, 2013, the plan sponsor decided not to transition the RSBP plan from RDS to EGWP following further evalu- ations of the design and administrative requirements of the EGWP. The effect of this change was a $160,000 increase to the projected benefit Weighted average assumptions used to determine projected benefit obligations obligation at June 30, 2013. Discount rate 4.55 3.90 4.80 4.10 4.50 3.90 The following tables present the amounts included in Accumulated Other Comprehensive Loss relating to Pension and Other Post Retirement Rate of compensation increase 5.70 5.40 5.70 5.40 Benefits: Health care growth rates-at end of 5.90 6.30 Amounts included in Accumulated Other Comprehensive Loss at June 30, 2013: fiscal year Ultimate health care growth rate 3.90 3.60 Year in which ultimate rate is reached 2022 2022 In thousands of US dollars SRP RSBP PEBP Total Weighted average assumptions used to determine net periodic pension cost Net acturial loss $16,111 $4,053 $4,650 $24,814 Discount rate 3.90 5.30 4.10 5.50 3.86 5.20 Prior service cost 90 1,487 10 1,587 Expected return on plan assets 5.80 6.40 6.10 6.70 Net amount recognized in Accumulated Rate of compensation increase 5.40 5.90 5.40 5.90 $16,201 $5,540 $4,660 $26,401 Other Comprehensive Loss Amounts included in Accumulated Other Comprehensive Loss at June 30, 2012: Health care growth rates - at end of 6.30 6.90 fiscal year Ultimate health care growth rate 3.60 4.00 In thousands of US dollars Year in which ultimate rate is reached 2022 2022 SRP RSBP PEBP Total The medical cost trend rate can significantly affect the reported postretirement benefit income or costs and benefit obligations for the RSBP. The Net acturial loss $22,916 $6,212 $5,117 $34,245 following table shows the effects of a one-percentage-point change in the assumed healthcare cost trend rate: Prior service cost 165 1,462 17 1,644 Net amount recognized in Accumulated One percentage One percentage $23,081 $7,674 $5,134 $35,889 In thousands of US dollars Other Comprehensive Loss point increase point decrease The estimated amounts that will be amortized from Accumulated Other Comprehensive Loss into net periodic benefit cost in the fiscal year Effect on total service and interest cost $600 $(400) ending June 30, 2014 are as follows: Effect on postretirement benefit obligation 4,900 (3,800) In thousands of US dollars SRP RSBP PEBP Total Net acturial loss $1,022 $204 $407 $1,633 Prior service cost 14 151 5 170 Amounts estimated to be amortized into net $1,036 $355 $412 $1,803 periodic benefit costs 96 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 97 Investment Strategy Fair Value Measurements The investment policy establishes the framework for investment of the plan assets based on long-term investment objectives and the trade-offs All plan assets are measured at fair value on recurring basis. The following table presents the fair value hierarchy of major categories of plans inherent in seeking adequate investment returns within acceptable risk parameters. A key component of the investment policy is to establish a assets as of June 30, 2013 and June 30, 2012: Strategic Asset Allocation (SAA) representing the policy portfolio (i.e., target mix of assets) around which the plans are invested. The SAA for the plans are reviewed in detail and reset about every three years, with more frequent reviews and changes if and as needed based on market conditions. Fair Value Measurements on a Recurring Basis as of June 30, 2013 The key long-term objective is to target and secure asset performance that is reasonable in relation to the growth rate of the underlying liabilities SRP RSBP and the assumed sponsor contribution rates. This is particularly so in the case of the SRP, which has liabilities that can be projected with a Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total reasonable level of confidence based on the actuarial assumptions. Given the relatively long investment horizons of the SRP and RSBP, and the relatively modest liquidity needs over the short-term to pay benefits and meet other cash requirements, the focus of the investment strategy is on generating sustainable long-term investment returns through various assets classes and strategies including equity, private equity and real estate. Debt Securities Time deposits $2 $2,264 $- $2,266 $- $305 $- $305 The SAA is derived using a mix of quantitative analysis that incorporates expected returns and volatilities by asset class as well as correlations across the asset classes, and qualitative considerations such as the desired liquidity needs of the plans. The strategic asset allocation is comprised Securities purchased of a diversified portfolio drawn from among fixed income, equity, real assets and absolute return strategies. under resale 3,100 - - 3,100 184 - - 184 agreements The most recent target asset allocations for the SRP and RSBP were approved in May 2013. Government and 29,140 6,724 - 35,864 1,734 2,549 - 4,283 The following table presents the actual and target asset allocation at June 30, 2013 and June 30, 2012 by asset category for the SRP and RSRP. agency securities The portfolios are in a period of transition to the new SAA, which explains for the most part, the difference between the target allocation and the Corporate and actual allocation as of June 30, 2013. - 1,391 - 1,391 - 92 - 92 convertible bonds Asset-backed securities - 800 - 800 - 1 - 1 In percent SRP RSBP Mortgage-backed - 1,843 - 1,843 - 18 - 18 securities Target % of Target % of allocation 2013 Plan Assets allocation 2013 Plan Assets Total Debt Securities 32,242 13,022 - 45,264 1,918 2,965 - 4,883 Asset Class (%) 2013 2012 (%) 2013 2012 Fixed income & cash 26 31 33 24 30 32 Equities Public equity 27 28 24 29 30 27 Private equity 20 18 20 20 21 24 US common stocks 4,986 - - 4,986 324 - - 324 Hedge funds 10 11 11 10 9 8 Non-US common stocks 23,755 - - 23,755 2,553 - - 2,553 Real assetsa 12 12 12 12 10 9 Opportunistic 5 - - 5 - - Mutual funds 1,547 - - 1,547 321 - - 321 Total 100 100 100 100 100 100 Real estate investment 3,188 - - 3,188 291 - - 291 a Real assets comprise primarily of Real estate and Real estate investment trusts (REITs) with a small allocation to infrastructure and timber trusts (REITs) Total Equity Securities 33,476 - - 33,476 3,490 - - 3,490 Significant Concentrations of Risk in Plan Assets The assets of the SRP and RSBP are diversified across a variety of asset classes. Investments in these asset classes are further diversified across funds, managers, strategies, geographies and sectors to limit the impact of any individual investment. In spite of such level of diversification, Commingled funds - 12,778 - 12,778 - 1,789 - 1,789 equity market risk remains the primary source of the plans’ overall return volatility. Real estate (including Risk Management Practices infrastructure and - 4,316 10,281 14,597 - 272 1,117 1,389 Managing investment risk is an integral part of managing the assets of the Plan. Liability-driven investment management and asset diversification timber) are central to the overall investment strategy and risk management approach for the SRP. The surplus volatility risk (defined as the annualized standard deviation of asset returns relative to that of liabilities) is considered the primary indicator of the Plan’s overall investment risk. It is used Private equity - - 27,394 27,394 - - 3,439 3,439 to define the risk tolerance level and establish the overall level of investment risk. Hedge funds - 11,645 4,469 16,114 - 1,039 401 1,440 Investment risk is regularly monitored at the absolute level, as well as at the relative levels with respect to the investment policy, manager benchmarks, and liabilities of the Plan. Stress tests are performed periodically using relevant market scenarios to assess the impact of extreme Derivative assets/ 7 99 106 (2) 39 - 37 market events. Monitoring of performance (at both manager and asset class levels) against benchmarks and compliance with investment liabilities guidelines is carried out on a regular basis as part of the risk monitoring process. Risk management for different asset classes is tailored to their Other assets/liabilities - (13) - (1,609) - - - 85 specific characteristics and is an integral part of the external managers’ due diligence and monitoring processes. Credit risk is monitored on a regular basis and assessed for possible credit event impacts. The liquidity position of the plans is analyzed at regular Total Assets $65,725 $41,847 $42,144 $148,120 $5,406 $6,104 $4,957 $16,551 intervals and periodically tested using various stress scenarios to ensure that the plans have sufficient liquidity to meet all cash flow requirements. In addition, the long-term cash flow needs of the Plans are considered during the SAA exercise and are one of the main drivers in determining maximum allocation to the illiquid investment vehicles. The Plans mitigate operational risk by maintaining a system of internal control along with other checks and balances at various levels to ensure the controls exist. 98 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 99 securities, where available. If quoted market prices are not available, fair values are based on discounted cash flow models using market-based In thousands of US dollars Fair Value Measurements on a Recurring Basis as of June 30, 2012 parameters such as yield curves, interest rates, volatilities, foreign exchange rates and credit curves. Some debt securities are valued using techniques which require significant unobservable inputs. The selection of these inputs may involve some judgment. Management believes its SRP RSBP estimates of fair value are reasonable given its processes for obtaining securities prices from multiple independent third-party vendors, ensuring Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total that valuation models are reviewed and validated, and applying its approach consistently from period to period. Unless quoted prices are available, money market instruments and securities purchased under resale agreements are reported at face value which approximates fair value. Debt Securities Equity securities (including REITs) are invested in companies in various industries and countries. Investments in public equity listed on securities exchanges are valued at the last reported sale price on the last business day of the fiscal year. Time deposits $- $468 $- $468 $- $188 $- $188 Commingled funds are typically common or collective trusts reported at NAV as provided by the investment manager or sponsor of the fund based Securities purchased on valuation of underlying investments, and reviewed by management. under resale 859 - - 859 171 - - 171 agreements Private equity includes investments primarily in leveraged buyouts, distressed investments and venture capital funds across North America, Government and Europe and Asia in a variety of sectors. A large number of these funds are in the investment phase of their life cycle. Private equity investments do 34,079 5,963 - 40,042 1,940 2,564 - 4,504 not have a readily determinable fair market value and are reported at NAV provided by the fund managers, and reviewed by management, taking agency securities into consideration the latest audited financial statements of the funds. The underlying investments are valued using inputs such as cost, operating Corporate and results, discounted future cash flows and trading multiples of comparable public securities. - 1,566 13 1,579 - 159 - 159 convertible bonds Asset-backed securities - 455 20 475 - 22 8 30 Real estate includes several funds which invest in core real estate as well as non-core types of real estate investments such as debt, value add, and opportunistic equity investments. Real estate investments do not have a readily determinable fair market value and are reported at NAV provided Mortgage-backed by the fund managers, and reviewed by management, taking into consideration the latest audited financial statements of the funds. The valuations - 2,813 18 2,831 - 62 2 64 of underlying investments are based on income and/or cost approaches or comparable sales approach, and taking into account discount and securities capitalization rates, financial conditions, local market conditions among others. Total Debt Securities 34,938 11,265 51 46,254 2,111 2,995 10 5,116 Hedge fund investments include those seeking to maximize absolute returns using a broad range of strategies to enhance returns and provide additional diversification. Hedge Funds include investments in equity, event driven, fixed income, multi strategy and macro relative value strategies. Equities These investments do not have a readily determinable fair market value and are reported at NAVs provided by external managers or fund admin- istrators (based on the valuations of underlying investments) on a monthly basis, and reviewed by management, taking into consideration the US common stocks 4,196 - - 4,196 370 - - 370 latest audited financial statements of the funds. Non-US common 13,756 - - 13,756 1,644 - - 1,644 stocks Investments in hedge funds and commingled funds can typically be redeemed at NAV within the near term while investments in private equity and most real estate are inherently long term and illiquid in nature with a quarter lag in reporting by the fund managers. For the reporting of those Mutual funds 6,118 - - 6,118 449 - - 449 asset classes with a reporting lag, management estimates are based on the latest available information taking into account underlying market fundamentals and significant events through the balance sheet date. Real estate investment 3,228 - - 3,228 167 - - 167 trusts (REITs) Investment in derivatives such as equity or bond futures, to-be-announced (TBA) securities, swaps, options and currency forwards are used to Total Equity Securities 27,298 - - 27,298 2,630 - - 2,630 achieve a variety of objectives that include hedging interest rates and currency risks, gaining desired market exposure of a security, an index or currency exposure and rebalancing the portfolio. Over-the-counter derivatives are reported using valuations based on discounted cash flow methods incorporating market observable input. Commingled funds - 7,994 - 7,994 - 1,178 - 1,178 The following tables present a reconciliation of Level 3 assets held during the year ended June 30, 2013 and June 30, 2012: Real estate (including infra- - 3,705 9,974 13,679 - 105 1,101 1,206 SRP - Fair Value Measurements Using Significant Unobservable Inputs (Level 3), structure and timber) In thousands of US dollars Fiscal Year Ended June 30, 2013 Private equity - - 28,053 28,053 - - 3,421 3,421 Corporate Asset- Mortgage- and Private Real Hedge Hedge funds - 9,929 3,913 13,842 - 772 339 1,111 backed backed Total convertible Equity Estate Funds Securities Securities Derivative assets/ Debt (7) (77) - (84) 13 (26) - (13) liabilities Other assets/liabilities - - - 2,073 - - - 22 Balance as of July 1, 2012 $13 $20 $18 $28,053 $9,974 $3,913 $41,991 Actual return on plan assets: Total Assets $62,229 $32,816 $41,991 $139,109 $4,754 $5,024 $4,871 $14,671 Relating to assets still held - - - 5,136 126 289 5,551 at the reporting date Valuation Methods and Assumptions Relating to assets sold during The following are general descriptions of asset categories, as well as the valuation methodologies and inputs used to determine the fair value - - - (1,215) 763 24 (428) the period of each major category of Plan assets. It is important to note that the investment amounts in the asset categories shown in the table above are Purchases, issuance and different from the asset category allocation shown in the Investment Strategy section of the note. Asset classes in the table above are grouped by (3) (20) (18) (4,580) (582) 353 (4,850) settlements, net the characteristics of the investments held. The asset class break-down in the Investment Strategy section is based on management’s view of the economic exposures after considering the impact of derivatives and certain trading strategies. Transfers in - - - - - 630 630 Transfers out (10) - - - - (740) (750) Debt securities include time deposits, U.S. treasuries and agencies, debt obligations of foreign governments and debt obligations in corporations of domestic and foreign issuers. Fixed income also includes investments in asset backed securities such as collateralized mortgage obligations Balance as of June 30, 2013 $- $- $- $27,394 $10,281 $4,469 $42,144 and mortgage backed securities. These securities are valued by independent pricing vendors at quoted market prices for the same or similar 100 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 101 RSBP - Fair Value Measurements Using Significant Unobservable Inputs (Level 3), RSBP - Fair Value Measurements Using Significant Unobservable Inputs (Level 3), In thousands of US dollars In thousands of US dollars Fiscal Year Ended June 30, 2013 Fiscal Year Ended June 30, 2012 Corporate Corporate Asset- Mortgage- Asset- Mortgage- and Private Real Hedge and Private Real Hedge backed backed Total backed backed Total convertible Equity Estate Funds convertible Equity Estate Funds Securities Securities Securities Securities Debt Debt Balance as of July 1, 2012 $- $8 $2 $3,421 $1,101 $339 $4,871 Balance as of July 1, 2011 $- $17 $8 $3,412 $889 $298 $4,624 Actual return on plan assets: Actual return on plan assets: Relating to assets still held - - - 663 3 19 685 Relating to assets still held - - - (292) 159 (9) (142) at the reporting date at the reporting date Relating to assets sold during - - - (110) 88 2 (20) Relating to assets sold during - - - 297 98 (1) 394 the period the period Purchases, issuance and - (8) (2) (535) (75) 52 (568) Purchases, issuance and - (8) (4) 4 (45) 86 33 settlements, net settlements, net Transfers in - - - - - 53 53 Transfers in - - - - - 17 17 Transfers out - - - - - (63) (63) Transfers out - - (2) - - (53) (55) Balance as of June 30, 2013 $- $- $- $3,439 $1,117 $401 $4,957 Balance as of June 30, 2012 $- $9 $2 $3,421 $1,101 $339 $4,871 Estimated Future Benefits Payments The following table shows the benefit payments expected to be paid in each of the next five years and subsequent five years. The expected benefit payments are based on the same assumptions used to measure the benefit obligation at June 30, 2013: SRP - Fair Value Measurements Using Significant Unobservable Inputs (Level 3), In thousands of US dollars Fiscal Year Ended June 30, 2012 Corporate In thousands of US dollars SRP RSBP PEBP Asset- Mortgage- and Private Real Hedge backed backed Total Before Medicare Part Medicare Part D convertible Equity Estate Funds Securities Securities D Subsidy Subsidy Debt July 1, 2013 - June 30, 2014 $5,474 $404 $9 $493 Balance as of July 1, 2011 $25 $268 $154 $27,394 $8,024 $3,518 $39,383 July 1, 2014 - June 30, 2015 5,955 447 11 547 Actual return on plan assets: - July 1, 2015 - June 30, 2016 6,414 496 13 620 Relating to assets still held July 1, 2016 - June 30, 2017 6,798 554 14 684 1 (7) 51 (2,497) 207 (69) (2,314) at the reporting date July 1, 2017 - June 30, 2018 7,119 618 15 704 Relating to assets sold during 1 2 (46) 2,231 313 (35) 2,466 July 1, 2018 - June 30, 2023 43,329 4,338 98 4,307 the period Purchases, issuance and (14) (239) (89) 925 1,430 590 2,603 settlements, net Expected Contributions Transfers in - - 9 - - 224 233 MIGA’s contribution to the SRP and RSBP varies from year to year, as determined by the Pension Finance Committee, which bases its judgment on the results of annual actuarial valuations of the assets and liabilities of the SRP and RSBP. The best estimate of the amount of contributions Transfers out - (4) (61) - - (315) (380) expected to be paid to the SRP and RSBP for MIGA during the fiscal year beginning July 1, 2013 is $3,247,000 and $1,222,000 respectively. Balance as of June 30, 2012 $13 $20 $18 $28,053 $9,974 $3,913 $41,991 102 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 103 Note G: Transactions with Affiliated Organizations Note H: Accumulated other Comprehensive Income (Loss) The following tables present the changes in Accumulated other Comprehensive Income (Loss) for the fiscal years ended June 30, 2013 and June MIGA contributes its share of the World Bank Group’s corporate costs. Payments for these services are made by MIGA to IBRD, IDA, and IFC 30, 2012: based on negotiated fees, charge backs and allocated charges where charge back is not feasible. Total fees paid by MIGA for the fiscal year ended June 30, 2013 and June 30, 2012 are as follows: In thousands of US dollars Fiscal Year Ended June 30, 2013 In thousands of US dollars Fiscal Year Ended June 30, 2013 Fiscal Year Ended June 30, 2012 Total Accumulated Cumulative Unrecognized Net Unrecognized Prior Other Translation Acturial Losses on Service Costs on Fees charged by IBRD $5,349 $5,518 Comprehenisve Adjustmenta Benefit Plans Benefit Plans Loss Fees charged by IDA 6,192 5,855 Balance, beginning of the fiscal year $3,435 $(34,245) $(1,644) $(32,454) Fees charged by IFC 2,738 3,544 Changes from the period activity - 9,431 57 9,488 At June 30, 2013 and June 30, 2012, MIGA had the following receivables from (payables to) its affiliated organizations with regard to administrative services and pension and other postretirement benefits: Balance, end of the fiscal year $3,435 $(24,814) $(1,587) $(22,966) a. Until June 30, 2006, all the currencies of transactions were deemed functional and the related currency In thousands of US dollars June 30, 2013 June 30, 2012 translation adjustments were reflected in Equity through Other Comprehensive Income. Pension and Pension and Administrative Other Administrative Other Total Total Services Postretirement Services Postretirement In thousands of US dollars Fiscal Year Ended June 30, 2012 Benefits Benefits IBRD $(3,501) $6,204 $2,703 $(2,165) $5,374 $3,209 Total Accumulated Cumulative Unrecognized Net Unrecognized Prior Other IFC (793) - (793) (1,546) - (1,546) Translation Acturial Losses on Service Costs on Comprehenisve Adjustmenta Benefit Plans Benefit Plans $(4,294) $6,204 $1,910 $(3,711) $5,374 $1,663 Loss Balance, beginning of the fiscal year $3,435 $(10,487) $(288) $(7,340) Changes from the period activity - (23,758) (1,356) (25,114) Balance, end of the fiscal year $3,435 $(34,245) $(1,644) $(32,454) a. Until June 30, 2006, all the currencies of transactions were deemed functional and the related currency translation adjustments were reflected in Equity through Other Comprehensive Income. 104 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 105 r Interest Rate Risk Note I: Fair Value Measurement Interest rate changes affect the market values of MIGA’s invested assets. A need to liquidate assets to pay for claims in an unfavorable interest rate environment may generate trading losses and reduce investment income. Changes in interest rates will also affect prepayment speeds of mortgage and asset backed security holdings, which may affect the duration of the asset portfolio. A 100 basis point parallel shift in the yield curve Fair value is defined as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction be- would impact the net income for the fiscal year ended June 30, 2013, by approximately $13.5 million ($19.9 million – June 30, 2012). This interest tween market participants at the measurement date. MIGA uses observable market data, when available, and minimizes the use of unobservable rate sensitivity is illustrative only and is based on simplified scenarios. The impact of a parallel shift in interest rates is determined using market inputs when determining fair value. The fair values of MIGA’s cash and non-negotiable, non interest-bearing demand obligations, receivables value weighted portfolio duration applied to invested asset balance at year end. for investment securities sold, payables for investment securities purchased, accounts payable and accrued expenses approximate their carrying values. The fair values of government obligations are based on quoted market prices and the fair values of asset-backed securities are based on r Foreign Exchange Rate Risk pricing models for which market observable inputs are used. The degree to which management judgment is involved in determining the fair The majority of MIGA’s assets and contingent liabilities are denominated in USD, but some guarantee contracts are issued in other currencies value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instru- such as EUR. To the extent that a claim is made in a non-USD currency and requires payment in excess of MIGA’s holdings of that currency, MIGA ments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring may face a foreign exchange related loss in converting to the needed currency to pay for a claim. A 10% change in the USD/Euro year end exchange fair value. Substantially all of MIGA’s financial instruments use either of the foregoing methodologies to determine fair values that are recorded rate would impact net income for the fiscal year ended June 30, 2013, by approximately $6.8 million ($9.0 million – fiscal year end June 30, 2012) on its financial statements. and net guarantee exposure by approximately $222.0 million ($229.7 million – fiscal year end June 30, 2012). The impact on the net income is mitigated by an offsetting effect due to exchange rate movement on investment portfolio and other assets. This foreign exchange rate sensitivity is illustrative only and is based on simplified scenarios. Note J: Risk Management r Liquidity Risk Adequate liquidity resources need to be maintained to sustain the Agency over prolonged periods of cash payouts due to claims. MIGA assesses and monitors the availability of its liquid assets on a periodic basis and analyzes the impact on its finances (capital and liquidity) under stress The responsibility for approving MIGA’s risk management policies lies with the Board of Directors. The Audit Committee of the Board deals scenarios where claims situations propagate through contagion across countries and regions. During the fiscal year ended June 30, 2013, there with risk management issues. While the Executive Vice President assumes the responsibility for overall risk management with the support of was one claim (fiscal year ended June 30, 2012 - None) filed with the Agency. the senior management team, the responsibility for the design and operational implementation of the risk management framework lies with the Finance and Risk Management Group with coordination from the Legal Affairs and Claims Group, the Operations Group and the Economics and r Operational Risk Sustainability Group. Operational Risk is intrinsic to financial institutions and is an important component of the agency-wide risk management framework. The most important types of operational risk involve breakdowns in internal controls, processes, systems and corporate governance. Risk Categories MIGA is exposed to a variety of risks and uses risk management programs such as an Economic Capital Framework, and reinsurance arrangements MIGA mitigates operational risks by maintaining a sound internal control system. Since 2000, MIGA has adopted the 1992 Committee of Spon- to manage its risk. Below is a description of risk management systems of the important risks for MIGA. soring Organizations of the Treadway Commission (COSO)’s integrated internal control framework, in line with IBRD/IDA and IFC, to regularly evaluate the effectiveness of internal control system. In addition, MIGA has introduced an integrated risk management process to strengthen r Insurance Risk monitoring of the operational risks and controls in financial reporting, and the effectiveness of key controls in the financial reporting process are Assessment of non–commercial and political risk forms an integral part of MIGA’s underwriting process, and includes the analysis of both assessed through the internal quality assurance review process. country-related and project-related risks. Insurance risk arises from MIGA’s core business of issuing investment guarantees. MIGA’s earnings depend upon the extent to which claims experience is consistent with assumptions used in setting prices for products and establishing technical MIGA’s internal control is regularly evaluated through independent review by the Internal Audit Department (IAD) of the World Bank Group. provisions and liabilities for claims. If actual claims experience of the Agency is less favorable than underlying assumptions, then income would be reduced. MIGA monitors claim activities and provisions for pending claims. In addition, claims reserves for the guarantee portfolio are calculated, With regard to information technology, all MIGA information systems and applications are hosted on the IBRD technology infrastructure that is using MIGA’s Economic Capital model. configured and adherent to the information security policy and procedures of the World Bank Group. In addition, increased collaboration with the World Bank Group has allowed MIGA to gain access to a larger pool of specialized skill sets to support its information systems. MIGA’s client r Economic Capital and Portfolio Risk Modeling relationship management system (MIGA CRM) is fully integrated with the Agency’s core financial system (Guarantee Database). Its content is For portfolio risk management purposes, MIGA currently utilizes an Economic Capital (EC) Model, based on best practices framework used in reviewed and verified against an external Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) database service. MIGA risk modeling. The Economic Capital concept is a widely recognized risk management tool in the banking and insurance industries, defining the redesigned its core information and financial system for managing and reporting data on activities supporting the guarantee process and imple- minimum amount of capital an organization needs to hold in order to sustain larger than expected losses with a high degree of confidence, over mented a new Guarantee Database on a SAP-based platform in March 2010. a defined time horizon and given the risk exposure and defined risk tolerance. MIGA defines its economic capital as the 99.99th percentile of the aggregate loss distribution over a one year horizon, minus the mean of the loss distribution, which is in line with industry practice. For business continuity, MIGA’s corporate web services have now been added to MIGA’s information systems already hosted at the World Bank Group’s Business Continuity Center. In addition, MIGA departments have further documented their business processes required to support the The model helps evaluate concentration risk in the guarantee portfolio and facilitates active, risk-based exposure management by allocating the Agency’s effort to re-establish basic operations following a crisis. For data security, more robust reporting functions and security monitoring have Economic Capital to particular regions, countries, sectors, covers, or individual contracts, based on their respective risk contribution. In order to been implemented to further enhance MIGA’s information security. prevent excessive risk concentration, MIGA uses the Economic Capital model to set exposure limits per country and per project, and to support decision making in terms of pricing and exposure retention for new projects. MIGA’s reinsurance program, including treaty and facultative rein- r Legal Risk surance, is linked to the portfolio risk modeling and helps manage the risk profile of the portfolio. Legal Risk arise primarily from changes in the legal parameters of MIGA’s member countries as a result of legislation or court decisions that may affect MIGA’s activities. There are also legal risks associated with MIGA being involved in legal disputes and arbitration proceedings, especially in The Economic Capital model is also used in the assessment of MIGA’s capital adequacy, and provides the analytical basis for risk-based pricing the context of claim resolution or settlement. of its products as well as quantification of the need for prudent technical provisions for claims. In addition, the model-based capital adequacy assessment determines the size and duration targets for MIGA’s liquidity holdings. The economic capital, pricing models and underlying pa- MIGA manages these risks by monitoring current and prospective future developments by way of ongoing discussions with member countries’ rameters are reviewed periodically. EC-based risk measures are combined with nominal exposures and income information in a comprehensive representatives on the Board of Directors and Council of Governors. MIGA also shares information and analyses with other members of the World portfolio exposure and risk report prepared for MIGA management on a monthly basis. Bank Group, the IMF and the United Nations. In addition, MIGA actively participates as a member of the Berne Union in discussions and analyses of the changes in the operating investment environment in its member countries. r Credit Risk Counter-party credit risk in MIGA’s portfolio is the risk that reinsurers would fail to pay their share of a claim. MIGA requires that private sector reinsurers, with which it conducts business, be rated by at least two of the four major rating agencies (Standard & Poor’s, A.M. Best, Moody’s and Fitch), and that the ratings be above a minimum threshold. Also, MIGA has established limits at both the project and portfolio levels, which restrict the amount of reinsurance. At present MIGA’s investment portfolio does not have significant credit risk exposure. MIGA currently invests in fixed income securities with high credit quality. The Investment authorization stipulates that government or agency sponsored debt securities be AA-rated or above, time deposits be A-rated or above, and corporate debt securities be AAA-rated. 106 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 107 MIGA Member Countries – 179 Appendices Industrialized Countries – 25 Australia • Austria • Belgium • Canada • Czech Republic • Denmark • Finland • France • Germany • Greece • Iceland • Ireland • Italy • Japan • Luxembourg • Netherlands • New Zealand • Norway • Portugal • Slovenia • Spain • Sweden • Switzerland • United Kingdom • United States Developing Countries – 154 ASIA AND THE PACIFIC Afghanistan • Bangladesh • Cambodia • China • Fiji • India • Indonesia • Korea (Republic of) • Lao People’s Democratic Republic • Malaysia • Maldives • Micronesia (Federated States of) • Mongolia • Nepal • Pakistan • Palau • Papua New Guinea • Philippines • Samoa • Singapore • Solomon Islands • Sri Lanka • Thailand • Timor-Leste • Vanuatu • Vietnam EUROPE AND CENTRAL ASIA Albania • Armenia • Azerbaijan • Belarus • Bulgaria • Bosnia and Herzegovina • Croatia • Cyprus • Estonia • Georgia • Hungary • Kazakhstan • Kosovo • Kyrgyz Republic • Latvia • Lithuania • Macedonia, former Yugoslav Republic of • Malta • Moldova • Montenegro • Poland • Romania • Russian Federation • Serbia • Slovak Republic • Tajikistan • Turkey • Turkmenistan • Ukraine • Uzbekistan appendices MIGA Member Countries Governors and Alternates LATIN AMERICA AND CARIBBEAN Directors and Alternates: Voting Power Antigua and Barbuda • Argentina • Bahamas (The) • Barbados • Belize • Bolivia • Brazil • Chile • Colombia • Costa Rica • Dominica • Dominican Republic • Ecuador • El Salvador • Grenada • Guatemala • Guyana • Haiti • Honduras • Jamaica • Signatories to MIGA’s Convention Mexico • Nicaragua • Paraguay • Panama • Peru • St. Kitts and Nevis • St. Lucia • St. Vincent and the Grenadines • Suriname • Trinidad and Tobago • Uruguay • Venezuela (República Bolivariana de) Subscriptions to the General Capital Increase MIDDLE EAST AND NORTH AFRICA Facultative Reinsurance Obtained by MIGA Algeria • Bahrain • Djibouti • Egypt (Arab Republic of) • Iran (Islamic Republic of) • Iraq • Israel • Jordan • Kuwait • Lebanon • Libya • Morocco • Oman • Qatar • Saudi Arabia • Syrian Arab Republic • Tunisia • United Arab Emirates • Yemen Facultative Reinsurance Provided by MIGA (Republic of) Guarantee Clients SUB-SAHARAN AFRICA Angola • Benin • Botswana • Burkina Faso • Burundi • Cameroon • Cape Verde • Central African Republic • Chad • Comoros • Photo Credits Congo (Democratic Republic of) • Congo (Republic of) • Côte d’Ivoire • Equatorial Guinea • Eritrea • Ethiopia • Gabon • Gambia (The) • Ghana • Guinea • Guinea-Bissau • Kenya • Lesotho • Liberia • Madagascar • Malawi • Mali • Mauritania • Mauritius • Mozambique • Namibia • Niger • Nigeria • Rwanda • São Tomé and Principe • Senegal • Seychelles • Sierra Leone • South Africa • South Sudan • Sudan • Swaziland • Tanzania • Togo • Uganda • Zambia • Zimbabwe Countries in the Process of Fullfilling Membership Requirements – 2 Bhutan • Myanmar 108 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 109 Governors and Alternates, as of June 30, 2013 Governors and Alternates, as of June 30, 2013 (cont’d) Member Governor Alternate Member Governor Alternate Afghanistan Omar Zakhilwal Mohammad M. Mastoor Dominica Roosevelt Skerrit Rosamund Edwards Albania Ardian Fullani Elisabeta Gjoni Dominican Republic Juan Temistocles Montas Simon Lizardo Algeria Karim Djoudi Abdelhak Bedjaoui Ecuador Fausto Eduardo Herrera Nicolalde Patricio Rivera Yanez Angola Job Graca Valentina Matias de Sousa Filipe Egypt, Arab Republic of Amr Darrag Yehia Hamed Antigua and Barbuda Harold E. Lovelle Whitfield Harris, Jr. El Salvador Alexander Ernesto Segovia Carlos Enrique Caceres Argentina Hernan Lorenzino Mercedes Marco del Pont Equatorial Guinea Conrado Okenve Ndoho Montserat Afang Ondo Armenia Vahram Avanesyan Vardan Aramyan Eritrea Berhane Abrehe Kidane Martha Woldegiorghis Australia Wayne Swan Bernie Ripoll Estonia Jurgen Ligi Martin Poder Austria Maria Fekter Edith Frauwallner Ethiopia Sufian Ahmed Abi Woldemeskel Bayou Azerbaijan Elman Siradjogly Rustamov Shahin Mustafayev Fiji Josaia Voreqe Bainimarama Filimone Waqabaca Bahamas, The Perry G. Christie John Rolle Finland Jutta Urpilainen Pentti Pikkarainen Bahrain Ahmed Bin Mohammed Al-Khalifa Yusuf Abdulla Humood France Pierre Moscovici Ramon Fernandez Bangladesh Abul Maal A. Muhith Arastoo Khan Gabon Luc Oyoubi Roger Owono Mba Barbados Christopher P. Sinckler Grantley W. Smith Gambia, The Abdou Kolley Mod A.K. Secka Belarus Petr Prokopovich Nikolai Snopkov Georgia Nodar Khaduri George Kvirikashvili Belgium Koen Geens Franciscus Godts Germany Dirk Niebel Thomas Steffen Belize Dean O. Barrow Yvonne Sharman Hyde Ghana Seth Terkper (vacant) Benin Marcel A. de Souza Jonas A. Gbian Greece Kostas Hatzidakis Panagiotis Mitarachi Bolivia Elba Viviana Caro Hinojosa Luis Alberto Arce Catacora Grenada Keith C. Mitchell Timothy Antoine Bosnia and Herzegovina Vjekoslav Bevanda Aleksandar Dzombic Guatemala Luis Antonio Velazquez Quiroa Pavel V. Centeno Botswana Ontefetse Kenneth Matambo Solomon M. Sekwakwa Guinea Kerfalla Yansane Sekou Traore Brazil Guido Mantega Alexandre Antonio Tombini Guinea-Bissau Jose Biai (vacant) Bulgaria Petar Chobanov Dimitar Kostov Guyana Ashni Kumar Singh Clyde Roopchand Burkina Faso Lucien Marie Noel Bembamba Lassane Kabore Haiti Wilson Laleau Charles Castel Burundi Tabu Abdallah Manirakiza Leon Nimbona Honduras Wilfredo Rafael Cerrato Rodriguez Maria Elena Mondragon Ordonez Cambodia Chhon Keat Porn Moniroth Aun Hungary Kornel Kisgergely Laszlo Orlos Cameroon Emmanuel Nganou Djoumessi Dieudonne Evou Mekou Iceland Gunnar Bragi Sveinsson Bjarni Benediktsson Canada James Michael Flaherty Margaret Biggs India P. Chidambaram Arvind Mayaram Cape Verde Cristina Duarte Sandro de Brito Indonesia Muhamad Chatib Basri Darmin Nasution Central African Republic (vacant) (vacant) Iran, Islamic Republic of Seyyed Shams Al-din Hosseini Behrouz Alishiri Chad Issa Ali Taher Ngariera Rimadjita Iraq Ali Yousif Al-Shukri (vacant) Chile Felipe Larrain Bascunan Rosanna Costa Costa Ireland Michael Noonan John Moran China Jiwei Lou Xiaosong Zheng Israel Stanley Fischer Michal Abadi-Boiangiu Colombia Mauricio Cardenas Santa Maria Mauricio Santamaria Italy Ignazio Visco Carlo Monticelli Comoros Mze Chei Oubeidi S. Soifiat Tadjiddine Alfeine Jamaica Peter Phillips Devon Rowe Congo, Democratic Republic of Patrice Kitebi Kibol Mvul Jean-Claude Masangu Mulongo Japan Taro Aso Koji Tsuruoka Congo, Republic of Gilbert Ondongo Leon Raphael Mokoko Jordan Ibrahim Saif Saleh Al-Kharabsheh Costa Rica Edgar Ayales Esna Rodrigo Bolanos Zamora Kazakhstan Yerbol Orynbayev Madina Abylkassymova Cote d'Ivoire Daniel Kablan Duncan Jean Claude Brou Kenya Henry Kiplagat Rotich Joseph Kanja Kinyua Croatia Slavko Linic Boris Lalovac Korea, Republic of Oh-Seok Hyun Choongsoo Kim Cyprus Harris Georgiades Christos Patsalides Kosovo Besim Beqaj (vacant) Czech Republic Miroslav Kalousek Tomas Zidek Kuwait Mustafa Al-Shamali Bader Mohamed Al-Saad Denmark Christian Friis Bach Ib Petersen Kyrgyz Republic Djoomart Otorbayev Olga Lavrova Djibouti Ilyas Moussa Dawaleh Amareh Ali Said 110 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 111 Governors and Alternates, as of June 30, 2013 (cont’d) Governors and Alternates, as of June 30, 2013 (cont’d) Member Governor Alternate Member Governor Alternate Lao People's Democratic Republic Phouphet Khamphounvong Sonexay Sitphaxay Rwanda Claver Gatete Kampeta Sayinzoga Latvia Andris Vilks Daniels Pavluts Samoa Faumuina Tiatia Liuga Lavea Iulai Lavea Lebanon Nicolas Nahas Mohammad Safadi Sao Tome and Principe Helio Silva Almeida (vacant) Lesotho Moeketsi Majoro Lerotholi Pheko Saudi Arabia Ibrahim A. Al-Assaf Fahad A. Almubarak Liberia Amara M. Konneh (vacant) Senegal Amadou Kane Abdoulaye Daouda Diallo Libya Elkalani AbdulKarim Elkalani Alsalim (vacant) Serbia Mladjan Dinkic Rasim Ljajic Lithuania Rimantas Sadzius Algimantas Rimkunas Seychelles Steve Fanny Sherin Renaud Luxembourg Luc Frieden Arsene Joseph Jacoby Sierra Leone Kaifala Marah Edmund Koroma Macedonia, former Yugoslav Republic of Zoran Stavreski Vladimir Pesevski Singapore Tharman Shanmugaratnam Peter Ong Boon Kwee Madagascar (vacant) (vacant) Slovak Republic Peter Kazimir Jan Toth Malawi Ralph Pachalo Jooma Randson Mwadiwa Slovenia Uros Cufer Mitja Mavko Malaysia Mohd. Najib Abdul Razak Mohd. Irwan Serigar Abdullah Solomon Islands Rick Nelson Houenipwela Shadrach Fanega Maldives Abdulla Jihad Ismail Ali Maniku South Africa Pravin J. Gordhan Lungisa Fuzile Mali Mamadou Namory Traore Abdel Karim Konate South Sudan Kosti Manibe Ngai Kornelio Koryom Malta Edward Scicluna Alfred S. Camilleri Spain Luis De Guindos Fernando Jimenez Latorre Mauritania Sidi Ould Tah Mohamed Lemine Ould Ahmed Sri Lanka Mahinda Rajapaksa P. B. Jayasundera Mauritius Charles Gaetan Xavier Luc Duval Ali Michael Mansoor St. Kitts and Nevis Denzil Douglas Hillary Hazel Mexico Luis Videgaray Caso Fernando Aportela Rodriguez St. Lucia Kenny D. Anthony Reginald Darius Micronesia, Federated States of Kensley K. Ikosia Rose Nakanaga St. Vincent and the Grenadines Ralph E. Gonsalves Laura Anthony-Browne Moldova Veaceslav Negruta Veaceslav Mamaliga Sudan Ali Mahmoud Mohamed Abdelrasoul Abd Elrahman Mohamed Dirar Mongolia Chultem Ulaan Naidansuren Zoljargal Suriname Gillmore Hoefdraad Adelien Wijnerman Montenegro Radoje Zugic Nikola Vukicevic Swaziland Bheki Sibonangaye Bhembe Sicelo M. Dlamini Morocco Nizar Baraka Mohamed Najib Boulif Sweden Anders Borg Gunilla Carlsson Mozambique Aiuba Cuereneia Ernesto Gouveia Gove Switzerland Beatrice Maser Mallor Olivier Burki Namibia Saara Kuugongelwa-Amadhila Ipumbu Shiimi Syrian Arab Republic Mohammed Zafer Muhabbek (vacant) Nepal Shankar Prasad Koirala Shanta Raj Subedi Tajikistan Shukhratdzhon M. Rakhmatboev Djamoliddin K. Nuraliev Netherlands Jeroen Dijsselbloem Lilianne Ploumen Tanzania William A. Mgimwa Ramadhan Mussa Khijjah New Zealand Bill English Gabriel Makhlouf Thailand Kittiratt Na-Ranong Areepong Bhoocha-Oom Nicaragua Ivan Acosta Montalvan Francisco J. Mayorga Timor-Leste Emilia Pires Santina J.R.F. Viegas-Cardoso Niger Amadou Boubacar Cisse Gilles Baillet Togo Mawussi Djossou Semodji Aheba Johnson Nigeria Ngozi Okonjo-Iweala Danladi Kifasi Trinidad and Tobago Larry Howai Bhoendradatt Tewarie Norway Heikki Holmas Arvinn Gadgil Tunisia Lamine Doghri Abdallah Zekri Oman Darwish bin Ismail Al Balushi (vacant) Turkey Ibrahim H. Canakci Evren Dilekli Pakistan Waqar Masood Khan Mohammad Younus Dagha Turkmenistan Dovletgeldi Sadykov Merdan Annadurdyyev Palau Elbuchel Sadang Rhinehart Silas Uganda Maria Kiwanuka Keith Muhakanizi Panama Frank De Lima Mahesh Khemlani Ukraine Serhiy Arbuzov Ihor Prasolov Papua New Guinea Don Polye Simon Tosali United Arab Emirates (vacant) Obaid Humaid Al Tayer Paraguay Manuel Ferreira Brusquetti Ramon Isidoro Ramirez Caballero United Kingdom Justine Greening George Osborne Peru Luis Miguel Castilla Rubio Carlos Augusto Oliva Neyra United States (vacant) Robert D. Hormats Philippines Cesar V. Purisima Amando M. Tetangco, Jr. Uruguay Fernando Lorenzo Pedro Buonomo Poland Michal Baj Andrzej Ciopinski Uzbekistan Galina Saidova Ravshan Gulyamov Portugal Vitor Gaspar Maria Luis Albuquerque Vanuatu Maki Stanley Simelum George Maniuri Qatar Yousef Hussain Kamal Abdullah Bin Saoud Al-Thani Venezuela, Republica Bolivariana de Jorge Giordani (vacant) Romania Daniel Chitoiu Cristian Popa Vietnam Binh Van Nguyen Minh Hung Le Russian Federation Anton Siluanov Andrey Belousov Yemen, Republic of Mohammed Saeed Al-Sadi Mutahar Abdulaziz Al-Abbasi Zambia Alexander B. Chikwanda Fredson K. Yamba Zimbabwe Tendai Biti Gideon Gono 112 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 113 Directors and Alternates: Voting Power, as of June 30, 2013 Directors and Alternates: Voting Power, as of June 30, 2013 (cont’d) Director Alternate Casting votes of Total votes % of total Director Alternate Casting votes of Total votes % of total Elected by the votes of the six largest shareholders Elected by the votes of other shareholders (cont’d) (Vacant) Sara Margalit Aviel United States 32,796 15.09 Mukesh Prasad Mohammad Tareque Bangladesh, India, Sri Lanka 7,144 3.29 (India) (Bangladesh) Hideaki Suzuki Yota Ono Japan 9,211 4.24 Benin, Burkina Faso, Cameroon, Cape Verde, Ingrid G. Hoven Wilhelm Rissmann Germany 9,168 4.22 Central African Republic, Chad, Congo Hervé de Villeroché Jean-Paul Julia France 8,797 4.05 Agapito Mendes Dias Mohamed Sikieh Kayad (Democratic Republic of), Congo (Republic 7,037 3.24 Gwen Hines Stewart James United Kingdom 8,797 4.05 (Sao Tome and Principe) (Djibouti) of), Cote d’Ivoire, Djibouti, Equatorial Guinea, Gabon, Guinea, Mali, Mauritania, Shaolin Yang Bin Han China 5,762 2.65 Mauritius, Niger, Senegal, Togo Muhammad Azeem- Omar Bougara Afganistan, Algeria, Ghana, Iran (Islamic ul-Haq Minhas 7,028 3.23 Elected by the votes of other shareholders (Algeria) Republic of), Morocco, Pakistan, Tunisia (Pakistan) Armenia, Bosnia and Herzegovina, Bulgaria, Azerbaijan, Kazakhstan, Kyrgyz Republic, Frank Heemskerk Croatia, Cyprus, Georgia, Israel, Macedonia Stefan Nanu Jorg Frieden Wieslaw Szczuka Poland, Serbia, Switzerland, Tajikistan, (Netherlands) (former Yugoslav Republic of), Moldova, 11,669 5.37 6,833 3.14 (Romania) (Switzerland) (Poland) Turkmenistan, Uzbekistan Montenegro, Netherlands, Romania, Ukraine Austria, Belarus, Belgium, Czech Republic, Boonchai Fiji, Indonesia, Lao People’s Democratic Mehmet Sefa Sundaran Annamalai Gino Alzetta Hungary, Kosovo, Luxembourg, Slovak Charassangsomboon Republic, Malaysia, Nepal, Singapore, 6,380 2.93 Pamuksuz 10,959 5.04 (Malaysia) (Belgium) Republic, Slovenia, Turkey (Thailand) Thailand, Vietnam (Turkey) Vadim Grishin Eugene Miagkov 5,760 2.65 Antigua and Barbuda, The Bahamas, Russian Federation (Russian Federtation) (Russian Federation) Janet Harris Barbados, Belize, Canada, Dominica, Marie-Lucie Morin (Vacant) Ibrahim Alturki 5,760 2.65 (St. Kitts and Nevis) Grenada, Guyana, Ireland, Jamaica, St. Kitts 10,054 4.63 Saudi Arabia (Canada) (Saudi Arabia) (Saudi Arabia) and Nevis, St. Lucia, St. Vincent and the Grenadines Cesar Guido Forcieri Ricardo Raineri Argentina, Bolivia, Chile, Paraguay, Peru, 5,677 2.61 (Argentina) (Chile) Uruguay Karim Wissa Bahrain, Egypt (Arab Republic of), Iraq, Merza H. Hasan Jordan, Kuwait, Lebanon, Libya, Maldives, Mansur Muhtar Ana Lourenco 4,032 1.85 (Arab Republic of 8,484 3.90 Angola, Nigeria, South Africa (Kuwait) Oman, Qatar, Syrian Arab Republic, United (Nigeria) (Angola) Egypt) Arab Emirates, Yemen (Republic of) Botswana, Burundi, Eritrea, Ethiopia, The In addition to the directors and alternates shown in the foregoing list, the following also served after November 1, 2012: Gambia, Kenya, Lesotho, Liberia, Malawi, Louis Rene Peter Director End of period of Alternate director End of period of service Denny H. Kalyalya Mozambique, Namibia, Rwanda, Seychelles, Larose 7,855 3.61 service (Zambia) Sierra Leone, South Sudan, Sudan, (Seychelles) Mohammed Al-Sheikh Dyg Sadiah Binti Abg Bohan Swaziland, Tanzania, Uganda, Zambia, April 30, 2013 (Saudi Arabia) February 8, 2013 (Malaysia) Zimbabwe Anna Brandt Giedre Balcytyte Denmark, Estonia, Finland, Iceland, Latvia, Anna Brandt Ayman Alkaffas (Sweden) (Lithuania) 7,822 3.60 June 30, 2013 March 31, 2013 Lithuania, Norway, Sweden (Sweden) (Egypt, Arab Republic of) Ambroise Fayolle Javed Talat Nuno Mota Pinto March 4, 2013 December 17, 2012 Piero Cipollone Albania, Greece, Italy, Malta, Portugal, (France) (Pakistan) (Portugal) 7,812 3.59 (Italy) Timor-Leste Ian Solomon Costa Rica, El Salvador, Guatemala, (United States) May 24, 2013 Juan Jose Bravo Honduras, Mexico, Nicaragua, Spain, (Vacant) 7,566 3.48 (Mexico) Venezuela (República Bolivariana de) Rudolf Treffers (Netherlands) March 31, 2013 Brazil, Colombia, Dominican Republic, Roberto Tan Rogerio Studart Ecuador, Haiti, Panama, Philippines, 7,531 3.46 (Philippines) (Brazil) Note: Guinea-Bissau (282 votes) and Madagascar (408 votes) did not participate in the 2012 Regular Election of Directors. Comoros (282 votes) Suriname, Trinidad and Tobago and Sao Tome and Principe (282 votes) became members after that Election Australia, Cambodia, Korea (Republic of), John Whitehead In-Kang Cho Micronesia (Federated States of), Mongolia, New Zealand, Palau, Papua New Guinea, 7,443 3.42 (New Zealand) (Republic of Korea) Samoa, Solomon Islands, Vanuatu 114 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 115 Signatories to MIGA’s Convention, as of June 30, 2013 Subscriptions to the General Capital Increase, as of June 30, 2013 Afghanistan Dominican Republic Lesotho St. Vincent and the Grenadines Shares Shares CATEGORY 1 Amount $ CATEGORY 2 Amount $ Subscribed Subscribed Albania Ecuador Liberia São Tomé and Principe Algeria Egypt, Arab Republic of Libya Samoa Australia 1,306 14,130,920 Albania 44 476,080 Angola El Salvador Lithuania Saudi Arabia Austria 591 6,394,620 Algeria 495 5,355,900 Antigua and Barbuda Equatorial Guinea Luxembourg Senegal Belgium 1,547 16,738,540 Argentina 956 10,343,920 Canada 2,260 24,453,200 Bahamas, The 76 822,320 Argentina Eritrea Macedonia, FYR of Serbia Czech Republic 339 3,667,980 Bahrain 59 638,380 Armenia Estonia Madagascar Seychelles Denmark 547 5,918,540 Bangladesh 259 2,802,380 Australia Ethiopia Malawi Sierra Leone Finland 457 4,944,740 Barbados 52 562,640 Austria Fiji Malaysia Singapore France 3,705 40,088,100 Belize 38 411,160 Azerbaijan Finland Maldives Slovak Republic Germany 3,865 41,819,300 Benin 47 508,540 Greece 213 2,304,660 Bolivia 95 1,027,900 Bahamas, The France Mali Slovenia Ireland 281 3,040,420 Botswana 38 411,160 Bahrain Gabon Malta Solomon Islands Italy 2,150 23,263,000 Brazil 1,127 12,194,140 Bangladesh Gambia, The Mauritania South Africa Japan 3,884 42,024,880 Bulgaria 278 3,007,960 Barbados Georgia Mauritius South Sudan Luxembourg 88 952,160 Cambodia 71 768,220 Netherlands 1,653 17,885,460 Chile 370 4,003,400 Belarus Germany Mexico Spain Norway 533 5,767,060 China 2,392 25,881,440 Belgium Ghana Micronesia, Fed. States of Sri Lanka Portugal 291 3,148,620 Colombia 333 3,603,060 Belize Greece Moldova Sudan Slovenia 78 843,960 Congo, Dem. Rep. of 258 2,791,560 Benin Grenada Mongolia Suriname Spain 980 10,603,600 Congo, Republic of 50 541,000 Sweden 800 8,656,000 Costa Rica 89 962,980 Bolivia Guatemala Montenegro Swaziland Switzerland 1,143 12,367,260 Côte d'Ivoire 134 1,449,880 Bosnia and Herzegovina Guinea Morocco Sweden United Kingdom 3,705 40,088,100 Croatia 143 1,547,260 Botswana Guinea-Bissau Mozambique Switzerland United States 12,045 130,326,900 Cyprus 79 854,780 Ecuador 139 1,503,980 Brazil Guyana Namibia Syrian Arab Republic Subtotal 42,461 459,428,020 Egypt, Arab Rep. of 350 3,787,000 Bulgaria Haiti Nepal Tajikistan Estonia 50 541,000 Burkina Faso Honduras Netherlands, The Tanzania Ethiopia 53 573,460 Burundi Hungary New Zealand Thailand Gabon 73 789,860 Ghana 187 2,023,340 Cambodia Iceland Nicaragua Timor-Leste Honduras 77 833,140 Cameroon India Niger Togo Hungary 430 4,652,600 Canada Indonesia Nigeria Trinidad and Tobago India 2,323 25,134,860 Cape Verde Iraq Norway Tunisia Indonesia 800 8,656,000 Israel 361 3,906,020 Central African Republic Iran, Islamic Republic of Oman Turkey Jamaica 138 1,493,160 Chad Ireland Pakistan Turkmenistan Jordan 74 800,680 Chile Israel Palau Uganda Kazakhstan 159 1,720,380 China Italy Panama Ukraine Kenya 131 1,417,420 Colombia Jamaica Papua New Guinea United Arab Emirates Korea, Republic of 342 3,700,440 Kuwait 709 7,671,380 Comoros Japan Paraguay United Kingdom Latvia 74 800,680 Congo, Democratic Republic of Jordan Peru United States Lebanon 108 1,168,560 Congo, Republic of Kazakhstan Philippines Uruguay Lesotho 38 411,160 Costa Rica Kenya Poland Uzbekistan Lithuania 81 876,420 Macedonia, FYR of 38 411,160 Côte d’Ivoire Korea, Republic of Portugal Vanuatu Madagascar 76 822,320 Croatia Kosovo Qatar Venezuela, R. B. de Malaysia 441 4,771,620 Cyprus Kuwait Romania Vietnam Mali 62 670,840 Czech Republic Kyrgyz Republic Russian Federation Yemen, Republic of Malta 57 616,740 Mauritania 48 519,360 Denmark Lao People’s Dem Rep. Rwanda Zambia Mauritius 66 714,120 Djibouti Latvia St. Kitts and Nevis Zimbabwe Morocco 265 2,867,300 Dominica Lebanon St. Lucia 116 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 117 Subscriptions to the General Capital Increase, as of June 30, 2013 (cont’d) Facultative Reinsurance Obtained by MIGA Investment Insurer Country CATEGORY 2 Shares Shares ACE European Group Ltd United Kingdom Amount $ SUMMARY Amount $ (cont’d) Subscribed Subscribed ACE Global Markets, Lloyd’s Syndicate 2488 United Kingdom A.F. Beazley, Esq., and Others, Lloyd’s Syndicates 2623 and 623 United Kingdom Mozambique 74 800,680 % of Total GCI 88.22% African Trade Insurance Agency Kenya Nepal 53 573,460 Completed-Cat. 1 30,416 329,101,120 Ark Syndicate Management Limited, Lloyd’s Syndicate 4020 United Kingdom Nicaragua 78 843,960 Completed-Cat. 2 26,842 290,430,440 AXIS Specialty Ltd. Bermuda Nigeria 643 6,957,260 Completed 57,258 619,531,560 AXIS Specialty Europe Plc Ireland Oman 72 779,040 Partial-Cat. 1 12,045 130,326,900 Partial-Cat. 2 Catlin Insurance Company Limited Bermuda Pakistan 503 5,442,460 – – Panama 100 1,082,000 Partial 12,045 130,326,900 Coface North America United States Paraguay 61 660,020 FCIA Management Company United States Peru 284 3,072,880 Total Cat. 1 42,461 459,428,020 Finnvera Plc Finland Philippines 369 3,992,580 Garanti-Institutte for Eksportkreditt (GIEK) Norway Qatar 104 1,125,280 Hannover Rückversicherung AG Germany Total Cat. 2 26,842 290,430,440 Romania 423 4,576,860 Hiscox Syndicates Limited, Lloyd’s Syndicate 33 United Kingdom Russian Fed. 2,391 25,870,620 Indian Harbor Insurance Company United States Rwanda 57 616,740 TOTAL 69,303 749,858,460 Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) Saudi Arabia St. Lucia 38 411,160 St. Vincent and the M.D. Reith and Others, Lloyd’s Syndicate 1414 United Kingdom 38 411,160 Grenadines Münchener Rückversicherungs-Gesellschaft Germany Saudi Arabia 2,391 25,870,620 National Union Fire Insurance Co. of Pittsburgh (AIG) United States Senegal 111 1,201,020 Nippon Export Investment Insurance (NEXI) Japan Serbia 176 1,904,320 Office Nationale du Ducroire (ONDD) Belgium Sierra Leone 57 616,740 Singapore 118 1,276,760 QBE Insurance Corporation United States Slovak Republic 169 1,828,580 S.J. Catlin, Esq., and Others, Lloyd’s Syndicates 1003 and 2003 United Kingdom South Africa 719 7,779,580 Sovereign Risk Insurance Ltd. Bermuda Sri Lanka 207 2,239,740 Starr Underwriting Agents on behalf of Lloyd’s Syndicate 1919 United Kingdom Syrian Arab Rep. 128 1,384,960 Steadfast Insurance Company (Zurich) United States Tajikistan 56 605,920 Swiss Reinsurance Company Switzerland Tanzania 107 1,157,740 Servizi Assicurativi del Commercio Estero (SACE) Italy Thailand 321 3,473,220 Talbot Underwriting Limited, Lloyd’s Syndicate 1183 United Kingdom Trinidad and Tobago 155 1,677,100 Tunisia 119 1,287,580 Turkey 352 3,808,640 Uganda 101 1,092,820 Ukraine 582 6,297,240 United Arab Emirates 284 3,072,880 Vietnam 168 1,817,760 Subtotal 26,842 290,430,440 Facultative Reinsurance Provided by MIGA Grand Total 69,303 749,858,460 Investment Insurer Country Office Nationale du Ducroire (ONDD) Belgium Overseas Private Investment Corporation (OPIC) United States Slovenska izvozna in razvozna banka (SID) Slovenia 118 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 119 Active Guarantee Clients as of June 30, 2013 Photo Credits Abengoa FMO Pan-African Infrastructure Development Absa Capital Fons Mediterrània Capital F.C.R. De Fund Cover Rebecca Post, MIGA; Izumi Kobayashi, MIGA; Gero Verheyen, MIGA; Suez Environnement, SA, Infilco Degremont, Inc., and ADC Financial Services & Corporate Régimen Simplificado POL-AM-Pack S.A. Morganti Group, Inc.; Cara Santos Pianesi, MIGA Development Fraport AG Portigon AG AES Bulgaria Holdings BV ProCredit Holding AG page 5 World Bank Group Photo Lab Geogas Trading S.A. Africa Finance Corporation GE.POR.TUR. s.a.s. Raghbir Sineh Chatthe page 7 World Bank Group Photo Lab Africa Renewables Limited Globeleq Holdings (Azito) Ltd. Ralph Odell Burleson (Individual) Africa Juice BV Globeleq Mesoamérica Energy (Wind) Rockland Steel Trading Ltd. page 9 World Bank Group Photo Lab Albemarle Corporation Limited (“GME”) Raiffeisen a.s., Prague/Czech Republic page 10 World Bank Group Photo Lab Mr. Giovanni Aletti Golden State Waste Management (Beijing) Sasol Gas Holdings (Pty) Ltd. Aqualyng Holding AS Corp State Bank Of India page 11 World Bank Group Photo Lab Autopistas del Nordeste (Cayman) Limited Grodco Panama SCDM Energie Groupe Europe Handling S.A.S. page 12 Rebecca Post, MIGA; Jillian Rachel Crowther, MIGA; Suez Environnement, SA, Infilco Degremont, Inc., and Morganti Group, Inc. Azalaï Hotels S.A. Bank of Nova Scotia S.S.A. Bakhresa, M.S. Bakhresa and A.S.S. Habib Bank AG Zurich Sena Development Limited page 15 Rebecca Post, MIGA Bakhresa Hitachi Construction Machinery Africa SGI Ethiopia Cement Limited Banco Universal S.A. Pty. Ltd page 17 Cara Santos Pianesi, MIGA SGS Societe Generale de Surveillance SA Barloworld Equipment UK Limited Hitachi Construction Machinery Southern Suez Environnement, SA, Infilco Degremont, Inc., and Morganti Group, Inc.; Chayton Africa; SASOL; Raiffeisen Bank International SID - Slovenska Izvozna in Razvojna page 19 Bartrac Equipment GBL HSBC Bank Plc International AG Sierra Investment Fund Ltd. Bergenshalvoens Kommunale kraftselskap Icam SPA Silverlands Ireland Holdings (Z2) Limited page 20 Rebecca Post, MIGA; Gero Verheyen, MIGA; Globeleq Mesoamérica Energy (Wind) Limited AS Industrial Development Corp. of South Societe Malienne de Promotion Hoteliere Banque Nationale de Paris Africa page 24 Gero Verheyen, MIGA S.A. Antoine & Gabriel Boulos Infilco Degremeont, Inc. SGS SA page 27 Jillian Rachel Crowther, MIGA; Graham Crouch, World Bank Bouygues Travaux Publics ING Bank, a Branch of ING-DiBa AG Sojitz Corporation Bureau Veritas Inspection, Valuation, Organization de Ingenieria Internacional page 34 Suzanne Pelland, MIGA; Financial Times Sonatel Assessment & Control S.A. Standard Bank Plc page 36 Simone D. McCourtie, World Bank; Graham Crouch, World Bank; Curt Carnemark, World Bank Caja Madrid InterMims Investment Limited Standard Chartered Bank Calyon Corporate & Investment Bank Investcom Global Ltd. Stora Enso South Asia Holdings AB page 39 World Bank Group; Almin Zrno, World Bank; Simone D. McCourtie, World Bank Can Pack S. A. Itochu Corporation Strand Minerals (Indonesia) Pte. Ltd Cementhai Chemicals Co., Ltd. Jean-Francois Guillon page 43 Cara Santos Pianesi, MIGA; Globeleq Mesoamérica Energy (Wind) Limited Suez Environment S.A. CfC Stanbic Bank Limited JPMorgan Chase Bank, N.A. Tapon France S.A.S page 45 Gero Verheyen, MIGA; Suez Environnement, SA, Infilco Degremont, Inc., and Morganti Group, Inc.; Izumi Kobayashi, MIGA Chayton Atlas Investments Karo Dis Ticaret ve Sanayi Ltd. Sti. Teleinvest Limited page 48 Jillian Rachel Crowther, MIGA; Rebecca Post, MIGA Chayton Africa Kenmare Resources PLC Tamboho International Ltd Campestres Holdings Limited Kjaer Group AS Globeleq Mesoamérica Energy (Wind) Limited; Suez Environnement, SA, Infilco Degremont, Inc., and Morganti Group, Inc.; Touton S.A. page 58 Citbibank N.A. Klaus Nikolaus Kohler Globeleq Holdings (Azito) Limited Korea Water Resources Corporation Traitex International SA CCB Management Services G,bH page 108 Africa Renewables Ltd.; Rebecca Post, MIGA; Cara Santos Pianesi, MIGA ContourGlobal Africa Holdings S.a.r.l. Linx Telecommunications B.V Troy AB (or other subsidiary of Celebi Liongate Venture Fund I SPC Group) Cotecna Inspection S.A. Mark M. Mullen Tulbagh Holdings LLC Darco Environmental Pte.Ltd Daye Water Investment (Ghana), B.V The Mauritius Commercial Bank Ltd. Office National de Telcomms."TUNISIE TELECOM" ISBN 978-1-4648-0059-7 Deutsche Bank Luxembourg S.A. MediCapital Bank Dubai Islamic Bank Millco Limited Umeme Holdings limited Dole Food Company, Inc MKV Holdings, LLC UniCredit Bank AG DP World FZCO The Morganti Group Inc. Unifruit Limited East West Gold Corporation Mobile Telephone Networks International UPM-Kymmene Corporation Ltd. EcoPlanet Bamboo Group LLC FG Volga Farming Ltd MXS SA EDF International West African Gas Pipeline Company Ltd. PTT Chemical Public Company Ltd Energy Engineering Investment Ltd Odinsa Holding Inc. Whirlpool Europe Coordination Center S.A. Erste Group Bank AG Orange Participations SA Kreditanstalt fur Wiederaufbau Eskom OPIC World Power Holdings Luxemborg S. a. r. l. Eurobank Ergasias Orascom Telecom WTE Wassertechnik GmbH EVN AG Orca Credit Holdings LLC YooMee Africa AG Finrep Ges M.B.H Ormat Holding Corp. 120 | MIGA ANNUAL REPORT 2013 MIGA ANNUAL REPORT 2013 | 121 Contact Information Senior Management Keiko Honda khonda@worldbank.org Executive Vice President Michel Wormser mwormser@worldbank.org Vice President and Chief Operating Officer Ana-Mita Betancourt abetancourt@worldbank.org Director and General Counsel, Legal Affairs and Claims Kevin W. Lu klu@worldbank.org Regional Director — Asia Pacific Edith P. Quintrell equintrell@worldbank.org Director, Operations Lakshmi Shyam-Sunder Director and Chief Financial Officer, lshyam-sunder@worldbank.org Finance and Risk Management Ravi Vish rvish@worldbank.org Director and Chief Economist, Economics and Sustainability Marcus S.D. Williams mwilliams5@worldbank.org Chief, Strategy, Communications and Partnerships Regional Hubs Asia Pacific — Kevin W. Lu klu@worldbank.org Regional Director Europe — Olivier Lambert olambert@worldbank.org Regional Manager Guarantees Antonio Barbalho abarbalho@worldbank.org Energy and Extractive Industries Nabil Fawaz nfawaz@worldbank.org Agribusiness, Manufacturing, and Services Olga Sclovscaia osclovscaia@worldbank.org Finance and Telecommunications Margaret Walsh mwalsh@worldbank.org Infrastructure Reinsurance Marc Roex mroex@worldbank.org Business Inquiries migainquiry@worldbank.org Media Inquiries Mallory Saleson msaleson@worldbank.org 122 | MIGA ANNUAL REPORT 2013 www. m i g a . o r g Multilateral Investment Guarantee Agency World Bank Group 1818 H Street, NW Washington, DC 20433 USA t. 202.458.2538 f. 202.522.0316 ISBN 978-1-4648-0059-7