Guarantee Fund for Private Investments in West Africa Annual Report Financial Year

Transcription

1 Guarantee Fund for Private Investments in West Africa 2013 Annual Report 2013 Financial Year 1

2 Table of Contents Pages 1. GARI s Mission: Objectives and Conditions of intervention General Objectives Major terms and conditions of intervention Articles of Association, Shareholding Structure and Operations Articles of Association Corporate Capital Structure and Distribution GARI's Process of Share Valorization and Transfer Functioning The Board of Directors The Guarantee Committee The Internal Committee The External Auditors Management The Internal Organization Activities Guarantee Activities Investment Activities Other Activities : Financial Situation Balance Sheet as at 31 December Assets Liabilities Off-Balance Sheet Commitments as at 31 December Income Statement as at 31 December Income Prudential, Regulatory and Internal Standards Notes on the Accounts for the Financial Year ended as at 31 December Methods and Principles used Additional Information ANNEXES

3 1. GARI s Mission: Objectives and Conditions of Intervention 1.1. General Objectives The major objective of the GARI Fund is to contribute to the development of the private sector by supporting the related investment financing. This support is in the form of medium and long term credit guarantees to banks and financial institutions and guarantees for resource mobilization transactions carried out by private companies operating within the Economic Community of West African States (ECOWAS). The guarantees cover a portion of the medium and long term financing granted to the companies.. The provision of such good quality and liquid external guarantees should be appreciated, in view of the difficulties that banks face when it comes to providing traditional strictly inherent guarantees. These guarantees which could constitute the bulk of the resources for the concerned coverage, often become depreciated not only as a result of sluggishness or non existence of a secondary market for capital goods and a mortgage market for real estate, but also these guarantees are fraught with administrative, legal and cultural bottlenecks in a business environment, which needs to be improved. The existing banking laws within WAMU grant huge weighting coefficients to the interventions of guarantee funds in general and the GARI Fund in particular, in the calculation of solvency ratios. Thus, using these instruments has a multiplier effect on the volume of loans that credit institutions can grant, as related own funds. Reducing the cost of credits, features prominently among the objectives of GARI. Any action to the contrary will undermine its foremost ambition of supporting private investments and to those who implement related investment policies. Therefore, the cost of services is calculated precisely and falls within the risk margin usually applied by banking institutions for financing operations of this nature. The consequence of this mechanism is the initial extremely substantial capitalization and financing efforts made by the founders of the GARI Fund. In order to promote efficiency, it is necessary to offer our banks and financial institutions an easily accessible and flexible instrument that is sufficiently open, as far as its scope of intervention is concerned, to eligible sectors and types of operations. The instrument thus created also took upon itself a series of internal objectives and management constraints aimed at maintaining its intervention capacity and financial equilibrium in a sustainable manner. GARI s action is focused on the long term and as such, it will do all within its capacity to maintain and consolidate its resources on which depend both its financial capacity to attract new commitments and its ability, at the appropriate time, to honour its signature. GARI thus adopted a series of ceiling-setting measures aimed at maintaining its intervention capacity and financial equilibrium, whether it concerns the total amount of its outstanding transactions that are officially below or equal to five (5) times the amount of net resources, or individual risk ceilings (by banks, by countries or by signature) defined in a restrictive and prudent manner. In addition to these objectives of solvency and precision, are the principles of selectiveness of risks and flexibility of management methods Major Terms and Conditions of Intervention The Fund s first rule of intervention is not to encourage the transfer of a large portion of the exposure, so as to dis-empower its partner bank but to offer it a balanced sharing. This sharing is done by a maximum guarantee quota of 60% of the financial assistance involved, by distribution, in the event of loss, the income from the guarantees and through delegation to the banks for an upstream processing of the requests. 3

4 GARI does not interfere in the relations between banks and their customers. Its intervention is not intended to weaken the provision of guarantee by the promoter and consequently, their involvement in the project. The Fund intervenes when all the usual guarantees mobilized fail to enable the bank to underwrite a risk which it deems sound, under adequately secure conditions. It could be deduced from the foregoing that GARI analyses and processes the risks that are submitted to it based on individual facts, appraisal reports and critical advice of the lender. Needless to say that the usual professional due diligence to be taken both during the processing of the financing, its provision, monitoring or recovery are covered by an express commitment of the beneficiary of the guarantee, which is included in the notification of the guarantee and its acceptance. The Fund also exercises the option to conduct spot checks at any moment, particularly during the enforcement of the guarantee. In the event of default of the financing facility guaranteed, an advance compensation equal to 85% of the residual capital covered is paid to the beneficiary institution. In the case of resource mobilization transactions, the compensation is immediate and covers the entire outstanding capital and interest. GARI has a relatively wide scope of eligible transactions: setting up of a business, modernization, increasing productivity, expansion of production capacity, property transfer, restructuring, privatization, etc. Private sector or commercially run public sector companies operating in the following sectors of the economy: agriculture, manufacturing industry, agro-industry, fisheries, mining, forestry, tourism, construction and public works, transport, hotel industry, commercial and professional real estate and services related to the productive sector, have to initiate this process. Therefore GARI Fund in its supporting and facilitating role supports all sectors not prohibited by law and relating to the fight against money laundering and terrorism. The duration of the guaranteed financing facility should be between 2 to 15 years, as the Fund limits the validity of its coverage to 10 years. The minimum amount of credits guaranteed should, unless otherwise stated, be equal to the equivalent of CFA francs 50 million. Finally, the cost of guarantees is to date made up of a fixed contribution collected upfront and a guarantee commission calculated on the successive outstanding guarantees on semi-annual basis. As at 31 st December 2013, the Fund s conditions for intervention in respect of bank borrowings corresponded to the application of a contribution rate equal to 1.5% of the guarantee granted, and an annual guarantee commission rate from 1.5% to 2.5%. In the case of guarantees granted in respect of resource mobilization transactions, the conditions consist of applying a 0.5% to 1% contribution rate on the total amount guaranteed and a variable minimum rate of 1% on the successive outstanding guarantees. 2. Articles of Association, Shareholding structure and Functioning 2.1. Articles of Association The GARI Fund was established on 21 st December 1994 as a Limited Liability Company under Togolese law and registered with the Registrar of Companies in Lomé on 19 th January The GARI Fund received its license to operate as a financial institution governed by the provisions of the banking laws in force within UEMOA countries on 3 rd July The Fund actually commenced business in September By 31 st December 2013, the Fund had ended its eighteenth financial year. 4

5 2.2. Corporate Capital Structure and Distribution The Fund s corporate capital was fixed at CFA francs 8,618,500,000 during the Constitutive General Meeting of Shareholders. At the end of two successive increases in capital decided and implemented in 1995, its capital currently stands at CFA francs 12,954,500,000, divided into 129,545 shares at a nominal value of CFA francs 100,000 per share fully paid-up. As at 31 December 2013, the corporate capital was divided as follows: Subscriber Number of shares subscribed Value of the shares Shares as a % of the capital French Development Agency (AFD) ,01% European Investment Bank ,30% Deutsche Entwicklungsgesellschaft ,53% Secrétariat d Etat à l Economie (Switzerland) ,72% West African Development Bank (BOAD) ,58% ATTICA ,83% BOA Mali ,83% CBAO Groupe ATTIJARIWAFA BANK ,83% Ecobank Burkina (Former BACB) ,83% Merchant Bank of Ghana ,83% ECOBANK Benin ,77% SFOM ,39% SGB Côte d'ivoire ,31% SGBS SNGL ,31% Banco Commercial do Atlantico ,19% Caixa Economica do Cabo Verde ,19% Citibank CI ,19% Citibank SNGL ,19% BDM Bamako (former BMCD) ,15% CLS Senegal ,15% SGBG Guinea 200 f ,15% SIB Abidjan ,15% UIBG Conakry ,15% BICIA Burkina ,08% BICICI Abidjan ,08% BICIGUI Conakry ,08% BICIS Dakar ,08% BTCI, Lome ,08% Mr. Diarra ,004% Mrs. Sanogoh ,004% Total paid up capital as at 31 st December % The corporate capital resources were supplemented in December 1996 with an amount of 3.8 million ECU, representing CFA francs 2,470,570,000, from the European Development Fund. As a result, GARI, in accordance with the objectives set out during its establishment, had initial resources of over CFA francs 15 billion. 5

6 2.3. GARI s Process of Share Valorization and Traansfer Following the 2011 decision of some non-regional shareholders to transfer part of their share capital in the Institution, which represents 80% of shares, the Board of Directors initiated the implementation of this decision in Therefore it was decided for better transparency and the need to increase GARI shares, to recruit an international consultancy firm through an international tendering process. An international firm was recruited to select potential bidders who share the same objectives with the transferring shareholders with a view to successfully concluding the transfer. In that respect, following the processing of the Tender documents and the selection process, the Cabinet Mazars de Côte d Ivoire et associés was selected. This firm carried out the valorization of the GARI shares Functioning The Board of Directors As at 31 st December 2013, the Board of Directors was made up of eight (8) out of the authorized twelve (12) Members, and an Auditor, the European Commission. Directors Status Representatives Agence Française de Développement (AFD) Corporate body M. COLLIGNON Banque Européenne d'investissement (BEI) Corporate body M. SAVINI Banque Ouest Africaine de Développement (BOAD) Corporate body Ourèye SAKHO EKLO Banque Togolaise pour le Commerce et l'industrie (BTCI) ATTICA SA Corporate body Corporate body M. BAFAÏ M. BASQUE CBAO Sénégal Corporate body Merchant Bank of Ghana Corporate body - Mme SANOGOH Natural person - Auditor Status Representative European Commission Corporate body The Representative of the EC in Togo Mrs. Bintou SANOGOH has chaired the Board of Directors since 19 th June, Some replacement was carried out in the membership of the Board during the 2013 Financial Year as follows: - Mr. Kodjo DOSSEH was replaced by Mrs Ourèye SAKHO EKLO ; - Mrs Anta DIOUM was replaced by Mr. Rida SALMI. Formalities are on-going to obtain derogation to the nationality clause in conformity with the requirements of the monetary authorities before proper assumption of duty. According to the GARI s Articles of Association, the Board is vested with the widest powers as far as the granting of guarantees is concerned. A portion of these powers has been delegated to the Guarantee Committee within the double limit of an individual ceiling per risk equaling the equivalent of CFA francs 1,500 million and an annual cumulated total of CFA francs 15 billion. The Board of Directors held four (4) ordinary meetings in 2013 at the end of which the following decisions were taken, among others: 6

7 - Twenty one (21) guarantee requests were considered [as against nineteen (19) in 2012], out of which twelve (12) were approved for an amount of Francs CFA thirty (30) billion; - Taken decisions relating to the administrative and financial management of the Institution including, inter alia: Closing of accounts for the 2012 Financial Year, - The adoption of the Business Plan. - The restructuring of the mode of determination of the FRBG provision for harmonization with the practice prevailing at the GARI Fund; - Consideration on a regular basis of the progress reports of the MAZARS mission relating to the increase in value of the Fund; - Treasury management of the Fund: authorization of cash investment of the Fund on proposal by Management and creation of a treasury Committee; - Administrative and Operational management of the Fund: adoption of rules and regulations relating to portfolio guarantee, as a result of recommendations made by the Consultant in his assignment report The Guarantee Committee The Guarantee Committee was established in 1995 and its membership is renewed annually As at 31 st December 2013, apart from the Managing Director of GARI who is the Chairman, the composition of the Guarantee Committee was as follows : Institutions Substantive Members Alternate Members AFD BOAD Merchant BANK BTCI BOA-Bénin Independent Expert Independent Expert Miss ZANNACHIS Mr.. SANI CHAIBOU Mrs ASHITEY Mrs AMORIN Mr. ALLA Mr. AMOUSSOU Mr. BENTUM Mr.. GURY Mr.. LEGOUDA Mrs ATAKORA Mr.. TOMEGAH Mr.. ABIONAN - - The Guarantee Committee met four (4) times in 2013 and considered twenty one (21) requests for guarantee [as against twenty three (23) in 2012] of which fourteen (14) were approved for an amount slightly higher than CFA Francs 7.7 billion The Internal Committee The Internal Guarantee Committee met once (1) in 2013 and approved one (1) request for an amount of CFA Francs 79 million The External Auditors The current External Auditors of the GARI Fund are Cabinets AFRIQUE AUDIT & CONSULTING (represented by Mr. Dominique GAYIBOR), and les Auditeurs Associés en Afrique -AAA-KPMG- TOGO, (represented by Mr.Toussaint Olatoundé de SOUZA), as the substantive Internal Auditors. As for the alternate Joint-External Auditors there are as follows: - le Cabinet TATE & ASSOCIES, represented by Mr. Evariste Tata TOMETY ; - le Cabinet Grant Thornton represented by Mr. Constant AWESSO. 7

8 Management Management of the GARI Fund was assumed by Mr. Jacques NIGNON, who was appointed as the Acting Managing Director Internal Organization In accordance with the guidelines defined by the founders of GARI to blend efficiency with flexibility in terms of available resources, the Fund continues to function with reduced staff. As at 31 st December 2013, the Staff strength at the Fund was thirteen (13) of which seven (7) were Professional Staff. 3. Activities 3.1. Guarantee Activities Thirty seven (37) requests for guarantees were submitted for consideration by the decision-making bodies of the GARI Fund in 2013, of which nineteen (19) emanated from credit institutions, fourteen (14) from International Financial Institutions and one (1) from Guarantee Funds and one from Financial Intermediation Companies (debenture loan requests) and two (2) requests from portfolio guarantee. Of the thirty seven (37) requests considered, twenty seven (27) were approved, amounting to a total of CFA francs billion. Trends in guarantees approved over the last three years by the decision-making bodies of the GARI Fund are summarized in the table below (in millions of CFA francs): Description N of requestss Value % N of requests Value % N of requests Value % Credit Institutionsf and Guarantee Funds % % % International Financial Instituions % % % Debenture Loans % % % Portfolio Guarantee % TOTAL % % % Of the twenty seven (27) requests for guarantee approved in 2013, fourteen (14) were from credit institutions, financial institutions and Guarantee Funds with a value of CFA francs billion, or roughly 30% of the total amount of requests approved in the year; 50% concern direct loan applications from International Financial Institutions in an amount of CFA francs billion; requestst for debenture loans and portfolio guarantee amounted to 10% each. The investments in respect of which the financing facilities were released, the object of the approved guarantees, are mainly from the various service sector (21%), hotel industry (22%), industry and agro 8

9 industry (27%), and finally various sectors (20%). This sectorial distribution was different from the one usually accepted by UEMOA. Trends of the major characteristics of requests for guarantee received and considered are presented as follows between 2011 and 2013: Characteristics of guarantee requests received and considered (unless otherwise specified, the amounts are expressed in millions of CFA Francs) 2011 FY 2012 FY 2013 FY Variation Total since 2013 in % origin Number of requests received % 506 Total amount of requests received ,5% Average amount per request % 767 Number of guarantees approved % 361 Amount of guarantees approved % Rate of acceptance (in % of amounts) 92% 79% 73% -3% 71% Average amount of guarantees approved per request % 728 Amount of financing facility corresponding to guarantees provided % % 47% 45% -4% 39% Average quota guaranteed in % Total Amount of investments concerned % Average duration of guarantees (months) % 58 The following major observations can be made from the table above: Since the launch of GARI s activities, five hundred and six (506) requests for guarantee have been submitted, amounting to a total of CFA Francs 389 billion (in equivalence); three hundred and sixty one (361) of these requests were approved to the equivalent amount of CFA Francs 263 billion. In 2013, the number of requests submitted to the decision-making bodies of the GARI Fund was thirty seveb (37) amounting to a total of 50 billion CFA Francs. These requests were submitted to the Board of Directors of which twenty seven (27) were approved amounting to 38.5 billion CFA Francs. Consequently the approval rate (in number of requests), settled at 73% for the 2013 Financial Year as against 79% in 2012 and 71% in 2011, taking into consideration the level of activities since the inception of the Fund. These figures confirm the quality of the requests submitted by Management to the decision-making bodies of the GARI Fund. The summary table on guarantee approvals per institution since commencement of activities is presented in Annex 1 of this document. The guarantees approved since the commencement of GARI s activities have generated a total volume of financing of CFA francs 669 billion for investments with a total amount of CFA francs 2,062 billion. The average quota guaranteed as against the total financing was 39%. This average quota was 45% in 2013 as against 47% in

10 With regard to the geographical distribution of the Fund s interventions, guarantees approved in 2013 were in respect of projects in Côte d Ivoire (7 operations), in Burkina Faso (4 operations), in Senegal and Togo (3 operations each) other countries (10 operations). In terms of value, Côte d Ivoire tops all the other countries with 27% of the volume of approvals in 2013, followed by Benin (15%), Togo (13%), and Senegal (10%). These first four countries accounted for 65% of approvals in Considering the Fund s interventions since the commencement of its activities, 84% of guarantees approved (in value) were concentrated in six (6) countries. They are: Côte d Ivoire (25%), Togo (14%), Ghana (11%), Benin and Senegal (10% each), and Burkina Faso (9%). The graphs below show the guarantees approved by GARI in 2013 and since it commenced activities. DISTRIBUTION OF GUARANTEE APPROVALS PER COUNTRY IN 2013 Sierra Leone 9,26% Togo; 13,15% (Value) Bénin; 15,44% Burkina Faso 4,92% Sénégal 10,24% Nigéria 0,45% Niger 0,24% Côte d'ivoire 27,49% Mali 7,72% Guinée 2,83% Ghana 8,26% 10

11 DISTRIBUTION OF GUARANTEE APPROVALS PER COUNTRY SINCE GARI COMMENCED ACTIVITIES (Value) SIERRA LEONE; 1,51 SENEGAL 9,92 TOGO 13,47 BENIN 9,93 BURKINA 9,01 CAP VERT 0,34 NIGERIA 2,71 NIGER 3,9 MALI 7,73 COTE D'IVOIRE; 24,82 GUINEE BISSAU; 1,51 GUINEE 3,17 GHANA 11,76 GAMBIE 0,21 The graph below shows the trend of approvals of guarantees per annum from 2005 to 2013;, the figure for 2008 is an average of guarantees approved during the first ten years of activity of the GARI Fund. Trends in guarantee approvals per annum (Volume, in millions of CFA Francs) (*) 0 (*) Average from 1995 to 2004, which represent the first ten years of activityo the Fund 11

12 Guarantee approvals for the 2013 Financial Year (or CFA Francs ) set the total amount approved since the inception of the GARI Fund at Francs CFA billion for 361 requests. These figures are distributed by category of beneficiary institutions as follows: Number of requests Amount (in millions of CFA francs) Banks, Guarantee Funds, Financial Institutions, Resource Mobilization The strategy adopted by the GARI Fund is to avoid the concentration of its portfolio in order to reduce the effect that socio-political and economic upheavals could have on a given country. Hence, in view of the internal management prudential regulations, the total number of cumulated commitments of GARI in a given country shall not exceed from 10 to 30% of its intervention capacity, considering the conditions prevailing in the country. As at 31 st December 2013, the distribution of GARI s outstanding real commitments per country is presented as follows: Côte d Ivoire (18,13%), as against 45% a few yeears before, followed by Togo (17,98%), Burkina Faso (13%), Benin (12%), Ghana (11%), and Senegal (8%), OUTSTANDING REAL COMMITMENTS PER COUNTRY AS AT 31/12/2013 Sénégal 8,12% Sierra Léone 0,51% Togo 17,98% Bénin 11,78% Burkina faso 12,95% Cap Vert 0,93% Nigeria 3,37% Niger 2,80% Mali 5,59% Guinée Bissau 4,71% Guine 2,33% Ghana 10,39% Gambie 0,41% Côte d'ivoire 18,13% 12

13 3.2. Investment Activities The volume of placements made by the Fund amounted roughly to Francs CFA billion FCFA as at 31 December 2013 as against Francs CFA billion at the same periodi n The placement transactions made it possible to generate income amounting to CFA Francs 833 million as against CFA Francs 947 million in 2012, or a 12% decrease during the year. This decrease was mainly due to the same trend observed on interest earned on placement with BCEAO Head Office. The table below presents the detail of cash placement as at 31 st December 2013 (in CFA francs): OPERATIONS ISSUER/ BENEFICIARY RATES (*) DEADLINE AVERAGE DURATION AMOUNT % DEBENTURES Various institutions 6,50% years % FIXED-TERM DEPOSIT Various banks 6,50% years % INTERIM TOTAL % DEPOSIT BCEAO HEAD OFFICE BCEAO DAKAR 0,50% QUARTERLY % GENERAL TOTAL % (*) This represents the annual average rate, net of taxes. The guiding principle of the Fund s cash management is the limitation of idle cash to the barest minimum and the diversification of the placements in order to minimize risks.. According to the rules and regulations of GARI, three objectives should be pursued as far as placements are concerned: profitability; liquidity, that is the possibility of withdrawing from a placement at any time without any penalty or loss; the security of the placement, this security shall take into consideration the three risks, namely: - the default risk either on the part of the bank or the lender, or the security depository body; - the interest rate risk where GARI is compelled to sell debt security before maturity, for example; - the foreign exchange risk, in the event of investment in foreign currency. As at the end of the 2013 Financial Year, GARI s placements could be analyzed as follows: Debenture portfolio: 2% of total placement, distributed as follows: (amount in millions of CFA Francs): ISSUING INSTITUTIONS Amount % EBID / 6,75% 120,0 21 CAA BENIN / 6,5% 75,0 14 CRRH-UMOA / 6,2% 143,8 24 TOGO / 6,5% 56,2 10 BOA BENIN / 6,2% 19,7 3 BOAD / 5,0% 12,0 2 SIFCA / 6,9% 150,

14 TOTAL 576, Fixed-Term Deposit: 54% of total placements, divided as follows: (in millions of CFA Francs) : BANKS Amount % BATG BOA BENIN BOA BENIN BTD BTD DIAMOND BANK TOGO DIAMOND BANK TOGO CORIS BANK CORIS BANK BSIC TOGO BSIC TOGO ORABANK TOGO ORABANK TOGO TOTAL Interest-bearing short-term deposit at the BCEAO Head Office: in an amount of CFA Francs billion, it represented 44% of total placement transactions. This deposit represents GARI s resources in euros, corresponding to the share capital of the European Institutional Shareholders and which, in conformiy with the requirements of the banking law, shall be kept in the books of a Banking Institution within UMOA countries if the Fund insists on placing them in foreign currency Other Activities: Promotional Activities: As part of promotional activities, routine visits were made to banks by the Business Officers and/or the Chief Executive, in the countries of the coverage area of the GARI Fund. Therefore, missions were undertaken in Côte d Ivoire, Benin, Burkina, Senegal, Guinea, and Ghana. In Togo, which is the host countr y, there is permanent contact with the beneficiaries of GARI s guarantee, which are essentially BOAD and EBID. Training Activities: During the financial year under review, Managers of the institution attended various training seminars on various topics relating to the operations of the institution, with the aim to upgrading knowledge on a permanent basis and learning new rules and policies in force in the guarantee activity. In order to facilitate better performance of the portfolio guarantee which is a new method of intervention, the Board of Directors recommended a special training with specific technical supervision by referring to external human resources. 4. Financial Situation The balance sheet and the income statement as well as the statement of off-balance sheet commitments as at 31 st December 2013 are presented in Annex 2 of this document. 14

15 4.1 Balance Sheet as at 31 st December 2013 The total balance sheet as at 31 st December 2013 was CFA francs billion, representing an increase of 988 million, or 3.5% as compared to that of the previous year which was CFA francs billion Assets. The assets are made up of cash consolidated position, various operational and fixed assets accounts. The cash consolidated position (84.62% of total assets) is as follows: Variation (CFA Francs) (CFA Francs) in % Cash in hand ,00 Demand account ,26 Time account and related accounts receivable ,70 TOTAL ,10 The Fund s cash position represents almost the entire assets of the institution (more than 96% in 2013). It is mainly derived from own funds (capital and subsidy) when GARI was established and the positive results regularly carried forward on a regular basis since the establishment of the Fund.. From an amount of CFA francs billion as at 31 st December 2013, it increased by roughly 4.10% as against 31 st December 2012 and is made up of the following: - Demand Deposits: the bulk of this (10.6 billion in CFA francs equivalent as at ) deposited in a negotiable order-of-withdrawal account in Euros, and opened at the Head Office of BCEAO in Dakar. During the financial year, interest on the deposits was paid into an operations account according to the rate used for BCEAO holdings after the deduction of the management fees of 0.25 points. This average rate was 0.5% as at 31 st December The other demand deposit accounts in CFA francs held a total cash of CFA francs million as at 31 st December They replenished through flat fees and guarantee commissions as well as interests from placements in local currency. The total amount of demand deposits as at 31 st December 2013, increased slightly by 0.26% as compared to 31 st December Fixed-Term Deposits: these placements amounted to CFA francs billion as at 31 st December 2013 in nominal capital and interests, as against CFA francs billion as at 31 st December This rise of 7.95% observed as against 2012 was due to new Fixed-Term Deposits which were constituted during the fiscal year. Various other transactions (13,82% of total assets) The balance of the other transactions accounts is analyzed as follows as at 31 st December 2013: Variation (CFA Francs) (CFA Francs) en % Securities and related accounts ,97 15

16 receivable Advances on enforceable ,44 guarantees Interest due on Fixed-Term Deposits ,50 Overdue commissions ,57 Suspense Account Assets ,29 Miscellaneous Debtors ,14 TOTAL ,45 - The investment securities in an amount of CFA francs million as at (including CFA francs 8.08 million of related accounts receivable), showed some increase as against the previous financial year, mainly due to subscription of new bonds. - The advances on enforceable guarantees concern the payment of 85% compensation by the Fund in respect of compromised requests whose guarantees were called up. From an amount of CFA francs billion as at 31 st December 2013, the outstanding of these advances varied as against the figures as at 31 st December 2012 because of compensation for a request during the fiscal year and the closing of the other. - Interests earned on Fixed Term Deposits of CFA francs 85 million as at 31 st December 2013 related to matured interest on a number of Fixed-Term Deposits not reimbursed as at the end of the financial year. They were paid up during the first quarter of Commissions due as at 31 st December 2013 by the beneficiaries of the Fund s guarantee, amounted to CFA francs 378 million. Nearly the total amount was recovered after the close of the financial year. - The miscellaneous debtors account in an amount of Francs CFA million, mainly comprised the assets of the Fund in the management and intermediation companies which manage the Fund s liabilities. This amount contributed to subscription to EBID s debenture loan in February Fixed assets (0,09% of total assets): The net fixed assets balance amounted to Francs CFA 27 million as at 31 st December Liabilities Various transactions (1.44% of total liabilities) The details of this item are presented as follows as at 31 st December 2013 in CFA francs: Variation in % Suppliers ,58 CNSS, CRRAE and public taxes ,74 Accruals ,60 Income collected in advance Miscellaneous , ,85 - The balance of suppliers accounts includes as at 31 st December 2013, renting costs due to BOAD and other operating costs payable to suppliers and service providers of the Fund. Most of these amounts had been settled during the first quarter of

17 - The debts owed to the State and other social security organizations (CNSS and CRRAE) are in respect of the last quarter of 2013 and these were paid after the close of the financial year. - Accruals in an amount of CFA francs 93.4 million are in respect of fees to the External Auditors, to the lawyer and other consultants, the provisions for bonuses and incentives for the 2013 financial year and for a few bills which had not been settled before the close of the financial year - The amount of CFA Francs million in other liabilities includes mainly dividends from previous financial years to be paid to shareholders. Capital invested (99% of total liabilities) The trends recorded in respect of the capital invested in 2013 are as follows, (in CFA francs): Balance as at Increase Decrease Balance as at Investsment Subsidy Provisions for risks and expenditures Funds for general banking risks Special Reserve Corporate Capital Allocation Optional Reserves Amount carried forward TOTAL The capital invested (including the profit of the 2013 financial year in an amount of CFA francs 303 million) amounted to CFA francs billion as at 31 st December It grew by 2.80% as against the previous year s amount of CFA francs billion. The provisions constituted to the tune of 100% in respect of compromised requests over the previous years that remained unchanged in 2013 were maintained at the same level. An upward readjustment was carried out on other requests, while some requests which recorded positive changes had their provisions cancelled for the following reasons: - Cancellation due to the closing of requests by the banks on their own; - Reconciliation of the outstanding payment by the bank. Moreover, the new requests that became compromised during the financial year were provisioned. The rates of provisioning defined by the GARI Fund, according to the assessment of these risks by GARI and the rule in force, stands between 25% and 100%. With regard to the provisions under the Fund for General Banking Risks (FGBR), a release of provisions of CFA francs 54 million was made.. Calculation of this provisions was modified and was determined from the net banking income; the rate applied is 3% according to a decision of the Board of Directors. 17

18 4.2. Off-Balance Sheet as at 31 st December 2013 The amount of off-balance sheet commitments corresponding to the guarantees provided stood at CFA francs billion as at 31 st December 2013, being 23% increase as against the previous financial year s amount which was CFA francs billion. Its trends are as follows (amount in CFA francs): Outstanding as at Outstanding as at Amounts % Amounts % Virtual risks (1) Normal risks (2) Compromised risks (3) Contentious risks (4) Total genuine risks (5) =(2+3+4) Total commitments (1)+ (5) The figures above call for the following c0mments: Virtual risks: These are guarantees granted but whose financing facilities are yet to be disbursed. As at 31 st December 2013, this category of risks accounted for 35% of GARI s portfolio as against 27% as at 31 st December 2012, after a 9% drop in-between the two periods.. Genuine Risks: They are guarantees granted but whose financing facilities have been partially or totally disbursed. As at 31 st December 2013, these risks increased by 8% as against the level as at 31 st December They represented 65% of GARI s portfolio (as against 73% in 2012). These risks are subdivided into the following risks: - Normal risks (or safe risks): they increased by 7% in absolute value as against the previous financial year. This explains the increase observed in the income from guarantees (ref. note 4.3.1). These risks covered 54% of the GARI s portfolio as at 31 st December 2013 as against 62% as at 31 st December Compromised Risks: These are financing facilities whose repayments are encountering difficulties and for which the Fund has provisioned in anticipation of a possible enforcement of the guarantee. These risks increased by 100% between 2012 and 2013 and are 7% of GARI s total commitments. Following the readjustments made on the provisions based on the information available on these requests, the compromised risks were totally provisioned to the tune of 28% as at 31 st December Contentious Risks: These are commitments in respect of which GARI paid 85% partial compensation (bank loans) and 100% (debenture loans) following the enforcement of the guarantee. The outstanding risks, which represented 4% of total commitments as at 31 st December 2013, increased slightly as compared to the previous financial year. They were provisioned at 100%. GARI s commitments portfolio (excluding virtual risks) was provisioned to the tune of 10% as at 31 st December 2013 as against 11% as at 31 st December

19 4.3. Income statement as at 31 st December The 2013 financial year posted a net profit of CFA francs 303 million as against CFA francs 778 million in 2012, or a drop by 61% mainly due to allocations to provisions for contentious risks. The various elements contributing to obtaining this result are presented as follows: Income During the 2013 financial year, the total amount of income generated by GARI s transactions stood at CFA francs billion as against CFA francs billion in 2012, or a stagnation (only 2% increase). It is broken down as follows in CFA francs: Variation in % Income from guarantee transactions Income from placements Income from securities Cancellation of provisions Exceptional income Exceptional income and over previous financial years TOTAL The income from guarantee transactions grew by 18% as a result of the increase in the level of the institution s normal risks by 11% as against 2012 financial year (Ref. 4.2). - The 13% drop in income from placements was mainly due to the decrease in the rate on the current account deposited at BCEAO Dakar. This rate which was 0.825% in 2012, varied from 0.50% to 0.25% in It should be noted for reference purposes, that it stood at 3% in 2006 and was higher than 4% in The increase in placement income was due to subscription of new bonds Expenditures The expenditures for 2013 financial year are as follows, in CFA francs: Variation in % Financial costs Overheads Depreciation expenses Provisioning Expenses and various losses Losses for bad debts TOTAL

20 The overall level of expenditures for 2013 increased by 40% compared to the previous financial year. This was due to the following: - A slight increase in overheads by 2% - A 97% increase in provision for compromised commitments; - A 49% decrease in depreciation charges due to full amortization of the Managing Director s vehicle and other items purchased by the GARI Fund; - The 50% decrease in losses and other expenses compared to 2012; - The increase in provisions for losses and bad debts. 5. Prudential, regulatory and internal standards As at 31 st December 2013, the Fund complied with the prudential, internal and regulatory standards. As a matter of fact, GARI s figures in respect of the prudential standards of the Banking Commission are as follows: Banking Commission Ceiling Rate GARI Ratio of actual capital invested over the risks Minimal 8% 49% Ratio of fixed assets and shareholding in relation Maximal with actual capital invested 100% 0,23% Liquidity ratio Minimal 75% 378% Regarding the internal risk diversification standards, it must be recalled that in accordance with the Articles of Association, the Fund s commitments should not exceed a ceiling corresponding to five (5) times the amount of its net resources, i.e. its capital plus reserves, grants received and income less the net fixed assets and provisions constituted on the commitments. Furthermore, the commitments of the Fund are not expected to exceed: - 10% to 20% of the Fund s commitment ceiling for the same beneficiary credit institution; - 30% of commitment ceiling for the same International Institution benefitting from the Fund s guarantee; - 15% to 30% of the GARI s commitment ceiling for the same country; - 15% of the capital invested for the same company or the same group benefiting from the guarantee: 15% of net equity (a cumulated 25% for companies of the same group). The statutory ceiling for the Fund s commitment as at 31 st December 2013 was Francs CFA 99 billion for cumulated commitments validated at Francs CFA 82 billion, or new commitment potentials to the tune of Francs CFA 17 billion. It should be noted that the statutory ceiling was CFA Francs 117 billion as at 31 st December Its decline at the end of the 2013 Financial Year was due to cancellation of many requests which had some repercussion on the level of net resources. In view of this decline all the intervention limits saw a drop in their amount. Some of them were even below standard. The highest risk ceilings per country and by institution stood at CFA Francs 30 billion as at 31 st December

21 As at 31 st December 2013: - The country with the highest guarantee risk is la Côte d Ivoire, which stood at CFA Francs 14 billion for a ceiling of CFA Francs 30 billion; - - The highest cumulated risks per Finance Institution was with BOAD for CFA Francs billion of guarantee,with a ceiling of CFA Francs 30 billion, or a 1.8 billion over-expenditure due to the problem raised above; - The highest risk per commercial bank was relating to the MERCHANT BANK Ghana with CFA Francs billion, for a ceiling amounting to CFA Francs 15 billion (or 15% intervention capacity); - The highest risk per company was relating to SODEHX: CFA Francs billion for a ceiling of CFA Francs billion. This exceeding of the ceiling of requests was carried out with a derogation of the Board of Directors; - The highest risk per group of companies was related to ALIOS with CFA Francs billion for a ceiling standing at CFA Francs billion. The risk internal and regulatory standards are summarized in Annexes 2 and 3 to this report. 6. Additional notes and information relating to the accounts for the 2013 Financial Year Directives for the implementation of the Banking Chart of Accounts require that the companies which must put in annex to their accounts to be published, information on a certain number of items, unless they are not of significant importance. a) Initial and residual duration of receivables and payables All receivables and payables accounted for on the assets and liabilities side of the balance-sheet respectively, showing initial and residual duration from 0 to 12 months, are due. b) Operations with companies from the same group According to the applicable banking regulation, companies or institutions from the same group, where a single shareholder has more than 10% of share capital, ranked among companies of the same group. Operations with upstream-group as at 31 st December 2013 (amount in CFA Francs): Receivables Commissions and contributions due (BOAD) : 0 Debts Accruals (rent and telephone BOAD): Off-Balance Sheet Commitment for financial guarantee of credit institutions: (BOAD ARIZ/AFD) 21

22 c) Category of bonds included in the share capital and attached rights The share capital of the Funds stands at CFA Francs 12,954,500,000 as at 31 st December 2013, made up of 129,545 share of a nominal value of CFA Francs each of them offering identical rights to the shareholders. d) Distributin of reserves (in CFA Francs) : Net income to be allocated: Profit of CFA Francs Before allocation Allocation of net After allocation income Special reserve (15%) Balance after special reserve (85%) : General reserve (50% of the balance) Total reserves Dividends CONCLUSION The 2013 Financial Year was the year of full implementation of reforms initiated for the past three years. Activities generated were not up to expectation considering the economic situation which was not very favourable and the execution of important administrative due diligence. The support of the decision-making bodies in general and the Board of Directors in particular was very valuable both in the areas of operational and financial activities. Despite the reduced staff strength whose number has been stable for the past few years, while the requests and duties have increased on a regular basis, Management strived to transform the GARI Fund into a credible institution, indispensable for the development of the private sector. The business plan updated for the period and adopted by the Board of Directors, stressed the ambitions of GARI Fund, the constraints to its development, the necessary improvements and future prospects. Among these measures stands the transfer of shares held by non-regionals who have supported the Fund since its inception, which has reached maturity and is willing to transfer the instrument to African institutions. 22

23 ANNEXES 23

24 Annexe 1 DISTRIBUTION OF GUARANTEE APPROVALS PER COUNTRY IN 2013 Number % AMOUNT % BENIN 2 7,41% ,44% BURKINA FASO 4 14,81% ,92% COTE D'IVOIRE 7 25,93% ,49% GHANA 2 7,41% ,26% GUINEA 2 7,41% ,83% MALI 1 3,70% ,72% NIGER 1 3,70% 95 0,24% NIGERIA 1 3,70% 173 0,45% SENEGAL 3 11,11% ,24% SIERRA LEONE 1 3,70% ,26% TOGO 3 11,11% ,15% ,00% ,00% DISTRIBUTION OF GUARANTEE APPROVALS PER COUNTRY SINCE INCEPTION Country Number % AMOUNT % BENIN 68 18, ,93 BURKINA 42 11, ,01 CABO VERDE 3 0, ,34 COTE D'IVOIRE 47 13, ,82 GAMBIA 1 0, ,21 GHANA 26 7, ,76 GUINEA 24 6, ,17 GUINEA BISSAU 1 0, ,51 MALI 23 6, ,73 NIGER 37 10, ,90 NIGERIA 4 1, ,71 SENEGAL 40 11, ,92 SIERRA LEONE 2 0, ,51 TOGO 43 11, ,47 TOTAL Rap gestion