Volume 2 - IFC

CHAPTER MANAGEMENT’S FOUR: SIGNIFICANT DISCUSSION AND IMPACT ANALYSIS
— IV. BY TREASURY REGION SERVICES
CAPITAL AND RETAINED EARNINGS
As of June 30, 2009, IFC’s total capital as reported in IFC’s consolidated
balance sheet amounted to $16.1 billion, down from the June 30, 2008
level of $18.3 billion. At June 30, 2009, total capital comprised $2.4 billion
of paid-in capital, substantially unchanged from June 30, 2008,
$13.0 billion of retained earnings ($13.2 billion at June 30, 2008), and
$0.7 billion of accumulated other comprehensive income ($2.7 billion at
June 30, 2008).
As of June 30, 2009 and 2008, IFC’s authorized capital was $2.45 billion,
of which $2.37 billion was subscribed and paid in.
DESIGNATIONS OF RETAINED EARNINGS
Beginning in the year ended June 30, 2004 (FY04), IFC began a process
of designating retained earnings to increase its support of advisory
services and, subsequently, for performance-based grants (year ended
June 30, 2005 (FY05)), grants to IDA (year ended June 30, 2006 (FY06)),
the Global Infrastructure Project Development Fund (FY08), and IFC SME
Ventures for IDA Countries (FY08). The levels and purposes of retained
earnings designations are set based on Board-approved principles, which
are applied each year to assess IFC’s financial capacity and to determine
the maximum levels of retained earnings designations.
Amounts available to be designated are determined based on a
Board-approved income-based formula and, beginning in FY08, on
a principles-based Board-approved financial distribution policy, and
are approved by IFC’s Board of Directors. Expenditures for the various
approved designations are recorded as expenses in IFC’s consolidated
income statement in the year in which they occur, and have the effect of
reducing retained earnings designated for this specific purpose.
At June 30, 2009, retained earnings comprised $12.3 billion of undesignated
retained earnings ($12.4 billion at June 30, 2008), $0.4 billion of
retained earnings designated for advisory services ($0.4 billion at June 30,
2008), $0.2 billion of retained earnings designated for PBG ($0.2 billion
at June 30, 2008), $0.1 billion of retained earnings designated for the
Global Infrastructure Project Development Fund ($0.1 billion at June 30,
2008) and $0.1 billion for IFC SME Ventures for IDA countries ($0.1 billion
at June 30, 2008).
GRANTS TO IDA
As of June 30, 2007, IFC’s Board of Directors had approved designations
of retained earnings of $150 million for grants to IDA, which was recorded
as an expense in IFC’s FY07 consolidated income statement. IFC’s Board
has also approved, in principle, an indicative program for grants to IDA
for the IDA 15 replenishment of up to $1,250 million funded by designations
of retained earnings from FY08 through the year ending June 30,
2010 (FY10). This amount is subject to availability of IFC funds and Board
approval in each year. As of June 30, 2008, IFC’s Board of Directors had
approved a further designation of retained earnings of $500 million,
which was recorded as an expense in IFC’s FY08 consolidated income
statement. On August 7, 2008, IFC’s Board of Directors approved the
designation of an additional $450 million for grants to IDA; this designation
was noted with approval by the Board of Governors on October 13,
2008, and recorded as an expense in IFC’s FY09 consolidated income
statement, leaving a remaining indicative program of up to $800 million.
ADVISORY SERVICES
As of June 30, 2008, IFC’s Board of Directors had approved designations
in the cumulative amount of $750 million of IFC’s retained earnings for
advisory services. On August 7, 2008, IFC’s Board of Directors approved
an additional designation of $100 million of IFC’s retained earnings.
This designation of retained earnings was noted with approval by
the Board of Governors on October 13, 2008. Prior to FY07, IFC had
incurred cumulative expenditures for advisory services of $93 million.
IFC incurred expenditures for advisory services of $96 million in FY07,
$123 million in FY08, and $129 million in FY09. Retained earnings designated
for advisory services at June 30, 2009 totaled $409 million.
PERFORMANCE-BASED GRANTS
As of June 30, 2007, IFC’s Board of Directors had approved designations
of $250 million of IFC’s retained earnings for performance-based grants,
targeted at specific industries in developing countries, particularly furthering
IFC’s frontier strategy by opening new opportunities to generate
developmental impact. IFC incurred expenditures for performance-based
grants of $35 million through FY07, $27 million in FY08, and $5 million in
FY09, thereby reducing the amount of retained earnings designated for
performance-based grants at June 30, 2008 to $183 million.
OTHER
On September 27, 2007, IFC’s Board of Directors approved the designations
of $100 million for a Global Infrastructure Project Development
Fund, and the designation of $100 million for IFC SME Ventures for IDA
countries. IFC has recorded an expense of $1 million in its FY09 consolidated
income statement related to these designations.
On August 5, 2009, IFC’s Board of Directors approved a designation of
$200 million of IFC’s retained earnings for grants to IDA and concurrently
reallocated $70 million of the unutilized balances of prior year designations
relating to performance-based grants, $70 million of the unutilized
balances of prior year designations relating to the Global Infrastructure
Project Development Fund and $60 million of the unutilized balances
relating to IFC SME Ventures for IDA countries. These designations and
reallocations are expected to be noted with approval by the Board of
Governors and thereby concluded in FY10.
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