1. This paper presents the Fund's actual net income for FY 2003 following the closing of its accounts for the financial year and the completion of the audit. The Executive Board reviewed the Fund's income position in April 2003 and took all necessary decisions at that time.1 No further decisions are required and this note is for the information of the Executive Board.

2. Regular income for FY 2003 before the retroactive reduction in the rate of charge amounted to SDR 125 million, exceeding the net income target for the year by SDR 56 million. The net income target of SDR 69 million was placed to the Special Reserve and the cost arising from the application of IAS 19, amounting to SDR 79 million2, was charged against the earmarked portion of that reserve (this holds the net cumulative gain resulting from the introduction of IAS 19 in FY 2000). Income in excess of the target of SDR 56 million was refunded on June 27, 2003 to members paying charges, reducing the proportion of the rate of charge for the financial year from 128.0 percent to 123.5 percent of the SDR interest rate. Surcharge income, net of the cost of administering the PRGF Trust, amounted to SDR 657 million and was placed to the General Reserve. The actual outcome was in line with the earlier projections, except for the factors set out in Table 1.

¹See Review of the Fund’s Income Position, the Rate of Charge, Precautionary Balances, and Burden Sharing for FY 2003 and FY 2004 (EBS/03/43, 4/7/03), discussed at Executive Board Meeting 03/36 on April 21, 2003.
²The actual IAS 19 expense included an adjustment of SDR 40 million made at year end to reflect the understatement of the Fund’s pension liabilities due to an actuarial estimation error because of the use of incorrect staff service data. This matter was reported to the Executive Board in the briefing by the External Audit Committee on June 18, 2003. The additional expense does not affect regular net income and the retroactive reduction in the rate of charge.

Table 1. Net Income for FY 2003
(in millions of SDRs)

Regular
Income

Other
Iincome

Total
Net income

Actual outcome

125

578

703

Projections in EBS/03/43

112

623

735

Differences

13

(45)

(32)

Attributable to:

Lower administrative expenses1

13

--

13

Lower-than-projected use of Fund credit

--

(5)

(5)

IAS 19 accounting adjustment

--

(40)

(40)

13

(45)

(32)

¹Actual administrative budget expenditures were $15 million below the estimated outturn provided in The FY 2004 Budget and the Medium-Term Framework (EBAP/03/41, 4/1/03).