Management's Discussion and Analysis and Condensed

Management’s Discussion and Analysis

and

Condensed Consolidated Financial Statements

December 31, 2015

(Unaudited)

Page 2

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

December 31, 2015

Contents

Page

I

Introduction ............................................................................................................................... 4

II Selected Financial Data and Financial Ratios .......................................................................... 4

III Overview of Financial Results .................................................................................................. 5

IV Client Services .......................................................................................................................... 7

V Liquid Assets .......................................................................................................................... 10

VI Funding Resources ................................................................................................................ 10

VII Results of Operations ............................................................................................................. 12

VIII Senior Management Changes ................................................................................................ 17

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INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

LIST OF TABLES

Tables

Page

Table 1a:

Change in Income before Net Unrealized Gains and Losses on Non-trading

Financial Instruments accounted for at Fair Value, Grants to IDA and Net Gains

and Losses attributable to Non-controlling Interests FY16 YTD vs FY15 YTD ........................ 6

Table 1b: Change in Income before Net Unrealized Gains and Losses on Non-trading

Financial Instruments accounted for at Fair Value, Grants to IDA and Net Gains

and Losses attributable to Non-controlling Interests FY16 Q2 vs FY15 Q2 ............................ 6

Table 2: Activities of the Funds Managed by AMC FY16 YTD vs FY15 YTD ........................................ 8

Table 3: FY16 YTD and FY15 YTD Long-Term Finance and Core Mobilization ................................... 9

Table 4: IFC's Capital ........................................................................................................................... 11

Table 5: IFC's Retained Earnings ......................................................................................................... 11

Table 6: Main Elements of Net Income and Comprehensive Income .................................................. 12

Table 7: Change in Net Income FY16 YTD vs FY15 YTD ................................................................... 13

Table 8: FY16 YTD Change in Income from Loans and Guarantees, including Realized

Gains and Losses on Loans and Associated Derivatives ...................................................... 13

Table 9: Net Unrealized Gains and Losses on Non-Trading Financial Instruments FY16 YTD

vs FY15 YTD .......................................................................................................................... 15

Table 10: Change in Other Comprehensive Income - Unrealized Gains and Losses on Equity

Investments and Debt Securities FY16 YTD vs FY15 YTD ..................................................... 16

Page 4

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

I. INTRODUCTION

This document should be read in conjunction with the International Finance Corporation’s (IFC or the Corporation) consolidated financial

statements and management’s discussion and analysis issued for the year ended June 30, 2015 (FY15). IFC undertakes no obligation to

update any forward-looking statements.

BASIS OF PREPARATION OF IFC’S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accounting and reporting policies of IFC conform to accounting principles generally accepted in the United States (GAAP). IFC’s

accounting policies are discussed in more detail in Note A to IFC’s Condensed Consolidated Financial Statements as of and for the three

and six months ended December 31, 2015 (FY16 YTD Financial Statements).

Management uses income available for designations (Allocable Income) (a non-GAAP measure) as a basis for designations of retained

earnings. Allocable Income generally comprises net income excluding net unrealized gains and losses on equity investments and net

unrealized gains and losses on non-trading financial instruments accounted for at fair value, income from consolidated entities other than

AMC, and expenses reported in net income related to prior year designations

.

II. SELECTED FINANCIAL DATA AND FINANCIAL RATIOS

As of and for

the six months ended

As of and for

the three months ended

As of and

for the year

ended

Investment Program (US$ millions)

December

31

, 2015

December

31

, 2014

December

31, 2015

December

31, 2014

June 30,

2015

Long-Term Finance

$

4,896

$

5,049

$

3,293

$

2,812

$

10,539

Core Mobilization

2,730

3,890

2,072

2,488

7,133

Total commitments (Long-Term

Finance and Core Mobilization)

$

7,626

$

8,939

$

5,365

$

5,300

$

17,672

Income Statement (US$ millions)

Income before grants to IDA

$

163

$

397

$

16

$

(30)

$

749

Grants to IDA

-

(340)

Net income (loss)

$

163

$

397

$

16

$

(30)

$

409

Add: Net losses attributable to non-

controlling interests

5

30

3

20

36

Net income (loss) attributable to

IFC

$

168

$

427

$

19

$

(10)

$

445

Income available for designations

1

$

292

$

920

Financial Ratios

2

Deployable strategic capital (DSC) as

a percentage of Total Resources

Available (TRA)

7.4%

5.0%

5.4%

External funding liquidity level

559%

533%

494%

Cash and liquid investments as a

percentage of next three years’

estimated net cash requirements

80%

83%

81%

Debt to equity ratio

2.7:1

2.9:1

2.6:1

Return on average assets (GAAP-

basis)

0.8%

1.0%

0.5%

Return on average capital (GAAP-

basis)

2.8%

3.6%

1.8%

1

Income available for designations in the six months ended December 31, 2015 totaled $292 million ($920 million – six months ended December, 2014). Based on the

distribution policy approved by IFC’s Board of Directors, the maximum designation would be $28 million in respect of the six months ended December 31, 2015 ($206 million

– six months ended December 31, 2014). Actual designations in respect of the year ending June 30, 2016 will ultimately be dependent on full year financial results.

2

Returns on average assets are annualized.

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INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

IFC’s DSC as a percentage of TRA was 7.4% at December 31, 2015, as compared with 5.4% at June 30, 2015. The increase in the DSC

in FY16 YTD is due to lower Total Resources Required (TRR) and higher TRA. TRR decreased due to a decline in the committed

investment portfolio as well as lower Treasury economic capital usage. The increase in TRA was supported by strong realized capital

gains on the equity portfolio offset by the $330 million designation to IDA, considered in advance for DSC purposes.

IFC’s debt-to-equity ratio was 2.7

:1

, well within the maximum of 4:1 required by policy approved by IFC’s Board of Directors. The externally

funded liquidity ratio was 559%, above the Board required minimum of 65% and IFC’s overall liquidity as a percentage of the next three

years' estimated net cash needs stood at 80%, above the minimum requirement of the Board of 45%.

III. OVERVIEW OF FINANCIAL RESULTS

IFC is the largest global development institution focused on the private sector in developing countries. Established in 1956, IFC is owned

by 184 member countries, a group that collectively determines its policies. IFC is a member of the World Bank Group (WBG)

3

but is a

legal entity separate and distinct from IBRD, IDA, MIGA, and ICSID, with its own Articles of Agreement, share capital, financial structure,

management and staff. Membership in IFC is open only to member countries of IBRD.

The WBG’s two goals, to be achieved by 2030, are to end extreme poverty by reducing the percentage of people living with less than

$1.90 per day to no more than 3% globally and to promote shared prosperity in a sustainable manner by fostering income growth for the

bottom 40% of the population in every developing country. In October 2015, the WBG raised its poverty line figure upwards, from $1.25 a

day to $1.90, to reflect the increase in prices worldwide based on updated purchasing-power-parity data.

IFC’s overall strategy remains focused on contributing to the WBG strategy and goals.

IFC helps developing countries achieve sustainable growth by financing private sector investment, mobilizing capital in international

financial markets, and providing advisory services to businesses and governments. IFC’s principal investment products are loans and

equity investments, with smaller debt securities and guarantee portfolios. IFC also plays an active and direct role in mobilizing additional

funding from other investors and lenders through a variety of means. Such means principally comprise: loan participations, parallel loans,

sales of loans, the non-IFC portion of structured finance transactions which meet core mobilization criteria, the non-IFC portion of

commitments in IFC’s initiatives, and the non-IFC investment portion of commitments in funds managed by IFC’s wholly owned subsidiary,

IFC Asset Management Company LLC (AMC), (collectively Core Mobilization). Unlike most other development institutions, IFC does not

accept host government guarantees of its exposures. IFC raises virtually all of the funds for its lending activities through the issuance of

debt obligations in the international capital markets, while maintaining a small borrowing window with IBRD. Equity investments are funded

from capital (net worth).

IFC’s capital base and its assets and liabilities, other than its equity investments, are primarily denominated in US Dollars ($ or US$) or

swapped into US Dollars but it has a growing portion of debt issuances denominated in currencies other than USD and which are invested

in such currencies. Overall, IFC seeks to minimize foreign exchange and interest rate risks arising from its loans and liquid assets funded

by the proceeds of market borrowings by closely matching the currency and rate bases of its assets in various currencies with liabilities

having the same characteristics. IFC generally manages non-equity investment related and certain lending related residual currency and

interest rate risks by utilizing currency and interest rate swaps and other derivative instruments.

The Management’s Discussion and Analysis contains forward looking statements which may be identified by such terms as “anticipates,”

“believes,” “expects,” “intends,” “plans” or words of similar meaning. Such statements involve a number of assumptions and estimates that

are based on current expectations, which are subject to risks and uncertainties beyond IFC’s control. Consequently, actual future results

could differ materially from those currently anticipated.

FINANCIAL PERFORMANCE SUMMARY

IFC’s net income is affected by a number of factors that can result in volatile financial performance.

Global equity markets in emerging economies have been volatile in recent years and in the six months ended December 31, 2015 (FY16

YTD) experienced significant deterioration with many emerging markets moving significantly lower in the three months ended September

30, 2015 (FY16 Q1). During FY16 Q2, there was continued intra-quarter volatility but overall such markets were essentially flat at

December 31, 2015 when compared to September 30, 2015. In addition, in FY16 YTD there was further depreciation of certain of IFC’s

major investment currencies against IFC’s reporting currency, the US$, particularly in the Latin America and Caribbean region, continuing

the trend experienced throughout much of FY15. FY16 YTD also saw a continuation of lower commodities prices. Collectively, these

factors negatively impacted the valuation of many of IFC’s investments.

The above factors, together with some adverse project-specific developments in a small but growing number of IFC’s loans, particularly

in the Europe and Central Asia and Middle East and North Africa regions, have also contributed to an increase in non-performing loans

and an increase in credit risk in the loan portfolio.

These factors have put downward pressure on IFC’s investment portfolio returns in FY16 YTD and has resulted in higher other-than-

temporary impairments on equity investments and debt securities and higher provisions for losses on loans in both FY16 YTD and FY16

Q2 alone. Partially offsetting these impacts on the investment portfolio, IFC was able to realize robust capital gains on a small number of

equity investments sales, largely in the East Asia and the Pacific region in FY16 Q1 with larger gains realized in FY16 Q1 compared to

FY16 Q2.

3

The other institutions of the World Bank Group are the International Bank for Reconstruction and Development (IBRD), the International Development Association

(IDA), the Multilateral Investment Guaranty Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

Page 6

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

IFC has also recorded significantly lower income from its liquid assets portfolio due in large part to credit spread widening and credit

downgrades.

SIX MONTHS ENDED DECEMBER 31, 2015

IFC reported income before net unrealized gains and losses on non-trading financial instruments accounted for at fair value and grants to

IDA of $124 million in FY16 YTD, as compared to $531 million in the six months ended December 31, 2014 (FY15 YTD). The $407 million

decrease in FY16 YTD when compared to FY15 YTD can be analyzed as follows:

Table 1a: Change in Income before net unrealized gains and losses on non-trading financial instruments accounted for at fair

value, grants to IDA and net gains and losses attributable to non-controlling interests FY16 YTD vs FY15 YTD (US$ millions)

Increase

(decrease)

FY16 YTD vs

FY15 YTD

Higher provisions for losses on loans, guarantees and other receivables

$

(137)

Lower income from liquid asset trading activities

(91)

Higher charges on borrowings

(48)

Lower foreign currency transaction gains on non-trading activities

(32)

Lower income from loans and guarantees, including realized gains and losses on loans and associated

derivatives

(26)

Higher other-than-temporary impairments on equity investments and debt securities

(14)

Higher gains on equity investments and associated derivatives, net

16

Other, net

(75)

Change in income before net unrealized gains and losses on non-trading financial instruments accounted

for at fair value, grants to IDA and net gains and losses attributable to non-controlling interests

$

(407)

Net unrealized gains on non-trading financial instruments accounted for at fair value totaled $39 million in FY16 YTD (net unrealized losses

of $134 million in FY15 YTD) resulting in income before grants to IDA of $163 million in FY16 YTD, as compared to $397 million in FY15

YTD. There were no grants to IDA in FY16 YTD and FY15 YTD. Net losses attributable to non-controlling interests totaled $5 million in

FY16 YTD ($30 million in FY15 YTD).

Accordingly, net income attributable to IFC totaled $168 million in FY16 YTD, as compared with $427 million in FY15 YTD.

THREE MONTHS ENDED DECEMBER 31, 2015

IFC reported losses before net unrealized gains and losses on non-trading financial instruments accounted for at fair value and grants to

IDA of $25 million in the three months ended December 31, 2015 (FY16 Q2), as compared to income of $19 million in the three months

ended December 31, 2014 (FY15 Q2). The $44 million decrease in FY16 Q2 when compared to FY15 Q2 can be analyzed as follows:

Table 1b: Change in Income before net unrealized gains and losses on non-trading financial instruments accounted for at fair

value, grants to IDA and net gains and losses attributable to non-controlling interests FY16 Q2 vs FY15 Q2 (US$ millions)

Increase

(decrease)

FY16 Q2 vs

FY15 Q2

Higher provisions for losses on loans, guarantees and other receivables

$

(68)

Lower foreign currency transaction gains on non-trading activities

(46)

Higher charges on borrowings

(27)

Higher gains on equity investments and associated derivatives, net

23

Higher income from loans and guarantees, including realized gains and losses on loans and associated

derivatives

30

Lower other-than-temporary impairments on equity investments and debt securities

70

Other, net

(26)

Change in income before net unrealized gains and losses on non-trading financial instruments accounted

for at fair value, grants to IDA and net gains and losses attributable to non-controlling interests

$

(44)

Net unrealized gains on non-trading financial instruments accounted for at fair value totaled $41 million in FY16 Q2 (net unrealized losses

of $49 million in FY15 Q2) resulting in income before grants to IDA of $16 million in FY16 Q2, as compared to net loss of $30 million in

FY15 Q2. There were no grants to IDA in FY16 Q2 and FY15 Q2. Net losses attributable to non-controlling interests totaled $3 million in

FY16 Q2 ($20 million in FY15 Q2).

Accordingly, net income attributable to IFC totaled $19 million in FY16 Q2, as compared to net loss of $10 million in FY15 Q2.

IFC’s financial performance is detailed more fully in Section VII, Results of Operations.

Page 7

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

IV. CLIENT SERVICES

BUSINESS OVERVIEW

IFC fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the

international financial markets, and providing advisory services to businesses and governments.

For all new investments, IFC articulates the expected impact on sustainable development, and, as the projects mature, IFC assesses the

quality of the development benefits realized.

IFC’s strategic focus areas are aligned to advance the World Bank Group’s global priorities.

INVESTMENT SERVICES

IFC’s investments are normally made in its developing member countries. The Articles of Agreement mandate that IFC shall invest in

productive private enterprise. The requirement for private ownership does not disqualify enterprises that are partly owned by the public

sector if such enterprises are organized under local commercial and corporate law, operate free of host government control in a market

context and according to profitability criteria, and/or are in the process of being totally or partially privatized.

IFC provides a range of financial products and services to its clients to promote sustainable enterprises, encourage entrepreneurship, and

mobilize resources that wouldn’t otherwise be available. IFC’s financing products are tailored to meet the needs of each project. Investment

services product lines include: loans, equity investments, trade finance, loan participations, structured finance, client risk management

services, and blended finance.

IFC carefully supervises its projects to monitor project performance and compliance with contractual obligations and with IFC’s internal

policies and procedures.

ADVISORY SERVICES

IFC’s Advisory Services (AS) strengthens the capacity and development impact of firms, helps governments design and implement public-

private partnership transactions (PPP), and helps governments and non-government institutions improve the enabling environment for

private investment. AS extends IFC’s footprint, especially in challenging markets. In these areas AS often leads the way for IFC, and is a

crucial part of its growth strategy.

ASSET MANAGEMENT COMPANY

IFC Asset Management Company, LLC (AMC), a wholly-owned subsidiary of IFC, invests third-party capital and IFC capital, enabling outside

investors to benefit from IFC’s expertise in achieving strong equity returns, as well as positive development impact in the countries in which

it invests in developing and frontier markets. Investors in funds managed by AMC include sovereign wealth funds, national pension funds,

multilateral and bilateral development institutions, national development agencies and international financial institutions. AMC helps IFC

mobilize additional capital resources for investment in productive private enterprise in developing countries.

At December 31, 2015, AMC managed eleven funds, with $8.7 billion total assets under management (ten funds; $8.5 billion at June 30,

2015):

• The IFC Capitalization (Equity) Fund, L.P. (Equity Capitalization Fund) and the Capitalization (Subordinated Debt) Fund, L.P.

(Sub-Debt Capitalization Fund), established in the year ended June 30, 2009, help strengthen systemically important banks in

emerging markets.

• The African, Latin American and Caribbean Fund, LP (ALAC Fund) was established in the year ended June 30, 2010 (FY10) and

invests in equity investments across a range of sectors in Sub-Saharan Africa, Latin America, and the Caribbean.

• The Africa Capitalization Fund, Ltd. (Africa Capitalization Fund) was established in FY10 to capitalize on systemically important

commercial banking institutions in northern and Sub-Saharan Africa.

• The Russian Bank Capitalization Fund, LP (Russian Bank Cap Fund) was established in the year ended June 30, 2012 to invest

in mid-sized commercial banks in Russia that are either: (i) privately owned and controlled; or (ii) state-owned; or (iii) controlled

and on a clear path to privatization.

• The Catalyst Fund, LP, IFC Catalyst Fund (UK), LP and IFC Catalyst Fund (Japan), LP (collectively, Catalyst Funds) were

established in the year ended June 30, 2013 (FY13) to make investments in selected climate- and resource efficiency-focused

private equity funds in emerging markets.

• The Global Infrastructure Fund, LP (Global Infrastructure Fund) was established in FY13 to focus on making equity and equity-

related investments in the infrastructure sector in global emerging markets.

• The China-Mexico Fund, LP (China-Mexico Fund) was established in FY15 to focus on making equity and equity-related

investments across all sectors in Mexico.

• The Financial Institutions Growth Fund, LP (FIG Fund) was established in FY15 to invest in equity and equity-related investments

in financial institutions in global emerging markets.

• The Global Emerging Markets Fund of Funds, LP and IFC Global Emerging Markets Fund of Funds (Japan Parallel), LP

(collectively, GEM Funds) were established in FY15 to primarily invest in a portfolio of investment funds in global emerging

markets.

•

The Middle East and North Africa Fund, LP (MENA Fund) was established in July 2015 to make equity and equity related

investments in the Middle East and North Africa region.

Page 8

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

The activities of the funds managed by AMC as of and for the six months ended December 31, 2015 and 2014 can be summarized as follows:

Table 2: Activities of the Funds Managed by AMC FY16 YTD vs FY15 YTD (US$ millions unless otherwise indicated)

As of December 31, 2015

For the six months ended December 31, 2015

Total assets under management

Disbursements to Fund

Disbursements

made by Fund

Disbursements

made by Fund

(number)*

Total

From IFC

From other

investors

From IFC

From other

investors

Equity Capitalization Fund

$ 1,275

$ 775

$ 500

$ 1

$ -

-

Sub-Debt Capitalization Fund

1,725

225

1,500

-

1

-

ALAC Fund

1,000

200

800

4

21

12

4

Africa Capitalization Fund

182

-

182

-

24

6

1

Russian Bank Cap Fund

550

250

300

1

2

-

Catalyst Funds

418

75

343

7

28

26

52

Global Infrastructure Fund**

1,430

200

1,230

18

74

98

3

China-Mexico Funds

1,200

-

1,200

-

5

-

FIG Fund

406

150

256

2

4

-

GEM Funds

406

81

325

2

7

4

6

MENA Fund

125

60

65

7

8

12

1

Total

$ 8,717

$ 2,016

$ 6,701

$ 42

$ 175

$ 158

67

*

Number of disbursements may include multiple disbursements to a single investee company or fund.

** Includes co-investment fund managed by AMC on behalf of Fund LPs.

As of December 31, 2014

For the six months ended December 31, 2014

Total assets under management

Disbursements to Fund

Disbursements

made by Fund

Disbursements

made by Fund

(number)*

Total

From IFC

From other

investors

From IFC

From other

investors

Equity Capitalization Fund

$ 1,275

$

775

$ 500

$ 4

$

2 $ 9

1

Sub-Debt Capitalization Fund

1,725

225

1,500

28

188

254

4

ALAC Fund

1,000

200

800

11

43 44

3

Africa Capitalization Fund

182

-

182

-

1

-

Russian Bank Cap Fund

550

250

300

2

3 -

-

Catalyst Funds

418

75

343

5

24

19

17

Global Infrastructure Fund**

1,430

200

1,230

12

207 209

4

China-Mexico Funds

1,200

-

1,200

-

FIG Fund

-

- -

-

GEM Funds

-

MENA Fund

-

- -

-

Total

$ 7,780

$ 1,725

$ 6,055

$ 62

$ 468

$ 535

29

*

Number of disbursements may include multiple disbursements to a single investee company or fund.

** Includes co-investment fund managed by AMC on behalf of Fund LPs.

INVESTMENT PROGRAM

COMMITMENTS

In FY16 YTD, Long-Term Finance was $4,896 million, as compared to $5,049 million in FY15 YTD and Core Mobilization was $2,730

million, as compared to $3,890 million for FY15 YTD, a total decrease of 15% reflecting the less favorable investing climate in FY16 YTD.

In addition, the average outstanding balance for Short-Term Finance was $2,707 million at December 31, 2015, as compared to $2,837

million at June 30, 2015.

Page 9

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

CORE MOBILIZATION

Core Mobilization is financing from entities other than IFC that becomes available to clients due to IFC’s direct involvement in raising

resources. lFC finances only a portion, usually not more than 25%, of the cost of any project. All IFC-financed projects, therefore, require

other financial partners. IFC mobilizes such private sector finance from other entities through a number of means, as outlined in the Table

below.

Table 3: FY16 YTD and FY15 YTD Long-Term Finance and Core Mobilization (US$ millions)

FY16

YTD

FY15

YTD

Total Long-Term Finance and Core Mobilization

4

$

7,626

$

8,939

Long-Term Finance

Loans

$

3,809

$

3,483

Equity investments

862

1,415

Guarantees

188

137

Client risk management

37

14

Total Long-Term Finance

$

4,896

$

5,049

Core Mobilization

Loan participations, parallel loans, and other mobilization

Loan participations

$

2,092

$

1,190

Managed Co-lending Portfolio Program

366

460

Parallel loans

65

994

Other Mobilization

111

300

Total loan participations, parallel loans and other mobilization

$

2,634

$

2,944

AMC

GEM Funds

40

-

Africa Capitalization Fund

$

23

$

-

Catalyst Funds

20

46

MENA Fund

6

-

ALAC Fund

5

76

Global Infrastructure Fund

2

121

Sub-debt Capitalization Fund

-

150

Equity Capitalization Fund

-

3

Total AMC

$

96

$

396

Other initiatives

Global Trade Liquidity Program and Critical Commodities Finance Program

$

-

$

150

Public Private Partnership

-

400

Total other initiatives

$

-

$

550

Total Core Mobilization

$

2,730

$

3,890

DISBURSEMENTS

IFC disbursed $4,990 million for its own account in FY16 YTD ($5,345 million in FY15 YTD): $3,497 million of loans ($3,671 million in

FY15 YTD), $1,125 million of equity investments ($1,244 million in FY15 YTD), and $368 million of debt securities ($430 million in FY15

YTD).

INVESTMENT PORTFOLIO

The carrying value of IFC’s investment portfolio was $36,735 million at December 31, 2015 ($37,578 million at June 30, 2015), comprising

the loan portfolio of $21,304 million ($21,336 million at June 30, 2015), the equity portfolio of $12,694 million ($13,503 million at June 30,

2015), and the debt security portfolio of $2,737 million ($2,739 million at June 30, 2015).

The carrying value of IFC’s investment portfolio comprises: (i) the disbursed investment portfolio; (ii) reserves against losses on loans;

(iii) unamortized deferred loan origination fees, net and other; (iv) disbursed amount allocated to a related financial instrument reported

separately in other assets or derivative assets; (v) unrealized gains and losses on equity investments held by consolidated variable interest

entities; (vi) unrealized gains and losses on investments accounted for at fair value as available-for-sale; and (vii) unrealized gains and

losses on investments.

4

Debt security commitments are included in loans and equity investments based on their predominant characteristics.

Page 10

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

GUARANTEES AND PARTIAL CREDIT GUARANTEES

IFC offers partial credit guarantees to clients covering, on a risk-sharing basis, client obligations on bonds and/or loans. IFC’s guarantee

is available for debt instruments and trade obligations of clients and covers commercial as well as noncommercial risks. IFC will provide

local currency guarantees, but when a guarantee is called, the client will generally be obligated to reimburse IFC in US dollar terms.

Guarantee fees are consistent with IFC’s loan pricing policies.

Guarantees of $3,242 million were outstanding (i.e., not called) at December 31, 2015 ($3,168 million at June 30, 2015).

V. LIQUID ASSETS

All liquid assets are managed according to an investment authority approved by the Board of Directors and liquid asset investment

guidelines approved by IFC’s Corporate Risk Committee, a subcommittee of IFC’s Management Team.

IFC funds its liquid assets from two sources, borrowings from market (funded liquidity) and capital (net worth). Liquid assets are managed

in a number of portfolios related to these sources.

IFC invests its liquid assets generally in highly rated fixed and floating rate instruments issued by, or unconditionally guaranteed by,

governments, government agencies and instrumentalities, multilateral organizations, and high quality corporate issuers; these include asset-

backed securities and mortgage-backed securities, time deposits, and other unconditional obligations of banks and financial institutions.

Diversification across multiple dimensions ensures a favorable risk return profile. IFC has a flexible approach to managing the liquid assets

portfolios by making investments on an aggregate portfolio basis against its benchmarks within specified risk parameters. In implementing

these portfolio management strategies, IFC utilizes derivative instruments, principally currency and interest rate swaps and futures and

options, and takes positions in various industry sectors and countries.

IFC’s liquid assets are accounted for as trading portfolios. The net asset value of the liquid assets portfolio was $41.3 billion at December 31,

2015 ($39.5 billion at June 30, 2015). The increase in FY16 YTD was principally due to additions to the portfolio from the investment of the

net proceeds of market borrowings, plus returns made on the investment portfolio partially offset by reductions due to investment

disbursements.

FUNDED LIQUIDITY

The primary funding source for liquid assets for IFC is borrowings from market sources. Proceeds of borrowings from market sources not

immediately disbursed for loans and loan-like debt securities (Funded Liquidity) are managed internally against money market

benchmarks. A small portion of Funded Liquidity is managed by third parties with the same benchmark as that managed internally.

MANAGED NET WORTH

The second funding source of liquid assets is that portion of IFC’s net worth not invested in equity and equity-like investments (Managed

Net Worth) which is managed against a U.S. Treasury benchmark. A portion of these assets is managed by third parties with the same

benchmark as that part managed internally.

For FY16 YTD, Income from liquid assets trading activities

5

from Funded Liquidity was $119 million while Managed Net Worth returned a

loss of $6 million.

VI. FUNDING RESOURCES

BORROWINGS

The major source of IFC’s borrowings is the international capital markets. Under the Articles of Agreement, IFC may borrow in the public

markets of a member country only with approvals from that member, together with the member in whose currency the borrowing is

denominated.

IFC’s new medium and long-term borrowings (after the effect of borrowing-related derivatives) totaled $6.8 billion during FY16 YTD ($10.0

billion, including $1.2 billion from IDA, in FY15 YTD).

IFC is increasingly using its borrowings issuances as a tool to promote capital markets development in emerging and frontier markets.

Proceeds of these issuances not disbursed into loans have primarily been invested in securities of the related sovereign and sovereign

instrumentalities in the currency of the issuances. As a result, borrowings from market sources at December 31, 2015 that have not been

swapped amounted to 5% of the total borrowings from market sources (6% at June 30, 2015 and 5% at June 30, 2014).

Market borrowings are generally swapped into floating-rate obligations denominated in US dollars. IFC’s mandate to help develop

domestic capital markets can result in raising local currency funds. As of December 31, 2015, $2.3 billion of non-US$ denominated market

borrowings were outstanding, denominated in Armenian drams, Chinese renminbi, Costa Rican colones, Dominican pesos, Georgian lari,

Indian rupees, Nigerian naira, Russian rubles, Rwandan francs and Zambian kwachas. Proceeds of these borrowings were invested in

corresponding local currencies, on lent to clients and/or partially swapped into US dollars.

5

Reported gross of borrowing costs and excluding foreign exchange gains and losses on local currency Funded Liquidity which are reported separately from income

from liquid assets trading activities in foreign currency gains and losses on non-trading activities and the effects of internal trades related to foregone swapping of

market borrowings and Funded Liquidity in certain currencies.

Page 11

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

CAPITAL AND RETAINED EARNINGS

As of

December 31, 2015, IFC’s authorized capital was $2.58 billion ($2.58 billion - June 30, 2015), of which $2.57 billion was subscribed

and paid in at

December 31, 2015 ($2.57 billion at June 30, 2015).

Table 4: IFC's Capital (US$ millions)

December 31,

2015

June 30,

2015

Capital

Capital stock, subscribed and paid-in

$

2,566

$

2,566

Accumulated other comprehensive income

262

1,197

Retained earnings

20,809

20,641

Total IFC capital

$

23,637

$

24,404

Non-controlling interests

19

22

Total capital

$

23,656

$

24,426

At December 31, 2015 and June 30, 2015, retained earnings comprised the following:

Table 5: IFC's Retained Earnings (US$ millions)

December 31,

2015

June 30,

2015

Undesignated retained earnings

$

20,305

$

20,457

Designated retained earnings:

Grants to IDA

330

-

Advisory services

132

137

Performance-based grants

15

16

IFC SME Ventures for IDA countries and Global Infrastructure Project Development Fund

27

31

Total designated retained earnings

$

504

$

184

Total retained earnings

$

20,809

$

20,641

SELECTIVE CAPITAL INCREASE (SCI)

On July 20, 2010, the IFC Board of Directors recommended that the IFC Board of Governors approve an increase of $130 million in the

authorized share capital of IFC to $2,580 million, through the issuance of $200 million in shares (including $70 million in unallocated

shares). The Board of Directors also recommended that the Board of Governors approve an increase in Basic Votes aimed at enhancing

the voice and participation of developing and transition countries which required an amendment to IFC’s Articles of Agreement.

The resolution recommended by the Board of Directors was adopted by the Board of Governors on March 9, 2012 (IFC Resolution no.

256 entitled "Amendment to the Articles of Agreement and 2010 Selective Capital Increase"). The amendment to the Articles of Agreement

and the increase in the authorized share capital became effective on June 27, 2012. As of the same date, eligible members were authorized

to subscribe to their allocated IFC shares.

As of June 30, 2015, IFC had received payments with respect to the SCI totaling $194.303 million and the balance of $5.697 million has

become part of IFC’s authorized and unallocated capital stock.

DESIGNATIONS OF RETAINED EARNINGS

Amounts available to be designated are determined based on a Board of Directors-approved income-based formula and, beginning in the

year ended June 30, 2008, on a principles-based Board of Directors-approved financial distribution policy, and are approved by the Board

of Directors.

IFC recognizes designations of retained earnings for advisory services when the Board of Directors approves it and recognizes designation

of retained earnings for grants to IDA when it is noted with approval by the Board of Governors. Expenditures for the various approved

designations are recorded as expenses in IFC’s condensed

consolidated income statement in the year in which they occur, and have the

effect of reducing retained earnings designated for this specific purpose.

On August 6, 2015, the Board of Directors approved a designation of $330 million of IFC’s retained earnings for grants to IDA and a designation

of $14 million of IFC’s retained earnings for Advisory Services. These designations were noted with approval by the Board of Governors on

October 9, 2015.

On January 15, 2016 IFC recognized grants to IDA of $330 million on the signing of a grant agreement between IDA and IFC concerning the

transfer to IDA and use of funds corresponding to the designation of retained earnings for grants to IDA approved by IFC’s Board of Directors

on August 6, 2015 and noted with approval by IFC’s Board of Governors on October 9, 2015. There were no grants to IDA recorded in FY16

YTD and FY15 YTD.

Page 12

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

Income available for designations in FY16 YTD (a non-GAAP measure)

6

totaled $292 million. Based on the distribution policy approved by

IFC’s Board of Directors the maximum amount available for designation would be $28 million - actual designations in respect of the year-

ending June 30, 2016 will ultimately be dependent on full year financial results.

VII. RESULTS OF OPERATIONS

OVERVIEW

The overall market environment has a significant influence on IFC’s financial performance. The main elements of IFC’s net income and

comprehensive income and influences on the level and variability of net income and comprehensive income from year to year are:

Table 6: Main Elements of Net Income and Comprehensive Income

ELEMENTS

SIGNIFICANT

INFLUENCES

Net income:

Yield on interest earning assets

Market conditions including spread levels and degree of competition. Nonaccruals and recoveries

of interest on loans formerly in nonaccrual status and income from participation notes on

individual loans are also included in income from loans.

Liquid asset income

Realized and unrealized gains and losses on the liquid asset portfolios, which are driven by

external factors such as: the interest rate environment; and liquidity of certain asset classes within

the liquid asset portfolio.

Income from the equity investment portfolio

Global climate for emerging markets equities, fluctuations in currency and commodity markets

and company-specific performance for equity investments. Performance of the equity portfolio

(principally realized capital gains, dividends, equity impairments, gains on non-monetary

exchanges and unrealized gains and losses on equity investments).

Provisions for losses on loans and

guarantees

Risk assessment of borrowers and probability of default and loss given default.

Other income and expenses

Level of advisory services provided by IFC to its clients, the level of expense from the staff

retirement and other benefits plans, and the approved and actual administrative expenses and

other budgets.

Gains and losses on other non-trading

financial instruments accounted for at fair

value

Principally, differences between changes in fair values of borrowings, including IFC’s credit

spread, and associated derivative instruments and unrealized gains or losses associated with the

investment portfolio including puts, warrants and stock options which in part are dependent on

the global climate for emerging markets. These securities are valued using internally developed

models or methodologies utilizing inputs that may be observable or non-observable.

Grants to IDA

Level of the Board of Governors-approved grants to IDA.

Other comprehensive income:

Unrealized gains and losses on listed

equity investments and debt securities

accounted for as available-for-sale

Global climate for emerging markets equities, fluctuations in currency and commodity markets

and company-specific performance. Such equity investments are valued using unadjusted

quoted market prices and debt securities are valued using internally developed models or

methodologies utilizing inputs that may be observable or non-observable.

Unrecognized net actuarial gains and

losses and unrecognized prior service

costs on benefit plans

Returns on pension plan assets and the key assumptions that underlay projected benefit

obligations, including financial market interest rates, staff expenses, past experience, and

management’s best estimate of future benefit cost changes and economic conditions.

The following paragraphs detail significant variances between FY16 YTD and FY15 YTD, covering the periods included in IFC’s FY16

YTD Condensed Consolidated Financial Statements. Certain amounts in FY15 YTD have been reclassified to conform to the current

year’s presentation. Such reclassifications had no effect on net income or total assets.

6

Income available for designations generally comprises net income excluding unrealized gains and losses on investments and unrealized gains and losses on other

non-trading financial instruments, income from consolidated VIEs, and expenses reported in net income related to prior year designations.

Page 13

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

NET INCOME

IFC reported income before net unrealized gains and losses on non-trading financial instruments accounted for at fair value, grants to IDA

and net gains and losses attributable to non-controlling interest of $124 million in FY16 YTD, as compared to $531 million in FY15 YTD.

Table 7: Change in Net Income FY16 YTD vs FY15 YTD (US$ millions)

Increase

(decrease)

FY16 YTD vs

FY15 YTD

Higher provisions for losses on loans, guarantees and other receivables

$

(137)

Lower income from liquid asset trading activities

(91)

Higher charges on borrowings

(48)

Lower foreign currency transaction gains on non-trading activities

(32)

Lower Income from Loans and guarantees, including realized gains and losses on loans and associated

derivatives

(26)

Higher other-than-temporary impairments on equity investments and debt securities

(14)

Higher gains on equity investments and associated derivatives, net

16

Other, net

(75)

Change in income before net unrealized gains and losses on non-trading financial instruments accounted

for at fair value, grants to IDA and net gains and losses attributable to non-controlling interests

$

(407)

FY16

YTD

FY15

YTD

Income before net unrealized gains and losses on non-trading financial instruments

accounted for at fair value, grants to IDA and net gains and losses attributable to non-controlling

interests

$

124

$

531

Net unrealized gains and losses on non-trading financial instruments accounted for at fair value

39

(134)

Net income

163

397

Net losses attributable to non-controlling interests

5

30

Net income attributable to IFC

$

168

$

427

A more detailed analysis of the components of IFC’s net income follows.

INCOME FROM LOANS AND GUARANTEES, INCLUDING REALIZED GAINS AND LOSSES ON LOANS AND ASSOCIATED

DERIVATIVES

IFC’s primary interest earning asset is its loan portfolio. Income from loans and guarantees, including realized gains and losses on loans

and associated derivatives for FY16 YTD totaled $545 million, compared with $571 million in FY15 YTD, a decrease of $26 million.

The disbursed loan portfolio increased $178 million from $23,252 million at June 30, 2015 to $23,430 million at December 31, 2015.

The increase in the loan portfolio due to new disbursements exceeding repayments was significantly offset by the reduction in loans

outstanding due to currency exchange rate fluctuations ($410 million in FY16 YTD) as IFC’s reporting currency, the US Dollar appreciated

against most of IFC’s lending currencies.

The weighted average contractual interest rate on loans at December 31, 2015 was 5.0% (4.9% as of June 30, 2015), up from 4.6% at

December 31, 2014.

Table 8: FY16 YTD Change in Income from Loans and guarantees, including realized gains and losses on loans and associated

derivatives (US$ millions)

Income from loans and guarantees, including realized gains and losses on loans and associated derivatives in FY15

YTD

$

571

Decrease due to lower commitment and financial fees

(15)

Decrease due to lower realized gains on loans, guarantees and associated derivatives

(14)

Decrease due to lower recoveries of interest on non-accruing loans, net

(6)

Increase due to change in loan portfolio and interest rate environment

5

Increase due to higher income from participation notes and other income

4

Change in Income from loans and guarantees, including realized gains and losses on loans and associated

derivatives

$

(26)

Income from loans and guarantees, including realized gains and losses on loans and associated derivatives in

FY16 YTD

$

545

Page 14

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

INCOME FROM EQUITY INVESTMENTS AND ASSOCIATED DERIVATIVES

Income from the equity investment portfolio, including associated derivatives, decreased by $10 million from $276 million in FY15 YTD to

$266 million in FY16 YTD.

IFC sells equity investments where IFC’s developmental role was complete, where pre-determined sales trigger levels had been met and,

where applicable, lock ups have expired. Gains on equity investments and associated derivatives comprise realized and unrealized gains.

IFC recognized realized gains on equity investments and associated derivatives in the form of cash and non-monetary considerations for

FY16 YTD of $757 million, as compared with $963 million for FY15 YTD, a decrease of $206 million. Realized gains on equity investments

and associated derivatives are concentrated in a small number of investments. In FY16 YTD, there were six investments that generated

individual capital gains in excess of $20 million for a total of $568 million, or 75%, of the FY16 YTD realized gains, compared to seven

investments that generated individual capital gains in excess of $20 million for a total of $753 million, or 78%, of the FY15 YTD realized

gains.

Dividend income in FY16 YTD totaled $90 million, as compared with $120 million in FY15 YTD. Dividend income in FY16 YTD included

returns from two unincorporated joint venture (UJVs) in the oil, gas and mining sectors accounted for under the cost recovery method,

which totaled $7 million, as compared with $12 million from four such UJVs in FY15 YTD.

Other-than-temporary impairments on equity investments totaled $441 million in FY16 YTD, as compared with $444 million in FY15 YTD,

driven by the continued economic downturn across key emerging markets, foreign exchange deterioration, and the continuing low oil

prices. The largest amount of write-downs in FY16 YTD were from the Latin America and the Caribbean region, accounting for 29% of

the total write-offs, followed by Europe and Central Asia (18%) and East Asia and the Pacific (17%). There were also seven individual

equity write-downs in FY16 YTD greater than $10 million across all regions except South Asia.

Net unrealized losses on equity investments and associated derivatives totaled $143 million (Net unrealized losses of $365 million in FY15

YTD), reflecting a generally deteriorating macro environment in emerging market equities which has negatively impacted the value of

many of IFC’s equity investments accounted for at fair value in net income.

INCOME FROM DEBT SECURITIES AND REALIZED GAINS AND LOSSES ON DEBT SECURITIES AND ASSOCIATED DERIVATIVES

Income from debt securities and realized gains and losses on debt securities and associated derivatives decreased to $69 million in FY16

YTD from $90 million in FY15 YTD, a decrease of $21 million. The largest components of the decrease were higher other-than-temporary

impairments ($17 million) and lower realized gains on debt securities and associated derivatives ($8 million) in FY16 YTD when compared

with FY15 YTD.

PROVISION FOR LOSSES ON LOANS, GUARANTEES AND OTHER RECEIVABLES

The quality of the loan portfolio, as measured by average country risk ratings and average credit risk ratings, deteriorated in FY16 YTD.

Non-performing loans (NPLs)* increased by $266 million, from $1,578 million of the disbursed loan portfolio at June 30, 2015 to $1,844

million at December 31, 2015. The increase of $266 million comprised $364 million of loans and loan-like debt securities being placed in

NPL status, $48 million being removed from NPL status and a $50 million reduction due to repayments and currency translation

adjustments.

IFC recorded a net provision for losses on loans, guarantees and other receivables of $195 million in FY16 YTD ($179 million of specific

provisions on loans; $15 million of portfolio provisions on loans; less than $0.5 million provision on guarantees; and $1 million provision

on other receivables) as compared to a provision of $58 million in FY15 YTD ($83 million of specific provisions for losses on loans; $22

million release of portfolio provisions for losses on loans; and net $3 million of release of provision for losses on guarantees and other

receivables). Project-specific developments on five loans comprised $81 million of the specific provision for losses on loans in FY16

YTD.

At December 31, 2015, IFC’s total reserves against losses on loans were $1,901 million or 8.1% of the disbursed loan portfolio ($1,743

million; 7.5% at June 30, 2015), an increase of $158 million. The increase in reserves against losses on loans due to provisions of $194

million has been partially offset by foreign exchange gains related to reserves held against non-U.S. Dollar-denominated loans and the

strengthening of the U.S. Dollar against many of IFC’s lending currencies of $33 million and write-offs, net of recoveries, and other

adjustments of $3 million.

Specific reserves against losses on loans at December 31, 2015 of $1,116 million ($962 million at June 30, 2015) are held against impaired

loans of $1,807 million ($1,722 million at June 30, 2015), a coverage ratio of 62% (56% at June 30, 2015).

INCOME FROM LIQUID ASSET TRADING ACTIVITIES

The liquid assets portfolio, net of derivatives and securities lending activities, increased by $1.8 billion from $39.5 billion at June 30, 2015,

to $41.3 billion at December 31, 2015. Gross income from liquid asset trading activities totaled $113 million in FY16 YTD compared to

$204 million in FY15 YTD, a decrease of $91 million.

Interest income in FY16 YTD totaled $275 million, compared to $307 million in FY15 YTD. In addition, the portfolio of ABS and MBS

experienced fair value losses totaling $88 million in FY16 YTD. Holdings in other products, including US Treasuries, global government

bonds, high quality corporate bonds and derivatives generated $74 million of losses in FY16 YTD, a total loss of $162 million (realized

and unrealized). This compares to a total loss of $103 million in FY15 YTD.

* Includes $74 million reported as debt securities on the Balance Sheet as of December 31, 2015 ($44 million - June 30, 2015).

Page 15

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

In FY16 Q1, the liquid assets portfolios underperformed their benchmarks by $27 million. In FY16 Q1, the weaker performance reflected

mark-to-market losses on securitized products and high-quality credit spread securities as spreads widened throughout the quarter. The

portfolios funded by market borrowings suffered declines as a result. In FY16 YTD, the liquid assets portfolios outperformed their

benchmarks by $24 million. US Treasury yields rose, particularly in FY16 Q2 as the path of monetary policy became clearer. In December,

the US Federal Reserve Board raised its target range for the Fed Funds rate by 25 basis points. As a result, the portion of the liquid

assets portfolio funded by net worth and that is benchmarked to U.S. Treasuries suffered a decline. This was partially offset by favorable

performance from international securitized products and resiliency from emerging markets corporate bonds.

At December 31, 2015, trading securities with a fair value of $61 million are classified as Level 3 securities ($86 million on June 30, 2015).

CHARGES ON BORROWINGS

IFC’s charges on borrowings increased by $48 million, from $118 million in FY15 YTD (net of $1 million gain on extinguishment of

borrowings) to $166 million in FY16 YTD (net of $2 million gain on extinguishment of borrowings), largely reflecting increased interest

charges as pricing in the SSA (Sovereigns, Supranational and Agencies) market became more expensive due to USD swap curve

tightening and widening borrowing spreads vs. LIBOR.

OTHER INCOME

Other income of $211 million for FY16 YTD was $27 million lower than in FY15 YTD ($238 million). There were lower returns on the Post

Employment Benefit Plan (PEBP) assets which are partly invested in global equities and reflected the challenging market for equity

investments in FY16 YTD as compared to the same period in FY15. Fee income from mobilization activities was lower in FY16 YTD as

compared with FY15 YTD reflecting overall weaker mobilization.

Other income also includes management and other fees from IFC’s consolidated subsidiary, AMC of $33 million ($29 million in FY15 YTD)

and income from Advisory Services of $109 million ($112 million in FY15 YTD).

OTHER EXPENSES

Administrative expenses (the principal component of other expenses) increased by $26 million from $465 million in FY15 YTD to $491

million in FY16 YTD. Administrative expenses includes the grossing-up effect of certain revenues and expenses attributable to IFC’s

reimbursable program and expenses incurred in relation to workout situations ($12 million in both FY16 YTD and FY15 YTD). Salary

costs, the largest component of administrative expenses, have decreased due to head count reductions, but this is more than offset by

increases in depreciation and variable costs.

IFC recorded expenses from the Staff Retirement Plan (SRP), the Retired Staff Benefits Plan (RSPB), and the PEBP in FY16 YTD of $92

million, a decrease of $7 million from $99 million in FY15 YTD generally reflecting lower service cost and lower amortization of

unrecognized net loss, net of higher interest cost.

Advisory services expenses totaled $128 million in FY16 YTD ($134 million in FY15 YTD).

FOREIGN CURRENCY TRANSACTION GAINS AND LOSSES ON NON-TRADING ACTIVITIES

Foreign currency transaction gains reported in net income in FY16 YTD totaled $12 million ($44 million - FY15 YTD). Foreign currency

transaction losses on debt securities accounted for as available-for-sale in the amount of $71 million in FY16 YTD (losses of $76 million

– FY15 YTD) are reported in Other Comprehensive Income, while gains and losses on the derivatives economically hedging such debt

securities are reported in net income.

Largely due to IFC having a small population of unhedged non-U.S. Dollar-denominated loans and debt securities and the U.S. Dollar

strengthening against such currencies, IFC has recorded overall foreign exchange related losses in a combination of Net Income and

Other Comprehensive Income of $59 million in FY16 YTD (losses of $32 million – FY15 YTD).

NET UNREALIZED GAINS AND LOSSES ON NON-TRADING FINANCIAL INSTRUMENTS

IFC accounts for certain financial instruments at fair value with unrealized gains and losses on such financial instruments being reported

in net income, namely: (i) all market borrowings that are economically hedged with financial instruments that are accounted for at fair value

with changes therein reported in net income; (ii) unrealized gains and losses on certain loans, debt securities and associated derivatives;

and (iii) borrowings from IDA.

Table 9: Net Unrealized Gains and Losses on Non-Trading Financial Instruments FY16 YTD vs FY15 YTD (US$ millions)

FY16

YTD

FY15

YTD

Unrealized gains and losses on loans, debt securities and associated derivatives

$

(68)

$

(32)

Unrealized gains and losses on borrowings from market, IDA and associated derivatives

, net

107

(102)

Net unrealized gains and losses on non-trading financial instruments accounted for at fair value

$

39

$

(134)

Changes in the fair value of IFC’s borrowings from market, IDA and associated derivatives, net, includes the impact of changes in IFC’s

own credit spread when measured against US$ LIBOR. As credit spreads widen, unrealized gains are recorded and when credit spreads

narrow, unrealized losses are recorded (notwithstanding the impact of other factors, such as changes in risk-free interest and foreign

currency exchange rates). The magnitude and direction (gain or loss) can be volatile from period to period but do not alter the cash flows.

IFC’s policy is to generally match currency, amount and timing of cash flows on market borrowings with cash flows on associated

derivatives entered into contemporaneously.

Page 16

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

In FY16 YTD, higher market interest rates and a widening of the credit spreads for IFC bond issuances resulted in unrealized gains from

the valuation of IFC’s market borrowings that were only partially offset by losses on related hedging swaps. Widening credit spreads

produced afterswap valuation gains as bond liabilities were discounted relatively more than swap receivables. IFC reported net $107

million of unrealized gains on borrowings and associated derivatives in FY16 YTD (net $102 million of unrealized losses in FY15

YTD). Unrealized gains were incurred on market borrowings after swaps, on balance, across most major funding currency portfolios. The

cost of economically hedging borrowings in US, Australian and New Zealand dollars afterswaps was more expensive across all maturities

with respect to benchmarks at FY16 Q2 end as compared to FY15 end.

IFC reported net unrealized losses on loans, debt securities and associated derivatives of $68 million in FY16 YTD (net unrealized losses

of $32 million in FY15 YTD). In FY16 this comprised of unrealized losses of $69 million on the loan and debt securities portfolio carried

at fair value, concentrated in two projects, which provided $42 million of losses, unrealized gains of $11 million on client risk management

swaps, and unrealized losses of $10 million on other derivatives, mainly conversion features, warrants and interest rate and currency

swaps economically hedging the fixed rate and/or non-US$ loan portfolio.

OTHER COMPREHENSIVE INCOME (OCI)

UNREALIZED GAINS AND LOSSES ON EQUITY INVESTMENTS AND DEBT SECURITIES

IFC’s investments in debt securities and equity investments that are listed in markets that provide readily determinable fair values are

classified as available-for-sale, with unrealized gains and losses on these investments being reported in OCI until realized. When realized,

the gain or loss is transferred to net income. Changes in unrealized gains and losses on equity investments and debt securities reported

in OCI are significantly impacted by (i) the global environment for emerging markets; and (ii) the realization of gains on sales of such equity

investments and debt securities.

Table 10: Change in Other Comprehensive Income - Unrealized Gains and Losses on Equity Investments and Debt Securities

FY16 YTD vs FY15 YTD (US$ millions)

FY16

YTD

FY15

YTD

Net unrealized gains and losses on equity investments arising during the period:

Unrealized gains

$

104

$

717

Unrealized losses

(647)

(656)

Reclassification adjustment for realized gains and other-than-temporary impairments included in net income

(301)

(346)

Net unrealized gains and losses on equity investments

$

(844)

$

(285)

Net unrealized gains and losses on debt securities arising during the period:

Unrealized gains

$

44

$

61

Unrealized losses

(148)

(126)

Reclassification adjustment for realized gains, non-credit related portion of impairments which were

recognized in net income and other-than-temporary included in net income

(4)

(30)

Net unrealized gains and losses on debt securities

$

(108)

$

(95)

Total unrealized gains and losses on equity investments and debt securities

$

(952)

$

(380)

Net unrealized losses on equity investments arising in FY16 YTD totaled $844 million, mainly due to decreases in equity fair values

reflecting the volatile and overall significantly negative market conditions (equity, commodities and FX) in FY16 YTD. Unrealized losses

of $976 million were reported in FY16 Q1 and unrealized gains of $24 million were reported in FY16 Q2, reflecting the significantly weaker

emerging markets environment that existed in FY16 Q1 when compared to FY16 Q2 and larger realizations of gains on equity investments

accounted for as available for sale early in FY16 Q1.

Page 17

INTERNATIONAL FINANCE CORPORATION

Management’s Discussion and Analysis

VIII. SENIOR MANAGEMENT CHANGES SINCE JULY 1, 2015

The following changes became effective July 1, 2015:

Nena Stoiljkovic assumed the role of Vice President, Global Client Services. Jean Philippe Prosper left the position of Vice President,

Global Client Services and became an Adviser to IFC’s Executive Vice President and CEO. Karin Finkelston left the position of Vice

President, Global Partnerships to become Vice President and Chief Operating Officer of MIGA. Saran Kebet-Koulibaly assumed the role

of Vice President, Corporate Risk and Sustainability. The units that previously reported to the Co-Vice Presidents, Global Partnerships,

were realigned with synergistic functional areas in IFC.

James Scriven, Vice President, Corporate Risk and Sustainability on June 30, 2015 left IFC effective October 31, 2015.

The following is a list of the principal officers of IFC as of December 31, 2015.

President ……………………………………………………………………………………………………………….

Dr. Jim Yong Kim

Executive Vice President and CEO ..............................................................................................................

Jin-Yong Cai*

Vice President, Global Client Services .........................................................................................................

Dimitris Tsitsiragos

Vice President, Global Client Services .........................................................................................................

Nena Stoiljkovic

Vice President, Corporate Risk & Sustainability and General Counsel .........................................................

Ethiopis Tafara

Vice President, Corporate Risk & Sustainability ...........................................................................................

Saran Kebet-Koulibaly

Vice President, Treasury and Syndications…………………………………………………………………………

Jindong Hua

CEO, IFC Asset Management Company LLC (a wholly-owned subsidiary of IFC)…………………………….

Gavin E.R. Wilson

* Jin-Yong Cai left IFC effective January 8, 2016. IFC has announced that Philippe Le Houérou has been appointed Executive Vice

President and CEO effective March 1, 2016. Ethiopis Tafara, IFC’s Vice President and General Counsel is the acting Executive Vice

President and CEO effective until Mr. Le Houérou’s appointment becomes effective.

Mr. Tafara designated Fady Zeidan as Acting Vice

President for Corporate Risk & Sustainability and General Counsel for the period from January 9, 2016 until January 21, 2016; and David

Harris as Acting Vice President for Corporate Risk & Sustainability and General Counsel for the period from January 22, 2016 until

February 29, 2016.

Page 18

INTERNATIONAL FINANCE CORPORATION

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

December 31, 2015

Contents

Page

Condensed consolidated balance sheets ........................................................................................... 19

Condensed consolidated income statements ..................................................................................... 20

Condensed consolidated statements of comprehensive income ........................................................ 21

Condensed consolidated statements of changes in capital ................................................................ 22

Condensed consolidated statements of cash flows ............................................................................ 23

Notes to condensed consolidated financial statements ...................................................................... 25

Independent Auditors’ Report ............................................................................................................. 75

Page 19

INTERNATIONAL FINANCE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

as of December 31, 2015 (unaudited) and June 30, 2015 (unaudited)

(US$ millions)

December 31

June 30

Assets

Cash and due from banks………………………………………………………………………………….

$

1,351

$

1,509

Time deposits…................................................................................................................................

10,975

7,509

Trading securities - Note K……………………….……………………………………………….............

32,260

34,731

Securities purchased under resale agreements and receivable

for cash collateral pledged - Note P….…………………………………...........................................

1,101

68

Investments - Notes B, D, E, F, K and M

Loans

($812 at December 31, 2015 and $784, June 30, 2015 at fair value;

net of reserve against losses of $1,901 at December 31, 2015, $1,743 at June 30, 2015)

- Notes D, E and K ...................................................................................................................

21,304

21,336

Equity investments

($9,435 at December 31, 2015, $10,253 at June 30, 2015 at fair value) - Notes B, D, G and K

12,694

13,503

Debt securities - Notes D, F and K ………………………………………………………………….….

2,737

2,739

Total investments ……………………………………………………………………………………...

36,735

37,578

Derivative assets - Notes J, K and P………………………………………………………………….....

3,518

3,255

Receivables and other assets……………………………………………………………………............

2,700

2,898

Total assets …………………………………………………………………………………………….

$

88,640

$

87,548

Liabilities and capital

Liabilities

Securities sold under repurchase agreements and payable

for cash collateral received - Note P..…………………………………………………………...........

$

4,262

$

4,695

Borrowings outstanding - Note K

From market and other sources at amortized cost ………………………………………………….

2,523

1,587

From market sources at fair value …………………………………………………………………….

49,271

48,329

From International Development Association at fair value …......…………………...………….….

1,110

1,136

From International Bank for Reconstruction and Development at amortized cost ………………

209

213

Total borrowings ……………………………………………………………………………………....

53,113

51,265

Derivative liabilities - Notes J, K and P……………………………………………………………..…...

4,622

4,225

Payables and other liabilities……………………………………………………………….…................

2,987

2,937

Total liabilities …………………………………………………………………………………….……..

64,984

63,122

Capital

Capital stock, authorized (2,580,000 at December 31, 2015 and June 30, 2015)

shares of $1,000 par value each

Subscribed and paid-in ………………………………………………………………………………..

2,566

Accumulated other comprehensive income - Note H …………………………………………………

262

1,197

Retained earnings - Note H ……………………………………………………………………………...

20,809

20,641

Total IFC capital ……………………………………………………………………………………….

23,637

24,404

Non-controlling interests …………………………………………………………………………………

19

22

Total capital …………………………………………………………………………………………….

23,656

24,426

Total liabilities and capital …………………………………………………………………………...

$

88,640

$

87,548

The notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 20

INTERNATIONAL FINANCE CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENTS

for each of the three and six months ended December 31, 2015 (unaudited) and December 31, 2014 (unaudited)

(US$ millions)

Three months ended

December 31,

Six months ended

December 31,

2015

2014

2015

2014

Income from investments

Income from loans and guarantees, including realized gains and losses

on loans and associated derivatives - Note E …..............................................

$

267

$

237

$

545

$

571

Provision for losses on loans, guarantees and other receivables - Note E...........

(107)

(39)

(195)

(58)

Income (loss) from equity investments and associated derivatives - Note G.......

27

(52)

266

276

Income from debt securities, including realized gains and losses on debt

securities and associated derivatives - Note F………………………………......

50

49

69

90

Total income from investments.....................................................................

237

195

685

879

Income from liquid asset trading activities - Note C.................................................

105

107

113

204

Charges on borrowings………………………………………………………................

(90)

(63)

(166)

(118)

Income from investments and liquid asset trading activities,

after charges on borrowings.........................................................................

252

239

632

965

Other income

Advisory services income.....................................................................................

64

62

109

112

Service fees..........................................................................................................

29

44

50

71

Other - Note B.......................................................................................................

40

34

52

55

Total other income..........................................................................................

133

140

211

238

Other expenses

Administrative expenses.......................................................................................

(246)

(243)

(491)

(465)

Advisory services expenses..................................................................................

(74)

(72)

(128)

(134)

Expense from pension and other postretirement benefit plans - Note O..............

(46)

(50)

(92)

(99)

Other - Note B.......................................................................................................

(13)

(10)

(20)

(18)

Total other expenses........................................................................................

(379)

(375)

(731)

(716)

Foreign currency transaction gains and losses on non-trading activities..................

(31)

15

12

44

Income (loss) before net unrealized gains and losses on non-trading

Financial instruments accounted for at fair value, grants to IDA and

net losses attributable to non-controlling interests....................................

(25)

19

124

531

Net unrealized gains and losses on non-trading financial instruments

accounted for at fair value - Note I.....................................................................

41

(49)

39

(134)

Net income (loss)…..........................................................................................

16

(30)

163

397

Net losses attributable to non-controlling interests...................................................

3

20

5

30

Net income (loss) attributable to IFC…………………………………………......

$

19

$

(10)

$

168

$

427

The notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 21

INTERNATIONAL FINANCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

for each of the three and six months ended December 31, 2015 (unaudited) and December 31, 2014 (unaudited)

(US$ millions)

Three months ended

December 31,

Six months ended

December 31,

2015

2014

2015

2014

Net income (loss) attributable to IFC….……………………………………..

$

19

$

(10)

$

168

$

427

Other comprehensive (loss) income

Unrealized gains and losses on debt securities

Net unrealized gains and losses on available-for-sale debt securities

arising during the period..........................................................................

(28)

(44)

(104)

(65)

Reclassification adjustment for realized gains included in net income

(Income from debt securities and realized gains and losses

on debt securities and associated derivatives)......................................

(20)

(16)

(30)

(39)

Reclassification adjustment for other-than-temporary impairments

included in net income (Income from debt securities and realized

gains and losses on debt securities and associated derivatives)..........

9

4

26

9

Net unrealized losses on debt securities.........................................

(39)

(56)

(108)

(95)

Unrealized gains and losses on equity investments

Net unrealized gains and losses on equity investments arising

53

(77)

(543)

61

during the period ......................................................................................

Reclassification adjustment for realized gains included in net income

(Income from equity investments and associated derivatives)................

(47)

(235)

(498)

(598)

Reclassification adjustment for other-than-temporary impairments

included in net income (Income from equity investments

and associated derivatives)....................................................................

57

143

197

252

Net unrealized gains (losses) on equity investments.....................

63

(169)

(844)

(285)

Net unrecognized net actuarial losses and unrecognized

prior service credits (costs) on benefit plans - Note O.......................

8

11

17

23

Total other comprehensive (loss) income................................................

32

(214)

(935)

(357)

Total comprehensive (loss) income attributable to IFC........................

$

51

$

(224)

$

(767)

$

70

The notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 22

INTERNATIONAL FINANCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN CAPITAL

for each of the six months ended December 31, 2015 (unaudited) and December 31, 2014 (unaudited)

(US$ millions)

Attributable to IFC

Undesignated

retained

earnings

Designated

retained

Earnings

Total

retained

earnings

Accumulated

other

comprehensive

income -

Note H

Capital

stock

Total IFC

capital

Non-

controlling

interests

Total

capital

At June 30, 2014

$

20,002

$

194

$

20,196

$

1,239

$

2,502

$

23,937

$

53

$

23,990

Six months ended

December 31, 2014

Net income attributable

to IFC

427

Other comprehensive

loss

(357)

Payments received for

IFC capital stock

Subscribed

2

Designations of retained

earnings - Note H

(398)

398

-

Expenditures against

designated retained

earnings - Note H

24

(24)

-

Non-controlling

interests issued

3

Net losses attributable to

non-controlling

interests

(30)

At December 31, 2014

$

20,055

$

568

$

20,623

$

882

$

2,504

$

24,009

$

26

$

24,035

At June 30, 2015

$

20,457

$

184

$

20,641

$

1,197

$

2,566

$

24,404

$

22

$

24,426

Six months ended

December 31, 2015

Net income attributable

to IFC

168

Other comprehensive

loss

(935)

Payments received for

IFC capital stock

Subscribed

-

Designations of retained

earnings - Note H

(344)

344

-

Expenditures against

designated retained

earnings - Note H

24

(24)

-

Non-controlling

interests issued

-

2

Net losses attributable to

non-controlling

interests

-

(5)

At December 31, 2015

$

20,305

$

504

$

20,809

$

262

$

2,566

$

23,637

$

19

$

23,656

The notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 23

INTERNATIONAL FINANCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

for each of the six months ended December 31, 2015 (unaudited) and December 31, 2014 (unaudited)

(US$ millions)

2015

2014

Cash flows from investing activities

Loan disbursements ………………………………………………………………….…...................

$

(3,497)

$

(3,671)

Investments in equity securities ………………………………………………………….................

(1,125)

(1,244)

Investments in debt securities ……………………………………………………………................

(368)

(430)

Loan repayments ………………………………………………………………………….................

2,886

2,902

Debt securities repayments ……………………………………………………………....................

117

96

Proceeds from sales of equity investments …………………………………………….................

1,225

1,680

Proceeds from sales of debt securities ………………………………………………....................

103

100

Net cash used in investing activities…………………………………………………………..

(659)

(567)

Cash flows from financing activities

Medium and long-term borrowings

Issuance ………………………………………………………………………………….................

7,665

10,066

Retirement …………………………………………………………………………………...............

(5,828)

(2,258)

Medium and long-term borrowings related derivatives, net …………………………................

(880)

(105)

Short-term borrowings, net ……………………………………………………………….................

1,661

99

Capital subscriptions ……………………………………………………………………...................

-

2

Non-controlling interests issued …………………………………………………………................

2

3

Net cash provided by financing activities ………………………………………..................

2,620

7,807

Cash flows from operating activities

Net income attributable to IFC..………………………………………………….............................

168

427

Add: Net losses attributable to non-controlling interests ……..……..........................................

(5)

(30)

Net income …….…………………………………………………………………………...................

163

397

Adjustments to reconcile net income to net cash used in operating activities:

Realized gains on loans and associated derivatives, net …………………..............................

(2)

(16)

Realized gains on debt securities and associated derivatives, net ………………...................

(37)

(45)

Gains on equity investments and related derivatives, net …………………………..................

(614)

(598)

Provision for losses on loans, guarantees and other receivables………………………...........

195

58

Other-than-temporary impairments on debt securities ………………………………................

26

9

Other-than-temporary impairments on equity investments…………………………..................

441

444

Net premiums received at issuance of borrowings…………………………………...................

2

-

Net discounts paid on retirement of borrowings……………………………………....................

(48)

(2)

Net realized gains on extinguishment of borrowings ………………………………...................

(2)

(1)

Foreign currency transaction gains on non-trading activities ……………................................

(12)

(44)

Net unrealized (gains) losses on non-trading financial instruments

accounted for at fair value ……………………………………………………………................

(39)

134

Change in accrued income on loans, time deposits and securities …………………...............

(36)

(76)

Change in payables and other liabilities ……………………………………………….................

(177)

(422)

Change in receivables and other assets ………………………………………………................

236

(278)

Change in trading securities and securities purchased and sold under

resale and repurchase agreements …………………………………………………................

1,049

(4,850)

Net cash provided by (used in) operating activities..……………………………...............

1,145

(5,290)

Change in cash and cash equivalents………………………………………………………………...

3,106

1,950

Effect of exchange rate changes on cash and cash equivalents…………………………………..

202

83

Net change in cash and cash equivalents…………………………………………………………….

3,308

2,033

Beginning cash and cash equivalents…………………………………………………………………

9,018

6,735

Ending cash and cash equivalents…………………………………………………………………

$

12,326

$

8,768

Composition of cash and cash equivalents

Cash and due from banks …………………………………………………………………................

$

1,351

$

1,526

Time deposits ……………………………………………………………………………….................

10,975

7,242

Total cash and cash equivalents……………………………………………………………………

$

12,326

$

8,768

The notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 24

INTERNATIONAL FINANCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

for each of the six months ended December 31, 2015 (unaudited) and December 31, 2014 (unaudited)

(US$ millions)

2015

2014

Supplemental disclosure

Change in ending balances resulting from currency exchange rate fluctuations:

Loans outstanding ………………………………………….......................................................

$

(410)

$

(690)

Debt securities ……………………………………………………………………….....................

(71)

(76)

Loan and debt security-related currency swaps ………………………………........................

515

773

Borrowings ……………………………………………………………………………...................

1,227

2,698

Borrowing-related currency swaps …………………………………………………...................

(1,086)

(2,510)

Charges on borrowings paid, net ………………………………………………………..................

$

162

$

106

Non-cash items:

Loan and debt security conversion to equity, net ………………………….............................

$

48

$

155

The notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Page 25

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

PURPOSE

The International Finance Corporation (IFC), an international organization, was established in 1956 to further economic development in its member

countries by encouraging the growth of private enterprise. IFC is a member of the World Bank Group (WBG), which also comprises the International

Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the Multilateral Investment Guarantee Agency

(MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). Each member is legally and financially independent. Transactions

with other World Bank Group members are disclosed in the notes that follow. IFC’s activities are closely coordinated with and complement the overall

development objectives of the other World Bank Group institutions. IFC, together with private investors, assists in financing the establishment,

improvement and expansion of private sector enterprises by making loans, equity investments and investments in debt securities where sufficient

private capital is not otherwise available on reasonable terms. IFC’s share capital is provided by its member countries. It raises most of the funds for

its investment activities through the issuance of notes, bonds and other debt securities in the international capital markets. IFC also plays a catalytic

role in mobilizing additional funding from other investors and lenders through parallel loans, loan participations, partial credit guarantees,

securitizations, loan sales, risk sharing facilities, and fund investments through the IFC Asset Management Company, LLC and other IFC crisis

initiatives. In addition to project finance and mobilization, IFC offers an array of financial and technical advisory services to private businesses in the

developing world to increase their chances of success. It also advises governments on how to create an environment hospitable to the growth of

private enterprise and foreign investment.

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIES

The Condensed Consolidated Financial Statements include the financial statements of IFC and consolidated subsidiaries as detailed in Note B. The

accounting and reporting policies of IFC conform with accounting principles generally accepted in the United States of America (US GAAP). In the

opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments necessary for the fair presentation of IFC’s financial

position and results of operation.

Condensed Consolidated Financial Statements presentation – Certain amounts in prior years have been changed to conform to the current year’s

presentation.

Advisory services – Funding received for IFC advisory services from governments and other donors are recognized as contribution revenue when

the conditions on which they depend are substantially met. Advisory services expenses are recognized in the period incurred. Advisory client fees and

administration fees are recognized as income when earned. See Notes L and N.

Functional currency – IFC’s functional currency is the United States dollar (US dollars or $).

Use of estimates – The preparation of the Condensed Consolidated Financial Statements requires management to make estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated

Financial Statements and the reported amounts of income and expense during the reporting periods. Actual results could differ from these estimates.

A significant degree of judgment has been used in the determination of: the reserve against losses on loans and impairment of debt securities and

equity investments; estimated fair values of financial instruments accounted for at fair value (including equity investments, debt securities, loans,

trading securities and derivative instruments); projected benefit obligations, fair value of pension and other postretirement benefit plan assets, and net

periodic pension income or expense. There are inherent risks and uncertainties related to IFC’s operations. The possibility exists that changing

economic conditions could have an adverse effect on the financial position of IFC.

IFC uses internal models to determine the fair values of derivative and other financial instruments and the aggregate level of the reserve against

losses on loans and impairment of equity investments. IFC undertakes continuous review and analysis of these models with the objective of refining

its estimates, consistent with evolving best practices appropriate to its operations. Changes in estimates resulting from refinements in the assumptions

and methodologies incorporated in the models are reflected in net income in the period in which the enhanced models are first applied.

Consolidation, non-controlling interests and variable interest entities – IFC consolidates:

i) all majority-owned subsidiaries;

ii) limited partnerships in which it is the general partner, unless the presumption of control is overcome by certain management participation or other

rights held by minority shareholders/limited partners; and

iii) variable interest entities (VIEs) for which IFC is deemed to be the VIE's primary beneficiary (together, consolidated subsidiaries).

Significant intercompany accounts and transactions are eliminated in consolidation.

Equity interests in consolidated subsidiaries held by third parties are referred to as non-controlling interests. Such interests and the amount of

consolidated net income/loss attributable to those interests are identified within IFC's condensed consolidated balance sheet and condensed

consolidated income statement as "non-controlling interests" and "net gains/losses attributable to non-controlling interests", respectively.

An entity is a VIE if:

i) its equity is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties;

ii) its equity investors do not have decision-making rights about the entity's operations; or

iii) its equity investors do not absorb the expected losses or receive the expected returns of the entity proportionally to their voting rights.

A variable interest is a contractual, ownership or other interest whose value changes as the fair value of the VIE's net assets change. IFC's variable

interests in VIEs arise from financial instruments, service contracts, guarantees, leases or other monetary interests in those entities.

IFC is considered to be the primary beneficiary of a VIE if it has the power to direct the VIE's activities that most significantly impact its economic

performance and the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Page 26

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

Prior to the adoption, effective July 1, 2015, of the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2015-02,

Amendments to the Consolidation Analysis, IFC was considered to be the primary beneficiary of a VIE if it had the power to direct the VIE's activities

that most significantly impact its economic performance and the obligation to absorb losses of or the right to receive benefits from the VIE that could

potentially have been significant to the VIE unless:

i) the entity had the attributes of an investment company or for which it is industry practice to account for their assets at fair value through earnings;

ii) IFC had an explicit or implicit obligation to fund losses of the entity that could potentially have been significant to that entity; and

iii) the entity was a securitization vehicle, an asset-backed financing entity, or an entity that was formerly considered a qualifying special purpose

entity, as well as entities that were required to comply with or operate in accordance with requirements that are similar to those included in Rule

2a-7 of the Investment Company Act of 1940.

In those cases, IFC was considered to be the primary beneficiary if it would absorb the majority of the VIE’s expected losses or expected residual

returns. See “Recently adopted accounting standards” in this Note A and Note M for more information regarding the adoption of ASU 2015-02. IFC

has a number of investments in VIEs that it manages and supervises in a manner consistent with other portfolio investments.

Fair Value Option and Fair Value Measurements – IFC has adopted the Financial Accounting Standards Board’s (FASB) Accounting Standards

Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820) and the Fair Value Option subsections of ASC Topic 825,

Financial Instruments (ASC 825 or the Fair Value Option). ASC 820 defines fair value, establishes a framework for measuring fair value and a fair

value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels and applies to all items measured

at fair value, including items for which impairment measures are based on fair value. ASC 825 permits the measurement of eligible financial assets,

financial liabilities and firm commitments at fair value on an instrument-by-instrument basis, that are not otherwise permitted to be accounted for at

fair value under other accounting standards. The election to use the Fair Value Option is available when an entity first recognizes a financial asset or

liability or upon entering into a firm commitment.

The Fair Value Option

IFC has elected the Fair Value Option for the following financial assets and financial liabilities:

i) investees in which IFC has significant influence:

a) direct investments in securities issued by the investee and, if IFC would have otherwise been required to apply equity method accounting,

all other financial interests in the investee (e.g., loans);

b) investments in Limited Liability Partnerships (LLPs), Limited Liability Companies (LLCs) and other investment fund structures that maintain

specific ownership accounts and loans or guarantees to such;

ii) direct equity investments representing 20 percent or more ownership but in which IFC does not have significant influence;

iii) all equity interests in private equity funds;

iv) certain hybrid instruments in the investment portfolio;

v) all market borrowings, that are economically hedged with financial instruments that are accounted for at fair value with changes therein reported

in earnings; and

vi) borrowings from IDA.

All borrowings for which the Fair Value Option has been elected are economically hedged with derivative or other financial instruments that are

accounted for at fair value with changes in fair value reported in earnings as such changes occur. Measuring at fair value those borrowings for which

the Fair Value Option has been elected mitigates the earnings volatility that would otherwise occur, due to measuring the borrowings and related

economic hedges differently, without having to apply ASC Topic 815’s, Derivatives and Hedging (ASC 815) complex hedge accounting requirements.

Measuring at fair value those equity investments that would otherwise require equity method accounting simplifies the accounting and renders a

carrying amount on the condensed consolidated balance sheet based on a measure (fair value) that IFC considers preferable to equity method

accounting. For the investments that otherwise would require equity method accounting for which the Fair Value Option is elected, ASC 825 requires

the Fair Value Option to also be applied to all eligible financial interests in the same entity. IFC has disbursed loans to certain of such investees;

therefore, the Fair Value Option is also applied to those loans. IFC elected the Fair Value Option for equity investments with 20% or more ownership

where it does not have significant influence so that the same measurement method (fair value) will be applied to all equity investments with more than

20% ownership.

The FVO has been elected for certain hybrid instruments in the investment portfolio that would otherwise require bifurcation of the host and embedded

derivative. Election of the FVO for these instruments eliminates the bifurcation requirement.

Equity securities held by consolidated subsidiaries that are investment companies

Pursuant to ASC Topic 946, Financial Services - Investment Companies (ASC 946) and ASC Topic 810, Consolidation, equity securities held by

consolidated subsidiaries that are investment companies are accounted for at fair value, with unrealized gains and losses reported in earnings.

Fair Value Measurements

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability (i.e., an exit price) in an orderly transaction between

independent, knowledgeable and willing market participants at the measurement date assuming the transaction occurs in the entity’s principal (or

most advantageous) market. Fair value must be based on assumptions market participants would use (inputs) in determining the price and measured

assuming that market participants act in their economic best interest, therefore, their fair values are determined based on a transaction to sell or

transfer the asset or liability on a standalone basis. Under ASC 820, fair value measurements are not adjusted for transaction costs.

Notwithstanding the following paragraph, pursuant to ASC Topic 320, Investments - Debt and Equity Securities (ASC 320), IFC reports equity

investments that are listed in markets that provide readily determinable fair values at fair value, with unrealized gains and losses being reported in

other comprehensive income.

Page 27

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

The fair value hierarchy established by ASC 820 gives the highest priority to unadjusted quoted prices in active markets for identical unrestricted

assets and liabilities (Level 1), the next highest priority to observable market based inputs or unobservable inputs that are corroborated by market

data from independent sources (Level 2) and the lowest priority to unobservable inputs that are not corroborated by market data (Level 3). Fair value

measurements are required to maximize the use of available observable inputs.

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. It

includes IFC’s debt securities and equity investments, which are listed in markets that provide readily determinable fair values, government issues

and money market funds in the liquid assets portfolio, and market borrowings that are listed on exchanges.

Level 2: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly for substantially the

full term of the asset or liability. It includes financial instruments that are valued using models and other valuation methodologies. These models

consider various assumptions and inputs, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity and

current market and contractual pricing for the underlying asset, as well as other relevant economic measures. Substantially all of these inputs are

observable in the market place, can be derived from observable data or are supported by observable levels at which market transactions are executed.

Financial instruments categorized as Level 2 include non-exchange-traded derivatives such as interest rate swaps, cross-currency swaps, certain

asset-backed securities, as well as the majority of trading securities in the liquid asset portfolio, and the portion of IFC’s borrowings accounted for at

fair value not included in Level 1.

Level 3: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing

for situations in which there is little, if any, market activity for the asset or liability at the measurement date. It consists of financial instruments whose

fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are non-observable. It also includes

financial instruments whose fair value is estimated based on price information from independent sources that cannot be corroborated by observable

market data. Level 3 includes equity and debt securities in the investment portfolios that are not listed in markets that provide readily determinable

fair values, all loans for which IFC has elected the Fair Value Option, and certain hard-to-price securities in the liquid assets portfolio.

IFC estimates the fair value of its investments in private equity funds that do not have readily determinable fair value based on the funds’ net asset

values (NAVs) per share as a practical expedient to the extent that a fund reports its investment assets at fair value and has all the attributes of an

investment company, pursuant to ASC 946. If the NAV is not as of IFC’s measurement date, IFC adjusts the most recent NAV, as necessary, to

estimate a NAV for the investment that is calculated in a manner consistent with the fair value measurement principles established by ASC 820.

Remeasurement of foreign currency transactions – Assets and liabilities not denominated in US dollars, other than disbursed equity investments,

are expressed in US dollars at the exchange rates prevailing at December 31, 2015 and June 30, 2015. Disbursed equity investments, other than

those accounted for at fair value, are expressed in US dollars at the prevailing exchange rates at the time of disbursement. Income and expenses are

recorded based on the rates of exchange prevailing at the time of the transaction. Transaction gains and losses are credited or charged to income.

Loans – IFC originates loans to facilitate project finance, restructuring, refinancing, corporate finance, and/or other developmental objectives. Loans

are recorded as assets when disbursed. Loans are generally carried at the principal amounts outstanding adjusted for net unamortized loan origination

costs and fees. It is IFC’s practice to obtain collateral security such as, but not limited to, mortgages and third-party guarantees.

Certain loans are carried at fair value in accordance with the Fair Value Option as discussed above. Unrealized gains and losses on loans accounted

for at fair value under the Fair Value Option are reported in Net unrealized gains and losses on non-trading financial instruments accounted for at

fair value on the condensed consolidated income statement.

Certain loans originated by IFC contain income participation, prepayment and conversion features. These features are bifurcated and separately

accounted for in accordance with ASC 815 if IFC has not elected the Fair Value Option for the loan host contracts and the features meet the definition

of a derivative, and are not considered to be clearly and closely related to their host loan contracts. Otherwise, these features are accounted for as

part of their host loan contracts in accordance with IFC’s accounting policies for loans as indicated herein.

Loans held for sale are carried at the lower of cost or fair value. The excess, if any, of amortized cost over fair value is accounted for as a valuation

allowance. Changes in the valuation allowance are recognized in net income as they occur.

Revenue recognition on loans – Interest income and commitment fees on loans are recorded as income on an accrual basis. Loan origination fees

and direct loan origination costs are deferred and amortized over the estimated life of the originated loan; such amortization is determined using the

interest method unless the loan is a revolving credit facility in which case amortization is determined using the straight-line method. Prepayment fees

are recorded as income when received.

IFC does not recognize income on loans where collectability is in doubt or payments of interest or principal are past due more than 60 days unless

management anticipates that collection of interest will occur in the near future. Any interest accrued on a loan placed in nonaccrual status is reversed

out of income and is thereafter recognized as income only when the actual payment is received. Interest not previously recognized but capitalized as

part of a debt restructuring is recorded as deferred income, included in the condensed consolidated balance sheet in payables and other liabilities,

and credited to income only when the related principal is received. Such capitalized interest is considered in the computation of the reserve against

losses on loans in the consolidated balance sheet.

Reserve against losses on loans – IFC recognizes impairment on loans not carried at fair value in the condensed consolidated balance sheet

through the reserve against losses on loans, recording a provision or release of provision for losses on loans in net income, which increases or

decreases the reserve against losses on loans. Individually impaired loans are measured based on the present value of expected future cash flows

to be received, observable market prices, or for loans that are dependent on collateral for repayment, the estimated fair value of the collateral.

The reserve against losses on loans reflects management’s estimates of both identified probable losses on individual loans (specific reserves) and

probable losses inherent in the portfolio but not specifically identifiable (portfolio reserves). The determination of identified probable losses represents

management’s judgment of the creditworthiness of the borrower. Reserves against losses are established through a review of individual loans

undertaken on a quarterly basis. IFC considers a loan as impaired when, based on current information and events, it is probable that IFC will be

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STATEMENTS (UNAUDITED)

unable to collect all amounts due according to the loan’s contractual terms. Information and events, with respect to the borrower and/or the economic

and political environment in which it operates, considered in determining that a loan is impaired include, but are not limited to, the borrower’s financial

difficulties, breach of contract, bankruptcy/reorganization, credit rating downgrade as well as geopolitical conflict, financial/economic crisis, commodity

price decline, adverse local government action and natural disaster. Unidentified probable losses are the losses incurred at the reporting date that

have not yet been specifically identified. The risks inherent in the portfolio that are considered in determining unidentified probable losses are those

proven to exist by past experience and include: country systemic risk; the risk of correlation or contagion of losses between markets; uninsured and

uninsurable risks; nonperformance under guarantees and support agreements; and opacity of, or misrepresentation in, financial statements. There

were no changes, during the periods presented herein, to IFC’s accounting policies and methodologies used to estimate its reserve against loan

losses.

For purposes of providing certain disclosures about IFC’s entire reserve against losses on loans, IFC considers its entire loan portfolio to comprise

one portfolio segment. A portfolio segment is the level at which the method for estimating the reserve against losses on loans is developed and

documented.

Loans are written-off when IFC has exhausted all possible means of recovery, by reducing the reserve against losses on loans. Such reductions in

the reserve are partially offset by recoveries, if any, associated with previously written-off loans.

Equity investments – IFC invests primarily for developmental impact; IFC does not seek to take operational, controlling, or strategic equity positions

within its investees. Equity investments are acquired through direct ownership of equity instruments of investees, as a limited partner in LLPs and

LLCs, and/or as an investor in private equity funds.

Revenue recognition on equity investments – Equity investments, which are listed in markets that provide readily determinable fair values, are

accounted for as available-for-sale securities at fair value with unrealized gains and losses reported in other comprehensive income in accordance

with ASC 320. As noted above under “Fair Value Option and Fair Value Measurements”, direct equity investments and investments in LLPs and LLCs

that maintain separate ownership accounts in which IFC has significant influence, direct equity investments representing 20 percent or more ownership

but in which IFC does not have significant influence and all new equity interests in funds are accounted for at fair value under the Fair Value Option.

Direct equity investments in which IFC does not have significant influence and which are not listed in markets that provide readily determinable fair

values are carried at cost, less impairment. Notwithstanding the foregoing, equity securities held by consolidated subsidiaries that are investment

companies are accounted for at fair value, with unrealized gains and losses reported in earnings.

IFC’s investments in certain private equity funds in which IFC is deemed to have a controlling financial interest, are fully consolidated by IFC, as the

presumption of control by the fund manager or the general partner has been overcome. Certain equity investments, for which recovery of invested

capital is uncertain, are accounted for under the cost recovery method, such that receipts are first applied to recovery of invested capital and then to

income from equity investments. The cost recovery method is applied to IFC's investments in its oil and gas unincorporated joint ventures (UJVs).

IFC’s share of conditional asset retirement obligations related to investments in UJVs are recorded when the fair value of the obligations can be

reasonably estimated. The obligations are capitalized and systematically amortized over the estimated economic useful lives.

Unrealized gains and losses on equity investments accounted for at fair value under the Fair Value Option are reported in income from equity

investments and associated derivatives on the condensed consolidated income statement. Unrealized gains and losses on equity investments listed

in markets that provide readily determinable fair values which are accounted for as available-for-sale are reported in other comprehensive income.

Realized gains on the sale or redemption of equity investments are measured against the average cost of the investments sold and are generally

recorded as income from equity investments and associated derivatives when received. Capital losses are recognized when incurred.

Dividends on listed equity investments are recorded on the ex-dividend date, and dividends on unlisted equity investments are recorded upon receipt

of notice of declaration. Realized gains on listed equity investments are recorded upon trade date, and realized gains on unlisted equity investments

are recorded upon incurring the obligation to deliver the applicable shares. Losses are recognized when incurred.

IFC enters into put and call option and warrant agreements in connection with certain equity investments; these are accounted for in accordance with

ASC 815 to the extent they meet the definition of a derivative.

Gains and losses on debt conversions and exchanges of equity interests – Loan and debt security conversions to equity interests are based

on the fair value of the equity interests received. Transfers of equity interests in exchange for equity interests in other entities and other non-cash

transactions are generally accounted for based on the fair value of the asset relinquished unless the fair value of the asset received is more clearly

evident in which case the accounting is based on the fair value of the asset received. The difference between the fair value of the asset received

and the recorded amount of the asset relinquished is recorded as a gain or loss in the income statement.

Impairment of equity investments – Equity investments accounted for at cost, less impairment and available-for-sale are assessed for impairment

each quarter. When impairment is identified, it is generally deemed to be other-than-temporary, and the equity investment is written down to the

impaired value, which becomes the new cost basis in the equity investment. Such other-than-temporary impairments are recognized in net income.

Subsequent increases in the fair value of available-for-sale equity investments are included in other comprehensive income, while subsequent

decreases in fair value, if not other-than-temporary impairment, also are included in other comprehensive income.

Debt securities – Debt securities in the investment portfolio are classified as available-for-sale and carried at fair value on the condensed consolidated

balance sheet with unrealized gains and losses included in accumulated other comprehensive income until realized. Realized gains on sales of debt

securities and interest on debt securities is included in income from debt securities and realized gains and losses on debt securities and associated

derivatives on the condensed consolidated income statement.

Certain debt securities are carried at fair value in accordance with the Fair Value Option as discussed above. Unrealized gains and losses on debt

securities accounted for at fair value under the Fair Value Option are reported in net unrealized gains and losses on non-trading financial instruments

accounted for at fair value on the condensed consolidated income statement.

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STATEMENTS (UNAUDITED)

IFC invests in certain debt securities with conversion features; these features are accounted for in accordance with ASC 815 to the extent they meet

the definition of a derivative.

Impairment of debt securities – In determining whether an unrealized loss on debt securities is other-than-temporary, IFC considers all relevant

information including the length of time and the extent to which fair value has been less than amortized cost, whether IFC intends to sell the debt

security or whether it is more likely than not that IFC will be required to sell the debt security, the payment structure of the obligation and the ability of

the issuer to make scheduled interest or principal payments, any changes to the ratings of a security, and relevant adverse conditions specifically

related to the security, an industry or geographic sector.

Debt securities in the investment portfolio are assessed for impairment each quarter. When impairment is identified, the entire impairment is

recognized in net income if (1) IFC intends to sell the security, or (2) it is more likely than not that IFC will be required to sell the security before

recovery. However, if IFC does not intend to sell the security and it is not more likely than not that IFC will be required to sell the security but the

security has a credit loss, the impairment charge will be separated into the credit loss component, which is recognized in net income, and the remainder

which is recorded in other comprehensive income. The impaired value becomes the new amortized cost basis of the debt security. Subsequent fair

value increases and decreases in the fair value of debt securities, if not an additional other-than-temporary impairment, are included in other

comprehensive income.

The difference between the new amortized cost basis of debt securities for which an other-than-temporary impairment has been recognized in net

income and the cash flows expected to be collected is accreted to interest income using the effective yield method. Significant subsequent increases

in the expected or actual cash flows previously expected are recognized as a prospective adjustment of the yield.

Guarantees – IFC extends financial guarantee facilities to its clients to provide credit enhancement for their debt securities and trade obligations. As

part of these financial guarantee facilities, IFC offers partial credit guarantees to clients covering, on a risk-sharing basis, client obligations on bonds

or loans. Under the terms of IFC's guarantees, IFC agrees to assume responsibility for the client’s financial obligations in the event of default by the

client (i.e., failure to pay when payment is due). Guarantees are regarded as issued when IFC commits to the guarantee. Guarantees are regarded

as outstanding when the underlying financial obligation of the client is incurred, and this date is considered to be the “inception” of the guarantee.

Guarantees are regarded as called when IFC’s obligation under the guarantee has been invoked. There are two liabilities associated with the

guarantees: (i) the stand-ready obligation to perform and (ii) the contingent liability. The fair value of the stand-ready obligation to perform is recognized

at the inception of the guarantee unless a contingent liability exists at that time or is expected to exist in the near term. The contingent liability associated

with the financial guarantee is recognized when it is probable the guarantee will be called and when the amount of guarantee called can be reasonably

estimated. When the guarantees are called, the amount disbursed is recorded as a new loan, and specific reserves against losses are established,

based on the estimated probable loss. Guarantee fees are recorded in income as the stand-ready obligation to perform is fulfilled. Commitment fees

on guarantees are recorded as income on an accrual basis. All liabilities associated with guarantees are included in payables and other liabilities, and

the receivables are included in other assets on the consolidated balance sheet.

Designations of retained earnings – IFC establishes funding mechanisms for specific Board approved purposes through designations of retained

earnings. Designations of retained earnings for grants to IDA are recorded as a transfer from undesignated retained earnings to designated retained

earnings when the designation is approved by the Board of Governors. All other designations are recorded as a transfer from undesignated retained

earnings to designated retained earnings when the designation is noted with approval by the Board of Directors. Total designations of retained earnings

are determined based on IFC’s annual income before expenditures against designated retained earnings and net unrealized gains and losses on non-

trading financial instruments accounted for at fair value in excess of $150 million, and contemplating the financial capacity and strategic priorities of

IFC.

Expenditures resulting from such designations are recorded as expenses in IFC’s condensed consolidated income statement in the year in which they

are incurred, also having the effect of reducing the respective designated retained earnings for such purposes. Expenditures are deemed to have

been incurred when IFC has ceded control of the funds to the recipient. If the recipient is deemed to be controlled by IFC, the expenditure is deemed

to have been incurred only when the recipient disburses the funds to a non-related party. On occasion, recipients who are deemed to be controlled

by IFC make investments. In such cases, IFC includes those assets on its condensed consolidated balance sheet until the recipient disposes of or

transfers the asset or IFC is deemed to no longer be in control of the recipient. These investments have had no material impact on IFC’s financial

position, results of operations, or cash flows. Investments resulting from such designations are recorded on IFC’s condensed consolidated balance

sheet in the year in which they occur, also having the effect of reducing the respective designated retained earnings for such purposes.

Liquid asset portfolio – The liquid asset portfolio, as defined by IFC, consists of: time deposits and securities; related derivative instruments;

securities purchased under resale agreements, securities sold under repurchase agreements and payable for cash collateral received; receivables

from sales of securities and payables for purchases of securities; and related accrued income and charges. IFC’s liquid funds are invested in

government, agency and government-sponsored agency obligations, time deposits and asset-backed, including mortgage-backed, securities.

Government and agency obligations include positions in high quality fixed rate bonds, notes, bills, and other obligations issued or unconditionally

guaranteed by governments of countries or other official entities including government agencies and instrumentalities or by multilateral organizations.

Asset-backed and mortgage-backed securities include agency and non-agency residential mortgage-backed securities, commercial mortgage-backed

securities, consumer, auto and student loan-backed securities, commercial real estate collateralized debt obligations and collateralized loan

obligations.

Securities and related derivative instruments within IFC’s liquid asset portfolio are classified as trading and are carried at fair value with any changes

in fair value reported in income from liquid asset trading activities. Interest on securities and amortization of premiums and accretion of discounts are

also reported in income from liquid asset trading activities. Gains and losses realized on the sale of trading securities are computed on a specific

security basis.

IFC classifies cash and due from banks and time deposits (collectively, cash and cash equivalents) as cash and as cash equivalents in the consolidated

statement of cash flows because they are generally readily convertible to known amounts of cash within 90 days of acquisition generally when the

original maturities for such instruments are under 90 days or in some cases are under 180 days.

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STATEMENTS (UNAUDITED)

Repurchase, resale and securities lending agreements – Repurchase agreements are contracts under which a party sells securities and

simultaneously agrees to repurchase the same securities at a specified future date at a fixed price. Resale agreements are contracts under which a

party purchases securities and simultaneously agrees to resell the same securities at a specified future date at a fixed price. Securities lending

agreements are similar to repurchase agreements except that the securities loaned are securities that IFC has received as collateral under unrelated

agreements and allowed by contract to rehypothecate. Amounts due under securities lending agreements are included in securities sold under

repurchase agreements and payable for cash collateral received on the consolidated balance sheet.

It is IFC’s policy to take possession of securities purchased under resale agreements, which are primarily liquid government securities. The market

value of these securities is monitored and, within parameters defined in the agreements, additional collateral is obtained when their value declines.

IFC also monitors its exposure with respect to securities sold under repurchase agreements and, in accordance with the terms of the agreements,

requests the return of excess securities held by the counterparty when their value increases.

Repurchase, resale and securities lending agreements are accounted for as collateralized financing transactions and recorded at the amount at which

the securities were acquired or sold plus accrued interest.

Borrowings – To diversify its access to funding, and reduce its borrowing costs, IFC borrows in a variety of currencies and uses a number of borrowing

structures, including foreign exchange rate-linked, inverse floating rate and zero coupon notes. In managing the currency exposure inherent in

borrowing in a variety of currencies, generally, IFC either simultaneously converts such borrowings into variable rate US dollar borrowings through

the use of currency and interest rate swap transactions or utilizes liquid asset portfolio or debt investments denominated in the same currency to

economically hedge changes in the fair value of certain borrowings. Under certain outstanding borrowing agreements, IFC is not permitted to mortgage

or allow a lien to be placed on its assets (other than purchase money security interests) without extending equivalent security to the holders of such

borrowings.

Substantially all borrowings are carried at fair value under the Fair Value Option with changes in fair value reported in net unrealized gains and losses

on non-trading financial instruments accounted for at fair value in the condensed consolidated income statement.

Interest on borrowings and amortization of premiums and accretion of discounts are reported in charges on borrowings.

Risk management and use of derivative instruments – IFC enters into transactions in various derivative instruments primarily for financial risk

management purposes in connection with its principal business activities, including lending, investing in debt securities and equity investments, client

risk management, borrowing, liquid asset portfolio management and asset and liability management. There are no derivatives designated as

accounting hedges.

All derivative instruments are recorded on the condensed consolidated balance sheet at fair value as derivative assets or derivative liabilities. Where

they are not clearly and closely related to the host contract, certain derivative instruments embedded in loans, debt securities and equity investments

are bifurcated from the host contract and recorded at fair value as derivative assets or liabilities unless the hybrid instrument is accounted for at fair

value with any changes in fair value reported in income. The fair value at inception of such embedded derivatives is excluded from the carrying amount

of the host contracts on the consolidated balance sheet. Changes in fair values of derivative instruments used in the liquid asset portfolio are recorded

in income from liquid asset trading activities. Changes in fair values of derivative instruments other than those in the liquid asset portfolio and those

associated with equity investments are recorded in net unrealized gains and losses on non-trading financial instruments accounted for at fair value.

The risk management policy for each of IFC’s principal business activities and the accounting policies particular to them are described below.

Lending activities IFC’s policy is to closely match the currency, interest rate basis, and maturity of its loans and borrowings. Derivative instruments

are used to convert the cash flows from fixed rate US dollar or non-US dollar loans into variable rate US dollars. IFC has elected not to designate any

hedging relationships for any of its lending-related derivatives.

Client risk management activities IFC enters into derivatives transactions with its clients to help them hedge their own currency, interest rate, or

commodity risk, which, in turn, improves the overall quality of IFC’s loan portfolio. To hedge the market risks that arise from these transactions with

clients, IFC enters into offsetting derivative transactions with matching terms with authorized market counterparties. Changes in fair value of all

derivatives associated with these activities are reported in net income in net unrealized gains and losses on non-trading financial instruments

accounted for at fair value.

Borrowing activities IFC issues debt securities in various capital markets with the objectives of minimizing its borrowing costs, diversifying funding

sources, and developing member countries’ capital markets, sometimes using complex structures. These structures include borrowings payable in

multiple currencies, or borrowings with principal and/or interest determined by reference to a specified index such as a stock market index, a reference

interest rate, a commodity index, or one or more foreign exchange rates. IFC generally uses derivative instruments with matching terms, primarily

currency and interest rate swaps, to convert certain of such borrowings into variable rate US dollar obligations, consistent with IFC’s matched funding

policy. IFC elected to carry at fair value, under the Fair Value Option, all market borrowings for which a derivative instrument, liquid asset portfolio

investment or debt investment is used to create an economic hedge. Changes in the fair value of such borrowings and the associated derivatives are

reported in net unrealized gains and losses on non-trading financial instruments accounted for at fair value in the condensed consolidated income

statement.

Liquid asset portfolio management activities IFC manages the interest rate, currency and other market risks associated with certain of the time

deposits and securities in its liquid asset portfolio by entering into derivative transactions to convert the cash flows from those instruments into variable

rate US dollars or by utilizing market borrowings denominated in the same currency to economically hedge changes in the fair value of certain liquid

asset portfolio investments. The derivative instruments used include short-term, over-the-counter foreign exchange forwards (covered forwards),

interest rate and currency swaps, and exchange-traded interest rate futures and options. As the entire liquid asset portfolio is classified as a trading

portfolio, all securities (including derivatives) are carried at fair value with changes in fair value reported in income from liquid asset trading activities.

No derivatives in the liquid asset portfolio have been designated as hedging instruments under ASC 815.

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STATEMENTS (UNAUDITED)

Asset and liability management In addition to the risk managed in the context of its business activities detailed above, IFC faces residual market risk

in its overall asset and liability management. Residual currency risk is managed by monitoring the aggregate position in each lending currency and

reducing the net excess asset or liability position through sales or purchases of currency. Interest rate risk arising from mismatches due to write-

downs, prepayments and re-schedulings, and residual reset date mismatches is monitored by measuring the sensitivity of the present value of assets

and liabilities in each currency to each basis point change in interest rates.

IFC monitors the credit risk associated with these activities by careful assessment and monitoring of prospective and actual clients and counterparties.

In respect of liquid assets and derivatives transactions, credit risk is managed by establishing exposure limits based on the credit rating and size of

the individual counterparty. In addition, IFC has entered into master agreements with its derivative market counterparties governing derivative

transactions that contain close-out and netting provisions and collateral arrangements. Under these agreements, if the credit exposure to one of the

parties to the agreement, on a mark-to-market basis, exceeds a specified level, that party must post collateral to cover the excess, generally in the

form of liquid government securities or cash. IFC does not offset the fair value amounts of derivatives and obligations to return, or rights to receive,

cash collateral associated with these master-netting agreements.

Loan participations – IFC mobilizes funds from commercial banks and other financial institutions (Participants) by facilitating loan participations,

without recourse. These loan participations are administered and serviced by IFC on behalf of the Participants. The disbursed and outstanding

balances of loan participations that meet the applicable accounting criteria are accounted for as sales and are not included in IFC’s consolidated

balance sheet. All other loan participations are accounted for as secured borrowings and are included in loans on IFC’s consolidated balance sheet,

with the related secured borrowings included in payables and other liabilities on IFC’s consolidated balance sheet.

Pension and other postretirement benefits – IBRD has 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 its staff members as well as the staff of IFC and of MIGA.

The SRP provides regular pension benefits and includes a cash balance plan. The RSBP provides certain health and life insurance benefits to eligible

retirees. The PEBP provides pension benefits administered outside the SRP. All costs associated with these plans are allocated between IBRD, IFC,

and MIGA based upon their employees’ respective participation in the plans. In addition, IFC and MIGA reimburse IBRD for their share of any

contributions made to these plans by IBRD.

The net periodic pension and other postretirement benefit income or expense allocated to IFC is included in income or expense from pension and

other postretirement benefit plans in the condensed consolidated income statement. IFC includes a receivable from IBRD in receivables and other

assets, representing prepaid pension and other postretirement benefit costs.

Recently adopted accounting standards – In June 2013, the FASB issued ASU 2013-08, Investment Companies (Topic 946): Amendments to the

Scope, Measurement and Disclosure Requirements (ASU 2013-08). Among other things, ASU 2013-08 amends the criteria for an entity to qualify as

an investment company under ASC Topic 946, introduces new disclosure requirements applicable to investment companies, and amends the

measurement criteria for certain investments by an investment company in another investment company. ASU 2013-08 is applicable for annual

reporting periods and interim periods within those annual periods, beginning after December 15, 2013 (which is the year ended June 30, 2015 for

IFC). IFC adopted ASU 2013-08 on July 1, 2014 with no material impact on IFC's financial position, results of operations or cash flows.

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings,

and Disclosures (ASU 2014-11). ASU 2014-11 requires secured borrowing accounting for repurchase-to-maturity transactions, eliminates current

accounting guidance on linking repurchase financing transactions and expands disclosure requirements related to certain transfers of financial assets

that are accounted for as sales and repurchase agreements, securities lending transactions and repurchase to maturity transactions accounted for as

secured borrowings. The accounting changes and expanded disclosure requirements for certain transfers accounted as sales are applicable for the

first interim or annual reporting period beginning after December 15, 2014 (which was the interim period ending March 31, 2015 for IFC). The

disclosure requirements for certain transactions accounted for as secured borrowings are applicable for interim periods beginning after March 15,

2015 (which was the quarter ended June 30, 2015 for IFC) and are reflected in Note P. IFC adopted ASU 2014-11’s accounting changes on January

1, 2015 with no material impact on IFC’s financial position, results of operations or cash flows.

In May 2015, the FASB issued ASU No. 2015-07, Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its

Equivalent) (ASU 2015-07). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy investments whose fair values are

measured at NAV (or its equivalent) under the practical expedient in the ASC, requires disclosure by reporting entities of the amount of investments

measured at NAV (or its equivalent) under the practical expedient, and limits the disclosure requirements all investments eligible to be measured at

NAV under the practical expedient to only those to which the practical expedient is applied. ASU 2015-07 is effective for fiscal years, and interim

periods within those fiscal years, beginning after December 15, 2015. As permitted, IFC early adopted ASU 2015-07 effective June 30, 2015 as

reflected in Note K.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (ASU 2015-02). ASU 2015-02 amends ASC Topic

810, Consolidation, by modifying the evaluation of whether limited partnerships and similar entities are VIEs; eliminating the presumption that a general

partner should consolidate a limited partnership; modifying the consolidation assessment of reporting entities that are involved with VIEs, particularly

those that have fee arrangements (with the VIE) and related party relationships; providing a scope exception from Topic 810 for reporting entities with

interests in certain money market funds. ASU 2015-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2015 (which is the year ending June 30, 2017 for IFC). As permitted, IFC early adopted ASU 2015-02 on July 1, 2015, as reflected in

Note M, with no material impact on IFC’s financial position, results of operations or cash flows.

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STATEMENTS (UNAUDITED)

Accounting and financial reporting developments – In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act)

became law. The Act seeks to reform the U.S. financial regulatory system by introducing new regulators and extending regulation over new markets,

entities, and activities. The implementation of the Act is dependent on the development of various rules to clarify and interpret its requirements.

Pending the development of these rules, no impact on IFC has been determined as of December 31, 2015. IFC continues to evaluate the potential

future implications of the Act.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09 replaces most existing revenue

recognition guidance by establishing a single recognition model for revenue arising from contracts with customers to deliver goods and services and

requires additional disclosure regarding those revenues - it does not change current accounting guidance for derivative contracts, investments in and

transfers of financial instruments or guarantees. ASU 2014-09 is currently applicable for annual reporting periods and interim periods within those

annual periods, beginning after December 15, 2017 (which is the year ending June 30, 2019 for IFC). IFC is currently evaluating the impact of ASU

2014-09.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Instruments - Going Concern (ASU 2014-15). ASU 2014-15 requires

reporting entities to perform interim and annual assessments of their ability to continue as a going concern within one year of the date of issuance of

the entity’s financial statements (or within one year of the date on which the financial statements are available to be issued). A reporting entity will be

required to make certain disclosures if there is substantial doubt about the entity’s ability to continue to as a going concern. ASU 2014-15 is effective

for annual periods ending after December 15, 2016 (which is the annual period ending June 30, 2017 for IFC) and for interim periods thereafter.

In November 2014, the FASB issued ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a

Share Is More Akin to Debt or to Equity (ASU 2014-16). ASU 2014-16 requires, for purposes of evaluating embedded features for bifurcation under

ASU 815, the determination of the nature of a host contract issued in share form to be based on the economic characteristics and risks of the entire

hybrid instrument, including the embedded feature being evaluated. Further, the ASU stipulates that the existence or omission of any single term or

feature does not necessarily determine the economic characteristics and risks of the host. ASU 2014-16 is effective for fiscal years, and interim periods

within those fiscal years, beginning after December 15, 2015 (which is the year ending June 30, 2017 for IFC). As permitted, IFC early adopted ASU

2014-16 on January 1, 2016 resulting in the reclassification of certain debt securities, equity investments, and derivative instruments with no material

impact of IFC’s financial position, results of operations or cash flows.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities (ASU 2016-01). ASU 2016-01

requires all investments in equity securities to be accounted for at fair value through net income. However, entities may elect to account for equity

investments that do not have readily determinable fair values at cost less impairment, as adjusted for observable price changes in orderly transactions

for the identical and similar instrument of the issuer. ASU 2016-01 will require separate presentation in other comprehensive income (OCI) the portion

of the total change in fair value resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair

value under the FVO. For public business entities, ASU 2016-01 is effective for fiscal years, and interim periods within those fiscal years, beginning

after December 15, 2017, (which is the year ending June 30, 2019 for IFC). ASC 2016-01’s requirements are to be adopted by means of a cumulative-

effect adjustment of the balance sheet as of the beginning of the fiscal year of adoption. Entities may adopt ASU 2016-01’s guidance relative to OCI

recognition of changes in fair value due to changes in the instrument-specific credit risk of liabilities measured under the FVO for financial statements

of fiscal years or interim periods that have not yet been issued, as of the beginning of the fiscal year of adoption – otherwise early adoption is not

permitted. IFC is currently evaluating the impact of ASU 2016-01.

In addition, during the six months ended December 31, 2015, the FASB issued and/or approved various other ASUs. IFC analyzed and implemented

the new guidance, as appropriate, with no material impact on the financial position, results of operations or cash flows of IFC.

Page 33

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE B – SCOPE OF CONSOLIDATION

IFC Asset Management Company, LLC (AMC) and AMC Funds

IFC, through its wholly owned subsidiary, AMC, mobilizes capital from outside IFC’s traditional investor pool and manages third-party capital. AMC

is consolidated into IFC’s financial statements. At December 31, 2015, IFC has provided $2 million of capital to AMC ($2 million - June 30, 2015).

As a result of the consolidation of AMC, amounts included in IFC’s condensed consolidated balance sheet at December 31, 2015 and June 30, 2015

comprise (US$ millions):

December 31,

2015

June 30,

2015

Cash, receivables and other assets

$

49

$

51

Equity investments

*

Payables and other liabilities

1

3

* less than $0.5 million.

As a result of the consolidation of AMC, amounts included in IFC’s condensed consolidated income statement for the three and six months ended

December 31, 2015 and 2014 comprise (US$ millions):

Three months ended

Six months ended

December 31,

2015

2014

2015

2014

Other income

$

16

$

15

$

33

$

29

Other expenses

8

5

12

9

At December 31, 2015, AMC managed eleven funds (collectively referred to as the AMC Funds). All AMC Funds are investment companies and

are required to report their investment assets at fair value through net income. IFC’s ownership interests in these AMC Funds are shown in the

following table:

AMC Funds

IFC’s ownership interest

IFC Capitalization (Equity) Fund, L.P.

61%

**

IFC Capitalization (Subordinated Debt) Fund, L.P.

13%

IFC African, Latin American and Caribbean Fund, LP

20%

Africa Capitalization Fund, Ltd.

-

IFC Russian Bank Capitalization Fund, LP

45%

IFC Catalyst Funds

18%

***

IFC Global Infrastructure Fund, LP

17%

China-Mexico Fund, LP

-

IFC Financial Institutions Growth Fund, LP

37%

IFC Global Emerging Markets Fund of Funds

20%

****

IFC Middle East and North Africa Fund, LP

48%

** By virtue of certain rights granted to non-IFC limited partner interests, IFC does not control or consolidate this fund.

***

The ownership interest of 18% reflects IFC’s ownership interest taking into consideration the overall commitments for the IFC Catalyst Funds, which is comprised of

IFC Catalyst Fund, LP, IFC Catalyst Fund (UK), LP and IFC Catalyst Fund (Japan), LP (collectively, IFC Catalyst Funds). IFC does not have an ownership interest in

either the IFC Catalyst Fund (UK), LP or the IFC Catalyst Fund (Japan), LP.

**** The ownership interest of 20% reflects IFC’s ownership interest taking into consideration the current committed amounts for the IFC Global Emerging Markets Fund

of Funds, which are comprised of IFC Global Emerging Markets Fund of Funds, LP and IFC Global Emerging Markets Fund of Funds, (Japan Parallel) LP. IFC is the

sole limited partner of IFC Global Emerging Markets Fund of Funds, LP. IFC does not have an ownership interest in the IFC Global Emerging Markets Fund of Funds,

(Japan Parallel) LP.

IFC’s investments in AMC Funds, except for the IFC Russian Bank Capitalization Fund, LP (RBCF) created in June 2012 and IFC Global Emerging

Markets Fund of Funds, LP created in June 2015, are accounted for at fair value under the Fair Value Option. RBCF and IFC Global Emerging

Markets Fund of Funds, LP are both VIEs and consolidated by IFC because IFC is deemed their primary beneficiary.

As a result of consolidating RBCF, IFC’s condensed consolidated balance sheet at December 31, 2015 includes $34 million of equity investments

($41 million - June 30, 2015), and non-controlling interests of $19 million ($22 million - June 30, 2015). These non-controlling interests meet the

FASB's definition of mandatorily redeemable financial instruments because the terms of the underlying partnership agreement provide for a

termination date at which time its remaining assets are to be sold, its liabilities settled and the remaining net proceeds distributed to the non-

controlling interest holders and IFC. RBCF's termination date is 2021 with a possible extension to 2023. As RBCF is considered an investment

company, its investment securities (equity investments) are measured at fair value in IFC's condensed consolidated balance sheet; therefore, the

settlement value or estimate of cash that would be due and payable to settle these non-controlling interests, assuming an orderly liquidation of

RBCF on December 31, 2015, approximates the $19 million of non-controlling interests reflected on IFC's condensed consolidated balance sheet

at December 31, 2015.

IFC is the sole limited partner of IFC Global Emerging Markets Fund of Funds, LP and hence there are no non-controlling interests in this entity. As

of December 31, 2015, IFC Global Emerging Markets Fund of Funds, LP had no significant investment.

Page 34

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

Other Consolidated entities

In August 2015, IFC created a special purpose vehicle, IFC Sukuk Company, to facilitate a $100 million Sukuk under IFC’s borrowings program.

The Sukuk is scheduled to mature in September 2020. IFC Sukuk Company is a VIE and has been consolidated into these Condensed Consolidated

Financial Statements because IFC is the VIE’s primary beneficiary. The collective impact of this and other entities consolidated into these

Condensed Consolidated Financial Statements under the VIE or voting interest model is insignificant.

NOTE C – LIQUID ASSET PORTFOLIO

Income from liquid asset trading activities

Income from liquid asset trading activities for the three and six months ended December 31, 2015 and 2014 comprises (US$ millions):

Three months ended

Six months ended

December 31,

2015

2014

2015

2014

Interest income, net

$

135

$

156

$

275

$

307

Net gains and losses on trading activities (realized and unrealized)

(30)

(49)

(162)

(103)

Total income from liquid asset trading activities

$

105

$

107

$

113

$

204

Net gains and losses on trading activities comprise net losses on asset-backed and mortgage-backed securities of $28 million and $88 million

for the three and six months ended December 31, 2015 ($18 million net losses and $23 million net losses - three and six months ended

December 31, 2014) and net losses on other trading securities of $2 million and $74 million for the three and six months ended December 31,

2015 ($31 million net losses and $80 million net losses - three and six months ended December 31, 2014).

NOTE D – INVESTMENTS

The carrying amount of investments at December 31, 2015 and June 30, 2015 comprises (US$ millions):

December 31, 2015

June 30, 2015

Loans

Loans at amortized cost

$

22,393

$

22,295

Less: Reserve against losses on loans

(1,901)

(1,743)

Loans at amortized cost less reserve against losses

20,492

20,552

Loans accounted for at fair value under the Fair Value Option

(outstanding principal balance $891 at December 31, 2015, $802 – June 30, 2015)

812

784

Total loans

21,304

21,336

Equity investments

Equity investments at cost less impairment

3,259

3,250

Equity investments accounted for at fair value as available-for-sale

(cost $2,466 at December 31, 2015, $2,505 – June 30, 2015)

3,674

4,557

Equity investments accounted for at fair value

(cost $5,106 at December 31, 2015, $4,800 – June 30, 2015)

5,761

5,696

Total equity investments

12,694

13,503

Debt securities

Debt securities accounted for at fair value as available-for-sale

(amortized cost $2,421 at December 31, 2015, $2,329 - June 30, 2015)

2,301

2,317

Debt securities accounted for at fair value under the Fair Value Option

(amortized cost $431 at December 31, 2015, $408 – June 30, 2015)

436

422

Total debt securities

2,737

2,739

Total carrying amount of investments

$

36,735

$

37,578

Page 35

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES

Loans

Income from Loans and guarantees, including realized gains and losses on loans and associated derivatives for the three and six months ended

December 31, 2015 and 2014 comprise the following (US$ millions):

Three months ended

Six months ended

December 31,

2015

2014

2015

2014

Interest income

$

240

$

204

$

496

$

493

Commitment fees

9

11

17

21

Other financial fees

16

17

30

41

Realized gains on loans, guarantees and associated derivatives

2

5

2

16

Income from loans and guarantees, including realized gains and

losses on loans and associated derivatives

$

267

$

237

$

545

$

571

Reserve against losses on loans and provision for losses on loans

Changes in the reserve against losses on loans for the three and six months ended December 31, 2015 and 2014, and for the years ended June 30,

2015, June 30, 2014, as well as the related recorded investment in loans, evaluated for impairment individually (specific reserves) and on a pool basis

(portfolio reserves) respectively, are summarized below (US$ millions):

Three months ended December 31, 2015

Six months ended December 31, 2015

Specific

reserves

Portfolio

reserves

Total

reserves

Specific

reserves

Portfolio

reserves

Total

reserves

Beginning balance

$

1,019

$

778

$

1,797

$

962

$

781

$

1,743

Provision for losses on loans

96

11

107

179

15

194

Write-offs

-

(17)

-

(17)

Recoveries of previously written-off

loans

20

-

20

-

20

Foreign currency transaction

adjustments

(11)

(4)

(15)

(22)

(11)

(33)

Other adjustments*

(8)

-

(8)

(6)

-

(6)

Ending balance

$

1,116

$

785

$

1,901

$

1,116

$

785

$

1,901

Related recorded investment in loans

at December 31, 2015 evaluated for

impairment**

$

22,393

$

20,586

$

22,393

$

22,393

$

20,586

$

22,393

Recorded investment in loans with

specific reserves

$

1,807

$

1,807

Three months ended December 31, 2014

Six months ended December 31, 2014

Specific

reserves

Portfolio

reserves

Total

reserves

Specific

reserves

Portfolio

reserves

Total

reserves

Beginning balance

$

876

$

792

$

1,668

$

838

$

848

$

1,686

Provision for (release of provision for)

losses on loans

26

20

46

83

(22)

61

Write-offs

(5)

-

(5)

-

(5)

Recoveries of previously written-off

loans

-

1

-

1

Foreign currency transaction

adjustments

(14)

(9)

(23)

(28)

(23)

(51)

Other adjustments*

(2)

-

(2)

(8)

-

(8)

Ending balance

$

881

$

803

$

1,684

$

881

$

803

$

1,684

Related recorded investment in loans

at December 31, 2014 evaluated for

impairment**

$

23,419

$

21,742

$

23,419

$

23,419

$

21,742

$

23,419

Recorded investment in loans with

specific reserves

$

1,677

$

1,677

*Other adjustments comprise reserves against interest capitalized as part of a debt restructuring.

**IFC individually evaluates all loans for impairment. Portfolio reserves are established for losses incurred, but not specifically identifiable, on loans for which no specific

reserve is established.

Page 36

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

Year ended June 30, 2015

Year ended June 30, 2014

Specific

reserves

Portfolio

reserves

Total

reserves

Specific

reserves

Portfolio

reserves

Total

reserves

Beginning balance

$

838

$

848

$

1,686

$

741

$

887

$

1,628

Provision for (release of provision for)

losses on loans

199

(30)

169

127

(44)

83

Write-offs

(34)

-

(34)

(44)

-

(44)

Recoveries of previously written-off

loans

4

-

4

1

-

1

Foreign currency transaction

adjustments

(43)

(37)

(80)

1

5

6

Other adjustments*

(2)

-

(2)

12

-

12

Ending balance

$

962

$

781

$

1,743

$

838

$

848

$

1,686

Related recorded investment in loans

at June 30, 2015 and 2014

evaluated for impairment**

$

22,295

$

20,573

$

22,295

$

23,562

$

21,837

$

23,562

Recorded investment in loans with

specific reserves

$

1,722

$

1,725

*Other adjustments comprise reserves against interest capitalized as part of a debt restructuring.

**IFC individually evaluates all loans for impairment. Portfolio reserves are established for losses incurred, but not specifically identifiable, on loans for which no specific

reserve is established.

Reserve for losses on guarantees and other receivables and provision for losses on guarantees and other receivables

Changes in the reserve against losses on guarantees for the three and six months ended December 31, 2015 and 2014, and for the years ended

June 30, 2015 and 2014, are summarized below (US$ millions):

Three months ended

Six months ended

Year ended

December 31,

June 30,

2015

2014

2015

2014

2015

2014

Beginning balance

$

18

$

20

$

20

$

22

$

22

$

17

Provision for (release of provision for)

losses on guarantees

2

(5)

***

(7)

(2)

5

Ending balance

$

20

$

15

$

20

$

15

$

20

$

22

*** less than $0.5 million.

Changes in the reserve against losses on other receivables for the three and six months ended December 31, 2015 and 2014, and for the years

ended June 30, 2015 and 2014, are summarized below (US$ millions):

Three months ended

Six months ended

Year ended

December 31,

June 30,

2015

2014

2015

2014

2015

2014

Beginning balance

$

10

$

9

$

7

$

3

$

3

$

3

Provision for (release of provision for)

losses on other receivables

(2)

1

4

-

Ending balance

$

8

$

7

$

8

$

7

$

7

$

3

Impaired loans

The average recorded investment and the recorded investment in loans at amortized cost that are impaired at December 31, 2015 and June 30, 2015

are as follows (US$ millions):

December 31, 2015

June 30, 2015

Average recorded investment in loans at amortized cost that are impaired

$

1,818

$

1,771

Recorded investment in loans at amortized cost that are impaired

1,807

1,722

Page 37

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

Loans at amortized cost that are impaired with specific reserves are summarized by industry sector and geographic region as follows (US$ millions):

December 31, 2015

Recorded

investment

Unpaid

principal

balance

reserve

Average

recorded

investment

Interest

income

recognized

Manufacturing, agribusiness and services

Asia

$

142

$

144

$

87

$

142

$

-

Europe, Middle East and North Africa

653

672

423

647

4

Sub-Saharan Africa, Latin America and Caribbean

233

255

149

239

1

Other

15

14

15

-

Total manufacturing, agribusiness and services

1,043

1,086

673

1,043

5

Financial markets

Asia

-

2

-

Europe, Middle East and North Africa

12

8

14

-

Sub-Saharan Africa, Latin America and Caribbean

30

55

28

34

-

Other

1

-

Total financial markets

43

70

37

49

-

Infrastructure and natural resources

Asia

166

86

166

(1)

Europe, Middle East and North Africa

295

193

296

3

Sub-Saharan Africa, Latin America and Caribbean

260

127

264

2

Total infrastructure and natural resources

721

406

726

4

Total

$

1,807

$

1,877

$

1,116

$

1,818

$

9

All impaired loans at December 31, 2015 had specific reserves.

Page 38

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

June 30, 2015

Recorded

investment

Unpaid

principal

balance

reserve

Average

recorded

investment

Interest

income

recognized

Manufacturing, agribusiness and services

Asia

$

126

$

128

$

82

$

126

$

1

Europe, Middle East and North Africa

673

676

408

684

(10)

Sub-Saharan Africa, Latin America and Caribbean

251

299

149

278

6

Other

15

14

15

-

Total manufacturing, agribusiness and services

1,065

1,118

653

1,103

(3)

Financial markets

Asia

-

2

-

Europe, Middle East and North Africa

15

9

16

1

Sub-Saharan Africa, Latin America and Caribbean

37

63

36

42

3

Other

1

-

Total financial markets

53

81

46

59

4

Infrastructure and natural resources

Asia

166

68

171

9

Europe, Middle East and North Africa

160

93

172

3

Sub-Saharan Africa, Latin America and Caribbean

137

79

136

(1)

Total infrastructure and natural resources

463

240

479

11

Telecom, media & technology, and venture investing

Sub-Saharan Africa, Latin America and Caribbean

29

7

29

2

Other

112

16

101

1

Total Telecom, media & technology, and venture investing

141

23

130

3

Total

$

1,722

$

1,803

$

962

$

1,771

$

15

All impaired loans at June 30, 2015 had specific reserves.

Nonaccruing loans

Loans on which the accrual of interest has been discontinued amounted to $1,770 million at December 31, 2015 ($1,534 million – June 30, 2015).

The interest income on such loans for the three and six months ended December 31, 2015 and 2014 is summarized as follows (US$ millions):

Three months ended

Six months ended

December 31,

2015

2014

2015

2014

Interest income not recognized on nonaccruing loans

$

26

$

54

$

65

$

70

Interest income recognized on loans in nonaccrual status

related to current and prior years, on a cash basis

6

5

10

21

Page 39

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

The recorded investment in nonaccruing loans at amortized cost at December 31, 2015 and June 30, 2015 is summarized by industry sector and

geographic region as follow (US$ millions):

December 31, 2015

Manufacturing,

agribusiness

and services

Financial

markets

Infrastructure

and natural

resources

Telecom,

media &

technology,

and venture

investing

Total

recorded

investment in

nonaccruing

loans

Asia

$

136

$

-

$

151

$

-

$

287

Europe, Middle East and North Africa

614

9

290

-

913

Sub-Saharan Africa, Latin America and

Caribbean

254

24

182

16

476

Other

15

1

-

16

Total disbursed loans at amortized

cost

$

1,019

$

34

$

623

$

16

$

1,692

June 30, 2015

Manufacturing,

agribusiness

and services

Financial

markets

Infrastructure

and natural

resources

Telecom,

media &

technology,

and venture

investing

Total

recorded

investment in

nonaccruing

loans

Asia

$

125

$

-

$

122

$

-

$

247

Europe, Middle East and North Africa

597

12

129

-

738

Sub-Saharan Africa, Latin America and

Caribbean

250

30

135

45

460

Other

15

-

15

Total disbursed loans at amortized

cost

$

987

$

42

$

386

$

45

$

1,460

Page 40

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

Past due loans

An age analysis, based on contractual terms, of IFC’s loans at amortized cost by industry sector and geographic region follows (US$ millions):

December 31, 2015

30-59

days

past due

60-89

days

past due

90 days

or greater

past due

Total

past due

Current

Total

loans

Manufacturing, agribusiness and services

Asia

$

-

$

-

$

136

$

136

$

1,409

$

1,545

Europe, Middle East and North Africa

24

-

581

605

2,238

2,843

Sub-Saharan Africa, Latin America and

Caribbean

5

-

229

234

2,294

2,528

Other

-

15

159

174

Total manufacturing, agribusiness and

services

29

-

961

990

6,100

7,090

Financial markets

Asia

154

-

154

1,807

1,961

Europe, Middle East and North Africa

-

4

1,878

1,882

Sub-Saharan Africa, Latin America and

Caribbean

-

24

2,868

2,892

Other

-

622

Total financial markets

154

-

28

182

7,175

7,357

Infrastructure and natural resources

Asia

-

166

1,383

1,549

Europe, Middle East and North Africa

5

-

163

168

1,675

1,843

Sub-Saharan Africa, Latin America and

Caribbean

15

-

41

56

3,767

3,823

Other

-

150

Total infrastructure and natural

resources

20

-

370

390

6,975

7,365

Telecom, media & technology, and venture

investing

Asia

-

220

Europe, Middle East and North Africa

-

168

Sub-Saharan Africa, Latin America and

Caribbean

-

16

191

207

Other

-

132

Total Telecom, media & technology,

and venture investing

-

16

711

727

Total disbursed loans

at amortized cost

$

203

$

-

$

1,375

$

1,578

$

20,961

$

22,539

Unamortized deferred loan origination fees,

net and other

(114)

Disbursed amount allocated to a related

financial instrument reported separately

in other assets or derivative assets

(32)

Recorded investment in loans

at amortized cost

$

22,393

At December 31, 2015, there are no loans 90 days or greater past due still accruing.

Page 41

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

June 30, 2015

30-59

days

past due

60-89

days

past due

90 days

or greater

past due

Total

past due

Current

Total

loans

Manufacturing, agribusiness and services

Asia

$

-

$

-

$

125

$

125

$

1,747

$

1,872

Europe, Middle East and North Africa

6

16

581

603

2,258

2,861

Sub-Saharan Africa, Latin America and

Caribbean

-

15

211

226

2,209

2,435

Other

-

15

156

171

Total manufacturing, agribusiness and

services

6

31

932

969

6,370

7,339

Financial markets

Asia

-

2,089

Europe, Middle East and North Africa

-

5

2,010

2,015

Sub-Saharan Africa, Latin America and

Caribbean

-

30

2,585

2,615

Other

-

501

Total financial markets

-

35

7,185

7,220

Infrastructure and natural resources

Asia

-

122

1,502

1,624

Europe, Middle East and North Africa

-

96

1,648

1,744

Sub-Saharan Africa, Latin America and

Caribbean

-

42

3,557

3,599

Other

-

156

Total infrastructure and natural

resources

-

260

6,863

7,123

Telecom, media & technology, and venture

investing

Asia

-

252

Europe, Middle East and North Africa

-

196

Sub-Saharan Africa, Latin America and

Caribbean

-

16

29

45

152

197

Other

-

123

Total Telecom, media & technology,

and venture investing

-

16

29

45

723

768

Total disbursed loans

at amortized cost

$

6

$

47

$

1,256

$

1,309

$

21,141

$

22,450

Unamortized deferred loan origination fees,

net and other

(119)

Disbursed amount allocated to a related

financial instrument reported separately

in other assets or derivative assets

(36)

Recorded investment in loans

at amortized cost

$

22,295

At June 30, 2015, there are no loans 90 days or greater past due still accruing.

Page 42

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

Loan Credit Quality Indicators

IFC utilizes a rating system to classify loans according to credit worthiness and risk. Each loan is categorized as very good, good, average, watch,

substandard, doubtful or loss.

A description of each category (credit quality indicator), in terms of the attributes of the borrower, the business environment in which the borrower

operates or the loan itself, follows:

Credit quality

indicator

Description

Very good

Excellent debt service capacity; superior management; market leader; very favorable operating environment; may also have strong

collateral and/or guarantee arrangements.

Good

Strong debt service capacity: good liquidity; stable performance, very strong management, high market share; minimal probability

of financial deterioration.

Average

Satisfactory balance sheet ratios, average liquidity; good debt service capacity; good management; average size and market

share.

Watch

Tight liquidity; financial performance below expectations; higher than average leverage ratio; weak management in certain

aspects; uncompetitive products and operations; unfavorable or unstable macroeconomic factors.

Substandard

Poor financial performance; difficulty servicing debt; inadequate net worth and debt service capacity; loan not fully secured: partial

past due amounts of interest and/or principal; well-

defined weaknesses may adversely impact collection but no loss of principal is

expected.

Doubtful

Bad financial performance; serious liquidity and debt service capacity issues: large and increasing past due amounts: partial loss

is very likely.

Loss

Close to or already in bankruptcy; serious regional geopolitical issues/conflicts; default and total loss highly likely.

Page 43

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

A summary of IFC’s loans at amortized cost by credit quality indicator effective December 31, 2015 and June 30, 2015 respectively, as well as by

industry sector and geographic region follows (US$ millions):

December 31, 2015

Very good

Good

Average

Watch

Substandard

Doubtful

Loss

Total

Manufacturing, agribusiness

and services

Asia

$

-

$

386

$

621

$

366

$

49

$

8

$

115

$

1,545

Europe, Middle East and North

Africa

-

410

758

746

309

112

508

2,843

Sub-Saharan Africa, Latin

America and Caribbean

50

231

607

1,179

247

47

167

2,528

Other

-

61

48

50

-

15

-

174

Total manufacturing,

agribusiness and services

50

1,088

2,034

2,341

605

182

790

7,090

Financial markets

Asia

-

929

790

235

7

-

1,961

Europe, Middle East and North

Africa

-

312

1,188

326

44

3

9

1,882

Sub-Saharan Africa, Latin

America and Caribbean

-

775

1,599

463

25

6

24

2,892

Other

-

250

-

371

-

1

-

622

Total financial markets

-

2,266

3,577

1,395

76

10

33

7,357

Infrastructure and natural

resources

Asia

-

237

314

756

76

69

97

1,549

Europe, Middle East and North

Africa

-

100

428

809

255

230

21

1,843

Sub-Saharan Africa, Latin

America and Caribbean

300

105

1,114

1,230

850

164

60

3,823

Other

-

150

-

150

Total infrastructure and

natural resources

300

442

2,006

2,795

1,181

463

178

7,365

Telecom, media & technology,

and venture investing

Asia

-

143

77

-

220

Europe, Middle East and North

Africa

-

58

8

25

77

-

168

Sub-Saharan Africa, Latin

America and Caribbean

-

5

70

107

9

16

-

207

Other

-

132

-

132

Total telecom, media &

technology, and venture

investing

-

206

155

264

86

16

-

727

Total disbursed loans

at amortized cost

$

350

$

4,002

$

7,772

$

6,795

$

1,948

$

671

$

1,001

$

22,539

Unamortized deferred loan

origination

fees, net and other

(114)

Disbursed amount allocated

to a related financial

instrument reported

separately in other assets or

derivative assets

(32)

Recorded investment in

loans at amortized cost

$

22,393

Page 44

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

June 30, 2015

Very good

Good

Average

Watch

Substandard

Doubtful

Loss

Total

Manufacturing, agribusiness

and services

Asia

$

-

$

531

$

601

$

546

$

69

$

9

$

116

$

1,872

Europe, Middle East and North

Africa

-

276

865

779

328

94

519

2,861

Sub-Saharan Africa, Latin

America and Caribbean

60

236

730

978

213

51

167

2,435

Other

-

57

49

50

-

15

-

171

Total manufacturing,

agribusiness and services

60

1,100

2,245

2,353

610

169

802

7,339

Financial markets

Asia

-

1,036

899

148

6

-

2,089

Europe, Middle East and North

Africa

-

455

1,102

350

22

74

12

2,015

Sub-Saharan Africa, Latin

America and Caribbean

-

596

1,613

334

35

7

30

2,615

Other

-

250

-

250

1

-

501

Total financial markets

-

2,337

3,614

1,082

64

81

42

7,220

Infrastructure and natural

resources

Asia

-

298

381

719

54

111

61

1,624

Europe, Middle East and North

Africa

-

118

458

823

293

30

22

1,744

Sub-Saharan Africa, Latin

America and Caribbean

300

154

1,245

1,332

426

115

27

3,599

Other

-

6

150

-

156

Total infrastructure and

natural resources

300

576

2,234

2,874

773

256

110

7,123

Telecom, media & technology,

and venture investing

Asia

-

165

85

2

-

252

Europe, Middle East and North

Africa

-

71

38

87

-

196

Sub-Saharan Africa, Latin

America and Caribbean

-

5

73

70

4

45

-

197

Other

-

123

-

123

Total telecom, media &

technology, and venture

investing

-

241

196

159

127

45

-

768

Total disbursed loans

at amortized cost

$

360

$

4,254

$

8,289

$

6,468

$

1,574

$

551

$

954

$

22,450

Unamortized deferred loan

origination

fees, net and other

(119)

Disbursed amount allocated

to a related financial

instrument reported

separately in other assets or

derivative assets

(36)

Recorded investment in

loans at amortized cost

$

22,295

Loan modifications during the three and six months ended December 31, 2015 considered troubled debt restructurings totaled $144 million and

$149 million ($42 million and $59 million – three and six months ended December 31, 2014). There were no loans that defaulted during the six

months ended December 31, 2015 that had been modified in a troubled debt restructuring within 12 months prior to the date of default.

Page 45

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE E – LOANS AND GUARANTEES (continued)

Guarantees

IFC extends financial guarantee facilities to its clients to provide full or partial credit enhancement for their debt securities and trade obligations.

Under the terms of IFC’s guarantees, IFC agrees to assume responsibility for the client’s financial obligations in the event of default by the client,

where default is defined as failure to pay when payment is due. Guarantees entered into by IFC generally have maturities consistent with those of

the loan portfolio. Guarantees signed at December 31, 2015 totaled $4,023 million

($4,091 million – June 30, 2015). Guarantees of $3,242 million

that were outstanding (i.e., not called) at December 31, 2015 ($3,168 million – June 30, 2015), were not included in loans on IFC’s consolidated

balance sheet. The outstanding amount represents the maximum amount of undiscounted future payments that IFC could be required to make

under these guarantees.

NOTE F – DEBT SECURITIES

Income from debt securities, including realized gains and losses on debt securities and associated derivatives for the three and six months

ended December 31, 2015 and 2014 comprise the following (US$ millions):

Three months ended

Six months ended

December 31,

2015

2014

2015

2014

Interest income

$

29

$

24

$

55

$ 47

Dividends

3

7

3

7

Realized gains on debt securities and associated derivatives

27

22

37

45

Other-than-temporary impairments

(9)

(4)

(26)

(9)

Total income from debt securities, including realized gains and losses on

debt securities and associated derivatives

$

50

$

49

$

69

$ 90

Debt securities accounted for as available-for-sale at December 31, 2015 and June 30, 2015 comprise (US$ millions):

December 31, 2015

Amortized cost

Foreign currency

transaction

Fair value

Unrealized Unrealized

gains

losses

Corporate debt securities

$

1,771

$

97

$

(52)

$

(177)

$

1,639

Preferred shares

509

55

**

(9)

555

Asset-backed securities

141

4

-

(38)

107

Total

$

2,421

$

156

$

(52)

$

(224)

$

2,301

** less than $0.5 million.

June 30, 2015

Amortized cost

Foreign currency

transaction

Fair value

Unrealized Unrealized

gains

losses

Corporate debt securities

$

1,642

$

125

$

(30)

$

(126)

$

1,611

Preferred shares

543

64

(2)

(21)

584

Asset-backed securities

144

5

-

(27)

122

Total

$

2,329

$

194

$

(32)

$

(174)

$

2,317

Page 46

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE F – DEBT SECURITIES (Continued)

The following table shows the unrealized losses and fair value of debt securities at December 31, 2015 and June 30, 2015 by length of time that

individual securities had been in a continuous loss position where the fair value of securities declined below their cost basis (US$ millions):

December 31, 2015

Less than 12 months

12 months or greater

Total

Fair

value

Unrealized

losses

Fair

value

Unrealized

losses

Fair

value

Unrealized

losses

Corporate debt securities

$

255

$

(43)

$

132

$

(9)

$

387

$

(52)

Preferred shares

32

**

4

**

36

**

Total

$

287

$

(43)

$

136

$

(9)

$

423

$

(52)

** less than $0.5 million.

June 30, 2015

Less than 12 months

12 months or greater

Total

Fair

value

Unrealized

losses

Fair

value

Unrealized

losses

Fair

value

Unrealized

losses

Corporate debt securities

$

189

$

(23)

$

152

$

(7)

$

341

$

(30)

Preferred shares

42

(1)

8

(1)

50

(2)

Total

$

231

$

(24)

$

160

$

(8)

$

391

$

(32)

Corporate debt securities comprise investments in bonds and notes. Unrealized losses associated with corporate debt securities are primarily

attributable to movements in the credit default swap spread curve applicable to the issuer. Based upon IFC’s assessment of expected credit losses,

IFC has determined that the issuer is expected to make all contractual principal and interest payments. Accordingly, IFC expects to recover the cost

basis of these securities.

Preferred shares comprise investments in preferred equity investments that are redeemable at the option of IFC or mandatorily redeemable by the

issuer. Unrealized losses associated with preferred shares are primarily driven by changes in discount rates associated with changes in credit

spreads or interest rates, minor changes in exchange rates and comparable market valuations in the applicable sector. Based upon IFC’s

assessment of the expected credit losses, IFC expects to recover the cost basis of these securities.

NOTE G – EQUITY INVESTMENTS AND ASSOCIATED DERIVATIVES

Income (loss) from equity investments and associated derivatives for the three and six months ended December 31, 2015 and 2014 comprises the

following (US$ millions):

Three months ended

Six months ended

December 31,

2015

2014

2015

2014

Gains on equity investments and associated derivatives, net

$

167

$

144

$

614

$

598

Dividends

47

68

90

120

Other-than-temporary impairments:

Equity investments at cost less impairment

(132)

(121)

(244)

(192)

Equity investments available-for-sale

(57)

(143)

(197)

(252)

Total other-than-temporary impairments

(189)

(264)

(441)

(444)

Custody, fees and other

2

-

3

2

Total income (loss) from equity investments and associated

derivatives

$

27

$

(52)

$

266

$

276

Gains on equity investments and associated derivatives includes realized gains and losses on equity investments and associated derivatives of

$210 million for the three months ended December 31, 2015 ($386 million – three months ended December 31, 2014) and $757 million for the six

months ended December 31, 2015 ($963 million - six months ended December 31, 2014).

Dividends include $4 million for the three months ended December 31, 2015 ($7 million – three months ended December 31, 2014) and $7 million

for the six months ended December 31, 2015 ($12 million – six months ended December 31, 2014) of receipts, net of cash disbursements, related

to investments accounted for under the cost recovery method, for which cost has been fully recovered.

Equity investments include several private equity funds that invest primarily in emerging markets across a range of sectors and that are accounted

for at fair value under the Fair Value Option. These investments cannot be redeemed. Instead distributions are received through the liquidation of

the underlying assets of the funds. IFC estimates that the underlying assets of the funds will be liquidated over five to eight years. The fair values

of these funds have been determined using the net asset value of IFC’s ownership interest in partners’ capital and totaled $3,231 million as of

December 31, 2015 ($3,409 million – June 30, 2015).

Page 47

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE H – RETAINED EARNINGS DESIGNATIONS AND RELATED EXPENDITURES AND ACCUMULATED OTHER COMPREHENSIVE

INCOME

Designated retained earnings

The components of designated retained earnings and related expenditures are summarized below (US$ millions):

Grants to

IDA

Advisory

services

Performance-

based grants

SME

Ventures

for IDA

countries

Global

Infrastructure

Project

Development

Fund

Total

designated

retained

earnings

At June 30, 2014

$

-

$

131

$

21

$

25

$

17

$

194

Year ended June 30, 2015

Designations of retained earnings

340

58

-

398

Expenditures against designated

retained earnings

(340)

(52)

(5)

(4)

(7)

(408)

At June 30, 2015

$

-

$

137

$

16

$

21

$

10

$

184

Six months ended

December 31, 2015

Designations of retained earnings

330

14

-

344

Expenditures against designated

retained earnings

-

(19)

(1)

(3)

(24)

At December 31, 2015

$

330

$

132

$

15

$

20

$

7

$

504

On August 6, 2015, the Board of Directors approved a designation of $330 million of IFC’s retained earnings for grants to IDA and a designation of

$14 million of IFC’s retained earnings for Advisory Services. On October 9, 2015, the Board of Governors noted with approval the designations

approved by the Board of Directors. IFC recognizes designation of retained earnings for advisory services when the Board of Directors approves it

and recognizes designation of retained earnings for grants to IDA when it is noted with approval by the Board of Governors.

Subsequent event – On January 15, 2016, IFC recognized grants to IDA of $330 million on the signing of a grant agreement between IDA and IFC

concerning the transfer to IDA and use of funds corresponding to the designation of retained earnings for grants to IDA approved by IFC’s Board of

Directors on August 6, 2015 and noted with approval by IFC’s Board of Governors on October 9, 2015.

Accumulated other comprehensive income

The components of accumulated other comprehensive income at December 31, 2015 and June 30, 2015 are summarized as follows (US$ millions):

December 31, 2015

June 30, 2015

Net unrealized losses on available-for-sale debt securities

$

(120)

$

(12)

Net unrealized gains on available-for-sale equity investments

1,208

2,052

Unrecognized net actuarial losses and unrecognized prior service costs on benefit plans

(826)

(843)

Total accumulated other comprehensive income

$

262

$

1,197

Page 48

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE I – NET UNREALIZED GAINS AND LOSSES ON NON-TRADING FINANCIAL INSTRUMENTS ACCOUNTED FOR AT FAIR VALUE

Net unrealized gains and losses on non-trading financial instruments accounted for at fair value for the three and six months ended December 31,

2015 and 2014 comprises (US$ millions):

Three months ended

Six months ended

December 31,

2015

2014

2015

2014

Unrealized gains and losses on loans, debt securities and associated

derivatives:

Unrealized gains (losses) on loans and associated derivatives

$

38

$

(22)

$

(58)

$

(31)

Unrealized gains (losses) on debt securities and associated derivatives

11

4

(10)

(1)

Total net unrealized gains (losses) on loans, debt securities and

associated derivatives

49

(18)

(68)

(32)

Unrealized gains and losses on borrowings from market, IDA and

associated derivatives:

Unrealized gains and losses on market borrowings accounted for at fair

value:

Credit spread component

16

9

139

(66)

Interest rate, foreign exchange and other components

347

(213)

237

(46)

Total unrealized gains (losses) on market borrowings

363

(204)

376

(112)

Unrealized (losses) gains on derivatives associated with market

borrowings

(389)

190

(271)

(6)

Unrealized gains (losses) on borrowings from IDA accounted for at fair

value

18

(17)

2

16

Total net unrealized (losses) gains on borrowings from market, IDA

and associated derivatives

(8)

(31)

107

(102)

Net unrealized gains and losses on non-trading financial instruments

accounted for at fair value

$

41

$

(49)

$

39

$

(134)

As discussed in Note A, “Summary of significant accounting and related policies”, market borrowings economically hedged with financial instruments,

including derivatives, accounted for at fair value with changes therein reported in earnings are accounted for at fair value under the Fair Value Option.

Differences arise between the movement in the fair value of market borrowings and the fair value of the associated derivatives primarily due to the

different credit characteristics. The change in fair value reported in “Unrealized gains and losses on borrowings from market, IDA and associated

derivatives” includes the impact of changes in IFC’s own credit spread. As credit spreads widen, unrealized gains are recorded and when such credit

spreads narrow, unrealized losses are recorded (notwithstanding the impact of other factors, such as changes in risk-free interest and foreign currency

exchange rates). The magnitude and direction (gain or loss) can be volatile from period to period but they do not alter the timing of the cash flows on

the market borrowings.

Page 49

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE J – DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS

As discussed in Note A, “Summary of significant accounting and related policies”, IFC enters into transactions in various derivative instruments for

financial risk management purposes in connection with its principal business activities, including lending, investing in debt securities, equity

investments, client risk management, borrowing, liquid asset management and asset and liability management. None of these derivative instruments

are designated as hedging instruments under ASC Topic 815. Note A describes IFC’s risk management and use of derivative instruments. The fair

value of derivative instrument assets and liabilities by risk type at December 31, 2015 and June 30, 2015 is summarized as follows (US$ millions):

Condensed consolidated balance sheet location

December 31, 2015

June 30, 2015

Derivative assets

Interest rate

$

352

$

426

Foreign exchange

155

221

Interest rate and currency

2,642

2,319

Equity and other

369

289

Total derivative assets

$

3,518

$

3,255

Derivative liabilities

Interest rate

$

275

$

268

Foreign exchange

62

154

Interest rate and currency

4,283

3,799

Equity and other

2

4

Total derivative liabilities

$

4,622

$

4,225

The effect of derivative instrument contracts on the condensed consolidated income statement for the three and six months ended December 31, 2015

and 2014 is summarized as follows (US$ millions):

Three months ended

Six months ended

Derivative risk

December 31,

category

Income statement location

2015

2014

2015

2014

Interest rate

Income from loans and guarantees, including realized gains and

losses on loans and associated derivatives

$

(9)

$

(10)

$

(14)

$

(19)

Income from debt securities, including realized gains and losses on

debt securities and associated derivatives

-

(1)

Income from liquid asset trading activities

(2)

(70)

(74)

(81)

Charges on borrowings

87

107

186

218

Other income

(1)

1

(2)

1

Net unrealized gains and losses on non-trading financial

instruments accounted for at fair value

(234)

93

(75)

(80)

Foreign

exchange

Income from liquid asset trading activities

9

(64)

(56)

(126)

Foreign currency transaction gains and losses on non-trading

activities

(11)

73

44

135

Net unrealized gains and losses on non-trading financial

instruments accounted for at fair value

1

-

1

Interest rate and

currency

Income from loans and guarantees, including realized gains and

losses on loans and associated derivatives

(43)

(52)

(87)

(97)

Income from debt securities, including realized gains and losses on

debt securities and associated derivatives

(4)

(5)

(9)

(11)

Income from liquid asset trading activities

34

27

40

30

Charges on borrowings

179

235

332

442

Foreign currency transaction gains and losses on non-trading

activities

444

(413)

(334)

(1,105)

Net unrealized gains and losses on non-trading financial

instruments accounted for at fair value

(98)

79

(191)

66

Equity

Income from equity investments and associated derivatives

53

(64)

96

(210)

Income from loans and guarantees, including realized gains and

losses on loans and associated derivatives

-

4

-

4

Net unrealized gains and losses on non-trading financial

instruments accounted for at fair value

(1)

(3)

(4)

(18)

Total

$

404

$

(62)

$

(148)

$

(851)

The income related to each derivative risk category includes realized and unrealized gains and losses.

Page 50

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE J – DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS (continued)

At December 31, 2015, the outstanding volume, measured by US$ equivalent notional, of interest rate contracts was $61,860 million ($55,792

million at June 30, 2015), foreign exchange contracts was $12,389 million ($12,020 million at June 30, 2015) and interest rate and currency contracts

was $33,599 million ($33,034 million at June 30, 2015). At December 31, 2015, there were 274 equity contracts related to IFC’s loan and equity

investment portfolio and 2 other derivative contracts recognized as derivatives assets or liabilities under ASC Topic 815 (290 equity risk and other

contracts at June 30, 2015).

NOTE K – FAIR VALUE MEASUREMENTS

Many of IFC’s financial instruments are not actively traded in any market. Accordingly, estimates and present value calculations of future cash flows

are used to estimate the fair values. Determining future cash flows for fair value estimation is subjective and imprecise, and minor changes in

assumptions or methodologies may materially affect the estimated values. The excess or deficit resulting from the difference between the carrying

amounts and the fair values presented does not necessarily reflect the values which will ultimately be realized, since IFC generally holds loans,

borrowings and other financial instruments with contractual maturities with the aim of realizing their contractual cash flows.

The estimated fair values as of December 31, 2015 and June 30, 2015 reflect multiple factors such as interest rates, credit risk, foreign currency

exchange rates and commodity prices. Reasonable comparability of fair values among financial institutions is not likely because of the wide range of

permitted valuation techniques and numerous estimates that must be made in the absence of secondary market prices. This lack of objective pricing

standard in the market introduces a greater degree of subjectivity and volatility to these derived or estimated fair values. Therefore, while disclosure

of estimated fair values of financial instruments is required, readers are cautioned in using these data for purposes of evaluating the financial condition

of IFC. The fair values of the individual financial instruments do not represent the fair value of IFC taken as a whole.

All of IFC’s financial instruments in its liquid assets portfolio are managed according to an investment authority approved by the Board of Directors

and investment guidelines approved by IFC’s Corporate Risk Committee (CRC), a subcommittee of IFC’s Management Team. Third party independent

vendor prices are used to price the vast majority of the liquid assets. The vendor prices are evaluated by IFC’s Treasury department and IFC’s

Corporate and Portfolio Risk Management department maintains oversight for the pricing of liquid assets.

IFC’s regional and industry departments are primarily responsible for fair valuing IFC’s investment portfolio (equity investments, debt securities, loan

investments and related derivatives). IFC’s Portfolio Valuation Unit, in Corporate Risk & Sustainability, and Portfolio Review Unit, in Finance and

Accounting, provide oversight over the fair valuation process by monitoring and reviewing the fair values of IFC’s investment portfolio. Prior to October

1, 2014, IFC’s Valuation Oversight Subcommittee (VOS), which was a subcommittee of CRC, reviewed significant valuation principles and the

reasonableness of high exposure valuations quarterly. Pursuant to a simplification of IFC’s organizational structure effective October 1, 2014, the

committees of IFC’s Management Team, including the VOS, are continuing to be reassessed.

IFC’s borrowings are fair valued by the Quantitative Analysis and Modeling Group in IFC’s Treasury department under the oversight of the Corporate

Portfolio and Risk Management department.

The methodologies used and key assumptions made to estimate fair values as of December 31, 2015, and June 30, 2015, are summarized below.

Liquid assets – The primary pricing source for the liquid assets is valuations obtained from external pricing services (vendor prices). The most

liquid securities in the liquid asset portfolio are exchange traded futures, options, and US Treasuries. For exchange traded futures and options,

exchange quoted prices are obtained and these are classified as Level 1 in accordance with ASC 820. Liquid assets valued using quoted market

prices are also classified as Level 1. Securities valued using vendor prices for which there is evidence of high market trade activity may also be

classified as Level 1. US Treasuries are valued using index prices and also classified as Level 1. The remaining liquid assets valued using vendor

prices are classified as Level 2 or Level 3 based on the results of IFC’s evaluation of the vendor’s pricing methodologies and individual security

facts and circumstances. Most vendor prices use some form of matrix pricing methodology to derive the inputs for projecting cash flows or to derive

prices. When vendor prices are not available, liquid assets are valued internally by IFC using yield-pricing approach or comparables model approach

and these are classified as Level 2 or Level 3 depending on the degree that the inputs are observable in the market.

The critical factors in valuing liquid assets in both Level 2 and Level 3 are the estimation of cash flows and yield. Other significant inputs for valuing

corporate securities, quasi-government securities and sovereign or sovereign-guaranteed securities include reported trades, broker/dealer quotes,

benchmark securities, option adjusted spread curve, volatilities, and other reference data. In addition to these inputs, valuation models for securitized

or collateralized securities use collateral performance inputs, such as weighted average coupon rate, weighted average maturity, conditional

prepayment rate, constant default rate, vintage, and credit enhancements.

Page 51

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Loans and debt securities – Loans and debt securities in IFC’s investment portfolio that do not have available market prices are primarily valued

using discounted cash flow approaches. All loans measured at fair value are classified as Level 3. Certain loans contain embedded conversion and/or

income participation features. If not bifurcated as standalone derivatives, these features are considered in determining the loans’ fair value based on

the quoted market prices or other calculated values of the equity investments into which the loans are convertible and the discounted cash flows of

the income participation features. The valuation techniques and significant unobservable inputs for loans and debt securities classified as Level 3 as

of December 31, 2015 and June 30, 2015 are presented below:

December 31, 2015

Valuation technique

Fair value

(US$

millions)

Significant inputs

Range

(%)

Weighted

average

(%)

Debt securities – preferred shares

Discounted cash flows

$

220

Discount rate

7.3 – 30.0

11.0

Relative valuations

44

Valuation multiples*

Recent transactions

261

Other techniques

76

Total preferred shares

601

Loans and other debt securities

Discounted cash flows

1,860

Credit default swap spreads

1.3 – 20.0

3.8

Recent transactions

413

Expected recovery rates

10.0 – 85.0

42.6

Other techniques

90

Total loans and other debt securities

2,363

Total

$

2,964

June 30, 2015

Valuation technique

Fair value

(US$

millions)

Significant inputs

Range

(%)

Weighted

average

(%)

Debt securities – preferred shares

Discounted cash flows

$

274

Discount rate

6.9 – 30.0

10.4

Relative valuations

126

Valuation multiples*

Recent transactions

140

Other techniques

15

Total preferred shares

555

Loans and other debt securities

Discounted cash flows

1,724

Credit default swap spreads

1.2 – 20.0

3.0

Recent transactions

495

Expected recovery rates

10.0 – 85.0

41.6

Other techniques

60

Total loans and other debt securities

2,279

Total

$

2,834

* In case of valuation techniques with multiple significant inputs, the range and weighted average are not provided.

Page 52

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Borrowings – Fair values derived by using quoted prices in active markets are classified as Level 1. Fair values derived by determining the present

value of estimated future cash flows using appropriate discount rates and option specific models where appropriate are classified as Level 2. The

significant inputs used in valuing borrowings classified as Level 2 are presented below:

Classes

Significant Inputs

Structured bonds

Foreign exchange rate and inter-bank yield curves, IFC’s credit curve and swaption volatility matrix, foreign

exchange rate volatility, equity spot price, volatility and dividend yield.

Unstructured bonds

Inter-bank yield curve and IFC’s credit curve.

As of December 31, 2015, IFC had bond issuances with a total fair value of $104 million classified as level 3 in Costa Rican colones, Rwandan francs,

Armenian drams and Georgian Lari, where the significant unobservable inputs were yield curve data.

Derivative instruments – The various classes of derivative instruments include interest rate contracts, foreign exchange contracts, interest rate and

currency contracts, equity contracts and other derivative contracts. Certain over the counter derivatives in the liquid asset portfolio priced in-house

are classified as Level 2, while certain over the counter derivatives priced using external manager prices are classified as Level 3. Fair values for

derivative instruments are derived by determining the present value of estimated future cash flows using appropriate discount rates and option specific

models where appropriate.

The significant inputs used in valuing the various classes of derivative instruments classified as Level 2 and significant unobservable inputs for

derivative instruments classified as Level 3 as of December 31, 2015 and June 30, 2015 are presented below:

Level 2 derivatives

Significant Inputs

Interest rate

Inter-bank yield curves, foreign exchange basis curve and yield curves specified to index floating rates.

Foreign exchange

Foreign exchange rate, inter-bank yield curves and foreign exchange basis curve.

Interest rate and currency

Foreign exchange rate, inter-bank yield curves, foreign exchange basis curve and yield curves specified to

index floating rates.

December 31, 2015

Level 3 derivatives

Type

Fair value

(US$ millions)

Significant inputs

Range

(%)

Weighted

average

(%)

Equity related derivatives

Fixed strike price options

$

40

Volatilities

11.0 – 53.1

15.6

Variable strike price options

326

Contractual strike price*

Other

1

Interest rate and

currency swap assets

Vanilla swaps

47

Yield curve points,

exchange rates

Interest rate and

currency swap liabilities

Vanilla swaps

(32)

Yield curve points,

exchange rates

Total

$

382

June 30, 2015

Level 3 derivatives

Type

Fair value

(US$ millions)

Significant inputs

Range

(%)

Weighted

average

(%)

Equity related derivatives

Fixed strike price options

$

34

Volatilities

12.0 – 50.2

24.7

Variable strike price options

249

Contractual strike price*

Other

2

Interest rate and

currency swap assets

Vanilla swaps

40

Yield curve points,

exchange rates

Interest rate and

currency swap liabilities

Vanilla swaps

(30)

Yield curve points,

exchange rates

Total

$

295

* In case of valuation techniques with multiple significant inputs, the range and weighted average are not provided.

Page 53

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Equity investments – Equity investments valued using quoted prices in active markets are classified as Level 1. Equity investments classified as

Level 2 were valued using quoted prices in inactive markets. The valuation techniques and significant unobservable inputs for equity investments

classified as Level 3 as of December 31, 2015 and June 30, 2015 are presented below:

December 31, 2015

Sector

Valuation technique

Fair value

(US$ millions)

Significant inputs

Range

Weighted

average

Banking and other financial

Discounted cash flows

$

666

Cost of equity (%)

10.3 – 22.6

15.2

Institutions

Asset growth rate (%)

(18.2) – 392.0

15.4

Return on assets (%)

(5.1) – 6.8

1.6

Perpetual growth rate (%)

2.5 – 11.0

5.2

Relative valuations

44

Price to book value

1.0 – 2.7

2.7

Listed price (adjusted)

43

Discount for lock-up (%)

0.0 – 9.4

0.8

Recent transactions

113

Other techniques

23

Total banking and other financial

institutions

889

Funds

Recent transactions

70

Total funds

70

Others

Discounted cash flows

574

Weighted average

cost of capital (%)

6.6 – 21.0 11.7

Cost of equity (%)

12.3 – 21.0

18.8

Relative valuations

370

Valuation multiples*

Listed price (adjusted)

171

Discount for lock-up (%)

0.3 - 4.5

2.4

Recent transactions

650

Other techniques

37

Total others

1,802

Total

$

2,761

* In case of valuation techniques with multiple significant inputs, the range and weighted average are not provided.

Page 54

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

June 30, 2015

Sector

Valuation technique

Fair value

(US$ millions)

Significant inputs

Range

Weighted

average

Banking and other financial

Discounted cash flows

$

580

Cost of equity (%)

10.2 – 22.6

15.1

Institutions

Asset growth rate (%)

(18.2) – 392.0

11.6

Return on assets (%)

(8.9) – 6.8

1.8

Perpetual growth rate (%)

2.5 – 11.0

5.0

Relative valuations

17

Valuation multiples*

Listed price (adjusted)

36

Discount for lock-up (%)

0.0 – 10.2

6.0

Recent transactions

216

Other techniques

52

Total banking and other financial

institutions

901

Funds

Recent transactions

55

Total funds

55

Others

Discounted cash flows

522

Weighted average

cost of capital (%)

6.6 – 23.2 12.0

Cost of equity (%)

12.3 – 15.0

14.6

Relative valuations

338

Valuation multiples*

Listed price (adjusted)

201

Discount for lock-up (%)

1.0 - 10.6

7.6

Recent transactions

517

Other techniques

94

Total others

1,672

Total

$

2,628

* In case of valuation techniques with multiple significant inputs, the range and weighted average are not provided.

Page 55

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Fair value of assets and liabilities

Estimated fair values of IFC’s financial assets and liabilities and off-balance sheet financial instruments at December 31, 2015 and June 30, 2015 are

summarized below (US$ millions):

December 31, 2015

June 30, 2015

Carrying

amount

Fair value

Carrying

amount

Fair

value

Financial assets

Cash and due from banks, time deposits, trading securities and

securities purchased under resale agreements and receivable for

cash collateral pledged

$

45,687

$

45,687

$

43,817

$

43,817

Investments:

Loans at amortized cost, net of reserves against losses

20,492

20,482

20,552

21,758

Loans accounted for at fair value under the Fair Value Option

812

784

Total loans

21,304

21,294

21,336

22,542

Equity investments at cost less impairment

3,259

4,458

3,250

4,581

Equity investments accounted for at fair value as available-for-sale

3,674

4,557

Equity investments accounted for at fair value

5,761

5,696

Total equity investments

12,694

13,893

13,503

14,834

Debt securities accounted for at fair value as available-for-sale

2,301

2,317

Debt securities accounted for at fair value under the Fair Value Option

436

422

Total debt securities

2,737

2,739

Total investments

36,735

37,924

37,578

40,115

Derivative assets:

Borrowings-related

511

620

Liquid asset portfolio-related and other

722

851

Investment-related

2,065

1,615

Client risk management-related

220

169

Total derivative assets

3,518

3,255

Other investment-related financial assets

11

72

1

75

Financial liabilities

Securities sold under repurchase agreements and payable for cash

collateral received

$

4,262

$

4,262

$

4,695

$

4,695

Market, IBRD, IDA and other borrowings outstanding

53,113

53,109

51,265

51,264

Derivative liabilities:

Borrowings-related

4,088

3,722

Liquid asset portfolio-related and other

140

244

Investment-related

157

82

Client risk management-related

237

177

Total derivative liabilities

4,622

4,225

Other investment-related financial assets comprise standalone options and warrants that do not meet the definition of a derivative.

The fair value of loan commitments amounted to $39 million at December 31, 2015 ($34 million - June 30, 2015). Fair values of loan commitments

are based on present value of loan commitment fees.

Page 56

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Fair value hierarchy

The following tables provide information as of December 31, 2015 and June 30, 2015, about IFC’s financial assets and financial liabilities measured

at fair value on a recurring basis. As required by ASC 820, financial assets and financial liabilities are classified in their entirety based on the lowest

level input that is significant to the fair value measurement (US$ millions):

December 31, 2015

Level 1

Level 2

Level 3

Total

Trading securities:

Government and agency obligations

$

10,200

$

1,560

$

21

$

11,781

Asset-backed securities

-

12,620

-

12,620

Corporate securities

4,584

2,395

40

7,019

Money market funds

840

-

840

Total trading securities

15,624*

16,575

61

32,260

Loans (outstanding principal balance $891)

-

812

Equity investments:

Banking and other financial institutions

1,912

103

889

2,904

Funds

-

70

Others

1,378

50

1,802

3,230

Equity investments measured at net asset value***

3,231

Total equity investments

3,290

153

2,761

9,435

Debt securities:

Corporate debt securities

274

-

1,443

1,717

Preferred shares

-

601

Asset-backed securities

-

106

Other debt securities

-

2

Debt securities measured at net asset value***

311

Total debt securities

274

-

2,152

2,737

Derivative assets:

Interest rate

-

352

-

352

Foreign exchange

-

155

-

155

Interest rate and currency

-

2,595

47

2,642

Equity and other

-

369

Total derivative assets

-

3,102

416

3,518

Total assets at fair value

$

19,188

$

19,830

$

6,202

$

48,762

Borrowings:

Structured bonds

$

-

$

4,132

$

-

$

4,132

Unstructured bonds

42,164

3,982

104

46,250

Total borrowings (outstanding principal balance $50,883**)

42,164

8,114

104

50,382

Derivative liabilities:

Interest rate

-

275

-

275

Foreign exchange

-

62

-

62

Interest rate and currency

-

4,251

32

4,283

Equity and other

-

2

Total derivative liabilities

-

4,588

34

4,622

Total liabilities at fair value

$

42,164

$

12,702

$

138

$

55,004

* includes securities priced at par plus accrued interest, which approximates fair value.

** includes discount notes (not under the short-term Discount Note Program), with original maturities greater than one year, with principal due at maturity of $1,854

million, with a fair value of $1,146 million as of December 31, 2015.

***In accordance with ASC 820, investments that are measured at fair value using net asset value per share have not been classified in the fair value hierarchy. The fair

value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in consolidated balance sheet.

Note: For the six months ended December 31, 2015: Trading securities with fair value of $153 million transferred from level 1 to level 2 and $1,016 million from level 2

to level 1 due to decrease/ increase in market activities. Equity investments with fair value of $54 million transferred from level 1 to level 2 and $61 million from level 2 to

level 1 due to decrease/increase in market activities. Bonds issued by IFC with a fair value $95 million transferred from level 2 to level 1 due to change in quality of

market price information.

Page 57

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

June 30, 2015

Level 1

Level 2

Level 3

Total

Trading securities:

Government and agency obligations

$

10,725

$

4,342

$

22

$

15,089

Asset-backed securities

-

12,793

-

12,793

Corporate securities

3,613

2,080

64

5,757

Money market funds

1,092

-

1,092

Total trading securities

15,430*

19,215

86

34,731

Loans (outstanding principal balance $802)

-

784

Equity investments:

Banking and other financial institutions

2,387

176

901

3,464

Funds

-

55

Others

1,561

92

1,672

3,325

Equity investments measured at net asset value***

3,409

Total equity investments

3,948

268

2,628

10,253

Debt securities:

Corporate debt securities

326

-

1,371

1,697

Preferred shares

-

555

Asset-backed securities

-

122

Other debt securities

-

2

Debt securities measured at net asset value***

363

Total debt securities

326

-

2,050

2,739

Derivative assets:

Interest rate

-

426

-

426

Foreign exchange

-

221

-

221

Interest rate and currency

-

2,279

40

2,319

Equity and other

-

289

Total derivative assets

-

2,926

329

3,255

Total assets at fair value

$

19,704

$

22,409

$

5,877

$

51,762

Borrowings:

Structured bonds

$

-

$

4,732

$

-

$

4,732

Unstructured bonds

39,671

4,959

103

44,733

Total borrowings (outstanding principal balance $49,342**)

39,671

9,691

103

49,465

Derivative liabilities:

Interest rate

-

268

-

268

Foreign exchange

-

154

-

154

Interest rate and currency

-

3,769

30

3,799

Equity and other

-

4

Total derivative liabilities

-

4,191

34

4,225

Total liabilities at fair value

$

39,671

$

13,882

$

137

$

53,690

* includes securities priced at par plus accrued interest, which approximates fair value.

** includes discount notes (not under the short-term Discount Note Program), with original maturities greater than one year, with principal due at maturity of $1,755

million, with a fair value of $1,364 million as of June 30, 2015.

***In accordance with ASC 820, investments that are measured at fair value using net asset value per share have not been classified in the fair value hierarchy. The fair

value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in consolidated balance sheet.

Note: For the year ended June 30, 2015: Trading securities with fair value of $1,447 million transferred from level 1 to level 2 and $615 million from level 2 to level 1 due

to decrease/ increase in market activities. Equity investments with fair value of $92 million transferred from level 1 to level 2 and $8 million from level 2 to level 1 due to

decrease/increase in market activities. Bonds issued by IFC with a fair value $13 million transferred from level 1 to level 2, while bonds with a fair value of $428 million

were transferred from level 2 to level 1 due to change in quality of market price information.

Page 58

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

The following tables present the changes in the carrying value of IFC’s Level 3 financial assets and financial liabilities for the three and six months

ended December 31, 2015 and 2014 (US$ millions). IFC’s policy is to recognize transfers in and transfers out at the beginning of the reporting

period.

Three months ended December 31, 2015

Balance as

of

October 1,

2015

Net gains and losses (realized

and unrealized) included in

Purchases,

issuances,

sales,

settlements

and others

Transfers

into

Level 3 (*)

Transfers

out of

Level 3

(**)

Balance as

of

December

31, 2015

Net unrealized

gains/losses

included in net

income related

to assets /

liabilities held

at period end

Net

Income

Other

comprehensive

income

Trading securities:

Asset-backed securities

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Corporate securities

39

1

-

40

1

Government and agency obligations

22

(1)

-

21

(1)

Total trading securities

61

-

61

-

Loans

795

(12)

-

29

-

812

(23)

Equity investments:

Banking and other financial institutions

999

(15)

(6)

(28)

-

(61)

889

(12)

Funds

76

2

-

(8)

-

70

3

Others

1,637

7

12

146

-

1,802

8

Total equity investments

2,712

(6)

6

110

-

(61)

2,761

(1)

Debt securities:

Corporate debt securities

1,387

(11)

(12)

79

-

1,443

(2)

Preferred shares

594

24

(23)

6

-

601

(3)

Asset-backed securities

110

-

(2)

-

106

-

Other debt securities

2

-

2

-

Total debt securities

2,093

13

(37)

83

-

2,152

(5)

Derivative assets:

Interest rate and currency

48

(6)

-

6

-

(1)

47

20

Equity and other

326

52

-

(9)

-

369

51

Total derivative assets

374

46

-

(3)

-

(1)

416

71

Total assets at fair value

$

6,035

$

41

$

(31)

$

219

$

-

$

(62)

$

6,202

$

42

Borrowings:

Structured bonds

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Unstructured bonds

(106)

2

-

(104)

2

Total borrowings

(106)

2

-

(104)

2

Derivative liabilities:

Interest rate

-

Interest rate and currency

(41)

9

-

(1)

-

1

(32)

(11)

Equity and other

(2)

-

(2)

-

Total derivative liabilities

(43)

9

-

(1)

-

1

(34)

(11)

Total liabilities at fair value

$

(149)

$

11

$

-

$

(1)

$

-

$

1

$

(138)

$

(9)

(*) Transfers into Level 3 are due to lack of observable market data resulting from a decrease in market activity for these securities as of December 31, 2015.

(**)Transfers out of Level 3 are due to availability of observable market data resulting from an increase in market activity for these securities that were part of October 1,

2015 beginning balance as of December 31, 2015.

Page 59

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Six months ended December 31, 2015

Balance as

of

July 1, 2015

Net gains and losses (realized

and unrealized) included in

Purchases,

issuances,

sales,

settlements

and others

Transfers

into

Level 3 (*)

Transfers

out of

Level 3

(**)

Balance as

of

December

31, 2015

Net unrealized

gains/losses

included in net

income related

to assets /

liabilities held

at period end

Net

Income

Other

comprehensive

income

Trading securities:

Asset-backed securities

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Corporate securities

64

(13)

-

(11)

-

40

(7)

Government and agency obligations

22

(1)

-

21

(1)

Total trading securities

86

(14)

-

(11)

-

61

(8)

Loans

784

(68)

-

96

-

812

(76)

Equity investments:

Banking and other financial institutions

901

(28)

(14)

(15)

147

(102)

889

(35)

Funds

55

-

15

-

70

1

Others

1,672

10

(35)

184

2

(31)

1,802

1

Total equity investments

2,628

(18)

(49)

184

149

(133)

2,761

(33)

Debt securities:

Corporate debt securities

1,371

(19)

(79)

170

-

1,443

(12)

Preferred shares

555

18

(16)

44

-

601

21

Asset-backed securities

122

-

(13)

(3)

-

106

-

Other debt securities

2

-

2

-

Total debt securities

2,050

(1)

(108)

211

-

2,152

9

Derivative assets:

Interest rate and currency

40

3

-

6

-

(2)

47

26

Equity and other

289

89

-

(9)

-

369

89

Total derivative assets

329

92

-

(3)

-

(2)

416

115

Total assets at fair value

$

5,877

$

(9)

$

(157)

$

477

$

149

$

(135)

$

6,202

$

7

Borrowings:

Structured bonds

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Unstructured bonds

(103)

2

-

(3)

-

(104)

2

Total borrowings

(103)

2

-

(3)

-

(104)

2

Derivative liabilities:

Interest rate

-

Interest rate and currency

(30)

(3)

-

(1)

-

2

(32)

(13)

Equity and other

(4)

3

-

(1)

-

(2)

3

Total derivative liabilities

(34)

-

(2)

-

2

(34)

(10)

Total liabilities at fair value

$

(137)

$

2

$

-

$

(5)

$

-

$

2

$

(138)

$

(8)

(*) Transfers into Level 3 are due to lack of observable market data resulting from a decrease in market activity for these securities as of December 31, 2015.

(**)Transfers out of Level 3 are due to availability of observable market data resulting from an increase in market activity for these securities that were part of July 1, 2015

beginning balance as of December 31, 2015.

Page 60

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Three months ended December 31, 2014

Balance as

of

October 1,

2014

Net gains and losses (realized

and unrealized) included in

Purchases,

issuances,

sales,

settlements

and others

Transfers

into

Level 3 (*)

Transfers

out of

Level 3

(**)

Balance as

of

December

31, 2014

Net unrealized

gains/losses

included in net

income related

to assets /

liabilities held

at period end

Net

income

Other

comprehensive

income

Trading securities:

Asset-backed securities

$

16

$

-

$

-

$

(1)

$

-

$

-

$

15

$

-

Corporate securities

139

(10)

-

(38)

91

(10)

Government and agency obligations

22

-

22

-

Total trading securities

177

(10)

-

(1)

-

(38)

128

(10)

Loans

767

(23)

-

33

-

777

(21)

Equity investments:

Banking and other financial institutions

1,059

(32)

(3)

14

-

(162)

876

(43)

Funds

81

(1)

-

(22)

-

58

(1)

Others

994

31

(12)

105

7

(18)

1,107

36

Total equity investments

2,134

(2)

(15)

97

7

(180)

2,041

(8)

Debt securities:

Corporate debt securities

1,410

15

(22)

236

-

1,639

7

Preferred shares

739

22

(23)

(215)

-

523

-

Asset-backed securities

139

-

(1)

-

138

-

Other debt securities

1

-

1

-

Total debt securities

2,289

37

(46)

21

-

2,301

7

Derivative assets:

Interest rate and currency

15

18

-

3

-

36

22

Equity and other

403

(69)

-

334

35

Total derivative assets

418

(51)

-

3

-

370

57

Total assets at fair value

$

5,785

$

(49)

$

(61)

$

153

$

7

$

(218)

$

5,617

$

25

Borrowings:

Structured bonds

$

(309)

$

137

$

-

$

-

$

-

$

172

$

-

$

-

Unstructured bonds

(72)

-

(72)

-

Total borrowings

(381)

137

-

172

(72)

-

Derivative liabilities:

Interest rate

(5)

(7)

-

12

-

Interest rate and currency

(94)

(131)

-

(1)

-

200

(26)

(14)

Equity and other

(19)

6

-

(13)

6

Total derivative liabilities

(118)

(132)

-

(1)

-

212

(39)

(8)

Total liabilities at fair value

$

(499)

$

5

$

-

$

(1)

$

-

$

384

$

(111)

$

(8)

(*) Transfers into Level 3 are due to lack of observable market data resulting from a decrease in market activity for these securities as of December 31, 2014.

(**)Transfers out of Level 3 are due to availability of observable market data resulting from an increase in market activity for these securities that were part of October 1,

2014 beginning balance as of December 31, 2014.

Page 61

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Six months ended December 31, 2014

Balance as

of

July 1, 2014

Net gains and losses (realized

and unrealized) included in

Purchases,

issuances,

sales,

settlements

and others

Transfers

into

Level 3 (*)

Transfers

out of

Level 3

(**)

Balance as

of

December

31, 2014

Net unrealized

gains/losses

included in net

income related

to assets /

liabilities held

at period end

Net

Income

Other

comprehensive

income

Trading securities:

Asset-backed securities

$

20

$

-

$

-

$

(5)

$

-

$

-

$

15

$

-

Corporate securities

146

(20)

-

21

-

(56)

91

(18)

Government and agency obligations

22

-

22

-

Total trading securities

188

(20)

-

16

-

(56)

128

(18)

Loans

683

(40)

-

134

-

777

(37)

Equity investments:

Banking and other financial institutions

1,312

143

(57)

(281)

14

(255)

876

(79)

Funds

45

2

-

11

-

58

(91)

Others

1,010

(30)

16

146

14

(49)

1,107

(26)

Total equity investments

2,367

115

(41)

(124)

28

(304)

2,041

(196)

Debt securities:

Corporate debt securities

1,410

8

(54)

275

-

1,639

1

Preferred shares

760

33

(28)

(242)

-

523

(5)

Asset-backed securities

144

-

(5)

(1)

-

138

-

Other debt securities

1

-

1

-

Total debt securities

2,315

41

(87)

32

-

2,301

(4)

Derivative assets:

Interest rate and currency

5

21

-

10

-

36

31

Equity and other

559

(229)

-

4

-

334

22

Total derivative assets

564

(208)

-

14

-

370

53

Total assets at fair value

$

6,117

$

(112)

$

(128)

$

72

$

28

$

(360)

$

5,617

$

(202)

Borrowings:

Structured bonds

$

(361)

$

189

$

-

$

-

$

-

$

172

$

-

$

-

Unstructured bonds

(70)

(2)

-

(72)

(2)

Total borrowings

(431)

187

-

172

(72)

(2)

Derivative liabilities:

Interest rate

-

(7)

-

(5)

-

12

-

Interest rate and currency

(63)

(163)

-

200

(26)

(32)

Equity and other

(18)

5

-

(13)

5

Total derivative liabilities

(81)

(165)

-

(5)

-

212

(39)

(27)

Total liabilities at fair value

$

(512)

$

22

$

-

$

(5)

$

-

$

384

$

(111)

$

(29)

(*) Transfers into Level 3 are due to lack of observable market data resulting from a decrease in market activity for these securities as of December 31, 2014.

(**)Transfers out of Level 3 are due to availability of observable market data resulting from an increase in market activity for these securities that were part of July 1,

2014 beginning balance as of December 31, 2014.

Page 62

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

The following tables present gross purchases, sales, issuances and settlements related to the changes in the carrying value of IFC’s Level 3 financial

assets and financial liabilities for the three and six months ended December 31, 2015 and 2014 (US$ millions).

Three months ended December 31, 2015

Purchases

Sales

Issuances

Settlements

and others

Net

Trading securities:

Asset-backed securities

$

-

$

-

$

-

$

-

$

-

Corporate securities

-

Total trading securities

-

Loans

83

-

(54)

29

Equity investments:

Banking and other financial institutions

35

(35)

-

(28)

Funds

26

-

(34)

(8)

Others

116

(9)

-

39

146

Total equity investments

177

(44)

-

(23)

110

Debt securities:

Corporate debt securities

102

-

(23)

79

Preferred shares

62

(54)

-

(2)

6

Asset-backed securities

-

(2)

Total debt securities

164

(54)

-

(27)

83

Derivative assets:

Interest rate and currency

6

-

6

Equity and other

-

(9)

Total derivative assets

6

-

(9)

(3)

Total assets at fair value

$

430

$

(98)

$

-

$

(113)

$

219

Borrowings:

Structured Bonds

-

Unstructured Bonds

-

Total Borrowings

-

Derivative liabilities:

Interest rate

-

Interest rate and currency

-

(1)

-

(1)

Equity and other

-

Total derivative liabilities

-

(1)

-

(1)

Total liabilities at fair value

$

-

$

-

$

(1)

$

-

$

(1)

Page 63

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Six months ended December 31, 2015

Purchases

Sales

Issuances

Settlements

and others

Net

Trading securities:

Asset-backed securities

$

-

$

-

$

-

$

-

$

-

Corporate securities

-

(8)

-

(3)

(11)

Total trading securities

-

(8)

-

(3)

(11)

Loans

154

-

(58)

96

Equity investments:

Banking and other financial institutions

62

(49)

-

(28)

(15)

Funds

56

-

(41)

15

Others

168

(37)

-

53

184

Total equity investments

28

6

(86)

-

(16)

184

Debt securities:

Corporate debt securities

264

(28)

-

(66)

170

Preferred shares

104

(54)

-

(6)

44

Asset-backed securities

-

(3)

Total debt securities

368

(82)

-

(75)

211

Derivative assets:

Interest rate and currency

6

-

6

Equity and other

-

(9)

Total derivative assets

6

-

(9)

(3)

Total assets at fair value

$

814

$

(176)

$

-

$

(161)

$

477

Borrowings:

Structured Bonds

-

Unstructured Bonds

-

(3)

-

(3)

Total Borrowings

-

(3)

-

(3)

Derivative liabilities:

Interest rate

-

Interest rate and currency

-

(1)

-

(1)

Equity and other

-

(1)

Total derivative liabilities

-

(1)

(2)

Total liabilities at fair value

$

-

$

-

$

(4)

$

(1)

$

(5)

Page 64

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Three months ended December 31, 2014

Purchases

Sales

Issuances

Settlements

and others

Net

Trading securities:

Asset-backed securities

$

-

$

-

$

-

$

(1)

$

(1)

Corporate securities

-

Total trading securities

-

(1)

Loans

28

-

5

33

Equity investments:

Banking and other financial institutions

50

(25)

-

(11)

14

Funds

17

-

(39)

(22)

Others

99

(2)

-

8

105

Total equity investments

166

(27)

-

(42)

97

Debt securities:

Corporate debt securities

290

-

(54)

236

Preferred shares

7

(59)

-

(163)

(215)

Asset-backed securities

2

-

(2)

-

Total debt securities

299

(59)

-

(219)

21

Derivative assets:

Interest rate and currency

-

3

-

3

Equity and other

12

-

(12)

-

Total derivative assets

12

-

3

(12)

3

Total assets at fair value

$

505

$

(86)

$

3

$

(269)

$

153

Derivative liabilities:

Interest rate

-

Interest rate and currency

-

(1)

-

(1)

Total derivative liabilities

-

(1)

-

(1)

Total liabilities at fair value

$

-

$

-

$

(1)

$

-

$

(1)

Page 65

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE K – FAIR VALUE MEASUREMENTS (continued)

Six months ended December 31, 2014

Purchases

Sales

Issuances

Settlements

and others

Net

Trading securities:

Asset-backed securities

$

-

$

-

$

-

$

(5)

$

(5)

Corporate securities

110

(89)

-

21

Total trading securities

110

(89)

-

(5)

16

Loans

141

-

(7)

134

Equity investments:

Banking and other financial institutions

153

(423)

-

(11)

(281)

Funds

63

-

(52)

11

Others

140

(10)

-

16

146

Total equity investments

356

(433)

-

(47)

(124)

Debt securities:

Corporate debt securities

388

-

(113)

275

Preferred shares

20

(99)

-

(163)

(242)

Asset-backed securities

2

-

(3)

(1)

Total debt securities

410

(99)

-

(279)

32

Derivative assets:

Interest rate and currency

-

10

-

10

Equity and other

12

-

(8)

4

Total derivative assets

12

-

10

(8)

14

Total assets at fair value

$

1,029

$

(621)

$

10

$

(346)

$

72

Derivative liabilities:

Interest rate

-

(5)

Interest rate and currency

-

(5)

5

-

Total derivative liabilities

-

(5)

-

(5)

Total liabilities at fair value

$

-

$

-

$

(5)

$

-

$

(5)

Gains and losses (realized and unrealized) from trading securities, loans, equity investments and debt securities included in net income for the

period are reported on the condensed consolidated income statement in income from liquid asset trading activities, Income from Loans and

guarantees, including realized gains and losses on loans and associated derivatives, income from equity investments and associated derivatives,

income from debt securities and realized gains and losses on debt securities and associated derivatives and net unrealized gains and losses on non-

trading financial instruments accounted for at fair value.

As of December 31, 2015, equity investments, accounted for at cost less impairment, with a carrying amount of $1,532 million were written down to

their fair value of $1,288 million ($1,063 million and $871 million – December 31, 2014), resulting in a loss of $244 million, which was included in

income from equity investments and associated derivatives in the condensed consolidated income statement during the six months ended December

31, 2015 (loss of $192 million – six months ended December 31, 2014). The amount of the write-down was based on a Level 3 measure of fair

value.

Page 66

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE L – SEGMENT REPORTING

For management purposes, IFC’s business comprises three segments: investment services, treasury services and advisory services. The

investment services segment consists primarily of lending and investing in debt and equity securities. The investment services segment also includes

AMC, which is not separately disclosed due to its immaterial impact. Further information about the impact of AMC on IFC’s condensed consolidated

balance sheets and income statements can be found in Note B. Operationally, the treasury services segment consists of the borrowing, liquid asset

management, asset and liability management and client risk management activities. Advisory services provide consultation services to governments

and the private sector. Consistent with internal reporting, net income or expense from asset and liability management and client risk management

activities in support of investment services is allocated from the treasury segment to the investment services segment.

The performance of investment services, treasury services and advisory services is assessed by senior management on the basis of net income

for each segment, return on assets, and return on capital employed. Advisory services are primarily assessed based on the level and adequacy of

its funding sources (See Note N). IFC’s management reporting system and policies are used to determine revenues and expenses attributable to

each segment. Consistent with internal reporting, administrative expenses are allocated to each segment based largely upon personnel costs and

segment headcounts. Transactions between segments are immaterial and, thus, are not a factor in reconciling to the consolidated data.

The methodology for allocating foreign currency transaction gains and losses on non-trading activities between the investment services segment

and the treasury services segment was revised during FY16 Q1 to more closely align with management reporting. This change has been reflected

in the segment results for the three and six months ended December 31, 2015 and 2014.

An analysis of IFC’s major components of income and expense by business segment for the three and six months ended December 31, 2015 and

2014, is provided below (US$ millions):

Three months ended December 31, 2015

Investment

services

Treasury

services

Advisory

services

Total

Income from loans and guarantees, including realized gains and losses

on loans and associated derivatives

$

267

$

-

$

-

$

267

Provision for losses on loans, guarantees and other receivables

(107)

-

(107)

Income from equity investments and associated derivatives

27

-

27

Income from debt securities, including realized gains and losses on

debt securities and associated derivatives

50

-

50

Income from liquid asset trading activities

-

105

-

105

Charges on borrowings

(24)

(66)

-

(90)

Advisory services income

-

64

Service fees and other income

69

-

69

Administrative expenses

(227)

(6)

(13)

(246)

Advisory services expenses

-

(74)

Expense from pension and other postretirement benefit plans

(32)

(2)

(12)

(46)

Other expenses

(13)

-

(13)

Foreign currency transaction gains (losses) on non-trading activities

(21)

(10)

-

(31)

Income (loss) before net unrealized gains and losses on non-

trading financial instruments accounted for at fair value and

grants to IDA

(11)

21

(35)

(25)

Net unrealized gains (losses) on non-trading financial instruments

accounted for at fair value

49

(8)

-

41

Net income (loss)

38

13

(35)

16

Net losses attributable to non-controlling interests

3

-

3

Net income (loss) attributable to IFC

$

41

$

13

$

(35)

$

19

Page 67

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE L – SEGMENT REPORTING (Continued)

Six months ended December 31, 2015

Investment

services

Treasury

services

Advisory

services

Total

Income from loans and guarantees, including realized gains and losses

on loans and associated derivatives

$

545

$

-

$

-

$

545

Provision for losses on loans, guarantees and other receivables

(195)

-

(195)

Income from equity investments and associated derivatives

266

-

266

Income from debt securities, including realized gains and losses on

debt securities and associated derivatives

69

-

69

Income from liquid asset trading activities

-

113

-

113

Charges on borrowings

(43)

(123)

-

(166)

Advisory services income

-

109

Service fees and other income

102

-

102

Administrative expenses

(456)

(9)

(26)

(491)

Advisory services expenses

-

(128)

Expense from pension and other postretirement benefit plans

(67)

(4)

(21)

(92)

Other expenses

(20)

-

(20)

Foreign currency transaction gains (losses) on non-trading activities

(30)

42

-

12

Income (loss) before net unrealized gains and losses on non-

trading financial instruments accounted for at fair value and

grants to IDA

171

19

(66)

124

Net unrealized gains (losses) on non-trading financial instruments

accounted for at fair value

(68)

107

-

39

Net income (loss)

103

126

(66)

163

Net losses attributable to non-controlling interests

5

-

5

Net income (loss) attributable to IFC

$

108

$

126

$

(66)

$

168

Three months ended December 31, 2014

Investment

services

Treasury

services

Advisory

services

Total

Income from loans and guarantees, realized gains and losses on loans

and associated derivatives

$

237

$

-

$

-

$

237

Provision for losses on loans, guarantees and other receivables

(39)

-

(39)

Income from equity investments and associated derivatives

(52)

-

(52)

Income from debt securities, including realized gains and losses on

debt securities and associated derivatives

49

-

49

Income from liquid asset trading activities

-

107

-

107

Charges on borrowings

2

(65)

-

(63)

Advisory services income

-

62

Service fees and other income

78

-

78

Administrative expenses

(226)

(4)

(13)

(243)

Advisory services expenses

-

(72)

Expense from pension and other postretirement benefit plans

(34)

(2)

(14)

(50)

Other expenses

(10)

-

(10)

Foreign currency transaction gains and losses on non-trading activities

(17)

32

-

15

Income (loss) before net unrealized gains and losses on non-

trading financial instruments accounted for at fair value and

grants to IDA

(12)

68

(37)

19

Net unrealized gains and losses on non-trading financial instruments

accounted for at fair value

(18)

(31)

-

(49)

Net income (loss)

(30)

37

(37)

(30)

Net losses attributable to non-controlling interests

20

-

20

Net income (loss) attributable to IFC

$

(10)

$

37

$

(37)

$

(10)

Page 68

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE L – SEGMENT REPORTING (Continued)

Six months ended December 31, 2014

Investment

services

Treasury

services

Advisory

services

Total

Income from loans and guarantees, realized gains and losses on loans

and associated derivatives

$

571

$

-

$

-

$

571

Provision for losses on loans, guarantees and other receivables

(58)

-

(58)

Income from equity investments and associated derivatives

276

-

276

Income from debt securities, including realized gains and losses on

debt securities and associated derivatives

90

-

90

Income from liquid asset trading activities

-

204

-

204

Charges on borrowings

(27)

(91)

-

(118)

Advisory services income

-

112

Service fees and other income

126

-

126

Administrative expenses

(434)

(8)

(23)

(465)

Advisory services expenses

-

(134)

Expense from pension and other postretirement benefit plans

(69)

(4)

(26)

(99)

Other expenses

(18)

-

(18)

Foreign currency transaction gains and losses on non-trading activities

(30)

74

-

44

Income (loss) before net unrealized gains and losses on non-

trading financial instruments accounted for at fair value and

grants to IDA

427

175

(71)

531

Net unrealized gains and losses on non-trading financial instruments

accounted for at fair value

(32)

(102)

-

(134)

Net income (loss)

395

73

(71)

397

Net losses attributable to non-controlling interests

30

-

30

Net income (loss) attributable to IFC

$

425

$

73

$

(71)

$

427

NOTE M – VARIABLE INTEREST ENTITIES

Significant variable interests

IFC has identified investments in 211 VIEs (43 of which were identified as such due to the adoption of ASU 2015-02 on July 1, 2015) which are not

consolidated by IFC but in which it is deemed to hold significant variable interests at December 31, 2015 (163 investments - June 30, 2015).

The majority of these VIEs do not involve securitizations or other types of structured financing. IFC is usually the minority investor in these VIEs.

These VIEs are mainly: (a) investment funds, where the general partner or fund manager does not have substantive equity at risk, which IFC does

not consolidate because it does not absorb the majority of funds’ expected losses or expected residual returns and (b) entities whose total equity

investment is considered insufficient to permit such entity to finance its activities without additional subordinated financial support or whose activities

are so narrowly defined by contracts that equity investors are considered to lack decision making ability, which IFC does not consolidate because it

does not have the power to control the activities that most significantly impact their economic performance. IFC’s involvement with these VIEs

includes investments in equity interests and senior or subordinated interests, guarantees and risk management arrangements. IFC’s interests in

these VIEs are recorded on IFC’s condensed consolidated balance sheet primarily in equity investments, loans, debt securities, and other liabilities,

as appropriate.

Based on the most recent available data of these VIEs, the balance sheet size, including committed funding, in which IFC is deemed to hold

significant variable interests, totaled $28,867 million at December 31, 2015 ($26,173 million - June 30, 2015). IFC’s maximum exposure to loss as

a result of its investments in these VIEs, comprising both carrying value of investments and amounts committed but not yet disbursed, was $5,651

million at December 31, 2015 ($4,096 million - June 30, 2015).

Page 69

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE M – VARIABLE INTEREST ENTITIES (continued)

The industry sector and geographical regional analysis of IFC’s maximum exposures as a result of its investment in these VIEs at December 31,

2015 and June 30, 2015 is as follows (US$ millions):

December 31, 2015

Loans

Equity

investments

Debt

securities

Guarantees

Risk

management

Total

Manufacturing, agribusiness and services

Asia

$

156

$

12

$

-

$

-

$

-

$

168

Europe, Middle East and North Africa

286

35

-

321

Sub-Saharan Africa, Latin America and

Caribbean

232

86

-

318

Other

-

30

-

30

Total manufacturing, agribusiness and

services

674

163

-

837

Financial markets

Asia

159

15

-

10

184

Europe, Middle East and North Africa

20

12

202

2

-

236

Sub-Saharan Africa, Latin America and

Caribbean

80

27

293

-

400

Other

2

93

227

-

9

331

Total financial markets

261

147

722

2

19

1,151

Infrastructure and natural resources

Asia

575

171

3

-

2

751

Europe, Middle East and North Africa

454

67

3

-

16

540

Sub-Saharan Africa, Latin America and

Caribbean

1,137

240

14

4

54

1,449

Other

220

1

-

221

Total infrastructure and natural resources

2,386

479

20

4

72

2,961

Telecom, media & technology, and venture

investing

Asia

-

274

-

274

Europe, Middle East and North Africa

-

118

7

-

125

Sub-Saharan Africa, Latin America and

Caribbean

36

223

9

-

1

269

Other

-

34

-

34

Total telecom, media & technology, and

venture investing

36

649

16

-

1

702

Maximum exposure to VIEs

$

3,357

$

1,438

$

758

$

6

$

92

$

5,651

of which:

Carrying value

2,912

834

529

6

51

4,332

Committed but not disbursed

445

604

229

-

41

1,319

Page 70

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE M – VARIABLE INTEREST ENTITIES (continued)

June 30, 2015

Loans

Equity

investments

Debt

securities

Guarantees

Risk

management

Total

Manufacturing, agribusiness and services

Asia

$

164

$

13

$

-

$

-

$

-

$

177

Europe, Middle East and North Africa

328

37

-

365

Sub-Saharan Africa, Latin America and

Caribbean

181

97

-

1

279

Total manufacturing, agribusiness and

services

673

147

-

1

821

Financial markets

Asia

167

-

10

177

Europe, Middle East and North Africa

23

13

118

2

-

156

Sub-Saharan Africa, Latin America and

Caribbean

6

1

124

-

131

Other

3

-

218

-

9

230

Total financial markets

199

14

460

2

19

694

Infrastructure and natural resources

Asia

450

57

2

-

509

Europe, Middle East and North Africa

439

31

51

-

19

540

Sub-Saharan Africa, Latin America and

Caribbean

1,059

25

1

4

44

1,133

Other

-

1

-

1

Total infrastructure and natural resources

1,948

114

54

4

63

2,183

Telecom, media & technology, and venture

investing

Asia

2

71

13

-

86

Europe, Middle East and North Africa

-

25

17

-

42

Sub-Saharan Africa, Latin America and

Caribbean

44

99

9

-

1

153

Other

-

109

8

-

117

Total telecom, media & technology, and

venture investing

46

304

47

-

1

398

Maximum exposure to VIEs

$

2,866

$

579

$

561

$

6

$

84

$

4,096

of which:

Carrying value

2,553

368

507

6

54

3,488

Committed but not disbursed

313

211

54

0

30

608

NOTE N – ADVISORY SERVICES

IFC provides advisory services to government and private sector clients. Since July 1, 2014, IFC advisory services to governments on investment

climate and financial sector development have been delivered in partnership with IBRD through WBG Global Practices. IFC funds this business line

by a combination of cash received from government and other donors and IFC’s operations via retained earnings and operating budget allocations as

well as fees received from the recipients of the services.

IFC administers donor funds through trust funds. Donor funds are restricted for purposes specified in agreements with the donors.

Donor funds under administration and IFC’s funding can be comingled in accordance with administration agreements with donors. The comingled

funds are held in a separate liquid asset investment portfolio managed by IBRD, which is not commingled with IFC’s other liquid assets and is reported

at fair value in other assets. Donor funds are refundable until expended for their designated purpose.

As of December 31, 2015, other assets include undisbursed donor funds of $532 million ($467 million - June 30, 2015) and IFC’s advisory services

funding of $193 million ($165 million - June 30, 2015). Included in other liabilities as of December 31, 2015 is $532 million ($467 million - June 30,

2015) of refundable undisbursed donor funds.

Page 71

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE O – PENSION AND OTHER POSTRETIREMENT BENEFITS

IBRD, IFC and MIGA participate in a defined benefit Staff Retirement Plan (SRP), a Retired Staff Benefits Plan and Trust (RSBP) and a Post-

Employment Benefits Plan (PEBP) that cover substantially all of their staff members.

All costs, assets and liabilities associated with these plans are allocated between IBRD, IFC and MIGA based upon their employees’ respective

participation in the plans. Costs allocated to IBRD are then shared between IBRD and IDA based on an agreed cost-sharing ratio. The expenses

for the SRP, RSBP, and PEBP are included in expense from pension and other postretirement benefit plans.

The following table summarizes the benefit costs associated with the SRP, RSBP, and PEBP allocated to IFC for the three and six months ended

December 31, 2015 and 2014 (US$ millions):

Three months ended December 31,

2015

2014

SRP

RSBP

PEBP

Total

SRP

RSBP

PEBP

Total

Benefit cost

Service cost

$

35

$

8

$

6

$

49

$

35

$

9

$

6

$

50

Interest cost

34

5

4

43

33

6

3

42

Expected return

on plan assets

(47)

(7)

-

(54)

(46)

(7)

-

(53)

Amortization of prior

service cost

1

-

1

*

Amortization of

unrecognized net

loss

4

-

3

7

6

1

4

11

Net periodic pension

cost

$

27

$

6

$

13

$

46

$

28

$

9

$

13

$

50

Six months ended December 31,

2015

2014

SRP

RSBP

PEBP

Total

SRP

RSBP

PEBP

Total

Benefit cost

Service cost

$

69

$

16

$

12

$

97

$

70

$

18

$

11

$

99

Interest cost

68

11

7

86

65

12

7

84

Expected return

on plan assets

(94)

(14)

-

(108)

(93)

(14)

-

(107)

Amortization of prior

service cost

1

3

1

*

2

Amortization of

unrecognized net

loss

8

-

6

14

11

3

7

21

Net periodic pension

cost

$

52

$

14

$

26

$

92

$

54

$

20

$

25

$

99

* Less than $0.5 million

Page 72

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE P – OFFSETTING OF DERIVATIVES, RESALE, REPURCHASE AND SECURITIES LENDING AGREEMENTS AND COLLATERAL

IFC does not present derivative assets and liabilities or amounts due or owed under resale, repurchase and securities lending transactions related

to contracts entered into with the same counterparty under a legally enforceable netting agreement on a net basis on its consolidated balance sheet.

The following table provides the gross and net positions of IFC’s derivative contracts, resale, repurchase and securities lending agreements

considering amounts and collateral held or pledged that are subject to enforceable counterparty credit support and netting agreements described

below (US$ millions). Collateral amounts are included only to the extent of the related net derivative fair values or net resale, repurchase and

securities lending agreements amounts.

December 31, 2015

Assets

Gross amount of

assets presented in

the consolidated

balance sheet

Gross amounts not offset in

the consolidated balance sheet

Financial

instruments

Collateral

received

Net amount

Derivative assets

$

3,910*

$

2,087

$

749***

$

1,074

Resale agreements

-

Total assets

$

3,910

$

2,087

$

749

$

1,074

December 31, 2015

Liabilities

Gross amount of

liabilities presented in

the consolidated

balance sheet

Gross amounts not offset in

the consolidated balance sheet

Financial

instruments

Cash

Collateral

pledged

Net amount

Derivative liabilities

$

4,828**

$

2,087

$

1,095

$

1,646

Repurchase and securities lending agreements

4,042

-

Total liabilities

$

8,870

$

6,129

$

1,095

$

1,646

June 30, 2015

Assets

Gross amount of

assets presented in the

consolidated

balance sheet

Gross amounts not offset in

the consolidated balance sheet

Financial

instruments

Collateral

received

Net amount

Derivative assets

$

3,626*

$

1,759

$

966***

$

901

Resale agreements

68

67

-

1

Total assets

$

3,694

$

1,826

$

966

$

902

June 30, 2015

Liabilities

Gross amount of

liabilities presented in

the consolidated

balance sheet

Gross amounts not offset in

the consolidated balance sheet

Financial

instruments

Collateral

pledged

Net amount

Derivative liabilities

$

4,398**

$

1,759

$

-

$

2,639

Repurchase and securities lending agreements

4,458

4,418

-

40

Total liabilities

$

8,856

$

6,177

$

-

$

2,679

* Includes accrued income of $392 million and $371 million as of December 31, 2015 and June 30, 2015 respectively.

** Includes accrued charges of $206 million and $173 million as of December 31, 2015 and June 30, 2015 respectively.

*** Includes cash collateral of $152 million and $216 million as of December 31, 2015 and June 30, 2015 respectively. The remaining amounts of collateral received consist

of off-balance-sheet US Treasury securities reported in the above table at fair value.

IFC’s derivative contracts with market counterparties are entered into under standardized master agreements published by the International Swaps

and Derivatives Association (“ISDA” Agreements). ISDA Agreements provide for a single lump sum settlement amount upon the early termination

of transactions following a default or termination event whereby amounts payable by the non-defaulting party to the other party may be applied to

reduce any amounts that the other party owes the non-defaulting party. This setoff effectively reduces any amount payable by the non-defaulting

party to the defaulting party.

Page 73

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE P – OFFSETTING OF DERIVATIVES, RESALE, REPURCHASE AND SECURITIES LENDING AGREEMENTS AND COLLATERAL

(Continued)

IFC’s ISDA Agreements are appended by a Credit Support Annex (“CSA”) that provides for the receipt, and in some cases, posting, of collateral in

the form of cash, U.S. Treasury securities or U.K. gilts to reduce mark-to market exposure among derivative market counterparties. IFC recognizes

cash collateral received and a corresponding liability on its balance sheet for the obligation to return it. Securities received as collateral are not

recognized on IFC’s balance sheet. As of December 31, 2015, $1,100 million of cash collateral was posted under CSAs ($0 June 30, 2015). IFC

recognizes a receivable on its balance sheet for its rights to cash collateral posted. In accordance with the CSAs, IFC may rehypothecate securities

received as collateral, subject to the obligation to return such collateral and any related distributions received. In the event of a counterparty default,

IFC may exercise certain rights and remedies, including the right to set off any amounts payable by the counterparty against any collateral held by

IFC and the right to liquidate any collateral held. As of December 31, 2015, IFC had $221 million ($237 million at June 30, 2015) of outstanding

obligations to return cash collateral under CSAs. The estimated fair value of all securities received and held as collateral under CSAs of December

31, 2015, all of which may be rehypothecated, was $601 million ($756 million - June 30, 2015). As of December 31, 2015, $0 of such collateral was

rehypothecated under securities lending agreements ($210 million - June 30, 2015).

Collateral posted by IFC in connection with repurchase agreements approximates the amounts classified as Securities sold under repurchase

agreements. At December 31, 2015, trading securities with a carrying amount (fair value) of $192 million ($171 million - June 30, 2015) were pledged

in connection with borrowings under a short-term discount note program, the carrying amount of which was $2,304 million ($1,343 million - June 30,

2015).

Under certain CSA’s IFC is not required to pledge collateral unless its credit rating is downgraded from its current AAA/Aaa. The aggregate fair

value of derivatives containing such a credit risk-linked contingent feature in a net liability position was $1,180 million at December 31, 2015 ($1,862

million at June 30, 2015). At December 31, 2015, IFC had no collateral posted under these agreements. If IFC’s credit rating were to be downgraded

from its current AAA/Aaa to AA+/Aa1 or below, then collateral in the amount of $538 million would be required to be posted against net liability

positions with counterparties at December 31, 2015 ($1,097 million at June 30, 2015).

IFC’s resale, repurchase and securities lending transactions are entered into with counterparties under industry standard master netting agreements

which generally provide the right to offset amounts owed one another with respect to multiple transactions under such master netting agreement

and liquidate the purchased or borrowed securities in the event of counterparty default. The estimated fair value of all securities received and held

as collateral under these master netting agreements as of December 31, 2015 was $0 ($68 million - June 30, 2015).

The following table presents an analysis of IFC’s repurchase and securities lending transactions by (1) class of collateral pledged and (2) their

remaining contractual maturity as of December 31, 2015 and June 30, 2015 (US$ millions):

Remaining Contractual Maturity of the Agreements, as of December 31, 2015

Overnight and

Continuous

Up to 30

days

30-90

days

Greater than

90 days

Total

Repurchase agreements

U.S. Treasury securities

$

592

$

3,450

$

-

$

-

$

4,042

Agency securities

-

Municipal securities and other

-

Total Repurchase agreements

592

3,450

-

4,042

Securities lending transactions

U.S. Treasury securities

$

-

$

-

$

-

$

-

$

-

Agency securities

-

Covered Bonds and other

-

Total Securities lending transactions

-

Total Repurchase agreements and Securities lending

transactions

$

592

$

3,450

$

-

$

-

$

4,042

As of December 31, 2015, IFC has no repurchase-to-maturity transactions outstanding.

Page 74

INTERNATIONAL FINANCE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTE P – OFFSETTING OF DERIVATIVES, RESALE, REPURCHASE AND SECURITIES LENDING AGREEMENTS AND COLLATERAL

(Continued)

Remaining Contractual Maturity of the Agreements, as of June 30 2015

Overnight and

Continuous

Up to 30

days

30-90

days

Greater than

90 days

Total

Repurchase agreements

U.S. Treasury securities

$

8

$

3,409

$

11

$

-

$

3,428

Agency securities

-

70

95

64

229

Municipal securities and other

18

394

141

-

553

Total Repurchase agreements

26

3,873

247

64

4,210

Securities lending transactions

U.S. Treasury securities

$

209

$

-

$

-

$

-

$

209

Agency securities

-

Covered Bonds and other

-

Total Securities lending transactions

209

-

209

Total Repurchase agreements and Securities lending

transactions

$

235

$

3,873

$

247

$

64

$

4,419

As of June 30, 2015, IFC has no repurchase-to-maturity transactions outstanding.

NOTE Q – RELATED PARTY TRANSACTIONS

During FY16Q2, IFC sold a portion of its building in Accra, Ghana to IBRD for $13 million that generated a gain of $3 million that is included in Other

income.

During FY15 Q1, IFC issued an amortizing, non-interest bearing promissory note, maturing September 15, 2039, to IDA (the Note) in exchange for

$1,179 million. The Note requires payments totaling $1,318 million, resulting in an effective interest rate of 1.84%. With IFC’s consent, IDA may

redeem the Note after September 2, 2019, upon an adverse change in its financial condition or outlook. The amount due IDA upon such redemption

is equal to the present value of the all unpaid amounts discounted at the effective interest rate. IDA may transfer the Note; however, its redemption

right is not transferrable. IFC has elected the Fair Value Option for the Note.

NOTE R – CONTINGENCIES

In the normal course of its business, IFC is from time to time named as a defendant or co-defendant in various legal actions on different grounds in

various jurisdictions. Although there can be no assurances, based on the information currently available, IFC’s Management does not believe the

outcome of any of the various existing legal actions will have a material adverse effect on IFC’s financial position, results of operations or cash flows.

KPMG LL

P

Suite 12000

1801 K Street, NW

Washington, DC 20006

KPMG LLP is a Delaware limited liability partnership,

the U.S. member firm of KPMG International Cooperative

(“KPMG International”), a Swiss entity.

Independent Auditors’ Review Report

President and Board of Directors

International Finance Corporation:

Report on the Financial Statements

We have reviewed the condensed consolidated financial statements of International Finance Corporation

(IFC), which comprise the condensed consolidated balance sheet as of December 31, 2015, the related

condensed consolidated statements of income and comprehensive income for the three and six-month

periods ended December 31, 2015 and 2014, and the related condensed and consolidated statements of

changes in capital and cash flows for the six-month periods ended December 31, 2015 and 2014.

Management’s Responsibility

IFC’s management is responsible for the preparation and fair presentation of the condensed consolidated

financial information in accordance with accounting principles generally accepted in the United States of

America; this responsibility includes the design, implementation, and maintenance of internal control

sufficient to provide a reasonable basis for the preparation and fair presentation of interim financial

information in accordance with accounting principles generally accepted in the United States of America.

Auditors’ Responsibility

Our responsibility is to conduct our reviews in accordance with auditing standards generally accepted in the

United States of America applicable to reviews of interim financial information. A review of interim

financial information consists principally of applying analytical procedures and making inquiries of

persons responsible for financial and accounting matters. It is substantially less in scope than an audit

conducted in accordance with auditing standards generally accepted in the United States of America, the

objective of which is the expression of an opinion regarding the financial information. Accordingly, we do

not express such an opinion.

Conclusion

Based on our reviews, we are not aware of any material modifications that should be made to the

condensed consolidated financial information referred to above for it to be in accordance with accounting

principles generally accepted in the United States of America.

Report on Condensed Balance Sheet as of June 30, 2015

We have previously audited, in accordance with auditing standards generally accepted in the United States

of America, the consolidated balance sheet as of June 30, 2015, and the related consolidated statements of

income, comprehensive income, changes in capital, and cash flows for the year then ended (not presented

herein); and we expressed an unmodified audit opinion on those audited consolidated financial statements

in our report dated August 6, 2015. In our opinion, the accompanying condensed consolidated balance

sheet of IFC as of June 30, 2015, is consistent, in all material respects, with the audited consolidated

financial statements from which it has been derived.

February 1 , 2016

Page 75