FirstCaribbean International Bank (Bahamas) Limited

cibcfcib.com

FirstCaribbean International Bank (Bahamas) Limited

Vision

To create the Caribbean’s number one

financial services institution.

First for Customers

First for Employees

First for Shareholders


Contents

Notice of Meeting . . . . . . . . . . . . . . . . .3

Section 1: One Bank, One Caribbean

Branch Network . . . . . . . . . . . . . . . . . . . .6

Ownership Structure . . . . . . . . . . . . . . . .7

Main Branches and Centres . . . . . . . . . . .9

Board of Directors . . . . . . . . . . . . . . . . .10

Executive Management . . . . . . . . . . . . .12

Advisors and Senior Management . . . . . .13

Chairman’s Report . . . . . . . . . . . . . . . . .15

Chief Executive Officer’s Report . . . . . . .17

Managing Director’s Report . . . . . . . . . .21

Directors’ Report . . . . . . . . . . . . . . . . . .23

Management’s Discussion

and Analysis . . . . . . . . . . . . . . . . . . . . . .24

Section 2: Building the Brand

Retail Banking . . . . . . . . . . . . . . . . . . . .30

Capital Markets . . . . . . . . . . . . . . . . . . .32

Corporate Banking . . . . . . . . . . . . . . . . .34

International Banking . . . . . . . . . . . . . . .36

Marketing . . . . . . . . . . . . . . . . . . . . . . .38

Human Resources . . . . . . . . . . . . . . . . . .40

Technology Report . . . . . . . . . . . . . . . . .42

Risk Report . . . . . . . . . . . . . . . . . . . . . .43

Section 3: Financial Statements 2004

Auditors’ Report . . . . . . . . . . . . . . . . . . .46

Financial Statements . . . . . . . . . . . . . . .47

Information Circular . . . . . . . . . . . . . . . .78

Proxy Form . . . . . . . . . . . . . . . . . . . . . .81

2


Notice of Meeting

Annual Meeting

Notice is hereby given that the Ninth Annual General

Meeting of FirstCaribbean International Bank (Bahamas)

Limited will be held at 6:00 p.m. on April 8th, 2005 at the

British Colonial Hilton, Victoria Room, Number One Bay

Street, Nassau, The Bahamas, for the following purposes:

1. To read the minutes of the last Annual General

Meeting held on March 31st, 2004.

2. To receive and consider the Chairman’s review.

3. To receive accounts for the year ended October 31st,

2004 and the report of the Directors and Auditors

thereon.

4. To elect the following Directors:

i.

ii.

iii.

iv.

v.

vi.

vii.

viii.

Sharon Brown

Teresa Butler

Jan-Arne Farstad

Terence R. Hilts

Joseph W. P. Krukowski

Michael Mansoor

Willie Moss

G. Diane Stewart

5. To approve the appointment of PricewaterhouseCoopers

as the Auditor of the Company and

authorise the Directors to fix their remuneration.

6. Ratification of dividends for fiscal 2004.

7. To discuss any other business which may properly

come before the Annual General Meeting.

By Order of the Board of Directors

Record Date

Holders of FirstCaribbean International Bank (Bahamas)

Limited ordinary shares of record at the close of business

on March 14, 2005 are entitled to vote at the meeting.

Financial Statements

The Company’s audited financial statements for the year

ended October 31st 2004 are included in the Company’s

2004 annual report, which is enclosed as a part of the

proxy soliciting material.

Proxies

Shareholders of the Company entitled to attend and vote

at the Meeting are entitled to appoint one or more proxies

to attend and, in a poll, vote instead of them. A proxy

need not be a shareholder of the Company. Any instrument

appointing a proxy must be received at the office of

the Corporate Secretary, FirstCaribbean International

Bank (Bahamas) Limited, 4th Floor, #308 East Bay Street,

Nassau, The Bahamas not less than 48 hours before the

Meeting. Shareholders who return completed proxy

forms are not precluded, if subsequently they so wish,

from attending the Meeting instead of their proxies and

voting in person. In the event of a poll, their proxy votes

lodged with the Registrar and Transfer Agent will be

excluded.

Dividend

An interim dividend of fifteen cents ($0.15) per common

share was paid on July 16th, 2004. A final dividend of

eighteen cents ($0.18) per common share for the fiscal

year 2004 was approved by the Directors on December

17th, 2004 and paid to shareholders on January 7th,

2005. Total dividends paid for fiscal 2004 was thirty-three

cents ($0.33).

REGISTERED OFFICE: FirstCaribbean International Bank

(Bahamas) Limited, 4th Floor, #308 East Bay Street,

Nassau, the Bahamas.

Teresa S. Williams

Corporate Secretary

FirstCaribbean International Bank (Bahamas) Limited

March 14th, 2005

3


One Bank, One Caribbean


Upon us now is a time of focus.

In the past year, we successfully completed the

tremendous task of integrating the systems of our

heritage institutions, making us truly one bank spanning

the region. We also faced the full force of four

hurricanes that battered several islands in the space of

one month. Yet this only served to affirm the bond we

have formed with the people and communities we

serve — our branches in the affected islands bounced

back remarkably, working round the clock to restore a

sense of normalcy to our customers in the face of

adversity.

Amidst all this turmoil, our commitment to key

strategies provided significant yields. Several business

targets exceeded even the most optimistic expectations.

New products and services were successfully launched.

And we took our first step into the attractive market of

Trinidad and Tobago with our acquisition of the

profitable local merchant banking entity, The

Mercantile.

This mix of triumph and challenge has proven most

encouraging. It has highlighted the resilience inherent

in the region and its people. It has also proven the

value of commitment and focus. We now move forward

with renewed vigour and purpose, in step with the

region as it marches towards achieving a single market

and economy, with the intent of realising the credo we

have adopted: One Bank, One Caribbean.


6

Branch Network


Ownership Structure

7


FirstCaribbean Locations

Abaco Island

Hope Town

PO Box AB-20402

Hope Town

Tel: (242) 366-0296

Fax: (242) 367-2156

Man-O-War Cay

PO Box AB-20402

Tel: (242) 393-4386

Fax: (242) 367-2156

Marsh Harbour

PO Box AB-20402

Marsh Harbour

Tel: (242)367-2166

Fax: (242) 367-2156

New Plymouth

PO Box AB-20401

New Plymouth

Green Turtle Cay

Tel: (242) 365-4144

Fax: (242) 365-4144

Eleuthera Island

Governor’s Harbour

PO Box EL-25022

Governor’s Harbour

Tel: (242) 332-2300

Fax: (242) 332-2318

Grand Bahama Island

East Mall, Freeport

PO Box F-42556

The First Commercial Centre

East Mall Drive

Tel: (242) 352-6651

Fax: (242) 352-6655

Pioneer’s Way, Freeport

PO Box F-42404

Pioneer’s Way

Tel: (242) 352-8391

Fax: (242) 367-9712

Queen’s Highway, Freeport

PO Box F-42556

Queen’s Highway

Tel: (242) 352-9365

Fax: (242) 352-9367

New Providence Island

Bay Street

PO Box N-8350

Bay Street

Nassau

Tel: (242) 356-8000

Fax:(242) 328-7979

Cable Beach

PO Box N-7125

Hoffer Shopping Centre

Nassau

Tel: (242) 327-8361

Harbour Bay

PO Box N-8350

East Bay Street

Nassau

Tel: (242) 393-2334

Hurricane Hole

PO Box SS-6254

Hurricane Hole Shopping Plaza

Paradise Island

Tel: (242) 363-3588

Fax: (242) 363-2146

RND Plaza West

PO Box N-8329

RND Plaza

John F. Kennedy Drive

Nassau

Tel: (242) 323-2422

Fax: (242) 322-7851

Marathon Mall

PO Box N-8329

Marathon Mall

Tel: (242) 393-4386

Fax; (242) 394-0239

Palmdale

PO Box N-8350

Madeira Street

Nassau

Tel: (242) 322-1231

Fax: (242) 322-1121

Shirley Street

PO Box N-7125

Shirley Street

Tel: (242) 322-8455

Fax: (242) 326-6552

Thompson Boulevard

PO Box N-8350

Thompson Boulevard

Nassau

Tel: (242) 325-6479

Fax: (242) 328-1717

Commercial Banking Centre

PO Box N-7125

Shirley Street

Nassau

Tel: (242) 322-8455

Fax: (242) 328-1690

FirstCaribbean International

(Bahamas) Limited

Corporate Office

308 East Bay Street

Nassau

Tel: (242) 393-4710

Fax: (242) 393-4280

International Banking Centre

PO Box N-8350

Shirley Street

Nassau

Tel: (242) 302-6000

Fax: (242) 302-6091

Card Services Centre

PO Box N-8329

Independence Drive

Nassau

Tel: (242) 394-8472

Fax: (242) 394-3655

Premier Banking Centre

PO Box N-8350

Shirley Street

Nassau

Tel: (242) 328-4223

Fax: (242) 328-4227

Managing Director’s Office

PO Box N-3221

Charlotte House

Nassau

Tel: (242) 325-7384

Fax: (242) 323-1087

Turks & Caicos

Grand Turk

PO Box 61

Cockburn Town

Grand Turk

Tel: (649) 946-2831

Fax: (649) 946-2695

Providenciales

PO Box 698

Leeward Highway

Providenciales

Tel: (649) 946-5303

Fax: (649) 946-5325

South Caicos

Lee Street

Cockburn Harbour

Tel: (649) 946-3268

9


Board of Directors

Sharon Brown

Managing Director,

The Bahamas and

Turks and Caicos Islands

Michael Mansoor

Chairman – FirstCaribbean

International Bank Limited

Terry Hilts

Retired Banker

10


G. Diane Stewart

Attorney-at-Law

Willie Moss

Attorney-at-Law

Joseph Krukowski

Chairman, Doctors Hospital

Health System Ltd.

Teresa Butler

Permanent Alternative

Independent Director,

Chairman – Public Service

Commission of the Bahamas

11


12

The Executive Leadership Team

Back Row (L to R): Stuart Gunn,

John F. Riviere

Second Row (L to R): Julian Murillo,

Richard Pantcheff, Jan-Arne Farstad,

Charles Pink, Michael Mansoor,

Patrick Buxton, Horace Cobham

First Row (L to R): Mark Strang,

Francis M. Lewis, Raymond Campbell,

Sharon Brown, Juan M. Corral,

Bryan Gaunt, Peter Hall


Advisors and Senior Management

Board of Directors

Michael Mansoor – Chairman

Sharon Brown

Teresa Butler

Terence R. Hilts

Joseph W. P. Krukowski

Willie Moss

G. Diane Stewart

Legal Advisors

Harry B. Sands, Lobosky & Company

McKinney, Bancroft & Hughes

Corporate Secretary

Teresa S. Williams

Registrar and Transfer Agents

CIBC Trust Company (Bahamas) Limited

Senior Management

Graeme Skinner

Corporate Banking Director,

Bahamas and Turks and Caicos Islands

Ken Bain

International Banking Director,

Bahamas and Turks and Caicos Islands

Pauline Lightbourne

AGM, Channel Management and Service Excellence,

Northern Caribbean

Dr. Kerry Higgs

Head of Human Resources, Northern Caribbean

Cheryl Bazard

Director of Compliance Professionals

Deverne Bethel

Operations Network Manager

Pedro Delaney

Manager, Finance

Basil Longley

Infrastructure Manager, Technical Support Unit,

Operations and Technology

Denise Turnquest

Deputy Corporate Banking Director,

Bahamas and Turks and Caicos Islands

Registered Office

FirstCaribbean International Bank (Bahamas) Limited

4th Floor, #308 East Bay Street, Nassau, The Bahamas

Regional Audit Committee

Ron Lalonde – Chairman

Christopher Bovell

Teresa Butler

Chester Feldberg

Sir Allan Fields

Sir Fred Gollop

David Ritch

Auditors

PricewaterhouseCoopers

Branch Managers

Cherise Archer

Manager, JFK Branch

Paul Bartlett

Manager, Marsh Harbour, Abaco

Audrey Colebrooke

Manager, Thompson Boulevard Branch

Joann Dames

Manager, Bay Street Branch

Lawrence Daxon

Manager, Marathon Mall Branch

Gaye Dean

Manager, Paradise Island Branch

Sherwin Hilton

Manager, Governor’s Harbour, Eleuthera

Marlene Knowles

Manager, Pioneer’s Way Branch, Freeport, Grand Bahama

Sally Laing

Manager, East Mall Branch, Freeport, Grand Bahama

Byron Miller

Manager, Shirley Street Branch

Jackie Reckley

Manager, Palmdale Branch

Rozelda Rigby

Manager, Harbour Bay Branch

Jewel Sands

Manager, Cable Beach Branch

Beryn Neely

Senior Manager, Domestic Premier

Wendy Major

Manager, FirstCaribbean International Finance Corporation

(Bahamas) Limited

J.B. Smith

Manager, Turks and Caicos Islands

Corporate Banking Management

Earle Beneby

Head of Corporate, Freeport, Grand Bahama

Peter Edmunds

Head of Corporate and Country Manager,

Turks and Caicos Islands

Sylvia Moxey

Head of Commercial Banking

13


14

Michael Mansoor

Executive Chairman


Chairman’s Report

Completing a very challenging integration programme and

battling the negative impact of hurricanes on our business in

Grand Bahama and Abaco occupied much of our attention

and focus during our second year of operation. We emerged

a stronger, better Bank, confident that we are equipped to

stave off adversity and function effectively in the interest of

our shareholders, customers and staff.

With our new integrated technological platform, consolidated

branches, common policies and procedures, a unified

corporate culture and a strong brand, we were able to register

an acceptable financial performance in 2004.

We achieved satisfactory growth in loans in both the Bahamas

and Turks and Caicos Islands, particularly in mortgages and

corporate loans. We can proudly regard 2004 as a year of

accomplishment in terms of building the infrastructure of the

Bank.

Governance

As our new Bank continues to evolve into the world-class

Caribbean financial institution which we intend it to be,

matters of good and effective governance are a major priority

and continue to engage us at every level. Our executives and

employees continue to function in a manner consistent with

an awareness of the need to adhere to a rigorous and robust

culture of risk management, internal controls and governance

that safeguard and bolster the interests of our shareholders,

customers and employees.

Internal audit, operational, market and credit risk

management functions reside with committed executives

and specially skilled and trained staff within the Group.

Despite the challenges of the past year, we have successfully

maintained the level of expenses for both credit and noncredit

losses within acceptable limits.

Legal and regulatory compliance is one of our highest

priorities. We continue to interface and consult with our

regulators and in the last year have increased our contact with

them to ensure that each aspect of our operations continues

to be in compliance with all applicable laws and regulations.

The Board

Our Board of Directors continues to meet quarterly and have

oversight of all aspects of the Bank’s business. The Directors

provide a further level of corporate governance and valuable

feedback and intelligence from the market. Our executives

and senior managers benefit tremendously from the

experience and expertise of our directors.

hardworking staff, and guided by our core values, they are

working assiduously to secure improved customer service,

control and governance of our business and to transform the

Bank by introducing new channels and platforms. With the

effective leadership of our Senior Management, our staff will

maximise their potential, and the Bank retains its

commitment to rewarding our people for performance.

We take this opportunity to extend our sincere appreciation

to Mr. Terry Hilts for his sterling contribution to the Bank as

Retail Director, Northern Caribbean and formerly as

Managing Director of CIBC Bahamas Limited. He has retired

and will continue to give us the benefit of his tremendous

experience as a director of the Bank.

We also extend condolences to the family of the late Reg

Lobosky, retired director of the Bank.

Outlook for 2005

In October 2004 the Bank entered into an agreement for sale

of its building located on Bay Street in Nassau and a leaseback

of a portion of the building from which the branch will

continue to operate. The transaction was completed in

January 2005. We expect to use the proceeds to bolster our

capital formation.

In December 2004 the FirstCaribbean Group completed the

acquisition of a niche player in the Trinidad and Tobago

market, the Mercantile Banking & Financial Corporation

Limited. We are keen to expand our footprint into this

relatively large and prosperous market.

We enter aggressively into 2005 with our eyes fully fixed on

growing our business and expanding our market share and

footprint in all segments of our business in the Bahamas and

the Turks and Caicos Islands, while adhering to our control

framework.

We are deeply committed to utilising the new integrated

technology platform together with new channels of

distribution to offer our customers an even wider range and

quality of service in the years ahead.

We acknowledge the loyalty and support of our customers,

particularly in more recent times when we dealt with the

difficulties of integrating the heritage banks in the Bahamas

and the Turks and Caicos Islands. We believe that our

integration has been difficult but eminently successful. I wish

to thank our regulators, shareholders, customers, directors

and staff for their support during the past year.

Our People

We have welcomed new and experienced members to our

Management team, which now comprises a rich blend of

skilled professionals. Together with our committed and

Michael Mansoor

Chairman

15


16

Charles Pink

Chief Executive Officer


Chief Executive Officer’s Report

Regional Financial Performance

2004 has been a year of challenges, but a good year in

terms of financial performance and wider delivery.

The challenge has been to simultaneously complete the

integration of our two banks whilst also driving forward

our strategy and financial performance.

Further external challenges have arisen from the

unprecedented effect of four hurricanes (Bonnie,

Charley, Ivan and Frances) hitting our businesses in little

over a month.

Hurricane Ivan in particular had a devastating and

heart-rending effect on our businesses, their people and

customers.

NIAT (Net Income after Tax, before Goodwill and

Integration/Restructuring Items) decreased by 3.1% to

US$102.5 million.

This number is struck after an exceptional provision of

US$7.9 million for the Credit Risk effects of Hurricane

Ivan. Excluding this item, NIAT was US$110.4 million, a

4.2% increase in underlying profit on 2003.

Strong revenue turnaround was the main driver of these

numbers. Loans increased by an outstanding 10.5%

over 2003, with strong performance in each of the

Retail, Corporate and International businesses. Deposits

increased by 1.1%. Both of these increases reversed

two-year declining trends seen in 2002 and 2003. Total

Revenue increased by 4.2% to US$385.4 million.

Costs grew 9.0% to US$247.7 million. The absolute

year-on-year increase of $20.4 million included US$4.0

million depreciation charged for the first time on

completion of the IT investment inherent in systems

harmonisation to one platform, and an estimated US$4

million on a one-time basis for post-integration

remedial activities.

Credit Risk provisions were again extremely well

controlled and, excluding the provision for Hurricane

Ivan, were US$7.1 million, or 0.18% of outstanding

loans. This ratio benchmarks extremely well versus main

competitors, and with 10.5% Loan growth indicates

that the Company’s business model aimed at growing

key business aggregates whilst maintaining world-class

control is beginning to bear fruit. The Company’s A-

rating from Standard and Poor’s was reiterated this

year. Maintenance of this rating remains a key

objective. Again, this rating benchmarks well against

key local competitors.

Integration

Integration of the two banks into “one bank” was

completed in June 2004. Integration is now over, with the

integration team disbanded. Integration was completed

to planned timetable, under implementation costs

budget and with financial synergies continuing to exceed

plan. The plan was to deliver synergies of US$60 million

in 2005, the third year of operations of FirstCaribbean,

and we confidently expect that target to be exceeded.

Integration has been a transformational event, with

highlights including transition to:

•A new segmental business model within four new lines

of business (Corporate, Retail, International and Capital

Markets), moving away from previous geographic

organisational structures to focus on customers. Subsegments

have been created within each line of business

to develop focused customer offerings, thus “Premier”

and “Retail” within Retail Banking and “Corporate” and

“Business Banking” within Corporate.

• A single new FirstCaribbean brand, replacing the

heritage brands across 15 countries.

• A single state-of-the-art IT platform.

•A new centralised operations model removing

processing from branches and focusing on 12 local

processing centres and three regional processing

centres, leveraging the new IT platform.

•Consolidation of duplicated branches in close

proximity.

•New channels of Telephone Banking and Internet

Banking (launched to customers in January 2005),

across 15 countries.

•New single “centre of excellence” Head Office

functions, including building new functions previously

supplied by the former parent banks (e.g. Treasury,

Strategy, Audit).

•New harmonised Human Resources policies across 15

countries, including new grading, pay, benefits,

pensions and performance management models.

To achieve this transformational change across 15

countries in 18 months is a phenomenal achievement. I

should like to record a massive “thank you” to our

3,391 staff who have shown the most enormous

appetite for building the Caribbean’s leading Bank. We

now have a platform on which to build the next phase

of our development.

17


Chief Executive Officer’s Report

Strategy

At the same time as delivering integration and driving

short-term business performance, we have also continued

to invest in rolling out the implementation of our 5-year

strategy as set out in last year’s Report.

Highlights for 2004 have included:

Retail and Cards

• The implementation of a new Sales and Service focused

Organisation Design built around three new product

businesses in Home Finance, Cards and Consumer

Lending and Asset Management and Insurance.

• The recruitment of a new senior leadership team to

drive this key business forward.

• The launch of the “Revitalising Retail” programme,

delivering the above but with a particular focus on

service improvement, in particular via the introduction

of key service standards.

Corporate

• The definition of a new Organisation Design focusing

on Sales and Service. This will roll out early in 2005.

• The successful piloting of a “Super Lender” model,

providing dedicated resource to support Relationship

Managers in delivering large and complex deals. This

concept will be expanded in 2005.

International

• Enhanced product, geographic coverage and

resourcing in support of the International Mortgage

business.

• New Wealth Management products such as Securities

Lending. This is a focus for 2005.

Capital Markets

• Recruitment of a high-quality origination team. Several

mandates had been won by year-end and will be

delivered early in 2005.

Geographic Expansion

• After the year-end the Bank announced the acquisition

of The Mercantile, marking our entry to the key

Trinidad and Tobago market. We have ambitious plans

for the expansion of this business and are delighted

with the quality and cultural fit of the senior

management and staff of The Mercantile.

• We believe we have a business model which can be

successfully applied to other new geographies and

selectively have an active M&A strategy. Mark Strang’s

18

appointment to the new full-time role of Executive Director,

Corporate Development, with effect from November 1,

2004, reflects this focus.

Customer Service

Customer service is a very high priority for our Bank, captured

in the “First for Customers” objective of our Mission

Statement. It is fair to say that customer service has been

challenged by the integration process. New systems and

processes, new colleagues and extensive periods of training

have challenged our people’s commitment to our customers.

That phase is, however, behind us.

Significantly improving customer service in all our markets is

a number one priority of the Company. A CustomerFirst

programme has been launched to coordinate this charge,

and focus is on:

• Training staff in service standards and protocol, and further

embedding key process and product training.

• Reviewing recruitment processes to ensure recruitment of

staff with customer service aptitude.

• Introducing service standards and measures and

performance managing against them.

• Re-engineering key customer-facing processes to improve

service.

People—Employer of Choice

“Employer of Choice” continues to be the other pillar on

which our Mission Statement is built.

In 2004:

• Under “Pay for Performance”, we completed the

harmonisation of pay and benefits to a market-leading

package. We are delighted with the interest shown from

the external market in positions which we seek to fill

externally.

• Under “Sharing in our Success”, some 566 staff have now

invested in our Employee Share Purchase Plan. The 30%

increase in the share price over 2004 means that the

$1,500 to $3,500 of shares of the share gift is now worth

$1,950 to $4,550. I am delighted that our staff are sharing

directly in the fruit of their labours.

• Under “Investing in our No. 1 Asset”, we completed our

US$3.8 million integration programme and additionally

rolled out a range of other training courses including

Coaching, Performance Management and Industrial

Relations training.


Chief Executive Officer’s Report

• Under “Opportunities for All”, 84 staff achieved

promotions in 2004. With our common human

resources policies across the Caribbean subject to legal

and work permit requirements we are now able to

move staff freely across our businesses to broaden

experience. Forty staff were working outside their home

country by year-end.

There have been changes in our Executive Leadership

team in 2004. Robert Lane and Jem Clark returned to

Barclays at the end of their secondments. We welcomed

Juan Corral and Patrick Buxton as their replacements as

Chief Operating Officer and Group Treasurer. Mark

Teversham is on his way back to Barclays at the end of his

secondment and we welcomed Jan-Arne Farstad as his

replacement. Richard Pantcheff also joined us to lead the

transformation of Credit Risk. After the year-end we

announced the recruitment of Milton Brady to a new role

as Managing Director for our Jamaica business, reflecting

increased strategic focus on this business. Robert, Jem and

Mark were architects of our new Bank and I thank them

for their vision and unstinting commitment. To Juan, Jan-

Arne, Patrick, Richard and Milton, welcome—we have lots

to do.

Investing in our people, and ensuring we get the

appropriate returns on that investment in terms of

performance, remains a key focus in 2005.

Community Partnership

We remain a committed partner in the countries that we

call home.

We have continued our pledging of 1% of our profit after

tax to the FirstCaribbean Foundation. The work of the

Foundation is captured in our Social Annual Report which

we believe to be a first for the Caribbean.

A particular focus in 2004 was hurricane relief, with some

US$700,000 donated by FirstCaribbean and its heritage

banks to relief in Grenada, Cayman, Jamaica and

Bahamas. These were terrible times for the Caribbean but

the response of our people was incredible. Our acrossthe-board

3-month loan repayment moratoriums in

hurricane-afflicted areas will, I hope, play a part in getting

our communities back on their feet.

This has been a long CEO’s report. The length captures

the breadth of the agenda addressed in 2004, and the

scale of the delivery by our 3,391 incredible people.

We are now at a crucial juncture for our new Bank. We

leave behind three years of merger completion and

integration of “2 into 1”. We now have a platform for

success. We enter this next phase with confidence and

some anticipation. We have invested. Now it is time to

yield.

Control

We believe our Risk and Control processes are very strong,

as captured in our A-rating.

Nevertheless, in 2004 we moved to further strengthen

them, in particular:

• Transforming the Credit Risk function with new people,

structures and processes. A sign of our confidence was

the transfer of all credit sanctioning to the Bank from its

heritage shareholders. No longer are credits referred to

London and Toronto for sanction.

Charles Pink

Chief Executive Officer

We are pleased with the results, including the record

low level of Credit Risk provisions at 0.18% of loan book

and Non-Accruing Debt reducing by 19% to US$260

million.

• Launching a new Group Control Programme to lead

the introduction of new structures and processes

designed to further improve Operational Risk

performance.

Completing this strengthening of our Control

infrastructure is also a key priority for 2005.

19


20

Sharon Brown

Managing Director


Managing Director’s Report

The financial year 2004 is best characterised as a year of

change, challenge and new beginnings. We successfully

completed our technology conversion which lays the

foundation for new and improved products and services.

Major work was done during the year on our branch mergers,

renovation and expansion programme while additionally

introducing new services via our telephone banking centre.

We additionally had the challenge of coping with the

consequence of the two major hurricane hits to the Bahamas

while expanding our community partnership and improving

our financial performance.

Improving and Expanding Our Services

In November 2003 we officially opened the Group’s first

Telephone Service Centre with a complement of 17 staff

providing banking services to both local and some regional

FirstCaribbean customers. The establishment of the Centre is

in keeping with the Bank’s commitment to expanding our

delivery channels to our customers and providing greater

choice in servicing their banking needs.

March 2004 saw the final stage in the amalgamation of the

former Barclays and CIBC in the Bahamas into FirstCaribbean

with the completion of our technology conversion. The conversion

which followed months of planning and training

enabled our banking system across the Bahamas chain of

islands to function on the same technology platform. This

meant the uniting of the former Barclays and CIBC branches

onto a single world-class technology platform enabling full

and free use of our network of branches and ABMs for all our

customers. We are pleased that we were able to complete this

major system integration technologically successfully and

thank our customers for their patience as we went through

adjustment. The Turks and Caicos Islands integrated their technology

platform in August 2003.

During the year we successfully completed our branch

mergers and renovation programme involving 12 of our

branches in Providenciales, Nassau and Marsh Harbour,

Abaco. The merger, renovation and expansion of branch

premises positioned us to better serve our customers. The

newly renovated facilities enable us to provide more cashiers,

customer service officers and loan officers; a Corporate area

with dedicated corporate cashiers; customer meeting rooms

for privacy; knowledgeable branch ambassadors to welcome

customers and assist with queries; and more spacious banking

halls.

We extend our gratitude to our customers and staff for their

immense patience through the transition.

The extremely active hurricane season brought two

destructive systems through our territory, Frances and Jeanne,

which impacted our operations and the lives of our staff and

customers in Grand Bahama and Abaco. It is through the

commitment to service and support of our resilient staff that

we were able to restore service to customers on these islands

within a very short period following the hurricane hits.

Operations & Technology

We continued in 2004 to upgrade and enhance our

technology platform. The conversion to a common technology

platform for our entire business enables us to consolidate

systems, applications and network thus improving our service

delivery and positioning us to launch new products and

services to better meet our client expectations. We were also

able to achieve cost and revenue synergies consequent to one

unified platform.

Our state-of-the-art technology also facilitated increased

efficiency and automation of many of our processes, thus

freeing our staff to devote more time to meeting the needs of

our customers and truly becoming our customers’ first choice

as their financial partner.

The Bahamas continues as the Northern hub for a number of

the FirstCaribbean Group’s operational and processing

activities, providing service and support to a number of the

Group’s regional businesses.

Financial Performance

FirstCaribbean Bahamas continues as an excellently capitalised

bank with capital exceeding $525 million. Total Assets grew by

almost $48 million in 2004 driven by our loan growth and

ended the year at $3.26 billion.

Our financial performance in 2004 is quite pleasing,

particularly considering the enormous amount of change for

our customers and staff during the year. We are particularly

pleased with the performance of our lending book which

stood at almost $1.7 billion at year-end. Our loan book grew

by $172 million with growth taking place primarily in

mortgages and business loans. We are pleased that we have

been able to facilitate our customers in realising their dream of

owning their own homes and establishing and expanding

their businesses. Our Sales teams worked hard to ensure the

loans being booked were quality lendings and our Receivables

team worked hard on recoveries and assisting our customers

whose financial situation required some restructuring of their

facilities. These efforts facilitated a reduction in non-performing

loans of $11 million or 10% and an improvement in our loan

loss expense of 13% compared to 2003.

In addition to the good news story on loans, our deposits

increased by $37 million and net interest income by 13%.

Consolidated net income for the year of $61.6 million is $13

million more than 2003 and when adjusted for the goodwill

expense in 2003 is $3.3 million higher.

Community Partnership

We were quite active partnering, donating and sponsor ing

21


Managing Director’s Report

with our local communities in 2004. In addition to the very

substantial number of charitable institutions which we

supported in 2004 to assist those who suffered enormously

from the devastation caused by Hurricanes Frances and

Jeanne, we contributed $150,000 to the Bahamas Disaster

Relief and Recovery Fund. We are pleased to assist in making a

difference.

We embarked on a major educational initiative in partnership

with the College of the Bahamas. This has been ratified by the

signing of a Memorandum of Understanding (MOU) to

provide a framework within which the College and the Bank

will collaborate in support of regional development and for the

mutual benefit of both institutions. We believe that education

is the key to successful development, and the signing of the

MOU is intended to facilitate our staff and the College in

keeping pace with and adapting to changes in technology and

the economic environment. Under the terms of the MOU,

FirstCaribbean provides funding to the College to support

some of the College’s initiatives.

2004 was the second year of our Unsung Heroes programme

wherein we recognised ordinary people in our communities

who perform over and above the call of duty without

consideration for reward or acclaim. We salute in the Bahamas

three worthy “unsung heroes”. Dr. Ebbie Shearer Jackson is an

optometrist who for two weeks every year provides free eye

care service in rural areas of the region. She has visited Haiti

where she can treat up to 200 patients in a day. Ricardo

Deveaux was instrumental in establishing the Primary School

Student of the Year Award. Dexter Bodie, of the Road Runners

Track Club, uses his personal resources to train the athletes and

fund their travel expenses. Each of our heroes was awarded

$6,000 toward their cause.

In the Bahamas we presented our Birthday Gift of $20,000 to

the Cancer Society of the Bahamas to support their very

valuable work. The funds were used by the Society to outfit

and equip two rooms of their new hospice facility which they

provide for Family Islanders seeking care in Nassau. In TCI we

made our gift presentation at the opening of their new branch

in Providenciales to the Turks and Caicos Medical Clinic to

assist in the purchase of a ventilator for the Pediatric Ward.

Our People

FirstCaribbean employees faced major challenges during the

year, including completing the integration process, branch

consolidation and dealing with the impact of hurricanes

Jeanne and Frances. We are tremendously proud of their

dedication and resilience, coupled with the delivery of strong

business results.

We are very proud of the opportunities available to our

employees to advance throughout the Bank regionally. Our

recent appointments include Pauline Lightbourne as Assistant

22

General Manager for Channels and Services for the Bahamas,

Turks and Caicos as well as the Cayman Islands. Mr. Andrew

McFall has been appointed to a similar role with responsibility

for the Leeward and Windward Islands. Additionally, within

our Compliance, Information Technology, Human Resources,

Operations and Corporate segments we have senior managers

based in the Bahamas with regional responsibilities as well as a

number of Bahamians holding positions outside The Bahamas.

As we move into 2005 our focus will be customer service

excellence, risk and control, development and growth. Project

Line in the Sand is a training programme that will be launched

in the second quarter with a focus on basic banking skills for

our new recruits, customer service training and people

management. We remain committed to ensuring that we

equip our employees so that they are able to deliver on our

goal to be “First for Customers”.

2005–Improving Customer Service, Operation

Efficiency and Shareholder Value

While the past year has been largely focused on implementing

and bedding down changes, the challenge for the year ahead

lies in continuing to improve our customer service and

operational efficiency whilst enhancing shareholder value. Staff

programmes to embed key activities and enhance

productivity, efficiency and relationship management are high

on the agenda for the coming year, as are continuing to

effectively managing risk, and adherence to prudent controls

and governance arrangements.

We are encouraged by what we see in the Bahamas and Turks

and Caicos economies and their future outlook.

Appreciation

We have accomplished much in 2004 with the commitment,

dedication and hard work of our management and staff. To

our staff of almost 800, you are to be commended for a year

that was productive and which created the launch pad for

sustainability, and even greater growth and success.

To our Board of Directors, we wish to thank you for your

oversight, counsel, guidance and support which you have

provided over the past year. And to our customers, we are

indebted to you for your patience and understanding in going

through these many changes with us during the past year as

we laid the foundation for improvement in our product

offering, enhancing our customer services.

Sharon Brown

Managing Director – Bahamas and Turks and Caicos Islands


Directors’ Report

In accordance with the Memorandum

and Articles of Association, the following

Directors cease to hold office at the end of

the Annual General Meeting, and being

eligible offer themselves for re-election:

Share Capital

Substantial Interest as at October 31st,

2004*

Common Shares of B$0.10 par value

i.

ii.

iii.

iv.

v.

vi.

vii.

viii.

Sharon E. Brown

Teresa Butler

Jan-Arne Farstad

Terence R. Hilts

Joseph W. P. Krukowski

Michael Mansoor

Willie Moss

G. Diane Stewart

1. FirstCaribbean International

Bank — 114,463,600 (95.21%)

*Substantial interest means a holding of

5% or more of the company’s issued

share capital.

The Board of Directors had appointed

Jan-Arne Farstad as a Director at a

meeting of the Board of Directors held on

December 17th, 2004, subject to

regulatory approval.

Teresa S. Williams

Corporate Secretary

By Order of the Board

Directors’ Interest

As at October 31st, 2004, particulars of Directors’

shareholdings in the issued capital of the Company are as

follows:

Common Shares of No Par Value

Beneficial Non-Beneficial

Interest

Interest

1. Terence Hilts 29,500 nil

Teresa S. Williams

Corporate Secretary

March 14th, 2005

Financial Results and Dividends

The Directors report that the Company’s net income for

the year ended October 31, 2004 before goodwill

amortisation and restructuring charges amounted to

$61.9 million. All statutory requirements for the year

ended October 31, 2004 have been fulfilled.

An interim dividend of fifteen cents ($0.15) per common

share was paid on July 16th, 2004. A final dividend of

eighteen cents ($0.18) per common share for the fiscal

year 2004 was approved by the Directors on December

17th, 2004 and paid to shareholders on January 7th,

2005. Total dividend paid for fiscal 2004 was thirty-three

cents ($0.33).

23


Management’s Discussion and Analysis of

Operating Results and Financial Condition

Financial Highlights

B$(000) 2004 2003

Net income 61,618 48,549

Operating income 61,897 58,581

Earnings per share (cents) 51.3 40.5

Operating income per share (cents) 51.5 48.9

Total assets 3,260,983 3,213,300

Total shareholders’ equity 525,092 500,740

Return on assets 1.9% 1.5%

Return on equity 19.1% 16.5%

Non-interest expense

to revenue ratio 48.6% 46.8%

Dividends per share (cents) 33 31

Dividend pay-out ratio 64% 77%

Dividends times covered 1.55 1.31

During the year, the Bank opted to adopt International

Financial Reporting Standards 3 – Business combinations,

International Accounting Standards 36 (revised 2004) –

Impairment of Assets and International Accounting

Standards 38 (revised 2004) – Intangible Assets. The effect

of these adoptions is that the Bank discontinued amortising

Goodwill effective November 1, 2003 which is now subject

to an annual impairment test. This year’s test revealed no

impairment in goodwill and as a result, there is no goodwill

amortisation expense for this fiscal year compared to $9.8

million last year. As a result of this change and along with

the $3.3 million improvement in operating profit, the Bank’s

net income for the year increased by $13.1 million over last

year to $61.6 million.

Likewise, earnings per share climbed to 51.3 cents for the

year from 40.5 cents in 2003 and operating profit per share

also increased to 51.5 cents from 48.9 cents last year.

Overview

Following the merger of CIBC Bahamas and Barclays

Bahamas in 2002, FirstCaribbean has begun an upward

trend in its net income and operating profit as well as its

assets.

55

50

45

49.6

48.9

51.5

Total assets increased by 1.5% from $3.21 billion at October

31, 2003 to $3.26 billion at October 31, 2004. Net income

was up by 26.9% from $48.5 million in 2003 to $61.6

million in 2004, whereas operating profit, i.e., net income

before integration and goodwill amortisation expenses,

increased by 5.7% from $58.6 million to $61.9 million.

40

35

30

25

20

2002 2003 2004

Return on equity for 2004, after allowing for the final

dividend for fiscal 2004, which was declared after the year

end, was 19.3% compared to 16.7% for the previous year.

Total Revenues

Total revenues, i.e. net interest income plus non-interest

income for the year increased by 6.7% over last year to

$135.8 million as net interest income increased by 12.9%

and non-interest income dropped by 6.9%.

24


Management’s Discussion and Analysis of

Operating Results and Financial Condition

$140

$135

$130

$125

$120

2002

2003 2004

Net Interest Income and Margin

Net interest income consists of interest earned on assets

(such as mortgages, loans, securities and deposits with

other banks), less interest paid on deposits from

customers and other banks.

$75

$70

$70.6

Net interest income for the year increased by $11.3 million,

or 12.9% from $87.6 million in 2003 to $98.9 million in

2004. Higher interest income of $6 million was earned on

loans as loan balances increased by 11.6% over last year.

Deposits placed with other banks and the securities

portfolios yielded $10 million more in interest than last year

as interest rates rose in the latter half of the fiscal year. The

US Fed rate bottomed out at 1.00% and as of July 2004

started to rise, ending the fiscal year at 1.75%. A substantial

amount of the Bank’s deposits and securities are held in US

dollars.

Interest expense increased by $4.8 million over last year due

to increased level of deposits as well as interest paid on

derivative instruments held in the trading portfolio.

Consequently, the net interest margin, which refers to the

interest spread earned by the Bank on total assets and total

liabilities, increased by 0.4% to 3.1% for the 2004 fiscal

year.

Non-interest Income

Non-interest income consists of all revenues not classified as

interest income. Non-interest income fell by $2.7 million to

$36.9 million for 2004 as the Bank incurred $3.7 million of

realised and unrealised losses on its trading portfolio this

fiscal year.

$65

$60

$55

$50

$59.5

$65.9

2002 2003 2004

Operating Expenses

The Bank’s operating expenses increased by $6.4 million or

10.8% to $65.9 million for the year ended October 31

2004. Property expenses along with depreciation expenses

increased during the year as the Bank upgraded its physical

premises as well as its technology systems. Increased

pension and healthcare costs along with increased

expenditures on outside services such as armored car

services and portfolio management fees raised the level of

staff costs and other operating expenses.

As a consequence, the ratio of non-interest expenses to

income increased from 46.8% in 2003 to 48.6% in 2004. In

25


Management’s Discussion and Analysis of

Operating Results and Financial Condition

order to improve operating efficiency, the Bank continues to

manage its expenses by seeking out opportunities to reduce

the overall costs and has nonetheless maintained the overall

ratio of operating expenses to revenues below 50%.

Summary Balance Sheet

B$(000)

2004 2003

Assets

Cash and due from banks 864,055 1,111,395

Securities 452,145 334,705

Loans 1,669,007 1,497,105

Other assets 275,776 270,095

3,260,983 3,213,300

Liabilities and shareholders' equity

Deposits 2,707,621 2,670,897

Other liabilities 28,270 41,663

Shareholders' equity 525,092 500,740

3,260,983 3,213,300

The Bank’s total assets grew by 1.5% or $47.7 million over

last year to $3,261 million at the end of 2004. This growth

is attributable to the strong growth in mortgages and the

increase in commercial loans.

Securities

The Bank maintains an investment portfolio of securities

and a trading portfolio of securities.

The investment securities are securities which the Bank

intends to hold to maturity and represent debt securities

issued by the Government or its related agencies. The B$

investment securities therefore form a part of the liquid

assets requirement prescribed by the Central Bank of the

Bahamas. The investment securities portfolio increased by

$14 million to $178.8 million at the end of this fiscal year.

Trading securities are securities which are acquired for the

purpose of generating a profit from short-term-fluctuations

in price or dealer’s margin. The trading securities, which

increased by $103 million during the year, consist of

government bonds, corporate bonds and asset-backed

securities.

Loans

Gross loans grew by $178 million or 12% from last year to

$1,715 million at October 31, 2004. Total loans, i.e., net of

the allowance for loan losses, was $1,669 million at the end

of this fiscal year.

A significant portion of this increase is represented by the

continued strong growth in residential mortgages which

resulted in total mortgages increasing by $112 million or

18% over last year. Commercial loans, including loans to

governments, also increased by $43 million, notwithstanding

the repayments during the year of some

significant business loans. Personal loans rose by $23

million from last year end.

$1,700

$1,669

$1,650

$1,600

$1,550

$1,500

$1,450

$1,513

$1,497

$1,400

$1,350

Cash and Due from Banks

Cash and due from banks decreased by $247 million at the

end of 2004 as funds were shifted to the trading securities

portfolio as well as used to fund the growth in loan

balances.

26

$1,300

$1,250

$1,200

2002 2003 2004


Management’s Discussion and Analysis of

Operating Results and Financial Condition

The loan loss provision was increased by $6.2 million to

$45.6 million with a total charge of $7.9 million to the

income statement for the year. This increase includes a $4.8

million increase in specific loan provision, which reflects the

Bank’s prudent approach to provisioning even as nonperforming

loans decreased by $11 million at year end.

The ratio of specific provision to non-performing loans

increased from 27.7% to 35.4%, whereas the general

provision as a percentage of performing loans remained at

0.6%. The ratio of the total provision to total loans

increased marginally from 2.6% in 2003 to 2.7% in 2004.

The actual expense for the year, however, decreased by

$1.2 million over last year to $7.9 million.

Deposits

Total deposits rose by $37 million, or 1.4% from its level in

2003, to $2,708 million at the end of this fiscal year.

$2,750

$2,725

$2,700

$2,675

to the end of last fiscal and deposits payable on demand

and after notice increased by 10% and 1% respectively.

Equity

The return on equity for this fiscal year is computed as

19.3% after adjusting shareholders’ equity for the final

dividend which was declared after the end of the year and

therefore not accrued. The return on equity last year was

16.7%. Using operating profit, the return on equity is

19.4% compared to 20.2% last year.

A final dividend of $0.18 per share in respect of this year’s

profits was declared after October 31, 2004 and therefore

not deducted from the reported shareholders’ equity. The

total dividend declared for the year amounted to $0.33 per

share ($39,671 million) compared to $0.31 ($37,267

million) last year. The dividend payout ratio for this year

computes to 64% compared to 77% last year. Using

operating profit, the dividend payout ratio is 64% for this

year as well as last year.

The capital ratio of the Bank, that is the ratio of capital to

the risk adjusted assets, increased to 17.1% at October 31,

2004, after allowing for the declaration of the final

dividend. The capital ratio of last year was 16.7%. The Bank

has continued to maintain a strong capital base and capital

ratio above the regulatory requirement.

The Bank increased its return on assets from 1.5% to 1.9%

at the end of fiscal year 2004.

$2,650

$2,625

$2,600

2002

2003 2004

Share Prices

During the year, the Bank experienced sustained growth in

the market price of its common shares. The market share

price improved 24% from $6.00 per share at October 2003

to $7.45 at October 31, 2004.

While deposits from individuals are traditionally less volatile

than other sources of funding, the level of personal savings

in The Bahamas remains relatively low and consequently the

core deposit funding is provided predominantly by the

commercial sector.

However, during the year, deposits from individuals

increased 6% or $56 million which brought the level of

these deposits to $984 million. Deposits from government

and the commercial sector increased by $28 million or 2%

from the end of last fiscal year to $1,672 million by October

31, 2004. There was a decrease in deposits from banks of

$47 million or 48% which reduced these deposits to $52

million.

At the end of fiscal 2004, the percentage of total deposits

held with a fixed maturity date declined by 11% compared

8

6

4

2

27


Building the Brand


Retail Banking

30


Revitalising in order to grow

The financial year 2004 was marked by

revitalisation. We completed the integration

exercise. We converted to the

new technology platform. The challenge

then was to bring a fresh approach to

service, and to rekindle our relationship

with customers. We intended to make

the new livery, colours and logo stand for

something special. In the ideal of our

core values, Retail Banking embarked on

being “your financial partner”.

The results were outstanding. We

achieved “double digit” growth in loans.

We heightened sales promotion activity

in the three core lending areas—

consumer loans, mortgages and credit

cards—and achieved market-leading

growth in all areas. The rate of growth in

mortgages outstripped all other banks in the Bahamas,

the Cayman Islands and Jamaica. All together, we now

service some 600,000 accounts.

Customer First

Our revitalised sales and service effort is changing the

way we regard customers. We are partners in their

growth and success, with capabilities to advise, support

and plan in addition to providing loans. Our sales

specialists are expected to interact with customers in

their own environment, and therefore we must be

proactive and mobile.

Within our office centres, we have refocused the role of

Branch Manager to one of customer-oriented

management of the frontline staff. The Branch Manager

must lead the service initiative by owning and modelling

behaviour; and by extension ensure enhanced customer

experience, through monitoring, coaching and shaping

service delivery through the team.

JULIAN MURILLO

Executive Director – Retail Banking

recovery, rather than on extensive

overhaul at this time.

We continue to work with our customers

in the Cayman Islands, the Bahamas,

Jamaica and Grenada who were

adversely affected by hurricanes.

Repayment “holidays” and hurricane

recovery packages were tailored for

these clients, and we are optimistic

about the recovery in all places. We are

also working with government and

private sector organisations to facilitate

the speed of the restoration process.

New Products and Services

We have launched our Premier service in

Antigua, St Lucia, the British Virgin

Islands and the Cayman Islands,

Barbados, the Bahamas and Jamaica. We have appointed

a manager and will soon launch this service in Belize.

In 2004, we announced our intention to extend our

services into insurance and asset management offerings.

We have negotiated with leading service providers, and

will offer, across our system, a range of insurance cover

including life, property, auto and related packages. The

asset management portfolio has enjoyed success in

Barbados and Jamaica—with focus on pension plans

including government-structured pensions, and mutual

funds—and will be expanded into other territories in

2005.

In January 2005, the Bank launched the FirstCaribbean

Internet and FirstCaribbean Telephone Banking services

across all countries. The launch of the pilot, support

services and customer service centres, in the Bahamas

and Jamaica, have significantly advanced these new

channels.

We have listened to customers more closely through

different feedback mechanisms. Our customer surveys

are conducted monthly. Mystery Shoppers are deployed

regularly and scientifically with scoresheets to record

specific standards. We aim to become the friendliest bank

around.

Branch Upgrades

In the year under review, we set out to upgrade and

streamline our branches to a new model to

accommodate increased capacity in more efficient flow

patterns. We have completed 13 branches across the

region. The events of Hurricane Ivan have slowed the

progress in St Vincent and the Grenadines and the

Cayman Islands. In Grenada, the focus has been on

We expect to present an exciting range of new products

in 2005, based on the efficiencies of our sales and service

upgrades, new channels, and cross-utilisation of in-house

as well as external providers of expertise. Our strategies

for Marketing and Product Development are expected to

increase the return on expenditure. We are optimistic

that we will sustain and surpass the growth enjoyed in

what was a very challenging year in 2004.

That we have enjoyed a year of tremendous and

benchmarking achievements is a credit to the

performances of individuals and teams. I take this

opportunity to thank all staff, whether in the background

supporting the internal customer, or on the frontline

facing the world, for their part in our success.

31


Capital Markets

32


Building the ‘Deal Pipeline’

Our market is increasingly characterised by

mergers, acquisitions, consolidation of

portfolios and new business launches, as

companies leverage their assets and human

capital to maintain market share and

competitiveness, or to expand. The examples

are everywhere: AIC Financial Group in

Trinidad and Tobago; National Commercial

Bank and PanCaribbean in Jamaica; and the

creation of Caribbean Money Market Brokers

in Barbados.

Building the Team

In the last year, FirstCaribbean began the

process of enhancing our human resources

by taking on board key new personnel for the

Capital Markets group. Our team includes

persons versed in areas such as corporate

finance, equity and fixed income trading,

securitisation, foreign exchange trading,

interest rate and foreign exchange swaps,

institutional trust, custodial and asset

administration services, among other

specialisations.

We now have a nucleus of a dynamic and

balanced team capable of meeting the

agenda for 2005. This team gives us the

confidence and capability to begin building

the “deal pipeline” that will move the

business from a series of discrete prospective

transactions to a continuous process of

referral and introduction through negotiation

and delivery to market.

RAYMOND CAMPBELL

Executive Director – Capital Markets

Importance of the CSME

The creation of a regional economic

bloc, the CARICOM Single Market and

Economy (CSME), recognises the need

for strength through consolidation. The

CSME reinforces FirstCaribbean’s strategy

as a financial provider offering regionally

based services, especially capital market

products. Furthermore, the CSME serves

our individual states as a larger “own

market” and is expected to provide

mutual support as a larger and stronger

entity in the imminent Free Trade Area of

the Americas.

Delivering Product

The acquisition of the Mercantile

Banking and Financial Corporation gives

us the platform on which to establish a

presence in Trinidad and Tobago, our

16th country. We are very pleased to be

able to partner with such a respected

institution as The Mercantile to launch

our business in this jurisdiction. Our

financial strength, pan-Caribbean reach,

range of services and international links

with shareholders Barclays and CIBC will

be well suited to Trinidad and Tobago’s

diverse financial services sector. Trinidad’s

vibrant energy sector and ambitious

manufacturing, insurance and multinational

corporations provide excellent

prospects for our Capital Markets

business.

Over the year just ended, we launched in

three of the five main markets: The Cayman

Islands, Jamaica and Barbados. These were

very well received, and we expect to

complete the regional network when we

launch in Trinidad and the Bahamas early in the new year. We

have offices in Jamaica and Barbados; and we will have an

office in Trinidad and Tobago following the completion of the

acquisition of the Mercantile Banking and Financial

Corporation.

Seeking Prospects

We believe that Caribbean governments, and a cadre of

ambitious and aggressive indigenous corporate entities, have

the capability to guide their countries and corporations, as well

as our region, into the future. We believe that the region has

the capacity to compete anywhere in the world; to face the

challenges and complexities of globalisation, and to win. The

strategy to achieve this must include leveraging our collective

synergies, and producing economies of scale across the region.

LLOYD SAMAROO

Executive Director Designate

– Capital Markets

In 2005, our expanded human resources

must be matched with further internal

spending to develop our infrastructure

(product, processes and policies). Our

task for the coming year will be to build the “deal

pipeline”, with a focus on people, products and

prospects.

I will be leaving FirstCaribbean International Bank at the

end of February 2005. I value very much the eight years I

have spent with the Bank, years that have witnessed

important transformations, most notably from CIBC to

FirstCaribbean. For over two years, I have held the

responsibility for leading both the Capital Markets

business and the Jamaica country team. It has been my

pleasure to have played a role in building the Bank and I

wish my successors and colleagues of the Executive

Management Committee the very best in the future.

At the time of printing the responsibility for Capital Markets has passed

to Lloyd Samaroo.

33


Corporate Banking

34


Growing Superior Performance

Leveraging the advantageous industry

position that FirstCaribbean inherited from

its heritage organisations, we focused on

two broad objectives: to successfully

complete the integration of all our units to

one technical platform, and consolidate our

position within the business segments and

markets we serve. We defined consolidation

in terms of being first for customers, as well

as achieving certain financial objectives.

Being first for customers is about making our

loans more accessible, speeding up our

response to loan applications and, generally,

improving our service level to customers.

Major Accomplishments

The Corporate Business team must be

congratulated on reaching and surpassing

its objectives. Full integration was achieved

in June and we want to thank our customers

for their patience and understanding during this challenging

period. Our financial performance was strong, with some

significant highlights over target. Loans grew by 13% and we

contributed 48% of the Bank’s total operating profit. We

acknowledge that this performance was the result of an

overall corporate team effort, supported by other teams

across the Bank, and we commend all who contributed.

Responding to the needs of a wide range of first-time and

existing customers, we extended more than US$1 billion in

new sanctioned loans. The major contributors to our loan

growth in dollar-value terms were the Northern and Central

Region and the Bahamas, providing 22% and 10% year-overyear

growth respectively. The largest loan growth as a

percentage of the previous year’s performance came from the

Netherlands Antilles, 45%; the Cayman Islands, 21%; Belize,

21%; and the Turks and Caicos Islands, 19%.

Without a doubt, we have achieved these results through the

dedication and commitment of our staff, who are being

continually challenged to rise to new expectations both

internally and, most importantly, from our customers. To

respond to these service expectations, we have provided

training in Negotiation and Lending Skills to our customerrelationship

teams, and rolled out an orientation process for

newly appointed Corporate Banking Officers to ensure that

they are knowledgeable about all our products and services.

Hurricane Ivan

In spite of the damage inflicted by Hurricane Ivan on Grenada

and the Cayman Islands, we are happy to report that our

portfolios are in good shape. This was confirmed by

independent reviews undertaken by our Credit Risk Group

and our external auditors. Where specific credit provisions

were considered prudent, these were raised.

HORACE COBHAM

Executive Director – Corporate Banking

Following the hurricanes, we provided a

moratorium on repayments of principal and

interest to customers in the affected areas.

We thank our truly dedicated and

compassionate staff in Grenada, the

Bahamas, Jamaica and the Cayman Islands

who provided yeoman service for

customers and other staff members. We

record our appreciation of their strong

dedication to each other, our customers

and the Bank during this very difficult

period. We are convinced that rebuilding

begins with keeping communities intact,

and we are proud to be part of our

Caribbean community.

Enhancing Customer Value

Central to everything we do are our

customers, and our “CustomerFirst”

approach to our business will come into

greater focus in 2005. Our primary strategy for continued

growth is the redesign of our organisational structure with the

objective of developing an organisation that will deliver

improved levels of service to all business customers, from

small enterprises to large commercial and corporate entities.

Our mantra for 2005 is “Customer Value: Create it! Capture

it! Sustain it!” We are anxious to provide customer service as

the customer perceives it. We are already instituting Customer

Value Initiatives which include proactive Relationship

Manager contact; enhanced access to specialised customer

agents who offer professional, personalised service to manage

and remove obstacles and irritants to a productive

CustomerFirst relationship and, generally, respond more

quickly to customer needs with appropriately tailored

financial solutions.

Capturing and sustaining Customer Value will be achieved

through a focus on solutions that create value for our

customers. We aim to foster closer business relationships with

customers to win the level of trust and confidence necessary

to becoming the first choice for their banking needs. We will

deepen and improve the relationship with customers through

a brand identity for exceptional service. Specifically, industry

experts, relationship managers and credit specialists will

collaborate closely to offer customers tailored financial

solutions in a timely manner to enhance their net worth. And

to improve customer convenience, we launched our Internet

and Telephone Banking offers early in the New Year.

Through these initiatives and approaches, we aim to develop

stronger relationships with our customers, provide speedier

value-added services that improve customer convenience and

in the process win their increased trust and loyalty.

35


International

Banking

36


More Solutions for International Clients

As I joined the Bank in October, full

credit for fine achievements in 2004

should go to the International Banking

team under the leadership of Mark

Teversham. The infrastructure, efficiency

and high performance that are already

embedded within the business, as well

as the commitment and enthusiasm of

staff, will assure continued momentum

and growth. We thank Mark and wish

him continued success in his next

chapter.

International Banking operates through

five client centres located in the

Bahamas, Barbados, the Cayman

Islands, the British Virgin Islands, and

the Turks and Caicos Islands. No other

bank offers its international clientele

such a wide choice within the

Caribbean. With the advent of Internet and Telephone

Banking we are opening up additional delivery channels

for our clients, who typically are non-residents. Clients

can of course contact their Relationship Manager on a

direct-line basis, with the “face-to-face” option still

remaining, but Internet access will provide timely

choice and convenience and will further strengthen our

competitive position.

Market-leading Products

We serve both international corporate and individual

clients. Both client segments value service quality and

our strong brand. Our corporate offering is aimed at,

and tailored to, the banking needs of the captive

insurance, offshore mutual fund and trading company

sectors as well as the offshore service providers located

close to our own International Banking Centres. Our

offering to individual clients centres on the Premier

client segment and increasingly on the high net worth

segment. FirstCaribbean is a main provider of both

deposit and mutual fund products to corporations and

individuals in our region. We feel we are well placed to

compete for market share in these segments.

JAN-ARNE FARSTAD

Executive Director – International Banking

Caribbean. In addition to our five client

centres, our reach continues to expand,

with international mortgages now

offered, or shortly to be available, in

Antigua, Belize, St Kitts & Nevis, St.

Lucia, the Netherlands Antilles, Tobago,

and St. Vincent and the Grenadines,

with other countries coming on stream

as demand dictates.

Seamless Service

We work with our colleagues across the

Retail, Corporate and Capital Markets

segments to develop a seamless

approach in our ability to serve the

client and to have the client at the

centre of all we do. We consultatively

review clients’ needs and find

appropriate solutions. Our heritage

banks provide a source of referral

business and best practice and we seek out other

avenues to expand our client base, and expand services

to existing clients.

Poised for Growth

Looking to the year ahead, we expect continued real

growth in all our segments. Our international mortgage

products are proving very successful. Last year we

successfully doubled our international mortgage book

and we have set ourselves the same target this year.

Client demand for quality investment products is on the

increase and we expect to expand our open

architecture offering of investment products further.

The wealth management segment of our business is

increasing and we expect this trend to accelerate. We

now have a strong international platform from which to

expand.

Our International team is made up of highly trained,

skilled and client-centric staff. We value their great

contribution to our success in 2004 and look forward to

even better team performance in 2005.

During the last 12 months we maintained an

encouraging rate of increase in the number of new

international clients, continued real growth in assets

under management and the launch of a new Securities

Dealing Service. Moreover, our international mortgage

products were improved, with appropriate innovative

campaigns branded under the themes “Perfect” and

“Life doesn’t get much better than this”, in respect of

property ownership in the Caribbean. We expect to

remain the market leader in mortgage finance for

international clients seeking to own property in the

37


Marketing

38


Towards a New Partnership with Customers and Employees

Following the changes made in the

previous year to new visual identity—

logo, colours, uniforms, signage—we

completed our mandate to integrate and

upgrade to a single operating system

without losing customers, and at the

same time begin to grow our customer

base.

In the year under review, we have

completed the conversion to a single

computer system across the

FirstCaribbean region and rolled out a

single set of products, drawing wherever

we could the best of both heritage banks.

Product and price harmonisation have

been achieved through a process that will

be ongoing, and which puts the

knowledge and skills of our people at the

heart of operations.

The first conversion was started in late 2003, and by June

2004 all branches were fully converted to the new

operating system. Customer issues were managed and

fallout minimal. Our customers have been kept informed

and have demonstrated considerable patience through all

these changes.

The marketing challenge has been to provide focus and

direction, to facilitate, communicate and foster a

revitalised relationship—a new partnership—among

employees and customers. We are doing this on several

levels by putting a professional marketing structure in

place with a research function and agenda that will

deepen understanding of our customers and markets.

The research agenda is intended to provide an objective

approach to customer satisfaction across all sectors in all

territories; and thereby inform product development. Our

product and channel development function includes

changing the way we think about customers. We intend

to increase our product per customer ratio through

improved products, better customer service, and access

through more channels with 24-hour convenience—

ABMs, telephone and Internet—and innovative sales

approaches.

The test of our communications system this year has been

the challenge of consolidating and refurbishing branches,

moving customers to new locations, with minimal

impact.

Our new channels for customer contact—Telephone and

Internet Banking—were put on test at the end of the year.

These were launched early in 2005.

FRANCIS M. LEWIS

Executive Director – Marketing and Product

Development

Win-Win Campaign

It was appropriate that our first big

campaign was Win-Win, reflecting our

brand promise of financial partnership—

in which the customer wins and the Bank

wins. This was intended to reflect the

changing culture of the Bank—service

oriented, sales driven, helping customers

to borrow reasonably.

FirstCaribbean Foundation

The establishment of the FirstCaribbean

Foundation has been followed with a

system of reporting to the market how

our contributions to the communities we

serve have impacted those communities.

It is a milestone that the first year’s results

were published in a Social Annual Report

in 2003.

The FirstCaribbean Foundation also provides the

opportunity for employees and branches to be a force for

good in their communities. It provides an allocation for

Sponsorship and Community Relations each year. We

also allocate funds to each country for the management

to support worthy causes.

The programme to recognise Unsung Heroes—people

who work tirelessly and selflessly on behalf of a cause or

community—has been expanded to 10 countries in its

second year.

Our social assistance programme for 2004 was extended

to communities damaged by Hurricane Ivan.

Sponsorships in excess of US$750,000 were pledged.

The Marketing Department

In 2005, we will deepen the research activities to focus

on Customer Service. We will continue to track the

experiences of customers in contact with our people and

our processes through focus groups, mystery shoppers

and feedback cards. We will track customers’

relationships with our staff as well as with the

competition.

In just two and a half years, we have made tremendous

strides in providing good experiences of our Brand as we

live up to the core values: Caribbean pride, international

strength and your financial partner.

In the year ahead, we intend to create experiences for our

customers that will prove we are well-matched,

dependable partners, and equal to their financial

challenges.

39


Human Resources

40


The Brand that Lives in our People

The financial services sector in our region is

driven by the need to be competitive. The

current environment is extremely dynamic

as organisations negotiate mergers and

acquisitions, and seek to create change

management capability internally as a key

lever for sustaining growth. This context is

impacting human resource agendas across

the region and in our Bank. This includes

elements of human resources strategy,

change management and organisational

communication. Critical to our business are

leadership and performance and these have

been areas of focus for us this year as we

have built momentum for continuing

leadership in the financial services sector in

the region.

Leadership and Performance

Our human resource strategy has as its

fundamental goal the achievement of ongoing employee

commitment to our business and by extension our regional

community. We have progressed this strategy by a focus on

our leadership and have successfully raised the bench

strength of our teams in almost every area of our business.

Integrating with this initiative has been a renewed rigour

around performance. In leadership development and

succession planning we are among a small number of

regional organisations that have the internal tools to enable

talent identification and development. We are developing a

culture that will deliver high performance in a sustained way.

FirstCaribbean is leading our industry in this area and our

competitive strength as an Employer of Choice is already

bearing fruit.

Union Partners

We continue to build with our union partners a new way of

working, and in the new calendar year will formally celebrate

the work we have done together. We have seen this year

many practical examples of how our principles and ways of

working have delivered results for the business and our

employees across the region. In the main, three-year

agreements are commonplace in FirstCaribbean, reflecting a

new level of trust and maturity among all stakeholders. I thank

all the unions in our partnership for their support for this

process that remains without comparison in the industrial

relations landscape of the region.

Learning and Development

I would like to congratulate all on their diligence and

commitment to the learning and development demanded by

the integration process. In the Bahamas, as an example, our

training requirements for the technology conversion were

achieved with 100% certification.

PETER HALL

Executive Director – Human Resources

In support of the focus on performance, we

introduced a core managerial programme

that includes performance management,

“coaching for results” and industrial

relations training that in future will become

a basic platform of management training. In

the new financial year, learning and

development will be a primary focus, with

significant training for our employees in the

areas of risk, control, customer service and

business growth. We will also be expanding

our training channels to include e-learning.

Cost and Change Management

In the last year we have learned much

about how changing technology platforms

across 15 countries creates change

management challenges. We learned how

serving customers better through business

segmentation and multichannel delivery

systems leads us to examine cost and business efficiencies.

These will be areas of additional focus in the new financial

year and our performance management system and training

initiatives will also be integrated to support these activities.

New Teams and Leaders

We have facilitated the recruitment of a team to build our

Capital Markets business and are confident that this team,

though small, will be the team that leads the market in the

region. In our Retail business we have facilitated the creation

of a leadership team that will be second to none in the region.

All across our business we are facilitating the development of

new teams at the segment and country level, including the

transition to dedicated Managing Director roles in the

Bahamas and Jamaica. These integrated activities build our

capability to compete effectively.

The Hurricane Season

We salute the courage and determination of our people in the

Bahamas, Jamaica, and particularly in the Cayman Islands and

Grenada, who responded so valiantly to the difficulties posed

by the destruction brought by various severe hurricanes. In

the Cayman Islands and Grenada our business was up and

running within days—a fantastic achievement and testimony

to our employees’ resilience and commitment.

Teams Across Our Region

We now have a fully resourced Human Resources team,

including a leading resource on Compensation and Benefits.

We thank our leaders and wish them continued success in the

next year: Dr Kerry Higgs in the Bahamas, Vivian Hinds,

Jacqueline Floro-Forde, Marsha Brooks, Marco Nozicka, Geoff

King and Debbie Kellet in Barbados, Jacqueline Richards in

Jamaica.

41


Supporting the Internal Client

The Technology Report

This was an exceptional year in terms of

the volume and complexity of business

change. It was also a year of significant

accomplishments, not least because of

the need to provide business continuity

to our systems after a severe hurricane

season.

Delivering on our plan, FirstCaribbean

completed the integration of four very

diverse technology platforms representing

four distinct sets of business

processes, data models and architectures

into one holistic platform across 15

countries and 26 islands. This

programme comprised a number of

separate projects, as well as system-wide

activities, which include architecture,

infrastructure, testing, and management

activities. The schedule for the country

conversions was completed in May

2004. All conversions were successfully completed on

the intended weekends according to plan, with quality,

and under budget. The benefits from this

standardisation of major technology integration to

FirstCaribbean included:

• Core banking systems;

• Business applications;

• Data centres;

• Networks;

• ABMs;

• Help desk;

• Field technical support services;

JOE BARRETTO

Executive Director – Change Management

and Chief Operating Officer/

Chief Information Officer

for the period to October 2004

made in building the technical capability

of our people. Sound relationships and

trust were the foundation upon which

all was built. The technology platform

will deliver higher levels of customer

service and product capability, to meet

the needs of our client base in Retail,

Corporate, International and Capital

markets across the region.

We have completed the delivery of the

base platform for Internet and

Telephone Banking to provide the

convenience of transactions from home

or office to our customers. This marked

the culmination of the enormous

amount of planning, design, building

and deployment activities that have

taken place over the past year and

engaged many of our team members. These new

channels have themselves predicated the introduction of

several leading-edge technologies into the FirstCaribbean

enterprise architecture.

Our team continues to support other transformational

initiatives, to reduce cost, and to provide a consistent

standard technology platform.

We thank and pay tribute to the team for meeting and

completing the challenge as planned, with discipline and

a high level of collaboration with all business partners.

with enhanced services delivered through the Intranet,

Internet, office productivity tools and a common set of

products and services. Some 300 business applications

were rationalised down to approximately 100.

This integration establishes FirstCaribbean as a

significant Caribbean presence and enables it to play a

key role in the financial services industry in the region.

Through the integration, FirstCaribbean’s Technology

Group has developed and tested a set of highly effective

change management processes that may be utilised in

future projects, upgrades or conversions.

A critical element of our strategy is our vision to be “First

for Customers and First for Employees”. The technology

programme brought together a diverse and dedicated

team from across the region and leveraged their

strengths and characteristics. Major investments were

42

It is noteworthy that during this fiscal year our region

was affected by four hurricanes — Charley, Francis, Ivan

and Jean. We found ourselves in the unenviable position

of responding to these threats. In the face of varying

degrees of disaster, our team showed a high level of

resilience and creativity in maintaining business

continuity, and the speedy restoration of services to

customers across the region. In Grenada and the

Cayman Islands, in particular, which were severely

affected by Hurricane Ivan, we were ready to be

operational as soon as we were given the green light by

the regulators.

In 2005, we will continue to support the range of

products and services offered across the FirstCaribbean

system. We intend to leverage the existing platform to

produce transformational initiatives to improve

customers’ experiences of FirstCaribbean.


One Caribbean Platform, One Team...and Ivan

The Risk Report

The highlight of our Credit Risk year

must be the significant strides we have

made in developing and implementing

appropriate new credit policies and

control procedures for our business,

while at the same time increasing the

effectiveness of the Credit Risk

Management Department (CRMD) in

working with Retail, Corporate,

International, and Capital Markets

segments to win new business of an

acceptable credit quality.

able successfully to evaluate the effects of the

hurricanes upon our credit provisions.

For 2005, we will, through independent and

objective assessment of portfolio and credit

risks, aid the growth of our lending portfolio,

while maintaining our quality standards. This

means working firstly with the Retail and

International business segments to deliver

quicker response times to our customers, and

provide appropriate scoring models, and

metrics.

CRMD exists to provide a robust and

objective credit assessment, modelling,

and decision-making capability to the

Bank. This is a role which has been

strengthened in 2004 by the

appointment of a Chief Credit Risk

Officer, and a number of other important hires.

Many significant objectives have been achieved by the

refocusing of CRMD in the spring of 2004, not least the

growth in the quantity of loan assets, the maintenance of

our credit portfolio quality, and the reduction in

nonperforming loans. Provisions for credit losses are also at

low, albeit prudent, levels. These achievements not only

deliver substantial value to the Bank, but also serve to give

the CRMD team a sense of pride.

Recruits to the team have brought new expertise, which has

allowed the CRMD to expand its credit structuring and

modelling capability with a high level of success. We have

also introduced Credit Conformance teams, which are

ensuring that credit policies are effectively applied, and

which assist Relationship Managers in all segments to

exercise their judgment appropriately and within the

authorised limits. We expect this to have significant

beneficial effects upon responsiveness to our customers, and

the quality of our credit portfolio and controls.

We were unfortunate this year in the number of extreme

weather conditions producing severe damage to some of

our customers’ livelihoods. We were obliged to examine the

impact of hurricanes, and provide support for those

customers who have been badly hit. In the islands with the

greatest devastation—Grenada and the Cayman Islands—

we have provided strong humanitarian support as well as a

moratorium on loan and interest payments. We continue to

liaise with governments, insurance companies, trade

associations and chambers of commerce to assist in the

restoration of these communities. Through the application

of robust and detailed portfolio modelling, we have been

RICHARD PANTCHEFF

Chief Risk Officer (Acting)

We are an integral line of business of the

reorganisation taking place in the Corporate

division. We intend to ensure the greatest

possible credit return on the reorganised

portfolio, and support to the Relationship

Management proposition.

We are supporting the launch of FirstCaribbean’s Capital

Markets business with suitable modelling and structuring

capabilities, and fresh expertise, in order to create the

environment for responsiveness, flexibility and long-term

commitment to this sector.

Altogether, we expect to support the Bank’s thrust to grow

the lending book safely with processes and policies which

provide a sound framework for the best possible returns. We

will continue to improve the metrics and information base

both for capturing data, modelling the portfolio, and

predicting future trends. Our conformance teams will work

hand in hand with all partners across the organisation to

promote best practice and the enhancement of credit skills.

Our twin focus for 2005 continues to be the maintenance of

the best possible framework for the independent control

and measurement of credit risk, as well as maximum

support to business development and customer relationship

management through the application of first-class credit

and portfolio modelling, structuring, and decision-making.

43


Financial Statements 2004


PricewaterhouseCoopers

Providence House

East Hill Street

P.O. Box N-3910

Nassau, The Bahamas

Website: www.pwc.com

E-mail: pwcbs@bs.pwc.com

Telephone: (242) 302-5300

Facsimile: (242) 302-5350

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of

FirstCaribbean International Bank (Bahamas) Limited

We have audited the accompanying consolidated balance sheet of FirstCaribbean International Bank (Bahamas)

Limited (the “Bank”) as of October 31, 2004 and the related consolidated statements of income, changes in

shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility

of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on

our audit.

We conducted our audit in accordance with International Standards on Auditing. Those Standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant

estimates made by management, as well as evaluating the overall financial statement presentation. We

believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated

financial position of the Bank as of October 31, 2004 and the results of its operations, and its cash flows for the

year then ended in accordance with International Financial Reporting Standards.

Chartered Accountants

December 17, 2004

46


Consolidated Balance Sheet

as of October 31, 2004

(expressed in thousands of Bahamian dollars)

Assets

Notes 2004 2003

$ $

(Restated)

Cash and due from banks 3 864,055 1,111,395

Trading securities 4 273,295 169,746

Loans and advances 5 1,669,007 1,497,105

Other assets 6 52,695 53,549

Investment securities 7 178,850 164,959

Property, plant and equipment 8 35,334 28,799

Goodwill 9 187,747 187,747

Total assets 3,260,983 3,213,300

Liabilities

Deposits 10 2,707,621 2,670,897

Other liabilities 11 28,270 41,663

Total liabilities 2,735,891 2,712,560

Shareholders’ equity

Share capital and reserves 13 414,364 413,664

Retained earnings 110,728 87,076

525,092 500,740

Total shareholders’ equity and liabilities 3,260,983 3,213,300

Approved by the Board of Directors

Chairman

Director

December 17, 2004

The accompanying notes are an integral part of these consolidated financial statements.

47


Consolidated Statement of Income

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars, except per share data)

Notes

2004 2003

$ $

Interest income 14 153,961 137,888

Interest expense 55,108 50,294

Net interest income 98,853 87,594

Non-interest income 15 36,907 39,630

135,760 127,224

Other operating expenses 16 65,954 59,511

Provision for credit losses 7,909 9,132

Restructuring & integration charges 17 279 177

Goodwill amortisation 9 – 9,855

74,142 78,675

Net income for the year 61,618 48,549

Earnings per share (cents) 22 0.51 0.41

The accompanying notes are an integral part of these consolidated financial statements

48


Consolidated Statement of Changes in Shareholders’ Equity

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

Share

Retained

Notes capital Reserves earnings Total

$ $ $ $

Balance at October 31, 2002,

as previously reported 472,828 (63,566) 58,459 467,721

Prior period adjustment 28 – – (1,900) (1,900)

Balance at October 31, 2002,

as restated 472,828 (63,566) 56,559 465,821

Net income for the year – – 48,549 48,549

Dividends – – (18,032) (18,032)

Net proceeds from rights offering 12 4,402 – – 4,402

Balance at October 31, 2003 477,230 (63,566) 87,076 500,740

Net income for the year – – 61,618 61,618

Dividends – – (37,266) (37,266)

Transfer to Statutory Reserve Fund

– Turks and Caicos Islands 13 – 700 (700) –

Balance at October 31, 2004 477,230 (62,866) 110,728 525,092

The accompanying notes are an integral part of these consolidated financial statements.

49


Consolidated Statement of Cash Flows

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2004 2003

$ $

Cash flows from operating activities

Net Income 61,618 48,549

Adjustments to reconcile net income

Provision for credit losses 7,909 9,132

Depreciation 2,933 2,504

Goodwill amortisation – 9,855

Operating income before changes in

operating assets and liabilities 72,460 70,040

Increase in mandatory reserves (6,514) (2,265)

(Increase)/decrease in loans and advances, net of repayments (179,811) 6,960

Increase in other assets/liabilities, net (12,539) (30,402)

Increase/(decrease) in deposits, net of withdrawals 36,724 (17,854)

Net cash (used in) from operating activities (89,680) 26,479

Cash flows from (used in) investing activities

Increase in property, plant and equipment, net of disposals (9,468) (4,686)

(Increase)/decrease in securities, net of disposals (117,440) 23,285

Net cash (used in) from investing activities (126,908) 18,599

Cash flows from (used in) financing activities

Dividends paid (37,266) (18,032)

Net proceeds from rights issue – 4,402

Net cash used in financing activities (37,266) (13,630)

Net (decrease)/increase in cash and cash equivalents (253,854) 31,448

Cash and cash equivalents, beginning of year 1,071,847 1,040,399

Cash and cash equivalents, end of year (note 3) 817,993 1,071,847

The accompanying notes are an integral part of these consolidated financial statements.

50


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

1. General information

The Bank, which was formerly named CIBC Bahamas Limited (“CIBC Bahamas”) and controlled by

Canadian Imperial Bank of Commerce (CIBC), changed its name to FirstCaribbean International Bank

(Bahamas) Limited on October 11, 2002, following the combination of the retail, corporate and offshore

banking operations of Barclays Bank PLC in The Bahamas and the Turks & Caicos Islands (“Barclays

Bahamas”) and CIBC Bahamas.

The Bank is a subsidiary of FirstCaribbean International Bank Limited formerly CIBC West Indies Holdings

Limited (the “Parent”), a company incorporated in Barbados with the ultimate parent companies being

jointly CIBC, a company incorporated in Canada, and Barclays Bank PLC, a company incorporated in

England.

Under the combination, CIBC West Indies became the legal parent company with Barclays transferring its

operations to subsidiaries of CIBC West Indies in exchange, ultimately, for common shares and newly

created classes of non-voting and preference shares of CIBC West Indies. Barclays was identified as the

acquirer as the fair value of its business prior to the combination was significantly greater than the fair value

of CIBC West Indies business and, as a result, Barclays had the greater economic interest in the Parent.

Barclays was therefore identified as the acquirer. This situation is described by International Financial

Reporting Standards (IFRS) as a reverse acquisition.

The registered office of the Bank is located at 308 East Bay Street, Nassau, The Bahamas. At October 31,

2004 the Bank had 738 employees (2003: 841).

2. Summary of significant accounting policies

Basis of presentation

These consolidated financial statements are prepared in accordance with IFRS under the historical cost

convention as modified by the revaluation of available-for-sale investment securities, financial assets and

financial liabilities held for trading and all derivative contracts.

Early adoption of standards

In 2004, the Bank early adopted the IFRS below, which are relevant to its operations. All changes in the

accounting policies have been made in accordance with the transition provisions in the respective

standards and the 2003 accounts have been amended, where required.

i) IFRS 3 Business Combinations

ii) IAS 36 (revised 2004) Impairment of Assets

iii) IAS 38 (revised 2004) Intangible Assets

The early adoption of IFRS 3, IAS 36 (revised 2004) and IAS 38 (revised 2004) resulted in a change in the

accounting policy for goodwill. Until October 31, 2003, goodwill was amortised on a straight-line basis

over 20 years; and assessed for an indication of impairment at each balance sheet date.

51


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Early adoption of standards (continued)

In accordance with the provisions of IFRS 3 the Bank has ceased amortisation of goodwill from November

1, 2003. Accumulated amortisation as at November 1, 2003 has been eliminated with a corresponding

decrease in the cost of goodwill. From the year ended October 31, 2003 onwards, goodwill is tested

annually for impairment.

Consolidation

Subsidiary undertakings, which are those companies in which the Bank directly or indirectly has an interest

of more than one half of the voting rights or otherwise has power to exercise control over the operations,

have been fully consolidated. The principal subsidiary undertakings are disclosed in note 25.

Subsidiaries are consolidated from the date on which the effective control is transferred to the Bank. All

inter-company transactions, balances and unrealised surpluses and deficits on transactions and balances

have been eliminated. Where necessary, the accounting policies used by subsidiaries have been changed

to ensure consistency with the policies adopted by the Bank.

Foreign currency translation

Items included in the consolidated financial statements are measured using the currency of the primary

economic environment in which the Bank operates (“the functional currency”). The functional currency of

the Bank is Bahamian dollars and these consolidated financial statements are presented in Bahamian

dollars.

Monetary assets and liabilities denominated in foreign currencies are translated into functional dollars at

rates prevailing at the date of the financial statements and non-monetary assets and liabilities are translated

at historic rates. Revenue and expenses denominated in foreign currencies are translated into the Bank’s

functional currency using exchange rates at the date of the transactions. Realised and unrealised gains and

losses on foreign currency positions are reported in income of the current period.

Translation adjustments of investment positions in foreign entities are reported in shareholders’ equity.

Translation differences on non-monetary items, such as equities classified as available-for-sale financial

assets, are included in the fair value reserve in equity.

Estimates

Preparation of financial statements in conformity with International Financial Reporting Standards requires

management to make estimates and assumptions that affect amounts reported in the financial statements

and accompanying notes. Actual results could differ from these estimates.

52


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than

90 days maturity from the date of acquisition including cash balances, deposits with Central Banks

(excluding mandatory reserve deposits), and other money market placements.

Trading securities

Trading securities are securities which are either acquired for generating a profit from short-term

fluctuations in price or dealer’s margin, or are securities included in a portfolio in which a pattern of shortterm

profit-taking exists. Trading securities are initially recognised at cost (which includes transaction costs)

and subsequently re-measured at fair value based on quoted bid prices. All related realised and unrealised

gains and losses are included in net income. Interest earned whilst holding trading securities is reported as

interest income.

All purchases and sales of trading securities that require delivery within the time frame established by

regulation or market convention (“regular way” purchases and sales) are recognised at trade date, which

is the date that the Bank commits to purchase or sell the asset. Otherwise such transactions are treated as

derivatives until settlement occurs.

Sale and repurchase agreements

Securities sold subject to linked repurchase agreements (“repos”) are retained in the financial statements

as investment securities and the counterparty liability is included in amounts due to other banks under

other liabilities. Securities purchased under agreements to resell are recorded as loans and advances to

other banks or customers as appropriate. The difference between sale and repurchase price is treated as

interest and accrued over the life of repurchase agreements using the effective yield method.

Originated loans and provisions for loan impairment

Loans and advances originated by the Bank by providing money directly to the borrower are categorised

as originated loans and are carried at amortised cost. Third party expenses, such as legal fees incurred in

securing a loan, are expensed as incurred. Interest income is accounted for on the accrual basis for all loans

and advances using the effective yield method.

All loans and advances are recognised when cash is advanced to borrowers.

A credit risk provision for loan impairment is established if there is objective evidence that the Bank will not

be able to collect all amounts due according to the original contractual terms of loans. The amount of the

provision is the difference between the carrying amount and the recoverable amount, being the estimated

present value of expected cash flows, including amounts recoverable from guarantees and collateral,

discounted based on the interest rate at classification of the loan.

53


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Originated loans and provisions for loan impairment (continued)

The loan loss provision also covers losses where there is objective evidence that probable losses are present

in components of the loan portfolio at the balance sheet date. These have been estimated based upon

historical patterns of losses in each component, the credit ratings allocated to the borrowers and reflect

the current economic climate in which the borrowers operate and are included in credit provisions. When

a loan is uncollectible, it is written off against the related provision for impairment; subsequent recoveries

are credited to the provision for credit losses in the income statement.

In circumstances where Central Bank guidelines and regulatory rules require provisions in excess of those

calculated under IFRS, the difference is disclosed as an appropriation of retained earnings and is not

distributable.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down,

the release of the provision is credited to the provision for credit losses in the income statement.

Investment securities

The Bank classified its investment securities into the following two categories: i) Held-to-maturity and ii)

available-for-sale assets.

Investment securities with fixed maturity where management has both the intent and the ability to hold

to maturity are classified as held-to-maturity. Investment securities and purchased loans and receivables

intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity

or changes in interest rates, exchange rates or equity prices are classified as available-for-sale.

Management determines the appropriate classification of its investments at the time of the purchase.

Held-to-maturity investments are carried at amortised cost using the effective yield method, less any

provision for impairment.

Investment securities and purchased loans and receivables are initially recognised at cost (which includes

transaction costs). Available-for-sale financial assets are subsequently re-measured at fair value based on

quoted bid prices or amounts derived from cash flow models. Unquoted equity instruments for which fair

values cannot be measured reliably are recognised at cost less impairment. Unrealised gains and losses

arising from changes in the fair value of securities classified as available-for-sale are recognised in equity.

When the securities are disposed of or impaired, the related accumulated fair value adjustments are

included in the income statement as gains and losses from investment securities.

54


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Investment securities (continued)

A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. The

amount of the impairment loss for assets carried at amortised cost is calculated as the difference between

the asset’s carrying amount and the present value of expected future cash flows discounted at the financial

instrument’s original effective interest rate. The recoverable amount of an instrument measured at fair value

is the present value of expected future cash flows discounted at the current market rate of interest for a

similar financial asset.

Interest earned whilst holding investment securities is reported as interest income. Dividends are recorded

on the accrual basis and included in income.

All regular way purchases and sales of investment securities are recognised at trade date, which is the date

that the Bank commits to purchase or sell the asset. All other purchases and sales are recognised as

derivative forward transactions until settlement.

Goodwill

Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets

of the acquired subsidiary undertaking at the date of acquisition and is reported in the balance sheet as an

intangible asset.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

Goodwill is allocated to lowest levels for which there are separately identifiable cash flows (cash-generating

units) for the purpose of impairment testing. An impairment loss is recognised for the amount by which

the asset’s carrying value exceeds its recoverable amount. The recoverable amount is the higher of an

asset’s fair value less costs to sell and value in use.

Computer software development costs

Costs associated with maintaining computer software programs are recognised as an expense as incurred.

However, expenditure that enhances or extends the benefits of computer software programs beyond their

original specifications and lives is recognised as a capital improvement and added to the original cost of

the software. Computer software development costs recognised as assets are amortised using the straightline

method over a five-year period.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation.

Depreciation is computed on the straight-line method at rates considered adequate to write off the cost

of depreciable assets, less salvage, over their useful lives.

55


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Property, plant and equipment (continued)

The annual rates used are:

Buildings 2.5%

Leasehold improvements

10% or the term of the lease, whichever is less

Equipment, furniture and vehicles 20 - 50%

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down

immediately to its recoverable amount. Gains and losses on disposal of property and equipment are

determined by reference to its recoverable amount and are taken into account in determining net income.

Provisions

Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past

events, it is probable that an outflow of resources embodying economic benefits will be required to settle

the obligation, and a reliable estimate of the amount of the obligation can be made.

Borrowings

Borrowings are recognised initially at “cost”, being their issue proceeds (fair value of consideration

received) net of transaction costs incurred. Borrowings are subsequently stated at amortised cost and any

difference between net proceeds and the redemption value is recognised in the income statement over the

period of the borrowings using the effective yield method.

Interest rate swaps and hedging

Interest rate swaps are initially recognised in the balance sheet at cost and subsequently are measured at

their fair value. Fair values are obtained from discounted cash flow models, using quoted market interest

rates. All interest rate swaps are carried as assets when fair value is positive and as liabilities when fair value

is negative.

Interest rate swaps have been designated as hedges when they effectively hedge the fair value of certain

loans, and hedge accounting is used for these derivative instruments. Changes in the fair value of the swaps

are recorded in the income statement and are matched with the corresponding change in the fair values

of the hedged loans that are attributable to market interest rate movements. Otherwise the interest rate

swaps are considered as held for trading and the changes in the fair vale of the swaps are immediately

reported in net profit.

Changes in the fair value of the effective portions of derivatives that are designated and qualify as fair value

hedges and that prove to be highly effective in relation to hedged risk, are recorded in the income

statement, along with the corresponding change in fair value of the hedged asset or liability that is

attributable to that specific hedged risk.

56


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Interest rate swaps and hedging (continued)

If the hedge no longer meets the criteria for hedge accounting, an adjustment to the carrying amount of

a hedged interest-bearing financial instrument is amortised to net profit or loss over the period to maturity.

The adjustment to the carrying amount of a hedged equity security remains in retained earnings until the

disposal of the equity security.

The Bank’s criteria for a derivative instrument to be accounted for as a hedge include:

i) formal documentation of the hedging instrument, hedged item, hedging objective, strategy and

relationship is prepared before hedge accounting is applied;

ii) the hedge is documented showing that it is expected to be highly effective in offsetting the risk in

the hedged item throughout the reporting period and;

iii) the hedge is highly effective on an ongoing basis.

Pension obligations

The Bank operates a number of pension plans, the assets of which are held in a separate trusteeadministered

fund. The pension plans are generally funded by payments from the Bank, taking account of

the recommendations of independent qualified actuaries, and from the employees.

A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually

as a function of one or more factors such as age, years of service or compensation. A defined contribution

plan is a pension plan under which the Bank pays fixed contributions into a separate entity (a fund) and

will have no legal or constructive obligations to pay further contributions if the fund does not hold

sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.

The liability in respect of defined benefit pension plans is the present value of the defined benefit obligation

at the balance sheet date minus the fair value of plan assets, together with adjustments for unrecognised

actuarial gains/losses and past service cost. The defined benefit obligation is calculated annually by

independent actuaries using the projected unit credit method. The present value of the defined benefit

obligation is determined by the estimated future cash outflows using interest rates of government

securities which have terms to maturity approximating the terms of the related liability. Most of the

pension plans are final salary plans and the charge for such pension plans, representing the net periodic

pension cost less employee contributions is included in staff costs. Actuarial gains and losses arising from

experience adjustments, changes in actuarial assumptions and amendments to pension plans are charged

or credited to income over the service lives of the related employees.

For defined contribution plans, the Bank makes contributions to publicly or privately administered pension

insurance plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid,

the Bank has no further payment obligations. The regular contributions constitute net periodic costs for

the year in which they are due and as such are included in staff costs. The Bank’s contributions to defined

contribution pension plans are charged to the income statement in the year to which they relate.

57


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Other post-retirement obligations

The Bank provides post-retirement healthcare benefits to its retirees. The entitlement to these benefits is

usually based on the employee remaining in service up to retirement age and the completion of a

minimum service period. The expected costs of these benefits are accrued over the period of employment,

using a methodology similar to that for defined benefit pension plans. Valuations of these obligations are

carried out by independent qualified actuaries.

Acceptances

The Bank’s potential liability under acceptances is reported as a liability in the consolidated balance sheet.

The recourse against the customer in the event of a call on any of these commitments is reported as a

corresponding asset of the same amount.

Share capital

Shares issued for cash are accounted for at the issue price less any transaction costs associated with the

issue. Shares issued as consideration for the purchase of assets or a business, are recorded at the market

price on the date of the issue.

Dividends on ordinary shares

Dividends on ordinary shares are recognised in equity in the period in which they are declared.

Interest income and expense

Interest income and expense are recognised in the income statement for all interest-bearing instruments

on an accrual basis using the effective yield method based on the actual purchase price or estimated

recoverable amount. Interest income includes coupons earned on fixed income investment and trading

securities and accrued discount and premium on treasury bills and other discounted instruments. Interest

income on impaired loans is recognised, according to the terms of the loan contract, to the extent that it

is deemed recoverable.

Fee and commission income

Fees and commissions are generally recognised on an accrual basis when the service has been provided.

Loan origination fees for loans, which are probable of being drawn down are deferred (together with

related direct costs) and recognised as an adjustment to the effective yield on the loan. Commission and

fees arising from negotiating, or participating in the negotiation of a transaction for a third party, such as

the acquisition of loans, shares or other securities or the purchase or sale of business, are recognised on

completion of the underlying transaction. Portfolio and other management advisory and service fees are

recognised based on the applicable service contracts. Asset management fees related to investment funds

are recognised over the period the service is provided. The same principle is applied for wealth

management, financial planning and custody services that are continuously provided over an extended

period of time.

58


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

2. Summary of significant accounting policies (continued)

Foreign exchange income

Foreign exchange income relates to income earned from exchanging foreign currencies and is recognised

on the transaction date.

Segment reporting

A segment is a distinguishable component of the Bank that is engaged in providing products or services

within a particular economic environment, which is subject to risks and rewards that are different from

those of other segments. Segments with a majority of revenue earned from external customers and whose

revenue, results or assets are 10% or more of all the segments are reported separately.

3. Cash and due from banks

2004 2003

$ $

Cash 22,915 22,443

Deposits with Central Bank – non-interest bearing 50,955 54,516

Due from other banks 790,185 1,034,436

Cash and due from banks 864,055 1,111,395

Mandatory reserve deposits with Central Bank (46,062) (39,548)

Cash and cash equivalents 817,993 1,071,847

The Bank is required to maintain a percentage of deposit liabilities as cash or deposits with The Central

Bank of The Bahamas. These funds are not available to finance the Bank’s day-to-day operations. At

October 31, 2004 the reserve requirement amounted to $46,062 (2003: $39,548).

The effective yield on cash resources during the year was 1.9% (2003: 1.5%).

4. Trading securities

2004 2003

$ $

Other debt securities 273,295 169,746

The effective yield on trading securities ranged from 1.1% to 8.9%.

273,295 169,746

59


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

5. Loans and advances

2004 2003

$ $

Mortgages 740,062 628,315

Personal loans 270,208 247,339

Business loans 704,354 660,835

1,714,624 1,536,489

Less: provisions for impairment

specific provisions for credit risk (36,269) (31,477)

general provisions for inherent risk (9,348) (7,907)

1,669,007 1,497,105

The average interest rate earned during the year on loans and advances was 7.3% (2003: 7.2%).

Movement in provisions for impairment is as follows:

Specific credit Inherent risk

risk provision

provision

$ $

Balance, October 31, 2002 (22,806) (10,082)

Doubtful debts expense (9,894) (106)

Recoveries of bad and doubtful debts 198 670

Bad debts written off 1,025 1,611

Balance, October 31, 2003 (31,477) (7,907)

Doubtful debt expense (6,104) (1,805)

Recoveries of bad and doubtful debts (289) –

Bad debts written off 1,601 364

Balance, October 31, 2004 (36,269) (9,348)

The aggregate amount of non-performing loans amounted to $102,555 as at October 31, 2004 (2003:

$113,589).

60


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

6. Other assets

2004 2003

$ $

Accrued interest receivable 17,164 14,261

Due from related parties 4,650 73

Other accounts receivable 16,580 23,827

Prepayments and deferred items 1,134 778

Pensions assets (note 18) 13,167 14,610

52,695 53,549

7. Investment securities

Originated debt

2004 2003

$ $

Issued or guaranteed by Government 178,850 164,959

178,850 164,959

All debt securities held by the Bank were issued by Government-related agencies. The effective interest

rates earned during the year on debt securities ranged from 0.2% to 9.5% (2003: 4.6% to 9.0%).

Investment securities have been classified as held-to-maturity based on management’s intent and ability

to hold these securities until maturity.

61


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

8. Property, plant and equipment

Equipment,

Land and furniture Leasehold Total

buildings and vehicles Improvements 2004

$ $ $ $

Cost

Balance, beginning of year 20,822 22,737 10,311 53,870

Purchases 5,148 4,459 3 9,610

Disposals – (154) – (154)

Balance, end of year 25,970 27,042 10,314 63,326

Accumulated depreciation

Balance, beginning of year 5,165 15,708 4,198 25,071

Depreciation 463 1,936 534 2,933

Disposals – (12) – (12)

Balance, end of year 5,628 17,632 4,732 27,992

Net book values

End of year 20,342 9,410 5,582 35,334

Beginning of year 15,657 7,029 6,113 28,799

9. Goodwill

2004 2003

$ $

Gross amount of goodwill at beginning of year 198,217 196,966

Adjustment made during the year (10,470) 1,251

Gross amount of goodwill at end of year 187,747 198,217

Goodwill accumulated amortisation at beginning of year 10,470 615

Amortisation during the year – 9,855

Adjustment made during the year (10,470) –

Goodwill accumulated amortisation at end of year – 10,470

Goodwill balance at end of year 187,747 187,747

62


Notes to Consoliddated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

10. Deposits

Payable Payable Payable

on demand after notice at a fixed 2004 2003

date $ $

Individuals 138,211 158,647 686,707 983,565 927,325

Business and Governments 660,436 12,408 999,616 1,672,460 1,644,677

Banks 11,927 – 39,669 51,596 98,895

810,574 171,055 1,725,992 2,707,621 2,670,897

The effective rate of interest on deposits was 1.9% during the year (2003: 1.9%).

11. Other liabilities

2004 2003

$ $

Accounts payable and accruals 2,149 12,957

Accrued interest 14,964 12,068

Restructuring provision (note 17) 2,011 6,883

Other post-retirement medical benefits (note 18) 9,064 7,998

Other 82 1,757

12. Share capital

28,270 41,663

Number of shares $

Share capital at October 31, 2002 119,463,600 472,828

Shares issued during the year in rights offering 752,604 4,402

Share capital at October 31, 2003 120,216,204 477,230

Share capital at October 31, 2004 120,216,204 477,230

The company is authorised to issue 150 million ordinary shares with a par value of $0.10 each and 50

million preference shares with a par value of $0.10 per share.

63


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

13. Capital and reserves

2004 2003

$ $

Share capital (note 12) 477,230 477,230

Reverse acquisition reserve (63,566) (63,566)

Statutory reserve – Turks and Caicos Islands 700 –

Total capital and reserves at end of year 414,364 413,664

At October 11, 2002, the equity of the Bank comprised the equity of Barclays Bahamas together with the

fair value of the consideration given to acquire CIBC Bahamas. However, legally the share capital of the

Bank comprised the issued share capital of CIBC Bahamas plus the shares issued to effect the combination,

recorded at fair value. The reverse acquisition reserve is therefore the difference between the legally

required share capital together with the retained earnings of Barclays Bahamas, and the equity of the Bank

presented in accordance with IFRS.

In accordance with the Banking (Amendment) Ordinance 2002 of the Turks and Caicos Islands, the Bank

is required to maintain a Statutory Reserve Fund of not less than the amount of its assigned capital. Where

it is less than the assigned capital, the Bank is required to annually transfer 25% of its net profit earned

from its TCI operations to this fund. During the year the Bank assigned $24 million of capital to the TCI

operations and transferred $700 from retained earnings to the statutory reserve fund.

14. Interest income

2004 2003

$ $

Loans and advances 118,235 112,210

Securities 17,338 11,194

Cash and due from banks 18,388 14,484

15. Non-interest income

153,961 137,888

2004 2003

$ $

Fees and commissions 27,220 31,025

Foreign exchange 9,687 8,605

36,907 39,630

64


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

16. Other operating expenses

2004 2003

$ $

Staff costs 35,042 33,098

Other operating expenses 16,611 12,925

Property and equipment expenses 11,368 10,984

Depreciation 2,933 2,504

65,954 59,511

17. Restructuring provision

2004 2003

$ $

Balance at beginning of the year 6,883 10,209

Charged to income statement during the year – (1,112)

Net asset adjustment on acquisition – 996

Utilised during the year (4,872) (3,210)

Balance at end of year

2,011 6,883

Amount recognised in the income statement for the year:

2004 2003

$ $

Decrease in restructuring provision – (1,112)

Other integration expenses 279 1,289

279 177

As a result of the merger in 2002, restructuring costs were estimated and recognised as a restructuring

provision in the prior periods. During fiscal year 2004 only $4,872 of this provision was utilised. The

remaining provision represents estimated third party costs and is expected to be fully utilised during fiscal

year 2005.

18. Employee post-retirement obligations

The Bank has insured and group health plans and several pension schemes, which are noncontributory,

allow additional voluntary contributions and are final salary-defined benefit plans. The insured health plans

allow for retirees to remain in the plans until death. The plans are valued by independent actuaries every

three years using the projected unit credit method.

65


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

18. Employee post-retirement obligations (continued)

The amounts recognised in the balance sheet are determined as follows:

Defined Benefit Pension Plans

Post-Retirement Medical Benefits

2004 2003 2004 2003

$ $ $ $

Fair value of plan assets 44,240 76,390 – –

Present value of funded

obligations (48,512) (55,652) (15,507) (7,997)

(4,272) 20,738 (15,507) (7,997)

Unrecognised

actuarial gain 17,439 (6,128) 6,443 (1)

Net asset/(liability)

in the balance sheet 13,167 14,610 (9,064) (7,998)

Unrecognised actuarial gains and losses result from differences between actuarial assumptions and the

actual performance of the plan in the year under review. Actuarial gains and losses are recognised only if

they exceed 10% of the present value of the defined benefit obligation and 10% of the fair value of any

plan asset at the end of the previous reporting period.

The amount recognised in the income statement is as follows:

Defined Benefit Pension Plans

Post-Retirement Medical Benefits

2004 2003 2004 2003

$ $ $ $

Current service costs 3,200 3,435 663 497

Interest cost 3,330 3,320 753 484

Expected return on plan

assets (4,769) (5,872) – –

Net amount included

in staff cost 1,761 883 1,416 981

Actual return

on plan assets 4,770 4,130 – –

66


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

18. Employee post-retirement obligations (continued)

The movement in the net asset (liability) recognised in the balance sheet is as follows:

Defined Benefit Pension Plans Post-Retirement Medical Benefits

2004 2003 2004 2003

$ $ $ $

Balance at the beginning

of the year 14,610 14,823 (7,998) (7,148)

Charge for the year (1,763) (883) (1,416) (981)

Contributions paid 320 670 350 131

Balance at the end of the year 13,167 14,610 (9,064) (7,998)

The principal actuarial assumptions used were:

2004 2003

Defined benefit pension plans

Discount rate 7.0% 6.4%

Expected return on plan assets 8.5% 7.9%

Future salary increases 5.5% 4.9%

Future pension increases 1.8% 2.9%

Post-retirement medical benefits

Discount rate 6.7% 6.4%

Premium escalation rate 5.7% 5.4%

Existing retiree age 64 67

The last actuarial valuation of the plan, which governs employees of the former CIBC bank, was conducted

as at November 1, 2001 and revealed a fund surplus of $4 million.

The employees of the former Barclays Bank previously participated in the defined-benefit scheme of the

Barclays Bank (1951) pension plan (“the Barclays plan”). In January 2004, following the completion of the

combination of the various plans, the active members of the Barclays plan elected to transfer into a defined

benefit pension scheme in the new entity (“the FirstCaribbean plan”).

67


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

18. Employee post-retirement obligations (continued)

During the year Barclays Bank PLC transferred to the FirstCaribbean plan assets sufficient to fully fund a

ten-year contribution holiday in respect of the employees of the former Barclays Bank. The fair value of the

plan assets included in these consolidated financial statements includes the amount that Barclays Bank PLC

transferred to the FirstCaribbean plan which was determined on the basis of an actuarial valuation.

The present value of funded obligations has been calculated on the basis that non-active members remain

in the Barclays plan, which will continue to fund all pension payments for these members. The pension

obligation to non-active members was not transferred into FirstCaribbean International Bank (Bahamas)

Limited, so this obligation is not reflected in these consolidated financial statements.

19. Related party transactions

Interest income includes $17.5 million (2003: $17.2 million) and interest expense includes $3.9 million

(2003: $4.4 million) earned from and paid to related entities.

In the normal course of business the parent companies provide banking and support services, for which

$2.3 million (2003: $3.3 million) was charged during the period.

Deposits maintained with other CIBC and Barclays entities amounted to $699 million (2003: $1,028

million).

Non-interest income includes $10 million (2003: $10 million) from Barclays Bank PLC as an incentive for

the Bank to retain its placement balance with Barclays Capital.

20. Contingent liabilities and commitments

The Bank conducts business involving guarantees, performance bonds and indemnities, which are not

reflected in the balance sheet.

At the balance sheet date the following contingent liabilities exist:

2004 2003

$ $

Contingent liability on letters of credit 9,897 35,179

Loan commitments 254,717 214,243

Contingent liability on guarantees and indemnities 7,757 11,722

272,371 261,144

68


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

20. Contingent liabilities and commitments (continued)

The Bank is the subject of legal actions arising in the normal course of business. Management considers

that the liability, if any, of these actions would not be material. No significant provision has been made as

professional advice indicates that it is unlikely that any significant loss will arise.

21. Future rental commitments under operating leases

The Bank held leases on buildings for extended periods. The future rental commitments under these leases

were as follows:

2004 2003

$ $

Not later than 1 year 2,706 2,800

Later than 1 year and less than 5 years 8,504 10,240

Later than 5 years 2,640 1,612

22. Earnings per share

13,850 14,652

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the

weighted average number of ordinary shares in issue during the period.

2004 2003

$ $

Net profit attributable to shareholders 61,618 48,549

Weighted average number of ordinary shares in issue 120,216 119,812

Basic earnings per share (expressed in cents per share) 51.3 40.5

23. Segmented information

The Bank operates in one industry, the financial services industry. Transactions between business segments

are on normal business terms and conditions. Total income comprises net interest income and non-interest

income. The geographic distribution of total income, total expenses and operating profit was as follows:

69


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

23. Segmented information (continued)

2004 2003

Total Total Operating Total Total Operating

Income Expenses Profit Income Expenses Profit

Turks & Caicos 12,446 (4,055) 8,391 11,221 (8,373) 2,848

Bahamas 123,314 (69,808) 53,506 116,003 (60,270) 55,733

135,760 (73,863) 61,897 127,224 (68,643) 58,581

2004 2003

$ $

Total operating profit 61,897 58,581

Restructuring & integration charges (279) (177)

Goodwill amortisation – (9,855)

Net income 61,618 48,549

In the normal course of business various credit-related arrangements are entered into to meet the needs

of customers and earn income. These financial instruments are subject to the Bank’s standard credit policies

and procedures. Segment assets and liabilities comprise operating assets and liabilities, being the majority

of the balance sheet but excluding such items as other assets and other liabilities. The geographic

distribution of operating assets, operating liabilities and capital expenditures at October 31 was as follows:

2004 2003

Operating Operating Capital Operating Operating Capital

Assets Liabilities Expenditure Assets Liabilities Expenditure

Turks & Caicos 174,841 340,953 6,955 276,756 287,996 5,275

Bahamas 2,810,366 2,366,668 28,379 2,666,449 2,382,901 23,524

2,985,207 2,707,621 35,334 2,943,205 2,670,897 28,799

Off balance sheet financial instruments:

2004 2003

$ $

Turks & Caicos 69,794 16,942

Bahamas 202,577 244,202

272,371 261,144

70


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

24. Use of financial instruments

a) Strategy in using financial instruments

By its nature the Bank’s activities are principally related to the use of financial instruments. The Bank

accepts deposits from customers at both fixed and floating rates and for various periods and seeks to

earn above average interest margins by investing these funds in high quality assets. The Bank seeks to

increase these margins by consolidating short-term funds and lending for longer periods at higher rates

whilst maintaining sufficient liquidity to meet all claims that might fall due.

The Bank also seeks to raise its interest margins by obtaining above average margins, net of provisions,

through lending to commercial and retail borrowers with a range of credit standing. Such exposures

involve not just on-balance sheet loans and advances but the Bank also enters into guarantees and

other commitments such as letters of credit and performance and other bonds.

b) Credit risk

The Bank takes on exposure to credit risk which is the risk that a counterparty will be unable to pay

amounts in full when due. The Bank structures the levels of credit risk it undertakes by placing limits on

the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical

and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more

frequent review.

The exposure to any one borrower including banks and brokers is further restricted by sub-limits

covering on and off-balance sheet exposures and daily delivery risk limits in relation to trading items

such as forward foreign exchange contracts. Actual exposures against limits are monitored daily.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential

borrowers to meet interest and capital repayment obligations and by changing these lending limits

where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate

and personal guarantees, but a significant portion is personal lending where no such facilities can be

obtained.

Derivatives

The Bank maintains strict control limits on net open derivative positions, i.e. the difference between

purchase and sale contracts, by both amount and term. At any one time the amount subject to credit

risk is limited to the current fair value of instruments that are favourable to the Bank (i.e. assets), which

in relation to derivatives is only a small fraction of the contract or notional values used to express the

volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending

limits with customers, together with potential exposures from market movements. Collateral or other

security is not usually obtained for credit risk exposures on these instruments, except where the Bank

requires margin deposits from counterparties.

71


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

24. Use of financial instruments (continued)

b) Credit risk (continued)

Master netting arrangements

The Bank further restricts its exposure to credit losses by entering into master netting

arrangements with counterparties with which it undertakes a significant volume of transactions.

Master netting arrangements do not generally result in an offset of balance sheet assets and

liabilities as transactions are usually settled on a gross basis. However, the credit risk associated

with favourable contracts is reduced by a master netting arrangement to the extent that if an

event of default occurs, all amounts with the counterparty are terminated and settled on a net

basis. The Bank’s overall exposure to credit risk on derivative instruments subject to master

netting arrangements can change substantially within a short period since it is affected by each

transaction subject to the arrangement.

Credit related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer as

required. Guarantees and standby letters of credit, which represent irrevocable assurances that

the Bank will make payments in the event that a customer cannot meet its obligations to third

parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which

are written undertakings by the Bank on behalf of a customer authorising a third party to draw

drafts on the Bank up to a stipulated amount under specific terms and conditions, are

collateralised by the underlying shipments of goods to which they relate and therefore carry less

risk than a direct borrowing.

Commitments to extend credit represent unused portions of authorisations to extend credit in

the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to

extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused

commitments. However, the likely amount of loss is less than the total unused commitments

since most commitments to extend credit are contingent upon customers maintaining specific

credit standards. The Bank monitors the term of maturity of credit commitments because longerterm

commitments generally have a greater degree of credit risk than shorter-term

commitments.

c) Currency risk

The Bank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange

rates on its financial position and cash flows. The Board of Directors sets limits on the level of

exposure by currency and in total for both overnight and intra-day positions, which are

monitored daily. The table below summarises the Bank’s exposure to foreign currency exchange

rate risk at October 31. The off-balance sheet gap represents the difference between the notional

amounts of foreign currency derivative financial instruments, which are principally used to reduce

the Bank’s exposure to currency movements, and their fair values.

72


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

24. Use of financial instruments (continued)

c) Currency risk (continued)

As at October 31, 2004

Concentrations of assets, liabilities and off balance sheet items:

BAH $ US $ Other Total

Assets

Cash resources 133,196 511,133 219,726 864,055

Trading securities – 273,295 – 273,295

Loans and advances 1,148,004 513,261 7,742 1,669,007

Investments securities 146,534 32,316 – 178,850

Other assets 43,422 9,273 – 52,695

Goodwill 187,747 – – 187,747

Property, plant and equipment 24,912 9,682 740 35,334

Total assets 1,683,815 1,348,960 228,208 3,260,983

Liabilities

Deposits 1,235,608 1,246,172 225,841 2,707,621

Other liabilities 15,013 12,466 791 28,270

Total liabilities 1,250,621 1,258,638 226,632 2,735,891

Net on balance sheet position 433,194 90,322 1,576 525,092

Off balance sheet net notional position 8,428 8,872 354 17,654

Credit commitments 93,771 160,946 – 254,717

As at October 31, 2003

Total assets 1,472,850 1,533,193 207,257 3,213,300

Total liabilities 1,073,295 1,450,356 188,909 2,712,560

Net on balance sheet position 399,555 82,837 18,348 500,740

Off balance sheet net notional position 10,736 36,150 15 46,901

Credit commitments 118,927 95,316 – 214,243

73


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

24. Use of financial instruments (continued)

d) Interest rate risk

Interest sensitivity of assets, liabilities and off balance sheet items – repricing analysis

The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest

rates on its financial position and cash flows. Interest margins may increase as a result of such

changes but may reduce or create losses in the event that unexpected movements arise. The

Board of Directors sets limits on the level of mismatch of interest rate repricing that may be

undertaken, which is monitored daily.

Expected repricing and maturity dates do not differ significantly from the contract dates, except

for the maturity of deposits up to 1 month, which represent balances on current accounts

considered by the Bank as a relatively stable core source of funding of its operations.

e) Liquidity risk

As at October 31, 2004

The Bank is exposed to daily calls on its available cash resources from overnight deposits, current

accounts, maturing deposits, loan draw downs, guarantees and from margin and other calls on

cash-settled derivatives. The Bank does not maintain cash resources to meet all of these needs as

experience shows that a minimum level of reinvestment of maturing funds can be predicted with

a high level of certainty. The Board of Directors sets limits on the minimum proportion of

maturing funds available to meet such calls and on the minimum level of interbank and other

borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand.

The table below analyses assets and liabilities of the Bank into relevant maturity groupings based

on the remaining period at balance sheet date to the contractual maturity date.

Maturities of assets and liabilities

1-3 3-12 1-5 Over 5

months months years years Total

$ $ $ $ $

Assets

Cash and due from banks 691,216 172,839 – – 864,055

Trading securities 273,295 – – – 273,295

Loans and advances 255,808 186,097 518,718 708,384 1,669,007

Investments securities 15,573 6,471 53,935 102,871 178,850

Other assets 39,447 – – 13,248 52,695

Goodwill 2,463 7,389 39,408 138,487 187,747

Property, plant and equipment – – – 35,334 35,334

Total assets

1,277,802 372,796 612,061 998,324 3,260,983

74


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

24. Use of financial instruments (continued)

e) Liquidity risk (continued)

1-3 3-12 1-5 Over 5

months months years years Total

$ $ $ $ $

Liabilities

Deposits 1,644,616 340,655 5,712 716,638 2,707,621

Other liabilities 3,856 24,193 – 221 28,270

Total liabilities 1,648,472 364,848 5,712 716,859 2,735,891

Net on balance sheet position (370,670) 7,948 606,349 281,465 525,092

Off balance sheet net notional position – 17,654 – – 17,654

Credit commitments 19,571 235,146 – – 254,717

As at October 31, 2003

Total assets 1,257,421 352,045 442,473 1,161,361 3,213,300

Total liabilities 2,340,724 363,284 5,554 2,998 2,712,560

Net on balance sheet position (1,083,303) (11,239) 436,919 1,158,363 500,740

Off balance sheet net notional position – 46,901 – – 46,901

Credit commitments 15,580 198,663 – – 214,243

The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is

fundamental to the management of the Bank. It is unusual for banks ever to be completely matched

since business transacted is often of uncertain term and different types. An unmatched position

potentially enhances profitability, but also increases the risk of losses.

The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing

liabilities as they mature, are important factors in assessing the liquidity of the Bank and its exposure

to changes in interest rates and exchange rates.

Liquidity requirements to support calls under guarantees and standby letters of credit are considerably

less than the amount of the commitment because the Bank does not generally expect the third party

to draw funds under the agreement. The total outstanding contractual amount of commitments to

extend credit does not necessarily represent future cash requirements, since many of these

commitments will expire or terminate without being funded.

75


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

24. Use of financial instruments (continued)

f) Fair values of financial assets and liabilities

Due from other banks

Due from other banks includes interbank placements and items in the course of collection.

The fair value of floating rate placements and overnight deposits is their carrying amount. The

estimated fair value of fixed interest-bearing deposits is based on discounted cash flows using

prevailing money market interest rates for debts with similar credit risk and remaining maturity.

Loans and advances to customers

Loans and advances are net of specific and other provisions for impairment. The estimated fair

value of loans and advances represents the discounted amount of estimated future cash flows

expected to be received. Expected cash flows are discounted at current market rates to

determine fair value.

Investment securities

Investment securities include only interest-bearing assets held-to-maturity, as assets available-forsale

are now measured at fair value. Fair value for held-to-maturity assets are based on market

prices or broker/dealer price quotations. Where this information is not available, fair value has

been estimated using quoted prices for securities with similar credit, maturity and yield

characteristics, or in some cases by reference to the net tangible asset backing of the investee.

Deposits and borrowings

The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing

deposits, is the amount repayable on demand.

The estimated fair value of fixed interest-bearing deposits and other borrowings without quoted

market price is based on discounted cash flows using interest rates for new debts with similar

remaining maturity.

76


Notes to Consolidated Financial Statements

For the year ended October 31, 2004

(expressed in thousands of Bahamian dollars)

25. Principal subsidiary undertakings

Name

FirstCaribbean International Finance Corporation (Bahamas) Limited

FirstCaribbean International (Bahamas) Nominees Company Limited

FirstCaribbean International Land Holdings (TCI) Limited

Country of incorporation

Bahamas

Bahamas

Turks & Caicos Islands

All subsidiaries are wholly owned.

26. Dividends

At the Board of Directors meeting held December 17, 2004, a final dividend of $0.18 per share

amounting to $21,638,917 (2003: $0.16 per share, amounting to $19,234,593) in respect of 2004

net income was proposed and declared. The consolidated financial statements for the year ended

October 31, 2004 do not reflect this resolution, which will be accounted for in the shareholders’ equity

as an appropriation of retained earnings in the year ending October 31, 2005.

27. Subsequent event

Subsequent to October 31, 2004, the Bank entered into a sales agreement for the sale of its office

building located on Bay Street, Nassau, Bahamas and a leaseback of a portion of the building from

which the branch will continue to operate. This transaction is expected to be completed by January

2005.

28. Prior period adjustment

Other assets balance as reported at October 31, 2003 and 2002 included a receivable amount of $1.9

million representing the overpayment of remittances to Barclays PLC for periods prior to the

combination of CIBC Bahamas and Barclays Bahamas. At the time of the combination, the

overpayment was accounted for in the net asset valuation and therefore the other assets balances were

incorrectly stated. In accordance with IFRS, the balances for October 31, 2003 are restated and

opening retained earnings for 2003 was reduced accordingly.

29. Reclassification

Certain balances on the consolidated balance sheet, including goodwill and other assets, as well as

certain notes to the consolidated financial statements have been reclassified to conform to the

presentation in the current year.

77


FirstCaribbean International Bank

(Bahamas) Limited Information Circular

We are providing these proxy materials in connection

with the solicitation by the Board of Directors of

FirstCaribbean International Bank (Bahamas) Limited, of

proxies to be voted at the Company’s 2004 Annual

General Meeting of Shareholders and at any meeting

following adjournment thereof.

Shareholders are advised that no shareholder proposal

has been filed and no action is proposed by the Board

of Directors which would create the possibility of a

“dissenting shareholder” under Section 168 of The

Companies Act, 1992. The Board of Directors is also not

aware of any solicitation of proxies by a person or

group adverse to present management of this

Company.

You are cordially invited to attend the annual meeting

on April 8, 2005 beginning at 6:00 p.m. E.S.T.

Shareholders will be admitted beginning at 5:30 p.m.

E.S.T. The meeting will be held at the British Colonial

Hilton, Victoria Room, Number One Bay Street, Nassau,

The Bahamas.

This financial year of FirstCaribbean International Bank

(Bahamas) Limited began on November 1, 2003 and

ended October 31, 2004. References in this proxy

statement to the year 2004 or financial 2004 refer to

the period as mentioned above.

We are mailing this proxy statement and accompanying

forms of proxy and voting instructions to holders of the

Company’s ordinary shares on March 14, 2005, the

record date for the meeting.

Proxies and Voting Procedures

The Board of Directors and the Management of the

Company do not contemplate the solicitation of

proxies otherwise than by mail.

A shareholder has the right to appoint a person or

company (who need not be a shareholder), other than

the persons designated by the Directors as proxy

holders in the accompanying form of proxy, to

represent the shareholder at the meeting by striking out

the names of the persons so designated and inserting

the name of the chosen proxy holder in the blank space

provided for that purpose in the form of proxy, or by

completing and signing another proper form of proxy.

A proxy must be in writing and must be executed by

the shareholder or by an attorney authorised in writing

and deposited at the offices of CIBC Trust (Bahamas)

Limited, Goodman’s Bay Corporate Centre, West Bay

Street, Nassau, The Bahamas. A shareholder who

executes and returns the accompanying form of proxy

may revoke it by an instrument in writing executed by

78

such shareholder or attorney authorised in writing and

deposited at the offices of CIBC Trust (Bahamas)

Limited, Registrar and Transfer Agents at Goodman’s

Bay Corporate Centre, West Bay Street, Nassau, The

Bahamas at any time up to and including the last

business day preceding the day of the meeting, or with

the Chairman of the meeting on the day of the meeting

prior to the commencement thereof, or in any other

manner permitted by law.

All shares entitled to vote and represented by properly

completed proxies received prior to the meeting and

not revoked will be voted at the meeting in accordance

with your instructions. If you do not indicate how your

shares should be voted on a matter, the shares

represented by your properly completed proxy will be

voted as the Board of Directors recommends.

If any other matters are properly presented at the

annual meeting for consideration, including, among

other things, consideration of a motion to adjourn the

meeting to another time or place, the persons named

as proxies and acting thereunder will have discretion to

vote on those matters according to their best judgment

to the same extent as the person delivering the proxy

would be entitled to vote. At the date this proxy

statement went to press, we did not anticipate that any

other matters would be raised at the meeting.

Shareholders Entitled to Vote

Shareholders at the close of business on the record date

are entitled to notice of and to vote at the annual

meeting.

On March 14, 2005 there were 120,216,204 ordinary

shares of par value $0.10 each outstanding. Each share

is entitled to one vote on each matter properly brought

before the meeting.

At close of business on March 14, 2005 FirstCaribbean

International Bank Limited beneficially owned or

controlled directly or indirectly 114,463,600 shares

which represents 95.21% of the Company’s issued

ordinary shares.

Quorum and Required Vote

The presence, in person or by proxy, of the holders of a

majority of the shares entitled to vote generally for the

election of Directors is necessary to constitute a quorum

a the meeting. For purposes of determining a quorum,

abstentions are counted as present and are entitled to

vote. Pursuant to the Articles of Association, three

persons, each being a member entitled to attend and

vote at the meeting, or a proxy for such a member, or

the duly authorised representative of a corporate

member so entitled, shall be a quorum.


FirstCaribbean International Bank

(Bahamas) Limited Information Circular

Election of Directors

The articles of the Company currently provide that the

Board of Directors of the Company shall consist of a

minimum of five (5) and a maximum of twelve (12)

directors, with the actual number of directors to be

determined from time to time by the Board of

Directors.

Directors can be either elected annually by the

shareholders at the annual meeting of shareholders or,

subject to the articles of the Company and applicable

law, appointed by the Board of Directors between

annual meetings. Each director shall hold office until

the close of the next annual meeting of shareholders or

until he or she ceases to be a director by operation of

law or articles of Association of the Company or until his

or her resignation becomes effective. By resolution of

the Board of Directors, the number of directors has

been fixed at eight (8) effective upon the election of

directors at the Meeting.

Mr. Mark Teversham will not be standing for re-election at

the Meeting.

The Board of Directors held seven (7) meetings in 2004.

The persons designated as proxy holders in the

accompanying form of proxy will vote ordinary shares

represented by such form of proxy, properly executed, for

the election of the nominees whose names are set forth

herein, unless specifically directed to withhold a vote. All

the nominees were previously elected by the shareholders

of the Company as directors of the Company.

If any nominee is for any reason unavailable to serve

(which management has no reason to believe to be the

case), the persons designated as proxy holders in the

accompanying form of proxy shall have the right to

exercise their discretion by voting for another qualified

nominee.

The following table sets out the names of all persons

proposed to be nominated for election as Directors, along

with other relevant information. All nominees are now

members of the Board of Directors.

Compensation of Directors

Each director, who is not an employee of FirstCaribbean

International Bank (Bahamas) Limited is paid a fee of

$1,500.00 per meeting for his or her services as a director.

Directors are also entitled to reimbursement for

reasonable travel and living expenses incurred by them in

attending any Board of Directors or committee meetings.

No special remuneration was paid to any director during

financial year 2004.

Senior Management Compensation

The senior management of the Company received

aggregate compensation amounting to $873,366 in the

financial year 2004.

Indebtedness of Management

There is a total indebtedness of approximately

B$1,964,226 due to the Company from members of

the senior management and directors. This represents

loans and mortgages.

Name and Position Principal Director Since Number of Shares

Occupation

Beneficially Owned

or Controlled

Directly or

Indirectly

Michael Mansoor

Executive Chairman,

FirstCaribbean International Bank 1999 Nil

Sharon Brown

Executive Director,

Managing Director 2002 Nil

J. W. P. Krukowski Chairman, Doctor’s

Hospital Health System Ltd 1997 Nil

Terence Hilts

Retail Director,

Northern Caribbean 1997 29,500

Willie Moss Attorney-at-law 1998 Nil

Teresa Butler

Chairman, Bahamas

Public Service Commission 2002 Nil

G. Diane Stewart Attorney-at-law 2002 Nil

Jan-Arne Farstad

Executive Director,

International Banking 2004 Nil

79


FirstCaribbean International Bank

(Bahamas) Limited Information Circular

Management’s Interest in Transactions

No director, executive officer, or senior officer of the

Company, or proposed nominee for election as a

director of the Company, has held or currently holds a

material interest in any transaction entered into by the

Company or its subsidiaries.

Share Option Plan

There is no share option plan.

Shareholder Feedback and Communication

The Company’s communications policy is reviewed by

the Board of Directors of the Company periodically and

provides that communications with all constituents will

be made in a timely, accurate and effective manner.

The Company communicates regularly with its

shareholders through press releases, and annual and

quarterly reports. At the Company’s shareholders’

meetings, a full opportunity is afforded to permit

shareholders to ask questions concerning the

Company’s activities. Investor and shareholder

concerns are addressed on an ongoing basis through

the office of the Corporate Secretary.

be stated or that is necessary to make a statement not

misleading in light of the circumstances in which it was

made.

Dated at the City of Nassau, New Providence Island in

the Commonwealth of The Bahamas this March 14,

2005.

Michael Mansoor

Chairman

Teresa S. Williams

Corporate Secretary

Appointment of Auditors

At the meeting, the shareholders will be called upon to

appoint auditors of the Company at a remuneration to

be fixed by the Board of Directors and to serve until the

close of the next annual meeting of the Company. To

be effective, the resolution appointing auditors of the

Company must be approved by the majority of the

votes cast by the holders of Ordinary Shares present in

person, or represented by proxy, at the Meeting.

Arrangements will be made for one or more

representatives of the proposed auditors to attend the

meeting.

Other Business

The management of the Company knows of no matters

to come before the meeting other than the matters

referred to in the Notice of Annual Meeting. However,

if any other matters which are not known to the

management of the Company should properly come

before the Meeting, forms of proxy given pursuant to

this solicitation by the management of the Company

will be voted on such matters in accordance with the

best judgment of the person voting the proxy.

Directors’ Approval and Certificate

The contents and the sending of this Information

Circular and Proxy Form have been approved by the

Board of Directors of the Company. The foregoing

contains no untrue statement of a material fact and

does not omit to state a material fact that is required to

80


Proxy Form

The undersigned _____________ (please print) of_________________________ (please print) being a shareholder of

FirstCaribbean International Bank (Bahamas) Limited (“the Company”) hereby appoints Mr. Michael M. Mansoor, or failing

him, Sharon E. Brown, or instead or either of them, _____________________ or ____________________as proxy of the

undersigned to attend and vote at the Annual General Meeting of Shareholders (“the meeting”) of the Company to be held

on 8th April, 2005 and at any adjournment thereof, notice of the meeting, together with the accompanying financial

statements and the Information Circular having been received by the undersigned, and on behalf of the undersigned to vote

as specifically directed below.

1. Specified in the accompanying Information Circular:

Michael Mansoor, Chairman VOTE FOR WITHHOLD FROM VOTING

Sharon Brown VOTE FOR WITHHOLD FROM VOTING

Terence Hilts VOTE FOR WITHHOLD FROM VOTING

Willie Moss VOTE FOR WITHHOLD FROM VOTING

Teresa Butler VOTE FOR WITHHOLD FROM VOTING

G. Diane Stewart VOTE FOR WITHHOLD FROM VOTING

Jan-Arne Farstad VOTE FOR WITHHOLD FROM VOTING

J.W.P. Krukowski VOTE FOR WITHHOLD FROM VOTING

2. To vote for or withhold from voting on the appointment of Auditors of the Company and to authorize the Directors to

fix their remuneration:

VOTE FOR

WITHHOLD FROM VOTING

3. To vote in their discretion upon any other business which may properly come before the meeting or any adjournment

thereof.

The undersigned revokes any prior proxies to vote the shares covered by this proxy.

This proxy is solicited on behalf of the Management of the Company and will be voted as directed in the spaces

provided above or, if no direction is given it will be voted in the affirmative for each of the above proposals.

Dated this ………………………………………. day of ……………………………………A.D., 2005

Corporate Seal ……………………………………………………………………………………………….

Notes:

The persons named in this proxy are Officers of the Company. Each shareholder submitting the proxy shall have the right to appoint a person or

company to represent him/her at the meeting other than the persons designated above. To exercise this right, the shareholder may insert the name

of the desired representative in the blank space provided and strike out the other names or may submit another appropriate proxy.

In order for this form of proxy or other appropriate forms of proxy to be valid, it must be signed and should be dated by the shareholder or the

shareholder’s attorney. The signature should be exactly the same as the name in which the shares are registered. The proxy must be sent by mail

or hand delivered to the offices of CIBC Trust (Bahamas) Limited, Registrar and Transfer Agents, Goodman’s Bay Corporate Centre, West Bay Street,

no later than 4 p.m. on the last business day immediately preceding the date of the meeting. If this form of proxy is received undated but otherwise

properly executed, it will for all purposes be deemed to be dated 7th April, 2005.

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