Bahamas - FirstCaribbean International Bank

ContentsOur Heritage 6Notice of Meeting 8Board of Directors 10Advisors & Senior Management 12Directors’ Report 14Chairman’s Review 16Group Chief Executive Officer’s Report 20Country Manager’s Report 26FirstCaribbean Internatioal Bank (Bahamas)Limited Locations 29Management’s Discussion and Analysis ofOperating Results and Financial ConditionBanking Segments: Retail Banking3034Corporate Banking 36International Banking 38Capital Markets 40Marketing and Communications 42Human Resources 44Financial Statements 46Information Circular (i)Proxy Form(v)Note: All currency is quoted in Bahamian dollars.

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FirstCaribbean International Bank

FirstCaribbean International Bank bringstogether two complementary and leadingfinancial services businesses in theCaribbean - Barclays Bank PLC and CIBCWest Indies Holdings Limited.FirstCaribbean is committed to building aCaribbean bank founded on the strength,tradition and integrity of the foundinginstitutions, but which is bigger than thelegacy banks were on their own in theregion.FirstCaribbean will have one of the largestcapital bases of any Caribbean bank, givingit the resources necessary to invest in thefuture of the region and better serve itscustomers.5

Our HeritageBarclays BankThrough the combinedstrengths of CIBC and Barclaysin the Caribbean,FirstCaribbean is poised as oneof the leading banks in theregion. Its size and diversitywill provide staff, customersand shareholders withsignificant potential andopportunity in the years tocome. FirstCaribbean is set tobecome the market leader inservice, products, ease ofaccess and innovation.Bob Hunter, Chief Executive Officer,Barclays Private Clients,LondonBarclays Bank PLC was the oldest banking institution inthe Commonwealth Caribbean. It provided unbrokenservice from May 1837 when its branches first openedtheir doors in the British West Indies.The new bank was greeted with enthusiasm. TheBarbadian described its charter as ‘one of the mostimportant documents that ever found its way fromEurope to the Western Tropical World.’ Offices quicklyopened in Barbados, Trinidad and British Guiana, soonfollowed by St Lucia, Grenada, Antigua, Dominica,St Kitts and St Vincent.The Bank’s first century saw few changes in itsoperations. The major event of this inter-war periodwas the merger of Barclays Bank (UK), the Anglo-Egyptian Bank and the Bank of South Africa, in 1925,to form Barclays Bank (Dominion Colonial andOverseas). The name was subsequently shortened, in1954, to Barclays Bank DCO.The end of World War II brought the greatest change.Until then, most of Barclays' customers came from thecommercial sector. There was now the need to activelyseek out customers in the rest of the community.Establishing branches in rural centres on the largerislands accomplished this. In Trinidad, the expansionwas notable: four branches in 1952, over 30 branchesby the mid-sixties.Government policy became a significant factoraffecting all banks in the region. In Jamaica, theManley Government nationalised Barclays in 1977. InTrinidad and Tobago, Barclays was localised in 1972 –reducing the parents' shareholding.For over 160 years Barclays served the Caribbean. Thesame pioneering spirit which motivated the opening ofthe first branch in 1837, now inflences its combinationwith CIBC to form one of the Caribbean’s largest banks.6

CIBCIn 1920 The Canadian Bank of Commerce decided toextend its operations beyond its national boundaries.The West Indies was selected as the first location fornew international branches. It was anticipated thatthere would be a significant development of tradebetween Canada and the Caribbean area. There hadbeen active trade relations in an earlier period betweenthe Province of Nova Scotia and the West Indies viathe Halifax Banking Company prior to its merger withThe Canadian Bank of Commerce in 1903. Bankexecutives visited the West Indies in 1919, andrecommended to the Board of Directors the opening ofbranches in Cuba, Jamaica and Barbados. The branchin Kingston opened on November 1, 1920 and theBridgetown branch opened on December 20, 1920.Branches soon followed in Port of Spain and Rio deJaneiro in 1921.Application was made to the governments of Jamaica,Trinidad and Barbados for note-issuing privilegessimilar to those enjoyed by other banks in the WestIndies. The Jamaica and Trinidad issues were datedMarch 1, 1929 and the Barbados issue was datedJanuary 2, 1922.With the combined experienceof close to 250 years in theCaribbean under the CIBC andBarclays banners,FirstCaribbean has a clearunderstanding of the businessand consumer needs in thisdiverse group of countries.FirstCaribbean is a bank of theCaribbean, for the Caribbean,with connections to the world.John Hunkin, Chairman and CEO,Canadian Imperial Bank of Commerce,TorontoThe 1950s and 60s saw another spurt in expansion inthe West Indies. Branches were opened in St. James,Trinidad, Nassau, the Bahamas, and in Port Antonio,Buff Bay, and Ochos Rios in Jamaica in the 1950s. Inthe 1960s branches opened in Half Way Tree andMontego Bay, Jamaica, and in Tunapuna, Port of Spainand San Juan in Trinidad, and Scarborough, Tobago.In 1993 a restructuring process was started to capitaliseon changes in the business environment. As a result,CIBC West Indies Limited was incorporated, and wassubsequently listed on the stock exchanges ofBarbados, Trinidad and Tobago, and Jamaica.7

Notice of MeetingAnnual MeetingNotice is hereby given that the Eighth AnnualGeneral Meeting of FirstCaribbean InternationalBank (Bahamas) Limited will be held at 6:00 p.m. onApril 25th, 2003 at British Colonial Hilton, No.1 BayStreet, Nassau, The Bahamas for the followingpurposes:1. To read the minutes of the last Annual GeneralMeeting held on March 7th, 2002.2. To receive and consider the Chairman’s Review.3. To receive accounts for the year endedOctober 31st, 2002 and the report of the Directorsand Auditors thereon.4. To elect the following Directors:(i) Joseph W. P. Krukowski(ii) Terence R. Hilts(iii) Walter A. Wells(iv) Willie Moss(v) G. Diane Stewart(vi) Sharon Brown(vii) Teresa Butler(viii) Michael Mansoor(ix) Mark Teversham5. To approve the appointment ofPricewaterhouseCoopers as the Auditor of theCompany and authorize the Directors to fix theirremuneration.6. Ratification of dividends for fiscal 20027. To discuss any other business which may properlycome before the Annual General Meeting.BY ORDER OF THE BOARD OF DIRECTORSCheryl E. BazardCorporate SecretaryFirstCaribbean International Bank (Bahamas) Limited23rd January, 2003Record DateHolders of FirstCaribbean International Bank(Bahamas) Limited ordinary shares of record at theclose of business on March 14th, 2003 are entitledto vote at the meeting.Financial StatementsThe Company’s audited financial statements forthe year ended October 31st 2002 are included inthe Company’s 2002 annual report, which isenclosed as a part of the proxy soliciting material.ProxiesShareholders of the Company entitled to attendand vote at the Meeting are entitled to appointone or more proxies to attend and, in a poll, voteinstead of them. A proxy need not be ashareholder of the Company. Any instrumentappointing a proxy must be received at the officeof the Corporate Secretary, FirstCaribbeanInternational Bank (Bahamas) Limited, 4th Floor,#308 East Bay Street, Nassau, The Bahamas not lessthan 48 hours before the Meeting. Shareholderswho return completed proxy forms are notprecluded, if subsequently they so wish, fromattending the Meeting instead of their proxies andvoting in person. In the event of a poll, theirproxy votes lodged with the Registrar and TransferAgent will be excluded.DividendAn interim dividend of eighteen cents ($0.18) percommon share was paid on June 21st, 2002. Afinal dividend of fifteen cents ($0.15) per commonshare for the fiscal year 2002 was approved by theDirectors on September 26th, 2002 and paid toshareholders on October 21st, 2002. Totaldividends paid for fiscal 2002 was thirty-threecents ($0.33).REGISTERED OFFICE: FirstCaribbeanInternational Bank (Bahamas) Limited, 4th Floor,#308 East Bay Street, Nassau, The Bahamas8

Michael MansoorChairman - FirstCaribbeanInternational Bank(Bahamas) LimitedTerence R. HiltsRetail Director,Northern Caribbeanand Country ManagerSharon BrownTeresa ButlerJoseph KrukowskiReginald LoboskyWillie MossG. Diane Stewart Mark StrangMark TevershamWalter Wells

Directors, Senior Management & AdvisorsBoard of DirectorsMichael Mansoor – ChairmanTerence R. HiltsSharon BrownTeresa ButlerJoseph W. P. KrukowskiReginald LoboskyWillie MossG. Diane StewartMark StrangMark TevershamWalter WellsLegal AdvisorsHarry B Sands, Lobosky & CompanyCorporate SecretaryCheryl E. BazardRegistrar and Transfer AgentsCIBC Trust Company (Bahamas) LimitedAnsbacher (Bahamas) LimitedSenior ManagementTerence R. HiltsRetail Director, Northern CaribbeanFrederick CartwrightActing Deputy Retail Director, NorthernCaribbeanCheryl BazardDirector of Compliance ProfessionalsPedro DelaneyManager, FinanceRobert GriffithsInternational Banking DirectorGregory WilliamsActing Head of OperationsGraeme SkinnerCorporate Banking Director, Bahamas and Turks andCaicos IslandsBasil LongleyInfrastructure Manager, Technical Support Unit,Operations and TechnologyRegistered OfficesFirstCaribbean International Bank (Bahamas) Limited4th Floor, #308 East Bay Street,Nassau, The BahamasRegional Audit CommitteeRon Lalonde - ChairmanChristopher BovellTeresa ButlerKathryn CasparianAllan FieldsChester FeldbergSir Fred GollopDavid RitchAuditorsPricewaterhouseCoopersDr. Kerry HiggsHead of Human Resources, Northern Caribbean12

Directors, Senior Management & AdvisorsBranch ManagersKen BainBay Street BranchManaging Director, FirstCaribbean InternationalFinance Corporation (Bahamas) LimitedRaymond AntonioManager, Shirley StreetPaul BartlettManager, Marsh Harbour, AbacoSean BlydenManager, JFK BranchThelma BurrowsManager, Governor’s Harbour, EleutheraJoey CartwrightManager, Domestic PremierRobert CoxManager, East Mall Branch, Freeport,Grand BahamaJoanne DamesActing Manager, Palmdale BranchOthneil DuncombeManager, Hurricane Hole, Paradise IslandPrudence GallagherManager, Pioneer’s WayYvette HaynesManager, Turks and CaicosMinerva KempManager, Queen’s Highway BranchPauline LightbourneManager, 308 East Bay & Harbour BayAndrew McFallManager, Marathon Mall BranchByron MillerManager, Cable Beach BranchJ.B.SmithManager, Turks and CaicosBeres StrachanManager, Thompson BoulevardRochelle WilkinsonManager, Madeira Street Branch13

Directors’ ReportDIRECTORSIn accordance with the Memorandum and Articlesof Association, the following Directors cease to holdoffice at the end of the Annual General Meeting,and being eligible offer themselves for re-election:-i.ii.iii.iv.v.vi.vii.viii.ix.Sharon BrownTeresa ButlerTerence R. HiltsJoseph W. P. KrukowskiMichael MansoorWillie MossG. Diane StewartMark TevershamWalter A. WellsDIRECTORS’ INTERESTAs at October 31st, 2002, particulars of Directors’shareholdings in the issued capital of the Companyare as follows:COMMON SHARES OF NO PAR VALUESHARE CAPITALSubstantial Interest as at October 31st, 2002*Common Shares of B$0.10 par value1. FirstCaribbean International Bank – 114,463,600 (95.8%)*Substantial interest means a holding of 5% or more of thecompany’s issued share capital.AUDITORSThe Auditors, PricewaterhouseCoopers have indicatedtheir willingness to be re-appointed and a resolution tothat effect will be proposed at the Annual GeneralMeeting of the Company.BY ORDER OF THE BOARDCheryl E. BazardCorporate SecretaryMarch 14th, 2003Beneficial Non-BeneficialInterest Interest1. Terence Hilts 17,500 nil2. Walter Wells 24,200 nil3. Reginald Lobosky nil 5,000FINANCIAL RESULTS AND DIVIDENDSThe Directors report that the Company’s netincome for the year ended October 31, 2002 beforegoodwill amortisation and restructuring chargesamounted to B$20.9 million. All statutoryrequirements for the year ended October 31, 2002have been fulfilled.An interim dividend of eighteen cents ($0.18) percommon share was paid on June 21st, 2002. A finaldividend of fifteen cents ($0.15) per common sharefor the fiscal year 2002 was approved by theDirectors on September 26th, 2002 and paid toshareholders on October 21st, 2002. Total dividendspaid for fiscal 2002 was thirty-three cents ($0.33).Cheryl E. BazardCorporate Secretary14

STRENGTHWe are strong, built solidly on the foundation of two WorldClass Banks, establishing security, reliability and opportunity.11

Chairman’s ReviewIn late 2002, consequent upon the combinationof CIBC Bahamas Limited and Barclays BankPLC’s retail, corporate and international bankingoperations in The Bahamas, your Board electedme to the position of Chairman of FirstCaribbeanInternational Bank (Bahamas) Limited, and I amhonoured to have this opportunity to present theCompany’s 2002 results.The combination of CIBC Bahamas and Barclaysin the Bahamas and the Turks and Caicos Islandswas clearly the most significant development in2002.Whereas CIBC Bahamas Limited had 13 branchesand an asset base of $1.3 billion, FirstCaribbeanInternational Bank (Bahamas) Limited has 23branches and an asset base of $3.2 billion.The shareholding of the Bank has also changed.Whereas CIBC Bahamas Limited was owned byCIBC West Indies Holdings Ltd. (90.9%) and alargely Bahamian minority (9.1%), theshareholding of the combined bank is sharedbetween FirstCaribbean International BankLimited 95.8% and the minority 4.2%approximately.Subsequent to the end of the reporting period,FirstCaribbean Bahamas’ Rights Issue wasannounced. Pursuant to the 3 for 5 Rights Issue,minority shareholders have the opportunity toacquire 3,000,000 shares at a price of $6.10. If allrights are taken up, the minority holding will beapproximately 6.7%.We continue to believe that the combination willenhance shareholder value despite the presentlevel of pro-forma combined earnings due in themain to the historically low rates of interest. Weexpect that the combined Bank will achievequantifiable synergies and economies of scaleand scope and in addition, any increases ininterest rates will have a favorable impact on theresults of the company.For 2002, a total dividend of 33 cents per sharewas paid based on the results of CIBC BahamasLimited for 11 months to September 30. Theperformance of both legacy banks wasnegatively affected by historically low interestrates and compression of net interest margins.GovernanceAll successful banks must have a rigorous androbust culture of risk management andinternal control, with appropriate systems toensure that they are managed in a prudentmanner. An equally important requirement iscompliance with the regulatory requirementsin the jurisdictions in which they operate.We have taken great care to ensure that in theperiod of integration and beyond, there areadequate organisational arrangements toensure that the requirements for control andregulatory compliance are satisfied.We expect that thecombined bank willachieve quantifiablesynergies and economiesof scale and scope...Both heritage banks have had exemplarypolicies and procedures for the managementof credit, operational and market risk andregulatory compliance. We have selected 'bestpractice' standards from our legacy banks andhave formulated our own procedures and16

Michael MansoorChairman

Chairman’s Reviewpolicies. We are also following the basic modelof having an internal operational risk group anda separate internal audit group to ensurecompliance.We regard good governance and regulatorycompliance as a cornerstone of our mission andstrategy and we are confident that we haveallocated the necessary resources to ensuresuccess in this important area.Our PeopleOur people are our most important asset and wehave done our best to ensure that the myriadconcerns of our people are dealt with duringthis period of integration and uncertainty.I am very happy to report that we havefollowed enlightened and, I believe, exemplarypractices in selecting persons to hold seniorpositions in the new bank.Our compensation policies are among the bestin the region and we regard this as acompetitive advantage. Compensation andbenefits are however dependent uponperformance and profitability, and the longterm prosperity of our staff and our bank willonly occur if there is restraint and due regardfor economic realities. Virtually all of our staffare shareholders or will become shareholderswithin the first year of the new bank’soperations.Our people have supported us in a difficult yearand we are grateful to everyone for this.Future OutlookWith respect to the future, it is very clear thatour success is dependent upon our ability tomerge the operations of the two heritage banksefficiently, within our budget for restructuringcosts and the established timeframe.We are optimistic that the integration andtransformation of the bank will take place ontime and within budget, because we havealready done a considerable amount of work inplanning and scheduling the several complexprojects that must be completed. We haveestablished a highly specialised team that isfocused solely on the implementation of theintegration program.I believe that a successful integration with themonetisation of the expected synergies is highlyprobable because of the important work that hasalready been done.A large bank such as ours, however, reflects themacro economic conditions of the economy, sothat real growth depends to a considerableextent on economic development. This is a timeof political and economic uncertainty on aglobal basis and we in the Caribbean and TheBahamas experience the effects of such trendsalmost immediately, as we found out inSeptember 2001.Foreign direct investment continues to be animportant determinant of economic buoyancyand such inflows are most likely to be negativelyimpacted because of global conditions.The future of the Bank will reflect these realtiesbut I am confident that our people will workextremely hard to manage successfully thematters that are within their control and preparewell for the major opportunities, which will nodoubt arise in due course.AppreciationWe have accomplished the combination of twosuccessful and profitable international banks andwe have laid the foundation for the creation of aworld-class financial institution. We are gratefulto the Governments of the Bahamas and theTurks & Caicos Islands, the Central Bank of theBahamas, the Financial Services Commission of18

Chairman’s Reviewthe Turks & Caicos Islands, The BahamasInternational Stock Exchange and the SecuritiesCommission of The Bahamas, for their help andsupport.We are also grateful to our staff and manyindividuals from Barclays and CIBC, who havegiven of their time and talent to help bringthese two legacy banks together.I would like to welcome to the Board ofDirectors, Sharon Brown, Teresa Butler, DianeStewart and Mark Teversham and also to thankin a very special way Mr. Joe Krukowski who hasbeen Chairman from inception of thecompany. I am delighted that Mr. Krukowskiremains on the Board of the new company.We thank our customers and our shareholdersfor their support.Michael MansoorChairman19

Group Chief Executive Officer’s ReportAs Chief Executive Officer of the FirstCaribbeanGroup, I am honoured to have this opportunityto touch on the highlights of the 2002 fiscalyear for the Group and for FirstCaribbeanInternational Bank (Bahamas) Limited, and tooutline some of our plans for continuing tobuild on the entire bank’s strong foundations,inherited from Barclays and CIBC, in the yearsto come.Financial Performance ofFirstCaribbean International Bank(Bahamas) LimitedDespite the severe economic downturn in theCaribbean and the Bahamas experiencedthroughout 2002, your bank remains very strong.The pro-forma net income for the year of $53.6million represents a modest 0.5 % decline onthe 2001 outturn. Your bank recorded anincrease in loans of 3.5% and assets of 3.6%.This number must also be considered againstour determination to continue to adhere to riskpolicies in the long-term interests of ourshareholders. The rewards of this policy arevisible in the excellent performance on creditprovisions, which declined by $4.3 million.The continuing strength of the FirstCaribbeanGroup is also exhibited in our A- credit ratingwith Standard & Poors. Again this comparesfavourably to major competitors in the region.Management took action to exert rigorousexpense control in the face of the difficulteconomic environment and the benefits of thatare seen in expenses showing a 1.7 % reductionof $1.2 million.At time of writing, the previously announcedRights Issue for FirstCaribbean InternationalBank (Bahamas) Limited has been approved bythe Central Bank of The Bahamas and hascommenced; we look forward to the continuedsupport of our shareholders through this RightsIssue.StrategyThe FirstCaribbean Group strategy is to focuson four customer focused businesses, eachdelivering sales and service support tailored tothe specific needs of their customers.Those businesses, and the key elements of ourstrategy for each, are as follows;Retail BankingFocused on our personal and small businesscustomers the key elements of our strategy are to:• Develop focused customer offeringsthrough differential focus on our threesub segments of Retail, Premier andBusiness banking.Our strategy is to concentrateon four customer focusedbusinesses, each deliveringsales and service supporttailored to the specificneeds of their customers• Develop alternative channels oftelephone banking, and in time Internetbanking, to bring choice andconvenience to our customers, adding toour 85 branches and 120 ATMs, of which20

Charles PinkGroup Chief Executive Officer19

Group Chief Executive Officer’s Report• 25 branches and 38 ATMS are in TheBahamas and the Turks and Caicos Islands.• Focus and develop in three key productareas: mortgages, credit cards andpersonal loans. In the first two of thesewe are market leaders.• Focus on customer service improvementvia our ‘Customer First’ programme. Weaim to be the market leader on customerservice over time. This programme willfocus on our Retail business but extend toall our lines of business.Corporate BankingFocused on our Corporate customers the keyelements of our strategy are to:• Offer excellence in relationshipmanagement with all customers to havea dedicated Relationship Manager anddedicated support points of contact.• Develop focused customer offeringsthrough differential focus on our twonew sub segments of Corporate andCommercial banking.• To increase the number of RelationshipManagers, and to free up the time of ourexisting Relationship Managers, viaprocess improvement and technologydeployment, to allow more time to bespent with our customers and onbusiness development.International BankingServing our Offshore Personal and Corporatecustomers the key elements of our strategy are to:• Extend the successful Barclays Offshorebanking model to the former CIBCOffshore client base, including adedicated Relationship Manager withspecialized international bankingexpertise, and dedicated support points ofcontact.• To extend our range of investmentsolutions to provide increased value toour clients.Capital MarketsServing our largest Corporate, institutional andGovernment clients the key elements of ourstrategy are to:• Extend the successful CIBC CapitalMarkets business in Jamaica and Barbadosacross the whole of the Caribbean, and toformer Barclays’ clients. The recentsuccessful underwriting of $52.5 millionfor Sagicor is an example of the sort oftransaction, which our expertise andcapital base will allow us to bring to bearfor the benefit of our clients in theCaribbean.• To develop value added services to ourclients in this segment via RelationshipManagers with very small portfolios andthe specialised knowledge necessary todeliver the complete range of bankingsolutions to this particularly sophisticatedclient segment.• In summary, we have a clear strategyfocused on providing value to our clients,and from it we will deliver long-termvalue to our shareholders.IntegrationAnnualised synergies continue to be expected toover $60 million pre-tax per annum by the endof the third year of operation of theFirstCaribbean Group.22

Group Chief Executive Officer’s ReportThese synergies are the return on totalrestructuring and Integration costs of some $76million for the FirstCaribbean Group, whichcontinues to be expected to be incurred in thesame three years.The sources of these synergies include:• The rationalisation of Head Officefunctions. Our target is to complete thisprocess within four months of thecombination.• The rationalisation of IT infrastructureincluding replacing the former BarclaysIT systems with the former CIBC’srecently upgraded ICBS system, andreplacing the former Barclays VSATcommunication system with the formerCIBC’s Frame Relay system. The latterhas already been completed. The bulk ofour technology integration effort hasbeen outsourced to Computer SciencesCorporation.• The rationalization of operationalprocessing, including leveraging thebenefits of the ICBS system for greatercentralisation and re-engineering ofprocesses.To ensure focus and minimum disturbance tothe customer focused businesses, Integration isbeing managed by a separate Integration Teambased both in Barbados and The Bahamasconsisting of some 130 professionals from theCaribbean, UK and Canada, led by a veryexperienced executive, Jackie Beaurivage, fromCIBC Canada. I am pleased with our earlyprogress.The re-signing of buildings and ATMs andintroduction of harmonised products andservices will take place country by countryacross our 15 countries of operation over a 12month period.Our overall journey of integration will take sometwo and a half years and we have a well-developedplan to ensure we achieve our targets. For the sakeof our customers, employees and shareholders wewill implement our transformation with care andprudence, in particular aiming for minimaldisruption for our customers. We willcommunicate extensively to ensure all ourstakeholders are kept fully informed as we makechanges.Our PeopleOur philosophy is that our people are our greatestasset and we invest accordingly.It is our aim to become the ‘Employer of Choice’within the Financial Services industry in theCaribbean and The Bahamas. We have a specificprogramme under the leadership of the ExecutiveDirector, Human Resources, aimed at delivering onthis objective. The key pieces, and some earlydeliverables, are:• Pay for performance: introducing a newPerformance Management system linkingpay to individual and Corporateperformance. This is already implementedbut we expect to further develop ourperformance culture over time.• Sharing in our success: encouraging ourstaff to hold shares in FirstCaribbean. Wegifted $1,500 – 3,500 of shares inFirstCaribbean to each employee uponcompletion of the merger and now plan tointroduce a subsidised scheme to allowfurther investment in our shares by ouremployees.• Investing in People: we have committed$3.8 million to training and developmentprogrammes over the first 18 months ofFirstCaribbean’s life and intend to offer allour staff ongoing programmes and supportto develop them to their full potential.23

Group Chief Executive Officer’s Report• Opportunities for All: All jobs inFirstCaribbean are posted openly andpreference is given to Caribbeannationals reflecting our status as aCaribbean bank. We are also focused onensuring opportunities for women andnotwithstanding the 34% of womenamongst the top two tiers ofmanagement have set ourselvesambitious targets to further increase thisproportion.The quality of people is a critical success factorin future performance and the opportunitypresented by the merger has been taken tosignificantly strengthen the senior managementin our selection processes. To that end it is mypleasure to welcome Stuart Gunn, Chief RiskOfficer, Bryan Gaunt, Executive Director,Internal Audit, Peter Hall, Executive Director,Human Resources, Francis Lewis, ExecutiveDirector, Marketing and Communications andJackie Beaurivage, Senior Vice President,Integration, all of whom have joined theExecutive Management Committee over the lastyear. A ‘best of both’ philosophy is beingapplied in selecting for jobs throughout our newbank and I am very pleased with the excellentquality of people which our bank starts its lifewith.CommunityWe believe in operating in partnership with thecommunities of which we are a part. We believein giving something back.is a very substantial commitment to ourregion’s future, but one which we aredelighted to make.• A commitment to produce an annualCommunity Partnership report, detailingthe spending of the 1%, and made widelyavailable, effectively offering externalauditing of our activities in this area.• Some 30% of the 1% is made available toour local Country Management teams fordistribution. The other 70 % is beingfocused on a number of central progammes,which are currently being developed.I see Community Partnership as a key facet of anyresponsible business and I will continue to updateyou on our performance in this area in subsequentreports.Our FutureOur name, FirstCaribbean International Bank, is avery literal name. It describes us as a bank withinternational reach, standards and heritage butsecurely grounded in our home of the Caribbean.But above all it describes our goal of being first ineverything we do.Our vision is to be the bank of first choice in theCaribbean and The Bahamas, first for customers,first for employees, first for service and first forinnovation in the eyes of all. We are committedto being the Caribbean’s number one financialservices organisation.To this background, FirstCaribbean hasintroduced a new Community PartnershipScheme for 2003. The key elements are:• A commitment to spend 1% on post taxprofits of our Community Partnershipactivities each year. For 2003, based on2002’s pro-forma profits, this is expectedto be a sum in excess of $1 million. ThisCharles PinkGroup Chief Executive Officer24

CARIBBEAN COMMITMENTWe provide products and services that cater to theCaribbean. Our commitment is to family, community,nation and region.23

Country Manager’s ReportYear in ReviewI am extremely pleased to take this opportunityas the Bahamas Country Head to report on theresults of your bank for 2002.This past fiscal has by far been the most excitingand challenging for our company in its 6 yearhistory. Perhaps fittingly, our new companybegan its operations the day after we celebratedDiscovery Day when the combined operationsof CIBC and Barclays in the Bahamas and Turksand Caicos began operation as FirstCaribbeanInternational Bank.Throughout the long and complicated processof bringing our banks together from a legalperspective, we have received strong supportfrom our employees, our customers, ourshareholders and our regulators. We appreciatethe hard work, support, patience,understanding and cooperation from all.Financial StrengthFirstCaribbean Bahamas, with total assets ofmore than $3.2 billion and capital of $467million, is the largest and best capitalized of anylocally incorporated financial institution in thismarket and positions us well for our journeyinto the new world.Our financial strengths include our diversifiedasset base which includes $1.4 billion in cashand securities, $1.5 billion in loans, of whichmortgages represent a very significant amountand more than $530 million along with ourstrong capital base.As indicated in the pro forma financial results,our net income on a pro forma basis hasremained flat during this transitional period,while commercial banks’ profits in the marketare reported by the Central Bank as being downsome 14% through September 2002. This isobvioulsy an accomplishment we are pleasedwith.These results are clearly due to the efforts of allour employees, the strong support of our parentbanks and the loyalty of our customers.Operations & TechnologyThe substantial investments made in ourOperation Support Center and technology overrecent years have resulted in a platform wellpositioned to take on the additional volumesresulting from the combination.We are very proud of our Support Center locatedon East West Highway and its people, as webelieve it represents one of the most modern andefficient processing centers in the region.The success of our Bank will be dependentupon a disciplined and effective approach togovernance and compliance and, with thesupport of our ultimate parents, two world classbanks, we are further strengthening our systemscontrols and processes.Human ResourcesFirstCaribbean’s employees have, for the mostpart, embraced the combination and are keento help establish FirstCaribbean as a householdname. To the employees in The Bahamas andTurks and Caicos, who have opted to leave thebank, on the Voluntary Leavers' Scheme, wewish to express our sincere thanks for all theircontributions over these many years.All of us at FirstCaribbean have a tremendousresponsibility to ensure the integration of ourheritage banks is completed effectively and withminimum disruption to our customers. We areencouraged by the resiliency of our people tothis time and the progress being made.To prove the point, our employees are movingto advance their skills ahead at great speed.Training and development in all areas, includingcredit assessment and operations and technology,have continued to be an important focus for the26

Terence R. HiltsRetail Director, Northern Caribbeanand Country Manager

Country Manager’s ReportBank in 2002. We are pleased to note the largenumber of our employees upgrading their skillsand knowledge through both internal andexternal sources to better equip themselves forthe challenges ahead. We have in excess of 80employees currently enrolled in tertiaryeducational programs.Future OutlookEconomies throughout the world areexperiencing many challenges and ours is noexception with our two major industries stillfeeling the effects of September 2001, and theresulting changes in the financial landscape.and Turks and Caicos will achieve our previouslystated goals.Our vision is to be the Bank of first choice in thisregion – first for customers, first for employees,first for service and first for innovation in theeyes of all. We are committed to being thenumber one financial services organisation inour market.Just as we are appreciative of the contributions ofour employees and shareholders, thecontribution of your Board of Directors in thischallenging year must not be overlooked and weare grateful for all their advice and counsel.Prospects however are more encouraging nowthan at this time last year, and we are optimisticthat we are poised to see some return tonormalcy and improved shareholder value inthe coming years.We remain confident that the anticipatedbenefits coming out of the combination of theoperations of Barclays and CIBC in the BahamasTerence R. HiltsRetail Director, Northern Caribbean andCountry Manager28

FirstCaribbean International Bank(Bahamas) Limited LocationsBay Street (B)P O Box N 8350Bay StreetNassauNew ProvidenceTel: (242) 356-8000Fax: (242) 328-7979Cable Beach (C)P O Box N-7125Hoffer Shopping CentreNassauNew Providence IslandTel: (242) 327-8361Fax: (242) 327-8324East Bay (C)P O Box SS-6254308 East Bay StreetNassauNew Providence IslandTel: (242) 393-1966Fax: (242) 393-7170East Mall (C)P O Box F-42556The First Commercial CentreEast Mall DriveFreeportTel: (242) 352-6651Fax: (242) 352-6655Freeport (B)P O Box F-42404Pioneers’ WayFreeportGrand Bahama IslandTel: (242) 352-8391Fax: (242) 367-9712Governor’s Harbour (B)P O Box EL-25022Governor’s HarbourEleuthera IslandTel: (242) 332-2300Fax: (242) 332-2318Harbour Bay (B)P O Box N-8350Bay StreetNassauNew Providence IslandTel: (242) 393-2334Fax: (242) 393-2560Hope Town (C)P O Box AB-20402Hope TownAbacoTel: (242) 366-0296Fax: (242) 367-2156Hurricane Hole (C)P O Box SS-6254Hurricane Hole ShoppingPlazaParadise IslandTel: (242) 363-3588Fax: (242) 393-2146John F Kennedy Drive (C)P O Box N-8329RND Plaza WestJFK DriveNassauNew Providence IslandTel: (242) 323-2422Fax: (242) 322-7851Madeira (C)P O Box N-7533MadeiraNew Providence IslandTel: (242) 322-8824Fax: (242) 325-7100Man-O-War Cay (C)P O Box AB-20402AbacoTel: (242) 352-9365Fax: (242) 367-2156Marathon Mall (C)P O Box N-8329Marathon MallNew Providence IslandTel: (242) 393-4386Fax: (242) 394-0239Marsh Harbour (B)P O Box AB-20401Great Abaco IslandTel: (242) 367-2152Fax: (242) 367-2659Marsh Harbour (C)P O Box AB-20402Marsh HarbourAbacoTel: (242) 367-2166Fax: (242) 367-2156New Plymouth (B)P O Box AB-20401New PlymouthGreen Turtle CayTel: (242) 365-4144Fax: (242) 365-4144Palmdale (B)P O Box N-8350PalmdaleMadeira StreetNassauNew Providence IslandTel: (242) 322-1231Fax: (242) 322-1121Queen’s Highway (C)P O Box F-42556Queen’s HighwayFreeportGrand Bahama IslandTel: (242) 352-9365Fax: (242) 352-9367Shirley Street (C)P O Box N-7125Shirley StreetNew Providence IslandTel: (242) 322-8455Fax: (242) 326-6552Thompson Boulevard (B)P O Box N-8350Thompson BoulevardNassauNew Providence IslandTel: (242) 325-6479Fax: (242) 328-1717Town Centre Mall (B)P O Box N-8350Town Centre MallBlue Hill RoadNassauNew Providence IslandTel: (242) 325-6479Fax: (242) 328-6839Providenciales (C)P O Box 698Leeward HighwayProvidencialesTel: (649) 946-5303Fax: (649) 946-5325Grand Turk (B)P O Box 61Cockburn TownGrand TurkTel: (649) 946-2831Fax: (649) 946-2695Providenciales (B)P O Box 236Butterfield SquareProvidencialesTel: (649) 946-4254Fax: 946-4573South Caicos (B)Lee StreetCockburn HarbourTel: (649) 946-3268FirstCaribbean International Bank(Bahamas) Limited (C)Commercial Banking CentreP O Box N-7125Shirley StreetNassauTel: (242) 322-8455Fax: (242) 328-1690FirstCaribbean International Bank(Bahamas) Limited (C)Corporate Office308 East Bay StreetNassauTel: (242) 393-4710Fax: (242) 393-4280Bahamas Corporate Division (B)P O Box N-3221Charlotte HouseShirley StreetNassauNew Providence IslandTel: (242) 326-1130Fax: (242) 356-3095Bahamas Offshore Banking Centre (B)P O Box N-8350Bay StreetNassauNew Providence IslandTel: (242) 356-8016Fax: (242) 328-7979FirstCaribbean International FinanceCorporation (Bahamas) Limited (B)P O Box N-8350NassauNew Providence IslandTel: (242) 322-7466Fax: (242) 326-8814Nassau VISA Centre (B)P O Box N-8350Charlotte HouseShirley StreetNassauNew Providence IslandTel: (242) 328-0405Fax: (242) 326-8814Card Services Centre (C)P O Box N-8329Independence DriveNassauNew Providence IslandTel: (242) 394-8472Fax: (242) 394-3655Note: (B) – formerly Barclays(C) – formerly CIBC2629

Management’s Discussion and Analysis ofOperating Results and Financial ConditionOverview of Audited Financial StatementsOn October 11, 2002 the combination of Barclaysand CIBC’s retail, corporate and offshore bankingoperations in the Bahamas and Turks & Caicos Islandswas completed and CIBC Bahamas Limited wasrenamed FirstCaribbean International Bank(Bahamas) Limited.Although CIBC and Barclays PLC hold identicalvoting share interests of 45% in FirstCaribbeanInternational Bank Limited which is the parentcompany of the Bank, at the initial stage of thecombination transaction, the value of Barclays’interest was larger than CIBC’s. As a result, underInternational Accounting Standards the accountingtreatment for the combination was determined to bethat of a reverse acquisition with Barclays identified asthe deemed acquirer. As a consequence, the publishedincome statement represents ten months results forBarclays Bahamas and Turks & Caicos Islandsoperations and approximately three weeks of CIBCBahamas results (Barclays’ results from January 1, 2002as they previously had a December fiscal year-end andCIBC Bahamas’ results from October 11, 2002 – thedate of the combination).This accounting convention applies to all of thefinancial statements although the balance sheet ismore straightforward, showing combined balances ata point in time i.e. October 31, 2002. The goodwillfigure of $196 million on the balance sheet representsthe excess of the fair value of CIBC Bahamas’ businessover the fair value of the identified assets andliabilities as of October 11, 2002, adjusted foramortization to the balance sheet date. All prior yearcomparatives reflect the fiscal 2001 results of BarclaysBahamas and Turks & Caicos Islands operations.As a result of the combination, the actual total assetsstood at $3.2 billion at October 31, 2002 with a totalloan portfolio of $1.5 billion and capital ratios well inexcess of regulatory requirements. The large increasein all balance sheet categories is due to the fact thatthe 2001 comparatives only include the operations ofBarclays in The Bahamas and Turks & Caicos Islands,whereas 2002 balances are those for the combinedoperations.A restructuring charge of $8.8 million has beenincurred this year to accommodate the funding ofcertain future costs related to the combination.Excluding the restructuring charge, the netincome before goodwill amortisation is $20.9million. Of this figure, $1.7 million relates tothree weeks of ex-CIBC operations and $19.2million relates to ten months of ex-Barclays’operations. Included in the ex-Barclays’ noninterestincome for the period is $8.3 million,representing ten months worth of the $10million annual incentive payment from BarclaysCapital (Barcap) which is further described inNote 19, of the Financial Statements.Performance OverviewIt is emphasized that because of the applicationof reverse acquisition accounting and theincurring of restructuring charges the reportednet profit of $11.5 million does not accuratelyreflect the ongoing operating performance of thecombined entity. To address this issue theremaining discussion and analysis focuses on thepro-forma combined results for Barclays and CIBC.This disclosure essentially allows the reader toview the combined performance of the twoentities as if they were two stand-alone businesses,without any accounting impact from a combination.On a combined basis, the total assets of the Bankgrew by $108 million or 3.6% with total loansincreasing by $53 million or 3.5%. Total customerdeposits also grew by $20 million or 0.7% of thecombined deposits of 2001. Despite this balancesheet growth, net income declined slightly from$53.9 million to $53.7 million.Net Interest IncomeNet interest income for the year fell by 12%from $101 million to $90 million with both theinterest income and the interest expense amountsdropping from the previous year. The decline innet interest income was brought about by thefalling US interest rates on our large US$denominated cash resources rather than decliningbusiness volumes. Net interest margin declinedfrom 3.5% to 3.0%.30

Management’s Discussion and Analysis ofOperating Results and Financial ConditionFirstCaribbean International Bank (Bahamas) LimitedUnaudited Pro-forma Income Statement (B$000s)20022001Net Interest IncomeNon-interest IncomeTotal Income90,46239,059129,521101,24934,041135,290Non-interest ExpenseLoan loss ProvisionTotal Expenses70,5665,30475,87071,7759,63581,410Net Income53,65153,880Total AssetsTotal LoansTotal Cash & InvestmentsTotal Deposits3,010,4801,519,0081,429,0352,688,7512,902,1061,465,9431,361,3062,668,896Average number of shares outstanding (000’s)Net Income per shareReturn on equity108,254$ 0.50 $25.2%107,5700.5028.6%Note:The proforma results for 2001 represent actual 12 months’ results of CIBC Bahamas Limited for theyear ended October 31, 2001 and actual 12 months’ results for Barclays Bahamas (including Turks &Caicos Islands) for the year ended December 31, 2001.The proforma results for 2002 represent actual 12 months of CIBC Bahamas Limited for the yearended October 31, 2002 and the actual 10 months’ results for Barclays Bahamas (including Turks &Caicos Islands) to October 31, 2002 with estimated two months. These balances do not include anyadjustments, such as goodwill arising from the combination of the two entities.31

Management’s Discussion and Analysis ofOperating Results and Financial ConditionNon-interest Income2002 non-interest income increased by $5 million to$39 million from $34 million in 2001.The 2002 figureincludes a figure of $10 million, representing theBarcap incentive fee as described in Note 19, of theFinancial Statements. Excluding this item, noninterestincome declined by $5 million or 13% yearover-yearwith the decline attributable to a decline inbank fees and commissions along with the nonrecurrenceof the $3 million in income earned in2001 as a result of the acquisition of E. F. Services Ltd.Non-interest Expensesfunction of rigorous management ofdiscretionary spending in the lead-up to thecombination.Full-time equivalent employee levels stood at843 as of October 31,2002 compared to 887 atthe same point in the prior year.Provision for Credit LossesLoan loss provisions reduced from $9.6 millionin 2001 to $5.3 million in 2002 due to higherrecoveries in 2002.Total non-interest expenses for 2002 fell by $1.2million or 1.7% over 2001.This decline is largely a32

INTERNATIONAL STANDARDSWe will lead in integrity, quality and innovation,providing international reach and recognition.

34Retail Banking

FirstCaribbean’s Retail Banking segment boastsapproximately 500,000 customers across the Caribbean,with a loan portfolio of US$700 million, a mortgageportfolio of US$800 million and more than US$2.4 billionin deposits.The Retail Banking segment consists of three key subsegments:Personal Banking, Premier Banking and BusinessBanking. The Personal Banking segment services thestandard transactional needs of FirstCaribbean’s personalbanking clients through traditional banking channels suchas branches and automatic teller machines. The Premiersegment is serviced through a relationship managedmodel with high touch service as its differentiation.Business Banking services the needs of our Micro/SmallBusiness Clients also through a relationship managedmodel.Future customer-centred improvements to be made in theRetail segment include the introduction of "BranchAmbassadors" in large branches across the Region. BranchAmbassadors in many cases will be the first point ofcontact for all customers entering these branches and theywill be positioned to help direct as well as educate ourcustomers about alternative banking channels, such as theATM network and the Customer Call Centre that iscurrently in the developmental stage and scheduled tocome on stream in the medium term.Walter Wells, Executive Director• Formerly Vice President, Commercial Clients forCIBC Bahamas Limited• Joined CIBC in 1971 and has held a variety ofsenior management roles throughout the WestIndies since 1983.• Holds a number of Board appointments in theBahamas, including being a founding member andLifetime Director of the Cancer Society of theBahamas.

36Corporate Banking

Serving approximately 20,000 customers, withborrowings exceeding US$2.1 billion and deposits ofUS$2.7 billion, the Corporate Line of Business is asignificant business customer segment withinFirstCaribbean.The Corporate Banking segment consists of two distinctcustomer sub-segments: Corporate business clients andCommercial business clients. Corporate customers aredefined as businesses with borrowing exceedingUS$1 million or deposits exceeding US$1 million or anannual sales exceeding US$2.5 million. TheCommercial sub-segment services customers withborrowings between US$100,000 & US$1 million orannual sales between US$200,000 and US$2.5 million.The key focus of the FirstCaribbean Corporate Bankingmodel is providing one-on-one servicing by a dedicatedrelationship manager; increased sales and businessdevelopment focus leading to increased penetration inthe Corporate market; and improvements in theprocessing of credit.The relationship managers, supported by a commercialbanking team of associates, will help commercialcustomers manage all their business banking needs outof dedicated Commercial Banking Centres.FirstCaribbean is establishing Corporate Centres ofExcellence across the region that will feature staff withspecialised skills and the appropriate atmosphereconducive to our valued customers.Sharon Brown, Executive Director• Joined Barclays following a 12-year career with theCentral Bank of the Bahamas.• Has held a number of management positionsculminating with the position of Regional CorporateDirector and Senior Bahamas Executive.• A member of the Board of Directors of a number ofpublic sector boards including the SecuritiesCommission, Bahamas Electricity Corporation,Bahamas Telecommunications Corporation.

38International Banking

FirstCaribbean’s International Banking segment serves morethan 25,000 customers, of which more than 15,000 arecorporate clients. International Banking customers are nonresidentsholding accounts primarily in US dollars, CanadianDollars, Pounds Sterling and Euros.The majority of clients are resident in North America with thebalance mainly from the United Kingdom, Europe and theCaribbean. The deposit portfolio is close to US$3 billion andthere is also a growing book of International mortgages andother lending products.FirstCaribbean's International Banking segment is beingmodelled on the successful Barclays offshore banking model,which is being extended to the former CIBC OffshoreBanking customer base. Similar to the Retail Segment andCorporate Segment models, the International Bankingsegment is using a customer-focused and segmented modelwith the goal of offering enhanced customer service.Key features of the International Segment include access todedicated relationship managers for Premier and Corporateclients, and access to an expanded suite of products andservices such as the International Mortgage and investmentproducts.International Banking customers using the BusinessmasterPC banking system can also access accounts 24 hours a day,thereby providing better cash management abilities.FirstCaribbean’s International Banking Centres are located inthe Bahamas, Barbados, the Cayman Islands, British VirginIslands, and Turks and Caicos Islands, and are staffed bymore than 50 International Banking sales and servicespecialists.Mark Teversham, Executive Director• Formerly responsible for the management of BarclaysBank's offshore banking business in the Caribbean and theBahamas based in the bank's regional office in Barbados.• Career with Barclays has spanned over 25 years duringwhich he has held management positions in the UnitedKingdom, the Middle East, Africa, Europe, and the Bahamas.• Banking experience has included corporate banking,private banking, human resources, risk management andretail banking.

40Capital Markets

Prior to the creation of FirstCaribbean, CIBC’s capital marketsbusiness was based largely in Jamaica and in Barbados.Capital Markets will now be expanded to provide financialsolutions to customers across the 15 Caribbean countries inwhich we operate. The product needs of our targeted clientbase – governments, large corporations, pension funds andhigh net worth individuals – are currently being identifiedand documented thus enabling us to develop customisedsolutions to meet those needs.FirstCaribbean’s Capital Market segment will service theneeds of issuers and investors in both equity and debt capitalinstruments. Our intention is to expand the existingsecondary market capability. We will structure and deliver toour clients, leading edge and customer specific bilateralfacilities and debt financing arrangements, risk managementadvice, funds management, foreign exchange services,portfolio management and treasury products and solutions.Our clients’ needs are long-term and our recognition of thiswill govern our approach. Our relationship managers havethe technical skills and the market place knowledge necessaryto take FirstCaribbean successfully to our clients, at their placeof business, where they will develop or strengthen thefinancial partnerships required to bring satisfaction year afteryear. We propose to extend our highly acclaimed CapitalMarket & Financial Management Forum Series, initiated inJamaica in 2000, to strategically selected locationsthroughout the region. This series proved to be an excellentforum for bringing closer together the Bank’s offerings withthe client’s needs and expectations, on a platform ofenhanced education and understanding of our clients.Raymond Campbell, Executive Director• Previously served as Vice President, Commercial Clients& Corporate Affairs, CIBC Jamaica Limited.• Began his career in banking in 1997 when he joined CIBC asGeneral Manager, CIBC Trust & Merchant Bank.• Prior to joining CIBC he held various positions within thefinancial and securities markets in Jamaica, culminating asGeneral Manager of the securities firm, Barita Investments Ltd.• He is a fellow of the Association of Chartered CertifiedAccountants and has completed the Canadian Securitiesand Operations Courses.• Chairman, Jamaica Institute of Bankers 2000 – 2001.• Elected President, Jamaica Bankers' Association, December2002.

42Marketing and Communications

The face of banking is changing throughout the world andFirstCaribbean intends to lead these changes here at home. Ourmarketing strategy will focus on ways to make a discernibledifference by the service we offer."Customer First" is the overarching theme of our approach atFirstCaribbean, forming the basis of our drive to attain and holdmarket leadership. We intend to be the bank that puts thecustomer at the centre of our planning and processes, doing sowith the most convenient and up to date procedures andtechnology.We are committed to developing products and services thatwill, in the years to come, meet the needs of the uniqueregional markets that we serve. Through segmentation we willcreate tailored customer offerings and focus on the very uniqueneeds of our specific customer groups. We are makingsignificant investments in our people and technology to convertall of our operations to a single leading-edge technologyplatform. We expect all countries to be on this new system bythe middle of 2004. It will enable us to provide our customerswith faster service and more ways to bank such as telephonebanking and eventually, Internet banking.However, changes will not happen overnight. Bringingtogether the operations of Barclays and CIBC will take time. Wewill work hard to ensure the transition is as smooth as possible.It may take us time to get there, but we believe this is a journeyworth making. Our destination is a bank the Caribbean can beproud of.Our name describes our aspirations, our promise, and ourvision to be the bank of first choice; to be the Caribbean’snumber one financial services institution.The FirstCaribbean Logo summarises what we stand for. Theimagery represents interlocking hands or the flanges of a safedoor, thereby symbolising the coming together of our twocompanies and the strength and security of our bank.Our colours are: the Gold of the Caribbean sun and sand, aswell as the colour of money, which is our business; and the Blueof the Caribbean Sea, joining the 15 countries within which weoperate. FirstCaribbean International Bank – Caribbean Pride,International Strength, Your Financial Partner.Francis Lewis, Executive Director• Formerly the Senior Consultant of Res Consulting Limited,a marketing and sales management consulting firm,which focused on resolving the business strategychallenges of regional firms.• Prior to Res Consulting, he was Executive Vice-President,Marketing, with BWIA International Airways, and beforethis, he was Marketing Director of Carib GlassworksLimited and Corporate Senior Manager with the ANSAMcAl Group.

44Human Resources

The vision of FirstCaribbean is to be first choice for customers inthe Caribbean: first for service and first for innovation. The onlyway we can make this vision a reality is if we’re also first for ouremployees.Top companies globally become the best in three areas:Operations, Finance and People Excellence. Our HR focus will beon achieving People Excellence, with particular emphasis onleadership and performance. These are the drivers for creating ahigh performance organisation.We believe we can become Employer of Choice by aligning theneeds and expectations of our employees to the needs of ourbusiness. FirstCaribbean is therefore committed to creating apositive work environment where employees are rewarded fordelivering our promise to our customers.Our goal will be to build an organisation with the people capabilitythat will deliver a competitive edge within the region. Indeed, thejourney ahead of us will be long and challenging. After all, we haveover 3000 people working in 15 countries and many differentsystems to join together. This complexity means it will take timeand effort to build and sustain our future.Subsequent to the end of the fiscal year we have made goodprogress in the area of Human Resources Transition, which isdelivering the very complex harmonisation and integrationprocess for our business. We have the legal transfer of all ouremployees and have made significant strides in the harmonisationprocess by delivering base pay harmonisation. The remainingprocess will be completed in the 2003 fiscal year.I would like to take this opportunity to thank all those employees inthe business, the many individuals in the Human ResourcesTransition Team, all the Unions in the region with whom we haveworked and our entire employee population across the region. Allof these groups have worked very hard over the last few months tohelp create the first foundations of our new business and to keepour customers coming through our doors.Peter Hall, Executive Director• Previously worked for Diageo in the Caribbean (includingRed Stripe) where he started 15 years ago as a traineemanager and went on to become Head of the Personneldepartment in 1994 and Vice President Human Resourcesin 1997.• Co-led the integration of the Guinness and UDV businessesin the Caribbean and Central America in 2000.

FirstCaribbeanInternational Bank(Bahamas) LimitedFinancial Statements2002

PricewaterhouseCoopersP.O. Box N-3910Providence HouseEast Hill StrreetNassau, The BahamasTelephone (242) 302-5300Facsimile (242) 302-5350To the Shareholders ofFirstCaribbean International Bank (Bahamas) LimitedWe have audited the accompanying consolidated balance sheet of FirstCaribbean InternationalBank (Bahamas) Limited (the “Bank”) as of October 31, 2002 and the related consolidatedstatements of income, changes in shareholders’ equity/head office accounts and cash flows for theten month period January 1 to October 31, 2002. These consolidated financial statements are theresponsibility of the Bank’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing. Those Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.In our opinion, the consolidated financial statements present fairly, in all material respects,the financial position of the Bank as of October 31, 2002 and the results of its operations, changesin shareholders’ equity/head office accounts and its cash flows for the period then ended inaccordance with International Accounting Standards.Chartered AccountantsJanuary 30, 2003

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDConsolidated Balance Sheet(expressed in thousands of Bahamian dollars)October 31,2002$December 31,2001$NotesAssetsCash resources 3 1,077,682 969,974Trading securities 4 206,217 –Loans and advances 5 1,513,197 514,165Investment securities 6 151,773 50,623Other assets 7 226,144 30,346Property, plant and equipment 8 26,617 9,461Total assets 3,201,630 1,574,569LiabilitiesDeposits 9 2,688,751 1,506,887Other liabilities 10 45,158 23,358Total liabilities 2,733,909 1,530,245Shareholders’ equityShare capital and reserves 13 409,262 1,158Retained earnings 58,459 14,283Due to Head Office – 28,883467,721 44,324Total shareholders’ equity and liabilities 3,201,630 1,574,569Approved by the Board of DirectorsMichael MansoorChairmanTerence R. HiltsDirectorJanuary 30, 2003The accompanying notes are an integral part of these consolidated financial statements.49

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDConsolidated Statement of Income(expressed in thousands of Bahamian dollars, except per share data)Period endedOctober 31,2002$Year endedDecember 31,2001$NotesInterest income 14 58,648 101,730Interest expense 22,563 52,163Net interest income 36,085 49,567Non-interest income 15 21,345 15,14957,430 64,716Other operating expenses 16 32,601 40,609Provision for credit losses 3,882 6,885Restructuring charges 17 8,812 –Goodwill amortisation 616 –45,911 47,494Net income for the period 11,519 17,222Earnings per share 22 0.20 ** not applicableThe accompanying notes are an integral part of these consolidated financial statements.50

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDConsolidated Statement of Changes in Shareholders’Equity/Head Office Account(expressed in thousands of Bahamian dollars)NotesShare/AssignedCapital$Reserves$RetainedEarnings$Due toHeadOffice$Total$Balance at December 31, 2000 1,158 – 8,731 31,090 40,979Net income for the year – – 3,354 13,868 17,222Transfer to head office – – – (16,075) (16,075)Dividends waived – – 2,198 – 2,198Balance at December 31, 2001 1,158 14,283 28,883 44,324Issuance of ordinary voting shares 11 472,828 – – – 472,828Transfer of opening share /assigned capital 11 (1,158) 158 (1,000)Transfer to retained earnings 23,715 (23,715) –Reverse acquisition reserve 13(63,566) (63,566)Net income for the period – – 11,519 – 11,519Transfers from/(to) head office – – 8,784 (5,168) 3,616Balance at October 31, 2002 472,828 (63,566) 58,459 – 467,721The accompanying notes are an integral part of these consolidated financial statements.51

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDConsolidated Statement of Cash Flows(expressed in thousands of Bahamian dollars)Period endedOctober 31,2002$Year endedDecember 31,2001$Cash flows from (used in) operating activitiesNet income 11,519 17,222Adjustments to reconcile net incomeProvision for credit losses 3,882 6,885Depreciation (net) 2,332 1,798Pension related expenses – 999Amortisation of goodwill 616 –Operating income before changes in operating assets and liabilities 18,349 26,904Increase in securities, net of disposals (76,541) (379)(Increase) / decrease in loans, net of repayments (32,711) 20,885Decrease in other assets and liabilities, net 17,595 1,270Decrease in deposits, net of withdrawals (48,866) (391,633)Net cash used in operating activities (122,174) (342,953)Cash flows used in financing activitiesRemittances to head office – (16,075)Net cash used in financing activities – (16,075)Cash flows used in investing activitiesIncrease in fixed assets, net of disposals (900) (1,346)Net cash used in investing activities (900) (1,346)Net decrease in cash and cash equivalents for the period (123,074) (360,374)Cash and cash equivalents acquired as a result ofbusiness combination 230,782 –Cash and cash equivalents, beginning of period 969,974 1,330,348Cash and cash equivalents, end of period 1,077,682 969,974The accompanying notes are an integral part of these consolidated financial statements.52

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)1 General informationThe Bank, which was formerly named CIBC Bahamas Limited (“CIBC Bahamas”) and controlled byCanadian 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 andoffshore 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 IndiesHoldings Limited (the “Parent”), a company incorporated in Barbados with the ultimate parentcompanies being jointly CIBC, a company incorporated in Canada, and Barclays Bank PLC, a companyincorporated in England.Under the combination, shares issued to Barclays Bank PLC for the Barclays Bahamas operations wereexchanged for shares in CIBC West Indies Holdings Limited which remained the legal parent companyof the Bank. Following the combination, Barclays Bank PLC and CIBC each own 45% of the votingshares of the Parent. Neither Barclays Bank PLC nor CIBC control the Parent, but InternationalAccounting Standards (IAS) requires that one of the combining entities be identified as the acquirer foraccounting purposes. The fair value of the Barclays’ business prior to the combination was greater thanthe fair value of CIBC’s business and, as a result, Barclays had the greater economic interest in theParent. Barclays was therefore identified as the acquirer. This situation is described by IAS as a reverseacquisition.Accordingly the financial statements of the Bank are presented as a continuation of the financialstatements of Barclays Bahamas and on the basis that Barclays Bahamas acquired CIBC Bahamas onOctober 11, 2002. The financial statements have been prepared as at October 31, 2002, the accountingreference date of CIBC Bahamas. The comparative amounts disclosed in the financial statements arethose of Barclays Bahamas as at and for the year ended December 31, 2001. The consolidated incomestatement includes the results of Barclays Bahamas for the period from January 1, 2002 to October 31,2002, together with results of the CIBC Bahamas subsequent to the combination. The consolidatedbalance sheet at October 31, 2002 reflects the assets and liabilities of Barclays Bahamas at book valueand the assets and liabilities of CIBC Bahamas based on their fair value at October 11, 2002 as adjustedto reflect movements in the period to October 31, 2002.Note 24 describes the accounting treatment applied to the acquisition.The registered office of the Bank is located at 308 East Bay Street, Nassau, The Bahamas. At October 31,2002 the Bank had 843 employees.53

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Summary of significant accounting policiesBasis of presentationThese consolidated financial statements are prepared in accordance with International AccountingStandards, under the historical cost convention as modified by the revaluation of available-for saleinvestment securities, financial assets and financial liabilities held for trading and all derivativecontracts.ConsolidationSubsidiary undertakings, which are those companies in which the company directly or indirectly hasan interest of more than one half of the voting rights or otherwise has power to exercise control overthe operations, have been fully consolidated.Subsidiaries are consolidated from the date on which the effective control is transferred to the Bankand are no longer consolidated from the date of disposal. All inter-company transactions, balances andunrealized 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 policiesadopted by the Bank.In the prior year Barclays Bahamas was not a group as defined in International Accounting Standard27, since there was no separate parent company. Accordingly, the consolidated financial statementswere prepared by aggregating the assets, liabilities, results of operations and cash flows of thoseBarclays Bank PLC branches and wholly owned entities that were transferred into FirstCaribbeanInternational Bank (Bahamas) Limited.EstimatesPreparation of financial statements in conformity with International Accounting Standards requiresmanagement to make estimates and assumptions that affect amounts reported in the financialstatements and accompanying notes. Actual results could differ from these estimates.Cash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise balances with lessthan 90 days maturity from the date of acquisition including cash balances, deposits with CentralBanks, and amounts due from other banks.54

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Significant accounting policies...continuedInvestmentsTrading securitiesTrading securities are securities, which are either acquired for generating a profit from short-termfluctuationsin price or dealer’s margin, or are securities included in a portfolio in which a pattern ofshort-term profit taking exists. Trading securities are initially recognised at cost (which includestransaction costs) and subsequently re-measured at fair value based on quoted bid prices. All relatedrealised and unrealised gains and losses are included in net income. Interest earned whilst holdingtrading securities is reported as interest income. Dividends received are included in interest income.All purchases and sales of trading securities that require delivery within the time frame established byregulation 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 aretreated as derivatives until settlement occurs.Sale and repurchase agreementsSecurities purchased under agreements to resell are recorded as loans and advances to other banks orcustomers as appropriate. The difference between sale and repurchase price is treated as interest andaccrued over the life of repurchase agreements using the effective yield method.Investment securitiesInvestment securities with fixed maturity where management has both the intent and the ability tohold to maturity are classified as held-to-maturity. Investment securities and purchased loans andreceivables intended to be held for an indefinite period of time, which may be sold in response toneeds for liquidity or changes in interest rates, exchange rates or equity prices are classified as availablefor-sale.Management determines the appropriate classification of its investments at the time of thepurchase.Investment securities and purchased loans and receivables are initially recognised at cost (whichincludes transaction costs). Available-for-sale financial assets are subsequently re-measured at fair valuebased on quoted bid prices or amounts derived from cash flow models. Fair values for unquoted equityinstruments are estimated to be cost except for a permanent diminution in value. Unrealised gains andlosses arising from changes in the fair value of securities classified as available-for-sale are recognised inequity. When the securities are disposed of or impaired, the related accumulated fair valueadjustments are included in the income statement as gains and losses from investment securities.Held-to-maturity investments are carried at amortised cost using the effective yield method, less anyprovision for impairment.55

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Significant accounting policies...continuedA 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 differencebetween the asset’s carrying amount and the present value of expected future cash flows discounted atthe financial instrument’s original effective interest rate. By comparison, the recoverable amount of aninstrument measured at fair value is the present value of expected future cash flows discounted at thecurrent market rate of interest for a similar financial asset.Interest earned whilst holding investment securities is reported as interest income. Dividends receivedare included separately in interest income.All regular way purchases and sales of investment securities are recognised at trade date, which is thedate that the Bank commits to purchase or sell the asset. All other purchases and sales are recognised asderivative forward transactions until settlement.Originated loans and provisions for loan impairmentLoans and advances originated by the Bank by providing money directly to the borrower arecategorized as originated loans and are carried at amortised cost. Third party expenses, such as legalfees, incurred in securing a loan are expensed as incurred. Interest income is accounted for on theaccrual basis for all loans and advances other than those that are impaired.Loan fees are recognized in income at the inception of the loan.A credit risk provision for loan impairment is established if there is objective evidence that the Bankwill not be able to collect all amounts due. The amount of the provision is the difference between thecarrying amount and the recoverable amount, being the estimated present value of expected cashflows, including amounts recoverable from guarantees and collateral, discounted based on the interestrate at inception of the loan.The loan loss provision also covers losses where there is objective evidence that probable losses arepresent in components of the loan portfolio at the balance sheet date. These have been estimatedbased upon historical patterns of losses in each component, the credit ratings allocated to theborrowers and reflecting the current economic climate in which the borrowers operate and is classifiedas a provision for inherent risk. When a loan is uncollectable, it is written off against the relatedprovision for impairments; subsequent recoveries are credited to the bad and doubtful debt expense inthe income statement.If the amount of the impairment subsequently decreases due to an event occurring after the writedown,the release of the provision is credited to the bad and doubtful debt expense.56

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Significant accounting policies...continuedAcceptancesThe Bank’s potential liability under acceptances is reported as a liability in the consolidated balancesheet. The recourse against the customer in the event of a call on any of these commitments is reportedas a corresponding asset of the same amount.GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Bank’s share ofthe net assets of the acquired subsidiary undertaking at the date of acquisition. Goodwill onacquisitions of subsidiaries is reported in the balance sheet as an intangible asset and is amortised usingthe straight-line method over its estimated useful life of 20 years.The carrying amount of goodwill is reviewed when circumstances or events indicate that there may beuncertainty over the carrying amount and written down for impairment where the net present value ofthe forecast future cash flows of the business are insufficient to support the carrying value.Computer software development costsCosts associated with maintaining computer software programmes are recognized as an expense asincurred. However, expenditure that enhances or extends the benefits of computer softwareprogrammes beyond their original specifications and lives is recognized as a capital improvement andadded to the original cost of the software. Computer software development costs recognized as assetsare amortized using the straight-line method over a five year period.Property, plant and equipmentAll 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 costof depreciable assets, less salvage, over their useful lives.The annual rates used are:Freehold buildings 2%Leasehold improvements 10%Equipment, vehicles and furniture 20%Where the carrying amount of an asset is greater than its estimated recoverable amount, it is writtendown immediately to its recoverable amount. Gains and losses on disposal of property and equipmentare determined by reference to its recoverable amount and are taken into account in determiningoperating income.57

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Significant accounting policies...continuedInterest rate swaps and hedgingInterest rate swaps are initially recognised in the balance sheet at cost and subsequently are measuredat their fair value. Fair values are obtained from discounted cash flow models, using quoted marketinterest rates. All interest rate swaps are carried as assets when fair value is positive and as liabilitieswhen fair value is negative.Interest rate swaps have been designated as highly effective hedges of the fair value of certain loans,and hedge accounting has been used for these derivative instruments. Changes in the fair value of theswaps are recorded in the income statement and are matched with the corresponding change in the fairvalues of the hedged loans that are attributable to market interest rate movements.ProvisionsProvisions are recognised when the Bank has a present legal or constructive obligation as a result ofpast events, it is probable that an outflow of resources embodying economic benefits will be required tosettle the obligation, and a reliable estimate of the amount of the obligation can be made.Foreign currenciesMonetary assets and liabilities denominated in foreign currencies are translated into Bahamian dollarsat rates prevailing at the date of the financial statements and non-monetary assets and liabilities aretranslated at historic rates. Revenue and expenses denominated in foreign currencies are translatedinto Bahamian dollars using prevailing average monthly exchange rates. Realized and unrealized gainsand losses on foreign currency positions are reported in income of the current period. Translationadjustments of investment positions in foreign entities are reported in shareholders’ equity.LeasesThe total payments made under the operating leases are charged to the income statement on a straightlinebasis over the period the lease.Pension ObligationsThe Bank operates defined benefit plans, the assets of which are generally held in separate trusteeadministeredfunds. The pension plans are generally funded by payments from the Bank, takingaccount of the recommendations of independent qualified actuaries.58

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Significant accounting policies...continuedFor defined benefit plans, accounting costs are assessed using the projected unit credit method. Underthis method, the cost of providing pensions is charged to the income statement so as to spread theregular cost over the lives of the employees in accordance with the advice of qualified actuaries whovalue the plans once every three years. The pension obligation is measured at the present value of theestimated future cash outflows using interest rates of government securities which have terms tomaturity approximating the terms of the related liability. All actuarial gains and losses are spreadforward over the average remaining service lives of the employees.Other post-retirement obligationsThe Bank provides post-retirement healthcare benefits to their retirees. The entitlement to thesebenefits is usually based on the employee remaining in service up to retirement age and thecompletion of a minimum service period. The expected costs of these benefits are accrued over theperiod of employment, using a methodology similar to that for defined benefit pension plans.Valuations of these obligations are carried out by independent qualified actuaries.Share capitalShare issue costsExternal costs directly attributable to the issue of new shares, other than on a business combination,are deducted from equity net of any related taxes.Dividends on ordinary sharesDividends on ordinary shares are recognized in equity in the period in which they are declared.Dividends for the year which are declared after the balance sheet date are dealt with in the subsequentevents note.Preferred sharesPreferred shares that are non-redeemable and upon which dividends are declared at the discretion ofthe directors are classified as equity.Interest income and expenseInterest income and expense are recognised in the income statement for all interest bearinginstruments on an accrual basis using the effective yield method based on the actual purchase price.Interest income includes coupons earned on fixed income investment and trading securities andaccrued discount and premium on treasury bills and other discounted instruments. Interest income issuspended when loans become doubtful of collection, such as when overdue by more than 90 days, orwhen the borrower or securities’ issuer defaults, if earlier than 90 days. Such income is excluded frominterest income until received. Interest income on loans in arrears greater than 90 days is taken intoincome to the extent that it is deemed recoverable.59

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)2 Significant accounting policies...continuedFee and commission incomeFees and commissions are recognized on an accrual basis.Foreign exchange incomeForeign exchange income relates to income earned from exchanging foreign currencies and is recognisedon the accrual basis.Segment reportingA segment is a distinguishable component of the Bank that is engaged in providing products or serviceswithin a particular economic environment, which is subject to risks and rewards that are different fromthose of other segments. Segments with a majority of revenue earned from sales to external customersand whose revenue, result or assets are 10 per cent or more of all the segments are reported separately.3 Cash resourcesOctober 31,2002$December 31,2001$Cash 19,764 15,496Deposits with Central Bank – non-interest bearing 48,019 19,223Due from other banks 1,009,899 935,2551,077,682 969,974The Bank is required to maintain a percentage of deposit liabilities as cash or deposits with The CentralBank of The Bahamas. These funds are not available to finance the Bank’s day-to-day operations. AtOctober 31, 2002 the reserve requirement amounted to $37,283 (2001 – $14,660).The effective yield on cash resources during the period was 2.1% (2001- 4.55 %).60

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)4 Trading securitiesOctober 31,2002$December 31,2001$Government treasury bills 17,420 –Other debt securities 188,797 –5 Loans and advances206,217 –October 31,2002$December 31,2001$Mortgages 530,119 165,421Personal loans 260,623 94,035Business loans 755,343 273,928–1,546,085 533,384Less: provisions for impairmentspecific provisions for credit risk (22,806) (13,891)specific provisions for inherent risk (10,082) (5,328)1,513,197 514,165The average interest rate earned during the period on loans and advances was 8.5% (2001 – 8.8%).61

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)5 Loans and advances…continuedMovement in provisions for impairment are as follows:Specific creditrisk provision$Inherentriskprovision$Balance, January 1, 2001 (8,971) (5,474)Doubtful debts expense (7,767) –Recoveries of bad and doubtful debts 882 –Bad debts written off 1,965 146Balance, December 31, 2001 (13,891) (5,328)Doubtful debts expense (5,502) (700)Provisions from entity acquired (7,145) (5,811)Recoveries of bad and doubtful debts 2,320 –Bad debts written-off 1,412 1,757Balance, October 31, 2002 (22,806) (10,082)The aggregate amount of non-performing loans on which interest was not being accrued amounted to$90,820 as at October 31, 2002 (2001 – $26,031).6 Investment securitiesOctober 31,2002$December 31,2001$Originated debtIssued or guaranteed by Government 103,101 –Securities held to maturityDebt securities 48,672 50,623151,773 50,623The market values of these securities approximate cost.62

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)6 Investment securities…continuedAll debt securities held by the Bank were issued by Goverment related Agencies.The effective interest rates earned during the year on debt securities ranged from 1.9% to 14.6%(2001 - 2.0% to 10.0%).Investment securities at October 31, 2002 have been classified as held-to-maturity based on whethermanagement had positive intent and ability to hold certain securities until maturity at that date.7 Other assetsOctober 31,2002$December 31,2001$Accrued interest receivable 7,498 2,831Due from related parties 54 –Other accounts receivable 7,902 12,570Goodwill 196,351 –Prepayments and deferred items 726 –Pension assets 13,613 14,945226,144 30,34663

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)8 Property, plant and equipmentCostLand andbuildings$Equipment,furnitureand vehicles$Leaseholdimprovements$Total$Balance, beginning of period 7,967 15,059 6,670 29,696Purchases 11,820 4,104 3,564 19,488Balance, end of period 19,787 19,163 10,234 49,184Accumulated depreciationBalance, beginning of period 3,359 13,241 3,635 20,235Depreciation 1,444 868 20 2,332Balance, end of period 4,803 14,109 3,655 22,567Net book valuesEnd of period 14,984 5,054 6,579 26,617Beginning of period 4,608 1,818 3,035 9,4619 DepositsPayable ondemand$Payableafter notice$Payable at afixed date$October 31,2002Total$December 31,2001Total$Individuals 78,858 133,167 874,850 1,086,875 690,446Business andGovernments 359,025 6,352 1,212,760 1,578,137 814,213Banks 750 – 22,989 23,739 2,228438,633 139,519 2,110,599 2,688,751 1,506,887The effective rate of interest on deposits was 1.78 % (2001 – 3.06 %) during the year.64

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)10 Other liabilitiesOctober 31,2002$December 31,2001$Accounts payable and accruals 8,648 7,283Accrued interest 11,264 7,422Bills payable 2,942 8,653Dividends payable 7,500 –Provisions (note 16) 10,209 –Pension liability 2,550 –Other 2,045 –45,158 23,35811 Share capitalNumber ofshares$Common shares - voting:Barclays shares in issue at January 1 and December 31, 2001 200,000 1,158Transfer of Barclays shares on reverse acquisition (200,000) (1,158)CIBC Bahamas shares in issue at October 31, 2001 andbrought into account on reverse acquisition 66,894,010 152,290Shares issued during period as consideration for Barclays operations 52,569,590 320,538119,463,600 472,828The company is authorized to issue 150 million ordinary shares with a par value of $0.10 each and 50million preference shares with a par value of $0.10 per share.As part of the combination, and to mitigate against the dilution of interest of minority shareholders ofCIBC Bahamas Limited, the Directors have authorised a 3 for 5 rights issue to all qualifying shareholdersto subscribe for new common shares at the same price as that at which shares were issued to CIBC andBarclays Bank PLC, being $6.10 per share for a maximum of 3 million new shares.The Directors expect the rights offering to commence during the second quarter of fiscal 2003.65

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)12 Assigned capitalAs at December 31, 2001, the assigned capital was $158.Under the relevant financial legislations, the previously unincorporated branches in The Bahamas wererequired to maintain assigned capital of $158.13 Capital and reservesOctober 31,2002$December 31,2001$Share capital (note 11) 472,828 1,000Assigned capital (note 12) – 158Reverse acquisition reserve (63,566) –Total capital and reserves at end of period 409,262 1,158Reverse acquisition reserveAt beginning of period – –Arising from the reverse acquisition accounting (63,566) –At end of period (63,566) –In accordance with IAS, the equity of the Bank at October 11, 2002 comprised the equity of BarclaysBahamas together with the fair value of the consideration given to acquire CIBC Bahamas. However,legally the share capital of the Bank comprise the issued share capital of CIBC Bahamas plus the sharesissued to effect the combination, recorded at fair value. The reverse acquisition reserve is therefore thedifference between the legally required share capital together with the retained earnings of BarclaysBahamas, and the equity of the Bank presented in accordance with IAS.66

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)14 Interest incomeFor theperiod endedOctober 31,2002$For theyear endedDecember 31,2001$Loans 38,276 48,190Securities 3,984 3,810Cash resources 16,388 49,73058,648 101,73015 Non-interest incomeFor theperiod endedOctober 31,2002$For theyear endedDecember 31,2001$Fees and commission 17,406 10,542Foreign exchange 3,939 4,60721,345 15,14916 Other operating expensesFor theperiod endedOctober 31,2002$For theyear endedDecember 31,2001$Staff costs 17,352 19,122Other operating expenses 7,426 12,767Property and equipment expenses 6,562 6,499Depreciation and amortisation 2,332 1,798Foreign exchange (gain)/loss on translation of pension asset (1,071) 42332,601 40,60967

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)17 Restructuring provisionOctober 31,2002$Charged to income statement during period 8,812Net asset adjustment on acquisition 1,397Utilised during period -Balance at October 31, 2002 10,209As a result of the merger, restructuring accruals in 2002 comprised of employee terminations costs of$8,561 and other third party costs of $1,648. The full amount of the costs estimated to be incurred hasbeen recognised as a restructuring provision in the current period and is expected tobe fully utilised during fiscal years 2003 and 2004.18 Pension obligationsThe Bank has several pension schemes, most of which are non-contributory, allow additional voluntarycontributions and are final salary defined benefit plans. The plans are valued by independent actuariesevery three years using the projected unit credit method.68

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)18 Pension obligations…continuedThe amounts recognised in the balance sheet are determined as follows:October 31,2002$December 31,2001$Fair value of pension plan assets 70,112 61,087Present value of funded obligations (49,093) (42,224)21,019 18,863Unrecognised actuarial gain (9,956) (3,918)Net pension asset 11,063 14,945Represented by:Pension asset in the balance sheet 13,613 14,945Pension liability in the balance sheet (2,550) –11,063 14,945Unrecognised actuarial gains and losses result from differences between actuarial assumptions and theactual performance of the plan in the year under review. Actuarial gains and losses are recognised only ifthey exceed 10% of the present value of the defined benefit obligation and 10% of the fair value of anyplan asset at the end of the previous reporting period.The amount recognised in the income statement is as follows:For theperiod endedOctober 31,2002$For theyear endedOctober 31,2002$Current service costs 2,143 2,591Interest cost 2,449 2,448Expected return on plan assets (2,164) (4,463)Net amount included in staff costs 2,428 576The actual return on plan assets for the period ended October 31, 2002 was $4,143 (2001-$11,373).69

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)18 Pension obligations…continuedThe movement in the net asset recognised in the balance sheet is as follows:October 31,2002$December 31,2001$Balance at the beginning of the period 14,945 15,944Acquisitions (2,553) –Pension charge for the period (2,427) (576)Contributions paid 27 –Foreign exchange translation gain/(loss) 1,071 (423)Balance at the end of the period 11,063 14,945The principal actuarial assumptions used were:October 31,2002$December 31,2001$Discount rate 6.40% 7.50%Expected return on plan assets 7.90% 9.00%Future salary increases 4.90% 6.00%Future pension increases 2.90% 3.00%The last actuarial valuation of the plan, which governs employees of the former CIBC bank, wasconducted as at November 1, 2001 and revealed a fund surplus of $4 million.The employees of the former Barclays Bank participate in the defined benefit scheme of the Barclays Bank(1951) pension plan (“the Barclays plan”). The plan is operated under the segregated fund policy. Annualvaluations, in pounds sterling, of the Barclays plan covering the West Indies based staff of the Bank areperformed by an independent actuary.Following completion of the combination, active members of the Barclays plan may elect to transfer intoa defined benefit pension scheme in the new entity (“the FirstCaribbean plan”). Barclays Bank PLC has agreedto transfer to the FirstCaribbean plan assets sufficient to fully fund a ten year contribution holiday forFirstCaribbean. Existing pension obligations for those members who do not transfer will continue to befunded by the Barclays plan. The fair value of the plan assets included in these financial statements is theamount that Barclays Bank PLC expects to transfer to the FirstCaribbean plan in accordance with thisagreement. The actual amount transferred will be determined on the basis of an actuarial valuation and maydiffer from the amount included in these consolidated financial statements.70

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)18 Pension obligations…continuedThe present value of funded obligations has been calculated on the basis that non active members will elect toremain in the Barclays plan, which will continue to fund all pension payments for these members. Thepension obligation to non active members will not be transferred into FirstCaribbean International Bank,(Bahamas) Limited so this obligation is not reflected in these financial statements.19 Related party transactionsInterest income includes $17.9 million (2001 - $51.3 million) and interest expense includes $2.2 million(2001- $8.4 million) earned from and paid to related entities.In the normal course of business the parent companies provides banking and support services, for which $1.6million (2001 - $2.1 million) was charged during the period.At October 31, 2002 deposits maintained with other CIBC and Barclays entities amounted to $957 million(2001 Barclays deposits amounted to $937 million).Non interest income includes $8.3 million representing ten months of an annualised payment of $10 millionfrom Barclays Bank PLC as an incentive for the Bank to retain its placement balance with Barclays Capitalwhich may be continued in the future.20 Contingent liabilities and commitmentsThe Bank conducts business involving guarantees, performance bonds and indemnities, which are notreflected in the balance sheet.At the balance sheet date the following contingent liabilities exist.October 31,2002$December 31,2001$Contingent liability on letters of credit 9,065 34,355Loan commitments 343,537 95,530Contingent liability on guarantees and indemnities 19,177 5,091371,779 134,976The Bank is the subject of legal actions arising in the normal course of business. Management considers thatthe liability, if any, of these actions would not be material. No significant provision has been made asprofessional advice indicates that it is unlikely that any significant loss will arise.71

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)21 Future rental commitments under operating leasesAs at October 31, 2002 the Bank held leases on buildings for extended periods. The future rentalcommitments under these leases were as follows:October 31,2002$December 31,2001$Not later than 1 year 2,819 304Later than 1 year and less than 5 years 7,720 4,249Later than 5 years 2,043 1,62412,582 6,17722 Earnings per shareBasic earnings per share is calculated by dividing the net profit attributable to shareholders by theweighted average number of ordinary shares in issue during the period.For theperiod endedOctober 31,2002$Net profit attributable to shareholders 11,519Weighted average number of ordinary shares in issue 57,191Basic earnings per share (expressed in cents per share) 20.072

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)23 Segmented informationThe Bank operates in one industry, the financial services industry. Transactions between businesssegments are on normal business terms and conditions. Total income comprises net interest income andnon-interest income. The geographic distribution of total income, total expenses and operating profitwas as follows:For the period endedOctober 31, 2002$For the year endedDecember 31, 2001$TotalIncomeTotalExpensesOperatingProfitTotalIncomeTotalExpensesOperatingProfitTurks & Caicos 11,140 (5,371) 5,769 14,549 (5,969) 8,580Bahamas 46,290 (27,230) 19,060 50,167 (34,640) 15,52757,430 (32,601) 24,829 64,716 (40,609) 24,107For theperiod endedOctober 31,2002$For theyear endedDecember 31,2001$Total operating profit 24,829 24,107Provision for loan losses (3,882) (6,885)Restructuring charges (8,812) –Goodwill amortisation (616) –Net Income 11,519 17,22273

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)23 Segmented information…continuedIn the normal course of business various credit related arrangements are entered into to meet the needs ofcustomers and earn income. These financial instruments are subject to the Bank’s standard credit policiesand procedures. Segment assets and liabilities comprise operating assets and liabilities, being the majorityof the balance sheet but excluding such items as other assets and other liabilities. The geographicdistribution of operating assets, operating liabilities and capital expenditures at October 31 was as follows:For the period endedOctober 31, 2002$For the year endedDecember 31, 2001$OperatingAssetsOperatingLiabilitiesCapitalExpenditureOperatingAssetsOperatingLiabilitiesCapitalExpenditureTurks & Caicos 272,042 270,383 4,527 264,595 265,668 3,101Bahamas 2,676,827 2,418,368 22,090 1,270,167 1,241,219 6,3602,948,869 2,688,751 26,617 1,534,762 1,506,887 9,461Off-balance sheet financial instruments:October 312002$December 312001$Turks & Caicos 20,099 21,802Bahamas 351,680 113,174371,779 134,97674

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)24 AcquisitionsThe purchase method has been applied to the combination of Barclays Bahamas and CIBC Bahamas andBarclays Bahamas has been identified as the acquirer. The fair value of the CIBC Bahamas business wascalculated to determine the purchase consideration. The goodwill arising from the combinationrepresents the excess of the purchase consideration over the fair value of the identifiable assets andliabilities of CIBC Bahamas at October 11, 2002.The details of the assets and liabilities acquired and goodwill arising are as follows:Cash and cash equivalents 230,782Loans and advances 970,203Investments 230,826Other assets 31,837Deposits (1,230,730)Other liabilities (21,623)Net assets of business acquired 211,295Fair market value of business 408,261Goodwill 196,966Cash and cash equivalents (above) 230,782Purchase consideration in the form of cash and cash equivalents 0Net cash acquired 230,782$Acquisition provisions included in liabilities above:Employee terminations costs 1,046Other costs 3501,39675

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)25 Use of financial instrumentsA Strategy in using financial instrumentsBy its nature the Bank’s activities are principally related to the use of financial instruments. The Bankaccepts deposits from customers at both fixed and floating rates and for various periods and seeks toearn above average interest margins by investing these funds in high quality assets. The Bank seeks toincrease these margins by consolidating short-term funds and lending for longer periods at higher rateswhilst 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 exposuresinvolve not just on-balance sheet loans and advances but the Bank also enters into guarantees andother commitments such as letter of credit and performance, and other bonds.B Credit riskThe Bank takes on exposure to credit risk which is the risk that a counterparty will be unable to payamounts in full when due. The Bank structures the levels of credit risk it undertakes by placing limitson the amount of risk accepted in relation to one borrower, or groups of borrowers, and togeographical and industry segments. Such risks are monitored on a revolving basis and subject to anannual or more frequent review.The exposure to any one borrower including banks and brokers is further restricted by sub-limitscovering on and off-balance sheet exposures and daily delivery risk limits in relation to trading itemssuch 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 potentialborrowers to meet interest and capital repayment obligations and by changing these lending limitswhere appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporateand personal guarantees, but a significant portion is personal lending where no such facilities can beobtained.DerivativesThe Bank maintains strict control limits on net open derivative positions, i.e. the difference betweenpurchase and sale contracts, by both amount and term. At any one time the amount subject to creditrisk is limited to the current fair value of instruments that are favorable to the Bank (i.e. assets), whichin relation to derivatives is only a small fraction of the contractor or notional values used to expressthe volume of instruments outstanding. This credit risk exposure is managed as part of the overalllending limits with customers, together with potential exposures from market movements. Collateralor other security is not usually obtained for credit risk exposures on these instruments, except wherethe Bank requires margin deposits from counterparties.76

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)25 Use of financial instruments…continuedB Credit risk…continuedMaster netting arrangementsThe Bank further restricts its exposure to credit losses by entering into master netting arrangementswith counterparties with which is undertakes a significant volume of transactions. Master nettingarrangements do not generally result in an offset of balance sheet assets and liabilities as transactionsare usually settled on a gross basis. However, the credit risk associated with favorable contracts isreduced by a master netting arrangement to the extent that if an event of default occurs, all amountswith the counterparty are terminated and settled on a net basis. The Bank’s overall exposure to creditrisk on derivative instruments subject to master netting arrangements can change substantially withina short period since it is affected by each transaction subject to the arrangement.Credit related commitmentsThe primary purpose of these instruments is to ensure that funds are available to a customer asrequired. Guarantees and standby letters of credit, which represent irrevocable assurances that theBank 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 writtenundertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the Bankup to a stipulated amount under specific terms and conditions, are collateralised by the underlyingshipments 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 theform of loans, guarantees or letters of credit. With respect to credit risk on commitments to extendcredit, 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 mostcommitments to extend credit are contingent upon customers maintaining specific credit standards.The Bank monitors the term of maturity of credit commitments because longer-term commitmentsgenerally have a greater degree of credit risk that shorter-term commitments.C Currency riskThe Bank takes on exposure to effects of fluctuations in the prevailing foreign currency exchange rateson its financial position and cash flows. The Board of Directors sets limits on the level of exposure bycurrency and in total for both overnight and intra-day positions, which are monitored daily. The tablebelow summarises the Bank’s exposure to foreign currency exchange rate risk at October 31. The offbalancesheet gap represents the difference between the notional amounts of foreign currencyderivative financial instruments, which are principally used to reduce the Bank’s exposure to currencymovements, and their fair values.77

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)25 Use of financial instruments…continuedConcentrations of assets, liabilities and off balance sheet items:BBD$ BAH$ US$ JA$ Other TotalAs at October 31, 2002AssetsCash resources and balances withother banks – 216,895 673,767 – 187,020 1,077,682Trading securities – 71,345 134,872 – – 206,217Loans and advancesto customers – 959,761 540,089 – 13,347 1,513,197Investments securities – 57,632 94,141 – – 151,773Property andequipment – 20,531 5,838 – 248 26,617Goodwill 196,350 – – 196,350Other assets – 19,472 8,747 – 1,575 29,794Total assets – 1,541,986 1,457,454 – 202,190 3,201,630LiabilitiesDeposits 612 1,165,161 1,322,652 – 200,326 2,688,751Other borrowed fundsOther liabilities – 42,887 962 – 1,309 45,158Total liabilities 612 1,208,048 1,323,614 – 201,635 2,733,909Net on balance sheet position (612) 333,938 133,840 – 555 467,721Off balance sheet net notionalposition – 25,761 2,481 – – 28,242Credit commitments – 281,630 42,855 – 19,052 343,53778

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)25 Use of financial instruments…continuedC Currency risk…continuedAs at December 31, 2001BBD$ BAH$ US$ JA$ Other TotalTotal assets 32 561,217 871,485 14,645 127,190 1,574,569Total liabilities 1,142 551,994 835,317 15,316 126,476 1,530,245Net on balance sheetposition (1,110) 9,223 36,168 (671) 714 44,324Off balance sheet netnotional position – 37,921 1,525 – 39,446Credit commitments – 75,253 – – 20,277 95,530D Interest rate riskInterest sensitivity of assets, liabilities and off balance sheet items – repricing analysisThe Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rateson its financial position and cash flows. Interest margins may increase as a result of such changes but mayreduce or create losses in the event that unexpected movements arise. The Board of Directors sets limitson 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 thematurity of deposits up to 1 month, of which represent balances on current accounts considered by theBank as a relatively stable core source of funding of its operations.E Liquidity riskThe 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 minimumlevel of reinvestment of maturing funds can be predicted with a high level of certainty. The Board sets limitson the minimum proportion of maturing funds available to meet such calls and on the minimum level ofinterbank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels ofdemand.The table below analyses assets and liabilities of the Bank into relevant maturity groupings based on theremaining period at balance sheet date to the contractual maturity date.79

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)25 Use of financial instruments…continuedMaturities of assets and liabilitiesAs at October 31, 20021-3months$3-12months$1-5years$Over 5years$Total$AssetsCash resources and balanceswith other banks 972,868 103,504 1,310 – 1,077,682Trading securities 206,217 – – – 206,217Loans and advances to customers 280,185 106,934 360,658 765,420 1,513,197Investments securities – 25,329 23,914 102,530 151,773Property and equipment – – – 26,617 26,617Other assets 22,497 5,309 780 197,558 226,144Total assets 1,481,767 241,076 386,662 1,092,125 3,201,630LiabilitiesDeposits 2,401,310 285,763 1,646 32 2,688,751Other liabilities 30,636 12,631 – 1,891 45,158Total liabilities 2,431,946 298,394 1,646 1,923 2,733,909Net on balance sheet position (950,179) (57,318) 385,016 1,090,202 467,721Off balance sheet net notional position – 28,242 – – 28,242– – – – –Credit commitments 208,106 135,431 – – 343,53780

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)25 Use of financial instruments…continuedELiquidity risk…continuedThe matching and controlled mismatching of the maturities and interest rates of assets and liabilities isfundamental to the management of the Bank. It is unusual for banks ever to be completely matchedsince business transacted is often of uncertain term and different types. An unmatched positionpotentially 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-bearingliabilities as they mature, are important factors in assessing the liquidity of the Bank and its exposure tochanges in interest rates and exchange rates.Liquidity requirements to support calls under guarantees and standby letters of credit are considerablyless than the amount of the commitment because the Bank does not generally expect the third party todraw funds under the agreement. The total outstanding contractual amount of commitments to extendcredit does not necessarily represent future cash requirements, since many of these commitments willexpire or terminate without being funded.FFair values of financial assets and liabilitiesDue from other banksDue from other banks includes inter-bank placements and items in the course of collection.The fair value of floating rate placements and overnight deposits is their carrying amount. The estimatedfair value of fixed interest bearing deposits is based on discounted cash flows using prevailing moneymarket interest rates for debts with similar credit risk and remaining maturity.Loans and advances to customersLoans and advances are net of specific and other provisions for impairment. The estimated fair value ofloans and advances represents the discounted amount of estimated future cash flows expected to bereceived. Expected cash flows are discounted at current market rates to determine fair value.81

FIRSTCARIBBEAN INTERNATIONAL BANK (BAHAMAS) LIMITEDNotes to Consolidated Financial StatementsOctober 31, 2002(expressed in thousands of Bahamian dollars)25 Use of financial instruments…continuedInvestment securitiesInvestment securities include only interest-bearing assets held to maturity, as assets available-for-sale are nowmeasured at fair value. Fair value for held to maturity assets is based on market prices or broker/dealer pricequotations. Where this information is not available, fair value has been estimated using quoted prices forsecurities with similar credit, maturity and yield characteristics, or in some cases by reference to the nettangible asset backing of the investee.Deposits and borrowingsThe estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, isthe amount repayable on demand.The estimated fair value of fixed interest bearing deposits and other borrowings without quoted market priceis based on discounted cash flows using interest rates for new debts with similar remaining maturity.26 Principal subsidiary undertakingsNameFirstCaribbean International Finance Corporation (Bahamas) LimitedFirstCaribbean International (Bahamas) Nominees Company LimitedFirstCaribbean International Land Holdings (TCI) LimitedCountry of incorporationBahamasBahamasTurks & Caicos IslandsAll subsidiaries are wholly ownedBranches of Barclays Bank PLC included in the December 31, 2001 combined financial statements are:• Bahamas• Turks & CaicosThe significant entity included in the combined financial statements is Barclays Finance Corporation(Bahamas) Limited.82

FirstCaribbean International Bank(Bahamas) Limited Information CircularWe are providing these proxy materials inconnection with the solicitation by theBoard of Directors of FirstCaribbeanInternational Bank (Bahamas) Limited, ofproxies to be voted at the Company’s 2002Annual General Meeting of Shareholders andat any meeting following adjournmentthereof.Shareholders are advised that no shareholderproposal has been filed and no action isproposed by the Board of Directors whichwould create the possibility of a “dissentingshareholder” under Section 168 of TheCompanies Act, 1992. The Board of Directors isalso not aware of any solicitation of proxies by aperson or group adverse to presentmanagement of this Company.You are cordially invited to attend the annualmeeting on April 25th, 2003 beginning at 6:00p.m. E.S.T. Shareholders will be admittedbeginning at 5:30 P.M. E.S.T. The meeting willbe held at British Colonial Hilton, 1 Bay Street,Nassau, The Bahamas.This financial year of FirstCaribbeanInternational Bank (Bahamas) Limited formerlyCIBC Bahamas Limited began on November 1st,2001 and ended October 31st, 2002. Referencesin this proxy statement to the year 2002 orfinancial 2002 refer to the period as mentionedabove.We are mailing this proxy statement andaccompanying forms of proxy and votinginstructions to holders of the Company’sordinary shares on March 25th, 2003, therecord date for the meeting.Proxies and Voting ProceduresThe Board of Directors and the Management ofthe Company do not contemplate thesolicitation of proxies otherwise than by mail.A shareholder has the right to appoint a personor company (who need not be a shareholder),other than the persons designated by theDirectors as proxy holders in the accompanyingform of proxy, to represent the shareholder at themeeting by striking out the names of the personsso designated and inserting the name of thechosen proxy holder in the blank space providedfor that purpose in the form of proxy, or bycompleting and signing another proper form ofproxy. A proxy must be in writing and must beexecuted by the shareholder or by an attorneyauthorized in writing and deposited at the officesof CIBC Trust (Bahamas) Limited, Goodman’s BayCorporate Centre, West Bay Street, Nassau, TheBahamas. A shareholder who executes andreturns the accompanying form of proxy mayrevoke it by an instrument in writing executed bysuch shareholder or attorney authorized inwriting and deposited at the offices of CIBC Trust(Bahamas) Limited, Registrar and Transfer Agentsat Goodman’s Bay Corporate Centre, West BayStreet, Nassau, The Bahamas at any time up toand including the last business day preceding theday of the meeting, or with the Chairman of themeeting on the day of the meeting prior to thecommencement thereof, or in any other mannerpermitted by law.All shares entitled to vote and represented byproperly completed proxies received prior to themeeting and not revoked will be voted at themeeting in accordance with your instructions. Ifyou do not indicate how your shares should bevoted on a matter, the shares represented by yourproperly completed proxy will be voted as theBoard of Directors recommends.If any other matters are properly presented at theannual meeting for consideration, including,among other things, consideration of a motion toadjourn the meeting to another time or place, thepersons named as proxies and acting thereunderwill have discretion to vote on those mattersaccording to their best judgment to the sameextent as the person delivering the proxy wouldbe entitled to vote. At the date this proxystatement went to press, we did not anticipatethat any other matters would be raised at themeeting.16 (i)

FirstCaribbean International Bank(Bahamas) Limited Information CircularShareholders Entitled to VoteShareholders at the close of business on therecord date are entitled to notice of and to voteat the annual meeting.On 14th March, 2003 there were one hundredand nineteen million, four hundred and sixtythreethousand, six hundred (119,463,600)ordinary shares of par value $0.10 eachoutstanding. Each share is entitled to one voteon each matter properly brought before themeeting.At close of business on 14th March, 2003,FirstCaribbean International Bank Limitedbeneficially owned or controlled directly orindirectly 114,463,600 shares which represents95.8% of the Company’s issued ordinaryshares.Quorum and Required VoteThe presence, in person or by proxy, of theholders of a majority of the shares entitled tovote generally for the election of Directors isnecessary to constitute a quorum at themeeting. For purposes of determining aquorum, abstentions are counted as present andare entitled to vote. Pursuant to the Articles ofAssociation, three persons, each being amember entitled to attend and vote at themeeting, or a proxy for such a member, or theduly authorised representative of a corporatemember so entitled, shall be a quorum.Election of DirectorsThe articles of the Company currently providethat the Board of Directors of the Companyshall consist of a minimum of five (5) and amaximum of twelve (12) directors, with theactual number of directors to be determinedfrom time to time by the Board of Directors.shareholders or, subject to the articles of theCompany and applicable law, appointed by theBoard of Directors between annual meetings.Each director shall hold office until the close ofthe next annual meeting of shareholders or untilhe or she ceases to be a director by operation oflaw or articles of Association of the Company oruntil his or her resignation becomes effective.By resolution of the Board of Directors, thenumber of directors has been fixed at nine (9)effective upon the election of directors at theMeeting.Messrs Mark Strang and Reginald Lobosky willnot be standing for re-election at the Meeting.The Board of Directors held six (6) meetings in2002.The persons designated as proxy holders in theaccompanying form of proxy will vote ordinaryshares represented by such form of proxy,properly executed, for the election of thenominees whose names are set forth herein,unless specifically directed to withhold a vote.All the nominees were previously elected by theshareholders of the Company as directors of theCompany.If any nominee is for any reason unavailable toserve (which management has no reason tobelieve to be the case), the persons designated asproxy holders in the accompanying form ofproxy shall have the right to exercise theirdiscretion by voting for another qualifiednominee.The following table sets out the names of allpersons proposed to be nominated for electionas Directors, along with other relevantinformation. All nominees are now members ofthe Board of Directors.Directors can be either elected annually by theshareholders at the annual meeting of16 (ii)

FirstCaribbean International Bank(Bahamas) Limited Information CircularName and positionPrincipal occupationDirectorsinceNumber of sharesbeneficially ownedor controlleddirectly or indirectlyMichael MansoorExecutive Chairman,FirstCaribbeanInternational Bank Limited1999NilJ. W. P. KrukowskiRetired Banker1997NilWillie MossAttorney-at-law1998NilTerence R. HiltsRetail Director,Northern Caribbean199717,500Walter WellsExecutive Director,Retail Banking199719,200Sharon BrownExecutive Director,Corporate Banking2002NilG. Diane StewartAttorney-at-law2002NilTeresa ButlerChairman, Departmentof Public Personnel2002NilMark TevershamExecutive Director,International Banking2002NilCompensation of DirectorsEach director, who is not an employee ofFirstCaribbean International Bank (Bahamas)Limited is paid a fee of $1500.00 per meeting forhis or her services as a director. Directors are alsoentitled to reimbursement for reasonable traveland living expenses incurred by them in attendingany Board of Directors or committee meetings.No special remuneration was paid to any directorduring financial year 2002.Senior Management CompensationThe senior management of the Companyreceived aggregate compensation amounting to$809,584 in the financial year 2002.16(iii)

FirstCaribbean International Bank(Bahamas) Limited Information CircularIndebtedness of Directors andSenior ManagementThere is a total indebtedness of approximatelyB$1,475,024 due to the Company from membersof the senior management and directors. Thisrepresents loans and mortgages.Management’s Interest in TransactionsNo director, executive officer, or senior officer ofthe Company, or proposed nominee for election asa director of the Company, has held or currentlyholds a material interest in any transactionentered into by the Company or its subsidiaries.Share Option PlanThere is no share option plan.Shareholder Feedback and CommunicationThe Company’s communications policy is reviewedby the Board of Directors of the Companyperiodically and provides that communicationswith all constituents will be made in a timely,accurate and effective manner. The Companycommunicates regularly with its shareholdersthrough press releases, and annual and quarterlyreports. At the Company’s shareholders’meetings, a full opportunity is afforded to permitshareholders to ask questions concerning theCompany’s activities. Investor and shareholderconcerns are addressed on an on-going basisthrough the office of the Corporate Secretary.Appointment of AuditorsAt the meeting, the shareholders will be calledupon to reappoint PricewaterhouseCoopers asthe auditors of the Company at a remunerationto be fixed by the Board of Directors and to serveuntil the close of the next annual meeting of theCompany. To be effective, the resolution reappointingPricewaterhouseCoopers as theauditors of the Company must be approved bythe majority of the votes cast by the holders ofOrdinary Shares present in person, or representedby proxy, at the Meeting. The audit committeeand the management of the Company recommendthat the shareholders vote for the reappointmentof PricewaterhouseCoopers. PricewaterhouseCoopersand its predecessor firms have acted as the auditorsof the Company since 1997.Arrangements have been made for one or morerepresentatives of PricewaterhouseCoopers toattend the meeting.Other BusinessThe management of the Company knows of nomatters to come before the meeting other than thematters referred to in the Notice of AnnualMeeting. However, if any other matters which arenot known to the management of the Companyshould properly come before the Meeting, forms ofproxy given pursuant to this solicitation by themanagement of the Company will be voted onsuch matters in accordance with the best judgmentof the person voting the proxy.Directors’ Approval and CertificateThe contents and the sending of this InformationCircular and Proxy Form have been approved bythe Board of Directors of the Company. Theforegoing contains no untrue statement of amaterial fact and does not omit to state a materialfact that is required to be stated or that is necessaryto make a statement not misleading in light of thecircumstances in which it was made.Dated at the City of Nassau, New ProvidenceIsland in the Commonwealth of The Bahamas14th March 2003.Michael MansoorChairmanCheryl E. BazardCorporate Secretary34 (iv)

The undersigned......................................................................................(please print) of..................................................................................(please print) being a shareholder of FirstCaribbean InternationalBank (Bahamas) Limited (“the Company”) hereby appoints Mr. Michael M. Mansoor, or failing him, Terence R. Hilts, orinstead or either of them, ............................................................................ or............................................................................... as proxy of the undersigned to attend and vote at the AnnualGeneral Meeting of Shareholders (“the meeting”) of the Company to be held on [date] and at any adjournment thereof,notice of the meeting, together with the accompanying financial statements and the Information Circular having beenreceived 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 VOTINGTerence Hilts VOTE FOR WITHHOLD FROM VOTINGWalter Wells VOTE FOR WITHHOLD FROM VOTINGWillie Moss VOTE FOR WITHHOLD FROM VOTINGSharon Brown VOTE FOR WITHHOLD FROM VOTINGTeresa Butler VOTE FOR WITHHOLD FROM VOTINGDiane Stewart VOTE FOR WITHHOLD FROM VOTINGMark Teversham VOTE FOR WITHHOLD FROM VOTINGJ. W. P. Krukowski VOTE FOR WITHHOLD FROM VOTING2. To vote for or withhold from voting on the appointment of PricewaterhouseCoopers, as Chartered To vote for orwithhold from voting on the election of the following directors, as Accountants, as the Auditors of the Company and toauthorize the Directors to fix their remuneration:VOTE FORWITHHOLD FROM VOTING3. To vote in their discretion upon any other business which may properly come before the meeting or any adjournmentthereof.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 spacesprovided 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., 2003Corporate 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 personor company to represent him/her at the meeting other than the persons designated above. To exercise this right, the shareholder may insertthe 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 orthe shareholder’s attorney. The signature should be exactly the same as the name in which the shares are registered. The proxy must be sentby mail or hand delivered to the offices of CIBC Trust (Bahamas) Limited, Registrar and Transfer Agents, Goodman’s Bay Corporate Centre, WestBay 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 receivedundated but otherwise properly executed, it will for all purposes be deemed to be dated 24th April 2003.