TABLE OF CONTENTS - AID Bank · 2017-03-20 · consistent monitoring of these business ventures in...

TABLE OF CONTENTSCHAIRMAN’S LETTER OF TRANSMITTAL ...................................................... 3MEMBERS OF THE BOARD OF DIRECTORS ................................................... 4-5STAFF MEMBERS as at June 30, 2003 .............................................................. 6-8ABBREVIATIONS ........................................................................................................ 9OPERATIONAL AND FINANCIAL OVERVIEW ................................................... 10

Mission Statement .............................................................................................. 10Objectives............................................................................................................ 10Operations .......................................................................................................... 10

ECONOMIC PERFORMANCE IN DOMINICA DURING 2002 ............................ 12Overall Sector Performance ............................................................................... 12Agriculture ......................................................................................................... 12Manufacturing .................................................................................................... 13Tourism .............................................................................................................. 12Construction ...................................................................................................... 13Central Government Fiscal Operations .............................................................. 13Money and Credit ............................................................................................... 13

FINANCE AND ACCOUNTS .................................................................................... 14Overall Financial Performance ........................................................................... 14Revenue ............................................................................................................ 14Expenses ........................................................................................................... 14Assets ............................................................................................................... 15Liabilities ............................................................................................................ 15Shareholders Equity .......................................................................................... 15Credit Risk Management ................................................................................... 15

CREDIT ...................................................................................................................... 16Agriculture ......................................................................................................... 17Manufacturing, Services & Transportation ......................................................... 17Tourism .............................................................................................................. 17Education .......................................................................................................... 17Housing ............................................................................................................. 17Personal & Other ............................................................................................... 17

BUSINESS DEVELOPMENT UNIT ........................................................................ 18OFFICE ADMINISTRATION .................................................................................... 19

Training .............................................................................................................. 19Staff ................................................................................................................... 19Achievements .................................................................................................... 19

OUTLOOK................................................................................................................... 20TABLE 1 Summary of Loan Approvals by Sector ................................................... 21TABLE 2 Summary of Loan Disbursements by Sector ........................................... 21TABLE 3 Financial Profile ....................................................................................... 22TABLE 4 Sector Performance Indicators ............................................................... 23TABLE 5 Agriculture Loan Approvals by Sub-sector .............................................. 24TABLE 6 Manufacturing, Services & Transportation Loan Approvals by Purpose .. 24TABLE 7 Tourism Loan Approvals by Purpose ....................................................... 24TABLE 8 Housing Loan Approvals by Purpose ...................................................... 25TABLE 9 Student Loan Approvals by Course of Study........................................... 26TABLE10 Personal Loan Approvals by Purpose ...................................................... 27AUDITORS’ REPORT & FINANCIAL STATEMENTS ......................................... 29

Chairman’s Letter of Transmittal

September 30, 2003

Dear Prime Minister,

Pursuant to Section 22(1), Chapter 74:03 of the Laws of the Commonwealth of Dominica,1990, I have the honour to submit to you the Annual Report on Operations and AuditedFinancial Statements for the Financial Year ended June 30, 2003

Yours faithfullyDOMINICA AGRICULTURAL INDUSTRIAL AND DEVELOPMENT BANK

Dr. Bernard YankeyCHAIRMAN

Honourable Pierre CharlesHon. Prime Minister and Minister of Finance and PlanningGovernment of the Commonwealth of DominicaDominica Financial Centre, Roseau

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Members of the Board of Directors

Dr. Bernard YankeyCHAIRMAN(from January 2003)

Mr. Reuben ThomasDIRECTOR

Mr. Elford HenryDIRECTOR

Mr. Lambert LewisDIRECTOR

Mr. Leon LeBlancDIRECTOR

Mr. Hubert JosephDIRECTOR

Ms. Gail RoyerBANK SECRETARY

Dr. Maria Bellot DIRECTOR

Mr. Swinburne Lestrade DEPUTY CHAIRMAN

Mr. Martin CharlesDIRECTOR

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Dominica Agricultural Industrial & Development BankCnr. Charles Ave and Rawles Lane,Goodwill, Commonwealth of Dominica

Tel. No. 767-448-2853Facsimile 767-448-4903E-mail [email protected] www.aidbank.com

SOLICITORS

Alick Lawrence, Chambers, RoseauPrevost & William, Chambers, Roseau

AUDITORS

Mr. Moreau, Winston & Co.

BANKERS

National Commercial Bank of Dominica

Members of the Board of Directors

Mr. Crispin A. Sorhaindo CHAIRMAN (up to December 2002)

Dr. Bernard Yankey CHAIRMAN (from April 2003)

Mr. Swinburne Lestrade DEPUTY CHAIRMAN

Dr. Maria Bellot DIRECTOR

Mr. Martin Charles DIRECTOR

Mr. Leon Leblanc DIRECTOR

Mr. Reuben Thomas DIRECTOR

Mr. Elford Henry DIRECTOR

Mr. Lambert Lewis DIRECTOR (CHAIRMAN from Jan - Mar 2003)

Mr. Hubert Joseph DIRECTOR

Ms. Gail Royer BANK SECRETARY

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Staff Membersas at June 30, 2003

Left to Right and Front To Back

R. Thomas , M. Royer, E. Alfred, N. WinstonN. Fevrier, M. Lewis, D. Julien, I. Prosper - Bruno, P. Shillingford - Chambers

E. Abraham, K. Albert, H. Leblanc, M. Julien Jno - RoseA. Dupigny, J. Dechausay, G. Royer,

E. Harris - Charles, R. Xavier, C. Samuel, C. Carty, M. Martin H. Sylvester, D. Edwards, K. Shillingford, C. Baron -Willams, G. Shillingford

K. Sylvester, A. Charles, M. Abel

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OFFICE OF THE GENERAL MANAGER

Mrs. P. CharlesM.A., Dev. BankingGeneral Manager

LEGAL DIVISION

Ms. Gail RoyerLL M, LL B., Dip. ManagementLegal Counsel/Bank Secretary

BUSINESS DEVELOPMENT UNIT

Mr. P. DelauneyDip. AgricultureManager, BDU

HUMAN RESOURCE DIVISION

Mrs. U. McDowell-JobB.A.Human Resource Manager

PROJECTS DIVISION

Mr. A. CharlesB.Sc.Manager Projects

Mr. A. H. LeBlanc Cert. Mortgage UnderwritingProject Officer

Ms. M. RoyerSecurities Officer

Mrs. C. Baron-WilliamsDip. BankingExecutive Secretary

Ms. G. EdwardsFile Clerk

Mr. G. NichollsOffice Attendant

Mrs. D. JulienCert. Bus. AdminAdministrative Officer, HRD

Mrs. M. AbelB.Sc.Asst. Manager, Projects

Mrs. P. Shillingford-ChambersDip. BankingProject Officer 1

Mr. F. FabienDip. AgricultureProject Officer

Mrs. R. XavierLoans Officer

Mrs. M. MartinLoans Officer

Ms. P. EtienneCert. Bus. AdminLoans Officer

Ms. E. AlfredBank Officer, Projects

Mr. C. LloydRecoveries Coordinator

Ms. G. ShillingfordSenior Bank OfficerRecoveries

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Mr. C. SamuelBank Officer, Recoveries

ECONOMIC INTELLIGENCE DIVISION

Mr. C. CartyFMAATDeputy General Manager/EID

Mrs. R. HyacinthDip. ManagementAdministrative Officer/EID

Mr. K. SylvesterM.C. P.Senior Bank Officer, MIS

Mr. K. ShillingfordBank Officer, Accounts


Ms. N. WinstonBank Officer, Recoveries

Mrs. E. Harris-CharlesM.Sc., M.A., B.A.Manager, EIU

Mrs. M. John RoseB.Sc.Corporate Planner

Ms. J. DechausayB.Sc.Communications/Customer Service Officer

Ms. N. FevrierReceptionist

Mr. David EdwardsB.B.A. (BCIS)Systems Analyst

Mrs. L. GonzalezPeltier-John,B.Sc.Administrative Officer, MIS

Ms. V. E AbrahamC.G.A., B.A.Accountant

Mrs. I. BrunoCert. Bus. Admin.Senior Accounts Officer

Ms. A. DupignyBank Officer, Accounts

Mr. K. AlbertBank Officer, Accounts

Ms. R. ThomasBank Officer, Accounts

Ms. H. SylvesterBank Officer, Accounts

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ABBREVIATIONS

ATI Appropriate Technology InternationalCAN CanadianCDB Caribbean Development BankCDE Centre for Development of EnterpriseCCF Counterpart Contribution FundCFTC Commonwealth Fund for Technical CooperationCTAP Canadian Training Award ProjectCTCS Caribbean Technological Consultancy ServicesDAIDB Dominica Agricultural Industrial & Development BankDBPL Dominica Banana Producers LimitedDEXIA Dominica Export Import AgencyDSS Dominica Social SecurityEC Eastern CaribbeanEURO Currency Unit of the European UnionEIB European Investment BankEU European UnionFDSL Financial Data Systems Ltd.FF French FrancICDF International Co-operation and Development FundIFAD International Fund for Agricultural DevelopmentMIS Management Information Systemmn millionOCR Ordinary Capital ResourcesOR-DO Ordinary Resources - DominicaROC Republic of ChinaSME Small and Medium EnterprisesSFR-D Special Fund Resources - DominicaTT Trinidad & TobagoUSAID United States Agency for International DevelopmentUS United StatesWAWU Waterfront & Allied Workers Union

$ represents Eastern Caribbean dollars throughout unless stated otherwise

9

MISSIONSTATEMENT

necessary to promote and sustain national socio-economic development with due regard to theenvironment, stakeholder satisfaction and profitability.

OBJECTIVESThe objectives of the Bank as set out in the Actestablishing the Bank are, “to promote and influencethe economic development of the Commonwealth ofDominica and to mobilize funds for the purpose of suchdevelopment ”.

OPERATIONSFinancial PerformanceFor the financial year ended June 2003, the Bank’s totalassets increased from $119.8mn to $120.1mn andshareholders’ equity declined by 7.5 percent from$28.1mn to $25.96mn due to a reduction in retainedearnings.

The Bank achieved gross revenue of $9.39mn and netrevenue of $1.3mn. Provisions for loan losses wereincreased significantly to $3.25mn, to comply withinternational standards, which had the effect of reducingnet earnings to a deficit of $1.81mn. Total expensesdeclined from $8.27mn to $8.07mn a 2.4 percentimprovement.

OVERVIEW

CreditThe Bank’s credit performance was directly affectedby the slowdown in domestic economic activity. Loanapprovals declined by 13 percent from $20.36mn to$17.66mn and loan disbursements decreasedmarginally by 1.45 percent from $19.8mn to $19.5mn.

One of the Bank’s major investments in the tourismsector, which had experienced some delays inimplementation, was finally completed towards the endof the Bank’s financial year with the official openingscheduled for September 2003. This tourism project,which offers a unique experience of Dominica’s rainforest, is the only one of its kind in the Caribbean.Even before opening it had already attracted a highlevel of interest from the market.

Technical AssistanceA technical assistance facility was established inDecember 2002 under the Enterprise DevelopmentFacility funded by the European Union (EU). As at June2003, a total of 29 technical assistance grantsamounting to $595,150 were approved for enterprisesin agriculture, services and tourism.

To mobil ise andefficiently managefunds and otherr e s o u r c e s t omaintain our leadposition in providingthe financial andtechnical services

Rainforest Aerial Tram

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New Developments During the Year

The Bank’s Strategic Plan, which commencedimplementation in March 2002, entered its first full yearof implementation. A few of the achievements of theyear included accessing of a new source of grant fundsfor technical assistance, strategic alliances with otherfinancial and state organisations in proactivelypromoting these funds and also attracting otherfinancial organisations to retail the special mortgageshelter funds, which are available for low-incomepersons.

As a result of prevailing economic conditions, StrategicPlan targets for approvals and disbursements for theyear had to be set at lower levels than originallyenvisaged in the plan. The revised performanceappraisal system with its new quarterly review processwas operationalised in the beginning of the financialyear.

During the period under review, the Bank’s commitmentto international standards was manifested in theautomation of its income recognition policy, resultingin the non-accrual of interest income on loans threemonths or more in arrears. The upgraded loanmanagement system also removes all interest alreadyaccrued on such loans. Formerly, the incomerecognition policy was managed, as is the norm in otherdevelopment banks in the region. The Bank continuedto upgrade its loan management software enabling itto run faster on the Windows platform and introducinggreater flexibility in reporting.

The Enterprise Development Facility, funded by theEuropean Union, was established in December 2002and is having a noticeably positive effect on productivesector lending. The Facility provides for grant, whichis 50 percent of total funding requirements of theproject, up to a maximum of $25,000. This grant ismatched with a 50 percent loan funded from the Bank’sown resources. As at June 30, 2003, productive sectorloans associated with the Facility amounted to $0.93m.Given the high levels of utilization by new and existingbusinesses, the facility is showing tremendousprospects for the development of local enterprises. Theforeseeable challenge for the Bank, however, is in theconsistent monitoring of these business ventures inorder to ensure sustained viability.

OVERVIEW

Community Outreach

During the year, the Bank supported a variety of nationaland community activities. One of these was the 2003National Queen pageant. The Bank sponsored a staffmember, Ms. Minerve Lewis, who made the Bank proudby winning the title of Carnival Queen 2003. Otheractivities included the construction of two bus shelterswithin the Canefield community and participation in theChristmas lighting competition, in which the bank wonfirst prize among business houses in the capital city.

Staff

Staff is recognized as the Bank’s most valuable asset,and the Bank continues to build capacity within theorganization through a variety of training initiativestowards the achievement of increased organizationalefficiency and employee job satisfaction. Theseinitiatives are aimed at contributing to the growth anddevelopment of the institution and by extension theeconomy.

Community Outreach

Canefield Bus Stop

11

In the 1990s Dominica achieved an average growthrate of 2.5 percent. However, in recent years growthhas been negative, reflecting external shocks to its keyexports, which have contributed to the deteriorationof public finances. These external shocks included theloss of preferential access to the European Union forbanana exports, the global slowdown, declines intourism following September 11 and growingcompetition in the tourism industry.

In August 2002, the IMF approved a Stand-Byarrangement to enable Dominica to deal with externalshocks, rising public debt and a prolonged economicdownturn. Government adopted a stabilization programfor the financial year July 2002 to June 2003, whichwas intended to deal with the budgetary financing crisis,regain sustainable growth, and reduce poverty.

Economic Performance in 2002In the year ended December 2002, economic activityin Dominica was estimated to have contracted by 4.7percent, compared to the downturn of 4.5 percentestimated in the corresponding period in 2001. Thisperformance reflected declines in the agriculture,tourism, construction and manufacturing sectors.

During the period, activity in the agricultural sectorcontracted, with banana export revenue falling from$22.23mn in 2001 to $21.99mn in 2002. Production inthe manufacturing industries of soap and dental creamdeclined by 13.43 percent and 11.54 percentrespectively. The fall in the output of soap and relatedproducts was partly associated with the decline indemand on the regional market and the competitionexperienced on the Jamaican market, while the declinein beverages was due in part to the fall in domesticdemand.

In the period under review, performance in the tourismsector was mixed. Stay-over visitors grew by 2.89percent from 66,393 to 68,311. However, cruiseshipvisitors declined by 34.08 percent from 208,627 to136,859. The decline in cruiseship visitors was due tothe cancellation of a major cruise liner during the thirdquarter of 2002.

ECONOMIC PERFORMANCE OF DOMINICA

The visible trade balance improved, moving from adeficit of $237.8mn in 2001 to a deficit of $200.5mn in2002. Export revenues declined by 3.7 percent andthe import bill declined by 12 percent, which resultedin an improvement of the overall balance of payments.A fall in banana exports of 1.08 percent led to a declinein the export revenue from total agricultural exportsby 1.2 percent. Export revenue from manufacturedgoods also declined by 15.9 percent.

The central government’s fiscal account deterioratedwith the deficit of $32.7mn in 2001 increasing to$34.1mn in 2002. Whereas government’s currentexpenditure fell by 1.3 percent, current account revenuedeclined by 2.2 percent to $197.3mn. The contractionin taxes on income, profits and international trade wereattributed mainly to a fall in domestic demand.Declines were also recorded on receipts from theeconomic citizenship programme and non-tax revenue.

As at December 2002, most of the performance criteriafor the stand-by arrangement and indicative targetsfor end of March 2003 were not observed and the publicsector continued to accumulate arrears. The IMFreported that fiscal consolidation was only partiallysuccessful due to the economic downturn and policyslippages.

Economic Performance in the First TwoQuarters of 2003In the first two quarters of 2003 the economy exhibitedmixed results. In comparison with the correspondingperiod in the previous year, the manufacturing, tourismand construction sectors improved together withgovernment’s current account balance. There was acontinued decline in banana exports and the trade gapwidened.

In the first two quarters of 2003 total agriculturalexports declined by 22.95 percent to $15.59mn from$20.23mn in the corresponding period in 2002. Thisdecline was due mainly to a 37 percent reduction inbanana exports from $11.17mn to $7.03mn by thenewly privatized company, Dominica Banana ProducersLimited (DBPL). This performance has been attributedto decreasing acreages under production and a lack of capitalat DBPL for the purchase of inputs.

12

On the other hand, the value of bananas exported toCaribbean markets increased from $0.93mn in 2002to $1.21mn in the same period of 2003. Otheragricultural exports declined by 9.59 percent to$8.24mn. Some produce exports increased such ashot pepper and avocado while there were declines incitrus fruits, plantains and others.

Figures for the first and second quarters of 2003indicated that production in the manufacturingindustries of soap and dental cream increased by 12.16percent and 10.47 percent respectively, relative to thesame period in 2002.

In tourism there were encouraging positive movementsin all categories of visitors. A comparison betweenJanuary to June 2002 and the corresponding period in2003 indicated that the number of stay over visitorsrose from 32,361 to 34,573, an increase of 6.84percent. Excursionists increased by 109.46 percentfrom 317 in 2002 to 664 in 2003. Cruise-ship passengerarrivals grew by 5.37 percent to 131,342 from 123,886in 2002.

In the construction industry there was an increase of58.45 percent in the value of construction starts to$21.09 mn in the first two quarters of 2003 whencompared with the corresponding period in the previousyear. The number of construction starts also increasedby 12.9 percent and imports of construction materialgrew by 17.51 percent to $15.64mn.

The visible trade balance worsened from a deficit of$98.43mn for the first two quarters of 2002 to one of$109.71mn for the same period in 2003. Thisdeterioration was caused by the decline in total exportsby 10.36 percent from $58.47mn to $52.41mn and anincrease in imports by 3.33 percent from $156.9mn to$162.12mn.

Central Government’s fiscal gap narrowed by 20.89percent or $3.01mn, declining from $14.41mn for the

ECONOMIC PERFORMANCE OF DOMINICA

first two quarters of 2002 to $11.4mn in thecorresponding period in 2003. While current revenuedeclined by $3.06mn from $101.22mn to $98.16mn,there was a larger reduction of $6.07mn in governmentexpenditure, which declined from $115.63mn to$109.56mn.

Given the deteriorating situation with respect to theIMF arrangement, the Government agreed to a revisedletter of intent, including a mix of policy adjustmentmeasures. These measures were outlined in the 2003-2004 Budget Address delivered in June 2003, with anumber of these having implications for the AID Bank.Effective July 1, 2003, there was the cessation of allduty and tax concessions in respect of the AID Bankand other statutory bodies. There was also adiscontinuation of exemption from income tax onmortgage interest earned by commercial banks. Thebudget also announced the establishment later in theyear of an integrated regulatory framework for allfinancial institutions in the ECCB member countries,including the development banks and credit unions.

Sources

Central Statistical Office, Quarterly EconomicIndicators, 4th Quarter 2002.

Central Statistical Office, Quarterly EconomicIndicators, 1st and 2nd Quarter 2003.

Commonwealth of Dominica, Budget Address for FiscalYear 2003-2004, June 23, 2003

International Monetary Fund Dominica, ‘First ReviewUnder the Stand-By Arrangement and Requests forExtension of the Arrangement and for Waiver ofPerformance Criteria’, July 11, 2003.

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FINANCE AND ACCOUNTS

OVERALL FINANCIAL PERFORMANCEAt the end of the financial year, the Bank recorded anet loss of $1.81mn. The major contributor to this deficitwas the provision for loan losses of $3.25mn, whichwas a significant increase from the previous year.Additionally, the Bank’s income recognition policy wasautomated to satisfy international accountingstandards, resulting in deferred interest revenue of$12.6mn, which impacted negatively on net results.

REVENUEGross revenue earned for the year totaled $9.39mn,which was 6.83 percent less than the previous year’sfigure of $10.08mn. Interest from ‘loans and advances’of $8.31mn accounted for 88.54 percent of grossrevenue and registered a 9.36 percent decline fromthe previous year’s interest revenue of $9.17mn. Theperformance of this component of revenue reflects theconservative accounting for interest income thatexcludes loans that are in arrears of interest from threemonths and over.

Interest earned on fixed deposits and other investmentsalso declined from $0.37mn to $0.26mn. During theyear, some amounts held in fixed deposits were utilizedas bridging finance for loan funding activities. Whileinterest income declined as a result of $6mn inmortgages sold to the Dominica Social Security (DSS),agency fees increased significantly by 227.82 percentfrom $0.042mn to $0.137mn as a result of fees earnedfor managing this secondary mortgage facility.

Other income of $0.65mn was another area thatrecorded notable growth of 39.35 percent. Thiscategory includes mainly fee income such as appraisalfees. However, this year, other income also included areimbursement from the EU/ACP Business AssistanceScheme (EBAS) for expenses incurred for a hotelconsultancy in the previous year.

EXPENSESTotal expenses for the year amounted to $8.07mn,compared to the previous year’s figure of $8.27mn, adecrease of 2.42 percent. This reduction resultedmainly from a decrease in other administrativeexpenses to $0.48mn a 27.85 percent decline comparedto the previous year. Staff cost of $2.29mn was $46,365or 2 percent higher than the previous year, due mainlyto adjustments resulting from an organizationalrestructuring.

Financial expenses of $4.41mn accounted for 54.67percent of these expenses and reflected a marginalincrease of 0.54 percent. Interest paid on long-termloans represented 90.97 percent of financial expenses,and 49.74 percent of total expenses.

ASSETSAs at year-end, the Bank’s total assets amounted to$120.13mn, an increase of 0.29 percent from theprevious year’s total of $119.78mn. Net loans tocustomers, comprising 88.66 percent of the bank’sassets, increased by 4.06 percent to $106.51mn, from$102.35mn recorded the previous year. The Bank’scash balance decreased considerably by 59.83 percent,from $5.63mn to $2.27mn, related to use of cash forloan financing. Accounts receivable also declined by26.12 percent as loan interest receivable from non-performing assets were deducted and placed into adeferred interest receivable account.

Net total fixed assets of $5.55mn were 6.2 percentlower than the previous year.

Net total investments of $3.43mn reflected a 39.92percent growth from the previous year’s $2.45mn. Thisincrease was as a result of additional quasi-equityinvestments made in a tourism project.

0

2,000

4,000

6,000

8,000

10,000

12,000

EC$'

000

1999 2000 2001 2002 2003

YEARS

REVENUE & EXPENDITURE

1999 - 2003

REVENUEEXPENDITURE

0

5,000

10,000

15,000

20,000

25,000

EC$'

000

1999 2000 2001 2002 2003

YEARS

LOAN DISBURSEMENTS

1999 - 2003

14

LIABILITIESOverall, total liabilities of $94.17mn reflected a 2.68percent increase from the previous year’s amount of$91.71mn. Long-term liabilities of $85.47mnrepresented 90.76 percent of total liabilities andregistered a 3.89 percent increase from the previousyear’s figure of $82.27mn, resulting from the draw-down of funds from CDB and DSS.

Current liabilities of $8.7mn were 7.8 percent less thanthe previous year’s $9.44mn. Fixed deposits of $5.66mheld for clients, which constituted 65.04 percent of thiscategory, increased marginally by 4.2 percent duringthe year. However, the decline in fixed deposits wasattributable to a deferred grant that was repaid to theEuropean Union, since these funds were beingconverted into a new Facility.

SHAREHOLDERS EQUITYRetained earnings of $3.44mn recorded a significantdecrease of 40.71 percent as a result of additionalreserves for loan provisions. Shareholders equitytherefore declined by 7.53 percent from $28.08mn to$25.96mn.

CREDIT RISK MANAGEMENT

As at June 2003, total principal outstanding was$117.47mn. Principal arrears were $9.25mn comparedto $6.69mn the previous year. Total interest arrearsamounted to $1.42mn. Total arrears amounted to$10.67mn or 9.08 percent of principal outstanding.This figure excluded interest on non-performing loans,amounting to $12.68mn, which was not included in

FINANCE AND ACCOUNTSthe income statement. These results showed thecombined effect of the economic slowdown and theautomation of the Bank’s interest income recognitionpolicy.

A sectoral breakdown of loans indicated that whileloans in Tourism, Industry and Agriculture formed only30 percent of the portfolio, 66 percent of non-performing loans were from these sectors. On theother hand Housing, Education and Personal and Otherloans comprised 58 percent of the total portfolio, but34 percent of all non-performing loans.

Individual sector figures reveal that Tourism loanscomprised 21 percent of the total portfolio, but 36.4percent of non-performing loans, Industry loanscomprised 12 percent of the portfolio and 17.2 percentof non-performing loans and Agriculture comprised 9percent of the portfolio and 12.4 percent of non-performing loans. Housing comprised 29 percent ofthe portfolio and 14.3 percent of non-performing,Education loans comprised 23 percent of the portfolioand 15.5 percent of non-performing loans, whilePersonal and other loans comprised 6 percent of theportfolio and 4.3 percent of non-performing loans.

Total amounts recovered on overdue accounts were$5.3mn compared to $5.04mn the previous year, animprovement of 5.15 percent. In addition to taking amore selective approach to lending, the Bank hasalready become more aggressive in loan collectionsand will be stepping up its activities in the comingfinancial year. One of these activities is the teamapproach, involving the entire staff, with each teamresponsible for collections on non-performing loans ina particular sector.

15

CREDITDepressed conditions in the economy have beenreflected both in lower demand for productive sectorcredit and in a deterioration in portfolio quality whichhas forced the Bank to take a more selective approachin extending credit.

Tables 1 – 9 provide details of the Bank’s level ofapprovals and disbursements. Table 1 shows that thelevel of approvals contracted by 13.29 percent from$20.36mn in 2002 to $17.66mn in 2003. Nonetheless,the Bank realized a 7 percent increase in housing sectorapprovals and a 158 percent increase in the combinedsectors of manufacturing, services and transportation.The Enterprise Development Facility of the EUcontributed significantly to the increase in approvalsrecorded in the productive sectors. As at June 30,2003 productive sector lending associated with theFacility amounted to $0.91mn.

Table 2 shows that disbursements declined marginallyby 1.45 percent, from $19.83mn to $19.54mn. Therewere disbursements amounting to $0.98mn of quasi-equity financing to the Rain Forest Aerial Tram.

The details of sector lending in Table 3 show that therewere 905 loans approved in the period, with 32 percentattributable to education loans. An estimated 833 jobswere created from investments in agriculture,manufacturing, services, transportation, tourism andhousing sectors.

AGRICULTUREAgricultural loan approvals shown in Table 4 amountedto $1.55mn compared to $1.68mn the previous year, adecline of 8 percent. The decline in approvals wasrecorded mainly in marine fishing, farm vehicleexpenses, plantain, tree crops, land purchase, farmbuilding and roads. Crop production loans increased

from $494,522 to $635,294. In particular, bananaproduction showed improvements, with a 30 percentincrease from $268,651 to $349,406 over the period.Increases were also recorded in approvals for hot

peppers, passion fruit, mixed crops, pineapples, rootcrops and vegetables. There was a notable increasein approvals for livestock, particularly pig production,which increased from $49,516 in 2002 to $178,049 in2003, an increase of 260 percent.

MANUFACTURING, SERVICES & TRANSPORTATIONTable 5 shows that the value of loan approvals in thesesectors increased significantly by 158 percent, from$0.59mn to $1.51mn. By far the largest increase of189 percent was recorded in the services sector wheresubstantial allocations went towards rental of businessspace, entertainment and snackettes. Loan approvalsin the manufacturing sector also increased from$15,787 to $47,971 over the period. Disbursementsfor these sectors increased markedly by 187 percentfrom $0.77mn to $2.2mn.

TOURISMDuring the period under review, loan approvals in thetourism sector declined from $1.06mn to $0.35mn asindicated in Table 6. However, there were smallincreases in approvals for accommodations and

Agriculture

Services

Fisheries

16

tour buses. Tourism ancillary services accountedfor 70 percent of the approvals. Disbursementsdeclined from $3.9mn to $0.67mn.

HOUSINGAs shown in Table 7, loan approvals in the housingsector increased by 7 percent from $4.64mn to$4.96mn. The loans generated approximately 291job opportunities mainly in the area of newconstruction, which accounted for 78 percent of thetotal approvals. Disbursements during the periodincreased by 43 percent from $4.05mn to $5.79mn.Recognizing the importance of this sector, the Bank

took the initiative during the period under review toreduce its mortgage lending rates in an effort to attractnew customers and stimulate economic growth.

EDUCATIONThe Bank continues to place emphasis on this sectoras a means of enhancing the human resource capabilityof the country. As indicated in Table 8, in the periodunder review, there were 290 student loan approvalsvalued at $7.3mn. The amount decreased marginallyby 8.4 percent from $7.96mn in the previous year.

Disbursements totaled $6.53mn compared with$5.63mn the previous year, an increase of 16 percent.The Bank also has available from CDB’s resources $2mnallocated to underprivileged students. These fundshave softer terms and conditions designed to increaseaccess to students who might normally have difficultyqualifying for these funds.

The study areas selected by the majority of thecustomers were Accounting, Business Administration& Management, Computer Science, Education,Electrical Engineering, Law, Medicine and Psychology.

PERSONAL & OTHERDuring the year under review, the Bank approved 263loans to a value of $1.99mn and disbursed an amountof $2.03mn. A breakdown of the different categoriesof lending under this sector is provided in Table 9.

CREDIT

HOUSING LOAN APPROVALS

2003

HOME IMPROVEMENT21%

HOME PURCHASE1%

NEW CONSTRUCTION78%

NEW CONSTRUCTION HOME IMPROVEMENT HOME PURCHASE

ACCOMMODATIONS17%

TOUR BUSES13%

OTHERS70%

ACCOMMODATIONS TOUR BUSES OTHERS

Rainforest Aerial Tram

Tourism

Housing

17

BUSINESS DEVELOPMENT UNITThe Bank’s newly established Business DevelopmentUnit has reported encouraging performance in only itsfirst full year of operations. In the Strategic Plan forthe period 2001-2006, one of the key strategies wasto add a technical assistance function to the Bank inrecognition that a significant contribution to growth anddevelopment in Dominica can come from establishinga Business Development and Advisory Unit to providebusiness advice and related services.

Given the urgency of the need, the Bank established asmall unit in March 2002, however, a consultant wascommissioned to advise the Bank on organizing andstrengthening the function of this unit in order to deliverall the required services. Approval for partial fundingof the consultancy was obtained from the Center forthe Development of Industry (CDE) in Brussels. Theconsultancy report received in January 2003 highlightedthe results of its survey confirming strong demand fortechnical assistance services and recommendingadditional specialized staffing for the unit.

In December 2002, the Bank received grant funds underthe Enterprise Development Facility from the EuropeanUnion, which have been complementary to operationsof the BDU. The funds are for financing technicalassistance grants for entrepreneurs. Together withthe National Development Foundation of Dominica andthe Dominica Co-operative Societies League Ltd., which

are also involved in managing these funds, the BDUspearheaded an outreach programme throughout thecountry to promote this Facility. The Facility wasdesigned to assist existing and prospective businesspersons by providing 50 percent grant funding fortechnical assistance for promoting and strengtheningtheir businesses, matched by 50 percent loan fundingfor capital and labour costs. Individual proposals mustbe formally presented in a business plan.

Under the Enterprise Development Facility, there were29 approvals for loan/grant funding totaling $595mnby June 30, 2003. Of these, $420,142 or 70.6 percentwere approved for agricultural enterprises, particularlybanana enterprises.

The Bank foresees an improvement in its approval levelsthrough the Business Development Unit since it hasalready received approximately 104 requests totaling$2.3mn. The full complement of staff is expected tobe in place during the new financial year. The unit willoffer assistance to the growing number ofentrepreneurs in Dominica with sound business ideas,who lack the skills to evaluate these ideas, developconvincing proposals and submit bankable applicationsto secure appropriate financing. It will also contributeto the creation of an environment conducive toenterprise proliferation, sustenance and growth incollaboration with stakeholders.

18

The Bank’s objectives in human resource developmentcontinue to center around training in appropriate skills,job enhancement and building capacity within theorganization. The human resource managementapproach endeavors to create and foster anenvironment that promotes mutual respect, spawnsinnovative ideas and creative approaches, valueshuman differences and encourages collaborationamong its staff.

During the year the AID Bank partnered with the CDBto host a regional training programme in Dominica forofficials of Development Banks and other financialinstitutions. The programme commenced at the endof June 2003. There were four courses each of oneweek’s duration on the subject areas of LoanAdministration, Credit Appraisal, Credit RiskManagement and Strategic Management. Regionalparticipants came from the Cayman Islands, Turks andCaicos Islands, Bahamas, Barbados, and other OECScountries. The Bank’s staff was fully represented inthese courses.

Presentation of Certificates

HUMAN RESOURCE DIVISION

TRAINING

In addition to the CDB Programme, during the yearfourteen persons attended various training workshopsand symposiums on subject areas including projectappraisal and management, commercial law, globalreadiness and accouning software (AccPac).

There are seven staff members pursuing tertiary levelstudies. Two staff members continue to pursue theCertificate in Business Administration, and a third hasproceeded to the level of the BSc. in BusinessAdministration with the University of the West Indies.Two other staff members were completing theAssociates Degree in Banking with the Institute ofCanadian Bankers. Two staff members had completedthe first year of a postgraduate degree, one in HumanResource Management and the other in FinancialManagement.

One of the activities identified in the strategic plan wasthe preparation of a Human Resource Manual, whichwas completed in March 2001 to enable staff, especiallynew recruits, to be better acquainted with the rules,regulations and policies of the bank and the benefitsavailable.

ACHIEVEMENT

Miss Gail Royer, Legal Counsel of the Bank, obtained aDiploma in Management at the U.W.I. in October 2002.Ms. Corinthia Baron obtained a Diploma in BusinessProgram for Bankers from the Institute of CanadianBankers.

19

As an institution whose objective is to promote andinfluence the economic development of theCommonwealth of Dominica, the Bank sees itself asassisting the Government of Dominica in the processof economic recovery through improving organisationalperformance, to better deliver its lending programmesand to promote sustainable, national, socio-economicgrowth and development, through profitableinvestments in the productive sector.

There will be a strong focus on portfolio quality in thenew financial year manifested by selective lending,aggressive collections and consistent loan monitoringto minimize delinquency. Additionally the Bank will becarrying out further restructuring of the organizationto achieve higher levels of efficiency, risk managementand service quality.

The Bank, will continue promotion of affordablemortgage funds available to individuals in low-incomehouseholds. These funds will also be channeledthrough the credit unions and other financialinstitutions.

Through the Enterprise Development Facility of the EU,the bank is poised to trigger the growth anddevelopment of the economy. Requests for loan andgrant funding have been on the increase since theavailability of the fund and much progress is expectedin the new financial year.

Since the first line of grant funds has already beencommitted, the Bank has signed another Memorandumof Agreement with the National Authorising Office ofthe Ministry of Finance and Planning to access additionalfunds from the European Union.

The Bank has recognized the opportunity to attractinvestors from Latin American Countries. Through theBusiness Development Unit the Bank will be workingtogether in strategic partnership with investors whoare prepared to expand or locate new enterprises inDominica. This will require considerable effort inensuring that the investment climate is amenable andservices are adequate and cost effective to sustainprofitable operations.

The Bank will continue to ensure excellent customerservice. More than ever it will be important to continuenetworking with various institutions within the publicand private sectors. In consideration of the currenteconomic challenges facing the country, the Bank willplace emphasis on finding creative ways to support self-employment initiatives, enhance expansion of small andmedium size enterprises, increase productivity in theagricultural sector in particular and attract high impactprojects.

OUTLOOK

20

INDEX TO THE FINANCIAL STATEMENTSFor The Year Ended JUNE 30, 2003

CONTENTS PAGE

Auditors’ report to the Board of Directors 29

Balance sheet 30

Statement of earnings /(deficit) 31

Statement of appropriations 32

Statement of changes in financial position 33

Notes to the financial statements 34 - 50

28

Schedule of other administrative expenses 51

AUDITORS’ REPORTTO THE BOARD OF DIRECTORS

Dominica Agricultural Industrial & Development BankGoodwillDOMINICA

We have examined the balance sheet of the Dominica Agricultural Industrial & DevelopmentBank as at June 30, 2003, and the statements of earnings/(deficit) and changes in financialposition for the year then ended. These financial statements are the responsibility ofmanagement of the Dominica Agricultural Industrial & Development Bank; our responsibilityis to express an opinion on these financial statements based on our audit.

We conducted our audit of these statements in accordance with generally accepted auditingstandards which require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statements presentation.

In our opinion, these financial statements present fairly, in all material respects, the financialposition of the Bank as at June 30, 2003 and the results of its operations and the changes inits financial position for the year then ended in accordance with generally accepted accountingprinciples.

Moreau, Winston & Co.ROSEAU

August 26, 2003

29

DOMINICA AGRICULTURAL INDUSTRIAL &DEVELOPMENT BANKBalance Sheet AS AT JUNE 30, 2003

Notes 2003 2002EC$ EC$

ASSETSCash and short-term deposits 3 2,265,063 5,638,076Accounts receivable 4 2,380,199 3,221,606Loans to customers (net) 5 106,506,571 102,352,456Investments 6 3,432,003 2,452,855Agency receivable 8 --- 204,232Fixed assets 7 5,547,776 5,914,642

120,131,612 119,783,867

LIABILITIES AND EQUITY LIABILITIESDeferred grants 11 --- 1,837,706Agency liabilities 182,776 ---Interest bearing deposits 5,658,664 5,431,858Accounts payable and accrued liabilities 17 2,484,479 1,917,173Dividend payable 375,000 250,000Long-term liabilities 9 85,469,081 82,272,506

94,170,000 91,709,243

SHAREHOLDERS’ EQUITYShare capitalAuthorized: 5,000,000 shares of $5.eachGovt-issued and fully paid: 2,509,526 10 12,547,631 12,547,631DSS-issued and fully paid: 1,000,000 5,000,000 5,000,000Reserves 12 3,925,384 3,925,384EIB Foreign Exchange Equal Fund 13 979,878 804,085EU Institutional strengthening grant 71,524 ---Retained earnings 3,437,195 5,797,524 25,961,612 28,074,62

120,131,612 119,783,867

The accompanying notes form an integral part of these financial statements.APPROVED ON BEHALF OF THE BOARD

——————————————— ——————————————————CHAIRMAN GENERAL MANAGER

30

DOMINICA AGRICULTURAL INDUSTRIAL ANDDEVELOPMENT BANKStatement Of Earnings/(Deficit) For The year Ended JUNE 30, 2003

2003 2002

EC$ EC$

REVENUEInterest on loans and advances 8,312,682 9,171,120Interest on fixed deposits 258,091 366,563Agency fees 136,691 41,697Administrative fees - I.E.U. 30,000 30,000Other income 651,327 467,413TOTAL REVENUES 9,388,791 10,076,793 EXPENSES

FINANCIAL:Interest on long-term loans 4,015,640 3,863,362Interest on fixed deposits - customers 341,313 507,510Commitment fees 25,455 7,731Bank interest and charges 31,659 11,701

4,414,067 4,390,304STAFF:Salaries and social security 1,986,672 1,812,734Travel and entertainment 137,669 236,306Training and other benefits 175,491 204,427

2,299,832 2,253,467Audit and consultancy fees 30,632 30,531Other administrative expenses 488,020 676,370

518,652 706,901

BUILDING OCCUPANCY EXPENSES 424,310 363,720DEPRECIATION (Note 7) 417,018 560,003

841,328 923,723TOTAL EXPENSES 8,073,879 8,274,395

NET INCOME BEFORE THE FOLLOWINGINCOME/(CHARGES) 1,314,912 1,802,398Loss in value of shares in DUTC ---- (412,475)Gain on foreign exchange 129,672 259,411Provision for loan loss expense net of recoveries (3,254,120) (790,557)

NET EARNINGS/(LOSS) FOR THE YEARBEFORE APPROPRIATIONS (1,809,536) 858,777

The accompanying notes form an integral part of these financial statements.

31

DOMINICA AGRICULTURAL INDUSTRIAL ANDDEVELOPMENT BANKSTATEMENT OF APPROPRIATIONSFor The Year Ended JUNE 30, 2003

2003 2002

EC$ EC$

NET EARNINGS/(LOSS) FOR THE YEARBEFORE APPROPRIATIONS (1,809,536) 858,777

APPROPRIATIONS TO RESERVE FUNDS (Note 12 & 13)Statutory reserve fund (25%) ---- (214,694)Special reserve fund ---- (1,278)

EIB Foreign Exchange Equalization Fund (175,793) (140,671)

(175,793) (356,643)NET EARNINGS/(DEFICIT) FOR THE YEARAFTER APPROPRIATIONS (1,985,329) 502,134

RETAINED EARNINGS:At beginning of year as originally stated 5,797,524 6,345,900Venture capital investment loss in VarietyFoods Limited ---- 800,510

As restated 5,797,524 5,545,390

DIVIDEND - DOMINICA SOCIAL SECURITY (375,000) ( 250,000)

RETAINED EARNINGS - end of year 3,437,195 5,797,524


32

DOMINICA AGRICULTURAL INDUSTRIALAND DEVELOPMENT BANKStatement OF Changes In Financial PositionFor The Year Ended JUNE 30, 2003

2003 2002

EC$ EC$OPERATING ACTIVITIES

Net earnings/(loss) for the year before appropriations (1,809,536) 858,777Items not affecting cash- Provision for loan and interest losses 3,260,415 1,800,446- Depreciation (Note 7) 417,018 560,003

1,867,897 3,219,226Changes in non-cash short-term balances related to operations:Decrease/(increase) in loans to customers (7,414,530) (1,737,128)Decrease/(increase) in accounts receivable 841,407 (354,350)Increase/(decrease) in agency liabilities 387,008 (19,091)Increase/(decrease) in accounts payables and accrued liabilities 919,112 (2,030,492)

(3,399,106) (921,835)FINANCING ACTIVITIES

Increase/(decrease) in long-term liabilities net of repayments 3,196,575 3,570,287EU grant 71,524 ---Increase/(decrease) in deferred grant (1,837,706) ---Foreign Exchange Equalization Fund loss --- (222)Statutory dividend (375,000) (250,000)

1,055,393 3,320,065INVESTING ACTIVITIES

Venture capital investments (979,148) ---Purchase of fixed assets (50,151) (527,718)Purchase of shares in ECSE --- (83,330)

(1,029,299) (611,048)

NET CASH FLOW (3,373,012) 1,787,182

NET CASH - beginning of year 5,638,076 3,850,894NET CASH - end of year (Note 3) 2,265,064 5,638,076

NET CASH CONSISTS OF:Interest bearing deposits 1,818,000 4,767,400Other cash and bank balances net of overdraft 447,064 870,676

2,265,064 5,638,076


33

DOMINICA AGRICULTURAL INDUSTRIAL ANDDEVELOPMENT BANKNotes To The Financial StatementsFor The Year Ended JUNE 30, 2003

1. INCORPORATION AND PRINCIPAL OBJECTIVES

The Bank is a body corporate established under Chapter 74:03 of the Laws of the Commonwealth of Dominica(Revised Edition), with its principal objectives being to promote and influence the economic development ofthe Commonwealth of Dominica and to mobilize funds for the purpose of such development.

2. ACCOUNTING POLICIES

(a) Basis of accountingThese financial statements have been prepared in accordance with the historical cost conventions, and inconformity with Generally Accepted Accounting Principles (GAAP).

(b) Accrual accountingRevenue and expenses are accounted for on the accrual basis of accounting. However, where significantdoubt as to the collectibility of a loan arises, such loans are categorized as “non-productive” and interestis recognized only to the extent payments are received. Income is not recognized on loans that are morethan ninety (90) days in arrears of either principal or interest. As at June 30, 2003 interest not recognizedas income amounted to EC$ 12,675,296.

(c) Provision for doubtful debtsSpecific provisions are made against loans where in the opinion of directors, recovery is doubtful. Inaddition, a general provision is made to cover losses, which, although not specifically identified are knownto be present in any portfolio of bank advances. The general provision is based on exposures existing inthe loan portfolio and other relevant factors. The aggregate provisions made during the year (less recoveriesof loans previously written off) are charged against earnings.

(d) Fixed assets Effective July 1, 2001 depreciation method for depreciable assets was changed to the straight-line method at rates estimated to write off the cost of the assets over their expected useful lives. In the past years fixed percentage on the declining method was applied. The rates currently applied are as follows:-

Furniture and equipment 20 and 33.33%Motor vehicles 20%Buildings 2%

(e) Foreign Exchange Currently, long-term loans denoted in foreign currencies are translated and reported at the rates of exchange in effect at the date the loan proceeds were received. Exchange gains or losses arising on

repayments of any portion of these loans are included in the determination of income in the current year. Exchange gains or losses that would arise from the translation of long-term loans at rates in effect at the balance sheet date are not reflected in these financial statements. The loss on translation that would have arisen as at June 30, 2003 amounted to EC$ 2,585,415.

34


3. CASH

Cash is made up as follows:- 2003 2002

EC$ EC$

Interest bearing deposits 1,818,000 4,767,400Cash at bank and on hand 447,064 870,676

2,265,064 5,638,076

4. ACCOUNTS RECEIVABLE

Accounts receivable is made up as follows:- 2003 2002

EC$ EC$

Accrued interest on Government debentures 8,692 1,192Accrued interest on time deposits 94,918 87,773Accrued interest on Treasury Bills 5,672 4,004Insurance premiums receivables/due from sub-borrower 54,653 42,864Loan interest receivable 1,416,799 3,002,348Recoverable expenses 799,465 671,396

2,380,199 3,809,577Less: Provision for doubtful accounts --- (587,971)

2,380,199 3,221,606

35


5. LOANS TO CUSTOMERS 2003 2002 EC$ EC$

Agricultural:Farm Improvement Credit 184,926 191,186Agricultural Production Credit 75,113 76,847Agricultural and Industrial Credit 9,916,508 10,602,644I.F.A.D. Agricultural Credit 82,737 87,831R.O.C. Fisheries Credit 691,402 692,730

10,950,686 11,651,238Industrial:Small Industry Credit 603,267 826,196Agricultural and Industrial Credit 16,767,572 14,460,542A.T.I. Small Industry Credit 101,898 150,498

17,472,737 15,437,236

Tourism 19,839,442 20,131,860Medium & Small Enterprises 597,621 420,238Personal and other 7,064,505 7,801,243

Housing Mortgage 30,489,417 27,974,332Staff loans 3,143,293 3,144,400Student loans 27,175,981 22,760,265Capitalization of interest 737,810 760,449

117,471,492 110,081,261

Less: Provision for doubtful accounts (10,964,922) (7,728,805) 106,506,571 102,352,456

36


6. INVESTMENTS (UNQUOTED)

These are made up as follows:-

2003 2002 EC$ EC$

Government of Dominica 7.5%Debentures dated December 1,1998maturing in December 2008 200,000 200,000

Government of Dominica 6% Treasury Bills 2,002,000 2,002,000

Shares in Dominica Unit TrustCorporation (DUTC) 500,000 500,000

Shares in (ESCE) Eastern CaribbeanSecurity Exchange 83,330 83,330

Shares in Financial Data Systems Ltd. 80,000 80,000 2,865,330 2,865,330

Venture capital investment in:

- Rain Forest Aerial Tram Ltd. 979,148 ---- Variety Food Limited 800,510 800,510

4,644,988 3,665,840

PROVISIONS:

- Venture capital investment loss in Variety Foods Limited (800,510) (800,510)

- Diminution in value of shares in DUTC (412,475) (412,475)3,432,003 2,452,855

37

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38


8. AGENCY LIABILITIESThe Government of Dominica and International Agencies make available to the Bank, funds to be used forspecific purposes, and for which the Bank acts as lending and collecting agent.

These are made up as follows:- 2003 2002

EC$ EC$

Deposits from Government of Dominicaand International Agencies net of repayments (16,437,599) (16,103,936)

Less: Total advances

DSS/AIDB - Secondary MHL 6,143,295 6,211,108

National Pig Producers 6,623 6,623

Government special mortgage programmeCDB/SMP-62/SFR-DMI 58,708 ---

Government Housing Loan Scheme 1,869,805 1,926,946

WAWU Housing Scheme 8,093,594 8,084,544

ROC/ICDF - Agriculture 82,798 78,947

Miscellaneous receivable --- --- 16,254,823 16,308,168 (182,776) 204,232

39


9. LONG-TERM LIABILITIESThese comprised as follows:-

FOREIGN 2003 2002CURRENCY EC$ EC$

a) Due to the CaribbeanDevelopment Bank.

7.25% loan (No.2/SFR-OR-D)principal repayable quarterlyin 60 equal instalments ofUS$ 21,633 which commencedNovember 15, 1989. US$ 108,447 292,253 526,055

2% loan (No.4/SFR-OR-D)-SFRrepayable semi-annualinstalments of blendedprinciple and interest in acurrency or currencies ofliability not exceeding theequivalent US$91,667commencing 1996. US$ 1,917,215 5,166,702 5,615,729

7.5% loan (No.4/SFR-OR-D)-OCRrepayable quarterly 60 equalinstalments of US$91,667 tocommenced March 31, 1996. US$ 1,081,370 2,914,184 3,209,286

*4% loan (No.29/SFR-D)principal repayable inquarterly instalments ofUS$2,198 which commencedJanuary 15, 1987. US$ 24,899 67,100 86,684

40


9. LONG-TERM LIABILITIES (Cont’d)These comprised as follows:-


a) Due to the CaribbeanDevelopment Bank.

4% loan (No.40/SFR-D)repayable quarterly in60 equal instalments ofblended principal andinterest which commencedDecember, 1991. US$ 308,331 830,922 1,163,290

7.5% loan (No.3/SFR-OR-D)OCRin 60 equal and consecutiveinstalments of blendedprincipal and interestcommenced September 30,1994. US$ 249,951 673,593 785,859

2% loan (No.3/SFR-OR-D)SFRrepayable in 100 equaland consecutive instalmentof blended principal andinterest commencing September30, 1994. US$ 1,515,762 4,084,828 4,340,129

41




a) Due to the CaribbeanDevelopment Bank.2% loan (No.7/SFR-OR-D)SFRrepayable in 60 equal andconsecutive quarterlyinstalment of blendedprincipal and interestcommencing July 1, 1998. US$ 1,325,921 3,573,226 3,939,710

8.3% loan (No.7/SFR-OR-D)OCRrepayable in 60 equal andconsecutive quarterlyinstalments of blendedprincipal and interestcommencing July 1, 1998. US$ 1,325,921 3,573,226 3,939,710

2.5% loan (9/SFR-OR-DO)SFRrepayable in 80 equal andconsecutive quarterlyinstalment of blendedprincipal and interest. US$ 1,105,492 2,979,189 2,721,980

6.75% loan (9/SFR-OR-DO)-OCRrepayable in 52 equal andconsecutive quarterlyinstalment of blendedprincipal and interestcommencing June 2003 US$ 3,893,904 10,495,606 10,495,606

2.5% loan (13/SFR-OR-DO)-SFRrepayable in 60 equal andconsecutive quarterly instalmentof blended principal and interestcommencing March 31, 2006 US$ 1,594,018 4,295,718 3,576,950

42




a) Due to the CaribbeanDevelopment Bank

7.5% loan (13/SFR-OR-DO)-OCRrepayable in 48 equal and consecutivequarterly instalment of blendedprincipal and interest commencingMarch 31, 2006 US$ 1,549,375 4,175,410 3,710,179

4% loan (No.43/SFR-D) Student loaninherited from Government repayableby quarterly instalments of fixed principalof US$ 9,730.63. US$ 145,960 393,346 498,239

4% loan (No.47/SFR-D) Student loaninherited from Government repayableby quarterly instalments of fixed principalof US$ 12,736.64. US$ 311,399 839,189 991,769

5.5% 15th CDB student loan- 15/SFR-OR-DMI-OCR repayable in 40 equal andconsecutive quarterly instalment of blendedprincipal and interest commencing September30, 2007. US$ 1,197,438 3,226,977 ---

2.5% 15th CDB student loan- 15/SFR-OR-DMI-SFR repayable in 40 equal andconsecutive quarterly instalment of blendedprincipal and interest commencing September30, 2007. US$ 489,095 1,318,061 ---

43



FOREIGN 2003 2002 CURRENCY EC$ EC$

b) Due to the International Fund forAgricultural Development.

These are due under a subsidiary agreementwith the Government of Dominicaof Dominica for the Administration of loan.

1% loan principal repayable in annualinstalments of $ 138,015 which commencedJuly, 1987. 552,058 690,073

4% loan principal repayable in semi-annualinstalments SDR 44,000 which commencedDecember, 1991. 995,771 1,196,219

c) Caisse Centrale De Co-operation Economique.

4% loan principal repayable in semi-annualinstalments of FF500,000(Euro 76,453)commencing October 31, 1994. EURO 146,745 460,608 939,120

4% loan principal repayable in 17 semi-annualinstalments of US$88,890 and 1 instalmentof US$88,870 commencing October 31, 2002. US$ 575,759 1,547,755 1,741,225

8.9% loan principal repayable in 13 semi-annualinstalments of US$28,570 and 1 instalmentof US$28,590 which commencedOctober 31, 1996. US$ 12,197 32,787 94,704

44



FOREIGN 2003 2002 CURRENCY EC$ EC$

d) Due to Dominica Social Security

7.5% loan (No.DSS Housing) principalrepayable in semi-annual instalments of$116,667 which commenced January, 1991. 716,791 1,037,495

7% loan/housing (No.262 of 1990) principalrepayable in semi-annual instalments of EC$83,333which commenced January, 1996. 1,484,408 1,643,933

8% loan/housing (No.56 of 1996) principal andinterest repayable in semi-annual instalments ofEC$325,888.63 commencing March, 2000. 5,208,603 5,430,303

7% loan/housing (No.447 of 1998) principal andinterest repayable in semi-annual instalments ofEC$253,798 commencing July1, 2002. 4,755,235 4,921,202

6.5% Student loan No.1 repayable in semi-annualinstalments of blended principal and interestof EC$53,000 which commenced October 20, 1990. 189,704 278,997

6.5% Student loan (No.261 of 1990) in semi-annualinstalments of blended principal and interest ofEC$23,000 which commenced July 25, 1996. 361,226 382,695

45




d) Due to Dominica Social Security

6.5% Student loan principal repayable insemi-annual instalments of EC$23,000commencing June 30, 1998. 421,722 439,442

6.5% Student loan repayable in semi-annualinstalments of principal and interest ofEC$79,022.58 commencing June 30, 1998. 1,189,307 1,266,275

6.5% Student loan repayable in 60 quarterlyinstalments of principal and interest ofEC$ 52,432.89 commencing September30, 2003. 1,918,304 2,000,000

7% Student loan repayable in 60 quarterlyinstalments of principal and interest ofEC$69,962.80 commencing May 31, 2006 3,000,000 1,000,000

e) Due to the Republic of China

2% loan principal repayable in semi-annualinstalments of US$33,333 whichcommenced April , 1996. US$ 500,005 1,350,014 1,530,012

3.5% loan principal repayable in semi-annualinstalments of US$ 27,778 through theGovernment of Dominica commencing2005. US$1,000,000 2,688,200 2,688,200

f) Due to European Investment Bank 2%loan repayable in 10 annual instalmentsof loans used to finance subloanscommencing November 30, 1998. EURO 1,000,000 3,252,748 3,903,297

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9. LONG-TERM LIABILITIES (Cont’d)


f) Due to European Investment Bank 2%loan repayable in 10 annual instalments ofloans used to finance subloans commencingAugust 5, 2004. EURO 2,030,000 4,979,297 3,971,599

Due to European Investment Bank asVenture capital financing EURO 360,000 966,672 ---

g) Due to Commonwealth DevelopmentCorporation

7% loan repayable semi- annual in 16 equalinstalments of US$ 97,500 whichcommenced February, 1996. US$ 188,697 498,343 1,516,540

85,469,081 82,272,506

Less: Amount payable within one year (7,652,160) (6,666,890) 77,816,921 75,605,616

*This loan was made to the Government of Dominica and on-lent to the Bank, which is the ExecutingAgency.

Loan funding approved but not drawn down as at June 30, 2003 are as follows:-

Caribbean Development Bank – Con Line of Credit EC$ 231,976Caribbean Development Bank-6th Con Line of Credit 1,616,645Caribbean Development Bank-7th Con Line of Credit 10,393,172Caribbean Development Bank-7th Student Loan 14,319,262

EC$ 26,561,055

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10. ISSUED AND FULLY PAID SHARES

By agreement Dominica Social Security must be paid annual dividend of not less than 5% on its shares.

11. DEFERRED GRANT(S)These comprise: 2003 2002

EC$ EC$

Grants from European Community (re STABEX) --- 1,773,550Grant from European Development Fund (EDF) 7,727 ---Institutional strengthening grants EDF 71,524 ---Grants from CDB for small and medium size enterprises --- 64,156

79,251 1,837,70612. RESERVES

These comprise: 2003 2002 EC$ EC$

General Reserve Fund 88,234 88,234Statutory Reserve Fund 3,396,028 3,396,028Special Reserve Fund 44.1,122 441,122

3,925,384 3,925,384

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12. RESERVES (cont’d)

(i) General Reserve FundPrior to July 1, 1978, the Government of Dominica paid certain of the administrative expensesof the Bank. The Government decided to waive the amount of $ 88,234 due to it and instructedthe Bank to create a general reserve for this amount.

(ii) Statutory Reserve FundThis represents twenty-five percent (25%) of the net earnings of the Bank for each financialyear allocated to Reserve as required by Section 20 of Chapter 74:03 of the Laws of theDominica Revised Edition.

(iii) Special Reserve FundUnder the provision of CDB loan 16/SFR-D Section 9 (9) for agricultural production, the Bank isrequired to set aside an amount representing 1/3 of earned interest per annum on each sub-loan. This amount is to be used in such a manner as the Caribbean Development Bank mayfrom time to time determine.

13. FOREIGN EXCHANGE EQUALIZATION FUND (FEEF)EIB loan agreement Section 6.07 requires that interest in excess of 8% per annum received by theborrower on subloans in excess of 8% per annum shall be credited to this special account. The creditbalance on the FEEF shall itself attract interest at an annual rate corresponding to the monthly ratepayable by the AidBank for deposits in XCD of equivalent size.

14. TAXATIONUnder the provision of Chapter 74:03 Section 32 of the Laws of Dominica the Bank is exempted fromthe payment of income tax.

15. CURRENCY These financial statements are expressed in East Caribbean Dollars.

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16. RISKThe shares and financial instruments of the Bank are not publicly traded. Management believes that thevalues recorded in the financial statements approximate fair values.

17. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

2003 2002 EC$ EC$

Loan prepayments/sundry deposits 680,890 537,796Deposits - insurance premium 456,735 370,602Deposits - legal fees 245,944 245,944Students’ insurance premium 217,704 55,425Staff fund 2,156 1,860

1,603,429 1,211,627

Interest payable long-term loans 283,616 292,420Interest payable - fixed deposits 572,176 347,716Other accrued expenses 17,530 65,410

2,476,752 1,917,17318. OTHER DISCLOSURE

a) Power to redeem sharesSection 16(a) of Chapter 74:03 of the Laws of Dominica empowers the Bank to redeem its shares atany time after the expiration of ten years from the date of issue. But shares issued to the Governmentare not redeemable

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18. OTHER DISCLOSURE (cont’d)b) Schedule of other administrative expenses 2003 2002

EC$ EC$

Directors’ emoluments 105,824 85,999

Motor vehicle expenses 22,096 23,331

Repairs and maintenance - equipment 35,929 21,032

Insurances - furniture and equipment 7,226 5,586

Telephone, fax and postage 82,185 66,269

Printing stationery and office supplies 73,868 82,441

Legal fees and expenses 10,676 550

Advertising and public relations 62,668 97,324

Subscriptions and donations 18,887 32,594

Consultancy 54,197 234,478

Annual Report 13,860 15,127

Miscellaneous 604 11,639488,020 676,370

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