ANNUAL REPORT 2005 - Caribbean Microfinance AR 2005.pdf · Microfin is managed by a Group Executive...

MICROFIN CARIBBEAN HOLDINGS LIMITEDP.O. Box 187, 10 Cipriani Boulevard,Port of Spain, Trinidad & Tobago, W.I.Phone: (868) 623-4665/6 (868) 625-0007/8 Fax: (868) 624-3563Email: [email protected]: www.microfin.org

Trinidad and Tobago Offices:

4 Eastern Main Road, Curepe Tel: 662-0252

54 - 56 Independence Avenue, San Fernando Tel: 652-6842

First Floor, Royal Plaza, Main Road, Chaguanas Tel: (868) 665-0324 / 665-0301 / 800-6427

MICROFIN St. Lucia Limited:

2-4 Mongiraud Street. Castries. ST. LUCIA Tel: (758) 453-1780 Fax: (758) 451-9586

MICROFIN Grenada Limited:

Bruce Street. St. George's. GRENADA Tel: (473) 435-4355 Fax: (473) 435-4626

MICROFIN Guyana (DFLSA Inc.):

78 Church Street. Georgetown. GUYANA Tel: (592) 225-9674/5 Fax: (592) 225-9674

A Member of

ANNUAL REPORT 2005

MICROFIN’S MISSION

MICROFIN’S ROLE IN THE FINANCIAL SYSTEM

MANAGEMENT

CORPORATE INFORMATION

FREQUENTLY ASKED QUESTIONS

DIRECTORS AND MANAGERS

CHAIRMAN’S LETTER

OPERATING AND FINANCIAL REVIEW

AUDITORS’ REPORT

CONSOLIDATED FINANCIAL STATEMENTS

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ANNUAL REPORT | 2005

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CONTENTS

MICROFIN CARIBBEAN HOLDINGS LIMITED

• Audley Walker - Chairman • Gaston Aguilera - Deputy Chairman • Gerard Pemberton • Charmaine Gardner • Bob Gopee • Robert De Silva • Prakash Dhanrajh • Morris Mathlin

MICROFIN GRENADA LIMITED

• Gerard Pemberton - Chairman • Gillian Golah • Morris Mathlin • Allan Bierzinski

COUNTRY MANAGERS

• Julian Henry - Trinidad and Tobago • Maureen Cox - Grenada • Amy Lofgren - St. Lucia

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ANNUAL REPORT | 2005ANNUAL REPORT | 2005

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OUR MISSIONTo generate a high level of economic value added (EVA) on its own capital in order to maintain financial soundness and portfolio growth, thus ensuring that MICROFIN remains a sustainable and suitable source of financing for the largest possible number of microenterprises and small enterprises in the Caribbean.

OUR ROLE IN THE FINANCIAL SYSTEM OF THE CARIBBEANMICROFIN’s role in the financial system will be to provide credit and related financial services to viable microenterprises and very small businesses that require such services for one or more of the following reasons:

• They are served inadequately or unsuitably by informal providers

• They are not served directly by commercial banks on a dedicated basis

• They are constrained by the timing or nature of responses from available sources

• They perceive that dealing with a specialised lender is in their best interest

MICROFIN will raise capital on capital and money markets within the Caribbean and therefore expects that it will be regulated by Central Banks in the Caribbean and that it will require an internationally recognised credit rating as a microfinance institution.

MANAGEMENTMicrofin is managed by a Group Executive Management Committee which oversees corporate management services including Marketing, Risk Management, Management Information Systems, Information Technology, Human Resouce Development and Internal Audit. Country Managers report to the Group General Manager. The Committee consists of:

Gerard M. Pemberton - President Prakash Dhanrajh - Vice President Wilfredo Garcia - Regional Manager (Guyana and OECS)

CORPORATE INFORMATION - 31 JULY, 2006

MICROFIN BOARD OF DIRECTORS

MICROFIN ST. LUCIA LIMITED

• Gerard Pemberton - Chairman • Charmaine Gardner • Wilfredo Garcia • Gillian Golah • Morris Mathlin

MICROFIN TRINIDAD AND TOBAGO

• Gerard Pemberton - Chairman • Prakash Dhanrajh • Boyer Jaggassar • Andrew Mc Eachrane

HOW CAN I LEARN ABOUT MICROFINANCE?

The key characteristics shared by successful microfinance programmes worldwide have been the subject of intense study. The principal storehouse of such information and links to information is located at www.microfinancegateway.com. All the major international development finance agencies have an interest in microfinance in the Caribbean. In 2005, the IDB published a study on microfinance in the Caribbean. Various institutions (including Stockholm University) have recently published books and papers on microfinance in the Caribbean. Proceedings of the four previous Roundtables on Microfinance in the Caribbean are available at www.microfin.org. The 5th Annual Roundtable will be held on May 15th to 17th in Grenada in 2006.

THE FUTURE OF MICROFINANCE IN THE CARIBBEAN

In some Caribbean countries, there are successful MFI that are owned and managed as private enterprises. They generally use international best practices including lending methods, accounting standards and good corporate governance. Weak credit cultures undermine the resolve of borrowers to repay loans. This affects the sustainability of these MFI’s especially when a new supplier enters the market. That is the single most important threat to the development of microfinance in the region.

FREQUENTLY ASKED QUESTIONS

Stabroek Market, GuyanaARE THERE BENCHMARKS THAT CAN BE USED TO EVALUATE PERFORMANCE?

One important development has been ongoing efforts to increase the use of standard performance measurements. While there are thousands of microfinance organizations worldwide, the most relevant benchmarks are provided by organizations that report semi-annually to the Microfinance Information Exchange (MIX), a nonprofit benchmarking association and web-based information exchange that can be found at www.cgap.org. Specialized microfinance rating agencies such as Microrate and CRISIL also play a role. Regulators are also beginning to take a focused look at microfinance. In the Caribbean, the Central Bank of Trinidad and Tobago and the ECCB have an interest in microfinance. In Guyana, MFI must be licenced by the Bank of Guyana.

Castries Market, St. Lucia


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DIRECTORS AND MANAGERS


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Prakash DhanrajhRobert De Silva Charmaine GardnerBob GopeeMorris Mathlin

Audley WalkerChairman

Gaston AguileraDeputy Chairman

Gerard M. PembertonPresident

MICROFIN CARIBBEAN HOLDINGS LIMITED

COUNTRY MANAGERS

Maureen CoxGrenada

Julian HenryTrinidad and To-

bago

Amy LofgrenSt. Lucia

REGIONAL MANAGER

Wilfredo GarciaGuyana and OECS

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CHAIRMAN’S LETTER

Microfin’s task in the Caribbean is challenging because microfinance markets in the Caribbean are small, fragmented and diverse. Recent studies have shown the need for the Caribbean to develop its own models while conforming fully to established best practices. Microfin has done that. The shareholders, DFL Caribbean and RBTT Financial Holdings Limited, have paid a high entry price but are satisfied with the results.

Microfin is established in four Caribbean countries and will extend its outreach in 2006. Microfin, the first MFI to operate across multiple national boundaries, is the first MFI to be regulated by Central Banks in the region. It is also the first commercially operated MFI in very small markets that started without any previous experience and without a portfolio. It is the first MFI in the Caribbean, outside of the Dominican Republic, to be evaluated by an international microfinance rating agency (CRISIL).

While it will be the first MFI operating across the Caribbean to be successful commercially, Microfin will manage separate “not-for-profit” entities that meet special needs in the region. In that regard we greatly value our relationship with FundAid in Trinidad and Tobago, and with FundAid Microfast in Guyana in which Scotiabank is a partner.

The Board of Directors gratefully acknowledges the contribution made by the Caribbean Development Bank (CDB) and the Department for International Development (DFID) in the establishment of our microfinance subsidiaries in the Eastern Caribbean and Guyana. This contribution was mainly in the form of technical assistance, staff training and market research. Without assistance from these agencies it would have been impossible to establish microfinance operations in the OECS because of the very small and fragile markets. Unfavourable economic conditions and natural disasters increased the difficulties. In Grenada, assistance was provided by USAID to form a Reconstruction Fund that supported Grenadian micro-entrepreneurs in returning to business after the damages caused by Hurricane Ivan. We greatly value the partnerships with these agencies, in particular the interchange of ideas and support and encouragement for maintaining best practices.

After three years of operations, our subsidiaries in the OECS are close to a minimum economic size that permits sustainability, notwithstanding the high cost of operations. We credit the Boards of the subsidiaries and management with that achievement. We look forward to their meeting the established targets.

We also acknowledge the valuable contribution made by Banco ADEMI in assisting Microfin in its early stages

Audley Walker, Chairman


and for its continuing friendship and support. We also thank ACCION for providing us with valuable guidance and inspiration and look forward to a closer relationship in 2006.

The European Investment Bank (EIB) and the Multilateral Investment Fund (MIF) have played vital, innovative roles in Microfin. The EIB provided a long term loan on a market-related basis that includes a profit-sharing arrangement. The Multilateral Investment Fund (MIF) participated in a Bond issued by the parent company, DFL Caribbean, which has a BB rating from FITCH Ratings. The Bond was used to provide long term funding for microfinance operations.

We all agree on one fundamental principle, that is, the dignity of every human being must be preserved. We must help people to help themselves. There will always be gaps in wealth and incomes that we cannot close. The mission is to help people embrace opportunities that allow them to generate income to meet their needs, including saving for the future. That process will create free societies. It is not charity, it is development. While some people do need charity, most need a meaningful job. However, some people, driven by adversity and their independent spirit to be entrepreneurs, need to be in the world of commerce. However small the size of the business, these are business people. They will find opportunities. Microfin is in the business of banking on these people to succeed.

We are also in the business of financial intermediation –we source large amounts of capital and we lend small amounts to low-income entrepreneurs. Lending small amounts of money is a very difficult and costly venture. It requires expertise, technology and dedication. It also requires a partnership with our clientele because we help each other. This is a business-to-business partnership not just a lender and borrower relationship. When we have successful partnerships, we will be able to sustain our efforts to help many others. That is the business of Microfin.

In a few years we learnt a lot about the business of microfinance. It has been a costly experience that has tested our resolve. It has taken a great deal of faith and confidence in the managers and staff who have dedicated themselves as professionals in this business. It requires innovation, continuous training and development. During 2005, two managers attended a university-level course in microfinance and five senior Managers attended workshops organized by the MIF’s Latin America and Caribbean Microfinance Network of which we are proud to be a member. ACCION has managed workshops for staff and will do more training in 2006 in the OECS and Guyana.

There is a lot more to be done to make Microfin’s operations viable. We must not just satisfy our creditors and shareholders, but also provide a wide-ranging, reliable service for our clientele in the Caribbean.

We need a great deal of co-operation from the rest of society. The purpose of this Annual Report is to foster a better understanding of microfinance in the Caribbean. We dedicate this first Annual Report to those who helped Microfin become a reality and to those who, by hard work and unwavering commitment, will make it successful and available to the next generation of micro-entrepreneurs.

We all congratulate the management of the company on the results of their work in 2005 and wish them great success in 2006.

On behalf of the Board it is my pleasure to thank the Chairman and the non-executive directors on the Boards of the three subsidiaries. Their work has been particularly valuable. In 2005, Microfin Caribbean Holdings Limited invited Charmaine Gardner of St. Lucia, and Morris Mathlin of Grenada, to be directors. We are very pleased that they agreed to serve. To my other colleagues on the Board I extend my warmest thanks and congratulations for their resolve and commitment in following a challenging path. AUDLEY WALKER, CHAIRMAN

The mission is to help people embrace opportunities that allow them to generate income to

meet their needs, including saving for the future.

Chaguanas Market, Trinidad

GROUP STRUCTURE

Caribbean Microfinance Trinidad and Tobago Limited and its two subsidiaries make up the Group referred to as “Microfin” in this Review. In 2006, these three companies will be grouped under “Microfin Caribbean Holdings Limited” whose parent company will be “DFL Caribbean Holdings Limited”. Microfin’s operations in Guyana will be carried out in Guyana and Suriname through DFLSA Inc., which is a financial institution licensed in Guyana.

OPERATING RESULTS

The Microfin Group showed a net loss of $21,383 in 2005 compared with a net loss of $3.9 million in 2004. Net interest income plus fees increased from $2.53 million in 2004 to $3.67 million in 2005. The loan portfolio increased by 60% from $11.8 million in 2004 to $18.9 million at the end of 2005. As at 31st December 2005, the Microfin Group had 2,020 loans totalling TT$19 million.

The operating results for 2005 were affected by unusual events and new developments that materially affected the Group’s results. These included grant funds of US$140,000 received early in 2005. Those funds were applied to reconstruct loans to micro-entrepreneurs whose businesses were seriously disrupted by Hurricane Ivan in 2004. These grants were recorded as income in 2005 but were offset by loan loss provisions and loss of interest income in 2004 and in 2005.

The results were favourably affected by the recovery of loans in Trinidad and Tobago leading to a write-back of TT$600,000 in loan loss provisions. This was partially offset by an increase in the provision in St. Lucia of $140,000 leading to a net write-back of $460,000 for the Group.

The results were also affected by corporate expenses charged for the first time in 2005 and development expense incurred in preparing a plan for extending services in the Caribbean. Together, these expenses amounted to over $600,000.

If all unusual items and all grants are not taken into account there would have been a net loss of approximately $720,000. The Group would have required a 19% increase in its portfolio to offset that

loss. The loan portfolio must be increased significantly.

Overhead costs, which increased in 2005 by 15%, amounted to 29% of the portfolio (40% in 2004). We would like to reduce this cost ratio to 20%. We can do this by increasing the loan portfolio by 50% through expanding existing operations and new operations in Guyana and Suriname.

The 2005 results for Microfin TT show no change from 2004 when both years are adjusted for un-usual items. There were significant improvements in portfolio quality and in the productivity of loan staff as well as improvements in administrative and operating efficiency.

Microfin Grenada showed a profit in 2005 because of grant income. However, it expanded its portfolio in late 2005 and can significantly increase its portfolio in 2006 to achieve profitability without grant income.

Microfin St. Lucia will show a loss in 2006. It is unlikely that portfolio expansion will come quickly enough during the year to ensure profitability.

Microfin Guyana should break even in 2006 though it made its first loan only in February 2006.

At the same time, we need to achieve good results from planned productivity improvements based on a new system of loan origination and appraisals that uses a credit scoring profile. Our loan officers will increase their personal productivity with training and better organisation of their time through more extensive use of computers and voice communications in the field.

PORTFOLIO QUALITY

Portfolio Quality has improved significantly but is not within benchmark limits in Grenada and St Lucia where the portfolio under 30 days in arrears is below 90%.

Microfin makes provisions equivalent to 100% of loans more than 90 days in arrears regardless of the probability of recovery of such loans. Accordingly, the level of provisions as a percentage of total portfolio will vary depending on the volume of loans over 90 days in arrears. Based on previous experience, the provisions are considered adequate.

OPERATING AND FINANCIAL REVIEW


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Less than 30 days 95.0% 88.7% 87.5% 91.5% 30 - 90 days 3.7% 5.0% 9.1% 5.6% Over 90 days 1.2% 6.3% 3.4% 3.0%

Over 90 days $ 117,665 $ 188,994 $ 278,716 $ 585,375 PaR (over 30 days) $ 476,586 $ 697,044 $ 499,342 $1,672,972 Provisions $ 117,665 $ 188,994 $ 278,716 $ 585,375 Provisions % PaR 24.7% 27.1% 55.8% 35.0%

TRINIDAD GRENADA ST LUCIA GROUP

Microfin does not accrue interest on loans. The loan portfolio reported in the financial statements therefore refers only to principal outstanding.

CREDIT RISK

The principal risk in microfinance is credit risk as reflected in ratios and loan loss provisions detailed in the table above. Credit risk in microfinance (unlike small business lending) is intrinsically a derived risk arising from a number of key factors. These include operating effectiveness, the impact of inflation on microenterprises, family and personal circumstances, the credit culture of the society (which is largely influenced by socio-economic and political factors) and natural disasters. We know each of these sources of credit risk from our experience.

Our business assessment is that the mitigators are continuous operational improvement, continuous market research and an effective Enterprise Risk Management system that provides a reliable focus for risk management. These can be managed at the corporate level but without any interference with (or oversight of) the operational level. Conventional “best practice” measures as widely described in the literature on microfinance are necessary. These must be firmly entrenched at the operational level in the field.

In 2006, Microfin will improve the efficiency of its loan decision-making process by implementing its “Five Profiles” approach. This includes a Credit Scoring Profile that will provide an internal rating. Information technology is the vital enabling function required to make this approach effective. We will place more emphasis on IT in 2006. An IT project manager will work with Microfin on a dedicated basis.

INFLATION, FOREIGN CURRENCY AND OTHER RISK

Inflation was not a factor that influenced results in 2005. However, we believe that inflation (mainly due to unprecedented oil price levels) will cause our overhead costs to increase. It will also increase loan unit size in 2006. Inflation will not significantly affect our

borrowing cost in 2006 because of fixed interest rates. Also, we do not expect that inflation will cause foreign currency fluctuations to affect the Group in 2006. This is because it is unlikely that nominal exchange rates will change significantly in all the countries in which we operate. However, inflation will have an adverse impact on low income households and that may dampen microenterprise business activity.

There is exposure to foreign exchange risk because the Group deals with at least three different currencies and these do not have a fixed relationship with our functional and reporting currency, the TTD. All loans are made in the applicable local currencies so that foreign currency risk must be managed at the central Treasury level and by the terms and conditions of borrowings. We believe that adequate protection and measures are in place to avoid any substantial potential loss.

A Multilateral Investment Fund (MIF) staff paper Microfinance: A view from the Fund (January 2005), provides an appropriate framework for this discussion. It covers the points discussed above and notes that excessive political interference in the microfinance industry appears to be one of the main threats to financial sustainability. We agree. Governmental economic, fiscal, monetary or political policies or factors can materially affect, directly or indirectly, the microfinance industry and therefore the Group’s operations.

While this may have affected our results in previous years there was no such impact in 2005 and we do not anticipate any negative impact in 2006. We believe that Microfin’s operations, and the work of international institutions, have both contributed to raising the level of maturity and effectiveness of microfinance in the Caribbean.

LIQUIDITY AND CAPITAL RESOURCES

Microfin has adequate funding in place for growing portfolio requirements in 2006 and in 2007 from the sources identified in Notes 7.1 and 7.2 attached to the financial statements. In addition, based on a

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study carried out by PricewaterhouseCoopers, Microfin has determined how it will raise short and medium term funding from money and capital markets in the Caribbean. The management and deployment of these funds will require astute central Treasury management in 2008.

RESEARCH AND DEVELOPMENT

In 2005 the Group expensed over $300,000 in research and development costs aimed at expanding operations in the Caribbean, and will spend at least $180,000 in 2006 on further refinement of a new, innovative methodology developed in 2005.

The shareholders of the Group (RBTT Bank and DFL Caribbean) have mandated the Group to carry out an expert study. The purpose is to determine the scope and modalities for implementing new synergies between the commercial banking network in the Caribbean and Microfin.

This study will help to further achieve one of Microfin’s major objectives which is to bring micro-entrepreneurs into the formal financial system of which Microfin itself is a member. It will also help to improve Microfin’s operating efficiency. The commercial banking network will benefit from fees for services, widening of market channels for certain savings products and ultimately from the graduation of high-quality borrowers.

TRENDS AND EVENTS

Microfin had carried out a leadership role in organising the Annual Roundtable on Microfinance in the Caribbean. The 5th Roundtable will be held in May 2006. After this event we expect that a new organisation will take over the leadership role in organising microfinance events, training, technical assistance and co-operation in the Caribbean. This organisation (Caribbean Microfinance Network) will be an integral part of the Latin American and Caribbean Microfinance Network organised initially by the Multilateral Investment Fund (MIF) and now operated by its members.

OUTLOOK FOR 2006

The operational budget prepared by management shows that the loan portfolio will be increased significantly. They also expect a modest improvement in loan yields. On that basis, we expect that the result for 2006 will be similar to that of the previous year and that Microfin will achieve full sustainability by the end of 2006.

It is evident however, that given the small, fragmented markets in the Caribbean and chronic excess liquidity in financial systems, we cannot fully achieve our Mission and Objectives without partnerships as noted in the Chairman’s Letter to Shareholders.

GERARD M. PEMBERTON, PRESIDENT


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TO THE MEMBERS OF CARIBBEAN MICROFINANCE LIMITED

We have audited the accompanying balance sheet of Caribbean Microfinance Limited and its Subsidiaries (the Group) as at 31 December 2005, and the income statement, statement of changes in equity and statement of cash flows for the year then ended as set out on pages 13 to 26. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2005 and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Chartered Accountants Port of Spain Trinidad, West Indies March 2005.

AUDITORS’ REPORT



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CONSOLIDATED BALANCE SHEET

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED ACCOUNTING POLICIES

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS

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CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETFOR THE YEAR ENDED 31 DECEMBER 2005

Notes 2005 2004 $ $

Assets

Cash And Short Term Funds 1

Cash and bank balances 3,678,135 3,349,430

Short term investments -- 1,743,653

Loans 2 18,899,517 11,830,258

Pre-Investment Study 3 510,908 547,401

Due From Related Parties 4 818 --

Other Assets 5 1,723,247 2,081,467

Deferred Income Tax Asset 6 52,368 --

Furniture and Equipment 7 1,152,024 1,221,942

Total Assets 26,017,017 20,774,151

Liabilities

Long Term Borrowings 8 14,859,631 11,125,738

Due To Related Parties 4 2,729,603 912,863

Taxation Payable 62,309 --

Other Liabilities 9 1,190,865 1,565,879

Total Liabilities 18,842,408 13,604,480

Net Assets 7,174,609 7,169,671

Shareholders' Equity

Ordinary shares 10 16,031,500 16,031,500

Other reserves 18,762 (7,559)

Accumulated Losses (8,875,653) (8,854,270)

7,174,609 7,169,671

The attached statements, accounting policies and notes set out on pages 16 to 26 are integral to these financial statements.

On 31 July 2005, the Board of Directors of Caribbean Microfinance Trinidad and Tobago Limited authorised these financial

statements for issue.

__________________________________ Director __________________________________ Director

EXPRESSED IN TRINIDAD AND TOBAGO DOLLARS

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2005 2004 $ $

Operating Activities

Net loss for the year (11,501) (3,912,602)

Adjustments for non-cash items in operating activities:

Depreciation and amortisation 353,856 547,211

Loss on disposal of fixed assets -- 7,209

Valuation loss/(gain) on financial asset 7,581 (59,410)

Net foreign exchange (gain)/loss on translation (53,310) (9,264)

Net movement in provision for loan losses (460,392) 2,593,571

Cash Flows Before Changes In Operating Assets (163,766) (833,285)

Changes In Operating Assets

Increase in loans (6,546,652) (3,619,920)

(Increase)/decrease in other assets 350,345 (1,211,729)

Increase in amount due from related parties (818) --

Increase/(decrease) in other liabilities (113,202) 1,439,536

Increase in amount due to parent company 2,167,905 5,519,714

Cash Generated From/(Used In) Operations (4,306,188) 1,294,316

Investing Activities

Purchase of fixed assets (245,780) (149,871)

Disposal of fixed assets -- 158,897

Cash Provided By/(Used In) Investing Activities (245,780) 9,026

Financing Activities

New borrowings 3,124,622 3,509

Repayment of borrowings (12,828) (31,032)

Cash (Used In)/Provided By Financing Activities 3,111,794 (27,523)

Net Increase/(Decrease) In Cash And Short Term Funds (1,440,174) 1,275,819

Net Foreign Exchange Loss/(Gain) 25,226 (11,842)

Cash And Short Term Funds At Beginning Of Year 5,093,083 3,829,106

Cash And Short Term Funds At End Of Year 3,678,135 5,093,083


Notes 2005 2004 $ $

Revenue

Interest income and fees 4,309,210 3,167,216

Interest cost and related finance charges (632,653) (639,618)

Net Interest Income and Fees 3,676,557 2,527,598

Grant income 11 882,281 687,635

Other income 377,361 107,856

Valuation (loss)/gain on financial asset (7,581) 59,410

4,928,618 3,382,499

General And Administrative Expenses 12 (4,940,119) (7,295,101)

Net Loss before Tax (11,501) (3,912,602)

Taxation 13 ( 9,882) --

Net Loss after Taxation 21,383 (3,912,602)


Ordinary Other Accumulated Total Shares Reserves Losses Equity $ $ $ $

Year ended 31 December 2004

Balance at beginning of year 16,031,500 -- (4,941,668) 11,089,832

Currency Translation Differences -- (7,559) -- (7,559)

Net loss for the year -- -- (3,912,602) (3,912,602)

Balance at end of year 16,031,500 (7,559) (8,854,270) 7,169,671


Balance at beginning of year 16,031,500 (7,559) (8,854,270) 7,169,671

Currency translation differences -- 26,321 -- 26,321

Net loss for the year -- -- (21,383) (21,383)

Balance at end of year 16,031,500 18,762 (8,875,653) 7,174,609


FOR THE YEAR ENDED 31 DECEMBER 2005

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2005

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2005EXPRESSED IN TRINIDAD AND TOBAGO DOLLARSEXPRESSED IN TRINIDAD AND TOBAGO DOLLARS


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CONSOLIDATED ACCOUNTING POLICIESFOR THE YEAR ENDED 31 DECEMBER 2005

STATEMENT OF COMPANY ACTIVITIES AND ACCOUNTING POLICIES

I Incorporation and nature of activities

The Company was incorporated on 5 July 1999 as a private limited liability company in the Republic of Trinidad and Tobago and its principal activities are that of providing microcredit and related services. The Company’s registered office is located at 10 Cipriani Boulevard, Port of Spain. On 23 January 2004, the name of the Company was changed from Caribbean Microfinance Limited to Caribbean Microfinance Trinidad and Tobago Limited.

It is a subsidiary of Development Finance Limited which is also incorporated in the Republic of Trinidad and Tobago.

The subsidiary, Caribbean Microfinance (St Lucia) Limited (100% owned) was incorporated in May 2002 as a private limited liability company in St Lucia and its principal activity is providing microcredit. The Company is licensed under Section 4 of the St. Lucia Banking Act #7 of 1991.

The subsidiary, Caribbean Microfinance (Grenada) Limited (100% owned), was incorporated in July 2002 as a private limited liability company in Grenada and its principal activity is providing microcredit. The Company is licensed under Section 3 (1) of the Grenada Banking Act 1993 (No: 40 of 1993).

SIGNIFICANT ACCOUNTING POLICIES

II Basis of preparation

The financial statements are prepared in accordance with International Financial Reporting Standards in Trinidad and Tobago dollars under the historical cost convention as modified by the revaluation of financial assets held at fair value through the income statement.

III Basis of consolidation

The consolidated financial statements of the Group include the assets and liabilities and results of operations of Caribbean Microfinance Trinidad and Tobago Limited and of its subsidiaries after elimination of inter company transactions and balances. Subsidiaries are all entities over which the Company is empowered to govern the financial and operating policies by virtue of a shareholding of more than one half of the voting rights.

IV Comparative information

Wherever changes in presentation have been made during the year the comparative figures for the prior year have been reclassified accordingly.

V Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). In the case of the St. Lucia and Grenada subsidiaries, this functional currency is the Eastern Caribbean dollar.

The consolidated financial statements are presented in Trinidad and Tobago dollars, which is the Company’s functional currency.

Transactions denominated in foreign currencies are translated into the functional currency at the rates of exchange prevailing at the dates of the transactions, and gains or losses arising on the settlement of such transactions are recognised in the Income Statement.

The results and financial position of Group entities with a functional currency different to that of the presentation currency are translated into the presentation currency as follows:

· Assets and liabilities are translated at the closing rate at the date of the balance sheet. · Income and expenses for each income statement are translated at average exchange rates. · All resulting exchange differences are recognised as a separate component of equity.

CONSOLIDATED ACCOUNTING POLICIESFOR THE YEAR ENDED 31 DECEMBER 2005

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

VI Specific provision for loan losses

Any loan that is more than one day in arrears is considered impaired. When a loan is more than thirty (30) days in arrears of either interest or principal it is classified as non-performing and included in Portfolio-At-Risk. If a loan is more than ninety (90) days in arrears, loan loss is deemed likely and a provision is made for the outstanding loan amount.

VII Revenue recognition

Microenterprises operate in volatile environments. The timing of interest payments and capital repayments on loans can vary

significantly. Management is unable to make precise and reliable estimates for the accrual of interest income, and historical experience has demonstrated that there is a high degree of uncertainty in the timing of collections. Therefore, revenue is recognised when received.

As described in note 6 above, any loan that is more than ninety (90) days in arrears is considered impaired.

VIII Fixed Assets

Furniture and equipment is stated at cost. Depreciation is computed on the reducing balance method over the estimated

useful lives of the related assets at the following rates:

Furniture and equipment - 12½% - 25% Computer software - 25%

EXPRESSED IN TRINIDAD AND TOBAGO DOLLARSEXPRESSED IN TRINIDAD AND TOBAGO DOLLARS

18 19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2005

D – DISCLOSURE NOTES TO THE FINANCIAL STATEMENTS

D1 Financial Risk Management

The Company does not have significant Concentration Risk or Market risk related with Interest rates, Foreign exchange rates, Market Prices or Liquidity. However, Operational Risk intensifies Credit Risk inherent in microfinance activities making Capital a critical component of financial risk management strategy. The Company maintains a capital adequacy ratio significantly above standard regulatory requirements.

Operational risk refers mainly to weaknesses and deficiencies in management effectiveness, information systems and internal controls. Cost efficiency is also a critical issue. Overhead costs, which increased in 2005 by 15%, amounted to 29% of the portfolio (40% in 2004). The benchmark set by the Company and agreed with its major lender is 20% which is in line with similar microfinance institutions of comparable size. The small size of the portfolio and low productivity (loans per staff) accounted for the unfavourable ratio in 2005.

While internal factors weigh heavily on financial risk in microfinance there are external factors that can create a heightened level of financial risk. Microfinance markets in the Caribbean are small, fragmented and diverse. Small enterprises are vulnerable to regular interruptions in the supply chain due to problems with transport facilities, weather, utilities, licensing regimes and natural disasters such as hurricanes and flooding. These enterprises are also vulnerable to disruptions in household incomes.

An IMF staff paper “Microfinance: A view from the Fund” (January 2005) provides an appropriate reference for discussion on risk in microfinance. It covers the points mentioned above and notes that excessive political interference in the microfinance industry appears to be one of the main threats to financial sustainability. Governmental economic, fiscal, monetary or political policies or factors can materially affect, directly or indirectly, the microfinance industry. While this may have affected our results in previous years there was no such impact in 2005. We do not anticipate any negative impact in 2006 because of the work of international institutions and the cessation of inappropriate funding programmes that created disincentives to commercial microfinance.

Credit Risk

The principal risk in microfinance is credit risk which in microfinance is mainly a derived risk (unlike in small business lending) arising from a number of factors. These factors include operating effectiveness, the credit culture of the society (which is largely influenced by socio-economic and political factors), the impact of inflation on micro enterprises, family and personal circumstances and the direct and indirect impact of natural disasters. We are aware of the impact of these sources of credit risk from our experience.

Our business assessment is that the action that can mitigate microfinance risk involves continuous operational improvement, continuous market research and an effective Enterprise Risk Management system that provides a reliable focus for risk management. These are managed at the corporate level. At the operational level, conventional “best practice” measures as widely described in the literature on microfinance are implemented.

In October 2005, CRISIL assigned the mfR4 microfinance grading to Caribbean Microfinance Trinidad and Tobago Limited (Microfin) reflecting its comfortable capitalization, good borrowing profile, experienced board, and parentage, all of which allow the organization to scale up and sustain operations. Nonetheless, the grading is tempered by the lack of economies of scale currently, weak asset quality, and stressed earnings profile, all of which have resulted in Microfin making losses operations since it commenced operations.

D2 Market Risk

Market Risk is the risk to the company’s financial condition resulting from adverse movements in the level or volatility of market prices such as interest rates and exchange rates that are related with the value of financial instruments. The Company does not have any significant market risk.

D2a Inflation and Foreign Currency Risk

Inflation was not a factor that influenced results in 2005. However, inflation (mainly due to unusually high oil prices) will cause our overhead costs to increase and will have an adverse impact on low income households that may dampen micro enterprise business activity. Inflation will also increase loan unit size in 2006 but will not significantly affect our borrowing cost in 2006 because of fixed interest rates.

There is exposure to foreign exchange risk. The Company deals with at least two different currencies which do not have a fixed relationship with our functional and reporting currency, the TTD. All loans are made in the applicable local currencies so that foreign currency risk must be managed at the central Treasury level and by the terms and conditions of borrowings. We believe that adequate protection and measures are in place to avoid any substantial potential loss. We do not expect that inflation will cause foreign currency fluctuations to affect the Microfin Group in 2006. This is because it is unlikely that nominal exchange rates will change significantly in all the countries in which we operate.


There were no significant foreign currency losses in the portfolio over the last two years. There were no significant changes in the values of any of the relevant currencies within the last five years.

The reporting currency of the Group is the Trinidad and Tobago dollar. The aggregate amount of assets and liabilities denominated in the respective currencies are as follows:

Trinidad and Eastern

Tobago Caribbean $ Total

$ (Expressed in TT$) $


Assets 12,522,779 13,494,238 26,017,017

Liabilities (17,724,012) (1,118,396) (18,842,408)

Net assets (5,201,233) 12,375,842 7,174,609


Assets 8,959,079 11,815,072 20,774,151

Liabilities (12,207,538) (1,396,942) (13,604,480)

Net assets (3,248,459) 10,418,130 7,169,671

D2b Movements in Interest Rates

Movements in interest rates may adversely or positively affect Net Interest Income which is the difference between interest income and the cost of funding. This risk is mitigated by matching interest rates on assets with interest rates on corresponding liabilities. Generally, these rates are coordinated by standard asset liability management practices. The Company’s existing and contracted borrowings are at fixed rates and its lending rates are fixed. However, this may be altered because of funding strategy or market circumstances.

D3 Liquidity Risk and Capital Resources

Microfin has adequate funding in place for growing portfolio requirements in 2006 and in 2007 from the sources identified in these Notes to the financial statements. In addition, based on a study carried out by PricewaterhouseCoopers, Microfin has determined how it will raise short and medium term funding from money and capital markets in the Caribbean. The management and deployment of these funds will require astute central Treasury management in 2008 because of different local currency needs and seasonal variations in demand for microfinance.

D4 Geographical Concentrations of Assets and Liabilities

As at 31 December 2005

Total Assets % Total Liabilities %

$ $

Trinidad and Tobago 12,522,779 48% 17,724,012 94%

St. Lucia 6,906,424 27% 297,276 2%

Grenada 6,587,814 25% 821,120 4%

Total 26,017,017 18,842,408

D – DISCLOSURE NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

D2a Inflation and foreign currency risk (Continued)


20 21


D4 Geographical Concentrations of Assets and Liabilities (Continued)


Total Assets % Total Liabilities %

$ $

Trinidad and Tobago 8,959,079 43% 12,207,538 90%

St. Lucia 5,854,759 28% 433,645 3%

Grenada 5,960,313 29% 963,297 7%

Total 20,774,151 13,604,480

D5 Capital risk management

The Company monitors capital in terms of (a) Gearing ratios (b) Debt Service payments and (c) minimum Capital Adequacy Ratios in subsidiaries.

a) The main gearing ratio refers to Net Senior Debt (borrowings less subordinated debt) divided by Net Assets which should not exceed 4.0 ( 0.9 in 2005). In addition, Net Total Debt should not exceed five (5) times Net Assets (2.07 in 2005). The Group can expand total assets as planned over the next three years without exceeding these limits.

b) The Company normally maintains cash and securities equivalent to 1.5 times debt service obligations due within one year.

c) Each subsidiary in the Group must maintain a level of capital that is adequate in terms of its financial risk exposures and that is in excess of required regulatory Capital Adequacy Ratios. The Company maintains a Capital Adequacy Ratio (CAR) in excess of 15% in each subsidiary.

At 31 December 2005, based on the following distribution of weights applied to classes of assets, the Group’s overall CAR was 22.6% based on the Basle method of calculation.

Total Assets Risk weighting Risk Adjusted

$ % $

Cash 3,678,135 0% --

Loans 18,899,517 150% 28,349,276

All other assets 3,439,365 100% 3,439,365

Total Assets 26,017,017 31,788,641

D6 Financial Instruments

Financial Assets and Liabilities are carried at amounts that approximate Fair Value at the balance sheet date. The following methods and assumptions have been used to estimate their value:

Assets

(a) Cash and Short Term Funds

As these assets are short term in nature, the values are taken as indicative of realisable value.

(b) Loans

Loans are valued net of provisions for losses. These assets result from transactions conducted under typical business conditions in accordance with standard policies and criteria. The rates of interest in the portfolio are market rates and the value of discounted expected cash flows of income and capital that approximate Fair Value are substantially in accordance with the values reported in the financial statements.



Liabilities(a) Long Term Borrowings with fixed rate characteristics are carried at values that are substantially equal to the Present Value

of the expected cash flows discounted at current market yields.

D7 Business Segments

The Company has one business segment managed through subsidiaries in three geographical areas with the following distribution of assets and profitability as at December 31, 2005

Trinidad St. Lucia Grenada Total

$ $ $ $


Total income 2,902,624 936,864 1,699,908 5,539,396

Net (loss)/profit (434,276) (211,230) 624,123 (21,383)

Total assets 12,522,779 6,906,424 6,587,814 26,017,017

Total liabilities (17,724,012) (297,276) (821,120) (18,842,408)


Total income 1,779,131 465,698 1,137,669 3,382,498

Net loss (2,774,844) (1,090,086) (47,672) (3,912,602)

Total assets 8,959,079 5,854,759 5,960,313 20,774,151

Total liabilities (12,207,538) (433,645) (963,297) (13,604,480)


D6 Financial Instruments (Continued)

NOTES TO THE BALANCE SHEET

1 Cash And Short Term Investments 2005 2004 $ $ Cash and bank balances Local currency 1,017,931 1,102,845 Foreign currency 2,660,204 2,246,585

3,678,135 3,349,430

Short term investments -- 1,743,653

2 Loans

Loans to customers are repayable within 6 - 36 months and are concentrated in the retail services and distribution sector.

2005 2004 $ $

Principal 19,891,128 16,094,421 Provision for loan losses (991,611) (4,264,163)

18,899,517 11,830,258 2.1 Provision for loan losses

Balance brought forward 4,264,163 1,672,630 Translation differences 7,392 (2,038) Loans written off against provision (2,819,552) -- Charge for the year (460,392) 2,593,571

991,611 4,264,163

Guarantees have been issued in favour of the Company in the amount of $387,000.


22 23

NOTES TO THE BALANCE SHEET (CONTINUED)

6 Deferred Income Tax Assets

Accelerated Tax Tax Losses Total Depreciation $ $ $

Credit to Income Statement 1,296 50,761 52,058 Translation Differences 7 303 310

As at 31 December, 2005 1,303 51,064 52,368

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of $890,028 (2004 - $867,907) in respect of losses amounting to $2,781,339 (2004 – $2,741,052).

Relief against future taxable profits for these tax losses is restricted to 50% of taxable income in any one year.

Total cumulative tax losses, both recognized as a Deferred Income Tax asset and unrecognized, will expire as follows:

2005 2004

Year Recognised Total Recognised Total of Expiry in Deferred Losses in Deferred Losses Tax Assets Unrecognised Tax Assets Unrecognised $ $ $ $ $ $

2005 -- -- -- -- 140,559 140,559 2006 15,211 -- 15,211 -- 173,095 173,095 2007 155,002 -- 155,002 -- 147,815 147,815 2008 -- 667,918 667,918 -- 662,390 662,390 2009 -- 445,298 445,298 -- 441,612 441,612 2010 -- 1,185,392 1,185,392 -- 1,175,581 1,175,581 2011 -- 482,731 482,731 -- -- --

Total 170,213 2,781,339 2,951,552 -- 2,741,052 2,741,052

7 Furniture and Equipment Furniture and Computer Equipment Software Total $ $ $ Year ended 31 December 2005

Opening net book amount 304,862 917,080 1,221,942 Foreign exchange differences 1,617 48 1,665 Additions 105,166 140,614 245,780 Depreciation charge (61,821) (255,542) (317,363)

Closing net book amount 349,824 802,200 1,152,024

At 31 December 2005

Cost 673,075 1,376,055 2,049,131 Accumulated depreciation (323,252) (573,855) (897,107)



Opening net book amount 486,060 1,082,858 1,568,918 Foreign exchange differences (192) (18) (210) Additions 49,222 100,649 149,871 Disposals and adjustments (166,106) -- (166,106) Depreciation charge (64,122) (266,409) (330,531)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEAR ENDED 31 DECEMBER 2005



3 Pre-Investment Study

This represents an investment made by Caribbean Microfinance Trinidad and Tobago Limited to engage a firm of consultants to carry out a study, related training and IT Systems Configuration. This study will enable the Company to serve micro enterprises in the Southern and Eastern Caribbean.

The final cost of this study was $1,179,612. This cost is being amortised over a period of seven years using the sum of digits method beginning in the year ended 31 December 2000, such that 19% of the cost was amortised in 2004 (2003 – 15%). In 2005, the Company reviewed the useful life of the pre-investment study, and determined that the Company expects to derive future benefits from this asset up to 2009. Consequently, with effect from 1 January 2005, the Company will amortise the carrying value of the asset as at 31 December 2004 of $547,401 over a 5 year period using the sum of the digits method.

2005 2004 $ $

Opening balance 547,401 764,081 Amortisation charge (36,493) (216,680)

Closing balance 510,908 547,401

Cost 1,179,612 1,179,612 Accumulated amortisation charge (668,704) (632,211)

Closing net book amount 510,908 547,401

4 Due From/To Related Parties

Development Finance Limited provides management services to Caribbean Microfinance Trinidad and Tobago Limited, including Treasury Management services that involve holding cash and other liquid items as well as providing advances to meet liquidity requirements. These claims and the advances are both non-interest bearing and recoverable.

Development Finance Limited’s subsidiary, CDN Management Services Limited provides services to Microfin’s subsidiaries, including Accounting and Audit Services.

5 Other Assets 2005 2004 $ $ Other assets comprise:

Loans to employees 430,522 308,259 Prepaid expenses 20,132 24,596 Grant funds receivable 754,936 1,516,949 Other receivables 517,657 231,663

Total prepayments and other assets 1,723,247 2,081,467

Fully secured loans have been provided to certain employees for the purpose of purchasing a motor vehicle at a reduced interest rate.

Prepaid expenses relate mainly to software license fees and property rent expenses, which are due to be paid in December of the year in advance for the following year.

Grant Funds Receivable relates to expenses which will be reimbursed on submission of claims for amounts spent, usually at least bi-annually in arrears.

The related grant income for expenses incurred under the terms of the grant is recorded in the income statement as a reduction in the related expense, or, in the case of Fixed Asset purchases, as a reduction in the carrying value of Fixed Assets. Where there is no comparable income to be reduced, grant income is recognised in the income statement in the line Grant Income.


24 25


7 Furniture and Equipment (Continued)

Furniture and Computer Equipment Software Total $ $ $ At 31 December 2004

Cost 565,266 1,235,371 1,800,637 Accumulated depreciation (260,404) (318,291) (578,695)


No Grant Income was recorded in 2005 related to Furniture and Eqiuipment. In 2004, Grant Income related to Furniture and Equipment purchases in the amount of $152,745 was recorded as a reduction in the carrying amount of the asset and is therefore recognised in income by way of reduced future depreciation charges over the life of the asset.

The amounts relieved in 2004 are as follows: Accumulated Net Book Cost Depreciation Amount $ $ $ Grant Funded Furniture and Equipment as at 1 January 2004 88,674 (15,939) 72,735 Additions 2004 80,010 -- 80,010

168,684 (15,939) 152,745

Reduction in the carrying amount of Furniture and Equipment (168,684) 15,939 (152,745) Carrying amount of Grant Funded Furniture and Equipment as at 31 December 2004 -- -- --

8 Long Term Borrowings 2005 2004 $ $

European Investment Bank 5,418,700 5,418,700 Accrued interest 1,025,038 754,103

Subtotal (Note 8.1) 6,443,738 6,172,803 Development Finance Limited 7,750,056 4,625,435 Accrued interest 574,265 23,100

Subtotal (Note 8.2) 8,324,321 4,848,535

Emerging Enterprises Venture Fund Caribbean Trust (EEVF) (Note 8.3) 91,572 104,400

Total Long Term Borrowings 14,859,631 11,125,738

8.1 The Company entered into a Finance Contract with the European Investment Bank for loans amounting to €5,000,000 to be used exclusively to finance micro and small enterprises in the Southern and Eastern Caribbean. This loan is denominated in Euros and bears a fixed interest rate of 5% per annum plus a participating rate based on the net profit of the Company. The loan is repayable in five annual instalments beginning 30 April 2012.

8.2 The Company has entered into an arrangement with Development Finance Limited to make available funding of US$2,855,000 from bonds issued by Development Finance Limited for this specific purpose on the local capital market. The Company has utilised TT$7,750.056 (2004 - TT$4,625,435) of the available funding.

8.3 The EEVF Caribbean Trust provided Caribbean Microfinance Trinidad and Tobago Limited with funding for making loans to small enterprises. The terms and conditions of this funding are conditional on the cash flows received from this portfolio of loans net of fees paid to the Company.




9 Other Liabilities 2005 2004 $ $

Other liabilities comprise: Audit fees 98,800 88,650 Funds held in trust 800,511 1,157,557 Other accrued expenses 291,554 319,672

Total other liabilities 1,190,865 1,565,879

Loan interest payable represents interest charged to the Income Statement but not yet remitted per the terms of the contract on the loan from the European Investment Bank described in Note 7.1 above.

10 Ordinary Shares 2005 2004 $ $

Authorised An unlimited number of ordinary shares of no par value Issued and fully paid 16,031,500 ordinary shares of no par value 16,031,500 16,031,500

NOTES TO THE INCOME STATEMENT

11 Grant Income

Grant Income of TT$882,281 relating to grants received by the subsidiary Caribbean Microfinance Grenada Limited for which there are no comparable expense lines to be reduced in the Income Statement was recorded in 2005 as explained in Note 5 above (2004 - $687,635).

This Grant Funding ended in 2005.

12 General and Administrative Expenses 2005 2004 $ $

Personnel costs 2,744,271 2,332,583 General corporate expenses 2,014,867 1,494,200 Corporate marketing and communications 342,641 326,568 Net Movement in Provision for loan losses (460,392) 2,593,571 Research and development expenses 36,493 216,680 Depreciation 317,363 330,531 Foreign exchange (gain)/loss on translation (55,124) 968

4,940,119 7,295,101

The Company has entered into agreements with regard to Grant Funding and amounts received under these grants have been presented in the Income Statement as a reduction in expenses as outlined below:

2005 2004 $ $

Personnel costs 682,632 876,135 General corporate expenses 68,333 118,015

750,965 994,150


26


NOTES TO THE INCOME STATEMENT (CONTINUED)

13 Taxation 2005 2004 $ $

Current tax (61,940) -- Deferred tax 52,058 --

(9,882) --

Tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rates applicable to profits of the consolidated companies as follows:

2005 2004 $ $

Net loss (11,501) (3,912,603)

Tax calculated at domestic tax rates applicable to profits in the respective countries 13,054 (1,198,354) Income not subject to tax 18,517 789,888 Tax losses for which no deferred income tax asset was recognised (153,661) 408,466 Permanent Diff – Exp not deductible for tax purposes (764) -- Prior Period deferred Tax Asset now recognized 51,032 -- Utilisation of previously unrecognized tax losses 61,940 --

Tax Charged to Income Statement (9,882) --

The weighted average applicable tax rate was 30% (2004 – 30.6%).


A Rostant Advertising ProductionPre-press and printing by CPPP (1993) Ltd.

MICROFIN CARIBBEAN HOLDINGS LIMITEDP.O. Box 187, 10 Cipriani Boulevard,Port of Spain, Trinidad & Tobago, W.I.Phone: (868) 623-4665/6 (868) 625-0007/8 Fax: (868) 624-3563Email: [email protected]: www.microfin.org

Trinidad and Tobago Offices:

4 Eastern Main Road, Curepe Tel: 662-0252

54 - 56 Independence Avenue, San Fernando Tel: 652-6842

First Floor, Royal Plaza, Main Road, Chaguanas Tel: (868) 665-0324 / 665-0301 / 800-6427

MICROFIN St. Lucia Limited:

2-4 Mongiraud Street. Castries. ST. LUCIA Tel: (758) 453-1780 Fax: (758) 451-9586

MICROFIN Grenada Limited:

Bruce Street. St. George's. GRENADA Tel: (473) 435-4355 Fax: (473) 435-4626

MICROFIN Guyana (DFLSA Inc.):

78 Church Street. Georgetown. GUYANA Tel: (592) 225-9674/5 Fax: (592) 225-9674

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ANNUAL REPORT 2005

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