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NBA ANNUAL REPORT & ACCOUNTS 2004/2005

Our nation is only as strong as the communityon which it is built and the nation builders areour people – working hand in hand, every day,with a common purpose and vision. At NBA,we are proud to play an integral part inAnguilla’s socio-economic development,through community investment and financialservices. We are “More than Banking” – weare Building Our Community throughPartnership.

Building Our Community Through Partnership

1


Contents

Mission Statement

Financial Highlights for the Bank 3

Photographs - Directors 4

Photographs - Senior Management 6

Board of Directors & Senior Management 7

Chairman’s Statement 8

Directors’ Report 11

Auditors’ Report to the Shareholders 15

Consolidated Balance Sheet 16

Consolidated Statement of Income 17

Consolidated Statement of Retained Earnings 18

Consolidated Statement of Cash Flows 19

Notes to the Consolidated Financial Statements 20

Selected Statistical Data for the Bank 38

Committed to Excellence in Financial Servicesthrough Skilled and Dedicated Managementand Staff for the Benefit of Customers,Shareholders and the Community.

Building Our Community Through Partnership NBA ANNUAL REPORT & ACCOUNTS 2004/2005

National Bank of Anguilla Limited.

3

Financial Highlights

EXPRESSED IN THOUSANDS EASTERN CARIBBEAN DOLLARS (EC$)

2005 2004 2003 2002 2001

Income $41,036 $35,089 $31,771 $27,378 $23,902

Expense 33,794 28,271 25,547 21,199 18,886

Net Income 7,242 6,818 6,224 6,179 5,016

Dividends Paid & Sanctioned 4,320 3,924 3,750 1,350 1,350

Dividends Declared 4,320 4,320 3,924 3,750 1,350

Net Loans $328,343 $296,149 $250,099 $228,174 $190,097

Total Assets 636,036 501,016 427,848 359,057 281,338

Deposits 570,263 436,681 372,168 309,142 236,169

Share Capital 30,676 30,676 30,675 28,563 13,500

Shareholders’ Equity 56,352 53,423 50,083 45,498 25,605

Number of shares issued (000’s) 1,800 1,800 1,800 1,800 1,350

Earnings per share $4.02 $3.79 $3.46 $3.43 $3.72

Dividends per share (EC$) $2.40 $2.40 $2.20 $2.20 $2.00

Number of Shareholders 3,889 3,891 3,881 3,777 3,777

Number of Employees 77 65 60 59 61

4 NBA ANNUAL REPORT & ACCOUNTS 2004/2005


Board of Directors

Mr. Conrad W. FlemingFIRST VICE CHAIRMAN

Mr. Frederick O. HarriganSECOND VICE CHAIRMAN

Mr. Timothy A. HodgeCOMPANY SECRETARY

Mr. Joseph N. PayneCHAIRMAN

Mr. Russel S. ReidSPECIAL DIRECTOR

Mr. E. Valentine BanksDIRECTOR

Mr. Fabian M. FahieDIRECTOR

NBA ANNUAL REPORT & ACCOUNTS 2004/2005 5


Board of Directors

Mr. Selwyn F. HorsfordDIRECTOR

Mr. Ralph V. C. HodgeDIRECTOR

Mr. Stanley E. ReidDIRECTOR

Mr. Everet F. RomneyDIRECTOR

Mr. Mario E. HalleyDIRECTOR

Mrs. Maglan A. RichardsonDIRECTOR



Mr. Selwyn F. HorsfordCHIEF CORPORATE OFFICER

Mr. Ian L. FergusonCHIEF FINANCIAL OFFICER

Ms. L. Icilma HazellMANAGER COMPLIANCE

Mr. E. Valentine BanksCHIEF EXECUTIVE OFFICER

Ms. L. Bernadine HorsfordMANAGER - LENDING

Mrs. Jo-anne A. HodgeMANAGER - INTERNAL AUDIT

Ms. Pamela A. RileyMANAGER - MARKETING &BUSINESS DEVELOPMENT

Ms. Caroll A. MortonASST. MANAGER - RETAILBANKING

6

Senior Management


Building Our Community Through Partnership NBA ANNUAL REPORT & ACCOUNTS 2004/2005 7


Board of Directors & Senior Management

BOARD OF DIRECTORS

CHAIRMAN Mr. Joseph N. Payne, M.B.E., J.P., C.P.M., L.M.0.A.C.C.P

FIRST VICE CHAIRMAN Mr. Conrad W. Fleming, R.L.S.

SECOND VICE CHAIRMAN Mr. Frederick O. Harrigan

COMPANY SECRETARY Mr. Timothy A. Hodge, B.A. (Business Administration), M.B.A.

Mr. Russel S. Reid, B.A. (Library Studies), M. Sc. (IT, Mgmt & Org. Change)

Mr. E. Valentine Banks, DIP. (Banking)

Mr. Fabian M. Fahie, B.Sc. (Economics), M.A. (Economics)

Mr. Selwyn F. Horsford, B. Sc. (Business)

Mr. Ralph V. C. Hodge, B.Sc. (Management Studies), M.B.E

Mr. Stanley E. Reid, LL.B., L.E.C., LL.M.

Mr. Everet F. Romney, M.B.E.

Mr. Mario E. Halley

Mrs. Maglan A. Richardson B.A. (Accounting), M.B.A

SENIOR MANAGEMENT

CHIEF EXECUITVE OFFICER Mr. E. Valentine Banks, DIP. (Banking)

CHIEF CORPORATE OFFICER Mr. Selwyn F. Horsford, B. Sc. (Business)

CHIEF FINANCIAL OFICER Mr. Ian L. Ferguson, B.A., (Accounting), C.P.A., M.B.A.

MANAGER-COMPLIANCE Ms. L. Icilma Hazell, DIP. (Banking)

MANAGER-LENDING Ms. L. Bernadine Horsford

MANAGER INTERNAL AUDIT Mrs. Jo-anne A. Hodge, DIP. (Banking), A. Sc. (Accounting)

MANAGER – MARKETING & Ms. Pamela A. Riley, B.B.A. (Accounting)BUSINESS DEVELOPMENT

ASST. MANAGER – Ms. Caroll A. Morton, DIP. (Banking)RETAIL BANKING

REGISTERED OFFICE The National Bank of Anguilla Limited

The Valley, Anguilla, B.W.I

AUDITORS KPMG LLC, Chartered Accountants

SOLICITORS Keithley Lake and Associates



Chairman’s Statement

INTRODUCTION

I am honoured and pleased as Chairman of the Board ofDirectors of the National Bank of Anguilla Ltd. to greet NBA’sshareholders, customers and associates at the conclusion ofanother successful year of operations. Through its manybanking and non-banking activities, NBA has for one more yearprovided services which are truly “more than banking”. We havelong recognized that for our institution to be “more thanbanking”, we cannot simply offer banking services. We mustalso be actively involved in community building and ultimately innation building. Further, we have recognized that those tasksrequire the best efforts of us all, and thus have partnered withindividuals, Government and national committees, NGO’s andbusinesses in pursuing them. Accordingly, we have chosen asthe theme for this year’s report "NBA: Building our Communitythrough Partnership".

20th ANNIVERSARY CELEBRATIONS

During the financial year just ended, NBA attained twosignificant milestones in its existence. On December 20th,2004, we celebrated the 20th anniversary of the incorporationof the National Bank of Anguilla Ltd., the public company formedwith the objective of negotiating the purchase of the local branchof Bank of America and raising the capital necessary toconclude such a purchase. We marked the occasion with thelaunch of our 20th Anniversary Celebrations under the theme“NBA 1985-2005: Creating Means, Fulfilling Dreams” and thenaming of NBA’s corporate building as “The Conrad W. FlemingCorporate Building” in honour of the Chairman of the Group ofPromoters and first Chairman of the Bank. The secondmilestone was on March 8th 2005, when we marked the 20thanniversary of NBA’s commencement of banking services to thepeople of Anguilla with a Customer Appreciation Day. Two otherfunctions were also held during that week: a Church Service onMarch 6th attended by Directors, Staff and Customers; and anAwards Dinner on March 12th, when the Bank’s Promoters,Directors, Consultants and Staff were presented withappreciation awards.

Mr. Joseph N. PayneCHAIRMAN

20th Anniversary Awards Dinner – NBA PromotersAbsent - Mr. Albert S. Lake and Mr. Kennedy Hodge

(Mrs. Olive Hodge representing him).



Chairman’s Statement continued

The 20th Anniversary Celebrations, marking the completion oftwenty years of stellar performance and a strong commitment toAnguilla’s development, will continue during the calendar yearand will be recorded for posterity in a 20th AnniversaryCommemorative Magazine.

BUSINESS ACTIVITIES

2004/2005 was a year of impressive growth for NBA, with Assetsincreasing to $636 million, Deposits increasing to $570.3 millionand Loans to $328.3 million. These all confirm NBA’s positionas the undisputed leader in the Anguillian banking market.

NBA continued during the financial year to roll out the mostcomprehensive ATM Network in Anguilla. It also launched theNBA Visa International Debit Card, which is being marketed asthe NBA Visa Cheque Card. This has provided our customersthe convenience of accessing their NBA savings and checkingaccounts at business places and ATMs all over the world.

NBA also completed plans to launch the National Bank ofAnguilla (Private Banking and Trust) Limited, a wholly ownedsubsidiary, at the beginning of the 2005/06 financial year. Thenew entity was incorporated in accordance with the law requiringall banks operating from within Anguilla and conductingbusiness in currencies other than Eastern Caribbean Dollarswith persons or entities who are not citizens or residents ofAnguilla to obtain an Offshore Banking Licence to conduct thisbusiness.

COMMUNITY ACTIVITIES

This year’s theme “NBA: Building our Community throughPartnership” is a reflection of our commitment to being anoutstanding corporate citizen, as well as our commitment toaccomplishing much through partnership in all spheres –whether in providing services to individuals or to corporations orin other aspects of national development. The Bank continuesto sponsor a wide range of community activities includingsporting competitions, cultural activities and a large number ofother less visible, but by no means less important, events andfunctions throughout our community. NBA continued to be theOfficial Bank and Premium Gold Sponsor of the Tranquility JazzFestival. I am particularly proud of the activities of the Staff’sSports and Social Club, which has so ably demonstrated how weall can help to build our community and has so aptly exemplifiedour theme.

NBA Jazz on the Parkway

NBA’s Kiddies Day Out

NBA’s Kiddies Day Out Race




PROSPECTS

Anguilla recorded exceptional economic growth in the financialyear just ended.This high level of growth is projected to continuein the short and medium term fuelled by increased activity intourism and its support services. It is expected that Anguilliansand Anguillian businesses will seek to be key players in, andbeneficiaries of, this growth and that there will be concomitantincreases in the need for banking services. This increasedeconomic activity will provide many opportunities for the Bank topursue as it continues to be an invaluable partner in Anguilla’sdevelopment. We are therefore confident that the prospects forNBA’s continued growth are very strong. Naturally, suchopportunities also present challenges. We must thereforeensure that NBA continues to be structurally and financiallysound and that its management, staff, facilities and systems areadequately prepared to meet the expected demands as it beginsits third decade of service.

CONCLUSION

NBA has indeed been fortunate as an institution. We truly havemuch to thank God for, and we sincerely appreciate all thoseshareholders and customers who have placed their confidencein NBA, our Directors, Management and Staff who have givenfaithful service to them over the Bank’s first 20 years. They haveall contributed to the realization of our theme “NBA: Building ourCommunity through Partnership,” and deserve to be proud oftheir respective roles. I pray God’s continued guidance andblessings as we enter a new era of promise, and look forward tothe continued support of customers and shareholders for ourBank, NBA.

Joseph N. Payne, M.B.E., J.P., C.P.M., L.M.O.A.C.C.P.Chairman

NBA’s 20th Anniversary Fun Day – StoneyGround - Representing Internet Banking

NBA’s 20th Anniversary Awards Dinner

NBA 20th Anniversary Fun Day – Blowing Point- Winning Team – Representing NBA Loans

Chairman’s Statement continued



Directors’ Report

OVERVIEW

It is once again a pleasure to report another successful financialyear at the National Bank of Anguilla Ltd. In comparison to lastyear’s Total Assets of $501.0 million, Total Assets as at March 31,2005 stood at $636.0 million, which indicates a 27.0% growth inasset size. NBA now holds 41.6% of Total Assets within thecommercial banking sector in Anguilla. Total Liabilities increasedfrom $447.6 million in the last financial year to $579.7 million andShareholders’ Equity rose from $53.4 million to $56.4 million, anincrease over the previous financial year of 29.5% and 5.5%respectively. Net Income was $7.2 million, showing an increase of6.2% over the previous years. Consequently, Return on Assetswas 1.3%, Return on Equity was 13.2% and Earnings per Sharewere $4.02.

DEPOSITS

As at March 31, 2005, Total Deposits increased by $133.6 millionover the previous year. This represents a 30.6% increase. NBAnow holds approximately 53.5% of Total Deposits among the fourcommercial banks operating within Anguilla. Savings Depositsincreased by $34.4 million (23.0%) and Time Deposits by $67.7million (32.6%) to $275.2 million, and Demand Deposits grew by$31.5 million (39.5%) to $111.3 million. The expansion of theBank’s deposit base may be attributed to the continued confidencein the Bank’s safety and soundness strategies.

LOANS

During the financial year ending March 31, 2005, Gross Loans toCustomers grew from $304.7 million to $336.3 million. Term Loansrepresent approximately 87.1% of Gross Loans. This categoryexperienced a 12.9% increase from the previous financial year.The most significant changes in Term Loans came fromCommercial Loans, Real Estate Loans and Personal Loans thatgrew by $15.1 million, $14.4 million and $8.4 million respectively,and Tourism Loans increased by $0.7 million. Like the previousyear, the Bank was successful in reducing the level of Non-performing Loans through its comprehensive delinquencymanagement programme. This year’s reduction amounted to $1.2million (4.9%). Non-performing Loans now represent 6.8% of TotalGross Loans, as opposed to 7.9% last financial year. This shows aconsistent decrease in delinquent Loans.




Directors’ Report continued

CASH AND CASH EQUIVALENTS

Cash and Cash Equivalents stood at $211.9 million as at March31, 2005. This represents a 60.5% increase over the prior year’sposition. Placements at Financial Institutions as well as Accountswith other Banks account for over 50% of Total Cash and CashEquivalents. These accounts earn interest based primarily on theexisting international interest rates. Amounts within this categoryfluctuate as a result of daily operational demands.

INVESTMENTS

During the year under review, the Investment portfolio grew by$20.5 million (42.1%). Total Investments now stand at $69.2million. In terms of the increase in equity in other institutions, anadditional investment of $0.5 million was placed in the NationalCommercial Data Services (NCDS) to facilitate the hosting ofInternet Banking Services. Additionally, the value of theinvestment in Malliouhana- Anico Insurance Company Limitedincreased by $0.4 million. There was also an appreciation in thevalue of the East Caribbean Financial Holding Company Limited(ECFHC), parent company of the Bank of St. Lucia, by $0.2 million.

NET INTEREST INCOME

Net Interest Income was $18.5 million, an increase of $1.3 millionover the previous year. This growth is consistent with the trend ofprevious years. Interest Income increased from $30.9 million to$36.2 million representing 88.3% of Total Income for the year.Interest on loans to customers remains the greatest component ofInterest Income (83.8%).

In addition, Interest Expense increased from $13.7 million to $17.7million representing a 28.9% increase over the last period. InterestExpense accounts for 52.3% of Total Expenses. In the Expensecategory, there were marginal increases in the Interest paid onSavings, Fixed Deposits and Other Deposits by $1.03 million, $2.9million and $0.04 million respectively.




NON-INTEREST INCOME & EXPENSES

Non-interest Income rose by 19.1% over the previous year andaccounted for 11.7% of Total Income. Although Fees, Charges andCommissions indicated an increase over last year there were nosignificant changes within these categories.

In the Non-Interest Expense category the amount charged thisyear to Provision for Loan Losses increased by $0.4 million. TotalGeneral and Administration Expenses, and Taxes on Assets were$15.7 million, exceeding last year’s figure by $1.6 million. This wasdue mainly to an increase in the fees charged by NCDS.

OPERATING RESULTS

The Net Appreciation for the previous financial year ending March31, 2004 has been restated from $7.2 million to $6.8 million. Thiswas due to the revision of International Accounting Standardnumber 39 (IAS 39), which requires all income from FinancialAssets to be recognised on the Balance Sheet. This changeresulted in the transfer of gains on investments in ECFHC and St.Kitts-Nevis-Anguilla National Bank (SKNANB) from the IncomeStatement to the equity section in the Balance Sheet. During theFinancial Year, March 31, 2005, NBA attained a Profit before Taxeson Assets of $7.8 million.The Net Income figure of $7.2 million wasachieved by subtracting Taxes on Assets of $1.4 million and addingProfit on Joint Venture of $0.2 million and Share of AssociateCompany Profit of $0.5 million.

EQUITY AND DIVIDENDS

During the financial year under review, Total Shareholders’ Equitygrew from $53.4 million to $56.3 million. The Board declared andpaid a dividend of $2.40 per share based on the profits for the yearended March 31, 2005.




DIRECTORS

The Directors retiring by rotation are Mr. Joseph N. Payne, Mr. Fabian M. Fahie, Mr. Mario A. Halley and Mrs. Maglan A.Richardson who being eligible have indicated their willingness tostand for re-election as Directors of the Company.

AUDITORS

The retiring Auditors, KPMG LLC, have indicated their willingnessto continue in office.

TIMOTHY A. HODGE, B.A, M.B.A.COMPANY SECRETARY

September 8th 2005




Auditors’ Report

KPMG LLCCaribbean Commercial CentreP.O. Box 136. The Valley, Anguilla, B.W.I.

Telephone (264) 497 5500Fax (264) 497 3755Email [email protected]

NATIONAL BANK OF ANGUILLA LIMITED.

Auditors’ Report to the Shareholders

We have audited the consolidated balance sheet of National Bank of Anguilla Limited as of March 31, 2005and the related consolidated statements of income, retained earnings and cash flows for the year then ended.The consolidated financial statements are the responsibility of the Bank's management. Our responsibility isto express an opinion on the financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing as promulgated by theInternational Federation of Accountants. Those standards require that we plan and perform an audit to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in theconsolidated financial statements. An audit also includes assessing the accounting principles used andsignificant 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 consolidated financial statements present fairly, in all material respects, the financial positionof the Bank as at March 31, 2005 and the results of its operations and its cash flows for the year then endedin accordance with International Financial Reporting Standards promulgated by the International AccountingStandards Board.

KPMG LLC

Chartered AccountantsThe ValleyAnguilla, B.W.I.September 8, 2005

KPMG LLCAnguilla Limited Liability Companyis a member firm of KPMG International, a Swiss Co-operative


Expressed in Eastern Caribbean Dollars (EC$)


The accompanying notes form an integral part of the Consolidated Financial Statements


Year ended March 31, 2005

The Bank Group

Notes 2005 2004 2005 2004

ASSETS

Cash and Cash Equivalents 3 211,985,783 132,107,793 211,942,835 132,247,321Loans to Customers 4 328,342,504 296,148,774 321,042,504 296,148,774Interest Receivable 410,357 2,012,348 418,919 2,017,695Other Assets and Receivables 6 13,211,786 8,179,368 13,211,786 8,189,518Investments 7 69,224,226 48,698,670 68,627,419 47,943,083Investment Property 8 - - 9,834,013 2,402,113Property, Plant and Equipment 9 12,861,804 13,869,211 12,861,804 13,869,211

636,036,460 501,016,164 637,939,280 502,817,715

LIABILITIES AND SHAREHOLDERS’EQUITY

LiabilitiesDeposits from Customers 10 570,263,169 436,680,765 570,263,169 436,680,765Interest Payable 7,899,751 5,754,736 7,899,751 5,754,736Other Liabilities 11 1,521,831 5,157,916 3,771,965 7,214,170

579,684,751 447,593,417 581,934,885 449,649,671

Shareholders’ EquityShare Capital 12 30,676,300 30,675,600 30,676,300 30,675,600

Statutory Reserve 13 14,522,453 13,074,173 14,522,453 13,074,173Unrealised Gain on Investments 7 452,024 445,255 452,024 445,255Retained Earnings 10,700,932 9,227,719 10,353,618 8,973,016

56,351,709 53,422,747 56,004,395 53,168,044636,036,460 501,016,164 637,939,280 502,817,715

On behalf of the Board:

Joseph N. Payne, M.B.E., J.P., C.P.M. Selwyn F. Horsford, B.Sc. (Business)Chairman Director

September 8, 2005

Consolidated Balance Sheet






Consolidated Statement of Income

The Bank Group

Notes 2005 2004 2005 2004

Interest and Similar Income

Loans to Customers 30,350,051 27,637,568 30,350,051 27,637,568

Placements with Banks 3,731,997 1,249,270 3,731,997 1,249,270

Treasury Bills 181,601 406,835 181,601 406,835

Securities 1,954,753 1,628,996 1,956,291 1,628,996

36,218,402 30,922,669 36,219,940 30,922,669

Interest and Similar Expenses

Savings (4,579,561) (3,549,053) (4,579,561) (3,549,053)

Time (12,446,450) (9,553,653) (12,446,450) (9,553,653)

Other (654,106) (614,748) (699,285) (613,530)

(17,680,117) (13,717,454) (17,725,296) (13,716,236)

Net Interest Income 18,538,285 17,205,215 18,494,644 17,206,433

Provision Reversed/(Made)for Loan Losses & Write-offs 5 (656,784) (280,540) (656,784) (280,540)

17,881,501 16,924,675 17,837,860 16,925,893

Fees, Charges and Commissions 4,357,620 3,721,875 4,357,620 3,721,875

General and Administration Expenses 14 (14,326,402) (12,747,812) (14,375,372) (12,768,362)

Operating Profit 7,912,719 7,898,738 7,820,108 7,879,406

Profit on Disposal ofProperty, Plant and Equipment - 2,700 - 2,700

Profit before Tax on Assets 7,912,719 7,901,438 7,820,108 7,882,106

Tax on Assets 15 (1,381,490) (1,279,135) (1,381,490) (1,279,135)

Net Income from Operations 6,531,229 6,622,303 6,438,618 6,602,971

Gain/(Loss) on Joint Venture 7 250,666 (124,377) 250,666 (124,377)

Share of Associate Company Profit 7 459,499 320,479 459,499 320,479

Net Income for the Year 7,241,394 6,818,405 7,148,783 6,799,073

Earnings per share 4.02 3.79 3.97 3.78







Consolidated Statement of Retained Earnings

The Bank Group

Notes 2005 2004 2005 2004

Balance at Beginning of Year 9,227,719 7,786,195 8,973,016 7,550,824

Net Income for the Year 7,241,394 6,818,405 7,148,783 6,799,073

Transfer to Statutory Reserve 13 (1,448,280) (1,452,732) (1,448,280) (1,452,732)

Dividends Paid and Sanctioned (4,319,901) (3,924,149) (4,319,901) (3,924,149)

Retained Earnings at End of Year 10,700,932 9,227,719 10,353,618 8,973,016

Dividends Declared but not yet Sanctioned:

Current Year (EC$2.40 per share:

2004: EC$2.40) (4,319,945) (4,319,901) (4,319,945) (4,319,901)

Balance after Dividends Declared 6,380,987 4,907,818 6,033,673 4,653,115






Consolidated Statement of Cash Flows

The Bank Group

2005 2004 2005 2004CASH FLOWS FROM OPERATING ACTIVITIESNet Income 7,241,394 6,818,405 7,148,783 6,799,073Items not involving Cash:Depreciation 1,311,005 1,230,437 1,311,005 1,230,437 Provision for Loan Losses 656,784 280,540 656,784 280,540 Interest and Similar lncome (36,218,402) (30,922,669) (36,219,940) (30,922,669) Interest and Similar Expenses 17,680,117 13,717,454 17,725,296 13,716,236 Expense of Tax on Assets 1,381,490 1,279,135 1,381,490 1,279,135Loss on Joint Venture (250,666) 124,377 (250,666) 124,377 Share of Profit of Associate Company (459,499) (320,479) (459,499) (320,479)Loss on Disposal of Property,

Plant and Equipment - (2,700) - (2,700) (8,657,777) (7,795,500) (8,706,747) (7,816,050)

Changes in Operating Assets and Liabilities:Loans to Customers (32,850,514) (46,329,899) (25,550,514) (46,329,899) Other Assets and Receivables (5,032,418) 2,618,855 (5,022,268) 2,611,405 Customer Deposits 133,582,404 64,512,845 133,582,404 64,512,845 Other Liabilities (3,636,085) 3,915,581 (3,442,205) 4,483,640

83,405,610 16,921,882 90,860,670 17,461,941

Interest and similar Receipts 37,820,393 30,767,121 37,818,716 30,761,774Interest and similar Payments (15,535,102) (12,317,394) (15,580,281) (12,316,176)Payment of Tax on Assets (1,381,490) (1,279,135) (1,381,490) (1,279,135)Net Cash provided by Operations 104,309,411 34,092,474 111,717,615 34,628,404

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Investments (19,815,391) (12,508,984) (19,974,171) (12,656,977) Purchase of Investment Property - - (7,431,900) (374,425) Purchase of Property, Plant and Equipmentincluding Capital Work-in-Progress (303,598) (1,051,955) (303,598) (1,051,955) Proceeds from Disposal of Property,

Plant and Equipment - 2,700 - 2,700Net Cash used by Investing Activities (20,118,989) (13,558,239) (27,709,669) (14,080,657) CASH FLOWS FROM FINANCING ACTIVITIESProceeds from Issue of Shares 700 500 700 500 Gain in investments 6,769 445,255 6,769 445,255Dividends Paid (4,319,901) (3,924,149) (4,319,901) (3,924,149)

Net Cash used by Financing Activities (4,312,432) (3,478,394) (4,312,432) (3,478,394) NET INCREASE IN CASH RESOURCES 79,877,990 17,055,841 79,695,514 17,069,353CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 132,107,793 115,051,952 132,247,321 115,177,968 CASH AND CASH EQUIVALENTS

AT END OF YEAR 211,985,783 132,107,793 211,942,835 132,247,321





March 31, 2005

Notes to the Consolidated Financial Statements (continued)

1. The Company

The National Bank of Anguilla Limited (The “Bank”) is a company incorporated and continued inAnguilla under the provisions of the Companies Act and the Banking Act and operates in The Valley,Anguilla.

The principal activity of the Bank is to carry on the business of banking, including acceptance ofdeposits from customers, making loans to customers and investing in debt and equity securities, jointventures and associate companies.

The consolidated financial statements of the Bank were authorised for issue by the Board of Directorson September 8, 2005.

2. Significant Accounting Policies

(a) Statement of Compliance:The consolidated financial statements are prepared in accordance with International FinancialReporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), andinterpretations issued by the International Financial Reporting Interpretations Committee of the IASB.

(b) Basis of Preparation:The consolidated financial statements are presented in Eastern Caribbean Dollars (EC$), thefunctional currency, and are prepared on the historical cost basis except for available for saleinvestments which are stated at fair value, and held to maturity investments which are stated atamortised cost.

(c) Basis of Consolidation:Subsidiaries are those enterprises controlled by the Bank. Control exists when the Bank has thepower, directly or indirectly, to govern the financial reporting and operating policies of an enterprise soas to obtain benefits from its activities. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control commences until the date that controlceases. The consolidated financial statements include the assets and liabilities and results ofoperations of the Bank and its wholly-owned subsidiaries, NBA Assets Limited. and NBA PensionFund Management Company Limited, for the year ended March 31, 2005. All inter-company balancesand transactions have been eliminated in preparing the consolidated financial statements.

(d) Use of Estimates:The preparation of consolidated financial statements in line with IFRS requires management to makeestimates and assumptions that affect the amounts reported in these consolidated financial statementsand the accompanying notes. These estimates are based on relevant information available at thebalance sheet date and, as such, actual results could differ from those estimates.

(e) Property, Plant and Equipment:Items of property, plant and equipment are stated at cost, less accumulated depreciation (refer below)and impairment losses, if any. The cost of the building includes the cost of materials, direct labour andan appropriate proportion of construction overheads. Depreciation is charged to the income statementon the straight-line basis over the estimated useful lives of items of property, plant and equipment.Land is not depreciated.




March 31, 2005


2. Significant Accounting Policies (continued)

The estimated useful lives are as follows:Building 40 yearsFurniture, Fittings and Equipment 5-7 yearsComputers 5-6 yearsMotor Vehicles 5 years

(f) Investment Properties:

Investment properties are acquired through public auctions by NBA Assets Limited (a wholly ownedsubsidiary of the Bank) for capital appreciation to be resold at more competitive prices.

Investments in real estate projects are stated at cost less depreciation. The cost includes purchase price,improvements, major renovations and certain costs directly related to the acquisition. Land is notdepreciated.

Investments are reviewed at each balance sheet date to determine whether there is any indicationof impairment. If such indication exists, the asset’s recoverable amount is estimated. No suchreductions have occurred to date.

(g) Financial Instruments:

i. ClassificationOriginated loans and receivables are loans and receivables created by the Bank providing funds toa debtor other than those created with the intention of short-term profit taking. Originated loansand receivables comprise loans and advances to banks and customers.

Held-to-maturity investments are financial assets with fixed or determinable payments and fixedmaturity that the Bank has the positive intent and ability to hold to maturity, other than loans andreceivables originated by the enterprise.

Available-for-sale assets are financial assets that are not held for trading purposes, originated bythe Bank or held to maturity. Available-for-sale instruments include money market placements andcertain debt and equity investments.

ii. Recognition/DerecognitionThe Bank recognises financial assets that are available-for-sale on the date it commits topurchasing the assets. From this date any gains and losses arising from changes in fair value ofthe assets are recognised. Investments available-for-sale are derecognised by the Bank on the daythey are transferred by the Bank.

Held to maturity investments are recognised/derecognised on the day they are transferred to/by theCompany, respectively.

Originated loans and receivables are recognised /derecognised on the day they are originated to/bythe Bank, respectively.

A financial asset is derecognised when the Bank loses control over the contractual rights thatcomprise that asset. This occurs when the rights are realised, expired or are surrendered. Afinancial liability is derecognised when it is extinguished.





March 31, 2005



iii. Measurement Financial instruments are measured initially at cost, including transaction costs.

Subsequent to initial recognition all available-for-sale assets are measured at fair value based on thebid price, prevailing on the balance sheet date on the exchange where the security is traded. If notrading took place on that date then the last price available is taken as the fair value. In situationswhere the instrument does not have a quoted market price in an active market and whose fair valuecannot be reliably measured, it is stated at cost, including transaction costs less impairment losses,which represents the management’s best estimate of the fair value under the circumstances.

All non-trading financial liabilities, originated loans and receivables and held-to-maturity assets aremeasured at amortised cost. Amortised cost is calculated on the effective interest rate method.Premiums and discounts, including initial transaction costs, are included in the carrying amount ofthe related instrument and amortised based on the effective interest rate of the instrument.

iv. Fair Value Measurement PrinciplesThe fair value of financial instruments is based on their quoted market price at the balance sheetdate without any deduction for transaction costs. If a quoted market price is not available, the fairvalue of the instrument is estimated using pricing models or discounted cash flow techniques wherefeasible.

Where discounted cash flow techniques are used, estimated future cash flows are based onmanagement’s best estimates and the discount rate is a market related rate at the balance sheetdate for an instrument with similar terms and conditions. Where pricing models are used, inputs arebased on market related measures at the balance sheet date.

v. Gains and Losses on Subsequent MeasurementGains and losses arising from a change in the fair value of available-for-sale assets are recognisedin the balance sheet.

(h) Specific Instruments:

i. Cash and Cash EquivalentsCash and cash equivalents comprise cash balances on hand, cash deposited with central banks andshort-term highly liquid investments with maturities of three months or less when purchased,including treasury bills and other bills eligible for rediscounting with the Central Bank.

ii. Investments in AssociatesAssociates are those enterprises in which the Bank has significant influence, but not control, over thefinancial and operating policies. Investment in associate companies are accounted for using the equitymethod.

iii. Investments in Joint VenturesJointly controlled entities are those enterprises over whose activities the Bank has joint control,established by contractual agreement. Investments in joint ventures are stated using the equitymethod.

iv. Loans to CustomersLoans and advances originated by the Bank are classified as originated loans and receivables andreported at amortised cost, less provision for loan losses and unearned interest.




March 31, 2005



Loans and advances are reported net of allowances to reflect the estimated recoverable amounts (referaccounting policy “(j)”.

(i) Foreign Currencies:Transactions in foreign currencies are converted to EC Dollars at the foreign exchange rate ruling at thedates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balancesheet date are translated to EC Dollars at the foreign exchange rate ruling at that date. Foreign exchangedifferences arising on conversion and translation are recognised in the income statement. Non-monetaryassets and liabilities denominated in foreign currencies, which are stated at historical cost, are translatedto EC Dollars at the foreign exchange rate ruling at the date of acquisition.

(j) Impairment:Financial assets, other than available-for-sale assets, are reviewed at each balance sheet date to determinewhether there is objective evidence of impairment. If any such indication exists, the asset’s recoverableamount is estimated.

Originated Loans and Advances:The recoverable amount of originated loans and advances and purchased loans that are classified as held-to-maturity, is measured at amortised cost less impairment.

Loans and advances are presented net of specific and general allowances for uncollectibility. Specificallowances are made against the carrying amount of loans and advances that are identified as beingimpaired based on regular reviews of outstanding balances to reduce these loans and advances to theirrecoverable amounts. General allowances are maintained to reduce the carrying amount of portfolios ofsimilar loans and advances to their estimated recoverable amounts at the balance sheet date. Theexpected cash flows for portfolios of similar assets are estimated based on previous experience andconsidering the credit rating of the underlying customers and late payments of interest or penalties.Increases in the allowance account are recognised in the income statement. When a loan is known to beuncollectible, all the necessary legal procedures have been completed, and the final loss has beendetermined, the loan is written off to the related provision.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linkedobjectively to an event occurring after the write-down, the corresponding write-down or allowance isreversed through the income statement.

(k) Interest Income and Expenses:Interest income and expenses are recorded on the accrual basis, except where collectibility of interestincome is doubtful, in which case it is recorded when received. Non-performing loans relate to accountswhose interest payments are ninety days or more in arrears. When a loan is classified as non-performing,all accrued but uncollected interest is reversed against income. Thereafter, interest income is recognisedwhen received.





March 31, 2005



(l) Fee and Commission Income:Fee and commission income arises on financial services provided by the Bank including cashmanagement services and brokerage services. Fee and commission income is recognised when thecorresponding service is provided.

(m) Employee Benefits:During the year 2002, the Bank introduced a contributory defined benefit pension plan for itsemployees. The Bank’s net obligation in respect of the defined benefit pension is calculated byestimating the amount of future benefit that employees have earned in return for their service in thecurrent and prior periods; that benefit is discounted to determine the present value and the fair valueof any plan assets is deducted. The calculation is performed by a qualified actuary using theprojected unit credit method.

Past service by employees is recognised as an expense in the income statement on a straight-linebasis over the average period until the benefits become vested (18 years). To the extent that thebenefits vest immediately, the expense is recognised immediately in the income statement.

(n) Dividends:Dividends are recognised as a liability in the period in which they are sanctioned by the shareholders.Current year dividends not sanctioned have not been recognised as a liability.

(o) Comparative Information:Comparative information has been re-classified where necessary to conform to the current yearpresentation.

(p) Subsequent Event:National Bank of Anguilla (Private Banking and Trust) Limited, a wholly owned subsidiary of theBank, began operations on April 1,2005. The role of this company is to conduct offshore bankingand trust business in accordance with the Trust Companies and Offshore Banking Act, 2000.




March 31, 2005


3. Cash and Cash Equivalents

The Bank Group

Notes 2005 2004 2005 2004

Cash 4,827,406 4,645,838 4,784,457 4,785,366

Placements with Financial Institutions* 119,764,979 41,850,208 119,764,979 41,850,208

Accounts with other Banks* 50,209,846 51,689,939 50,209,846 51,689,939

Treasury Bills** 4,590,000 7,886,383 4,590,000 7,886,383

Eastern Caribbean Central Bank*** 32,593,552 26,035,425 32,593,553 26,035,425

211,985,783 132,107,793 211,942,835 132,247,321

*Placements with financial institutions and accounts with Banks are with institutions located outside ofAnguilla.

**Treasury Bills were issued by the St. Kitts-Nevis, St. Lucia, Grenada and St.Vincent and the GrenadinesGovernments.

***As at March 31,2005, balances with Eastern Caribbean Central Bank (ECCB) included funds depositedwith ECCB as the minimum reserve requirement. These funds are not available for the Bank’s dailybusiness.

4. Loans to Customers

2005 2004 2005 2004

Demand 20,359,764 20,597,473 20,359,764 20,597,473

Term 292,799,617 259,233,412 285,499,617 259,233,412

Non-performing Loans 22,840,231 24,022,647 22,840,231 24,022,647

Judgement Debts 335,718 878,246 335,718 878,246

336,335,330 304,731,778 329,035,330 304,731,778

Provision for Loan Losses 5 (5,559,495) (6,557,819) (5,559,495) (6,557,819)

Unearned Interest (2,433,331) (2,025,185) (2,433,331) (2,025,185)

328,342,504 296,148,774 321,042,504 296,148,774





March 31, 2005


4. Loans to Customers (continued)

Maturity Analysis

The Bank Group

Notes 2005 2004 2005 2004

On Demand 20,695,482 26,781,706 20,695,482 26,781,706

Within 1 Year 16,985,852 11,052,581 16,985,852 11,052,581

Between 1 to 5 Years 48,955,677 59,140,000 41,655,677 59,140,000

After 5 Years 249,698,319 207,757,491 249,698,319 207,757,491

336,335,330 304,731,778 329,035,330 304,731,778

At March 31, 2005, approximately eighty-seven percent 87% of the total loan portfolio has been made to residents of Anguilla, while thirteen percent 13% has been made to non-residents.

5. Provision for Loan Losses

2005 2004 2005 2004

Provision at Beginning of Year 6,557,819 7,239,573 6,557,819 7,239,573

Provision made during Year 656,784 280,540 656,784 280,540

Write-offs during Year (1,655,108) (962,294) (1,655,108) (962,294)

Provision as at End of Year 4 5,559,495 6,557,819 5,559,495 6,557,819

6. Other Assets and Receivables

2005 2004 2005 2004

Pension Plan Assets (154,925) 1,029,230 (154,925) 1,029,230

Other Assets and Receivables 13,366,711 7,150,138 13,366,711 7,160,288

13,211,786 8,179,368 13,211,786 8,189,518




March 31, 2005


6. Other Assets and Receivables (continued)

During the year 2002, the Bank introduced a contributory defined benefit pension plan. All contributionsare made to a group company: NBA Pension Funds Management Company Limited. At the end of theyear, the net assets/(liability) of the fund are specified as follows:

The Bank Group

2005 2004 2005 2004

Defined Benefit Obligation 3,306,538 1,871,494 3,306,538 1,871,494

Fair Value Of Plan Assets (2,212,728) (1,894,776) (2,212,728) (1,894,776)

Amount Under/(Over) Funded 1,093,810 (23,282) 1,093,810 (23,282)

Unrecognised Past Service Cost (938,885) (1,005,948) (938,885) (1,005,948)

Pension Plan (Assets)Liabilities 154,925 (1,029,230) 154,925 (1,029,230)

Movements in the Net PensionPlan (Asset) Liability Account:

Balance at April 1, 2004 (1,029,230) (1,094,770) (1,029,230) (1,094,770)

Contribution Received (161,527) (138,637) (161,527) (138,637)

Unrecognised Portion of Unfunded Liability 1,002,645 - 1,002,645 -

Expense recognised in the Income Statement 343,037 204,177 343,037 204,177

154,925 (1,029,230) 154,925 (1,029,230)

Amounts recognised in theIncome Statement are as follows:

Current Service Cost 161,527 138,637 161,527 138,637

Interest on Obligation 131,004 113,364 131,004 113,364

Expected Return on Plan Assets (132,634) (114,888) (132,634) (114,888)

Amortisation of Unfunded Liability 116,076 - 116,076 -

Past Service Cost recognised during the Year 67,064 67,064 67,064 67,064

343,037 204,177 343,037 204,177

Principal actuarial assumptions are as follows:

Discount Rate 7% 7% 7% 7%

Expected Return on Plan Assets 7% 7% 7% 7%

Future Salary Increase 4% 4% 4% 4%

Average period in which the benefits become vested 18 years 18 years 18 years 18 years





March 31, 2005


7. Investments

Investment in Associate

The Bank Group

2005 2004 2005 2004

Malliouhana-Anico Insurance

Company Limited-Cost 29.03% 945,000 945,000 945,000 945,000

Balance at Beginning of the Year 1,897,633 1,577,154 1,897,633 1,577,154

Dividend received in year (94,499) - (94,499) -

Bank’s share of Retained Profit 459,499 320,479 459,499 320,479

Balance at End of the Year 2,262,633 1,897,633 2,262,633 1,897,633

The Bank’s share of retained profit is based on Audited Financial Statements as at and for the year

ended December 31, 2004.

Investment in Joint Venture

National Commercial

Data Services Limited-Cost 50% 2,236,900 1,735,900 2,236,900 1,735,900

Balance as Per Equity Method 2,263,018 1,511,352 2,263,018 1,511,352

(Gain)/Loss on Joint Venture (26,118) 224,548 (26,118) 224,548

NBA Assets Limited 100% 2,800,000 2,800,000 - -

NBA Pension FundsManagement Company Limited 100% 10,000 10,000 - -

National Investment Companyof Anguilla Limited 2.13% 100,000 100,000 350,886 350,886

Provision for decline in value (75,000) (75,000) (265,611) (265,611)

25,000 25,000 85,275 85,275

Caribbean Credit CardCorporation 11.32% 550,000 550,000 550,000 550,000

Eastern CaribbeanHome Mortgage Bank 0.41% 40,500 40,500 40,500 40,500

%Ownership




March 31, 2005


7. Investments (continued)

The Bank Group

2005 2004 2005 2004

East Caribbean FinancialHolding Co. Limited 0.45% 461,077 312,672 461,077 312,672

Anguilla ElectricityCompany Limited 9.87% 3,587,750 3,587,750 3,587,750 3,587,750

Caribbean CommercialBank (Anguilla) Limited 3.5% 175,000 175,000 175, 000 175,000

Eastern CaribbeanSecurities Exchange 0.25% 25,000 25,000 25,000 25,000

Antigua-BarbudaInvestment Bank Limited 0.85% 300,000 300,000 300,000 300,000

St. Kitts-Nevis-AnguillaNational Bank Limited 0.25% 620,000 700,000 620,000 700,000

13,119, 978 11,934,907 10,370,253 9,185,182

Debt Securities beingHeld to Maturity*** 56,104,248 36,763,763 56,104,248 36,763,763

Other Debt and Equity Securities**** - - 2,152,918 1,994,138

Total Debt and Equity Securities 69,224,226 48,698,670 68,627,419 47,943,083

*Stated at cost less any impairment since the fair value cannot be reliably measured except for EastCaribbean Financial Holding Co. Limited and St. Kitts-Nevis-Anguilla National Bank Limited, which arereflected at fair value based on the bid price prevailing at the balance sheet date.

**The entity is inactive and has no assets and liabilities.***This represents investments in money market funds and Federal Agency Bonds. The Bank makes these

investments through The Morgan McReynolds Group at Smith Barney Inc., the Company’s investmentadvisor.

****These represent investments in money market funds, stocks and US Government and Federal AgencyBonds made by NBA Pension Funds Management Company Limited, a wholly-owned subsidiary of NationalBank of Anguilla Limited. NBA Pension Fund Management Company Limited makes these investmentsthrough The Morgan McReynolds Group at Smith Barney Inc., the Company’s investment advisor.

It should be noted that the net income and the shareholders’ equity for the financial year ended 2004 havebeen restated as a result of IAS 39 (revised). The gain on investment for the financial year ending March31, 2004 of $445,255 has been removed from the income statement and transferred to the balance sheet inline with IAS 39 (revised). The net effect is to reduce the net income in the income statement by $445,255and to increase the shareholders’ equity in the balance sheet by the same amount.

8. Investment PropertyThe Bank Group

2005 2004 2005 2004Opening Balance - - 2,402,113 2,027,688Additions made during the Year - - 7,431,900 374,425Disposals during the Year - - - -Closing Balance - - 9,834,013 2,402,113

%Ownership





March 31, 2005


8. Investment Property (Continued)

The investment properties represent investment in land and buildings. The value is based on the auction pricepaid by NBA Assets Limited to acquire the properties, which approximates fair value at the time of purchase.

9. Property, Plant and Equipment

Furniture,Land Fittings and Motor Total Total

and Building Equipment Computers Vehicles Bank Group

At Cost:

April 1, 2004 12,333,276 3,648,935 2,467,501 351,149 18,800,861 18,800,861

Additions - 114,644 183,675 - 298,319 298,319

March 31, 2005 12,333,276 3,763,579 2,651,176 351,149 19,099,180 19,099,180

Depreciation:

April 1, 2004 938,796 1,986,212 1,910,599 96,043 4,931,650 4,931,650

Charge for the Year 308,616 508,083 424,077 70,229 1,311,005 1,311,005

March 31, 2005 1,247,412 2,494,295 2,334,676 166,272 6,242,655 6,242,655

Net Book Values:

March 31, 2005 11,085,864 1,269,284 316,500 184,877 12,856,525 12,856,525

Capital work in progress 5,279 5,279

12,861,804 12,861,804

Net Book Values:

March 31, 2004 11,394,480 1,662,723 556,902 255,106 13,869,211 13,869,211

Capital work in progress - -

13,869,211 13,869,211

Land and Building include leasehold land at an amortised value of $347,765 (2004: $355,409). The leasewas signed between the Government of Anguilla and National Bank of Anguilla Limited for 1 acre of landon March 31,1998 for a term of 99 years.




March 31, 2005


10. Deposits from Customers The Bank Group

2005 2004 2005 2004

Demand 111,265,211 79,765,531 111,265,211 79,765,531

Savings 183,754,182 149,399,978 183,754,182 149,399,978

Time 275,243,776 207,515,256 275,243,776 207,515,256

570,263,169 436,680,765 570,263,169 436,680,765

At March 31, 2005, approximately eight percent (8%) of deposits held are from North America, threepercent (3%) from Europe, four percent (4%) from the Caribbean and eighty five percent (85%) of the deposit portfolio is local. Approximately eighty four percent (84%) of deposits held are from residents of Anguilla, while sixteen percent (16%) are from non-residents.

11. Other Liabilities2005 2004 2005 2004

Accrued Expenses 1,521,831 5,157,916 1,535,931 5,168,868

Pension Obligation - - 2,236,036 2,045,302

1,521,831 5,157,916 3,771,965 7,214,170

12. Share Capital

The authorised share capital is unlimited.

2005 2004 2005 2004

Issued and fully Paid Up at no Par Value

Balance at Beginning of the Year

(1,800,024 Ordinary Shares) 30,675,600 30,675,100 30,675,600 30,675,100

Issues during the Year - - - -

Amounts paid during the Year 700 500 700 500

Balance at End of Year(1,800,024 Ordinary Shares) 30,676,300 30,675,600 30,676,300 30,675,600





March 31, 2005


13. Statutory Reserve The Bank Group

2005 2004 2005 2004

Balance at Beginning of Year 13,074,173 11,621,441 13,074,173 11,621,441

Transfer from Retained Earnings 1,448,280 1,452,732 1,448,280 1,452,732

Balance at End of Year 14,522,453 13,074,173 14,522,453 13,074,173

Under the Banking Act, at least 20% of net income for the year should be transferred to the statutoryreserve account, if the amount of such Reserve is less than 100% of the paid up capital.This reserve cannot be utilized for any purpose other than when the Bank goes into liquidation orwhen the Eastern Caribbean Central Bank specifically allows for any purpose.

14. General and Administration Expenses

2005 2004 2005 2004

Staff Costs* 5,974,287 6,142,994 5,974,287 6,142,994

Directors' Emoluments 545,832 432,647 545,832 432,647

Depreciation 1,311,008 1,230,437 1,311,005 1,230,437

Audit Fees 204,131 162,000 217,631 175,500

Professional Fees 199,996 447,630 204,115 447,630

Occupancy Costs 1,130,752 1,453,657 1,130,755 1,453,657

Public Relations 1,295,965 700,073 1,293,238 700,073

Other Expenses 3,694,431 2,178,374 3,698,509 2,185,424

14,326,402 12,747,812 14,375,372 12,768,362

*Staff costs for 2004 include staff training cost of $613, 806 which was previously capitalised.




March 31, 2005


15. Tax on Assets

Under the Licensed Financial Institutions Levy Act, every licensed financial institution shall pay onor before the first day of July in each year, a levy of 0.3% of the value of such total assets of thelicensed financial institution as at December 31 in the calendar year immediately prior to the yearof payment.

16. Related Party Disclosure

Loans to Related Parties The Bank Group

2005 2004 2005 2004

Loans to Directors 7.25%-10% 4,547,250 5,173,022 4,547,250 5,173,022

Loans to Employees 7.5%-10% 12,290,819 11,918,675 12,883,599 11,918,675

Loans to Employees- Studentand Computer loans 0% 766,316 683,843 173,536 683,843

Loans to Joint Venture 7% 1,200,403 1,227,468 1,200,403 1,227,468

Loans to Related Companies 7.5% - 13% 7,465,555 4,563,478 7,465,555 4,563,478

26,270,343 23,566,486 26,270,343 23,566,486

The loans to Directors and Employees are secured by Assets including Cash.

Deposits from Related Parties The Bank Group

2005 2004 2005 2004

Deposits from Directors Up to 7% 8,188,438 7,509,643 8,188,438 7,509,643

Deposits from Employees Up to 5.75% 3,470,229 1,928,750 3,470,229 1,928,750

Deposits from Joint Ventures Up to 7%(demand) - 1,295,761 309,562 1,295,761 309,562

Deposits from Associates Up to 7% 3,831,440 2,689,422 3,831,440 2,689,422

Deposits from Related Companies Up to 9% 1,318,761 373,799 1,318,761 373,799

18,104,629 12,811,176 18,104,629 12,811,176

InterestRate

InterestRate





March 31, 2005


16. Related Party Disclosure (Continued)

Remuneration to Directors and Executive Staff

The Bank Group

2005 2004 2005 2004

Directors' Fees and Expenses 545,832 432,647 545,832 432,647

Executive Staff Salaries 1,212,496 1,129,610 1,212,496 1,129,610

Other Related Party Transactions

Service Maintenance Fees paid to JointVenture 1,142,214 486,119 1,142,214 486,119

Insurance Expenses paid to Associate 403,040 381,492 403,040 381,492

Real Estate purchased by NBA Assets Limited 7,431,902 374,423 7,431,902 374,423

17. Commitments

(a) Capital

There are no capital commitments at March 31, 2005 (2004: none).

(b) Customer Loans and Others

Customer loans approved at March 31, 2005 but not disbursed, amounted to $10,882,081(2004: $11,263,338). Un-drawn overdraft facilities were $12,659,763 (2004: $6,100,438)and guarantees and letters of credit were $3,314,063 (2004: $4,337,634).

18. Risk Management Disclosures

The Bank is exposed to credit risk, liquidity risk and market risk. Market risk includes foreign currency risk, interest rate risk and equity price risk.




March 31, 2005


18. Risk Management Disclosures (continued)

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation andcause the other party to incur a financial loss.

The Bank’s primary exposure to credit risk arises through its loans and advances. The amount ofcredit exposure in this regard is represented by the carrying amounts of the assets on the balancesheet. In addition, the Bank is exposed to off balance sheet credit risk through commitments toextend credit and guarantees issued.

Concentrations of credit risk (whether on or off balance sheet) that arise from financial instrumentsexist for groups of counter-parties when they have similar economic characteristics that would causetheir ability to meet contractual obligations to be similarly affected by changes in economic or otherconditions.

The major concentrations of credit risk arise by location and type of customer in relation to theBank’s investments, loans and advances, commitments to extend credit and guarantees issued. TheBank has no significant exposure to any individual customer or counterpart.

Total economic sector credit risk concentrations are presented in the table below:

2005 2004

(000’s) (000’s)Agriculture 1,303 1,521Fisheries 362 564Mining & Quarrying 7,486 7 ,786Manufacturing 2,875 2,926Utilities 322 2,734Construction/Land Development 12,105 10,520Distributive Trades 18,823 17,567Tourism 53,567 49,953Entertainment 5,105 2,816Transportation 7,826 7,892Financial Institutions 404 412Professional Services 26,653 23,528Public Administration 14,967 11,266Personal - Housing 127,741 126,102Personal - Other 56,461 38,267Judgment Debts 335 878Bank Total 336,335 304,732

The Bank requires collateral in respect of credit facilities granted. Collateral is usually in the form ofland and buildings. Management has a credit policy in place and the exposure to credit risk ismonitored on an ongoing basis. Credit evaluations are performed on all customers.

Appropriate loan loss provisions are made taking into consideration the Eastern Caribbean CentralBank Prudential Guidelines on loan loss provision. Additionally, at the close of each financial year,all loans of $270,000 or more as well as all loans that are in arrears for 60 days or more are reviewedand an additional provision is made, if necessary. In addition, a 1.0% general provision is made tothe remaining loan portfolio.





March 31, 2005


18. Risk Management Disclosures (continued)

Liquidity Risk

Liquidity risk arises in the general funding of the Bank’s activities and in the management of positions. Itincludes both the risk of being unable to fund assets at appropriate maturities and rates and the risk ofbeing unable to liquidate an asset at a reasonable price and in an appropriate time frame.

The Bank has access to a diverse funding base. Funds are raised using a broad range of instrumentsincluding deposits, other liabilities and share capital. This enhances funding flexibility, limits dependenceon any one source of funds and generally lowers the cost of funds. The Bank strives to maintain abalance between continuity of funding and flexibility through the use of liabilities with a range ofmaturities. The Bank continually assesses liquidity risk by identifying and monitoring changes in fundingrequired to meet business goals and targets set in terms of the overall Bank strategy. In addition, theBank holds a portfolio of liquid assets as part of its liquidity risk management strategy.

Foreign Currency Risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes inforeign exchange rates.

The Bank incurs foreign currency risk on transactions that are denominated in a currency other than thefunctional currency, the EC Dollar. The main currency giving rise to this risk is the US Dollar. Thirty fourpercent (34%) of the loans in the total loan portfolio are EC Dollar loans while sixty six percent (66%)are US Dollar loans. Seventy nine percent (79%) of held to maturity investments are in US Dollars.Twenty percent (20%) of cash resources are in EC Dollars and sixty six percent (66%) are in US Dollarswith the remaining fourteen percent (14%) being Pound Sterling and Canadian Dollars. EC Dollardeposits contribute twenty two percent (22%) to the total deposits and US Dollar deposits seventy sevenpercent (77%) with the remaining one percent (1%) being Pound Sterling and Canadian Dollars. Further,the EC Dollar is pegged to the US Dollar at the rate of 2.70. After evaluating these factors, foreigncurrency risk is considered as minimum.




March 31, 2005


18. Risk Management Disclosure (continued)

Interest Rate Risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes inmarket interest rates. Interest rate risk is affected where there is a mismatch between interest earningassets and interest-bearing liabilities, which is subject to interest rate adjustments within a specifiedperiod.

In respect of income-earning financial assets and interest-bearing financial liabilities, the followingtable indicates their effective interest rates at balance sheet date and the periods in which they arere-priced.

In thousands of EC Dollars

Note 2005 2004

Effective EffectiveInterest 12 Months 1 - 5 Years More than Interest 12 Months l - 5 Years More thanRate % Total Or Less 5 Years Rate % Total Or Less 5 Years

Debt Securities held to 7 3.6 56,104 12,965 33,273 9,866 3.9 36,763 8,100 13,353 15,310maturityCash Resources 3 1.0 211,986 211,986 - - 1.1 132,108 132,108 - -Loans to Customers 4 9.7 336,335 37,681 48,956 249,698 10.1 304,732 37,835 59,140 207,757Deposits from Customers 10 3.4 (570,263) (435,893) (124,912) (9,458) 3.2 (436,681) (382,795) (51,861) (2,025)Re-pricing Gap 34,162 (173,261) (42,683) 250,106 36,922 (204,752) 20,632 221,042

Equity Price Risk

Equity price risk is the possibility that equity prices will fluctuate affecting the fair value of equityinvestments and other instruments that derive their value from a particular equity investment or indexof equity prices. The primary exposure to equity prices arises from trading activities. The Bankmanages its non-trading equity investments in response to changing market conditions and limits therisk by maintaining a diversified portfolio.

Fair Values

Fair value of the debt securities being held to maturity is as follows:

The Bank Group

2005 2004 2005 2004

Fair Value 56,596,235 37,473,181 56,596,235 37,473,181

Carrying Amounts (56,104,248) (36,763,763) (56,104,248) (36,763,763)

Unrecognised Gain 491,987 709,418 491,987 709,418




Selected Statistical Data For The Bank

OPERATING & AVERAGE BALANCE SHEET RATIOS

OPERATING RATIOS USINGAVERAGE BALANCE SHEET DATA

2005 2004 2003 2002 2001

Net Income to:

Paid in Capital 23.6% 22.2% 21.0% 29.4% 37.2%

Shareholders' Equity (ROE) 13.2% 13.2% 13.0% 17.4% 20.1%

Earning Assets (ROEA) 1.5% 1.7% 1.8% 2.2% 2.3%

Total Assets (ROA) 1.3% 1.5% 1.6% 1.9% 2.0%

BALANCE SHEET RATIOS

Shareholders’ Equity to:

Total Assets 8.9% 10.7% 11.7% 12.7% 9.1%

Net Loans 17.2% 18.0% 20.0% 19.9% 13.5%

Deposits 9.9% 12.2% 13.5% 14.7% 10.8%

Net Loans to Total Deposits 57.6% 67.8% 67.2% 73.8% 80.5%

Earning Assets to Total Assets 87.6% 86.0% 85.1% 87.0% 87.6%

OTHER RATIOS

Non-Interest Income To Staff Cost 79.1% 65.8% 77.4% 77.3% 86.5%

Staff Cost To Average Assets 1.1% 1.3% l.l% 1.2% 1.3%

Cost per Staff Member (EC$) $79k $95k $70k $66k $52k

Assets per Staff Member (EC$) $8.3m $7.7m $7.1 m $6.1 m $4.6m

Profit per Staff Member(EC$) $94k $105k $104k $105k $82k

Cost to Income (Efficiency) 69.0% 67.9% 67.7% 64.0% 67.7%

Interest Expense to lnterest Income 48.8% 44.4% 43.0% 41.8% 39.5%



Selected Statistical Data For The Bank (continued)

SOURCE AND DISTRIBUTION OF INCOME

2005 2004 2003 2002 2001

Source of Income:

Interest Income 88.3% 88.4% 89.8% 89.0% 88.4%

Non-lnterest Income 11.7% 11.6% 10.2% 11.0% 11.6%

100.0% 100.0% 100.0% 100.0% 100.0%

Distribution of Income

Interest on Deposits 43.1% 39.1% 38.8% 37.2% 34.9%

Salaries and Personnel Benefits 14.6% 17.5% 13.2% 14.3% 13.4%

Other Operating Costs 23.7% 22.8% 22.0% 21.6% 25.4%

Reserve Fund 3.5% 4.1% 4.9% 5.0% 4.6%

General Reserve 0.0% 0.0% 0.0% 0.0% 0.0%

Appropriations to Losses 1.0% 1.2% 6.4% 4.3% 5.3%

Dividends 10.5% 11.2% 11.8% 4.9% 15.5%

Retained Earnings 3.6% 4.1% 2.9% 12.7% 0.9%

100.0% 100.0% 100.0% 100.0% 100.0%

ANALYSIS OF EXPENSE

Personnel 17.7% 21.9% 16.4% 18.4% 16.9%

Financial 52.3% 48.7% 48.2% 48.1% 44.2%

Administration 30.0% 29.4% 35.4% 33.5% 38.9%

100.0% 100.0% 100.0% 100.0% 100.0%





FIVE YEAR OPERATING RESULTS(In Thousands EC$)

2005 2004 2003 2002 2001

Interest Income $36,218 $30,923 $28,629 $24,358 $21,136

Interest on Deposit Liabilities 17,680 13,718 12,321 10,192 8,349

Net Interest Income 18,538 17,205 16,308 14,166 12,787

Provision for Loan Losses 657 281 2,027 1,166 1,259

Net Interest Income After Loan Loss Provision 17,881 16,925 14,281 13,000 11,528

Other Income 4,358 3,722 2,810 2,474 2,612

22,239 20,647 17,091 15,474 14,140

Personnel Expenses 5,974 6,143 4,191 3,906 3,197

Administrative and Other Expenses 9,734 7,881 7,008 5,935 6,081

15,708 14,024 11,199 9,841 9,278

Profit Before Provision for Diminution inInvestments 6,531 6,622 5,891 5,633 4,862

Gain/Loss on Joint Venture 251 (124) (100) 0 0

Share of Associates Company Profit 459 320 374 258 0

Increase in Provision for Diminution inInvestments 0 0 59 288 154

Profit Before Appropriations 7,241 6,818 6,224 6,179 5,016

Appropriations:

General Reserves 0 0 0 0 0

Reserve Fund 1,448 1,453 1,564 1,357 1,100

Dividends Paid- Declared and Sanctioned inCurrent Year 4,320 3,924 3,750 1,350 1,350

Total Appropriations 5,768 5,377 5,314 2,707 2,450

Un-appropriated Profit Carried to Retained Earnings 1,473 1,442 910 3,472 2,566




FIVE YEAR BALANCE SHEET TOTALS (In Thousands EC$)

ASSETS2005 2004 2003 2002 2001

Cash and Short-Term Funds 179,392 106,072 93,028 67,609 43,130

Advances and Other Accounts 328,343 296,149 250,099 228,174 191,097

Statutory Cash Deposits 32,594 26,036 22,024 16,687 12,161

540,328 428,256 365,151 312,470 246,388

Property and Equipment 12,862 13,869 14,048 13,855 11,573

Investments 69,224 48,699 35,994 24,105 18,237

Interest Receivable 410 2,012 1,857 1,628 1,355

Other Assets 13,212 8,179 10,798 6,999 3,785

95,708 72,760 62,697 46,587 34,950

636,036 501,016 427,848 359,057 281,338

LIABILITIES

Customers’ Deposits 570,263 436,681 372,168 309,142 236,169

Interest Payable 7,900 5,755 4,355 3,572 2,736

Other Liabilities 1,522 5,168 1,242 845 16,828

579,685 447,594 377,765 313,559 255,733

SHAREHOLDERS' FUNDS

Issued Share Capital 30,676 30,675 30,675 28,563 13,500

Statutory Reserve 14,523 13,074 11,621 10,057 8700

Unrealized Gain on Investments 452 445 - - -

Retained Earnings 10,701 9,228 7,787 6,878 3,405

56,352 53,422 50,083 45,498 25,605

636,036 501,016 427,848 359,057 281,338




Important Relationships & General Information

REGULATOR

THE EASTERN CARIBBEAN CENTRAL BANK

OVERSEAS CORRESPONDENT BANKS

Worldwide BANK OF AMERICA NT & SA

Canada BANK OF AMERICA

Eastern Caribbean THE ROYAL BANK OF CANADA

Antigua ANTIGUA COMMERCIAL BANK

United Kingdom ROYAL BANK OF SCOTLAND

Puerto Rico FIRST BANK

United States BANK OF AMERICA MIAMI

BANK OF AMERICA NEW YORK

UNION PLANTERS BANK

St Maarten RBTT BANK

St. Lucia BANK OF ST LUCIA

Nevis BANK OF NEVIS

St. Kitts-Nevis ST. KITTS-NEVIS-ANGUILLA

NATIONAL BANK

ROYAL BANK OF CANADA

OTHER RELATIONSHIPS

Caribbean Association of Indigenous Banks

American Express

Caribbean Credit Card Corporation

Eastern Caribbean Home Mortgage Bank

S.W.I.F.T.

Eastern Caribbean Institute of Banking and Financial Services

Eastern Caribbean Securities Exchange

The Morgan McReynolds Group at Smith Barney Inc.

National Commercial Data Services

MAIN OFFICEThe ValleyAnguillaBritish West IndiesTel. (264) 497-2101/2007Fax: (264) 497-3310Email: [email protected]: www.nba.ai

CORPORATE OFFICEThe ValleyAnguillaBritish West IndiesTel: (264) 497-3001/2007Fax: (264) 497-3870E-mail: [email protected]: www.nba.ai

POSTAL ADDRESSNational Bank of Anguilla LimitedP O Box 44The ValleyAnguillaBritish West Indies

ATM LOCATIONSNational Bank of Anguilla LimitedMain Office, The Valley

Romcan Mini-Market, South Hill

Sydans, Sandy Ground

Palm Plaza, West End

Wallblake Airport, Wallblake

Island Gases, Long Path

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