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B B Holdings Ltd – ‘20-F’ for 3/31/05

On:  Friday, 7/8/05, at 2:39pm ET   ·   For:  3/31/05   ·   Accession #:  1193125-5-139547   ·   File #:  0-19775

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/08/05  B B Holdings Ltd                  20-F        3/31/05   11:1.8M                                   RR Donnelley/FA

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 1: 20-F        Annual Report of a Foreign Private Issuer           HTML   1.33M 
 2: EX-1.3      Amendments to the Articles of Association of        HTML     19K 
                          Carlisle Holdings Limited                              
 4: EX-4.18     Amendment 1, Dated as of September 17, 2004         HTML     49K 
 5: EX-4.19     Amendment 2 Dated as of December 15, 2004           HTML     55K 
 3: EX-4.8      Schedule of Policies and Payments                   HTML     66K 
 6: EX-8        List of Subsidiaries                                HTML     90K 
 7: EX-12.1     Section 302 CEO Certification                       HTML     14K 
 8: EX-12.2     Section 302 CFO Certification                       HTML     14K 
 9: EX-13.1     Section 906 CEO Certification                       HTML      8K 
10: EX-13.2     Section 906 CFO Certification                       HTML      8K 
11: EX-14       Consent of Pricewaterhousecoopers LLP               HTML      7K 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For fiscal year ended March 31, 2005

OR

Commission file number 0 - 19775

CARLISLE HOLDINGS LIMITED

(Exact name of Registrant as Specified in its Charter)

BELIZE

(Jurisdiction of Incorporation or Organization)

PO Box 1764

60 Market Square

Belize City, Belize

Central America

(Address of Principal Executive Offices)

Securities Registered or to be Registered pursuant to Section 12(b) of the Act:

None

Securities Registered or to be Registered pursuant to Section 12(g) of the Act:

Ordinary Shares each of no par value, each with an accompanying one-third of a Series A Preference Share purchase right

Securities for which there is a Reporting Obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.

Ordinary Shares of no par value – 62,554,040*

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark which financial statement item the registrant has elected to follow.    ITEM 17  ¨    ITEM 18  x

Table of Contents

CARLISLE HOLDINGS LIMITED

TABLE OF CONTENTS

Table of Contents

Carlisle Holdings Limited Annual Report on Form 20-F for fiscal year ended March 31, 2005

The consolidated financial statements of Carlisle Holdings Limited (“CHL”) and its subsidiaries (together referred to herein as the “Company”) have been prepared in United States dollars (“US dollars” or “$”) in accordance with generally accepted accounting principles in the United States (“US GAAP”).

This Annual Report contains translations of certain amounts from various currencies into US dollars. The translations, except where expressly otherwise stated, of foreign currencies have been made at the noon buying rate in New York City for cable transfers in foreign currencies as announced for customs purposes by the Federal Reserve Bank of New York on the date of the information so translated. The translation of Belize dollars into US dollars has been made at a fixed rate of two Belize dollars to every one US dollar. This exchange rate has been fixed by the Government of Belize since 1976.

Certain statements in this Annual Report constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements contained herein regarding the consummation and benefits of future acquisitions, as well as expectations with respect to future revenues, operating efficiencies, net income and business expansion, are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of the Company, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Factors that might affect such forward looking statements include, among others, overall economic and business conditions, the demand for the Company’s services, competitive factors, regulatory approvals and the uncertainty of consummation of future acquisitions. Additional factors which may affect the Company’s businesses and performance are set forth in submissions by CHL with the United States Securities and Exchange Commission.

PART I

Item 1. DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

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Item 3. KEY INFORMATION

A. Selected Financial Data

The selected financial data presented below has been derived from the audited consolidated financial statements of the Company. The information presented below should be read in conjunction with the consolidated financial statements of the Company and the related notes thereto and “Operating and Financial Review and Prospects”.

Consolidated income statement and other data

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Consolidated balance sheet data

The acquisition of Ohsea has been accounted for by CHL using the “as-if” pooling of interests method of accounting due to the existence of a common controlling shareholder, Lord Ashcroft, KCMG, in both CHL and Ohsea. Lord Ashcroft is the Chairman of CHL. This method of pooling of interests assumes that the combining companies have been merged since their inception (being the time from which Lord Ashcroft held a controlling interest in each entity) and requires that the historical consolidated financial statements of the Company are pooled with those of Ohsea and restated, with a minority interest eliminated for all periods where a non-controlling minority interest existed in the share capital of Ohsea. The non-controlling minority interest in Ohsea was acquired by CHL in April 2004 and was accounted for by CHL using the purchase method. Ohsea acquired Professional Staff in July 2003 and accounted for the acquisition using the purchase method.

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disposal has been included in income from discontinued operations for all reporting periods. The net gain on disposal of Belize Telecommunications amounted to $4.7 million and has been included in income from discontinued operations for the year ended March 31, 2004.

B. Capitalization and Indebtedness

Not applicable

C. Reasons for the Offer and Use of Proceeds

Not applicable

D. Risk Factors

Belize

Belize has been an independent country since 1981. Prior to its independence, Belize (formerly known as British Honduras) was a colony of Great Britain. Since its independence, Belize has been engaged in a program of developing its industries and economic infrastructure and making improvements in basic social services. Belize is bordered by southern Mexico and by Guatemala, with which a long outstanding territorial dispute remains unresolved, although diplomatic relations were restored between the two countries in 1991. However, Belize has a long history of mostly peaceful coexistence with neighboring countries, and has a stable democracy with successive governments that have encouraged foreign investment.

Foreign locations

The Company operates in a number of countries, including the United States, the United Kingdom and Belize.

The Company operates, and may in the future continue to operate, in certain selected countries in the Central American region with varying histories of political and economic stability. To date, the Company has focused on some of the more stable countries in the region though there can be no assurance that the currently favorable factors affecting these countries will not change.

Investment in a developing country, such as Belize, or any of the countries in Central America, can involve certain risks, including possible restrictions on transfers of income or assets, the restriction or elimination of foreign ownership of land or other assets, the restriction or prohibition of the transfer of income or assets outside of the

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country, or the appropriation of assets not domestically owned. In addition, countries in the region have historically been subject to, among other things, high inflation, difficulties in repatriation of capital, volatile exchange rates and possible unenforceability of contracts which, although CHL believes the region is improving in these areas, can be factors that may materially affect one or more of the Company’s businesses or investments from time to time.

Currency fluctuations

CHL’s United States operations have no material exposure to currency fluctuations. The Company is susceptible to currency fluctuations between US dollars, the Company’s reporting and functional currency, and UK pounds sterling, the functional currency of CHL’s United Kingdom businesses.

CHL’s strategy is to give preference to transactions involving companies with recurring convertible currency revenues or export markets to minimize the risk of restrictions on repatriation or the adverse effects of currency devaluations. CHL’s Belize operations are conducted in Belize currency which has been fixed by the Government of Belize at two Belize dollars to every one US dollar since 1976. There can be no assurance that the Government of Belize will maintain this rate and will not change its policy to allow the exchange rate to fluctuate in the future. A devaluation of the Belizean dollar could have a material adverse effect on the Company’s earnings and CHL’s ability to pay dividends.

Preferential markets

Belize and certain other countries in Central America enjoy preferential market access to the European Union with regard to banana and sugar exports, and to the United States with regard to citrus, through the Caribbean Basin Initiative. There can be no assurance that the benefits accruing to those countries through these arrangements will not be adversely affected by changes in the European Union market or by the impact of the North American Free Trade Agreement with regard to the Mexican, Canadian and US markets. Any such adverse effect may impact the economic environment of the countries in the region, which may, in turn, adversely affect the Company’s operations.

Hurricanes

Serious hurricanes have affected Belize in the past, the worst of which were in 1931 and 1961. Less serious hurricanes occurred in 1978, 1998, 2000 and 2001. Depending on the extent of damage, a serious hurricane could have a material adverse effect upon the physical infrastructure of Belize and a consequential effect on the economic stability of Belize. This could, under certain circumstances, lead to increased lending activity to adversely affected businesses and consumers, yet it can also be expected generally to slow economic growth and have an overriding negative effect on the Belizean economy as a whole. Any such negative effect would materially affect the Company and its results of operations.

Governmental and regulatory factors

Governmental actions concerning the economies of those countries where CHL operates have had and could continue to have a significant effect on private sector entities such as CHL, and on market conditions, prices and returns on equity securities, including those of CHL.

The Company’s results of operations and the value of the ordinary shares of CHL may be affected by inflation, currency devaluation, interest rates, changes in Government policy (including foreign investment policy and taxation), social instability and other political, economic or diplomatic developments in or affecting Belize or other countries in which the Company operates. CHL cannot provide assurance that future developments in the Belizean or other relevant economies, over which CHL has no control, may not adversely affect the Company’s operations.

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In 1990 an investment agreement was concluded between the Government of Belize and CHL (the “Investment Agreement”), which was evidenced, in part, through the subsequent enactment of Part XI of the International Business Companies Act, 1990 of Belize, as amended (the “IBC Act”). CHL benefits substantially from the Investment Agreement and from its special status under the IBC Act. Specifically, CHL is exempt from all forms of taxes and duties in Belize for a period of 30 years. This period expires on April 30, 2020, but may be extended by the Minster of Finance of Belize. CHL may also issue shares to residents of Belize and make loans to its subsidiaries in Belize without obtaining exchange control permission.

There can be no assurance that the Government of Belize will not further modify, amend, repeal or enact rules, regulations or laws, including retroactive amendments, that will eliminate or curtail the benefit of these various concessions and rights.

There can be no assurance that the Government of Belize, nor any other government in countries in which the Company invests or operates, will not further modify, amend, repeal or enact rules, regulations or laws, including retroactive amendments, that will eliminate or curtail the benefit of the various concessions and rights applicable to the Company’s businesses and investments.

As an international business company under the IBC Act, CHL is deemed to be non-resident in Belize for exchange control purposes. Accordingly, there are no limitations currently in effect on the rights of non-residents of Belize to hold, transfer or vote shares in CHL. There can be no assurance, however, that the Government of Belize will not further modify, amend, repeal or enact rules, regulations or laws that will impose restrictions on the rights of non-Belizean investors to hold, transfer or vote shares in CHL.

Performance of businesses and investments

Facilities and Staffing Services:

CHL is planning to develop and expand the Facilities Services and Staffing Services divisions by a combination of organic growth and, in the medium term, selective acquisitions of businesses in existing or related activities. Neither Division is dependent on any material individual customer, unusually competitive conditions, or other factors, other than normal market and general economic conditions. As a result of the current economic environments in both the United States and the United Kingdom, growth in organic sales revenues and margins in certain areas of its operations have proved difficult to achieve. This environment may continue, dependent upon general economic and market conditions. Whilst the Company is actively managing this overall situation, principally through pricing and cost control measures, it is currently unclear as to what effect these overall market and economic conditions may have on the Company’s future operating and financial performance.

Financial Services:

The Belize Bank Limited (the “Bank”) currently anticipates that its loan portfolio will continue to grow, although not necessarily at the same rate as in the past. As a result of this increase, the Bank’s historic loan loss experience may not be indicative of its future loan loss experience. As the Bank’s loan portfolio continues to grow, the Bank believes that loan losses will increase. Nevertheless, the Bank has adopted policies and procedures to deal with expected losses and to adjust its allowance for loan losses accordingly. The allowance for loan losses is believed by the Bank to be adequate to cover all known losses and any losses inherent in its loan portfolio.

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Under regulations governing the Bank, the Central Bank of Belize (the “Central Bank”) is empowered, at any time, to revoke a banking license or impose or vary terms and conditions to which the license is subject on grounds set out in the regulations. There can be no assurance that the banking license granted to the Bank will not be cancelled or that conditions will not be attached to it in the future.

Regional investment:

The businesses of Grupo Agroindustrial CB, S.A. and related companies (together known as “NUMAR”) are subject to economic factors and conditions which CHL, due to the non-controlling nature of the Company’s equity investment, is not in a position to address directly other than through CHL’s active board participation. Furthermore, the performance of NUMAR is affected by world demand and supply conditions for edible oils, weather and crop factors and general economic and market conditions in Costa Rica and other countries in which NUMAR operates.

Terrorism

Terrorist acts or acts of war (wherever located around the world) may cause harm, damage or disruption to the employees, facilities, customers or suppliers of CHL and its subsidiaries and associates, which could have a material adverse effect on the Company’s earnings and financial position. The terrorist attacks that took place in the United States in September 2001 have created, and may continue to create, many economic and political uncertainties, some of which may adversely impact the Company’s businesses and resultant earnings. The long-term effects on the Company’s businesses of these, and any subsequent events, are unknown. The potential for future terrorist attacks, any national and international responses to such attacks, and other acts of hostility or war have created, and may continue to create, many economic and political uncertainties, which could adversely affect the Company’s businesses and earnings, in ways that cannot presently be predicted. In addition, as a multi-national company, with significant operations located in the United States and in the United Kingdom, the Company may be impacted by actions against the United States and the United Kingdom. The Company is principally uninsured against losses and interruptions caused by terrorist acts and acts of war.

Controlling shareholder

CHL’s major shareholder is Lord Ashcroft, KCMG, Chairman of CHL, who as of May 31, 2005 beneficially owned and controlled 44,120,884 ordinary shares of CHL (70.5 percent of the issued and outstanding ordinary shares of CHL). CHL’s constitutional documents do not provide for cumulative voting in the election of directors. Consequently, as a result of his beneficial ownership, Lord Ashcroft controls CHL and retains the power to elect all of its directors and to determine the outcome of any action requiring shareholder approval.

Item 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

CHL was incorporated in Belize in January 1987 as a general business corporation, and reincorporated in May 1990 as an international business company under the IBC Act. The liability of the members of CHL is limited.

CHL is currently engaged in three service businesses - Facilities Services principally operating in the United States and the United Kingdom; Staffing Services operating in the United Kingdom, the Republic of Ireland and the United States; and Financial Services principally operating in Belize.

CHL also continues to hold a significant equity investment in NUMAR.

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In January 2001, CHL acquired from Lord Ashcroft a 23.5 percent interest in Belize Telecommunications. At that time, the Company held a 27.6 percent equity investment in Belize Telecommunications. Accordingly, the Company consolidated Belize Telecommunications as a subsidiary with a 48.9 percent minority interest. In November 2001 and November 2003, CHL increased its interest in Belize Telecommunications to 51.7 percent and 52.5 percent, respectively, with, respectively, a 48.3 percent and 47.5 percent minority interest.

In February 2004, CHL disposed of its entire 52.5 percent interest in Belize Telecommunications.

In April 2004, CHL acquired the entire issued share capital of Ohsea – see Item 7.B - Related Party Transactions.

The registered office of CHL is located at PO Box 1764, 60 Market Square, Belize City, Belize, Central America, telephone +501-227-7178, facsimile +501-227-4443. The Company’s principal subsidiary in the United States is OneSource Holdings, Inc. which maintains offices at 1600 Parkwood Circle, Suite 400, Atlanta, Georgia, 30339, telephone 770-308-5566.

B. Business Overview

Business strategy

CHL’s main priority remains that of building shareholder value.

CHL remains committed to a strategy of development and growth both organically and, in the medium term, through selective acquisitions in both the Facilities Services and the Staffing Services divisions. CHL considers that the markets in which the Facilities Services and Staffing Services divisions of CHL operate are large and highly fragmented and that considerable opportunities exist for consolidation within these markets and within these service sectors generally, both in the United States and Europe.

CHL considers that there are opportunities to use the critical mass of both the Facilities Services and the Staffing Services divisions to develop and grow through organic growth and, in the medium term, through selective acquisitions. CHL’s strategy for these businesses is to group services, where appropriate, to meet customers’ different demands and to provide flexible, broadly based service packages to its customers. CHL believes that this business development strategy will enhance the recurring revenue base of both divisions.

CHL considers that there are a number of ways to deliver strong performance, including improving customer retention; ensuring that existing services meet the highest standards; marketing higher margin services across the large, established customer base; adding selective acquisitions in the medium term to leverage the customer base; of each division; and leveraging technology to improve efficiency.

While these businesses operate in competitive markets, with limited barriers to entry, CHL is confident that its established management is well positioned to further develop its business operations organically and to take advantage of opportunities to acquire complementary businesses within the support services sector.

CHL’s strategy with respect to its Financial Services business is to maintain and develop the Bank’s dominant position as the leading and largest banking institution in Belize and to provide an increasing complement of financial and non-financial products and services to individuals, corporations and other customers. The Bank, either directly or through other affiliates, intends to accomplish this through increased commercial and consumer lending, the introduction of new products and services, including internet banking, the offering of non-credit fee-generating administrative services and continued cost and service efficiencies. CHL intends to continue to expand its financial services business in line with economic growth and to enhance market share for particular products and services.

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CHL’s strategy with regard to its equity investment in NUMAR is to maximize shareholder value either by continuing to hold the investment for the medium to long-term or by taking advantage of any divestment opportunities that may arise and which would allow CHL to redeploy the disposal proceeds and achieve a higher return on the shareholders’ funds employed. CHL will continue to monitor this investment in order to achieve capital appreciation, cash flow and an advantageous exit route - which may include a private sale or a public offering.

Industry overview - Facilities Services

The provision of facilities services is divided between in-house provided services and contracted-out (outsourced) services. The proportion of the market represented by each varies from country to country based on local conditions. CHL believes that the market for contracted-out services has been growing and will continue to grow as companies and public institutions seek to reduce their administrative and overhead costs by outsourcing their non-core business operations to contractors such as the Company.

The outsourced facilities services industry, principally the commercial, institutional and industrial building services market, is highly fragmented with many small, local suppliers in geographical sub-markets and few providers operating either nationally or internationally.

Business description - Facilities Services

The Facilities Services division operates in the United States through OneSource Holdings, Inc. (“OneSource”) and in the United Kingdom principally through Carlisle Cleaning Services Limited and Carlisle Facilities Services Limited both trading under the name Carlisle Facilities Services (“Carlisle Facilities”).

OneSource is a leading provider of outsourced facilities services, principally providing cleaning and value added building maintenance and support services to commercial, institutional and industrial facilities throughout the United States. Carlisle Facilities provides specialized contract cleaning and ancillary support services and specialist security services, principally manned guarding, to businesses principally in the retail, transport and public sectors. within the United Kingdom.

OneSource has approximately 30,700 employees providing janitorial, landscaping, general repair and maintenance, and other specialized services for more than 10,200 commercial, institutional and industrial clients. Carlisle Facilities employs approximately 3,630 people who provide contract cleaning and support services and more than 1,050 officers as a leading provider of manned guards for retail and anti-terrorist security, at 860 sites throughout the United Kingdom.

At March 31, 2005, the Facilities Services division has approximately $940 million in annual revenues, of which approximately 90 percent are generated from commercial cleaning services, such as janitorial services, interior construction clean-up, restroom cleaning, recycling, trash removal, window cleaning, blind and drapery maintenance, carpet and floor care, and hygiene and kitchen deep cleans.

In certain areas, the Company also offers its customers other services such as landscape management, metal and marble restoration, maintenance, pest control, engineering, aviation, speciality cleaning and manned guarding.

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The Company provides cleaning services to substantially all types of commercial buildings including office buildings, large retail establishments, industrial plants, institutional buildings, government buildings, large residential buildings, hotels, educational institutions, airports, banks, theaters, warehouses, health institutions, railway stations, trains, buses, public buildings and facilities and shopping malls.

The Facilities Services division is not dependent on any material individual customer, group of customers, industry or geographical sector, unusually competitive conditions, or other factors, other than normal market and general economic conditions.

The majority of customer contracts are obtained by competitive bidding. Contracts are typically written for an initial period of between one to three years and many have automatic renewal clauses. However, contracts are usually subject to termination by either party on the giving of 30 days’ notice. Most contracts are obtained through direct negotiations with the customer; however there is an increasing trend for major contracts to be put out for tender. CHL believes that this trend provides it with increasing opportunities for additional business because leading vendors are customarily invited to bid for major contracts. The cleaning and building facility services business is very price competitive and operating margins are typically lower than the division’s other business services.

The strategic focus of the Facilities Services division is on the development and marketing of high quality, customer-oriented outsourced services that are provided by well-motivated and trained employees to achieve and maintain the leading market position for its services. CHL expects both the level of service and service offerings to increase, as the market for outsourcing facilities services expands.

Industry overview - Staffing Services

The business of recruiting and providing temporary and contract staff across all sectors of the economy in the United Kingdom, together with permanent recruitment, is estimated by CHL at approximately $40 billion. The UK market is recognized as the largest in Europe and second largest in the world behind the United States.

In overall terms, over 90 percent of the market derives from temporary and contract staff recruitment services, with the balance being permanent placement services. The United Kingdom market is highly fragmented with over 10,500 companies operating in the UK sector in 2004.

Business description - Staffing Services

The Staffing Services division operates principally in the United Kingdom, the Republic of Ireland and the United States and provides temporary and permanent staff recruitment services as well as managed staffing services across a range of marketplaces.

The division operates as Carlisle Staffing Services with a brand and presence in the market for Professional Services, Office and Industrial Services, Public Services, Human Resources Services and the Scientific and Telecoms/Technology markets.

In April 2004, CHL acquired Ohsea, giving the Company a presence in the scientific and telcoms/technology markets.

The Staffing Services division is not dependent on any material individual client, group of clients, industry or geographical sector, unusually competitive conditions, or other factors, other than normal market and general economic and legislative conditions.

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At March 31, 2005, the Staffing Services division had approximately $430 million in annual revenues. Temporary and contract staffing services account for over 90 percent of the division’s revenues, with permanent placement staffing services accounting for the balance. The temporary and contract staffing revenues generated from the placement of temporary and contract staff is a source of business which CHL considers to be less susceptible to the effects of recession with long-term managed resourcing contracts also offering greater future revenue visibility. The remaining revenues, which are derived from permanent placements, can be more susceptible to the effects of recession.

The Staffing Services division serves more than 5,000 clients and is responsible for the placement of more than 9,000 contracted temporary personnel per week. The division operates from more than 80 locations and trades under a number of recognized brand names in each of its defined markets.

The Staffing Services division’s principal strengths are recognized and respected brand names, a reputation for quality of service, an experienced management team, experienced operational staff, a presence across several service sectors, a wide range of clients, a good geographical spread of offices, and a tight focus on productivity and cost controls.

The strategic focus of the Staffing Services division is to continue to expand its geographic and sector penetration, to increase its activities in existing and new specialist areas and to develop in the growing markets for outsourced human resource management services. The Staffing Services division is pursuing a strategy that includes investment in and development of its current businesses combined with a selective acquisition strategy in the medium term to increase the size and scale of services within existing markets served and to enter new speciality sectors.

Business description - Financial Services

Financial Services are provided principally through the Company’s ownership of the Bank, the largest, full service commercial and retail banking operation in Belize with a head office in Belize City and twelve branches. The Bank’s branch network is located in each of the six regions of Belize. The principal operations of the Bank are commercial lending, consumer lending, deposit-taking and related banking activities. In addition, other CHL affiliates provide a range of other financial and related services including company formation and related accounting and administrative services, plus company registration services.

Commercial lending

The Bank provides commercial loans for short-term financing and working capital purposes. These loans are mainly collateralized, repayable on demand and are made to a wide range of corporations and commercial enterprises, primarily small to medium-sized businesses with annual sales of less than $2.5 million and to certain larger Belizean businesses. Most commercial loans are variable rate loans based on the Bank’s prime rate and typically have maturities ranging from one to ten years. As these loans are generally repayable on demand, the Bank is generally protected against liquidity constraints. In addition, as the loans are granted on a variable rate basis, the Bank is protected against interest rate risk. The 20 largest commercial borrowers represented approximately 41 percent of the Bank’s total loan portfolio at March 31, 2005.

Under Belizean law, there are no restrictions on the extent to which the Bank may extend credit to companies or businesses engaged in any particular sector of the economy, though approval of the Central Bank is required for any lending to one customer which exceeds 25 percent of the Bank’s equity.

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Consumer lending

The Bank conducts its consumer lending business through its network of branch offices, which is the largest of any financial institution in Belize. The Bank offers collateralized and non-collateralized personal financing, mostly for consumer items. The Bank makes its credit decisions based upon both the credit history of the individual borrower and the existence of supporting collateral. Approximately 48 percent in value of consumer loans are covered by collateral.

Consumer loans are comprised principally of consumer installment loans, which are repayable on demand, with fixed interest terms, and are generally subject to a maximum amount of $25,000. In practice, consumer loans typically have maturity terms of up to five years.

The loss rate in the consumer loan portfolio is normally higher than other loans, offsetting to some extent the higher yields obtained from these loans. The Bank continues to monitor the risks associated with both collateralized and non-collateralized personal credits through personal knowledge of the client, careful monitoring of payment histories and a thorough credit review prior to loan disbursement.

Other lending

Other lending comprises residential mortgage loans and commercial mortgage loans including construction loans. Although technically granted on a demand basis, mortgage loans generally have maturities of up to 10 to 15 years with variable interest rates. Residential loans are primarily to higher net worth individuals and are generally granted in amounts not greater than 60 percent of the appraised fair market value of the property.

Deposit-taking and funding

The Bank currently offers several types of deposit accounts including demand deposits, savings deposits and term deposits. Demand deposits pay no interest other than to a few selected customers. Savings deposits pay semi-annual interest of 5 percent or 6 percent per annum depending on the balance maintained, and are repayable on demand. The Central Bank mandates that a minimum rate of 4.5 percent per annum must be paid on ordinary savings deposits. Term deposits (certificates of deposit), which require a minimum deposit of $2,500, have various rates of interest and provide for a penalty upon early withdrawal.

Most deposits are denominated in Belizean dollars, but the Bank also offers foreign currency deposit accounts (mainly US dollars). Rates on foreign currency demand and term deposits are based on international market rates. There is no deposit insurance system in effect in Belize.

The Bank funds itself primarily through deposits. Savings accounts and term deposits represent approximately 66 percent of the Bank’s total liabilities. The Bank has Belize’s largest deposit base with approximately 58,900 savings and demand accounts. At March 31, 2005, the Bank held an approximate 43 percent share of the Belizean banking system’s total deposits, an approximate 37 percent share of total Belizean dollar deposits and an approximate 83 percent share of foreign currency deposits according to the Central Bank. In each of these deposit markets, the Bank is believed to hold the leading market share of all financial institutions operating in Belize.

Other activities

The Bank also derives income from foreign exchange transactions related to trade, and from various customer service and letter of credit fees, credit card fees, safe deposit boxes, point of sale machines, ATM and other fee-based services.

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International operations

In May 1999, through a subsidiary of the Bank, the Company opened a banking operation in the Turks and Caicos Islands. Except for this investment, the Bank does not operate any branches abroad or hold any investments in offshore banking affiliates. The Bank engages in international transactions by providing international drafts and money orders, telegraphic fund transfers, American Express traveler’s checks, documentary collections and letters of credit. The Bank facilitates international transactions through its correspondent banking relationships with certain major US and Canadian banks.

Risk controls

The Bank’s lending practices are sustained by its credit analysis standards, which include strict application of standard credit analysis techniques. Applications for credit facilities are subject to a strict credit review procedure, with any loan over $125,000 requiring approval of the credit committee of the Bank. The Bank has established general loan policies and ongoing analysis techniques for (i) evaluation of credit, (ii) lending limits to a single customer or economic group, (iii) maximum terms of loans, (iv) collateral requirements for certain types of loans and their valuation, (v) economic sector performance, and (vi) continuing detailed monitoring, review and management of the loan portfolio.

Non-accrual loan portfolio

Non-accrual loans are comprised principally of loans 90 days or more past due as well as certain loans which are current but uncertain as to the ability of the borrower to fully comply with the loan terms. At March 31, 2005, the Bank’s non-accrual loans as a percentage of total loans represented 4.1 percent.

Allowance for loan losses

The Bank’s management calculates its loan loss provision for a given period based on a loan-by-loan review giving consideration to, among other factors, actual loan loss experience, the present and prospective condition of the relevant borrower and its related industry, general economic conditions prevailing at the time and estimated recovery from any assets held as collateral or recovery from litigation. At March 31, 2005, the allowance for loan losses as a percentage of total loans was 1.5 percent, and as a percentage of non-accrual loans was 36.9 percent.

The Bank’s policy with regard to collection procedures is to contact the borrower upon an installment of principal or interest becoming past due. In the event payment is not forthcoming as a result of written notice or personal contact, legal action is commenced. Belize law facilitates legal proceedings for collections. The legal process depends on the type of security collateralizing the loan. Typically real estate is sold by public auction and other assets are sold by either public auction or private treaty. For a non-collateralized loan, judgment is obtained from the court and personal assets of the customer seized.

Investment in NUMAR

The Company has a 23.4 percent equity interest in NUMAR. NUMAR owns edible oil processing and distribution operations and palm seed plantations principally in Costa Rica, where they are market leaders in edible oils, margarine, industrial oils and animal feed. The operations are fully integrated. NUMAR’s plantations now encompass more than 62,000 acres of African palm plantations principally in Southeast Costa Rica.

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NUMAR is a local market leader in its main product areas and is expected to continue to take advantage of international market opportunities and further consolidate market strength, particularly through product and positioning improvement and new product introductions. CHL currently anticipates that the Company’s ultimate exit strategy will either be a private sale or a listing of NUMAR on an international stock exchange.

Discontinued operations

During the year ended March 31, 2004 the Company owned a 52.5 percent interest in Belize Telecommunications. Belize Telecommunications is a licensed provider of local, national and long distance telecommunication services to residential and commercial customers in Belize. In February 2004, CHL disposed of its entire 52.5 percent interest in Belize Telecommunications and this business has been classified as a discontinued operation for all reporting periods.

Competition

Facilities Services

CHL believes that the facilities services sector is highly competitive, and that such competition is based primarily on price and quality of service. Customers keep the performance, quality and price competitiveness of their contractors under continuous review.

The Company’s competitors include a large number of regional and local companies located in major cities throughout the United States and the United Kingdom together with a small number of national and international providers.

Staffing Services

CHL considers that the staffing services sector is highly competitive, and that such competition is primarily based on service and price.

The Staffing Services division competes with a certain number of national providers and a significant number of smaller regional and local providers.

Financial Services

The Bank competes domestically with The Bank of Nova Scotia, Atlantic Bank Limited, First Caribbean International Bank (Barbados) Ltd. and Alliance Bank of Belize Limited. The rates paid by banks on deposits, the rates charged by banks on loans, the products sold, the services provided and the bank’s reputation each affect the competitive position of a bank. Although the Bank benefits by operating from a wider network of branches within Belize than any of its competitors, The Bank of Nova Scotia and First Caribbean International Bank (Barbados) Ltd. are members of major international banking networks which are of a greater size and net worth than CHL and which provide international support for their Belizean operations.

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Regulation

Regulation of Carlisle Holdings Limited

Prior to May 1990, CHL was organized under the Companies Act of Belize as a general business corporation. In 1990, with the adoption of the IBC Act, CHL became an international business company.

As an international business company, CHL is entitled to certain benefits, the most important of which are exemption from income tax in Belize, the right to pay dividends free from income tax in Belize and to be deemed non-resident in Belize for Belizean exchange control purposes.

An international business company is required to maintain a registered office and appoint a registered agent in Belize. The Bank acts as registered agent to a number of international business companies including CHL.

In addition to the above, the IBC Act permitted the grant of special status under the IBC Act which was granted to CHL in May 1990. The grant of this special status confers a number of additional taxation and other benefits upon CHL and its subsidiaries. Specifically, CHL is permitted to own an interest in real property in Belize and manage funds belonging to residents of Belize. CHL is also exempted from all forms of taxes and duties in Belize for a period of 30 years, expiring April 30, 2020 (which period may be extended by the Minister of Finance of Belize), may issue shares to residents of Belize and make loans to its subsidiaries in Belize without obtaining exchange control permission, is permitted to pay dividends with no Belizean local tax and is deemed to be non-Belizean for the purposes of domestic foreign exchange regulations.

Regulation of Financial Services

The Belize Bank Limited

The Bank’s business in Belize is governed by the Banks and Financial Institutions Act, 1995 of Belize (“BFIA”) and is supervised by the Minister of Finance of Belize and by the Central Bank. The BFIA came into effect in January 1996 replacing the Banking Act of Belize which had previously regulated the Bank’s business. Any financial institution which carries on a banking business in or from Belize must obtain a banking license and conduct its business in accordance with the requirements of the BFIA. The BFIA requirements relate, among other things, to maintenance of capital and reserves by a licensed financial institution, maintenance of a reserve fund, minimum holdings of approved liquid assets, submission of returns and accounts to the Central Bank, disclosure of financial information, the production of books, and powers of investigation by the Central Bank. The Central Bank also conducts a regular inspection and review of the operations of each licensed financial institution in Belize, which takes place approximately once every 18 to 24 months.

Capital requirements and reserves

The BFIA requires commercial banks, such as the Bank, to maintain shareholder’s equity at a minimum of 9 percent of the Bank’s total risk weighted assets. The BFIA also requires commercial banks to maintain an amount equivalent to 20 percent of average deposit liabilities in the form of approved liquid assets, principally Government of Belize securities, balances with the Central Bank and deposits with other banks. An amount equivalent to 7 percent of average deposit liabilities must also be maintained as a non-interest-bearing deposit with the Central Bank.

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The following table sets forth the key ratio requirements of the BFIA and the actual ratios of the Bank at March 31, 2005 and at June 30, 2005:

On May 1, 2005, the average liquid assets and Central Bank balance requirements were increased by the BFIA from 20.0% and 7.0%, respectively, at March 31, 2005, to 21.0% and 8.0%, respectively.

Under the BFIA, the Central Bank, with the approval of the Minister of Finance of Belize, is empowered, at any time, to revoke a banking license or impose or vary terms and conditions to which the license is subject on grounds set out in the BFIA. These grounds include contravention of the BFIA or regulations thereunder, failure to comply with a directive of the Central Bank and the inadequacy of the licensee’s assets in meeting its liabilities. While CHL and the Bank believe their relationships with the Central Bank are good, there can be no assurance that the banking license granted to the Bank will not be cancelled or that conditions will not be attached to it in the future.

Regulation of investment in NUMAR

The Company’s investment in NUMAR is subject to the regulatory environment in Costa Rica and the countries in which those companies operate. The Government of Costa Rica enforces price regulation in relation to certain key commodities in the edible oils market. The pricing of regulated commodities may be adjusted, upwards or downwards, by the Government of Costa Rica at any time, although the practice of the relevant Ministry has been to indicate to producers prior to each year, after discussions, the Government’s intentions in relation to relevant price regulation for that year.

Trademarks

The Company believes that it owns or is licensed to use all corporate names, trade names, trademarks, service marks, copyrights, patents and trade secrets which are material to the Company’s operations.

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C. Organizational Structure

CHL is the parent company of the group and, through its subsidiaries, provides strategic management for the Company and coordinates the Company’s activities. CHL also provides centralized controlling, treasury, and service functions to the Company, as well as communications, capital markets and investor relation functions. CHL’s operating activities are organized into three business units, each of which is responsible for managing its own day-to-day business. The following table sets forth the name and country of incorporation of each of the subsidiaries (which are 100 percent owned) which serves as a parent company within the business unit.

D. Property, Plant and Equipment

Belize

The Bank’s branch network consists of 12 branches, of which nine are located in properties owned by the Bank and three in properties leased by the Bank. The Bank also owns four other properties in Belize used as offices and managers’ residences.

United States and United Kingdom

In the United States, the Company owns two properties and rents or leases approximately 95 properties that are utilized in the management and administrative functions of the operations. In the United Kingdom, the Company rents or leases approximately 88 properties that are utilized in the management and administrative functions of the operations.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Introduction

In April 2004, CHL acquired the entire issued share capital of Ohsea. Ohsea is a holding company, incorporated in the United Kingdom, whose principle asset is its wholly owned investment in Professional Staff, a company incorporated in the United Kingdom, which was acquired by Ohsea in July 2003. Professional Staff and its subsidiaries are a staffing services group based mainly in the United Kingdom and the United States, providing temporary and permanent staff recruitment services.

The acquisition of Ohsea has been accounted for by CHL using the “as-if” pooling of interests method of accounting due to the existence of a common controlling shareholder, Lord Ashcroft, KCMG, in both CHL and

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Ohsea. This method of pooling of interests assumes that the combining companies have been merged since their inception (being the time from which Lord Ashcroft held a controlling interest in each entity) and requires that the historical consolidated financial statements of the Company are pooled with those of Ohsea and restated, with a minority interest eliminated for all periods where a non-controlling minority interest existed in the share capital of Ohsea. The non-controlling minority interest in Ohsea was acquired by CHL in April 2004 and was accounted for by CHL using the purchase method. Ohsea acquired Professional Staff in July 2003 and accounted for the acquisition using the purchase method. Further details are set out in notes 1, 3, 14, and 26 to the consolidated financial statements.

In February 2004, CHL disposed of its entire 52.5 percent interest in Belize Telecommunications and this business has been classified as a discontinued operation for all reporting periods. Further details are set out in note 8 to the consolidated financial statements.

During the year, the Company was engaged in three service businesses: Facilities Services principally operating in the United States and the United Kingdom; Staffing Services principally operating in the United Kingdom, United States and the Republic of Ireland; and Financial Services principally operating in Belize.

Facilities Services:

The Facilities Services division operates in the United States under the name OneSource, and in the United Kingdom under the names Carlisle Cleaning Services Limited and Carlisle Facilities Services Limited both trading under the name Carlisle Facilities Services.

OneSource is a leading provider of outsourced facilities services, principally providing cleaning and value added building maintenance and support services to commercial, institutional and industrial facilities throughout the United States. Carlisle Facilities Services provides specialized contract cleaning and ancillary support services and specialist security services, principally manned guarding, to businesses principally in the retail, transport and public sectors in the United Kingdom.

Staffing Services:

The Staffing Services division, principally through Carlisle Staffing plc, a company incorporated in the United Kingdom, and Professional Staff, operates in the United Kingdom, the Republic of Ireland and the United States under a number of different brand names. The division provides temporary and permanent staff recruitment services as well as managed staffing services across a range of marketplaces.

Financial Services:

Financial Services are provided principally through the Bank, a full service commercial and retail banking operation in Belize.

Associates:

CHL’s equity investment comprises 23.4 percent of NUMAR, which has interests in agro-processing and distribution operations principally in Costa Rica.

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Discontinued operations:

Until February 2004, Telecommunication Services were provided principally through Belize Telecommunications, which is a licensed provider of local, national and long distance telecommunication services in Belize. In February 2004, CHL disposed of its entire 52.5 percent interest in Belize Telecommunications.

The information presented below should be read in conjunction with the consolidated financial statements of the Company and the related notes thereto.

Operating Results

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Facilities Services operations

Sales in fiscal 2005 compared with fiscal 2004 increased by $39.1 million (4.3 percent), principally due to the positive net effect of new contracts won and lost in a price competitive market.

Sales in fiscal 2004 compared with fiscal 2003 decreased by $12.8 million (1.4 percent), principally due to the closure or winding down in early 2003 of certain under-performing, non-core businesses in the United States and the net effect of new contracts won and lost in a price competitive market.

Gross margin percentage (comprising gross profit as a percentage of net sales) increased to 11.3 percent in fiscal 2005 compared to 10.9 percent in fiscal 2004, due principally to more efficient management of labor related costs and other direct costs of sale.

Gross margin percentage declined to 10.9 percent in fiscal 2004 compared to 11.4 percent in fiscal 2003, due principally to increased labor and related costs and competitive downward pressure on sales revenues.

Selling, general and administrative expenses increased in fiscal 2005 compared with fiscal 2004, principally due to investment in support of the achieved growth in revenues and an increase in personnel costs and timing of settlement of certain liabilities.

Selling, general and administrative expenses declined in fiscal 2004 compared with fiscal 2003, principally due to further efficiencies achieved at both corporate and field level following the implementation of back office system improvements in fiscal 2003.

Details of restructuring and other non-recurring items are more fully described in note 5 to the consolidated financial statements.

As a result of the current economic environments in both the United States and the United Kingdom, the division is facing downward pressure on sales revenues and margins, which may continue dependent upon general economic and market conditions. The Company is actively managing this situation with a primary focus on four key business elements, which include customer retention, labor cost control, receivables management and overhead cost reductions.

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Staffing Services operations

Sales in fiscal 2005 compared with fiscal 2004 increased by $115.3 million. Net sales included the sales of Ohsea for the nine months ended March 31, 2004 and for the twelve months ended March 31, 2005. The improved sales performance in fiscal 2005 also reflected an increase in revenues resulting from organic growth and a favorable effect of the average exchange rate compared to fiscal 2004

Sales in fiscal 2004 compared with fiscal 2003 increased by $98.9 million. This was principally due to the acquisition by Ohsea of Professional Staff in July 2003 which accounted for $99.2 million of the increase. The underlying business performance remained flat which reflected a net decline in revenues, principally due to general market and economic conditions, offset by a favorable average exchange rate compared with fiscal 2003.

Gross margin percentage declined to 21.1 percent in fiscal 2005 compared to 23.4 percent in fiscal 2004, principally due to the effect of competition affecting personnel costs and fee income together with a decline in permanent placements as a result of economic conditions.

Gross margin percentage declined to 23.4 percent in fiscal 2004 compared to 26.2 percent in fiscal 2003, principally due to the effect of competition affecting personnel costs and fee income together with a decline in permanent placements as a result of economic conditions.

Selling, general and administrative expenses increased in fiscal 2005 compared with fiscal 2004 principally due to costs incurred in developing new business and achieving growth in sales, the inclusion of Ohsea for a twelve month period in fiscal 2005 compared with a nine month period in fiscal 2004, together with certain costs of integration.

Selling, general and administrative expenses increased in fiscal 2004 compared with fiscal 2003 principally due to the effects of the acquisition of Ohsea in July 2003 together with costs incurred in developing new business. Disciplined cost control measures, a focus on improving productivity ratios remain a high priority.

With a few niche exceptions, demand for both temporary labor and contract workers and permanent placements has been depressed, making growth in organic sales revenues and margins a challenge. Dependent upon general economic and market conditions this trend may continue. Disciplined cost control measures and a focus on improving productivity ratios remain a high priority.

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Financial Services operations

The components of the Bank’s interest income are as follows:

The increases in interest income in fiscal 2005 and fiscal 2004 were primarily the result of increases in the average volume of the Bank’s portfolio of loans. The average volume of the Bank’s loan portfolio for fiscal 2005 was $343.2 million, a 15.4 percent increase over the fiscal 2004 average balance of $297.4 million, which in turn represented a 15.9 percent increase over the fiscal 2003 average balance of $256.5 million.

Interest income on deposits with banks increased in fiscal 2005 by $0.3 million compared to fiscal 2004 reflecting an increase in the average yield on deposits held with correspondent banks from 0.9 percent in fiscal 2004 to 1.4 percent in fiscal 2005.

Interest income on deposits with banks declined in fiscal 2004 by $0.1 million compared to fiscal 2003 reflecting a decrease in the average yield on deposits held with correspondent banks from 1.0 percent in fiscal 2003 to 0.9 percent in fiscal 2004.

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As a matter of policy, the Bank seeks to maximize returns on funds not otherwise disbursed as loans and the Bank expects in the future to continue to place under-utilized funds in government securities and with other banks as appropriate.

The components of the Bank’s interest expense are as follows:

The Bank’s interest expense increased in fiscal 2005 compared with fiscal 2004, due primarily to an increased volume of deposits held with the Bank and interest on short-term and long-term debt.

The Bank’s interest expense increased in fiscal 2004 compared with fiscal 2003, due primarily to higher average interest rates paid on deposits placed with the Bank from 3.5 percent in fiscal 2003 to 4.0 percent in fiscal 2004 and interest on long-term debt.

The Bank’s net interest income increased 2.8 percent to $32.8 million in fiscal 2005 from $31.9 million in fiscal 2004. This increase was primarily due to an increased level of interest income offset by an increase in interest expense.

The net interest spread and net interest margin declined to 7.6 percent and 8.2 percent, respectively, in fiscal 2005, from 8.8 percent and 9.3 percent, respectively, in fiscal 2004. The reduced spread and margin were largely due to a lower average rate earned on loans and an increased average deposits volume.

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The Bank’s net interest income increased 7.0 percent to $31.9 million in fiscal 2004 from $29.8 million in fiscal 2003. This increase was primarily due to an increased level of interest income offset by an increased level of interest expense.

The net interest spread and net interest margin declined to 8.8 percent and 9.3 percent, respectively, in fiscal 2004, from 9.3 percent and 9.8 percent, respectively, in fiscal 2003. The reduced spread and margin were largely due to a lower average rate earned on loans and an increased average deposits balance.

The non-accrual loans analysis was as follows:

Non-accrual loans are comprised principally of loans 90 days or more past due as well as certain loans which are current but where doubt exists as to the ability of the borrower to fully comply with the loan terms. The Bank’s charge-offs were $0.7 million in fiscal 2005; $0.6 million in fiscal 2004 and $0.6 million in fiscal 2003.

The Company considers that the allowance for loan losses is adequate to cover any known losses and any losses inherent in its portfolio. The Company’s consideration as to the adequacy of the allowance to provide for probable loan losses is based on a continuing review of the loan portfolio and includes, but is not limited to, consideration of the actual loan loss experience, the present and prospective condition of each borrower and its related industry, general economic conditions prevailing from time to time, and the estimated fair value of the related collateral.

Details of non-interest income and non-interest expense are set out in note 6 to the consolidated financial statements.

During the year ended March 31, 2000, the Company disposed of its entire 50 percent interest in Belize International Services Limited, a financial and other services operation, for an aggregate initial consideration of $3.0 million. The Company was also entitled to receive deferred consideration of up to $3.6 million, contingent on certain future performance targets of BISL. During fiscal 2003, deferred consideration of $1.5 million was received and classified as part of restructuring and other non-recurring items. No further deferred consideration is receivable on this disposal. Details of restructuring and other non-recurring items are more fully described in note 5 to the consolidated financial statements.

The Bank currently anticipates that its loan portfolio will continue to grow, although not necessarily at the same rate as in the past, subject to and dependent on general economic and market conditions. The continuing growth in the demand for loans and the availability of sufficient deposits to fund such demand will depend on the growth of the Belizean economy.

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Corporate expenses

Corporate expenses comprise administrative, legal and general corporate expenses net of other income and include all central costs not directly connected with the operational management of the Company’s businesses that are responsible for their own corporate overheads.

Corporate expenses increased in fiscal 2005 to $6.0 million from $4.7 million in fiscal 2004, principally due to an increase in legal and professional fees incurred at the corporate level.

Corporate expenses declined in fiscal 2004 to $4.7 million from $6.5 million in fiscal 2003, principally due to disciplined cost control and a decrease in professional fees incurred at the corporate level.

Associates

The components of the Company’s net equity income from associates are as follows:

The increase in the net equity income from the Company’s investment in its associate NUMAR in fiscal 2005 compared to fiscal 2004 and 2003 was principally due to the stabilization in the market price for edible oils offset by continued margin pressures within the domestic market.

Interest income and interest expense

Interest income increased in fiscal 2005 compared with fiscal 2004 principally due to an increase in the average level of cash deposits held by the Company in fiscal 2005 and the effects of marginally higher market rates of interest.

Interest income increased in fiscal 2004 compared with fiscal 2003 principally due to an increase in the average level of cash deposits held by the Company in fiscal 2004.

Interest expense declined in fiscal 2005 compared with fiscal 2004 principally due to a lower level of borrowings which was partially offset by marginally higher rates of interest.

Interest expense declined in fiscal 2004 compared with fiscal 2003 principally due to a lower level of borrowings as a result of a reduced working capital requirement and the repayment of long-term debt principally utilizing the disposal proceeds arising on the sale of Belize Telecommunications.

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Income taxes

Income taxes relate to federal, state and local tax liabilities incurred in the United States, together with local income taxes in certain non-United States jurisdictions, in particular the United Kingdom and Belize. Taxes at the Bank are applied to interest income and other revenues less interest expense. A portion of net income is not subject to tax by virtue of the Company’s status under the IBC Act.

During the year ended March 31, 2004, the Company recorded a $1.0 million US state and local income tax credit comprising a $1.4 million tax repayment arising from a reassessment of the Company’s state tax liabilities and a $0.4 million state and local income tax charge for the year.

During the year ended March 31, 2003, the Company recorded a US federal income tax credit of $1.8 million principally relating to repayments of income taxes arising from one-time carry backs of net operating losses arising prior years.

See note 7 to the consolidated financial statements for further details of income taxes.

Discontinued operations

For the year ended March 31, 2004, discontinued operations include approximately ten months of operations of Belize Telecommunications as well as the net gain of $4.7 million arising on disposal.

Sales in fiscal 2004 (10 months) amounted to $50.6 million compared with $55.2 million in fiscal 2003 (12 months). Fiscal 2004 benefited from organic growth, principally in the prepaid cellular market and in both national and international usage.

Net income remained flat in fiscal 2004 ($5.0 million before the net gain of $4.7 million arising on disposal) compared with $4.9 million in fiscal 2003 principally due to the continued effects of the carrying value and debt related to the GSM network and costs related to the regulatory framework.

In February 2004, CHL disposed of its entire 52.5 interest in Belize Telecommunications for an aggregate cash consideration of $57.0 million. The net gain on disposal amounted to $4.7 million.

Further details on discontinued operations are set out in note 8 to the consolidated financial statements.

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Effects of inflation

Due to the relatively low levels of inflation experienced in fiscal 2005, 2004 and 2003 in the major markets in which the Company operates, inflation did not have a significant effect on the results of the Company in these years.

Application of critical accounting policies

The preparation of consolidated financial statements in accordance with US GAAP requires management to make extensive use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

The Company considers that the most significant accounting policies that require use of management estimates are as follows:

(i) Accounts receivable - estimates of an allowance for doubtful receivables. The key factors used in arriving at this estimate include detailed analysis of individual accounts receivable balances by age and customer, the review of individual customers’ financial viability where necessary and the use of historical trends. The analysis is used to specifically reserve for identified customer balances that are deemed probable as not collectible. This approach has been consistently applied in the past and is currently expected to continue to be prepared on the same basis for the foreseeable future as it has historically provided a materially accurate assessment of the required reserve. At March 31, 2005, total gross trade accounts receivable amounted to $173.2 million, with an allowance for doubtful receivables of $2.4 million (1.4 percent). The equivalent percentage at March 31, 2004 amounted to 1.8 percent ($3.1 million).

(ii) Long-lived assets (principally comprising goodwill – March 31, 2005 $400.4 million (2004 - $397.7 million)) - estimates of future cash flows and discount rates associated with goodwill impairments. These are estimated utilizing the Company’s current detailed projections and plans built up from a divisional level, which are both market and organically driven, and current discount rates based on risk weighted average cost of capital. This approach has been consistently applied in the past and is currently expected to continue to be prepared on the same basis for the foreseeable future. Goodwill arises in the Facilities Services and Staffing Services divisions. The accounting estimates relating to asset impairment have been and will continue to be highly susceptible to change from period to period because (a) it requires management to make assumptions based on the latest information available about future revenues and margins over the life of the related assets, (b) it requires the utilization of changing market discount rates, and (c) it is impacted by the continually changing market conditions which are outside of the Company’s control. The impact of recording an impairment loss may have a material adverse effect on the Company’s operating performance and financial position. No impairments were identified during the year ended March 31, 2005.

(iii) Insurance reserves - estimated actuarially calculated liabilities and provisions under self-insurance programs that are based upon historical loss experience and recorded at the net present value of the estimated obligations within an actuarial range of exposure. The actuarial assumptions used, including the estimates of claims incurred but not reported (IBNR) and those used by the Company’s actuarial consultants, may differ materially from actual results due, amongst other things, to changing prospective market conditions and historic claims payment patterns not being replicated in the future years. The claims payout period of accrued liabilities typically extends over a number of years during which these factors can change significantly. At March 31, 2005, the provision for insurance reserves amounted to $66.4 million, utilizing an estimated average risk free discount rate of 4.0 percent. The Company principally maintains a $500,000 deductible for workers’ compensation, general liability and

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automobile liability coverage principally in respect of its Facilities Services operation at OneSource. The Company also has umbrella insurance coverage for certain risk exposures subject to specified limits. The primary estimate made by management is in connection with the IBNR liability, as the provision is based, amongst other things, on past claims history. The actuarial basis for these estimates are historical payouts on claims, industry historical payouts, judgment of consulting actuaries as to certain methods that reflect trends in recent history and various state medical and indemnity requirements in settling claims, such as medical diagnosis, improving or worsening medical condition and changes in laws and statutes. These estimates are highly susceptible to change in the future due to changing market conditions and changes in the processes supporting the self insured liabilities.

(iv) Allowance for loan losses - this is based on a continuing review by management of the loan portfolio including, but not limited to, consideration of the actual loan loss experience, the present and prospective condition of each borrower and its related industry, general economic conditions prevailing from time to time, and the estimated fair value of the related collateral. This approach has been consistently applied in the past and is currently expected to continue to be prepared on the same basis for the foreseeable future as it has historically provided a materially accurate assessment of the required reserve. At March 31, 2005, total loans amounted to $342.8 million, of which $14.1 million was classified as non-accrual loans, and the total allowance for loan losses amounted to $5.2 million (comprising 4.1 percent and 36.9 percent, respectively). The equivalent percentages at March 31, 2004 amounted to 2.7 percent and 56.5 percent, respectively. The accounting estimate for loan loss allowances is critical because it requires management to make assumptions about the future ability of the borrower to repay the loan principal and interest and, if in default, the fair value of the related collateral. Both of these factors can be influenced by market conditions that are outside the Company’s control.

(v) Revenue recognition - net sales are recognized when the risks and rewards of the underlying services provided and goods supplied have been substantially transferred to the customer. Revenues from services or products are recognized when services are rendered or deliveries are made. Interest income for the Bank is recorded on an accruals basis. When either the collectibility of principal or interest is considered by management to be doubtful or payment of principal or interest is ninety days or more past due, loans are placed on non-accrual status and previously accrued but unpaid interest is charged against current year interest income.

(vi) Income taxes - estimates to determine the provision for income taxes, deferred income tax assets and liabilities and any valuation allowances for deferred tax assets. Key factors and circumstances in estimating the provision for income taxes, deferred tax assets and liabilities and valuation allowances include legislative tax law changes,, projections of future profits, tax attributes and statutory tax rates. The use of these measures and this approach have historically provided a materially accurate estimate of income tax liability. In the future, estimates of the income tax provision, deferred tax asset and valuation allowances are reasonably likely to change in the future as a result of the above factors.

The selection, deliberation and disclosure of the critical accounting policies have been discussed between senior management of the Company and CHL’s Audit Committee.

Recently issued accounting pronouncements

The Company has reviewed all recently issued accounting pronouncements and does not consider that their impact has had, or will have when effective, a material effect on the Company’s consolidated financial statements. Further details are set out in note 2 to the consolidated financial statements.

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Liquidity and capital resources

Consolidated cash flow information:

The net decrease in cash, cash equivalents and due from banks for the year ended March 31, 2005 amounted to $7.4 million, after $0.1 million currency translation adjustments. The components of the decrease were net cash of $35.4 million provided by operating activities and $28.1 million provided by financing activities, offset by $71.0 million utilized by investing activities.

The net cash provided by operating activities of $35.4 million was primarily due to adjusted net income of $44.8 million, offset by net movements in working capital of $9.4 million, principally being a net decrease in liabilities, mainly insurance reserves.

Net cash utilized by investing activities of $71.0 million was principally due to an increase in interest-bearing deposits with correspondent banks of $15.8 million, an increase in loans to customers of $33.5 million, an increase in Government securities of $9.9 million and purchases of property, plant and equipment of $12.1 million.

Net cash provided by financing activities of $28.1 million was principally due to a $35.1 million increase in deposits at the Bank, offset by a $9.3 million dividend paid to shareholders.

Service Businesses:

Liquid assets available to the Company at March 31, 2005 amounted to $19.9 million represented by cash and cash equivalents. At March 31, 2005, the Company had available but undrawn facilities of $29.0 million under its financing agreements.

In March 2004, OneSource entered into a new $55 million collateralized, revolving credit facility which can be used for general working capital purposes and letters of credit up to a maximum of $15 million. The agreement has a term of three years, expiring on March 17, 2007 and is collateralized by a security interest and lien on principally all of OneSource’s assets including accounts receivable. Amounts drawn under the terms of the facility bear interest at LIBOR plus a margin.

Under the terms of the facility, OneSource is required to maintain certain financial and other covenants, including restrictions on OneSource’s ability to incur additional indebtedness, limitations on certain payments, restrictions on capital expenditure and certain other financial covenants applicable to OneSource, including a minimum EBITDA level and a minimum fixed charge coverage ratio. Amounts available under the facility are based on a percentage of eligible accounts receivable. At March 31, 2005, $41.8 million was available, of which $26.6 million was drawn together with letters of credit amounting to $5.0. The credit facility has been classified as a current liability because the agreement contains a subjective acceleration clause and the lender also has access to OneSource’s lockbox arrangements.

In March 2004, the Company entered into an $11 million, collateralized, short-term bank overdraft facility available to the Company’s operations in the United Kingdom, which could be used for general working capital purposes and letters of credit/guarantees up to a maximum of $1.8 million. In October 2004, this overdraft facility was replaced by a collateralized revolving credit facility of up to $25 million which can be used for general working capital purposes and letters of credit, bonds, guarantees and indemnities up to a maximum of $2.8 million. The agreement has a term of three years, expiring in October 2007 and is collateralized by a security interest and lien on certain of the Company’s United Kingdom assets, including accounts receivable. Amounts drawn under the terms of the facility bear interest at base rate plus a margin. At March 31, 2005, no amounts had been drawn under the facility and $2.4 million had been utilized in the form of certain letters of credit, bonds, guarantees and indemnities arising in the ordinary course of business issued by the bank on behalf of the Company.

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In July 2003, Ohsea and its subsidiaries entered into a $24 million collateralized, revolving credit facility which can be used for general working capital purposes. The agreement has a term of three years, expiring on July 9, 2006 and is collateralized by a security interest and lien on certain of Ohsea’s assets including accounts receivable. Amounts drawn under the terms of the facility bear interest at LIBOR plus a margin. Amounts available under this facility are based on a percentage of eligible accounts receivable. At March 31, 2005, $19.0 million was available of which $16.5 million was drawn.

Further details are set out in notes 19 to the consolidated financial statements.

The Company believes that the working capital at March 31, 2005, its available borrowing facilities and the current cash flows provided by operating activities will be sufficient for the Company’s normal growth and operating needs, the funding of its capital expenditures budget and the current servicing of its debt.

Financial Services:

The Bank’s asset and liability management policy is structured in order to ensure that sufficient liquidity is available to meet its funding requirements, to accommodate possible outflows in deposits and capital commitments and to take advantage of any interest rate market opportunities. The Bank’s liquidity position is monitored on a daily basis by its management and independently by the Central Bank based on weekly and monthly reports submitted to the Central Bank.

In accordance with the BFIA, as administered by the Central Bank, the Bank maintains a certain percentage of its deposits in approved liquid assets as defined in the BFIA and computed on a monthly average basis. These approved liquid assets are comprised principally of balances with the Central Bank, Government of Belize securities and deposits with other banks. The required percentage was 20 percent of deposits at March 31, 2005. The Bank’s approved liquid assets represented 30.5 percent of deposit liabilities at March 31, 2005.

The Bank is also required to maintain an average monthly balance with the Central Bank of 7.0 percent of average deposit liabilities. As this balance is non-interest-bearing, it is the strategy of the Bank to maintain this balance as closely as possible to the minimum requirement and maximize interest-bearing liquid deposits in the form of Government of Belize securities and balances with other banks. The balances with other banks are principally US dollar deposits with correspondent banks in the United States for collateralization of letters of credit and other foreign business of the Bank. The average deposit liabilities at March 31, 2005 were 7.2 percent.

The Bank’s primary source of funds is its deposit base, which consists of certificates of deposit, demand deposits, and savings deposits. Total deposits accounted for approximately 94 percent of the Bank’s total liabilities at March 31, 2005.

The BFIA also requires commercial banks to maintain shareholder’s equity at a minimum of 9 percent of total risk weighted assets (“capital ratio”). The Bank’s capital ratio at March 31, 2005 was 23.9 percent.

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The table below presents the Bank’s actual capital and the minimum capital required under the Central Bank’s requirements:

The capital requirement established by the BFIA is based on the risk-based capital guidelines established by the Basle Committee on Banking Regulations and Supervisory Practices.

The Bank’s earnings in the last three fiscal years have enabled the Bank to maintain strong capital levels despite loan and asset growth and dividend payments in each of such years.

During the year ended March 31, 2004, the Bank issued a five-year, non-collateralized, $15.0 million note payable to Belize Telecommunications. Interest is payable annually at 9.0 percent per annum and the principal amount is repayable in full in November 2008.

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Contractual obligations and commercial commitments

Contractual obligations:

The table below provides certain information concerning the amounts falling due under the Company’s contractual obligations as of March 31, 2005.

Further details of contractual obligations are set out in the notes to the consolidated financial statements.

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OneSource also has certain obligations under its funded, defined benefit pension plan details of which are set out in note 27 to the consolidated financial statements.

Commercial commitments: