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					     BRITISH VIRGIN ISLANDS
 FINANCIAL SERVICES COMMISSION

    Audited Financial Statements

For The Year Ended December 31, 2005




                               BDO Binder
    BRITISH VIRGIN ISLANDS
FINANCIAL SERVICES COMMISSION

     Audited Financial Statements

 For The Year Ended December 31, 2005




                                        BDO Binder
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Table Of Contents
For The Year Ended December 31, 2005


                                                             Page

Commission Directory                                           2


Independent Auditors' Report                                   3


Financial Statements For The Year Ended December 31, 2005:
Balance Sheet                                                  4

Statement of Income                                            5

Statement of Changes in Reserves                               6

Statement of Cash Flows                                        7

Notes to the Financial Statements                            8-13




                                                 -1-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Commission Directory
For The Year Ended December 31, 2005


BOARD OF COMMISSIONERS
Mr. Michael Riegels, Q.C.         Chairman
Mr. Robin Gaul                    Deputy Chairman
Ms. Eleanor Smith                 Commissioner
Mr. Phillip Fenty                 Commissioner
Mr. Rodney Gallagher              Commissioner (term ended August 23, 2005)
Mr. Martin Fuggle                 Commissioner (appointed August 23, 2005)
Mr. E. Walwyn Brewley             Commissioner
Mr. Robert Mathavious             Managing Director, ex officio Commissioner



REGISTERED OFFICE
P.O. Box 418
Pasea Estate
Road Town, Tortola
British Virgin Islands



COMMISSION SECRETARY
Ms. Annet Mactavious



INDEPENDENT AUDITORS
BDO Binder
P.O. Box 34
Sea Meadow House
Tobacco Wharf
Road Town, Tortola
British Virgin Islands




                                             -2-
                          BDO Binder                                               Sea Meadow House
                          Accountants and Consultants                              Tobacco Wharf
                                                                                   P.O. Box 34
                                                                                   Road Town, Tortola
                                                                                   British Virgin Islands
                                                                                   Telephone: (284) 494-3783
                                                                                   Facsimile: (284) 494-2220
                                                                                   E-mail: mail@bdobvi.com




Independent Auditors’ Report


To the Board of Commissioners
British Virgin Islands Financial Services Commission
Tortola, British Virgin Islands


We have audited the accompanying balance sheet of the British Virgin Islands Financial Services Commission (the
Commission) as of December 31, 2005 and the related statements of income, changes in reserves and cash flows for
the year then ended. These financial statements are the responsibility of the Commission’s management. Our
responsibility is to express an opinion on these financial statements based on our audit.

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

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




April 10, 2006




                                                        -3-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Balance Sheet
As at December 31, 2005


                                                                 Notes                2005             2004
ASSETS
Non-current assets
Fixed Assets                                                          3           2,109,410        1,859,576

                                                                                  2,109,410        1,859,576

Current assets
Regulatory deposits                                                   4           7,876,599        8,269,034
Cash and cash equivalents                                             5          12,758,924       10,331,260
Other receivables and deposits                                                        5,357           42,631

                                                                                 20,640,880       18,642,925

TOTAL ASSETS                                                                 US$ 22,750,290   US$ 20,502,501


RESERVES AND LIABILITIES
Reserves
General reserve                                                       6           4,655,037        4,655,037
Pension reserve                                                       6                 -          1,300,000
Training reserve                                                      6             400,000          245,000
Loan revolving reserve                                                6             165,000          165,000
Property, plant & equipment reserve                                   6           3,000,000          391,000
Refunds & drawbacks reserve                                           6              50,000           50,000
Enforcement reserve                                                   6           2,000,000        2,000,000
Contingency reserve                                                   6           3,049,940        3,113,092

Total reserves                                                                   13,319,977       11,919,129

Current liabilities
Trade and other payables                                              7             553,714          314,338
Distribution payable to Government                                    8           1,000,000              -
Regulatory deposits from licensed entities                            4           7,876,599        8,269,034

Total liabilities                                                                 9,430,313        8,583,372

TOTAL RESERVES AND LIABILITIES                                               US$ 22,750,290   US$ 20,502,501



Signed on behalf of the Commission, April 25, 2006



Chairman                                                         Managing Director


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

                                                        -4-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Statement of Income
For The Year Ended December 31, 2005


                                                                 Notes                  2005               2004
INCOME
Fees collected on behalf of the Government                            5         145,897,754        121,731,621
Less: Fees due to the Government                                      5        (131,049,206)      (109,558,459)

Fees retained by the Commission                                                    14,848,548         12,173,162
Other income                                                                           36,907             45,500
Interest income                                                                        12,000             12,000

TOTAL INCOME                                                                       14,897,455         12,230,662


EXPENSES
Operating expenses                                                             ( 5,300,357)       ( 4,772,074)
Staff costs                                                        9,13        ( 6,176,494)       ( 4,508,705)
Pension past service costs                                         9,13        ( 1,019,756)       (       - )

TOTAL EXPENSES                                                                 ( 12,496,607)      ( 9,280,779)

SURPLUS BEFORE GOVERNMENT DISTRIBUTION                                              2,400,848          2,949,883

Distribution to Government                                            8        ( 1,000,000)                 -

SURPLUS FOR THE YEAR                                                         US$    1,400,848   US$    2,949,883




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

                                                        -5-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Statement of Changes in Reserves
For The Year Ended December 31, 2005


                                               Opening            Surplus for                           Closing
                                                balance              the year     Transfers             balance

Year ended December 31, 2004:
Surplus for the year                                -               2,949,883     (2,949,883)               -
General reserve                               4,655,037                  -                 -           4,655,037
Pension reserve                                 573,200                  -             726,800         1,300,000
Training reserve                                200,000                  -              45,000           245,000
Loan revolving reserve                          165,000                  -                 -             165,000
Property, plant & equipment reserve             350,000                  -              41,000           391,000
Refunds & drawbacks reserve                      50,000                  -                 -              50,000
Enforcement reserve                           1,000,000                  -            1,000,000        2,000,000
Contingency reserve                           1,976,009                  -            1,137,083        3,113,092

                                         US$ 8,969,246          US$ 2,949,883   US$        -      US$ 11,919,129

Year ended December 31, 2005:
Surplus for the year                                -               1,400,848     (1,400,848)               -
General reserve                               4,655,037                  -                 -           4,655,037
Pension reserve                               1,300,000                  -        (1,300,000)               -
Training reserve                                245,000                  -             155,000           400,000
Loan revolving reserve                          165,000                  -                 -             165,000
Property, plant & equipment reserve             391,000                  -            2,609,000        3,000,000
Refunds & drawbacks reserve                      50,000                  -                 -              50,000
Enforcement reserve                           2,000,000                  -                 -           2,000,000
Contingency reserve                           3,113,092                  -        (     63,152)        3,049,940

                                       US$ 11,919,129           US$ 1,400,848   US$        -      US$ 13,319,977




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




                                                          -6-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Statement of Cash Flows
For The Year Ended December 31, 2005


CASH FLOW FROM OPERATING ACTIVITIES                                                   2005              2004

Surplus for the year                                                              1,400,848         2,949,883
Adjustment to reconcile net surplus to net cash
  from operating activities:
    Depreciation                                                                    858,635           883,109

Operating surplus before working capital changes                                  2,259,483         3,832,992
Movement in regulatory deposits                                                      44,890               -
Decrease (increase) in other receivables and deposits                                37,274       (    42,631)
Increase (decrease) in trade and other payables                                     239,376       ( 149,174)
Increase in distribution payable to Government                                    1,000,000               -

Net cash generated from operations                                                3,536,133         3,641,187

CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of fixed assets                                                      (1,108,469)      ( 1,586,441)

Net cash used in investing activities                                            (1,108,469)      ( 1,586,441)

NET INCREASE IN CASH AND CASH EQUIVALENTS                                         2,427,664         2,054,746

CASH AND CASH EQUIVALENTS
   At beginning of year                                                          10,331,260         8,276,514

    At end of year                                                           US$ 12,758,924    US$ 10,331,260




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




                                                        -7-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Notes to the Financial Statements
For The Year Ended December 31, 2005


1.   Organization and Objectives

     The British Virgin Islands Financial Services Commission (the “Commission”) was established under the
     Financial Services Commission Act, 2001 (the “Act”) on December 31, 2001. The Act established the
     Commission as an autonomous regulatory authority responsible for the regulation, supervision and inspection of
     all financial services in and from within the British Virgin Islands. Such services include insurance, banking,
     fiduciary business, company management, mutual funds business as well as the registration of companies,
     limited partnerships, intellectual property and ships.

     The Commission oversees all regulatory responsibilities previously handled by the Government of the British
     Virgin Islands (the “Government”) through the Financial Services Department with the additional
     responsibilities of facilitating public understanding of the financial services system and its products, policing
     the perimeter of regulated activity, reducing financial crime and preventing market abuse.


2.   Significant Accounting Policies

     (a) Basis of Preparation
         These financial statements have been prepared in accordance with International Financial Reporting
         Standards, which comprise standards issued or adopted by the International Accounting Standards Board
         and interpretations issued by its Standing Interpretations Committee. They have been prepared under the
         historical costs convention and are expressed in U.S. dollars.

     (b) Fixed Assets
         Fixed Assets are stated at historical cost less accumulated depreciation. Depreciation is calculated on the
         straight-line method to write off the cost of each asset over their estimated useful life as follows:

         Computer equipment               3 years                       Motor vehicles                        5 years
         Office equipment                 5 years                       Leasehold improvements                5 years
         Leasehold land                  63 years

     (c) Regulated Deposits From Licenced Entities
         These deposits are carried at cost and consist of current deposits held at commercial banks with maturity
         dates of three months or less.

     (d) Cash and Cash Equivalents
         For the purpose of the cash flow statement, cash and cash equivalents consist of current deposits held with
         commercial banks with maturity dates of three months or less.

     (e) Revenue Recognition
         Fees and Commission income are recognised on a cash basis. Interest income and expenses are recognised
         on an accrual basis.

     (f) Taxation
         In accordance with Section 28 of the Act, the Commission is exempt from the payment of taxes on its
         income and operations.



                                                         -8-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Notes to the Financial Statements
For The Year Ended December 31, 2005


2.   Significant Accounting Policies (Cont’d)

     (g) Foreign currency translation
         Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions.
         Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets
         and liabilities denominated in foreign currencies are recognised in the income statement. Assets and liabilities
         are translated at the exchange rate in effect at the Balance Sheet date.

     (h) Leases
         Leases where a significant portion of the risks and rewards of ownership are retained by the lessor, are
         classified as operating leases. Payments made under operating leases are charged to the income statement on a
         straight-line basis over the period of the lease.

     (i) Pension Plan
         The Commission’s pension plan obligations are recognised on the accrual basis. Past service contributions
         were recognized when paid.

     (i) Financial Instruments
         Financial instruments carried on the balance sheet include cash and cash equivalents, statutory deposits, other
         receivables, trade and other payables, and statutory deposits from licensed entities. The particular recognition
         methods adopted are disclosed in the individual policy statements associated with each item.


3.   Fixed Assets
                            Leasehold        Motor      Furniture         Computers     Leasehold
                                Land        Vehicles & Equipment          & Software Improvements                   Total
     Year ended December 31, 2004:
     Opening net book value     -             39,000         545,772          375,389        196,083           1,156,244
     Additions              130,000              -           295,263          206,520        954,658           1,586,441
     Depreciation               -            (13,000)       (220,477)        (399,861)     ( 249,771)         ( 883,109)

     Net book value      US$ 130,000 US$ 26,000         US$ 620,558     US$ 182,048 US$ 900,970           US$ 1,859,576

     Year ended December 31, 2005:
     Opening net book value 130,000           26,000         620,558          182,048        900,970           1,859,576
     Additions                  -                -           242,487          288,171        577,811           1,108,469
     Depreciation          ( 2,063)          (13,000)       (268,974)        (209,265)     ( 365,333)         ( 858,635)

     Net book value      US$ 127,937 US$ 13,000         US$ 594,071     US$ 260,954 US$1,113,448          US$ 2,109,410

     As at December 31, 2005:
     Cost                      130,000        65,000       1,344,870        1,487,756       1,826,665          4,854,293
     Accumulated
      depreciation            ( 2,063)       (52,000)     ( 750,801)       (1,226,802)     ( 713,217)         (2,744,883)

     Net book value      US$ 127,937 US$ 13,000 US$ 594,071 US$ 260,954 US$ 1,113,448                     US$ 2,109,410


                                                           -9-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Notes to the Financial Statements
For The Year Ended December 31, 2005

4.   Regulatory Deposits From Licensed Entities
     By statute, certain entities licensed to operate in the financial services sector within the British Virgin Islands are
     required to place a deposit with the Commission. The Commission has undertaken to hold these amounts in a
     designated interest-bearing account and distributes interest thereon to the licensees on an annual basis. The
     deposits are refundable upon surrender of the licence.


5.   Cash and Cash Equivalents
                                                                                              2005                    2004
     Cash held in Government Trust Account                                               5,009,477                 798,320
     Payable to Government                                                              (4,840,742)            ( 1,406,577)

     Net cash held in Government Trust Account                                             168,735             ( 608,257)
     Cash in operating account                                                          12,590,189              10,939,517

     Total cash and cash equivalents                                               US$ 12,758,924          US$ 10,331,260
     Fees collected on behalf of the Government are paid into a trust account maintained jointly in the name of the
     Commission and the Government. Prior to the commencement of the Commission’s financial year, the
     Government’s Executive Council (“Council”) determines the percentage of fees collected on their behalf that is to
     be remitted to them, with the Commission retaining the balance. In April 2005, Council approved retention of 10%
     for 2005 and 10% for 2004. This resulted in cash of US$4,840,742 (2004: US$1,406,577) being held on behalf of
     the Government as at December 31, 2005.


6.   Reserves

     In accordance with Section 26 of the Act, the surplus for the year was allocated to reserve accounts at the
     discretion of the Commission. The reserves established include:
     (i)    General reserve that arose from an initial transfer on the establishment of the FSC and includes
            approximately 3 months of operating expenses;
     (ii)   Pension reserve to establish a fund towards a pension scheme for employees (15% of payroll). This reserve
            has been released during the year to fund the past service contributions of a defined benefit pension plan
            (note 13);
     (iii) Training reserve for long term training/ study leave of staff;
     (iv) Loan revolving reserve to facilitate staff loans (personal, medical, etc.) as the Act requires employees
            transferred from Government at the inception of the Commission to be no less well off than they were with
            Government;
     (v)    Property, plant & equipment reserve towards securing property, constructing and equipping a building;
     (vi) Refunds & drawbacks reserve to provide for making refunds when necessary;
     (vii) Enforcement reserve to establish a fund to address enforcement expenses as they arise;
     (viii) Contingency reserve to establish a fund in the event of unforeseen circumstances.


7.   Trade and Other Payables
                                                                                              2005                    2004
     Accounts payable                                                                      310,242                 198,724
     Employee deductions payable                                                           243,472                 115,614
                                                                                      US$ 553,714             US$ 314,338

                                                           -10-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Notes to the Financial Statements
For The Year Ended December 31, 2005


8.   Distribution Payable to Government

     On April 25, 2006, the Board of Commissioners approved a distribution to Government of US$1,000,000 from
     surplus earned by the Commission during the year ended December 31, 2005.


9.   Staff Costs
                                                                                          2005                   2004
     Wages and salaries                                                              4,999,770              4,029,114
     Allowances and benefits                                                           920,209                479,591
     Payroll taxes                                                                     256,515                    -

                                                                                US$ 6,176,494          US$ 4,508,705
     The average number of full time employees in 2005 was 118 (2004: 100).
     During the year ended December 31, 2005, the Commission paid US$1,019,756 for past service costs and
     US$418,051 for current service costs to a defined contribution pension plan setup during the year, which has been
     included as part of allowances and benefits. Details of the pension plan can be found in note 13.
     Effective January 1, 2005 the Commission became subject to a payroll tax of 6% on all salaries, wages and
     benefits paid to employees, after an initial allowance of US$7,500 per employee, by virtue of the Payroll Taxes
     Act, 2004.


10. Related Party Transactions

     The Government’s Financial Secretary and Accountant General along with the Chairman of the Board and the
     Managing Director of the Commission are signatories to a joint account maintained in the names of the
     Government and the Commission referred to as the Government Trust Account as per section 19 (1) and (7) of the
     Act. (See note 5)


11. Commitments and Contingencies

     As at December 31, 2005, the Commission is committed to making future minimum payments to various
     contractors totalling US$100,973 (2004: US$178,655) in relation to contracts in progress at that date.

     The Commission currently occupies various properties in accordance with the terms of annual operating lease
     agreements and is committed to making payments on these leases as agreed in the future.

     The future aggregate minimum lease payments under non-cancellable leases are as follows:


           2006                                                                           420,000
           2007                                                                           420,000
           2008                                                                           420,000
           2009                                                                           210,000

                                                                                   US$ 1,470,000




                                                        -11-
BRITISH VIRGIN ISLANDS FINANCIAL SERVICES COMMISSION

Notes to the Financial Statements
For The Year Ended December 31, 2005


12. Risk Associated With Financial Instruments

    Credit risk is the risk that a party to a financial instrument will fail to discharge an obligation and cause the other
    party to incur financial loss. Financial assets which potentially expose the Commission to credit risk consist of
    statutory deposits, cash and cash equivalents and other receivables. The extent of the Commission’s exposure to
    credit risk in respect of these financial assets approximate the carrying values as recorded in the Commission’s
    balance sheet.

    The Commission has no significant concentrations of interest rate risk, currency risk or liquidity risk. The
    Commission does not enter into credit transactions for its services and as at December 31, 2005 it did not own any
    assets or liabilities that are denominated in foreign currency or are exposed to adversities of fluctuating interest
    rates. In addition, it did not own any illiquid assets.


13. Defined Contribution Pension Plan

    During the year ended December 31, 2005, a defined contribution pension scheme (the “Plan”) was setup to
    provide retirement benefits for all established employees, which is administered by Trustees appointed by the
    Commission. Under the Plan, the Commission has an obligation limited to 15% of the participants’ basic annual
    salary, with the participants contributing a minimum of 5%. A participant’s interest in the Commission’s
    contributions commences to vest after 7 years employment and is fully vested after 10 years.

    During the year ended December 31, 2005, the Commission paid its portion of the participants’ past service
    costs from January 1, 2002 to December 31, 2004, which totalled US$1,019,756. As at December 31, 2005, all
    past service obligations applicable to the Commission have been fully funded.

    During the year ended December 31, 2005, the Commission contributed US$418,051 for the participants’
    current service obligations.




                                                          -12-

				
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