Common use of SIGNIFICANT ACCOUNTING POLICIES Clause in Contracts

SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the significant accounting policies followed by the Trust. Security Valuation--Investment securities held by the Cash Management Fund are stated at amortized cost, which approximates market value. Under this valuation method, purchase discounts and premiums are accreted and amortized ratably to maturity and are included in interest income. Investment securities held by the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Fund which are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price on each business day. If there is no such reported sale, these securities are valued at the most recently quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Debt obligations, with sixty days or less remaining until maturity, may be valued at their amortized cost. Federal Income Taxes--It is each Fund's intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of the Internal Revenue Code of 1986, as amended. Accordingly, no provisions for Federal income taxes are required. Security Transactions and Related Income--Security transactions are accounted for on the date the security is purchased or sold (trade date). Dividend income is recognized on the ex-dividend date, and interest income is recognized on the accrual basis. Costs used in determining realized gains and losses on the sale of investment securities are those of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Fund are accreted and amortized to maturity using the scientific interest method, which approximates the effective interest method. Repurchase Agreements--Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. Net Asset Value Per Share--The net asset value per share of each Fund is calculated on each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for the Investor shares of the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund and the Small Com- NOTES TO FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- FFB Lexicon Funds--August 31, 1995 pany Growth Fund is equal to the net asset value per share plus a sales load of 4.50%. Distributions--Distributions from net investment income are paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Classes--Class-specific expenses are borne by that class. Income, expenses, and realized and unrealized gains & losses are allocated to the respective classes on the basis of relative daily net assets. Other--Expenses that are directly related to one of the Funds are charged to that Fund. Other operating expenses of the Trust are prorated to the Funds on the basis of relative daily net assets.

SIGNIFICANT ACCOUNTING POLICIES. Basis of preparation The following is a summary financial statements of the significant Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The financial statements have been presented in US Dollars. The financial statements are prepared on a historical cost basis. Changes in accounting policies followed The accounting policies adopted are consistent with those of the previous financial year, except for the following amendments to IFRS effective as of 1 January 2014: • Recoverable Amount Disclosures for Non-Financial Assets – Amendments to IAS 36 • Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) • Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 • Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39 The adoption of the above new standard and amendments to standards did not impact the financial position or performance of the Company. Income tax Taxes are accrued for in accordance with the Lebanese Income Tax Law. Cash and cash equivalents Cash and cash equivalents comprise of cash on hand and bank balances and short-term deposits with an original maturity of three months or less. Accounts payable and accruals Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the Trustsupplier or not. Security Valuation--Investment securities held by the Cash Management Fund Accounts receivable Accounts receivable are stated at amortized cost, which approximates market valueoriginal invoice amount less a provision for any uncollectible amounts. Under this valuation method, purchase discounts and premiums An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are accreted and amortized ratably to maturity and are included in interest income. Investment securities held by the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Fund which are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price on each business day. If written off when there is no such reported sale, these securities possibility of recovery. COLONY CAPITAL (OFFSHORE) XXX NOTES TO THE FINANCIAL STATEMENTS 31 December 2014 3 SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currency transactions Transactions in foreign currencies are valued recorded at the most recently quoted bid price. Unlisted securities for which market quotations are readily available are valued rate ruling at the most recently quoted bid price. Debt obligations, with sixty days or less remaining until maturity, may be valued at their amortized cost. Federal Income Taxes--It is each Fund's intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions date of the Internal Revenue Code transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of 1986, as amendedexchange ruling at the statement of financial position date. Accordingly, no provisions All differences are taken to the statement of comprehensive income. Fair values The fair value of interest-bearing items is estimated based on discounted cash flows using interest rates for Federal income taxes are requireditems with similar terms and risk characteristics. Security Transactions 4 GENERAL AND ADMINISTRATIVE EXPENSES 2014 US$ 2013 US$ Salaries and Related Income--Security transactions are accounted for on the date the security is purchased or sold (trade date). Dividend income is recognized on the ex-dividend date, related benefits 73,259 — Office rent 55,001 — Professional fees 18,220 2,860 Transportation and interest income is recognized on the accrual basis. Costs used in determining realized gains telecommunications 17,919 — Maintenance 10,826 — Water and losses on the sale of investment securities are those of the specific securities sold adjusted electricity expenses 8,693 — Office supplies and stationery 6,291 — Taxes 6,965 — Gifts 2,012 — Others 56 663 199,242 3,523 5 PROPERTY AND EQUIPMENT Computer equipment US$ Office equipment US$ Furniture and fixtures US$ Total US$ Cost Additions 3,431 605 11,094 15,130 At 31 December 2014 3,431 605 11,094 15,130 Depreciation At 1 January 2014 — — — — Depreciation charge for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts and premiums on securities held by the Intermediate-Term Government Securities Fundyear 687 48 784 1,519 At 31 December 2014 687 48 784 1,519 Net carrying value At 31 December 2014 2,744 557 10,310 13,611 During 2014, the Fixed Income FundCompany purchased fixed assets amounting to US$ 12,758 from Colony Capital SARL, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Fund are accreted and amortized to maturity using the scientific interest method, which approximates the effective interest methoda related party. Repurchase Agreements--Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. Net Asset Value Per Share--The net asset value per share of each Fund is calculated on each business day, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for the Investor shares of the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund and the Small Com- COLONY CAPITAL (OFFSHORE) XXX NOTES TO THE FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- FFB Lexicon Funds--August 31, 1995 pany Growth Fund is equal to the net asset value per share plus a sales load of 4.50%. Distributions--Distributions from net investment income are paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Classes--Class-specific expenses are borne by that class. Income, expenses, and realized and unrealized gains & losses are allocated to the respective classes on the basis of relative daily net assets. Other--Expenses that are directly related to one of the Funds are charged to that Fund. Other operating expenses of the Trust are prorated to the Funds on the basis of relative daily net assets.STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES. The following is a summary financial statements of the CIDB have been prepared in accordance with International Accounting Standards under the historical cost convention. The significant accounting policies followed adopted by the TrustBank are as follows: • Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, cash at bank and deposit accounts with terms of maturity within three months or less from the date of acquisition. Security Valuation--Investment securities held by the Cash Management Fund are stated at amortized cost• Deposit Accounts Deposit accounts reflect term deposits, which approximates market valueare placed with approved financial institutions. Under this valuation methodSuch deposits have maturity between three (3) months and twelve (12) months from the date of acquisition. • Loans Receivable and Provision for Loan Losses Loans receivable is generally stated in the amount of the outstanding principal balance. This is reduced by a provision for possible loan losses. Management first takes into account the overall portfolio quality in the context of various factors, purchase discounts and premiums are accreted and amortized ratably including current economic conditions, in order to maturity and are included arrive at a general provision that appears adequate to reflect possible losses on the portfolio as a whole. In addition, specific provisions for loan losses can be determined for problem loans that may be likely to become uncollectible in interest income. Investment securities the light of the borrowers' inability to service the debt, assessment of security held by the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Fund which are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price on each business daypossible risk of further default. If there • Income Recognition Interest income is no such reported sale, these securities are valued at the most recently quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Debt obligations, with sixty days or less remaining until maturity, may be valued at their amortized cost. Federal Income Taxes--It is each Fund's intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of the Internal Revenue Code of 1986, as amended. Accordingly, no provisions for Federal income taxes are required. Security Transactions and Related Income--Security transactions are accounted for recorded on the date accrual basis for all loans. The CIDBs policy is to cease accruing interest on loans when the security is purchased or sold principal and interest payments are contractually 90 days in arrears (trade dateclassified as non- performing loans). Dividend Any accrued and uncollected interest on non-performing loans is reversed against income is recognized on for the ex-dividend datecurrent period. Thereafter, and interest income is recognized recognised on a cash basis, but only after prior write-offs and specific provisions for losses have been recovered. • Depreciation of Fixed Assets Fixed assets are recorded at acquisition cost and are depreciated using the accrual basisstraight-line method at rates considered adequate to write off the cost of the assets over their estimated useful lives as follows: Furniture 5 years Office equipment 5 years Leasehold Improvements 5 years Computer Equipment 3 years • Foreign Currency Transactions Transactions in currencies other than the Cayman Islands dollar are converted at exchange rates ruling at the date of the transactions. Costs used Also, assets and liabilities denominated in determining realized foreign currencies are translated at the rate of exchange prevailing at the balance sheet date. Resulting gains and losses on exchange are recognised in the sale Statement of investment securities are those Income and Expenses at the end of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts THE CAYMAN ISLANDS DEVELOPMENT BANK FORECAST OPERATING STATEMENT FOR THE YEAR ENDING 30 JUNE 2006 NOTE 2006 Budget $ 2005 Estimated/ Actual $ Revenue Outputs Funded by Cabinet 1,577,872 7,077,875 Operations 1 1,777,665 955,913 Total Operating Revenue 3,355,537 8,033,788 Operating Expenses Personnel 888,695 718,935 Office Accommodation 132,720 126,719 Computer Licenses and premiums Maintenance 40,004 39,972 Provision for Loan Losses 239,233 179,137 Depreciation and Amortization 106,060 59,660 Other Operating Expenses 218,350 142,524 Interest Expense 632,996 175,744 Total Operating Expenses 2,258,058 1,442,691 Surplus/Deficit from Operating Activities 1,097,479 91,097 Extraordinary Items Extraordinary Outputs 1,000,000 6,500,000 Gain/Loss on securities held Foreign Loss Conversion 47,242 Net Surplus/Deficit after Extraordinary Items 97,479 138,339 THE CAYMAN ISLANDS DEVELOPMENT BANK STATEMENT OF CHANGES IN NET WORTH FOR THE YEAR ENDING 30 JUNE 2006 NOTE 2006 Budget $ 2005 Estimated/ Actual $ Opening Balance Net Worth 6,266,760 5,628,421 Net Income 62,480 138,339 Transfer to Reserve Fund (12,496) (27,668) Total Recognized Revenues and Expenses 49,983 110,671 Equity Capital New Equity Capital - 500,000 Conversion to Equity Capital Reserve Fund - 12,496 27,668 Closing Balance Net Worth 6,329,240 6,266,760 THE CAYMAN ISLANDS DEVELOPMENT BANK FORECAST BALANCE SHEET AS AT 30 JUNE 2006 NOTE 2006Budget $ 2005 Estimated/ Actual $ Current Assets Cash and Cash Equivalents 2 84,584 7,511,930 Deposit Accounts Account Receivable -(609,936) Other Current Assets 3 264,328 11,297,869 Total Current Assets -261,024 19,040,373 Long-Term Assets Loans & Deposit Interest Receivable 129,461 Loans Receivable 21,965,035 101,113 Leasehold Improvements and Fixed Assets 4 225,670 155,828 TOTAL ASSETS 21,929,681 19,196,201 Current Liabilities Accounts & Other Payables 50,500 50,500 Current Portion of Obligations under Long -Term Debt 144,000 144,000 Total Current Liabilities 194,500 194,500 Long -Term Liabilities Loans from External Funding Agency/Bond Issue 5 15,370,941 12,734,941 Total Liabilities 15,565,441 12,929,441 Capital Equity Capital 6 3,289,185 3,289,185 Reserve Funds 7 83,609 71,113 Retained Earnings 2,956,444 2,906,462 TOTAL LIABILITIES AND EQUITY 21,894,679 19,196,201 THE CAYMAN ISLANDS DEVELOPMENT BANK FORECAST STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2006 2006 2005 Budget Estimated/ NOTE $ Actual $ Cash Flows from Operating Activities 279,556 349,758 Net Cash Flows from Investing Activities Cash Flows from Financing Activities (10,472,363) (4,327,664) Capital Injection 0 500,000 Other Financing Activities 2,636,000 10,852,590 Net Cash Provided by Financing Activities 2,636,000 11,352,590 Opening Balance Cash & Cash Equivalents 7,641,391 266,707 Net Change in Cash & Cash Equivalents (7,556,807) 7,374,684 Closing Balance Cash & Cash Equivalents 2 84,584 7,641,391 THE CAYMAN ISLANDS DEVELOPMENT BANK NOTES TO THE FORECAST FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Note 1: OPERATING REVENUES 2006 2005 Budget $ Estimated/ Actual $ Outputs Funded By Cabinet 1,577,872 7,077,875 Operations 1,777,665 955,913 3,355,537 8,033,788 Note 2: CASH & CASH EQUIVALENTS 2006 2005 Budget $ Estimated/ Actual $ Current and Call Accounts 84,584 7,511,930 Short -Term Fixed Deposits within 3 months - 129,461 84,584 7,641,391 Note 3: LOANS RECEIVABLE Loans Receivable is comprised of the total unpaid principal outstanding on the borrowers' accounts less the equivalent of 2% of this amount, which is set aside as a Provision for Loan Losses. Specific provisions are also made for problem loans that may become uncollectible. 2006 2005 Budget Estimated/ Actual $ $ Principal Amount Owed by Xxxxxxxxx 21,899,974 11,668,574 Less: Provision for Loan Losses (609,938) (370,705) Net Balance 21,290,036 11,297,869 Note 4: LEASEHOLD IMPROVEMENTS AND FIXED ASSETS Leasehold Improvements 2006 Budget $ 2005 Estimated/ Actual $ Opening Book Value/Cost 64,627 58,137 Additions 100,000 21,024 Depreciation (38,739) (14,534) Closing Book Value 125,888 64,627 Office Furniture and Equipment Opening Book Value/Cost 17,868 22,683 Additions 58,500 9,045 Depreciation (27,260) (13,860) Closing Book Value 49,108 17,868 Computer Hardware and Software Opening Book Value/Cost 73,333 - Additions 82,463 110,000 Depreciation (40,061) (36,667) Closing Book Value 115,735 73,333 Leasehold Improvements Fit out works were carried out in 2002/03 on the existing office accommodation and the cost of which is being amortized over a 5-year period. No additional words are anticipated in 2005/06. Note 5: LOANS FROM EXTERNAL FUNDING AGENCY/BOND ISSUE The CIDB acts as executing agent for three lines of credit from the Caribbean Development Bank (CDB). Of these, two are currently being repaid and draw downs are being made under the third which is specifically earmarked for mortgage financing. Repayments under the third line of credit will not commence until 2007. In addition, the CIDB raised CI$ 10 million by way of two variable rate development Bonds on June 30,2005 The drawdowns for 2005/06 below include the anticipated draws from the CDB line of credit. 2006 Budget $ 2005 Estimated/ Actual $ Opening Balance for Period 12,878,941 2,150,311 Draw downs 2,780,000 10,820,000 Repayments (144,000) (91,370) Closing Balance for Period 15,514,941 12,878,941 Note 6: EQUITY CAPITAL The authorized capital of the Cayman Islands Development Bank is CI$50 million. The paid-up capital is exclusively subscribed for by the Intermediate-Term Government Securities FundCayman Islands Government. 2006 Budget $ 2005 Estimated/ Actual $ Opening Balance 3,289,185 2,789,185 Additions 0 500,000 Closing Balance 3,289,185 3,289,185 Note 7: RESERVE FUND Under Section 20 of the CIDB Law, 2001, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Bank is required to maintain a Reserve Fund are accreted and amortized equivalent to maturity using the scientific interest method, which approximates the effective interest method. Repurchase Agreements--Securities pledged as collateral for repurchase agreements are held by the custodian bank 20% of its net income until the respective agreements mature. Provisions total amount standing to the credit of such reserve is equivalent to the paid- up portion of the repurchase agreements ensure that the market value authorized capital of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterpartyBank. If the counterparty defaults and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. Net Asset Value Per Share--The net asset value per share of each Reserve Fund is calculated on each business daycomprised as follows: 2006 2005 Budget $ Estimated/ Actual $ Balance at Beginning of Year 71,013 43,345 Transfer of 20% of Net Income 12,496 27,668 Balance at End of Year 83,509 71,013 August 6, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for the Investor shares of the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund and the Small Com- NOTES TO FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- FFB Lexicon Funds--2005 Amended August 31, 1995 pany Growth Fund is equal to the net asset value per share plus a sales load of 4.50%. Distributions--Distributions from net investment income are paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Classes--Class-specific expenses are borne by that class. Income, expenses, and realized and unrealized gains & losses are allocated to the respective classes on the basis of relative daily net assets. Other--Expenses that are directly related to one 2005 CIDB Ownership Agreement Between The Cabinet of the Funds are charged to that Fund. Other operating expenses of Cayman Islands Government And Cayman Islands Monetary Authority For the Trust are prorated to the Funds on the basis of relative daily net assets.year ending 30 June 2006 Contents

SIGNIFICANT ACCOUNTING POLICIES. The following is a summary financial statements of the CIDB have been prepared in accordance with International Accounting Standards under the historical cost convention. The significant accounting policies followed adopted by the TrustBank are as follows: • Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, cash at bank and deposit accounts with terms of maturity within three months or less from the date of acquisition. Security Valuation--Investment securities held by the Cash Management Fund are stated at amortized cost• Deposit Accounts Deposit accounts reflect term deposits, which approximates market valueare placed with approved financial institutions. Under this valuation methodSuch deposits have maturity between three (3) months and twelve (12) months from the date of acquisition. • Loans Receivable and Provision for Loan Losses Loans receivable is generally stated in the amount of the outstanding principal balance. This is reduced by a provision for possible loan losses. Management first takes into account the overall portfolio quality in the context of various factors, purchase discounts and premiums are accreted and amortized ratably including current economic conditions, in order to maturity and are included arrive at a general provision that appears adequate to reflect possible losses on the portfolio as a whole. In addition, specific provisions for loan losses can be determined for problem loans that may be likely to become uncollectible in interest income. Investment securities the light of the borrowers' inability to service the debt, assessment of security held by the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Fund which are listed on a securities exchange for which market quotations are available are valued at the last quoted sales price on each business daypossible risk of further default. If there • Income Recognition Interest income is no such reported sale, these securities are valued at the most recently quoted bid price. Unlisted securities for which market quotations are readily available are valued at the most recently quoted bid price. Debt obligations, with sixty days or less remaining until maturity, may be valued at their amortized cost. Federal Income Taxes--It is each Fund's intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of the Internal Revenue Code of 1986, as amended. Accordingly, no provisions for Federal income taxes are required. Security Transactions and Related Income--Security transactions are accounted for recorded on the date accrual basis for all loans. The CIDBs policy is to cease accruing interest on loans when the security is purchased or sold principal and interest payments are contractually 90 days in arrears (trade dateclassified as non- performing loans). Dividend Any accrued and uncollected interest on non-performing loans is reversed against income is recognized on for the ex-dividend datecurrent period. Thereafter, and interest income is recognized recognised on a cash basis, but only after prior write-offs and specific provisions for losses have been recovered. • Depreciation of Fixed Assets Fixed assets are recorded at acquisition cost and are depreciated using the accrual basisstraight-line method at rates considered adequate to write off the cost of the assets over their estimated useful lives as follows: Furniture 5 years Office equipment 5 years Leasehold Improvements 5 years Computer Equipment 3 years • Foreign Currency Transactions Transactions in currencies other than the Cayman Islands dollar are converted at exchange rates ruling at the date of the transactions. Costs used Also, assets and liabilities denominated in determining realized foreign currencies are translated at the rate of exchange prevailing at the balance sheet date. Resulting gains and losses on exchange are recognised in the sale Statement of investment securities are those Income and Expenses at the end of the specific securities sold adjusted for the accretion and amortization of purchase discounts and premiums during the respective holding period. Purchase discounts THE CAYMAN ISLANDS DEVELOPMENT BANK FORECAST OPERATING STATEMENT FOR THE YEAR ENDING 30 JUNE 2006 2006 Budget 2005 Estimated/ Actual NOTE $ $ Revenue Outputs Funded by Cabinet 1,577,872 7,077,875 Operations 1 1,777,665 955,913 Total Operating Revenue 3,355,537 8,033,788 Operating Expenses Personnel 888,695 718,935 Office Accommodation 132,720 126,719 Computer Licenses and premiums Maintenance 40,004 39,972 Provision for Loan Losses 239,233 179,137 Depreciation and Amortization 106,060 59,660 Other Operating Expenses 218,350 142,524 Interest Expense 632,996 175,744 Total Operating Expenses 2,258,058 1,442,691 Surplus/Deficit from Operating Activities 1,097,479 91,097 Extraordinary Items Extraordinary Outputs 1,000,000 6,500,000 Gain/Loss on securities held Foreign Loss Conversion 47,242 Net Surplus/Deficit after Extraordinary Items 97,479 138,339 THE CAYMAN ISLANDS DEVELOPMENT BANK STATEMENT OF CHANGES IN NET WORTH FOR THE YEAR ENDING 30 JUNE 2006 2006 Budget 2005 Estimated/ Actual NOTE $ $ Opening Balance Net Worth 6,266,760 5,628,421 Net Income 62,480 138,339 Transfer to Reserve Fund (12,496) (27,668) Total Recognized Revenues and Expenses 49,983 110,671 Equity Capital New Equity Capital - 500,000 Conversion to Equity Capital Reserve Fund - 12,496 27,668 Closing Balance Net Worth 6,329,240 6,266,760 THE CAYMAN ISLANDS DEVELOPMENT BANK FORECAST BALANCE SHEET AS AT 30 JUNE 2006 NOTE 2006 Budget $ 2005 Estimated/ Actual $ Current Assets Cash and Cash Equivalents 2 84,584 7,511,930 Deposit Accounts Account Receivable - (609,936) Other Current Assets 3 264,328 11,297,869 Total Current Assets -261,024 19,040,373 Long-Term Assets Loans & Deposit Interest Receivable 129,461 Loans Receivable 21,965,035 101,113 Leasehold Improvements and Fixed Assets 4 225,670 155,828 TOTAL ASSETS 21,929,681 19,196,201 Current Liabilities Accounts & Other Payables 50,500 50,500 Current Portion of Obligations under Long -Term Debt 144,000 144,000 Total Current Liabilities 194,500 194,500 Long -Term Liabilities Loans from External Funding Agency/Bond Issue 5 15,370,941 12,734,941 Total Liabilities 15,565,441 12,929,441 Capital Equity Capital 6 3,289,185 3,289,185 Reserve Funds 7 83,609 71,113 Retained Earnings 2,956,444 2,906,462 TOTAL LIABILITIES AND EQUITY 21,894,679 19,196,201 THE CAYMAN ISLANDS DEVELOPMENT BANK FORECAST STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2006 2006 2005 Budget Estimated/ Actual NOTE $ $ Cash Flows from Operating Activities 279,556 349,758 Net Cash Flows from Investing Activities Cash Flows from Financing Activities (10,472,363) (4,327,664) Capital Injection 0 500,000 Other Financing Activities 2,636,000 10,852,590 Net Cash Provided by Financing Activities 2,636,000 11,352,590 Opening Balance Cash & Cash Equivalents 7,641,391 266,707 Net Change in Cash & Cash Equivalents (7,556,807) 7,374,684 Closing Balance Cash & Cash Equivalents 2 84,584 7,641,391 THE CAYMAN ISLANDS DEVELOPMENT BANK NOTES TO THE FORECAST FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006 Note 1: OPERATING REVENUES 2006 Budget $ 2005 Estimated/ Actual $ Outputs Funded By Cabinet 1,577,872 7,077,875 Operations 1,777,665 955,913 3,355,537 8,033,788 Note 2: CASH & CASH EQUIVALENTS 2006 2005 Budget $ Estimated/ Actual $ Current and Call Accounts 84,584 7,511,930 Short -Term Fixed Deposits within 3 months - 129,461 84,584 7,641,391 Note 3: LOANS RECEIVABLE Loans Receivable is comprised of the total unpaid principal outstanding on the borrowers' accounts less the equivalent of 2% of this amount, which is set aside as a Provision for Loan Losses. Specific provisions are also made for problem loans that may become uncollectible. 2006 2005 Budget Estimated/ Actual $ $ Principal Amount Owed by Xxxxxxxxx 21,899,974 11,668,574 Less: Provision for Loan Losses (609,938) (370,705) Net Balance 21,290,036 11,297,869 Note 4: LEASEHOLD IMPROVEMENTS AND FIXED ASSETS 2006 Budget 2005 Estimated/ Actual Leasehold Improvements $ $ Opening Book Value/Cost 64,627 58,137 Additions 100,000 21,024 Depreciation (38,739) (14,534) Closing Book Value 125,888 64,627 Office Furniture and Equipment Opening Book Value/Cost 17,868 22,683 Additions 58,500 9,045 Depreciation (27,260) (13,860) Closing Book Value 49,108 17,868 Computer Hardware and Software Opening Book Value/Cost 73,333 - Additions 82,463 110,000 Depreciation (40,061) (36,667) Closing Book Value 115,735 73,333 Leasehold Improvements Fit out works were carried out in 2002/03 on the existing office accommodation and the cost of which is being amortized over a 5-year period. No additional words are anticipated in 2005/06. Note 5: LOANS FROM EXTERNAL FUNDING AGENCY/BOND ISSUE The CIDB acts as executing agent for three lines of credit from the Caribbean Development Bank (CDB). Of these, two are currently being repaid and draw downs are being made under the third which is specifically earmarked for mortgage financing. Repayments under the third line of credit will not commence until 2007. In addition, the CIDB raised CI$ 10 million by way of two variable rate development Bonds on June 30,2005 The drawdowns for 2005/06 below include the anticipated draws from the CDB line of credit. 2006 Budget 2005 Estimated/ Actual $ $ Opening Balance for Period 12,878,941 2,150,311 Draw downs 2,780,000 10,820,000 Repayments (144,000) (91,370) Closing Balance for Period 15,514,941 12,878,941 Note 6: EQUITY CAPITAL The authorized capital of the Cayman Islands Development Bank is CI$50 million. The paid-up capital is exclusively subscribed for by the Intermediate-Term Government Securities FundCayman Islands Government. 2006 Budget 2005 Estimated/ Actual $ $ Opening Balance 3,289,185 2,789,185 Additions 0 500,000 Closing Balance 3,289,185 3,289,185 Note 7: RESERVE FUND Under Section 20 of the CIDB Law, 2001, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund, and the Small Company Growth Bank is required to maintain a Reserve Fund are accreted and amortized equivalent to maturity using the scientific interest method, which approximates the effective interest method. Repurchase Agreements--Securities pledged as collateral for repurchase agreements are held by the custodian bank 20% of its net income until the respective agreements mature. Provisions total amount standing to the credit of such reserve is equivalent to the paid- up portion of the repurchase agreements ensure that the market value authorized capital of the collateral, including accrued interest thereon, is sufficient in the event of default of the counterpartyBank. If the counterparty defaults and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited. Net Asset Value Per Share--The net asset value per share of each Reserve Fund is calculated on each business daycomprised as follows: 2006 2005 Budget $ Estimated/ Actual $ Balance at Beginning of Year 71,013 43,345 Transfer of 20% of Net Income 12,496 27,668 Balance at End of Year 83,509 71,013 August 6, by dividing the total value of each Fund's assets, less liabilities, by the number of shares outstanding. The maximum offering price per share for the Investor shares of the Intermediate-Term Government Securities Fund, the Fixed Income Fund, the Capital Appreciation Equity Fund, the Select Value Fund and the Small Com- NOTES TO FINANCIAL STATEMENTS (Continued) -------------------------------------------------------------------------------- FFB Lexicon Funds--2005 Amended August 31, 1995 pany Growth Fund is equal to the net asset value per share plus a sales load of 4.50%. Distributions--Distributions from net investment income are paid to shareholders on a monthly basis. Any net realized capital gains on sales of securities are distributed to shareholders at least annually. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Classes--Class-specific expenses are borne by that class. Income, expenses, and realized and unrealized gains & losses are allocated to the respective classes on the basis of relative daily net assets. Other--Expenses that are directly related to one 2005 CIDB Ownership Agreement Between The Cabinet of the Funds are charged to that Fund. Other operating expenses of Cayman Islands Government And Cayman Islands Monetary Authority For the Trust are prorated to the Funds on the basis of relative daily net assets.year ending 30 June 2006 Contents