Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Financial Highlights 25
Chairman’s Letter 22
Income Statement 24
Balance Sheet 25
Statement of Changes in Equity 26
Statement of Cash Flows 27
Notes to the Financial Statements 28
Auditors’ Report 50
Report of Management 51
“Since 1985 we have witnessed and
4
FINANCIAL HIGHLIGHTS
(Expressed in thousands of United States dollars)
Year Ended 31 December 2005
CAPITAL
Shareholder’s Equity $ 282,454 $ 246,543 $ 135,029
Percent of Total Assets* 6.96% 7.99% 6.07%
Percent of Total Client Deposits* 7.51% 8.72% 6.48%
YEAR-END BALANCES
TOTAL ASSETS (see Figure 2) $ 4,059,114 $ 3,086,421 $ 2,225,506
TOTAL DEPOSITS (see Figure 2) $ 3,763,011 $ 2,827,941 $ 2,083,398
*Based on year-end equity as a percentage of year-end balances of assets and client deposits.
500
450 4.5
432
4.1
400 4.0 3.8
350 3.5
332
3.1
300 3.0 2.8
254
250 2.5
2.2 2.1
200 2.0
150 1.5
100 1.0
50 0.5
0 0
2003 2004 2005 2003 2004 2005
5
OUR FOCUS AND PRIORITIES
We have successfully built Stanford International Bank (SIB) into an institution that is second to none because our
focus and priorities have never changed.
Unlike other international banks serving many different types of clients and many different market segments with a
myriad of products and services, SIB has focused on a very select client profile and a very select product line.
6
“As the connection between
We have employed the best of the best in human talent from around the globe in the international banking and financial
services industries. These top caliber men and women who proudly wear our eagle pin are totally committed to
providing our clients with a level of service that is second to none.
9
10
“The Bank is domiciled in a well-regulated, low-tax jurisdiction and as
11
OUR INVESTMENT PHILOSOPHY
We believe value investing combined with a thoroughly understood and well-managed alternative strategy is the
foundation from which all long-term investment success is built.
Our investment philosophy may not produce dazzling returns and does not always follow current trends, but we have
proved year after year it consistently protects principal and grows capital.
12
“We manage risk by keeping
SIB employs an investment strategy with the goal of minimizing systematic and unsystematic risk, while maintaining more
than adequate liquidity, portfolio efficiency, operational flexibility and absolute yields as opposed to index-benchmark
yields. Our return-on-investment expectations are realistic and based on as much knowledge and information as we can
obtain on a firsthand basis. In many instances this simply means rolling up our sleeves to do the hard work necessary in
order to make sound investment decisions.
15
“I have been with SIB for over 12 years and have seen
16
17
BUILDING RELATIONSHIPS
After two decades of serving our clients we know that no matter how technological our world becomes, nothing will ever
replace the human touch in building and maintaining the client relationship.
18
19
THE FUTURE
For 20 years SIB has consistently delivered a premium return to our clients on their deposits, combined with true
world-class private banking service. By staying true to our principles of hard work, clear vision and value for the
client we look optimistically to the next two decades of success and growth.
20
21
CHAIRMAN’S LETTER
2005 was another successful year of growth, productivity and profit for Stanford International Bank, as total assets
surpassed $4 billion at year’s end. Our ability to attract the best talent in the financial services industry, the addition
of new cutting-edge technology and our consistent profitability all speak volumes as to the Bank’s firm foundation for
the future.
However, before I highlight our achievements during 2005 and plans for the future, I am compelled to look back to the
Bank’s beginning 20 years ago.
In 1985 there was no Internet, computers were only just beginning to enter the workplace, cell phones were virtually
nonexistent and fax machines, then called telecopiers, were in limited use. It’s hard to fathom our world today without
these tools at our fingertips and we can only imagine where the next 20-year leap of technology will take us.
Likewise, during the past 20 years we have witnessed an array of different economic and political events. In October of
1987, we experienced the worst stock market decline since the Great Depression. In 1990, the United States went into a
major recession. During the next few years, we saw the Mexican peso crisis of 1994, the Asian crisis of 1997, the Russian
crisis of 1998 and the collapse of long-term capital. Speculation in technology stocks drove the NASDAQ over 5,000 for
the first time in March 2000, and this exuberance carried over into the Dow, prompting it to break the 11,000 mark. The
sharp rise in Internet stocks led to the eventual bursting of the Internet stock bubble that same year with a staggering
78 percent market decline as measured by the NASDAQ Composite. The following year, major corporate scandals
further added to market volatility. The events of 11 September 2001 not only impacted the world’s markets but have
significantly changed the way we now conduct international banking business. Economic problems in Argentina took
center stage in 2002 when the government defaulted on its debt. The integration process of Western Europe was
greatly accelerated with the introduction of the Eurocurrency in 1999 and its implementation in 2002, and although
many nationalistic issues remain to be solved, the European Union is now a reality. There is no doubt that China and
India are altering the global investment climate in a manner that will continue to mold and shape the world’s economic
base for decades to come. Also, looking back over the past 20 years, it is mind-boggling to reflect on the number of
worldwide mergers and acquisitions that have taken place in the international banking and financial services arena.
To say the world has changed dramatically over the past two decades would be an understatement. And serving a
global base of increasingly sophisticated clients today requires skill and experience; a constant dedication to staying
abreast of the latest in technology, regulatory requirements, tax laws and compliance mandates; and keeping a finger
on the pulse of a multitude of social and economic issues.
Amidst all of this change, however, our principles of hard work, clear vision and value for the client have remained
constant and are still as applicable today as they were in 1932 when my grandfather founded our first Stanford
company. This is one of the reasons that our very first client remains with the Bank to this day, and what continues to
earn us the loyalty of those who place their confidence and trust in us year after year.
Our board of directors and advisors, most of whom have been with the Bank throughout its 20-year history, have been
instrumental in our success. They will continue to play a key role in our future successes and I look forward to working
with all of them in the years ahead.
I would like to express my eternal gratitude to our Bank’s chairman emeritus, my father — James A. Stanford — for his
wisdom and vision during our first decade of operation. What was built during those formative years was a strong
foundation upon which we have now built a world-class, international private banking institution.
22
I am most proud, though, of the Bank’s top management and support staff, who in my opinion are without equal in terms
of ability, loyalty and work ethic. On behalf of the board of directors, I want to thank Juan Rodriguez-Tolentino, president
of SIB, and his entire team for working so diligently day after day, flawlessly managing our Bank’s growth.
Total revenues for the year were $431.7 million, an increase of 30.1 percent over the previous year. Investment income for
the year was $339.2 million, or 78.6 percent of total revenue, and $61.9 million, or 22.3 percent, greater than 2004. Interest
income of $86.3 million represented approximately 20.0 percent of total revenue, an increase from $56.8 million in 2004.
Interest paid to depositors for 2005 was $220.8 million, 36.6 percent greater than the $161.7 million paid in 2004. Referral
fees increased by 37.8 percent to $87.8 million, and management fees increased to $74.5 million, or 25.4 percent over the
prior year.
Our cash balances increased to $257.5 million, or 29.6 percent over last year and represented 6.8 percent of client
deposits. Financial assets at fair value increased $906.7 million to $3.8 billion, a 31.9 percent increase from 2004. As of 31
December 2005, shareholder’s equity increased to $282.5 million, up 14.6 percent from $246.5 million on 31 December 2004.
THE FUTURE
We have come a long way since our beginning in 1985. From a few hundred clients in a handful of countries and a small,
but talented staff of hardworking employees, we have grown into a multibillion-dollar institution that today serves over
35,000 clients in 102 countries around the globe. We have expanded our physical plant five times during this period,
brought on many new “best of the best,” Stanford-quality international banking professionals and have basically
reinvented ourselves through technology seven times. We will continue this process because with growth and evolution
comes change, and although our balance sheet in 2005 dwarfs the Bank’s modest beginnings in 1985, in many ways I feel
that we are just starting to build an institution that has unlimited potential and an incredibly bright future. I confidently
make this bold statement simply because we have never lost our way along this 20-year journey. We understand where
we came from, what our principles are and that the only reason we come to work every day is to serve you, our clients.
I promise you will never find any bank more committed to helping you achieve your goals than SIB. And we will not
become diluted in this endeavor as we continue to grow and expand our market reach around the globe.
On behalf of the board of directors, management and all of our employees, I want to thank you, our clients, and your
families for the trust and loyalty you have demonstrated over these past two decades.
Yours truly,
R. Allen Stanford
Chairman
23
INCOME STATEMENT
(Expressed in United States dollars)
Year Ended 31 December 2005
OPERATING EXPENSES
9 Personnel Expenses 2,460,181 2,099,423
10 General and Administrative Expenses 83,029,691 66,691,773
14 Depreciation of Property and Equipment 902,431 879,481
TOTAL OPERATING EXPENSES $ 86,392,303 $ 69,670,677
36.2 35.9
140 35 33.1
122
120 30
106
100 25
80 73 20
60 15
40 10
20 5
0 0
2003 2004 2005 2003 2004 2005
24
BALANCE SHEET
(Expressed in United States dollars)
At 31 December 2005
4.0
3.8
3.5
1.0 100 97
0.5 50
0.0 0
2003 2004 2005 2003 2004 2005
25
STATEMENT OF CHANGES IN EQUITY
(Expressed in United States dollars)
Total
Share Capital Share Premium Retained Earnings Shareholder’s
Equity
26
STATEMENT OF CASH FLOWS
(Expressed in United States dollars)
Year Ended 31 December 2005
300
256
250
200 198
150
108
100
50
0
2003 2004 2005
27
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States dollars)
Stanford International Bank (“the Bank”) provides private banking services to the international market. The Bank has more than 35,000
clients from 102 countries around the world. The Bank is registered under the International Business Corporation Act No. 28 of 1982 as
amended (“the Act”). The Bank’s activities are governed by the Act and by every other act currently in force concerning international
business corporations and affecting the corporation in Antigua and Barbuda. The Bank is also regulated by the Financial Services
Regulatory Commission (FSRC). International banks are subject to annual audits, regulatory inspections and licensing requirements by
this body. The supervisory authority for money laundering and other financial crimes is the Office of the National Drug Control and
Money Laundering Policy (ONDCP). The FSRC and ONDCP, although independent, work closely together.
These financial statements have been approved for issue by the board of directors on 28 April 2006.
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all years presented unless otherwise stated.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Bank’s accounting policies. The areas involving a higher
degree of judgement or complexity, as well as areas in which assumptions and estimates are significant to the financial statements, are
disclosed in Note 4.
The Bank is adopting the following IFRS, which are relevant to its operations. All other standards do not currently apply to the Bank’s
operations. As required, the 2004 accounts have been amended in accordance with the relevant requirements.
All changes in the accounting policies have been made in accordance with the transition provisions in the respective standards. There
was no impact to the opening retained earnings at 1 January 2004 from the adoption of any of the above-mentioned standards.
28
Notes to the Financial Statements, Continued
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.
Translation differences on non-monetary items, such as equities held at fair value through profit and loss, are reported as part of the
fair-value gain or loss.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e., the fair value of the consideration
given or received) unless the fair value of the instrument is evidenced by comparison with other observable current market
transactions in the same instrument (i.e., without modification or repackaging) or based on a valuation technique whose variables
include only data from observable markets. When such evidence exists, the Bank recognizes profits on day one.
The Bank uses the following derivative instruments and strategies for hedging and non-hedging purposes:
Financial futures contracts represent commitments to buy and sell underlying financial instruments in the future and are accounted for
on a recognition and specific identity basis.
Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of exchange on specific
future dates.
Cross-currency swaps are agreements to exchange and, on termination of the swap, re-exchange principal amounts denominated in
different currencies. Cross-currency swaps may involve the exchange of interest payments in one specified currency for interest
payments in another specified currency for specified periods.
A currency option gives the buyer the right, but not the obligation, to buy or sell specified amounts of currency at agreed rates of
exchange on or before a specified future date.
Interest-rate futures are typically exchange-traded documents to buy or sell a standard amount of a specified fixed-income security or
time deposit at an agreed interest rate on a standard date.
A forward rate agreement gives the buyer the ability to determine the underlying rate of interest for a specified holding period
commencing on a specified future date. There is no exchange of principal, and settlement is effected on the settlement date. The
settlement amount is calculated by reference to the difference between the contract rate and the market rate prevailing on the
settlement date.
Interest-rate options give the buyer the right, but not the obligation, to fix the rate of interest on a future deposit or loan for a
specified period and commencing on a specified future date.
Interest-rate caps and floors give the buyer the ability to fix the maximum or minimum rate of interest. There is no facility to deposit
or draw down funds; instead the writer pays to the buyer the amount by which the market rate exceeds or falls short of the cap rate or
the floor rate respectively. A combination of an interest-rate cap and floor is known as an interest-rate collar.
Equities options give the buyer the right, but not the obligation, to buy or sell specified amounts of equities or a basket of equities in
the form of published indices.
29
Notes to the Financial Statements, Continued
The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and of allocating
the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, through a
shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the
Bank estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment options) but does
not consider future credit losses. The calculation includes all fees and points that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts that have been paid or received between parties to the contract.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is
recognized using the rate of interest utilized to discount the future cash flows for the purpose of measuring the impairment loss.
2.6 INSURANCE
The insurance coverage of the Bank includes Property and Casualty, Worldwide Package, Vehicle, Workers’ Compensation and Travel
Accident coverage. Financial coverage includes Banker’s Blanket Bond, Directors’ and Officers’ Liability, and Errors and Omissions
Liability. The Bank also maintains Depository Insolvency coverage for its correspondent banks.
The Bank’s insurance program is independently reviewed. The latest review was performed by Stogniew & Associates, an independent
risk management consultant. The primary objective of each review is to provide assurance that the risk management and internal
controls currently implemented minimize the Bank’s exposure to loss. The most recent assessment stated that the Bank had
reasonable internal controls and risk management systems in place and found no material weaknesses in these areas.
Financial assets at fair value through profit or loss has two subcategories: financial assets held for trading, and those designated at
fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of
selling in the short term or if so designated by management. Derivatives are also categorized as held for trading unless they are
designated as hedges.
Purchases and sales of financial assets at fair value through profit or loss are recognized on trade-date — the date on which the Bank
commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial
assets have expired or where the Bank has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains
and losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are included in
the income statement in the period in which they arise. Interest calculated using the effective interest method is recognized in the
income statement.
The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active
(for unlisted securities), the Bank establishes fair value by using valuation techniques. These include recent arm’s-length transactions,
discounted cash flow, option pricing models and other valuation techniques commonly utilized by market participants.
30
Notes to the Financial Statements, Continued
objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss
event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial
assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is impaired includes observable data
that comes to the attention of the Bank about the following loss events:
The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually
significant, and then individually or collectively for financial assets that are not individually significant. If the Bank determines that no
objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in
a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are
individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.
If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the
asset is reduced through the use of an allowance account and the amount of the loss is recognized in the income statement. As a
practical expedient, the Bank may measure impairment on the basis of an instrument’s fair value using an observable market price.
The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that
may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics
(i.e., on the basis of the Bank’s grading process that considers asset type, industry, geographical location, collateral type, past-due
status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by
being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future
cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual
cash flows of the assets in the Bank and historical loss experience for assets with credit risk characteristics similar to those in the
Bank. Historical loss experience is adjusted on the basis of current observable data and to reflect the effects of current conditions
that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the
historical period that do not exist currently.
Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related
observable data from period to period (for example, changes in unemployment rates, property prices, payment status and other
factors indicative of changes — and their magnitude — in the probability of losses in the group). The methodology and assumptions
used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and
actual loss experience.
31
Notes to the Financial Statements, Continued
Subsequent costs are included in the asset’s carrying amount or are recognized as a separate asset. All other repairs and maintenance
are charged to the income statement during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their costs to their
residual values over their estimated useful lives, as follows:
- Buildings 20 years
- Leasehold Improvements 20 years, or over the period of the lease if less than 20 years
- Computer Equipment 5 years
- Furniture and Equipment 3-8 years
- Motor Vehicles 5 years
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Assets that are
subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to
sell and value in use. Gains and losses on disposals are determined by comparing proceeds with the carrying amounts. These
are included in the income statement.
2.11 LEASES
The leases entered into by the Bank are primarily operating leases for office space and equipment. Payments made by the Bank under
operating leases are charged to the income statement on a straight-line basis as defined in the lease agreements in effect for the
period. If an operating lease is terminated before the lease period has expired, any payment required to be made by the Bank as a
penalty is recognized as an expense in the period in which termination takes place.
Income from leases received by the Bank is recorded as rental income in the other income section of the income statement and is not
part of the normal business of the Bank.
(c) Dividends
No dividends have been authorized or distributed. All excess earnings have been reinvested into the Bank.
2.14 COMPARATIVES
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
32
Notes to the Financial Statements, Continued
The Bank’s investment portfolio maintains a stable and well-balanced structure due to a high proportion of fixed-income investments
and a diversified investment advisory network resulting in an optimum diversification process. There is a policy of maintaining
sufficient liquidity, thus protecting longer-term investments with significant returns.
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one
borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and
are subject to weekly review. Limits on the level of credit risk by product, by industry sector and by country are approved
quarterly by the board of directors.
(a) Derivatives
The Bank maintains strict control limits on net open derivative positions (i.e., the difference between purchase and sale contracts),
by both amount and term. At any one time, the amount subject to credit risk is limited to the current fair value of instruments
that are favorable to the Bank (i.e., assets where their fair value is positive), which in relation to derivatives is only a small
fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is
managed as part of the overall exposures from market movements. Collateral or other security is not usually obtained for credit
risk exposures on these instruments.
Antigua and Barbuda, West Indies, is the Bank’s domicile. The Bank has also maintained a representative office in Montreal, Canada,
since December 2004. The Bank has more than 35,000 depositors and clients from 102 countries. The Bank’s certificates of deposit and
other investment accounts are primarily denominated in U.S. dollars, British pounds/sterling, euros and Canadian dollars.
33
Notes to the Financial Statements, Continued
sectors (health, financials, energy, etc.), issuers (governments, multinationals, commercial banks, etc.), currencies (U.S. dollars, Swiss
francs, Japanese yen, euros and other currencies), and geographical areas (United States, Switzerland, England, France, Austria,
Australia, Asia/Pacific Rim, etc.). Furthermore, the Bank’s investment policy specifies selling limits at 7 percent to 8 percent on the
downside for equity holdings and monitors historical statistical information for diversified investments, such as funds, for exposure to risk.
LIABILITIES
Deposits from Clients 3,604,026,524 126,831,157 27,984,808 0 4,168,551 3,763,011,040
Other Liabilities and Provisions 13,604,368 0 0 0 44,549 13,648,917
TOTAL LIABILITIES $ 3,617,630,892 $ 126,831,157 $ 27,984,808 $ 0 $ 4,213,100 $ 3,776,659,957
NET ON-BALANCE SHEET POSITION $ (1,217,865,423) $ 265,855,111 $ 229,946,983 $ 271,972,012 $ 732,545,147 $ 282,453,830
Credit Commitment 28,365,441 0 0 0 0 28,365,441
AT 31 DECEMBER 2004
Total Assets 1,281,614,431 429,114,258 319,381,753 413,242,313 643,068,705 3,086,421,460
Total Liabilities 2,761,932,295 68,335,318 2,284,432 26,752 7,300,067 2,839,878,864
NET ON-BALANCE SHEET POSITION $ (1,480,317,864) $ 360,778,940 $ 317,097,321 $ 413,215,561 $ 635,768,638 $ 246,542,596
Credit Commitments 12,851,598 0 0 0 0 12,851,598
34
Notes to the Financial Statements, Continued
Assets primarily consist of securities and, to a lesser degree, client credits that are matched in premium and timing. It is unusual
for banks to be completely matched due to terms and types of products. An unmatched position potentially enhances profitability, but
may increase the risk of losses.
The maturities of assets and liabilities, and the ability to replace liabilities as they mature, are important factors for assessing the
liquidity of the Bank and its exposure to changes in interest rates and exchange rates.
Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the
commitment because the Bank does not generally expect the third party to draw funds under the agreement. The total outstanding
contractual amount of commitments to extend credit does not necessarily represent future cash requirements, as many of these
commitments will expire or terminate without being funded.
35
Notes to the Financial Statements, Continued
LIABILITIES
Deposits from Clients 350,424,991 363,905,085 264,954,590 869,696,365 1,914,030,009 0 3,763,011,040
Other Liabilities 0 0 0 0 0 13,648,917 13,648,917
TOTAL LIABILITIES $ 350,424,991 $ 363,905,085 $ 264,954,590 $ 869,696,365 $ 1,914,030,009 $ 13,648,917 $ 3,776,659,957
NET LIQUIDITY GAP $ 2,791,960,927 $ (232,284,196) $ (123,691,798) $ (745,227,283) $ (1,405,079,803) $ (3,224,017) $ 282,453,830
AT 31 DECEMBER 2004
Total Assets $ 2,170,965,701 $ 92,684,538 $ 13,144,763 $ 182,240,727 $ 615,078,194 $ 12,307,537 $ 3,086,421,460
Total Liabilities 298,470,972 299,918,035 146,455,038 764,007,189 1,319,090,259 11,937,371 2,839,878,864
NET LIQUIDITY GAP $ 1,872,494,729 $ (207,233,497) $ (133,310,275) $ (581,766,462) $ (704,012,065) $ 370,166 $ 246,542,596
36
Notes to the Financial Statements, Continued
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
37
Notes to the Financial Statements, Continued
Alternative 23.9%
Equities 39.9%
Fiduciary 4.8%
Figure 8. INVESTMENT INCOME
Dollars (in millions)
140 135
120
100
80 81
80 76
71
63
62
60
49 47
44
40 38
30
20 16
11 12
0
Equities Fixed Income Fiduciary Alternative Precious
Metals
2003 2004 2005
38
Notes to the Financial Statements, Continued
INTEREST EXPENSE
Banks and Clients 220,791,640 161,677,476
TOTAL (see Figure 11) $ 220,791,640 $ 161,677,476
100 250
90 86 225 221
80 200
70 175
162
60 57 150
55 134
50 125
40 100
30 75
20 50
10 25
0 0
2003 2004 2005 2003 2004 2005
39
Notes to the Financial Statements, Continued
FEE EXPENSE
Bank Fees 349,616 281,309
Commissions 250,083 187,705
Credit Card Losses 132,068 40,492
Miscellaneous Fees 76,720 61,649
Referral Fees 87,827,022 63,756,447
TOTAL $ 88,635,509 $ 64,327,602
Referral fees are paid to Stanford Group Company, Stanford Trust Company Limited and Stanford Group (Antigua) Limited. The fees are a
percentage of the managed client portfolio and are negotiated annually.
40
Notes to the Financial Statements, Continued
Management fees consist of expenses related to the marketing and service agreement in place with Stanford Financial Group Company. These
services include treasury-related functions, establishing and implementing trading policy, client communications, research, marketing and
branding, government and public relations, technology and other related administrative services. The service agreement is negotiated annually
and was renewed for the year 2005 on 29 December 2004.
Treasury 4.2%
Communications &
Branding 43.5%
41
Notes to the Financial Statements, Continued
Mandatory reserve deposits are not available for use in the Bank’s day-to-day operations.
3.5
Alternative 7.4%
3.0 2.8
Fiduciary 1.0%
2.5
2.1
2.0
Equity 54.9%
1.5
Fixed Income 23.3%
1.0
0.5
0
2003 2004 2005
42
Notes to the Financial Statements, Continued
BY TYPE OF COLLATERAL
Cash Deposit Guarantees $ 38,448,848 $ 28,342,780
Corporate 43.4%
Figure 15. LOANS AND ADVANCES
Dollars (in millions)
Private 56.6%
40.0 38
35.0
30.0 28
25.0 24
0.0
2003 2004 2005
43
Notes to the Financial Statements, Continued
DEPRECIATION
At 31 December 2004 $ 2,993,655 $ 1,048,211 $ 309,113 $ 265,043 $ 0 $ 0 $ 4,616,022
Additions 255,033 478,215 81,280 87,903 0 0 902,431
Disposals and Write-Offs 0 0 0 (11,863) 0 0 (11,863)
AT 31 DECEMBER 2005 $ 3,248,688 $ 1,526,426 $ 390,393 $ 341,083 $ 0 $ 0 $ 5,506,590
CARRYING AMOUNT 31 DECEMBER 2005 $ 2,279,766 $ 943,090 $ 883,611 $ 205,083 $ 72,619 $ 215,118 $ 4,599,287
CARRYING AMOUNT 31 DECEMBER 2004 $ 4,539,584 $ 1,383,129 $ 742,959 $ 237,375 $ 56,786 $ 237,098 $ 7,196,931
Figure 18. PROPERTY AND EQUIPMENT Figure 19. PROPERTY AND EQUIPMENT
Dollars (in millions)
6.0 5.6
Land,
5.0 Building and
4.6 Leasehold 49.5%
4.0
Furniture
and Equipment 19.2%
3.0
2.0
44
Notes to the Financial Statements, Continued
Express Accounts
Funds from these accounts are generally invested in short-term instruments, euros and foreign currency deposits.
Performance Accounts
Funds from these accounts are generally invested in investment-grade bonds, securities, euros and foreign currency deposits.
Certificates of Deposit
The certificates of deposit accounts guarantee payment of the stated interest rate until maturity. Funds from these accounts are generally
invested in investment-grade bonds, securities, euros and foreign currency deposits.
sm
FlexCD — A certificate of deposit that accepts additional deposits and withdrawals (up to 25 percent of the balance and a maximum of four
per year) without incurring early withdrawal penalties or additional fees. This product is available in most international currencies.
sm
FixedCD — A certificate of deposit that does not accept additional deposits and withdrawals are subject to early withdrawal penalties. This
product is available in most international currencies.
Index-Linked Certificate of Deposit (ILCD) — A certificate of deposit that is linked to the performance of either the S&P 500 Index, NASDAQ 100
Index or the Dow Jones Euro STOXX 50 Index. At term end, the depositor receives the initial amount invested plus a fixed interest rate or an index
participation rate, whichever is greater. This product does not renew automatically, is only available in U.S. dollars and withdrawals are subject to
an early withdrawal penalty.
2005 2004
ILCD 0.5%
4.0 3.7 3.8
3.5
FlexCD 35.7%
3.0 2.7 2.8
2.5
1.5
1.0
FixedCD 63.8%
0.5
0.0
2003 2004 2005
45
Notes to the Financial Statements, Continued
2005 2004
ACCRUED INTEREST COMPONENT OF CLIENT DEPOSITS AT 31 DECEMBER WERE:
Express Accounts $ 12,833 $ 6,453
Performance Accounts 1,729 (213)
FlexCD 52,441,421 45,023,520
FixedCD 103,904,483 58,319,398
Index-Linked Certificates of Deposit 1,225,722 976,560
TOTAL $ 157,586,188 $ 104,325,718
All shares have a par value of $100 and have been fully paid.
46
Notes to the Financial Statements, Continued
180
36
160
140
36
133
120
100
33 97
80
64
60
40
20
0.0
2003 2004 2005
Accumulated Earnings Current Year Earnings
47
Notes to the Financial Statements, Continued
The Bank is a member of Stanford Private Wealth Management, a global network of privately held, wholly owned affiliated financial service
companies. Although independent, the affiliated companies together provide coordinated wealth management through international private
banking, asset management, investment advisory services, trust administration, commercial banking and insurance for clients worldwide. Stanford
Private Wealth Management affiliates serve more than 90,000 clients on six continents.
A number of banking transactions are entered into with related parties in the normal course of business. These include, but are not limited to,
loans, deposits and foreign currency transactions. The volumes of related-party transactions, outstanding balances at the year end and related
expenses for the year are as follows:
2005 2004
EXPENSES
Interest on Deposits $ 887,621 $ 412,959
Rent 909,376 848,000
Referral Fees 87,827,022 63,756,447
Management Fees 74,534,656 59,443,130
TOTAL $ 164,158,675 $ 124,460,536
A referral fee agreement exists between the Bank and Stanford Group Company, Stanford Trust Company Limited and Stanford Group (Antigua)
Limited. The fee is a percentage of the managed client portfolio of each company and is negotiated annually.
A management fee agreement related to marketing and services exists between the Bank and Stanford Financial Group Company. These services
include treasury-related functions, establishing and implementing trading policy, client communications, research, marketing and branding,
government and public relations, technology and other related administrative services.
All Bank personnel are compensated in the same manner and no special benefits exist for management.
A list of the members of the board of directors is shown on page 52 of this Annual Report.
48
SUPPLEMENTAL INFORMATION: INTERNATIONAL BUSINESS CORPORATION (IBC) ACT DISCLOSURE INFORMATION
Under authority of section 350 of the IBC Act, the Bank is required to disclose the following information as it pertains to the expenses that
impact the national economy of Antigua and Barbuda.
2005 2004
OPERATING EXPENSES (see Figures 23 and 24)
Salaries $ 1,652,470 $ 1,339,370
Other Staff Cost 783,525 726,145
Vehicle Expense 27,315 13,685
Rent 1,105,026 1,085,420
Professional Fees 218,638 79,449
Electricity 90,483 99,412
Telephone/Fax 847,566 613,873
Travel and Entertainment 465,874 362,466
General Office 1,108,528 916,431
Insurance 42,593 81,901
Management Fees — Local 579,251 583,189
Repairs and Maintenance 219,146 231,578
Subscriptions and Donations 94,813 33,443
Licenses and Permits 739,365 100,633
TOTAL$ $ 7,974,593 $ 6,266,995
CAPITAL EXPENSES
Vehicle Purchases $ 63,519 $ 35,148
3.0
Travel and Rent 14.0%
Entertainment 5.8%
2.0
Professional Fees 2.7%
1.0 Telephone/Fax 10.6%
Electricity 1.1%
0.0
2003 2004 2005
49
AUDITORS’ REPORT
We have audited the accompanying balance sheet of Stanford In our opinion, the financial statements are fair in all material
International Bank Ltd. as at 31 December 2005 and the related respects, and they show a true position of the company as at 31
statements of income, changes in shareholder’s equity and December 2005, and the results of its operations and its cash
cash flows for the year then ended. These financial statements flow for the year in accordance with international financial
are the responsibility of the company’s management. Our reporting standards.
responsibility is to express an opinion on these financial
statements based on our audit.
50
REPORT OF MANAGEMENT
The management of Stanford International Bank is responsible for responsibility to report operating results and financial
the preparation, integrity and objectivity of the financial condition. Working with the Bank’s internal auditors, they review
statements of the Bank. The financial statements and notes have and make tests, as appropriate, of the data included in the
been prepared by the Bank in accordance with International financial statements.
Financial Reporting Standards, and in the judgement of
management, present fairly and consistently the Bank’s financial The board of directors discharges its responsibility for the Bank’s
position and results of operations. The financial statements and financial statements through its Audit Committee. The Audit
other financial information in this annual report include amounts Committee meets periodically with the independent accountants,
that are based on management’s best estimates and judgements internal auditors and management. Both the independent
and give due consideration to materiality. accountants and the internal auditors have direct access to the
Audit Committee to discuss the scope and results of their work,
The Bank maintains a system of internal accounting controls to the adequacy of internal accounting controls and the quality of
provide reasonable assurance that assets are safeguarded, and financial reporting.
that transactions are executed in accordance with management’s
authorization and recorded properly to permit the preparation of
financial statements in accordance with International Financial
Reporting Standards. The internal audit function of the Bank
reviews, evaluates, monitors and makes recommendations on R. Allen Stanford
both administrative and accounting controls, which act as an Chairman of the Board
integral but independent part of the system of internal controls.
51
BOARD OF DIRECTORS BANK’S MANAGEMENT SIB REPRESENTATIVE OFFICE
R. Allen Stanford Juan Rodriguez-Tolentino Alain Lapointe
Chairman of the Board President Senior Vice President
1800 McGill College Ave., Third Floor
James A. Stanford Miguel Pacheco Montreal, Quebec, Canada
Chairman Emeritus Senior Vice President
AUDITORS
James M. Davis Michael Zarich
Chief Financial Officer Vice President & C.A.S. Hewlett & Co.
Senior Investment Officer Chartered Accountants
O.Y. Goswick St. John’s Street, St. John’s, Antigua
Investments Eugene Kipper
Vice President INSURANCE AND RISK MANAGERS
Kenneth C. Allen, Q.C. Bowen, Miclette & Britt
Secretary and Treasurer Beverly M. Jacobs 1111 North Loop West
Operations Manager P.O. Box 922022
Sir Courtney N. Blackman, Ph.D. Houston, Texas 77292
International Banking Bhanoo P. Persaud, ACCA
Accounting Manager Willis Limited
Robert S. Winter 10 Trinity Square
Insurance COMPLIANCE London 3C3P 3AX
Pedro E. Rodriguez, CRCM United Kingdom
Vice President &
Senior Compliance Officer BARRISTERS AND SOLICITORS
52
“Build the business,
step by step, on a firm
foundation of hard
work, clear vision and
value for the client.”
— Lodis Stanford
1932