Our business performed extremely well in 2010, achieving a significant improvement in the core underlying profit in line with the guidance we provided. The global economic crisis that developed during late 2008 and intensified during 2009 has left Papua New Guinea largely unscathed. Substantial improvement of the Papua New Guinea economy, driven largely as a result of the massive US$15 billion Exxon Mobil led PNGLNG Project, has laid the foundation for another highly successful year with our core business of finance and property enjoying increased demand and earnings growth. We are extremely well positioned with a growing business and a very strong balance sheet.

Credit Corporation (PNG) Limited and its subsidiaries recorded a core operating profit of K68.24 million for the year ended 31 December 2010, 52% above the 2009 result. The Group recorded a net profit after tax of K29.50 million for the same period, 36% above the 2009 result. Included in this result, as the Chairman noted in his report, the sum of K24.68 million was booked against the profit and loss account due to the continuing decrease in the value of our Bank of South Pacific Limited shareholding on the Port Moresby Stock Exchange. This decrease is disappointing and has continued the poor performance on the Port Moresby Stock Exchange of our Bank of South Pacific Limited shareholding over the last two years. Bank of South Pacific Limited's market capitalisation on the Port Moresby Stock Exchange has fallen by over K1 billion over the past two years, an extremely disappointing situation and one that it is hoped the Bank will address.

Shareholders’ equity has continued the growth of the last few years, and has now reached K629.17 million, while total assets have grown to K849.55 million. Net asset backing per share is K2.01 as at 31 December 2010 and our expense to income ratio has slightly increased to 37.9%. All in all, an excellent year. During 2010, the Board initiated a comprehensive independent Risk Management Review by the accounting firm PWC. The review highlighted a number of areas where attention was needed and action is being taken to minimise these areas of risk. The Company practices the highest levels of corporate governance. The Risk Management Statement is just one of the tools used to ensure that these high levels of governance are maintained and serious issues of risk, if any, are addressed by the Board.

2010 also saw the introduction of the first On Market Share Buy Back as the Chairman noted in his review. The Company resolved to offer to buy back up to K2 million worth of shares from shareholders, subject to a maximum of 5,000 shares per shareholder. The Board believes that as the Company shares are trading below net asset value on the Port Moresby Stock Exchange, an investment of surplus capital in the Company's own shares represents the best alternative for shareholders in accordance with the Board capital management strategy. The buy back has stabilised the fluctuations in the Company's share price on the Port Moresby Stock Exchange and has enabled shareholders to sell their shareholding at a fair and reasonable price. Over 50% of all shareholders hold under 5,000 shares in the Company and are now able to sell into the buy back scheme with no brokerage or other fees.

During 2010, the IT Committee reported to the Board recommending that the Company install an updated and upgraded accounting software system. The Board, at its meeting on 2 December 2010 resolved to accept the recommendation of the IT Committee to replace the existing Unix system. A new system has been identified and will be installed by the end of 2011. This is a large and extensive project that will place the Company in good stead with a modern world-class management information system.

Credit House

Despite a challenging year in 2010, Credit House Limited recorded a net profit after tax of K2.80 million with net assets increasing to K52.64 million during the year.

The property remains fully tenanted, with two new tenants being welcomed to the building, as well as three existing tenants renewing their leases. In addition, an upgrade of the lifts and the retrofit of a new air conditioning system was completed in 2010.

The major upgrades undertaken and leases put in place have positioned the building well for the future with significantly improved profitability and performance forecast in 2011.

Era Dorina Estate

Era Dorina Limited has achieved another record year in 2010 with demand for executive residential accommodation remaining high and Stage 4 operating for its first full year of occupancy. The property posted a record operating profit before tax of K11.18 million, an increase of 54% from the previous year. Net assets increased to K97.35 million. In 2011, we will be focusing on improving the facilities within the Estate as well as expanding the accommodation units on the site. The projects we have earmarked for 2011 include:

• The construction of 20 x 1 bedroom executive apartments to be known as Stage 5.
• The expansion of the gymnasium facilities.
• The interior upgrade of the Stage 1 and 2 townhouses and apartments.

We forecast another excellent year for 2011 and despite new developments being completed in Port Moresby over the next 2 to 3 years, we are confident the Era Dorina Estate is well positioned and will continue to maintain high occupancy levels.

Credit Corporation Finance Limited

Credit Corporation Finance Limited has again performed very well and made a substantial contribution to the overall profit of the Group. Net operating profit before tax for the period was K19.62 million, an increase of 23.64% over 2009. The PNGLNG project has had a large influence on the PNG economy and Credit Corporation Finance Limited has been able to benefit from this by securing large corporate clients, as well as assisting current clients improve their involvement in the project. With our major focus being on the civil contracting and transport sectors, 2011 should once again be a good year for Credit Corporation Finance Limited..

Credit Corporation (Fiji) Limited

The Fiji operation had an excellent year earning a record operating profit before tax of F$6.77 million (PGK9.57million) a 12% increase on the 2009 result. This is considered a very good result given the sluggish economic conditions and significantly increased competition that prevailed during the year.

Profit after tax of F$4.93 million (PGK6.97 million) is also a record being an 18% increase on the 2009 result.

With the Fiji economy forecast to remain depressed and continuing increased competitor activity, we expect challenging operating conditions to continue during 2011.

Credit Corporation (SI) Limited

Credit Corporation (SI) Limited recorded an operating profit after tax of SBD2.13 million (PGK0.78 million) for the year ended 31 December 2010, a decline of 22.17% over the 2009 result. This was anticipated given the “hold back” approach adopted by various industries in the Solomon Islands due to the general election during 2010 and the subsequent formation of a new government. Notwithstanding this, strong growth in both our receivable and operating profit lines was reported in the last quarter and continues into 2011.

During 2010 Philip Wyatt our, Country Head, retired after over ten years service to the Group. Philip was the inaugural Country Head of the Solomon Islands after serving for five years as our Branch Manager based in Kokopo. I would like to thank Philip for his valuable contribution to the Company and wish him well in his retirement.

Philip has been replaced by a Solomon Islander, Tony Langston who has had over 26 years experience in the Solomon Islands and South Pacific financial sectors. We are already seeing positive results from Tony with a growing finance book and improved arrears management.

Credit Corporation (SI) Limited is now an established player in the Solomon Islands finance industry and will continue to play a major role in the growth of the Solomon Islands business community in the years to come.

Credit Corporation (Vanuatu) Limited

In the third year of operation, Credit Corporation Vanuatu Limited posted another pleasing result recording an operating profit of Vatu 68.24 million (K1.96 million) for the year, an increase of 26.01% over 2009.

The Company has enjoyed strong growth on the back of a stable economic climate, buoyed by increased commodity exports which were supported by high international prices and increased tourist arrivals. This augurs well for another positive year ahead.

Outlook

Credit Corporation (PNG) Limited is very well placed with an excellent business, committed staff, and deliverable growth opportunities in our core operation areas of finance and property. 2011 has started in a very positive manner and with significantly increased demand for both our rental accommodation and financial products in the early stages of the year. This demand is expected to increase as the year progresses.

One thing that will never change at Credit Corporation (PNG) Limited is our prime focus of delivering value to all our stakeholders, particularly our shareholders. The 2010 result is an excellent achievement, which could not have been achieved without the dedication of our professional teams in Papua New Guinea and around the South Pacific. I receive enormous support and loyalty from the Credit Corporation team and I am extremely fortunate to have a Board that provides the guidance and encouragement that is needed. With the help of all at Credit Corporation during 2011, I expect to achieve our budget targets and to continue to create further shareholder wealth in the years to come.

Robert Allport
Chief Executive Officer