OPERATIONS REPORT TO THE TOWNSHIPS PROJECT ANNUAL GENERAL MEETING - FEBRUARY 18, 2004 - SUBMITTED BY JOHN BOWYER

We are pleased to report the following accomplishments during the year ended December 31, 2003:

369 loans were made by the project in 2003, of which 62 were to ?step up? borrowers, i.e. clients who have repaid a prior loan and are eligible for a higher loan amount to expand their business (the initial loan amount is R600 or CDN $115). The principal only repayment rate for completed loans during 2003 is more than 98%. This exceeds the acknowledged international standard of 95%.

Since start-up in June 1999, the Project has made 717 loans to 544 clients with 102 clients reaching level two (R850), 38 level three (R1,100) and one reaching level 5 (R2,200). This means the project has impacted over 2,200 people.

We are in the process of applying for a charitable donations tax receipt number -a process that can take anywhere from 7 months to 2 years. Our initial application was made in the Spring of 2003 and received a response from CCRA requesting further information. A ?draft? response has been prepared and we have requested Borden Ladner Gervais (who has provided pro-bono assistance in establishing the Townships Society Act Registration) review it prior to submission. We have also spoken to other groups who have been through the process. We continue to use CMUC?s tax receipt number.

During 2003, our not-for-profit entity in South African the Eastern Cape Micro Finance Enterprise (ECMFE) became operational. ECMFE?s Board of Directors is comprised of three Canadian (Jocelyn, Martha, and John) and four South African members, including Mr. JJ Oosthuysen, an experienced micro-finance lender who is Managing Director of Nicro Enterprise Finance in CapeTown, the President of the Mdantsane Chamber of Commerce and an East London Lawyer. Board meetings are typically held quarterly and conducted via teleconference which has it?s challenges and over time are becoming more effective.

Our field office staff has been expanded to three: Ms. Bongi Ndubaza, our Project Manager, is assisted by two field workers to administer new loans, weekly meetings, business training and collections. We receive weekly loan status reports and monthly income and expense reports which is a significant improvement over what was experienced in prior years.

During the past summer, Bongi visited Canada to attend the Africa-Canada Youth Symposium at Antigonish, Nova Scotia, sponsored by the Coady International Institute. We used this opportunity to organize fundraising activities in PEI, Toronto & Vancouver.

Robert Hibberd of PricewaterhouseCoopers has developed a new loan tracking system which is in the process of being implemented. Bongi?s comment ?THANK YOU for helping us it is really a good system I'm OK with it?.

During 2004 we plan to increase the number of loans made to more than 600, to increase the proportion of ?step up? loans to 50% (2003 17%), increase the ratio of loans made to expenses from 1 to 1 in 2003 to 1.7 to 1 in 2004. This plan which was developed with major input from Bongi, will require funding of approximately CDN $55,000.

Thank you for your continued interest in and support for The Townships Project.