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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 TABLE OF CONTENTS CORPORATE PROFILE CHAIRMAN’S REPORT BOARD OF DIRECTORS OVERVIEW OF OPERATIONS INVESTMENT PROJECTS OTHER PROJECTS AGENCY PROJECTS COMMUNITY INVOLVEMENT FINANCIAL OVERVIEW AGENCY PROJECTS The Jamaica Conference Centre Lift Up Jamaica 2 The Tax Incentive Programme for Urban Renewal KINGSTON REGION Kingston Waterfront Upgrading Kingston City Centre Improvement Company (KCCIC) Projects Upgrading of St. William Grant Park Urban Transport Centre The Simon Bolivar Cultural Centre Soapberry Sewage Treatment Plant ST. CATHERINE REGION Caymanas Estate Two Sisters Caves Attractions Hellshire Lot C (Hellshire Glades) Hellshire Lot 143 Hellshire Development Plan Hellshire Lot 143 Area Management Programme SOUTHWEST COAST / MONTEGO BAY / NEGRIL REGION North Western Jamaica Schools Projects Mount Edgecombe Subdivision Success South Sub-Division Lilliput Infrastructure Old Hospital Site, Montego Bay Montego Bay Convention Centre NORTH EAST COAST REGION Dunn’s River Falls and Park Green Grotto Caves and Attractions Buckfield Commercial Sub-Division Reach Falls Fairy Hill Development North East Coast Development Plan UDC SUBSIDIARIES Montego Freeport Limited National Hotels and Properties Limited

Cover Photo: Reach Falls, Portland

2 2 6 7 8 8 8 8 10 13 13 13 14 14 14 15 15 15 16 16 16 16 16 16 17 17 17 17 18 18 19 19 20 20 20 21 21 21 21 21 21 21 21 22 22

Pegasus Hotels of Jamaica Limited The Ocho Rios Commercial Centre & Sandcastles Runaway Bay Water Company Limited St Ann Development Company (SADCo) Dunn’s River Falls & Park Green Grotto Caves and Attractions Ocho Rios Bay Beach Turtle River Park Pineapple Place Craft Market, Ocho Rios Craft Market Urban Maintenance (1977) Limited UDC GROUP SUBSIDIARIES & ASSOCIATED COMPANIES Urban Development Corporation Ackendown Newtown Development Company Limited Bloody Bay Hotel Development Limited Caymanas Development Company Limited Hellshire Marble Limited Kingston Waterfront Re-Development Company Limited Lilliput Development Corporation Limited Montego Freeport Limited National Hotels and Properties Limited Ocho Rios Commercial Centre Limited Pegasus Hotel of Jamaica Limited Portmore New Town Development Company Limited (Dormant) Port Royal Development Company Limited (Dormant) Runaway Bay Water Company Limited Rutland Point Beach Resorts Limited Seacastles Limited St. Ann Development Company Limited Urban Maintenance (1977) Limited UDC Sub-committees Audit Contracts Finance Investments Personnel Planning & Building Marketing & Public Relations Montego Bay Advisory Committee Negril Advisory Committee EXECUTIVE MANAGEMENT TEAM SENIOR EXECUTIVE COMPENSATION DIRECTORS COMPENSATION DIRECTORS COMPENSATION FINANCIAL STATEMENTS

23 24 24 24 25 25 26 26 26 26 29 30 31 31 31 31 31 31 31 31 31 32 32 32 32 32 32 32 32 33 33 33 33 33 33 33 34 34 34 34 35 36 37 38




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007

Core Values and Philosophy The UDC believes in people

We see ourselves as an organisation of people serving people. We are committed to making development happen for the people of Jamaica while nurturing a culture which values both our internal and external customers and is sensitive to their needs.

The UDC believes in quality

We are committed to employing the highest standards in the timely and efficient delivery of our products and services and will benchmark our operations against international practices.

The UDC believes in accountability

We will conduct our business in a transparent manner, while assuming responsibility for our actions and communicating openly and regularly with our clients and stakeholders.

Vision

To be the leading urban and rural development agency in the Caribbean.

The Corporate Mission Statement

The mission of the UDC is to fulfill our role as the nation’s main urban and rural development agency and facilitator, by effectively and efficiently assigning and managing our resources, so as to ensure the economic viability of the Corporation, sustainable national development and the best quality of life for the citizens of Jamaica.




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007

CHAIRMAN’S REPORT

Dr. John Cooke Chairman

The Financial Year 2006-2007 is probably best characterized as one of challenge and change for the UDC. Challenge came in terms of particular reference to issues relating to public/private sector joint venture partnerships as exemplified by the Sandals Whitehouse Hotel development . The public debate on the matter focused attention on the need for careful scrutiny of that approach to the implementation of our development projects. At the national level, change came with the appointment of a new Governor General, the Most Honourable Professor Kenneth Hall and a new portfolio minister in the person of newly appointed Prime Minister Portia Simpson Miller. At the corporate level it came with the resignation of long serving chairman, Dr Vincent Lawrence in July 2006 and the appointment of a new Board of Directors on December 1, 2006. The composition of this Board which retained members who had previously served and included new members facilitated the transition process. In spite of the challenges and changes, the UDC continued to be active both in the investment arm of its operation and the projects undertaken on behalf of the Government of Jamaica. To this extent, the Corporation continued to be a catalyst in making development happen with a keen recognition that not only physical but also social infrastructure is critical in order to achieve sustainable national development. Consequently for Financial Year 2006-2007 the UDC was involved in several sectors in the economy in which it has participated over the years, with emphasis being placed on, Shelter Provision, Tourism, Health and Education, Culture, Primary Infrastructure, Urban Renewal and Community Development. Significantly, I wish at this point to mention such investment projects as: •

Hellshire Glades Housing

Soapberry Sewage Treatment Plant

Two Sisters Caves

Green Grotto Caves and Attractions

Reach Falls




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Mention must also be made of the agency projects Northwestern Schools Programme and Lift Up Jamaica phase 2. Details of these and other projects will be provided in the President and CEO’s Report. In terms of financial performance, in the financial year 2006-2007 the UDC Group recorded a 21.9% increase in revenue of $447M over the comparative year’s revenue of $2.034B. The main sources of income were:

2006-2007

$M

2005-2006 $M

•Real Estate Sales

356.77

161.89

•Hotel Operations

739.98

658.43

•Attractions

617.92

555.52

•Project/Other Management Fees

99.91

229.43

•Rental Income

269.69

221.78

Administrative expenses totaled $636.545M, reflecting an increase of 10.8% above the 2005/06 amount of $574.44M. The most significant contributor to the Corporation’s profit before taxation was the increase of $7.276B in the fair value of Investment Properties recorded in the financial year. Income from the Corporation’s investment in joint ventures was also considerable contributing a profit of $697M. The Corporation has recorded Profit Before Taxation of $8.848B in 2006-2007 compared to $1.046B in the previous year. The main variables impacting on a positive movement of $16.21b in the Group’s Asset Base from $17.021b (2005-2006) to $33.235B at the end of the 2006-2007 period were the increases in the fair value of Investment Properties of $7.22B, the increase of $5.534B in the value of the Corporation’s Property, Plant and Equipment as well as the increase recorded in the value of the Corporation’s investment in joint ventures of $912M. As I indicated at the appreciation function held February 20, 2007 for former chairman Vincent Lawrence, the new Board of Directors inherited a very proud tradition of excellence pursued and achieved by a Corporation that has earned its place as a pivotal Jamaican institution. This is not to be scoffed at or taken lightly. And so it is against the background of a UDC story of challenge and achievement we again record our acknowledgement of Dr Lawrence’s service to the UDC for almost half the life time of the Corporation’s existence. I also acknowledge, with sincere thanks, the support and commitment of the Board of Directors, Management and Staff of the UDC for steadfastly working to make development happen for the people of Jamaica. On their behalf, I also extend our appreciation to the Office of the Prime Minister, all other Ministries and Government as well as non-Governmental Agencies, the private sector and community groupings who partner with us in pursuit of our mission.




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Most Honourable Prime Minister, it is my honour on behalf of the Board of Directors, the President and Chief Executive Officer, her management team and staff to present to you the Annual Report and Financial Statements of the Urban Development Corporation, its Subsidiaries and Associated Companies for the period April 1, 2006 to March 31, 2007.

John Cooke

Chairman




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007

Board of Directors

Dr. John Cooke, Chairman

Mr. Enrick Williams, Staff Representative

Mrs. Sonia Hyman

Miss Pamela Redwood

Mr. Donovan Stanberry

Mr. Easton Douglas

Mr. Roy Hutchinson

Mr. Jack Wilmot, Deputy Chairman

Miss. Joy Douglas

Mr. George Duncan

Rev. Fr. Burchell McPherson

Mrs. Marjorie Campbell, President & CEO

Mr. Jalil Dabdoub

Mr. Cowell Lyn

Mr. Leon A. Gordon

Mr. Michael Palmer

Mr. Lambert Brown

Mr. Carlton Depass




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007

OVERVIEW OF OPERATIONS

Miss Joy Douglas, Director, UDC

For Financial Year 2006-2007, the UDC set out in its Corporate Strategic Plan a programme of works aimed at the delivery of service to our customers and stakeholders. The Annual Corporate Strategic Plan was platformed on the Five-Year Strategic Plan - Industry and Strategic Analysis (ISA), an analysis of the core business and those elements of the 2005-2006 Corporate Plan which were not realized but remained applicable. This approach aimed to give continuity to the proposed development programmes of the Corporation for the planned period and to allow for responsiveness to the needs of the market place and our various clients and stakeholders. Seven (7) Corporate Objectives were identified and translated into the core functions of the divisions/departments in their respective specialized services. These ranged from technical services in the area of Urban and Regional Planning, Engineering, Architecture, Quantity Surveying, Investment and Estate Management and Legal, Project Management, Information Systems Management, Human Resource, Research and Communication, Marketing, Finance, Audit Management and Administrative Services. They were consolidated in this plan in the form of the following major tasks: -

The development, operation and management of tourism products/services namely, hotels,

resort attractions, beaches, parks (entertainment facilities)

-

Provision of infrastructure works to facilitate residential and commercial developments

-

Construction of commercial and residential accommodation for sale to the public

-

Planning, design and implementation of various development programmes/projects for itself

and on behalf of the GOJ

-

Provision, operation and management of water distribution system

-

Provision of project management services

-

Provision of community development services

-

Provision of appropriate technology, balanced skills set, adequate financial resources, accurate

and timely information to guide the decision making process, effective communication

and customer services.




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 In terms of the core product realization process of the Corporation, the following projects were identified for the period under review:

Investment Projects (funded by UDC Treasury) Two Sisters Caves Janilla Hill Subdivision Dunn’s River Information Centre Dunn’s River New Buildings on the Beach Ocho Rios Bay Beach Pineapple Place Craft Market Kingston Waterfront Rehabilitation Reach Falls (Phase 1) Winnifred Beach Green Grotto Caves and Attractions Contract 11 JPS Mansfield Hellshire Lot C Johnson Hill lot 143 Hellshire Lot C Phase 11 Naggo Head Business Park

Aerial view of pipe bridge to Soapberry Sewage Treatment Plant, St. Catherine

Mount Edgecombe Housing Development Mount Edgecombe Infrastructure Success South Subdivision Redevelopment of Fort Clarence Beach Catherine Hall Infrastructure Caymanas Estate Infrastructure Dunn’s River Sewerage Upgrade

AGENCY PROJECTS (on behalf of Government of Jamaica) Port Maria Civic Centre Phase 11 Montego Bay Sports Complex G.C. Foster College Seating North Western Jamaica Schools Montego Bay Convention Centre Simon Bolivar Cultural Centre Jamaica Conference Centre Tax Incentive Programme for Urban Renewal PROJECTS IN PLANNING Spanish Town Planning Port Henderson Planning

Milton Brady, G.M. FirstCaribbean International Bank explains landscaping model for Kingston Waterfront to Governor-General, Professor Kenneth Hall. Seated at head table are (l-r) Hon Bruce Golding, M.P., Lady Rheima Hall and Mayor Desmond McKenzie




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Fairy Hill Planning Ireland Pen Planning Landscaping of Kingston Coastal Road Catherine Hall Theme Park Bluefields/Ackendown Planning Braco Lands Hellshire Commercial Centre Winnifred Cottages North Negril River Attraction Portmore Business Centre (Naggo Head) Montego Bay Waterfront Sandhills Bay Beach Development. Fort Clarence Oceana Fire Alarm Dunn’s River Generator

Fort Clarence Beach

Runaway Bay Water Company Ocho Rios Commercial Centre (Renovation) OTHER PROJECTS KCCIC –Transportation Centre KCCIC-St. William Grant Park Central Wastewater Treatment Company (Soapberry) Lift Up Jamaica Phase 2 The planning and/or execution of these projects was the result of the cumulative effort of the human resources of the Corporation – the Board of Directors, the management team and our multi-disciplinary staff and I would like to record in this report my own appreciation of the value and commitment they all brought to the mission of making development happen for Jamaica. Community involvement As people serving people, the UDC also continued to be responsive to our commitment to good corporate citizenry, demonstrated through our active community relations programme in our various project areas. The introduction of a series of environmental fairs, beginning with the first being held at the Green Globe certified Green Grotto Caves and Attractions, is noteworthy in this regard. The fair not only involved stakeholders in the attractions Christmas Treat at Reach, Portland


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 and tourism sector, but focused attention on the UDC’s commitment to the promotion of environmental responsibility. The rest of my Overview will highlight aspects of the Consolidated Financial Report and present progress reports on project implementation in the four regions – Kingston, St Catherine, Southwest Coast and the Northeast Coast over the period. These projects provided employment for the various categories of workers in the construction industry, as follows: North East Coast Projects – approximately 100 persons North Western Schools Programme – approximately 5,000 persons St. Catherine Projects – approximately 102 persons The Overview will also include reports from Lift Up Jamaica, the Jamaica Conference Centre and our subsidiaries. Following is the Financial Overview, highlighting Income by Sector, Earnings and Asset Base over a FiveYear Period: R ental Income Over a F ive Year Period

FINANCIAL OVERVIEW

300,000

250,000

200,000

150,000 $'000 100,000

50,000

2003

2004

2005

2006

2007

Years Project/Other Management F ees 250,000

200,000

150,000

$'000 100,000

50,000

2003

2004

2005

Years

2006

2007


11

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 FINANCIAL OVERVIEW

G ros s Attractions Income over a five year period 700,000 600,000 500,000 400,000 $'000 300,000 200,000 100,000 2003

2004

2005 Years

2006

2007

G r os s R eal E s tate S ales over a five year per iod 700,000 600,000 500,000 400,000 $'000 300,000 200,000 100,000 2003

2004

2005 Y ear s

G ros s Income from Hotel Operations over a five year period 800,000 700,000 600,000 500,000 400,000 $'000 300,000 200,000 100,000 2003

2004

2005 Years

2006

2007

2006

2007


12

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 FINANCIAL OVERVIEW

G ros s Income 800,000

700,000

600,000

500,000

400,000

$'000

300,000

200,000

100,000

Hotel Operations

Real Estate

Rental Incom e

Attractions

Sales

Agricultural

Project

Managem ent

Water and

Operations

Managem ent F ees

F ees

Sewerage

2007

Other Operations

Other Interest Incom e

2006

Hotel Operations

2% 11%

Real Estate

30%

2% 1%

Rental Income

4% Attractions

0% Agricultural Operations Project Management Fees

Other Management Fees

25%

Water and Sewerage

14%

As s et C ompar is on

Other Operations

35,000 Other Interest Income

11% 30,000 25,000 20,000 $'000

15,000

E arnings ($M)

10,000

9,000

5,000

8,000

2003

2004

2005 Years

2006

2007

7,000 6,000

Asset Base

Total Assets

5,000 $'000

4,000 3,000 2,000 1,000 2003

Miss Joy Douglas, Director, UDC

2004

Gross Income

2005 Years Profit before Taxation

2006

Net Profit

2007


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 AGENCY PROJECTS During the reporting period, the UDC, working as an agent on behalf of the Government of Jamaica, continued the implementation of the following projects funded under the San Jose Accord:

•Port Maria Civic Centre Phase 11

•Montego Bay Sports Complex

•G.C. Foster College Seating

In addition, the Corporation continued work on the North Western Jamaica Schools Project, the Montego Bay Convention Centre and the Simon Bolivar Cultural Centre as well as Lift Up Jamaica 2 and managed both the Jamaica Conference Centre and the Tax Incentive Programme for Urban Renewal on behalf of the Ministry of Finance and Planning. Updates on the San Jose projects, the North Western Schools Project, the Simon Bolivar Centre and the Montego Bay Convention Centre are provided in the Regional Reports section of this publication, while performance in the latter three areas is provided as follows:

The Jamaica Conference Centre In spite of several challenges with its physical plant and equipment, the Jamaica Conference Centre (JCC) sought to maintain its delivery of quality customer service in an effort to increase its market share in the conference, convention and events sector. The Centre continued to attract clientele from both local and international corporate and educational institutions including the Taino Trade Expo from Colombia which generated a lot of publicity for the Centre. Total revenue generated this year was $18.78M compared with $16.20M in the previous financial year, reflecting a marginal increase in overall revenue. In spite of a reduction in the amount of receivables and the maintenance of an average of approximately 85% collection throughout the year, expenses have increased, as a result of increased electricity and maintenance costs. These costs have been increasing due to the deterioration of the physical plant, audio system, kitchen equipment and air conditioning system, which adversely affect the operations at the Centre.

Lift Up Jamaica 2 During 2006-2007 the UDC continued to manage Phase 2 of the Lift Up Jamaica Programme. With budgeted expenditure of $1B and projected employment of 10-13 thousand persons, work was undertaken in a number of areas including:


14

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007

•Creation of formal vending areas/refurbishing of existing markets

•Formalization of taxi/car parks

•River training

•Refurbishing of public buildings

•Refurbishing of basic schools

•Construction of community facilities including

community centers, basketball/netball courts and playfields •A sanitation programme where communal

toilets and showers will be constructed.

Lift Up Jamaica, which was re-introduced in the last Financial Year, is a short term employment programme

Students at Brinkley Basic School, St Elizabeth upgraded under Lift Up Jamaica 2

aimed at improving community infrastructure. While providing jobs for approximately 20,000 persons between the ages of 18 - 35 years, 40 percent of whom should be women, an important segment of the programme is that involving the on-the job training and certification for future employment opportunities. This important aspect of the programme is being implemented in collaboration with the HEART Trust/NTA. The programme, which is expected to cost $2B over a three year period, starting July 2005, is financed by the Government of Jamaica through the Caracas Energy Development Fund.

The Tax Incentive Programme for Urban Renewal The Tax Relief Programme was established by an Act of Parliament in September 1995 to encourage investment, entrepreneurship, initiative and so further the plans to revive economic, social and cultural activities in Special Development Areas. Its main goal was to stimulate the private sector to play an active role in the redevelopment of areas designated as blighted.

The Special Development Areas in which the

programme has been implemented are downtown Kingston, Port Royal, and Montego Bay. During the year, the UDC continued to manage the Tax Incentive Programme on behalf of Government and acting as an agent of the Ministry of Finance. It received one application for approved developer status valued at $95M to facilitate the redevelopment of property in downtown Kingston.

REGIONAL REPORTS Kingston Region

Kingston Waterfront Upgrading The UDC, in accordance with a mandate from Government, accelerated its on-going improvement of the Kingston Waterfront in February/March 2007 in preparation for the 2007 Cricket World Cup held March 11-


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 April 27 in the Caribbean. The first phase of works was carried out on landscaping, upgrading of the Kingston Craft Market, improvement of the Victoria Pier Building and the provision of street lights along Ocean Boulevard. Through a Memorandum of Understanding, with the UDC First Caribbean International Bank undertook the hard and soft landscaping for the section of the Boulevard from Victoria Pier in the east to Orange Street in the west. The Bank has also agreed to provide ongoing maintenance for the area for a minimum of three years. The UDC will continue improvement works during 2007-2008.

Kingston City Centre Improvement Company (KCCIC) Projects As managers of the St William Grant Park and Urban Transport Centre projects on behalf of the KCCIC, the UDC completed planning and design work on both projects during 2006-2007 and had them tendered for execution in 2007-2008.

Upgrading of St. William Grant Park This project involves the extensive refurbishing of the park located in downtown Kingston between North and South Parade. It includes the refurbishing to all sanitary conveniences, rehabilitation of the existing landscaping and fountain, modification to footpaths and boundary fence, and the installation of a new sprinkler system and all other associated works. Estimated construction cost is approximately $80M and following the signing of a Memorandum of Understanding between the KCCIC and owners of the property, the KSAC, the project was sent to public tender in March 2006.

Urban Transportation Centre A modern transport centre is to be constructed to the west of the city, between Port Royal Street and Water Lane on lands owned by the UDC. The new transport centre is intended to facilitate the relocation of the parking of all buses and taxis from North and South Parade and all areas surrounding the St. William Grant Park, thus merging the existing 10 bus terminals into one multi-modal centre and easing congestion around the Parade area. The works involve the refurbishing of an existing warehouse of approximately 1500 sq. m. to accommodate commercial spaces, administrative

Upgraded landscaping on Kingston Waterfront


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 offices, public areas and service areas; construction of passenger sheds and the marling, asphalting and concreting of approximately 30842 sq. m. of terminal space. Initial construction cost of the Centre was estimated at approximately $300M and although designs were completed and the project sent to tender in April 2005, its implementation has been delayed by issues relating to design changes in order to reduce cost. KCCIC was established in November 2003 as a private/public sector initiative to spearhead the redevelopment of downtown Kingston.

Simon Bolivar Cultural Centre The Corporation continued with the preparation of this project, financed by the Government of Venezuela, with the planned execution of the physical works in the 2007-2008 Financial Year.

Soapberry Sewage Treatment Plant Work on this 24 month US$50.5M sewage treatment plant project at Soapberry, St. Catherine, proceeded on schedule during the 2006-2007. The project will serve 600,000 residential and commercial customers in the Kingston Metropolitan Area, and will contribute towards the cleaning up of the Kingston Harbour.

St. Catherine Region Caymanas Estate

Avi Ashkenazi of Ashtrom and his team examine work in progress on pipe bridge at Soapberry plant

The development of lands at Caymanas is subject to the finalisation of the updated Development Plan. The objective is to incorporate the requirements of the National Environment and Planning Agency (NEPA) and the proposed use of the air-strip lands and lands owned by Mr. Alex Hamilton. The execution of the physical works at Janilla Hill and the infrastructure works, were put on hold subject to the matter of the Development Plan being finalised and approved.

Two Sisters Caves Attraction The Attraction was upgraded by the Corporation by way of a contract executed by B.W. Thompson and Associates, in the sum of $9,391,179.00. This allowed for the re-opening of the Caves to the public in mid 2006.


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Hellshire Lot C ( Hellshire Glades) The Corporation substantially completed and handed over the 165 housing units and related infrastructure works, constructed by way of a contract awarded to West Indies Home Construction Company (WIHCON) in the sum of $480,813,856. Financing for the project was provided by the National Housing Trust (NHT). The Corporation further negotiated the variation of the contract with WIHCON, for the construction of an additional 53 units at Lot C, subject to the formal approval of the National Contract Committee (NCC) and Cabinet. The Development is to be provided with adequate playing facilities for children.

Family at home in Hellshire Glades

Hellshire Lot 143 The Corporation decided to re-tender this project in the 2007-2008 Financial Year to allow for additional infrastructure works to be carried out in the overall development.

Hellshire Development Plan Work proceeded on the up-dating of the Development Plan, with consideration being given to the matter of the ‘Protected Area’, in terms of the inclusion of appropriate type projects. The Corporation also negotiated with the Ministry of Education and Youth, regarding the relocation of the Ministry’s proposed school site for Hellshire.

Area Management Programme

Innswood High School performs at re-opening of Two Sisters Caves

Providing employment for 47 people, the area management programme, in addition to managing the assets of the UDC in Hellshire, continued to focus on implementation of the Hellshire Environmental Management Plan (HEMP), phase I of which has now been fully initiated. The environmental team now in place includes

o

one (1) Protected Area Supervisor

o

four (4) Environmental Wardens and

o

one (1) Environmental Officer.

In keeping with the agreed management requirements, a Memorandum of Understanding (MOU) has been signed with the University of the West Indies (UWI) for research in Hellshire Hills. Required equipment is


18

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 being procured and Ranger Stations have been designed and are expected to go to tender early in the Financial Year 2007-2008. Both UDC visitor attractions in the area - Fort Clarence Beach and Two Sisters Caves, were upgraded and are being operated by the Corporation. Fort Clarence Beach was repossessed by the Corporation, refurbished and commenced operation in December 2006, while Two Sisters Caves was extensively refurbished and facilities upgraded. Squatting has been contained at existing levels with no report of increased activity during the reporting period.

South West Coast/Montego Bay/Negril Region North Western Jamaica Schools Project Financial Year 2006-2007 saw the continuation of Government’s programme to provide a mix of 17 new basic, primary and high schools in the parishes of Trelawny (4), St James (8), Hanover (4) and Westmoreland (1) at a cost of $3.5 B. Under the North Western Jamaica School Project (NWJSP), the UDC has already completed and handed over sixteen (16) of the seventeen (17) schools being constructed in the

Students at Irwin High School, Montego Bay

four western parishes, to the Ministry of Education and Youth for use. This has been done through a Design Build contract awarded to West Indies Home Contractors Ltd. (WIHCON) at a total construction cost of $3.8 billion. The schools are:

Frome Technical

Irwin High and Primary

Holland High

Green Pond High, Primary and Basic

Hague Primary and Basic

Spot Valley High and Primary

Hopewell High

Lucea High


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007

Orange Bay High

Bethel Basic

Success Primary

Work will be completed on the remaining High School at Troy, Trelawny before the end of July 2007.

Sports and Culture New loan financing was agreed between the Bank of Economic and Social Development (BANDES) of Venezuela and the Government of Jamaica in respect of securing funding for the following:

Port Maria Civic Centre Phase 2 - US$2,663,360.00

Montego Bay Sports Complex Phase 3 – US$11,581,176.00

Under the loans to be executed by the Government of Jamaica (GOJ) and the Venezuelan Bank of Economic and Social Development (BANDES), the Corporation carried out prequalification and tendering exercises in relation to the Montego Bay Sports complex, Phase 3 and Port Maria Civic Centre Phase 2 projects, to facilitate the award of contracts and the commencement of work in the 2007-2008 Financial Year. Following completion of Phase 1 in 2002, work under Phase 2 of the Port Maria Civic Centre project will involve the restoration of the remaining area of the two-storey building to allow for a fully functional facility, while Phase 3 of the Sports Complex is slated to provide spectator seating, bathrooms, changing rooms, admin and other support areas, lighting, parking and landscaping.

Mount Edgecombe Sub-division – 395 lots on approximately 28 acres The development of housing proposed for this sub-division was delayed on account of the inability to secure potable water for the project. Consequently, the Board mandated that the technical officers make every effort to source water for the project during 2007-2008, before any consideration could be given to the proposed construction of the planned housing units at Mount Edgecombe. The options being considered include, extracting water from Robins River; use of a desalination plant, sourcing water from Dalintober and the drilling of a well.

Success South Sub-Division In pursuit of its project to supply 31 housing solutions, 31 individual lots and six townhouse blocks at Success in Montego Bay, the UDC invited and received tenders for the related infrastructure works during the fourth quarter of the 2006-2007 Financial Year. The recommendation for the award of contract is expected early in 2007-2008, subject to the matter of sewage collection being addressed, in collaboration with the Rose Hall Development Company and the National Water Commission.


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Lilliput Infrastructure In keeping with its programme to upgrade and regularize the Lilliput subdivision in the Rose Hall area of Montego Bay, the UDC completed the construction of a water tank by way of a supply and installation contract with Tankweld Limited, in the sum of approximately $9.780M. The Corporation is also in negotiation with the St. James Parish Council, to enable tendering of road works for selected roadways. at a projected total expenditure of approximately $70M.

Old Hospital Site, Montego Bay At the request of the Tourism Product Development Company (TPDCO), the UDC is to undertake the role of project manager for the creation of a park at the Old Hospital site in Montego Bay. The project, estimated to cost approximately $23 million, is to be financed by TPDCO and the project has been prepared for tendering in July 2007.

Montego Bay Convention Centre The GOJ and the People’s Republic of China advanced negotiations for financing to be provided for the construction of a Convention Centre on lands at Rose Hall, Montego Bay, with the signing of the loan agreement on June 1, 2007. On May 25 the UDC, as project managers, signed an agreement with the China National Complete Plant Import and Export Corporation (Complant),

L- R Marjorie Campbell, UDC President and CEO joins in signing contract agreement for the construction of the Montego Bay Convention Centre with Cui Kui Yuan, general manager COMPLANT; His Excellency Chen Jinghua Chinese Ambassador to Jamaica; the Hon Portia Simpson- Miller, Prime Minister; Hon. Donald Buchanan, Minister of Information , while Michael Vaccianna, attorney at law observes.

the approved design/ build contractors, to allow for work to proceed with the development of designs for the project. The physical work is expected to commence by September 2007.


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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 North East Coast Region Dunn’s River Falls and Park In keeping with regulatory guidelines, planned physical work at Dunn’s River Falls and Park was subject to the upgrading of the sewerage system at the attraction. Approval was obtained from the Environmental Health Unit of the Ministry of Health, for the UDC to proceed with the implementation on the basis of potential options. Consequently, work has been scheduled for implementation in 2007-2008 . The Corporation completed all outstanding items of work related to the Upgrading of Electrical and Telephone Distribution System during the year under review. The physical work associated with the Beach Replenishment and Buildings on the Beach project was subject to design amendments and the sewerage upgrading project.

Green Grotto Caves – Contracts 1 and 2 All outstanding items of work under contract No. 1 entered into with S.C. Cox and Brothers in the sum of approximately $48M were practically completed during the year. Following the execution of the tender process, contract No. 2 for the second phase of the upgrading works was awarded to KSA Engineering, in the sum of $14,148M. The work which is to be implemented during the 2007-2008 Financial Year will provide a new administration building and refurbish existing covered areas at the attraction.

Buckfield Commercial Sub-division Following the tendering and award of contract to Ronhan and Associates, in the sum of $19.526M, the UDC embarked on its project to develop 8 commercial lots at Buckfield in Ocho Rios. The project was substantially advanced at March 31, 2007.

Reach Falls Interim upgrading works at Reach Falls, in Portland was completed at a cost of approximately $6.2M. The next phase of upgrading works is being planned for the 2007-2008 Financial Year at a projected cost of $29.7M. The re-development programme at the 4.6-hectare attraction includes the provision of proper sanitary facilities, improved water and electrical supply systems, administration buildings, and improved parking and landscaping. This is intended to optimize the attraction’s natural features by way of an environment-friendly design approach.


22

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Fairy Hill Development (Winnifred Beach) In keeping with the requirements of the National Environment Planning Agency (NEPA), the UDC commissioned an Environmental Impact Assessment Study (EIA) as a pre-requisite to proposed upgrading at Winnifred Beach at Fairy Hill, Portland. At March 31, 2006 NEPA was awaiting feedback from all stakeholders, prior to its final review of the EIA. Completion of the feedback process was contingent on a public meeting to be arranged in the parish.

North East Coast Development Plan The Corporation completed the preparation of the necessary maps for inclusion in the Plan, to allow for its approval by the relevant agencies. This is expected to be achieved early in the 2007-2008 Financial Year.

SUBSIDIARIES Montego Freeport Limited During the period under review, Montego Freeport Limited sold seven lots for the development of a 5-star luxury hotel. Operating income was $31.158M. Gain on investment property and sale of investment property was $114.028. Operating profit of $114.244, plus finance income and less taxation resulted in a net profit of $118.069M. Earnings per stock unit for the period was $0.21. Dr. Vincent Lawrence resigned as a director of the company and Messrs. Lambert Brown and George Duncan were appointed to the Board effective March 1, 2007.

National Hotels and Properties (NHP) Limited During 2006-2007 the NHP continued to manage the accounts of the hotel subsidiaries of the Urban Development Corporation, namely

Pegasus Hotels of Jamaica Limited (The Jamaica Pegasus)

Ackendown New Town Development Company Limited (Sandals Whitehouse)

Bloody Bay Hotel Development Limited (Grand Lido Negril)

Montego Beach (1975) Limited (Club Jamaica)

Kingston Waterfront Hotel Company Limited (Oceana Hotel)


23

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Pegasus Hotels of Jamaica Limited Gross profit earned by the Jamaica Pegasus for the year under review is $462.965M. This resulted from total sales of $738.015M. After accounting for administrative and other operating expenses; interest income and taxation net profit was $41.080M. The balance in the Capital Reserve Account as at 31 March 2007 is $2,721,511M and in the Retained Earnings Account is $15.836M. Historical Review

2007

2006

2005

2004

2003

$738.015M

$658.433M

$589.591M

$538.073M

$474.992M

$45.342M

$ 16.616M

$ 27.485M

$ 15.640M

$21.940M (Loss)

Net Profit/(Loss)

$ 41.080M

$ 17.402M

$ 30.692M

$ 20.115M

$ 19.664M

Net Current Assets

$128.798M

$115.907M

$ 81.641M

$112.466M

$104.495M

Earnings/(Loss)

$0.34

$0.14

$0.26

$0.17

$0.16

Revenue Operating Profit

Per Stock Unit Dividends A dividend of $0.25 cents per stock was paid in November 2006 and a further $0.15 cents per stock unit paid in April 2007 out of the profits of the year in review. At this time the directors do not recommend a dividend. Directors During the period under review Mr. Ivan Anderson, a nominated director resigned. The Board of Directors records their thanks and appreciation to him. Under Article 77(1) (a) of the Articles of Association of the Company, National Hotels and Properties Limited, a wholly owned subsidiary of Urban Development Corporation nominated Messrs. George Duncan and Easton Douglas to serve as Directors of the Company. Audit Committee The Audit Committee was formed in March 2006 and consists of four non-executive directors, considered by the Board to be independent. These are Rev. Denzil Barnes (Chairman), Mrs. Marjorie Campbell, Mr. B. Anthony Lindo and Hon. Shirley Tyndall. The committee has members possessing relevant financial experience, a chartered accountant, and a former finance director. The main role and responsibilities of the committee are set out in written terms of reference which can be made available for inspection.


24

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 The committee has met twice since its formation where audit plans for the year and quarterly report from the head of internal audit was presented. The General Manager and the Financial Controller attended these meetings on the invitation of the committee’s Chairman.

The Ocho Rios Commercial Centre and Sandcastles Ocho Rios Commercial Centre (ORCC), a subsidiary of the UDC, is responsible to rent and maintain the shops and offices at the Ocean Village Shopping Centre and the Sandcastles Complex in Ocho Rios. With 75 shops and nine offices rented at the Ocean Village Shopping Centre and 11 shops, four offices and a loft at the Sandcastles Complex, ORCC maintained a 97 % occupancy rate at the shopping centre and 100% at the Sandcastles Complex. During the year under review the shops and offices at Sandcastles were put up for sale and

four shops

were sold during the period. The current tenants were given priority to purchase these units and most expressed the desire to do so. Total sales revenue generated throughout the 2006-2007 financial year amounted to $15.7M, an increase of $1.2M or 7.82% over the previous financial year. Income was also realized on the increase in the fair value of investment properties of $80.34M a total of 0.21 times of the previous year. The car park service complemented the income with $1.9M and related expenses of $1M. Income from rental of shops and offices amounted to $13.8M an increase of $832,000 or 6.42% over the previous year with the associated operating costs of $7.7M.

Runaway Bay Water Company Ltd. The Runaway Bay Water Company Ltd. is a wholly owned subsidiary of the Urban Development Corporation (U.D.C.). During the Financial Year April 2006 to March 2007, the Company employed 17 full-time and 3 part-time employees to operate two wells from which it extracted 2.26m3 of water and sold 2.11M m3, 1.69M m3 or 74% of which was sold, wholesale, to the National Water Commission for re-distribution to the Runaway Bay Area and the remainder was distributed directly to 300 domestic customers and 51 commercial customers in the Cardiff Hall sub-division. Over the same period the Company generated total Sales Revenue of $59.19M.

Staff at work at Runaway Bay Water Company Ltd., St Ann


25

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 St Ann Development Company (SADCo) Established in 1967 to plan and implement development strategies in the parish of St. Ann, the St Ann Development Company (SADCo), continued during 2006-07 to manage the various attractions and properties owned by the UDC in the parish. With a current staff complement of over 240 permanent workers and approximately 26 casual workers, the subsidiary carried out management functions at:

DUNN’S RIVER FALLS AND PARK

GREEN GROTTO CAVES AND ATTRACTIONS

LAUGHING WATERS

OCHO RIOS BAY BEACH

OCHO RIOS CRAFT MARKET

PINEAPPLE PLACE CRAFT MARKET

ROARING RIVER / BELMONT/ MALVERN PARK ESTATES

SHAW PARK NORTH

THE SADCO MAIN OFFICE – Ocean Village Shopping Centre

TURTLE RIVER PARK

For financial year April 2006 to March 2007, SADCO reports the following:

Dunn’s River Falls & Park Dunn’s River Falls and Park, currently benefiting from a development programme valued in excess of J$300M, experienced an increase in total income of $61,810,874 over the previous year. The main contributing factors were increases in revenue from ticket sales and locker rentals. Operating expense for the period saw a $17,076,524 or 7% increase over the previous year.

Green Grotto Caves and Attractions Green Grotto Caves and Attractions commenced operations as a UDC owned facility on April 17, 2000, after being acquired in October 1999. Operations on this 25.9- hectare (62 acre) property commenced with the offering of a 45 minute guided tour of two cave systems. The Corporation, however, had instituted a development plan, with a phased programme of improvements, to upgrade the facility and achieve its vision to become the best eco tourism attraction in Jamaica. As a result, Green Grotto Caves and Attractions is currently benefiting from a $49M expansion programme, which includes the following and which at March 31, 2007 was approximately 98% complete:


26

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 1.

Construction of a structured parking bay at the main entrance to include paved walkways,

handicapped parking facilities and landscaping works.

2.

Upgrading of cave trails, descent to the Grotto and lighting.

3.

Construction of a fishing attraction with supporting facilities and nature trails.

There were 35,826 visitors to the attraction during the year, an increase of 6,664 over the prior year. Green Grotto Caves and Attractions increased its total income for 2006-2007 by $3,365,072M or 23% over the previous year. The highest level of income was generated from ticket sales with a marginal increase of $1,802,066 or 25% over the previous year. Income from fees, the second highest earner, experienced an increase of $967,814 or 16%. Operating expense for 2006-2007 increased by $4,995,102 or 22% with the main contributory factors being salaries and wages and security charges.

Ocho Rios Bay Beach Ocho Rios Bay Beach increased its income for the 2006-2007 financial year by $5,061,562 or 33% with its main earner, ticket sales, seeing an increase of $2,083,668 and entrance fees by $2,447,266. Operating expenses decreased over the previous period by $2,503,035.

Turtle River Park Since its completion in May 2004, the Turtle River Park has continued its growth as a venue of choice for cultural events and recreational activities. Designed as a passive urban recreational public space to serve the Ocho Rios community, cruise ship passengers and local and foreign visitors, Turtle River Park continues to be heavily patronized by both local residents and international and locals visitors. Use of the parking lot to the north of the property, which can accommodate approximately seventy (70) cars continues to be conservative. Income increased by $334,211 or 40% over that of the previous year largely as a result of increased snack sales.

Pineapple Place Craft Market, Ocho Rios Craft Market and Fisherman’s Point There was no increase or decrease in the income for both Pineapple Place and Fisherman’s Point, which was $937,200 and $120,000, respectively. However the Ocho Rios Craft Market increased its income by $1,596,602 or 390% over the previous year this resulted from increased rantal and commsion rates. Expenses decreased for all properties by 27%, 9% and 54% respectively, throughout the 2006-2007 financial year.


27

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Urban Maintenance (1977) Limited During Financial Year 2006-2007 The Urban Maintenance Ltd., a wholly owned subsidiary of the UDC, continued to exercise its responsibility for maintaining all buildings along the waterfront owned by the Corporation, inclusive of the Office Centre Building and the Oceana Building; The Institute of Jamaica; The Kingston Mall and The Seabed Arcade. The company also managed UDC-owned car-parks in downtown Kingston, comprising 3 multi-storey parking garages and five open parking lots. In addition, UML continued to offer maintenance services to its sister subsidiary companies - Runaway Bay Water Company and Hellshire Bay. For the year under review UML made an operating loss of $4.2M. The company’s staff complement increased to 49 permanent employees. Details of the Company’s operations for the period 2006 - 2007 are as follows: Block 4 – Office Centre Building, 12 Ocean Boulevard, Kingston

Work to rehabilitate the elevators started.

Installation works for changing out the cooling coils on three floors (2nd, 5th and 6th floors)

began

Retiled the first floor

Block 3 – The National Gallery Building, 12 Ocean Boulevard, Kingston

Installed four mini-split units, for the smaller offices and spaces

Oceana Complex, 2 – 4, King Street

Remedial roof works to the 1st floor and 12th floor

Internal painting and tiling.

Block 2/6

Repainted the 12-storey building.

Jamaica Conference Centre

Continued to maintain the Jamaica Conference Centre.

CAR PARKS Open Car parks

Painted parking bays and repaired the perimeter fence at the Western Car park

Multi-storey Car Parks Repaired the joints and completed resealing works at the Seabed Car Park. The Local Organising Committee (LOC) for Cricket World cup, contracted, with the UDC to use 300 spaces in the Corporation’s Western Car Park for $315,000.00 for a seven- day period.


28

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 The total capacity of the eight car parks remained at approximately 2600 spaces, of which 65% was designated contract parking. The Corporation maintained a total average occupancy from contractual parking of about 90%. Unaudited figures indicated that the company earned a profit of $10.5M as at February 2007.

OTHER PROJECTS Waterfront – Landscaping UML undertook minor works along the waterfront in February in preparation for the staging of the ICC Cricket World Cup. These works included the installation of pop-up sprinklers, painting of the outdoor stage, curb walls, and planters, mulching and fertilizing of the lawns and foliage beds. PROMOTION OF DOWNTOWN KINGSTON UML was integral to the establishing a “promotional village” displaying local wares, located at the corner of Ocean Boulevard and Orange Street, for the period March 13 – April 28. The village, called the “The Orange Park Village” had booths providing food, craft and an entertainment package for special cricket days to target the patrons of cricket, the employees of the various entities Downtown, the communities in and around the area and the public at large. Although there were plans to host the annual New Year’s Eve celebration – Fireworks on the Waterfront - on December 31, 2006, it had to be cancelled due to a malarial outbreak.


29

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 SUBSIDIARIES & ASSOCIATED COMPANIES AS AT MARCH 31, 2007

• ACKENDOWN NEWTOWN DEVELOPMENT COMPANY LIMITED

• BLOODY BAY HOTEL DEVELOPMENT LTD

• CAYMANAS DEVELOPMENT COMPANY LIMITED

• CENTRAL WASTEWATER TREATMENT COMPANY LIMITED

• HELLSHIRE MARBLE LIMITED (Dormant)

• KINGSTON WATERFRONT REDEVELOPMENT COMPANY LIMITED (Dormant)

• KINGSTON WATERFRONT HOTEL COMPANY LIMITED (Dormant)

• LILLIPUT DEVELOPMENT CORPORATION LIMITED

• MONTEGO FREEPORT LIMITED

• MONTEGO BEACH (1975) LIMITED (Dormant)

• MONTEGO SHOPPING CENTRE LIMITED

• NATIONAL HOTELS AND PROPERTIES LIMITED

• OCHO RIOS COMMERCIAL CENTRE LIMITED

• PEGASUS HOTELS OF JAMAICA LIMITED

• PORTMORE COMMERCIAL DEVELOPMENT COMPANY LIMITED

• PORTMORE NEWTOWN DEVELOPMENT COMPANY LIMITED (Dormant)

• PORT ROYAL DEVELOPMENT COMPANY LIMITED

• ROSE HALL RESORT LIMITED

• RUNAWAY BAY WATER COMPANY LIMITED

• RUTLAND POINT BEACH RESORTS LIMITED

• ST. ANN DEVELOPMENT COMPANY LIMITED

• SEACASTLES LIMITED

• SEASIDE AT ROSE HALL DEVELOPMENTS LIMITED

• URBAN MAINTENANCE (1977) LIMITED


30

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 DIRECTORS OF THE URBAN DEVELOPMENT CORPORATION, SUBSIDIARIES AND ASSOCIATED COMPANIES Urban Development Corporation Directors - April 2006 –November 2006

Urban Development Corporation Directors - December 1, 2006 - March 31, 2007

Vincent Lawrence

John Cooke

Chairman

(Resigned July 24, 2006)

Jack Wilmot

Deputy Chairman

Jack Wilmot

Deputy Chairman

Marjorie Campbell

President & CEO

Marjorie Campbell

President & CEO

Cowell Lyn

Chairman

Annette Braithwaite

George Duncan

Richard Burgher

Lambert Brown

Jacqueline DaCosta

Pamela Redwood

Carlton DePass

Joy Douglas

Rudyard Ellis

Jalil Dabdoub

Leon A. Gordon

Burchell McPherson

Roy Hutchinson

Leon A. Gordon

George Duncan

Roy Hutchinson

Annalise Harewood

Carlton DePass

Fiona Rerrie

Sonia Hyman

Gary Peart

Michael Palmer

Reynold Scott

Easton Douglas

Sonia Hyman

Donovan Stanberry Enrick Williams

* Designation of General Manager changed to President & CEO on February 1, 2006


31

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Ackendown Newtown Development Company Limited

Lilliput Development Corporation Limited

Gordon Shirley

George Duncan

Marjorie Campbell Sonia Hyman

Gloria Royale Davis

Bloody Bay Hotel Development Limited

Jewell Spencer

Paul Sloley Doris Channer-Watson

Easton Douglas

Michael Thorpe

Gloria Royale-Davis

Cleveland Parker

Vivalyn Downer-Edwards

Vivalyn Downer-Edwards

Hon John J. Issa Muna Issa

Montego Freeport Limited

Stuart Fisher Marlene McLean

Company Secretary

Caymanas Development Company Limited Joy Douglas

Chairman

Lambert Brown Marjorie Campbell Maizie O’Reggio-Alexander Rev Daniel Samuels Noel Sloley

Easton Douglas

Jewell Spencer

Kemel Allen

Faith Thomas

Gordon Hutchinson

Marlene McLean

Jewell Spencer Carlton DePass

Marjorie Campbell

Scarlett Gillings

Gloria Royale-Davis

Hellshire Marble Limited Winston Hayden Avris Pamela Whittingham Raymond Wright Noel Lyons Norman Patrick Saulter Reginald Carl Chantrielle Jewell Spencer Kingston Waterfront Redevelopment Company Marjorie Campbell Cowell Lyn

Company Secretary

National Hotels and Properties Limited

Jack Wilmot

Limited

Chairman

Winston Ritchie

Ocho Rios Commercial Centre Limited Michael Palmer Errol Philp Faith Thomas Marjorie Campbell Jewell Spencer Jackson Wilmot Patricia Wilson Marlene McLean

Company Secretary


32

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Pegasus Hotels of Jamaica Limited

Seacastles Limited

Hon John J. Issa

Vivalyn Downer-Edwards

Chairman

Rev. Denzil Barnes

Maurice Johnson

Christopher Bovell

St. Ann Development Company Limited

Marjorie Campbell B. Anthony Lindo

Marjorie Campbell

Deputy Chairperson

Hon. Shirley Tyndall

Faith Thomas

General Manager

George Duncan

Anthony Carr

Easton Douglas

Patricia Wilson

Marlene McLean

Company Secretary

James Walsh Marcia Ward

Portmore New Town Development Company Limited

Carroll Jackson

(Dormant)

Mark Campbell

Marjorie Campbell

Jeff McKitty

Hopeton Smith

Ian Kelly

Port Royal Development Company Limited

Barbara Hall

Leon Gordon

(Dormant)

Urban Maintenance (1977) Limited

Robert Stephens

Jalil Dabdoub

Jewell Spencer

Sonia Dowding

Carole Guntley Brady

Carlton Depass

Michael Campbell

George Harty

Lois Sherwood

Pamela Redwood

Marjorie Campbell

Roy Budram

Cowell Lyn Robert Gregory Donovan Stanberry Runaway Bay Water Company Limited Joy Douglas

Chairman

Donald Lee Peter Morais Desmond Malcolm Leon Gordon Collie Wallace

Company Secretary

Rutland Point Beach Resorts Limited Marjorie Campbell Winston Ritchie

Company Secretary


33

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 BOARD COMMITTEES

Investments

Audit Jalil Dabdoub

Lambert Brown Gary Peart

Roy Hutchinson

Kemel Allen

Rudyard Ellis

Annalise Harewood

Nicola Reid

Marjorie Campbell

Olive Kerr

Jewell Spencer

Sonia Hyman

Marcia Ward Donovan Dowie

Contracts Michael Palmer

Chairman

Jack Wilmot Carlton Depass Marjorie Campbell Jalil Dabdoub

Maxine Foreman Finance Chairman

John Cooke Jack Wilmot Cowell Lyn Marjorie Campbell Lambert Brown George Duncan Pamella Redwood Joy Douglas Jalil Dabdoub Rev. Fr. Burchell McPherson Leon Gordon Carlton DePass Sonia Hyman Marcia Ward Michael Palmer Easton Douglas Donovan Stanberry Enrick Williams

Audrey Henry Gary Peart Marjorie Campbell Marcia Scott Golding

Easton Douglas

Gary Peart

Rev. Fr. Burchell McPherson

Minette Mitchell

Pamella Redwood

Roy Hutchinson

Personnel

Gloria Royale Davis Sonia Hyman Enrick Williams Planning & Building Carlton Depass

Chairman

Roy Hutchinson Leon A. Gordon Sonia Hyman Marjorie Campbell Easton Douglas Joy Douglas Cowell Lyn Lloyd Grey Jewell Spencer Peter Morais Vivalyn Edwards Elizabeth Harrilal Hopeton Smith Maurice Johnson


34

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 Marketing & Public Relations

Negril Advisory Committee

Pamella Redwood

Roy Hutchinson Chairman

Chairman

Joy Douglas

Winston Ritchie

Leon Gordon

Cliff Reynolds

Lambert Brown

Patricia Sinclair Stair

Gloria Royale Davis

Joseph Smith

Doreen O’Connor

Alfred Graham

Venora Fletcher Lorna Clarke

David Gardener

Jewell Spencer

Montego Bay Advisory Committee George Duncan

Chairman

Winston Ritchie Paul Sloley Sam James Neville Claire

Urban Development Corporation Compensation – Executive and Senior Management EXECUTIVE MANAGEMENT TEAM President and Chief Executive Officer:

Mrs. Marjorie Campbell

Vice Presidents:

Mrs. Jewell Spencer

Investment

Mrs. Marcia Ward

Finance & Administration

Mr. Lloyd Grey (Acting)

Technical Services

Chief Legal Counsel/Company Secretary:

Mrs. Vivalyn Downer Edwards

Ass’t Vice President

Dr. Gloria Royale-Davis

Ass’t Vice President

- Corporate Services

- Project Management

Mr Maurice Johnson (Acting)


35

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 The compensation package for Executive Management and Senior Managers for the period 2006-2007 is as shown below: SENIOR EXECUTIVE COMPENSATION 2006-2007 Position of Senior Executive

Salary $

President and CEO

6,765,776.62

Vice President Corporate Services

4,226,109.96

Chief Legal Counsel

4,067,630.90

Vice PresidentFinance & Administration

5,547,175.68

Vice PresidentInvestments

5,547,175.70

Assistant Vice president Project Management

Gratuity or Performance Incentive $

Travelling Allowance or Value of Assigned Motor Vehicle $

Pension Other Non-Cash or Other Allowances Benefits Retirement ($) ($) Benefits

360,141.74

Total ($)

885.95

-

7,126,804.31

528,000.00

885.95

-

4,754,995.91

528,000.00

-

-

4,596,073.90

239,426.38

100,000.00

885.95

-

5,887,488.01

239,426.34

528,000.00

885.95

-

6,315,487.97

2,291,396.16

528,000.00

282,567.79

-

3,101,963.95

Acting Vice President Technical Services

2,573,200.20

525,161.30

753,052.55

-

4,098,441.25

General ManagerSADCO

3,609,653.90

727,786.62

1,018.84

-

4,338,459.46

Co-ordinating Manager - NHP

2,484,244.7

706,622.12

885.95

-

3,191,752.86

-

909,532.38

-

44,321,000.00

Project Manager –Lift Up Jamaica Total

909,532.38

38,021,796.20 2,273,403.2

247,027.2

-

2,737161.3

247,027.2 1,041,511.9


36

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 DIRECTORS COMPENSATION APRIL 2006-NOVEMBER 2006

Position of Director

Fees ($)

Motor Vehicle Upkeep Travelling or Value of Assigned Motor Vehicle ($)

Honoraria ($)

All Other Compensation including Non-Cash Benefits as applicable ($)

Total ($)

Chairman

53,500

N/A

N/A

N/A

53,500

Deputy Chairman

39,500

N/A

N/A

N/A

39,500

Director

44,000

N/A

N/A

N/A

44,000

Director

44,000

N/A

N/A

N/A

44,000

Director

48,000

N/A

N/A

N/A

48,000

Director

44,000

N/A

N/A

N/A

44,000

Director

38,000

N/A

N/A

N/A

38,000

Director

36,000

N/A

N/A

N/A

36,000

Director

40,000

N/A

N/A

N/A

40,000

Director

42,000

N/A

N/A

N/A

42,000

Director

46,000

N/A

N/A

N/A

46,000

Director

40,000

N/A

N/A

N/A

40,000

Director

36,000

N/A

N/A

N/A

36,000

Director

38,000

N/A

N/A

N/A

38,000

Director

44,000

N/A

N/A

N/A

44,000

Director

50,000

N/A

N/A

N/A

50,000

Total

643,000

*Compensation not included for Executive members.

643,000


37

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2006-2007 DIRECTORS COMPENSATION DECEMBER 2006-MARCH 2007

Position of Director

Fees ($)

Motor Vehicle Upkeep Travelling or Value of Assigned Motor Vehicle ($)

Honoraria ($)

All Other Compensation including Non-Cash Benefits as applicable ($)

Total ($)

Chairman

38,000

N/A

N/A

N/A

38,000

Deputy Chairman

24,000

N/A

N/A

N/A

24,000

Director

24,000

N/A

N/A

N/A

24,000

Director

24,000

N/A

N/A

N/A

24,000

Director

24,000

N/A

N/A

N/A

24,000

Director

24,000

N/A

N/A

N/A

24,000

Director

24,000

N/A

N/A

N/A

Director

24,000

N/A

N/A

N/A

24,000

Director

24,000

N/A

N/A

24,000

Director

24,000

Director

24,000

24,000

N/A

N/A

N/A

24,000

N/A

N/A

N/A

24,000

N/A

N/A

N/A

24,000

Director

24,000

Director

24,000

N/A

N/A

N/A

24,000

Director

24,000

N/A

N/A

N/A

24,000

Director

30,000

N/A

N/A

N/A

30,000

Director

28,000

N/A

N/A

N/A

28,000

Director

24,000

Total

N/A

432,000

Total Compensation for Directors $1,142,000. *Compensation not included for Executive members.

N/A

N/A

24,000 432,000


URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES YEAR ENDED MARCH 31, 2007

CONTENTS

Page

Independent Auditors’ Report – to the members

1

CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheet

2

Income Statement

3

Statement of Changes in Equity

4

Statement of Cash Flows

5

Notes to the Financial Statements

6-48


Page 1.1 INDEPENDENT AUDITORS’ REPORT To the members of URBAN DEVELOPMENT CORPORATION

Report on the financial statements We have audited the financial statements of Urban Development Corporation and its subsidiaries (the Group) as of March 31, 2007 set out on Pages 2 to 48 which comprise the balance sheet as at March 31, 2007, the income statement, statements of changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and consistently applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ Responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.


Page 3

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED INCOME STATEMENT YEAR ENDED MARCH 31, 2007

2007 $’000

2006 $’000

2,481,340

2,034,741

(1,439,249)

(1,239,667)

Notes

Revenue

26(a)

Cost of sales Gross profit

26(b)

1,042,091

795,074

41,236

28,336

Other operating income Administrative expenses

( 636,545)

( 574,437)

Other operating expenses

( 117,409)

( 381,529)

Impairment loss on joint venture Finance costs

9 28

Share of profit from associates Increase in fair value of investment properties

6

Profit /(loss) on disposal of investment properties

29

PROFIT BEFORE TAXATION Income tax charge (credit)

(

7,390)

30

PROFIT FOR THE YEAR AFTER TAXATION

( 412,077) (

6,574)

471,262

109,994

7,276,086

1,348,090

6,860

Income from investment in joint venture Income from investments

-

(

16,115)

697,915

9,732

73,910

146,217

8,848,016

1,046,711

217,781

(

69,690)

8,630,235

1,116,401

8,592,278 37,957

1,098,698 17,703

8,630,235

1,116,401

Attributable to: Equity holders of the parent Minorities' share of income

The Notes on Pages 6 to 48 form an integral part of the Financial Statements.


Page 4 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED MARCH 31, 2007

Balance at April 1, 2005 as previously stated Adjustment to opening retained earnings

Note

Capital Contribution $’000

Capital Reserve $’000

39

222,788 -

3,516,597 -

325,950 -

222,788

3,516,597

325,950

Restated balance at April 1, 2005 Revaluation increase on land and buildings

-

Deferred tax

-

Gains on projects funded internally

-

Reserves of subsidiary written off

436,135

General Reserve $’000

Advances to the Government of Jamaica $’000

Attributable to Equity Holders of Parent Company $’000

Minority Interest $’000

Total $’000

9,380,721 296,958

(292,924) -

13,153,132 296,958

1,244,267 -

14,397,399 296,958

9,677,679

(292,924)

13,450,090

1,244,267

14,694,357

436,135

112,313

548,448

Revenue Reserve $’000

-

-

-

-

-

-

-

13,512

-

-

-

-

( 29,364)

-

-

Distribution to minority interest

-

-

-

-

-

Net income recognized directly in equity

-

( 15,852)

-

-

330,144

76,649

406,793

Net profit for the year

-

Total recognized income and expenses

-

Transfer from capital reserve

-

Transfer from replacement reserve

-

-

222,788

3,825,976

319,183

Revaluation increase on land and buildings

-

5,505,012

Deferred tax

-

Reserves of subsidiary written off

-

Distribution to minority interest

(

90,139)

345,996

90,139)

(

(

21,174)

13,512

-

29,364)

-

-

(

14,490)

(

111,313) 13,512

(

29,364)

(

14,490)

-

1,092,210

-

1,092,210

17,703

1,109,913

( 15,852)

1,092,210

-

1,422,354

94,352

1,516,706

36,617

-

-

-

-

-

-

-

-

10,797,421

( 292,924)

14,872,444

1,338,619

16,211,063

-

-

-

5,505,012

180,852

5,685,864

-

-

-

(

83,583)

-

( 16,888)

-

-

(

16,888)

-

-

-

-

-

Net income recognized directly in equity

-

5,421,429

( 16,888)

-

-

5,404,541

132,239

5,536,780

Net profit for the year

-

-

-

8,592,278

-

8,592,278

37,957

8,630,235

Total recognized income and expenses

-

5,421,429

( 16,888)

8,592,278

-

13,996,819

170,196

14,167,015

Transfer from capital reserve

-

(

14,226)

-

14,226

-

-

-

-

Transfer to revenue reserve Transfer to general reserve

-

(

22,391) -

20,731

22,391 20,731)

-

-

-

-

Balance at March 31, 2007

222,788

( 292,924)

28,869,263

1,508,815

30,378,078

Balance at April 1, 2006 restated

The Notes on Pages 6 to 48 form an integral part of the Financial Statements.

-

(

345,996 (

(

36,617)

83,583)

9,210,788

9,085

323,026

(

(

9,085)

19,405,585

-

(

36,536) -

(

12,077)

(

120,119)

(

16,888)

(

12,077)


Page 5.1

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2007

OPERATING ACTIVITIES Profit for the year Adjustments for: Depreciation of property, plant and equipment Increase in fair value of investment property Retirement benefit charge Net foreign exchange (gain) loss (Gain)/loss on disposal of property, plant and equipment (Gain)/loss on disposal of investment properties Increase in provision for future infrastructure costs on land sold Share of income from associates Income from investment in joint venture Tax expense Impairment loss on joint venture Interest expense Interest income

2007 $’000

2006 $’000

8,630,235

1,116,401

120,709 (7,276,086) ( 67,269) ( 9,177) ( 4,583) ( 6,860) 31,967 ( 471,262) ( 697,915) 217,781 ( 93,466)

98,231 (1,348,090) ( 11,344) 4,167 16,115 40,207 ( 109,994) ( 9,732) ( 69,690) 412,077 6,574 ( 89,153)

Operating cash flows before movements in working capital Increase in inventories Decrease in receivables (Decrease) increase in owed to regional companies Increase in inventory of land and development projects

374,074 (

8,730) 117,645 ( 44,276) ( 558,279)

55,769 (

39) 447,278 37,317 ( 189,802)

Increase in payables

392,120

295,212

Cash generated by operations

272,554

645,735

Income taxes paid Interest paid Net cash provided by operating activities

(

70,974) 201,580

( (

59,516) 6,574) 579,645


Page 5.2

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2007 2007 $’000

2006 $’000

INVESTING ACTIVITIES Interest received Investment in associates Investment in joint venture Purchases of property, plant and equipment Purchase of investment properties Encashment of available-for-sale investments Purchase of intangible assets Proceeds on disposal of investment properties Proceeds on disposal of property, plant and equipment Retirement benefit contributions

84,421 ( 8,497) ( 214,630) ( 37,573) ( 80) ( 48,807) ( 4,793) 108,030 6,922 ( 11,168)

75,875 ( 103,944) ( 109,653) ( 134,065) ( 18,832) 25,745 ( 6,480) 127,503 ( 7,497)

Net cash used in investing activities

( 126,175)

( 151,348)

FINANCING ACTIVITIES Repayment of borrowings Loans received

(

(

17,435) 236,650

29,045) 39,130

Net cash provided by financing activities

219,215

10,085

NET INCREASE IN CASH AND CASH EQUIVALENTS

294,620

438,382

1,388,447

950,065

OPENING CASH AND CASH EQUIVALENTS Effects of foreign exchange rate changes CASH AND CASH EQUIVALENTS AT END OF YEAR

The Notes on Pages 6 to 48 form an integral part of the Financial Statements.

9,177 1,692,244

1,388,447


Page 6 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

1

IDENTIFICATION The group comprises: !

The Corporation which is incorporated under the Urban Development Act of Jamaica. Its main activity is to undertake urban renewal and development in specific areas designated by the Government of Jamaica. Sections 20A and 20B of the Act previously exempted the Corporation from income tax, stamp duties and registration or recording fees. The enactment of the Public Enterprises Act (removal of tax concessions) 2003 which came into effect on December 22, 2003, has now removed these exemptions. The registered office of the Corporation is 12 Ocean Boulevard, Kingston Mall, Kingston.

!

Its subsidiaries, all of which are incorporated in Jamaica under the Companies’ Act.

The principal activities of the subsidiaries at March 31, 2007 are as follows: Place of Incorporation (or registration) and operation

Proportion of ownership interest

Proportion of voting power held

Hellshire Bay Development Company Limited

Jamaica

100

100

Dormant

Negril Jamaica Estates Limited

Jamaica

100

100

Non-trading

Urban Maintenance (1977) Limited

Jamaica

100

100

Management and maintenance services

Runaway Bay Water Company Limited

Jamaica

100

100

Supply of water

National Hotels and Properties Limited

Jamaica

100

100

Management of subsidiaries, leasing and hotel operations Project management in the construction of roads and buildings

Name of subsidiary

Portmore Newtown Development Company Limited

Principal activity

Jamaica

100

100

Jamaica

100

100

Ocho Rios Commercial Centre Limited

Jamaica

100

100

Leasing of commercial properties

Montego Freeport Limited

Jamaica

82

82

Property owners and managers

Lilliput Development Corporation Limited

Jamaica

100

100

Caymanas Development Company Limited

Operation of golf course and management of agricultural and horticultural projects

Project management in housing development and infrastructure


Page 7 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

1

I IDENTIFICATION (Cont’d) Five of the subsidiaries were audited by Chartered Accountants other than the auditors of the parent Corporation. The financial statements of those companies reflect total assets and gross revenue of 12% and 18% respectively of the related Group totals. Accounting period The Group and all the companies in the Group have prepared financial statements for the year ended March 31, 2007. Reporting currency These financial statements are presented in Jamaican dollars since that is the currency in which the majority of the Group’s transactions are denominated.

2

ADOPTION OF THE NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on April 1, 2006. The adoption of these new and revised Standards and Interpretations has not resulted in changes to the Group’s accounting policies nor the amounts reported for the current or prior years, although additional disclosures have resulted in some instances. Standards and Interpretations in issue not yet adopted At the date of authorization of these financial statements, the following Standards and Interpretations were in issue but not effective for the financial period being reported on: . IAS 1, 16, 19, 20, 23, 27, 28, 29, 31, 36, 38, 39, 40, 41 and IFRS 5 (Revised)

Effective for annual periods beginning on or after

Amendments resulting from May 2008 Annual Improvements to IFRS

January 1, 2009

Amendments relating to disclosure of puttable instruments and obligations arising on liquidation

January 1, 2009

IAS 23 (Revised)

Borrowing costs

January 1, 2007

IAS 27, 28, and 31 (Revised)

Consequential amendments arising from amendments to IFRS 3

July 1, 2009

IAS 1 and 32 (Revised)


Page 8 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

2

ADOPTION OF THE NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d) Standards and Interpretations in issue not yet adopted (Cont’d) Effective for annual periods beginning on or after IAS 1 (Revised)

Presentation of Financial Statements Comprehensive revision including requiring a statement of comprehensive income

January 1, 2009

IAS 23 (Revised)

Borrowing costs

January 1, 2009

IAS 27 (Revised)

-

January 1, 2009

-

Amendment to add disclosures about an entity’s capital Consolidated and Separate Financial Statements Amendment relating to cost of an investment on first-time adoption

January 1, 2009

IAS 32 (Revised)

Financial Instrument Presentation

January 1, 2007

IFRS 1 (Revised)

First-time Adoption of International Financial Reporting Standards – Amendment relating to cost of an investment on first-time adoption

January 1, 2009

Share-based Payment – Amendment conditions and cancellations

January 1, 2009

IFRS 2 (Revised) IFRS 3 (Revised)

relating

to

vesting

Business Combinations – Comprehensive revision on applying the acquisition method

July 1, 2009

Non-Current Assets Held-for-sale and discontinued operations Amendments resulting from May 2008 Annual Improvements to IFRS

July 1, 2009

IFRS 7

Financial Instrument Disclosures

January 1, 2007

IFRIC 8

Scope of IFRS

May 1, 2006

IFRIC 9

Reassessment of Embedded Derivatives

June 1, 2006

IFRIC 10

Interim Financial Reporting and Impairment

November 1, 2006

IFRIC 11

Group and Treasury Share Transaction

March 1, 2007

IFRIC 12

Service Concession Arrangements

January 1, 2008

IFRIC 13

Customer Loyalty Programmes

July 1, 2008

IFRIC 14:IAS 19

The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction

January 1, 2008

IFRIC 15

Agreements for the Construction of Real Estate

January 1, 2009

IFRIC 16

Hedges of a Net Investment in a Foreign Operation

October 1, 2008

IFRIC 17

Distribution of Non-Cash Assets to Owners

July 1, 2009

IFRS 5 (Revised)

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group although additional disclosures will arise on the adoption of IFRS 7.


Page 9 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

2

ADOPTION OF THE NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d) New and Revised Standards and Interpretations that are not relevant IAS 20 (Revised) IAS 29 (Revised) IAS 41 (Revised) IFRS 1 (Revised) IFRS 2 (Revised) IFRIC 12 IFRIC 13 IFRIC 16 IFRIC 17

Accounting for Government Assistance and Disclosure of Government Assistance Financial Reporting in Hyperinflationary Economies Agriculture First-time Adoption of IFRS Share based payment Service Concession Agreement Customer Loyalty Programme Hedges of Net Investment in a Foreign Operation Distribution of Non-Cash Assets to Owners

New and Revised Standards and Interpretations that are relevant !

Amendments specifically to IAS 1, 16, 27, 28, 31, 36, 38, 39 and 40, resulting from the May 2008 annual improvements to IFRS are not expected to have a significant impact on the Group’s financial statements on adoption at the respective effective dates.

!

IAS 1 (Revised 2007) Presentation of Financial Statements – IAS 1, among other things, affects the presentation of owner changes in equity and comprehensive income. It requires the presentation of all nonowners changes in equity (comprehensive income) in one or two statements; either in a single statement of comprehensive income, or in an income statement and a statement of comprehensive income. On adoption at its effective date, the standard will result in a change in the presentation of the Group’s statement of operations and the statement of changes in equity.

!

Under the amendment to IAS 1 and 32 Financial instruments: Presentation – Puttable Instruments and Obligations Arising on Liquidation, certain financial instruments that currently meet the definition of a financial liability will be classified as equity because they represent the residual interest in the net assets of the entity. This standard is not expected to have any significant impact on the Group’s financial statements.

!

IAS 23 (Revised) – Borrowing costs removes the option of either capitalizing borrowing costs relating to qualifying assets or expensing these borrowing costs. The revised standard requires management to capitalize borrowing costs attributable to qualifying assets. Qualifying assets are assets that take a substantial time to get ready for their intended use of sale. The adoption of this revised standard at its effective date is not expected to have a material impact on the Group’s financial statements.

!

Revised IFRS 3 Business Combinations and consequential amendments to IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures. The revisions remove the scope exclusions for business combinations involving two or more mutual entities and business combinations in which separate entities are brought together to form a reporting entity by contract alone without the obtaining of an ownership interest. The standard is not expected to have any significant impact on the Group’s financial statements.

!

Amendments to IFRS 5 – Non-Current-Assets held-for-sale and discontinued operations resulting from the May 2008 Annual Improvements to IFRS are not expected to have any significant impact on the comparative financial statements on adoption at its effective date.


Page 10 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

2

ADOPTION OF THE NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d) New and Revised Standards and Interpretations that are relevant (Cont’d)

3

!

IFRS 7 – Financial Instruments: Disclosures, and a complementary Amendment to IAS 1, Presentation of Financial Statements – Capital Disclosures (effective from 1 January 2007). IFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. The amendment to IAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital.

!

IFRIC 14, IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction provides guidance on assessing the limit set in IAS 19 on any amount of the surplus that can be recognised as an asset. It also explains how a pension asset or liability may be affected by a statutory or contractual minimum funding requirement. The impact of any potential effects of IFRIC 14 and IAS 19 on the Group’s financial statements has not yet been determined.

!

IFRIC 15 – Agreements for the Construction of Real Estate addresses the accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The Interpretation addresses the determination of whether an agreement for the construction of real estate is within the scope of IAS 11, Construction Contracts or IAS 18, Revenue, and when revenue from the construction of real estate should be recognised. IFRIC 15 will not have any significant impact on the financial statements of the Group.

SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The Group’s financial statements have been prepared in accordance and comply with International Financial Reporting Standards (IFRS) and under the historical cost convention, except for the revaluation of freehold land and buildings and investment. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Group and entities controlled by the Group (its subsidiaries). Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination, (See below) and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.


Page 11 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the criteria for recognition under IFRS 3 (Business Combinations) are recognized at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations), which are recognized and measured at fair value less costs to sell. Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If, after reassessment, the Group’s interest in the net fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities exceed the cost of the business combination, the excess is recognized immediately in profit or loss. The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of assets, liabilities and contingent liabilities recognized. Property, plant and equipment Land and buildings held for use in the production or supply of goods and services, or for administrative purposes , are stated in the balance sheet at their revalued amounts being the fair value at the date of revaluation, less any subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation increase arising on the revaluation of such land and buildings is credited to capital reserves, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in the profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged to profit or loss to the extent that it exceeds the balance, if any, held in capital reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in capital reserve is transferred directly to revenue reserve. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Properties held for rental or administrative purposes or for purposes not yet determined, are carried at cost, less any recognized impairment loss. Costs include acquisition costs professional fees, and for qualifying assets borrowing costs capitalized in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Freehold land is not depreciated. Furniture, fixtures equipment and motor vehicle are stated at cost less accumulated depreciation and any accumulated impairment losses.


Page 12 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Property, plant and equipment (Cont’d) Depreciation is charged so as to write off the cost or valuation of assets other than land and properties under construction, over their estimated useful lives using the straight-line method. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. Investment property Investment property, which is property held to earn rentals and land held for indeterminable future use which is therefore considered to be held for future capital appreciation, is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains and losses arising from changes in the fair value of investment property are included in profit or loss in the period in which they arise. Intangible assets Expenditure on research activities is recognized as an expense in the period in which it is incurred. An internally-generated intangible asset arising from the Group’s project development plans is recognized if and only if all of the following have been demonstrated: ! ! ! ! ! !

the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Feasibility costs are transferred to inventory of land and development projects upon completion. Other internally-generated intangible assets are amortised on a straight-line basis over their useful lives. Where no internally-generated asset can be recognized, development expenditure is recognized as an expense in the period in which it is incurred. Computer software are being amortised over three years, licensing fee is expensed in the period in which it is incurred.


Page 13 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Investment in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate are not recognized. Any excess of the cost of acquisition over the Group’s share of net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. Interest in joint venture A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decision relating to the activities require the unanimous consent of the parties sharing control. Where a Group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognized in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognized when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amounts can be measured reliably. Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group’s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line by line basis. Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a subsidiary. Where the Group transacts with its jointly controlled entities, unrealized profits and losses are eliminated to the extent of the Group’s interest in the joint venture.


Page 14 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Retirement benefit costs The Group operates a defined benefit pension plan which is open to all permanent employees, the assets of which are held in a separate trustee-administered fund. The plan is funded by contributions from employees at the rate of 5% of pensionable salaries (with the option of contributing an additional 5%), and the employer at rates recommended by independent actuaries (currently 1.5% of pensionable salaries). The cost of providing benefits is determined using the Projected Unit Credit Method, with independent actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses that exceed 10 per cent of the greater of the present value of the Group’s defined benefit obligation and the fair value of plan assets is amortized over the expected average remaining working lives of the participating employees. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the amended benefits become vested. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service costs, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognized actuarial losses and past service costs, plus the present value of available refunds and reductions in future contributions to the plan. Financial instruments A financial instrument is any contract that gives rise to a financial asset to one entity and a financial liability to, or equity to, another entity. A financial asset is any asset that is: (a) (b) (c)

cash an equity instrument of another entity a contractual right: (i) (ii)

(d)

to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the Group; or

a contract that will or may be settled in the Group’s own equity instruments and is: (i) (ii)

a non-derivative for which the Group is or may be obliged to receive a variable number of the Group’s own equity instruments; or a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s own equity instruments. For this purpose the Group’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the Group’s own equity instruments.

A financial liability is any liability that is: (a)

a contractual obligation: (i) (ii)

to deliver cash or another financial asset to another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Group; or


Page 15 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Financial instruments (Cont’d) (b)

a contract that will or may be settled in the Group’s own equity instruments and is: (i) (ii)

a non-derivative for which the Group is or may be obliged to deliver a variable number of the Group’s own equity instruments; or a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s own equity instruments. For this purpose the Group’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the Group’s own equity instruments.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group recognizes financial assets or financial liabilities on its balance sheet only when the Group becomes a party to the contractual provisions of the instruments. Financial assets Financial assets are recognized and de-recognized using trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the asset within the timeframe established by market concerned and are initially measured at fair value plus transaction cost, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. The financial assets of the Group include cash resources and accounts receivable. Financial assets are classified into the category of: !

Loans and receivables

The classification depends on the nature and purpose of the financial assets and is determined at the time of acquisition. Loans and receivables Loans and accounts receivable that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate except for short term receivables, when the recognition of interest would be immaterial. Effective interest rate method The effective interest rate method is a method of calculating the amortized cost of a financial asset and allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction cost and other premiums or discounts) through the expected life of the financial asset, or, where appropriate a shorter period. Income is recognized on an effective interest basis for the instruments.


Page 16 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Financial instruments (Cont’d) Financial assets (Cont’d) Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition of the financial asset, the estimated future cash flow has been impacted. For certain categories of financial assets, such as accounts receivable, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments. For financial assets carried at amortized cost, the amount of the impairment is 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. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the umber of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. De-recognition of financial assets The Group de-recognizes a financial asset only when the contractual rights to the cash flows from the assets expire; or it transfers the financial asset and substantially all the risk and rewards to the ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risk and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and the associated liability for the amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes the collateralized borrowing for the proceeds received. Financial liabilities Financial liabilities are measured at fair value, net of transaction cost and subsequently measured at amortized cost using the effective interest rate method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. The financial liabilities of the Group are those classified as current liabilities, with the exception of provision and deferred tax liabilities. De-recognition of financial liabilities The Group de-recognizes financial liabilities when, and only when the Group’s obligations are discharged, cancelled or they expire.


Page 17 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that are in effect at the balance sheet date. Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates currently enacted which rates are expected to apply in the period when the liability is settled or the asset realized. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Inventory of land and development projects Inventory of land and development projects and unsold apartments is stated at the lower of cost and net realisable value. Costs comprise land acquisition, infrastructure works, construction costs, direct administrative expenses, interest charges less rent receivable during the interval between acquisition and construction. These costs are treated as inventory until disposal. The cost of land sales is determined based on the land area sold to the total land area available for sale. Net realizable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. Net realisable value is obtained from an inhouse valuation based on sample valuations supplied by independent valuators or on market value obtained by recent real estate sales.


Page 18 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Inventories Inventories consist of hotel supplies, consumable items and spare parts, and are stated at the lower of cost and net realizable value. Cost comprises direct materials and, where applicable, direct labour and those overheads that have been incurred in bringing the inventory to their present location and condition. Cost is calculated using the weighted average method or first-in-first-out basis. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Replacement reserve A replacement reserve for soft furnishings and minor equipment is credited with 5% of gross sales of a subsidiary. Cost of replacements is charged against the reserve as and when incurred. Deferred income Management fees related to projects funded by the Group will be amortised when the projects are completed and sold. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sale related taxes. Real estate trading income When a contract is recognised as a sale, the cost of fulfilling the remainder of the Group’s obligations under the contract is estimated and accrued. Sales and gross profit are recognised in the income statement when the following conditions are obtained: ! ! ! ! !

In the case of sale of apartments, a pre-checked sub-division plan has been deposited with the Registrar of Titles. A signed sale agreement exists. The refund period has expired and title has been transferred. The purchase price is fully paid or appropriate mortgage or other loan commitment has been obtained by the purchaser for the outstanding balance to be paid. Profit is recognised after taking into account the total outstanding commitment for infrastructure costs in relation to the land and units sold.

Interest income This is accrued on a time proportion basis by reference to the principal outstanding and at the effective interest rate applicable which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying value. Hotel operations This comprises gross income from room, food and beverage, communications and other sales. recognized on an accrual basis on performance of the underlying service or transaction.

Revenue is


Page 19 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Other revenue This comprises rental income, ticket sales, project management fees, water and sewage fees and is recognized on the accrual basis in accordance with the substance of the underlying contracts. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risk and rewards of ownership to the lessee. All other leases are classified as operating leases. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct cost incurred in negotiating and arranging an operating lease is added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term. Foreign currencies The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Jamaican dollars, which is the functional currency of the Group, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the Group, transactions in currencies other than the Group’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in profit or loss in the period in which they arise except for: !

exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency borrowings;

!

exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation and which are recognized in the foreign currency translation reserve and recognized in profit or loss on disposal of the net investment.

Interest Aggregate interest for the year is allocated as follows: -

to projects on the basis of actual interest incurred on their net cash flow. in the income statement, the remainder after above allocations.

Provisions Provisions are recognized when the Group has a present obligation as a result of past events and it is probable that the Group will be required to settle that obligation. Provisions are measured at the management’s best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.


Page 20 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Goodwill Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity recognized at the date of acquisition. Goodwill is initially recognized as an asset at cost and is subsequently remeasured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

4

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.


Page 21 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

4

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d) Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Employees’ benefits As disclosed in Note 10, the Group operates a defined benefit pension plan. The amounts shown in the balance sheet of an asset of approximately $242.867 million ($164.43 million) in respect of the defined benefits plan is subject to estimates in respect of periodic costs which costs would be dependent on returns on assets, future discount rates, rates of salary increases and inflation rate in respect of the pension plan. The estimated return on pension assets assumption is determined by considering long-term historical returns, asset allocation and future estimates of long-term investment returns. The Group estimates the appropriate discount rate annually which rate is used to determine the present value of estimated cash outflows expected to be required to settle the pension obligation. To determine the appropriate discount rate in the absence of high quality corporate bonds, the interest rates on government bonds that have maturities approximating the related pension liabilities were considered. Fair value of property, plant and equipment and investment properties Included in the balance sheet are amounts of $10,322,743 million (2006: $4,741,884 million) and $13,493,665 million (2006: $6,273,769 million) representing the fair values of property, plant and equipment and investment properties respectively. In making its judgement management’s best estimate of their fair value was based on current prices of properties of different nature, condition or location adjusted to reflect those recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions occurred at those prices. Critical judgement in applying accounting policies The following are the critical judgements that management have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognized in the financial statements. Investments in joint ventures During the previous financial year, on the basis of the market value of the major asset of Ackendown, a recently constructed hotel property, as determined by independent valuators, it was concluded that impairment of the investment in the joint venture had occurred. The Group recorded an impairment loss against the carrying amount of its investment in the joint venture in prior year by writing down its value by the same percentage that the impairment loss in the joint venture bears to the book value of the ordinary shares. The asset was not revalued during the year ended March 31, 2007. Deferred tax asset of $137.359 million has been provided for in these financial statements in regard to the impairment loss.


Page 22 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

4

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d) Recoverability of internally-generated intangible asset The Group has recognized as an asset feasibility costs directly associated with land and project development plans. During the year, management reconsidered the recoverability of the asset, which is included in its balance sheet at $73.727 million. Detailed analysis has been carried out and management is confident that the carrying amount of the assets will be recovered in full. The situation will be closely monitored, and adjustments made in future periods, if market activity indicates that such adjustments are appropriate. Provision for future infrastructure cost on land sold Included in the balance sheet is an amount for $212,868 million representing management’s estimate of costs to be incurred for infrastructure in relation to land sold. In making its judgement, management considered the detailed criteria for recognition of a provision set out in IAS 37. The provision is based on the proportionate amount of the following in relation to land sold: i) ii) iii) iv)

Estimates to complete contracts already being undertaken by the Group; The estimates costs to carry out known infrastructure works for which contracts have not yet been let; Estimated costings have taken into account labour and material prices existing up to and during the month of March 2006; and Where necessary, allowances have been made for the likely effect of increases due to interest costs, labour and material escalation projected for the years that ensue.

Management is satisfied that all costs to complete that can be ascertained from the information described above, have been brought to account and that the provision for future infrastructure cost on land sold is reasonable.


Page 23 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007 5

PROPERTY, PLANT AND EQUIPMENT Freehold Land $’000 At cost or valuation April 1, 2005 Additions Transfers Adjustments Revaluation adjustments Disposals

Freehold Buildings $’000

Leasehold Properties $’000

Motor Vehicles $’000

Furniture, Fixtures & Fittings $’000

Sewerage Treatment Plant $’000

Capital Work-in Progress $’000

Total $’000

1,662,334 ( 55,819) 231,183 -

2,746,507 531 245 212,695 ( 3,000)

52,107 2,085 -

40,125 14,602 ( 1,742) ( 1,307)

553,233 102,129 ( 937) ( 42)

36,533 -

25 15,249 ( 531) -

5,090,864 134,065 ( 55,819) ( 2,434) 443,878 ( 4,349)

1,837,698 ( 63,110) 5,328,601 ( 176)

2,956,978 597 ( 7,685) 1,818 322,358 ( 1,544)

54,192 ( 227) -

51,678 887 1,192 ( 6,895)

654,383 31,246 ( 184) ( 888)

36,533 -

14,743 4,835 -

5,606,205 37,565 ( 70,795) 2,763 5,650,959 ( 9,667)

March 31, 2007

7,103,013

3,272,522

53,965

46,862

684,557

36,533

19,578

11,217,030

Classified as follows: At cost At valuation

7,103,013

52,792 3,219,730

53,965 -

46,862 -

684,557 -

36,533 -

19,578 -

894,287 10,322,743

7,103,013

3,272,522

53,965

46,862

684,557

36,533

19,578

11,217,030

3,816 58,108 57,720) -

-

29,158 4,682 ( 877) ( 954) ( 182)

422,883 32,740 ( 899) ______

15,239 2,701 -

-

( ( ( (

4,204 68,913 36,197) 654)

-

31,827 6,275 ( 6,312)

454,724 42,820 ( 8) ( 362)

17,940 2,701 -

-

508,695 120,709 ( 8) ( 36,197) ( 7,328)

36,266

-

31,790

497,174

20,641

-

585,871

April 1, 2006 Additions Transfers Adjustment Revaluation Disposals

Depreciation April 1, 2005 Charge for year Transfers Adjustments Revaluation adjustments On disposals

-

April 1, 2006 Charge for year Adjustments Revaluation adjustments On disposals

-

March 31, 2007

-

(

( (

471,096 98,231 877) 1,853) 57,720) 182)

Net book value March 31, 2007

7,103,013

3,236,256

53,965

15,072

187,383

15,892

19,578

10,631,159

March 31, 2006

1,837,698

2,952,774

54,192

19,851

199,659

18,593

14,743

5,097,510


Page 24 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

5

PROPERTY, PLANT AND EQUIPMENT (Cont’d) The following rates are used for depreciation of property, plant and equipment: Freehold buildings Leasehold improvements Motor vehicles Furniture, fixtures and equipment Sewerage treatment plant Loose tools

-

10 - 60 years 3½ years 5 years 5 - 15 years 10 years 10 years

Freehold Lands and buildings are carried at fair value. An independent valuation of the Group’s land and building was performed by L. C. Latouche, Real Estate dealers Chang, Rattray and Company and Property Consultants Ltd. Land revalued for Runaway Bay Water Company (a subsidiary) was performed by the Urban Development Corporation in house valuators. The effective date of all valuations was as at March 31, 2007. 6

INVESTMENT PROPERTIES (a)

Fair value of investment properties This represents open market value determined by qualified internal valuators. $’000 Fair value Balance at April 1, 2005 Additions Transfers Disposals Increase in fair value during the year

4,994,646 18,832 55,819 ( 143,618) 1,348,090

Balance at April 1, 2006 Additions Transfers Disposals Increase in fair value during the year

6,273,769 80 44,902 ( 101,170) 7,276,087

Balance at March 31, 2007

13,493,668

The fair value of the Group’s Investment property at March 31, 2007 has been arrived at on a basis of a revaluation carried out at that date by L.C. Latouche, Real Estate dealers and Chang Rattray and Company and Property Consultants Ltd. The valuations were arrived at by reference to market evidence of transaction prices for similar properties. (b)

Investment Properties (Land) Comprise primary projects which relate to land held for public purposes or retained for future development.


Page 25 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

6

INVESTMENT PROPERTIES (Cont’d) (c)

Investment Properties (Buildings) Comprises commercial, office and residential buildings held for long-term rental and are not occupied by the Group.

7

(d)

The property rental income earned by the Group from its investment properties all of which are leased under operating leases amounts to $198.154 million (2006: $160.754 million). Direct operating expenses arising in the investment properties during the period amount to $98.367 million (2006: $89.344 million).

(e)

During the year certain properties previously included in Secondary Projects, classified as Inventory of land and development projects and carried at cost or a nominal value were transferred to investment properties as it was deemed that such properties were not in a developmental stage, hence should be correctly classified as investment properties. The revaluation increase on such properties totalled $4,394.6 million.

INTANGIBLE ASSETS Balance at April 1, 2005 Additions during the year Transfer during the year

$’000 62,454 6,480 -

Balance at April 1, 2006 Additions during the year

68,934 4,793

Balance at March 31, 2007

73,727

This represents feasibility costs on projects to be capitalized upon completion of projects. 8

INVESTMENTS IN ASSOCIATES (a)

Principal activities in associates

Name of associate

Place of InGroup (or registration) and operation

Proportion of ownership interest

Proportion of voting power held

Seacastles Limited

Jamaica

35

35

Construction and rental

Rutland Point Beach Resorts Limited

Jamaica

35

35

Construction and rental

Hellshire Marble Company Limited

Jamaica

40

40

Non-trading

Portmore Commercial Development Company Limited

Jamaica

49

49

Operation of shopping and commercial centre

Bloody Bay Hotel Development Limited

Jamaica

50

50

Hotel operation

Principal activity


Page 26 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

8

INVESTMENTS IN ASSOCIATES (Cont’d) (b)

Shareholding and other transactions in associates Percentage Holdings Shares at cost: Seacastles Limited Rutland Point Beach Resorts Limited Hellshire Marble Company Limited Portmore Commercial Development Co. Ltd. Bloody Bay Hotel Development Limited Seamist Limited Kingston Restoration Company Limited

2006 $’000

1 1 12,000 65,923 194,794 -* 25

1 1 12,000 65,923 194,794 -* 25

Cost of investment

272,744

272,744

Loans

104,308

104,308

Advances to: Seacastles Limited Rutland Point Beach Resorts Limited Hellshire Marble Company Limited Portmore Commercial Development Co. Ltd. Bloody Bay Hotel Development Limited Seamist Limited Less: Provision for losses

Share of post acquisition profits Increase in fair value of investment properties Total investments in associated companies

35 35 40 49 50

2007 $’000

-

34,855 49,047 65,381 ( 383) 114,226 1,193 264,319 ( 124,498)

(

34,392 51,183 65,381 383) 98,016 1,193

249,782 ( 124,498)

139,821

125,284

1,154,972

698,875

17,815

8,690

1,689,660

1,209,901

* Investment of less than $1,000. Summarized audited financial information in respect of the Group’s associates are as follows: 2007 $’000 Total assets Total liabilities

2006 $’000

3,654,306 ( 626,897)

2,488,436 ( 500,121)

Net assets

3,027,409

1,988,315

Group’s share of associate’s net assets

1,040,457

1,516,512

Revenue

1,052,275

321,185

Profit for the period

957,580

132,965

Group’s share of associate’s profit for the period

471,262

109,994


Page 27 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

9

INVESTMENTS IN JOINT VENTURES The Group has the following interest in Joint Ventures: (a)

Investment in Ackendown Newtown Development Company Limited is based on the Heads of Agreement between the three participants to the Joint Venture. The other participants are National Investment Bank of Jamaica Limited and Gorstew Limited. Once shares are fully allotted to all parties, the Group’s shareholding will be 37.45%. The company was incorporated for the purpose of constructing a 360 room key hotel under the Group South West Coast Development Plan (in the parish of Westmoreland).

(b)

An 8.34% equity investment in Port Royal Development Company.

(c)

Investment in Seaside at Rose Hall is based on the Heads of Agreement between the Group and Rose Hall Development Limited in which the Group has a shareholding of 60%. The company was incorporated for the purpose of developing 29 acres of land (contributed by the Group) at Rose Hall, St. James.

(d)

The total investments comprise: 2007 $’000 Ackendown Newtown Development Company Ltd. Stated capital Impairment loss

497,828 ( 412,077)

2006 $’000 527,154 (412,077)

85,751 596,622

115,077 479,296

682,373

594,373

18,137

18,137

Seaside at Rosehall Initial investment Accumulated share of profits

287,226 707,647

287,226 9,732

Loans receivable/(payable)

994,873 28,213

296,958 ( 98,417)

Loans

Port Royal Development Company

Total investment

1,023,086

198,541

1,723,596

811,051

During the previous financial year, on the basis of the market value of the major asset of Ackendown, a recently constructed hotel property, as determined by independent valuators, it was concluded that impairment of the investment in the joint venture had occurred. The Group recorded an impairment loss against the carrying amount of its investment in the joint venture in prior year by writing down its value by the same percentage that the impairment loss in the joint venture bears to the book value of the ordinary shares. The asset was not revalued during the year ended March 31, 2007.


Page 28 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

10

RETIREMENT BENEFIT ASSET The Group operates a defined benefit pension plan. The plan is funded by contributions from the employee at a rate of 5% of pensionable salaries. The employer contributes to the plan at rates determined periodically by independent actuaries currently 1.5% of future pensionable salaries. Under the plan retirement benefits are determined on a prescribed basis and are payable at a rate of 2% of final three year average salary times the employees number of years membership in the plan, the maximum being 33 years. If the employee’s service is terminated before retirement age, the employee may leave his contributions to accumulate at credited interest thereon to provide a deferred pension commencing at normal retirement date or elect a cash return of his contributions together with credited interest to the date of termination. No other post-retirement benefits are provided. The most recent valuation of plan assets and the present value of the defined benefit obligation at December 31, 2006 was carried out at May 18, 2007 by Mr. Phillip M. Whittaker, Fellow of the Institute of Actuaries, (Coke & Associates/Eckler Partnership). The Actuaries have confirmed that there was no material change in respect of the valuation of the plan between December 31, 2006 and March 31, 2007. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method. The actuarial valuation showed that the market value of plan assets was $1,112,082 million (2006:$932,743 million) and that the actuarial valuation of these assets represented 121% (2006:170%) in excess of the present value of the obligation. (a)

The principal assumptions used for the purpose of the actuarial valuations were as follows: Valuation at

Gross discount rate Expected return on assets Expected rate of salary increases Future pension increases Inflation (b)

2007 %

2006 %

12.00 9.50 9.50 2.50 8.00

12.50 10.00 10.00 2.50 8.00

Amounts included in the balance sheet in respect of the plan are as follows: 2007 $’000 Present value of funded obligation Fair value of plan assets Unrecognised net actuarial gains Asset not recognized due to limitation in paragraph 58(b) of IAS 19 Net asset in balance sheet

2006 $’000

( 490,420) 1,127,554

(345,304) 932,741

637,134 ( 240,107)

587,437 (241,312)

( 154,160)

(181,695)

242,867

164,430


Page 29 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

10

RETIREMENT BENEFIT ASSET (Cont’d) (c)

Amounts recognized in income in respect of the plan are as follows: 2007 $’000

(d)

Current service cost - employer Interest costs Expected return on plan assets Recognized actuarial losses

7,134 43,216 ( 84,196) ( 6,572)

11,214 37,990 ( 74,065) ( 4,424)

Total included in staff cost Increase (Reduction) in income due to limit

( 40,418) ( 604)

( 29,285) 911

Net pension expense

( 41,022)

( 28,374)

Movements in the net assets in the year were as follows: 2007 $’000

(e)

2006 $’000

Balance, April 1 Amounts charged to income Contributions Increase (Reduction) in income due to limit

164,430 41,022 11,168 26,247

145,589 28,374 7,497 ( 17,030)

Balance, March 31

242,867

164,430

Changes in the present value of the defined benefit obligation are as follows: 2007 $’000 Opening defined benefit obligation Service cost Employees Employer Interest cost Actuarial gains Benefits paid Closing defined benefit obligation

(f)

2006 $’000

2006 $’000

345,304 22,350 7,134 43,216 84,031 ( 11,615)

291,911 13,343 11,214 37,990 15,928 ( 25,082)

490,420

345,304

2007 $’000

2006 $’000

Changes in the fair value of plan assets are as follows:

Opening fair value of plan assets Adjustment to opening fair value of plan assets Contributions Employees Employer Expected return on plan assets Benefits paid Actuarial gain Closing fair value of plan assets

932,741 19,025 11,168 84,196 ( 11,615) 92,039

778,062 ( 4,378) 15,543 7,497 74,065 ( 25,082) 87,034

1,127,554

932,741


Page 30 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

10

RETIREMENT BENEFIT ASSET (Cont’d) (g)

Retirement benefit experience adjustments 2004 $’000

2005 $’000

2006 $’000

2007 $’000

Present value of defined benefit obligation Fair value of plan assets

213,470 (611,209)

284,780 (764,327)

341,396 (919,737)

Surplus in the plan

(397,739)

(479,547)

(578,341)

597,838

Experience adjustment to plan liability

(

8,516

47,691

19,985

108,252

90,034

61,223

Experience adjustment to plan assets

6,026) 34,992

494,600 (1,092,438)

In accordance with the transitional provision for Amendments of IAS 19 Employee benefits in March 2004, the discharge above is determined prospectively from the 2004 Reporting Period. The Group expects to make contribution of $9.879M to the deferred benefits plan during the next financial year. (h)

The fair value of plan assets at the balance sheet date is analysed as follows:

Equity fund Fixed income fund Mortgage and real estate Other assets

11

2007 $’000

2006 $’000

57,079 819,307 216,049 35,119

58,749 690,987 183,005 -

1,127,554

932,741

2007 $’000

2006 $’000

AVAILABLE-FOR-SALE INVESTMENTS

Government of Jamaica securities maturing after 12 months Government of Jamaica securities maturing within 12 months

-

-

123,063

74,256

123,063

74,256

The weighted average effective interest rate on Government of Jamaica securities is 11.75%. Included in the investment is interest receivable of $ 3,199,000 (2006:$1,775,000).


Page 31 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

12

INVENTORY OF LAND AND DEVELOPMENT PROJECTS (a)

Inventory of land and development projects (Secondary projects) comprise primary land which is currently being developed as well as housing units available for sale. The balance is shown net of deferred income of which represents management fees charged on projects funded by the Group. This deferred income will be amortised when the projects are completed. $’000 Balance at April 1, 2006 Revenue deferred in respect of management fees charged on projects charged on projects funded by the Group

30,710 341 31,051

(b)

The inventory of land and development projects is stated as follows:

2007 $’000 Inventory at cost Provision for the excess of cost of certain projects over their net realisable value

2006 $’000

2,684,689 2,684,689

2,105,684 (

2,404) 2,103,280

Management’s estimate of net realisable value which was based on independent valuations during 2007, was $1.860 billion (2006:$7.294 billion) in excess of cost. Management has not revalued land classified as development projects. 13

INVENTORIES

Food and beverage China and glassware Spare parts and maintenance materials Tools

2007 $’000

2006 $’000

15,428 1,642 9,531 17,891

13,031 1,672 7,745 13,314

44,492

35,762


Page 32 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007 0 14

TRADE AND OTHER RECEIVABLES These comprise: 2007 $’000 Amount advanced on specific projects Trade receivables Mobilisation advances Prepayments Interest receivable Others Real estate sales receivable Current portion of long-term receivable

2006 $’000

118,311 224,654 17,544 65,251 13,518 435,811 203,679 -

321,845 223,981 117,176 59,189 136,940 128,021 200,070 147

1,078,768

1,187,369

The average credit period in respect of trade receivables is 30 days. An allowance has been made for estimated irrecoverable amounts of J$250.842 million (2007: J$402.124 million). This allowance has been determined by reference to past default experience. 15

OWED TO REGIONAL COMPANIES The regional companies are: (a) (b)

Kingston Waterfront Redevelopment Company Limited St. Ann Development Company Limited

Ministry Paper dated February 27, 1968 stated that the companies shown at (a) and (b) were incorporated to initiate primary development in their respective areas pending the establishment of the Group by Act of Parliament. It is intended that these companies should operate as wholly-owned regional agents of the Group. At March 31, 2007 the shares in the regional companies had not been transferred to the Group. The net deficit in the income statement at March 31, 2007 aggregated $3.513 million (2006:$3.513 million) which amounts have not been incorporated in these financial statements. 16

CASH AND CASH EQUIVALENTS For the purpose of the cash flow statement, cash and cash equivalents include cash on hand and in banks and investment in short-term instruments. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement can be reconciled to the related items in the balance sheet as follows:

Cash and bank balances

2007 $’000

2006 $’000

1,692,244

1,388,447


Page 33 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

17

CAPITAL RESERVE (a)

This comprises:

Surplus on valuation of fixed assets In prior years Land and building Deferred tax liability Deduct: Transfer to revenue reserve in respect of exchange losses on foreign currency loans utilized for erecting and/or acquiring the assets revalued In prior years

2006 $’000

4,442,310 5,505,012 ( 83,583)

4,073,665 436,135 ( 90,139)

9,863,739

4,419,661

(

17,869)

(

17,869)

Transfer to revenue reserve, in respect of assets sold In prior years

( 501,610)

( 501,610)

Transfer to revenue reserve in respect of gains realised through depreciation charges against income In prior years In current year

( 488,337) ( 36,617)

( 429,329) ( 36,617)

( 524,954)

( 465,946)

Share of capital reserves of associated companies Unrealised surplus on land sold to subsidiaries Total (b)

2007 $’000

386,515 4,967

386,773 4,967

9,210,788

3,825,976

36,617

36,617

36,617

36,617

The net transfer to revenue reserve is made up as follows: Depreciation charges against income The Parent Total

18

GENERAL RESERVE During 1998 the board of directors of the Group made a decision to establish a reserve account for the purpose of funding projects approved by the Government of Jamaica from time to time. The interest earned on a fixed deposit which was established from the proceeds from the sale of a hotel property is transferred to the general reserve.


Page 34 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

19

REVENUE RESERVE This comprises: 2007 $’000 The Corporation Operating profits Net foreign exchange gains Increase in fair value of investment properties Its subsidiaries and associated companies: Operating profits Net foreign exchange gains Increase in fair value of investment properties

Negative goodwill arising on acquisition of subsidiaries has to be written back

20

2006 $’000

6,108,289 315,459 8,894,474

5,905,377 274,262 1,296,681

15,318,222

7,476,320

2,704,842 278,270 1,042,171

2,318,463 273,824 666,734

4,025,283

3,259,021

19,343,505

10,735,341

62,080

62,080

19,405,585

10,797,421

ADVANCES TO THE GOVERNMENT OF JAMAICA This comprises: 2007 $’000 Advances to the Government of Jamaica (Note 20(a)) Real estate receivable (Note 20(b))

93,674

2006 $’000 93,674

199,250

199,250

292,924

292,924

The amounts in Notes 20(a) and 20(b) are on account of distributions to the Government and arose from: (a)

Hotel divestment proceeds transferred to the Government of Jamaica.

(b)

Amounts receivable from the sale of real estate to the Government of Jamaica.

(c)

The Group received J$83.292 million, the equivalent of US$2.2 million, from the Government of Jamaica which it advanced to Port Royal Development Company Limited on account of the purchase of shares. The shares will be held by the Group in trust for the Accountant General. This matter has not been reflected in these financial statements except by way of this note.


Page 35 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

21

MINORITY INTERESTS IN SUBSIDIARY COMPANIES Minority interests are in respect of shares in the following subsidiary companies:

Ordinary and preference shares in: Pegasus Hotels of Jamaica Limited Kingston Waterfront Hotel Company Limited New Kingston Hotel Limited Montego Freeport Limited

Share of capital reserve Add: Share of profits in subsidiary companies attributable to minority shareholders' interest

22

2007 $'000

2006 $'000

48,307

48,307

334 1 50,676

334 1 50,676

99,318

99,318

949,189

949,189

1,048,507

1,048,507

460,308

290,112

1,508,815

1,338,619

LONG-TERM BORROWINGS

Non-Government Loans Unsecured Secured Government and Government Agency Loans Secured Less: Amounts due for settlement within 12 months shown under current liabilities

2007 $’000

2006 $’000

38,542

54,461

38,542

54,461

235,134

-

273,676

54,461

253,150

16,500

20,526

37,961


Page 36 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

22

LONG-TERM BORROWINGS (Cont’d) The loans were arranged at fixed interest rates. The other principal features of the Group borrowings are as follows: Non-Government Loans Summary of terms of repayment:

Interest Rate (%) 13

2007 $’000

2006 $’000

20,526

54,461

20,526

54,461

2007 $’000

2006 $’000

Repayable Repayable by installment Until 2010

Government and Government Agency Loans Summary of terms of repayment:

Year-end Interest Rate (13%) Government agency Non-Government agency

23

Repayable 2008 2008

235,134 18,016

16,500

253,150

16,500

2007 $’000

2006 $’000

At April 1 Additional provision for the year Utilisation of provision

180,901 31,967 -

140,694 40,207 -

At March 31

212,868

180,901

PROVISION FOR FUTURE INFRASTRUCTURE COST ON LAND SOLD


Page 37 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

24

DEFERRED TAX LIABILITIES Deferred tax is calculated on all temporary differences under the liability method using a tax rate of 33!"# Deferred tax that would be payable has not been provided for on operating profits (losses) and fair value increases of investment properties of associated companies, to the extent that such earnings are permanently reinvested. Such undistributed earnings totalled $9.456 billion (2006: $8.690 billion). 2007 $’000

2006 $’000

1,554,072 ( 433,450)

1,337,322 ( 449,435)

Analysis for financial reporting purposes Deferred tax liabilities Deferred tax assets Net position

1,120,622

887,887

The movement during the year in the Group’s deferred tax position was as follows:

At April 1 Charged (credited) to income for the year Charged to equity for the year At March 31

2007 $’000

2006 $’000

887,887 112,616 120,119

912,373 (114,625) 90,139

1,120,622

887,887


Page 38 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007 24

DEFERRED TAX LIABILITIES (Cont’d) The following are the major deferred tax liabilities and assets recognized by the Group and the movements thereon during the current and prior periods. Deferred Tax Liabilities Retirement Benefit Asset $’000

Revaluation Surplus $’000

Interest Receivable $’000

Fair value Adjustments $’000

Accelerated Tax Depreciation $’000

Unrealized Foreign Exchange Gains $’000

Total $’000

At April 1, 2005 Charged (credited) to income for the year Charged to equity for the year

866,841

48,394

41,418

194,013

3,005

4,177

7,390

6,258

5,818

73,297

( 368)

( 3,060)

89,335

90,139

-

-

-

-

-

90,139

At April 1, 2006 Charged (credited) to income for the year Charged to equity for the year

964,370

54,652

47,236

267,310

2,637

1,117

1,337,322

21,048

26,158

( 40,281)

89,188

93

425

96,631

119,520

-

-

-

-

80,810

6,955

2,730

1,542

At March 31, 2007

1,104,938

599 357,097

Deferred Tax Assets Depreciation charges in excess of Capital Allowances $’000

Retirement benefit obligations $’000

At April 1, 2005 (Charged) credited to income for the year

168,472

158

17,386

At April 1, 2006 (Charged) credited to income for the year

185,858

At March 31, 2007

194,647

8,789

Tax losses carried forward $’000

Unrealised exchange gains $’000

Accrued vacation pay $’000

Impairment loss on joint venture $’000

Total $’000

66,753

-

10,092

-

245,475

( 12)

50,092

-

(

137,359

203,960

146

116,845

-

9,227

137,359

449,435

-

( 28,247)

-

3,473

-

( 15,985)

146

88,598

-

12,700

137,359

433,450

865)

1,157,848

120,119 1,554,072


Page 39 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

25

TRADE AND OTHER PAYABLES 2007 $’000

2006 $’000

These comprise: Amounts to be disbursed on specific projects Trade payables Contract payables and retentions Deposits on sale of real estate Deferred income Accruals Others

26

258,015 67,881 53,689 605,807 136,192 102,484 235,618

370,330 68,863 7,548 202,279 136,192 145,969 106,128

1,459,686

1,037,309

REVENUE Analyses of the Group’s gross income and gross operating profits are as follows: (a)

Gross income This represents the gross value of Group sales to third parties and comprises:2007 $’000 Hotel operations Real estate sales Lease income Ticket sales Car park income Agricultural operations Project management fees Management fees Water and sewage Other operations Other interest income

2006 $’000

739,975 356,773 198,154 617,923 38,301 1,483 28,565 97,349 59,449 285,476 57,892

658,433 161,893 160,754 555,515 61,022 1,741 132,086 97,344 76,856 109,357 19,740

2,481,340

2,034,741


Page 40 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

26

REVENUE (Cont’d) (b)

Gross operating profit 2007 $’000 Hotel operations Real estate trading Rental income net of related expenses Ticket sales Car park income Agricultural operations Project management fees Management fees - other - joint venture Water and sewage Profit on other operations Other interest income

27

2006 $’000

462,965 138,742 204,559 304,994 15,122 ( 15,924) ( 461,012) 97,349 ( 1,581) 28,088 210,897 57,892

404,822 29,293 78,454 266,709 19,402 ( 13,631) (196,359) 23,359 ( 14,855) 48,143 129,997 19,740

1,042,091

795,074

PROFIT (LOSS) FROM OPERATIONS 2007 $’000

2006 $’000

708,850 120,709 -

725,866 98,350 -

The profit (loss) from operations for the year has been arrived at after charging: Employee benefit expense Depreciation of property, plant and equipment Transfer tax on capital distribution 28

FINANCE COSTS 2007 $’000 Interest on bank overdrafts and loans Interest on mortgage loans

29

2006 $’000

7,390 -

4,241 2,333

7,390

6,574

INCOME FROM INVESTMENTS 2007 $’000 Interest on bank deposits Foreign exchange gains on deposits

2006 $’000

49,803 24,107

94,979 51,238

73,910

146,217


Page 41 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

30

INCOME TAX EXPENSE (a)

Total charge for the year comprises:

Income tax at 33!% of taxable income Deferred tax adjustment (Note 24)

2007 $’000

2006 $’000

105,165 112,616

44,935 (114,625)

217,781

( 69,690)

Subject to agreement with the Commissioner, Taxpayer Audit and Assessment, tax losses of the Corporation and its subsidiary companies amounting to $366.32 million (2006: $582.950 million) are available for set-off against future taxable profits of those companies. No deferred tax asset has been recognized in respect of $236.52 million (2006: $12.352 million) of these losses due to the unpredictability of future profit streams. (b)

The charge for the year can be reconciled to the profit per the statement of income as follows:

Profit before taxation Tax at domestic income tax rate of 33!" Tax effect of expenses that are not deductible for tax purposes Tax effect of share of profit from associates Tax effect of share of profit from joint venture Tax effect on fair value gains on investment property Other Total tax charge for the year 31

2007 $’000

2006 $’000

8,848,016

1,046,711

2,949,339 2,596 ( 157,087) ( 232,638) (2,303,579) ( 40,850)

348,904 9,738 ( 109,994) 3,244 ( 331,113) 9,531

217,781

(

69,690)

INCOME ATTRIBUTABLE TO THE PARENT CORPORATION The profit attributable to the members of the Group is reflected in the financial statements of the Corporation on the equity basis and comprises profits (losses) of: 2007 2006 $’000 $’000 The Parent The subsidiary companies Associated companies

7,801,039 357,934 471,262

685,502 320,905 109,994

8,630,235

1,116,401


Page 42 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

32

RELATED PARTIES TRANSACTIONS Transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. Material transactions with related parties were as follows: Associates 2007 $’000 Advances receivable (net) Advances payable Loans

140,204 ( 383) ( 104,308) 35,513

2006 $’000 125,607 ( 383) ( 75,808) 49,416

Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows:

Short term benefits 33

2007 $’000

2006 $’000

45,463

41,705

NON-CASH TRANSACTIONS The following non-cash transactions are not reflected in the statement of cash flows:

34

(a)

Capital reserve increased by $5,384.812M and of this amount $5,407.203M was eliminated against property, plant and equipment. This resulted from the revaluation of property, plant and equipment in the Group.

(b)

The increase of $232.735M in deferred tax liabilities comprises deferred tax on the revaluation surplus $120.119M and $112.616M charged against net profit.

FAIR VALUES OF FINANCIAL INSTRUMENTS Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. A market price, where an active market (such as a recognized stock exchange) exists, is the best evidence of the fair value of a financial instrument. The fair values presented in these financial statements have been estimated using present value, appropriate valuation methodologies and other estimation techniques based on market conditions existing at balance sheet date. The values derived using these techniques are significantly affected by underlying assumptions concerning both the amounts and timing of future cash flows and the discount rates used. The following methods and assumptions have been used: (i)

The fair values of cash and available-for-sale investments, accounts receivable and accounts payable and other assets and liabilities less any credit adjustments maturing within twelve months are assumed to approximate their carrying amount because of the short-term maturity of these instruments.


Page 43 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

34

35

FAIR VALUES OF FINANCIAL INSTRUMENTS (Cont’d) (ii)

The fair value of investments which comprises investments in associated companies is equal to the value as stated in these financial statements.

(iii)

Long-term liabilities include fixed rate, Government and non-government loans. These are concessionary loans, some with no repayment dates and would not be available to other organizations. Therefore fair values have not been computed.

RISK MANAGEMENT (a)

Credit risk Financial instruments contain an element of risk that the other obligators may be unable to meet the terms of agreements. Direct credit risk represents risk of loss resulting from the obligators’ default in relation to assets on the balance sheet. In respect of cash and short-term investments, the Group minimizes this risk by limiting its obligators to major banks. Financial instruments which potentially subject the Group to concentrations of credit risk, primarily consist of trade receivables, since amounts advanced on specific projects are receivable from the funds received from the Government of Jamaica and mobilization advances are receivable from amounts payable to the contractors. However, concentration of credit risk with respect to trade receivables are limited because the Group’s primary customers are government-owned companies.

(b)

Cash flow and fair value interest rate risk Cash flow risk is the risk that future cash flows of a financial instrument will fluctuate due to changes in the market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rate on its financial position and cash flows. Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise. There are no bank loans and related party loans are interest free. The Group is therefore not exposed to fair value interest rate risk. The Group manages its cash flow risk through budgetary measures, ensuring, as far as possible, that fluctuations in cash flows relating to monetary financial assets and liabilities are matched, to mitigate any significant adverse cash flows. Detailed below is the carrying amounts of interest rate sensitive financial instruments based on maturity dates: Within 3 months $’000

3 -12 months $’000

1 - 5 years $’000

Total $’000

Non-Government as at March 31, 2007

______

18,016

20,526

38,542

Non-Government as at March 31, 2006

-

8,979

45,482

54,461


Page 44 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

35

RISK MANAGEMENT (Cont’d) (b)

(Cont’d) The weighted average interest rate for rate sensitive financial instruments is as follows:

Non-Government loans (c)

Within 3 months %

3 -12 months %

1 - 5 years %

-

8

8

Foreign currency risk The Group is exposed to foreign currency risks on transactions that are denominated in currencies other than the Jamaican dollar. The Group’s net foreign currency assets as at year-end were as follows:

Cash and short-term investments Other assets

(d)

2007 US$’000

2006 US$’000

121,654 2,303

11,798 1,984

123,957

13,782

Market risk Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices whether those changes are caused by factors specific to the individual security or its issuer or factors affecting all securities traded in the market. The Group has no exposure to market risk as there are no traded securities.

(e)

Liquidity risk Liquidity risk, also referred to as funding risk, is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at, or close to, its fair value. Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, and the availability of funding through an adequate amount of committed facilities. Due to the dynamic nature of the underlying business, the management of the Group maintains an adequate amount of its financial assets in liquid form to meet contractual obligations and other recurring payments.

36

OTHER DISCLOSURES - EMPLOYEES 2007 $’000

2006 $’000

Staff costs incurred during the year in respect of employees were: Senior executives emoluments Salaries and wages Pension contributions Statutory contributions Other

41,860 576,941 28,127 54,849 7,073

32,590 609,637 28,780 43,262 11,597

708,850

725,866


Page 45 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

37

COMMITMENTS AND CONTINGENCIES (a)

Commitments The Group has estimated cost of $24.309 million (2006: $897.773 million) to complete operational projects. Of this amount, $24.309 million has been provided for in these financial statements in accounts payable.

(b)

Contingencies - litigation Gorstew Limited and Sandals Whitehouse Management Limited claimed against UDC and NIBJ, US$41.5M for project overruns re Ackendown Development. In addition the claimants also claimed against UDC and Ackendown special damages in the sum of US$28.9M with respect of negligent misstatement, breach of warranty, breach of lease agreement and breach of technical service agreement. The entity’s lawyer, Livingston, Alexander, Levy considers that th the Group has a good defence to the claim and a defence has accordingly been filed on 19 January 2006. Accordingly no provisions have been made regarding the above matters.

38

OPERATING LEASE ARRANGEMENTS Property rental income earned during the year was $198.154 million (2006: $160.754 million). At balance sheet date the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second and third years

2007 $’000

2006 $’000

99,141 -

120,257 99,141

99,141

219,398


Page 46 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

39

EFFECTS OF RESTATEMENT (a) Previously stated 2006 $'000

Note

Revenue Cost of sales

Effects of Restatement $'000

Revised 2006 $'000

2,034,741

-

2,034,741

(1,239,667)

-

(1,239,667)

Gross profit Other operating income

795,074

-

795,074

28,336

-

28,336

Administrative expenses

( 574,437)

-

( 574,437)

Other operating expenses

( 381,529)

-

( 381,529)

Impairment loss on joint venture

( 412,077)

-

( 412,077)

Finance cost

(

-

(

Share of profit from Associates Increase in fair value of investment properties Loss on disposal of investment properties

(

Income from investment Income from joint venture

<1>

<1>

(

6,574)

109,994

-

109,994

1,348,090

-

1,348,090

-

(

16,115) 146,217

PROFIT BEFORE TAXATION Income tax charge (credit)

6,574)

-

16,115) 146,217

-

9,732

9,732

1,036,979

9,732

1,046,711

72,934)

3,244

(

69,690)

PROFIT FOR THE YEAR AFTER TAXATION

1,109,913

6,488

1,116,401

Attributable to: Equity holders of the parent Minorities' share of income

1,092,210 17,703

6,488 -

1,098,698 17,703

1,109,913

6,488

1,116,401


Page 47 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

39

EFFECTS OF RESTATEMENT (Contâ&#x20AC;&#x2122;d) (b)

Effect on equity as at March 31, 2006 Previously stated 2006 $'000

Effects of Restatement $'000

Revised 2006 $'000

5,097,510 6,273,769 68,934 1,209,901 514,093 164,430 2,103,280

296,958 -

5,097,510 6,273,769 68,934 1,209,901 811,051 164,430 2,103,280

15,431,917

296,958

15,728,875

74,256 21,724 35,762 1,187,369 1,388,447

-

74,256 21,724 35,762 1,187,369 1,388,447

2,707,558

-

2,707,558

18,139,475

296,958

18,436,433

222,788 3,825,976 319,183 10,500,463 ( 292,924)

296,958 -

222,788 3,825,976 319,183 10,797,421 ( 292,924)

Equity attributable to equity holders of the parent company Minority interest

14,575,486 1,338,619

296,958 -

14,872,444 1,338,619

Total equity

15,914,105

296,958

16,211,063

Note ASSETS Non-current assets Property, plant and equipment Investment properties Intangible assets Investments in associates Investment in joint ventures Retirement benefit assets Inventory of land and development projects

<1>

Current assets Available-for-sale investment Income tax recoverable Inventories Trade and other receivables Cash and cash equivalents

Total assets EQUITY AND LIABILITIES Government Equity Capital contributions Capital reserve General reserve Revenue reserve Advances to the Government of Jamaica

Non-current liabilities Long-term borrowings Provision for future infrastructure cost on land sold Deferred tax liability Current liabilities Current portion of long-term borrowings Trade and other payables Owed to regional companies

Total equity and liabilities

<1>

37,961 180,901 887,887

-

37,961 180,901 887,887

1,106,749

-

1,106,749

16,500 1,037,309 64,812

-

16,500 1,037,309 64,812

1,118,621

-

1,118,621

18,139,475

296,958

18,436,433


Page 48 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2007

39

EFFECTS OF RESTATEMENT (Cont’d) Investment The following significant adjustments have been effected: (1)

Restatement of profit to reflect UDC’s investment of property at valuation, in the joint venture regarding Seaside at Rose Hall. The venture is based on the Heads of Agreement between the Corporation and Rosehall Development Limited in which the Corporation has a shareholding of 60%. The restatements also record UDC’s share of profit for the period ended March 31, 2006. $ (a)

Retained earnings Investment in joint ventures

(296,958) 296,958

(b)

Retained earnings Investment in joint venture

(

(c)

Retained earnings Income tax

9,732) 9,732 3,244 (3,244)


Annreport06 07