Page 1

2007 - 2008


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 TABLE OF CONTENTS 2

UDC GROUP SUBSIDIARIES & ASSOCIATED COMPANIES

22

3

Directors

23

BOARD OF DIRECTORS

5

Urban Development Corporation

23

ACTING GENERAL MANAGER’S REPORT

6

Ackendown New Town Development Company Limited

23

FINANCIAL OVERVIEW

7

Bloody Bay Hotel Development Limited

23

9

Caymanas Development Company Limited

23

The Jamaica Conference Centre

9

Central Wastewater Treatment Company Limited

23

Lift Up Jamaica 2

11

Hellshire Marble Limited (Dormant)

23

The Tax Incentive Programme for Urban Renewal

11

Kingston Waterfront Re-Development Company Limited (Dormant)

24

12

Kingston Waterfront Hotel Company Limited (Dormant)

24

Area Management Programme

12

Lilliput Development Corporation Limited

24

Hellshire Environmental Management Plan

12

Montego Freeport Limited

24

Fort Clarence Beach and Two Sisters Caves

13

National Hotels and Properties Limited

24

13

Ocho Rios Commercial Centre Limited

24

SOUTHWEST COAST / MONTEGO BAY / NEGRIL REGION

13

Pegasus Hotels of Jamaica Limited

24

North Western Jamaica Schools Projects

13

Portmore New Town Development Company Limited (Dormant)

24

Montego Bay Sport Complex

13

Portmore Commercial Development Company Limited

24

13

Port Royal Development Company Limited (Dormant)

24

Success South Sub-Division

14

Runaway Bay Water Company Limited

25

NORTH EAST COAST REGION

14

Rutland Point Beach Resorts Limited

25

Port Maria Civic Centre

14

Seacastles Limited

25

14

Seaside at Rose Hall Developments Limited

25

Downtown Kingston

14

St. Ann Development Company Limited

25

St. William Grant Park

15

Urban Maintenance (1977) Limited

25

Urban Transportion Centre

15

UDC Sub-committees

25

16

Audit

25

Caymanas Development Company Ltd.

16

Contracts Awards

25

Ocho Rios Commercial Centre Ltd.

16

Finance & Investments

25

National Hotels and Properties Limited

16

Human Resource Management

25

17

Planning & Development

26

Runaway Bay Water Company Limited

18

Public Relations & Marketing

26

St Ann Development Company Ltd. (SADCo)

18

Information Technology

26

•Dunn’s River Falls & Park

19

Montego Bay Advisory Committee

26

19

Negril Advisory Committee

26

•Ocho Rios Bay Beach

19

EXECUTIVE MANAGEMENT TEAM

26

•Turtle River Park

20

SENIOR EXECUTIVE COMPENSATION

27

•Pineapple Place Craft Market

20

DIRECTORS COMPENSATION

28

20

DIRECTORS COMPENSATION

29

20

FINANCIAL STATEMENTS

CORPORATE PROFILE CHAIRMAN’S REPORT

PROJECTS

ST. CATHERINE REGION

Soapberry Sewage Treatment Plant

Montego Bay Convention Centre

Winnifred Beach

UDC SUBSIDIARIES

•Pegasus Hotels of Jamaica Limited

•Green Grotto Caves and Attractions

•Ocho Rios Craft Market Urban Maintenance (1977) Limited

(Cover Photo) Pipe bridge connecting Soapberry Sewage plant to the Kingston Metropolition Area




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008

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 2007-2008

CHAIRMAN’S REPORT

Francis Kennedy Deputy Chairman

On November 1, 2007, a new 17-member Board of Directors, was appointed to the Urban Development Corporation, replacing the John Cooke-led team which had served from December 1, 2006 to August 2007. President and CEO, Marjorie Campbell demitted the organization on December 20, 2007, when that position was made redundant, on commencement of an organizational restructuring. Consequently, on December 21, 2007 noted urban planner, Joy Douglas, was appointed to serve in the capacity of acting general manager for a one-year period. These appointments resulted from a continuing process of change initiated with National General Elections held September 3 and the appointment of a new portfolio minister in the person of (newly appointed) Prime Minister the Honourable Orette Bruce Golding. In accepting our appointment to serve the UDC and the nation, the Board of Directors also accepted Government’s and its Minister’s mandate to return to the core business of the Corporation. It is in this context therefore, that we have immediately accepted the task of re-energizing the Corporation’s efforts at planning and designing urban environments and serving as a catalyst to foster private sector involvement in national development initiatives. Consequently, the Board has committed to reviewing the parameters of the UDC’s designated areas and development plans in tandem with the policies of the new administration and is actively pursuing several initiatives to further this commitment. Of particular note is the renewed thrust to revitalize the downtown Kingston area by undertaking a number of infrastructural and socio-economic projects, while crafting the plans that will guide the future orderly development of urban centres islandwide. This renewed effort of the UDC to truly address the requirements of urban planning and re-development comes at a time when the Corporation is marking its own 40th Anniversary, having been established in March 1968. The year 2008 is therefore a very significant one for the UDC and marks the coming of age of an institution that continues to be critical to national development. A review of Financial Year April 2007 to March 2008 will show that the UDC: • Completed work on the Northwestern Schools Programme




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 • Practically completed work on the Kingston Metropolitan Wastewater Treatment project at Soapberry in St Catherine • Continued work under the Lift Up Jamaica Programme • Commenced work on Phase 2 of the Port Maria Civic Centre • Commenced work on Phase 3 of the Montego Bay Sports Complex • Signed the contract agreement to facilitate construction of the Montego Bay Convention Centre • Signed the contracts for construction of the bus park component of Kingston Transport Centre and • Refurbishing of St. William Grant Park In terms of financial performance, the UDC Group in Financial Year 2007-2008 recorded a 14.7% increase in revenue of $365M over the comparative year’s revenue of $2.481B, resulting in revenue of $2.846B. The main sources of income were: •Real Estate Sales •Hotel Operations •Attractions •Project/Other Management Fees •Rental Income of properties.

2007/08 $M 620.17 676.29 626.18 244.20 262.80

2006/07 $M 356.77 739.98 617.92 125.90 269.69

Administrative expenses totalled $777.40M, reflecting an increase of 22.10% above the 2006-2007 amount of $636.55M. The most significant contributor to the Corporation’s profit before taxation is the increase in fair value of our Investment Properties of $1.538B recorded in the financial year. Income from the Corporation’s share of profits from Associates of $464M as well as Investment Income of $308.44M was also noteworthy revenue items during the financial year. The Corporation recorded Profit Before Taxation of $2.366B in 2007-2008 compared to $8.85B in the previous year where a fair value gain on the value of investment properties of $7.276B accounts for the disparity in each year’s annual profit. A modest increase of $2.95B or 8.8 % in the Corporation’s asset base, taking it to $36.422B was achieved. The increase is primarily attributable to positive movements in the fair value of Investment Properties of $1B as well as the increase in the value of the Corporation’s Property, Plant and Equipment of $1.2B. During the coming year, as the UDC commemorates its 40th Anniversary, we will continue to vigorously pursue our mission to fulfill our role as the nation’s main development agency. We will seek to complete those projects already in progress, while charting the return to our core function. Honourable Prime Minister, on behalf of the Board, management and staff of the UDC, I welcome you to your office and present to you the Annual Report and Financial Statements of the Urban Development Corporation, its Subsidiaries and Associated Companies for the period April 1, 2007 to March 31, 2008.

Francis Kennedy Deputy Chairman




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 Board of Directors

Louis Williams Chairman

Francis Kennedy Deputy Chairman

Joy Douglas Acting General Manager

Saleem Lazarus

Alston Douglas

Oliver Nembhard

Fay Hutchinson

Angus Gordon

LL. Laurie Ventour

Wentworth Charles

Baron Stewart

Homer Davis

Shalman Scott

Patricia Sinclair McCalla

Enrick Williams Staff Representative

Veronica Bennett Warmington




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008

ACTING GENERAL MANAGER’S REPORT

Joy Douglas Acting General Manager

The April 2007- March 2008 Financial Year marked the beginning of a transitional period for the Urban Development Corporation. Significantly, the Corporation, on Palm Sunday, March 16, 2008 marked its coming of age at its 40th Anniversary Church Service held at the St. Andrew’s Scots Kirk United Church in downtown Kingston. This symbolically provided an opportunity for the renewal of the UDC’s commitment to the re-development of downtown Kingston, one of the Corporation’s first designated areas and home of our corporate headquarters. The anniversary church service also provided an opportunity to our portfolio minister, the Hon. Bruce Golding, to publicly articulate his administration’s mandate to the UDC to return to its core mission of planning and implementing development projects in its designated areas. In so doing, the Prime Minister noted that although the UDC had done significant work in the past, it should use its 40th anniversary to reflect and prepare for the task that lay ahead. This includes a careful analysis of urban sprawl in Kingston and other areas and to develop the relevant mitigating strategies. Consequently, the management team at the UDC commenced the process of returning the Corporation to its core function by addressing large-scale development projects in designated areas across Jamaica.

The Tivoli Dance Troupe entertains at the UDC’s 40th Anniversary Celebrations on March 16, 2008, at the St. Andrew’s Scots Kirk United Church on Duke Street, Downtown Kingston




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 To facilitate the corporate strategic direction, it will be important to: 1. Return the UDC to its core functions as defined by the UDC Act within three (3) years: a. Identify non-core assets and prepare some for divestment. b. Prepare and implement development plans consistent with the mission of the UDC. 2. Improve the financial sustainability of the UDC by ensuring that its cash flow is able to support its project and operating expenditure. 3. Redesign the organizational structure and staffing in pursuit of the mission and objectives of the UDC including a culture of providing excellent customer service delivery. Cognizant of the complexity of the organization, a Management Audit will be undertaken to guide the transition process and to ensure its success. Our financial performance is further highlighted in the following Consolidated Financial Overview which shows our Earnings, Income by Sector and Asset Base over the two-year period April 2006-March 2008. The rest of this report will also provide details of the activities and performance of our projects, corporate programmes and subsidiaries.

FINANCIAL OVERVIEW Rental Income Over a five year period 300,000

250,000

200,000

150,000

$'000

100,000

50,000

2004

2005

2006

2007

2008

Years Gross Real Estate Sales over a five year period 700,000 600,000 500,000 400,000 $'000 300,000 200,000 100,000 2004

2005

2006 Years



2007

2008


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 FINANCIAL OVERVIEW

Gross 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 Gross Income

2004

2005

2006

2007

800,000

2008

Years

700,000

600,000

500,000

400,000

$'000

300,000

200,000

100,000

Hotel Operations Real Estate Sales

Rental Income

Attractions

Agricultural Operations

Project Management Fees

2008

Management Fees

2007

Hotel Operations

8% 4%

23%

3%

Real Estate Rental Income

7% Attractions

2% Agricultural Operations

0%

Project Management Fees Other Management Fees

22%

22%

Water and Sewerage Other Operations

9%

Other Interest Income

Asset Comparison 40,000 35,000 30,000 25,000 20,000

$'000

15,000 10,000 5,000 2004

2005

2006 Years Asset Base

Joy Douglas Acting General Manager



Total Assets

2007

2008

Water and Sewerage

Other Operations

Other Interest Income


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 PROJECTS 2007-2008 The Jamaica Conference Centre During the Financial Year the UDC continued to manage the Conference Centre on behalf of the Ministry of Finance and the Public Service. A general state of disrepair and adverse weather conditions contributed to the on-going challenges encountered. Specifically, the following militated against the achievement of targets set: 1. A number of cancellations, due for the most part to catering costs 2. The passage of Hurricane Dean, which resulted in a three-week closure 3. Heavy rainfall in the third quarter Nonetheless, several major and significant events were hosted during the year at the Centre and some promotional activities were undertaken providing positive exposure for the Centre. Total revenue generated this year was $20,020,319.12.

R ev en u e fo r th e P erio d A pril 2006 - Ma rc h 2008 4,000,000.00 3,500,000.00 3,000,000.00 2,500,000.00 2,000,000.00 1,500,000.00 Revenue 1,000,000.00 500,000.00 0.00

2006 2007 2008

April May June July March August October January December February SeptemberNovember M onth

R e v e nue by Q ua r te r s for the F ina nc ia l P e r iod 0 6 /0 7 & 0 7 /0 8 9,000,000.00 8,000,000.00 7,000,000.00 6,000,000.00 5,000,000.00

YEAR 1

4,000,000.00 Revenue 3,000,000.00

YEAR 2

2,000,000.00 1,000,000.00 0.00

Apr. Jul. 06 -06 Jun 06 Apr. 07 Jun. 07 Oct. - Sept. 06 Jan. - 06 Dec. 07 - 06 Mar. Jul.-07 07 Oct. - Sept. 07 Jan. - Dec. 07 08 - 07 Mar. 08 Qu arter




URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 Receivables were reduced and maintained at an average of approximately 85% of collection throughout the year. However, expenses moved up as a result of increases in electricity charges and maintenance costs. At the beginning of the fourth quarter, Government approved for refurbishing programme for the JCC, to be undertaken in two phases - April to May in preparation for the 14th Session of the International Seabed Authority Meetings and the 3rd Biennial Jamaican Diaspora Conference and the second phase to commence at the end of June 2008. Hence, the Centre will be closed to the public as of April through to December 2008.

Refurbishing Works Following is the status of refurbishing works as at March 31, 2008: Roof Repairs - repairs to roof 100% complete A.C. Repairs During repairs to three of the motors, it was discovered that a fourth was defective and this was therefore included in the scope. Surveillance System Work on Phase I is about 55% complete; installation of the equipment has commenced. Workman completes re-flooring of the Harbour Lounge at the Jamaica Conference Centre

Fire Detection System Phase I is about 65% complete Conference Communication and Voting System Retrofitting and cabling commenced; installation 25% complete. External Painting General painting of walls, ceilings and sandblasting will commence in April 2008.

Telecommunications Repair and upgrade existing telecommunications system: Cabling work commenced and is about 60% complete. Furniture Repairs Refinishing of tables and re-caning of chairs about 50% complete. Internal accessories, builders work pertaining to Link Bridge and Tower: Work commenced and is expected to be completed by end April 2008.

10


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 Lift Up Jamaica 2 Based on assessments at March 2008, The Lift Up Jamaica 2 programme was extended to July 2008. With budgeted expenditure of $1B and projected employment of 10-13,000 persons, work was undertaken in a number of areas including: • 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 centres, 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 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.

Bridgeport Basic School, St. Catherine refurbished under the Lift Up Jamaica Programme

The programme, 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 In an attempt to reverse the decay and accompanying decline in economic and social conditions that characterised many parish capitals, the Government of Jamaica enacted the Urban Renewal (Tax Relief) Act, 1995 to provide incentives for capital expenditures and purchase of Urban Renewal Bonds. The incentives sought to attract increased levels of capital investments from the private sector in the Special Development Areas as declared by the Minister responsible for urban development. During the period under review, the UDC continued its management of the programme working as agents on behalf of The Ministry of Finance. On March 13, 2008, the Tax Incentive Programme was extended from its areas of operation in downtown Kingston, Port Royal and Montego Bay to include Spanish Town. This was achieved with the assistance of the St. Catherine Parish Council, The National Environmental Planning Agency and the Office of the Prime Minister. It is envisaged that the TIP will become one of the primary catalysts in arresting blight and enabling the urban renewal process in Spanish Town. On March 18, 2008, the UDC received the first application for approved developer for the redevelopment of property in the Spanish Town Special Development Area. This application was valued at US$24 million.

11


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 An application for approved developer valued at J$4.6M was also processed for the downtown Kingston Special Development Area.

REGIONAL REPORTS ST. CATHERINE REGION Hellshire Glades Housing – Phase 2 During the period under review, the original West Indies Home Contractors Ltd. (WIHCON) contract was extended to allow for the construction of 45 additional units at Hellshire Glades in St Catherine. This followed the completion of 165 housing units and related infrastructure works during the previous period.

Area Management Programme Implementation of the Hellshire Environmental Management Plan (HEMP), managing the operations at both Fort Clarence Beach and Two Sisters Caves constituted the main areas of focus of the area management programme during the period under review.

Workmen undertake construction work under phase 2 of the Hellshire Glades Housing Development in St. Catherine on April 3, 2008

With a staff complement of approximately 30 persons, community outreach activities were also carried out as programmed during the year in Hellshire, Caymanas and Portmore communities while squatting was contained at existing levels with no report of increased activity during the reporting period.

Hellshire Environmental Management Plan - HEMP The HEMP team, consisting of the Protected Area Supervisor, Environmental Officer and four environmental Wardens, has been involved in implementing the environmental programme for Hellshire Hills.

Royan Gayle, Environmental Officer and Danae Vaccianna, Protected Area Supervisor discuss the Hellshire Environmental Management Plan with residents on December 10, 2007. The HEMP plan is aimed at preserving the environmental value of the Hellshire Hills and guiding subsequent developments of its land space.

The programme includes monitoring of the environment in the Hellshire Hills and Goat Islands with a view not only towards preventing damage/destruction but working in conjunction with NEPA and other relevant agencies in conservation activities. Principal of these activities has been the work of the UWI’s Iguana Project.

12


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 The main challenge so far experienced has been the activity of coal burners and woodcutters who have been decimating large areas of the forest. The team has been working with the Island Special Constabulary Force (ISCF) to bring the situation under control. The team is also working with the Forestry Department to develop a tree planting programme in Hellshire Hills Fort Clarence Beach and Two Sisters Caves In spite of extensive damage to the infrastructure at Fort Clarence and Two Sisters Caves, the two locations continue to make major contribution to the recreational fare of the Kingston Metropolitan Region. Soapberry Sewage Treatment Plant The Kingston Metropolitan Sewage Treatment Plant, located at Soapberry in St Catherine, was completed and handed over to the UDC in February 2008. The project was conceptualised to provide improved treatment facilities for the Kingston Metropolitan Region and will result in the conveyance of all waste into a centralised system that will provide treatment in keeping with local and international standards. A joint venture initiative involving the UDC, National Housing Trust, Ashtrom Building Systems and National Water Commission, the Soapberry plant will be managed by the Central Wastewater Treatment Company.

South West Coast/Montego Bay/Negril

Dr. Horace Chang, Minister of Water and Housing speaks with E.G Hunter, President of the National Water Commission, (left) on a tour of the Soapberry Treatment Plant on November 7, 2007

Northwestern Schools Project Work was completed on the last remaining high school at Troy, Trelawny during the 2nd Quarter of the Financial Year. The official handing over on September 21, marked the completion of the contract managed by the UDC on behalf of the Ministry of Education and executed by WIHCON. Under the schools programme which commenced in 2003 a mix of 17 schools, providing 16,000 new spaces were constructed in the parishes of Westmoreland, Hanover, St James and Trelawny at a cost of $3.8 Billion. Montego Bay Sports Complex Work by way of a contract awarded to Presport of Venezuela, in the sum of US$11,497.00 commenced on Phase 3 of the Montego Bay Sports Complex at Catherine Hall in St James. All structural steel, seats and aluminum works were completed off site.

13

Linvern Wright, Principal of the Troy High School, Trelawny greets students at the handing over of keys on September 21, 2007. The school is the final of 17, constructed under the UDC managed government’s J$3.8 billion Northwestern Schools Programme, in the parishes of Trelawny, St James, Hanover and Westmoreland.


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 Montego Bay Convention Centre Preparatory arrangements including the acquisition of relevant permits and the submission of working drawings by the China National Complete Plant Import and Export Corporation (COMPLANT), the design and build contractor were completed at the end of Financial Year 2007-2008. This followed the signing of the project contract in the amount of RMB Yuan 350 million (approx. US$45 million) between the UDC and the Exim Bank of China for the construction of the convention centre at Rose Hall in St James. Physical works were expected to commence by June 2008. Success South Sub-division A contract in the sum of $108 million was awarded to Build Rite Construction for the implementation of infrastructure works to facilitate the provision of housing solutions at Success in Montego Bay, St James. The commencement of physical work was however put on hold, pending discussions with Rose Hall Development Company and the National Water Commission to resolve sewage disposal problems.

North East Coast Region Port Maria Civic Centre With the signing of a contract between the UDC and contractor Recar Engineer, work commenced in January 2008, on Phase 2 of the Port Maria Civic Centre in St Mary. The project was halted however at the request of the Jamaica National Heritage Trust to facilitate amendments to the drawings. These were subsequently adjusted and re-submitted to and approved by both the Heritage Trust and the St. Mary Parish Council. At the end of the review period, instructions were issued to the contractors to recommence work, while an assessment of the project was undertaken to ascertain possible increased cost resulting from the delay and changes. Winnifred Beach The UDC engaged in discussions with the Portland Parish Council with a view to arriving at a comanagement agreement for Winnifred Beach at Fairy Hill in Portland. Following several community meetings and the completion of an Environmental Impact Assessment it was the UDC’s intention to provide temporary facilities for the Independence holidays in August, after which the beach would be closed to start upgrading works. However, approval was not forthcoming from the National Environment and Planning Agency (NEPA) and litigation relating to prescriptive rights for access to the beach was initiated against the UDC. Downtown Kingston In keeping with its commitment to furthering the re-development of downtown Kingston, the UDC continued in Financial Year 2007-2008 with the implementation of plans and projects for the capital city. Chief among these were projects managed by the UDC on behalf of the Kingston City Centre Improvement Company (KCCIC) as follows:

14


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 St. William Grant Park Following the signing of the contract with Jatlin Construction & Associates in January 2008, upgrading work at St William Grant Park was approximately 40% complete at March 31, 2008. The project involves the extensive refurbishing of the park located in downtown Kingston between North and South Parade. It includes the refurbishing of 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. Workmen at St. William Grant Park review blueprint for refurbishing works at the park

Urban Transport Centre With a view to rationalizing the public transportation system in downtown Kingston, the UDC acting on behalf of the KCCIC signed a contract with Alcar Construction & Haulage Company in January 2008 for the construction of the bus park component of the Urban Transport Centre. At March 31, 2008 the project was approximately 40% complete. The KCCIC will have responsibility for the associated commercial centre, inclusive of a ticket office and other support facilities. 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 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.

15

Joy Douglas, UDC Acting General Manager, speaks at the contract signing for the Urban Transport Centre at Jamaica House on January 15, 2008. Also in photo are Hon. Orette Golding, Prime Minister, and UDC Chairman Louis Williams.


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 SUBSIDIARIES Caymanas Development Company Limited Caymanas Golf and Country Club The Caymanas Golf and Country Club has had what can best be described as a challenging year, resulting largely from two major occurrences. In mid-July the club lost its water supply when the well casing collapsed necessitating the provision of a new well. This was followed shortly thereafter by Hurricane Dean in August. Both occurrences resulted in a reduction in revenue by approximately $2 Million and additionally, incurred an unanticipated expense of $3 Million for the trucking of water. The water supply remained inoperative throughout the full Club year but it is anticipated that this will be reactivated by mid-May 2008.

Caymanas Golf Club and Country Club

The golf course remains in good condition and there are many encouraging plans for the development of the Caymanas Estate which are expected to contribute to enhancing the facility.

Ocho Rios Commercial Centre Limited Established in 1972 along the waterfront as part of the UDC’s rural township development thrust, the Ocho Rios Commercial Centre (ORCC) are owners and operators of the Ocean Village Shopping Centre on 29 Main Street, Ocho Rios thus complementing both the resort and residential properties in the town. Financial Year 2007-2008 can be described as an atypical one for the entity given the following: • A change in leadership on June 18, 2007 with the retirement of Manager Mrs. Yvette Mason • The redesigning of the property’s gardens • External training in related disciplines for approximately 70% of the staff members. • The re roofing of the office block building by Tropical Metal Products Limited • Increased usage of the court to host promotional activities by corporate companies The complex’s spaces are in high demand for rental based on its competitive rates for rental and maintenance fees and its ideal location. For the period under review all 83 lettable spaces were occupied. The entity continues to be profitable and recorded an unaudited profit of $4,659,062.90 for Financial Year 2007-2008.

National Hotels and Properties Limited (NHP) During Financial Year 2007-2008 the NHP continued to manage the accounts of the hotels associated to 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)

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URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008

➢ ➢

Montego Beach (1975) Limited (Club Jamaica) Kingston Waterfront Hotel Company Limited (Oceana Hotel)

Pegasus Hotels of Jamaica Limited For the year ended March 31, 2008, the Pegasus Hotels of Jamaica recorded gross profit of $407.511Million earned from total sales of $676.291 Million. After accounting for administrative and other operating expenses, interest income and taxation, net profit recorded is $39.015M. The balance in the Capital Reserve Account as at March 31 is $3,206,394,000 while the balance in the Retained Earnings Account is $24.810 Million.

Historical Review

2008

2007

2006

2005

2004

Revenue

$676.291M

$738.015M

$658.433M

$589.591M

$538.073M

Operating Profit/(Loss)

$61.796M

$ 45.342M

$ 16.616M

$ 27.485M

$ 15.640M

Net Profit/(Loss)

$39.015M

$ 41.080M

$ 17.402M

$ 30.692M

$ 20.115M

Net Current Assets

$106.547M

$128.798M

$115.907M

$ 81.641M

$112.466M

$0.32

$0.34

$0.14

$0.26

$0.17

Earnings/(Loss) Per Stock Unit

Dividends An interim dividend of $0.15 cents per stock was paid on April 16, 2007 based on the results of the third quarter financial report as at 30 December 2006, and a further $0.25 cents per stock unit paid on November 1, 2007 based on cash flow as at August 2007. At this time the directors do not recommend a dividend. Directors During the period under review the following nominated Directors resigned: Mrs. Marjorie Campbell, Hon. Shirley Tyndall, Messrs. Easton Douglas and George Duncan. The Board of Directors records their thanks and appreciation to them. Under Article 80(1) (a) of the Articles of Incorporation of the Company, National Hotels and Properties Limited, major shareholder in Pegasus Hotels of Jamaica Limited, and a wholly owned subsidiary of Urban Development Corporation, nominated Miss Joy Douglas, Mrs. Marcia Ward, Messrs. Alston Douglas, L. L. (Laurie) Ventour and Louis Williams to serve as Directors of the Company. Under Article 80(1)(c) of the Articles of Incorporation of the Company, Rev. Denzil Barnes was co-opted a Director for a period of one year.

17


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 Audit Committee During the period under review Mrs. Marjorie Campbell and Hon. Shirley Tyndall resigned as members of the Audit Committee. Mr. L. L. (Laurie) Ventour was appointed to serve on the Committee. The committee now comprises Rev. Denzil Barnes – Chairman, Mr. B. Anthony Lindo and Mr. L. L. (Laurie) Ventour. The Committee met four times where the audit plan for the year, quarterly reports for the Jamaica Stock Exchange and reports from the Internal Auditor were discussed. The Internal Auditor, General Manager and Financial Controller attended these meetings on the invitation of the Committee’s Chairman. Auditors PricewaterhouseCoopers have expressed their willingness to continue as Auditors of the Company and a resolution will be proposed authorizing the Directors to fix their remuneration.

Runaway Bay Water Company Ltd. The Runaway Bay Water Company Ltd. is a licensed utility company. During the Financial Year April 1, 2007 to March 31, 2008, the Company employed 19 members of staff to operate two plants at Cardiff Hall and Mount Edgecombe and extracted and treated 2.4 million m3 of potable water, an increase of 6.27% over 2006-2007 and sold 2.33 million m3 a 10.39% increase over the previous year. A total of 79% or 1.82 million m3 of water produced was sold wholesale to the National Water Commission for distribution to its customers in the town of Runaway Bay and its environs. The remainder of 512 thousand m3 or 21% of sales was distributed directly by the Company to its over 400 domestic and commercial customers in the Cardiff Hall Subdivision of Runaway Bay. The Company recorded sales revenue of $73.76 Million and net profit after tax of J$2.03 Million.

St. Ann Development Company Ltd. (SADCo) Established in 1967 to plan and implement development strategies in the parish of St. Ann SADCo, continued during 2007-2008 to manage the various attractions and properties owned by the UDC in the parish. With a 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 WATER 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

18


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 For financial year April 2007 to March 2008, 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 $300 Million, recorded some 850,255 visitors to the attraction during the year under review. This represents a decrease of 9% or 70,314 less than the previous year, attributable to the effects of Hurricane Dean. In spite of the reduction in visitor arrivals, the attraction experienced an increase in total income of $8,425,762 over the previous year. The main contributing factors to the increased income were increases in the price of tickets, locker rental and rental and concession rates. It should be noted that there was a decrease of 12% in entrance fees when compared to the previous period. Operating expense for the period saw a $36,465,516 or 15% 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. The attraction continued during 2007-2008 to benefit from a $49M expansion programme, which includes the following and which at March 31, 2008 was approximately 98% complete: 1. 2. 3.

Construction of a structured parking bay at the main entrance to include paved walkways, handicapped parking facilities and landscaping works. Upgrading of cave trails, descent to the Grotto and lighting. Construction of a fishing attraction with supporting facilities and nature trails.

There were 38,789 visitors to the attraction during the year, an increase of 2,963 over the prior year.

Green Grotto Caves and Attractions

Green Grotto Caves and Attractions increased its total income for 2007-2008 by $2,771,559 or 15% over the previous year. The highest level of income was generated from ticket sales which recorded an increase of $2,037,561 or 23% over the previous year. Income from fees, the second highest earner, registered an increase of 5%. Operating expense for 2007-2008 increased by $10,065,755 or 36% with the main contributory factors being expenditure for staff welfare, security, salaries and wages, depreciation and advertising. Ocho Rios Bay Beach The income for Ocho Rios Bay Beach decreased in the 2007-2008 financial year by $313,117 or 2%. The main earner, ticket sales, recorded a decrease of $788,090 while entrance fees declined by $58,192. Operating expenses increased over the previous period by $11,632,481 or 43%.

19


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 Turtle River Park Established in May 2004, the Turtle River Park which was designed as a passive urban recreational public space to serve the Ocho Rios community, cruise ship passengers and local and foreign visitors, continued during 2007-2008 to be 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 continued to be conservative. Income generated by the facility increased by $635,624 or 54% over that of the previous year, with the main earner, income derived from snack sales, increasing by $124,900. Operating expense for 2007-2008 increased by $3,754,445 or 18% over the previous year; the factors contributing to this were staff welfare, salaries and wages, electricity and security. Pineapple Place Craft Market, Ocho Rios Craft Market and Fisherman’s Point There was no change in the income for either Pineapple Place or Fisherman’s Point, which amounted to $937,200 and $120,000, respectively during the review period. However, income generated by the Ocho Rios Craft Market increased by $575,078 or 29% over the previous year. Expenses for the properties increased by 56%, 96% and 8%, respectively throughout the 2007-2008 financial year as a result of ???.

Urban Maintenance (1977) Limited (UML) Urban Maintenance (1977) Ltd., a wholly owned subsidiary of the Urban Development Corporation, continued during 2007-2008 to exercise its responsibility for • Maintaining all buildings along the waterfront owned by the UDC, inclusive of two (2) 12-storey office blocks – the Office Centre Building (Block 4) and the Oceana Building; an art gallery and institute – the Institute of Jamaica (Block 3); a commercial block with offices and shops – The Kingston Mall (Block 2/6), and a commercial block with small shops – The Seabed Arcade; • Maintaining the Jamaica Conference Centre for which the UDC has responsibility; as well as, • Managing the car parks in the Downtown area also owned by the UDC, which includes three multi-storey parking garages and five open parking lots. For the year under review UML made an operating loss of $12.2M (unaudited) as there were increases in expenditure higher than expected inflation. Details of the Company’s operations for the period 2007-2008 were as follows: Cost Centres The following major works were undertaken at the various Cost Centres. Block 4 – Office Centre Building, 12 Ocean Boulevard, Kingston • To improve the cooling on some floors, completed changing out three (3) coils for the air- handling units on floors 2, 5, and 6 • Repaired sections of roof on 12th and 1st floors. • Sealed and repaired the windows on the three floor level. • Retiled the 6th floor and part of 1st floor.

20


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 Oceana Complex, 2 – 4, King Street • Did extensive repairs to the York chiller • Effected repairs to sections of the roof of the former Ball room roof. • Sealed some areas on the poolside • Did some internal painting and tiling. Block 2/6 • Installed new water meters to separate the commercial from the residential • Upgraded common area washrooms • Prepared the spaces for new tenants including the - Registrar General’s Department (RGD) - Major Investigation Taskforce (MIT) • Upgraded spaces for current tenants - Early Childhood Commision Jamaica Conference Centre • Did minor roof repairs • Installed new tiles and refurbished other floor areas in the Delegates Dining Room. Open Car parks Uniformed signage was installed at all the car parks during the year. The car parks made a profit of $6.1 Million, which was somewhat less than the prior year as there were several lost days during the period. Of the approximately 2600 spaces in the eight car parks almost 55% was occupied for contractual parking, while the usage for daily parking averaged 50,000 vehicles per month. Hurricane Repairs The Company responded to effecting cleanup activities and to repairing damage after the Hurricane. Works included: • Repairing the windows at Oceana, JCC and Block 4 • Repairing the roofing at JCC • Doing cleanup of the landscape including clearing fallen trees etc. Other Projects UML continued to offer maintenance services to our sister subsidiary companies, i.e. Runaway Bay Water Company and Hellshire Bay and was again involved in activities, sponsored by the UDC to promote downtown Kingston. The Fireworks on the Waterfront event normally held on December 31 to herald in the New Year was not held as there was a difficulty in securing sufficient sponsorship.

21


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 URBAN DEVELOPMENT CORPORATION SUBSIDIARIES & ASSOCIATED COMPANIES AS AT MARCH 31, 2008

• 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

22


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 DIRECTORS OF THE URBAN DEVELOPMENT CORPORATION, SUBSIDIARIES AND ASSOCIATED COMPANIES Urban Development Corporation Board of Directors April 2007 – October 2007 John Cooke Jack Wilmot Marjorie Campbell Cowell Lyn George Duncan Lambert Brown Pamela Redwood Joy Douglas Jail Dabdoub Burchell McPherson Leon A. Gordon Roy Hutchinson Carlton Depass Sonia Hyman Michael Palmer Easton Douglas Donovan Stanberry Enrick Williams

Ackendown Newtown Development Company Limited

Chairman Deputy Chairman President & CEO

Joseph Matalon Milverton Reynolds Laurie Ventour Wilfred Bagaloo Ann Marie Rhoden Joy Douglas Bloody Bay Hotel Development Ltd Hon. John J. Issa Muna Issa Stuart Fisher Vivalyn Downer-Edwards Laurie Ventour Gloria Royale-Davis Caymanas Development Company Limited

Urban Development Corporation Board of Directors November 2007 – March 2008

Joy Douglas Kemel Allen Gordon Hutchinson Jewell Spencer Carlton Depass

Louis Williams Chairman Francis Kennedy Deputy Chairman *Joy Douglas Acting General Manager Laurie Ventour Saleem Lazarus Fay Hutchinson Homer Davis Wentworth Charles Oliver Nembhard Angus Gordon Alston Douglas Baron Stewart Shalman Scott Patricia Sinclair-McCalla Veronica Warmington Bennett Enrick Williams

Central Wastewater Treatment Company Limited Everton G. Hunter C. Earl Samuels Akiva Schiff Louis Williams Lawrence Ventour Hellshire Marble Limited (Dormant) Winston Hayden Avris Pamella Whittingham Raymond Wright Norman Patrick Saulter Reginald Carl Chantrielle Jewell Spencer

*Appointed Acting General Manager in December 2007

23


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 DIRECTORS OF THE URBAN DEVELOPMENT CORPORATION, SUBSIDIARIES AND ASSOCIATED COMPANIES Kingston Waterfront Re-Development Company Limited

Pegasus Hotels of Jamaica Limited

Vivalyn Downer-Edwards Gloria Royale-Davis

Hon John J. Issa Rev Denzil Barnes Christopher Bovell Joy Douglas Alston Douglas Laurie Ventour Marcia Ward Louis Williams

Lilliput Development Corporation Limited

Portmore New Town Development Company Limited (Dormant)

Cowell Lyn Marjorie Campbell Kingston Waterfront Hotel Company Limited

Paul Sloley Jewell Spencer Doris Channer-Watson Michael Thorpe Cleveland Parker Vivalyn Edwards

Marjorie Campbell Hopeton Smith Portmore Commercial Development Company Barrington Chisholm Keith Smith Lloyd Davis Audrey Deer-Williams Ludlow Bowie Fay Hutchinson, Vivalyn Edwards Jewell Spencer Marjorie Campbell

Montego Freeport Limited John Gourzong Chairman Barrington Baugh Melissa Chang Homer Davis Angus Gordon Methelina Scarlett-Jones Dale Sinclair Jewel Spencer

Port Royal Development Company Limited (Dormant) Donovan Stanberry Robert Stephens Cowell Lyn Robert Gregory Edison Galbraith Lois Sherwood Jewell Spencer Marjorie Campbell Carole Guntley Donovan Perkins Michael Campbell

National Hotels and Properties Limited Louis Williams Laurie Ventour Joy Douglas Jewell Spencer Marcia Ward Ocho Rios Commercial Centre Limited Joy Douglas Jewell Spencer Angus Gordon

24


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 DIRECTORS OF THE URBAN DEVELOPMENT CORPORATION, SUBSIDIARIES AND ASSOCIATED COMPANIES Runaway Bay Water Company Limited

St. Ann Development Company Limited

Joy Douglas Donald Lee Peter Morais Desmond Malcolm Leon Gordon

Alfred Lee Joy Douglas Laura Heron Mike Walter Carlton Cole Nathan Morrison Deon Mitchell Patrick Drake Delroy Giscombe Derrick Chang Desmond Morgan Junior Haughton Vivalyn Downer-Edwards

Rutland Point Beach Resorts Limited Marcia Ward Lydia Jackson-Lawrence Seacastles Limited Vivalyn Edwards Marcia Ward Seaside at Rose Hall Development Limited

Urban Maintenance (1977) Limited

Don C. Stansberry Jr Michele Rollins Peter Williams Vivalyn Downer-Edwards Joy Douglas

Angus Gordon Alston Douglas Oliver Nembhard Francis Kennedy William Masterton Lydia Jackson-Lawrence

URBAN DEVELOPMENT CORPORATION BOARD COMMITTEES Audit

Finance & Investment

Angus Gordon Chairman Louis Williams L.L. (Laurie) Ventour Francis Kennedy Patricia Sinclair-McCalla Jomo Pitterson

L.L. (Laurie) Ventour Angus Gordon Francis Kennedy Homer Davis Wentworth Charles Vivalyn Downer-Edwards Jewell Spencer Marcia Ward Veronica Bennett-Warmington

Contracts Wentworth Charles Homer Davis Oliver Nembhard Alston Douglas Vivalyn Downer-Edwards George Harty Maurice Johnson

Chairman

Chairman

Human Resource Management Baron Stewart Chairman Fay Hutchinson Shalman Scott Gloria Royale Davis Marcia Scott Golding Enrick Williams

25


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 URBAN DEVELOPMENT CORPORATION BOARD COMMITTEES Planning & Development Francis Kennedy Baron Stewart Louis Williams Joy Douglas Saleem Lazarus Lloyd Grey Peter Morais Jewell Spencer Colin Davis Hopeton Smith

Public Relations & Marketing Chairman

Fay Hutchinson Saleem Lazarus Shalman Scott Gloria Royale Davis Doreen O’Connor Venora Fletcher Lorna Clarke

Chairman

URBAN DEVELOPMENT CORPORATION ADVISORY COMMITTEES Information Technology Angus Gordon Laurie Ventour

Negril Advisory Committee Chairman

Shalman Scott Roy Hutchinson Cliff Reynolds Cosmo Brown Linus Aruliah Eric Clarke Grace Lee Patricia Sinclair-McCalla David Gardner Isaac Gordon

Montego Bay Advisory Committee Homer Davis Caryle Allen Lennox Wallace Patrick Fletcher David Baugh Maxine Bisasor Isaac Gordon

Chairman

Urban Development Corporation Compensation – Executive and Senior Management EXECUTIVE MANAGEMENT TEAM President and Chief Executive Officer: Mrs. Marjorie Campbell Vice Presidents: Mrs. Jewell Spencer Mrs. Marcia Ward Mr. Lloyd Grey (Acting)

Investment Finance & Administration Technical Services

Chief Legal Counsel/Company Secretary: Mrs. Vivalyn Downer Edwards Ass’t Vice President

- Corporate Services Dr. Gloria Royale-Davis

Ass’t Vice President - Project Management Mr Maurice Johnson (Acting)

26

Chairman


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 The compensation package for Executive Management and Senior Managers for the period 2007-2008 is as shown below: SENIOR EXECUTIVE COMPENSATION 2007-2008 Position of Senior Executive

Salary $

President & CEO

5,730,612.78

Acting General Manager

2,067,320.59

Gratuity or Performance Incentive $

Travelling Allowance or Value of Assigned Motor Vehicle $

297,694.17

964,132.45

Pension or Other Retirement Benefits

Total ($)

7,674,713.87 14,667,153.27 2,067,320.59

5,113,593.12 Assistant to the General Manager

696,903.00

5,810,496.12

528,000.00

7,381,890.56

34,700.00

6,364,996.00

528,000.00

6,996,006.88

DGM-Legal Division

6,649,346.84

DGM-Finance & Administration

6,330,296.00

DGMInvestments

6,284,950.08

DGM-Project Management

7,635,303.76 2,070,104.59*

528,000.00

10,233,408.35

DGM-Technical Services

6,519,106.36 1,140,525.12**

667,096.75

8,326,728.23

3,946,832.20

7,674,713.87 61,848,000.00

Total

204,543.72

183,056.80

46,330,529.53 3,895,924.40

Designation of President & CEO changed to General Manager in December 2007. Nomenclature for vice presidents changed to deputy general managers * Includes payment in lieu of notice ** Includes gratuity carried forward from previous year.

27


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 DIRECTORS COMPENSATION APRIL 2007- OCTOBER 2007

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

Honoraria ($)

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

103,500

N/A

N/A

N/A

103,500

Deputy Chairman

57,000

N/A

N/A

N/A

57,000

Position of Director

Chairman

Fees ($)

Total ($)

Director

45,750

N/A

N/A

N/A

45,750

Director Director

58,500 58,500

N/A N/A

N/A N/A

N/A N/A

58,500 58,500

Director

45,750

N/A

N/A

N/A

45,750

Director Director

52,125 58,500

N/A N/A

N/A N/A

N/A N/A

52,125 58,500

Director

45,750 52,125

N/A N/A

N/A

N/A

45,750

Director

N/A

52,125

Director Director

58,500 52,125

N/A N/A

Director Director Director

58,500 52,125 45,750

N/A N/A

N/A N/A N/A N/A

N/A N/A N/A

N/A

N/A

N/A N/A N/A

Director

58,500

N/A

N/A

N/A

58,500

Director

58,500

N/A

N/A

N/A

58,500

TOTAL

58,500 52,125 58,500 52,125 45,750

974,250

974,250

*Compensation not included for Executive members.

28


URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008 DIRECTORS COMPENSATION NOVEMBER 2007- MARCH 2008

Position of Director

Fees ($)

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

Honoraria ($)

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

N/A

N/A

N/A

67,625

Total ($)

Chairman

67,625

Deputy Chairman

59,500

N/A

N/A

N/A

59,500

N/A

N/A

59,500

Director

59,500

N/A

Director

59,500

N/A

N/A

N/A

59,500

Director Director

59,500 51,000

N/A N/A

N/A N/A

59,500 51,000

Director

59,500

N/A

N/A

N/A N/A N/A

59,500

Director

N/A

N/A

51,000

N/A

N/A N/A

Director Director Director

51,000 59,500 51,000 59,500 59,500

N/A N/A

N/A N/A

N/A N/A N/A

59,500 51,000 59,500

N/A

N/A

N/A

59,500

Director

59,500

N/A

N/A

N/A

59,500 42,500

Director

Director

42,500

N/A

N/A

N/A

Director

46,000

N/A

N/A

N/A

TOTAL

46,000 844,625

844,625

Total Directors Compensation - $1,818,875 *Compensation not included for Executive members.

29


FINANCIAL STATEMENTS

URBAN DEVELOPMENT CORPORATION ANNUAL REPORT 2007-2008

30


URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES YEAR ENDED MARCH 31, 2008

CONTENTS Page

Independent Auditors’ Report – to the members

1

FINANCIAL STATEMENTS

Consolidated Balance Sheet

2

Consolidated Income Statement

3

Consolidated Statement of Changes in Equity

4

Consolidated Statement of Cash Flows

5

Corporation’s Balance Sheet

6

Consolidated Income Statement

7

Corporation’s Statement of Changes in Equity

8

Corporation’s Statement of Cash Flows

9

Notes to the Consolidated Financial Statements

10 - 62


Page 3

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED INCOME STATEMENT YEAR ENDED MARCH 31, 2008

2008 $’000

2007 $’000

2,846,289

2,481,340

(2,025,501)

(1,439,249)

Notes

Revenue

26(a)

Cost of sales Gross profit

26(b)

Other operating income

820,788

1,042,091

251,606

41,236

Administrative expenses

( 777,401)

( 636,545)

Other operating expenses

( 354,341)

( 117,409)

(

(

Finance costs

28

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

6

Profit on disposal of investment properties Income from investment in joint venture Income from investments

29

PROFIT BEFORE TAXATION Income tax charge

30

PROFIT FOR THE YEAR AFTER TAXATION

12,855)

7,390)

495,757

471,262

1,538,163

7,276,086

105,902

6,860

4,118

697,915

82,208

73,910

2,153,945

8,848,016

318,803

217,781

1,835,142

8,630,235

1,764,677 70,465

8,592,278 37,957

1,835,142

8,630,235

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

The Notes on Pages 10 to 62 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, 2008

Note Balance at April 1, 2006

Capital Contribution $’000

General Reserve $’000

Revenue Reserve $’000

Advances to the Government of Jamaica $’000

Attributable to Equity Holders of Parent Company $’000

Minority Interest $’000

Total $’000

222,788

3,825,976

319,183

10,797,421

( 292,924)

14,872,444

1,338,619

16,211,063

-

5,505,012

-

-

-

5,505,012

180,852

5,685,864

-

-

-

(

83,583)

(

16,888)

Revaluation increase on land and buildings Deferred tax

Capital Reserve $’000

23

-

(

83,583)

(

36,536)

120,119)

(

16,888)

(

12,077)

Reserves of subsidiary written off

-

-

( 16,888)

-

-

Distribution to minority interest

-

-

-

-

-

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

-

(

22,391)

-

22,391

-

-

-

-

Transfer to general reserve

-

-

20,731

20,731)

-

-

-

-

Balance at March 31, 2007

222,788

9,210,788

323,026

19,405,585

(292,924)

28,869,263

1,508,815

30,378,078

937,119

259,070

1,196,189

Revaluation increase on land and buildings

(

-

-

(

(

12,077)

-

937,119

-

-

-

-

( 173,217)

-

-

-

Net income recognized directly in equity

-

763,902

-

-

-

763,902

197,874

961,776

Net profit for the year

-

Total recognized income and expenses

-

Transfer to capital reserve

-

Transfer to general reserve

-

-

Distribution to minority interest

-

-

-

222,788

10,241,184

325,718

Deferred tax

Balance at March 31, 2008

23

The Notes on Pages 10 to 62 form an integral part of the Financial Statements.

-

(

173,217)

(

61,196)

(

234,413)

-

1,764,677

-

1,764,677

70,465

1,835,142

763,902

-

1,764,677

-

2,528,579

268,339

2,796,918

266,494

-

( 266,494)

-

-

-

-

(

-

-

-

-

-

-

-

20,901,076

(292,924)

31,397,842

2,692

2,692)

(

65,792)

1,711,362

(

65,792) 33,109,204


Page 5.1

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2008

2008 $’000

2007 $’000

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 (Gain) on disposal of property, plant and equipment (Gain) on disposal of investment properties Increase in provision for future infrastructure costs on land sold Impairment loss recognised on trade and other receivable Share of income from associates Income from investment in joint venture Tax expense Interest expense Adjustment to fixed assets Interest income

1,835,142

8,630,235

142,150 (1,538,163) ( 55,568) ( 50,942) ( 5,092) ( 105,902) 15,482 ( 41,080) ( 495,757) ( 4,118) 318,803 10,394 3,040 ( 256,615)

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

Operating cash flows before movements in working capital

( 228,226)

Decrease (increase) in inventories (Increase) decrease in receivables Increase(decrease) in owed to regional companies Decrease (increase) in inventory of land and development projects

2,917 ( 745,416) 17,477 392,391

Increase (decrease) in payables

(

374,074 (

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

78,145)

392,120

Cash (used in) generated by operations

( 639,002)

272,554

Interest expense Income taxes paid

( (

Net cash (used in) provided by operating activities

( 726,285)

10,394) 76,889)

(

70,974) 201,580


Page 5.2

URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2008 2008 $’000 INVESTING ACTIVITIES Interest received Investment in associates Investment in joint venture Purchase 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 Net cash provided by (used in) investing activities

256,345 ( 116,960) ( 7,935) ( 152,515) 86,824 ( 6,497) 1,048,750 5,092 ( 6,392)

82,263 ( 8,497) ( 214,630) ( 37,573) ( 80) ( 48,807) ( 4,793) 108,030 6,922 ( 11,168)

1,106,712

( 128,333)

FINANCING ACTIVITIES Dividends paid to minority interest Repayment of borrowings Loans received

( 65,792) ( 221,229) 25,061

Net cash (used in) provided by financing activities

( 261,960)

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

The Notes on Pages10 to 62 form an integral part of the Financial Statements.

2007 $’000

(

17,435) 236,650 219,215

118,467

292,462

1,690,086

1,388,447

50,942

9,177

1,859,495

1,690,086


Page 7

URBAN DEVELOPMENT CORPORATION INCOME STATEMENT YEAR ENDED MARCH 31, 2008

2008 $’000

Notes

Revenue

26(a)

Cost of sales Gross profit

2007 $’000

1,948,433

1,533,876

(1,697,230)

(1,111,423)

26(b)

251,203

422,453

Administrative expenses

( 134,632)

(

99,807)

Other operating expenses

( 252,943)

(

47,022)

(

(

2,653)

Finance cost Increase in fair value of investment properties Income from investments

28 6

695,926

6,900,649

29

296,275

65,457

853,517

7,239,077

86,000

172,806

767,517

7,066,271

PROFIT BEFORE TAXATION Taxation

2,312)

30

PROFIT FOR THE YEAR

The Notes on Pages 10 to 62 form an integral part of the Financial Statements.


Page 8 URBAN DEVELOPMENT CORPORATION STATEMENT OF CHANGES IN EQUITY YEAR ENDED MARCH 31, 2008

Notes

Capital Contribution $’000

Capital Reserve $’000

General Reserve $’000

Revenue Reserve $’000

Advances to the Government of Jamaica $’000

Total $’000

Balance at April 1, 2006 Adjustment to opening retained earnings

222,788 -

2,192,117 -

319,183 -

7,466,588 109,890

(292,924) -

9,907,752 109,890

Restated balance at April 1, 2006

222,788

2,192,117

319,183

7,576,478

( 292,924)

10,017,642

-

5,232,980

-

-

-

5,232,980

-

(

-

-

-

(

28,628)

(

16,888)

Revaluation increase on land and buildings Deferred tax

23

28,628)

Reserve from subsidiary written off

-

-

( 16,888)

-

-

Net income (expense) recognised directly in equity

-

5,204,352

( 16,888)

-

-

5,187,464

Net profit for the year

-

-

-

7,066,271

-

7,066,271

Total recognized income and expenses

-

5,204,352

( 16,888)

7,066,271

-

12,253,735

Transfer from capital reserve

-

36,617

-

-

Transfer to general reserve

-

-

20,731

20,731)

-

-

222,788

7,359,852

323,026

14,658,635

(292,924)

22,271,377

-

-

-

-

-

-

-

-

-

460,363

Restated balance at March 31, 2007 Revaluation increase on land and buildings Deferred tax

(

36,617)

23

-

535,952 (

75,589)

Net income recognised directly in equity

-

Net profit for the year

-

Total recognized income and expenses

-

Transfer from capital reserve

-

Transfer to general reserve

-

-

Balance at March 31, 2008

222,788

7,801,005

The Notes on Pages 10 to 62 form an integral part of the Financial Statements.

460,363 460,363 (

19,210)

(

535,952 (

75,589)

-

767,517

-

767,517

-

767,517

-

1,227,880

-

19,210

-

-

-

-

(292,924)

23,499,257

2,692 325,718

(

2,692)

15,442,670


Page 9 URBAN DEVELOPMENT CORPORATION STATEMENT OF CASH FLOWS YEAR ENDED MARCH 31, 2008 Note

2008 $’000

2007 $’000

OPERATING ACTIVITIES Net profit

767,517

7,066,271

Adjustments for: Depreciation of property, plant and equipment Tax charge Increase in fair value of investment properties Retirement benefit credit Net foreign exchange gain Increase in provision for future infrastructure costs on land sold Interest income Dividend income Impairment loss on recognised trade and other receivables Profit on disposal of property, plant and equipment

(

71,613 86,000 695,926) 35,150) 28,763) 15,482 41,283) 226,229) 44,451 2,551)

49,540 172,806 (6,900,649) ( 62,606) ( 15,654) 31,967 ( 49,803) 26,627 ( 2,435)

Operating cash flows before movements in working capital

(

44,839)

Decrease in trade and other receivables Increase in payables (Decrease) Increase in owed to regional companies

( 91,341) ( 59,652) 17,477

232,135 90,537 ( 44,276)

Cash (utilized in) generated by operations Tax paid

( 278,355) ( 37,102)

(

Net cash (used in) from operating activities

( 315,457)

( ( ( ( (

INVESTING ACTIVITIES Purchase of property, plant and equipment Interest received Dividend received Retirement benefit contributions Purchase of intangible assets Decrease in advances to subsidiary and associated companies Increase in inventory of land and development projects Joint venture Proceeds on disposal of investment property Proceeds on disposal of property, plant and equipment

(

23,164) 39,852 226,229 ( 10,455) ( 6,497) 28,690 383,529 ( 7,935) 44,000 2,551

Net cash from (used in) investing activities

676,800

316,064

594,460 32,731) 561,729

(

( ( ( (

15,905) 40,211 8,412) 4,793) 112,134 581,409) 214,630) 30,000 2,435

( 640,369)

FINANCING ACTIVITIES Repayment of borrowings Loan proceeds

( 235,134) -

235,134

Net cash (used in) from financing activities

( 235,134)

235,134

126,209

156,494

1,034,181

862,033

28,763

15,654

1,189,153

1,034,181

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

15

The Notes on Pages 10 to 62 form an integral part of the Financial Statements.


Page 10 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

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:

Name of subsidiary

Place of Incorporation (or registration) and operation

Proportion of ownership interest %

Proportion of voting power held %

Principal activity

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

100

Project management in the construction of roads and buildings

Portmore Newtown Development Company Limited

Jamaica

100

Caymanas Development Company Limited

Jamaica

100

100

Operation of golf course and management of agricultural and horticultural projects

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

Project management in housing development and infrastructure


Page 11 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

1

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, 2008. 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 Standards and Interpretations effective in the current year In the current year, the Group adopted IFRS 7 Financial Instruments: Disclosure which is effective for annual reporting periods beginning on or after January 1, 2007, and the consequential amendments to IAS 1, Presentation of Financial Statements. The impact of the adoption of IFRS 7 and the changes to IAS 1 has been to expand the disclosures provided in these financial statement regarding the Group’s financial instruments and management of capital (See Note 35). Four interpretations issued by the International Financial Reporting Committee are effective for the current period. These are: IFRIC 8 IFRIC 9 IFRIC 10 IFRIC 11

Scope of IFRS 2 Reassessment of Embedded derivatives Interim Financial Reporting and Impairment Group and Treasury Share Transaction

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.. Standards and Interpretations in issue not yet effective 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, 8,10,16, 18,19, 20, 23, 27, 28, 29, 31, 36, 38, 39, 40, 41 and IFRS 7 (Revised) IAS 1, 7, 17, 36, 39, IFRS 5 and 8 (Revised) IAS 1 and 32 (Revised)

Amendments resulting from May 2008 Annual Improvements to IFRS Amendments arising from April 2009 Annual Improvements to IFRS Amendments relating to disclosure of puttable instruments and obligations arising on liquidation

Effective for annual periods beginning on or after

January 1, 2009

January 1, 2009 January 1, 2009


Page 12 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

2

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d) Standards and Interpretations in issue not yet effective (Cont’d) Effective for annual periods beginning on or after IAS 27, 28, and 31 (Revised) IAS 1 (Revised)

IAS 23 (Revised) IAS 27 (Revised)

IAS 38 (Revised) IAS 39 (Revised) IAS 39 and IFRIC 9 (Revised) IFRS 1 (Revised)

Consequential amendments arising from amendments to IFRS 3 Presentation of Financial Statements Comprehensive revision including requiring a statement of comprehensive income Borrowing costs Consolidated and Separate Financial Statements Amendment relating to cost of an investment on first-time adoption Intangible assets – Amendments arising from April 2009 Annual Improvements to IFRS Eligible Hedged Items

Embedded Derivatives First-time Adoption of International Financial Reporting Standards Amendment relating to cost of an investment on first-time adoption IFRS 2 (Revised) Share-based Payment: Amendment relating to vesting conditions and cancellations Amendments arising from April 2009 Annual Improvements to IFRS IFRS 3 (Revised) Business Combinations – Comprehensive revision on applying the acquisition method IFRS 5 (Revised) Non-current Assets Held for Sale and Discontinued Operations Amendments resulting from May 2008 Annual Improvements to IFRS IFRS 7 (Revised) Financial Instruments: Disclosures - Amendments enhancing disclosures about fair value and liquidity risk New and Revised Interpretations IFRIC 9 (Revised) Reassessment of Embedded Derivatives – Amendments arising from April 2009 Annual Improvements to IFRS IFRIC 13 Customer Loyalty Programmes IFRIC 15 Agreements for the Construction of Real Estate IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC16 (Revised) Hedges of a Net Investment in a Foreign Operation – Amendments arising from April 2009 Annual Improvements to IFRS IFRIC 17 Distributions of Non-cash Assets to Owners IFRIC 18 Transfer of Assets from Customers

July 1, 2009

January 1, 2009 January 1, 2009

January 1, 2009 July 1, 2009 July 1, 2009 (i)

January 1, 2009 January 1, 2009 July 1, 2009 July 1, 2009 July 1, 2009 January 1, 2009

July 1, 2009 July 1, 2008 January 1, 2009 October 1, 2008 July 1, 2009 July 1, 2009 (ii)

(i) - effective for annual periods ending on or after June 30, 2009. (ii) - effective for transfers received on or after July 1, 2009. The Board of Directors has assessed the impact of all the new and revised Standards and Interpretations above and believe the following are relevant to the Group’s operations.


Page 13 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

2

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

Amendments specifically to IAS 1, 8, 10, 16, 18, 19, 27, 28, 31, 36, 38, 39, 40 and 41, 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 non-owners 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 income statement 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 20 (Revised) Accounting for Government Assistance and Disclosure of Government Assistance – resulting from the May 2008 annual improvements to IFRS. The revised standard requires disclosure regarding the accounting policy adopted for grants, including method of balance sheet presentation, the nature and extent of grants recognized in the financial statements and unfulfilled conditions and contingencies attaching to recognized grants. This standard is not expected to have any significant impact on the Group’s financial statements.

!

IAS 23 (Revised) Borrowing costs – The revision 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 as it currently has no qualifying assets.

!

IAS 27 (Revised) - Consolidated and Separate Financial Statements, under the amendments, the increases or decreases in a parent’s ownership interest that do not result in a loss of control, is accounted for as equity transactions of the consolidated entity. No gain or loss is recognised on such transactions and goodwill is not remeasured. Any difference between the change in the non-controlling investment and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent. Where there is loss of control of a subsidiary, any retained non-controlling investment at the date control is lost is remeasured to fair value. Losses of the acquired entities are allocated to the Minority interest even if they exceed the Minority’s share of equity in the subsidiary. The adoption of the revised standard is not expected to have any significant impact on the financial statements of the Group.

!

The amendments to IAS 39, Eligible Hedged Items, provide clarification in relation to identifying inflation as a hedged risk and hedging with options. These amendments are not expected to have any significant impact on the Group’s financial statements.

!

The amendments to IAS 39 and IFRIC 9, Embedded Derivatives, clarify the accounting for embedded derivatives when a financial asset is reclassified out of the ‘fair value through profit or loss’ (FVTPL) category as permitted by the October 2008 amendments to IAS 39, Financial Instruments: Recognition and Measurement. These amendments are not expected to have any significant 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.


Page 14 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

2

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

3

!

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 Statement of Compliance The Group’s financial statements have been prepared in accordance and comply with International Financial Reporting Standards (IFRS) and the Urban Development Corporation Act. Basis of preparation The Group’s financial statements have been prepared on the historical cost basis, except for the revaluation of freehold land, buildings and investment properties. 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 15 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

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 the income statement. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in capital reserve is transferred directly to revenue reserve. 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. 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 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. 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.


Page 16 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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 Intangible assets acquired separately are reported at cost less accumulated amortization and accumulated impairment losses. Amortization is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each annual reporting period with the effect of any changes in estimate being accounted for on a prospective basis. 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. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internallygenerated asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets acquired separately. Computer software are being amortised over three years, licensing fee is expensed in the period in which it is incurred. 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.


Page 17 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Goodwill (Cont’d) 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. Impairment of tangible and intangible assets 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 in profit or loss immediately, 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. 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.


Page 18 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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 the equity method. 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. 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. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current 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.


Page 19 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Taxation (Cont’d) Deferred tax 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. Current and deferred tax for the period Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognized directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination. 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.


Page 20 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial instruments (Cont’d) A financial liability is any liability that is: (a)

a contractual obligation: (i) (ii)

(b)

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

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

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

(ii)

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 21 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial instruments (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 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. Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.


Page 22 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 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. 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. 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 23 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

3

SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Revenue recognition( 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 allocations to the projects.

Deferred income Management fees related to projects funded by the Group will be amortised when the projects are completed and sold.


Page 24 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

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. 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 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. Deferred tax asset of $137.359 million has been provided for in these financial statements in regard to the impairment loss. 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. (a) 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 $304.827 million (2007: $242.867 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. (b) Fair value of property, plant and equipment and investment properties Included in the balance sheet are amounts of $11,832,838 million (2007: $10,631,159 million) and $14,019,798 million (2007: $13,493,665 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.


Page 25 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

4

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d) Key sources of estimation uncertainty (Cont’d) (c) 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 $71.362 million (2007: $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. (d) Provision for future infrastructure cost on land sold Included in the balance sheet is an amount for $228,350 million (2007: $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) Estimates to complete contracts already being undertaken by the Group; ii) The estimates costs to carry out known infrastructure works for which contracts have not yet been let; iii) Estimated costings have taken into account labour and material prices existing up to and during the month of March 2007 and 2008 iv) 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 26 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

5

PROPERTY, PLANT AND EQUIPMENT Leasehold Properties $’000

Motor Vehicles $’000

Furniture, Fixtures & Fittings $’000

Sewerage Treatment Plant $’000

The Group Freehold Land $’000 At cost or valuation April 1, 2006 Additions Transfers Adjustments Revaluation adjustments Disposals

Freehold Buildings $’000

Capital Work-in Progress $’000

Total $’000

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

2,956,978 597 ( 7,685) 1,982 322,358 ( 1,708)

54,192 -

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) 2,990 5,650,959 ( 9,667)

April 1, 2007 Additions Transfers Adjustments Revaluation Disposals Impairment

7,103,013 493,146 -

3,272,522 294 ( 1,017) 603,974 -

54,192 -

46,862 1,594 ( 3) ( 1,945) -

684,557 145,536 ( 65) ( 6,866) ( 17,880)

36,533 -

19,578 5,091 ( 818) 7,841 -

11,217,257 152,515 ( 1,835) 7,773 1,097,120 ( 8,811) ( 17,880)

March 31, 2008

7,596,159

3,875,773

54,192

46,508

805,282

36,533

31,692

12,446,139

Classified as follows: At cost At valuation

7,596,159

8,855 3,866,918

54,192 -

46,508 -

805,282 -

36,533 -

31,692 -

983,062 11,463,077

7,596,159

3,875,773

54,192

46,508

805,282

36,533

31,692

12,446,139

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

-

April 1, 2007 Charge for year Adjustments Revaluation adjustments Impairment On disposals

-

March 31, 2008

-

( (

(

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

228 -

31,827 6,275 ( 6,312)

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

17,940 2,701 -

-

508,695 120,937 ( 8) ( 36,197) ( 7,328)

36,266 66,318 99,069) -

228 26,282 -

31,790 5,826 ( 1,945)

497,174 41,023 ( 4) ( 7,064) ( 6,866)

20,641 2,701 -

-

586,099 142,150 4) 99,069) 7,064) 8,811)

3,515

26,510

35,671

524,263

23,342

-

( ( ( (

613,301

Net Book Value March 31, 2008

7,596,159

3,872,258

27,682

10,837

281,019

13,191

31,692

11,832,838

March 31, 2007

7,103,013

3,236,256

53,965

15,072

187,383

15,892

19,578

10,631,159


Page 27 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008 5

PROPERTY, PLANT AND EQUIPMENT (Cont’d) Motor Vehicles $’000

Furniture, Fixtures & Equipment $’000

The Corporation Freehold Land $’000 At cost or valuation April 1, 2006 Additions Disposals Transfers Adjustments Revaluation adjustments

Freehold Buildings $’000

Sewerage Treatment Plant $’000

Leasehold Property $’000

Capital Work-in Progress $’000

Total $’000

1,114,957 ( 63,110) 5,147,095

587,159 ( 7,685) 1,984 83,378

43,615 ( 6,196) 1,191 -

166,176 8,943 -

36,533 -

54,192 -

14,743 4,017 -

2,017,375 12,960 ( 6,196) ( 70,795) 3,175 5,230,473

April 1, 2007 Additions Disposals Transfers Adjustments Revaluation adjustments

6,198,942 309,182

664,836 ( 1,835) 165,490

38,610 1,594 ( 1,945) -

175,119 16,479 ( 56) -

36,533 -

54,192 -

18,760 5,091 -

7,186,992 23,164 ( 1,945) ( 1,835) ( 56) 474,672

March 31, 2008

6,508,124

828,491

38,259

191,542

36,533

54,192

23,851

7,680,992

Classified as follows: At cost At valuation

6,508,124

828,491

38,259 -

191,542 -

36,532 -

54,192 -

23,851 -

344,377 7,336,615

23,851

7,680,992

6,508,124

828,491

38,259

191,542

36,532

54,192

Depreciation April 1, 2006 Charge for year Eliminated on revaluation On disposals

-

123 34,849 ( 2,507) -

25,952 5,176 ( 6,196)

123,055 6,814 -

17,940 2,701 -

228 -

-

167,070 49,768 ( 2,507) ( 6,196)

April 1, 2007 Charge for year Eliminated on revaluation On disposals

-

32,465 28,815 ( 61,280) -

24,932 5,088 ( 1,945)

129,869 8,728 -

20,641 2,701 -

228 26,281 -

-

208,135 71,613 ( 61,280) ( 1,945)

March 31, 2008

-

-

28,075

138,597

23,342

26,509

-

Net Book Value March 31, 2008

6,508,124

828,491

10,184

52,945

13,191

27,683

23,851

7,464,469

March 31, 2007

6,198,942

632,371

13,678

45,250

15,892

53,964

18,760

6,978,857

216,523


Page 28 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

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, 2008. 6

INVESTMENT PROPERTIES (a)

Fair value of investment properties This represents open market value determined by qualified internal valuators. The Group 2008 2007 $’000 $’000 At beginning of the year Additions Transfers Disposal Increase in fair value during the year At year-end

13,493,668 ( (

69,185) 942,848)

6,273,769 80 44,902 ( 101,170)

The Corporation 2008 2007 $’000 $’000 10,379,647 ( (

69,185) 44,000)

3,464,280 44,718 ( 30,000)

1,538,163

7,276,087

695,926

6,900,649

14,019,798

13,493,668

10,962,388

10,379,647

The fair value of the Group’s Investment property at March 31, 2008 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 29 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

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 $216.327 million (2007: $198.154 million). Direct operating expenses arising in the investment properties during the period amount to $127.336 million (2007: $98.367 million).

(e)

During 2007, 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 (2008: NIL) (2007:$4,394.6 million).

INTANGIBLE ASSETS The Group and the Corporation 2008 2007 $’000 $’000 At beginning of the year Additions during the year Amounts capitalized during the year

73,727 6,497 ( 8,862)

68,934 4,793 -

71,362

73,727

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

INVESTMENTS IN ASSOCIATES The Group (a)

Principal activities in associates

Name of associate

Place of InGroup (or registration) and operation

Seacastles Limited

Jamaica

35

35

Construction and rental

Rutland Point Beach Resorts Limited

Jamaica

35

35

Construction and rental

Hellshire Marble 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

Proportion of ownership interest %

Proportion of voting power held %

Principal activity


Page 30 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

8

INVESTMENTS IN ASSOCIATES (Cont’d) The Group (Cont’d) (b)

Shareholdings and other transactions in associates and other companies Percentage Holdings Shares at cost: Seacastles Limited Rutland Point Beach Resorts Limited Hellshire Marble Limited Portmore Commercial Development Co. Ltd. Bloody Bay Hotel Development Limited Seamist Limited Shares at cost other companies Kingston Restoration Company Limited Rose Hall Resort Cost of investment Advances to: Seacastles Limited Rutland Point Beach Resorts Limited Hellshire Marble Limited Portmore Commercial Development Co. Ltd. Bloody Bay Hotel Development Limited Seamist Limited

Less: Provision for losses

35 35 40 49 50

-

2008 $’000

2007 $’000

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

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

272,719 25 109,890

272,719 25 -

382,634

272,744

36,515 48,041 66,846 ( 383) 132,495 1,193

34,855 49,047 65,381 ( 383) 114,226 1,193

284,707 ( 124,498)

264,319 ( 124,498)

160,209

139,821

Share of post acquisition profits

1,650,735

1,172,787

Loans to associated companies

108,799

104,308

2,302,377

1,689,660

Total investments in associated companies * Investment of less than $1,000.


Page 31 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

8

INVESTMENTS IN ASSOCIATES (Cont’d) The Corporation Details of the Corporation’s investments in subsidiaries and associates at March 31, 2008 are as follows: 2008 $’000

2007 $’000

425,887 214,495 109,915

458,858 210,214 109,915

750,297

778,987

2008 $’000

2007 $’000

National Hotels and Properties Limited Montego Freeport Limited Ocho Rios Commercial Centre Limited Runaway Bay Water Company Limited Negril Jamaica Estates Limited Hellshire Bay Development Company Limited Portmore Newtown Development Company Limited Urban Maintenance (1977) Limited Caymanas Development Company Limited Lilliput Development Corporation Limited

109,696 5,985 3,547 21 10 1 1 1 1 1

109,696 5,985 3,547 21 10 1 1 1 1 1

Total shares at cost

119,264

119,264

Advances Long-term loans

303,756 3,071

265,206 74,592

(a)

Investments in subsidiaries (Note 8(b)) Investments in associates (Note 8(c)) Investments in other companies (Note 8(d))

(b)

Shareholding and other transactions in subsidiaries Name of subsidiary

Less: Provision for losses

Total investments in subsidiary companies

(

306,827 204)

(

339,798 204)

306,623

339,594

425,887

458,858


Page 32 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

8

INVESTMENTS IN ASSOCIATES (Cont’d) The Corporation (Cont’d) (c)

Shareholdings and other transactions in associates 2008 $’000

2007 $’000

1 1 12,000

1 1 12,000

65,923 * *

65,923 * *

77,925

77,925

108,799

106,637

Seacastles Limited Rutland Point Beach Resorts Limited Hellshire Marble Limited Portmore Commercial Development Co. Ltd. Seamist Limited Bloody Bay Development Company Limited

36,516 48,041 66,846 ( 383) 1,193 56

34,856 49,047 65,381 ( 383) 1,193 56

Less: Provision for losses

152,269 (124,498)

150,150 (124,498)

27,771

25,652

214,495

210,214

2008 $’000

2007 $’000

25 109,890

25 109,890

109,915

109,915

Seacastles Limited Rutland Point Beach Resorts Limited Hellshire Marble Limited Portmore Commercial Development Company Limited Seamist Limited Bloody Bay Development Company Limited Cost of investment Loans Advances to:

Total investments in associated companies * Investment of less than $1,000. (d)

Investment in other companies

Investment in other companies Shares at Cost:- Kingston Restoration Company Limited - Rosehall Resort


Page 33 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

8

INVESTMENTS IN ASSOCIATES (Cont’d) Summarized audited financial information in respect of the Group’s associates are as follows: 2008 $’000 Total assets Total liabilities

9

2007 $’000

4,600,405 ( 639,105)

3,654,306 ( 626,897)

Net assets

3,961,300

3,027,409

Group’s share of associate’s net assets

1,983,333

1,513,805

Revenue

1,034,384

1,052,275

Profit for the period

940,658

957,580

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

464,024

471,262

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: The Group 2008 $’000 Ackendown Newtown Development Company Limited Stated capital Impairment loss

497,828 ( 412,077)

2007 $’000

497,828 ( 412,077)

The Corporation 2008 2007 $’000 $’000

497,828 ( 412,077)

497,828 ( 412,077)

85,751 599,745

85,751 596,622

85,751 599,745

85,751 596,622

685,496

682,373

685,496

682,373

18,137

18,137

18,137

18,137

Seaside at Rosehall Initial Investment Accumulated share of profits

287,226 711,765

287,226 707,647

287,226 -

287,226 -

Loans receivable

998,991 33,025

994,873 28,213

287,226 33,025

287,226 28,213

1,032,016

1,023,086

320,251

315,439

1,735,649

1,723,596

1,023,884

1,015,949

Loans

Port Royal Development Company

Total Investment


Page 34 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

9

INVESTMENTS IN JOINT VENTURES (Cont’d) (d)

(Cont’d) 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, 2008.

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 postretirement benefits are provided. The most recent valuation of plan assets and the present value of the defined benefit obligation at December 31, 2007 was carried out at May 7, 2008 by Mrs. Constantine Dalmadge Hall, 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, 2007 and March 31, 2008. 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 for the Group was $1,243.7 million (2007: $1,112.1 million) and for the Corporation $1,071.6 million (2007: $969.5 million) and that the actuarial valuation of these assets represented 113% (2007:121%) for the Group and 109% (2007: 121%) for the Corporation in excess of the present value of the obligation. (a)

The principal assumptions used for the purpose of the actuarial valuations were as follows: The Group and The Corporation Valuation at 2008 2007 % % Gross discount rate Expected return on assets Expected rate of salary increases Future pension increases Inflation

13.00 9.50 10.00 3.50 8.75

12.00 9.50 9.50 2.50 8.00


Page 35 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

10

RETIREMENT BENEFIT ASSET (Cont’d) (b)

Amounts included in the balance sheet in respect of the plan are as follows: The Group 2008 $’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

(c)

2007 $’000

( 583,688) 1,243,660

( 490,420) 1,127,554

( 511,780) 1,071,628

(438,497) 969,488

659,972 ( 225,032)

637,134 ( 240,107)

559,848 ( 179,504)

530,991 (181,290)

( 130,113)

( 154,160)

( 124,587)

(139,549)

255,757

210,152

304,827

242,867

Amounts recognized in income in respect of the plan are as follows: The Group 2008 $’000 Current service cost - employer Interest costs Expected return on plan assets Recognized actuarial losses Increase (Reduction) in income due to limit Total included in Employee benefit expense

20,527 61,428 ( 100,953) ( 8,056) 3,978 ( 23,076)

2007 $’000

19,968 57,483 ( 93,426) ( 7,644)

7,227 40,461 ( 77,964) ( 6,045)

(

604)

( 11,531)

( 26,285)

( 41,022)

( 35,150)

( 62,606)

110,457

138,559

Movements in the net assets in the year were as follows: The Group 2008 $’000

(e)

The Corporation 2008 2007 $’000 $’000

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

The actual return on plan assets was (d)

The Corporation 2008 2007 $’000 $’000

2007 $’000

The Corporation 2008 2007 $’000 $’000

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

242,867 35,752 6,392 19,816

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

210,152 35,150 10,455 -

139,134 62,606 8,412 -

Balance, March 31

304,827

242,867

255,757

210,152

Changes in the present value of the defined benefit obligation are as follows: The Group 2008 $’000 Opening defined benefit obligation Adjustment to opening defined benefit obligation Service cost Employees Employer Interest cost Actuarial gains Benefits paid Settlements Closing defined benefit obligation

2007 $’000

The Corporation 2008 2007 $’000 $’000

490,420

345,304

438,497

300,901

11,859 27,131 22,445 63,485 777 ( 32,428) -

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

23,698 19,968 57,483 3,609 ( 6,278) ( 25,197)

17,995 7,227 40,461 82,472 ( 10,559) -

583,689

490,420

511,780

438,497


Page 36 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

10

RETIREMENT BENEFIT ASSET (Cont’d) (f)

Changes in the fair value of plan assets are as follows: The Group 2008 $’000 Opening fair value of plan assets Contributions Employees Employer Expected return on plan assets Benefits paid Actuarial gain Settlements Closing fair value of plan assets

The Corporation 2008 2007 $’000 $’000

2007 $’000

1,112,082 26,818 11,992 107,497 ( 7,232) 17,700 ( 25,197)

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

969,488 23,698 10,455 93,426 ( 6,278) 6,036 ( 25,197)

1,243,660

1,127,554

1,071,628

810,421 18,073 8,412 77,964 (10,559) 65,177 969,488

(g) Retirement benefit experience adjustments The Group 2008 $’000

2007 $’000

2006 $’000

2005 $’000

2004 $’000

Present value of defined benefit obligation Fair value of plan assets

583,688 (1,243,660)

490,420 (1,127,554)

341,396 (919,737)

284,780 (764,327)

213,470 (611,209)

Surplus in the plan

( 659,972)

(

637,134)

(578,341)

(479,547)

(397,739)

Experience adjustment to plan liability

34,194

19,985

47,691

8,516

Experience adjustment to plan assets

17,531

61,223

90,034

108,252

(

6,026) 34,992

The Group expects to make contribution of $9.879M to the deferred benefits plan during the next financial year. The Corporation 2008 $’000

2007 $’000

2006 $’000

2005 $’000

2004 $’000

Present value of defined benefit obligation Fair value of plan assets

511,780 (1,071,627)

438,497 (969,488)

300,902 (810,422)

254,643 (682,379)

184,850 (528,995)

Surplus in the plan

( 559,847)

(530,991)

(509,520)

(427,736)

(344,145)

Experience adjustment to plan liability

30,687

41,483

12,892

16,615

Experience adjustment to plan assets

29,307

62,612

69,972

118,163

(

5,522) 29,853

The Corporation expects to make a contribution of $ 23.917M to the defined benefits plan during the next financial year. (h) The fair value of plan assets at the balance sheet date is analysed as follows: The Group 2008 2007 $’000 $’000 Equity fund Fixed income fund Mortgage and real estate Other assets

The Corporation 2008 2007 $’000 $’000

65,685 888,227 262,053 27,695

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

57,888 782,793 230,947 -

50,655 727,099 191,734 -

1,243,660

1,127,554

1,071,628

969,488


Page 37 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

11

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. The Group and the Corporation 2008 2007 $’000 $’000

(b)

Balance at April 1, Revenue deferred in respect of management fees charged on projects charged on projects funded by the Group

31,051

30,710

135,794

341

Balance at March 31,

166,845

31,051

2008 $’000

2007 $’000

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

Inventory at cost - Land and development projects Less: Deferred management fees (Note 11(a))

2,539,025 ( 166,845) 2,372,180

(

2,715,740 31,051) 2,684,689

Management’s estimate of net realisable value which was based on independent valuations during 2008, was $1.989 billion (2007: $1.860 billion) in excess of cost. Management has not revalued land classified as development projects. 12

INVENTORIES The Group

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

2008 $’000

2007 $’000

16,009 2,495 7,896 15,175

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

41,575

44,492


Page 38 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

13

TRADE AND OTHER RECEIVABLES These comprise: The Group 2008 2007 $’000 $’000 Trade receivables Real Estate sales receivables

Less: Provision for doubtful debt

Other receivables and prepayment Amount advanced on specific projects Mobilisation advances Prepayments Interest receivable Other Less : Provision for doubtful debt

The Corporation 2008 2007 $’000 $’000

433,679 458,236

532,248 203,678

304,094 458,236

280,767 203,678

819,915

735,926

762,330

484,445

(231,432)

(193,296)

(202,536)

(179,029)

660,483

542,630

559,794

305,416

72,108 1,254,897

118,312 17,543 65,251 13,518 435,811

41,882 266,705

118,312 17,543 42,233 13,518 208,181

1,327,005 ( 135,241)

650,435 ( 114,297)

308,587 (135,241)

399,787 (114,297)

1,191,764

536,138

173,346

285,490

1,852,247

1,078,768

733,140

590,906

The average credit period on the sale of goods is 30 days. Interest at a rate of 20% per annum is charged on outstanding amounts effective on the date payment was due. The Corporation and its subsidiaries has fully provided for all receivables 91 days and over, because historical experience is such that receivables that are past due 91 days and beyond are generally not recoverable. Based on the nature of the Corporation’s and its subsidiaries business no credit checks are performed for individuals purchasing houses/land. Additional projects are awarded primarily to government-owned companies. Included in the Corporation and its subsidiaries trade receivable balance are debtors with a carrying amount of $104.160 million (2007:$71.866 million) which are past due at the reporting date for which the Corporation and its subsidiaries has not provided as there has not been significant change in credit quality and the amounts are still considered recoverable. The Corporation and its subsidiaries does not hold any collateral over these balances. The average age of these receivables is 61 days (2007: 61 days). Ageing of past due but not impaired: The Group 2008 2007 $’000 $’000 31 – 60 days 61 – 90 days

The Corporation 2008 2007 $’000 $’000

93,858 10,302

24,620 47,246

84,727 3,391

18,981 38,240

104,160

71,866

88,118

57,221


Page 39 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

13

TRADE AND OTHER RECEIVABLES (Cont’d) Movements in allowance for doubtful debts: The Group

Trade $’000 Balance at beginning of year Amounts written off during the year Increase in allowance recognized in profit and loss Balance at end of the year

2008 Other receivables $’000

Trade $’000

193,296 -

114,297 -

185,409 -

38,136

20,944

7,887

231,432

135,241

193,296

2007 Other receivables $’000 155,298 (41,001) 114,297

The Corporation

Trade $’000 Balance at beginning of year Amounts written off during the year Increase in allowance recognized in profit and loss Balance at end of the year

2008 Other receivables $’000

Trade $’000

2007 Other receivables $’000

179,029 -

114,297 -

175,025 (22,623)

155,298 (41,001)

23,507

20,944

26,627

-

202,536

135,241

179,029

114,297

In determining the recoverability of a trade receivable, the Corporation and its subsidiaries considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Corporation and its subsidiaries believes that there is no further credit provision required in excess of allowance for doubtful debts. Ageing of impaired trade receivables: The Group

91 – 120 days 120 days

The Corporation 2008 2007 $’000 $’000

2008 $’000

2007 $’000

10,248 607,546

39,888 141,003

10,248 607,546

39,888 141,003

617,794

180,891

617,794

180,891


Page 40 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

14

AVAILABLE-FOR-SALE INVESTMENTS

Government of Jamaica securities maturing within 12 months

2008 $’000

2007 $’000

36,239

123,063

The weighted average effective interest rate on Government of Jamaica securities is 6.85% (2007: 11.75%) Included in the investment is interest receivable of $1,239,000 (2007:$3,199,000). 15

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: The Group 2008 $’000 Cash at bank and short-term deposits Bank overdraft Less: interest receivable deposits

2007 $’000

1,876,099 1,159) 1,874,940 ( 15,445)

1,692,244 1,692,244 ( 2,158)

1,859,495

1,690,086

2008 $’000

2007 $’000

(

The Corporation

Cash and bank balances Short-term deposit

Less: Interest receivable - deposits

(

144,933 1,059,169

588,563 445,618

1,204,102

1,034,181

14,949) 1,189,153

1,034,181

Interest rates on bank deposits range from 3.0% to 5.0% (2007: 3.0% to 5.0%) for investments in United States dollars and 3.0% to 11% (2007: 3% to 11%) for investments in Jamaican dollars.


Page 41 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

16

CAPITAL RESERVE (a)

This comprises: The Group 2008 2007 $’000 $’000 Surplus on valuation of fixed assets In prior years In current year Land and building Deferred tax liability

9,863,739

(

940,070 173,217)

(

10,630,592 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

(

17,869)

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

(

501,610)

Capital distribution

( 168,865)

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

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

The Corporation 2008 2007 $’000 $’000

4,442,310

8,081,521

5,505,012 83,583)

(

9,863,739

8,541,884

(

17,869)

( 501,610) -

(

535,952 75,589)

17,869)

( 201,237) -

2,877,169

(

5,232,980 28,628) 8,081,521

(

17,869)

( 201,237) -

(

524,954) 266,494

( 488,337) ( 36,617)

( 502,563) ( 19,210)

( 465,946) ( 36,617)

(

258,460)

( 524,954)

( 521,773)

( 502,563)

386,515 4,967

386,515 4,967

10,075,270

9,210,788

7,801,005

7,359,852

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

The Group 2008 $’000

2007 $’000

The Corporation 2008 2007 $’000 $’000

The Parent

266,494

36,617

19,210

36,617

Total

266,494

36,617

19,210

36,617


Page 42 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

17

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.

18

REVENUE RESERVE This comprises:

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

19

2008 $’000

2007 $’000

6,208,470 339,683 8,893,256

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

15,441,409

15,318,222

3,433,288 292,866 1,884,408

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

5,610,562

4,025,283

21,051,971

19,343,505

62,080

62,080

21,114,051

19,405,585

ADVANCES TO THE GOVERNMENT OF JAMAICA This comprises: The Group and the Corporation 2008 2007 $’000 $’000 Advances to the Government of Jamaica (Note 19 (a)) Real estate receivable (Note 19 (b))

93,674

93,6

199,250

199,250

292,924

292,924

The amounts in Notes 19(a) and 19(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 43 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

20

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

21

2008 $'000

2007 $'000

48,307

48,307

334 1 50,676

334 1 50,676

99,318

99,318

1,288,973

949,189

1,388,291

1,048,507

373,836

460,308

1,762,127

1,508,815

LONG-TERM BORROWINGS

(a) Loan (b) Redeemable convertible cumulative preference shares (c) Redeemable preference shares Less: Current Portion

2008 $’000

2007 $’000

76,977 333 198

273,343 333 -

77,508 31,921

273,676 253,150

45,587

20,526

(a) This represents the balance owing by a subsidiary on long-term loan facilities which were obtained for certain specified refurbishment projects. The facilities attract interest at a fixed rate of 13%. The facilities are secured by : (i) promissory notes to the value of the facilities; (ii) a mortgage of a portion of the company’s land; and (iii) a debenture creating a fixed and floating charge over present and future assets of the Corporation The loan is repayable by installments until year 2016. (b) The balance represents10% redeemable convertible cumulative preference shares. At March 31, 2008 there were arrears of cumulative preference dividends amounting to $1.2 million (2007: $1.1 million). No provision has been made for this amount.


Page 44 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

21

LONG-TERM BORROWINGS (Cont’d) (c) Redeemable preference shares 2008 $’000 10% Redeemable cumulative preference shares

198

2007 $’000 -

The preference shares could have been redeemed on March 31, 1993; however, no redemption has taken place up to March 31, 2008. They may be redeemed at a premium at anytime. At March 31, 2008, there were arrears of cumulative preference dividends amounting to $416,210 (2007: $396,910) for which no provision has been made in the financial statements. No decision has yet been taken in respect of the right to these arrears of preference dividends, which the Urban Development Corporation agreed to waive so long as a long-term loan remained outstanding. However, that loan was fully repaid in the financial year ended March 31, 1997. 22

PROVISION FOR FUTURE INFRASTRUCTURE COST ON LAND SOLD The Group and the Corporation 2008 2007 $’000 $’000 212,868 180,901 15,482 31,967

At April 1 Additional provision for the year At March 31 23

228,350

212,868

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 $1.628 billion (2007: $1.173 billion). The Group 2008 $’000

2007 $’000

The Corporation 2008 2007 $’000 $’000

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

2,033,795 ( 427,581)

1,554,072 ( 433,450)

(443,554) 264,849

(327,053) 282,842

1,606,214

1,120,622

(178,705)

( 44,211)


Page 45 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

23

DEFERRED TAX LIABILITIES (Cont’d) The movement during the year in the Group’s deferred tax position was as follows: The Group 2008 $’000

2007 $’000

The Corporation 2008 2007 $’000 $’000

At April 1, 2007 Charged (credited) to income for the year Charged to equity for the year

1,120,622

887,887

( 44,211)

109,872

251,179 234,413

112,616 120,119

( 58,905) ( 75,589)

(125,454) ( 28,629)

At March 31, 2008

1,606,214

1,120,622

(178,705)

( 44,211)


Page 46 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

23

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. The Group Deferred Tax Liabilities Unrealized Foreign Exchange Gains $’000

Revaluation Surplus $’000

Retirement Benefit Asset $’000

Interest Receivable $’000

Fair value Adjustments $’000

Accelerated Tax Depreciation $’000

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

-

-

At April 1, 2007 Charged (credited) to income for the year Charged to equity for the year

1,104,938

80,810

2,730

1,542

11,000

20,652

At March 31, 2008

1,343,755

119,520

227,817

-

-

-

6,955 (

564)

599 357,097 216,508

-

101,462

6,391

(

946)

Total $’000

120,119 1,554,072

(1,340)

245,310 234,413

67

6,529

-

573,672

8,313

202

Accrued vacation pay $’000

2,033,795

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

Retirement benefit obligations $’000

Tax losses carried forward $’000

Unrealised exchange gains $’000

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

185,858

146

116,845

-

9,227

137,359

449,435

-

( 28,247)

-

3,473

-

( 15,985)

At April 1, 2007 (Charged) credited to income for the year

194,647

146

88,598

-

12,700

137,359

433,450

( 21,893)

(146)

15,307

-

863

172,754

-

103,905

-

13,563

At March 31, 2008

8,789

Impairment loss on joint venture $’000

137,359

Total $’000

(

5,869) 427,581


Page 47 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

23

DEFERRED TAX LIABILITIES (Cont’d) The Corporation Deferred tax liabilities Revaluation Surplus Buildings $’000

Revaluation of Investment Properties $’000

Retirement Benefit Assets $’000

Interest Receivable $’000

Total $’000

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

71,099

86,470

46,378

4,398

208,345

28,629

66,298 -

23,673 -

108 -

90,079 28,629

At March 31, 2007 Charged to income for the year Charged to equity

99,728 75,589

152,768 25,233 -

70,051 15,202 -

4,506 477 -

327,053 40,912 75,589

175,317

178,001

85,253

4,983

443,554

Tax Losses $’000

Impairment loss on Joint Venture $’000

Total $’000

At March 31, 2008 Deferred tax assets

Accrued Vacation Leave $’000

24

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

8,776

At March 31, 2007 (Charged) Credited to income for the year

11,980

At March 31, 2008

12,733

3,204

753

Depreciation Charges in Excess of Capital allowances $’000 135,098 (

1,595)

36,984

137,359

318,217

(36,984)

-

( 35,375)

133,503

-

137,359

282,842

( 18,746)

-

-

( 17,993)

114,757

-

137,359

264,849

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, 2008 the shares in the regional companies had not been transferred to the Group. The net deficit in the income statement at March 31, 2008 aggregated $3.513 million (2007:$3.513 million) which amounts have not been incorporated in these financial statements.


Page 48 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

25

TRADE AND OTHER PAYABLES These comprise: The Group 2008 $’000 Amounts to be disbursed on specific projects Trade payables Contract payables and retentions Deposits on sale of real estate Deferred income Accruals Others

26

2007 $’000

The Corporation 2008 2007 $’000 $’000

314,232 108,249 58,641 289,698 208,680 402,041

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

314,232 58,641 185,796 153,310 194,875

258,015 53,689 305,198 136,192 55,696 157,772

1,381,541

1,459,686

906,854

966,562

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

Gross income This represents the gross value of Group and Corporation sales to third parties and comprises:The Group

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

The Corporation 2008 2007 $’000 $’000

2008 $’000

2007 $’000

676,291 620,178 222,404 626,183 40,397 881 54,059 190,135 75,286 125,170 215,305

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

620,178 145,077 626,183 40,397 881 54,059 144,140 1,814 144,942 170,762

356,773 135,027 617,923 38,301 1,483 25,170 163,849 863 185,220 9,267

2,846,289

2,481,340

1,948,433

1,533,876


Page 49 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

26

REVENUE (Cont’d) (b)

Gross operating profit The Group 2008 $’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

2007 $’000

The Corporation 2008 2007 $’000 $’000

407,511 77,682 212,858 254,583 14,862 ( 23,269) ( 605,345) 166,316 ( 52) 40,613 59,724 215,305

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

77,682 130,599 254,583 14,862 ( 23,269) (605,345) 144,140 ( 52) 1,814 85,427 170,762

138,742 125,668 304,994 15,122 ( 15,924) (464,407) 163,849 ( 1,581) 863 145,860 9,267

820,788

1,042,091

251,203

422,453

PROFIT (LOSS) FROM OPERATIONS The Group 2008 $’000

2007 $’000

The Corporation 2008 2007 $’000 $’000

The profit (loss) from operations for the year has been arrived at after charging: Net foreign exchange gains Depreciation of property, plant and equipment Employee benefit expense 28

( 40,898) 115,868 821,399

( 24,107) 120,709 708,850

( 28,763) 71,613 617,507

( 15,654) 49,540 519,173

FINANCE COSTS The Group 2008 $’000 Interest on bank overdrafts and loans Foreign exchange losses

2007 $’000

The Corporation 2008 2007 $’000 $’000

10,394 2,461

7,390 -

2,312 -

2,653 -

12,855

7,390

2,312

2,653


Page 50 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

29

INCOME FROM INVESTMENTS The Group 2008 2007 $’000 $’000 Dividend income Interest on bank deposits Foreign exchange gains on deposits

30

The Corporation 2008 2007 $’000 $’000

226,229 41,310 40,898

49,803 24,107

226,229 41,283 28,763

49,803 15,654

308,437

73,910

296,275

65,457

INCOME TAX EXPENSE (a)

Total charge for the year comprises: The Group 2008 2007 $’000 $’000 Income tax at 33!% of taxable income Deferred tax adjustment (Note 23)

The Corporation 2008 2007 $’000 $’000

67,624 251,179

105,165 112,616

27,095 58,905

47,352 125,454

318,803

217,781

86,000

172,806

Subject to agreement with the Commissioner, Taxpayer Audit and Assessment, tax losses of the Corporation and its subsidiary companies amounting to $296.658 million (2007: $366.32 million) are available for set-off against future taxable profits of those companies. No deferred tax asset has been recognized in respect of $3.33 million (2007: $236.52 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: The Group 2008 $’000 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

2007 $’000

The Corporation 2008 $’000

2007 $’000

2,153,945

8,848,016

853,517

7,239,077

717,982

2,949,339

284,506

2,413,026

7,127 -

2,429 -

12,214 ( 165,252) ( 1,373)

2,596 ( 157,087) ( 232,638)

( 280,746) 35,978

(2,303,579) ( 40,850)

318,803

217,781

(202,001) ( 3,632) 86,000

(2,244,742) 2,093 172,806


Page 51 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

31

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: 2008 2007 $’000 $’000 The Parent The subsidiary companies Associated companies

32

767,517 501,403 495,757

7,066,271 357,934 471,262

1,764,677

7,895,467

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 2008 $’000 Advances receivable (net) Advances payable Loans

147,400 ( 383) (108,799) 38,218

2007 $’000

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

Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: The Group 2008 $’000 Short term benefits 33

63,556

2007 $’000 45,463

The Corporation 2008 2007 $’000 $’000 58,880

32,675

NON-CASH TRANSACTIONS The following non-cash transactions are not reflected in the statement of cash flows: Capital reserve increased by $864.42M and of this amount $766.853 (net of deferred tax) was eliminated against property, plant and equipment. This resulted from the revaluation of property, plant and equipment in the Group.


Page 52 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

34

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:

35

(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.

(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.

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liabilities and equity instrument are disclosed in note 3 to the financial statements. Categories of financial instruments The following table sets out the financial instruments as at the balance sheet date: The Group 2008 2007 $’000 $’000 Financial Assets Investments : available for sale Loans and receivables (including cash and bank balances)

Financial Liabilities Other liabilities

36,239

-

The Corporation 2008 2007 $’000 $’000

-

-

3,656,238

2,705,761

1,763,896

1,339,597

3,692,477

2,705,761

1,763,896

1,339,597

1,289,541

1,651,414

791,037

1,166,536


Page 53 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) Financial risk management policies and objectives The Group has financial risk management policies which are directed by its shareholders. These policies set out the Group’s overall business strategies and its risk management philosophy. The financial risk management programme seeks to minimize potential adverse effects of financial performance of the Group. The Board of Directors, directed by the shareholders, provides principles for overall financial risk management and policies covering specific areas, such as market risk (including currency risk, fair value interest rate risk and other price risk), credit risk, liquidity risk and cash flow interest rate risk. Periodic reviews are undertaken to ensure that the policy guidelines are complied with. The Group’s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. There has been no change during the year to the Group’s exposure to these financial risks or the manner in which it manages and measures the risk. The Group does not hold or issue derivative financial instruments. Exposures are measured using sensitivity analyses indicated below: (a)

Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group’s principal financial assets are cash and bank balances and trade receivables. Management of Credit Risk The credit risk relating to cash and bank balances is mitigated by the maintenance of deposits only with reputable financial institutions with high credit ratings. The Group’s credit risk is primarily attributable to its trade receivable. 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 contractors. Trade receivables presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The Group’s risk regarding advances to specific projects and mobilization advances are limited because the Group’s primary customers are Government-owned companies. Maximum Exposure to Credit Risk The Group’s maximum exposure to credit risk at year end was as follows:

Trade and other receivables Cash and bank balances

2008 $’000

2007 $’000

1,780,139 1,876,099

1,013,517 1,692,244

3,656,238

2,705,761


Page 54 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) (a)

Credit risk (Cont’d) Maximum Exposure to Credit Risk (Cont’d) The Corporation’s maximum exposure to credit risk at year end was as follows: 2008 $’000 Trade receivables - non-related parties Cash and bank balances

(b)

2007 $’000

559,794 1,204,102

305,416 1,034,181

1,763,896

1,339,597

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 exposure to market risk includes foreign currency and interest rate risk that are managed as follows: (i)

Foreign currency risk Foreign currency risk is the risk of loss arising from adverse movements in foreign exchange rates. The Group is exposed to foreign currency risk as a result of transactions that are denominated in a currency other than the Jamaican dollar. The currency giving rise to the exposure is the United States dollar.

Management of Foreign Currency Risk The Group manages foreign currency risk by ensuring that the exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency position. Management further manages this risk by maximizing foreign currency earnings and holding foreign currency balances. The Group 2008

Total asset Total liabilities Net assets

2007

US$ $’000

J$ $’000

US$ $’000

J$ $’000

19,796 11,011

1,406,150 782,752

14,364 2,913

969,454 197,504

8,785

623,398

11,451

771,950


Page 55 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) The Corporation (b)

Market risk (Cont’d) (i)

Foreign currency risk (Cont’d) Management of Foreign Currency Risk (Cont’d) The Corporation 2008

2007

US$ $’000

J$ $’000

US$ $’000

J$ $’000

Total asset

3,381

239,208

1,259

80,963

Net assets

3,381

239,208

1,259

80,963

Foreign currency sensitivity The following table details the Group’s sensitivity to a 5% increase or decrease in the Jamaican dollar against the relevant foreign currencies. 5% represents management’s assessment of the reasonably possible change in foreign exchange rates. The table indicates the Jamaican dollar to which the Group had exposure on its monetary assets and liabilities and its forecast cash flows. The sensitivity analysis represents outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 5% change in foreign currency rates. The sensitivity analysis includes accounts receivable, cash resources, accounts payable, obligation under finance lease and short term loans. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variable, variables had to be on the individual basis. It should be noted that movements in these variables are non linear. The Group 2008

Currency US dollar

2007

Change in currency rate %

Effect on net profit $’000

Change in currency rate %

Effect on net profit $’000

5

31,170

5

38,598

Change in currency rate %

Effect on net profit $’000

Change in currency rate %

Effect on net profit $’000

5

11,960

5

4,048

The Corporation 2008

Currency US dollar

2007


Page 56 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) (b)

Market risk (Cont’d) (ii)

Interest rate risk 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.

Management of interest rate risk The Group is exposed to interest rate risk through borrowings and deposits held at fixed and variable rates. The Corporation manages these risks by ensuring that an appropriate mix is maintained. Additionally, the risk position is evaluated regularly. The Group’s exposure to interest rates on financial assets and financial liabilities are detailed in the Liquidity risk management section of this note.


Page 57 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) (b)

Market risk (Cont’d) (ii) Interest rate risk (Cont’d) Management of interest rate risk (Cont’d) The Group 2008 Within 1 Month $’000

1 to 3 Months $’000

3 to 12 Months $’000

1 to 5 Years $’000

Non-interest Bearing $’000

Assets Investments: available for sale security Receivables Cash and bank

45,306

541,099

36,239 -

-

1,780,139 1,289,694

36,239 1,780,139 1,876,099

Total financial assets

45,306

541,099

36,239

-

3,069,833

3,692,477

Total $’000

Liabilities Long-term borrowings Trade and other payables Owed to regional companies

-

-

33,080 -

45,587 -

1,172,861 38,013

78,667 1,172,861 38,013

Total financial liabilities

-

-

33,080

45,587

1,210,874

1,289,541

Interest sensitivity gap

45,306

541,099

3,159

(45,587)

1,858,959

2,402,936

Within 1 Month $’000

1 to 3 Months $’000

Assets Receivables Cash and bank

258,160

88,118

-

Total financial assets

258,160

88,118

-

3 to 12 Months $’000

2007 1 to 5 Years $’000

-

Non-interest Bearing $’000

Total $’000

1,013,517 1,345,966

1,013,517 1,692,244

2,359,483

2,705,761

Liabilities Long-term borrowings Owed to regional companies Payables

-

-

253,150 -

20,526 -

20,536 1,357,202

273,676 20,536 1,357,202

Total financial liabilities

-

-

253,150

20,526

1,377,738

1,651,414

(253,150)

(20,526)

981,745

1,054,347

Interest sensitivity gap

258,160

88,118


Page 58 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) (b)

Market risk (Cont’d) (ii) Interest rate risk (Cont’d) Management of interest rate risk (Cont’d) The Corporation Within 1 Month $’000

1 to 3 Months $’000

3 to 12 Months $’000

2008 1 to 5 Years $’000

Non-interest Bearing $’000

Total $’000

Assets Receivables Cash and bank

-

238,886

-

-

559,794 965,216

559,794 1,204,102

Total financial assets

-

238,886

-

-

1,525,010

1,763,896

Liabilities Trade and other payables Owed to regional companies

-

-

-

-

753,283 37,754

753,283 37,754

Total financial liabilities

-

-

-

-

791,037

791,037

Interest sensitivity gap

-

-

-

733,973

972,859

238,886

2007 Within 1 Month $’000

1 to 3 Months $’000

3 to 12 Months $’000

1 to 5 Years $’000

Non-interest Bearing $’000

Total $’000

Assets Receivables Cash and bank

-

64,493

-

-

305,416 969,688

305,416 1,034,181

Total financial assets

-

64,493

-

-

1,275,104

1,339,597

Liabilities Short-term borrowings Owed to regional company Payables

-

-

235,134 -

-

20,536 910,866

235,134 20,536 910,866

Total financial liabilities

-

-

235,134

-

931,402

1,166,536

Interest sensitivity gap

-

(235,134)

-

343,702

173,061

64,493


Page 59 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) (b)

Market risk (Cont’d) (ii) Interest rate risk (Cont’d) Average effective yields by the earlier of the contractual repricing or maturity dates:

Immediately Rate Sensitive % Investments: availablefor- sale security

-

Cash and bank balance

8.1

Long-term borrowings

Within 3 Months %

The Group 2008 3 to 12 Months %

1 to 5 Years %

Over 5 Years %

Weighted Average %

-

6.85

-

-

6.85

10.89

-

-

-

10.67

-

-

13.00

13.00

-

13.00

Immediately Rate Sensitive %

Within 3 Months %

2007 3 to 12 Months %

1 to 5 Years %

Over 5 Years %

Weighted Average %

10.58

8.9

-

-

-

10.15

-

10.20

13.00

-

10.40

Immediately Rate Sensitive %

Within 3 Months %

The Corporation 2008 3 to 12 Months %

1 to 5 Years %

Over 5 Years %

Weighted Average %

-

10.98

-

-

-

10.98

Immediately Rate Sensitive %

Within 3 Months %

2007 3 to 12 Months %

1 to 5 Years %

Over 5 Years %

Weighted Average %

Cash and bank balance

-

10.48

Short-term borrowings

-

Cash and bank balance Long-term borrowings

Cash and bank balance

-

-

-

-

-

10.48

10.00

-

-

10.00

Interest rate sensitivity The sensitivity analysis below has been determined based on the exposure to interest rates financial instruments at the balance sheet date. The analysis has been prepared on the assumption that the floating rate assets and liabilities at the balance sheet date have been outstanding for the whole year. A 5% increase or decrease represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 5% higher/lower and all other variables were held constant, the Group’s results for the year ended March 31, 2008 would have decreased/increased by $25.4 million (2007: $3.6 million) and the Corporation decrease/increase by $11.9 million (2007: $8.5 million). This is attributable to the exposure to interest rate on its short-term loan, cash resources and borrowings.


Page 60 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) (c)

Liquidity risk Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due. Prudent liquidity risk management implies maintaining sufficient cash balances to meet the Group’s monthly operating needs. Management of liquidity risk The Group’s liquidity management process includes: (i) Monitoring future cash flows and liquidity regularly. This incorporates an assessment of expected cash flows through forecasting on a monthly basis; and (ii) Preparation of an annual budget which is reviewed and approved by the Board of Directors. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Group and its exposure to changes in interest rates and exchange rates. Undiscounted cash flows of financial liabilities The maturity profile of the Group’s financial liabilities at year end based on contractual undiscounted payments was as follows: The Group 2008 Weighted average effective interest rate

Interest bearing Non-interest bearing

Less than 1 Month

%

$’000

13% Nil

-

1 to 3 Months $’000 -

3 to 12 Months

1 to 5 Years

Total

$’000

$’000

$’000

35,230

95,633 1,210,874 1,306,507

170,941

881,927

156,016

60,403 1,990

170,941

881,927

191,246

62,393

3 to 12 Months $’000

1 to 5 Years $’000

Total $’000

266,061

28,531

294,592

2007 Weighted average effective interest rate % Interest bearing Non-interest bearing

10.40

Less than 1 Month $’000 -

1 to 3 Months $’000 -

193,038

1,006,265

176,184

193,038

1,006,265

442,245

22 1 30,782

1,377,738 1,672,330


Page 61 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

35

FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d) (c)

Liquidity risk (Cont’d) Management of liquidity risk (Cont’d) The Corporation 2008 Weighted average effective interest rate

Non-interest bearing

Less than 1 Month

%

$’000

Nil

-

1 to 3 Months $’000 791,037

3 to 12 Months

1 to 5 Years

Total

$’000

$’000

$’000

-

-

791,037

791,037

791,037

2007 Weighted average effective interest rate % Interest bearing

10

Non-interest bearing

(d)

Less than 1 Month $’000

1 to 3 Months $’000

3 to 12 Months $’000

1 to 5 Years $’000 -

Total $’000

-

-

246,890

-

910,866

20,536

931,402

910,866

267,426

1,178,292

246,890

Capital risk management policies and objectives Management objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for the Group’s shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. There were no changes to the Group’s approach to capital management during the year.

36

OTHER DISCLOSURES - EMPLOYEES The Group 2008 2007 $’000 $’000

The Corporation 2008 2007 $’000 $’000

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

63,556 664,159 19,428 64,739 9,517

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

61,848 533,728 ( 35,150) 57,081 -

34,613 498,124 ( 62,606) 49,042 -

821,399

708,850

617,507

519,173


Page 62 URBAN DEVELOPMENT CORPORATION AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2008

37

COMMITMENTS AND CONTINGENCIES (a)

Commitments The Group has estimated cost of $900.845 million (2007: $24.309 million) to complete operational projects. Of this amount, $237.776 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 the Group has a good defence to the claim and a defence has accordingly th 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 for the Group was $222.404 million (2007: $198.154 million) and the Corporation, $145.573 million (2007: 135.027 million). At balance sheet date the Group had contracted with tenants for the following future minimum lease payments:

The Group and the Corporation 2008 2007 $’000 $’000 Within one year In the second and third years

120,817 304,235

99,141 -

425,052

99,141


Head Office: 12 Ocean Boulevard, Kingston Mall, Jamaica W.I. Telephone: (876) 922-8310-4. Telefax: (876) 922-9326 Email: info@udcja.com Website: www.udcja.com Branch Offices: Montego Bay, 42 Fort Street. Telephone: (876) 952-2044. Telefax: (876) 971-7001. Ocho Rios, Ocean Village Shopping Centre. Telephone: (876) 974-5015-6. Telefax: 974-2731 Negril, Norman Manley Boulevard. Telephone: (876) 957-5260, Telefax: (876) 957-3159

Annreport07 08